BLACKROCK Ltd DURATION INCOME TRUST

Regulatory Filings • Nov 10, 2008

N-CSR 1 c55258_ncsr.htm c55258_ncsr.htm

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 811-21349

Name of Fund: BlackRock Limited Duration Income Trust (BLW)

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: Donald C. Burke, Chief Executive Officer, BlackRock Limited Duration Income Trust, 800 Scudders Mill Road, Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011, Princeton, NJ, 08543-9011

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

Date of fiscal year end: 08/31/2008

Date of reporting period: 11/01/2007 – 08/31/2008

Item 1– Report to Stockholders

EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS

Annual Report
AUGUST 31, 2008

BlackRock Core Bond Trust (BHK)
BlackRock High Income Shares (HIS)
BlackRock High Yield Trust (BHY)
BlackRock Income Opportunity Trust, Inc. (BNA)
BlackRock Income Trust, Inc. (BKT)
BlackRock Limited Duration Income Trust (BLW)
BlackRock Strategic Bond Trust (BHD)

NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE

Table of Contents
	Page
A Letter to
Shareholders	3
Annual Report:
Trust Summaries	4
The Benefits and
Risks of Leveraging	11
Swap Agreements	11
Financial Statements:
Schedules of
Investments	12
Statements of Assets and
Liabilities	60
Statements of
Operations	62
Statements of Changes in
Net Assets	64
Statements of Cash
Flows	67
Financial
Highlights	68
Notes to
Financial Statements	75
Report of
Independent Registered Public Accounting Firm	84
Disclosure of
Investment Advisory Agreement and Subadvisory Agreement	85
Dividend
Reinvestment Plans	89
Important Tax
Information	89
Officers and
Directors/Trustees	90
Additional
Information	94

2 ANNUAL REPORT AUGUST 31, 2008

A Letter to Shareholders

Dear Shareholder

It has been a tumultuous year for investors, marked by almost daily headlines related to the beleaguered housing market, rising food and energy prices, and the escalating credit crisis. The news took an extraordinarily heavy tone shortly after the close of this reporting period as the credit crisis boiled over and triggered unprecedented failures and consolidation in the financial sector, stoking fears of a market and economic collapse and prompting the largest government rescue plan since the Great Depression.

Through it all, the Federal Reserve Board (the “Fed”) has been aggressive in its attempts to restore order in financial markets. Key moves included slashing the target federal funds rate 325 basis points (3.25%) between September 2007 and April 2008 and providing numerous cash injections and lending programs. As the credit crisis took an extreme turn for the worse in September, the Fed, in concert with five other global central banks, cut interest rates by 50 basis points in a rare move intended to stave off worldwide economic damage from the intensifying financial market turmoil. The U.S. economy managed to grow at a slow-but-positive pace through the second quarter of the year, though the recent events almost certainly portend a global economic recession.

Against this backdrop, U.S. stocks experienced intense volatility (steep declines and quick recoveries), generally posting losses for the current reporting period. Small-cap stocks fared significantly better than their larger counterparts. Non-U.S. markets followed the U.S. on the way down and, notably, decelerated at a faster pace than domestic equities — a stark reversal of recent years’ trends, when international stocks generally outpaced U.S. stocks.

Treasury securities also traded in a volatile fashion, but rallied overall (yields fell and prices correspondingly rose), as the broader flight-to-quality theme persisted. The yield on 10-year Treasury issues, which fell to 3.34% in March, climbed to the 4.20% range in mid-June as investors temporarily shifted out of Treasury issues in favor of riskier assets (such as stocks and other high-quality fixed income sectors), then declined again to 3.83% by period-end when credit fears resurfaced. Tax-exempt issues posted positive returns, but problems among municipal bond insurers and the collapse in the market for auction rate securities pressured the group throughout the course of the past year. Economic and financial market distress also dampened the performance of high yield issues, which were very volatile due to the macro factors noted above.

Overall, severe market instability resulted in mixed results for the major benchmark indexes:

Total returns as of August 31, 2008 — U.S. equities (S&P 500 Index)	6-month — (2.57	)%	12-month — (11.14	)%
Small cap U.S. equities (Russell
2000 Index)	8.53		(5.48	)
International equities (MSCI
Europe, Australasia, Far East Index)	(10.18	)	(14.41	)
Fixed income (Lehman Brothers
U.S. Aggregate Index)	0.18		5.86
Tax-exempt fixed income (Lehman
Brothers Municipal Bond Index)	5.12		4.48
High yield bonds (Lehman Brothers
U.S. Corporate High Yield 2% Issuer Capped Index)	0.74		(0.66	)

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

Through periods of market turbulence, as ever, BlackRock’s full resources are dedicated to the management of our clients’ assets. For our most current views on the economy and financial markets, we invite you to visit www.blackrock.com/funds . As always, we thank you for entrusting BlackRock with your investments, and we look forward to continuing to serve you in the months and years ahead.

Sincerely,

Rob Kapito President, BlackRock Advisors, LLC

THIS PAGE NOT PART OF YOUR FUND REPORT AUGUST 31, 2008 3

T rust Summary as of August 31, 2008 BlackRock Core Bond Trust

| Investment
Objective |
| --- |
| BlackRock Core
Bond Trust (BHK) (the “Trust”) seeks to provide high
current income with the potential for capital appreciation. |
| Performance |
| For the 12 months ended August
31, 2008, the Trust returned (0.44)% based on market price and 1.87% based on
net asset value (“NAV”). For the same period, the closed-end Lipper Corporate
Debt Funds BBB-Rated category posted an average return of 0.76% on a NAV
basis. All returns reflect reinvestment of dividends. The Trust’s allocation
to mortgage-backed securities (MBS) which comprised 43% of net assets as of
August 31, 2008, benefited performance as MBS outperformed corporate bonds. Conversely,
allocations to high yield and preferred securities detracted from
performance. The Trust’s lower leverage position versus its peers (about 24%
of the portfolio as of August 31, 2008) also hurt performance. |
| The views expressed reflect the opinions of BlackRock as
of the date of this report and are subject to change based on changes in
market, economic or other conditions. These views are not intended to be a forecast of future events
and are no guarantee of future results. |
| Trust
Information |

| Symbol on New York Stock
Exchange: | BHK |
| --- | --- |
| Initial Offering Date: | November 27, 2001 |
| Yield on Closing Market Price as
of August 31, 2008 ($11.51): 1 | 6.46% |
| Current Monthly Distribution per
Share: 2 | $0.062 |
| Current Annualized Distribution
per Share: 2 | $0.744 |
| Leverage as of August 31, 2008: 3 | 24% |

| 1 | Yield on closing market price is calculated by dividing
the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results. |
| --- | --- |
| 2 | The distribution is not constant and is subject to change. |
| 3 | As a percentage of total managed assets, which is the
total assets of the Trust (including any assets attributable to any borrowing
that may be outstanding) minus the sum of accrued liabilities (other than
debt representing financial leverage). |

| The table below summarizes the
changes in the Trust’s market price and net asset value per share: | 8/31/08 | 10/31/07 | Change | | High | Low |
| --- | --- | --- | --- | --- | --- | --- |
| Market Price | $ 11.51 | $ 12.23 | (5.89 | )% | $ 12.68 | $ 11.06 |
| Net Asset Value | $ 12.81 | $ 13.63 | (6.02 | )% | $ 13.77 | $ 12.67 |
| The following unaudited charts
show the portfolio composition of the Trust’s long-term investments and
credit quality allocations of the Trust’s corporate bond investments: | | | | | | |

| Portfolio
Composition | 8/31/08 | 10/31/07 |
| --- | --- | --- |
| Corporate Bonds | 47 % | 42 % |
| U.S. Government Agency
Mortgage-Backed Securities | 18 | 38 |
| Non-Government Agency
Mortgage-Backed Securities | 13 | 9 |
| Asset-Backed Securities | 9 | 4 |
| U.S. Government Obligations | 8 | 4 |
| Preferred Securities | 2 | 2 |
| U.S. Government Agency Mortgage-Backed Securities-
Collateralized Mortgage
Obligations | 2 | 1 |
| Foreign Government
Obligations | 1 | — |
| Credit Quality
Allocations 4 | | |
| Credit Rating | 8/31/08 | 10/31/07 |
| AAA/Aaa | 7 % | 6 % |
| AA/Aa | 18 | 24 |
| A/A | 26 | 21 |
| BBB/Baa | 26 | 20 |
| BB/Ba | 5 | 7 |
| B/B | 13 | 16 |
| CCC/Caa | 4 | 6 |
| Not Rated | 1 | — |

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

4 ANNUAL REPORT AUGUST 31, 2008

Trust Summary as of August 31, 2008 BlackRock High Income Shares

| Investment
Objective |
| --- |
| BlackRock High
Income Shares (HIS) (the “Trust”) seeks to provide the
highest current income and to a lesser extent capital appreciation, by
investing in a diversified portfolio of below investment grade securities. |
| Performance |
| For the 12 months ended August
31, 2008, the Trust returned (11.04)% based on market price and (3.17)% based
on NAV. For the same period, the closed-end Lipper High Current Yield Funds
(Leveraged) category posted an average return of (14.03)% on a NAV basis. All
returns reflect reinvestment of dividends. Amid considerable volatility in
credit markets, the Trust’s relative performance was aided by conservative
positioning, with higher-than-normal credit quality, defensive sector
positioning, an allocation to bank loans, and higher-than-normal cash
balances. The Trust had much lower leverage (18% as of August 31, 2008) than
most of its peers, which also aided relative performance. The Trust’s
discount to NAV, which widened from 13.4% to 15.7% during the period,
accounts for the difference between performance based on price and
performance based on NAV. |
| 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. |
| Trust
Information |

| Symbol on New York Stock
Exchange: | HIS |
| --- | --- |
| Initial Offering Date: | August 10, 1988 |
| Yield on Closing Market Price as
of August 31, 2008 ($1.88): 1 | 11.62% |
| Current Monthly Distribution per
Share: 2 | $0.0182 |
| Current Annualized Distribution
per Share: 2 | $0.2184 |
| Leverage as of August 31, 2008: 3 | 18% |

| 1 | Yield on closing market price is calculated by dividing
the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results. |
| --- | --- |
| 2 | The distribution is not constant and is subject to change. |
| 3 | As a percentage of total managed assets, which is the
total assets of the Trust (including any assets attributable to any borrowing
that may be outstanding) minus the sum of accrued liabilities (other than
debt representing financial leverage). |

| The table below summarizes the
changes in the Trust’s market price and net asset value per share: | 8/31/08 | 12/31/07 | Change | | High | Low |
| --- | --- | --- | --- | --- | --- | --- |
| Market Price | $ 1.88 | $ 2.14 | (12.15 | )% | $ 2.28 | $ 1.84 |
| Net Asset Value | $ 2.23 | $ 2.47 | (9.72 | )% | $ 2.47 | $ 2.22 |

| The following unaudited charts
show the portfolio composition of the Trust’s long-term investments and
credit quality allocations of the Trust’s corporate bond investments: | | |
| --- | --- | --- |
| Portfolio
Composition | | |
| | 8/31/08 | 12/31/07 |
| Corporate Bonds | 86 % | 93 % |
| Floating Rate Loan Interests | 11 | 5 |
| Preferred Securities | 3 | 2 |
| Credit Quality
Allocations 4 | | |
| Credit Rating | 8/31/08 | 12/31/07 |
| BBB/Baa | 4 % | 1 % |
| BB/Ba | 23 | 21 |
| B/B | 52 | 54 |
| CCC/Caa | 16 | 21 |
| Not Rated | 5 | 3 |

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

ANNUAL REPORT AUGUST 31, 2008 5

Trust Summary as of August 31, 2008 BlackRock High Yield Trust

| Investment
Objective |
| --- |
| BlackRock High
Yield Trust (BHY) (the “Trust”) seeks to provide high
current income and to a lesser extent to seek capital appreciation by
investing in a diversified portfolio of below investment grade securities. |
| Performance |
| For the 12 months ended August
31, 2008, the Trust returned (11.03)% based on market price and (3.16)% based
on NAV. For the same period, the closed-end Lipper High Current Yield Funds
(Leveraged) category posted an average return of (14.03)% on a NAV basis. All
returns reflect reinvestment of dividends. Amid considerable volatility in
credit markets, the Trust’s relative performance was aided by conservative positioning,
with higher-than-normal credit quality, defensive sector positioning, an
allocation to bank loans, and higher-than-normal cash balances. The Trust had
much lower leverage (12% as of August 31, 2008) than most of its peers, which
also aided relative performance. The Trust’s discount to NAV, which widened
from 12.5% to 12.9% during the period, accounts for the difference between
performance based on price and performance based on NAV. |
| 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. |
| Trust
Information |

| Symbol on New York Stock
Exchange: | BHY |
| --- | --- |
| Initial Offering Date: | December 23, 1998 |
| Yield on Closing Market Price as
of August 31, 2008 ($5.96): 1 | 10.27% |
| Current Monthly Distribution per
Share: 2 | $0.051 |
| Current Annualized Distribution
per Share: 2 | $0.612 |
| Leverage as of August 31, 2008: 3 | 12% |

| 1 | Yield on closing market price is calculated by dividing
the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results. |
| --- | --- |
| 2 | The distribution is not constant and is subject to change. |
| 3 | As a percentage of total managed assets, which is the
total assets of the Trust (including any assets attributable to any borrowing
that may be outstanding) minus the sum of accrued liabilities (other than
debt representing financial leverage). |

| The table below summarizes the
changes in the Trust’s market price and net asset value per share: | 8/31/08 | 10/31/07 | Change | | High | Low |
| --- | --- | --- | --- | --- | --- | --- |
| Market Price | $ 5.96 | $ 6.92 | (13.87 | )% | $ 7.21 | $ 5.65 |
| Net Asset Value | $ 6.84 | $ 7.91 | (13.53 | )% | $ 7.91 | $ 6.82 |

| The following unaudited charts
show the ten largest industries and credit quality allocations of the Trust’s
corporate bond investments: | | |
| --- | --- | --- |
| Ten Largest
Industries 4 | | |
| | 8/31/08 | 10/31/07 |
| Media | 13 % | 17 % |
| Oil, Gas & Consumable Fuels | 11 | 8 |
| Wireless Telecommunications
Services | 6 | 5 |
| Hotels, Restaurants & Leisure | 6 | 6 |
| Diversified Telecommunications
Services | 6 | 4 |
| Independent Power Producers &
Energy Traders | 5 | 6 |
| Metals & Mining | 4 | 3 |
| Diversified Financial Services | 4 | — |
| Specialty Retail | 3 | 4 |
| Chemicals | 3 | 5 |

4 For Trust compliance purposes, the Trust’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 Trust management. This definition may not apply for purposes of this report, which may combine sector and industry sub-classification for reporting ease.

| Credit Quality
Allocations 4 — Credit Rating | 8/31/08 | 10/31/07 |
| --- | --- | --- |
| BBB/Baa | 6 % | 4 % |
| BB/Ba | 24 | 21 |
| B | 52 | 51 |
| CCC/Caa | 15 | 21 |
| Not Rated | 3 | 3 |

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

6 ANNUAL REPORT AUGUST 31, 2008

Trust Summary as of August 31, 2008 BlackRock Income Opportunity Trust

| Investment
Objective |
| --- |
| BlackRock Income
Opportunity Trust (BNA) (the “Trust”) seeks to provide current
income and capital appreciation in a portfolio of primarily U.S.
dollar-denominated securities. |
| Performance |
| For the 12 months ended August
31, 2008, the Trust returned 4.76% based on market price and 1.94% based on
NAV. For the same period, the closed-end Lipper Corporate Debt Funds
BBB-Rated category posted an average return of 0.76% on a NAV basis. All
returns reflect reinvestment of dividends. The Trust’s relative performance
was aided by holdings in U.S. government agency mortgage-backed securities.
Conversely, holdings in investment-grade financials, non-agency mortgage
securities, high yield bonds and preferred securities detracted from results.
The Trust had much lower leverage (22% as of August 31, 2008) than its peers,
which also hurt performance. The Trust’s discount to NAV, which narrowed
modestly during the period, accounts for the difference between performance
based on price and performance based on NAV. |
| 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. |
| Trust
Information |

| Symbol on New York Stock
Exchange: | BNA |
| --- | --- |
| Initial Offering Date: | December 20, 1991 |
| Yield on Closing Market Price as
of August 31, 2008 ($9.82): 1 | 6.23% |
| Current Monthly Distribution per
Share: 2 | $0.051 |
| Current Annualized Distribution
per Share: 2 | $0.612 |
| Leverage as of August 31, 2008: 3 | 22% |

| 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 | As a percentage of total managed assets, which is the
total assets of the Trust (including any assets attributable to any borrowing
that may be outstanding) minus the sum of accrued liabilities (other than
debt representing financial leverage). |

| The table
below summarizes the changes in the Trust’s market price and net asset value
per share: | 8/31/08 | 10/31/07 | Change | | High | Low |
| --- | --- | --- | --- | --- | --- | --- |
| Market Price | $ 9.82 | $ 10.19 | (3.63 | )% | $ 10.50 | $ 9.06 |
| Net Asset Value | $ 10.35 | $ 11.02 | (6.08 | )% | $ 11.16 | $ 10.20 |

| The following unaudited charts
show the portfolio composition of the Trust’s long-term investments and
credit quality allocations of the Trust’s corporate bond investments: | | |
| --- | --- | --- |
| Portfolio
Composition | | |
| | 8/31/08 | 10/31/07 |
| Corporate Bonds | 42 % | 38 % |
| U.S. Government Agency
Mortgage Backed Securities | 15 | 34 |
| Non-U.S. Government Agency
Mortgage Backed Securities | 14 | 9 |
| U.S. Government Obligations | 11 | 4 |
| Asset-Backed Securities | 10 | 7 |
| U.S. Government and Agency
Mortgage-Backed Securities -
Collateralized Mortgage
Obligations | 3 | 5 |
| Capital Trusts | 4 | — |
| Foreign Government Obligations | 1 | — |
| Trust Preferred | — | 2 |
| Municipal Bonds | — | 1 |

| Credit Quality
Allocations 4 — Credit Rating | 8/31/08 | 10/31/07 |
| --- | --- | --- |
| AAA/Aaa | 8 % | 8 % |
| AA/Aa | 18 | 21 |
| A/A | 28 | 20 |
| BBB/Baa | 26 | 22 |
| BB/Ba | 5 | 6 |
| B/B | 12 | 17 |
| CCC/Caa | 3 | 6 |

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

ANNUAL REPORT AUGUST 31, 2008 7

Trust Summary as of August 31, 2008 BlackRock Income Trust Inc.

| Investment
Objective |
| --- |
| BlackRock Income
Trust Inc. (BKT) (the “Trust”) seeks to provide high
monthly income while preserving capital by investing in a portfolio of
mortgage-backed securities. |
| Performance |
| For the 12 months ended August
31, 2008, the Trust returned 6.59% based on market price and 11.98% based on
NAV. For the same period, the closed-end Lipper U.S. Mortgage Funds category
posted an average return of 1.41% on a NAV basis. All returns reflect
reinvestment of dividends. The primary driver behind the Trust’s relative
outperformance was its large allocation to U.S. government agency
mortgage-backed securities (MBS). Meanwhile, small allocations to non-agency
MBS and other structured securities detracted from results. The Trust had
much lower leverage during the period than its peers, which also hurt
performance. The Trust’s discount to NAV, which widened modestly during the
period, accounts for the difference between performance based on price and
performance based on NAV. |
| 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. |
| Trust
Information |

| Symbol on New York Stock
Exchange: | BKT |
| --- | --- |
| Initial Offering Date: | July 22, 1988 |
| Yield on Closing Market Price as
of August 31, 2008 ($6.07): 1 | 4.74% |
| Current Monthly Distribution per
Share: 2 | $0.024 |
| Current Annualized Distribution
per Share: 2 | $0.288 |

| 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. |

| The table below summarizes the
changes in the Trust’s market price and net asset value per share: | 8/31/08 | 10/31/07 | Change | High | Low |
| --- | --- | --- | --- | --- | --- |
| Market Price | $ 6.07 | $ 5.81 | 4.48 % | $ 6.20 | $ 5.23 |
| Net Asset Value | $ 6.94 | $ 6.53 | 6.28 % | $ 7.05 | $ 6.35 |

| The following unaudited chart
shows the portfolio composition of the Trust’s long-term investments: | | |
| --- | --- | --- |
| Portfolio
Composition | | |
| | 8/31/08 | 10/31/07 |
| U.S. Government Agency
Mortgage-Backed Securities | 46 % | 51 % |
| U.S. Government Agency
Mortgage-Backed Securities —
Collateralized Mortgage
Obligations | 28 | 25 |
| Non U.S. Government Agency
Mortgage Backed Securities | 18 | 12 |
| U.S. Government and
Agency Obligations | 6 | 9 |
| Asset-Backed Securities | 2 | 2 |
| Corporate Bonds | — | 1 |

8 ANNUAL REPORT AUGUST 31, 2008

Trust Summary as of August 31, 2008 BlackRock Limited Duration Income Trust

| Investment
Objective |
| --- |
| BlackRock
Limited Duration Income Trust (BLW) (the “Trust”) seeks to
provide current income and capital appreciation. |
| Performance |
| For the 12 months ended August
31, 2008, the Trust returned (7.37)% based on market price and 0.58% based on
NAV. For the same period, the closed-end Lipper High Current Yield Funds
(Leveraged) category posted an average return of (14.03)% on a NAV basis. All
returns reflect reinvestment of dividends. The Trust’s allocations to high
yield loans (58% of net assets as of August 31, 2008) and mortgage securities
(21% as of August 31, 2008) benefited relative performance, as those sectors
outperformed high yield bonds. The Trust was modestly leveraged (9% as of
August 31, 2008) relative to its peers, which also aided relative performance. The Trust’s discount to NAV, which widened from 9.9% to 12.8% during
the period, accounts for the difference between performance based on price
and performance based on NAV. |
| 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. |
| Trust
Information |

| Symbol on New York Stock
Exchange: | BLW |
| --- | --- |
| Initial Offering Date: | July 30, 2003 |
| Yield on Closing Market Price as
of August 31, 2008 ($14.57): 1 | 8.65% |
| Current Monthly Distribution per
Share: 2 | $0.105 |
| Current Annualized Distribution
per Share: 2 | $1.260 |
| Leverage as of August 31, 2008: 3 | 9% |

| 1 | Yield on closing market price is calculated by dividing
the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results. |
| --- | --- |
| 2 | The distribution is not constant and is subject to change. |
| 3 | As a percentage of total managed assets, which is the
total assets of the Trust (including any assets attributable to any borrowing
that may be outstanding) minus the sum of accrued liabilities (other than
debt representing financial leverage). |

| The table
below summarizes the Trust’s market price and net asset value per share: | 8/31/08 | 10/31/07 | Change | | High | Low |
| --- | --- | --- | --- | --- | --- | --- |
| Market Price | $ 14.57 | $ 16.68 | (12.65 | )% | $ 16.99 | $ 13.60 |
| Net Asset Value | $ 16.71 | $ 18.52 | (9.77 | )% | $ 18.52 | $ 16.59 |

| The following unaudited charts
show the portfolio composition of the Trust’s long-term investments and
credit quality allocations of the Trust’s corporate bond investments: | | |
| --- | --- | --- |
| Portfolio
Composition | | |
| | 8/31/08 | 10/31/07 |
| Floating Rate Loan Interests | 46 % | 42 % |
| Corporate Bonds | 32 | 37 |
| U.S. Government Agency
Mortgage Backed Securities | 16 | 16 |
| U.S. Government and Agency
Obligations | 4 | 3 |
| Foreign Government Obligations | 2 | 2 |
| Credit Quality
Allocations 4 | | |
| Credit Rating | 8/31/08 | 10/31/07 |
| AAA/Aaa | 7 % | 1 % |
| A/A | — | 4 |
| BBB/Baa | 14 | 8 |
| BB/Ba | 17 | 23 |
| B/B | 44 | 43 |
| CCC/Caa | 13 | 18 |
| Not Rated | 5 | 3 |

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

ANNUAL REPORT AUGUST 31, 2008 9

Trust Summary as of August 31, 2008 BlackRock Strategic Bond Trust

| Investment
Objective |
| --- |
| BlackRock Strategic
Bond Trust (BHD) (the “Trust”) seeks total return through
high current income and capital appreciation. |
| Performance |
| For the 12 months ended August
31, 2008, the Trust returned (2.53)% based on market price and 1.49% based on
NAV. For the same period, the closed-end Lipper General Bond Funds category
posted an average return of 2.15% on a NAV basis. All returns reflect
reinvestment of dividends. The Trust’s allocation to high yield loans (5% of
net assets as of August 31, 2008) hurt relative performance as the Trust is
in a general bond fund category and high yield bonds underperformed
investment-grade bonds. The Trust’s discount to NAV, which widened modestly
during the period, accounts for the difference between performance based on
price and performance based on NAV. |
| 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. |
| Trust
Information |

| Symbol on New York Stock
Exchange: | BHD |
| --- | --- |
| Initial Offering Date: | February 26, 2002 |
| Yield on Closing Market Price as
of August 31, 2008 ($10.85): 1 | 8.52% |
| Current Monthly Distribution per
Share: 2 | $0.077 |
| Current Annualized Distribution
per Share: 2 | $0.924 |
| Leverage as of August 31, 2008: 3 | 2% |

| 1 | Yield on closing market price is calculated by dividing
the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results. |
| --- | --- |
| 2 | The distribution is not constant and is subject to change. |
| 3 | As a percentage of total management assets, which is the
total assets of the Trust (including any assets attributable to any borrowing
that maybe outstanding) minus the sum of accrued liabilities (other than debt
representing financial leverage). |

| The table below summarizes the
changes in the Trust’s market price and net asset value per share: | 8/31/08 | 10/31/07 | Change | | High | Low |
| --- | --- | --- | --- | --- | --- | --- |
| Market Price | $ 10.85 | $ 11.88 | (8.67 | )% | $ 12.12 | $ 10.48 |
| Net Asset Value | $ 12.76 | $ 13.80 | (7.54 | )% | $ 13.82 | $ 12.72 |

| The following unaudited charts
show the ten largest industries and credit quality allocations of the Trust’s
corporate bond investments: | | |
| --- | --- | --- |
| Ten Largest
Industries 3 | | |
| | 8/31/08 | 10/31/07 |
| Media | 15 % | 22 % |
| Diversified Telecommunications Services | 10 | 8 |
| Aerospace & Defense | 7 | 8 |
| Oil, Gas & Consumable Fuels | 7 | 6 |
| Wireless Telecommunications Services | 5 | 3 |
| Commercial Services & Supplies | 4 | 5 |
| Diversified Financial Services | 4 | 2 |
| Electric Utilities | 3 | 4 |
| Independent Power Producers & Energy Traders | 3 | — |
| Specialty Retail | 3 | 4 |
| Hotels, Restaurants & Leisure | — | 2 |

3 For Trust compliance purposes, the Trust’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Trust management. This definition may not apply for purposes of this report, which may combine sector and industry sub-classification for reporting ease.

| Credit Quality
Allocations 4 — Credit Rating | 8/31/08 | 10/31/07 |
| --- | --- | --- |
| AAA/Aaa | — % | 1 % |
| AA/Aa | 4 | 4 |
| A | 18 | 17 |
| BBB/Baa | 18 | 15 |
| BB/Ba | 14 | 12 |
| B | 36 | 37 |
| CCC/Caa | 8 | 12 |
| Not Rated | 2 | 2 |

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

10 ANNUAL REPORT AUGUST 31, 2008

T he Benefits and Risks of Leveraging

The Trusts may utilize leverage through borrowings or issuance of short-term debt securities. The concept of leveraging is based on the premise that the cost of assets to be obtained from leverage will be based on short-term interest rates, which normally will be lower than the income earned by each Trust on its longer-term portfolio investments. To the extent that the total assets of each Trust (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, each Trust’s shareholders will benefit from the incremental yield.

Leverage creates risks for shareholders including the likelihood of greater NAV and market price volatility. In addition, there is the risk that fluctuations in interest rates on borrowings may reduce each Trust’s yield and negatively impact its NAV and market price. If the income derived from securities purchased with assets received from leverage exceeds the cost of leverage, the Trust’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, the Trust’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.

Under the Investment Company Act of 1940, the Trusts are permitted to borrow through a credit facility and the issuance of short-term debt securities up to 33 1 / 3 % of total managed assets. As of August 31, 2008, the Trusts had outstanding leverage from short-term debt securities or credit facility borrowings as a percentage of total managed assets as follows:

| | Percent
of Leverage |
| --- | --- |
| BlackRock Core Bond Trust | 24 % |
| BlackRock High Income Shares | 18 % |
| BlackRock High Yield Trust | 12 % |
| BlackRock Income Opportunity
Trust | 22 % |
| BlackRock Limited Duration Income
Trust, Inc. | 9 % |
| BlackRock Strategic Bond Trust | 2 % |

S wap Agreements

The Trusts may invest in swap agreements, which are over-the-counter contracts in which one party agrees to make periodic payments based on the change in market value of a specified bond, basket of bonds, or index in return for periodic payments based on a fixed or variable interest rate or the change in market value of a different bond, basket of bonds or index. Swap agreements may be used to obtain exposure to a bond or market without owning or taking physical custody of securities. Swap agreements involve the risk that the party with whom the Trusts have entered into a swap will default on its obligation to pay the Trusts and the risk that the Trusts will not be able to meet their obligations to pay the other party to the agreement.

ANNUAL REPORT AUGUST 31, 2008 11

Schedule of Investments August 31, 2008 BlackRock Core Bond Trust (BHK) (Percentages shown are based on Net Assets)

Asset-Backed Securities		Par (000)	Value
American
Express Issuance Trust Series 2008-2 Class A, 4.02%, 1/18/11	USD	2,580	$ 2,584,864
Bank of
America Credit Card Trust Series 2008-A9 Class A9, 4.07%, 7/16/12		2,485	2,492,806
Chase
Issuance Trust:
Series
2007-A17 Class A, 5.12%, 10/15/14		2,300	2,294,002
Series
2008-A9 Class A9, 4.26%, 5/15/13		2,525	2,499,894
Chase
Manhattan Auto Owner Trust Series 2005-B Class A4, 4.88%, 6/15/12		2,469	2,482,893
Citibank
Credit Card Issuance Trust Series 2006-A2 Class A2, 4.85%, 2/10/11		2,825	2,841,499
Citibank
Omni Master Trust Series 2007-A9A Class A9, 3.571%, 12/23/13 (a)		2,720	2,720,638
Daimler
Chrysler Auto Trust Series 2006-A Class A3, 5%, 5/08/10		878	883,046
Ford Credit
Auto Owner Trust Series 2006-A Class A4, 5.07%, 12/15/10		2,850	2,839,728
Harley-Davidson
Motorcycle Trust Series 2005-2 Class A2, 4.07%, 2/15/12		1,524	1,526,441
Home Equity
Asset Trust Series 2007-2 Class 2A1, 2.582%, 7/25/37 (a)		842	771,735
JPMorgan
Mortgage Acquisition Corp. Series 2007-CH5 Class A3, 2.582%, 6/25/37 (a)		3,635	3,118,721
MBNA Credit
Card Master Note Trust Series 2006-A1 Class A1, 4.90%, 7/15/11		2,825	2,842,981
SLM Student
Loan Trust (a):
Series
2005-5 Class A1, 2.80%, 1/25/18		289	288,343
Series
2008-5 Class A2, 3.90%, 10/25/16		3,200	3,203,840
Series
2008-5 Class A3, 4.10%, 1/25/18		810	827,018
Series
2008-5 Class A4, 4.50%, 7/25/23		2,180	2,244,572
Small
Business Administration Class 1:
Series
2003-P10B, 5.136%, 8/10/13		888	882,117
Series
2004-P10B, 4.754%, 8/10/14		519	500,854
Sterling
Bank Trust Series 2004-2 Class Note, 2.081%, 3/30/30 (b)		7,226	270,967
Sterling
Coofs Trust Series 1, 2.362%, 4/15/29 (b)		9,987	808,315
USAA Auto
Owner Trust Series 2006-1 Class A4, 5.04%, 12/15/11		2,725	2,751,427
Total Asset-Backed Securities—12.0%			41,676,701
Corporate Bonds
Aerospace &
Defense—1.2%
CHC
Helicopter Corp., 7.375%, 5/01/14		405	421,200
DRS
Technologies, Inc.:
6.875%,
11/01/13		70	70,875
7.625%,
2/01/18		80	84,200
Hexcel
Corp., 6.75%, 2/01/15		140	135,800
Honeywell
International, Inc., 5.70%, 3/15/37		975	907,664
Northrop-Grumman
Corp., 7.875%, 3/01/26		960	1,122,810
TransDigm,
Inc., 7.75%, 7/15/14		120	116,700
United
Technologies Corp., 4.875%, 5/01/15		1,125	1,129,653
			3,988,902
Air Freight &
Logistics—0.5%
Park-Ohio
Industries, Inc., 8.375%, 11/15/14		120	99,000
United
Parcel Service, Inc., 6.20%, 1/15/38		1,650	1,660,996
			1,759,996
Airlines—0.0%
American
Airlines, Inc. Series 99-1, 7.324%, 4/15/11		115	104,650
Auto Components—0.1%
Lear Corp.,
8.75%, 12/01/16		250	188,125
Metaldyne
Corp., 10%, 11/01/13		250	67,500
			255,625

Corporate Bonds		Par (000)	Value
Automobiles—0.2%
Ford
Capital BV, 9.50%, 6/01/10	USD	600	$ 499,500
Building
Products—0.1%
CPG
International I, Inc., 10.50%, 7/01/13		200	154,000
Momentive
Performance Materials, Inc., 11.50%, 12/01/16		405	315,900
			469,900
Capital Markets—2.7%
The Goldman
Sachs Group, Inc., 6.75%, 10/01/37		975	857,857
Lehman
Brothers Holdings, Inc.:
4.476%,
9/15/22 (a)		525	485,881
Series MTN,
7%, 9/27/27		1,250	1,114,613
Morgan
Stanley:
3.041%,
1/09/12 (a)		1,340	1,213,564
6.25%,
8/28/17		1,700	1,547,328
6.25%,
8/09/26		525	448,993
Series F,
5.55%, 4/27/17		1,375	1,207,063
UBS AG
Series DPNT, 5.875%, 12/20/17 (d)		2,575	2,510,275
			9,385,574
Chemicals—0.7%
American
Pacific Corp., 9%, 2/01/15		250	242,500
Ames True
Temper, Inc., 6.791%, 1/15/12 (a)		650	520,000
Huntsman
LLC, 11.50%, 7/15/12		66	68,970
Ineos Group
Holdings Plc, 7.875%, 2/15/16 (e)	EUR	285	257,137
Innophos,
Inc., 8.875%, 8/15/14	USD	885	907,125
Key
Plastics LLC, 11.75%, 3/15/13 (e)		515	180,250
Terra
Capital, Inc. Series B, 7%, 2/01/17		80	77,800
			2,253,782
Commercial
Banks—2.8%
DEPFA ACS
Bank, 5.125%, 3/16/37 (e)		3,775	3,583,702
HBOS
Treasury Services Plc, 3.75%, 9/30/08 (e)		825	824,073
HSBC Bank
USA NA, 5.875%, 11/01/34		775	679,165
HSBC
Finance Corp., 6.50%, 5/02/36		300	276,934
SunTrust
Bank Series CD, 4.415%, 6/15/09		1,265	1,271,321
SunTrust
Banks, Inc., 4%, 10/15/08		995	994,955
Wachovia
Bank NA, 6.60%, 1/15/38		1,925	1,508,139
Wells Fargo
& Co., 4.875%, 1/12/11		435	442,144
			9,580,433
Commercial Services &
Supplies—0.7%
DI Finance
Series B, 9.50%, 2/15/13		598	593,515
Sally
Holdings LLC, 10.50%, 11/15/16		281	282,405
Waste
Services, Inc., 9.50%, 4/15/14		590	595,900
West Corp.,
11%, 10/15/16		1,100	860,750
			2,332,570
Communications
Equipment—0.2%
Nortel
Networks Ltd., 7.041%, 7/15/11 (a)		670	621,425
Computers &
Peripherals—0.9%
International
Business Machines Corp., 5.70%, 9/14/17 (d)		3,125	3,186,759
Consumer
Finance—0.1%
SLM Corp.
Series A, 3.10%, 1/27/14 (a)		550	436,128
Containers &
Packaging—0.7%
Berry
Plastics Holding Corp., 8.875%, 9/15/14		95	78,850
Crown
Americas LLC, 7.75%, 11/15/15		150	153,750
Impress
Holdings BV, 5.916%, 9/15/13 (a)(e)		300	270,000
Owens-Brockway
Glass Container, Inc., 8.25%, 5/15/13		1,500	1,545,000
Pregis
Corp., 12.375%, 10/15/13		545	520,475
			2,568,075

| See Notes
to Financial Statements. — 12 | ANNUAL REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Core Bond Trust (BHK) (Percentages shown are based on Net Assets)

Corporate Bonds		Par (000)	Value
Diversified Financial
Services—7.1%
Bank of
America Corp.:
6%, 9/01/17	USD	1,590	$ 1,513,550
5.75%,
12/01/17		1,355	1,264,028
Bank of
America NA, 6.10%, 6/15/17 (h)		1,975	1,894,600
Citigroup,
Inc.:
3.625%,
2/09/09 (f)		3,950	3,943,348
4.25%,
7/29/09 (d)		1,020	1,019,253
4.125%,
2/22/10 (f)(h)		4,790	4,745,031
6.875%,
2/15/98		525	454,043
Ford Motor
Credit Co. LLC:
5.538%,
1/13/12 (a)		125	92,288
7.80%,
6/01/12		340	252,506
General
Electric Capital Corp.:
6.15%,
8/07/37 (d)		6,855	6,500,836
5.875%, 1/14/38		1,525	1,373,163
JPMorgan
Chase & Co. 6%, 1/15/18		125	121,048
Structured
Asset Repackaged Trust, 3.761%, 1/21/10		1,510	1,462,908
			24,636,602
Diversified Telecommunication
Services—5.9%
AT&T,
Inc.:
6.45%,
6/15/34		780	745,271
6.50%,
9/01/37 (d)		2,875	2,767,090
6.30%,
1/15/38		600	565,778
Bellsouth
Telecommunications, Inc., 6.027%, 12/15/95 (g)		1,700	844,274
Cincinnati
Bell, Inc., 7.25%, 7/15/13		210	201,863
Comcast
Cable Holdings LLC, 7.875%, 8/01/13		10	10,882
Deutsche
Telekom International Finance BV, 5.75%, 3/23/16 (d)		3,000	2,882,088
Qwest
Communications International, Inc. 7.50%, 2/15/14		180	163,800
Qwest
Corp., 6.026%, 6/15/13 (a)		470	434,750
Telecom
Italia Capital SA:
4.95%,
9/30/14		1,075	974,160
6%, 9/30/34		1,550	1,263,092
Telefonica
Emisiones SAU, 7.045%, 6/20/36		1,975	2,005,496
Telefonica
Europe BV, 7.75%, 9/15/10		725	764,287
Verizon
Communications, Inc., 6.40%, 2/15/38 (h)		2,125	1,977,215
Verizon
Global Funding Corp., 7.75%, 12/01/30		70	74,485
Verizon
Maryland, Inc. Series B, 5.125%, 6/15/33		125	96,769
Verizon New
Jersey, Inc.:
5.875%,
1/17/12		335	340,621
7.85%, 11/15/29		230	239,239
Verizon
Virginia, Inc. Series A, 4.625%, 3/15/13 (d)(e)		3,150	3,031,941
Wind
Acquisition Finance SA, 10.75%, 12/01/15 (e)		350	358,750
Windstream
Corp.:
8.125%,
8/01/13		500	495,000
8.625%,
8/01/16		230	227,700
			20,464,551
Electric
Utilities—3.7%
Duke Energy
Carolinas LLC:
6.10%,
6/01/37		315	299,916
6%, 1/15/38		825	798,632
E.ON
International Finance BV, 6.65%, 4/30/38 (e)		1,525	1,547,073
EDP Finance
BV, 6%, 2/02/18 (e)		1,125	1,115,850
Edison
Mission Energy, 7.50%, 6/15/13		115	115,288
Elwood
Energy LLC, 8.159%, 7/05/26		116	109,396
Florida
Power & Light Co., 4.95%, 6/01/35		950	816,975
Florida
Power Corp., 6.40%, 6/15/38		875	890,389
Midwest
Generation LLC Series B, 8.56%, 1/02/16		75	77,574
PacifiCorp.,
6.25%, 10/15/37		575	558,607
Progress
Energy Florida, Inc., 6.35%, 9/15/37		1,325	1,339,408
Public
Service Co. of Colorado, 6.25%, 9/01/37		1,200	1,205,120

Corporate Bonds		Par (000)	Value
Electric
Utilities (concluded)
Southern California Edison Co.:
5.625%,
2/01/36	USD	625	$ 592,984
Series
05-E, 5.35%, 7/15/35		125	114,091
Series
08-A, 5.95%, 2/01/38		1,075	1,066,372
The Toledo Edison Co., 6.15%, 5/15/37		350	303,055
Virginia Electric and Power Co. Series A, 6%, 5/15/37		2,000	1,890,772
			12,841,502
Electrical
Equipment—0.3%
Superior Essex Communications LLC, 9%, 4/15/12		945	987,525
Electronic
Equipment & Instruments—0.3%
Sanmina-SCI Corp., 8.125%, 3/01/16		1,190	1,073,975
Energy
Equipment & Services—0.6%
Compagnie Generale de Geophysique-Veritas:
7.50%,
5/15/15		55	54,725
7.75%,
5/15/17		90	89,550
Grant Prideco, Inc. Series B, 6.125%, 8/15/15		80	77,755
North American Energy Partners, Inc., 8.75%, 12/01/11		85	84,575
Transocean, Inc., 6.80%, 3/15/38		1,100	1,097,461
Weatherford International, Inc., 6.80%, 6/15/37		625	619,455
			2,023,521
Food
& Staples Retailing—1.4%
CVS Caremark Corp., 6.25%, 6/01/27		775	736,402
The Pantry, Inc., 7.75%, 2/15/14		1,000	835,000
Rite Aid Corp., 7.50%, 3/01/17		695	576,850
Wal-Mart Stores, Inc.:
6.50%,
8/15/37		1,900	1,945,089
6.20%,
4/15/38		850	840,835
			4,934,176
Food
Products—0.4%
Kraft Foods, Inc., 7%, 8/11/37		1,455	1,447,751
Gas
Utilities—0.2%
El Paso Natural Gas Co.:
8.625%,
1/15/22		265	291,788
8.375%,
6/15/32		225	248,850
Targa Resources, Inc., 8.50%, 11/01/13		320	304,000
			844,638
Health
Care Equipment & Supplies—0.6%
Biomet, Inc.:
10.375%,
10/15/17 (i)		340	358,700
11.625%,
10/15/17		340	357,425
DJO Finance LLC, 10.875%, 11/15/14		1,380	1,383,450
			2,099,575
Health
Care Providers & Services—0.5%
Tenet Healthcare Corp., 6.50%, 6/01/12		1,020	986,850
UnitedHealth Group, Inc., 5.80%, 3/15/36		870	705,586
WellPoint, Inc., 5.95%, 12/15/34		85	73,243
			1,765,679
Hotels,
Restaurants & Leisure—1.5%
American Real Estate Partners LP:
8.125%,
6/01/12		3,165	2,947,406
7.125%,
2/15/13		320	279,600
Circus and Eldorado Joint Venture, 10.125%, 3/01/12		1,000	915,000
Gaylord Entertainment Co., 6.75%, 11/15/14		150	130,875
Greektown Holdings, LLC, 10.75%, 12/01/13 (e)(j)		315	237,825
Harrah’s Operating Co., Inc., 10.75%, 2/01/18 (e)(i)		880	519,774
Seneca Gaming Corp. Series B, 7.25%, 5/01/12		260	232,050
Wynn Las Vegas LLC, 6.625%, 12/01/14		40	36,450
			5,298,980

| See Notes
to Financial Statements. — ANNUAL REPORT | AUGUST
31, 2008 | 13 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Core Bond Trust (BHK) (Percentages shown are based on Net Assets)

Corporate Bonds		Par (000)	Value
Household
Durables—0.7%
Belvoir
Land LLC Series A-1, 5.27%, 12/15/47	USD	350	$ 256,498
Irwin Land
LLC:
Series A-1,
5.03%, 12/15/25		525	457,044
Series A-2,
5.40%, 12/15/47		1,500	1,211,730
Ohana
Military Communities LLC Series 04I,
6.193%,
4/01/49		350	322,063
			2,247,335
Household
Products—0.3%
Kimberly-Clark,
Corp., 6.625%, 8/01/37		850	895,861
IT Services—0.4%
iPayment,
Inc., 9.75%, 5/15/14		240	201,000
iPayment
Investors LP, 12.75%, 7/15/14 (e)(i)		904	897,607
SunGard
Data Systems, Inc., 9.125%, 8/15/13		205	208,075
			1,306,682
Independent Power Producers &
Energy Traders—0.1%
NRG Energy,
Inc.:
7.25%,
2/01/14		50	49,312
7.375%,
2/01/16		285	281,437
			330,749
Industrial
Conglomerates—0.6%
Sequa Corp.
(e):
11.75%,
12/01/15		690	607,200
13.50%,
12/01/15 (i)		1,644	1,338,995
			1,946,195
Insurance—2.6%
Berkshire
Hathaway Finance Corp., 4.75%, 5/15/12		1,075	1,093,455
Chubb
Corp., 6%, 5/11/37		1,100	974,401
Hartford
Life Global Funding Trusts, 2.946%, 9/15/09 (a)		925	921,618
MetLife,
Inc., 5.70%, 6/15/35		1,525	1,315,315
Metropolitan
Life Global Funding I, 4.25%, 7/30/09 (e)		1,150	1,140,706
Monument
Global Funding Ltd., 2.646%, 6/16/10 (a)		1,810	1,795,071
New York
Life Global Funding, 3.875%, 1/15/09 (e)		850	851,380
Prudential
Financial, Inc.:
5.70%, 12/14/36		675	548,496
Series D,
5.90%, 3/17/36		500	420,500
			9,060,942
Machinery—0.3%
AGY Holding
Corp., 11%, 11/15/14		360	334,800
Accuride
Corp., 8.50%, 2/01/15		265	170,925
Sunstate
Equipment Co. LLC, 10.50%, 4/01/13 (e)		950	693,500
			1,199,225
Marine—0.3%
Nakilat,
Inc. Series A, 6.067%, 12/31/33 (e)		1,050	916,828
Navios
Maritime Holdings, Inc., 9.50%, 12/15/14		141	134,655
			1,051,483
Media—6.0%
Affinion
Group, Inc., 10.125%, 10/15/13		695	684,575
CMP
Susquehanna Corp., 9.875%, 5/15/14		645	403,125
Cablevision
Systems Corp. Series B, 7.133%, 4/01/09 (a)		180	180,900
Charter
Communications Holdings I, LLC, 11%, 10/01/15		175	134,313
Charter
Communications Holdings II, LLC, 10.25%, 9/15/10		1,450	1,391,350
Comcast
Cable Holdings LLC, 7.125%, 2/15/28		200	194,967
Comcast
Corp.:
6.50%,
1/15/17		1,750	1,765,076
6.50%,
11/15/35		625	588,010
6.45%,
3/15/37		790	728,613
6.95%,
8/15/37		25	24,397
DirecTV
Holdings LLC, 8.375%, 3/15/13		125	129,375
EchoStar
DBS Corp.:
5.75%,
10/01/08		175	175,000
7%,
10/01/13		43	40,850
7.125%,
2/01/16		75	69,000

Corporate Bonds		Par (000)	Value
Media
(concluded)
Network
Communications, Inc., 10.75%, 12/01/13	USD	155	$ 111,406
News
America Holdings, Inc.:
7.70%,
10/30/25		825	885,343
8.45%,
8/01/34		625	710,362
News
America, Inc., 7.625%, 11/30/28		985	1,045,827
Nielsen
Finance LLC, 10%, 8/01/14		965	977,062
R.H.
Donnelley Corp., 11.75%, 5/15/15 (e)		1,720	1,264,200
Rainbow
National Services LLC (e):
8.75%, 9/01/12		200	204,000
10.375%,
9/01/14		943	1,003,116
TCI
Communications, Inc., 7.875%, 2/15/26		610	641,780
TL
Acquisitions, Inc., 10.50%, 1/15/15 (b)		1,000	855,000
Time Warner
Cable, Inc., 7.30%, 7/01/38		2,525	2,537,188
Time Warner
Cos., Inc.:
7.57%,
2/01/24 (d)		3,040	3,078,912
6.95%,
1/15/28		70	66,515
6.625%,
5/15/29		90	82,319
Time
Warner, Inc.:
7.625%,
4/15/31		205	205,128
7.70%,
5/01/32		85	85,746
Windstream
Regatta Holdings, Inc., 11%, 12/01/17 (e)		823	477,340
			20,740,795
Metals &
Mining—1.5%
AK Steel
Corp., 7.75%, 6/15/12		995	1,017,388
Falconbridge
Ltd.:
6%,
10/15/15		825	782,225
6.20%,
6/15/35		1,250	1,021,918
Freeport-McMoRan
Copper & Gold, Inc.:
5.883%,
4/01/15 (a)		490	491,294
8.375%,
4/01/17		790	837,400
Teck
Cominco Ltd., 6.125%, 10/01/35		1,430	1,156,347
			5,306,572
Multi-Utilities—0.6%
DTE Energy
Co., 6.35%, 6/01/16		725	722,112
Energy East
Corp., 6.75%, 7/15/36		1,500	1,433,321
			2,155,433
Oil, Gas & Consumable
Fuels—5.5%
Amerada
Hess Corp., 7.125%, 3/15/33		425	453,535
Anadarko
Petroleum Corp., 6.45%, 9/15/36		2,350	2,159,901
Berry
Petroleum Co., 8.25%, 11/01/16		140	133,700
Burlington
Resources Finance Co., 7.40%, 12/01/31		875	1,000,894
Canadian
Natural Resources, Ltd.:
6.25%,
3/15/38		375	345,397
6.75%, 2/01/39		1,025	1,008,277
Chaparral
Energy, Inc., 8.50%, 12/01/15		320	278,400
Chesapeake
Energy Corp., 6.375%, 6/15/15		150	139,500
Compton
Petroleum Finance Corp., 7.625%, 12/01/13		115	107,956
Conoco
Funding Co., 7.25%, 10/15/31		125	144,044
ConocoPhillips
Canada Funding Co., 5.95%, 10/15/36		535	534,959
ConocoPhillips
Holding Co., 6.95%, 4/15/29		650	711,039
Devon
Energy Corp., 7.95%, 4/15/32		625	723,520
EXCO
Resources, Inc., 7.25%, 1/15/11		130	128,700
EnCana
Corp.:
6.50%,
8/15/34		670	639,512
6.625%,
8/15/37		700	666,086
6.50%,
2/01/38		325	304,522
Encore
Acquisition Co., 6%, 7/15/15		40	34,900
MidAmerican
Energy Co., 5.80%, 10/15/36		700	635,538
MidAmerican
Energy Holdings Co.:
5.95%,
5/15/37		800	741,258
6.50%,
9/15/37		1,525	1,521,396

| See Notes
to Financial Statements. — 14 | ANNUAL REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Core Bond Trust (BHK) (Percentages shown are based on Net Assets)

Corporate Bonds		Par (000)	Value
Oil, Gas & Consumable Fuels
(concluded)
Nexen,
Inc., 6.40%, 5/15/37	USD	550	$ 493,311
OPTI
Canada, Inc., 8.25%, 12/15/14		450	449,437
Pemex
Project Funding Master Trust, 9.375%, 12/02/08		833	846,578
Sabine Pass
LNG LP, 7.50%, 11/30/16		330	288,750
Suncor
Energy, Inc., 6.50%, 6/15/38		645	617,336
TransCanada
PipeLines Ltd., 5.85%, 3/15/36		550	472,153
Valero
Energy Corp., 6.625%, 6/15/37		495	436,762
Whiting
Petroleum Corp.:
7.25%,
5/01/12		40	38,600
7.25%,
5/01/13		335	321,600
XTO Energy,
Inc.:
6.75%,
8/01/37		1,925	1,815,643
6.375%,
6/15/38		900	811,318
			19,004,522
Paper & Forest
Products—0.5%
Bowater,
Inc., 5.776%, 3/15/10 (a)		80	65,600
Domtar
Corp., 7.125%, 8/15/15		60	57,900
NewPage
Corp., 10%, 5/01/12		1,625	1,576,250
			1,699,750
Pharmaceuticals—1.9%
Bristol-Myers
Squibb Co., 5.875%, 11/15/36		340	321,443
Eli Lilly
& Co., 5.55%, 3/15/37 (d)		2,275	2,167,056
Schering-Plough
Corp., 6.55%, 9/15/37		1,125	1,073,429
Teva Pharmaceutical
Finance LLC, 6.15%, 2/01/36		1,445	1,301,207
Wyeth:
6%, 2/15/36		675	663,386
5.95%,
4/01/37		925	888,195
			6,414,716
Professional
Services—0.0%
FTI
Consulting, Inc., 7.75%, 10/01/16		100	103,750
Real Estate Investment Trusts
(REITs)—0.1%
AvalonBay
Communities, Inc., 6.625%, 9/15/11		350	354,416
Road & Rail—0.1%
Canadian
National Railway Co., 6.25%, 8/01/34		350	350,064
Semiconductors & Semiconductor
Equipment—0.1%
Amkor
Technology, Inc.:
7.75%,
5/15/13		80	75,000
9.25%,
6/01/16		85	82,025
Freescale
Semiconductor, Inc.:
8.875%,
12/15/14		120	97,200
9.125%,
12/15/14 (i)		290	226,200
			480,425
Software—0.7%
BMS
Holdings, Inc., 10.595%, 2/15/12 (a)(e)(i)		107	64,117
Oracle
Corp., 5.75%, 4/15/18 (d)		2,225	2,231,343
			2,295,460
Specialty
Retail—0.9%
AutoNation,
Inc.:
4.791%,
4/15/13 (a)		150	123,750
7%, 4/15/14		150	129,750
General
Nutrition Centers, Inc.:
7.199%,
3/15/14 (h)		500	411,745
10.75%,
3/15/15		400	347,000
Lazy Days’
R.V. Center, Inc., 11.75%, 5/15/12		314	157,000
Michaels
Stores, Inc.:
10%,
11/01/14		380	285,000
11.375%,
11/01/16		110	70,400
Sonic
Automotive, Inc. Series B, 8.625%, 8/15/13		2,100	1,617,000
			3,141,645

Corporate Bonds		Par (000)	Value
Textiles, Apparel & Luxury
Goods—0.0%
Quiksilver,
Inc., 6.875%, 4/15/15	USD	175	$ 140,438
Wireless Telecommunication
Services—1.8%
Cricket
Communications, Inc., 9.375%, 11/01/14		100	99,125
Digicel
Group Ltd. (e):
8.875%,
1/15/15		240	225,312
9.125%,
1/15/15 (i)		560	506,100
MetroPCS
Wireless, Inc., 9.25%, 11/01/14		80	79,300
Nordic
Telephone Co. Holdings ApS, 8.875%, 5/01/16 (e)		770	741,125
Rogers
Communications, Inc., 7.50%, 8/15/38		1,150	1,180,882
Sprint
Capital Corp., 6.875%, 11/15/28		915	777,750
Vodafone
Group Plc, 7.75%, 2/15/10 (d)		2,504	2,619,850
			6,229,444
Total Corporate
Bonds—58.4%			202,317,696
Foreign Government Obligations
Bundesrepublik
Deutschland Series 07, 4.25%, 7/04/39	EUR	1,290	1,792,363
France
Government Bond, 3.15%, 7/25/32		584	1,012,228
Israel
Government AID Bond:
5.50%,
4/26/24	USD	825	886,652
5.50%,
9/18/33		845	915,864
Total Foreign Government
Obligations—1.3%			4,607,107
Non-Government Agency Mortgage-Backed
Securities
Collateralized Mortgage
Obligations—4.3%
American
Home Mortgage Assets Series 2006-6 Class A1A, 2.662%, 12/25/46 (a)		354	215,452
Bear
Stearns Adjustable Rate Mortgage Series 2004-8 Class 14A1, 5.473%, 11/25/34 (a)		784	722,161
Citigroup
Mortgage Loan Trust, Inc. Series 2005-4 Class A, 5.344%, 8/25/35 (a)		718	630,949
Countrywide
Alternative Loan Trust:
Series
2005-64CB Class 1A15, 5.50%, 12/25/35		1,600	1,111,486
Series
2006-01A0 Class 1A1, 4.039%, 8/25/46 (a)		367	231,107
Series
2006-0A19 Class A1, 2.651%, 2/20/47 (a)		532	329,143
Series
2006-0A21 Class A1, 2.661%, 3/20/47 (a)		979	609,134
Countrywide
Home Loan Mortgage Pass-Through Trust Series 2006-0A5 Class 2A1, 2.672%, 4/25/46 (a)		424	257,664
Deutsche
Alt-A Securities, Inc. Alternate Loan Trust:
Series
2003-3 Class 2A1, 5.50%, 10/25/33		1,300	1,076,968
Series
2006-0A1 Class A1, 2.672%, 2/25/47 (a)		518	328,640
GSR
Mortgage Loan Trust (a):
Series
2005-AR4 Class 6A1, 5.25%, 7/25/35		717	655,080
Series
2006-0A1 Class 2A1, 2.662%, 8/25/46		1,096	756,121
Harborview
Mortgage Loan Trust Series 2006-9 Class 2A1A, 2.676%, 11/19/36 (a)		733	447,191
Homebanc
Mortgage Trust Series 2006-2 Class A1, 2.652%, 12/25/36 (a)		1,099	730,074
Maryland
Insurance Backed Securities Trust Series 2006-1A, 5.55%, 12/10/65		2,500	1,750,000
Merrill
Lynch Mortgage Investors, Inc. Series 2006-A3 Class 3A1, 5.823%, 5/25/36 (a)(k)		1,045	678,964
Structured
Asset Securities Corp. Series 2002-AL1 Class A2, 3.45%, 2/25/32		2,096	1,738,939
WaMu
Mortgage Pass Through Certificates (a):
Series
2005-AR10 Class 1A3, 4.834%, 9/25/35		1,800	1,589,221
Series
2007-0A4 Class 1A, 3.849%, 5/25/47		501	300,468
Series
2007-0A5 Class 1A, 3.829%, 6/25/47		860	583,748
			14,742,510

| See Notes
to Financial Statements. — ANNUAL REPORT | AUGUST
31, 2008 | 15 |
| --- | --- | --- |

Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

| Non-Government Agency Mortgage-Backed
Securities | Par (000) | | Value |
| --- | --- | --- | --- |
| Commercial Mortgage-Backed
Securities—12.7% | | | |
| Banc of
America Commercial Mortgage, Inc. Series 2005-1 Class 4A, 4.988%, 11/10/42 (a) | USD | 2,180 | $ 2,142,973 |
| CS First
Boston Mortgage Securities Corp. Series 2002-CP5 Class A2, 4.94%, 12/15/35 | | 2,720 | 2,643,455 |
| Citigroup
Commercial Mortgage Trust Series 2008-C7 Class A4, 6.299%, 12/10/49 (a) | | 1,370 | 1,283,135 |
| Citigroup/Deutsche
Bank Commercial Mortgage Trust Series 2007-CD5 Class A4, 5.886%, 11/15/44 (a) | | 2,500 | 2,284,573 |
| Commercial
Mortgage Pass-Through Certificates Series 2004-LB3A Class A3, 5.09%, 7/10/37 (a) | | 960 | 950,534 |
| First Union
National Bank Commercial Mortgage: | | | |
| Series
2001-C3 Class A3, 6.423%, 8/15/33 | | 2,910 | 2,965,044 |
| Series
2001-C4 Class A2, 6.223%, 12/12/33 | | 2,265 | 2,298,385 |
| GMAC
Commercial Mortgage Securities, Inc. Class A2: | | | |
| Series
1999-C3, 7.179%, 8/15/36 (a) | | 1,302 | 1,321,719 |
| Series
2002-C3, 4.93%, 7/10/39 | | 2,350 | 2,279,239 |
| Heller
Financial Commercial Mortgage Asset Series 1999-PH1 Class A2, 6.847%, 5/15/31 (a) | | 819 | 819,520 |
| JPMorgan
Chase Commercial Mortgage Securities Corp.: | | | |
| Series
2001-C1 Class A3, 5.857%, 10/12/35 | | 2,140 | 2,150,813 |
| Series
2004-CB8 Class A1A, 4.158%, 1/12/39 | | 976 | 914,922 |
| Series
2004-CBX Class A4, 4.529%, 1/12/37 | | 2,180 | 2,118,693 |
| Series
2006-LDP9 Class A3, 5.336%, 5/15/47 | | 960 | 866,961 |
| JPMorgan
Commercial Mortgage Finance Corp. Series 2000-C10 Class A2, 7.371%, 8/15/32 (a) | | 1,621 | 1,660,008 |
| LB-UBS
Commercial Mortgage Trust (a): | | | |
| Series
2007-C6 Class A4, 5.858%, 7/15/40 | | 1,816 | 1,660,552 |
| Series
2007-C7 Class A3, 5.866%, 9/15/45 | | 5,000 | 4,563,787 |
| Merrill
Lynch Mortgage Trust Series 2007-C1 Class AM, 6.022%, 6/12/50 (a)(k) | | 925 | 792,051 |
| Morgan
Stanley Capital I: | | | |
| Series
2005-HQ6 Class A4A, 4.989%, 8/13/42 | | 1,475 | 1,376,293 |
| Series
2007-IQ16 Class A4, 5.809%, 12/12/49 | | 618 | 561,011 |
| Series
2007-T27 Class A4, 5.804%, 6/13/42 (a) | | 995 | 903,414 |
| Series
2008-T29 Class A4, 6.458%, 1/11/43 (a) | | 1,370 | 1,293,780 |
| Salomon
Brothers Mortgage Securities VII, Inc. Series 2000-C1 Class A2, 7.52%, 12/18/09 (a) | | 3,265 | 3,335,013 |
| Wachovia
Bank Commercial Mortgage Trust (a): | | | |
| Series
2005-C21 Class A3, 5.274%, 10/15/44 | | 910 | 906,421 |
| Series
2006-C25 Class A4, 5.926%, 5/15/43 | | 1,190 | 1,119,525 |
| Series
2007-C33 Class A4, 6.10%, 2/15/51 | | 995 | 920,108 |
| | | | 44,131,929 |
| Total Non-Government Agency Mortgage-Backed
Securities—17.0% | | | 58,874,439 |
| U.S. Government Agency Mortgage-Backed
Securities | | | |
| Fannie Mae
Guaranteed Pass Through Certificates: | | | |
| 5.00%,
3/01/21–7/01/36 (l) | | 7,344 | 7,120,308 |
| 5.50%,
9/15/23–9/15/38 (h)(l) | | 60,991 | 60,374,119 |
| 6.00%,
8/01/29–3/01/38 | | 8,406 | 8,497,446 |
| 7.00%,
1/01/31–7/01/32 | | 214 | 225,617 |
| Freddie Mac
Mortgage Participation Certificates: | | | |
| 5.00%,
8/01/33 | | 70 | 67,454 |
| 5.50%,
11/01/34–5/01/36 (d) | | 4,502 | 4,451,684 |
| 6.00%,
2/01/13–12/01/18 (h) | | 2,113 | 2,164,347 |
| 6.277%,
5/01/32 | | 47 | 47,367 |
| 7.00%,
9/01/31 | | 19 | 20,397 |
| Ginnie Mae
MBS Certificates: | | | |
| 5.50%,
8/15/33 (d) | | 190 | 190,620 |
| 6.50%,
10/18/37 (l) | | 200 | 204,750 |
| Total U.S. Government Agency Mortgage-Backed
Securities—24.1% | | | 83,364,109 |

U.S. Government Agency Mortgage-Backed Securities—Collateralized Mortgage Obligations	Par (000)		Value
Fannie Mae
Trust:
Series 378
Class 5, 5%, 7/01/36 (b)	USD	3,984	$ 1,000,476
Series
2004-90 Class JH, 1.828%, 11/25/34 (a)(b)		20,628	1,912,141
Series
2005-5 Class PK, 5%, 12/25/34		2,250	2,268,900
Freddie Mac
Multiclass Certificates:
Series 2579
Class HI, 5%, 8/15/17(b)		1,736	200,646
Series 2611
Class QI, 5.50%, 9/15/32 (b)		5,107	890,595
Series 2684
Class SP, 4.986%, 1/15/33 (a)(b)		395	64,189
Series 2825
Class VP, 5.50%, 6/15/15		1,189	1,215,251
Series 3208
Class PS, 4.586%, 8/15/36 (a)(b)		1,942	227,571
Series 3316
Class SB, 4.729%, 8/15/35 (a)(b)		354	47,849
Total U.S. Government Agency
Mortgage-Backed Securities— Collateralized Mortgage Obligations—2.3%			7,827,618
U.S. Government Obligations
Federal
Housing Administration, Hebre Home Hospital, 6.25%, 9/01/28		1,007	1,028,029
Resolution
Funding Corp. (m):
6.196%,
7/15/18		525	343,762
6.30%,
10/15/18		525	338,152
U.S.
Treasury Bonds, 6.125%, 11/15/27		1,345	1,634,071
U.S.
Treasury Inflation Indexed Bonds:
2.375%,
1/15/27 (d)		1,534	1,587,066
1.75%,
1/15/28		4,727	4,429,269
U.S.
Treasury Notes:
4%, 8/15/18
(d)		17,125	17,385,882
5%, 5/15/37		545	595,540
4.375%,
2/15/38 (d)		8,115	8,057,310
4.50%,
5/15/38		3,000	3,034,686
Total U.S. Government
Obligations—11.1%			38,433,767
Preferred Securities
Capital Trusts
Capital Markets—0.1%
Credit
Suisse Guernsey Ltd., 5.86% (a)(c)		494	400,876
Commercial Banks—1.9%
BAC Capital
Trust XI, 6.625%, 5/23/36		545	482,819
Barclays
Bank Plc, 7.434% (a)(c)(e)		1,975	1,745,051
Credit
Agricole SA, 6.637% (a)(c)(e)		250	199,461
RBS Capital
Trust IV, 3.496% (a)(c)(d)		475	349,518
Royal Bank
of Scotland Group Plc, Series MTN, 7.64% (c)(d)		2,200	1,858,461
Wachovia
Corp. Series K, 7.98% (a)(c)(d)		2,550	1,915,790
			6,551,100
Diversified Financial Services—2.4%
Bank of
America Corp. (a)(c):
Series K,
8%		1,360	1,212,010
Series M,
8.125%		1,050	947,919
Citigroup,
Inc. 8.30%, 12/21/57 (a)(h)		2,225	2,008,454
JPMorgan
Chase & Co., 7.90% (a)(c)		1,925	1,748,863
JPMorgan
Chase Capital XXV, 6.80%, 10/01/37 (d)		2,780	2,373,050
			8,290,296
Electric Utilities—0.2%
PECO Energy
Capital Trust IV, 5.75%, 6/15/33		790	657,741
Insurance—1.4%
The
Allstate Corp., 6.50%, 5/15/57 (a)		1,950	1,591,512
American
International Group, Inc., 8.175%, 5/15/58 (a)(e)		1,230	950,030
Lincoln
National Corp., 6.05%, 4/20/67 (a)		675	529,291
Progressive
Corp., 6.70%, 6/15/37 (a)		605	495,684
The
Travelers Cos., Inc., 6.25%, 3/15/67 (a)		675	574,860
ZFS Finance
(USA) Trust V, 6.50%, 5/09/67 (a)(e)		675	581,494
			4,722,871
Total Capital Trusts—6.0%			20,622,884

| See Notes to Financial Statements. — 16 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

Preferred Stocks		Value
Diversified Financial Services—0.1%
Citigroup,
Inc. Series AA, 8.125%	25,500	$ 506,940
Total Preferred Stocks—0.1%		506,940
Total Preferred Securities—6.1%		21,129,824

Other Interests (n)	Beneficial Interest (000)
Health Care Providers &
Services—0.0%
Critical
Care Systems International, Inc. (o)	USD	2	637
Total Other Interests—0.0%			637
Total Long-Term Investments (Cost—$478,486,079)—132.3%			458,231,898

Short-Term Securities	Par (000)
U.S. Government & Agency
Obligations—0.9%
Federal
Home Loan Bank, 2.60%, 9/02/08 (p)	USD	400	400,000
U.S.
Treasury Bills, 1.79%, 9/25/08 (p)		2,600	2,597,126
Total Short-Term Securities (Cost—$2,997,126)—0.9%			2,997,126

Options Purchased
Call Swaptions Purchased
Receive a
fixed rate of 5.12% and pay a floating rate based on 3-month LIBOR, expiring November 2010	11	398,475
Receive a
fixed rate of 5.39% and pay a floating rate based on 3-month LIBOR, expiring March 2012	6	410,758
Receive a
fixed rate of 5.47% and pay a floating rate based on 3-month LIBOR, expiring May 2012	11	729,814
Receive a
fixed rate of 6.025% and pay a floating rate based on 3-month LIBOR, expiring June 2012	7	680,542
		2,219,589
Put Swaptions Purchased
Pay a fixed
rate of 5.12% and receive a floating rate based on 3-month LIBOR, expiring November 2010	11	230,549
Pay a fixed
rate of 5.39% and receive a floating rate based on 3-month LIBOR, expiring March 2012	6	272,026
Pay a fixed
rate of 5.47% and receive a floating rate based 3-month LIBOR, expiring May 2012	11	443,363
Pay a fixed
rate of 6.025% and receive a floating rate based on 3-month LIBOR, expiring June 2012	7	201,169
		1,147,107
Total Options Purchased (Cost—$2,586,423)—1.0%		3,366,696
Total Investments Before TBA Sale
Commitments and Options Written (Cost—$484,069,628*)—134.2%		464,595,720

TBA Sale Commitments	Par (000)
Fannie Mae
Guaranteed Pass Through Certificates:
5.00%,
3/01/21–7/01/36	USD	(4,100	)	(3,945,389	)
5.50%,
9/15/23–9/15/38		(9,900	)	(9,787,754	)
6.00%,
8/01/29–3/01/38		(2,700	)	(2,729,257	)
Freddie Mac
Mortgage Participation Certificates,
5.50%,
11/01/34–5/01/36		(4,500	)	(4,441,955	)
Ginnie Mae
MBS Certificates, 5.50%, 8/15/33		(100	)	(99,531	)
Total TBA Sale Commitments (Proceeds—$20,649,320)—(6.1)%				(21,003,886	)

Options Written	Contracts	Value
Call Option Written
30-Year
U.S. Treasury Bonds, expiring November 2008 at $118	100	$ (181,250	)
Call Swaptions Written (q)
Pay a fixed
rated of 4.58% and received a floating rate based on 3-month LIBOR, expiring May 2009	9	(219,870	)
Pay a fixed
rate of 4.94% and receive floating rate based on 3-month LIBOR, expiring December 2008	14	(524,986	)
Pay a fixed
rate of 5.01% and receive a floating rate based on 3-month LIBOR, expiring November 2008	4	(162,520	)
Pay a fixed
rate of 5.05% and receive a floating rate based on 3-month LIBOR, expiring May 2011	10	(494,250	)
Pay a fixed
rate of 5.08% and receive a floating rate based on 3-month LIBOR, expiring May 2011	6	(307,544	)
Pay a fixed
rate of 5.0825% and receive a floating rate based on 3-month LIBOR, expiring July, 2010	3	(121,990	)
Pay a fixed
rate of 5.325% and receive a floating rate based on 3-month LIBOR, expiring July 2013	8	(322,972	)
Pay a fixed
rated of 5.485% and receive a floating rate based on 3-month LIBOR, expiring October 2009	4	(308,709	)
Pay a fixed
rated of 5.67% and receive a floating rate based on 3-month LIBOR, expiring January 2010	11	(899,151	)
		(3,361,992	)
Put Swaptions Written (q)
Receive a
fixed rate of 3.10% and pay a floating rate based on 3-month LIBOR, expiring October 2008	20	(127,745	)
Receive a
fixed rate of 4.58% and pay a floating rate based on 3-month LIBOR, expiring May 2009	9	(287,325	)
Receive a
fixed rate of 4.94% and pay a floating rate based on 3-month LIBOR, expiring December 2008	14	(131,320	)
Receive a
fixed rate of 5.01% and pay a floating rate based on 3-month LIBOR, expiring November 2008	4	(19,310	)
Receive a
fixed rate of 5.05% and pay a floating rate based on 3-month LIBOR, expiring May 2011	10	(468,630	)
Receive a
fixed rate of 5.08% and pay a floating rate based on 3-month LIBOR, expiring May 2011	6	(277,904	)
Receive a
fixed rate of 5.0825% and pay a floating rate based on 3-month LIBOR, expiring July, 2010	3	(91,080	)
Receive a
fixed rate of 5.325% and pay a floating rate based on 3-month LIBOR, expiring July 2013	8	(248,470	)
Receive a
fixed rate of 5.485% and pay a floating rate based on 3-month LIBOR, expiring October 2009	4	(68,612	)
Receive a
fixed rate of 5.67% and pay a floating rate based on 3-month LIBOR, expiring January 2010	12	(163,565	)
		(1,883,961	)
Total Options Written (Premiums Received—$5,724,085)—(1.5)%		(5,427,203	)
Total Investments, Net of TBA Sale
Commitments and Options Written—126.6%		438,164,631
Liabilities in Excess of Other
Assets—(26.6)%		(91,988,005	)
Net Assets—100.0%		$ 346,176,626

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 17 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Core Bond Trust (BHK)

• The cost and unrealized appreciation (depreciation) of investments as of August 31, 2008, as computed for federal income tax purposes, were as follows:

Aggregate cost	$
Gross unrealized appreciation	$ 4,718,525
Gross unrealized depreciation	(24,202,742	)
Net unrealized depreciation	$ (19,484,217	)

| (a) | Variable rate security. Rate shown is as of report date.
Maturity shown is the final maturity date. |
| --- | --- |
| (b) | Represents the interest only portion of a mortgage-backed
security and has either a nominal or a notional amount of principal. |
| (c) | Security is perpetual in nature and has no stated maturity
date. |
| (d) | All or a portion of the security has been pledged as
collateral for reverse repurchase agreements. |
| (e) | Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions exempt
from registration to qualified institutional investors. |
| (f) | All or a portion of the security has been pledged as
collateral in connection with open financial futures contracts. |
| (g) | Represents a step bond. Rate shown reflects the effective
yield at the time of purchase. |
| (h) | All or a portion of the security has been pledged as
collateral in connection with swaps. |
| (i) | Represents a payment-in-kind security which may pay
interest/dividends in additional par/shares. |
| (j) | Non-income producing security; issuer filed for bankruptcy
or is in default of interest payments. |
| (k) | Investments in companies considered to be an affiliate of
the Trust, for purposes of Section 2(a)(3) of the Investment Company Act of
1940, were as follows: |

Affiliate	Purchase Cost	Sale Cost	Realized Gain	Income
Merrill
Lynch Mortgage
Investors, Inc.
Series 2006-A3
Class 3A1, 5.823%,
5/25/36	$ 720,827	—	—	$ 1,014
Merrill
Lynch Mortgage
Trust Series 2007-C1
Class AM, 6.022%,
6/12/50	—	—	—	$ 53,024

| (l) | Represents or includes a to-be-announced transaction. The
Trust has committed to purchasing securities for which all specific
information is not available at this time. |
| --- | --- |
| (m) | Represents a zero-coupon bond. Rate shown reflects the
effective yield at the time of purchase. |
| (n) | Other interests represent beneficial interest in
liquidation trusts and other reorganization entities and are non-income
producing. |
| (o) | Security is fair valued. |
| (p) | Rate shown is the yield to maturity as of the date of
purchase. |
| (q) | One contract represents a notional amount of $1,000,000. |
| • | For Trust compliance purposes, the Trust’s industry
classifications refer to any one or more of the industry sub-classifications
used by one or more widely recognized market indexes or ratings group indexes,
and/or as defined by Trust management. This definition may not apply for
purposes of this report, which may combine industry subclassifications for
reporting ease. These industry classifications are unaudited. |
| • | Reverse repurchase agreements outstanding as of August 31,
2008 were as follows: |

Counterparty	Interest Rate	Trade Date	Maturity Date
Credit
Suisse
Securities LLC	2.60%	8/14/08	Open	$ 14,179,559	$ 14,161,150
Lehman Brothers
International	2.10%	7/12/08	Open	1,466,454	1,459,219
Lehman
Brothers
International	2.75%	7/13/08	Open	23,076,597	22,934,688
Lehman
Brothers
International	2.00%	8/07/08	Open	7,893,079	7,881,694
Lehman
Brothers
International	2.40%	8/12/08	9/11/08	46,298,649	46,237,000
Lehman
Brothers
International	2.15%	8/15/08	Open	6,669,957	6,662,794
Lehman
Brothers
International	2.03%	8/26/08	Open	8,357,047	8,353,750
Total				$ 107,941,342	$ 107,690,295

| See Notes to Financial Statements. — 18 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Core Bond Trust (BHK)

• Foreign currency exchange contracts as of August 31, 2008 were as follows:

Currency Purchased		Currency Sold		Settlement Date	Unrealized Appreciation
USD	5,479,338	EUR	3,501,040	10/23/08	$ 358,360
USD	1,081,352	EUR	683,500	10/23/08	81,595
USD	964,232	EUR	611,500	10/23/08	69,789
EUR	224,000	USD	326,786	10/23/08	859
Total					$ 510,603

• Financial futures contracts purchased as of August 31, 2008 were as follows:

Contracts	Issue	Expiration Date	Face Value	Unrealized Appreciation (Depreciation)
968	30-Year U.S. Treasury Bond	September 2008	$ 110,702,598	$ 3,702,902
224	30-Year U.S. Treasury Bond	December 2008	$ 26,388,643	(110,643	)
Total				$ 3,592,259

• Financial futures contracts sold as of August 31, 2008 were as follows:

Contracts	Issue	Expiration Date	Face Value	Unrealized Depreciation
164	2-Year
	U.S. Treasury Bond	September 2008	$ 34,479,811	$ (441,939	)
253	2-Year
	U.S. Treasury Bond	December 2008	$ 53,664,638	(42,518	)
1,512	5-Year
	U.S. Treasury Bond	September 2008	$ 167,884,772	(2,144,353	)
588	5-Year
	U.S. Treasury Bond	December 2008	$ 65,565,600	(253,650	)
Total				$ (2,882,460	)

• Swaps outstanding as of August 31, 2008 were as follows:

	Notional Amount (000)		Unrealized Appreciation (Depreciation)
Receive a fixed rate of 4.88% and pay a floating rate based on 3-month LIBOR
Broker, Lehman Brothers Special Financing Expires August 2009	USD	40,200	$ 729,889
Receive a fixed rate of 4.7709% and pay a floating rate based on 3-month LIBOR
Broker, Lehman Brothers Special Financing Expires August 2009	USD	27,800	475,478
Receive a fixed rate of 4.62377% and pay a floating rate based on 3-month LIBOR
Broker, Credit Suisse First Boston Expires September 2009	USD	50,000	813,357
Receive a fixed rate of 5% and pay a floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London Expires November 2010	USD	4,600	153,324
Pay a fixed rate of 4.922% and receive a floating rate based on 3-month LIBOR
Broker, Lehman Brothers Special Financing Expires March 2011	USD	13,500	(451,813	)
Receive a fixed rate of 5.496% and pay a floating rate based on 3-month LIBOR
Broker, Bank of America NA Expires July 2011	USD	25,100	1,288,037
Receive a fixed rate of 4.95% and pay a floating rate based on 3-month LIBOR
Broker, UBS Warburg Expires November 2011	USD	2,200	82,144
Receive a fixed rate of 5.025% and pay a floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London Expires November 2011	USD	3,000	118,177
Pay a fixed rate of 5.0016% and receive a floating rate based on 3-month LIBOR
Broker, UBS Warburg Expires January 2012	USD	8,300	(327,056	)
Pay a fixed rate of 5.58875% and receive a floating rate based on 3-month LIBOR
Broker, Goldman Sachs & Co. Expires July 2012	USD	42,000	(2,610,056	)
Receive a fixed rate of 5.07625% and pay a floating rate based on 3-month LIBOR
Broker, Citibank NA Expires August 2012	USD	82,500	3,644,976
Receive a fixed rate of 5.10531% and pay a floating rate based on 3-month LIBOR
Broker, Goldman Sachs & Co. Expires August 2012	USD	19,500	882,193
Receive a fixed rate of 5.0565% and pay a floating rate based on 3-month LIBOR
Broker, Bank of America NA Expires August 2012	USD	49,300	2,115,995

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 19 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Core Bond Trust (BHK)

	Notional Amount (000)		Unrealized Appreciation (Depreciation)
Receive a fixed rate of 4.9034% and pay a floating rate based on 3-month LIBOR
Broker, Barclay Bank PLC Expires September 2012	USD	30,000	$ 1,129,706
Receive a fixed rate of 4.856% and pay a floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London Expires October 2012	USD	9,400	339,537
Receive a fixed rate of 4.32% and pay a floating rate based on 3-month LIBOR
Broker, Citibank NA Expires November 2012	USD	10,500	161,228
Receive a fixed rate of 4.25% and pay a floating rate based on 3-month LIBOR
Broker, Goldman Sachs & Co. Expires November 2012	USD	2,625	33,138
Pay a fixed rate of 4.2424% and receive a floating rate based on 3-month LIBOR
Broker, Lehman Brothers Special Financing Expires December 2012	USD	45,000	(586,230	)
Receive a fixed rate of 3.66375% and pay a floating rate based on 3-month LIBOR
Broker, Citibank NA Expires April 2013	USD	7,300	(98,928	)
Receive a fixed rate of 5.29375% and pay a floating rate based on 6-month British Pound Sterling LIBOR
Broker, Deutsche Bank AG London Expires April 2013	GBP	2,000	(12,234	)
Receive a fixed rate of 5.14% and pay a floating rate based on 6-month British Pound Sterling LIBOR
Broker, Deutsche Bank AG London Expires April 2013	GBP	2,000	(23,647	)
Receive a fixed rate of 4.2825% and pay a floating rate based on 3-month LIBOR
Broker, Credit Suisse First Boston Expires July 2013	USD	82,500	973,111
Receive a fixed rate of 4.2125% and pay a floating rate based on 3-month LIBOR
Broker, Morgan Stanley Capital Services Expires August 2013	USD	13,200	109,287
Pay a fixed rate of 4.51% and receive a floating rate based on 3-month LIBOR
Broker, Citibank NA Expires October 2014	USD	41,200	(718,403	)
Receive a fixed rate of 5.005% and pay a floating rate based on 3-month LIBOR
Broker, JPMorgan Chase Expires October 2014	USD	9,500	421,059
Pay a fixed rate of 4.5% and receive a floating rate based on 3-month LIBOR
Broker, JPMorgan Chase Expires May 2015	USD	2,800	(41,936	)
Receive a fixed rate of 4.725% and pay a floating rate based on 3-month LIBOR
Broker, Morgan Stanley Capital Services Expires August 2015	USD	6,200	173,326

	Notional Amount (000)		Unrealized Appreciation (Depreciation)
Receive a fixed rate of 4.87% and pay a floating rate based on 3-month LIBOR
Broker, Goldman Sachs & Co. Expires January 2016	USD	5,000	$ 178,409
Receive a fixed rate of 5.723% and pay a floating rate based on 3-month LIBOR
Broker, JPMorgan Chase Expires July 2016	USD	4,800	439,916
Pay a fixed rate of 5.155% and receive a floating rate based on 3-month LIBOR
Broker, Citibank NA Expires September 2017	USD	10,900	(577,741	)
Pay a fixed rate of 5.04015% and receive a floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London Expires September 2017	USD	12,500	(560,294	)
Pay a fixed rate of 5.3075% and receive a floating rate based on 3-month LIBOR
Broker, Barclay Bank PLC Expires October 2017	USD	13,800	(897,403	)
Pay a fixed rate of 5.115% and receive a floating rate based on 3-month LIBOR
Broker, Lehman Brothers Special Financing Expires March 2018	USD	6,600	(330,034	)
Receive a fixed rate of 4.311% and pay a floating rate based on 3-month LIBOR
Broker, Deutsche Bank AG London Expires May 2018	USD	6,600	(90,312	)
Receive a fixed rate of 4.7058% and pay a floating rate based on 3-month LIBOR
Broker, UBS Warburg Expires July 2018	USD	8,700	148,211
Pay a fixed rate of 4.52165% and receive a floating rate based on 3-month LIBOR
Broker, Goldman Sachs & Co. Expires July 2018	USD	12,300	(27,080	)
Receive a fixed rate of 5.411% and pay a floating rate based on 3-month LIBOR
Broker, JPMorgan Chase Expires August 2022	USD	8,545	656,068
Pay a fixed rate of 5.365% and receive a floating rate based on 3-month LIBOR
Broker, Bank of America NA Expires September 2027	USD	8,000	(591,485	)
Pay a fixed rate of 5.0605% and receive a floating rate based on 3-month LIBOR
Broker, Goldman Sachs & Co. Expires November 2037	USD	6,200	(224,788	)
Pay a fixed rate of 5.06276% and receive a floating rate based on 3-month LIBOR
Broker, Citibank NA Expires December 2037	USD	1,300	(47,544	)
Pay a fixed rate of 5.0639% and receive a floating rate based on 3-month LIBOR
Broker, Lehman Brothers Special Financing Expires December 2037	USD	1,300	(47,770	)

| See Notes to Financial Statements. — 20 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (concluded) BlackRock Core Bond Trust (BHK)

	Notional Amount (000)		Unrealized Appreciation (Depreciation)
Pay a fixed rate of 4.785% and receive a floating rate based on 3-month LIBOR
Broker, Citibank NA Expires January 2038	USD	2,000	$ 14,638
Pay a fixed rate of 4.601% and receive a floating rate based on 3-month LIBOR
Broker, Lehman Brothers Special Financing Expires January 2038	USD	5,000	181,923
Pay a fixed rate of 4.8375% and receive a floating rate based on the 3-month LIBOR
Broker, Morgan Stanley Capital Services Expires January 2038	USD	6,000	(5,900	)
Receive a fixed rate of 5.29750% and pay a floating rate based on 3-month LIBOR
Broker, Citibank NA Expires February 2038	USD	700	51,907
Receive a fixed rate of 5.1575% and pay a floating rate based on 3-month LIBOR
Broker, Citibank NA Expires June 2038	USD	1,000	51,774
Total			$ 7,096,154

•
EUR	Euro
GBP	British Pound
USD	U.S. Dollar

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 21 |
| --- | --- | --- |

Schedule of Investments August 31, 2008 BlackRock High Income Shares (HIS) (Percentages shown are based on Net Assets)

Corporate Bonds		Par (000)	Value
Aerospace &
Defense—1.7%
CHC
Helicopter Corp., 7.375%, 5/01/14	USD	679	$ 707,200
DRS
Technologies, Inc.:
6.875%,
11/01/13		170	172,125
7.625%,
2/01/18		170	178,925
Hawker
Beechcraft Acquisitions Co. LLC, 8.875%, 4/01/15		140	139,300
Hexcel
Corp., 6.75%, 2/01/15		405	392,850
L-3
Communications Corp., 5.875%, 1/15/15		140	131,950
TransDigm,
Inc., 7.75%, 7/15/14		300	291,750
			2,014,100
Airlines—0.2%
American
Airlines, Inc. Series 99-1, 7.324%, 4/15/11		280	254,800
Auto Components—2.5%
Allison
Transmission, Inc.(a):
11%,
11/01/15		265	243,800
11.25%,
11/01/15 (b)		695	611,600
The
Goodyear Tire & Rubber Co.:
7.857%,
8/15/11		420	422,100
8.625%,
12/01/11		682	702,460
Lear Corp.,
8.75%, 12/01/16		370	278,425
Meritor
Automotive Inc., 6.80%, 2/15/09		22	21,670
Metaldyne
Corp., 10%, 11/01/13		935	252,450
Stanadyne
Corp. Series 1, 10%, 8/15/14		525	493,500
			3,026,005
Automobiles—1.0%
Ford
Capital BV, 9.50%, 6/01/10		1,330	1,107,225
Ford Motor
Co., 8.90%, 1/15/32		300	159,000
			1,266,225
Building
Products—1.4%
CPG
International I, Inc., 10.50%, 7/01/13		540	415,800
Momentive
Performance Materials, Inc., 11.50%, 12/01/16		945	737,100
Ply Gem
Industries, Inc., 11.75%, 6/15/13 (a)		635	577,850
			1,730,750
Chemicals—3.2%
American
Pacific Corp., 9%, 2/01/15		400	388,000
Ames True
Temper, Inc., 6.791%, 1/15/12 (c)		1,070	856,000
Hexion U.S.
Finance Corp.:
7.304%,
11/15/14 (c)		275	209,688
9.75%,
11/15/14		250	208,125
Innophos,
Inc., 8.875%, 8/15/14		1,170	1,199,250
Key
Plastics LLC, 11.75%, 3/15/13 (a)		205	71,750
MacDermid,
Inc., 9.50%, 4/15/17 (a)		755	690,825
Terra
Capital, Inc. Series B, 7%, 2/01/17		265	257,713
			3,881,351
Commercial Services &
Supplies—3.3%
ARAMARK
Corp., 8.50%, 2/01/15		85	85,637
Casella
Waste Systems, Inc., 9.75%, 2/01/13		400	396,000
DI Finance
Series B, 9.50%, 2/15/13		904	897,220
Sally
Holdings LLC:
9.25%,
11/15/14		90	91,013
10.50%,
11/15/16		529	531,645
Waste
Services, Inc., 9.50%, 4/15/14		800	808,000
West Corp.:
9.50%,
10/15/14		375	319,688
11%,
10/15/16		1,195	935,087
			4,064,290
Communications
Equipment—0.4%
Nortel
Networks Ltd., 7.041%, 7/15/11 (c)		555	514,762
Construction
Materials—1.2%
Nortek
Holdings, Inc., 10%, 12/01/13 (a)		1,580	1,477,300

Corporate Bonds		Par (000)	Value
Containers &
Packaging—5.5%
Berry
Plastics Holding Corp., 6.651%, 9/15/14 (c)	USD	300	$ 225,000
Crown
Americas LLC, 7.75%, 11/15/15		255	261,375
Graphic
Packaging International Corp., 9.50%, 8/15/13		65	61,100
Impress
Holdings BV, 5.916%, 9/15/13 (a)(c)		775	697,500
Jefferson
Smurfit Corp. US, 7.50%, 6/01/13		1,000	830,000
Owens-Brockway
Glass Container, Inc., 8.25%, 5/15/13		2,600	2,678,000
Pregis
Corp., 12.375%, 10/15/13		1,034	987,470
Smurfit-Stone
Container Enterprises, Inc., 8%, 3/15/17		1,140	912,000
			6,652,445
Diversified Financial
Services—4.0%
Axcan
Intermediate Holdings, Inc., 12.75%, 3/01/16 (a)		240	241,200
FCE Bank
Plc, 7.125%, 1/16/12	EUR	1,100	1,345,966
Ford Motor
Credit Co LLC:
8.625%, 11/01/10	USD	140	116,957
5.538%,
1/13/12 (c)		290	214,108
7.80%,
6/01/12		1,500	1,113,998
GMAC LLC:
6.875%,
8/28/12		710	416,518
5.011%,
12/01/14 (c)		560	294,082
6.75%,
12/01/14		405	219,901
8%,
11/01/31		675	364,061
Leucadia
National Corp., 8.125%, 9/15/15		600	603,750
			4,930,541
Diversified Telecommunication
Services—5.9%
Broadview
Networks Holdings, Inc., 11.375%, 9/01/12		440	378,400
Cincinnati
Bell, Inc., 7.25%, 7/15/13		2,085	2,004,206
Qwest
Capital Funding, Inc., 7%, 8/03/09		230	229,713
Qwest
Communications International, Inc., 7.50%, 2/15/14		1,280	1,164,800
Qwest
Corp., 6.026%, 6/15/13 (c)		850	786,250
Wind
Acquisition Finance SA, 10.75%, 12/01/15 (a)		1,100	1,127,500
Windstream
Corp.:
8.125%,
8/01/13		855	846,450
8.625%,
8/01/16		645	638,550
			7,175,869
Electric
Utilities—1.5%
Edison
Mission Energy, 7.50%, 6/15/13		35	35,087
Elwood
Energy LLC, 8.159%, 7/05/26		453	427,327
Homer City
Funding LLC Series B, 8.734%, 10/01/26		150	162,499
NSG
Holdings LLC, 7.75%, 12/15/25 (a)		565	542,400
Salton Sea
Funding Corp. Series E, 8.30%, 5/30/11		619	657,639
			1,824,952
Electrical
Equipment—1.0%
Coleman
Cable, Inc., 9.875%, 10/01/12		400	372,000
Superior
Essex Communications LLC, 9%, 4/15/12		830	867,350
			1,239,350
Electronic Equipment &
Instruments—0.8%
NXP BV,
5.541%, 10/15/13 (c)		440	342,100
Sanmina-SCI
Corp., 8.125%, 3/01/16		725	654,313
			996,413
Energy Equipment &
Services—1.6%
Compagnie
Generale de Geophysique-Veritas:
7.50%,
5/15/15		135	134,325
7.75%,
5/15/17		220	218,900
Grant
Prideco, Inc. Series B, 6.125%, 8/15/15		100	97,193
North
American Energy Partners, Inc., 8.75%, 12/01/11		1,560	1,552,200
			2,002,618
Food & Staples
Retailing—0.3%
Rite Aid
Corp., 7.50%, 3/01/17		445	369,350
Food Products—0.4%
Del Monte
Corp., 8.625%, 12/15/12		475	479,750

| See Notes
to Financial Statements. — 22 | ANNUAL REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock High Income Shares (HIS) (Percentages shown are based on Net Assets)

Corporate Bonds		Par (000)	Value
Gas Utilities—0.3%
El Paso Natural Gas Co., 8.375%, 6/15/32	USD	50	$ 55,300
Targa Resources, Inc., 8.50%, 11/01/13		345	327,750
			383,050
Health Care
Equipment & Supplies—3.0%
Biomet, Inc.:
10.375%, 10/15/17 (b)		120	126,600
11.625%, 10/15/17		120	126,150
Catalent Pharma Solutions, Inc., 9.50%, 4/15/15
(b)		610	509,350
DJO Finance LLC, 10.875%, 11/15/14		2,400	2,406,000
Hologic, Inc., 2%, 12/15/37 (d)(e)		395	322,419
			3,490,519
Health Care
Providers & Services—1.9%
Community Health Systems, Inc.
8.875%, 7/15/15		250	252,500
Tenet Healthcare Corp.:
6.375%, 12/01/11		125	120,625
6.50%, 6/01/12		1,735	1,678,613
United Surgical Partners International, Inc.,
8.875%, 5/01/17		346	297,560
			2,349,298
Hotels, Restaurants
& Leisure—5.2%
American Real Estate Partners LP, 7.125%,
2/15/13		735	642,206
Caesars Entertainment, Inc., 7.875%, 3/15/10		500	426,250
Gaylord Entertainment Co.:
8%, 11/15/13		1,000	917,500
6.75%, 11/15/14		450	392,625
Great Canadian Gaming Corp., 7.25%, 2/15/15 (a)		1,390	1,310,075
Greektown Holdings, LLC, 10.75%, 12/01/13
(a)(f)(g)		649	489,995
Harrah’s Operating Co., Inc., 10.75%, 2/01/18
(a)(b)		1,470	868,258
Seneca Gaming Corp. Series B, 7.25%, 5/01/12		630	562,275
Travelport LLC, 7.436%, 9/01/14 (c)		170	133,875
Tropicana Entertainment LLC, 9.625%, 12/15/14
(f)(g)		215	68,800
Virgin River Casino Corp., 9%, 1/15/12		585	410,963
Wynn Las Vegas LLC, 6.625%, 12/01/14		100	91,125
			6,313,947
Household
Durables—0.6%
Jarden Corp., 7.50%, 5/01/17		690	614,100
The Yankee Candle Co., Inc., 9.75%, 2/15/17		100	63,500
			677,600
IT Services—2.1%
First Data Corp., 9.875%, 9/24/15 (a)		575	495,937
iPayment, Inc., 9.75%, 5/15/14		335	280,562
iPayment Investors LP, 12.75%, 7/15/14 (a)(b)		1,507	1,496,148
SunGard Data Systems, Inc., 9.125%, 8/15/13		310	314,650
			2,587,297
Independent Power
Producers & Energy Traders—3.4%
AES Red Oak LLC Series B, 9.20%, 11/30/29		1,250	1,256,250
Energy Future Holding Corp., 11.25%, 11/01/17
(a)(b)		1,600	1,576,000
NRG Energy, Inc.:
7.25%, 2/01/14		100	98,625
7.375%, 2/01/16		570	562,875
Texas Competitive Electric Holdings Co. LLC (a):
10.50%, 11/01/16 (b)		430	410,650
Series B, 10.25%, 11/01/15		290	289,275
			4,193,675
Industrial
Conglomerates—1.8%
Sequa Corp.(a):
11.75%, 12/01/15		1,150	1,012,000
13.50%, 12/01/15 (b)		1,499	1,221,634
			2,233,634

Corporate Bonds		Par (000)	Value
Insurance—0.8%
Alliant
Holdings I, Inc., 11%, 5/01/15 (a)	USD	800	$ 712,000
USI
Holdings Corp., 6.679%, 11/15/14 (a)(c)		310	247,225
			959,225
Leisure Equipment &
Products—0.3%
Easton-Bell
Sports, Inc., 8.375%, 10/01/12		430	365,500
Machinery—2.6%
AGY Holding
Corp., 11%, 11/15/14		890	827,700
Accuride
Corp., 8.50%, 2/01/15		340	219,300
RBS Global,
Inc., 8.875%, 9/01/16		370	345,025
Sunstate
Equipment Co. LLC, 10.50%, 4/01/13 (a)		1,720	1,255,600
Terex
Corp.:
7.375%,
1/15/14		175	172,375
8%,
11/15/17		330	325,875
			3,145,875
Marine—0.2%
Navios
Maritime Holdings, Inc., 9.50%, 12/15/14		254	242,570
Media—13.6%
Affinion
Group, Inc., 10.125%, 10/15/13		1,045	1,029,325
CMP
Susquehanna Corp., 9.875%, 5/15/14		865	540,625
Cablevision
Systems Corp. Series B, 7.133%, 4/01/09 (c)		750	753,750
Charter
Communications Holdings I, LLC, 11%, 10/01/15		455	347,313
Charter
Communications Holdings II, LLC, 10.25%, 9/15/10		2,860	2,743,025
Charter
Communications Operating, LLC, 8.375%, 4/30/14 (a)		500	481,875
Dex Media
West LLC, 9.875%, 8/15/13		1,183	910,910
DirecTV
Holdings LLC:
8.375%,
3/15/13		300	310,500
7.625%,
5/15/16 (a)		640	638,400
EchoStar
DBS Corp.:
7%,
10/01/13		192	182,400
7.125%,
2/01/16		325	299,000
Harland
Clarke Holdings Corp.:
7.554%,
5/15/15 (c)		160	112,800
9.50%,
5/15/15		190	149,150
Network
Communications, Inc., 10.75%, 12/01/13		830	596,562
Nielsen
Finance LLC, 10%, 8/01/14		1,780	1,802,250
ProtoStar I
Ltd., 12.50%, 10/15/12 (a)(c)(d)		1,382	1,340,759
R.H.
Donnelley Corp., 11.75%, 5/15/15 (a)		870	639,450
Rainbow
National Services LLC, 10.375%, 9/01/14 (a)		1,653	1,758,379
Sinclair
Broadcast Group, Inc. Class A, 4.875%, 7/15/18 (e)		225	206,156
TL
Acquisitions, Inc., 10.50%, 1/15/15 (a)		1,570	1,342,350
Virgin
Media, Inc., 6.50%, 11/15/16 (a)(d)		195	178,913
Windstream
Regatta Holdings, Inc., 11%, 12/01/17 (a)		304	176,320
			16,540,212
Metals &
Mining—4.3%
AK Steel
Corp., 7.75%, 6/15/12		415	424,338
Aleris
International, Inc.:
9%,
12/15/14		200	156,000
10%,
12/15/16		680	474,300
FMG Finance
Property Ltd. (a):
10%,
9/01/13		240	256,800
10.625%,
9/01/16		735	823,200
Freeport-McMoRan
Copper & Gold, Inc.:
5.883%,
4/01/15 (c)		430	431,135
8.375%,
4/01/17		1,720	1,823,200
Ryerson,
Inc.(a):
10.176%,
11/01/14 (c)		180	171,900
12%,
11/01/15		125	122,500
Steel
Dynamics, Inc., 7.375%, 11/01/12		230	227,700
Vedanta
Resources Plc, 9.50%, 7/18/18 (a)		295	294,586
			5,205,659
Multiline
Retail—0.3%
Neiman
Marcus Group, Inc., 9%, 10/15/15 (b)		345	335,512

| See Notes
to Financial Statements. — ANNUAL REPORT | AUGUST
31, 2008 | 23 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock High Income Shares (HIS) (Percentages shown are based on Net Assets)

Corporate Bonds		Par (000)	Value
Oil, Gas & Consumable
Fuels—7.8%
Atlas
Energy Resources LLC, 10.75%, 2/01/18 (a)	USD	575	$ 577,875
Berry
Petroleum Co., 8.25%, 11/01/16		275	262,625
Chaparral
Energy, Inc., 8.50%, 12/01/15		100	87,000
Chesapeake
Energy Corp.:
6.375%,
6/15/15		350	325,500
6.625%,
1/15/16		235	220,312
7.25%,
12/15/18		650	633,750
2.25%,
12/15/38 (d)		375	351,563
Compton
Petroleum Finance Corp., 7.625%, 12/01/13		245	229,994
Connacher
Oil and Gas Ltd., 10.25%, 12/15/15 (a)		605	624,662
Corral
Finans AB, 7.713%, 4/15/10 (a)(b)		928	858,692
Denbury
Resources, Inc., 7.50%, 12/15/15		75	73,219
EXCO
Resources, Inc., 7.25%, 1/15/11		1,115	1,103,850
Encore
Acquisition Co., 6%, 7/15/15		130	113,425
Forest Oil
Corp., 7.25%, 6/15/19		1,035	952,200
OPTI
Canada, Inc., 8.25%, 12/15/14		980	978,775
Petrohawk
Energy Corp., 7.875%, 6/01/15 (a)		300	279,750
Sabine Pass
LNG LP, 7.50%, 11/30/16		210	183,750
SandRidge
Energy, Inc., 8%, 6/01/18 (a)		455	426,563
Whiting
Petroleum Corp.:
7.25%,
5/01/12		150	144,750
7.25%,
5/01/13		1,155	1,108,800
			9,537,055
Paper & Forest
Products—2.6%
Abitibi-Consolidated,
Inc., 8.85%, 8/01/30		80	29,600
Bowater,
Inc.:
9%, 8/01/09		270	251,100
5.776%,
3/15/10 (c)		350	287,000
Domtar Corp.:
7.875%,
10/15/11		100	102,750
7.125%,
8/15/15		160	154,400
NewPage
Corp.:
10%,
5/01/12		1,260	1,222,200
12%,
5/01/13		435	406,725
Norske Skog
Canada Ltd., 7.375%, 3/01/14		175	122,937
Verso Paper
Holdings LLC Series B:
6.551%,
8/01/14 (c)		130	115,700
9.125%,
8/01/14		465	437,100
			3,129,512
Pharmaceuticals—0.5%
Angiotech
Pharmaceuticals, Inc., 6.56%, 12/01/13 (c)		630	557,550
Professional
Services—0.2%
FTI
Consulting, Inc., 7.75%, 10/01/16		275	285,312
Real Estate Management &
Development—0.9%
Realogy
Corp.:
10.50%,
4/15/14		680	401,200
11%,
4/15/14 (b)		1,045	491,150
12.375%,
4/15/15		325	149,500
			1,041,850
Semiconductors & Semiconductor
Equipment—0.9%
Amkor
Technology, Inc.:
7.75%,
5/15/13		160	150,000
9.25%,
6/01/16		155	149,575
Freescale
Semiconductor, Inc.:
8.875%,
12/15/14		160	129,600
9.125%,
12/15/14 (b)		360	280,800
Spansion,
Inc., 5.935%, 6/01/13 (a)(c)		550	382,250
			1,092,225
Software—0.1%
BMS
Holdings, Inc., 10.595%, 2/15/12 (a)(b)(c)		198	118,705

Corporate Bonds		Par (000)	Value
Specialty
Retail—5.7%
Asbury
Automotive Group, Inc., 7.625%, 3/15/17	USD	240	$ 171,600
AutoNation,
Inc.:
4.791%,
4/15/13 (c)		360	297,000
7%, 4/15/14		360	311,400
General
Nutrition Centers, Inc.:
7.199%, 3/15/14
(b)(c)		800	658,791
10.75%,
3/15/15		990	858,825
Group 1
Automotive, Inc., 2.25%, 6/15/36 (e)		470	280,238
Lazy Days’
R.V. Center, Inc., 11.75%, 5/15/12		2,307	1,153,500
Michaels
Stores, Inc.:
10%,
11/01/14		680	510,000
11.375%,
11/01/16		490	313,600
Rent-A-Center,
Inc. Series B, 7.50%, 5/01/10		1,910	1,871,800
United Auto
Group, Inc., 7.75%, 12/15/16		710	575,988
			7,002,742
Textiles, Apparel & Luxury
Goods—0.2%
Quiksilver,
Inc., 6.875%, 4/15/15		350	280,875
Wireless Telecommunication
Services—8.0%
American
Tower Corp., 7.125%, 10/15/12		1,000	1,020,000
Centennial
Communications Corp.:
8.541%,
1/01/13 (c)		650	646,750
8.125%,
2/01/14		645	654,675
Cricket
Communications, Inc.:
10.875%,
11/01/14		540	535,275
10%,
7/15/15 (a)		40	40,200
Digicel
Group Ltd. (a):
8.875%,
1/15/15		590	553,892
9.125%,
1/15/15 (b)		1,320	1,192,950
FiberTower
Corp., 9%, 11/15/12 (d)		300	198,000
iPCS, Inc.,
4.926%, 5/01/13 (c)		280	248,500
MetroPCS
Wireless, Inc., 9.25%, 11/01/14		1,415	1,402,619
Nordic
Telephone Co. Holdings ApS, 8.875%, 5/01/16 (a)		1,980	1,905,750
Rural
Cellular Corp., 8.25%, 3/15/12		350	364,438
Sprint
Capital Corp., 7.625%, 1/30/11		1,025	1,025,000
			9,788,049
Total Corporate Bonds—103.2%			125,758,319
Floating Rate Loan Interests
Auto Components—0.6%
Dana Corp.
Term Advance, 6.75%, 1/31/15		724	665,302
Delphi
Automotive Systems:
Initial
Tranche C, 8.50%, 12/31/08		136	112,596
Subsequent
Tranche C Term Loan, 8.50%, 12/31/08		14	11,467
			789,365
Automobiles—0.5%
Ford Motor
Term Loan, 5.47%, 12/16/13		425	328,978
General
Motors Corp. Term Secured Loan, 5.163%, 11/29/13		374	276,154
			605,132
Building
Products—2.1%
Building
Material Corp. of America Term Loan Advance,
5.438% -
5.5625%, 2/24/14		249	213,943
CPG
International, I Inc. Term Loan B, 7.85%, 2/28/11		1,500	1,470,000
Stile
Acquisition (Masonite International):
Canadian
Term Loan, 4.63% - 5.046%, 4/06/13		498	424,086
U.S. Term
Loan, 4.63% - 5.046%, 4/06/13		500	426,070
			2,534,099
Chemicals—1.1%
PQ Corp.
Second Lien Loan, 9.30%, 7/30/15		1,500	1,297,500

| See Notes
to Financial Statements. — 24 | ANNUAL REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

Floating Rate Loan Interests	Par (000)		Value
Health Care Providers &
Services—1.2%
Community
Health Systems, Inc. Term Loan B, 5.06%, 6/18/14	USD	714	$ 674,347
Rotech
Healthcare, Inc. Term Loan, 9.676%, 9/26/11 (b)		808	764,352
			1,438,699
Hotels, Restaurants &
Leisure—0.9%
Travelport,
Inc. Term Loan, 9.793%, 3/27/12 (b)		1,834	1,127,704
Household Products—0.2%
Spectrum
Brands, Inc.:
Dollar Term
Loan B, 6.669% - 6.804%, 3/30/13		271	232,982
Letter of
Credit, 2.31375%, 3/30/13		13	11,765
			244,747
Independent Power Producers & Energy
Traders—1.6%
Calpine
Corp. First Priority Term Loan, 5.685%, 3/29/14		300	278,625
Texas
Competitive Electric Holdings Co., LLC (TXU):
Initial
Tranche Term Loan B-2, 5.963% - 6.303%, 10/10/14		249	231,821
Initial
Tranche Term Loan B-3, 5.963% - 6.303%, 10/10/14		1,489	1,384,538
			1,894,984
Machinery—0.8%
Navistar
International Transportation Corp.:
Revolving
Credit, 5.686%, 6/30/12		245	225,706
Term Loan,
6.292%, 6/30/12		680	626,450
Rexnord
Corp. Loan, 9.676%, 3/01/13 (b)		186	148,673
			1,000,829
Media—3.1%
Cengage
(Thomson Learning, Inc.) Tranche 1 Incremental Term Loan 2, 7.50%, 7/05/14		750	742,500
HMH
Publishing (Education Media):
Mezzanine
Term Loan, 5.50% - 6.46375%, 11/14/14		2,586	2,068,985
Tranche A
Term Loan B, 6.46375%, 11/14/14		1,098	985,890
			3,797,375
Oil, Gas & Consumable Fuels—0.8%
Turbo Beta
Limited Dollar Facility, 14.50%, 3/15/18 (h)		1,003	983,338
Paper & Forest Products—0.3%
Verso Paper
Holdings LLC:
Term Loan,
9.03313%, 2/01/13		421	394,800
Total Floating Rate Loan
Interests—13.2%			16,108,572

Common Stocks (g)
Containers & Packaging—0.2%
Owens-Illinois,
Inc.	4,745	211,627
Machinery—0.0%
Goss
Holdings Inc. Class B (h)	64,467	1
Wireless Telecommunication
Services—0.0%
Crown
Castle International Corp.	495	18,513
Total Common Stocks—0.2%		230,141

Preferred Securities	Par (000)		Value
Capital Trusts
Diversified Financial Services—1.1%
Citigroup,
Inc., 8.40% (c)(i)	USD	1,210	$ 1,027,314
JPMorgan
Chase & Co., 7.90% (c)(i)		350	317,975
Total Capital Trusts—1.1%			1,345,289

Preferred Stocks
Containers & Packaging—0.4%
Smurfit-Stone
Container Corp., 7% (b)(d)	30,000	525,000
Independent Power Producers & Energy
Traders—0.8%
NTG Energy,
Inc., 4%	500	954,375
Media—0.2%
Emmis
Communications Corp. Class A, 6.25% (d)	10,300	260,075
Wireless Telecommunication
Services—0.5%
Crown
Castle International Corp., 6.25% (d)	10,000	547,500
Total Preferred Stocks—1.9%		2,286,950
Total Preferred Securities—3.0%		3,632,239

Other Interests (j)	Beneficial Interest (000)
Health Care Providers &
Services—0.0%
Critical
Care Systems International, Inc. (h)	USD	5	1,591
Total Other Interests—0.0%			1,591
Total Long-Term Investments (Cost—$161,390,640)—119.6%			145,730,862

Short-Term Securities
U.S. Government & Agency
Obligations—1.3%
Federal Home Loan Bank, 2.60%, 9/02/08 (k)	1,600	1,600,000
Total Short-Term Securities (Cost—$1,600,000)—1.3%		1,600,000
Total Investments (Cost—$162,990,640*)—120.9%		147,330,862
Liabilities in Excess of Other
Assets—(20.9)%		(25,522,519	)
Net Assets—100.0%	$	121,808,343

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 25 |
| --- | --- | --- |

Schedule of Investments (concluded) BlackRock High Income Shares (HIS)

• The cost and unrealized appreciation (depreciation) of investments as of August 31, 2008, as computed for federal income tax purposes, were as follows:

Aggregate cost	$
Gross unrealized appreciation	$ 1,367,022
Gross unrealized depreciation	(17,397,751	)
Net unrealized depreciation	$ (16,030,729	)

| (a) | Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions exempt
from registration to qualified institutional investors. |
| --- | --- |
| (b) | Represents a payment-in-kind security which may pay
interest/dividends in additional par/shares. |
| (c) | Variable rate security. Rate shown is as of report date. |
| (d) | Convertible security. |
| (e) | Represents a step bond. Rate shown reflects the effective
yield at time of purchase. |
| (f) | Issuer filed for bankruptcy or is in default of interest
payments. |
| (g) | Non-income producing security. |
| (h) | Security is fair valued. |
| (i) | Security is perpetual in nature and has no stated maturity
date. |
| (j) | Other interests represent beneficial interest in
liquidation trusts and other reorganization entities and are non-income
producing. |
| (k) | Rate shown is yield to maturity as of the date of
purchase. |
| • | For Trust compliance purposes, the Trust’s industry
classifications refer to any one or more of the industry sub-classifications
used by one or more widely recognized market indexes or ratings group
indexes, and/or as defined by Trust management. This definition may not apply
for purposes of this report which may combine industry subclassifications for
reporting ease. These industry classifications are unaudited. |
| • | Foreign currency exchange contracts as of August 31, 2008
were as follows: |

Currency Purchased — USD 1,397,924	Currency Sold — EUR	948,000	Settlement Date — 10/23/08	$11,282

•
EUR	Euro
USD	U.S. Dollar

•
•	Level 1 - price quotations in active markets/exchanges for
identical securities
•	Level 2 - other observable inputs (including, but not
limited to: quoted prices for similar assets or liabilities in markets that
are not active, inputs other than quoted prices that are observable for the
assets or liabilities (such as interest rates, yield curves, volatilities,
prepayment speeds, loss severities, credit risks, and default rates) or other
market-corroborated inputs)
•	Level 3 - unobservable inputs based on the best
information available in the circumstance, to the extent observable inputs
are not available (including the Trust’s own assumption used in determining
the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For information about the Trust’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the inputs used as of August 31, 2008 in determining the fair valuation of the Trust’s investments:

| Valuation Inputs | Investments
in Securities | Other
Financial Instruments* |
| --- | --- | --- |
| Level 1 | $ 230,140 | $ — |
| Level 2 | 146,115,792 | 11,282 |
| Level 3 | 984,930 | — |
| Total | $ 147,330,862 | $ 11,282 |

• Other financial instruments are foreign currency exchange contracts.

The following is a reconciliation of investments for unobservable inputs (Level 3):

| | Investments
in Securities |
| --- | --- |
| Balance, as of December 31, 2007 | $ 1,592 |
| Accrued discounts/premiums | — |
| Realized gain (loss) | — |
| Change in unrealized appreciation (depreciation) | — |
| Net purchases (sales) | 983,338 |
| Net transfers in/out of Level 3 | — |
| Balance, as of August 31, 2008 | $ 984,930 |

| See Notes to Financial Statements. — 26 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments August 31, 2008
(Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)	Value
Aerospace & Defense—1.2%
CHC
Helicopter Corp., 7.375%, 5/01/14	$ 170	$ 176,800
DRS
Technologies, Inc.:
6.875%,
11/01/13	40	40,500
7.625%,
2/01/18	100	105,250
Hexcel
Corp., 6.75%, 2/01/15	80	77,600
L-3
Communications Corp., 5.875%, 1/15/15	20	18,850
TransDigm,
Inc., 7.75%, 7/15/14	100	97,250
		516,250
Air Freight & Logistics—0.2%
Park-Ohio
Industries, Inc., 8.375%, 11/15/14	85	70,125
Airlines—0.2%
American
Airlines, Inc. Series 99-1, 7.324%, 4/15/11	95	86,450
Auto Components—2.7%
Allison
Transmission, Inc. (a):
11%,
11/01/15	95	87,400
11.25%,
11/01/15 (b)	235	206,800
The
Goodyear Tire & Rubber Co.:
7.857%,
8/15/11	135	135,675
8.625%,
12/01/11	236	243,080
Lear Corp.,
8.75%, 12/01/16	135	101,587
Metaldyne
Corp., 10%, 11/01/13	255	68,850
Stanadyne
Corp. Series 1, 10%, 8/15/14	350	329,000
		1,172,392
Automobiles—1.1%
Ford
Capital BV, 9.50%, 6/01/10	520	432,900
Ford Motor
Co., 8.90%, 1/15/32	125	66,250
		499,150
Building Products—1.2%
CPG
International I, Inc., 10.50%, 7/01/13	150	115,500
Momentive
Performance Materials, Inc., 11.50%, 12/01/16	285	222,300
Ply Gem
Industries, Inc., 11.75%, 6/15/13 (a)	220	200,200
		538,000
Capital Markets—0.5%
Marsico
Parent Co., LLC, 10.625%, 1/15/16 (a)	174	146,160
Marsico
Parent Holdco, LLC, 12.50%, 7/15/16 (a)(b)	64	53,512
Marsico
Parent Superholdco, LLC, 14.50%, 1/15/18 (a)(b)	43	36,080
		235,752
Chemicals—3.3%
American
Pacific Corp., 9%, 2/01/15	140	135,800
Ames True
Temper, Inc., 6.791%, 1/15/12 (c)	265	212,000
Hexion U.S.
Finance Corp.:
7.304%,
11/15/14 (c)	100	76,250
9.75%,
11/15/14	75	62,437
Huntsman
LLC, 11.50%, 7/15/12	95	99,275
Innophos,
Inc., 8.875%, 8/15/14	545	558,625
Key
Plastics LLC, 11.75%, 3/15/13 (a)	70	24,500
MacDermid,
Inc., 9.50%, 4/15/17 (a)	265	242,475
Terra
Capital, Inc. Series B, 7%, 2/01/17	40	38,900
		1,450,262
Commercial Services &
Supplies—2.8%
ARAMARK
Corp., 8.50%, 2/01/15	55	55,412
DI Finance
Series B, 9.50%, 2/15/13	201	199,492
Sally Holdings
LLC:
9.25%,
11/15/14	35	35,394
10.50%,
11/15/16	179	179,895
US
Investigations Services, Inc., 10.50%, 11/01/15 (a)	100	89,000
Waste
Services, Inc., 9.50%, 4/15/14	185	186,850
West Corp.:
9.50%,
10/15/14	125	106,563
11%,
10/15/16	475	371,688
		1,224,294

Corporate Bonds
Communications Equipment—0.3%
Nortel Networks Ltd., 7.041%, 7/15/11 (c)	$ 145	$ 134,487
Construction Materials—1.1%
Nortek Holdings, Inc., 10%, 12/01/13 (a)	530	495,550
Containers & Packaging—2.6%
Berry Plastics Holding Corp., 6.651%, 9/15/14 (c)	75	56,250
Cascades, Inc., 7.25%, 2/15/13	175	147,875
Crown Americas LLC, 7.75%, 11/15/15	85	87,125
Graphic Packaging International Corp., 9.50%, 8/15/13	30	28,200
Impress Holdings BV, 5.916%, 9/15/13 (a)(c)	270	243,000
Pregis Corp., 12.375%, 10/15/13	310	296,050
Smurfit-Stone Container Enterprises, Inc., 8%, 3/15/17	375	300,000
		1,158,500
Diversified Financial Services—3.5%
CDX North America High Yield Series 6-T1, 8.625%, 6/29/11	490	494,596
Ford Motor Credit Co. LLC:
5.538%,
1/13/12 (c)	110	81,213
7.80%,
6/01/12	500	371,332
GMAC LLC:
5.011%,
12/01/14 (c)	225	118,158
6.75%,
12/01/14	230	124,882
8%,
11/01/31	240	129,444
Leucadia National Corp., 8.125%, 9/15/15	200	201,250
		1,520,875
Diversified Telecommunication
Services—5.3%
Asia Global Crossing Ltd., 13.375%, 10/15/10 (d)(e)	2,000	90,000
Broadview Networks Holdings, Inc., 11.375%, 9/01/12	180	154,800
Cincinnati Bell, Inc., 7.25%, 7/15/13	405	389,306
Qwest Communications International, Inc., 7.50%, 2/15/14	875	796,250
Qwest Corp., 6.026%, 6/15/13 (c)	230	212,750
Wind Acquisition Finance SA, 10.75%, 12/01/15 (a)	375	384,375
Windstream Corp.:
8.125%,
8/01/13	200	198,000
8.625%,
8/01/16	120	118,800
		2,344,281
Electric Utilities—1.7%
Elwood Energy LLC, 8.159%, 7/05/26	449	423,908
Homer City Funding LLC Series B, 8.734%, 10/01/26	97	104,838
NSG Holdings LLC, 7.75%, 12/15/25 (a)	170	163,200
Sithe/Independence Funding Corp. Series A, 9%, 12/30/13	36	37,903
		729,849
Electrical Equipment—1.1%
Coleman Cable, Inc., 9.875%, 10/01/12	155	144,150
Superior Essex Communications LLC, 9%, 4/15/12	305	318,725
		462,875
Electronic Equipment &
Instruments—0.8%
NXP BV, 5.541%, 10/15/13 (c)	125	97,187
Sanmina-SCI Corp., 8.125%, 3/01/16	255	230,137
		327,324
Energy Equipment & Services—1.2%
Compagnie Generale de Geophysique-Veritas:
7.50%,
5/15/15	50	49,750
7.75%,
5/15/17	80	79,600
Grant Prideco, Inc. Series B, 6.125%, 8/15/15	50	48,597
Hornbeck Offshore Services, Inc. Series B, 6.125%,
12/01/14	5	4,650
North American Energy Partners, Inc., 8.75%, 12/01/11	335	333,325
		515,922
Food & Staples Retailing—1.0%
The Pantry, Inc., 7.75%, 2/15/14	265	221,275
Rite Aid Corp., 7.50%, 3/01/17	250	207,500
		428,775

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 27 |
| --- | --- | --- |

Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)	Value
Gas Utilities—0.4%
Targa
Resources, Inc., 8.50%, 11/01/13	$ 200	$ 190,000
Health Care Equipment &
Supplies—3.0%
Biomet,
Inc.:
10%,
10/15/17	75	81,000
10.375%,
10/15/17 (b)	120	126,600
11.625%,
10/15/17	100	105,125
Catalent
Pharma Solutions, Inc., 9.50%, 4/15/15 (b)	150	125,250
DJO Finance
LLC, 10.875%, 11/15/14	760	761,900
Hologic,
Inc., 2%, 12/15/37 (f)(g)	145	118,356
		1,318,231
Health Care Providers &
Services—2.0%
Community
Health Systems, Inc., 8.875%, 7/15/15	40	40,400
Tenet
Healthcare Corp.:
6.375%,
12/01/11	45	43,425
6.50%,
6/01/12	615	595,012
United
Surgical Partners International, Inc., 8.875%, 5/01/17	119	102,340
Viant
Holdings, Inc., 10.125%, 7/15/17 (a)	115	97,175
		878,352
Hotels, Restaurants &
Leisure—5.7%
American
Real Estate Partners LP:
8.125%,
6/01/12	185	161,644
7.125%,
2/15/13	300	279,375
Gaylord
Entertainment Co.:
8%, 11/15/13	40	36,700
6.75%,
11/15/14	280	244,300
Great
Canadian Gaming Corp., 7.25%, 2/15/15 (a)	320	301,600
Greektown
Holdings, LLC, 10.75%, 12/01/13 (a)(d)(e)	174	131,370
Harrah’s
Operating Co., Inc. (a):
10.75%,
2/01/16	525	353,063
10.75%,
2/01/18 (b)	702	414,638
Seneca
Gaming Corp. Series B, 7.25%, 5/01/12	140	124,950
Shingle
Springs Tribal Gaming Authority, 9.375%, 6/15/15 (a)	40	32,500
Travelport
LLC, 7.436%, 9/01/14 (c)	60	47,250
Tropicana
Entertainment LLC, 9.625%, 12/15/14 (d)(e)	25	8,000
Virgin
River Casino Corp., 9%, 1/15/12	445	312,613
Wynn Las
Vegas LLC, 6.625%, 12/01/14	70	63,788
		2,511,791
Household Durables—0.3%
Jarden
Corp., 7.50%, 5/01/17	150	133,500
The Yankee
Candle Co., Inc., 9.75%, 2/15/17	30	19,050
		152,550
IT Services—1.9%
First Data
Corp., 9.875%, 9/24/15 (a)	195	168,188
iPayment,
Inc., 9.75%, 5/15/14	120	100,500
iPayment
Investors LP, 12.75%, 7/15/14 (a)(b)	500	494,450
SunGard
Data Systems, Inc., 9.125%, 8/15/13	85	86,275
		849,413
Independent Power Producers & Energy
Traders—4.4%
AES Red Oak
LLC:
Series A,
8.54%, 11/30/19	127	129,476
Series B,
9.20%, 11/30/29	500	502,500
Energy
Future Holding Corp., 11.25%, 11/01/17 (a)(b)	575	566,375
NRG Energy,
Inc.:
7.25%,
2/01/14	130	128,212
7.375%,
2/01/16	385	380,188
Texas
Competitive Electric Holdings Co. LLC (a):
10.50%,
11/01/16 (b)	160	152,800
Series B,
10.25%, 11/01/15	70	69,825
		1,929,376

Corporate Bonds	Par (000)	Value
Industrial Conglomerates—1.7%
Sequa Corp.
(a):
11.75%, 12/01/15	$ 380	$ 334,400
13.50%,
12/01/15 (b)	496	404,403
		738,803
Insurance—0.8%
Alliant
Holdings I, Inc., 11%, 5/01/15 (a)	300	267,000
USI
Holdings Corp., 6.679%, 11/15/14 (a)(c)	100	79,750
		346,750
Leisure Equipment &
Products—0.2%
Easton-Bell
Sports, Inc., 8.375%, 10/01/12	115	97,750
Machinery—2.0%
AGY Holding
Corp., 11%, 11/15/14	200	186,000
Accuride
Corp., 8.50%, 2/01/15	85	54,825
RBS Global,
Inc., 8.875%, 9/01/16	85	79,262
Sunstate
Equipment Co. LLC, 10.50%, 4/01/13 (a)	510	372,300
Terex
Corp.:
7.375%,
1/15/14	55	54,175
8%,
11/15/17	135	133,312
		879,874
Marine—0.2%
Navios
Maritime Holdings, Inc., 9.50%, 12/15/14	106	101,230
Media—12.3%
Affinion
Group, Inc., 10.125%, 10/15/13	390	384,150
CMP
Susquehanna Corp., 9.875%, 5/15/14	290	181,250
CSC
Holdings, Inc. Series B, 7.625%, 4/01/11	45	45,225
Cablevision
Systems Corp. Series B, 7.133%, 4/01/09 (c)	175	175,875
Charter
Communications Holdings I, LLC, 11%, 10/01/15	190	145,301
Charter
Communications Holdings II, LLC, 10.25%, 9/15/10	850	815,625
Dex Media
West LLC, 9.875%, 8/15/13	40	30,800
DirecTV
Holdings LLC:
8.375%,
3/15/13	125	129,375
7.625%,
5/15/16 (a)	240	239,400
EchoStar
DBS Corp.:
7%,
10/01/13	40	38,000
7.125%,
2/01/16	260	239,200
Harland
Clarke Holdings Corp.:
7.554%,
5/15/15 (c)	50	35,250
9.50%,
5/15/15	60	47,100
Intelsat
Corp., 6.875%, 1/15/28	210	161,700
Network
Communications, Inc., 10.75%, 12/01/13	245	176,094
Nielsen
Finance LLC, 10%, 8/01/14	560	567,000
ProtoStar I
Ltd., 12.50%, 10/15/12 (a)(c)(f)	401	388,922
R.H.
Donnelley Corp., 11.75%, 5/15/15 (a)	404	296,940
Rainbow
National Services LLC (a):
8.75%,
9/01/12	310	316,200
10.375%,
9/01/14	318	338,273
TL
Acquisitions, Inc., 10.50%, 1/15/15 (a)	590	504,450
Virgin
Media, Inc., 6.50%, 11/15/16 (a)(f)	75	68,813
Windstream
Regatta Holdings, Inc., 11%, 12/01/17 (a)	150	87,000
		5,411,943
Metals & Mining—3.6%
AK Steel
Corp., 7.75%, 6/15/12	85	86,912
Aleris
International, Inc.:
9%,
12/15/14 (b)	120	93,600
10%,
12/15/16	125	87,187
FMG Finance
Property Ltd.(a):
10%,
9/01/13	85	90,950
10.625%,
9/01/16	205	229,600
Freeport-McMoRan
Copper & Gold, Inc.:
5.883%,
4/01/15 (c)	240	240,634
8.375%,
4/01/17	415	439,900

| See Notes to Financial Statements. — 28 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock High Yield Trust (BHY) (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)	Value
Metals & Mining
(concluded)
Ryerson,
Inc. (a):
10.176%,
11/01/14 (c)	$ 60	$ 57,300
12%,
11/01/15	85	83,300
Steel
Dynamics, Inc., 7.375%, 11/01/12	80	79,200
Vedanta
Resources Plc, 9.50%, 7/18/18 (a)	105	104,853
		1,593,436
Multiline
Retail—0.3%
Neiman
Marcus Group, Inc., 9%, 10/15/15 (b)	115	111,837
Oil, Gas & Consumable
Fuels—10.8%
Atlas
Energy Resources LLC, 10.75%, 2/01/18 (a)	210	211,050
Berry
Petroleum Co., 8.25%, 11/01/16	80	76,400
Chaparral
Energy, Inc., 8.50%, 12/01/15	100	87,000
Chesapeake
Energy Corp.:
6.375%,
6/15/15	90	83,700
6.625%,
1/15/16	250	234,375
7.25%,
12/15/18	125	121,875
2.25%,
12/15/38 (f)	125	117,188
Compton
Petroleum Finance Corp., 7.625%, 12/01/13	100	93,875
Connacher
Oil and Gas Ltd., 10.25%, 12/15/15 (a)	200	206,500
Corral
Finans AB, 7.713%, 4/15/10 (a)(b)	338	312,250
Denbury
Resources, Inc., 7.50%, 12/15/15	30	29,287
EXCO
Resources, Inc., 7.25%, 1/15/11	370	366,300
Encore Acquisition
Co., 6%, 7/15/15	40	34,900
Forest Oil
Corp.:
7.25%,
6/15/19	190	174,800
7.25%,
6/15/19 (a)	175	161,000
Frontier
Oil Corp., 6.625%, 10/01/11	65	63,212
Newfield
Exploration Co., 6.625%, 9/01/14	30	28,238
OPTI Canada,
Inc., 8.25%, 12/15/14	440	439,450
Overseas
Shipholding Group, Inc., 7.50%, 2/15/24	350	319,375
Petrohawk
Energy Corp., 7.875%, 6/01/15 (a)	50	46,625
Range
Resources Corp., 7.375%, 7/15/13	185	183,150
Sabine Pass
LNG LP, 7.50%, 11/30/16	130	113,750
SandRidge
Energy, Inc., 8%, 6/01/18 (a)	165	154,688
Tennessee
Gas Pipeline Co., 8.375%, 6/15/32	160	176,960
Transcontinental
Gas Pipe Line Corp. Series B, 8.875%, 7/15/12	400	443,852
Whiting
Petroleum Corp.:
7.25%,
5/01/12	125	120,625
7.25%,
5/01/13	370	355,200
		4,755,625
Paper & Forest
Products—2.6%
Abitibi-Consolidated,
Inc., 8.85%, 8/01/30	35	12,950
Ainsworth
Lumber Co. Ltd., 11%, 7/29/15 (a)	18	14,782
Bowater,
Inc.:
9%, 8/01/09	60	55,800
5.776%,
3/15/10 (c)	130	106,600
Domtar
Corp., 7.125%, 8/15/15	40	38,600
NewPage
Corp.:
10%,
5/01/12	520	504,400
12%,
5/01/13	160	149,600
Norske Skog
Canada Ltd., 7.375%, 3/01/14	120	84,300
Verso Paper
Holdings LLC Series B:
6.551%,
8/01/14 (c)	40	35,600
9.125%,
8/01/14	165	155,100
		1,157,732
Pharmaceuticals—0.5%
Angiotech
Pharmaceuticals, Inc., 6.56%, 12/01/13 (c)	230	203,550
Professional
Services—0.2%
FTI
Consulting, Inc., 7.75%, 10/01/16	100	103,750

Corporate Bonds	Par (000)	Value
Real Estate Management &
Development—0.7%
Realogy
Corp.:
10.50%,
4/15/14	$ 200	$ 118,000
11%,
4/15/14 (b)	255	119,850
12.375%,
4/15/15	105	48,300
		286,150
Semiconductors & Semiconductor
Equipment—1.3%
Amkor Technology,
Inc.:
7.75%,
5/15/13	40	37,500
9.25%,
6/01/16	125	120,625
Freescale
Semiconductor, Inc.:
8.875%,
12/15/14	100	81,000
9.125%,
12/15/14 (b)	235	183,300
Spansion,
Inc., 5.935%, 6/01/13 (a)(c)	190	132,050
		554,475
Software—0.1%
BMS
Holdings, Inc., 10.595%, 2/15/12 (a)(b)(c)	72	43,121
Specialty
Retail—3.4%
Asbury
Automotive Group, Inc., 7.625%, 3/15/17	60	42,900
AutoNation,
Inc.:
4.791%,
4/15/13 (c)	80	66,000
7%, 4/15/14	90	77,850
General
Nutrition Centers, Inc.:
7.199%,
3/15/14 (b)(c)	250	203,852
10.75%,
3/15/15	280	243,600
Group 1
Automotive, Inc., 2.25%, 6/15/36 (g)	25	14,906
Lazy Days’
R.V. Center, Inc., 11.75%, 5/15/12	475	237,500
Michaels
Stores, Inc.:
10%,
11/01/14	150	112,500
11.375%,
11/01/16	130	83,200
Rent-A-Center,
Inc. Series B, 7.50%, 5/01/10	250	245,000
United Auto
Group, Inc., 7.75%, 12/15/16	180	146,025
		1,473,333
Textiles, Apparel & Luxury
Goods—0.2%
Quiksilver,
Inc., 6.875%, 4/15/15	100	80,250
Thrifts & Mortgage
Finance—0.0%
Residential
Capital LLC, 8.50%, 5/15/10 (a)	7	4,830
Trading Companies &
Distributors—0.3%
Russel
Metals, Inc., 6.375%, 3/01/14	125	117,500
Wireless Telecommunication
Services—6.1%
Centennial
Communications Corp.:
8.541%,
1/01/13 (c)	220	218,900
8.125%,
2/01/14	455	461,825
Cricket
Communications, Inc.:
9.375%,
11/01/14	40	39,650
10.875%,
11/01/14	180	178,425
10%,
7/15/15 (a)	10	10,050
Digicel
Group Ltd.(a):
8.875%,
1/15/15	130	122,044
9.125%,
1/15/15 (b)	294	265,702
iPCS, Inc.,
4.926%, 5/01/13 (c)	90	79,875
MetroPCS
Wireless, Inc., 9.25%, 11/01/14	515	510,494
Nordic
Telephone Co. Holdings ApS, 8.875%, 5/01/16 (a)	445	428,312
Sprint
Capital Corp., 7.625%, 1/30/11	355	355,000
		2,670,277
Total Corporate Bonds—96.8%		42,473,042

| See Notes
to Financial Statements. — ANNUAL REPORT | AUGUST
31, 2008 | 29 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock High Yield Trust (BHY) (Percentages shown are based on Net Assets)

Floating Rate Loan Interests	Par (000)	Value
Auto Components—0.8%
Dana Corp.
Term Advance, 6.75%, 1/31/15	$ 325	$ 298,269
Delphi
Automotive Systems Initial Tranche C Loan, 8.50%, 12/31/08	50	41,354
		339,623
Automobiles—0.4%
Ford Motor
Term Loan, 5.47%, 12/16/13	150	116,098
General
Motors Corp. Secured Term Loan, 5.163%, 11/29/13	100	73,641
		189,739
Building
Products—1.1%
Building
Material Corp. of America Term Loan Advance, 5.438% - 5.5625%, 2/24/14	150	128,366
Stile
Acquisition (Masonite International):
Canadian
Term Loan, 4.63% - 5.046%, 4/06/13	198	168,851
U.S. Term
Loan, 4.63% - 5.046%, 4/06/13	200	170,149
		467,366
Chemicals—1.0%
PQ Corp.
Second Lien Loan, 9.30%, 7/30/15	500	432,500
Health Care Providers &
Services—1.2%
Community
Health Systems, Inc. Term Loan B, 4.228%, 7/15/14	285	269,739
Rotech
Healthcare, Inc. Term Loan, 9.135%, 9/26/11 (b)	288	242,330
		512,069
Hotels, Restaurants &
Leisure—0.6%
Travelport,
Inc. Term Loan, 9.793%, 3/27/12 (b)	446	274,351
Household
Products—0.2%
Spectrum
Brands, Inc.:
Dollar Term
Loan B, 6.669% - 6.804%, 3/30/13	80	68,524
Letter of
Credit, 2.31375%, 3/30/13	4	3,460
		71,984
Independent Power Producers &
Energy Traders—1.8%
Calpine
Corp. First Priority Term Loan, 5.685%, 3/29/14	100	92,875
Texas
Competitive Electric Holdings Co., LLC (TXU) Term Loan:
Initial
Tranche Term Loan B-2, 5.963% - 6.303%, 10/10/14	248	231,239
Initial
Tranche Term Loan B-3, 5.963% - 6.303%, 10/10/14	496	461,513
		785,627
Machinery—0.8%
Navistar
International Transportation Corp.:
Revolving
Credit, 5.686%, 6/30/12	90	82,913
Term Loan,
6.292%, 6/30/12	245	225,706
Rexnord
Corp. Loan, 9.676%, 3/01/13 (b)	58	46,460
		355,079
Media—3.9%
Affinion
Group, Inc. Loan, 9.3675%, 3/01/12	325	272,594
Cengage
(Thomson Learning, Inc.) Tranche 1 Incremental Term Loan 2, 7.50%, 7/05/14	250	247,500
HMH
Publishing (Education Media):
Mezzanine
Term Loan, 6.46375%, 11/14/14	1,034	827,594
Tranche A
Term Loan, 6.46375%, 11/14/14	439	394,356
		1,742,044
Paper & Forest
Products—0.4%
Verso Paper
Holdings LLC Term Loan, 9.033%, 2/01/13	179	168,000
Total Floating Rate Loan
Interests—12.2%		5,338,382
Common Stocks	Shares
Paper & Forest
Products—0.0%
Ainsworth
Lumber Co. Ltd.	2,234	6,418
Ainsworth
Lumber Co. Ltd. (a)	2,507	7,215
		13,633

Common Stocks	Shares	Value
Specialty
Retail—0.0%
Mattress Discounters Corp. (d)(h)	14,992	$ —
Total
Common Stocks—0.0%		13,633
Preferred Securities	Par (000)
Capital Trusts
Diversified
Financial Services—1.1%
Citigroup, Inc., 8.40% (c)(i)	$ 420	356,588
JPMorgan Chase & Co., 7.90% (c)(i)	130	118,105
Total Capital Trusts—1.1%		474,693
Preferred Stocks	Shares
Capital
Markets—0.0%
Marsico Parent Superholdco, LLC, 16.75% (a)	12	10,260
Total Preferred Stocks—0.0%		10,260
Total Preferred Securities—1.1%		484,953
Warrants (j)
Communications
Equipment—0.0%
PF Net Communications, Inc. (expires 5/15/10) (a)	600	—
Diversified
Telecommunication Services—0.0%
NEON Communications, Inc. (expires 12/02/12) (h)	53,622	1
Total Warrants—0.0%		1
Other Interests (k)	Beneficial Interest (000)
Health
Care Providers & Services—0.0%
Critical Care Systems International, Inc. (h)	$ 5	1,592
Total Other Interests—0.0%		1,592
Total Long Term Investments (Cost—$56,353,746)—110.1%		48,311,603
Short-Term Securities	Par (000)
U.S.
Government & Agency Obligations—3.4%
Federal Home Loan Bank, 2.60%, 9/02/08 (l)	1,500	1,500,000
Total Short-Term Securities (Cost—$1,500,000)—3.4%		1,500,000
Options Purchased	Contracts
Call Options Purchased
Marsico
Parent Superholdco LLC, expiring December 2019 at $942.86	3	5,070
Total Options Purchased (Cost—$2,933)—0.0%		5,070
Total Investments
(Cost—$57,856,679*)—113.5%		49,816,673
Liabilities in Excess of Other
Assets—(13.5)%		(5,919,892	)
Net Assets—100.0%		$ 43,896,781

| See Notes
to Financial Statements. — 30 | ANNUAL REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (concluded) BlackRock High Yield Trust (BHY)

• The cost and unrealized appreciation (depreciation) of investments, as of August 31, 2008, as computed for federal income tax purposes, were as follows:

Aggregate cost	$
Gross unrealized appreciation	$ 216,977
Gross unrealized depreciation	(8,287,269	)
Net unrealized depreciation	$ (8,070,292	)

| (a) | Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions exempt
from registration to qualified institutional investors. |
| --- | --- |
| (b) | Represents a payment-in-kind security which may pay
interest/dividends in additional par/shares. |
| (c) | Variable rate security. Rate shown is as of report date. |
| (d) | Non-income producing security. |
| (e) | Issuer filed for bankruptcy or is in default of interest
payments. |
| (f) | Convertible security. |
| (g) | Represents a step bond. Rate shown reflects the effective
yield at time of purchase. |
| (h) | Security is fair valued. |
| (i) | Security is perpetual in nature and has no stated maturity
date. |
| (j) | Warrants entitle the Trust 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. |
| (k) | Other interests represent beneficial interest in
liquidation trusts and other reorganization entities and are non-income
producing. |
| (l) | Rate shown is the yield to maturity as of the date of
purchase. |

• For Trust compliance purposes, the Trust’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Trust management. This definition may not apply for purposes of this report, which may combine industry subclassifications for reporting ease. These industry classifications are unaudited.

• Swaps outstanding as of August 31, 2008 were as follows:

Sold credit default protection on Cooper Tire & Rubber Co. and received 7.70% Broker, Lehman Brothers Special Financing Expires, September 2013	$ 200	$ 61

| See Notes
to Financial Statements. — ANNUAL REPORT | AUGUST
31, 2008 | 31 |
| --- | --- | --- |

| Schedule of
Investments August 31, 2008 |
| --- |
| (Percentages shown
are based on Net Assets) |

Corporate Bonds	Par (000)	Value
Aerospace &
Defense—0.8%
CHC
Helicopter Corp., 7.375%, 5/01/14	$ 450	$ 468,000
DRS
Technologies, Inc.:
6.875%,
11/01/13	80	81,000
7.625%,
2/01/18	80	84,200
Hexcel
Corp., 6.75%, 2/01/15	150	145,500
Honeywell
International, Inc., 5.70%, 3/15/37	915	851,808
TransDigm,
Inc., 7.75%, 7/15/14	140	136,150
United
Technologies Corp., 4.875%, 5/01/15 (a)	1,250	1,255,170
		3,021,828
Air Freight &
Logistics—0.5%
Park-Ohio
Industries, Inc., 8.375%, 11/15/14	165	136,125
United
Parcel Service, Inc., 6.20%, 1/15/38 (a)	1,710	1,721,395
		1,857,520
Airlines—0.0%
American
Airlines, Inc. Series 99-1, 7.324%, 4/15/11	120	109,200
Auto Components—0.1%
Lear Corp.,
8.75%, 12/01/16	270	203,175
Metaldyne
Corp., 10%, 11/01/13	295	79,650
		282,825
Biotechnology—0.4%
Amgen, Inc.
Series WI, 2.889%, 11/28/08 (a)(b)	1,325	1,322,792
Building
Products—0.1%
CPG
International I, Inc., 10.50%, 7/01/13	230	177,100
Momentive
Performance Materials, Inc., 11.50%, 12/01/16	440	343,200
		520,300
Capital Markets—3.4%
Credit
Suisse (USA) Inc.:
6.125%,
11/15/11 (c)	700	721,003
7.125%,
7/15/32	1,000	1,056,473
The Goldman
Sachs Group, Inc.:
6.60%,
1/15/12	1,000	1,034,832
6.75%,
10/01/37	850	747,875
Lehman
Brothers Holdings, Inc.:
5.625%,
1/24/13	1,415	1,321,318
4.80%,
3/13/14	100	86,665
6.50%,
7/19/17	225	199,173
4.476%,
9/15/22 (b)	575	532,155
Series MTN,
7%, 9/27/27	550	490,430
Morgan
Stanley:
3.041%,
1/09/12 (b)	960	869,419
6.25%,
8/28/17	1,200	1,092,232
6.25%,
8/09/26 (a)	2,100	1,795,970
UBS AG
Series DPNT, 5.875%, 12/20/17	1,925	1,876,613
		11,824,158
Chemicals—0.6%
American
Pacific Corp., 9%, 2/01/15	280	271,600
Ames True
Temper, Inc., 6.791%, 1/15/12 (b)	720	576,000
Huntsman
LLC, 11.50%, 7/15/12	72	75,240
Innophos,
Inc., 8.875%, 8/15/14	975	999,375
Key
Plastics LLC, 11.75%, 3/15/13 (e)	565	197,750
		2,119,965
Commercial
Banks—2.8%
DEPFA ACS
Bank, 5.125%, 3/16/37 (e)	4,150	3,939,699
HSBC
Finance Corp., 6.50%, 5/02/36	1,275	1,176,969
Wachovia
Bank NA, 6.60%, 1/15/38 (a)	2,125	1,664,829
Wells Fargo
& Co., 4.625%, 8/09/10	1,000	1,012,446
Wells Fargo
Bank NA, 7.55%, 6/21/10 (a)	2,000	2,104,410
		9,898,353
Corporate Bonds	Par (000)	Value
Commercial Services &
Supplies—1.3%
Casella
Waste Systems, Inc., 9.75%, 2/01/13	$ 2,250	$ 2,227,500
DI Finance
Series B, 9.50%, 2/15/13	679	673,908
Sally
Holdings LLC, 10.50%, 11/15/16 (e)	136	136,680
Waste
Services, Inc., 9.50%, 4/15/14	600	606,000
West Corp.,
11%, 10/15/16	1,210	946,825
		4,590,913
Communications
Equipment—0.2%
Nortel
Networks Ltd., 7.041%, 7/15/11 (b)	855	793,012
Computers &
Peripherals—1.0%
International
Business Machines Corp., 5.70%, 9/14/17 (a)	3,450	3,518,182
Consumer
Finance—0.1%
SLM Corp.
Series A, 3.10%, 1/27/14 (b)	600	475,776
Containers &
Packaging—0.3%
Berry
Plastics Holding Corp., 8.875%, 9/15/14	115	95,450
Crown
Americas LLC, 7.75%, 11/15/15	150	153,750
Impress
Holdings BV, 5.916%, 9/15/13 (b)(e)	330	297,000
Pregis
Corp., 12.375%, 10/15/13	535	510,925
		1,057,125
Diversified Financial
Services—6.7%
Bank of
America Corp:
7.80%,
2/15/10 (a)	2,450	2,553,250
6%, 9/01/17	1,795	1,708,693
5.75%,
12/01/17	980	914,205
Bank of
America NA:
5.30%,
3/15/17	600	544,465
6.10%,
6/15/17	1,975	1,894,600
Citigroup,
Inc.:
4.125%,
2/22/10 (a)(c)	5,230	5,180,901
6.875%,
2/15/98	550	475,664
Ford Motor
Credit Co. LLC:
5.538%,
1/13/12 (b)	120	88,597
7.80%,
6/01/12	380	282,213
General
Electric Capital Corp. (a):
6.75%,
3/15/32	3,000	3,031,767
6.15%,
8/07/37	7,610	7,216,829
		23,891,184
Diversified Telecommunication
Services—4.8%
AT&T,
Inc., 6.50%, 9/01/37 (a)	4,075	3,922,049
Bellsouth
Telecommunications, Inc., 6.207%, 12/15/95 (f)	1,700	844,274
Cincinnati
Bell, Inc., 7.25%, 7/15/13	470	451,787
Deutsche
Telekom International Finance BV, 5.75%, 3/23/16	325	312,226
Qwest
Communications International, Inc., 7.50%, 2/15/14	55	50,050
Qwest
Corp., 6.026%, 6/15/13 (b)	375	346,875
Telecom
Italia Capital SA, 4.95%, 9/30/14 (a)	4,375	3,964,603
Telefonica
Emisiones SAU, 7.045%, 6/20/36	1,000	1,015,441
Verizon
Communications, Inc., 6.40%, 2/15/38 (a)	2,100	1,953,953
Verizon
Global Funding Corp., 7.75%, 6/15/32	575	609,433
Verizon
Maryland, Inc.:
Series A,
6.125%, 3/01/12 (c)	1,355	1,385,788
Series B,
5.125%, 6/15/33	540	418,043
Verizon
Virginia, Inc. Series A, 4.625%, 3/15/13	750	721,891
Wind
Acquisition Finance SA, 10.75%, 12/01/15 (e)	360	369,000
Windstream
Corp.:
8.125%,
8/01/13	410	405,900
8.625%,
8/01/16	250	247,500
		17,018,813

See Notes to Financial Statements.

32 ANNUAL REPORT AUGUST 31, 2008

Schedule of Investments (continued) BlackRock Income Opportunity Trust, Inc. (BNA) (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)	Value
Electric
Utilities—3.8%
Duke Energy
Carolinas LLC:
6.10%,
6/01/37	$ 325	$ 309,437
6%, 1/15/38	850	822,833
E.ON
International Finance BV, 6.65%, 4/30/38 (e)	1,575	1,597,797
EDP Finance
BV, 6%, 2/02/18 (e)	1,250	1,239,834
Edison
Mission Energy, 7.50%, 6/15/13	130	130,325
Elwood
Energy LLC, 8.159%, 7/05/26	170	160,675
Florida
Power & Light Co., 4.95%, 6/01/35	575	494,485
Florida
Power Corp:
6.35%,
9/15/37 (a)	1,450	1,465,767
6.40%,
6/15/38	800	814,070
Midwest
Generation LLC Series B, 8.56%, 1/02/16	84	86,193
PacifiCorp.,
6.25%, 10/15/37	650	631,469
Public
Service Co. of Colorado, 6.25%, 9/01/37	1,350	1,355,760
Southern
California Edison Co.:
5.625%,
2/01/36	675	640,422
Series
05-E, 5.35%, 7/15/35	150	136,909
Series
08-A, 5.95%, 2/01/38	1,100	1,091,171
Toledo
Edison Co./The, 6.15%, 5/15/37	350	303,055
Virginia
Electric and Power Co. Series A, 6%, 5/15/37 (a)	2,200	2,079,849
		13,360,051
Electrical
Equipment—0.3%
Superior
Essex Communications LLC, 9%, 4/15/12	950	992,750
Electronic Equipment &
Instruments—0.3%
Sanmina-SCI
Corp., 8.125%, 3/01/16	1,280	1,155,200
Energy Equipment &
Services—0.6%
Compagnie
Generale de Geophysique-Veritas:
7.50%,
5/15/15	60	59,700
7.75%,
5/15/17	100	99,500
Grant
Prideco, Inc. Series B, 6.125%, 8/15/15	90	87,474
North
American Energy Partners, Inc., 8.75%, 12/01/11	85	84,575
Transocean,
Inc., 6.80%, 3/15/38	1,175	1,172,288
Weatherford
International, Inc., 6.80%, 6/15/37 (e)	625	619,455
		2,122,992
Food & Staples
Retailing—1.2%
CVS
Caremark Corp., 6.25%, 6/01/27	850	807,667
Rite Aid
Corp., 7.50%, 3/01/17	770	639,100
Wal-Mart
Stores, Inc.:
6.20%,
4/15/38	850	840,835
6.50%,
8/15/37 (a)	1,975	2,021,869
		4,309,471
Food Products—0.5%
Kraft
Foods, Inc., 7%, 8/11/37 (a)	1,670	1,661,680
Gas Utilities—0.1%
El Paso
Natural Gas Co., 8.375%, 6/15/32	150	165,900
Targa
Resources, Inc., 8.50%, 11/01/13	360	342,000
		507,900
Health Care Equipment &
Supplies—0.4%
DJO Finance
LLC, 10.875%, 11/15/14	1,530	1,533,825
Health Care Providers &
Services—0.4%
Tenet
Healthcare Corp., 6.50%, 6/01/12	1,640	1,586,700
Hotels, Restaurants &
Leisure—0.3%
American
Real Estate Partners LP, 7.125%, 2/15/13	350	305,813
Gaylord
Entertainment Co., 6.75%, 11/15/14	250	218,125
Greektown
Holdings, LLC, 10.75%, 12/01/13 (e)(g)(h)	305	230,275
Seneca
Gaming Corp. Series B, 7.25%, 5/01/12	290	258,825
Wynn Las
Vegas LLC, 6.625%, 12/01/14	25	22,781
		1,035,819

Corporate Bonds	Par (000)	Value
Household
Durables—0.3%
Irwin Land
LLC:
Series A-1,
5.03%, 12/15/25	$ 575	$ 500,572
Series A-2,
5.30%, 12/15/35	780	639,304
		1,139,876
Household
Products—0.3%
Kimberly-Clark,
Corp., 6.625%, 8/01/37	975	1,027,605
IT Services—0.4%
iPayment,
Inc., 9.75%, 5/15/14	270	226,125
iPayment
Investors LP, 12.75%, 7/15/14 (e)(i)	994	986,734
SunGard
Data Systems, Inc., 9.125%, 8/15/13	195	197,925
		1,410,784
Independent Power Producers &
Energy Traders—0.1%
NRG Energy,
Inc.:
7.25%,
2/01/14	50	49,312
7.375%,
2/01/16	285	281,437
		330,749
Industrial
Conglomerates—0.4%
Sequa Corp.
(e):
11.75%,
12/01/15	760	668,800
13.50%,
12/01/15 (i)	786	639,994
		1,308,794
Insurance—1.7%
Chubb
Corp., 6%, 5/11/37	1,415	1,253,434
Hartford
Life Global Funding Trusts, 2.946%, 9/15/09 (b)	1,020	1,016,271
MetLife,
Inc., 5.70%, 6/15/35	1,200	1,035,002
Monument
Global Funding Ltd., 2.646%, 6/16/10 (b)	1,990	1,973,587
Prudential
Financial, Inc., 5.70%, 12/14/36	950	771,957
		6,050,251
Machinery—0.4%
AGY Holding
Corp., 11%, 11/15/14	400	372,000
Accuride
Corp., 8.50%, 2/01/15	305	196,725
Sunstate
Equipment Co. LLC, 10.50%, 4/01/13 (e)	1,050	766,500
		1,335,225
Marine—0.3%
Nakilat,
Inc. Series A, 6.067%, 12/31/33 (e)	1,100	960,487
Navios
Maritime Holdings, Inc., 9.50%, 12/15/14 (e)	188	179,540
		1,140,027
Media—6.8%
Affinion
Group, Inc., 10.125%, 10/15/13	740	728,900
CMP
Susquehanna Corp., 9.875%, 5/15/14 (e)	690	431,250
Cablevision
Systems Corp. Series B, 7.133%, 4/01/09 (b)	161	161,805
Charter
Communications Holdings I, LLC, 11%, 10/01/15	115	88,262
Charter
Communications Holdings II, LLC, 10.25%, 9/15/10	1,375	1,319,100
Comcast
Cable Communications Holdings, Inc.,
8.375%,
3/15/13	1,415	1,562,925
Comcast
Cable Communications LLC, 6.75%, 1/30/11	1,000	1,037,489
Comcast
Corp., 6.95%, 8/15/37 (a)	1,805	1,761,445
DirecTV
Holdings LLC, 8.375%, 3/15/13	140	144,900
EchoStar
DBS Corp.:
5.75%,
10/01/08	180	180,000
7%,
10/01/13	48	45,600
7.125%,
2/01/16	75	69,000
Network
Communications, Inc., 10.75%, 12/01/13	195	140,156
News
America Holdings, Inc.:
8.45%,
8/01/34 (a)	2,475	2,813,035
8.15%,
10/17/36	145	160,176

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 33 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Income Opportunity Trust, Inc. (BNA) (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)	Value
Media
(concluded)
Nielsen Finance LLC, 10%, 8/01/14	$ 1,100	$ 1,113,750
R.H. Donnelley Corp., 11.75%, 5/15/15 (e)	669	491,715
Rainbow National Services LLC (e):
8.75%,
9/01/12	225	229,500
10.375%,
9/01/14	1,070	1,138,212
TCI Communications, Inc., 8.75%, 8/01/15	1,495	1,630,676
TL Acquisitions, Inc., 10.50%, 1/15/15 (e)	1,100	940,500
Time Warner Cable, Inc.:
9.125%,
1/15/13 (a)	3,000	3,274,242
7.57%,
2/01/24	1,635	1,655,928
6.55%,
5/01/37	800	737,370
7.30%,
7/01/38	1,925	1,934,292
Windstream Regatta Holdings, Inc., 11%, 12/01/17 (e)	977	566,660
		24,356,888
Metals
& Mining—1.7%
AK Steel Corp., 7.75%, 6/15/12	1,115	1,140,088
Falconbridge Ltd.:
6%,
10/15/15	600	568,891
6.20%,
6/15/35	1,550	1,267,178
Freeport-McMoRan Copper & Gold, Inc.:
5.883%,
4/01/15 (b)	660	661,742
8.375%,
4/01/17	1,225	1,298,500
Teck Cominco Ltd., 6.125%, 10/01/35	1,570	1,269,555
		6,205,954
Multi-Utilities—0.6%
DTE Energy Co., 6.35%, 6/01/16	450	448,208
Energy East Corp., 6.75%, 7/15/36	1,675	1,600,541
		2,048,749
Oil,
Gas & Consumable Fuels—5.2%
Anadarko Petroleum Corp., 6.45%, 9/15/36	2,625	2,412,656
Berry Petroleum Co., 8.25%, 11/01/16	160	152,800
Burlington Resources Finance Co., 7.40%, 12/01/31 (c)	950	1,086,685
Canadian Natural Resources, Ltd.:
6.25%,
3/15/38	500	460,529
6.75%,
2/01/39	950	934,501
Chaparral Energy, Inc., 8.50%, 12/01/15	380	330,600
Chesapeake Energy Corp., 6.375%, 6/15/15	175	162,750
Compton Petroleum Finance Corp., 7.625%, 12/01/13	90	84,488
Conoco Funding Co., 7.25%, 10/15/31	150	172,853
ConocoPhillips Canada Funding Co., 5.95%, 10/15/36	150	149,988
ConocoPhillips Holding Co., 6.95%, 4/15/29	700	765,734
Devon Energy Corp., 7.95%, 4/15/32	650	752,461
EXCO Resources, Inc., 7.25%, 1/15/11	435	430,650
EnCana Corp.:
6.50%,
8/15/34	70	66,815
6.625%,
8/15/37	775	737,452
6.50%,
2/01/38	675	632,468
Encore Acquisition Co., 6%, 7/15/15	50	43,625
MidAmerican Energy Co., 5.80%, 10/15/36	800	726,329
MidAmerican Energy Holdings Co.:
5.95%,
5/15/37	950	880,244
6.50%,
9/15/37	1,725	1,720,924
Nexen, Inc., 6.40%, 5/15/37	600	538,157
OPTI Canada, Inc., 8.25%, 12/15/14	490	489,387
Sabine Pass LNG LP, 7.50%, 11/30/16	350	306,250
Suncor Energy, Inc., 6.50%, 6/15/38	400	382,844
TransCanada PipeLines Ltd., 5.85%, 3/15/36	600	515,076
Valero Energy Corp., 6.625%, 6/15/37	550	485,291
Whiting Petroleum Corp.:
7.25%,
5/01/12	40	38,600
7.25%,
5/01/13	375	360,000
XTO Energy, Inc.:
6.75%,
8/01/37	2,125	2,004,281
6.375%,
6/15/38	925	833,854
		18,658,292

Corporate Bonds	Par (000)	Value
Paper
& Forest Products—0.2%
Bowater, Inc., 5.776%, 3/15/10 (b)	$ 90	$ 73,800
Domtar Corp., 7.125%, 8/15/15	80	77,200
NewPage Corp., 10%, 5/01/12	485	470,450
		621,450
Pharmaceuticals—2.2%
Bristol-Myers Squibb Co., 5.875%, 11/15/36	1,135	1,073,053
Eli Lilly & Co., 5.55%, 3/15/37 (a)	2,495	2,376,617
Schering-Plough Corp., 6.55%, 9/15/37	1,250	1,192,699
Teva Pharmaceutical Finance LLC, 6.15%, 2/01/36	1,475	1,328,221
Wyeth, 5.95%, 4/01/37 (a)	1,775	1,704,375
		7,674,965
Professional
Services—0.0%
FTI Consulting, Inc., 7.75%, 10/01/16	125	129,688
Real
Estate Investment Trusts (REITs)—0.3%
AvalonBay Communities, Inc., 6.625%, 9/15/11	1,000	1,012,618
Road & Rail—0.3%
Canadian National Railway Co., 6.375%, 10/15/11	1,000	1,054,686
Semiconductors
& Semiconductor Equipment—0.1%
Amkor Technology, Inc.:
7.75%,
5/15/13	90	84,375
9.25%,
6/01/16	75	72,375
Freescale Semiconductor, Inc.:
8.875%,
12/15/14	130	105,300
9.125%,
12/15/14 (i)	315	245,700
		507,750
Software—0.7%
BMS Holdings, Inc., 10.595%, 2/15/12 (b)(e)(i)	120	72,030
Oracle Corp., 5.75%, 4/15/18	2,300	2,306,557
		2,378,587
Specialty
Retail—0.5%
AutoNation, Inc.:
4.791%,
4/15/13 (b)	160	132,000
7%, 4/15/14	170	147,050
General Nutrition Centers, Inc.:
7.584%,
3/15/14 (b)(i)	500	418,302
10.75%,
3/15/15	450	390,375
Lazy Days’ R.V. Center, Inc., 11.75%, 5/15/12	362	181,000
Michaels Stores, Inc.:
10%,
11/01/14	435	326,250
11.375%,
11/01/16	150	96,000
		1,690,977
Textiles,
Apparel & Luxury Goods—0.1%
Quiksilver, Inc., 6.875%, 4/15/15	250	200,625
Wireless
Telecommunication Services—1.3%
Cricket Communications, Inc., 9.375%, 11/01/14	105	104,081
Digicel Group Ltd., 8.875%, 1/15/15 (e)	270	253,476
MetroPCS Wireless, Inc., 9.25%, 11/01/14	80	79,300
Nordic Telephone Co. Holdings ApS, 8.875%, 5/01/16 (e)	935	899,937
Rogers Communications, Inc., 7.50%, 8/15/38	1,175	1,206,553
Sprint Capital Corp.:
6.875%,
11/15/28	930	790,500
8.75%,
3/15/32	350	340,375
Vodafone Group Plc, 7.75%, 2/15/10	1,000	1,046,266
		4,720,488
Total Corporate Bonds—54.9%		195,573,362

| See Notes to Financial Statements. — 34 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Income Opportunity Trust, Inc. (BNA) (Percentages shown are based on Net Assets)

| Asset-Backed Securities — American
Express Issuance Trust Series 2008-2 Class A, 4.02%, 1/18/11 | Par (000) — $ | 2,655 | $ | 2,660,005 |
| --- | --- | --- | --- | --- |
| Ameriquest
Mortgage Securities, Inc. Series 2004-R11 Class A1, 2.774%, 11/25/34 (b) | | 1,103 | | 809,610 |
| Bank of
America Credit Card Trust Series 2008-A9 Class A9, 4.07%, 7/16/12 | | 2,555 | | 2,563,026 |
| Capital Auto
Receivables Asset Trust Series 2006-1 Class A3, 5.03%, 10/15/09 | | 582 | | 582,790 |
| Chase
Issuance Trust Series 2006-A3 Class A3, 2.457%, 7/15/11 (b) | | 2,650 | | 2,634,254 |
| Chase
Issuance Trust Series 2007-A17 Class A, 5.12%, 10/15/14 | | 2,600 | | 2,593,220 |
| Chase
Issuance Trust Series 2008-A9 Class A9, 4.26%, 5/15/13 | | 2,605 | | 2,579,098 |
| Chase
Manhattan Auto Owner Trust Series 2005-B Class A4, 4.88%, 6/15/12 | | 2,733 | | 2,748,917 |
| Citibank
Credit Card Issuance Trust Series 2006-A2 Class A2, 4.85%, 2/10/11 | | 3,125 | | 3,143,251 |
| Citibank
Omni Master Trust Series 2007-A9A Class A9, 3.571%, 12/23/13 (b) | | 2,795 | | 2,795,655 |
| Daimler
Chrysler Auto Trust Series 2006-A Class A3, 5%, 5/08/10 | | 979 | | 984,635 |
| Ford Credit
Auto Owner Trust Series 2006-A Class A3, 5.05%, 3/15/10 | | 871 | | 872,862 |
| Harley-Davidson
Motorcycle Trust Series 2005-2 Class A2, 4.07%, 2/15/12 | | 1,690 | | 1,692,358 |
| Home Equity
Asset Trust Series 2007-2 Class 2A1, 2.582%, 7/25/37 (b) | | 912 | | 835,814 |
| JPMorgan
Mortgage Acquisition Corp. Series 2007-CH5 Class A3, 2.582%, 6/25/37 (b) | | 3,730 | | 3,200,228 |
| MBNA Credit
Card Master Note Trust (e): | | | | |
| Series
2006-A1 Class A1, 4.90%, 7/15/11 | | 3,075 | | 3,094,573 |
| Series
2006-A4 Class A4, 2.457%, 9/15/11 (b) | | 4,050 | | 4,029,295 |
| Morgan
Stanley ABS Capital I Series 2006-HE5 Class A2A, 2.542%, 8/25/36 (b) | | 275 | | 272,590 |
| SLM Student
Loan Trust Series 2008-5 (b): | | | | |
| Class A2,
3.90%, 10/25/16 | | 3,300 | | 3,303,960 |
| Class A3,
4.10%, 1/25/18 | | 840 | | 857,648 |
| Class A4,
4.50%, 7/25/23 | | 2,250 | | 2,316,645 |
| Small
Business Administration Participation Certificates Series 1996-20K Class 1, 6.95%, 11/01/16 | | 603 | | 619,129 |
| Sterling
Bank Trust Series 2004-2 Class Note, 2.081%, 3/30/30 (j) | | 7,844 | | 294,135 |
| Sterling
Coofs Trust Series 1, 2.362%, 4/15/29 (j) | | 9,834 | | 795,891 |
| USAA Auto
Owner Trust Series 2006-1 Class A3, 5.01%, 9/15/10 (e) | | 923 | | 928,069 |
| Wachovia
Auto Owner Trust Series 2006-A Class A4, 5.38%, 3/20/13 | | 2,275 | | 2,173,853 |
| Total Asset-Backed Securities—13.8% | | | | 49,381,511 |
| Foreign Government Obligations | | | | |
| Bundesrepublik
Deutschland Series 07, 4.25%, 7/04/39 | EUR | 1,340 | | 1,861,834 |
| France
Government Bond, 3.15%, 7/25/32 | | 603 | | 1,046,168 |
| Total Foreign Government
Obligations—0.8% | | | | 2,908,002 |
| U.S. Government Agency Mortgage-Backed
Securities | Par (000) | | Value | |
| Fannie Mae
Guaranteed Pass-Through Certificates: | | | | |
| 5.00%, 7/1/35 | $ | 12,188 | $ | 11,756,856 |
| 5.50%,
12/01/13 - 9/15/38 (c)(k) | | 53,767 | | 53,277,712 |
| 6.00%,
3/01/16 - 9/15/38 (k) | | 6,505 | | 6,579,568 |
| 7.00%,
2/01/24 - 8/01/36 | | 77 | | 80,612 |
| Freddie Mac
Mortgage Participation Certificates (b): | | | | |
| 5.025%,
1/01/35 | | 921 | | 910,615 |
| 6.148%,
1/01/35 | | 280 | | 280,313 |
| Ginnie Mae
MBS Certificates | | | | |
| 8.00%,
4/15/24 - 6/15/25 | | 95 | | 103,727 |
| Total U.S. Government Agency Mortgage-Backed Securities—20.5% | | | | 72,989,403 |
| U.S. Government Agency Mortgage-Backed Securities—Collateralized Mortgage Obligations | | | | |
| Fannie Mae
Trust Series: | | | | |
| G-7 Class
S, 116.20%, 3/25/21 (b) | | — | (l) | 2,497 |
| G-10 Class
S, 0.575%, 5/25/21 (j) | | 412 | | 7,487 |
| G-12 Class
S, 0.608%, 5/25/21 (j) | | 343 | | 6,829 |
| G-17 Class
S, 0.58%, 6/25/21 (j) | | 206 | | 3,400 |
| G-33 Class
PV, 1.078%, 10/25/21 (j) | | 269 | | 7,118 |
| G-46 Class
H, 1.043%, 12/25/09 (j) | | 734 | | 3,384 |
| G-49 Class
S, 774.80%, 12/25/21 (b) | | — | (l) | 1,433 |
| G92-5 Class
H, 9%, 1/25/22 (j) | | 66 | | 14,223 |
| 7 Class 2,
8.50%, 4/01/17 (j) | | 4 | | 936 |
| 89 Class 2,
8%, 10/01/18 (j) | | 8 | | 1,739 |
| 94 Class 2,
9.50%, 8/01/21 (j) | | 2 | | 494 |
| 203 Class
1, 0%, 2/01/23 (m) | | 17 | | 13,784 |
| 228 Class
1, 0%, 6/01/23 (m) | | 12 | | 10,274 |
| 378 Class
19, 5%, 6/01/35 (j) | | 4,035 | | 1,034,971 |
| 1990-123
Class M, 1.01%, 10/25/20 (j) | | 17 | | 410 |
| 1990-136
Class S, 0.015%, 11/25/20 (j) | | 10,456 | | 12,291 |
| 1991-38
Class N, 1.009%, 4/25/21 (j) | | 13 | | 88 |
| 1991-46
Class S, 1.403%, 5/25/21 (j) | | 76 | | 2,828 |
| 1991-87
Class S, 20.058%, 8/25/21 (b) | | 44 | | 52,336 |
| 1991-99
Class L, 0.93%, 8/25/21 (j) | | 94 | | 1,998 |
| 1991-139
Class PT, 0.648%, 10/25/21 (j) | | 175 | | 3,297 |
| 1991-167
Class D, 0%, 10/25/17 (m) | | 13 | | 12,759 |
| 1993-51 Class
E, 0%, 2/25/23 (m) | | 56 | | 45,229 |
| 1993-70
Class A, 0%, 5/25/23 (m) | | 10 | | 7,933 |
| 1994-23
Class PS, 10.697%, 4/25/23 (b) | | 529 | | 539,384 |
| 1997-50
Class SI, 1.20%, 4/25/23 (j) | | 292 | | 11,147 |
| 2004-90
Class JH, 1.828%, 11/25/34 (j) | | 20,628 | | 1,912,141 |
| 2005-5
Class PK, 5%, 12/25/34 | | 2,390 | | 2,409,244 |
| Freddie Mac
Multiclass Certificates Series: | | | | |
| 19 Class R,
9.757%, 3/15/20 (j)(n) | | 7 | | 1,135 |
| 75 Class R,
9.50%, 1/15/21 (n) | | — | (l) | 2 |
| 75 Class
RS, 18.554%, 1/15/21 (n) | | — | (l) | 2 |
| 173 Class
R, 0%, 11/15/21 (j)(n) | | 10 | | 9 |
| 173 Class
RS, 9.126%, 11/15/21 (n) | | — | (l) | 10 |
| 176 Class
M, 1.01%, 7/15/21 (j) | | 21 | | 476 |
| 192 Class
U, 1.009%, 2/15/22 (j) | | 2 | | 54 |
| 200 Class
R, 98.523%, 12/15/22 (j)(n) | | 1 | | 11 |
| 1043 Class
H, 0.022%, 2/15/21 (j) | | 5,720 | | 8,197 |
| 1054 Class
I, 0.435%, 3/15/21 (j) | | 59 | | 697 |
| 1056 Class
KD, 1.085%, 3/15/21 (j) | | 50 | | 1,248 |
| 1057 Class
J, 1.008%, 3/15/21 (j) | | 62 | | 1,439 |
| 1148 Class
E, 0.593%, 10/15/21 (j) | | 171 | | 3,079 |
| 1179 Class
O, 1.009%, 11/15/21 (j) | | 23 | | 120 |
| 1254 Class
Z, 8.50%, 4/15/22 (j) | | 127 | | 143 |
| 1611 Class
JC, 10%, 8/15/23 (b) | | 269 | | 276,333 |
| 1739 Class
B, 0%, 2/15/24 (m) | | 66 | | 58,939 |
| 1831 Class
PG, 6.50%, 3/15/11 (j) | | 127 | | 7,079 |
| 2611 Class
QI, 5.50%, 9/15/32 (j) | | 5,108 | | 890,595 |
| 2684 Class
SP, 4.986%, 1/15/33 (j) | | 410 | | 66,626 |
| 3174 Class
PZ, 5%, 1/15/36 | | 7,487 | | 6,476,061 |
| 3208 Class
PS, 4.586%, 8/15/36 (j) | | 1,983 | | 229,855 |
| 3316 Class
SB, 4.729%, 8/15/35 (j) | | 362 | | 48,497 |
| Total U.S. Government Agency Mortgage-Backed
Securities— Collateralized Mortgage Obligations—4.0% | | | | 14,190,261 |

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 35 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Income Opportunity Trust, Inc. (BNA) (Percentages shown are based on Net Assets)

Non-U.S. Government Agency Mortgage-Backed Securities	Par (000)
Collateralized Mortgage Obligations—7.1%
American
Home Mortgage Assets Series 2006-6 Class A1A, 2.662%, 12/25/46 (b)	$ 371	$	225,712
Citigroup
Mortgage Loan Trust, Inc. Series 2005-4 Class A, 5.343%, 8/25/35 (b)(e)	4,785		4,206,328
Collateralized
Mortgage Obligation Trust Series 40 Class R, 0.58%, 4/01/18 (j)(n)	129		129
Collateralized
Mortgage Obligation Trust Series 42 Class R, 6%, 10/01/14 (j)(n)	19		1,226
Countrywide
Alternative Loan Trust Series 2005-64CB Class 1A15, 5.50%, 12/25/35	1,700		1,180,954
Countrywide
Alternative Loan Trust Series 2006-01A0 Class 1A1, 4.039%, 8/25/46 (b)	387		243,947
Countrywide
Alternative Loan Trust Series 2006-0A21 Class A1, 2.661%, 3/20/47 (b)	1,055		655,990
Countrywide
Home Loan Mortgage Pass-Through Trust Series 2006-0A5 Class 2A1, 2.672%, 4/25/46 (b)	443		268,866
Deutsche
Alt-A Securities, Inc. Alternate Loan Trust Series 2003-3 Class 2A1, 5.50%, 10/25/33	1,300		1,076,968
Deutsche
Alt-A Securities, Inc. Alternate Loan Trust Series 2006-0A1 Class A1, 2.672%, 2/25/47 (b)	535		339,415
GSMPS
Mortgage Loan Trust Series 1998-5 Class IO, 0.97%, 6/19/27 (j)	3,398		63,878
GSR
Mortgage Loan Trust Series 2005-AR4 Class 6A1, 5.25%, 7/25/35 (b)	4,878		4,454,542
GSR
Mortgage Loan Trust Series 2006-0A1 Class 2A1, 2.662%, 8/25/46 (b)	1,128		778,491
Harborview
Mortgage Loan Trust Series 2005-8 Class 1A2A, 2.796%, 9/19/35 (b)	121		78,263
Harborview
Mortgage Loan Trust Series 2006-9 Class 2A1A, 2.676%, 11/19/36 (b)	751		458,098
Homebanc Mortgage
Trust Series 2006-2 Class A1, 2.652%, 12/25/36 (b)	1,120		744,114
Maryland
Insurance Backed Securities Trust Series 2006-1A, 5.55%, 12/10/65	2,500		1,750,000
Merrill
Lynch Mortgage Investors, Inc. Series 2006-A3 Class 3A1, 5.823%, 5/25/36 (b)(o)	1,075		698,933
Residential
Funding Securities LLC Series 2003-RM2 Class AI5, 8.50%, 5/25/33	6,470		6,790,740
Salomon
Brothers Mortgage Securities VII, Inc. Series 2000-1 Class IO, 0.492%, 3/25/22 (j)	965		26
Summit
Mortgage Trust Series 2000-1 Class B1, 6.647%, 12/28/12 (b)(n)	—	(l)	369
WaMu
Mortgage Pass-Through Certificates Series 2007-0A4 Class 1A, 3.849%, 5/25/47 (b)	501		300,467
WaMu
Mortgage Pass-Through Certificates Series 2007-0A5 Class 1A, 3.829%, 6/25/47 (b)	882		599,110
Wells Fargo
Mortgage Backed Securities Trust Series 2006-AR4 Class 2A4, 5.772%, 4/25/36 (b)	300		249,189
			25,165,755
Commercial Mortgage-Backed
Securities—11.8%
Bear
Stearns Commercial Mortgage Securities Series 2005-PWR7 Class A2, 4.945%, 2/11/41	2,320		2,269,084
CS First
Boston Mortgage Securities Corp. Series 2002-CP5 Class A2, 4.94%, 12/15/35	2,970		2,886,420
Citigroup
Commercial Mortgage Trust Series 2008-C7 Class A4, 6.299%, 12/10/49 (b)	2,020		1,891,922
Citigroup/Deutsche
Bank Commercial Mortgage Trust Series 2007-CD5 Class A4, 5.886%, 11/15/44 (b)	3,075		2,810,025
Commercial
Mortgage Loan Trust Series 2008-LS1 Class A4B, 6.221%, 12/10/49 (b)	1,515		1,410,757
Commercial
Mortgage Pass-Through Certificates Series 2004-LB3A Class A3, 5.09%, 7/10/37 (b)	990		980,238
Non-U.S. Government Agency Mortgage-Backed Securities	Par (000)	Value
Commercial Mortgage-Backed Securities
(concluded)
DLJ
Commercial Mortgage Corp. Series 2000-CKP1 Class A1B, 7.18%, 11/10/33	$ 2,289	$	2,358,390
First Union
National Bank Commercial Mortgage Series 2000-C2 Class A2, 7.202%, 10/15/32	2,014		2,075,075
First
Union-Lehman Brothers-Bank of America Series 1998-C2 Class D, 6.778%, 11/18/35	2,630		2,709,689
GE Capital
Commercial Mortgage Corp. Series 2002-1A Class A3, 6.269%, 12/10/35	2,310		2,346,744
GMAC
Commercial Mortgage Securities, Inc.:
Series
2002-C3 Class A2, 4.93%, 7/10/39	2,580		2,502,313
Series
2004-C3 Class A4, 4.547%, 12/10/41	2,475		2,380,863
JPMorgan
Chase Commercial Mortgage Securities Corp.:
Series
2001-C1 Class A3, 5.857%, 10/12/35	1,990		2,000,055
Series
2004-CBX Class A4, 4.529%, 1/12/37	2,380		2,313,069
Series
2006-LDP9 Class A3, 5.336%, 5/15/47	1,065		961,785
LB-UBS
Commercial Mortgage Trust Series 2004-C4 Class A3, 5.44%, 6/15/29 (b)	2,530		2,505,377
Morgan
Stanley Capital I:
Series
1997-HF1 Class X, 3.438%, 7/15/29 (j)	20		2
Series
2005-HQ6 Class A4A, 4.989%, 8/13/42	1,520		1,418,282
Series
2007-IQ16 Class A4, 5.809%, 12/12/49	680		617,793
Series
2007-T27 Class A4, 5.803%, 6/13/42 (b)(e)	1,105		1,003,289
Series
2008-T29 Class A4, 6.458%, 1/11/43 (b)	1,520		1,435,435
Wachovia
Bank Commercial Mortgage Trust (b):
Series
2005-C21 Class A3, 5.384%, 10/15/44	940		936,303
Series
2006-C25 Class A4, 5.926%, 5/15/43	1,305		1,227,714
Series
2007-C33 Class A4, 6.10%, 2/15/51	1,105		1,021,829
			42,062,453
Total Non-U.S. Government Agency Mortgage-Backed Securities—18.9%			67,228,208
U.S. Government Obligations
Federal
Housing Administration, General Motors Acceptance Corp. Projects:
Series 37,
7.43%, 5/01/22	110		111,289
Series 44,
7.43%, 8/01/22	73		74,642
Federal Housing Administration:
Merrill
Projects, Series 29, 7.43%, 10/01/20 (o)	48		49,010
Merrill
Projects, Series 42, 7.43%, 9/25/22 (o)	47		48,453
Reilly
Project, Series B-11, 7.40%, 4/01/21	1,647		1,680,464
Westmore
Project, 7.25%, 4/01/21	1,625		1,657,563
Overseas Private Investment Corp.:
4.09%,
5/29/12	371		388,303
4.30%,
5/29/12 (b)	933		1,014,465
4.64%,
5/29/12	786		870,186
4.68%,
5/29/12	444		469,371
4.87%,
5/29/12	3,379		3,775,286
Resolution Funding Corp., 0%, 4/15/30	6,055		2,153,800
U.S. Treasury Bonds, 6.125%, 11/15/27	1,385		1,682,667
U.S. Treasury Inflation Indexed Bonds, 1.75%, 1/15/28 (a)	5,965		5,832,361
U.S. Treasury Notes:
4%, 8/15/18
(a)	19,695		19,995,034
5%, 5/15/37	545		595,540
4.375%,
2/15/38 (a)	8,110		8,052,346
4.50%,
5/15/38 (a)	3,000		3,034,686
Total U.S. Government Obligations—14.4%			51,485,466

| See Notes to Financial Statements. — 36 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Income Opportunity Trust, Inc. (BNA) (Percentages shown are based on Net Assets)

Preferred Securities — Capital Trusts	Par (000)		Value
Capital Markets—0.6%
UBS
Preferred Funding Trust I, 8.622% (a)(b)(d)	$ 2,000		$ 1,925,870
Commercial Banks—1.7%
Barclays
Bank Plc. 7.434% (a)(b)(d)(e)	2,175		1,921,765
Credit
Agricole SA, 6.637% (b)(d)(e)	330		263,289
RBS Capital
Trust IV, 3.496% (b)(d)	525		386,309
Royal Bank
of Scotland Group Plc. Series MTN, 7.64% (a)(b)(d)	2,600		2,196,363
Wachovia
Corp. Series K, 7.98% (a)(b)(d)	1,650		1,239,629
			6,007,355
Diversified Financial Services—2.2%
Bank of
America Corp. (b)(d):
Series K,
8% (a)	1,400		1,247,658
Series M,
8.125%	1,125		1,015,628
Citigroup,
Inc. 8.30%, 12/21/77	1,500		1,354,014
JPMorgan
Chase & Co., 7.90% (b)(d)	1,600		1,453,600
JPMorgan
Chase Capital XXV, 6.80%, 10/01/37	3,265		2,787,053
			7,857,953
Insurance—1.4%
The
Allstate Corp., 6.50%, 5/15/57 (a)(b)	2,150		1,754,744
American
International Group, Inc., 8.175% 5/15/58 (b)(e)	1,390		1,073,611
Lincoln
National Corp., 6.05%, 4/20/67 (b)	750		588,101
Progressive
Corp., 6.70%, 6/15/37 (b)	665		544,842
The
Travelers Cos., Inc., 6.25%, 3/15/67 (b)	750		638,734
ZFS Finance
(USA) Trust V, 6.50%, 5/09/67 (b)(e)	575		495,347
			5,095,379
Total Capital Trusts—5.9%			20,886,557
Preferred Stocks	Shares
Diversified Financial Services—0.1%
Citigroup, Inc. Series AA, 8.125%	26,000		516,880
Total Preferred Stocks—0.1%			516,880
Total Preferred Securities—6.0%			21,403,437
Other Interests (p)	Beneficial Interest
Health Care Providers & Services—0.0%
Critical Care Systems International, Inc. (n)	1,895		637
Total Other Interests—0.0%			637
Total Long-Term investments (Cost—$495,200,996)—133.3%			475,160,287
Short-Term Securities	Par (000)
U.S. Government & Agency
Obligations—1.2%
Federal Home Loan Bank, 2.60%, 9/02/08 (q)	$ 4,300		4,300,000
Total Short-Term Securities (Cost—$4,300,000)—1.2%			4,300,000
Options Purchased	Contracts	(r)
Call Swaptions Purchased
Receive a
fixed rate of 5.12% and pay a floating rate based on 3-month LIBOR, expiring November 2010	14		507,150
Receive a
fixed rate of 5.39% and pay a floating rate based on 3-month LIBOR, expiring March 2012	7		454,323
Receive a
fixed rate of 5.47% and pay a floating rate based on 3-month LIBOR, expiring May 2012	12		801,492
Receive a
fixed rate of 6.025% and pay a floating rate based on 3-month LIBOR, expiring June 2012	8		747,045
			2,510,010
Options Purchased (concluded)	Contracts	(r)	Value
Put Swaptions Purchased
Pay a fixed
rate of 5.12% and receive a floating rate based on 3-month LIBOR, expiring November 2010	14		$ 293,426
Pay a fixed
rate of 5.39% and receive a floating rate based on 3-month LIBOR, expiring March 2012	7		300,877
Pay a fixed
rate of 5.47% and receive a floating rate based on3-month LIBOR, expiring May 2012	12		486,908
Pay a fixed
rate of 6.025% and receive a floating rate based on 3-month LIBOR, expiring June 2012	8		220,828
			1,302,039
Total Options Purchased (Cost—$2,945,378)—1.1%			3,812,049
Total Investments Before TBA Sale
Commitments and Options Written (Cost—$502,446,374*)—135.6%			483,272,336
TBA Sale Commitments	Par (000)
Fannie Mae
Guaranteed Pass-Through Certificates, 5.5%, 12/01/13—9/15/38	$ (2,400	)	(2,423,023	)
Fannie Mae
Guaranteed Pass-Through Certificates, 5%,7/01/35	(10,800	)	(10,392,732	)
Total TBA Sale Commitments (Proceeds—$12,573,559)—(3.6)%			(12,815,755	)
Options Written	Contracts
Call Option Written
30-Year
U.S. Treasury Bonds expiring November 2008 at $118	100		(181,250	)
Call Swaptions Written (r)
Pay a fixed
rate of 4.94% and receive floating rate based on 3-month LIBOR, expiring December 2008	14		(524,986	)
Pay a fixed
rate of 5.01% and receive a floating rate based on 3-month LIBOR, expiring November 2008	4		(178,772	)
Pay a fixed
rate of 5.05% and receive a floating rate based on 3-month LIBOR, expiring May 2011	15		(741,375	)
Pay a fixed
rate of 5.08% and receive a floating rate based on 3-month LIBOR, expiring May 2011	6		(317,627	)
Pay a fixed
rate of 5.0825% and receive a floating rate based on 3-month LIBOR, expiring July, 2010	2		(126,870	)
Pay a fixed
rate of 5.325% and receive a floating rate based on 3-month LIBOR, expiring July 2013	9		(333,859	)
Pay a fixed
rated of 4.58% and received a floating rate based on 3-month LIBOR, expiring May 2009	9		(227,199	)
Pay a fixed
rated of 5.485% and receive a floating rate based on expiring 3-month LIBOR, expiring October 2009	5		(363,591	)
Pay a fixed
rated of 5.67% and receive a floating rate based on 3-month LIBOR, expiring January 2010	12		(969,519	)
			(3,783,798	)
Put Swaptions Written (r)
Receive a
fixed rate of 3.10% and pay a floating rate based on 3-month LIBOR, expiring October 2008	20		(131,020	)
Receive a
fixed rate of 4.58% and pay a floating rate based on 3-month LIBOR, expiring May 2009	9		(296,902	)
Receive a
fixed rate of 4.94% and pay a floating rate based on 3-month LIBOR, expiring December 2008	14		(131,320	)
Receive a
fixed rate of 5.01% and pay a floating rate based on 3-month LIBOR, expiring November 2008	4		(21,243	)
Receive a
fixed rate of 5.05% and pay a floating rate based on 3-month LIBOR, expiring May 2011	15		(702,945	)
Receive a
fixed rate of 5.08% and pay a floating rate based on 3-month LIBOR, expiring May 2011	6		(287,015	)
Receive a
fixed rate of 5.0825% and pay a floating rate based on 3-month LIBOR, expiring July, 2010	2		(94,723	)
Receive a
fixed rate of 5.325% and pay a floating rate based on 3-month LIBOR, expiring July 2013	9		(256,846	)

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 37 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Income Opportunity Trust, Inc. (BNA)

	Options Written (concluded)		Value
	Put Swaptions Written (concluded)
	Receive a
fixed rate of 5.485% and pay a floating rate based on 3-month LIBOR, expiring October 2009	5	$ (80,809	)
	Receive a
fixed rate of 5.67% and pay a floating rate based on 3-month LIBOR, expiring January 2010	12	(176,365	)
			(2,179,188	)
	Total Options Written (Premiums Received—$6,457,698)—(1.7)%		(6,144,236	)
	Total Investments, Net of TBA Sale Commitments and Options Written—130.3%		464,312,345
	Liabilities in Excess of Other
Assets—(30.3)%		107,796,490	)
	Net Assets—100.0%		$ 356,455,622
*	The cost and unrealized appreciation (depreciation) of
investments, as of August 31, 2008, as computed for federal income tax
purposes, were as follows:
	Aggregate cost		$ 502,566,975
	Gross unrealized appreciation		$ 5,441,311
	Gross unrealized depreciation		(24,735,950	)
	Net unrealized depreciation		$ (19,294,639	)

| (a) | All or a portion of the security has been pledged as
collateral for reverse repurchase agreements. |
| --- | --- |
| (b) | Variable rate security. Rate shown is as of report date. |
| (c) | All or a portion of the security has been pledged as
collateral in connection with open financial futures contracts or swaps. |
| (d) | Security is perpetual in nature and has no stated maturity
date. |
| (e) | Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions exempt
from registration to qualified institutional investors. |
| (f) | Represents a step bond. |
| (g) | The issuer filed for bankruptcy or is in default of
interest payments. |
| (h) | Non-income producing security. |
| (i) | Represents a payment-in-kind security which may pay
interest/dividends in additional par/shares. |
| (j) | Represents the interest only portion of a mortgage-backed
security and has either a nominal or a notional amount of principal. |
| (k) | Represents or includes a to-be-announced transaction. The
Trust has committed to purchasing securities for which all specific
information is not available at this time. |
| (l) | Amount is less than $1,000. |
| (m) | Represents the principal-only portion of a mortgage-backed
security. |
| (n) | Security is fair valued. |
| (o) | Investments in companies considered to be an affiliate of
the Trust, for purposes of Section 2(a)(3) of the Investment Company Act of
1940, were as follows: |

Affiliate	Purchase Cost	Sale Cost	Realized Loss		Income
Federal
Housing Administration, Merrill Projects:
Series 29,
7.43%, 10/01/20	—	$ 2,204	$ (93	)	$ 55,852
Series 42,
7.43%, 9/24/22	—	$ 1,422	$ (65	)	$ 54,855
Merrill
Lynch Mortgage Investors, Inc.
Series 2006-A3 Class 3A1, 5.823%, 5/25/36	$ 742,027	—	—		$ 1,044

| (p) | Other interests represent beneficial interest in
liquidation trusts and other reorganization entities and are non-income
producing. |
| --- | --- |
| (q) | Rate shown is the yield to maturity as of the date of
purchase. |
| (r) | One contract represents a notional amount of $1,000,000. |
| • | For Trust compliance purposes, the Trust’s industry
classifications refer to any one or more of the industry sub-classifications
used by one or more widely recognized market indexes or ratings group
indexes, and/or as defined by Trust management. This definition may not apply
for purposes of this report which may combine industry subclassifications for
reporting ease. These industry classifications are unaudited. |
| • | Foreign currency exchange contracts as of August 31, 2008
were as follows: |

Currency Purchased	Currency Sold		Settlement Date	Unrealized Appreciation
EUR 191,000	USD	279,305	10/23/08	$ 71
USD1,119,018	EUR	715,000	10/23/08	73,186
USD3,756,435	EUR	2,395,000	10/23/08	253,264
USD1,117,740	EUR	706,500	10/23/08	84,341
USD1,192,872	EUR	756,500	10/23/08	86,338
Total				$ 497,200

| • | Financial future contracts sold as of August 31, 2008 were
as follows: — Contracts | Issue | Expiration Date | Face Value | Unrealized Depreciation | |
| --- | --- | --- | --- | --- | --- | --- |
| | 644 | 5-Year U.S.
Treasury Bond | December 2008 | $ 71,809,943 | $ (277,807 | ) |
| | 248 | 2-Year U.S.
Treasury Bond | December 2008 | $ 52,604,061 | (41,689 | ) |
| | 1,659 | 5-Year U.S.
Treasury Bond | September 2008 | $ 184,111,667 | (2,448,067 | ) |
| | 161 | 2-Year U.S.
Treasury Bond | September 2008 | $ 33,814,537 | (468,401 | ) |
| | Total | | | | $ (3,235,964 | ) |
| • | Financial futures contracts purchased as of August 31,
2008 were as follows: | | | | | |
| | Contracts | Issue | Expiration Date | Face Value | Unrealized Appreciation (Depreciation) | |
| | 108 | 30-Year U.S.
Treasury Bond | December 2008 | $ 12,703,825 | $ (34,075 | ) |
| | 1,006 | 30-Year U.S.
Treasury Bond | September 2008 | $ 115,126,596 | 3,770,029 | |
| | 172 | 10-Year U.S.
Treasury Bond | September 2008 | $ 20,053,650 | 16,600 | |
| | Total | | | | $ 3,752,554 | |
| • | Reverse repurchase agreements outstanding as of August 31,
2008 were as follows: | | | | | |

Counterparty	Interest Rate	Trade Date	Maturity Date	Net Closing Amount	Face Amount
Lehman Brothers International	3.0 %	4/17/08	Open	$ 3,252,716	$ 3,216,000
Lehman Brothers International	3.0 %	4/17/08	Open	3,920,599	3,876,344
Lehman Brothers International	3.0 %	4/17/08	Open	1,957,849	1,935,750
Lehman Brothers International	3.0 %	4/17/08	Open	3,565,092	3,524,850
Lehman Brothers International	3.0 %	4/17/08	Open	1,798,223	1,777,925
Lehman Brothers International	3.0 %	4/17/08	Open	7,340,900	7,258,037
Lehman Brothers International	3.0 %	4/17/08	Open	3,476,302	3,437,062
Lehman Brothers International	3.0 %	4/17/08	Open	1,670,063	1,651,212
Lehman Brothers International	3.0 %	4/17/08	Open	2,334,223	2,307,875
Lehman Brothers International	2.77355 %	4/17/08	Open	2,903,777	2,871,000
Lehman Brothers International	3.0 %	4/17/08	Open	2,294,398	2,268,500
Lehman Brothers International	3.0 %	4/17/08	Open	2,102,735	2,079,000
Lehman Brothers International	3.0 %	4/17/08	Open	1,971,946	1,949,688
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,789,510	1,787,187
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,265,643	1,264,000
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	2,391,855	2,388,750
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,279,161	1,277,500
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,422,847	1,421,000
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	2,985,125	2,981,250
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,695,326	1,693,125
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	3,898,811	3,893,750
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,945,025	1,942,500
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,641,594	1,639,463
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,209,383	1,207,813
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,881,943	1,879,500
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,276,282	1,274,625
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,162,509	1,161,000
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,990,083	1,987,500
Credit Suisse Securities LLC	2.6 %	8/14/08	Open	1,650,674	1,648,531
Lehman Brothers Inc.	2.15 %	8/15/08	Open	7,891,855	7,883,381
Lehman Brothers Inc.	2.22 %	8/15/08	Open	3,029,609	3,026,250
Lehman Brothers Inc.	2.22 %	8/15/08	Open	2,252,497	2,250,000
Lehman Brothers Inc.	2.0 %	8/7/08	Open	7,888,216	7,876,838
Lehman Brothers Inc.	2.03 %	8/26/08	Open	5,503,421	5,501,250
Lehman Brothers Inc.	2.0 %	8/28/08	Open	6,602,967	6,601,500
Total				$ 101,243,159	$ 100,739,956

| See Notes to Financial Statements. — 38 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Income Opportunity Trust, Inc. (BNA)

• Swaps outstanding as of August 31, 2008 were as follows:

Receive a fixed rate of 4.88% and pay a floating rate based on 3-month LIBOR Broker, Lehman Brothers Special Finance Expires August 2009	Notional Amount (000) — USD	44,500	Unrealized Appreciation (Depreciation) — $ 801,209
Receive a fixed rate of 4.7709% and pay a floating rate based on 3-month LIBOR Broker, Lehman Brothers Special Finance Expires August 2009	USD	30,700	519,120
Receive a fixed rate of 4.62377% and pay a floating rate based on 3-month LIBOR Broker, Credit Suisse First Boston International Expires September 2009	USD	50,000	831,516
Receive a fixed rate of 5% and pay a floating rate based on 3-month LIBOR Broker, Deutsche Bank AG London Expires November 2010	USD	5,000	167,822
Pay a fixed rate of 4.922% and receive a floating rate based on 3-month LIBOR Broker, Lehman Brothers Special Finance Expires March 2011	USD	14,800	(500,711	)
Receive a fixed rate of 5.496% and pay a floating rate based on 3-month LIBOR Broker, Bank of America Expires July 2011	USD	27,900	1,433,931
Receive a fixed rate of 4.95% and pay a floating rate based on 3-month LIBOR Broker, UBS Warburg Expires November 2011	USD	3,100	116,474
Receive a fixed rate of 5.025% and pay a floating rate based on 3-month LIBOR Broker, Deutsche Bank AG London Expires November 2011	USD	3,200	126,805
Receive a fixed rate of 4.897% and pay a floating rate based on 3-month LIBOR Broker, JPMorgan Chase Expires December 2011	USD	10,000	359,538
Pay a fixed rate of 5.0016% and receive a floating rate based on 3-month LIBOR Broker, UBS Warburg Expires January 2012	USD	12,000	(472,081	)
Pay a fixed rate of 5.58875% and receive a floating rate based on 3-month LIBOR Broker, Goldman Sachs & Co. Expires July 2012	USD	46,800	(2,912,289	)
Receive a fixed rate of 5.07625% and pay a floating rate based on 3-month LIBOR Broker, Citibank N.A. Expires August 2012	USD	91,000	4,016,186
Receive a fixed rate of 5.10531% and pay a floating rate based on 3-month LIBOR Broker, Goldman Sachs & Co. Expires August 2012	USD	21,600	976,119
Receive a fixed rate of 5.0565% and pay a floating rate based on 3-month LIBOR Broker, Bank of America Expires August 2012	USD	54,600	2,370,784

Receive a fixed rate of 4.9034% and pay a floating rate based on 3-month LIBOR Broker, Barclays London Expires September 2012	Notional Amount (000) — USD	35,000	Unrealized Appreciation (Depreciation) — $ 1,329,405
Receive a fixed rate of 4.32% and pay a floating rate based on 3-month LIBOR Broker, Citibank N.A. Expires November 2012	USD	11,700	182,393
Pay a fixed rate of 4.2424% and receive a floating rate based on 3-month LIBOR Broker, Lehman Brothers Special Finance Expires December 2012	USD	50,000	(620,491	)
Pay a fixed rate of 3.48375% and receive a floating rate based on 3-month LIBOR Broker, Goldman Sachs & Co. Expires March 2013	USD	5,900	115,724
Receive a fixed rate of 3.66375% and pay a floating rate based on 3-month LIBOR Broker, Citibank N.A. Expires April 2013	USD	7,500	(99,947	)
Receive a fixed rate of 5.29375% and pay a floating rate based on 6-month LIBOR Broker, Deutsche Bank AG London Expires April 2013	GBP	2,100	(14,650	)
Receive a fixed rate of 5.14% and pay a floating rate based on 6-month British Pound Sterling LIBOR Broker, Deutsche Bank AG London Expires April 2013	GBP	2,100	(26,506	)
Receive a fixed rate of 3.78% and pay a floating rate based on 3-month LIBOR Broker, Bank of America Expires May 2013	USD	13,200	(118,309	)
Receive a fixed rate of 4.2825% and pay a floating rate based on 3-month LIBOR Broker, Credit Suisse First Boston International Expires July 2013	USD	84,800	1,009,802
Receive a fixed rate of 4.2125% and pay a floating rate based on 3-month LIBOR Broker, Morgan Stanley Capital Services Expires August 2013	USD	13,500	111,759
Pay a fixed rate of 4.51% and receive a floating rate based on 3-month LIBOR Broker, Citibank N.A. Expires October 2014	USD	13,800	(245,406	)
Pay a fixed rate of 4.39919% and receive a floating rate based on 3-month LIBOR Broker, Deutsche Bank AG London Expires October 2014	USD	27,500	(320,606	)
Receive a fixed rate of 5.005% and pay a floating rate based on 3-month LIBOR Broker, JPMorgan Chase Expires October 2014	USD	10,500	467,761
Pay a fixed rate of 4.5% and receive a floating rate based on 3-month LIBOR Broker, JPMorgan Chase Expires May 2015	USD	3,000	(45,634	)
Receive a fixed rate of 4.3715% and pay a floating rate based on 3-month Lehman Brothers Muni Swap Index Broker, UBS Warburg Expires June 2015	USD	5,200	38,474

See Notes to Financial Statements. — ANNUAL REPORT	AUGUST 31, 2008	39

Schedule of Investments (concluded) BlackRock Income Opportunity Trust, Inc. (BNA)

Receive a fixed rate of 4.67% and pay a floating rate based on 3-month LIBOR Broker, Goldman Sachs & Co. Expires September 2015	Notional Amount (000) — USD	8,000	Unrealized Appreciation (Depreciation) — $ 194,605
Receive a fixed rate of 5.723% and pay a floating rate based on 3-month LIBOR Broker, JPMorgan Chase Expires July 2016	USD	5,200	476,940
Pay a fixed rate of 5.071% and receive a floating rate based on 3-month LIBOR Broker, UBS Warburg Expires March 2017	USD	5,000	(239,530	)
Pay a fixed rate of 5.85% and receive a floating rate based on 3-month LIBOR Broker, Deutsche Bank AG London Expires June 2017	USD	1,000	(104,511	)
Pay a fixed rate of 5.6425% and receive a floating rate based on 3-month LIBOR Broker, Citibank N.A. Expires July 2017	USD	7,200	(644,766	)
Pay a fixed rate of 5.155% and receive a floating rate based on 3-month LIBOR Broker, Citibank N.A. Expires September 2017	USD	12,000	(640,493	)
Pay a fixed rate of 5.307% and receive a floating rate based on 3-month LIBOR Broker, Deutsche Bank AG London Expires October 2017	USD	6,000	(391,463	)
Pay a fixed rate of 5.3075% and receive a floating rate based on 3-month LIBOR Broker, Barclays London Expires October 2017	USD	15,300	(998,528	)
Pay a fixed rate of 5.115% and receive a floating rate based on 3-month LIBOR Broker, Lehman Brothers Special Finance Expires March 2018	USD	7,300	(367,731	)
Receive a fixed rate of 4.7058% and pay a floating rate based on 3-month LIBOR Broker, UBS Warburg Expires July 2018	USD	8,900	152,515
Pay a fixed rate of 4.52165% and receive a floating rate based on 3-month LIBOR Broker, Goldman Sachs & Co. Expires July 2018	USD	12,700	(29,339	)

Receive a fixed rate of 5.411% and pay a floating rate based on 3-month LIBOR Broker, JPMorgan Chase Expires August 2022	Notional Amount (000) — USD	9,405	Unrealized Appreciation (Depreciation) — $ 721,452
Pay a fixed rate of 5.365% and receive a floating rate based on 3-month LIBOR Broker, Bank of America Expires September 2027	USD	8,900	(661,377	)
Pay a fixed rate of 5.0605% and receive a floating rate based on 3-month LIBOR Broker, Goldman Sachs & Co. Expires November 2037	USD	6,900	(251,782	)
Pay a fixed rate of 5.06276% and receive a floating rate based on 3-month LIBOR Broker, Citibank N.A. Expires December 2037	USD	1,400	(51,253	)
Pay a fixed rate of 5.0639% and receive a floating rate based on 3-month LIBOR Broker, Lehman Brothers Special Finance Expires December 2037	USD	1,400	(51,496	)
Pay a fixed rate of 4.785% and receive a floating rate based on 3-month LIBOR Broker, Citibank N.A. Expires January 2038	USD	2,100	15,157
Pay a fixed rate of 4.601% and receive a floating rate based on 3-month LIBOR Broker, Lehman Brothers Special Finance Expires January 2038	USD	5,000	181,362
Pay a fixed rate of 4.8375% and receive a floating rate based on the 3-month LIBOR Broker, Morgan Stanley Capital Services Expires January 2038	USD	6,100	(6,561	)
Receive a fixed rate of 5.29750% and pay a floating rate based on 3-month LIBOR Broker, Citibank N.A. Expires February 2038	USD	700	51,866
Receive a fixed rate of 5.1575% and pay a floating rate based on 3-month LIBOR Broker, Citibank N.A. Expires June 2038	USD	6,000	310,922
Total			$ 7,264,181

• Currency Abbreviations:

EUR	Euro
GBP	British Pound
USD	U.S. Dollar

See Notes to Financial Statements. — 40	ANNUAL REPORT	AUGUST 31, 2008

| Schedule of
Investments August 31,
2008 |
| --- |
| (Percentages shown
are based on Net Assets) |

| Asset-Backed Securities — First
Franklin Mortgage Loan Asset Backed Certificates Series 2005-FF2 Class M2, 2.912%, 3/25/35 (a) | Par (000) — $ 5,890 | $ | 3,534,000 |
| --- | --- | --- | --- |
| GSAA Home
Equity Trust Series 2005-1 Class AF2, 4.316%, 11/25/34 (a) | 3,587 | | 3,365,810 |
| Securitized
Asset Backed Receivables LLC Trust Series 2005-OP2 Class M1, 2.902%, 10/25/35 (a) | 1,875 | | 1,179,682 |
| Small Business Administration Participation Certificates: | | | |
| Series
1996-20E Class 1, 7.60%, 5/01/16 | 464 | | 479,292 |
| Series
1996-20F Class 1, 7.55%, 6/01/16 | 554 | | 571,827 |
| Series
1996-20G Class 1, 7.70%, 7/01/16 | 401 | | 415,517 |
| Series
1996-20H Class 1, 7.25%, 8/01/16 | 651 | | 670,715 |
| Series
1996-20K Class 1, 6.95%, 11/01/16 | 1,142 | | 1,172,275 |
| Series
1997-20C Class 1, 7.15%, 3/01/17 | 528 | | 543,584 |
| Sterling
Bank Trust Series 2004-2 Class Note, 2.081%, 3/30/30 (b) | 8,025 | | 300,921 |
| Sterling Coofs Trust Series 1, 2.362%, 4/15/29 (b) | 12,237 | | 990,442 |
| Total Asset-Backed Securities—3.0% | | | 13,224,065 |
| Corporate Bonds | | | |
| Diversified
Financial Services—0.4% | | | |
| Structured Asset Repackaged Trust, 3.761%, 1/21/10 | 1,703 | | 1,650,459 |
| U.S. Government Agency Mortgage-Backed
Securities | | | |
| Fannie Mae Guaranteed Pass-Through Certificates: | | | |
| 5.00%, 4/01/19
- 9/15/38 (c)(d) | 52,811 | | 50,964,075 |
| 5.50%,
6/01/21 - 9/15/38 (c)(d) | 151,631 | | 150,214,027 |
| 5.97%,
8/01/16 | 3,125 | | 3,250,888 |
| 6.00%,
10/01/36 - 7/01/37 (c)(d) | 21,288 | | 21,516,787 |
| 6.50%,
7/01/36 - 9/15/38 | 28,106 | | 28,918,888 |
| 7.50%, 2/01/22 | — | (e) | 196 |
| 8.00%,
10/01/09 - 5/01/22 | 12 | | 12,835 |
| 9.50%,
1/01/19 - 9/01/19 | 4 | | 4,027 |
| Freddie Mac Mortgage Participation Certificates: | | | |
| 4.991%,
10/01/34 (a) | 790 | | 792,352 |
| 5.50%,
12/01/21 - 3/01/22 (d) | 7,545 | | 7,616,047 |
| 5.983%,
1/01/35 (a)(d) | 219 | | 217,920 |
| 6.01%,
11/01/17 | 25 | | 24,988 |
| 6.50%,
9/15/38 (c) | 100 | | 102,719 |
| 8.00%,
11/01/15 | 3 | | 3,537 |
| 9.00%,
9/01/20 (d) | 106 | | 116,024 |
| Ginnie Mae MBS Certificates: | | | |
| 5.50%,
9/15/38 (c) | 6,000 | | 5,988,750 |
| 6.50%, 9/15/38
(c) | 10,800 | | 11,124,000 |
| 7.00%,
10/15/17 | 33 | | 34,983 |
| 7.50%,
8/15/21 - 12/15/23 | 364 | | 391,950 |
| 8.00%,
10/15/22 - 2/15/29 | 167 | | 182,373 |
| 9.00%,
6/15/18 - 9/15/21 | 13 | | 14,026 |
| Total U.S. Government Agency Mortgage-Backed Securities—63.4% | | | 281,491,392 |

U.S. Government Agency Mortgage-Backed Securities— Collateralized Mortgage Obligations	Par (000)
Fannie Mae Trust:
Series 7
Class 2, 8.50%, 4/01/17 (b)	$ 9	$	2,010
Series 89
Class 2, 8%, 10/01/18 (b)	18		3,734
Series 94
Class 2, 9.50%, 8/01/21 (b)	5		1,062
Series 203
Class 1, 0%, 2/01/23 (f)	36		29,084
Series 228
Class 1, 0%, 6/01/23 (f)	27		21,932
Series 273
Class 1, 0%, 8/01/26 (f)	199		160,364
Series 328
Class 1, 0%, 12/01/32 (f)	3,918		2,889,880
Series 338
Class 1, 0%, 7/01/33 (f)	3,272		2,372,474
Series
1990-123 Class M, 1.01%, 10/25/20 (b)	36		880
Series
1990-136 Class S, 0.015%, 11/25/20 (a)(b)	22,449		26,390
Series
1991-7 Class J, 0%, 2/25/21 (f)	37		31,412
Series
1991-38 Class F, 8.325%, 4/25/21 (a)	36		36,446
Series
1991-38 Class N, 1.009%, 4/25/21 (b)	27		190
Series
1991-38 Class SA, 10.186%, 4/25/21 (a)	37		37,134
Series
1991-46 Class S, 1.403%, 5/25/21 (b)	163		6,071
Series
1991-87 Class S, 20.058%, 8/25/21 (a)	96		114,354
Series
1991-99 Class L, 0.93%, 8/25/21 (b)	202		4,290
Series
1991-139 Class PT, 0.648%, 10/25/21 (b)	377		7,080
Series
1991-167 Class D, 0%, 10/25/17 (f)	28		27,392
Series
1993-51 Class E, 0%, 2/25/23 (f)	120		97,107
Series
1993-70 Class A, 0%, 5/25/23 (f)	21		16,667
Series
1993-170 Class SC, 9%, 9/25/08 (a)	3		2,544
Series
1993-196 Class SC, 8.863%, 10/25/08 (a)	15		14,555
Series
1993-199 Class SB, 2.625%, 10/25/23 (b)	1,913		171,531
Series
1993-214 Class SH, 11.842%, 12/25/08 (a)	21		21,272
Series
1993-247 Class SN, 10%, 12/25/23 (a)	770		890,228
Series
1993-249 Class B, 0%, 11/25/23 (f)	1,717		1,316,229
Series
1994-33 Class SG, 3.225%, 3/25/09 (b)	195		2,691
Series
1996-68 Class SC, 2.257%, 1/25/24 (b)	1,504		95,930
Series
1997-50 Class SI, 1.20%, 4/25/23 (b)	584		22,295
Series
1997-90 Class M, 6%, 1/25/28 (b)	11,547		2,854,025
Series
1999-W4 Class IO, 6.50%, 12/25/28 (b)	550		130,338
Series
1999-W4 Class PO, 0%, 2/25/29 (f)	299		227,600
Series
2002-13 Class PR, 0%, 3/25/32 (f)	773		535,478
Series
2003-9 Class BI, 5.50%, 10/25/22 (b)	3,262		418,065
Series
2003-32 Class VT, 6%, 9/25/15	6,529		6,707,451
Series
2003-51 Class IE, 5.50%, 4/25/26 (b)	576		1,739
Series
2003-55 Class GI, 5%, 7/25/19 (b)	4,060		326,946
Series
2003-66 Class CI, 5%, 7/25/33 (b)	5,223		1,257,636
Series
2003-88 Class TI, 4.50%, 11/25/13 (b)	1,835		25,335
Series
2003-122 Class IC, 5%, 9/25/18 (b)	3,741		235,217
Series
2003-135 Class PB, 6%, 1/25/34	12,264		12,118,967
Series
2004-13 Class IG, 5%, 10/25/22 (b)	1,883		26,865
Series
2004-28 Class PB, 6%, 8/25/28	2,745		2,782,456
Series
2004-29 Class HC, 7.50%, 7/25/30	1,922		2,025,910
Series
2004-31 Class ZG, 7.50%, 5/25/34	2,534		2,996,870
Series
2004-90 Class JH, 1.828%, 11/25/34 (b)	25,646		2,377,257
Series
2005-43 Class IC, 6%, 3/25/34 (b)	705		138,187
Series
2005-55 Class SB, 1.278%, 7/25/35 (b)	11,017		787,420
Series
2005-68 Class PC, 5.50%, 7/25/35	2,240		2,286,086
Series
2005-73 Class DS, 11.123%, 8/25/35 (a)	5,092		5,015,317
Series
2005-73 Class ST, 1.258%, 8/25/35 (b)	11,711		751,761
Series
2006-2 Class KP, 0%, 2/25/35 (a)	1,221		987,221
Series
2006-8 Class WL, 3.874%, 3/25/36 (b)	5,860		539,529
Series
2006-36 Class SP, 1.828%, 5/25/36 (b)	43,486		3,764,494
Series
2006-38 Class Z, 5%, 5/25/36	905		873,827
Series
2006-101 Class SA, 3.204%, 10/25/36 (b)	32,276		2,437,215
Series
3006-8 Class HN, 4.858%, 3/25/36 (b)	3,856		359,399
Series G-7
Class S, 116.20%, 3/25/21 (a)	—	(e)	5,361
Series G-10
Class S, 0.575%, 5/25/21 (b)	884		16,075
Series G-12
Class S, 0.608%, 5/25/21 (b)	736		14,662
Series G-17
Class S, 0.58%, 6/25/21 (b)	443		7,299
Series G-33
Class PV, 1.078%, 10/25/21 (b)	577		15,281
Series G-49
Class S, 778.05%, 12/25/21 (a)	—	(e)	3,077

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 41 |
| --- | --- | --- |

| Schedule of
Investments (continued) |
| --- |
| (Percentages shown
are based on Net Assets) |

U.S. Government Agency Mortgage-Backed Securities— Collateralized Mortgage Obligations	Par (000)
Fannie Mae Trust—(concluded)
Series G-50
Class G, 1.159%, 12/25/21 (b)	$ 358	$	5,550
Series
G92-5 Class H, 9%, 1/25/22 (b)	169		36,573
Series
G92-12 Class C, 1.017%, 2/25/22 (b)	440		11,577
Series
G92-59 Class S, 5.023%, 10/25/22 (b)	3,208		545,153
Series
G92-60 Class SB, 1.60%, 10/25/22 (b)	484		20,584
Series
G93-2 Class KB, 0%, 1/25/23 (f)	265		212,973
Freddie Mac Multiclass Certificates:
Series 19
Class F, 8.50%, 3/15/20	154		161,884
Series 19
Class R, 9.757%, 3/15/20 (b)(g)	15		2,438
Series 40
Class K, 6.50%, 8/17/24	640		666,874
Series 60
Class HS, 1.125%, 4/25/24 (b)	456		1,804
Series 75
Class R, 9.50%, 1/15/21 (g)	—	(e)	4
Series 75
Class RS, 18.477%, 1/15/21 (g)	—	(e)	4
Series 173
Class R, 0%, 11/15/21 (b)(g)	23		23
Series 173
Class RS, 9.142%, 11/15/21(g)	—	(e)	22
Series 176
Class M, 1.01%, 7/15/21 (b)	45		1,023
Series 192
Class U, 1.009%, 2/15/22 (b)	5		116
Series 200
Class R, 98.523%, 12/15/22 (b)(g)	2		24
Series 204
Class IO, 6%, 5/01/29 (b)	1,508		375,694
Series 1043
Class H, 0.022%, 2/15/21 (b)	12,282		17,600
Series 1054
Class I, 0.435%, 3/15/21 (b)	127		1,495
Series 1056
Class KD, 1.085%, 3/15/21 (b)	107		2,679
Series 1057
Class J, 1.008%, 3/15/21 (b)	132		3,090
Series 1148
Class E, 0.593%, 10/15/21 (b)	368		6,611
Series 1160
Class F, 29.678%, 10/15/21 (a)	29		39,881
Series 1179
Class O, 1.009%, 11/15/21 (b)	50		258
Series 1418
Class M, 0%, 11/15/22 (f)	132		105,737
Series 1571
Class G, 0%, 8/15/23 (f)	577		431,452
Series 1598
Class J, 6.50%, 10/15/08	107		107,131
Series 1616
Class SB, 8.50%, 11/15/08 (a)(d)	14		13,764
Series 1691
Class B, 0%, 3/15/24 (f)	1,786		1,463,313
Series 1706
Class IA, 7%, 10/15/23 (b)	71		1,142
Series 1720
Class PK, 7.50%, 1/15/24 (b)	37		2,050
Series 1739
Class B, 0%, 2/15/24 (f)	148		132,081
Series 1914
Class PC, 0.75%, 12/15/11 (b)	1,856		14,441
Series 1961
Class H, 6.50%, 5/15/12	212		213,726
Series 2218
Class Z, 8.50%, 3/15/30	8,843		9,654,562
Series 2296
Class SA, 2.139%, 3/15/16 (b)	563		40,551
Series 2431
Class Z, 6.50%, 6/15/32	11,256		11,719,937
Series 2444
Class ST, 2.359%, 9/15/29 (b)	225		8,408
Series 2542
Class MX, 5.50%, 5/15/22 (b)	1,183		168,765
Series 2542
Class UC, 6%, 12/15/22	10,200		10,612,204
Series 2545
Class NI, 5.50%, 3/15/22 (b)	2,016		238,742
Series 2559
Class IO, 5%, 8/15/30 (b)	419		6,449
Series 2561
Class EW, 5%, 9/15/16 (b)	3,144		237,590
Series 2564
Class NC, 5%, 2/15/33	928		821,497
Series 2611
Class QI, 5.50%, 9/15/32 (b)	9,322		1,625,457
Series 2630
Class PI, 5%, 8/15/28 (b)	4,164		381,763
Series 2647
Class IV, 1.959%, 7/15/33 (b)	16,307		3,356,217
Series 2653
Class MI, 5%, 4/15/26 (b)	2,634		284,358
Series 2658
Class PI, 4.50%, 6/15/13 (b)	1,000		5,563
Series 2672
Class TQ, 5%, 3/15/23 (b)	1,240		13,166
Series 2687
Class IL, 5%, 9/15/18 (b)	3,633		208,624
Series 2693
Class IB, 4.50%, 6/15/13 (b)	774		3,596
Series 2694
Class LI, 4.50%, 7/15/19 (b)	1,926		146,151
Series 2758
Class KV, 5.50%, 5/15/23	11,059		11,052,178
Series 2765
Class UA, 4%, 3/15/11	1,570		1,562,333
Series 2769
Class SQ, 7.237%, 2/15/34 (a)	4,359		2,598,098
Series 2773
Class OX, 5%, 2/15/18 (b)	3,681		351,872
Series 2780
Class SM, 1.348%, 4/15/34 (b)	15,725		1,151,643
Series 2825
Class NI, 5.50%, 3/15/30 (b)	6,727		1,246,104
Series 2827
Class SR, 1.348%, 1/15/22 (b)	10,191		866,786
Series 2840
Class SK, 11.121%, 8/15/34 (a)	1,851		1,414,791
Series 2861
Class AX, 7.10%, 9/15/34 (a)	562		520,301

U.S. Government Agency Mortgage-Backed Securities— Collateralized Mortgage Obligations	Par (000)	Value
Freddie Mac Multiclass Certificates—(concluded)
Series 2865
Class SR, 1.908%, 10/15/33 (b)	$ 17,570	$ 2,751,349
Series 2865
Class SV, 2.753%, 10/15/33 (b)	11,899	2,968,863
Series 2927
Class BZ, 5.50%, 2/15/35	2,514	2,371,787
Series 2933
Class SL, 2.914%, 2/15/35 (b)	1,815	166,274
Series 2949
Class IO, 5.50%, 3/15/35 (b)	1,554	295,302
Series 2990
Class WR, 1.929%, 6/15/35 (b)	29,557	2,581,607
Series 3010
Class SC, 10.583%, 3/15/34 (a)	1,196	1,225,779
Series 3061
Class BD, 7.50%, 11/15/35	3,641	3,922,240
Series 3167
Class SX, 22.699%, 6/15/36 (a)	526	556,810
Series 3225
Class EY, 1.638%, 10/15/36 (b)	80,315	7,039,557
Series 3299
Class TI, 5%, 4/15/37 (b)	3,092	712,441
Series T-8
Class A10, 0%, 11/15/28 (f)	203	153,674
Series T-11
Class A9, 2.265%, 1/25/28 (a)	3,649	3,287,280
Ginnie Mae Trust:
Series
1996-5 Class Z, 7%, 5/16/26	900	948,859
Series
2001-33 Class PB, 6.50%, 7/20/31	1,488	1,542,017
Series
2003-58 Class IT, 5.50%, 7/20/33 (b)	1,602	206,518
Series
2003-89 Class SA, 0.84%, 10/16/33 (b)	14,517	894,838
Series
2004-18 Class VC, 5%, 3/16/15	6,619	6,674,170
Series
2004-39 Class ID, 5%, 5/20/33 (b)	1,500	374,383
Series
2004-89 Class PE, 6%, 10/20/34	3,638	3,709,290
Series
2005-18 Class SL, 1.203%, 2/20/35 (b)	14,045	976,875
Series
2005-47 Class SP, 0.853%, 8/20/32 (b)	17,127	866,090
Total U.S. Government Agency
Mortgage-Backed Securities— Collateralized Mortgage Obligations—38.4%		170,596,074
Non-U.S. Government Agency
Mortgage-Backed Securities
Collateralized
Mortgage Obligations—22.6%
ABN AMRO
Mortgage Corp. Series 2003-4 Class A2, 5.50%, 3/25/33 (b)	316	1,925
Banc of America Funding Corp. (b):
Series
2007-2 Class 1A19, 0%, 3/25/37	100,614	3,997,631
Series
2007-5 Class 4A3, 3.655%, 7/25/37	34,923	3,094,736
Banc of
America Mortgage Securities Inc. Series 2003-3 Class 1AIO, 0.286%, 5/25/18 (b)	213,484	2,010,727
Bear
Stearns Asset Backed Securities Series 2007-AC2 Class X, 0.25%, 3/25/37 (b)	24,127	236,100
Citi
Mortgage Alternative Loan Trust Series 2007-A5 Class 1A7, 6%, 5/25/37 (b)	1,886	239,251
Citigroup
Mortgage Loan Trust, Inc. Series 2005-12 Class 1A2, 1.615%, 8/25/35 (b)	22,950	1,012,910
Collateralized Mortgage Obligation Trust (b)(g):
Series 40
Class R, 0.58%, 4/01/18	277	277
Series 42
Class R, 6%, 10/01/14	41	2,632
Countrywide Alternative Loan Trust:
Series
2005-28CB Class 1A5, 5.50%, 8/25/35	3,503	3,060,854
Series
2005-56 Class 1A1, 3.202%, 11/25/35 (a)	4,889	3,198,491
Series
2005-72 Class A2, 2.832%, 1/25/36 (a)	4,136	1,737,087
Series
2005-79C Class A2, 0%, 1/25/36 (b)	130,075	5,697,131
Countrywide Home Loan Mortgage Pass-Through Trust (f):
Series
2003-26 Class PO, 0%, 8/25/33	4,778	3,185,154
Series
2003-J4 Class PO, 0%, 6/25/33	989	702,776
Series
2003-J5 Class PO, 0%, 7/25/33	1,291	872,098
Series
2003-J8 Class PO, 0%, 9/25/23	1,082	693,310
Deutsche
Alt-A Securities Inc. Mortgage Series 2006-AR5 Class 22A, 5.50%, 10/25/21	1,867	1,623,764
Drexel Burnham Lambert CMO Trust (f):
Series K
Class 1, 0%, 9/23/17	18	17,796
Series V
Class 1, 0%, 9/01/18	200	159,958
First
Boston Mortgage Securities Corp. Series C Class I-O, 10.965%, 4/25/17 (b)	65	15,749

| See Notes to Financial Statements. — 42 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

| Schedule of
Investments (continued) |
| --- |
| (Percentages shown
are based on Net Assets) |

Non-U.S. Government Agency Mortgage-Backed Securities	Par (000)	Value
Collateralized
Mortgage Obligations (concluded)
First Horizon Alternative Mortgage Securities (b):
Series
2005-FA7 Class 1A7, 0%, 10/25/35	$ 68,014	$ 3,089,898
Series
2005-FA9 Class A2, 0%, 12/25/35	167,184	7,157,550
Series
2006-FA2 Class 1A4, 0.628%, 5/25/36	19,221	1,169,616
GSMPS
Mortgage Loan Trust Series 1998-5 Class IO, 0.97%, 6/19/27 (b)	6,754	126,984
Homebanc
Mortgage Trust Series 2005-4 Class A1, 2.742%, 10/25/35 (a)	4,657	3,832,763
Indymac
Index Mortgage Loan Trust Series 2006-AR33 Class 4AX, 0.165%, 1/25/37 (b)	145,063	570,198
JPMorgan Mortgage Trust:
Series
2005-S1 Class 2A1, 8%, 1/25/35	5,936	5,433,137
Series
2006-A7 Class 2A2, 5.801%, 1/25/37 (a)	1,382	1,266,305
Kidder
Peabody Acceptance Corp Series 1993-1 Class A6, 12.031%, 8/25/23 (a)	105	105,148
Kidder
Peabody Mortgage Assets Trust Series B Class A2, 9.50%, 4/22/18 (b)	50	9,616
Luminent
Mortgage Trust Series 2006-A1 Class 2A1, 2.642%, 12/25/36 (a)	4,767	2,907,548
MASTR
Adjustable Rate Mortgages Trust Series 2004-3 Class 3AX, 0.977%, 4/25/34 (b)	20,871	211,029
MASTR Alternative Loans Trust:
Series
2003-7 Class 4A3, 8%, 11/25/18	1,350	1,439,092
Series
2003-9 Class 15X2, 6%, 1/25/19 (b)	1,192	252,659
MASTR Asset
Securitization Trust Series 2004-3 Class 4A15, 0%, 3/25/34 (f)	314	110,755
Morgan
Stanley Mortgage Loan Trust Series 2004-3 Class 1AX, 5%, 5/25/19 (b)	1,341	158,577
Painewebber
CMO Trust Series 88M, 13.80%, 9/01/18	13	—
Residential Accredit Loans, Inc. (a):
Series
2005-QS16 Class A2, 0%, 11/25/35 (b)	131,328	4,897,652
Series
2006-Q03 Class A1, 2.682%, 4/25/46	2,991	1,893,139
Series
2006-Q04 Class 2A2, 2.712%, 4/25/46	3,240	1,296,122
Residential
Asset Securitization Trust Series 2005-A15 Class 1A8, 0%, 2/25/36 (f)	983	452,294
Residential
Funding Securities LLC Series 2003-RM2 Class AI5, 8.50%, 5/25/33	9,057	9,507,037
Sequoia
Mortgage Trust Series 2005-2 Class XA, 0.998%, 3/20/35 (b)	49,570	604,757
Structured Adjustable Rate Mortgage Loan Trust:
Series
2004-11 Class A, 5.418%, 8/25/34 (a)	1,859	1,857,428
Series
2005-18 Class 7AX, 5.50%, 9/25/35 (b)	4,725	568,079
Series
2005-20 Class 3AX, 5.50%, 10/25/35 (b)	3,802	537,006
Series
2006-2 Class 4AX, 5.50%, 3/25/36 (b)	12,482	2,432,828
Series
2006-7 Class 3AS, 2.374%, 8/25/36 (b)	40,199	4,546,465
Structured
Mortgage Asset Residential Trust Series 1993-3C Class CX, 0%, 4/25/24 (f)	11	5,767
Summit
Mortgage Trust Series 2000-1 Class B1, 6.647%, 12/28/12 (a)(g)	4	3,923
Vendee
Mortgage Trust Series 1999-2 Class 1IO, 0.052%, 5/15/29 (b)	77,958	192,963
WaMu Mortgage Pass-Through Certificates (a):
Series
2005-AR4 Class A3, 4.585%, 4/25/35	3,000	2,912,971
Series
2006-AR1 Class 2A1C, 4.598%, 1/25/46	7,004	3,151,890
Washington Mutual Alternative Mortgage Pass-Through
Certificates:
Series
2005-8 Class 1A4, 1.215%, 10/25/35 (b)	8,654	274,932
Series
2005-9 Class CP, 0%, 11/25/35 (f)	918	555,147
Series
2007-1 Class 1A3, 2.842%, 2/25/37 (a)	7,488	5,290,007
		100,381,639

Non-U.S. Government Agency Mortgage-Backed Securities	Par (000)	Value
Commercial
Mortgage-Backed Securities—1.4%
CS First
Boston Mortgage Securities Corp. Series 1997-C1 Class AX, 1.672%, 6/20/29 (b)	$ 5,369	$ 230,609
Commercial Mortgage
Acceptance Corp. Series 1997-ML1 Class IO, 0.705%, 12/15/30 (b)	12,238	404,491
Credit
Suisse Mortgage Capital Certificates Series 2007-C2 Class A3, 5.542%, 1/15/49 (a)	2,420	2,171,110
First
Union-Lehman Brothers Commercial Mortgage Series 1997-C2 Class D, 7.12%, 11/18/29	3,500	3,652,844
Morgan
Stanley Capital I Series 1997-HF1 Class X, 3.438%, 7/15/29 (b)	68	8
		6,459,062
Total Non-U.S. Government Agency Mortgage-Backed Securities—24.0%		106,840,701
U.S. Government and Agency Obligations
Federal Housing Administration:
General
Motors Acceptance Corp. Projects, Series 56, 7.43%, 11/01/22	340	347,040
Merrill
Projects, Series 54, 7.43%, 2/01/23 (h)	2	2,365
Reilly
Project, Series 41, 8.28%, 3/01/20	724	738,887
USGI
Projects, Series 87, 7.43%, 12/01/22	76	77,980
USGI
Projects, Series 99, 7.43%, 6/01/21	5,234	5,338,872
USGI
Projects, Series 99, 7.43%, 10/01/23	80	81,978
USGI
Projects, Series 99, 7.43%, 10/01/23	237	242,207
Overseas Private Investment Corp.:
4.09%,
5/29/12	338	353,036
4.30%,
5/29/12 (a)	847	922,243
4.64%,
5/29/12	715	791,080
4.68%,
5/29/12	404	426,702
4.87%,
5/29/12	3,072	3,432,089
Resolution Funding Corp., 0%, 4/15/30 (f)	13,000	4,624,178
Small Business Administration Series 1, 1%, 4/01/15 (b)	4,368	43,681
U.S. Treasury Strips, 0%, 11/15/24 (d)(i)	40,000	19,235,920
Total U.S. Government and Agency
Obligations—8.3%		36,658,258
Total Long-Term Securities
(Cost—$577,763,665)—137.5%		610,460,949
Short-Term Securities
U.S.
Government & Agency Obligations—0.2%
Federal Home Loan Bank, 2.60%, 9/02/08 (j)	800	800,000
Borrowed
Bond Agreement—4.7%
Lehman Brothers Inc., 2.08% to 9/15/08	20,748	20,748,444
Total Short-Term Securities
(Cost—$21,548,444)—4.9%		21,548,444
Options Purchased	Contracts
(k)
Call
Swaptions Purchased
Receive a
fixed rate of 5.39% and pay a floating rate based on 3-month LIBOR, expiring March 2012	7	454,323
Receive a
fixed rate of 5.47% and pay a floating rate based on 3-month LIBOR, expiring May 2012	12	808,009
Receive a
fixed rate of 5.78% and pay a floating rate based on 3-month LIBOR, expiring August 2010	2	228,043
Receive a
fixed rate of 6.025% and pay a floating rate based on 3-month LIBOR, expiring June 2012	8	766,109
		2,256,484
Put
Swaptions Purchased
Pay a fixed
rate of 5.39% and receive a floating rate based on 3-month LIBOR, expiring March 2012	7	300,877

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 43 |
| --- | --- | --- |

Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

| Options
Purchased (concluded) | | Value |
| --- | --- | --- |
| Put Swaptions Purchased (concluded) | | |
| Pay a fixed rate of 5.47% and receive a floating rate based 3-month LIBOR, expiring May 2012 | 12 | $ 490,866 |
| Pay a fixed rate of 5.78% and receive a floating rate based 3-month LIBOR, expiring August 2010 | 2 | 52,226 |
| Pay a fixed rate of 6.025% and receive a floating rate based on 3-month LIBOR, expiring June 2012 | 8 | 226,463 |
| | | 1,070,432 |
| Total
Options Purchased (Cost—$2,446,908)—0.7% | | 3,326,916 |
| Total
Investments before Borrowed Bond, TBA Sale Commitments and Options Written (Cost—$601,759,017*)—143.1% | | 635,336,309 |

| Borrowed
Bond — U.S. Treasury Note,
4.75% 5/31/12 | Par (000 ) — $ (19,505 | ) | (20,823,109 | ) |
| --- | --- | --- | --- | --- |
| Total
Borrowed Bond (Proceeds—$19,383,094)—(4.7)% | | | (20,823,109 | ) |
| TBA Sale Commitments | | | | |
| Fannie Mae Guaranteed Pass-Through Certificates, 6.0%, 10/01/36 - 7/01/37 | (14,300 | ) | (14,454,955 | ) |
| Ginnie
Mae MBS Certificates, 5.50%, 9/15/38 | (6,000 | ) | (5,971,872 | ) |
| Total TBA Sale Commitments (Proceeds—$20,284,422)—(4.6)% | | | (20,426,827 | ) |

| Options
Written | | | |
| --- | --- | --- | --- |
| Call Swaptions Written | | | |
| Pay a fixed rate of 4.7525% and receive a floating rate based on 3-month LIBOR, expiring May 2009 | 30 | (943,020 | ) |
| Pay a fixed rate of 5.325% and receive a floating rate based on 3-month LIBOR, expiring July 2013 | 11 | (402,808 | ) |
| Pay a fixed rated of 5.485% and receive a floating rate based on expiring 3-month LIBOR, expiring October 2009 | 5 | (370,451 | ) |
| Pay a fixed rated of 5.67% and receive a floating rate based on 3-month LIBOR, expiring January 2010 | 12 | (969,519 | ) |
| | | (2,685,798 | ) |
| Put Swaptions Written | | | |
| Receive a fixed rate of 4.7525% and pay a floating rate based on 3-month LIBOR, expiring May 2009 | 30 | (761,670 | ) |
| Receive a fixed rate of 5.325% and pay a floating rate based on 3-month LIBOR, expiring July 2013 | 11 | (309,890 | ) |
| Receive a fixed rate of 5.485% and pay a floating rate based on 3-month LIBOR, expiring October 2009 | 5 | (82,334 | ) |
| Receive a fixed rate of 5.67% and pay a floating rate based on 3-month LIBOR, expiring January 2010 | 12 | (176,365 | ) |
| | | (1,330,259 | ) |
| Total
Options Written (Premiums Received—$4,365,959)—(0.9)% | | (4,016,057 | ) |
| Total
Investments net of Borrowed Bond, TBA Sale Commitments and Options Written—132.9% | | 590,070,316 | |
| Liabilities
in Excess of Other Assets—(32.9%) | | (146,016,406 | ) |
| Net
Assets—100.0% | $ | 444,053,910 | |

• The cost and unrealized appreciation (depreciation) of investments, as of August 31, 2008, as computed for federal income tax purposes, were as follows:

Aggregate cost	$
Gross unrealized
appreciation	$ 71,138,420
Gross unrealized
depreciation	(37,696,764	)
Net unrealized
appreciation	$ 33,441,656

| (a) | Variable rate
security. Rate shown is as of report date. |
| --- | --- |
| (b) | Represents the
interest-only portion of a mortgage-backed security and has either a nominal
or a notional amount of principal. |
| (c) | Represents or
includes a to-be-announced transaction. The Trust has committed to purchasing
securities for which all specific information is not available at this time. |
| (d) | All or a portion of
security held as collateral in connection with financial futures contracts
and/or swaps. |
| (e) | Amount is less than
$1,000. |
| (f) | Represents the
principal-only portion of a mortgage-backed security. |
| (g) | Security is fair
valued. |
| (h) | Investments in
companies considered to be an affiliate of the Trust, for purposes of Section
2(a)(3) of the Investment Company Act of 1940, were as follows: |

Affiliate		Sale Cost	Realized Loss		Income
Federal Housing
Administration, Merrill Projects,
Series 54, 7.43%, 2/01/23	—	$ 300	$ (13	)	$ 52,828

| (i) | Separately Traded
Registered Interest and Principal Securities. |
| --- | --- |
| (j) | Rate shown is the
yield to maturity as of the date of purchase. |
| (k) | One contract
represents a notional amount of $1,000,000. |
| • | For Trust
compliance purposes, the Trust’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 Trust
management. This definition may not apply for purposes of this report, which
may combine industry sub-classifications for reporting ease. These industry
classifications are unaudited. |
| • | Financial future
contracts purchased as of August 31, 2008 were as follows: |

Contracts	Issue	Expiration Date	Face Value	Unrealized Appreciation
183	5-Year Futures	September 2008	$ 20,560,739	$ 18,183
8	EuroDollar Futures	March 2010	$ 1,918,324	6,176
11	EuroDollar Futures	December 2010	$ 2,621,821	9,791
37	EuroDollar Futures	March 2011	$ 8,818,329	26,058
22	EuroDollar Futures	June 2011	$ 5,234,155	20,270
Total				$ 80,478

• Interest rate floors outstanding as of August 31, 2008 were as follows:

| Pay a fixed rate of
5.50% and receive a floating rate based on 3-month LIBOR Broker, UBS AG Expiring March 2010 | Notional Amount (000) — $ 58,000 | Value — $ (2,116,883 | ) | Unrealized Depreciation — $ (1,246,884 | ) |
| --- | --- | --- | --- | --- | --- |
| Pay a fixed rate of
4.80% and receive a floating rate based on 3-month LIBOR Broker, Goldman Sachs & Co. Expiring March 2011 | 115,000 | (3,567,070 | ) | (2,294,403 | ) |
| Pay a fixed rate of
4.95% and receive a floating rate based on 3-month LIBOR Broker, JPMorgan Chase Expiring March 2011 | 68,000 | (1,775,616 | ) | (1,048,016 | ) |
| Pay a fixed rate of
5.50% and receive a floating rate based on 3-month LIBOR Broker, Citibank Expiring September 2011 | 33,000 | (1,757,118 | ) | (1,124,618 | ) |
| Total | | $ (9,216,687 | ) | $ (5,713,921 | ) |

See Notes to Financial Statements. — 44	ANNUAL REPORT	AUGUST 31, 2008

Schedule of Investments (continued) BlackRock Income Trust, Inc. (BKT)

• Financial future contracts sold as of August 31, 2008 were as follows:

Contracts	Issue	Expiration Date	Face Value	Unrealized Appreciation (Depreciatiion)
408	30-Year U.S. Treasury Bond	September 2008	$ 46,316,356	$ (1,904,144	)
149	10-Year U.S. Treasury Bond	September 2008	$ 16,813,068	(573,369	)
129	2-Year U.S. Treasury Bond	September 2008	$ 27,313,954	(154,983	)
88	EuroDollar Futures	September 2008	$ 21,416,707	37,657
777	10-Year U.S. Treasury Bond	December 2008	$ 89,651,437	(92,063	)
479	2-Year U.S. Treasury Bond	December 2008	$ 101,596,356	(86,363	)
62	EuroDollar Futures	December 2008	$ 15,119,776	80,901
51	EuroDollar Futures	March 2009	$ 12,429,322	56,722
50	EuroDollar Futures	June 2009	$ 12,157,448	43,073
70	EuroDollar Futures	September 2009	$ 16,956,472	32,222
3	EuroDollar Futures	December 2009	$ 721,520	(1,705	)
2	EuroDollar Futures	June 2010	$ 479,160	(940	)
14	EuroDollar Futures	September 2010	$ 3,372,372	17,622
Total				$ (2,545,370	)

• Swaps outstanding as of August 31, 2008 were as follows:

| Receive a fixed
rate of 5.38341% and pay a floating rate based on 3-month LIBOR Broker, Credit Suisse First Boston International Expires July 2009 | $ 200,000 | $ 4,106,005 | |
| --- | --- | --- | --- |
| Receive a fixed
rate of 4.7775% and pay a floating rate based on 3-month LIBOR Broker, Citibank N.A. Expires August 2009 | $ 18,800 | 321,713 | |
| Receive a fixed
rate of 4.034% and pay a floating rate based on 3-month LIBOR Broker, Deutsche Bank AG London Expires December 2009 | $ 16,200 | 192,814 | |
| Receive a fixed
rate of 4.1% and pay a floating rate based on 3-month LIBOR Broker, Lehman Brothers Special Finance Expires December 2009 | $ 12,600 | 160,638 | |
| Receive a fixed
rate of 4.05% and pay a floating rate based on 3-month LIBOR Broker, Barclays London Expires December 2009 | $ 5,600 | 67,763 | |
| Pay a fixed rate of
3.535% and receive a floating rate based on 3-month LIBOR Broker, Lehman Brothers Special Finance Expires January 2010 | $ 29,300 | (162,008 | ) |
| Receive a fixed
rate of 4.31996% and pay a floating rate based on 3-month LIBOR Broker, UBS Warburg Expires September 2010 | $ 12,000 | 222,234 | |
| Receive a fixed
rate of 4.95% and pay a floating rate based on 3-month LIBOR Broker, UBS Warburg Expires November 2011 | $ 4,400 | 164,026 | |
| Receive a fixed
rate of 5.025% and pay a floating rate based on 3-month LIBOR Broker, Deutsche Bank AG London Expires November 2011 | $ 3,000 | 117,993 | |
| Receive a fixed
rate of 5.39256% and pay a floating rate based on 3-month LIBOR Broker, Credit Suisse First Boston Expires June 2012 | $ 64,000 | 3,472,165 | |

| Pay a fixed rate of
4.115% and receive a floating rate based on 3-month LIBOR Broker, Goldman Sachs & Co. Expires August 2013 | $ 19,700 | $ (74,920 | ) |
| --- | --- | --- | --- |
| Pay a fixed rate of
4.88911% and receive a floating rate based on 3-month LIBOR Broker, Goldman Sachs & Co. Expires August 2014 | $ 19,000 | (727,226 | ) |
| Pay a fixed rate of
4.39919% and receive a floating rate based on 3-month LIBOR Broker, Deutsche Bank AG London Expires October 2014 | $ 12,500 | (142,258 | ) |
| Receive a fixed
rate of 4.8834% and pay a floating rate based on 3-month LIBOR Broker, UBS Warburg Expires March 2015 | $ 25,000 | 924,374 | |
| Pay a fixed rate of
4.925% and receive a floating rate based on 3-month Lehman Brothers Municipal Swap Index Broker, Deutsche Bank AG London Expires March 2015 | $ 16,000 | (631,865 | ) |
| Pay a fixed rate of
4.5% and receive a floating rate based on 3-month LIBOR Broker, JPMorgan Chase Expires May 2015 | $ 3,000 | (44,791 | ) |
| Receive a fixed
rate of 4.442% and pay a floating rate based on 3-month LIBOR Broker, Morgan Stanley Capital Services Inc. Expires July 2015 | $ 4,500 | 50,400 | |
| Receive a fixed
rate of 5.94% and pay a floating rate based on 3-month LIBOR Broker, UBS Warburg Expires December 2015 | $ 2,800 | 288,169 | |
| Receive a fixed
rate of 4.87% and pay a floating rate based on 3-month Lehman Brothers Muni Swap Index Broker, Goldman Sachs & Co. Expires January 2016 | $ 5,500 | 195,971 | |
| Receive a fixed
rate of 5.723% and pay a floating rate based on 3-month LIBOR Broker, JPMorgan Chase Expires July 2016 | $ 5,400 | 494,448 | |
| Receive a fixed
rate of 5.295% and pay a floating rate based on 3-month LIBOR Broker, UBS Warburg Expires February 2017 | $ 11,900 | 755,576 | |
| Receive a fixed
rate of 5.25% and pay a floating rate based on 3-month LIBOR Broker, Goldman Sachs & Co. Expires April 2017 | $ 800 | 48,085 | |
| Pay a fixed rate of
5.74% and receive a floating rate based on 3-month LIBOR Broker, Deutsche Bank AG London Expires June 2017 | $ 1,400 | (135,054 | ) |
| Pay a fixed rate of
5.5451% and receive a floating rate based on 3-month LIBOR Broker, Deutsche Bank AG London Expires June 2017 | $ 1,800 | (147,942 | ) |

See Notes to Financial Statements. — ANNUAL REPORT	AUGUST 31, 2008	45

Schedule of Investments (concluded) BlackRock Income Trust, Inc. (BKT)

| Pay a fixed rate of
5.85% and receive a floating rate based on 3-month LIBOR Broker, Deutsche Bank AG London Expires June 2017 | $ 1,000 | $ (104,527 | ) |
| --- | --- | --- | --- |
| Receive a fixed
rate of 5.505% and pay a floating rate based on 3-month LIBOR Broker, Bank of America Expires August 2017 | $ 165,647 | 13,205,888 | |
| Pay a fixed rate of
4.54% and receive a floating rate based on 3-month LIBOR Broker, Morgan Stanley Capital Services Inc. Expires December 2017 | $ 7,700 | (50,944 | ) |
| Pay a fixed rate of
4.4575% and receive a floating rate based on 3-month LIBOR Broker, Goldman Sachs & Co. Expires January 2018 | $ 2,600 | 644 | |
| Pay a fixed rate of
5.115% and receive a floating rate based on 3-month LIBOR Broker, Lehman Brothers Special Finance Expires March 2018 | $ 7,300 | (364,520 | ) |

| Pay a fixed rate of
5.135% and receive a floating rate based on 3-month LIBOR Broker, Barclays London Expires April 2018 | $ 5,700 | $ (44,320 | ) |
| --- | --- | --- | --- |
| Pay a fixed rate of
5.88% and receive a floating rate based on 3-month LIBOR Broker, Deutsche Bank AG London Expires June 2018 | $ 63,930 | (5,727,192 | ) |
| Pay a fixed rate of
5.46% and receive a floating rate based on 3-month LIBOR Broker, JPMorgan Chase Expires August 2018 | $ 3,800 | (196,776 | ) |
| Receive a fixed
rate of 5.411% and pay a floating rate based on 3-month LIBOR Broker, JPMorgan Chase Expires August 2022 | $ 9,565 | 733,550 | |
| Total | | $ 16,968,113 | |

See Notes to Financial Statements. — 46	ANNUAL REPORT	AUGUST 31, 2008

Schedule of Investments August 31, 2008
(Percentages shown
are based on Net Assets)

Asset-Backed Securities		Par (000)	Value
Sterling
Bank Trust Series 2004-2 Class Note, 2.081%, 3/30/30 (a)	USD	21,758	$ 815,916
Sterling
Coofs Trust Series 1, 2.362%, 4/15/29 (a)		17,045	1,379,544
Total Asset-Backed Securities—0.4%			2,195,460

Corporate Bonds
Aerospace &
Defense—0.6%
CHC
Helicopter Corp., 7.375%, 5/01/14		1,715	1,783,600
DRS
Technologies, Inc.:
6.875%,
11/01/13		330	334,125
7.625%,
2/01/18		310	326,275
Hexcel
Corp., 6.75%, 2/01/15		650	630,500
TransDigm,
Inc., 7.75%, 7/15/14		570	554,325
			3,628,825
Air Freight &
Logistics—0.1%
Park-Ohio
Industries, Inc., 8.375%, 11/15/14		905	746,625
Airlines—0.1%
American
Airlines, Inc. Series 99-1, 7.324%, 4/15/11		520	473,200
Auto Components—0.3%
Allison
Transmission, Inc. (b):
11%,
11/01/15		70	64,400
11.25%,
11/01/15 (c)		670	589,600
Lear Corp.,
8.75%, 12/01/16		1,065	801,412
Metaldyne
Corp., 10%, 11/01/13		1,000	270,000
			1,725,412
Automobiles—0.1%
Ford
Capital BV, 9.50%, 6/01/10		500	416,250
Building
Products—0.4%
CPG
International I, Inc., 10.50%, 7/01/13		750	577,500
Momentive
Performance Materials, Inc., 11.50%, 12/01/16		2,590	2,020,200
			2,597,700
Capital Markets—1.0%
E*Trade
Financial Corp., 12.50%, 11/30/17 (b)		2,500	2,675,000
Marsico Parent
Co., LLC, 10.625%, 1/15/16 (b)		2,651	2,226,840
Marsico
Parent Holdco, LLC, 12.50%, 7/15/16 (b)(c)		977	810,735
Marsico
Parent Superholdco, LLC, 14.50%, 1/15/18 (b)(c)		659	546,616
			6,259,191
Chemicals—1.2%
American
Pacific Corp., 9%, 2/01/15		1,100	1,067,000
Ames True
Temper, Inc., 6.791%, 1/15/12 (d)		2,085	1,668,000
Huntsman
LLC, 11.50%, 7/15/12		310	323,950
Ineos Group
Holdings Plc, 7.875%, 2/15/16 (b)	EUR	1,490	1,344,331
Innophos,
Inc., 8.875%, 8/15/14	USD	2,225	2,280,625
Key
Plastics LLC, 11.75%, 3/15/13 (b)		980	343,000
Terra
Capital, Inc. Series B, 7%, 2/01/17		115	111,837
			7,138,743
Commercial Services &
Supplies—1.7%
Casella
Waste Systems, Inc., 9.75%, 2/01/13		2,000	1,980,000
DI Finance
Series B, 9.50%, 2/15/13		2,538	2,518,965
Sally
Holdings LLC, 10.50%, 11/15/16 (e)		990	994,950
Waste
Services, Inc., 9.50%, 4/15/14		2,065	2,085,650
West Corp.,
11%, 10/15/16 (e)		3,595	2,813,088
			10,392,653
Communications
Equipment—0.3%
Nortel
Networks Ltd., 7.041%, 7/15/11 (d)		1,970	1,827,175
Containers &
Packaging—0.9%
Berry Plastics
Holding Corp.:
6.651%,
9/15/14 (d)		510	382,500
8.875%,
9/15/14		910	755,300
Crown
Americas LLC, 7.75%, 11/15/15		885	907,125

Corporate Bonds		Par (000)	Value
Containers & Packaging
(concluded)
Impress
Holdings BV, 5.916%, 9/15/13 (b)(d)	USD	1,370	$ 1,233,000
Pregis
Corp., 12.375%, 10/15/13		2,020	1,929,100
			5,207,025
Diversified Financial
Services—1.4%
Ford Motor
Credit Co., 7.375%, 2/01/11		2,800	2,253,675
Ford Motor
Credit Co. LLC:
5.538%,
1/13/12 (d)		565	417,142
7.241%,
4/15/12 (d)		60	57,377
7.80%,
6/01/12		1,665	1,236,537
GMAC LLC,
6.875%, 8/28/12		2,735	1,604,474
Structured
Asset Repackaged Trust, 3.761%, 1/21/10		3,068	2,972,703
			8,541,908
Diversified Telecommunication
Services—3.1%
Cincinnati
Bell, Inc., 7.25%, 7/15/13		1,420	1,364,975
Deutsche
Telekom International Finance BV, 8%, 6/15/10 (e)		5,000	5,291,760
Qwest
Communications International, Inc.:
6.304%,
2/15/09 (d)		1,364	1,360,590
7.50%,
2/15/14		3,595	3,271,450
Qwest
Corp., 6.026%, 6/15/13 (d)(e)		3,000	2,775,000
Wind
Acquisition Finance SA, 10.75%, 12/01/15 (b)		1,500	1,537,500
Windstream
Corp.:
8.125%,
8/01/13		2,340	2,316,600
8.625%,
8/01/16		1,060	1,049,400
			18,967,275
Electric
Utilities—0.6%
Edison
Mission Energy, 7.50%, 6/15/13		590	591,475
Elwood
Energy LLC, 8.159%, 7/05/26		149	140,163
Midwest
Generation LLC Series B, 8.56%, 1/02/16		2,676	2,762,490
			3,494,128
Electrical
Equipment—0.6%
Superior
Essex Communications LLC, 9%, 4/15/12		3,765	3,934,425
Electronic
Equipment & Instruments—0.4%
Sanmina-SCI
Corp.:
6.75%,
3/01/13		315	284,287
8.125%,
3/01/16 (e)		2,560	2,310,400
			2,594,687
Energy Equipment &
Services—0.2%
Compagnie
Generale de Geophysique-Veritas:
7.50%,
5/15/15		255	253,725
7.75%,
5/15/17		420	417,900
Grant
Prideco, Inc. Series B, 6.125%, 8/15/15		380	369,335
North
American Energy Partners, Inc., 8.75%, 12/01/11		270	268,650
			1,309,610
Food & Staples
Retailing—0.4%
Rite Aid
Corp., 7.50%, 3/01/17		2,940	2,440,200
Gas Utilities—0.2%
El Paso
Natural Gas Co., 8.375%, 6/15/32		400	442,400
Targa
Resources, Inc., 8.50%, 11/01/13		725	688,750
			1,131,150
Health Care Equipment &
Supplies—1.3%
Biomet,
Inc.:
10%,
10/15/17		500	540,000
10.375%,
10/15/17 (c)		500	527,500
11.625%,
10/15/17		670	704,337
DJO Finance
LLC, 10.875%, 11/15/14		6,420	6,436,050
			8,207,887
Health Care Providers &
Services—0.7%
Tenet
Healthcare Corp., 6.50%, 6/01/12		1,985	1,920,487
Viant
Holdings, Inc., 10.125%, 7/15/17 (b)		2,948	2,491,060
			4,411,547

See Notes to Financial Statements. — ANNUAL REPORT	AUGUST 31, 2008	47

Schedule of Investments (continued)
(Percentages shown
are based on Net Assets)

Corporate Bonds		Par (000)	Value
Hotels, Restaurants &
Leisure—2.1%
American
Real Estate Partners LP:
8.125%,
6/01/12	USD	5,860	$ 5,457,125
7.125%,
2/15/13		1,480	1,293,150
Greektown
Holdings, LLC, 10.75%, 12/01/13 (b)(f)(g)		1,344	1,014,720
Harrah’s
Operating Co., Inc. (b):
10.75%,
2/01/16		5,695	3,829,887
10.75%,
2/01/18 (c)		1,790	1,057,268
Tropicana
Entertainment LLC Series WI, 9.625%, 12/15/14 (f)(g)		375	120,000
Wynn Las
Vegas LLC, 6.625%, 12/01/14		100	91,125
			12,863,275
Household
Durables—0.0%
Berkline/BenchCraft,
LLC, 4.50%, 11/03/12 (c)(f)(g)(h)		200	—
IT Services—1.0%
First Data
Corp., 9.875%, 9/24/15 (b)		270	232,875
iPayment,
Inc., 9.75%, 5/15/14		950	795,625
iPayment
Investors LP, 12.75%, 7/15/14 (b)(c)		4,205	4,176,115
SunGard
Data Systems, Inc., 9.125%, 8/15/13		790	801,850
			6,006,465
Independent Power Producers &
Energy Traders—0.7%
The AES
Corp., 8.75%, 5/15/13 (b)		2,803	2,901,105
NRG Energy,
Inc.:
7.25%,
2/01/14		210	207,112
7.375%,
2/01/16		1,185	1,170,187
			4,278,404
Industrial
Conglomerates—1.1%
Sequa Corp.
(b):
11.75%,
12/01/15		3,210	2,824,800
13.50%,
12/01/15 (c)		4,972	4,050,671
			6,875,471
Machinery—0.9%
AGY Holding
Corp., 11%, 11/15/14		1,700	1,581,000
Accuride
Corp., 8.50%, 2/01/15		850	548,250
Sunstate
Equipment Co. LLC, 10.50%, 4/01/13 (b)		3,125	2,281,250
Synventive
Molding Solutions Sub-Series A, 14%, 1/14/11		650	292,491
Terex Corp.,
8%, 11/15/17		1,085	1,071,438
			5,774,429
Marine—0.1%
Navios
Maritime Holdings, Inc., 9.50%, 12/15/14		676	645,580
Media—6.7%
Affinion
Group, Inc., 10.125%, 10/15/13		2,825	2,782,625
CMP
Susquehanna Corp., 9.875%, 5/15/14		2,425	1,515,625
Cablevision
Systems Corp. Series B, 7.133%, 4/01/09 (d)		800	804,000
Charter
Communications Holdings I, LLC, 11%, 10/01/15		340	260,950
Charter
Communications Holdings II, LLC, 10.25%, 9/15/10		3,420	3,278,875
Comcast
Cable Communications LLC, 6.875%, 6/15/09 (e)		6,685	6,846,730
Dex Media
West LLC, 9.875%, 8/15/13		1,510	1,162,700
DirecTV
Holdings LLC, 8.375%, 3/15/13		500	517,500
EchoStar
DBS Corp.:
5.75%,
10/01/08		2,800	2,800,000
7%,
10/01/13		200	190,000
7.125%,
2/01/16		200	184,000
Network
Communications, Inc., 10.75%, 12/01/13		1,520	1,092,500
Nielsen
Finance LLC, 10%, 8/01/14		3,825	3,872,812
ProtoStar I
Ltd., 12.50%, 10/15/12 (b)(d)(i)		3,345	3,244,435
R.H.
Donnelley Corp., 11.75%, 5/15/15 (b)		2,442	1,794,870
Rainbow
National Services LLC (b):
8.75%,
9/01/12		925	943,500
10.375%,
9/01/14		3,134	3,333,792
Salem
Communications Corp., 7.75%, 12/15/10		2,000	1,680,000
Sinclair
Broadcast Group, Inc. Class A, 4.875%, 7/15/18 (i)(j)		460	421,475
TL
Acquisitions, Inc., 10.50%, 1/15/15 (b)		4,500	3,847,500
Windstream
Regatta Holdings, Inc., 11%, 12/01/17 (b)		1,575	913,500
			41,487,389

Corporate Bonds		Par (000)	Value
Metals &
Mining—1.2%
AK Steel
Corp., 7.75%, 6/15/12	USD	2,200	$ 2,249,500
Freeport-McMoRan
Copper & Gold, Inc.:
5.883%,
4/01/15 (d)		1,495	1,498,947
8.375%,
4/01/17 (e)		3,495	3,704,700
			7,453,147
Multiline
Retail—0.8%
JC Penney
Corp. Inc., 8%, 3/01/10 (e)		4,400	4,536,985
Neiman
Marcus Group, Inc., 9%, 10/15/15 (c)		73	70,992
			4,607,977
Oil, Gas & Consumable
Fuels—2.1%
Berry
Petroleum Co., 8.25%, 11/01/16		550	525,250
Chaparral
Energy, Inc., 8.50%, 12/01/15		1,210	1,052,700
Chesapeake
Energy Corp., 6.375%, 6/15/15		650	604,500
Compton
Petroleum Finance Corp., 7.625%, 12/01/13		700	657,125
EXCO
Resources, Inc., 7.25%, 1/15/11		495	490,050
Encore
Acquisition Co., 6%, 7/15/15		250	218,125
OPTI
Canada, Inc., 8.25%, 12/15/14		1,990	1,987,512
Overseas
Shipholding Group, Inc., 8.75%, 12/01/13		1,650	1,716,000
Sabine Pass
LNG LP, 7.50%, 11/30/16		1,515	1,325,625
SandRidge
Energy, Inc. (b):
6.416%,
4/01/14 (d)		1,500	1,406,731
8.625%,
4/01/15 (c)		1,500	1,451,250
Whiting
Petroleum Corp.:
7.25%,
5/01/12		160	154,400
7.25%,
5/01/13		1,390	1,334,400
			12,923,668
Paper & Forest
Products—0.5%
Bowater,
Inc., 5.776%, 3/15/10 (d)		670	549,400
Domtar
Corp.:
7.875%,
10/15/11		140	143,850
7.125%,
8/15/15		300	289,500
NewPage
Corp.:
9.051%,
5/01/12 (d)		1,500	1,406,250
10%,
5/01/12		665	645,050
12%,
5/01/13		200	187,000
			3,221,050
Professional
Services—0.1%
FTI
Consulting, Inc., 7.75%, 10/01/16		350	363,125
Real Estate Investment Trusts
(REITs)—0.2%
Rouse Co.
LP, 5.375%, 11/26/13		2,000	1,523,422
Semiconductors & Semiconductor
Equipment—0.6%
Amkor
Technology, Inc.:
7.75%,
5/15/13		2,063	1,934,062
9.25%,
6/01/16		310	299,150
Freescale
Semiconductor, Inc.:
8.875%,
12/15/14		560	453,600
9.125%,
12/15/14 (c)		1,305	1,017,900
			3,704,712
Software—0.1%
BMS
Holdings, Inc., 10.595%, 2/15/12 (b)(c)(d)		516	309,442
Specialty
Retail—2.5%
AutoNation,
Inc.:
4.791%,
4/15/13 (d)		690	569,250
7%, 4/15/14		690	596,850
General Nutrition
Centers, Inc.:
7.199%,
3/15/14 (c)(d)		2,250	1,882,229
10.75%,
3/15/15		1,880	1,630,900
Group 1
Automotive, Inc., 8.25%, 8/15/13		5,000	4,550,000
Lazy Days’
R.V. Center, Inc., 11.75%, 5/15/12		1,475	737,500
Michaels
Stores, Inc. (e):
10%,
11/01/14		1,895	1,421,250
11.375%,
11/01/16		1,565	1,001,600
Sonic
Automotive, Inc. Series B, 8.625%, 8/15/13		3,500	2,695,000
			15,084,579

See Notes to Financial Statements. — 48	ANNUAL REPORT	AUGUST 31, 2008

Schedule of Investments (continued)
(Percentages shown
are based on Net Assets)

Corporate Bonds		Par (000)	Value
Textiles, Apparel & Luxury
Goods—0.1%
Quiksilver,
Inc., 6.875%, 4/15/15	USD	575	$ 461,437
Tobacco—0.2%
Reynolds
American, Inc., 7.625%, 6/01/16		1,000	1,036,980
Wireless Telecommunication
Services—1.2%
Cricket Communications,
Inc., 9.375%, 11/01/14		270	267,637
Digicel
Group Ltd. (b):
8.875%,
1/15/15		1,120	1,051,456
9.125%,
1/15/15 (c)		2,466	2,229,551
MetroPCS
Wireless, Inc., 9.25%, 11/01/14		360	356,850
Nordic
Telephone Co. Holdings ApS, 8.875%, 5/01/16 (b)		3,850	3,705,625
			7,611,119
Total Corporate Bonds—37.6%			231,677,287

| Foreign Government Obligations — Colombia
Government International Bond, 9.75%, 4/23/09 (e) | 5,000 | 5,200,000 |
| --- | --- | --- |
| Peru
Government International Bond, 8.375%, 5/03/16 | 4,871 | 5,714,657 |
| Turkey
Government International Bond, 7%, 9/26/16 | 5,093 | 5,213,959 |
| Total Foreign Government
Obligations—2.6% | | 16,128,616 |

| U.S. Government Agency Mortgage-Backed
Securities | | |
| --- | --- | --- |
| Fannie Mae
Guaranteed Pass-Through Certificates: | | |
| 5.00%,
9/15/23 (k) | 121,000 | 119,865,625 |
| 5.50%,
12/01/28—11/01/33 (e)(l) | 7,721 | 7,669,437 |
| Total U.S. Government Agency
Mortgage-Backed Securities—20.7% | | 127,535,062 |

Floating Rate Loan Interests
Aerospace &
Defense—1.2%
Avio
Holding SpA:
Term Loan
B, 4.594%, 9/25/14	1,000	902,143
Term Loan
C, 5.219%, 9/25/15	1,000	902,143
Hawker
Beechcraft Acquisition Co. LLC:
Letter of
Credit, 2.70%, 3/26/14	267	248,549
Term Loan,
4.801%, 3/26/14	4,569	4,254,328
IAP
Worldwide Services, Inc. First Lien Term Loan, 8.25%, 12/30/12	586	455,807
Wesco
Aircraft Hardware Corp. First Lien Term Loan, 5.06%, 9/29/13	486	466,192
		7,229,162
Airlines—0.3%
US Airways
Group, Inc. Term Loan, 4.963%, 3/24/14	2,970	2,034,450
Auto Components—0.9%
Allison
Transmission, Inc. Term Loan, 5.22%—5.56%, 8/07/14	4,064	3,644,625
Dayco
Products LLC (Mark IV, Inc.) Replacement B Term Loan, 7.14%—7.68%, 6/21/11	864	598,359
Delphi
Corp. Second Lien:
Subsequent
Tranche C Term Loan, 8.5%, 12/31/08	79	64,979
Term Loan,
8.50%, 1/11/16	771	638,041
Metaldyne
Co. LLC:
Initial
Tranche B Term Loan, 6.50%, 4/09/12	667	373,060
Letter of
Credit Deposit Funded Tranche, 2.35%—6.56%, 1/11/14	98	54,862
Rallyparts
LLC (Motorsport Aftermarket) Group Tranche B Term Loan, 5.301%, 11/30/13	493	310,275
		5,684,201

Floating Rate Loan Interests		Par (000)
Beverages—0.3%
Culligan
International Co. Second Lien Term Loan, 9.229%—9.615%, 4/24/13	EUR	1,500	$ 1,100,288
Le-Nature’s,
Inc. Term Loan B, 10.25%, 9/01/11 (f)(g)	USD	1,000	570,000
			1,670,288
Biotechnology—0.2%
Talecris
Biotherapeutics, Holdings Corp. First Lien Term Loan, 5.97%—6.31%, 12/06/13		995	962,614
Building
Products—1.5%
Armstrong
World Industries Tranche B Term Loan, 4.221%, 10/02/13		195	189,657
Building
Materials Corp. of America Term Loan Advance, 5.438%—5.563%, 2/22/14		2,888	2,477,436
Custom
Building Products Second Lien Term Loan, 7.801%, 4/20/12		1,500	1,170,000
Financiere
(Lafarge Roofing) SA:
Term Loan
B1, 6.856%, 6/14/15	EUR	725	610,930
Term Loan
B2, 6.856%, 6/14/15		296	249,534
Term Loan
B4, 4.594%, 6/14/15	USD	278	158,218
Term Loan
C1, 7.106%, 3/14/16	EUR	673	567,038
Term Loan C2,
7.106%, 3/14/16	USD	346	291,693
Term Loan
C4, 4.838%, 3/14/16		285	162,023
Momentive
Performance Materials, Inc.:
Tranche
B-1, 4.75%, 12/04/13	USD	967	890,911
Tranche
B-2, 6.73%, 12/14/13	EUR	1,000	1,285,503
United
Subcontractors Inc. Tranche B Term Loan,
7.79%—8.14%,
12/27/12	USD	1,811	1,014,458
			9,067,401
Capital Markets—0.1%
Marsico
Parent Co., LLC Term Loan, 5.50%—6.813%, 12/16/14		498	425,363
Chemicals—4.0%
Brenntag
Holdings:
Term Loan
Facility B6 A, 6.793%, 3/01/12	EUR	282	382,763
Term Loan
Facility B6 B, 6.793%, 3/01/12		218	296,331
Cognis
Deutschland:
Facility A
(German), 6.961%, 9/16/13		803	1,070,180
Facility B
(French), 6.961%, 9/16/13		197	262,085
Edwards
(Cayman Islands II) Ltd. First Lien Term Loan, 4.81%, 5/31/14		495	429,413
Electricinvest
Holding Co. Ltd., Junior 8.735%—9.625%, 12/19/12	GBP	1,793	2,616,541
Flint Group
Term Loan B, 4.88%, 12/31/14	USD	2,000	1,613,334
Huish
Detergents, Inc. Term Loan Tranche B, 4.81%, 4/26/14		1,250	1,132,291
ISP Chemco
LLC Term Loan, 4%—4.313%, 6/04/14		1,485	1,369,913
Ineos U.S.
Finance Group Plc Term Loan Facility:
A4,
4.721%—4.885%, 12/16/12		1,016	883,526
B2, 4.885%,
12/16/13		1,715	1,449,175
C2, 5.385%,
12/23/14		1,715	1,449,175
Invista
Canada Co. Term Loan:
B1, 4.301%,
4/29/11		1,274	1,213,114
B2, 4.301%,
4/29/11		675	643,041
Lucite International
Finance Plc, 13.96%, 7/14/13 (c)	EUR	1,105	923,795
PQ Corp.:
First Lien
Term Loan, 5.92%—6.05%, 7/30/14	USD	4,000	3,742,500
Second Lien
Term Loan, 9.30%, 7/30/14		3,250	2,811,250
Rockwood
Specialties Group, Inc. Tranche E Term Loan, 4.299%, 7/30/12		965	924,677
Solutia,
Inc. Term Loan, 8.50%, 2/28/14		1,750	1,686,017
			24,899,121
Commercial Services &
Supplies—1.7%
ARAMARK
Corp.:
Letter of
Credit, 2.44%, 1/26/14		185	174,918
Term Loan
B, 4.676%, 1/26/14		2,907	2,753,329

See Notes to Financial Statements. — ANNUAL REPORT	AUGUST 31, 2008	49

| Schedule of
Investments (continued) |
| --- |
| (Percentages shown
are based on Net Assets) |

Floating Rate Loan Interests		Par (000)	Value
Commercial Services & Supplies
(concluded)
Brickman
Group Holdings, Inc. Term Loan Tranche B, 4.801%, 1/23/14	USD	1,234	$ 1,104,766
EnviroSolutions Term Loan, 11.50%—12.25%, 7/07/12		501	457,982
Kion Group GmbH:
Term Loan
B, 4.469%, 12/28/14		250	216,298
Term Loan
C, 4.969%, 12/28/15		250	216,298
Language Line Services Term Loan B1, 6.06%, 6/11/11		729	685,510
Sirva
Second Lien Facility Loan, 12%, 5/15/15		229	186,326
Synagro Technologies, Inc. Term Loan, 4.81%, 4/02/14		2,743	2,317,897
West Corp. Term Loan B2, 4.844%—5.171%, 10/24/13		2,955	2,592,634
			10,705,958
Communications
Equipment—1.4%
Alltel Corp. Initial Tranche:
Term Loan
B2, 5.064%, 5/16/15		1,744	1,723,239
Term Loan
B3, 4.966%, 5/18/15		5,219	5,199,435
SafeNet, Inc. Term Loan B, 5.788%, 4/11/14		1,980	1,702,800
			8,625,474
Computers
& Peripherals—0.6%
Intergraph Corp.:
Initial
Term Loan, First Lien, 4.809%, 5/29/14		1,431	1,359,292
Second Lien
Term Loan, 8.809%, 11/29/14		750	720,000
Dealer
Computer Services (Reynolds and Reynolds) Term Loan, 4.801%, 10/26/12		1,889	1,747,366
			3,826,658
Construction
& Engineering—0.2%
Brand Energy & Infrastructure Services, Inc.:
First Lien
Term Loan B, 5.063%, 2/07/14		993	908,422
Second Lien
Term Loan, 8.813%, 2/07/15		500	460,000
			1,368,422
Containers
& Packaging—1.2%
Atlantis Plastics Second Lien Term Loan, 12%, 3/22/12
(f)(g)		250	43,750
Consolidated
Container Co. LLC Second Lien Term Loan, 7.969%—8.31%, 9/28/14		350	171,500
Graham
Packaging Co. LP New Term Loan E, 4.938%—5.063%, 10/07/11		2,095	1,990,289
Graphic
Packaging International Corp. Incremental Term Loan, 5.535%—5.884%, 5/16/14		2,363	2,278,939
Mivisa Envases SAU:
Term Loan
B1	EUR	826	1,054,549
Term Loan
B2		174	221,785
Smurfit-Stone
Container Enterprises, Inc. Deposit Account, 4.913%, 11/01/10	USD	568	548,645
Solo Cup Co. Term B1 Loan, 5.97%—6.31%, 2/27/11		1,198	1,163,086
			7,472,543
Distributors—0.2%
Keystone
Automotive Operations, Inc. Term Loan, 5.966%—5.972%, 1/12/12		1,434	1,003,542
Diversified
Consumer Services—0.7%
Coinmach
Corp. Term Loan, 5.48%—5.81%, 11/20/14		4,738	4,353,125
Diversified
Financial Services—0.7%
J.G. Wentworth LLC:
First Lien
Term Loan, 5.051%, 4/04/14		4,400	3,388,000
Professional
Services First Lien Term Loan, 5.22%, 10/31/12		752	676,849
			4,064,849
Diversified
Telecommunication Services—1.5%
BCM Ireland Holdings (Eircom):
Term Loan
B, 6.606%, 9/30/14	EUR	2,000	2,695,948
Term Loan
C, 6.856%, 9/30/15		2,000	2,696,752
Country
Road Communications Second Lien Term Loan, 10.42%, 7/15/13	USD	500	485,000

Floating Rate Loan Interests		Par (000)	Value
Diversified
Telecommunication Services (concluded)
Hawaiian
Telcom Communications, Inc. Term Loan C, 5.301%, 6/01/14	USD	648	$ 514,238
Time Warner
Telecom Holdings, Inc. Term Loan B, 4.47%, 1/07/13		2,023	1,935,167
Wind
Telecomunicazion SpA Term Loan A1, 6.235%—6.89%, 5/25/10	EUR	653	895,390
			9,222,495
Electric
Utilities—0.1%
TPF Generation Holdings LLC:
First Lien
Letter of Credit, 2.10%, 12/15/13	USD	151	144,634
First Lien
Term Loan, 4.801%, 12/15/13		743	713,827
Revolving
Credit, 4.801%, 12/15/13		47	45,340
			903,801
Electrical
Equipment—0.4%
Electrical
Components International Holdings Second Lien Term Loan, 10.50%, 4/28/14		500	225,000
Generac
Acquisition Corp., Inc. First Lien Term Loan, 5.288%, 11/09/13		1,479	1,142,571
Sensus Metering Systems, Inc.:
New Term
Loan B-1, 4.47%—4.812%, 12/17/10		1,057	1,024,826
New Term Loan B-2, 4.47%, 12/17/10		27	26,411
			2,418,808
Electronic
Equipment & Instruments—0.9%
Flextronics
International Ltd. Delay Draw Term Loan A Closing Date, 5.041%, 10/01/14		1,109	1,005,903
Flextronics
International Ltd. Closing Date Loan 5.038%—5.041%, 10/01/14		3,859	3,525,719
Matinvest (Deutsch Connectors):
Term Loan
B2, 5.384%, 6/22/14		491	430,103
Term Loan
C2, 5.634%, 6/22/15		851	746,220
			5,707,945
Energy
Equipment & Services—0.8%
Dresser,
Inc. Term Loan B, 4.713%—5.057%, 5/04/14		3,432	3,273,621
MEG Energy Corp. Initial Term Loan, 4.80%, 4/03/13		489	466,604
Trinidad U.S.A. Partnership LP Term Loan, 4.964%, 5/01/11		1,465	1,391,750
			5,131,975
Food
& Staples Retailing—1.4%
AB Acquisition Term Loan B, 8.091%, 7/15/15	GBP	4,000	6,466,578
Advantage
Sales & Marketing, Inc. Term Loan, 4.47%—4.81%, 3/29/13	USD	973	899,429
DS Waters of America Term Loan B, 6.469%, 3/07/12		500	462,500
WM
Bolthouse Farms, Inc. First Lien Term Loan, 5.063%, 12/16/12		975	933,563
			8,762,070
Food
Products—2.0%
Dole Food Co., Inc.:
Linked
Deposit, 2.65%, 4/12/13		280	256,702
Term Loan
B, 4.5%—6%, 4/12/13		511	468,875
Term Loan
C, 4.50%—6%, 4/12/13		2,050	1,881,950
Eight O’Clock Coffee Co. Term Loan, 5.25%, 11/14/11		1,813	1,740,696
Michael Foods Term Loan B-1, 4.845%—5.194%, 11/21/10		2,167	2,123,436
Osi Funds GMBH-German Term Loan, 4.801%, 9/2/11		531	522,597
Osi Group LLC.-U.S. Term Loan B, 4.801%, 9/2/11		1,194	1,175,844
Osi Holland Finance-Dutch Term Loan, 4.801%, 9/2/11		663	653,247
Sturm Foods, Inc.:
First Lien
Term Loan 5.25%—5.375%, 1/31/14		1,355	1,104,564
Initial
First Lien Term Loan 5.375%, 1/31/14 (c)(h)		500	407,500
Second Lien
Term Loan, 8.875%, 7/31/14		500	305,000
Wrigley Co. Term Loan B, 0%, 8/11/14		1,500	1,505,894
			12,146,305

| See Notes to Financial Statements. — 50 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

| Schedule of
Investments (continued) |
| --- |
| (Percentages shown
are based on Net Assets) |

Floating Rate Loan Interests		Par (000)	Value
Health
Care Equipment & Supplies—1.2%
Biomet, Inc. Dollar Term Loan, 5.801%, 3/25/15	USD	4,466	$ 4,374,134
DJO Finance
LLC Term Loan, 5.469%—5.801%, 5/20/14		2,488	2,425,313
Select Medical Term Loan B, 4.472%—6.0%, 2/24/12		966	895,140
			7,694,587
Health
Care Providers & Services—2.3%
CCS Medical
First Lien Term Loan (Chronic Care), 6.06%, 9/30/12		840	673,758
Cardinal Health Euro Term Loan, 7.205%, 4/15/14	EUR	1,980	2,556,188
Community
Health Systems, Inc. Term Loan, 4.719%—5.06%, 7/25/14	USD	8,188	7,738,726
Health
Management Associates, Inc. Term Loan B, 4.551%, 2/28/14		886	811,432
HealthSouth Corp. Term Loan, 5.29%, 3/10/13		801	757,575
Surgical
Care Affiliates LLC Term Loan B, 5.051%, 12/29/14		1,987	1,748,961
			14,286,640
Health
Care Technology—0.2%
Sunquest
Holdings Inc. (Misys Hospital Systems), Term Loan, 5.72%—6.05%, 10/13/14		1,489	1,403,147
Hotels,
Restaurants & Leisure—2.2%
CCM Merger
Inc. (MotorCity Casino) Term Loan B, 4.808%—4.815%, 7/13/12		1,665	1,494,422
Green Valley Ranch Gaming LLC:
First Lien
Term Loan, 4.469%—4.801%, 2/16/14		476	364,285
Second
Lien, 5.719%, 8/16/14		1,500	753,750
Harrah’s Operating Co., Inc.:
Term Loan
B1, 5.80%—5.801%, 1/28/15		554	486,221
Term Loan
B2, 5.80%, 1/28/15		698	611,580
Term Loan
B3, 5.801%, 1/28/15		810	709,546
OSI Restaurant Partners, Inc.:
Incremental
Term Loan, 5.125%, 5/15/13		403	307,635
Revolving
Credit, 5.026%, 5/15/13		39	29,795
Prefunded
Penn National Gaming, Inc. Term Loan B, 4.21%—4.55%, 10/03/12		4,046	3,871,761
QCE LLC First Lien Term Loan, 4.813%, 5/05/13		1,960	1,652,933
Travelport LLC (Travelport, Inc.):
Standby
Letter of Credit, 5.051%, 8/23/13 (c)		29	24,225
Term Loan,
9.793%, 3/27/12 (c)		4,216	2,592,978
Term Loan
B, 4.719%, 3/27/12		145	120,731
Wembley,
Inc. First Lien Term Loan, 6.72%—7.19%, 8/23/11		491	364,865
			13,384,727
Household
Durables—0.3%
Berkline
Corp. Term Loan B, 6.578%, 11/03/11 (f)(g)(h)		95	4,735
Jarden Corp. Term Loan B3, 5.301%, 1/24/12		995	915,377
The Yankee
Candle Co., Inc. Term Loan B, 4.48%—4.81%, 2/06/14		1,000	872,500
			1,792,612
Household
Products—0.2%
Central
Garden & Pet Term Loan New Tranche B, 3.97%—3.98%, 9/30/12		1,082	951,793
IT
Services—2.5%
Affiliated
Computer Services Term Loan, 4.472%, 3/20/13		731	705,395
Amadeus Global Travel Distribution SA:
Term Loan
B-3, 6.981%, 7/15/13	EUR	307	379,178
Term Loan
B-4, 6.481%, 7/15/13		186	229,621
Term Loan
C-3, 6.981%, 7/15/14		307	379,178
Term Loan
C-4, 6.981%, 7/15/14		186	229,621
Audio
Visual Services Group, Inc. Second Lien Term Loan, 8.31%, 2/28/14	USD	1,000	880,000
Ceridian Corp. U.S. Term Loan, 5.464%, 11/09/14		3,500	3,290,000

Floating Rate Loan Interests		Par (000)	Value
IT
Services (concluded)
First Data Corp.:
Term Loan
B1, 5.222%—5.551%, 9/24/14	USD	3,701	$ 3,390,309
Term Loan
B2, 5.222%—5.551%, 9/24/14		1,250	1,145,899
Term Loan
B3, 5.551%, 9/24/14		850	778,931
RedPrairie
Corp. Term Loan, 5.50%, 7/20/12		689	647,384
SunGard
Data Systems, Inc. (Solar Capital Corp.) New U.S. Term Loan, 4.553%, 2/28/14		2,426	2,276,390
Verifone,
Inc. Term Loan, 5.42%—5.55%, 10/31/13		930	888,150
			15,220,056
Independent
Power Producers & Energy Traders—1.6%
The AES Corp. Term Loan, 5.063%—5.10%, 8/10/11		429	418,393
Texas Competitive Electric Holdings Co. LLC (TXU):
Term Loan
B-2, 5.963%—6.303%, 10/13/14		2,978	2,774,863
Term Loan
B-3, 5.963%—6.303%, 10/13/14		7,306	6,794,795
			9,988,051
Insurance—0.3%
Conseco New Term Loan, 4.469%, 10/10/13		737	615,301
Sedgwick
Claims Management Service, Inc. Term Loan B, 5.051%, 1/31/13		1,070	1,016,482
			1,631,783
Internet
& Catalog Retail—0.1%
Oriental
Trading First Lien Term Loan, 4.72%, 7/31/13 (h)		956	692,817
Leisure
Equipment & Products—0.1%
24 Hour
Fitness Worldwide, Inc. Tranche B Term Loan, 4.97%—5.17%, 6/08/12		977	909,075
Life
Sciences Tools & Services—0.2%
Quintiles
Transnational First Lien Term Loan B4, 4.81%, 3/31/13		978	928,625
Machinery—1.6%
Big Dumpster (Wastequip):
Delay Draw
Term Loan, 5.051%, 2/05/13		287	224,527
Term Loan
B, 5.051%, 2/05/13		683	533,251
Blount, Inc. Term Loan B, 4.214%, 8/09/10		726	693,045
LN
Acquisition Corp. (Lincoln Industrials) Second Lien Initial Term Loan, 8.22%, 1/09/15		1,500	1,365,000
NACCO
Materials Handling Group Term Loan, 4.469%—4.82%, 3/21/13		490	426,300
Navistar International Corp.:
Advance
Term Loan, 6.046%—6.292%, 1/19/12		2,750	2,533,438
Revolving
Credit, 5.903%—6.046, 1/19/12		1,000	921,250
OshKosh Truck Corp. Term Loan B, 4.22%—4.43%, 12/06/13		2,331	2,120,465
Standard Steel:
Delay Draw
Term Loan, 4.97%—6.50%, 6/30/12		83	75,075
Initial
Term Loan, 5.31%, 6/30/12		408	371,583
Trimas Co. LLC:
Term Loan
B, 4.72%—6.75%, 8/02/13		399	361,222
Tranche B-1,
2.46%, 8/02/13		94	84,844
			9,710,000
Marine—0.4%
Delphi Acquisition Holding:
Facility
B1—Assignment, 5.176%, 1/11/15		488	447,214
Facility
B2—Assignment, 5.176%, 1/11/15		1,000	915,000
Facility
C1—Assignment, 5.675%, 1/11/16		489	447,214
Facility
C2—Assignment, 5.675%, 1/11/16		1,000	915,000
			2,724,428
Media—14.1%
Acosta, Inc. Term Loan, 4.72%, 7/29/13		980	910,175
Affinion Group, Inc. Term Loan, 9.368%, 3/01/12		1,000	838,750
Alix Partners Tranche C Term Loan, 4.79%, 10/12/13		1,446	1,391,813
Alpha Topco (Formula One Group):
Facility D
(Second Lien), 6.634%, 12/31/13		1,000	909,250
Term Loan
B1, 4.719%, 12/31/13		857	779,357
Term Loan
B2, 4.719%, 12/31/13		589	498,437

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 51 |
| --- | --- | --- |

| Schedule of
Investments (continued) |
| --- |
| (Percentages shown
are based on Net Assets) |

Floating Rate Loan Interests		Par (000)	Value
Media
(continued)
Atlantic
Broadband Finance Term Loan B2, 5.06%, 8/10/12	USD	980	$ 945,792
Cablevision
Systems Corp. Incremental Term Loan, 4.214%, 3/29/13		2,910	2,767,410
Catalina
Marketing Group Initial Term Loan, 5.801%, 10/01/14		2,977	2,795,105
Cengage
Learning Inc. Tranche 1 Term Loan, 7.50%, 7/05/14		3,750	3,712,500
Cequel
Communications LLC Term Loan, 4.791%—6.0%, 11/05/13		7,416	6,922,586
Charter
Communications, Inc. Replacement Term Loan, 4.67%—4.8%, 3/06/14		3,970	3,467,684
Cinemark Term Loan B, 4.53%—4.93%, 10/05/13		1,105	1,043,731
Clarke
American Corp. Term Loan B, 5.291%—5.301%, 6/30/14		3,401	2,795,746
Dex Media West Term Loan B, 7%, 10/24/14		2,250	2,057,344
Discovery
Communications Term Loan B, 4.801%, 5/14/14		1,487	1,449,928
Education
Media and Publishing Mezzanine Loan, 6.46%, 12/12/13		8,793	7,034,551
GateHouse Media Operating, Inc.:
Delay Draw
Term Loan, 4.81%, 8/28/14		497	266,900
Term Loan
B, 4.81%, 8/28/14		745	400,496
Getty Images, Inc. Initial Term
Loan, 7.25%, 7/02/15		750	748,829
Gray
Communications Systems, Inc. Delay Draw Term Loan B, 3.77%—5.25%, 12/31/14		1,800	1,494,068
HIT Entertainment Ltd.
Second Lien
Term Loan, 8.30%, 2/26/13		1,000	795,000
Term Loan,
4.80%, 3/20/12		366	312,944
Hanley-Wood
LLC Term Loan, 4.711%—4.717%, 3/08/14 (h)		1,492	1,158,553
Insight
Midwest Holdings LLC Term Loan B, 4.47%, 4/06/14		3,550	3,409,111
Intelsat (PanAmSat Corp.):
Term Loan
B2A, 5.288%, 1/03/12		986	937,479
Term Loan
B2B, 5.288%, 1/03/12		986	937,762
Term Loan
B2C, 5.288%, 1/03/12		986	937,479
Knology,
Inc. Term Loan, 5.038%, 6/30/12		495	455,400
Lavena Holdings (ProSiebenSat 1 Media AG):
Facility
B1, 6.86%—7.526%, 6/30/16		500	504,115
Term Loan
C1, 7.11%—7.776%, 6/30/15		500	504,115
Term Loan
D, 8.235%—8.901%, 6/30/15	EUR	1,000	524,470
MCC Iowa LLC (Mediacom Broadband Group)
Term Loan
D-1, 4.21%—4.23%, 1/31/15	USD	1,970	1,817,325
MCNA Cable
(One Link) Term Loan, 9.47%, 10/31/13 (c)		1,687	1,478,577
Mediacom LLC Term Loan C, 4.22%—4.23%, 1/31/15		1,945	1,796,067
Metro-Goldwyn-Mayer,
Inc. Term Loan B, 6.051%, 4/08/12 (h)		3,890	2,929,695
Mission
Broadcastinng, Inc. Term Loan B, 4.551%, 10/01/12		1,892	1,722,087
Multicultural
Radio Broadcasting Inc. Term Loan, 5.422%, 12/18/12	EUR	349	314,100
NTL Cable Plc. (Virgin):
B1
Facility, 8.145%, 9/03/12		818	1,356,091
B2
Facility, 8.145%, 9/03/12		437	724,880
C Facility,
8.743%, 3/03/13	GBP	2,000	3,183,485
NV
Broadcasting First Lien Term Loan, 5.69%, 10/21/13	USD	826	726,552
Newsday LLC Fixed Rate, 9.75%, 8/01/13		1,500	1,497,188
Nexstar
Broadcasting Group Term Loan B, 4.416%, 10/01/12		1,791	1,629,956
Nielsen Finance LLC Dollar Term Loan, 4.803%, 8/09/13		3,439	3,176,028
Parkin
Broadcasting (NV Broadcasting) Term Loan, 5.69%, 10/21/13		169	149,036

Floating Rate Loan Interests		Par (000)	Value
Media
(concluded)
Penton Media (h):
First Lien
Term Loan 4.719%—5.049%, 2/01/13	USD	1,111	$ 841,535
Second Lien
Term Loan 7.799%, 2/01/14		1,000	690,000
Puerto Rico
(Choice Cable) Second Lien Term Loan, 10.313%, 1/26/12		692	553,846
Stile
(ClientLogic Holding Corp.) U.S. Term Loan, 4.962%—5.359%, 1/30/14 (h)		968	751,762
Telecommunications Management LLC:
Multi Draw
Term Loan, 5.969%—7.75%, 6/20/13		237	206,467
Term Loan,
5.969%, 6/30/13		931	875,140
United Pan Europe Communications:
Term Loan
M, 6.482%, 12/31/14	EUR	1,413	1,842,970
Term Loan
N, 4.214%, 12/31/14	USD	2,000	1,873,000
Yell Group Plc Term Loan B2:
4.469%,
2/10/13		1,000	868,750
6.485%,
2/27/13	EUR	1,500	1,944,008
			86,655,426
Metals
& Mining—0.1%
Compass
Minerals Group, Inc. Term Loan, 3.98%—6.59%, 12/22/12	USD	780	751,224
Euramax International:
Domestic
Loan (Second Lien), 10.791%, 6/29/13		167	111,125
European
Loan (Second Lien), 10.791%, 6/29/13		83	55,125
			917,474
Multi-Utilities—0.6%
Coleto Creek:
Letter of
Credit, 5.551%, 6/28/13		127	114,650
Synthetic
LC First Lien Term Loan, 5.551%, 6/28/13		1,807	1,626,734
MACH Gen LLC:
First Lien
Term Loan B, 4.81%, 2/22/14		668	635,728
Letter of
Credit First Lien, 4.551%, 2/22/13		70	66,867
NE Energy:
First Lien
Term Loan B, 5.31%, 11/01/13		1,230	1,131,998
Letter of
Credit, 5.313%, 11/01/13		159	145,854
			3,721,831
Multiline
Retail—0.3%
Neiman
Marcus Group, Inc. Term Loan, 4.422%, 4/06/13		1,940	1,799,673
Oil,
Gas & Consumable Fuels—1.2%
Big West Oil & Gas:
Delayed
Advance Term Loan, 4.463%—4.471%, 5/15/14		550	484,000
Initial
Term Advance, 4.68%, 5/15/14		440	387,200
CR Gas Storage:
Bridge
Loan, 4.843%, 5/12/13		29	26,829
Canadian
Term Loan B, 4.534%, 5/12/13		455	422,451
Delay Draw
U.S. Term B, 4.844%, 5/08/13		51	47,230
U.S. Term
Loan, 4.411%, 5/12/13		75	69,723
Coffeyville Resources LLC:
Funded
Letter of Credit, 2.69%, 12/28/10		243	221,351
Term Loan
D, 5.541%—6.75%, 12/28/13		787	716,503
Drummond Oil Term Advance, 3.75%, 2/14/11		1,425	1,382,250
Turbo Beta Term Loan, 14.50%, 3/15/18 (h)		3,010	2,950,013
Western Refining Co. LP Term Loan, 7.75%, 5/30/14		919	792,501
			7,500,051
Paper
& Forest Products—1.8%
Boise
Cascade Holdings LLC First Lien Tranche B Term Loan, 7.50%, 2/22/14		1,247	1,241,309
Georgia-Pacific Corp.:
Term Loan
B, 4.219%—4.551%, 12/20/12		5,684	5,367,099
Add on Term
Loan B2, 4.446%—4.551%, 12/20/12		2,386	2,252,892
NewPage Corp. Tem Loan, 6.563%, 12/21/14		1,990	1,938,758
Verso Paper Holdings LLC Term Loan, 9.033%, 8/01/13		560	525,000
			11,325,058

| See Notes to Financial Statements. — 52 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Limited Duration Income Trust (BLW) (Percentages shown are based on Net Assets)

Floating Rate Loan Interests	Par (000)		Value
Personal
Products—0.6%
American
Safety Razor Co. Second Lien Term Loan, 8.72%—8.90%, 1/30/14	USD	2,500	$ 2,250,000
Prestige
Brands Term Loan B, 4.713%—5.043%, 4/06/11		1,142	1,116,105
			3,366,105
Real Estate Management &
Development—1.1%
Enclave
Term Loan B, 6.14%, 3/01/12		3,000	2,493,000
Georgian
Towers Term Loan B5, 6.14%, 12/20/12		3,000	2,431,500
Pivotal
Promontory Second Lien Term Loan, 10.5%, 8/31/11 (f)(g)		750	112,500
Realogy
Corp. Term Loan B, 5.462%, 10/10/13 (h)		1,485	1,225,744
Yellowstone
Club First Lien Loan B, 4.844%, 9/30/10		409	340,429
			6,603,173
Road & Rail—0.2%
Rail
America, Inc.:
Canadian
Term Loan 6.79%, 8/14/09		91	90,744
U.S. Term
Loan, 6.79%, 8/14/09		1,409	1,401,756
			1,492,500
Semiconductors & Semiconductor
Equipment—0.1%
Marvell
Technology Group Term Loan, 4.969%, 11/08/09		482	477,056
Software—0.2%
Bankruptcy
Management Solutions, Inc.
First Lien
Term Loan, 6.47%, 7/28/12		983	903,900
CCC
Information Services, Inc. Term Loan, 5.06%, 2/10/13		414	396,978
			1,300,878
Specialty
Retail—1.2%
ADESA, Inc.
Initial Term Loan, 5.06%, 10/18/13		1,724	1,533,790
Burlington
Coat Factory Warehouse Corp. Term Loan, 5.06%, 5/28/13		586	453,815
Claire’s
Stores Term Loan B, 5.219%—5.56%, 5/29/14		1,236	825,671
Eye Care
Centers of America, Inc. Term Loan, 4.97%—5.31%, 2/16/12		656	623,052
Orchard
Supply Hardware Note Participation B, 4.917%, 12/09/08		1,500	1,275,000
Petco
Animal Supplies, Inc. Term Loan, 4.719%—5.051%, 10/26/13		394	358,540
Rent-A-Center
Term Loan B, 4.54%—4.57%, 6/30/12		805	760,277
Sensata
Technologies U.S. Term Loan, 4.412%—4.543%, 4/27/13		1,930	1,695,113
			7,525,258
Textiles, Apparel & Luxury
Goods—0.3%
Hanesbrands,
Inc. Term Loan B, 4.545%—4.551%, 9/05/13		1,000	969,722
Renfro
Corp. Delayed Draw Tranche B, 5.92%—6.05%, 10/05/13		463	380,713
St. John
Knits, Inc. Term Loan B, 5.801%, 3/21/12		660	613,973
			1,964,408
Trading Companies &
Distributors—0.2%
Beacon
Sales Co. Term Loan B, 4.469%—4.783%, 9/30/13		1,228	1,093,031
Wireless Telecommunication
Services—0.9%
Cellular
South Term Loan B, 4.21%, 5/29/14		1,485	1,425,600
Centennial
Cellular Operating Co. Term Loan B, 4.469%, 2/09/11		800	782,666
Cricket
Communications, Inc. Term Loan B, 6.50%, 6/16/13		950	937,334
NG
Wireless:
Delay Draw
Term Loan, 5.219%, 8/15/14		140	133,356
First Lien
Term Loan, 5.219%—5.551%, 8/15/14		610	579,144
NTELOS Inc.
B-1 Facility, 4.72%, 8/24/11		1,687	1,649,362
			5,507,462
Total Floating Rate Loan
Interests—58.4%			360,254,295

U.S. Government Obligations — Fannie Mae, 7.25%, 1/15/10	Par (000) — USD	17,000	Value — $ 17,947,886
U.S. Treasury Notes (e):
3.375%,
12/15/08		17,000	17,075,701
3.875%,
5/15/09 (l)		6,000	6,073,596
3.375%,
9/15/09		3,425	3,467,545
4.25%,
8/15/15		1,815	1,916,952
Total U.S. Government Obligations—7.5%			46,481,680
Common Stocks	Shares
Capital
Markets—0.1%
E*Trade Financial Corp. (f)		121,011	387,235
Commercial
Services & Supplies—0.0%
Sirva Common Stock (f)(h)		1,109	77,630
Independent
Power Producers & Energy Traders—0.0%
Reliant Energy, Inc. (f)		4,573	77,878
Total Common Stocks—0.1%			542,743
Preferred Stocks
Capital
Markets—0.0%
Marsico Parent Superholdco, LLC, 16.75% (b)		177	151,335
Total Preferred Stocks—0.0%			151,335
Warrants (m)
Machinery—0.0%
Synventive Molding Solutions (expires 1/15/13)		1	0
Total Warrants—0.0%			0
Other Interests (n)	Beneficial Interest (000 )
Health
Care Providers & Services—0.0%
Critical Care Systems International, Inc. (h)	$	7,579	2,547
Household
Durables—0.0%
Berkline Benchcraft Equity LLC (h)		3,155	—
Total Other Interests—0.0%			2,547
Total Long-Term Investments
(Cost—$847,774,339)—127.3%			784,969,025
Short-Term Securities
U.S.
Government & Agency Obligations—0.4%
Federal Home Loan Bank, 2.60%, 9/02/08 (o)		2,200	2,200,000
Total Short-Term Securities
(Cost—$2,200,000)—0.4%			2,200,000
Options Purchased	Contracts
Call Options Purchased
Marsico
Parent Superholdco LLC, expiring December 2019 at $942.86		46	77,740
Total Options Purchased
(Cost—$44,978)—0.0%			77,740
Total Investments
(Cost—$850,019,317*)—127.7%			787,246,765
Liabilities in Excess of Other
Assets—(27.7)%			(170,854,018	)
Net Assets—100.0%			$ 616,392,747

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 53 |
| --- | --- | --- |

Schedule of Investments (concluded) BlackRock Limited Duration Income Trust (BLW)

• The cost and unrealized appreciation (depreciation) of investments as of August 31, 2008, as computed for federal income tax purposes, were as follows:

Aggregate cost	$
Gross unrealized appreciation	$ 6,121,952
Gross unrealized depreciation	(68,991,899	)
Net unrealized depreciation	$ (62,869,947	)

| (a) | Represents the interest only portion of a mortgage-backed
security and has either a nominal or a notional amount of principal. |
| --- | --- |
| (b) | Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions exempt
from registration to qualified institutional investors. |
| (c) | Represents a payment-in-kind security which may pay
interest/dividends in additional par/shares. |
| (d) | Variable rate security. Rate shown is as of report date. |
| (e) | All or a portion of security has been pledged as collateral
for reverse repurchase agreements. |
| (f) | Non-income producing security. |
| (g) | Issuer filed for bankruptcy or is in default of interest
payments. |
| (h) | Security is fair valued. |
| (i) | Convertible security. |
| (j) | Represents a step bond. |
| (k) | Represents or includes a to-be-announced transaction. The
Trust has committed to purchasing securities for which all specific
information is not available at this time. |
| (l) | All or a portion of security held as collateral in
connection with financial futures contracts and/or swaps. |
| (m) | Warrants entitle the Trust 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. |
| (n) | Other interests represent beneficial interest in
liquidation trusts and other reorganization entities and are non-income
producing. |
| (o) | Rate shown is the yield to maturity as of the date of
purchase. |
| • | For Trust compliance purposes, the Trust’s industry
classifications refer to any one or more of the industry sub-classifications
used by one or more widely recognized market indexes or ratings group
indexes, and/or as defined by Trust management. This definition may not apply
for purposes of this report, which may combine industry sub-classifications
for reporting ease. These industry classifications are unaudited. |
| • | Financial futures contracts purchased as of August 31,
2008 were as follows: |

Contracts	Issue	Expiration Date	Face Value	Unrealized Appreciation
67	5-Year U.S. Treasury Bond	September 2008	$ 7,402,077	$ 132,282

• Foreign currency exchange contracts as of August 31, 2008 were as follows:

Currency Purchased		Currency Sold		Settlement Date	Unrealized Appreciation
USD	30,303,553	EUR	19,362,550	10/23/08	$ 1,981,918
USD	15,951,178	GBP	8,042,900	10/23/08	1,350,233
Total					$ 3,332,151

• Swaps outstanding as of August 31, 2008 were as follows:

Sold credit default protection LCDX Index receive 5.25% Broker, UBS Securities Expires June 2013	3,000	Unrealized Appreciation (Depreciation) — $ (120,421	)
Bought credit default protection on LCDX Index and pay 3.25% Broker, UBS Securities Expires June 2013	3,500	58,415
Total		$ (62,006	)

• Reverse repurchase agreements outstanding as of August 31, 2008 were as follows:

| Counterparty — Credit Suisse Securities LLC | Interest Rate — 2.50 | % | 6/05/08 | Open | Net
Closing Amount — $ 3,969,545 | Face Amount — $ 3,945,125 |
| --- | --- | --- | --- | --- | --- | --- |
| Credit Suisse Securities LLC | 2.60 | % | 8/07/08 | Open | 2,155,645 | 2,152,225 |
| Credit Suisse Securities LLC | 2.60 | % | 8/07/08 | Open | 4,462,079 | 4,455,000 |
| Credit Suisse Securities LLC | 2.60 | % | 8/07/08 | Open | 5,108,103 | 5,100,000 |
| Credit Suisse Securities LLC | 2.60 | % | 8/07/08 | Open | 2,275,610 | 2,272,000 |
| Credit Suisse Securities LLC | 2.60 | % | 8/07/08 | Open | 3,535,559 | 3,529,950 |
| Lehman Brothers Inc. | 2.11 | % | 7/08/08 | Open | 17,202,283 | 17,148,750 |
| Lehman Brothers Inc. | 2.11 | % | 7/08/08 | Open | 6,082,887 | 6,063,900 |
| Lehman Brothers Inc. | 2.11 | % | 7/08/08 | Open | 3,521,617 | 3,510,625 |
| Lehman Brothers Inc. | 2.06 | % | 7/08/08 | Open | 1,934,399 | 1,928,438 |
| Lehman Brothers Inc. | 2.40 | % | 8/27/08 | 9/11/08 | 2,267,964 | 2,266,000 |
| Lehman Brothers International | (1.00 | )% | 7/02/08 | Open | 1,017,060 | 1,018,815 |
| Lehman Brothers International | (0.75 | )% | 7/02/08 | Open | 758,349 | 759,330 |
| Lehman Brothers International | 1.50 | % | 7/02/08 | Open | 2,504,980 | 2,498,525 |
| Lehman Brothers International | 2.75 | % | 7/02/08 | Open | 4,402,963 | 4,381,875 |
| Lehman Brothers International | 2.75 | % | 7/02/08 | Open | 2,266,936 | 2,256,250 |
| Lehman Brothers International | 0.75 | % | 7/24/08 | Open | 1,251,638 | 1,250,700 |
| Total | | | | | $ 64,717,617 | $ 64,537,508 |

• Currency Abbreviations:

EUR	Euro
GBP	British Pound
USD	U.S. Dollar

| See Notes to Financial Statements. — 54 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments August 31, 2008 BlackRock Strategic Bond Trust (BHD) (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)	Value
Aerospace
& Defense—6.6%
CHC
Helicopter Corp., 7.375%, 5/01/14	$ 475	$ 494,000
DRS
Technologies, Inc.:
6.875%,
11/01/13	50	50,625
7.625%,
2/01/18	80	84,200
Hexcel
Corp., 6.75%, 2/01/15	100	97,000
Honeywell
International, 7.50%, 3/01/10	325	344,949
Lockheed
Martin Corp. Series B, 6.15%, 9/01/36	2,000	1,973,700
Northrop
Grumman Corp., 7.125%, 2/15/11	1,000	1,059,353
Raytheon
Co., 4.85%, 1/15/11	650	655,914
TransDigm,
Inc., 7.75%, 7/15/14	90	87,525
United
Technologies Corp., 6.35%, 3/01/11	1,000	1,055,694
		5,902,960
Air Freight &
Logistics—0.3%
Park-Ohio
Industries, Inc., 8.375%, 11/15/14	300	247,500
Airlines—0.1%
American
Airlines, Inc. Series 99-1, 7.324%, 4/15/11	125	113,750
Auto Components—1.2%
Allison
Transmission, Inc. (a):
11%,
11/01/15	120	110,400
11.25%,
11/01/15 (b)	190	167,200
The
Goodyear Tire & Rubber Co.:
7.857%,
8/15/11	195	195,975
8.625%,
12/01/11	390	401,700
Lear Corp.,
8.75%, 12/01/16	185	139,213
Metaldyne
Corp., 10%, 11/01/13	200	54,000
		1,068,488
Automobiles—1.5%
DaimlerChrysler
NA Holding Corp., 7.30%, 1/15/12	1,000	1,045,714
Ford
Capital BV, 9.50%, 6/01/10	350	291,375
		1,337,089
Building
Products—0.9%
CPG
International I, Inc., 10.50%, 7/01/13	150	115,500
Momentive
Performance Materials, Inc., 11.50%, 12/01/16	445	347,100
Ply Gem
Industries, Inc., 11.75%, 6/15/13 (a)	370	336,700
		799,300
Capital Markets—0.5%
Marsico
Parent Co., LLC, 10.625%, 1/15/16	341	286,440
Marsico
Parent Holdco, LLC, 12.50%, 7/15/16 (a)(b)	126	104,351
Marsico
Parent Superholdco, LLC, 14.50%, 1/15/18 (a)(b)	85	70,356
		461,147
Chemicals—1.9%
American
Pacific Corp., 9%, 2/01/15	180	174,600
Ames True
Temper, Inc., 6.791%, 1/15/12 (c)	350	280,000
Huntsman
LLC, 11.50%, 7/15/12	99	103,455
Innophos,
Inc., 8.875%, 8/15/14	980	1,004,500
Key
Plastics LLC, 11.75%, 3/15/13 (a)	135	47,250
Terra
Capital, Inc. Series B, 7%, 2/01/17	80	77,800
		1,687,605
Commercial
Banks—1.7%
HSBC Bank
USA NA, 3.875%, 9/15/09	1,500	1,493,075
Commercial Services &
Supplies—3.7%
Casella
Waste Systems, Inc., 9.75%, 2/01/13	1,500	1,485,000
DI Finance
Series B, 9.50%, 2/15/13	524	520,070
Sally
Holdings LLC, 10.50%, 11/15/16	294	295,470
Waste
Services, Inc., 9.50%, 4/15/14	550	555,500
West Corp.,
11%, 10/15/16	590	461,675
		3,317,715
Communications
Equipment—0.3%
Nortel
Networks Ltd., 7.041%, 7/15/11 (c)	250	231,875

Corporate Bonds	Par (000)	Value
Construction
Materials—0.7%
Nortek
Holdings, Inc., 10%, 12/01/13 (a)	$ 700	$ 654,500
Containers &
Packaging—1.5%
Berry
Plastics Holding Corp.:
6.651%,
9/15/14 (c)	80	60,000
8.875%,
9/15/14	140	116,200
Crown
Americas LLC, 7.75%, 11/15/15	250	256,250
Impress
Holdings BV, 5.916%, 9/15/13 (a)(c)	260	234,000
Pregis
Corp., 12.375%, 10/15/13	565	539,575
Smurfit-Stone
Container Enterprises, Inc., 8%, 3/15/17	200	160,000
		1,366,025
Diversified Financial
Services—3.2%
Ford Motor
Credit Co. LLC:
4.361%,
1/15/10 (c)	1,600	1,368,438
5.538%,
1/13/12 (c)	100	73,830
7.80%,
6/01/12	250	185,666
GMAC LLC:
5.011%,
12/01/14 (c)	385	202,182
6.75%,
12/01/14	285	154,745
8%,
11/01/31	990	533,956
Structured
Asset Repackaged Trust, 3.761%, 1/21/10	397	384,482
		2,903,299
Diversified Telecommunication
Services—8.6%
AT&T,
Inc., 6.45%, 6/15/34	1,500	1,433,214
Broadview
Networks Holdings, Inc., 11.375%, 9/01/12	125	107,500
Cincinnati
Bell, Inc., 7.25%, 7/15/13	590	567,137
Citizens
Communications Co., 6.25%, 1/15/13	200	191,000
Qwest
Communications International, Inc., 7.50%, 2/15/14	1,180	1,073,800
Qwest
Corp.:
6.026%,
6/15/13 (c)	340	314,500
7.50%,
6/15/23	500	417,500
Telecom
Italia Capital SA, 4.95%, 9/30/14	1,000	906,195
Verizon New
England, Inc., 6.50%, 9/15/11	2,000	2,062,278
Wind
Acquisition Finance SA, 10.75%, 12/01/15 (a)	250	256,250
Windstream
Corp.:
8.125%,
8/01/13	360	356,400
8.625%,
8/01/16	170	168,300
		7,854,074
Electric
Utilities—3.0%
Edison
Mission Energy, 7.50%, 6/15/13	125	125,312
Elwood
Energy LLC, 8.159%, 7/05/26	29	27,349
FirstEnergy
Corp., 7.375%, 11/15/31	1,075	1,153,304
Midwest
Generation LLC Series B, 8.56%, 1/02/16	238	245,651
Progress
Energy, Inc., 7.75%, 3/01/31	1,000	1,125,144
		2,676,760
Electrical
Equipment—1.2%
Superior
Essex Communications LLC, 9%, 4/15/12	1,010	1,055,450
Electronic Equipment &
Instruments—0.5%
Sanmina-SCI
Corp., 8.125%, 3/01/16	465	419,663
Energy Equipment &
Services—0.4%
Compagnie
Generale de Geophysique-Veritas:
7.50%,
5/15/15	65	64,675
7.75%,
5/15/17	70	69,650
Grant
Prideco, Inc. Series B, 6.125%, 8/15/15	60	58,316
North
American Energy Partners, Inc., 8.75%, 12/01/11	125	124,375
		317,016
Food & Staples
Retailing—0.8%
The Pantry,
Inc., 7.75%, 2/15/14	500	417,500
Rite Aid
Corp., 7.50%, 3/01/17	375	311,250
		728,750
Food Products—0.3%
Kraft
Foods, Inc., 6.125%, 8/23/18	250	245,231

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 55 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Strategic Bond Trust (BHD) (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)	Value
Gas Utilities—0.6%
El Paso
Natural Gas Co., 8.375%, 6/15/32	$ 175	$ 193,550
Targa
Resources, Inc., 8.50%, 11/01/13	400	380,000
		573,550
Health Care Equipment &
Supplies—1.4%
Biomet,
Inc.:
10.375%,
10/15/17 (b)	100	105,500
11.625%,
10/15/17	100	105,125
DJO Finance
LLC, 10.875%, 11/15/14	1,090	1,092,725
		1,303,350
Health Care Providers &
Services—2.6%
Community
Health Systems, Inc. Series WI,
8.875%,
7/15/15	200	202,000
Tenet
Healthcare Corp.:
6.375%,
12/01/11	95	91,675
6.50%,
6/01/12	1,225	1,185,188
WellPoint,
Inc., 5.95%, 12/15/34	1,000	861,679
		2,340,542
Hotels, Restaurants &
Leisure—2.5%
American
Real Estate Partners LP:
8.125%,
6/01/12	860	800,875
7.125%,
2/15/13	230	200,962
Gaylord
Entertainment Co., 8%, 11/15/13	135	123,862
Greektown
Holdings, LLC, 10.75%, 12/01/13 (a)(e)(f)	211	159,305
Harrah’s
Operating Co., Inc. (a):
10.75%,
2/01/16	400	269,000
10.75%,
2/01/18 (b)	640	378,017
Seneca
Gaming Corp. Series B, 7.25%, 5/01/12	190	169,575
Tropicana
Entertainment LLC Series WI, 9.625%, 12/15/14 (e)(f)	50	16,000
Wynn Las
Vegas LLC, 6.625%, 12/01/14	115	104,794
		2,222,390
IT Services—1.5%
First Data
Corp., 9.875%, 9/24/15 (a)	360	310,500
iPayment,
Inc., 9.75%, 5/15/14	175	146,563
iPayment
Investors LP, 12.75%, 7/15/14 (a)(b)	647	642,967
SunGard
Data Systems, Inc., 9.125%, 8/15/13	240	243,600
		1,343,630
Independent Power Producers &
Energy Traders—2.9%
The AES
Corp., 8%, 6/01/20 (a)	750	718,125
AES
Ironwood LLC, 8.875%, 11/30/25	99	101,424
NRG Energy,
Inc.:
7.25%,
2/01/14	50	49,313
7.375%,
2/01/16	485	478,938
Texas
Competitive Electric Holdings Co. LLC:
10.50%,
11/01/16 (a)(b)	500	477,500
Series B,
10.25%, 11/01/15 (a)	750	748,125
		2,573,425
Industrial
Conglomerates—1.1%
Sequa Corp.
(a):
11.75%,
12/01/15	500	440,000
13.50%,
12/01/15 (b)	724	589,494
		1,029,494
Insurance—0.4%
MetLife,
Inc., 6.125%, 12/01/11	325	332,307
Machinery—0.7%
AGY Holding
Corp., 11%, 11/15/14	260	241,800
Accuride
Corp., 8.50%, 2/01/15	110	70,950
Sunstate
Equipment Co. LLC, 10.50%, 4/01/13 (a)	470	343,100
		655,850
Marine—0.2%
Navios
Maritime Holdings, Inc., 9.50%, 12/15/14	156	148,980

Corporate Bonds	Par (000)	Value
Media—13.4%
Affinion
Group, Inc., 10.125%, 10/15/13	$ 655	$ 645,175
CBS Corp.,
6.625%, 5/15/11	85	85,359
CMP
Susquehanna Corp., 9.875%, 5/15/14	500	312,500
Cablevision
Systems Corp. Series B, 7.133%, 4/01/09 (c)	120	120,600
Charter
Communications Holdings I, LLC, 11%, 10/01/15	90	69,075
Charter
Communications Holdings II, LLC, 10.25%, 9/15/10	800	767,475
Comcast
Cable Communications LLC, 6.875%, 6/15/09	1,000	1,024,193
Dex Media
West LLC, 9.875%, 8/15/13	30	23,100
DirecTV
Holdings LLC:
8.375%,
3/15/13	100	103,500
7.625%,
5/15/16 (a)	335	334,162
EchoStar
DBS Corp.:
5.75%,
10/01/08	550	550,000
7%,
10/01/13	51	48,450
7.125%,
2/01/16	45	41,400
Network
Communications, Inc., 10.75%, 12/01/13	325	233,594
News
America, Inc., 6.20%, 12/15/34	1,500	1,363,140
Nielsen
Finance LLC, 10%, 8/01/14	1,075	1,088,438
R.H.
Donnelley Corp., 11.75%, 5/15/15 (a)	1,001	735,735
Rainbow
National Services LLC (a):
8.75%,
9/01/12	210	214,200
10.375%,
9/01/14	1,455	1,547,756
Sinclair
Broadcast Group, Inc. Class A, 4.875%, 7/15/18 (g)(h)	70	64,138
TCI
Communications, Inc., 7.875%, 2/15/26	1,000	1,052,099
TL Acquisitions,
Inc., 10.50%, 1/15/15 (a)	750	641,250
Time
Warner, Inc., 7.70%, 5/01/32	1,000	1,008,772
Windstream
Regatta Holdings, Inc., 11%, 12/01/17 (a)	229	132,820
		12,206,931
Metals &
Mining—2.5%
AK Steel Corp.,
7.75%, 6/15/12	320	327,200
Aleris
International, Inc., 10%, 12/15/16	315	219,712
FMG Finance
Property Ltd., 10.625%, 9/01/16 (a)	130	145,600
Freeport-McMoRan
Copper & Gold, Inc.:
5.883%,
4/01/15 (c)	740	741,954
8.375%,
4/01/17	725	768,500
		2,202,966
Multi-Utilities—1.4%
DTE Energy
Co., 7.05%, 6/01/11	250	259,889
Dominion
Resources, Inc., 5.70%, 9/17/12	1,000	1,013,543
		1,273,432
Oil, Gas & Consumable
Fuels—5.9%
Berry
Petroleum Co., 8.25%, 11/01/16	100	95,500
Chaparral
Energy, Inc., 8.50%, 12/01/15	250	217,500
Chesapeake
Energy Corp., 2.25%, 12/15/38 (g)	275	257,813
Chesapeake
Energy Corp.:
6.375%,
6/15/15	130	120,900
7.25%,
12/15/18	650	633,750
Compton
Petroleum Finance Corp., 7.625%, 12/01/13	225	211,219
ConocoPhillips
Holding Co., 6.95%, 4/15/29	1,000	1,093,906
Corral
Finans AB, 7.713%, 4/15/10 (a)(b)	602	556,622
EXCO
Resources, Inc., 7.25%, 1/15/11	275	272,250
Encore
Acquisition Co., 6%, 7/15/15	30	26,175
Forest Oil
Corp.:
7.25%,
6/15/19	360	331,200
7.25%,
6/15/19 (a)	350	322,000
OPTI
Canada, Inc., 8.25%, 12/15/14	320	319,600
Occidental
Petroleum Corp., 6.75%, 1/15/12	250	268,212
Sabine Pass
LNG LP, 7.50%, 11/30/16	305	266,875

| See Notes to Financial Statements. — 56 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Schedule of Investments (continued) BlackRock Strategic Bond Trust (BHD) (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)	Value
Oil, Gas & Consumable Fuels
(concluded)
Whiting
Petroleum Corp.:
7.25%,
5/01/12	$ 30	$ 28,950
7.25%,
5/01/13	300	288,000
Williams
Cos., Inc., 7.125%, 9/01/11	25	25,875
		5,336,347
Paper & Forest
Products—1.7%
Bowater,
Inc.:
9%, 8/01/09	200	186,000
5.776%,
3/15/10 (c)	60	49,200
Domtar
Corp., 7.125%, 8/15/15	40	38,600
NewPage
Corp., 10%, 5/01/12	750	727,500
Verso Paper
Holdings LLC Series B, 6.551%, 8/01/14 (c)	626	557,140
		1,558,440
Pharmaceuticals—2.3%
Merck &
Co., Inc., 4.375%, 2/15/13	1,000	1,009,003
Wyeth,
6.50%, 2/01/34	1,000	1,049,924
		2,058,927
Real Estate Investment Trusts
(REITs)—0.6%
ERP
Operating LP, 6.95%, 3/02/11	500	511,420
Real Estate Management &
Development—0.1%
Realogy
Corp., 12.375%, 4/15/15	140	64,400
Road & Rail—0.6%
Canadian
National Railway Co., 6.90%, 7/15/28	500	535,566
Semiconductors & Semiconductor
Equipment—0.4%
Amkor
Technology, Inc.:
7.75%,
5/15/13	50	46,875
9.25%,
6/01/16	50	48,250
Freescale
Semiconductor, Inc.:
8.875%,
12/15/14	100	81,000
9.125%,
12/15/14 (b)	225	175,500
		351,625
Software—0.0%
BMS
Holdings, Inc., 10.595%, 2/15/12 (a)(b)(c)	66	39,568
Specialty
Retail—2.7%
AutoNation,
Inc.:
4.791%,
4/15/13 (c)	110	90,750
7%, 4/15/14	110	95,150
General
Nutrition Centers, Inc.:
7.199%,
3/15/14 (b)(c)	360	296,456
10.75%,
3/15/15	290	251,575
Group 1
Automotive, Inc., 2.25%, 6/15/36 (g)(h)	50	29,813
Lazy Days’
R.V. Center, Inc., 11.75%, 5/15/12	362	181,000
Michaels
Stores, Inc.:
10%,
11/01/14	310	232,500
11.375%,
11/01/16	240	153,600
Sonic
Automotive, Inc. Series B, 8.625%, 8/15/13	1,400	1,078,000
		2,408,844
Textiles, Apparel & Luxury
Goods—0.1%
Quiksilver,
Inc., 6.875%, 4/15/15	100	80,250
Thrifts & Mortgage
Finance—0.0%
Residential
Capital LLC, 8.50%, 5/15/10 (a)	52	35,880

Corporate Bonds	Par (000)	Value
Wireless
Telecommunication Services—4.9%
Cricket Communications, Inc.:
9.375%,
11/01/14	$ 185	$ 183,381
10%,
7/15/15 (a)	20	20,100
Digicel Group Ltd. (a):
8.875%,
1/15/15	470	441,236
9.125%,
1/15/15 (b)	438	396,746
MetroPCS Wireless, Inc., 9.25%, 11/01/14	1,070	1,060,638
Nordic Telephone Co. Holdings ApS, 8.875%, 5/01/16 (a)	500	481,250
Sprint Capital Corp.:
7.625%,
1/30/11	545	545,000
6.875%,
11/15/28	240	204,000
Vodafone Group Plc, 7.75%, 2/15/10	1,000	1,046,266
		4,378,617
Total Corporate Bonds—89.4%		80,448,003
Floating Rate Loan Interests
Auto
Components—0.6%
Dana Corp. Term Loan B, 6.75%, 1/31/15	599	550,694
Automobiles—0.4%
Ford Motor Term Loan B, 5.47%, 12/15/13 (h)	250	193,465
General Motors Corp. Term Loan B, 5.163%, 11/29/13 (h)	225	165,693
		359,158
Building
Products—0.9%
Building
Material Corp. of America First Lien Term Loan, 5.4375%—5.5253%, 2/22/14	249	213,943
Stile Acquisition (Masonite International) Term Loan:
Canadian
4.63%—5.046%, 4/06/13	370	315,135
U.S. B,
4.63%—5.046%, 4/06/13	375	319,452
		848,530
Chemicals—0.7%
PQ Corp. Second Lien Term Loan, 9.30%, 7/30/15	750	648,750
Health
Care Providers & Services—0.6%
Community Health Systems, Inc.:
Delay Draw
Term Loan, 7.57%, 6/18/14	27	25,291
Term Loan
B, 5.06%, 7/25/14	523	494,521
		519,812
Independent
Power Producers & Energy Traders—0.2%
Calpine Corp. Term Loan, 5.685%, 3/29/14	200	185,750
Machinery—0.7%
Navistar International Transportation Corp.:
Revolving
Credit, 5.686%, 6/30/12	180	165,825
Term Loan,
6.292%, 6/30/12	500	460,625
		626,450
Media—0.6%
Cengage
(Thomson Learning, Inc.) Tranche 1 Incremental, 7.50%, 7/05/14	500	495,000
Total Floating Rate Loan Interests—4.7%		4,234,144
U.S. Government Obligations
U.S. Treasury Bonds, 5.375%, 2/15/31	410	462,467
U.S. Treasury Notes:
4.125%,
8/15/10 (i)	810	838,413
4.25%,
8/15/13 (j)	1,000	1,053,750
4.25%,
8/15/15	75	79,213
4.75%,
5/15/14 (j)	710	770,128
4.75%,
2/15/37	130	136,622
4.875%,
8/15/16	550	598,512
Total U.S. Government Obligations—4.4%		3,939,105

| See Notes to Financial Statements. — ANNUAL
REPORT | AUGUST
31, 2008 | 57 |
| --- | --- | --- |

Schedule of Investments (concluded) BlackRock Strategic Bond Trust (BHD) (Percentages shown are based on Net Assets)

Common Stocks	Shares	Value
Media—0.0%
Adelphia Recovery Trust	396,568	$ 14,871
Total Common Stocks—0.0%		14,871
Preferred Securities
Capital Trusts	Par (000 )
Commercial
Banks—0.7%
Barclay’s Bank, Plc, 8.55% (a)(c)(d)	$ 650	636,952
Diversified
Financial Services—1.9%
Bank of America Corp. Series M, 8.125% (c)(d)	1,550	1,399,309
Citigroup, Inc., 8.40% (c)(d)	100	84,902
JPMorgan Chase & Co., 7.90% (c)(d)	260	236,210
		1,720,421
Total Capital Trusts—2.6%		2,357,373
Preferred Stocks	Shares
Capital
Markets—0.0%
Marsico Parent Superholdco, LLC, 16.75% (a)	23	19,665
Total Preferred Stocks—0.0%		19,665
Total Preferred Securities—2.6%		2,377,038
Other Interests (k)	Beneficial Interest (000)
Health
Care Providers & Services—0.0%
Critical Care Systems International, Inc. (l)	$ 1	318
Media—0.0%
Adelphia Recovery Trust Escrow	400	33,500
Total Other Interests—0.0%		33,818
Total Long-Term Investments (Cost—$97,007,216)—101.1%		91,046,979
Options Purchased	Contracts
Call
Options Purchased
Marsico
Parent Superholdco LLC, expiring December 2019 at $942.86	6	10,140
Total Options Purchased (Cost—$5,867)—0.0%		10,140
Total Investments
(Cost—$97,013,083*)—101.1%		91,057,119
Liabilities in Excess of Other
Assets—(1.1%)		(964,654	)
Net Assets—100.0%		$ 90,092,465

* — Aggregate cost	$ 97,064,711
Gross unrealized appreciation	$ 903,937
Gross unrealized depreciation	(6,911,529	)
Net unrealized depreciation	$ (6,007,592	)

| (a) | Security exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions exempt
from registration to qualified institutional investors. |
| --- | --- |
| (b) | Represents a payment-in-kind security, which may pay
interest/dividends in additional par/shares. |
| (c) | Variable rate security. Rate shown is as of report date. |
| (d) | Security is perpetual in nature and has no stated maturity
date. |
| (e) | Non-income producing security. |
| (f) | Issuer filed for bankruptcy or is in default of interest
payments. |
| (g) | Convertible security. |
| (h) | Represents a step bond. |
| (i) | All or a portion of security held as collateral in
connection with financial futures contracts. |
| (j) | All or portion of security has been pledged as collateral
for reverse repurchase agreements. |
| (k) | Other interests represent beneficial interest in liquidation
trusts and other reorganization entities and are non-income producing. |
| (l) | Security is fair valued. |
| • | For Trust compliance purposes, the Trust’s industry
classifications refer to any one or more of the industry sub-classifications
used by one or more widely recognized market indexes or ratings group
indexes, and/or as defined by Trust management. This definition may not apply
for purposes of this report which may combine industry subclassifications for
reporting ease. These industry classifications are unaudited. |
| • | Financial futures contracts sold as of August 31, 2008
were as follows: |

	Contracts	Issue	Expiration Date	Face Value	Unrealized Depreciation
	17	10-Year U.S. Treasury Bond	September 2008	$1,901,829	$(81,859)
•	Reverse repurchase agreements outstanding as of August 31,
2008 were as follows:

| Counterparty | Interest Rate | Trade Date | Maturity Date | Net
Closing Amount | Face Amount |
| --- | --- | --- | --- | --- | --- |
| Lehman Brothers Inc. | 2.06% | 8/22/08 | 9/02/08 | $ 791,748 | $ 791,250 |
| Lehman Brothers Inc. | 1.90% | 8/28/08 | 9/08/08 | 780,318 | 780,113 |
| Total | | | | $ 1,572,066 | $ 1,571,363 |

| See Notes to Financial Statements. — 58 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

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Statements of Assets and Liabilities

August 31, 2008	BlackRock Core Bond Trust (BHK)
Assets
Investments
at value - unaffiliated 1	$ 463,124,705	$	147,330,862	$	49,816,673	$	482,475,940	$	635,333,944
Investments
at value - affiliated 2	1,471,015		—		—		796,396		2,365
Cash	49,626		118,356		78,103		23,691		118,899
Foreign
currency at value 3	3,576,354		194		—		3,813,979		—
Investments
sold receivable	20,921,658		41,573		83,954		12,647,913		20,284,422
Unrealized
appreciation on swaps	15,366,808		—		61		17,079,641		25,522,456
Unrealized
appreciation on foreign currency exchange contracts	510,603		11,282		—		497,200		—
Interest
receivable	5,488,973		3,577,271		1,194,679		5,348,711		2,589,552
Swap
premium paid	—		—		—		—		—
Swaps
receivable	2,439,119		—		257		2,619,487		2,291,603
Margin
variation receivable	—		—		—		—		362,823
Dividends
receivable	248		5,068		70		—		—
Commitment
fees receivable	—		—		—		—		—
Principal
paydown receivable	2,940		8,462		209		19,369		137,850
Other
assets	47,451		10,722		9,988		125,661		88,990
Prepaid
expenses	39,010		15,357		5,267		42,471		40,294
Total
assets	513,038,510		151,119,147		51,189,261		525,490,459		686,773,198
Liabilities
Unrealized
depreciation on swaps	8,270,654		—		—		9,815,460		8,554,343
Loan
payable	—		27,000,000		6,250,000		—		—
Unrealized
depreciation on unfunded corporate loans	—		—		—		—		—
TBA sale
commitments at value 4	21,003,886		—		—		12,815,755		20,426,827
Options
written at value 5	5,427,203		—		—		6,144,236		4,016,057
Borrowed
bonds at value 6	—		—		—		—		20,823,109
Interest rate
floors at value	—		—		—		—		9,216,687
Reverse
repurchase agreements	107,690,295		—		—		100,739,956		—
Swap
premium received	—		—		—		—		1,670,735
Cash held
as collateral in connection with swaps	373,000		—		—		—		—
Investments
purchased payable	20,345,977		1,941,731		894,145		35,328,221		175,679,762
Margin
variation payable	823,936		—		—		810,969		—
Interest
expense payable	251,048		20,067		4,731		503,211		—
Dividends
payable	52,925		40,745		2,419		60,211		57,367
Investment
advisory fees payable	217,666		96,542		46,645		157,280		244,892
Swaps
payable	2,160,948		—		—		2,355,328		1,421,567
Officer’s
and Directors’/Trustees’ fees payable	48,941		9,970		10,130		73,544		90,986
Deferred
Income	—		—		—		—		—
Administration
fees payable	—		—		4,442		31,031		56,514
Other
affiliates payable	2,299		831		—		—		—
Other
liabilities	—		77,576		4,530		—		236,064
Other
accrued expenses	193,106		123,342		75,438		199,635		224,378
Total
liabilities	166,861,884		29,310,804		7,292,480		169,034,837		242,719,288
Net Assets	$ 346,176,626	$	121,808,343	$	43,896,781	$	356,455,622	$	444,053,910
Net Assets Consist
of
Par value
per share 7, 8	$ 27,019	$	—	$	6,419	$	344,497	$	639,425
Paid-in
capital in excess of par	378,599,795		343,233,097		87,170,276		402,521,909		478,686,574
Cost of
shares held in Treasury 9	—		—		—		(17,377,850	)	—
Undistributed
(distributions in excess of) net investment income	1,846,284		1,415,821		65,690		1,846,620		6,981,497
Accumulated
net realized loss	(23,052,437	)	(207,191,137	)	(35,305,659	)	(20,084,647	)	(83,387,661	)
Net
unrealized appreciation/depreciation	(11,244,035	)	(15,649,438	)	(8,039,945	)	(10,794,907	)	41,134,075
Net Assets	$ 346,176,626	$	121,808,343	$	43,896,781	$	356,455,622	$	444,053,910
Net asset
value	$ 12.81	$	2.23	$	6.84	$	10.35	$	6.94
1 Investments
at cost - unaffiliated	$ 482,422,040	$	162,990,640	$	57,856,679	$	501,604,485	$	601,756,594
2 Investments
at cost - affiliated	$ 1,647,588		—		—	$	841,889	$	2,423
3 Foreign
currency at cost	$ 3,609,859	$	195		—	$	3,850,232		—
4 Proceeds
from TBA sale commitments	$ 20,649,320		—		—	$	12,573,559	$	20,284,422
5 Proceeds
from options written	$ 5,724,085		—		—	$	6,457,698	$	4,365,959
6 Proceeds
from borrowed bonds	—		—		—		—	$	19,383,094
7 Par
value
per share	$ 0.001		—		0.001	$	0.010	$	0.010
8 Shares
outstanding	27,018,774		54,620,873		6,418,859		34,449,693		63,942,536
9 Shares held
in treasury	—		—		—		1,757,400		—

See Notes to Financial Statements. — 60	ANNUAL REPORT	AUGUST 31, 2008

August 31, 2008	BlackRock Limited Duration Income Trust (BLW)
Assets
Investments
at value - unaffiliated 1	$ 787,246,765	$	91,057,119
Investments
at value - affiliated 2	—		—
Cash	864,219		171,651
Foreign
currency at value 3	1,439,525		—
Investments
sold receivable	2,817,965		33,258
Unrealized
appreciation on swaps	58,415		—
Unrealized
appreciation on foreign currency exchange contracts	3,332,151		—
Interest
receivable	10,670,493		1,944,271
Swap
premium paid	67,004		—
Swaps
receivable	49,870		—
Margin
variation receivable	10,399		2,391
Dividends
receivable	—		—
Commitment
fees receivable	1,766		—
Principal
paydown receivable	139,375		—
Other
assets	105,936		8,740
Prepaid
expenses	69,729		8,724
Total
assets	806,873,612		93,226,154
Liabilities
Unrealized
depreciation on swaps	120,421		—
Loan
payable	—		—
Unrealized
depreciation on unfunded corporate loans	26,733		—
TBA sale
commitments at value 4	—		—
Options
written at value 5	—		—
Borrowed
bonds at value 6	—		—
Interest
rate floors at value	—		—
Reverse
repurchase agreements	64,537,508		1,571,363
Swap
premium received	—		—
Cash held
as collateral in connection with swaps	—		—
Investments
purchased payable	124,669,333		1,402,183
Margin
variation payable	—		—
Interest
expense payable	178,414		704
Dividends
payable	223,998		14,372
Investment
advisory fees payable	329,892		52,026
Swaps
payable	23,382		—
Officer’s
and Directors’/Trustees’ fees payable	87,878		8,706
Deferred
Income	16,287		—
Administration
fees payable	—		—
Other
affiliates payable	4,062		590
Other
liabilities	—		—
Other
accrued expenses	262,957		83,745
Total
liabilities	190,480,865		3,133,689
Net Assets	$ 616,392,747	$	90,092,465
Net Assets Consist
of
Par value
per share 7, 8	$ 36,890	$	7,058
Paid-in
capital in excess of par	701,305,214		98,443,594
Cost of
shares held in Treasury 9	—		—
Undistributed
(distributions in excess of) net investment income	(3,360,775	)	124,460
Accumulated
net realized loss	(22,109,174	)	(2,444,824	)
Net
unrealized appreciation/depreciation	(59,479,408	)	(6,037,823	)
Net Assets	$ 616,392,747	$	90,092,465
Net asset
value	$ 16.71	$	12.76
1 Investments
at cost - unaffiliated	$ 850,019,317	$	97,013,083
2 Investments
at cost - affiliated	—		—
3 Foreign
currency at cost	$ 1,494,389		—
4 Proceeds
from TBA sale commitments	—		—
5 Proceeds
from options written	—		—
6 Proceeds
from borrowed bonds	—		—
7 Par
value
per share	$ 0.001	$	0.001
8 Shares
outstanding	36,889,650		7,058,402
9 Shares held
in treasury	—		—

ANNUAL REPORT AUGUST 31, 2008 61

Statements of Operations

		BlackRock Core Bond Trust (BHK)
		Period November 1, 2007 to August 31, 2008		Year
Ended October 31, 2007	Period January 1, 2008 to August 31, 2008			Year
Ended December 31, 2007
Investment
Income
	Interest	$ 20,160,443		$ 25,484,417	$	9,702,882		$ 17,866,586
	Dividends 1	255,974		32,154		101,150		161,798
	Facility and other fees	29,109		—		—		—
	Income from affiliates	56,221		56,961		374		558
	Total
income	20,501,747		25,573,532		9,804,406		18,028,942
Expenses 2
	Investment
advisory	2,264,834		2,263,497		773,843		1,488,955
	Accounting
services	74,754		—		15,897		—
	Professional	75,819		138,679		64,556		96,034
	Transfer
agent	6,787		14,489		933		29,569
	Registration	9,982		11,073		17,904		19,503
	Printing	76,190		102,521		13,888		74,406
	Officer and
Directors/Trustees	28,180		48,448		—		20,128
	Custodian	51,976		249,091		12,513		100,935
	Administration	—		—		—		—
	Miscellaneous	95,704		62,848		—		27,980
	Total
expenses excluding interest expense	2,684,226		2,890,646		899,534		1,857,510
	Interest
expense	4,180,291		2,986,285		788,934		3,303,478
	Total
expenses	6,864,517		5,876,931		1,688,468		5,160,988
	Less fees
waived by advisor	—		—		—		—
	Less fees
paid indirectly	(4,483	)	(9,486	)	(1,348	)	(16,764	)
	Total
expenses after waiver and fees paid indirectly	6,860,034		5,867,445		1,687,120		5,144,224
	Net
investment income	13,641,713		19,706,087		8,117,286		12,884,718
Realized and Unrealized Gain
(Loss):
	Net
realized gain (loss) from:
	Investments	666,665		2,932,807		(7,086,236	)	(1,962,158	)
	Futures and
swaps	(6,639,676	)	(2,641,007	)	—		—
	Foreign
currency	115,130		(243,679	)	7,066		—
	Options
written	689,863		472,353		—		—
	Short sales	—		(181,836	)	—		—
	Borrowed
bonds	(3,376,859	)	—		—		—
	Interest
rate floors	—		3,316		—		—
		(8,544,877	)	341,954		(7,079,170	)	(1,962,158	)
	Net change
in unrealized appreciation/ depreciation on:
	Investments	(17,774,472	)	1,396,645		(7,379,404	)	(9,438,821	)
	Futures and
swaps	7,669,555		(4,729,198	)	—		—
	Foreign
currency	465,856		84,610		10,194		85
	Options
written	(410,322	)	(224,655	)	—		—
	TBA sale
commitments	(352,021	)	(2,545	)	—		—
	Short sales	—		—		—		—
	Borrowed
bonds	32,701		(32,701	)	—		—
	Interest
rate floors	—		—		—		—
	Unfunded
corporate loans	—		—		—		—
		(10,368,703	)	(3,507,844	)	(7,369,210	)	(9,438,736	)
	Total
realized and unrealized gain (loss)	(18,913,580	)	(3,165,890	)	(14,448,380	)	(11,400,894	)
	Net Increase (Decrease) in Net Assets Resulting from
Operations	$ (5,271,867	)	$ 16,540,197	$	(6,331,094	)	$ 1,483,824
1	Foreign
withholding tax	—		—		—		—
2	Prior year presentation has been changed to match current
year groupings for certain line items.
3	Includes
$(158) from affiliates.
4	Includes
$(13) from affiliates.

		BlackRock High Yield Trust (BHY)
		Period November 1, 2007 to August 31, 2008		Year
Ended October 31, 2007
Investment
Income
	Interest	$ 4,223,110		$ 6,149,702
	Dividends 1	2,850		12,606
	Facility and other fees	5,398		—
	Income from affiliates	425		853
	Total
income	4,231,783		6,163,161
Expenses 2
	Investment advisory	469,993		727,265
	Accounting services	21,116		—
	Professional	63,568		91,930
	Transfer agent	7,678		14,192
	Registration	9,921		10,987
	Printing	12,748		33,297
	Officer and Directors/Trustees	2,864		7,768
	Custodian	10,757		113,949
	Administration	44,750		69,263
	Miscellaneous	41,993		19,745
	Total expenses excluding interest expense	685,388		1,088,396
	Interest
expense	324,688		1,050,907
	Total expenses	1,010,076		2,139,303
	Less fees
waived by advisor	—		—
	Less fees
paid indirectly	(951	)	(8,027	)
	Total expenses after waiver and fees paid indirectly	1,009,125		2,131,276
	Net investment income	3,222,658		4,031,885
Realized
and Unrealized Gain (Loss):
	Net
realized gain (loss) from:
	Investments	(2,047,360	)	(2,479,994	)
	Futures and
swaps	448		5,700
	Foreign
currency	—		—
	Options
written	—		23,138
	Short sales	—		1,000
	Borrowed
bonds	—		—
	Interest
rate floors	—		—
		(2,046,912	)	(2,450,156	)
	Net change
in unrealized appreciation/depreciation on:
	Investments	(4,787,664	)	2,730,808
	Futures and
swaps	61		—
	Foreign
currency	—		—
	Options
written	—		—
	TBA sale
commitments	—		—
	Short sales	—		—
	Borrowed
bonds	—		—
	Interest
rate floors	—		—
	Unfunded
corporate loans	—		—
		(4,787,603	)	2,730,808
	Total
realized and unrealized gain (loss)	(6,834,515	)	280,652
	Net Increase (Decrease) in Net Assets Resulting from
Operations	$ (3,611,857	)	$ 4,312,537
1	Foreign
withholding tax	—		—
2	Prior year
presentation has been changed to match current year groupings for certain
line items.
3	Includes
$(158) from affiliates.
4	Includes $(13)
from affiliates.

| See Notes to Financial Statements. — 62 | ANNUAL
REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

		BlackRock Income Opportunity Trust (BNA)
		Period November 1, 2007 to August 31, 2008		Year
Ended October 31, 2007	Period November 1, 2007 to August 31, 2008		Year
Ended October 31, 2007
Investment
Income
	Interest	$ 24,803,941		$ 28,944,530	$	22,407,113	$	30,455,219
	Dividends 1	259,454		27,829		—		—
	Facility
and other fees	—		—		—		—
	Income from
affiliates	114,995		69,703		57,038		12,288
	Total
income	25,178,390		29,042,062		22,464,151		30,467,507
Expenses 2
	Investment
advisory	1,850,067		2,268,956		2,299,487		2,680,534
	Accounting
services	72,780		—		90,018		—
	Professional	100,156		131,746		93,668		129,354
	Transfer
agent	8,769		21,836		38,397		66,456
	Registration	12,976		15,345		23,920		25,782
	Printing	75,566		118,718		76,901		155,712
	Officer and
Directors/Trustees	27,618		51,073		16,184		55,080
	Custodian	56,391		231,868		54,566		268,396
	Administration	308,345		378,159		531,627		618,585
	Miscellaneous	48,269		66,507		26,487		74,034
	Total
expenses excluding interest expense	2,560,937		3,284,208		3,251,255		4,073,933
	Interest
expense	4,401,186		4,308,893		2,569,337		7,442,611
	Total
expenses	6,962,123		7,593,101		5,820,592		11,516,544
	Less fees
waived by advisor	—		—		—		—
	Less fees
paid indirectly	(3,652	)	(12,757	)	(5,699	)	(22,750	)
	Total
expenses after waiver and fees paid indirectly	6,958,471		7,580,344		5,814,893		11,493,794
	Net
investment income	18,219,919		21,461,718		16,649,258		18,973,713
Realized and Unrealized Gain
(Loss):
	Net
realized gain (loss) from:
	Investments	(2,183,328	) 3	2,379,781		4,045,924	4	5,100,250
	Futures and
swaps	(9,058,770	)	(561,310	)	(12,167,254	)	(14,906,137	)
	Foreign
currency	(271,155	)	1,864		—		—
	Options
written	748,642		505,900		497,659		66,100
	Short sales	—		(216,750	)	—		(631,861	)
	Borrowed
bonds	(3,674,680	)	—		(1,275,586	)	—
	Interest
rate floors	—		3,654		(1,039,453	)	3,623
		(14,439,291	)	2,113,139		(9,938,710	)	(10,368,025	)
	Net change
in unrealized appreciation/depreciation on:
	Investments	(16,858,428	)	34,707		39,607,500		9,813,510
	Futures and
swaps	7,628,633		(5,924,500	)	288,232		14,400,816
	Foreign currency	527,488		—		—		—
	Options
written	(452,891	)	(232,716	)	1,662,264		(2,301,793	)
	TBA sale
commitments	(103,686	)	—		764,751		—
	Short sales	—		39,033		—		(2,547,439	)
	Borrowed
bonds	36,144		—		(326,677	)	—
	Interest
rate floors	—		—		(6,509,852	)	(993,376	)
	Unfunded
corporate loans	—		—		—		—
		(9,222,740	)	(6,083,476	)	35,486,218		18,371,718
	Total
realized and unrealized gain (loss)	(23,662,031	)	(3,970,337	)	25,547,508		8,003,693
	Net Increase (Decrease) in Net Assets Resulting from
Operations	$ (5,442,112	)	$ 17,491,381	$	42,196,766	$	26,977,406
1	Foreign
withholding tax	—		$ 2,097		—		—
2	Prior year presentation has been changed to match current
year groupings for certain line items.
3	Includes
$(158) from affiliates.
4	Includes
$(13) from affiliates.

		BlackRock Limited Duration Income Trust (BLW)
		Period November 1, 2007 to August 31, 2008		Year
Ended October 31, 2007	Period November 1, 2007 to August 31, 2008			Year
Ended October 31, 2007
Investment
Income
	Interest	$ 49,123,991		$ 70,129,223	$	5,991,779		$ 7,972,023
	Dividends 1	8,906		25,138		—		6,407
	Facility
and other fees	182,605		—		—		—
	Income from
affiliates	3,539		4,008		8,912		629
	Total
income	49,319,041		70,158,369		6,000,691		7,979,059
Expenses 2
	Investment
advisory	3,487,647		4,890,429		584,766		791,363
	Accounting
services	112,317		—		19,712		—
	Professional	189,858		134,550		48,388		56,797
	Transfer
agent	3,759		13,687		6,927		13,605
	Registration	14,220		16,509		8,811		10,969
	Printing	110,509		192,757		18,471		31,092
	Officer and
Directors/Trustees	28,447		62,521		3,272		13,373
	Custodian	53,899		458,823		9,960		99,288
	Administration	—		—		—		—
	Miscellaneous	47,019		114,686		27,233		19,894
	Total
expenses excluding interest expense	4,047,675		5,883,962		727,540		1,036,381
	Interest
expense	3,371,225		9,171,719		4,060		389,572
	Total
expenses	7,418,900		15,055,681		731,600		1,425,953
	Less fees
waived by advisor	—		—		(91,643	)	(176,670	)
	Less fees
paid indirectly	(18,872	)	(116,925	)	(1,487	)	(5,761	)
	Total
expenses after waiver and fees paid indirectly	7,400,028		14,938,756		638,470		1,243,522
	Net
investment income	41,919,013		55,219,613		5,362,221		6,735,537
Realized and Unrealized Gain
(Loss):
	Net
realized gain (loss) from:
	Investments	(22,021,064	)	5,056,888		(1,961,605	)	999,009
	Futures and
swaps	712,296		442,248		34,284		—
	Foreign
currency	(2,809,398	)	(2,379,054	)	—		—
	Options
written	—		—		—		—
	Short sales	—		—		—		—
	Borrowed
bonds	—		—		—		—
	Interest
rate floors	—		—		—		—
		(24,118,166	)	3,120,082		(1,927,321	)	999,009
	Net change
in unrealized appreciation/depreciation on:
	Investments	(45,643,297	)	(19,529,245	)	(5,235,330	)	(1,416,472	)
	Futures and
swaps	338,091		(918,619	)	(81,859	)	—
	Foreign
currency	4,713,108		(773,728	)	—		—
	Options
written	—		—		—		—
	TBA sale
commitments	—		—		—		—
	Short sales	—		—		—		—
	Borrowed
bonds	—		—		—		—
	Interest
rate floors	—		—		—		—
	Unfunded corporate
loans	(26,733	)	—		—		—
		(40,618,831	)	(21,221,592	)	(5,317,189	)	(1,416,472	)
	Total
realized and unrealized gain (loss)	(64,736,997	)	(18,101,510	)	(7,244,510	)	(417,463	)
	Net Increase (Decrease) in Net Assets Resulting from
Operations	$ (22,817,984	)	$ 37,118,103	$	(1,882,289	)	$ 6,318,074
1	Foreign
withholding tax	$ 76,324		—		—		—
2	Prior year presentation has been changed to match current
year groupings for certain line items.
3	Includes
$(158) from affiliates.
4	Includes
$(13) from affiliates.

ANNUAL REPORT AUGUST 31, 2008 63

Statements of Changes in Net Assets

	BlackRock Core Bond Trust (BHK)
	Period
November 1, 2007 to August 31, 2008	Year
Ended October 31,
Increase (Decrease) in Net Assets			2007		2006
Operations
Net investment income	$ 13,641,713	$	19,706,087		$ 17,700,447
Net realized gain (loss)	(8,544,877	)	341,954		(8,285,073	)
Net change in unrealized appreciation/depreciation	(10,368,703	)	(3,507,844	)	11,551,542
Net increase (decrease) in net assets resulting from
operations	(5,271,867	)	16,540,197		20,966,916
Dividends and Distributions to
Shareholders From
Net investment income	(16,387,174	)	(16,495,698	)	(25,048,230	)
Net realized gain	—		—		(7,914,351	)
Tax return of capital	(499,560	)	(5,227,396	)	—
Decrease in net assets resulting from dividends and
distributions to shareholders	(16,886,734	)	(21,723,094	)	(32,962,581	)
Capital Share
Transactions
Reinvestment of dividends	—		—		—
Net Assets
Total increase (decrease) in net assets	(22,158,601	)	(5,182,897	)	(11,995,665	)
Beginning of period	368,335,227		373,518,124		385,513,789
End of period	$ 346,176,626	$	368,335,227		$ 373,518,124
End of period undistributed (distributions in excess of)
net investment income	$ 1,846,284	$	(1,696,051	)	$ (5,693,238	)
	BlackRock Income Opportunity Trust, Inc. (BNA)
	Period
November 1, 2007 to August 31, 2008	Year
Ended October 31,
Increase
(Decrease) in Net Assets			2007		2006
Operations
Net investment income	$ 18,219,919	$	21,461,718		$ 19,514,794
Net realized gain (loss)	(14,439,291	)	2,113,139		(7,330,378	)
Net change in unrealized appreciation/depreciation	(9,222,740	)	(6,083,476	)	7,965,246
Net increase (decrease) in net assets resulting from
operations	(5,442,112	)	17,491,381		20,149,662
Dividends and Distributions to
Shareholders From
Net investment income	(17,707,143	)	(20,862,233	)	(22,238,524	)
Net realized gain	—		—		(8,976,694	)
Tax return of capital	—		(1,874,570	)	(2,162,198	)
Decrease in net assets resulting from dividends and
distributions to shareholders	(17,707,143	)	(22,736,803	)	(33,377,416	)
Capital Share
Transactions
Reinvestment of dividends	—		—		—
Net Assets
Total increase (decrease) in net assets	(23,149,255	)	(5,245,422	)	(13,227,754	)
Beginning of period	379,604,877		384,850,299		398,078,053
End of period	$ 356,455,622	$	379,604,877		$ 384,850,299
End of period undistributed (distributions in excess of)
net investment income	$ 1,846,620	$	768,824		$ (900,730	)

See Notes to Financial Statements. — 64	ANNUAL REPORT	AUGUST 31, 2008

	BlackRock High Income Shares (HIS)
	Period
January 1, 2008 to August 31, 2008	Year
Ended December 31,
Increase (Decrease) in Net Assets		2007			2006
Operations
Net
investment income	$ 8,117,286	$	12,884,718		$ 12,046,246
Net
realized gain (loss)	(7,079,170	)	(1,962,158	)	(1,735,666	)
Net change
in unrealized appreciation/depreciation	(7,369,210	)	(9,438,736	)	6,228,859
Net
increase (decrease) in net assets resulting from operations	(6,331,094	)	1,483,824		16,539,439
Dividends and Distributions to
Shareholders From
Net
investment income	(6,958,699	)	(12,923,299	)	(12,792,689	)
Net
realized gain	—		—		—
Tax return
of capital	—		—		—
Decrease in
net assets resulting from dividends and distributions to shareholders	(6,958,699	)	(12,923,299	)	(12,792,689	)
Capital Share
Transactions
Reinvestment of dividends	—		—		333,553
Net Assets
Total increase
(decrease) in net assets	(13,289,793	)	(11,439,475	)	4,080,303
Beginning
of period	135,098,136		146,537,611		142,457,308
End of
period	$ 121,808,343	$	135,098,136		$ 146,537,611
End of
period undistributed (distributions in excess of) net investment income	$ 1,415,821	$	(33,209	)	$ (827,376	)
	BlackRock High Yield Trust (BHY)
	Period
November 1, 2007 to August 31, 2008	Year
Ended October 31,
Increase (Decrease) in Net Assets		2007			2006
Operations
Net
investment income	$ 3,222,658	$	4,031,885		$ 4,211,671
Net
realized gain (loss)	(2,046,912	)	(2,450,156	)	(2,067,969	)
Net change
in unrealized appreciation/depreciation	(4,787,603	)	2,730,808		4,444,627
Net
increase (decrease) in net assets resulting from operations	(3,611,857	)	4,312,537		6,588,329
Dividends and Distributions to
Shareholders From
Net
investment income	(3,273,618	)	(3,927,807	)	(4,175,232	)
Net
realized gain	—		—		—
Tax return
of capital			—		—
Decrease in
net assets resulting from dividends and distributions to shareholders	(3,273,618	)	(3,927,807	)	(4,175,232	)
Capital Share
Transactions
Reinvestment of dividends	—		12,289		48,307
Net Assets
Total
increase (decrease) in net assets	(6,885,475	)	397,019		2,461,404
Beginning
of period	50,782,256		50,385,237		47,923,833
End of
period	$ 43,896,781	$	50,782,256		$ 50,385,237
End of
period undistributed (distributions in excess of) net investment income	$ 65,690	$	116,650		$ 10,204

	BlackRock Income Trust, Inc. (BKT)
	Period
November 1, 2007 to August 31, 2008		Year
Ended October 31,
Increase (Decrease) in Net Assets			2007		2006
Operations
Net
investment income	$ 16,649,258		$ 18,973,713		$ 20,352,044
Net
realized gain (loss)	(9,938,710	)	(10,368,025	)	1,937,674
Net change
in unrealized appreciation/depreciation	35,486,218		18,371,718		1,267,311
Net
increase (decrease) in net assets resulting from operations	42,196,766		26,977,406		23,557,029
Dividends and Distributions to
Shareholders From
Net
investment income	(15,793,807	)	(18,808,452	)	(21,910,288	)
Net
realized gain	—		—		—
Tax return
of capital	—		(4,978,175	)	(5,576,693	)
Decrease in
net assets resulting from dividends and distributions to shareholders	(15,793,807	)	(23,786,627	)	(27,486,981	)
Capital Share
Transactions
Reinvestment of dividends	—		—		—
Net Assets
Total
increase (decrease) in net assets	26,402,959		3,190,779		(3,929,952	)
Beginning
of period	417,650,951		414,460,172		418,390,124
End of
period	$ 444,053,910		$ 417,650,951		$ 414,460,172
End of
period undistributed (distributions in excess of) net investment income	$ 6,981,497		$ (6,313,294	)	$ (519,359	)
	BlackRock Limited Duration Income Trust (BLW)
	Period
November 1, 2007 to August 31, 2008		Year
Ended October 31,
Increase (Decrease) in Net Assets			2007		2006
Operations
Net
investment income	$ 41,919,013		$ 55,219,613		$ 49,596,055
Net
realized gain (loss)	(24,118,166	)	3,120,082		(1,589,905	)
Net change
in unrealized appreciation/depreciation	(40,618,831	)	(21,221,592	)	2,473,132
Net
increase (decrease) in net assets resulting from operations	(22,817,984	)	37,118,103		50,479,282
Dividends and Distributions to
Shareholders From
Net
investment income	(43,898,690	)	(51,967,739	)	(55,725,066	)
Net
realized gain	—		(2,229,742	)	—
Tax return
of capital	—		(1,074,826	)	(760,960	)
Decrease in
net assets resulting from dividends and distributions to shareholders	(43,898,690	)	(55,272,307	)	(56,486,026	)
Capital Share
Transactions
Reinvestment of dividends	—		2,057,525		251,427
Net Assets
Total
increase (decrease) in net assets	(66,716,674	)	(16,096,679	)	(5,755,317	)
Beginning
of period	683,109,421		699,206,100		704,961,417
End of
period	$ 616,392,747		$ 683,109,421		$ 699,206,100
End of
period undistributed (distributions in excess of) net investment income	$ (3,360,775	)	$ 800,386		$ (36,700	)

ANNUAL REPORT AUGUST 31, 2008 65

Statements of Changes in Net Assets

	BlackRock Strategic Bond Trust (BHD)
	Period
November 1, 2007 to August 31, 2008	Year
Ended October 31,
Increase (Decrease) in Net Assets		2007		2006
Operations
Net
investment income	$ 5,362,221	$	6,735,537	$	6,965,538
Net
realized gain (loss)	(1,927,321	)	999,009		(759,640	)
Net change
in unrealized appreciation/depreciation	(5,317,189	)	(1,416,472	)	2,082,388
Net
increase (decrease) in net assets resulting from operations	(1,882,289	)	6,318,074		8,288,286
Dividends and
Distributions to
Shareholders From
Net
investment income	(5,434,969	)	(6,521,963	)	(6,969,104	)
Tax return
of capital	—		—		(251,641	)
Decrease in
net assets resulting from dividends and distributions to shareholders	(5,434,969	)	(6,521,963	)	(7,220,745	)
Net
Assets
Total
increase (decrease) in net assets	(7,317,258	)	(203,889	)	1,067,541
Beginning
of period	97,409,723		97,613,612		96,546,071
End of
period	$ 90,092,465	$	97,409,723	$	97,613,612
End of
period undistributed (distributions in excess of) net investment income	$ 124,460	$	197,208	$	(16,366	)

See Notes to Financial Statements. — 66	ANNUAL REPORT	AUGUST 31, 2008

Statements of Cash Flows

Period Ended August 31, 2008	BlackRock Core Bond Trust (BHK)		BlackRock High Income Shares (HIS)		BlackRock High Yield Trust (BHY)		BlackRock Income Opportunity Trust (BNA)		BlackRock Limited Duration Income Trust (BLW)
Cash Provided by
Operating Activities
Net decrease
in net assets resulting from operations	$ (5,271,867	)	$ (6,331,094	)	$ (3,611,857	)	$ (5,442,112	)	$ (22,817,984	)
Adjustments
to reconcile net decrease in net assets resulting from operations to net cash
provided by operating activities:
Increase
(decrease) in receivables	(1,749,282	)	110,575		181,907		(1,658,112	)	3,483,769
Increase
(decrease) in prepaid expenses and other assets	(85,335	)	(3,915	)	(14,150	)	(166,448	)	(173,869	)
Increase
(decrease) in TBA sale commitments	16,373,509		—		—		(409,617	)	—
Increase
(decrease) in borrowed bonds	(80,405,639	)	—		—		(85,300,660	)	—
Decrease in
other liabilities	2,027,067		(176,928	)	(50,600	)	2,120,058		(3,689,282	)
Swap
premiums paid	—		—		—		—		(67,004	)
Net
realized and unrealized loss	14,139,179		14,425,380		6,990,835		14,336,179		64,493,436
Amortization
of premium and discount on investments	(96,377	)	4,176		(48,002	)	222,274		(274,349	)
Paid-in-kind
income	—		(299,947	)	(154,251	)	(88,727	)	(1,572,611	)
Proceeds
from sales and paydowns of long-term securities	2,943,356,231		56,993,572		21,512,233		2,382,177,037		1,721,282,956
Purchases
of long-term securities	(2,949,850,636	)	(37,761,311	)	(17,646,822	)	(2,361,189,147	)	(1,671,339,488	)
Net
proceeds from sales of short-term investments	77,546,253		25,981		(869,327	)	81,440,025		1,127,200
Premiums
paid on closing options written	29,737		—		—		30,105		—
Net cash
provided by operating activities	16,012,840		26,986,489		6,289,966		26,070,855		90,452,774
Cash Used for
Financing Activities
Cash
receipts from loans	—		24,000,000		15,000,000		—		—
Cash
payments from loans	—		(43,000,000	)	(18,000,000	)	—		—
Cash
receipts from reverse repurchase agreements	943,961,402		—		—		466,821,734		103,691,246
Cash
payments from reverse repurchase agreements	(939,624,799	)	—		—		(471,343,290	)	(148,440,646	)
Cash
dividends paid	(16,892,026	)	(7,912,097	)	(3,275,032	)	(17,698,398	)	(43,935,334	)
Net cash
used for financing activities	(12,555,423	)	(26,912,097	)	(6,275,032	)	(22,219,954	)	(88,684,734	)
Cash Impact from
Foreign Exchange
Fluctuations
Cash impact
from foreign exchange fluctuations	(33,864	)	(147	)	—		(36,253	)	(54,864	)
Cash:
Net
increase in cash	3,423,553		74,245		14,934		3,814,648		1,713,176
Cash at
beginning of period	202,427		44,305		63,169		23,022		590,568
Cash at end
of period	$ 3,625,980		$ 118,550		78,103		$ 3,837,670		$ 2,303,744
Cash Flow
Information:
Cash paid
during the period for interest	$ 4,912,127		$ 976,593		$ 365,994		$ 5,219,162		$ 6,967,653

See Notes to Financial Statements. — ANNUAL REPORT	AUGUST 31, 2008	67

Financial Highlights BlackRock Core Bond Trust (BHK)

	Period November 1, 2007 to August 31, 2008
		2007		2006		2005		2004		2003
Per Share Operating
Performance
Net asset value,
beginning of period	$ 13.63	$	13.82	$	14.27	$	15.22	$	14.75	$	14.33
Net investment
income	0.50	1	0.74		0.66		0.78		0.92		0.83
Net realized and
unrealized gain (loss)	(0.69	)	(0.13	)	0.11		(0.37	)	0.66		0.77
Net increase (decrease)
from investment operations	(0.19	)	0.61		0.77		0.41		1.58		1.60
Dividends and
distributions from:
Net investment
income	(0.61	)	(0.61	)	(0.93	)	(1.01	)	(0.86	)	(1.00	)
Net realized gain	—		—		(0.29	)	(0.35	)	(0.25	)	(0.18	)
Tax return of
capital	(0.02	)	(0.19	)	—		—		—		—
Total dividends and
distributions	(0.63	)	(0.80	)	(1.22	)	(1.36	)	(1.11	)	(1.18	)
Net asset value, end of
period	$ 12.81	$	13.63	$	13.82	$	14.27	$	15.22	$	14.75
Market price, end of
period	$ 11.51	$	12.23	$	12.86	$	13.69	$	14.02	$	13.57
Total Investment Return 2
Based on net asset value	(1.00	)% 3	5.04	%	6.20	%	3.18	%	11.79	%	11.76	%
Based on market price	(0.87	)% 3	1.29	%	3.07	%	7.46	%	11.93	%	6.62	%
Ratios to Average Net Assets
Total expenses after fees
paid indirectly and excluding interest expense	0.89	% 4	0.78	%	0.77	%	0.85	%	0.92	%	0.87	%
Total expenses after fees paid indirectly	2.29	% 4	1.60	%	1.08	%	1.50	%	1.32	%	1.05	%
Total expenses	2.29	% 4	1.60	%	1.08	%	1.50	%	1.32	%	1.05	%
Net investment income	4.55	% 4	5.36	%	4.78	%	5.20	%	6.20	%	5.58	%
Supplemental Data
Net assets, end of period (000)	$ 346,177	$	368,335	$	373,518	$	385,514	$	411,163	$	398,540
Reverse repurchase
agreements outstanding, end of period (000)	$ 107,690	$	103,354	$	3,911	$	86,876	$	102,474	$	91,668
Reverse repurchase
agreements average daily balance (000)	$ 134,784	$	44,786	$	25,340	$	91,130	$	145,094	$	67,591
Portfolio turnover	598	% 5	122	%	88	%	220	%	398	%	161	%
Asset coverage, end of period per $1,000	$ 4,215	$	4,564	$	96,502	$	5,438	$	5,012	$	5,348

1	Based on average shares outstanding.
2	Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns exclude the effects
of sales charges.
3	Aggregate total investment return.
4	Annualized.
5	Includes TBA transactions. Excluding these transactions, the
portfolio turnover would have been 337%.

See Notes to Financial Statements. — 68	ANNUAL REPORT	AUGUST 31, 2008

Financial Highlights BlackRock High Income Shares (HIS)

	Period January 1, 2008 to August 31, 2008
		2007		2006		2005		2004 1		2003 1
Per Share Operating Performance
Net asset value,
beginning of period	$ 2.47	$	2.68	$	2.61	$	2.87	$	2.86	$	2.42
Net investment
income	0.15	2	0.24		0.22		0.24		0.28	3	0.32	3
Net realized and
unrealized gain (loss)	(0.26	)	(0.21	)	0.08		(0.23	)	0.03		0.40
Net increase (decrease)
from investment operations	(0.11	)	0.03		0.30		0.01		0.31		0.72
Dividends to shareholders
from net investment income	(0.13	)	(0.24	)	(0.23	)	(0.27	)	(0.30	)	(0.28	)
Net asset value, end of
period	$ 2.23	$	2.47	$	2.68	$	2.61	$	2.87	$	2.86
Market price, end of
period	$ 1.88	$	2.14	$	2.55	$	2.33	$	2.90	$	2.87
Total Investment Return 4
Based on net asset value	(4.00	)% 5	1.58	%	12.32	%	0.43	%	11.46	%	31.10	%
Based on market price	(6.59	)% 5	(7.51	)%	19.70	%	(11.28	)%	12.24	%	37.23	%
Ratios to Average Net Assets
Total expenses after fees
paid indirectly and excluding interest expense	1.05	% 6	1.27	%	1.34	%	1.37	%	1.39	%	1.46	%
Total expenses after fees
paid indirectly	1.98	% 6	3.55	%	3.77	%	3.04	%	2.23	%	2.21	%
Total expenses	1.98	% 6	3.56	%	3.78	%	3.04	%	2.23	%	2.21	%
Net investment
income	9.52	% 6	8.89	%	8.42	%	8.82	%	9.70	%	11.99	%
Supplemental Data
Net assets, end of period
(000)	$ 121,808	$	135,098	$	146,538	$	142,457	$	155,298	$	154,298
Loan outstanding, end of
period (000)	$ 27,000	$	46,000	$	62,000	$	66,000	$	69,000	$	68,000
Average loan outstanding
during the period (000)	$ 27,069	$	55,868	$	62,838	$	65,992	$	64,081	$	60,604
Portfolio
turnover	25	%	69	%	83	%	115	%	56	%	93	%
Asset coverage, end of
period per $1,000	$ 5,512	$	3,937	$	3,364	$	3,158	$	3,251	$	3,269

| 1 | Audited by other Independent Registered Public Accounting
Firm. |
| --- | --- |
| 2 | Based on average shares outstanding. |
| 3 | Net investment income per share has been recalculated in
accordance with Securities and Exchange Commission requirements, with the
exception that end-of-the-year accumulated undistributed/(overdistributed) net investment income has not
been adjusted to reflect current-year permanent differences between financial
and tax accounting. |
| 4 | Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns exclude the effects of sales charges. |
| 5 | Aggregate total investment return. |
| 6 | Annualized. |
| The performance set forth in this table is the financial data of
BlackRock High Income Shares. BlackRock Advisors, LLC began managing the
Trust on March 2, 2005. | |

See Notes to Financial Statements. — ANNUAL REPORT	AUGUST 31, 2008	69

Financial Highlights BlackRock High Yield Trust (BHY)

| | Period
November 1, 2007 to August 31, 2008 | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | | |
| Per Share Operating Performance | | | | | | | | | | | | |
| Net asset
value, beginning of period | $ 7.91 | $ | 7.85 | $ | 7.48 | $ | 7.95 | $ | 6.96 | $ | 6.13 | |
| Net
investment income | 0.50 | 1 | 0.63 | | 0.66 | | 0.68 | | 0.92 | | 1.06 | |
| Net
realized and unrealized gain (loss) | (1.06 | ) | 0.04 | | 0.36 | | (0.36 | ) | 1.02 | | 0.89 | |
| Net
increase (decrease) from investment operations | (0.56 | ) | 0.67 | | 1.02 | | 0.32 | | 1.94 | | 1.95 | |
| Dividends
and distributions from: | | | | | | | | | | | | |
| Net
investment income | (0.51 | ) | (0.61 | ) | (0.65 | ) | (0.79 | ) | (0.92 | ) | (1.07 | ) |
| Tax return
of capital | — | | — | | — | | — | | (0.03 | ) | (0.05 | ) |
| Total
dividends and distributions | (0.51 | ) | (0.61 | ) | (0.65 | ) | (0.79 | ) | (0.95 | ) | (1.12 | ) |
| Net asset
value, end of period | $ 6.84 | $ | 7.91 | $ | 7.85 | $ | 7.48 | $ | 7.95 | $ | 6.96 | |
| Market
price, end of period | $ 5.96 | $ | 6.92 | $ | 7.77 | $ | 7.36 | $ | 9.30 | $ | 10.25 | |
| Total Investment Return 2 | | | | | | | | | | | | |
| Based on
net asset value | (6.47 | )% 3 | 9.03 | % | 14.25 | % | 2.85 | % | 26.24 | % | 27.75 | % |
| Based on
market price | (6.85 | )% 3 | (3.63 | )% | 14.93 | % | (13.49 | )% | 0.28 | % | 32.87 | % |
| Ratios to Average Net Assets | | | | | | | | | | | | |
| Total
expenses after fees paid indirectly and excluding interest expense | 1.77 | % 4 | 2.10 | % | 2.19 | % | 2.10 | % | 1.96 | % | 2.22 | % |
| Total
expenses after fees paid indirectly | 2.61 | % 4 | 4.14 | % | 4.49 | % | 3.51 | % | 2.68 | % | 3.07 | % |
| Total
expenses before fees paid indirectly | 2.61 | % 4 | 4.14 | % | 4.49 | % | 3.51 | % | 2.68 | % | 3.07 | % |
| Total
expenses | 2.61 | % 4 | 4.16 | % | 4.50 | % | 3.52 | % | 2.69 | % | 3.07 | % |
| Net
investment income | 8.34 | % 4 | 7.84 | % | 8.74 | % | 8.71 | % | 12.16 | % | 16.37 | % |
| Supplemental
Data | | | | | | | | | | | | |
| Net assets,
end of period (000) | $ 43,897 | $ | 50,782 | $ | 50,385 | $ | 47,924 | $ | 50,914 | $ | 44,438 | |
| Loan
outstanding, end of period (000) | $ 6,250 | $ | 9,250 | $ | 20,250 | $ | 20,750 | $ | 19,250 | $ | 19,250 | |
| Average
loan outstanding during the period (000) | $ 7,443 | $ | 17,710 | $ | 20,621 | $ | 20,425 | $ | 19,250 | $ | 19,250 | |
| Portfolio
turnover | 34 | % | 69 | % | 85 | % | 102 | % | 156 | % | 30 | % |
| Asset
coverage, end of period per $1,000 | $ 8,023 | $ | 6,490 | $ | 3,488 | $ | 3,310 | $ | 3,645 | $ | 3,308 | |

1	Based on average shares outstanding.
2	Total investment returns based on market value, which can
be significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns exclude the effects
of sales charges.
3	Aggregate total investment return.
4	Annualized.

| See Notes to Financial Statements. — 70 | ANNUAL REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Financial Highlights BlackRock Income Opportunity Trust, Inc. (BNA)

| | Period
November 1, 2007 to August 31, 2008 | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | 2007 | | 2006 | | 2005 | | 2004 | | 2003 | | |
| Per Share Operating Performance | | | | | | | | | | | | |
| Net asset
value, beginning of period | $ 11.02 | $ | 11.17 | $ | 11.56 | $ | 12.38 | $ | 11.93 | $ | 11.83 | |
| Net
investment income | 0.53 | 1 | 0.62 | | 0.57 | | 0.72 | | 0.76 | | 0.84 | |
| Net
realized and unrealized gain (loss) | (0.69 | ) | (0.11 | ) | 0.01 | | (0.45 | ) | 0.53 | | 0.31 | |
| Net
increase (decrease) from investment operations | (0.16 | ) | 0.51 | | 0.58 | | 0.27 | | 1.29 | | 1.15 | |
| Dividends
and distributions from: | | | | | | | | | | | | |
| Net
investment income | (0.51 | ) | (0.61 | ) | (0.65 | ) | (0.81 | ) | (0.84 | ) | (0.81 | ) |
| Net
realized gain | — | | — | | (0.26 | ) | (0.28 | ) | — | | (0.24 | ) |
| Tax return
of capital | — | | (0.05 | ) | (0.06 | ) | — | | — | | — | |
| Total
dividends and distributions | (0.51 | ) | (0.66 | ) | (0.97 | ) | (1.09 | ) | (0.84 | ) | (1.05 | ) |
| Net asset
value, end of period | $ 10.35 | $ | 11.02 | $ | 11.17 | $ | 11.56 | $ | 12.38 | $ | 11.93 | |
| Market
price, end of period | $ 9.82 | $ | 10.19 | $ | 10.58 | $ | 10.90 | $ | 11.38 | $ | 10.95 | |
| Total Investment Return 2 | | | | | | | | | | | | |
| Based on
net asset value | (1.07 | )% 3 | 5.11 | % | 5.76 | % | 2.95 | % | 11.90 | % | 10.92 | % |
| Based on
market price | 1.51 | % 3 | 2.62 | % | 6.27 | % | 5.53 | % | 12.04 | % | 14.71 | % |
| Ratios to Average Net Assets | | | | | | | | | | | | |
| Total
expenses after fees paid indirectly and excluding interest expense | 0.83 | % 4 | 0.87 | % | 0.89 | % | 0.87 | % | 0.84 | % | 0.89 | % |
| Total
expenses after fees paid indirectly | 2.25 | % 4 | 2.00 | % | 1.61 | % | 1.72 | % | 1.11 | % | 1.29 | % |
| Total
expenses before fees paid indirectly | 2.25 | % 4 | 2.01 | % | 1.61 | % | 1.72 | % | 1.11 | % | 1.29 | % |
| Total
expenses | 2.25 | % 4 | 2.01 | % | 1.61 | % | 1.72 | % | 1.11 | % | 1.29 | % |
| Net
investment income | 5.89 | % 4 | 5.68 | % | 5.11 | % | 5.97 | % | 6.29 | % | 6.99 | % |
| Supplemental
Data | | | | | | | | | | | | |
| Net assets,
end of period (000) | $ 356,456 | $ | 379,605 | $ | 384,850 | $ | 398,078 | $ | 426,643 | $ | 410,981 | |
| Reverse
repurchase agreements outstanding, end of period (000) | $ 100,740 | $ | 105,262 | $ | 34,326 | $ | 120,179 | $ | 94,644 | $ | 103,378 | |
| Reverse
repurchase agreements average daily balance (000) | $ 131,462 | $ | 68,241 | $ | 59,691 | $ | 122,457 | $ | 97,264 | $ | 136,172 | |
| Portfolio
turnover | 441 | % 5 | 196 | % | 131 | % | 396 | % | 300 | % | 46 | % |
| Asset
coverage, end of period per $1,000 | $ 4,538 | $ | 4,606 | $ | 12,212 | $ | 4,312 | $ | 5,508 | $ | 4,976 | |

1	Based on average shares outstanding.
2	Total investment returns based on market value, which can
be significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns exclude the effects
of sales charges.
3	Aggregate total investment return.
4	Annualized.
5	Includes TBA transactions. Excluding these transactions,
the portfolio turnover would have been 168%.

| See Notes to Financial Statements. — ANNUAL REPORT | AUGUST
31, 2008 | 71 |
| --- | --- | --- |

Financial Highlights BlackRock Income Trust, Inc. (BKT)

		2007		2006		2005		2004		2003
Per Share Operating
Performance
Net asset
value, beginning of period	$ 6.53	$	6.48	$	6.54	$	6.95	$	7.21	$	8.13
Net
investment income	0.26	1	0.30		0.32		0.44		0.51		0.61
Net
realized and unrealized gain (loss)	0.40		0.12		0.05		(0.30	)	(0.16	)	(0.52	)
Net
increase from investment operations	0.66		0.42		0.37		0.14		0.35		0.09
Dividends
and distributions from:
Net
investment income	(0.25	)	(0.29	)	(0.34	)	(0.48	)	(0.61	)	(1.01	)
Tax return
of capital	—		(0.08	)	(0.09	)	(0.07	)	—		—
Total
dividends and distributions	(0.25	)	(0.37	)	(0.43	)	(0.55	)	(0.61	)	(1.01	)
Net asset
value, end of period	$ 6.94	$	6.53	$	6.48	$	6.54	$	6.95	$	7.21
Market
price, end of period	$ 6.07	$	5.81	$	6.07	$	5.90	$	7.50	$	7.71
Total Investment
Return 2
Based on
net asset value	10.82	% 3	7.06	%	6.06	%	2.12	%	5.01	%	1.20	%
Based on
market price	8.94	% 3	1.69	%	10.18	%	(14.63	)%	5.97	%	15.41	%
Ratios to Average Net
Assets
Total
expenses after fees paid indirectly and excluding interest expense	0.91	% 4	0.98	%	1.00	%	0.99	%	0.97	%	1.02	%
Total
expenses after fees paid indirectly	1.63	% 4	2.76	%	2.84	%	2.79	%	1.37	%	1.36	%
Total
expenses before fees paid indirectly	1.63	% 4	2.77	%	2.85		2.80	%	1.37	%	1.36	%
Total
expenses	1.63	% 4	2.77	%	2.85	%	2.80	%	1.37	%	1.36	%
Net
investment income	4.67	% 4	4.60	%	4.92	%	6.54	%	7.13	%	8.18	%
Supplemental Data
Net assets,
end of period (000)	$ 444,054	$	417,651	$	414,460	$	418,390	$	442,635	$	457,301
Reverse
repurchase agreements outstanding, end of period (000)	—	$	33,895	$	70,691	$	149,558	$	223,736	$	121,767
Reverse
repurchase agreements average daily balance (000)	$ 61,777	$	93,325	$	104,393	$	180,553	$	158,278	$	135,804
Portfolio
turnover	263	% 5	250	%	80	%	60	%	120	%	64	%
Asset
coverage, end of period per $1,000	—	$	13,322	$	6,863	$	3,798	$	2,978	$	4,756

1	Based on average shares outstanding.
2	Total investment returns based on market value, which can
be significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns exclude the effects
of sales charges.
3	Aggregate total investment return.
4	Annualized.
5	Includes TBA transactions. Excluding these transactions,
the portfolio turnover rate would have been 0%.

| See Notes to Financial Statements. — 72 | ANNUAL REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Financial Highlights BlackRock Limited Duration Income Trust (BLW)

Period November 1, 2007 to August 31, 2008		Year Ended October 31,
		2007		2006		2005		2004
Per Share Operating
Performance
Net asset
value, beginning of period	$ 18.52	$	19.01	$	19.17	$	20.13	$	19.74	$	19.10	2
Net
investment income	1.14	3	1.50		1.35		1.46		1.46		0.33
Net realized
and unrealized gain (loss)	(1.76	)	(0.49	)	0.03		(0.94	)	0.43		0.60
Net
increase (decrease) from investment operations	(0.62	)	1.01		1.38		0.52		1.89		0.93
Dividends
and distributions from:
Net
investment income	(1.19	)	(1.41	)	(1.52	)	(1.33	)	(1.49	)	(0.25	)
Net
realized gain	—		(0.06	)	—		(0.15	)	(0.01	)	—
Tax return
of capital	—		(0.03	)	(0.02	)	—		—		—
Total
dividends and distributions	(1.19	)	(1.50	)	(1.54	)	(1.48	)	(1.50	)	(0.25	)
Capital
charges with respect to issuance of shares	—		—		—		—		—		(0.04	)
Net asset
value, end of period	$ 16.71	$	18.52	$	19.01	$	19.17	$	20.13	$	19.74
Market
price, end of period	$ 14.57	$	16.68	$	18.85	$	17.48	$	19.95	$	18.80
Total Investment
Return 4
Based on
net asset value	(2.60	)% 5	5.66	%	7.85	%	2.93	%	10.17	%	4.71	% 5
Based on market
price	(5.70	)% 5	(4.03	)%	17.31	%	(5.30	)%	14.64	%	(4.77	)% 5
Ratios to Average Net
Assets
Total
expenses after fees paid indirectly and excluding interest expense	0.76	% 6	0.83	%	0.91	%	0.92	%	0.90	%	0.79	% 6
Total
expenses after fees paid indirectly	1.38	% 6	2.14	%	2.19	%	1.71	%	1.25	%	0.82	% 6
Total
expenses before fees paid indirectly	1.39	% 6	2.16	%	2.20	%	1.71	%	1.28	%	0.82	% 6
Total
expenses	1.39	% 6	2.16	%	2.20	%	1.71	%	1.26	%	0.82	% 6
Net
investment income	7.84	% 6	7.92	%	7.10	%	7.42	%	7.34	%	6.87	% 6
Supplemental Data
Net assets,
end of period (000)	$ 616,393	$	638,109	$	699,206	$	704,961	$	739,225	$	724,747
Reverse
repurchase agreements outstanding, end of period (000)	$ 64,538	$	109,287	$	220,000	$	176,010	$	159,416	$	118,993
Reverse
repurchase agreements average daily balance (000)	$ 120,295	$	172,040	$	179,366	$	186,660	$	195,845	$	26,591
Portfolio
turnover	191	% 7	65	%	132	%	70	%	215	%	127	%
Asset
coverage, end of period per $1,000	$ 10,551	$	7,251	$	4,178	$	5,005	$	5,637	$	7,091

1	Commencement of operations.
2	Net asset value, beginning of period, reflects a deduction
of $0.90 per share sales charge from the inital offering price of $20.00 per
share.
3	Based on average shares outstanding.
4	Total investment returns based on market value, which can
be significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns exclude the effects
of sales charges.
5	Aggregate total investment return.
6	Annualized.
7	Includes TBA transactions. Excluding these transactions
the portfolio turnover would have been 24%.

| See Notes to Financial Statements. — ANNUAL REPORT | AUGUST
31, 2008 | 73 |
| --- | --- | --- |

Financial Highlights BlackRock Strategic Bond Trust (BHD)

		2007		2006		2005		2004		2003
Per Share Operating
Performance
Net asset
value, beginning of period	$ 13.80	$	13.83	$	13.68	$	15.10	$	15.07	$	12.63
Net
investment income	0.76	1	0.95		0.99		1.10		1.39		1.59
Net
realized and unrealized gain (loss)	(1.03	)	(0.06	)	0.18		(1.13	)	0.25		2.34
Net
increase (decrease) from investment operations	(0.27	)	0.89		1.17		(0.03	)	1.64		3.93
Dividends
and distributions from:
Net
investment income	(0.77	)	(0.92	)	(0.98	)	(1.12	)	(1.61	)	(1.49	)
Tax return
of capital	—		—		(0.04	)	(0.27	)	—		—
Total
dividends and distributions	(0.77	)	(0.92	)	(1.02	)	(1.39	)	(1.61	)	(1.49	)
Net asset
value, end of period	$ 12.76	$	13.80	$	13.83	$	13.68	$	15.10	$	15.07
Market
price, end of period	$ 10.85	$	11.88	$	12.85	$	12.45	$	16.70	$	15.27
Total Investment
Return 2
Based on
net asset value	(1.19	)% 3	7.26	%	9.58	%	(0.49	)%	11.35	%	32.55	%
Based on
market price	(2.40	)% 3	(0.62	)%	11.87	%	(18.11	)%	21.54	%	37.36	%
Ratios to Average Net
Assets
Total
expenses after waiver and fees paid indirectly and excluding interest expense	0.81	% 4	0.87	%	0.94	%	0.92	%	0.89	%	1.01	%
Total
expenses after waiver and fees paid indirectly	0.82	% 4	1.27	%	2.00	%	1.87	%	1.23	%	1.71	%
Total
expenses after waiver and before fees paid indirectly	0.82	% 4	1.27	%	2.25	%	2.14	%	1.49	%	2.01	%
Total
expenses	0.93	% 4	1.45	%	2.25	%	2.14	%	1.49	%	2.01	%
Net
investment income	6.85	% 4	6.86	%	7.26	%	7.58	%	9.23	%	11.32	%
Supplemental Data
Net assets,
end of period (000)	$ 90,092	$	97,410	$	97,614	$	96,546	$	106,433	$	106,045
Reverse
repurchase agreements outstanding, end of period (000)	$ 1,571	$	413	$	14,951	$	31,883	$	13,188	$	45,872
Reverse
repurchase agreements average daily balance (000)	$ 391	$	7,240	$	21,104	$	30,406	$	27,562	$	46,036
Portfolio
turnover	27	%	34	%	56	%	51	%	31	%	32	%
Asset
coverage, end of period per $1,000	$ 58,347	$	236,789	$	7,529	$	4,028	$	9,071	$	3,312

1	Based on average shares outstanding.
2	Total investment returns based on market value, which can
be significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns exclude the effects
of sales charges.
3	Aggregate total investment return.
4	Annualized.

| See Notes to Financial Statements. — 74 | ANNUAL REPORT | AUGUST
31, 2008 |
| --- | --- | --- |

Notes to Financial Statements

Note 1. Significant Accounting Policies:

BlackRock Core Bond Trust (“Core Bond”), BlackRock High Income Shares (‘High Income”), BlackRock High Yield Trust (“High Yield”), BlackRock Income Opportunity Trust, Inc. (“Income Opportunity”), BlackRock Income Trust, Inc. (“Income Trust”), BlackRock Limited Duration Income Trust (“Limited Duration”) and BlackRock Strategic Bond Trust (“Strategic Bond”) are registered as diversified, closed-end management investment companies under the Investment Company Act of 1940 (the “1940 Act”), as amended. Income Opportunity and Income Trust are organized as Maryland corporations. Core Bond, High Yield, Limited Duration and Strategic Bond are organized as Delaware statutory trusts. High Income is organized as a Massachusetts business trust. Core Bond, High Income, High Yield, Income Opportunity, Income Trust, Limited Duration and Strategic Bond, are individually referred to as a “Trust” and collectively as the “Trusts”. The Trusts’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America, which may require the use of management accruals and estimates. Actual results may differ from these estimates. The Trusts recently changed their fiscal year end to August 31. The Trusts determine and make available for publication the net asset value of their Common Shares on a daily basis.

The following is a summary of significant accounting policies followed by the Trusts:

Valuation of Investments: The Trusts value their bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services selected under the supervision of each Trust’s Board of Directors or Trustees, as appropriate (the “Board”). Floating rate loan interests are valued at the mean between the last available bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments, and calculated yield measures based on valuation technology commonly employed in the market for such investments. Financial futures contracts traded on exchanges are valued at their last sale price. TBA commitments are valued at the current market value of the underlying securities. Swap agreements are valued by quoted fair values received daily by the Trusts’ pricing service or through brokers. Short-term securities are valued at amortized cost. Investments in open-end investment companies are valued at net asset value each business day.

Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior 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.

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 and previously were valued at the last sales price as of the close of options trading on applicable exchanges. 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 determined that the prior day’s price no longer reflects the fair value of the option. Over-the-counter options are valued by an independent pricing service using a mathematical model which incorporates a number of market data factors.

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, the investment will be valued by a method approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the investment advisor and/or sub-advisor seeks to determine the price that each Trust 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. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof.

Generally, trading in foreign securities is substantially completed each day at various times prior to the close of business on the New York Stock Exchange (“NYSE”). The values of such securities used in computing the net assets of each Trust are determined as of such times. Foreign currency exchange rates will be determined as of the close of business on the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of business on the NYSE that may not be reflected in the computation of each Trust’s net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such securities, those securities may be valued at their fair value as determined in good faith by the Board or by the investment advisor using a pricing service and/or procedures approved by the Board.

Derivative Financial Instruments: Each Trust may engage in various portfolio investment strategies both to increase the returns of the Trusts and to hedge, or protect, their exposure to interest rate movements and movements in the securities markets. Losses may arise if the value of the contract decreases due to an unfavorable change in the price of the underlying security, or if the counterparty does not perform under the contract.

• Financial futures contracts — Each Trust may purchase or sell financial futures contracts and options on such financial futures contracts. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Trust deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Trust agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in

ANNUAL REPORT AUGUST 31, 2008 75

Notes to Financial Statements (continued)

| | value of the contract. Such
receipts or payments are known as margin variation and are recognized by the
Trust as unrealized gains or losses. When the contract is closed, the Trust
records 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. |
| --- | --- |
| • | Foreign currency exchange
contracts — Each Trust may enter into foreign currency exchange contracts as
a hedge against either specific transactions or portfolio positions. Foreign
currency exchange contracts, when used by the Trusts, help to manage the
overall exposure to the foreign currency backing some of the investments held
by the Trusts. The contract is marked-to-market daily and the change in
market value is recorded by the Trusts as an unrealized gain or loss. When
the contract is closed, the Trusts 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. |
| • | Options — Each Trust may purchase
and write call and put options. When a Trust writes an option, an amount
equal to the premium received by the Trusts is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option written.
When a security 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 security acquired or deducted from (or added to) the proceeds of the
security sold. When an option expires (or the Trusts enter into a closing
transaction), the Trusts 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 premium received or paid). |
| | A call option gives the purchaser
of the option the right (but not the obligation) to buy, and obligates the
seller to sell (when the option is exercised), the underlying position at the
exercise price at any time or at a specified time during the option period. A
put option gives the holder the right to sell and obligates the writer to buy
the underlying position at the exercise price at any time or at a specified
time during the option period. |
| • | Swaps — Each Trust may enter into
swap agreements, in which the Trust and a counterparty agree to make periodic
net payments on a specified notional amount. These periodic payments received
or made by the Trusts are recorded in the accompanying Statements of
Operations as realized gains or losses, respectively. Gains or losses are
realized upon termination of the swap agreements. Swaps are marked-to-market
daily and changes in value are recorded as unrealized appreciation
(depreciation). When the swap is terminated, the Trusts will record a
realized gain or loss equal to the difference between the proceeds from (or
cost of) the closing transaction and the Trust’s basis in the contract, if
any. |
| | Credit default swaps — Credit
default swaps are agreements in which one party pays fixed periodic payments
to a counterparty in consideration for a guarantee from the counterparty to
make a specific payment should a negative credit event take place. |
| | Interest rate swaps — Interest
rate swaps are agreements in which one party pays a floating rate of interest
on a notional principal amount and receives a fixed rate of interest on the
same notional principal amount for a specified period of time. Alternatively,
a party may pay a fixed rate and receive a floating rate. Interest rate swaps
are efficient as asset/liability management tools. In more complex swaps, the
notional principal amount may decline (or amortize) over time. |
| | Total return swaps — Total return
swaps are agreements in which one party commits to pay interest in exchange
for a market-linked return. To the extent the total return of the security or
index underlying the transaction exceeds or falls short of the offsetting
interest rate obligation, the Trust will receive a payment from or make a
payment to the counterparty. |
| • | Swaptions — Swap options
(swaptions) are similar to options on securities except that instead of
selling or purchasing the right to buy or sell a security, the writer or
purchaser of the swap option is granting or buying the right to enter into a
previously agreed upon interest rate swap agreement at any time before the
expiration of the option. |

Foreign Currency Transactions: Foreign currency amounts are translated into United States dollars on the following basis: (i) market value of investment securities, assets and liabilities at the current rate of exchange; and (ii) purchases and sales of investment securities, income and expenses at the rates of exchange prevailing on the respective dates of such transactions.

The Trusts report foreign currency related transactions as components of realized gains for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes.

Asset-Backed and Mortgage-Backed Securities: Certain Trusts 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 a Trust 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.

Certain Trusts may purchase in the secondary market certain mortgage pass-through securities. There are a number of important differences

76 ANNUAL REPORT AUGUST 31, 2008

Notes to Financial Statements (continued)

among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by the Government National Mortgage Association (“GNMA”) are guaranteed as to the timely payment of principal and interest by GNMA and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by the Federal National Mortgage Association (“FNMA”) include FNMA guaranteed Mortgage Pass-Through Certificates which are solely the obligations of the FNMA, are not backed by or entitled to the full faith and credit of the United States and are supported by the right of the issuer to borrow from the Treasury.

Certain Trusts invest a significant portion of its assets in securities backed by commercial or residential mortgage loans or in issuers that hold mortgage and other asset-backed securities. Please see the Schedules of Investments for these securities. Changes in economic conditions, including delinquencies and/or defaults on assets underlying these securities, can affect the value, income and/or liquidity of such positions.

Borrowed Bond Agreements: In a borrowed bond agreement, a Trust borrows securities from a third party, with the commitment that they will be returned to the lender on an agreed-upon date. Borrowed bond agreements are primarily entered into to settle short positions. In a borrowed bond agreement, the Trust’s prime broker or third party broker takes possession of the underlying collateral securities or cash to settle such short positions. The value of the underlying collateral securities or cash approximates the principal amount of the borrowed bond transaction, including accrued interest. To the extent that borrowed bond transactions exceed one business day, the value of the collateral with any counterparty is “marked to market” on a daily basis to ensure the adequacy of the collateral. If the lender defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the lender of the security, realization of the collateral by the Trust may be delayed or limited.

Capital Trusts: These securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured as either fixed or adjustable coupon securities that can have either a perpetual or stated maturity date. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for Federal income tax purposes. These securities can have a rating that is slightly below that of the issuing company’s senior debt securities.

Floating Rate Loans: The Trusts may invest in floating rate loans, which are generally non-investment grade, made by banks, other financial institutions and privately and publicly offered corporations. Floating rate loans are senior in the debt structure of a corporation. Floating rate loans generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally (i) the lending rate offered by one or more European banks, such as LIBOR (London InterBank Offered Rate), (ii) the prime rate offered by one or more U.S. banks or (iii) the certificate of deposit rate. The Trusts consider these investments to be investments in debt securities for purposes of their investment policies.

A Trust earns and/or pays facility and other fees on floating rate loans. Other fees earned/paid include commitment, amendment, consent, commissions and prepayment penalty fees. Facility, amendment and consent fees are typically amortized as premium and/or accreted as discount over the term of the loan. Commitment, commission and various other fees are recorded as income. Prepayment penalty fees are recorded on the accrual basis. When the Trust buys a floating rate loan it may receive a facility fee and when it sells a floating rate loan it may pay a facility fee. On an ongoing basis, the Trust may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a floating rate loan. In certain circumstances, the Trust may receive a prepayment penalty fee upon the prepayment of a floating rate loan by a borrower. Other fees received by the Trust may include covenant waiver fees and covenant modification fees.

A Trust may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

Floating rate loans are usually freely callable at the issuer’s option. The Trusts may invest in such loans in the form of participations in loans (“Participations”) and assignments of all or a portion of loans from third parties. Participations typically will result in the Trusts having a contractual relationship only with the lender, not with the borrower. The Trusts 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 Trusts generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loans, nor any rights of offset against the borrower, and a Trust may not benefit directly from any collateral supporting the loan in which it has purchased the Participation.

As a result, a Trust will assume the credit risk of both the borrower and the lender that is selling the Participation. The Trust’s investments in loan participation interests involve the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, the Trust may be treated as general creditors of the lender and may not benefit from any offset between the lender and the borrower.

Interest Rate Floors: Interest rate floors are similar to interest rate swaps, except that one party agrees to pay a fee, while the other party pays the deficiency, if any, of a floating rate under a specified fixed or floating rate.

Interest rate floors are used by the Trusts to both manage the duration of the portfolios and their exposure to changes in short-term interest rates. The Trusts’ leverage provides extra income in a period of falling rates.

ANNUAL REPORT AUGUST 31, 2008 77

Notes to Financial Statements (continued)

Selling floors reduces some of that extra income by partially monetizing it as an up front payment which the Trusts receive.

Transaction fees paid or received by the Trusts are recognized as assets or liabilities and amortized or accreted into interest expense or income over the life of the interest rate floor. The asset or liability is subsequently adjusted to the current market value of the interest rate floor purchased or sold. Changes in the value of the interest rate floor are recognized as unrealized gains and losses.

Mortgage Dollar Rolls: Each Trust may sell mortgage-backed securities for delivery in the current month and simultaneously contract to repurchase substantially similar (same type, coupon and maturity) securities on a specific future date at an agreed-upon price. The market value of the securities that the Trust is required to purchase may decline below the agreed upon repurchase price of those securities. Pools of mortgages collateralizing those securities may have different prepayment histories than those sold. During the period between the sale and the repurchase, the Trust will not be entitled to receive interest and principal payments on the securities sold. Proceeds of the sale will be invested in additional instruments for the Trust, and the income from these investments will generate income for the Trust.

If such income does not exceed the income, capital appreciation and gain or loss that would have been realized on the securities sold as part of the dollar roll, the use of this technique will diminish the investment performance of the Trust compared with what the performance would have been without the use of dollar rolls.

Preferred Stock: The Trusts may invest in preferred stocks. Preferred stock has a preference over common stocks 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.

Reverse Repurchase Agreements: The Trusts may enter into reverse repurchase agreements with qualified third party broker-dealers. Interest on the value of the reverse repurchase agreements issued and outstanding is based upon competitive market rates at the time of issuance. At the time the Trust enters into a reverse repurchase agreement, it identifies for segregation certain liquid securities having a value not less than the repurchase price, including accrued interest, of the reverse repurchase agreement. The Trusts may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction.

TBA Commitments: The Trusts may enter into to-be-announced (“TBA”) commitments to purchase or sell securities for a fixed price at a future date. TBA commitments are considered securities in themselves, and involve a risk of loss if the value of the security to be purchased or sold declines or increases prior to settlement date, which is in addition to the risk of decline in the value of the Trust’s other assets. Unsettled TBA commitments are valued at the current market value of the underlying securities, according to the procedures described under “Valuation of Investments.”

Zero Coupon Bonds: The Trusts may invest in zero-coupon bonds, which are normally issued at a significant discount from face value and do not provide for periodic interest payments. Zero-coupon bonds may experience greater volatility in market value than similar maturity debt obligations which provide for regular interest payments.

Segregation: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that each Trust segregates assets in connection with certain investments (e.g., reverse repurchase agreements, swaps, swaptions or futures contracts) or certain borrowings, each Trust will, consistent with certain interpretive letters issued by the SEC, designate on their books and record cash or other liquid debt securities having a market value at least equal to the amount that would otherwise be required to be physically segregated.

Investment Transactions and Investment Income: Investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on security transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Trust has determined the ex-dividend date. Interest income is recognized on the accrual basis. The Trusts amortize all premiums and discounts on debt securities.

Dividends and Distributions: Dividends from net investment income are declared and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. If the total dividends and distributions made in any tax year exceeds net investment income and accumulated realized capital gains, a portion of the total distribution may be treated as a tax return of capital.

Income Taxes: It is each Trust’s policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. Therefore, no federal income tax provision is required. Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.

Effective April 30, 2008, each Trust except High Income implemented Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB

78 ANNUAL REPORT AUGUST 31, 2008

Notes to Financial Statements (continued)

Statement No. 109” (“FIN 48”). Effective June 30, 2007, High Income implemented FIN 48. FIN 48 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity, including investment companies, before being measured and recognized in the financial statements. The investment advisor has evaluated the application of FIN 48 to the Trusts, and has determined that the adoption of FIN 48 does not have a material impact on each Trust’s financial statements. Each Trust files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on High Yield, Income Opportunity, Income Trust, Limited Duration and Strategic Bond’s U.S. federal tax returns remains open for the years ended October 31, 2005 through October 31, 2007. The statute of limitations on Core Bond’s and High Income’s U.S. federal tax returns remains open for the years ended December 31, 2005 through December 31, 2007. The statute of limitations on each Trust’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Recent Accounting Pronouncements: In September 2006, Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”), was issued and is effective for fiscal years beginning after November 15, 2007. Effective January 1, 2008, High Income adopted FAS 157. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The impact on the other Trusts’ financial statement disclosures, if any, is currently being assessed.

In March 2008, Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133” (“FAS 161”), was issued. FAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity’s results of operations and financial position. In September 2008, FASB Staff Position No. 133-1 and FASB Interpretation No. 45-4 (the “FSP”), “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161” was issued and is effective for fiscal years and interim periods ending after November 15, 2008. The FSP amends FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. The FSP also clarifies the effective date of FAS 161, whereby disclosures required by FAS 161 are effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The impact on the Trusts’ financial statement disclosures, if any, is currently being assessed.

Deferred Compensation and BlackRock Closed-End Share Equivalent Investment Plan: Under the deferred compensation plan approved by each Trust’s Board, non-interested Directors or Trustees (“Independent Directors or Trustees”) may defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts have been invested in common shares of other certain BlackRock Closed-End Funds selected by the Independent Directors or Trustees. This has approximately the same economic effect for the Independent Directors or Trustees as if the Independent Directors or Trustees had invested the deferred amounts directly in other certain BlackRock Closed-End Funds.

The deferred compensation plan is not funded and obligations thereunder represent general unsecured claims against the general assets of each Trust. Each Trust may, however, elect to invest in common shares of other certain BlackRock Closed-End Funds selected by the Independent Directors or Trustees in order to match its deferred compensation obligations. Investments to cover each Trust’s deferred compensation liability are included in other assets on the Statements of Assets and Liabilities. Dividends and distributions from the BlackRock Closed-End Fund investments under the plan are included in income from affiliates on the Statements of Operations.

Other: Expenses directly related to a Trust are charged to that Trust. Other operating expenses shared by several Trusts are pro-rated among those Trusts on the basis of relative net assets or other appropriate methods.

2. Investment Advisory Agreement and Other Transactions with Affiliates:

Each Trust has entered into an Investment Advisory Agreement with BlackRock Advisors, LLC (the “Advisor”), an indirect, wholly owned subsidiary of BlackRock, Inc., to provide investment services for all Trusts and administration services for Core Bond, High Income, Limited Duration and Strategic Bond. Merrill Lynch & Co., Inc. and The PNC Financial Services Group, Inc. are principal owners of BlackRock, Inc.

Each Trust’s investment advisory fee paid to the Advisor is computed weekly and payable monthly based on an annual rate of 0.60% for Income Opportunity and 0.65% for Income Trust, of each Trust’s average net assets and 0.75% of the first $200 million and 0.50% thereafter for High Income, 0.55% for Core Bond and Limited Duration, 1.05% for High Yield and 0.75% for Strategic Bond, of each Trust’s average total assets (including any assets attributable to borrowings) minus the sum of accrued liabilities (other than debt representing financial leverage). The Advisor has voluntarily agreed to waive a portion of the investment advisory fees or other expenses on Strategic Bond as a percentage of its average weekly managed assets as follows: 0.15% through February 29, 2008, 0.10% through February 28, 2009 and 0.05% through February 28, 2010.

High Yield, Income Opportunity and Income Trust each has an Administration Agreement with the Advisor. The administration fee paid to the Advisor is computed weekly and payable monthly based on an annual rate, 0.10% for Income Opportunity, and 0.15% for Income Trust, of each Trust’s average net assets and 0.10% for High Yield of the Trust’s average weekly managed assets.

ANNUAL REPORT AUGUST 31, 2008 79

Notes to Financial Statements (continued)

The Trusts reimbursed the Advisor the following amounts for certain accounting services, which are included in accounting services in the Statements of Operations. For the period November 1, 2007 (January 1, 2008 for High Income) through August 31, 2008, the amounts were as follows:

Core Bond	$
High Income	$ 1,360
Limited Duration	$ 6,679
Strategic Bond	$ 979

BlackRock Financial Management, Inc. (“BFM”), a wholly owned subsidiary of BlackRock, Inc., serves as sub-advisor to Core Bond, High Income, Limited Duration and Strategic Bond. The Advisor pays BFM for services they provide, a monthly fee that is a percentage of the investment advisory fee paid by each Trust to the Advisor.

For the period November 1, 2007 (January 1, 2008 for High Income) through August 31, 2008 and the year ended October 31, 2007 (December 31, 2007 for High Income) Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a wholly owned subsidiary of Merrill Lynch, earned commissions on transactions of securities as follows:

| | Period
November 1, 2007 and January 1, 2008 through August 31, 2008 | Year
Ended October 31, 2007 and December 31, 2007 |
| --- | --- | --- |
| Core Bond | $ 163 | $ 104,454 |
| High Yield | $ — | $ 8 |
| Income Opportunity | $ — | $ 110,446 |
| Income Trust | $ 30 | $ 66,166 |
| Limited Duration | $ — | $ 1,603 |
| Strategic Bond | $ — | $ 28 |

Pursuant to the terms of the custody agreement, custodian fees may be reduced by amounts calculated on uninvested cash balances (“custody credits”), which are on the Statements of Operations as fees paid indirectly.

Certain officers and/or directors or trustees of the Trusts are officers and/or directors of BlackRock, Inc. or its affiliates. The Trusts reimburse the Advisor for compensation paid to the Trusts’ Chief Compliance Officer.

3. Investments:

Purchases and sales (including paydowns) of investments, excluding short-term securities, for the period November 1, 2007 (January 1, 2008 for High Income) through August 31, 2008 were as follows:

	Purchases	Sales
Core Bond	$ 2,775,007,242	$ 2,886,368,488
High Income	$ 38,775,390	$ 57,039,232
High Yield	$ 17,419,016	$ 21,298,253
Income Opportunity	$ 2,131,008,684	$ 2,274,418,387
Income Trust	$ 1,498,993,466	$ 1,340,247,404
Limited Duration	$ 1,655,569,758	$ 1,713,425,181
Strategic Bond	$ 34,494,528	$ 23,185,479

Transactions in options written for the period November 1, 2007 (January 1, 2008 for High Income) through August 31, 2008 were as follows:

Core Bond

Outstanding call options written, beginning of period	28	$	1,130,772
Options written	277		2,220,862
Options exercised	(5	)	(231,610	)
Options expired	(61	)	(169,503	)
Options closed	(68	)	(54,609	)
Outstanding call options written, end of period	171	$	2,895,912
* Some contracts represent a notional amount of $1,000,000.

Outstanding put options written, beginning of period	28	$	1,130,773
Options written	206		2,192,888
Options expired	(23	)	(384,072	)
Options closed	(121	)	(111,416	)
Outstanding put options written, end of period	90	$	2,828,173
* Some contracts represent a notional amount of $1,000,000.

Income Opportunity

Outstanding call options written, beginning of period	31	$	1,239,282
Options written	286		2,513,046
Options expired	(66	)	(187,105	)
Options exercised	(6	)	(249,090	)
Options closed	(69	)	(54,609	)
Outstanding call options written, end of period	176	$	3,261,524
* Some contracts represent a notional amount of $1,000,000.

80 ANNUAL REPORT AUGUST 31, 2008

Notes to Financial Statements (continued)

Outstanding put options written, beginning of period	31	$	1,239,278
Options written	234		2,493,928
Options expired	(46	)	(424,538	)
Options closed	(123	)	(112,495	)
Outstanding put options written, end of period	96	$	3,196,173
* Some contracts represent a notional amount of $1,000,000.

Income Trust

Outstanding call options written, beginning of period	162	$	4,975,195
Options written	41		1,343,258
Options expired	(22	)	(182,440	)
Options exercised	(75	)	(1,705,738	)
Options closed	(48	)	(2,247,298	)
Outstanding call options written, end of period	58	$	2,182,977
* Some contracts represent a notional amount of $1,000,000.

Outstanding put options written, beginning of period	138	$	4,929,221
Options written	40		1,343,246
Options expired	(17	)	(501,427	)
Options closed	(103	)	(3,588,058	)
Outstanding put options written, end of period	58	$	2,182,982
* Some contracts represent a notional amount of $1,000,000.

4. Reverse Repurchase Agreements:

For the period November 1, 2007 to August 31, 2008, Core Bond’s daily weighted average interest rate was 2.89%.

For the period November 1, 2007 to August 31, 2008, Income Opportunity’s daily weighted average interest rate was 3.14%.

For the period November 1, 2007 to August 31, 2008, Limited Duration’s daily weighted average interest rate was 3.27%.

For the period November 1, 2007 to August 31, 2008, Income Trust’s daily weighted average interest rate was 3.08%.

For the period November 1, 2007 to August 31, 2008, Strategic Bond’s daily weighted average interest rate was 1.13%.

5. Commitments:

Limited Duration may invest in floating rate loans. In connection with these investments, the Trust may, with its Advisor, also enter into unfunded corporate loans (“commitments”). Commitments may obligate the Trust to furnish temporary financing to a borrower until permanent financing can be arranged. At August 31, 2008, the Trust had outstanding commitments of approximately $919,000. In connection with these commitments, the Trust earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is classified in the Statements of Operations as facility and other fees, is recognized ratably over the commitment period. As of August 31, 2008, the Trust had the following unfunded loan commitments:

| Borrower | Unfunded Commitment (000) | Value
of Underlying Loan (000) |
| --- | --- | --- |
| Cellular South | $ 500 | $ 480 |
| Community Health Systems, Inc. | 419 | 396 |

Foreign Currency Exchange Commitments: At August 31, 2008, Income Opportunity had entered into foreign exchange contracts, in addition to the contracts listed on the Schedule of Investments, under which it had agreed to sell a foreign currency with an approximate value of $280,000.

6. Capital Share Transactions:

There are 200 million of $0.01 par value shares authorized for Income Opportunity and Income Trust. There are an unlimited number of $0.001 par value shares authorized for Core Bond, High Yield, Limited Duration and Strategic Bond. There are an unlimited number of no par value shares authorized for High Income. At August 31, 2008, the shares owned by an affiliate of the Advisor of Limited Duration were 6,021.

During the period November 1, 2007 (January 1, 2008 for High Income) to August 31, 2008, shares remained constant. For the years ended October 31, 2007 and 2006, the following Trusts issued additional shares under their respective dividend reinvestment plan:

High Yield	1,496	6,259
Limited Duration	107,367	13,785

For High Income, for the year ended December 31, 2007, shares remained constant and for the year ended December 31, 2006 shares increased by 127,532.

7. Short Term Borrowings:

On May 16, 2008, High Income and High Yield renewed their revolving credit and security agreement funded by a commercial paper asset securiti-zation program with Citicorp North America, Inc. (“Citicorp”), as Agent, certain secondary backstop lenders and certain asset securitization conduits, as lenders (the “Lenders”). The agreement was renewed for one year and has a maximum limit of $80,000,000 for High Income and $32,000,000 for High Yield. Under the Citicorp program, the conduits will fund advances to these Trusts through highly rated commercial paper. High Income and High Yield have granted a security interest in substantially all of its assets

ANNUAL REPORT AUGUST 31, 2008 81

Notes to Financial Statements (continued)

to, and in favor of, the Lenders as security for its obligations to the Lenders. The interest rate on the Trust’s borrowings is based on the interest rate carried by the commercial paper plus a program fee. In addition, the Trusts pay a liquidity fee to the secondary backstop lenders and the agent. These amounts are included in interest expense on the Statements of Operations.

For the period ended August 31, 2008, the daily weighted average interest rates were as follows:

High Income	2.91 %
High Yield	4.36 %

8. Income Tax Information:

Reclassification: Accounting principles generally accepted in the United States of America require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or on net asset values per share. The following permanent differences as of August 31, 2008 attributable to paydowns, accounting for swap agreements, foreign currency transactions, amortization methods on fixed income securities, expiration of capital loss carryforwards and other differences between financial reporting and tax accounting, were reclassified to the following accounts:

| Increase
(decrease) paid-in-capital | Core Bond — $ (1,762,892 | ) | High Income — $ (35,363,213 | High Yield — $ (3,270,311 | Income Opportunity — $ 26,609 | |
| --- | --- | --- | --- | --- | --- | --- |
| Increase
(decrease) undistributed (distributions in excess of) net investment income | $ 6,287,796 | | $ 290,443 | $ — | $ 565,020 | |
| Increase
(decrease) accumulated net realized gain (loss) | $ (4,524,904 | ) | $ 35,072,770 | $ 3,270,311 | $ (591,629 | ) |

| Increase
(decrease) paid-in-capital | Income Trust — $ (1,352,206 | ) | Limited Duration — $ — | |
| --- | --- | --- | --- | --- |
| Increase
(decrease) undistributed (distributions in excess of) net investment income | $ 12,439,340 | | $ (2,181,484 | ) |
| Increase
(decrease) accumulated net realized gain (loss) | $ (11,087,134 | ) | $ 2,181,484 | |

The tax character of distributions paid during the years ended August 31, 2008, October 31, 2007 and October 31, 2006 was as follows:

	Core Bond	High Income	High Yield	Income Opportunity
Ordinary
income
8/31/08	$ 16,387,174	$ 6,958,699	$ 3,273,618	$ 17,707,143
10/31/07	$ 11,064,934	$ 12,923,299	$ 3,927,807	$ 20,862,233
10/31/06	$ 25,048,230	$ 12,792,689	$ 4,175,232	$ 22,238,533
Long-term
capital gain
8/31/08	$ —	$ —	$ —	$ —
10/31/07	—	—	—	—
10/31/06	7,914,351	—	—	8,976,685
Tax return
of capital
8/31/08	$ 499,560	$ —	$ —	$ —
10/31/07	5,227,386	—	—	1,874,570
10/31/06	—	—	—	2,162,198
Total
8/31/08	$ 16,886,734	$ 6,958,699	$ 3,273,618	$ 17,707,143
10/31/07	16,292,320	12,923,299	3,927,807	22,736,803
10/31/06	32,962,581	12,792,689	4,175,232	33,377,416

	Income Trust	Limited Duration	Strategic Bond
Ordinary income
8/31/08	$ 15,793,806	$ 43,898,690	$ 5,434,969
10/31/07	18,808,452	51,967,739	6,521,963
10/31/06	21,910,288	55,725,066	6,969,104
Long-term
capital gain
8/31/08	$ —	$ —	$ —
10/31/07	—	2,229,742	—
10/31/06	—	—	—
Tax return
of capital
8/31/08	$ —	$ —	$ —
10/31/07	4,978,175	1,074,826	—
10/31/06	5,576,693	760,960	251,641
Total
8/31/08	$ 15,793,806	$ 43,898,690	$ 5,434,969
10/31/07	23,786,627	55,272,307	6,521,963
10/31/06	27,486,981	56,486,026	7,220,745

As of August 31, 2008, the tax components of accumulated earnings (losses) were as follows:

Undistributed ordinary income	Core Bond — $ 2,301,597		High Income — $ 1,760,914		High Yield — $ 82,363		Income Opportunity — $ 2,297,559
Capital loss carryforwards	(22,295,867	)	(207,134,596	)	(35,284,031	)	(19,529,044	)
Net unrealized gains (losses)*	(12,455,918	)	(16,051,072	)	(8,078,246	)	(11,801,449	)
Total Accumulated Net Earnings (Losses)	$ (32,450,188	)	$ (221,424,754	)	$ (43,279,914	)	$ (29,032,934	)

82 ANNUAL REPORT AUGUST 31, 2008

Notes to Financial Statements (concluded)

Undistributed ordinary income	Income Trust — $ 7,072,280		Limited Duration — $ 382,595		Strategic Bond — $ 111,699
Capital loss carryforwards	(85,705,294	)	(21,933,927	)	(2,483,153	)
Net unrealized gains (losses)*	43,360,925		(63,398,025	)	(5,986,733	)
Total Accumulated Net Earnings (Losses)	$ (35,272,089	)	$ (84,949,357	)	$ (8,358,187	)

• The difference between book-basis and tax-basis net unrealized gains (losses) is attributable primarily to the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains on certain options, futures and foreign currency contracts, the difference between book and tax amortization methods for premiums and discounts on fixed income securities, the deferral of compensation to trustees, accounting for swap agreements, book/tax differences in the accrual of income on securities in default and other book/tax temporary differences.

As of August 31, 2008, the Trusts had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates:

Expires August 31,	Core Bond	High Income	High Yield	Income Opportunity
2009	$ —	$ 55,878,284	$ 15,159,280	$ —
2010	—	102,576,339	8,468,860	—
2011	—	28,467,396	4,771,417	—
2012	—	2,339,279	316,410	—
2013	—	—	—	—
2014	4,880,373	7,043,976	2,060,533	2,451,626
2015	—	—	2,467,772	2,342,921
2016	17,415,494	10,829,322	2,039,759	14,734,497
Total	$ 22,295,867	$ 207,134,596	$ 35,284,031	$ 19,529,044

Expires August 31,	Income Trust	Limited Duration	Strategic Bond
2009	$ 13,940,898	$ —	$ —
2010	—	—	—
2011	21,960,613	—	—
2012	10,100,201	—	—
2013	3,861,222	—	—
2014	6,952,429	—	447,113
2015	8,585,744	—	—
2016	20,304,187	21,933,927	2,036,040
Total	$ 85,705,294	$ 21,933,927	$ 2,483,153

9. Subsequent Events:

The Trusts paid net investment income dividends on September 30, 2008 to shareholders of record on September 15, 2008 in the following amounts:

Core Bond	$
High Income	$ 0.018200
High Yield	$ 0.051000
Income Opportunity	$ 0.051000
Income Trust	$ 0.024000
Limited Duration	$ 0.105000
Strategic Bond	$ 0.077000

On September 15, 2008, Bank of America Corporation announced that it has agreed to acquire Merrill Lynch & Co., Inc., one of the principal owners of BlackRock, Inc. The purchase has been approved by the directors of both companies. Subject to shareholder and regulatory approvals, the transaction is expected to close in the first quarter of 2009.

On September 15, 2008, Lehman Brothers Holdings, Inc. and various other Lehman Brothers entities filed for Chapter 11 bankruptcy. As of August 31, 2008, Core Bond and Income Opportunity held Lehman Brothers Holdings, Inc. bonds valued at $1,600,494 and $2,629,741 with interest receivable of approximately $43,000 and $35,000, respectively. The bankruptcy adversely impacted the value of such investments, and realization of any principal or interest receivable is not guaranteed. Core Bond, High Yield, Income Opportunity and Income Trust had swap contracts outstanding on August 31, 2008 with various Lehman counterparties with net unrealized appreciation or (depreciation) of $(28,557), $61, $(38,235) and $(365,890), respectively, and interest receivable or (payable) of approximately $(477,000) $1,000, $(535,000) and $(122,000), respectively. Furthermore, Core Bond, Income Opportunity and Income Trust had outstanding swaptions with Lehman with net values of $1,473,254, $1,777,955 and $43,082, respectively as of August 31, 2008. On September 15, 2008, the Trusts terminated the various contracts that were outstanding as of that date. Core Bond, High Yield, Income Opportunity and Income Trust incurred losses as a result of terminating the contracts of approximately $1,155,000, $6,000, $1,273,000 and $886,000, respectively. Additionally, as of August 31, 2008, Core Bond, Income Opportunity, Limited Duration and Strategic Bond had reverse repurchase agreements outstanding with Lehman with face amounts of $93,529,145, $71,292,462, $43,083,208 and $1,571,363, respectively. Core Bond, Income Opportunity and Strategic Bond terminated the reverse repurchase agreements prior to September 15, 2008 without any realized gain or loss. Subsequent to September 15, 2008, Limited Duration terminated any remaining reverse repurchase agreements that were outstanding as of August 31, 2008 incurring losses of approximately $500,000 as a result.

ANNUAL REPORT AUGUST 31, 2008 83

| Report of
Independent Registered Public Accounting Firm |
| --- |
| To the
Shareholders and Board of Trustees/Directors of: |
| BlackRock Core Bond
Trust |
| BlackRock High Income
Shares |
| BlackRock High Yield
Trust |
| BlackRock Income Opportunity Trust,
Inc. |
| BlackRock Income Trust,
Inc. |
| BlackRock Limited Duration Income
Trust |
| BlackRock Strategic Bond
Trust |
| (Collectively the
“Trusts”) |

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of BlackRock Core Bond Trust, BlackRock High Yield Trust, BlackRock Income Opportunity Trust, Inc., BlackRock Income Trust, Inc., BlackRock Limited Duration Income Trust, and BlackRock Strategic Bond Trust as of August 31, 2008, and the related statements of operations for the period November 1, 2007 to August 31, 2008 and for the year ended October 31, 2007, the statements of cash flows for the period November 1, 2007 to August 31, 2008 for BlackRock Core Bond Trust, BlackRock High Yield Trust, BlackRock Income Opportunity Trust, Inc., and BlackRock Limited Duration Income Trust, the statements of changes in net assets for the period November 1, 2007 to August 31, 2008 and for each of the two years in the period ended October 31, 2007, and the financial highlights for the periods presented. We have also audited the accompanying statement of assets and liabilities, including the schedule of investments, of BlackRock High Income Shares as of August 31, 2008, and the related statements of operations for the period January 1, 2008 to August 31, 2008 and for the year ended December 31, 2007, the statement of cash flows for the period January 1, 2008 to August 31, 2008, the statements of changes in net assets for the period January 1, 2008 to August 31, 2008 and for each of the two years in the period ended December 31, 2007, and the financial highlights for the period January 1, 2008 to August 31, 2008 and for each of the three years in the period ended December 31, 2007. These financial statements and financial highlights are the responsibility of the Trusts’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of BlackRock High Income Shares for each of two years in the period ended December 31, 2004 were audited by other auditors whose report, dated February 22, 2005, expressed an unqualified opinion on those financial highlights.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trusts are not required to have, nor were we engaged to perform an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trusts’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures include confirmation of the securities owned as of August 31, 2008, by correspondence with the custodian, brokers and financial intermediaries; where replies were not received from brokers and financial intermediaries, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BlackRock Core Bond Trust, BlackRock High Yield Trust, BlackRock Income Opportunity Trust, Inc., BlackRock Income Trust, Inc., BlackRock Limited Duration Income Trust, and BlackRock Strategic Bond Trust as of August 31, 2008, the results of their operations for the period November 1, 2007 to August 31, 2008 and for the year ended October 31, 2007, the results of cash flows for the period November 1, 2007 to August 31, 2008 for BlackRock Core Bond Trust, BlackRock High Yield Trust, BlackRock Income Opportunity Trust, Inc., and BlackRock Limited Duration Income Trust, changes in their net assets for the period November 1, 2007 to August 31, 2008 and for each of the two years in the period ended October 31, 2007, and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. Additionally, in our opinion, the financial statements and financial highlights referred to above, present fairly, in all material respects, the financial position of BlackRock High Income Shares as of August 31, 2008, the results of its operations for the period January 1, 2008 to August 31, 2008 and for the year ended December 31, 2007, the statement of cash flows for the period January 1, 2008 to August 31, 2008, the changes in its net assets for the period January 1, 2008 to August 31, 2008 and for each of the two years in the period ended December 31, 2007, and the financial highlights for the period January 1, 2008 to August 31, 2008 and for each of the three years in the period ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP Princeton, New Jersey October 30, 2008

84 ANNUAL REPORT AUGUST 31, 2008

Disclosure of Investment Advisory Agreement and Subadvisory Agreement

The Board of Trustees (collectively, the “Board,” the members of which are referred to as “Trustees”) of the BlackRock Core Bond Trust (“BHK”), BlackRock High Income Shares (“HIS”), BlackRock High Yield Trust (“BHY”), BlackRock Income Opportunity Trust, Inc. (“BNA”), BlackRock Income Trust, Inc. (“BKT”), BlackRock Limited Duration Income Trust (“BLW”) and BlackRock Strategic Bond Trust (“BHD,” and together with BHK, HIS, BHY, BNA, BKT and BLW, the “Funds”) met in April and May 2008 to consider approving the continuation of each Fund’s investment advisory agreement (each, an “Advisory Agreement”) with BlackRock Advisors, LLC (the “Advisor”), each Fund’s investment advisor. The Board also considered the approval of each Fund’s subadvisory agreement (each, a “Subadvisory Agreement” and, together with the “Advisory Agreement,” the “Agreements”) between the Advisor and BlackRock Financial Management, Inc. (the “Subadvisor”). The Advisor and the Subadvisor are collectively referred to herein as the “Advisors” and, together with BlackRock, Inc., “BlackRock.”

Disclosure regarding HIS’s Investment Advisory Agreement and Subadvisory Agreement can be found in its most recent semi-annual report dated June 30, 2008 and is incorporated herein by reference.

Activities and Composition of the Board

The Board of each Fund consists of thirteen individuals, eleven of whom are not “interested persons” of the Funds as defined in the Investment Company Act of 1940 (the “1940 Act”) (the “Independent Trustees”). The Trustees 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 Trustees have retained independent legal counsel to assist them in connection with their duties. The Chairman of the Board is an Independent Trustee. The Board has established four standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee and a Performance Oversight Committee.

Advisory Agreement and Subadvisory Agreement

Upon the consummation of the combination of BlackRock, Inc.’s investment management business with Merrill Lynch & Co., Inc.’s investment management business, including Merrill Lynch Investment Managers, L.P., and certain affiliates, each Fund entered into an Advisory Agreement and a Subadvisory Agreement, each with an initial two-year term. Consistent with the 1940 Act, after the Advisory Agreement’s and Subadvisory Agreement’s respective initial two-year term, the Board is required to consider the continuation of each Fund’s Advisory Agreement and Subadvisory Agreement on an annual basis. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services provided to each Fund by the personnel of BlackRock and its affiliates, including investment advisory services, administrative services, secondary market support services, oversight of fund accounting and custody, and assistance in meeting legal and regulatory requirements. The Board also received and assessed information regarding the services provided to each Fund by certain unaffiliated service providers.

Throughout the year, the Board also considered a range of information in connection with its oversight of the services provided by BlackRock and its affiliates. Among the matters the Board considered were: (a) investment performance for one-, three- and five-year periods, as applicable, against peer funds, as well as senior management and portfolio managers’ analysis of the reasons for underperformance, if applicable; (b) fees, including advisory, administration and other fees paid to BlackRock and its affiliates by each Fund, as applicable; (c) Fund operating expenses paid to third parties; (d) the resources devoted to and compliance reports relating to each Fund’s investment objective, policies and restrictions; (e) each Fund’s compliance with its Code of Ethics and 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; (h) BlackRock’s implementation of the proxy voting guidelines approved by the Board; (i) execution quality; (j) valuation and liquidity procedures; and (k) reviews of BlackRock’s business, including BlackRock’s response to the increasing scale of its business.

Board Considerations in Approving the Advisory Agreement and Subadvisory Agreement

To assist the Board in its evaluation of the Agreements, the Trustees received information from BlackRock in advance of the April 22, 2008 meeting which detailed, among other things, the organization, business lines and capabilities of the Advisors, including: (a) the responsibilities of various departments and key personnel and biographical information relating to key personnel; (b) financial statements for BlackRock; (c) the advisory and/or administrative fees paid by each Fund to the Advisors, including comparisons, compiled by Lipper Inc. (“Lipper”), an independent third party, with the management fees, which include advisory and administration fees, of funds with similar investment objectives (“Peers”); (d) the profitability of BlackRock and certain industry profitability analyses for advisors to registered investment companies; (e) the expenses of BlackRock in providing various services; (f) non-investment advisory reimbursements, if applicable, and “fallout” benefits to BlackRock; (g) economies of scale, if any, generated through the Advisors’ management of all of the BlackRock closed-end funds (the “Fund Complex”); (h) the expenses of each Fund, including comparisons of each such Fund’s expense ratios (both before and after any fee waivers) with the expense ratios of its Peers; (i) an internal comparison of management fees classified by Lipper, if applicable; and (j) each Fund’s performance for the past one-, three- and five-year periods, as applicable, as well as each Fund’s performance compared to its Peers.

The Board also considered other matters it deemed important to the approval process, where applicable, such as payments made to BlackRock or its affiliates relating to the distribution of Fund shares, services related to the valuation and pricing of Fund portfolio holdings, and direct and indirect benefits to BlackRock and its affiliates from their relationship with the Funds.

In addition to the foregoing materials, independent legal counsel to the Independent Trustees provided a legal memorandum outlining, among other things, the duties of the Board under the 1940 Act, as well as the general principles of relevant law in reviewing and approving advisory contracts, the requirements of the 1940 Act in such matters, an advisor’s fiduciary duty

ANNUAL REPORT AUGUST 31, 2008 85

Disclosure of Investment Advisory Agreement and Subadvisory Agreement (continued)

with respect to advisory agreements and compensation, and the standards used by courts in determining whether investment company boards of directors have fulfilled their duties and the factors to be considered by boards in voting on advisory agreements.

The Independent Trustees reviewed this information and discussed it with independent legal counsel prior to the meeting on April 22, 2008. At the Board meeting on April 22, 2008, BlackRock made a presentation to and responded to questions from the Board. Following the meeting on April 22, 2008, the Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written materials provided to the Trustees prior to the meetings on May 29 and 30, 2008. At the Board meetings on May 29 and 30, 2008, BlackRock responded to further questions from the Board. In connection with BlackRock’s presentations, the Board considered each Agreement and, in consultation with independent legal counsel, reviewed the factors set out in judicial decisions and Securities and Exchange Commission (“SEC”) statements relating to the renewal of the Agreements.

Matters Considered by the Board

In connection with its deliberations with respect to the Agreements, the Board considered all factors it believed relevant with respect to each Fund, including the following: the nature, extent and quality of the services provided by the Advisors; the investment performance of each Fund; the costs of the services to be provided and profits to be realized by the Advisors and their affiliates from their relationship with the Funds; the extent to which economies of scale would be realized as the Fund Complex grows; and whether BlackRock realizes other benefits from its relationship with the Funds.

A. Nature, Extent and Quality of the Services: In evaluating the nature, extent and quality of the Advisors’ services, the Board reviewed information concerning the types of services that the Advisors provide and are expected to provide to each Fund, narrative and statistical information concerning each Fund’s performance record and how such performance compares to each Fund’s Peers, information describing BlackRock’s organization and its various departments, the experience and responsibilities of key personnel and available resources. The Board noted the willingness of the personnel of BlackRock to engage in open, candid discussions with the Board. The Board further considered the quality of the Advisors’ investment process in making portfolio management decisions.

In addition to advisory services, the Trustees considered the quality of the administrative and non-investment advisory services provided to the Funds. The Advisors and their affiliates provided each Fund with such administrative and other services, as applicable (in addition to any such services provided by others for the Funds), and officers and other personnel as are necessary for the operations of the respective Fund. In addition to investment management services, the Advisors and their affiliates provided each Fund with services such as: preparing shareholder reports and communications, including annual and semi-annual financial statements and the Funds’ websites; communications with analysts to support secondary market trading; assisting with daily accounting and pricing; preparing periodic filings with regulators and stock exchanges; overseeing and coordinating the activities of other service providers; administering and organizing Board meetings and preparing the Board materials for such meetings; providing legal and compliance support (such as helping to prepare proxy statements and responding to regulatory inquiries); and performing other Fund administrative tasks necessary for the operation of the respective Fund (such as tax reporting and fulfilling regulatory filing requirements). The Board considered the Advisors’ policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Funds and BlackRock: As previously noted, the Board received performance information regarding each Fund and its Peers. Among other things, the Board received materials reflecting each Fund’s historic performance and each Fund’s one-, three- and five-year total returns (as applicable) relative to its Peers (including the Peers’ median performance). The Board was provided with a description of the methodology used by Lipper to select each Fund’s Peers. The Board noted that it regularly reviews the performance of each Fund throughout the year. The Board reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper rankings.

The Board noted that in general BHK, BHY and BKT performed better than their respective Peers in that their performance was at or above the median of their respective Peers in at least two of the one-, three- and five-year periods reported.

The Board noted that in general BLW performed better than its Peers in that its performance was at or above the median of its Peers in at least two of the one-year, three-year and since inception periods reported.

The Board noted that although BNA underperformed its Peers in at least two of the one-, three- and five-year periods reported, such underperformance was not greater than 10% of the median return of its Peers for any of the periods above and therefore was not considered to be material.

The Board noted that BHD performed below the median of its Peers in at least two of the one-, three- and five-year periods reported. The Board then discussed with representatives of BlackRock the reasons for BHD’s under-performance during these periods compared with its Peers. The Board noted that two of BHD’s Peers have very different investment objectives in that they invest in private placement/mezzanine companies and, when recalculating the Peer universe to exclude these two funds, BHD outperforms the median of its Peers for all periods.

For each of BNA and BHD, the Board concluded that BlackRock was committed to providing the resources necessary to assist the portfolio managers and to continue improving each Fund’s performance. Based on its review, the Board generally was satisfied with BlackRock’s efforts to manage each of the Funds.

86 ANNUAL REPORT AUGUST 31, 2008

Disclosure of Investment Advisory Agreement and Subadvisory Agreement (continued)

C. Consideration of the Advisory Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Funds: In evaluating the management fees and expenses that each Fund is expected to bear, the Board considered each Fund’s current management fee structure and each Fund’s expense ratios in absolute terms as well as relative to the fees and expense ratios of its applicable Peers. The Board, among other things, reviewed comparisons of each Fund’s gross management fees before and after any applicable reimbursements and fee waivers and total expense ratios before and after any applicable waivers with those of applicable Peers. The Board also reviewed a narrative analysis of the Peer rankings prepared by Lipper and summarized by BlackRock at the request of the Board. This summary placed the Peer rankings into context by analyzing various factors that affect these comparisons.

The Board noted that each of BHK, BKT, BLW and BHD paid contractual management fees lower than or equal to the median contractual fees paid by each Fund’s respective Peers. This comparison was made without giving effect to any expense reimbursements or fee waivers.

The Board noted that, although BHY paid contractual management fees that were higher than the median of its Peers, the Advisor had incurred substantially greater business risk in connection with the initial public offering of common shares of the Fund because the Advisor had paid the underwriting commissions on behalf of investors. The Board concluded that a higher fee to compensate the Advisor for this additional risk was reasonable.

The Board noted that, although BNA paid contractual management fees that were higher than the median of its Peers, the Fund’s actual management fees were below the median of its Peers.

The Board also compared the management fees charged and services provided by the Advisors to closed-end funds in general versus other types of clients (such as open-end investment companies and separately managed institutional accounts) in similar investment categories. The Board noted certain differences in services provided and costs incurred by the Advisor with respect to closed-end funds compared to these other types of clients and the reasons for such differences.

In connection with the Board’s consideration of the fees and expense information, the Board reviewed the considerable investment management experience of the Advisors and considered the high level of investment management, administrative and other services provided by the Advisors.

D. Profitability of BlackRock: The Board also considered BlackRock’s profitability in conjunction with its review of fees. The Board reviewed BlackRock’s profitability with respect to the Fund Complex and other fund complexes managed by the Advisors. In reviewing profitability, the Board recognized that one of the most difficult issues in determining profitability is establishing a method of allocating expenses. The Board also reviewed BlackRock’s assumptions and methodology of allocating expenses, noting the inherent limitations in allocating costs among various advisory products. The Board also recognized that individual fund or product line profitability of other advisors is generally not publicly available.

The Board recognized that profitability may be affected by numerous factors including, among other things, the types of funds managed, expense allocations and business mix, and therefore comparability of profitability is somewhat limited. Nevertheless, to the extent available, the Board considered BlackRock’s operating margin compared to the operating margin estimated by BlackRock for a leading investment management firm whose operations consist primarily of advising closed-end funds. The comparison indicated that BlackRock’s operating margin was approximately the same as the operating margin of such firm.

In evaluating the reasonableness of the Advisors’ compensation, the Board also considered any other revenues paid to the Advisors, including partial reimbursements paid to the Advisors for certain non-investment advisory services, if applicable. The Board noted that these payments were less than the Advisors’ costs for providing these services. The Board also considered indirect benefits (such as soft dollar arrangements) that the Advisors and their affiliates are expected to receive, which are attributable to their management of the Fund.

E. Economies of Scale: In reviewing each Fund’s fees and expenses, the Board examined the potential benefits of economies of scale, and whether any economies of scale should be reflected in the Fund’s fee structure, for example through the use of breakpoints for the Fund or the Fund Complex. In this regard, the Board reviewed information provided by BlackRock, noting that most closed-end fund complexes do not have fund-level breakpoints because closed-end funds generally do not experience substantial growth after their initial public offering and each fund is managed independently consistent with its own investment objectives. The Board noted that only three closed-end funds in the Fund Complex have breakpoints in their fee structures. Information provided by Lipper also revealed that only one closed-end fund complex used a complex-level breakpoint structure. The Board found, based on its review of comparable funds, that each Fund’s management fee is appropriate in light of the scale of the respective Fund.

F. Other Factors: In evaluating fees, the Board also considered indirect benefits or profits the Advisors or their affiliates may receive as a result of their relationships with the Funds (“fall-out benefits”). The Trustees, including the Independent Trustees, considered the intangible benefits that accrue to the Advisors and their affiliates by virtue of their relationships with the Funds, including potential benefits accruing to the Advisors and their affiliates as a result of participating in offerings of the Funds’ shares, potentially stronger relationships with members of the broker-dealer community, increased name recognition of the Advisors and their affiliates, enhanced sales of other investment funds and products sponsored by the Advisors and their affiliates and increased assets under management which may increase the benefits realized by the Advisors from soft dollar arrangements with broker-dealers. The Board also considered the unquantifiable nature of these potential benefits.

ANNUAL REPORT AUGUST 31, 2008 87

Disclosure of Investment Advisory Agreement and Subadvisory Agreement (concluded)

Conclusion with Respect to the Agreements

In reviewing and approving the continuation of the Agreements, the Trustees did not identify any single factor discussed above as all-important or controlling, but considered all factors together, and different Trustees may have attributed different weights to the various factors considered. The Independent Directors were also assisted by the advice of independent legal counsel in making this determination. The Trustees, including the Independent Trustees, unanimously determined that each of the factors described above, in light of all the other factors and all of the facts and circumstances applicable to each respective Fund, was acceptable for each Fund and supported the Trustees’ conclusion that the terms of each Agreement were fair and reasonable, that each Fund’s fees are reasonable in light of the services provided to the respective Fund and that each Agreement should be approved.

88 ANNUAL REPORT AUGUST 31, 2008

Dividend Reinvestment Plans

Pursuant to each Trust’s respective Dividend Reinvestment Plan (the “Plan”), common shareholders of High Income, Income Opportunity and Income Trust may elect, while shareholders of Core Bond, High Yield, Limited Duration and Strategic Bond are automatically enrolled, to have all distributions of dividends and capital gains reinvested by Computershare Trust Company, N.A. (the “Plan Agent”) in the respective Trust’s shares pursuant to the Plan. Shareholders who do not participate in the Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street or other nominee name, then to the nominee) by the Plan Agent, which serves as agent for the shareholders in administering the Plan.

After Core Bond, High Income, High Yield, Income Trust, Limited Duration and Strategic Bond declares a dividend or determines to make a capital gain distribution, the Plan Agent will acquire shares for the participants’ account, depending upon the circumstances described below, either (i) through receipt of unissued but authorized shares from the Trust (“newly issued shares”) or (ii) by open market purchases. If, on the dividend payment date, the net asset value per share (“NAV”) is equal to or less than the market price per share plus estimated brokerage commissions (such condition being referred to herein as “market premium”), the Plan Agent will invest the dividend amount in newly issued shares on behalf of the participants. The number of newly issued shares to be credited to each participant’s account will be determined by dividing the dollar amount of the dividend by the NAV on the date the shares are issued. However, if the NAV is less than 95% of the market price on the payment date, the dollar amount of the dividend will be divided by 95% of the market price on the payment date. If, on the dividend payment date, the NAV is greater than the market value per share plus estimated brokerage commissions (such condition being referred to herein as “market discount”), the Plan Agent will invest the dividend amount in shares acquired on behalf of the participants in open-market purchases.

The Plan Agent’s fees for the handling of the reinvestment of dividends and distributions will be paid by each Trust. However, each participant will pay a pro rata share of brokerage commissions incurred with respect to the Plan Agent’s open market purchases in connection with the reinvestment of dividends and distributions. The automatic reinvestment of dividends and distributions will not relieve participants of any Federal income tax that may be payable on such dividends or distributions.

Each Trust reserves the right to amend or terminate the Plan. There is no direct service charge to participants in the Plan; however, each Trust reserves the right to amend the Plan to include a service charge payable by the participants. Participants who request a sale of shares through the Plan Agent are subject to a $2.50 sales fee and a $0.15 per share sold brokerage commission. All correspondence concerning the Plan should be directed to the Plan Agent at P.O. Box 43078, Providence, RI 02940-3078 or by calling (800) 699-1BFM. All overnight correspondence should be directed to the Plan Agent at 250 Royall Street, Canton, MA 02021.

| Important Tax information |
| --- |
| The following information is
provided with respect to the ordinary income distributions paid by the Trusts
for the taxable period ended August 31, 2008: |

	BlackRock Core Bond Trust	BlackRock High Yield Trust	BlackRock Income Trust	BlackRock Income Opportunities Trust	BlackRock Limited Duration Income Trust	BlackRock Strategic Bond Trust	BlackRock High Income Shares
Federal Obligation Interest (1)	2.22 %	0.76 %	3.57 %	1.26 %	1.61 %	5.54 %	None
Interest-Related Dividends for Non-U.S. Residents (2)
November
2007	68.02 %	82.91 %	70.00 %	75.00 %	75.00 %	79.65 %	92.82 %
December
2007	68.02 %	68.81 %	70.00 %	75.00 %	75.00 %	66.41 %	92.82 %
January
2008	60.34 %	68.81 %	70.00 %	75.00 %	75.00 %	66.41 %	92.82 %
February
2008	60.34 %	92.32 %	78.67 %	89.07 %	76.79 %	88.21 %	86.72 %
March 2008	60.34 %	92.32 %	78.67 %	89.07 %	76.79 %	88.21 %	86.72 %
April 2008	60.34 %	92.32 %	78.67 %	89.07 %	76.79 %	88.21 %	86.72 %
May 2008	60.34 %	92.32 %	78.67 %	89.07 %	76.79 %	88.21 %	86.72 %
June 2008	60.34 %	92.32 %	78.67 %	89.07 %	76.79 %	88.21 %	86.72 %
July 2008	60.34 %	92.32 %	78.67 %	89.07 %	76.79 %	88.21 %	86.72 %
August 2008	60.34 %	92.32 %	78.67 %	89.07 %	76.79 %	88.21 %	86.72 %

| (1) | The law varies in each state as
to whether and what percentage of dividend income attributable to federal
obligations is exempt from state income tax. We recommend that you consult
your adviser to determine if any portion of the dividends you received is
exempt from state income taxes. |
| --- | --- |
| (2) | Represents the portion of the
taxable ordinary income dividends eligible for exemption from U.S.
withholding tax for nonresident aliens and foreign corporations. |

ANNUAL REPORT AUGUST 31, 2008 89

Officers and Directors/Trustees

| Name,
Address and Year of Birth | Position(s)
Held with Trusts | Length
of Time Served as Director/Trustee 2 | Principal
Occupation(s) During Past Five Years | Number
of BlackRock- Advised Funds and Portfolios Overseen | Public
Directorships |
| --- | --- | --- | --- | --- | --- |
| Non-Interested Directors/Trustees 1 | | | | | |
| Richard
E. Cavanagh 40 East 52nd Street New York, NY 10022 1946 | Chairman of the Board and Director/Trustee | Since 1994 | Trustee, Aircraft
Finance Trust since 1999; Director, The Guardian Life Insurance Company of
America since 1998; Trustee, Educational Testing Service since 1997;
Director, The Fremont Group since 1996; Formerly President and Chief
Executive Officer of The Conference Board, Inc. (global business research
organization) from 1995 to 2007. | 113 Funds 110 Portfolios | Arch Chemical
(chemical and allied products) |
| Karen
P. Robards 40 East 52nd Street New York, NY 10022 1950 | Vice Chair of the Board, Chair of the Audit Committee and Director/Trustee | Since 2007 | Partner of Robards
& Company, LLC, (financial advisory firm) since 1987; Co-founder and
Director of the Cooke Center for Learning and Development, (a not-for-profit
organization) since 1987; Formerly Director of Enable Medical Corp. from 1996
to 2005; Formerly an investment banker at Morgan Stanley from 1976 to 1987. | 112 Funds 109 Portfolios | AtriCure, Inc.
(medical devices); Care Investment Trust, Inc. (health care REIT) |
| G.
Nicholas Beckwith, III 40 East 52nd Street New York, NY 10022 1945 | Director/Trustee | Since 2007 | Chairman and Chief
Executive Officer, Arch Street Management, LLC (Beckwith Family Foundation)
and various Beckwith property companies since 2005; Chairman of the Board of
Directors, University of Pittsburgh Medical Center since 2002; Board of
Directors, Shady Side Hospital Foundation since 1977; Board of Directors,
Beckwith Institute for Innovation In Patient Care since 1991; Member,
Advisory Council on Biology and Medicine, Brown University since 2002;
Trustee, Claude Worthington Benedum Foundation (charitable foundation) since
1989; Board of Trustees, Chatham University since 1981; Board of Trustees,
University of Pittsburgh since 2002; Emeritus Trustee, Shady Side Academy
since 1977; Formerly Chairman and Manager, Penn West Industrial Trucks LLC
(sales, rental and servicing of material handling equipment) from 2005 to
2007; Formerly Chairman, President and Chief Executive Officer, Beckwith
Machinery Company (sales, rental and servicing of construction and equipment)
from 1985 to 2005; Formerly Board of Directors, National Retail Properties
(REIT) from 2006 to 2007. | 112 Funds 109 Portfolios | None |
| Kent
Dixon 40 East 52nd Street New York, NY 10022 1937 | Director/Trustee
and Member of the Audit Committee | Since 1988 | Consultant/Investor
since 1988. | 113 Funds 110 Portfolios | None |
| Frank
J. Fabozzi 40 East 52nd Street New York, NY 10022 1948 | Director/Trustee
and Member of the Audit Committee | Since 1988 | Consultant/Editor
of The Journal of Portfolio Management since 2006; Professor in the Practice
of Finance and Becton Fellow, Yale University, School of Management, since
2006; Formerly Adjunct Professor of Finance and Becton Fellow, Yale
University from 1994 to 2006. | 113 Funds 110 Portfolios | None |

90 ANNUAL REPORT AUGUST 31, 2008

Officers and Directors/Trustees (continued)

| Name,
Address and Year of Birth | Position(s)
Held with Trust | Length
of Time Served as a Director/Trustee | Principal
Occupation(s) During Past Five Years | Number
of BlackRock- Advised Funds and Portfolios Overseen | Public
Directorships |
| --- | --- | --- | --- | --- | --- |
| Non-Interested Directors/Trustees 1 | | | | | |
| Kathleen
F. Feldstein 40 East 52nd Street New York, NY 10022 1941 | Director/Trustee | Since 2005 | President of
Economics Studies, Inc. (private economic consulting firm) since 1987; Chair,
Board of Trustees, McLean Hospital from 2000 to 2008 and Trustee Emeritus
thereof since 2008; Member of the Corporation of Partners Community
Healthcare, Inc. since 2005; Member of the Corporation of Partners HealthCare
since 1995; Member of the Corporation of Sherrill House (healthcare) since
1990; Trustee, Museum of Fine Arts, Boston since 1992; Member of the Visiting
Committee to the Harvard University Art Museum since 2003; Trustee, The
Committee for Economic Development (research organization) since 1990; Member
of the Advisory Board to the International School of Business, Brandeis
University since 2002. | 113 Funds 110 Portfolios | The McClatchy
Company (newspaper publishing) |
| James
T. Flynn 40 East 52nd Street New York, NY 10022 1939 | Director/Trustee
and Member of the Audit Committee | Since 2007 | Formerly Chief
Financial Officer of JP Morgan & Co., Inc. from 1990 to 1995. | 112 Funds 109 Portfolios | None |
| Jerrold
B. Harris 40 East 52nd Street New York, NY 10022 1942 | Director/Trustee | Since 2007 | Trustee, Ursinus
College since 2000; Director, Troemner LLC (scientific equipment) since 2000. | 112 Funds 109
Portfolios | BlackRock Kelso
Capital Corp. |
| R.
Glenn Hubbard 40 East 52nd Street New York, NY 10022 1958 | Director/Trustee | Since 2004 | Dean of Columbia
Business School since 2004; Columbia faculty member since 1988; Formerly
Co-Director of Columbia Business School’s Entrepreneurship Program from 1997
to 2004; Visiting Professor at the John F. Kennedy School of Government at
Harvard University and the Harvard Business School since 1985 and at the
University of Chicago since 1994; Formerly Chairman of the U.S. Council of
Economic Advisers under the President of the United States from 2001 to 2003. | 113 Funds 110 Portfolios | ADP (data and
information services), KKR Financial Corporation (finance), Duke Realty (real
estate), Metropolitan Life Insurance Company (insurance), Information
Services Group (media/technology) |
| W.
Carl Kester 40 East 52nd Street New York, NY 10022 1951 | Director/Trustee
and Member of the Audit Committee | Since 2007 | Mizuho Financial
Group Professor of Finance, Harvard Business School. Deputy Dean for Academic
Affairs since 2006; Unit Head, Finance, Harvard Business School, from 2005 to
2006; Senior Associate Dean and Chairman of the MBA Program of Harvard
Business School, from 1999 to 2005; Member of the faculty of Harvard Business
School since 1981; Independent Consultant since 1978. | 112 Funds 109 Portfolios | None |
| Robert
S. Salomon, Jr. 40 East 52nd Street New York, NY 10022 1936 | Director/Trustee
and Member of the Audit Committee | Since 2007 | Formerly Principal
of STI Management LLC (investment adviser) from 1994 to 2005. | 112 Funds 109 Portfolios | None |

| 1 | Directors/Trustees
serve until their resignation, removal or death, or until December 31 of the
year in which they turn 72. |
| --- | --- |
| 2 | Following
the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and
BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and
legacy BlackRock Fund boards were realigned and consolidated into three new
Fund boards in 2007. As a result, although the chart shows certain
directors/trustees as joining the Fund’s board in 2007, each director/trustee
first became a member of the board of directors/trustees of other legacy MLIM
or legacy BlackRock Funds as follows: G. Nicholas Beckwith, III since 1999;
Richard E. Cavanagh since 1994; Kent Dixon since 1988; Frank J. Fabozzi since
1988; Kathleen F. Feldstein since 2005; James T. Flynn since 1996; Jerrold B.
Harris since 1999; R. Glenn Hubbard since 2004; W. Carl Kester since 1998;
Karen P. Robards since 1998 and Robert S. Salomon, Jr. since 1996. |

ANNUAL REPORT AUGUST 31, 2008 91

Officers and Directors/Trustees (continued)

| Name,
Address and Year of Birth | Position(s)
Held with Trusts | Length
of Time Served as a Director/Trustee | Principal
Occupation(s) During Past Five Years | Number of BlackRock- Advised Funds and Portfolios Overseen | Public
Directorships |
| --- | --- | --- | --- | --- | --- |
| Interested Directors/Trustees 1 | | | | | |
| Richard
S. Davis 40 East 52nd Street New York, NY 10022 1945 | Director/Trustee | Since 2007 | Managing Director,
BlackRock, Inc. since 2005; Formerly Chief Executive Officer, State Street
Research & Management Company from 2000 to 2005; Formerly Chairman of the
Board of Trustees, State Street Research Mutual Funds from 2000 to 2005;
Formerly Chairman, SSR Realty from 2000 to 2004. | 185 Funds 295 Portfolios | None |
| Henry
Gabbay 40 East 52nd Street New York, NY 10022 1947 | Director/Trustee | Since 2007 | Consultant,
BlackRock, Inc. since 2007; Formerly Managing Director, BlackRock, Inc. from
1989 to 2007; Formerly Chief Administrative Officer, BlackRock Advisors, LLC
from 1998 to 2007; Formerly President of BlackRock Funds and BlackRock Bond
Allocation Target Shares from 2005 to 2007; Formerly Treasurer of certain
closed-end funds in the BlackRock fund complex from 1989 to 2006. | 184 Funds 294 Portfolios | None |
| Trust Officers 2 | | | | | |
| Donald
C. Burke 40 East 52nd Street New York, NY 10022 1960 | Trust President and Chief Executive Officer | Since 2007 | Managing Director
of BlackRock, Inc. since 2006; Formerly Managing Director of Merrill Lynch
Investment Managers, L.P. (“MLIM”) and Fund Asset Management, L.P. (“FAM”) in
2006; First Vice President thereof from 1997 to 2005; Treasurer thereof from
1999 to 2006 and Vice President thereof from 1990 to 1997. | | |
| Anne
F. Ackerley 40 East 52nd Street New York, NY 10022 1962 | Vice President | Since 2003 | Managing Director
of BlackRock, Inc. since 2000; Chief Operating Officer of BlackRock’s U.S.
Retail Group since 2006; Head of BlackRock’s Mutual Fund Group from 2000 to
2006; Merrill Lynch & Co., Inc. from 1984 to 1986 and from 1988 to 2000,
most recently as First Vice President and Operating Officer of the Mergers
and Acquisitions Group. | | |
| Neal
J. Andrews 40 East 52nd Street New York, NY 10022 1966 | Chief Financial Officer | Since 2007 | Managing Director
of BlackRock, Inc. since 2006; Formerly Senior Vice President and Line of
Business Head of Fund Accounting and Administration at PNC Global Investment
Servicing (U.S.) Inc. (formerly PFPC Inc.) from 1992 to 2006. | | |
| Jay
M. Fife 40 East 52nd Street New York, NY 10022 1970 | Treasurer | Since 2007 | Managing Director
of BlackRock, Inc. since 2007 and Director in 2006; Formerly Assistant
Treasurer of the MLIM/FAM advised funds from 2005 to 2006; Director of MLIM
Fund Services Group from 2001 to 2006. | | |
| Brian
P. Kindelan 40 East 52nd Street New York, NY 10022 1959 | Chief Compliance Officer of the Trusts | Since 2007 | Chief Compliance
Officer of the BlackRock-advised Funds since 2007; Anti-Money Laundering
Officer of the BlackRock-advised Funds since 2007; Managing Director and
Senior Counsel of BlackRock, Inc. since 2005; Director and Senior Counsel of
BlackRock Advisors, Inc. from 2001 to 2004 and Vice President and Senior
Counsel thereof from 1998 to 2000; Formerly Senior Counsel of The PNC Bank
Corp. from 1995 to 1998. | | |
| Howard
Surloff 40 East 52nd Street New York, NY 10022 1965 | Secretary | Since 2007 | Managing Director
of BlackRock, Inc. and General Counsel of U.S. Funds at BlackRock, Inc. since
2006; Formerly General Counsel (U.S.)of Goldman Sachs Asset Management, L.P.
from 1993 to 2006. | | |

| 1 | Messrs.
Davis and Gabbay are both “interested persons,” as defined in the Investment
Company Act of 1940, of the Trusts based on their positions with BlackRock,
Inc. and its affiliates. Directors/Trustees serve until their resignation,
removal or death, or until December 31 of the year in which they turn 72. |
| --- | --- |
| 2 | Officers
of the Trusts serve at the pleasure of the Board of Directors/Trustees. |

92 ANNUAL REPORT AUGUST 31, 2008

Officers and Directors/Trustees (concluded)

Custodian
State
Street Bank and Trust Company
Boston,
MA 02101
Trusts Address
BlackRock
Closed-End Funds
c/o
BlackRock Advisors, LLC
100
Bellevue Parkway
Wilmington,
DE 19809
Transfer Agents Common Shares:
Computershare
Trust
Companies,
N.A.
Canton,
MA 02021
For Preferred and Equity Preferred Shares:
BNY
Mellon Shareowner Services
Jersey
City, NJ 07310
Accounting Agent
State
Street Bank and Trust Company
Princeton,
NJ 08540
Independent Registered Public Accounting Firm
Deloitte
& Touche LLP
Princeton,
NJ 08540
Legal Counsel
Skadden,
Arps, Slate,
Meagher
& Flom LLP
New
York, NY 10036

ANNUAL REPORT AUGUST 31, 2008 93

Additional Information

Fund Certification

The Trusts are listed for trading on the New York Stock Exchange (“NYSE”) and have filed with the NYSE their annual chief executive officer certification regarding compliance with the NYSE’s listing standards. Each Trust filed with the SEC the certification of their chief executive officer and chief financial officer required by section 302 of the Sabanes-Oxley Act.

Availability of Quarterly Schedule of Investments

Each Trust files their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Each Trust’s 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 the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. Each Trust’s Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Electronic Delivery

Electronic copies of most financial reports are available on the Trusts’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Trusts’ 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.

General Information

The Trusts do not make available copies of their Statements of Additional Information because the Trusts’ shares are not continuously offered, which means that the Statements of Additional Information of the Trusts have not been updated after completion of the Trusts’ offering and the information contained in the Trusts’ Statements of Additional Information may have become outdated.

During the period, there were no material changes in the Trusts’ investment objectives or policies or to the Trusts’ charters or by-laws that were not approved by the shareholders or in the principal risk factors associated with the investment in the Trusts. There have been no changes in the persons who are primarily responsible for the day-to-day management of the Trusts’ portfolios. The Trusts will mail only one copy of shareholder documents, including annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and it is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact the Trusts at (800) 441-7762

Quarterly performance, semi-annual and annual reports and other information regarding each Trust 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 each Trust and does not, and is not intended to, incorporate BlackRock’s website into this report.

Section 19 Notices

The amounts and sources of distributions reported are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources for tax reporting purposes will depend upon each Trust’s investment experience during the year and may be subject to changes based on the tax regulations. The Trusts will send you a Form 1099-DIV each calendar year that will tell you how to report these distributions for federal income tax purposes.

	Total Fiscal Period to Date Cumulative Distributions by Character — Net Investment Income	Net Realized Capital Gains	Return of Capital	Total Per Common Share	Percentage of Fiscal Period to Date Cumulative Distributions by Character — Net Investment Income	Net Realized Capital Gains	Return of Capital	Total Per Common Share
BlackRock Core Bond Trust	$ 0.545	$ —	$ 0.08	$ 0.625	87 %	0 %	13 %	100 %
BlackRock High Income Shares	$ 0.127	$ —	$ —	$ 0.127	100 %	0 %	0 %	100 %
BlackRock High Yield Trust	$ 0.510	$ —	$ —	$ 0.510	100 %	0 %	0 %	100 %
BlackRock Income Opportunity Trust, Inc.	$ 0.514	$ —	$ —	$ 0.514	100 %	0 %	0 %	100 %
BlackRock Income Trust, Inc.	$ 0.247	$ —	$ —	$ 0.247	100 %	0 %	0 %	100 %
BlackRock Limited Duration Income Trust	$ 1.190	$ —	$ —	$ 1.190	100 %	0 %	0 %	100 %
BlackRock Strategic Bond Trust	$ 0.770	$ —	$ —	$ 0.770	100 %	0 %	0 %	100 %

94 ANNUAL REPORT AUGUST 31, 2008

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 nonpublic 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 nonpublic 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 nonaffiliated third parties any nonpublic information about its Clients, except as permitted by law or as necessary to service Client accounts. These nonaffiliated 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 nonpublic 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 nonpublic personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

ANNUAL REPORT AUGUST 31, 2008 95

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This report is transmitted to shareholders only. It is not a prospectus. The Trusts 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 Common Shares, and the risk that fluctuations in the short-term interest rates may reduce the Common Shares’ yield. Past performance results shown in these reports should not be considered a representation of future performance. Statements and other information herein are as dated and are subject to change.

A description of the policies and procedures that the Trusts use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling toll-free (800) 441-7762; (2) at www.blackrock.com; and (3) on the Securities and Exchange Commission’s website at http://www.sec.gov. Information about how each Trust voted proxies relating to securities held in each Trust’s portfolio during the most recent 12-month period ended June 30 is available upon request and without charge (1) at www.blackrock.com or by calling (800) 441-7762 and (2) on the Securities and Exchange Commission’s website at http://www.sec.gov.

CEF-AR-BK7-0808

Item 2 –	Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer and principal accounting officer, or persons performing similar functions. During the period covered by this report, there have been no amendments to or waivers granted under the code of ethics. A copy of the code of ethics is available without charge at www.blackrock.com.
Item 3 –	Audit Committee Financial Expert – The registrant’s board of directors or trustees, as applicable
(the “board of directors”) has determined that (i) the registrant has the following audit committee
financial experts serving on its audit committee and (ii) each audit committee financial expert is
independent:
	Kent Dixon Frank J. Fabozzi James T. Flynn W. Carl Kester Karen P. Robards Robert S. Salomon, Jr.
	The registrant’s board of directors has determined that W. Carl Kester and Karen P. Robards qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR. Prof. Kester has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Prof. Kester has been involved in providing valuation and other financial consulting services to corporate clients since 1978. Prof. Kester’s financial consulting services present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the registrant’s financial statements. Ms. Robards has a thorough understanding of generally accepted accounting principles, financial statements and internal control over financial reporting as well as audit committee functions. Ms. Robards has been President of Robards & Company, a financial advisory firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years where she was responsible for evaluating and assessing the performance of companies based on their financial results. Ms. Robards has over 30 years of experience analyzing financial statements. She also is a member of the audit committee of one publicly held company and a non-profit organization. Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification.

Item 4 – Principal Accountant Fees and Services

| | (a) Audit Fees — Current | Previous | (b)
Audit-Related Fees 1 — Current | Previous | (c) Tax Fees 2 — Current | Previous | (d) All Other Fees 3 — Current | Previous |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year |
| Entity Name | End | End | End | End | End | End | End | End |
| BlackRock Limited | | | | | | | | |
| Duration Income | $49,300 | $ 44,200 | $0 | $0 | $6,100 | $6,100 | $1,049 | $1,042 |
| Trust | | | | | | | | |

1 The nature of the services include assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees. 2 The nature of the services include tax compliance, tax advice and tax planning. 3 The nature of the services include a review of compliance procedures and attestation thereto.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

The registrant’s audit committee (the “Committee”) has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the registrant’s affiliated service providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are a) consistent with the SEC’s auditor independence rules and b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operation or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 for all of the registrants the Committee oversees. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.

Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to one or more of its members the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.

(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) Affiliates’ Aggregate Non-Audit Fees:

	Current Fiscal Year	Previous Fiscal Year
Entity Name	End	End
BlackRock Limited Duration
Income Trust	$294,649	$291,642

| | (h) The registrant’s audit committee has considered and determined that the provision of non-audit services that were rendered to the registrant’s investment advisor (not including any non-affiliated
sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by
the registrant’s investment advisor), and any entity controlling, controlled by, or under common
control with the investment advisor that provides ongoing services to the registrant that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant’s independence. Regulation S-X Rule 2-01(c)(7)(ii) – $287,500,
0% |
| --- | --- |
| Item 5 – | Audit Committee of Listed Registrants – The following individuals are members of the registrant’s separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)): |
| | Kent Dixon Frank J. Fabozzi James T. Flynn W. Carl Kester Karen P. Robards Robert S. Salomon, Jr. |
| 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 – The board of directors has delegated the voting of proxies for the Fund securities to the Fund’s investment advisor (“Investment Advisor”) pursuant to the Investment Advisor’s proxy voting guidelines. Under these guidelines, the Investment Advisor will vote proxies related to Fund securities in the best interests of the Fund and its stockholders. From time to time, a vote may present a conflict between the interests of the Fund’s stockholders, on the one hand, and those of the Investment Advisor, or any affiliated person of the Fund or the Investment Advisor, on the other. In such event, provided that the Investment Advisor’s Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight Committee”) is aware of the real or potential conflict or material non-routine matter and if
the Oversight Committee does not reasonably
believe it is able to follow its general voting guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote impartially, the Oversight Committee may retain an independent fiduciary to advise the Oversight Committee on how to vote or to cast votes on behalf of the Investment Advisor’s clients. If the Investment Advisor determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Oversight Committee shall determine how to vote the proxy after consulting with the Investment Advisor’s Portfolio Management Group and/or the Investment Advisor’s Legal and Compliance Department and concluding that the vote cast is in its client’s best interest notwithstanding the conflict. A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit 99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities during the most
recent 12-month period |

	ended June 30 is available without charge, (i) at www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov .
Item 8 –	Portfolio Managers of Closed-End Management Investment Companies – as of August 31, 2008.
	(a)(1) BlackRock Limited Duration Income Trust is managed by a team of investment professionals comprised of Mark J. Williams, Managing Director and head of the bank loan investment team at
BlackRock, Kevin J. Booth, CFA, Managing Director and co-head of the high yield team at
BlackRock, James Keenan, CFA, Managing Director and co-head of the high yield team at
BlackRock, and Jeffrey Gary, CPA, Managing Director at BlackRock. Each is a member of
BlackRock’s fixed income portfolio management group. Messrs. Williams, Booth and Keenan are
the Fund’s co-portfolio managers and are responsible for the day-to-day management of the Fund’s
portfolio and the selection of its investments. Mr. Gary has been a member of the Fund’s portfolio
management team since 2006. Messrs. Williams, Booth and Keenan have been members of the
Fund’s portfolio management team since 2007. Mark J. Williams heads BlackRock's bank loan investment team within the Fixed Income Portfolio
Management Group and is co-head of BlackRock's leveraged finance business. He is a member of
the firm's Investment Strategy Group and the Alternatives Operating Committee. Mr. Williams is
also involved in the evaluation and sourcing of mezzanine investments, and is a member of the
Investment Committee for BlackRock Kelso Capital, the firm's business development company.
Prior to joining BlackRock in 1998, Mr. Williams spent eight years with PNC Bank's New York
office and was a founding member of the bank's leveraged finance group. In that capacity he was
responsible for structuring proprietary middle market leveraged deals and sourcing and evaluating
broadly syndicated leveraged loans in the primary and secondary markets for PNC Bank's
investment portfolio. Mr. Williams has developed extensive contacts over the years working with
private equity sponsors and major loan syndication groups. From 1984 until 1990, Mr. Williams
worked in PNC Bank's Philadelphia office in a variety of marketing and corporate finance positions. Kevin Booth is co-head of the high yield team within BlackRock's Fixed Income Portfolio
Management Group, he also co-heads BlackRock's leveraged finance business. His primary
responsibilities are managing portfolios and directing investment strategy. He specializes in hybrid
high yield portfolios, consisting of leveraged bank loans, high yield bonds, and distressed
obligations. Prior to joining BlackRock, Mr. Booth was a Managing Director (Global Fixed Income)
of Merrill Lynch Investment Managers (“MLIM”) in 2006, a Director from 1998 to 2006 and was
a Vice President of MLIM from 1991 to 1998. He has been a portfolio manager with BlackRock or
MLIM since 1992, and was a member of MLIM’s bank loan group from 2000 to 2006. James Keenan is co-head of the high yield team within BlackRock's Fixed Income Portfolio
Management Group and co-head of BlackRock's leveraged finance business. His primary
responsibilities are managing portfolios and directing investment strategy. Mr. Keenan has been with
BlackRock since 2004. Prior to joining BlackRock, he was a senior high yield trader at Columbia
Management Group. Mr. Keenan began his investment career at UBS Global Asset Management
where he held roles as a trader, research analyst and a portfolio analyst from 1998 through 2003. Jeffrey Gary is a senior member of the high yield team within BlackRock's Fixed Income Portfolio
Management Group. His primary responsibilities are business development, client service, and

product development. Prior to joining BlackRock in 2003, Mr. Gary was a Managing Director and portfolio manager with AIG (American General) Investment Group.

(a)(2) As of August 31, 2008:

	Number of Other Accounts Managed			Number of Other Accounts and
	and Assets by Account Type			Assets for Which Advisory Fee is
				Performance-Based
	Other	Other Pooled		Other	Other Pooled
Name of	Registered	Investment	Other	Registered	Investment	Other
Portfolio Manager	Investment	Vehicles	Accounts	Investment	Vehicles	Accounts
	Companies			Companies
Mark J. Williams	10	17	2	0	12	0
	$2.61 Billion	$6.7 Billion	$364 Million	$0	$5.5 Billion	$0
Kevin Booth	24	10	10	0	4	3
	$8.44 Billion	$4.87 Billion	$1.97 Billion	$0	$2.98 Billion	$400 Million
James Keenan	18	9	59	0	4	20
	$6.62 Billion	$4.93 Billion	$8.9 Billion	$0	$3.56 Billion	$4.29 Billion
Jeffrey Gary	14	8	15	0	4	6
	$5.66 Billion	$2.7 Billion	$5.94 Billion	$0	$1.7 Billion	$800.7 Million

(iv) Potential Material Conflicts of Interest

BlackRock, Inc. and its affiliates (collectively, herein “BlackRock”) has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made for the Fund. In addition, BlackRock, its affiliates and any officer, director, stockholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, or any of its affiliates, or any officer, director, stockholder, employee or any member of their families may take different actions than those recommended to the Fund by BlackRock with respect to the same securities. Moreover, BlackRock may refrain from rendering any advice or services concerning securities of companies of which any of BlackRock’s (or its affiliates’) officers, directors or employees are directors or officers, or companies as to which BlackRock or any of its affiliates or the officers, directors or employees of any of them has any substantial economic interest or possesses material non-public information. Each portfolio manager also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund. In this regard, it should be noted that Messrs. Williams, Booth, Keenan and Gary currently manage certain accounts that are subject to performance fees. In addition, Mr. Keenan assists in managing certain hedge funds and may be entitled to receive a portion of any incentive fees earned on such funds and a portion of such incentive fees may be voluntarily or involuntarily deferred. Additional portfolio managers may in the future manage other such accounts or funds and may be entitled to receive incentive fees.

As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly. When BlackRock purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no account receiving preferential treatment. To this end, BlackRock has adopted a policy that is intended to ensure that investment opportunities are allocated fairly and equitably among client accounts over time. This policy also seeks to achieve reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a manner that is consistent with the particular investment discipline and client base.

(a)(3) As of August 31, 2008:

Portfolio Manager Compensation Overview

BlackRock’s financial arrangements with its portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary, a performance-based discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock such as its Long-Term Retention and Incentive Plan and Restricted Stock Program.

Base compensation. Generally, portfolio managers receive base compensation based on their seniority and/or their position with the firm. Senior portfolio managers who perform additional management functions within the portfolio management group or within BlackRock may receive additional compensation for serving in these other capacities.

Discretionary Incentive Compensation

Discretionary incentive compensation is a function of several components: the performance of BlackRock, Inc., the performance of the portfolio manager’s group within BlackRock, the investment performance, including risk-adjusted returns, of the firm’s assets under management or supervision by that portfolio manager relative to predetermined benchmarks, and the individual’s seniority, role within the portfolio management team, teamwork and contribution to the overall performance of these portfolios and BlackRock. In most cases, including for the portfolio managers of the Fund, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Fund or other accounts managed by the portfolio managers are measured. BlackRock’s Chief Investment Officers determine the benchmarks against which the performance of funds and other accounts managed by each portfolio manager is compared and the period of time over which performance is evaluated. With respect to the portfolio managers, such benchmarks for the Fund include the following:

Portfolio Manager	Benchmarks Applicable to Each Manager
Mark Williams	A combination of market-based
indices (e.g., Credit Suisse
	Leveraged Loan Index, LIBOR),
certain customized indices and
	certain
fund industry peer groups.
Kevin Booth	A combination of market-based
indices (e.g., The Lehman
	Brothers U.S. Corporate High
Yield 2% Issuer Cap Index),
	certain
customized indices and certain fund industry peer
	groups.
James Keenan	A combination of market-based
indices (e.g., The Lehman
	Brothers U.S. Corporate High
Yield 2% Issuer Cap Index),
	certain customized indices
and certain fund industry peer
	groups.
Jeffrey Gary	A combination of market-based
indices (e.g., The Lehman
	Brothers U.S. Corporate High
Yield 2% Issuer Cap Index),
	certain customized indices and
certain fund industry peer
	groups.

BlackRock’s Chief Investment Officers make a subjective determination with respect to the portfolio managers’ compensation based on the performance of the funds and other accounts managed by each portfolio manager relative to the various benchmarks noted above. Performance is measured on both a pre-tax and after-tax basis over various time periods including 1, 3, 5 and 10-year periods, as applicable.

Distribution of Discretionary Incentive Compensation

Discretionary incentive compensation is distributed to portfolio managers in a combination of cash and BlackRock, Inc. restricted stock units which vest ratably over a number of years. The BlackRock, Inc. restricted stock units, if properly vested, will be settled in BlackRock, Inc. common stock. Typically, the cash bonus, when combined with base salary, represents more than 60% of total compensation for the portfolio managers. Paying a portion of annual bonuses in stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods.

Long-Term Retention and Incentive Plan (“LTIP”) — The LTIP is a long-term incentive plan that seeks to reward certain key employees. Prior to 2006, the plan provided for the grant of awards that were expressed as an amount of cash that, if properly vested and subject to the attainment of certain performance goals, will be settled in cash and/or in BlackRock, Inc. common stock. Beginning in 2006, awards are granted under the LTIP in the form of BlackRock, Inc. restricted stock units that, if properly vested and subject to the attainment of certain performance goals, will be settled in BlackRock, Inc. common stock. Each portfolio manager has received awards under the LTIP.

Deferred Compensation Program — A portion of the compensation paid to eligible BlackRock employees may be voluntarily deferred into an account that tracks the performance of certain of the firm’s investment products. Each participant in the deferred compensation program is permitted to allocate his deferred amounts among the various investment options. Each portfolio manager has participated in the deferred compensation program.

Options and Restricted Stock Awards — A portion of the annual compensation of certain employees is mandatorily deferred into BlackRock restricted stock units. Prior to the mandatory deferral into restricted stock units, BlackRock granted stock options to key employees, including certain portfolio managers who may still hold unexercised or unvested options. BlackRock, Inc. also granted restricted stock awards designed to reward certain key employees as an incentive to contribute to the long-term success of BlackRock. These awards vest over a period of years. Mr. Williams has been granted stock options and/or restricted stock in prior years.

	Other compensation benefits. In addition to base compensation and discretionary incentive compensation, portfolio managers may be eligible to receive or participate in one or more of the following:
	Incentive Savings
Plans — BlackRock, Inc. has created
a variety of incentive savings plans in which BlackRock employees are eligible
to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan
(RSP), and the BlackRock Employee Stock Purchase Plan (ESPP). The employer contribution
components of the RSP include a company match equal to 50% of the first 6% of
eligible pay contributed to the plan capped at $4,000 per year, and a company retirement contribution equal to 3% of eligible compensation, plus an additional contribution of 2% for any year in which BlackRock has positive net
operating income. The RSP offers a range of investment options, including registered investment companies managed by the firm. BlackRock contributions follow the investment direction set by participants for their own contributions or, absent
employee investment direction, are invested into a balanced portfolio. The ESPP allows for investment in BlackRock common stock at a 5% discount on the fair market value of the stock on the purchase date. Annual participation in the ESPP is limited
to the purchase of 1,000 shares or a dollar value of $25,000. Each portfolio
manager is eligible to participate in these plans.
	(a)(4)	Beneficial Ownership
of Securities. As of August 31, 2008, none of Messrs. Williams, Booth,
Keenan or Gary beneficially owned any stock issued by the Fund.
Item 9 –	Purchases of Equity Securities by
Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable due to no such
purchases during the period covered by this report.
Item 10 –	Submission of Matters
to a Vote of Security Holders – The registrant’s Nominating and
Governance Committee will consider nominees to the board of directors recommended by shareholders when a vacancy becomes available. Shareholders who wish to recommend a nominee should send nominations that include biographical information and set forth the qualifications of the proposed nominee to the registrant’s Secretary. There have been no material changes to these procedures.
Item 11 –	Controls
and Procedures
11(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.
11(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
12(a)(1) –	Code
of Ethics – See Item 2
12(a)(2) –	Certifications – Attached
hereto
12(a)(3) –	Not Applicable
12(b) –	Certifications – Attached
hereto

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 Limited Duration Income Trust
By:	/s/ Donald C. Burke
	Donald C. Burke
	Chief Executive Officer of
	BlackRock Limited Duration Income Trust
Date:	October 20, 2008

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/
Donald C. Burke |
| --- | --- |
| | Donald C. Burke |
| | Chief Executive Officer (principal executive officer) of |
| | BlackRock Limited Duration Income Trust |
| Date: | October 20, 2008 |
| By: | /s/
Neal J. Andrews |
| | Neal J. Andrews |
| | Chief Financial Officer (principal financial officer) of |
| | BlackRock Limited Duration Income Trust |
| Date: | October 20, 2008 |