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D
isclosure
of Investment Advisory Agreements and Sub-Advisory Agreements
|
The Board of Directors (each,
a Board, collectively, the Boards, and the members of which are referred to
as Board Members) of BlackRock Corporate High Yield Fund, Inc. (COY),
BlackRock Corporate High Yield Fund III, Inc. (CYE), BlackRock Debt
Strategies Fund, Inc. (DSU), BlackRock Floating Rate Income Strategies Fund
II, Inc. (FRB) and BlackRock Senior High Income Fund, Inc. (ARK and
together with COY, CYE, DSU, and FRB, each a Fund, and, collectively, the
Funds) met on April 14, 2011 and May 1213, 2011 to consider the approval of
each Funds investment advisory agreement (each, an Advisory Agreement) with
BlackRock Advisors, LLC (the Manager), each Funds investment advisor. The
Board of each Fund also considered the approval of the sub-advisory agreement
(each, a Sub-Advisory Agreement) between the Manager and BlackRock Financial
Management, Inc. (the Sub-Advisor), with respect to each Fund. The Manager
and the Sub-Advisor are referred to herein as BlackRock. The Advisory
Agreements and the Sub-Advisory Agreements are referred to herein as the
Agreements.
Activities and Composition of the Board
Each Board consists of eleven
individuals, nine of whom are not interested persons of such Fund as defined
in the Investment Company Act of 1940 (the 1940 Act) (the Independent Board
Members). The Board Members are responsible for the oversight of the
operations of the Funds and perform the various duties imposed on the directors
of investment companies by the 1940 Act. The Independent Board Members have
retained independent legal counsel to assist them in connection with their
duties. The Chairman of the Board is an Independent Board Member. Each Board
has established five standing committees: an Audit Committee, a Governance and
Nominating Committee, a Compliance Committee, a Performance Oversight Committee
and an Executive Committee, each of which is composed of Independent Board
Members (except for the Executive Committee, which also has one interested
Board Member) and is chaired by an Independent Board Member. Each Board also
established an
ad hoc
committee,
the Joint Product Pricing Committee, which consisted of Independent Board
Members and the directors/trustees of the boards of certain other
BlackRock-managed funds, who were not interested persons of their respective
funds.
The Agreements
Pursuant to the 1940 Act, the
Boards are required to consider the continuation of the Agreements on an annual
basis. In connection with this process, the Boards assessed, among other
things, the nature, scope and quality of the services provided to the Funds by
BlackRock, its personnel and its affiliates, including investment management,
administrative and shareholder services, oversight of fund accounting and
custody, marketing services, risk oversight, compliance program and assistance
in meeting applicable legal and regulatory requirements.
The Boards, acting directly
and through their respective committees, considered at each of their meetings,
and from time to time as appropriate, factors that are relevant to its annual
consideration of the renewal of the Agreements, including the services and
support provided by BlackRock to the Funds and their shareholders. Among the
matters the Boards considered were: (a) investment performance for one-, three-
and five-year periods, as applicable, against peer funds, and applicable
benchmarks, if any, as well as senior managements and portfolio managers
analysis of the reasons for any over performance or underperformance against
their peers and/or benchmark, as applicable; (b) fees, including advisory and
other amounts paid to BlackRock and its affiliates by the Funds for services
such as call center and fund accounting; (c) Fund operating expenses and how
BlackRock allocates expenses to the Funds; (d) the resources devoted to, risk
oversight of, and compliance reports relating to, implementation of the Funds
investment objectives, policies and restrictions; (e) the Funds compliance
with its Code of Ethics and other compliance policies and procedures; (f) the
nature, cost and character of non-investment management services provided by
BlackRock and its affiliates; (g) BlackRocks and other service providers
internal controls and risk and compliance oversight mechanisms; (h) BlackRocks
implementation of the proxy voting policies approved by the Boards; (i)
execution quality of portfolio transactions; (j) BlackRocks implementation of
the Funds valuation and liquidity procedures; (k) an analysis of contractual
and actual management fee ratios for products with similar investment
objectives across the open-end fund, closed-end fund and institutional account
product channels, as applicable; (l) BlackRocks compensation methodology for
its investment professionals and the incentives it creates; and (m) periodic
updates on BlackRocks business.
Board Considerations in Approving the Agreements
The Approval Process:
Prior to the April 14, 2011 meeting, the
Boards requested and received materials specifically relating to the
Agreements. The Boards are engaged in a process with BlackRock to review
periodically the nature and scope of the information provided to better assist
their deliberations. The materials provided in connection with the April meeting
included (a) information independently compiled and prepared by Lipper, Inc.
(Lipper) on Fund fees and expenses and the investment performance of the
Funds as compared with a peer group of funds as determined by Lipper and, with
respect to DSU, FRB and ARK, a customized peer group selected by BlackRock
(collectively, Peers); (b) information on the profitability of the Agreements
to BlackRock and a discussion of fall-out benefits to BlackRock and its
affiliates and significant shareholders; (c) a general analysis provided by
BlackRock concerning investment management fees (a combination of the advisory
fee and the administration fee, if any) charged to other clients, such as
institutional clients and open-end funds, under similar investment mandates, as
applicable; (d) the impact of economies of scale; (e) a summary of aggregate
amounts paid by each Fund to BlackRock and (f) if applicable, a comparison of
management fees to similar BlackRock closed-end funds, as classified by Lipper.
At an in-person meeting held
on April 14, 2011, the Boards reviewed materials relating to their
consideration of the Agreements. As a result of the discussions that occurred
during the April 14, 2011 meeting, and as a culmination of the Boards
year-long deliberative process, the Boards presented BlackRock with questions
and requests for additional information. BlackRock responded to these requests
with additional written information in advance of the May 1213, 2011 Board
meeting.
At an in-person meeting held
on May 1213, 2011, each Board, including the Independent Board Members,
unanimously approved the continuation of the Advisory Agreement between the
Manager and its Fund and the Sub-Advisory Agreement between the Manager and the
Sub-Advisor with respect to its Fund, each for a one-year term ending June 30,
2012. In approving the continuation of the Agreements, the Boards considered:
(a) the nature,
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SEMI-ANNUAL REPORT
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AUGUST 31, 2011
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79
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Disclosure of Investment
Advisory Agreements and Sub-Advisory Agreements (continued)
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extent and quality of the
services provided by BlackRock; (b) the investment performance of the Funds and
BlackRock; (c) the advisory fee and the cost of the services and profits to be
realized by BlackRock and its affiliates from their relationship with the
Funds; (d) economies of scale; (e) fall-out benefits to BlackRock as a result
of its relationship with the Funds; and (f) other factors deemed relevant by
the Board Members.
The Boards also considered
other matters they deemed important to the approval process, such as services
related to the valuation and pricing of Fund portfolio holdings, direct and
indirect benefits to BlackRock and its affiliates and significant shareholders
from their relationship with Funds and advice from independent legal counsel
with respect to the review process and materials submitted for the Boards
review. The Boards noted the willingness of BlackRock personnel to engage in
open, candid discussions with the Boards. The Boards did not identify any particular
information as controlling, and each Board Member may have attributed different
weights to the various items considered.
A. Nature, Extent and Quality of the Services Provided by
BlackRock:
The Boards,
including the Independent Board Members, reviewed the nature, extent and
quality of services provided by BlackRock, including the investment advisory
services and the resulting performance of the Funds. Throughout the year, the
Boards compared Fund performance to the performance of a comparable group of
closed-end funds and/or the performance of a relevant benchmark, if any. The
Boards met with BlackRocks senior management personnel responsible for
investment operations, including the senior investment officers. Each Board
also reviewed the materials provided by its Funds portfolio management team
discussing Fund performance and the Funds investment objective, strategies and
outlook.
The Boards considered, among
other factors, the number, education and experience of BlackRocks investment
personnel generally and their Funds portfolio management teams, investments by
portfolio managers in the funds they manage, BlackRocks portfolio trading
capabilities, BlackRocks use of technology, BlackRocks commitment to
compliance, BlackRocks credit analysis capabilities, BlackRocks risk analysis
capabilities and BlackRocks approach to training and retaining portfolio
managers and other research, advisory and management personnel. The Boards
engaged in a review of BlackRocks compensation structure with respect to their
Funds portfolio management teams and BlackRocks ability to attract and retain
high-quality talent and create performance incentives.
In addition to advisory
services, the Boards considered the quality of the administrative and
non-investment advisory services provided to the Funds. BlackRock and its
affiliates provide the Funds with certain services (in addition to any such
services provided to the Funds by third parties) and officers and other
personnel as are necessary for the operations of the Funds. In addition to
investment advisory services, BlackRock and its affiliates provide the Funds
with other services, including (i) preparing disclosure documents, such as the
prospectus and the statement of additional information in connection with the
initial public offering and periodic shareholder reports; (ii) preparing
communications with analysts to support secondary market trading of the Funds;
(iii) assisting with daily accounting and pricing; (iv) preparing periodic
filings with regulators and stock exchanges; (v) overseeing and coordinating
the activities of other service providers; (vi) organizing Board meetings and
preparing the materials for such Board meetings; (vii) providing legal and
compliance support; and (viii) performing other administrative functions
necessary for the operation of the Funds, such as tax reporting, fulfilling
regulatory filing requirements and call center services. The Boards reviewed
the structure and duties of BlackRocks fund administration, accounting, legal
and compliance departments and considered BlackRocks policies and procedures
for assuring compliance with applicable laws and regulations.
B. The Investment Performance of the Fund and BlackRock:
The Boards, including the Independent Board
Members, also reviewed and considered the performance history of their Funds.
In preparation for the April 14, 2011 meeting, the Boards worked with BlackRock
and Lipper to develop a template for, and was provided with reports
independently prepared by Lipper, which included a comprehensive analysis of
each Funds performance. The Boards also reviewed a narrative and statistical
analysis of the Lipper data that was prepared by BlackRock, which analyzed
various factors that affect Lippers rankings. In connection with its review,
each Board received and reviewed information regarding the investment
performance of its Fund as compared to funds in that Funds applicable Lipper
category and, with respect to DSU, FRB and ARK, a customized peer group
selected by BlackRock. The Boards were provided with a description of the
methodology used by Lipper to select peer funds. The Boards and each Boards
Performance Oversight Committee regularly review, and meet with Fund management
to discuss, the performance of the Funds throughout the year.
The Board of each of COY and
CYE noted that, in general, its respective Fund performed better than its Peers
in that the Funds performance was at or above the median of its Lipper
Performance Universe in each of the one-, three- and five-year periods reported.
The Board of DSU noted that
the Fund performed below the median of its Customized Lipper Peer Group in the
three- and five-year periods reported, but that the Fund performed at or above
the median of its Customized Lipper Peer Group in the one-year period reported.
The Board of DSU and BlackRock reviewed and discussed the reasons for the
Funds underperformance during the three- and five-year periods compared with
its Peers. The Board of DSU was informed that, among other things, the primary
factor impacting relative performance over the three- and five-year periods was
2008 performance. Performance in 2008 was impacted by the Funds credit
positioning, which was biased towards lower credit ratings, higher yield and
higher beta credits.
The Board of FRB noted that
the Fund performed below the median of its Customized Lipper Peer Group in each
of the one-, three- and five-year periods reported. The Board of FRB and
BlackRock reviewed and discussed the reasons for the Funds underperformance
during these periods compared with its Peers. The Board of FRB was informed
that, among other things, in general the Funds portfolio management team runs
a conservative investment style that is biased towards the higher credit tiers
and higher quality credits in terms of cash flow, asset quality, collateral,
and loan structure. The Funds portfolio management team believes this leads to
superior risk-adjusted performance over longer periods but can cause the Fund
to trail the average fund in up markets such as 2009 and 2010.
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80
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SEMI-ANNUAL REPORT
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AUGUST 31, 2011
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Disclosure of Investment
Advisory Agreements and Sub-Advisory Agreements (continued)
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The Board of ARK noted that
the Fund performed below the median of its Customized Lipper Peer Group in each
of the one-, three- and five-year periods reported. The Board of ARK and
BlackRock reviewed and discussed the reasons for the Funds underperformance
during these periods compared with its Peers. The Board of ARK was informed
that, among other things, a major factor impacting performance over the three-
and five-year periods was the Funds performance in 2008. Performance in 2008
was impacted by the Funds credit positioning, which was biased towards lower
credit ratings, higher yield and higher beta credits.
The Board of each of DSU, FRB
and ARK discussed with BlackRock its strategy for improving the respective
Funds performance and BlackRocks commitment to providing the resources
necessary to assist the Funds portfolio managers and to improve the Funds
performance.
The Boards noted that
BlackRock has made changes to the organization of the overall fixed income
group management structure designed to result in a strengthened leadership
team.
C. Consideration of the Advisory/Management Fees and the Cost
of the Services and Profits to be Realized by BlackRock and its Affiliates from
their Relationship with the Fund:
Each Board, including the Independent Board Members, reviewed its Funds
contractual management fee ratio compared with the other funds in its Lipper
category. It also compared the Funds total expense ratio, as well as actual
management fee ratio, to those of other funds in its Lipper category. The
Boards considered the services provided and the fees charged by BlackRock to
other types of clients with similar investment mandates, including separately
managed institutional accounts.
The Boards received and
reviewed statements relating to BlackRocks financial condition and
profitability with respect to the services it provided the Funds. The Boards
were also provided with a profitability analysis that detailed the revenues
earned and the expenses incurred by BlackRock for services provided to the
Funds. The Boards reviewed BlackRocks profitability with respect to the Funds
and other funds the Boards currently oversee for the year ended December 31,
2010 compared to available aggregate profitability data provided for the years
ended December 31, 2009, and December 31, 2008. The Boards reviewed
BlackRocks profitability with respect to other fund complexes managed by the
Manager and/or its affiliates. The Boards reviewed BlackRocks assumptions and
methodology of allocating expenses in the profitability analysis, noting the
inherent limitations in allocating costs among various advisory products. The
Boards recognized that profitability may be affected by numerous factors
including, among other things, fee waivers and expense reimbursements by the
Manager, the types of funds managed, expense allocations and business mix, and
the difficulty of comparing profitability as a result of those factors.
The Boards noted that, in
general, individual fund or product line profitability of other advisors is not
publicly available. The Boards considered BlackRocks overall operating margin,
in general, compared to the operating margin for leading investment management
firms whose operations include advising closed-end funds, among other product
types. That data indicates that operating margins for BlackRock, in general and
with respect to its registered funds, are generally consistent with margins
earned by similarly situated publicly traded competitors. In addition, the
Boards considered, among other things, certain third
party data comparing BlackRocks operating margin with that of other
publicly-traded asset management firms. That third party data indicates that
larger asset bases do not, in themselves, translate to higher profit margins.
In addition, the Boards
considered the cost of the services provided to the Funds by BlackRock, and
BlackRocks and its affiliates profits relating to the management of the Funds
and the other funds advised by BlackRock and its affiliates. As part of its
analysis, the Boards reviewed BlackRocks methodology in allocating its costs
to the management of the Funds. The Boards also considered whether BlackRock
has the financial resources necessary to attract and retain high-quality
investment management personnel to perform its obligations under the Agreements
and to continue to provide the high quality of services that is expected by the
Boards.
The Board of each Fund noted
that its respective Funds contractual management fee ratio (a combination of
the advisory fee and the administration fee, if any) was lower than or equal to
the median contractual management fee ratio paid by the Funds Peers, in each
case before taking into account any expense reimbursements or fee waivers.
D. Economies of Scale:
Each Board, including the Independent Board
Members, considered the extent to which economies of scale might be realized as
the assets of its Fund increase. Each Board also considered the extent to which
its Fund benefits from such economies and whether there should be changes in
the advisory fee rate or structure in order to enable the Fund to participate
in these economies of scale, for example through the use of breakpoints in the
advisory fee based upon the asset level of the Fund. Based on the
ad hoc
Joint Product Pricing Committees
and the Boards review and consideration of this issue, the Boards concluded
that closed-end funds are typically priced at scale at a funds inception;
therefore, the implementation of breakpoints was not necessary.
The Boards noted that most
closed-end funds do not have fund level breakpoints because closed-end funds
generally do not experience substantial growth after the initial public
offering. The Boards noted that only one closed-end fund in the Fund Complex
has breakpoints in its advisory fee structure.
E. Other Factors Deemed Relevant by the Board Members:
The Boards, including the Independent Board
Members, also took into account other ancillary or fall-out benefits that
BlackRock or its affiliates and significant shareholders may derive from their
respective relationships with the Funds, both tangible and intangible, such as
BlackRocks ability to leverage its investment professionals who manage other
portfolios and risk management personnel, an increase in BlackRocks profile in
the investment advisory community, and the engagement of BlackRocks affiliates
as service providers to the Funds, including securities lending services. The
Boards also considered BlackRocks overall operations and its efforts to expand
the scale of, and improve the quality of, its operations. The Boards also noted
that BlackRock may use and benefit from third party research obtained by soft
dollars generated by certain registered fund transactions to assist in managing
all or a number of its other client accounts. The Boards further noted that
BlackRocks funds may invest in affiliated ETFs without any offset against the
management fees payable by the funds to BlackRock.
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SEMI-ANNUAL REPORT
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AUGUST 31, 2011
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81
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Disclosure of Investment
Advisory Agreements and Sub-Advisory Agreements (concluded)
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In connection with its
consideration of the Agreements, the Boards also received information regarding
BlackRocks brokerage and soft dollar practices. The Boards received reports
from BlackRock which included information on brokerage commissions and trade
execution practices throughout the year.
The Boards noted the
competitive nature of the closed-end fund marketplace and that shareholders are
able to sell their Fund shares in the secondary market if they believe that the
Funds fees and expenses are too high or if they are dissatisfied with the performance
of the Fund.
Conclusion
Each Board, including the
Independent Board Members, unanimously approved the continuation of the
Advisory Agreement between the Manager and its Fund for a one-year term ending
June 30, 2012 and the Sub-Advisory Agreement between the Manager and the
Sub-Advisor, with respect to its Fund, for a one-year term ending June 30,
2012. As part of its approval, the Boards considered the detailed review of
BlackRocks fee structure, as it applies to the Funds, conducted by the
ad hoc
Joint Product Pricing Committee.
Based upon their evaluations of all of the aforementioned factors in their
totality, the Boards, including the Independent Board Members, were satisfied
that the terms of the Agreements were fair and reasonable and in the best
interest of the Funds and their shareholders. In arriving at their decision to
approve the Agreements, the Boards did not identify any single factor or group
of factors as all-important or controlling, but considered all factors
together, and different Board Members may have attributed different weights to
the various factors considered. The Independent Board Members were also
assisted by the advice of independent legal counsel in making these
determinations. The contractual fee arrangements for the Funds reflect the
results of several years of review by the Board Members and predecessor Board
Members, and discussions between such Board Members (and predecessor Board
Members) and BlackRock. As a result, the Board Members conclusions may be
based in part on their consideration of these arrangements in prior years.
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82
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SEMI-ANNUAL REPORT
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AUGUST 31, 2011
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Richard E. Cavanagh, Chairman
of the Board and Director
Karen P. Robards, Vice Chairperson of the Board,
Chairperson of the Audit Committee and Director
Paul L. Audet, Director
Michael J. Castellano, Director and Member of the Audit Committee
Frank J. Fabozzi, Director and Member of the Audit Committee
Kathleen F. Feldstein, Director
James T. Flynn, Director and Member of the Audit Committee
Henry Gabbay, Director
Jerrold B. Harris, Director
R. Glenn Hubbard, Director
W. Carl Kester, Director and Member of the Audit Committee
John M. Perlowski, President and Chief Executive Officer
Anne Ackerley, Vice President
Brendan Kyne, Vice President
Neal Andrews, Chief Financial Officer
Jay Fife, Treasurer
Brian Kindelan, Chief Compliance Officer and
Anti-Money Laundering Officer
Ira P. Shapiro, Secretary
Investment Advisor
BlackRock Advisors, LLC
Wilmington, DE 19809
Sub-Advisor
BlackRock Financial
Management, Inc.
New York, NY 10055
Custodians
JPMorgan Chase Bank, N.A.
1
New York, NY 10017
State Street Bank and Trust
Company
2
Boston, MA 02111
The Bank of New York Mellon
3
New York, NY 10286
Transfer Agents
BNY Mellon Shareowner
Services
3
Jersey City, NJ 07310
Computershare Trust Company,
N.A.
1,2
Providence, RI 02940
Accounting Agent
State Street Bank and Trust
Company
Boston, MA 02116
Legal Counsel
Skadden, Arps, Slate, Meagher
& Flom LLP
New York, NY 10036
Independent Registered Public Accounting Firm
Deloitte & Touche
LLP
Boston, MA 02116
Address of the Funds
100 Bellevue Parkway
Wilmington, DE 19809
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1
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For COY.
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2
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For CYE and FRB.
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3
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For DSU and ARK.
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Effective April 14, 2011,
Michael J. Castellano became Director of the Funds and Member of the Audit
Committee.
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Effective July 28, 2011,
Richard S. Davis resigned as Director of the Funds, and Paul L. Audet became
Director of the Funds.
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SEMI-ANNUAL
REPORT
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AUGUST 31, 2011
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83
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The Annual Meeting of
Shareholders was held on July 28, 2011 for shareholders of record on May 31,
2011, to elect director nominees for each Fund. There were no broker non-votes
with regard to any of the Funds.
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Paul L.
Audet
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Michael
J. Castellano
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Richard
E. Cavanagh
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Votes
For
|
|
Votes
Withheld
|
|
Abstain
|
|
Votes
For
|
|
Votes
Withheld
|
|
Abstain
|
|
Votes
For
|
|
Votes
Withheld
|
|
Abstain
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COY
|
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26,645,732
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760,801
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|
0
|
|
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26,682,412
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|
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724,121
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|
0
|
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26,628,673
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777,860
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|
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0
|
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CYE
|
|
|
28,435,992
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758,155
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0
|
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28,425,194
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|
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768,953
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0
|
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28,362,453
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831,694
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|
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0
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DSU
|
|
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85,341,623
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2,310,604
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0
|
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85,307,064
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|
2,345,163
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0
|
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85,349,415
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2,302,812
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0
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FRB
|
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6,911,699
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315,308
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0
|
|
|
6,899,160
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|
|
327,847
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|
0
|
|
|
6,911,699
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|
|
315,308
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|
|
0
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ARK
|
|
|
46,679,991
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|
|
1,032,281
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|
0
|
|
|
46,663,663
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|
|
1,048,609
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|
0
|
|
|
46,632,207
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|
|
1,080,065
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|
|
0
|
|
|
|
|
|
|
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|
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Frank
J. Fabozzi
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|
Kathleen
F. Feldstein
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James
T. Flynn
|
|
|
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Votes
For
|
|
Votes
Withheld
|
|
Abstain
|
|
Votes
For
|
|
Votes
Withheld
|
|
Abstain
|
|
Votes
For
|
|
Votes
Withheld
|
|
Abstain
|
|
COY
|
|
|
26,600,086
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|
|
806,447
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0
|
|
|
26,519,271
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887,262
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0
|
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26,562,238
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844,295
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|
|
0
|
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CYE
|
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|
28,407,163
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|
|
786,984
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|
0
|
|
|
28,299,553
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|
894,594
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0
|
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28,394,193
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|
799,954
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|
|
0
|
|
DSU
|
|
|
85,351,279
|
|
|
2,300,948
|
|
0
|
|
|
85,218,368
|
|
|
2,433,859
|
|
0
|
|
|
85,156,466
|
|
|
2,495,761
|
|
|
0
|
|
FRB
|
|
|
6,899,160
|
|
|
327,847
|
|
0
|
|
|
6,895,914
|
|
|
331,093
|
|
0
|
|
|
6,894,536
|
|
|
332,471
|
|
|
0
|
|
ARK
|
|
|
46,530,202
|
|
|
1,182,070
|
|
0
|
|
|
46,640,428
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|
|
1,071,844
|
|
0
|
|
|
46,531,898
|
|
|
1,180,374
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry
Gabbay
|
|
Jerrold
B. Harris
|
|
R.
Glenn Hubbard
|
|
|
|
Votes
For
|
|
Votes
Withheld
|
|
Abstain
|
|
Votes
For
|
|
Votes
Withheld
|
|
Abstain
|
|
Votes
For
|
|
Votes
Withheld
|
|
Abstain
|
|
COY
|
|
|
26,545,573
|
|
|
860,960
|
|
0
|
|
|
26,632,218
|
|
|
774,316
|
|
0
|
|
|
26,621,144
|
|
|
785,390
|
|
|
0
|
|
CYE
|
|
|
28,437,894
|
|
|
756,253
|
|
0
|
|
|
28,380,655
|
|
|
813,492
|
|
0
|
|
|
28,371,677
|
|
|
822,470
|
|
|
0
|
|
DSU
|
|
|
85,391,657
|
|
|
2,260,570
|
|
0
|
|
|
85,394,789
|
|
|
2,257,438
|
|
0
|
|
|
85,314,620
|
|
|
2,337,607
|
|
|
0
|
|
FRB
|
|
|
6,908,538
|
|
|
318,469
|
|
0
|
|
|
6,900,340
|
|
|
326,667
|
|
0
|
|
|
6,903,501
|
|
|
323,506
|
|
|
0
|
|
ARK
|
|
|
46,718,199
|
|
|
994,073
|
|
0
|
|
|
46,726,858
|
|
|
985,414
|
|
0
|
|
|
46,570,391
|
|
|
1,141,881
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. Carl
Kester
|
|
Karen
P. Robards
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes
For
|
|
Votes
Withheld
|
|
Abstain
|
|
Votes
For
|
|
Votes
Withheld
|
|
Abstain
|
|
|
|
|
|
|
|
|
|
|
COY
|
|
|
26,636,721
|
|
|
769,813
|
|
0
|
|
|
26,588,355
|
|
|
818,179
|
|
0
|
|
|
|
|
|
|
|
|
|
|
CYE
|
|
|
28,417,785
|
|
|
776,362
|
|
0
|
|
|
28,352,920
|
|
|
841,227
|
|
0
|
|
|
|
|
|
|
|
|
|
|
DSU
|
|
|
85,404,764
|
|
|
2,247,463
|
|
0
|
|
|
85,331,083
|
|
|
2,321,144
|
|
0
|
|
|
|
|
|
|
|
|
|
|
FRB
|
|
|
6,900,340
|
|
|
326,667
|
|
0
|
|
|
6,895,914
|
|
|
331,093
|
|
0
|
|
|
|
|
|
|
|
|
|
|
ARK
|
|
|
46,746,768
|
|
|
965,504
|
|
0
|
|
|
46,734,992
|
|
|
977,280
|
|
0
|
|
|
|
|
|
|
|
|
|
|
The Funds dividend policy is
to distribute all or a portion of their net investment income to their
shareholders on a monthly basis. In order to provide shareholders with a more
stable level of dividend distributions, the Funds may at times pay out less
than the entire amount of net investment income earned in any particular month
and may at times in any particular month pay out such accumulated but
undistributed income in addition to net investment income earned in that month.
As a result, the dividends paid by the Funds for any particular month may be
more or less than the amount of net investment income earned by the Funds
during such month. The Funds current accumulated but undistributed net
investment income, if any, is disclosed in the Statements of Assets and
Liabilities, which comprises part of the financial information included in this
report.
|
|
|
|
|
|
84
|
SEMI-ANNUAL REPORT
|
AUGUST 31, 2011
|
|
|
Additional Information
(continued)
|
|
General
Information
|
The Funds do not make
available copies of their Statements of Additional Information because the
Funds shares are not continuously offered, which means that the Statement of
Additional Information of each Fund has not been updated after completion of
the respective Funds offerings and the information contained in each Funds
Statement of Additional Information may have become outdated.
During the period, there were
no material changes in the Funds investment objectives or policies or to the
Funds charter or by-laws that would delay or prevent a change of control of
the Funds that were not approved by shareholders or in the principal risk
factors associated with investment in the Funds. There have been no changes in
the persons who are primarily responsible for the day-to-day management of the
Funds portfolios.
Quarterly performance,
semi-annual and annual reports and other information regarding the Funds may be
found on 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 Funds and does not,
and is not intended to, incorporate BlackRocks website into this report.
Electronic Delivery
Electronic copies of most
financial reports are available on the Funds website or shareholders can sign
up for e-mail notifications of quarterly statements, annual and semi-annual
reports by enrolling in the Funds electronic delivery program.
Shareholders Who Hold Accounts with Investment Advisors,
Banks or Brokerages:
Please contact your financial
advisor to enroll. Please note that not all investment advisors, banks or
brokerages may offer this service.
Householding
The Funds will mail only one
copy of shareholder documents, including annual and semi-annual reports and
proxy statements, to shareholders with multiple accounts at the same address.
This practice is commonly called householding and is intended to reduce
expenses and eliminate duplicate mailings of shareholder documents. Mailings of
your shareholder documents may be householded indefinitely unless you instruct
us otherwise. If you do not want the mailing of these documents to be combined
with those for other members of your household, please call (800) 441-7762.
Availability of Quarterly Schedule of Investments
Each Fund files its complete
schedule of portfolio holdings with the SEC for the first and third quarters of
each fiscal year on Form N-Q. The Funds Forms N-Q are available on the SECs
website at http://www.sec.gov and may also be reviewed and copied at the SECs
Public Reference Room in Washington, D.C. Information on how to access
documents on the SECs website without charge may be obtained by calling (800)
SEC-0330. Each Funds Forms N-Q may also be obtained upon request and without
charge by calling (800) 441-7762.
Availability of Proxy Voting Policies and Procedures
A description of the policies
and procedures that the Funds use to determine how to vote proxies relating to
portfolio securities is available (1) without charge, upon request, by calling
(800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SECs website
at http://www.sec.gov.
Availability of Proxy Voting Record
Information about how the
Funds voted proxies relating to securities held in the Funds portfolios during
the most recent 12-month period ended June 30 is available upon request and
without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and
(2) on the SECs website at http://www.sec.gov.
Availability of Fund Updates
BlackRock will update
performance and certain other data for the Funds on a monthly basis on its
website in the Closed-end Funds section of http://www.blackrock.com.
Investors and others are advised to periodically check the website for updated
performance information and the release of other material information about the
Funds.
|
|
|
|
|
|
|
|
|
|
|
|
|
SEMI-ANNUAL
REPORT
|
AUGUST 31, 2011
|
85
|
|
|
Additional Information
(concluded)
|
|
BlackRock
Privacy Principles
|
BlackRock is committed to
maintaining the privacy of its current and former fund investors and individual
clients (collectively, Clients) and to safeguarding their non-public personal
information. The following information is provided to help you understand what
personal information BlackRock collects, how we protect that information and
why in certain cases we share such information with select parties.
If you are located in a
jurisdiction where specific laws, rules or regulations require BlackRock to
provide you with additional or different privacy-related rights beyond what is
set forth below, then BlackRock will comply with those specific laws, rules or
regulations.
BlackRock obtains or verifies
personal non-public information from and about you from different sources,
including the following: (i) information we receive from you or, if applicable,
your financial intermediary, on applications, forms or other documents; (ii)
information about your transactions with us, our affiliates, or others; (iii)
information we receive from a consumer reporting agency; and (iv) from visits
to our websites.
BlackRock does not sell or
disclose to non-affiliated third parties any non-public personal information
about its Clients, except as permitted by law or as is necessary to respond to
regulatory requests or to service Client accounts. These non-affiliated third
parties are required to protect the confidentiality and security of this
information and to use it only for its intended purpose.
We may share information with
our affiliates to service your account or to provide you with information about
other BlackRock products or services that may be of interest to you. In
addition, BlackRock restricts access to non-public personal information about
its Clients to those BlackRock employees with a legitimate business need for
the information. BlackRock maintains physical, electronic and procedural
safeguards that are designed to protect the non-public personal information of
its Clients, including procedures relating to the proper storage and disposal
of such information.
|
|
|
|
|
|
86
|
SEMI-ANNUAL REPORT
|
AUGUST 31, 2011
|
This report is transmitted to
shareholders only. It is not a prospectus. Past performance results shown in
this report should not be considered a representation of future performance.
The Funds have leveraged their Common Shares, which creates risks for Common
Shareholders, including the likelihood of greater volatility of net asset value
and market price of the Common Shares, and the risk that fluctuations in
short-term interest rates may reduce the Common Shares yield. Statements and
other information herein are as dated and are subject to change.
|
|
#CEF1-5-8/11
|
|
Item 2 –
|
Code of Ethics – Not Applicable to this semi-annual report
|
|
|
Item 3 –
|
Audit Committee Financial Expert – Not Applicable to this semi-annual report
|
|
|
Item 4 –
|
Principal Accountant Fees and Services – Not Applicable to this semi-annual report
|
|
|
Item 5 –
|
Audit Committee of Listed Registrants – Not Applicable to this semi-annual report
|
|
|
Item 6 –
|
Investments
|
|
(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.
|
|
(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.
|
|
|
Item 7 –
|
Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable to this semi-annual report
|
|
|
Item 8 –
|
Portfolio Managers of Closed-End Management Investment Companies
|
|
(a) Not Applicable to this semi-annual report
|
|
(b) As of the date of this filing, there have been no changes in any of the portfolio managers identified in the most recent annual report on Form N-CSR.
|
|
|
Item 9 –
|
Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable
|
|
|
Item 10 –
|
Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.
|
|
|
Item 11 –
|
Controls and Procedures
|
|
|
|
(a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing
of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended.
|
|
|
|
(b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial
reporting.
|
|
|
Item 12 –
|
Exhibits attached hereto
|
|
|
|
(a)(1) – Code of Ethics – Not Applicable to this semi-annual report
|
|
|
|
(a)(2) – Certifications – Attached hereto
|
|
|
|
(a)(3) – Not Applicable
|
|
|
|
(b) – Certifications – Attached hereto
|
|
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 Debt Strategies Fund, Inc.
|
|
|
|
By:
|
/s/ John M. Perlowski
|
|
|
|
John M. Perlowski
|
|
|
Chief Executive Officer (principal executive officer) of
|
|
|
BlackRock Debt Strategies Fund, Inc.
|
|
|
|
Date: November 4, 2011
|
|
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
|
|
|
By:
|
/s/ John M. Perlowski
|
|
|
|
John M. Perlowski
|
|
|
Chief Executive Officer (principal executive officer) of
|
|
|
BlackRock Debt Strategies Fund, Inc.
|
|
|
|
Date: November 4, 2011
|
|
|
|
By:
|
/s/ Neal J. Andrews
|
|
|
|
Neal J. Andrews
|
|
|
Chief Financial Officer (principal financial officer) of
|
|
|
BlackRock Debt Strategies Fund, Inc.
|
|
|
|
|
Date: November 4, 2011
|
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