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: 811-10543
The BlackRock Core Bond Trust
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(Exact name of registrant as specified in charter)
100 Bellevue Parkway, Wilmington, DE 19809
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(Address of principal executive offices) (Zip code)
Robert S. Kapito, President
The BlackRock Core Bond Trust
40 East 52nd Street, New York, NY 10022
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(Name and address of agent for service)
Registrant's telephone number, including area code: (302) 797-2449
Date of fiscal year end: 10/31
Date of reporting period: 10/31/03
ITEM 1. REPORTS TO STOCKHOLDERS.
The Trust's annual report transmitted to shareholders pursuant to Rule 30e-1
under the Investment Company Act of 1940 is as follows:
FIXED INCOME LIQUIDITY EQUITIES ALTERNATIVES BLACKROCK SOLUTIONS
----------------------------------------------------------------------------
BlackRock
Closed-End Funds
Annual Report
OCTOBER 31, 2003
----------------------------------------------------------------------------
BlackRock Broad Investment Grade 2009 Term Trust (BCT)
BlackRock Core Bond Trust (BHK)
BlackRock High Yield Trust (BHY)
BlackRock Income Opportunity Trust (BNA)
BlackRock Income Trust (BKT)
BlackRock Limited Duration Income Trust (BLW)
BlackRock Strategic Bond Trust (BHD)
[BlackRock Logo]
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
TABLE OF CONTENTS
Letter to Shareholders ..................................................... 1
Trust Summaries ............................................................ 2
Portfolios of Investments .................................................. 9
Financial Statements
Statements of Assets and Liabilities .................................... 40
Statements of Operations ................................................ 42
Statements of Cash Flows ................................................ 44
Statements of Changes in Net Assets ..................................... 46
Financial Highlights ....................................................... 49
Notes to Financial Statements .............................................. 56
Independent Auditors' Report ............................................... 64
Additional Information ..................................................... 65
Tax Information ............................................................ 65
Dividend Reinvestment Plans ................................................ 65
Trustees Information ....................................................... 66
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PRIVACY PRINCIPLES OF THE TRUSTS
The Trusts are committed to maintaining the privacy of shareholders and to
safeguarding their non-public personal information. The following information is
provided to help you understand what personal information the Trusts collect,
how we protect that information and why, in certain cases, we may share
information with select other parties.
Generally, the Trusts do not receive any non-public personal information
relating to their shareholders, although certain non-public personal information
of shareholders may become available to the Trusts. The Trusts do not disclose
any non-public personal information about their shareholders or former
shareholders to anyone, except as permitted by law or as is necessary in order
to service shareholder accounts (for example, to a transfer agent or third party
administrator).
The Trusts restrict access to non-public personal information about their
shareholders to BlackRock employees with a legitimate business need for the
information. The Trusts maintain physical, electronic and procedural safeguards
designed to protect the non-public personal information of their shareholders.
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LETTER TO SHAREHOLDERS
October 31, 2003
Dear Shareholder:
We are pleased to report that during the period, the Trusts provided
monthly income, as well as the opportunity to invest in various portfolios of
fixed income securities. This report contains the Trusts' audited financial
statements and a listing of the portfolios' holdings.
The portfolio management team continuously monitors the fixed income
markets and adjusts the portfolios in order to gain exposure to various issuers
and security types. This strategy enables the Trusts to move among different
sectors, credits and coupons to capitalize on changing market conditions.
The following table shows the Trusts' yields, closing market prices per
share and net asset values ("NAV") per share as of October 31, 2003.
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TRUST YIELD MARKET PRICE NAV
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BlackRock Broad Investment Grade 2009 Term Trust Inc. (BCT) 5.68% $15.85 $16.02
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BlackRock Core Bond Trust (BHK) 7.74 13.57 14.75
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BlackRock High Yield Trust (BHY) 9.85 10.25 6.96
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BlackRock Income Opportunity Trust (BNA) 7.67 10.95 11.93
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BlackRock Income Trust Inc. (BKT) 7.94 7.71 7.21
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BlackRock Limited Duration Income Trust (BLW) 7.98 18.80 19.74
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BlackRock Strategic Bond Trust (BHD) 10.22 15.27 15.07
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Yield is based on market price.
BlackRock, Inc. ("BlackRock"), a world leader in asset management, has
a proven commitment to fixed income. As of September 30, 2003, BlackRock managed
approximately $200 billion in bonds, including 16 open-end and 47 closed-end
bond funds. BlackRock is recognized for its emphasis on risk management and
proprietary analytics and for its reputation managing money for the world's
largest institutional investors. BlackRock Advisors, Inc., which manages the
Trusts, is a wholly owned subsidiary of BlackRock, Inc.
On behalf of BlackRock, we thank you for your continued trust and
assure you that we remain committed to excellence in managing your assets.
Sincerely,
/s/ Laurence D. Fink /s/ Ralph L. Schlosstein
Laurence D. Fink Ralph L. Schlosstein
Chief Executive Officer President
BlackRock Advisors, Inc. BlackRock Advisors, Inc.
1
TRUST SUMMARIES
OCTOBER 31, 2003
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BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST (BCT)
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TRUST INFORMATION
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Symbol on American Stock Exchange: BCT
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Initial Offering Date: June 17, 1993
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Closing Market Price as of 10/31/03: $15.85
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Net Asset Value as of 10/31/03: $16.02
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Yield on Closing Market Price as of 10/31/03 ($15.85):(1) 5.68%
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Current Monthly Distribution per Share:(2) $ 0.075
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Current Annualized Distribution per Share:(2) $ 0.900
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(1) Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
(2) The distribution is not constant and is subject to change.
The table below summarizes the changes in the Trust's market price and NAV:
--------------------------------------------------------------
10/31/03 10/31/02 CHANGE HIGH LOW
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Market Price $15.85 $16.18 (2.04)% $16.95 $15.68
--------------------------------------------------------------------------------
NAV $16.02 $17.33 (7.56)% $17.38 $15.77
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The following charts show the Trust's asset composition and corporate credit
quality allocations of the Trust's long-term investments:
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SECTOR BREAKDOWN
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COMPOSITION OCTOBER 31, 2003 OCTOBER 31, 2002
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U.S. Government and Agency Securities 56% 36%
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Interest Only Mortgage-Backed Securities 12 8
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Agency Multiple Class Mortgage Pass-Throughs 8 18
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Corporate Bonds 8 10
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Inverse Floating Rate Mortgages 8 18
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Taxable Municipal Bonds 5 5
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Mortgage Pass-Throughs 1 2
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Commercial Mortgage-Backed Securities 1 1
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Other 1 2
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CORPORATE CREDIT BREAKDOWN(3)
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CREDIT RATING OCTOBER 31, 2003 OCTOBER 31, 2002
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AAA/Aaa --% 8%
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AA/Aa 35 19
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A 43 42
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BBB/Baa 21 30
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BB/Ba -- 1
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CCC/Caa 1 --
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(3) Using the higher of Standard & Poor's ("S&P"), Moody's Investors Service
("Moody's") or Fitch Ratings ("Fitch") rating. Corporate bonds represented
approximately 11.0% and 13.3% of net assets on October 31, 2003 and October
31, 2002, respectively.
2
TRUST SUMMARIES
OCTOBER 31, 2003
---------------------------------
BLACKROCK CORE BOND TRUST (BHK)
---------------------------------
TRUST INFORMATION
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Symbol on New York Stock Exchange: BHK
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Initial Offering Date: November 27, 2001
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Closing Market Price as of 10/31/03: $13.57
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Net Asset Value as of 10/31/03: $14.75
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Yield on Closing Market Price as of 10/31/03 ($13.57):(1) 7.74%
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Current Monthly Distribution per Share:(2) $ 0.0875
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Current Annualized Distribution per Share:(2) $ 1.0500
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(1) Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
(2) The distribution is not constant and is subject to change.
The table below summarizes the changes in the Trust's market price and NAV:
----------------------------------------------------------------
10/31/03 10/31/02 CHANGE HIGH LOW
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Market Price $13.57 $13.82 (1.81)% $15.41 $13.41
--------------------------------------------------------------------------------
NAV $14.75 $14.33 2.93% $15.99 $14.08
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The following charts show the Trust's asset composition and corporate credit
quality allocations of the Trust's long-term investments:
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SECTOR BREAKDOWN
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COMPOSITION OCTOBER 31, 2003 OCTOBER 31, 2002
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Corporate Bonds 46% 44%
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Mortgage Pass-Throughs 26 28
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U.S. Government and Agency Securities 16 17
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Foreign Government Bonds 7 3
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Taxable Municipal Bonds 2 --
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Commercial Mortgage-Backed Securities 2 6
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Interest Only Mortgage-Backed Securities 1 2
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CORPORATE CREDIT BREAKDOWN(3)
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CREDIT RATING OCTOBER 31, 2003 OCTOBER 31, 2002
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AAA/Aaa 3% 14%
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AA/Aa 11 6
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A 25 20
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BBB/Baa 21 18
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BB/Ba 12 10
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B 23 29
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CCC/Caa 5 1
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Not Rated -- 2
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(3) Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds
represented approximately 61.6% and 62.1% of net assets on October 31, 2003
and October 31, 2002, respectively.
3
TRUST SUMMARIES
OCTOBER 31, 2003
----------------------------------
BLACKROCK HIGH YIELD TRUST (BHY)
----------------------------------
TRUST INFORMATION
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Symbol on New York Stock Exchange: BHY
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Initial Offering Date: December 23, 1998
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Closing Market Price as of 10/31/03: $10.25
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Net Asset Value as of 10/31/03: $ 6.96
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Yield on Closing Market Price as of 10/31/03 ($10.25):(1) 9.85%
--------------------------------------------------------------------------------
Current Monthly Distribution per Share:(2) $ 0.084167
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Current Annualized Distribution per Share:(2) $ 1.010004
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(1) Yield on closing market price is calculated by dividing the annualized
distribution per share by the closing market price.
(2) The distribution is not constant and is subject to change.
The table below summarizes the changes in the Trust's market price and NAV:
----------------------------------------------------------------
10/31/03 10/31/02 CHANGE HIGH LOW
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Market Price $10.25 $8.68 18.09% $11.20 $7.91
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NAV $ 6.96 $6.13 13.54% $ 6.96 $6.02
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The following chart shows the Trust's corporate credit quality allocations of
the Trust's long-term investments:
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CORPORATE CREDIT BREAKDOWN(3)
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CREDIT RATING OCTOBER 31, 2003 OCTOBER 31, 2002
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BBB/Baa 3% 4%
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BB/Ba 12 18
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B 52 62
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CCC/Caa 25 10
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CC/Ca 5 3
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Not Rated 3 3
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(3) Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds
represented approximately 135.4% and 144.5% of net assets on October 31,
2003 and October 31, 2002, respectively.
4
TRUST SUMMARIES
OCTOBER 31, 2003
------------------------------------------
BLACKROCK INCOME OPPORTUNITY TRUST (BNA)
------------------------------------------
TRUST INFORMATION
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Symbol on New York Stock Exchange: BNA
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Initial Offering Date: December 20, 1991
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Closing Market Price as of 10/31/03: $10.95
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Net Asset Value as of 10/31/03: $11.93
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Yield on Closing Market Price as of 10/31/03 ($10.95):(1) 7.67%
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Current Monthly Distribution per Share:(2) $ 0.07
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Current Annualized Distribution per Share:(2) $ 0.84
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(1) Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
(2) The distribution is not constant and is subject to change.
The table below summarizes the changes in the Trust's market price and NAV:
---------------------------------------------------------------
10/31/03 10/31/02 CHANGE HIGH LOW
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Market Price $10.95 $10.50 4.29% $11.79 $10.30
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NAV $11.93 $11.83 0.85% $12.86 $11.21
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The following charts show the Trust's asset composition and credit quality
allocations of the Trust's long-term investments:
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SECTOR BREAKDOWN
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COMPOSITION OCTOBER 31, 2003 OCTOBER 31, 2002
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Corporate Bonds 59% 30%
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Mortgage Pass-Throughs 29 55
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U.S. Government and Agency Securities 7 7
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Federal Housing Administration 2 4
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Interest Only Mortgage-Backed Securities 2 1
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Inverse Floating Rate Mortgages 1 1
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Principal Only Mortgage-Backed Securities -- 2
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CORPORATE CREDIT BREAKDOWN(3)
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CREDIT RATING OCTOBER 31, 2003 OCTOBER 31, 2002
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AAA/Aaa 6% 14%
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AA/Aa 12 8
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A 22 21
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BBB/Baa 19 13
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BB/Ba 17 24
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B 22 20
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CCC/Caa 2 --
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(3) Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds
represented approximately 71.2% and 40.9% of net assets on October 31, 2003
and October 31, 2002, respectively.
5
TRUST SUMMARIES
OCTOBER 31, 2003
------------------------------
BLACKROCK INCOME TRUST (BKT)
------------------------------
TRUST INFORMATION
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Symbol on New York Stock Exchange: BKT
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Initial Offering Date: July 22, 1988
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Closing Market Price as of 10/31/03: $7.71
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Net Asset Value as of 10/31/03: $7.21
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Yield on Closing Market Price as of 10/31/03 ($7.71):(1) 7.94%
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Current Monthly Distribution per Share:(2) $0.051042
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Current Annualized Distribution per Share:(2) $0.612504
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(1) Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
(2) The distribution is not constant and is subject to change.
The table below summarizes the changes in the Trust's market price and NAV:
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10/31/03 10/31/02 CHANGE HIGH LOW
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Market Price $7.71 $8.07 (4.46)% $8.25 $6.80
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NAV $7.21 $8.13 (11.32)% $8.09 $7.02
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The following chart shows the Trust's asset composition of the Trust's corporate
investments:
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SECTOR BREAKDOWN
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COMPOSITION OCTOBER 31, 2003 OCTOBER 31, 2002
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Mortgage Pass-Throughs 32% 48%
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U.S. Government and Agency Securities 30 16
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Interest Only Mortgage-Backed Securities 15 8
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Principal Only Mortgage-Backed Securities 11 8
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Inverse Floating Rate Mortgages 4 9
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Federal Housing Administration 3 5
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Agency Multiple Class Mortgage Pass-Throughs 3 2
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Commercial Mortgage-Backed Securities 2 2
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Non-Agency Multiple Class Mortgage Pass-Throughs -- 1
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Adjustable Rate Mortgage Securities -- 1
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6
TRUST SUMMARIES
OCTOBER 31, 2003
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BLACKROCK LIMITED DURATION INCOME TRUST (BLW)
-----------------------------------------------
TRUST INFORMATION
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Symbol on New York Stock Exchange: BLW
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Initial Offering Date: July 30, 2003
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Closing Market Price as of 10/31/03: $18.80
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Net Asset Value as of 10/31/03: $19.74
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Yield on Closing Market Price as of 10/31/03 ($18.80):(1) 7.98%
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Current Monthly Distribution per Share:(2) $ 0.125
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Current Annualized Distribution per Share:(2) $ 1.500
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(1) Yield on closing market price is calculated by dividing the current
annualized distribution per share by the closing market price.
(2) The distribution is not constant and is subject to change.
The table below summarizes the Trust's market price and NAV:
----------------------------------------------
10/31/03 HIGH LOW
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Market Price $18.80 $20.01 $18.76
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NAV $19.74 $19.76 $18.72
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The following charts show the Trust's asset composition and corporate credit
quality allocations of the Trust's long-term investments:
--------------------------------------------------------------------------------
SECTOR BREAKDOWN
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COMPOSITION OCTOBER 31, 2003
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Corporate Bonds 47%
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Mortgage Pass-Throughs 24
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Bank Loans 20
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U.S. Government and Agency Securities 8
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Foreign Government Bonds 1
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CORPORATE CREDIT BREAKDOWN(3)
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CREDIT RATING OCTOBER 31, 2003
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A 6%
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BBB/Baa 8
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BB/Ba 26
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B 60
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(3) Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds
represented approximately 64.6% of net assets on October 31, 2003.
7
TRUST SUMMARIES
OCTOBER 31, 2003
--------------------------------------
BLACKROCK STRATEGIC BOND TRUST (BHD)
--------------------------------------
TRUST INFORMATION
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange: BHD
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Initial Offering Date: February 26, 2002
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Closing Market Price as of 10/31/03: $15.27
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Net Asset Value as of 10/31/03: $15.07
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Yield on Closing Market Price as of 10/31/03 ($15.27):(1) 10.22%
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Current Monthly Distribution per Share:(2) $ 0.13
--------------------------------------------------------------------------------
Current Annualized Distribution per Share:(2) $ 1.56
--------------------------------------------------------------------------------
(1) Yield on closing market price is calculated by dividing the annualized
distribution per share as of October 31, 2003 by the closing market price.
(2) The distribution is not constant and is subject to change.
The table below summarizes the changes in the Trust's market price and NAV:
-----------------------------------------------------------------
10/31/03 10/31/02 CHANGE HIGH LOW
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Market Price $15.27 $12.35 23.64% $15.52 $12.41
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NAV $15.07 $12.63 19.32% $15.07 $12.91
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The following chart shows the Trust's corporate credit quality allocations of
the Trust's long-term investments:
--------------------------------------------------------------------------------
CORPORATE CREDIT BREAKDOWN(3)
--------------------------------------------------------------------------------
CREDIT RATING OCTOBER 31, 2003 OCTOBER 31, 2002
--------------------------------------------------------------------------------
AAA/Aaa 1% 1%
--------------------------------------------------------------------------------
AA/Aa 5 6
--------------------------------------------------------------------------------
A 9 10
--------------------------------------------------------------------------------
BBB/Baa 10 12
--------------------------------------------------------------------------------
BB/Ba 23 29
--------------------------------------------------------------------------------
B 47 41
--------------------------------------------------------------------------------
CCC/Caa 4 --
--------------------------------------------------------------------------------
Not Rated 1 1
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----------
(3) Using the higher of S&P's, Moody's or Fitch's rating. Corporate bonds
represented approximately 134.4% and 143.4% of net assets on October 31,
2003 and October 31, 2002, respectively.
8
CONSOLIDATED PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2003
--------------------------------------------------------
BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST (BCT)
--------------------------------------------------------
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--135.6%
MORTGAGE PASS-THROUGHS--1.8%
Federal National Mortgage Assoc.,
$ 758 5.50%, 1/01/17 - 2/01/17 .............................................................. $ 780,934
47 6.50%, 7/01/29 ........................................................................ 48,755
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Total Mortgage Pass-Throughs ............................................................ 829,689
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AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--11.2%
Federal Home Loan Mortgage Corp.,
2,168 Ser. 1510, Class G, 5/15/13 ........................................................... 2,317,007
400 Ser. 1534, Class IG, 2/15/10 .......................................................... 414,464
2 Ser. 1601, Class SD, 10/15/08 ......................................................... 2,039
Federal National Mortgage Assoc.,
619 Ser. 10, Class V, 7/25/13 ............................................................. 626,679
232 Ser. 13, Class SJ, 2/25/09 ............................................................ 240,068
118 Ser. 43, Class E, 4/25/22 ............................................................. 122,852
1,000 Ser. 49, Class H, 4/25/13 ............................................................. 1,058,370
14 Ser. 87, Class J, 4/25/22 ............................................................. 14,446
450 Ser. 214, Class SK, 12/25/08 .......................................................... 495,293
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Total Agency Multiple Class Mortgage Pass-Throughs ...................................... 5,291,218
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INVERSE FLOATING RATE MORTGAGES--10.6%
AAA 462 Citicorp Mortgage Securities, Inc., Ser. 14, Class A-4, 11/25/23 ........................ 540,221
Aaa 532 Countrywide Funding Corp., Ser. 2, Class A-12S, 2/25/09 ................................. 542,715
Federal Home Loan Mortgage Corp.,
336 Ser. 1425, Class SB, 12/15/07 ......................................................... 418,446
132 Ser. 1506, Class S, 5/15/08 ........................................................... 151,678
106 Ser. 1515, Class S, 5/15/08 ........................................................... 117,217
117 Ser. 1618, Class SA, 11/15/08 ......................................................... 121,227
304 Ser. 1621, Class SH, 11/15/22 ......................................................... 317,755
34 Ser. 1626, Class SA, 12/15/08 ......................................................... 34,031
171 Ser. 1661, Class SB, 1/15/09 .......................................................... 186,068
413 Ser. 1688, Class S, 12/15/13 .......................................................... 446,295
Federal National Mortgage Assoc.,
166 Ser. 32, Class SA, 5/25/32 ............................................................ 172,229
35 Ser. 48, Class SC, 6/25/33 ............................................................ 35,198
474 Ser. 187, Class SB, 10/25/07 .......................................................... 560,675
261 Ser. 190, Class S, 11/25/07 ........................................................... 317,251
274 Ser. 191, Class SD, 10/25/08 .......................................................... 303,414
59 Ser. 202, Class VB, 11/25/23 .......................................................... 60,904
324 Ser. 214, Class SH, 12/25/08 .......................................................... 360,162
Residential Funding Mortgage Securities I, Inc.,
AAA 169 Ser. S23, Class A-12, 6/25/08 ......................................................... 175,267
AAA 175 Ser. S23, Class A-16, 6/25/08 ......................................................... 179,975
-------------
Total Inverse Floating Rate Mortgages ................................................... 5,040,728
-------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--16.3%
Federal Home Loan Mortgage Corp.,
252 Ser. 65, Class I, 8/15/20 ............................................................. 42,530
82 Ser. 141, Class H, 5/15/21 ............................................................ 1,238
253 Ser. 1114, Class J, 7/15/06 ........................................................... 24,815
225 Ser. 1285, Class M, 5/15/07 ........................................................... 14,547
2,000 Ser. 1598, Class J, 10/15/08 .......................................................... 2,145,900
1,096 Ser. 1645, Class IB, 9/15/08 .......................................................... 90,466
210 Ser. 2063, Class PU, 10/15/26 ......................................................... 2,956
70 Ser. 2306, Class PM, 5/15/26 .......................................................... 22
1,299 Ser. 2462, Class NI, 8/15/21 .......................................................... 191,169
1,578 Ser. 2513, Class BI, 12/15/15 ......................................................... 142,547
3,100 Ser. 2542, Class IY, 5/15/16 .......................................................... 49,042
2,688 Ser. 2543, Class IJ, 10/15/12 ......................................................... 215,494
See Notes to Financial Statements.
9
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--(CONT'D)
Federal Home Loan Mortgage Corp. (cont'd)
$ 3,670 Ser. 2543, Class IM, 9/15/12 ........................................................ $ 191,619
5,419 Ser. 2572, Class IT, 5/15/19 ........................................................ 507,230
3,981 Ser. 2633, Class PI, 3/15/12 ........................................................ 346,264
4,577 Ser. 2672, Class TP, 9/15/16 ........................................................ 426,868
Federal National Mortgage Assoc.,
607 Ser. 8, Class HA, 1/25/08 ........................................................... 96,006
582 Ser. 20, Class SL, 9/25/08 .......................................................... 109,332
134 Ser. 39, Class PE, 1/25/23 .......................................................... 8,985
321 Ser. 42, Class SO, 3/25/23 .......................................................... 10,813
1,701 Ser. 49, Class L, 4/25/13 ........................................................... 134,822
1,540 Ser. 51, Class K, 4/25/07 ........................................................... 192,476
12,992 Ser. 70, Class ID, 4/25/22 .......................................................... 2,105,484
173 Ser. 72, Class H, 7/25/06 ........................................................... 21,778
1,710 Ser. 80, Class PI, 9/25/23 .......................................................... 68,969
2,000 Ser. 82, Class IR, 9/25/12 .......................................................... 179,063
1,047 Ser. 90, Class M, 1/25/28 ........................................................... 152,561
10 Ser. 174, Class S, 9/25/22 .......................................................... 30,884
418 Ser. 194, Class PV, 6/25/08 ......................................................... 23,296
1,731 Ser. 208, Class S, 2/25/23 .......................................................... 57,402
348 Ser. 223, Class PT, 10/25/23 ........................................................ 31,234
7 Ser. G-21, Class L, 7/25/21 ......................................................... 15,856
75 PNC Mortgage Securities Corp., Ser. 8, Class 4-X, 10/25/28 ............................ 2,889
6,672 Structured Asset Securities Corp., Ser. ALS1, Class 3AX, 5/25/14 ...................... 28,468
28,355 Vendee Mortgage Trust, Ser. 1, Class 1IO, 10/15/31 .................................... 39,980
-------------
Total Interest Only Mortgage-Backed Securities ........................................ 7,703,005
-------------
PRINCIPAL ONLY MORTGAGE-BACKED SECURITIES--0.1%
Aaa 55 Salomon Brothers Mortgage Securities Inc. VI, Ser. 3, Class A, 10/23/17 ............... 50,068
-------------
COMMERCIAL MORTGAGE-BACKED SECURITIES--1.7%
AAA 750(2) New York City Mortgage Loan Trust, Multifamily, Ser. 1996, Class A2, 6.75%, 6/25/11 ... 826,187
-------------
ASSET-BACKED SECURITIES--0.1%
NR 239(2,4,5) Global Rated Eligible Asset Trust, Ser. A, Class 1, 7.33%, 3/15/06 .................. 7,169
Structured Mortgage Asset Residential Trust,
NR 577(4,5) Ser. 2, 8.24%, 3/15/06 .............................................................. 10,099
NR 640(4,5) Ser. 3, 8.724%, 4/15/06 ............................................................. 11,194
-------------
Total Asset-Backed Securities ......................................................... 28,462
-------------
U.S. GOVERNMENT AND AGENCY SECURITIES--75.5%
236 Small Business Investment Companies, Ser. P10A-1, Class 1, 6.12%, 2/01/08 ............. 250,178
27,000(3) U.S. Treasury Bond, zero coupon, 11/15/09 ............................................. 21,488,922
U.S. Treasury Notes,
3,200(3) 3.50%, 11/15/06 ..................................................................... 3,302,749
7,225(3) 4.375%, 8/15/12 ..................................................................... 7,334,502
500 5.00%, 8/15/11 ...................................................................... 533,535
1,700 5.75%, 11/15/05 ..................................................................... 1,831,485
550 6.00%, 8/15/09 ...................................................................... 621,887
385 6.625%, 5/15/07 ..................................................................... 436,584
-------------
Total U.S. Government and Agency Securities ........................................... 35,799,842
-------------
CORPORATE BONDS--11.0%
CHEMICAL--2.5%
A- 1,000 Dow Capital BV, 9.20%, 6/01/10 ........................................................ 1,192,660
-------------
CONSUMER PRODUCTS--1.1%
BBB+ 500 General Mills, 8.75%, 9/15/04 ......................................................... 530,305
-------------
ENERGY--1.1%
BBB+ 500(2) Israel Electric Corp., Ltd., 7.25%, 12/15/06 (Israel) ................................. 541,920
-------------
FINANCE & BANKING--4.8%
A+ 500(2) Metropolitan Life Insurance Co., 6.30%, 11/01/03 ...................................... 500,000
Aa3 1,000(3) Morgan Stanley Group, Inc., 10.00%, 6/15/08 ........................................... 1,254,560
AA+ 500 UBS PaineWebber Group, Inc., 8.875%, 3/15/05 .......................................... 541,190
-------------
2,295,750
-------------
See Notes to Financial Statements.
10
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS--(CONT'D)
TELECOMMUNICATION--1.2%
A $ 500 Alltel Corp., 7.50%, 3/01/06 ............................................................ $ 551,766
-------------
TRANSPORTATION--0.2%
CCC 100 American Airlines, Inc., 10.44%, 3/04/07 ................................................ 79,500
-------------
Total Corporate Bonds ................................................................... 5,191,901
-------------
TAXABLE MUNICIPAL BONDS--7.3%
AAA 500 Fresno California Pension Oblig., 7.80%, 6/01/14 ........................................ 619,445
AAA 500 Kern County California Pension Oblig., 6.98%, 8/15/09 ................................... 583,160
Los Angeles County California Pension Oblig.,
AAA 1,000 Ser. A, 8.62%, 6/30/06 ................................................................ 1,152,740
AAA 500 Ser. D, 6.97%, 6/30/08 ................................................................ 575,030
AAA 500 Orleans Parish Louisiana School Board, Ser. A, 6.60%, 2/01/08 ........................... 554,300
-------------
Total Taxable Municipal Bonds ........................................................... 3,484,675
-------------
TOTAL LONG-TERM INVESTMENTS--(cost $63,224,280) ......................................... 64,245,775
-------------
SHORT-TERM INVESTMENT--2.9%
U.S. GOVERNMENT AGENCY SECURITY--2.9%
1,400(6) Student Loan Marketing, 0.94%, 11/03/03 (cost $1,399,927) ............................... 1,399,927
-------------
TOTAL INVESTMENTS--138.5% (cost $64,624,207) ............................................ 65,645,702
-------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(38.5)% .......................................... (18,264,430)
-------------
NET ASSETS--100% ........................................................................ $ 47,381,272
=============
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of October 31, 2003, the
Trust held 4.0% of its net assets, with a current market value of
$1,875,276, in securities restricted as to resale.
(3) Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
(4) Security is fair valued.
(5) Illiquid securities representing 0.06% of net assets.
(6) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
See Notes to Financial Statements.
11
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2003
---------------------------------
BLACKROCK CORE BOND TRUST (BHK)
---------------------------------
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--135.3%
MORTGAGE PASS-THROUGHS--35.8%
$ 3,225 Federal Home Loan Bank System, 4.50%, 9/16/13 ......................................... $ 3,152,341
Federal Home Loan Mortgage Corp.,
1,875 3.50%, 4/01/08 ...................................................................... 1,862,213
7,500 3.875%, 11/10/08 .................................................................... 7,446,750
7,488 5.50%, 9/01/33 ...................................................................... 7,548,667
1,885 5.75%, 4/15/08 ...................................................................... 2,064,414
1,045 6.00%, 6/15/11 ...................................................................... 1,150,838
3,175(2) 6.625%, 9/15/09 ..................................................................... 3,616,516
1,340 6.875%, 9/15/10 ..................................................................... 1,548,772
972 7.00%, 3/15/10 - 9/01/31 ............................................................ 1,114,985
1,500 5.00%, TBA .......................................................................... 1,476,570
4,000 5.50%, TBA .......................................................................... 4,118,752
44,000 6.00%, TBA .......................................................................... 45,718,728
Federal National Mortgage Assoc.,
2,225 1.75%, 6/16/06 ...................................................................... 2,172,179
3,000 2.75%, 8/11/06 ...................................................................... 2,991,390
1,500 3.75%, 9/15/08 ...................................................................... 1,490,085
1,280 4.75%, 2/21/13 ...................................................................... 1,259,110
8,270 5.50%, - 6/01/33 .................................................................... 8,344,449
1,740 5.75%, 2/15/08 ...................................................................... 1,906,309
11,600(2) 6.00%, 5/15/08 - 5/15/11 ............................................................ 12,805,616
6,745 6.625%, 10/15/07 - 11/15/10 ......................................................... 7,668,760
1,615 7.00%, 1/01/31 - 7/01/32 ............................................................ 1,700,860
2,380(2) 7.125%, 3/15/07 - 6/15/10 ........................................................... 2,726,018
3,410(2) 7.25%, 1/15/10 ...................................................................... 4,001,635
1,600 5.00%, TBA .......................................................................... 1,578,000
1,000 5.50%, TBA .......................................................................... 1,029,375
5,900 6.00%, TBA .......................................................................... 6,062,091
684 Government National Mortgage Assoc., 5.50%, 5/15/33 - 9/15/33 ......................... 692,967
27,248 Residential Accredit Loans, Inc., Ser. QS10, Class A16, 6.43%, 10/25/03 ............... 2,929,143
2,550 Small Business Admin., Ser. P10B, Class 1, 5.136%, 8/10/13 ............................ 2,599,008
-------------
Total Mortgage Pass-Throughs .......................................................... 142,776,541
-------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--1.5%
5,317 Federal Home Loan Mortgage Corp., Ser. 2579, Class HI, 8/15/17 ........................ 787,085
Federal National Mortgage Assoc.,
9,700 Ser. 16, Class IW, 11/25/12 ......................................................... 791,115
24,146 Ser. 92, Class IC, 4/25/13 .......................................................... 3,412,585
1,009 Residential Funding Mortgage Securities I, Inc., Ser. S6, Class A7, 4/25/17 ........... 1,020,114
-------------
Total Interest Only Mortgage-Backed Securities ........................................ 6,010,899
-------------
COMMERCIAL MORTGAGE-BACKED SECURITIES--2.5%
AAA 1,437 Banc of America Funding Corp., Class A1, 6.00%, 5/20/33 ............................... 1,443,370
AAA 1,677 Heller Financial Commercial Mortgage Asset Co., Ser. PH1, Class A2, 6.847%, 5/15/31 ... 1,882,818
AAA 1,470 Morgan Stanley Capital I, Inc., Ser. HF2, Class A2, 6.48%, 11/15/30 ................... 1,634,632
AAA 431 Residential Funding Mortgage Securities I, Inc., Ser. S6, Class A7, 6.00%, 4/25/17 .... 434,792
AAA 3,500 Salomon Brothers Mortgage Securities VII, Ser. C1, Class A2, 7.52%, 12/18/09 .......... 4,066,301
AAA 414 Washington Mutual Mortgage Securitization Corp., Ser. 12, Class A, 6.50%, 5/25/32 ..... 421,083
-------------
Total Commercial Mortgage-Backed Securities ........................................... 9,882,996
-------------
U.S. GOVERNMENT AND AGENCY SECURITIES--21.8%
1,050 Resolution Funding Corp., Zero coupon, 7/15/18 - 10/15/18 ............................. 456,278
U.S. Treasury Bonds,
9,955 Zero coupon, 8/15/22 - 2/15/23 ...................................................... 3,458,375
15,615(2) 5.375%, 2/15/31 ..................................................................... 16,136,510
560 6.00%, 2/15/26 ...................................................................... 615,169
4,745(2) 6.75%, 8/15/26 ...................................................................... 5,694,370
3,350 7.625%, 11/15/22 .................................................................... 4,349,767
See Notes to Financial Statements.
12
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AND AGENCY SECURITIES--(CONT'D)
U.S. Treasury Bonds,
$11,325(2) 8.125%, 8/15/19 ..................................................................... $ 15,197,618
1,360 9.25%, 2/15/16 ...................................................................... 1,942,676
5,310(2) 10.375%, 11/15/12 ................................................................... 6,804,680
2,230(2) 12.00%, 8/15/13 ..................................................................... 3,094,734
U.S. Treasury Notes,
13,765(2) 1.625%, 1/31/05 - 10/31/05 .......................................................... 13,718,105
1,265 2.375%, 8/15/06 ..................................................................... 1,268,953
1,515(2) 4.00%, 11/15/12 ..................................................................... 1,492,097
10,540 4.25%, 8/15/13 ...................................................................... 10,497,186
2,000(2) 5.00%, 8/15/11 ...................................................................... 2,134,140
-------------
Total U.S. Government and Agency Securities ........................................... 86,860,658
-------------
CORPORATE BONDS--61.6%
AERO & DEFENSE--2.0%
B- 3,000 BE Aerospace, Inc., Ser. B, 8.00%, 3/01/08 ............................................ 2,700,000
A 270 General Dynamics Corp., 4.50%, 8/15/10 ................................................ 272,498
Lockheed Martin Corp.,
BBB 1,485 7.20%, 5/01/36 ...................................................................... 1,689,900
BBB 475 8.50%, 12/01/29 ..................................................................... 616,659
Northrop Grumman Corp.,
BBB 380 7.125%, 2/15/11 ..................................................................... 434,481
BBB 960 7.875%, 3/01/26 ..................................................................... 1,140,132
BBB- 1,000(2) Raytheon Co., 6.55%, 3/15/10 .......................................................... 1,094,973
-------------
7,948,643
-------------
AUTOMOTIVE--3.2%
A3 2,000 Chrysler Corporation, 7.45%, 3/01/27 .................................................. 1,984,396
B 2,000 CSK Auto, Inc., 12.00%, 6/15/06 ....................................................... 2,245,000
DaimlerChrysler NA Holding Corp.,
A3 975 4.05%, 6/04/08 ...................................................................... 947,359
A3 940 4.75%, 1/15/08 ...................................................................... 936,578
B3 1,500 Delco Remy Intl., Inc., 11.00%, 5/01/09 ............................................... 1,376,250
Baa1 850 General Motors Corp., 8.375%, 7/15/33 ................................................. 896,614
B+ 3,000(3) Sonic Automotive Inc., 8.625%, 8/15/13 ................................................ 3,172,500
B+ 1,000(3) TRW Automotive, Inc., 9.375%, 2/15/13 ................................................. 1,135,000
-------------
12,693,697
-------------
BUILDING & DEVELOPMENT--1.5%
B- 2,000 Ainsworth Lumber Co. Ltd., 12.50%, 7/15/07, (Canada) .................................. 2,280,000
BB 3,000 Hovnanian Enterprises, Inc., 10.50%, 10/01/07 ......................................... 3,551,250
-------------
5,831,250
-------------
CHEMICAL--2.6%
CCC+ 3,000 Avecia Group PLC, 11.00%, 7/01/09, (United Kingdom) ................................... 2,790,000
Dow Chemical Co.,
A- 1,650 5.97%, 1/15/09 ...................................................................... 1,755,303
A- 175 6.125%, 2/01/11 ..................................................................... 184,767
A- 1,460 7.375%, 11/01/29 .................................................................... 1,599,342
BB- 4,000 Lyondell Chemical Co., Ser. B, 9.875%, 5/01/07 ........................................ 4,060,000
-------------
10,389,412
-------------
CONGLOMERATES--0.4%
Tyco Intl. Group SA, (Luxembourg),
BBB- 930 5.80%, 8/01/06 ...................................................................... 971,850
BBB- 684 6.375%, 2/15/06 ..................................................................... 723,070
-------------
1,694,920
-------------
CONSUMER PRODUCTS--4.6%
BB+ 3,000 American Greetings Corp., 11.75%, 7/15/08 ............................................. 3,465,000
A 1,025 Avery Dennison Corp., 4.875%, 1/15/13 ................................................. 1,015,673
BBB 220(3) Cadbury Schweppes US Finance, 5.125%, 10/01/13 ........................................ 217,900
B+ 1,950 Elizabeth Arden, Inc., Ser. B, 11.75%, 2/01/11 ........................................ 2,232,750
BBB+ 510 General Mills, Inc., 6.00%, 2/15/12 ................................................... 544,226
BBB 690 Kellogg Co., Ser. B, 6.60%, 4/01/11 ................................................... 771,220
Kraft Foods, Inc.,
A3 400 5.25%, 6/01/07 ...................................................................... 423,440
A3 4,250 5.625%, 11/01/11 .................................................................... 4,420,723
See Notes to Financial Statements.
13
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--(CONT'D)
Kroger Co.,
BBB $ 650 6.80%, 4/01/11 ...................................................................... $ 724,395
BBB 550 Ser. B, 7.70%, 6/01/29 .............................................................. 635,524
B- 1,000 Pantry, Inc., The, 10.25%, 10/15/07 ................................................... 1,035,000
AA 3,035 Wal Mart Stores Inc., 3.375%, 10/01/08 ................................................ 2,991,639
-------------
18,477,490
-------------
CONTAINERS & GLASS--0.7%
B 1,000 Crown European Holdings SA, 10.875%, 3/01/13, (United Kingdom) ........................ 1,140,000
BB 1,500 Owens-Brockway Glass Container, 8.75%, 11/15/12 ....................................... 1,638,750
-------------
2,778,750
-------------
ECOLOGICAL SERVICES & EQUIPMENT--1.4%
B+ 5,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ........................................ 5,437,500
-------------
ELECTRONICS--0.9%
CCC- 2,500 Knowles Electronics Holdings, Inc., 13.125%, 10/15/09 ................................. 2,475,000
B 1,000 Stoneridge, Inc., 11.50%, 5/01/12 ..................................................... 1,161,250
-------------
3,636,250
-------------
ENERGY--7.6%
BBB 350 Amerada Hess Corp., 7.30%, 8/15/31 .................................................... 351,606
BBB+ 765(2) Anadarko Petroleum Corp., 5.375%, 3/01/07 ............................................. 817,471
CCC+ 1,000 Calpine Canada Energy Finance ULC, 8.50%, 5/01/08, (Canada) ........................... 732,500
BBB 270(3) Centerpoint Energy Houston, Ser. K, 6.95%, 3/15/33 .................................... 297,513
BB- 1,250 Chesapeake Energy Corp., 9.00%, 8/15/12 ............................................... 1,425,000
BB 1,000 Compagnie Generale De Geophysique SA, 10.625%, 11/15/07, (France) ..................... 1,060,000
A- 665 Conoco Funding Co., 6.35%, 10/15/11 ................................................... 738,955
A- 1,085 ConocoPhillips, 5.90%, 10/15/32 ....................................................... 1,075,745
A- 1,795 ConocoPhillips Holding Co., 6.95%, 4/15/29 ............................................ 2,012,949
BBB 550 Devon Energy, Corp., 7.95%, 4/15/32 ................................................... 661,645
BBB 140 Devon Financing Corp. ULC, 7.875%, 9/30/31 ............................................ 166,029
BBB+ 1,225 Dominion Resources, Inc., Ser. E, 6.75%, 12/15/32 ..................................... 1,299,394
B 3,000 Dresser, Inc., 9.375%, 4/15/11 ........................................................ 3,082,500
DTE Energy Co.,
BBB 250 6.00%, 6/01/04 ...................................................................... 255,635
BBB 660 6.45%, 6/01/06 ...................................................................... 712,411
B- 2,500(3) Dynegy Holdings Inc., 10.125%, 7/15/13 ................................................ 2,700,000
El Paso Natural Gas Co.,
B+ 850 7.625%, 8/01/10 ..................................................................... 841,500
B+ 265 8.375%, 6/15/32 ..................................................................... 246,450
B+ 2,250(3) El Paso Production Holding Co., 7.75%, 6/01/13 ........................................ 2,160,000
BBB+ 305 Exelon Corp., 6.75%, 5/01/11 .......................................................... 338,028
Baa2 530 FirstEnergy Corp., Ser. C, 7.375%, 11/15/31 ........................................... 566,183
BBB+ 220 Kinder Morgan Energy Partners LP, 7.30%, 8/15/33 ...................................... 244,838
BBB 930 Kinder Morgan, Inc., 7.25%, 3/01/28 ................................................... 1,021,001
BB- 2,000 Leviathan Gas Pipeline Partners LP, Ser. B, 10.375%, 6/01/09 .......................... 2,170,000
BBB+ 360 Occidental Petroleum Corp., 7.20%, 4/01/28 ............................................ 409,909
Oncor Electric Delivery Co.,
Baa1 435(3) 6.375%, 1/15/15 ..................................................................... 464,838
Baa1 350(3) 7.25%, 1/15/33 ...................................................................... 392,575
Baa1 1,650 Petroleos Mexicanos, 9.375%, 12/02/08, (Mexico) ....................................... 1,922,250
BBB+ 195 Texas Eastern Transmission LP, 7.00%, 7/15/32 ......................................... 210,477
BBB 955 Valero Energy Corp., 7.50%, 4/15/32 ................................................... 1,044,995
A3 725 Virginia Electric & Power Co., Ser. A, 5.75%, 3/31/06 ................................. 779,629
-------------
30,202,026
-------------
FINANCE & BANKING--17.9%
Aa1 1,000(2,3) American General Instl. Capital A, 7.57%, 12/01/45 .................................... 1,179,580
Bank of America Corp.,
Aa2 1,000 3.875%, 1/15/08 ..................................................................... 1,016,490
Aa3 1,350 7.40%, 1/15/11 ...................................................................... 1,570,320
Aa2 325 Bank One NA, 3.70%, 1/15/08 ........................................................... 327,652
A1 1,980 Bear Stearns Cos., Inc., 2.875%, 7/02/08 .............................................. 1,908,304
AAA 200(3) Camp Pendleton & Quantico Housing LLC, Military Housing Rev., Ser. A1, 5.937%, 10/01/43 198,626
See Notes to Financial Statements.
14
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
FINANCE & BANKING--(CONT'D)
Citigroup, Inc.,
Aa2 $ 2,675 5.875%, 2/22/33 ..................................................................... $ 2,650,042
Aa1 185 6.875%, 6/01/25 ..................................................................... 205,029
Aa2 2,465 7.25%, 10/01/10 ..................................................................... 2,866,795
Aa3 585 Credit Suisse First Boston USA, Inc., 6.125%, 11/15/11 ................................ 632,543
BB 1,000(3) Crum & Forster Holdings Corp., 10.375%, 6/15/13 ....................................... 1,075,000
Ford Motor Credit Co.,
A3 650 5.625%, 10/01/08 .................................................................... 637,143
A3 1,320 7.375%, 10/28/09 .................................................................... 1,363,375
A3 505 7.875%, 6/15/10 ..................................................................... 531,316
Baa2 280 Fund American Cos, Inc., 5.875%, 5/15/13 .............................................. 276,912
General Electric Capital Corp.,
AAA 1,050 3.50%, 8/15/07 ...................................................................... 1,056,804
AAA 2,720 Ser. A, 5.875%, 2/15/12 ............................................................. 2,894,896
AAA 2,775 Ser. A, 6.00%, 6/15/12 .............................................................. 2,987,454
AAA 1,080 Ser. A, 6.125%, 2/22/11 ............................................................. 1,177,632
General Motors Acceptance Corp.,
A3 2,139 6.875%, 9/15/11 ..................................................................... 2,208,945
A3 150 8.00%, 11/01/31 155,280
Goldman Sachs Group, Inc.,
Aa3 2,050 5.25%, 10/15/13 ..................................................................... 2,051,669
Aa3 750 6.125%, 2/15/33 ..................................................................... 746,183
Aa3 940 6.60%, 1/15/12 ...................................................................... 1,043,447
Aa3 190 6.875%, 1/15/11 ..................................................................... 214,979
Aa3 135 7.35%, 10/01/09 ..................................................................... 156,792
Household Finance Corp.,
A1 160 4.75%, 7/15/13 ...................................................................... 154,696
A1 1,760 6.375%, 8/01/10 - 11/27/12 .......................................................... 1,924,784
A1 2,325 6.75%, 5/15/11 ...................................................................... 2,602,559
A1 475 7.625%, 5/17/32 ..................................................................... 564,899
A1 825 HSBC Holdings PLC, 5.25%, 12/12/12 .................................................... 841,187
Aa3 1,750(3) ING Bank NV, 5.125%, 5/01/15, (Netherlands) ........................................... 1,730,015
JP Morgan Chase & Co.,
A+ 540 3.625%, 5/01/08 ..................................................................... 539,039
A 1,155 6.75%, 2/01/11 ...................................................................... 1,294,351
Lehman Brothers Holdings, Inc.,
A1 165 6.25%, 5/15/06 ...................................................................... 179,523
A1 175 7.00%, 2/01/08 ...................................................................... 198,172
AA 650(3) Massachusetts Mutual Life Insurance Co., 5.625%, 5/15/33 .............................. 618,007
A 390 Metlife, Inc., 6.50%, 12/15/32 ........................................................ 408,252
Morgan Stanley,
Aa3 375 5.80%, 4/01/07 ...................................................................... 404,348
Aa3 285 6.75%, 4/15/11 ...................................................................... 319,271
A- 20,300(3) Morgan Stanley Tracers, 5.894%, 3/01/03 ............................................... 21,783,118
A 415(3) Pacific Life Corp., 6.60%, 9/15/33 .................................................... 433,223
AA 775(3) Principal Life Global, 5.25%, 1/15/13 ................................................. 781,766
A- 635 Prudential Financial Inc., 5.75%, 7/15/33 ............................................. 588,924
A+ 1,000(3) Prudential Funding LLC, 6.60%, 5/15/08 ................................................ 1,115,090
Sears Roebuck Acceptance Corp.,
Baa1 725 6.75%, 8/15/11 ...................................................................... 812,798
Baa1 1,305 7.00%, 2/01/11 - 6/01/32 ............................................................ 1,432,078
SLM Corp.,
A 1,150 1.381%, 7/25/07 ..................................................................... 1,150,850
A 90 5.625%, 4/10/07 ..................................................................... 97,345
Aa3 375 U.S. Bancorp, Ser. N, 3.95%, 8/23/07 .................................................. 384,727
-------------
71,492,230
-------------
FOREST PRODUCTS--1.5%
B+ 3,425 Caraustar Industries, Inc., 9.875%, 4/01/11 ........................................... 3,562,000
Weyerhaeuser Co.,
BBB 1,245 6.875%, 12/15/33 .................................................................... 1,268,046
BBB 1,060 6.95%, 10/01/27 ..................................................................... 1,075,805
-------------
5,905,851
-------------
See Notes to Financial Statements.
15
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE--1.0%
D $ 2,000(4) HealthSouth Corp., 7.625%, 6/01/12 .................................................... $ 1,740,000
B 2,000 United Surgical Partners Int'l., Inc., 10.00%, 12/15/11 ............................... 2,220,000
-------------
3,960,000
-------------
HOTELS & CASINO--1.2%
B+ 1,000 Circus & Eldorado Joint Venture, 10.125%, 3/01/12 ..................................... 1,023,750
Ba3 2,574 HMH Properties, Inc., Ser. A, 7.875%, 8/01/05 ......................................... 2,641,568
B 1,000 Resorts Intl. Hotel & Casino, Inc., 11.50%, 3/15/09 ................................... 1,030,000
-------------
4,695,318
-------------
INDUSTRIAL EQUIPMENT--1.3%
B 3,000 Terex Corp., 9.25%, 7/15/11 ........................................................... 3,285,000
B+ 2,000(2) United Rentals, Inc., Ser. B, 9.25%, 1/15/09 .......................................... 2,100,000
-------------
5,385,000
-------------
LEISURE--0.8%
BB+ 3,000 Royal Caribbean Cruises Ltd., 8.125%, 7/28/04, (Liberia) .............................. 3,105,000
-------------
MEDIA--6.5%
B1 4,000 Alliance Atlantis Communications, Inc., 13.00%, 12/15/09, (Canada) .................... 4,615,000
BBB+ 80 AOL Time Warner, Inc., 6.125%, 4/15/06 ................................................ 86,088
Ca 4,000 Charter Communications Holdings LLC, 10.75%, 10/01/09 ................................. 3,380,000
BBB 1,050 Comcast Cable Communications, Inc., 6.875%, 6/15/09 ................................... 1,174,258
BBB 3,550 Comcast Corp., 5.50%, 3/15/11 ......................................................... 3,662,677
Baa1 355(3) COX Enterprises, Inc., 4.375%, 5/01/08 ................................................ 359,278
BB- 4,000 EchoStar DBS Corp., 10.375%, 10/01/07 ................................................. 4,400,000
BBB- 700 News America Inc., 7.625%, 11/30/28 ................................................... 803,243
BBB 1,975 TCI Communications Inc., 7.875%, 2/15/26 .............................................. 2,256,307
BBB 10 Tele-Communications-TCI Group, 7.875%, 8/01/13 ........................................ 11,706
Time Warner, Inc.,
BBB+ 90 6.625%, 5/15/29 ..................................................................... 89,266
BBB+ 260 6.875%, 6/15/18 ..................................................................... 279,777
BBB+ 4,380 7.57%, 2/01/24 ...................................................................... 4,817,912
-------------
25,935,512
-------------
REAL ESTATE--1.1%
AvalonBay Communities, Inc.,
BBB+ 350 6.625%, 9/15/11 ..................................................................... 381,381
BBB+ 775 8.25%, 7/15/08 ...................................................................... 915,368
BBB+ 315 EOP Operating LP, 7.50%, 4/19/29 ...................................................... 348,800
ERP Operating LP,
BBB+ 1,950 5.20%, 4/01/13 ...................................................................... 1,940,074
BBB+ 825 6.95%, 3/02/11 ...................................................................... 919,982
-------------
4,505,605
-------------
TELECOMMUNICATION--3.9%
A+ 170 Ameritech Capital Funding Corp., 6.45%, 1/15/18 ....................................... 189,373
A- 1,015 British Telecommunications PLC, 8.875%, 12/15/30, (United Kingdom) .................... 1,311,441
Deutsche Telekom Intl. Finance BV, (Netherlands)
BBB+ 1,060 8.50%, 6/15/10 ...................................................................... 1,275,191
BBB+ 1,585 8.75%, 12/15/03 ..................................................................... 1,994,754
Aa3 1,750 New England Telephone & Telegraph Co., 7.875%, 11/15/29 ............................... 2,064,510
Aa3 230 New Jersey Bell Telephone Co., 7.85%, 11/15/29 ........................................ 272,258
Nextel Communications, Inc.,
B+ 2,000 9.375%, 11/15/09 .................................................................... 2,180,000
B+ 3,000 9.50%, 2/01/11 ...................................................................... 3,382,500
BBB+ 375(3) Telecom Italia Cap, 5.25%, 11/15/13, (Italy) .......................................... 372,939
A+ 325 Verizon Global Funding Corp., 7.75%, 12/01/30 - 6/15/32 ............................... 377,065
Aa3 1,750 Verizon New Jersey, Inc., Ser. A, 5.875%, 1/17/12 ..................................... 1,839,967
A 350 Vodafone Group PLC, 6.25%, 11/30/32, (United Kingdom) ................................. 350,361
-------------
15,610,359
-------------
See Notes to Financial Statements.
16
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--1.5%
Aa3 $ 1,485 Burlington Northern Santa Fe Railway, Ser. 1, 8.251%, 1/15/21 ........................... $ 1,798,445
BBB+ 1,410(2) Canadian National Railway Co., 6.90%, 7/15/28, (Canada) ................................. 1,558,233
BBB 1,450 Canadian Pacific Railway Ltd., 6.25%, 10/15/11, (Canada) ................................ 1,586,605
A- 634 Continental Airlines, Inc., Ser. A, 6.545%, 2/02/19 ..................................... 630,180
Baa1 375 Norfolk Southern Corp., 7.05%, 5/01/37 .................................................. 412,815
-------------
5,986,278
-------------
Total Corporate Bonds ................................................................... 245,671,091
-------------
TAXABLE MUNICIPAL BONDS--2.8%
California Dept. of Wtr. Res. Pwr. Sply.,
A3 5,000 3.585%, 5/01/04 ....................................................................... 5,041,050
A3 650 3.975%, 5/01/05 ....................................................................... 660,582
AA 4,275 Illinois State, Taxable Pension, 5.10%, 6/01/33 ......................................... 3,865,669
AA- 1,400 Oregon State, Taxable Pension, 5.892%, 6/01/27 .......................................... 1,417,570
-------------
Total Taxable Municipal Bonds ........................................................... 10,984,871
-------------
FOREIGN GOVERNMENT BONDS--9.3%
Aaa 5,850 Canada Government, 5.25%, 6/01/13 ....................................................... 4,568,234
AAA 4,260 France Government, 3.50%, 1/12/08 ....................................................... 4,947,509
AAA 9,860 Germany Federal Republic, 3.00%, 4/11/08 ................................................ 11,209,038
Kingdom of Sweden,
AAA 21,325 5.00%, 1/28/09 ........................................................................ 2,803,763
AAA 17,515 8.00%, 8/15/07 ........................................................................ 2,545,164
Quebec Province Canada,
A+ 550 7.38%, 4/09/26 ........................................................................ 652,408
A+ 2,475 7.50%, 7/15/23 ........................................................................ 3,000,591
United Mexican States,
Baa2 350 4.625%, 10/08/08 ...................................................................... 351,225
Baa2 4,000 6.625%, 3/03/15 ....................................................................... 4,080,000
Baa2 2,770 8.00%, 9/24/22 ........................................................................ 2,991,600
-------------
Total Foreign Government Bonds .......................................................... 37,149,532
-------------
TOTAL LONG-TERM INVESTMENTS--(cost $527,426,624) ........................................ 539,336,588
-------------
SHORT-TERM INVESTMENTS--1.2%
U.S. GOVERNMENT AND AGENCY SECURITIES--1.2%
1,100(5) Student Loan Marketing, 0.94%, 11/03/03 ................................................. 1,099,943
U.S. Treasury Bonds
2,284(5) 0.55%, 11/03/03 ....................................................................... 1,344,000
1,344(5) 0.85%, 11/17/03 ....................................................................... 2,284,187
-------------
TOTAL SHORT-TERM INVESTMENTS (cost $4,728,130) .......................................... 4,728,130
-------------
TOTAL INVESTMENTS BEFORE INVESTMENTS SOLD SHORT AND OUTSTANDING OPTIONS WRITTEN
(COST $532,154,754) ................................................................... 544,064,718
-------------
INVESTMENTS SOLD SHORT--(0.4)%
(1,500) Federal Home Loan Mortgage Corp., 5.00%, TBA (proceeds $1,458,281) ...................... (1,459,680)
-------------
NOTIONAL
AMOUNT
(000)
----------
OUTSTANDING OPTIONS WRITTEN--(0.5)%
$ 2,750 Federal Home Loan Mortgage Corp., 5.00%, expires 2/01/04 ................................ (34,375)
52,700 Interest Rate Swap, 3.60% over 3 month LIBOR, expires 11/01/04 .......................... (541,016)
39,000 Interest Rate Swap, 5.75% over 3 month LIBOR, expires 9/23/05 ........................... (890,760)
11,000 Interest Rate Swap, 6.00% over 3 month LIBOR, expires 10/25/04 .......................... (439,005)
158 U.S. Treasury Notes Futures ............................................................. (248,296)
-------------
Total Outstanding Options Written (premium received $2,069,401) ......................... (2,153,452)
-------------
TOTAL INVESTMENTS, NET OF INVESTMENTS SOLD SHORT AND OUTSTANDING OPTIONS WRITTEN--135.6% 540,451,586
LIABILITIES IN EXCESS OF OTHER ASSETS--(35.6)% .......................................... (141,911,876)
-------------
NET ASSETS--100% ........................................................................ $ 398,539,710
=============
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
(3) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of October 31, 2003, the
Trust held 10.1% of its net assets, with a current market value of
$40,186,968, in securities restricted as to resale.
(4) Issuer is technically in default and/or bankruptcy.
(5) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
See Notes to Financial Statements.
17
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2003
----------------------------------
BLACKROCK HIGH YIELD TRUST (BHY)
----------------------------------
PRINCIPAL
AMOUNT
RATING(1) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--135.8%
CORPORATE BONDS--135.4%
AERO & DEFENSE--3.3%
B- $1,000 BE Aerospace, Inc., 9.50%, 11/01/08 ................................................... $ 942,500
NR 1,500(2) Condor Systems Inc., Ser. B, 11.875%, 5/01/09 ......................................... 525,000
-------------
1,467,500
-------------
AUTOMOTIVE--4.6%
B 1,000 CSK Auto, Inc., 12.00%, 6/15/06 ....................................................... 1,122,500
B3 1,000 Delco Remy Intl., Inc., 11.00%, 5/01/09 ............................................... 917,500
-------------
2,040,000
-------------
BASIC MATERIAL--0.6%
NR 2,000(2) Golden Northwest Aluminum Inc., 12.00%, 12/15/06 ...................................... 115,000
NR 376(2) Republic Engineered Products LLC, 10.00%, 8/16/09 ..................................... 112,941
NR 2,000(2) Republic Technologies International LLC, 13.75%, 7/15/09 .............................. 40,000
-------------
267,941
-------------
BUILDING & DEVELOPMENT--7.8%
B- 1,500 Ainsworth Lumber Co. Ltd., 12.50%, 7/15/07, (Canada) .................................. 1,710,000
Ba1 1,000 D.R. Horton, Inc., 10.50%, 4/01/05 .................................................... 1,090,000
CCC 1,000 MMI Prods Inc., Ser. B, 11.25%, 4/15/07 ............................................... 650,000
-------------
3,450,000
-------------
CHEMICAL--9.8%
CCC+ 250 Avecia Group PLC, 11.00%, 7/01/09, (United Kingdom) ................................... 232,500
Ba2 1,000 Hercules Inc., 11.125%, 11/15/07 ...................................................... 1,162,500
B 1,000(3) Huntsman LLC, 11.625%, 10/15/10 ....................................................... 960,000
B 1,000 Lyondell Chemical Co., 10.875%, 5/01/09 ............................................... 980,000
NR 1,750(2) Mississippi Chemical Corp., 7.25%, 11/15/17 ........................................... 140,000
CCC- 1,000 Solutia, Inc., 11.25%, 7/15/09 ........................................................ 890,000
-------------
4,365,000
-------------
CONGLOMERATES--2.5%
B- 1,000 Penhall Intl., Inc., 12.00%, 8/01/06 .................................................. 862,500
NR 250 Precision Partners Inc., 12.00%, 2/01/07 .............................................. 250,376
-------------
1,112,876
-------------
CONSUMER PRODUCTS--16.7%
BB+ 1,000 American Greetings Corp., 11.75%, 7/15/08 ............................................. 1,155,000
B+ 650 Elizabeth Arden, Inc., Ser. B, 11.75%, 2/01/11 ........................................ 744,250
B 250 Levi Strauss & Co., 11.625%, 1/15/08 .................................................. 215,000
B3 441 National Vision Inc., 12.00%, 3/30/09 ................................................. 233,685
NR 1,200(2) Nebco Evans Holding Co., 12.375%, 7/15/07 ............................................. 0
B- 1,100 Pantry, Inc., The, 10.25%, 10/15/07 ................................................... 1,138,500
Revlon Consumer Products Corp.,
CCC- 2,000 8.625%, 2/01/08 ..................................................................... 980,000
CCC+ 1,000 12.00%, 12/01/05 .................................................................... 980,000
B- 1,000 Sbarro, Inc., 11.00%, 9/15/09 ......................................................... 865,000
B- 1,000 St. John Knits Intl., Inc., 12.50%, 7/01/09 ........................................... 1,102,500
-------------
7,413,935
-------------
CONTAINERS & GLASS--4.8%
B 1,000(3) Radnor Holdings Inc., 11.00%, 3/15/10 ................................................. 860,000
CCC+ 1,500 U.S. Can Co., Ser. B, 12.375%, 10/01/10 ............................................... 1,275,000
-------------
2,135,000
-------------
ECOLOGICAL SERVICES & EQUIPMENT--2.4%
B+ 1,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ........................................ 1,087,500
-------------
ELECTRONICS--10.1%
B3 1,000 Communications & Power Industry Inc., 12.00%, 8/01/05 ................................. 1,012,500
CCC- 2,500 Knowles Electronics Holdings, Inc., 13.125%, 10/15/09 ................................. 2,475,000
B 825 On Semiconductor Corp., 12.00%, 3/15/10 ............................................... 981,750
-------------
4,469,250
-------------
See Notes to Financial Statements.
18
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
ENERGY--9.4%
B- $ 1,000 AES Corp., 8.375%, 8/15/07 ............................................................ $ 1,000,000
Calpine Corp.,
B 500(3) 8.75%, 7/15/13 ...................................................................... 457,500
CCC+ 1,000 10.50%, 5/15/06 ..................................................................... 915,000
CCC 1,000 Mission Energy Holding Co., 13.50%, 7/15/08 ........................................... 650,000
B2 1,000 Orion Power Holdings, Inc., 12.00%, 5/01/10 ........................................... 1,155,000
-------------
4,177,500
-------------
FINANCE & BANKING--16.3%
NR 500(2,3) Ameriserve Finance Capital Corp., 12.00%, 9/15/06 ..................................... 25,000
BBB+ 1,788 Asat Finance LLC, 12.50%, 11/01/06 .................................................... 1,876,980
Ba2 1,000(3) Capital Guardian High Yield, CBO, Ltd., Ser. 1A, 11.45%, 5/24/13 ...................... 820,000
BB 1,200(3) Crum & Forster Holdings Corp., 10.375%, 6/15/13 ....................................... 1,290,000
BB 1,000 Fairfax Financial Holdings Ltd., 6.875%, 4/15/08 ...................................... 970,000
Ba3 2,500(3) First Dominion Funding II, Ser. 1A, 11.614%, 4/25/14 .................................. 906,250
CCC+ 1,000 Madison River Capital Corp., 13.25%, 3/01/10 .......................................... 1,075,000
Caa 2,204(3) Zais Investment Grade Ltd., Class C, Pay-in-kind, 9.95%, 9/23/14 ...................... 264,474
-------------
7,227,704
-------------
FOREST PRODUCTS--1.5%
B 1,000 FiberMark Inc., 10.75%, 4/15/11 ....................................................... 670,000
-------------
HEALTH CARE--2.4%
B- 1,000 MedQuest Inc., Ser. B, 11.875%, 8/15/12 ............................................... 1,080,000
-------------
HOME FURNISHING--5.4%
CCC+ 1,760 O'Sullivan Industries Inc., 13.375%, 10/15/09 ......................................... 1,390,400
B- 1,000 Salton, Inc., 12.25%, 4/15/08 ......................................................... 990,000
-------------
2,380,400
-------------
INDUSTRIAL EQUIPMENT--6.2%
B- 1,000 Concentra Operating Corp., Ser. B, 13.00%, 8/15/09 .................................... 1,115,000
MSX Intl., Inc.,
B 500(3) 11.00%, 10/15/07 .................................................................... 500,000
B- 500 11.375%, 1/15/08 .................................................................... 385,000
Caa3 2,000(2) National Equipment Services Inc., Ser. D, 10.00%, 11/30/04 ............................ 740,000
-------------
2,740,000
-------------
LEISURE--1.7%
B3 1,000 Trump Atlantic City Assoc., 11.25%, 5/01/06 ........................................... 762,500
-------------
MEDIA--14.8%
B1 2,000 Alliance Atlantis Communications, Inc., 13.00%, 12/15/09, (Canada) .................... 2,307,500
Charter Communications Holdings LLC,
Ca 1,000 10.75%, 10/01/09 .................................................................... 845,000
Ca 1,000 11.125%, 1/15/11 .................................................................... 850,000
B- 1,000 WRC Media Inc., 12.75%, 11/15/09 ...................................................... 970,000
CCC+ 980 XM Satellite Radio Inc., 14.00%, 3/15/10 .............................................. 1,091,475
CC 647 Ziff Davis Media Inc., Ser. B, Pay-in-kind, 12.00%, 8/12/09 ........................... 517,733
-------------
6,581,708
-------------
TELECOMMUNICATION--5.3%
NR 2,000(2) Asia Global Crossing Ltd., 13.375%, 10/15/10, (United Kingdom) ........................ 290,000
B+ 1,000 Nextel Communications Inc., 12.00%, 11/01/08 .......................................... 1,062,500
NR 600(2,3) PF. Net Communications, Inc., 13.75%, 5/15/10 ......................................... 3,000
B3 1,000 Time Warner Telecom LLC, 9.75%, 7/15/08 ............................................... 1,025,000
-------------
2,380,500
-------------
TRANSPORTATION--9.8%
Amtran Inc.,
Ca 2,000(4) 9.625%, 12/15/05 .................................................................... 1,500,000
Ca 1,000(4) 10.50%, 8/01/04 ..................................................................... 780,000
B 1,000 Sea Containers Ltd., Ser. B, 10.75%, 10/15/06 ......................................... 970,000
B+ 1,000 TFM SA de CV, 12.50%, 6/15/12, (Mexico) ............................................... 1,100,000
-------------
4,350,000
-------------
Total Corporate Bonds ................................................................. 60,159,314
-------------
See Notes to Financial Statements.
19
SHARES DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK--0.4%
8,000 Mattress Discounters Corp. ............................................................ $ 0
54,000 Neon Communications Inc. .............................................................. 147,461
1,000 Precision Partners Inc. ............................................................... 49,659
-------------
Total Common Stock .................................................................... 197,120
-------------
PREFERRED SECURITIES--0.0%
1,098(2) Adelphia Business Solutions, Inc., Ser. B, 12.875% .................................... 549
-------------
UNITS
-------
WARRANTS--0.0%
1,000(3) Mattress Discounters Corp., Expires 7/15/07 ........................................... 1,000
53,622 Neon Communications Inc., Expires 12/02/12 ............................................ 0
600(3,4) PF. Net Communications, Inc., Expires 5/15/10 ......................................... 0
2,000(3) Republic Technologies International LLC, Expires 7/15/09 .............................. 20
-------------
Total Warrants ........................................................................ 1,020
-------------
TOTAL LONG-TERM INVESTMENTS--135.8% (cost $74,360,140) ................................ 60,358,003
-------------
PRINCIPAL
AMOUNT
(000)
----------
SHORT-TERM INVESTMENT--2.5%
U.S. GOVERNMENT AGENCY SECURITIES--2.5%
$ 1,100(5) Student Loan Marketing, 0.94%, 11/03/03 (cost $1,099,943) ............................. 1,099,943
-------------
TOTAL INVESTMENTS--138.3% (cost $75,460,083) .......................................... 61,457,946
-------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(38.3)% ........................................ (17,019,892)
-------------
NET ASSETS--100% ...................................................................... $ 44,438,054
=============
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Issuer is technically in default and/or bankruptcy.
(3) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of October 31, 2003, the
Trust held 13.7% of its net assets, with a current market value of
$6,087,244, in securities restricted as to resale.
(4) Illiquid securities representing 5.1% of net assets.
(5) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
See Notes to Financial Statements.
20
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2003
------------------------------------------
BLACKROCK INCOME OPPORTUNITY TRUST (BNA)
------------------------------------------
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--120.6%
MORTGAGE PASS-THROUGHS--34.4%
$24,438(2) Federal Home Loan Mortgage Corp., 6.50%, 1/01/26 - 11/01/32 ........................... $ 25,421,702
Federal National Mortgage Assoc.,
59,065(2) 5.50%, 1/01/29 - 2/01/33 ............................................................ 59,632,724
14,518(2) 6.00%, 3/01/27 - 11/01/32 ........................................................... 14,919,748
663 7.00%, 2/01/24 - 1/01/29 ............................................................ 699,682
23,315 5.50%, 12/01/13 - 9/01/17, TBA ...................................................... 24,030,868
15,677 6.00%, 12/01/09 - 11/01/17, TBA ..................................................... 16,331,883
250 Government National Mortgage Assoc., 8.00%, 4/15/24 - 11/15/25 ........................ 271,577
-------------
Total Mortgage Pass-Throughs .......................................................... 141,308,184
-------------
FEDERAL HOUSING ADMINISTRATION--2.0%
GMAC Projects,
900 Ser. 37, 7.43%, 5/01/22 ............................................................. 957,442
622 Ser. 44, 7.43%, 8/01/22 ............................................................. 661,910
Merrill Projects,
201 Ser. 29, 7.43%, 10/01/20 ............................................................ 213,624
1,867 Ser. 42, 7.43%, 9/01/22 ............................................................. 1,985,035
1,988 Reilly Project, Series B-11, 7.40%, 4/01/21 ........................................... 2,112,612
2,018 Westmore Project 8240, 7.25%, 4/01/21 ................................................. 2,135,584
-------------
Total Federal Housing Administration .................................................. 8,066,207
-------------
NON-AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--0.0%
AAA 139(3) Summit Mortgage Trust, Ser. 1, Class B1, 6.079%, 12/28/12 ............................. 140,043
-------------
ADJUSTABLE RATE MORTGAGE SECURITIES--0.0%
94 Federal National Mortgage Assoc., Ser. 256, Class F, 2.625%, 11/25/23 ................. 82,712
-------------
INVERSE FLOATING RATE MORTGAGES--0.8%
Federal Home Loan Mortgage Corp.,
7 Ser. 1601, Class SE, 10/15/08 ....................................................... 6,799
1,000 Ser. 1611, Class JC, 8/15/23 ........................................................ 1,058,090
Federal National Mortgage Assoc.,
1,808 Ser. 23, Class PS, 4/25/23 .......................................................... 2,083,241
33 Ser. 46, Class S, 5/25/21 ........................................................... 9,755
30 Ser. 49, Class S, 12/25/21 .......................................................... 3,381
153 Ser. 87, Class S, 8/25/21 ........................................................... 189,106
63 Ser. 145, Class S, 10/25/06 ......................................................... 76,521
-------------
Total Inverse Floating Rate Mortgages ................................................. 3,426,893
-------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--1.8%
Federal Home Loan Mortgage Corp.,
30 Ser. 19, Class R, 3/15/20 ........................................................... 3,812
0 Ser. 75, Class R, 1/15/21 ........................................................... 16
0 Ser. 173 Class R, 11/15/21 .......................................................... 84
8 Ser. 176 Class M, 7/15/21 ........................................................... 957
1 Ser. 192 Class U, 2/15/22 ........................................................... 173
49 Ser. 200 Class R, 12/15/22 .......................................................... 5,752
22 Ser. 1043 Class H, 2/15/21 .......................................................... 22,906
4 Ser. 1054 Class I, 3/15/21 .......................................................... 4,349
27 Ser. 1056 Class K, 3/15/21 .......................................................... 2,608
30 Ser. 1057 Class J, 3/15/21 .......................................................... 2,558
94 Ser. 1148 Class E, 10/15/21 ......................................................... 20,388
25 Ser. 1178 Class O, 11/15/21 ......................................................... 429
27 Ser. 1221 Class H, 3/15/07 .......................................................... 2,526
882 Ser. 1223, Class H, 3/15/22 ......................................................... 144,842
606 Ser. 1254, Class Z, 4/15/22 ......................................................... 132,425
2,862 Ser. 1809, Class SC, 12/15/23 ....................................................... 52,570
1,245 Ser. 1831, Class PG, 3/15/11 ........................................................ 147,705
323 Ser. 2080, Class PL, 1/15/27 ........................................................ 6,721
See Notes to Financial Statements.
21
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--(CONT'D)
Federal National Mortgage Assoc.,
$ 237 Ser. 5, Class H, 1/25/22 ............................................................ $ 49,328
19 Ser. 7, Class 2, 4/1/17 ............................................................. 3,598
1,100 Ser. 7, Class PH, 4/25/11 ........................................................... 137,428
51 Ser. 7, Class S, 3/25/21 ............................................................ 7,696
158 Ser. 10, Class S, 5/25/21 ........................................................... 22,074
122 Ser. 12, Class S, 5/25/21 ........................................................... 28,171
10,300 Ser. 16, Class IW, 11/25/12 ......................................................... 840,050
74 Ser. 17, Class S, 6/25/21 ........................................................... 10,619
2 Ser. 20, Class H, 3/25/06 ........................................................... 125
107 Ser. 33, Class PV, 10/25/21 ......................................................... 24,655
11 Ser. 38, Class N, 4/25/21 ........................................................... 1,970
1,196 Ser. 50, Class SI, 4/25/23 .......................................................... 30,921
9 Ser. 54, Class H, 5/25/05 ........................................................... 655
5,974 Ser. 70, Class IN, 5/25/15 .......................................................... 487,253
17 Ser. 84, Class H, 8/25/06 ........................................................... 1,669
33 Ser. 89, Class 2, 6/1/18 ............................................................ 6,060
25,750 Ser. 92, Class IC, 4/25/13 .......................................................... 3,639,298
10 Ser. 94, Class 2, 8/1/21 ............................................................ 1,630
43 Ser. 99, Class L, 8/25/21 ........................................................... 8,384
6 Ser. 123, Class M, 10/25/20 ......................................................... 1,344
58 Ser. 136, Class S, 11/25/20 ......................................................... 67,751
67 Ser. 139, Class PT, 10/25/21 ........................................................ 10,245
47 Ser. 141, Class SA, 8/25/07 ......................................................... 11,875
1,212 Ser. G46, Class H, 12/25/09 ......................................................... 225,365
12,117(3) Goldman Sachs Mortgage Securities Corp., Ser. 5, 2/19/25 .............................. 242,345
438 Government National Assoc., Ser. 3, Class E, 6/16/25 .................................. 77,368
7,402(3) Hanover Grantor Trust, Ser. A, Class 1, 8/1/27 ........................................ 87,898
3,403(3) Morgan Stanley Capital 1, Inc., Ser. HF1, Class X, 6/15/17 ............................ 124,543
7,359 Prudential Home Mortgage Securities Co., Ser. 05, Class A9, 2/25/24 ................... 1
Residential Asset Securization Trust,
10,137 Ser. A3, Class X, 5/25/29 ........................................................... 95,046
6,345 Ser. A5, Class A2, 9/25/30 .......................................................... 298,423
12,957 Salomon Brothers Mortgage Securities VII Inc., Ser. 1, Class IO, 3/25/22 .............. 103,265
26,388 Vendee Mortgage Trust, Ser. 1, Class IO, 2/15/27 ...................................... 239,079
-------------
Total Interest Only Mortgage-Backed Securities ........................................ 7,436,953
-------------
PRINCIPAL ONLY MORTGAGE-BACKED SECURITIES--0.6%
Federal Home Loan Mortgage Corp.,
357(2) Ser. 1739, Class B, 2/15/24 ......................................................... 328,367
79 Ser. 1857, Class PB, 12/15/08 ....................................................... 78,748
Federal National Mortgage Assoc.,
35 Ser. 167, Class D, 10/25/17 ......................................................... 30,963
76 Ser. 203, Class 1, 2/1/23 ........................................................... 67,472
57 Ser. 228, Class 1, 5/1/23 ........................................................... 51,735
234 Ser. 26, Class L, 3/25/23 ........................................................... 233,053
212 Ser. 279, Class 1, 7/1/26 ........................................................... 183,424
74 Ser. 51, Class E, 2/25/23 ........................................................... 56,175
44 Ser. 70, Class A, 5/25/23 ........................................................... 37,026
6,055 Resolution Funding Corp., Ser. B, 4/15/30 ............................................. 1,282,086
-------------
Total Principal Only Mortgage-Backed Securities ....................................... 2,349,049
-------------
U.S. GOVERNMENT AND AGENCY SECURITIES--9.0%
18,736 Overseas Private Investment Corp., 4.09%-7.35%, 5/29/12 ............................... 19,723,249
2,201 Small Business Administration, Ser. 20K-1, 6.95%, 11/01/16 ............................ 2,438,953
U.S. Treasury Notes,
9,300(2) 2.00%, 5/15/06 ...................................................................... 9,277,475
2,100(2) 4.00%, 11/15/12 ..................................................................... 2,068,254
2,715(2) 4.25%, 8/15/13 ...................................................................... 2,704,395
700 4.875%, 2/15/12 ..................................................................... 738,445
-------------
Total U.S. Government and Agency Securities ........................................... 36,950,771
-------------
COLLATERALIZED MORTGAGE OBLIGATION RESIDUALS--0.0%
5 Collateralized Mortgage Obligation Trust 40, Class R, 4/01/18 ......................... 457
76 Collateralized Mortgage Obligation Trust 42, Class R, 10/01/14 ........................ 2,711
Morgan Stanley Mortgage Trust,
83 Ser. 38, Class 2, 11/20/21 .......................................................... 14,049
92 Ser. 39, Class 2, 12/20/21 .......................................................... 16,110
-------------
Total Collateralized Mortgage Obligation Residuals .................................... 33,327
-------------
See Notes to Financial Statements.
22
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS--71.2%
AERO & DEFENSE--1.7%
B- $ 1,235 BE Aerospace, Inc., 9.50%, 11/01/08 ................................................... $ 1,163,988
BB- 1,500 L-3 Communications Corp., 7.625%, 6/15/12 ............................................. 1,635,000
BBB 1,250 Lockheed Martin Corp., 8.50%, 12/01/29 ................................................ 1,622,787
BBB 1,000 Northrop Grumman Corp., 7.125%, 2/15/11 ............................................... 1,143,370
BBB- 1,200 Raytheon Co., 6.15%, 11/01/08 ......................................................... 1,294,200
-------------
6,859,345
-------------
AUTOMOTIVE--1.9%
BB+ 1,500 Autonation, Inc., 9.00%, 8/01/08 ...................................................... 1,710,000
BB+ 2,000 Briggs & Stratton Corp., 8.875%, 3/15/11 .............................................. 2,300,000
B+ 3,715 Dura Operating Corp., Ser. B, 8.625%, 4/15/12 ......................................... 3,770,725
-------------
7,780,725
-------------
BASIC MATERIAL--1.3%
B+ 3,000 AK Steel Corp., 7.875%, 2/15/09 ....................................................... 2,100,000
A2 2,000 Alcoa, Inc., 7.375%, 8/01/10 .......................................................... 2,330,880
B 1,000 Oregon Steel Mills, Inc., 10.00%, 7/15/09 ............................................. 820,000
-------------
5,250,880
-------------
BUILDING & DEVELOPMENT--0.9%
B- 1,000 Ainsworth Lumber Co. Ltd., 12.50%, 7/15/07, (Canada) .................................. 1,140,000
Ba1 2,500 D.R. Horton, Inc., 10.50%, 4/01/05 .................................................... 2,725,000
-------------
3,865,000
-------------
CHEMICAL--1.9%
CCC+ 500 Avecia Group PLC, 11.00%, 7/01/09, (United Kingdom) ................................... 465,000
Dow Chemical Co.,
A- 750 5.75%, 12/15/08 ..................................................................... 795,713
A- 1,400 6.00%, 10/01/12 ..................................................................... 1,453,816
BB- 3,000 Lyondell Chemical Co., 11.125%, 7/15/12 ............................................... 3,120,000
B 1,750 Noveon, Inc., Ser. B, 11.00%, 2/28/11 ................................................. 2,012,500
-------------
7,847,029
-------------
CONGLOMERATES--1.2%
AAA 3,650 General Electric Co., 5.00%, 2/01/13 .................................................. 3,671,572
A 1,300 Honeywell, Inc., 6.125%, 11/01/11 ..................................................... 1,422,317
-------------
5,093,889
-------------
CONSUMER PRODUCTS--9.1%
A 2,000 Avery Dennison Corp., 4.875%, 1/15/13 ................................................. 1,981,800
B- 2,000 Buffets Inc., 11.25%, 7/15/10 ......................................................... 2,160,000
General Mills, Inc.,
BBB+ 550 5.125%, 2/15/07 ..................................................................... 584,188
BBB+ 1,700 6.00%, 2/15/12 ...................................................................... 1,814,087
Kellogg Co.,
BBB 700 Ser. B, 6.00%, 4/01/06 .............................................................. 753,977
BBB 2,000 Ser. B, 6.60%, 4/01/11 .............................................................. 2,235,420
A- 3,000 Kohls Corp., 6.30%, 3/01/11 ........................................................... 3,333,720
A3 2,000 Kraft Foods, Inc., 5.625%, 11/01/11 ................................................... 2,080,340
BBB 1,000 Kroger Co., 5.50%, 2/01/13 ............................................................ 1,015,930
B 2,000 Levi Strauss & Co., 12.25%, 12/15/12 .................................................. 1,650,000
AA- 3,000 Procter & Gamble Co., 6.875%, 9/15/09 ................................................. 3,463,230
B 2,000 Roundys, Inc., Ser. B, 8.875%, 6/15/12 ................................................ 2,090,000
BBB 2,495 Safeway, Inc., 6.50%, 3/01/11 ......................................................... 2,722,155
A+ 2,000 Unilever Capital Corp., 7.125%, 11/01/10 .............................................. 2,318,500
BB- 2,000 United Rentals N.A. Inc., 10.75%, 4/15/08 ............................................. 2,240,000
AA 3,000 Wal-Mart Stores, Inc., 6.875%, 8/10/09 ................................................ 3,447,990
BB+ 3,000 Yum! Brands, Inc., 8.875%, 4/15/11 .................................................... 3,570,000
-------------
37,461,337
-------------
CONTAINERS & GLASS--1.9%
B+ 1,500 Crown European Holdings SA, 9.50%, 3/01/11, (United Kingdom) .......................... 1,665,000
BB 2,250 Owens-Brockway Glass Container, Inc., 8.875%, 2/15/09 ................................. 2,435,625
B+ 2,275 Plastipak Holdings, Inc., 10.75%, 9/01/11 ............................................. 2,502,500
B 1,240 Stone Container Corp., 9.25%, 2/01/08 ................................................. 1,351,600
-------------
7,954,725
-------------
See Notes to Financial Statements.
23
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
ECOLOGICAL SERVICES & EQUIPMENT--1.4%
B+ $ 3,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ........................................ $ 3,262,500
B 2,250 Casella Waste Systems Inc., 9.75%, 2/01/13 ............................................ 2,452,500
-------------
5,715,000
-------------
ELECTRONICS--0.5%
B- 1,750 Chippac Int. Ltd., Ser. B, 12.75%, 8/01/09 ............................................ 1,933,750
-------------
ENERGY--8.3%
BBB 2,000 Amerada Hess Corp., 6.65%, 8/15/11 .................................................... 2,158,360
BBB+ 600 Anadarko Petroleum Corp., 5.375%, 3/01/07 ............................................. 641,154
BB- 2,500 Chesapeake Energy Corp., 9.00%, 8/15/12 ............................................... 2,850,000
A- 3,000 Conoco Funding Co., 6.35%, 10/15/11 ................................................... 3,333,630
BBB+ 2,000 Dominion Resources, Inc., 5.70%, 9/17/12 .............................................. 2,087,700
B 2,500 Dresser, Inc., 9.375%, 4/15/11 ........................................................ 2,568,750
BBB 1,500 DTE Energy Co., 7.05%, 6/01/11 ........................................................ 1,696,980
B- 2,000(2) Dynegy Holdings Inc., 10.125%, 7/15/13 ................................................ 2,160,000
B 400 El Paso Corporation, 7.875%, 6/15/12 .................................................. 341,000
B+ 1,000 El Paso Natural Gas Co., 7.625%, 8/01/10 .............................................. 990,000
B+ 1,500(2) El Paso Production Holding Co., 7.75%, 6/01/13 ........................................ 1,440,000
BBB+ 640 Exelon Corp., 6.75%, 5/01/11 .......................................................... 709,306
Baa2 1,500 FirstEnergy Corp., Ser. C, 7.375%, 11/15/31 ........................................... 1,602,404
BBB+ 1,250 Kinder Morgan Energy Partners LP, 7.30%, 8/15/33 ...................................... 1,391,124
BBB 1,000 Kinder Morgan, Inc., 6.50%, 9/01/12 ................................................... 1,091,060
BB- 2,500 Leviathan Gas Pipeline Partners LP, Ser. B, 10.375%, 6/01/09 .......................... 2,712,500
BBB+ 1,800 Occidental Petroleum Corp., 6.75%, 1/15/12 ............................................ 2,030,310
Progress Energy, Inc.,
Baa2 1,800 6.75%, 3/01/06 ...................................................................... 1,953,270
Baa2 2,000 7.10%, 3/01/11 ...................................................................... 2,235,380
-------------
33,992,928
-------------
FINANCE & BANKING--15.8%
Aa3 2,450 Bank of America Corp., 7.80%, 2/15/10 ................................................. 2,892,250
Aa3 1,400(2) Bank One Corp., 6.50%, 2/01/06 ........................................................ 1,516,088
Aa3 2,000(3) Barclays Bank PLC, 6.86%, 9/29/49, (United Kingdom) ................................... 2,157,304
A1 500 Bear Stearns Co., Inc., 6.50%, 5/01/06 ................................................ 544,205
Aa2 6,000 Citigroup, Inc., 5.625%, 8/27/12 ...................................................... 6,330,360
Credit Suisse First Boston USA, Inc.,
Aa3 700(2) 6.125%, 11/15/11 .................................................................... 756,889
Aa3 1,000 7.125%, 7/15/32 ..................................................................... 1,125,840
BB 1,000(3) Crum & Forster Holdings Corp., 10.375%, 6/15/13 ....................................... 1,075,000
AAA 4,0002 Federal Home Loan Mortgage Corp., 6.875%, 9/15/10 ..................................... 4,623,200
AAA 4,000 Federal National Mortgage Assoc., 4.375%, 9/15/12 ..................................... 3,926,720
A3 3,000(2) Ford Motor Credit Co., 6.875%, 2/01/06 ................................................ 3,136,320
AAA 3,000 General Electric Capital Corp., Ser. A, 6.75%, 3/15/32 ................................ 3,330,180
General Motors Acceptance Corp.,
A3 700 6.75%, 1/15/06 ...................................................................... 747,180
A3 4,000 6.875%, 8/28/12 ..................................................................... 4,112,800
Aa3 1,000 Goldman Sachs Group, Inc., 6.60%, 1/15/12 ............................................. 1,110,050
A1 3,650 Household Finance Corp., 6.375%, 10/15/11 - 11/27/12 .................................. 3,978,887
JP Morgan Chase & Co.,
A+ 2,100 5.25%, 5/30/07 ...................................................................... 2,243,472
A 1,000 6.75%, 2/01/11 ...................................................................... 1,120,650
AAA 3,000 KFW Intl. Finance, Inc., 5.25%, 6/28/06 ............................................... 3,213,300
Ba1 1,000 Labranche & Co., Inc., 12.00%, 3/02/07 ................................................ 1,025,000
Lehman Brothers Holdings, Inc.,
A1 850 6.25%, 5/15/06 ...................................................................... 924,817
A1 1,500 6.625%, 1/18/12 ..................................................................... 1,676,280
A 2,000 Metlife, Inc., 5.375%, 12/15/12 ....................................................... 2,055,920
Morgan Stanley,
Aa3 600 5.80%, 4/01/07 ...................................................................... 646,956
Aa3 1,600 6.75%, 4/15/11 ...................................................................... 1,792,400
A+ 2,000 Northern Trust Co., 6.30%, 3/07/11 .................................................... 2,197,980
Baa1 2,000 Sears Roebuck Acceptance Corp., 6.75%, 8/15/11 ........................................ 2,242,200
AA- 2,000 UBS Preferred Funding Trust I, 8.622%, 10/29/49 ....................................... 2,451,113
Aa1 2,000 Wells Fargo Bank, 7.55%, 6/21/10 ...................................................... 2,360,060
-------------
65,313,421
-------------
See Notes to Financial Statements.
24
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS--1.8%
B+ $2,000 Caraustar Industries, Inc., 9.875%, 4/01/11 ........................................... $ 2,080,000
BB 2,500 Tembec Industries, Inc., 8.50%, 2/01/11, (Canada) ..................................... 2,425,000
Weyerhaeuser Co.,
BBB 1,550 5.95%, 11/01/08 ..................................................................... 1,658,640
BBB 1,000 6.75%, 3/15/12 ...................................................................... 1,083,590
-------------
7,247,230
-------------
HEALTH CARE--1.3%
AA- 1,000 Bristol Myers Squibb Co., 5.75%, 10/01/11 ............................................. 1,069,390
D 3,000(4) HealthSouth Corp., 7.00%, 6/15/08 ..................................................... 2,610,000
BB+ 1,500 Omnicare, Inc., Ser. B, 8.125%, 3/15/11 ............................................... 1,638,750
-------------
5,318,140
-------------
HOTELS & CASINO--4.5%
B+ 2,100 Argosy Gaming Co., 10.75%, 6/01/09 .................................................... 2,296,875
B+ 2,000 Boyd Gaming Corp., 8.75%, 4/15/12 ..................................................... 2,170,000
B 2,000 Extended Stay America, Inc., 9.875%, 6/15/11 .......................................... 2,240,000
B 1,700 Hammons John Q. Hotels LP, Ser. B, 8.875%, 5/15/12 .................................... 1,857,250
B 1,500 Herbst Gaming, Inc., Ser. B, 10.75%, 9/01/08 .......................................... 1,676,250
Ba3 1,500 HMH Properties, Inc., Ser. B, 7.875%, 8/01/08 ......................................... 1,548,750
Ba2 1,000 MGM Mirage, Inc., 9.75%, 6/01/07 ...................................................... 1,133,750
Ba2 2,000 Park Place Entertainment Corp., 8.875%, 9/15/08 ....................................... 2,222,500
BB+ 3,000 Starwood Hotels & Resorts World, 7.875%, 5/01/12 ...................................... 3,315,000
-------------
18,460,375
-------------
INDUSTRIAL EQUIPMENT--0.9%
B- 1,200 Concentra Operating Corp., Ser. B, 13.00%, 8/15/09 .................................... 1,338,000
B 2,010 Manitowoc, Inc., 10.50%, 8/01/12 ...................................................... 2,281,350
-------------
3,619,350
-------------
MEDIA--5.3%
B1 2,000 Alliance Atlantis Communications, Inc., 13.00%, 12/15/09, (Canada) .................... 2,307,500
AOL Time Warner, Inc.,
BBB+ 2,000 7.70%, 5/01/32 ...................................................................... 2,263,460
BBB+ 3,000 9.125%, 1/15/13 ..................................................................... 3,771,570
Ca 3,000 Charter Communications Holdings LLC, 10.75%, 10/01/09 ................................. 2,535,000
Comcast Cable Communications, Inc.,
BBB 1,000 6.75%, 1/30/11 ...................................................................... 1,107,070
BBB 1,800 8.875%, 5/01/17 ..................................................................... 2,277,601
BB- 3,000 EchoStar DBS Corp., 10.375%, 10/01/07 ................................................. 3,300,000
B 1,000 Quebecor Media, Inc., 11.125%, 7/15/11, (Canada) ...................................... 1,152,500
B- 3,000 WRC Media Inc., 12.75%, 11/15/09 ...................................................... 2,910,000
-------------
21,624,701
-------------
OTHER--4.8%
A3 17,508(3) Targeted Return Index Securities Trust, Inc, Ser. 10-2002, 6.851%, 1/15/12 ............ 19,642,548
-------------
REAL ESTATE--0.5%
BBB+ 1,000 AvalonBay Communities, Inc., 6.625%, 9/15/11 .......................................... 1,089,660
BBB+ 800 EOP Operating LP, 7.00%, 7/15/11 ...................................................... 901,152
-------------
1,990,812
-------------
TECHNOLOGY--0.5%
BB+ 2,000 Seagate Technology Holdings, 8.00%, 5/15/09 ........................................... 2,175,000
-------------
TELECOMMUNICATION--3.7%
BBB+ 2,000 Deutsche Telekom Intl. Finance BV, 8.50%, 6/15/10, (Netherlands) ...................... 2,406,020
B3 1,340 Dobson Communications Corp., 10.875%, 7/01/10 ......................................... 1,474,000
B+ 1,000 Nextel Communications, Inc., 9.95%, 2/15/08 ........................................... 1,050,000
Ba3 3,000 PanAmSat Corp., 8.50%, 2/01/12 ........................................................ 3,217,500
SBC Communications, Inc.,
A+ 450 5.875%, 8/15/12 ..................................................................... 476,069
A+ 1,000 6.25%, 3/15/11 ...................................................................... 1,089,040
A+ 1,000 Verizon Global Funding Corp., 7.75%, 6/15/32 .......................................... 1,162,540
Aa3 3,000 Verizon Pennsylvania, Inc., Ser. A, 5.65%, 11/15/11 ................................... 3,117,810
A 1,000 Vodafone Group PLC, 7.75%, 2/15/10, (United Kingdom) .................................. 1,177,710
-------------
15,170,689
-------------
See Notes to Financial Statements.
25
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
-----------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--2.0%
BBB+ $ 1,000 Burlington Northern Santa Fe Corp., 5.90%, 7/01/12 ...................................... $ 1,062,630
BBB+ 1,000 Canadian National Railway Co., 6.375%, 10/15/11, (Canada) ............................... 1,102,912
BBB 1,475 Canadian Pacific Railway Ltd., 6.25%, 10/15/11, (Canada) ................................ 1,613,960
B 2,000 Railamerica Transportation Corp., 12.875%, 8/15/10 ...................................... 2,300,000
BBB 2,000 Union Pacific Corp., 6.125%, 1/15/12 .................................................... 2,156,740
-------------
8,236,242
-------------
Total Corporate Bonds ................................................................... 292,553,116
-------------
FOREIGN GOVERNMENT BONDS--0.8%
Baa2 3,000 United Mexican States, 8.00%, 9/24/22 ................................................... 3,240,000
-------------
TOTAL LONG-TERM INVESTMENTS (cost $479,724,642) ......................................... 495,587,255
-------------
SHORT-TERM INVESTMENTS--15.4%
U.S. GOVERNMENT AND AGENCY SECURITIES--15.4%
8,800(5) Student Loan Marketing, 0.94%, 11/03/03 ................................................. 8,799,540
21,632(5) U.S. Treasury Bonds, 0.85%, 11/03/03 .................................................... 21,631,500
32,794(5) U.S. Treasury Notes, 0.85%, 11/03/03 .................................................... 32,793,750
-------------
TOTAL SHORT-TERM INVESTMENTS (cost $63,224,790) ......................................... 63,224,790
-------------
TOTAL INVESTMENTS BEFORE INVESTMENTS SOLD SHORT AND OUTSTANDING OPTIONS WRITTEN
(COST $542,949,432) ................................................................... 558,812,045
-------------
INVESTMENTS SOLD SHORT--(13.1%)
(20,700) U.S. Treasury Bonds, 5.375%, 2/15/31 .................................................... (21,391,339)
(33,000) U.S. Treasury Notes, 2.625%, 5/15/08 .................................................... (32,349,008)
-------------
TOTAL INVESTMENTS SOLD SHORT (proceeds $53,049,018) ..................................... (53,740,347)
-------------
NOTIONAL
AMOUNT
(000)
---------
OUTSTANDING OPTIONS WRITTEN--(0.6)%
$56,300 Interest Rate Swap, 3.60% over 3 month LIBOR, expires 11/01/04 .......................... (577,973)
55,000 Interest Rate Swap, 5.75% over 3 month LIBOR, expires 9/23/05 ........................... (1,256,200)
11,900 Interest Rate Swap, 6.00% over 3 month LIBOR, expires 10/25/04 .......................... (470,645)
140 U.S. Treasury Notes Futures ............................................................. (277,812)
-------------
Total Outstanding Options Written (premium received $2,432,578) ......................... (2,582,630)
-------------
TOTAL INVESTMENTS, NET OF INVESTMENTS SOLD SHORT AND OUTSTANDING OPTIONS WRITTEN--122.3% 502,486,068
LIABILITIES IN EXCESS OF OTHER ASSETS--(22.3)% .......................................... (91,505,304)
-------------
NET ASSETS--100% ........................................................................ $ 410,980,764
=============
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
(3) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of October 31, 2003, the
Trust held 6.6% of its net assets, with a current market value of
$27,069,681, in securities restricted as to resale.
(4) Issuer is technically in default.
(5) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
See Notes to Financial Statements.
26
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2003
------------------------------
BLACKROCK INCOME TRUST (BKT)
------------------------------
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--117.0%
MORTGAGE PASS-THROUGHS--37.1%
Federal Home Loan Mortgage Corp.,
$23,746 5.50%, 10/01/16 - 5/01/17 ........................................................... $ 24,461,458
136 6.50%, 5/01/29 - 5/01/30 ............................................................ 141,617
43 7.50%, 2/01/23 ...................................................................... 46,482
204 8.00%, 11/01/15 ..................................................................... 215,307
411 9.00%, 9/01/20 ...................................................................... 457,762
173 8.50%, 10/01/06 - 3/01/08, TBA ...................................................... 184,693
Federal National Mortgage Assoc.,
19,391 5.00%, 6/01/33 ...................................................................... 19,138,264
59,3852 5.50%, 11/01/16 - 9/01/17 ........................................................... 61,210,114
19,781 6.00%, 11/01/31 - 10/01/32 .......................................................... 20,306,567
11,876 6.50%, 2/01/26 - 5/01/31 ............................................................ 12,342,158
18,433 7.00%, 6/01/26 - 2/01/32 ............................................................ 19,413,933
5,292 7.50%, 11/01/14 - 9/01/23 ........................................................... 5,922,556
917 8.00%, 5/01/08 - 5/01/22 ............................................................ 981,646
14 9.50%, 1/01/19 - 6/01/20 ............................................................ 15,254
1,688 5.50%, 12/01/13 - 6/01/17, TBA ...................................................... 1,743,624
Government National Mortgage Assoc.,
193 7.00%, 10/15/17 ..................................................................... 205,930
1,437 7.50%, 8/15/21 - 12/15/23 ........................................................... 1,546,568
1,027 8.00%, 10/15/22 - 2/15/29 ........................................................... 1,112,263
79 9.00%, 6/15/18 - 9/15/21 ............................................................ 87,360
-------------
Total Mortgage Pass-Throughs .......................................................... 169,533,556
-------------
FEDERAL HOUSING ADMINISTRATION--3.4%
GMAC Projects,
754 Ser. 46, 7.43%, 1/01/22 ............................................................. 802,375
665 Ser. 51, 7.43%, 2/01/23 ............................................................. 706,873
1,920 Ser. 56, 7.43%, 11/01/22 ............................................................ 2,041,567
100 Merrill Project, Ser. 54, 7.43%, 5/15/23 .............................................. 105,920
904 Reilly Project, Ser. 41, 8.28%, 3/01/20 ............................................... 934,040
USGI Projects,
346 Ser. 87, 7.43%, 12/01/22 ............................................................ 358,286
1,385 Ser. 99, 7.43%, 10/01/23 ............................................................ 1,472,601
2,450 Ser. 6302, 7.43%, 12/01/21 .......................................................... 2,562,282
6,224 Yorkville, Ser. 6094, 7.43%, 6/01/21 .................................................. 6,619,842
-------------
Total Federal Housing Administration .................................................. 15,603,786
-------------
AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--3.7%
Federal Home Loan Mortgage Corp.,
592 Ser. 19, Class F, 3/15/20 ........................................................... 592,054
8,578 Ser. T-11, Class A-9, 1/25/28 ....................................................... 7,817,843
Federal National Mortgage Assoc.,
739 Ser. 12, Class G, 2/25/20 ........................................................... 747,130
770 Ser. 43, Class E, 4/25/22 ........................................................... 799,764
Government National Mortgage Assoc.,
3,356 Ser. 5, Class Z, 5/16/26 ............................................................ 3,489,864
2,500 Ser. 33, Class PB, 7/20/31 .......................................................... 2,620,289
4,516 Ser. 58, Class IT, 7/20/33 .......................................................... 799,504
-------------
Total Agency Multiple Class Mortgage Pass-Throughs .................................... 16,866,448
-------------
NON-AGENCY MULTIPLE CLASS MORTGAGE PASS-THROUGHS--0.1%
AAA 200 Prudential Home Mortgage Securities Co., Ser. 35, Class A12, 6.75%, 9/25/08 ........... 199,614
AAA 418(3) Summit Mortgage Trust, Ser. 1, Class B1, 6.079%, 12/28/12 ............................. 420,129
-------------
Total Non-Agency Multiple Class Mortgage Pass-Throughs ................................ 619,743
-------------
ADJUSTABLE RATE MORTGAGE SECURITIES--0.1%
Federal National Mortgage Assoc.,
314 Ser. 38, Class F, 4/25/21 ........................................................... 335,414
211 Ser. 256, Class F, 11/25/23 ......................................................... 186,102
-------------
Total Adjustable Rate Mortgage Securities ............................................. 521,516
-------------
See Notes to Financial Statements.
27
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
INVERSE FLOATING RATE MORTGAGES--4.6%
AAA $ 156 Banc of America Mortgage Securities Inc., Ser. 2, Class 1A, 4/25/33 ................... $ 156,430
Federal Home Loan Mortgage Corp.,
105 Ser. 1160, Class F, 10/15/21 ........................................................ 121,015
7 Ser. 1601, Class SE, 10/15/08 ....................................................... 7,373
1,225(2) Ser. 1616, Class SB, 11/15/08 ....................................................... 1,286,265
3,721 Ser. 1688, Class S, 12/15/13 ........................................................ 4,016,659
Federal National Mortgage Assoc.,
2,213 Ser. 32, Class SA, 5/25/32 .......................................................... 2,299,948
319 Ser. 38, Class SA, 4/25/21 .......................................................... 333,189
75 Ser. 46, Class S, 5/25/21 ........................................................... 22,018
311 Ser. 48, Class SC, 6/25/33 .......................................................... 309,167
65 Ser. 49, Class S, 12/25/21 .......................................................... 7,258
335 Ser. 87, Class S, 8/25/21 ........................................................... 413,197
1,049 Ser. 93, Class S, 5/25/08 ........................................................... 1,085,094
128 Ser. 145, Class S, 10/25/06 ......................................................... 155,741
782 Ser. 170, Class SC, 9/25/08 ......................................................... 814,772
3,474 Ser. 196, Class SC, 10/25/08 ........................................................ 3,705,679
1,187 Ser. 214, Class S, 12/25/08 ......................................................... 1,224,596
972 Ser. 214, Class SH, 12/25/08 ........................................................ 1,080,486
2,562 Ser. 247, Class SN, 12/25/23 ........................................................ 2,657,500
Aaa 952 Kidder Peabody Acceptance Corp., Ser. 1, Class A6, 8/25/23 ............................ 968,346
AAA 238 Residential Funding Mortgage Securities Inc., Ser. S36, Class A13, 10/25/08 ........... 240,144
-------------
Total Inverse Floating Rate Mortgages 20,904,877
-------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--17.2%
American Housing Trust,
443 Ser. III, Class 4, 3/25/19 .......................................................... 9,999
97 Ser. VII, Class 2, 11/25/20 ......................................................... 291,961
103,939 Commercial Mortgage Acceptance Corp., Ser. ML1, 12/15/30 .............................. 2,078,786
34,311(3) CS First Boston Mortgage Securities Corp., Ser. C1, Class AX, 6/20/29 ................. 1,765,244
Federal Home Loan Mortgage Corp.,
56 Ser. 19, Class R, 3/15/20 ........................................................... 7,226
64 Ser. 75, Class R, 1/15/21 ........................................................... 64,332
0 Ser. 173 Class R, 11/15/21 .......................................................... 175
17 Ser. 176 Class M, 7/15/21 ........................................................... 2,055
2 Ser. 192 Class U, 2/15/22 ........................................................... 354
109 Ser. 200 Class R, 12/15/22 .......................................................... 12,819
6,294 Ser. 204, 5/01/29 ................................................................... 1,030,590
48 Ser. 1043 Class H, 2/15/21 .......................................................... 49,179
5 Ser. 1054 Class I, 3/15/21 .......................................................... 6,420
59 Ser. 1056 Class K, 3/15/21 .......................................................... 5,599
65 Ser. 1057 Class J, 3/15/21 .......................................................... 5,491
203 Ser. 1148 Class E, 10/15/21 ......................................................... 43,773
54 Ser. 1178 Class O, 11/15/21 ......................................................... 921
57 Ser. 1221 Class H, 3/15/07 .......................................................... 5,423
3,000 Ser. 1598 Class J, 10/15/08 ......................................................... 3,218,850
1,843 Ser. 1706, Class IA, 10/15/23 ....................................................... 272,406
520 Ser. 1720, Class PK, 1/15/24 ........................................................ 68,686
7,584 Ser. 1809, Class SC, 12/15/23 ....................................................... 139,309
13,682 Ser. 1914, Class PC, 12/15/11 ....................................................... 169,244
1,889 Ser. 1961 Class H, 5/15/12 .......................................................... 1,968,825
19,208 Ser. 2002, Class HJ, 10/15/08 ....................................................... 716,710
41 Ser. 2037, Class IB, 12/15/26 ....................................................... 16
766 Ser. 2050, Class PI, 12/15/11 ....................................................... 5,157
541 Ser. 2063, Class PI, 4/15/12 ........................................................ 13,418
896 Ser. 2080, Class PL, 1/15/27 ........................................................ 18,663
1,409 Ser. 2099, Class JB, 9/15/22 ........................................................ 107,754
65 Ser. 2138, Class PI, 3/15/11 ........................................................ 11
6,773 Ser. 2218 Class Z, 3/15/30 .......................................................... 7,826,295
3,625 Ser. 2296, Class SA, 3/15/16 ........................................................ 206,415
2,225 Ser. 2345 Class PQ, 8/15/16 ......................................................... 2,324,013
2,975 Ser. 2444, Class ST, 9/15/29 ........................................................ 219,403
2,488 Ser. 2513, Class BI, 12/15/15 ....................................................... 224,793
3,524 Ser. 2542, Class MX, 5/15/22 ........................................................ 333,153
4,613 Ser. 2543, Class IM, 9/15/12 ........................................................ 240,856
7,701 Ser. 2545, Class NI, 3/15/22 ........................................................ 1,585,503
11,974 Ser. 2561, Class EW, 9/15/16 ........................................................ 1,398,487
592 Ser. 2613, Class ZT, 3/15/33 ........................................................ 592,266
See Notes to Financial Statements.
28
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
INTEREST ONLY MORTGAGE-BACKED SECURITIES--(CONT'D)
Federal Home Loan Mortgage Corp., (cont'd)
$29,000 Ser. 2633, Class PI, 3/15/12 ........................................................ $ 2,522,710
11,963 Ser. 2658, Class PI, 6/15/13 ........................................................ 1,468,619
31,948 Ser. G-60, Class HS, 4/25/24 ........................................................ 1,653,168
Federal National Mortgage Assoc.,
2,606 Ser. 2, Class ID, 3/25/23 ........................................................... 2,294
610 Ser. 5, Class H, 1/25/22 ............................................................ 126,842
36 Ser. 7, Class 2, 4/01/17 ............................................................ 6,884
110 Ser. 7, Class S, 3/25/21 ............................................................ 16,522
339 Ser. 10, Class S, 5/25/21 ........................................................... 47,394
262 Ser. 12, Class S, 5/25/21 ........................................................... 60,481
28,816 Ser. 16, Class PI, 11/25/12 ......................................................... 2,057,734
158 Ser. 17, Class S, 6/25/21 ........................................................... 22,799
4 Ser. 20, Class H, 3/25/06 ........................................................... 265
40,162 Ser. 23, Class ES, 10/25/22 ......................................................... 4,437,898
230 Ser. 33, Class PV, 10/25/21 ......................................................... 52,928
7,981 Ser. 33, Class SG, 3/25/09 .......................................................... 680,120
8,631 Ser. 37, Class SE, 10/25/22 ......................................................... 46,687
44,896 Ser. 38, Class MI, 9/25/20 .......................................................... 9,411,201
24 Ser. 38, Class N, 4/25/21 ........................................................... 4,229
15,708 Ser. 39, Class IA, 10/25/22 ......................................................... 3,533,588
39,896 Ser. 41, Class SP, 7/25/15 .......................................................... 4,108,138
2,393 Ser. 50, Class SI, 4/25/23 .......................................................... 61,842
7,372 Ser. 51, Class IE, 4/25/26 .......................................................... 1,403,760
20 Ser. 54, Class H, 5/25/05 ........................................................... 1,406
3,132 Ser. 62, Class IC, 7/25/15 .......................................................... 176,325
4,972 Ser. 62, Class IL, 3/25/24 .......................................................... 340,307
9,495 Ser. 66, Class Ci, 7/25/33 .......................................................... 2,425,663
10,119 Ser. 68, Class SC, 1/25/24 .......................................................... 834,705
7,989 Ser. 82, Class IR, 9/25/12 .......................................................... 715,227
36 Ser. 84, Class H, 8/25/06 ........................................................... 3,584
72 Ser. 89, Class 2, 6/01/18 ........................................................... 13,011
35,584 Ser. 90, Class M, 1/25/28 ........................................................... 5,187,078
18 Ser. 94, Class 2, 8/01/21 ........................................................... 3,125
93 Ser. 99, Class L, 8/25/21 ........................................................... 18,003
13 Ser. 123, Class M, 10/25/20 ......................................................... 2,886
125 Ser. 136, Class S, 11/25/20 ......................................................... 145,460
144 Ser. 139, Class PT, 10/25/21 ........................................................ 21,997
90 Ser. 141, Class SA, 8/25/07 ......................................................... 22,791
6,769 Ser. 199, Class SB, 10/25/23 ........................................................ 703,657
3,306 Ser. 301, Class 2, 4/01/29 .......................................................... 509,377
6,046 Ser. 302, Class 2, 6/01/29 .......................................................... 1,107,260
4,297 Ser. 339, Class 8, 7/01/33 .......................................................... 915,807
9,236 Ser. 602, Class BI, 10/25/22 ........................................................ 1,326,748
196 Ser. G-50, Class G, 12/25/21 ........................................................ 36,149
163 Ser. G92-12, Class C, 2/25/22 ....................................................... 30,944
1,922 Ser. G92-60, Class SB, 10/25/22 ..................................................... 53,164
2,063 Ser. W4, 12/25/28 ................................................................... 324,280
226 First Boston Mortgage Securities Corp., Ser. C, Class I, 4/25/17 ...................... 43,920
35,942 GMAC Commercial Mortgage Securities, Inc., Ser. C1, Class X, 7/15/27 .................. 2,050,369
24,961(3) Goldman Sachs Mortgage Securities Corp., Ser. 5, 2/19/25 .............................. 481,763
14,091(3) Hanover Grantor Trust, Ser. A, Class 1, 8/01/27 ....................................... 167,334
236 Kidder Peabody Acceptance Corp., Ser. B, Class A2, 4/22/18 ............................ 52,769
6,936 Merrill Lynch Mortgage Investors, Inc., Ser. C2, 6/15/21 .............................. 150,966
11,312(3) Morgan Stanley Capital 1, Inc., Ser. HF1, Class X, 6/15/17 ............................ 413,939
13,668 Prudential Home Mortgage Securities Co., Ser 5, Class A9, 2/25/24 ..................... 1
51 Prudential Securities Inc., Ser. 15, Class 1G, 5/20/21 ................................ 21,234
4,017 Residential Accredit Loans, Inc., Ser. QS7, Class A1, 4/25/33 ......................... 726,582
27,242 Small Business Administration, Ser. 1, 4/01/15 ........................................ 340,520
231,356 Vendee Mortgage Trust, Ser. 2, Class 1, 5/15/29 ....................................... 393,306
-------------
Total Interest Only Mortgage-Backed Securities 78,518,340
-------------
See Notes to Financial Statements.
29
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL ONLY MORTGAGE-BACKED SECURITIES--12.5%
Aaa $ 273 Chase Mortgage Finance Corp., Ser. A, Class AP, 1/25/10 ............................... $ 255,001
Aaa 196 Collateralized Mortgage Obligation Trust, Ser. 29, Class A, 5/23/17 ................... 177,619
Countrywide Home Loans Inc.,
AAA 9,501 Ser. 26, 8/25/33 .................................................................... 7,107,596
AAA 1,774 Ser. J4, 6/25/33 .................................................................... 1,288,369
AAA 2,536 Ser. J5, 7/25/33 .................................................................... 1,889,354
AAA 1,638 Ser. J8, 9/25/23 .................................................................... 1,203,884
Drexel Burnham Lambert, Inc.,
AAA 78 Ser. K, Class 1, 9/23/17 ............................................................ 70,288
AAA 840 Ser. V, Class 1, 9/1/18 ............................................................. 781,803
Federal Home Loan Mortgage Corp.,
538 Ser. 1418, Class M, 11/15/22 ........................................................ 462,545
1,670 Ser. 1571, Class G, 8/15/23 ......................................................... 1,440,718
6,274 Ser. 1691, Class B, 3/15/24 ......................................................... 5,612,603
801 Ser. 1739, Class B, 2/15/24 ......................................................... 735,863
11 Ser. 1750, Class PC, 3/15/24 ........................................................ 11,130
322 Ser. 1857, Class PB, 12/15/08 ....................................................... 321,854
708 Ser. T-8, Class A-10, 11/15/28 ...................................................... 587,417
Federal National Mortgage Assoc.,
128 Ser. 7, Class J, 2/25/21 ............................................................ 115,337
3,439 Ser. 13, Class PR, 3/25/32 .......................................................... 3,077,677
638 Ser. 26, Class L, 3/25/23 ........................................................... 635,489
158 Ser. 51, Class E, 2/25/23 ........................................................... 120,606
95 Ser. 70, Class A, 5/25/23 ........................................................... 79,495
75 Ser. 167, Class D, 10/25/17 ......................................................... 66,477
163 Ser. 203, Class 1, 2/01/23 .......................................................... 144,860
123 Ser. 228, Class 1, 5/01/23 .......................................................... 111,073
923 Ser. 273, Class 1, 7/01/26 .......................................................... 821,219
547 Ser. 279, Class 1, 7/01/26 .......................................................... 473,021
15,330 Ser. 328, Class 1, 11/01/32 ......................................................... 12,738,335
11,435 Ser. 329, Class 1, 12/01/32 ......................................................... 8,879,910
4,437 Ser. 333, Class 1, 3/01/33 .......................................................... 3,407,930
1,066 Ser. G93-2, Class KB, 1/25/23 ....................................................... 968,319
1,002 Ser. W4, 2/25/29 .................................................................... 791,156
AAA 183 First Union Residential Securitization Trust, Ser. A, Class 1APO, 3/25/15 ............. 171,844
AAA 59 Structured Mortgage Asset Residential Trust, Ser. 3C, Class CX, 4/25/24 ............... 51,378
13,000 Resolution Funding Corp., Ser. B, 4/15/30 ............................................. 2,752,620
-------------
Total Principal Only Mortgage-Backed Securities ....................................... 57,352,790
-------------
COMMERCIAL MORTGAGE-BACKED SECURITIES--2.9%
AAA 10,250(3) New York City Mortgage Loan Trust, Ser. 1996, Class A2, 6.75%, 6/25/11 ................ 11,291,225
AAA 1,915 Banc of America Funding Corp., Class A1, 6.00%, 5/20/33 ............................... 1,924,493
-------------
Total Commercial Mortgage-Backed Securities ........................................... 13,215,718
-------------
U.S. GOVERNMENT AGENCY SECURITIES--8.3%
17,033 Overseas Private Investment Corp., 4.09%-7.35%, 5/29/12 ............................... 17,930,225
Small Business Administration,
1,513 Ser. 20C-1, 7.15%, 3/01/17 .......................................................... 1,687,339
2,532 Ser. 20E-1, 7.60%, 5/01/16 .......................................................... 2,859,106
3,176 Ser. 20F-1, 7.55%, 6/01/16 .......................................................... 3,561,236
1,942 Ser. 20G-1, 7.70%, 7/01/16 .......................................................... 2,188,848
2,431 Ser. 20H-1, 7.25%, 8/01/16 .......................................................... 2,709,054
4,168 Ser. 20K-1, 6.95%, 11/01/16 ......................................................... 4,617,980
2,072 Small Business Investment Companies, Ser. P10A, Class 1, 6.12%, 2/01/08 ............... 2,197,567
-------------
Total U.S. Government and Agency Securities ........................................... 37,751,355
-------------
COLLATERALIZED MORTGAGE OBLIGATION RESIDUALS--0.1%
Collateralized Mortgage Obligation Trust,
10 Ser. 40, Class R, 4/01/18 ........................................................... 981
157 Ser. 42, Class R, 10/01/14 .......................................................... 5,576
45(5) FBC Mortgage Securities Trust 16, CMO, Ser. A-1, 7/01/17 .............................. 336,825
Morgan Stanley Mortgage Trust,
177 Ser. 38, Class 2, 11/20/21 .......................................................... 30,161
197 Ser. 39, Class 2, 12/20/21 .......................................................... 34,592
-------------
Total Collateralized Mortgage Obligation Residuals .................................... 408,135
-------------
See Notes to Financial Statements.
30
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES--27.0%
$155,700 U.S. Treasury Bonds, Zero Coupon, 11/15/24 .............................................. $ 48,232,123
8,325 U.S. Treasury Bonds, 8.00%, 11/15/21 .................................................... 11,157,123
U.S. Treasury Notes,
61,250 3.25%, 8/15/08 ........................................................................ 61,391,181
3,000 3.875%, 2/15/13 ....................................................................... 2,916,444
-------------
Total U.S. Government Securities ........................................................ 123,696,871
-------------
TOTAL LONG-TERM INVESTMENTS (cost $404,080,649) ......................................... 534,993,135
-------------
SHORT-TERM INVESTMENTS--38.1%
U.S. GOVERNMENT AND AGENCY SECURITIES--38.1%
1,200(4) Student Loan Marketing, 0.94%, 11/03/03 ................................................. 1,199,937
41,069(4) U.S. Treasury Bonds, 0.85%, 11/03/03 .................................................... 41,068,500
U.S. Treasury Notes,
35,219(4) 0.55%, 11/03/03 ....................................................................... 35,218,750
3,834(4) 0.80%, 11/04/03 ....................................................................... 3,834,375
93,098(4) 0.85%, 11/03/03 - 11/05/03 ............................................................ 93,098,125
-------------
TOTAL SHORT-TERM INVESTMENTS (cost $174,419,687) ........................................ 174,419,687
-------------
TOTAL INVESTMENTS BEFORE INVESTMENTS SOLD SHORT AND OUTSTANDING OPTIONS WRITTEN (COST
$717,432,138) ......................................................................... 709,412,822
-------------
INVESTMENTS SOLD SHORT--(29.8)%
(39,300) U.S. Treasury Bonds, 5.375%, 2/15/31 .................................................... (40,612,541)
U.S. Treasury Notes,
(30,000) 1.50%, 7/31/05 ........................................................................ (29,902,740)
(25,280) 2.625%, 5/15/08 ....................................................................... (24,781,302)
(38,900) 3.625%, 5/15/13 ....................................................................... (37,245,233)
(3,750) 4.375%, 8/15/12 ....................................................................... (3,806,835)
-------------
TOTAL INVESTMENTS SOLD SHORT (proceeds $134,559,335) .................................... (136,348,651)
-------------
NOTIONAL
AMOUNT
(000)
---------
OUTSTANDING OPTIONS WRITTEN--(0.7)%
$60,500 Interest Rate Swap, 3.60% over 3 month LIBOR, expires 11/01/04 .......................... (621,090)
77,000 Interest Rate Swap, 5.75% over 3 month LIBOR, expires 9/23/05 ........................... (1,758,680)
12,800 Interest Rate Swap, 6.00% over 3 month LIBOR, expires 10/25/04 .......................... (506,240)
185 U.S. Treasury Notes Futures ............................................................. (367,109)
-------------
Total Outstanding Options Written (premium received $3,054,224) ......................... (3,253,119)
-------------
TOTAL INVESTMENTS, NET OF INVESTMENTS SOLD SHORT AND OUTSTANDING OPTIONS WRITTEN--124.6% 569,811,052
LIABILITIES IN EXCESS OF OTHER ASSETS--(24.6)% .......................................... (112,510,372)
-------------
NET ASSETS--100% ........................................................................ $ 457,300,680
=============
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
(3) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of October 31, 2003, the
Trust held 3.2% of its net assets, with a current market value of
$14,539,634, in securities restricted as to resale.
(4) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
(5) Illiquid securities representing 0.07% of net assets.
See Notes to Financial Statements.
31
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2003
-----------------------------------------------
BLACKROCK LIMITED DURATION INCOME TRUST (BLW)
-----------------------------------------------
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--138.9%
CORPORATE BONDS--63.2%
AERO & DEFENSE--1.1%
BB- $ 5,000 Sequa Corp., Ser. B, 8.875%, 4/01/08 .................................................. $ 5,400,000
B 2,500(2) Titan Corp., 8.00%, 5/15/11 ........................................................... 2,900,000
-------------
8,300,000
-------------
AUTOMOTIVE--6.1%
B2 5,000(2) Advanced Accessory Systems LLC, 10.75%, 6/15/11 ....................................... 5,350,000
B2 2,750 Collins & Aikman Products Co., 10.75%, 12/31/11 ....................................... 2,323,750
A3 7,500 DaimlerChrysler NA Holding Corp., 4.05%, 6/04/08 ...................................... 7,287,375
Dura Operating Corp.,
B+ 3,000 Ser. B, 8.625%, 4/15/12 ............................................................. 3,045,000
B 1,000 Ser. D, 9.00%, 5/01/09 .............................................................. 920,000
B- 5,000(2) EaglePicher Inc., 9.75%, 9/01/13 ...................................................... 5,300,000
B+ 5,000(2) Group 1 Automotive Inc., 8.25%, 8/15/13 ............................................... 5,425,000
B+ 5,000(2) Sonic Automotive Inc., 8.625%, 8/15/13 ................................................ 5,287,500
B+ 5,200(2) TRW Automotive, Inc., 9.375%, 2/15/13 ................................................. 5,902,000
B 3,000 Williams Scotsman Inc., 9.875%, 6/01/07 ............................................... 3,045,000
-------------
43,885,625
-------------
BASIC MATERIAL--1.5%
BB+ 5,000(2) Ipsco Inc, 8.75%, 6/01/13 ............................................................. 5,400,000
BB- 5,000 U.S. Steel Corp., 10.75%, 8/01/08 ..................................................... 5,487,500
-------------
10,887,500
-------------
BUILDING & DEVELOPMENT--0.4%
B 250 Collins & Aikman Floorcovering, Ser. B, 9.75%, 2/15/10 ................................ 265,000
Ba1 3,000 D R Horton Inc., 5.875%, 7/01/13 ...................................................... 2,940,000
-------------
3,205,000
-------------
CHEMICAL--3.1%
A- 5,590 Dow Chemical Co., 5.97%, 1/15/09 ...................................................... 5,946,754
B 2,500(2) Huntsman Advanced Materials LLC, 11.00%, 7/15/10 ...................................... 2,725,000
B 3,000(2) Huntsman Intl LLC, 11.625%, 10/15/10 .................................................. 2,880,000
BB- 5,000 Lyondell Chemical Co., 11.125%, 7/15/12 ............................................... 5,200,000
B- 5,000(2) Rockwood Specialties Group Inc., 10.625%, 5/15/11 ..................................... 5,375,000
-------------
22,126,754
-------------
CONGLOMERATES--0.4%
B 3,000 Trimas Corp., 9.875%, 6/15/12 ......................................................... 2,970,000
-------------
CONSUMER PRODUCTS--1.8%
B2 2,000 Chattem Inc., 8.875%, 4/01/08 ......................................................... 2,055,000
BB+ 5,000 JC Penney Co. Inc., 8.00%, 3/01/10 .................................................... 5,562,500
B+ 5,000 Rite Aid Corp., 8.125%, 5/01/10 ....................................................... 5,387,500
-------------
13,005,000
-------------
CONTAINERS & GLASS--1.3%
B- 5,000(2) Graphic Packaging Intl., Inc., 9.50%, 8/15/13 ......................................... 5,562,500
B+ 4,000(2) Silgan Holdings Inc., 6.75%, 11/15/13 ................................................. 4,005,000
-------------
9,567,500
-------------
ECOLOGICAL SERVICES & EQUIPMENT--2.3%
B+ 7,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ........................................ 7,612,500
B 2,000 Casella Waste Systems Inc., 9.75%, 2/01/13 ............................................ 2,180,000
B 6,250 National Waterworks Inc., Ser. B, 10.50%, 12/01/12 .................................... 6,968,750
-------------
16,761,250
-------------
ELECTRONICS--1.7%
B1 5,243(2) Amkor Technology Inc., 7.75%, 5/15/13 ................................................. 5,557,580
B- 2,500 Chippac Int. Ltd., Ser. B, 12.75%, 8/01/09 ............................................ 2,762,500
Ba2 3,972(2) Flextronics Intl. Ltd., 6.50%, 5/15/13, (Singapore) ................................... 3,912,420
-------------
12,232,500
-------------
See Notes to Financial Statements.
32
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
ENERGY--9.3%
B+ $ 5,500(2) AES Corp., The, 8.75%, 5/15/13 ........................................................ $ 5,871,250
BB- 5,290(2) Chesapeake Energy Corp., 7.50%, 9/15/13 ............................................... 5,686,750
BB 2,000 Compagnie Generale De Geophysique SA, 10.625%, 11/15/07, (France) ..................... 2,120,000
B 5,000 Dresser, Inc., 9.375%, 4/15/11 ........................................................ 5,137,500
B- 6,000 Dynegy Holdings Inc., 10.125%, 7/15/13 ................................................ 6,480,000
B+ 4,000 El Paso Production Holding Co., 7.75%, 6/01/13 ........................................ 3,840,000
B+ 5,000(2) Gazprom, 9.625%, 3/01/13, (Russia) .................................................... 5,425,000
B2 2,950 Hanover Equipment Test, Ser. B, 8.75%, 9/01/03 ........................................ 3,001,625
B 5,000(2) Hilcorp Energy I L P, 10.50%, 9/01/10 ................................................. 5,375,000
B+ 2,000 Massey Energy Corp., 6.95%, 3/01/07 ................................................... 2,010,000
BB- 5,000 Midwest Generation LLC, Ser. A, 8.30%, 7/02/09 ........................................ 4,900,000
B 5,000 Swift Energy Co., 9.375%, 5/01/12 ..................................................... 5,325,000
Ba3 5,000 Westport Resources Corp. New, 8.25%, 11/01/11 ......................................... 5,512,500
Williams Cos Inc.,
B+ 1,000 8.125%, 3/15/12 ..................................................................... 1,075,000
B+ 5,000 8.625%, 6/01/10 ..................................................................... 5,475,000
-------------
67,234,625
-------------
FINANCE & BANKING--8.9%
BB 3,000(2) Crum & Forster Holdings Corp., 10.375%, 6/15/13 ....................................... 3,225,000
A3 7,500(3) Ford Motor Credit Co., 7.375%, 2/01/11 ................................................ 7,636,162
B 3,000(2) Gemstone Investor Ltd., 7.71%, 10/31/04 ............................................... 2,992,500
A3 7,500 General Motors Acceptance Corp., 6.875%, 8/28/12 ...................................... 7,711,500
HYDI 100,
B2 10,000(2) 6.40%, 6/20/08 ...................................................................... 9,937,500
B3 9,815(2) 9.00%, 6/20/08 ...................................................................... 10,096,991
Baa3 5,000(2) Kazkommerts Intl BV, 10.125%, 5/08/07, (Netherlands) .................................. 5,500,000
Ba1 2,840 Labranche & Co., Inc., 12.00%, 3/02/07 ................................................ 2,911,000
B1 4,500(2) Sheridan Group Inc., 10.25%, 8/15/11 .................................................. 4,657,500
B+ 5,000(2) Southern Star Central Corp., 8.50%, 8/01/10 ........................................... 5,300,000
BB- 4,215 Western Financial Bank, 9.625%, 5/15/12 ............................................... 4,604,888
-------------
64,573,041
-------------
FOREST PRODUCTS--2.5%
B+ 4,000 Caraustar Industries, Inc., 9.875%, 4/01/11 ........................................... 4,160,000
BB+ 5,685 Georgia Pacific Corp., 8.875%, 2/01/10 ................................................ 6,495,113
BBB 7,500 Weyerhaeuser Co., 5.25%, 12/15/09 ..................................................... 7,734,667
-------------
18,389,780
-------------
HEALTH CARE--4.3%
B 4,000 Alaris Med Systems Inc., 7.25%, 7/01/11 ............................................... 4,080,000
BB 5,000 Amerisourcebergen Corp., 8.125%, 9/01/08 .............................................. 5,412,500
BB- 1,000(2) Bio Rad Laboratories Inc., 7.50%, 8/15/13 ............................................. 1,062,500
B- 5,000 Concentra Operating Corp., 9.50%, 8/15/10 ............................................. 5,325,000
B- 3,500 Iasis Healthcare Corp., 8.50%, 10/15/09 ............................................... 3,666,250
B- 3,000 Insight Health Services Corp., Ser. B, 9.875%, 11/01/11 ............................... 3,217,500
B- 3,000(2) Norcross Safety Products LLC, 9.875%, 8/15/11 ......................................... 3,240,000
B 4,500 United Surgical Partners Int'l., Inc., 10.00%, 12/15/11 ............................... 4,995,000
-------------
30,998,750
-------------
HOTELS & CASINOS--3.2%
B 3,500 Ameristar Casinos Inc., 10.75%, 2/15/09 ............................................... 4,033,750
B+ 4,125 Boyd Gaming Corp., 7.75%, 12/15/12 .................................................... 4,320,937
B 2,000 Hammons John Q. Hotels LP, Ser. B, 8.875%, 5/15/12 .................................... 2,185,000
B 1,000 Herbst Gaming, Inc., Ser. B, 10.75%, 9/01/08 .......................................... 1,117,500
Ba3 5,000 HMH Properties, Inc., Ser. B, 7.875%, 8/01/08 ......................................... 5,162,500
Ba2 5,425 MGM Mirage, Inc., 9.75%, 6/01/07 ...................................................... 6,150,594
-------------
22,970,281
-------------
INDUSTRIALS--4.2%
B- 4,000 Fasten Tech Inc., 11.50%, 5/01/11 ..................................................... 4,240,000
B 5,025 Hexcel Corp., 9.875%, 10/01/08 ........................................................ 5,577,750
BB- 5,000 Mail-Well I Corp., 9.625%, 3/15/12 .................................................... 5,587,500
B- 5,885(2) Transdigm Inc., 8.375%, 7/15/11 ....................................................... 6,282,238
BBB- 7,500 Tyco Intl Group SA, 6.125%, 11/01/08, (Luxembourg) .................................... 7,853,175
B 1,000 Von Hoffman Corp., 10.25%, 3/15/09 .................................................... 1,077,500
-------------
30,618,163
-------------
See Notes to Financial Statements.
33
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
LEISURE--0.5%
BB+ $ 3,500 Royal Caribbean Cruises Ltd., 8.00%, 5/15/10, (Liberia) ............................... $ 3,745,000
-------------
MEDIA--5.4%
B1 2,500 Alliance Atlantis Communications, Inc., 13.00%, 12/15/09, (Canada) .................... 2,884,375
B- 3,500(2) CBD Media Inc., 8.625%, 6/01/11 ....................................................... 3,753,750
BBB 7,500 Comcast Cable Communications I, 6.20%, 11/15/08 ....................................... 8,174,467
BB- 6,000 CSC Holdings Inc., 7.875%, 12/15/07 ................................................... 6,120,000
B 2,000 Dex Media East LLC, Ser. B, 12.125%, 11/15/12 ......................................... 2,400,000
BB- 2,000(2) Echostar Dbs Corp., 5.75%, 10/01/08 ................................................... 1,992,500
B 5,000 Houghton Mifflin Company, 9.875%, 2/01/13 ............................................. 5,400,000
B- 3,250 Nextmedia Operating, Inc., 10.75%, 7/01/11 ............................................ 3,672,500
B- 4,650 Salem Communications Holding Corp., 7.75%, 12/15/10 ................................... 4,789,500
B- 275 WRC Media Inc., 12.75%, 11/15/09 ...................................................... 266,750
-------------
39,453,842
-------------
TECHNOLOGY--0.8%
B+ 1,600(2) Cooperative Computing Inc., 10.50%, 6/15/11 ........................................... 1,728,000
BB+ 3,500 Unisys Corp., 6.875%, 3/15/10 ......................................................... 3,710,000
-------------
5,438,000
-------------
TELECOMMUNICATION--3.6%
B2 6,000(2) ACC Escrow Corp., 10.00%, 8/01/11 ..................................................... 6,540,000
BBB+ 7,500(3) Deutsche Telekom Intl. BV, 3.875%, 7/22/08, (Netherlands) ............................. 7,450,725
B+ 5,000 Nextel Communications Inc., 7.375%, 8/01/15 ........................................... 5,200,000
Ba3 6,000(2) Qwest Corp., 8.875%, 3/15/12 .......................................................... 6,780,000
-------------
25,970,725
-------------
TRANSPORTATION--0.8%
BB+ 1,650 Overseas Shipholding Group Inc., 8.75%, 12/01/13 ...................................... 1,757,250
B 3,720 RailAmerica Transportation Corp., 12.875%, 8/15/10 .................................... 4,278,000
-------------
6,035,250
-------------
Total Corporate Bonds ................................................................. 458,368,586
-------------
BANK LOANS--28.5%
AUTOMOTIVE--1.4%
2,988 EaglePicher Inc., Term Loan B, LIBOR + 3.50%, 8/07/09 ................................. 3,024,844
1,494 Metaldyne Co. LLC, Term Loan, LIBOR + 4.25%, 12/31/09 ................................. 1,468,226
4,000 TRW Automotive, Inc., Term Loan C1, LIBOR + 3.00%, 2/28/11 ............................ 4,060,000
1,902 Williams Scotsman, Inc., Term Loan, LIBOR + 3.00%, 12/31/08 ........................... 1,909,373
-------------
10,462,443
-------------
BASIC MATERIALS--0.3%
1,948 International Steel, Term Loan B, LIBOR + 4.00%, 5/07/07 .............................. 1,941,143
-------------
BUILDING & DEVELOPMENT--0.3%
1,895 Associated Materials, Inc., Term Loan, LIBOR + 1.75%, 8/20/10 ......................... 1,918,421
-------------
BUSINESS EQUIPMENT & SERVICES--0.2%
1,500 Buhrmann U.S., Inc., Term Loan B, LIBOR + 4.00%, 11/01/07 ............................. 1,500,000
-------------
CHEMICAL--1.6%
Huntsman Intl LLC,
1,250 Term Loan B, LIBOR + 4.00%, 6/30/08 ................................................. 1,250,000
1,250 Term Loan C, LIBOR + 4.25%, 6/30/07 ................................................. 1,250,000
998 INEOS Group Holdings Plc, Term Loan C, LIBOR + 3.50%, 6/30/09 ......................... 1,001,375
3,000 Nalco Chemical Co., Term Loan, LIBOR + 2.50%, 11/01/10 ................................ 3,000,000
1,000 USI Holdings Corp., Term Loan B, LIBOR + 3.00%, 7/30/08 ............................... 1,005,000
4,415 Veritas DGC, Inc., Term Loan B, LIBOR + 5.00%, 2/14/07 ................................ 4,360,005
-------------
11,866,380
-------------
CONGLOMERATES--1.3%
Colfax Corp.,
3,925 Term Loan B, LIBOR + 3.75%, 6/30/09 ................................................. 3,934,812
1,250 Term Loan C, LIBOR + 6.25%, 6/30/10 ................................................. 1,251,563
2,500 Quintiles Transnational Corp., Term Loan, LIBOR + 4.25%, 9/25/09 ...................... 2,525,000
2,000 Trimas Corp., Term Loan, LIBOR + 3.25%, 12/31/09 ...................................... 2,000,000
-------------
9,711,375
-------------
See Notes to Financial Statements.
34
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--3.0%
$ 864 Dean Foods Co., Term Loan B, LIBOR + 2.00%, 8/15/08 ................................... $ 871,912
1,746 Dole Food Co., Inc., Term Loan B, LIBOR + 2.75%, 8/30/08 .............................. 1,760,981
2,000 Jarden Corp., Term Loan B, LIBOR + 2.75%, 4/30/08 ..................................... 2,017,500
3,000 Jostens, Inc., Term Loan B, LIBOR + 2.50%, 7/08/10 .................................... 3,011,250
2,000 Meow Mix Co., Term Loan, LIBOR + 3.50%, 8/30/09 ....................................... 2,015,000
2,500 Olympus, Term Loan B, PRIME + 2.00%, 9/30/10 .......................................... 2,325,000
2,963 Oriental Trading Co., Inc., Term Loan B, LIBOR + 2.75%, 6/30/09 ....................... 2,992,125
2,000 Pantry, Inc., The, Term Loan, LIBOR + 4.25%, 3/31/07 .................................. 2,020,000
1,500 Scotts Co., The, Term Loan, LIBOR + 2.00%, 10/30/10 ................................... 1,518,750
3,242 Tempur Pedic, Term Loan B, LIBOR + 3.50%, 8/13/09 ..................................... 3,258,084
-------------
21,790,602
-------------
CONTAINERS & GLASS--2.6%
6,000 Crown Cork & Seal Co., Inc., Term Loan B1, LIBOR + 3.00%, 9/30/08 ..................... 6,060,000
4,000 Graphic Packaging Intl., Inc., Term Loan B, LIBOR + 2.75%, 6/30/10 .................... 4,050,000
8,500 Owens Brockway Glass Container, Inc., Term Loan A, LIBOR + 3.25%, 6/30/07 ............. 8,521,250
-------------
18,631,250
-------------
ECOLOGICAL SERVICES & EQUIPMENT--0.6%
4,000 Allied Waste NA, Inc., Term Loan C, LIBOR + 3.00%, 1/15/10 ............................ 4,055,000
-------------
ELECTRONICS--0.5%
3,390 Knowles Electronics, Inc., Term Loan B2, LIBOR + 5.00%, 6/29/07 ....................... 3,339,215
-------------
ENERGY--1.6%
1,500 AES Corp., The, Term Loan, LIBOR + 4.00%, 4/30/08 ..................................... 1,500,000
1,995 Calpine Corp., LIBOR + 5.75%, 7/15/07 ................................................. 1,855,350
7,000 Centerpoint Energy, Inc., Term Loan, LIBOR + 3.50%, 10/30/06 .......................... 7,061,250
1,496 Massey Energy Corp., Term Loan B, LIBOR, 6/30/08 ...................................... 1,496,250
-------------
11,912,850
-------------
FINANCE & BANKING--0.8%
Nextel Finance Co.,
2,743 Term Loan B, LIBOR + 3.375%, 6/30/08 ................................................ 2,749,931
2,743 Term Loan C, LIBOR + 3.625%, 12/31/08 ............................................... 2,749,930
-------------
5,499,861
-------------
FOREST PRODUCTS--1.1%
Jefferson Smurfit Group,
4,000 Term Loan B3, LIBOR + 2.75%, 12/31/08 ............................................... 4,020,000
4,000 Term Loan C3, LIBOR + 3.25%, 10/31/11 ............................................... 4,020,000
-------------
8,040,000
-------------
FUNERAL SERVICES--0.3%
2,394 Alderwoods Group, Inc., Term Loan B, LIBOR + 3.25%, 9/30/08 ........................... 2,426,896
-------------
HEALTH CARE--3.4%
3,990 Community Health Systems, Inc., Term Loan B, LIBOR + 2.50%, 6/16/11 ................... 4,029,824
2,993 Concentra Operating Corp., Term Loan, LIBOR + 3.75%, 8/13/09 .......................... 3,022,425
3,000 Connecticare, Term Loan, LIBOR + 3.75%, 10/31/09 ...................................... 3,026,250
2,992 Davita, Inc., Term Loan B, LIBOR + 2.50%, 6/23/09 ..................................... 3,014,358
1,356 Fisher Scientific Intl., Inc., Term Loan B1, LIBOR + 2.25%, 2/28/10 ................... 1,371,192
2,993 Kinetic Concepts, Inc., Term Loan B, LIBOR + 2.75%, 8/05/10 ........................... 3,022,425
5,000 Medco Health, Term Loan, LIBOR + 2.25%, 6/30/10 ....................................... 5,062,500
2,000 Per-Se Technologies, Term Loan B, LIBOR + 4.25%, 8/30/08 .............................. 2,010,000
-------------
24,558,974
-------------
HOTELS & CASINOS--0.6%
962 Greektown Casino, LLC, Term Loan B, LIBOR + 3.75%, 9/01/04 ............................ 966,062
3,000 Marina District Finance Co., Inc., Term Loan A, LIBOR + 3.00%, 12/01/07 ............... 3,022,500
-------------
3,988,562
-------------
MEDIA--6.2%
2,000 Charter, Term Loan B, LIBOR + 2.75%, 9/30/07 .......................................... 1,912,500
2,494 Charter Communications Operating LLC, Incremental Term Loan, LIBOR + 2.75%, 9/18/08 ... 2,418,861
Cinram,
6,000 Term Loan B, LIBOR + 3.75%, 10/30/09 ................................................ 5,947,500
1,500 Term Loan C, LIBOR + 5.75%, 4/30/10 ................................................. 1,509,375
3,000 Dex Media East, LLC, Term Loan A, LIBOR + 2.50%, 11/08/08 ............................. 3,007,500
See Notes to Financial Statements.
35
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
MEDIA--(CONT'D)
Dex Media West, LLC,
$ 4,868 Term Loan A, LIBOR + 2.75%, 9/01/09 ................................................. $ 4,928,907
1,655 Term Loan B, LIBOR + 2.75%, 9/10/09 ................................................. 1,675,828
4,500 DirecTV Holdings, LLC, Term Loan B1, LIBOR + 2.75%, 2/13/10 ........................... 4,533,750
4,500 Echostar Dbs Corp., Term Loan, LIBOR + 3.75%, 1/01/04 ................................. 4,629,375
5,000 Insight Midwest Holdings LLC, Incremental Term Loan, LIBOR + 2.75%, 1/06/10 ........... 5,000,000
3,964 Loews Cineplex Entertainment Corp., LIBOR + 3.50%, 2/29/08 ............................ 3,968,490
4,000 MCC Iowa LLC, Term Loan B, LIBOR + 2,50%, 9/30/10 ..................................... 4,000,000
1,566 Readers Digest Assoc., Inc., Term Loan B, LIBOR + 3.00%, 5/20/08 ...................... 1,567,692
-------------
45,099,778
-------------
TELECOMMUNICATIONS--2.7%
4,500 Crown Castle Operating Co., Term Loan B, LIBOR + 3.50%, 4/30/10 ....................... 4,533,750
1,556 Panamsat Corp., Term Loan B1, LIBOR + 2.50%, 10/29/10 ................................. 1,571,307
3,685 Pinnacle Towers, Inc., Term Loan, LIBOR + 4.50%, 10/31/05 ............................. 3,685,406
5,000 Qwest Corp., Term Loan A, LIBOR + 4.75%, 6/30/07 ...................................... 5,143,750
3,125 Western Wireless Corp., Term Loan B, LIBOR + 3.25%, 3/31/08 - 9/30/08 ................. 3,103,657
1,500 Worldspan, L.P., Term Loan, LIBOR + 3.75%, 6/30/07 .................................... 1,500,000
-------------
19,537,870
-------------
Total Bank Loans ...................................................................... 206,280,620
-------------
MORTGAGE PASS-THROUGHS--33.3%
Federal National Mortgage Assoc.,
8,439 4.542%, TBA ......................................................................... 8,604,008
130,000 5.00%, TBA .......................................................................... 132,031,250
99,467 5.50%, TBA .......................................................................... 100,383,105
-------------
Total Mortgage Pass-Throughs .......................................................... 241,018,363
-------------
U.S. GOVERNMENT SECURITIES--10.7% U.S. Treasury Notes,
60,000(3) 1.625%, 10/31/05 .................................................................... 59,746,860
18,200(3) 4.00%, 11/15/12 ..................................................................... 17,924,871
-------------
Total U.S. Government Securities ...................................................... 77,671,731
-------------
FOREIGN GOVERNMENT BONDS--3.2%
BB 5,000 Columbia Republic, 9.75%, 4/23/09 ..................................................... 5,400,000
B+ 5,000 Federal Republic of Brazil, 2.188%, 10/15/03 .......................................... 4,218,750
BB- 5,000 Peru Republic, 9.125%, 2/21/12 ........................................................ 5,587,500
B2 2,143 Republic of Venezuela, 2.313%, 12/18/03 ............................................... 1,982,090
B+ 5,000 Turkey Republic, 11.375%, 11/27/06 .................................................... 5,900,000
-------------
Total Foreign Government Bonds ........................................................ 23,088,340
-------------
TOTAL LONG-TERM INVESTMENTS (cost $984,552,252) ....................................... 1,006,427,640
-------------
SHORT-TERM INVESTMENTS--8.1%
MORTGAGE PASS-THROUGHS--7.5%
54,570(4) Federal National Mortgage Assoc., 1.07%, 11/13/03 ..................................... 54,569,985
-------------
U.S. GOVERNMENT AND AGENCY SECURITIES--0.6%
800(4) Student Loan Marketing, 0.94%, 11/03/03 ............................................... 799,958
3,337(4) U.S. Treasury Notes, 0.50%, 11/14/03 .................................................. 3,337,125
-------------
Total U.S. Government and Agency Securities ........................................... 4,137,083
-------------
TOTAL SHORT-TERM INVESTMENTS (cost $58,707,068) ....................................... 58,707,068
-------------
TOTAL INVESTMENTS (cost $1,043,259,320) ............................................... 1,065,134,708
-------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(47.0)% ........................................ (340,387,304)
-------------
NET ASSETS--100% ...................................................................... $ 724,747,404
=============
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of October 31, 2003, the
Trust held 24.2% of its net assets, with a current market value of
$175,588,478, in securities restricted as to resale.
(3) Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
(4) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
See Notes to Financial Statements.
36
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2003
--------------------------------------
BLACKROCK STRATEGIC BOND TRUST (BHD)
--------------------------------------
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS--137.3%
CORPORATE BONDS--134.4%
AERO & DEFENSE--4.6%
B- $2,000(2) BE Aerospace, Inc., 9.50%, 11/01/08 ................................................... $ 1,885,000
BBB 1,000 Lockheed Martin Corp., 8.20%, 12/01/09 ................................................ 1,212,970
BBB- 650(2) Raytheon Co., 6.55%, 3/15/10 .......................................................... 711,733
A 1,000(2) United Technologies Corp., 6.35%, 3/01/11 ............................................. 1,114,330
-------------
4,924,033
-------------
AUTOMOTIVE--12.9%
BB+ 2,000(2) Autonation, Inc., 9.00%, 8/01/08 ...................................................... 2,280,000
B2 2,000(2) Collins & Aikman Products Co., 10.75%, 12/31/11 ....................................... 1,690,000
A3 1,000(2) Daimler Chrysler NA Corp., 7.30%, 1/15/12 ............................................. 1,081,810
BB 2,000 Dana Corp., 10.125%, 3/15/10 .......................................................... 2,250,000
B3 1,000 Delco Remy Intl., Inc., 11.00%, 5/01/09 ............................................... 917,500
B 2,000 Dura Operating Corp., Ser. D, 9.00%, 5/01/09 .......................................... 1,840,000
B+ 2,000(3) Sonic Automotive Inc., 8.625%, 8/15/13 ................................................ 2,115,000
B+ 1,000(3) TRW Automotive, Inc., 9.375%, 2/15/13 ................................................. 1,135,000
B 2,000(2) United Auto Group Inc., 9.625%, 3/15/12 ............................................... 2,180,000
-------------
15,489,310
-------------
BASIC MATERIAL--2.1%
BB- 2,000(2) Century Aluminum Co., 11.75%, 4/15/08 ................................................. 2,200,000
-------------
BUILDING & DEVELOPMENT--5.1%
BB 1,000 Beazer Homes USA, Inc., 8.625%, 5/15/11 ............................................... 1,092,500
B- 2,000 Great Lakes Dredge & Dock Corp., 11.25%, 8/15/08 ...................................... 2,110,000
Ba1 2,000 Schuler Homes, Inc., 9.375%, 7/15/09 .................................................. 2,240,000
-------------
5,442,500
-------------
CHEMICAL--5.0%
BB- 2,000 Lyondell Chemical Co., Ser. B, 9.875%, 5/01/07 ........................................ 2,030,000
B 1,796 Noveon, Inc., Ser. B, 11.00%, 2/28/11 ................................................. 2,065,400
B- 1,250 Resolution Performance Products, Inc., 13.50%, 11/15/10 ............................... 1,168,750
-------------
5,264,150
-------------
CONGLOMERATES--4.7%
A 325 Honeywell Intl., Inc., 7.50%, 3/01/10 ................................................. 380,243
B 1,500 MDP Acquisitions Plc, 9.625%, 10/01/12, (Ireland) ..................................... 1,665,000
B- 2,000 Penhall Intl., Inc., 12.00%, 8/01/06 .................................................. 1,725,000
BBB- 1,132(2) Tyco Intl. Group SA, 6.375%, 2/15/06, (Luxembourg) .................................... 1,196,660
-------------
4,966,903
-------------
CONSUMER PRODUCTS--6.2%
BBB+ 1,000(2) General Mills, Inc., 5.125%, 2/15/07 .................................................. 1,062,160
BBB 575(2) Kellogg Co., Ser. B, 6.00%, 4/01/06 ................................................... 619,338
B 1,000 Levi Strauss & Co., 12.25%, 12/15/12 .................................................. 825,000
B- 500 Pantry, Inc., The, 10.25%, 10/15/07 ................................................... 517,500
B- 2,000(2) Sbarro, Inc., 11.00%, 9/15/09 ......................................................... 1,730,000
-------------
4,753,998
-------------
CONTAINERS & GLASS--2.9%
B 1,000 Crown European Holdings SA, 10.875%, 3/01/13, (United Kingdom) ........................ 1,140,000
B+ 1,800 Plastipak Holdings, Inc., 10.75%, 9/01/11 ............................................. 1,980,000
-------------
3,120,000
-------------
ECOLOGICAL SERVICES & EQUIPMENT--3.6%
B+ 2,000 Allied Waste NA, Inc., Ser. B, 10.00%, 8/01/09 ........................................ 2,175,000
B 1,500 Casella Waste Systems Inc., 9.75%, 2/01/13 ............................................ 1,635,000
-------------
3,810,000
-------------
See Notes to Financial Statements.
37
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
ENERGY--21.0%
BBB+ $ 1,000(2) Anadarko Petroleum Corp., 5.375%, 3/01/07 ............................................. $ 1,068,590
CCC+ 2,000 Calpine Corp., 10.50%, 5/15/06 ........................................................ 1,830,000
BB 2,000(2) Compagnie Generale De Geophysique SA, 10.625%, 11/15/07, (France) ..................... 2,120,000
A- 1,000(2) ConocoPhillips Holding Co., 6.95%, 4/15/29 ............................................ 1,121,420
B 2,000(2) Dresser, Inc., 9.375%, 4/15/11 ........................................................ 2,055,000
BBB 250(2) DTE Energy Co., 7.05%, 6/01/11 ........................................................ 282,830
B- 1,500(3) Dynegy Holdings Inc., 10.125%, 7/15/13 ................................................ 1,620,000
El Paso Corp.,
B 165 7.75%, 1/15/32 ...................................................................... 124,163
B 85 7.80%, 8/01/31 ...................................................................... 63,750
BB- 1,000 El Paso Natural Gas Co., Ser. B, 8.50%, 6/01/11 ....................................... 1,090,000
B+ 1,750(3) El Paso Production Holding Co., 7.75%, 6/01/13 ........................................ 1,680,000
BBB+ 105 Exelon Corp., 6.75%, 5/01/11 .......................................................... 116,370
Baa2 325(2) FirstEnergy Corp., Ser. C, 7.375%, 11/15/31 ........................................... 347,187
B+ 2,000 Hanover Equipment Test, Ser. A, 8.50%, 9/01/08 ........................................ 2,035,000
BB- 1,000 Leviathan Gas Pipeline Partners LP, Ser. B, 10.375%, 6/01/09 .......................... 1,085,000
BBB+ 250 Occidental Petroleum Corp., 6.75%, 1/15/12 ............................................ 281,988
Baa2 1,000(2) Progress Energy, Inc., 6.75%, 3/01/06 ................................................. 1,085,150
B 2,000 Swift Energy Co., 10.25%, 8/01/09 ..................................................... 2,140,000
BB- 2,000 Western Gas Resources, Inc., 10.00%, 6/15/09 .......................................... 2,135,000
-------------
22,281,448
-------------
FINANCE & BANKING--16.4%
A+ 500(2) Allstate Corp., 7.875%, 5/01/05 ....................................................... 544,075
Aa3 1,000(2) Bank One Corp., 6.50%, 2/01/06 ........................................................ 1,082,920
Aa3 650(2,3) Barclays Bank PLC, 8.55%, 9/29/49, (United Kingdom) ................................... 797,314
A1 325(2) Bear Stearns Co., Inc., 6.50%, 5/01/06 ................................................ 353,733
B1 2,000 Bluewater Finance Ltd., 10.25%, 2/15/12, (United Kingdom) ............................. 2,020,000
Aa1 3,000(2) Citigroup, Inc., 5.75%, 5/10/06 ....................................................... 3,228,690
BB 500(3) Crum & Forster Holdings Corp., 10.375%, 6/15/13 ....................................... 537,500
Ford Motor Credit Co.,
A3 750(2) 5.80%, 1/12/09 ...................................................................... 734,887
A3 2,000(2) 6.875%, 2/01/06 ..................................................................... 2,090,880
General Motors Acceptance Corp.,
A3 250(2) 6.75%, 1/15/06 ...................................................................... 266,850
A3 900(2) 6.875%, 9/15/11 ..................................................................... 929,430
A3 300(2) 8.00%, 11/01/31 ..................................................................... 310,560
AAA 850(2) KFW Intl. Finance, Inc., 5.25%, 6/28/06 ............................................... 910,435
Ba1 1,000 Labranche & Co., Inc., 12.00%, 3/02/07 ................................................ 1,025,000
A1 1,000(2) Lehman Brothers Holdings, Inc., 6.25%, 5/15/06 ........................................ 1,088,020
A 325(2) Metlife, Inc., 6.125%, 12/01/11 ....................................................... 352,424
Baa1 1,000 Sears Roebuck Acceptance Corp., 6.75%, 8/15/11 ........................................ 1,121,100
-------------
17,393,818
-------------
FOREST PRODUCTS--3.0%
B+ 2,000 Caraustar Industries, Inc., 9.875%, 4/01/11 ........................................... 2,080,000
BBB 1,000 Weyerhaeuser Co., 6.125%, 3/15/07 ..................................................... 1,082,700
-------------
3,162,700
-------------
HEALTH CARE--7.3%
D 2,000(4) HealthSouth Corp., 6.875%, 6/15/05 .................................................... 1,810,000
B- 2,000 Insight Health Services Corp., Ser. B, 9.875%, 11/01/11 ............................... 2,145,000
B+ 2,000 Matria Healthcare, Inc., Ser. B, 11.00%, 5/01/08 ...................................... 2,140,000
B 1,500 United Surgical Partners Int'l., Inc., 10.00%, 12/15/11 ............................... 1,665,000
-------------
7,760,000
-------------
HOTELS & CASINO--3.0%
Ba2 2,000 Park Place Entertainment Corp., 7.875%, 3/15/10 ....................................... 2,160,000
B 1,000 Resorts Intl. Hotel & Casino, Inc., 11.50%, 3/15/09 ................................... 1,030,000
-------------
3,190,000
-------------
INDUSTRIAL EQUIPMENT--4.1%
BB- 2,000 Mail-Well I Corp., 9.625%, 3/15/12 .................................................... 2,235,000
B+ 2,000(2) United Rentals, Inc., Ser. B, 9.25%, 1/15/09 .......................................... 2,100,000
-------------
4,335,000
-------------
LEISURE--1.6%
BB+ 1,500 Royal Caribbean Cruises Ltd., 8.75%, 2/02/11, (Liberia) ............................... 1,680,000
-------------
See Notes to Financial Statements.
38
PRINCIPAL
RATING(1) AMOUNT
(UNAUDITED) (000) DESCRIPTION VALUE
----------------------------------------------------------------------------------------------------------------------------------
MEDIA--13.5%
NR $ 2,000(2,4) Adelphia Communications Corp., Ser. B, 10.50%, 7/15/04 ................................ $ 1,640,000
B1 1,500(2) Alliance Atlantis Communications, Inc., 13.00%, 12/15/09, (Canada) .................... 1,730,625
BBB+ 1,000(2) AOL Time Warner, Inc., 7.70%, 5/01/32 ................................................. 1,131,730
Ca 2,000 Charter Communications Holdings LLC, 11.125%, 1/15/11 ................................. 1,700,000
BBB 1,000 Comcast Cable Communications, Inc., 6.875%, 6/15/09 ................................... 1,118,341
BB- 2,000 EchoStar DBS Corp., 10.375%, 10/01/07 ................................................. 2,200,000
B- 2,000 Nextmedia Operating, Inc., 10.75%, 7/01/11 ............................................ 2,260,000
A- 1,000(2) Viacom, Inc., 6.625%, 5/15/11 ......................................................... 1,122,290
B- 1,500 WRC Media Inc., 12.75%, 11/15/09 ...................................................... 1,455,000
-------------
14,357,986
-------------
REAL ESTATE--2.6%
BBB+ 500(2) ERP Operating LP, 6.95%, 3/02/11 ...................................................... 557,565
Felcore Lodging LP,
B1 1,000 9.00%, 6/01/11 ...................................................................... 1,090,000
B1 1,000 10.00%, 9/15/08 ..................................................................... 1,085,000
-------------
2,732,565
-------------
TECHNOLOGY--2.1%
BB+ 2,000 Unisys Corp., 8.125%, 6/01/06 ......................................................... 2,195,000
-------------
TELECOMMUNICATION--9.6%
B2 1,750(3) ACC Escrow Corp., 10.00%, 8/01/11 ..................................................... 1,907,500
BBB 900(2) AT&T Corp., 7.25%, 11/15/06 ........................................................... 999,972
B3 1,000 Crown Castle Int'l. Corp., 10.75%, 8/01/11 ............................................ 1,122,500
Ba3 2,000 PanAmSat Corp., 8.50%, 2/01/12 ........................................................ 2,145,000
CCC+ 450 Qwest Capital Funding, Inc., 5.875%, 8/03/04 .......................................... 447,750
Aa3 2,000(2) Verizon New England, Inc., 6.50%, 9/15/11 ............................................. 2,179,500
A 1,000(2) Vodafone Group PLC, 7.75%, 2/15/10, (United Kingdom) .................................. 1,177,710
Worldcom, Inc.,
D 400(3,5) 7.375%, 1/15/06 ..................................................................... 149,000
D 200(5) 8.00%, 5/15/06 ...................................................................... 74,500
-------------
10,203,432
-------------
TRANSPORTATION--3.1%
BBB+ 500(2) Canadian National Railway Co., 6.90%, 7/15/28, (Canada) ............................... 552,565
Baa1 400 Norfolk Southern Corp., 7.05%, 5/01/37 ................................................ 440,336
B 2,000 Railamerica Transportation Corp., 12.875%, 8/15/10 .................................... 2,300,000
-------------
3,292,901
-------------
Total Corporate Bonds ................................................................. 142,555,744
-------------
U.S. GOVERNMENT SECURITIES--0.9%
1,000 U.S. Treasury Notes, 4.25%, 8/15/13 ................................................... 996,094
-------------
FOREIGN GOVERNMENT BONDS--1.1%
Baa2 1,000 United Mexican States, 8.125%, 12/30/19 ............................................... 1,104,000
-------------
SUPRANATIONAL--0.9%
AAA 850(2) European Investment Bank, 4.875%, 9/06/06 ............................................. 904,239
-------------
TOTAL LONG-TERM INVESTMENTS--137.3% (cost $139,987,252) ............................... 145,560,077
-------------
SHORT-TERM INVESTMENTS--0.7%
U.S. GOVERNMENT AGENCY SECURITIES--0.7%
800(4) Student Loan Marketing, 0.94%, 11/03/03, (cost $799,958) .............................. 799,958
-------------
TOTAL INVESTMENTS--138.0% (cost $140,787,210) ......................................... 146,360,035
-------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(38.0)% ........................................ (40,315,064)
-------------
NET ASSETS--100% ...................................................................... $106,044,971
=============
----------
(1) Using the higher of S&P's, Moody's or Fitch's rating.
(2) Entire or partial principal amount pledged as collateral for reverse
repurchase agreements or financial futures contracts.
(3) Security is not registered under the Securities Act of 1933. These
securities may be resold in transactions in accordance with Rule 144A under
that Act, to qualified institutional buyers. As of October 31, 2003, the
Trust held 9.4% of its net assets, with a current market value of
$9,941,314, in securities restricted as to resale.
(4) For purposes of amortized cost valuation, the maturity date of this
instrument is considered to be the earlier of the next date on which the
security can be redeemed at par, or the next date on which the rate of
interest is adjusted.
(5) Issuer is technically in default.
See Notes to Financial Statements.
39
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2003
--------------------------------------------------------------------------------
BROAD INVESTMENT
GRADE 2009 CORE
TERM TRUST(1) BOND TRUST
(BCT) (BHK)
---------------- -------------
ASSETS
Investments at value(2) ................................. $ 65,645,702 $ 544,064,718
Cash .................................................... 88,952 --
Foreign currency at value ............................... -- 246
Receivable for investments sold ......................... 1,144,618 45,179,866
Variation margin receivable ............................. 56,563 --
Receivable for open forward foreign currency contacts ... -- 67,187
Interest receivable ..................................... 778,406 8,152,134
Unrealized appreciation on interest rate swaps .......... -- --
Other assets ............................................ 14,358 49,777
------------- -------------
67,728,599 597,513,928
------------- -------------
LIABILITIES
Reverse repurchase agreement ............................ 19,952,625 91,668,469
Payable to custodian .................................... -- 460,397
Payable for investments purchased ....................... -- 102,452,396
Variation margin payable ................................ -- 66,844
Loan payable ............................................ -- --
Investments sold short at value(3) ...................... -- 1,459,680
Outstanding options written at value(4) ................. -- 2,153,452
Interest payable ........................................ 13,421 180,841
Unrealized depreciation on interest rate swaps .......... -- 188,307
Interest rate floors at value(3) ........................ -- --
Payable for closed forward foreign currency contacts, net -- 64,413
Investment advisory fee payable ......................... 22,397 211,451
Administration fee payable .............................. 6,108 --
Deferred Directors/Trustees fees ........................ 11,180 26,212
Other accrued expenses .................................. 341,596 41,756
------------- -------------
20,347,327 198,974,218
------------- -------------
NET ASSETS .............................................. $ 47,381,272 $ 398,539,710
============= =============
Composition of Net Assets:
Par value ............................................... $ 29,571 $ 27,019
Paid-in capital in excess of par ........................ 39,184,069 386,195,639
Cost of shares held in treasury(5) ...................... -- --
Undistributed net investment income ..................... 8,349,474 --
Accumulated net realized gain (loss) .................... (1,501,431) 350,131
Net unrealized appreciation (depreciation) .............. 1,319,589 11,966,921
------------- -------------
Net assets, October 31, 2003 ............................ $ 47,381,272 $ 398,539,710
============= =============
Net Asset Value Per Common Share(6) ..................... $16.02 $14.75
====== ======
(1)Consolidated Statement of Assets and Liabilities
(2)Investments at cost .................................. $ 64,624,207 $ 532,154,754
(3)Proceeds received .................................... -- 1,458,281
(4)Premium received ..................................... -- 2,069,401
(5)Shares held in treasury .............................. -- --
(6)Common shares outstanding ............................ 2,957,093 27,018,774
See Notes to Financial Statements.
40
INCOME LIMITED
HIGH OPPORTUNITY INCOME DURATION STRATEGIC
YIELD TRUST TRUST TRUST INCOME TRUST BOND TRUST
(BHY) (BNA) (BKT) (BLW) (BHD)
-------------- -------------- -------------- -------------- --------------
$ 61,457,946 $ 558,812,045 $ 709,412,822 $1,065,134,708 $ 146,360,035
107,680 -- 1,080,121 222,505 84,692
-- -- -- -- --
403,691 2,736,337 6,542,352 11,634,999 2,159,542
-- 388,797 159,375 -- --
-- -- -- -- --
1,860,522 7,882,677 5,088,448 13,895,130 3,534,350
-- 2,654,095 931,496 -- --
57,487 108,428 127,287 41,048 12,005
-------------- -------------- -------------- -------------- --------------
63,887,326 572,582,379 723,341,901 1,090,928,390 152,150,624
-------------- -------------- -------------- -------------- --------------
-- 103,378,025 121,766,813 118,993,475 45,871,594
-- 406,757 -- -- --
-- -- 1,253,807 246,555,554 --
-- -- -- -- --
19,250,000 -- -- -- --
-- 53,740,347 136,348,651 -- --
-- 2,582,630 3,253,119 -- --
26,742 995,054 1,953,179 29,155 24,619
-- -- -- -- --
-- -- 827,945 -- --
-- -- -- -- --
38,029 209,153 252,993 475,379 71,223
1,531 68,348 102,077 -- --
16,828 84,172 101,517 1,500 5,138
116,142 137,129 171,778 125,923 133,079
-------------- -------------- -------------- -------------- --------------
19,449,272 161,601,615 266,031,879 366,180,986 46,105,653
-------------- -------------- -------------- -------------- --------------
$ 44,438,054 $ 410,980,764 $ 457,310,022 $ 724,747,404 $ 106,044,971
============== ============== ============== ============== ==============
$ 6,382 $ 344,497 $ 633,632 $ 36,706 $ 7,034
93,565,135 406,532,068 553,795,068 699,580,295 100,247,645
-- (17,377,850) -- -- --
-- 5,785,104 10,115,860 2,864,550 1,711,227
(35,131,326) (2,798,701) (98,385,297) 390,465 (1,493,760)
(14,002,137) 18,495,646 (8,849,241) 21,875,388 5,572,825
-------------- -------------- -------------- -------------- --------------
$ 44,438,054 $ 410,980,764 $ 457,310,022 $ 724,747,404 $ 106,044,971
============== ============== ============== ============== ==============
$6.96 $11.93 $7.21 $19.74 $15.07
===== ====== ===== ====== ======
$ 75,460,083 $ 542,949,432 $ 717,432,138 $1,043,259,320 $ 140,787,210
-- 53,049,018 134,559,335 -- --
-- 2,432,578 3,054,224 -- --
-- 1,757,400 -- -- --
6,381,648 34,449,693 63,389,691 36,706,021 7,035,621
41
STATEMENTS OF OPERATIONS
FOR THE PERIOD(1) ENDED OCTOBER 31, 2003
--------------------------------------------------------------------------------
BROAD INVESTMENT
GRADE 2009 CORE
TERM TRUST(2) BOND TRUST
(BCT) (BHK)
---------------- ------------
NET INVESTMENT INCOME
Interest Income ...................................................... $ 4,972,268 $ 26,586,539
------------ ------------
EXPENSES
Investment advisory ................................................ 274,354 2,985,893
Administration ..................................................... 74,824 --
Transfer agent ..................................................... 12,204 16,284
Custodian .......................................................... 66,960 140,774
Reports to shareholders ............................................ 46,680 86,628
Directors/Trustees ................................................. 14,355 52,798
Registration ....................................................... 2,369 31,500
Independent accountants ............................................ 49,011 45,700
Legal .............................................................. 22,931 38,069
Insurance .......................................................... 3,489 47,361
Organization ....................................................... -- --
Miscellaneous ...................................................... 19,010 56,290
------------ ------------
Total expenses excluding interest expense and excise tax ......... 586,187 3,501,297
Interest Expense ............................................... 235,225 709,198
Excise Tax ..................................................... 390,244 --
------------ ------------
Total expenses ................................................... 1,211,656 4,210,495
Less fees waived by Advisor .................................... -- --
Less fees paid directly ........................................ -- (4,561)
------------ ------------
Net expenses ..................................................... 1,211,656 4,205,934
------------ ------------
Net investment income ................................................ 3,760,612 22,380,605
------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments ...................................................... (2,442,600) 5,740,077
Foreign currency ................................................. -- 4,030,682
Futures .......................................................... (516,247) 371,443
Interest rate caps ............................................... -- --
Interest rate swaps .............................................. -- 495,924
Options written .................................................. -- (529,193)
Short sales ...................................................... -- --
------------ ------------
(2,958,847) 10,108,933
------------ ------------
Net change in unrealized appreciation/depreciation on:
Investments ...................................................... (1,384,674) 10,091,362
Foreign currency ................................................. -- 119,806
Futures .......................................................... 225,201 824,878
Interest rate caps ............................................... -- --
Interest rate floors ............................................. -- --
Interest rate swaps .............................................. -- (188,307)
Options written .................................................. -- 50,529
Short sales ...................................................... -- (1,399)
------------ ------------
(1,159,473) 10,896,869
------------ ------------
Net gain (loss) ...................................................... (4,118,320) 21,005,802
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...... $ (357,708) $ 43,386,407
============ ============
----------
(1) Commencement of investment operations for Limited Duration was July 30,
2003. The other Trusts' statements are for a full year.
(2) Consolidated Statement of Operations.
See Notes to Financial Statements.
42
INCOME LIMITED
HIGH OPPORTUNITY INCOME DURATION STRATEGIC
YIELD TRUST TRUST TRUST INCOME TRUST BOND TRUST
(BHY) (BNA) (BKT) (BLW) (BHD)
------------ ------------ ------------ ------------ ------------
$ 8,033,894 $ 34,238,249 $ 45,060,425 $ 13,462,605 $ 12,835,456
------------ ------------ ------------ ------------ ------------
636,202 2,481,258 3,072,754 1,154,773 1,084,562
60,591 413,543 898,600 -- --
21,364 32,000 91,811 4,557 15,810
31,392 199,285 184,754 51,336 46,011
56,513 108,217 125,000 50,000 27,435
12,000 57,620 74,706 20,367 13,221
22,500 31,500 48,074 11,067 22,499
31,976 119,586 112,141 30,000 39,930
24,083 67,546 49,000 17,856 13,316
1,830 44,553 29,901 20,086 7,556
-- -- -- 15,000 --
20,188 111,042 155,803 10,136 18,969
------------ ------------ ------------ ------------ ------------
918,639 3,666,150 4,842,544 1,385,178 1,289,309
350,855 1,664,516 1,584,933 51,372 694,780
-- -- -- -- --
------------ ------------ ------------ ------------ ------------
1,269,494 5,330,666 6,427,477 1,436,550 1,984,089
-- -- -- -- (289,217)
(1,864) (5,057) (8,158) -- (6,589)
------------ ------------ ------------ ------------ ------------
1,267,630 5,325,609 6,419,319 1,436,550 1,688,283
------------ ------------ ------------ ------------ ------------
6,766,264 28,912,640 38,641,106 12,026,055 11,147,173
------------ ------------ ------------ ------------ ------------
(4,771,417) (3,393,714) (4,527,133) 594,555 (1,177,052)
-- (198,307) -- -- --
-- (217,858) (13,602,696) (204,090) --
-- -- (2,318) -- --
-- 1,491,314 (4,162,695) -- --
-- (861,522) (615,153) -- --
-- -- 889,290 -- --
------------ ------------ ------------ ------------ ------------
(4,771,417) (3,180,087) (22,020,705) 390,465 (1,177,052)
------------ ------------ ------------ ------------ ------------
10,326,575 12,430,608 (19,541,288) 21,875,388 17,670,059
-- 168,091 -- -- --
-- 1,032,645 75,909 -- --
-- -- 356,506 -- --
-- -- 1,000,886 -- --
-- 537,812 8,956,825 -- --
-- (40,795) 201,718 -- --
-- (92,090) (1,789,316) -- --
------------ ------------ ------------ ------------ ------------
10,326,575 14,036,271 (10,738,760) 21,875,388 17,670,059
------------ ------------ ------------ ------------ ------------
5,555,158 10,856,184 (32,759,465) 22,265,853 16,493,007
------------ ------------ ------------ ------------ ------------
$ 12,321,422 $ 39,768,824 $ 5,881,641 $ 34,291,908 $ 27,640,180
============ ============ ============ ============ ============
43
STATEMENTS OF CASH FLOWS
FOR THE PERIOD(1) ENDED OCTOBER 31, 2003
--------------------------------------------------------------------------------
BROAD INVESTMENT
RECONCILIATION OF NET INCREASE (DECREASE) GRADE 2009 CORE
IN NET ASSETS RESULTING FROM OPERATIONS TO TERM TRUST(2) BOND TRUST
NET CASH FLOWS PROVIDED BY (USED FOR) (BCT) (BHK)
OPERATING ACTIVITIES --------------- -------------
Net increase (decrease) in net assets resulting from operations ...... $ (357,708) $ 43,386,407
------------ ------------
Decrease (increase) in investments ................................... 4,562,308 45,448,469
Net realized loss (gain) ............................................. 2,958,847 (10,108,933)
Decrease (increase) in unrealized appreciation (depreciation) ........ 1,159,473 (10,896,869)
Decrease in interest rate caps ....................................... -- --
Increase in interest rate swaps ...................................... -- --
Decrease (increase) in receivable for investments sold ............... (1,144,618) (13,872,329)
Increase in receivable for forward foreign currency contacts ......... -- (67,187)
Decrease (increase) in variation margin receivable ................... (33,001) 410,275
Decrease in collateral deposited with brokers ........................ -- --
Decrease (increase) in interest receivable ........................... (118,760) (268,707)
Increase in other assets ............................................. (5,195) (37,268)
Increase (decrease) in payable for investments purchased ............. -- (82,058,415)
Decrease in payable for forward foreign currency contacts ............ -- (112,134)
Increase in payable for forward foreign currency contacts, net ....... -- 47,287
Increase in variation margin payable ................................. -- 66,844
Increase (decrease) in interest payable .............................. (3,902) 180,693
Increase in outstanding options written .............................. -- 1,819,233
Increase (decrease) in investments sold short ........................ -- 1,459,680
Increase in interest rate floor ...................................... -- --
Increase (decrease) in interest rate swaps ........................... -- 188,307
Increase (decrease) in investment advisory fee payable ............... (1,632) (9,350)
Increase (decrease) in administration fee payable .................... (445) --
Increase in deferred Directors/Trustees fees ......................... 3,503 17,116
Increase (decrease) in accrued expenses .............................. 215,573 (69,786)
------------ ------------
Total adjustments .................................................. 7,592,151 (67,863,074)
------------ ------------
Net cash flows provided by (used for) operating activities ........... $ 7,234,443 $(24,476,667)
============ ============
INCREASE (DECREASE) IN CASH AND FOREIGN CURRENCY
Net cash flows provided by (used for) operating activities ........... $ 7,234,443 $(24,476,667)
------------ ------------
Cash flows provided by (used for) financing activities:
Capital contributions .............................................. -- --
Increase (decrease) in reverse repurchase agreements ............... (3,716,562) 56,265,969
Cash dividends paid ................................................ (3,504,653) (32,084,759)
------------ ------------
Net cash flows provided by (used for) financing activities ........... (7,221,215) 24,181,210
------------ ------------
Net increase (decrease) in cash .................................... 13,228 (295,457)
Cash and foreign currency at beginning of period ................... 75,724 (164,694)
------------ ------------
Cash and foreign currency at end of period ......................... $ 88,952 $ (460,151)
============ ============
----------
(1) Commencement of investment operations for Limited Duration was July 30,
2003. This information includes the initial investment by BlackRock
Funding, Inc. The other Trusts' statements are for a full year.
(2) Consolidated Statement of Cash Flows.
See Notes to Financial Statements.
44
INCOME LIMITED
HIGH OPPORTUNITY INCOME DURATION STRATEGIC
YIELD TRUST TRUST TRUST INCOME TRUST BOND TRUST
(BHY) (BNA) (BKT) (BLW) (BHD)
--------------- --------------- --------------- --------------- ---------------
$ 12,321,422 $ 39,768,824 $ 5,881,641 $ 34,291,908 $ 27,640,180
--------------- --------------- --------------- --------------- ---------------
373,218 10,781,983 (53,973,836) (1,042,868,855) (468,135)
4,771,417 3,180,087 22,020,705 (390,465) 1,177,052
(10,326,575) (14,036,271) 10,738,760 (21,875,388) (17,670,059)
-- -- 20 -- --
-- (537,811) (931,496) -- --
(403,691) 99,155,268 13,138,945 (11,634,999) (2,159,542)
-- -- -- -- --
-- 300,045 136,839 -- --
-- -- 17,234,375 -- --
451,489 (2,087,451) 1,734,013 (13,895,130) 150,919
(5,218) (14,977) (46,991) (41,048) (9,548)
-- (101,568,077) (206,805) 246,555,554 --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
(13,822) 715,163 (333,672) 29,155 (10,933)
-- 2,348,912 2,396,153 -- --
-- (19,811,393) 136,348,651 -- --
(1,358,636) -- --
-- -- (8,025,329) -- --
(15,925) 2,968 (26,841) 475,379 7,989
(3,607) 33,984 21,963 -- --
4,236 22,977 27,842 1,500 3,387
52,880 (158,754) (81,575) 125,923 (28,020)
--------------- --------------- --------------- --------------- ---------------
(4,115,598) (21,673,347) 138,813,085 (843,518,374) (19,006,890)
--------------- --------------- --------------- --------------- ---------------
$ 7,205,824 $ 18,095,477 $ 144,694,726 $ (809,226,466) $ 8,633,290
=============== =============== =============== =============== ===============
$ 7,205,824 $ 18,095,477 $ 144,694,726 $ (809,226,466) $ 8,633,290
--------------- --------------- --------------- --------------- ---------------
-- -- -- 699,632,001 --
-- 17,674,238 (84,025,451) 118,993,475 1,648,219
(6,836,072) (36,267,803) (59,956,759) (9,176,505) (10,189,515)
--------------- --------------- --------------- --------------- ---------------
(6,836,072) (18,593,565) (143,982,210) 809,448,971 (8,541,296)
--------------- --------------- --------------- --------------- ---------------
369,752 (498,088) 712,516 222,505 91,994
(262,072) 91,331 367,605 -- (7,302)
--------------- --------------- --------------- --------------- ---------------
$ 107,680 $ (406,757) $ 1,080,121 $ 222,505 $ 84,692
=============== =============== =============== =============== ===============
45
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31, 2003 AND FOR THE PERIOD(1) ENDED OCTOBER 31, 2002
--------------------------------------------------------------------------------
BROAD INVESTMENT GRADE
2009 TERM TRUST(2) CORE BOND TRUST
(BCT) (BHK)
------------------------------ ------------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ................................ $ 3,760,612 $ 5,953,008 $ 22,380,605 $ 26,838,280
Net realized gain (loss) ............................. (2,958,847) 2,180,535 10,108,933 78,567
Net change in unrealized appreciation/depreciation ... (1,159,473) (2,064,590) 10,896,869 1,070,052
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations ...................................... (357,708) 6,068,953 43,386,407 27,986,899
------------- ------------- ------------- -------------
DIVIDENDS AND DISTRIBUTIONS:
From net investment income ........................... (3,504,653) (2,291,473) (27,108,407) (26,838,280)
From net realized gains .............................. -- -- (4,976,352) --
Tax return of capital distributions .................. -- -- -- --
In excess of net investment income ................... -- -- -- (179,545)
------------- ------------- ------------- -------------
Total dividends and distributions .................. (3,504,653) (2,291,473) (32,084,759) (27,017,825)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from the issuance of common shares ...... -- -- -- 357,484,731
Net proceeds from the underwriters'
overallotment option exercised ..................... -- -- -- 28,650,000
Reinvestment of dividends ............................ -- -- -- 134,257
Cost of Trust shares reacquired ...................... -- -- -- --
------------- ------------- ------------- -------------
Net proceeds from capital share transactions ....... -- -- -- 386,268,988
------------- ------------- ------------- -------------
Total increase (decrease) ........................ (3,862,361) 3,777,480 11,301,648 387,238,062
------------- ------------- ------------- -------------
Net Assets
Beginning of period .................................... 51,243,633 47,466,153 387,238,062 --
------------- ------------- ------------- -------------
End of period .......................................... $ 47,381,272 $ 51,243,633 $ 398,539,710 $ 387,238,062
============= ============= ============= =============
End of period undistributed net investment income ...... $ 8,349,474 $ 7,480,911 $ -- $ (144,545)
----------
(1) Commencement of investment operations for Core Bond was November 30, 2001.
This information includes the initial investment by BlackRock Funding, Inc.
The other Trusts' statements are for a full year.
(2) Consolidated Statement of Changes in Net Assets.
See Notes to Financial Statements.
46
HIGH YIELD TRUST INCOME OPPORTUNITY TRUST INCOME TRUST
(BHY) (BNA) (BKT)
------------------------------- ------------------------------- -------------------------------
2003 2002 2003 2002 2003 2002
------------- ------------- ------------- ------------- ------------- -------------
$ 6,766,264 $ 7,613,863 $ 28,912,640 $ 39,603,548 $ 38,641,106 $ 62,183,766
(4,771,417) (8,468,860) (3,180,087) (6,747,774) (22,020,705) 28,398,002
10,326,575 2,224,397 14,036,271 5,135,503 (10,738,760) (50,286,165)
------------- ------------- ------------- ------------- ------------- -------------
12,321,422 1,369,400 39,768,824 37,991,277 5,881,641 40,295,603
------------- ------------- ------------- ------------- ------------- -------------
(7,116,448) (7,613,863) (27,903,349) (25,885,698) (63,862,381) (35,876,922)
-- -- (8,364,454) -- -- --
-- (584,069) -- -- -- --
-- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
(7,116,448) (8,197,932) (36,267,803) (25,885,698) (63,862,381) (35,876,922)
------------- ------------- ------------- ------------- ------------- -------------
-- -- -- -- -- --
-- -- -- -- -- --
280,376 261,647 -- -- 3,905,622 202,011
-- -- -- (2,381,796) -- --
------------- ------------- ------------- ------------- ------------- -------------
280,376 261,647 -- (2,381,796) 3,905,622 202,011
------------- ------------- ------------- ------------- ------------- -------------
5,485,350 (6,566,885) 3,501,021 9,723,783 (54,075,118) 4,620,692
------------- ------------- ------------- ------------- ------------- -------------
38,952,704 45,519,589 407,479,743 397,755,960 511,385,140 506,764,448
------------- ------------- ------------- ------------- ------------- -------------
$ 44,438,054 $ 38,952,704 $ 410,980,764 $ 407,479,743 $ 457,310,022 $ 511,385,140
============= ============= ============= ============= ============= =============
$ -- $ -- $ 5,785,104 $ 4,974,125 $ 10,115,860 $ 35,337,135
47
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD(1) ENDED OCTOBER 31, 2003 AND FOR THE PERIOD(2) ENDED
OCTOBER 31, 2002
--------------------------------------------------------------------------------
LIMITED
DURATION INCOME STRATEGIC BOND TRUST
TRUST (BLW) (BHD)
--------------- --------------------------------
2003 2003 2002
------------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net investment income ................................ $ 12,026,055 $ 11,147,173 $ 6,886,556
Net realized gain (loss) ............................. 390,465 (1,177,052) (316,708)
Net change in unrealized appreciation/depreciation ... 21,875,388 17,670,059 (12,097,234)
------------- ------------- -------------
Net increase (decrease) in net assets resulting
from operations ...................................... 34,291,908 27,640,180 (5,527,386)
------------- ------------- -------------
DIVIDENDS FROM NET INVESTMENT INCOME ................... (9,176,505) (10,466,535) (5,890,967)
------------- ------------- -------------
Capital Share Transactions:
Net proceeds from the issuance of common shares ...... 653,888,001 -- 99,920,015
Net proceeds from the underwriters'
overallotment option exercised ..................... 45,744,000 -- --
Reinvestment of dividends ............................ -- 277,020 92,644
------------- ------------- -------------
Net proceeds from capital share transactions ....... 699,632,001 277,020 100,012,659
------------- ------------- -------------
Total increase .................................. 724,747,404 17,450,665 88,594,306
------------- ------------- -------------
NET ASSETS
Beginning of period .................................... -- 88,594,306 --
------------- ------------- -------------
End of period .......................................... $ 724,747,404 $ 106,044,971 $ 88,594,306
============= ============= =============
End of period undistributed net investment income ...... $ 2,864,550 $ 1,711,227 $ 1,005,589
----------
(1) Commencement of investment operations for Limited Duration was July 30,
2003. This information includes the initial investment by BlackRock
Funding, Inc. The other Trust's statement is for a full year.
(2) Commencement of investment operations for Strategic Bond was February 28,
2002. This information includes the initial investment by BlackRock
Funding, Inc.
See Notes to Financial Statements.
48
FINANCIAL HIGHLIGHTS
--------------------------------------------------------
BLACKROCK BROAD INVESTMENT GRADE 2009 TERM TRUST (BCT)
--------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
2003 2002 2001 2000 1999
------- ------- ------- ------- -------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ....................... $ 17.33 $ 16.05 $ 13.64 $ 13.64 $ 15.01
------- ------- ------- ------- -------
Investment operations:
Net investment income .................................. 1.28 2.01 1.17 0.91 0.93
Net realized and unrealized gain (loss) ................ (1.40) 0.04 2.01 (0.09) (1.45)
------- ------- ------- ------- -------
Net increase (decrease) from investment operations ....... (0.12) 2.05 3.18 0.82 (0.52)
------- ------- ------- ------- -------
Dividends from net investment income ..................... (1.19) (0.77) (0.77) (0.82) (0.85)
------- ------- ------- ------- -------
Net asset value, end of year ............................. $ 16.02 $ 17.33 $ 16.05 $ 13.64 $ 13.64
======= ======= ======= ======= =======
Market value, end of year ................................ $ 15.85 $ 16.18 $ 14.39 $ 11.94 $ 11.44
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(1) ............................... 5.32% 18.34% 27.66% 12.11% (7.68)%
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS:
Total expenses ........................................... 2.43% 2.50% 3.52% 4.36% 3.49%
Net expenses ............................................. 2.43% 2.50% 3.52% 4.36% 3.49%
Net expenses excluding interest expense and excise tax ... 1.18% 1.16% 1.16% 1.31% 1.03%
Net investment income .................................... 7.54% 12.22% 7.93% 6.83% 6.58%
SUPPLEMENTAL DATA:
Average net assets (000) ................................. $49,882 $48,731 $43,701 $39,425 $41,909
Portfolio turnover ....................................... 39% 35% 19% 36% 25%
Net assets, end of year (000) ............................ $47,381 $51,244 $47,466 $40,321 $40,345
Reverse repurchase agreements outstanding,
end of year (000) ...................................... $19,953 $23,669 $13,373 $18,850 $16,304
Asset coverage(2) ........................................ $ 3,375 $ 3,165 $ 4,550 $ 3,139 $ 3,475
----------
(1) Total investment return is calculated assuming a purchase of a share at the
current market price on the first day and a sale at the current market
price on the last day of each year reported. Dividends and distributions,
if any, are assumed for purposes of this calculation to be reinvested at
prices obtained under the Trust's dividend reinvestment plan. Total
investment returns do not reflect brokerage commissions. Total investment
returns for less than a full year are not annualized. Past performance is
not a guarantee of future results.
(2) Per $1,000 of reverse repurchase agreements outstanding.
The information above represents the audited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each year indicated. This information has been determined
based upon financial information provided in the financial statements and market
value data for the Trust's shares.
See Notes to Financial Statements.
49
FINANCIAL HIGHLIGHTS
---------------------------------
BLACKROCK CORE BOND TRUST (BHK)
---------------------------------
FOR THE PERIOD
NOVEMBER 30, 2001(1)
YEAR ENDED THROUGH
OCTOBER 31, 2003 OCTOBER 31, 2002
---------------- ------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............................. $ 14.33 $ 14.33(2)
----------- -----------
Investment operations:
Net investment income ......................................... 0.83 0.99
Net realized and unrealized gain .............................. 0.77 0.04
----------- -----------
Net increase from investment operations .......................... 1.60 1.03
----------- -----------
Dividends and distributions:
From net investment income .................................... (1.00) (1.00)
Net realized gain ............................................. (0.18) --
----------- -----------
Total dividends and distributions ............................. (1.18) (1.00)
----------- -----------
Capital charges with respect to issuance of shares ............... -- (0.03)
----------- -----------
Net asset value, end of period ................................... $ 14.75 $ 14.33
=========== ===========
Market value, end of period ...................................... $ 13.57 $ 13.82
=========== ===========
TOTAL INVESTMENT RETURN(3) ....................................... 6.62% (1.02)%
=========== ===========
RATIOS TO AVERAGE NET ASSETS:
Total expenses ................................................... 1.05% 1.04%(4)
Net expenses ..................................................... 1.05% 1.04%(4)
Net expenses excluding interest expense .......................... 0.87% 0.93%(4)
Net investment income ............................................ 5.58% 7.67%(4)
SUPPLEMENTAL DATA:
Average net assets (000) ......................................... $ 401,049 $ 380,277
Portfolio turnover ............................................... 161% 73%
Net assets, end of period (000) .................................. $ 398,540 $ 387,238
Reverse repurchase agreements outstanding, end of period (000) ... $ 91,668 $ 165,215
Asset coverage(5) ................................................ $ 5,348 $ 3,342
----------
(1) Commencement of investment operations. This information includes the
initial investment by BlackRock Funding, Inc.
(2) Net asset value, beginning of period, reflects a deduction of $0.675 per
share sales charge from the initial offering price of $15.00 per share.
(3) Total investment return is calculated assuming a purchase of a share at the
current market price on the first day and a sale at the current market
price on the last day of each period reported. Dividends and distributions,
if any, are assumed for purposes of this calculation to be reinvested at
prices obtained under the Trust's dividend reinvestment plan. Total
investment returns do not reflect brokerage commissions. Total investment
returns for less than a full year are not annualized. Past performance is
not a guarantee of future results.
(4) Annualized.
(5) Per $1,000 of reverse repurchase agreements outstanding.
The information above represents the audited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each period indicated. This information has been
determined based upon financial information provided in the financial statements
and market value data for the Trust's shares.
See Notes to Financial Statements.
50
FINANCIAL HIGHLIGHTS
----------------------------------
BLACKROCK HIGH YIELD TRUST (BHY)
----------------------------------
FOR THE PERIOD
DECEMBER 23, 1998(1)
YEAR ENDED OCTOBER 31, THROUGH
------------------------------------------------- OCTOBER 31,
2003 2002 2001 2000 1999
------- ------- ------- ------- --------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ................. $ 6.13 $ 7.20 $ 10.60 $ 13.58 $ 15.00
------- ------- ------- ------- -------
Investment operations:
Net investment income ............................. 1.06 1.20 1.32 1.66 1.29
Net realized and unrealized gain (loss) ........... 0.89 (0.98) (3.13) (3.02) (1.52)
------- ------- ------- ------- -------
Net increase (decrease) from investment operations xxx 1.95 0.22 (1.81) (1.36) (0.23)
------- ------- ------- ------- -------
Dividends and distributions:
From net investment income ........................ (1.07) (1.20) (1.48) (1.62) (1.17)
Tax return of capital ............................. (0.05) (0.09) (0.11) -- --
------- ------- ------- ------- -------
Total dividends and distributions .................... (1.12) (1.29) (1.59) (1.62) (1.17)
------- ------- ------- ------- -------
Capital charge with respect to issuance of shares .... -- -- -- -- (0.02)
------- ------- ------- ------- -------
Net asset value, end of period ....................... $ 6.96 $ 6.13 $ 7.20 $ 10.60 $ 13.58
======= ======= ======= ======= =======
Market value, end of period .......................... $ 10.25 $ 8.68 $ 9.18 $ 11.88 $ 12.50
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN(3) ........................... 32.87% 7.97% (11.31)% 8.23% (9.68)%
======= ======= ======= ======= =======
RATIOS TO AVERAGE NET ASSETS:
Total expenses ....................................... 3.07% 3.45% 4.90% 5.29% 4.16%(4)
Net expenses ......................................... 3.07% 3.45% 4.90% 5.29% 4.08%(4)
Net expenses excluding interest expense .............. 2.22% 2.20% 2.03% 1.99% 1.98%(4)
Net investment income ................................ 16.37% 16.29% 14.23% 13.12% 10.34%(4)
SUPPLEMENTAL DATA:
Average net assets (000) ............................. $41,326 $46,751 $58,553 $79,602 $92,116
Portfolio turnover ................................... 30% 147% 71% 92% 121%
Net assets, end of period (000) ...................... $44,438 $38,953 $45,520 $66,867 $85,652
Loan outstanding, end of period (000) ................ $19,250 $19,250 $23,000 $33,000 $41,000
Asset coverage(5) .................................... $ 3,308 $ 3,024 $ 2,983 $ 3,032 $ 3,094
----------
(1) Commencement of investment operations. This information includes the
initial investment by BlackRock Financial Management, Inc.
(2) Net asset value, beginning of period, reflects a deduction of $0.675 per
share sales charge from the initial offering price of $15.00 per share.
(3) Total investment return is calculated assuming a purchase of a share at the
current market price on the first day and a sale at the current market
price on the last day of each period reported. Dividends and distributions,
if any, are assumed for purposes of this calculation, to be reinvested at
prices obtained under the Trust's dividend reinvestment plan. Total
investment return does not reflect brokerage commissions. Total investment
returns for less than a full year are not annualized. Past performance is
not a guarantee of future results.
(4) Annualized.
(5) Per $1,000 of loan outstanding.
The information above represents the audited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each period indicated. This information has been
determined based upon financial information provided in the financial statements
and market value data for the Trust's shares.
See Notes to Financial Statements.
51
FINANCIAL HIGHLIGHTS
------------------------------------------
BLACKROCK INCOME OPPORTUNITY TRUST (BNA)
------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ................. $ 11.83 $ 11.47 $ 11.03 $ 11.45 $ 11.88
-------- -------- -------- -------- --------
Investment operations:
Net investment income ........................... 0.84 1.15 0.87 0.70 0.84
Net realized and unrealized gain (loss) ......... 0.31 (0.05) 0.34 (0.31) (0.46)
-------- -------- -------- -------- --------
Net increase from investment operations ............ 1.15 1.10 1.21 0.39 0.38
-------- -------- -------- -------- --------
Dividends and distributions:
From net investment income ...................... (0.81) (0.75) (0.23) (0.39) (0.84)
From net realized gains ......................... (0.24) -- -- (0.04) --
Tax return of capital ........................... -- -- (0.54) (0.41) --
-------- -------- -------- -------- --------
Total dividends and distributions .................. (1.05) (0.75) (0.77) (0.84) (0.84)
-------- -------- -------- -------- --------
Increase resulting from Trust shares repurchased ... -- 0.01 -- 0.03 0.03
-------- -------- -------- -------- --------
Net asset value, end of year ....................... $ 11.93 $ 11.83 $ 11.47 $ 11.03 $ 11.45
======== ======== ======== ======== ========
Market value, end of year .......................... $ 10.95 $ 10.50 $ 10.41 $ 9.75 $ 9.69
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(1) ......................... 14.71% 8.44% 15.09% 9.82% 6.70%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Total expenses ..................................... 1.29% 1.40% 3.62% 3.76% 3.18%
Net expenses ....................................... 1.29% 1.40% 3.62% 3.76% 3.18%
Net expenses excluding interest expense ............ 0.89% 0.93% 1.01% 0.88% 0.85%
Net investment income .............................. 6.99% 10.04% 7.76% 6.14% 7.14%
SUPPLEMENTAL DATA:
Average net assets (000) ........................... $413,543 $394,495 $388,478 $396,157 $426,283
Portfolio turnover ................................. 46% 153% 83% 82% 186%
Net assets, end of year (000) ...................... $410,981 $407,480 $397,756 $383,651 $406,178
Reverse repurchase agreements outstanding,
end of year (000) ............................... $103,378 $ 85,704 $136,385 $178,033 $149,346
Asset coverage(2) .................................. $ 4,976 $ 5,755 $ 3,916 $ 3,155 $ 3,720
----------
(1) Total investment return is calculated assuming a purchase of a share at the
current market price on the first day and a sale at the current market
price on the last day of each year reported. Dividends and distributions,
if any, are assumed for purposes of this calculation to be reinvested at
prices obtained under the Trust's dividend reinvestment plan. Total
investment return does not reflect brokerage commissions. Total investment
returns for less than a full year are not annualized. Past performance is
not a guarantee of future results.
(2) Per $1,000 of reverse repurchase agreements outstanding.
The information above represents the audited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each year indicated. This information has been determined
based upon financial information provided in the financial statements and market
value data for the Trust's shares.
See Notes to Financial Statements.
52
FINANCIAL HIGHLIGHTS
------------------------------
BLACKROCK INCOME TRUST (BKT)
------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year ................... $ 8.13 $ 8.06 $ 7.23 $ 7.31 $ 7.94
-------- -------- -------- -------- --------
Investment operations:
Net investment income ............................. 0.61 0.99 0.56 0.50 0.73
Net realized and unrealized gain (loss) ........... (0.52) (0.35) 0.83 (0.02) (0.80)
-------- -------- -------- -------- --------
Net increase (decrease) from investment operations ... 0.09 0.64 1.39 0.48 (0.07)
-------- -------- -------- -------- --------
Dividends from net investment income ................. (1.01) (0.57) (0.56) (0.56) (0.56)
-------- -------- -------- -------- --------
Net asset value, end of year ......................... $ 7.21 $ 8.13 $ 8.06 $ 7.23 $ 7.31
======== ======== ======== ======== ========
Market value, end of year ............................ $ 7.71 $ 8.07 $ 7.26 $ 6.38 $ 6.13
======== ======== ======== ======== ========
TOTAL INVESTMENT RETURN(1) ........................... 15.41% 15.35% 23.23% 14.01% (4.04)%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS:
Total expense ........................................ 1.36% 2.05% 2.54% 2.78% 3.03%
Net expenses ......................................... 1.36% 2.05% 2.54% 2.78% 3.03%
Net expenses excluding interest expense .............. 1.02% 1.03% 1.03% 1.05% 1.01%
Net investment income ................................ 8.18% 12.28% 7.43% 7.11% 9.54%
SUPPLEMENTAL DATA:
Average net assets (000) ............................. $472,676 $506,533 $470,185 $448,027 $482,685
Portfolio turnover ................................... 64% 125% 32% 114% 144%
Net assets, end of year (000) ........................ $457,301 $511,385 $506,764 $454,510 $459,399
Reverse repurchase agreements outstanding,
end of year (000) ................................. $121,767 $205,792 $118,634 $ 64,460 $186,451
Asset coverage(2) .................................... $ 4,756 $ 3,485 $ 5,272 $ 8,095 $ 3,478
----------
(1) Total investment return is calculated assuming a purchase of a share at the
current market price on the first day and a sale at the current market
price on the last day of each year reported. Dividends and distributions,
if any, are assumed for purposes of this calculation to be reinvested at
prices obtained under the Trust's dividend reinvestment plan. Total
investment returns do not reflect brokerage commissions. Total investment
returns for less than a full year are not annualized. Past performance is
not a guarantee of future results.
(2) Per $1,000 of reverse repurchase agreements outstanding.
The information above represents the audited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each year indicated. This information has been determined
based upon financial information provided in the financial statements and market
value data for the Trust's shares.
See Notes to Financial Statements.
53
FINANCIAL HIGHLIGHTS
-----------------------------------------------
BLACKROCK LIMITED DURATION INCOME TRUST (BLW)
-----------------------------------------------
FOR THE PERIOD
JULY 30, 2003(1)
THROUGH
OCTOBER 31, 2003
----------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............................. $ 19.10
-----------
Investment operations:
Net investment income ......................................... 0.33
Net realized and unrealized loss .............................. 0.60
-----------
Net increase from investment operations .......................... 0.93
-----------
Dividends from net investment income ............................. (0.25)
-----------
Capital charges with respect to issuance of shares ............... (0.04)
-----------
Net asset value, end of period ................................... $ 19.74
===========
Market value, end of period ...................................... $ 18.80
===========
TOTAL INVESTMENT RETURN(3) ....................................... (4.77)%
===========
RATIOS TO AVERAGE NET ASSETS:
Total expenses ................................................... 0.82%(4)
Net expenses ..................................................... 0.82%(4)
Net expenses excluding interest expense .......................... 0.79%(4)
Net investment income ............................................ 6.87%(4)
SUPPLEMENTAL DATA:
Average net assets (000) ......................................... $ 686,655
Portfolio turnover ............................................... 127%
Net assets, end of period (000) .................................. $ 724,747
Reverse repurchase agreements outstanding, end of period (000) ... $ 118,993
Asset coverage(5) ................................................ $ 7,091
----------
(1) Commencement of investment operations. This information includes the
initial investment by BlackRock Funding, Inc.
(2) Net asset value, beginning of period, reflects a deduction of $0.90 per
share sales charge from the initial offering price of $20.00 per share.
(3) Total investment return is calculated assuming a purchase of a share at the
current market price on the first day and a sale at the current market
price on the last day of each period reported. Dividends and distributions,
if any, are assumed for purposes of this calculation to be reinvested at
prices obtained under the Trust's dividend reinvestment plan. Total
investment returns do not reflect brokerage commissions. Total investment
returns for less than a full year are not annualized. Past performance is
not a guarantee of future results.
(4) Annualized.
(5) Per $1,000 of reverse repurchase agreements outstanding.
The information above represents the audited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each period indicated. This information has been
determined based upon financial information provided in the financial statements
and market value data for the Trust's shares.
54
FINANCIAL HIGHLIGHTS
--------------------------------------
BLACKROCK STRATEGIC BOND TRUST (BHD)
--------------------------------------
FOR THE PERIOD
FEBRUARY 28, 2002(1)
YEAR ENDED THROUGH
OCTOBER 31, 2003 OCTOBER 31, 2002
---------------- --------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............................. $ 12.63 $ 14.33(2)
-------- --------
Investment operations:
Net investment income ......................................... 1.59 0.98
Net realized and unrealized loss .............................. 2.34 (1.77)
-------- --------
Net increase from investment operations .......................... 3.93 (0.79)
-------- --------
Dividends from net investment income ............................. (1.49) (0.84)
-------- --------
Capital charges with respect to issuance of shares ............... -- (0.07)
-------- --------
Net asset value, end of period ................................... $ 15.07 $ 12.63
======== ========
Market value, end of period ...................................... $ 15.27 $ 12.35
======== ========
TOTAL INVESTMENT RETURN(3) ....................................... 37.36% (12.34)%
======== ========
RATIOS TO AVERAGE NET ASSETS:
Total expenses ................................................... 2.01% 2.57%(4)
Net expenses ..................................................... 1.71% 2.26%(4)
Net expenses excluding interest expense .......................... 1.01% 1.25%(4)
Net investment income ............................................ 11.32% 10.68%(4)
SUPPLEMENTAL DATA:
Average net assets (000) ......................................... $ 98,498 $ 95,675
Portfolio turnover ............................................... 32% 22%
Net assets, end of period (000) .................................. $106,045 $ 88,594
Reverse repurchase agreements outstanding, end of period (000) ... $ 45,872 $ 44,223
Asset coverage(5) ................................................ $ 3,312 $ 3,003
----------
(1) Commencement of investment operations. This information includes the
initial investment by BlackRock Funding, Inc.
(2) Net asset value, beginning of period, reflects a deduction of $0.675 per
share sales charge from the initial offering price of $15.00 per share.
(3) Total investment return is calculated assuming a purchase of a share at the
current market price on the first day and a sale at the current market
price on the last day of each period reported. Dividends and distributions,
if any, are assumed for purposes of this calculation to be reinvested at
prices obtained under the Trust's dividend reinvestment plan. Total
investment returns do not reflect brokerage commissions. Total investment
returns for less than a full year are not annualized. Past performance is
not a guarantee of future results.
(4) Annualized.
(5) Per $1,000 of reverse repurchase agreements outstanding.
The information above represents the audited operating performance for a share
outstanding, total investment returns, ratios to average net assets and other
supplemental data for each period indicated. This information has been
determined based upon financial information provided in the financial statements
and market value data for the Trust's shares.
See Notes to Financial Statements.
55
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1. ORGANIZATION & ACCOUNTING POLICIES
The BlackRock Broad Investment Grade 2009 Term Trust Inc. ("Broad Investment
Grade"), BlackRock Core Bond Trust ("Core Bond"), The BlackRock High Yield Trust
("High Yield"), BlackRock Income Opportunity Trust ("Income Opportunity"), The
BlackRock Income Trust Inc. ("Income Trust"), BlackRock Limited Duration Income
Trust ("Limited Duration") and BlackRock Strategic Bond Trust ("Strategic Bond")
are registered as diversified, closed-end management investment companies under
the Investment Company Act of 1940, as amended. Broad Investment Grade, Income
Opportunity and Income Trust are Maryland corporations. Core Bond, High Yield,
Limited Duration and Strategic Bond are organized as Delaware statutory trusts.
Limited Duration had no transactions before its commencement of investment
operations on July 30, 2003 other than a sale to BlackRock Funding, Inc. of
6,021 common shares for $115,001.
On December 3, 1999, Broad Investment Grade transferred a substantial portion
of its total assets to a 100% owned regulated investment company subsidiary
called BCT Subsidiary, Inc. The financial statements and these notes to the
financial statements for Broad Investment Grade are consolidated and include the
operations of both Broad Investment Grade and its wholly owned subsidiary after
elimination of all intercompany transactions and balances.
The following is a summary of significant accounting policies followed by the
Trusts.
SECURITIES VALUATION: The Trusts value most of their securities on the basis of
current market quotations provided by dealers or pricing services selected under
the supervision of each Trust's Board (the "Board") of Directors/Trustees
("Trustees"). In determining the value of a particular security, pricing
services may use certain information with respect to transactions in such
securities, quotations from dealers, market transactions in comparable
securities, various relationships observed in the market between securities, and
calculated yield measures based on valuation technology commonly employed in the
market for such securities. Exchange traded options are valued at their last
sales price as of the close of options trading on applicable exchanges. In the
absence of a last sale, options are valued at the average of the quoted bid and
asked prices as of the close of business. A futures contract is valued at the
last sale price as of the close of the commodities exchange on which it trades.
Short-term securities may be valued at amortized cost. Securities or other
assets for which such current market quotations are not readily available are
valued at fair value as determined in good faith under procedures established
by, and under the general supervision and responsibility of, each Trust's Board.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on trade date. Realized and unrealized gains and losses are calculated
on the identified cost basis. Each Trust also records interest income on an
accrual basis and amortizes premium and/or accretes discount on securities
purchased using the interest method.
REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements,
a Trust's custodian takes possession of the underlying collateral securities,
the value of which at least equals the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by a Trust may be delayed or limited.
OPTION WRITING/PURCHASING: When a Trust writes or purchases an option, an amount
equal to the premium received or paid by the Trust is recorded as a liability or
an asset and is subsequently adjusted to the current market value of the option
written or purchased. Premiums received or paid from writing or purchasing
options which expire unexercised are treated by the Trust on the expiration date
as realized gains or losses. The difference between the premium and the amount
paid or received on effecting a closing purchase or sale transaction, including
brokerage commissions, is also treated as a realized gain or loss. If an option
is exercised, the premium paid or received is added to the proceeds from the
sale or cost of the purchase in determining whether a Trust has realized a gain
or a loss on investment transactions. A Trust, as writer of an option, may have
no control over whether the underlying securities may be sold (call) or
purchased (put) and as a result bears the market risk of an unfavorable change
in the price of the security underlying the written option.
Options, when used by the Trusts, help in maintaining a targeted duration.
Duration is a measure of the price sensitivity of a security or a portfolio to
relative changes in interest rates. For instance, a duration of "one" means that
a portfolio's or a security's price would be expected to change by approximately
one percent with a one percent change in interest rates, while a duration of
five would imply that the price would move approximately five percent in
relation to a one percent change in interest rates.
Option writing and purchasing may be used by the Trusts as an attempt to
manage the duration of positions, or collections of positions, so that changes
in interest rates do not adversely affect the targeted duration of the portfolio
unexpectedly. A call option gives the purchaser of the option the right (but not
obligation) to buy, and obligates the seller to sell (when the option is
exercised), the underlying position at the exercise price at any time or at a
specified time during the option period. A put option gives the holder the right
to sell and obligates the writer to buy the underlying position at the exercise
price at any time or at a specified time during the option period. Put or call
options can be purchased or sold to effectively help manage the targeted
duration of the portfolio.
The main risk that is associated with purchasing options is that the option
expires without being exercised. In this case, the option expires worthless and
the premium paid for the option is considered the loss. The risk associated with
writing call options is that a Trust may forgo the opportunity for a profit if
the market value of the underlying position increases and the option is
exercised. The risk in writing put options is that a Trust may incur a loss if
the market value of the underlying position decreases and the option is
exercised. In addition, as with futures contracts, the Trust risks not being
able to enter into a closing transaction for the written option as the result of
an illiquid market.
INTEREST RATE SWAPS: In an interest rate swap, one investor pays a floating rate
of interest on a notional principal amount and receives a fixed rate of interest
on the same notional principal amount for a specified period of time.
Alternatively, an investor may pay a fixed rate and receive
56
a floating rate. Interest rate swaps are efficient as asset/liability management
tools. In more complex swaps, the notional principal amount may decline (or
amortize) over time.
During the term of the swap, changes in the value of the swap are recognized
as unrealized gains or losses by "marking-to-market" to reflect the market value
of the swap. When the swap is terminated, a Trust will record a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transaction and the Trust's basis in the contract, if any.
The Trusts are exposed to credit loss in the event of non-performance by the
other party to the swap. However, the Trusts closely monitor swaps and do not
anticipate non-performance by any counterparty.
SWAP OPTIONS: Swap options are similar to options on securities except that
instead of selling or purchasing the right to buy or sell a security, the writer
or purchaser of the swap option is granting or buying the right to enter into a
previously agreed upon interest rate swap agreement at any time before the
expiration of the option. Premiums received or paid from writing or purchasing
options are recorded as liabilities or assets and are subsequently adjusted to
the current market value of the option written or purchased. Premiums received
or paid from writing or purchasing options which expire unexercised are treated
by a Trust on the expiration date as realized gains or losses. The difference
between the premium and the amount paid or received on effecting a closing
purchase or sale transaction, including brokerage commission, is also treated as
a realized gain or loss. If an option is exercised, the premium paid or received
is added to the proceeds from the sale or cost of the purchase in determining
whether a Trust has realized a gain or loss on investment transactions.
The main risk that is associated with purchasing swap options is that the
swap option expires without being exercised. In this case, the option expires
worthless and the premium paid for the swap option is considered the loss. The
main risk that is associated with the writing of a swap option is the market
risk of an unfavorable change in the value of the interest rate swap underlying
the written swap option.
Swap options may be used by the Trusts to manage the duration of the Trusts'
portfolios in a manner similar to more generic options described above.
INTEREST RATE CAPS: Interest rate caps are similar to interest rate swaps,
except that one party agrees to pay a fee, while the other party pays the
excess, if any, of a floating rate over a specified fixed or floating rate.
Interest rate caps are intended to both manage the duration of the Trusts'
portfolios and their exposure to changes in short-term interest rates. Owning
interest rate caps reduces a portfolio's duration, making them less sensitive to
changes in interest rates from a market value perspective. The effect on income
involves protection from rising short-term interest rates, which the Trusts
experience primarily in the form of leverage.
The Trusts are exposed to credit loss in the event of non-performance by the
other party to the interest rate cap. However, the Trusts do not anticipate
non-performance by any counterparty.
Transactions fees paid or received by the Trusts are recognized as assets or
liabilities and amortized or accreted into interest expense or income over the
life of the interest rate cap. The asset or liability is subsequently adjusted
to the current market value of the interest rate cap purchased or sold. Changes
in the value of the interest rate cap are recognized as unrealized gains and
losses.
INTEREST RATE FLOORS: Interest rate floors are similar to interest rate swaps,
except that one party agrees to pay a fee, while the other party pays the
deficiency, if any, of a floating rate under a specified fixed or floating rate.
Interest rate floors are used by the Trusts to both manage the duration of
the portfolios and their exposure to changes in short-term interest rates.
Selling interest rate floors reduces a portfolios duration, making it less
sensitive to changes in interest rates from a market value perspective. The
Trusts' leverage provides extra income in a period of falling rates. Selling
floors reduces some of that advantage by partially monetizing it as an up front
payment which the Trusts receive.
The Trusts are exposed to credit loss in the event of non-performance by the
other party to the interest rate floor. However, the Trusts do not anticipate
non-performance by any counterparty.
Transactions fees paid or received by the Trusts are recognized as assets or
liabilities and amortized or accreted into interest expense or income over the
life of the interest rate floor. The asset or liability is subsequently adjusted
to the current market value of the interest rate floor purchased or sold.
Changes in the value of the interest rate floor are recognized as unrealized
gains and losses.
FINANCIAL FUTURES CONTRACTS: A futures contract is an agreement between two
parties to buy and sell a financial instrument for a set price on a future date.
Initial margin deposits are made upon entering into futures contracts and can be
either cash or securities. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received, depending upon whether unrealized gains or losses are
incurred. When the contract is closed, a Trust records a realized gain or loss
equal to the difference between the proceeds from (or cost of) the closing
transaction and the Trust's basis in the contract.
Financial futures contracts, when used by the Trusts, help in maintaining a
targeted duration. Futures contracts can be sold to effectively shorten an
otherwise longer duration portfolio. In the same sense, futures contracts can be
purchased to lengthen a portfolio that is shorter than its duration target.
Thus, by buying or selling futures contracts, the Trusts may attempt to manage
the duration of positions so that changes in interest rates do not change the
duration of the portfolio unexpectedly.
FORWARD CURRENCY CONTRACTS: The Trusts enter into forward currency contracts
primarily to facilitate settlement of purchases and sales of foreign securities
and to help manage the overall exposure to foreign currency. A forward contract
is a commitment to purchase or sell a foreign currency at a future date (usually
the security transaction settlement date) at a negotiated forward rate. In the
event that a security fails to settle within the normal settlement period, the
forward currency contract is renegotiated at a new rate. The gain or loss
arising from the differ-
57
ence between the settlement value of the original and renegotiated forward
contracts is isolated and is included in net realized gains (losses) from
foreign currency transactions. Risks may arise as a result of the potential
inability of the counterparties to meet the terms of their contract.
Forward currency contracts, when used by the Trusts, help to manage the
overall exposure to the foreign currency backing some of the investments held by
the Trusts. Forward currency contracts are not meant to be used to eliminate all
of the exposure to the foreign currency, rather they allow the Trusts to limit
their exposure to foreign currency within a narrow band to the objectives of the
Trusts.
FOREIGN CURRENCY TRANSLATION: Foreign currency amounts are translated into
United States dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities--at the New York City noon rates of exchange.
(ii) purchases and sales of investment securities, income and
expenses--at the rates of exchange prevailing on the respective
dates of such transactions.
The Trusts isolate that portion of the results of operations arising as a
result of changes in the foreign exchange rates from the fluctuations arising
from changes in the market prices of securities held at period end. Similarly,
the Trusts isolate the effect of changes in foreign exchange rates from the
fluctuations arising from changes in the market prices of portfolio securities
sold during the period.
Net realized and unrealized foreign exchange gains and losses including
realized foreign exchange gains and losses from sales and maturities of foreign
portfolio securities, maturities of foreign reverse repurchase agreements, sales
of foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the amounts
of interest and discount recorded on the Trusts' books and the U.S. dollar
equivalent amounts actually received or paid and changes in unrealized foreign
exchange gains and losses in the value of portfolio securities and other assets
and liabilities arising as a result of changes in the exchange rate.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of domestic origin, including
unanticipated movements in the value of the foreign currency relative to the
U.S. dollar.
SHORT SALES: The Trusts may make short sales of securities as a method of
managing potential price declines in similar securities owned. When a Trust
makes a short sale, it may borrow the security sold short and deliver it to the
broker-dealer through which it made the short sale as collateral for its
obligation to deliver the security upon conclusion of the sale. The Trusts may
have to pay a fee to borrow the particular securities and may be obligated to
pay over any payments received on such borrowed securities. A gain, limited to
the price at which the Trust sold the security short, or a loss, unlimited as to
dollar amount, will be recognized upon the termination of a short sale if the
market price is greater or less than the proceeds originally received.
SECURITY LENDING: The Trusts may lend their portfolio securities to qualified
institutions. The loans are secured by collateral at least equal, at all times,
to the market value of the securities loaned. The Trusts may bear the risk of
delay in recovery of, or even loss of rights in, the securities loaned should
the borrower of the securities fail financially. The Trusts receive compensation
for lending their securities in the form of interest on the loan. The Trusts
also continue to receive interest on the securities loaned, and any gain or loss
in the market price of the securities loaned that may occur during the term of
the loan will be for the accounts of the Trusts. The Trusts did not enter into
any security lending transactions during the period ended October 31, 2003.
SEGREGATION: In cases in which the Investment Company Act of 1940, as amended,
and the interpretive positions of the Securities and Exchange Commission ("SEC")
require that each Trust segregate assets in connection with certain investments
(e.g., when issued securities, reverse repurchase agreements or futures
contracts), each Trust will, consistent with certain interpretive letters issued
by the SEC, designate on its books and records cash or other liquid debt
securities having a market value at least equal to the amount that would
otherwise be required to be physically segregated.
FEDERAL INCOME TAXES: It is each Trust's (excluding Limited Duration) intention
to continue, and Limited Duration intends to elect, to be treated as a regulated
investment company under the Internal Revenue Code and to distribute sufficient
amounts of their taxable income to shareholders. Therefore, no Federal income
tax provisions are required. As part of a tax planning strategy, Broad
Investment Grade intends to retain a portion of its taxable income and pay an
excise tax on the undistributed amounts.
DIVIDENDS AND DISTRIBUTIONS: Each Trust declares and pays dividends and
distributions to common shareholders monthly from net investment income, net
realized short-term capital gains and other sources, if necessary. Net long-term
capital gains, if any, in excess of loss carryforwards may be distributed
annually. Dividends and distributions are recorded on the ex-dividend date.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America.
ESTIMATES: The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
DEFERRED COMPENSATION AND BLACKROCK CLOSED-END SHARE EQUIVALENT INVESTMENT PLAN:
Under the revised deferred compensation plan approved by each Trust's Board,
non-interested Trustees may elect to defer receipt of all or a portion of their
annual compensation. As of January 1, 2003, the Board elected to require its
non-interested members to defer a portion of their annual complex compensation
pursuant to the plan. Deferred amounts earn an approximate return as though
equivalent dollar amounts had been invested in common shares of other BlackRock
closed-end funds selected by the Trustees. This has the same economic effect for
the Trustees as if the Trustees had invested the deferred amounts in such
Trusts.
The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of the Trust. Each
Trust may, however, elect to invest in common shares of those Trusts selected by
the Trustees/Directors in order to match its deferred compensation obligations.
58
RECLASSIFICATION OF CAPITAL ACCOUNTS: In order to present undistributed
(distribution in excess of) net investment income ("UNII"), accumulated net
realized gain ("Accumulated Gain") and paid-in capital ("PIC") more closely to
its tax character the following accounts, for each Trust, were increased
(decreased):
TRUST UNII ACCUMULATED GAIN PIC
--------- ---------- ---------------- -------------
Broad Investment Grade $ 612,604 $ 443,366 $ (1,055,970)
Core Bond 4,872,347 (4,861,017) (11,330)
High Yield 350,184 (350,184)
Income Opportunity (198,402) 198,402
Income Trust 10,359,634 (10,359,634)
Limited Duration 15,000 (15,000)
Strategic Bond 25,000 (25,000)
NOTE 2. AGREEMENTS
Each Trust has an Investment Management Agreement with BlackRock Advisors, Inc.
(the "Advisor"), which is a wholly owned subsidiary of BlackRock, Inc. BlackRock
Financial Management, Inc., a wholly owned subsidiary of BlackRock, Inc., serves
as sub-advisor to Core Bond, Limited Duration and Strategic Bond. BlackRock,
Inc. is an indirect, majority owned subsidiary of The PNC Financial Services
Group, Inc. The investment management agreement for Core Bond, Limited Duration
and Strategic Bond covers both investment advisory and administration services.
Broad Investment Grade had an Administration Agreement with Princeton
Administrators, L.P. ("Princeton"), an indirect wholly owned affiliate of
Merrill Lynch & Co., Inc. High Yield, Income Opportunity and Income Trust each
had an Administration Agreement with Prudential Investments LLC ("Prudential"),
an indirect wholly owned subsidiary of Prudential Financial, Inc.
Each Trust's investment advisory fee paid to the Advisor is computed weekly and
payable monthly based on an annual rate, 0.55% for Broad Investment Grade, 0.60%
for Income Opportunity and 0.65% for Income Trust, of each Trust's average net
assets and 0.55% for Core Bond and Limited Duration, 1.05% for High Yield and
0.75% for Strategic Bond, of each Trust's average weekly managed assets. The
Advisor has voluntarily agreed to waive a portion of the investment advisory
fees or other expenses on Strategic Bond as a percentage of its average weekly
managed assets as follows: 0.20% for the first 5 years of the Trust's
operations, 0.15% in year 6, 0.10% in year 7 and 0.05% in year 8.
The administration fee paid to each Trust's respective administrator, on other
than Core Bond, Limited Duration and Strategic Bond, is computed weekly and
payable monthly based on an annual rate, 0.15% for Broad Investment Grade, 0.10%
for Income Opportunity and 0.20% of the first $500 million and 0.15% on any
excess for Income Trust, of each Trust's average net assets and 0.10% for High
Yield based on its average weekly managed assets.
On May 22, 2003, the Board approved the change of the Trusts' administrators to
the Advisor. The new administration agreements became effective August 18, 2003.
The administration fee structures for Broad Investment Grade, Income Opportunity
and High Yield, as described above, remain unchanged under the new
administration agreements. Income Trust's new administration fee is 0.15% of its
average weekly net assets.
Pursuant to the agreements, the Advisor provides continuous supervision of the
investment portfolio and pays the compensation of officers of each Trust who are
affiliated persons of the Advisor. The Advisor pays occupancy and certain
clerical and accounting costs for Core Bond, Limited Duration and Strategic
Bond. Each Trust's respective administrator pays occupancy and certain clerical
and accounting costs of their respective Trust(s). Each Trust bears all other
costs and expenses, which include reimbursements to the Advisor for certain
operational support services provided to each Trust.
Pursuant to the terms of their custody agreements, Core Bond, High Yield, Income
Opportunity, Income Trust and Strategic Bond received earnings credits from its
custodian for positive cash balances maintained, which are used to offset
custody fees.
NOTE 3. PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term investments,
dollar rolls and U.S. government securities, for the year ended October 31,
2003, aggregated as follows:
TRUST PURCHASES SALES
--------- -------------- -------------
Broad Investment Grade $ 9,518,939 $ 17,566,287
Core Bond 1,802,685,560 447,259,526
High Yield 17,429,401 21,150,056
Income Opportunity 254,047,342 230,794,922
Income Trust 191,331,458 124,033,582
Limited Duration 2,374,989,704 554,303,341
Strategic Bond 41,918,181 43,796,771
Purchases and sales of U.S. government securities for the year ended October 31,
2003, aggregated as follows:
TRUST PURCHASES SALES
--------- -------------- -------------
Broad Investment Grade $ 10,556,264 $ 1,817,063
Core Bond 590,274,891 594,380,609
High Yield -- --
Income Opportunity 26,261,365 33,652,852
Income Trust 421,835,640 269,779,710
Limited Duration 155,160,852 76,878,768
Strategic Bond 2,828,040 3,026,708
59
Each Trust may from time to time purchase in the secondary market certain
mortgage pass-through securities packaged or master serviced by affiliates or
mortgage related securities containing loans or mortgages originated by PNCBank
or its affiliates, including Midland Loan Services, Inc. It is possible under
certain circumstances, that PNC Mortgage Securities Corp. or its affiliates,
including Midland Loan Services, Inc., could have interests that are in conflict
with the holders of these mortgage backed securities, and such holders could
have rights against PNC Mortgage Securities Corp. or its affiliates, including
Midland Loan Services, Inc.
At October 31, 2003, the total cost of securities for Federal income tax
purposes and the aggregate gross unrealized appreciation and depreciation for
securities held by each Trust were as follows:
TRUST COST APPRECIATION DEPRECIATION NET
-------- -------------- ------------ ------------ -------------
Broad Investment Grade $ 64,723,574 $ 3,764,776 $ 2,842,648 $ 922,128
Core Bond 536,291,164 12,242,474 4,468,920 7,773,554
High Yield 75,461,110 5,124,302 19,127,466 (14,003,164)
Income Opportunity 542,949,432 21,880,827 6,018,214 15,862,613
Income Trust 717,455,177 26,541,762 34,584,117 (8,042,355)
Limited Duration 1,043,259,320 23,014,432 1,139,044 21,875,388
Strategic Bond 140,787,210 8,071,541 2,498,716 5,572,825
For Federal income tax purposes, the following Trusts had capital loss
carryforwards as of their last respective tax year end. These amounts may be
used to offset future realized capital gains, if any:
CAPITAL LOSS CAPITAL LOSS
TRUST CARRYFORWARDS AMOUNT EXPIRES TRUST CARRYFORWARDS AMOUNT EXPIRES
-------- -------------------- ------- -------- -------------------- -------
Broad Investment Grade $ 85,817 2008 Income Opportunity $ 1,978,381 2011
131,829 2011 ===========
----------- INCOME TRUST $27,373,194 2004
$ 217,646 33,107,952 2007
=========== 1,352,206 2008
High Yield $ 3,443,603 2007 13,940,898 2009
3,270,311 2008 21,960,613 2011
15,159,280 2009 -----------
8,468,860 2010 $97,734,863
4,771,417 2011 ===========
----------- Strategic Bond $ 316,708 2010
$35,113,471 1,177,052 2011
=========== -----------
$ 1,493,760
===========
Accordingly, no capital gain distributions are expected to be paid to
shareholders of a Trust until that Trust has net realized capital gains in
excess of its carryforward amounts.
Details of open financial futures contracts at October 31, 2003, were as
follows:
UNREALIZED
NUMBER OF EXPIRATION VALUE AT VALUE AT APPRECIATION
TRUST CONTRACTS TYPE DATE TRADE DATE OCTOBER 31, 2003 (DEPRECIATION)
-------- --------- ------------------ ---------- ------------ ---------------- --------------
LONG POSITION:
Broad Investment Grade 60 10 Yr. U.S. T-Note Dec. '03 $ 6,628,781 $ 6,737,813 $ 109,032
50 30 Yr. U.S. T-Bond Dec. '03 5,246,876 5,435,939 189,063
-----------
$ 298,095
===========
Core Bond 422 30 Yr. U.S. T-Bond Dec. '03 44,332,486 45,879,313 $ 1,546,827
-----------
Income Opportunity 826 10 Yr. U.S. T-Note Dec. '03 91,388,531 92,757,218 $ 1,368,687
380 30 Yr. U.S. T-Bond Dec. '03 39,907,169 41,313,125 1,405,956
-----------
$ 2,774,643
===========
Income Trust 350 30 Yr. U.S. T-Bond Dec. '03 36,723,694 38,051,563 $ 1,327,869
-----------
SHORT POSITION:
Core Bond 718 5 Yr. U.S. T-Note Dec. '03 $ 79,256,986 $ 80,281,375 $(1,024,389)
177 10 Yr. U.S. T-Note Dec. '03 19,709,270 19,876,547 (167,277)
49 10 Yr. U.S. T-Note Mar. '04 5,399,033 5,432,109 (33,076)
-----------
$(1,224,742)
===========
Income Opportunity 979 5 Yr. U.S. T-Note Dec. '03 107,510,114 109,464,437 $(1,954,323)
-----------
60
UNREALIZED
NUMBER OF EXPIRATION VALUE AT VALUE AT APPRECIATION
TRUST CONTRACTS TYPE DATE TRADE DATE OCTOBER 31, 2003 (DEPRECIATION)
-------- --------- ------------------ ---------- ---------- ---------------- --------------
Income Trust 436 10 Yr. U.S. T-Note Dec. '03 23,671,102 24,256,125 $ (585,023)
30 Euro Dollar Jun. '04 7,346,137 7,376,250 (30,113)
30 Euro Dollar Sep. '04 7,316,513 7,345,875 (29,362)
30 Euro Dollar Dec. '04 7,289,137 7,312,125 (22,988)
30 Euro Dollar Mar. '05 7,266,638 7,281,750 (15,112)
25 Euro Dollar Jun. '05 6,036,781 6,045,625 (8,844)
25 Euro Dollar Sep. '05 6,021,156 6,025,625 (4,469)
25 Euro Dollar Dec. '05 6,006,157 6,009,063 (2,906)
25 Euro Dollar Mar. '06 5,992,406 5,994,063 (1,657)
----------
$ (700,474)
==========
Core Bond had open forward currency contracts at October 31, 2003, were as
follows:
VALUE AT VALUE AT UNREALIZED
SETTLEMENT CONTRACT SETTLEMENT OCTOBER 31, APPRECIATION
TRUST AND FOREIGN CURRENCY DATE TO RECEIVE DATE 2003 (DEPRECIATION)
-------------------------- ---------- ------------- ----------- ----------- --------------
SOLD:
Canadian Dollar 01/12/04 6,264,653 $ $ 4,713,369 $ 4,733,640 $(20,271)
Euro 01/08/04 14,232,091 Euro 16,509,226 16,491,551 17,675
Swedish Krona 01/07/04 39,660,864 kr 5,134,757 5,064,974 69,783
--------
$ 67,187
========
Income Trust held one interest rate floor. Under the agreement, Income Trust
pays the excess, if any, of a fixed rate over a floating rate. Income Trust
received a transaction fee for the floor. Transaction fees are amortized through
the termination of the agreement. Details of the interest rate floor held at
October 31, 2003, were as follows:
NOTIONAL VALUE AT
AMOUNT FIXED FLOATING TERMINATION AMORTIZED OCTOBER 31, UNREALIZED
(000) RATE RATE DATE COST 2003 DEPRECIATION
-------- -------- ---------- ---------- -------- --------- ------------
$23,000 6.00% 1-month LIBOR 1/25/05 $417,375 $827,945 $(410,570)
======== ======== =========
Details of open interest rate swaps at October 31, 2003, were as follows:
NOTIONAL UNREALIZED
AMOUNT FIXED FLOATING TERMINATION APPRECIATION
TRUST (000) RATE RATE DATE (DEPRECIATION)
-------- --------- --------- ------------- ----------- --------------
Core Bond $25,000 2.64% (a) 3-month LIBOR 8/14/06 $ (25,906)
21,800 3.52% (a) 3-month LIBOR 9/26/08 (182,715)
5,700 3.52% (a) 3-month LIBOR 9/26/08 (31,848)
10,800 3.57% (b) 3-month LIBOR 10/31/08 52,162
4,400 5.82% (b) 3-month LIBOR 11/27/24 --
----------
$ (188,307)
==========
Income Opportunity $47,000 5.73% (a) 3-month LIBOR 5/4/06 $2,620,762
50,000 2.64% (a) 3-month LIBOR 8/14/06 (54,951)
8,000 3.52% (a) 3-month LIBOR 9/26/08 (44,800)
11,500 3.57% (B) 3-MONTH LIBOR 10/31/08 55,543
7,000 5.23% (b) 3-month LIBOR 11/4/21 77,741
4,800 5.82% (b) 3-month LIBOR 11/27/24 --
----------
$2,654,295
==========
Income Trust $50,000 2.64% (a) 3-month LIBOR 8/14/06 $ (54,951)
24,000 3.55% (a) 3-month LIBOR 10/26/06 537,931
11,200 3.52% (a) 3-month LIBOR 9/26/08 (62,720)
12,400 3.57% (b) 3-month LIBOR 10/31/08 59,892
25,000 5.23% (b) 3-month LIBOR 8/15/23 451,344
5,100 5.82% (b) 3-month LIBOR 11/27/24 --
----------
$ 931,496
==========
----------
(a) Trust pays floating interest rate and receives fixed rate.
(b) Trust pays fixed interest rate and receives floating rate.
61
Transactions in options written during the year ended October 31, 2003, were
as follows:
CONTRACTS/
NOTIONAL
AMOUNT PREMIUM
TRUST (000) RECEIVED
--------- ----------- -----------
CORE BOND
Options outstanding at October 31, 2002 $ 138 $ 199,639
Options written 113,366 2,291,544
Options expired (138) (199,639)
Options terminated in closing purchase transactions (7,658) (222,143)
-------- ----------
Options outstanding at October 31, 2003 $105,708 $2,069,401
======== ==========
INCOME OPPORTUNITY
Options outstanding at October 31, 2002 $ 6,000 $ 124,460
Options written 123,340 2,432,578
Options expired (3,000) (56,660)
Options terminated in closing purchase transactions (3,000) (67,800)
-------- ----------
Options outstanding at October 31, 2003 $123,340 $2,432,578
======== ==========
INCOME TRUST
Options outstanding at October 31, 2002 $ 22,000 $ 456,353
Options written 150,485 3,054,224
Options expired (11,000) (207,753)
Options terminated in closing purchase transactions (11,000) (248,600)
-------- ----------
Options outstanding at October 31, 2003 $150,485 $3,054,224
======== ==========
NOTE 4. BORROWINGS
REVERSE REPURCHASE AGREEMENTS: The Trusts may enter into reverse repurchase
agreements with qualified, third-party broker-dealers as determined by and under
the direction of the Trusts' Board. Interest on the value of reverse repurchase
agreements issued and outstanding is based upon competitive market rates at the
time of issuance. At the time a Trust enters into a reverse repurchase
agreement, it will establish and maintain a segregated account with the lender,
containing liquid investment grade securities having a value not less than the
repurchase price, including accrued interest of the reverse repurchase
agreement.
The average daily balance and weighted average interest rate of reverse
repurchase agreements during the year ended October 31, 2003, were as follows:
AVERAGE DAILY WEIGHTED AVERAGE
TRUST BALANCE INTEREST RATE
----- ------------- -----------------
Broad Investment Grade $ 19,408,552 1.21%
Core Bond 67,591,003 1.05%
Income Opportunity 136,171,515 1.22%
Income Trust 135,804,028 1.17%
Limited Duration 26,590,763 0.76%
Strategic Bond 46,036,350 1.51%
DOLLAR ROLLS: The Trusts may enter into dollar rolls in which a Trust sells
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period the Trusts forgo principal and
interest paid on the securities. The Trusts will be compensated by the interest
earned on the cash proceeds of the initial sale and/or by the lower repurchase
price at the future date.
LOAN PAYABLE: High Yield has a $32 million committed credit facility (the
"facility"). Under the terms of the facility, the Trust borrows at the London
Interbank Offered Rate ("LIBOR") plus facility and administrative fees. In
addition, the Trust pays a liquidity fee on the unused portion of the facility.
The Trust may borrow up to 33 1/3% of its total assets up to the committed
amount. In accordance with the terms of the debt agreement, the Trust has
pledged its portfolio assets as collateral for the borrowing.
For the year ended October 31, 2003, High Yield borrowed a daily weighted
average balance of $19,250,000 at a weighted average interest rate at 1.96%.
62
NOTE 5. CAPITAL
There are 200 million of $0.01 par value common shares authorized for Broad
Investment Grade, Income Opportunity and Income Trust. There are an unlimited
number of $0.001 par value common shares authorized for Core Bond, High Yield,
Limited Duration and Strategic Bond. At October 31, 2003, the common shares
outstanding and the shares owned by affiliates of the Advisor of each Trust
were:
COMMON SHARES COMMON SHARES
TRUST OUTSTANDING OWNED
-------- ------------- --------------
Broad Investment Grade 2,957,093 7,093
Core Bond 27,018,774 9,425
High Yield 6,381,648 --
Income Opportunity 34,449,693 --
Income Trust 63,389,691 --
Limited Duration 36,706,021 8,029
Strategic Bond 7,035,621 9,425
Transactions in common shares of beneficial interest for the periods ended
October 31, 2003, were as follows:
SHARES FROM
-------------------------------------------------------------
INTIAL PUBLIC UNDERWRITERS' EXERCISING THE REINVESTMENT NET INCREASE IN
TRUST OFFERING OVER-ALLOTMENT OPTION OF DIVIDENDS SHARES OUTSTANDING
----- ------------- ---------------------------- ------------ ------------------
High Yield -- -- 29,680 56,728
Income Trust -- -- 514,874 514,874
Limited Duration 34,306,021 2,400,000 -- 36,706,021
Strategic Bond -- -- 19,467 19,467
Transactions in common shares of beneficial interest for the periods ended
October 31, 2002, were as follows:
SHARES FROM
-------------------------------------------------------------
INTIAL PUBLIC UNDERWRITERS' EXERCISING THE REINVESTMENT NET INCREASE IN
TRUST OFFERING OVER-ALLOTMENT OPTION OF DIVIDENDS SHARES OUTSTANDING
----- ------------- ---------------------------- ------------ ------------------
Core Bond 25,009,425 2,000,000 9,349 27,018,774
High Yield -- -- 27,048 27,048
Strategic Bond 7,009,425 -- 6,729 7,016,154
During the year ended October 31, 2002, Income Opportunity repurchased a
total of 238,100 shares of its outstanding common shares at a cost of
$2,381,796, at an average discount of approximately 9.8% from its net asset
value. These shares are being held in treasury.
Offering costs incurred in connection with Core Bond, Limited Duration and
Strategic Bond offering of common shares have been charged to paid-in capital in
excess of par of the common shares were $765,000, $1,222,110 and $490,000,
respectively.
NOTE 6. DIVIDENDS
Subsequent to October 31, 2003, the Board of each of the Trusts declared
dividends per common share payable November 28, 2003, to shareholders of record
on November 14, 2003. The per share common dividends declared were as follows:
COMMON DIVIDEND
TRUST PER SHARE
-------- ---------------
Broad Investment Grade $0.075000
Core Bond 0.087500
High Yield 0.084167
Income Opportunity 0.070000
Income Trust 0.051042
Limited Duration 0.125000
Strategic Bond 0.130000
63
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------
To the Board of Directors/Trustees and Shareholders of:
BlackRock Broad Investment Grade 2009 Term Trust
BlackRock Core Bond Trust
BlackRock High Yield Trust
BlackRock Income Opportunity Trust
BlackRock Income Trust
BlackRock Limited Duration Income Trust
BlackRock Strategic Bond Trust
We have audited the accompanying statements of assets and liabilities of each of
the above mentioned Trusts, including the portfolios of investments, as of
October 31, 2003, and the related statements of operations and cash flows for
the year then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Trusts' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures, included confirmation of securities owned as of
October 31, 2003, by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the Trusts as of
October 31, 2003, the results of their operations and their cash flows for the
year then ended, the changes in their net assets for each of the two years in
the period then ended, and the financial highlights for the periods presented,
in conformity with accounting principles generally accepted in the United States
of America.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
December 18, 2003
64
DIVIDEND REINVESTMENT PLANS
--------------------------------------------------------------------------------
Pursuant to each Trust's respective Dividend Reinvestment Plan (the "Plan"),
shareholders of Broad Investment Grade, Income Opportunity and Income Trust may
elect, while shareholders of Core Bond, High Yield, Limited Duration and
Strategic Bond are automatically enrolled, to have all distributions of
dividends and capital gains reinvested by EquiServe Trust Company, N.A. (the
"Plan Agent") in the respective Trust's shares pursuant to the Plan.
Shareholders who do not participate in the Plan will receive all distributions
in cash paid by check and mailed directly to the shareholders of record (or if
the shares are held in street or other nominee name, then to the nominee) by the
Plan Agent, which serves as agent for the shareholders in administering the
Plan.
After Broad Investment Grade and/or Income Opportunity Trust declares a
dividend or determines to make a capital gain distribution, the Plan Agent will
acquire shares for the participants' account, by the purchase of outstanding
shares on the open market, on the Trust's primary exchange or elsewhere ("open
market purchases"). The Trust will not issue any new shares under the Plan.
After Core Bond, High Yield, Income Trust, Limited Duration and/or Strategic
Bond declares a dividend or determines to make a capital gain distribution, the
Plan Agent will acquire shares for the participants' account, depending upon the
circumstances described below, either (i) through receipt of unissued but
authorized shares from the Trust ("newly issued shares") or (ii) by open market
purchases. If, on the dividend payment date, the NAV is equal to or less than
the market price per share plus estimated brokerage commissions (such condition
being referred to herein as "market premium"), the Plan Agent will invest the
dividend amount in newly issued shares on behalf of the participants. The number
of newly issued shares to be credited to each participant's account will be
determined by dividing the dollar amount of the dividend by the NAV on the date
the shares are issued. However, if the NAV is less than 95% of the market price
on the payment date, the dollar amount of the dividend will be divided by 95% of
the market price on the payment date. If, on the dividend payment date, the NAV
is greater than the market value per share plus estimated brokerage commissions
(such condition being referred to herein as "market discount"), the Plan Agent
will invest the dividend amount in shares acquired on behalf of the participants
in open-market purchases.
The Plan Agent's fees for the handling of the reinvestment of dividends and
distributions will be paid by each Trust. However, each participant will pay a
pro rata share of brokerage commissions incurred with respect to the Plan
Agent's open market purchases in connection with the reinvestment of dividends
and distributions. The automatic reinvestment of dividends and distributions
will not relieve participants of any Federal income tax that may be payable on
such dividends or distributions.
Each Trust reserves the right to amend or terminate the Plan. There is no
direct service charge to participants in the Plan; however, each Trust reserves
the right to amend the Plan to include a service charge payable by the
participants. Participants that request a sale of shares through the Plan Agent
are subject to a $2.50 sales fee and a $0.15 per share sold brokerage commisson.
All correspondence concerning the Plan should be directed to the Plan Agent at
150 Royall Street, Canton, MA 02021 or (800) 699-1BFM.
65
TRUSTEES INFORMATION
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
-------------------------------------------------------------------------------------------------------------------------------
Name, address, age Andrew F. Brimmer Richard E. Cavanagh Kent Dixon
P.O. Box 4546 P.O. Box 4546 P.O. Box 4546
New York, NY 10163-4546 New York, NY 10163-4546 New York, NY 10163-4546
Age: 77 Age: 57 Age: 66
-------------------------------------------------------------------------------------------------------------------------------
Current positions held with Lead Trustee Trustee Trustee
the Trusts Audit Committee Chairman(2) Audit Committee Member Audit Committee Member(2)
-------------------------------------------------------------------------------------------------------------------------------
Term of office and length 3 years(4)/since inception 3 years(4)/since inception(5) 3 years(4)/since inception
of time served
-------------------------------------------------------------------------------------------------------------------------------
Principal occupations President of Brimmer & President and Chief Executive Consultant/Investor. Former
during the past five years Company, Inc., a Washington, Officer of The Conference President and Chief Executive
D.C.-based economic and Board, Inc., a leading global Officer of Empire Federal
financial consulting firm, business membership Savings Bank of America and
also Wilmer D. Barrett organization, from Banc PLUS Savings Association,
Professor of Economics, 1995-present. Former Executive former Chairman of the Board,
University of Massachusetts - Dean of the John F. Kennedy President and Chief Executive
Amherst. Formerly member of School of Government at Officer of Northeast Savings.
the Board of Governors of the Harvard University from
Federal Reserve System. Former 1988-1995. Acting Director,
Chairman, District of Columbia Harvard Center for Business
Financial Control Board. and Government (1991-1993).
Formerly Partner (principal)
of McKinsey & Company, Inc.
(1980- 1988). Former Executive
Director of Federal Cash
Management, White House Office
of Management and Budget
(1977-1979). Co-author, THE
WINNING PERFORMANCE (best
selling management book
published in 13 national
editions).
-------------------------------------------------------------------------------------------------------------------------------
Number of portfolios over- 48 48 48
seen within the fund complex
-------------------------------------------------------------------------------------------------------------------------------
Other Directorships held Director of CarrAmerica Realty Trustee: Airplanes Group, Former Director of ISFA (the
outside of the fund Corporation and Borg-Warner Aircraft Finance Trust (AFT) owner of INVEST, a national
complex Automotive. Formerly Director and Educational Testing securities brokerage service
of Airborne Express, Service (ETS). Director, Arch designed for banks and thrift
BankAmerica Corporation (Bank Chemicals, Fremont Group and institutions).
of America), Bell South The Guardian Life Insurance
Corporation, College Company of America.
Retirement Equities Fund
(Trustee), Commodity Exchange,
Inc. (Public Governor),
Connecticut Mutual Life
Insurance Company, E.I. du
Pont de Nemours & Company,
Equitable Life Assurance
Society of the United States,
Gannett Company, Mercedes-Benz
of North America, MNC
Financial Corporation
(American Security Bank), NCM
Capital Management, Navistar
International Corporation, PHH
Corp. and UAL Corporation
(United Airlines).
-------------------------------------------------------------------------------------------------------------------------------
For "Interested Director/
Trustee" Relationships, events
or transactions by reason of
which the Trustee is an
interested person as defined
in Section 2(a)(19)(1940 Act)
-------------------------------------------------------------------------------------------------------------------------------
(1) Interested Trustee as defined by Section 2(a)(19) of the Investment Company
Act of 1940.
(2) The Board of each Trust has determined that each Trust has two Audit
Committee financial experts serving on its Audit Committee, Dr. Brimmer and
Mr. Dixon, both of whom are independent for the purpose of the definition
of Audit Committee financial expert as applicable to the Trusts.
(3) Trustee since inception; appointed Chairman of the Board on August 22,
2002.
(4) The Board is classified into three classes of which one class is elected
annually. Each Trustee serves a three year term concurrent with the class
from which he is elected.
(5) For Broad Investment Grade, Income Opportunity and Income Trust appointed
Director on 08/11/94.
(6) For Income Opportunity and Income Trust appointed Director on 06/19/92.
(7) Except during the periods 08/12/93 through 04/15/97 and 10/31/02 through
11/11/02.
(8) Effective 12/11/03.
66
------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
------------------------------------------------------------------------------------------------
Frank J. Fabozzi James Clayburn La Force, Jr. Walter F. Mondale
P.O. Box 4546 P.O. Box 4546 P.O. Box 4546
New York, NY 10163-4546 New York, NY 10163-4546 New York, NY 10163-4546
Age: 55 Age: 74 Age: 75
------------------------------------------------------------------------------------------------
Trustee Trustee Trustee
------------------------------------------------------------------------------------------------
3 years(4)/since inception 3 years(4)/since inception(6) 3 years(4)/since inception(7)
------------------------------------------------------------------------------------------------
Consultant. Editor of THE Dean Emeritus of the John E. Partner, Dorsey & Whitney,
JOURNAL OF PORTFOLIO Anderson Graduate School of LLP., a law firm (December
MANAGEMENT and Frederick Frank Management, University of 1996-present, September
Adjunct Professor of Finance California since July 1, 1993. 1987-August 1993). Formerly
at the School of Management at Acting Dean of the School of U.S. Ambassador to Japan
Yale University. Author and Business, Hong Kong University (1993-1996). Formerly Vice
editor of several books on of Science and Technology President of the United
fixed income portfolio 1990-1993. From 1978 to States, U.S. Senator and
management. Visiting Professor September 1993, Dean of the Attorney General of the State
of Finance and Accounting at John E. Anderson Graduate of Minnesota. 1984 Democratic
the Sloan School of School of Management, Nominee for President of the
Management, Massachusetts University of California. United States.
Institute of Technology from
1986 to August 1992.
------------------------------------------------------------------------------------------------
48 48 48
------------------------------------------------------------------------------------------------
Director, Guardian Mutual Payden & Rygel Investment
Funds Group (18 portfolios). Trust, Provident Investment
Counsel Funds, Advisors Series
Trust, Arena Pharmaceuticals,
Inc. and CancerVax
Corporation.
------------------------------------------------------------------------------------------------
-----------------------------------------------------------------
INTERESTED TRUSTEES(1)
-----------------------------------------------------------------
Ralph L. Schlosstein Robert S. Kapito
BlackRock,Inc. BlackRock,Inc.
40 East 52nd Street 40 East 52nd Street
New York, NY 10022 New York, NY 10022
Age: 52 Age: 46
-----------------------------------------------------------------
Chairman of the Board(3) President and Trustee
-----------------------------------------------------------------
3 years(4)/since inception 3 years(4)/since August 22, 2002(7)
-----------------------------------------------------------------
Director since 1999 and Vice Chairman of BlackRock,
President of BlackRock, Inc. Inc. Head of the Portfolio
since its formation in 1998 Management Group. Also a
and of BlackRock, Inc.'s member of the Management
predecessor entities since Committee, the Investment
1988. Member of the Management Strategy Group, the Fixed
Committee and Investment Income and Global Operating
Strategy Group of BlackRock, Committees and the Equity
Inc. Formerly, Managing Investment Strategy Group.
Director of Lehman Brothers, Responsible for the portfolio
Inc. and Co-head of its management of the Fixed
Mortgage and Savings Income, Domestic Equity and
Institutions Group. Currently, International Equity,
Chairman and a Trustee of each Liquidity, and Alternative
of the closed-end Trusts in Investment Groups of
which BlackRock Advisors, Inc. BlackRock. Currently President
acts as investment advisor. and a Director/Trustee of each
of the closed-end Trusts in
which BlackRock Advisors, Inc.
acts as investment advisor.
-----------------------------------------------------------------
48 48
-----------------------------------------------------------------
Chairman and President of the Chairman of the Hope and
BlackRock Provident Heroes Children's Cancer Fund.
Institutional Funds (10 President of the Board of
portfolios), Director of Directors of the Periwinkle
Anthracite Capital, Inc.8 and National Theatre for Young
Director of several of Audiences. Director of
BlackRock's alternative icruise.com, Corp.
investment vehicles.
Currently, a Member of the
Visiting Board of Overseers of
the John F. Kennedy School of
Government at Harvard
University, the Financial
Institutions Center Board of
the Wharton School of the
University of Pennsylvania, a
Trustee of Trinity School in
New York City and a Trustee of
New Visions for Public
Education in New York City.
Formerly, a Director of Pulte
Corporation and a Member of
Fannie Mae's Advisory Council.
-----------------------------------------------------------------
Director and President of the Vice Chairman of the Advisor.
Advisor.
-----------------------------------------------------------------
67
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
PORTFOLIO MANAGEMENT
As of September 2003, Jeff Gary, Managing Director of BlackRock Financial
Management ("BFM") since 2003, joined the portfolio management team for the
following Trusts: BlackRock Strategic Bond Trust (BHD), BlackRock High Yield
Trust (BHY), BlackRock Core Bond Trust (BHK), BlackRock Limited Duration Income
Trust (BLW) and BlackRock Income Opportunity Trust (BNA). Prior to joining BFM,
Mr. Gary was a Managing Director and high yield portfolio manager with AIG
(American General) Investment Group. Dennis Schaney is no longer a member of the
portfolio management team for the Trusts listed above.
TAX INFORMATION
--------------------------------------------------------------------------------
We wish to advise you as to the federal tax status of dividends paid by the
Trusts during the fiscal year ended October 31, 2003.
During the fiscal year ended October 31, 2003, the Trusts paid dividends and
distributions as follows:
NON-TAXABLE LONG TERM
ORDINARY INCOME RETURN OF CAPITAL CAPITAL GAINS
FUND PER SHARE PER SHARE PER SHARE TOTAL
-------- --------------- ----------------- -------------- --------
Broad Investment Grade 2009 Term (BCT) $1.18525 -- -- $1.18525
Core Bond (BHK) 1.12106 -- $0.06644 1.18750
High Yield (BHY) 1.11796 $0.05224 -- 1.17020
Income Opportunity (BNA) 0.81000 -- 0.24280 1.05280
Income (BKT) 1.01250 -- -- 1.01250
Limited Duration Income (BLW) 0.25000 -- -- 0.25000
Strategic Bond (BHD) 1.49000 -- -- 1.49000
Further, we with to advise you that your income dividends do not qualify for
the dividends received deduction.
For the purpose of preparing your 2003 annual federal income tax return, you
should report the amounts as reflected on the appropriate From 1099 DIV which
will be mailed to you in January 2004.
68
BlackRock Closed-End Funds
Director/Trustees Custodian
Ralph L. Schlosstein, CHAIRMAN State Street Bank and Trust Company
Andrew F. Brimmer One Heritage Drive
Richard E. Cavanagh North Quincy, MA 02171
Kent Dixon
Frank J. Fabozzi Transfer Agent
Robert S. Kapito EquiServe Trust Company, N.A.
James Clayburn La Force, Jr. 150 Royall Street
Walter F. Mondale Canton, MA 02021
(800) 699-1BFM
Officers
Robert S. Kapito, PRESIDENT Independent Accountants
Henry Gabbay, TREASURER Deloitte & Touche LLP
Anne Ackerley, VICE PRESIDENT 200 Berkeley Street
Jeff Gary, VICE PRESIDENT Boston, MA 02116
Michael Lustig, VICE PRESIDENT
Richard M. Shea, VICE PRESIDENT/TAX Legal Counsel
James Kong, ASSISTANT TREASURER Skadden, Arps, Slate, Meagher & Flom LLP
Vincent B. Tritto, SECRETARY Four Times Square
Brian P. Kindelan, ASSISTANT SECRETARY New York, NY 10036
Investment Advisor Legal Counsel - Independent Trustees
BlackRock Advisors, Inc. Debevoise & Plimpton
100 Bellevue Parkway 919 Third Avenue
Wilmington, DE 19809 New York, NY 10022
(800) 227-7BFM
This report is for shareholder information.
Sub-Advisor(1) This is not a prospectus intended for use in the
BlackRock Financial Management, Inc. purchase or sale of Trust shares. Statements and
40 East 52nd Street other information contained in this report are
New York, NY 10022 as dated and are subject to change.
--------------------------------------------------------------------------------
BlackRock Advisors, Inc.(2) Princeton Administrators, L.P.(2) Prudential Investments LLC(2)
100 Bellevue Parkway P.O. Box 9095 Gateway Center Three
Wilmington, DE 19809 Princeton, NJ 08543-9095 100 Mulberry Street
(800) 227-7BFM (800) 543-6217 Newark, NJ 07102-4077
BlackRock Core Bond Trust BlackRock Broad Investment Grade (800) 277-7BFM
BlackRock Limited Duration 2009 Term Trust BlackRock High Yield Trust
Income Trust BlackRock Income Opportunity Trust
BlackRock Strategic Bond Trust BlackRock Income Trust
Effective August 18, 2003, BlackRock Advisors, Inc. provides administrative
services for all trusts.
----------
(1) For Core Bond, Limited Duration and Strategic Bond only.
(2) Provided administrative services for the Trust(s) listed directly below its
name.
The Trusts will mail only one copy of shareholder documents, including annual
and semi-annual reports and proxy statements, to shareholders with multiple
accounts at the same address. This practice is commonly called "householding"
and is intended to reduce expenses and eliminate duplicate mailings of
shareholder documents. Mailings of your shareholder documents may be householded
indefinitely unless you instruct us otherwise. If you do not want the mailing of
these documents to be combined with those for other members of your household,
please contact the Trusts at (800) 227-7BFM.
The Trusts have delegated to the Advisor the voting of proxies relating to their
voting securities pursuant to the Advisor's proxy voting policies and
procedures. You may obtain a copy of these proxy voting procedures, without
charge, by calling (800) 699-1236. These policies and procedures are also
available on the website of the Securities and Exchange Commission at
http://www.sec.gov.
[BLACKROCK LOGO]
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Trust shares. Statements and other
information contained in this report are as dated and are subject to change.
CEF-ANN-3
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics (the "Code of Ethics") that
applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions.
(b) Not applicable.
(c) The Registrant has not amended its Code of Ethics during the period covered
by the shareholder report presented in Item 1 hereto.
(d) The Registrant has not granted a waiver or an implicit waiver from a
provision of its Code of Ethics during the period covered by the shareholder
report presented in Item 1 hereto.
(e) Not applicable.
(f) The Registrant's Code of Ethics is attached as an Exhibit hereto.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Registrant's Board of Trustees has determined that it has two audit
committee financial experts serving on its audit committee, each of whom is an
"independent" Trustee: Dr. Andrew F. Brimmer and Mr. Kent Dixon. Under
applicable securities laws, a person who is determined to be an audit committee
financial expert will not be deemed an "expert" for any purpose, including
without limitation for the purposes of Section 11 of the Securities Act of 1933,
as a result of being designated or identified as an audit committee financial
expert. The designation or identification of a person as an audit committee
financial expert does not impose on such person any duties, obligations, or
liabilities that are greater than the duties, obligations, and liabilities
imposed on such person as a member of the audit committee and Board of Trustees
in the absence of such designation or identification.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable until annual reports for fiscal years ending after December 15,
2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The Trust has a separately designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The
audit committee of the Trust is comprised of: Dr. Andrew F. Brimmer; Richard E.
Cavanagh; and Kent Dixon.
ITEM 6. RESERVED.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Registrant has delegated the voting of proxies relating to its
voting securities to its investment advisor, BlackRock Advisors, Inc. (the
"Advisor") and its sub-advisor, BlackRock Financial Management, Inc. (the
"Sub-Advisor"). The Proxy Voting Policies and Procedures of the Advisor and
Sub-Advisor (the "Proxy Voting Policies") are included as an Exhibit hereto.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive officer and principal financial officer
have evaluated the Registrant's disclosure controls and procedures within 90
days of this filing and have concluded that the Registrant's disclosure controls
and procedures were effective, as of that date, in ensuring that information
required to be disclosed by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported timely.
(b) The Registrant's principal executive officer and principal financial officer
are aware of no changes in the Registrant's internal control over financial
reporting that occurred during the Registrant's most recent fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Code of Ethics.
(a)(2) Certifications of principal executive officer and principal financial
officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(b) Certification of principal executive officer and principal financial
officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
(c) Proxy Voting Policies.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The BlackRock Core Bond Trust
By: /s/ Henry Gabbay
---------------------------
Name: Henry Gabbay
Title: Treasurer
Date: January 7, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
By: /s/ Robert S. Kapito
---------------------------
Name: Robert S. Kapito
Title: Principal Executive Officer
Date: January 7, 2004
By: /s/ Henry Gabbay
---------------------------
Name: Henry Gabbay
Title: Principal Financial Officer
Date: January 7, 2004