BLACKROCK Ltd DURATION INCOME TRUST

N-CSR/A 1 c51481_n-csra.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

Registrants telephone number, including area code: (800) 882-0052, Option 4 Date of fiscal year end: 10/31/2007 Date of reporting period: 11/01/2006 10/31/2007

Item 1 Report to Stockholders

EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS

Closed-End Funds
ANNUAL REPORT \| OCTOBER 31, 2007

| BlackRock Broad Investment Grade
2009 Term Trust Inc. (BCT) |
| --- |
| BlackRock Core Bond Trust (BHK) |
| BlackRock High Yield Trust (BHY) |
| BlackRock Income Opportunity
Trust (BNA) |
| BlackRock Income Trust Inc.
(BKT) |
| BlackRock Limited Duration
Income Trust (BLW) |
| BlackRock Preferred and Equity
Advantage Trust (BTZ) |
| BlackRock Strategic Bond Trust
(BHD) |

NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE

| Table
of Contents | Page |
| --- | --- |
| A Letter to
Shareholders | 1 |
| Annual Report: | |
| Trust Summaries | 2 |
| Financial Statements: | |
| Portfolio of
Investments | 10 |
| Statements of Assets and
Liabilities | 47 |
| Statements of
Operations | 49 |
| Statements of Cash
Flows | 51 |
| Statements of Changes in
Net Assets | 53 |
| Financial
Highlights | 55 |
| Notes to
Financial Statements | 63 |
| Report of
Independent Registered Public Accounting Firm | 78 |
| The Benefits and
Risks of Leveraging | 79 |
| Dividend
Reinvestment Plans | 80 |
| BlackRock Privacy
Principles | 80 |
| Additional
Information | 81 |
| Section 19
Notices | 84 |
| Directors/Trustees
Information | 85 |

A Letter to Shareholders

Dear Shareholder

The October reporting period was fairly tumultuous for financial markets, but culminated in positive performance for most major benchmarks:

Total returns as of October 31, 2007

	6-month	12-month
U.S. equities (S&P 500 Index)	+5.49 %	+14.56 %
Small cap U.S. equities (Russell 2000 Index)	+2.25 %	+9.27 %
International equities (MSCI Europe, Australasia, Far East
Index)	+8.19 %	+24.91 %
Fixed income (Lehman Brothers U.S. Aggregate Bond Index)	+2.68 %	+5.38 %
Tax-exempt fixed income (Lehman Brothers Municipal Bond
Index)	+1.30 %	+2.91 %
High yield bonds
(Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap
Index)	-0.07 %	+6.89 %

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

Subprime mortgage woes dominated headlines for much of 2007, but intensified in the summer and fall, spawning a widespread liquidity and credit crisis with ramifications across global markets. The Federal Reserve Board (Fed) and other countries central banks stepped in to inject liquidity into the markets and bolster investor confidence. The Fed cut the federal funds rate by 0.50% in September and another 0.25% on the final day of the reporting period, bringing its target rate to 4.50%. In taking action, the central bankers, who had long deemed themselves inflation fighters, were seeking to stem the fallout from the credit crunch and forestall a wider economic unraveling. By period-end, the Fed had cited the risks between slower economic growth and faster inflation as equally balanced.

Amid the volatility throughout the past year, equity markets have displayed surprising resilience. Most recently, the credit turmoil dampened corporate merger-and-acquisition (M&A) activity, a key source of strength for equity markets. Still, market fundamentals have held firm, dividend payouts and share buybacks have continued to grow, and valuations remain attractive. These tailwinds generally have prevailed over the headwinds created by the slowing U.S. economy, troubled housing market and, recently, a more difficult corporate earnings backdrop. International markets fared even better than U.S. equities, benefiting from robust M&A activity and generally stronger economies.

In fixed income markets, mixed economic signals and the credit woes resulted in a flight to quality. At the height of the uncertainty, investors shunned bonds associated with the housing and credit markets in favor of higher-quality Treasury issues. The yield on 10-year Treasury issues, which touched 5.30% in June (its highest level in five years), fell to 4.48% by period-end, while prices correspondingly rose. The tax-exempt bond market has been challenged by a combination of record-setting supply year-to-date, economic uncertainty and concerns around the credit worthiness of bond insurers. This has brought municipal bond prices to relatively attractive levels and, as such, demand generally has remained firm.

As you navigate market volatility, we encourage you to review your investment goals with your financial professional and to make portfolio changes, as needed. For more market insight and commentary from BlackRock investment professionals, we invite you to visit www.blackrock.com/funds . As always, we thank you for entrusting BlackRock with your investment assets, and we look forward to continuing to serve you in the months and years ahead.

Sincerely,

Robert C. Doll, Jr.
Vice Chairman, BlackRock, Inc.

THIS PAGE NOT PART OF YOUR TRUSTS REPORT

1 ANNUAL REPORT OCTOBER 31, 2007

Trust Summary as of October 31, 2007 BlackRock Broad Investment Grade 2009 Term Trust Inc. (BCT)

Investment Objective

The Trusts investment objective is to manage a portfolio of fixed income securities that will return $15 per share (the initial public offering price per share) to investors on or about December 31, 2009 while providing high monthly income.

Trust Information

| Symbol on American Stock
Exchange: | BCT |
| --- | --- |
| Initial Offering Date: | June 17, 1993 |
| Yield on Closing Market Price as
of October 31, 2007 ($15.15): 1 | 5.94% |
| Current Monthly Distribution per
Share: 2 | $ 0.075 |
| Current Annualized Distribution
per Share: 2 | $ 0.900 |

| 1 | Yield on closing market price is calculated by dividing
the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results. |
| --- | --- |
| 2 | A change in the distribution rate was declared on November
1, 2007. The Monthly Distribution per Common Share was decreased to $0.049.
The Yield on Closing Market Price, Current Monthly Distribution and Current
Annualized Distribution do not reflect the new distribution rate. The new
distribution rate is not constant and is subject to further change in the
future. |

The table below summarizes the changes in the Trusts market price and net asset value per share:

	10/31/07	10/31/06	Change		High	Low
Market Price	$ 15.15	$ 15.08	0.46	%	$ 15.65	$ 14.82
Net Asset Value	$ 13.38	$ 13.79	(2.97	)%	$ 13.81	$ 13.36

The following unaudited chart shows the portfolio composition of the Trusts long-term investments:

Portfolio Composition

Composition	10/31/07	10/31/06
Agency Multiple Class Mortgage Pass-Through Securities	31 %	28 %
Taxable Municipal Bonds	18	11
Non-Agency Multiple Class
Mortgage Pass-Through Securities	16
Inverse Floating Rate Mortgage
Securities	15	8
Corporate Bonds	9	14
Interest Only Mortgage-Backed
Securities	8	7
Mortgage Pass-Through Securities	3	2
U.S. Government and Agency
Securities		30

ANNUAL REPORT OCTOBER 31, 2007 2

Trust Summary as of October 31, 2007 BlackRock Core Bond Trust (BHK)

Investment Objective

The Trusts investment objective is to provide current income and capital appreciation.

Trust Information

| Symbol on New York Stock
Exchange: | BHK |
| --- | --- |
| Initial Offering Date: | November 27, 2001 |
| Yield on Closing Market Price as
of October 31, 2007 ($12.23): 1 | 6.57% |
| Current Monthly Distribution per
Share: 2 | $0.067 |
| Current Annualized Distribution
per Share: 2 | $0.804 |
| Leverage as of October 31, 2007: 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 | A change in the distribution rate was declared on December
5, 2007. The Monthly Distribution per Common Share was decreased to $0.062.
The Yield on Closing Market Price, Current Monthly Distribution and Current
Annualized Distribution do not reflect the new distribution rate. The new
distribution rate is not constant and is subject to further change in the
future. |
| 3 | As a percentage of managed assets (as defined in Note 2 of
the Notes to Financial Statements). |

| The table below summarizes the
changes in the Trusts market price and net asset value per share: — 10/31/07 | 10/31/06 | Change | High | Low | |
| --- | --- | --- | --- | --- | --- |
| Market Price | $12.23 | $12.86 | (4.90) % | $13.25 | $11.32 |
| Net Asset Value | $13.63 | $13.82 | (1.37) % | $14.01 | $13.11 |

The following unaudited charts show the portfolio composition of the Trusts long-term investments and credit quality allocations of the Trusts corporate bond investments:

Portfolio Composition

Composition	10/31/07	10/31/06
Corporate Bonds	42 %	58 %
Mortgage Pass-Through Securities	36	10
Asset-Backed Securities	4	8
Commercial Mortgage-Backed Securities	4	6
U.S. Government and Agency
Securities	4	5
Non-Agency Multiple Class
Mortgage Pass-Through Securities	4	2
Agency Multiple Class
Mortgage Pass-Through
Securities	3	8
Trust Preferred Stocks	2
Interest Only Mortgage-Backed Securities	1	1
Interest Only Asset-Backed
Securities		1
Foreign Government Bonds		1

Corporate Bond Breakdown 4

Credit Rating	10/31/07	10/31/06
AAA/Aaa	6 %	7 %
AA/Aa	24	26
A	21	10
BBB/Baa	20	17
BB/Ba	7	12
B	16	23
CCC/Caa	6	5

4 Using the highest of Standard & Poors (S&Ps), Moodys Investors Service (Moodys) or Fitch Rating (Fitchs) ratings. Corporate bonds represented approximately 66.2% and 58.3% of net assets on October 31, 2007 and 2006, respectively.

3 ANNUAL REPORT OCTOBER 31, 2007

Trust Summary as of October 31, 2007 BlackRock High Yield Trust (BHY)

Investment Objective

The Trusts investment objective is to generate high current income and, to a lesser extent, to seek capital appreciation.

Trust Information

| Symbol on New York Stock
Exchange: | BHY |
| --- | --- |
| Initial Offering Date: | December 23, 1998 |
| Yield on Closing Market Price as
of October 31, 2007 ($6.92): 1 | 8.84% |
| Current Monthly Distribution per
Share: 2 | $0.051 |
| Current Annualized Distribution
per Share: 2 | $0.612 |
| Leverage as of October 31, 2007: 3 | 15% |

| 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 managed assets (as defined in Note 2 of
the Notes to Financial Statements). |

| The table below summarizes the
changes in the Trusts market price and net asset value per share: — 10/31/07 | 10/31/06 | Change | | High | Low | |
| --- | --- | --- | --- | --- | --- | --- |
| Market Price | $6.92 | $7.77 | (10.94 | )% | $8.70 | $5.83 |
| Net Asset Value | $7.91 | $7.85 | 0.76 | % | $8.32 | $7.63 |

The following unaudited charts show the portfolio composition and credit quality allocations of the Trusts corporate bond investments:

Portfolio Composition 4

Corporate Portfolio Composition	10/31/07	10/31/06
Telecommunications	15 %	13 %
Energy	14	16
Media	11	11
Basic Materials	10	11
Financial Institutions	10	14
Consumer Products	6	6
Technology	6	5
Automotive	4	3
Entertainment & Leisure	4	4
Industrials	4	3
Health Care	3	3
Containers & Packaging	3	3
Aerospace & Defense	3	3
Transportation	2	2
Building & Development	2	3
Real Estate	1
Ecological Services & Equipment	1
Commercial Services	1

4 For Trust compliance purposes, the Trusts sector and industry classification refer to any one or more of the Standard Industry Codes as defined by the SEC. This definition may not apply for purposes of this report, which may combine sector and industry sub-classification for reporting ease.

Corporate Bond Breakdown 5

Credit Rating	10/31/07	10/31/06
BBB/Baa	4 %	3 %
BB/Ba	21	26
B	51	55
CCC/Caa	21	12
C		2
Not Rated	3	2

5 Using the highest of S&Ps, Moodys or Fitchs rating. Corporate bonds represented approximately 110.4% and 128.9% of net assets on October 31, 2007 and 2006, respectively.

ANNUAL REPORT OCTOBER 31, 2007 4

Trust Summary as of October 31, 2007 BlackRock Income Opportunity Trust (BNA)

Investment Objective

The Trusts investment objective is to provide current income and capital appreciation.

Trust Information

| Symbol on New York Stock
Exchange: | BNA |
| --- | --- |
| Initial Offering Date: | December 20, 1991 |
| Yield on Closing Market Price as
of October 31, 2007 ($10.19): 1 | 6.48% |
| Current Monthly Distribution per
Share: 2 | $0.055 |
| Current Annualized Distribution
per Share: 2 | $0.660 |
| Leverage as of October 31, 2007: 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 | A change in the distribution rate was declared on December
5, 2007. The Monthly Distribution per Common Share was decreased to $0.051.
The Yield on Closing Market Price, Current Monthly Distribution and Current
Annualized Distribution do not reflect the new distribution rate. The new
distribution rate is not constant and is subject to further change in the
future. |
| 3 | As a percentage of managed assets (as defined in Note 2 of
the Notes to Financial Statements). |

| The table below summarizes the
changes in the Trusts market price and net asset value per share: — 10/31/07 | 10/31/06 | Change | High | | Low |
| --- | --- | --- | --- | --- | --- |
| Market Price | $10.19 | $10.58 | (3.69)% | $10.88 | $ 9.13 |
| Net Asset Value | $11.02 | $11.17 | (1.34)% | $11.33 | $ 10.53 |

The following unaudited charts show the portfolio composition of the Trusts long-term investments and credit quality allocations of the Trusts corporate bond investments:

Portfolio Composition

Composition	10/31/07	10/31/06
Corporate Bonds	38 %	48 %
Mortgage Pass-Through Securities	36	12
Asset-Backed Securities	7	13
Non-Agency Multiple Class
Mortgage Pass-Through
Securities	5	6
Agency Multiple Class Mortgage Pass-Through
Securities	4	7
U.S. Government and
Agency Securities	3	7
Commercial Mortgage-Backed Securities	3	4
Trust Preferred Stocks	2
Federal Housing Administration Securities	1	1
Interest Only Mortgage-Backed Securities	1	1
Inverse Floating Rate Mortgage Securities		1

Corporate Bond Breakdown 4

Credit Rating	10/31/07	10/31/06
AAA/Aaa	8 %	9 %
AA/Aa	21	17
A	20	10
BBB/Baa	22	19
BB/Ba	6	13
B	17	25
CCC/Caa	6	6
Not Rated		1

4 Using the highest of S&Ps, Moodys or Fitchs rating. Corporate bonds represented approximately 64.0% and 52.1% of net assets on October 31, 2007 and 2006, respectively.

5 ANNUAL REPORT OCTOBER 31, 2007

Trust Summary as of October 31, 2007 BlackRock Income Trust Inc. (BKT)

Investment Objective

The Trusts investment objective is to manage a portfolio of high quality securities to achieve high monthly income consistent with the preservation of capital.

Trust Information

| Symbol on New York Stock
Exchange: | BKT |
| --- | --- |
| Initial Offering Date: | July 22, 1988 |
| Yield on Closing Market Price as
of October 31, 2007 ($5.81): 1 | 6.40% |
| Current Monthly Distribution per
Share: 2 | $0.031 |
| Current Annualized Distribution
per Share: 2 | $0.372 |
| Leverage as of October 31, 2007: 3 | 8% |

| 1 | Yield on closing market price is calculated by dividing
the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results. |
| --- | --- |
| 2 | A change in the distribution rate was declared on December
5, 2007. The Monthly Distribution per Common Share was decreased to $0.024.
The Yield on Closing Market Price, Current Monthly Distribution and Current
Annualized Distribution do not reflect the new distribution rate. The new
distribution rate is not constant and is subject to further change in the
future. |
| 3 | As a percentage of managed assets (as defined in Note 2 of
the Notes to Financial Statements). |

| The table below summarizes the
changes in the Trusts market price and net asset value per share: — 10/31/07 | 10/31/06 | | Change | High | Low | |
| --- | --- | --- | --- | --- | --- | --- |
| Market Price | $5.81 | $6.07 | (4.28 | )% | $6.33 | $5.49 |
| Net Asset Value | $6.53 | $6.48 | 0.77 | % | $6.61 | $6.25 |

The following unaudited chart shows the portfolio composition of the Trusts long-term investments:

Portfolio Composition

Composition	10/31/07	10/31/06
Mortgage Pass-Through
Securities	27 %	22 %
Agency Multiple Class
Mortgage Pass-Through
Securities	26	28
Interest Only Mortgage-Backed Securities	13	10
U.S. Government and
Agency Securities	10	20
Non-Agency Multiple Class
Mortgage Pass-Through
Securities	9	9
Principal Only Mortgage-Backed Securities	5	5
Inverse Floating Rate
Mortgage Securities	4	3
Federal Housing Administration Securities	2	2
Asset-Backed Securities	2
Commercial Mortgage-Backed
Securities	1
Corporate Bonds	1	1

ANNUAL REPORT OCTOBER 31, 2007 6

Trust Summary as of October 31, 2007 BlackRock Limited Duration Income Trust (BLW)

Investment Objective

The Trusts investment objective is to provide current income and capital appreciation.

Trust Information

| Symbol on New York Stock
Exchange: | BLW |
| --- | --- |
| Initial Offering Date: | July 30, 2003 |
| Yield on Closing Market Price as
of October 31, 2007 ($16.68): 1 | 8.99% |
| Current Monthly Distribution per
Share: 2 | $0.125 |
| Current Annualized Distribution
per Share: 2 | $1.500 |
| Leverage as of October 31, 2007: 3 | 14% |

| 1 | Yield on closing market price is calculated by dividing
the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results. |
| --- | --- |
| 2 | The distribution is not constant and is subject to change. |
| 3 | As a percentage of managed assets (as defined in Note 2 of
the Notes to Financial Statements). |

| The table below summarizes the
Trusts market price and net asset value per share: — 10/31/07 | 10/31/06 | | Change | High | Low | |
| --- | --- | --- | --- | --- | --- | --- |
| Market Price | $16.68 | $18.85 | (11.51 | ) % | $19.89 | $14.20 |
| Net Asset Value | $18.52 | $19.01 | (2.58 | ) % | $19.38 | $18.08 |

The following unaudited charts show the portfolio composition of the Trusts long-term investments and credit quality allocations of the Trusts corporate bond investments:

Portfolio Composition

Composition	10/31/07	10/31/06
Bank Loans	42 %	36 %
Corporate Bonds	37	43
Mortgage Pass-Through
Securities	16	14
U.S. Government and Agency
Securities	3	4
Foreign Government Bonds	2	2
Non-Agency Multiple Class Mortgage Pass-Through
Securities		1

Corporate Bond Breakdown 4

Credit Rating	10/31/07	10/31/06
AA/Aa	1 %	2 %
A	4	1
BBB/Baa	8	9
BB/Ba	23	24
B	43	51
CCC/Caa	18	11
Not Rated	3	2

4 Using the highest of S&Ps, Moodys or Fitchs rating. Corporate bonds represented approximately 49.1% and 64.3% of net assets on October 31, 2007 and 2006, respectively.

7 ANNUAL REPORT OCTOBER 31, 2007

Trust Summary as of October 31, 2007
Investment
Objective

The Trusts investment objective is to seek current income, current gains and capital appreciation.

Trust Information

| Symbol on New York
Stock Exchange: | BTZ |
| --- | --- |
| Initial Offering
Date: | December 27, 2006 |
| Yield on Closing
Market Price as of October 31, 2007 ($18.65): 1 | 10.05% |
| Current Monthly
Distribution per Share: 2 | $0.15625 |
| Current Annualized
Distribution per Share: 2 | $1.87500 |
| Leverage as of
October 31, 2007: 3 | 33% |

| 1 | Yield on closing market price is calculated by dividing
the current annualized distribution per share by the closing market price.
Past performance does not guarantee future results. |
| --- | --- |
| 2 | The distribution is not constant and is subject to change. |
| 3 | As a percentage of managed assets (as defined in Note 2 of
the Notes to Financial Statements). |

| The table below
summarizes the changes in the Trusts market price and net asset value per
share: | 10/31/2007 | High | Low |
| --- | --- | --- | --- |
| Market Price | $18.65 | $25.25 | $15.63 |
| Net Asset Value | $21.37 | $24.35 | $20.87 |
| The following
unaudited charts show the portfolio composition of the Trusts long-term
investments and credit quality allocations of the Trusts preferred stock,
trust preferred stock and corporate bond investments: | | | |

Portfolio Composition 4

Composition	10/31/07
Financial
Institutions	65 %
Energy	8
Technology	5
Consumer Products	4
Health Care	4
Telecommunications	3
Real Estate	3
Media	2
Industrials	2
Basic Materials	1
Entertainment
& Leisure	1
Automotive	1
Transportation	1

Preferred, Trust Preferred and Corporate Bond Breakdown 5

Credit Rating	10/31/07
AA/Aa	20 %
A	42
BBB/Baa	29
BB/Ba	1
B	6
CCC/Caa	1
Not Rated	1

5 Using the higher of S&P, Moodys or Fitch ratings.

ANNUAL REPORT OCTOBER 31, 2007 8

Trust Summary as of October 31, 2007
Investment
Objective

The Trusts investment objective is to seek total return through high current income and capital appreciation.

Trust Information

| Symbol on New York
Stock Exchange: | BHD |
| --- | --- |
| Initial Offering
Date: | February 26, 2002 |
| Yield on Closing
Market Price as of October 31, 2007 ($11.88): 1 | 7.78% |
| Current Monthly
Distribution per Share: 2 | $0.077 |
| Current Annualized
Distribution per Share: 2 | $0.924 |

| The table below summarizes
the changes in the Trusts market price and net asset value per share: | 10/31/07 | 10/31/06 | Change | High | Low |
| --- | --- | --- | --- | --- | --- |
| Market Price | $11.88 | $12.85 | (7.55)% | $13.29 | $10.40 |
| Net Asset Value | $13.80 | $13.83 | (0.22)% | $14.19 | $13.47 |
| The following
unaudited charts show the portfolio composition and credit quality
allocations of the Trusts corporate bond investments: | | | | | |

Corporate Portfolio Composition 3

Composition	10/31/07	10/31/06
Media	17 %	14 %
Telecommunications	14	12
Energy	13	13
Financial
Institutions	12	18
Aerospace &
Defense	8	6
Basic Materials	6	6
Consumer Products	5	7
Technology	4	5
Automotive	4	2
Health Care	4	4
Transportation	3	1
Ecological Services
& Equipment	3	2
Industrials	2	3
Containers &
Packaging	2	1
Entertainment
& Leisure	1	3
Building &
Development	1	2
Real Estate	1	1

3 For Trust compliance purposes, the Trusts sector and industry classification refer to any one or more of the Standard Industry Codes as defined by the SEC. This definition may not apply for purposes of this report, which may combine sector and industry sub-classification for reporting ease.

Corporate Bond Breakdown 4

Credit Rating	10/31/07	10/31/06
AAA/Aaa	1 %	3 %
AA/Aa	4	6
A	17	12
BBB/Baa	15	13
BB/Ba	12	16
B	37	40
CCC/Caa	12	9
Not Rated	2	1

4 Using the highest of S&Ps, Moodys or Fitchs rating. Corporate bonds represented approximately 84.5% and 107.6% of net assets on October 31, 2007 and 2006, respectively.

9 ANNUAL REPORT OCTOBER 31, 2007

Portfolio of Investments as of October 31, 2007
(Percentages shown are based on
Net Assets)

Principal Amount (000)		Description	Value
LONG-TERM
INVESTMENTS29.2%
Mortgage
Pass-Through Securities0.9%
		Federal National Mortgage Assoc.,
$ 314		5.50%,
1/01/17-2/01/17	$ 316,169
14		6.50%,
7/01/29	14,777
		Total Mortgage Pass-Through Securities	330,946
Agency
Multiple Class Mortgage Pass-Through Securities9.1%
		Federal Home Loan Mortgage Corp.,
1,745		Ser. 1510,
Class G, 7.05%, 5/15/13	1,753,683
1,098		Ser. 1598,
Class J, 6.50%, 10/15/08	1,095,825
81		Ser. 2564,
Class NC, 5.00%, 2/15/33	69,195
668		Federal
National Mortgage Assoc., Ser. 49, Class H, 7.00%, 4/25/13	689,837
		Total
Agency Multiple Class Mortgage Pass-Through Securities	3,608,540
Inverse
Floating Rate Mortgage Securities4.3%
132	1	Citicorp
Mortgage Securities, Inc., Ser. 14, Class A-4, 6.352%, 11/25/23	131,701
		Federal
Home Loan Mortgage Corp.,
5	1	Ser. 1425,
Class SB, 11.886%, 12/15/07	4,876
4	1	Ser. 1506,
Class S, 9.708%, 5/15/08	4,468
152	1	Ser. 1515,
Class S, 8.753%, 5/15/08	152,069
10	1	Ser. 1600,
Class SC, 8.60%, 10/15/08	9,853
144	1	Ser. 1618,
Class SA, 8.25%, 11/15/08	144,815
7	1	Ser. 1661,
Class SB, 8.83%, 1/15/09	7,035
21	1	Ser. 1688,
Class S, 9.566%, 12/15/13	21,408
105	1	Ser. 2412,
Class SE, 5.519%, 2/15/09	106,281
275	1	Ser. 2517,
Class SE, 3.522%, 10/15/09	264,534
		Federal National Mortgage Assoc.,
7	1	Ser. 13,
Class SJ, 8.75%, 2/25/09	7,505
3	1	Ser. 174,
Class S, 97.223%, 9/25/22	9,514
118	1	Ser. 192,
Class SC, 6.84%, 10/25/08	117,971
37	1	Ser. 214,
Class SH, 5.592%, 12/25/08	36,653
51	1	Ser. 214,
Class SK, 10.00%, 12/25/08	52,172
618	1	Residential
Accredit Loans, Inc., Ser. QS16, Class A3, 6.435%, 10/25/17	620,297
		Total
Inverse Floating Rate Mortgage Securities	1,691,152
Interest
Only Mortgage-Backed Securities2.3%
		Federal
Home Loan Mortgage Corp.,
1		Ser. 65,
Class I, 918.03%, 8/15/20	1,058
		Ser. 141,
Class H, 1,060.00%, 5/15/21	220
1,444		Ser. 2523,
Class EH, 5.50%, 4/15/20	73,865
149		Ser. 2633,
Class PI, 4.50%, 3/15/12	781
3,531		Ser. 2739,
Class PI, 5.00%, 3/15/22	94,580
1,467		Ser. 2976,
Class KI, 5.50%, 11/15/34	191,597
1,664		Ser. 3189,
Class KI, 6.00%, 1/15/35	174,439
2,615		Ser. 3207,
Class QI, 6.00%, 2/15/35	234,558
		Federal
National Mortgage Assoc.,
		Ser. 8,
Class HA, 1,199.999%, 1/25/08	105
899		Ser. 13,
Class IG, 5.00%, 10/25/22	21,655
35	1	Ser. 20,
Class SL, 10.12%, 9/25/08	1,260
2		Ser. 49,
Class L, 444.917%, 4/25/13	16,790
4,343		Ser. 70,
Class ID, 5.00%, 4/25/22	61,437
		Ser. G-21,
Class L, 949.50%, 7/25/21	7,410
12,042	1	Vendee
Mortgage Trust, Ser. 1, 0.043%, 10/15/31	26,627
		Total
Interest Only Mortgage-Backed Securities	906,382

Principal Amount (000)		Description	Value
Principal
Only Mortgage-Backed Security0.0%
$ 14	2	Salomon
Brothers Mortgage Securities, Inc. VI, Ser. 3, Class A, 12.50%, 10/23/17	$ 13,246
Asset-Backed
Securities0.0%
234	1,3,4,5	Global
Rated Eligible Asset Trust, Ser. A, Class 1, 7.33%, 9/15/07	23
568	1,3,5	Structured
Mortgage Asset Residential Trust, Ser. 2, 8.24%, 12/15/07	57
		Total
Asset-Backed Securities	80
Corporate Bond2.6%
1,000		Morgan
Stanley Group, Inc., 10.00%, 6/15/08	1,029,161
Taxable Municipal
Bonds5.2%
500		Fresno
California Pension Oblig., 7.80%, 6/01/14	544,725
500		Kern County
California Pension Oblig., 6.98%, 8/15/09	518,005
500		Los Angeles
County California Pension Oblig., Ser. D, 6.97%, 6/30/08	506,585
500		Orleans
Parish Louisiana School Board, Ser. A, 6.60%, 2/01/08	501,925
		Total
Taxable Municipal Bonds	2,071,240
Non-Agency Multiple Class Mortgage
Pass-Through Securities4.8%
1,914	1	JPMorgan
Mortgage Trust, Ser. A7, Class 2A2, 5.83%, 1/25/37	1,910,904
		Total Long-Term Investments (cost $11,827,713)	11,561,651
SHORT-TERM
INVESTMENT70.3%
U.S. Government and Agency Discount
Notes70.3%
27,800	6	Federal
Home Loan Bank Disc. Notes, 4.351%, 11/01/07 (cost $27,800,000)	27,800,000
Total Investments99.5% (cost
$39,627,713 7 )			$ 39,361,651
Other assets in excess of
liabilities0.5%			207,328
Net Assets100%			$ 39,568,979

| 1 | Variable rate security. Rate shown is interest rate as of
October 31, 2007. |
| --- | --- |
| 2 | Rate shown is effective yield of the underlying collateral
as of October 31, 2007. |
| 3 | Illiquid security. As of October 31, 2007, the Trust held
less than 0.1% of its net assets, with a current market value of $80, in
these securities. |
| 4 | Security is not registered under the Securities Act of
1933. These securities may be resold in transactions in accordance with Rule
144A under that Act, to qualified institutional buyers. As of October 31,
2007, the Trust held less than 0.1% of its net assets, with a current market
value of $23, in securities restricted as to resale. |
| 5 | Security is fair valued. |
| 6 | Rate shown is the yield to maturity as of the date of
purchase. |
| 7 | Cost for federal income tax purposes is $39,627,713. The
net unrealized depreciation on a tax basis is $266,062, consisting of
$321,614 gross unrealized appreciation and $587,676 gross unrealized
depreciation. |

Portfolio Abbreviations

ADR	American Depositary Receipt
EUR	Euro
GBP	British Pound
LIBOR	London Interbank Offered Rate
PRIME	Prime Rate
REIT	Real Estate Investment Trust
TBA	To Be Announced
TBD	To Be Determined

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER 31, 2007 | 10 |
| --- | --- | --- |

| Portfolio of
Investments as of October 31, 2007 |
| --- |
| (Percentages shown are based on
Net Assets) |

Principal Amount (000)		Description
LONG-TERM
INVESTMENTS158.7%
Mortgage
Pass-Through Securities58.2%
$ 757	1	Citigroup
Mortgage Loan Trust, Inc., Ser. 4, Class A, 5.345%, 8/25/35	$ 738,529
		Federal
Home Loan Mortgage Corp.,
75		5.00%,
8/01/33	71,842
1,428	2	5.50%,
11/01/18	1,434,281
5,183		5.50%,
11/01/18-5/01/36	5,112,866
2,498		6.00%,
2/01/13-12/01/18	2,545,922
23		7.00%,
9/01/31	23,749
59	1	7.379%,
5/01/32	60,118
4,000		TBA, 5.50%,
12/12/37	3,935,000
		Federal
National Mortgage Assoc.,
44		4.50%,
2/01/20	42,798
10,051		5.00%,
11/01/17-6/01/37	9,870,125
12,498	2	5.00%,
1/01/18-5/01/37	12,026,793
2,747		5.50%,
1/01/18-7/01/34	2,719,784
43,246	2	5.50%,
12/01/35-4/01/36	42,661,096
6,658	2	6.00%,
2/01/36-10/01/36	6,708,610
3,159		6.00%,
8/01/29-11/01/36	3,182,236
289		7.00%,
1/01/31-7/01/32	302,834
400		TBA, 5.00%,
11/19/22	393,750
85,500		TBA, 5.50%,
11/19/22-11/13/37	84,249,051
18,900		TBA, 6.00%,
11/13/37-12/12/37	19,019,812
15,600		TBA, 6.50%,
12/12/37	15,946,133
		Government
National Mortgage Assoc.,
205		5.50%,
8/15/33	204,241
200		TBA, 6.50%,
11/20/37	205,312
760	1	GSR
Mortgage Loan Trust, Ser. AR4, Class 6A1, 5.25%, 7/25/35	739,031
		Small
Business Administration,
767		Ser. P10B,
Class 1, 4.754%, 8/01/14	751,230
1,351		Ser. P10B,
Class 1, 5.136%, 8/01/13	1,352,827
		Total
Mortgage Pass-Through Securities	214,297,970
Federal Housing Administration
Security0.3%
1,028		FHA Hebre
Home Hospital, 6.25%, 9/01/28	1,038,331
Agency Multiple Class Mortgage
Pass-Through Securities4.0%
		Federal
Home Loan Mortgage Corp.,
1,200		Ser. 2562,
Class PG, 5.00%, 1/15/18	1,185,166
2,170		Ser. 2775,
Class OE, 4.50%, 4/15/19	2,056,897
2,959		Ser. 2806,
Class VC, 6.00%, 12/15/19	3,008,150
1,306		Ser. 2825,
Class VP, 5.50%, 6/15/15	1,322,326
1,300		Ser. 2883,
Class DR, 5.00%, 11/15/19	1,257,396
1,600		Ser. 2968,
Class EG, 6.00%, 10/15/34	1,622,310
		Federal
National Mortgage Assoc.,
2,691		Ser. 5,
Class PK, 5.00%, 12/25/34	2,684,529
1,663	1	Ser. 118,
Class FD, 5.273%, 12/25/33	1,651,013
		Total
Agency Multiple Class Mortgage Pass-Through Securities	14,787,787
Asset-Backed
Securities6.7%
2,300		Chase
Issuance Trust, Ser. A17, Class A, 5.12%, 10/15/14	2,315,364
2,800		Chase
Manhattan Auto Owner Trust, Ser. B, Class A4, 4.88%, 6/15/12	2,801,647
2,825		Citibank
Credit Card Issuance Trust, Ser. A2, Class A2, 4.85%, 2/10/11	2,826,461
229	1	Countrywide
Asset-Backed Certificates, Ser. 16, Class 4AV1, 4.973%, 1/25/35	228,876
2,406		DaimlerChrysler
Auto Trust, Ser. A, Class A3, 5.00%, 5/08/10	2,406,171
2,850		Ford Credit
Auto Owner Trust, Ser. A, Class A4, 5.08%, 12/15/10	2,860,611
2,300		Harley-Davidson
Motorcycle Trust, Ser. 2, Class A2, 4.07%, 2/15/12	2,283,930
2,500		Maryland
Trust, Ser. 1, Class A, 5.55%, 12/10/65	2,371,875

Principal Amount (000)		Description	Value
Asset
Backed Securities(contd)
$ 2,825		MBNA Credit
Card Master Note Trust, Ser. A1, Class A, 4.90%, 7/15/11	$ 2,830,207
59	1	New Century
Home Equity Loan Trust, Ser. C, Class A2A, 4.953%, 1/25/36	59,262
564	1	SLM Student
Loan Trust, Ser. 5, Class A1, 5.084%, 1/25/18	564,436
471	1	Structured
Asset Investment Loan Trust, Ser. 1, Class A1, 4.953%, 1/25/36	469,358
2,725		USAA Auto
Owner Trust, Ser. 1 Class A4, 5.04%, 12/15/11	2,738,565
		Total
Asset-Backed Securities	24,756,763
Interest Only Asset-Backed
Securities0.2%
		Sterling
Coofs Trust,
12,656		Ser. 1,
2.365%, 4/15/29	561,620
10,125	3	Ser. 2,
2.081%, 3/30/30	272,114
		Total
Interest Only Asset-Backed Securities	833,734
Interest Only Mortgage-Backed
Securities1.0%
		Federal
Home Loan Mortgage Corp.,
2,104		Ser. 2579,
Class HI, 5.00%, 8/15/17	242,617
5,772		Ser. 2611,
Class QI, 5.50%, 9/15/32	1,047,320
		Federal
National Mortgage Assoc.,
23,975	1	Ser. 90,
Class JH, 1.828%, 11/25/34	1,341,116
4,030		Ser. 378,
Class 5, 5.00%, 7/01/36	980,948
		Total
Interest Only Mortgage-Backed Securities	3,612,001
Commercial Mortgage-Backed
Securities6.4%
2,180	1	Banc of
America Commerical Mortgage, Inc., Ser. 1, Class A4, 4.871%, 11/10/42	2,163,105
2,720		Credit
Suisse First Boston Mortgage Securities Corp., Ser. CP5, Class A2, 4.94%, 12/15/35	2,667,298
2,170	1	Credit
Suisse Mortgage Capital Certificates, Ser. C2, Class A3, 5.542%, 1/15/49	2,147,296
1,463	1	General
Motor Acceptance Corp. Commercial Mortgage Securities, Inc., Ser. C3, Class A2, 7.179%, 8/15/36	1,504,810
1,973		Goldman
Sachs Mortgage Securities Corp. II, Ser. C1, Class A3, 6.135%, 10/18/30	1,977,721
1,435	1	Heller
Financial Commercial Mortgage Asset Co., Ser. PH1, Class A2, 6.847%, 5/15/31	1,453,914
		JPMorgan
Chase Commercial Mortgage Securities Corp.,
2,140		Ser. C1,
Class A3, 5.857%, 10/12/35	2,185,265
2,180		Ser. CBX,
Class A4, 4.529%, 1/12/37	2,131,593
1,652	1	JPMorgan
Commercial Mortgage Finance Corp., Ser. C10, Class A2, 7.371%, 8/15/32	1,717,907
2,082	1	Morgan
Stanley Capital Trust I, Ser. HF2, Class A2, 6.48%, 11/15/30	2,089,181
3,489	1	Salomon
Brothers Mortgage Securities VII, Ser. C1, Class A2, 7.52%, 12/18/09	3,619,954
		Total
Commercial Mortgage-Backed Securities	23,658,044
Corporate Bonds66.2%
Aerospace &
Defense1.1%
150	3	Bombardier,
Inc., 8.00%, 11/15/14 (Canada)	156,000
1,195		DI
Finance/DynCorp Intl., Ser. B, 9.50%, 2/15/13	1,269,688
		DRS
Technologies, Inc.,
70		6.875%,
11/01/13	70,000
80		7.625%,
2/01/18	81,800
960		Northrop
Grumman Corp., 7.875%, 3/01/26	1,147,117
15		Sequa
Corp., 9.00%, 8/01/09	16,088
120		TransDigm,
Inc., 7.75%, 7/15/14	122,100
1,125		United
Technologies Corp., 4.875%, 5/01/15	1,088,382
		Total
Aerospace & Defense	3,951,175
Automotive1.0%
265		Accuride
Corp., 8.50%, 2/01/15	249,100
		AutoNation,
Inc.,
150		7.00%,
4/15/14	145,125
150	1	7.243%, 4/15/13	146,625
600		Ford
Capital BV, 9.50%, 6/01/10 (Netherlands)	604,500

| See Notes to Financial Statements. — 11 | ANNUAL
REPORT | OCTOBER 31, 2007 |
| --- | --- | --- |

| Portfolio of
Investments as of October 31, 2007 |
| --- |
| (Percentages shown are based on Net Assets) |

Principal Amount (000)		Description	Value
Automotive(contd)
$ 360		Lear Corp., Ser. B, 8.75%, 12/01/16	$ 345,600
250		Metaldyne Corp., 10.00%, 11/01/13	232,500
2,100		Sonic Automotive, Inc., Ser. B, 8.625%, 8/15/13	2,121,000
		Total Automotive	3,844,450
Basic Materials3.3%
500		Abitibi-Consolidated, Inc., 6.00%, 6/20/13 (Canada)	367,500
995		AK Steel Corp., 7.75%, 6/15/12	1,014,900
250		American Pacific Corp., 9.00%, 2/01/15	256,250
80	1	Bowater, Inc., 8.694%, 3/15/10	73,200
30		Chemtura Corp., 6.875%, 6/01/16	28,650
200		CPG Intl. I, Inc., 10.50%, 7/01/13	200,000
60		Domtar, Inc., 7.125%, 8/15/15 (Canada)	59,400
		Freeport-McMoRan Copper & Gold, Inc.,
1,020		8.375%,
4/01/17	1,116,900
330	1	8.394%,
4/01/15	340,725
66		Huntsman LLC, 12.00%, 7/15/12	71,775
		Ineos Group Holdings Plc (United Kingdom)
285		7.875%,
2/07/16 (EUR)	379,810
1,330	3	8.50%,
2/15/16	1,263,500
885		Innophos, Inc., 8.875%, 8/15/14	891,638
515	3	Key
Plastics LLC/Key Plastics Finance Corp., 11.75%, 3/15/13	437,750
1,705		NewPage Corp., 10.00%, 5/01/12	1,803,037
		Noranda, Inc. (Canada)
825		6.00%,
10/15/15	830,709
1,250		6.20%,
6/15/35	1,200,827
1,430		Teck Cominco Ltd., 6.125%, 10/01/35 (Canada)	1,354,563
430		Terra Capital, Inc., Ser. B, 7.00%, 2/01/17	430,000
		Total Basic Materials	12,121,134
Building & Development0.2%
440		Goodman
Global Holding Co., Inc., 7.875%, 12/15/12	459,800
140		Nortek, Inc., 8.50%, 9/01/14	123,900
85		North
American Energy Partners, Inc., 8.75%, 12/01/11 (Canada)	85,850
		Total Building & Development	669,550
Commercial Services0.1%
100		FTI Consulting, Inc., 7.75%, 10/01/16	104,500
200	3	Quebecor World, Inc., 9.75%, 1/15/15 (Canada)	195,000
		Total Commercial Services	299,500
Consumer Products2.5%
650	1	Ames True Temper, Inc., 9.243%, 1/15/12	624,000
30	1	Avis Budget
Car Rental LLC/Avis Budget Finance, Inc., 8.058%, 5/15/14	29,625
775		CVS Caremark Corp., 6.25%, 6/01/27	770,626
695		Federated Retail Holdings, Inc., 5.90%, 12/01/16	663,511
		General Nutrition Centers, Inc.,
500	1	10.009%,
3/15/14	481,250
400		10.75%,
3/15/15	389,000
850		Kimberly-Clark Corp., 6.625%, 8/01/37	935,813
1,515		Kraft Foods, Inc., 7.00%, 8/11/37	1,644,963
314		Lazy Days RV Center, Inc., 11.75%, 5/15/12	282,600
		Michaels Stores, Inc.,
470		10.00%,
11/01/14	473,525
600	2	11.375%,
11/01/16	598,500
1,000		Pantry, Inc. (The), 7.75%, 2/15/14	975,000
175		Quiksilver, Inc., 6.875%, 4/15/15	163,188
250		Reynolds American, Inc., 7.625%, 6/01/16	270,479
775		Rite Aid Corp., 7.50%, 3/01/17	720,750
390		Sally Holdings LLC, 10.50%, 11/15/16	388,050
		Total Consumer Products	9,410,880

Principal Amount (000)		Description	Value
Containers & Packaging0.8%
		Berry Plastics Holding Corp.,
$ 270		8.875%,
9/15/14	$ 276,750
180	1	9.569%,
9/15/14	180,450
150		Crown
Americas LLC/Crown Americas Capital Corp., 7.75%, 11/15/15	154,500
75		Graham Packaging Co., Inc., 8.50%, 10/15/12	74,438
300	1,3	Impress Holdings BV, 8.368%, 9/15/13 (Netherlands)	298,426
1,500		Owens Brockway, 8.25%, 5/15/13	1,560,000
545		Pregis Corp., 12.375%, 10/15/13	594,050
		Total Containers & Packaging	3,138,614
Ecological Services & Equipment0.2%
590		Waste Services, Inc., 9.50%, 4/15/14	590,000
Energy9.7%
425		Amerada Hess Corp., 7.125%, 3/15/33	469,065
2,350		Anadarko Petroleum Corp., 6.45%, 9/15/36	2,377,558
140		Berry Petroleum Co., 8.25%, 11/01/16	142,800
875		Burlington
Resources Finance Co., 7.40%, 12/01/31 (Canada)	1,031,161
375		Canadian
Natural Resources Ltd., 6.25%, 3/15/38 (Canada)	370,540
320		Chaparral Energy, Inc., 8.50%, 12/01/15	298,400
		Chesapeake Energy Corp.,
150		6.375%,
6/15/15	145,500
20		6.875%,
11/15/20	19,550
500		Cleveland Electric Illuminating Co., 5.95%, 12/15/36	463,733
		Compagnie Generale de Geophysique-Veritas (France)
55		7.50%,
5/15/15	56,100
90		7.75%,
5/15/17	92,700
235		Compton Petroleum Finance Corp.,
		7.625%,
12/01/13 (Canada)	225,013
125		Conoco Funding Co., 7.25%, 10/15/31 (Canada)	145,774
535		ConocoPhillips Funding Co., 5.95%, 10/15/36 (Canada)	548,451
650		ConocoPhillips Holding Co., 6.95%, 4/15/29	740,160
100		Devon Energy Corp., 7.95%, 4/15/32	122,312
725		DTE Energy Co., 6.35%, 6/01/16	750,656
115		Edison Mission Energy, 7.50%, 6/15/13	116,581
1,125	3	EDP Finance BV, 6.00%, 2/02/18 (Netherlands)	1,122,493
		El Paso Natural Gas Co.,
265		8.625%,
1/15/22	308,335
225		8.875%,
6/15/32	262,282
124		Elwood Energy LLC, 8.159%, 7/05/26	127,055
		EnCana Corp., (Canada)
1,000		6.50%,
8/15/34	1,045,819
700		6.625%,
8/15/37	739,318
		Encore Acquisition Co.,
40		6.00%,
7/15/15	36,200
60		7.25%,
12/01/17	57,450
1,500		Energy East Corp., 6.75%, 7/15/36	1,546,705
130		Exco Resources, Inc., 7.25%, 1/15/11	128,375
950		Florida Power & Light Co., 4.95%, 6/01/35	824,533
675		Florida Power Corp., 6.35%, 9/15/37	708,736
80		Grant Prideco, Inc., Ser. B, 6.125%, 8/15/15	80,400
210		KCS Energy, Inc., 7.125%, 4/01/12	206,850
700		Midamerican Energy Co., 5.80%, 10/15/36	680,105
		Midamerican Energy Holdings Co.,
800		5.95%,
5/15/37	766,990
1,525	3	6.50%,
9/15/37	1,563,997
75		Midwest Generation LLC, Ser. B, 8.56%, 1/02/16	80,767
155		Mirant Americas Generation LLC, 8.30%, 5/01/11	156,744
1,050	3	Nakilat, Inc., 6.067%, 12/31/33 (Qatar)	995,715
550		Nexen, Inc., 6.40%, 5/15/37 (Canada)	547,239
		NRG Energy, Inc.,
50		7.25%, 2/01/14	50,000
285		7.375%,
2/01/16	284,288

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER 31, 2007 | 12 |
| --- | --- | --- |

| Portfolio of
Investments as of October 31, 2007 |
| --- |
| (Percentages shown are based on Net Assets) |

Principal Amount (000)		Description	Value
Energy(contd)
$ 1,000		Ohio Edison
Co., 6.875%, 7/15/36	$ 1,047,284
425		ONEOK
Partners LP, 6.65%, 10/01/36	432,782
450	3	OPTI, Inc.,
8.25%, 12/15/14 (Canada)	451,125
130		Orion Power
Holdings, Inc., 12.00%, 5/01/10	143,650
575		Pacificorp,
6.25%, 10/15/37	590,146
1,650		Pemex
Project Funding Master Trust, 9.625%, 12/02/08	1,725,900
1,200		Public
Service Co. of Colorado, 6.25%, 9/01/37	1,245,049
330		Sabine Pass
LNG LP, 7.50%, 11/30/16	323,400
700		Scottish
Power Plc, 5.375%, 3/15/15 (United Kingdom)	689,766
315	3	SemGroup
LP, 8.75%, 11/15/15	302,400
		Southern
California Edison Co.,
625		5.625%,
2/01/36	596,659
125		Ser. 05-E,
5.35%, 7/15/35	113,955
645		Suncor
Energy, Inc., 6.50%, 6/15/38 (Canada)	675,171
320	3	Targa
Resources, Inc., 8.50%, 11/01/13	323,200
550		Trans-Canada
Pipelines Ltd., 5.85%, 3/15/36 (Canada)	527,368
950		Valero
Energy Corp., 6.625%, 6/15/37	978,133
2,000		Virginia
Electric & Power Co., Ser. A, 6.00%, 5/15/37	1,965,206
625	3	Weatherford
Intl., Inc., 6.80%, 6/15/37	655,387
375		Whiting
Petroleum Corp., 7.25%, 5/01/12-5/01/13	368,638
1,925		XTO Energy,
Inc., 6.75%, 8/01/37	2,064,924
		Total
Energy	35,656,593
Entertainment & Leisure0.6%
185		AMC
Entertainment, Inc., 11.00%, 2/01/16	200,263
1,000		Circus
& Eldorado Joint Venture, 10.125%, 3/01/12	1,040,000
150		Gaylord
Entertainment Co., 6.75%, 11/15/14	145,500
335	3	Greektown
Holdings LLC, 10.75%, 12/01/13	333,325
375		Harrahs
Operating Co., Inc., 5.75%, 10/01/17	276,562
260		Seneca
Gaming Corp., Ser. B, 7.25%, 5/01/12	261,950
40		Wynn Las
Vegas LLC/Wynn Las Vegas Capital Corp., 6.625%, 12/01/14	39,300
		Total
Entertainment & Leisure	2,296,900
Financial Institutions23.6%
		American
Real Estate Partners LP/American Real Estate Finance
Corp.,
320		7.125%,
2/15/13	312,000
3,165		8.125%,
6/01/11	3,188,737
2,575		Bank of
America Corp., 6.00%, 9/01/17	2,625,030
1,975		Bank of
America NA, Ser. BKNT, 6.10%, 6/15/17	2,021,363
325		Bank One
Corp., 3.70%, 1/15/08	324,161
1,400		BankBoston
NA, 6.375%, 3/25/08-4/15/08	1,406,364
1,270		Bear
Stearns Cos., Inc. (The), Ser. MTN, 6.95%, 8/10/12	1,321,679
350	3	Belvoir
Land LLC, Ser. A1, 5.27%, 12/15/47	310,765
1,075		Berkshire
Hathaway Finance Corp., 4.75%, 5/15/12	1,059,247
181	1,3	BMS
Holdings, Inc., 12.40%, 2/15/12	173,374
1,100		Chubb
Corp., 6.00%, 5/11/37	1,070,352
600		CitiFinancial,
6.25%, 1/01/08	600,878
		Citigroup,
Inc.,
3,950	4	3.625%,
2/09/09	3,891,149
4,790	4	4.125%,
2/22/10	4,709,978
1,020		4.25%, 7/29/09	1,007,887
1,005		5.875%,
2/22/33-5/29/37	955,122
525		6.875%,
2/15/98	534,624
3,775	3	Depfa ACS
Bank, 5.125%, 3/16/37 (Ireland)	3,570,723
		Ford Motor
Credit Co. LLC,
340		7.80%,
6/01/12	319,456
200	1	7.993%,
1/13/12	185,155
525	3	Fort Irwin
Land LLC, Ser. A-1, 5.03%, 12/15/25	495,254
6,855	2	General
Electric Capital Corp., Ser. GMTN, 6.15%, 8/07/37	7,103,041

Principal Amount (000)		Description
Financial
Institutions(contd)
		Goldman
Sachs Group, Inc. (The),
$ 1,415		5.35%,
1/15/16	$ 1,377,548
4,885		5.45%,
11/01/12	4,914,139
135		6.25%,
9/01/17	140,028
925	1	Hartford
Life Global Funding Trusts, Ser. MTN, 5.864%, 9/15/09	924,002
825	3	HBOS
Treasury Services Plc, 3.75%, 9/30/08 (United Kingdom)	812,767
775		HSBC Bank
NA, 5.875%, 11/01/34	716,502
300		HSBC
Holdings Plc, 6.50%, 5/02/36 (United Kingdom)	296,167
799	3	iPayment
Investors LP, 11.625%, 7/15/14	822,779
240		iPayment,
Inc., 9.75%, 5/15/14	230,400
1,500	3	Irwin Land
LLC, 5.40%, 12/15/47	1,378,395
3,950		JPMorgan
Chase Capital XXV, Ser. Y, 6.80%, 10/01/37	3,945,643
		Lehman
Brothers Holdings, Inc.,
1,875		6.50%,
7/19/17	1,888,348
525	1	Ser. MTN,
7.394%, 9/15/22	536,446
1,525		MetLife,
Inc., 5.70%, 6/15/35	1,413,587
1,150	3	Metropolitan
Global Funding I, 4.25%, 7/30/09	1,136,666
		Momentive
Performance Materials, Inc.,
40	3	9.75%,
12/01/14	39,000
405	3	11.50%,
12/01/16	390,825
1,810	1,3	Monumental
Global Funding Ltd., Ser. MTN, 5.24%, 6/16/10 (Cayman Islands)	1,793,710
		Morgan
Stanley,
3,300	1	5.493%,
1/09/12	3,246,860
525		6.25%,
8/09/26	517,443
1,700		Ser. MTN,
6.25%, 8/28/17	1,740,576
1,375		Ser. MTN,
5.55%, 4/27/17	1,338,083
850	3	New York
Life Global Funding, 3.875%, 1/15/09	843,505
350		Ohana
Military Communities LLC, Ser. 04I, 6.193%, 4/01/49	357,088
		Prudential
Financial, Inc.,
500		5.90%,
3/17/36	471,162
675		Ser. MTN, 5.70%,
12/14/36	626,303
1,000	3	Prudential
Funding LLC, 6.60%, 5/15/08	1,006,033
		Rainbow
National Services LLC,
200	3	8.75%,
9/01/12	208,000
943	3	10.375%,
9/01/14	1,037,300
550	1	SLM Corp.,
5.384%, 1/27/14	486,399
2,170	5	Structured
Asset Receivable Trust, 5.68%, 1/21/10	2,148,367
		SunTrust
Bank,
995		4.00%,
10/15/08	985,997
1,265		4.415%,
6/15/09	1,249,858
235	3	TIAA Global
Markets, Inc., 3.875%, 1/22/08	234,326
975		Travelers
Cos., Inc., Ser. MTN, 6.25%, 6/15/37	961,956
50	1	Universal
City Florida Holding Co. I/II, 9.661%, 5/01/10	51,125
2,790	2	US Bank NA,
6.50%, 2/01/08	2,794,765
495	3	USAA
Capital Corp., 4.00%, 12/10/07	494,478
		Wells Fargo
& Co.,
1,031		3.12%,
8/15/08	1,013,318
355		4.20%,
1/15/10	349,594
1,665		4.625%,
8/09/10	1,648,918
435		4.875%,
1/12/11	432,628
540		Wells Fargo
Bank NA, 5.95%, 8/26/36	532,155
605	3	Wimar Opco
LLC/Wimar Opco Finance Corp., 9.625%, 12/15/14	453,750
1,775	3	Xstrata
Finance Ltd., 5.80%, 11/15/16 (Canada)	1,760,351
		Total
Financial Institutions	86,933,629
Health Care3.5%
1,205	1,3	Amgen,
Inc., 5.585%, 11/28/08	1,202,827
1,625		AstraZeneca
Plc, 6.45%, 9/15/37 (United Kingdom)	1,712,300
340		Bristol-Myers
Squibb Co., 5.875%, 11/15/36	333,724
2,275	2	Eli Lilly
& Co., 5.55%, 3/15/37	2,172,348
1,125		Johnson
& Johnson, 5.95%, 8/15/37	1,176,591
1,125		Schering-Plough
Corp., 6.55%, 9/15/37	1,165,932

| See Notes to Financial Statements. — 13 | ANNUAL
REPORT | OCTOBER 31, 2007 |
| --- | --- | --- |

| Portfolio of
Investments as of October 31, 2007 |
| --- |
| (Percentages shown are based on Net Assets) |

Principal Amount (000)		Description	Value
Health Care(contd)
$ 1,020		Tenet
Healthcare Corp., 6.50%, 6/01/12	$ 864,450
995		Teva
Pharmaceutical Finance LLC, 6.15%, 2/01/36	979,429
870		UnitedHealth
Group, Inc., 5.80%, 3/15/36	837,188
		WellPoint,
Inc.,
955		5.85%, 1/15/36	897,356
85		5.95%,
12/15/34	82,113
		Wyeth,
925		5.95%,
4/01/37	914,805
675		6.00%,
2/15/36	668,576
		Total
Health Care	13,007,639
Industrials1.4%
1,575		3M Co.,
Ser. MTN, 5.70%, 3/15/37	1,579,348
360	3	AGY Holding
Corp., 11.00%, 11/15/14	354,600
140		Hexcel
Corp., 6.75%, 2/01/15	137,550
975		Honeywell
Intl., Inc., 5.70%, 3/15/37	947,863
120		Park-Ohio
Industries, Inc., 8.375%, 11/15/14	111,900
		RBS Global,
Inc./Rexnord Corp.,
480		9.50%,
8/01/14	495,600
505		11.75%,
8/01/16	535,300
950	3	Sunstate
Equipment Co. LLC, 10.50%, 4/01/13	912,000
		Total
Industrials	5,074,161
Media6.2%
		Affinion
Group, Inc.,
515		10.125%,
10/15/13	536,887
180		11.50%,
10/15/15	187,650
100		American
Media Operations, Inc., Ser. B, 10.25%, 5/01/09	95,750
		AOL Time
Warner, Inc.,
90		6.625%,
5/15/29	90,172
3,040		7.57%,
2/01/24	3,331,311
205		7.625%,
4/15/31	228,088
85		7.70%,
5/01/32	95,515
180	1	Cablevision
Systems Corp., Ser. B, 9.644%, 4/01/09	184,950
110		CanWest
MediaWorks, Inc., 8.00%, 9/15/12 (Canada)	107,250
430		Charter
Communications Holdings I LLC/Charter Communications Holdings I Capital Corp., 11.00%, 10/01/15	417,100
		Charter
Communications Holdings II LLC/Charter
		Communications
Holdings II Capital Corp.,
1,545		10.25%,
9/15/10	1,575,900
130		Ser. B,
10.25%, 9/15/10	132,275
645		CMP
Susquehanna Corp., 9.875%, 5/15/14	592,594
		Comcast
Corp.,
790		6.45%,
3/15/37	796,377
2,375		6.50%,
1/15/17-11/15/35	2,464,004
25		6.95%,
8/15/37	26,753
75		Dex Media
West LLC/Dex Media Finance Co., Ser. B, 9.875%, 8/15/13	79,969
125		DirecTV
Holdings LLC/DirecTV Financing Co., 8.375%, 3/15/13	130,625
		EchoStar
DBS Corp.,
175		5.75%,
10/01/08	174,563
290		7.00%,
10/01/13	301,962
75		7.125%,
2/01/16	78,375
620		Idearc,
Inc., 8.00%, 11/15/16	621,550
600	1,3	ION Media
Networks, Inc., 8.493%, 1/15/12	601,500
485		Network
Communications, Inc., 10.75%, 12/01/13	488,031
		News
America Holdings, Inc.,
985		7.625%,
11/30/28	1,092,925
825		7.70%,
10/30/25	917,857
625		8.45%,
8/01/34	755,622
560		Nexstar
Finance, Inc., 7.00%, 1/15/14	537,600
		Nielsen
Finance LLC/Nielsen Finance Co.,
300	6	9.115%,
8/01/16	216,750
965		10.00%,
8/01/14	1,015,662
865		RH
Donnelley Corp., Ser. A-3, 8.875%, 1/15/16	865,000

Principal Amount (000)		Description	Value
Media(contd)
$ 70		Sirius Satellite Radio, Inc., 9.625%, 8/01/13	$ 69,563
		TCI Communications, Inc.,
200		7.125%,
2/15/28	212,777
620		7.875%,
8/01/13-2/15/26	705,603
70		Time Warner Cos., Inc., 6.95%, 1/15/28	72,559
1,000	3	TL Acquisitions, Inc., 10.50%, 1/15/15	995,000
350	3	Univision Communications, Inc., 9.75%, 3/15/15	343,000
645		Vertis, Inc., 9.75%, 4/01/09	645,000
1,205		Young Broadcasting, Inc., 10.00%, 3/01/11	1,132,700
		Total Media	22,916,769
Real Estate0.9%
		AvalonBay Communities, Inc.,
350		6.625%,
9/15/11	364,056
775		8.25%,
7/15/08	792,236
		Rouse Co.,
895		3.625%,
3/15/09	853,281
1,650		5.375%,
11/26/13	1,495,190
		Total Real Estate	3,504,763
Technology1.9%
		Amkor Technology, Inc.,
80		7.75%,
5/15/13	77,400
145		9.25%,
6/01/16	148,263
250		Celestica, Inc., 7.625%, 7/01/13 (Canada)	240,000
		Freescale Semiconductor, Inc.,
655		9.125%,
12/15/14	592,775
140	1	9.569%,
12/15/14	128,625
3,125	2	Intl. Business Machines Corp., 5.70%, 9/14/17	3,171,831
440		NXP BV/NXP Funding LLC, 9.50%, 10/15/15 (Netherlands)	415,800
630		Sanmina-SCI Corp., 8.125%, 3/01/16	552,825
		SunGard Data Systems, Inc.,
105		9.125%,
8/15/13	107,100
610		10.25%,
8/15/15	635,925
945		Superior Essex Communications LLC/Essex Group, Inc.,
		9.00%,
4/15/12	933,187
		Total Technology	7,003,731
Telecommunications8.7%
2,875	2	AT&T, Inc., 6.50%, 9/01/37	3,032,607
1,700	6	BellSouth Telecommunications, 6.402%, 12/15/95	902,807
210		Cincinnati Bell, Inc., 7.25%, 7/15/13	210,525
225		Cricket Communications, Inc., 9.375%, 11/01/14	223,313
3,000	2	Deutsche Telekom Intl. Finance BV,
		5.75%,
3/23/16 (Netherlands)	3,007,887
		Digicel Group Ltd., (Bermuda)
240	3	8.875%,
1/15/15	224,112
560	3	9.125%,
1/15/15	523,340
190	1	Hawaiian
Telcom Communications, Inc., Ser. B, 10.318%, 5/01/13	192,375
475		Intelsat Corp., 9.00%, 6/15/16	485,687
		Intelsat Ltd. (Bermuda)
95	1	8.886%,
1/15/15	96,425
500		9.25%,
6/15/16	518,750
200		11.25%,
6/15/16	215,000
870	1	11.409%,
6/15/13	906,975
295		Intelsat
Subsidiary Holding Co. Ltd., 8.625%, 1/15/15 (Bermuda)	299,425
120	3	MetroPCS Wireless, Inc., 9.25%, 11/01/14	119,100
770	3	Nordic
Telephone Co. Holdings A.p.S., 8.875%, 5/01/16 (Denmark)	814,275
1,120	1,3	Nortel Networks Ltd., 9.493%, 7/15/11 (Canada)	1,106,000
155		PanAmSat Corp., 9.00%, 8/15/14	158,100
		Qwest Corp.,
200		7.875%,
9/01/11	211,000
470	1	8.944%,
6/15/13	501,137
780		SBC Communications, Inc., 6.45%, 6/15/34	810,601
1,715		Sprint Capital Corp., 6.875%, 11/15/28	1,642,877

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER 31, 2007 | 14 |
| --- | --- | --- |

| Portfolio of
Investments as of October 31, 2007 |
| --- |
| (Percentages shown are based on Net Assets) |

Principal Amount (000)		Description	Value
Telecommunications(contd)
		Telecom Italia Capital S.A. (Luxembourg)
$ 1,075		4.95%,
9/30/14	$ 1,028,927
1,550		6.00%,
9/30/34	1,484,579
1,975		Telefonica Emisones SAU, 7.045%, 6/20/36 (Spain)	2,169,348
725		Telefonica Europe BV, 7.75%, 9/15/10 (Netherlands)	776,297
70		Verizon Global Funding Corp., 7.75%, 12/01/30	82,465
125		Verizon Maryland, Inc., 5.125%, 6/15/33	104,256
		Verizon New Jersey, Inc.,
230		7.85%,
11/15/29	261,440
335		Ser. A,
5.875%, 1/17/12	342,618
3,150	2	Verizon Virginia, Inc., 4.625%, 3/15/13	3,024,873
		Vodafone Group Plc, (United Kingdom)
1,465	1	5.288%,
12/28/07	1,465,296
2,504		7.75%,
2/15/10	2,648,073
1,100		West Corp., 11.00%, 10/15/16	1,152,250
350	3	Wind
Acquisition Finance S.A., 10.75%, 12/01/15 (Luxembourg)	389,375
		Windstream Corp.,
500		8.125%,
8/01/13	528,750
230		8.625%,
8/01/16	246,100
		Total Telecommunications	31,906,965
Transportation0.5%
115		American
Airlines, Inc., Ser. 99-1, 7.324%,4/15/11	113,563
110		Britannia
Bulk Plc, 11.00%, 12/01/11 (United Kingdom)	115,500
350		Canadian
National Railway Co., 6.25%, 8/01/34 (Canada)	352,778
405		CHC
Helicopter Corp., 7.375%, 5/01/14 (Canada)	391,837
500		Navios
Maritime Holdings, Inc., 9.50%, 12/15/14 (Marshall Islands)	528,750
360	3	St.
Acquisition Corp., 12.50%, 5/15/17	229,500
		Total
Transportation	1,731,928
		Total
Corporate Bonds	244,058,381
U.S. Government and Agency
Securities5.8%
1,670		Aid to
Israel, 5.50%, 4/26/24-9/18/33	1,753,313
1,050		Resolution
Funding Corp., Zero Coupon, 7/15/18-10/15/18	623,776
1,655		Tennessee
Valley Authority, Ser. C, 5.88%, 4/01/36	1,829,397
330		U.S.
Treasury Bonds, 4.75%, 2/15/37	329,820
5,832	2	U.S.
Treasury Inflation Protected Bond, 2.375%, 1/15/27	5,982,762
10,450	2	U.S.
Treasury Notes, 4.75%, 8/15/17	10,680,242
		Total U.S.
Government and Agency Securities	21,199,310
Foreign Government Bond0.4%
1,100		France,
3.75%, 4/25/17	1,522,816
Non-Agency Multiple Class Mortgage Pass-Through
Securities5.5%
1,600		Countrywide
Alternative Loan Trust, Ser. 64CB, Class 1A15, 5.50%, 12/25/35	1,504,462
2,755	1	CW Capital
Cobalt Ltd., Ser. C3, Class A4, 5.82%, 5/15/46	2,830,870
		First Union
National Bank Commercial Mortgage,
3,044		Ser. C3,
Class A3, 6.423%, 8/15/33	3,151,030
2,265		Ser. C4,
Class A2, 6.223%, 12/12/33	2,340,547
2,350		General
Motor Acceptance Corp. Commercial Mortgage Securities, Inc., Ser. C4, Class A2, 4.93%,7/10/39	2,308,750
960		JPMorgan
Chase Commercial Mortgage Securities Corp., Ser. LDP9, Class A3, 5.336%, 5/15/47	936,591
2,275	1	LB-UBS
Commercial Mortgage Trust, Ser. C6, Class A4, 5.858%, 7/15/40	2,304,488
925	1,7	Merrill
Lynch Mortgage Trust, Ser. C1, Class AM, 5.83%, 6/12/50	933,463
995	1	Morgan
Stanley Capital I, Ser. T27, Class A4, 5.651%, 6/11/42	999,692
2,305		Structured
Asset Securities Corp., Ser. AL1, Class A2, 3.45%, 2/25/32	1,977,073
995	1	Wachovia
Bank Commercial Mortgage Trust, Ser. C33, Class A4, 5.903%, 2/15/51	1,017,710
		Total Non-Agency
Multiple Class Mortgage Pass-Through Securities	20,304,676

Principal Amount (000)		Description	Value
Taxable Municipal Bond0.3%
$ 1,000		Illinois St. Pension, 5.10%, 6/01/33	$ 948,570
Trust Preferred Stocks3.3%
1,950	1	Allstate Corp., 6.50%, 5/15/57	1,890,800
545		BAC Capital Trust XI, 6.625%, 5/23/36	553,198
850	1,3,8	Barclays Bank Plc, 7.434% (United Kingdom)	901,035
915	1,3,8	Credit Agricole S.A., 6.637% (France)	869,590
1,550	1,8	Credit Suisse Ltd., 5.86% (Guernsey)	1,443,920
675	1	Lincoln National Corp., 6.05%, 4/20/67	646,921
790		Peco Energy Capital Trust IV, 5.75%, 6/15/33	672,418
605	1	Progressive Corp., 6.70%, 6/15/37	593,676
2,200	1,8	Royal Bank of Scotland Group Plc, Ser. MTN,
		7.64% (United Kingdom)	2,280,326
1,000	1,3,8	Societe Generale, 5.922% (France)	951,690
675	1	Travelers Cos., Inc., 6.25%, 3/15/67	655,470
675	1,3	ZFS Finance Trust I, 6.50%, 5/09/37	649,622
		Total Trust Preferred Stocks	12,108,666

Shares
Common Stocks0.0%
1,895	9,10	Critical Care Systems Intl., Inc.	11,826
Preferred Stocks0.4%
55,000		Deutsche Bank Contingent Capital Trust II, 6.55%	1,317,250
45,000	10	Superior Essex Holding Corp., Ser. A, 9.50%	27,900
		Total Preferred Stocks	1,345,150
		Total Long-Term Investments (cost $586,479,015)	584,484,025

		Description	Value
BORROWED BOND AGREEMENTS21.8%
		Lehman Brothers Inc.,
$ 50,927	12	4.47%, 11/08/07	$ 50,927,000
29,563	12	4.45%, 11/08/07	29,563,000
		Total Borrowed Bond Agreements
		(cost $80,490,000)	80,490,000

Notional Amount (000)
OUTSTANDING OPTIONS PURCHASED1.0%
3,880	EUR Put Option, strike price $1.40, expires 1/10/08	16,186
	Interest Rate Swaps,
6,600	Trust pays
3-month LIBOR, Trust receives 5.39%, expires 3/19/12	267,762
4,900	Trust pays
3-month LIBOR, Trust receives 5.52%, expires 9/21/36	289,016
7,600	Trust pays
3-month LIBOR, Trust receives 5.79%, expires 8/16/10	392,551
7,675	Trust pays
3-month LIBOR, Trust receives 6.025%, expires 6/08/12	471,859
7,675	Trust pays
3-month LIBOR, Trust receives 6.025%, expires 6/08/12	242,300
6,600	Trust pays
5.39%, Trust receives 3-month LIBOR, expires 3/19/12	322,872
11,200	Trust pays
5.47%, Trust receives 3-month LIBOR, expires 5/08/12	480,480
11,200	Trust pays
5.47%, Trust receives 3-month LIBOR, expires 5/08/12	523,600

| See Notes to Financial Statements. — 15 | ANNUAL
REPORT | OCTOBER 31, 2007 |
| --- | --- | --- |

| Portfolio of Investments as
of October 31, 2007 |
| --- |
| (Percentages shown are based
on Net Assets) |

Notional Amount (000)	Description	Value
OUTSTANDING
OPTIONS PURCHASED(contd)
4,900	Trust pays
5.52%, Trust receives 3-month LIBOR, expires 9/21/36	$ 332,459
7,600	Trust pays
5.79%, Trust receives 3-month LIBOR, expires 8/16/10	204,273
	Total Outstanding Options Purchased (cost $3,247,804)	3,543,358
	Total Investments before borrowed bonds, TBA sale commitments, and outstanding options written (cost $670,216,819 11 )	668,517,383

Principal Amount (000)
BORROWED BONDS(21.8)%
		U.S. Treasury Notes,
$ (50,800	)	4.00%, 8/31/09	(50,835,712	)
(29,600	)	4.125%, 8/31/12	(29,569,927	)
		Total
Borrowed Bonds
		(proceeds
$80,372,938)	(80,405,639	)
TBA SALE COMMITMENTS(1.3)%
(4,400	)	Federal National Mortgage
Assoc., 6.00%, 11/13/37	(4,431,627	)
(200	)	Government National Mortgage Assoc., 5.50%, 11/20/37	(198,750	)
		Total TBA
Sale Commitments (proceeds $4,627,832)	(4,630,377	)

Notional Amount (000)
OUTSTANDING
OPTIONS WRITTEN(0.4)%
		Interest Rate Swaps,
(5,300	)	Trust pays
3-month LIBOR, Trust receives 5.135%, expires 4/21/08	(90,551	)
(6,600	)	Trust pays
3-month LIBOR, Trust receives 5.148%, expires 3/19/08	(107,646	)
(4,500	)	Trust pays
3-month LIBOR, Trust receives 5.485%, expires 10/28/19	(132,205	)
(11,500	)	Trust pays
3-month LIBOR, Trust receives 5.67%, expires 1/04/10	(292,905	)
(6,600	)	Trust pays
5.115%, Trust receives 3-month LIBOR, expires 3/19/08	(107,316	)
(5,300	)	Trust pays
5.135%, Trust receives 3-month LIBOR, expires 4/21/08	(90,551	)
(4,500	)	Trust pays
5.485%, Trust receives 3-month LIBOR, expires 10/28/19	(176,797	)
(11,500	)	Trust pays
5.67%, Trust receives 3-month LIBOR, expires 1/04/10	(556,370	)
		Total Outstanding Options Written (premium received $2,261,545)	(1,554,341	)
Total Investments net of borrowed bonds, TBA sale commitments and outstanding options written158.0%			581,927,026
Liabilities in excess of other
assets(58.0)%			(213,591,799	)
Net Assets100%		$	368,335,227

| 1 | Variable rate security. Rate shown is interest rate as of
October 31, 2007. |
| --- | --- |
| 2 | Entire or partial principal amount pledged as collateral
for reverse repurchase agreements. See Note 4 in the Notes to Financial
Statements for details of open reverse repurchase agreements. |
| 3 | Security is not registered under the Securities Act of
1933. These securities may be resold in transactions in accordance with Rule
144A under that Act, to qualified institutional buyers. As of October 31,
2007, the Trust held 9.9% of its net assets, with a current market value of
$36,518,999, in securities restricted as to resale. |
| 4 | Security, or a portion thereof, pledged as collateral with
a value of $4,615,550 on 134 long Eurodollar futures contracts expiring
December 2007 to March 2008, 198 long U.S. Treasury Note futures contracts
expiring December 2007, 1,153 long U.S. Treasury Bond futures contracts
expiring December 2007, 163 short Eurodollar futures contracts expiring
December 2007, 3,130 short U.S. Treasury Note futures contracts expiring
December 2007 and 224 short U.S. Treasury Note futures contracts expiring
December 2007. The notional value of such contracts on October 31, 2007 was
$243,902,499, with an unrealized loss of $519,568. |
| 5 | Illiquid security. As of October 31, 2007, the Trust held
0.6% of its net assets, with a current market value of $2,148,367, in these
securities. |
| 6 | Represents a step up bond; the interest rate shown
reflects the effective yield at the time of purchase. |
| 7 | Represents an investment in an affiliate. |
| 8 | The security is a perpetual bond and has no stated
maturity date. |
| 9 | Non-income producing security. |
| 10 | Security is fair valued. |
| 11 | Cost for federal income tax
purposes is $671,388,702. The net unrealized depreciation on a tax basis is
$2,871,319, consisting of $6,742,797 gross unrealized appreciation and
$9,614,116 gross unrealized depreciation. |
| 12 | See Note 1 in the Notes to
Financial Statements for details of borrowed bond agreements. |
| For Trust compliance purposes, the Trusts sector and
industry classifications refer to any one or more of the Standard Industry
Codes as defined by the SEC. This definition may not apply for purposes of
this report, which may combine sector and industry sub-classifications for
reporting ease. | |

See Notes to Financial Statements.

ANNUAL REPORT OCTOBER 31, 2007 16

| Portfolio of Investments as
of October 31, 2007 |
| --- |
| (Percentages shown are based
on Net Assets) |

Principal Amount (000)		Description	Value
LONG-TERM
INVESTMENTS116.2%
Corporate
Bonds110.2%
Aerospace
& Defense3.0%
		AAR Corp.,
$ 330		6.875%,
12/15/07	$ 330,000
350	1	Ser. A2,
8.39%, 5/15/11	353,500
100	2	Bombardier, Inc., 8.00%, 11/15/14 (Canada)	104,000
410		DI Finance/DynCorp Intl., Ser. B, 9.50%, 2/15/13	435,625
		DRS Technologies, Inc.,
40		6.875%,
11/01/13	40,000
100		7.625%,
2/01/18	102,250
20		L-3 Communications Corp., 5.875%, 1/15/15	19,500
40		Sequa Corp., 9.00%, 8/01/09	42,900
100		TransDigm, Inc., 7.75%, 7/15/14	101,750
		Total Aerospace & Defense	1,529,525
Automotive5.0%
85		Accuride Corp., 8.50%, 2/01/15	79,900
185	2	Allison Transmission, 11.25%, 11/01/15	182,456
60		Asbury Automotive Group, Inc., 7.625%, 3/15/17	56,100
		AutoNation, Inc.,
90		7.00%,
4/15/14	87,075
80	3	7.243%,
4/15/13	78,200
520		Ford Capital BV, 9.50%, 6/01/10 (Netherlands)	523,900
125		Ford Motor Co., 8.90%, 1/15/32	110,313
		Goodyear Tire & Rubber Co. (The),
40		7.857%,
8/15/11	41,400
156		8.625%,
12/01/11	166,140
195		Lear Corp., Ser. B, 8.75%, 12/01/16	187,200
255		Metaldyne Corp., 10.00%, 11/01/13	237,150
180		Penske Auto Group, Inc., 7.75%, 12/15/16	175,050
250		Rent-A-Center, Inc., 7.50%, 5/01/10	238,750
350		Stanadyne Corp., 10.00%, 8/15/14	355,250
		Total Automotive	2,518,884
Basic
Materials11.1%
185		AK Steel Corp., 7.75%, 6/15/12	188,700
		Abitibi-Consolidated, Inc., (Canada)
165		6.00%,
6/20/13	121,275
35		8.85%,
8/01/30	25,900
205		Alpha
Natural Resources LLC/Alpha Natural Resources Capital Corp., 10.00%, 6/01/12	218,325
140		American Pacific Corp., 9.00%, 2/01/15	143,500
115		Bowater Finance Corp., 7.95%, 11/15/11 (Canada)	98,613
130	3	Bowater, Inc., 8.694%, 3/15/10	118,950
150		CPG Intl. I, Inc., 10.50%, 7/01/13	150,000
175		Cascades, Inc., 7.25%, 2/15/13 (Canada)	169,750
120		Catalyst Paper Corp., 7.375%, 3/01/14 (Canada)	87,900
50		Chemtura Corp., 6.875%, 6/01/16	47,750
40		Domtar, Inc., 7.125%, 8/15/15 (Canada)	39,600
		Equistar Chemicals LP/Equistar Funding Corp.,
66		10.125%,
9/01/08	68,145
57		10.625%,
5/01/11	59,565
		FMG Finance Ltd. (Australia)
85	2	10.00%,
9/01/13	93,925
120	2	10.625%,
9/01/16	142,200
		Freeport-McMoRan Copper & Gold, Inc.,
550		8.375%,
4/01/17	602,250
180	3	8.394%,
4/01/15	185,850
		Huntsman LLC,
95		11.50%,
7/15/12	103,312
365		11.625%,
10/15/10	386,900
205	2	Ineos Group
Holdings Plc, 8.50%, 2/15/16 (United Kingdom)	194,750
545		Innophos, Inc., 8.875%, 8/15/14	549,087

Principal Amount (000)		Description	Value
Basic
Materials(contd)
$ 70	2	Key Plastics LLC/Key Plastics Finance Corp.,
		11.75%,
3/15/13	$ 59,500
260		Lyondell Chemical Co., 10.50%, 6/01/13	280,150
265	2	MacDermid, Inc., 9.50%, 4/15/17	253,075
		NewPage Corp.,
450		10.00%,
5/01/12	475,875
210		12.00%,
5/01/13	226,800
105	3	NOVA Chemicals Corp., 8.484%, 11/15/13 (Canada)	103,163
125		Russel Metals, Inc., 6.375%, 3/01/14 (Canada)	118,750
		Ryerson, Inc.,
100	2	12.00%,
11/01/15	102,750
60	2,3	12.574%,
11/01/14	61,200
80	2	Steel Dynamics, Inc., 7.375%, 11/01/12	80,000
85		Terra Capital, Inc., Ser. B, 7.00%, 2/01/17	85,000
		Total Basic Materials	5,642,510
Building
& Development1.9%
40	3	Ainsworth Lumber Co. Ltd., 8.981%, 10/01/10 (Canada)	30,250
		Goodman Global Holding Co., Inc.,
160		7.875%,
12/15/12	167,200
32	3	8.36%,
6/15/12	32,160
250		K. Hovnanian Enterprises, Inc., 6.25%, 1/15/15	192,500
100		Masonite Intl. Corp., 11.00%, 4/06/15 (Canada)	84,500
110		Nortek, Inc., 8.50%, 9/01/14	97,350
335		North American Energy Partners, Inc.,
		8.75%,
12/01/11 (Canada)	338,350
		Total Building & Development	942,310
Commercial
Services0.7%
100		FTI Consulting, Inc., 7.75%, 10/01/16	104,500
145	2	Quebecor World, Inc., 9.75%, 1/15/15 (Canada)	141,375
100	2	U.S. Investigations Services, Inc., 10.50%, 11/01/15	95,250
		Total Commercial Services	341,125
Consumer
Products6.9%
265	3	Ames True Temper, Inc., 9.243%, 1/15/12	254,400
20	3	Avis Budget Car Rental LLC/Avis Budget Finance, Inc.,
		8.058%,
5/15/14	19,750
70	2	Bausch & Lomb, Inc., 9.875%, 11/01/15	72,100
50	2	Beverages & More, Inc., 9.25%, 3/01/12	51,500
130		Buffets, Inc., 12.50%, 11/01/14	84,175
		General Nutrition Centers, Inc.,
280	3	10.009%,
3/15/14	269,500
250		10.75%,
3/15/15	243,125
150		Jarden Corp., 7.50%, 5/01/17	142,500
475		Lazy Days RV Center, Inc., 11.75%, 5/15/12	427,500
		Michaels Stores, Inc.,
260		10.00%,
11/01/14	261,950
330		11.375%,
11/01/16	329,175
20		Neiman-Marcus Group, Inc., 9.00%, 10/15/15	21,100
265		Pantry, Inc. (The), 7.75%, 2/15/14	258,375
100		Quiksilver, Inc., 6.875%, 4/15/15	93,250
120		Reynolds American, Inc., 7.625%, 6/01/16	129,830
		Rite Aid Corp.,
400		7.50%,
3/01/17	372,000
80	2	9.375%,
12/15/15	73,800
		Sally Holdings LLC,
35		9.25%,
11/15/14	35,175
270		10.50%,
11/15/16	268,650
110		Yankee Acquisition Corp., Ser. B, 9.75%, 2/15/17	101,750
		Total Consumer Products	3,509,605
Containers
& Packaging3.3%
		Berry Plastics Holding Corp.,
340		8.875%,
9/15/14	348,500
100	3	9.569%,
9/15/14	100,250
85		Crown Americas LLC/Crown Americas Capital Corp.,
		7.75%,
11/15/15	87,550

See Notes to Financial Statements.

17 ANNUAL REPORT OCTOBER 31, 2007

| Portfolio of Investments as
of October 31, 2007 |
| --- |
| (Percentages shown are based
on Net Assets) |

Principal Amount (000)		Description	Value
Containers
& Packaging(contd)
$ 110		Graham Packaging Co., Inc., 8.50%, 10/15/12	$ 109,175
30		Graphic Packaging Intl. Corp., 9.50%, 8/15/13	31,500
270	2,3	Impress Holdings BV, 8.368%, 9/15/13 (Netherlands)	268,584
310		Pregis Corp., 12.375%, 10/15/13	337,900
375		Smurfit-Stone Container Enterprises, Inc.,
		8.00%,
3/15/17	372,656
		Total Containers & Packaging	1,656,115
Ecological
Services & Equipment0.8%
270		Aleris Intl., Inc., 9.00%, 12/15/14	243,675
185		Waste Services, Inc., 9.50%, 4/15/14	185,000
		Total Ecological Services & Equipment	428,675
Energy15.9%
130		AES Red Oak LLC, Ser. A, 8.54%, 11/30/19	139,162
80		Berry Petroleum Co., 8.25%, 11/01/16	81,600
100		Chaparral Energy, Inc., 8.50%, 12/01/15	93,250
		Chesapeake Energy Corp.,
90		6.375%,
6/15/15	87,300
250		6.625%,
1/15/16	245,000
20		6.875%,
11/15/20	19,550
		Compagnie Generale de Geophysique-Veritas (France)
50		7.50%,
5/15/15	51,000
80		7.75%,
5/15/17	82,400
115		Compton Petroleum Finance Corp.,
		7.625%,
12/01/13 (Canada)	110,113
70		Copano Energy LLC, 8.125%, 3/01/16	71,925
407	2,3	Corral Finans AB, 6.855%, 4/15/10 (Sweden)	384,865
30		Denbury Resources, Inc., 7.50%, 12/15/15	30,450
260	1	East Cameron
Gas Co., 11.25%, 7/09/19 (Cayman Islands)	249,600
480		Elwood Energy LLC, 8.159%, 7/05/26	492,337
		Encore Acquisition Co.,
40		6.00%,
7/15/15	36,200
30		7.25%,
12/01/17	28,725
475	2	Energy Future Holdings, 11.25%, 11/01/17	480,937
370		Exco Resources, Inc., 7.25%, 1/15/11	365,375
190	2	Forest Oil Corp., 7.25%, 6/15/19	190,000
65		Frontier Oil Corp., 6.625%, 10/01/11	64,675
50		Grant Prideco, Inc., Ser. B, 6.125%, 8/15/15	50,250
97		Homer City Funding LLC, 8.734%, 10/01/26	107,670
5		Hornbeck Offshore Services, Inc., 6.125%, 12/01/14	4,763
440		KCS Energy, Inc., 7.125%, 4/01/12	433,400
96		Midwest Generation LLC, Ser. B, 8.56%, 1/02/16	103,203
350		Mirant Americas Generation LLC, 8.30%, 5/01/11	353,937
30		Newfield Exploration Co., 6.625%, 9/01/14	29,475
		NRG Energy, Inc.,
130		7.25%,
2/01/14	130,000
385		7.375%,
2/01/16	384,037
440	2	OPTI, Inc., 8.25%, 12/15/14 (Canada)	441,100
345		Orion Power Holdings, Inc., 12.00%, 5/01/10	381,225
185		Range Resources Corp., 7.375%, 7/15/13	188,237
130		Sabine Pass LNG LP, 7.50%, 11/30/16	127,400
210	2	SemGroup LP, 8.75%, 11/15/15	201,600
40		Sithe Independence Funding, Ser. A, 9.00%, 12/30/13	42,349
200	2	Targa Resources, Inc., 8.50%, 11/01/13	202,000
160		Tennessee Gas Pipeline Co., 8.375%, 6/15/32	186,512
450	2	Texas Competitive Electric Holdings Co. LLC,
		10.25%,
11/01/15	452,250
400		Transcontinental Gas Pipe Line Corp., Ser. B,
		8.875%,
7/15/12	449,000
495		Whiting Petroleum Corp., 7.25%, 5/01/12-5/01/13	486,963
		Total Energy	8,059,835

Principal Amount (000)		Description	Value
Entertainment
& Leisure4.8%
$ 150		AMC Entertainment, Inc., 11.00%, 2/01/16	$ 162,375
125	2	French Lick
Resorts & Casino LLC/French Lick Resorts & Casino Corp., 10.75%, 4/15/14	99,375
		Gaylord Entertainment Co.,
280		6.75%,
11/15/14	271,600
40		8.00%, 11/15/13	40,700
320	2	Great Canadian Gaming Corp., 7.25%, 2/15/15 (Canada)	318,400
185	2	Greektown Holdings LLC, 10.75%, 12/01/13	184,075
210		Harrahs Operating Co., Inc., 5.75%, 10/01/17	154,875
60		MGM Mirage, 6.75%, 9/01/12	59,100
200	2	Pinnacle Entertainment, Inc., 7.50%, 6/15/15	193,000
115		Riddell Bell Holdings, Inc., 8.375%, 10/01/12	110,400
140		Seneca Gaming Corp., Ser. B, 7.25%, 5/01/12	141,050
140	2	Shingle Springs Tribal Gaming Authority, 9.375%, 6/15/15	140,700
50		Station Casinos, Inc., 6.625%, 3/15/18	39,625
60	3	Travelport LLC, 10.246%, 9/01/14	60,300
435		Virgin River Casino, 9.00%, 1/15/12	411,075
70		Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp.,
		6.625%,
12/01/14	68,775
		Total Entertainment & Leisure	2,455,425
Financial
Institutions10.6%
500		AES Red Oak LLC, Ser. B, 9.20%, 11/30/29	568,750
300	2	Alliant Holdings I, Inc., 11.00%, 5/01/15	288,750
		American Real Estate Partners LP/American Real Estate
		Finance Corp.,
185		7.125%,
2/15/13	180,375
300		8.125%,
6/01/12	302,250
112	2,3	BMS Holdings, Inc., 12.40%, 2/15/12	107,084
500	2	Dow Jones CDX HY, Ser. 6-T1, 8.625%, 6/29/11	528,050
		Ford Motor Credit Co. LLC,
500		7.80%,
6/01/12	469,787
110	3	7.993%,
1/13/12	101,835
40		General Motors Acceptance Corp. LLC, 8.00%, 11/01/31	36,973
		Hexion U.S. Finance Corp./Hexion Nova Scotia Finance ULC,
75		9.75%,
11/15/14	82,312
100	3	10.058%,
11/15/14	103,500
442	2	iPayment Investors LP, 11.625%, 7/15/14	455,155
120		iPayment, Inc., 9.75%, 5/15/14	115,200
		LVB Acquisition Merger Sub, Inc.,
75	2	10.00%,
10/15/17	77,063
75	2	10.375%,
10/15/17	75,938
100	2	11.625%,
10/15/17	101,875
		Momentive Performance Materials, Inc.,
175	2	9.75%,
12/01/14	170,625
40	2	10.125%,
12/01/14	38,600
285	2	11.50%,
12/01/16	275,025
70	2	NSG Holdings LLC/NSG Holdings, Inc., 7.75%, 12/15/25	69,300
220	2,3	PNA Intermediate Holding Corp., 12.36%, 2/15/13	216,150
		Rainbow National Services LLC,
310	2	8.75%,
9/01/12	322,400
318	2	10.375%,
9/01/14	349,800
100	2,3	USI Holdings Corp., 9.433%, 11/15/14	93,000
30	3	Universal City Florida Holding Co. I/II, 9.661%, 5/01/10	30,675
300	2	Wimar Opco LLC/Wimar Opco Finance Corp.,
		9.625%,
12/15/14	225,000
		Total Financial Institutions	5,385,472
Health
Care3.7%
165		Accellent, Inc., 10.50%, 12/01/13	155,512
180	3	Angiotech Pharmaceuticals, Inc.,
		9.371%,
12/01/13 (Canada)	178,200
140	2	Community Health Systems, Inc., 8.875%, 7/15/15	141,750
100		Cooper Cos., Inc. (The), 7.125%, 2/15/15	99,000
135		Norcross Safety Products LLC/Norcross Capital Corp.,
		9.875%,
8/15/11	140,063
150	2	PTS Acquisition Corp., 9.50%, 4/15/15	144,750

See Notes to Financial Statements.

ANNUAL REPORT OCTOBER 31, 2007 18

| Portfolio of Investments as
of October 31, 2007 |
| --- |
| (Percentages shown are based
on Net Assets) |

Principal Amount (000)		Description	Value
Health
Care(contd)
		Tenet Healthcare Corp.,
$ 615		6.50%,
6/01/12	$ 521,212
50		9.875%,
7/01/14	45,500
230		United Surgical Partners Intl., Inc., 8.875%, 5/01/17	234,600
		Universal Hospital Services, Inc.,
50	2	8.50%,
6/01/15	50,875
50	2,3	8.759%,
6/01/15	50,125
115	2	Viant Holdings, Inc., 10.125%, 7/15/17	108,100
		Total Health Care	1,869,687
Industrials3.9%
200	2	AGY Holding Corp., 11.00%, 11/15/14	197,000
30	2	Blaze Recycling & Metals LLC/Blaze Finance Corp.,
		10.875%,
7/15/12	30,000
		Harland Clarke Holdings Corp.,
60		9.50%, 5/15/15	54,600
50	3	10.308%,
5/15/15	45,000
80		Hexcel Corp., 6.75%, 2/01/15	78,600
200		Leucadia National Corp., 8.125%, 9/15/15	201,750
85		Park-Ohio Industries, Inc., 8.375%, 11/15/14	79,263
		RBS Global, Inc./Rexnord Corp.,
85		8.875%,
9/01/16	86,062
340		9.50%,
8/01/14	351,050
280		11.75%,
8/01/16	296,800
510	2	Sunstate Equipment Co. LLC, 10.50%, 4/01/13	489,600
55		Terex Corp., 7.375%, 1/15/14	55,275
		Total Industrials	1,965,000
Media12.1%
		Affinion Group, Inc.,
215		10.125%,
10/15/13	224,137
175		11.50%,
10/15/15	182,437
35		American Media Operations, Inc., Ser. B, 10.25%, 5/01/09	33,513
80	2	Bonten Media Acquisition Co., 9.00%, 6/01/15	73,500
290		CMP Susquehanna Corp., 9.875%, 5/15/14	266,437
45		CSC Holdings, Inc., Ser. B, 7.625%, 4/01/11	44,888
175	3	Cablevision Systems Corp., Ser. B, 9.644%, 4/01/09	179,812
60		CanWest MediaWorks, Inc., 8.00%, 9/15/12 (Canada)	58,500
270		Charter Communications Holdings I LLC/Charter
		Communications Holdings I Capital Corp.,
		11.00%,
10/01/15	261,575
		Charter Communications Holdings II LLC/Charter
		Communications Holdings II Capital Corp.,
810		10.25%, 9/15/10	826,200
75		Ser. B,
10.25%, 9/15/10	76,313
50		Dex Media West LLC/Dex Media Finance Co., Ser. B,
		9.875%,
8/15/13	53,313
125		DirecTV Holdings LLC/DirecTV Financing Co.,
		8.375%,
3/15/13	130,625
		EchoStar DBS Corp.,
200		7.00%,
10/01/13	208,250
260		7.125%,
2/01/16	271,700
125	2,3	ION Media Networks, Inc., 8.493%, 1/15/12	125,313
320		Idearc, Inc., 8.00%, 11/15/16	320,800
290		Network Communications, Inc., 10.75%, 12/01/13	291,812
325		Nexstar Finance, Inc., 7.00%, 1/15/14	312,000
		Nielsen Finance LLC/Nielsen Finance Co.,
170	4	9.115%,
8/01/16	122,825
445		10.00%,
8/01/14	468,362
35	2	Quebecor Media, Inc., 7.75%, 3/15/16 (Canada)	33,775
		RH Donnelley Corp.,
100	2	8.875%,
10/15/17	100,000
275		Ser. A-3,
8.875%, 1/15/16	275,000
590	2	TL Acquisitions, Inc., 10.50%, 1/15/15	587,050
180	2	Univision Communications, Inc., 9.75%, 3/15/15	176,400
280		Vertis, Inc., 9.75%, 4/01/09	280,000
175		Young Broadcasting, Inc., 10.00%, 3/01/11	164,500
		Total Media	6,149,037

Principal Amount (000)		Description	Value
Real
Estate1.4%
		Realogy Corp.,
$ 240	2	10.50%,
4/15/14	$ 199,500
380	2	11.00%,
4/15/14	309,700
265	2	12.375%,
4/15/15	193,450
		Total Real Estate	702,650
Technology6.3%
		Amkor Technology, Inc.,
40		7.75%,
5/15/13	38,700
235		9.25%,
6/01/16	240,288
60		Belden, Inc., 7.00%, 3/15/17	60,900
350		Celestica, Inc., 7.625%, 7/01/13 (Canada)	336,000
180		Coleman Cable, Inc., 9.875%, 10/01/12	177,300
430	2	First Data Corp., 9.875%, 9/24/15	411,725
530		Freescale Semiconductor, Inc., 9.125%, 12/15/14	479,650
		NXP BV/NXP Funding LLC (Netherlands)
125	3	7.993%,
10/15/13	118,438
150		9.50%,
10/15/15	141,750
190		Sanmina-SCI Corp., 8.125%, 3/01/16	166,725
190	2,3	Spansion, Inc., 8.746%, 6/01/13	180,025
		SunGard Data Systems, Inc.,
85		9.125%,
8/15/13	86,700
465		10.25%,
8/15/15	484,762
305		Superior Essex Communications LLC/Essex Group, Inc.,
		9.00%,
4/15/12	301,187
		Total Technology	3,224,150
Telecommunications16.6%
2,000	5	Asia Global Crossing Ltd., 13.375%, 10/15/10 (Bermuda)	180,000
		Centennial Communications Corp.,
455		8.125%,
2/01/14	464,100
220	3	10.981%,
1/01/13	226,600
405		Cincinnati Bell, Inc., 7.25%, 7/15/13	406,012
		Cricket Communications, Inc.,
115		9.375%,
11/01/14	114,138
230	2	9.375%,
11/01/14	228,275
		Digicel Group Ltd. (Bermuda)
130	2	8.875%,
1/15/15	121,394
394	2	9.125%,
1/15/15	368,276
260		Dobson Cellular Systems, Inc., 8.375%, 11/01/11	275,600
100	3	Hawaiian Telcom Communications, Inc., Ser. B,
		10.318%,
5/01/13	101,250
90	3	iPCS, Inc., 7.036%, 5/01/13	87,750
320		Intelsat Corp., 9.00%, 6/15/16	327,200
40		Intelsat Intermediate Holding Co. Ltd.,
		9.25%,
2/01/15 (Bermuda)	32,900
		Intelsat Ltd. (Bermuda)
295	3	8.886%,
1/15/15	299,425
150		9.25%,
6/15/16	155,625
70		11.25%,
6/15/16	75,250
320	3	11.409%,
6/15/13	333,600
245		Intelsat Subsidiary Holding Co. Ltd.,
		8.625%,
1/15/15 (Bermuda)	248,675
565	2	MetroPCS Wireless, Inc., 9.25%, 11/01/14	560,763
445	2	Nordic Telephone Co. Holdings A.p.S.,
		8.875%,
5/01/16 (Denmark)	470,587
245	2,3	Nortel Networks Ltd., 9.493%, 7/15/11 (Canada)	241,938
		PanAmSat Corp.,
210		6.875%,
1/15/28	177,450
270		9.00%,
8/15/14	275,400
394	2,3	ProtoStar I Ltd., 12.50%, 10/15/12 (Bermuda)	413,758
		Qwest Corp.,
600		7.875%,
9/01/11	633,000
230	3	8.944%,
6/15/13	245,237
		West Corp.,
125		9.50%,
10/15/14	128,438
475		11.00%,
10/15/16	497,562

See Notes to Financial Statements.

19 ANNUAL REPORT OCTOBER 31, 2007

| Portfolio of Investments as of October 31,
2007 |
| --- |
| (Percentages shown are based on Net Assets) |

Principal Amount (000)		Description	Value
Telecommunications(contd)
$ 375	2	Wind Acquisition Finance S.A., 10.75%,
		12/01/15 (Luxembourg)	$ 417,187
		Windstream Corp.,
200		8.125%, 8/01/13	211,500
120		8.625%, 8/01/16	128,400
		Total Telecommunications	8,447,290
Transportation2.2%
95		American Airlines, Inc., Ser. 99-1, 7.324%,
4/15/11	93,813
60		Britannia Bulk Plc, 11.00%, 12/01/11 (United
Kingdom)	63,000
170		CHC Helicopter Corp., 7.375%, 5/01/14 (Canada)	164,475
320		Navios Maritime Holdings, Inc., 9.50%, 12/15/14 (Marshall Islands)	338,400
350		Overseas Shipholding Group, Inc., 7.50%,
2/15/24	342,125
200	2	St. Acquisition Corp., 12.50%, 5/15/17	127,500
		Total Transportation	1,129,313
		Total Corporate Bonds	55,956,608
Bank Loans5.2%
325		Affinion Group, Inc., LIBOR + 6.25%, 3/01/12	315,792
50		Rexnord Holdings, Inc., LIBOR + 6.25%, 3/02/13	46,814
50		Riverdeep Interactive Learning USA, Inc., LIBOR + 7.20%, 12/19/14	49,337
252		Rotech Healthcare, LIBOR + 6.00%, 9/26/11	244,105
430		ServiceMaster Co. (The), LIBOR + 4.50%, 6/19/08	397,212
85		Spectrum Brands, Inc., LIBOR + 4.00% , 4/15/13	83,741
750		Texas Competitive Electric Holdings Co. LLC, LIBOR + 3.50%, 10/10/14	749,785
394		Travelport Holdco, LIBOR + 7.00%, 3/22/12	379,314
400		Verso Paper Finance Holdings LLC, LIBOR + 6.25%, 2/01/13	389,000
		Total Bank Loans	2,655,100

Shares
Common Stocks0.8%
4,737	1,6	Critical Care Systems Intl., Inc.	29,606
14,992	1,6	Mattress Discounters Corp.
68,358	6	Neon Communications Group, Inc.	352,044
		Total Common Stocks	381,650
Preferred
Stock0.0%
40,000	1	Superior Essex Holding Corp., Ser. A, 9.50%	24,800

Units (000)
Warrants0.0%
54	1,2,7	Neon Communications, Inc., expires 12/02/12	1
	1,2,6,7	PF. Net Communications, Inc., expires 5/15/10,
		strike price $0.01, 36.87243 shares
for 1 warrant
		Total Warrants	1
		Total Long-Term Investments
		(cost $62,270,501)	59,018,159

Principal Amount (000)		Description	Value
SHORT-TERM INVESTMENT1.2%
U.S. Government and Agency Discount
Notes1.2%
$ 600	8	Federal Home Loan Bank Disc.
Notes,
		4.401%,
11/01/07 (cost $600,000)	$ 600,000
Total
Investments117.4% (cost $62,870,501 9 )			59,618,159
Liabilities in
excess of other assets(17.4)%			(8,835,903	)
Net Assets100%			$ 50,782,256

1	Security is fair valued.
2	Security is not registered under
the Securities Act of 1933. These securities may be resold in transactions in
accordance with Rule 144A under that Act, to qualified institutional buyers.
As of October 31, 2007, the Trust held 30.1% of its net assets, with a
current market value of $15,307,398, in securities restricted as to resale.
3	Variable rate security. Rate
shown is interest rate as of October 31, 2007.
4	Represents a step up bond; the
interest rate shown reflects the effective yield at the time of purchase.
5	Issuer is in default and/or
bankruptcy.
6	Non-income producing security.
7	Illiquid security. As of October
31, 2007, the Trust held less than 0.1% of its net assets, with a current
market value of $1, in these securities.
8	Rate shown is the yield to
maturity as of the date of purchase.
9	Cost for federal income tax
purposes is $62,884,976. The net unrealized depreciation on a tax basis is
$3,266,817, consisting of $1,051,387 gross unrealized appreciation and
$4,318,204 gross unrealized depreciation.

For Trust compliance purposes, the Trusts sector and industry classifications refer to any one or more of the Standard Industry Codes as defined by the SEC. This definition may not apply for purposes of this report, which may combine sector and industry sub-classifications for reporting ease.

See Notes to Financial Statements.

ANNUAL REPORT OCTOBER 31, 2007 20

| Portfolio of Investments as of October 31,
2007 |
| --- |
| (Percentages shown are based on Net Assets) |

Principal Amount (000)		Description
LONG-TERM INVESTMENTS167.7%
Mortgage Pass-Through Securities60.2%
$ 5,047	1	Citigroup Mortgage Loan Trust, Inc., Ser. 4, Class A, 5.345%, 8/25/35	$ 4,923,530
		Federal Home Loan Mortgage Corp.,
651	1	4.207%, 1/01/35	661,712
1,455	1,2	5.067%, 1/01/35	1,436,926
4,000		TBA, 5.50%, 12/12/37	3,935,000
		Federal National Mortgage Assoc.,
498		5.00%, 1/01/37-4/01/37	477,395
13,179	2	5.00%, 7/01/35	12,661,887
13,497		5.50%, 12/01/13-5/18/35	13,465,940
335	3	5.50%, 12/01/32	331,440
6,848	2,3	5.50%, 1/01/33	6,769,130
14,910	2	5.50%, 7/01/16-6/01/36	14,806,796
747		6.00%, 3/01/16-1/01/37	760,348
897	2	6.00%, 6/01/37	903,619
89		7.00%, 2/01/24-8/01/36	92,148
115,700		TBA, 5.50%, 12/01/99	114,000,598
30,300		TBA, 6.00%, 11/13/37-12/12/37	30,491,251
17,400		TBA, 6.50%, 12/12/37	17,786,071
97		Government National Mortgage Assoc., 8.00%, 4/15/24-6/15/25	103,077
5,168	1	GSR Mortgage Loan Trust, Ser. AR4, Class 6A1, 5.25%, 7/25/35	5,025,408
		Total Mortgage Pass-Through Securities	228,632,276
Federal Housing
Administration Securities1.0%
		General Motors Acceptance Corp. Projects,
190		Ser. 37, 7.43%, 5/01/22	191,819
77		Ser. 44, 7.43%, 8/01/22	77,296
		Merrill Projects,
50	4	Ser. 29, 7.43%, 10/01/20	50,662
49	4	Ser. 42, 7.43%, 9/01/22	49,745
1,715		Reilly Project, Ser. B-11, 7.40%, 4/01/21	1,732,569
1,710		Westmore Project, 7.25%, 4/01/21	1,726,757
		Total Federal Housing Administration Securities	3,828,848
Agency Multiple Class
Mortgage Pass-Through Securities6.5%
		Federal Home Loan Mortgage Corp.,
	1	Ser. 192, Class U, 1,009.033%,
2/15/22	4
		Ser. 1057, Class J, 1,008.001%,
3/15/21	740
3,156		Ser. 2806, Class VC, 6.00%,
12/15/19	3,208,113
6,000		Ser. 2874, Class BC, 5.00%,
10/15/19	5,832,895
1,390		Ser. 2883, Class DR, 5.00%,
11/15/19	1,344,446
1,725		Ser. 2968, Class EG, 6.00%,
10/15/34	1,749,053
7,182		Ser. 3174, Class PZ, 5.00%,
1/15/36	6,420,018
		Federal National Mortgage Assoc.,
2,858		Ser. 5, Class PK, 5.00%,
12/25/34	2,850,583
		Ser. 33, Class PV, 1,078.42%,
10/25/21	9,533
1,571	1	Ser. 118, Class FD, 5.273%,
12/25/33	1,559,544
1,525		Government National Mortgage Assoc., Ser. 65, Class VA, 6.00%, 6/20/15	1,554,302
		Total Agency Multiple Class Mortgage Pass-Through Securities	24,529,231
Non-Agency Multiple
Class Mortgage Pass-Through Securities7.5%
1,700		Countrywide Alternative Loan Trust, Ser. 64CB, Class 1A15, 5.50%, 12/25/35	1,598,490
3,025	1	CW Capital Cobalt Ltd., Ser. C3, Class A4, 5.82%, 5/15/46	3,108,306
2,369		Donaldson, Lufkin & Jenrette Commercial Mortgage
Corp., Class A 1B, 7.18%, 11/10/33	2,478,743
2,630		First Union-Lehman Brothers-Bank of America, Ser. C2, Class D, 6.778%, 11/18/35	2,786,483

Principal Amount (000)		Description	Value
Non-Agency Multiple Class Mortgage
Pass-Through Securities(contd)
$ 2,310		GE Capital Commercial Mortgage Corp., Ser. 1A, Class A3, 6.269%, 12/10/35	$ 2,394,614
2,580		General Motor Acceptance Corp. Commercial Mortgage Securities, Inc., Ser. C4, Class A2, 4.93%, 7/10/39	2,534,713
1,065		JPMorgan Chase Commercial Mortgage Securities Corp., Ser. LDP9, Class A3, 5.336%, 5/15/47	1,039,030
2,500	1	LB-UBS Commercial Mortgage Trust, Ser. C6, Class A4, 5.858%, 7/20/40	2,532,404
1,105	1	Morgan Stanley Capital I, Ser. T27, Class A4, 5.651%, 6/11/42	1,110,211
7,077		Residential Funding Securities Corp., Ser. RM2, Class AI5, 8.50%, 5/25/33	7,557,206
2	1,5,6	Summit Mortgage Trust, Ser. 1, Class B1, 6.611%, 12/28/12	2,055
1,105	1	Wachovia Bank Commercial Mortgage Trust, Ser. C33, Class A4, 5.903%, 2/15/51	1,130,221
300	1	Wells Fargo Mortgage Backed Securities Trust, Ser. AR4, Class 2A4, 5.774%, 4/25/36	292,254
		Total Non-Agency Multiple Class Mortgage Pass-Through Securities	28,564,730
Inverse Floating Rate
Mortgage Securities0.4%
		Federal Home Loan Mortgage Corp.,
7	1	Ser. 1043, Class H, 21.938%,
2/15/21	6,728
	1	Ser. 1148, Class E, 592.552%,
10/15/21	254
401	1	Ser. 1611, Class JC, 10.00%,
8/15/23	415,923
		Federal National Mortgage Assoc.,
	1	Ser. 7, Class S, 594.704%,
3/25/21	3,020
	1	Ser. 10, Class S, 575.455%,
5/25/21	9,122
	1	Ser. 12, Class S, 608.135%,
5/25/21	7,929
	1	Ser. 17, Class S, 580.114%,
6/25/21	4,623
970	1	Ser. 23, Class PS, 9.565%,
4/25/23	997,875
	1	Ser. 46, Class S, 1,402.625%,
5/25/21	3,397
	1	Ser. 49, Class S, 527.80%,
12/25/21	1,620
54	1	Ser. 87, Class S, 13.764%,
8/25/21	66,182
		Total Inverse Floating Rate Mortgage Securities	1,516,673
Asset-Backed
Securities11.6%
1,171	1	Ameriquest Mortgage Securities, Inc., Ser. R11, Class A1, 5.175%, 11/25/34	1,130,435
3,025		Capital Auto Receivables Asset Trust, Ser. 1, Class
A3, 5.03%, 10/15/09	3,023,858
		Chase Issuance Trust,
2,600		Ser. A17, Class A, 5.12%,
10/15/14	2,617,368
2,650	1	Ser. A3, 5.081%, 7/15/11	2,642,849
3,100		Chase Manhattan Auto Owner Trust, Ser. B, Class
A4, 4.88%, 6/15/12	3,101,824
3,125		Citibank Credit Card Issuance Trust, Ser. A2, Class
A2, 4.85%, 2/10/11	3,126,616
251	1	Countrywide Asset-Backed Certificates, Ser. 16, Class 4AV1, 4.973%, 1/25/35	250,395
2,683		DaimlerChrysler Auto Trust, Ser. A, Class A3, 5.00%, 5/08/10	2,682,987
2,575	1	Discover Card Master Trust I, Ser. 1, Class A, 5.101%, 9/16/10	2,573,534
2,829		Ford Credit Auto Owner Trust, Ser. A, Class A3, 5.07%, 11/15/09	2,828,664
2,550		Harley-Davidson Motorcycle Trust, Ser. 2, Class A2, 4.07%, 2/15/12	2,532,184
2,500		Maryland Trust, Ser. 1, Class A, 5.55%,
12/10/65	2,371,875
		MBNA Credit Card Master Note Trust,
3,075		Ser. A1, Class A, 4.90%,
7/15/11	3,080,667
4,050	1	Ser. A4, 5.081%, 9/15/11	4,039,664
		Morgan Stanley ABS Capital I,
1,483	1	Ser. HE5, Class A2A, 4.943%,
8/25/36	1,470,690
1,094	1	Ser. NC4, Class A2A, 4.903%,
6/25/36	1,088,057

See Notes to Financial Statements.

21 ANNUAL REPORT OCTOBER 31, 2007

| Portfolio of Investments as of October 31,
2007 |
| --- |
| (Percentages shown are based on Net Assets) |

Principal Amount (000)		Description	Value
Asset-Backed Securities(contd)
$ 65	1	New Century Home Equity Loan Trust, Ser. C, Class A2A, 4.953%, 1/25/36	$ 64,997
520	1	Structured Asset Investment Loan Trust, Ser. 1, Class A1, 4.953%, 1/25/36	518,334
2,517		USAA Auto Owner Trust, Ser. 1, Class A3, 5.01%, 9/15/10	2,517,258
2,275		Wachovia Auto Owner Trust, Ser. A, Class A4, 5.38%, 3/20/13	2,300,691
		Total Asset-Backed Securities	43,962,947
Interest Only
Asset-Backed Securities 0.2%
24	1,5	Morgan Stanley Capital Trust I, Ser. HF1,
Class X, 2.25%, 6/15/17	1
		Sterling Coofs Trust,
12,656		Ser. 1, 2.365%, 4/15/29	561,620
10,991	5	Ser. 2, 2.081%, 3/30/30	295,381
		Total Interest Only Asset-Backed Securities	857,002
Interest Only
Mortgage-Backed Securities1.0%
		Federal Home Loan Mortgage Corp.,
		Ser. 176, Class M, 1,010.00%,
7/15/21	32
	6	Ser. 200, Class R, 93,522.906%,
12/15/22	139
	1	Ser. 1054, Class I, 435.32%,
3/15/21	84
		Ser. 1056, Class KD, 1,084.50%,
3/15/21	557
		Ser. 1179, Class O, 1,009.389%,
11/15/21	38
150		Ser. 1254, Class Z, 8.50%,
4/15/22	7
214		Ser. 1831, Class PG, 6.50%,
3/15/11	14,123
5,772		Ser. 2611, Class QI, 5.50%,
9/15/32	1,047,320
		Federal National Mortgage Assoc.,
78		Ser. 5, Class H, 9.00%,
1/25/22	17,839
5		Ser. 7, Class 2, 8.50%,
4/01/17	994
		Ser. 38, Class N, 1,008.50%,
4/25/21	204
2		Ser. 46, Class H, 1,042.50%,
12/25/09	15,158
337 1		Ser. 50, Class SI, 1.20%,
4/25/23	10,500
10		Ser. 89, Class 2, 8.00%,
6/01/18	1,821
23,975	1	Ser. 90, Class JH, 1.828%,
11/25/34	1,341,116
3		Ser. 94, Class 2, 9.50%,
8/01/21	768
		Ser. 99, Class L, 930.00%,
8/25/21	2,800
		Ser. 123, Class M, 1,009.50%,
10/25/20	530
12	1	Ser. 136, Class S, 15.214%,
11/25/20	15,118
		Ser. 139, Class PT, 648.35%,
10/25/21	3,532
4,383		Ser. 378, Class 19, 5.00%,
6/01/35	1,146,190
3,941	1,5	Goldman Sachs Mortgage Securities Corp., Ser. 5, 0.97%, 2/19/25	77,590
1,176	1	Salomon Brothers Mortgage Securities VII, Ser. 1, 0.492%, 3/25/22	116
		Total Interest Only Mortgage-Backed Securities	3,696,576
Principal Only
Mortgage-Backed Securities0.1%
82	7	Federal Home Loan Mortgage Corp., Ser. 1739, Class B, 7.50%, 2/15/24	76,238
		Federal National Mortgage Assoc.,
67	7	Ser. 51, Class E, 8.00%,
2/25/23	57,780
11	7	Ser. 70, Class A, 7.00%,
5/25/23	9,646
22	7	Ser. 167, Class D, 8.50%,
10/25/17	20,996
20	7	Ser. 203, Class 1, 8.00%,
2/01/23	16,792
14	7	Ser. 228, Class 1, 7.00%,
5/01/23	11,294
		Total Principal Only Mortgage-Backed Securities	192,746
Commercial
Mortgage-Backed Securities5.0%
2,320		Bear Stearns Commercial Mortgage Services, Ser. PWR7, Class A2, 4.945%, 2/11/41	2,287,635
2,970		Credit Suisse First Boston Mortgage Securities Corp., Ser. CP5, Class A2, 4.94%, 12/15/35	2,912,454
2,400	1	Credit Suisse Mortgage Capital Certificates, Ser. C2, Class A3, 5.542%, 1/15/49	2,374,889

Principal Amount (000)		Description	Value
Commercial Mortgage-Backed
Securities(contd)
$ 2,067		First Union National Bank Commercial Mortgage Trust, Ser. C2, Class A2, 7.202%, 10/15/32	$ 2,165,673
2,475		General Motors Acceptance Corp. Commercial Mortgage Securities, Inc., Ser. C3, Class A4, 4.547%, 12/10/41	2,412,505
		JPMorgan Chase Commercial Mortgage Securities
Corp.,
1,990		Ser. C1, Class A3, 5.857%,
10/12/35	2,032,092
2,380		Ser. CBX, Class A4, 4.529%,
1/12/37	2,327,152
2,530	1	Lehman Brothers-UBS Commercial Mortgage Trust, Ser. C4, Class A3, 4.972%, 6/15/29	2,538,263
		Total Commercial Mortgage-Backed Securities	19,050,663
Collateralized
Mortgage Obligation Residual Securities0.0%
		Collateralized Mortgage Obligation Trust,
	6	Ser. 40, Class R, 580.50%,
4/01/18	156
	6	Ser. 42, Class R, 6,000.00%,
10/01/14	1,602
		Federal Home Loan Mortgage Corp.,
	6	Ser. 19, Class R, 9,427.22%,
3/15/20	1,373
	6	Ser. 75, Class R, 9.50%,
1/15/21	2
	6	Ser. 75, Class RS, 12.479%,
1/15/21	2
	6	Ser. 173, Class R, 9.00%,
11/15/21	10
	6	Ser. 173, Class RS, 9.029%,
11/15/21	11
6	6,8	Painewebber CMO Trust, Ser. 88 M, Class 6, 13.80%, 9/01/18
		Total Collateralized Mortgage Obligation Residual
Securities	3,156
Corporate
Bonds64.0%
Aerospace &
Defense0.8%
170	5	Bombardier, Inc., 8.00%, 11/15/14 (Canada)	176,800
1,363		DI Finance/DynCorp Intl., Ser. B, 9.50%,
2/15/13	1,448,187
		DRS Technologies, Inc.,
80		6.875%, 11/01/13	80,000
80		7.625%, 2/01/18	81,800
15		Sequa Corp., 9.00%, 8/01/09	16,088
140		TransDigm, Inc., 7.75%, 7/15/14	142,450
1,250	2	United Technologies Corp., 4.875%, 5/01/15	1,209,314
		Total Aerospace & Defense	3,154,639
Automotive0.3%
305		Accuride Corp., 8.50%, 2/01/15	286,700
		AutoNation, Inc.,
170		7.00%, 4/15/14	164,475
160	1	7.243%, 4/15/13	156,400
410		Lear Corp., Ser. B, 8.75%, 12/01/16	393,600
295		Metaldyne Corp., 10.00%, 11/01/13	274,350
		Total Automotive	1,275,525
Basic
Materials3.2%
485		Abitibi-Consolidated, Inc., 6.00%, 6/20/13
(Canada)	356,475
1,115		AK Steel Corp., 7.75%, 6/15/12	1,137,300
280		American Pacific Corp., 9.00%, 2/01/15	287,000
90	1	Bowater, Inc., 8.694%, 3/15/10	82,350
30		Chemtura Corp., 6.875%, 6/01/16	28,650
230		CPG Intl. I, Inc., 10.50%, 7/01/13	230,000
80		Domtar, Inc., 7.125%, 8/15/15 (Canada)	79,200
171		Equistar Chemicals LP/Equistar Funding Corp., 10.625%, 5/01/11	178,695
		Freeport-McMoRan Copper & Gold, Inc.,
1,275		8.375%, 4/01/17	1,396,125
360	1	8.394%, 4/01/15	371,700
		Huntsman LLC,
72		12.00%, 7/15/12	78,300
230		11.625%, 10/15/10	243,800
1,500	5	Ineos Group Holdings Plc, 8.50%, 2/15/16 (United Kingdom)	1,425,000
975		Innophos, Inc., 8.875%, 8/15/14	982,312
565	5	Key Plastics LLC/Key Plastics Finance Corp., 11.75%, 3/15/13	480,250

See Notes to Financial Statements.

ANNUAL REPORT OCTOBER 31, 2007 22

| Portfolio of Investments as of October 31,
2007 |
| --- |
| (Percentages shown are based on Net Assets) |

Principal Amount (000)		Description	Value
Basic Materials(contd)
$ 130		Lyondell Chemical Co., 10.50%, 6/01/13	$ 140,075
575		NewPage Corp., 10.00%, 5/01/12	608,063
		Noranda, Inc., (Canada)
600		6.00%, 10/15/15	604,152
1,550		6.20%, 6/15/35	1,489,026
1,570		Teck Cominco Ltd., 6.125%, 10/01/35 (Canada)	1,487,178
360		Terra Capital, Inc., Ser. B, 7.00%, 2/01/17	360,000
		Total Basic Materials	12,045,651
Building &
Development0.2%
495		Goodman Global Holding Co., Inc., 7.875%,
12/15/12	517,275
160		Nortek, Inc., 8.50%, 9/01/14	141,600
85		North American Energy Partners, Inc., 8.75%, 12/01/11 (Canada)	85,850
		Total Building & Development	744,725
Commercial
Services0.1%
125		FTI Consulting, Inc., 7.75%, 10/01/16	130,625
225	5	Quebecor World, Inc., 9.75%, 1/15/15 (Canada)	219,375
		Total Commercial Services	350,000
Consumer
Products2.4%
720	1	Ames True Temper, Inc., 9.243%, 1/15/12	691,200
30	1	Avis Budget Car Rental LLC/Avis Budget Finance, Inc., 8.058%, 5/15/14	29,625
850		CVS Caremark Corp., 6.25%, 6/01/27	845,203
840		Federated Retail Holdings, Inc., 5.90%,
12/01/16	801,941
		General Nutrition Centers, Inc.,
500	1	10.009%, 3/15/14	481,250
450		10.75%, 3/15/15	437,625
975		Kimberly-Clark Corp., 6.625%, 8/01/37	1,073,433
1,670	2	Kraft Foods, Inc., 7.00%, 8/11/37	1,813,260
362		Lazy Days RV Center, Inc., 11.75%, 5/15/12	325,800
		Michaels Stores, Inc.,
530		10.00%, 11/01/14	533,975
670	2	11.375%, 11/01/16	668,325
250		Quiksilver, Inc., 6.875%, 4/15/15	233,125
250		Reynolds American, Inc., 7.625%, 6/01/16	270,479
860		Rite Aid Corp., 7.50%, 3/01/17	799,800
190		Sally Holdings LLC, 10.50%, 11/15/16	189,050
		Total Consumer Products	9,194,091
Containers &
Packaging0.8%
		Berry Plastics Holding Corp.,
290		8.875%, 9/15/14	297,250
190	1	9.569%, 9/15/14	190,475
150		Crown Americas LLC/Crown Americas Capital Corp., 7.75%, 11/15/15	154,500
330	1,5	Impress Holdings BV, 8.368%, 9/15/13
(Netherlands)	328,269
1,626		Owens-Brockway Glass Container, Inc., 8.875%,
2/15/09	1,638,195
535		Pregis Corp., 12.375%, 10/15/13	583,150
		Total Containers & Packaging	3,191,839
Ecological Services
& Equipment0.8%
2,250		Casella Waste Systems, Inc., 9.75%, 2/01/13	2,295,000
600		Waste Services, Inc., 9.50%, 4/15/14	600,000
		Total Ecological Services & Equipment	2,895,000
Energy9.7%
2,625		Anadarko Petroleum Corp., 6.45%, 9/15/36	2,655,783
160		Berry Petroleum Co., 8.25%, 11/01/16	163,200
950		Burlington Resources Finance Co., 7.40%, 12/01/31 (Canada)	1,119,546
500		Canadian Natural Resources Ltd., 6.25%, 3/15/38 (Canada)	494,053
380		Chaparral Energy, Inc., 8.50%, 12/01/15	354,350

Principal Amount (000)		Description	Value
Energy(contd)
		Chesapeake Energy Corp.,
$ 175		6.375%, 6/15/15	$ 169,750
20		6.875%, 11/15/20	19,550
1,300		Cleveland Electric Illuminating Co., 5.95%,
12/15/36	1,205,706
550		CMS Energy Corp., 6.55%, 7/17/17	533,873
		Compagnie Generale de Geophysique-Veritas
(France)
60		7.50%, 5/15/15	61,200
100		7.75%, 5/15/17	103,000
225		Compton Petroleum Finance Corp., 7.625%, 12/01/13 (Canada)	215,438
150		Conoco Funding Co., 7.25%, 10/15/31 (Canada)	174,928
1,970	1,2	ConocoPhillips Australia Funding Co., 5.343%,
4/09/09	1,964,845
150		ConocoPhillips Funding Co., 5.95%, 10/15/36
(Canada)	153,771
700		ConocoPhillips Holding Co., 6.95%, 4/15/29	797,096
125		Devon Energy Corp., 7.95%, 4/15/32	152,890
450		DTE Energy Co., 6.35%, 6/01/16	465,924
130		Edison Mission Energy, 7.50%, 6/15/13	131,788
1,250	5	EDP Finance BV, 6.00%, 2/02/18 (Netherlands)	1,247,215
150		El Paso Natural Gas Co., 8.875%, 6/15/32	174,855
182		Elwood Energy LLC, 8.159%, 7/05/26	186,611
		EnCana Corp. (Canada)
425		6.50%, 8/15/34	444,473
775		6.625%, 8/15/37	818,530
		Encore Acquisition Co.,
50		6.00%, 7/15/15	45,250
60		7.25%, 12/01/17	57,450
1,675		Energy East Corp., 6.75%, 7/15/36	1,727,154
435		Exco Resources, Inc., 7.25%, 1/15/11	429,562
480		FirstEnergy Corp., Ser. B, 6.45%, 11/15/11	495,357
575		Florida Power & Light Co., 4.95%, 6/01/35	499,059
675		Florida Power Corp., 6.35%, 9/15/37	708,736
90		Grant Prideco, Inc., Ser. B, 6.125%, 8/15/15	90,450
255		KCS Energy, Inc., 7.125%, 4/01/12	251,175
800		Midamerican Energy Co., 5.80%, 10/15/36	777,262
		Midamerican Energy Holdings Co.,
950		5.95%, 5/15/37	910,800
1,725	5	6.50%, 9/15/37	1,769,112
83		Midwest Generation LLC, Ser. B, 8.56%, 1/02/16	89,741
175		Mirant Americas Generation LLC, 8.30%, 5/01/11	176,969
1,100	5	Nakilat, Inc., 6.067%, 12/31/33 (Qatar)	1,043,130
600		Nexen, Inc., 6.40%, 5/15/37 (Canada)	596,988
		NRG Energy, Inc.,
50		7.25%, 2/01/14	50,000
285		7.375%, 2/01/16	284,288
350		Ohio Edison Co., 6.875%, 7/15/36	366,549
500		ONEOK Partners LP, 6.65%, 10/01/36	509,155
490	5	OPTI, Inc., 8.25%, 12/15/14 (Canada)	491,225
140		Orion Power Holdings, Inc., 12.00%, 5/01/10	154,700
650		Pacificorp, 6.25%, 10/15/37	667,122
1,350		Public Service Co. of Colorado, 6.25%, 9/01/37	1,400,680
350		Sabine Pass LNG LP, 7.50%, 11/30/16	343,000
175		Scottish Power Plc, 5.375%, 3/15/15 (United
Kingdom)	172,442
350	5	SemGroup LP, 8.75%, 11/15/15	336,000
		Southern California Edison Co.,
675		5.625%, 2/01/36	644,392
150		Ser. 05-E, 5.35%, 7/15/35	136,746
400		Suncor Energy, Inc., 6.50%, 6/15/38 (Canada)	418,711
360	5	Targa Resources, Inc., 8.50%, 11/01/13	363,600
600		Trans-Canada Pipelines Ltd., 5.85%, 3/15/36
(Canada)	575,310
1,050		Valero Energy Corp., 6.625%, 6/15/37	1,081,095
2,200		Virginia Electric & Power Co., Ser. A, 6.00%,
5/15/37	2,161,727
625	5	Weatherford Intl., Inc., 6.80%, 6/15/37	655,387
415		Whiting Petroleum Corp., 7.25%, 5/01/12-5/01/13	407,938
2,125		XTO Energy, Inc., 6.75%, 8/01/37	2,279,462
		Total Energy	36,976,099

See Notes to Financial Statements.

23 ANNUAL REPORT OCTOBER 31, 2007

| Portfolio of
Investments as
of October 31, 2007 |
| --- |
| (Percentages shown are based on Net
Assets) |

Principal Amount (000)		Description
Entertainment & Leisure0.9%
$ 185		AMC
Entertainment, Inc., 11.00%, 2/01/16	$ 200,262
250		Gaylord
Entertainment Co., 6.75%, 11/15/14	242,500
325	5	Greektown
Holdings LLC, 10.75%, 12/01/13	323,375
185		Harrahs
Operating Co., Inc., 5.75%, 10/01/17	136,437
2,000		Park Place
Entertainment Corp., 8.875%, 9/15/08	2,027,500
290		Seneca
Gaming Corp., Ser. B, 7.25%, 5/01/12	292,175
25		Wynn Las
Vegas LLC/Wynn Las Vegas Capital Corp., 6.625%, 12/01/14	24,563
		Total
Entertainment & Leisure	3,246,812
Financial Institutions20.9%
350		American
Real Estate Partners LP/American Real Estate Finance Corp., 7.125%, 2/15/13	341,250
		Bank of
America Corp.,
2,850	2	6.00%,
9/01/17	2,905,373
2,450	2	7.80%,
2/15/10	2,597,750
1,975	2	Bank of
America NA, Ser. BKNT, 6.10%, 6/15/17	2,021,363
1,400		Bear
Stearns Cos., Inc. (The), Ser. MTN, 6.95%, 8/10/12	1,456,969
2,525	2	Berkshire
Hathaway Finance Corp., 3.375%, 10/15/08	2,491,311
202	1,5	BMS
Holdings, Inc., 12.40%, 2/15/12	193,771
1,415		Chubb
Corp., 6.00%, 5/11/37	1,376,861
		Citigroup,
Inc.,
5,230	2,3	4.125%,
2/22/10	5,142,628
1,155		5.875%,
2/22/33-5/29/37	1,097,862
1,200	2	6.125%,
8/25/36	1,170,559
550		6.875%,
2/15/98	560,083
		Credit
Suisse First Boston, Inc.,
700	3	6.125%,
11/15/11	723,814
1,000		7.125%,
7/15/32	1,127,028
4,150	5	Depfa ACS
Bank, 5.125%, 3/16/37 (Ireland)	3,925,431
		Ford Motor
Credit Co. LLC,
380		7.80%,
6/01/12	357,038
220	1	7.993%,
1/13/12	203,671
		Fort Irwin
Land LLC,
780	5	Ser. A,
Class II, 5.30%, 12/15/35	736,086
575	5	Ser. A-1,
5.03%, 12/15/25	542,420
		General
Electric Capital Corp.,
3,000	2	6.75%,
3/15/32	3,347,964
7,610	2	Ser. GMTN,
6.15%, 8/01/37	7,885,360
		Goldman
Sachs Group, Inc. (The),
5,390		5.45%,
11/01/12	5,422,151
1,020		6.25%,
9/01/17	1,057,991
1,000		6.60%,
1/15/12	1,047,663
1,020	1	Hartford
Life Global Funding Trusts, Ser. MTN, 5.864%, 9/15/09	1,018,899
1,275		HSBC
Holdings Plc, 6.50%, 5/02/36 (United Kingdom)	1,258,708
878	5	iPayment
Investors LP, 11.625%, 7/15/14	904,475
270		iPayment,
Inc., 9.75%, 5/15/14	259,200
4,375	2	JPMorgan
Chase Capital XXV, Ser. Y, 6.80%, 10/01/37	4,370,174
		Lehman
Brothers Holdings, Inc.,
1,050		6.50%,
7/19/17	1,057,475
1,500		Ser. MTN,
6.00%, 7/19/12	1,520,782
575	1	Ser. MTN,
7.394%, 9/15/22	587,536
100		Ser. MTNG,
4.80%, 3/13/14	94,845
1,200		MetLife,
Inc., 5.70%, 6/15/35	1,112,330
		Momentive
Performance Materials, Inc.,
50	5	9.75%,
12/01/14	48,750
440	5	11.50%,
12/01/16	424,600
1,990	1,5	Monumental
Global Funding Ltd., Ser. MTN, 5.24%, 6/16/10 (Cayman Islands)	1,972,090

Principal Amount (000)		Description	Value
Financial Institutions(contd)
		Morgan Stanley,
$ 3,620	1,2	5.493%,
1/09/12	$ 3,561,707
2,100	2	6.25%,
8/09/26	2,069,773
1,200	2	Ser. MTN,
6.25%, 8/28/17	1,228,642
950		Prudential Financial, Inc., Ser. MTN, 5.70%, 12/14/36	881,463
		Rainbow National Services LLC,
225	5	8.75%,
9/01/12	234,000
1,070	5	10.375%,
9/01/14	1,177,000
600	1	SLM Corp., 5.384%, 1/27/14	530,617
1,050		Travelers Cos., Inc., Ser. MTN, 6.25%, 6/15/37	1,035,953
50	1	Universal City Florida Holding Co. I/II, 9.661%, 5/01/10	51,125
1,000		Wells Fargo & Co., 4.625%, 8/09/10	990,341
		Wells Fargo Bank NA,
610		5.95%,
8/26/36	601,139
2,000	2	7.55%,
6/21/10	2,124,152
650	5	Wimar Opco
LLC/Wimar Opco Finance Corp., 9.625%, 12/15/14	487,500
1,875	5	Xstrata Finance Ltd., 5.80%, 11/15/16 (Canada)	1,859,526
		Total Financial Institutions	79,195,199
Health Care3.9%
1,325	1,2,5	Amgen, Inc., 5.585%, 11/28/08	1,322,611
1,825	2	AstraZeneca Plc, 6.45%, 9/15/37 (United Kingdom)	1,923,044
1,135		Bristol-Myers Squibb Co., 5.875%, 11/15/36	1,114,049
2,495	2	Eli Lilly & Co., 5.55%, 3/15/37	2,382,421
1,200	2	Johnson & Johnson, 5.95%, 8/15/37	1,255,031
1,250		Schering-Plough Corp., 6.55%, 9/15/37	1,295,480
1,640		Tenet Healthcare Corp., 6.50%, 6/01/12	1,389,900
1,175		Teva Pharmaceutical Finance LLC, 6.15%, 2/01/36	1,156,612
		WellPoint, Inc.,
595		5.85%,
1/15/36	559,086
475		6.375%,
6/15/37	482,920
1,775	2	Wyeth, 5.95%, 4/01/37	1,755,436
		Total Health Care	14,636,590
Industrials1.4%
1,700		3M Co., Ser. MTN, 5.70%, 3/15/37	1,704,694
400	5	AGY Holding Corp., 11.00%, 11/15/14	394,000
150		Hexcel Corp., 6.75%, 2/01/15	147,375
915		Honeywell Intl., Inc., 5.70%, 3/15/37	889,533
165		Park-Ohio Industries, Inc., 8.375%, 11/15/14	153,862
		RBS Global, Inc./Rexnord Corp.,
540		9.50%,
8/01/14	557,550
555		11.75%,
8/01/16	588,300
1,050	5	Sunstate Equipment Co. LLC, 10.50%, 4/01/13	1,008,000
		Total Industrials	5,443,314
Media7.4%
		Affinion Group, Inc.,
540		10.125%,
10/15/13	562,950
200		11.50%,
10/15/15	208,500
125		American Media Operations, Inc., Ser. B, 10.25%, 5/01/09	119,688
		AOL Time Warner, Inc.,
1,635		7.57%,
2/01/24	1,791,676
3,000		9.125%,
1/15/13	3,448,833
1,415		AT&T Broadband Corp., 8.375%, 3/15/13	1,596,700
161	1	Cablevision Systems Corp., Ser. B, 9.644%, 4/01/09	165,427
120		CanWest MediaWorks, Inc., 8.00%, 9/15/12 (Canada)	117,000
485		Charter
Communications Holdings I LLC/Charter Communications Holdings I Capital Corp., 11.00%, 10/01/15	470,450
		Charter
Communications Holdings II LLC/Charter Communications Holdings II Capital Corp.,
1,320		10.25%,
9/15/10	1,346,400
180		Ser. B,
10.25%, 9/15/10	183,150

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER
31, 2007 | 24 |
| --- | --- | --- |

| Portfolio of
Investments as
of October 31, 2007 |
| --- |
| (Percentages shown are based on Net
Assets) |

Principal Amount (000)		Description	Value
Media(contd)
$ 690		CMP
Susquehanna Corp., 9.875%, 5/15/14	$ 633,937
1,000		Comcast
Cable Communications, Inc., 6.75%, 1/30/11	1,042,435
1,805		Comcast
Corp., 6.95%, 8/15/37	1,931,570
85		Dex Media
West LLC/Dex Media Finance Co., Ser. B,
		9.875%,
8/15/13	90,631
140		DirecTV
Holdings LLC/DirecTV Financing Co.,
		8.375%,
3/15/13	146,300
		EchoStar
DBS Corp.,
180		5.75%,
10/01/08	179,550
320		7.00%,
10/01/13	333,200
75		7.125%,
2/01/16	78,375
665		Idearc,
Inc., 8.00%, 11/15/16	666,662
500	1,5	ION Media
Networks, Inc., 8.493%, 1/15/12	501,250
535		Network
Communications, Inc., 10.75%, 12/01/13	538,344
		News
America Holdings, Inc.,
145		8.15%,
10/17/36	172,776
2,475		8.45%,
8/01/34	2,992,265
660		Nexstar
Finance, Inc., 7.00%, 1/15/14	633,600
		Nielsen
Finance LLC/Nielsen Finance Co.,
330	7	9.115%,
8/01/16	238,425
1,100		10.00%,
8/01/14	1,157,750
950		RH
Donnelley Corp., Ser. A-3, 8.875%, 1/15/16	950,000
70		Sirius
Satellite Radio, Inc., 9.625%, 8/01/13	69,563
1,495		TCI
Communications, Inc., 8.75%, 8/01/15	1,753,387
800	5	Time Warner
Cable, Inc., 6.55%, 5/01/37	806,473
1,100	5	TL
Acquisitions, Inc., 10.50%, 1/15/15	1,094,500
325	5	Univision
Communications, Inc., 9.75%, 3/15/15	318,500
570		Vertis,
Inc., 9.75%, 4/01/09	570,000
1,294		Young
Broadcasting, Inc., 10.00%, 3/01/11	1,216,360
		Total Media	28,126,627
Real Estate0.9%
1,000		AvalonBay
Communities, Inc., 6.625%, 9/15/11	1,040,161
		Rouse Co.,
725		3.625%,
3/15/09	691,205
1,715		5.375%,
11/26/13	1,554,092
		Total Real
Estate	3,285,458
Technology2.1%
		Amkor
Technology, Inc.,
90		7.75%,
5/15/13	87,075
135		9.25%,
6/01/16	138,038
555		Celestica,
Inc., 7.625%, 7/01/13 (Canada)	532,800
		Freescale
Semiconductor, Inc.,
715		9.125%,
12/15/14	647,075
160	1	9.569%,
12/15/14	147,000
3,450	2	Intl.
Business Machines Corp., 5.70%, 9/14/17	3,501,702
480		NXP BV/NXP
Funding LLC, 9.50%, 10/15/15 (Netherlands)	453,600
660		Sanmina-SCI
Corp., 8.125%, 3/01/16	579,150
		SunGard
Data Systems, Inc.,
95		9.125%,
8/15/13	96,900
675		10.25%,
8/15/15	703,687
950		Superior
Essex Communications LLC/Essex Group, Inc., 9.00%, 4/15/12	938,125
		Total
Technology	7,825,152
Telecommunications7.5%
4,075	2	AT&T,
Inc., 6.50%, 9/01/37	4,298,391
1,700	9	BellSouth
Telecommunications, 6.402%, 12/15/95	902,807
470		Cincinnati
Bell, Inc., 7.25%, 7/15/13	471,175
255		Cricket
Communications, Inc., 9.375%, 11/01/14	253,088
325		Deutsche
Telekom Intl. Finance BV, 5.75%, 3/23/16 (Netherlands)	325,854
270	5	Digicel
Group Ltd., 8.875%, 1/15/15 (Bermuda)	252,126

Principal Amount (000)		Description	Value
Telecommunications(contd)
$ 170	1	Hawaiian
Telcom Communications, Inc., Ser. B, 10.318%, 5/01/13	$ 172,125
515		Intelsat
Corp., 9.00%, 6/15/16	526,588
		Intelsat
Ltd. (Bermuda)
120	1	8.886%,
1/15/15	121,800
450		9.25%,
6/15/16	466,875
210		11.25%,
6/15/16	225,750
920	1	11.409%,
6/15/13	959,100
300		Intelsat
Subsidiary Holding Co. Ltd., 8.625%, 1/15/15 (Bermuda)	304,500
120	5	MetroPCS
Wireless, Inc., 9.25%, 11/01/14	119,100
935	5	Nordic
Telephone Co. Holdings A.p.S., 8.875%, 5/01/16 (Denmark)	988,763
1,435	1,5	Nortel
Networks Ltd., 9.493%, 7/15/11 (Canada)	1,417,062
160		PanAmSat
Corp., 9.00%, 8/15/14	163,200
		Qwest
Corp.,
55		7.875%,
9/01/11	58,025
375	1	8.944%,
6/15/13	399,844
		Sprint
Capital Corp.,
1,205		6.875%,
11/15/28	1,154,325
1,250		8.75%, 3/15/32	1,425,325
4,375		Telecom
Italia Capital S.A., 4.95%, 9/30/14 (Luxembourg)	4,187,492
1,000		Telefonica
Emisones SAU, 7.045%, 6/20/36 (Spain)	1,098,404
575		Verizon
Global Funding Corp., 7.75%, 6/15/32	677,879
		Verizon
Maryland, Inc.,
540		5.125%,
6/15/33	450,386
1,355		Ser. A,
6.125%, 3/01/12	1,396,925
750		Verizon
Virginia, Inc., 4.625%, 3/15/13	720,208
		Vodafone
Group Plc (United Kingdom)
1,615	1,2	5.288%,
12/28/07	1,615,326
1,000		7.75%,
2/15/10	1,057,537
1,210		West Corp.,
11.00%, 10/15/16	1,267,475
360	5	Wind
Acquisition Finance S.A., 10.75%, 12/01/15 (Luxembourg)	400,500
		Windstream
Corp.,
410		8.125%,
8/01/13	433,575
250		8.625%,
8/01/16	267,500
		Total
Telecommunications	28,579,030
Transportation0.7%
120		American
Airlines, Inc., Ser. 99-1, 7.324%, 4/15/11	118,500
120		Britannia
Bulk Plc, 11.00%, 12/01/11 (United Kingdom)	126,000
1,000		Canadian
National Railway Co., 6.375%, 10/15/11 (Canada)	1,044,565
450		CHC
Helicopter Corp., 7.375%, 5/01/14 (Canada)	435,375
600		Navios
Maritime Holdings, Inc., 9.50%, 12/15/14 (Marshall Islands)	634,500
455	5	St.
Acquisition Corp., 12.50%, 5/15/17	290,062
		Total
Transportation	2,649,002
		Total
Corporate Bonds	242,814,753
U.S. Government and Agency
Securities5.7%
		Overseas
Private Investment Corp.,
357		4.09%,
5/29/12	338,675
1,000	1	4.30%, 5/29/12	1,000,255
752		4.64%,
5/29/12	761,852
425		4.68%,
5/29/12	404,472
3,221		4.87%,
5/29/12	3,295,838
384	1	5.40%,
5/29/12	413,963
6,055		Resolution
Funding Corp., Ser. B, Zero Coupon, 4/15/30	2,018,561
788		Small
Business Administration, Ser. 20K-1, 6.95%, 11/01/16	812,396
1,800		Tennessee
Valley Authority, Ser. C, 5.88%, 4/01/36	1,989,677
510		U.S.
Treasury Bonds, 4.75%, 2/15/37	509,721
846		U.S.
Treasury Inflation Protected Bond, 2.375%, 1/15/27	867,527
9,115	2	U.S.
Treasury Notes, 4.75%, 8/15/17	9,315,813
		Total U.S.
Government and Agency Securities	21,728,750

See Notes to Financial Statements. — 25	ANNUAL REPORT	OCTOBER 31, 2007

| Portfolio of
Investments as
of October 31, 2007 |
| --- |
| (Percentages shown are based on Net
Assets) |

Principal Amount (000)		Description	Value
Trust Preferred Stocks3.5%
$ 2,150	1,2	Allstate
Corp., 6.50%, 5/15/57	$ 2,084,728
600		Bank of
America, 5.30%, 3/15/17	579,691
950	1,5,10	Barclays
Bank Plc, 7.434% (United Kingdom)	1,007,039
1,000	1,5,10	Credit
Agricole S.A., 6.637% (France)	950,372
750	1	Lincoln
National Corp., 6.05%, 4/20/67	718,801
665	1	Progressive
Corp., 6.70%, 6/15/37	652,553
2,600	1,10	Royal Bank
of Scotland Group Plc, Ser. MTN, 7.64% (United Kingdom)	2,694,931
1,125	1,2,5,10	Societe Generale, 5.922% (France)	1,070,652
750	1	Travelers
Cos., Inc., 6.25%, 3/15/67	728,300
2,000	1,2,10	UBS
Preferred Funding Trust I, 8.622%	2,170,314
575	1,5	ZFS Finance
Trust I, 6.50%, 5/09/37	553,382
		Total Trust
Preferred Stocks	13,210,763
Taxable Municipal Bond0.6%
2,525		Illinois
St. Pension, 5.10%, 6/01/33	2,395,139
Shares
Common Stocks0.0%
1,895	6,11	Critical Care Systems Intl., Inc.	11,844
Preferred Stock0.4%
60,000		Deutsche Bank Contingent Capital Trust II, 6.55%	1,437,000
		Total Long-Term Investments (cost $639,074,109)	636,433,097

Principal Amount (000)
SHORT-TERM INVESTMENT0.1%
U.S. Government and Agency Discount
Notes0.1%
$ 300	12	Federal
Home Loan Bank Disc. Notes, 4.401%, 11/01/07 (cost $300,000)	300,000
BORROWED BOND AGREEMENTS22.5%
		Lehman
Brothers Inc.,
50,927	14	4.47%,
11/08/07	50,927,000
34,457	14	4.45%,
11/08/07	34,456,875
		Total Borrowed Bond Agreements (cost $85,383,875)	85,383,875

Notional Amount (000)
OUTSTANDING OPTIONS PURCHASED1.0%
4,285	EUR Put
Option, strike price $1.40, expires 1/10/08	17,876
	Interest
Rate Swaps,
8,400	Trust pays
5.79%, Trust receives 3-month LIBOR, expires 8/16/10	225,776
8,400	Trust pays
3-month LIBOR, Trust receives 5.79%, expires 8/16/10	433,872
5,500	Trust pays
5.52%, Trust receives 3-month LIBOR, expires 9/21/36	373,168
5,500	Trust pays
3-month LIBOR, Trust receives 5.52%, expires 9/21/36	324,406
12,300	Trust pays
5.47%, Trust receives 3-month LIBOR, expires 5/08/12	575,025
12,300	Trust pays
5.47%, Trust receives 3-month LIBOR, expires 5/08/12	527,670
8,425	Trust pays
3-month LIBOR, Trust receives 6.025%, expires 6/08/12	517,969

Notional Amount (000)	Description	Value
OUTSTANDING OPTIONS PURCHASED(contd)
8,425	Trust pays
3-month LIBOR, Trust receives 6.025%, expires 6/08/12	$ 265,977
7,300	Trust pays
5.39%, Trust receives 3-month LIBOR, expires 3/19/12	357,114
7,300	Trust pays
3-month LIBOR, Trust receives 5.39%, expires 3/19/12	296,161
	Total Outstanding Options Purchased (cost $3,589,612)	3,915,014
	Total Investments before borrowed bonds, TBA sale commitments, and outstanding options written (cost $728,347,596 13 )	726,031,986
Principal Amount (000)
BORROWED BONDS(22.5)%
	U.S. Treasury Notes,
$ (50,800)	4.00%,
8/31/09	(50,835,712	)
(34,500)	4.125%,
8/31/12	(34,464,948	)
	Total Borrowed Bonds (proceeds $85,264,516)	(85,300,660	)
TBA SALE COMMITMENTS(3.5)%
	Federal National Mortgage Assoc.,
(400)	5.00%,
12/12/37	(383,625	)
(8,600)	5.50%,
11/19/22	(8,613,433	)
(4,200)	6.00%,
11/13/37-12/12/37	(4,228,314	)
	Total TBA Sale Commitments (proceeds $13,086,862)	(13,225,372	)
INVESTMENTS SOLD SHORT(22.5)%
	U.S. Treasury Notes,
(50,800)	4.00%,
8/31/09	(50,835,712	)
(34,500)	4.125%,
8/31/12	(34,464,948	)
	Total Investments Sold Short (proceeds $85,264,516)	(85,300,660	)

Notional Amount (000)
OUTSTANDING OPTIONS WRITTEN(0.5)%
	Interest Rate Swaps,
(5,700)	Trust pays
5.135%, Trust receives 3-month LIBOR, expires 4/21/08	(97,385	)
(5,700)	Trust pays
3-month LIBOR, Trust receives 5.135%, expires 4/21/08	(97,385	)
(12,400)	Trust pays
3-month LIBOR, Trust receives 5.67%, expires 1/04/10	(315,828	)
(12,400)	Trust pays
5.67%, Trust receives 3-month LIBOR, expires 1/04/10	(599,912	)
(5,300)	Trust pays
5.485%, Trust receives 3-month LIBOR, expires 10/28/19	(208,227	)
(5,300)	Trust pays
3-month LIBOR, Trust receives 5.485%, expires 10/28/19	(155,709	)
(7,300)	Trust pays
3-month LIBOR, Trust receives 5.148%, expires 3/19/08	(119,063	)
(7,300)	Trust pays
5.115%, Trust receives 3-month LIBOR, expires 3/19/08	(118,698	)
	Total Outstanding Options Written (premium received $2,478,560)	(1,712,207	)
Total Investments net of borrowed bonds, TBA sale
commitments and outstanding options written164.8%	$	625,793,747
Liabilities in excess of other
assets(64.8)%		(246,188,870	)
Net Assets100%	$	379,604,877

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER
31, 2007 | 26 |
| --- | --- | --- |

| Portfolio of
Investments as
of October 31, 2007 |
| --- |
| (Percentages shown are based on Net
Assets) |

| 1 | Variable rate security. Rate shown is interest rate as of
October 31, 2007. |
| --- | --- |
| 2 | Entire or partial principal amount pledged as collateral
for reverse repurchase agreements. See Note 4 in the Notes to Financial
Statements for details of open reverse repurchase agreements. |
| 3 | Security, or a portion thereof, pledged as collateral with
a value of $2,950,914 on 147 long Eurodollar futures contracts expiring
December 2007 to March 2008, 337 long U.S. Treasury Note futures contracts
expiring December 2007, 1,339 long U.S. Treasury Bond futures contracts
expiring December 2007, 180 short Eurodollar futures contracts expiring
December 2007 and 3,750 short U.S. Treasury Note futures contracts expiring
December 2007. The notional value of such contracts on October 31, 2007 was
$246,676,023, with an unrealized loss of $650,550. |
| 4 | Represents an investment in an affiliate. |
| 5 | Security is not registered under the Securities Act of
1933. These securities may be resold in transactions in accordance with Rule
144A under that Act, to qualified institutional buyers. As of October 31,
2007, the Trust held 9.0% of its net assets, with a current market value of
$34,233,806, in securities restricted as to resale. |
| 6 | Security is fair valued. |
| 7 | Rate shown is effective yield of the underlying collateral
as of October 31, 2007. |
| 8 | Illiquid security. As of October 31, 2007, the Trust held
less than 0.1% of its net assets, with a current market value of $0, in this
security. |
| 9 | Represents a step up bond; the interest rate shown
reflects the effective yield at the time of purchase. |
| 10 | The security is a perpetual bond and has no stated
maturity date. |
| 11 | Non-income producing security. |
| 12 | Rate shown is the yield to maturity as of the date of
purchase. |
| 13 | Cost for federal income tax purposes is $729,365,583. The
net unrealized depreciation on a tax basis is $3,333,597, consisting of
$7,722,546 gross unrealized appreciation and $11,056,143 gross unrealized
depreciation. |
| 14 | See Note 1 in the Notes to Financial Statements for
details of borrowed bond agreements. |

See Notes to Financial Statements. — 27	ANNUAL REPORT	OCTOBER 31, 2007

| Portfolio of Investments as of October 31,
2007 |
| --- |
| (Percentages shown are based on Net Assets) |

Principal Amount (000)		Description	Value
LONG-TERM INVESTMENTS104.8%
Mortgage Pass-Through Securities31.2%
		Federal Home Loan Mortgage Corp.,
$ 775	1	4.019%, 1/01/35	$ 773,674
802	1	4.934%, 10/01/34	806,789
92		5.50%, 12/01/21	92,516
609	2	5.50%, 1/01/22	609,749
8,423	2,3	5.50%, 3/01/22	8,436,410
27	1	6.01%, 11/01/17	27,570
14		8.00%, 11/01/15	13,954
		8.50%, 3/01/08	15
124	2	9.00%, 9/01/20	132,699
100		TBA, 6.50%, 12/12/37	102,406
		Federal National Mortgage Assoc.,
31,248		5.00%, 6/01/33-3/01/37	30,045,633
732	2	5.00%, 1/01/37	702,248
44,873		5.50%, 6/01/21-6/01/37	44,632,581
3,125		5.97%, 8/01/16	3,184,788
22,939		6.00%, 10/01/36-7/01/37	23,108,362
12,645		6.50%, 7/01/36-9/01/37	12,943,071
		7.50%, 2/01/22	241
32		8.00%, 5/01/08-5/01/22	32,874
3		9.50%, 1/01/19-9/01/19	4,163
100		TBA, 5.50%, 11/13/37	98,531
1,700		TBA, 6.00%, 11/13/37	1,712,220
2,200		TBA, 6.50%, 11/13/37	2,251,564
		Government National Mortgage
Assoc.,
37		7.00%, 10/15/17	38,792
412		7.50%, 8/15/21-12/15/23	434,645
210		8.00%, 10/15/22-2/15/29	223,884
15		9.00%, 6/15/18-9/15/21	17,385
		Total Mortgage Pass-Through
Securities	130,426,764
Federal Housing Administration Securities1.8%
		General Motors Acceptance Corp.
Projects,
288	4	Ser. 51, 7.43%, 2/01/23	290,577
358		Ser. 56, 7.43%, 11/01/22	361,639
50	5	Merrill Projects, Ser. 54, 7.43%,
5/15/23	50,019
758		Reilly Project, Ser. 41, 8.28%,
3/01/20	765,282
		USGI Projects,
88		Ser. 87, 7.43%, 12/01/22	88,790
329		Ser. 99,7.43%, 10/01/23	332,589
5,431		Ser. 6094, 7.43%, 6/01/21	5,485,577
		Total Federal Housing
Administration Securities	7,374,473
Agency Multiple Class Mortgage Pass-Through
Securities26.3%
		Federal Home Loan Mortgage Corp.,
4,076	1	Ser. 11, Class A9, 2.282%,
1/25/28	3,595,985
187		Ser. 19, Class F, 8.50%,
3/15/20	194,531
746		Ser. 40, Class K, 6.50%,
8/17/24	768,950
	1	Ser. 192, Class U, 1,009.033%,
2/15/22	7
		Ser. 1057, Class J, 1,008.001%,
3/15/21	1,589
1,647		Ser. 1598, Class J, 6.50%,
10/15/08	1,643,738
341		Ser. 1961, Class H, 6.50%,
5/15/12	345,289
9,504		Ser. 2218, Class Z, 8.50%,
3/15/30	10,279,474
13,018		Ser. 2461, Class Z, 6.50%,
6/15/32	13,445,486
10,200		Ser. 2542, Class UC, 6.00%,
12/15/22	10,599,985
2,475		Ser. 2562, Class PG, 5.00%,
1/15/18	2,444,405
928		Ser. 2564, Class NC, 5.00%,
2/15/33	795,889
2,050		Ser. 2750, Class TC, 5.25%,
2/15/34	2,015,608
11,458		Ser. 2758, Class KV, 5.50%,
5/15/23	11,448,878
1,573		Ser. 2765, Class UA, 4.00%,
3/15/11	1,529,913
3,212		Ser. 2806, Class VC, 6.00%,
12/15/19	3,265,494
2,402		Ser. 2927, Class BZ, 5.50%,
2/15/35	2,245,710
3,946		Ser. 3061, Class BD, 7.50%,
11/15/35	4,063,969

		Description	Value
Agency Multiple Class Mortgage Pass-Through
Securities(contd)
		Federal National Mortgage Assoc.,
$ 1,221	1	Ser. 2, Class KP, Zero Coupon,
2/25/35	$ 1,153,297
4,006		Ser. 28, Class PB, 6.00%,
8/25/28	4,028,409
2,150		Ser. 29, Class HC, 7.50%,
7/25/30	2,288,156
2,381		Ser. 31, Class ZG, 7.50%,
5/25/34	2,841,336
7,147		Ser. 32, Class VT, 6.00%,
9/25/15	7,258,242
1		Ser. 33, Class PV, 1,078.42%,
10/25/21	20,464
50	1	Ser. 38, Class F, 8.325%,
4/25/21	51,981
1,663		Ser. 38, Class Z, 5.00%,
5/25/36	1,655,826
2,630		Ser. 68, Class PC, 5.50%,
7/25/35	2,657,932
12,264		Ser. 135, Class PB, 6.00%,
1/25/34	12,319,211
		Government National Mortgage
Assoc.,
1,041		Ser. 5, Class Z, 7.00%, 5/16/26	1,089,576
1,749		Ser. 33, Class PB, 6.50%,
7/20/31	1,793,424
4,030		Ser. 89, Class PE, 6.00%,
10/20/34	4,118,536
		Total Agency Multiple Class
Mortgage Pass-Through Securities	109,961,290
Non-Agency Multiple Class Mortgage
Pass-Through Securities9.5%
5,932		CWALT, Inc., Ser. 28CB, Class
1A5, 5.50%, 8/25/35	5,926,543
		JPMorgan Mortgage Trust,
1,868	1	Ser. A7, Class 2A2, 5.83%,
1/25/37	1,865,043
6,457		Ser. S1, Class 2A1, 8.00%,
1/25/35	6,827,600
1,561		MASTR Alternative Loan Trust, Ser. 7, Class 4A3, 8.00%,
11/25/18	1,634,533
7,488		MASTR Asset Securitization Trust, Ser. 12, Class 3A5, 5.25%, 10/25/14	7,358,441
5,697	1	Residential Asset Securitization Trust, Ser. A8, Class A2, 5.223%, 10/25/18	5,630,061
9,908		Residential Funding Securities Corp., Ser. RM2, Class AI5, 8.50%, 5/25/33	10,580,089
14	1,6,7	Summit Mortgage Trust, Ser. 1, Class B1, 6.611%,
12/28/12	14,138
		Total Non-Agency Multiple Class Mortgage Pass-Through
Securities	39,836,448
Inverse Floating Rate Mortgage Securities4.3%
		Federal Home Loan Mortgage Corp.,
14	1	Ser. 1043, Class H, 21.938%,
2/15/21	14,443
	1	Ser. 1148, Class E, 592.552%,
10/15/21	545
32	1	Ser. 1160, Class F, 18.381%,
10/15/21	31,693
96	1,2	Ser. 1616, Class SB, 8.50%,
11/15/08	96,046
192	1	Ser. 1688, Class S, 9.566%,
12/15/13	192,669
4,359	1	Ser. 2769, Class SQ, Zero Coupon,
2/15/34	2,718,727
2,101	1	Ser. 2840, Class SK, 1.499%,
8/15/34	1,600,748
2,373	1	Ser. 3167, Class SX, 6.953%,
6/15/36	2,277,238
		Federal National Mortgage Assoc.,
	1	Ser. 7, Class S, 594.704%,
3/25/21	6,484
1	1	Ser. 10, Class S, 575.455%,
5/25/21	19,584
1	1	Ser. 12, Class S, 608.135%,
5/25/21	17,025
1	1	Ser. 17, Class S, 580.114%,
6/25/21	9,925
51	1	Ser. 38, Class SA, 10.186%,
4/25/21	53,332
	1	Ser. 46, Class S, 1,402.625%,
5/25/21	7,283
	1	Ser. 49, Class S, 527.80%,
12/25/21	3,478
114	1	Ser. 72, Class S, 8.75%,
5/25/08	114,584
5,828	1	Ser. 73, Class DS, 4.882%,
8/25/35	5,625,111
119	1	Ser. 87, Class S, 13.764%,
8/25/21	144,608
26	1	Ser. 93, Class S, 8.50%,
5/25/08	26,334
12	1	Ser. 170, Class SC, 9.00%,
9/25/08	11,829
222	1	Ser. 196, Class SC, 8.423%,
10/25/08	222,978
110	1	Ser. 214, Class SH, 5.592%,
12/25/08	109,958
899	1	Ser. 247, Class SN, 10.00%,
12/25/23	1,002,361
		First Horizon Alternative
Mortgage Securities,
72,527	1	Ser. FA7, Class 1A7, Zero Coupon,
10/25/35	736,052
179,328	1	Ser. FA9, Class A2, Zero Coupon,
12/25/35	1,905,915

See Notes to Financial Statements. — ANNUAL REPORT	OCTOBER 31, 2007	28

Portfolio of Investments as of October 31, 2007
(Percentages
shown are based on Net Assets)

		Description	Value
Inverse Floating Rate Mortgage
Securities(contd)
$ 112	1	Kidder Peabody Acceptance Corp., Ser. 1, Class A6, 7.573%,
8/25/23	$ 112,216
145,657	1	Residential Accredit Loans, Inc., Ser. QS16, Class A2,
Zero Coupon, 11/25/35	818,081
		Total Inverse Floating Rate Mortgage Securities	17,879,247
Interest Only Asset-Backed Securities0.4%
110,512	1	Banc of America Funding Corp., Ser. 2, Class 1A19, 0.528%,
3/25/37	691,670
81	1,6	Morgan Stanley Capital Trust I, Ser. HF1, Class X, 2.25%,
6/15/17	4
		Sterling Coofs Trust,
15,750		Ser. 1, 2.365%, 4/15/29	698,905
11,244	6	Ser. 2, 2.081%, 3/30/30	302,195
		Total Interest Only Asset-Backed Securities	1,692,774
Interest Only Mortgage-Backed
Securities12.7%
1,135		ABN Amro Mortgage Corp., Ser. 4, Class A2, 5.50%,
3/25/33	28,901
229,295	1	Banc of America Mortgage Securities, Inc., Ser. 3, Class
1A, 0.285%, 5/25/18	1,896,595
25,802	1	Commercial Mortgage Acceptance Corp., Ser. ML1, 0.705%,
11/15/17	458,311
5,770	1,6	Credit Suisse First Boston Mortgage Securities Corp., Ser.
C1, Class AX, 1.486%, 6/20/29	304,690
142,857	1	CWALT, Inc., Ser. 79CB, Class A2, 0.078%,
1/25/36	1,827,318
		Federal Home Loan Mortgage Corp.,
1,972	1	Ser. 60, Class HS, 1.125%, 4/25/24	7,746
		Ser. 176, Class M, 1,010.00%,
7/15/21	70
	7	Ser. 200, Class R, 98,513.94%,
12/15/22	300
1,735		Ser. 204, Class IO, 6.00%,
5/01/29	407,040
	1	Ser. 1054, Class I, 435.32%,
3/15/21	180
		Ser. 1056, Class KD, 1,084.50%,
3/15/21	1,195
		Ser. 1179, Class O, 1,009.389%,
11/15/21	82
168		Ser. 1706, Class IA, 7.00%,
10/15/23	6,174
59		Ser. 1720, Class PK, 7.50%,
1/15/24	3,125
2,773		Ser. 1914, Class PC, 0.75%,
12/15/11	27,104
719	1	Ser. 2296, Class SA, 2.659%,
3/15/16	40,402
358	1	Ser. 2444, Class ST, 2.879%,
9/15/29	10,985
1,417		Ser. 2542, Class MX, 5.50%,
5/15/22	211,221
2,564		Ser. 2545, Class NI, 5.50%,
3/15/22	310,315
490	1	Ser. 2559, Class IO, 0.50%,
8/15/30	4,929
4,079		Ser. 2561, Class EW, 5.00%,
9/15/16	330,514
10,535		Ser. 2611, Class QI, 5.50%,
9/15/32	1,911,501
1,084		Ser. 2633, Class PI, 4.50%,
3/15/12	5,691
16,307	1	Ser. 2647, Class IV, 1.959%,
7/15/33	1,159,405
3,156		Ser. 2653, Class MI, 5.00%,
4/15/26	270,379
3,750		Ser. 2658, Class PI, 4.50%,
6/15/13	87,123
2,985		Ser. 2672, Class TQ, 5.00%,
3/15/23	61,706
3,633		Ser. 2687, Class IL, 5.00%,
9/15/18	346,465
1,352		Ser. 2687, Class IQ, 5.50%,
9/15/22	4,898
3,237		Ser. 2693, Class IB, 4.50%,
6/15/13	72,307
2,454		Ser. 2694, Class LI, 4.50%,
7/15/19	201,286
4,516		Ser. 2773, Class OX, 5.00%,
2/15/18	490,886
16,428	1	Ser. 2780, Class SM, 0.909%,
4/15/34	417,281
6,727		Ser. 2825, Class NI, 5.50%,
3/15/30	1,461,900
10,587	1	Ser. 2827, Class SR, 0.909%,
1/15/22	305,563
17,570	1	Ser. 2865, Class SR, 0.92%,
10/15/33	952,603
11,899	1	Ser. 2865, Class SV, 1.327%,
10/15/33	1,073,798
1,733		Ser. 2949, Class IO, 5.50%,
3/15/35	206,125
33,027	1	Ser. 2990, Class WR, 1.519%,
6/15/35	1,984,065
93,788	1	Ser. 3122, Class IS, 1.609%,
3/15/36	5,412,475
90,419	1	Ser. 3225, Class EY, 1.199%,
10/15/36	4,422,749
3,534		Ser. 3299, Class TI, 5.00%,
4/15/37	668,994

		Description	Value
Interest Only Mortgage-Backed
Securities(contd)
		Federal National Mortgage Assoc.,
$ 200		Ser. 5, Class H, 9.00%, 1/25/22	$ 45,871
11		Ser. 7, Class 2, 8.50%, 4/01/17	2,133
3,969		Ser. 9, Class BI, 5.50%,
10/25/22	562,098
1		Ser. 12, Class C, 1,016.897%,
2/25/22	15,735
3,608		Ser. 13, Class IG, 5.00%,
10/25/22	86,885
738	1	Ser. 33, Class SG, 3.225%,
3/25/09	13,452
50,106	1	Ser. 36, Class SP, 1.828%,
5/25/36	3,367,058
		Ser. 38, Class N, 1,008.50%,
4/25/21	438
837		Ser. 43, Class LC, 6.00%,
3/25/34	198,642
		Ser. 50, Class G, 1,158.628%,
12/25/21	7,002
674	1	Ser. 50, Class SI, 1.20%,
4/25/23	21,001
3,006		Ser. 51, Class IE, 5.50%,
4/25/26	58,423
5,340		Ser. 55, Class GI, 5.00%,
7/25/19	458,903
12,224	1	Ser. 55, Class SB, 1.278%,
7/25/35	511,975
3,707	1	Ser. 59, Class S, 4.917%,
10/25/22	569,668
576	1	Ser. 60, Class SB, 1.60%,
10/25/22	25,680
146		Ser. 62, Class IC, 5.50%,
7/25/15	1,538
5,630		Ser. 66, Class CI, 5.00%,
7/25/33	1,376,325
1,945	1	Ser. 68, Class SC, 3.225%,
1/25/24	103,751
13,693	1	Ser. 73, Class ST, 1.258%,
8/25/35	546,888
4,094		Ser. 88, Class TI, 4.50%,
11/25/13	109,742
21		Ser. 89, Class 2, 8.00%,
6/01/18	3,910
29,807	1	Ser. 90, Class JH, 1.828%,
11/25/34	1,667,334
13,213		Ser. 90, Class M, 6.00%,
1/25/28	2,423,410
7		Ser. 94, Class 2, 9.50%,
8/01/21	1,649
		Ser. 99, Class L, 930.00%,
8/25/21	6,013
3,741		Ser. 122, Class IC, 5.00%,
9/25/18	368,323
		Ser. 123, Class M, 1,009.50%,
10/25/20	1,135
25	1	Ser. 136, Class S, 15.214%,
11/25/20	32,457
		Ser. 139, Class PT, 648.35%,
10/25/21	7,582
2,186	1	Ser. 199, Class SB, 2.625%,
10/25/23	113,348
633		Ser. W4, Class IO, 6.50%,
12/25/28	135,539
89		First Boston Mortgage Securities Corp., Ser. C, Class I,
10.965%, 4/25/17	21,021
42,028	1	First Horizon Alternative Mortgage Securities, Ser. FA2,
Class 1A4, 0.628%, 5/25/36	380,454
6,323	1	General Motors Acceptance Corp., Commercial Mortgage
Securities, Inc., Ser. C1, Class X, 1.315%, 7/15/27	320,421
7,835	1,6	Goldman Sachs Mortgage Securities Corp., Ser. 5, 0.97%,
2/19/25	154,243
		Government National Mortgage Assoc.,
16,722	1	Ser. 18, Class SL, 1.203%,
2/20/35	773,287
1,650		Ser. 39, Class ID, 5.00%,
5/20/33	459,300
1,945		Ser. 58, Class IT, 5.50%,
7/20/33	255,838
1,717		Ser. 75, Class IJ, 5.50%,
7/20/25	10,022
16,629	1	Ser. 89, Classl SA, 0.84%,
10/16/33	592,706
153,908		Indymac Index Mortgage Loan Trust, Ser. AR33, Class 4AX,
0.165%, 1/25/37	700,218
57		Kidder Peabody Acceptance Corp., Ser. B, Class A2, 9.50%,
4/22/18	13,028
24,598		MASTR Adjustable Rate Mortgages Trust, Ser. 3, Class 3AX,
0.977%, 4/25/34	352,827
1,311		MASTR Alternative Loan Trust, Ser. 9, Class 15X2, 6.00%,
1/25/19	245,404
1,609		Morgan Stanley Capital Trust I, Ser. 3, Class 1AX, 5.00%,
5/25/19	237,158
66,154	1	Sequoia Mortgage Trust, Ser. 2, Class XA, 0.775%,
3/20/35	686,683
6,379	4	Small Business Administration, Ser. 1, 1.381%,
4/01/15	63,790

See Notes to Financial Statements. — 29	ANNUAL REPORT	OCTOBER 31, 2007

Portfolio of Investments as of October 31, 2007
(Percentages
shown are based on Net Assets)

		Description	Value
Interest Only Mortgage-Backed
Securities(contd)
		Structured Adjustable Rate Mortgage Loan Trust,
$ 14,185	1	Ser. 2, Class 4AX, 5.50%,
3/25/36	$ 1,346,970
44,655	1	Ser. 7, Class 3AS, 2.548%,
8/25/36	4,353,522
5,240	1	Ser. 18, Class 7AX, 5.50%,
9/25/35	751,739
4,082		Ser. 20, Class 3AX, 5.50%,
10/25/35	755,438
85,907	1	Vendee Mortgage Trust, Ser. 2, Class 1, 0.052%,
5/15/29	215,679
		Total Interest Only Mortgage-Backed Securities	52,928,053
Principal Only Mortgage-Backed
Securities4.9%
		Countrywide Home Loans, Inc.,
5,329	8	Ser. 26, 4.944%, 8/25/33	4,217,491
1,043	8	Ser. J4, 5.142%, 6/25/33	745,815
1,427	8	Ser. J5, 4.911%, 7/25/33	847,321
1,152	8	Ser. J8, 4.787%, 9/25/23	882,292
		Drexel Burnham Lambert, Inc.,
22	8	Ser. K, Class 1, 11.50%,
9/23/17	22,301
269	8	Ser. V, Class 1, 11.50%,
9/01/18	240,360
		Federal Home Loan Mortgage Corp.,
233	8	Ser. 8, Class A10, 6.737%,
11/15/28	208,620
153	8	Ser. 1418, Class M, 7.50%,
11/15/22	144,736
577	8	Ser. 1571, Class G, 7.50%,
8/15/23	538,553
2,044	8	Ser. 1691, Class B, 7.50%,
3/15/24	1,825,583
184	8	Ser. 1739, Class B, 7.50%,
2/15/24	170,847
		Federal National Mortgage Assoc.,
298	8	Ser. 2, Class KB, 8.00%,
1/25/23	251,437
43	8	Ser. 7, Class J, 10.00%,
2/25/21	36,451
896	8	Ser. 13, Class PR, 6.50%,
3/25/32	721,798
143	8	Ser. 51, Class E, 8.00%,
2/25/23	124,053
24	8	Ser. 70, Class A, 7.00%,
5/25/23	20,709
47	8	Ser. 167, Class D, 8.50%,
10/25/17	45,077
43	8	Ser. 203, Class 1, 8.00%,
2/01/23	36,053
30	8	Ser. 228, Class 1, 7.00%,
5/01/23	24,248
1,947	8	Ser. 249, Class B, 7.50%,
11/25/23	1,662,352
232	8	Ser. 273, Class 1, 7.00%,
7/01/26	186,899
4,422	8	Ser. 328, Class 1, 6.00%,
11/01/32	3,411,524
3,590	8	Ser. 338, Class 1, 5.50%,
6/01/33	2,672,048
336	8	Ser. W4, Class PO, 5.985%,
2/25/29	263,208
314	8	MASTR Asset Securitization Trust, Ser. 3, Class 4A15, 5.634%, 3/25/34	173,253
983	8	Residential Asset Securitization Trust, Ser. A15, Class
1A8, 5.713%, 2/25/36	502,836
12	4,8	Structured Mortgage Asset Residential Trust, Ser. 3C,
Class CX, 7.031%, 4/25/24	11,439
956	8	Washington Mutual, Ser. 9, Class CP, 5.112%,
11/25/35	721,550
		Total Principal Only Mortgage-Backed Securities	20,708,854
Collateralized
Mortgage Obligation Residual Securities0.0%
		Collateralized Mortgage Obligation Trust,
	7	Ser. 40, Class R, 580.50%,
4/01/18	338
	7	Ser. 42, Class R, 6,000.00%,
10/01/14	3,440
		Federal Home Loan Mortgage Corp.,
	7	Ser. 19, Class R, 9,757.652%,
3/15/20	2,952
	7	Ser. 75, Class R, 9.50%,
1/15/21	5
	7	Ser. 75, Class RS, 17.757%,
1/15/21	5
	7	Ser. 173, Class R, 9.00%,
11/15/21	23
	7	Ser. 173, Class RS, 9.103%,
11/15/21	23
13	4	Painewebber CMO Trust, Ser. 88 M, Class 6, 13.80%,
9/01/18
Total Collateralized Mortgage Obligation Residual
Securities			6,786
U.S. Government and
Agency Securities9.9%
		Overseas Private Investment Corp.,
325		4.09%, 5/29/12	307,885
910	1	4.30%, 5/29/12	909,323
683		4.64%, 5/29/12	692,592
386		4.68%, 5/29/12	367,702
2,928		4.87%, 5/29/12	2,996,217
350	1	5.40%, 5/29/12	376,330

		Description	Value
U.S. Government and Agency
Securities(contd)
$ 13,000	3	Resolution Funding Corp., Ser. B,
Zero Coupon, 4/15/30	$ 4,333,823
		Small Business Administration,
612		Ser. 20C-1, 7.15%, 3/01/17	634,079
616		Ser. 20E-1, 7.60%, 5/01/16	638,742
816		Ser. 20F-1, 7.55%, 6/01/16	846,061
560		Ser. 20G-1, 7.70%, 7/01/16	582,014
833		Ser. 20H-1, 7.25%, 8/01/16	862,324
1,492		Ser. 20K-1, 6.95%, 11/01/16	1,538,213
60,000	3	U.S. Treasury Strip, Zero Coupon,
11/15/24	26,123,880
		Total U.S. Government and Agency Securities	41,209,185
Corporate Bond0.6%
2,448	4	Structured Asset Receivable
Trust, 5.68%, 1/21/10	2,423,798
Commercial Mortgage-Backed Securities1.5%
2,420	1	Credit Suisse Mortgage Capital Certificates, Ser. C2, Class A3, 5.542%, 1/15/49	2,394,680
3,500		First Union Commercial Mortgage Securities, Inc., Ser. C2,
Class D, 7.12%, 11/18/29	3,757,506
		Total Commercial Mortgage-Backed Securities	6,152,186
Asset-Backed Securities1.7%
5,890	1	First Franklin Mortgage Loan Asset Backed Certificates, Ser. FF2, Class M2, 5.313%, 3/25/35	5,414,503
1,875	1	Securitized Asset Backed Receivables LLC Trust, Ser. OP2,
Class M1, 5.303%, 10/25/35	1,730,120
		Total Asset-Backed Securities	7,144,623
		Total Long-Term Investments (cost $444,968,496)	437,744,481
SHORT-TERM INVESTMENT0.4%
U.S. Government and Agency Discount
Notes0.4%
1,600	9	Federal Home Loan Bank Disc. Notes, 4.401%, 11/01/07 (cost
$1,600,000)	1,600,000
BORROWED BOND AGREEMENT8.3%
34,721	11	Lehman Brothers, Inc., 4.64%, 11/08/07 (cost
$34,720,656)	34,720,656


OUTSTANDING OPTIONS PURCHASED2.2%
	Interest Rate Swaps,
7,300	Trust pays 3-month LIBOR, Trust receives
5.39%, expires 3/19/12	296,161
31,965	Trust pays 3-month LIBOR, Trust receives
5.495%, expires 5/08/12	1,394,313
5,500	Trust pays 3-month LIBOR, Trust receives
5.52%, expires 9/21/36	324,406
31,965	Trust pays 3-month LIBOR, Trust receives
5.725%, expires 5/24/12	1,253,348
2,800	Trust pays 3-month LIBOR, Trust receives
5.78%, expires 8/09/10	148,512
8,640	Trust pays 3-month LIBOR, Trust receives
6.025%, expires 6/08/12	531,187
8,640	Trust pays 3-month LIBOR, Trust receives
6.025%, expires 6/08/12	272,765
7,300	Trust pays 5.39%, Trust receives 3-month
LIBOR, expires 3/19/12	357,116
12,400	Trust pays 5.47%, Trust receives 3-month
LIBOR, expires 5/08/12	531,960
12,400	Trust pays 5.47%, Trust receives 3-month
LIBOR, expires 5/08/12	579,700
31,965	Trust pays 5.495%, Trust receives 3-month
LIBOR, expires 5/08/12	1,467,833
5,500	Trust pays 5.52%, Trust receives 3-month
LIBOR, expires 9/21/36	373,168

See Notes to Financial Statements. — ANNUAL REPORT	OCTOBER 31, 2007	30

Portfolio of Investments as of October 31, 2007
(Percentages
shown are based on Net Assets)

	Description	Value
OUTSTANDING OPTIONS PURCHASED(contd)
31,965	Trust pays 5.725%, Trust receives 3-month LIBOR, expires
5/24/12	$ 1,625,420
2,800	Trust pays 5.78%, Trust receives 3-month LIBOR, expires
8/09/10	77,446
	Total Outstanding Options Purchased (cost
$8,039,528)	9,233,335
	Total Investments before borrowed bonds, TBA
sale commitments, and outstanding options written (cost $489,328,680 10 )	483,298,472


BORROWED BOND(8.5)%
$ (34,505	)	U.S. Treasury Notes, 4.75%, 5/31/12 (proceeds
$34,289,344)	(35,402,682	)
TBA SALE
COMMITMENTS(12.1)%
		Federal National Mortgage Assoc.,
(19,800	)	5.00%, 11/13/37	(18,989,428	)
(15,900	)	5.50%, 11/13/37	(15,666,460	)
(16,000	)	6.00%, 11/13/37	(16,115,008	)
		Total TBA Sale Commitments (proceeds
$49,863,740)	(50,770,896	)


OUTSTANDING OPTIONS
WRITTEN(2.7)%
(23	)	Eurodollar Future, expiring 12/17/07	(28,125	)
(38	)	Eurodollar Future, expiring 3/17/08 Interest Rate
Swaps,	(56,437	)
(5,700	)	Trust pays 3-month LIBOR, Trust receives 5.135%, expires
4/21/08	(97,385	)
(7,300	)	Trust pays 3-month LIBOR, Trust receives 5.148%, expires
3/19/08	(119,063	)
(19,500	)	Trust pays 3-month LIBOR, Trust receives 5.448%, expires
5/07/10	(1,299,480	)
(3,800	)	Trust pays 3-month LIBOR, Trust receives 5.46%, expires
8/22/08	(52,272	)
(5,400	)	Trust pays 3-month LIBOR, Trust receives 5.485%, expires
10/28/19	(158,647	)
(12,400	)	Trust pays 3-month LIBOR, Trust receives 5.67%, expires
1/04/10	(315,828	)
(19,495	)	Trust pays 3-month LIBOR, Trust receives 5.685%, expires
5/24/10	(1,024,462	)
(63,930	)	Trust pays 3-month LIBOR, Trust receives 5.88%, expires
6/23/08	(3,831,325	)
(7,300	)	Trust pays 5.115%, Trust receives 3-month LIBOR, expires
3/19/08	(118,698	)
(5,700	)	Trust pays 5.135%, Trust receives 3-month LIBOR, expires
4/21/08	(97,385	)
(19,500	)	Trust pays 5.448%, Trust receives 3-month LIBOR, expires
5/07/10	(1,241,955	)
(3,800	)	Trust pays 5.46%, Trust receives 3-month LIBOR, expires
8/22/08	(131,135	)
(5,400	)	Trust pays 5.485%, Trust receives 3-month LIBOR, expires
10/28/19	(212,156	)
(12,400	)	Trust pays 5.67%, Trust receives 3-month LIBOR, expires
1/04/10	(599,912	)

		Description	Value
OUTSTANDING OPTIONS
WRITTEN(contd)
(19,495	)	Trust pays 5.685%, Trust receives 3-month LIBOR, expires
5/24/10	$ (1,567,203	)
(63,930	)	Trust pays 5.88%, Trust receives 3-month LIBOR, expires
6/23/08	(265,310	)
		Total Outstanding Options Written (premium received $9,904,416)	(11,216,778	)
Total investments net of borrowed bonds,
TBA sale commitments and outstanding options written92.4%			$ 385,908,116
Other assets in excess of
liabilities7.6%			31,742,835
Net Assets100%			$ 417,650,951

| 1 | Variable rate security. Rate
shown is interest rate as of October 31, 2007. |
| --- | --- |
| 2 | Security, or a portion thereof,
pledged as collateral with a value of $6,412,510 on 123 long U.S. Treasury
Note futures contracts expiring December 2007, 686 short Eurodollar futures
contracts expiring December 2007 to September 2009, 3,506 short U.S. Treasury
Note futures contracts expiring December 2007 and 463 short U.S. Treasury
Bond futures contracts expiring December 2007. The notional value of such
contracts on October 31, 2007 was $756,077,952, with an unrealized loss of
$4,500,487. |
| 3 | Entire or partial principal
amount pledged as collateral for reverse repurchase agreements. See Note 4 in
the Notes to Financial Statements for details of open reverse repurchase
agreements. |
| 4 | Illiquid security. As of October
31, 2007, the Trust held 0.7% of its net assets, with a current market value
of $2,789,604, in these securities. |
| 5 | Represents an investment in an
affiliate. |
| 6 | Security is not registered under
the Securities Act of 1933. These securities may be resold in transactions in
accordance with Rule 144A under that Act, to qualified institutional buyers.
As of October 31, 2007, the Trust held 0.2% of its net assets, with a current
market value of $775,270, in securities restricted as to resale. |
| 7 | Security is fair valued. |
| 8 | Rate shown is effective yield of
the underlying collateral as of October 31, 2007. |
| 9 | Rate shown is the yield to
maturity as of the date of purchase. |
| 10 | Cost for federal income tax
purposes is $489,476,259. The net unrealized depreciation on a tax basis is
$6,177,787, consisting of $21,888,429 gross unrealized appreciation and
$28,066,216 gross unrealized depreciation. |
| 11 | See Note 1 in the Notes to
Financial Statements for details of borrowed bond agreements. |

See Notes to Financial Statements. — 31	ANNUAL REPORT	OCTOBER 31, 2007

| Portfolio of Investments as of October 31,
2007 |
| --- |
| (Percentages shown are based on Net Assets) |

		Description	Value
LONG-TERM
INVESTMENTS133.7%
Corporate
Bonds49.1%
Aerospace
& Defense1.5%
$ 1,560	1	AAR Corp., Ser. A2, 8.39%, 5/15/11	$ 1,575,600
745	2	Bombardier, Inc., 8.00%, 11/15/14 (Canada)	774,800
5,236		DI Finance/DynCorp Intl., Ser. B, 9.50%, 2/15/13	5,563,250
		DRS Technologies, Inc.,
330		6.875%,
11/01/13	330,000
310		7.625%,
2/01/18	316,975
755		Sequa Corp., 9.00%, 8/01/09	809,737
570		TransDigm, Inc., 7.75%, 7/15/14	579,975
		Total Aerospace & Defense	9,950,337
Automotive2.4%
850		Accuride Corp., 8.50%, 2/01/15	799,000
		AutoNation, Inc.,
690		7.00%,
4/15/14	667,575
690	3	7.243%,
4/15/13	674,475
7,500	4	DaimlerChrysler NA Holding Corp., 4.05%, 6/04/08	7,439,415
500		Ford Capital BV, 9.50%, 6/01/10 (Netherlands)	503,750
1,575		Lear Corp., Ser. B, 8.75%, 12/01/16	1,512,000
1,000	4	Metaldyne Corp., 11.00%, 11/01/13	930,000
3,500		Sonic Automotive, Inc., Ser. B, 8.625%, 8/15/13	3,535,000
		Total Automotive	16,061,215
Basic
Materials3.9%
1,405		Abitibi-Consolidated, Inc., 6.00%, 6/20/13 (Canada)	1,032,675
2,200		AK Steel Corp., 7.75%, 6/15/12	2,244,000
1,100		American Pacific Corp., 9.00%, 2/01/15	1,127,500
670	3	Bowater, Inc., 8.694%, 3/15/10	613,050
120		Chemtura Corp., 6.875%, 6/01/16	114,600
750		CPG Intl. I, Inc., 10.50%, 7/01/13	750,000
		Domtar, Inc., (Canada)
300		7.125%,
8/15/15	297,000
140		7.875%,
10/15/11	143,850
		Freeport-McMoRan Copper & Gold, Inc.,
4,585	4	8.375%,
4/01/17	5,020,575
750	3	8.394%,
4/01/15	774,375
		Huntsman LLC,
1,950	4	11.625%,
10/15/10	2,067,000
310		12.00%,
7/15/12	337,125
		Ineos Group Holdings Plc (United Kingdom)
1,490		7.875%,
2/07/16 (EUR)	1,985,671
2,885	2	8.50%,
2/15/16	2,740,750
2,225		Innophos, Inc., 8.875%, 8/15/14	2,241,687
980	2	Key
Plastics LLC/Key Plastics Finance Corp., 11.75%, 3/15/13	833,000
560		Lyondell Chemical Co., 10.50%, 6/01/13	603,400
		NewPage Corp.,
810		10.00%,
5/01/12	856,575
1,500	3,4	11.161%,
5/01/12	1,616,250
300		12.00%,
5/01/13	324,000
500	3	NOVA Chemicals Corp., 8.484%, 11/15/13 (Canada)	491,250
730		Terra Capital, Inc., Ser. B, 7.00%, 2/01/17	730,000
		Total Basic Materials	26,944,333
Building
& Development0.9%
3,000	4	DR Horton, Inc., 5.875%, 7/01/13	2,688,714
		Goodman Global Holding Co., Inc.,
2,000		7.875%,
12/15/12	2,090,000
269	3	8.36%,
6/15/12	270,345
665		Nortek, Inc., 8.50%, 9/01/14	588,525
270		North
American Energy Partners, Inc., 8.75%, 12/01/11 (Canada)	272,700
		Total Building & Development	5,910,284

		Description
Commercial
Services0.2%
$ 350		FTI
Consulting, Inc., 7.75%, 10/01/16	$ 365,750
875	2	Quebecor
World, Inc., 9.75%, 1/15/15 (Canada)	853,125
		Total
Commercial Services	1,218,875
Consumer
Products5.0%
2,085	3	Ames True
Temper, Inc., 9.243%, 1/15/12	2,001,600
130	3	Avis Budget
Car Rental LLC/Avis Budget Finance, Inc., 8.058%, 5/15/14	128,375
		General
Nutrition Centers, Inc.,
2,250		9.85%,
3/15/14	2,165,625
1,880		10.75%,
3/15/15	1,828,300
5,000	4	Group 1
Automotive, Inc., 8.25%, 8/15/13	5,000,000
4,400	4	JCPenney
Co., Inc., 8.00%, 3/01/10	4,687,540
1,475		Lazy Days
RV Center, Inc., 11.75%, 5/15/12	1,327,500
		Michaels
Stores, Inc.,
2,210		10.00%,
11/01/14	2,226,575
2,800	4	11.375%,
11/01/16	2,793,000
73		Neiman-Marcus
Group, Inc., 9.00%, 10/15/15	77,015
575		Quiksilver,
Inc., 6.875%, 4/15/15	536,187
1,000	4	Reynolds
American, Inc., 7.625%, 6/01/16	1,081,917
		Rite Aid
Corp.,
3,440	4	7.50%,
3/01/17	3,199,200
5,000	4	8.125%,
5/01/10	5,031,250
1,790	4	Sally
Holdings LLC, 10.50%, 11/15/16	1,781,050
		Total
Consumer Products	33,865,134
Containers
& Packaging1.0%
		Berry
Plastics Holding Corp.,
1,210		8.875%,
9/15/14	1,240,250
835	3	9.569%,
9/15/14	837,087
885		Crown
Americas LLC/Crown Americas Capital Corp., 7.75%, 11/15/15	911,550
585		Graham
Packaging Co., Inc., 8.50%, 10/15/12	580,613
1,370	2,3	Impress
Holdings BV, 8.368%, 9/15/13 (Netherlands)	1,362,813
2,020		Pregis
Corp., 12.375%, 10/15/13	2,201,800
		Total
Containers & Packaging	7,134,113
Ecological
Services & Equipment0.6%
2,000		Casella
Waste Systems, Inc., 9.75%, 2/01/13	2,040,000
2,065		Waste
Services, Inc., 9.50%, 4/15/14	2,065,000
		Total
Ecological Services & Equipment	4,105,000
Energy4.9%
5,500	2	AES Corp.,
8.75%, 5/15/13	5,816,250
550		Berry
Petroleum Co., 8.25%, 11/01/16	561,000
1,210		Chaparral
Energy, Inc., 8.50%, 12/01/15	1,128,325
		Chesapeake
Energy Corp.,
650		6.375%,
6/15/15	630,500
100		6.875%,
11/15/20	97,750
4,000	4	7.50%,
9/15/13	4,110,000
		Compagnie
Generale de Geophysique-Veritas (France)
255		7.50%,
5/15/15	260,100
420		7.75%,
5/15/17	432,600
925		Compton
Petroleum Finance Corp., 7.625%, 12/01/13 (Canada)	885,687
1,640	1	East
Cameron Gas Co., 11.25%, 7/09/19 (Cayman Islands)	1,574,400
590		Edison
Mission Energy, 7.50%, 6/15/13	598,113
400		El Paso
Natural Gas Co., 8.875%, 6/15/32	466,279
159		Elwood
Energy LLC, 8.159%, 7/05/26	162,789
		Encore
Acquisition Co.,
250		6.00%,
7/15/15	226,250
200		7.25%,
12/01/17	191,500
495		Exco
Resources, Inc., 7.25%, 1/15/11	488,813
380	4	Grant
Prideco, Inc., Ser. B, 6.125%, 8/15/15	381,900
895		KCS Energy,
Inc., 7.125%, 4/01/12	881,575
4,324	4	Midwest
Generation LLC, Ser. B, 8.56%, 1/02/16	4,648,585
625		Mirant
Americas Generation LLC, 8.30%, 5/01/11	632,031

See Notes to Financial Statements. — ANNUAL REPORT	OCTOBER 31, 2007	32

| Portfolio of Investments as of October 31,
2007 |
| --- |
| (Percentages shown are based on Net Assets) |

		Description	Value
Energy(contd)
		NRG Energy,
Inc.,
$ 210		7.25%, 2/01/14	$ 210,000
1,185		7.375%,
2/01/16	1,182,037
1,990	2	OPTI, Inc.,
8.25%, 12/15/14 (Canada)	1,994,975
580		Orion Power
Holdings, Inc., 12.00%, 5/01/10	640,900
1,515		Sabine Pass
LNG LP, 7.50%, 11/30/16	1,484,700
1,240	2	SemGroup LP,
8.75%, 11/15/15	1,190,400
725	2	Targa
Resources, Inc., 8.50%, 11/01/13	732,250
1,550		Whiting
Petroleum Corp., 7.25%, 5/01/12-5/01/13	1,523,675
		Total
Energy	33,133,384
Entertainment &
Leisure0.4%
505		AMC
Entertainment, Inc., 11.00%, 2/01/16	546,663
1,430	2	Greektown
Holdings LLC, 10.75%, 12/01/13	1,422,850
1,020		Harrahs
Operating Co., Inc., 5.75%, 10/01/17	752,250
100		Wynn Las
Vegas LLC/Wynn Las Vegas Capital Corp., 6.625%, 12/01/14	98,250
		Total
Entertainment & Leisure	2,820,013
Financial
Institutions5.2%
		American
Real Estate Partners LP/American Real Estate
		Finance
Corp.,
1,480		7.125%,
2/15/13	1,443,000
5,860	4	8.125%,
6/01/11	5,903,950
839	2,3	BMS
Holdings, Inc., 12.40%, 2/15/12	805,682
		Ford Motor
Credit Co. LLC,
2,800		7.375%,
2/01/11	2,640,938
1,665		7.80%,
6/01/12	1,564,392
940	3	7.993%,
1/13/12	870,229
60	3	9.693%,
4/15/12	60,570
2,735	4	General
Motors Acceptance Corp., 6.875%, 8/28/12	2,465,586
3,716	2	iPayment
Investors LP, 11.625%, 7/15/14	3,827,972
950		iPayment,
Inc., 9.75%, 5/15/14	912,000
		LVB
Acquisition Merger Sub, Inc.,
500	2	10.00%,
10/15/17	513,750
500	2	10.375%,
10/15/17	506,250
670	2	11.625%,
10/15/17	682,563
2,590	2	Momentive
Performance Materials, Inc., 11.50%, 12/01/16	2,499,350
		Rainbow
National Services LLC,
925	2	8.75%,
9/01/12	962,000
3,134	2	10.375%,
9/01/14	3,447,400
4,410	5	Structured
Asset Receivable Trust, 5.68%, 1/21/10	4,365,591
220	3	Universal
City Florida Holding Co. I/II, 9.661%, 5/01/10	224,950
2,780	2	Wimar Opco
LLC/Wimar Opco Finance Corp., 9.625%, 12/15/14	2,085,000
		Total
Financial Institutions	35,781,173
Health Care1.1%
3,000		Norcross
Safety Products LLC/Norcross Capital Corp., 9.875%, 8/15/11	3,112,500
1,985		Tenet
Healthcare Corp., 6.50%, 6/01/12	1,682,288
2,948	2	Viant
Holdings, Inc., 10.125%, 7/15/17	2,771,120
		Total
Health Care	7,565,908
Industrials1.4%
1,700	2	AGY Holding
Corp., 11.00%, 11/15/14	1,674,500
650		Hexcel
Corp., 6.75%, 2/01/15	638,625
905		Park-Ohio
Industries, Inc., 8.375%, 11/15/14	843,913
		RBS Global,
Inc./Rexnord Corp.,
2,000		9.50%,
8/01/14	2,065,000
1,430		11.75%,
8/01/16	1,515,800
3,125	2	Sunstate
Equipment Co. LLC, 10.50%, 4/01/13	3,000,000
		Total
Industrials	9,737,838
Media8.6%
		Affinion
Group, Inc.,
1,975		10.125%,
10/15/13	2,058,937
850		11.50%,
10/15/15	886,125
420		American
Media Operations, Inc., Ser. B, 10.25%, 5/01/09	402,150

		Description	Value
Media(contd)
$ 800	3	Cablevision
Systems Corp., Ser. B, 9.644%, 4/01/09	$ 822,000
520		CanWest
MediaWorks, Inc., 8.00%, 9/15/12 (Canada)	507,000
1,395		Charter
Communications Holdings I LLC/Charter Communications Holdings I Capital Corp., 11.00%, 10/01/15	1,353,150
2,880		Charter
Communications Holdings II LLC/Charter Communications Holdings II Capital Corp., 10.25%, 9/15/10	2,937,600
865		Ser. B,
10.25%, 9/15/10	880,138
2,425		CMP
Susquehanna Corp., 9.875%, 5/15/14	2,227,969
6,685	4	Comcast
Cable Communications, Inc., 6.875%, 6/15/09	6,854,899
1,650		Dex Media
West LLC/Dex Media Finance Co., Ser. B, 9.875%, 8/15/13	1,759,313
500		DirecTV
Holdings LLC/DirecTV Financing Co., 8.375%, 3/15/13	522,500
		EchoStar
DBS Corp.,
2,800		5.75%,
10/01/08	2,793,000
1,330		7.00%,
10/01/13	1,384,863
200		7.125%,
2/01/16	209,000
2,525		Idearc,
Inc., 8.00%, 11/15/16	2,531,312
2,000	2,3	ION Media
Networks, Inc., 8.493%, 1/15/12	2,005,000
2,105		Network
Communications, Inc., 10.75%, 12/01/13	2,118,156
2,790		Nexstar
Finance, Inc., 7.00%, 1/15/14	2,678,400
		Nielsen
Finance LLC/Nielsen Finance Co.,
1,400	6	9.115%,
8/01/16	1,011,500
4,340		10.00%,
8/01/14	4,567,850
3,465		RH
Donnelley Corp., Ser. A-3, 8.875%, 1/15/16	3,465,000
2,000		Salem
Communications Corp., 7.75%, 12/15/10	2,007,500
460		Sinclair
Broadcast Group, Inc., 4.875%, 7/15/18	417,019
185		Sirius
Satellite Radio, Inc., 9.625%, 8/01/13	183,844
4,500	2	TL
Acquisitions, Inc., 10.50%, 1/15/15	4,477,500
1,465	2	Univision
Communications, Inc., 9.75%, 3/15/15	1,435,700
2,390		Vertis,
Inc., 9.75%, 4/01/09	2,390,000
4,342		Young Broadcasting,
Inc., 10.00%, 3/01/11	4,081,480
		Total Media	58,968,905
Real
Estate0.3%
2,000	3	Rouse Co., 5.375%, 11/26/13	1,812,352
Technology2.6%
		Amkor
Technology, Inc.,
2,063		7.75%,
5/15/13	1,995,952
600		9.25%,
6/01/16	613,500
1,965	4	Celestica,
Inc., 7.625%, 7/01/13 (Canada)	1,886,400
		Freescale
Semiconductor, Inc.,
3,015		9.125%,
12/15/14	2,728,575
600	3	9.569%,
12/15/14	551,250
1,625		NXP BV/NXP
Funding LLC, 9.50%, 10/15/15 (Netherlands)	1,535,625
1,835	4	Sanmina-SCI
Corp., 8.125%, 3/01/16	1,610,213
		SunGard
Data Systems, Inc.,
590		9.125%,
8/15/13	601,800
2,600		10.25%,
8/15/15	2,710,500
3,765		Superior
Essex Communications LLC/Essex Group, Inc., 9.00%, 4/15/12	3,717,937
		Total
Technology	17,951,752
Telecommunications7.9%
1,420		Cincinnati
Bell, Inc., 7.25%, 7/15/13	1,423,550
990		Cricket
Communications, Inc., 9.375%, 11/01/14	982,575
5,000	4	Deutsche
Telekom Intl. Finance BV, 8.00%, 6/15/10 (Netherlands)	5,361,380
		Digicel
Group Ltd. (Bermuda)
1,120	2	8.875%,
1/15/15	1,045,856
2,797	2	9.125%,
1/15/15	2,611,856
860	3	Hawaiian
Telcom Communications, Inc., Ser. B, 10.318%, 5/01/13	870,750
2,495		Intelsat
Corp., 9.00%, 6/15/16	2,551,138

See Notes to Financial Statements. — 33	ANNUAL REPORT	OCTOBER 31, 2007

| Portfolio of Investments as of October 31,
2007 |
| --- |
| (Percentages shown are based on Net Assets) |

		Description	Value
Telecommunications(contd)
		Intelsat
Ltd. (Bermuda)
$ 415	3	8.886%,
1/15/15	$ 421,225
1,800		9.25%,
6/15/16	1,867,500
630		11.25%,
6/15/16	677,250
2,815	3	11.409%,
6/15/13	2,934,637
1,470		Intelsat
Subsidiary Holding Co. Ltd., 8.625%, 1/15/15 (Bermuda)	1,492,050
500	2	MetroPCS
Wireless, Inc., 9.25%, 11/01/14	496,250
3,850	2	Nordic
Telephone Co. Holdings A.p.S., 8.875%, 5/01/16 (Denmark)	4,071,375
3,300	2,3	Nortel
Networks Ltd., 9.493%, 7/15/11 (Canada)	3,258,750
3,517		PanAmSat
Corp., 9.00%, 8/15/14	3,587,340
3,287	2,3	ProtoStar I
Ltd., 12.50%, 10/15/12 (Bermuda)	3,451,615
1,364	3	Qwest
Communications Intl., Inc., 9.058%, 2/15/09	1,370,820
		Qwest
Corp.,
1,000		7.875%,
9/01/11	1,055,000
2,500	3	8.944%,
6/15/13	2,665,625
2,675	4	9.125%,
3/15/12	2,929,125
3,595		West Corp.,
11.00%, 10/15/16	3,765,762
1,500	2	Wind
Acquisition Finance S.A., 10.75%, 12/01/15 (Luxembourg)	1,668,750
		Windstream
Corp.,
2,340	4	8.125%,
8/01/13	2,474,550
1,060		8.625%,
8/01/16	1,134,200
		Total Telecommunications	54,168,929
Transportation1.2%
520		American
Airlines, Inc., Ser. 99-1, 7.324%, 4/15/11	513,500
490		Britannia
Bulk Plc, 11.00%, 12/01/11 (United Kingdom)	514,500
1,715		CHC
Helicopter Corp., 7.375%, 5/01/14 (Canada)	1,659,263
2,150		Navios
Maritime Holdings, Inc., 9.50%, 12/15/14 (Marshall Islands)	2,273,625
1,650		Overseas
Shipholding Group, Inc., 8.75%, 12/01/13	1,769,625
1,900	2	St.
Acquisition Corp., 12.50%, 5/15/17	1,211,250
		Total
Transportation	7,941,763
		Total Corporate Bonds	335,071,308
Bank
Loans56.5%
Aerospace
& Defense0.3%
1,750		DI
Finance/DynCorp Intl., Loan B,
		LIBOR +
2.00%, 2/11/11	1,675,789
486		Wesco
Aircraft Hardware Corp., First Lien Loan, LIBOR + 2.25%, 9/29/13	480,375
		Total
Aerospace & Defense	2,156,164
Automotive1.7%
637		IAP
Worldwide Services, Inc., First Lien Loan, LIBOR + 6.25%, 12/30/12	571,731
1,489		Keystone
Automotive Industries, Inc., Loan B, LIBOR + 3.50%, 1/12/12	1,385,778
964		Mark IV
Industries, Inc., First Lien Loan, LIBOR + 2.50%, 6/21/11	927,972
765		Metaldyne
Corp., LIBOR , 1/11/14	745,875
496		Motorsport
Aftermarket Group, Inc., LIBOR + 2.50%, 11/30/13	477,641
		Navistar
Intl. Corp.,
1,000		Revolver
Loan, Unfunded, 0.50%, 1/19/12	980,750
2,750		LIBOR +
3.25%, 1/19/12	2,697,062
921		Rent-A-Center,
Inc., Loan B, LIBOR + 1.75%, 6/30/12	899,519
		Reynolds
& Reynolds Co.,
1,870		LIBOR +
2.00%, 10/26/12	1,821,930
1,250		Second Lien
Loan, LIBOR + 5.50%, 10/26/13	1,246,875
		Total
Automotive	11,755,133

	Description	Value
Basic
Materials2.6%
$ 998	Appleton Papers, Inc., Loan B, LIBOR + 1.75%, 6/05/14	$ 956,977
499	BOC Edwards, LIBOR + 2.00%, 5/31/14	466,331
	Brenntag Holdings (EUR)
282	Loan B6,
LIBOR + 2.00%, 9/15/14	390,878
218	Loan B6b,
LIBOR + 2.00%, 9/15/14	302,615
1,000	Cognis Group, LIBOR, 11/17/13 (EUR)	1,391,641
786	Compass
Minerals Group, Inc., LIBOR + 1.50%, 12/22/12	773,060
550	Huntsman Intl. LLC, Loan B, LIBOR + 1.75%, 4/19/14	545,102
	Ineos Group Holdings Plc,
1,241	Loan A4,
LIBOR + 2.25%, 12/16/12	1,210,496
1,682	Loan B2,
LIBOR + 2.25%, 12/16/13	1,664,679
1,682	Loan C2,
LIBOR + 2.75%, 12/23/14	1,664,223
	Invista BV,
1,283	Loan B1,
LIBOR + 1.50%, 4/29/11	1,259,879
680	Loan B2,
LIBOR + 1.50%, 4/29/11	667,829
1,496	ISP Chemco LLC, Loan B, LIBOR + 1.75%, 6/04/14	1,459,218
1,151	John Maneely Co., Loan B, LIBOR + 3.25%, 12/08/13	1,065,305
1,562	Nalco Co., Loan B, LIBOR + 1.75%, 11/04/10	1,551,152
975	Rockwood
Specialties Group, Inc., Loan E, LIBOR + 1.50%, 12/13/13	957,694
1,611	SP Newsprint, Loan B, LIBOR + 3.75%, 1/09/10	1,562,778
	Total Basic Materials	17,889,857
Building
& Development-2.0%
196	Armstrong
World Industries, Inc., LIBOR + 1.75%, 10/02/13	194,045
1,238	Beacon
Roofing Supply, Inc., Loan B, LIBOR + 2.00%, 9/30/13	1,175,625
	Brand
Energy & Infrastructure Services, Inc.,
498	First Lien
Loan B, LIBOR + 2.25%, 2/07/14	474,698
500	Second Lien
Loan, LIBOR + 6.00%, 2/07/15	477,917
2,481	Building
Materials Holding Corp., PRIME + 1.75%, 3/15/14	2,238,485
1,500	Custom
Building Products, Inc., Second Lien Loan, LIBOR + 5.00%, 4/29/12	1,380,000
250	Euramax
Intl., Inc., Second Lien Loan, LIBOR + 8.00% , 6/29/13	212,908
1,500	Hanley Wood
LLC, LIBOR + 2.25%, 3/08/14	1,233,750
	Lafarge Roofing Holdings, Inc.,
725	Loan B1,
LIBOR + 2.13%, 2/28/14 (EUR)	955,310
296	Loan B2,
LIBOR + 2.13%, 2/28/14 (EUR)	390,196
278	Loan B4,
LIBOR + 0.00%, 2/28/14	251,415
673	Loan C1,
LIBOR, 2/28/15 (EUR)	890,852
346	Loan C2,
LIBOR, 2/28/15 (EUR)	458,268
285	Loan C4,
LIBOR, 2/28/15	258,886
494	Nacco
Industries, Inc., Unfunded, 0.25%, 3/21/13	475,234
485	Nortek,
Inc., Loan B, PRIME + 1.25%, 8/27/11	472,875
800	Rhodes Ranch, First Lien Loan, LIBOR + 3.50%, 11/21/10	724,000
1,870	United
Subcontractors, Inc., First Lien Loan, LIBOR + 3.00%, 12/27/12	1,533,469
	Total Building & Development	13,797,933
Conglomerates1.3%
	Atlantis Plastics, Inc.,
975	First Lien
Loan, LIBOR + 4.00%, 9/22/11	809,250
250	Second Lien
Loan, LIBOR + 9.00%, 3/22/12	207,500
891	Blount Intl., Loan B, PRIME, 8/09/10	870,631
1,946	Colfax Corp., Loan B, LIBOR + 2.25%, 5/30/09	1,923,989
	Invensys Plc,
1,000	Loan A,
LIBOR + 2.00%, 12/15/11	975,000
1,000	Loan B,
LIBOR + 2.13%, 12/15/11 (GBP)	2,042,913
1,122	Sensus
Metering Systems, Inc., Loan B1, LIBOR + 2.00%, 12/17/10	1,099,304
722	St. John
Knits Intl., Inc., Loan B, LIBOR + 3.00%, 3/21/12	707,649
	Total Conglomerates	8,636,236

See Notes to Financial Statements. — ANNUAL REPORT	OCTOBER 31, 2007	34

| Portfolio of Investments as of October 31,
2007 |
| --- |
| (Percentages shown are based on Net Assets) |

		Description
Consumer Products8.1%
$ 1,000		Aearo
Technologies, Inc., Second Lien Loan, LIBOR + 5.50%, 12/01/14	$ 965,000
985		24 Hour
Fitness Worldwide, Inc., Loan B, LIBOR + 2.50%, 6/08/12	965,300
		Advance
Food Co.,
774		Loan B,
PRIME + 0.75%, 3/16/14	739,064
222		TBD,
Unfunded, 3/16/14	212,222
750		American
Safety Razor Co., Second Lien Loan, LIBOR + 6.25%, 1/30/14	746,250
		ARAMARK
Corp.,
178		Letter of
Credit, LIBOR + 2.00%, 1/26/14	173,305
2,487		Loan B,
LIBOR + 2.00%, 1/26/14	2,424,837
448		Arbys
Restaurant Group, Inc., Loan B, LIBOR + 2.25%, 7/25/12	438,529
390		Bare
Escentuals Beauty, Inc., First Lien Loan, LIBOR + 2.25%, 2/18/12	384,738
		Berkline
Bench Craft,
94	7	Loan B,
PRIME + 2.75%, 11/03/11	54,230
1,005	7	Second Lien
Loan, TBD, 5/11/12	50,252
1,244		Brickman
Group Ltd., LIBOR + 2.00%, 1/23/14	1,206,438
1,011		Burlington
Coat Factory Warehouse Corp., Loan B, LIBOR + 2.25%, 5/28/13	945,381
1,090		Central
Garden & Pet Co., Loan B, PRIME + 0.75%, 9/30/12	991,792
		Cenveo
Corp.,
31		Delayed
Draw Loan, LIBOR + 1.75%, 6/21/13	29,806
923		Loan C,
LIBOR + 1.75%, 6/21/13	896,921
435		Chiquita
Brands Intl., Inc., Loan C, LIBOR + 3.00%, 6/28/12	427,253
1,245		Claires
Stores, Inc., Loan B, LIBOR + 2.75%, 5/29/14	1,169,912
993		Coinmach
Corp., Loan B1, Unfunded, 1.25%, 12/19/12	985,492
2,209		Cracker
Barrel, Loan B, LIBOR + 1.50%, 4/27/13	2,144,617
1,500		Culligan
International Co., Second Lien Loan, LIBOR, 4/24/13 (EUR)	1,912,085
995		Davids
Bridal, Inc., LIBOR + 2.00%, 1/31/14	937,788
		Dole Food
Co., Inc.,
468		Letter of
Credit, LIBOR, 4/12/13	453,863
1,038		LIBOR +
2.00%, 4/12/13	1,005,873
3,460		Loan C,
LIBOR + 2.00%, 4/12/13	3,352,910
500		DS Waters
Holdings, Inc., Loan B, LIBOR, 3/07/12	486,250
1,936		Eight
OClock Coffee, First Lien Loan, LIBOR + 2.75%, 11/14/11	1,935,747
672		FTD, Inc.,
LIBOR + 2.00%, 7/28/13	664,045
350		Gold Toe,
Second Lien Loan, LIBOR + 6.00%, 4/30/14	343,000
1,938		JRD
Holdings, Inc., LIBOR + 2.50%, 5/11/14	1,889,063
780		Language
Line, Inc., Loan B1, LIBOR + 3.25%, 6/11/11	757,381
1,000	7	Le-Natures,
Inc., Loan B, LIBOR + 4.00%, 3/01/11	577,500
2,420		Michael
Foods, Inc., Loan B1, LIBOR + 2.00%, 11/21/10	2,382,496
1,440		Neiman-Marcus
Group, Inc., LIBOR + 1.75%, 4/06/13	1,413,836
1,330		New Page,
Loan B, LIBOR + 2.25%, 5/02/11	1,313,308
1,500		Orchard
Supply Hardware Stores Corp., Loan B2, LIBOR + 2.45%, 12/09/07	1,477,500
963		Oriental
Trading Co., LIBOR + 2.25%, 7/31/13	924,585
		OSI Food
Co.,
75		Pre Funded
Revolver, Unfunded, 0.50%, 6/14/13	72,256
922		Loan B,
LIBOR + 2.25%, 6/14/14	886,522
2,910		OSI Group
LLC, LIBOR + 2.00% , 9/02/11	2,829,975
1,164		Pantry,
Inc. (The), Loan B, LIBOR + 1.75%, 5/15/14	1,122,291
397		PETCO
Animal Supplies, Inc., LIBOR + 2.25%, 10/26/13	387,241
591		Pierre
Foods, Inc., Loan B, LIBOR + 4.00%, 6/30/10	580,901
750		Pivotal
Promontory LLC, Second Lien Loan, PRIME + 5.50%, 8/31/11	656,250
1,315		Prestige
Brands Holdings, Inc., Loan B, LIBOR + 2.25%, 4/06/11	1,304,701
1,975		Quiznos
Corp., First Lien Loan, LIBOR + 2.25%, 5/05/13	1,910,263

		Description
Consumer Products(contd)
		Riverdeep
Interactive Learning, Inc.,
$ 402		Bridge
Loan, LIBOR + 7.20%, 12/21/07	$ 400,179
995		Loan B,
LIBOR + 2.75%, 12/20/13	987,318
3,650		ServiceMaster
Co. (The), Bridge Loan, LIBOR + 4.50%, 6/19/08	3,371,687
		Sturm
Foods, Inc.,
1,368		LIBOR +
2.50%, 1/31/14	1,272,356
500		Second Lien
Loan, LIBOR + 7.00%, 7/21/14	458,750
621	7	Synventive
Acquisition, Inc., Mezzanine Loan, LIBOR, 1/31/14	279,656
354		Warnaco,
Inc., Loan B, LIBOR + 1.50%, 1/31/13	349,191
		Wastequip,
Inc.,
311		Delayed
Draw Loan, LIBOR + 2.25%, 2/05/13	293,286
689		Loan B,
LIBOR + 2.25%, 2/05/13	649,215
		Total
Consumer Products	55,590,607
Containers & Packaging2.0%
		Bluegrass
Container Co. LLC,
364		Delayed
Draw Second Lien Loan, LIBOR + 5.00%, 12/30/13	364,318
341		First Lien
Loan, LIBOR + 2.25%, 6/30/13	337,969
1,140		Loan B,
LIBOR + 2.25%, 6/30/13	1,129,527
1,136		Second Lien
Loan, LIBOR + 5.00%, 12/30/13	1,138,494
		Consolidated
Container Co. LLC,
995		First Lien
Loan, LIBOR + 2.25%, 3/28/14	927,837
750		Second Lien
Loan, LIBOR, 9/28/14	648,750
2,456		Georgia-Pacific
Corp., First Lien Loan, LIBOR + 1.75%, 12/20/12	2,396,598
4,975		Graham
Packaging Co. LP, Loan B, LIBOR + 2.25%, 10/07/11	4,869,281
568		Smurfit-Stone
Container Enterprises, Inc., Unfunded, 0.50%, 11/01/10	561,259
1,352		Solo Cup,
Inc., LIBOR + 3.50%, 2/27/11	1,346,182
		Total
Containers & Packaging	13,720,215
Ecological Services &
Equipment0.1%
500		Envirosolutions,
Inc., LIBOR + 3.50%, 7/07/12	470,000
73		Sensus
Metering Systems, Inc., Loan B2, LIBOR + 2.00%, 12/17/10	71,423
		Total
Ecological Services & Equipment	541,423
Energy6.0%
429		AES Corp.,
LIBOR + 1.75%, 4/30/08	425,223
		Big West
Oil LLC,
550		Delayed
Draw Loan, LIBOR + 1.50%, 5/15/14	528,000
448		LIBOR +
2.25%, 5/15/14	429,600
		Coffeyville
Resources LLC,
243		Letter Of
Credit, Unfunded, 0.50%, 12/29/10	240,659
793		Loan D,
PRIME + 3.25%, 12/28/13	784,872
		Coleto
Creek Power,
127		Letter of
Credit, LIBOR + 2.85%, 6/28/13	125,000
1,849		Loan B,
LIBOR + 2.75%, 6/28/13	1,814,531
1,485		Dresser,
Inc., Loan B, LIBOR + 2.50%, 5/04/14	1,452,233
		ElectricInvest
Holding Co. Ltd.,
894		LIBOR +
4.00% , 12/21/12 (EUR)	1,250,814
900		LIBOR +
4.00% , 12/21/12 (GBP)	1,808,212
2,000		Flint, Loan
B9, LIBOR, 11/09/14	1,922,500
		Generac
Power Systems, Inc.,
990		First Lien
Loan, PRIME + 1.50%, 11/09/13	868,372
500		Second Lien
Loan, PRIME + 5.00%, 5/10/14	358,959
1,474		Key Energy
Services, Inc., Loan C, LIBOR +
2.50%, 6/30/12	1,467,302
		MACH Gen
LLC,
70		Letter Of
Credit, Unfunded, 0.50%, 2/22/13	67,887
675		LIBOR +
2.00%, 2/22/14	651,316
496		McJunkin
Corp., Loan B, LIBOR + 3.25%, 1/31/13	493,459
493		MEG Energy
Corp., Loan B, LIBOR + 2.00%, 4/03/13	481,788

See Notes to Financial Statements. — 35	ANNUAL REPORT	OCTOBER 31, 2007

Portfolio of Investments as of October 31, 2007
(Percentages
shown are based on Net Assets)

Principal Amount (000)		Description	Value
Energy(contd)
		Northeast Energy,
$ 159		Letter of Credit, LIBOR + 2.50%,
11/01/13	$ 152,988
1,297		Loan B, LIBOR + 2.50%, 11/01/13	1,251,802
250		Second Lien Loan, LIBOR + 4.50%,
5/01/14	236,875
1,995		Safenet, Inc., Loan B, LIBOR,
4/12/14	1,895,250
		SandRidge Energy, Inc.,
1,500		LIBOR, 4/01/14	1,485,000
1,500		TBD, 4/01/15	1,485,000
15,000		Texas Competitive Electric Holdings Co. LLC, TBD, 10/10/14	14,997,424
		TPF Generation Holdings LLC,
151		Letter of Credit, LIBOR + 2.10%,
12/15/13	147,381
770		Loan B, LIBOR + 2.00%, 12/15/13	753,776
47		Revolver Loan, Unfunded, 0.50%,
12/15/13	46,201
1,477		Trinidad Energy Services Income Trust, LIBOR + 2.50%, 5/13/11	1,462,725
926		Western Refining, LIBOR + 1.75%, 5/30/14	906,567
		Wolf Hollow I LP,
470		Loan B, LIBOR + 2.25%, 6/22/12	437,481
400		Synthetic Letter of Credit, LIBOR +
2.25%, 6/22/12	372,000
100		Synthetic Revolver Loan, LIBOR + 2.25%,
6/22/12	93,000
		Total Energy	40,894,197
Entertainment & Leisure3.4%
		Alpha III,
857		Loan B1, LIBOR + 2.38%,
12/31/13	837,857
643		Loan B2, LIBOR + 2.38%,
12/31/13	628,393
1,000		Loan D, LIBOR, 6/30/14	975,833
1,692		CCM Merger, Inc., Loan B, LIBOR + 2.00%, 7/13/12	1,649,478
1,107		Cinemark, Inc., Loan B, LIBOR + 1.75%, 10/05/13	1,080,323
998		Discovery Channel, Loan B, LIBOR + 2.00%,
5/14/14	983,161
1,980		Greektown Holdings LLC, Loan B, LIBOR + 2.75%, 12/03/12	1,900,800
		Green Valley Ranch Gaming LLC,
479		First Lien Loan, LIBOR + 2.00%,
2/16/14	467,335
1,000		Second Lien Loan, LIBOR + 3.25%,
8/16/14	947,500
490		Hit Entertainment Ltd., LIBOR + 2.00%,
3/20/12	479,593
		Las Vegas Sands LLC,
700		Delayed Draw Loan, LIBOR + 0.75%,
5/23/14	678,731
2,294		Loan B, LIBOR + 1.75%, 5/23/14	2,224,539
4,925		Metro-Goldwyn-Mayer Studios, Inc., Loan B, LIBOR + 3.25%, 4/08/12	4,713,634
978		Penn National Gaming, Inc., Loan B, LIBOR + 1.75%, 10/03/12	969,818
3,728		Travelport LLC, LIBOR + 7.00%, 3/27/12	3,584,752
		Travelport, Inc.,
29		Letter of Credit, LIBOR + 2.25%,
8/23/13	28,354
145		LIBOR + 2.25%, 8/23/13	141,309
495		Wembley, Inc., First Lien Loan, LIBOR + 2.50%,
8/23/11	478,872
413		Yellowstone Mountain Club, LIBOR + 2.38%,
9/30/10	387,781
		Total Entertainment & Leisure	23,158,063
Financial Institutions2.9%
984		Advantage Sales & Marketing, Inc., LIBOR + 2.00%,
3/29/13	946,694
1,489		Alix Partners, LIBOR + 2.00%, 10/12/13	1,460,836
990		Bankruptcy Management, LIBOR + 2.75%, 7/28/12	962,775
925		Billing Services Group, LIBOR + 2.50%, 5/11/12
(EUR)	1,339,908
929		BNY Convergex Group LLC, First Lien Loan, LIBOR + 3.00%, 10/02/13	913,482
432		CCC Information Services Group, Inc., Loan B, LIBOR + 2.50%, 2/10/13	426,637
1,238		Charter Mac, Loan B, LIBOR + 2.50%, 8/15/12	1,138,500
743		Conseco, Inc., LIBOR + 2.00%, 10/10/13	707,544
3,000	1	Enclave, Loan B, LIBOR, 3/01/12	2,842,680

Principal Amount (000)	Description	Value
Financial
Institutions(contd)
	GS Holdings Corp.,
$ 52	Delayed Draw Loan, LIBOR + 1.75%,
5/12/13	$ 50,662
80	LIBOR + 1.75%, 5/13/11	77,718
541	LIBOR + 1.75%, 5/12/13	526,878
4,000	J.G. Wentworth LLC, First Lien Loan, LIBOR + 2.25%, 4/04/14	3,805,000
385	Jostens, Inc., Loan C, LIBOR + 2.00%, 12/21/11	381,351
998	Lucite Intl. Finance Plc, LIBOR + 9.00%, 7/07/13
(EUR)	1,394,644
801	Professional Service, Inc., Loan B, LIBOR + 2.75%, 10/31/12	785,380
496	Renfro Corp., Delayed Draw Loan, LIBOR + 3.25%, 10/05/13	485,994
1,111	Sedgewick Claims Management Services, Inc., Loan B, LIBOR + 2.25%, 1/31/13	1,091,258
741	Vertellus, First Lien Loan, LIBOR + 3.25%,
3/31/13	720,258
	Total Financial Institutions	20,058,199
Health Care2.9%
	Cardinal Health, Inc.,
1,995	Loan B, LIBOR + 2.25%, 4/15/14
(EUR)	2,600,870
1,496	Unfunded, 2.25%, 4/10/14	1,346,625
859	CCS Medical, Loan B, LIBOR + 3.25%, 9/30/12	834,993
	Community Health Systems, Inc.,
340	Delayed Draw Loan, Unfunded, 0.50%,
7/25/14	332,047
5,160	Loan B, LIBOR + 2.25%, 7/25/14	5,033,938
250	Emdeon Business Services, LLC, Second Lien Loan, LIBOR, 5/16/14	247,500
663	Eye Care Centers of America, Inc., LIBOR + 2.50%, 2/16/12	653,545
1,990	Health Management Associates, Inc., PRIME + 0.75%, 2/28/14	1,897,133
859	HealthSouth Corp., Loan B, LIBOR + 2.50%,
3/10/13	838,432
491	National Renal Institutes, Inc., Loan B, LIBOR + 2.25%, 3/31/13	477,163
	Quintiles Transnational Corp.,
985	First Lien Loan, LIBOR + 2.00%,
3/31/13	964,993
250	Second Lien Loan, LIBOR + 4.00%,
3/31/14	247,500
975	Select Medical Corp., Loan B, LIBOR +
2.00%, 2/24/12	931,531
980	Vanguard Health Holding Co. II LLC, LIBOR + 2.25%, 9/23/11	957,508
	Warner Chilcott Corp.,
1,722	Loan B, LIBOR + 2.00%, 1/18/12	1,692,909
515	Loan C, LIBOR + 2.00%, 1/18/12	506,661
	Total Health Care	19,563,348
Industrials2.7%
987	Acosta, Inc., LIBOR + 2.25%, 7/28/13	964,047
983	Bolthouse Farms, Inc., First Lien Loan, LIBOR + 2.25%, 12/16/12	966,534
998	Bucyrus International, Inc., LIBOR + 1.50%,
5/04/14	985,031
	Buhrmann U.S., Inc.,
496	Loan D, LIBOR + 2.00%, 12/31/10	490,047
2,246	Loan D1, LIBOR + 2.00%,
12/23/10	2,218,149
1,725	Drummond Co., Inc., LIBOR + 1.25%, 2/14/11	1,690,500
1,496	Harland Clarke Holdings Corp., Loan B, LIBOR + 2.50%, 6/30/14	1,406,475
1,496	Jason, Inc., LIBOR + 2.50%, 4/30/10	1,451,363
	Kion Group,
250	Loan B, LIBOR + 2.25%, 3/15/15	245,764
250	Loan C, LIBOR + 2.50%, 3/15/16	247,014
1,500	Lincoln Industrial Corp., Second Lien Loan, LIBOR + 5.75%, 1/12/15	1,477,500
	Mivisa Envases S.A.U. (EUR)
826	Loan B1, LIBOR, 5/03/15	1,158,797
174	Loan B2, LIBOR, 5/03/15	243,708
2,469	Oshkosh Truck Corp., Loan B, LIBOR + 1.75%,
12/06/13	2,425,804

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER
31, 2007 | 36 |
| --- | --- | --- |

Portfolio of Investments as of October 31, 2007
(Percentages shown are based on
Net Assets)

Principal Amount (000)	Description	Value
Industrials(contd)
	Standard Steel LLC,
$ 411	Loan B, LIBOR + 2.50%, 6/30/12	$ 403,229
83	Delayed Draw Loan, Unfunded, 2.50%,
6/30/12	81,258
1,210	Thermo Fluids, Inc., Loan B, LIBOR + 3.50%,
6/27/13	1,053,089
	Trimas Corp.,
94	Letter of Credit, LIBOR + 2.25%,
8/02/13	91,875
402	Loan B, LIBOR + 2.75%, 8/02/13	394,144
468	United Rentals NA, Inc., LIBOR + 2.00%, 2/14/11	464,919
	Total Industrials	18,459,247
Media11.1%
500	Affinion Group, Inc., LIBOR + 6.25%, 3/01/12	485,834
988	Atlantic Broadband Finance LLC, Loan B2, LIBOR + 2.25%, 8/10/12	971,697
1,000	Audio Visual Services Corp., Second Lien Loan, LIBOR + 5.50%, 2/28/14	950,000
3,940	Cablevision Systems Corp., LIBOR + 1.75%,
3/29/13	3,842,485
6,468	Cequel Communications II LLC, First Lien Loan, LIBOR + 2.00%, 4/04/13	6,258,115
6,000	Charter Communications Holdings LLC, LIBOR + 2.00%, 3/06/13	5,760,000
714	CMP Susquehanna Corp., Loan B, LIBOR + 2.00%, 5/05/13	689,569
	Dex Media West LLC/Dex Media Finance Co.,
625	Loan B1, LIBOR + 1.50%, 3/09/10	617,292
2,486	Loan B2, LIBOR + 1.50%, 3/09/10	2,454,977
1,311	DirecTV Holdings LLC, Loan B, LIBOR + 1.50%,
4/13/13	1,301,047
	Gatehouse Media Operating, Inc.,
592	Delayed Draw Loan, LIBOR + 2.00%,
8/28/14	548,031
1,000	Loan B, LIBOR + 2.00%, 8/28/14	926,250
2,000	Gray Television, Inc., Delayed Draw Loan, LIBOR + 1.50%, 12/31/14	1,924,166
2,978	Idearc, Inc., Loan B, LIBOR + 2.00%, 11/17/14	2,932,528
499	Knology, First Lien Loan, LIBOR + 2.25%, 6/30/12	481,294
1,985	Mediacom Broadband LLC, Loan D1, LIBOR + 1.75%, 1/31/15	1,919,070
1,960	Mediacom Illinois LLC, Loan C, LIBOR + 1.75%,
1/31/15	1,896,481
1,907	Mission Broadcasting, Inc., Loan B, LIBOR + 1.75%, 10/01/12	1,835,485
357	Multicultural Radio Broadcasting, Inc., LIBOR + 2.75%, 12/18/12	349,860
1,000	National CineMedia, Inc., Loan B, LIBOR + 1.75%,
2/13/15	964,219
	New Wave Communications,
2	LIBOR + 2.75%, 6/20/13	68,950
938	Loan A, LIBOR + 3.50%, 6/30/13	924,053
235	Loan Z, LIBOR + 3.50%, 6/20/13	164,495
63	TBD, 6/20/13	62,055
1,806	Nexstar Finance, Inc., Loan B, LIBOR + 1.75%,
10/01/12	1,738,291
3,465	Nielsen Finance LLC/Nielsen Finance Co., Loan B, LIBOR + 2.00%, 8/09/13	3,368,754
	NTL Investment Holding Ltd.,
446	Loan B1, LIBOR + 2.13%, 9/03/12
(GBP)	897,657
522	Loan B2, TBD, 9/03/12 (GBP)	1,049,219
484	Loan B4, LIBOR + 2.00%, 9/03/12	468,552
2,000	Loan C, TBD, 3/03/13 (GBP)	4,038,001
	Penton Media, Inc.,
1,119	First Lien Loan, LIBOR + 2.25%,
2/01/13	1,059,209
1,000	Second Lien Loan, LIBOR + 5.00%,
2/01/14	932,500
	ProSieben (EUR)
500	Loan B1, LIBOR + 2.375%,
3/04/16	676,291
500	Loan C1, LIBOR + 2.625%,
6/30/15	679,913
1,000	Loan D1, LIBOR + 3.75%, 9/02/16	1,329,044
750	Puerto Rico Cable Acquisition Co., Second Lien Loan, LIBOR + 6.25%, 1/26/12	708,750
998	RCN Corp., Loan B, LIBOR + 2.25%, 5/25/14	965,705
2,838	RH Donnelley, Inc., Loan D2, LIBOR + 1.50%,
6/30/11	2,792,642

Principal Amount (000)	Description	Value
Media(contd)
	Univision Communications, Inc.,
$ 201	Delayed Draw Loan, Unfunded, 1.00%,
9/29/14	$ 190,541
5,799	Loan B, LIBOR + 2.25%, 9/29/14	5,487,583
1,000	Second Lien Loan, LIBOR,
3/29/09	989,375
	UPC Broadband Holding BV,
1,413	Loan M1, LIBOR, 12/31/14 (EUR)	1,977,718
3,500	Loan N1, LIBOR + 1.75%,
12/31/14	3,380,783
1,922	WMG Acquisition Corp., LIBOR + 2.00%, 2/28/11	1,872,243
	Yell Group Plc,
1,000	Loan B, LIBOR + 2.00%, 2/10/13	984,063
1,500	Loan B, LIBOR + 2.00%, 2/27/13
(EUR)	2,137,176
	Total Media	76,051,963
Real Estate0.7%
3,000	Georgian Towers, Loan B5, LIBOR, 3/01/12	2,853,269
488	Masonite Intl. Corp., LIBOR + 2.00% , 4/06/13	456,891
1,496	Realogy Corp., LIBOR + 3.00%, 10/10/13	1,388,333
	Total Real Estate	4,698,493
Technology2.9%
737	Affiliated Computer Services, Inc., Loan B, LIBOR + 2.00%, 3/20/13	726,397
973	ClientLogic Corp., LIBOR + 2.50%, 1/30/14	919,920
995	CoCreate Software, Inc., LIBOR + 3.00%, 5/17/13	965,150
371	Coinstar, Inc., LIBOR + 2.25%, 7/07/11	369,173
500	Electrical Components Intl. Holdings Co., Second Lien
Loan, LIBOR + 6.50%, 5/01/14	440,000
1,750	First Data Corp., Loan B1, LIBOR + 2.75% 9/24/14	1,683,579
4,000	Flextronics Intl. Ltd., Loan A, LIBOR, 10/12/14	3,970,000
	Intergraph Corp.,
419	First Lien Loan, LIBOR + 2.00%,
5/29/14	408,747
750	Second Lien Loan, LIBOR + 6.00%,
11/15/14	744,375
989	Marvell Technology Group Ltd., Loan B, LIBOR + 2.50%, 11/09/09	967,114
694	RedPrairie Corp., Loan B, PRIME + 2.00%, 7/20/12	676,628
1,500	San Juan Cable, LIBOR + 6.50%, 10/31/13	1,434,845
1,945	Sensata Technologies BV, Loan B, LIBOR + 1.75%, 4/27/13	1,889,922
2,444	SunGard Data Systems, Inc., Loan B, LIBOR + 2.00%, 2/28/14	2,408,204
945	Verifone, Inc., LIBOR + 1.75%, 10/31/13	937,913
996	Wire Rope Corp., LIBOR + 2.25%, 2/08/14	970,961
	Total Technology	19,512,928
Telecommunications3.7%
1,990	American Cellular Corp., Loan B, LIBOR + 2.00%,
3/15/14	1,981,294
1,250	American Cellular Wireless LLC, Delayed Draw Loan, Unfunded, 0.75%, 3/15/14	1,242,187
	Cellular South, Inc.,
500	Delayed Draw Loan, Unfunded, 1.00%,
5/29/14	490,000
1,496	Loan B, PRIME + 0.75%, 5/29/14	1,466,325
1,481	Consolidated Communications, Inc., Loan D, LIBOR + 1.75%, 10/14/11	1,471,066
500	Country Road Communications LLC, Second Lien Loan, LIBOR + 7.75%, 7/15/13	492,500
	Eircom Group Plc (EUR)
2,000	Loan B, LIBOR + 1.88%, 9/30/14	2,835,813
2,000	Loan C, LIBOR + 2.13%, 9/30/15	2,851,831
4,000	Insight Midwest Holdings LLC, Loan B, Unfunded, 1.75%, 4/06/14	3,912,224
2,000	Iowa Telecommunications Services, Inc., Loan B, LIBOR + 1.75%, 11/23/11	1,970,000
	NG Wireless,
140	Delayed Draw Loan, Unfunded, 0.50%,
7/31/14	138,269
610	First Lien Loan, PRIME + 2.75%,
7/31/14	600,481
1,700	NTELOS, Inc., First Lien Loan, LIBOR + 2.25%,
8/24/11	1,679,861
2,970	West Corp., Loan B2, LIBOR + 2.38%, 10/24/13	2,909,004

| See Notes to Financial Statements. — 37 | ANNUAL
REPORT | OCTOBER
31, 2007 |
| --- | --- | --- |

Portfolio of Investments as of October 31, 2007
(Percentages
shown are based on Net Assets)

Principal Amount (000)		Description	Value
Telecommunications(contd)
		Wind Acquisition Finance S.A. (EUR)
$ 693		Loan A1, LIBOR + 2.00%, 5/25/12	$ 990,929
139		Loan A2, LIBOR + 2.00%,
12/31/10	199,284
		Total Telecommunications	25,231,068
Transportation2.2%
		Dockwise Transport N.V.,
1,489		Loan B1, LIBOR + 2.38%,
11/01/15	1,447,470
489		Loan C, LIBOR + 2.88%, 11/01/16	474,401
1,000		Loan C2, LIBOR + 2.88%,
11/01/16	975,625
		Hawker Beechcraft Acquisition Co.,
78		Letter of Credit, Unfunded, 0.50%,
3/26/14	76,076
917		LIBOR + 2.00%, 3/26/14	894,585
1,750		RailAmerica, Inc., Loan B, LIBOR + 2.25%,
8/14/08	1,719,375
644		Sirva Worldwide, Inc., LIBOR + 7.25%, 12/01/10	450,378
3,977		Swift Transportation Co., Inc., LIBOR + 3.00%,
5/10/14	3,488,881
3,000		U.S. Airways, Loan B, LIBOR + 2.50%, 3/24/14	2,863,392
2,239		United Air Lines, Inc., Loan B, LIBOR + 2.00%,
2/01/14	2,142,358
		Total Transportation	14,532,541
		Total Bank Loans	386,247,615
Mortgage Pass-Through
Securities21.3%
		Federal National Mortgage Assoc.,
22	8	5.50%, 12/01/28	21,448
8,564		5.50%, 4/01/29-11/01/33	8,467,048
17,000		7.25%, 1/15/10	18,027,939
121,000		TBA, 5.00%, 11/19/22	119,109,375
		Total Mortgage Pass-Through Securities	145,625,810
Interest Only Asset-Backed
Securities0.2%
		Sterling Coofs Trust,
21,937		Ser. 1, 2.365%, 4/15/29	973,475
18,114	2	Ser. 2, 2.081%, 3/30/30	486,826
		Total Interest Only Asset-Backed Securities	1,460,301
U.S. Government and Agency
Securities4.1%
		U.S. Treasury Notes,
20,425	4	3.375%, 12/15/08-9/15/09	20,273,083
6,000	4,8	3.875%, 5/15/09	5,992,032
1,815	4	4.25%, 8/15/15	1,801,388
		Total U.S. Government and Agency Securities	28,066,503
Foreign Government Bonds2.5%
238		Bolivarian Republic of Venezuela, %, 12/18/07	238,029
4,871		Peru Government International Bond, 8.375%,
5/03/16	5,735,602
5,000	4	Republic of Colombia, 9.75%, 4/23/09	5,325,000
5,093	4	Turkey, 7.00%, 9/26/16	5,328,806
		Total Foreign Government Bonds	16,627,437

Units (000)		Description	Value
Warrants0.0%
2	9	Reliant Resources, Inc., expires 8/25/08, strike price $0.001, 1 share for 1 warrant	$ 41,249

Shares
Common
Stocks0.0%
7,579	1,9	Critical Care Systems Intl., Inc.	47,371
Preferred
Stock0.0%
125,000	1	Superior Essex Holding Corp.,
Ser. A, 9.50%,	77,500
		Total Long-Term Investments (cost $930,394,349)	913,265,094

Principal Amount (000)
SHORT-TERM
INVESTMENT0.5%
U.S. Government
and Agency Discount Notes0.5%
$ 3,200	10	Federal Home Loan Bank Disc. Notes, 4.351%, 11/01/07 (cost $3,200,000)	3,200,000
Total
investments134.2% (cost $933,594,349 11 )		$	916,465,094
Liabilities in
excess of other assets(34.2)%			(233,355,673	)
Net Assets100%
$		$	683,109,421

1	Security is fair valued.
2	Security is not registered under
the Securities Act of 1933. These securities may be resold in transactions in
accordance with Rule 144A under that Act, to qualified institutional buyers.
As of October 31, 2007, the Trust held 9.8% of its net assets, with a current
market value of $66,717,528, in securities restricted as to resale.
3	Variable rate security. Rate
shown is interest rate as of October 31, 2007.
4	Entire or partial principal
amount pledged as collateral for reverse repurchase agreements. See Note 4 in
the Notes to Financial Statements for details of open reverse repurchase
agreements.
5	Illiquid security. As of October
31, 2007, the Trust held 0.6% of its net assets, with a current market value
of $4,365,591, in these securities.
6	Represents a step up bond; the
interest rate shown reflects the effective yield at the time of purchase.
7	Issuer is in default and/or
bankruptcy.
8	Security, or a portion thereof,
pledged as collateral with a value of $77,630 on 81 long U.S. Treasury Note
futures contracts expiring December 2007. The notional value of such contracts
on October 31, 2007 was $8,694,844, with an unrealized gain of $45,523.
9	Non-income producing security.
10	Rate shown is the yield to
maturity as of the date of purchase.
11	Cost for federal income tax
purposes is $933,721,317. The net unrealized depreciation on a tax basis is
$17,256,223, consisting of $9,391,420 gross unrealized appreciation and
$26,647,643 gross unrealized depreciation.

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER
31, 2007 | 38 |
| --- | --- | --- |

Portfolio of Investments as of October 31, 2007
(Percentages
shown are based on Net Assets)

Shares		Description	Value
LONG-TERM INVESTMENTS144.4%
Common
Stocks40.4%
Aerospace &
Defense0.6%
1,900		L-3 Communications Holdings, Inc.	$ 208,316
28,300		Lockheed Martin Corp.	3,114,132
40,300		Northrop Grumman Corp.	3,369,886
		Total Aerospace & Defense	6,692,334
Automotive0.3%
264,500	1	Ford Motor Co.	2,346,115
1,900		General Motors Corp.	74,461
11,200		Genuine Parts Co.	549,584
3,800		PACCAR, Inc.	211,128
		Total Automotive	3,181,288
Basic Materials1.7%
23,300		Allegheny Technologies, Inc.	2,380,561
2,400		BASF AG (ADR)	333,408
72,200		Dow Chemical Co. (The)	3,251,888
71,500		E.I. du Pont de Nemours & Co.	3,539,965
74,200		Intl. Paper Co.	2,742,432
33,900		MeadWestvaco Corp.	1,140,396
21,000		Monsanto Co.	2,050,230
30,000		Nucor Corp.	1,860,600
13,700		PPG Industries, Inc.	1,023,938
14,100		Weyerhauser Co.	1,070,331
		Total Basic Materials	19,393,749
Building & Development0.1%
9,300		D.R. Horton, Inc.	118,017
2,600		KB Home	71,864
16,000		Masco Corp.	385,280
		Total Building & Development	575,161
Consumer Products5.7%
93,100		Altria Group, Inc.	6,789,783
4,800	1	Amazon.com, Inc.	427,920
76,200	1	Amgen, Inc.	4,427,982
45,000		Anheuser-Busch Cos., Inc.	2,307,600
10,300		Black & Decker Corp.	926,073
8,300		Clorox Co.	519,331
14,300	1	Coach, Inc.	522,808
68,100		Coca-Cola Co. (The)	4,205,856
49,506		CVS Caremark Corp.	2,067,866
26,400		Eastman Kodak Co.	756,624
21,800		Fortune Brands, Inc.	1,826,186
6,700		Gap, Inc.	126,630
112,500		Home Depot, Inc.	3,544,875
6,900		JCPenney Co., Inc.	388,056
10,600	1	Kohls Corp.	582,682
54,446		Kraft Foods, Inc.	1,819,041
17,200		Loews Corp.	844,348
12,600		Ltd. Brands, Inc., Class A	277,326
1,600		Macys, Inc.	51,248
17,400		Newell Rubbermaid, Inc.	507,384
1,400		Nordstrom, Inc.	55,216
1,500		OfficeMax, Inc.	47,475
60,300		PepsiCo, Inc.	4,445,316
128,000		Procter & Gamble Co.	8,898,560
19,700		Reynolds American, Inc.	1,269,271
140,100		Sara Lee Corp.	2,317,254
10,100	1	Sears Holdings Corp.	1,361,379
75,900	1	Starbucks Corp.	2,025,012
1,000		Universal Corp.	48,740
53,100		UST, Inc.	2,831,292
4,700		VF Corp.	409,511
115,100		Wal-Mart Stores, Inc.	5,203,671
37,900		Walgreen Co.	1,502,735
		Total Consumer Products	63,335,051

Shares		Description	Value
Energy5.3%
13,500		American Electric Power, Inc.	$ 650,835
15,500		Anadarko Petroleum Corp.	914,810
11,100		Apache Corp.	1,152,291
2,900		BP Plc (ADR)	226,171
10,700		Baker Hughes, Inc.	927,904
15,800		Chesapeake Energy Corp.	623,784
100,400		Chevron Corp.	9,187,604
55,900		ConocoPhillips	4,749,264
35,700		Consolidated Edison, Inc.	1,681,113
27,600		DTE Energy Co.	1,368,960
14,900		Devon Energy Corp.	1,391,660
78,400		Duke Energy Corp.	1,502,928
22,800		Exelon Corp.	1,887,384
155,900		Exxon Mobil Corp.	14,341,241
24,500		Great Plains Energy, Inc.	731,080
14,000		Hess Corp.	1,002,540
13,800	1	National Oilwell Varco, Inc.	1,010,712
1,500		Nicor, Inc.	64,905
24,000		NiSource, Inc.	490,800
21,000		Sasol Ltd. (ADR)	1,068,060
25,400		Schlumberger Ltd.	2,452,878
49,918		Smith Intl., Inc.	3,297,084
44,700		Southern Co.	1,638,702
24,400		Spectra Energy Corp.	633,912
15,100	1	Transocean, Inc.	1,802,487
21,200		Valero Energy Corp.	1,493,116
13,000	1	Weatherford Intl. Ltd.	843,830
2,300		Williams Cos., Inc.	83,927
14,800		XTO Energy, Inc.	982,424
		Total Energy	58,202,406
Entertainment & Leisure0.3%
12,500		Brunswick Corp.	278,875
31,900		Carnival Corp.	1,530,562
50,000		Regal Entertainment Group	1,128,500
		Total Entertainment & Leisure	2,937,937
Financial Institutions7.5%
11,700		American Capital Strategies Ltd.	507,897
47,700	2	American Intl. Group, Inc.	3,010,824
18,300		Arthur J. Gallagher & Co.	486,963
71,400		BB&T Corp.	2,639,658
205,400		Bank of America Corp.	9,916,712
37,452		Bank of New York Mellon Corp.	1,829,530
1,800		CME Group, Inc.	1,199,250
31,600		Charles Schwab Corp. (The)	734,384
16,800		Cigna Corp.	881,832
246,300		Citigroup, Inc.	10,319,970
33,800		Comerica, Inc.	1,577,784
37,750		Discover Financial Services	728,575
84,900	1	E*Trade Financial Corp.	945,786
37,400		Fannie Mae	2,133,296
5,400		Franklin Resources, Inc.	700,272
22,900		Freddie Mac	1,196,067
23,800		Goldman Sachs Group, Inc. (The)	5,900,496
20,700		HSBC Holdings Plc (ADR)	2,060,064
21,400		Hartford Financial Services Group, Inc.	2,076,442
85,300		JPMorgan Chase & Co.	4,009,100
13,300		KeyCorp	378,385
24,200		Legg Mason, Inc.	2,007,148
26,600		Lehman Brothers Holdings, Inc.	1,684,844
40,800		Lincoln National Corp.	2,544,696
259,600		MCG Capital Corp.	3,636,996
54,900		Marsh & McLennan Cos., Inc.	1,421,361
28,600		MetLife, Inc.	1,969,110
19,500		National City Corp.	472,875
54,700		Progressive Corp.	1,011,950
15,300		Prudential Financial, Inc.	1,479,816

| See Notes to Financial Statements. — 39 | ANNUAL
REPORT | OCTOBER
31, 2007 |
| --- | --- | --- |

Portfolio of Investments as of October 31, 2007 BlackRock Preferred and Equity Advantage Trust (BTZ) (continued) (Percentages shown are based on Net Assets)

Shares		Description
Financial
Institutions(contd)
23,900		Regions Financial Corp.	$ 648,168
19,100		Safeco Corp.	1,105,890
25,900		Travelers Cos., Inc.	1,352,239
75,100		U.S. Bancorp	2,490,316
64,900		Wachovia Corp.	2,967,877
48,600		Washington Mutual, Inc.	1,354,968
81,300		Wells Fargo & Co.	2,765,013
25,700		Western Union Co. (The)	566,428
8,900		XL Capital Ltd., Class A Bermuda	640,355
		Total Financial Institutions	83,353,337
Health
Care4.7%
52,200		Abbott Laboratories	2,851,164
11,900		Allergan, Inc.	804,202
9,600	1	Biogen Idec, Inc.	714,624
32,600	1	Boston Scientific Corp.	452,162
153,200		Bristol-Myers Squibb Co.	4,594,468
13,200	1	Celgene Corp.	871,200
50,100	1	Charles River Laboratories Intl., Inc.	2,905,800
32,500		Covidien Ltd. Bermuda	1,352,000
64,900		Eli Lilly & Co.	3,514,335
10,100	1	Genzyme Corp.	767,297
31,200	1	Gilead Sciences, Inc.	1,441,128
106,600		Johnson & Johnson	6,947,122
11,400		McKesson Corp.	753,540
10,800	1	Medco Health Solutions, Inc.	1,019,304
107,500		Merck & Co., Inc.	6,262,950
367,900	2	Pfizer, Inc.	9,054,019
11,100		Quest Diagnostics, Inc.	590,298
11,500		Stryker Corp.	816,500
16,300	1	Thermo Fisher Scientific, Inc.	958,603
47,400		UnitedHealth Group, Inc.	2,329,710
23,700	1	WellPoint, Inc.	1,877,751
19,500	1	Zimmer Holdings, Inc.	1,355,055
		Total Health Care	52,233,232
Industrials3.1%
43,500		3M Co.	3,756,660
44,800		Caterpillar, Inc.	3,342,528
3,500		Cummins, Inc.	419,860
9,200		Danaher Corp.	788,164
45,400		Emerson Electric Co.	2,373,058
14,500		Fluor Corp.	2,291,000
383,400		General Electric Co.	15,780,744
38,000		Illinois Tool Works, Inc.	2,175,880
22,800		Johnson Controls, Inc.	996,816
20,300		Leggett & Platt, Inc.	394,429
5,300		Precision Castparts Corp.	793,993
15,900		Rockwell Automation, Inc.	1,095,192
3,300		Tyco Intl. Ltd.	135,861
		Total Industrials	34,344,185
Media1.1%
75,100		CBS Corp., Class B	2,155,370
2,987		Citadel Broadcasting Corp.	13,144
129,450	1	Comcast Corp., Class A	2,724,923
55,700	1	DIRECTV Group, Inc.	1,474,936
34,300		New York Times Co. (The)	670,908
77,300		News Corp., Class A	1,675,091
28,200	1	Viacom, Inc.	1,164,378
64,900		Walt Disney Co. (The)	2,247,487
		Total Media	12,126,237
Real
Estate0.5%
4,000		Boston Properties, Inc. (REIT)	433,360
9,900		Equity Residential (REIT)	413,622
15,600		First Industrial Realty Trust, Inc. (REIT)	635,700
51,500		Hospitality Properties Trust (REIT)	2,039,400

Shares		Description
Real
Estate(contd)
6,000		Plum Creek Timber Co., Inc. (REIT)	$ 268,020
39,600		Starwood Hotels & Resorts Worldwide, Inc.	2,251,656
		Total Real Estate	6,041,758
Technology6.2%
19,700	1	Adobe Systems, Inc.	943,630
12,900	1	Agilent Technologies, Inc.	475,365
59,500		Analog Devices, Inc.	1,990,870
31,300	1	Apple, Inc.	5,945,435
52,300	1	AutoDesk, Inc.	2,557,470
18,000	1	Broadcom Corp.	585,900
27,200	1	Cognizant Technology Solutions Corp.	1,127,712
82,700	1	Dell, Inc.	2,530,620
70,000	1	EMC Corp.	1,777,300
92,800	1	eBay, Inc.	3,350,080
16,500	1	Electronic Arts, Inc.	1,008,480
7,300	1	Google, Inc.	5,161,100
37,800		Hewlett-Packard Co.	1,953,504
182,900		Intel Corp.	4,920,010
22,000		Intl. Business Machines Corp.	2,554,640
39,100	1	Lam Research Corp.	1,962,820
69,800		Linear Technology Corp.	2,304,796
7,500	1	MEMC Electronic Materials, Inc.	549,150
287,000		Microsoft Corp.	10,564,470
94,050	1	Nvidia Corp.	3,327,489
131,500	1	Oracle Corp.	2,915,355
51,900		Paychex, Inc.	2,168,382
17,200		Pitney Bowes, Inc.	688,688
44,900	1	SanDisk Corp.	1,993,560
115,800	1	Sanmina-SCI Corp.	255,918
252,400	1	Sun Microsystems, Inc.	1,441,204
34,900	1	Symantec Corp.	655,422
32,500		Tyco Electronics Ltd.	1,159,275
36,300	1	Xerox Corp.	633,072
4,300		Xilinx, Inc.	104,920
42,000	1	Yahoo!, Inc.	1,306,200
		Total Technology	68,912,837
Telecommunications2.6%
175,987		AT&T, Inc.	7,354,497
40,610		Chunghwa Telecom Co. Ltd. (ADR)	779,712
209,600	1	Cisco Systems, Inc.	6,929,376
64,000		Citizens Communications Co.	842,240
52,500		Corning, Inc.	1,274,175
17,200	1	Juniper Networks, Inc.	619,200
123,900		Qualcomm, Inc.	5,294,247
98,400		Verizon Communications, Inc.	4,533,288
93,412		Windstream Corp.	1,256,391
		Total Telecommunications	28,883,126
Transportation0.7%
16,000		General Maritime Corp.	450,880
51,645		Nordic American Tanker Shipping	1,998,145
87,700		Ship Finance Intl. Ltd.	2,401,226
37,900		United Parcel Service, Inc., Class B	2,846,290
		Total Transportation	7,696,541
		Total Common Stocks	447,909,179
Preferred
Stocks18.9%
Energy2.7%
100,000		Alabama Power Co., 6.50%	2,525,000
40,000		Entergy Louisiana LLC, 6.95%	4,156,478
785,000		Interstate Power & Light Co., Ser. B, 8.375%	23,672,695
		Total Energy	30,354,173

| See Notes
to Financial Statements. — ANNUAL REPORT | OCTOBER 31, 2007 | 40 |
| --- | --- | --- |

Portfolio of Investments as of October 31, 2007 BlackRock Preferred and Equity Advantage Trust (BTZ) (continued) (Percentages shown are based on Net Assets)

		Description
Financial
Institutions14.7%
400,000		ACE Ltd.,
Ser. C, 7.80%	$ 10,237,520
400,000		Aegon N.V.,
6.50%	9,137,520
		Arch
Capital Group Ltd.,
100,000		8.00%	2,500,000
160,000		Ser. B,
7.875%	3,947,200
655,000	3	Aspen
Insurance Holdings Ltd., 7.401%	15,621,750
180,000	3	Axis
Capital Holdings Ltd., Ser. B, 7.50%	18,331,884
320,000		Bank of
America Corp., 6.625%	8,210,016
10,000	4	Centaur
Funding Corp., Ser. B, 9.08%	11,312,500
150,000	4	CoBank ACB,
7.00%	7,478,700
389,000		Endurance
Specialty Holdings Ltd., 7.75%	9,907,363
316,000		Federal
Home Loan Mortgage Corp., Ser. Y, 6.55%	8,137,000
200,000		ING Groep
N.V., 6.125%	4,387,500
265,600		PartnerRE
Ltd., Ser. C, 6.75%	6,241,600
285,000		RenaissanceRe
Holdings Ltd., Ser. D, 6.60%	6,093,300
50	3	Roslyn Real
Estate Asset Corp., Ser. D, 8.881%	5,026,562
67,200		Royal Bank
of Scotland Group Plc, Ser. L, 5.75%	1,414,560
		Santander
Finance Preferred S.A. Unipersonal,
522,000	4	6.50%	12,267,000
670,000	4	7.05%	15,703,125
277,900		XL Capital
Ltd., Ser. B, 7.625%	6,964,869
		Total
Financial Institutions	162,919,969
Real Estate1.5%
300,000		CBL &
Associates Properties, Inc., Ser. C, 7.75% (REIT)	7,206,000
55,000		iStar
Financial, Inc., Ser. I, 7.50% (REIT)	1,182,500
372,500		Public
Storage, Inc., Ser. M, 6.625% (REIT)	8,229,941
		Total Real
Estate	16,618,441
		Total
Preferred Stocks	209,892,583


Trust Preferred
Stocks71.6%
Building &
Development0.3%
$ 3,160	3,4,5	C8 Capital
SPV Ltd., 6.64% (British Virgin Islands)	3,080,905
Energy2.6%
4,500	3	Enterprise
Products Operating LP, 8.375%, 8/01/66	4,684,248
120,000		Nexen,
Inc., 7.35%, 11/01/43	2,970,000
5,900	3	PPL Capital
Funding, Inc., Ser. A, 6.70%, 3/30/67	5,693,022
288,000		PPL Energy
Supply LLC, 7.00%, 7/15/46	7,209,014
1,575	3	Puget Sound
Energy, Inc., Ser. A, 6.974%, 6/01/67	1,482,497
7,325	3	Trans-Canada
Pipelines Ltd., 6.35%, 5/15/67 (Canada)	7,086,945
		Total
Energy	29,125,726
Financial
Institutions64.8%
2,375	3,5	Abbey
National Capital Trust I, 8.963%	2,897,982
17,000		Ace Capital
Trust II, 9.70%, 4/01/30	21,717,840
		Allstate
Corp.,
8,725	3	6.125%,
5/15/37	8,531,916
10,675	3	6.50%,
5/15/57	10,350,918
11,150		American
Intl. Group, Inc., Ser. A1, 6.25%, 3/15/37	10,376,268
18,273		AON Corp.,
8.205%, 1/01/27	19,846,561
5,000		Astoria
Capital Trust I, Ser. B, 9.75%, 11/01/29	5,612,955
		AXA S.A.
(France)
17,000	3,4,5	6.463%	15,807,178
3,225	3,4,5	6.379%	2,937,188
		Barclays
Bank Plc (United Kingdom)
15,000	3,4,5	6.86%	14,704,647
4,275	3,4,5	7.434%	4,531,675
15,300	3	BB&T
Capital Trust IV, 6.82%, 6/12/57	14,904,311
170,731		Berkley
W.R. Capital Trust II, 6.75%, 7/26/45	3,996,181
23,200,	2,3,4,5	BNP
Paribas, 7.195% (France)	23,075,834
6,685	3,4,5	BOI Capital
Funding No. 2 LP, 5.571% (Ireland)	6,145,521


Amount
(000)		Description	Value
Financial
Institutions(contd)
$ 30,000	3,4,5,6	BOI Capital
Funding No. 3, 6.107% (Ireland)	$ 27,601,950
7,700	5	BTA Finance
Luxembourg SA, 8.25% (Kazakhstan)	5,736,500
5,000	3,4,5	C10 Capital
SPV Ltd., 6.722% (British Virgin Islands)	4,818,500
5,000		Capital One
Capital III, 7.686%, 8/15/36	4,846,285
15,300	3	Chubb
Corp., 6.375%, 3/29/37	15,061,029
210,000		Citizens
Funding Trust I, 7.50%, 9/15/66	4,882,500
20,000	3,4,5	Commonwealth
Bank of Australia, 6.024% (Australia)	19,269,300
27,970	3,4,5	Credit
Agricole S.A., 6.637% (France)	26,581,905
7,000	3,5	Credit
Suisse Ltd., 5.86% (Guernsey)	6,520,927
7,200	4	Dresdner
Funding Trust I, 8.151%, 6/30/31	7,877,347
12,025	3	Everest
Reinsurance Holdings, Inc., 6.60%, 5/15/37	11,244,133
2,025	3,5	Goldman
Sachs Capital II, 5.793%	1,888,537
25,000	3,4,5	HBOS Plc,
6.657% (United Kingdom)	22,216,250
7,000	3,4,5	HSBC
Capital Funding LP, Ser. 2, 10.176% (Jersey Channel Islands)	9,205,357
3,250	3	Huntington
Capital III, 6.65%, 5/15/37	3,049,846
3,867	4	HVB Funding
Trust I, 8.741%, 6/30/31	4,485,782
25,100	3,4,5,6	ICICI Bank
Ltd., 7.25% (India)	23,306,103
10,000	3,5	ING Groep
N.V., 5.775% (Netherlands)	9,658,830
12,875	3	JPMorgan
Chase Capital XXI, Ser. U, 5.844%, 2/02/37	11,422,430
13,945	3	JPMorgan
Chase Capital XXIII, 6.558%, 5/15/47	12,289,296
5,000	5	Kazkommerts
Finance 2 BV, 9.25% (Netherlands)	4,548,875
785,000		KeyCorp
Capital IX, 6.75%, 12/15/66	18,494,600
5,000	3,5	Lehman
Brothers Holdings Capital Trust V, Ser. MTN, 5.857%	4,666,875
11,600	3,4	Liberty
Mutual Group, Inc., Ser. B, 7.00%, 3/15/37	10,903,907
4,225	3	Lincoln
National Corp., 6.05%, 4/20/67	4,049,244
13,000	3,4,5	Lloyds TSB
Group Plc, 6.267% (United Kingdom)	12,026,547
10,000	3,4	Mangrove
Bay Pass-Through Trust, 6.102%, 7/15/33	9,334,000
21,000	3,4,5	Mizuho
Capital Investment 1 Ltd., 6.686% (Cayman Islands)	19,899,180
298,100		National
City Capital Trust II, 6.625%, 11/15/36	6,390,519
8,025		Nationwide
Financial Services, 6.75%, 5/15/37	7,719,721
19,675	3	Progressive
Corp., 6.70%, 6/15/37, 6/15/37	19,306,743
7,105	3,4,5	QBE Capital
Funding II LP, 6.797% (Jersey Channel Islands)	6,948,676
7,780	5	RBS Capital
Trust, Ser. B, 6.80% (United Kingdom)	7,604,950
16,825	3,4,5	Resona
Preferred Global Securities Ltd., 7.191% (Cayman Islands)	16,895,800
		Royal Bank
of Scotland Group Plc, (United Kingdom)
4,675	3,4,5	6.99%	4,756,813
3,130	3,5	7.648%	3,341,369
6,100	3,5	Ser. MTN,
7.64%	6,322,723
7,000	3,4,5	Shinsei
Finance II, 7.16% (Cayman Islands)	6,345,941
10,000	3,4,5	SMFG
Preferred Capital 1 Ltd., 6.078% (Cayman Islands)	9,354,100
17,850	3,4,5	Societe
Generale, 5.922% (France)	16,987,666
85,000		Sovereign
Capital Trust V, 7.75%, 5/22/36	2,127,661
28,305	3,6	State
Street Capital Trust IV, 6.694%, 6/15/37	25,559,273
11,300	3,4,5	Standard
Chartered Plc, 7.014% (United Kingdom)	11,307,119
27,475	3,4,5,6	Swiss Re
Capital I LP, 6.854%	27,711,477
19,100	3	Travelers
Cos., Inc., 6.25%, 3/15/37	18,547,380
95,700		Wachovia
Capital Trust IX, 6.375%, 6/01/67	2,177,175
3,225	3	Webster
Capital Trust IV, 7.65%, 6/15/37	3,198,942
4,400	3,4,5	White
Mountains RE Group Ltd., 7.506% (Bermuda)	4,151,206
7,150	3,4	Woori Bank,
6.208%, 5/02/37 (South Korea)	6,665,087
10,000	3,5	XL Capital
Ltd., Ser. E, 6.50% (Cayman Islands)	9,287,300
15,220	3,4	ZFS Finance
Trust I, 6.50%, 5/09/37	14,647,774
		Total
Financial Institutions	718,678,425
Media1.6%
780,000		Comcast Corp.,
6.625%, 5/15/56	18,119,400
Real
Estate1.6%
13,000	4,5	Sovereign
Real Estate Investment Corp. (REIT), 12.00%	18,122,000
Telecommunications0.6%
270,000		AT&T,
Inc., 6.375%, 2/15/56	6,504,300
		Total Trust
Preferred Stocks	793,630,756

| See Notes
to Financial Statements. — 41 | ANNUAL REPORT | OCTOBER 31, 2007 |
| --- | --- | --- |

Portfolio of Investments as of October 31, 2007 BlackRock Preferred and Equity Advantage Trust (BTZ) (continued) (Percentages shown are based on Net Assets)

		Description
Corporate
Bonds12.6%
Automotive0.4%
$ 5,000		Lear Corp., Ser. B, 8.75%, 12/01/16	$ 4,800,000
Basic
Materials0.2%
2,350	4	Ineos Group Holdings Plc, 8.50%, 2/15/16
		(United Kingdom)	2,232,500
Commercial
Services0.4%
5,000	4	Quebecor World, Inc., 9.75%, 1/15/15 (Canada)	4,875,000
Consumer
Products0.4%
5,000	6	Michaels Stores, Inc., 11.375%, 11/01/16	4,987,500
Ecological
Services & Equipment0.4%
5,000		Aleris Intl., Inc., 10.00%, 12/15/16	4,400,000
Energy1.0%
6,250		CMS Energy Corp., 6.55%, 7/17/17	6,066,737
5,000	3	Southern Union Co., 7.20%, 11/01/66	4,991,065
		Total Energy	11,057,802
Entertainment
& Leisure0.6%
2,500		AMC Entertainment, Inc., 11.00%, 2/01/16	2,706,250
1,760		Harrahs Operating Co., Inc., 5.75%, 10/01/17	1,298,000
3,000		Station Casinos, Inc., 6.875%, 3/01/16	2,482,500
		Total Entertainment & Leisure	6,486,750
Financial
Institutions6.2%
		Bear Stearns Cos., Inc. (The),
3,050		6.40%, 10/02/17	3,040,106
3,000		Ser. MTN, 6.95%, 8/10/12	3,122,076
3,095	3	CIT Group, Inc., 5.734%, 11/23/07	3,089,899
6,500	3,4	ICICI Bank Ltd., 6.375%, 4/30/22 (India)	6,018,539
18,400		JPMorgan Chase Capital XXV, Ser. Y, 6.80%, 10/01/37	18,379,705
		Lehman Brothers Holdings, Inc.,
6,375		6.875%, 7/17/37	6,316,669
1,075	3	Ser. MTN, 7.394%, 9/15/22	1,098,436
3,750	3	Lincoln National Corp., 7.00%, 5/17/66	3,851,715
4,550		MetLife, Inc., 6.40%, 12/15/36	4,310,242
5,000	4	Momentive Performance Materials, Inc., 9.75%, 12/01/14	4,875,000
15,000	3	Reinsurance Group of America, Inc., 6.75%, 12/15/65	14,263,755
		Total Financial Institutions	68,366,142
Health
Care0.4%
4,500		Tenet Healthcare Corp., 9.875%, 7/01/14	4,095,000
Industrials0.0%
283		Stan IV Ltd., 7.137%, 7/17/11	274,510
Media0.5%
5,000		Cablevision Systems Corp., Ser. B, 8.00%, 4/15/12	4,887,500
1,000		Nexstar Finance, Inc., 7.00%, 1/15/14	960,000
		Total Media	5,847,500
Technology1.3%
4,410		Freescale Semiconductor, Inc., 9.125%, 12/15/14	3,991,050
5,000		NXP BV/NXP Funding LLC, 9.50%, 10/15/15 (Netherlands)	4,725,000
5,000		SunGard Data Systems, Inc., 10.25%, 8/15/15	5,212,500
		Total Technology	13,928,550
Telecommunications0.8%
		Intelsat Ltd. (Bermuda)
3,325	3	8.886%, 1/15/15	3,374,875
5,000		11.25%, 6/15/16	5,375,000
		Total Telecommunications	8,749,875
		Total Corporate Bonds	140,101,129
U.S.
Government and Agency Securities0.9%
5,595		U.S. Treasury Bonds, 4.75%, 2/15/37	5,589,753
4,340		U.S. Treasury Notes, 4.75%, 8/15/17	4,435,614
		Total U.S. Government and Agency Securities	10,025,367
		Total Long-Term Investments
		(cost $1,649,080,855)	1,601,559,014
Shares		Description	Value
SHORT-TERM
INVESTMENTS2.8%
Money
Market Fund2.6%
28,300	7	SSgA Tax Free Money Mkt. Fund - Class A, 4.757%	$ 28,300,000


Amount
(000)
U.S.
Government and Agency Discount Notes0.2%
$ 2,100	8	Federal Home Loan Bank Disc. Notes,
		4.401%, 11/01/07	2,099,743
		Total Short-Term Investments
		(cost $30,399,743)	30,399,743
BORROWED
BOND AGREEMENTS1.2%
		Lehman Brothers, Inc.,
3,947	10	4.53%, 11/08/07	3,946,555
4,530	10	4.11%, 11/08/07	4,530,094
5,356	10	4.25%, 11/02/07	5,355,637
		Total Borrowed Bond Agreements
($13,832,286)	13,832,286
		Total Investments before borrowed bonds,
		investments sold short and outstanding
call
		options written (cost $1,693,312,884 9 )	1,645,791,043
BORROWED
BONDS(1.2)%
(3,855	)	U.S. Treasury Bonds, 4.75%, 2/15/37	(3,851,383	)
(9,695	)	U.S. Treasury Notes, 4.75, 8/15/17	(9,908,592	)
		Total Borrowed Bonds (proceeds
$13,843,782)	(13,759,975	)
INVESTMENTS
SOLD SHORT(0.0)%
(465	) 3,4,5	Barclays Bank Plc, 5.926% (United Kingdom)
		(proceeds $441,536)	(440,135	)


(000)
OUTSTANDING
CALL OPTIONS WRITTEN(0.4)%
(48	)	S&P 500 Index, strike price $1,550, expires 11/17/07	(983,250	)
(30	)	S&P 500 Index, strike price $1,550, expires 12/22/07	(1,200,650	)
(108	)	S&P 500 Index, strike price $1,575, expires 11/17/07	(772,200	)
(31	)	S&P 500 Index, strike price $1,575, expires 12/22/07	(706,000	)
(30	)	S&P 500 Index, strike price $1,600, expires 12/22/07	(468,000	)
		Total Outstanding Options Written
		(premium received $5,426,127)	(4,130,100	)
Total Investments net of borrowed bonds, investments sold
short
and outstanding call options written146.8%		$	1,627,460,833
Liabilities in excess of other assets(5.1)%			(56,649,879	)
Preferred shares at redemption value, including dividends
payable(41.7)%			(462,276,473	)
Net Assets Applicable to Common Shareholders100%		$	1,108,534,481

| See Notes
to Financial Statements. — ANNUAL REPORT | OCTOBER 31, 2007 | 42 |
| --- | --- | --- |

Portfolio of Investments as of October 31, 2007 BlackRock Preferred and Equity Advantage Trust (BTZ) (concluded) (Percentages shown are based on Net Assets)

1	Non-income producing security.
2	Security, or a portion thereof, pledged as collateral with
a value of $24,670,394 on 70 long S&P 500 Index futures contracts
expiring December 2007 and 5,470 short U.S. Treasury Note futures contracts
expiring December 2007. The notional value of such contracts on October 31,
2007 was $574,574,719, with an unrealized loss of $5,812,349.
3	Variable rate security. Rate shown is interest rate as of
October 31, 2007.
4	Security is not registered under the Securities Act of
1933. These securities may be resold in transactions in accordance with Rule
144A under that Act, to qualified institutional buyers. As of October 31,
2007, the Trust held 43.0% of its net assets, with a current market value of
$476,024,964, in securities restricted as to resale.
5	The security is a perpetual bond and has no stated
maturity date.
6	Entire or partial principal amount pledged as collateral
for reverse repurchase agreements. See Note 4 in the Notes to Financial
Statements for details of open reverse repurchase agreements.
7	Represents current yield as of October 31, 2007.
8	Rate shown is the yield to maturity as of the date of
purchase.
9	Cost for federal income tax purposes is $1,671,302,709.
The net unrealized depreciation on a tax basis is $47,639,949, consisting of
$35,071,886 gross unrealized appreciation and $82,702,835 gross unrealized
depreciation.
10	See Note 1 in the Notes to Financial Statements for
details of borrowed bond agreements.
For Trust compliance purposes, the Trusts sector and
industry classifications refer to any one or more of the Standard Industry
Codes as defined by the SEC. This definition may not apply for purposes of
this report, which may combine sector and industry sub-classifications for
reporting ease.

| See Notes
to Financial Statements. — 43 | ANNUAL REPORT | OCTOBER 31, 2007 |
| --- | --- | --- |

| Portfolio of
Investments as of October 31, 2007 |
| --- |
| (Percentages shown are based on Net Assets) |

Principal Amount (000)		Description	Value
LONG-TERM
INVESTMENTS89.3%
Corporate
Bonds84.5%
Aerospace
& Defense6.8%
$ 250	1	AAR Corp., Ser. A2, 8.39%, 5/15/11	$ 252,500
120	2	Bombardier, Inc., 8.00%, 11/15/14 (Canada)	124,800
1,064		DI Finance/DynCorp Intl., Ser. B, 9.50%, 2/15/13	1,130,500
		DRS Technologies, Inc.,
50		6.875%,
11/01/13	50,000
80		7.625%,
2/01/18	81,800
2,000		Lockheed Martin Corp., Ser. B, 6.15%, 9/01/36	2,057,416
1,000		Northrop Grumman Corp., 7.125%, 2/15/11	1,061,478
650		Raytheon Co., 4.85%, 1/15/11	643,928
50		Sequa Corp., 9.00%, 8/01/09	53,625
90		TransDigm, Inc., 7.75%, 7/15/14	91,575
1,000		United Technologies Corp., 6.35%, 3/01/11	1,042,565
		Total Aerospace & Defense	6,590,187
Automotive3.7%
110		Accuride Corp., 8.50%, 2/01/15	103,400
45	2	Ashtead Capital, Inc., 9.00%, 8/15/16	43,650
		AutoNation, Inc.,
110		7.00%,
4/15/14	106,425
110	3	7.243%,
4/15/13	107,525
1,000		DaimlerChrysler NA Holding Corp., 7.30%, 1/15/12	1,074,229
350		Ford Capital BV, 9.50%, 6/01/10 (Netherlands)	352,625
275		Lear Corp., Ser. B, 8.75%, 12/01/16	264,000
200		Metaldyne Corp., 10.00%, 11/01/13	186,000
1,400		Sonic Automotive, Inc., Ser. B, 8.625%, 8/15/13	1,414,000
		Total Automotive	3,651,854
Basic
Materials5.1%
320		AK Steel Corp., 7.75%, 6/15/12	326,400
220		Abitibi-Consolidated, Inc., 6.00%, 6/20/13 (Canada)	161,700
180		American Pacific Corp., 9.00%, 2/01/15	184,500
60	3	Bowater, Inc., 8.694%, 3/15/10	54,900
150		CPG Intl. I, Inc., 10.50%, 7/01/13	150,000
20		Chemtura Corp., 6.875%, 6/01/16	19,100
40		Domtar, Inc., 7.125%, 8/15/15 (Canada)	39,600
130	2	FMG Finance Ltd., 10.625%, 9/01/16 (Australia)	154,050
		Freeport-McMoRan Copper & Gold, Inc.,
690		8.375%,
4/01/17	755,550
240	3	8.394%,
4/01/15	247,800
		Huntsman LLC,
99		11.50%, 7/15/12	107,663
50		11.625%, 10/15/10	53,000
595	2	Ineos Group Holdings Plc, 8.50%, 2/15/16 (United Kingdom)	565,250
980		Innophos, Inc., 8.875%, 8/15/14	987,350
135	2	Key Plastics LLC/Key Plastics Finance Corp.,
		11.75%,
3/15/13	114,750
130		Lyondell Chemical Co., 10.50%, 6/01/13	140,075
530		NewPage Corp., 10.00%, 5/01/12	560,475
155	3	NOVA Chemicals Corp., 8.484%, 11/15/13 (Canada)	152,287
170		Terra Capital, Inc., Ser. B, 7.00%, 2/01/17	170,000
		Total Basic Materials	4,944,450
Building
& Development0.7%
465		Goodman Global Holding Co., Inc., 7.875%, 12/15/12	485,925
115		Nortek, Inc., 8.50%, 9/01/14	101,775
125		North American Energy Partners, Inc.,
		8.75%,
12/01/11 (Canada)	126,250
		Total Building & Development	713,950
Commercial
Services0.1%
120	2	Quebecor World, Inc., 9.75%, 1/15/15 (Canada)	117,000
Conglomerates0.4%
325		Honeywell Intl., Inc., 7.50%, 3/01/10	344,254

Principal Amount (000)		Description	Value
Consumer
Products3.8%
$ 350	3	Ames True Temper, Inc., 9.243%, 1/15/12	$ 336,000
20	3	Avis Budget Car Rental LLC/Avis Budget Finance, Inc.,
		8.058%,
5/15/14	19,750
60	2	Beverages & More, Inc., 9.25%, 3/01/12	61,800
		General Nutrition Centers, Inc.,
360	3	10.194%,
3/15/14	346,500
290		10.75%,
3/15/15	282,025
362		Lazy Days RV Center, Inc., 11.75%, 5/15/12	325,800
		Michaels Stores, Inc.,
340		10.00%,
11/01/14	342,550
430	4	11.375%,
11/01/16	428,925
500		Pantry, Inc. (The), 7.75%, 2/15/14	487,500
100		Quiksilver, Inc., 6.875%, 4/15/15	93,250
200		Reynolds American, Inc., 7.625%, 6/01/16	216,383
525		Rite Aid Corp., 7.50%, 3/01/17	488,250
270		Sally Holdings LLC, 10.50%, 11/15/16	268,650
		Total Consumer Products	3,697,383
Containers
& Packaging1.6%
		Berry Plastics Holding Corp.,
190		8.875%,
9/15/14	194,750
130	3	9.569%,
9/15/14	130,325
250		Crown Americas LLC/Crown Americas Capital Corp.,
		7.75%,
11/15/15	257,500
55		Graham Packaging Co., Inc., 8.50%, 10/15/12	54,588
260	2,3	Impress Holdings BV, 8.368%, 9/15/13 (Netherlands)	258,636
565		Pregis Corp., 12.375%, 10/15/13	615,850
		Total Containers & Packaging	1,511,649
Ecological
Services & Equipment2.1%
1,500		Casella Waste Systems, Inc., 9.75%, 2/01/13	1,530,000
550		Waste Services, Inc., 9.50%, 4/15/14	550,000
		Total Ecological Services & Equipment	2,080,000
Energy11.0%
100		Berry Petroleum Co., 8.25%, 11/01/16	102,000
250		Chaparral Energy, Inc., 8.50%, 12/01/15	233,125
		Chesapeake Energy Corp.,
130		6.375%,
6/15/15	126,100
20		6.875%,
11/15/20	19,550
		Compagnie Generale de Geophysique-Veritas (France)
65		7.50%,
5/15/15	66,300
70		7.75%,
5/15/17	72,100
255		Compton Petroleum Finance Corp.,
		7.625%,
12/01/13 (Canada)	244,163
1,000		ConocoPhillips Holding Co., 6.95%, 4/15/29	1,138,708
738	2,3	Corral Finans AB, 6.855%, 4/15/10 (Sweden)	697,569
250		DTE Energy Co., 7.05%, 6/01/11	263,126
1,000		Dominion Resources, Inc., 5.70%, 9/17/12	1,012,104
125		Edison Mission Energy, 7.50%, 6/15/13	126,719
175		El Paso Natural Gas Co., 8.375%, 6/15/32	203,997
31		Elwood Energy LLC, 8.159%, 7/05/26	31,764
		Encore Acquisition Co.,
30		6.00%,
7/15/15	27,150
40		7.25%,
12/01/17	38,300
275		Exco Resources, Inc., 7.25%, 1/15/11	271,562
1,075		FirstEnergy Corp., Ser. C, 7.375%, 11/15/31	1,173,577
360	2	Forest Oil Corp., 7.25%, 6/15/19	360,000
60		Grant Prideco, Inc., Ser. B, 6.125%, 8/15/15	60,300
225		KCS Energy, Inc., 7.125%, 4/01/12	221,625
426		Midwest Generation LLC, Ser. B, 8.56%, 1/02/16	457,680
185		Mirant Americas Generation LLC, 8.30%, 5/01/11	187,081
		NRG Energy, Inc.,
50		7.25%,
2/01/14	50,000
285		7.375%,
2/01/16	284,287
250		Occidental Petroleum Corp., 6.75%, 1/15/12	264,973
320	2	OPTI, Inc., 8.25%, 12/15/14 (Canada)	320,800
140		Orion Power Holdings, Inc., 12.00%, 5/01/10	154,700

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER 31, 2007 | 44 |
| --- | --- | --- |

| Portfolio of
Investments as of October 31, 2007 |
| --- |
| (Percentages shown are based on Net Assets) |

Principal Amount (000)		Description
Energy(contd)
$ 1,000		Progress
Energy, Inc., 7.75%, 3/01/31	$ 1,174,755
305		Sabine Pass
LNG LP, 7.50%, 11/30/16	298,900
275	2	SemGroup
LP, 8.75%, 11/15/15	264,000
400	2	Targa
Resources, Inc., 8.50%, 11/01/13	404,000
330		Whiting
Petroleum Corp., 7.25%, 5/01/12-5/01/13	324,375
25		Williams
Cos., Inc., 7.125%, 9/01/11	25,938
		Total
Energy	10,701,328
Entertainment
& Leisure0.8%
200		AMC
Entertainment, Inc., 11.00%, 2/01/16	216,500
225	2	Greektown
Holdings LLC, 10.75%, 12/01/13	223,875
85		Harrahs
Operating Co., Inc., 5.75%, 10/01/17	62,688
190		Seneca
Gaming Corp., Ser. B, 7.25%, 5/01/12	191,425
115		Wynn Las
Vegas LLC/Wynn Las Vegas Capital Corp.,
		6.625%,
12/01/14	112,987
		Total
Entertainment & Leisure	807,475
Financial
Institutions10.2%
102		AES
Ironwood LLC, 8.857%, 11/30/25	110,975
		American
Real Estate Partners LP/American Real Estate
Finance Corp.,
230		7.125%,
2/15/13	224,250
860		8.125%,
6/01/12	866,450
106	2,3	BMS
Holdings, Inc., 12.40%, 2/15/12	101,985
		Ford Motor
Credit Co. LLC,
1,600	3	6.813%,
1/15/10	1,524,146
150	3	7.993%,
1/13/12	138,866
250		7.80%,
6/01/12	234,894
1,500		HSBC Bank,
Inc., 3.875%, 9/15/09	1,469,899
572	2	iPayment
Investors LP, 11.625%, 7/15/14	589,367
175		iPayment,
Inc., 9.75%, 5/15/14	168,000
325		MetLife,
Inc., 6.125%, 12/01/11	336,267
		Momentive
Performance Materials, Inc.,
30	2	9.75%,
12/01/14	29,250
445	2	11.50%,
12/01/16	429,425
		Rainbow
National Services LLC,
210	2	8.75%,
9/01/12	218,400
1,455	2	10.375%,
9/01/14	1,600,500
570	5	Structured
Asset Receivable Trust, 1.649%, 1/21/10	564,635
1,000	2	TIAA Global
Markets, Inc., 3.875%, 1/22/08	997,133
50	3	Universal
City Florida Holding Co. I/II, 9.661%, 5/01/10	51,125
425	2	Wimar Opco
LLC/Wimar Opco Finance Corp.,
		9.625%,
12/15/14	318,750
		Total
Financial Institutions	9,974,317
Health Care3.4%
1,000		Merck &
Co., Inc., 4.375%, 2/15/13	969,871
320		Tenet
Healthcare Corp., 6.50%, 6/01/12	271,200
1,000		WellPoint,
Inc., 5.95%, 12/15/34	966,030
1,000		Wyeth,
6.50%, 2/01/34	1,055,966
		Total Health
Care	3,263,067
Industrials1.7%
260	2	AGY Holding
Corp., 11.00%, 11/15/14	256,100
100		Hexcel
Corp., 6.75%, 2/01/15	98,250
300		Park-Ohio
Industries, Inc., 8.375%, 11/15/14	279,750
		RBS Global,
Inc./Rexnord Corp.,
350		9.50%,
8/01/14	361,375
225		11.75%,
8/01/16	238,500
470	1	Sunstate
Equipment Co. LLC, 10.50%, 4/01/13	451,200
		Total
Industrials	1,685,175
Media14.4%
400		Adelphia
Communications Corp., 10.50%, 12/31/49	66,000
		Affinion
Group, Inc.,
435		10.125%,
10/15/13	453,487
220		11.50%,
10/15/15	229,350
125		American
Media Operations, Inc., Ser. B, 10.25%, 5/01/09	119,688

Principal Amount (000)		Description	Value
Media(contd)
$ 1,000		AOL Time
Warner, Inc., 7.70%, 5/01/32	$ 1,123,704
120	3	Cablevision
Systems Corp., Ser. B, 9.644%, 4/01/09	123,300
80		CanWest
MediaWorks, Inc., 8.00%, 9/15/12 (Canada)	78,000
215		Charter
Communications Holdings I LLC/Charter Communications Holdings I Capital Corp.,
		11.00%,
10/01/15	208,550
		Charter
Communications Holdings II LLC/Charter Communications Holdings II Capital Corp.,
605		10.25%,
9/15/10	617,100
105		Ser. B,
10.25%, 9/15/10	106,838
500		CMP
Susquehanna Corp., 9.875%, 5/15/14	459,375
1,000		Comcast
Cable Communications, Inc., 6.875%, 6/15/09	1,025,415
50		Dex Media
West LLC/Dex Media Finance Co., Ser. B,
		9.875%,
8/15/13	53,313
100		DirecTV Holdings
LLC/DirecTV Financing Co.,
		8.375%,
3/15/13	104,500
		EchoStar
DBS Corp.,
550		5.75%,
10/01/08	548,625
210		7.00%,
10/01/13	218,662
45		7.125%,
2/01/16	47,025
500	2,3	ION Media
Networks, Inc., 8.493%, 1/15/12	501,250
485		Idearc,
Inc., 8.00%, 11/15/16	486,212
405		Network
Communications, Inc., 10.75%, 12/01/13	407,531
1,500		News
America, Inc., 6.20%, 12/15/34	1,454,229
560		Nexstar
Finance, Inc., 7.00%, 1/15/14	537,600
		Nielsen
Finance LLC/Nielsen Finance Co.,
220	6	9.115%,
8/01/16	158,950
710		10.00%,
8/01/14	747,275
945		RH
Donnelley Corp., Ser. A-3, 8.875%, 1/15/16	945,000
70		Sinclair
Broadcast Group, Inc., 4.875%, 7/15/18	63,459
80		Sirius
Satellite Radio, Inc., 9.625%, 8/01/13	79,500
1,000		TCI
Communications, Inc., 7.875%, 2/15/26	1,138,691
750	2	TL
Acquisitions, Inc., 10.50%, 1/15/15	746,250
275	2	Univision
Communications, Inc., 9.75%, 3/15/15	269,500
445		Vertis,
Inc., 9.75%, 4/01/09	445,000
85		Viacom,
Inc., 6.625%, 5/15/11	88,370
370		Young
Broadcasting, Inc., 10.00%, 3/01/11	347,800
		Total Media	13,999,549
Real Estate0.5%
500		ERP
Operating LP, 6.95%, 3/02/11	521,745
Technology3.8%
		Amkor
Technology, Inc.,
50		7.75%,
5/15/13	48,375
90		9.25%,
6/01/16	92,025
565		Celestica,
Inc., 7.625%, 7/01/13 (Canada)	542,400
		Freescale
Semiconductor, Inc.,
540		9.125%,
12/15/14	488,700
100	3	9.569%,
12/15/14	91,875
340		NXP BV/NXP
Funding LLC, 9.50%, 10/15/15 (Netherlands)	321,300
345		Sanmina-SCI
Corp., 8.125%, 3/01/16	302,738
		SunGard
Data Systems, Inc.,
140		9.125%,
8/15/13	142,800
610		10.25%,
8/15/15	635,925
1,010		Superior
Essex Communications LLC/Essex Group, Inc.,
		9.00%,
4/15/12	997,375
		Total
Technology	3,663,513
Telecommunications12.2%
190		Cincinnati
Bell, Inc., 7.25%, 7/15/13	190,475
140		Cricket
Communications, Inc., 9.375%, 11/01/14	138,950
		Digicel
Group Ltd. (Bermuda)
170	2	8.875%,
1/15/15	158,746
540	2	9.125%,
1/15/15	503,957
130	3	Hawaiian
Telcom Communications, Inc., Ser. B,
		10.318%,
5/01/13	131,625
355		Intelsat
Corp., 9.00%, 6/15/16	362,987

| See Notes to Financial Statements. — 45 | ANNUAL
REPORT | OCTOBER 31, 2007 |
| --- | --- | --- |

| Portfolio of Investments as
of October 31, 2007 |
| --- |
| (Percentages
shown are based on Net Assets) |

Principal Amount (000)		Description	Value
Telecommunications(contd)
		Intelsat Ltd. (Bermuda)
$ 85	3	8.886%, 1/15/15	$ 86,275
300		9.25%, 6/15/16	311,250
170		11.25%, 6/15/16	182,750
730	3	11.409%, 6/15/13	761,025
240		Intelsat Subsidiary Holding Co. Ltd., 8.625%, 1/15/15 (Bermuda)	243,600
90	2	MetroPCS Wireless, Inc., 9.25%, 11/01/14	89,325
500	2	Nordic Telephone Co. Holdings A.p.S., 8.875%, 5/01/16 (Denmark)	528,750
410	2,3	Nortel Networks Ltd., 9.493%, 7/15/11 (Canada)	404,875
125		PanAmSat Corp., 9.00%, 8/15/14	127,500
		Qwest Corp.,
200		7.875%, 9/01/11	211,000
340	3	8.944%, 6/15/13	362,525
1,500		SBC Communications, Inc., 6.45%, 6/15/34	1,558,848
1,000		Telecom Italia Capital S.A., 4.95%, 9/30/14
(Luxembourg)	957,141
2,000		Verizon New England, Inc., 6.50%, 9/15/11	2,078,264
1,000		Vodafone Group Plc, 7.75%, 2/15/10 (United
Kingdom)	1,057,537
590		West Corp., 11.00%, 10/15/16	618,025
250	2	Wind Acquisition Finance S.A., 10.75%, 12/01/15 (Luxembourg)	278,125
		Windstream Corp.,
360		8.125%, 8/01/13	380,700
170		8.625%, 8/01/16	181,900
		Total Telecommunications	11,906,155
Transportation2.2%
125		American Airlines, Inc., Ser. 99-1, 7.324%,
4/15/11	123,438
80		Britannia Bulk Plc, 11.00%, 12/01/11 (United
Kingdom)	84,000
500		Canadian National Railway Co., 6.90%, 7/15/28
(Canada)	542,396
475		CHC Helicopter Corp., 7.375%, 5/01/14 (Canada)	459,562
425		Navios Maritime Holdings, Inc., 9.50%, 12/15/14 (Marshall Islands)	449,438
300		Overseas Shipholding Group, Inc., 8.25%,
3/15/13	309,750
240 2		St. Acquisition Corp., 12.50%, 5/15/17	153,000
		Total Transportation	2,121,584
		Total Corporate Bonds	82,294,635
U.S. Government and Agency
Securities3.9%
		U.S. Treasury Bonds,
130		4.75%, 2/15/37	129,929
410		5.375%, 2/15/31	444,210
		U.S. Treasury Notes,
810		4.125%, 8/15/10	813,924
1,075		4.25%, 8/15/13-8/15/15	1,077,249
550		4.875%, 8/15/16	567,359
710		4.75%, 5/15/14	729,691
		Total U.S. Government and Agency Securities	3,762,362
Trust Preferred
Stock0.7%
650	2,3,7	Barclays Bank Plc, 8.55% (United Kingdom)	699,144

Shares		Description
Common Stocks0.2%
396,568	1,8	Adelphia Recovery Trust	$ 29,742
947	1,8	Critical Care Systems Intl., Inc.	5,919
6,388	8	Time Warner Cable, Inc.	182,633
		Total Common Stocks	218,294
Preferred Stock0.0%
50,000	1	Superior Essex Holding Corp., Ser. A, 9.50%	31,000
		Total Long-Term Investments (cost $87,726,069)	87,005,435

Principal Amount (000)
SHORT-TERM
INVESTMENT9.3%
U.S. Government and
Agency Discount Notes9.3%
$ 9,000	9	Federal Home Loan Bank Disc. Notes, 4.401%, 11/01/07 (cost $9,000,000)	9,000,000
Total investments98.6% (cost
$96,726,069 10 )		$	96,005,435
Other assets in excess of liabilities1.4%			1,404,288
Net Assets100%		$	97,409,723

1	Security is fair valued.
2	Security is not registered under
the Securities Act of 1933. These securities may be resold in transactions in
accordance with Rule 144A under that Act, to qualified institutional buyers.
As of October 31, 2007, the Trust held 13.4% of its net assets, with a
current market value of $13,035,212, in securities restricted as to resale.
3	Variable rate security. Rate
shown is interest rate as of October 31, 2007.
4	Entire or partial principal
amount pledged as collateral for reverse repurchase agreements. See Note 4 in
the Notes to Financial Statements for details of open reverse repurchase
agreements.
5	Illiquid security. As of October
31, 2007, the Trust held 0.6% of its net assets, with a current market value
of $564,635, in these securities.
6	Represents a step up bond; the
interest rate shown reflects the effective yield at the time of purchase.
7	The security is a perpetual bond
and has no stated maturity date.
8	Non-income producing security.
9	Rate shown is the yield to
maturity as of the date of purchase.
10	Cost for federal income tax
purposes is $96,796,459. The net unrealized depreciation on a tax basis is
$791,024, consisting of $1,347,299 gross unrealized appreciation and
$2,138,323 gross unrealized depreciation.

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER 31, 2007 | 46 |
| --- | --- | --- |

Statements of Assets and Liabilities

October 31, 2007	BlackRock Broad Investment Grade 2009 Term Trust Inc. 1 (BCT)
Assets
Investments
at value, unaffiliated 2	$ 39,361,651	$	667,583,920	$	59,618,159	$	725,931,579	$	483,248,453
Investments
at value, affiliated 3			933,463				100,407		50,019
Investments
in affiliates	21,616		83,837		31,411		156,215		187,780
Cash	179,354		184,465		63,169		23,022		210,894
Foreign
currency at value 4			17,962
Receivable
from investments sold			79,414,032		298,143		118,755,429		298,981,807
Variation
margin receivable			285,126				196,616		2,503,972
Unrealized
gain on foreign currency exchange contracts			21,131
Interest
receivable	191,706		5,893,932		1,376,913		6,113,470		3,266,783
Unrealized
appreciation on interest rate swaps			5,366,013				6,167,813		19,676,308
Other
assets			1,126		1,105		1,684		2,960
	39,754,327		759,785,007		61,388,900		857,446,235		808,128,976
Liabilities
Reverse
repurchase agreements			103,353,692				105,261,512		33,895,363
Payable for
investments purchased			194,609,753		1,124,884		264,757,861		252,599,751
Variation
margin payable
Unrealized
loss on foreign currency exchange contracts
Loans
payable					9,250,000
Borrowed
bonds at value 5			80,405,639				85,300,660		35,402,682
Investments
sold short at value
Outstanding
options written at value 6			1,554,341				1,712,207		11,216,778
TBA sale
commitments 7			4,630,377				13,225,372		50,770,896
Unrealized
depreciation on interest rate swaps			4,709,585				5,365,027		960,832
Unrealized
depreciation on credit default swaps			462				98
Interest
payable			982,884		46,037		1,321,187		1,030,721
Deferred
income liability
Interest
rate floors at value									3,683,965
Cash
received as collateral			600,000				200,000
Dividends
payable	6,990		58,217		3,833		51,466		86,657
Investment
advisory fees payable	18,502		217,707		54,216		192,939		230,091
Administration
fees payable	5,046				5,163		32,156		53,098
Deferred
Trustees fees	21,616		83,837		31,411		156,215		187,780
Payable to
affiliates			11,894		316		9,053		14,467
Trustees
fees	8,518		7,882		1,667		7,560		6,507
Other
accrued expenses	124,676		223,510		89,117		248,045		338,437
	185,348		391,449,780		10,606,644		477,841,358		390,478,025
Preferred Shares at Redemption
Value
$0.001 par
value per share and $25,000 liquidation value per share, including dividends
payable 8
Net Assets
Applicable to Common Shareholders	$ 39,568,979	$	368,335,227	$	50,782,256	$	379,604,877	$	417,650,951
Composition
of Net Assets Applicable to Common Shareholders
Par value 9	$ 29,571	$	27,019	$	6,419	$	344,497	$	639,425
Paid-in
capital in excess of par	38,164,047		380,862,247		90,440,587		402,495,300		480,038,780
Cost of
shares held in treasury 10							(17,377,850	)
Undistributed
(distributions in excess of) net investment income	4,863,653		(1,696,051	)	116,650		768,824		(6,313,294	)
Accumulated
net realized gain (loss)	(3,222,230	)	(9,982,656	)	(36,529,058	)	(5,053,727	)	(62,361,817	)
Net
unrealized appreciation (depreciation)	(266,062	)	(875,332	)	(3,252,342	)	(1,572,167	)	5,647,857
Net assets
applicable to common shareholders, October 31, 2007	$ 39,568,979	$	368,335,227	$	50,782,256	$	379,604,877	$	417,650,951
Net asset
value 11	$ 13.38	$	13.63	$	7.91	$	11.02	$	6.53
1 Consolidated
Statement of Assets and Liabilities
2 Investments
at cost, unaffiliated	$ 39,627,713	$	669,290,048	$	62,870,501	$	728,241,712	$	489,276,096
3 Investments
at cost, affiliated	$	$	926,771	$		$	105,884	$	52,584
4 Foreign
currency at cost	$	$	17,603	$		$		$
5 Proceeds
received	$	$	80,372,938	$		$	85,264,516	$	34,289,344
6 Premiums
received	$	$	2,261,545	$		$	2,478,560	$	9,904,416
7 Proceeds
for TBA sale commitments	$	$	4,627,832	$		$	13,086,862	$	49,863,740
8 Preferred
shares outstanding
9 Par value
per share	$ 0.010	$	0.001	$	0.001	$	0.010	$	0.010
10 Shares held
in treasury							1,757,400
11 Common
shares outstanding	2,957,093		27,018,774		6,418,859		34,449,693		63,942,536

See Notes to Financial Statements.

47 ANNUAL REPORT OCTOBER 31, 2007

October 31, 2007	BlackRock Limited Duration Income Trust (BLW)
Assets
Investments
at value, unaffiliated 2	$ 916,465,094	$	1,645,791,043	$	96,005,435
Investments
at value, affiliated 3
Investments
in affiliates	77,688				16,994
Cash	459,217		2,433,274		25,014
Foreign
currency at value 4	131,351
Receivable
from investments sold	7,605,343		17,269,931		381,617
Variation
margin receivable			3,860,541
Unrealized
gain on foreign currency exchange contracts
Interest
receivable	14,216,297		18,988,818		1,752,232
Unrealized
appreciation on interest rate swaps
Other
assets	1,796		1,756		1,101
	938,956,786		1,688,345,363		98,182,393
Liabilities
Reverse
repurchase agreements	109,286,907		88,290,625		413,123
Payable for
investments purchased	140,394,085		7,757,330		152,692
Variation
margin payable	39,234
Unrealized
loss on foreign currency exchange contracts	922,551
Loans
payable
Borrowed
bonds at value 5			13,759,975
Investments
sold short at value			440,135
Outstanding
options written at value 6			4,130,100
TBA sale
commitments 7
Unrealized
depreciation on interest rate swaps
Unrealized
depreciation on credit default swaps	313,338
Interest
payable	3,774,842		245,379
Deferred
income liability	65,081
Interest
rate floors at value
Cash
received as collateral
Dividends
payable	260,642		1,522,131		20,589
Investment
advisory fees payable	371,728		929,772		49,601
Administration
fees payable
Deferred
Trustees fees	77,688				16,994
Payable to
affiliates	22,039		25,990		6,950
Trustees
fees	10,448		11,625		4,714
Other
accrued expenses	308,782		421,347		108,007
	255,847,365		117,534,409		772,670
Preferred Shares at Redemption
Value
$0.001 par
value per share and $25,000 liquidation value per share, including dividends
payable 8			462,276,473
Net Assets
Applicable to Common Shareholders	$ 683,109,421	$	1,108,534,481	$	97,409,723
Composition
of Net Assets Applicable to Common Shareholders
Par value 9	$ 36,890	$	51,828	$	7,058
Paid-in
capital in excess of par	701,305,214		1,206,156,456		98,443,594
Cost of
shares held in treasury 10
Undistributed
(distributions in excess of) net investment income	800,386		(276,473	)	197,208
Accumulated
net realized gain (loss)	(172,492	)	(45,444,375	)	(517,503	)
Net
unrealized appreciation (depreciation)	(18,860,577	)	(51,952,955	)	(720,634	)
Net assets
applicable to common shareholders, October 31, 2007	$ 683,109,421	$	1,108,534,481	$	97,409,723
Net asset
value 11	$ 18.52	$	21.39	$	13.80
1 Consolidated
Statement of Assets and Liabilities
2 Investments
at cost, unaffiliated	$ 933,594,349	$	1,693,312,884	$	96,726,069
3 Investments
at cost, affiliated	$	$		$
4 Foreign
currency at cost	$ 130,848	$		$
5 Proceeds
received	$	$	14,285,318	$
6 Premiums
received	$	$	5,426,127	$
7 Proceeds
for TBA sale commitments	$	$		$
8 Preferred
shares outstanding			18,480
9 Par value
per share	$ 0.001	$	0.001	$	0.001
10 Shares held
in treasury
11 Common
shares outstanding	36,889,650		51,828,157		7,058,402

ANNUAL REPORT OCTOBER 31, 2007 48

Statements of Operations

For the year ended October 31, 2007	BlackRock Broad Investment Grade 2009 Term Trust Inc. 1 (BCT)	BlackRock Core Bond Trust (BHK)
Investment
Income
Interest income	$ 2,158,502	$ 25,484,417	$	6,149,702	$	28,944,530	$	30,455,219
Dividend income		32,154		12,606		29,926
Foreign taxes withheld						(2,097	)
Income from affiliates	334	4,101		853		6,247		8,557
Affiliated income		52,860				63,456		3,731
Total investment income	2,158,836	25,573,532		6,163,161		29,042,062		30,467,507
Expenses
Investment advisory	221,437	2,263,497		727,265		2,268,956		2,680,534
Administration	60,392			69,263		378,159		618,585
Transfer agent	9,182	14,489		14,192		21,836		66,456
Custodian	63,355	249,091		113,949		231,868		268,396
Reports to shareholders	30,278	102,521		33,297		118,718		155,712
Directors/Trustees	10,093	35,499		5,698		35,718		36,317
Registration	932	11,073		10,987		15,345		25,782
Independent accountants	43,608	75,556		44,407		75,692		75,973
Legal	8,402	63,123		47,523		56,054		53,381
Officers fees	973	8,848		1,217		9,108		10,206
Insurance	2,087	20,151		3,620		22,254		25,791
Organization
Auction agent
Deferred Trustees fees	334	4,101		853		6,247		8,557
Miscellaneous	16,158	42,697		16,125		44,253		48,243
Total expenses excluding interest expense and excise tax	467,231	2,890,646		1,088,396		3,284,208		4,073,933
Interest expense		2,986,285		1,050,907		4,308,893		7,442,611
Excise tax	283,057
Total expenses	750,288	5,876,931		2,139,303		7,593,101		11,516,544
Less advisory fees waived
Less fees paid indirectly		(9,486	)	(8,027	)	(12,757	)	(22,750	)
Net expenses	750,288	5,867,445		2,131,276		7,580,344		11,493,794
Net investment income	1,408,548	19,706,087		4,031,885		21,461,718		18,973,713
Realized and
Unrealized Gain (Loss)
Net realized gain on:
Investments	16,829	2,932,807		(2,479,994	)	2,379,781		5,100,250
Foreign currency		(243,679	)			1,864
Futures and swaps		(2,641,007	)	5,700		(561,310	)	(14,906,137	)
Interest rate floors		3,316				3,654		3,623
Options written		472,353		23,138		505,900		66,100
Short sales		(181,836	)	1,000		(216,750	)	(631,861	)
	16,829	341,954		(2,450,156	)	2,113,139		(10,368,025	)
Net change in unrealized appreciation on:
Investments	23,668	1,396,645		2,730,808		34,707		9,813,510
Foreign currency		84,610
Futures and swaps		(4,729,198	)			(5,924,500	)	14,400,816
Interest rate floors								(993,376	)
Options written		(224,655	)			(232,716	)	(2,301,793	)
Short sales and borrowed bonds		(35,246	)			39,033		(2,547,439	)
	23,668	(3,507,844	)	2,730,808		(6,083,476	)	18,371,718
Net gain (loss)	40,497	(3,165,890	)	280,652		(3,970,337	)	8,003,693
Dividends from Net Investment Income to Preferred
Shareholders
Net Increase (Decrease) in Net Assets
Applicable to Common Shareholders Resulting from Operations	$ 1,449,045	$ 16,540,197	$	4,312,537	$	17,491,381	$	26,977,406

| 1 | Consolidated Statement of
Operations. |
| --- | --- |
| 2 | Commencement of investment of operations
for Preferred and Equity Advantage Trust was December 27, 2006. This
information includes the initial investment by BlackRock Funding, Inc. |

| See Notes
to Financial Statements. — 49 | ANNUAL REPORT | OCTOBER 31, 2007 |
| --- | --- | --- |

For the year ended October 31, 2007	BlackRock Limited Duration Income Trust (BLW)	BlackRock Preferred and Equity Advantage Trust 2 (BTZ)		BlackRock Strategic Bond Trust (BHD)
Investment Income
Interest income	$ 70,129,223	$ 59,961,405		$ 7,972,023
Dividend income	25,138	23,665,646		6,407
Foreign taxes withheld		(72,205	)
Income from affiliates	4,008			629
Affiliated income
Total investment income	70,158,369	83,554,846		7,979,059
Expenses
Investment advisory	4,890,429	9,017,835		791,363
Administration
Transfer agent	13,687	12,720		13,605
Custodian	458,823	194,874		99,288
Reports to shareholders	192,757	140,899		31,092
Directors/Trustees	42,093	42,388		10,395
Registration	16,509	14,642		10,969
Independent accountants	52,443	53,616		40,196
Legal	82,107	56,724		16,601
Officers fees	16,420	27,170		2,349
Insurance	47,141	55,998		5,517
Organization		15,000
Auction agent		766,268
Deferred Trustees fees	4,008			629
Miscellaneous	67,545	73,222		14,377
Total expenses excluding interest expense and excise tax	5,883,962	10,471,356		1,036,381
Interest expense	9,171,719	8,445,410		389,572
Excise tax		14,538
Total expenses	15,055,681	18,931,304		1,425,953
Less advisory fees waived				(176,670	)
Less fees paid indirectly	(116,925)	(150,583	)	(5,761	)
Net expenses	14,938,756	18,780,721		1,243,522
Net investment income	55,219,613	64,774,125		6,735,537
Realized and
Unrealized Gain (Loss)
Net realized gain on:
Investments	5,056,888	(1,920,106	)	999,009
Foreign currency	(2,379,054)
Futures and swaps	442,248	(29,263,030	)
Interest rate floors
Options written		(18,088,249	)
Short sales		3,748,880
	3,120,082	(45,522,505	)	999,009
Net change in unrealized appreciation on:
Investments	(19,529,245)	(47,521,841	)	(1,416,472	)
Foreign currency	(918,619)
Futures and swaps	(773,728)	(5,812,349	)
Interest rate floors
Options written		1,296,027
Short sales and borrowed bonds		85,208
	(21,221,592)	(51,952,955	)	(1,416,472	)
Net gain (loss)	(18,101,510)	(97,475,460	)	(417,463	)
Dividends from Net Investment Income to Preferred
Shareholders		(16,313,570	)
Net Increase (Decrease) in Net Assets
Applicable to Common Shareholders Resulting from Operations	$ 37,118,103	$ (49,014,905	)	$ 6,318,074

ANNUAL REPORT OCTOBER 31, 2007 50

Statements of Cash Flows

For the Year Ended October 31, 2007	BlackRock Core Bond Trust (BHK)		BlackRock High Yield Trust (BHY)		BlackRock Income Opportunity Trust (BNA)
Cash
Flows Provided by (Used for) Operating Activities
Net increase (decrease) in net assets resulting from
operations, excluding dividends to preferred shareholders	$ 16,540,197		$ 4,312,537		$ 17,491,381
Adjustments
to Reconcile Net Increase (Decrease) in Net Assets Resulting from Operations
to Net Cash from Operating Activities
Purchases of long-term investments	(1,941,701,638	)	(45,730,396	)	(2,429,447,517	)
Proceeds from sales of long-term investments	1,733,431,910		53,761,581		2,211,685,787
Net proceeds (purchases) of short-term investments	889,872		1,609,785		4,896,196
Decrease (Increase) in borrowed bond agreements	(80,490,000	)			(85,383,875	)
Amortization of premium and discount on investments	2,145,093		(52,354	)	1,397,029
Net realized loss (gain) on investments	(2,931,258	)	2,479,994		(2,379,781	)
Decrease (Increase) in unrealized
appreciation/depreciation on investments	(1,396,645	)	(2,730,808	)	(34,707	)
Net effect of exchange rates on foreign currency	243,678				(1,864	)
Increase in investments sold short and borrowed bonds	80,405,639				85,300,660
Increase (Decrease) in outstanding options written	(573,431	)			(610,347	)
Increase (Decrease) in TBA sale commitments	4,630,377				(12,762,315	)
Decrease in interest rate floor
Decrease (Increase) in unrealized appreciation
(depreciation) on swaps	1,779,656				2,004,890
Decrease (Increase) in credit default swaps	(44,465	)			(49,874	)
Increase in investments in affiliates	(4,101	)	(852	)	(6,247	)
Decrease (Increase) in receivable for investments sold	(79,018,214	)	(76,424	)	(92,217,031	)
Decrease in unrealized gain on foreign currency exchange
contracts	62,356
Decrease (Increase) in variation margin receivable	348,212				613,478
Decrease (Increase) in interest receivable	(541,245	)	187,539		(563,244	)
Decrease (Increase) in other assets	21,210		2,902		27,891
Increase (Decrease) in payable for investments purchased	183,643,965		1,064,252		251,167,512
Decrease in payable for dollar rolls
Increase in unrealized loss on foreign currency exchange
contracts
Increase in variation margin payable
Increase (Decrease) in interest payable	300,147		(40,863	)	444,016
Increase in deferred income
Increase (Decrease) in investment advisory fee payable	70,571		9,609		(1,049	)
Increase (Decrease) in cash with brokers as collateral					(400,000	)
Increase (Decrease) in administration fee payable			3,006		(33,664	)
Increase in Deferred Directors/Trustees fees	4,101		852		6,247
Increase (Decrease) in payable to affiliates	(5,945	)	(664	)	3,248
Increase (Decrease) in Officers & Trustees fees	7,882		1,667		7,560
Increase in accrued expenses	44,363		11,260		77,837
Total adjustments	(98,677,910	)	10,500,086		(66,259,164	)
Net cash provided by (used for) operating activities	$ (82,137,713	)	$ 14,812,623		$ (48,767,783	)
Cash flows provided by (used for)
financing activities:
Capital contributions
Increase (Decrease) in reverse repurchase agreements	99,442,604				70,935,354
Draws on loan			3,000,000
Payments on loan			(14,000,000	)
Increase in preferred shares at redemption value including
dividends payable
Cash dividends paid	(21,664,877	)	(3,911,685	)	(22,685,337	)
Distributions to Preferred Shareholders
Net cash provided by (used for) financing activities:	$ 77,777,727		$ (14,911,685	)	$ 48,250,017
Net increase (decrease) in cash	(4,359,986	)	(99,062	)	(517,766	)
Cash and foreign currency at beginning of year	4,562,413		162,231		540,788
Cash and foreign currency at end of year	$ 202,427		$ 63,169		$ 23,022
Cash paid during the period for interest	$ 2,686,138		$ 1,091,770		$ 3,864,877
Non cash financing activities not included herein consist
of reinvestment of dividends of	$		$ 12,289		$

1 Commencement of investment of operations for Preferred and Equity Advantage Trust was December 27, 2006. This information includes the initial investment by BlackRock Funding, Inc.

See Notes to Financial Statements.

51 ANNUAL REPORT OCTOBER 31, 2007

For the Year Ended October 31, 2007	BlackRock Income Trust Inc. (BKT)		BlackRock Limited Duration Income Trust (BLW)		BlackRock Preferred and Equity Advantage Trust (BTZ) 1
Cash
Flows Provided by (Used for) Operating Activities
Net increase (decrease) in net assets resulting from
operations, excluding dividends to preferred shareholders	$ 26,977,406		$ 37,118,103		$ (32,701,335	)
Adjustments
to Reconcile Net Increase (Decrease) in Net Assets Resulting from Operations
to Net Cash from Operating Activities
Purchases of long-term investments	(2,648,040,603	)	(2,075,694,027	)	(3,036,455,711	)
Proceeds from sales of long-term investments	2,705,505,681		2,184,331,730		1,384,949,447
Net proceeds (purchases) of short-term investments	(453,891	)	(3,048,518	)	(29,250,052	)
Decrease (Increase) in borrowed bond agreements	25,681,719				(13,832,286	)
Amortization of premium and discount on investments	12,697,538		2,200,638		(644,388	)
Net realized loss (gain) on investments	(5,100,250	)	(5,056,888	)	1,920,106
Decrease (Increase) in unrealized
appreciation/depreciation on investments	(9,813,510	)	19,529,245		47,521,841
Net effect of exchange rates on foreign currency			2,379,053
Increase in investments sold short and borrowed bonds	(25,665,758	)			14,200,110
Increase (Decrease) in outstanding options written	8,893,649				4,130,100
Increase (Decrease) in TBA sale commitments	34,189,494
Decrease in interest rate floor	1,789,109
Decrease (Increase) in unrealized appreciation
(depreciation) on swaps
Decrease (Increase) in credit default swaps	(17,631,968	)	313,338
Increase in investments in affiliates	(8,558	)	(4,008	)
Decrease (Increase) in receivable for investments sold	(282,517,813	)	(4,213,569	)	(17,269,931	)
Decrease in unrealized gain on foreign currency exchange
contracts
Decrease (Increase) in variation margin receivable	(2,503,972	)			(3,860,541	)
Decrease (Increase) in interest receivable	1,027,688		1,254,444		(18,988,818	)
Decrease (Increase) in other assets	24,976		56,737		(1,756	)
Increase (Decrease) in payable for investments purchased	252,599,751		828,336		7,757,330
Decrease in payable for dollar rolls	(15,527,433	)
Increase in unrealized loss on foreign currency exchange
contracts			885,571
Increase in variation margin payable	(1,068,671	)	2,254
Increase (Decrease) in interest payable	(572,515	)	3,099,604		245,379
Increase in deferred income			65,081
Increase (Decrease) in investment advisory fee payable	2,351		(51,146	)	929,772
Increase (Decrease) in cash with brokers as collateral
Increase (Decrease) in administration fee payable	(43,151	)
Increase in Deferred Directors/Trustees fees	8,558		4,008
Increase (Decrease) in payable to affiliates	(33,285	)	3,531		25,990
Increase (Decrease) in Officers & Trustees fees	6,507		10,448		11,625
Increase in accrued expenses	174,675		83,711		421,347
Total adjustments	33,620,318		126,979,573		(1,658,190,436	)
Net cash provided by (used for) operating activities	60,597,724		$ 164,097,676		$ (1,690,891,771	)
Cash flows provided by (used for)
financing activities:
Capital contributions					1,228,660,977
Increase (Decrease) in reverse repurchase agreements	(36,795,262	)	(110,712,624	)	88,290,625
Draws on loan
Payments on loan
Increase in preferred shares at redemption value including
dividends payable					462,276,473
Cash dividends paid	(23,699,970	)	(52,954,140	)	(69,589,460	)
Distributions to Preferred Shareholders					(16,313,570	)
Net cash provided by (used for) financing activities:	(60,495,232	)	$ (163,666,764	)	$ 1,693,325,045
Net increase (decrease) in cash	102,492		430,912		2,433,274
Cash and foreign currency at beginning of year	108,402		159,656
Cash and foreign currency at end of year	210,894		$ 590,568		$ 2,433,274
Cash paid during the period for interest	7,917,798		$ 6,072,115		$ 8,163,917
Non cash financing activities not included herein consist
of reinvestment of dividends of	$		$ 2,057,525		$ 1,748,836

ANNUAL REPORT OCTOBER 31, 2007 52

Statements of Changes in Net Assets For the years ended October 31, 2007 and 2006

| Net Increase
(Decrease) in Net Assets | BlackRock Broad Investment Grade 2009 Term Trust Inc. 1 (BCT) — 2007 | 2006 | | 2007 | | | 2006 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Operations | | | | | | | | |
| Net investment income | $ 1,408,548 | $ | 1,918,798 | $ | 19,706,087 | | $ 17,700,447 | |
| Net realized gain (loss) | 16,829 | | (493,395 | ) | 341,954 | | (8,285,073 | ) |
| Net change in unrealized
appreciation/depreciation | 23,668 | | 341,005 | | (3,507,844 | ) | 11,551,542 | |
| Net increase in net assets resulting from
operations | 1,449,045 | | 1,766,408 | | 16,540,197 | | 20,966,916 | |
| Dividends and
Distributions to Common Shareholders from: | | | | | | | | |
| Net investment income | (2,661,384 | ) | (4,191,834 | ) | (16,495,698 | ) | (25,048,230 | ) |
| Net realized gains | | | (69,260 | ) | | | (7,914,351 | ) |
| Tax return of capital | | | | | (5,227,396 | ) | | |
| Total dividends and distributions | (2,661,384 | ) | (4,261,094 | ) | (21,723,094 | ) | (32,962,581 | ) |
| Capital Share
Transactions: | | | | | | | | |
| Reinvestment of common dividends | | | | | | | | |
| Total increase (decrease) | (1,212,339 | ) | (2,494,686 | ) | (5,182,897 | ) | (11,995,665 | ) |
| Net Assets | | | | | | | | |
| Beginning of year | 40,781,318 | | 43,276,004 | | 373,518,124 | | 385,513,789 | |
| End of year | $ 39,568,979 | $ | 40,781,318 | $ | 368,335,227 | | $ 373,518,124 | |
| End of year undistributed (distribution in excess of) net
investment income | $ 4,863,653 | $ | 5,833,604 | $ | (1,696,051 | ) | $ (5,693,238 | ) |

1 Consolidated Statement of Changes in Net Assets.

| Net Increase (Decrease) in Net Assets Applicable to
Common Shareholders | BlackRock Limited Duration Income Trust (BLW) — 2007 | 2006 | | | BlackRock Preferred and Equity Advantage Trust 1 (BTZ) — 2007 | |
| --- | --- | --- | --- | --- | --- | --- |
| Operations: | | | | | | |
| Net
investment income | $ 55,219,613 | $ | 49,596,055 | | $ 64,774,125 | |
| Net
realized gain (loss) | 3,120,082 | | (1,589,905 | ) | (45,522,505 | ) |
| Net change
in unrealized appreciation/depreciation | (21,221,592 | ) | 2,473,132 | | (51,952,955 | ) |
| Dividends
from net investment income to Preferred Shareholders: | | | | | (16,313,570 | ) |
| Net
increase (decrease) in net assets applicable to common shareholders resulting
from operations | 37,118,103 | | 50,479,282 | | (49,014,905 | ) |
| Dividends and Distributions to Common
Shareholders from: | | | | | | |
| Net
investment income | (51,967,739 | ) | (55,725,066 | ) | (48,688,436 | ) |
| Net
realized gains | (2,229,742 | ) | | | | |
| Tax return
of capital distributions | (1,074,826 | ) | (760,960 | ) | (24,171,991 | ) |
| Total
dividends and distributions | (55,272,307 | ) | (56,486,026 | ) | (72,860,427 | ) |
| Capital Share
Transactions: | | | | | | |
| Net from
the issuance of common shares | | | | | 1,115,290,352 | |
| Net
proceeds from the underwriters over-allotment exercised | | | | | 113,370,625 | |
| Reinvestment
of common dividends | 2,057,525 | | 251,427 | | 1,748,836 | |
| | 2,057,525 | | 251,427 | | 1,230,409,813 | |
| Total
increase (decrease) | (16,096,679 | ) | (5,755,317 | ) | 1,108,534,481 | |
| Net Assets Applicable to Common
Shareholders | | | | | | |
| Beginning
of period | 699,206,100 | | 704,961,417 | | | |
| End of
period | $ 683,109,421 | $ | 699,206,100 | | $ 1,108,534,481 | |
| End of
period undistributed (distribution in excess of) net investment income | $ 800,386 | $ | (36,700 | ) | $ (276,473 | ) |

1 Commencement of investment operations for Preferred and Equity Advantage Trust was December 27, 2006. This information includes the initial investment by BlackRock Funding, Inc.

| See Notes to Financial Statements. — 53 | ANNUAL
REPORT | OCTOBER 31, 2007 |
| --- | --- | --- |

| Net Increase
(Decrease) in Net Assets | BlackRock High Yield Trust (BHY) — 2007 | 2006 | | 2007 | | 2006 | | | BlackRock Income Trust Inc. (BKT) — 2007 | | 2006 | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Operations | | | | | | | | | | | | |
| Net investment income | $ 4,031,885 | $ | 4,211,671 | $ | 21,461,718 | $ | 19,514,794 | | $ 18,973,713 | | $ 20,352,044 | |
| Net realized gain (loss) | (2,450,156 | ) | (2,067,969 | ) | 2,113,139 | | (7,330,378 | ) | (10,368,025 | ) | 1,937,674 | |
| Net change in unrealized
appreciation/depreciation | 2,730,808 | | 4,444,627 | | (6,083,476 | ) | 7,965,246 | | 18,371,718 | | 1,267,311 | |
| Net increase in net assets resulting from
operations | 4,312,537 | | 6,588,329 | | 17,491,381 | | 20,149,662 | | 26,977,406 | | 23,557,029 | |
| Dividends and
Distributions to Common Shareholders from: | | | | | | | | | | | | |
| Net investment income | (3,927,807 | ) | (4,175,232 | ) | (20,862,233 | ) | (22,238,524 | ) | (18,808,452 | ) | (21,910,288 | ) |
| Net realized gains | | | | | | | (8,976,694 | ) | | | | |
| Tax return of capital | | | | | (1,874,570 | ) | (2,162,198 | ) | (4,978,175 | ) | (5,576,693 | ) |
| Total dividends and distributions | (3,927,807 | ) | (4,175,232 | ) | (22,736,803 | ) | (33,377,416 | ) | (23,786,627 | ) | (27,486,981 | ) |
| Capital Share
Transactions: | | | | | | | | | | | | |
| Reinvestment of common dividends | 12,289 | | 48,307 | | | | | | | | | |
| Total increase (decrease) | 397,019 | | 2,461,404 | | (5,245,422 | ) | (13,227,754 | ) | 3,190,779 | | (3,929,952 | ) |
| Net Assets | | | | | | | | | | | | |
| Beginning of year | 50,385,237 | | 47,923,833 | | 384,850,299 | | 398,078,053 | | 414,460,172 | | 418,390,124 | |
| End of year | $ 50,782,256 | $ | 50,385,237 | $ | 379,604,877 | $ | 384,850,299 | | $ 417,650,951 | | $ 414,460,172 | |
| End of year undistributed (distribution in excess of) net
investment income | $ 116,650 | $ | 10,204 | $ | 768,824 | $ | (900,730 | ) | $ (6,313,294 | ) | $ (519,359 | ) |

| Net Increase (Decrease) in Net Assets Applicable to
Common Shareholders | BlackRock Strategic Bond Trust (BHD) — 2007 | 2006 | | |
| --- | --- | --- | --- | --- |
| Operations: | | | | |
| Net
investment income | $ 6,735,537 | $ | 6,965,538 | |
| Net
realized gain (loss) | 999,009 | | (759,640 | ) |
| Net change
in unrealized appreciation/depreciation | (1,416,472 | ) | 2,082,388 | |
| Dividends
from net investment income to Preferred Shareholders: | | | | |
| Net
increase (decrease) in net assets applicable to common shareholders resulting
from operations | 6,318,074 | | 8,288,286 | |
| Dividends and Distributions to Common
Shareholders from: | | | | |
| Net
investment income | (6,521,963 | ) | (6,969,104 | ) |
| Net
realized gains | | | | |
| Tax return
of capital distributions | | | (251,641 | ) |
| Total
dividends and distributions | (6,521,963 | ) | (7,220,745 | ) |
| Capital Share
Transactions: | | | | |
| Net from
the issuance of common shares | | | | |
| Net
proceeds from the underwriters over-allotment exercised | | | | |
| Reinvestment
of common dividends | | | | |
| | | | | |
| Total increase
(decrease) | (203,889 | ) | 1,067,541 | |
| Net Assets Applicable to Common
Shareholders | | | | |
| Beginning
of period | 97,613,612 | | 96,546,071 | |
| End of
period | $ 97,409,723 | $ | 97,613,612 | |
| End of
period undistributed (distribution in excess of) net investment income | $ 197,208 | $ | (16,366 | ) |

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER 31, 2007 | 54 |
| --- | --- | --- |

Financial Highlights BlackRock Broad Investment Grade 2009 Term Trust Inc. (BCT)

| | Year
Ended October 31, — 2007 | 2006 | | 2005 | | 2004 | | 2003 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Per Share Operating
Performance | | | | | | | | | | |
| Net asset
value, beginning of year | $ 13.79 | $ | 14.63 | $ | 15.98 | $ | 16.02 | $ | 17.33 | |
| Investment
operations: | | | | | | | | | | |
| Net
investment income | 0.48 | | 0.65 | | 0.80 | | 0.61 | | 1.28 | |
| Net
realized and unrealized gain (loss) | 0.01 | | (0.05 | ) | (0.87 | ) | 0.25 | | (1.40 | ) |
| Net
increase (decrease) from investment operations | 0.49 | | 0.60 | | (0.07 | ) | 0.86 | | (0.12 | ) |
| Dividends
and distributions from: | | | | | | | | | | |
| Net
investment income | (0.90 | ) | (1.42 | ) | (1.03 | ) | (0.90 | ) | (1.19 | ) |
| Net
realized gains | | | (0.02 | ) | (0.25 | ) | | | | |
| Total
dividends and distributions | (0.90 | ) | (1.44 | ) | (1.28 | ) | (0.90 | ) | (1.19 | ) |
| Net asset
value, end of year | $ 13.38 | $ | 13.79 | $ | 14.63 | $ | 15.98 | $ | 16.02 | |
| Market
price, end of year | $ 15.15 | $ | 15.08 | $ | 15.86 | $ | 15.80 | $ | 15.85 | |
| Total Investment
Returns 1 | | | | | | | | | | |
| At net
asset value | 2.95 | % | 3.53 | % | (0.82 | )% | 5.52 | % | (0.61 | )% |
| At market
value | 6.60 | % | 4.44 | % | 8.74 | % | 5.45 | % | 5.32 | % |
| Ratios to Average Net
Assets | | | | | | | | | | |
| Total
expenses | 1.86 | % | 1.14 | % | 2.37 | % | 2.48 | % | 2.43 | % |
| Net
expenses | 1.86 | % | 1.14 | % | 2.37 | % | 2.48 | % | 2.43 | % |
| Net expenses
excluding excise tax | 1.16 | % | 1.14 | % | 1.19 | % | 1.11 | % | 1.18 | % |
| Net
investment income | 3.50 | % | 4.50 | % | 5.23 | % | 3.83 | % | 7.54 | % |
| Supplemental
Data | | | | | | | | | | |
| Average net
assets (000) | $ 40,261 | $ | 42,625 | $ | 45,264 | $ | 47,191 | $ | 49,882 | |
| Portfolio
turnover | 10 | % | 8 | % | 116 | % | 20 | % | 39 | % |
| Net assets,
end of year (000) | $ 39,569 | $ | 40,781 | $ | 43,276 | $ | 47,255 | $ | 47,381 | |
| Reverse
repurchase agreements outstanding, end of year (000) | $ | $ | | $ | | $ | 19,263 | $ | 19,953 | |
| Asset
coverage, end of year 2 | $ | $ | | $ | | $ | 3,453 | $ | 3,375 | |
| Reverse
repurchase agreements average daily balance (000) | $ | $ | | $ | 7,865 | $ | 22,055 | $ | 19,409 | |
| Reverse
repurchase agreements weighted average interest rate | | % | | % | 2.32 | % | 1.20 | % | 1.21 | % |

| 1 | Total investment return at market price, which can be
significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns excludes the
effects of brokerage commissions. Total investment returns for less than a
full year are not annualized. Past performance is not a guarantee of future
results. |
| --- | --- |
| 2 | Per $1,000 of reverse repurchase agreements outstanding. |
| The information in the above Financial Highlights
represents the operating performance for a common share outstanding, total
investment returns, ratios to average net assets and other supplemental data
for each period indicated. This information has been determined based upon
financial information provided in the financial statements and market price
data for the Trusts common shares. | |

See Notes to Financial Statements. — 55	ANNUAL REPORT	OCTOBER 31, 2007

Financial Highlights BlackRock Core Bond Trust (BHK)

| | Year
Ended October 31, — 2007 | 2006 | | 2005 | | 2004 | | 2003 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Per Share Operating
Performance | | | | | | | | | | |
| Net asset value, beginning of year | $ 13.82 | $ | 14.27 | $ | 15.22 | $ | 14.75 | $ | 14.33 | |
| Investment operations: | | | | | | | | | | |
| Net
investment income | 0.74 | | 0.66 | | 0.78 | | 0.92 | | 0.83 | |
| Net
realized and unrealized gain (loss) | (0.13 | ) | 0.11 | | (0.37 | ) | 0.66 | | 0.77 | |
| Net increase from investment operations | 0.61 | | 0.77 | | 0.41 | | 1.58 | | 1.60 | |
| Dividends and distributions from: | | | | | | | | | | |
| Net
investment income | (0.61 | ) | (0.93 | ) | (1.01 | ) | (0.86 | ) | (1.00 | ) |
| Net
realized gains | | | (0.29 | ) | (0.35 | ) | (0.25 | ) | (0.18 | ) |
| Tax return
of capital | (0.19 | ) | | | | | | | | |
| Total dividends and distributions | (0.80 | ) | (1.22 | ) | (1.36 | ) | (1.11 | ) | (1.18 | ) |
| Net asset value, end of year | $ 13.63 | $ | 13.82 | $ | 14.27 | $ | 15.22 | $ | 14.75 | |
| Market price, end of year | $ 12.23 | $ | 12.86 | $ | 13.69 | $ | 14.02 | $ | 13.57 | |
| Total Investment
Returns 1 | | | | | | | | | | |
| At net asset value | 5.04 | % | 6.20 | % | 3.18 | % | 11.79 | % | 11.76 | % |
| At market value | 1.29 | % | 3.07 | % | 7.46 | % | 11.93 | % | 6.62 | % |
| Ratios to Average Net
Assets | | | | | | | | | | |
| Total expenses | 1.60 | % | 1.08 | % | 1.50 | % | 1.32 | % | 1.05 | % |
| Net expenses | 1.60 | % | 1.08 | % | 1.50 | % | 1.32 | % | 1.05 | % |
| Net expenses excluding interest expense | 0.78 | % | 0.77 | % | 0.85 | % | 0.92 | % | 0.87 | % |
| Net investment income | 5.36 | % | 4.78 | % | 5.20 | % | 6.20 | % | 5.58 | % |
| Supplemental
Data | | | | | | | | | | |
| Average net assets (000) | $ 367,577 | $ | 370,219 | $ | 402,783 | $ | 401,212 | $ | 401,049 | |
| Portfolio turnover | 122 | % | 88 | % | 220 | % | 398 | % | 161 | % |
| Net assets, end of year (000) | $ 368,335 | $ | 373,518 | $ | 385,514 | $ | 411,163 | $ | 398,540 | |
| Reverse repurchase agreements outstanding, end of year
(000) | $ 103,354 | $ | 3,911 | $ | 86,876 | $ | 102,474 | $ | 91,668 | |
| Asset coverage, end of year 2 | $ 4,564 | $ | 96,502 | $ | 5,438 | $ | 5,012 | $ | 5,348 | |
| Reverse repurchase agreements average daily balance (000) | $ 44,786 | $ | 25,340 | $ | 91,130 | $ | 145,094 | $ | 67,591 | |
| Reverse repurchase agreements weighted average interest
rate | 5.24 | % | 4.54 | % | 2.86 | % | 1.11 | % | 1.05 | % |

| 1 | Total investment return at market price, which can be
significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns excludes the effects
of brokerage commissions. Total investment returns for less than a full year
are not annualized. Past performance is not a guarantee of future results. |
| --- | --- |
| 2 | Per $1,000 of reverse repurchase agreements outstanding. |
| The information in the above Financial Highlights
represents the operating performance for a common share outstanding, total
investment returns, ratios to average net assets and other supplemental data
for each period indicated. This information has been determined based upon
financial information provided in the financial statements and market price
data for the Trusts common shares. | |

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER 31, 2007 | 56 |
| --- | --- | --- |

Financial Highlights BlackRock High Yield Trust (BHY)

| | Year
Ended October 31, — 2007 | 2006 | | 2005 | | 2004 | | 2003 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Per Share Operating
Performance | | | | | | | | | | |
| Net asset value, beginning of year | $ 7.85 | $ | 7.48 | $ | 7.95 | $ | 6.96 | $ | 6.13 | |
| Investment operations: | | | | | | | | | | |
| Net
investment income | 0.63 | | 0.66 | | 0.68 | | 0.92 | | 1.06 | |
| Net
realized and unrealized gain (loss) | 0.04 | | 0.36 | | (0.36 | ) | 1.02 | | 0.89 | |
| Net increase from investment operations | 0.67 | | 1.02 | | 0.32 | | 1.94 | | 1.95 | |
| Dividends and distributions from: | | | | | | | | | | |
| Net
investment income | (0.61 | ) | (0.65 | ) | (0.79 | ) | (0.92 | ) | (1.07 | ) |
| Tax return
of capital | | | | | | | (0.03 | ) | (0.05 | ) |
| Total dividends and distributions | (0.61 | ) | (0.65 | ) | (0.79 | ) | (0.95 | ) | (1.12 | ) |
| Net asset value, end of year | $ 7.91 | $ | 7.85 | $ | 7.48 | $ | 7.95 | $ | 6.96 | |
| Market price, end of year | $ 6.92 | $ | 7.77 | $ | 7.36 | $ | 9.30 | $ | 10.25 | |
| Total Investment
Returns 1 | | | | | | | | | | |
| At net asset value | 9.03 | % | 14.25 | % | 2.85 | % | 26.24 | % | 27.75 | % |
| At market value | (3.63 | ) % | 14.93 | % | (13.49 | ) % | 0.28 | % | 32.87 | % |
| Ratios to Average Net
Assets | | | | | | | | | | |
| Total expenses | 4.16 | % | 4.50 | % | 3.52 | % | 2.69 | % | 3.07 | % |
| Net expenses | 4.14 | % | 4.49 | % | 3.51 | % | 2.68 | % | 3.07 | % |
| Net expenses excluding interest expense | 2.10 | % | 2.19 | % | 2.10 | % | 1.96 | % | 2.22 | % |
| Net investment income | 7.84 | % | 8.74 | % | 8.71 | % | 12.16 | % | 16.37 | % |
| Supplemental
Data | | | | | | | | | | |
| Average net assets (000) | $ 51,435 | $ | 48,176 | $ | 50,104 | $ | 48,186 | $ | 41,326 | |
| Portfolio turnover | 69 | % | 85 | % | 102 | % | 156 | % | 30 | % |
| Net assets, end of year (000) | $ 50,782 | $ | 50,385 | $ | 47,924 | $ | 50,914 | $ | 44,438 | |
| Loan outstanding, end of year (000) | $ 9,250 | $ | 20,250 | $ | 20,750 | $ | 19,250 | $ | 19,250 | |
| Asset coverage, end of year 2 | $ 6,490 | $ | 3,488 | $ | 3,310 | $ | 3,645 | $ | 3,308 | |
| Loan average daily balance (000) | $ 17,710 | $ | 20,621 | $ | 20,425 | $ | 19,250 | $ | 19,250 | |
| Loan weighted average interest rate | 5.28 | % | 4.75 | % | 2.87 | % | 1.80 | % | 1.96 | % |

| 1 | Total investment return at market price, which can be
significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns excludes the effects
of brokerage commissions. Total investment returns for less than a full year
are not annualized. Past performance is not a guarantee of future results. |
| --- | --- |
| 2 | Per $1,000 of reverse repurchase agreements outstanding. |
| The information in the above Financial Highlights
represents the operating performance for a common share outstanding, total
investment returns, ratios to average net assets and other supplemental data
for each period indicated. This information has been determined based upon
financial information provided in the financial statements and market price
data for the Trusts common shares. | |

See Notes to Financial Statements. — 57	ANNUAL REPORT	OCTOBER 31, 2007

Financial Highlights BlackRock Income Opportunity Trust (BNA)

| | Year
Ended October 31, — 2007 | 2006 | | 2005 | | 2004 | | 2003 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Per Share Operating
Performance | | | | | | | | | | |
| Net asset value, beginning of year | $ 11.17 | $ | 11.56 | $ | 12.38 | $ | 11.93 | $ | 11.83 | |
| Investment operations: | | | | | | | | | | |
| Net
investment income | 0.62 | | 0.57 | | 0.72 | | 0.76 | | 0.84 | |
| Net realized
and unrealized gain (loss) | (0.11 | ) | 0.01 | | (0.45 | ) | 0.53 | | 0.31 | |
| Net increase from investment operations | 0.51 | | 0.58 | | 0.27 | | 1.29 | | 1.15 | |
| Dividends and distributions from: | | | | | | | | | | |
| Net
investment income | (0.61 | ) | (0.65 | ) | (0.81 | ) | (0.84 | ) | (0.81 | ) |
| Net
realized gains | | | (0.26 | ) | (0.28 | ) | | | (0.24 | ) |
| Tax return
of capital | (0.05 | ) | (0.06 | ) | | | | | | |
| Total dividends and distributions | (0.66 | ) | (0.97 | ) | (1.09 | ) | (0.84 | ) | (1.05 | ) |
| Net asset value, end of year | $ 11.02 | $ | 11.17 | $ | 11.56 | $ | 12.38 | $ | 11.93 | |
| Market price, end of year | $ 10.19 | $ | 10.58 | $ | 10.90 | $ | 11.38 | $ | 10.95 | |
| Total Investment
Returns 1 | | | | | | | | | | |
| At net asset value | 5.11 | % | 5.76 | % | 2.95 | % | 11.90 | % | 10.92 | % |
| At market value | 2.62 | % | 6.27 | % | 5.53 | % | 12.04 | % | 14.71 | % |
| Ratios to Average Net
Assets | | | | | | | | | | |
| Total expenses | 2.01 | % | 1.61 | % | 1.72 | % | 1.11 | % | 1.29 | % |
| Net expenses | 2.00 | % | 1.61 | % | 1.72 | % | 1.11 | % | 1.29 | % |
| Net expenses excluding interest expense | 0.87 | % | 0.89 | % | 0.87 | % | 0.84 | % | 0.89 | % |
| Net investment income | 5.68 | % | 5.11 | % | 5.97 | % | 6.29 | % | 6.99 | % |
| Supplemental
Data | | | | | | | | | | |
| Average net assets (000) | $ 378,159 | $ | 381,726 | $ | 413,777 | $ | 415,131 | $ | 413,543 | |
| Portfolio turnover | 196 | % | 131 | % | 396 | % | 300 | % | 46 | % |
| Net assets, end of year (000) | $ 379,605 | $ | 384,850 | $ | 398,078 | $ | 426,643 | $ | 410,981 | |
| Reverse repurchase agreements outstanding, end of year
(000) | $ 105,262 | $ | 34,326 | $ | 120,179 | $ | 94,644 | $ | 103,378 | |
| Asset coverage, end of year 2 | $ 4,606 | $ | 12,212 | $ | 4,312 | $ | 5,508 | $ | 4,976 | |
| Reverse repurchase agreements average daily balance (000) | $ 68,241 | $ | 59,691 | $ | 122,457 | $ | 97,264 | $ | 136,172 | |
| Reverse repurchase agreements weighted average interest
rate | 5.27 | % | 4.59 | % | 2.87 | % | 1.14 | % | 1.22 | % |

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER 31, 2007 | 58 |
| --- | --- | --- |

Financial Highlights BlackRock Income Trust Inc. (BKT)

| | Year
Ended October 31, — 2007 | 2006 | | 2005 | | 2004 | | 2003 | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Per Share Operating
Performance | | | | | | | | | | |
| Net asset
value, beginning of year | $ 6.48 | $ | 6.54 | $ | 6.95 | $ | 7.21 | $ | 8.13 | |
| Investment
operations: | | | | | | | | | | |
| Net
investment income | 0.30 | | 0.32 | | 0.44 | | 0.51 | | 0.61 | |
| Net
realized and unrealized gain (loss) | 0.12 | | 0.05 | | (0.30 | ) | (0.16 | ) | (0.52 | ) |
| Net
increase from investment operations | 0.42 | | 0.37 | | 0.14 | | 0.35 | | 0.09 | |
| Dividends
and distributions from: | | | | | | | | | | |
| Net
investment income | (0.29 | ) | (0.34 | ) | (0.48 | ) | (0.61 | ) | (1.01 | ) |
| Tax return
of capital | (0.08 | ) | (0.09 | ) | (0.07 | ) | | | | |
| Total dividends and distributions | (0.37 | ) | (0.43 | ) | (0.55 | ) | (0.61 | ) | (1.01 | ) |
| Net asset
value, end of year | $ 6.53 | $ | 6.48 | $ | 6.54 | $ | 6.95 | $ | 7.21 | |
| Market
price, end of year | $ 5.81 | $ | 6.07 | $ | 5.90 | $ | 7.50 | $ | 7.71 | |
| Total Investment
Returns 1 | | | | | | | | | | |
| At net
asset value | 7.06 | % | 6.06 | % | 2.12 | % | 5.01 | % | 1.20 | % |
| At market
value | 1.69 | % | 10.18 | % | (14.63 | )% | 5.97 | % | 15.41 | % |
| Ratios to Average Net
Assets | | | | | | | | | | |
| Total
expenses | 2.77 | % | 2.85 | % | 2.80 | % | 1.37 | % | 1.36 | % |
| Net expenses | 2.76 | % | 2.84 | % | 2.79 | % | 1.37 | % | 1.36 | % |
| Net
expenses excluding interest expense | 0.98 | % | 1.00 | % | 0.99 | % | 0.97 | % | 1.02 | % |
| Net
investment income | 4.60 | % | 4.92 | % | 6.54 | % | 7.13 | % | 8.18 | % |
| Supplemental Data | | | | | | | | | | |
| Average net
assets (000) | $ 412,390 | $ | 413,597 | $ | 430,035 | $ | 447,984 | $ | 472,676 | |
| Portfolio
turnover | 250 | % | 80 | % | 60 | % | 120 | % | 64 | % |
| Net assets,
end of year (000) | $ 417,651 | $ | 414,460 | $ | 418,390 | $ | 442,635 | $ | 457,301 | |
| Reverse
repurchase agreements outstanding, end of year (000) | $ 33,895 | $ | 70,691 | $ | 149,558 | $ | 223,736 | $ | 121,767 | |
| Asset
coverage, end of year 2 | $ 13,322 | $ | 6,863 | $ | 3,798 | $ | 2,978 | $ | 4,756 | |
| Reverse
repurchase agreements average daily balance (000) | $ 93,325 | $ | 104,393 | $ | 180,553 | $ | 158,278 | $ | 135,804 | |
| Reverse
repurchase agreements weighted average interest rate | 5.21 | % | 4.54 | % | 2.81 | % | 1.12 | % | 1.17 | % |

The information in the above Financial Highlights represents the operating performance for a common share outstanding, total investment returns, ratios to average net assets and other supplemental data for each period indicated. This information has been determined based upon financial information provided in the financial statements and market price data for the Trusts common shares.

See Notes to Financial Statements. — 59	ANNUAL REPORT	OCTOBER 31, 2007

Financial Highlights BlackRock Limited Duration Income Trust (BLW)

| | Year
Ended October 31, | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | 2007 | 2006 | | 2005 | | 2004 | | | | |
| Per Share Operating
Performance | | | | | | | | | | |
| Net asset
value, beginning of year | $ 19.01 | $ | 19.17 | $ | 20.13 | $ | 19.74 | $ | 19.10 | 2 |
| Investment
operations: | | | | | | | | | | |
| Net
investment income | 1.50 | | 1.35 | | 1.46 | | 1.46 | | 0.33 | |
| Net
realized and unrealized gain (loss) | (0.49 | ) | 0.03 | | (0.94 | ) | 0.43 | | 0.60 | |
| Net
increase from investment operations | 1.01 | | 1.38 | | 0.52 | | 1.89 | | 0.93 | |
| Dividends
and distributions from: | | | | | | | | | | |
| Net
investment income | (1.41 | ) | (1.52 | ) | (1.33 | ) | (1.49 | ) | (0.25 | ) |
| Net
realized gains | (0.06 | ) | | | (0.15 | ) | (0.01 | ) | | |
| Tax return
of capital | (0.03 | ) | (0.02 | ) | | | | | | |
| Total
dividends and distributions | (1.50 | ) | (1.54 | ) | (1.48 | ) | (1.50 | ) | (0.25 | ) |
| Capital
charges with respect to issuance of Common shares | | | | | | | | | (0.04 | ) |
| Net asset
value, end of year | $ 18.52 | $ | 19.01 | $ | 19.17 | $ | 20.13 | $ | 19.74 | |
| Market
price, end of year | $ 16.68 | $ | 18.85 | $ | 17.48 | $ | 19.95 | $ | 18.80 | |
| Total Investment
Returns 3 | | | | | | | | | | |
| At net
asset value | 5.66 | % | 7.85 | % | 2.93 | % | 10.17 | % | 4.71 | % |
| At market
value | (4.03 | )% | 17.31 | % | (5.30 | )% | 14.64 | % | (4.77 | )% |
| Ratios to Average Net
Assets | | | | | | | | | | |
| Total
expenses | 2.16 | % | 2.20 | % | 1.71 | % | 1.26 | % | 0.82 | % 4 |
| Net expenses | 2.14 | % | 2.19 | % | 1.71 | % | 1.25 | % | 0.82 | % 4 |
| Net
expenses excluding interest expense | 0.83 | % | 0.91 | % | 0.92 | % | 0.90 | % | 0.79 | % 4 |
| Net
investment income | 7.92 | % | 7.10 | % | 7.42 | % | 7.34 | % | 6.87 | % 4 |
| Supplemental Data | | | | | | | | | | |
| Average net
assets (000) | $ 696,946 | $ | 698,382 | $ | 722,668 | $ | 730,369 | $ | 686,655 | |
| Portfolio
turnover | 65 | % | 132 | % | 70 | % | 215 | % | 127 | % |
| Net assets,
end of year (000) | $ 683,109 | $ | 699,206 | $ | 704,961 | $ | 739,225 | $ | 724,747 | |
| Reverse
repurchase agreements outstanding, end of year (000) | $ 109,287 | $ | 220,000 | $ | 176,010 | $ | 159,416 | $ | 118,993 | |
| Asset
coverage, end of year 5 | $ 7,251 | $ | 4,178 | $ | 5,005 | $ | 5,637 | $ | 7,091 | |
| Reverse
repurchase agreements average daily balance (000) | $ 172,040 | $ | 179,366 | $ | 186,660 | $ | 195,845 | $ | 26,591 | |
| Reverse
repurchase agreements weighted average interest rate | 5.28 | % | 4.96 | % | 3.08 | % | 1.32 | % | 0.76 | % |

| 1 | Commencement of investment operations. This information
includes the initial investment by BlackRock Funding, Inc. |
| --- | --- |
| 2 | Net asset value, beginning of period, reflects a deduction
of $0.90 per share sales charge from the initial offering price of $20.00 per
share. |
| 3 | Total investment return at market price, which can be
significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns excludes the
effects of brokerage commissions. Total investment returns for less than a
full year are not annualized. Past performance is not a guarantee of future results. |
| 4 | Annualized. |
| 5 | Per $1,000 of reverse repurchase agreements outstanding. |

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER 31, 2007 | 60 |
| --- | --- | --- |

Financial Highlights BlackRock Preferred and Equity Advantage Trust (BTZ)


Per Common Share Operating
Performance
Net asset
value, beginning of period	$ 23.88	2
Investment
operations:
Net
investment income	1.25
Net
realized and unrealized gain (loss)	(1.86	)
Dividends
to preferred shareholders from net investment income	(0.31	)
Net
increase (decrease) from investment operations	(0.92	)
Dividends
and distributions to common shareholders from:
Net
investment income	(0.93	)
Tax return
of capital	(0.47	)
Total
dividends and distributions	(1.40	)
Capital
charges with respect to issuance of:
Common
shares	(0.04	)
Preferred
shares	(0.13	)
Total
capital charges	(0.17	)
Net asset
value, end of period	$ 21.39
Market
price, end of period	$ 18.65
Total Investment
Returns 3
At net
asset value	(4.42	)%
At market
value	(20.34	)%
Ratios to Average Net Assets of
Common Shareholders 4,5
Total
expenses	1.90	%
Net
expenses	1.88	%
Net
expenses excluding interest expense and excise tax	1.04	%
Net
investment income available to common shareholders	4.86	%
Preferred
share dividends	1.64	%
Supplemental Data
Average net
assets of common shareholders (000)	$ 1,177,716
Portfolio
turnover	35	%
Net assets
applicable to common shareholders, end of period (000)	$ 1,108,534
Reverse
repurchase agreements outstanding, end of period (000)	$ 88,291
Asset
coverage per preferred share, end of period 3	$ 89,737
Reverse
repurchase agreements average daily balance (000)	$ 96,468
Reverse
repurchase agreements weighted average interest rate	5.32	%

| 1 | Commencement of investment operations. This information
includes the initial investment by BlackRock Funding, Inc. |
| --- | --- |
| 2 | Net asset value, beginning of period, reflects a deduction
of $1.125 per share sales charge from the initial offering price of $25.00
per share. |
| 3 | Total investment return at market price, which can be
significantly greater or lesser than the net asset value, may result in
substantially different returns. Total investment returns excludes the
effects of brokerage commissions. Total investment returns for less than a
full year are not annualized. Past performance is not a guarantee of future
results. |
| 4 | Annualized. |
| 5 | Ratios are calculated on the basis of income and expenses
applicable to both the common and preferred shares relative to the average
net assets of the common shareholders. |

See Notes to Financial Statements. — 61	ANNUAL REPORT	OCTOBER 31, 2007

Financial Highlights BlackRock Strategic Bond Trust (BHD)

	2007	2006		2005		2004		2003
Per Share Operating
Performance
Net asset
value, beginning of year	$ 13.83	$	13.68	$	15.10	$	15.07	$	12.63
Investment
operations:
Net
investment income	0.95		0.99		1.10		1.39		1.59
Net
realized and unrealized gain (loss)	(0.06	)	0.18		(1.13	)	0.25		2.34
Net
increase (decrease) from investment operations	0.89		1.17		(0.03	)	1.64		3.93
Dividends
and distributions from:
Net
investment income	(0.92	)	(0.98	)	(1.12	)	(1.61	)	(1.49	)
Tax return
of capital			(0.04	)	(0.27	)
Total
dividends and distributions	(0.92	)	(1.02	)	(1.39	)	(1.61	)	(1.49	)
Net asset
value, end of year	$ 13.80	$	13.83	$	13.68	$	15.10	$	15.07
Market
price, end of year	$ 11.88	$	12.85	$	12.45	$	16.70	$	15.27
Total Investment
Returns 1
At net
asset value	7.26	%	9.58	%	(0.49	)%	11.35	%	32.55	%
At market
value	(0.62	)%	11.87	%	(18.11	)%	21.54	%	37.36	%
Ratios to Average Net
Assets
Total
expenses	1.45	%	2.25	%	2.14	%	1.49	%	2.01	%
Net
expenses	1.27	%	2.00	%	1.87	%	1.23	%	1.71	%
Net
expenses excluding interest expense	0.87	%	0.94	%	0.92	%	0.89	%	1.01	%
Net
investment income	6.86	%	7.26	%	7.58	%	9.23	%	11.32	%
Supplemental Data
Average net
assets (000)	$ 98,130	$	96,003	$	101,990	$	106,330	$	98,498
Portfolio
turnover	34	%	56	%	51	%	31	%	32	%
Net assets,
end of year (000)	$ 97,410	$	97,614	$	96,546	$	106,433	$	106,045
Reverse
repurchase agreements outstanding, end of year (000)	$ 413	$	14,951	$	31,883	$	13,188	$	45,872
Asset
coverage, end of year 2	$ 236,789	$	7,529	$	4,028	$	9,071	$	3,312
Reverse
repurchase agreements average daily balance (000)	$ 7,240	$	21,104	$	30,406	$	27,562	$	46,036
Reverse
repurchase agreements weighted average interest rate	5.34	%	4.81	%	3.20	%	1.33	%	1.51	%

| See Notes to Financial Statements. — ANNUAL
REPORT | OCTOBER 31, 2007 | 62 |
| --- | --- | --- |

Notes to Financial Statements

Note 1. Organization & Accounting Policies

BlackRock Broad Investment Grade 2009 Term Trust Inc. (Broad Investment Grade), BlackRock Core Bond Trust (Core Bond), BlackRock High Yield Trust (High Yield), BlackRock Income Opportunity Trust (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, as amended (the 1940 Act). BlackRock Preferred and Equity Advantage Trust (Preferred and Equity) is registered as a non-diversified, closed-end management investment company under the 1940 Act. Broad Investment Grade, 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. Broad Investment Grade, Core Bond, High Yield, Income Opportunity, Income Trust, Limited Duration, Preferred and Equity and Strategic Bond are individually referred to as a Trust and collectively as the Trusts.

Preferred and Equity was organized on October 26, 2006 and had no transactions until November 21, 2006 when the Trust sold 4,817 common shares for $115,006 to BlackRock Funding, Inc. Investment operations for Preferred and Equity commenced on December 27, 2006. The Trust incurred organization costs which were deferred from the organization date until the commencement of operations.

On December 3, 1999, Broad Investment Grade transferred a substantial portion of its total assets to a 100% owned registered investment company subsidiary called BCT Subsidiary, Inc. The financial statements and these notes to the financial statements for Broad Investment Grade are consolidated and include the operations of both Broad Investment Grade and its wholly owned subsidiary after elimination of all intercompany transactions and balances.

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

Investments Valuation: The Trusts value most of their investments on the basis of current market quotations provided by dealers or pricing services selected under the supervision of each Trusts Board (the Board) of Directors or Trustees, as appropriate (the Trustees). In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, 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. Effective September 4, 2007, 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. Swap quotations are provided by dealers selected under supervision of the Board. A futures contract is valued at the last sale price as of the close of the commodities exchange on which it trades. Short-term securities may be valued at amortized cost.

Bank loans (loan interests) are valued in accordance with guidelines established by the Board. Loan interests are valued at the average between the last available bid prices from one or more brokers or dealers as obtained from Loan Pricing Corporation (LPC). If no reliable price quotes are available, LPC values such interests through the use of pricing matrixes. If the pricing service does not provide a value for the loan interests, BlackRock Advisors, LLC (the Manager), an indirect, wholly owned subsidiary of BlackRock, Inc., will value the loan interests at fair value under methods approved by the Funds Board.

Investments or other assets for which such current market quotations are not readily available are valued at fair value (Fair Value Assets) as determined in good faith under procedures established by, and under the general supervision and responsibility of, each Trusts Board. The investment advisor and/or sub-advisor will submit its recommendations regarding the valuation and/or valuation methodologies for Fair Value Assets to a valuation committee. The valuation committee may accept, modify or reject any recommendations. The pricing of all Fair Value Assets shall be subsequently reported to the Board.

When determining the price for a Fair Value Asset, the investment advisor and/or sub-advisor shall seek to determine the price that the Trust might reasonably expect to receive from the current sale of that asset in an arms-length transaction. Fair value determinations shall be based upon all available factors that the Manager deems relevant.

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. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. At this time, management is evaluating the implication of FAS 157 and its impact on the Trusts financial statements, if any, has not been determined.

In addition, in February 2007, Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (FAS 159), was issued and is effective for fiscial years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FAS 157. FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. FAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. At this time, management is evaluating the implications of FAS 159 and its impact on the Trusts financial statements, if any, has not been determind.

Investment Transactions and Investment Income: Investment transactions are recorded on trade date. The cost of investments sold and the related gain or loss is determined by use of the specific identification method, generally first-in, first-out, for both financial reporting and federal income tax purposes. Each Trust records interest income on an accrual basis and amortizes premium and/or accretes discount on securities purchased using the interest method. Dividend income is recorded on the ex-dividend date.

63 ANNUAL REPORT OCTOBER 31, 2007

Notes to Financial Statements (continued)

Each trust may from time to time purchase in the secondary market certain mortgage pass-through securities packaged or master serviced by affiliates or mortgage-related securities containing loans or mortgages originated by Merrill Lynch & Co., Inc. (Merrill Lynch) and The PNC Financial Services Group, Inc. (PNC), both principal owners of BlackRock, Inc., or their affiliates, including Midland Loan Services, Inc. It is possible under certain circumstances, that Merrill Lynch Mortgage Investors, Inc. and PNC Mortgage Securities Corp. or their affiliates, including Midland Loan Services, Inc., could have interest that are conflict with the holders of these mortgage-backed securities, and such holders could have rights against Merrill Lynch Mortgage Investors, Inc. and PNC Mortgage Securitites Corp. or their affiliates, including Midland Loan Services, Inc.

Reverse Repurchase Agreements: The Trusts may enter into reverse repurchase agreements with qualified third-party broker-dealers as determined by and under the direction of the Trusts Board. Interest on the value of reverse repurchase agreements issued and outstanding is based upon competitive market rates at the time of issuance. At the time a Trust enters into a reverse repurchase agreement, it will establish and maintain a segregated account with the lender, containing liquid investment grade securities having a value not less than the repurchase price, including accrued interest of the reverse repurchase agreement.

Dollar Rolls: The Trusts may enter into dollar rolls in which a Trust sells securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period the Trusts forgo principal and interest paid on the securities. The Trusts will be compensated by the interest earned on the cash proceeds of the initial sale and/or by the lower repurchase price at the future date.

Loan Payable: High Yield has a $32 million committed credit facility (the facility). Under the terms of the facility, the Trust borrows at the London Interbank Offered Rate (LIBOR) plus facility and administrative fees. In addition, the Trust pays a liquidity fee on the unused portion of the facility. The Trust may borrow up to 33 1 / 3 % of its total assets up to the committed amount. In accordance with the terms of the facility, the Trust has pledged its portfolio assets as collateral for the borrowing.

Bank Loans: In the process of buying, selling and holding bank loans, a Trust may receive and/or pay certain fees. These fees are included in the purchase price and may include facility fees, commitment fees, amendment fees, commissions and prepayment penalty fees. These fees are amortized as premium and/or accreted as discount over the term of the loan. When a Trust buys a bank loan it may receive a facility fee and when it sells a bank loan it may pay a facility fee. On an ongoing basis, a Trust may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a bank loan. In certain circumstances, a Trust may receive a prepayment penalty fee upon the prepayment of a bank loan by a borrower. Other fees recieved by a Trust may include covenant waiver fees and covenant modification fees.

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

Option Writing/Purchasing: When a Trust writes or purchases an option, an amount equal to the premium received or paid by the Trust is recorded as a liability or an asset and is subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options which expire unexercised are treated by the Trust on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including brokerage commissions, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the cost of the purchase or the proceeds from the sale in determining whether a Trust has realized a gain or a loss on investment transactions. A Trust, as writer of an option, has no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option.

Option writing and purchasing may be used by the Trusts as an attempt to manage the duration of positions, or collections of positions, so that changes in interest rates do not adversely affect the targeted duration of the portfolio unexpectedly. Duration is a measure of the price sensitivity of a security or a portfolio to relative changes in interest rates. For instance, a duration of one means that a portfolios or a securitys price would be expected to change by approximately one percent with a one percent change in interest rates, while a duration of five would imply that the price would move approximately five percent in relation to a one percent change in interest rates.

A call option gives the purchaser of the option the right (but not obligation) to buy, and obligates the writer 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. The main risk that is associated with purchasing options is that the option expires without being exercised. In this case, the option expires worthless and the premium paid for the option is considered the loss. The risk associated with writing call options is that a Trust may forgo the opportunity for a profit if the market value of the underlying position increases and the option is exercised. The risk in writing put options is that a Trust may incur a loss if the market value of the underlying position decreases and the option is exercised. In addition, the Trust risks not being able to enter into a closing transaction for the written option as the result of an illiquid market.

Stripped Mortgage-Backed Securities: Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. In certain cases, one class will receive all of the interest (the interest-only or IO class), while the other class will receive all of the principal (the principal-only or PO class). The yield to maturity on IOs is sensitive to the rate of principal repayments (including prepayments) on the related underlying mortgage assets, and principal payments may have a material effect on yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Trust may not fully recoup its initial

ANNUAL REPORT OCTOBER 31, 2007 64

Notes to Financial Statements (continued)

investment in IOs. Such securities will be considered liquid only if so determined in accordance with guidelines established by the Trustees.

Inverse Floating Rate Securities: The Trusts may invest in inverse floating rate securities that pay interest at a rate that varies inversely with interest rates. As interest rates rise, inverse floating rates decline. The market value of such securities is more volatile than comparable fixed rate securities.

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. Risks arise from the possible inability of the counterparties to meet the terms of their contracts.

During the term of the swap, changes in the value of the swap are recognized as unrealized gains or losses by marking-to-market to reflect the market value of the swap. When the swap is terminated, a Trust will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Trusts basis in the contract, if any.

The Trusts are exposed to credit loss in the event of non-performance by the other party to the swap. However, the Trusts closely monitor swaps and do not anticipate non-performance by any counterparty.

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.

Interest Rate Swaps: In an interest rate swap, one investor pays a floating rate of interest on a notional principal amount and receives a fixed rate of interest on the same notional principal amount for a specified period of time. Alternatively, an investor may pay a fixed rate and receive 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.

Swap Options: Swap options are similar to options on securities except that instead of selling or purchasing the right to buy or sell a security, the writer or purchaser of the swap option is granting or buying the right to enter into a previously agreed upon interest rate swap agreement at any time before the expiration of the option. Premiums received or paid from writing or purchasing options are recorded as liabilities or assets and are subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options which expire unexercised are treated by a Trust on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including brokerage commission, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the cost of the purchase or the proceeds from the sale in determining whether a Trust has realized a gain or loss on investment transactions.

The main risk that is associated with purchasing swap options is that the swap option expires without being exercised. In this case, the option expires worthless and the premium paid for the swap option is considered the loss. The main risk that is associated with the writing of a swap option is the market risk of an unfavorable change in the value of the interest rate swap underlying the written swap option.

Swap options may be used by the Trusts to manage the duration of the Trusts portfolios in a manner similar to more generic options described above.

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

Interest rate floors are used by the Trusts to both manage the duration of the portfolios and their exposure to changes in short-term interest rates. Selling interest rate floors reduces a portfolios duration, making it less sensitive to changes in interest rates from a market value perspective. The Trusts leverage provides extra income in a period of falling rates. Selling floors reduces some of that extra income by partially monetizing it as an up front payment which the Trusts receive.

The Trusts are exposed to credit loss in the event of non-performance by the other party to the interest rate floor. However, the Trusts do not anticipate non-performance by any counterparty.

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.

Financial Futures Contracts: A futures contract is an agreement between two parties to buy and sell a financial instrument for a set price on a future date. Initial margin deposits are made upon entering into futures contracts and can be either cash or securities. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by marking-to-market on a daily basis to reflect the market value of the contract at the end of each days trading. Variation margin pay-

65 ANNUAL REPORT OCTOBER 31, 2007

Notes to Financial Statements (continued)

ments are made or received, depending upon whether unrealized gains or losses are incurred. When the contract is closed, a Trust records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Trusts basis in the contract.

Financial futures contracts, when used by the Trusts, help in maintaining a targeted duration. Futures contracts can be sold to effectively shorten an otherwise longer duration portfolio. In the same sense, futures contracts can be purchased to lengthen a portfolio that is shorter than its duration target. Thus, by buying or selling futures contracts, the Trusts attempt to manage the duration of positions so that changes in interest rates do not change the duration of the portfolio unexpectedly.

Forward Currency Contracts: The Trusts enter into forward currency contracts primarily to facilitate settlement of purchases and sales of foreign securities and to help manage the overall exposure to foreign currency. A forward contract is a commitment to purchase or sell a foreign currency at a future date (usually the security transaction settlement date) at a negotiated forward rate. In the event that a security fails to settle within the normal settlement period, the forward currency contract is renegotiated at a new rate. The gain or loss arising from the difference between the settlement value of the original and renegotiated forward contracts is isolated and is included in net realized gains (losses) from foreign currency transactions. Risks may arise as a result of the potential inability of the counterparties to meet the terms of their contract.

Forward currency contracts, when used by the Trusts, help to manage the overall exposure to the foreign currency backing some of the investments held by the Trusts. Forward currency contracts are not meant to be used to eliminate all of the exposure to the foreign currency, rather they allow the Trusts to limit their exposure to foreign currency within a narrow band to the objectives of the Trusts.

Foreign Currency Translation: Foreign currency amounts are translated into United States dollars on the following basis:

(i) market value of investment securities, assets and liabilities at the current rate of exchange.

(ii) purchases and sales of investment securities, income and expensesat the rates of exchange prevailing on the respective dates of such transactions.

For fixed income securities, the Trusts isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Trusts isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of portfolio securities sold during the period.

Net realized and unrealized foreign exchange gains and losses includes realized foreign exchange gains and losses from sales and maturities of foreign portfolio securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of interest and discount recorded on the Trusts books and the U.S. dollar equivalent amounts actually received or paid, and changes in unrealized foreign exchange gains and losses in the value of portfolio securities and other assets and liabilities arising as a result of changes in the exchange rate.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. dollar.

Short Sales/Borrowed Bonds: The Trusts engage in short selling of securities as a method of managing potential price declines in similar securities owned by the Trust. When a Trust engages in short selling, it may enter into a borrowed bond agreement to borrow the security sold short and deliver it to the broker-dealer with which it engaged in the short sale. A gain, limited to the price at which a Trust sold the security short or pursuant to the borrowed bond agreement, or a loss, unlimited as to dollar amount, will be recognized upon the termination of a short sale or borrowed bond agreement if the market price is greater or less than the proceeds originally received.

Borrowed Bond Agreements: In a borrowed bond agreement, each 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 Trusts prime broker or third party broker takes possession of cash as collateral. The Trusts receive interest income on the cash collateral relating to the borrowed bond agreement and are obligated to pay the prime broker or third party broker payments received on such borrowed securities. The cash collateral approximates the principal amount of the bonds borrowed transaction. To the extent that the bonds borrowed transactions exceed one business day, the value of the collateral with any counter-party 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.

Trust Preferred Stock: 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 companys senior debt securities.

TBA Purchase 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

ANNUAL REPORT OCTOBER 31, 2007 66

Notes to Financial Statements (continued)

declines or increases prior to settlement date, which is in addition to the risk of decline in the value of the Trusts other assets. Unsettled TBA commitments are valued at the current market value of the underlying securities, according to the procedures described under Investments Valuation.

Mortgage Dollar Rolls: The Trusts may enter into mortgage dollar rolls (principally using TBA commitments) in which the Trusts sell mortgage securities for delivery in the current month and simultaneously contract to repurchase similar, but not identical, securities at an agreed upon price on a fixed date. The Trusts receive compensation, in either fee or drop, as consideration for entering into the commitment to repurchase. A Trust must maintain liquid securities having a value not less than the repurchase price (including accrued interest) for such dollar rolls. The market value of the securities that a Trust is required to purchase may decline below the agreed upon repurchase price of those securities. In a fee roll, the compensation received is recorded as deferred income and amortized to income over the roll period. In a drop roll, the compensation is paid via a lower price for the security upon its repurchase. The counterparty receives all principal and interest payments, including prepayments, made in respect of a security subject to such a contract while it is the holder. Mortgage dollar rolls may be renewed with a new purchase and repurchase price and a cash settlement made on settlement date without physical delivery of the securities subject to the contract. A Trust engages in dollar rolls for the purpose of enhancing its yield, principally by earning a negotiated fee.

Financing Transactions: The Trusts may enter into financing transactions consisting of sales by a Trust of securities together with a commitment to repurchase similar securities at a future date. The difference between the selling price and the future purchase price is an adjustment to interest income. If the counterparty to whom the Trust sells the security becomes insolvent, a Trusts right to repurchase the security may be restricted. The value of the security may change over the term of the financing transaction.

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

Federal Income Taxes: It is each Trusts intention to continue to be treated as a regulated investment company under the Internal Revenue Code and to distribute sufficient amounts of their taxable income to shareholders. Therefore, no federal income tax provisions have been recorded.

In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes an interpretation of FAS Statement No. 109. 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 mutual funds, before being measured and recognized in the financial statements. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. The impact on the Trusts, excluding Preferred and Equity, financial statements, if any, from FIN 48 is currently being assessed.

Effective October 31, 2007, Preferred and Equity implemented Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109 (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. Management has evaluated the application of FIN 48 to Preferred and Equity and has determined that the adoption of FIN 48 does not have a material impact on the financial statements. Preferred and Equity will file its first Federal and state tax returns in 2008 for the period ended October 31, 2007.

Dividends and Distributions: Each Trust declares and pays dividends and distributions to common shareholders monthly from net investment income, net realized short-term capital gains and other sources, if necessary. Net long-term capital gains, if any, in excess of loss carryforwards may be distributed in accordance with the 1940 Act. If the total dividends and distributions made in any tax year exceeds net investment income and accumulated realized captial gains, a portion of the total distribution may be treated as a tax-free return of capital. Dividends and distributions are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States of America. Dividends and distributions to preferred shareholders are accrued and determined as described in Note 7.

Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities including investment valuations at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and such differences may be material.

Deferred Compensation and BlackRock Closed-End Share Equivalent Investment Plan: Under the deferred compensation plan approved by each Trusts Board, non-interested Trustees (Independent Trustees) defer a portion of their annual complex-wide compensation. Deferred amounts earn an approximate return as though equivalent dollar amounts had been invested in common shares of the other BlackRock Closed-End Funds selected by the Independent Trustees. These amounts are shown on the Statement of Assets and Liabilities as Investments in Affiliates. This has approximately the same economic effect for the Independent Trustees as if the Independent Trustees had invested the deferred amounts directly in such Trusts.

The deferred compensation plan is not funded and obligations thereunder represent general unsecured claims against the general assets of the Trust.

67 ANNUAL REPORT OCTOBER 31, 2007

Notes to Financial Statements (continued)

Each Trust may, however, elect to invest in common shares of those Trusts selected by the Independent Trustees in order to match its deferred compensation obligations.

Other: Expenses that are directly related to one of the Trusts are charged directly to that Trust. Other operating expenses are generally prorated to the Trusts on the basis of relative net assets of all the BlackRock Closed-End Funds.

Note 2. Agreements and Other Transactions with Affiliates and Related Parties

Each Trust has an Investment Management Agreement with the Manager. BlackRock Financial Management, Inc. (BFM), a wholly owned subsidiary of BlackRock, Inc., serves as sub-advisor to Core Bond, Limited Duration, Preferred and Equity and Strategic Bond. BlackRock Investment Management, LLC (BIM), a wholly owned subsidiary of BlackRock, Inc., also serves as sub-advisor to Preferred and Equity. Merrill Lynch and PNC are principal owners of BlackRock, Inc.

Broad Investment Grade, High Yield, Income Opportunity and Income Trust each have an Administration Agreement with the Advisor. The Investment Management Agreement for Core Bond, Limited Duration, Preferred and Equity and Strategic Bond covers both investment advisory and administration services.

Each Trusts investment advisory fee paid to the Advisor is computed weekly and payable monthly based on an annual rate, 0.55% for Broad Investment Grade, 0.60% for Income Opportunity and 0.65% for Income Trust, of each Trusts average net assets and 0.55% for Core Bond and Limited Duration, 0.65% for Preferred and Equity, 1.05% for High Yield and 0.75% for Strategic Bond, of each Trusts average managed assets. Net assets means the total assets of the Trust minus the sum of accrued liabilities. Managed assets means the total assets of a 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 Advisor has voluntarily agreed to waive a portion of the investment advisory fees or other expenses on Strategic Bond as a percentage of its average weekly managed assets as follows: 0.20% for the first five years of the Trusts operations from 2002 through February 28, 2007, 0.15% through February 28, 2008, 0.10% through February 28, 2009 and 0.05% through February 28, 2010.

The Advisor pays BFM fees for its sub-advisory services.

The administration fee paid to the Advisor is computed weekly and payable monthly based on an annual rate, 0.15% for Broad Investment Grade, 0.10% for Income Opportunity, and 0.15% for Income Trust, of each Trusts average net assets and 0.10% for High Yield of the Trusts average managed assets.

Pursuant to the advisory agreements, the Advisor provides continuous supervision of the investment portfolio and pays the compensation of officers of each Trust who are affiliated persons of the Advisor, as well as occupancy and certain clerical and accounting costs of each Trust. Each Trust bears all other costs and expenses, which include reimbursements to the Advisor for cost of employees that provide pricing and secondary market support to each Trust. These expenses are generally pro-rated to the Trusts on the basis of relative net assets of all the BlackRock Closed-End Funds. For the year ended October 31, 2007, the Trusts reimbursed the Advisor the following amounts, which are included in miscellaneous expenses in the Statements of Operations:

Trust
Broad Investment Grade	$ 2,929
Core Bond	22,028
High Yield	2,530
Income Opportunity	22,733
Income Trust	26,282
Limited Duration	40,812
Preferred and Equity	25,990
Strategic Bond	5,617

Pursuant to the terms of their custody agreements, each Trust may receive earnings credits from its custodian for positive cash balances maintained, which are used to offset custody fees. These credits are shown on the Statements of Operations as fees paid indirectly.

During the year ended October 31, 2007, Merrill Lynch, through its affiliated broker dealer Merrill Lynch, Pierce, Fenner & Smith, Inc., earned commissions on transactions of securities as follows:

Trust
Core Bond	$ 104,454
High Yield	8
Income Opportunity	110,446
Income Trust	66,166
Limited Duration	1,603
Preferred and Equity	757,239
Strategic Bond	28

ANNUAL REPORT OCTOBER 31, 2007 68

Notes to Financial Statements (continued)

Investments in companies considered to be an affiliate of the Trusts, for purposes of Section 2(a)(3) of the 1940 Act, were as follows:

Trust	Portfolio Company	Beginning Principal Amount	Purchases	Sales	Ending Principal Amount	Interest Income	Market Value of Affiliates at October 31, 2007
Core Bond	Merrill Lynch	$ 1,509,548	$	$ 1,509,548	$	$ 45,271	$
	Mortgage
	Investors, Inc.,
	Ser. HE2,
	Class A2A
	Merrill Lynch		925,000		925,000	7,589	933,463
	Mortgage Trust,
	Ser. C1,
	Class AM
Income	Merrill Lynch	1,651,471		1,651,471		49,245
Opportunity	Mortgage
	Investors, Inc.,
	Ser. HE2,
	Class A2A
	Merrill Projects,	152,326		102,166	50,160	10,465	50,662
	Ser. 29
	Merrill Projects,	51,398		2,145	49,253	3,746	49,745
	Ser. 42
Income	Merrill Projects,	51,249		1,726	49,523	3,731	50,019
Trust	Ser. 54

Certain officers and/or directors of the Trusts are officers and/or directors of BlackRock, Inc. or its affiliates.

Note 3. Portfolio Securities

Purchases and sales of investment securities, other than short-term investments, dollar rolls and U.S. government securities, for the year ended October 31, 2007 were as follows:

Trust — Broad Investment Grade	$ 3,771,896	$ 4,504,593
Core Bond	722,652,874	440,021,114
High Yield	45,730,396	53,761,581
Income Opportunity	1,000,463,875	694,999,046
Income Trust	1,181,095,299	1,209,086,090
Limited Duration	654,114,184	991,030,609
Preferred and Equity	2,424,297,184	773,130,150
Strategic Bond	34,511,252	56,088,950

Purchases and sales of U.S. government securities for the year ended October 31, 2007, aggregated as follows:

Trust — Broad Investment Grade	$	$ 5,655,469
Core Bond	188,022,696	260,028,377
Income Opportunity	213,262,623	298,489,442
Income Trust	132,824,013	163,361,268
Limited Duration		10,000,000
Preferred and Equity	479,869,532	487,606,224
Strategic Bond	172,822	933,000

69 ANNUAL REPORT OCTOBER 31, 2007

Notes to Financial Statements (continued)

Details of open forward currency contracts at October 31, 2007 were as follows:

Trust	Foreign Currency	Settlement Date
Core	Bought:
Bond	Japanese
	Yen	1/15/08	$ 793,358,661	$ 6,876,169	$ 6,937,915	$ 61,746
	Sold:
	Euro	1/23/08	1,233,067	1,747,256	1,787,871	(40,615	)
						$ 21,131
Limited	Sold:
Duration	Euro	1/23/08	$ 20,975,550	$ 29,722,354	$ 30,413,254	$ (690,900	)
	British
	Pounds	1/23/08	5,195,000	10,540,239	10,771,890	(231,651	)
						$ (922,551	)

Income Trust held interest rate floors at October 31, 2007. Under the agreement, Income Trust pays the excess, if any, of a fixed rate over a floating rate. Income Trust received a transaction fee for the floor. Transaction fees are amortized through the termination of the agreement. Details of the interest rate floor held at October 31, 2007 were as follows:

Notional Amount (000)	Variable Rate	Counter Party	Floating Rate	Effective Date	Termination Date	Amortized Cost
$ 145,000	4.80 %	Goldman Sachs	3-month LIBOR	12/25/05	03/25/11	$ (1,603,115	)	$ (953,577	)	$ 649,538
96,000	4.95	JPMorgan	3-month LIBOR	03/27/06	03/25/11	(1,243,216	)	(443,318	)	799,898
70,000	5.50	Union Bank of Switzerland	3-month LIBOR	12/15/06	03/15/10	(916,771	)	(1,244,600	)	(327,829	)
39,000	5.50	Citibank	3-month LIBOR	06/15/07	09/15/11	(716,795	)	(1,042,470	)	(325,675	)
						$ (4,479,897	)	$ (3,683,965	)	$ 795,932

Details of open interest rate swaps at October 31, 2007 were as follows:

Trust	Notional Amount (000)	Fixed Rate		Counter Party	Floating Rate	Effective Date	Termination Date
Core Bond	$ 41,200	4.510	% (a)	Citibank	3-month LIBOR	10/29/04	10/29/14	$ 1,063,372
	2,800	4.500	(a)	JPMorgan	3-month LIBOR	05/26/05	05/26/15	62,565
	4,800	4.372	(b)	Union Bank of Switzerland	3-month LIBOR	06/30/05	06/30/15	(139,248	)
	6,200	4.725	(b)	Morgan Stanley	3-month LIBOR	08/02/05	08/02/15	(121,184	)
	4,600	5.000	(b)	Deutsche Bank	3-month LIBOR	11/07/05	11/07/10	98,394
	5,000	4.870	(b)	Goldman Sachs	3-month LIBOR	01/25/06	01/25/16	5,336
	4,800	5.723	(b)	JPMorgan	3-month LIBOR	07/14/06	07/14/16	296,976
	25,100	5.496	(b)	Bank of America	3-month LIBOR	07/28/06	07/28/11	1,016,550
	3,000	5.025	(b)	Deutsche Bank	3-month LIBOR	11/21/06	11/21/11	66,000
	2,200	4.950	(b)	Union Bank of Switzerland	3-month LIBOR	11/29/06	11/29/11	41,734
	8,300	5.002	(a)	Union Bank of Switzerland	3-month LIBOR	01/08/07	01/08/12	(178,865	)
	8,545	5.411	(b)	JPMorgan	3-month LIBOR	02/05/07	08/15/22	147,914
	11,300	5.295	(b)	Union Bank of Switzerland	3-month LIBOR	02/08/07	02/08/17	187,806
	13,500	4.922	(a)	Lehman Brothers	3-month LIBOR	03/22/07	03/22/11	(98,145	)
	700	5.250	(b)	Goldman Sachs	3-month LIBOR	04/12/07	04/12/17	8,291
	1,400	5.411	(b)	Goldman Sachs	3-month LIBOR	04/30/07	04/30/27	18,746
	1,600	5.545	(a)	Deutsche Bank	3-month LIBOR	06/07/07	06/07/17	(77,360	)
	1,200	5.740	(a)	Deutsche Bank	3-month LIBOR	06/13/07	06/13/17	(76,656	)
	900	5.850	(a)	Deutsche Bank	3-month LIBOR	06/14/07	06/14/17	(65,367	)
	4,600	5.683	(a)	Lehman Brothers	3-month LIBOR	06/29/07	06/29/17	(278,070	)
	6,500	5.643	(a)	Citibank	3-month LIBOR	07/05/07	07/05/17	(369,720	)
	12,300	5.775	(a)	Deutsche Bank	3-month LIBOR	07/09/07	07/09/17	(828,528	)
	42,000	5.589	(a)	Goldman Sachs	3-month LIBOR	07/16/07	07/16/12	(1,940,683	)
	19,500	5.105	(b)	Goldman Sachs	3-month LIBOR	08/20/07	08/20/12	226,522
	82,500	5.076	(b)	Citibank	3-month LIBOR	08/21/07	08/21/12	884,400
	49,300	5.057	(b)	Bank of America	3-month LIBOR	08/22/07	08/22/12	485,112
	27,800	4.771	(b)	Lehman Brothers	3-month LIBOR	08/23/07	08/23/09	42,812
	40,200	4.880	(b)	Lehman Brothers	3-month LIBOR	08/24/07	08/24/09	143,514
	40,000	5.076	(b)	Morgan Stanley	3-month LIBOR	08/28/07	08/28/12	416,828
	30,000	4.903	(b)	Barclays	3-month LIBOR	09/07/07	09/07/12	54,879

ANNUAL REPORT OCTOBER 31, 2007 70

Notes to Financial Statements (continued)

Trust	Notional Amount (000)	Fixed Rate		Counter Party	Floating Rate	Effective Date	Termination Date
Core Bond	$ 12,500	5.040	% (a)	Deutsche Bank	3-month LIBOR	09/12/07	09/12/17	$ 67,500
(contd)	50,000	4.624	(b)	Credit Suisse International	3-month LIBOR	09/20/07	09/20/09	(52,500	)
	8,000	5.365	% (a)	Bank of America	3-month LIBOR	09/21/07	09/21/27	(55,120	)
	10,900	5.155	(a)	Citibank	3-month LIBOR	09/21/07	09/21/17	(51,666	)
	5,100	5.261	(a)	Morgan Stanley	3-month LIBOR	09/28/07	09/28/17	(61,132	)
	13,800	5.308	(a)	Barclays	3-month LIBOR	10/15/07	10/15/17	(226,458	)
	5,400	5.307	(a)	Deutsche Bank	3-month LIBOR	10/18/07	10/18/17	(88,884	)
	9,400	4.856	(b)	Deutsche Bank	3-month LIBOR	10/19/07	10/19/12	14,194
	9,500	5.005	(b)	JPMorgan	3-month LIBOR	10/22/07	10/22/14	16,569
								$ 656,428
Income	27,500	4.399	% (a)	Deutsche Bank	3-month LIBOR	10/25/04	10/25/14	896,225
Opportunity	13,800	4.510	(a)	Citibank	3-month LIBOR	10/29/04	10/29/14	356,178
Trust	3,000	4.500	(a)	JPMorgan	3-month LIBOR	05/26/05	05/26/15	67,034
	5,200	4.372	(b)	Union Bank of Switzerland	3-month LIBOR	06/30/05	06/30/15	(150,852	)
	8,000	4.670	(b)	Goldman Sachs	3-month LIBOR	09/20/05	09/20/15	(191,440	)
	5,000	5.000	(b)	Deutsche Bank	3-month LIBOR	11/07/05	11/07/10	106,950
	5,200	5.723	(b)	JPMorgan	3-month LIBOR	07/14/06	07/14/16	321,724
	27,900	5.496	(b)	Bank of America	3-month LIBOR	07/28/06	07/28/11	1,129,608
	3,200	5.025	(b)	Deutsche Bank	3-month LIBOR	11/21/06	11/21/11	70,400
	3,100	4.950	(b)	Union Bank of Switzerland	3-month LIBOR	11/29/06	11/29/11	58,807
	10,000	4.897	(b)	JPMorgan	3-month LIBOR	12/12/06	12/12/11	163,300
	12,000	5.002	(a)	Union Bank of Switzerland	3-month LIBOR	01/08/07	01/08/12	(258,600	)
	12,000	5.295	(b)	Union Bank of Switzerland	3-month LIBOR	02/08/07	02/08/17	199,440
	14,800	4.922	(a)	Lehman Brothers	3-month LIBOR	03/22/07	03/22/11	(107,596	)
	5,000	5.071	(a)	Union Bank of Switzerland	3-month LIBOR	03/26/07	03/26/17	950
	800	5.250	(b)	Goldman Sachs	3-month LIBOR	04/12/07	04/12/17	9,475
	1,550	5.411	(b)	Goldman Sachs	3-month LIBOR	04/30/07	04/30/27	20,755
	1,800	5.545	(a)	Deutsche Bank	3-month LIBOR	06/07/07	06/07/17	(87,030	)
	1,400	5.740	(a)	Deutsche Bank	3-month LIBOR	06/13/07	06/13/17	(89,432	)
	1,000	5.850	(a)	Deutsche Bank	3-month LIBOR	06/14/07	06/14/17	(72,630	)
	5,100	5.683	(a)	Lehman Brothers	3-month LIBOR	06/29/07	06/29/17	(308,295	)
	7,200	5.643	(a)	Citibank	3-month LIBOR	07/05/07	07/05/17	(409,536	)
	13,600	5.775	(a)	Deutsche Bank	3-month LIBOR	07/09/07	07/09/17	(916,096	)
	46,800	5.589	(a)	Goldman Sachs	3-month LIBOR	07/16/07	07/16/12	(2,184,663	)
	9,405	5.411	(b)	JPMorgan	3-month LIBOR	08/15/07	08/15/22	162,801
	21,600	5.105	(b)	Goldman Sachs	3-month LIBOR	08/20/07	08/20/12	250,916
	91,000	5.076	(b)	Citibank	3-month LIBOR	08/21/07	08/21/12	975,520
	54,600	5.057	(b)	Bank of America	3-month LIBOR	08/22/07	08/22/12	537,264
	30,700	4.771	(b)	Lehman Brothers	3-month LIBOR	08/23/07	08/23/09	47,278
	44,500	4.880	(b)	Lehman Brothers	3-month LIBOR	08/24/07	08/24/09	158,865
	45,000	5.076	(b)	Morgan Stanley	3-month LIBOR	08/28/07	08/28/12	468,932
	35,000	4.903	(b)	Barclays	3-month LIBOR	09/07/07	09/07/12	64,026
	12,500	5.040	(a)	Deutsche Bank	3-month LIBOR	09/12/07	09/12/17	67,500
	50,000	4.624	(b)	Credit Suisse International	3-month LIBOR	09/20/07	09/20/09	(52,500	)
	8,900	5.365	(a)	Bank of America	3-month LIBOR	09/21/07	09/21/27	(61,321	)
	12,000	5.155	(a)	Citibank	3-month LIBOR	09/21/07	09/21/17	(56,880	)
	5,700	5.261	(a)	Morgan Stanley	3-month LIBOR	09/28/07	09/28/17	(68,324	)
	15,300	5.308	(a)	Barclays	3-month LIBOR	10/15/07	10/15/17	(251,073	)
	6,000	5.307	(a)	Deutsche Bank	3-month LIBOR	10/18/07	10/18/17	(98,760	)
	10,300	4.856	(b)	Deutsche Bank	3-month LIBOR	10/19/07	10/19/12	15,553
	10,500	5.005	(b)	JPMorgan	3-month LIBOR	10/22/07	10/22/14	18,313
								$ 802,786
Income Trust	19,000	4.889	% (a)	Goldman Sachs	3-month LIBOR	04/22/04	04/22/14	51,374
	12,500	4.399	% (a)	Deutsche Bank	3-month LIBOR	10/25/04	10/25/14	407,375
	25,000	4.883	(b)	Union Bank of Switzerland	3-month LIBOR	03/21/05	03/21/15	(151,000	)
	16,000	4.925	(a)	Deutsche Bank	3-month LIBOR	03/22/05	03/22/15	53,760
	3,000	4.500	(a)	JPMorgan	3-month LIBOR	05/26/05	05/26/15	67,034
	4,500	4.442	(b)	Morgan Stanley	3-month LIBOR	07/11/05	07/11/15	(114,160	)
	12,000	4.320	(b)	Union Bank of Switzerland	3-month LIBOR	09/08/05	09/08/10	(132,240	)
	2,800	5.940	(b)	Union Bank of Switzerland	3-month LIBOR	12/07/05	12/07/15	213,220
	5,500	4.870	(b)	Goldman Sachs	3-month LIBOR	01/25/06	01/25/16	5,869
	5,400	5.723	(b)	JPMorgan	3-month LIBOR	07/14/06	07/14/16	334,098
	3,000	5.025	(b)	Deutsche Bank	3-month LIBOR	11/21/06	11/21/11	66,000

71 ANNUAL REPORT OCTOBER 31, 2007

Notes to Financial Statements

Trust	Notional Amount (000)	Fixed Rate		Counter Party	Floating Rate	Effective Date	Termination Date
Income Trust	$ 4,400	4.950	% (b)	Union Bank of Switzerland	3-month LIBOR	11/29/06	11/29/11	$ 83,468
(contd)	11,900	5.295	(b)	Union Bank of Switzerland	3-month LIBOR	02/08/07	02/08/17	197,778
	800	5.250	(b)	Goldman Sachs	3-month LIBOR	04/12/07	04/12/17	9,475
	64,000	5.393	(b)	Credit Suisse International	3-month LIBOR	06/05/07	06/05/12	2,403,840
	1,800	5.545	(a)	Deutsche Bank	3-month LIBOR	06/07/07	06/07/17	(87,030	)
	1,400	5.740	(a)	Deutsche Bank	3-month LIBOR	06/13/07	06/13/17	(89,432	)
	1,000	5.850	(a)	Deutsche Bank	3-month LIBOR	06/14/07	06/14/17	(72,630	)
	5,200	5.683	(a)	Lehman Brothers	3-month LIBOR	06/29/07	06/29/17	(314,340	)
	200,000	5.383	(b)	Credit Suisse International	3-month LIBOR	07/16/07	07/16/09	5,234,000
	187,370	5.376	(b)	Bank of America	3-month LIBOR	07/20/07	07/20/09	4,950,315
	165,647	5.505	(b)	Bank of America	3-month LIBOR	08/03/07	08/03/17	5,401,736
	9,565	5.411	(b)	JPMorgan	3-month LIBOR	02/05/07	08/15/22	165,570
	18,800	4.778	(b)	Citibank	3-month LIBOR	08/23/07	08/23/09	31,396
								$ 18,715,476

| (a) | Trust pays fixed
interest rate and receives floating rate. |
| --- | --- |
| (b) | Trust pays floating
interest rate and receives fixed rate. |

Details of open credit default swaps at October 31, 2007 were as follows:

| Trust — Core
Bond | $ 340 | (a) | Fixed Rate — 0.950 % | Counter Party — Deutsche Bank | Effective Date — 08/02/07 | Termination Date — 09/20/12 | $ (462 | ) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Income Opportunity Trust | 375 | (a ) | 0.950 | Deutsche Bank | 08/02/07 | 09/20/12 | $ (98 | ) |
| Limited Duration | 4,500 | (b) | 1.200 | Morgan Stanley | 05/23/07 | 06/20/12 | $ (156,669 | ) |
| | 4,500 | (b) | 1.200 | JP Morgan | 05/23/07 | 06/20/12 | (156,669 | ) |
| | | | | | | | $ (313,338 | ) |

| (a) | The terms were to
receive the quarterly notional amount multiplied by the fixed rate and pay
the counterparty, upon default of Lehman Brothers Holdings, Inc., the par
value of the notional amount of Lehman Brothers Holdings, Inc. |
| --- | --- |
| (b) | The terms were to
receive the quarterly notional amount multiplied by the fixed rate and pay
the counterparty, upon default of LCDX, the par value of the notional amount
of LCDX. |

Transaction in options written during the year ended October 31, 2007 were as follows:

Trust	Calls — Contracts/ Notional Amount	Premium Received		Contracts/ Notional Amount		Premium Received
Core Bond
Options outstanding
at October 31, 2006	$ 21,300,000	$	991,347	$	135,100,037	$	2,068,284
Options written	18,200,000		455,276		18,200,000		455,276
Options closed	(11,600,000	)	(315,851	)	(125,400,037	)	(1,392,787	)
Options outstanding
at October 31, 2007	$ 27,900,000	$	1,130,772	$	27,900,000	$	1,130,773
Income Opportunity
Trust
Options outstanding
at October 31, 2006	$ 23,400,000	$	1,085,069	$	148,200,041	$	2,236,554
Options written	19,700,000		491,847		19,700,000		491,847
Options closed	(12,400,000	)	(337,634	)	(137,200,041	)	(1,489,123	)
Options outstanding
at October 31, 2007	$ 30,700,000	$	1,239,282	$	30,700,000	$	1,239,278
Income Trust
Options outstanding
at October 31, 2006	$ 23,500,000	$	1,088,815	$	150,100,000	$	2,223,745
Options written	160,860,047		4,960,873		160,860,000		4,875,117
Options closed	(46,835,007	)	(1,047,343	)
Options expired	(16	)	(27,150	)	(173,435,000	)	(2,169,641	)
Options outstanding
at October 31, 2007	$ 137,525,024	$	4,975,195	$	137,525,000	$	4,929,221

Trust	Calls — Contracts/ Notional Amount	Premium Received
Preferred and
Equity
Options outstanding
at beginning of period	$	$
Options written	3,335,500		57,773,808
Options closed	(3,079,500	)	(52,286,976	)
Options expired	(10,500	)	(60,705	)
Options outstanding
at October 31, 2007	$ 245,500	$	5,426,127

ANNUAL REPORT OCTOBER 31, 2007 72

Notes to Financial Statements

Note 4. Borrowings

Details of open reverse repurchase agreements at October 31, 2007 were as follows (please see Corresponding Underlying Collateral Chart):

| Trust/Counter Party | Rate | Trade Date | Maturity Date 1 | Net
Closing Amount | Par |
| --- | --- | --- | --- | --- | --- |
| Core Bond | | | | | |
| Barclays
Bank | 5.250 % | 09/06/07 | TBD | $ 6,920,063 | $ 6,865,000 |
| | 5.270 | 09/06/07 | TBD | 3,189,475 | 3,164,000 |
| | 5.270 | 09/06/07 | TBD | 2,980,808 | 2,957,000 |
| | 5.290 | 09/06/07 | TBD | 3,003,076 | 2,979,000 |
| | 5.290 | 09/06/07 | TBD | 2,589,763 | 2,569,000 |
| | 5.290 | 09/24/07 | TBD | 1,707,280 | 1,698,048 |
| | | | | | $ 20,232,048 |
| Credit
Suisse First | | | | | |
| Boston LLC | 5.100 | 09/17/07 | TBD | 2,014,479 | $ 2,002,000 |
| | 5.100 | 09/17/07 | TBD | 1,771,977 | 1,761,000 |
| | 4.900 | 10/11/07 | 11/13/07 | 60,535,343 | 60,371,000 |
| | 5.100 | 10/11/07 | TBD | 2,016,020 | 2,010,325 |
| | | | | | $ 66,144,325 |
| Lehman
Brothers | 4.200 | 10/02/07 | TBD | 9,963,295 | $ 9,929,700 |
| | 4.600 | 10/23/07 | TBD | 3,000,939 | 2,997,875 |
| | 4.600 | 10/26/07 | TBD | 2,423,047 | 2,421,500 |
| | 4.150 | 10/31/07 | 11/07/07 | 1,051,794 | 1,051,794 |
| | | | | | $ 16,400,869 |
| Morgan Stanley | 0.000 | 10/19/07 | TBD | 576,450 | $ 576,450 |
| Income Opportunity | | | | | |
| Barclays
Bank | 5.120 | 08/06/07 | TBD | 7,317,925 | $ 7,229,500 |
| | 5.120 | 08/06/07 | TBD | 1,973,243 | 1,949,400 |
| | 5.120 | 08/07/07 | TBD | 643,038 | 635,357 |
| | 5.140 | 08/13/07 | TBD | 1,407,495 | 1,391,796 |
| | 5.140 | 08/15/07 | TBD | 2,362,693 | 2,337,000 |
| | 5.120 | 08/17/07 | TBD | 1,335,584 | 1,321,488 |
| | 5.140 | 08/17/07 | TBD | 2,054,810 | 2,033,040 |
| | 5.140 | 08/17/07 | TBD | 2,528,732 | 2,501,940 |
| | 5.140 | 08/17/07 | TBD | 1,628,615 | 1,611,360 |
| | 5.120 | 08/21/07 | TBD | 1,082,805 | 1,071,980 |
| | 5.140 | 08/22/07 | TBD | 2,766,799 | 2,739,420 |
| | 5.140 | 08/22/07 | TBD | 1,716,619 | 1,699,632 |
| | 5.140 | 09/13/07 | TBD | 1,171,977 | 1,164,000 |
| | 5.160 | 09/13/07 | TBD | 1,681,490 | 1,670,000 |
| | 5.160 | 09/13/07 | TBD | 1,490,686 | 1,480,500 |
| | 5.140 | 09/13/07 | TBD | 1,800,757 | 1,788,500 |
| | 5.140 | 09/13/07 | TBD | 845,757 | 840,000 |
| | 5.160 | 09/13/07 | TBD | 1,929,182 | 1,916,000 |
| | 5.290 | 09/14/07 | TBD | 2,083,390 | 2,069,100 |
| | | | | | $ 37,450,013 |
| Credit
Suisse | | | | | |
| First
Boston LLC | 5.100 | 08/20/07 | TBD | 2,207,211 | $ 2,184,925 |
| | 5.100 | 08/20/07 | TBD | 1,977,972 | 1,958,000 |
| | 5.100 | 08/20/07 | TBD | 2,099,423 | 2,078,225 |
| | 5.100 | 08/20/07 | TBD | 1,914,329 | 1,895,000 |
| | 5.100 | 08/20/07 | TBD | 614,394 | 608,190 |
| | 5.100 | 08/30/07 | TBD | 1,593,878 | 1,580,000 |
| | 5.100 | 08/30/07 | TBD | 1,187,338 | 1,177,000 |
| | 5.100 | 08/30/07 | TBD | 1,174,224 | 1,164,000 |
| | 5.600 | 08/31/07 | 11/01/07 | 1,933,171 | 1,915,000 |
| | 5.100 | 08/31/07 | TBD | 1,603,740 | 1,590,000 |
| | 4.900 | 10/10/07 | 11/13/07 | 26,408,268 | 26,333,000 |
| | 4.900 | 10/11/07 | 11/13/07 | 4,518,266 | 4,506,000 |
| | 5.100 | 10/18/07 | TBD | 4,278,469 | 4,270,000 |
| | | | | | $ 51,259,340 |

Trust/Counter Party	Rate	Trade Date	Maturity Date 1	Net Closing Amount	Par
Income Opportunity (contd)
Lehman
Brothers	4.200 %	10/01/07	TBD	$ 8,485,395	$ 8,455,800
	4.900	10/11/07	11/01/07	1,973,232	1,967,875
	4.800	10/25/07	11/13/07	4,322,455	4,319,000
	4.150	10/31/07	11/07/07	1,165,916	1,165,781
					$ 15,908,456
Morgan
Stanley	0.000	10/19/07	TBD	643,703	$ 643,703
Income Trust
Lehman
Brothers	4.600	11/01/07	TBD	24,280,081	$ 24,280,113
	4.800	11/01/07	11/02/07	3,035,595	3,036,000
	4.800	11/01/07	11/02/07	1,073,107	1,073,250
	4.900	11/01/07	11/02/07	5,505,251	5,506,000
					$ 33,895,363
Limited Duration
Barclays
Bank	5.220	04/24/07	TBD	967,952	$ 942,000
	5.220	05/01/07	TBD	4,508,542	4,392,000
	5.200	05/01/07	TBD	4,834,245	4,709,751
	5.170	05/01/07	TBD	5,005,043	4,876,875
	5.220	05/01/07	TBD	4,890,798	4,764,375
	5.220	05/01/07	TBD	4,775,313	4,651,875
	5.220	05/01/07	TBD	3,093,874	3,013,900
	5.220	05/01/07	TBD	571,375	556,605
	5.200	05/17/07	TBD	3,091,825	3,019,000
	5.220	07/09/07	TBD	771,546	759,000
					$ 31,685,381
Credit
Suisse
First
Boston LLC	5.375	11/26/13	TBD	1,809,853	$ 1,722,000
	5.100	12/05/06	TBD	5,565,373	5,316,812
	5.100	12/05/06	TBD	7,491,361	7,156,781
	5.100	12/07/06	TBD	2,997,342	2,864,250
	5.100	12/07/06	TBD	4,817,122	4,603,225
	5.100	01/18/07	TBD	2,295,602	2,206,213
	5.300	01/18/07	TBD	2,491,177	2,390,523
	5.300	04/17/07	TBD	1,604,750	1,559,520
	0.000	10/04/07	TBD	2,784,000	2,784,000
	5.300	05/16/07	TBD	1,796,358	1,753,000
	5.300	06/11/07	TBD	3,966,218	3,885,000
	5.300	06/11/07	TBD	5,165,782	5,060,000
	5.300	06/29/07	TBD	2,878,082	2,826,483
	5.300	07/09/07	TBD	1,511,957	1,487,000
					$ 45,614,807
Lehman
Brothers	5.100	7/26/06	TBD	1,474,583	$ 1,384,000
	4.750	09/06/06	TBD	937,210	888,000
	5.000	11/27/06	TBD	349,679	334,000
	4.550	01/09/07	TBD	3,472,764	3,347,938
	4.510	01/12/07	TBD	17,203,359	16,596,250
	4.470	02/12/07	TBD	1,841,028	1,783,238
	4.520	02/28/07	TBD	709,164	688,000
	4.520	03/01/07	TBD	5,395,680	5,235,293
	1.250	09/07/07	TBD	1,733,244	1,730,000
					$ 31,986,719
Preferred and Equity Advantage
Credit
Suisse
First
Boston LLC	0.000	10/04/07	TBD	4,988,000	$ 4,988,000
	4.000	10/22/07	TBD	5,290,535	5,285,250
					$ 10,273,250
Lehman
Brothers	5.000	10/23/07	TBD	27,566,470	$ 27,535,875
	5.000	10/23/07	TBD	25,046,799	25,019,000
	5.000	10/23/07	TBD	25,490,792	25,462,500
					$ 78,017,375
Strategic Bond
Morgan
Stanley	0.000	10/19/07	TBD	413,123	$ 413,123

1 TBD To be determined

73 ANNUAL REPORT OCTOBER 31, 2007

Notes to Financial Statements (continued)

Details of underlying collateral for open reverse repurchase agreements at October 31, 2007 were as follows:

| Trust/Counter Party | Description | Rate | Maturity
Date | Original
Face | Current
Face | Market
Value |
| --- | --- | --- | --- | --- | --- | --- |
| Core Bond | | | | | | |
| Barclays
Bank | General
Electric Capital Corp. | 6.150 % | 8/7/2037 | $ 6,855,000 | $ 6,855,000 | $ 7,103,041 |
| | Deutsche
Telekom Intl. Finance BV | 5.750 | 3/23/2016 | 3,000,000 | 3,000,000 | 3,007,887 |
| | Verizon
Virginia, Inc. | 4.625 | 3/15/2013 | 3,150,000 | 3,150,000 | 3,024,873 |
| | AT&T,
Inc. | 6.500 | 9/1/2037 | 2,600,000 | 2,600,000 | 2,742,532 |
| | Intl.
Business Machines Corp. | 5.700 | 9/14/2017 | 1,760,000 | 1,760,000 | 1,786,375 |
| | Morgan
Stanley | 5.493 | 1/19/2012 | 3,300,000 | 3,300,000 | 3,246,860 |
| | | | | | | $ 20,911,568 |
| Credit
Suisse | Eli Lilly
& Co. | 5.550 | 3/15/2037 | 2,275,000 | 2,275,000 | $ 2,172,347 |
| | U.S. Bank | 6.500 | 2/1/2008 | 1,800,000 | 1,800,000 | 1,803,074 |
| | Federal
Home Loan Mortgage Corp. | 5.500 | 11/1/2018 | 2,832,896 | 1,169,936 | 1,175,041 |
| | Federal
National Mortgage Assoc. | 5.000 | 1/1/2018 | 3,536,110 | 1,041,164 | 1,029,288 |
| | Federal
National Mortgage Assoc. | 5.000 | 7/1/2036 | 6,784,029 | 6,254,571 | 6,004,420 |
| | Federal
National Mortgage Assoc. | 6.000 | 2/1/2036 | 1,116,625 | 894,711 | 901,470 |
| | Federal
National Mortgage Assoc. | 6.000 | 4/1/2036 | 1,091,509 | 908,081 | 914,940 |
| | Federal
National Mortgage Assoc. | 5.500 | 4/1/2036 | 1,018,042 | 895,122 | 882,170 |
| | Federal
National Mortgage Assoc. | 6.000 | 2/1/2036 | 1,134,707 | 891,461 | 898,195 |
| | Federal
National Mortgage Assoc. | 6.000 | 9/1/2036 | 1,039,072 | 863,698 | 870,222 |
| | Federal
National Mortgage Assoc. | 5.500 | 12/1/2035 | 44,000,000 | 42,351,254 | 41,778,926 |
| | Federal
National Mortgage Assoc. | 6.000 | 10/1/2036 | 3,304,703 | 3,100,363 | 3,123,783 |
| | Federal
National Mortgage Assoc. | 5.000 | 3/1/2037 | 1,009,339 | 997,326 | 957,244 |
| | Federal
National Mortgage Assoc. | 5.000 | 5/1/2037 | 4,257,973 | 4,204,831 | 4,035,841 |
| | Royal Bank
of Scotland Group PLC | 7.640 | N/A 1 | 2,000,000 | 2,000,000 | 2,073,024 |
| | | | | | | $ 68,619,985 |
| Lehman | U.S.
Treasury Inflation Indexed Bonds | 2.375 | 1/15/2027 | 5,220,000 | 5,220,000 | $ 5,523,085 |
| | U.S.
Treasury Notes | 4.750 | 8/15/2017 | 10,750,000 | 10,750,000 | 10,986,833 |
| | | | | | | $ 16,509,918 |
| Morgan
Stanley | Michaels
Stores, Inc. | 11.375 | 11/1/2016 | 600,000 | 600,000 | $ 598,500 |
| Income Opportunity | | | | | | |
| Barclays
Bank | General
Electric Capital Corp. | 6.150 | 8/7/2037 | 7,610,000 | 7,610,000 | $ 7,885,360 |
| | General
Electric Capital Corp. | 6.750 | 3/15/2032 | 1,900,000 | 1,900,000 | 2,120,377 |
| | Berkshire
Hathaway Finance Corp. | 3.375 | 10/15/2008 | 2,025,000 | 2,025,000 | 1,997,982 |
| | Morgan
Stanley | 5.493 | 1/9/2012 | 3,620,000 | 3,620,000 | 3,561,707 |
| | Citigroup,
Inc. | 4.125 | 2/22/2010 | 2,425,000 | 2,425,000 | 2,384,488 |
| | Bank of
America Corp. | 7.800 | 2/15/2010 | 2,450,000 | 2,450,000 | 2,597,750 |
| | Eli Lilly
& Co. | 5.550 | 3/15/2037 | 1,800,000 | 1,800,000 | 1,718,780 |
| | Johnson
& Johnson | 5.950 | 8/15/2037 | 1,120,000 | 1,120,000 | 1,171,362 |
| | Bank of
America Corp. | 6.000 | 9/1/2017 | 2,850,000 | 2,850,000 | 2,905,373 |
| | Bank of
America NA | 6.100 | 6/15/17 | 1,740,000 | 1,740,000 | 1,780,847 |
| | Morgan
Stanley | 6.250 | 8/28/2017 | 1,200,000 | 1,200,000 | 1,228,642 |
| | Kraft
Foods, Inc. | 7.000 | 8/11/2037 | 1,670,000 | 1,670,000 | 1,813,260 |
| | Societe
Generale | 5.922 | N/A 1 | 1,575,000 | 1,575,000 | 1,498,912 |
| | AstraZeneca
Plc | 6.450 | 9/15/2037 | 1,825,000 | 1,825,000 | 1,923,044 |
| | Citigroup,
Inc. | 6.125 | 8/25/2036 | 900,000 | 900,000 | 877,919 |
| | AT&T,
Inc. | 6.500 | 9/1/2037 | 1,980,000 | 1,980,000 | 2,088,544 |
| | Intl.
Business Machines Corp. | 5.700 | 9/14/2017 | 2,200,000 | 2,200,000 | 2,232,968 |
| | | | | | | $ 39,787,315 |
| Credit
Suisse | UBS
Preferred Funding Trust I | 8.622 | N/A 1 | 2,000,000 | 2,000,000 | $ 2,170,314 |
| | Morgan
Stanley | 6.250 | 8/9/2026 | 2,100,000 | 2,100,000 | 2,069,773 |
| | Wells Fargo
Bank NA | 7.550 | 6/21/10 | 2,000,000 | 2,000,000 | 2,124,152 |
| | Allstate
Corp. | 6.500 | 5/15/2057 | 2,150,000 | 2,150,000 | 2,084,728 |
| | General
Electric Capital Corp. | 6.750 | 3/15/2032 | 570,000 | 570,000 | 636,113 |
| | Vodafone
Group Plc | 5.288 | 12/28/2007 | 1,615,000 | 1,615,000 | 1,615,326 |
| | United
Technologies Corp. | 4.875 | 5/1/2015 | 1,250,000 | 1,250,000 | 1,209,314 |
| | Amgen, Inc. | 5.585 | 11/28/2008 | 1,200,000 | 1,200,000 | 1,197,836 |
| | ConocoPhillips
Australia Funding Co. | 5.343 | 4/9/2009 | 1,970,000 | 1,970,000 | 1,964,845 |
| | Wyeth | 5.950 | 4/1/2037 | 1,690,000 | 1,690,000 | 1,671,373 |
| | Federal
National Mortgage Assoc. | 5.500 | 1/1/2033 | 16,270,578 | 6,219,377 | 6,147,618 |
| | Federal
National Mortgage Assoc. | 5.500 | 2/1/2033 | 17,464,674 | 6,144,495 | 6,073,600 |
| | Federal
National Mortgage Assoc. | 5.500 | 2/1/2035 | 5,014,015 | 3,066,745 | 3,030,676 |
| | Federal
National Mortgage Assoc. | 5.000 | 7/1/2035 | 15,659,841 | 13,178,821 | 12,661,887 |
| | Federal
National Mortgage Assoc. | 5.500 | 10/1/2020 | 1,641,812 | 1,178,209 | 1,180,664 |
| | Federal
National Mortgage Assoc. | 5.500 | 3/1/2021 | 677,502 | 561,380 | 562,448 |
| | Federal
National Mortgage Assoc. | 5.500 | 6/1/2036 | 1,001,094 | 912,150 | 898,951 |
| | Federal
National Mortgage Assoc. | 5.500 | 3/1/2021 | 654,254 | 539,250 | 540,276 |
| | Federal
National Mortgage Assoc. | 6.000 | 6/1/2037 | 910,396 | 896,952 | 903,619 |
| | JP Morgan
Chase Capital XXV | 6.800 | 10/1/2037 | 4,375,000 | 4,375,000 | 4,370,175 |
| | | | | | | $ 53,113,688 |

ANNUAL REPORT OCTOBER 31, 2007 74

Notes to Financial Statements (continued)

| Trust/Counter Party | Description | Rate | Maturity
Date | Original
Face | Current
Face | Market
Value |
| --- | --- | --- | --- | --- | --- | --- |
| Income Opportunity (contd) | | | | | | |
| Lehman
Brothers | U.S.
Treasury Notes | 4.750 % | 8/15/2017 | $ 9,415,000 | $ 9,415,000 | $ 9,622,422 |
| | Resolution
Funding Corp. | 0.000 | 4/15/2030 | 6,055,000 | 6,055,000 | 2,018,561 |
| | Federal
Home Loan Mortgage Corp. | 5.067 | 1/1/2035 | 7,644,276 | 1,881,935 | 1,858,585 |
| | Federal
National Mortgage Assoc. | 5.500 | 7/1/2016 | 1,539,074 | 481,759 | 484,728 |
| | Federal
National Mortgage Assoc. | 5.500 | 3/1/2018 | 4,172,428 | 485,682 | 488,057 |
| | Federal
National Mortgage Assoc. | 5.500 | 11/1/2017 | 3,217,577 | 496,702 | 499,351 |
| | Federal
National Mortgage Assoc. | 5.500 | 8/1/2017 | 3,622,323 | 1,075,243 | 1,080,979 |
| | | | | | | $ 16,052,683 |
| Morgan
Stanley | Michaels
Stores, Inc. | 11.375 | 11/1/2016 | 670,000 | 670,000 | $ 668,325 |
| Income Trust | | | | | | |
| Lehman
Brothers | U.S.
Treasury Strip Principal | 0.000 | 11/15/2024 | 56,630,000 | 56,630,000 | $ 24,656,589 |
| | Resolution
Funding Corp. | 0.000 | 4/15/2030 | 12,440,000 | 12,440,000 | 4,147,135 |
| | Federal
Home Loan Mortgage Corp. | 5.500 | 3/1/2022 | 6,083,988 | 5,641,353 | 5,650,273 |
| | | | | | | $ 34,453,997 |
| Limited Duration | | | | | | |
| Barclays
Bank | Huntsman
LLC | 11.625 | 10/15/2010 | 1,495,000 | 1,495,000 | $ 1,584,700 |
| | Midwest
Generation LLC | 8.560 | 1/2/2016 | 5,180,000 | 4,324,265 | 4,648,585 |
| | Turkey | 7.000 | 9/26/2016 | 5,093,000 | 5,093,000 | 5,328,806 |
| | Columbia | 9.750 | 4/23/2009 | 5,000,000 | 6,144,495 | 6,543,887 |
| | Group 1
Automotive, Inc. | 8.250 | 8/15/2013 | 5,000,000 | 5,000,000 | 5,000,000 |
| | Rite Aid
Corp. | 8.125 | 5/1/2010 | 3,429,659 | 5,000,000 | 5,031,250 |
| | Freeport-McMoRan
Copper & Gold, Inc. | 8.375 | 4/1/2017 | 3,034,000 | 3,034,000 | 3,322,230 |
| | Comcast
Cable Communications LLC | 6.875 | 6/15/2009 | 2,907,000 | 2,907,000 | 2,980,881 |
| | Reynolds
American, Inc. | 7.625 | 6/1/2016 | 756,000 | 756,000 | 817,930 |
| | | | | | | $ 35,258,269 |
| Credit
Suisse | Rouse Co.
LP | 5.375 | 11/26/2013 | 2,000,000 | 2,000,000 | $ 1,812,352 |
| | Deutsche
Telekom Intl. Finance BV | 8.000 | 6/15/2010 | 5,000,000 | 5,000,000 | 5,361,380 |
| | Daimler
Finance North America LLC | 4.050 | 6/4/2008 | 7,500,000 | 7,500,000 | 7,439,415 |
| | DR Horton,
Inc. | 5.875 | 7/1/2013 | 3,000,000 | 3,000,000 | 2,688,714 |
| | JC Penney
Corp., Inc. | 8.000 | 3/1/2010 | 4,400,000 | 4,400,000 | 4,687,540 |
| | Comcast
Cable Communications LLC | 6.875 | 6/15/2009 | 2,185,000 | 2,185,000 | 2,240,532 |
| | Windstream
Corp. | 8.125 | 8/1/2013 | 2,340,000 | 2,340,000 | 2,474,550 |
| | Sanmina-SCI
Corp. | 8.125 | 3/1/2016 | 1,710,000 | 1,710,000 | 1,500,525 |
| | Michaels
Stores, Inc. | 11.375 | 11/1/2016 | 2,800,000 | 2,800,000 | 2,793,000 |
| | Celestica,
Inc. | 7.625 | 7/1/2013 | 1,965,000 | 1,965,000 | 1,886,400 |
| | Chesapeake
Energy Corp. | 7.500 | 9/15/2013 | 4,000,000 | 4,000,000 | 4,110,000 |
| | American
Real Estate Partners LP/American | | | | | |
| | Real Estate
Finance Corp. | 8.125 | 6/1/2012 | 5,390,000 | 5,390,000 | 5,430,425 |
| | Qwest Corp. | 8.875 | 3/15/2012 | 2,640,000 | 2,640,000 | 2,890,800 |
| | Rite Aid
Corp. | 7.500 | 3/1/2017 | 1,628,000 | 1,628,000 | 1,514,040 |
| | | | | | | $ 46,829,673 |
| Lehman
Brothers | NewPage
Corp | 11.606 | 5/1/2012 | 1,500,000 | 1,500,000 | $ 1,616,250 |
| | Metaldyne
Corp. | 10.000 | 11/1/13 | 1,000,000 | 1,000,000 | 930,000 |
| | Grant
Prideco Inc | 6.125 | 8/15/2015 | 380,000 | 380,000 | 381,900 |
| | U.S.
Treasury Notes | 3.375 | 9/15/2009 | 3,425,000 | 3,425,000 | 3,391,284 |
| | U.S.
Treasury Notes | 3.375 | 12/15/2008 | 17,000,000 | 17,000,000 | 16,881,799 |
| | U.S.
Treasury Notes | 4.250 | 8/15/2015 | 1,815,000 | 1,815,000 | 1,801,388 |
| | U.S.
Treasury Notes | 3.875 | 5/15/2009 | 5,945,000 | 5,945,000 | 5,937,105 |
| | Sally
Holdings LLC | 10.500 | 11/15/2016 | 1,790,000 | 1,790,000 | 1,781,050 |
| | | | | | | $ 32,720,776 |
| Preferred and Equity | | | | | | |
| Credit
Suisse | Michaels
Stores, Inc. | 11.375 | 11/1/2016 | 5,000,000 | 5,000,000 | $ 4,987,500 |
| | ICICI Bank
Ltd. | 7.250 | N/A 1 | 6,600,000 | 6,600,000 | 6,128,298 |
| | | | | | | $ 11,115,798 |
| Lehman
Brothers | BOI Capital
Funding No. 3 | 6.107 | N/A 1 | 30,000,000 | 30,000,000 | $ 27,601,950 |
| | State
Street Capital Trust IV | 6.694 | 6/15/2037 | 28,305,000 | 28,305,000 | 25,559,273 |
| | Swiss Re
Capital I LP | 6.854 | N/A 1 | 25,000,000 | 25,000,000 | 25,215,175 |
| | | | | | | $ 78,376,398 |
| Strategic Bond | | | | | | |
| Morgan
Stanley | Michaels
Stores, Inc. | 11.375 | 11/1/2016 | 430,000 | 430,000 | $ 428,925 |

1 The security is a perpetual bond and has no stated maturity date.

75 ANNUAL REPORT OCTOBER 31, 2007

Notes to Financial Statements (continued)

Note 5. Commitments

Bridge Debt Commitments: Limited Duration may invest in floating rate senior loans. In connection with these investments, Limited Duration may, with its Manager, also enter into senior unsecured bridge financing commitments. Bridge financing commitments may obligate Limited Duration to furnish temporary financing to a borrower until permanent financing can be arranged. These commitments range in duration from 43 to 294 days. At October 31, 2007, Limited Duration had outstanding bridge financing commitments of $20,740,000. In connection with these commitments, Limited Duration earns a commitment fee, typically set as a percentage of the commitment amount. Such fee income, which is classified in the statement of operations as interest income, is recognized ratably over the commitment period. During the year ended October 31, 2007, Limited Duration earned $254,615 in commitment fee income and the unrecognized commitment fee income is recoded on the statement of assets and liabilities as deferred income liability.

Note 6. Income Tax Information

No provision is made for U.S. federal taxes as it is the portfolios intention to continue to qualify for and elect the tax treatment applicable to regulated investment companies under Subchapter M of the Internal Revenue Code of 1986, as amended, and to make the requisite distributions to its shareholders which will be sufficient to relieve it from federal income and excise taxes.

Dividends from net investment income and distributions from net capital gains are determined in accordance with U.S. federal income tax regulations, which may differ from those amounts determined under accounting principles generally accepted in the United States. These Book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in-capital, undistributed net investment income, or accumulated net realized gain, as appropriate, in the period the difference arise.

Reclassification of Capital Accounts: The following permanent differences as of October 31, 2007, attributable to swap income/(loss), transactions involving foreign securities and currencies, expiration of capital loss carryfor-wards and other differences between financial reporting and tax accounting were reclassified to the following accounts.

Trust — Broad Investment Grade	$ 282,885	$	172	$	(283,057	)
Core Bond	786,797		(786,797	)
High Yield	2,368		2,556,500		(2,558,868	)
Income Opportunity	1,070,069		(1,070,069	)
Income Trust	(5,959,196	)	39,067,148		(33,107,952	)
Limited Duration	(2,414,790	)	2,414,790
Preferred and Equity	(48,592	)	78,130		(29,538	)

The tax character of distributions paid during the year ended October 31, 2007 and 2006 were as follows:

| Distributions Paid from: | Year
ended October 31, 2007 — Ordinary Income | Non-taxable Return of Capital | Long-term Capital Gains | Total Distributions |
| --- | --- | --- | --- | --- |
| Broad Investment Grade | $ 4,490,035 | $ | $ | $ 4,490,035 |
| Core Bond | 11,064,934 | 5,227,386 | | 16,292,320 |
| High Yield | 3,927,807 | | | 3,927,807 |
| Income Opportunity | 20,862,233 | 1,874,570 | | 22,736,803 |
| Income Trust | 18,808,452 | 4,978,175 | | 23,786,627 |
| Limited Duration | 51,967,739 | 1,074,826 | 2,229,742 | 55,272,307 |
| Preferred and Equity | 65,002,006 | 24,171,991 | | 89,173,997 |
| Strategic Bond | 6,521,963 | | | 6,521,963 |

| Distributions Paid from: | Year
ended October 31, 2006 — Ordinary Income | Non-taxable Return of Capital | Long-term Capital Gains | Total Distributions |
| --- | --- | --- | --- | --- |
| Broad Investment Grade | $ 4,241,016 | $ | $ 20,078 | $ 4,261,094 |
| Core Bond | 25,048,230 | | 7,914,351 | 32,962,581 |
| High Yield | 4,175,232 | | | 4,175,232 |
| Income Opportunity | 22,238,533 | 2,162,198 | 8,976,685 | 33,377,416 |
| Income Trust | 21,910,288 | 5,576,693 | | 27,486,981 |
| Limited Duration | 55,725,066 | 760,960 | | 56,486,026 |
| Strategic Bond | 6,969,104 | 251,641 | | 7,220,745 |

As of October 31, 2007, the components of distributable earnings on a tax basis were as follows:

Trust — Broad Investment Grade	Undistributed Ordinary Income — $ 4,855,266	$	(3,222,226	)	Unrealized Gain/(Loss) Net — $ (287,678	)
Core Bond	(2,423,603	)	(9,296,969	)	(833,467	)
High Yield	148,061		(36,514,583	)	(3,298,228	)
Income Opportunity			(4,794,548	)	(1,062,523	)
Income Trust			(66,753,313	)	3,726,058
Limited Duration					(18,232,683	)
Preferred and Equity			(49,741,712	)	(47,853,961	)
Strategic Bond	214,202		(447,113	)	(808,018	)

ANNUAL REPORT OCTOBER 31, 2007 76

Notes to Financial Statements (concluded)

For federal income tax purposes, the following Trusts had capital loss carry-forward as of their last respective tax year-end. These amounts may be used to offset future realized capital gains, if any:

| Trust | Capital
Loss Carryforward Amount | Expires |
| --- | --- | --- |
| Broad Investment Grade | $ 2,061,303 | 2011 |
| | 684,360 | 2012 |
| | 479,567 | 2014 |
| | $ 3,225,230 | |
| Core Bond | $ 6,643,266 | 2014 |
| High Yield | $ 3,270,311 | 2008 |
| | 15,159,280 | 2009 |
| | 8,468,860 | 2010 |
| | 4,771,417 | 2011 |
| | 316,410 | 2012 |
| | 2,060,533 | 2014 |
| | 2,467,773 | 2015 |
| | $ 36,514,584 | |
| Income Opportunity | $ 2,451,626 | 2014 |
| | 2,342,922 | 2015 |
| | $ 4,794,548 | |
| Income Trust | $ 1,352,206 | 2008 |
| | 13,940,898 | 2009 |
| | 21,960,613 | 2011 |
| | 10,100,201 | 2012 |
| | 3,861,222 | 2013 |
| | 6,952,429 | 2014 |
| | 8,585,744 | 2015 |
| | $ 66,753,313 | |
| Preferred and Equity | $ 49,741,712 | 2015 |
| Strategic Bond | $ 447,113 | 2014 |

Note 7. Capital

There are 200 million of $0.01 par value common shares authorized for Broad Investment Grade, Income Opportunity and Income Trust. There are an unlimited number of $0.001 par value common shares authorized for Core Bond, High Yield, Limited Duration, Preferred and Equity and Strategic Bond. At October 31, 2007, the shares owned by an affiliate of the Advisor of Limited Duration and Preferred and Equity were 6,021 and 4,817, respectively.

Preferred and Equity, which commenced on December 27, 2006, issued 47,004,817 common shares under the initial public offering. On February 1, 2007, an additional 4,750,000 shares were issued by the underwriters exercising their over-allotment option. Offering costs incurred in connection with the offering of common shares have been charged against the proceeds from the initial common share offering in the amount of $1,367,957.

During the years ended October 31, 2007 and 2006, the following Trusts issued additional shares under their respective dividend reinvestment plan:

| Trust | October
31, 2007 | October
31, 2006 |
| --- | --- | --- |
| High Yield | 1,496 | 6,259 |
| Limited Duration | 107,367 | 13,785 |
| Preferred and Equity | 73,340 | |

As of October 31, 2007, Preferred and Equity has the following series of preferred shares outstanding as listed in the table below. The preferred shares have a liquidation value of $25,000 per share plus any accumulated unpaid dividends.

Series	Shares
T7	4,620
W7	4,620
R7	4,620
F7	4,620

Dividends on seven-day preferred shares are cumulative at a rate which is reset every seven days based on the results of an auction. The dividend ranges on the preferred shares for Preferred and Equity for the period ended October 31, 2007 were as follows:

Series — T7	5.05 %	6.40 %	5.38 %
W7	5.08	6.40	5.39
R7	4.99	6.30	5.39
F7	5.00	6.35	5.36

Note 8. Subsequent Events

Subsequent to October 31, 2007, the Board of each of the Trusts declared dividends per common share payable November 30, 2007, to shareholders of record on November 15, 2007. The per share common dividends declared were as follows:

Trust
Broad Investment Grade	$ 0.04900
Core Bond	0.06700
High Yield	0.05100
Income Opportunity	0.05500
Income Trust	0.03100
Limited Duration	0.12500
Preferred and Equity	0.15625
Strategic Bond	0.07700

The dividends declared on preferred shares for the period November 1, 2007 to November 30, 2007 for Preferred and Equity were as follows:

Series	Dividends Declared
T7	$ 458,581
W7	455,301
R7	567,983
F7	574,127

On November 29, 2007, Broad Investment Grades Board of Trustees approved a Plan of Liquidation and Dissolution. Accordingly, the Broad Investment Grade will liquidate substantially all of its assets on or about the close of business on December 31, 2009.

77 ANNUAL REPORT OCTOBER 31, 2007

Report of Independent Registered Public Accounting Firm

To the Directors/Trustees and Shareholders of: BlackRock Broad Investment Grade 2009 Term Trust Inc. BlackRock Core Bond Trust BlackRock High Yield Trust BlackRock Income Opportunity Trust BlackRock Income Trust Inc. BlackRock Limited Duration Income Trust BlackRock Preferred and Equity Advantage Trust BlackRock Strategic Bond Trust (Collectively the Trusts)

We have audited the accompanying statements of assets and liabilities of the Trusts, including the portfolios of investments, as of October 31, 2007, and the related statements of operations for the year then ended, the statements of changes in net assets and the financial highlights for each of the periods presented. We have also audited the statements of cash flows of BlackRock Core Bond Trust, BlackRock High Yield Trust, BlackRock Income Opportunity Trust, BlackRock Income Trust Inc., BlackRock Limited Duration Income Trust and BlackRock Preferred and Equity Advantage Trust, for the year ended October 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.

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 included confirmation of securities owned as of October 31, 2007, by correspondence with the custodian and brokers; where replies were not received from brokers, 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 the Trusts as of October 31, 2007, the results of their operations and the cash flows of BlackRock Core Bond Trust, BlackRock High Yield Trust, BlackRock Income Opportunity Trust, BlackRock Income Trust Inc., BlackRock Limited Duration Income Trust and BlackRock Preferred and Equity Advantage Trust, for the year then ended, the changes in their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Boston, Massachusetts December 28, 2007

ANNUAL REPORT OCTOBER 31, 2007 78

The Benefits and Risks of Leveraging (unaudited)

The Trusts may utilize leveraging through borrowings or issuance of short-term debt securities or shares of Preferred Stock. 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 on borrowings or dividend rates on the Preferred Stock, 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 Trusts Common Stock shareholders will be the beneficiaries of the incremental yield.

As of October 31, 2007, the Trusts had the following leverage amounts to total net assets before the deduction of leverage of:

Trust	Leverage%
Core Bond	22%
High Yield	15%
Income Opportunity	22%
Income Trust	8%
Limited Duration	14%
Preferred and Equity	33%

Leverage creates risks for holders of Common Stock including the likelihood of greater net asset value and market price volatility. In addition, there is the risk that fluctuations in interest rates on borrowings or in the dividend rates on any Preferred Stock may reduce the Common Stocks yield and negatively impact its net asset value and market price. If the income derived from securities purchased with assets received from leverage exceeds the cost of leverage, each Trusts net income will be greater than if leverage had not been used. Conversely, if the income from the securities purchased is not sufficient to cover the cost of leverage, each Trusts net income will be less than if leverage had not been used, and therefore the amount available for distribution to Common Stock shareholders will be reduced.

79 ANNUAL REPORT OCTOBER 31, 2007

Dividend Reinvestment Plans (unaudited)

Pursuant to each Trusts respective Dividend Reinvestment Plan (the Plan), common shareholders of Broad Investment Grade, Income Opportunity and Income Trust may elect, while shareholders of Core Bond, High Yield, Limited Duration, Preferred and Equity 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 Trusts shares pursuant to the Plan. Shareholders who do not participate in the Plan will receive all distributions in cash paid by check and mailed directly to the shareholders of record (or if the shares are held in street or other nominee name, then to the nominee) by the Plan Agent, which serves as agent for the shareholders in administering the Plan.

After Broad Investment Grade declares a dividend or determines to make a capital gain distribution, the Plan Agent will acquire shares for the participants account, by the purchase of outstanding shares on the open market, on the Trusts primary exchange or elsewhere (open market purchases). The Trust will not issue any new shares under the Plan.

After Core Bond, High Yield, Income Trust, Limited Duration, Preferred and Equity and/or Strategic Bond declares a dividend or determines to make a capital gain distribution, the Plan Agent will acquire shares for the participants account, depending upon the circumstances described below, either (i) through receipt of unissued but authorized shares from the Trust (newly issued shares) or (ii) by open market purchases. If, on the dividend payment date, the 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 participants 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.

At a meeting of the Board of Trustees of the Income Opportunity Trust on November 21, 2006, the Board approved an amendment to the Dividend Reinvestment Plan of the Income Opportunity Trust. The Plan previously operated in a manner similar to Broad Investment Grades Plan, and permitted shares to be purchased only on the open market. As a result of the amendment, the Plan will permit purchases of newly issued shares on terms similar to the Plans described in the next paragraph. This amendment took effect on April 1, 2007.

The Plan Agents 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 Agents 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 250 Royall Street, Canton, MA 02021 or (800) 699-1BFM.

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 Web sites.

BlackRock does not sell or disclose to nonaffiliated third parties any non-public personal information about its Clients, except as permitted by law or as is 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 OCTOBER 31, 2007 80

Additional Information (unaudited)

TAX NOTICE

The following information is provided with respect to the distributions paid by the BlackRock Closed-End Funds for the fiscal year ended October 31, 2007:

| | Payable
Date | Federal Obligation Interest 1 | Interest
Related Dividends for Non- U.S. Residents 2 | Long-Term Capital Gains Per Share ($) |
| --- | --- | --- | --- | --- |
| Broad Investment Grade 2009 Term Trust (BCT) | 11/30/06 1/31/07 | 3.48 % | 8.50 % | |
| | 2/28/07 10/31/07 | 2.13 % | 42.10 % | |
| High Yield Trust (BHY) | 11/30/06 1/31/07 | 2.08 % | 58.91 % | |
| | 2/28/07 10/31/07 | 1.78 % | 87.67 % | |
| Income Opportunity Trust (BNA) | 11/30/06 1/31/06 | 8.24 % | 51.11 % | |
| | 2/28/07 10/31/07 | 1.97 % | 100 % | |
| Income Trust (BKT) | 11/30/06 1/31/07 | 7.80 % | 58.17 % | |
| | 2/28/07 10/31/07 | 12.22 % | 84.45 % | |
| Limited Duration Income Trust (BLW) | 11/30/06 1/31/07 | 2.41 % | 57.97 % | |
| | 2/28/07 9/30/07 | 1.93 % | 100 % | |
| | 10/31/07 | 1.93 % | 100 % | 0.060444 |
| Preferred and Equity Advantage Trust (BTZ)* | 1/31/07 10/31/07 | 2.31 % | 37.89 % | |
| Strategic Bond Trust (BHD) | 11/30/06 1/31/07 | 2.50 % | 57.18 % | |
| | 2/28/07 10/31/07 | 3.76 % | 100 % | |

| * | Of the ordinary distributions paid by Preferred and Equity
Advantage Trust, 37 percent consist of qualified dividend income for
individuals and dividends qualifying for the dividends received deduction for
corporations. |
| --- | --- |
| 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 tax advisor to
determine if any portion of the dividends you received is exempt from state
income taxes. |
| 2 | Represents the portion of the distributions paid that are exempt
from U.S withholding tax for nonresident aliens and foreign corporations. |

In January 2008, a form 1099-DIV will be sent to shareholders which will state the amount and composition of distributions and provide information with respect to their appropriate tax treatment.

81 ANNUAL REPORT OCTOBER 31, 2007

Additional Information (unaudited) (continued)

Shareholder Meetings

The Joint Annual Meeting of Shareholders was held on August 16, 2007 for shareholders of record on June 20, 2007, to elect director or trustee nominees of each Trust. This proposal was part of the reorganization of the Trusts Boards of Trustees (the Boards) to take effect on or about November 1, 2007. The Board is organized into three classes one class of which is elected annually. Each Trustee serves a three-year term concurrent with the class into which he or she is elected.

Approved the Class I Directors/Trustees as follows:

| Votes
For | Votes Withheld | Votes
For | Votes Withheld | Votes
For | Votes Withheld | |
| --- | --- | --- | --- | --- | --- | --- |
| Broad Investment Grade | 2,600,006 | 20,037 | 2,600,006 | 20,037 | 2,600,006 | 20,037 |
| Core Bond | 21,540,504 | 205,001 | 21,534,431 | 211,073 | 21,540,366 | 205,138 |
| High Yield | 5,938,569 | 96,163 | 5,941,585 | 93,147 | 5,937,943 | 96,789 |
| Income Opportunity | 27,451,182 | 274,088 | 27,449,422 | 275,848 | 27,444,122 | 281,147 |
| Income Trust | 54,004,899 | 878,220 | 54,007,568 | 875,552 | 54,012,161 | 870,958 |
| Limited Duration | 31,528,458 | 301,321 | 31,522,202 | 307,576 | 31,527,975 | 301,804 |
| Preferred and Equity | 49,178,575 | 636,127 | 49,172,672 | 642,030 | 49,178,097 | 636,605 |
| Strategic Bond | 5,838,976 | 188,565 | 5,839,626 | 187,915 | 5,838,876 | 188,665 |

| Votes
For | | Votes Withheld | | Votes
For | Votes Withheld | |
| --- | --- | --- | --- | --- | --- | --- |
| Broad Investment Grade | 2,600,006 | | 20,037 | | 2,600,006 | 20,037 |
| Core Bond | 21,542,541 | | 202,963 | | 21,532,904 | 212,601 |
| High Yield | 5,940,393 | | 94,339 | | 5,941,060 | 93,672 |
| Income Opportunity | 27,459,822 | | 265,448 | | 27,427,963 | 297,307 |
| Income Trust | 54,014,548 | | 868,572 | | 53,998,127 | 884,992 |
| Limited Duration | 31,535,465 | | 294,314 | | 31,529,737 | 300,042 |
| Preferred and Equity | 12,415 | 1 | 63 | 1 | 49,178,951 | 635,751 |
| Strategic Bond | 5,839,476 | | 188,065 | | 5,839,776 | 187,765 |

Approved the Class II Directors/Trustees as follows:

| Votes
For | Votes Withheld | Votes
For | | Votes Withheld | | Votes
For | Votes Withheld | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Broad Investment Grade | 2,600,006 | 20,037 | 2,600,006 | | 20,037 | | 2,600,006 | 20,037 |
| Core Bond | 21,528,535 | 216,970 | 21,543,679 | | 201,825 | | 21,535,708 | 209,796 |
| High Yield | 5,939,343 | 95,389 | 5,938,756 | | 95,976 | | 5,941,378 | 93,354 |
| Income Opportunity | 27,452,493 | 272,777 | 27,456,158 | | 269,112 | | 27,447,610 | 277,660 |
| Income Trust | 54,011,445 | 871,675 | 54,017,461 | | 865,659 | | 54,012,426 | 870,694 |
| Limited Duration | 31,533,743 | 296,036 | 31,534,354 | | 295,425 | | 31,531,608 | 298,171 |
| Preferred and Equity | 49,181,551 | 633,151 | 12,415 | 1 | 63 | 1 | 49,179,416 | 635,286 |
| Strategic Bond | 5,839,276 | 188,265 | 5,836,791 | | 190,750 | | 5,839,776 | 187,765 |

| Votes
For | Votes Withheld | |
| --- | --- | --- |
| Broad Investment Grade | 2,600,006 | 20,037 |
| Core Bond | 21,546,810 | 198,695 |
| High Yield | 5,939,791 | 94,941 |
| Income Opportunity | 27,457,771 | 267,499 |
| Income Trust | 54,006,888 | 876,232 |
| Limited Duration | 31,534,697 | 295,081 |
| Preferred and Equity | 49,180,119 | 634,583 |
| Strategic Bond | 5,839,676 | 187,865 |

1 Voted on by holders of preferred shares only.

ANNUAL REPORT OCTOBER 31, 2007 82

Additional Information (unaudited) (concluded)

Approved the Class III Directors/Trustees as follows:

| Votes
For | Votes Withheld | Votes
For | Votes Withheld | Votes
For | Votes Withheld | |
| --- | --- | --- | --- | --- | --- | --- |
| Broad Investment Grade | 2,600,006 | 20,037 | 2,600,006 | 20,037 | 2,600,006 | 20,037 |
| Core Bond | 21,545,394 | 200,110 | 21,537,449 | 208,056 | 21,528,340 | 217,164 |
| High Yield | 5,939,949 | 94,783 | 5,937,482 | 97,250 | 5,939,881 | 94,851 |
| Income Opportunity | 27,447,696 | 277,574 | 27,434,374 | 290,896 | 27,449,506 | 275,764 |
| Income Trust | 54,014,874 | 868,245 | 53,992,362 | 890,757 | 54,015,668 | 867,452 |
| Limited Duration | 31,529,595 | 300,184 | 31,523,085 | 306,693 | 31,527,485 | 302,294 |
| Preferred and Equity | 49,151,157 | 663,545 | 49,177,230 | 637,472 | 49,184,426 | 630,276 |
| Strategic Bond | 5,839,176 | 188,365 | 5,838,876 | 188,665 | 5,839,926 | 187,615 |

| Votes
For | Votes Withheld | |
| --- | --- | --- |
| Broad Investment Grade | 2,600,006 | 20,037 |
| Core Bond | 21,544,954 | 200,551 |
| High Yield | 5,941,378 | 93,354 |
| Income Opportunity | 27,441,156 | 284,114 |
| Income Trust | 54,010,458 | 872,661 |
| Limited Duration | 31,525,195 | 304,584 |
| Preferred and Equity | 49,180,428 | 634,274 |
| Strategic Bond | 5,838,976 | 188,565 |

The following Trusts had an additional proposal (Proposal #2) to amend their respective Declarations of Trust to increase the maximum number of Board Members to 15:

Core Bond	21,397,280	273,953	74,272
High Yield	5,853,627	164,515	16,590
Limited Duration	30,858,715	452,424	518,639
Preferred and Equity	48,460,779	990,861	363,061
Strategic Bond	5,817,653	131,815	78,074

Each Trust listed for trading on the New York Stock Exchange (NYSE) has filed with the NYSE its annual chief executive officer certification regarding compliance with the NYSEs listing standards and each Trust listed for trading on the American Stock Exchange (AMEX) has filed with the AMEX its corporate governance certification regarding compliance with the AMEXs listing standards. All of the Trusts have filed with the Securities and Exchange Commission the certification of its chief executive officer and chief financial officer required by section 302 of the Sarbanes-Oxley Act.

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

During the period, there were no material changes in any Trusts investment objective or policies or to any Trusts charters or by-laws that were not approved by the shareholders or in the principal risk factors associated with investment in the Trusts.

Quarterly performance and other information regarding the Trusts may be found on BlackRocks website, which can be accessed at http://www.blackrock.com. This reference to BlackRocks website is intended to allow investors public access to information regarding the Trusts and does not, and is not intended, to incorporate BlackRocks website into this report.

83 ANNUAL REPORT OCTOBER 31, 2007

Section 19 Notices (unaudited)

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 the Trusts investment experience during the remainder of its fiscal year and may be subject to changes based on the tax regulations. The Trust will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.

| Trust | Total
Fiscal Year to Date Cumulative Distributions by Character — Net Investment Income | Net Realized Capital Gains | Return of Capital | Total
Per Common Share | Percentage
of Fiscal Year to Date Cumulative Distributions by Character — Net Investment Income | Net Realized Capital Gains | Return of Capital | Total
Per Common Share |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Core Bond | $ 0.72 | $ | $ 0.09 | $ 0.80 | 89 % | % | 11 % | 100 % |
| Income Opportunity | 0.61 | | 0.05 | 0.66 | 92 | | 8 | 100 |
| Income Trust | 0.32 | | 0.05 | 0.37 | 85 | | 15 | 100 |
| Preferred and Equity | 0.89 | | 0.52 | 1.41 | 63 | | 37 | 100 |

Each Trust estimates that it has distributed more than its income and net realized gains; therefore, a portion of the distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to the shareholder. A return of capital does not necessarily reflect the Funds investment performance and should not be confused with yield or income.

ANNUAL REPORT OCTOBER 31, 2007 84

Directors/Trustees Information (unaudited)

Name, Address and Year of Birth	Current Positions Held With the Trusts	Term of Office and Length of Time Served	Principal Occupations During the Past Five Years
Interested Director/Trustee 2
Ralph L. Schlosstein BlackRock, Inc. 40 East 52nd Street New York, NY 10022 1951	Chairman of the Board 3	3 years 4 / since inception	Director from 1999 to 2007 and President of BlackRock,
Inc. from 1998 to 2007. Chairman and President of the BlackRock Liquidity
Funds.	70	None	Former Director and President of the Advisor until
September 2007.

| 1 | The Fund Complex means two or more registered investment
companies that: (1) hold themselves out to investors as related companies for
purposes of investment and investor services; or (2) have a common investment
advisor or have an investment advisor that is an affiliated person of the
investment advisor of any of the other registered investment companies. |
| --- | --- |
| 2 | Interested Director/Trustee as defined by Section 2(a)(19)
of the Investment Company Act of 1940. |
| 3 | Director/Trustee since inception; appointed Chairman of
the Board on August 22, 2002. |
| 4 | The Board is classified into three classes of which one
class is elected annually. Each Director/Trustee serves a three-year term
concurrent with the class from which they are elected. |

85 ANNUAL REPORT OCTOBER 31, 2007

Directors/Trustees Information (unaudited) (continued)

Name, Address and Year of Birth	Current Positions Held With the Trusts	Term of Office and Length of Time Served	Principal Occupations During the Past Five Years	Number of Portfolios Overseen Within the Fund Complex 1	Other Directorships Held Outside the Fund Complex
Independent Directors/Trustees
Richard E. Cavanagh P.O. Box 4546 New York, NY 10163-4546 1946	Lead Trustee Audit Committee Member 2	3 years 3 /since inception	Trustee, Aircraft Finance Trust (AFT) from 1999 to the
present; Director, The Guardian Life Insurance Company of America and The
Mutual Life Insurance Company from 1998 to the present; Trustee, Educational
Testing Service (ETS) from 1997 until the present; Director, the Freemont
Group from 1996 until the present. President and Chief Executive Officer of
The Conference Board, Inc. (a leading global busi- ness research
organization) from 1995 to 2007.	60	Arch Chemical (Chemicals and Allied Products).
Kent Dixon P.O. Box 4546 New York, NY 10163-4546 1937	Trustee Audit Committee Member 2	3 years 3 /since inception	Consultant/Investor since 1988.	60	None
Frank J. Fabozzi P.O. Box 4546 New York, NY 10163-4546 1948	Trustee Audit Committee Member 2	3 years 3 /since inception	Consultant/Editor of, The Journal of Portfolio
Management; Yale University, School of Management, Professor in the Practice
of Finance and Becton Fellow from 2006 until present; Adjunct Professor of
Finance and Becton Fellow from 2005 to 2006; Professor in the practice of
Finance from 2003 to 2005; Adjunct Professor of Finance from 1994 to 2003;
Author and Editor.	60	None

| 1 | The Fund Complex means two or more registered investments
companies that: (1) hold themselves out to investors as related companies for
purposes of investment and investor services; or (2) have a common investment
advisor or have an investment advisor that is an affiliated person of the investment
advisor of any of the other registered investment companies. |
| --- | --- |
| 2 | The Board of each Trust has determined that each Trust has
three Audit Committee financial experts serving on its Audit Committee, Mr.
Cavanagh, Mr. Dixon and Mr. Fabozzi, each of whom is independent for the
purpose of the definition of Audit Committee financial expert as applicable
to the Trusts. |
| 3 | The Board is classified into three classes of which one
class is elected annually. Each Director/Trustee serves a three-year term
concurrent with the class from which they are elected. |

ANNUAL REPORT OCTOBER 31, 2007 86

Directors/Trustees Information (unaudited) (concluded)

Name, Address and Year of Birth	Current Positions Held With the Trusts	Term of Office and Length of Time Served	Principal Occupations During the Past Five Years
Independent Directors/Trustees
Kathleen F. Feldstein P.O. Box 4546 New York, NY 10163-4546 1941	Trustee	3 years 3 /since January 19, 2005	President of Economic Studies, Inc., (a Belmont MA-based
private economic consulting firm) since 1987; Chair, Board of Trustees,
McLean Hospital since 2000. Member of the Board of Partners Community
Healthcare, Inc. from 2005 until the present; Member of the Board of Partners
HealthCare and Sherrill House from 1990 to the present; Trustee, Museum of
Fine Arts, Boston from 1992 until the present and a Member of the Visiting
Committee to the Harvard University Art Museum from 2003 to the present;
Trustee, The Committee for Economic Development (a research organization of
business leaders and educators) from 1990 to the present; Member of the
Advisory Board to the International School of Business, Brandeis University
from 2002 to the present.	60	Director, The McClatchy Company.
R. Glenn Hubbard P.O. Box 4546 New York, NY 10163-4546 1958	Trustee	3 years 3 /since November 16, 2004	Dean of Columbia Business School since 2004; Columbia
faculty member since 1988; Co-director of Columbia Business Schools
Entrepreneurship Program 1997 to 2004; Visiting Professor at the John F.
Kennedy School of Government at Harvard University and the Harvard Business
School from 1985, as well as the University of Chicago from 1994; Deputy
Assistant Secretary of the U.S. Treasury Department for Tax Policy from 1991
to 1993; Chairman of the U.S. Council of Economic Advisers under the
President of the United States from 2001 to 2003.	60	ADP, KKR Financial Corporation, Duke Realty, Metropolitan
Life Insurance Company.

| 1 | The Fund Complex means two or more registered investments
companies that: (1) hold themselves out to investors as related companies for
purposes of investment and investor services; or (2) have a common investment
advisor or have an investment advisor that is an affiliated person of the
investment advisor of any of the other registered investment companies. |
| --- | --- |
| 2 | The Board of each Trust has determined that each Trust has
three Audit Committee financial experts serving on its Audit Committee, Mr.
Cavanagh, Mr. Dixon and Mr. Fabozzi, each of whom is independent for the
purpose of the definition of Audit Committee financial expert as applicable
to the Trusts. |
| 3 | The Board is classified into three classes of which one
class is elected annually. Each Director/Trustee serves a three-year term
concurrent with the class from which they are elected. |

87 ANNUAL REPORT OCTOBER 31, 2007

BlackRock Closed-End Funds
Officers
Robert S. Kapito, President
Donald C. Burke, Treasurer
Bartholomew Battista, Chief
Compliance Officer
Anne Ackerley, Vice
President
Vincent B. Tritto, Secretary
Investment Advisor
BlackRock Advisors, LLC
100 Bellevue Parkway
Wilmington, DE 19809
(800) 227-7BFM
Sub-Advisor
BlackRock Financial Management, Inc. 1
40 East 52nd Street
New York, NY 10022
BlackRock Investment Management, LLC 2
40 East 52nd Street
New York, NY 10022
Accounting Agent
and Custodian
State Street Bank and Trust Company
2 Avenue De Lafayette
Boston, MA 02111
Transfer Agent
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
(800) 699-1BFM
Auction Agent 2
Bank of New York
101 Barclay Street, 7 West
New York, NY 10286
Independent
Registered Public Accounting Firm
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Legal Counsel
Independent Trustees
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022

This report is for shareholder information. This is not a prospectus intended for use in the purchase or sale of Trust shares. Statements and other information contained in this report are as dated and are subject to change.

BlackRock Closed-End Funds c/o BlackRock Advisors, LLC 100 Bellevue Parkway Wilmington, DE 19809 (800) 227-7BFM

| 1 | For Core Bond, Limited Duration,
Preferred and Equity and Strategic Bond. |
| --- | --- |
| 2 | For Preferred and Equity. |

The Trusts will mail only one copy of shareholder documents, including annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called householding and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact the Trusts at (800) 699-1BFM.

The Trusts have delegated to the Advisor the voting of proxies relating to their voting securities pursuant to the Advisors proxy voting policies and procedures. You may obtain a copy of these proxy voting policies and procedures, without charge, by calling (800) 699-1BFM. These policies and procedures are also available on the website of the Securities and Exchange Commission (the Commission) at http://www.sec.gov.

Information on how proxies relating to the Trusts voting securities were voted by the Advisor during the most recent 12-month period ended June 30th is available without charge, upon request, by calling (800) 699-1BFM or on the website of the Commission at http://www.sec.gov.

The Trusts file their complete schedule of portfolio holdings for the first and third quarters of their respective fiscal years with the Commission on Form N-Q. Each Trusts Form N-Q is available on the Commissions website at http://www.sec.gov. Each Trusts Form N-Q may be reviewed and copied at the Commissions Public Reference Room in Washington, D.C. Information regarding the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. Each Trusts Form N-Q may also be obtained without charge, upon request, by calling (800) 699-1BFM.

ANNUAL REPORT OCTOBER 31, 2007

| This report is for shareholder
information. This is not a prospectus intended for use in the purchase or sale of Trust shares. Statements and other information contained in this report are as dated and are subject to change. | |
| --- | --- |
| CEF-ANN-3-1007 | ● |

| 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 Dr. Andrew F. Brimmer (retired as of December 31, 2006) Robert S. Salomon, Jr. (term began effective November 1, 2007) W. Carl
Kester (term began effective November 1, 2007) James T. Flynn (term began
effective November 1, 2007) Karen P. Robards (term began effective November
1, 2007) |
| | 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. Kesters financial consulting services present
a breadth and level of complexity of accounting issues that are generally
comparable to the breadth and complexity of issues that can reasonably
be expected to be raised by the registrants financial statements. Ms. Robards has a thorough understanding
of generally accepted accounting principles, financial statements and
internal control over financial reporting as well as audit committee
functions. Ms. Robards has been President of Robards & Company,
a financial advisory firm, since 1987. Ms. Robards was formerly an
investment banker for more than 10 years where she was responsible
for evaluating and assessing the performance of companies based on
their financial results. Ms. Robards has over 30 years of experience
analyzing financial statements. She also is the member of the Audit
Committees 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 | $37,000 | $37,000 | $0 | $0 | $6,100 | $8,000 | $1,042 | $4,700 |
| 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 has polices and procedures (the "Policy") for the pre-approval by the registrant's audit committee of Audit, Audit-Related, Tax and Other Services (as each is defined in the Policy) provided by the Fund's independent auditor (the "Independent Auditor") to the registrant and other "Covered Entities" (as defined below). The term of any such pre-approval is 12 months from the date of pre-approval, unless the audit committee specifically provides for a different period. The amount of any such pre-approval is set forth in the appendices to the Policy (the "Service Pre-Approval Documents"). At its first meeting of each calendar year, the audit committee will review and re-approve the Policy and approve or re-approve the Service Pre-Approval Documents for that year, together with any changes deemed necessary or desirable by the audit committee. The audit committee may, from time to time, modify the nature of the services pre-approved, the aggregate level of fees pre-approved or both. For the purposes of the Policy, "Covered Services" means (A) all engagements for audit and non-audit services to be provided by the Independent Auditor to the Fund and (B) all engagements for non-audit services related directly to the operations and financial reporting or the Fund to be provided by the Independent Auditor to any Covered Entity, "Covered Entities" means (1) the Advisor or (2) any entity controlling, controlled by or under common control with the Advisor that provides ongoing services to the Fund. In the intervals between the scheduled meetings of the audit committee, the audit committee delegates pre-approval authority under this Policy to the Chairman of the audit committee (the "Chairman"). The Chairman shall report any pre-approval decisions under this Policy to the audit committee at its next scheduled meeting. At each scheduled meeting, the audit committee will review with the Independent Auditor the Covered Services pre-approved by the Chairman pursuant to delegated authority, if any, and the fees related thereto. Based on these reviews, the audit committee can modify, at its discretion, the pre-approval originally granted by the Chairman pursuant to delegated authority. This modification can be to the nature of services pre-approved, the aggregate level of fees approved, or both. Pre-approval of Covered Services by the Chairman pursuant to delegated authority is expected to be the exception rather than the rule and the audit committee may modify or withdraw this delegated authority at any time the audit committee determines that it is appropriate to do so. Fee levels for all Covered Services to be provided by the Independent Auditor and pre-approved under this Policy will be established annually by the audit committee and set forth in the Service Pre-Approval Documents. Any increase in pre-approved fee levels will require specific pre-approval by the audit committee (or the Chairman pursuant to delegated authority).

The terms and fees of the annual Audit services engagement for the Fund are subject to the specific pre-approval of the audit committee. The audit committee (or the Chairman pursuant to delegated authority) will approve, if necessary, any changes in terms, conditions or fees resulting from changes in audit scope, Fund structure or other matters. In addition to the annual Audit services engagement specifically approved by the audit committee, any other Audit services for the Fund not listed in the Service Pre-Approval Document for the respective period must be specifically pre-approved by the audit committee (or the Chairman pursuant to delegated authority). Audit-Related services are assurance and related services that are not required for the audit, but are reasonably related to the performance of the audit or review of the financial statements of the registrant and, to the extent they are Covered Services, the other Covered Entities (as defined in the Joint Audit Committee Charter) or that are traditionally performed by the Independent Auditor. Audit-Related services that are Covered Services and are not listed in the Service Pre-Approval Document for the respective period must be specifically pre-approved by the audit committee (or the Chairman pursuant to delegated authority). The audit committee believes that the Independent Auditor can provide Tax services to the Covered Entities such as tax compliance, tax planning and tax advice without impairing the auditors independence. However, the audit committee will not permit the retention of the Independent Auditor in connection with a transaction initially recommended by the Independent Auditor, the sole business purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. Tax services that are Covered Services and are not listed in the Service Pre-Approval Document for the respective period must be specifically pre-approved by the audit committee (or the Chairman pursuant to delegated authority). All Other services that are covered and are not listed in the Service Pre-Approval Document for the respective period must be specifically pre-approved by the audit committee (or the Chairman pursuant to delegated authority). Requests or applications to provide Covered Services that require approval by the audit committee (or the Chairman pursuant to delegated authority) must be submitted to the audit committee or the Chairman, as the case may be, by both the Independent Auditor and the Chief Financial Officer of the respective Covered Entity, and must include a joint statement as to whether, in their view, (a) the request or application is consistent with the rules of the Securities and Exchange Commission ("SEC") on auditor independence and (b) the requested service is or is not a non-audit service prohibited by the SEC. A request or application submitted to the Chairman between scheduled meetings of the audit committee should include a discussion as to why approval is being sought prior to the next regularly scheduled meeting of the audit committee. (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 | $291,642 | $298,900 |

| | (h) The registrants audit
committee has considered and determined that the provision of non audit
services that were rendered to the registrants investment adviser
(not including any non-affiliated sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by the registrants
investment adviser), and any entity controlling, controlled by, or
under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining
the principal accountants independence. Regulation S-X Rule 2-01(c)(7)(ii) $284,500,
0% |
| --- | --- |
| Item 5 | Audit Committee of Listed Registrants The
following individuals are members of the registrants separately-designated
standing audit committee established in accordance with Section 3(a)(58)(A)
of the Exchange Act (15 U.S.C. 78c(a)(58)(A)): Dr. Andrew F. Brimmer (retired
as of December 31, 2006) Richard E. Cavanagh (not reappointed to Audit
Committee as of November 1, 2007) Kent Dixon Frank J. Fabozzi Robert S. Salomon, Jr. (term began effective November 1, 2007) W. Carl Kester (term began effective November 1, 2007) James T. Flynn (term began effective November 1, 2007) Karen P. Robards (term began effective November 1, 2007) |
| Item 6 | Schedule of Investments The registrants
Schedule of Investments is included as part of the Report to Stockholders
filed under Item 1 of this form. |
| Item 7 | Disclosure of Proxy Voting
Policies and Procedures for Closed-End Management Investment Companies The
registrant has delegated the voting of proxies relating to Fund portfolio
securities to its investment adviser, BlackRock Advisors, LLC and its
sub-adviser, as applicable. The Proxy Voting Policies and Procedures
of the adviser and sub-adviser are attached hereto as Exhibit 99.PROXYPOL. Information about how the Fund
voted proxies relating to securities held in the Funds portfolio
during the most recent 12 month period ended June 30 is available without
charge (1) at www.blackrock.com and (2) on the Commissions web
site at http://www.sec.gov . |
| Item 8 | Portfolio Managers of Closed-End
Management Investment Companies as of October 31, 2007. (a)(1) BlackRock Limited Duration
Income Trust is managed by a team of investment professionals comprised
of Scott Amero, Managing Director at BlackRock, Jeffrey Gary, CPA,
Managing Director at BlackRock, Mark J. Williams, Managing Director
at BlackRock, Kevin J. Booth, CFA, Managing Director at BlackRock and
James E. Keenan, CFA, Director at BlackRock. Each is a member of BlackRocks
fixed income portfolio management group. Messrs. Amero and Gary are
responsible for setting the Funds overall credit strategy. Mr.
Williams is responsible for setting overall investment strategy and
overseeing management of the Fund. Messrs. Booth and Keenan are the
Funds co-portfolio managers and are responsible for the day-to-day
management of the Funds portfolio and the selection of its investments.
Mr. Amero has been a member of the Funds |

management team since 2003, Mr. Gary has been a member of the Funds management team since 2006 and Mr. Williams has been a member of the Funds management team since 2007. Messrs. Booth and Keenan have been the Funds co-portfolio managers since 2007. Scott Amero is co-head of BlackRocks fixed income portfolio management group. He is a member of the Management Committee and the Investment Strategy Group. Mr. Amero is a senior strategist and portfolio manager with responsibility for overseeing all fixed income sector strategy and the overall management of client portfolios. He is also the head of global credit research. He is a director of Anthracite Capital, Inc., BlackRocks publicly-traded real estate investment trust. Mr. Amero has been with BlackRock since 1990. Jeffrey Gary is the head of BlackRocks high yield team within the Fixed Income Portfolio Management Group. Prior to joining BlackRock in 2003, Mr. Gary was a Managing Director and portfolio manager with AIG (American General) Investment Group. Mr. Williams is the head of BlackRocks bank loan group and a member of the Investment Strategy Group. His primary responsibility is originating and evaluating bank loan investments for the firm's collateralized bond obligations. He is also involved in the evaluation and sourcing of mezzanine investments. 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. 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 BlackRocks Fixed Income Portfolio Management Group. 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 MLIMs bank loan group from 2000 to 2006. James Keenan is a high yield portfolio manager and trader within BlackRocks Fixed Income Portfolio Management Group. His primary responsibilities are managing client portfolios, executing trades and ensuring consistency across high yield portfolios. 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.

(a)(2) As of October 31, 2007:

| | | | | (iii) Number
of Other Accounts and | | |
| --- | --- | --- | --- | --- | --- | --- |
| | (ii) Number
of Other Accounts Managed | | | Assets for
Which Advisory Fee is | | |
| | and
Assets by Account Type | | | Performance-Based | | |
| | Other | | | Other | | |
| (i) Name of | Registered | Other Pooled | | Registered | Other Pooled | |
| Portfolio | Investment | Investment | Other | Investment | Investment | Other |
| Manager | Companies | Vehicles | Accounts | Companies | Vehicles | Accounts |
| Scott
Amero | 48 | 38 | 258 | 0 | 3 | 21 |
| | $40,182,202,768 | $6,954,333,971 | $95,887,026,723 | $0 | $2,577,310,124 | $6,366,579,342 |
| Jeffrey
Gary | 17 | 12 | 17 | 0 | 5 | 5 |
| | $7,990,123,814 | $3,521,329,269 | $7,450,262,711 | $0 | $2,134,982,068 | $929,839,511 |
| Mark
Williams | 9 | 17 | 2 | 0 | 11 | 1 |
| | $3,797,096,245 | $5,624,729,433 | $180,860,442 | $0 | $4,255,521,628 | $27,911,281 |
| Kevin
Booth | 23 | 9 | 7 | 0 | 3 | 3 |
| | $10,847,789,334 | $2,807,991,314 | $1,342,876,998 | $0 | $983,503,746 | $597,096,279 |
| James
Keenan | 17 | 9 | 16 | 0 | 2 | 5 |
| | $7,990,123,814 | $2,533,806,875 | $3,031,198,440 | $0 | $1,211,076,381 | $780,980,221 |

(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 to 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 BlackRocks (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 and employees of any of them has any substantial economic interest or possesses material non-public information. Each portfolio manager also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for the Fund. In this connection, it should be noted that certain portfolio managers currently manage certain accounts that are subject to performance fees. In addition, certain portfolio managers assist in managing certain hedge funds and may be entitled to receive a portion of any incentive fees earned on such funds and a portion of such incentive fees may be voluntarily or involuntarily deferred. Additional portfolio managers may in the future manage other such accounts or funds and may be entitled to receive incentive fees.

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

(a)(3) As of October 31, 2007:

Portfolio Manager Compensation

The portfolio manager compensation program of BlackRock is critical to BlackRocks ability to attract and retain the most talented asset management professionals. This program ensures that compensation is aligned with maximizing investment returns and it provides a competitive pay opportunity for competitive performance.

Compensation Program

The elements of total compensation for BlackRock portfolio managers are: fixed base salary, annual performance-based cash and stock compensation (cash and stock bonus) and other benefits. BlackRock has balanced these components of pay to provide portfolio managers with a powerful incentive to achieve consistently superior investment performance. By design, portfolio manager compensation levels fluctuate both up and down with the relative investment performance of the portfolios that they manage.

Base Salary

Under the BlackRock approach, like that of many asset management firms, fixed base salaries represent a relatively small portion of a portfolio managers total compensation. This approach serves to enhance the motivational value of the performance-based (and therefore variable) compensation elements of the compensation program.

Performance-Based Compensation

BlackRock believes that the best interests of investors are served by recruiting and retaining exceptional asset management talent and managing their compensation within a consistent and disciplined framework that emphasizes pay for performance in the context of an intensely competitive market for talent. To that end, the portfolio manager incentive compensation is based on a formulaic compensation program.

BlackRocks formulaic portfolio manager compensation program includes: pre-tax investment performance relative to the appropriate competitors or benchmarks over 1-, 3- and 5-year performance periods and a measure of operational efficiency. If a portfolio managers tenure is less than 5 years, performance periods will reflect time in position. Portfolio managers are compensated based on products they manage. For these purposes, the performance of the Fund is compared to

the Lipper Closed-end High Current Yield Funds classification. A smaller discretionary element of portfolio manager compensation may include consideration of: financial results, expense control, profit margins, strategic planning and implementation, quality of client service, market share, corporate reputation, capital allocation, compliance and risk control, leadership, workforce diversity, supervision, technology and innovation. All factors are considered collectively by BlackRock management.

Cash Bonus

Performance-based compensation is distributed to portfolio managers in a combination of cash and stock. Typically, the cash bonus, when combined with base salary, represents more than 60% of total compensation for the portfolio managers.

Stock Bonus

A portion of the dollar value of the total annual performance-based bonus is paid in restricted shares of stock of BlackRock, Inc. (the Company). Paying a portion of annual bonuses in stock puts compensation earned by a portfolio manager for a given year at risk based on the Companys ability to sustain and improve its performance over future periods. The ultimate value of stock bonuses is dependent on future Company stock price performance. As such, the stock bonus aligns each portfolio managers financial interests with those of the Companys shareholders and encourages a balance between short-term goals and long-term strategic objectives. Management strongly believes that providing a significant portion of competitive performance-based compensation in stock is in the best interests of investors and shareholders. This approach ensures that portfolio managers participate as shareholders in both the downside risk and upside opportunity of the Companys performance. Portfolio managers, therefore, have a direct incentive to protect the Companys reputation for integrity.

Other Benefits

Portfolio managers are also eligible to participate in broad-based plans offered generally to BlackRock employees, including broad-based retirement, 401(k), health, and other employee benefit plans. For example, 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. Company contributions follow the investment direction set by participants for their own contributions or absent, employee investment direction, are invested into a stable value fund. 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
October 31, 2007, none of Messrs. Williams, Gary, Keenan or Booth beneficially
owned any stock issued by the Fund. As of October 31, 2007, Mr. Amero
beneficially owned stock issued by the Fund in the range of $10,001
to $50,000. |
| --- | --- |
| 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 registrants Nominating and Governance Committee
will consider nominees to the Board recommended by shareholders when
a vacancy becomes available. Shareholders who wish to recommend a nominee
should send nominations which include biographical information and set
forth the qualifications of the proposed nominee to the registrants
Secretary. There have been no material changes to these procedures. |
| Item 11 | Controls and Procedures |
| 11(a) | The registrants principal executive and
principal financial officers or persons performing similar functions
have concluded that the registrants disclosure controls and procedures
(as defined in Rule 30a-3(c) under the Investment Company Act of 1940,
as amended (the 1940 Act)) are effective as of a date within
90 days of the filing of this report based on the evaluation of these
controls and procedures required by Rule 30a-3(b) under the 1940 Act
and Rule 13a-15(b) under the Securities and Exchange Act of 1934, as
amended. |
| 11(b) | There were no changes in the registrants
internal control over financial reporting (as defined in Rule 30a-3(d)
under the 1940 Act) that occurred during the second fiscal quarter of
the period covered by this report that have materially affected, or are
reasonably likely to materially affect, the registrants internal
control over financial reporting. |
| 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: December 19, 2007

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: December 19, 2007

By: /s/ Neal J. Andrews Neal J. Andrews, Chief Financial Officer (principal financial officer) of BlackRock Limited Duration Income Trust

Date: December 19, 2007

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