BlackRock Corporate High Yield III
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-08497

Name of Fund:   BlackRock Corporate High Yield Fund III, Inc. (CYE)

Fund Address:   100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Corporate High Yield Fund III, Inc., 55 East 52nd Street, New York, NY 10055

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

Date of fiscal year end: 02/28/2013

Date of reporting period: 08/31/2012


Table of Contents
Item 1 –   Report to Stockholders


Table of Contents
LOGO    August 31, 2012

 

Semi-Annual Report (Unaudited)

 

BlackRock Corporate High Yield Fund, Inc. (COY)

BlackRock Corporate High Yield Fund III, Inc. (CYE)

BlackRock Debt Strategies Fund, Inc. (DSU)

BlackRock Floating Rate Income Strategies Fund II, Inc. (FRB)

BlackRock Senior High Income Fund, Inc. (ARK)

 

Not FDIC Insured • No Bank Guarantee • May Lose Value


Table of Contents
Table of Contents     

 

      Page  

Dear Shareholder

     3   

Semi-Annual Report:

  

Fund Summaries

     4   

The Benefits and Risks of Leveraging

     14   

Derivative Financial Instruments

     14   

Financial Statements:

  

Consolidated Schedules of Investments

     15   

Consolidated Statements of Assets and Liabilities

     69   

Consolidated Statements of Operations

     70   

Consolidated Statements of Changes in Net Assets

     71   

Consolidated Statements of Cash Flows

     73   

Financial Highlights

     74   

Notes to Consolidated Financial Statements

     79   

Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements

     89   

Officers and Directors

     93   

Additional Information

     94   

 

                
2    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Dear Shareholder

 

About this time one year ago, financial markets had been upended by sovereign debt turmoil in the United States and Europe as well as growing concerns about the future of the global economy. Since then, asset prices have waxed and waned in broad strokes as investors reacted to developments in Europe’s financial situation, mixed US economic news and global central bank policy action.

After confidence crumbled in the third quarter of 2011, October brought improving economic data and more concerted efforts among European leaders toward stemming the region’s debt crisis, gradually drawing investors back to the markets. Improving sentiment carried over into early 2012 as investors felt some relief from the world’s financial woes. Volatility abated and risk assets (including stocks, commodities and high yield bonds) moved boldly higher through the first two months of 2012 while climbing Treasury yields pressured higher-quality fixed income assets.

Markets reversed course in the spring when Europe’s debt problems boiled over once again. High levels of volatility returned as political instability in Greece threatened the country’s membership in the euro zone. Spain faced severe deficit issues while the nation’s banks clamored for liquidity. Yields on Spanish and Italian government debt rose to levels deemed unsustainable. European leaders conferred and debated vehemently over the need for fiscal integration among the 17 nations comprising the euro currency bloc as a means to resolve the crisis for the long term.

Alongside the drama in Europe, investors were discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key powerhouse for global growth, became particularly worrisome. In the United States, disappointing jobs reports dealt a crushing blow to sentiment. Risk assets sold off in the second quarter as investors again retreated to safe haven assets.

Despite the continuation of heightened market volatility, most asset classes enjoyed a robust summer rally. Global economic data continued to be mixed, but the spate of downside surprises seen in the second quarter began to recede and, outside of Europe, the risk of recession largely subsided. Central bank policy action has been a major driver of market sentiment in 2012. Investors’ anticipation for economic stimulus drove asset prices higher over the summer as the European Central Bank stepped up its efforts to support the region’s troubled nations and the US Federal Reserve reiterated its readiness to take action if economic conditions warrant.

On the whole, most asset classes advanced during the reporting period. US large cap stocks delivered strong returns for the 12 months ended August 31, 2012, while small cap stocks and high yield bonds also performed well. Despite the risk-asset rally in recent months, higher-quality investments including tax-exempt municipal bonds and US Treasury bonds posted exceptional gains by historical standards and outperformed investment-grade corporate bonds. International and emerging equities, however, lagged other asset classes amid ongoing global uncertainty. Near-zero short term interest rates kept yields on money market securities near their all-time lows.

We know that investors continue to face a world of uncertainty and volatile markets, but we also believe these challenging times present many opportunities. We remain committed to working with you and your financial professional to identify actionable ideas for your portfolio. We encourage you to visit www.blackrock.com/newworld for more information.

Sincerely,

 

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

 

 

LOGO

“We know that investors continue to face a world of uncertainty and volatile markets, but we also believe these challenging times present many opportunities.”

Rob Kapito

President, BlackRock Advisors, LLC

 

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

US large cap equities

(S&P 500® Index)

    4.14     18.00

US small cap equities
(Russell 2000® Index)

    0.89        13.40   

International equities

(MSCI Europe, Australasia,
Far East Index)

    (4.00     (0.04

Emerging market equities (MSCI Emerging Markets Index)

    (10.51     (5.80

3-month Treasury bill

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

    0.06        0.06   

US Treasury securities

(BofA Merrill Lynch 10-Year
US Treasury Index)

    5.25        9.14   

US investment grade bonds (Barclays US Aggregate
Bond Index)

    2.97        5.78   

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

    3.24        9.37   

US high yield bonds

(Barclays US Corporate

High Yield 2% Issuer

Capped Index)

    4.80        13.84   

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

   

 

 

                
   THIS PAGE NOT PART OF YOUR FUND REPORT       3


Table of Contents
Fund Summary as of August 31, 2012    BlackRock Corporate High Yield Fund, Inc.

 

 

Investment Objective

BlackRock Corporate High Yield Fund, Inc.’s (COY) (the “Fund”) investment objective is to provide shareholders with current income by investing primarily in a diversified portfolio of fixed income securities, which are rated in the lower rating categories of the established rating services (BB or lower by Standard & Poor’s Corporation (“S&P’s”) or Ba or lower by Moody’s Investors Service, Inc. (“Moody’s”)) or are unrated securities considered by BlackRock to be of comparable quality. As a secondary objective, the Fund also seeks to provide shareholders with capital appreciation. The Fund invests, under normal market conditions, at least 80% of its assets in high yield debt instruments, including high yield bonds (commonly referred to as “junk” bonds) and corporate loans which are below investment grade quality. The Fund may invest directly in such securities or synthetically through the use of derivatives.

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

 

Portfolio Management Commentary

 

How did the Fund perform?

 

Ÿ  

For the six-month period ended August 31, 2012, the Fund returned 6.02% based on market price and 5.85% based on net asset value (“NAV”). For the same period, the closed-end Lipper High Yield Funds (Leveraged) category posted an average return of 8.15% based on market price and 5.80% based on NAV. All returns reflect reinvestment of dividends. The Fund’s premium to NAV, which widened slightly during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

 

Ÿ  

Security selection across the high yield quality spectrum had a positive impact on performance. From a sector perspective, selection among non-captive diversified financials, cable media and wireless names boosted returns.

 

Ÿ  

Conversely, on a sector basis, security selection among non-rated securities detracted from performance. On a sector basis, selection within independent energy, automotive and gaming had a negative impact on returns. The Fund’s allocation to bank loans also hindered performance as the asset class underperformed relative to the high yield market in the risk asset rally.

Describe recent portfolio activity.

 

Ÿ  

The Fund began the reporting period increasing its risk profile; however, as risk asset prices surged in 2012, the Fund moderated its degree of

risk-taking over the six-month period. While the Fund’s view on high yield remained positive throughout this period, as average prices moved north of par for the market, the Fund’s holdings became increasingly focused on higher-quality income-oriented credit names with stable fundamentals and an attractive coupon rate, since the potential for price appreciation had largely diminished. With global growth concerns posing a persistent threat and fueling uncertainty, the Fund continued to favor issuers in mature industries that exhibit consistent cash flows and good earnings visibility and debt instruments that are backed by profitable assets. The Fund generally remained cautious of cyclical credits that tend to be more vulnerable to slower economic growth and/or macroeconomic weakness.

Describe portfolio positioning at period end.

 

Ÿ  

At period end, the Fund held 78% of its total portfolio in corporate bonds and 14% in floating rate loan interests (bank loans), with the remainder in common stocks, preferred securities and other interests. The Fund’s largest sector exposures included non-cable media, healthcare and chemicals, while its portfolio holdings reflected less emphasis on the riskier, more cyclical segments of the market such as banking, home construction and restaurants. The Fund ended the period with economic leverage at 27% of its total managed assets.

 

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

                
4    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
   BlackRock Corporate High Yield Fund, Inc.

 

 

Fund Information

 

Symbol on New York Stock Exchange (“NYSE”)

   COY

Initial Offering Date

   June 25, 1993

Yield on Closing Market Price as of August 31, 2012 ($7.89)1

   7.76%

Current Monthly Distribution per Common Share2

   $0.051

Current Annualized Distribution per Common Share2

   $0.612

Economic Leverage as of August 31, 20123

   27%

 

  1   

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

 

  2   

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

 

  3   

Represents loan outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 14.

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

 

        8/31/12        2/29/12        Change      High        Low  

Market Price

     $ 7.89         $ 7.76           1.68    $ 8.15         $ 7.13   

Net Asset Value

     $ 7.40         $ 7.29           1.51    $ 7.40         $ 7.00   

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

 

Portfolio Composition               
      8/31/12     2/29/12  

Corporate Bonds

     78     80

Floating Rate Loan Interests

     14        12   

Common Stocks

     5        5   

Preferred Securities

     2        2   

Other Interests

     1        1   
Credit Quality Allocations4               
      8/31/12     2/29/12  

A

     1     1

BBB/Baa

     5        6   

BB/Ba

     36        42   

B

     43        40   

CCC/Caa

     13        10   

Not Rated

     2        1   

 

  4  

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

 

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    5


Table of Contents
Fund Summary as of August 31, 2012    BlackRock Corporate High Yield Fund III, Inc.

 

 

Investment Objective

BlackRock Corporate High Yield Fund III, Inc.’s (CYE) (the “Fund”) primary investment objective is to provide current income by investing primarily in fixed-income securities, which are rated in the lower rating categories of the established rating services (BBB or lower by S&P’s or Baa or lower by Moody’s) or are unrated securities of comparable quality. The Fund’s secondary investment objective is to provide capital appreciation. The Fund may invest directly in such securities or synthetically through the use of derivatives.

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

 

Portfolio Management Commentary

 

How did the Fund perform?

 

Ÿ  

For the six-month period ended August 31, 2012, the Fund returned 9.12% based on market price and 6.10% based on NAV. For the same period, the closed-end Lipper High Yield Funds (Leveraged) category posted an average return of 8.15% based on market price and 5.80% based on NAV. All returns reflect reinvestment of dividends. The Fund’s premium to NAV, which widened during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

 

Ÿ  

Security selection across the high yield quality spectrum had a positive impact on performance. From a sector perspective, selection among non-captive diversified financials, cable media and wireless names boosted returns.

 

Ÿ  

Conversely, on a sector basis, security selection among non-rated securities detracted from performance. On a sector basis, selection within independent energy, automotive and gaming had a negative impact on returns. The Fund’s allocation to bank loans also hindered performance as the asset class underperformed relative to the high yield market in the risk asset rally.

Describe recent portfolio activity.

 

Ÿ  

The Fund began the reporting period increasing its risk profile; however, as risk asset prices surged in 2012, the Fund moderated its degree of

risk-taking over the six-month period. While the Fund’s view on high yield remained positive throughout this period, as average prices moved north of par for the market, the Fund’s holdings became increasingly focused on higher-quality income-oriented credit names with stable fundamentals and an attractive coupon rate, since the potential for price appreciation had largely diminished. With global growth concerns posing a persistent threat and fueling uncertainty, the Fund continued to favor issuers in mature industries that exhibit consistent cash flows and good earnings visibility and debt instruments that are backed by profitable assets. The Fund generally remained cautious of cyclical credits that tend to be more vulnerable to slower economic growth and/or macroeconomic weakness.

Describe portfolio positioning at period end.

 

Ÿ  

At period end, the Fund held 75% of its total portfolio in corporate bonds and 17% in floating rate loan interests (bank loans), with the remainder in common stocks, preferred securities and other interests. The Fund’s largest sector exposures included non-cable media, healthcare and chemicals, while its portfolio holdings reflected less emphasis on the riskier, more cyclical segments of the market such as banking, home construction and retailers. The Fund ended the period with economic leverage at 29% of its total managed assets.

 

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

                
6    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
   BlackRock Corporate High Yield Fund III, Inc.

 

 

Fund Information

 

Symbol on NYSE

   CYE

Initial Offering Date

   January 30, 1998

Yield on Closing Market Price as of August 31, 2012 ($8.11)1

   7.77%

Current Monthly Distribution per Common Share2

   $0.0525

Current Annualized Distribution per Common Share2

   $0.6300

Economic Leverage as of August 31, 20123

   29%

 

  1   

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

 

  2   

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

 

  3   

Represents loan outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 14.

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

 

        8/31/12        2/29/12        Change      High        Low  

Market Price

     $ 8.11         $ 7.75           4.65    $ 8.12         $ 7.15   

Net Asset Value

     $ 7.54         $ 7.41           1.75    $ 7.54         $ 7.11   

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

 

Portfolio Composition               
      8/31/12     2/29/12  

Corporate Bonds

     75     77

Floating Rate Loan Interests

     17        15   

Common Stocks

     5        6   

Preferred Securities

     2        2   

Other Interests

     1          
Credit Quality Allocations4               
      8/31/12     2/29/12  

A

     1     1

BBB/Baa

     5        7   

BB/Ba

     35        38   

B

     43        43   

CCC/Caa

     13        10   

Not Rated

     3        1   

 

  4   

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

 

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    7


Table of Contents
Fund Summary as of August 31, 2012    BlackRock Debt Strategies Fund, Inc.

 

 

Investment Objective

BlackRock Debt Strategies Fund, Inc.’s (DSU) (the “Fund”) primary investment objective is to provide current income by investing primarily in a diversified portfolio of US companies’ debt instruments, including corporate loans, which are rated in the lower rating categories of the established rating services (BBB or lower by S&P’s or Baa or lower by Moody’s) or unrated debt instruments, which are in the judgment of the investment adviser of equivalent quality. The Fund’s secondary objective is to provide capital appreciation. Corporate loans include senior and subordinated corporate loans, both secured and unsecured. The Fund may invest directly in such securities or synthetically through the use of derivatives.

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

 

Portfolio Management Commentary

 

How did the Fund perform?

 

Ÿ  

For the six-month period ended August 31, 2012, the Fund returned 10.04% based on market price and 5.51% based on NAV. For the same period, the closed-end Lipper High Yield Funds (Leveraged) category posted an average return of 8.15% based on market price and 5.80% based on NAV. All returns reflect reinvestment of dividends. The Fund began the period with neither a discount nor a premium to NAV, and moved to a premium by period end. The following discussion relates to performance based on NAV.

What factors influenced performance?

 

Ÿ  

Security selection among lower quality debt instruments (including both bonds and loans) had a positive impact on performance. From a sector perspective, selection within consumer services, wireless and technology contributed positively.

 

Ÿ  

The Fund invests roughly half of its assets in high yield bonds and half in floating rate loan interests (bank loans), while most funds in the Lipper category invest primarily in high yield bonds. While the Fund’s allocation to bank loans did not detract from performance on an absolute basis, the asset class underperformed high yield bonds for the period. Security selection in the independent energy and electric sectors hindered returns for the period.

Describe recent portfolio activity.

 

Ÿ  

The Fund began the reporting period increasing its risk profile; however, as risk asset prices surged in 2012, the Fund moderated its degree of risk-taking over the six-month period. While the Fund’s view on high yield and bank loan assets remained positive throughout this period, its holdings became increasingly focused on higher-quality income-oriented credit names with stable fundamentals and an attractive coupon rate. With global growth concerns posing a persistent threat and fueling uncertainty, the Fund continued to favor issuers in mature industries that exhibit consistent cash flows and good earnings visibility and debt instruments that are backed by profitable assets. The Fund generally remained cautious of cyclical credits that tend to be more vulnerable to slower economic growth and/or macroeconomic weakness.

Describe portfolio positioning at period end.

 

Ÿ  

At period end, the Fund held 53% of its total portfolio in floating rate loan interests, and 43% in corporate bonds, with the remainder in common stocks, asset-backed securities and other interests. The Fund’s largest sector exposures included healthcare, independent energy and chemicals. The Fund ended the period with economic leverage at 30% of its total managed assets.

 

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

                
8    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
   BlackRock Debt Strategies Fund, Inc.

 

 

Fund Information

 

Symbol on NYSE

   DSU

Initial Offering Date

   March 27, 1998

Yield on Closing Market Price as of August 31, 2012 ($4.37)1

   7.41%

Current Monthly Distribution per Common Share2

   $0.027

Current Annualized Distribution per Common Share2

   $0.324

Economic Leverage as of August 31, 20123

   30%

 

  1   

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

 

  2   

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

 

  3   

Represents loan outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 14.

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

 

        8/31/12        2/29/12        Change      High        Low  

Market Price

     $ 4.37         $ 4.13           5.81    $ 4.39         $ 4.00   

Net Asset Value

     $ 4.19         $ 4.13           1.45    $ 4.19         $ 4.00   

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

 

Portfolio Composition               
      8/31/12     2/29/12  

Floating Rate Loan Interests

     53     54

Corporate Bonds

     43        43   

Asset-Backed Securities

     2        1   

Common Stocks

     1        1   

Other Interests

     1        1   

 

Credit Quality Allocations4               
      8/31/12     2/29/12  

A

     1     1

BBB/Baa

     5        5   

BB/Ba

     34        36   

B

     47        45   

CCC/Caa

     12        8   

Not Rated

     1        5   

 

  4   

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

 

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    9


Table of Contents
Fund Summary as of August 31, 2012    BlackRock Floating Rate Income Strategies Fund II,  Inc.

 

 

Investment Objective

BlackRock Floating Rate Income Strategies Fund II, Inc.’s (FRB) (the “Fund”) investment objective is to provide shareholders with high current income and such preservation of capital as is consistent with investment in a diversified, leveraged portfolio consisting primarily of floating rate debt securities and instruments. The Fund seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its assets in floating rate debt securities, including floating or variable rate debt securities that pay interest at rates that adjust whenever a specified interest rate changes and/or which reset on predetermined dates (such as the last day of a month or calendar quarter). The Fund invests a substantial portion of its investments in floating rate debt securities consisting of secured or unsecured senior floating rate loans that are rated below investment grade. The Fund may invest directly in such securities or synthetically through the use of derivatives.

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

 

Portfolio Management Commentary

 

Ÿ  

On May 23, 2012, the Board of Directors of FRB approved a plan of reorganization, whereby BlackRock Floating Rate Income Strategies Fund, Inc. (FRA) will acquire all of the assets and all of the liabilities of FRB in exchange for newly issued shares of FRA in a merger transaction. At a shareholder meeting on September 13, 2012, FRB’s and FRA’s shareholders approved the plan of reorganization. The reorganization took place on October 5, 2012.

How did the Fund perform?

 

Ÿ  

For the six-month period ended August 31, 2012, the Fund returned 6.50% based on market price and 4.59% based on NAV. For the same period, the closed-end Lipper Loan Participation Funds (Leveraged) category posted an average return of 9.00% based on market price and 5.03% based on NAV. All returns reflect reinvestment of dividends. The Fund’s discount to NAV, which narrowed during the period, accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

 

Ÿ  

Security selection among higher and lower quality loan instruments had a positive impact on the Fund’s performance. From a sector perspective, security selection within the consumer services and gaming segments boosted returns. The Fund’s tactical allocation to high yield bonds also contributed positively as the asset class outperformed bank loans and higher-duration fixed income instruments during the period.

Ÿ  

Conversely, on a sector basis, security selection in the electric and non-cable media sectors detracted from performance, as did selection among middle quality loan instruments.

Describe recent portfolio activity.

 

Ÿ  

During the period, the Fund maintained its focus on the higher quality portions of the loan market in terms of loan structure, liquidity and overall credit quality. Given mixed economic data along with global policy uncertainty and an overall weak outlook for global growth, the Fund remained cautious of lower-rated less-liquid loans. Instead, the Fund sought issuers with attractive risk-reward characteristics and superior fundamentals. The European Central Bank’s long-term refinancing operations, introduced in December 2011, were supportive of risk markets in first half of 2012. However, this development did not have a significant influence on the Fund’s view on risk within the loan market. More specifically, the Fund continued to adhere to a strict investment discipline with the goal of pursuing yield while minimizing exposure to macroeconomic risks.

Describe portfolio positioning at period end.

 

Ÿ  

At period end, the Fund held 87% of its total portfolio in floating rate loan interests (bank loans) and 10% in corporate bonds, with the remainder in asset-backed securities and common stocks. The Fund’s largest sector exposures included healthcare, technology and chemicals. The Fund ended the period with economic leverage at 30% of its total managed assets.

 

 

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

                
10    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
     BlackRock Floating Rate Income Strategies Fund II,  Inc.

 

 

Fund Information

 

Symbol on NYSE

   FRB

Initial Offering Date

   July 30, 2004

Yield on Closing Market Price as of August 31, 2012 ($13.62)1

   6.43%

Current Monthly Distribution per Common Share2

   $0.073

Current Annualized Distribution per Common Share2

   $0.876

Economic Leverage as of August 31, 20123

   30%

 

  1   

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

 

  2   

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

 

  3   

Represents loan outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 14.

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

 

        8/31/12        2/29/12        Change      High        Low  

Market Price

     $ 13.62         $ 13.21           3.10    $ 14.00         $ 12.90   

Net Asset Value

     $ 13.77         $ 13.60           1.25    $ 13.77         $ 13.37   

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

 

Portfolio Composition               
      8/31/12     2/29/12  

Floating Rate Loan Interests

     87     84

Corporate Bonds

     10        13   

Asset-Backed Securities

     2        2   

Common Stocks

     1        1   
Credit Quality Allocations4               
      8/31/12     2/29/12  

BBB/Baa

     7     10

BB/Ba

     33        36   

B

     40        39   

CCC/Caa

     11        7   

Not Rated

     9        8   

 

  4  

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

 

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    11


Table of Contents
Fund Summary as of August 31, 2012    BlackRock Senior High Income Fund, Inc.

 

 

Investment Objective

BlackRock Senior High Income Fund, Inc.’s (ARK) (the “Fund”) investment objective is to provide high current income by investing principally in senior debt obligations of companies, including corporate loans made by banks and other financial institutions and both privately placed and publicly offered corporate bonds and notes. The Fund may invest directly in such securities or synthetically through the use of derivatives.

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

 

Portfolio Management Commentary

 

How did the Fund perform?

 

Ÿ  

For the six-month period ended August 31, 2012, the Fund returned 13.11% based on market price and 5.41% based on NAV. For the same period, the closed-end Lipper High Yield Funds (Leveraged) category posted an average return of 8.15% based on market price and 5.80% based on NAV. All returns reflect reinvestment of dividends. The Fund moved from a discount to NAV to a premium by period end, which accounts for the difference between performance based on price and performance based on NAV. The following discussion relates to performance based on NAV.

What factors influenced performance?

 

Ÿ  

Security selection among lower quality debt instruments (including both bonds and loans) had a positive impact on performance. From a sector perspective, selection within gaming, wireless and technology contributed positively. The Trust’s exposures to preferred securities and common stock also boosted returns.

 

Ÿ  

The Fund invests roughly half of its assets in high yield bonds and half in floating rate loan interests (bank loans), while most funds in the Lipper category invest primarily in high yield bonds. While the Fund’s allocation to bank loans did not detract from performance on an absolute basis, the asset class underperformed high yield bonds for the period. Security selection in the independent energy and electric sectors hindered returns for the period.

Describe recent portfolio activity.

 

Ÿ  

The Fund began the reporting period increasing its risk profile; however, as risk asset prices surged in 2012, the Fund moderated its degree of risk-taking over the six-month period. While the Fund’s view on high yield and bank loan assets remained positive throughout this period, its holdings became increasingly focused on higher-quality income-oriented credit names with stable fundamentals and an attractive coupon rate. With global growth concerns posing a persistent threat and fueling uncertainty, the Fund continued to favor issuers in mature industries that exhibit consistent cash flows and good earnings visibility and debt instruments that are backed by profitable assets. The Fund generally remained cautious of cyclical credits that tend to be more vulnerable to slower economic growth and/or macroeconomic weakness.

Describe portfolio positioning at period end.

 

Ÿ  

At period end, the Fund held 56% of its total portfolio in floating rate loan interests (bank loans) and 41% in corporate bonds, with the remainder in asset-backed securities and common stocks. The Fund’s largest sector exposures included healthcare, independent energy and chemicals. The Fund ended the period with economic leverage at 27% of its total managed assets.

 

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

 

                
12    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
     BlackRock Senior High Income Fund, Inc.

 

 

Fund Information

 

Symbol on NYSE

   ARK

Initial Offering Date

   April 30, 1993

Yield on Closing Market Price as of August 31, 2012 ($4.43)1

   6.77%

Current Monthly Distribution per Common Share2

   $0.025

Current Annualized Distribution per Common Share2

   $0.300

Economic Leverage as of August 31, 20123

   27%

 

  1   

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

 

  2   

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

 

  3   

Represents loan outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowings) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 14.

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

 

        8/31/12        2/29/12        Change      High        Low  

Market Price

     $ 4.43         $ 4.06           9.11    $ 4.43         $ 3.99   

Net Asset Value

     $ 4.22         $ 4.15           1.69    $ 4.22         $ 4.03   

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

 

Portfolio Composition               
      8/31/12     2/29/12  

Floating Rate Loan Interests

     56     56

Corporate Bonds

     41        41   

Asset-Backed Securities

     2        2   

Common Stocks

     1        1   
Credit Quality Allocations4               
      8/31/12     2/29/12  

A

     1     1

BBB/Baa

     6        6   

BB/Ba

     35        39   

B

     54        48   

CCC/Caa

     4        3   

Not Rated

            3   

 

  4   

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

 

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    13


Table of Contents
The Benefits and Risks of Leveraging     

 

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

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

The interest earned on securities purchased with the proceeds from leverage is paid to shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share NAV. However, in order to benefit shareholders, the yield curve must be positively sloped; that is, short-term interest rates must be lower than long-term interest rates. If the yield curve becomes negatively sloped, meaning short-term interest rates exceed long-term interest rates, income to shareholders will be lower than if the Funds had not used leverage.

To illustrate these concepts, assume a Fund’s capitalization is $100 million and it borrows for an additional $30 million, creating a total value of $130 million available for investment in long-term securities. If prevailing short-term interest rates are 3% and long-term interest rates are 6%, the yield curve has a strongly positive slope. In this case, the Fund pays borrowing costs and interest expense on the $30 million of borrowings based on the lower short-term interest rates. At the same time, the securities purchased by the Fund with assets received from the borrowings earn income based on long-term interest rates. In this case, the borrowing costs and interest expense of the borrowings is significantly lower than the income earned on the Fund’s long-term investments, and therefore the Fund’s shareholders are the beneficiaries of the incremental net income.

If short-term interest rates rise, narrowing the differential between short-term and long-term interest rates, the incremental net income pickup will be reduced or eliminated completely. Furthermore, if prevailing short-term interest rates rise above long-term interest rates, the yield curve has a negative slope. In this case, the Fund pays higher short-term interest rates whereas the Fund’s total portfolio earns income based on lower long-term interest rates.

Furthermore, the value of the Funds’ portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. In contrast, the redemption value of the Funds’ borrowings does not fluctuate in relation to interest rates. As a result, changes in interest rates can influence the Funds’ NAVs positively or negatively in addition to the impact on Fund performance from leverage from borrowings discussed above.

The use of leverage may enhance opportunities for increased income to the Funds, but as described above, it also creates risks as short- or long-term interest rates fluctuate. Leverage also will generally cause greater changes in the Funds’ NAVs, market prices and dividend rates than comparable portfolios without leverage. If the income derived from securities purchased with assets received from leverage exceeds the cost of leverage, the Fund’s net income will be greater than if leverage had not been used. Conversely, if the income from the securities purchased is not sufficient to cover the cost of leverage, each Fund’s net income will be less than if leverage had not been used, and therefore the amount available for distribution to shareholders will be reduced. Each Fund may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of leverage instruments, which may cause a Fund to incur losses. The use of leverage may limit each Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. Each Fund will incur expenses in connection with the use of leverage, all of which are borne by shareholders and may reduce income.

Under the Investment Company Act of 1940, as amended (the “1940 Act”), the Funds are permitted to issue senior securities representing indebtedness up to 33 1/3% of their total managed assets (each Fund’s net assets plus the proceeds of any outstanding borrowings). In addition, each Fund voluntarily limits its aggregate economic leverage to 50% of its managed assets. As of August 31, 2012, the Funds had aggregate economic leverage from borrowings through a credit facility as a percentage of their total managed assets as follows:

 

      Percent of
Economic
Leverage
 

COY

     27

CYE

     29

DSU

     30

FRB

     30

ARK

     27
 

 

Derivative Financial Instruments

 

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

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

 

 

                
14    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments     BlackRock Corporate High Yield Fund, Inc. (COY)
August 31, 2012 (Unaudited)    (Percentages shown are based on Net Assets)

 

Common Stocks        
Shares
    Value  
    

Auto Components — 2.3%

    

Dana Holding Corp.

     92,740      $ 1,266,828   

Delphi Automotive Plc (a)

     153,225        4,641,186   
    

 

 

 
               5,908,014   

Biotechnology — 0.0%

  

Ironwood Pharmaceuticals, Inc. (a)

     6,540        81,946   

Capital Markets — 0.4%

  

American Capital Ltd. (a)

     46,567        511,771   

E*Trade Financial Corp. (a)

     68,100        583,617   
    

 

 

 
               1,095,388   

Chemicals — 0.2%

  

ADA-ES, Inc. (a)

     1,670        39,162   

CF Industries Holdings, Inc.

     940        194,589   

Huntsman Corp.

     12,750        183,345   
    

 

 

 
               417,096   

Commercial Banks — 0.2%

  

CIT Group, Inc. (a)

     15,830        597,741   

Communications Equipment — 0.3%

  

Loral Space & Communications Ltd.

     11,463        841,614   

Containers & Packaging — 0.0%

  

Smurfit Kappa Plc (a)

     3,634        29,647   

Diversified Financial Services — 0.5%

  

Kcad Holdings I Ltd.

     210,194,127        1,393,797   

Diversified Telecommunication Services — 0.2%

  

Level 3 Communications, Inc. (a)

     20,920        450,826   

Electrical Equipment — 0.0%

  

Medis Technologies Ltd.

     67,974        204   

Energy Equipment & Services — 1.0%

  

Laricina Energy Ltd. (a)

     35,294        1,521,679   

Osum Oil Sands Corp. (a)

     74,000        938,372   
    

 

 

 
               2,460,051   

Hotels, Restaurants & Leisure — 0.0%

  

Travelport Worldwide Ltd.

     70,685        9,189   

Media — 2.2%

  

Belo Corp., Class A

     20,724        151,285   

Charter Communications, Inc. (a)

     65,816        5,120,485   

Clear Channel Outdoor Holdings, Inc., Class A (a)

     8,934        46,903   

Cumulus Media, Inc., Class A (a)

     88,000        243,760   

DISH Network Corp., Class A

     5,420        173,386   
    

 

 

 
               5,735,819   

Metals & Mining — 0.1%

  

African Minerals Ltd. (a)

     40,400        161,685   

Oil, Gas & Consumable Fuels — 0.1%

  

African Petroleum Corp. Ltd. (a)

     180,300        230,983   

Paper & Forest Products — 0.1%

  

Ainsworth Lumber Co. Ltd. (a)(b)

     41,686        91,344   

Ainsworth Lumber Co. Ltd. (a)

     36,744        80,514   

Western Forest Products, Inc. (a)

     147,968        160,615   

Western Forest Products, Inc. (a)(b)

     41,528        45,077   
    

 

 

 
               377,550   
Common Stocks        
Shares
    Value  
    

Semiconductors & Semiconductor Equipment — 0.3%

  

NXP Semiconductors NV (a)

     5,000      $ 116,600   

Spansion, Inc., Class A (a)

     60,342        689,709   

SunPower Corp.

     123        551   
    

 

 

 
               806,860   

Software — 0.2%

  

Bankruptcy Management Solutions, Inc. (a)

     468        5   

HMH Holdings/EduMedia

     19,102        468,005   
    

 

 

 
               468,010   
Total Common Stocks – 8.1%              21,066,420   

 

Corporate Bonds   

Par 

(000)

        

Aerospace & Defense — 0.7%

    

Huntington Ingalls Industries, Inc.:

    

6.88%, 3/15/18

   USD 210        224,700   

7.13%, 3/15/21

     295        319,338   

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

     796        847,740   

Meccanica Holdings USA, Inc.,
6.25%, 7/15/19 (b)

     405        366,463   
    

 

 

 
               1,758,241   

Air Freight & Logistics — 0.4%

  

National Air Cargo Group, Inc.:

    

Series 1 12.38%, 9/02/15

     548        558,607   

Series 2 12.38%, 8/16/15

     555        565,094   
    

 

 

 
               1,123,701   

Airlines — 1.5%

  

American Airlines Pass-Through Trust, Series 2011-2, Class A, 8.63%, 4/15/23

     1,007        1,067,798   

Continental Airlines, Inc.:

    

Series 1997-4, Class B 6.90%, 7/02/18

     268        267,785   

Series 2010-1, Class B 6.00%, 7/12/20

     355        357,812   

Delta Air Lines, Inc.:

    

Series 2002-1, Class G-1 6.72%, 7/02/24

     555        601,640   

Series 2009-1 Series B 9.75%, 6/17/18

     173        187,232   

Series 2010-1, Class B 6.38%, 7/02/17

     447        447,000   

US Airways Pass Through Trust:

    

Series 2011-1, Class C 10.88%, 10/22/14

     620        635,357   

Series 2012-1, Class C 9.13%, 10/01/15

     420        428,400   
    

 

 

 
               3,993,024   

Auto Components — 2.1%

  

Dana Holding Corp., 6.75%, 2/15/21

     410        441,775   

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

     150        165,000   

Icahn Enterprises LP, 8.00%, 1/15/18

     2,995        3,189,675   

IDQ Holdings, Inc., 11.50%, 4/01/17 (b)

     355        371,419   

International Automotive Components Group SL, 9.13%, 6/01/18 (b)

     40        38,350   

Jaguar Land Rover Plc, 8.25%, 3/15/20

   GBP 439        735,238   

Titan International, Inc., 7.88%, 10/01/17

   USD 430        450,425   
    

 

 

 
               5,391,882   
 
Portfolio Abbreviations

 

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

AUD   Australian Dollar
CAD   Canadian Dollar
EBITDA   Earnings Before Interest, Taxes, Depreciation and Amortization
ETF   Exchange –Traded Fund
EUR   Euro
FKA   Formerly Known As
GBP   British Pound
LIBOR   London Interbank Offered Rate
PIK   Payment–in-Kind
SPDR   Standard and Poor’s Depository Receipts
USD   US Dollar
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    15


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund, Inc. (COY)

(Percentages shown are based on Net Assets)

 

Corporate Bonds   

Par 

(000)

    Value  
    

Beverages — 0.2%

  

Crown European Holdings SA:

    

7.13%, 8/15/18 (b)

   EUR 227      $ 314,073   

7.13%, 8/15/18

     171        236,592   
    

 

 

 
               550,665   

Biotechnology — 0.0%

  

QHP Royalty Sub LLC, 10.25%, 3/15/15 (b)

   USD 53        53,117   

Building Products — 0.8%

  

Building Materials Corp. of America (b):

    

7.00%, 2/15/20

     500        541,250   

6.75%, 5/01/21

     710        775,675   

Momentive Performance Materials, Inc.,
11.50%, 12/01/16

     340        207,400   

USG Corp., 9.75%, 1/15/18

     550        589,875   
    

 

 

 
               2,114,200   

Capital Markets — 0.8%

  

E*Trade Financial Corp.:

    

12.50%, 11/30/17 (c)

     980        1,118,425   

2.25%, 8/31/19 (b)(d)(e)

     226        193,230   

KKR Group Finance Co. LLC, 6.38%, 9/29/20 (b)

     600        679,171   
    

 

 

 
               1,990,826   

Chemicals — 4.3%

  

Basell Finance Co. BV, 8.10%, 3/15/27 (b)

     380        507,300   

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

     1,640        1,812,200   

Chemtura Corp., 7.88%, 9/01/18

     285        307,087   

Hexion US Finance Corp.:

    

6.63%, 4/15/20

     215        217,150   

9.00%, 11/15/20

     285        243,675   

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

     155        177,475   

INEOS Finance Plc (b):

    

8.38%, 2/15/19

     835        878,837   

7.50%, 5/01/20

     405        413,100   

INEOS Group Holdings Plc, 8.50%, 2/15/16 (b)

     135        127,238   

Kinove German Bondco GmbH, 10.00%, 6/15/18

   EUR 315        431,866   

Kraton Polymers LLC, 6.75%, 3/01/19

   USD 115        117,875   

LyondellBasell Industries NV, 5.75%, 4/15/24

     2,590        2,933,175   

Nexeo Solutions LLC, 8.38%, 3/01/18

     170        166,175   

OXEA Finance/Cy SCA, 9.63%, 7/15/17 (b)

   EUR 330        457,743   

PolyOne Corp., 7.38%, 9/15/20

   USD 200        218,500   

TPC Group LLC, 8.25%, 10/01/17

     310        340,225   

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

     1,740        1,757,400   
    

 

 

 
               11,107,021   

Commercial Banks — 1.1%

  

CIT Group, Inc.:

    

7.00%, 5/02/16 (b)

     901        904,569   

5.25%, 3/15/18

     510        531,675   

5.50%, 2/15/19 (b)

     490        510,825   

5.00%, 8/15/22

     530        534,015   

6.00%, 4/01/36

     500        452,915   
    

 

 

 
               2,933,999   

Commercial Services & Supplies — 2.0%

  

ARAMARK Corp., 8.50%, 2/01/15

     330        338,253   

ARAMARK Holdings Corp., 8.63%, 5/01/16 (b)(c)

     405        414,623   

Aviation Capital Group Corp., 6.75%, 4/06/21 (b)

     500        513,375   

Brickman Group Holdings, Inc., 9.13%, 11/01/18 (b)

     24        24,240   

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

     430        425,700   

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

     484        496,705   

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

     585        639,623   

EC Finance Plc, 9.75%, 8/01/17

   EUR  300        391,019   

Mead Products LLC/ACCO Brands Corp., 6.75%, 4/30/20 (b)

   USD 205        216,788   
Corporate Bonds   

Par 

(000)

    Value  
    

Commercial Services & Supplies (concluded)

  

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

   USD 335      $ 359,287   

RSC Equipment Rental, Inc., 8.25%, 2/01/21

     800        876,000   

Verisure Holding AB:

    

8.75%, 9/01/18

   EUR 169        212,568   

8.75%, 12/01/18

     100        111,315   

West Corp., 8.63%, 10/01/18

   USD 125        126,875   
    

 

 

 
               5,146,371   

Communications Equipment — 1.8%

    

Avaya, Inc., 9.75%, 11/01/15

     650        563,875   

Frontier Communications Corp., 6.25%, 1/15/13

     830        844,525   

Hughes Satellite Systems Corp., 6.50%, 6/15/19

     370        396,362   

Zayo Group LLC/Zayo Capital, Inc.:

    

8.13%, 1/01/20

     1,420        1,508,750   

10.13%, 7/01/20

     1,160        1,244,100   
    

 

 

 
               4,557,612   

Computers & Peripherals — 0.1%

    

SanDisk Corp., 1.50%, 8/15/17 (e)

     200        221,500   

Construction & Engineering — 0.2%

    

Boart Longyear Management Property Ltd., 7.00%, 4/01/21 (b)

     175        181,563   

H&E Equipment Services, Inc., 7.00%, 9/01/22 (b)

     305        316,437   

URS Corp., 5.00%, 4/01/22 (b)

     65        65,909   
    

 

 

 
               563,909   

Construction Materials — 1.4%

    

HD Supply, Inc. (b):

    

8.13%, 4/15/19

     1,425        1,546,125   

11.00%, 4/15/20

     1,350        1,485,000   

Xefin Lux SCA:

    

8.00%, 6/01/18 (b)

   EUR 233        285,741   

8.00%, 6/01/18

     200        245,271   
    

 

 

 
               3,562,137   

Consumer Finance — 0.8%

    

Credit Acceptance Corp., 9.13%, 2/01/17

   USD 435        478,500   

Ford Motor Credit Co. LLC:

    

7.00%, 4/15/15

     480        534,327   

12.00%, 5/15/15

     670        834,150   

6.63%, 8/15/17

     131        150,595   
    

 

 

 
               1,997,572   

Containers & Packaging — 1.8%

    

Ardagh Packaging Finance Plc:

    

7.38%, 10/15/17 (b)

     200        214,250   

7.38%, 10/15/17 (b)

   EUR 335        445,592   

7.38%, 10/15/17

     200        266,025   

9.13%, 10/15/20 (b)

   USD 365        379,600   

9.13%, 10/15/20 (b)

     205        214,225   

9.13%, 10/15/20 (b)

     204        212,670   

Berry Plastics Corp.:

    

4.34%, 9/15/14 (f)

     275        270,875   

8.25%, 11/15/15

     110        115,775   

9.75%, 1/15/21

     390        431,925   

Beverage Packaging Holdings Luxembourg II SA, 8.00%, 12/15/16

   EUR 617        760,541   

GCL Holdings SCA, 9.38%, 4/15/18 (b)

     244        297,696   

Graphic Packaging International, Inc., 7.88%, 10/01/18

   USD 340        379,100   

OI European Group BV, 6.88%, 3/31/17

   EUR 152        197,399   

Sealed Air Corp., 8.38%, 9/15/21 (b)

   USD 175        196,875   

Tekni-Plex, Inc., 9.75%, 6/01/19 (b)

     165        172,425   
    

 

 

 
               4,554,973   
 

 

See Notes to Consolidated Financial Statements.

 

                
16    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund, Inc. (COY)

(Percentages shown are based on Net Assets)

 

Corporate Bonds   

Par 

(000)

    Value  
    

Distributors — 0.6%

    

VWR Funding, Inc., 7.25%, 9/15/17 (b)(g)

   USD 1,485      $ 1,503,563   

Diversified Consumer Services — 1.5%

    

Laureate Education, Inc., 9.25%, 9/01/19 (b)

     555        555,000   

Service Corp. International, 7.00%, 6/15/17

     2,800        3,192,000   

ServiceMaster Co., 8.00%, 2/15/20

     175        186,594   
    

 

 

 
               3,933,594   

Diversified Financial Services — 4.1%

    

Aircastle Ltd., 6.75%, 4/15/17

     430        464,400   

Ally Financial, Inc.:

    

7.50%, 12/31/13

     350        374,062   

8.00%, 11/01/31

     2,705        3,198,662   

8.00%, 11/01/31

     560        664,717   

CNG Holdings, Inc., 9.38%, 5/15/20 (b)

     280        285,600   

DPL, Inc., 7.25%, 10/15/21 (b)

     1,075        1,225,500   

Gala Group Finance Plc, 8.88%, 9/01/18

   GBP 300        444,201   

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

   USD 270        299,361   

Leucadia National Corp., 8.13%, 9/15/15

     790        890,725   

Reynolds Group Issuer, Inc.:

    

7.75%, 10/15/16

   EUR 187        242,853   

7.13%, 4/15/19

   USD 230        247,825   

9.75%, 4/15/19

     260        264,225   

7.88%, 8/15/19

     315        350,438   

9.88%, 8/15/19

     955        1,009,912   

8.25%, 2/15/21

     125        122,813   

WMG Acquisition Corp.:

    

9.50%, 6/15/16

     110        120,175   

11.50%, 10/01/18

     382        419,245   
    

 

 

 
               10,624,714   

Diversified Telecommunication Services — 2.3%

    

Broadview Networks Holdings, Inc., 11.38%, 9/01/12 (a)(h)

     1,000        675,000   

Consolidated Communications Finance Co., 10.88%, 6/01/20 (b)

     550        589,875   

ITC Deltacom, Inc., 10.50%, 4/01/16

     260        280,150   

Level 3 Communications, Inc., 8.88%, 6/01/19 (b)

     295        300,900   

Level 3 Financing, Inc.:

    

8.13%, 7/01/19

     1,224        1,282,140   

7.00%, 6/01/20 (b)

     525        522,375   

8.63%, 7/15/20

     785        839,950   

OTE Plc, 5.00%, 8/05/13

   EUR 104        113,377   

Telenet Finance V Luxembourg SCA:

    

6.25%, 8/15/22

     137        173,180   

6.75%, 8/15/24

     350        446,834   

Windstream Corp.:

    

8.13%, 8/01/13

   USD 400        422,000   

7.88%, 11/01/17

     360        391,500   
    

 

 

 
               6,037,281   

Electric Utilities — 0.7%

    

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

     269        289,152   

The Tokyo Electric Power Co., Inc., 4.50%, 3/24/14

   EUR 1,150        1,439,671   
    

 

 

 
               1,728,823   

Electrical Equipment — 0.1%

    

Belden, Inc., 5.50%, 9/01/22 (b)

   USD 340        340,850   

Electronic Equipment, Instruments & Components — 0.5%

  

CDW LLC/CDW Finance Corp., 8.50%, 4/01/19

     354        387,630   

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

     215        258,000   

Micron Technology, Inc., 2.38%, 5/01/32 (b)(e)

     407        387,159   

NXP BV/NXP Funding LLC, 9.75%, 8/01/18 (b)

     190        217,075   
    

 

 

 
               1,249,864   
Corporate Bonds   

Par 

(000)

    Value  
    

Energy Equipment & Services — 3.4%

    

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

   USD 130      $ 138,775   

Calfrac Holdings LP, 7.50%, 12/01/20 (b)

     360        352,800   

Compagnie Générale de Géophysique, Veritas:

    

7.75%, 5/15/17

     235        245,575   

6.50%, 6/01/21

     1,150        1,197,437   

Forbes Energy Services Ltd., 9.00%, 6/15/19

     335        324,950   

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

     1,615        1,667,487   

Gulfmark Offshore, Inc., 6.38%, 3/15/22 (b)

     145        147,900   

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

     290        295,800   

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

     415        422,263   

MEG Energy Corp. (b):

    

6.50%, 3/15/21

     1,105        1,163,012   

6.38%, 1/30/23

     415        432,638   

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

     290        308,125   

Peabody Energy Corp.:

    

6.25%, 11/15/21 (b)

     1,285        1,307,487   

7.88%, 11/01/26

     345        368,288   

Precision Drilling Corp.:

    

6.63%, 11/15/20

     70        73,500   

6.50%, 12/15/21

     275        288,750   
    

 

 

 
               8,734,787   

Food & Staples Retailing — 0.2%

    

Bakkavor Finance 2 Plc, 8.25%, 2/15/18

   GBP 100        139,731   

Rite Aid Corp., 9.25%, 3/15/20

   USD 345        354,487   
    

 

 

 
               494,218   

Food Products — 0.4%

    

Darling International, Inc., 8.50%, 12/15/18

     105        118,913   

Del Monte Corp., 7.63%, 2/15/19

     56        55,930   

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

     405        426,769   

Smithfield Foods, Inc., 6.63%, 8/15/22

     531        543,611   
    

 

 

 
               1,145,223   

Health Care Equipment & Supplies — 1.5%

    

Biomet, Inc.:

    

10.00%, 10/15/17

     180        190,463   

6.50%, 8/01/20 (b)

     645        669,187   

DJO Finance LLC:

    

10.88%, 11/15/14

     476        496,825   

8.75%, 3/15/18 (b)

     415        440,937   

7.75%, 4/15/18

     95        86,925   

Fresenius Medical Care US Finance, Inc., 6.50%, 9/15/18 (b)

     192        215,280   

Fresenius Medical Care US Finance II, Inc.,
5.88%, 1/31/22 (b)

     600        637,500   

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

     500        575,625   

Kinetic Concepts, Inc./KCI USA, Inc., 12.50%, 11/01/19 (b)

     255        231,413   

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

     270        288,900   
    

 

 

 
               3,833,055   

Health Care Providers & Services — 7.3%

    

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

     520        540,800   

CHS/Community Health Systems, Inc.:

    

5.13%, 8/15/18

     785        809,531   

7.13%, 7/15/20

     415        434,712   

ConvaTec Healthcare E SA, 7.38%, 12/15/17 (b)

   EUR 400        538,338   

Crown Newco 3 Plc, 7.00%, 2/15/18 (b)

   GBP 331        529,521   

DaVita, Inc., 5.75%, 8/15/22

   USD 849        882,960   

HCA, Inc.:

    

8.50%, 4/15/19

     120        135,300   

6.50%, 2/15/20

     2,160        2,373,300   

7.88%, 2/15/20

     85        94,881   

7.25%, 9/15/20

     2,405        2,665,041   

5.88%, 3/15/22

     250        265,938   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    17


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund, Inc. (COY)

(Percentages shown are based on Net Assets)

 

Corporate Bonds   

Par 

(000)

    Value  
    

Health Care Providers & Services (concluded)

    

Hologic, Inc., 6.25%, 8/01/20 (b)

   USD 1,464      $ 1,550,010   

IASIS Healthcare LLC, 8.38%, 5/15/19

     1,420        1,354,325   

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

     375        367,500   

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

     115        96,888   

Omnicare, Inc., 7.75%, 6/01/20

     905        997,762   

PSS World Medical, Inc., 6.38%, 3/01/22

     307        324,653   

Symbion, Inc., 8.00%, 6/15/16

     315        318,347   

Tenet Healthcare Corp.:

    

10.00%, 5/01/18

     792        910,800   

6.25%, 11/01/18

     300        325,687   

8.88%, 7/01/19

     2,355        2,678,812   

United Surgical Partners International, Inc.,
9.00%, 4/01/20 (b)

     270        289,913   

Vanguard Health Holding Co. II LLC,
7.75%, 2/01/19 (b)

     425        443,062   
    

 

 

 
               18,928,081   

Health Care Technology — 1.0%

    

IMS Health, Inc., 12.50%, 3/01/18 (b)

     2,235        2,626,125   

Hotels, Restaurants & Leisure — 4.6%

    

Affinity Gaming LLC/Affinity Gaming Finance Corp., 9.00%, 5/15/18 (b)

     265        269,638   

Caesars Entertainment Operating Co., Inc.:

    

11.25%, 6/01/17

     1,270        1,368,425   

10.00%, 12/15/18

     2,935        1,849,050   

8.50%, 2/15/20 (b)

     280        276,150   

Caesars Operating Escrow LLC, 9.00%, 2/15/20 (b)

     1,533        1,525,335   

Carlson Wagonlit BV, 6.88%, 6/15/19 (b)

     295        306,800   

Cirsa Funding Luxembourg SA, 8.75%, 5/15/18

   EUR 202        222,951   

Diamond Resorts Corp., 12.00%, 8/15/18

   USD 1,100        1,170,125   

El Dorado Resorts LLC, 8.63%, 6/15/19 (b)

     125        121,875   

Enterprise Inns Plc, 6.50%, 12/06/18

   GBP 296        406,553   

Gategroup Finance Luxembourg SA,
6.75%, 3/01/19

   EUR 250        321,525   

Little Traverse Bay Bands of Odawa Indians,
9.00%, 8/31/20 (b)

   USD 270        245,700   

MGM Resorts International:

    

10.38%, 5/15/14

     175        198,625   

4.25%, 4/15/15 (e)

     996        1,005,960   

11.13%, 11/15/17

     1,315        1,462,937   

MTR Gaming Group, Inc., 11.50%, 8/01/19 (c)

     136        139,406   

Travelport LLC:

    

5.09%, 9/01/14 (f)

     165        117,150   

9.88%, 9/01/14

     35        27,825   

9.00%, 3/01/16

     110        78,100   

6.46%, 12/01/16 (b)(c)

     385        297,456   

Tropicana Entertainment LLC,
9.63%, 12/15/14 (a)(h)

     315          

Wynn Las Vegas LLC, 5.38%, 3/15/22 (b)

     565        577,713   
    

 

 

 
               11,989,299   

Household Durables — 1.7%

    

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

     30        30,675   

Jarden Corp., 7.50%, 1/15/20

   EUR 285        386,255   

Libbey Glass, Inc., 6.88%, 5/15/20 (b)

   USD 560        597,100   

Pulte Group, Inc., 6.38%, 5/15/33

     175        152,250   

Ryland Group, Inc., 6.63%, 5/01/20

     315        332,325   

Spie BondCo 3 SCA, 11.00%, 8/15/19

   EUR 276        352,360   

Standard Pacific Corp.:

    

10.75%, 9/15/16

   USD 1,285        1,551,637   

8.38%, 1/15/21

     955        1,064,825   
    

 

 

 
               4,467,427   
Corporate Bonds   

Par 

(000)

    Value  
    

Household Products — 0.3%

    

Ontex IV SA:

    

7.50%, 4/15/18 (b)

   EUR 130      $ 165,967   

9.00%, 4/15/19

     213        246,478   

Spectrum Brands Holdings, Inc., 9.50%, 6/15/18

   USD 330        376,613   
    

 

 

 
               789,058   

Independent Power Producers & Energy Traders — 3.3%

  

 

The AES Corp., 7.38%, 7/01/21

     250        286,250   

Calpine Corp. (b):

    

7.25%, 10/15/17

     165        176,550   

7.50%, 2/15/21

     95        105,450   

7.88%, 1/15/23

     405        457,650   

Energy Future Holdings Corp., 10.00%, 1/15/20

     1,765        1,945,913   

Energy Future Intermediate Holding Co. LLC:

    

6.88%, 8/15/17 (b)

     280        285,950   

10.00%, 12/01/20

     2,786        3,127,285   

11.75%, 3/01/22 (b)

     547        582,555   

GenOn REMA LLC, 9.24%, 7/02/17

     222        238,967   

Laredo Petroleum, Inc.:

    

9.50%, 2/15/19

     445        505,075   

7.38%, 5/01/22

     345        370,875   

QEP Resources, Inc., 5.38%, 10/01/22

     305        312,625   
    

 

 

 
               8,395,145   

Industrial Conglomerates — 2.4%

    

Sequa Corp. (b):

    

11.75%, 12/01/15

     2,190        2,299,500   

13.50%, 12/01/15

     3,759        3,984,277   
    

 

 

 
               6,283,777   

Insurance — 1.0%

    

Alliant Holdings I, Inc., 11.00%, 5/01/15 (b)

     1,600        1,654,000   

CNO Financial Group, Inc., 9.00%, 1/15/18 (b)

     339        370,781   

Genworth Financial, Inc., 7.63%, 9/24/21

     390        398,502   

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

     235        210,325   
    

 

 

 
               2,633,608   

IT Services — 3.1%

    

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

     1,355        1,453,237   

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

     510        525,300   

First Data Corp.:

    

7.38%, 6/15/19 (b)

     1,445        1,491,962   

8.88%, 8/15/20 (b)

     495        539,550   

6.75%, 11/01/20 (b)

     815        808,888   

8.25%, 1/15/21 (b)

     570        565,013   

12.63%, 1/15/21

     1,528        1,547,100   

SunGard Data Systems, Inc.:

    

7.38%, 11/15/18

     500        531,250   

7.63%, 11/15/20

     550        589,875   
    

 

 

 
               8,052,175   

Machinery — 1.1%

    

SPX Corp., 6.88%, 9/01/17

     160        177,600   

UR Merger Sub Corp. (b):

    

5.75%, 7/15/18

     236        249,570   

7.38%, 5/15/20

     405        429,300   

7.63%, 4/15/22

     1,935        2,089,800   
    

 

 

 
               2,946,270   

Media — 13.1%

    

Affinion Group, Inc., 7.88%, 12/15/18

     745        532,675   

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

     205        232,163   

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

     982        1,075,689   

CCO Holdings LLC:

    

6.50%, 4/30/21

     431        462,247   

5.25%, 9/30/22

     900        891,000   

Cengage Learning Acquisitions, Inc., 11.50%, 4/15/20 (b)

     1,055        1,110,387   
 

 

See Notes to Consolidated Financial Statements.

 

                
18    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund, Inc. (COY)

(Percentages shown are based on Net Assets)

 

Corporate Bonds   

Par 

(000)

    Value  
    

Media (concluded)

    

Checkout Holding Corp., 16.00%, 11/15/15 (b)(d)

   USD 615      $ 375,150   

Cinemark USA, Inc., 8.63%, 6/15/19

     200        224,000   

Clear Channel Communications, Inc., 9.00%, 3/01/21

     409        350,718   

Clear Channel Worldwide Holdings, Inc.:

    

Series A, 9.25%, 12/15/17

     1,379        1,492,767   

Series B, 9.25%, 12/15/17

     4,816        5,231,380   

Series B, 7.63%, 3/15/20

     1,494        1,449,180   

Cox Enterprises, Inc. (b):

    

Loan Close 2, 12.00%, 8/15/18

     655        655,708   

Loan Close 3, 12.00%, 8/15/18

     749        749,663   

Shares Loan, 12.00%, 8/15/18

     773        773,166   

CSC Holdings LLC, 8.50%, 4/15/14

     370        406,538   

DISH DBS Corp., 5.88%, 7/15/22 (b)

     680        685,100   

Harron Communications LP, 9.13%, 4/01/20 (b)

     300        324,750   

Intelsat Jackson Holdings SA:

    

11.25%, 6/15/16

     812        854,630   

7.25%, 10/15/20 (b)

     750        808,125   

Intelsat Luxembourg SA:

    

11.25%, 2/04/17

     560        588,000   

11.50%, 2/04/17 (c)

     1,100        1,155,000   

Interactive Data Corp., 10.25%, 8/01/18

     1,235        1,392,462   

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

     315        352,013   

Kabel Deutschland Vertrieb und Service GmbH & Co. KG, 6.50%, 6/29/18 (b)

   EUR 315        426,913   

Lamar Media Corp., 5.88%, 2/01/22

   USD 130        137,800   

Live Nation Entertainment, Inc., 8.13%, 5/15/18 (b)

     675        722,250   

NAI Entertainment Holdings LLC, 8.25%, 12/15/17 (b)

     513        571,995   

Nielsen Finance LLC:

    

11.63%, 2/01/14

     45        51,075   

7.75%, 10/15/18

     2,085        2,345,625   

Odeon & UCI Finco Plc, 9.00%, 8/01/18 (b)

   GBP 189        297,853   

ProQuest LLC, 9.00%, 10/15/18 (b)

   USD 460        422,050   

ProtoStar I Ltd., 18.00%, 10/15/12 (a)(b)(e)(h)

     812        406   

Truven Health Analytics, Inc., 10.63%,
6/01/20 (b)

     470        501,725   

Unitymedia GmbH:

    

9.63%, 12/01/19

   EUR 158        223,326   

9.63%, 12/01/19 (b)

     530        749,130   

9.50%, 3/15/21

     385        552,654   

Unitymedia Hessen GmbH & Co. KG:

    

8.13%, 12/01/17 (b)

   USD 817        884,402   

8.13%, 12/01/17 (b)

   EUR 122        165,536   

7.50%, 3/15/19

     722        994,404   

UPC Holding BV, 9.88%, 4/15/18 (b)

   USD 400        449,000   

UPCB Finance II Ltd.:

    

6.38%, 7/01/20 (b)

   EUR 753        989,744   

6.38%, 7/01/20

     300        394,320   

WaveDivision Escrow LLC/WaveDivision Escrow Corp., 8.13%, 9/01/20 (b)

   USD 275        283,250   

Ziggo Bond Co. BV, 8.00%, 5/15/18 (b)

   EUR 343        473,489   

Ziggo Finance BV, 6.13%, 11/15/17 (b)

     56        75,191   
    

 

 

 
               33,884,649   

Metals & Mining — 3.8%

    

Eco-Bat Finance Plc, 7.75%, 2/15/17

     435        552,614   

FMG Resources August 2006 Property Ltd. (b):

    

6.88%, 2/01/18

   USD 325        309,563   

6.88%, 4/01/22

     165        151,800   

Global Brass and Copper, Inc., 9.50%, 6/01/19 (b)

     275        289,438   

Goldcorp, Inc., 2.00%, 8/01/14 (e)

     970        1,117,925   

Kaiser Aluminum Corp., 8.25%, 6/01/20 (b)

     205        217,300   

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

     140        147,350   

New World Resources NV, 7.88%, 5/01/18

   EUR 627        784,697   
Corporate Bonds   

Par 

(000)

    Value  
    

Metals & Mining (concluded)

    

Newmont Mining Corp., Series A, 1.25%, 7/15/14 (e)

   USD 1,345      $ 1,709,831   

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

     3,045        3,402,787   

Schmolz + Bickenbach Luxembourg SA, 9.88%, 5/15/19

   EUR 295        299,624   

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

   USD 225        232,875   

Taseko Mines Ltd., 7.75%, 4/15/19

     385        366,713   

Vedanta Resources Plc, 8.25%, 6/07/21 (b)

     245        233,975   
    

 

 

 
               9,816,492   

Multiline Retail — 0.3%

    

Dollar General Corp., 4.13%, 7/15/17

     727        756,080   

Oil, Gas & Consumable Fuels — 10.9%

    

Access Midstream Partners LP, 6.13%, 7/15/22

     250        259,375   

Alpha Appalachia Holdings, Inc., 3.25%, 8/01/15 (e)

     746        669,535   

Alpha Natural Resources, Inc.:

    

6.00%, 6/01/19

     290        261,000   

6.25%, 6/01/21

     240        214,800   

Aurora USA Oil & Gas, Inc., 9.88%, 2/15/17 (b)

     610        637,450   

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

     375        399,375   

BreitBurn Energy Partners LP, 7.88%, 4/15/22 (b)

     235        239,700   

CCS, Inc., 11.00%, 11/15/15 (b)

     520        538,200   

Chaparral Energy, Inc., 7.63%, 11/15/22 (b)

     205        216,788   

Chesapeake Energy Corp.:

    

7.25%, 12/15/18

     15        15,713   

6.63%, 8/15/20

     165        169,538   

6.88%, 11/15/20

     160        166,000   

6.13%, 2/15/21

     545        540,912   

Coffeyville Resources LLC, 9.00%, 4/01/15 (b)

     103        109,695   

Concho Resources, Inc.:

    

7.00%, 1/15/21

     150        167,250   

6.50%, 1/15/22

     100        108,000   

5.50%, 10/01/22

     430        443,975   

Consol Energy, Inc., 8.25%, 4/01/20

     1,625        1,750,937   

Continental Resources, Inc., 7.13%, 4/01/21

     340        380,800   

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

     275        287,375   

Crosstex Energy LP:

    

8.88%, 2/15/18

     165        176,138   

7.13%, 6/01/22 (b)

     140        139,300   

Crown Oil Partners IV LP, 15.00%, 3/07/15

     545        545,482   

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

     42        47,670   

Energy XXI Gulf Coast, Inc.:

    

9.25%, 12/15/17

     510        568,650   

7.75%, 6/15/19

     815        865,937   
    

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

     315        337,837   

EP Energy LLC/Everest Acquisition Finance, Inc., 7.75%, 9/01/22 (b)

     195        195,488   

EV Energy Partners LP, 8.00%, 4/15/19

     140        144,550   

Hilcorp Energy I LP, 7.63%, 4/15/21 (b)

     690        759,000   

Holly Energy Partners LP, 6.50%, 3/01/20 (b)

     145        151,525   

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

     320        340,000   

Linn Energy LLC:

    

6.50%, 5/15/19 (b)

     90        89,550   

6.25%, 11/01/19 (b)

     1,865        1,841,687   

8.63%, 4/15/20

     205        221,400   

7.75%, 2/01/21

     185        192,863   

MarkWest Energy Partners LP:

    

6.25%, 6/15/22

     75        79,688   

5.50%, 2/15/23

     200        204,500   

Newfield Exploration Co., 6.88%, 2/01/20

     715        781,137   

Northern Oil and Gas, Inc., 8.00%, 6/01/20 (b)

     285        290,700   

Oasis Petroleum, Inc.:

    

7.25%, 2/01/19

     240        253,200   

6.50%, 11/01/21

     270        275,400   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    19


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund, Inc. (COY)

(Percentages shown are based on Net Assets)

 

Corporate Bonds   

Par 

(000)

    Value  
    

Oil, Gas & Consumable Fuels (concluded)

    

Offshore Group Investments Ltd.:

    

11.50%, 8/01/15 (b)

   USD 1,215      $ 1,342,575   

11.50%, 8/01/15

     300        331,500   

OGX Petroleo e Gas Participacoes SA (b):

    

8.50%, 6/01/18

     2,057        1,825,587   

8.38%, 4/01/22

     640        544,000   

PBF Holding Co. LLC, 8.25%, 2/15/20 (b)

     275        287,375   

PetroBakken Energy Ltd., 8.63%, 2/01/20 (b)

     1,105        1,129,862   

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

     530        565,775   

Pioneer Natural Resources Co.:

    

6.88%, 5/01/18

     425        514,547   

7.50%, 1/15/20

     135        168,840   

Range Resources Corp.:

    

8.00%, 5/15/19

     345        381,225   

5.75%, 6/01/21

     900        957,375   

5.00%, 8/15/22

     403        419,624   

Sabine Pass Liquified Natural Gas LP, 7.50%, 11/30/16

     560        599,200   

Samson Investment Co., 9.75%, 2/15/20 (b)

     78        80,340   

SandRidge Energy, Inc.:

    

7.50%, 3/15/21 (b)

     630        637,875   

7.50%, 3/15/21

     230        232,875   

8.13%, 10/15/22 (b)

     235        245,575   

7.50%, 2/15/23 (b)

     515        517,575   

SESI LLC:

    

6.38%, 5/01/19

     300        318,000   

7.13%, 12/15/21

     215        239,188   

SM Energy Co.:

    

6.63%, 2/15/19

     120        125,400   

6.50%, 11/15/21

     240        250,800   

6.50%, 1/01/23 (b)

     115        119,888   

Vanguard Natural Resources, 7.88%, 4/01/20

     250        250,000   
    

 

 

 
               28,163,121   

Paper & Forest Products — 1.3%

    

Ainsworth Lumber Co. Ltd., 11.00%, 7/29/15 (b)(c)

     372        338,190   

Boise Paper Holdings LLC:

    

9.00%, 11/01/17

     55        60,913   

8.00%, 4/01/20

     105        116,025   

Clearwater Paper Corp.:

    

10.63%, 6/15/16

     370        413,475   

7.13%, 11/01/18

     535        584,487   

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

     315        326,025   

NewPage Corp., 11.38%, 12/31/14 (a)(h)

     1,935        1,310,962   

Sappi Papier Holding GmbH (b):

    

8.38%, 6/15/19

     200        210,500   

6.63%, 4/15/21

     120        111,000   
    

 

 

 
               3,471,577   

Pharmaceuticals — 1.0%

    

Capsugel Finance Co. SCA:

    

9.88%, 8/01/19 (b)

   EUR 200        281,118   

9.88%, 8/01/19

     100        140,559   

Pharmaceutical Product Development, Inc., 9.50%, 12/01/19 (b)

   USD 160        178,400   

Spectrum Brands, Inc., 6.75%, 3/15/20 (b)

     240        252,000   

Valeant Pharmaceuticals International (b):

    

6.50%, 7/15/16

     1,140        1,202,700   

6.75%, 8/15/21

     520        527,800   
    

 

 

 
               2,582,577   

Professional Services — 0.4%

    

FTI Consulting, Inc., 6.75%, 10/01/20

     850        907,375   
Corporate Bonds   

Par 

(000)

    Value  
    

Real Estate Investment Trusts (REITs) — 0.7%

    

Felcor Lodging LP, 6.75%, 6/01/19

   USD 1,110      $ 1,190,475   

The Rouse Co. LP, 6.75%, 11/09/15

     480        505,800   
    

 

 

 
               1,696,275   

Real Estate Management & Development — 2.3%

    

CBRE Services, Inc., 6.63%, 10/15/20

     310        338,675   

Crescent Resources LLC/Crescent Ventures, Inc., 10.25%, 8/15/17 (b)

     650        666,250   

Forest City Enterprises, Inc., 7.63%, 6/01/15

     392        389,795   

Realogy Corp.:

    

11.50%, 4/15/17

     360        382,500   

12.00%, 4/15/17

     90        94,275   

7.88%, 2/15/19 (b)

     1,895        1,951,850   

7.63%, 1/15/20 (b)

     465        506,850   

9.00%, 1/15/20 (b)

     305        329,400   

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

     1,145        1,273,812   
    

 

 

 
               5,933,407   

Road & Rail — 1.3%

    

Florida East Coast Railway Corp., 8.13%, 2/01/17

     410        430,500   

The Hertz Corp.:

    

7.50%, 10/15/18

     505        544,769   

6.75%, 4/15/19 (b)

     265        278,250   

7.38%, 1/15/21

     380        413,250   

Hertz Holdings Netherlands BV:

    

8.50%, 7/31/15

   EUR 172        234,730   

8.50%, 7/31/15 (b)

     1,031        1,407,019   
    

 

 

 
               3,308,518   

Semiconductors & Semiconductor Equipment — 0.2%

  

 

Spansion LLC, 7.88%, 11/15/17

   USD 540        526,500   

Software — 1.3%

    

Audatex North America, Inc., 6.75%, 6/15/18 (b)

     480        514,800   

Infor US, Inc., 9.38%, 4/01/19 (b)

     1,520        1,645,400   

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

     805        823,112   

Sophia LP, 9.75%, 1/15/19 (b)

     408        438,600   
    

 

 

 
               3,421,912   

Specialty Retail — 2.8%

    

Asbury Automotive Group, Inc., 8.38%, 11/15/20

     335        370,175   

Claire’s Stores, Inc., 9.00%, 3/15/19 (b)

     450        466,875   

House of Fraser Funding Plc, 8.88%, 8/15/18

   GBP 480        677,377   

Limited Brands, Inc.:

    

8.50%, 6/15/19

   USD 745        894,000   

5.63%, 2/15/22

     150        157,875   

Party City Holdings, Inc., 8.88%, 8/01/20 (b)

     729        770,917   

Penske Automotive Group, Inc.,
5.75%, 10/01/22 (b)

     495        504,900   

Phones4u Finance Plc, 9.50%, 4/01/18 (b)

   GBP 370        566,942   

QVC, Inc. (b):

    

7.13%, 4/15/17

   USD 210        222,122   

7.50%, 10/01/19

     565        626,028   

7.38%, 10/15/20

     270        300,853   

5.13%, 7/02/22

     392        410,872   

Sally Holdings LLC:

    

6.88%, 11/15/19

     500        558,750   

5.75%, 6/01/22

     400        430,500   

Sonic Automotive, Inc., 9.00%, 3/15/18

     345        376,913   
    

 

 

 
               7,335,099   

Textiles, Apparel & Luxury Goods — 0.2%

    

Levi Strauss & Co., 6.88%, 5/01/22

     400        415,000   

Trading Companies & Distributors — 0.6%

    

Ashtead Capital, Inc., 6.50%, 7/15/22 (b)

     455        473,200   

Doric Nimrod Air Finance Alpha Ltd. (b):

    

Series 2012-1, Class A, 5.13%, 11/30/24

     550        558,250   

Series 2012-1, Class B, 6.50%, 5/30/21

     530        536,265   
    

 

 

 
               1,567,715   
 

 

See Notes to Consolidated Financial Statements.

 

                
20    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund, Inc. (COY)

(Percentages shown are based on Net Assets)

 

Corporate Bonds   

Par 

(000)

    Value  
    

Transportation Infrastructure — 0.2%

    

Aguila 3 SA, 7.88%, 1/31/18 (b)

   USD 398      $ 419,393   

Wireless Telecommunication Services — 4.2%

    

Cricket Communications, Inc.:

    

7.75%, 5/15/16

     226        238,430   

7.75%, 10/15/20

     205        198,850   

Digicel Group Ltd. (b):

    

9.13%, 1/15/15

     1,711        1,727,738   

8.25%, 9/01/17

     1,135        1,203,100   

10.50%, 4/15/18

     900        972,000   

Matterhorn Mobile Holdings SA, 8.25%, 2/15/20

   EUR 190        258,698   

MetroPCS Wireless, Inc., 6.63%, 11/15/20

   USD 710        734,850   

NII Capital Corp., 7.63%, 4/01/21

     324        250,290   

SBA Telecommunications, Inc., 5.75%, 7/15/20 (b)

     262        273,790   

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

     1,876        1,697,780   

Sprint Nextel Corp. (b):

    

9.00%, 11/15/18

     1,590        1,876,200   

7.00%, 3/01/20

     1,220        1,335,900   
    

 

 

 
               10,767,626   
Total Corporate Bonds – 105.7%              273,331,003   

 

Floating Rate Loan Interests (f)               

Airlines — 0.2%

    

Delta Air Lines, Inc., Credit Term Loan B,
5.50%, 4/20/17

     395        397,607   

Auto Components — 0.5%

    

Federal-Mogul Corp., Term Loan B,
2.17%—2.18%, 12/29/14

     895        854,406   

Schaeffler AG, Term Loan C2, 6.00%, 1/27/17

     360        361,051   
    

 

 

 
               1,215,457   

Building Products — 0.1%

    

Goodman Global, Inc., Term Loan (Second Lien), 9.00%, 10/30/17

     318        322,360   

Capital Markets — 0.7%

    

American Capital Holdings, Term Loan,
5.50%, 7/19/16

     743        745,786   

Nuveen Investments, Inc.:

    

Incremental Term Loan, 7.25%, 5/13/17

     600        602,700   

Second Lien Term Loan, 8.25%, 2/28/19

     380        382,375   
    

 

 

 
               1,730,861   

Chemicals — 0.6%

    

Evergreen Acqco 1 LP, Term Loan B,
6.25%, 7/09/19

     155        156,454   

INEOS US Finance LLC, 6 Year Term Loan,
6.50%, 5/04/18

     1,047        1,048,904   

PQ Corp., Term Loan B, 3.98%, 7/30/14

     313        307,178   
    

 

 

 
               1,512,536   

Communications Equipment — 0.8%

    

Avaya, Inc., Term Loan B1, 3.18%, 10/24/14

     229        219,639   

Zayo Group, LLC, Term Loan B, 7.13%, 7/02/19

     1,905        1,932,985   
    

 

 

 
               2,152,624   

Construction & Engineering — 0.7%

    

Safway Services LLC, Mezzanine Loan, 15.63%, 12/16/17

     1,750        1,750,000   

Construction Materials — 0.4%

    

HD Supply, Inc., Senior Debt B, 7.25%, 10/12/17

     1,045        1,067,645   

Floating Rate Loan Interests (f)

  

Par 

(000)

    Value  
    

Consumer Finance — 1.5%

    

Springleaf Financial Funding Co., Term Loan, 5.50%, 5/10/17

   USD 3,940      $ 3,805,055   

Diversified Consumer Services — 0.1%

    

Laureate Education, Inc., Extended Term Loan, 5.25%, 6/18/18

     134        131,018   

ServiceMaster Co.:

    

Delayed Draw Term Loan, 2.74%, 7/24/14

     8        7,539   

Term Loan, 2.75%—2.97%, 7/24/14

     76        75,702   
    

 

 

 
               214,259   

Diversified Financial Services — 0.5%

    

Residential Capital LLC:

    

DIP Term Loan A1, 5.00%, 11/18/13

     1,150        1,152,875   

DIP Term Loan A2, 6.75%, 11/18/13

     170        171,984   
    

 

 

 
               1,324,859   

Diversified Telecommunication Services — 0.5%

    

Level 3 Financing, Inc.:

    

2016 Term Loan B, 4.75%, 2/01/16

     645        646,290   

2019 Term Loan B, 5.25%, 8/01/19

     530        530,774   
    

 

 

 
               1,177,064   

Electronic Equipment, Instruments & Components — 0.1%

  

CDW LLC, Extended Term Loan, 4.00%, 7/14/17

     251        247,978   

Energy Equipment & Services — 1.0%

    

Dynegy Midwest Generation LLC, Coal Co. Term Loan, 9.25%, 8/04/16

     1,325        1,374,396   

Dynegy Power LLC, Gas Co. Term Loan,
9.25%, 8/04/16

     963        1,007,771   

Tervita Corp., Incremental Term Loan, 6.50%, 10/17/14

     249        248,544   
    

 

 

 
               2,630,711   

Food & Staples Retailing — 0.0%

    

US Foods, Inc.(FKA U.S. Foodservice, Inc.), Extended Term Loan B, 5.75%, 3/31/17

     69        66,935   

Food Products — 0.1%

    

Advance Pierre Foods, Term Loan (Second Lien), 11.75%, 9/29/17

     200        201,200   

Health Care Equipment & Supplies — 0.3%

    

Bausch & Lomb, Inc., Term Loan B,
5.25%, 5/17/19

     440        441,465   

LHP Hospital Group, Inc., Term Loan,
9.00%, 7/03/18

     260        261,950   
    

 

 

 
               703,415   

Health Care Providers & Services — 0.5%

    

Harden Healthcare LLC:

    

Add on Term Loan A, 7.75%, 3/02/15

     369        357,628   

Term Loan A, 8.50%, 3/02/15

     323        316,806   

inVentiv Health, Inc., Combined Term Loan, 6.50%, 8/04/16

     698        649,917   
    

 

 

 
               1,324,351   

Hotels, Restaurants & Leisure — 1.2%

    

Caesars Entertainment Operating Co., Inc.:

    

Extended Term Loan B6, 5.49%, 1/26/18

     185        162,626   

Incremental Term Loan B4, 9.50%, 10/31/16

     448        456,533   

Term Loan B1, 3.24%, 1/28/15

     371        352,042   

Term Loan B2, 3.24%, 1/28/15

     409        388,020   

Term Loan B3, 3.24%—3.46%, 1/28/15

     895        848,628   

OSI Restaurant Partners LLC:

    

Revolver, 2.49%—4.50%, 6/14/13

     9        8,463   

Term Loan B, 2.56%, 6/14/14

     86        85,297   

Sabre, Inc., Non Extended Initial Term Loan,
2.23%, 9/30/14

     57        56,665   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    21


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund, Inc. (COY)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (f)

  

Par 

(000)

    Value  
    

Hotels, Restaurants & Leisure (concluded)

    

Station Casinos, Inc., Term Loan B1, 3.23%, 6/17/16

     USD 785      $ 746,113   

Travelport LLC:

    

Extended Tranche A Term Loan,
6.44%, 9/28/12

     177        53,166   

Extended Tranche B Term Loan,
13.94%, 12/01/16

     571        45,708   
    

 

 

 
               3,203,261   

Industrial Conglomerates — 0.1%

    

Sequa Corp.:

    

Incremental Term Loan, 6.25%, 12/03/14

     164        163,986   

Term Loan, 3.69%—3.72%, 12/03/14

     140        139,038   
    

 

 

 
               303,024   

IT Services — 0.3%

    

Ceridian Corp., Extended Term Loan,
5.99%, 5/09/17

     62        62,323   

First Data Corp., 2018 Term Loan B,
4.24%, 3/23/18

     720        679,802   
    

 

 

 
               742,125   

Leisure Equipment & Products — 0.2%

    

Eastman Kodak Co., DIP Term Loan B,
8.50%, 7/19/13

     600        594,453   

Machinery — 0.5%

    

Navistar International Corp., Term Loan B,
7.00%, 8/17/17

     620        623,175   

Rexnord Corp., Term Loan B, 5.00%, 4/02/18

     542        544,406   
    

 

 

 
               1,167,581   

Media — 4.7%

    

Affinion Group, Inc., Term Loan B, 5.00%, 7/15/15

     40        33,616   

Cengage Learning Acquisitions, Inc.:

    

Non-Extended Term Loan, 2.49%, 7/03/14

     293        270,168   

Tranche 1 Incremental, Term Loan,
7.50%, 7/03/14

     1,432        1,386,000   

Cequel Communications LLC, Term Loan B, 4.00%, 2/14/19

     399        398,170   

Clear Channel Communications, Inc.:

    

Term Loan B, 3.88%, 1/28/16

     1,774        1,373,868   

Term Loan C, 3.88%, 1/28/16

     348        264,946   

EMI Music Publishing Ltd., Term Loan B,
5.50%, 6/29/18

     400        402,700   

Intelsat Jackson Holdings SA, Tranche B Term Loan, 5.25%, 4/02/18

     5,706        5,724,099   

Interactive Data Corp., Term Loan B,
4.50%, 2/12/18

     379        379,596   

Newsday LLC, Fixed Rate Term Loan,
10.50%, 8/01/13

     1,375        1,382,452   

Thomson Reuters (Healthcare), Inc., Term Loan B, 6.75%, 6/06/19

     345        347,443   

Univision Communications, Inc., Extended Term Loan, 4.48%, 3/31/17

     279        269,452   
    

 

 

 
               12,232,510   

Metals & Mining — 0.2%

    

Constellium Holding Co. BV, Term Loan B, 9.25%, 5/25/18

     390        382,200   

Multiline Retail — 0.5%

    

HEMA Holding BV, Mezzanine, 8.64%, 7/05/17

   EUR 1,154        1,205,001   

Oil, Gas & Consumable Fuels — 0.8%

    

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

   USD 1,090        1,092,343   

Obsidian Natural Gas Trust, Term Loan,
7.00%, 11/02/15

     926        926,279   
    

 

 

 
               2,018,622   

Floating Rate Loan Interests (f)

  

Par 

(000)

    Value  
    

Paper & Forest Products — 0.4%

    

Ainsworth Lumber Co. Ltd., Term Loan, 5.25%, 6/26/14 (g)

   USD 360      $ 348,300   

Verso Paper Finance Holdings LLC, Term Loan, 6.49%—7.24%, 2/01/13

     1,420        710,209   
    

 

 

 
               1,058,509   

Pharmaceuticals — 0.1%

    

Pharmaceutical Product Development, Inc., Term Loan B, 6.25%, 12/05/18

     288        291,496   

Real Estate Investment Trusts (REITs) — 0.5%

    

iStar Financial, Inc.:

    

Term Loan A1, 5.00%, 6/28/13

     1,388        1,389,104   

Term Loan A2, 7.00%, 6/30/14

     5        5,005   
    

 

 

 
               1,394,109   

Real Estate Management & Development — 0.4%

  

 

Realogy Corp.:

    

Extended Letter of Credit Loan,
4.50%, 10/10/16

     104        99,974   

Extended Term Loan, 4.49%, 10/10/16

     689        664,920   

Stockbridge SBE Holdings LLC, Term Loan B, 13.00%, 5/02/17

     170        169,150   
    

 

 

 
               934,044   

Semiconductors & Semiconductor Equipment — 0.0%

  

 

NXP BV, Term Loan A-2, 5.50%, 3/03/17

     65        65,443   

Software — 0.4%

    

Infor US, Inc. (FKA Lawson Software, Inc.), Term Loan B, 6.25%, 4/05/18

     1,127        1,138,762   

Specialty Retail — 0.1%

    

Claire’s Stores, Inc., Term Loan B, 2.98%—3.20%, 5/29/14

     356        349,553   

Textiles, Apparel & Luxury Goods — 0.4%

    

Ascend Performance Materials LLC, Term Loan B, 6.75%, 4/10/18

     1,047        1,037,771   

Wireless Telecommunication Services — 0.0%

    

Crown Castle International Corp., Term Loan B, 4.00%, 1/31/19

     54        54,320   
Total Floating Rate Loan Interests — 19.4%              50,017,701   

 

Other Interests (i)    Beneficial
Interest
(000)
        

Chemicals — 0.0%

    

Wellman Holdings, Inc., Litigation Trust Certificate

     2,650        26   

Media — 0.0%

    

Adelphia Escrow (a)

     700        7   

Adelphia Recovery Trust (a)

     878        88   
    

 

 

 
               95   
Total Other Interests — 0.0%              121   

 

Preferred Securities               
Capital Trusts — 0.2%   

Par 

(000)

        

Insurance — 0.2%

    

Genworth Financial, Inc., 6.15%, 11/15/66 (f)

     790        474,000   
 

 

See Notes to Consolidated Financial Statements.

 

                
22    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments
(continued)
  

BlackRock Corporate High Yield Fund, Inc. (COY)

(Percentages shown are based on Net Assets)

 

Preferred Stocks    Shares     Value  
    

Auto Components — 0.4%

    

Dana Holding Corp., 4.00% (b)(e)

     7,570      $ 884,744   

Diversified Financial Services — 1.4%

    

Ally Financial, Inc., 7.00% (b)

     4,023        3,663,319   
Total Preferred Stocks – 1.8%              4,548,063   

 

Trust Preferreds               

Diversified Financial Services — 0.8%

    

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

     70,660        1,746,206   

RBS Capital Funding Trust VII, 6.08% (a)(f)(h)(j)

     26,500        454,210   
Total Trust Preferreds — 0.8%              2,200,416   
Total Preferred Securities — 2.8%              7,222,479   

 

Warrants (k)               

Health Care Providers & Services — 0.0%

    

HealthSouth Corp. (Expires 1/16/14)

     29,930          

Media — 0.0%

    

New Vision Holdings LLC (Expires 9/30/14)

     15          

Software — 0.0%

    

Bankruptcy Management Solutions, Inc. (Expires 9/28/17)

     312          

HMH Holdings/EduMedia (Issued/Exercisable 3/09/10, 19 Shares for 1 Warrant, Expires 6/22/19, Strike Price $42.27)

     1,070          
Total Warrants – 0.0%                
Total Long-Term Investments (Cost — $345,014,624) — 136.0%              351,637,724   

 

Options Purchased    Contracts         

Over-the-Counter Call Options — 0.0%

    

Marsico Parent Superholdco LLC, Strike Price USD 942.86, Expires 12/14/19, Broker Goldman Sachs Group, Inc.

     17          
Total Options Purchased
(Cost — $16,622) — 0.0%
               
Total Investments (Cost — $345,031,246) — 136.0%        351,637,724   
Liabilities in Excess of Other Assets — (36.0)%        (93,146,505
    

 

 

 
Net Assets — 100.0%      $ 258,491,219   
    

 

 

 
                  

 

(a)   Non-income producing security.

 

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

 

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

 

(d)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

 

(e)   Convertible security.

 

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

 

(g)   When-issued security. Unsettled when-issued transaction was as follows:

 

Counterparty    Value      Unrealized
Appreciation
 

Goldman Sachs Group, Inc.

   $ 1,851,863       $ 15,413   

 

(h)   Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.

 

(i)   Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.

 

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

 

(k)   Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

 

Ÿ  

Investments in issuers considered to be an affiliate of the Fund during the six months ended August 31, 2012, for purposes of Section 2(a)(3) of the 1940 Act, as amended, were as follows:

 

Affiliate    Shares
Held at
February 29,
2012
     Net
Activity
    Shares
Held at
August 31,
2012
     Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

     2,264,805         (2,264,805           $ 1,117   

 

Ÿ  

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

 

Contracts   Issue   Exchange   Expiration   Notional
Value
    Unrealized
Depreciation
 
108   S&P 500
Index E-Mini
  Chicago
Mercantile
  September
2012
  $ 7,587,540      $ (522,208

 

Ÿ  

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

 

Currency
Purchased
    Currency Sold     Counter
party
  Settle
ment
Date
    Unrealized
Appreci
ation
(Depreci
ation)
 
GBP     103,000        USD        159,655      Credit
Suisse
Group AG
    10/17/12      $ 3,869   
GBP     148,000        USD        232,085      UBS AG     10/17/12        2,883   
USD     68,178        AUD        67,500      Citigroup, Inc.     10/17/12        (1,288
USD     119,010        AUD        117,000      UBS AG     10/17/12        (1,396
USD     2,596,553        CAD        2,637,000      UBS AG     10/17/12        (76,153
USD     145,793        GBP        93,000      Deutsche
Bank AG
    10/17/12        (1,855
USD     3,797,156        GBP        2,446,000      UBS AG     10/17/12        (86,155
USD     92,521        GBP        59,000      UBS AG     10/17/12        (1,149
USD     86,393        GBP        55,000      UBS AG     10/17/12        (926
EUR     50,000        USD        61,834      Citigroup, Inc.     10/22/12        1,088   
EUR     181,000        USD        221,660      UBS AG     10/22/12        6,120   
EUR     699,000        USD        867,358      UBS AG     10/22/12        12,297   
USD     18,786,611        EUR        15,323,500      Citigroup, Inc.     10/22/12        (497,226
USD     222,494        EUR        181,000      Citigroup, Inc.     10/22/12        (5,285
USD     385,156        EUR        310,000      Citigroup, Inc.     10/22/12        (4,963
USD     126,569        EUR        102,000      Royal Bank
of Scotland
Group Plc
    10/22/12        (1,792
USD     512,701        EUR        415,000      UBS AG     10/22/12        (9,556
USD     260,389        EUR        211,000      UBS AG     10/22/12        (5,144
USD     224,679        EUR        182,000      UBS AG     10/22/12        (4,358
USD     126,612        EUR        103,000      UBS AG     10/22/12        (3,009
Total             $ (673,998
           

 

 

 
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    23


Table of Contents
Consolidated Schedule of Investments (continued)    BlackRock Corporate High Yield Fund, Inc. (COY)

 

 

Ÿ  

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

 

Issuer   Pay
Fixed
Rate
  Counter
party
  Expiration
Date
  Notional
Amount
(000)
    Unrealized
Appreciation
(Depreciation)
 
MGM Resorts International   5.00%   Deutsche
Bank AG
  6/20/15   $ 95      $ (7,042
MGM Resorts International   5.00%   Deutsche Bank AG   6/20/15   $ 80        (6,570
MGM Resorts International   5.00%   Deutsche Bank AG   6/20/15   $ 155        (11,042
MGM Resorts International   5.00%   Deutsche Bank AG   6/20/15   $ 85        (4,339
MGM Resorts International   5.00%   Deutsche Bank AG   6/20/15   $ 80        (4,585
Republic of Hungary   1.00%   Deutsche Bank AG   12/20/15   $ 280        5,093   
Israel (State of)   1.00%   Deutsche Bank AG   3/20/17   $ 210        (4,707
Israel Government
Bond
  1.00%   Deutsche Bank AG   3/20/17   $ 625        (14,401

Total

  

  $ (47,593
         

 

 

 

 

Ÿ  

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

 

Issuer   Receive
Fixed
Rate
    Counter
party
  Expira
tion
Date
    Issuer
Credit
Rating1
    Notional
Amount
(000)2
    Unrea
lized
Appreci
ation
(Depreci
ation)
 

Air Lease Corp.

    5.00   Goldman
Sachs
Group, Inc.
    2/14/13        NR      $ 500      $ 8,290   

CIT Group, Inc.

    5.00   Deutsche
Bank AG
    9/20/15        BB-      $ 3,100        403,195   

ARAMARK Corp.

    5.00   Goldman Sachs
Group, Inc.
    3/20/16        B      $ 500        41,882   

ARAMARK Corp.

    5.00   Goldman Sachs
Group, Inc.
    6/20/16        B      $ 300        25,338   

ARAMARK Corp.

    5.00   Goldman Sachs
Group, Inc.
    6/20/16        B      $ 300        27,000   

ARAMARK Corp.

    5.00   Credit Suisse
Group AG
    9/20/16        B      $ 125        14,933   

ARAMARK Corp.

    5.00   Goldman Sachs
Group, Inc.
    9/20/16        B      $ 350        30,667   

ARAMARK Corp.

    5.00   Goldman Sachs
Group, Inc.
    9/20/16        B      $ 125        14,522   

ARAMARK Corp.

    5.00   Deutsche
Bank AG
    3/20/17        B      $ 185        12,212   
Crown Castle International Corp.     7.25   Deutsche
Bank AG
    3/20/17        B–      $ 430        6,129   
Ford Motor Co.     5.00   Deutsche
Bank AG
    3/20/17        BB+      $ 1,300        57,262   
Hertz Corp.     5.00   Citigroup, Inc.     6/20/17        B      $ 165        (5,451
Goodyear Tire & Rubber Co.     5.00   Deutsche
Bank AG
    6/20/17        B+      $ 290        13,513   
Goodyear Tire & Rubber Co.     5.00   Goldman Sachs
Group, Inc.
    6/20/17        B+      $ 300        10,572   
CCO
Holdings
LLC
    8.00   Deutsche
Bank AG
    9/20/17        BB–      $ 1,500        122,198   
Level 3 Communic
ations, Inc.
    5.00   Goldman Sachs
Group, Inc.
    6/20/19        B–      $ 900        24,602   

Total

  

  $ 806,864   
           

 

 

 

 

1   

Using S&P’s rating.

 

2   

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

 

Ÿ  

Credit default swaps on traded indexes — buy protection outstanding as of August 31, 2012 were as follows:

 

Index   Pay
Fixed
Rate
    Counter
party
  Expiration
Date
    Notional
Amount
(000)
    Unrealized
Depreciation
 

Dow Jones CDX North America High Yield
Series 18

    5.00   Credit
Suisse
Group AG
    6/20/17      $ 1,683      $ (5,458

 

Ÿ  

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

 

Ÿ  

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

 

Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities

 

Ÿ  

Level 2 — other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

Ÿ  

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

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

 

 

See Notes to Consolidated Financial Statements.

 

                
24    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments
(continued)
   BlackRock Corporate High Yield Fund, Inc. (COY)

 

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

 

     Level 1     Level 2     Level 3     Total  

Assets:

       
Investments:        

Long-Term Investments:

       

Common Stocks

  $ 16,544,041      $ 668,526      $ 3,853,853      $ 21,066,420   

Corporate Bonds

           269,237,177        4,093,826        273,331,003   

Floating Rate Loan Interests

           42,446,578        7,571,123        50,017,701   

Other Interests

    88               33        121   

Preferred Securities

    2,200,416        5,022,063               7,222,479   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 18,744,545      $ 317,374,344      $ 15,518,835      $ 351,637,724   
 

 

 

   

 

 

   

 

 

   

 

 

 
       
     Level 1     Level 2     Level 3     Total  
Derivative Financial Instruments1        

Assets:

       

Credit contracts

         $ 277,596      $ 539,812      $ 817,408   

Foreign currency exchange contracts

           26,257               26,257   

Liabilities:

       

Credit contracts

           (63,595            (63,595

Equity contracts

  $ (522,208                   (522,208

Foreign currency exchange contracts

           (700,255            (700,255
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ (522,208   $ (459,997   $ 539,812      $ (442,393
 

 

 

   

 

 

   

 

 

   

 

 

 

 

  1   

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

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

 

     Level 1     Level 2     Level 3     Total  

Assets:

       

Cash

  $ 1,506,487                    $ 1,506,487   

Cash pledged as collateral for financial futures contracts

    432,000                      432,000   

Foreign currency at value

    260,020                      260,020   

Liabilities:

       

Cash received as collateral for swaps

         $ (600,000            (600,000

Loan payable

           (98,000,000            (98,000,000
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 2,198,507      $ (98,600,000          $ (96,401,493
 

 

 

   

 

 

   

 

 

   

 

 

 

As of February 29, 2012, the Fund used observable inputs in determining the value of certain equity securities. During the year, the Fund began valuing these securities using unadjusted price quotations from an exchange. As a result, investments with a beginning of period value of $6,894,626 transferred from Level 2 to Level 1 in the disclosure hierarchy.

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    25


Table of Contents
Consolidated Schedule of Investments (continued)    BlackRock Corporate High Yield Fund, Inc. (COY)

 

The following table summarizes the valuation techniques used and unobservable inputs developed by the BlackRock Global Valuation Methodologies Committee (“Global Valuation Committee”) to determine the fair value of certain of the Fund’s Level 3 investments as of August 31, 2012:

 

     Value      Valuation Techniques    Unobservable Inputs1   

Range of
Unobservable

Inputs

  

Weighted

Average of
Unobservable

Inputs2

Assets:

             

Common Stocks

  $ 3,853,848       Market Comparable Companies    EBITDA Multiple    5.9x    5.9x
        Forward EBITDA Multiple    4.6x    4.6x
     Cost    N/A3      

Corporate Bonds

    3,847,720       Market Comparable Companies    Yield    7.00%—9.67%    8.76%
        EBITDA Multiple    6.0x    6.0x
     Cost    N/A3      

Floating Rate Loan Interests

    3,134,643       Market Comparable Companies    Illiquidity Discount    50%    50%
        Yield    9.65%    9.65%
     Cost    N/A3      
 

 

 

Total4

  $ 10,836,211               
 

 

 

             

 

1   

A change to the unobservable input may result in a significant change to the value of the investment as follows:

 

Unobservable Input   

Impact to

Value if Input Increases

   Impact to
Value if Input Decreases
EBITDA Multiple    Increase    Decrease
Forward EBITDA Multiple    Increase    Decrease
Illiquidity Discount    Decrease    Increase
Yield    Decrease    Increase

 

2  

Unobservable inputs are weighted based on the fair value of the investments included in the range.

 

3   

The Fund fair values certain of its Level 3 investments using prior transaction prices (acquisition cost), although the transaction may not have occurred during the current reporting period. In such cases, these investments are generally privately held investments. There may not be a secondary market, and/or there are a limited number of investors. The determination to fair value such investments at cost is based upon factors consistent with the principles of fair value measurement that are reasonably available to the Global Valuation Committee, or its delegate. Valuations are reviewed utilizing available market information to determine if the carrying value should be adjusted. Such market data may include, but is not limited to, observations of the trading multiples of public companies considered comparable to the private companies being valued, financial or operational information released by the company, and/or news or corporate events that affect the investment. Valuations may be adjusted to account for company-specific issues, the lack of liquidity inherent in a nonpublic investment and the fact that comparable public companies are not identical to the investments being fair valued by the Fund.

 

4   

Does not include Level 3 investments with values derived utilizing prices from recent prior transactions or third party pricing information without adjustment for which such inputs are unobservable. See above valuation input table for values of such Level 3 investments. A significant change in third party pricing information could result in a significantly lower or higher value in such Level 3 investments.

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

 

     Common
Stocks
    Corporate
Bonds
    Floating Rate
Loan Interests
    Other
Interests
    Total  
Assets:          

Opening balance, as of February 29, 2012

  $ 4,138,509      $ 4,181,040      $ 5,454,878      $ 34      $ 13,774,461   

Transfers into Level 35

                  2,003,700               2,003,700   

Transfers out of Level 36

    (35,343            (201,394            (236,737

Accrued discounts/premiums

           1,564        62,000               63,564   

Net realized gain (loss)

    (1,186,175            (328,514            (1,514,689

Net change in unrealized appreciation/depreciation7

    790,896        (53,051     290,432        (1     1,028,276   

Purchases

    145,977        53,465        1,615,477               1,814,919   

Sales

    (11     (89,192     (1,325,456            (1,414,659
 

 

 

 
Closing Balance, as of August 31, 2012   $ 3,853,853      $ 4,093,826      $ 7,571,123      $ 33      $ 15,518,835   
 

 

 

 

 

5   

As of February 29, 2012, the Fund used observable inputs in determining the value of certain investments. As of August 31, 2012, the Fund used significant unobservable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $2,003,700 transferred from Level 2 to Level 3 in the disclosure hierarchy.

 

6   

As of February 29, 2012, the Fund used significant unobservable inputs in determining the value of certain investments. As of August 31, 2012, the Fund used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $236,737 transferred from Level 3 to Level 2 in the disclosure hierarchy.

 

7   

Included in the related net change in unrealized appreciation/depreciation in the Consolidated Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of August 31, 2012 was $(440,350).

 

See Notes to Consolidated Financial Statements.      
                
26    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (concluded)    BlackRock Corporate High Yield Fund, Inc. (COY)

 

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

 

     Credit
Contracts
 
Assets/Liabilities:  

Opening balance, as of February 29, 2012

  $ 216,962   

Transfers into Level 31

      

Transfers out of Level 31

      

Accrued discounts/premiums

      

Net realized gain (loss)

      

Net change in unrealized appreciation/depreciation2

    322,850   

Purchases

      

Issuances3

      

Sales

      

Settlements4

      
 

 

 

 

Closing Balance, as of August 31, 2012

  $ 539,812   
 

 

 

 

 

1   

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

 

2   

Included in the related net change in unrealized appreciation/depreciation in the Consolidated Statements of Operations. The change in unrealized appreciation/depreciation on derivative financial instruments still held as of August 31, 2012 was $322,850.

 

3   

Issuances represent upfront cash received on certain derivative financial instruments.

 

4   

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

 

 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    27


Table of Contents
Consolidated Schedule of Investments    BlackRock Corporate High Yield Fund III, Inc. (CYE)
August 31, 2012 (Unaudited)    (Percentages shown are based on Net Assets)

 

Common Stocks   

Shares

    Value  
    

Auto Components — 2.0%

    

Dana Holding Corp.

     36,200      $ 494,492   

Delphi Automotive Plc (a)

     171,704        5,200,902   
    

 

 

 
               5,695,394   

Biotechnology — 0.0%

    

Ironwood Pharmaceuticals, Inc. (a)

     7,130        89,339   

Capital Markets — 0.4%

    

American Capital Ltd. (a)

     53,273        585,470   

E*Trade Financial Corp. (a)

     74,600        639,322   
    

 

 

 
               1,224,792   

Chemicals — 0.2%

    

ADA-ES, Inc. (a)

     1,820        42,679   

CF Industries Holdings, Inc.

     1,000        207,010   

Huntsman Corp.

     14,000        201,320   
    

 

 

 
               451,009   

Commercial Banks — 0.2%

    

CIT Group, Inc. (a)

     17,270        652,115   

Communications Equipment — 0.3%

    

Loral Space & Communications Ltd.

     12,778        938,161   

Diversified Financial Services — 0.5%

    

Kcad Holdings I Ltd.

     220,203,372        1,460,169   

Diversified Telecommunication Services — 0.2%

  

Level 3 Communications, Inc. (a)

     22,280        480,134   

Electrical Equipment — 0.0%

    

Medis Technologies Ltd.

     70,784        212   

Energy Equipment & Services — 0.9%

    

Laricina Energy Ltd. (a)

     35,294        1,521,679   

Osum Oil Sands Corp. (a)

     82,000        1,039,817   
    

 

 

 
               2,561,496   

Hotels, Restaurants & Leisure — 0.0%

    

Travelport Worldwide Ltd.

     76,940        10,002   

Media — 2.2%

    

Belo Corp., Class A

     23,782        173,609   

Charter Communications, Inc. (a)

     70,305        5,469,729   

Clear Channel Outdoor Holdings, Inc., Class A (a)

     9,964        52,311   

Cumulus Media, Inc., Class A (a)

     93,867        260,011   

DISH Network Corp., Class A

     5,900        188,741   
    

 

 

 
               6,144,401   

Metals & Mining — 0.1%

    

African Minerals Ltd. (a)

     47,050        188,299   

Oil, Gas & Consumable Fuels — 0.1%

    

African Petroleum Corp. Ltd. (a)

     196,300        251,481   

Paper & Forest Products — 0.3%

    

Ainsworth Lumber Co. Ltd. (a)(b)

     140,415        307,681   

Ainsworth Lumber Co. Ltd. (a)

     122,117        267,586   

Western Forest Products, Inc. (a)

     158,023        171,529   

Western Forest Products, Inc. (a)(b)

     45,762        49,673   
    

 

 

 
               796,469   

Semiconductors & Semiconductor Equipment — 0.3%

  

NXP Semiconductors NV (a)

     5,400        125,928   

Spansion, Inc., Class A (a)

     64,237        734,229   

SunPower Corp.

     271        1,214   
    

 

 

 
               861,371   

Software — 0.2%

    

Bankruptcy Management Solutions, Inc. (a)

     501        5   

HMH Holdings/EduMedia

     20,718        507,588   
    

 

 

 
               507,593   
Total Common Stocks — 7.9%              22,312,437   
Corporate Bonds    Par 
(000)
    Value  
    

Aerospace & Defense — 0.7%

    

Huntington Ingalls Industries, Inc.:

    

6.88%, 3/15/18

   USD 230      $ 246,100   

7.13%, 3/15/21

     330        357,225   

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

     846        900,990   

Meccanica Holdings USA, Inc.,
6.25%, 7/15/19 (b)

     435        393,608   
    

 

 

 
               1,897,923   

Air Freight & Logistics — 0.4%

    

National Air Cargo Group, Inc.:

    

Series 1 12.38%, 9/02/15

     596        606,832   

Series 2 12.38%, 8/16/15

     603        613,879   
    

 

 

 
               1,220,711   

Airlines — 1.5%

    

American Airlines Pass-Through Trust, Series 2011-2, Class A, 8.63%, 4/15/23

     1,087        1,152,151   

Continental Airlines, Inc.:

    

Series 1997-4, Class B 6.90%, 7/02/18 (c)

     278        277,703   

Series 2010-1, Class B 6.00%, 7/12/20

     444        447,265   

Delta Air Lines, Inc.:

    

Series 2002-1, Class G-1 6.72%, 7/02/24

     611        662,744   

Delta Air Lines, Inc.:

    

Series 2009-1-B 9.75%, 6/17/18

     192        207,396   

Series 2010-1, Class B 6.38%, 7/02/17

     500        500,000   

US Airways Pass Through Trust:

    

Series 2011-1, Class C 10.88%, 10/22/14

     679        695,867   

Series 2012-1, Class C 9.13%, 10/01/15

     450        459,000   
    

 

 

 
               4,402,126   

Auto Components — 2.1%

    

Dana Holding Corp., 6.75%, 2/15/21

     450        484,875   

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

     170        187,000   

Icahn Enterprises LP:

    

4.00%, 8/15/13 (b)(d)(e)

     255        255,000   

8.00%, 1/15/18

     3,035        3,232,275   

IDQ Holdings, Inc., 11.50%, 4/01/17 (b)

     380        397,575   

International Automotive Components Group SL,
9.13%, 6/01/18 (b)

     40        38,350   

Jaguar Land Rover Plc, 8.25%, 3/15/20

   GBP 482        807,254   

Titan International, Inc., 7.88%, 10/01/17

   USD 465        487,088   
    

 

 

 
               5,889,417   

Beverages — 0.2%

    

Crown European Holdings SA:

    

7.13%, 8/15/18 (b)

   EUR 251        347,279   

7.13%, 8/15/18

     188        260,113   
    

 

 

 
               607,392   

Biotechnology — 0.0%

    

QHP Royalty Sub LLC, 10.25%, 3/15/15 (b)

   USD 54        53,876   

Building Products — 0.8%

    

Building Materials Corp. of America (b):

    

7.00%, 2/15/20

     530        573,725   

6.75%, 5/01/21

     790        863,075   

Momentive Performance Materials, Inc.,
11.50%, 12/01/16

     375        228,750   

USG Corp., 9.75%, 1/15/18

     610        654,225   
    

 

 

 
               2,319,775   
 

 

See Notes to Consolidated Financial Statements.

 

                
28    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund III, Inc. (CYE)

(Percentages shown are based on Net Assets)

 

Corporate Bonds    Par 
(000)
    Value  
    

Capital Markets — 0.8%

    

E*Trade Financial Corp.:

    

12.50%, 11/30/17 (f)

   USD  1,070      $ 1,221,138   

2.25%, 8/31/19 (b)(e)(g)

     244        208,620   

Series A 2.25%, 8/31/19 (g)

     7        5,985   

KKR Group Finance Co. LLC, 6.38%, 9/29/20 (b)

     650        735,768   
    

 

 

 
               2,171,511   

Chemicals — 4.1%

    

Basell Finance Co. BV, 8.10%, 3/15/27 (b)

     420        560,700   

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

     1,785        1,972,425   

Chemtura Corp., 7.88%, 9/01/18

     310        334,025   

Hexion US Finance Corp.:

    

6.63%, 4/15/20

     245        247,450   

9.00%, 11/15/20

     310        265,050   

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

     170        194,650   

INEOS Finance Plc (b):

    

8.38%, 2/15/19

     890        936,725   

7.50%, 5/01/20

     440        448,800   

INEOS Group Holdings Plc, 8.50%, 2/15/16 (b)

     145        136,663   

Kinove German Bondco GmbH, 10.00%, 6/15/18

   EUR 342        468,883   

Kraton Polymers LLC, 6.75%, 3/01/19

   USD 125        128,125   

LyondellBasell Industries NV, 5.75%, 4/15/24

     2,820        3,193,650   

Nexeo Solutions LLC, 8.38%, 3/01/18

     185        180,838   

PolyOne Corp., 7.38%, 9/15/20

     215        234,887   

TPC Group LLC, 8.25%, 10/01/17

     335        367,662   

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

     1,900        1,919,000   
    

 

 

 
               11,589,533   

Commercial Banks — 0.9%

    

CIT Group, Inc.:

    

7.00%, 5/02/16 (b)

     378        378,713   

5.25%, 3/15/18

     550        573,375   

5.50%, 2/15/19 (b)

     530        552,525   

5.00%, 8/15/22

     580        584,394   

6.00%, 4/01/36

     550        498,206   
    

 

 

 
               2,587,213   

Commercial Services & Supplies — 2.0%

    

ARAMARK Corp., 8.50%, 2/01/15

     360        369,004   

ARAMARK Holdings Corp., 8.63%, 5/01/16 (b)(f)

     440        450,454   

Aviation Capital Group Corp., 6.75%, 4/06/21 (b)

     540        554,445   

AWAS Aviation Capital Ltd., 7.00%, 10/17/16 (b)

     108        113,788   

Brickman Group Holdings, Inc., 9.13%,
11/01/18 (b)

     25        25,250   

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

     470        465,300   

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

     528        541,860   

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

     635        694,291   

EC Finance Plc, 9.75%, 8/01/17

   EUR 352        458,795   

Mead Products LLC/ACCO Brands Corp.,
6.75%, 4/30/20 (b)

   USD 222        234,765   

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

     365        391,463   

RSC Equipment Rental, Inc., 8.25%, 2/01/21

     875        958,125   

Verisure Holding AB:

    

8.75%, 9/01/18

   EUR 184        231,435   

8.75%, 12/01/18

     100        111,315   

West Corp., 8.63%, 10/01/18

   USD 135        137,025   
    

 

 

 
               5,737,315   

Communications Equipment — 1.8%

    

Avaya, Inc., 9.75%, 11/01/15

     780        676,650   

Frontier Communications Corp., 6.25%, 1/15/13

     900        915,750   

Hughes Satellite Systems Corp., 6.50%, 6/15/19

     410        439,212   

Zayo Group LLC/Zayo Capital, Inc.:

    

8.13%, 1/01/20

     1,550        1,646,875   

10.13%, 7/01/20

     1,270        1,362,075   
    

 

 

 
               5,040,562   
Corporate Bonds    Par 
(000)
    Value  
    

Computers & Peripherals — 0.1%

    

SanDisk Corp., 1.50%, 8/15/17 (e)

   USD 220      $ 243,650   

Construction & Engineering — 0.2%

    

Boart Longyear Management Property Ltd.,
7.00%, 4/01/21 (b)

     200        207,500   

H&E Equipment Services, Inc., 7.00%, 9/01/22 (b)

     330        342,375   

URS Corp., 5.00%, 4/01/22 (b)

     75        76,049   
    

 

 

 
               625,924   

Construction Materials — 1.4%

    

HD Supply, Inc. (b):

    

8.13%, 4/15/19

     1,545        1,676,325   

11.00%, 4/15/20

     1,475        1,622,500   

Xefin Lux SCA:

    

8.00%, 6/01/18 (b)

   EUR 254        311,494   

8.00%, 6/01/18

     200        245,271   
    

 

 

 
               3,855,590   

Consumer Finance — 0.2%

    

Credit Acceptance Corp., 9.13%, 2/01/17

   USD 445        489,500   

Containers & Packaging — 1.7%

    

Ardagh Packaging Finance Plc:

    

7.38%, 10/15/17 (b)

   EUR 375        498,796   

7.38%, 10/15/17 (b)

   USD 200        214,250   

7.38%, 10/15/17

   EUR 200        266,025   

9.13%, 10/15/20 (b)

   USD 395        410,800   

9.13%, 10/15/20 (b)

     205        214,225   

9.13%, 10/15/20 (b)

     204        212,670   

Berry Plastics Corp.:

    

4.34%, 9/15/14 (d)

     300        295,500   

8.25%, 11/15/15

     115        121,037   

9.75%, 1/15/21

     420        465,150   

Beverage Packaging Holdings Luxembourg II SA,
8.00%, 12/15/16

   EUR 706        870,247   

GCL Holdings SCA, 9.38%, 4/15/18 (b)

     267        325,758   

Graphic Packaging International, Inc.,
7.88%, 10/01/18

   USD 375        418,125   

OI European Group BV, 6.88%, 3/31/17

   EUR 155        201,295   

Sealed Air Corp., 8.38%, 9/15/21 (b)

   USD 185        208,125   

Tekni-Plex, Inc., 9.75%, 6/01/19 (b)

     180        188,100   
    

 

 

 
               4,910,103   

Distributors — 0.6%

    

VWR Funding, Inc., 7.25%, 9/15/17 (b)(h)

     1,619        1,639,238   

Diversified Consumer Services — 1.5%

    

Laureate Education, Inc., 9.25%, 9/01/19 (b)

     605        605,000   

Service Corp. International, 7.00%, 6/15/17

     3,000        3,420,000   

ServiceMaster Co., 8.00%, 2/15/20

     190        202,588   
    

 

 

 
               4,227,588   

Diversified Financial Services — 4.4%

    

Aircastle Ltd., 6.75%, 4/15/17

     470        507,600   

Ally Financial, Inc.:

    

7.50%, 12/31/13

     280        299,250   

8.00%, 11/01/31

     3,650        4,316,125   

CNG Holdings, Inc., 9.38%, 5/15/20 (b)

     300        306,000   

DPL, Inc., 7.25%, 10/15/21 (b)

     1,175        1,339,500   

Gala Group Finance Plc, 8.88%, 9/01/18

   GBP 300        444,201   

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

   USD 300        332,623   

Lehman Brothers Holdings, Inc. (a)(i):

    

5.38%, 10/17/12

   EUR 150        48,111   

4.75%, 1/16/14

     760        243,762   

1.00%, 2/05/14

     1,600        520,226   

1.00%, 9/22/18

   USD 175        43,094   

1.00%, 12/31/49

     620        152,675   

Leucadia National Corp., 8.13%, 9/15/15

     825        930,187   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    29


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund III, Inc. (CYE)

(Percentages shown are based on Net Assets)

 

Corporate Bonds    Par 
(000)
    Value  
    

Diversified Financial Services (concluded)

    

Reynolds Group Issuer, Inc.:

    

7.75%, 10/15/16

   EUR 209      $ 271,424   

7.13%, 4/15/19

   USD 245        263,988   

9.75%, 4/15/19

     275        279,469   

7.88%, 8/15/19

     355        394,937   

9.88%, 8/15/19

     1,045        1,105,087   

8.25%, 2/15/21

     135        132,638   

WMG Acquisition Corp.:

    

9.50%, 6/15/16

     120        131,100   

11.50%, 10/01/18

     416        456,560   
    

 

 

 
               12,518,557   

Diversified Telecommunication Services — 2.3%

    

Broadview Networks Holdings, Inc.,
11.38%, 9/01/12 (a)(i)

     1,035        698,625   

Consolidated Communications Finance Co.,
10.88%, 6/01/20 (b)

     595        638,137   

ITC Deltacom, Inc., 10.50%, 4/01/16

     280        301,700   

Level 3 Communications, Inc., 8.88%, 6/01/19 (b)

     315        321,300   

Level 3 Financing, Inc.:

    

8.13%, 7/01/19

     1,325        1,387,937   

7.00%, 6/01/20 (b)

     574        571,130   

8.63%, 7/15/20

     845        904,150   

OTE Plc, 5.00%, 8/05/13

   EUR 112        122,099   

Telenet Finance V Luxembourg SCA:

    

6.25%, 8/15/22

     150        189,613   

6.75%, 8/15/24

     367        468,537   

Windstream Corp.:

    

8.13%, 8/01/13

   USD 460        485,300   

7.88%, 11/01/17

     393        427,388   
    

 

 

 
               6,515,916   

Electric Utilities — 0.7%

    

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

     290        311,742   

The Tokyo Electric Power Co., Inc.,
4.50%, 3/24/14

   EUR 1,300        1,627,455   
    

 

 

 
               1,939,197   

Electrical Equipment — 0.1%

    

Belden, Inc., 5.50%, 9/01/22 (b)

   USD 370        370,925   

Electronic Equipment, Instruments &
Components — 0.5%

   

CDW LLC/CDW Finance Corp., 8.50%, 4/01/19

     370        405,150   

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

     235        282,000   

Micron Technology, Inc., 2.38%, 5/01/32 (b)(e)

     441        419,501   

NXP BV/NXP Funding LLC, 9.75%, 8/01/18 (b)

     200        228,500   
    

 

 

 
               1,335,151   

Energy Equipment & Services — 3.4%

    

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

     140        149,450   

Calfrac Holdings LP, 7.50%, 12/01/20 (b)

     395        387,100   

Compagnie Générale de Géophysique, Veritas:

    

7.75%, 5/15/17

     250        261,250   

6.50%, 6/01/21

     1,255        1,306,769   

Forbes Energy Services Ltd., 9.00%, 6/15/19

     365        354,050   

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

     1,755        1,812,037   

Gulfmark Offshore, Inc., 6.38%, 3/15/22 (b)

     155        158,100   

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

     315        321,300   

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

     450        457,875   

MEG Energy Corp. (b):

    

6.50%, 3/15/21

     1,205        1,268,263   

6.38%, 1/30/23

     450        469,125   

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

     320        340,000   

Peabody Energy Corp.:

    

6.25%, 11/15/21 (b)

     1,405        1,429,587   

7.88%, 11/01/26

     375        400,313   
Corporate Bonds    Par 
(000)
    Value  
    

Energy Equipment & Services (concluded)

    

Precision Drilling Corp.:

    

6.63%, 11/15/20

   USD 75      $ 78,750   

6.50%, 12/15/21

     295        309,750   
    

 

 

 
               9,503,719   

Food & Staples Retailing — 0.2%

    

Bakkavor Finance 2 Plc, 8.25%, 2/15/18

   GBP 100        139,731   

Rite Aid Corp., 9.25%, 3/15/20

   USD 375        385,312   
    

 

 

 
               525,043   

Food Products — 0.4%

    

Darling International, Inc., 8.50%, 12/15/18

     115        130,237   

Del Monte Corp., 7.63%, 2/15/19

     61        60,924   

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

     385        405,694   

Smithfield Foods, Inc., 6.63%, 8/15/22

     588        601,965   
    

 

 

 
               1,198,820   

Health Care Equipment & Supplies — 1.5%

    

Biomet, Inc.:

    

10.00%, 10/15/17

     195        206,335   

6.50%, 8/01/20 (b)

     708        734,550   

DJO Finance LLC:

    

10.88%, 11/15/14

     519        541,706   

8.75%, 3/15/18 (b)

     450        478,125   

7.75%, 4/15/18

     100        91,500   

Fresenius Medical Care US Finance, Inc.,
6.50%, 9/15/18 (b)

     208        233,220   

Fresenius Medical Care US Finance II, Inc.,
5.88%, 1/31/22 (b)

     650        690,625   

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

     540        621,675   

Kinetic Concepts, Inc./KCI USA, Inc.,
12.50%, 11/01/19 (b)

     280        254,100   

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

     295        315,650   
    

 

 

 
               4,167,486   

Health Care Providers & Services — 7.3%

    

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

     570        592,800   

CHS/Community Health Systems, Inc.:

    

5.13%, 8/15/18

     785        809,531   

7.13%, 7/15/20

     456        477,660   

ConvaTec Healthcare E SA, 7.38%, 12/15/17 (b)

   EUR 494        664,848   

Crown Newco 3 Plc, 7.00%, 2/15/18 (b)

   GBP 364        582,313   

DaVita, Inc., 5.75%, 8/15/22

   USD 928        965,120   

HCA, Inc.:

    

8.50%, 4/15/19

     135        152,213   

6.50%, 2/15/20

     2,355        2,587,556   

7.88%, 2/15/20

     95        106,044   

7.25%, 9/15/20

     2,600        2,881,125   

5.88%, 3/15/22

     275        292,531   

Hologic, Inc., 6.25%, 8/01/20 (b)

     1,597        1,690,824   

IASIS Healthcare LLC, 8.38%, 5/15/19

     1,538        1,466,867   

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

     410        401,800   

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

     135        113,738   

Omnicare, Inc., 7.75%, 6/01/20

     1,005        1,108,012   

PSS World Medical, Inc., 6.38%, 3/01/22

     334        353,205   

Symbion, Inc., 8.00%, 6/15/16

     345        348,666   

Tenet Healthcare Corp.:

    

10.00%, 5/01/18

     839        964,850   

6.25%, 11/01/18

     330        358,256   

8.88%, 7/01/19

     2,624        2,984,800   

United Surgical Partners International, Inc.,
9.00%, 4/01/20 (b)

     290        311,388   

Vanguard Health Holding Co. II LLC, 7.75%,
2/01/19 (b)

     465        484,762   
    

 

 

 
               20,698,909   
 

 

See Notes to Consolidated Financial Statements.

 

                
30    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund III, Inc. (CYE)

(Percentages shown are based on Net Assets)

 

Corporate Bonds    Par 
(000)
    Value  
    

Health Care Technology — 1.0%

    

IMS Health, Inc., 12.50%, 3/01/18 (b)

   USD  2,405      $ 2,825,875   

Hotels, Restaurants & Leisure — 4.5%

    

Affinity Gaming LLC/Affinity Gaming Finance Corp.,
9.00%, 5/15/18 (b)

     290        295,075   

Caesars Entertainment Operating Co., Inc.:

    

11.25%, 6/01/17

     1,360        1,465,400   

10.00%, 12/15/18

     2,684        1,690,920   

8.50%, 2/15/20 (b)

     305        300,806   

Caesars Operating Escrow LLC, 9.00%, 2/15/20 (b)

     1,673        1,664,635   

Carlson Wagonlit BV, 6.88%, 6/15/19 (b)

     325        338,000   

Cirsa Funding Luxembourg SA, 8.75%, 5/15/18

   EUR 211        232,885   

Diamond Resorts Corp., 12.00%, 8/15/18

   USD 1,190        1,265,862   

El Dorado Resorts LLC, 8.63%, 6/15/19 (b)

     140        136,500   

Enterprise Inns Plc, 6.50%, 12/06/18

   GBP 324        445,011   

Gategroup Finance Luxembourg SA, 6.75%, 3/01/19

   EUR 265        340,817   

Little Traverse Bay Bands of Odawa Indians,
9.00%, 8/31/20 (b)

   USD 300        273,000   

MGM Resorts International:

    

10.38%, 5/15/14

     190        215,650   

4.25%, 4/15/15 (e)

     1,080        1,090,800   

11.13%, 11/15/17

     1,400        1,557,500   

MTR Gaming Group, Inc., 11.50%, 8/01/19 (f)

     151        154,896   

Travelport LLC:

    

5.09%, 9/01/14 (d)

     180        127,800   

9.88%, 9/01/14

     40        31,800   

9.00%, 3/01/16

     120        85,200   

6.46%, 12/01/16 (b)(f)

     419        323,781   

Tropicana Entertainment LLC, 9.63%,
12/15/14 (a)(i)

     305          

Wynn Las Vegas LLC, 5.38%, 3/15/22 (b)

     620        633,950   
    

 

 

 
               12,670,288   

Household Durables — 1.7%

    

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

     50        51,125   

Jarden Corp., 7.50%, 1/15/20

   EUR 305        413,360   

Libbey Glass, Inc., 6.88%, 5/15/20 (b)

   USD 610        650,413   

Pulte Group, Inc., 6.38%, 5/15/33

     190        165,300   

Ryland Group, Inc., 6.63%, 5/01/20

     340        358,700   

Spie BondCo 3 SCA, 11.00%, 8/15/19

   EUR 303        386,830   

Standard Pacific Corp.:

    

10.75%, 9/15/16

   USD 1,390        1,678,425   

8.38%, 1/15/21

     1,055        1,176,325   
    

 

 

 
               4,880,478   

Household Products — 0.6%

    

Ontex IV SA:

    

7.50%, 4/15/18

   EUR 104        132,773   

7.50%, 4/15/18 (b)

     150        191,500   

9.00%, 4/15/19

     213        246,478   

Spectrum Brands Holdings, Inc.:

    

9.50%, 6/15/18

   USD 360        410,850   

9.50%, 6/15/18 (b)

     590        673,338   
    

 

 

 
               1,654,939   
Independent Power Producers &
Energy Traders — 3.1%
     

The AES Corp., 7.38%, 7/01/21

     275        314,875   

Calpine Corp. (b):

    

7.25%, 10/15/17

     180        192,600   

7.50%, 2/15/21

     100        111,000   

7.88%, 1/15/23

     445        502,850   

Energy Future Holdings Corp., 10.00%, 1/15/20

     1,920        2,116,800   

Energy Future Intermediate Holding Co. LLC:

    

6.88%, 8/15/17 (b)

     305        311,481   

10.00%, 12/01/20

     2,691        3,020,648   
Corporate Bonds    Par 
(000)
    Value  
    
Independent Power Producers &
Energy Traders (concluded)
     

11.75%, 3/01/22 (b)

   USD 588      $ 626,220   

GenOn REMA LLC, 9.24%, 7/02/17

     242        259,665   

Laredo Petroleum, Inc.:

    

9.50%, 2/15/19

     485        550,475   

7.38%, 5/01/22

     370        397,750   

QEP Resources, Inc., 5.38%, 10/01/22

     333        341,325   
    

 

 

 
               8,745,689   

Industrial Conglomerates — 2.3%

    

Sequa Corp. (b):

    

11.75%, 12/01/15

     2,340        2,457,000   

13.50%, 12/01/15

     3,954        4,191,252   
    

 

 

 
               6,648,252   

Insurance — 1.0%

    

Alliant Holdings I, Inc., 11.00%, 5/01/15 (b)

     1,700        1,757,375   

CNO Financial Group, Inc., 9.00%, 1/15/18 (b)

     367        401,406   

Genworth Financial, Inc., 7.63%, 9/24/21

     430        439,374   

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

     260        232,700   
    

 

 

 
               2,830,855   

IT Services — 3.1%

    

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

     1,480        1,587,300   

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

     570        587,100   

First Data Corp.:

    

7.38%, 6/15/19 (b)

     1,580        1,631,350   

8.88%, 8/15/20 (b)

     535        583,150   

6.75%, 11/01/20 (b)

     895        888,288   

8.25%, 1/15/21 (b)

     620        614,575   

12.63%, 1/15/21

     1,699        1,720,237   

SunGard Data Systems, Inc.:

    

7.38%, 11/15/18

     550        584,375   

7.63%, 11/15/20

     600        643,500   
    

 

 

 
               8,839,875   

Machinery — 1.2%

    

SPX Corp., 6.88%, 9/01/17

     175        194,250   

UR Merger Sub Corp. (b):

    

5.75%, 7/15/18

     257        271,778   

7.38%, 5/15/20

     440        466,400   

7.63%, 4/15/22

     2,157        2,329,560   
    

 

 

 
               3,261,988   

Media — 12.7%

    

Affinion Group, Inc., 7.88%, 12/15/18

     815        582,725   

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

     225        254,813   

CCO Holdings LLC:

    

6.50%, 4/30/21

     498        534,105   

5.25%, 9/30/22

     990        980,100   

Cengage Learning Acquisitions, Inc.,
11.50%, 4/15/20 (b)

     1,065        1,120,912   

Checkout Holding Corp., 16.00%, 11/15/15 (b)(g)

     670        408,700   

Cinemark USA, Inc., 8.63%, 6/15/19

     220        246,400   

Clear Channel Communications, Inc.,
9.00%, 3/01/21

     449        385,018   

Clear Channel Worldwide Holdings, Inc.:

    

Series A, 9.25%, 12/15/17

     1,495        1,618,337   

Series B, 9.25%, 12/15/17

     5,202        5,650,672   

Series B, 7.63%, 3/15/20

     1,624        1,575,280   

Cox Enterprises, Inc. (b):

    

Loan Close 2, 12.00%, 8/15/18

     688        688,495   

Loan Close 3, 12.00%, 8/15/18

     786        787,146   

Shares Loan, 12.00%, 8/15/18

     811        811,824   

CSC Holdings LLC, 8.50%, 4/15/14

     390        428,513   

DISH DBS Corp., 5.88%, 7/15/22 (b)

     1,150        1,158,625   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    31


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund III, Inc. (CYE)

(Percentages shown are based on Net Assets)

 

Corporate Bonds    Par 
(000)
    Value  
    

Media (concluded)

  

 

Harron Communications LP,
9.13%, 4/01/20 (b)

   USD 320      $ 346,400   

Intelsat Jackson Holdings SA:

    

11.25%, 6/15/16

     883        929,357   

7.25%, 10/15/20 (b)

     820        883,550   

Intelsat Luxembourg SA:

    

11.25%, 2/04/17

     620        651,000   

11.50%, 2/04/17 (f)

     1,200        1,260,000   

Interactive Data Corp., 10.25%, 8/01/18

     1,345        1,516,487   

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

     340        379,950   

Kabel Deutschland Vertrieb und Service
GmbH & Co. KG, 6.50%, 6/29/18 (b)

   EUR 345        467,571   

Lamar Media Corp., 5.88%, 2/01/22

   USD 140        148,400   

Live Nation Entertainment, Inc., 8.13%, 5/15/18 (b)

     735        786,450   

NAI Entertainment Holdings LLC, 8.25%, 12/15/17 (b)

     558        622,170   

Nielsen Finance LLC:

    

11.63%, 2/01/14

     117        132,795   

7.75%, 10/15/18

     2,145        2,413,125   

Odeon & UCI Finco Plc, 9.00%, 8/01/18 (b)

   GBP 207        326,220   

ProQuest LLC, 9.00%, 10/15/18 (b)

   USD 500        458,750   

ProtoStar I Ltd., 18.00%, 10/15/12 (a)(b)(e)(i)

     850        425   

Truven Health Analytics, Inc., 10.63%, 6/01/20 (b)

     510        544,425   

Unitymedia GmbH:

    

9.63%, 12/01/19 (b)

   EUR 570        805,668   

9.63%, 12/01/19

     168        237,460   

9.50%, 3/15/21

     320        459,349   

Unitymedia Hessen GmbH & Co. KG:

    

8.13%, 12/01/17 (b)

   USD 956        1,034,870   

8.13%, 12/01/17 (b)

   EUR 135        183,175   

7.50%, 3/15/19

     794        1,093,569   

UPC Holding BV, 9.88%, 4/15/18 (b)

   USD 400        449,000   

UPCB Finance II Ltd.:

    

6.38%, 7/01/20 (b)

   EUR 822        1,080,438   

6.38%, 7/01/20

     300        394,320   

WaveDivision Escrow LLC/WaveDivision Escrow Corp., 8.13%, 9/01/20 (b)

   USD 300        309,000   

Ziggo Bond Co. BV, 8.00%, 5/15/18 (b)

   EUR 388        535,609   

Ziggo Finance BV, 6.13%, 11/15/17 (b)

     74        99,360   
    

 

 

 
               35,780,558   

Metals & Mining — 3.8%

    

Eco-Bat Finance Plc, 7.75%, 2/15/17

     460        584,374   

FMG Resources August 2006 Property Ltd. (b):

    

6.88%, 2/01/18

   USD 360        342,900   

6.88%, 4/01/22

     190        174,800   

Global Brass and Copper, Inc., 9.50%, 6/01/19 (b)

     300        315,750   

Goldcorp, Inc., 2.00%, 8/01/14 (e)

     1,060        1,221,650   

Kaiser Aluminum Corp., 8.25%, 6/01/20 (b)

     225        238,500   

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

     150        157,875   

New World Resources NV, 7.88%, 5/01/18

   EUR 655        819,740   

Newmont Mining Corp., Series A, 1.25%, 7/15/14 (e)

   USD 1,475        1,875,094   

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

     3,315        3,704,512   

Schmolz + Bickenbach Luxembourg SA,
9.88%, 5/15/19

   EUR 315        319,937   

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

   USD 245        253,575   

Taseko Mines Ltd., 7.75%, 4/15/19

     420        400,050   

Vedanta Resources Plc, 8.25%, 6/07/21 (b)

     270        257,850   
    

 

 

 
               10,666,607   

Multiline Retail — 0.3%

    

Dollar General Corp., 4.13%, 7/15/17

     792        823,680   
Corporate Bonds    Par 
(000)
    Value  
    

Oil, Gas & Consumable Fuels — 10.7%

    

Access Midstream Partners LP, 6.13%, 7/15/22

   USD 275      $ 285,313   

Alpha Appalachia Holdings, Inc.,
3.25%, 8/01/15 (e)

     803        720,692   

Alpha Natural Resources, Inc.:

    

6.00%, 6/01/19

     315        283,500   

6.25%, 6/01/21

     255        228,225   

Aurora USA Oil & Gas, Inc., 9.88%, 2/15/17 (b)

     680        710,600   

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

     410        436,650   

BreitBurn Energy Partners LP, 7.88%, 4/15/22 (b)

     255        260,100   

CCS, Inc., 11.00%, 11/15/15 (b)

     570        589,950   

Chaparral Energy, Inc., 7.63%, 11/15/22 (b)

     220        232,650   

Chesapeake Energy Corp.:

    

7.25%, 12/15/18

     15        15,713   

6.63%, 8/15/20

     180        184,950   

6.88%, 11/15/20

     175        181,563   

6.13%, 2/15/21

     595        590,537   

Coffeyville Resources LLC, 9.00%, 4/01/15 (b)

     116        123,540   

Concho Resources, Inc.:

    

7.00%, 1/15/21

     160        178,400   

6.50%, 1/15/22

     110        118,800   

5.50%, 10/01/22

     475        490,437   

Consol Energy, Inc., 8.25%, 4/01/20

     1,765        1,901,787   

Continental Resources, Inc., 7.13%, 4/01/21

     370        414,400   

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

     300        313,500   

Crosstex Energy LP:

    

8.88%, 2/15/18

     180        192,150   

7.13%, 6/01/22 (b)

     150        149,250   

Crown Oil Partners IV LP, 15.00%, 3/07/15

     597        596,620   

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

     47        53,345   

Energy XXI Gulf Coast, Inc.:

    

9.25%, 12/15/17

     555        618,825   

7.75%, 6/15/19

     900        956,250   

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

     345        370,012   

EP Energy LLC/Everest Acquisition Finance, Inc., 7.75%, 9/01/22 (b)

     215        215,538   

EV Energy Partners LP, 8.00%, 4/15/19

     150        154,875   

Hilcorp Energy I LP, 7.63%, 4/15/21 (b)

     745        819,500   

Holly Energy Partners LP, 6.50%, 3/01/20 (b)

     155        161,975   

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

     350        371,875   

Linn Energy LLC:

    

6.50%, 5/15/19 (b)

     95        94,525   

6.25%, 11/01/19 (b)

     2,045        2,019,437   

8.63%, 4/15/20

     225        243,000   

7.75%, 2/01/21

     200        208,500   

MarkWest Energy Partners LP:

    

6.25%, 6/15/22

     80        85,000   

5.50%, 2/15/23

     225        230,063   

Newfield Exploration Co., 6.88%, 2/01/20

     780        852,150   

Northern Oil and Gas, Inc., 8.00%, 6/01/20 (b)

     310        316,200   

Oasis Petroleum, Inc.:

    

7.25%, 2/01/19

     265        279,575   

6.50%, 11/01/21

     290        295,800   

Offshore Group Investments Ltd.:

    

11.50%, 8/01/15 (b)

     1,330        1,469,650   

11.50%, 8/01/15

     325        359,125   

OGX Petroleo e Gas Participacoes SA (b):

    

8.50%, 6/01/18

     1,997        1,772,337   

8.38%, 4/01/22

     500        425,000   

PBF Holding Co. LLC, 8.25%, 2/15/20 (b)

     295        308,275   

PetroBakken Energy Ltd., 8.63%, 2/01/20 (b)

     1,195        1,221,887   

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

     575        613,812   

Pioneer Natural Resources Co.:

    

6.88%, 5/01/18

     460        556,922   

7.50%, 1/15/20

     145        181,347   

Range Resources Corp.:

    

8.00%, 5/15/19

     345        381,225   

5.75%, 6/01/21

     985        1,047,794   

5.00%, 8/15/22

     435        452,944   
 

 

See Notes to Consolidated Financial Statements.

 

                
32    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund III, Inc. (CYE)

(Percentages shown are based on Net Assets)

 

Corporate Bonds    Par 
(000)
    Value  
    

Oil, Gas & Consumable Fuels (concluded)

  

 

Sabine Pass Liquified Natural Gas LP, 7.50%,
11/30/16

   USD 610      $ 652,700   

Samson Investment Co., 9.75%, 2/15/20 (b)

     83        85,490   

SandRidge Energy, Inc.:

    

7.50%, 3/15/21

     250        253,125   

7.50%, 3/15/21 (b)

     690        698,625   

8.13%, 10/15/22 (b)

     255        266,475   

7.50%, 2/15/23 (b)

     545        547,725   

SESI LLC:

    

6.38%, 5/01/19

     325        344,500   

7.13%, 12/15/21

     235        261,438   

SM Energy Co.:

    

6.63%, 2/15/19

     130        135,850   

6.50%, 11/15/21

     265        276,925   

6.50%, 1/01/23 (b)

     125        130,313   

Vanguard Natural Resources, 7.88%, 4/01/20

     270        270,000   
    

 

 

 
               30,259,256   

Paper & Forest Products — 1.6%

    

Ainsworth Lumber Co. Ltd., 11.00%, 7/29/15 (b)(f)

     1,252        1,139,184   

Boise Paper Holdings LLC:

    

9.00%, 11/01/17

     60        66,450   

8.00%, 4/01/20

     125        138,125   

Clearwater Paper Corp.:

    

10.63%, 6/15/16

     390        435,825   

7.13%, 11/01/18

     585        639,113   

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

     345        357,075   

NewPage Corp., 11.38%, 12/31/14 (a)(i)

     2,070        1,402,425   

Sappi Papier Holding GmbH (b):

    

8.38%, 6/15/19

     200        210,500   

6.63%, 4/15/21

     140        129,500   
    

 

 

 
               4,518,197   

Pharmaceuticals — 1.0%

    

Capsugel Finance Co. SCA:

    

9.88%, 8/01/19

   EUR 100        140,559   

9.88%, 8/01/19 (b)

     200        281,118   

Pharmaceutical Product Development, Inc.,
9.50%, 12/01/19 (b)

   USD 185        206,275   

Spectrum Brands, Inc., 6.75%, 3/15/20 (b)

     260        273,000   

Valeant Pharmaceuticals International (b):

    

6.50%, 7/15/16

     1,245        1,313,475   

6.75%, 8/15/21

     570        578,550   
    

 

 

 
               2,792,977   

Professional Services — 0.3%

    

FTI Consulting, Inc., 6.75%, 10/01/20

     920        982,100   

Real Estate Investment Trusts (REITs) — 0.7%

    

Felcor Lodging LP, 6.75%, 6/01/19

     1,215        1,303,088   

The Rouse Co. LP, 6.75%, 11/09/15

     520        547,950   
    

 

 

 
               1,851,038   

Real Estate Management & Development — 2.3%

  

CBRE Services, Inc., 6.63%, 10/15/20

     335        365,987   

Crescent Resources LLC/Crescent Ventures, Inc.,
10.25%, 8/15/17 (b)

     710        727,750   

Forest City Enterprises, Inc., 7.63%, 6/01/15

     426        423,604   

IVG Immobilien AG, 8.00% (j)

   EUR 200        114,208   

Realogy Corp.:

    

11.50%, 4/15/17

   USD 400        425,000   

12.00%, 4/15/17

     100        104,750   

7.88%, 2/15/19 (b)

     2,065        2,126,950   

7.63%, 1/15/20 (b)

     505        550,450   

9.00%, 1/15/20 (b)

     335        361,800   

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

     1,250        1,390,625   
    

 

 

 
               6,591,124   
Corporate Bonds    Par 
(000)
    Value  
    

Road & Rail — 1.3%

  

 

Florida East Coast Railway Corp., 8.13%, 2/01/17

   USD 410      $ 430,500   

The Hertz Corp.:

    

7.50%, 10/15/18

     550        593,312   

6.75%, 4/15/19 (b)

     290        304,500   

7.38%, 1/15/21

     415        451,313   

Hertz Holdings Netherlands BV:

    

8.50%, 7/31/15

   EUR 188        256,566   

8.50%, 7/31/15 (b)

     1,115        1,521,655   
    

 

 

 
               3,557,846   

Semiconductors & Semiconductor Equipment — 0.2%

  

 

Spansion LLC, 7.88%, 11/15/17

   USD 580        565,500   

Software — 1.3%

    

Audatex North America, Inc., 6.75%, 6/15/18 (b)

     530        568,425   

Infor US, Inc., 9.38%, 4/01/19 (b)

     1,650        1,786,125   

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

     885        904,913   

Sophia LP, 9.75%, 1/15/19 (b)

     442        475,150   
    

 

 

 
               3,734,613   

Specialty Retail — 2.8%

    

Asbury Automotive Group, Inc., 8.38%, 11/15/20

     365        403,325   

Claire’s Stores, Inc., 9.00%, 3/15/19 (b)

     490        508,375   

House of Fraser Funding Plc:

    

8.88%, 8/15/18 (b)

   GBP 285        402,193   

8.88%, 8/15/18

     221        311,876   

Limited Brands, Inc.:

    

8.50%, 6/15/19

   USD 785        942,000   

5.63%, 2/15/22

     160        168,400   

Party City Holdings, Inc., 8.88%, 8/01/20 (b)

     793        838,597   

Penske Automotive Group, Inc.,
5.75%, 10/01/22 (b)

     540        550,800   

Phones4u Finance Plc, 9.50%, 4/01/18 (b)

   GBP 400        612,910   

QVC, Inc. (b):

    

7.13%, 4/15/17

   USD 230        243,276   

7.50%, 10/01/19

     625        692,509   

7.38%, 10/15/20

     290        323,138   

5.13%, 7/02/22

     429        449,653   

Sally Holdings LLC:

    

6.88%, 11/15/19

     545        609,038   

5.75%, 6/01/22

     435        468,169   

Sonic Automotive, Inc., 9.00%, 3/15/18

     370        404,225   
    

 

 

 
               7,928,484   

Textiles, Apparel & Luxury Goods — 0.2%

    

Levi Strauss & Co., 6.88%, 5/01/22

     440        456,500   

Trading Companies & Distributors — 0.6%

    

Ashtead Capital, Inc., 6.50%, 7/15/22 (b)

     490        509,600   

Doric Nimrod Air Finance Alpha Ltd. (b):

    

Series 2012-1, Class A, 5.13%, 11/30/24

     635        644,525   

Series 2012-1, Class B, 6.50%, 5/30/21

     575        581,797   
    

 

 

 
               1,735,922   

Transportation Infrastructure — 0.2%

    

Aguila 3 SA, 7.88%, 1/31/18 (b)

     431        454,166   

Wireless Telecommunication Services — 4.0%

    

Cricket Communications, Inc.:

    

7.75%, 5/15/16

     110        116,050   

7.75%, 10/15/20

     215        208,550   

Digicel Group Ltd. (b):

    

9.13%, 1/15/15

     1,783        1,800,830   

8.25%, 9/01/17

     1,180        1,250,800   

10.50%, 4/15/18

     1,020        1,101,600   

Matterhorn Mobile Holdings SA, 8.25%, 2/15/20

   EUR 195        265,506   

MetroPCS Wireless, Inc., 6.63%, 11/15/20

   USD 760        786,600   

NII Capital Corp., 7.63%, 4/01/21

     341        263,422   

SBA Telecommunications, Inc., 5.75%, 7/15/20 (b)

     286        298,870   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    33


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund III, Inc. (CYE)

(Percentages shown are based on Net Assets)

 

Corporate Bonds    Par 
(000)
    Value  
    

Wireless Telecommunication Services (concluded)

  

 

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

     USD 1,827      $ 1,653,435   

Sprint Nextel Corp. (b):

    

9.00%, 11/15/18

     1,780        2,100,400   

7.00%, 3/01/20

     1,330        1,456,350   
    

 

 

 
               11,302,413   
Total Corporate Bonds – 104.3%        294,641,890   
    

 

Floating Rate Loan Interests (d)               

Airlines — 0.1%

    

Delta Air Lines, Inc., Credit, Term Loan B,
5.50%, 4/20/17

     396        398,797   

Auto Components — 0.5%

    

Federal-Mogul Corp., Term Loan B,
2.17%—2.18%, 12/29/14

     945        901,873   

Schaeffler AG, Term Loan C2, 6.00%, 1/27/17

     395        396,153   
    

 

 

 
               1,298,026   

Building Products — 0.2%

    

Goodman Global, Inc., Term Loan (Second Lien),
9.00%, 10/30/17

     398        402,949   

Capital Markets — 0.7%

    

American Capital Holdings, Term Loan,
5.50%, 7/19/16

     816        819,060   

Nuveen Investments, Inc.:

    

Incremental Term Loan, 7.25%, 5/13/17

     655        657,947   

Second Lien Term Loan, 8.25%, 2/28/19

     415        417,594   
    

 

 

 
               1,894,601   

Chemicals — 0.7%

    

Evergreen Acqco 1 LP, Term Loan B,
6.25%, 7/09/19

     170        171,595   

INEOS US Finance LLC, 6 Year Term Loan,
6.50%, 5/04/18

     1,147        1,148,800   

PQ Corp., Term Loan B, 3.98%, 7/30/14

     290        284,529   

Styron Sarl LLC, Term Loan B, 8.00%, 8/02/17

     393        365,804   
    

 

 

 
               1,970,728   

Commercial Services & Supplies — 0.7%

    

AWAS Finance Luxembourg Sarl, Term Loan B,
5.25%, 6/10/16

     465        465,004   

Delos Aircraft, Inc., Term Loan B2, 4.75%, 4/12/16

     550        555,500   

Volume Services America, Inc., Term Loan B,
10.50%—10.75%, 9/16/16

     983        982,500   
    

 

 

 
               2,003,004   

Communications Equipment — 0.8%

    

Avaya, Inc., Term Loan B1, 3.18%, 10/24/14

     254        243,513   

Zayo Group, LLC, Term Loan B, 7.13%, 7/02/19

     2,075        2,105,482   
    

 

 

 
               2,348,995   

Construction & Engineering — 0.7%

    

Safway Services LLC, Mezzanine Loan,
15.63%, 12/16/17

     2,000        2,000,000   

Construction Materials — 0.4%

    

HD Supply, Inc., Senior Debt B, 7.25%, 10/12/17

     1,115        1,139,162   

Consumer Finance — 1.7%

    

Springleaf Financial Funding Co., Term Loan,
5.50%, 5/10/17

     5,085        4,910,839   

Diversified Consumer Services — 0.1%

    

Laureate Education, Inc., Extended Term Loan,
5.25%, 6/18/18

     144        140,723   
Floating Rate Loan Interests (d)    Par 
(000)
    Value  

Diversified Consumer Services (concluded)

    

ServiceMaster Co.:

    

Delayed Draw Term Loan, 2.74%, 7/24/14

   USD 8      $ 8,426   

Term Loan, 2.75%—2.97%, 7/24/14

     85        84,608   
    

 

 

 
               233,757   

Diversified Financial Services — 0.5%

  

 

Residential Capital LLC:

    

DIP Term Loan A1, 5.00%, 11/18/13

     1,255        1,258,137   

DIP Term Loan A2, 6.75%, 11/18/13

     185        187,159   
    

 

 

 
               1,445,296   

Diversified Telecommunication Services — 0.5%

  

Level 3 Financing, Inc.:

    

2016 Term Loan B, 4.75%, 2/01/16

     330        330,660   

2019 Term Loan B, 5.25%, 8/01/19

     270        270,394   

Term Loan B3, 5.75%, 8/31/18

     850        852,244   
    

 

 

 
               1,453,298   

Electronic Equipment, Instruments & Components — 0.1%

  

CDW LLC, Extended Term Loan, 4.00%, 7/14/17

     276        272,290   

Energy Equipment & Services — 2.2%

  

Dynegy Midwest Generation LLC, Coal Co. Term Loan, 9.25%, 8/04/16

     1,981        2,055,246   

Dynegy Power LLC, Gas Co. Term Loan,
9.25%, 8/04/16

     3,626        3,795,937   

Tervita Corp., Incremental Term Loan,
6.50%, 10/17/14

     274        273,398   
    

 

 

 
               6,124,581   

Food & Staples Retailing — 0.0%

  

US Foods, Inc. (FKA U.S. Foodservice, Inc.), Extended Term Loan B, 5.75%, 3/31/17

     74        71,704   

Food Products — 0.3%

  

Advance Pierre Foods, Term Loan (Second Lien), 11.25%, 9/29/17

     900        905,400   

Health Care Equipment & Supplies — 0.5%

  

Bausch & Lomb, Inc., Term Loan B, 5.25%, 5/17/19

     475        476,582   

Hupah Finance, Inc., Term Loan B, 6.25%, 1/21/19

     763        765,949   

LHP Hospital Group, Inc., Term Loan,
9.00%, 7/03/18

     285        287,137   
    

 

 

 
               1,529,668   

Health Care Providers & Services — 0.5%

  

Harden Healthcare LLC:

    

Add on Term Loan A, 7.75%, 3/02/15

     387        375,509   

Term Loan A, 8.50%, 3/02/15

     367        360,007   

InVentiv Health, Inc., Combined Term Loan, 6.50%, 8/04/16

     683        635,995   
    

 

 

 
               1,371,511   

Hotels, Restaurants & Leisure — 1.2%

  

Caesars Entertainment Operating Co., Inc.:

    

Extended Term Loan B6, 5.49%, 1/26/18

     200        175,812   

Incremental Term Loan B4, 9.50%, 10/31/16

     483        492,041   

Term Loan B1, 3.24%, 1/28/15

     411        389,885   

Term Loan B2, 3.24%, 1/28/15

     444        421,185   

Term Loan B3, 3.24%—3.46%, 1/28/15

     965        915,341   

OSI Restaurant Partners LLC:

    

Revolver, 2.49%—4.50%, 6/14/13

     9        9,354   

Term Loan B, 2.56%, 6/14/14

     95        94,275   

Sabre, Inc., Non Extended Initial Term Loan,
2.23%, 9/30/14

     64        62,961   

Station Casinos, Inc., Term Loan B1,
3.23%, 6/17/16

     868        824,651   

Travelport LLC:

    

Extended Tranche A Term Loan, 6.44%, 9/28/12

     193        57,871   

Extended Tranche B Term Loan, 13.94%, 12/01/16

     622        49,753   
    

 

 

 
               3,493,129   
 

 

See Notes to Consolidated Financial Statements.

 

                
34    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund III, Inc. (CYE)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (d)    Par 
(000)
    Value  
    

Industrial Conglomerates — 0.1%

  

 

Sequa Corp.:

    

Incremental Term Loan, 6.25%, 12/03/14

     USD    178      $ 178,898   

Term Loan, 3.69%—3.72%, 12/03/14

     155        153,935   
    

 

 

 
               332,833   

IT Services — 0.3%

  

Ceridian Corp., Extended Term Loan,
5.99%, 5/09/17

     68        68,258   

First Data Corp., 2018 Term Loan B,
4.24%, 3/23/18

     785        741,174   
    

 

 

 
               809,432   

Leisure Equipment & Products — 0.2%

  

Eastman Kodak Co., DIP Term Loan B,
8.50%, 7/19/13

     653        646,881   

Machinery — 0.5%

  

Navistar International Corp., Term Loan B,
7.00%, 8/17/17

     676        678,879   

Rexnord Corp., Term Loan B, 5.00%, 4/02/18

     592        594,352   
    

 

 

 
               1,273,231   

Media — 4.8%

  

Affinion Group, Inc., Term Loan B, 5.00%, 7/15/15

     40        33,595   

Cengage Learning Acquisitions, Inc.:

    

Non-Extended Term Loan, 2.49%, 7/03/14

     323        297,642   

Tranche 1 Incremental, Term Loan, 7.50%, 7/03/14

     1,676        1,617,000   

Cequel Communications LLC, Term Loan B,
4.00%, 2/14/19

     474        472,827   

Clear Channel Communications, Inc.:

    

Term Loan B, 3.88%, 1/28/16

     1,936        1,499,459   

Term Loan C, 3.88%, 1/28/16

     385        292,430   

EMI Music Publishing Ltd., Term Loan B,
5.50%, 6/29/18

     435        437,936   

Intelsat Jackson Holdings SA, Tranche B Term Loan, 5.25%, 4/02/18

     6,364        6,385,066   

Interactive Data Corp., Term Loan B, 4.50%, 2/12/18

     409        409,564   

Newsday LLC, Fixed Rate Term Loan, 10.50%, 8/01/13

     1,325        1,332,182   

Thomson Reuters (Healthcare), Inc., Term Loan B,
6.75%, 6/06/19

     375        377,655   

Univision Communications, Inc., Extended Term Loan, 4.48%, 3/31/17

     301        291,182   
    

 

 

 
               13,446,538   

Metals & Mining — 0.2%

  

Constellium Holding Co. BV, Term Loan B,
9.25%, 5/25/18

     430        421,400   

Oil, Gas & Consumable Fuels — 0.8%

    

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

     1,200        1,202,580   

Obsidian Natural Gas Trust, Term Loan,
7.00%, 11/02/15

     1,003        1,003,160   
    

 

 

 
               2,205,740   

Paper & Forest Products — 0.6%

  

Ainsworth Lumber Co. Ltd., Term Loan,
5.25%, 6/26/14

     390        377,325   

NewPage Corp., DIP Term Loan, 8.00%, 3/07/13

     600        605,628   

Verso Paper Finance Holdings LLC, Term Loan,
6.49%—7.24%, 2/01/13

     1,535        767,555   
    

 

 

 
               1,750,508   

Pharmaceuticals — 0.5%

  

Aptalis Pharma, Inc., Term Loan B, 5.50%, 2/10/17

     985        981,306   

Pharmaceutical Product Development, Inc., Term Loan B, 6.25%, 12/05/18

     313        316,621   
    

 

 

 
               1,297,927   
Floating Rate Loan Interests (d)    Par 
(000)
    Value  
    

Real Estate Investment Trusts (REITs) — 0.4%

  

iStar Financial, Inc.:

  

Term Loan A1, 5.00%, 6/28/13

     USD 1,080      $ 1,080,900   

Term Loan A2, 7.00%, 6/30/14

     5        5,005   
    

 

 

 
               1,085,905   

Real Estate Management & Development — 0.4%

  

Realogy Corp.:

    

Extended Letter of Credit Loan,
4.50%, 10/10/16

     111        107,609   

Extended Term Loan, 4.49%, 10/10/16

     737        711,002   

Stockbridge SBE Holdings LLC, Term Loan B,
13.00%, 5/02/17

     185        184,075   
    

 

 

 
               1,002,686   

Semiconductors & Semiconductor Equipment — 0.0%

  

NXP BV, Term Loan A-2, 5.50%, 3/03/17

     70        70,477   

Software — 0.4%

  

Infor US, Inc. (FKA Lawson Software, Inc.),
Term Loan B, 6.25%, 4/05/18

     1,232        1,244,577   

Specialty Retail — 0.1%

  

Claire’s Stores, Inc., Term Loan B,
2.98%—3.20%, 5/29/14

     387        380,054   

Textiles, Apparel & Luxury Goods — 0.4%

  

Ascend Performance Materials LLC, Term Loan B,
6.75%, 4/10/18

     1,137        1,126,722   

Wireless Telecommunication Services — 1.2%

  

Crown Castle International Corp., Term Loan B,
4.00%, 1/31/19

     49        49,414   

Vodafone Americas Finance 2, Inc. (f):

    

Term Loan, 6.88%, 8/11/15

     1,938        2,015,700   

Term Loan B, 6.25%, 7/11/16

     1,341        1,367,437   
    

 

 

 
               3,432,551   
Total Floating Rate Loan Interests – 23.3%        65,795,197   

 

    
Other Interests (k)    Beneficial
Interest
(000)
        

Auto Components — 0.0%

  

 

Lear Corp. Escrow

     460,000        4,887   

Chemicals — 0.0%

  

 

Wellman Holdings, Inc., Litigation Trust Certificate

     2,830,000        28   

Hotels, Restaurants & Leisure — 0.0%

  

 

Buffets, Inc. (a)

     575,000        6   

Media — 0.0%

  

 

Adelphia Escrow (a)

     750,000        8   

Adelphia Recovery Trust (a)

     940,601        94   
    

 

 

 
               102   
Total Other Interests – 0.0%        5,023   

 

    
Preferred Securities               
Capital Trusts — 0.2%   

Par 

(000)

        

Insurance — 0.2%

  

 

Genworth Financial, Inc., 6.15%, 11/15/66 (d)

     865        519,000   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    35


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Corporate High Yield Fund III, Inc. (CYE)

(Percentages shown are based on Net Assets)

 

Preferred Stocks        
Shares
    Value  
    

Auto Components — 0.7%

  

 

Dana Holding Corp., 4.00% (b)(e)

     17,830      $ 2,083,881   

Diversified Financial Services — 1.5%

  

Ally Financial, Inc., 7.00% (b)

     4,464        4,064,891   

Real Estate Investment Trusts (REITs) — 0.1%

  

MPG Office Trust, Inc., Series A, 7.63% (a)

     8,994        206,682   

Thrifts & Mortgage Finance — 0.0%

  

Fannie Mae, Series O, 7.00% (a)

     30,000        36,000   

Freddie Mac, Series Z, 8.38% (a)

     75,961        70,644   
    

 

 

 
               106,644   
Total Preferred Stocks – 2.3%        6,462,098   

 

Trust Preferreds               

Diversified Financial Services — 0.9%

  

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

     76,790        1,897,696   

RBS Capital Funding Trust VII,
6.08% (a)(d)(i)(j)

     26,500        497,060   
Total Trust Preferreds – 0.9%              2,394,756   
Total Preferred Securities – 3.4%              9,375,854   

 

Warrants (l)               

Containers & Packaging — 0.0%

  

 

MDP Acquisitions Plc (Expires 10/10/13)

     700        29,437   

Health Care Providers & Services — 0.0%

  

HealthSouth Corp. (Expires 1/16/14)

     32,042          

Media — 0.0%

  

New Vision Holdings LLC (Expires 9/30/14)

     22          

Software — 0.0%

  

Bankruptcy Management Solutions, Inc. (Expires 9/28/17)

     334          

HMH Holdings/EduMedia (Issued/Exercisable 3/09/10, 19 Shares for 1 Warrant, Expires 6/22/19, Strike Price $42.27)

     1,164          
    

 

 

 
                 
Total Warrants – 0.0%              29,437   
Total Long-Term Investments
(Cost – $383,887,453) – 138.9%
             392,159,838   

 

Options Purchased    Contracts         

Over-the-Counter Call Options — 0.0%

  

 

Marsico Parent Superholdco LLC, Strike Price USD 942.86, Expires 12/14/19, Broker Goldman Sachs Group, Inc.

     19          
Total Options Purchased
(Cost — $18,578) – 0.0%
               
Total Investments (Cost — $383,906,031) – 138.9%        392,159,838   
Liabilities in Excess of Other Assets – (38.9)%        (109,733,285
    

 

 

 

Net Assets – 100.0%

     $ 282,426,553   
    

 

 

 

 

 

 

(a)   Non-income producing security.

 

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

 

(c)   All or a portion of security has been pledged as collateral in connection with swaps.

 

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

 

 

 

 

(e)   Convertible security.

 

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

 

(g)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

 

(h)   When-issued security. Unsettled when-issued transaction was as follows:

 

Counterparty    Value      Unrealized
Appreciation
 
Goldman Sachs Group, inc.    $ 1,639,238       $ 20,238   

 

(i)   Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.

 

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

 

(k)   Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.

 

(l)   Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

 

Ÿ  

Investments in issuers considered to be an affiliate of the Fund during the six months ended August 31, 2012, for purposes of Section 2(a)(3) of the 1940 Act, as amended, were as follows:

 

Affiliate   

Shares

Held at
February 29,
2012

     Net
Activity
     Shares
Held at
August 31,
2012
     Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

                           $ 444   

 

Ÿ  

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

 

Contracts    Issue    Exchange    Expiration    Notional
Value
     Unrealized
Depreciation
 
117    S&P 500
E-Mini Index
   Chicago
Mercantile
   September
2012
   $ 8,219,835       $ (565,522

 

Ÿ  

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

 

Currency Purchased     Currency Sold     Counter
party
  Settle
ment
Date
   

Unrealized

Appreciation

(Depreciation)

 

GBP

    155,000        USD        240,823      Citigroup,
Inc.
    10/17/12      $ 5,258   

GBP

    72,000        USD        112,584      UBS AG     10/17/12        1,724   

USD

    74,743        AUD        74,000      Citigroup, Inc.     10/17/12        (1,412

USD

    129,182        AUD        127,000      UBS AG     10/17/12        (1,516

USD

    2,776,254        CAD        2,819,500      UBS AG     10/17/12        (81,423

USD

    4,179,821        GBP        2,692,500      UBS AG     10/17/12        (94,837

USD

    73,703        GBP        47,000      UBS AG     10/17/12        (915

USD

    70,686        GBP        45,000      UBS AG     10/17/12        (757

EUR

    270,000        USD        330,556      Citigroup, Inc.     10/22/12        9,225   

EUR

    300,000        USD        367,285      Citigroup, Inc.     10/22/12        10,250   

EUR

    292,000        USD        358,211      Credit Suisse
Group AG
    10/22/12        9,256   

EUR

    169,000        USD        208,807      UBS AG     10/22/12        3,871   

USD

    18,442,105        EUR        15,042,500      Citigroup, Inc.     10/22/12        (488,108

USD

    242,162        EUR        197,000      Citigroup, Inc.     10/22/12        (5,752

USD

    422,430        EUR        340,000      Citigroup, Inc.     10/22/12        (5,443

USD

    106,848        EUR        85,000      Royal Bank
of Scotland
Group Plc
    10/22/12        (120

USD

    562,117        EUR        455,000      UBS AG     10/22/12        (10,477

USD

    262,857        EUR        213,000      UBS AG     10/22/12        (5,193
 

 

See Notes to Consolidated Financial Statements.

 

                
36    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)    BlackRock Corporate High Yield Fund III, Inc. (CYE)

 

Foreign currency exchange contracts as of August 31, 2012 were as follows (concluded):

 

Currency Purchased     Currency Sold     Counter
party
  Settle
ment
Date
   

Unrealized

Appreci
ation

(Depreci
ation)

 

USD

    255,542        EUR        207,000      UBS AG     10/22/12      $ (4,957)   

USD

    132,758        EUR        108,000      UBS AG     10/22/12        (3,155)   

USD

    65,174        EUR        52,000      UBS AG     10/22/12        (266)   

Total

            $ (664,747)   
           

 

 

 

 

Ÿ  

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

 

Issuer    Pay
Fixed
Rate
  Counterparty   Expiration
Date
  Notional
Amount
(000)
    Unrealized
Appreciation
(Depreciation)
 
MGM Resorts International    5.00%   Deutsche
Bank AG
  6/20/15   $ 170      $ (12,110)   
MGM Resorts International    5.00%   Deutsche
Bank AG
  6/20/15   $ 105        (7,783)   
MGM Resorts International    5.00%   Deutsche
Bank AG
  6/20/15   $ 85        (6,981)   
MGM Resorts International    5.00%   Deutsche
Bank AG
  6/20/15   $ 90        (4,594)   
MGM Resorts International    5.00%   Deutsche
Bank AG
  6/20/15   $ 90        (5,158)   
Republic of Hungary    1.00%   Deutsche
Bank AG
  12/20/15   $ 300        5,456   
Israel (State of)    1.00%   Deutsche
Bank AG
  3/20/17   $ 225        (5,043)   
Israel Government Bond    1.00%   Deutsche
Bank AG
  3/20/17   $ 675        (15,553)   

Total

           $ (51,766)   
          

 

 

 

 

Ÿ  

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

 

Issuer   Receive
Fixed
Rate
  Counter
party
  Expiration
Date
  Issuer
Credit
Rating1
    Notional
Amount
(000) 2
    Unrealized
Appreciation
 
Air Lease Corp.   5.00%   Goldman

Sachs
Group,
Inc.

  2/14/13     NR      $ 500      $ 8,290   
CIT Group, Inc.   5.00%   Deutsche
Bank AG
  9/20/15     BB-      $ 3,400        442,214   
Aramark Corp.   5.00%   Goldman
Sachs Group,
Inc.
  3/20/16     B      $ 500        41,882   
Aramark Corp.   5.00%   Goldman
Sachs Group,
Inc.
  6/20/16     B      $ 300        25,338   
Aramark Corp.   5.00%   Goldman
Sachs Group,
Inc.
  6/20/16     B      $ 300        27,000   
Aramark Corp.   5.00%   Credit Suisse
Group AG
  9/20/16     B      $ 125        14,934   
Aramark Corp.   5.00%   Goldman
Sachs Group,
Inc.
  9/20/16     B      $ 350        30,667   
Aramark Corp.`   5.00%   Goldman
Sachs Group,
Inc.
  9/20/16     B      $ 125        14,522   
Aramark Corp.   5.00%   Deutsche
Bank AG
  3/20/17     B      $ 200        13,202   

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

 

Issuer   Receive
Fixed
Rate
  Counter
party
  Expiration
Date
  Issuer
Credit
Rating1
    Notional
Amount
(000) 2
    Unrealized
Appreci
ation
 
Crown Castle International Corp.   7.25%   Deutsche
Bank AG
  3/20/17     B-      $ 470      $ 6,699   
Ford Motor Co.   5.00%   Deutsche
Bank AG
  3/20/17     BB+      $ 1,500        66,071   
Goodyear Tire & Rubber Co.   5.00%   Deutsche
Bank AG
  6/20/17     B+      $ 310        14,445   
Goodyear Tire & Rubber Co.   5.00%   Goldman
Sachs
Group,
Inc.
  6/20/17     B+      $ 300        10,572   
CCO Holdings LLC   8.00%   Deutsche
Bank AG
  9/20/17     BB-      $ 1,600        130,344   
Level 3 Communi
cations, Inc.
  5.00%   Goldman
Sachs
Group, Inc.
  6/20/19     B-      $ 1,000        27,335   

Total

            $ 873,515   
           

 

 

 

 

1   

Using S&P’s rating.

 

2   

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

 

Ÿ  

Credit default swaps on traded indexes - buy protection outstanding as of August 31, 2012 were as follows:

 

Index   Pay
Fixed
Rate
  Counterparty   Expiration
Date
  Notional
Amount
(000)
    Unrealized
Depreciation
 

Dow Jones CDX North America High Yield
Series 18

  5.00%   Credit
Suisse

Group AG

  6/20/17   $ 1,881      $ (6,100

 

Ÿ  

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

 

Ÿ  

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

 

Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities

 

Ÿ  

Level 2 — other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

Ÿ  

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

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

 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    37


Table of Contents
Consolidated Schedule of Investments (continued)    BlackRock Corporate High Yield Fund III, Inc. (CYE)

 

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

 

     Level 1     Level 2     Level 3     Total  

Assets:

       
Investments:        

Long-Term Investments:

       

Common Stocks

  $ 17,584,878      $ 705,889      $ 4,021,670      $ 22,312,437   

Corporate Bonds

           290,263,669        4,378,221        294,641,890   

Floating Rate Loan Interests

           53,781,377        12,013,820        65,795,197   

Other Interests

    94               4,929        5,023   

Preferred Securities

    2,708,082        6,667,772               9,375,854   

Warrants

           29,437               29,437   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 20,293,054      $ 351,448,144      $ 20,418,640      $ 392,159,838   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

      Level 1     Level 2     Level 3      Total  
Derivative Financial Instruments1          

Assets:

         

Credit contracts

          $ 291,424      $ 587,547       $ 878,971   

Foreign currency exchange contracts

            39,584                39,584   

Liabilities:

         

Credit contracts

            (63,322             (63,322

Equity contracts

   $ (565,522                    (565,522

Foreign currency exchange contracts

            (704,331             (704,331
  

 

 

   

 

 

   

 

 

    

 

 

 

Total

   $ (565,522   $ (436,645   $ 587,547       $ (414,620
  

 

 

   

 

 

   

 

 

    

 

 

 

 

1   

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

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

 

      Level 1      Level 2     Level 3      Total  

Assets:

          

Cash

   $ 893,481                      $ 893,481   

Cash pledged as collateral for financial futures contracts

     533,000                        533,000   

Cash pledged as collateral for swaps

     100,000                        100,000   

Foreign currency at value

     229,653                        229,653   

Liabilities:

          

Cash received as collateral for swaps

           $ (400,000             (400,000

Loan payable

             (115,000,000             (115,000,000
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 1,756,134       $ (115,400,000           $ (113,643,866
  

 

 

    

 

 

   

 

 

    

 

 

 

As of February 29, 2012, the Fund used observable inputs in determining the value of certain equity securities. During the year, the Fund began valuing these securities using unadjusted price quotations from an exchange. As a result, investments with a beginning of period value of $7,570,792 transferred from Level 2 to Level 1 in the disclosure hierarchy.

 

The following table summarizes the valuation techniques used and unobservable inputs developed by the Global Valuation Committee to determine the fair value of certain of the Fund’s Level 3 investments as of August 31, 2012:

 

     Value      Valuation Techniques    Unobservable Inputs2    Range of
Unobservable
Inputs
   Weighted
Average of
Unobservable
Inputs3

Assets:

             

Common Stocks

  $ 4,021,665       Market Comparable Companies    EBITDA Multiple    5.9x    5.9x
        Forward EBITDA Multiple    4.6x    4.6x
     Cost    N/A4      

Corporate Bonds

    4,104,796       Market Comparable Companies    Yield    7.00%—9.67%    8.74%
        EBITDA Multiple    6.0x    6.0x
     Cost    N/A4      

Floating Rate Loan interests

    3,503,071       Market Comparable Companies    Illiquidity Discount    50%    50%
        Yield    9.65%    9.65%
     Cost    N/A4      
 

 

 

Total5

  $ 11,629,532               
 

 

 

             

 

2   

A change to the unobservable input may result in a significant change to the value of the investment as follows:

 

Unobservable Input    Impact to
Value if Input Increases
   Impact to
Value if Input Decreases
EBITDA Multiple    Increase    Decrease
Forward EBITDA Multiple    Increase    Decrease
Illiquidity Discount    Decrease    Increase
Yield    Decrease    Increase

 

See Notes to Consolidated Financial Statements.

 

                
38    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (concluded)    BlackRock Corporate High Yield Fund III, Inc.  (CYE)

 

 

3  

Unobservable inputs are weighted based on the value of the investments included in the range.

 

4   

The Fund fair values certain of its Level 3 investments using prior transaction prices (acquisition cost), although the transaction may not have occurred during the current reporting period. In such cases, these investments are generally privately held investments. There may not be a secondary market, and/or there are a limited number of investors. The determination to fair value such investments at cost is based upon factors consistent with the principles of fair value measurement that are reasonably available to the Global Valuation Committee, or its delegate. Valuations are reviewed utilizing available market information to determine if the carrying value should be adjusted. Such market data may include, but is not limited to, observations of the trading multiples of public companies considered comparable to the private companies being valued, financial or operational information released by the company, and/or news or corporate events that affect the investment. Valuations may be adjusted to account for company-specific issues, the lack of liquidity inherent in a nonpublic investment and the fact that comparable public companies are not identical to the investments being fair valued by the Fund.

 

5   

Does not include Level 3 investments with values derived utilizing prices from recent prior transactions or third party pricing information without adjustment for which such inputs are unobservable. See above valuation input table for values of such Level 3 investments. A significant change in third party pricing information could result in a significantly lower or higher value in such Level 3 investments.

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

 

     Common
Stocks
    Corporate
Bonds
    Floating Rate
Loan Interests
    Other
Interests
    Preferred
Securities
    Warrants     Total  
Assets/Liabilities:              

Opening balance, as of February 29, 2012

  $ 4,322,217      $ 4,458,734      $ 9,295,244      $ 4,642      $ 352,582      $ 1      $ 18,433,420   

Transfers into Level 31

                  2,542,871                             2,542,871   

Transfers out of Level 32

    (38,470            (219,217                          (257,687

Accrued discounts/premiums

           1,737        62,211                             63,948   

Net realized gain (loss)

    (937,908            (352,573            (87,104     (177,871     (1,555,456

Net change in unrealized appreciation/depreciation3

    522,915        (55,811     399,346        287        110,561        177,870        1,155,168   

Purchases

    152,928        56,611        1,732,804                             1,942,343   

Sales

    (12     (83,050     (1,446,866            (376,039            (1,905,967
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Closing Balance, as of August 31, 2012   $ 4,021,670      $ 4,378,221      $ 12,013,820      $ 4,929                    $ 20,418,640   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1   

As of February 29, 2012, the Fund used observable inputs in determining the value of certain investments. As of August 31, 2012, the Fund used significant unobservable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $2,542,871 transferred from Level 2 to Level 3 in the disclosure hierarchy.

 

2   

As of February 29, 2012, the Fund used significant unobservable inputs in determining the value of certain investments. As of August 31, 2012, the Fund used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $257,687 transferred from Level 3 to Level 2 in the disclosure hierarchy.

 

3   

Included in the related net change in unrealized appreciation/depreciation in the Consolidated Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of August 31, 2012 was $(373,524).

 

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

 

    

Credit

Contracts

 

Assets/Liabilities:

 

Opening balance, as of February 29, 2012

  $ 237,861   

Transfers into Level 34

      

Transfers out of Level 34

      

Accrued discounts/premiums

      

Net realized gain (loss)

      

Net change in unrealized appreciation/depreciation5

    349,686   

Purchases

      

Issuances6

      

Sales

      

Settlements7

      
 

 

 

 
Closing Balance, as of August 31, 2012   $ 587,547   
 

 

 

 

 

4   

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

 

5   

Included in the related net change in unrealized appreciation/depreciation in the Consolidated Statement of Operations. The change in unrealized appreciation/depreciation on derivative financial instruments still held at August 31, 2012 was $349,686.

 

6   

Issuances represent upfront cash received on certain derivative financial instruments.

 

7   

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

 

 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    39


Table of Contents
Consolidated Schedule of Investments     BlackRock Debt Strategies Fund, Inc. (DSU)
August 31, 2012 (Unaudited)    (Percentages shown are based on Net Assets)

 

Asset-Backed Securities   

Par 

(000)

    Value  
    

CSAM Funding, Series 2A, Class B1,
7.05%, 10/15/16 (a)

   USD 625      $ 631,500   

Fraser Sullivan CLO Ltd., Series 2012-7A, Class C, 4.47%, 4/20/23 (a)(b)

     765        679,779   

Gannett Peak CLO Ltd., Series 2006-1X, Class A2, 0.81%, 10/27/20 (b)

     940        791,950   

Goldentree Loan Opportunities VI Ltd., Series 2012-6A, Class D, 4.66%, 4/17/22 (a)(b)

     1,250        1,136,375   

Greyrock CDO Ltd., Series 2005-1X, Class A2L, 0.85%, 11/15/17 (b)

     1,980        1,751,706   

Highbridge Loan Management Ltd., Series 2012-1A, Class C,
5.71%, 9/20/22 (a)(b)(c)

     1,200        1,107,600   

ING Investment Management, Series 2012-2A, Class D, 4.99%, 10/15/22 (a)(b)

     1,275        1,136,803   

LCM LP (a)(b):

    

Series 11A, Class D2, 4.41%, 4/19/22

     1,300        1,137,500   

Series 9A, Class E, 4.66%, 7/14/22

     1,000        775,100   

Symphony CLO Ltd. (a)(b):

    

Series 2012-10A, Class D,
5.69%, 7/23/23

     1,200        1,110,000   

Series 2012-9A, Class D,
4.71%, 4/16/22

     1,075        958,040   
                  
Total Asset-Backed Securities – 2.5%              11,216,353   

 

Common Stocks (d)    Shares         

Chemicals — 0.0%

  

GEO Specialty Chemicals, Inc.

     339,340        156,096   

Containers & Packaging — 0.1%

  

Smurfit Kappa Plc

     36,342        296,488   

Diversified Financial Services — 0.9%

  

Kcad Holdings I Ltd.

     590,545,406        3,915,907   

Electrical Equipment — 0.0%

  

Medis Technologies Ltd.

     286,757        860   

Hotels, Restaurants & Leisure — 0.0%

  

HRP PIK Corp., Class B (a)

     5,000          

Metals & Mining — 0.1%

  

Euramax International

     2,337        498,623   

Paper & Forest Products — 0.6%

  

Ainsworth Lumber Co. Ltd. (a)

    
 1,237,553
  
    2,711,757   

Western Forest Products, Inc. (a)

     211,149        229,195   
    

 

 

 
        2,940,952   

Semiconductors & Semiconductor Equipment — 0.0%

  

SunPower Corp.

     1,707        7,647   

Software — 0.3%

    

Bankruptcy Management Solutions, Inc.

     1,870        19   

HMH Holdings/EduMedia

     52,041        1,275,011   
    

 

 

 
               1,275,030   

Specialty Retail — 0.0%

    

Movie Gallery, Inc.

     503,737        5   
Total Common Stocks – 2.0%              9,091,608   
Corporate Bonds   

Par 

(000)

    Value  
    

Aerospace & Defense — 0.6%

    

Huntington Ingalls Industries, Inc., 7.13%, 3/15/21

   USD 810      $ 876,825   

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

     1,364        1,452,660   

Meccanica Holdings USA, Inc., 6.25%, 7/15/19 (a)

     405        366,463   
    

 

 

 
               2,695,948   

Airlines — 0.1%

    

American Airlines Pass-Through Trust, Series 2011-2, Class A, 8.63%, 4/15/23

     611        648,085   

Delta Air Lines, Inc., Series 2009-1-B,
9.75%, 6/17/18

     176        190,113   
    

 

 

 
               838,198   

Auto Components — 1.5%

    

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

     560        616,000   

Icahn Enterprises LP:

    

7.75%, 1/15/16

     220        231,000   

8.00%, 1/15/18

     4,035        4,297,275   

Jaguar Land Rover Plc, 8.25%, 3/15/20

   GBP 392        656,522   

Titan International, Inc., 7.88%, 10/01/17

   USD 940        984,650   

Venture Holdings Co. LLC (d)(e):

    

12.00%, 7/01/49

     4,450        1   

Series B, 9.50%, 7/01/05

     1,800          
    

 

 

 
               6,785,448   

Beverages — 0.2%

  

Crown European Holdings SA:

    

7.13%, 8/15/18 (a)

   EUR  304        420,608   

7.13%, 8/15/18

     257        355,580   

Refresco Group BV, 7.38%, 5/15/18

     213        251,837   
    

 

 

 
               1,028,025   

Biotechnology — 0.0%

  

QHP Royalty Sub LLC, 10.25%, 3/15/15 (a)

   USD 45        44,770   

Building Products — 0.6%

  

Building Materials Corp. of America (a):

  

 

7.00%, 2/15/20

     1,000        1,082,500   

6.75%, 5/01/21

     590        644,575   

USG Corp., 9.75%, 1/15/18

     980        1,051,050   
    

 

 

 
               2,778,125   

Capital Markets — 0.7%

  

E*Trade Financial Corp.:

    

12.50%, 11/30/17 (f)

     1,765        2,014,306   

2.25%, 8/31/19 (a)(g)(h)

     593        507,015   

KKR Group Finance Co. LLC, 6.38%, 9/29/20 (a)

     540        611,254   
    

 

 

 
               3,132,575   

Chemicals — 4.9%

  

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

     475        476,188   

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

     1,415        1,563,575   

GEO Specialty Chemicals, Inc. (a):

    

7.50%, 3/31/15 (f)(h)

     4,171        5,004,944   

10.00%, 3/31/15

     4,106        4,105,600   

Hexion US Finance Corp.:

    

6.63%, 4/15/20

     895        903,950   

9.00%, 11/15/20

     670        572,850   

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

     735        841,575   

INEOS Finance Plc (a):

    

8.38%, 2/15/19

     1,470        1,547,175   

7.50%, 5/01/20

     365        372,300   

INEOS Group Holdings Plc, 8.50%, 2/15/16 (a)

     240        226,200   
 

 

See Notes to Consolidated Financial Statements.

 

                
40    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments
(continued)
  

BlackRock Debt Strategies Fund, Inc. (DSU)

(Percentages shown are based on Net Assets)

 

Corporate Bonds  

Par 

(000)

    Value  
   

Chemicals (concluded)

   

LyondellBasell Industries NV:

   

6.00%, 11/15/21

  USD 930      $ 1,060,200   

5.75%, 4/15/24

    1,775        2,010,187   

NOVA Chemicals Corp., 8.63%, 11/01/19

    570        649,800   

Orion Engineered Carbons Bondco
GmbH, 9.63%, 6/15/18 (a)

    800        844,000   

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

    2,035        2,055,350   
   

 

 

 
              22,233,894   

Commercial Banks — 0.9%

  

CIT Group, Inc.:

   

7.00%, 5/02/16 (a)

    1,556        1,559,880   

5.00%, 5/15/17

    620        646,350   

5.50%, 2/15/19 (a)

    1,430        1,490,775   

5.00%, 8/15/22

    480        483,636   
   

 

 

 
              4,180,641   

Commercial Services & Supplies — 1.3%

  

ARAMARK Holdings Corp., 8.63%, 5/01/16 (a)(f)

    625        639,850   

AWAS Aviation Capital Ltd., 7.00%, 10/17/16 (a)

    757        798,323   

Brickman Group Holdings, Inc.,
9.13%, 11/01/18 (a)

    55        55,550   

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

    427        438,209   

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

    800        874,698   

The Geo Group, Inc., 7.75%, 10/15/17

    850        921,187   

Mead Products LLC/ACCO Brands Corp.,
6.75%, 4/30/20 (a)

    617        652,477   

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

    640        686,400   

Verisure Holding AB:

   

8.75%, 9/01/18

  EUR 400        503,120   

8.75%, 12/01/18

    149        165,860   

West Corp., 8.63%, 10/01/18

  USD 315        319,725   
   

 

 

 
              6,055,399   

Communications Equipment — 0.8%

  

Avaya, Inc., 9.75%, 11/01/15

    360        312,300   

Hughes Satellite Systems Corp., 6.50%, 6/15/19

    720        771,300   

Zayo Group LLC/Zayo Capital, Inc.:

   

8.13%, 1/01/20

    1,320        1,402,500   

10.13%, 7/01/20

    1,020        1,093,950   
   

 

 

 
              3,580,050   

Construction Materials — 0.5%

  

HD Supply, Inc., 8.13%, 4/15/19 (a)

    2,080        2,256,800   

Consumer Finance — 0.1%

   

Ford Motor Credit Co. LLC:

   

7.00%, 4/15/15

    280        311,691   

6.63%, 8/15/17

    148        170,138   
   

 

 

 
              481,829   

Containers & Packaging — 1.5%

  

Ardagh Packaging Finance Plc:

   

7.38%, 10/15/17

  EUR 100        133,012   

7.38%, 10/15/17 (a)

    385        512,098   

7.38%, 10/15/17

    100        133,012   

7.38%, 10/15/17 (a)

  USD 206        220,678   

9.13%, 10/15/20 (a)

    300        312,000   

Ball Corp., 6.75%, 9/15/20

    625        690,625   

Berry Plastics Corp.:

   

4.34%, 9/15/14 (b)

    495        487,575   

8.25%, 11/15/15

    655        689,388   

9.75%, 1/15/21

    475        526,063   

Beverage Packaging Holdings Luxembourg II SA, 8.00%, 12/15/16

  EUR  1,243        1,532,176   

Sealed Air Corp. (a):

   

8.13%, 9/15/19

  USD 770        856,625   
Corporate Bonds  

Par 

(000)

    Value  
   

Containers & Packaging (concluded)

  

 

Sealed Air Corp. (a) (concluded) :

   

8.38%, 9/15/21

  USD 150      $ 168,750   

Smurfit Kappa Acquisitions, 7.75%, 11/15/19

  EUR 390        537,143   
   

 

 

 
              6,799,145   

Distributors — 0.2%

  

VWR Funding, Inc., 7.25%, 9/15/17 (a)(c)

  USD 725        734,063   

Diversified Consumer Services — 0.2%

  

Laureate Education, Inc., 9.25%, 9/01/19 (a)

    585        585,000   

ServiceMaster Co., 8.00%, 2/15/20

    235        250,569   
   

 

 

 
              835,569   

Diversified Financial Services — 3.0%

  

Ally Financial, Inc.:

   

7.50%, 12/31/13

    90        96,188   

8.30%, 2/12/15

    1,330        1,476,300   

7.50%, 9/15/20

    1,990        2,278,550   

8.00%, 11/01/31

    2,460        2,908,950   

8.00%, 11/01/31

    1,030        1,222,604   

Archemedes Funding III Ltd., 5.50%, 11/29/12

    1,829          

CNG Holdings, Inc., 9.38%, 5/15/20 (a)

    490        499,800   

DPL, Inc., 7.25%, 10/15/21 (a)

    180        205,200   

Gala Group Finance Plc, 8.88%, 9/01/18

  GBP 200        296,134   

Reynolds Group Issuer, Inc.:

   

7.75%, 10/15/16

  EUR 350        454,537   

7.13%, 4/15/19

  USD 1,070        1,152,925   

9.88%, 8/15/19

    1,845        1,951,087   

6.88%, 2/15/21

    665        719,863   

8.25%, 2/15/21

    155        152,288   

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

    200        218,500   
   

 

 

 
              13,632,926   

Diversified Telecommunication Services — 1.8%

  

ITC Deltacom, Inc., 10.50%, 4/01/16

    1,010        1,088,275   

Level 3 Communications, Inc., 8.88%, 6/01/19 (a)

    520        530,400   

Level 3 Financing, Inc.:

   

4.47%, 2/15/15 (b)

    2,420        2,395,800   

8.13%, 7/01/19

     2,902        3,039,845   

7.00%, 6/01/20 (a)

    460        457,700   

OTE Plc, 5.00%, 8/05/13

  EUR 88        95,935   

Telefonica Emisiones SAU, 4.69%, 11/11/19

    50        58,042   

Telenet Finance V Luxembourg SCA:

   

6.25%, 8/15/22

    119        150,427   

6.75%, 8/15/24

    222        283,420   
   

 

 

 
              8,099,844   

Electric Utilities — 0.1%

  

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

  USD 475        510,534   

Electrical Equipment — 0.1%

   

Belden, Inc., 5.50%, 9/01/22 (a)

    360        360,900   

Electronic Equipment, Instruments & Components — 0.0%

  

Muzak Holdings LLC, 13.00%, 3/15/10 (d)(e)

    2,675          

Energy Equipment & Services — 2.5%

  

 

Calfrac Holdings LP, 7.50%, 12/01/20 (a)

    1,680        1,646,400   

Compagnie Générale de Géophysique, Veritas, 6.50%, 6/01/21

    2,100        2,186,625   

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

    1,190        1,228,675   

Gulfmark Offshore, Inc., 6.38%, 3/15/22 (a)

    130        132,600   

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

    265        270,300   

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

    740        752,950   

MEG Energy Corp. (a):

   

6.50%, 3/15/21

    950        999,875   

6.38%, 1/30/23

    315        328,388   

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

    475        504,687   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    41


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Debt Strategies Fund, Inc. (DSU)

(Percentages shown are based on Net Assets)

 

Corporate Bonds  

Par 

(000)

    Value  
   

Energy Equipment & Services (concluded)

   

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

    USD 2,045      $ 2,080,787   

Precision Drilling Corp.:

   

6.63%, 11/15/20

     125        131,250   

6.50%, 12/15/21

    840        882,000   
   

 

 

 
              11,144,537   

Food & Staples Retailing — 0.1%

  

 

Bakkavor Finance 2 Plc, 8.25%, 2/15/18

  GBP 100        139,731   

Rite Aid Corp., 9.25%, 3/15/20

  USD 435        446,962   
   

 

 

 
              586,693   

Food Products — 0.4%

  

Constellation Brands, Inc., 6.00%, 5/01/22

    460        516,925   

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

    465        489,994   

Smithfield Foods, Inc., 6.63%, 8/15/22

    687        703,316   
   

 

 

 
              1,710,235   

Health Care Equipment & Supplies — 0.6%

   

Biomet, Inc., 6.50%, 8/01/20 (a)

    523        542,612   

DJO Finance LLC:

   

10.88%, 11/15/14

    284        296,425   

8.75%, 3/15/18 (a)

    215        228,438   

7.75%, 4/15/18

    770        704,550   

Fresenius Medical Care US Finance II, Inc., 5.88%, 1/31/22 (a)

    640        680,000   

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

    475        508,250   
   

 

 

 
              2,960,275   

Health Care Providers & Services — 3.5%

   

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

    700        728,000   

CHS/Community Health Systems, Inc.:

   

5.13%, 8/15/18

    345        355,781   

7.13%, 7/15/20

    333        348,818   

Crown Newco 3 Plc:

   

7.00%, 2/15/18 (a)

  GBP 108        172,774   

7.00%, 2/15/18

    194        310,353   

DaVita, Inc., 5.75%, 8/15/22

  USD 686        713,440   

HCA, Inc.:

   

6.50%, 2/15/20

    2,020        2,219,475   

7.88%, 2/15/20

    1,210        1,350,662   

5.88%, 3/15/22

    2,380        2,531,725   

Hologic, Inc., 6.25%, 8/01/20 (a)

    977        1,034,399   

IASIS Healthcare LLC, 8.38%, 5/15/19

    1,243        1,185,511   

Omnicare, Inc., 7.75%, 6/01/20

    1,310        1,444,275   

Tenet Healthcare Corp., 8.88%, 7/01/19

    2,305        2,621,937   

United Surgical Partners International, Inc., 9.00%, 4/01/20 (a)

    330        354,338   

Vanguard Health Holding Co. II LLC, 7.75%, 2/01/19 (a)

    565        589,013   
   

 

 

 
              15,960,501   

Health Care Technology — 0.8%

   

IMS Health, Inc., 12.50%, 3/01/18 (a)

    3,205        3,765,875   

Hotels, Restaurants & Leisure — 2.3%

   

Affinity Gaming LLC/Affinity Gaming Finance Corp., 9.00%, 5/15/18 (a)

    235        239,112   

Caesars Entertainment Operating Co., Inc.:

   

11.25%, 6/01/17

    770        829,675   

10.00%, 12/15/18

    518        326,340   

8.50%, 2/15/20 (a)

    880        867,900   

Caesars Operating Escrow LLC, 9.00%, 2/15/20 (a)

    1,343        1,336,285   

Carlson Wagonlit BV, 6.88%, 6/15/19 (a)

    260        270,400   

Choice Hotels International, Inc., 5.75%, 7/01/22

    170        182,325   

Cirsa Funding Luxembourg SA, 8.75%, 5/15/18

  EUR  1,679        1,853,145   

Diamond Resorts Corp., 12.00%, 8/15/18

  USD 1,040        1,106,300   

Gategroup Finance Luxembourg SA, 6.75%, 3/01/19

  EUR 235        302,233   
Corporate Bonds  

Par 

(000)

    Value  
   

Hotels, Restaurants & Leisure (concluded)

   

HRP Myrtle Beach Holdings LLC, 14.50%, 4/01/14 (a)(d)(e)

  USD 6,892      $ 1   

HRP Myrtle Beach Operations LLC (a)(d)(e):

   

0.00%, 4/01/12

    5,000        1   

12.50%, 4/01/13

    5,000        1   

Little Traverse Bay Bands of Odawa Indians,
9.00%, 8/31/20 (a)

    609        554,190   

Travelport LLC:

   

5.09%, 9/01/14 (b)

    1,770        1,256,700   

9.88%, 9/01/14

    390        310,050   

Tropicana Entertainment LLC,
9.63%, 12/15/14 (d)(e)

    530        —     

Wynn Las Vegas LLC, 5.38%, 3/15/22 (a)

    888        907,980   
   

 

 

 
              10,342,638   

Household Durables — 0.7%

   

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

    640        654,400   

Libbey Glass, Inc., 6.88%, 5/15/20 (a)

    175        186,594   

Spie BondCo 3 SCA, 11.00%, 8/15/19

  EUR 244        311,506   

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

  USD 1,685        1,878,775   
   

 

 

 
              3,031,275   

Household Products — 0.0%

   

Ontex IV SA, 9.00%, 4/15/19

  EUR 110        127,289   

Independent Power Producers & Energy Traders — 3.5%

  

The AES Corp.:

   

7.75%, 10/15/15

  USD 300        339,000   

9.75%, 4/15/16

    1,305        1,559,475   

7.38%, 7/01/21

    130        148,850   

Calpine Corp. (a):

   

7.25%, 10/15/17

    920        984,400   

7.50%, 2/15/21

    365        405,150   

Energy Future Holdings Corp., 10.00%, 1/15/20

    2,315        2,552,287   

Energy Future Intermediate Holding Co. LLC:

   

10.00%, 12/01/20

    6,060        6,802,350   

11.75%, 3/01/22 (a)

    470        500,550   

GenOn REMA LLC, 9.24%, 7/02/17

    392        421,486   

Laredo Petroleum, Inc.:

   

9.50%, 2/15/19

    1,210        1,373,350   

7.38%, 5/01/22

    360        387,000   

QEP Resources, Inc., 5.38%, 10/01/22

    335        343,375   
   

 

 

 
              15,817,273   

Industrial Conglomerates — 1.6%

   

Sequa Corp. (a):

   

11.75%, 12/01/15

    2,850        2,992,500   

13.50%, 12/01/15

    4,023        4,264,216   
              7,256,716   

Insurance — 0.6%

   

CNO Financial Group, Inc., 9.00%, 1/15/18 (a)

    1,649        1,803,594   

Genworth Financial, Inc., 7.63%, 9/24/21

    700        715,260   

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

    415        371,425   
   

 

 

 
              2,890,279   

IT Services — 1.2%

   

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

    980        1,051,050   

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

    720        741,600   

First Data Corp.:

   

7.38%, 6/15/19 (a)

    835        862,137   

6.75%, 11/01/20 (a)

    870        863,475   

8.25%, 1/15/21 (a)

    535        530,319   

12.63%, 1/15/21

    764        773,550   

SunGard Data Systems, Inc., 7.63%, 11/15/20

    600        643,500   
   

 

 

 
              5,465,631   
 

 

See Notes to Consolidated Financial Statements.

 

                
42    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Debt Strategies Fund, Inc. (DSU)

(Percentages shown are based on Net Assets)

 

Corporate Bonds   

Par 

(000)

    Value  
    

Machinery — 0.9%

    

UR Financing Escrow Corp. (a):

    

5.75%, 7/15/18

   USD 877      $ 927,427   

7.38%, 5/15/20

     565        598,900   

7.63%, 4/15/22

     2,328        2,514,240   
    

 

 

 
               4,040,567   

Media — 5.6%

    

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

     365        413,363   

Cengage Learning Acquisitions, Inc.,
11.50%, 4/15/20 (a)

     815        857,787   

Checkout Holding Corp., 16.03%, 11/15/15 (a)(g)

     1,090        664,900   

Cinemark USA, Inc., 8.63%, 6/15/19

     410        459,200   

Clear Channel Communications, Inc.,
9.00%, 3/01/21

     617        529,078   

Clear Channel Worldwide Holdings, Inc.:

    

Series A, 9.25%, 12/15/17

     639        691,717   

Series B, 9.25%, 12/15/17

     5,512        5,987,410   

Series B, 7.63%, 3/15/20

     1,677        1,626,690   

DISH DBS Corp., 5.88%, 7/15/22 (a)

     1,440        1,450,800   

Intelsat Jackson Holdings SA:

    

11.25%, 6/15/16

     182        191,555   

7.25%, 10/15/20 (a)

     1,370        1,476,175   

Intelsat Luxembourg SA:

    

11.25%, 2/04/17

     250        262,500   

11.50%, 2/04/17 (f)

     1,190        1,249,500   

Interactive Data Corp., 10.25%, 8/01/18

     1,545        1,741,987   

Lamar Media Corp., 5.88%, 2/01/22

     480        508,800   

NAI Entertainment Holdings LLC,
8.25%, 12/15/17 (a)

     920        1,025,800   

Nielsen Finance LLC, 7.75%, 10/15/18

     1,235        1,389,375   

ProQuest LLC, 9.00%, 10/15/18 (a)

     415        380,763   

Truven Health Analytics, Inc., 10.63%, 6/01/20 (a)

     380        405,650   

Unitymedia Hessen GmbH & Co. KG:

    

8.13%, 12/01/17 (a)

     2,730        2,955,225   

7.50%, 3/15/19

     1,040        1,125,301   

Ziggo Finance BV, 6.13%, 11/15/17 (a)

   EUR 51        68,478   
    

 

 

 
               25,462,054   

Metals & Mining — 1.5%

    

Eco-Bat Finance Plc, 7.75%, 2/15/17

     305        387,465   

FMG Resources August 2006 Property Ltd. (a):

    

6.88%, 2/01/18

   USD 640        609,600   

6.88%, 4/01/22

     290        266,800   

Global Brass and Copper, Inc., 9.50%, 6/01/19 (a)

     485        510,463   

Kaiser Aluminum Corp., 8.25%, 6/01/20 (a)

     360        381,600   

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

     120        126,300   

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

     3,625        4,050,938   

RathGibson, Inc., 11.25%, 2/15/14 (d)(e)

     4,440          

Schmolz + Bickenbach Luxembourg SA,
9.88%, 5/15/19

   EUR 260        264,075   

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

   USD 390        403,650   
    

 

 

 
               7,000,891   

Multiline Retail — 0.1%

    

Dollar General Corp., 4.13%, 7/15/17

     241        250,640   

Oil, Gas & Consumable Fuels — 7.4%

    

Access Midstream Partners LP, 6.13%, 7/15/22

     785        814,437   

Alpha Natural Resources, Inc.:

    

6.00%, 6/01/19

     460        414,000   

6.25%, 6/01/21

     345        308,775   

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

     340        362,100   

CCS, Inc., 11.00%, 11/15/15 (a)

     920        952,200   

Chaparral Energy, Inc., 7.63%, 11/15/22 (a)

     215        227,363   

Chesapeake Energy Corp.:

    

7.25%, 12/15/18

     45        47,138   

6.63%, 8/15/20

     500        513,750   

6.88%, 11/15/20

     285        295,688   
Corporate Bonds   

Par 

(000)

    Value  
    

Oil, Gas & Consumable Fuels (concluded)

    

Chesapeake Energy Corp. (concluded) :

    

6.13%, 2/15/21

   USD 435      $ 431,737   

Coffeyville Resources LLC, 9.00%, 4/01/15 (a)

      191        203,415   

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

     395        407,837   

Consol Energy, Inc.:

    

8.25%, 4/01/20

     2,145        2,311,237   

6.38%, 3/01/21

     440        435,600   

Crosstex Energy LP:

    

8.88%, 2/15/18

     100        106,750   

7.13%, 6/01/22 (a)

     370        368,150   

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

     50        56,750   

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

     1,300        1,381,250   

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

     440        471,900   

Hilcorp Energy I LP, 7.63%, 4/15/21 (a)

     2,100        2,310,000   

Holly Energy Partners LP, 6.50%, 3/01/20 (a)

     150        156,750   

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

     605        642,812   

Linn Energy LLC:

    

6.25%, 11/01/19 (a)

     2,780        2,745,250   

8.63%, 4/15/20

     360        388,800   

7.75%, 2/01/21

     930        969,525   

MarkWest Energy Partners LP, 5.50%, 2/15/23

     275        281,188   

Newfield Exploration Co.:

    

5.75%, 1/30/22

     255        279,225   

5.63%, 7/01/24

     1,200        1,302,000   

Northern Oil and Gas, Inc., 8.00%, 6/01/20 (a)

     505        515,100   

Oasis Petroleum, Inc.:

    

7.25%, 2/01/19

     270        284,850   

6.50%, 11/01/21

     290        295,800   

Offshore Group Investments Ltd.:

    

11.50%, 8/01/15

     840        928,200   

11.50%, 8/01/15 (a)

     800        884,000   

OGX Petroleo e Gas Participacoes SA (a):

    

8.50%, 6/01/18

     1,324        1,175,050   

8.38%, 4/01/22

     565        480,250   

PetroBakken Energy Ltd., 8.63%, 2/01/20 (a)

     1,240        1,267,900   

Pioneer Natural Resources Co., 7.20%, 1/15/28

     1,080        1,371,966   

Range Resources Corp.:

    

5.75%, 6/01/21

     1,230        1,308,412   

5.00%, 8/15/22

     547        569,564   

Sabine Pass Liquified Natural Gas LP,
7.50%, 11/30/16

     1,015        1,086,050   

Samson Investment Co., 9.75%, 2/15/20 (a)

     76        78,280   

SandRidge Energy, Inc.:

    

7.50%, 3/15/21 (a)

     305        308,813   

7.50%, 3/15/21

     225        227,813   

8.13%, 10/15/22 (a)

     205        214,225   

7.50%, 2/15/23 (a)

     535        537,675   

SESI LLC:

    

6.38%, 5/01/19

     530        561,800   

7.13%, 12/15/21

     525        584,062   

SM Energy Co.:

    

6.50%, 11/15/21

     425        444,125   

6.50%, 1/01/23 (a)

     200        208,500   

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

     370        397,750   

Titan Petrochemicals Group Ltd.,
8.50%, 3/18/49 (d)(e)

     1,760        440,000   
    

 

 

 
               33,355,812   

Paper & Forest Products — 0.6%

    

Clearwater Paper Corp., 10.63%, 6/15/16

     640        715,200   

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

     280        289,800   

NewPage Corp., 11.38%, 12/31/14 (d)(e)

     2,280        1,544,700   

Sappi Papier Holding GmbH, 8.38%, 6/15/19 (a)

     200        210,500   
    

 

 

 
               2,760,200   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    43


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Debt Strategies Fund, Inc. (DSU)

(Percentages shown are based on Net Assets)

 

Corporate Bonds   

Par 

(000)

    Value  
    

Pharmaceuticals — 0.4%

    

Valeant Pharmaceuticals International (a):

    

6.50%, 7/15/16

   USD 990      $ 1,044,450   

7.25%, 7/15/22

     660        681,450   
    

 

 

 
               1,725,900   

Real Estate Investment Trusts (REITs) — 0.4%

    

Felcor Lodging LP, 6.75%, 6/01/19

     1,575        1,689,188   

Real Estate Management & Development — 1.2%

    

Realogy Corp.:

    

11.50%, 4/15/17

     275        292,187   

12.00%, 4/15/17

     160        167,600   

7.88%, 2/15/19 (a)

     1,760        1,812,800   

7.63%, 1/15/20 (a)

     1,190        1,297,100   

9.00%, 1/15/20 (a)

     310        334,800   

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

     1,240        1,379,500   
    

 

 

 
               5,283,987   

Road & Rail — 0.9%

    

Florida East Coast Railway Corp., 8.13%, 2/01/17

     370        388,500   

The Hertz Corp.:

    

7.50%, 10/15/18

     1,490        1,607,337   

6.75%, 4/15/19

     265        278,250   

6.75%, 4/15/19 (a)

     285        299,250   

7.38%, 1/15/21

     1,280        1,392,000   
    

 

 

 
               3,965,337   

Software — 0.8%

    

Infor US, Inc., 9.38%, 4/01/19 (a)

     2,420        2,619,650   

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

     1,225        1,252,563   
    

 

 

 
               3,872,213   

Specialty Retail — 0.6%

    

Claire’s Stores, Inc., 9.00%, 3/15/19 (a)

     430        446,125   

Party City Holdings, Inc., 8.88%, 8/01/20 (a)

     422        446,265   

Penske Automotive Group, Inc., 5.75%, 10/01/22 (a)

     495        504,900   

QVC, Inc., 5.13%, 7/02/22 (a)

     260        272,517   

Sally Holdings LLC:

    

6.88%, 11/15/19

     650        726,375   

5.75%, 6/01/22

     300        322,875   
    

 

 

 
               2,719,057   

Textiles, Apparel & Luxury Goods — 0.2%

    

Levi Strauss & Co., 6.88%, 5/01/22

     265        274,938   

PVH Corp., 7.75%, 11/15/23

     410        478,346   
    

 

 

 
               753,284   

Trading Companies & Distributors — 0.5%

    

Doric Nimrod Air Finance Alpha Ltd. (a):

    

Series 2012-1, Class A, 5.13%, 11/30/24

     1,190        1,207,850   

Series 2012-1, Class B, 6.50%, 5/30/21

     940        951,111   
    

 

 

 
               2,158,961   

Transportation Infrastructure — 0.1%

    

Aguila 3 SA, 7.88%, 1/31/18 (a)

     353        371,974   

Wireless Telecommunication Services — 4.0%

    

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

     3,050        3,217,750   

Digicel Group Ltd. (a):

    

9.13%, 1/15/15

     3,948        3,987,480   

8.25%, 9/01/17

     810        858,600   

10.50%, 4/15/18

     400        432,000   

MetroPCS Wireless, Inc., 6.63%, 11/15/20

     690        714,150   

SBA Telecommunications, Inc., 5.75%, 7/15/20 (a)

     230        240,350   

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

     1,720        1,556,600   

Sprint Nextel Corp. (a):

    

9.00%, 11/15/18

     4,260        5,026,800   

7.00%, 3/01/20

     1,770        1,938,150   
    

 

 

 
               17,971,880   
Total Corporate Bonds – 62.1%              281,505,845   
Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Aerospace & Defense — 0.3%

    

TransDigm, Inc.:

    

Add on Term Loan B2, 4.00%, 2/14/17

   USD 263      $ 264,452   

Term Loan B, 4.00%, 2/14/17

     1,193        1,197,326   
    

 

 

 
               1,461,778   

Airlines — 0.4%

    

Delta Air Lines, Inc., Credit, Term Loan B,
5.50%, 4/20/17

     1,862        1,875,232   

US Airways Group, Inc., Term Loan, 2.74%, 3/21/14

     100        96,625   
    

 

 

 
               1,971,857   

Auto Components — 1.7%

    

Autoparts Holdings Ltd.:

    

First Lien Term Loan, 6.50%, 7/28/17

     1,390        1,361,710   

Second Lien Term Loan, 10.50%, 1/29/18

     1,800        1,566,000   

Federal-Mogul Corp.:

    

Term Loan B, 2.17%—2.18%, 12/29/14

     1,516        1,446,900   

Term Loan C, 2.17%—2.18%, 12/28/15

     248        236,610   

The Goodyear Tire & Rubber Co., Term Loan
(Second Lien), 4.75%, 4/30/19

     2,170        2,161,863   

Schaeffler AG, Term Loan C2, 6.00%, 1/27/17

     750        752,190   
    

 

 

 
               7,525,273   

Biotechnology — 0.2%

    

Grifols, Inc., Term Loan B, 4.50%, 6/01/17

     1,032        1,034,506   

Building Products — 1.6%

    

Armstrong World Industries, Inc., Term Loan B,
4.00%, 3/09/18

     1,111        1,107,797   

CPG International, Inc., Term Loan B,
6.00%, 2/18/17

     1,182        1,162,792   

Goodman Global, Inc.:

    

Initial Term Loan (First Lien), 5.75%, 10/28/16

     3,025        3,027,871   

Term Loan (Second Lien), 9.00%, 10/30/17

     764        773,663   

Momentive Performance Materials, Inc. (Nautilus), Extended Term Loan, 3.62%, 5/05/15

   EUR 1,053        1,212,118   
    

 

 

 
               7,284,241   

Capital Markets — 1.1%

    

American Capital Holdings, Term Loan,
5.50%, 7/19/16

   USD 925        928,469   

HarbourVest Partners LLC, Term Loan B,
6.25%, 12/16/16

     1,508        1,506,163   

Nuveen Investments, Inc.:

    

Extended (First Lien), Term Loan,
5.95%—5.96%, 5/13/17

     418        418,700   

Extended Term Loan, 5.92%—5.96%, 5/12/17

     1,682        1,686,289   

Incremental Term Loan, 7.25%, 5/13/17

     555        557,497   
    

 

 

 
               5,097,118   

Chemicals — 4.0%

    

American Rock Salt Holdings LLC, Term Loan, 5.50%, 4/25/17

     2,242        2,176,618   

Chemtura Corp., Exit Term Loan B, 5.50%, 8/27/16

     1,300        1,303,796   

Evergreen Acqco 1 LP, Term Loan B, 6.25%, 7/09/19

     620        625,816   

Gentek, Inc., Term Loan, 5.00%—5.75%, 10/06/15

     951        946,495   

INEOS US Finance LLC, 6 Year Term Loan,
6.50%, 5/04/18

     4,691        4,698,212   

MacDermid, Inc., Tranche C Term Loan,
2.32%, 4/11/14

   EUR 612        760,883   

Nexeo Solutions LLC, Term Loan B, 5.00%, 9/08/17

   USD  1,605        1,561,570   

PolyOne Corp., Term Loan, 5.00%, 12/20/17

     657        658,670   

PQ Corp., Term Loan B, 3.98%, 7/30/14

     3,091        3,035,419   

Styron Sarl LLC, Term Loan B, 8.00%, 8/02/17

     584        543,979   

Tronox Pigments (Netherlands) BV:

    

Delayed Draw Term Loan, 4.25%, 2/08/18

     208        207,356   

Term Loan B, 4.25%, 2/08/18

     762        760,306   

Univar, Inc., Term Loan B, 5.00%, 6/30/17

     798        792,681   
    

 

 

 
               18,071,801   
 

 

See Notes to Consolidated Financial Statements.

 

                
44    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments
(continued)
  

BlackRock Debt Strategies Fund, Inc. (DSU)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Commercial Services & Supplies — 3.0%

    

ACCO Brands Corp., Term Loan B, 4.25%, 4/30/19

   USD 1,343      $ 1,342,135   

Altegrity, Inc., Tranche D Term Loan, 7.75%, 2/20/15

     2,517        2,503,508   

AWAS Finance Luxembourg 2012 SA, Term Loan, 5.75%, 7/16/18

     440        440,000   

AWAS Finance Luxembourg Sarl, Term Loan B, 5.25%, 6/10/16

     822        821,673   

Delos Aircraft, Inc., Term Loan B2, 4.75%, 4/12/16

     975        984,750   

KAR Auction Services, Inc., Term Loan B,
5.00%, 5/19/17

     2,373        2,372,730   

Protection One, Inc., Term Loan, 5.75%, 3/21/19

     958        967,176   

Synagro Technologies, Inc., Term Loan B,
2.24%, 4/02/14

     869        770,779   

Volume Services America, Inc., Term Loan B, 10.50%—10.75%, 9/16/16

     1,769        1,768,500   

West Corp., Term Loan B6, 5.75%, 6/29/18

     1,600        1,605,008   
    

 

 

 
               13,576,259   

Communications Equipment — 2.3%

  

 

Avaya, Inc.:

    

Extended Term Loan B3, 4.93%, 10/26/17

     123        110,142   

Term Loan B1, 3.18%, 10/24/14

     2,018        1,937,696   

CommScope, Inc., Term Loan, 4.25%, 1/12/18

     1,481        1,480,717   

Telesat Canada, Term Loan A, 4.41%, 3/28/17

   CAD  2,630        2,547,959   

Zayo Group, LLC, Term Loan B, 7.13%, 7/02/19

   USD 4,090        4,150,082   
    

 

 

 
               10,226,596   

Construction & Engineering — 0.9%

  

 

BakerCorp. International, Inc., Term Loan B,
4.75%, 6/01/18

     1,189        1,183,754   

Safway Services LLC, First Out Term Loan,
9.00%, 12/16/17

     2,750        2,750,000   
    

 

 

 
               3,933,754   

Construction Materials — 1.0%

  

 

HD Supply, Inc., Senior Debt B, 7.25%, 10/12/17

     4,630        4,730,332   

Consumer Finance — 0.3%

  

 

Springleaf Financial Funding Co., Term Loan,
5.50%, 5/10/17

     1,635        1,579,001   

Containers & Packaging — 0.2%

  

 

Sealed Air Corp., Term Loan B, 4.75%, 10/03/18

     855        859,634   

Diversified Consumer Services — 2.0%

  

 

Coinmach Service Corp., Term Loan B,
3.33%, 11/20/14

     4,090        3,923,884   

Education Management LLC, Term Loan C3,
8.25%, 3/29/18

     1,092        960,991   

Laureate Education, Inc., Extended Term Loan, 5.25%, 6/18/18

     1,798        1,754,146   

ServiceMaster Co.:

    

Delayed Draw Term Loan, 2.74%, 7/24/14

     152        151,126   

Term Loan, 2.75% — 2.97%, 7/24/14

     1,527        1,517,633   

Weight Watchers International, Inc., Term Loan F, 4.00%, 3/15/19

     887        876,109   
    

 

 

 
               9,183,889   

Diversified Financial Services — 1.4%

  

 

Residential Capital LLC, DIP Term Loan A1, 5.00%, 11/18/13

      2,035        2,040,088   

Reynolds Group Holdings, Inc.:

    

Term Loan B, 6.50%, 2/09/18

     943        948,053   

Term Loan C, 6.50%, 8/09/18

     3,376        3,418,815   
    

 

 

 
               6,406,956   

Diversified Telecommunication Services — 2.4%

  

Hawaiian Telcom Communications, Inc., Term Loan B, 7.00%, 2/28/17

     2,025        2,050,312   

Level 3 Financing, Inc.:

    

2016 Term Loan B, 4.75%, 2/01/16

     135        135,270   
Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Diversified Telecommunication Services (concluded)

  

Level 3 Financing, Inc. (concluded):

    

2019 Term Loan B, 5.25%, 8/01/19

   USD 110      $ 110,161   

Term Loan B2, 5.75%, 9/03/18

     5,500        5,514,520   

Term Loan B3, 5.75%, 8/31/18

     1,500        1,503,960   

US Telepacific Corp., Term Loan B, 5.75%, 2/23/17

     1,490        1,423,282   
    

 

 

 
               10,737,505   

Electronic Equipment, Instruments & Components — 0.4%

  

CDW LLC, Extended Term Loan, 4.00%, 7/14/17

     831        820,421   

Sensata Technologies Finance Co. LLC, Term Loan, 4.00%, 5/11/18

     1,148        1,149,419   
    

 

 

 
               1,969,840   

Energy Equipment & Services — 2.0%

    

Dynegy Midwest Generation LLC, Coal Co. Term Loan, 9.25%, 8/04/16

     1,631        1,691,485   

Dynegy Power LLC, Gas Co. Term Loan,
9.25%, 8/04/16

     2,984        3,124,090   

MEG Energy Corp., Term Loan B, 4.00%, 3/16/18

     2,978        2,980,865   

Tervita Corp., Term Loan B, 3.23%, 11/14/14

     1,355        1,329,474   
    

 

 

 
               9,125,914   

Food & Staples Retailing — 1.4%

    

AB Acquisitions UK Topco 2, Term Loan B1,
3.52%, 7/09/15

   GBP 3,000        4,495,603   

Pilot Travel Centers LLC, Term Loan B2,
4.25%, 8/07/19

   USD 860        862,150   

US Foods, Inc. (FKA U.S. Foodservice, Inc.), Extended Term Loan B, 5.75%, 3/31/17

     972        939,437   
    

 

 

 
               6,297,190   

Food Products — 1.9%

    

Advance Pierre Foods:

    

Term Loan (First Lien), 7.00%, 9/30/16

     2,550        2,561,486   

Term Loan (Second Lien), 11.25%, 9/29/17

     1,800        1,810,800   

Del Monte Foods Co., Term Loan, 4.50%, 3/08/18

     1,651        1,628,797   

Pinnacle Foods Finance LLC, Term Loan E,
4.75%, 10/17/18

     1,376        1,370,828   

Solvest Ltd. (Dole):

    

Term Loan B-2, 5.00%—6.00%, 7/06/18

     400        400,708   

Term Loan C-2, 5.00%—6.00%, 7/06/18

     716        717,057   
    

 

 

 
               8,489,676   

Health Care Equipment & Supplies — 3.1%

    

Bausch & Lomb, Inc., Term Loan B, 5.25%, 5/17/19

     2,150        2,157,159   

Biomet, Inc., Term Loan B, 3.00%—3.47%, 3/25/15

     200        199,476   

BSN Medical Acquisition Holding GmbH, Term Loan B, 6.00%, 7/27/19

     1,360        1,363,400   

DJO Finance LLC:

    

Extended Term Loan B2, 5.23%, 11/01/16

     759        758,923   

Term Loan B3, 6.25%, 9/15/17

     2,334        2,336,087   

Hologic, Inc., Term Loan B, 4.50%, 8/01/19

     3,580        3,601,731   

Hupah Finance, Inc., Term Loan B, 6.25%, 1/21/19

     1,262        1,266,569   

Immucor, Inc., Term Loan B, 7.25%, 8/17/18

     1,509        1,514,257   

LHP Hospital Group, Inc., Term Loan,
9.00%, 7/03/18

     755        760,663   
    

 

 

 
               13,958,265   

Health Care Providers & Services — 3.0%

    

ConvaTec, Inc., Term Loan, 5.75%, 12/22/16

      1,766        1,768,889   

DaVita, Inc.:

    

Term Loan B, 4.50%, 10/20/16

     1,970        1,974,925   

Term Loan B2, 4.00%, 9/02/19

     1,115        1,109,603   

Emergency Medical Services Corp., Term Loan, 5.25%, 5/25/18

     720        719,388   

Harden Healthcare LLC:

    

Add on Term Loan A, 7.75%, 3/02/15

     1,956        1,895,429   

Term Loan A, 8.50%, 3/02/15

     588        576,011   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    45


Table of Contents
Consolidated Schedule of Investments
(continued)
  

BlackRock Debt Strategies Fund, Inc. (DSU)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Health Care Providers & Services (concluded)

  

 

HCA, Inc.:

    

Extended Term Loan B3, 3.48%, 5/01/18

   USD 1,035      $ 1,018,668   

Term Loan B, 2.48%, 11/18/13

     245        244,610   

inVentiv Health, Inc.:

    

Combined Term Loan, 6.50%, 8/04/16

     411        382,649   

Incremental Term Loan B-3, 6.75%, 5/15/18

     1,013        944,377   

Medpace, Inc., Term Loan, 6.50%—7.25%, 6/16/17

     1,915        1,828,658   

Sheridan Holdings, Inc., First Lien Term Loan,
6.00%, 6/29/18

     345        345,286   

US Renal Care, Inc., First Lien Term Loan,
6.25%—7.25%, 7/02/19

     910        916,825   
    

 

 

 
               13,725,318   

Health Care Technology — 0.9%

    

IMS Health, Inc., Term Loan B, 4.50%, 8/25/17

     1,969        1,974,786   

Kinetic Concepts, Inc., Term Loan B, 7.00%, 5/04/18

     1,303        1,314,308   

MedAssets, Inc., Term Loan, 5.25%, 11/16/16

     813        814,929   
    

 

 

 
               4,104,023   

Hotels, Restaurants & Leisure — 3.6%

  

 

Alpha D2 Ltd., Term Loan B, 5.75%, 4/28/17

     1,102        1,107,969   

Caesars Entertainment Operating Co., Inc.:

    

Extended Term Loan B6, 5.49%, 1/26/18

     330        290,090   

Incremental Term Loan B4, 9.50%, 10/31/16

     1,004        1,023,456   

Term Loan B1, 3.24%, 1/28/15

     1,934        1,834,233   

Term Loan B3, 3.24%—3.46%, 1/28/15

     4,276        4,055,093   

Dunkin’ Brands, Inc., Term Loan B2,
4.00%, 11/23/17

     3,044        3,010,665   

Golden Living, Term Loan, 5.00%, 5/04/18

     243        231,833   

OSI Restaurant Partners LLC:

    

Revolver, 2.49%—4.50%, 6/14/13

     15        15,145   

Term Loan B, 2.56%, 6/14/14

     154        152,636   

Sabre, Inc., Non Extended Initial Term Loan,
2.23%, 9/30/14

     372        368,324   

SeaWorld Parks & Entertainment, Inc., Term Loan B, 4.00%, 8/17/17

     1,468        1,468,423   

Six Flags Theme Parks, Inc., Term Loan B,
4.25%, 12/20/18

     790        791,849   

Wendy’s International, Inc., Term Loan B,
4.75%, 5/15/19

     1,785        1,792,961   
    

 

 

 
               16,142,677   

Household Products — 0.3%

    

Prestige Brands, Inc., Term Loan,
5.25%—6.25%, 1/31/19

     1,323        1,332,718   
Independent Power Producers & Energy Traders —0.6%     

The AES Corp., Term Loan, 4.25%, 6/01/18

     1,778        1,781,944   

Calpine Corp., Term Loan B, 4.50%, 4/02/18

     760        761,049   

GenOn Energy, Inc., Term Loan B, 6.00%, 12/01/17

     295        297,112   
    

 

 

 
               2,840,105   

Industrial Conglomerates — 0.7%

    

Sequa Corp.:

    

Incremental Term Loan, 6.25%, 12/03/14

     552        553,605   

Term Loan, 3.69%—3.72%, 12/03/14

     2,643        2,625,018   
    

 

 

 
               3,178,623   

Insurance — 0.2%

    

Asurion LLC, Term Loan (First Lien), 5.50%, 5/24/18

      1,067        1,069,201   

Internet Software & Services — 0.2%

  

 

Web.com Group, Inc., Term Loan B,
7.00%, 10/27/17

     1,133        1,127,487   

IT Services — 3.7%

    

Ceridian Corp., Extended Term Loan,
5.99%, 5/09/17

     1,568        1,567,491   
Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

IT Services (concluded)

    

First Data Corp.:

    

2018 Term Loan B, 4.24%, 3/23/18

   USD 6,888      $ 6,503,537   

Non-Extended Term Loan B-1,
2.99%, 9/24/14

     449        442,136   

Non-Extended Term Loan B-3,
2.99%, 9/24/14

     121        118,791   

Genpact International, Inc., Term Loan B,
4.25%, 8/16/19

     980        980,000   

InfoGroup, Inc., Term Loan, 5.75%, 5/25/18

     853        755,033   

iPayment, Inc., Term Loan B, 5.75%, 5/08/17

     1,028        1,028,000   

Neustar, Inc., Term Loan B, 5.00%, 11/08/18

     1,444        1,451,308   

TransUnion LLC, Term Loan B, 5.50%, 2/12/18

     3,683        3,707,541   
    

 

 

 
               16,553,837   

Leisure Equipment & Products — 0.9%

    

Eastman Kodak Co., DIP Term Loan B,
8.50%, 7/19/13

     1,380        1,367,638   

EB Sports Corp., Term Loan, 11.50%, 12/31/15

     1,838        1,801,073   

FGI Operating Company, LLC, Term Loan,
5.50%—6.50%, 4/19/19

     680        682,128   
    

 

 

 
               3,850,839   

Machinery — 2.0%

    

Intelligrated, Inc., First Lien Term Loan,
6.75%, 7/30/18

     800        792,000   

Navistar International Corp., Term Loan B,
7.00%, 8/17/17

     734        737,488   

Rexnord Corp., Term Loan B, 5.00%, 4/02/18

     1,027        1,030,785   

Terex Corp.:

    

Term Loan, 6.00%, 4/28/17

   EUR 218        273,268   

Term Loan B, 5.50%, 4/28/17

   USD 2,032        2,041,673   

Tomkins LLC, Term Loan B, 4.25%, 9/29/16

     2,062        2,067,124   

Wabash National Corp., Term Loan B,
6.00%, 5/02/19

     1,940        1,952,263   
    

 

 

 
               8,894,601   

Media — 9.3%

    

Acosta, Inc., Term Loan B, 5.75%, 3/01/18

     582        582,891   

Affinion Group, Inc., Term Loan B, 5.00%, 7/16/15

     349        296,324   

AMC Networks, Inc., Term Loan B, 4.00%, 12/31/18

     1,408        1,407,072   

Capsugel Holdings US, Inc., Term Loan B,
4.75%, 8/01/18

     1,424        1,425,312   

Cengage Learning Acquisitions, Inc., Tranche 1 Incremental, 7.50%, 7/03/14

     1,244        1,200,074   

Charter Communications Operating LLC:

    

Extended Term Loan C, 3.49%, 9/06/16

     2,050        2,044,712   

Term Loan D, 4.00%, 5/15/19

     798        797,456   

Clear Channel Communications, Inc.:

    

Term Loan B, 3.88%, 1/28/16

     2,420        1,874,054   

Term Loan C, 3.88%, 1/28/16

     556        423,009   

Cumulus Media, Inc., First Lien Term Loan,
5.75%, 9/17/18

     1,492        1,494,567   

EMI Music Publishing Ltd., Term Loan B,
5.50%, 6/29/18

     895        901,041   

Gray Television, Inc., Term Loan B,
3.75%, 12/31/14

     1,212        1,205,154   

Houghton Mifflin Harcourt Publishing Co., DIP Term Loan B, 7.25%, 6/01/18

     1,521        1,538,301   

Hubbard Broadcasting, Term Loan B,
5.25%, 4/28/17

     965        965,734   

Intelsat Jackson Holdings SA, Tranche B Term Loan, 5.25%, 4/02/18

     7,241        7,264,096   

Interactive Data Corp., Term Loan B,
4.50%, 2/12/18

     1,683        1,685,457   

Kabel Deutschland GmbH, Term Loan F,
4.25%, 2/01/19

     2,265        2,260,900   
 

 

See Notes to Consolidated Financial Statements.

 

                
46    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Debt Strategies Fund, Inc. (DSU)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Media (concluded)

    

Lavena Holding 4 GmbH (Prosiebensat.1 Media AG):

    

Term Loan B, 2.95%, 3/06/15

   EUR 304      $ 349,790   

Term Loan C, 3.32%, 3/04/16

     608        703,402   

Newsday LLC, Fixed Rate Term Loan,
10.50%, 8/01/13

     USD 4,250        4,273,035   

Nielsen Finance LLC, Class C Term Loan,
3.49%, 5/02/16

     401        400,408   

Sinclair Television Group, Inc., Term Loan B,
4.00%, 10/28/16

     2,042        2,040,975   

Thomson Reuters (Healthcare), Inc., Term Loan B, 6.75%, 6/06/19

     1,060        1,067,505   

Univision Communications, Inc., Extended Term Loan, 4.48%, 3/31/17

     2,389        2,309,232   

UPC Broadband Holding BV, Term Loan U,
4.15%, 12/29/17

   EUR 196        244,786   

UPC Financing Partnership:

    

Term Loan, 4.75%, 12/29/17

   USD  1,050        1,053,066   

Term Loan T, 3.75%, 12/30/16

     255        252,611   

WC Luxco Sarl, Term Loan B3, 4.25%, 3/15/18

     502        499,660   

Weather Channel, Term Loan B, 4.25%, 2/13/17

     1,000        1,002,906   

WideOpenWest Finance LLC, First Lien Term Loan, 6.25%, 7/17/18

     655        654,594   
    

 

 

 
               42,218,124   

Metals & Mining — 1.7%

    

Constellium Holding Co BV, Term Loan B,
9.25%, 5/25/18

     920        901,600   

Novelis, Inc.:

    

Incremental Term Loan B2, 4.00%, 3/10/17

     1,124        1,116,261   

Term Loan, 4.00%, 3/10/17

     2,078        2,065,138   

SunCoke Energy, Inc., Term Loan B, 4.00%, 7/26/18

     1,584        1,576,083   

Walter Energy, Inc., Term Loan B, 4.00%, 4/02/18

     2,173        2,136,548   
    

 

 

 
               7,795,630   

Multiline Retail — 1.3%

    

99¢ Only Stores, Term Loan, 5.25%, 1/11/19

     1,493        1,500,882   

Hema Holding BV:

    

Second Lien Term Loan, 5.14%, 1/05/17

   EUR 2,900        3,419,644   

Term Loan B, 2.89%, 7/06/15

     357        433,171   

Term Loan C, 2.14%, 7/05/16

     357        435,420   
    

 

 

 
               5,789,117   

Oil, Gas & Consumable Fuels — 1.4%

    

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

   USD 1,930        1,934,149   

Everest Acquisition LLC, Term Loan B,
5.00%, 4/24/18

     1,190        1,192,975   

Gibson Energy ULC, Term Loan B, 4.75%, 6/15/18

     1,310        1,315,380   

Obsidian Natural Gas Trust, Term Loan,
7.00%, 11/02/15

     1,934        1,933,520   
    

 

 

 
               6,376,024   

Paper & Forest Products — 0.9%

    

Ainsworth Lumber Co. Ltd., Term Loan,
5.25%, 6/26/14

     630        609,525   

NewPage Corp., DIP Term Loan, 8.00%, 3/07/13

     1,050        1,059,849   

Verso Paper Finance Holdings LLC, Term Loan, 6.49%—7.24%, 2/01/13

     4,820        2,410,006   
    

 

 

 
               4,079,380   

Pharmaceuticals — 2.0%

    

Aptalis Pharma, Inc., Term Loan B, 5.50%, 2/10/17

     1,773        1,766,351   

Pharmaceutical Product Development, Inc., Term Loan B, 6.25%, 12/05/18

     2,489        2,516,613   

Quintiles Transnational Corp., Term Loan B,
5.00%, 6/08/18

     772        773,652   
Floating Rate Loan Interests (b)   

    
Par 

(000)

    Value  
    

Pharmaceuticals (concluded)

  

 

RPI Finance Trust:

    

Incremental Tranche 2, 4.00%, 11/09/18

   USD 324      $ 324,527   

Term Loan Tranche 2, 4.00%, 5/09/18

     568        568,465   

Valeant Pharmaceuticals International, Inc.:

    

Add-On Term Loan B, 4.75%, 2/13/19

     1,067        1,069,801   

Series A Tranche B, 4.75%, 2/13/19

     505        506,172   

Warner Chilcott Corp.:

    

Incremental Term Loan B-1,
4.25%, 3/15/18

     278        275,992   

Term Loan B-1, 4.25%, 3/15/18

     731        726,778   

Term Loan B-2, 4.25%, 3/15/18

     365        363,389   
    

 

 

 
               8,891,740   

Professional Services — 0.9%

  

 

Booz Allen Hamilton, Inc., Term Loan B,
4.50%, 7/31/19

     1,140        1,141,425   

Emdeon, Inc., Term Loan B1, 5.00%, 11/02/18

     2,584        2,585,035   

ON Assignment, Inc., Term Loan B,
5.00%, 5/15/19

     430        427,963   
    

 

 

 
               4,154,423   

Real Estate Investment Trusts (REITs) — 0.8%

    

iStar Financial, Inc.:

    

Term Loan A1, 5.00%, 6/28/13

     3,423        3,425,624   

Term Loan A2, 7.00%, 6/30/14

     140        140,132   
    

 

 

 
               3,565,756   

Real Estate Management & Development — 0.9%

  

Realogy Corp.:

    

Extended Letter of Credit Loan,
4.50%, 10/10/16

     383        370,121   

Extended Term Loan, 4.49%, 10/10/16

     3,700        3,572,003   

Stockbridge SBE Holdings LLC, Term Loan B, 13.00%, 5/02/17

     300        298,500   
    

 

 

 
               4,240,624   

Road & Rail — 0.7%

    

Avis Budget Car Rental LLC, Incremental Term Loan, 6.25%, 9/21/18

     612        614,922   

RailAmerica, Inc., Term Loan B,
4.00%, 3/01/19

     1,571        1,570,088   

Road Infrastructure Investment LLC, Term Loan B, 6.25%, 3/30/18

     823        818,823   
    

 

 

 
               3,003,833   

Semiconductors & Semiconductor Equipment — 0.5%

  

Freescale Semiconductor, Inc.,
Extended Term Loan B, 4.50%, 12/01/16

     1,373        1,317,319   

NXP BV, Term Loan A-2, 5.50%, 3/03/17

     952        963,448   
    

 

 

 
               2,280,767   

Software — 1.9%

    

Blackboard, Inc., Term Loan B, 7.50%, 10/04/18

     597        586,929   

Infor US, Inc. (FKA Lawson Software, Inc.),
Term Loan B, 6.25%, 4/05/18

     3,621        3,658,148   

Sophia, LP, Term Loan B, 6.25%, 7/19/18

     1,197        1,206,875   

SS&C Technologies, Inc.:

    

Term Loan B-1, 5.00%, 6/07/19

     1,573        1,574,813   

Term Loan B-2, 5.00%, 6/07/19

     163        162,912   

WaveDivision Holdings LLC,
Term Loan B, 5.50%, 8/23/19

     1,240        1,244,625   
    

 

 

 
               8,434,302   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    47


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Debt Strategies Fund, Inc. (DSU)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Specialty Retail — 3.9%

    

Academy Ltd., Term Loan, 6.00%, 8/03/18

     USD 1,891      $ 1,897,117   

Bass Pro Group LLC, Term Loan,
5.25%, 6/13/17

     823        828,764   

Burlington Coat Factory Warehouse Corp., Term Loan B1, 5.50%, 2/23/17

     519        520,169   

Claire’s Stores, Inc., Term Loan B,
2.98%—3.20%, 5/29/14

     1,109        1,087,805   

General Nutrition Centers, Inc., Term Loan B, 4.25%, 3/02/18

     2,170        2,166,940   

Harbor Freight Tools USA, Inc., Term Loan B, 5.50%, 11/14/17

     810        808,858   

Jo-Ann Stores, Inc., Term Loan, 4.75%, 3/16/18

     774        772,879   

Michaels Stores, Inc.:

    

Extended Term Loan B3, 5.00%, 7/29/16

     980        985,326   

Term Loan B2, 5.00%, 7/29/16

     862        866,756   

Party City Holdings, Inc., Term Loan B,
5.75%, 7/26/19

     1,505        1,511,893   

PETCO Animal Supplies, Inc., Term Loan,
4.50%, 11/24/17

     2,555        2,556,910   

Things Remembered, Inc., Term Loan B,
8.00%, 5/24/18

     1,100        1,078,000   

Toys ‘R’ Us Delaware, Inc.:

    

Incremental Term Loan B2,
5.25%, 5/25/18

     688        659,090   

Term Loan, 6.00%, 9/01/16

     470        461,287   

Term Loan B3, 5.25%, 5/25/18

     234        225,036   

The Yankee Candle Co., Inc., Term Loan B, 5.25%, 4/02/19

     1,062        1,066,459   
    

 

 

 
               17,493,289   

Textiles, Apparel & Luxury Goods — 0.5%

    

Ascend Performance Materials LLC, Term Loan B, 6.75%, 4/10/18

     1,431        1,418,287   

Wolverine Worldwide, Inc., 6.75%, Term Loan B, 6/26/19

     1,010        1,016,292   
    

 

 

 
               2,434,579   

Wireless Telecommunication Services — 1.7%

    

Crown Castle International Corp., Term Loan B, 4.00%, 1/31/19

     223        222,275   

MetroPCS Wireless, Inc., Term Loan B-3,
4.00%, 3/16/18

     1,255        1,250,309   

Vodafone Americas Finance 2, Inc., Term Loan, 6.88%, 8/11/15 (f)

     6,091        6,335,057   
    

 

 

 
               7,807,641   
Total Floating Rate Loan Interests – 76.1%              344,906,043   

 

Other Interests (i)    Beneficial
Interest
(000)
        
    

Auto Components — 0.0%

    

Intermet Liquidating Trust Class A (d)

     833        1   

Chemicals — 0.0%

    

Wellman Holdings, Inc., Litigation Trust Certificate

     10,000        100   

Diversified Financial Services — 0.3%

    

JG Wentworth LLC Preferred Equity Interests (d)

     1        1,454,714   

Hotels, Restaurants & Leisure — 0.0%

    

Buffets, Inc. (d)

     1,440        14   

Household Durables — 0.6%

    

Stanley Martin, Class B Membership Units

     2        2,940,570   
Other Interests (i)    Beneficial
Interest
(000)
    Value  
    

Media — 0.0%

    

Adelphia Escrow (d)

     USD    7,500      $ 75   

Adelphia Preferred Escrow (d)

     5          

Adelphia Recovery Trust (d)

     9,406        941   

Adelphia Recovery Trust Series ACC-6B INT (d)

     500        2,500   
    

 

 

 
               3,516   

Specialty Retail — 0.0%

    

Movie Gallery, Inc. Default Escrow (d)

     21,700        217   
Total Other Interests – 0.9%        4,399,132   

 

Warrants (j)   

Shares

        

Health Care Providers & Services — 0.0%

    

HealthSouth Corp. (Expires 1/16/14)

     126,761        1   

Media — 0.1%

    

Charter Communications, Inc. (Issued/exercisable 11/30/09, 1 Share for 1 warrant, Expires 11/30/14, Strike Price $51.28)

     12,661        366,536   

Software — 0.0%

    

Bankruptcy Management Solutions, Inc. (Expires 9/28/17)

     1,247          

HMH Holdings/EduMedia (Issued/Exercisable 3/09/10, 19 Shares for 1 Warrant, Expires 6/22/19, Strike Price $42.27)

     2,067          
    

 

 

 
                 
Total Warrants — 0.1%              366,537   

Total Long-Term Investments

(Cost — $696,154,128) — 143.7%

             651,485,518   

 

Short-Term Securities               

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (k)(l)

     2,038,105        2,038,105   

Total Short-Term Securities

(Cost — $2,038,105) — 0.4%

  

  

    2,038,105   
Total Investments (Cost — $698,192,233) — 144.1%        653,523,623   

Liabilities in Excess of Other Assets — (44.1)%

  

    (200,087,811
    

 

 

 
Net Assets — 100.0%      $ 453,435,812   
    

 

 

 
                  

 

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

 

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

 

(c)   When-issued security. Unsettled when-issued transactions were as follows:

 

Counterparty    Value      Unrealized
Appreciation
 
Credit Suisse Group AG    $ 1,107,600           
Goldman Sachs Group, Inc.    $ 734,063       $ 9,063   

 

(d)   Non-income producing security.

 

(e)   Issuer filed for bankruptcy and/or is in default of interest payments.

 

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

 

(g)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

 

(h)   Convertible security.

 

(i)   Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.
 

 

See Notes to Consolidated Financial Statements.

 

                
48    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)    BlackRock Debt Strategies Fund, Inc. (DSU)

 

 

(j)   Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

 

(k)   Investments in issuers considered to be an affiliate of the Fund during the six months ended August 31, 2012, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate    Shares
Held at
February 29,
2012
     Net
Activity
    

Shares
Held at
August 31,

2012

     Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

             2,038,105         2,038,105       $ 1,179   

 

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

 

Ÿ  

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

 

Currency

Purchased

    Currency Sold     Counter
party
  Settle
ment
Date
  Unrealized
Appreciation
(Depreciation)
 
USD     238,119      GBP     150,000      Royal Bank
of Scotland
Group Plc
  9/04/12   $ (59
USD     226,440      EUR     180,000      Deutsche
Bank AG
  9/05/12     36   
GBP     150,000      USD     238,085      Royal Bank
of Scotland
Group Plc
  10/17/12     58   
USD     2,206,135      CAD     2,240,500      UBS AG   10/17/12     (64,703
USD     446,528      GBP     285,000      Citigroup, Inc.   10/17/12     (5,943
USD     133,252      GBP     85,000      Deutsche
Bank AG
  10/17/12     (1,696
USD     5,352,655      GBP     3,448,000      UBS AG   10/17/12     (121,448
USD     120,747      GBP     77,000      UBS AG   10/17/12     (1,499
EUR     106,000      USD     131,357      Citigroup, Inc.   10/22/12     2,038   
EUR     180,000      USD     226,555      Deutsche
Bank AG
  10/22/12     (34
EUR     145,000      USD     179,154      UBS AG   10/22/12     3,322   
USD     13,891,193      EUR     11,330,500      Citigroup, Inc.   10/22/12     (367,659
USD     576,649      EUR     466,000      Citigroup, Inc.   10/22/12     (9,788
USD     447,278      EUR     360,000      Citigroup, Inc.   10/22/12     (5,763
USD     127,842      EUR     104,000      Citigroup, Inc.   10/22/12     (3,037
USD     57,080      EUR     46,000      Royal Bank
of Scotland
Group Plc
  10/22/12     (808
USD     738,772      EUR     601,000      UBS AG   10/22/12     (17,556
USD     297,515      EUR     241,000      UBS AG   10/22/12     (5,771
USD     250,516      EUR     203,000      UBS AG   10/22/12     (4,949
USD     167,190      EUR     136,000      UBS AG   10/22/12     (3,959

Total

            $ (609,218
           

 

 

 

 

Ÿ  

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

 

Ÿ  

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

 

Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities

 

Ÿ  

Level 2 — other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

Ÿ  

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

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

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

 

     Level 1     Level 2     Level 3     Total  

Assets:

       
Investments:        

Long-Term Investments:

       

Asset-Backed Securities

                $ 11,216,353      $ 11,216,353   

Common Stocks

  $ 2,949,459      $ 2,070,122        4,072,027        9,091,608   

Corporate Bonds

           271,841,107        9,664,738        281,505,845   

Floating Rate Loan Interests

           308,847,920        36,058,123        344,906,043   

Other Interests

    3,441               4,395,691        4,399,132   

Warrants

    366,536               1        366,537   

Short-Term Securities

    2,038,105                      2,038,105   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 5,357,541      $ 582,759,149      $ 65,406,933      $ 653,523,623   
 

 

 

   

 

 

   

 

 

   

 

 

 
       
     Level 1     Level 2     Level 3     Total  
Derivative Financial Instruments1        

Assets:

       

Foreign currency exchange contracts

         $ 5,454             $ 5,454   

Liabilities:

       

Foreign currency exchange contracts

           (614,672            (614,672
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

         $ (609,218          $ (609,218
 

 

 

   

 

 

   

 

 

   

 

 

 

 

1   

Derivative financial instruments are foreign currency exchange contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

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

 

      Level 1      Level 2     Level 3      Total  

Assets:

          

Cash

   $ 80,941                      $ 80,941   

Foreign currency at value

     290,567                        290,567   

Liabilities:

          

Loan payable

           $ (195,000,000             (195,000,000
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 371,508       $ (195,000,000           $ (194,628,492
  

 

 

    

 

 

   

 

 

    

 

 

 

There were no transfers between Level 1 and Level 2 during the six months ended August 31, 2012.

 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    49


Table of Contents
Consolidated Schedule of Investments (concluded)    BlackRock Debt Strategies Fund, Inc. (DSU)

 

The following table summarizes the valuation techniques used and unobservable inputs developed by the Global Valuation Committee to determine the fair value of certain of the Fund’s Level 3 investments as of August 31, 2012:

 

     Value      Valuation Techniques    Unobservable Inputs1    Range of
Unobservable
Inputs
  Weighted
Average of
Unobservable
Inputs2

Assets:

            

Common Stocks

  $ 4,072,003       Market Comparable Companies    EBITDA Multiple    5.0x -5.9x   5.9x
        Forward EBITDA Multiple    4.6x   4.6x
        Illiquidity Discount    20%   20%
        Proforma Revenue Increase    37%   37%

Other Interests

    2,940,570       Market Comparable Companies    Tangible Book Value Multiple    1.44x   1.44x

Corporate Bonds

    9,110,544       Market Comparable Companies    EBITDA Multiple    5.0x   5.0x
        Illiquidity Discount    20%   20%
        Proforma Revenue Increase    37%   37%

Floating Rate Loan Interests

    7,631,445       Market Comparable Companies    Yield    9.65%   9.65%
        Illiquidity Discount    50%   50%
           Cost    N/A3     
            

Total4

  $ 23,754,562              
 

 

 

            

 

1   

A change to the unobservable input may result in a significant change to the value of the investment as follows:

 

Unobservable Input    Impact to
Value if Input Increases
   Impact to
Value if Input Decreases
EBITDA Multiple    Increase    Decrease
Forward EBITDA Multiple    Increase    Decrease
Illiquidity Discount    Decrease    Increase
Proforma Revenue Increase    Increase    Decrease
Tangible Book Value Multiple    Increase    Decrease
Yield    Decrease    Increase

 

2  

Unobservable inputs are weighted based on the value of the investments included in the range.

 

3   

The Fund fair values certain of its Level 3 investments using prior transaction prices (acquisition cost), although the transaction may not have occurred during the current reporting period. In such cases, these investments are generally privately held investments. There may not be a secondary market, and/or there are a limited number of investors. The determination to fair value such investments at cost is based upon factors consistent with the principles of fair value measurement that are reasonably available to the Global Valuation Committee, or its delegate. Valuations are reviewed utilizing available market information to determine if the carrying value should be adjusted. Such market data may include, but is not limited to, observations of the trading multiples of public companies considered comparable to the private companies being valued, financial or operational information released by the company, and/or news or corporate events that affect the investment. Valuations may be adjusted to account for company-specific issues, the lack of liquidity inherent in a nonpublic investment and the fact that comparable public companies are not identical to the investments being fair valued by the Fund.

 

4   

Does not include Level 3 investments with values derived utilizing prices from recent prior transactions or third party pricing information without adjustment for which such inputs are unobservable. See above valuation input table for values of such Level 3 investments. A significant change in third party pricing information could result in a significantly lower or higher value in such Level 3 investments.

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

 

     Asset-Backed
Securities
   

Common

Stocks

    Corporate
Bonds
    Floating
Rate Loan
Interests
    Other
Interests
     Warrants     Total  
Assets:               

Opening balance, as of February 29, 2012

  $ 4,989,143      $ 5,458,062      $ 9,604,936      $ 28,186,100      $ 3,410,858       $ 2      $ 51,649,101   

Transfers into Level 35

                         7,215,466                       7,215,466   

Transfers out of Level 36

           (677,817            (4,536,423                    (5,214,240

Accrued discounts/ premiums

    99,738               202,235        136,007                       437,980   

Net realized gain (loss)

    (45,069     (2,511,903            (928,362             (433,873     (3,919,207

Net change in unrealized appreciation/depreciation7

    56,727        1,393,580        (222,602     956,313        984,833         433,872        3,602,723   

Purchases

    8,129,039        410,126        80,169        8,743,925                       17,363,259   

Sales

    (2,013,225     (21            (3,714,903                    (5,728,149
 

 

 

   

 

 

   

 

 

 
Closing Balance, as of August 31, 2012   $ 11,216,353      $ 4,072,027      $ 9,664,738      $ 36,058,123      $ 4,395,691       $ 1      $ 65,406,933   
 

 

 

 

 

5   

As of February 29, 2012, the Fund used observable inputs in determining the value of certain investments. As of August 31, 2012, the Fund used significant unobservable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $7,215,466 transferred from Level 2 to Level 3 in the disclosure hierarchy.

 

6   

As of February 29, 2012, the Fund used significant unobservable inputs in determining the value of certain investments. As of August 31, 2012, the Fund used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $5,214,140 transferred from Level 3 to Level 2 in the disclosure hierarchy.

 

7   

Included in the related net change in unrealized appreciation/depreciation in the Consolidated Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of August 31, 2012 was $271,065.

 

See Notes to Consolidated Financial Statements.

 

                
50    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments     BlackRock Floating Rate Income Strategies Fund II, Inc.  (FRB)
August 31, 2012 (Unaudited)    (Percentages shown are based on Net Assets)

 

Asset-Backed Securities   

Par 

(000)

    Value  
    

Fraser Sullivan CLO Ltd., Series 2012-7A, Class C, 4.47%, 4/20/23 (a)(b)

   USD 250      $ 222,150   

Gannett Peak CLO Ltd., Series 2006-1X, Class A2, 0.81%, 10/27/20 (b)

     305        256,962   

Goldentree Loan Opportunities VI Ltd., Series 2012-6A, Class D, 4.66%, 4/17/22 (a)(b)

     400        363,640   

Goldman Sachs Asset Management CLO Plc, Series 2007-1A, Class B, 0.89%, 8/01/22 (a)(b)

     665        561,925   

Highbridge Loan Management Ltd., Series 2012-1A, Class C, 5.71%, 9/20/22 (a)(b)(c)

     400        369,200   

ING Investment Management, Series 2012-2A, Class D, 4.99%, 10/15/22 (a)(b)

     400        356,644   

LCM LP, Series 11A, Class D2, 4.41%, 4/19/22 (a)(b)

     425        371,875   

MAPS CLO Fund LLC, Series 2005-1A, Class C,
1.42%, 12/21/17 (a)(b)

     300        284,610   

Race Point CLO, Series 2012-6A, Class D,
4.93%, 5/24/23 (a)(b)

     275        248,518   

Symphony CLO Ltd. (a)(b):

    

Series 2012-10A, Class D, 5.69%, 7/23/23

     400        370,000   

Series 2012-9A, Class D, 4.71%, 4/16/22

     500        445,600   
Total Asset-Backed Securities – 2.6%        3,851,124   

 

Common Stocks (d)    Shares         

Auto Components — 0.3%

    

Delphi Automotive Plc

     15,181        459,824   

Chemicals — 0.0%

    

GEO Specialty Chemicals, Inc.

     10,732        4,937   

Electrical Equipment — 0.0%

    

Medis Technologies Ltd.

     13,053        39   

Semiconductors & Semiconductor Equipment — 0.0%

  

SunPower Corp.

     1,860        8,333   

Software — 0.3%

    

HMH Holdings/EduMedia

     16,429        402,509   
Total Common Stocks – 0.6%              875,642   

 

Corporate Bonds   

Par 

(000)

        

Airlines — 0.1%

    

American Airlines Pass-Through Trust, Series 2011-2, Class A, 8.63%, 4/15/23

   USD 143        151,220   

Delta Air Lines, Inc., Series 2009-1-B, 9.75%, 6/17/18

     53        57,610   
    

 

 

 
               208,830   

Auto Components — 0.8%

    

Icahn Enterprises LP:

    

7.75%, 1/15/16

     30        31,500   

8.00%, 1/15/18

     1,075        1,144,875   
    

 

 

 
               1,176,375   

Capital Markets — 0.0%

    

E*Trade Financial Corp., 2.25%, 8/31/19 (a)(e)(f)

     46        39,330   

Chemicals — 1.3%

    

GEO Specialty Chemicals, Inc. (a):

    

7.50%, 3/31/15 (f)(g)

     702        842,521   

10.00%, 3/31/15

     766        765,560   

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

     145        146,450   

INEOS Finance Plc, 8.38%, 2/15/19 (a)

     125        131,563   
    

 

 

 
               1,886,094   

Commercial Services & Supplies — 0.3%

    

ARAMARK Corp., 3.94%, 2/01/15 (b)

     75        74,812   

AWAS Aviation Capital Ltd., 7.00%, 10/17/16 (a)

     318        335,043   
Corporate Bonds   

Par 

(000)

    Value  
    

Commercial Services & Supplies (concluded)

    

Brickman Group Holdings, Inc., 9.13%, 11/01/18 (a)

   USD 12      $ 12,120   
    

 

 

 
               421,975   

Communications Equipment — 0.5%

    

Zayo Group LLC/Zayo Capital, Inc.:

    

8.13%, 1/01/20

     430        456,875   

10.13%, 7/01/20

     290        311,025   
    

 

 

 
               767,900   

Consumer Finance — 0.3%

    

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

     425        462,187   

Containers & Packaging — 0.1%

    

OI European Group BV, 6.88%, 3/31/17

   EUR 113        146,751   

Diversified Financial Services — 0.8%

    

Ally Financial, Inc., 2.62%, 12/01/14 (b)

   USD 505        496,344   

Reynolds Group Issuer, Inc.:

    

7.75%, 10/15/16

   EUR 200        259,736   

6.88%, 2/15/21

   USD 395        427,587   
    

 

 

 
               1,183,667   

Diversified Telecommunication Services — 0.2%

  

 

ITC Deltacom, Inc., 10.50%, 4/01/16

     290        312,475   

Energy Equipment & Services — 0.1%

    

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

     180        185,850   

Health Care Equipment & Supplies — 0.2%

    

DJO Finance LLC:

    

10.88%, 11/15/14

     144        150,300   

7.75%, 4/15/18

     95        86,925   
    

 

 

 
               237,225   

Health Care Providers & Services — 0.8%

    

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

     410        422,813   

HCA, Inc., 6.50%, 2/15/20

     455        499,931   

Tenet Healthcare Corp., 8.88%, 7/01/19

     170        193,375   
    

 

 

 
               1,116,119   

Health Care Technology — 0.8%

    

IMS Health, Inc., 12.50%, 3/01/18 (a)

     980        1,151,500   

Hotels, Restaurants & Leisure — 0.7%

    

Little Traverse Bay Bands of Odawa Indians,
9.00%, 8/31/20 (a)

     383        348,530   

Travelport LLC:

    

5.04%, 9/01/14 (b)

     665        472,150   

9.88%, 9/01/14

     150        119,250   
    

 

 

 
               939,930   

Household Durables — 0.2%

    

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

     205        209,613   

Independent Power Producers & Energy Traders — 1.9%

  

Calpine Corp., 7.25%, 10/15/17 (a)

     625        668,750   

Energy Future Holdings Corp., 10.00%, 1/15/20

     365        402,412   

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

     1,510        1,694,975   
    

 

 

 
               2,766,137   

Industrial Conglomerates — 0.5%

    

Sequa Corp., 13.50%, 12/01/15 (a)

     679        719,387   

IT Services — 0.2%

    

First Data Corp., 6.75%, 11/01/20 (a)

     280        277,900   

Machinery — 0.1%

    

UR Financing Escrow Corp., 5.75%, 7/15/18 (a)

     90        95,175   

Media — 2.1%

    

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

     120        135,900   

Checkout Holding Corp., 16.29%, 11/15/15 (a)(e)

     350        213,500   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    51


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Floating Rate Income Strategies Fund II, Inc. (FRB)

(Percentages shown are based on Net Assets)

 

Corporate Bonds   

Par 

(000)

    Value  
    

Media (concluded)

    

Clear Channel Worldwide Holdings, Inc.:

    

Series A, 9.25%, 12/15/17

   USD 212      $ 229,490   

Series B, 9.25%, 12/15/17

     967        1,050,404   

NAI Entertainment Holdings LLC, 8.25%, 12/15/17 (a)

     297        331,155   

Unitymedia Hessen GmbH & Co. KG,
8.13%, 12/01/17 (a)

     1,000        1,082,500   
    

 

 

 
               3,042,949   

Oil, Gas & Consumable Fuels — 0.2%

    

Coffeyville Resources LLC, 9.00%, 4/01/15 (a)

     144        153,360   

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

     165        176,962   
    

 

 

 
               330,322   

Paper & Forest Products — 0.1%

    

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

     180        186,300   

Pharmaceuticals — 0.2%

    

Valeant Pharmaceuticals International,
6.50%, 7/15/16 (a)

     210        221,550   

Real Estate Management & Development — 0.1%

    

Realogy Corp., 7.63%, 1/15/20 (a)

     190        207,100   

Wireless Telecommunication Services — 2.2%

    

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

     825        870,375   

Digicel Group Ltd. (a):

    

9.13%, 1/15/15

     399        402,990   

8.25%, 9/01/17

     265        280,900   

iPCS, Inc., 2.57%, 5/01/13 (b)

     500        496,250   

Sprint Nextel Corp. (a):

    

9.00%, 11/15/18

     400        472,000   

7.00%, 3/01/20

     630        689,850   
    

 

 

 
               3,212,365   
Total Corporate Bonds – 14.8%              21,505,006   

 

Floating Rate Loan Interests (b)               

Aerospace & Defense — 1.7%

    

DynCorp International, Term Loan B, 6.25%, 7/07/16

     385        384,754   

SI Organization, Inc., Term Loan B, 4.50%, 11/22/16

     465        452,000   

Spirit Aerosystems, Inc., Term Loan B, 3.75%, 4/18/19

     419        419,650   

TransDigm, Inc.:

    

Add on Term Loan B2, 4.00%, 2/14/17

     224        225,088   

Term Loan B, 4.00%, 2/14/17

     596        598,282   

Wesco Aircraft Hardware Corp., Term Loan B,
4.25%, 4/07/17

     356        356,002   
    

 

 

 
               2,435,776   

Airlines — 0.8%

    

Delta Air Lines, Inc., Credit, Term Loan B,
5.50%, 4/20/17

     1,105        1,112,617   

US Airways Group, Inc., Term Loan, 2.73%, 3/21/14

     65        62,806   
    

 

 

 
               1,175,423   

Auto Components — 2.8%

    

Autoparts Holdings Ltd., First Lien Term Loan,
6.50%, 7/28/17

     744        729,487   

Federal-Mogul Corp.:

    

Term Loan B, 2.17%—2.18%, 12/29/14

     993        947,925   

Term Loan C, 2.17%—2.18%, 12/28/15

     337        321,311   

The Goodyear Tire & Rubber Co., Term Loan
(Second Lien), 4.75%, 4/30/19

     1,310        1,305,087   

GPX International Tire Corp. (d)(h):

    

Term Loan, 8.37%, 3/30/12

     9          

Term Loan, 12.00%, 3/31/12

     549          
Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Auto Components (concluded)

    

Schaeffler AG, Term Loan C2, 6.00%, 1/27/17

   USD 430      $ 431,256   

UCI International, Inc., Term Loan, 5.50%, 7/26/17

     394        394,985   
    

 

 

 
               4,130,051   

Biotechnology — 0.5%

    

Grifols, Inc., Term Loan B, 4.50%, 6/01/17

     707        708,905   

Building Products — 3.2%

    

Armstrong World Industries, Inc., Term Loan B,
4.00%, 3/09/18

     976        973,457   

CPG International, Inc., Term Loan B, 6.00%, 2/18/17

     936        920,544   

Goodman Global, Inc., Initial Term Loan (First Lien), 5.75%, 10/28/16

     2,327        2,329,131   

Momentive Performance Materials, Inc. (Nautilus), Extended Term Loan, 3.62%, 5/05/15

   EUR 338        389,006   
    

 

 

 
               4,612,138   

Capital Markets — 2.0%

    

American Capital Holdings, Term Loan, 5.50%, 7/19/16

   USD 586        588,198   

HarbourVest Partners LLC, Term Loan B, 6.25%, 12/16/16

     754        753,081   

Nuveen Investments, Inc.:

    

Extended (First Lien), Term Loan,
5.95%—5.96%, 5/13/17

     459        459,384   

Extended Term Loan, 5.92%—5.96%, 5/12/17

     916        918,479   

Incremental Term Loan, 7.25%, 5/13/17

     180        180,810   
    

 

 

 
               2,899,952   

Chemicals — 6.2%

    

American Rock Salt Holdings LLC, Term Loan,
5.50%, 4/25/17

     711        690,381   

Ashland, Inc., Term Loan B, 3.75%, 8/23/18

     297        297,686   

Chemtura Corp., Exit Term Loan B, 5.50%, 8/27/16

     800        802,336   

Evergreen Acqco 1 LP, Term Loan B, 6.25%, 7/09/19

     405        408,799   

Gentek, Inc., Term Loan, 5.00%—5.75%, 10/06/15

     442        439,353   

INEOS US Finance LLC:

    

3 Year Term Loan, 5.50%, 5/04/15

     100        100,498   

6 Year Term Loan, 6.50%, 5/04/18

     2,157        2,160,487   

MacDermid, Inc., Tranche C Term Loan, 2.32%, 4/11/14

   EUR 250        310,993   

Nexeo Solutions LLC, Term Loan B, 5.00%, 9/08/17

   USD 617        600,604   

PolyOne Corp., Term Loan, 5.00%, 12/20/17

     214        214,567   

PQ Corp., Term Loan B, 3.98%, 7/30/14

     1,255        1,232,596   

Styron Sarl LLC, Term Loan B, 8.00%, 8/02/17

     290        270,020   

Tronox Pigments (Netherlands) BV:

    

Delayed Draw Term Loan, 4.25%, 2/08/18

     180        179,566   

Term Loan B, 4.25%, 2/08/18

     660        658,409   

Univar, Inc., Term Loan B, 5.00%, 6/30/17

     687        682,789   
    

 

 

 
               9,049,084   

Commercial Services & Supplies — 5.7%

  

 

ACCO Brands Corp., Term Loan B, 4.25%, 4/30/19

     985        984,233   

Altegrity, Inc., Tranche D Term Loan, 7.75%, 2/20/15

     839        834,503   

ARAMARK Corp.:

    

Extended Term Loan B, 3.48%, 7/26/16

     196        195,165   

Extended Term Loan C, 3.48%—3.71%, 7/26/16

     111        110,624   

Letter of Credit, 3.50%, 7/26/16

     13        12,835   

Letter of Credit Facility, 3.50%, 7/26/16

     9        8,911   

AWAS Finance Luxembourg 2012 SA, Term Loan, 5.75%, 7/16/18

     325        325,000   

AWAS Finance Luxembourg Sarl, Term Loan B,
5.25%, 6/10/16

     462        462,255   

Delos Aircraft, Inc., Term Loan B2, 4.75%, 4/12/16

     1,000        1,010,000   

KAR Auction Services, Inc., Term Loan B,
5.00%, 5/19/17

     1,335        1,334,661   

Protection One, Inc., Term Loan, 5.75%, 3/21/19

     643        649,821   

Synagro Technologies, Inc., Term Loan B,
2.24%, 4/02/14

     855        758,018   
 

 

See Notes to Consolidated Financial Statements.

 

                
52    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Floating Rate Income Strategies Fund II, Inc. (FRB)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Commercial Services & Supplies (concluded)

    

Volume Services America, Inc., Term Loan B,
10.50%—10.75%, 9/16/16

   USD 516      $ 515,813   

West Corp., Term Loan B6, 5.75%, 6/29/18

     1,025        1,028,208   
    

 

 

 
               8,230,047   

Communications Equipment — 3.5%

    

Avaya, Inc.:

    

Extended Term Loan B3, 4.93%, 10/26/17

     148        132,128   

Term Loan B1, 3.18%, 10/24/14

     918        881,448   

CommScope, Inc., Term Loan, 4.25%, 1/12/18

     765        764,232   

Telesat Canada, Term Loan A, 4.41%, 3/24/17

   CAD 870        842,861   

Zayo Group, LLC, Term Loan B, 7.13%, 7/02/19

   USD  2,385        2,420,036   
    

 

 

 
               5,040,705   

Construction & Engineering — 0.9%

    

BakerCorp. International, Inc., Term Loan B,
4.75%, 6/01/18

     426        423,891   

Safway Services LLC, First Out Term Loan,
9.00%, 12/16/17

     900        900,000   
    

 

 

 
               1,323,891   

Construction Materials — 2.0%

    

HD Supply, Inc., Senior Debt B, 7.25%, 10/12/17

     2,885        2,947,518   

Consumer Finance — 0.8%

    

Springleaf Financial Funding Co., Term Loan,
5.50%, 5/10/17

     1,215        1,173,386   

Containers & Packaging — 0.5%

    

Sealed Air Corp., Term Loan B, 4.75%, 10/03/18

     698        701,984   

Diversified Consumer Services — 3.3%

    

Coinmach Service Corp., Term Loan B,
3.33%, 11/20/14

     1,334        1,279,396   

Education Management LLC, Term Loan C3,
8.25%, 3/29/18

     354        311,554   

Laureate Education, Inc., Extended Term Loan,
5.25%, 6/18/18

     1,168        1,139,579   

ServiceMaster Co.:

    

Delayed Draw Term Loan, 2.74%, 7/24/14

     125        123,884   

Term Loan, 2.75%—2.97%, 7/24/14

     1,252        1,244,041   

Weight Watchers International, Inc., Term Loan F,
4.00%, 3/15/19

     688        679,524   
    

 

 

 
               4,777,978   

Diversified Financial Services — 2.0%

    

Residential Capital LLC:

    

DIP Term Loan A1, 5.00%, 11/18/13

     665        666,662   

DIP Term Loan A2, 6.75%, 11/18/13

     95        96,109   

Reynolds Group Holdings, Inc.:

    

Term Loan B, 6.50%, 2/09/18

     684        687,707   

Term Loan C, 6.50%, 8/09/18

     1,398        1,415,538   
    

 

 

 
               2,866,016   

Diversified Telecommunication Services — 4.3%

    

Hawaiian Telcom Communications, Inc., Term Loan B, 7.00%, 2/28/17

     565        572,062   

Integra Telecom Holdings, Inc., Term Loan B,
9.25%, 4/15/15

     784        772,240   

Level 3 Financing, Inc.:

    

2016 Term Loan B, 4.75%, 2/01/16

     860        861,720   

2019 Term Loan B, 5.25%, 8/01/19

     705        706,029   

Term Loan B2, 5.75%, 9/03/18

     1,800        1,804,752   

Term Loan B3, 5.75%, 8/31/18

     650        651,716   

US Telepacific Corp., Term Loan B, 5.75%, 2/23/17

     890        850,140   
    

 

 

 
               6,218,659   
Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Electronic Equipment, Instruments & Components — 0.9%

  

 

CDW LLC, Extended Term Loan, 4.00%, 7/14/17

   USD 591      $ 583,252   

Flextronics International Ltd. Delay Draw:

    

Term Loan A-2, 2.48%, 10/01/14

     20        20,202   

Term Loan A-3, 2.48%, 10/01/14

     24        23,569   

Sensata Technologies Finance Co. LLC, Term Loan, 4.00%, 5/11/18

     701        701,572   
    

 

 

 
               1,328,595   

Energy Equipment & Services — 2.9%

    

Dynegy Midwest Generation LLC, Coal Co. Term Loan, 9.25%, 8/04/16

     517        536,375   

Dynegy Power LLC, Gas Co. Term Loan, 9.25%, 8/04/16

     674        705,440   

MEG Energy Corp., Term Loan B, 4.00%, 3/16/18

     1,737        1,738,838   

Tervita Corp.:

    

Incremental Term Loan, 6.50%, 10/17/14

     403        402,640   

Term Loan B, 3.23%, 11/14/14

     866        850,105   
    

 

 

 
               4,233,398   

Food & Staples Retailing — 1.6%

    

Alliance Boots Holdings Ltd., Term Loan B1,
3.52%, 7/09/15

   GBP 675        1,011,511   

Pilot Travel Centers LLC, Term Loan B2, 4.25%, 8/07/19

   USD 555        556,387   

US Foods, Inc. (FKA U.S. Foodservice, Inc.), Extended Term Loan B, 5.75%, 3/31/17

     719        695,295   
    

 

 

 
               2,263,193   

Food Products — 3.0%

    

Advance Pierre Foods:

    

Term Loan (First Lien), 7.00%, 9/30/16

     922        926,376   

Term Loan (Second Lien), 11.25%, 9/29/17

     655        658,930   

Del Monte Foods Co., Term Loan, 4.50%, 3/08/18

     1,225        1,208,397   

Michael Foods Group, Inc., Term Loan B,
4.25%, 2/23/18

     143        142,801   

Pinnacle Foods Finance LLC:

    

Extended Term Loan B, 3.75%, 10/03/16

     50        49,055   

Term Loan E, 4.75%, 10/17/18

     593        590,928   

Solvest Ltd. (Dole):

    

Term Loan B-2, 5.00%—6.00%, 7/06/18

     298        298,362   

Term Loan C-2, 5.00%—6.00%, 7/06/18

     533        533,913   
    

 

 

 
               4,408,762   

Health Care Equipment & Supplies — 5.3%

    

Bausch & Lomb, Inc., Term Loan B, 5.25%, 5/17/19

     1,520        1,525,062   

Biomet, Inc., Term Loan B, 3.23%—3.47%, 3/25/15

     361        360,261   

BSN Medical Acquisition Holding GmbH, Term Loan B, 6.00%, 7/27/19

     440        441,100   

DJO Finance LLC:

    

Extended Term Loan B2, 5.23%, 11/01/16

     223        222,858   

Term Loan B3, 6.25%, 9/15/17

     1,197        1,197,994   

Hologic, Inc., Term Loan B, 4.50%, 8/01/19

     2,010        2,022,201   

Hupah Finance, Inc., Term Loan B, 6.25%, 1/21/19

     409        410,509   

Iasis Healthcare LLC, Term Loan, 5.00%, 5/03/18

     402        395,452   

Immucor, Inc., Term Loan B, 6.00%, 8/17/18

     948        951,392   

LHP Hospital Group, Inc., Term Loan, 9.00%, 7/03/18

     245        246,837   
    

 

 

 
               7,773,666   

Health Care Providers & Services — 4.9%

    

Community Health Systems, Inc., Extended Term Loan B, 3.92%—3.96%, 1/25/17

     48        48,166   

ConvaTec, Inc., Term Loan, 5.75%, 12/22/16

     678        678,876   

DaVita, Inc.:

    

Term Loan B, 4.50%, 10/20/16

     1,031        1,033,345   

Term Loan B2, 4.00%, 9/02/19

     720        716,515   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    53


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Floating Rate Income Strategies Fund II, Inc. (FRB)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Health Care Providers & Services (concluded)

    

Emergency Medical Services Corp., Term Loan,
5.25%, 5/25/18

   USD 759      $ 757,672   

Harden Healthcare LLC:

    

Add on Term Loan A, 7.75%, 3/02/15

     517        500,679   

Term Loan A, 8.50%, 3/02/15

     294        288,005   

HCA, Inc.:

    

Extended Term Loan B3, 3.48%, 5/01/18

     270        265,739   

Tranche B-2 Term Loan, 3.71%, 3/31/17

     368        362,671   

inVentiv Health, Inc.:

    

Combined Term Loan, 6.50%, 8/04/16

     365        339,483   

Incremental Term Loan B-3, 6.75%, 5/15/18

     510        475,981   

Medpace, Inc., Term Loan, 6.50%—7.25%, 6/16/17

     622        594,314   

Sheridan Holdings, Inc., First Lien Term Loan,
6.00%, 6/29/18

     345        345,286   

US Renal Care, Inc., First Lien Term Loan,
6.24%—7.25%, 7/02/19

     590        594,425   

Vanguard Health Holding Co. II LLC (Vanguard Health Systems, Inc.), Term Loan B, 5.00%, 1/29/16

     69        69,781   
    

 

 

 
               7,070,938   

Health Care Technology — 1.4%

    

IMS Health, Inc., Term Loan B, 4.50%, 8/25/17

     634        635,550   

Kinetic Concepts, Inc., Term Loan B, 7.00%, 5/04/18

     1,055        1,064,228   

MedAssets, Inc., Term Loan, 5.25%, 11/16/16

     368        369,342   
    

 

 

 
               2,069,120   

Hotels, Restaurants & Leisure — 7.1%

    

Alpha D2 Ltd., Term Loan B, 5.75%, 4/28/17

     713        716,921   

Ameristar Casinos, Inc., Term Loan B, 4.00%, 4/16/18

     637        637,870   

Boyd Gaming Corp., Incremental Term Loan,
6.00%, 12/17/15

     439        442,278   

Caesars Entertainment Operating Co., Inc.:

    

Extended Term Loan B6, 5.49%, 1/26/18

     105        92,301   

Incremental Term Loan B4, 9.50%, 10/31/16

     668        680,882   

Term Loan B1, 3.24%, 1/28/15

     133        126,349   

Term Loan B3, 3.24%—3.46%, 1/28/15

     2,720        2,579,499   

DineEquity, Inc., Term Loan B,
4.25%—5.25%, 10/19/17

     37        37,169   

Dunkin’ Brands, Inc., Term Loan B2, 4.00%, 11/23/17

     1,287        1,273,485   

Golden Living, Term Loan, 5.00%, 5/04/18

     166        158,891   

OSI Restaurant Partners LLC:

    

Revolver, 2.49%—4.50%, 6/14/13

     5        4,900   

Term Loan B, 2.56%, 6/14/14

     50        49,382   

Sabre, Inc., Non Extended Initial Term Loan,
2.23%, 9/30/14

     169        166,848   

SeaWorld Parks & Entertainment, Inc., Term Loan B, 4.00%, 8/17/17

     506        506,320   

Six Flags Theme Parks, Inc., Term Loan B,
4.25%, 12/20/18

     800        801,872   

Station Casinos, Inc., Term Loan B1, 3.23%, 6/17/16

     455        431,960   

Twin River Worldwide Holdings, Inc., Term Loan,
8.50%, 11/05/15

     375        376,550   

Wendy’s International, Inc., Term Loan B,
4.75%, 5/15/19

     1,235        1,240,508   
    

 

 

 
               10,323,985   

Household Products — 0.5%

    

Prestige Brands, Inc., Term Loan,
5.25%—6.25%, 1/31/19

     676        681,455   

Independent Power Producers & Energy

Traders — 0.9%

    

The AES Corp., Term Loan, 4.25%, 6/01/18

     988        989,969   

Calpine Corp., Term Loan B, 4.50%, 4/02/18

     245        245,338   

GenOn Energy, Inc., Term Loan B, 6.00%, 12/01/17

     140        141,004   
    

 

 

 
               1,376,311   
Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Industrial Conglomerates — 1.9%

    

Sequa Corp.:

    

Incremental Term Loan, 6.25%, 12/03/14

   USD 229      $ 229,122   

Term Loan, 3.69%—3.72%, 12/03/14

     2,541        2,523,804   
    

 

 

 
               2,752,926   

Insurance — 0.7%

    

Asurion LLC, Term Loan (First Lien), 5.50%, 5/24/18

     346        346,896   

CNO Financial Group, Inc., Term Loan B,
6.25%, 9/30/16

     731        732,639   
    

 

 

 
               1,079,535   

Internet Software & Services — 0.4%

    

Web.com Group, Inc., Term Loan B, 7.00%, 10/27/17

     605        601,963   

IT Services — 5.5%

    

Ceridian Corp., Extended Term Loan, 5.99%, 5/09/17

     800        799,990   

First Data Corp.:

    

2018 Term Loan B, 4.24%, 3/23/18

     3,314        3,129,373   

Non-Extended Term Loan B-1, 2.99%, 9/24/14

     159        156,565   

Non-Extended Term Loan B-3, 2.99%, 9/24/14

     45        44,349   

Genpact International, Inc., Term Loan B,
4.25%, 8/16/19

     875        875,000   

InfoGroup, Inc., Term Loan, 5.75%, 5/25/18

     376        332,527   

iPayment, Inc., Term Loan B, 5.75%, 5/08/17

     358        357,500   

Neustar, Inc., Term Loan B, 5.00%, 11/08/18

     466        468,807   

SunGard Data Systems, Inc. (Solar Capital Corp.), Term Loan, 3.86%—4.06%, 2/26/16

     161        160,488   

TransUnion LLC, Term Loan B, 5.50%, 2/12/18

     1,720        1,731,384   
    

 

 

 
               8,055,983   

Leisure Equipment & Products — 0.8%

    

Eastman Kodak Co., DIP Term Loan B, 8.50%, 7/19/13

     595        589,972   

FGI Operating Company, LLC, Term Loan,
5.50%—6.50%, 4/19/19

     595        596,862   
    

 

 

 
               1,186,834   

Machinery — 2.8%

    

Intelligrated, Inc., First Lien Term Loan, 6.75%, 7/30/18

     500        495,000   

Navistar International Corp., Term Loan B,
7.00%, 8/17/17

     499        500,903   

Rexnord Corp., Term Loan B, 5.00%, 4/02/18

     373        374,591   

Terex Corp.:

    

Term Loan, 6.00%, 4/28/17

   EUR 69        86,949   

Term Loan B, 5.50%, 4/28/17

   USD 690        693,599   

Tomkins LLC, Term Loan B, 4.25%, 9/29/16

     1,282        1,285,281   

Wabash National Corp., Term Loan B, 6.00%, 5/02/19

     628        632,353   
    

 

 

 
               4,068,676   

Media — 16.4%

    

Acosta, Inc., Term Loan B, 5.75%, 3/01/18

     270        270,835   

Affinion Group, Inc., Term Loan B, 5.00%, 7/15/15

     287        243,775   

AMC Entertainment, Inc., Term Loan B3,
4.25%, 2/22/18

     373        373,498   

AMC Networks, Inc., Term Loan B, 4.00%, 12/31/18

     891        890,448   

Atlantic Broadband Finance LLC, 1st Lien Term Loan, 5.25%, 4/04/19

     535        535,503   

BBHI Acquisition LLC (FKA Bresnan Telecommunications Co. LLC), Term Loan B, 4.50%, 12/14/17

     1,378        1,381,445   

Capsugel Holdings US, Inc., Term Loan B,
4.75%, 8/01/18

     664        665,146   

Catalina Marketing Corp., Extended Term Loan B,
5.73%, 9/29/17

     618        609,557   

Cengage Learning Acquisitions, Inc.:

    

Non-Extended Term Loan, 2.49%, 7/03/14

     185        170,637   

Tranche 1 Incremental, 7.50%, 7/03/14

     490        473,176   
 

 

See Notes to Consolidated Financial Statements.

 

                
54    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Floating Rate Income Strategies Fund II, Inc. (FRB)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Media (concluded)

    

Charter Communications Operating LLC:

    

Extended Term Loan C, 3.49%, 9/06/16

   USD 891      $ 888,894   

Term Loan D, 4.00%, 5/15/19

     347        346,676   

Clarke American Corp., Term Facility B,
2.73%—2.96%, 6/30/14

     106        94,971   

Clear Channel Communications, Inc.:

    

Term Loan B, 3.88%, 1/28/16

     1,003        776,623   

Term Loan C, 3.88%, 1/28/16

     182        138,507   

Cumulus Media, Inc., First Lien Term Loan,
5.75%, 9/17/18

     701        702,447   

EMI Music Publishing Ltd., Term Loan B,
5.50%, 6/29/18

     515        518,476   

Gray Television, Inc., Term Loan B, 3.75%, 12/31/14

     731        726,965   

Houghton Mifflin Harcourt Publishing Co., DIP Term Loan B, 7.25%, 6/01/18

     499        504,361   

Hubbard Broadcasting, Term Loan B, 5.25%, 4/28/17

     438        438,970   

Intelsat Jackson Holdings SA, Tranche B Term Loan, 5.25%, 4/02/18

     3,172        3,182,279   

Interactive Data Corp., Term Loan B, 4.50%, 2/12/18

     1,535        1,536,740   

Kabel Deutschland GmbH, Term Loan F,
4.25%, 2/01/19

     860        858,443   

Lavena Holding 4 GmbH (Prosiebensat.1 Media AG), Term Loan B, 2.95%, 3/06/15

   EUR 304        349,790   

LIN Television Corp., Term Loan B, 5.00%, 12/21/18

   USD 373        375,226   

Newsday LLC, Fixed Rate Term Loan, 10.50%, 8/01/13

     1,325        1,332,181   

Nielsen Finance LLC, Class B Term Loan,
3.99%, 5/02/16

     724        726,271   

Sinclair Television Group, Inc., Term Loan B,
4.00%, 10/28/16

     640        639,696   

Thomson Reuters (Healthcare), Inc., Term Loan B,
6.75%, 6/06/19

     695        699,921   

Univision Communications, Inc., Extended Term Loan, 4.48%, 3/31/17

     986        952,754   

UPC Broadband Holding BV, Term Loan U,
4.15%, 12/29/17

   EUR 210        262,893   

UPC Financing Partnership:

    

Term Loan, 4.75%, 12/29/17

   USD 530        531,548   

Term Loan T, 3.75%, 12/30/16

     95        94,110   

WC Luxco Sarl, Term Loan B3, 4.25%, 3/15/18

     212        210,383   

Weather Channel, Term Loan B, 4.25%, 2/13/17

     962        965,597   

WideOpenWest Finance LLC, First Lien Term Loan,
6.25%, 7/17/18

     595        594,631   
    

 

 

 
               24,063,373   

Metals & Mining — 2.6%

    

Constellium Holding Co. BV, Term Loan B,
9.25%, 5/25/18

     590        578,200   

Novelis, Inc., Term Loan, 4.00%, 3/10/17

     1,322        1,313,681   

SunCoke Energy, Inc., Term Loan B, 4.00%, 7/26/18

     495        492,526   

Walter Energy, Inc., Term Loan B, 4.00%, 4/02/18

     1,478        1,453,044   
    

 

 

 
               3,837,451   

Multiline Retail — 1.3%

    

99¢ Only Stores, Term Loan, 5.25%, 1/11/19

     597        600,353   

Dollar General Corp., Tranche B-2 Term Loan,
2.98%, 7/07/14

     360        361,067   

Hema Holding BV:

    

Term Loan B, 2.89%, 7/06/15

   EUR 203        245,464   

Term Loan C, 2.14%, 7/05/16

     203        246,738   

The Neiman Marcus Group, Inc., Term Loan,
4.75%, 5/16/18

   USD 485        485,000   
    

 

 

 
               1,938,622   

Oil, Gas & Consumable Fuels — 2.3%

    

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

     1,060        1,062,279   

Everest Acquisition LLC, Term Loan B1, 5.00%, 4/24/18

     755        756,888   
Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Oil, Gas & Consumable Fuels (concluded)

    

Gibson Energy ULC, Term Loan B, 4.75%, 6/15/18

   USD 881      $ 883,970   

Obsidian Natural Gas Trust, Term Loan,
7.00%, 11/02/15

     618        618,239   
    

 

 

 
               3,321,376   

Paper & Forest Products — 0.8%

    

Ainsworth Lumber Co. Ltd., Term Loan, 5.25%, 6/26/14

     200        193,500   

NewPage Corp., DIP Term Loan, 8.00%, 3/07/13

     250        252,345   

Verso Paper Finance Holdings LLC, Term Loan,
6.49%—7.24%, 2/01/13

     1,520        760,203   
    

 

 

 
               1,206,048   

Pharmaceuticals — 4.1%

    

Aptalis Pharma, Inc., Term Loan B, 5.50%, 2/10/17

     1,283        1,277,940   

Pharmaceutical Product Development, Inc., Term Loan B, 6.25%, 12/05/18

     1,593        1,610,294   

Quintiles Transnational Corp., Term Loan B,
5.00%, 6/08/18

     673        674,466   

RPI Finance Trust:

    

Incremental Tranche 2, 4.00%, 11/09/18

     110        109,840   

Term Loan Tranche 2, 4.00%, 5/09/18

     494        494,516   

Valeant Pharmaceuticals International, Inc.:

    

Add-On Term Loan B, 4.75%, 2/13/19

     678        679,310   

Series A Tranche B, 4.75%, 2/13/19

     495        496,148   

Warner Chilcott Corp.:

    

Incremental Term Loan B-1, 4.25%, 3/15/18

     117        116,207   

Term Loan B-1, 4.25%, 3/15/18

     308        306,012   

Term Loan B-2, 4.25%, 3/15/18

     154        153,006   
    

 

 

 
               5,917,739   

Professional Services — 1.4%

    

Booz Allen Hamilton, Inc., Term Loan B, 4.50%, 7/31/19

     740        740,925   

Emdeon, Inc., Term Loan B1, 5.00%, 11/02/18

     931        931,544   

ON Assignment, Inc., Term Loan B, 5.00%, 5/15/19

     306        304,329   
    

 

 

 
               1,976,798   

Real Estate Investment Trusts (REITs) — 0.8%

    

iStar Financial, Inc.:

    

Term Loan A1, 5.00%, 6/28/13

     1,185        1,186,350   

Term Loan A2, 7.00%, 6/30/14

     35        35,033   
    

 

 

 
               1,221,383   

Real Estate Management & Development — 1.6%

    

Mattamy Funding Partnership, Term Loan B,
2.69%, 4/11/13

     225        221,802   

Realogy Corp.:

    

Extended Letter of Credit Loan, 4.50%, 10/10/16

     103        99,281   

Extended Synthetic Letter of Credit,
3.25%, 10/10/13

     29        26,904   

Extended Term Loan, 4.48%, 10/10/16

     1,971        1,902,900   

Stockbridge SBE Holdings LLC, Term Loan B,
13.00%, 5/02/17

     100        99,500   
    

 

 

 
               2,350,387   

Road & Rail — 0.7%

    

Avis Budget Car Rental LLC, Incremental Term Loan, 6.25%, 9/21/18

     316        317,379   

RailAmerica, Inc., Term Loan B, 4.00%, 3/01/19

     509        508,410   

Road Infrastructure Investment LLC, Term Loan B, 6.25%, 3/30/18

     269        267,978   
    

 

 

 
               1,093,767   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    55


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Floating Rate Income Strategies Fund II, Inc. (FRB)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Semiconductors & Semiconductor Equipment — 0.9%

    

Freescale Semiconductor, Inc., Extended Term Loan B, 4.50%, 12/01/16

   USD 869      $ 833,242   

NXP BV, Term Loan A-2, 5.50%, 3/03/17

     446        451,476   
    

 

 

 
               1,284,718   

Software — 3.7%

    

Blackboard, Inc., Term Loan B, 7.50%, 10/04/18

     294        288,573   

Infor US, Inc. (FKA Lawson Software, Inc.), Term Loan B, 6.25%, 4/05/18

     2,040        2,060,857   

Sophia, LP, Term Loan B, 6.25%, 7/19/18

     738        744,240   

SS&C Technologies, Inc.:

    

Term Loan B-1, 5.00%, 6/07/19

     1,028        1,029,174   

Term Loan B-2, 5.00%, 6/07/19

     106        106,466   

Vertafore, Inc., Term Loan B, 5.25%, 7/29/16

     355        354,248   

WaveDivision Holdings LLC, Term Loan B,
5.50%, 8/23/19

     800        802,984   
    

 

 

 
               5,386,542   

Specialty Retail — 6.6%

    

Academy Ltd., Term Loan, 6.00%, 8/03/18

     896        898,634   

Bass Pro Group LLC, Term Loan, 5.25%, 6/13/17

     644        648,582   

Burlington Coat Factory Warehouse Corp., Term Loan B1, 5.50%, 2/23/17

     173        173,423   

Claire’s Stores, Inc., Term Loan B,
2.98%—3.20%, 5/29/14

     926        908,258   

General Nutrition Centers, Inc., Term Loan B,
4.25%, 3/02/18

     985        983,611   

The Gymboree Corp., Term Loan, 5.00%, 2/23/18

     146        141,494   

Harbor Freight Tools USA, Inc., Term Loan B,
5.50%, 11/14/17

     525        524,260   

Jo-Ann Stores, Inc., Term Loan, 4.75%, 3/16/18

     362        361,984   

Michaels Stores, Inc.:

    

Extended Term Loan B3, 5.00%, 7/29/16

     392        394,015   

Term Loan B2, 5.00%, 7/29/16

     701        704,503   

Party City Holdings, Inc., Term Loan B, 5.75%, 7/26/19

     975        979,465   

PETCO Animal Supplies, Inc., Term Loan, 4.50%, 11/24/17

     1,125        1,125,709   

Things Remembered, Inc., Term Loan B,
8.00%, 5/24/18

     360        352,800   

Toys ‘R’ Us Delaware, Inc.:

    

Incremental Term Loan B2, 5.25%, 5/25/18

     242        231,414   

Term Loan, 6.00%, 9/01/16

     300        294,271   

Term Loan B3, 5.25%, 5/25/18

     110        105,336   

The Yankee Candle Co., Inc., Term Loan B,
5.25%, 4/02/19

     728        731,000   
    

 

 

 
               9,558,759   

Textiles, Apparel & Luxury Goods — 1.2%

    

Ascend Performance Materials LLC, Term Loan B, 6.75%, 4/10/18

     1,057        1,047,654   

Wolverine Worldwide, Inc., Term Loan B, 6.75%, 6/26/19

     660        664,112   
    

 

 

 
               1,711,766   

Wireless Telecommunication Services — 1.7%

    

Crown Castle International Corp., Term Loan B, 4.00%, 1/31/19

     317        316,122   

MetroPCS Wireless, Inc.:

    

Term Loan B-3, 4.00%, 3/16/18

     146        145,501   

Tranche B-2 Term Loan, 4.07%, 11/03/16

     474        473,170   

Vodafone Americas Finance 2, Inc. (g):

    

Term Loan, 6.88%, 8/11/15

     1,211        1,259,443   

Term Loan B, 6.25%, 7/11/16

     309        315,562   
    

 

 

 
               2,509,798   
Total Floating Rate Loan Interests – 126.9%              184,945,380   
Other Interests (i)    Beneficial
Interest
(000)
    Value  
    

Chemicals — 0.0%

    

Wellman Holdings, Inc., Litigation Trust Certificate

     USD 2,000      $ 20   

Diversified Financial Services — 0.3%

    

J.G. Wentworth LLC Preferred Equity Interests (d)

     (j)      365,704   
Total Other Interests – 0.3%              365,724   

 

Warrants (k)    Shares         

Software — 0.0%

    

HMH Holdings/EduMedia (Issued/Exercisable 3/09/10, 19 Shares for 1 Warrant, Expires 6/22/19, Strike Price $42.27)

     613          
Total Long-Term Investments
(Cost — $211,136,977) — 145.2%
             211,542,876   

 

Short-Term Securities               

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (l)(m)

     1,481,869        1,481,869   

Total Short-Term Securities

(Cost — $1,481,869) — 1.0%

             1,481,869   

 

Options Purchased    Contracts         
    

Over-the-Counter Call Options — 0.0%

    

Marsico Parent Superholdco LLC, Strike Price USD 942.86, Expires 12/14/19, Broker Goldman Sachs Group, Inc.

     11          
Total Options Purchased
(Cost — $10,755) — 0.0%
               
Total Investments (Cost — $212,629,601) — 146.2%        213,024,745   

Liabilities in Excess of Other Assets — (46.2)%

       (67,347,038
    

 

 

 
Net Assets — 100.0%      $ 145,677,707   
    

 

 

 
                  

 

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

 

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

 

(c)   When-issued security. Unsettled when-issued transaction was as follows:

 

Counterparty    Value      Unrealized
Appreciation
 
Credit Suisse Group AG    $ 369,200           

 

(d)   Non-income producing security.

 

(e)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

 

(f)   Convertible security.

 

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

 

(h)   Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.

 

(i)   Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.

 

(j)   Amount is less than $500.

 

(k)   Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

 

 

 

See Notes to Consolidated Financial Statements.

 

                
56    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Floating Rate Income Strategies Fund II, Inc.  (FRB)

 

(l)   Investments in issuers considered to be an affiliate of the Fund during the six months ended August 31, 2012, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate    Shares
Held at
February 29,
2012
     Net
Activity
    Shares
Held at
August 31,
2012
     Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

     2,382,746         (900,877     1,481,869       $ 445   

 

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

 

Ÿ  

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

 

Currency

Purchased

    Currency Sold     Counter
party
    Settle
ment
Date
    Unrealized
Depreciation
 
USD     768,036      CAD     780,000        UBS AG        10/17/12      $ (22,525)   
USD     70,504      GBP     45,000        Citigroup,
Inc.
       10/17/12        (938)   
USD     871,669      GBP     561,500        UBS AG        10/17/12        (19,778)   
USD     2,150,404      EUR     1,754,000        Citigroup, Inc.        10/22/12        (56,915)   
Total             $ (100,156)   
           

 

 

 

 

Ÿ  

Credit default swaps on traded indexes — buy protection outstanding as of August 31, 2012 were as follows:

 

Index    Pay
Fixed
Rate
  Counterparty     Expiration
Date
    Notional
Amount
(000)
    Unrealized
Depreciation
 

Dow Jones CDX North

America High Yield

Index Series 18

   5.00%    

 

JPMorgan &

Chase Co.

  

  

    6/20/17      $ 1,906      $ (77,373

 

Ÿ  

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

 

Ÿ  

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

 

Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities

 

Ÿ  

Level 2 — other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

Ÿ  

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

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

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

 

     Level 1     Level 2     Level 3     Total  

Assets:

       
Investments:        

Long-Term Investments:

       

Asset-Backed Securities

                $ 3,851,124      $ 3,851,124   

Common Stocks

  $ 468,196      $ 402,509        4,937        875,642   

Corporate Bonds

           19,548,395        1,956,611        21,505,006   

Floating Rate Loan Interests

           172,570,323        12,375,057        184,945,380   

Other Interests

                  365,724        365,724   

Warrants

                           

Short-Term Securities

    1,481,869                      1,481,869   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,950,065      $ 192,521,227      $ 18,553,453      $ 213,024,745   
 

 

 

   

 

 

   

 

 

   

 

 

 

 

 

     Level 1     Level 2     Level 3     Total  
Derivative Financial Instruments1        

Liabilities:

       

Foreign currency exchange contracts

         $ (100,156          $ (100,156

Interest rate contracts

           (77,373            (77,373
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

         $ (177,529          $ (177,529
 

 

 

   

 

 

   

 

 

   

 

 

 

 

1   

Derivative financial instruments are foreign currency exchange contracts and swaps, which are valued at the unrealized appreciation/depreciation on the instrument.

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

 

      Level 1      Level 2     Level 3      Total  

Assets:

          

Cash

   $ 3,216                      $ 3,216   

Foreign currency at value

     35,669                        35,669   

Liabilities:

          

Loan payable

           $ (63,000,000             (63,000,000
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

   $ 38,885       $ (63,000,000           $ (62,961,115
  

 

 

    

 

 

   

 

 

    

 

 

 

There were no transfers between Level 1 and Level 2 during the six months ended August 31, 2012.

 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    57


Table of Contents
Consolidated Schedule of Investments (concluded)    BlackRock Floating Rate Income Strategies Fund II, Inc.  (FRB)

 

The following table summarizes the valuation techniques used and unobservable inputs developed by the Global Valuation Committee to determine the fair value of certain of the Fund’s Level 3 investments as of August 31, 2012:

 

     Value      Valuation Techniques    Unobservable Inputs1    Range of
Unobservable
Inputs
   Weighted
Average of
Unobservable
Inputs2

Assets:

             

Common Stocks

  $ 4,937       Market Comparable Companies    EBITDA Multiple    5.0x    5.0x
        Illiquidity Discount    20%    20%
        Proforma Revenue Increase    37%    37%

Corporate Bonds

    1,608,081       Market Comparable Companies    EBITDA Multiple    5.0x    5.0x
        Illiquidity Discount    20%    20%
        Proforma Revenue Increase    37%    37%

Floating Rate Loan Interests

    2,448,888       Market Comparable Companies    Illiquidity Discount    50%    50%
        Yield    9.65%    9.65%
           Cost    N/A3      

Total4

  $ 4,061,906               
 

 

 

             

 

1   

A change to the unobservable inputs may result in a significant change to the value of the investment as follows:

 

Unobservable Input    Impact to
Value if Input Increases
     Impact to
Value if Input Decreases
 

EBITDA Multiple

     Increase         Decrease   

Illiquidity Discount

     Decrease         Increase   

Proforma Revenue Increase

     Increase         Decrease   

Yield

     Decrease         Increase   

 

2  

Unobservable inputs are weighted based on the value of the investments included in the range.

 

3   

The Fund fair values certain of its Level 3 investments using prior transaction prices (acquisition cost), although the transaction may not have occurred during the current reporting period. In such cases, these investments are generally privately held investments. There may not be a secondary market, and/or there are a limited number of investors. The determination to fair value such investments at cost is based upon factors consistent with the principles of fair value measurement that are reasonably available to the Global Valuation Committee, or its delegate. Valuations are reviewed utilizing available market information to determine if the carrying value should be adjusted. Such market data may include, but is not limited to, observations of the trading multiples of public companies considered comparable to the private companies being valued, financial or operational information released by the company, and/or news or corporate events that affect the investment. Valuations may be adjusted to account for company-specific issues, the lack of liquidity inherent in a nonpublic investment and the fact that comparable public companies are not identical to the investments being fair valued by the Fund.

 

4   

Does not include Level 3 investments with values derived utilizing prices from recent prior transactions or third party pricing information without adjustment for which such inputs are unobservable. See above valuation input table for values of such Level 3 investments. A significant change in third party pricing information could result in a significantly lower or higher value in such Level 3 investments.

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

 

     Asset-Backed
Securities
    Common
Stocks
    Corporate
Bonds
    Floating Rate
Loan Interests
    Other
Interests
     Total  
Assets:             

Opening balance, as of February 29, 2012

  $ 3,012,124      $ 16,744      $ 1,863,100      $ 9,442,927      $ 311,546       $ 14,646,441   

Transfers into Level 35

                         2,698,968                2,698,968   

Transfers out of Level 36

                         (2,006,150             (2,006,150

Accrued discounts/premiums

    20,211               32,997        (70,340             (17,132

Net realized gain (loss)

    (45,594     (669,326            (278,193             (993,113

Net change in unrealized appreciation/depreciation7

    169,049        657,525        (14,486     487,360        54,178         1,353,626   

Purchases

    2,776,459               75,000        3,992,590                6,844,049   

Sales

    (2,081,125     (6            (1,892,105             (3,973,236
 

 

 

   

 

 

 
Closing Balance, as of August 31, 2012   $ 3,851,124      $ 4,937      $ 1,956,611      $ 12,375,057      $ 365,724       $ 18,553,453   
 

 

 

   

 

 

 

 

5   

As of February 29, 2012, the Fund used observable inputs in determining the value of certain investments. As of August 31, 2012, the Fund used significant unobservable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $2,698,968 transferred from Level 2 to Level 3 in the disclosure hierarchy.

 

6   

As of February 29, 2012, the Fund used significant unobservable inputs in determining the value of certain investments. As of August 31, 2012, the Fund used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $2,006,150 transferred from Level 3 to Level 2 in the disclosure hierarchy.

 

7   

Included in the related net change in unrealized appreciation/depreciation in the Consolidated Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of August 31, 2012 was $242,680

 

 

See Notes to Consolidated Financial Statements.      
                
58    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments     BlackRock Senior High Income Fund, Inc. (ARK)
August 31, 2012  (Unaudited)    (Percentages shown are based on Net Assets)

 

Asset-Backed Securities  

Par 

(000)

    Value  
   

CSAM Funding, Series 2A, Class B1,
7.05%, 10/15/16 (a)

  USD 500      $ 505,200   

Fraser Sullivan CLO Ltd., Series 2012-7A, Class C, 4.47%, 4/20/23 (a)(b)

    405        359,883   

Gannett Peak CLO Ltd., Series 2006-1X, Class A2, 0.81%, 10/27/20 (b)

    495        417,038   

Goldentree Loan Opportunities VI Ltd., Series 2012-6A, Class D, 4.66%, 4/17/22 (a)(b)

    650        590,915   

Greyrock CDO Ltd., Series 2005-1X, Class A2L,
0.85%, 11/15/17 (b)

    1,025        906,817   

Highbridge Loan Management Ltd., Series 2012-1A, Class C, 5.71%, 9/20/22 (a)(b)(c)

    650        599,950   

ING Investment Management, Series 2012-2A, Class D, 4.99%, 10/15/22 (a)(b)

    675        601,837   

LCM LP (a)(b):

   

Series 11A, Class D2, 4.41%, 4/19/22

    700        612,500   

Series 9A, Class E, 4.66%, 7/14/22

    500        387,550   

Symphony CLO Ltd. (a)(b):

   

Series 2012-9A, Class D, 4.71%, 4/16/22

    525        467,880   

Series 2012-10A, Class D, 5.69%, 7/23/23

    650        601,250   
Total Asset-Backed Securities – 2.5%        6,050,820   

 

Common Stocks (d)   Shares         

Chemicals — 0.0%

   

GEO Specialty Chemicals, Inc.

    142,466        65,534   

Containers & Packaging — 0.1%

   

Smurfit Kappa Plc

    18,171        148,244   

Metals & Mining — 0.1%

   

Euramax International

    935        199,445   

Paper & Forest Products — 0.5%

   

Ainsworth Lumber Co. Ltd.

    547,756        1,200,257   

Software — 0.3%

   

HMH Holdings/EduMedia

    30,022        735,532   
Total Common Stocks – 1.0%        2,349,012   

 

Corporate Bonds  

Par 

(000)

        

Aerospace & Defense — 0.5%

   

Huntington Ingalls Industries, Inc., 7.13%, 3/15/21

  USD 425        460,063   

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

    692        736,980   
   

 

 

 
              1,197,043   

Airlines — 0.2%

   

American Airlines Pass-Through Trust, Series 2011-2, Class A, 8.63%, 4/15/23

    325        344,617   

Delta Air Lines, Inc., Series 2009-1-B,
9.75%, 6/17/18

    85        92,176   
   

 

 

 
              436,793   

Auto Components — 1.3%

   

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

    290        319,000   

Icahn Enterprises LP:

   

7.75%, 1/15/16

    110        115,500   

8.00%, 1/15/18

    2,065        2,199,225   

Titan International, Inc., 7.88%, 10/01/17

    490        513,275   

Venture Holdings Co. LLC (d)(e):

   

12.00%, 7/01/49

    700          

Series B, 9.50%, 7/01/05

    3,325          
   

 

 

 
              3,147,000   

Biotechnology — 0.0%

   

QHP Royalty Sub LLC, 10.25%, 3/15/15 (a)

    24        23,903   
Corporate Bonds  

Par 

(000)

    Value  
   

Building Products — 0.4%

   

Building Materials Corp. of America (a):

   

7.00%, 2/15/20

  USD 485      $ 525,013   

6.75%, 5/01/21

    410        447,925   
   

 

 

 
              972,938   

Capital Markets — 0.6%

   

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

    935        1,067,069   

KKR Group Finance Co. LLC, 6.38%, 9/29/20 (a)

    280        316,946   
   

 

 

 
              1,384,015   

Chemicals — 4.4%

   

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

    255        255,638   

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

    745        823,225   

GEO Specialty Chemicals, Inc.:

   

7.50%, 3/31/15 (f)(g)

    1,869        2,242,348   

10.00%, 3/31/15

    1,839        1,838,720   

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

    470        474,700   

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

    395        452,275   

INEOS Finance Plc (a):

   

8.38%, 2/15/19

    805        847,262   

7.50%, 5/01/20

    195        198,900   

LyondellBasell Industries NV:

   

6.00%, 11/15/21

    535        609,900   

5.75%, 4/15/24

    935        1,058,887   

NOVA Chemicals Corp., 8.63%, 11/01/19

    300        342,000   

Orion Engineered Carbons Bondco GmbH,
9.63%, 6/15/18 (a)

    400        422,000   

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

    1,075        1,085,750   
   

 

 

 
              10,651,605   

Commercial Banks — 0.6%

   

CIT Group, Inc.:

   

5.00%, 5/15/17

    330        344,025   

5.50%, 2/15/19 (a)

    760        792,300   

5.00%, 8/15/22

    250        251,894   
   

 

 

 
              1,388,219   

Commercial Services & Supplies — 1.2%

   

ARAMARK Holdings Corp., 8.63%, 5/01/16 (a)(f)

    330        337,841   

AWAS Aviation Capital Ltd., 7.00%, 10/17/16 (a)

    500        527,399   

Brickman Group Holdings, Inc., 9.13%, 11/01/18 (a)

    25        25,250   

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

    226        231,933   

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

    420        459,216   

The Geo Group, Inc., 7.75%, 10/15/17

    450        487,687   

Mead Products LLC/ACCO Brands Corp.,
6.75%, 4/30/20 (a)

    328        346,860   

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

    335        359,287   

West Corp., 8.63%, 10/01/18

    165        167,475   
   

 

 

 
              2,942,948   

Communications Equipment — 0.4%

   

Hughes Satellite Systems Corp., 6.50%, 6/15/19

    320        342,800   

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

    700        743,750   
   

 

 

 
              1,086,550   

Construction Materials — 0.5%

   

HD Supply, Inc., 8.13%, 4/15/19 (a)

    1,095        1,188,075   

Consumer Finance — 0.2%

   

Ford Motor Credit Co. LLC:

   

7.00%, 4/15/15

    140        155,845   

6.63%, 8/15/17

    300        344,875   
   

 

 

 
              500,720   

Containers & Packaging — 1.1%

   

Ardagh Packaging Finance Plc (a):

   

7.38%, 10/15/17

    200        214,250   

9.13%, 10/15/20

    300        312,000   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    59


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Senior High Income Fund, Inc. (ARK)

(Percentages shown are based on Net Assets)

 

Corporate Bonds  

Par 

(000)

    Value  
   

Containers & Packaging (concluded)

   

Ball Corp., 6.75%, 9/15/20

  USD 325      $ 359,125   

Berry Plastics Corp., 8.25%, 11/15/15

    540        568,350   

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

    535        591,175   

Sealed Air Corp. (a):

   

8.13%, 9/15/19

    405        450,562   

8.38%, 9/15/21

    80        90,000   
   

 

 

 
              2,585,462   

Distributors — 0.2%

   

VWR Funding, Inc., 7.25%, 9/15/17 (a)(c)

    383        387,788   

Diversified Consumer Services — 0.1%

   

ServiceMaster Co., 8.00%, 2/15/20

    125        133,281   

Diversified Financial Services — 3.1%

   

Ally Financial, Inc.:

   

8.30%, 2/12/15

    3,670        4,073,700   

8.00%, 11/01/31

    230        271,975   

8.00%, 11/01/31

    370        439,188   

CNG Holdings, Inc., 9.38%, 5/15/20 (a)

    260        265,200   

DPL, Inc., 7.25%, 10/15/21 (a)

    95        108,300   

Reynolds Group Issuer, Inc.:

   

7.13%, 4/15/19

    560        603,400   

9.88%, 8/15/19

    965        1,020,487   

6.88%, 2/15/21

    500        541,250   

8.25%, 2/15/21

    100        98,250   

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

    105        114,713   
   

 

 

 
              7,536,463   

Diversified Telecommunication Services — 1.4%

   

ITC Deltacom, Inc., 10.50%, 4/01/16

    520        560,300   

Level 3 Financing, Inc.:

   

4.47%, 2/15/15 (b)

    1,295        1,282,050   

8.13%, 7/01/19

    1,130        1,183,675   

7.00%, 6/01/20 (a)

    244        242,780   
   

 

 

 
              3,268,805   

Electric Utilities — 0.1%

   

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

    248        266,562   

Electrical Equipment — 0.1%

   

Belden, Inc., 5.50%, 9/01/22 (a)

    190        190,475   

Energy Equipment & Services — 2.5%

   

Calfrac Holdings LP, 7.50%, 12/01/20 (a)

    920        901,600   

Compagnie Générale de Géophysique, Veritas, 6.50%, 6/01/21

    1,105        1,150,581   

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

    625        645,312   

Gulfmark Offshore, Inc., 6.38%, 3/15/22 (a)

    70        71,400   

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

    140        142,800   

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

    380        386,650   

MEG Energy Corp. (a):

   

6.50%, 3/15/21

    490        515,725   

6.38%, 1/30/23

    165        172,013   

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

    270        286,875   

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

    1,090        1,109,075   

Precision Drilling Corp.:

   

6.63%, 11/15/20

    65        68,250   

6.50%, 12/15/21

    445        467,250   
              5,917,531   

Food Products — 0.4%

   

Constellation Brands, Inc., 6.00%, 5/01/22

    245        275,319   

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

    250        263,438   

Smithfield Foods, Inc., 6.63%, 8/15/22

    367        375,716   
   

 

 

 
              914,473   
Corporate Bonds  

Par 

(000)

    Value  
   

Health Care Equipment & Supplies — 0.7%

   

Biomet, Inc., 6.50%, 8/01/20 (a)

  USD 279      $ 289,462   

DJO Finance LLC:

   

10.88%, 11/15/14

    150        156,562   

8.75%, 3/15/18 (a)

    115        122,188   

7.75%, 4/15/18

    30        27,450   

Fresenius Medical Care US Finance II, Inc. (a):

   

5.63%, 7/31/19

    360        384,750   

5.88%, 1/31/22

    340        361,250   

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

    250        267,500   
   

 

 

 
              1,609,162   

Health Care Providers & Services — 3.2%

   

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

    365        379,600   

CHS/Community Health Systems, Inc.:

   

5.13%, 8/15/18

    185        190,781   

7.13%, 7/15/20

    176        184,360   

DaVita, Inc., 5.75%, 8/15/22

    362        376,480   

HCA, Inc.:

   

8.50%, 4/15/19

    25        28,188   

6.50%, 2/15/20

    1,030        1,131,712   

7.88%, 2/15/20

    1,174        1,310,477   

5.88%, 3/15/22

    785        835,044   

Hologic, Inc., 6.25%, 8/01/20 (a)

    516        546,315   

Omnicare, Inc., 7.75%, 6/01/20

    695        766,238   

Tenet Healthcare Corp.:

   

10.00%, 5/01/18

    430        494,500   

8.88%, 7/01/19

    1,015        1,154,562   

Vanguard Health Holding Co. II LLC, 7.75%, 2/01/19 (a)

    300        312,750   
   

 

 

 
              7,711,007   

Health Care Technology — 0.8%

   

IMS Health, Inc., 12.50%, 3/01/18 (a)

    1,730        2,032,750   

Hotels, Restaurants & Leisure — 1.4%

   

Affinity Gaming LLC/Affinity Gaming Finance Corp., 9.00%, 5/15/18 (a)

    125        127,187   

Caesars Entertainment Operating Co., Inc.:

   

11.25%, 6/01/17

    140        150,850   

8.50%, 2/15/20 (a)

    675        665,719   

Caesars Operating Escrow LLC, 9.00%, 2/15/20 (a)

    709        705,455   

Carlson Wagonlit BV, 6.88%, 6/15/19 (a)

    200        208,000   

Choice Hotels International, Inc., 5.75%, 7/01/22

    90        96,525   

Diamond Resorts Corp., 12.00%, 8/15/18

    540        574,425   

Little Traverse Bay Bands of Odawa Indians,
9.00%, 8/31/20 (a)

    282        256,620   

Tropicana Entertainment LLC, 9.63%, 12/15/14 (d)(e)

    220          

Wynn Las Vegas LLC, 5.38%, 3/15/22 (a)

    468        478,530   
   

 

 

 
              3,263,311   

Household Durables — 0.7%

   

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

    340        347,650   

Libbey Glass, Inc., 6.88%, 5/15/20 (a)

    90        95,962   

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

    1,120        1,248,800   
   

 

 

 
              1,692,412   

Independent Power Producers & Energy Traders — 3.5%

  

 

The AES Corp.:

   

7.75%, 10/15/15

    155        175,150   

9.75%, 4/15/16

    674        805,430   

7.38%, 7/01/21

    70        80,150   

Calpine Corp. (a):

   

7.25%, 10/15/17

    350        374,500   

7.50%, 2/15/21

    190        210,900   

Energy Future Holdings Corp., 10.00%, 1/15/20

    775        854,438   

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

    4,160        4,669,600   

GenOn REMA LLC, 9.24%, 7/02/17

    207        222,785   
 

 

See Notes to Consolidated Financial Statements.

 

                
60    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Senior High Income Fund, Inc. (ARK)

(Percentages shown are based on Net Assets)

 

Corporate Bonds  

Par 

(000)

    Value  
   

Independent Power Producers & Energy Traders (concluded)

  

 

Laredo Petroleum, Inc.:

   

9.50%, 2/15/19

  USD 495      $ 561,825   

7.38%, 5/01/22

    185        198,875   

QEP Resources, Inc., 5.38%, 10/01/22

    178        182,450   
   

 

 

 
              8,336,103   

Industrial Conglomerates — 1.5%

   

Sequa Corp. (a):

   

11.75%, 12/01/15

    1,430        1,501,500   

13.50%, 12/01/15

    1,930        2,045,776   
   

 

 

 
              3,547,276   

Insurance — 0.6%

   

CNO Financial Group, Inc., 9.00%, 1/15/18 (a)

    851        930,781   

Genworth Financial, Inc., 7.63%, 9/24/21

    370        378,066   

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

    220        196,900   
   

 

 

 
              1,505,747   

IT Services — 1.1%

   

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

    520        557,700   

First Data Corp.:

   

7.38%, 6/15/19 (a)

    445        459,462   

6.75%, 11/01/20 (a)

    460        456,550   

8.25%, 1/15/21 (a)

    651        645,304   

12.63%, 1/15/21

    288        291,600   

SunGard Data Systems, Inc., 7.63%, 11/15/20

    315        337,838   
   

 

 

 
              2,748,454   

Machinery — 0.9%

   

UR Financing Escrow Corp. (a):

   

5.75%, 7/15/18

    462        488,565   

7.38%, 5/15/20

    300        318,000   

7.63%, 4/15/22

    1,245        1,344,600   
   

 

 

 
              2,151,165   

Media — 6.6%

   

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

    190        215,175   

Cengage Learning Acquisitions, Inc.,
11.50%, 4/15/20 (a)

    500        526,250   

Checkout Holding Corp., 16.03%, 11/15/15 (a)(h)

    570        347,700   

Cinemark USA, Inc., 8.63%, 6/15/19

    195        218,400   

Clear Channel Worldwide Holdings, Inc.:

   

Series A, 9.25%, 12/15/17

    340        368,050   

Series B, 9.25%, 12/15/17

    4,301        4,671,961   

Series B, 7.63%, 3/15/20

    952        923,440   

DISH DBS Corp., 5.88%, 7/15/22 (a)

    795        800,963   

Intelsat Jackson Holdings SA, 7.25%, 10/15/20 (a)

    1,450        1,562,375   

Interactive Data Corp., 10.25%, 8/01/18

    810        913,275   

Lamar Media Corp., 5.88%, 2/01/22

    255        270,300   

NAI Entertainment Holdings LLC, 8.25%, 12/15/17 (a)

    476        530,740   

Nielsen Finance LLC, 7.75%, 10/15/18

    640        720,000   

ProQuest LLC, 9.00%, 10/15/18 (a)

    220        201,850   

Unitymedia Hessen GmbH & Co. KG:

   

8.13%, 12/01/17 (a)

    1,500        1,623,750   

7.50%, 3/15/19

    540        584,291   

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

    1,250        1,362,500   
   

 

 

 
              15,841,020   

Metals & Mining — 1.4%

   

FMG Resources August 2006 Property Ltd. (a):

   

6.88%, 2/01/18

    340        323,850   

6.88%, 4/01/22

    155        142,600   

Global Brass and Copper, Inc., 9.50%, 6/01/19 (a)

    255        268,388   

Kaiser Aluminum Corp., 8.25%, 6/01/20 (a)

    190        201,400   

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

    65        68,413   

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

    1,895        2,117,662   

RathGibson, Inc., 11.25%, 2/15/14 (d)(e)

    2,175          
Corporate Bonds  

Par 

(000)

    Value  
   

Metals & Mining (concluded)

   

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

  USD 205      $ 212,175   
   

 

 

 
              3,334,488   

Multiline Retail — 0.1%

   

Dollar General Corp., 4.13%, 7/15/17

    127        132,080   

Oil, Gas & Consumable Fuels — 6.7%

   

Access Midstream Partners LP, 6.13%, 7/15/22

    415        430,562   

Alpha Natural Resources, Inc.:

   

6.00%, 6/01/19 USD

    245        220,500   

6.25%, 6/01/21

    180        161,100   

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

    180        191,700   

Chaparral Energy, Inc., 7.63%, 11/15/22 (a)

    115        121,613   

Chesapeake Energy Corp.:

   

7.25%, 12/15/18

    25        26,188   

6.63%, 8/15/20

    265        272,287   

6.88%, 11/15/20

    150        155,625   

6.13%, 2/15/21

    235        233,238   

Coffeyville Resources LLC, 9.00%, 4/01/15 (a)

    105        111,825   

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

    210        216,825   

Consol Energy, Inc.:

   

8.25%, 4/01/20

    1,110        1,196,025   

6.38%, 3/01/21

    230        227,700   

Crosstex Energy LP:

   

8.88%, 2/15/18

    55        58,713   

7.13%, 6/01/22 (a)

    195        194,025   

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

    26        29,510   

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

    665        706,562   

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

    235        252,037   

Hilcorp Energy I LP, 7.63%, 4/15/21 (a)

    1,105        1,215,500   

Holly Energy Partners LP, 6.50%, 3/01/20 (a)

    80        83,600   

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

    320        340,000   

Linn Energy LLC:

   

6.25%, 11/01/19 (a)

    1,460        1,441,750   

8.63%, 4/15/20

    190        205,200   

7.75%, 2/01/21

    485        505,612   

MarkWest Energy Partners LP, 5.50%, 2/15/23

    115        117,588   

Newfield Exploration Co.:

   

5.75%, 1/30/22

    135        147,825   

5.63%, 7/01/24

    630        683,550   

Northern Oil and Gas, Inc., 8.00%, 6/01/20 (a)

    265        270,300   

Oasis Petroleum, Inc.:

   

7.25%, 2/01/19

    135        142,425   

6.50%, 11/01/21

    155        158,100   

Offshore Group Investments Ltd.:

   

11.50%, 8/01/15 (a)

    425        469,625   

11.50%, 8/01/15

    440        486,200   

OGX Petroleo e Gas Participacoes SA (a):

   

8.50%, 6/01/18

    552        489,900   

8.38%, 4/01/22

    295        250,750   

Pioneer Natural Resources Co., 7.20%, 1/15/28

    570        724,093   

Range Resources Corp.:

   

5.75%, 6/01/21

    645        686,119   

5.00%, 8/15/22

    298        310,292   

Sabine Pass Liquified Natural Gas LP, 7.50%, 11/30/16

    540        577,800   

Samson Investment Co., 9.75%, 2/15/20 (a)

    40        41,200   

SandRidge Energy, Inc.:

   

7.50%, 3/15/21

    120        121,500   

7.50%, 3/15/21 (a)

    165        167,063   

8.13%, 10/15/22 (a)

    110        114,950   

7.50%, 2/15/23 (a)

    285        286,425   

SESI LLC:

   

6.38%, 5/01/19

    280        296,800   

7.13%, 12/15/21

    275        305,937   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    61


Table of Contents
Consolidated Schedule of Investments
(continued)
  

BlackRock Senior High Income Fund, Inc. (ARK)

(Percentages shown are based on Net Assets)

 

Corporate Bonds  

Par 

(000)

    Value  
   

Oil, Gas & Consumable Fuels (concluded)

   

SM Energy Co.:

   

6.50%, 11/15/21

  USD 225      $ 235,125   

6.50%, 1/01/23 (a)

    105        109,463   

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

    190        204,250   
   

 

 

 
              15,994,977   

Paper & Forest Products — 0.3%

   

Clearwater Paper Corp., 10.63%, 6/15/16

    365        407,888   

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

    145        150,075   

Sappi Papier Holding GmbH, 8.38%, 6/15/19 (a)

    200        210,500   
   

 

 

 
              768,463   

Pharmaceuticals — 0.3%

   

Valeant Pharmaceuticals International (a):

   

6.50%, 7/15/16

    380        400,900   

7.25%, 7/15/22

    350        361,375   
   

 

 

 
              762,275   

Real Estate Investment Trusts (REITs) — 0.4%

   

Felcor Lodging LP, 6.75%, 6/01/19

    820        879,450   

Real Estate Management & Development — 0.8%

   

Realogy Corp., 7.63%, 1/15/20 (a)

    1,130        1,231,700   

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

    655        728,687   
   

 

 

 
              1,960,387   

Road & Rail — 1.1%

   

Florida East Coast Railway Corp., 8.13%, 2/01/17

    200        210,000   

The Hertz Corp.:

   

7.50%, 10/15/18

    780        841,425   

6.75%, 4/15/19

    135        141,750   

6.75%, 4/15/19 (a)

    150        157,500   

7.38%, 1/15/21

    1,095        1,190,812   
   

 

 

 
              2,541,487   

Software — 0.8%

   

Infor US, Inc., 9.38%, 4/01/19 (a)

    1,295        1,401,837   

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

    605        618,613   
   

 

 

 
              2,020,450   

Specialty Retail — 0.5%

   

Claire’s Stores, Inc., 9.00%, 3/15/19 (a)

    225        233,437   

Penske Automotive Group, Inc., 5.75%, 10/01/22 (a)

    260        265,200   

QVC, Inc., 5.13%, 7/02/22 (a)

    138        144,644   

Sally Holdings LLC:

   

6.88%, 11/15/19

    350        391,125   

5.75%, 6/01/22

    160        172,200   
   

 

 

 
              1,206,606   

Textiles, Apparel & Luxury Goods — 0.2%

   

Levi Strauss & Co., 6.88%, 5/01/22

    140        145,250   

PVH Corp., 7.75%, 11/15/23

    215        250,840   
   

 

 

 
              396,090   

Trading Companies & Distributors — 0.4%

   

Doric Nimrod Air Finance Alpha Ltd. (a):

   

Series 2012-1, Class A, 5.13%, 11/30/24

    440        446,600   

Series 2012-1, Class B, 6.50%, 5/30/21

    495        500,851   
   

 

 

 
              947,451   

Transportation Infrastructure — 0.1%

   

Aguila 3 SA, 7.88%, 1/31/18 (a)

    176        185,460   

Wireless Telecommunication Services — 3.6%

   

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

    1,770        1,867,350   

Digicel Group Ltd. (a):

   

12.00%, 4/01/14

    800        892,000   

8.25%, 9/01/17

    270        286,200   
Corporate Bonds  

Par 

(000)

    Value  
   

Wireless Telecommunication Services (concluded)

   

Digicel Group Ltd. (a) (concluded):

   

MetroPCS Wireless, Inc., 6.63%, 11/15/20

  USD 460      $ 476,100   

SBA Telecommunications, Inc., 5.75%, 7/15/20 (a)

    122        127,490   

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

    1,940        1,755,700   

Sprint Nextel Corp. (a):

   

9.00%, 11/15/18

    1,150        1,357,000   

7.00%, 3/01/20

    1,605        1,757,475   
   

 

 

 
              8,519,315   
Total Corporate Bonds – 57.0%        136,208,035   

 

Floating Rate Loan Interests (b)              

Aerospace & Defense — 0.3%

   

TransDigm, Inc.:

   

Add on Term Loan B2, 4.00%, 2/14/17

    189        189,598   

Term Loan B, 4.00%, 2/14/17

    599        601,166   
   

 

 

 
              790,764   

Airlines — 0.4%

   

Delta Air Lines, Inc., Term Loan B, 5.50%, 4/20/17

    1,004        1,010,996   

US Airways Group, Inc., Term Loan, 2.74%, 3/21/14

    55        53,144   
   

 

 

 
              1,064,140   

Auto Components — 1.7%

   

Autoparts Holdings Ltd.:

   

First Lien Term Loan, 6.50%, 7/28/17

    859        841,342   

Second Lien Term Loan, 10.50%, 1/29/18

    900        783,000   

Federal-Mogul Corp.:

   

Term Loan B, 2.17% - 2.18%, 12/29/14

    791        754,390   

Term Loan C, 2.17% - 2.18%, 12/28/15

    150        143,197   

The Goodyear Tire & Rubber Co., Term Loan (Second Lien), 4.75%, 4/30/19

    1,110        1,105,838   

Schaeffler AG, Term Loan C2, 6.00%, 1/27/17

    395        396,153   
   

 

 

 
              4,023,920   

Biotechnology — 0.2%

   

Grifols, Inc., Term Loan B, 4.50%, 6/01/17

    568        569,450   

Building Products — 1.3%

   

Armstrong World Industries, Inc., Term Loan B,
4.00%, 3/09/18

    588        586,183   

CPG International, Inc., Term Loan B, 6.00%, 2/18/17

    591        581,396   

Goodman Global, Inc.:

   

Initial Term Loan (First Lien), 5.75%, 10/28/16

    1,629        1,630,392   

Term Loan (Second Lien), 9.00%, 10/30/17

    382        386,831   
   

 

 

 
              3,184,802   

Capital Markets — 1.2%

   

American Capital Holdings, Term Loan, 5.50%, 7/19/16

    491        492,841   

HarbourVest Partners LLC, Term Loan B,
6.25%, 12/16/16

    754        753,082   

Nuveen Investments, Inc.:

   

Extended (First Lien), Term Loan,
5.95%—5.96%, 5/13/17

    371        370,857   

Extended Term Loan, 5.92%—5.96%, 5/12/17

    1,004        1,007,198   

Incremental Term Loan, 7.25%, 5/13/17

    295        296,328   
   

 

 

 
              2,920,306   

Chemicals — 3.9%

   

American Rock Salt Holdings LLC, Term Loan,
5.50%, 4/25/17

    1,180        1,145,841   

Chemtura Corp., Exit Term Loan B, 5.50%, 8/27/16

    800        802,336   

Evergreen Acqco 1 LP, Term Loan B, 6.25%, 7/09/19

    330        333,095   

General Chemical Corp., Term Loan,
5.00%—5.75%, 10/06/15

    503        500,788   
 

 

See Notes to Consolidated Financial Statements.

 

                
62    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Senior High Income Fund, Inc. (ARK)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)  

Par 

(000)

    Value  
   

Chemicals (concluded)

   

INEOS US Finance LLC, 6 Year Term Loan,
6.50%, 5/04/18

  USD 2,483      $ 2,486,487   

Nexeo Solutions LLC, Term Loan B, 5.00%, 9/08/17

    864        840,845   

PolyOne Corp., Term Loan, 5.00%, 12/20/17

    348        349,295   

PQ Corp., Term Loan B, 3.98%, 7/30/14

    1,735        1,703,559   

Styron Sarl LLC, Term Loan B, 8.00%, 8/02/17

    318        296,107   

Tronox Pigments (Netherlands) BV:

   

Delayed Draw Term Loan, 4.25%, 2/08/18

    106        105,816   

Term Loan B, 4.25%, 2/08/18

    389        387,991   

Univar, Inc., Term Loan B, 5.00%, 6/30/17

    428        424,823   
   

 

 

 
              9,376,983   

Commercial Services & Supplies — 3.3%

   

ACCO Brands Corp., Term Loan B, 4.25%, 4/30/19

    711        710,834   

Altegrity, Inc., Tranche D Term Loan, 7.75%, 2/20/15

    1,259        1,251,754   

AWAS Finance Luxembourg 2012 SA, Term Loan,
5.75%, 7/16/18

    160        160,000   

AWAS Finance Luxembourg Sarl, Term Loan B,
5.25%, 6/10/16

    562        561,992   

Delos Aircraft, Inc., Term Loan B2, 4.75%, 4/12/16 USD

    1,075        1,085,750   

KAR Auction Services, Inc., Term Loan B,
5.00%, 5/19/17

    1,236        1,235,797   

Protection One, Inc., Term Loan, 5.75%, 3/21/19

    509        513,812   

Synagro Technologies, Inc., Term Loan B,
2.24%, 4/02/14

    489        433,859   

Volume Services America, Inc., Term Loan B,
10.50%—10.75%, 9/16/16

    983        982,500   

West Corp., Term Loan B6, 5.75%, 6/29/18

    850        852,660   
   

 

 

 
              7,788,958   

Communications Equipment — 1.7%

   

Avaya, Inc.:

   

Extended Term Loan B3, 4.93%, 10/26/17

    79        70,661   

Term Loan B1, 3.18%, 10/24/14

    1,047        1,004,823   

CommScope, Inc., Term Loan, 4.25%, 1/12/18

    825        824,687   

Zayo Group, LLC, Term Loan B, 7.13%, 7/02/19

    2,165        2,196,804   
   

 

 

 
              4,096,975   

Construction & Engineering — 0.9%

   

BakerCorp. International, Inc., Term Loan B,
4.75%, 6/01/18

    679        675,762   

Safway Services LLC, First Out Term Loan,
9.00%, 12/16/17

    1,500        1,500,000   
   

 

 

 
              2,175,762   

Construction Materials — 1.1%

   

HD Supply, Inc., Senior Debt B, 7.25%, 10/12/17

    2,460        2,513,308   

Consumer Finance — 0.3%

   

Springleaf Financial Funding Co., Term Loan,
5.50%, 5/10/17

    865        835,374   

Containers & Packaging — 0.2%

   

Sealed Air Corp., Term Loan B, 4.75%, 10/03/18

    452        453,947   

Diversified Consumer Services — 2.1%

   

Coinmach Service Corp., Term Loan B, 3.33%, 11/20/14

    2,154        2,066,634   

Education Management LLC, Term Loan C3,
8.25%, 3/29/18

    573        504,630   

Laureate Education, Inc., Extended Term Loan,
5.25%, 6/18/18

    987        962,334   

ServiceMaster Co.:

   

Delayed Draw Term Loan, 2.74%, 7/24/14

    83        82,529   

Term Loan, 2.75% - 2.97%, 7/24/14 USD

    834        828,771   

Weight Watchers International, Inc., Term Loan F,
4.00%, 3/15/19

    468        462,654   
   

 

 

 
              4,907,552   
Floating Rate Loan Interests (b)  

Par 

(000)

    Value  
   

Diversified Financial Services — 1.5%

   

Residential Capital LLC, DIP Term Loan A1,
5.00%, 11/18/13

  USD 1,075      $ 1,077,687   

Reynolds Group Holdings, Inc.:

   

Term Loan B, 6.50%, 2/09/18

    449        451,922   

Term Loan C, 6.50%, 8/09/18

    2,083        2,109,095   
   

 

 

 
              3,638,704   

Diversified Telecommunication Services — 3.6%

   

Hawaiian Telcom Communications, Inc., Term Loan B, 7.00%, 2/28/17

    870        880,875   

Integra Telecom Holdings, Inc., Term Loan B,
9.25%, 4/15/15

    907        892,903   

Level 3 Financing, Inc.:

   

2016 Term Loan B, 4.75%, 2/01/16

    730        731,460   

2019 Term Loan B, 5.25%, 8/01/19

    595        595,869   

Term Loan B2, 5.75%, 9/03/18

    2,050        2,055,412   

Term Loan B3, 5.75%, 8/31/18

    775        777,046   

Telesat LLC, Term Loan B, 4.25%, 3/28/19

    1,385        1,381,759   

US Telepacific Corp., Term Loan B, 5.75%, 2/23/17

    1,365        1,304,302   
   

 

 

 
              8,619,626   

Electronic Equipment, Instruments & Components — 0.4%

  

 

CDW LLC, Extended Term Loan, 4.00%, 7/14/17

    431        425,419   

Sensata Technologies Finance Co. LLC, Term Loan, 4.00%, 5/11/18

    603        604,247   
   

 

 

 
              1,029,666   

Energy Equipment & Services — 2.2%

   

Dynegy Midwest Generation LLC, Coal Co. Term Loan, 9.25%, 8/04/16

    859        891,213   

Dynegy Power LLC, Gas Co. Term Loan, 9.25%, 8/04/16

    1,572        1,646,026   

MEG Energy Corp., Term Loan B, 4.00%, 3/16/18

    1,548        1,550,049   

Tervita Corp., Term Loan B, 3.23%, 11/14/14

    1,200        1,177,201   
   

 

 

 
              5,264,489   

Food & Staples Retailing — 0.4%

   

Pilot Travel Centers LLC, Term Loan B2, 4.25%, 8/07/19

    455        456,138   

US Foods, Inc. (FKA U.S. Foodservice, Inc.), Extended Term Loan B, 5.75%, 3/31/17

    547        528,400   
   

 

 

 
              984,538   

Food Products — 2.0%

   

Advance Pierre Foods, Term Loan (First Lien),
7.00%, 9/30/16

    2,272        2,282,078   

Del Monte Foods Co., Term Loan, 4.50%, 3/08/18

    1,006        992,585   

Pinnacle Foods Finance LLC:

   

Extended Term Loan B, 3.75%, 10/03/16

    119        117,732   

Term Loan E, 4.75%, 10/17/18

    731        727,943   

Solvest Ltd. (Dole):

   

Term Loan B-2, 5.00% - 6.00%, 7/06/18

    203        202,956   

Term Loan C-2, 5.00% - 6.00%, 7/06/18

    363        363,185   
   

 

 

 
              4,686,479   

Health Care Equipment & Supplies — 3.3%

   

Bausch & Lomb, Inc., Term Loan B, 5.25%, 5/17/19

    1,135        1,138,780   

Biomet, Inc., Term Loan B, 3.00%—3.47%, 3/25/15

    200        199,476   

BSN Medical Acquisition Holding GmbH, Term Loan B, 6.00%, 7/27/19

    720        721,800   

DJO Finance LLC:

   

Extended Term Loan B2, 5.23%, 11/01/16

    356        355,369   

Term Loan B3, 6.25%, 9/15/17

    1,232        1,232,935   

Hologic, Inc., Term Loan B, 4.50%, 8/01/19

    1,895        1,906,503   

Hupah Finance, Inc., Term Loan B, 6.25%, 1/21/19

    673        675,837   

Iasis Healthcare LLC, Term Loan, 5.00%, 5/03/18

    365        359,222   

Immucor, Inc., Term Loan B, 7.25%, 8/17/18

    973        976,297   

LHP Hospital Group, Inc., Term Loan, 9.00%, 7/03/18

    400        403,000   
   

 

 

 
              7,969,219   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    63


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Senior High Income Fund, Inc. (ARK)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)  

Par 

(000)

    Value  
   

Health Care Providers & Services — 3.0%

   

ConvaTec, Inc., Term Loan, 5.75%, 12/22/16

  USD 1,068      $ 1,069,737   

DaVita, Inc.:

   

Term Loan B, 4.50%, 10/20/16

    1,084        1,086,209   

Term Loan B2, 9/02/19

    590        587,144   

Emergency Medical Services Corp., Term Loan,
5.25%, 5/25/18

    399        398,426   

Harden Healthcare LLC:

   

Add on Term Loan A, 7.75%, 3/02/15

    1,033        1,001,359   

Term Loan A, 8.50%, 3/02/15

    294        288,005   

HCA, Inc., Extended Term Loan B3, 3.48%, 5/01/18

    550        541,321   

inVentiv Health, Inc.:

   

Combined Term Loan, 6.50%, 8/04/16

    95        88,366   

Incremental Term Loan B-3, 6.75%, 5/15/18

    619        576,761   

Medpace, Inc., Term Loan, 6.50%—7.25%, 6/16/17

    1,005        960,045   

Sheridan Holdings, Inc., First Lien Term Loan,
6.00%, 6/29/18

    180        180,149   

US Renal Care, Inc., First Lien Term Loan,
6.25%—7.25%, 7/02/19

    480        483,600   
   

 

 

 
              7,261,122   

Health Care Technology — 0.9%

   

IMS Health, Inc., Term Loan B, 4.50%, 8/25/17

    1,026        1,028,476   

Kinetic Concepts, Inc., Term Loan B, 7.00%, 5/04/18

    697        702,302   

MedAssets, Inc., Term Loan, 5.25%, 11/16/16

    475        476,183   
   

 

 

 
              2,206,961   

Hotels, Restaurants & Leisure — 3.8%

   

Alpha D2 Ltd., Term Loan B, 5.75%, 4/28/17

    584        586,572   

Caesars Entertainment Operating Co., Inc.:

   

Extended Term Loan B6, 5.49%, 1/26/18

    175        153,835   

Incremental Term Loan B4, 9.50%, 10/31/16

    727        741,266   

Term Loan B1, 3.24%, 1/28/15

    536        508,505   

Term Loan B3, 3.24% - 3.46%, 1/28/15

    2,935        2,782,898   

Drumm Investors LLC, Term Loan, 5.00%, 5/04/18

    141        134,748   

Dunkin’ Brands, Inc., Term Loan B2, 4.00%, 11/23/17

    1,615        1,597,801   

OSI Restaurant Partners LLC:

   

Revolver, 2.49% - 4.50%, 6/14/13

    8        8,018   

Term Loan B, 2.56%, 6/14/14

    81        80,807   

Sabre, Inc., Non Extended Initial Term Loan,
2.23%, 9/30/14

    197        195,180   

SeaWorld Parks & Entertainment, Inc., Term Loan B, 4.00%, 8/17/17

    897        897,825   

Six Flags Theme Parks, Inc., Term Loan B,
4.25%, 12/20/18

    420        420,983   

Wendy’s International, Inc., Term Loan B,
4.75%, 5/15/19

    1,010        1,014,505   
   

 

 

 
              9,122,943   

Household Products — 0.3%

   

Prestige Brands, Inc., Term Loan,
5.25%—6.25%, 1/31/19

    702        707,333   

Independent Power Producers & Energy Traders — 0.6%

  

 

The AES Corp., Term Loan, 4.25%, 6/01/18

    938        940,470   

Calpine Corp., Term Loan B, 4.50%, 4/02/18

    405        405,559   

GenOn Energy, Inc., Term Loan B, 6.00%, 12/01/17

    160        161,147   
   

 

 

 
              1,507,176   

Industrial Conglomerates — 1.1%

   

Sequa Corp.:

   

Incremental Term Loan, 6.25%, 12/03/14

    303        304,234   

Term Loan, 3.69% - 3.72%, 12/03/14

    1,225        1,216,446   

Tomkins Plc, Term Loan B, 4.25%, 9/29/16

    1,023        1,026,061   
   

 

 

 
              2,546,741   

Insurance — 0.2%

   

Asurion LLC, Term Loan (First Lien), 5.50%, 5/24/18

    564        565,488   
Floating Rate Loan Interests (b)  

Par 

(000)

    Value  
   

Internet Software & Services — 0.3%

   

Web.com Group, Inc., Term Loan B, 7.00%, 10/27/17

  USD 600      $ 597,186   

IT Services — 3.9%

   

Ceridian Corp., Extended Term Loan, 5.99%, 5/09/17

    833        833,075   

First Data Corp.:

   

Extended 2018 Term Loan B, 4.24%, 3/23/18

    3,949        3,728,115   

Non-Extended Term Loan B-1, 2.99%, 9/24/14

    116        114,791   

Non-Extended Term Loan B-3, 2.99%, 9/24/14

    81        79,864   

Genpact International, Inc., Term Loan B,
4.25%, 8/16/19

    520        520,000   

InfoGroup, Inc., Term Loan, 5.75%, 5/25/18

    473        418,593   

iPayment, Inc., Term Loan B, 5.75%, 5/08/17

    511        511,000   

Neustar, Inc., Term Loan B, 5.00%, 11/08/18

    769        773,034   

SunGard Data Systems, Inc. (Solar Capital Corp.), Term Loan B, 3.86%—4.06%, 2/26/16

    287        286,827   

TransUnion LLC, Term Loan B, 5.50%, 2/12/18

    1,940        1,952,609   
   

 

 

 
              9,217,908   

Leisure Equipment & Products — 0.5%

   

Eastman Kodak Co., DIP Term Loan B, 8.50%, 7/19/13

    726        719,712   

FGI Operating Company, LLC, Term Loan,
5.50%—6.50%, 4/19/19

    360        361,127   
   

 

 

 
              1,080,839   

Machinery — 1.5%

   

Intelligrated, Inc., First Lien Term Loan, 6.75%, 7/30/18

    400        396,000   

Navistar International Corp., Term Loan B,
7.00%, 8/17/17

    387        388,739   

Rexnord Corp., Term Loan B, 5.00%, 4/02/18

    543        545,385   

Terex Corp., Term Loan B, 5.50%, 4/28/17

    1,127        1,132,832   

Wabash National Corp., Term Loan B, 6.00%, 5/02/19

    1,022        1,028,828   
   

 

 

 
              3,491,784   

Media — 10.3%

   

Acosta, Inc., Term Loan B, 5.75%, 3/01/18

    305        306,117   

Affinion Group, Inc., Term Loan B, 5.00%, 7/15/15

    264        224,360   

AMC Networks, Inc., Term Loan B, 4.00%, 12/31/18

    715        714,501   

Capsugel Holdings US, Inc., Term Loan B,
4.75%, 8/01/18

    759        760,167   

Cengage Learning Acquisitions, Inc.:

   

Non-Extended Term Loan, 2.49%, 7/03/14

    193        177,340   

Tranche 1 Incremental, 7.50%, 7/03/14

    663        639,392   

Charter Communications Operating LLC:

   

Extended Term Loan C, 3.49%, 9/06/16

    1,628        1,624,182   

Term Loan D, 4.00%, 5/15/19

    634        633,445   

Cumulus Media, Inc., First Lien Term Loan,
5.75%, 9/17/18

    1,149        1,150,817   

EMI Music Publishing Ltd., Term Loan B, 5.50%, 6/29/18

    370        372,498   

Gray Television, Inc., Term Loan B, 3.75%, 12/31/14

    866        861,562   

Houghton Mifflin Harcourt Publishing Co., DIP Term Loan B, 7.25%, 6/01/18

    808        817,065   

Hubbard Broadcasting, Term Loan B, 5.25%, 4/28/17

    526        526,764   

Intelsat Jackson Holdings SA, Tranche B Term Loan, 5.25%, 4/02/18

    5,346        5,363,174   

Interactive Data Corp., Term Loan B, 4.50%, 2/12/18

    891        892,301   

Kabel Deutschland GmbH, Term Loan F, 4.25%, 2/01/19

    1,200        1,197,828   

Newsday LLC, Fixed Rate Term Loan, 10.50%, 8/01/13

    3,250        3,267,615   

Nielsen Finance LLC, Class C Term Loan,
3.49%, 5/02/16

    223        222,449   

Sinclair Television Group, Inc., Term Loan B,
4.00%, 10/28/16

    1,109        1,108,197   

Thomson Reuters (Healthcare), Inc., Term Loan B,
6.75%, 6/06/19

    560        563,965   

Univision Communications, Inc., Extended Term Loan, 4.48%, 3/31/17

    1,252        1,210,644   

UPC Financing Partnership:

   

Term Loan, 4.75%, 12/29/17

    350        351,022   
 

 

See Notes to Consolidated Financial Statements.

 

                
64    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Senior High Income Fund, Inc. (ARK)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)  

Par 

(000)

    Value  
   

Media (concluded)

   

UPC Financing Partnership (concluded) :

   

Term Loan T, 3.75%, 12/30/16

  USD 425      $ 420,970   

WC Luxco Sarl, Term Loan B3, 4.25%, 3/15/18

    264        262,979   

Weather Channel, Term Loan B, 4.25%, 2/13/17

    629        631,361   

WideOpenWest Finance LLC, First Lien Term Loan,
6.25%, 7/17/18

    345        344,786   
   

 

 

 
              24,645,501   

Metals & Mining — 2.0%

   

Constellium Holding Co BV, Term Loan B,
9.25%, 5/25/18

    485        475,300   

Novelis, Inc.:

   

Incremental Term Loan B2, 4.00%, 3/10/17

    890        884,079   

Term Loan, 4.00%, 3/10/17

    1,100        1,093,571   

SunCoke Energy, Inc., Term Loan B, 4.00%, 7/26/18

    842        837,294   

Walter Energy, Inc., Term Loan B, 4.00%, 4/02/18

    1,555        1,529,237   
   

 

 

 
              4,819,481   

Multiline Retail — 0.3%

   

99¢ Only Stores, Term Loan, 5.25%, 1/11/19

    791        795,468   

Oil, Gas & Consumable Fuels — 1.5%

   

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

    1,245        1,247,677   

Everest Acquisition LLC, Term Loan B1, 5.00%, 4/24/18

    645        646,613   

Gibson Energy ULC, Term Loan B, 4.75%, 6/15/18

    697        699,867   

Obsidian Natural Gas Trust, Term Loan,
7.00%, 11/02/15

    953        952,872   
   

 

 

 
              3,547,029   

Paper & Forest Products — 0.3%

   

Ainsworth Lumber Co. Ltd., Term Loan, 5.25%, 6/26/14

    330        319,275   

NewPage Corp., DIP Term Loan, 8.00%, 3/07/13

    350        353,283   
   

 

 

 
              672,558   

Pharmaceuticals — 2.3%

   

Aptalis Pharma, Inc., Term Loan B, 5.50%, 2/10/17

    936        932,241   

Pharmaceutical Product Development, Inc., Term Loan B, 6.25%, 12/05/18

    1,588        1,605,239   

Quintiles Transnational Corp., Term Loan B,
5.00%, 6/08/18

    698        699,262   

RPI Finance Trust:

   

Incremental Tranche 2, 4.00%, 11/09/18

    170        169,753   

Term Loan Tranche 2, 4.00%, 5/09/18

    443        443,703   

Valeant Pharmaceuticals International, Inc.:

   

Add-On Term Loan B, 4.75%, 2/13/19

    728        729,864   

Series A Tranche B, 4.75%, 2/13/19

    270        270,627   

Warner Chilcott Corp.:

   

Incremental Term Loan B-1, 4.25%, 3/15/18

    146        145,259   

Term Loan B-1, 4.25%, 3/15/18

    385        382,515   

Term Loan B-2, 4.25%, 3/15/18

    192        191,257   
   

 

 

 
              5,569,720   

Professional Services — 0.9%

   

Booz Allen Hamilton, Inc., Term Loan B, 4.50%, 7/31/19

    605        605,756   

Emdeon, Inc., Term Loan B1, 5.00%, 11/02/18

    1,318        1,318,135   

ON Assignment, Inc., Term Loan B, 5.00%, 5/15/19

    225        223,492   
   

 

 

 
              2,147,383   

Real Estate Investment Trusts (REITs) — 0.8%

  

 

iStar Financial, Inc.:

   

Term Loan A1, 5.00%, 6/28/13

    1,932        1,933,396   

Term Loan A2, 7.00%, 6/30/14

    80        80,075   
   

 

 

 
              2,013,471   

Real Estate Management & Development — 1.4%

   

Realogy Corp.:

   

Extended Letter of Credit Loan, 4.50%, 10/10/16

    1,157        1,116,685   
Floating Rate Loan Interests (b)  

Par 

(000)

    Value  
   

Real Estate Management & Development (concluded)

   

Realogy Corp. (concluded):

   

Extended Term Loan, 4.49%, 10/10/16

  USD 2,133      $ 2,058,978   

Stockbridge SBE Holdings LLC, Term Loan B,
13.00%, 5/02/17

    160        159,200   
   

 

 

 
              3,334,863   

Road & Rail — 0.7%

   

Avis Budget Car Rental LLC, Incremental Term Loan, 6.25%, 9/21/18

    324        325,880   

RailAmerica, Inc., Term Loan B, 4.00%, 3/01/19

    828        827,412   

Road Infrastructure Investment LLC, Term Loan B,
6.25%, 3/30/18

    439        436,705   
   

 

 

 
              1,589,997   

Semiconductors & Semiconductor Equipment — 0.6%

   

Freescale Semiconductor, Inc., Extended Term Loan B, 4.50%, 12/01/16

    852        817,800   

NXP BV, Term Loan A-2, 5.50%, 3/03/17

    506        511,834   
   

 

 

 
              1,329,634   

Software — 1.9%

   

Blackboard, Inc., Term Loan B, 7.50%, 10/04/18

    323        317,920   

Infor US, Inc. (FKA Lawson Software, Inc.), Term Loan B, 6.25%, 4/05/18

    1,915        1,934,888   

Sophia, LP, Term Loan B, 6.25%, 7/19/18

    648        653,724   

SS&C Technologies, Inc.:

   

Term Loan B-1, 5.00%, 6/07/19

    833        833,986   

Term Loan B-2, 5.00%, 6/07/19

    86        86,274   

WaveDivision Holdings LLC, Term Loan B, 5.50%, 8/23/19

    660        662,462   
   

 

 

 
              4,489,254   

Specialty Retail — 4.0%

   

Academy Ltd., Term Loan, 6.00%, 8/03/18

    995        998,482   

Bass Pro Group LLC, Term Loan, 5.25%, 6/13/17

    434        436,985   

Burlington Coat Factory Warehouse Corp., Term Loan B1, 5.50%, 2/23/17

    357        357,294   

Claire’s Stores, Inc., Term Loan B,
2.98%—3.20%, 5/29/14

    602        590,281   

General Nutrition Centers, Inc., Term Loan B,
4.25%, 3/02/18

    1,155        1,153,371   

Harbor Freight Tools USA, Inc., Term Loan B,
5.50%, 11/14/17

    425        424,401   

Jo-Ann Stores, Inc., Term Loan, 4.75%, 3/16/18

    387        386,440   

Michaels Stores, Inc.:

   

Extended Term Loan B3, 5.00%, 7/29/16

    239        240,261   

Term Loan B2, 5.00%, 7/29/16

    959        963,487   

Party City Holdings, Inc., Term Loan B, 5.75%, 7/26/19

    800        803,664   

PETCO Animal Supplies, Inc., Term Loan,
4.50%, 11/24/17

    1,504        1,505,248   

Things Remembered, Inc., Term Loan B, 8.00%, 5/24/18

    580        568,400   

Toys ‘R’ Us Delaware, Inc.:

   

Incremental Term Loan B2, 5.25%, 5/25/18

    161        154,435   

Term Loan, 6.00%, 9/01/16

    306        300,118   

Term Loan B3, 5.25%, 5/25/18

    125        119,700   

The Yankee Candle Co., Inc., Term Loan B,
5.25%, 4/02/19

    554        555,761   
   

 

 

 
              9,558,328   

Textiles, Apparel & Luxury Goods — 0.5%

   

Ascend Performance Materials LLC, Term Loan B,
6.75%, 4/10/18

    753        746,206   

Wolverine Worldwide, Inc., Term Loan B, 6.75%, 6/26/19

    535        538,333   
   

 

 

 
              1,284,539   
 

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    65


Table of Contents
Consolidated Schedule of Investments (continued)   

BlackRock Senior High Income Fund, Inc. (ARK)

(Percentages shown are based on Net Assets)

 

Floating Rate Loan Interests (b)   

Par 

(000)

    Value  
    

Wireless Telecommunication Services — 1.6%

    

Crown Castle International Corp., Term Loan B, 4.00%, 1/31/19

   USD 124      $ 123,510   

MetroPCS Wireless, Inc., Term Loan B-3, 4.00%, 3/16/18

     566        563,503   

Vodafone Americas Finance 2, Inc., Term Loan, 6.88%, 8/11/15 (f)

     3,046        3,167,528   
    

 

 

 
               3,854,541   

Total Floating Rate Loan Interests – 77.2%

             184,852,210   

 

Other Interests (i)    Beneficial
Interest
(000)
        
    

Auto Components — 0.0%

    

Intermet Liquidating Trust Class A (d)

     320          

Diversified Financial Services — 0.4%

    

J.G.Wentworth LLC Preferred Equity Interests (d)

     —   (j)      1,162,154   

Media — 0.0%

    

Adelphia Preferred Escrow (d)

     3          

Adelphia Recovery Trust Series ACC-6B INT (d)

     250        1,250   
    

 

 

 
               1,250   

Total Other Interests – 0.4%

             1,163,404   

 

Preferred Securities    Shares         
Preferred Stocks — 0.1%               

Diversified Financial Services — 0.1%

    

Ally Financial, Inc., 7.00% (a)

     290        264,072   

 

Trust Preferreds — 0.2%               

Diversified Financial Services — 0.2%

    

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

     22,630        559,251   
Total Preferred Securities – 0.3%        823,323   

 

Warrants (k)               

Media — 0.1%

    

Charter Communications, Inc. (Issued/Exercisable 11/30/09, 1 Share for 1 Warrant, Expires 11/30/14, Strike Price $51.28)

     6,862        198,655   

Software — 0.0%

    

HMH Holdings/EduMedia (Issued/Exercisable 3/09/10, 19 Shares for 1 Warrant, Expires 6/22/19, Strike Price $42.27)

     982          
Total Warrants – 0.1%              198,655   
Total Long-Term Investments
(Cost — $333,510,383) — 138.5%
             331,645,459   

 

Short-Term Securities   

Shares

    Value  

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (l)(m)

     1,682,598      $ 1,682,598   

Total Short-Term Securities

(Cost — $1,682,598) — 0.7%

             1,682,598   
Total Investments
(Cost — $335,192,981) — 139.2%
        333,328,057   

Liabilities in Excess of Other Assets — (39.2)%

  

    (93,874,866
    

 

 

 
Net Assets — 100.0%      $ 239,453,191   
    

 

 

 
                  

 

 

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

 

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

 

(c)   When-issued security. Unsettled when-issued transactions were as follows:

 

Counterparty      Value        Unrealized
Appreciation
 
Credit Suisse Group AG      $ 599,950           —     
Goldman Sachs Group, Inc.      $ 387,788         $ 4,788   

 

(d)   Non-income producing security.

 

(e)   Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.

 

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

 

(g)   Convertible security.

 

(h)   Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

 

(i)   Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.

 

(j)   Amount is less than $500.

 

(k)   Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

 

(l)   Investments in issuers considered to be an affiliate of the Fund during the six months ended August 31, 2012, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

 

Affiliate    Shares
Held at
February 29,
2012
     Net
Activity
     Shares
Held at
August 31,
2012
     Income  

BlackRock Liquidity Funds, TempFund, Institutional Class

             1,682,598         1,682,598       $ 824   

 

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

 

Ÿ  

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

 

Currency Purchased    Currency Sold    Counterparty    Settlement
Date
     Unrealized
Depreciation
 
USD  350,301    CAD  356,000    UBS AG      10/17/12         $ (10,520)   

 

Ÿ  

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

 

Ÿ  

Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities

 

Ÿ  

Level 2 — other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

 

See Notes to Consolidated Financial Statements.

 

                
66    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Schedule of Investments (continued)    BlackRock Senior High Income Fund, Inc. (ARK)

 

 

Ÿ  

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

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

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

 

     Level 1     Level 2     Level 3     Total  

Assets:

       
Investments:        

Long-Term Investments:

       

Asset-Backed Securities

                $ 6,050,820      $ 6,050,820   

Common
Stocks

  $ 1,200,257      $ 1,083,221        65,534        2,349,012   

Corporate Bonds

           131,870,347        4,337,688        136,208,035   

Floating Rate Loan interests

           168,593,728        16,258,482        184,852,210   

Other Interests .

    1,250               1,162,154        1,163,404   

Preferred Securities

    559,251        264,072               823,323   

Warrants

    198,655                      198,655   

Short-Term Securities

    1,682,598                      1,682,598   
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 3,642,011      $ 301,811,368      $ 27,874,678      $ 333,328,057   
 

 

 

   

 

 

   

 

 

   

 

 

 
     Level 1      Level 2     Level 3      Total  
Derivative Financial Instruments1          

Liabilities:

         

Foreign currency exchange contracts

          $ (10,520           $ (10,520

 

1   

Derivative financial instruments are foreign currency exchange contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

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

 

     Level 1     Level 2     Level 3     Total  

Assets:

       

Cash

  $ 45,726                    $ 45,726   

Foreign currency at value

    4,613                      4,613   

Liabilities:

       

Loan payable

         $ (90,000,000            (90,000,000
 

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 50,339      $ (90,000,000          $ (89,949,661
 

 

 

   

 

 

   

 

 

   

 

 

 

There were no transfers between Level 1 and Level 2 during the six months ended August 31, 2012.

 

The following table summarizes the valuation techniques used and unobservable inputs developed by the Global Valuation Committee to determine the fair value of certain of the Fund’s Level 3 investments as of August 31, 2012:

 

      Value      Valuation Techniques    Unobservable Inputs2   

Range of

Unobservable
Inputs

   Weighted
Average of
Unobservable
Inputs3

Assets:

              

Common Stocks

   $ 65,534       Market Comparable Companies    EBITDA Multiple    5.0x    5.0x
         Illiquidity Discount    20%    20%
         Proforma Revenue Increase    37%    37%

Corporate Bonds

     4,081,068       Market Comparable Companies    EBITDA Multiple    5.0x    5.0x
         Illiquidity Discount    20%    20%
         Proforma Revenue Increase    37%    37%

Floating Rate Loan Interests

     2,789,634       Market Comparable Companies    Yield    9.65%    9.65%
      Cost    N/A4      
  

 

 

    

 

  

 

  

 

  

 

Total5

   $ 6,935,966               
  

 

 

             

 

2   

A change to the unobservable input may result in a significant change to the value of the investment as follows:

 

Unobservable Input    Impact to
Value if Input Increases
   Impact to
Value if Input Decreases
EBITDA Multiple    Increase    Decrease
Illiquidity Discount    Decrease    Increase
Proforma Revenue Increase    Increase    Decrease
Yield    Decrease    Increase

 

3  

Unobservable inputs are weighted based on the value of the investments included in the range.

 

4   

The Fund fair values certain of its Level 3 investments using prior transaction prices (acquisition cost), although the transaction may not have occurred during the current reporting period. In such cases, these investments are generally privately held investments. There may not be a secondary market, and/or there are a limited number of investors. The determination to fair value such investments at cost is based upon factors consistent with the principles of fair value measurement that are reasonably available to the Global Valuation Committee, or its delegate. Valuations are reviewed utilizing available market information to determine if the carrying value should be adjusted. Such market data may

 

See Notes to Consolidated Financial Statements.

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    67


Table of Contents
Consolidated Schedule of Investments (concluded)    BlackRock Senior High Income Fund, Inc. (ARK)

 

  include, but is not limited to, observations of the trading multiples of public companies considered comparable to the private companies being valued, financial or operational information released by the company, and/or news or corporate events that affect the investment. Valuations may be adjusted to account for company-specific issues, the lack of liquidity inherent in a nonpublic investment and the fact that comparable public companies are not identical to the investments being fair valued by the Fund.

 

5   

Does not include Level 3 investments with values derived utilizing prices from recent prior transactions or third party pricing information without adjustment for which such inputs are unobservable. See above valuation input table for values of such Level 3 investments. A significant change in third party pricing information could result in a significantly lower or higher value in such Level 3 investments.

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

 

     Asset-Backed
Securities
    Common
Stocks
    Corporate
Bonds
    Floating Rate
Loan Interests
    Other
Interests
     Total  
Assets:             

Opening balance, as of February 29, 2012

  $ 3,022,303      $ 355,574      $ 4,310,541      $ 12,348,294      $ 989,983       $ 21,026,695   

Transfers into Level 31

                         3,211,500                3,211,500   

Transfers out of Level 32

           (271,121            (2,137,449             (2,408,570

Accrued discounts/premiums

    24,160               90,639        15,615                130,414   

Net realized gain (loss)

    (37,006     (749,636            (542,731             (1,329,373

Net change in unrealized appreciation/depreciation3

    52,930        730,727        (63,492     643,691        172,171         1,536,027   

Purchases

    4,266,328                      4,483,515                8,749,843   

Sales

    (1,277,895     (10            (1,763,953             (3,041,858
 

 

 

 
Closing Balance, as of August 31, 2012   $ 6,050,820      $ 65,534      $ 4,337,688      $ 16,258,482      $ 1,162,154       $ 27,874,678   
 

 

 

 

 

1   

As of February 29, 2012, the Fund used observable inputs in determining the value of certain investments. As of August 31, 2012, the Fund used significant unobservable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $3,211,500 transferred from Level 2 to Level 3 in the disclosure hierarchy.

 

2   

As of February 29, 2012, the Fund used significant unobservable inputs in determining the value of certain investments. As of August 31, 2012, the Fund used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $2,408,570 transferred from Level 3 to Level 2 in the disclosure hierarchy.

 

3   

Included in the related net change in unrealized appreciation/depreciation in the Consolidated Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of August 31, 2012 was $279,972.

 

 

See Notes to Consolidated Financial Statements.      
                
68    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Statements of Assets and Liabilities     

 

August 31, 2012 (Unaudited)   BlackRock
Corporate
High Yield
Fund, Inc.
(COY)
    BlackRock
Corporate
High Yield
Fund III, Inc.
(CYE)
    BlackRock
Debt
Strategies
Fund, Inc.
(DSU)
    BlackRock
Floating Rate
Income
Strategies
Fund II, Inc.
(FRB)
    BlackRock
Senior High
Income
Fund, Inc.
(ARK)
 
         
Assets                                        

Investments at value — unaffiliated1

  $ 351,637,724      $ 392,159,838      $ 651,485,518      $ 211,542,876      $ 331,645,459   

Investments at value — affiliated2

                  2,038,105        1,481,869        1,682,598   

Cash

    1,506,487        1,293,481        102,956        3,216        45,726   

Cash pledged as collateral for financial futures contracts

    432,000        533,000                        

Foreign currency at value3

    260,020        229,653        290,567        35,669        4,613   

Interest receivable

    5,466,353        5,936,415        7,118,896        1,405,980        3,471,376   

Investments sold receivable

    834,514        949,059        608,206        1,479,036        116,571   

Unrealized appreciation on swaps

    817,408        878,971                        

Swap premiums paid

    241,702        257,845               111,598          

Swaps receivable

    121,004        128,266                        

Cash pledged as collateral for swaps

           100,000                        

Unrealized appreciation on foreign currency exchange contracts

    26,257        39,584        5,454                 

Dividends receivable

    1,658        2,605                        

Income receivable — affiliated

    192        52                        

Prepaid expenses

    6,732        5,387        59,165        3,050        21,952   

Other assets

                  250,171                 
 

 

 

 

Total assets

    361,352,051        402,514,156        661,959,038        216,063,294        336,988,295   
 

 

 

 
         
Liabilities                                        

Loan payable

    98,000,000        115,000,000        195,000,000        63,000,000        90,000,000   

Investments purchased payable

    2,684,955        3,032,322        11,954,974        6,655,533        7,154,861   

Unrealized depreciation on foreign currency exchange contracts

    700,255        704,331        614,672        100,156        10,520   

Investment advisory fees payable

    148,557        198,429        324,299        129,451        137,229   

Swap premiums received

    337,187        367,270                        

Cash received as collateral for swaps

    600,000        400,000                        

Interest expense payable

    74,986        87,693        146,205        47,367        69,005   

Unrealized depreciation on swaps

    63,595        63,322               77,373          

Swaps payable

    51,381        56,973               20,116          

Officer’s and Directors’ fees payable

    22        787        121,733        373        48   

Variation margin payable

    43,200        46,800                        

Income dividends payable

                         34,420          

Reorganization costs payable

                         211,906          

Other accrued expenses payable

    156,694        129,676        361,343        108,892        163,441   
 

 

 

 

Total liabilities

    102,860,832        120,087,603        208,523,226        70,385,587        97,535,104   
 

 

 

 

Net Assets

  $ 258,491,219      $ 282,426,553      $ 453,435,812      $ 145,677,707      $ 239,453,191   
 

 

 

 
         
Net Assets Consist of                                        

Paid-in capital4

  $ 305,876,835      $ 325,806,245      $ 780,812,152      $ 199,606,403      $ 349,736,558   

Undistributed net investment income

    4,579,687        4,285,366        4,571,751        836,044        3,584,526   

Accumulated net realized loss

    (58,133,836     (55,506,353     (286,673,125     (54,983,006     (111,992,264

Net unrealized appreciation/depreciation

    6,168,533        7,841,295        (45,274,966     218,266        (1,875,629
 

 

 

 

Net Assets

  $ 258,491,219      $ 282,426,553      $ 453,435,812      $ 145,677,707      $ 239,453,191   
 

 

 

 

Net asset value per share

  $ 7.40      $ 7.54      $ 4.19      $ 13.77      $ 4.22   
 

 

 

 

1 Investments at cost — unaffiliated

  $ 345,031,246      $ 383,906,031      $ 696,154,128      $ 211,147,732      $ 333,510,383   
 

 

 

 

2 Investments at cost — affiliated

                $ 2,038,105      $ 1,481,869      $ 1,682,598   
 

 

 

 

3 Foreign currency at cost

  $ 257,736      $ 228,997      $ 289,801      $ 35,165      $ 4,798   
 

 

 

 

4 Shares outstanding, 200 million shares authorized, par value $0.10 per share

    34,929,683        37,479,992        108,217,078        10,577,054        56,753,905   
 

 

 

 

 

See Notes to Consolidated Financial Statements.      
                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    69


Table of Contents
Consolidated Statements of Operations     

 

Six Months Ended August 31, 2012 (Unaudited)   BlackRock
Corporate
High Yield
Fund, Inc.
(COY)
    BlackRock
Corporate
High Yield
Fund III, Inc.
(CYE)
    BlackRock
Debt
Strategies
Fund, Inc.
(DSU)
    BlackRock
Floating Rate
Income
Strategies
Fund II, Inc.
(FRB)
    BlackRock
Senior High
Income
Fund, Inc.
(ARK)
 
         
Investment Income                                        

Interest

  $ 12,226,709      $ 13,861,447      $ 21,109,820      $ 6,075,771      $ 10,640,855   

Dividends — unaffiliated

    313,326        356,651        6,754               10,226   

Dividends — affiliated

    1,117        444        2,031        445        824   
 

 

 

 

Total income

    12,541,152        14,218,542        21,118,605        6,076,216        10,651,905   
 

 

 

 
         
Expenses                                        

Investment advisory

    851,047        1,147,064        1,842,968        728,021        786,760   

Professional

    115,409        100,393        165,613        103,289        130,839   

Borrowing costs1

    62,285        68,007        110,465        35,734        58,015   

Reorganization

                         211,906          

Accounting services

    40,951        43,970        52,284        19,820        32,640   

Transfer agent

    30,394        27,174        49,194        9,329        43,297   

Custodian

    16,721        42,476        22,853        48,628        14,420   

Printing

    21,438        22,972        26,904        12,442        18,288   

Officer and Directors

    11,690        11,782        27,846        6,658        11,433   

Registration

    9,692        9,781        18,261        7,698        15,226   

Miscellaneous

    41,014        36,473        22,831        8,296        15,239   
 

 

 

 

Total expenses excluding interest expense

    1,200,641        1,510,092        2,339,219        1,191,821        1,126,157   

Interest expense

    404,883        492,495        781,283        230,719        365,892   
 

 

 

 

Total expenses

    1,605,524        2,002,587        3,120,502        1,422,540        1,492,049   

Less fees waived by Manager

    (599     (219     (594     (229     (418
 

 

 

 

Total expenses after fees waived

    1,604,925        2,002,368        3,119,908        1,422,311        1,491,631   
 

 

 

 

Net investment income

    10,936,227        12,216,174        17,998,697        4,653,905        9,160,274   
 

 

 

 
         
Realized and Unrealized Gain (Loss)                                        
Net realized gain (loss) from:          

Investments

    1,767,638        1,499,915        (4,754,160     (239,457     340,950   

Financial futures contracts

    (42,138     (31,386                     

Foreign currency transactions

    915,515        857,140        674,153        81,522        (4,502

Options written

    220,356        228,248                        

Swaps

    288,725        278,324        (397,040     (23,603     (299,946
 

 

 

 
    3,150,096        2,832,241        (4,477,047     (181,538     36,502   
 

 

 

 
Net change in unrealized appreciation/depreciation on:          

Investments

    77,343        963,949        10,439,561 2      2,065,067        3,058,482   

Financial futures contracts

    (264,271     (306,694                     

Foreign currency translations

    227,833        264,618        130,959        40,040        2,160   

Options written

    (61,310     (65,050                     

Swaps

    388,724        445,690               (77,373       
 

 

 

 
    368,319        1,302,513        10,570,520        2,027,734        3,060,642   
 

 

 

 

Total realized and unrealized gain

    3,518,415        4,134,754        6,093,473        1,846,196        3,097,144   
 

 

 

 

Net Increase in Net Assets Resulting from Operations

  $ 14,454,642      $ 16,350,928      $ 24,092,170      $ 6,500,101      $ 12,257,418   
 

 

 

 

 

1   

See Note 6 of the Notes to Consolidated Financial Statements for details of short-term borrowings.

 

2   

Net of income tax of $146,090.

 

 

See Notes to Consolidated Financial Statements.      
                
70    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Statements of Changes in Net Assets     

 

    BlackRock Corporate
High Yield Fund, Inc. (COY)
    BlackRock Corporate
High Yield Fund III, Inc. (CYE)
 
Increase (Decrease) in Net Assets:   Six Months Ended
August 31,
2012
(Unaudited)
   

Year Ended

February 29,
2012

    Six Months Ended
August 31,
2012
(Unaudited)
   

Year Ended

February 29,
2012

 
       
Operations                                

Net investment income

  $ 10,936,227      $ 21,422,864      $ 12,216,174      $ 23,646,017   

Net realized gain

    3,150,096        3,093,487        2,832,241        4,144,308   

Net change in unrealized appreciation/depreciation

    368,319        (7,679,396     1,302,513        (9,736,485
 

 

 

   

 

 

 

Net increase in net assets resulting from operations

    14,454,642        16,836,955        16,350,928        18,053,840   
 

 

 

   

 

 

 
       
Dividends to Shareholders From                                

Net investment income

    (10,675,371     (21,290,884     (11,625,094     (23,502,064
 

 

 

   

 

 

 
       
Capital Share Transactions                                

Reinvestment of dividends

    536,186        720,465        514,097        376,319   
 

 

 

   

 

 

 
       
Net Assets                                

Total increase (decrease) in net assets

    4,315,457        (3,733,464     5,239,931        (5,071,905

Beginning of period

    254,175,762        257,909,226        277,186,622        282,258,527   
 

 

 

   

 

 

 

End of period

  $ 258,491,219      $ 254,175,762      $ 282,426,553      $ 277,186,622   
 

 

 

   

 

 

 

Undistributed net investment income

  $ 4,579,687      $ 4,318,831      $ 4,285,366      $ 3,694,286   
 

 

 

   

 

 

 
    BlackRock Debt
Strategies

Fund, Inc. (DSU)
    BlackRock Floating Rate Income
Strategies Fund II, Inc. (FRB)
 
Increase (Decrease) in Net Assets:   Six Months Ended
August 31,
2012
(Unaudited)
    Year Ended
February 29,
2012
    Six Months Ended
August 31,
2012
(Unaudited)
    Year Ended
February 29,
2012
 
       
Operations                                

Net investment income

  $ 17,998,697      $ 35,437,438      $ 4,653,905      $ 9,426,886   

Net realized loss

    (4,477,047     (7,630,186     (181,538     (1,448,947

Net change in unrealized appreciation/depreciation

    10,570,520        (9,094,003     2,027,734        (3,642,963
 

 

 

   

 

 

 

Net increase in net assets resulting from operations

    24,092,170        18,713,249        6,500,101        4,334,976   
 

 

 

   

 

 

 
       
Dividends to Shareholders From                                

Net investment income

    (17,508,136     (34,943,170     (4,632,551     (9,323,747
 

 

 

   

 

 

 
       
Capital Share Transactions                                

Reinvestment of dividends

    1,027,543        806,965        37,206        210,036   
 

 

 

   

 

 

 
       
Net Assets                                

Total increase (decrease) in net assets

    7,611,577        (15,422,956     1,904,756        (4,778,735

Beginning of period

    445,824,235        461,247,191        143,772,951        148,551,686   
 

 

 

   

 

 

 

End of period

  $ 453,435,812      $ 445,824,235      $ 145,677,707      $ 143,772,951   
 

 

 

   

 

 

 

Undistributed net investment income

  $ 4,571,751      $ 4,081,190      $ 836,044      $ 814,690   
 

 

 

   

 

 

 

 

See Notes to Consolidated Financial Statements.      
                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    71


Table of Contents
Consolidated Statements of Changes in Net Assets     

 

    BlackRock Senior High
Income Fund, Inc. (ARK)
 
Increase (Decrease) in Net Assets:   Six Months Ended
August 31,
2012
(Unaudited)
    Year Ended
February 29,
2012
 
   
Operations                

Net investment income

  $ 9,160,274      $ 18,248,158   

Net realized gain (loss)

    36,502        (4,845,458

Net change in unrealized appreciation/depreciation

    3,060,642        1,670,108   
 

 

 

 

Net increase in net assets resulting from operations

    12,257,418        15,072,808   
 

 

 

 
   
Dividends to Shareholders From                

Net investment income

    (8,504,020     (18,750,192
 

 

 

 
   
Capital Share Transactions                

Reinvestment of dividends

    383,295        233,462   
 

 

 

 
   
Net Assets                

Total increase (decrease) in net assets

    4,136,693        (3,443,922

Beginning of period

    235,316,498        238,760,420   
 

 

 

 

End of period

  $ 239,453,191      $ 235,316,498   
 

 

 

 

Undistributed net investment income

  $ 3,584,526      $ 2,928,272   
 

 

 

 

 

 

See Notes to Consolidated Financial Statements.      
                
72    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Consolidated Statements of Cash Flows     

 

Six Months Ended August 31, 2012  

BlackRock

Corporate

High Yield

Fund, Inc.

(COY)

   

BlackRock
Corporate
High Yield
Fund III, Inc.

(CYE)

   

BlackRock
Debt
Strategies
Fund, Inc.

(DSU)

   

BlackRock

Floating Rate

Income
Strategies

Fund II, Inc.

(FRB)

    BlackRock
Senior
High Income
Fund, Inc.
(ARK)
 
         
Cash Used for Operating Activities                                        

Net increase in net assets resulting from operations

  $ 14,454,642      $ 16,350,928      $ 24,092,170      $ 6,500,101      $ 12,257,418   

Adjustments to reconcile net increase in net assets resulting from operations to net cash used for operating activities:

         

Increase in interest receivable

    (730,358     (386,972     (1,291,798     (216,294     (532,191

Increase in swaps receivable

    (19,910     (25,966                     

(Increase) decrease in income receivable — affiliated

    (192     (41     56,752               188   

Decrease in dividends receivable — unaffiliated

    8,079        18,294                        

Decrease in cash pledged as collateral for financial futures contracts

    130,000        43,000                        

Decrease in cash pledged as collateral in connection with swaps

    500,000                               

Decrease in other assets

    48,396        6,507        261,913                 

Decrease in variation margin receivable

    40,950        42,000                        

Increase in investment advisory fees payable

    24,948        29,941        60,845        21,215        20,971   

Increase in cash received as collateral for swaps

    600,000        400,000                        

Increase (decrease) in interest expense payable

    16,554        (38,403     (59,958     (18,928     (31,246

Increase (decrease) in other accrued expenses payable

    (88,956     (47,749     34,937        (17,727     30,558   

Increase (decrease) in prepaid expenses

    19,615        19,407        (35,822     13,879        7,052   

Decrease in deferred income

           (79,400     (123,185     (4,161     (65,666

Increase in variation margin payable

    43,200        46,800                        

Increase in swaps payable

    40,830        45,423               20,116          

Increase in reorganization costs payable

                         211,906          

Increase (decrease) in Officer’s and Directors’ fees payable

    (684     (1,888     9,242        92        (150

Net periodic and termination payment of swaps

    423,387        468,869        (382,012     (119,901     (288,732

Net realized and unrealized loss on investments

    (2,585,832     (3,246,225     (5,415,870     (1,764,674     (3,101,646

Amortization of premium and accretion of discount on investments and swaps

    (86,982     (161,621     (1,335,321     (492,893     (403,624

Premiums received from options written

    232,496        239,254                        

Premiums paid on closing options written

    (89,037     (92,087                     

Proceeds from sales of long-term investments

    113,318,568        134,267,991        203,600,279        56,729,490        103,488,452   

Purchases of long-term investments

    (147,916,930     (164,312,531     (260,007,490     (79,374,510     (127,585,887

Net proceeds from sales of short-term securities

    2,264,805               7,271,735        900,877        3,438,425   
 

 

 

 

Cash used for operating activities

    (19,352,411     (16,414,469     (33,263,583     (17,611,412     (12,766,078
 

 

 

 
         
Cash Provided by Financing Activities                                        

Cash receipts from borrowings

    80,000,000        73,000,000        126,000,000        48,000,000        67,000,000   

Cash payments on borrowings

    (49,000,000     (44,000,000     (76,000,000     (26,000,000     (46,000,000

Cash dividends paid to shareholders

    (10,139,185     (11,110,997     (16,480,593     (4,598,832     (8,198,982

Decrease in bank overdraft

           (193,858                     
 

 

 

 

Cash provided by financing activities

    20,860,815        17,695,145        33,519,407        17,401,168        12,801,018   
 

 

 

 
         
Cash Impact from Foreign Exchange Fluctuations                                        

Cash impact from foreign exchange fluctuations

    (600     (1,384     (75     (2,231     (229
 

 

 

 
         
Cash and Foreign Currency                                        

Net increase (decrease) in cash and foreign currency

    1,507,804        1,279,292        255,749        (212,475     34,711   

Cash and foreign currency at beginning of period

    258,703        243,842        137,774        251,360        15,628   
 

 

 

 

Cash and foreign currency at end of period

  $ 1,766,507      $ 1,523,134      $ 393,523      $ 38,885      $ 50,339   
 

 

 

 
         
Cash Flow Information                                        

Cash paid during the period for interest

  $ 388,329      $ 530,898      $ 841,241      $ 249,647      $ 397,138   
 

 

 

 
         
Non-cash Financing Activities                                        

Capital shares issued in reinvestment of dividends

  $ 536,186      $ 514,097      $ 1,027,543      $ 37,206      $ 383,295   
 

 

 

 

A Statement of Cash Flows is presented when a Fund had a significant amount of borrowing during the period, based on the average borrowing outstanding in relation to average total assets.

 

See Notes to Consolidated Financial Statements.      
                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    73


Table of Contents
Financial Highlights    BlackRock Corporate High Yield Fund, Inc. (COY)

 

   

Six Months Ended
August 31,
2012

(Unaudited)1

   

Year Ended
February 29,

20121

    Year Ended February 28,    

Period
June 1, 2008
to February 28,

2009

     Year Ended May 31,  
        2011     2010        2008      2007  
               
Per Share Operating Performance                                                          

Net asset value, beginning of period

  $ 7.29      $ 7.42      $ 6.64      $ 4.19      $ 7.74       $ 9.07       $ 8.52   
 

 

 

 

Net investment income2

    0.31        0.62        0.65        0.65        0.50         0.75         0.73   

Net realized and unrealized gain (loss)

    0.11        (0.14     0.74        2.53        (3.50      (1.32      0.49   
 

 

 

 

Net increase (decrease) from investment operations

    0.42        0.48        1.39        3.18        (3.00      (0.57      1.22   
 

 

 

 

Dividends from net investment income

    (0.31     (0.61     (0.61     (0.73     (0.55      (0.76      (0.67
 

 

 

 

Net asset value, end of period

  $ 7.40      $ 7.29      $ 7.42      $ 6.64      $ 4.19       $ 7.74       $ 9.07   
 

 

 

 

Market price, end of period

  $ 7.89      $ 7.76      $ 7.03      $ 6.88      $ 3.91       $ 7.28       $ 8.47   
 

 

 

 
               
Total Investment Return3                                                          

Based on net asset value

    5.85% 4      7.15%        22.11%        79.91%        (38.98)% 4       (5.49)%         15.60%   
 

 

 

 

Based on market price

    6.02% 4      20.39%        11.66%        99.76%        (39.46)% 4       (4.81)%         23.96%   
 

 

 

 
               
Ratios to Average Net Assets                                                          

Total expenses

    1.26% 5      1.15%        1.18%        1.18%        2.29% 5       2.33%         3.25%   
 

 

 

 

Total expenses after fees waived and paid indirectly

    1.26% 5      1.15%        1.18%        1.18% 5      2.29% 5       2.33%         3.25%   
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense

    0.94% 5,6      0.90%        0.89%        0.92%        1.17% 5       0.83%         0.91%   
 

 

 

 

Net investment income

    8.61% 5      8.67%        9.28%        11.36%        11.45% 5       9.15%         8.36%   
 

 

 

 
               
Supplemental Data                                                          

Net assets applicable, end of period (000)

  $ 258,491      $ 254,176      $ 257,909      $ 230,593      $ 144,800       $ 267,698       $ 313,821   
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 98,000      $ 67,000      $ 63,000      $ 72,000      $ 38,700       $ 64,700       $ 126,200   
 

 

 

 

Average borrowings outstanding, during the period (000)

  $ 85,924      $ 63,281      $ 55,304      $ 42,184      $ 59,553       $ 81,598       $ 125,974   
 

 

 

 

Portfolio turnover

    32%        71%        83%        85%        37%         38%         62%   
 

 

 

 

Asset coverage, end of period (000)

  $ 3,638      $ 4,794      $ 5,094      $ 4,203      $ 4,742       $ 5,138       $ 3,487   
 

 

 

 
1   

Consolidated Financial Highlights.

 

2  

Based on average shares outstanding.

 

3  

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

 

4  

Aggregate total investment return.

 

5  

Annualized.

 

6  

For the period ended August 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs was 0.90%.

 

 

See Notes to Consolidated Financial Statements.      
                
74    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Financial Highlights    BlackRock Corporate High Yield Fund III, Inc. (CYE)

 

   

Six Months Ended
August 31,
2012

(Unaudited)1

   

Year Ended
February 29,

20121

    Year Ended February 28,    

Period

June 1, 2008
to February 28,

2009

     Year Ended May 31,  
        2011     2010        2008      2007  
               
Per Share Operating Performance                                                          

Net asset value, beginning of period

  $ 7.41      $ 7.56      $ 6.69      $ 4.05      $ 7.62       $ 8.99       $ 8.46   
 

 

 

 

Net investment income2

    0.33        0.63        0.65        0.64        0.50         0.73         0.71   

Net realized and unrealized gain (loss)

    0.11        (0.15     0.83        2.68        (3.51      (1.33      0.49   
 

 

 

 

Net increase (decrease) from investment operations

    0.44        0.48        1.48        3.32        (3.01      (0.60      1.20   
 

 

 

 

Dividends from net investment income

    (0.31     (0.63     (0.61     (0.68     (0.56      (0.77      (0.67
 

 

 

 

Net asset value, end of period

  $ 7.54      $ 7.41      $ 7.56      $ 6.69      $ 4.05       $ 7.62       $ 8.99   
 

 

 

 

Market price, end of period

  $ 8.11      $ 7.75      $ 7.14      $ 6.67      $ 3.57       $ 7.03       $ 8.53   
 

 

 

 
               
Total Investment Return3                                                          

Based on net asset value

    6.10% 4      7.11%        23.50%        86.65%        (39.69)% 4       (5.69)%         15.51%   
 

 

 

 

Based on market price

    9.12% 4      18.62%        16.99%        111.12%        (42.38)% 4       (8.30)%         25.98%   
 

 

 

 
               
Ratios to Average Net Assets                                                          

Total expenses

    1.44% 5      1.38%        1.37%        1.34%        2.45% 5       2.47%         3.38%   
 

 

 

 

Total expenses after fees waived and paid indirectly

    1.44% 5      1.38%        1.37%        1.33%        2.45% 5       2.47%         3.38%   
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense

    1.09% 5,6      1.08%        1.03%        1.04%        1.29% 5       0.96%         1.04%   
 

 

 

 

Net investment income

    8.81% 5      8.76%        9.15%        11.35%        11.80% 5       9.01%         8.25%   
 

 

 

 
               
Supplemental Data                                                          

Net assets, end of period (000)

  $ 282,427      $ 277,187      $ 282,259      $ 249,721      $ 151,261       $ 284,361       $ 335,479   
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 115,000      $ 86,000      $ 91,000      $ 76,000      $ 44,200       $ 71,700       $ 129,700   
 

 

 

 

Average borrowings outstanding, during the period (000)

  $ 104,775      $ 83,997      $ 69,937      $ 49,196      $ 65,500       $ 88,466       $ 134,704   
 

 

 

 

Portfolio turnover

    33%        70%        89%        89%        37%         38%         62%   
 

 

 

 

Asset coverage, end of period (000)

  $ 3,456      $ 4,223      $ 4,102      $ 4,286      $ 4,422       $ 4,966       $ 3,587   
 

 

 

 

 

1  

Consolidated Financial Highlights.

 

2   

Based on average shares outstanding.

 

3  

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

 

4  

Aggregate total investment return.

 

5  

Annualized.

 

6  

For the period ended August 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs was 1.04%.

 

See Notes to Consolidated Financial Statements.      
                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    75


Table of Contents
Financial Highlights    BlackRock Debt Strategies Fund, Inc. (DSU)

 

   

Six Months Ended

August 31,
20121

(Unaudited)

   

Year Ended
February 29,

20121

    Year Ended February 28,     

Year Ended

February 29,

2008

 
        2011     2010     2009     
            
Per Share Operating Performance                                                 

Net asset value, beginning of period

  $ 4.13      $ 4.28      $ 3.89      $ 2.35      $ 5.57       $ 7.01   
 

 

 

 

Net investment income2

    0.17        0.33        0.33        0.39        0.52         0.66   

Net realized and unrealized gain (loss)

    0.05        (0.16     0.40        1.55        (3.12      (1.43
 

 

 

 

Net increase (decrease) from investment operations

    0.22        0.17        0.73        1.94        (2.60      (0.77
 

 

 

 

Dividends and distributions from:

            

Net investment income

    (0.16     (0.32     (0.33     (0.39     (0.62      (0.67

Tax return of capital

                  (0.01     (0.01               
 

 

 

 

Total dividends and distributions

    (0.16     (0.32     (0.34     (0.40     (0.62      (0.67
 

 

 

 

Net asset value, end of period

  $ 4.19      $ 4.13      $ 4.28      $ 3.89      $ 2.35       $ 5.57   
 

 

 

 

Market price, end of period

  $ 4.37      $ 4.13      $ 4.05      $ 3.91      $ 2.07       $ 5.43   
 

 

 

 
            
Total Investment Return3                                                 

Based on net asset value

    5.51% 4      4.53%        19.92%        87.82%        (50.19)%         (11.72)%   
 

 

 

 

Based on market price

    10.04% 4      10.47%        12.90%        114.32%        (54.99)%         (17.13)%   
 

 

 

 
            
Ratios to Average Net Assets                                                 

Total expenses

    1.39% 5      1.37%        1.27%        1.23%        2.42%         3.13%   
 

 

 

 

Total expenses after fees waived

    1.39% 5      1.37%        1.27%        1.23%        2.42%         3.13%   
 

 

 

 

Total expenses after fees waived and excluding interest expense

    1.04% 5,6      1.06%        1.02%        1.02%        1.20%         0.99%   
 

 

 

 

Net investment income

    8.04% 5      8.06%        8.22%        12.16%        11.79%         9.90%   
 

 

 

 
            
Supplemental Data                                                 

Net assets, end of period (000)

  $ 453,436      $ 445,824      $ 461,247      $ 419,222      $ 252,080       $ 594,204   
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 195,000      $ 145,000      $ 117,000      $ 67,000      $ 90,000       $ 199,000   
 

 

 

 

Average borrowings outstanding, during the period (000)

  $ 165,842      $ 142,596      $ 89,362      $ 58,574      $ 163,286       $ 272,846   
 

 

 

 

Portfolio turnover

    31%        59%        81%        86%        44%         51%   
 

 

 

 

Asset coverage, end of period (000)

  $ 3,325      $ 4,075      $ 4,942      $ 7,257      $ 3,801       $ 3,986   
 

 

 

 

 

1  

Consolidated Financial Highlights.

 

2  

Based on average shares outstanding.

 

3  

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of sales charges and include the reinvestment of dividends and distributions.

 

4  

Aggregate total investment return.

 

5  

Annualized.

 

6  

For the period ended August 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs was 1.00%.

 

 

See Notes to Consolidated Financial Statements.      
                
76    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Financial Highlights    BlackRock Floating Rate Income Strategies Fund II, Inc.  (FRB)

 

   

Six Months Ended
August 31,

20121

   

Year Ended

February 29,

20121

    Year Ended February 28,     

Year Ended
February 29,

2008

 
        2011     2010     2009     
            
Per Share Operating Performance                                                 

Net asset value, beginning of period

  $ 13.60      $ 14.07      $ 13.16      $ 8.92      $ 16.06       $ 19.28   
 

 

 

 

Net investment income2

    0.43        0.89        0.87        0.86        1.37         1.55   

Net realized and unrealized gain (loss)

    0.18        (0.48     0.94        4.44        (6.98      (3.27
 

 

 

 

Net increase (decrease) from investment operations

    0.61        0.41        1.81        5.30        (5.61      (1.72
 

 

 

 

Dividends and distributions from:

            

Net investment income

    (0.44     (0.88     (0.83     (0.98     (1.53      (1.50

Tax return of capital

                  (0.07     (0.08               
 

 

 

 

Total dividends and distributions

    (0.44     (0.88     (0.90     (1.06     (1.53      (1.50
 

 

 

 

Net asset value, end of period

  $ 13.77      $ 13.60      $ 14.07      $ 13.16      $ 8.92       $ 16.06   
 

 

 

 

Market price, end of period

  $ 13.62      $ 13.21      $ 14.22      $ 15.01      $ 8.28       $ 14.75   
 

 

 

 
            
Total Investment Return3                                                 

Based on net asset value

    4.59% 4      3.41%        14.20%        62.08%        (36.46)%         (8.98)%   
 

 

 

 

Based on market price

    6.50% 4      (0.61)%        1.19%        99.15%        (35.78)%         (12.88)%   
 

 

 

 
            
Ratios to Average Net Assets                                                 

Total expenses

    1.82% 5      1.68%        1.56%        1.50%        2.48%         2.78%   
 

 

 

 

Total expenses after fees waived and paid indirectly

    1.82% 5      1.68%        1.56%        1.50%        2.48%         2.78%   
 

 

 

 

Total expenses after fees waived and paid indirectly and excluding interest expense

    1.50% 5,6      1.36%        1.30%        1.27%        1.38%         1.20%   
 

 

 

 

Net investment income

    6.56% 5      6.61%        6.48%        7.40%        10.08%         8.39%   
 

 

 

 
 
Supplemental Data                                                 

Net assets, end of period (000)

  $ 145,678      $  143,773      $ 148,552      $ 138,371      $ 93,656       $ 168,553   
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 63,000      $ 41,000      $ 36,000      $ 24,000      $ 26,000       $ 50,000   
 

 

 

 

Average borrowings outstanding, during the period (000)

  $ 48,951      $ 48,292      $ 29,101      $ 22,225      $ 45,165       $ 55,269   
 

 

 

 

Portfolio turnover

    26%        57%        100%        92%        47%         65%   
 

 

 

 

Asset coverage, end of period (000)

  $ 3,312      $ 4,507      $ 5,126      $ 6,765      $ 4,602       $ 4,371   
 

 

 

 

 

1  

Consolidated Financial Highlights.

 

2  

Based on average shares outstanding.

 

3  

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of sales charges and include the reinvestment of dividends and distributions.

 

4  

Aggregate total investment return.

 

5  

Annualized. Certain non-recurring expenses have been included in the ratio but not annualized. If these expenses were annualized, the ratio of total expenses, total expenses after fees waiver and paid indirectly, total expenses after fees waived and paid indirectly and excluding interest expense and net investment income would have been 1.96%, 1.96%, 1.64% and 6.41%, respectively.

 

6  

For the period ended August 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs was 1.45%.

 

See Notes to Consolidated Financial Statements.      
                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    77


Table of Contents
Financial Highlights    BlackRock Senior High Income Fund, Inc. (ARK)

 

   

Six Months Ended
August 31,
20121

(Unaudited)

   

Year Ended
February 29,

20121

    Year Ended February 28,     

Year Ended
February 29,

2008

 
        2011     2010     2009     
            
Per Share Operating Performance   

Net asset value, beginning of period

  $ 4.15      $ 4.22      $ 3.91      $ 2.54      $ 5.04       $ 6.17   
 

 

 

 

Net investment income2

    0.16        0.32        0.32        0.36        0.41         0.54   

Net realized and unrealized gain (loss)

    0.06        (0.06     0.32        1.31        (2.43      (1.11
 

 

 

 

Net increase (decrease) from investment operations

    0.22        0.26        0.64        1.67        (2.02      (0.57
 

 

 

 

Dividends and distributions from:

            

Net investment income

    (0.15     (0.33     (0.33     (0.30     (0.43      (0.56

Tax return of capital

                                (0.05        
 

 

 

 

Total dividends and distributions

    (0.15     (0.33     (0.33     (0.30     (0.48      (0.56
 

 

 

 

Net asset value, end of period

  $ 4.22      $ 4.15      $ 4.22      $ 3.91      $ 2.54       $ 5.04   
 

 

 

 

Market price, end of period

  $ 4.43      $ 4.06      $ 4.18      $ 3.94      $ 2.21       $ 4.91   
 

 

 

 
            
Total Investment Return3                                                 

Based on net asset value

    5.41% 4      6.86%        17.13%        68.90%        (42.15)%         (9.76)%   
 

 

 

 

Based on market price

    13.11% 4      5.54%        15.13%        95.61%        (48.33)%         (16.94)%   
 

 

 

 
            
Ratios to Average Net Assets                                                 

Total expenses

    1.26% 5      1.21%        1.13%        1.13%        2.24%         2.70%   
 

 

 

 

Total expenses after fees waived

    1.26% 5      1.21%        1.13%        1.13%        2.24%         2.70%   
 

 

 

 

Total expenses after fees waived and excluding interest expense

    0.95% 5,6      0.94%        0.90%        0.93%        1.05%         0.86%   
 

 

 

 

Net investment income

    7.74% 5      7.84%        7.83%        10.70%        9.96%         9.16%   
 

 

 

 
            
Supplemental Data                                                 

Net assets, end of period (000)

  $ 239,453      $ 235,316      $ 238,760      $ 221,173      $ 143,643       $ 284,692   
 

 

 

 

Borrowings outstanding, end of period (000)

  $ 90,000      $ 69,000      $ 50,000      $ 43,000      $ 47,000       $ 91,500   
 

 

 

 

Average borrowings outstanding, during the period (000)

  $ 77,679      $ 66,806      $ 41,405      $ 29,978      $ 79,422       $ 109,978   
 

 

 

 

Portfolio turnover

    31%        60%        83%        80%        49%         48%   
 

 

 

 

Asset coverage, end of period (000)

  $ 3,661      $ 4,410      $ 5,775      $ 6,144      $ 4,056       $ 4,112   
 

 

 

 

 

1  

Consolidated Financial Highlights.

 

2  

Based on average shares outstanding.

 

3  

Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable, total investment returns exclude the effects of sales charges and include the reinvestment of dividends and distributions.

 

4  

Aggregate total investment return.

 

5  

Annualized.

 

6  

For the period ended August 31, 2012, the total expense ratio after fees waived and paid indirectly and excluding interest expense and borrowing costs was 0.90%.

 

 

See Notes to Consolidated Financial Statements.      
                
78    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Notes to Consolidated Financial Statements (Unaudited)

 

1. Organization and Significant Accounting Policies:

BlackRock Corporate High Yield Fund, Inc. (“COY”), BlackRock Corporate High Yield Fund III, Inc. (“CYE”), BlackRock Debt Strategies Fund, Inc. (“DSU”) and BlackRock Floating Rate Income Strategies Fund II, Inc. (“FRB”) are registered under the 1940 Act, as diversified, closed-end management investment companies. BlackRock Senior High Income Fund, Inc. (“ARK”) is registered under the 1940 Act, as a non-diversified, closed-end management investment company. COY, CYE, DSU, FRB and ARK are referred to collectively as the “Funds” or individually as a “Fund”. The Funds are organized as Maryland corporations. The Funds’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Boards of Directors of the Funds are collectively referred to throughout this report as the “Board of Directors” or the “Board”, and the directors thereof are collectively referred to throughout this report as “Directors”. The Funds determine, and make available for publication the NAVs of their Common Shares on a daily basis.

Reorganization: On May 23, 2012, the Board approved a plan of reorganization whereby BlackRock Floating Rate Income Strategies Fund, Inc. (“FRA”) will acquire all of the assets and all of the liabilities of FRB in exchange for newly issued shares of FRA in a merger transaction.

The following is a summary of significant accounting policies followed by the Funds:

Basis of Consolidation: The accompanying consolidated financial statements include the accounts of BLK COY (Luxembourg) Investments, S.a.r.l. and BLK CYE (Luxembourg) Investments, S.a.r.l. (the “Luxembourg Subsidiaries”) and DSU JGW SPV, LLC, DSU (S-Martin) SPV, LLC, FRB JGW SPV, LLC and ARK JGW SPV, LLC (the “US Subsidiaries”), all of which are wholly owned taxable subsidiaries of each Fund. The US Subsidiaries enable the Funds to hold investments that are organized as an operating partnership and still satisfy Regulated Investment Company (“RIC”) tax requirements. Income earned and gains realized on the investments held by the US Subsidiaries are taxable to such subsidiaries. The Luxembourg Subsidiaries hold shares of private Canadian companies. These shares are held in the Luxembourg Subsidiaries in order to realize benefits under the Double Tax Avoidance Convention between Canada and Luxembourg, the result of which is gains on the sale of such shares will not be subject to capital gains taxes in Canada. Income earned on the investments held by the Luxembourg Subsidiaries may be taxable to such subsidiaries in Luxembourg. An income tax provision for all income, including realized and unrealized gains, if any, is reflected as either a reduction in investment income or as component of realized and unrealized gain (loss) on the Consolidated Statements of Operations. The Funds may invest up to 25% of their total assets in the US Subsidiary. Intercompany accounts and transactions have been eliminated. Both the US and Luxembourg Subsidiaries are subject to the same investment policies and restrictions that apply to the Funds.

Valuation: US GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds fair value their financial instruments at market value using independent dealers or pricing services under policies approved by the Board. The Global Valuation Committee is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Funds for all financial instruments.

The Funds value their bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures. Asset-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. Financial futures contracts traded on exchanges are valued at their last sale price. Swap agreements are valued utilizing quotes received daily by the Funds’ pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. Investments in open-end registered investment companies are valued at NAV each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid price. If no bid price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security.

Securities and other assets and liabilities denominated in foreign currencies are translated into US dollars using exchange rates determined as of the close of business on the New York Stock Exchange (“NYSE”). Foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is

 

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    79


Table of Contents
Notes to Consolidated Financial Statements (continued)

 

determined that the prior day’s price no longer reflects the fair value of the option. Over-the-counter (“OTC”) options and swaptions are valued by an independent pricing service using a mathematical model which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

In the event that application of these methods of valuation results in a price for an investment, which is deemed not to be representative of the market value of such investment or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor deems relevant consistent with the principles of fair value measurement which include the market approach, income approach and/or cost approach, as appropriate. A market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate . These factors include but are not limited to (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Funds’ pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of each Fund’s net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to affect the value of such instruments materially, those instruments may be Fair Value Assets and be valued at their fair value, as determined in good faith by the Global Valuation Committee using a pricing service and/or policies approved by the Board.

Foreign Currency: The Funds’ books and records are maintained in US dollars. Purchases and sales of investment securities are recorded at the rates of exchange prevailing on the respective date of such transactions. Generally, when the US dollar rises in value against a foreign currency, the Funds’ investments denominated in that currency will lose value because that currency is worth fewer US dollars; the opposite effect occurs if the US dollar falls in relative value.

The Funds do not isolate the portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in foreign currency exchange rates on investments are not segregated on the Consolidated Statements of Operations from the effects of changes in market prices of those investments but are included as a component of net realized and unrealized gain (loss) from investments. The Funds report realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes.

Asset-Backed Securities: The Funds may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security subject to such a prepayment feature will have the effect of shortening the maturity of the security. If the Fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

Zero-Coupon Bonds: The Funds may invest in zero-coupon bonds, which are normally issued at a significant discount from face value and do not provide for periodic interest payments. Zero-coupon bonds may experience greater volatility in market value than similar maturity debt obligations which provide for regular interest payments.

Capital Trusts: The Funds may invest in capital trusts. These securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured as either fixed or adjustable coupon securities that can have either a perpetual or stated maturity date. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been

 

 

                
80    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Notes to Consolidated Financial Statements (continued)

 

met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities.

Preferred Stock: The Funds may invest in preferred stocks. Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Floating Rate Loan Interests: The Funds may invest in floating rate loan interests. The floating rate loan interests the Funds hold are typically issued to companies (the “borrower”) by banks, other financial institutions, and privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged. The Funds may invest in obligations of borrowers who are in bankruptcy proceedings. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally the lending rate offered by one or more European banks, such as London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more US banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. The Funds consider these investments to be investments in debt securities for purposes of their investment policies.

When the Fund purchases a floating rate loan interest it may receive a facility fee and when it sells a floating rate loan interest it may pay a facility fee. On an ongoing basis, the Funds may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by the Funds upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. The Funds may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s option. The Funds may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in the Funds having a contractual relationship only with the lender, not with the borrower. The Funds will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, the Funds generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower, and the Funds may not benefit directly from any collateral supporting the loan in which it has purchased the Participation. As a result, the Funds will assume the credit risk of both the borrower and the lender that is selling the Participation. The Funds’ investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, the Funds may be treated as general creditors of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in the Funds having a direct contractual relationship with the borrower and the Funds may enforce compliance by the borrower with the terms of the loan agreement.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that the Funds either deliver collateral or segregate assets in connection with certain investments (e.g., financial futures contracts, foreign currency exchange contracts or swaps), or certain borrowings (e.g., loan payable), the Funds will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on their books and records cash or liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, each party to such transactions has requirements to deliver/deposit securities as collateral for certain investments.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of lost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis. Consent fees are compensation for agreeing to changes in the terms of debt instruments and are included in interest income in the Consolidated Statements of Operations.

Dividends and Distributions: Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. The portion of dividends and distributions that exceed a Fund’s current and accumulated earnings and profits, which are measured on a tax basis, may be treated as a tax return of capital. Distributions in

 

 

                
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Notes to Consolidated Financial Statements (continued)

 

excess of a Fund’s taxable income and net capital gains, but not in excess of a Fund’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. Capital losses carried forward from years beginning before 2011 do not reduce earnings and profits, even if such carried forward losses offset current year realized gains. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

Income Taxes: It is each Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to RICs and to distribute substantially all of its taxable income to its shareholders. Therefore, no federal income tax provision is required.

Each Fund files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Funds’ US federal tax returns remains open for each of the following periods:

 

      Four Years Ended      Three Years Ended      Period Ended  

COY

             February 29, 2012         February 28, 2009   

CYE

             February 29, 2012         February 28, 2009   

DSU

     February 29, 2012                   

FRB

     February 29, 2012                   

ARK

     February 29, 2012                   

The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

Recent Accounting Standard: In December 2011, the Financial Accounting Standards Board issued guidance that will expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the Consolidated Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the consolidated financial statements. The guidance is effective for consolidated financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Funds’ financial statement disclosures.

Deferred Compensation and BlackRock Closed-End Share Equivalent Investment Plan: Under the deferred compensation plan approved by each Fund’s Board, independent Directors (“Independent Directors”) may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of certain other BlackRock Closed-End Funds selected by the Independent Directors. This has approximately the same economic effect for the Independent Directors as if the Independent Directors had invested the deferred amounts directly in certain other BlackRock Closed-End Funds.

The deferred compensation plan is not funded and obligations there under represent general unsecured claims against the general assets of each Fund. Prior to March 31, 2012, each Fund elected to invest in

common shares of certain other BlackRock Closed-End Funds selected by the Independent Directors in order to match its deferred compensation obligations, and dividends and distributions received from the BlackRock Closed-End Fund investments through March 31, 2012 are included in income — affiliated in the Consolidated Statements of Operations.

Other: Expenses directly related to a Fund are charged to that Fund. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods.

The Funds have an arrangement with the custodians whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Consolidated Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

2. Derivative Financial Instruments:

The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to economically hedge, or protect, their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk. These contracts may be transacted on an exchange or OTC.

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. The Funds’ maximum risk of loss from counterparty credit risk on OTC derivatives is generally the aggregate unrealized gain netted against any collateral pledged by/posted to the counterparty. For OTC options purchased, the Funds bear the risk of loss in the amount of the premiums paid plus the positive change in market values net of any collateral received on the options should the counterparty fail to perform under the contracts. Options written by the Funds do not give rise to counterparty credit risk, as options written obligate the Funds to perform and not the counterparty. Counterparty risk related to exchange-traded financial futures contracts and options is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

The Funds may mitigate counterparty risk by procuring collateral and through netting provisions included within an International Swaps and Derivatives Association, Inc. master agreement (“ISDA Master Agreement”) implemented between a Fund and each of its respective counterparties. An ISDA Master Agreement allows each Fund to offset with each separate counterparty certain derivative financial instrument’s payables and/or receivables with collateral held. The amount of collateral moved to/from applicable counterparties is generally based upon minimum transfer amounts of up to $500,000. To the extent amounts due to the Funds from their counterparties are not fully collateralized, contractually or otherwise, the Funds bear the risk of loss from counterparty non-performance. See Note 1 “Segregation and Collateralization” for information with respect to collateral practices. In addition, the Funds manage counterparty risk by entering into agreements only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

 

 

                
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Notes to Consolidated Financial Statements (continued)

 

Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Funds’ net assets decline by a stated percentage or the Funds fails to meet the terms of their ISDA Master Agreements, which would cause the Funds to accelerate payment of any net liability owed to the counterparty.

Financial Futures Contracts: The Funds purchase or sell financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in value of equity securities (equity risk). Financial futures contracts are agreements between the Funds and the counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Funds as unrealized appreciation or depreciation. When the contract is closed, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest rates and the underlying assets.

Foreign Currency Exchange Contracts: The Funds enter into foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to foreign currencies (foreign currency exchange rate risk). A foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Foreign currency exchange contracts, when used by the Funds, help to manage the overall exposure to the currencies, in which some of the investments held by the Funds are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Funds as an unrealized gain or loss. When the contract is closed, the Funds record a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies and the risk that the counterparty to the contract does not perform its obligations under the agreement.

Options: The Funds purchase and write call and put options to increase or decrease their exposure to underlying instruments (including equity risk and/or interest rate risk and/or, in the case of options written, to generate gains from options premiums. A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised), the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. When the Funds purchase (writes) an option, an amount equal to

the premium paid (received) by the Funds is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked-to-market to reflect the current market value of the option purchased (written). When an instrument is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the instrument acquired or deducted from (or added to) the proceeds of the instrument sold. When an option expires (or the Fund enters into a closing transaction), the Funds realize a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premiums received or paid). When the Funds write a call option, such option is “covered,” meaning that the Funds holds the underlying instrument subject to being called by the option counterparty. When the Funds write a put option, such option is covered by cash in an amount sufficient to cover the obligation.

In purchasing and writing options, the Funds bear the risk of an unfavorable change in the value of the underlying instrument or the risk that the Funds may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Funds purchasing or selling a security at a price different from the current market value.

Swaps: The Funds enter into swap agreements, in which the fund and a counterparty agree to either make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be executed on a registered financial and commodities exchange (“centrally cleared swaps”). In a centrally cleared swap, the Funds typically enter into an agreement with a counterparty; however, performance is guaranteed by the central clearinghouse reducing or eliminating the Fund’s exposure to the credit risk of the counterparty. These payments received or made by the Funds are recorded in the Consolidated Statements of Operations as realized gains or losses, respectively. Any upfront fees paid are recorded as assets and any upfront fees received are recorded as liabilities and amortized over the term of the swap. Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swaps, if any, is recorded as a receivable or payable for variation margin in the Consolidated Statements of Assets and Liabilities. When the swap is terminated, the Funds will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Funds’ basis in the contract, if any. Generally, the basis of the contracts is the premium received or paid. Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Consolidated Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

 

Ÿ  

Credit default swaps — The Funds enter into credit default swaps to manage their exposure to the market or certain sectors of the market, to

 

 

                
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Notes to Consolidated Financial Statements (continued)     

 

   

reduce their risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which they are not otherwise exposed (credit risk). The Funds enter into credit default swap agreements to provide a measure of protection against the default of an issuer (as buyer of protection) and/or gain credit exposure to an issuer to which it is not otherwise exposed (as seller of protection). The Funds may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps on single-name issuers are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation accelerators, repudiation, moratorium or restructuring). Credit default swaps on traded indexes are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a write-down, principal or interest shortfall or default of all or individual underlying securities included in the index occurs. As a buyer, if an underlying credit event occurs, the Funds will either receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising

   

the index or receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Funds will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

 

Ÿ  

Interest rate swaps — Certain Funds enter into interest rate swaps to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate risk by economically hedging the value of the fixed rate bonds which may decrease when interest rates rise (interest rate risk). Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. Interest rate floors, which are a type of interest rate swap, are agreements in which one party agrees to make payments to the other party to the extent that interest rates fall below a specified rate or floor in return for a premium. In more complex swaps, the notional principal amount may decline (or amortize) over time.

 

 

Derivative Financial Instruments Categorized by Risk Exposure:                       
Fair Values of Derivative Financial Instruments as of August 31, 2012  
     Asset Derivatives  
                COY     CYE     DSU  
     Consolidated Statements of Assets and Liabilities Location                 Value  

Foreign currency exchange contracts

  Unrealized appreciation on foreign currency exchange contracts       $ 26,257      $ 39,584      $ 5,454   

Credit contracts

  Unrealized appreciation on swaps         817,408        878,971          

Equity contracts

  Investments at value-unaffiliated1                                     

Total

        $ 843,665      $ 918,555      $ 5,454   
           
     Liability Derivatives  
    COY     CYE     DSU     FRB     ARK  
     Consolidated Statements of Assets and Liabilities Location   Value  

Foreign currency exchange contracts

  Unrealized depreciation on foreign currency exchange contracts   $ (700,255   $ (704,331   $ (614,672   $ (100,156   $ (10,520

Credit contracts

  Unrealized depreciation on swaps     (63,595     (63,322            (77,373       

Equity contracts

  Net unrealized appreciation/depreciation2; Options written at value     (522,208     (565,522                     

Total

    $ (1,286,058   $ (1,331,175   $ (614,672   $ (177,529   $ (10,520
1   

Includes options purchased at value as reported in the Consolidated Schedules of Investments.

 

2   

Includes cumulative appreciation/depreciation on financial futures contracts as reported in the Consolidated Schedules of Investments. Only current day’s variation margin is reported within the Consolidated Statements of Assets and Liabilities.

 

                
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Table of Contents
Notes to Consolidated Financial Statements (continued)     

 

 

The Effect of Derivative Financial Instruments in the Consolidated Statements of Operations
Six Months Ended August 31, 2012
 
    Net Realized Gain (Loss) From  
     COY     CYE     DSU     FRB     ARK  
Interest rate contracts:          

Options1

  $ 15,600      $ 17,025                        
Foreign currency exchange contracts:          

Foreign currency transactions

    309,490        128,641      $ 218,317      $ 36,754      $ (4,502
Credit contracts:          

Swaps

    288,725        278,324        (397,040     (23,603     (299,946
Equity contracts:          

Financial futures contracts

    (42,138     (31,386                

Options1

    86,316        67,779                         

Total

  $ 657,993      $ 460,383      $ (178,723   $ 13,151      $ (304,448
         
     Net Change in Unrealized Appreciation/Depreciation on  
     COY     CYE     DSU     FRB     ARK  
Foreign currency exchange contracts:          

Foreign currency translations

  $ 232,445      $ 266,261      $ 140,807      $ 45,270      $ 2,389   
Credit contracts:          

Swaps

    388,724        445,690               (77,373       
Equity contracts:          

Financial futures contracts

    (264,271     (306,694                     

Options1

    161,711        172,474                        

Total

  $ 518,609      $ 577,731      $ 140,807      $ (32,103   $ 2,389   

 

1   

Options purchased are included in the net realized gain (loss) from investments and net change in unrealized appreciation/depreciation on investments.

For the six months ended August 31, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:

 

      COY      CYE      DSU      FRB      ARK  
Financial futures contracts:               

Average number of contracts sold

     99         105                           

Average notional value of contracts sold

   $ 6,706,740       $ 7,121,078                           
Foreign currency exchange contracts:               

Average number of contracts-US dollars purchased

     12         11         11         5         1   

Average number of contracts-US dollars sold

     3         4         3         1           

Average US dollar amounts purchased

   $ 28,517,195       $ 28,856,948       $ 25,280,693       $ 4,522,528       $ 367,191   

Average US dollar amounts sold

   $ 1,340,117       $ 1,676,355       $ 853,865       $ 421,964           
Options:               

Average number of option contracts purchased

     387         417                 11           

Average number of option contracts written

     370         398                           

Average notional value of option contracts purchased

   $ 4,900,029       $ 5,264,914               $ 10,371           

Average notional value of option contracts written

   $ 4,514,000       $ 4,849,500                           

Average number of swaption contracts written

     1         1                           

Average notional value of swaption contracts written

   $ 520,000       $ 567,500                           
Credit default swaps:               

Average number of contracts-buy protection

     10         10                 1           

Average number of contracts-sell protection

     18         17         1                 1   

Average notional value-buy protection

   $ 2,639,000       $ 2,868,000               $ 952,875           

Average notional value-sell protection

   $ 11,372,500       $ 12,062,500       $ 6,275,000               $ 4,725,000   

 

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”) is the largest stockholder and an affiliate, for 1940 Act purposes, of BlackRock, Inc. (“BlackRock”).

Each Fund entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the “Manager”), the Funds’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of each Fund’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Fund.

For such services, each Fund pays the Manager a monthly fee based on a percentage of each Fund’s average daily net assets, plus the proceeds of any outstanding borrowings used for leverage, at the following annual rates:

 

COY

     0.50

CYE

     0.60

DSU

     0.60

FRB

     0.75

ARK

     0.50
 

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    85


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Notes to Consolidated Financial Statements (continued)     

 

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each Fund’s investment in other affiliated investment companies, if any. These amounts are included in fees waived by Manager in the Consolidated Statements of Operations.

The Manager provides investment management and other services to the US and Luxembourg Subsidiaries. The Manager does not receive separate compensation from the Subsidiaries for providing investment management or administrative services. However, each Fund pays the Manager based on the Fund’s net assets which includes the assets of the US and Luxembourg Subsidiaries.

The Manager entered into a sub-advisory agreement with BlackRock Financial Management, Inc. (“BFM”), an affiliate of the Manager. The

Manager pays BFM, for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by each Fund to the Manager.

Certain officers and/or Directors of the Funds are officers and/or directors of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Funds’ Chief Compliance Officer.

4. Investments:

Purchases and sales of investments including paydowns and excluding short-term securities for the six months ended August 31, 2012 were as follows:

 

      Purchases      Sales  

COY

   $ 131,743,078       $ 107,133,105   

CYE

   $ 146,959,026       $ 124,866,799   

DSU

   $ 242,442,068       $ 192,210,235   

FRB

   $ 77,190,994       $ 51,661,009   

ARK

   $ 118,910,270       $ 97,687,572   
 

 

Transactions in options written for the six months ended August 31, 2012, were as follows:

 

     Puts  
    COY     CYE  
     Contracts    

Notional

(000)

    Premiums
Received
    Contracts    

Notional

(000)

    Premiums
Received
 

Outstanding options, beginning of period. . . . . . . . . . . . . . . . . . . . . . . . .

    1,075             $ 76,897        1,140             $ 81,580   

Options written . . . . . . . . . . . . . . . . . . .

    3,240      $ 1,040,000        232,496        3,295      $ 1,135,000        239,254   

Options exercised. . . . . . . . . . . . . . . . .

                                         

Options expired. . . . . . . . . . . . . . . . . . .

           (1,040,000     (15,600            (1,135,000     (17,024

Options closed. . . . . . . . . . . . . . . . . .

    (4,315            (293,793     (4,435            (303,810

Outstanding options, end of period

                                         

5. Income Tax Information:

As of February 29, 2012, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates:

 

Expires    COY      CYE      DSU      FRB      ARK  

2013

                   $ 21,126,025                   

2014

                     20,233,987       $ 100,800       $ 4,906,362   

2015

                     3,578,574         1,315,945         1,585,622   

2016

   $ 454,146                                   

2017

     23,362,415       $ 22,687,878         56,690,782         12,168,927         27,675,242   

2018

     36,323,237         33,834,777         148,062,952         38,830,450         60,685,648   

2019

                     16,301,990                 9,564,345   

No expiration date1

                     13,051,575         1,757,611         6,629,052   
  

 

 

 

Total

   $ 60,139,798       $ 56,522,655       $ 279,045,885       $ 54,173,733       $ 111,046,271   
  

 

 

 

 

1   

Must be utilized prior to losses subject to expiration.

As of August 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

 

      COY     CYE     DSU     FRB     ARK  

Tax cost

   $ 345,918,965      $ 384,865,720      $ 693,627,700      $ 212,077,769      $ 333,309,001   
  

 

 

 

Gross unrealized appreciation

     20,064,817        22,497,565        21,556,686        3,967,961        10,904,854   

Gross unrealized depreciation

     (14,346,058     (15,203,447     (61,660,763     (3,020,985     (10,885,798
  

 

 

 

Net unrealized appreciation (depreciation)

   $ 5,718,759      $ 7,294,118      $ (40,104,077   $ 946,976      $ 19,056   
  

 

 

 

 

                
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Table of Contents
Notes to Consolidated Financial Statements (continued)

 

6. Borrowings:

On March 3, 2011, the Funds renewed their senior committed secured, 364-day revolving line of credit and a separate security agreement (the “SSB Agreement”) with State Street Bank and Trust Company (“SSB”). The Funds have granted a security interest in substantially all of their assets to SSB. The SSB Agreement allows for the following maximum commitment amounts:

 

     

Commitment

Amounts

 

COY

   $ 126,600,000   

CYE

   $ 138,000,000   

DSU

   $ 224,500,000   

FRB

   $ 72,500,000   

ARK

   $ 117,500,000   

Advances are made by SSB to the Funds, at the Fund’s option of (a) the higher of (i) 0.80% above the Fed Funds rate and (ii) 0.80% above the Overnight LIBOR or (b) 0.80% above 7-day, 30-day, 60-day or 90-day LIBOR.

Effective March 2, 2012, the SSB Agreement was renewed for an additional 364 days. The SSB Agreement allows for the following maximum commitment amounts:

 

     

Commitment

Amounts

 

COY

   $ 126,600,000   

CYE

   $ 138,000,000   

DSU

   $ 224,500,000   

FRB

   $ 72,500,000   

ARK

   $ 117,500,000   

Advances will be made by SSB to the Funds, at the Funds’ option of (a) the higher of (i) 0.75% above the Fed Funds rate and (ii) 0.75% above the overnight LIBOR or (b) 0.75% above 7-day, 30-day, 60-day or 90-day LIBOR.

In addition, the Funds pay a facility fee and a commitment fee based upon SSB’s total commitment to the Funds. The fees associated with each of the agreements are included in the Statements of Operations as borrowing costs. Advances to the Funds as of August 31, 2012 are shown in the Consolidated Statements of Assets and Liabilities as loan payable. Based on the short-term nature of the borrowings under the line of credit and the variable interest rate, the carrying amount of the borrowings approximates fair value.

The Funds may not declare dividends or make other distributions on shares or purchase any such shares if, at the time of the declaration, distribution or purchase, asset coverage with respect to the outstanding short-term borrowings is less than 300%.

For the six months ended August 31, 2012, the daily weighted average interest rates for the Funds with loans under the revolving credit agreements were as follows:

 

     

Annualized Daily Weighted

Average Interest Rate

 

COY

     0.93

CYE

     0.92

DSU

     0.94

FRB

     0.93

ARK

     0.93

7. Commitments:

The Funds may invest in floating rate loan interests. In connection with these investments, the Funds may also enter into bridge loan commitments (“commitments”). Bridge loan commitments may obligate the Funds to furnish temporary financing to a borrower until permanent financing can be arranged. As of August 31, 2012, the Funds had outstanding bridge loan commitments as follows:

 

     

Commitment

Amounts

 

COY

   $ 600,000   

CYE

   $ 660,000   

DSU

   $ 845,000   

In connection with these commitments, the Funds earn a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is included in interest income in the Consolidated Statements of Operations, is recognized ratably over the commitment period. Commitment fees received in advance and unrecognized are recorded on the Consolidated Statements of Assets and Liabilities as deferred income.

8. Market and Credit Risk:

In the normal course of business, the Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Funds; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity with which the Funds have unsettled or open transactions may fail to or be unable to perform on its commitments. The Funds manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Funds’ Consolidated Statements of Assets and Liabilities, less any collateral held by the Funds.

9. Capital Share Transactions:

Each Fund is authorized to issue 200 million shares, par value $0.10 per share, all of which were initially classified as Common Shares. The Board is authorized, however, to reclassify any unissued shares without approval of Common Shareholders.

 

 

                
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Table of Contents
Notes to Financial Statements (concluded)

 

For the six months ended August 31, 2012 and the year ended February 29, 2012, shares issued and outstanding increased by the following amounts as a result of dividend reinvestment:

 

      Six Months
Ended August 31,
2012
    

Year Ended

February 29,
2012

 

COY

     73,542         102,019   

CYE

     69,544         53,550   

DSU

     249,632         195,440   

FRB

     2,727         15,006   

ARK

     92,132         55,454   

10. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the Funds’ financial statements was completed through the date the financial statements were issued and the following items were noted:

Each Fund paid a net investment income dividend on September 28, 2012 to Common Shareholders of record on September 14, 2012 as follows:

 

      Common
Dividend
Per Share
 

COY

   $ 0.0510   

CYE

   $ 0.0525   

DSU

   $ 0.0270   

FRB

   $ 0.0730   

ARK

   $ 0.0250   

Additionally, the Funds declared a net investment income dividend on October 1, 2012 payable to Common Shareholders of record on October 15, 2012 as follows:

 

      Common
Dividend
Per Share
 

COY

   $ 0.0510   

CYE

   $ 0.0525   

DSU

   $ 0.0270   

ARK

   $ 0.0250   

At a shareholder meeting on September 13, 2012, FRB’s and FRA’s shareholders approved the plan of reorganization discussed in Note 1. The reorganization took place on October 5, 2012. In connection with the reorganization, FRB paid a special income distribution of $0.1610 per share on September 26, 2012 to shareholders of record as of September 24, 2012.

 

 

                
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Table of Contents
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements

 

The Board of Directors (each, a “Board,” collectively, the “Boards,” and the members of which are referred to as “Board Members”) of BlackRock Corporate High Yield Fund, Inc. (“COY”), BlackRock Corporate High Yield Fund III, Inc. (“CYE”), BlackRock Debt Strategies Fund, Inc. (“DSU”), BlackRock Floating Rate Income Strategies Fund II, Inc. (“FRB”) and BlackRock Senior High Income Fund, Inc. (“ARK” and together with COY, CYE, DSU, and FRB, each a “Fund,” and, collectively, the “Funds”) met on April 26, 2012 and May 22-23, 2012 to consider the approval of each Fund’s investment advisory agreement (each, an “Advisory Agreement”) with BlackRock Advisors, LLC (the “Manager”), each Fund’s investment advisor. The Board of each Fund also considered the approval of the sub-advisory agreement (each, a “Sub-Advisory Agreement”) among the Manager, BlackRock Financial Management, Inc. (the “Sub-Advisor”), and its Fund. The Manager and the Sub-Advisor are referred to herein as “BlackRock.” The Advisory Agreements and the Sub-Advisory Agreements are referred to herein as the “Agreements.”

Activities and Composition of the Board

Each Board consists of eleven individuals, nine of whom are not “interested persons” of such Fund as defined in the Investment Company Act of 1940 (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Funds and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chairman of the Board is an Independent Board Member. Each Board has established six standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee, an Executive Committee, and a Leverage Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Executive Committee and the Leverage Committee, each of which also has one interested Board Member).

The Agreements

Pursuant to the 1940 Act, the Boards are required to consider the continuation of the Agreements on an annual basis. The Boards have four quarterly meetings per year, each extending over two days, and a fifth meeting to consider specific information surrounding the consideration of renewing the Agreements. In connection with this process, the Boards assessed, among other things, the nature, scope and quality of the services provided to the Funds by BlackRock, its personnel and its affiliates, including investment management, administrative and shareholder services, oversight of fund accounting and custody, marketing services, risk oversight, compliance and assistance in meeting applicable legal and regulatory requirements.

The Boards, acting directly and through their respective committees, considered at each of their meetings, and from time to time as appropriate, factors that are relevant to their annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to the Funds and their shareholders. Among the matters the Boards considered were: (a) investment performance for one-, three- and five-year periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio

managers’ analysis of the reasons for any over performance or underperformance against their peers and/or benchmark, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Funds for services such as call center and fund accounting; (c) Fund operating expenses and how BlackRock allocates expenses to the Funds; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Funds’ investment objectives, policies and restrictions; (e) the Funds’ compliance with their Code of Ethics and other compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Boards; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of the Funds’ valuation and liquidity procedures; (k) an analysis of management fees ratios for products with similar investment objectives across the open-end fund, closed-end fund and institutional account product channels, as applicable; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.

The Boards have engaged in an ongoing strategic review with BlackRock of opportunities to consolidate funds and of BlackRock’s commitment to investment performance. In addition, the Boards requested, to the extent reasonably possible, an analysis of the risk and return relative to selected funds in peer groups. BlackRock provides information to the Boards in response to specific questions. These questions covered issues such as profitability, including the impact of BlackRock’s upfront costs in sponsoring closed-end funds and the relative profitability of closed-end and open end funds, investment performance and management fee levels. The Boards considered the importance of: (i) managing fixed income assets with a view toward preservation of capital; (ii) portfolio managers’ investments in the funds they manage; (iii) BlackRock’s controls surrounding the coding of quantitative investment models; and (iv) BlackRock’s oversight of relationships with third party service providers.

Board Considerations in Approving the Agreements

The Approval Process: Prior to the April 26, 2012 meeting, the Boards requested and received materials specifically relating to the Agreements. The Boards are engaged in a process with its independent legal counsel and BlackRock to review periodically the nature and scope of the information provided to better assist their deliberations. The materials provided in connection with the April meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on Fund fees and expenses and the investment performance of the Funds as compared with a peer group of funds as determined by Lipper and, with respect to DSU, FRB and ARK, a customized peer group selected by BlackRock (collectively, “Peers”); (b) information on the profitability of the Agreements to BlackRock and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees (a combination of the advisory fee and the administration fee, if any) charged to other clients, such as

 

 

                
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Table of Contents
Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)

 

institutional clients and open-end funds, under similar investment mandates, as applicable; (d) the existence, impact and sharing of potential economies of scale; (e) a summary of aggregate amounts paid by each Fund to BlackRock and (f) if applicable, a comparison of management fees to similar BlackRock closed-end funds, as classified by Lipper.

At an in-person meeting held on April 26, 2012, the Boards reviewed materials relating to their consideration of the Agreements. As a result of the discussions that occurred during the April 26, 2012 meeting, and as a culmination of the Boards’ year-long deliberative process, the Boards presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the May 22-23, 2012 Board meeting.

At an in-person meeting held on May 22-23, 2012, each Board, including all the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and its Fund, and the Sub-Advisory Agreement among the Manager, the Sub-Advisor, and its Fund, each for a one-year term ending June 30, 2013. In approving the continuation of the Agreements, the Boards considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Funds and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with the Funds; (d) economies of scale; (e) fall-out benefits to BlackRock as a result of its relationship with the Funds; and (f) other factors deemed relevant by the Board Members.

The Boards also considered other matters they deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to securities lending, services related to the valuation and pricing of Fund portfolio holdings, direct and indirect benefits to BlackRock and its affiliates from their relationship with the Funds and advice from independent legal counsel with respect to the review process and materials submitted for the Boards’ review. The Boards noted the willingness of BlackRock personnel to engage in open, candid discussions with the Boards. The Boards did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The Boards, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of the Funds. Throughout the year, the Boards compared Fund performance to the performance of a comparable group of closed-end funds and/or the performance of a relevant benchmark, if any. The Boards met with BlackRock’s senior management personnel responsible for investment operations, including the senior investment officers. Each Board also reviewed the materials provided by its Fund’s portfolio management team discussing Fund performance and the Fund’s investment objective, strategies and outlook.

The Boards considered, among other factors, the number, education and experience of BlackRock’s investment personnel generally and their Funds’ portfolio management teams, investments by portfolio managers in the funds they manage, BlackRock’s portfolio trading capabilities, BlackRock’s use of technology, BlackRock’s commitment to compliance,

BlackRock’s credit analysis capabilities, BlackRock’s risk analysis and oversight capabilities and BlackRock’s approach to training and retaining portfolio managers and other research, advisory and management personnel. The Boards engaged in a review of BlackRock’s compensation structure with respect to their Funds’ portfolio management teams and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to advisory services, the Boards considered the quality of the administrative and non-investment advisory services provided to the Funds. BlackRock and its affiliates provide the Funds with certain services (in addition to any such services provided to the Funds by third parties) and officers and other personnel as are necessary for the operations of the Funds. In particular, BlackRock and its affiliates provide the Funds with the following administrative services including, among others: (i) preparing disclosure documents, such as the prospectus and the statement of additional information in connection with the initial public offering and periodic shareholder reports; (ii) preparing communications with analysts to support secondary market trading of the Funds; (iii) assisting with daily accounting and pricing; (iv) preparing periodic filings with regulators and stock exchanges; (v) overseeing and coordinating the activities of other service providers; (vi) organizing Board meetings and preparing the materials for such Board meetings; (vii) providing legal and compliance support; and (viii) performing other administrative functions necessary for the operation of the Funds, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Boards reviewed the structure and duties of BlackRock’s fund administration, accounting, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Funds and BlackRock: The Boards, including the Independent Board Members, also reviewed and considered the performance history of their Funds. In preparation for the April 26, 2012 meeting, the Boards worked with its independent legal counsel, BlackRock and Lipper to develop a template for, and was provided with reports independently prepared by Lipper, which included a comprehensive analysis of each Fund’s performance. The Boards also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with their review, each Board received and reviewed information regarding the investment performance, based on net asset value (NAV), of its Fund as compared to funds in that Fund’s applicable Lipper category, and with respect to DSU, FRB and ARK, a customized peer group selected by BlackRock. The Boards were provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper representatives to review their methodology. Each Board and its Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of its Fund throughout the year.

The Board of COY noted that, in general, COY performed better than its Peers in that COY’s performance was at or above the median of its Lipper Performance Universe in each of the one-, three- and five-year periods reported.

 

 

 

                
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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)

 

The Board of CYE noted that, in general, CYE performed better than its Peers in that CYE’s performance was at or above the median of its Lipper Performance Universe in the three- and five-year periods reported, although performance for the one-year period reported was below the median. The Board of CYE and BlackRock reviewed and discussed the reasons for CYE’s underperformance during the one-year period and will monitor closely CYE’s performance in the coming year.

The Board of DSU noted that, in general, DSU performed better than its Peers in that DSU’s performance was at or above the median of its Customized Lipper Peer Group in two of the one-, three- and five-year periods reported. Based on its discussions with BlackRock and the Board’s review of DSU’s investment performance compared to its Lipper Peer Group, the methodology used by Lipper to select peer funds, and other relevant information provided by BlackRock, DSU’s Board noted that DSU’s investment performance as compared to its Customized Lipper Peer Group provided a more meaningful comparison of DSU’s relative performance.

The Board pf FRB noted that FRB performed below the median of its Customized Lipper Peer Group in each of the one-, three- and five-year periods reported. Based on its discussions with BlackRock and the Board’s review of FRB’s investment performance compared to its Lipper Peer Group, the methodology used by Lipper to select peer funds, and other relevant information provided by BlackRock, the Board of FRB noted that FRB’s investment performance as compared to its Customized Lipper Peer Group provided a more meaningful comparison of FRB’s relative performance. The Board of FRB and BlackRock reviewed and discussed the reasons for FRB’s underperformance during these periods compared with its Peers. FRB’s Board was informed that, among other things, the two major factors impacting performance during the one- and three-year periods were leverage and general investment style. On average, FRB has tended to run lower leverage than FRB’s competitors and the investment style leads to overweight positions to higher-quality assets. The two years following the financial crisis in 2008 witnessed a significant rally in lower credit quality assets. The overweight to higher quality assets and below average leverage were the primary drivers to the underperformance for the three-year period.

The Board of ARK noted that ARK performed below the median of its Customized Lipper Peer Group in the three- and five-year periods reported, but that ARK performed at or above the median of its Customized Lipper Peer Group in the one-year period reported. Based on its discussions with BlackRock and the Board’s review of ARK’s investment performance compared to its Lipper Peer Group, the methodology used by Lipper to select peer funds, and other relevant information provided by BlackRock, the Board of ARK noted that ARK’s investment performance as compared to its Customized Lipper Peer Group provided a more meaningful comparison of ARK’s relative performance. The Board of ARK and BlackRock reviewed and discussed the reasons for ARK’s underperformance during the three- and five-year periods compared with its Peers. ARK’s Board was informed that, among other things, ARK’s underperformance over the three-year period is largely a result of less leverage versus its Customized Lipper Peer Group. The high yield and bank loan markets posted record returns in 2009 and 2010’s bull market, which is

why running less leverage than the peer group on average produced a lag. ARK’s five-year period underperformance can be attributed to 2008; returns in both the high yield and bank loans markets were down substantially.

The Boards of FRB and ARK and BlackRock discussed BlackRock’s strategy for improving the Funds’ performance and BlackRock’s commitment to providing the resources necessary to assist the Funds’ portfolio managers and to improve the Funds’ performance.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Funds: Each Board, including the Independent Board Members, reviewed its Fund’s contractual management fee rate compared with the other funds in its Lipper category. It also compared the Fund’s total expense ratio, as well as actual management fee rate, to those of other funds in its Lipper category. The Boards considered the services provided and the fees charged by BlackRock to other types of clients with similar investment mandates, including separately managed institutional accounts.

The Boards received and reviewed statements relating to BlackRock’s financial condition and profitability with respect to the services it provided the Funds. The Boards were also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Funds. The Boards reviewed BlackRock’s profitability with respect to the Funds and other funds the Boards currently oversee for the year ended December 31, 2011 compared to available aggregate profitability data provided for the years ended December 31, 2010, and December 31, 2009. The Boards reviewed BlackRock’s profitability with respect to other fund complexes managed by the Manager and/or its affiliates. The Boards reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Boards recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, expense allocations and business mix, and the difficulty of comparing profitability as a result of those factors.

The Boards noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Boards considered BlackRock’s overall operating margin, in general, compared to the operating margin for leading investment management firms whose operations include advising closed-end funds, among other product types. In addition, the Boards considered, among other things, certain third party data comparing BlackRock’s operating margin with that of other publicly-traded asset management firms. The Boards considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, the Boards considered the cost of the services provided to the Funds by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management of the Funds and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Boards reviewed BlackRock’s

 

 

                
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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (concluded)

 

methodology in allocating its costs to the management of the Funds. The Boards also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreements and to continue to provide the high quality of services that is expected by the Boards.

The Board of each of COY, CYE, DSU, FRB and ARK noted that its respective Fund’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was lower than or equal to the median contractual management fee ratio paid by the Fund’s Peers, in each case before taking into account any expense reimbursements or fee waivers.

D. Economies of Scale: Each Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of its Fund increase. Each Board also considered the extent to which its Fund benefits from such economies and whether there should be changes in the advisory fee rate or structure in order to enable the Fund to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Fund.

Based on the Boards’ review and consideration of the issue, the Boards concluded that most closed-end funds do not have fund level breakpoints because closed-end funds generally do not experience substantial growth after the initial public offering. They are typically priced at scale at a fund’s inception. The Boards noted that only one closed-end fund in the Fund Complex has breakpoints in its advisory fee structure.

E. Other Factors Deemed Relevant by the Board Members: The Boards, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with the Funds, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Funds, including securities lending and cash management services. The Boards also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Boards also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Boards further noted that they had considered the investment by BlackRock’s funds in exchange traded funds (i.e., ETFs) without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Agreements, the Boards also received information regarding BlackRock’s brokerage and soft dollar practices. The Boards received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

The Boards noted the competitive nature of the closed-end fund marketplace, and that shareholders are able to sell their Fund shares in the secondary market if they believe that the Fund’s fees and expenses are too high or if they are dissatisfied with the performance of the Fund.

Conclusion

Each Board, including all the Independent Board Members, unanimously approved the continuation of the Advisory Agreement between the Manager and its Fund for a one-year term ending June 30, 2013, and the Sub-Advisory Agreement among the Manager, the Sub-Advisor, and its Fund for a one-year term ending June 30, 2013. Based upon its evaluation of all of the aforementioned factors in their totality, the Boards, including the Independent Board Members, were satisfied that the terms of the Agreements were fair and reasonable and in the best interest of the Funds and their shareholders. In arriving at their decision to approve the Agreements, the Boards did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making these determinations. The contractual fee arrangements for the Funds reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

 

 

                
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Table of Contents
Officers and Directors     

 

Richard E. Cavanagh, Chairman of the Board and Director

Karen P. Robards, Vice Chairperson of the Board, Chairperson of the Audit Committee and Director

Paul L. Audet, Director

Michael J. Castellano, Director and Member of the Audit Committee

Frank J. Fabozzi, Director and Member of the Audit Committee

Kathleen F. Feldstein, Director

James T. Flynn, Director and Member of the Audit Committee

Henry Gabbay, Director

Jerrold B. Harris, Director

R. Glenn Hubbard, Director

W. Carl Kester, Director and Member of the Audit Committee

John M. Perlowski, President and Chief Executive Officer

Anne Ackerley, Vice President

Brendan Kyne, Vice President

Robert W. Crothers, Vice President1

Neal Andrews, Chief Financial Officer

Jay Fife, Treasurer

Brian Kindelan, Chief Compliance Officer and Anti-Money Laundering Officer

Janey Ahn, Secretary2

 

1   

Effective May 22, 2012, Robert W. Crothers became Vice President of the Funds.

 

2   

Effective May 22, 2012, Ira P. Shapiro resigned as Secretary of the Funds and Janey Ahn became Secretary of the Funds.

Investment Advisor

BlackRock Advisors, LLC

Wilmington, DE 19809

Sub-Advisor

BlackRock Financial Management, Inc.

New York, NY 10055

Custodians

JPMorgan Chase Bank, N.A.3

New York, NY 10017

State Street Bank and Trust Company4

Boston, MA 02110

The Bank of New York Mellon5

New York, NY 10286

Transfer Agent

Computershare Trust Company, N.A.

Canton, MA 02021

Accounting Agent

State Street Bank and Trust Company

Boston, MA 02110

Legal Counsel

Skadden, Arps, Slate, Meagher & Flom LLP

New York, NY 10036

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Boston,MA 02116

Address of the Funds

100 Bellevue Parkway

Wilmington, DE 19809

 

3   

For COY.

 

4   

For CYE and FRB.

 

5   

For DSU and ARK.

 

 

                
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Table of Contents
Additional Information     

 

 

Proxy Results

The Annual Meeting of Shareholders was held on July 27, 2012 for shareholders of record on May 31, 2012 to elect director nominees for each Fund. There were no broker non-votes with regard to any of the Funds.

 

     Paul L. Audet           Michael J. Castellano           Richard E. Cavanagh  
      Votes For      Votes
Withheld
     Abstain            Votes For      Votes
Withheld
     Abstain            Votes For      Votes
Withheld
     Abstain  

COY

     31,934,050         1,000,367         0            31,881,351         1,053,066         0            31,937,831         996,586         0   

CYE

     34,239,474         1,051,994         0            34,260,909         1,030,559         0            34,338,410         953,058         0   

DSU

     98,873,904         2,240,266         0            97,768,080         2,346,090         0            98,730,425         2,383,745         0   

FRB

     9,595,670         283,003         0            9,590,212         288,461         0            9,580,472         298,201         0   

ARK

     52,424,466         762,485         0              52,425,135         761,816         0              52,426,588         760,363         0   
     Frank J. Fabozzi           Kathleen F. Feldstein           James T. Flynn  
      Votes For      Votes
Withheld
     Abstain            Votes For      Votes
Withheld
     Abstain            Votes For      Votes
Withheld
     Abstain  

COY

     31,922,017         1,012,400         0            31,816,329         1,118,088         0            31,877,262         1,057,155         0   

CYE

     34,349,629         941,839         0            34,170,136         1,121,332         0            34,198,897         1,092,571         0   

DSU

     98,823,345         2,290,825         0            98,704,927         2,409,243         0            98,693,714         2,420,456         0   

FRB

     9,587,487         291,186         0            9,571,166         307,507         0            9,582,638         296,035         0   

ARK

     52,424,956         761,995         0              52,406,990         779,961         0              52,404,817         782,134         0   
     Henry Gabbay           Jerrold B. Harris           R. Glenn Hubbard  
      Votes For      Votes
Withheld
     Abstain            Votes For      Votes
Withheld
     Abstain            Votes For      Votes
Withheld
     Abstain  

COY

     31,928,105         1,006,312         0            31,919,855         1,014,562         0            31,886,183         1,048,234         0   

CYE

     34,283,460         1,008,008         0            34,319,212         972,256         0            34,291,049         1,000,419         0   

DSU

     98,855,469         2,258,701         0            98,676,596         2,437,574         0            98,847,227         2,266,943         0   

FRB

     9,590,522         288,151         0            9,587,269         291,404         0            9,580,697         297,976         0   

ARK

     52,423,697         763,254         0              52,418,439         768,512         0              52,422,588         764,363         0   
     W. Carl Kester           Karen P. Robards                            
      Votes For      Votes
Withheld
     Abstain            Votes For      Votes
Withheld
     Abstain                            

COY

     31,958,391         976,026         0            31,907,694         1,026,723         0               

CYE

     34,287,134         1,004,334         0            34,318,274         973,194         0               

DSU

     98,902,576         2,211,594         0            98,859,778         2,254,392         0               

FRB

     9,580,697         297,976         0            9,588,881         289,792         0               

ARK

     52,425,843         761,108         0              52,424,324         762,627         0                                   

 

                
94    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Additional Information (continued)     

 

Dividend Policy

 

Each Funds’ dividend policy is to distribute all or a portion of their net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more stable level of dividend distributions, the Funds may at times pay out less than the entire amount of net investment income earned in any particular month and may at times in any particular month pay out such accumulated but undistributed income in addition to net investment income earned in that month. As a result,

the dividends paid by the Funds for any particular month may be more or less than the amount of net investment income earned by the Funds during such month. The Funds’ current accumulated but undistributed net investment income, if any, is disclosed in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.

 

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    95


Table of Contents
Additional Information (continued)     

 

 

General Information

 

The Funds do not make available copies of their Statements of Additional Information because the Funds’ shares are not continuously offered, which means that the Statement of Additional Information of each Fund has not been updated after completion of the respective Fund’s offerings and the information contained in each Fund’s Statement of Additional Information may have become outdated.

During the period, there were no material changes in the Funds’investment objectives or policies or to the Funds’ charters or by-laws that would delay or prevent a change of control of the Funds that were not approved by shareholders or in the principal risk factors associated with investment in the Funds. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Funds’ portfolios.

Quarterly performance, semi-annual and annual reports and other information regarding the Funds may be found on BlackRock’s website, which can be accessed at http://www.blackrock.com. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.

Electronic Delivery

Electronic copies of most financial reports are available on the Funds’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports by enrolling in the Funds’ electronic delivery program.

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor to enroll. Please note that not all investment advisors, banks or brokerages may offer this service.

Householding

The Funds will mail only one copy of shareholder documents, including annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder

documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Availability of Fund Updates

BlackRock will update performance and certain other data for the Funds on a monthly basis on its website in the “Closed-end Funds” section of http://www.blackrock.com. Investors and others are advised to periodically check the website for updated performance information and the release of other material information about the Funds. This reference to BlackRock’s website is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.

 

 

                
96    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents
Additional Information (continued)     

 

Section 19(a) Notices

These reported amounts and sources of distributions are estimates and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Fund’s investment experience during the year and may be subject to changes based on the tax regulations. Each Fund will provide a Form 1099-DIV each calendar year that will explain the character of these dividends and distributions for federal income tax purposes.

 

August 31, 2012                                                                   
    

Total Fiscal Year-to-Date

Cumulative Distributions by Character

         

Percent of Fiscal Year-to-Date

Cumulative Distributions by Character

 
      Net
Investment
Income
     Net
Realized
Capital
Gains
    

Return

of
Capital

     Total Per
Common
Share
           Net
Investment
Income
    Net
Realized
Capital
Gains
    Return
of
Capital
    Total Per
Common
Share
 

ARK

   $ 0.150000                       $ 0.150000            100     0     0     100

CYE

   $ 0.310500                       $ 0.310500              100     0     0     100

 

                
   SEMI-ANNUAL REPORT    AUGUST 31, 2012    97


Table of Contents
Additional Information (concluded)     

 

 

BlackRock Privacy Principles

 

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

 

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

 

 

                
98    SEMI-ANNUAL REPORT    AUGUST 31, 2012   


Table of Contents

This report is transmitted to shareholders only. It is not a prospectus. Past performance results shown in this report should not be considered a representation of future performance. The Funds have leveraged their Common Shares, which creates risks for Common Shareholders, including the likelihood of greater volatility of net asset value and market price of the Common Shares, and the risk that fluctuations in short-term interest rates may reduce the Common Shares’ yield. Statements and other information herein are as dated and are subject to change.

 

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#CEF1-5-8/12-SAR    LOGO


Table of Contents
Item 2 –   Code of Ethics – Not Applicable to this semi-annual report
Item 3 –   Audit Committee Financial Expert – Not Applicable to this semi-annual report
Item 4 –   Principal Accountant Fees and Services – Not Applicable to this semi-annual report
Item 5 –   Audit Committee of Listed Registrants – Not Applicable to this semi-annual report
Item 6 –   Investments
  (a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form.
  (b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.
Item 7 –   Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable to this semi-annual report
Item 8 –   Portfolio Managers of Closed-End Management Investment Companies
 

(a)   Not Applicable to this semi-annual report

 

(b)  As of the date of this filing, there have been no changes in any of the portfolio managers identified in the most recent annual report on Form N-CSR.

Item 9 –   Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable
Item 10 –   Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.
Item 11 –   Controls and Procedures
  (a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.
  (b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12 –   Exhibits attached hereto
  (a)(1) – Code of Ethics – Not Applicable to this semi-annual report
  (a)(2) – Certifications – Attached hereto
  (a)(3) – Not Applicable
  (b) – Certifications – Attached hereto


Table of Contents

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

BlackRock Corporate High Yield Fund III, Inc.  
By:  

/s/ John M. Perlowski

   
  John M. Perlowski    
  Chief Executive Officer (principal executive officer) of  
  BlackRock Corporate High Yield Fund III, Inc.  
Date: November 5, 2012    
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By:  

/s/ John M. Perlowski

   
  John M. Perlowski    
  Chief Executive Officer (principal executive officer) of  
  BlackRock Corporate High Yield Fund III, Inc.  
Date: November 5, 2012    
By:  

/s/ Neal J. Andrews

   
  Neal J. Andrews    
  Chief Financial Officer (principal financial officer) of  
  BlackRock Corporate High Yield Fund III, Inc.  
Date: November 5, 2012