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 811-21286
Name of Fund: BlackRock Preferred Income Strategies Fund, Inc. (PSY)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Donald C. Burke, Chief Executive
Officer, BlackRock Preferred Income Strategies Fund, Inc., 800 Scudders
Mill Road, Plainsboro, NJ 08536. Mailing address: P.O. Box 9011,
Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (800) 882-0052, Option 4
Date of fiscal year end: 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
Annual Report BLACKROCK
OCTOBER 31, 2007
BlackRock Preferred and Corporate Income Strategies Fund, Inc. (PSW)
BlackRock Preferred Income Strategies Fund, Inc. (PSY)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents
================================================================================
Page
--------------------------------------------------------------------------------
A Letter to Shareholders .................................................. 3
Annual Report:
Fund Summary .............................................................. 4
Financial Statements:
Schedule of Investments ................................................. 6
Statements of Net Assets ................................................ 14
Statements of Operations ................................................ 16
Statements of Changes in Net Assets ..................................... 17
Financial Highlights ...................................................... 19
Notes to Financial Statements ............................................. 21
Report of Independent Registered Public Accounting Firm ................... 26
Important Tax Information ................................................. 27
Automatic Dividend Reinvestment Plan ...................................... 28
Officers and Directors .................................................... 29
The Benefits and Risks of Leveraging ...................................... 31
Additional Information .................................................... 31
2 ANNUAL REPORT OCTOBER 31, 2007
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 (the "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,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
Vice Chairman, BlackRock, Inc.
3
THIS PAGE NOT PART OF YOUR FUND REPORT
Fund Summary as of October 31, 2007
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
Investment Objective
BlackRock Preferred and Corporate Income Strategies Fund, Inc. (PSW) seeks to
provide shareholders with high current income. The secondary objective of the
Fund is to seek to provide shareholders with capital appreciation. The Fund
seeks to achieve its objectives by investing primarily in a portfolio of
preferred securities and debt securities, including convertible securities that
may be converted into common stock or other securities of the same or a
different issuer.
Fund Information
Symbol on New York Stock Exchange .............................. PSW
Initial Offering Date .......................................... August 1, 2003
Yield on Closing Market Price as of October 31, 2007 ($17.29)* . 9.25%
Current Monthly Distribution per share of Common Stock** ....... $.133333
Current Annualized Distribution per share of Common Stock** .... $ 1.60
Leverage as of October 31, 2007*** ............................. 40.43%
--------------------------------------------------------------------------------
* 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.
** The distribution is not constant and is subject to change. A portion of
the distribution may be deemed a tax return of capital or net realized
gain at fiscal year end.
*** As a percentage of managed assets, which is the total assets of the Fund
(including any assets attributable to any borrowing that may be
outstanding) minus the sum of accrued liabilities (other than total debt
representing financial leverage).
The table below summarizes the changes in the Fund's market price and net asset
value per share:
--------------------------------------------------------------------------------
10/31/07 10/31/06 Change High Low
--------------------------------------------------------------------------------
Market Price $17.29 $21.26 (18.67%) $22.47 $15.70
Net Asset Value $19.54 $22.25 (12.18%) $22.48 $19.20
--------------------------------------------------------------------------------
The following charts show the portfolio composition and credit quality
allocations of the Fund's long-term investments:
Portfolio Composition
Asset Mix 10/31/07 10/31/06
--------------------------------------------------------------------------------
Corporate Bonds .......................................... 42.7% 19.4%
Preferred Stocks ......................................... 21.8 22.9
Capital Trusts ........................................... 18.9 35.8
Trust Preferreds ......................................... 8.7 6.1
Real Estate Investment Trusts ............................ 6.8 12.8
Government & Agency Obligations .......................... 1.1 3.0
--------------------------------------------------------------------------------
Credit Quality Allocations*
Credit Rating 10/31/07 10/31/06
--------------------------------------------------------------------------------
AAA/Aaa .................................................. 2.7% 4.5%
AA/Aa .................................................... 11.5 0.9
A/A ...................................................... 20.8 12.5
BBB/Baa .................................................. 30.4 35.8
BB/Ba .................................................... 4.4 7.9
NR (Not Rated) ........................................... 2.0 2.7
Other* ................................................... 28.2 35.7
--------------------------------------------------------------------------------
* Includes portfolio holdings in Preferred Stocks and Real Estate Investment
Trusts.
4 ANNUAL REPORT OCTOBER 31, 2007
Fund Summary as of October 31, 2007
BlackRock Preferred Income Strategies Fund, Inc.
Investment Objective
BlackRock Preferred Income Strategies Fund, Inc. (PSY) seeks to provide
shareholders with high current income. The secondary objective of the Fund is to
seek to provide shareholders with capital appreciation. The Fund seeks to
achieve its objectives by investing primarily in a portfolio of preferred
securities, including convertible preferred securities that may be converted
into common stock or other securities of the same or a different issuer.
Fund Information
Symbol on New York Stock Exchange .............................. PSY
Initial Offering Date .......................................... March 28, 2003
Yield on Closing Market Price as of October 31, 2007 ($16.94)* . 8.12%
Current Monthly Distribution per share of Common Stock** ....... $ .114583
Current Annualized Distribution per share of Common Stock** .... $ 1.375
Leverage as of October 31, 2007*** ............................. 40.45%
--------------------------------------------------------------------------------
* 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.
** The distribution is not constant and is subject to change. A portion of
the distribution may be deemed a tax return of capital or net realized
gain at fiscal year end.
*** As a percentage of managed assets, which is the total assets of the Fund
(including any assets attributable to any borrowing that may be
outstanding) minus the sum of accrued liabilities (other than total debt
representing financial leverage).
The table below summarizes the changes in the Fund's market price and net asset
value per share:
--------------------------------------------------------------------------------
10/31/07 10/31/06 Change High Low
--------------------------------------------------------------------------------
Market Price $16.94 $20.12 (15.81%) $21.09 $15.66
Net Asset Value $19.93 $22.36 (10.87%) $22.74 $19.51
--------------------------------------------------------------------------------
The following charts show the portfolio composition and credit quality
allocations of the Fund's long-term investments:
Portfolio Composition
Asset Mix 10/31/07 10/31/06
--------------------------------------------------------------------------------
Corporate Bonds ......................................... 38.1% 20.0%
Preferred Stocks ........................................ 25.2 27.6
Capital Trusts .......................................... 24.6 30.7
Trust Preferreds ........................................ 7.9 5.9
Real Estate Investment Trusts ........................... 3.4 14.4
Government & Agency Obligations ......................... 0.8 1.4
--------------------------------------------------------------------------------
Credit Quality Allocations*
Credit Rating 10/31/07 10/31/06
--------------------------------------------------------------------------------
AAA/Aaa ................................................. 1.3% 2.5%
AA/Aa ................................................... 12.9 2.4
A/A ..................................................... 29.2 20.7
BBB/Baa ................................................. 23.2 25.4
BB/Ba ................................................... 2.0 2.9
NR (Not Rated) .......................................... 2.7 4.1
Other* .................................................. 28.7 42.0
--------------------------------------------------------------------------------
* Includes portfolio holdings in Preferred Stocks and Real Estate Investment
Trusts.
ANNUAL REPORT OCTOBER 31, 2007 5
Schedule of Investments As of October 31, 2007
BlackRock Preferred and Corporate Income Strategies Fund, Inc. (in U.S. dollars)
Preferred Securities
Face
Amount Capital Trusts Value
===============================================================================
Capital Markets -- 1.5%
$ 3,390,000 State Street Capital Trust IV, 6.694%
due 6/01/2067 (b) $ 3,061,153
===============================================================================
Commercial Banks -- 11.0%
725,000 Abbey National Capital Trust I,
8.963% (b)(g) 884,647
4,600,000 BB&T Capital Trust IV, 6.82% due
6/12/2077 (b) 4,481,035
1,585,000 Barclays Bank Plc, 5.926% (b)(f)(g) 1,500,247
2,000,000 Cullen/Frost Capital Trust I, 7.171%
due 3/01/2034 (b) 1,892,174
975,000 Dresdner Funding Trust I, 8.151%
due 6/30/2031 (f) 1,066,724
5,000,000 First Chicago NBD Institutional Capital I,
5.461% due 2/01/2027 (b) 4,580,670
910,000 First Empire Capital Trust II, 8.277%
due 6/01/2027 948,837
1,500,000 Hubco Capital Trust II Series B, 7.65%
due 6/15/2028 1,560,000
975,000 Huntington Capital III, 6.65%
due 5/15/2037 (b) 914,954
2,310,000 RBS Capital Trust B, 6.80% (g) 2,258,025
980,000 Royal Bank of Scotland Group Plc,
7.648% (b)(g) 1,046,179
1,050,000 SunTrust Preferred Capital I, 5.853% (b)(g) 1,030,856
--------------
22,164,348
===============================================================================
Consumer Finance -- 2.2%
3,470,000 Capital One Capital III, 7.686% due 8/15/2036 3,363,322
910,000 MBNA Capital A, 8.278% due 12/01/2026 945,393
--------------
4,308,715
===============================================================================
Diversified Financial Services -- 2.4%
3,000,000 Farm Credit Bank of Texas Series 1,
7.561% (b)(g) 3,242,730
1,830,000 JPMorgan Chase Capital XXIII, 6.558%
due 5/15/2047 (b)(h) 1,612,722
--------------
4,855,452
===============================================================================
Insurance -- 10.4%
3,990,000 AON Corp., 8.205% due 1/01/2027 4,333,595
1,510,000 Ace Capital Trust II, 9.70% due 4/01/2030 1,929,055
9,110,000 Farmers Exchange Capital, 7.05%
due 7/15/2028 (f) 9,262,547
750,000 Genworth Financial, Inc., 6.15%
due 11/15/2066 (b) 699,818
3,000,000 Mangrove Bay Pass-Through Trust, 6.102%
due 7/15/2033 (b)(f) 2,800,200
915,000 Oil Casualty Insurance Ltd., 8%
due 9/15/2034 (f) 910,053
1,000,000 Zenith National Insurance Capital Trust I,
8.55% due 8/01/2028 (f) 985,000
--------------
20,920,268
===============================================================================
Multi-Utilities -- 0.6%
1,200,000 Dominion Resources Capital Trust I, 7.83%
due 12/01/2027 1,252,379
===============================================================================
Thrifts & Mortgage Finance -- 0.5%
975,000 Webster Capital Trust IV, 7.65%
due 6/15/2037 (b) 967,122
===============================================================================
Total Capital Trusts
(Cost -- $57,286,276) -- 28.6% 57,529,437
===============================================================================
===============================================================================
Shares
Held Preferred Stocks Value
===============================================================================
Capital Markets -- 1.2%
1,900,000 Ameriprise Financial, Inc., 7.518%
due 6/01/2066 (b) 1,941,768
15,000 Deutsche Bank Contingent Capital
Trust II, 6.55% 360,000
--------------
2,301,768
===============================================================================
Commercial Banks -- 8.3%
1,000,000 Barclays Bank Plc, 6.278% (b) 882,236
1,176 First Tennessee Bank NA, 6.10% (b)(f) 1,128,593
1,900,000 ICICI Bank Ltd., 7.25% (b)(f) 1,764,207
42,000 Provident Financial Group, Inc., 7.75% 1,090,690
4,425,000 Resona Preferred Global Securities Ltd.,
7.191% (b)(f) 4,443,620
1,200,000 Royal Bank of Scotland Group Plc, 9.118% 1,283,501
Santander Finance Preferred SA
Unipersonal (f):
149,000 6.50% 3,501,500
100,000 6.80% 2,343,750
12,000 Sovereign Bancorp, Inc. Series C, 7.30% (a) 312,000
--------------
16,750,097
===============================================================================
Diversified Financial Services -- 3.9%
98,000 Bank of America Corp., 6.625% 2,523,500
38,000 Cobank ACB, 7% (f) 1,894,604
3,870,000 JPMorgan Chase Capital XXI Series U, 5.844%
due 2/02/2037 (b) 3,433,383
--------------
7,851,487
===============================================================================
Electric Utilities -- 1.9%
25,000 Alabama Power Co., 6.50% 631,250
28,800 Entergy Arkansas, Inc., 6.45% 741,600
22,650 Entergy Louisiana LLC, 6.95% 2,353,607
--------------
3,726,457
===============================================================================
Insurance -- 11.7%
4,975,000 AXA SA, 6.379% (b)(f) 4,531,011
55,000 Aspen Insurance Holdings Ltd., 7.401% (b) 1,289,063
Axis Capital Holdings Ltd:
35,000 Series A, 7.25% 841,750
9,000 Series B, 7.50% (b) 916,594
35,200 Endurance Specialty Holdings Ltd.
Series A, 7.75% 893,024
1,740,000 Financial Security Assurance Holdings Ltd.,
6.40% due 12/15/2066 (b)(f) 1,569,603
2,000,000 Great West Life & Annuity Insurance Co.,
7.153% due 5/16/2046 (b)(f) 2,043,250
MetLife, Inc.:
4,000,000 6.40% due 12/15/2036 3,789,224
70,000 Series B, 6.50% 1,740,200
1,000,000 Oil Insurance Ltd., 7.558% (b)(f) 1,027,920
1,450,000 PartnerRe Finance II, 6.44%
due 12/01/2066 (b) 1,348,329
165,000 RenaissanceRe Holding Ltd. Series D, 6.60% 3,547,500
--------------
23,537,468
===============================================================================
Multi-Utilities -- 1.1%
2,100,000 Dominion Resources, Inc., 7.50%
due 6/30/2066 (b) 2,158,922
===============================================================================
Oil, Gas & Consumable Fuels -- 0.4%
825,000 Enterprise Products Operating LP, 8.375% due
8/01/2066 (b) 858,779
===============================================================================
6 ANNUAL REPORT OCTOBER 31, 2007
Schedule of Investments (continued)
BlackRock Preferred and Corporate Income Strategies Fund, Inc. (in U.S. dollars)
Preferred Securities (continued)
Shares
Held Preferred Stocks Value
===============================================================================
Thrifts & Mortgage Finance -- 3.1%
6,000 Fannie Mae Series L, 5.125% $ 248,100
100,000 Freddie Mac Series Y, 6.55% 2,570,000
160,000 Washington Mutual Capital Trust 2001
Series K, 6.394% (b) 3,462,400
--------------
6,280,500
===============================================================================
Wireless Telecommunication Services -- 1.5%
2,720 Centaur Funding Corp., 9.08% (f) 3,077,000
-------------------------------------------------------------------------------
Total Preferred Stocks
(Cost -- $69,448,019) -- 33.1% 66,542,478
===============================================================================
===============================================================================
Real Estate Investment Trusts
===============================================================================
Real Estate -- 10.4%
63,800 Alexandria Real Estate Equities, Inc.
Series C, 8.375% 1,620,520
21,000 CBL & Associates Properties, Inc.
Series C, 7.75% 504,420
610 First Industrial Realty Trust, Inc.,
6.236% (b) 618,578
17,000 HCP, Inc. Series F, 7.10% 379,950
HRPT Properties Trust:
425,000 Series B, 8.75% 10,625,000
125,000 Series C, 7.125% 2,951,250
44,000 Health Care REIT, Inc. Series F, 7.625% 1,078,000
59,500 iStar Financial, Inc. Series I, 7.50% 1,297,100
15,000 Kimco Realty Corp. Series G, 7.75% (i) 380,250
18,400 PS Business Parks, Inc. Series K, 7.95% 462,760
40,000 Public Storage, Inc. Series I, 7.25% 982,500
-------------------------------------------------------------------------------
Total Real Estate Investment Trusts
(Cost -- $22,087,250) -- 10.4% 20,900,328
===============================================================================
===============================================================================
Face
Amount Trust Preferreds
===============================================================================
Commercial Banks -- 1.1%
$ 250,000 KeyCorp Capital IX, 6.75% 232,555
700,000 National City Capital Trust II, 6.625%
due 11/15/2066 594,131
1,500,000 Wachovia Capital Trust IX, 6.375%
due 6/01/2067 1,357,285
--------------
2,183,971
===============================================================================
Consumer Finance -- 1.1%
2,325,500 Capital One Capital II, 7.50% due 6/15/2066 2,199,710
===============================================================================
Diversified Financial Services -- 0.9%
1,980,000 Citigroup Capital XVII, 6.35% due 3/15/2067 1,796,762
===============================================================================
Electric Utilities -- 0.6%
1,235,000 PPL Energy Supply LLC, 7% due 7/15/2046 1,234,188
===============================================================================
Gas Utilities -- 4.9%
10,000,000 Southwest Gas Capital II, 7.70% due 9/15/2043 9,970,031
===============================================================================
Insurance -- 1.9%
2,000,000 ABN AMRO North America Capital Funding
Trust II, 5.749% (b)(f)(g) 1,677,979
2,250,000 Lincoln National Capital VI Series F, 6.75%
due 9/11/2052 2,168,955
--------------
3,846,934
===============================================================================
Media -- 2.7%
5,875,000 Comcast Corp., 6.625% due 5/15/2056 5,457,992
-------------------------------------------------------------------------------
Total Trust Preferreds
(Cost -- $28,010,801) -- 13.2% 26,689,588
-------------------------------------------------------------------------------
Total Preferred Securities
(Cost -- $176,832,346) -- 85.3% 171,661,831
===============================================================================
===============================================================================
Corporate Bonds
===============================================================================
Building Products -- 0.5%
980,000 C8 Capital SPV Ltd., 6.64% (b)(f)(g) 955,471
===============================================================================
Capital Markets -- 4.0%
The Bear Stearns Cos., Inc.:
1,000,000 6.95% due 8/10/2012 1,040,692
950,000 6.40% due 10/02/2017 946,918
1,970,000 Credit Suisse Guernsey Ltd., 5.86% (b)(g) 1,835,175
610,000 Goldman Sachs Capital II, 5.793% (b)(g) 568,893
1,600,000 Lehman Brothers Holdings Capital Trust V,
6.371% (b)(g) 1,468,770
Lehman Brothers Holdings, Inc.:
330,000 7.394% due 9/15/2022 (b) 330,280
1,950,000 6.875% due 7/17/2037 1,932,158
--------------
8,122,886
===============================================================================
Commercial Banks -- 16.8%
7,000,000 BNP Paribas, 7.195% (b)(f)(g) 6,962,536
2,015,000 Bank of Ireland Capital Funding II, LP,
5.571% (b)(f)(g) 1,852,390
2,150,000 Bank of Ireland Capital Funding III, LP,
6.107% (b)(f)(g) 1,978,140
1,325,000 Barclays Bank Plc, 7.434% (b)(f)(g) 1,404,554
8,095,000 Credit Agricole SA, 6.637% (b)(f)(g) 7,693,261
1,400,000 Royal Bank of Scotland Group Plc,
6.99% (b)(f)(g) 1,424,500
1,900,000 Royal Bank of Scotland Plc Series MTN,
7.64% (b)(g) 1,969,373
5,325,000 Societe Generale, 5.922% (b)(f)(g) 5,067,749
3,350,000 Standard Chartered Bank, 7.014% (b)(f)(g) 3,352,110
2,125,000 Woori Bank, 6.208% due 5/02/2067 (b)(f) 1,980,882
--------------
33,685,495
===============================================================================
Containers & Packaging -- 2.3%
5,000,000 Sealed Air Corp., 6.875% due 7/15/2033 (f) 4,726,705
===============================================================================
Diversified Financial Services -- 3.9%
935,000 CIT Group, Inc., 5.734% due 11/23/2007 (b) 933,459
1,100,000 HVB Funding Trust I, 8.741% due 6/30/2031 (f) 1,276,018
5,625,000 JPMorgan Chase Capital XXV, 6.80%
due 10/01/2037 5,618,796
--------------
7,828,273
===============================================================================
Diversified Telecommunication Services -- 2.6%
4,000,000 France Telecom SA, 8.50% due 3/01/2031 5,241,380
===============================================================================
Electric Utilities -- 6.3%
5,000,000 Energy East Corp., 6.75% due 9/15/2033 5,149,900
1,500,000 PPL Capital Funding, 6.70% due 3/30/2067 (b) 1,447,378
6,175,000 Virginia Electric and Power Co. Series A, 6%
due 5/15/2037 6,067,574
--------------
12,664,852
ANNUAL REPORT OCTOBER 31, 2007 7
Schedule of Investments (continued)
BlackRock Preferred and Corporate Income Strategies Fund, Inc. (in U.S. dollars)
Face
Amount Corporate Bonds Value
===============================================================================
Gas Utilities -- 1.2%
$2,350,000 Southern Union Co., 7.20% due 11/01/2066 (b) $ 2,345,800
===============================================================================
Insurance -- 21.3%
The Allstate Corp. (b):
3,200,000 6.50% due 5/15/2057 3,102,851
2,625,000 Series B, 6.125% due 5/15/2037 2,566,909
3,100,000 American International Group, Inc., 6.25%
due 3/15/2037 2,884,882
4,475,000 Chubb Corp., 6.375% due 3/29/2037 (b) 4,405,105
3,560,000 Everest Reinsurance Holdings, Inc., 6.60%
due 5/01/2067 (b) 3,328,824
2,550,000 Liberty Mutual Group, Inc., 7%
due 3/15/2037 (b)(f) 2,396,980
1,250,000 Lincoln National Corp., 6.05%
due 4/20/2067 (b) 1,198,001
2,450,000 Nationwide Life Global Funding I, 6.75%
due 5/15/2037 2,356,799
2,900,000 Progressive Corp., 6.70% due 6/15/2037 (b) 2,845,721
2,120,000 QBE Capital Funding II LP, 6.797% (b)(f)(g) 2,073,356
700,000 Reinsurance Group of America, 6.75%
due 12/15/2065 (b) 665,642
2,225,000 Swiss Re Capital I LP, 6.854% (b)(f)(g) 2,244,151
5,750,000 The Travelers Cos., Inc., 6.25%
due 3/15/2067 (b) 5,583,635
1,425,000 XL Capital Ltd. Series E, 6.50% (b)(g) 1,323,440
ZFS Finance (USA) (b)(f):
1,800,000 Trust II, 6.45% due 12/15/2065 1,731,103
4,355,000 Trust V, 6.50% due 5/09/2037 4,191,265
--------------
42,898,664
===============================================================================
Media -- 3.4%
2,000,000 TCI Communications, Inc., 8.75%
due 8/01/2015 2,345,668
4,000,000 Time Warner, Inc., 7.625% due 4/15/2031 (d) 4,450,492
--------------
6,796,160
===============================================================================
Multi-Utilities -- 0.2%
475,000 Puget Sound Energy, Inc. Series A, 6.974% due
6/01/2067 (b) 446,746
===============================================================================
Oil, Gas & Consumable Fuels -- 1.0%
2,150,000 TransCanada PipeLines Ltd., 6.35%
due 5/15/2067 (b) 2,080,127
===============================================================================
Wireless Telecommunication Services -- 1.3%
2,205,000 Sprint Capital Corp., 8.75% due 3/15/2032 2,514,273
-------------------------------------------------------------------------------
Total Corporate Bonds
(Cost -- $132,612,099) -- 64.8% 130,306,832
===============================================================================
===============================================================================
Government & Agency Obligations
===============================================================================
1,740,000 U.S. Treasury Bond, 4.75% due 2/15/2037 1,739,048
1,630,000 U.S. Treasury Note, 4.75% due 8/15/2017 1,665,911
-------------------------------------------------------------------------------
Total Government & Agency Obligations
(Cost -- $3,411,864) -- 1.7% 3,404,959
===============================================================================
===============================================================================
Beneficial
Interest Short-Term Securities
===============================================================================
22,956,095 BlackRock Liquidity Series, LLC
Cash Sweep Series, 4.96% (c)(e) 22,956,095
-------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $22,956,095) -- 11.4% 22,956,095
===============================================================================
Total Investments Before Borrowed
Bond Agreements and Borrowed Bonds
(Cost -- $335,812,404) -- 163.2% 328,329,717
===============================================================================
===============================================================================
Face
Amount Borrowed Bond Agreements
===============================================================================
Lehman Brothers, Inc. (j):
2,560,950 4.20% due 11/02/2007, T/D 10/09/2007,
closing amount $2,567,822 2,560,950
1,356,469 4.20% due 11/09/2007, T/D 10/18/2007,
closing amount $1,359,792 1,356,469
-------------------------------------------------------------------------------
Total Borrowed Bond Agreements
(Cost -- $3,917,419) -- 2.0% 3,917,419
===============================================================================
===============================================================================
Borrowed Bonds
===============================================================================
(3,845,000) U.S. Treasury Notes, 4.75% due 8/15/2017 (j) (3,929,709)
-------------------------------------------------------------------------------
Total Borrowed Bonds
(Proceeds -- $3,913,699) -- (2.0%) (3,929,709)
===============================================================================
Total Investments, Net of Borrowed Bond Agreements and
Borrowed Bonds (Cost -- $335,816,124*) -- 163.2% 328,317,427
Other Assets Less Liabilities --4.7% 9,364,017
Preferred Stock, at Redemption Value -- (67.9%) (136,526,775)
--------------
Net Assets Applicable to Common Stock -- 100.0% $ 201,154,669
==============
8 ANNUAL REPORT OCTOBER 31, 2007
Schedule of Investments (concluded)
BlackRock Preferred and Corporate Income Strategies Fund, Inc. (in U.S. dollars)
* The cost and unrealized appreciation (depreciation) of investments,
excluding borrowed bond agreements and borrowed bonds, as of October 31,
2007, as computed for federal income tax purposes, were as follows:
Aggregate cost .......................................... $ 335,806,445
=============
Gross unrealized appreciation ........................... $ 3,121,521
Gross unrealized depreciation ........................... (10,598,249)
-------------
Net unrealized depreciation ............................. $ (7,476,728)
=============
(a) Depositary receipts.
(b) Floating rate security.
(c) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series $1,769,636 $1,415,121
--------------------------------------------------------------------------
(d) All or a portion of security held as collateral in connection with open
financial futures contracts.
(e) Represents the current yield as of October 31, 2007.
(f) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(g) The security is a perpetual bond and has no stated maturity date.
(h) All or a portion of security held as collateral in connection with open
reverse repurchase agreement.
Reverse repurchase agreement outstanding as of October 31, 2007 was as
follows:
--------------------------------------------------------------------------
Net
Interest Trade Maturity Closing Face
Counterparty Rate Date Date Amount Amount
--------------------------------------------------------------------------
Credit Suisse 5.25% 9/26/07 To be $593,097 $590,000
First Boston LLC determined
--------------------------------------------------------------------------
(i) Non-income producing security.
(j) See Note 1(h) and 1(i) of Notes to Financial Statements.
o For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease. Industries are shown as a percent of net assets. These industry
classifications are unaudited.
o Financial futures contracts sold as of October 31, 2007 were as follows:
--------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Depreciation
--------------------------------------------------------------------------
10-Year December
862 U.S. Treasury Notes 2007 $94,328,736 $(504,733)
30-Year December
322 U.S. Treasury Notes 2007 $36,121,676 (133,512)
--------------------------------------------------------------------------
Total Unrealized Depreciation $(638,245)
=========
See Notes to Financial Statements.
ANNUAL REPORT OCTOBER 31, 2007 9
Schedule of Investments As of October 31, 2007
BlackRock Preferred Income Strategies Fund, Inc. (in U.S. dollars)
Preferred Securities
Face
Amount Capital Trusts Value
===============================================================================
Capital Markets -- 1.5%
$13,535,000 State Street Capital Trust IV, 6.694%
due 6/01/2067 (b) $ 12,222,037
===============================================================================
Commercial Banks -- 18.3%
12,035,000 ABN AMRO North America Holding Preferred
Capital Repackaging Trust I,
6.523% (b)(f)(g) 12,375,651
2,811,000 Abbey National Capital Trust I, 8.963% (b)(g) 3,429,991
18,350,000 BB&T Capital Trust IV, 6.82%
due 6/12/2077 (b) 17,875,432
2,000,000 Bank One Capital III, 8.75% due 9/01/2030 2,433,010
6,115,000 Barclays Bank Plc, 5.926% (b)(f)(g) 5,788,019
16,455,000 Chase Capital II Series B, 5.411%
due 2/01/2027 (b) 14,983,002
3,875,000 Dresdner Funding Trust I, 8.151%
due 6/30/2031 (f) 4,239,545
3,630,000 First Empire Capital Trust II, 8.277%
due 6/01/2027 3,784,921
2,000,000 HSBC America Capital Trust I, 7.808%
due 12/15/2026 (f) 2,078,080
15,835,000 HSBC Capital Funding LP/Jersey Channel
Islands, 10.176% (b)(f)(g) 20,823,833
7,300,000 HSBC Finance Capital Trust IX, 5.911%
due 11/30/2035 (b) 6,980,428
12,275,000 Hubco Capital Trust II Series B, 7.65%
due 6/15/2028 12,766,000
3,850,000 Huntington Capital III, 6.65%
due 5/15/2037 (b) 3,612,894
2,000,000 Lloyds TSB Bank Plc, 6.90% (g) 1,955,000
18,470,000 Nationsbank Capital Trust III, 5.793%
due 1/15/2027 (b) 17,129,484
9,255,000 RBS Capital Trust B, 6.80% (g) 9,046,763
3,930,000 Royal Bank of Scotland Group PLC,
7.648% (b)(g) 4,195,393
4,175,000 SunTrust Preferred Capital I, 5.853% (b)(g) 4,098,881
--------------
147,596,327
===============================================================================
Consumer Finance -- 2.2%
13,670,000 Capital One Capital III, 7.686% due 8/15/2036 13,249,743
4,630,000 MBNA Capital A, 8.278% due 12/01/2026 4,810,079
--------------
18,059,822
===============================================================================
Diversified Financial Services -- 4.1%
15,000,000 AgFirst Farm Credit Bank, 8.393%
due 12/15/2016 (b) 16,221,795
9,000,000 Farm Credit Bank of Texas Series 1,
7.561% (b)(g) 9,728,190
8,375,000 JPMorgan Chase Capital XXIII, 6.558%
due 5/15/2077 (b) 7,380,628
--------------
33,330,613
===============================================================================
Electric Utilities -- 0.6%
5,000,000 SWEPCO Capital I, 5.25% due 10/01/2043 (b) 4,999,960
===============================================================================
Insurance -- 9.6%
12,175,000 AON Corp., 8.205% due 1/01/2027 13,223,438
11,300,000 Ace Capital Trust II, 9.70% due 4/01/2030 14,435,976
15,000,000 Farmers Exchange Capital, 7.05%
due 7/15/2028 (f) 15,251,175
10,000,000 GE Global Insurance Holding Corp.,
7.75% due 6/15/2030 11,510,180
3,000,000 Genworth Financial, Inc.,
6.15% due 11/15/2066 (b) 2,799,273
6,066,000 ING Capital Funding Trust III, 8.439% (b)(g) 6,555,071
3,605,000 Oil Casualty Insurance Ltd., 8%
due 9/15/2034 (f) 3,585,511
6,325,000 Principal Life Insurance Co., 8%
due 3/01/2044 (Surplus Notes) (f) 6,726,467
3,750,000 Zenith National Insurance Capital Trust I,
8.55% due 8/01/2028 (f) 3,693,750
--------------
77,780,841
===============================================================================
Multi-Utilities -- 1.3%
10,000,000 Dominion Resources Capital Trust I, 7.83%
due 12/01/2027 10,436,490
===============================================================================
Road & Rail -- 0.4%
3,750,000 BNSF Funding Trust I, 6.613%
due 12/15/2055 (b) 3,501,683
===============================================================================
Thrifts & Mortgage Finance -- 0.6%
1,000,000 Astoria Capital Trust I, 9.75%
due 11/01/2029 (f) 1,062,500
3,875,000 Webster Capital Trust IV, 7.65%
due 6/15/2037 (b) 3,843,690
--------------
4,906,190
-------------------------------------------------------------------------------
Total Capital Trusts
(Cost -- $321,011,283) -- 38.6% 312,833,963
===============================================================================
===============================================================================
Shares
Held Preferred Stocks
===============================================================================
Capital Markets -- 1.2%
7,600,000 Ameriprise Financial, Inc., 7.518%
due 6/01/2066 (b) 7,767,071
72,200 Deutsche Bank Contingent Capital Trust II,
6.55% 1,732,800
--------------
9,499,871
===============================================================================
Commercial Banks --10.7%
4,000,000 Barclays Bank Plc, 6.278% (b) 3,528,944
4,650 First Tennessee Bank NA, 6.10% (b)(f) 4,462,547
8,000,000 ICICI Bank Ltd., 7.25% (b)(f) 7,428,240
Provident Financial Group, Inc., 7.75% 4,331,596
16,075,000 Resona Preferred Global Securities Ltd.,
7.191% (b)(f) 16,142,644
4,800,000 Royal Bank of Scotland Group Plc, 9.118% 5,134,003
23,000 SG Preferred Capital II, 6.302% (b) 24,078,125
Santander Finance Preferred SA
Unipersonal (f):
599,000 6.50% 14,076,500
250,000 6.80% 5,859,375
48,000 Sovereign Bancorp, Inc. Series C, 7.30% (a) 1,248,000
--------------
86,289,974
===============================================================================
Diversified Financial Services -- 3.9%
390,000 Bank of America Corp., 6.625% 10,042,500
152,000 Cobank ACB, 7% (f) 7,578,416
15,525,000 JPMorgan Chase Capital XXI Series U, 5.844%
due 2/02/2037 (b) 13,773,454
--------------
31,394,370
===============================================================================
10 ANNUAL REPORT OCTOBER 31, 2007
Schedule of Investments (continued)
BlackRock Preferred Income Strategies Fund, Inc. (in U.S. dollars)
Preferred Securities (continued)
Shares
Held Preferred Stocks Value
===============================================================================
Electric Utilities -- 1.8%
Alabama Power Co.:
14,000 5.83% $ 318,500
145,000 6.50% 3,661,250
114,400 Entergy Arkansas, Inc., 6.45% 2,945,800
49,850 Entergy Louisiana LLC, 6.95% 5,180,013
80,000 Interstate Power & Light Co. Series B, 8.375% 2,408,000
--------------
14,513,563
===============================================================================
Insurance -- 15.8%
400,000 ACE Ltd. Series C, 7.80% 10,200,000
25,825,000 AXA SA, 6.379% (b)(f) 23,520,274
194,000 Aspen Insurance Holdings Ltd., 7.401% (b) 4,546,875
Axis Capital Holdings Ltd.:
140,000 Series A, 7.25% 3,367,000
36,000 Series B, 7.50% (b) 3,666,377
139,200 Endurance Specialty Holdings Ltd. Series A,
7.75% 3,531,504
6,930,000 Financial Security Assurance Holdings Ltd.,
6.40% due 12/15/2066 (b)(f) 6,251,352
7,500,000 Great West Life & Annuity Insurance Co.,
7.153% due 5/16/2046 (b)(f) 7,662,187
MetLife, Inc.:
15,875,000 6.40% due 12/15/2036 15,038,483
493,000 Series B, 6.50% 12,255,980
5,000,000 Oil Insurance Ltd., 7.558% (b)(f) 5,139,600
5,700,000 PartnerRe Finance II, 6.44% due 12/01/2066 (b) 5,300,327
140,000 Prudential Plc, 6.50% 3,290,000
660,000 RenaissanceRe Holding Ltd. Series D, 6.60% 14,190,000
9,800 Zurich RegCaPS Funding Trust, 6.58% (b)(f) 10,072,563
--------------
128,032,522
===============================================================================
Multi-Utilities -- 1.5%
8,400,000 Dominion Resources, Inc., 7.50%
due 6/30/2066 (b) 8,635,687
140,000 Pacific Gas & Electric Co. Series A, 6% 3,584,000
--------------
12,219,687
===============================================================================
Oil, Gas & Consumable Fuels -- 0.5%
4,225,000 Enterprise Products Operating LP, 8.375%
due 8/01/2066 (b) 4,397,988
===============================================================================
Thrifts & Mortgage Finance -- 3.8%
264,650 Fannie Mae Series L, 5.125% 10,943,278
Freddie Mac:
120,000 Series Q, 5.16% (b) 5,520,000
392,000 Series Y, 6.55% 10,074,400
40 Roslyn Real Estate Asset Corp. Series D,
8.88% (b) 4,021,250
--------------
30,558,928
===============================================================================
Wireless Telecommunication Services -- 0.3%
2,423 Centaur Funding Corp., 9.08% (f) 2,741,019
-------------------------------------------------------------------------------
Total Preferred Stocks
(Cost -- $329,991,491) -- 39.5% 319,647,922
===============================================================================
===============================================================================
Shares
Held Real Estate Investment Trusts Value
===============================================================================
Real Estate -- 5.4%
251,400 Alexandria Real Estate Equities, Inc.
Series C, 8.375% 6,385,560
100,000 CBL & Associates Properties, Inc. Series C,
7.75% 2,402,000
400,000 Developers Diversified Realty Corp., 8% 10,064,000
2,390 First Industrial Realty Trust, Inc.,
6.236% (b) 2,423,609
4,000 Firstar Realty LLC, 8.875% (f) 5,275,000
50,000 HCP, Inc. Series F, 7.10% 1,117,500
172,800 Health Care REIT, Inc. Series F, 7.625% 4,233,600
50,000 Kimco Realty Corp. Series F, 6.65% 1,140,500
40,000 PS Business Parks, Inc. Series K, 7.95% 1,006,000
160,000 Public Storage, Inc. Series I, 7.25% 3,930,000
3,857 Sovereign Real Estate Investment Corp.,
12% (f) 5,376,658
-------------------------------------------------------------------------------
Total Real Estate Investment Trusts
(Cost -- $43,495,510) -- 5.4% 43,354,427
===============================================================================
===============================================================================
Face
Amount Trust Preferreds
===============================================================================
Commercial Banks -- 1.4%
$ 3,725,000 KeyCorp Capital IX, 6.75% 3,447,114
2,790,000 National City Capital Trust II, 6.625%
due 11/15/2066 2,368,034
6,415,000 Wachovia Capital Trust IX, 6.375%
due 6/01/2067 5,820,034
--------------
11,635,182
===============================================================================
Communications Equipment -- 0.2%
2,000,000 Corporate-Backed Trust Certificates, 8.375%
due 11/15/2028 2,005,802
===============================================================================
Consumer Finance -- 2.0%
16,702,000 Capital One Capital II, 7.50% due 6/15/2066 15,798,561
===============================================================================
Diversified Financial Services -- 0.8%
7,547,500 Citigroup Capital XVII, 6.35% due 3/15/2067 6,848,705
===============================================================================
Electric Utilities -- 1.3%
1,250,000 Georgia Power Co. Series O, 1.475%
due 4/15/2033 1,166,093
1,250,000 HECO Capital Trust III, 6.50% due 3/18/2034 1,182,462
1,250,000 National Rural Utilities Cooperative Finance
Corp., 6.75% due 2/15/2043 1,200,616
5,835,000 PPL Energy Supply LLC, 7% due 7/15/2046 5,852,297
950,000 Virginia Power Capital Trust II, 1.844%
due 7/30/2042 949,998
--------------
10,351,466
===============================================================================
Gas Utilities -- 0.7%
5,750,000 Southwest Gas Capital II, 7.70%
due 9/15/2043 5,733,971
===============================================================================
Insurance -- 2.6%
11,000,000 ABN AMRO North America Capital Funding
Trust II, 5.749% (b)(f)(g) 9,228,382
7,375,000 Berkley W.R. Capital Trust II, 6.75%
due 7/26/2045 6,883,083
5,000,000 Lincoln National Capital VI Series F, 6.75%
due 9/11/2052 4,820,818
--------------
20,932,283
===============================================================================
ANNUAL REPORT OCTOBER 31, 2007 11
Schedule of Investments (continued)
BlackRock Preferred Income Strategies Fund, Inc. (in U.S. dollars)
Preferred Securities (concluded)
Face
Amount Trust Preferreds Value
===============================================================================
Media -- 2.7%
$23,375,000 Comcast Corp., 6.625% due 5/15/2056 $ 21,779,259
===============================================================================
Multi-Utilities -- 0.1%
397,425 PSEG Funding Trust II, 8.75% due 12/31/2032 397,414
===============================================================================
Thrifts & Mortgage Finance -- 0.7%
6,000,000 Dime Community Capital I, 7% due 4/14/2034 5,640,000
-------------------------------------------------------------------------------
Total Trust Preferreds
(Cost -- $108,131,669) -- 12.5% 101,122,643
-------------------------------------------------------------------------------
Total Preferred Securities
(Cost -- $802,629,953) -- 96.0% 776,958,955
===============================================================================
===============================================================================
Corporate Bonds
===============================================================================
Automobiles -- 1.7%
11,000,000 DaimlerChrysler NA Holding Corp., 8.50%
due 1/18/2031 13,976,611
===============================================================================
Building Products -- 0.5%
3,915,000 C8 Capital SPV Ltd., 6.64% (b)(f)(g) 3,817,008
===============================================================================
Capital Markets -- 4.1%
The Bear Stearns Cos., Inc.:
4,000,000 6.95% due 8/10/2012 4,162,768
3,750,000 6.40% due 10/02/2017 3,737,835
9,045,000 Credit Suisse Guernsey Ltd., 5.86% (b)(g) 8,425,969
2,445,000 Goldman Sachs Capital II, 5.793% (b)(g) 2,280,234
6,400,000 Lehman Brothers Holdings Capital Trust V,
6.371% (b)(g) 5,875,078
Lehman Brothers Holdings, Inc.:
1,310,000 7.394% due 9/15/2022 (b) 1,311,114
7,800,000 6.875% due 7/17/2037 7,728,630
--------------
33,521,628
===============================================================================
Commercial Banks -- 17.2%
28,025,000 BNP Paribas, 7.195% (b)(d)(f)(g) 27,875,010
8,065,000 Bank of Ireland Capital Funding II, LP,
5.571% (b)(f)(g) 7,414,154
8,575,000 Bank of Ireland Capital Funding III, LP,
6.107% (b)(f)(g) 7,889,557
5,250,000 Barclays Bank Plc, 7.434% (b)(f)(g) 5,565,215
32,375,000 Credit Agricole SA, 6.637% (b)(f)(g) 30,768,293
5,000,000 HBOS Plc, 6.657% (b)(f)(g) 4,443,250
5,575,000 Royal Bank of Scotland Group Plc,
6.99% (b)(f)(g) 5,672,563
7,500,000 Royal Bank of Scotland Plc Series MTN,
7.64% (b)(g) 7,773,840
21,250,000 Societe Generale, 5.922% (b)(f)(g) 20,223,413
13,550,000 Standard Chartered Bank, 7.014% (b)(f)(g) 13,558,537
8,500,000 Woori Bank, 6.208% due 5/02/2067 (b)(f) 7,923,530
--------------
139,107,362
===============================================================================
Diversified Financial Services -- 3.9%
3,725,000 CIT Group, Inc., 5.734% due 11/23/2007 (b) 3,718,861
4,405,000 HVB Funding Trust I, 8.741% due 6/30/2031 (f) 5,109,870
23,000,000 JPMorgan Chase Capital XXV, 6.80%
due 10/01/2037 22,974,631
--------------
31,803,362
===============================================================================
Diversified Telecommunication Services -- 4.1%
25,500,000 France Telecom SA, 8.50% due 3/01/2031 33,413,798
===============================================================================
Electric Utilities -- 4.1%
16,575,000 Duke Energy Field Services LLC, 8.125%
due 8/16/2030 19,402,960
5,925,000 PPL Capital Funding, 6.70% due 3/30/2067 (b) 5,717,145
7,825,000 Virginia Electric and Power Co. Series A, 6%
due 5/15/2037 7,688,868
--------------
32,808,973
===============================================================================
Gas Utilities -- 1.8%
14,400,000 Southern Union Co., 7.20% due 11/01/2066 14,374,267
===============================================================================
Insurance -- 20.4%
The Allstate Corp. (b):
12,775,000 6.50% due 5/15/2057 12,387,164
10,450,000 Series B, 6.125% due 5/15/2037 10,218,741
12,395,000 American International Group, Inc., 6.25%
due 3/15/2037 11,534,874
17,700,000 Chubb Corp., 6.375% due 3/29/2067 (b) 17,423,544
14,280,000 Everest Reinsurance Holdings, Inc., 6.60%
due 5/01/2067 (b) 13,352,700
10,150,000 Liberty Mutual Group, Inc., 7%
due 3/15/2037 (b)(f) 9,540,919
5,025,000 Lincoln National Corp., 6.05%
due 4/20/2067 (b) 4,815,965
9,675,000 Nationwide Life Global Funding I, 6.75%
due 5/15/2037 9,306,953
11,650,000 Progressive Corp., 6.70% due 6/15/2037 (b) 11,431,947
8,525,000 QBE Capital Funding II LP, 6.797% (b)(f)(g) 8,337,433
3,000,000 Reinsurance Group of America, 6.75%
due 12/15/2065 (b) 2,852,751
585,495 START 2004-1, 5.417% due 4/21/2011 584,031
8,875,000 Swiss Re Capital I LP, 6.854% (b)(f)(g) 8,951,387
22,850,000 The Travelers Cos., Inc., 6.25%
due 3/15/2067 (b) 22,188,881
5,725,000 XL Capital Ltd. Series E, 6.50% (b)(g) 5,316,979
17,110,000 ZFS Finance (USA) Trust V, 6.50%
due 5/09/2037 (b)(f) 16,466,715
--------------
164,710,984
===============================================================================
Media -- 0.8%
Time Warner, Inc.:
1,000,000 7.625% due 4/15/2031 1,112,623
5,000,000 7.70% due 5/01/2032 5,618,520
--------------
6,731,143
===============================================================================
Multi-Utilities -- 0.2%
1,825,000 Puget Sound Energy, Inc. Series A, 6.974%
due 6/01/2067 (b) 1,716,445
===============================================================================
Oil, Gas & Consumable Fuels -- 1.0%
8,300,000 TransCanada PipeLines Ltd., 6.35%
due 5/15/2067 (b) 8,030,258
-------------------------------------------------------------------------------
Total Corporate Bonds
(Cost -- $491,447,202) -- 59.8% 484,011,839
===============================================================================
12 ANNUAL REPORT OCTOBER 31, 2007
Schedule of Investments (concluded)
BlackRock Preferred Income Strategies Fund, Inc. (in U.S. dollars)
Face
Amount Government & Agency Obligations Value
===============================================================================
$ 2,965,000 U.S. Treasury Bond, 4.75% due 2/15/2037 $ 2,963,369
6,685,000 U.S. Treasury Note, 4.75% due 8/15/2017 6,832,243
-------------------------------------------------------------------------------
Total Government & Agency Obligations
(Cost -- $9,875,646) -- 1.2% 9,795,612
===============================================================================
===============================================================================
Short-Term Securities
===============================================================================
1,000,000 Fannie Mae, 4.90% due 11/05/2007 999,477
1,000,000 U.S. Treasury Bills, 3.90% due 11/23/2007 997,696
===============================================================================
===============================================================================
Beneficial
Interest
===============================================================================
$54,265,247 BlackRock Liquidity Series, LLC
Cash Sweep Series, 4.96% (c)(e) 54,265,247
-------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $56,262,420) -- 7.0% 56,262,420
===============================================================================
Total Investments Before Borrowed Bond
Agreements and Borrowed Bonds
(Cost -- $1,360,215,221) -- 164.0% 1,327,028,826
===============================================================================
===============================================================================
Face
Amount Borrowed Bond Agreements Value
===============================================================================
Lehman Brothers, Inc. (h):
10,545,500 4.20% due 11/02/2007, T/D 10/09/2007,
closing amount $10,574,119 10,545,500
5,451,469 4.20% due 11/08/2007, T/D 10/18/2007,
closing amount $5,463,921 5,451,469
14,616,387 4.49% due 11/08/2007, T/D 10/24/2007,
closing amount $14,643,387 14,616,387
-------------------------------------------------------------------------------
Total Borrowed Bond Agreements
(Cost -- $30,613,356) -- 3.8% 30,613,356
===============================================================================
===============================================================================
Borrowed Bonds
===============================================================================
(14,365,000) U.S. Treasury Bond, 4.75% due 2/15/2037 (h) (14,357,099)
(15,825,000) U.S. Treasury Note, 4.75% due 8/15/2017 (h) (16,173,641)
-------------------------------------------------------------------------------
Total Borrowed Bonds
(Proceeds -- $30,027,326) -- (3.8%) (30,530,740)
===============================================================================
Total Investments, Net of Borrowed Bond Agreements and
Borrowed Bonds (Cost -- $1,360,801,251*) -- 164.0% 1,327,111,442
Other Assets Less Liabilities --4.0% 32,871,770
Preferred Stock, at Redemption Value -- (68.0%) (550,571,848)
--------------
Net Assets Applicable to Common Stock -- 100.0% $ 809,411,364
==============
* The cost and unrealized appreciation (depreciation) of investments,
excluding borrowed bond agreements and borrowed bonds, as of October 31,
2007, as computed for federal income tax purposes, were as follows:
Aggregate cost ........................................ $ 1,358,026,204
===============
Gross unrealized appreciation ......................... $ 12,040,593
Gross unrealized depreciation ......................... (43,037,971)
---------------
Net unrealized depreciation ........................... $ (30,997,378)
===============
(a) Depositary receipts.
(b) Floating rate security.
(c) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series $33,723,746 $3,641,677
--------------------------------------------------------------------------
(d) All or a portion of security held as collateral in connection with open
financial futures contracts.
(e) Represents the current yield as of October 31, 2007.
(f) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(g) The security is a perpetual bond and has no stated maturity date.
(h) See Note 1(h) and 1(i) of Notes to Financial Statements.
o For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease. Industries are shown as a percent of net assets. These industry
classifications are unaudited.
o Financial futures contracts sold as of October 31, 2007 were as follows:
--------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Amount Depreciation
--------------------------------------------------------------------------
10-Year December
3,499 U.S. Treasury Notes 2007 $382,812,807 $(2,131,865)
30-Year December
1,392 U.S. Treasury Bonds 2007 $156,177,826 (552,674)
--------------------------------------------------------------------------
Total Unrealized Depreciation $(2,684,539)
===========
o Swaps outstanding as of October 31, 2007 were as follows:
--------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
--------------------------------------------------------------------------
Sold credit default protection on Dow
Jones CDX North America Investment Grade
Index Series 8 and receive .35%
Broker, Lehman Brothers Special Finance
Expires June 2012 $10,000,000 $27,133
Bought credit default protection on Dow
Jones CDX North America Investment Grade
Index Series 8 and pay .35%
Broker, Morgan Stanley Capital Services Inc.
Expires June 2012 $10,000,000 25,994
--------------------------------------------------------------------------
Total $53,127
=======
See Notes to Financial Statements.
ANNUAL REPORT OCTOBER 31, 2007 13
Statements of Net Assets
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
As of October 31, 2007 Fund, Inc. Fund, Inc.
===================================================================================================================================
Assets
-----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value* ............................................... $ 309,291,041 $1,303,376,935
Investments in affiliated securities, at value** ................................................ 22,956,095 54,265,247
Cash ............................................................................................ 2,643,614 726,729
Unrealized appreciation on swaps ................................................................ -- 53,127
Interest receivable ............................................................................. 4,758,347 20,363,556
Receivable for securities sold .................................................................. 3,491,702 16,352,698
Dividends receivable ............................................................................ 282,914 279,562
Receivable for swaps ............................................................................ -- 4,882
Variation margin ................................................................................ 874,219 3,633,547
Swap premiums paid .............................................................................. -- 98,486
Prepaid expenses and other assets ............................................................... 11,319 68,425
-------------------------------
Total assets .................................................................................... 344,309,251 1,399,223,194
-------------------------------
===================================================================================================================================
Liabilities
-----------------------------------------------------------------------------------------------------------------------------------
Reverse repurchase agreements ................................................................... 590,000 --
Borrowed bonds, at market value*** .............................................................. 3,929,709 30,530,740
Payable for securities purchased ................................................................ 1,693,893 6,947,101
Payable to investment adviser ................................................................... 173,852 698,699
Dividends payable to Common Stock shareholders .................................................. 90,690 454,193
Payable for swaps ............................................................................... -- 19,930
Interest expense payable
Swap premiums received .......................................................................... -- 141,081
Payable for other affiliates .................................................................... 2,022 8,121
Accrued expenses and other liabilities .......................................................... 91,448 211,527
-------------------------------
Total liabilities ............................................................................... 6,627,807 39,239,982
-------------------------------
===================================================================================================================================
Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------------
Preferred Stock, at redemption value, par value $.10 per share+ of AMPS@ at
$25,000 per share liquidation preference ...................................................... 136,526,775 550,571,848
-------------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock ........................................................... $ 201,154,669 $ 809,411,364
===============================
14 ANNUAL REPORT OCTOBER 31, 2007
Statements of Net Assets (concluded)
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
As of October 31, 2007 Fund, Inc. Fund, Inc.
===================================================================================================================================
Analysis of Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Undistributed investment income -- net .......................................................... $ 1,621,310 $ 6,030,241
Accumulated realized capital losses -- net ...................................................... (31,752,983) (110,928,720)
Unrealized depreciation -- net .................................................................. (8,136,942) (36,321,221)
-------------------------------
Total accumulated losses -- net ................................................................. (38,268,615) (141,219,700)
-------------------------------
Common Stock, par value $.10 per share++ ........................................................ 1,029,188 4,060,654
Paid-in capital in excess of par ................................................................ 238,394,096 946,570,410
-------------------------------
Net Assets ...................................................................................... $ 201,154,669 $ 809,411,364
===============================
Net asset value per share of Common Stock ....................................................... $ 19.54 $ 19.93
-------------------------------
Market price .................................................................................... $ 17.29 $ 16.94
-------------------------------
* Identified cost on unaffiliated securities ................................................ $ 316,773,728 $1,336,563,330
===============================
** Identified cost on affiliated securities .................................................. $ 22,956,095 $ 54,265,247
===============================
*** Proceeds from borrowed bonds .............................................................. $ 3,913,699 $ 30,027,326
===============================
+ Preferred Stock authorized, issued and outstanding:
Series M7 Shares ...................................................................... 2,730 2,800
-------------------------------
Series T7 Shares ...................................................................... 2,730 2,800
-------------------------------
Series W7 Shares ...................................................................... -- 2,800
-------------------------------
Series TH7 Shares ..................................................................... -- 2,800
-------------------------------
Series F7 Shares ...................................................................... -- 2,800
-------------------------------
Series W28 Shares ..................................................................... -- 4,000
-------------------------------
Series TH28 Shares .................................................................... -- 4,000
-------------------------------
++ Common Stock issued and outstanding ....................................................... 10,291,881 40,606,540
===============================
@ Auction Market Preferred Stock.
See Notes to Financial Statements.
ANNUAL REPORT OCTOBER 31, 2007 15
Statements of Operations
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
For the Year Ended October 31, 2007 Fund, Inc. Fund, Inc.
===================================================================================================================================
Investment Income
-----------------------------------------------------------------------------------------------------------------------------------
Interest* ....................................................................................... $ 17,864,814 $ 67,135,924
Dividends ....................................................................................... 5,736,368 25,917,506
-------------------------------
Total income .................................................................................... 23,601,182 93,053,430
-------------------------------
===================================================================================================================================
Expenses
-----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ........................................................................ 2,142,450 8,588,233
Interest expense ................................................................................ 67,657 371,578
Commission fees ................................................................................. 350,150 1,395,560
Accounting services ............................................................................. 114,594 337,844
Transfer agent fees ............................................................................. 38,991 87,385
Professional fees ............................................................................... 69,253 100,000
Directors' fees and expenses .................................................................... 31,172 100,270
Printing and shareholder reports ................................................................ 19,512 77,863
Custodian fees .................................................................................. 21,882 41,736
Listing fees .................................................................................... 9,436 14,225
Pricing fees .................................................................................... 12,453 14,331
Other ........................................................................................... 39,839 65,189
-------------------------------
Total expenses .................................................................................. 2,917,389 11,194,214
-------------------------------
Investment income -- net ........................................................................ 20,683,793 81,859,216
-------------------------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) -- Net
-----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments -- net .......................................................................... (181,033) 8,057,128
Financial futures contracts and swaps -- net ................................................ (6,594,020) (24,638,364)
Borrowed bonds -- net ....................................................................... (146,832) (277,548)
-------------------------------
Total realized loss -- net ...................................................................... (6,921,885) (16,858,784)
-------------------------------
Change in unrealized appreciation/depreciation on:
Investments -- net .......................................................................... (17,652,152) (76,130,046)
Financial futures contracts and swaps -- net ................................................ (239,243) (1,548,696)
Borrowed bonds -- net ....................................................................... (16,010) (503,414)
-------------------------------
Total change in unrealized appreciation/depreciation -- net ..................................... (17,907,405) (78,182,156)
-------------------------------
Total realized and unrealized loss -- net ....................................................... (24,829,290) (95,040,940)
-------------------------------
===================================================================================================================================
Dividends to Preferred Stock Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ........................................................................ (7,254,700) (29,469,686)
-------------------------------
Net Decrease in Net Assets Resulting from Operations ............................................ $ (11,400,197) $ (42,651,410)
===============================
* Interest from affiliates .................................................................... $ 1,415,121 $ 3,641,677
===============================
See Notes to Financial Statements.
16 ANNUAL REPORT OCTOBER 31, 2007
Statements of Changes in Net Assets
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
For the Year Ended
October 31,
-------------------------------
Increase (Decrease) in Net Assets: 2007 2006
===================================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ........................................................................ $ 20,683,793 $ 21,981,944
Realized loss -- net ............................................................................ (6,921,885) (7,435,088)
Change in unrealized appreciation/depreciation -- net ........................................... (17,907,405) 8,108,246
Dividends to Preferred Stock shareholders ....................................................... (7,254,700) (6,435,477)
-------------------------------
Net increase (decrease) in net assets resulting from operations ................................. (11,400,197) 16,219,625
-------------------------------
===================================================================================================================================
Dividends and Distributions to Common Stock Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ........................................................................ (12,124,207) (17,335,379)
Tax return of capital ........................................................................... (4,335,991) --
-------------------------------
Net decrease in net assets resulting from dividends and distributions
to Common Stock shareholders .................................................................. (16,460,198) (17,335,379)
-------------------------------
===================================================================================================================================
Common Stock Transactions
-----------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to Common Stock shareholders in reinvestment of dividends ................ 281,127 --
-------------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets applicable to Common Stock ......................................... (27,579,268) (1,115,754)
Beginning of year ............................................................................... 228,733,937 229,849,691
-------------------------------
End of year* .................................................................................... $ 201,154,669 $ 228,733,937
===============================
* Undistributed (accumulated distributions in excess of) investment income -- net ............. $ 1,621,310 $ (71,035)
===============================
See Notes to Financial Statements.
ANNUAL REPORT OCTOBER 31, 2007 17
Statements of Changes in Net Assets
BlackRock Preferred Income Strategies Fund, Inc.
For the Year Ended
October 31,
-------------------------------
Increase (Decrease) in Net Assets: 2007 2006
===================================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ........................................................................ $ 81,859,216 $ 82,582,439
Realized loss -- net ............................................................................ (16,858,784) (9,358,240)
Change in unrealized appreciation/depreciation -- net ........................................... (78,182,156) 21,990,144
Dividends to Preferred Stock shareholders ....................................................... (29,469,686) (26,423,012)
-------------------------------
Net increase (decrease) in net assets resulting from operations ................................. (42,651,410) 68,791,331
-------------------------------
===================================================================================================================================
Dividends and Distributions to Common Stock Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ........................................................................ (47,141,781) (61,249,442)
Tax return of capital ........................................................................... (8,692,071) (3,547,483)
-------------------------------
Net decrease in net assets resulting from dividends and distributions
to Common Stock shareholders .................................................................. (55,833,852) (64,796,925)
-------------------------------
===================================================================================================================================
Common Stock Transactions
-----------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to Common Stock shareholders in reinvestment of dividends ................ -- 301,458
-------------------------------
===================================================================================================================================
Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets applicable to Common Stock .............................. (98,485,262) 4,295,864
-------------------------------
Beginning of year ............................................................................... 907,896,626 903,600,762
End of year* .................................................................................... $ 809,411,364 $ 907,896,626
===============================
* Undistributed (accumulated distributions in excess of) investment income -- net ............. $ 6,030,241 $ (561,947)
===============================
See Notes to Financial Statements.
18 ANNUAL REPORT OCTOBER 31, 2007
Financial Highlights
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
For the Year Ended
October 31, For the Period
The following per share data and ratios have been derived ----------------------------------------------- August 1, 2003+
from information provided in the financial statements. 2007 2006 2005 2004 to Oct. 31, 2003
====================================================================================================================================
Per Share Operating Performance
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .......................... $ 22.25 $ 22.36 $ 23.69 $ 24.38 $ 23.88
------------------------------------------------------------------
Investment income -- net ...................................... 2.01@@ 2.14@@ 2.16 2.19 .39
Realized and unrealized gain (loss) -- net .................... (2.41) .07 (1.09) (.70) .67
Dividends to Preferred Stock shareholders from investment
income -- net ............................................... (.71) (.63) (.40) (.18) (.03)
------------------------------------------------------------------
Total from investment operations .............................. (1.11) 1.58 .67 1.31 1.03
------------------------------------------------------------------
Less dividends and distributions to Common Stock shareholders:
Investment income -- net .................................. (1.18) (1.69) (2.00) (2.00) (.33)
Tax return of capital ..................................... (.42) -- -- -- --
------------------------------------------------------------------
Total dividends and distributions to Common Stock shareholders (1.60) (1.69) (2.00) (2.00) (.33)
------------------------------------------------------------------
Offering costs resulting from the issuance of Common Stock .... -- -- -- -- (.04)
------------------------------------------------------------------
Offering and underwriting costs resulting from the issuance
of Preferred Stock .......................................... -- -- -- -- (.16)
------------------------------------------------------------------
Net asset value, end of period ................................ $ 19.54 $ 22.25 $ 22.36 $ 23.69 $ 24.38
==================================================================
Market price per share, end of period ......................... $ 17.29 $ 21.26 $ 21.03 $ 22.84 $ 23.60
==================================================================
====================================================================================================================================
Total Investment Return**
------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............................ (5.03%) 7.97% 3.25% 5.86% 3.53%@
==================================================================
Based on market price per share ............................... (12.05%) 9.69% .73% 5.44% (4.33%)@
==================================================================
====================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
------------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and excluding interest expense*** 1.29% 1.29% 1.26% 1.26% .49%*
==================================================================
Total expenses, net of waiver*** .............................. 1.32% 1.29% 1.26% 1.26% .49%*
==================================================================
Total expenses*** ............................................. 1.32% 1.29% 1.26% 1.27% 1.11%*
==================================================================
Total investment income -- net*** ............................. 9.38% 9.70% 9.23% 9.04% 6.79%*
==================================================================
Amount of dividends to Preferred Stock shareholders ........... 3.29% 2.84% 1.71% .76% .50%*
==================================================================
Investment income to Common Stock shareholders -- net ......... 6.09% 6.86% 7.52% 8.28% 6.29%*
==================================================================
====================================================================================================================================
Supplemental Data
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of period
(in thousands) .............................................. $201,155 $228,734 $229,850 $243,492 $250,631
==================================================================
Preferred Stock outstanding at liquidation preference,
end of period (in thousands) ................................ $136,500 $136,500 $136,500 $136,500 $136,500
==================================================================
Portfolio turnover ............................................ 88% 19% 25% 27% 12%
==================================================================
====================================================================================================================================
Leverage
------------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ..................................... $ 2,474 $ 2,676 $ 2,684 $ 2,784 $ 2,836
==================================================================
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
dif ferent returns. Total investment returns exclude the effects of sales
charges.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Commencement of operations.
@ Aggregate total investment return.
@@ Based on average shares outstanding.
See Notes to Financial Statements.
ANNUAL REPORT OCTOBER 31, 2007 19
Financial Highlights (concluded)
BlackRock Preferred Income Strategies Fund, Inc.
For the Year Ended
October 31, For the Period
The following per share data and ratios have been derived ----------------------------------------------- March 28, 2003+
from information provided in the financial statements. 2007 2006 2005 2004 to Oct. 31, 2003
====================================================================================================================================
Per Share Operating Performance
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .......................... $ 22.36 $ 22.26 $ 23.48 $ 24.53 $ 23.88
------------------------------------------------------------------
Investment income -- net ...................................... 2.02@@ 2.03@@ 2.09@@ 2.14@@ 1.14
Realized and unrealized gain (loss) -- net .................... (2.35) .32 (.91) (.78) .61
Dividends and distributions to Preferred Stock shareholders:
Investment income -- net .................................. (.73) (.65) (.40) (.18) (.07)
Realized gain -- net ...................................... -- -- -- (.01) --
------------------------------------------------------------------
Total from investment operations .............................. (1.06) 1.70 .78 1.17 1.68
------------------------------------------------------------------
Less dividends and distributions to Common Stock shareholders:
Investment income -- net .................................. (1.16) (1.51) (2.00) (2.13) (.87)
Realized gain -- net ...................................... -- -- -- (.09) --
Tax return of capital ..................................... (.21) (.09) -- -- --
------------------------------------------------------------------
Total dividends and distributions to Common Stock shareholders (1.37) (1.60) (2.00) (2.22) (.87)
------------------------------------------------------------------
Offering costs resulting from the issuance of Common Stock .... -- -- -- -- (.01)
------------------------------------------------------------------
Offering and underwriting costs resulting from the issuance
of Preferred Stock .......................................... -- -- -- -- (.15)
------------------------------------------------------------------
Net asset value, end of period ................................ $ 19.93 $ 22.36 $ 22.26 $ 23.48 $ 24.53
==================================================================
Market price per share, end of period ......................... $ 16.94 $ 20.12 $ 21.20 $ 22.87 $ 23.69
==================================================================
====================================================================================================================================
Total Investment Return**
------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............................ (4.35%) 8.77% 3.73% 5.22% 6.47%@
==================================================================
Based on market price per share ............................... (9.65%) 2.77% 1.43% 6.12% (1.80%)@
==================================================================
====================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
------------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver and excluding interest expense*** 1.23% 1.23% 1.20% 1.19% .79%*
==================================================================
Total expenses, net of waiver *** ............................. 1.27% 1.23% 1.20% 1.19% .79%*
==================================================================
Total expenses*** ............................................. 1.27% 1.23% 1.20% 1.19% 1.05%*
==================================================================
Total investment income -- net*** ............................. 9.29% 9.26% 8.96% 8.93% 8.31%*
==================================================================
Amount of dividends to Preferred Stock shareholders ........... 3.34% 2.96% 1.73% .74% .49%*
==================================================================
Investment income to Common Stock shareholders -- net ......... 5.95% 6.30% 7.23% 8.19% 7.82%*
==================================================================
====================================================================================================================================
Supplemental Data
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of period
(in thousands) .............................................. $809,411 $907,897 $903,601 $952,973 $995,722
==================================================================
Preferred Stock outstanding at liquidation preference,
end of period (in thousands) ................................ $550,000 $550,000 $550,000 $550,000 $550,000
==================================================================
Portfolio turnover ............................................ 81% 18% 28% 23% 27%
==================================================================
====================================================================================================================================
Leverage
------------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ..................................... $ 2,472 $ 2,651 $ 2,643 $ 2,733 $ 2,810
==================================================================
* Annualized.
** Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, may result in substantially
dif ferent returns. Total investment returns exclude the effects of sales
charges.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Commencement of operations.
@ Aggregate total investment return.
@@ Based on average shares outstanding.
See Notes to Financial Statements.
20 ANNUAL REPORT OCTOBER 31, 2007
Notes to Financial Statements
1. Significant Accounting Policies:
BlackRock Preferred and Corporate Income Strategies Fund, Inc. and BlackRock
Preferred Income Strategies Fund, Inc. (the "Funds" or individually as the
"Fund") are registered under the Investment Company Act of 1940, as amended, as
diversified, closed-end management investment companies. The Funds' financial
statements are prepared in conformity with U.S. generally accepted accounting
principles, which may require the use of management accruals and estimates.
Actual results may differ from these estimates. The Funds' Common Stock shares
are listed on the New York Stock Exchange ("NYSE") under the symbol PSW for
BlackRock Preferred and Corporate Income Strategies Fund, Inc. and PSY for
BlackRock Preferred Income Strategies Fund, Inc. The following is a summary of
significant accounting policies followed by the Funds.
(a) Valuation of investments -- Debt securities are traded primarily in the
over-the-counter ("OTC") markets and are valued at the last available bid price
in the OTC market or on the basis of values obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer-supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of each of the Funds under the general
direction of the respective Board of Directors. Such valuations and procedures
will be reviewed periodically by the Board of Directors of the respective Funds.
Effective September 4, 2007, exchange-traded options are valued at the mean
price 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. Options traded in the OTC
market are valued at the last asked price (options written) or the last bid
price (options purchased). Financial futures contracts and options thereon,
which are traded on exchanges, are valued at their closing prices as of the
close of such exchanges. Swap agreements are valued based upon quoted fair
valuations received daily by each Fund from a pricing service or counterparty.
Valuation of short-term investment vehicles is generally based on the net asset
value of the underlying investment vehicle or amortized cost. Repurchase
agreements are valued at cost plus accrued interest. Reverse repurchase
agreements are valued at cost. Securities and other assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of each Fund's Board of Directors.
Equity securities held by the Funds that are traded on stock exchanges or the
NASDAQ Global Market are valued at the last sale price or official close price
on the exchange, as of the close of business on the day the securities are being
valued or, lacking any sales, at the last available bid price for long
positions, and at the last available asked price for short positions. In cases
where equity securities are traded on more than one exchange, the securities are
valued on the exchange designated as the primary market by or under the
authority of the Board of Directors of each Fund. Long positions traded in the
OTC markets, NASDAQ Capital Market or Bulletin Board are valued at the last
available bid price or yield equivalent obtained from one or more dealers or
pricing services approved by the Board of Directors of each Fund. Short
positions traded in the OTC markets are valued at the last available asked
price. Portfolio securities that are traded both in the OTC markets and on a
stock exchange are valued according to the broadest and most representative
market.
Generally, trading in foreign securities, as well as U.S. government securities,
and money market instruments, is substantially completed each day at various
times prior to the close of business on the NYSE. The values of such securities
used in computing the net asset value of the Funds' shares are determined as of
such times. Foreign currency exchange rates will generally be determined as of
the close of business on the NYSE. Occasionally, events affecting the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of business on the NYSE that may not be
reflected in the computation in each of the Funds' net asset value. If events
(for example, a company announcement, market volatility or a natural disaster)
occur during such periods that are expected to materially affect the value of
such securities, those securities will be valued at their fair value as
determined in good faith by each Fund's Board of Directors or by BlackRock
Advisors, LLC (the "Manager"), an indirect, wholly owned subsidiary of
BlackRock, Inc., using a pricing service and/or procedures approved by each
Fund's Board of Directors.
(b) Derivative financial instruments -- Each Fund may engage in various
portfolio investment strategies both to increase the return of each Fund and to
hedge, or protect, its exposure to interest rate movements and movements in the
securities markets. Losses may arise due to changes in the value of the contract
due to an unfavorable change in the price of the underlying security or index,
or if the counterparty does not perform under the contract. The counterparty for
certain instruments may pledge cash or securities as collateral.
o Options -- Each Fund may write and purchase call and put options. When the
Fund writes an option, an amount equal to the premium received by the Fund
is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market
value of the option written. When a security is purchased or sold through
an exercise of an option, the related premium paid (or received) is added
to (or deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option expires
(or the Fund enters into a closing transaction), the Fund realizes a gain
or loss on the option to the extent of the premiums received or paid (or
gain or loss to the extent the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
o Financial futures contracts -- Each Fund may purchase or sell financial
futures contracts and options on such financial futures contracts.
Financial futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield.
Upon
ANNUAL REPORT OCTOBER 31, 2007 21
Notes to Financial Statements (continued)
entering into a contract, the Fund deposits, and maintains as collateral,
such initial margin as required by the exchange on which the transaction
is effected. Pursuant to the contract, the Fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as variation
margin and are recorded by the Fund as unrealized gains or losses. When
the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened
and the value at the time it was closed.
o Swaps -- Each Fund may enter into swap agreements, which are OTC contracts
in which the Fund and a counterparty agree to make periodic net payments
on a specified notional amount. The net payments can be made for a set
period of time or may be triggered by a predetermined credit event. The
net periodic payments may be based on a fixed or variable interest rate;
the change in market value of a specified security, basket of securities,
or index; or the return generated by a security. These periodic payments
received or made by the Fund are recorded in the accompanying Statements
of Operations as realized gains or losses, respectively. Gains or losses
are also realized upon termination of the swap agreements. Swaps are
marked-to-market daily and changes in value are recorded as unrealized
appreciation (depreciation). Risks include changes in the returns of the
underlying instruments, failure of the counterparties to perform under the
contracts' terms and the possible lack of liquidity with respect to the
swap agreements.
(c) Income taxes -- It is each Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are deter-mined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Funds amortize all
premiums and discounts on debt securities.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates. A portion of the dividends paid by BlackRock Preferred and
Corporate Income Strategies Fund, Inc. during the year ended October 31, 2007
and by BlackRock Preferred Income Strategies Fund, Inc. during the year ended
October 31, 2007 and 2006 are characterized as a tax return of capital.
(f) Repurchase agreements -- Each Fund may invest in U.S. government and agency
securities pursuant to repurchase agreements. Under such agreements, the
counterparty agrees to repurchase the security at a mutually agreed upon time
and price. The counterparty will be required on a daily basis to maintain the
value of securities subject to the agreement at no less that the repurchase
price. The agreements are conditioned upon the collateral being deposited under
the Federal Reserve book entry system or held in a segregated account by the
Fund's custodian. If the counterparty defaults and the fair value of the
collateral declines, liquidation of the collateral by the Fund may be delayed or
limited.
(g) Reverse repurchase agreements -- Under reverse repurchase agreements, each
Fund sold securities to the counterparty and agreed to repurchase them at a
mutually agreed upon date and price, and may have exchanged their respective
commitments to pay or receive interest. If the counterparty defaulted on its
obligation, the Fund's ability to receive interest would be delayed or limited.
Furthermore, if the Fund did not have sufficient client income to pay its
obligation under the reverse repurchase agreement, the Fund would be in default
and the counterparty would have been able to terminate the repurchase agreement.
At the time the Fund entered into a reverse repurchase agreement, it would have
established a segregated account with the custodian containing cash, or cash
equivalents of liquid high grade debt securities having a value at least equal
to the repurchase price.
(h) Short sales/borrowed bonds -- The Funds engage in short selling of
securities as a method of managing potential price declines in similar
securities owned by the Fund. When a Fund 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 Fund 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.
(i) Borrowed bond agreements -- In a borrowed bond agreement, each Fund 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 settle short positions. In a borrowed bond agreement, the Fund's
prime broker or third party broker takes possession of cash as collateral. The
Funds 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 counterparty is marked-to-market on a daily basis to ensure the
adequacy of the collateral. If the lender defaults and the value of the
collateral declines or if bankruptcy proceedings are commenced with respect to
the lender of the security, realization of the collateral by the Fund may be
delayed or limited.
22 ANNUAL REPORT OCTOBER 31, 2007
Notes to Financial Statements (continued)
(j) Securities lending -- Each Fund may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Fund and any additional required collateral is delivered to the Fund on the
next business day. Where the Fund receives securities as collateral for the
loaned securities, it collects a fee from the borrower. The Fund typically
receives the income on the loaned securities but does not receive the income on
the collateral. Where the Fund receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within five
business days. The Fund may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason, the Fund could experience delays
and costs in gaining access to the collateral. The Fund also could suffer a loss
where the value of the collateral falls below the market value of the borrowed
securities, in the event of borrower default or in the event of losses on
investments made with cash collateral.
(k) Recent accounting pronouncements -- In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes -- an interpretation of FASB 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 each Fund's financial statements, if any, is currently being assessed.
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 implications of FAS 157
and its impact on each Fund's financial statements, if any, has not been
determined.
In addition, in February 2007, FASB issued Statement of Financial Accounting
Standards No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("FAS 159"), which is effective for fiscal 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 each Fund's financial statements,
if any, has not been determined.
(l) Reclassifications -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, for BlackRock
Preferred and Corporate Income Strategies Fund, Inc., during the current year,
$387,459 has been reclassified between accumulated net realized capital losses
and accumulated distributions in excess of net investment income as a result of
permanent differences attributable to the classification of investments and swap
agreements. These reclassifications have no effect on net assets or net asset
values per share. Accordingly, for BlackRock Preferred Income Strategies Fund,
Inc., during the current year $1,344,439 has been reclassified between
accumulated net realized capital losses and accumulated distributions in excess
of net investment income as a result of permanent differences attributable to
the classification of investments, and swap agreements. This reclassification
has no effect on net assets or net asset values per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
Each Fund entered into an Investment Advisory Agreement with the Manager.
Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC Financial Services
Group, Inc. are the principal owners of BlackRock, Inc.
The Manager is responsible for the management of each Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of each Fund. For such services, each Fund
pays a monthly fee at an annual rate of .60% of each Fund's average daily net
assets (including proceeds from the issuance of Preferred Stock) plus the
proceeds of any outstanding borrowings used for leverage. In addition, the
Manager has entered into a sub-advisory agreement with BlackRock Financial
Management, Inc., an affiliate of the Manager, under which the Manager pays the
sub-adviser for services it provides to each Fund a monthly fee at an annual
rate that is a percentage of the management fee paid by each Fund to the
Manager.
The Funds have received an exemptive order from the Securities and Exchange
Commission permitting them to lend portfolio securities to Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of
Merrill Lynch, or its affiliates. Pursuant to that order,
ANNUAL REPORT OCTOBER 31, 2007 23
Notes to Financial Statements (continued)
the Funds have retained BlackRock Investment Management, LLC ("BIM"), an
affiliate of the Manager, as the securities lending agent for a fee based on a
share of the returns on investment of cash collateral. BIM may, on behalf of the
Funds, invest cash collateral received by the Funds for such loans, among other
things, in a private investment company managed by the Manager or in registered
money market funds advised by the Manager or its affiliates.
The Funds reimbursed the Manager for certain accounting services. The
reimbursements were as follows:
--------------------------------------------------------------------------------
For the
Year Ended
October 31, 2007
--------------------------------------------------------------------------------
BlackRock Preferred and Corporate Income Strategies
Fund, Inc. ............................................... $ 6,691
BlackRock Preferred Income Strategies Fund, Inc. ........... $26,841
--------------------------------------------------------------------------------
Certain officers and/or directors of the Funds are officers and/or directors of
BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 2007 were as follows:
--------------------------------------------------------------------------------
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
Fund, Inc. Fund, Inc.
--------------------------------------------------------------------------------
Total Purchases ..................... $289,322,421 $1,091,856,649
Total Sales ......................... $286,701,401 $1,109,155,883
--------------------------------------------------------------------------------
4. Stock Transactions:
Each Fund is authorized to issue 200,000,000 shares of capital stock, including
Preferred Stock, par value $.10 per share, all of which were initially
classified as Common Stock. Each Fund's Board of Directors is authorized,
however, to reclassify any unissued shares of capital stock without approval of
the holders of Common Stock.
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
Shares issued and outstanding during the year ended October 31, 2007 increased
by 12,692 as a result of dividend reinvestment and October 31, 2006 remained
constant.
BlackRock Preferred Income Strategies Fund, Inc.
Shares issued and outstanding during the years ended October 31, 2007 and
October 31, 2006 remained constant and increased by 13,470 as a result of
dividend reinvestment, respectively.
Preferred Stock
Auction Market Preferred Stock are redeemable shares of Preferred Stock of the
Funds, with a par value of $.10 per share and liquidation preference of $25,000
per share, plus accrued and unpaid dividends, that entitle their holders to
receive cash dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at October 31, 2007 were as follows:
--------------------------------------------------------------------------------
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
Fund, Inc. Fund, Inc.
--------------------------------------------------------------------------------
Series M7 ........................................ 5.15% 4.98%
Series T7 ........................................ 5.10% 5.10%
Series W7 ........................................ -- 5.15%
Series TH7 ....................................... -- 5.10%
Series F7 ........................................ -- 4.90%
Series W28 ....................................... -- 5.30%
Series TH28 ...................................... -- 5.50%
--------------------------------------------------------------------------------
Each Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the year ended October 31, 2007, MLPF&S earned commissions as
follows:
--------------------------------------------------------------------------------
Commissions
--------------------------------------------------------------------------------
BlackRock Preferred and Corporate Income Strategies Fund, Inc. .... $214,971
BlackRock Preferred Income Strategies Fund, Inc. .................. $531,046
--------------------------------------------------------------------------------
5. Reverse Repurchase Agreement:
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
For the year ended October 31, 2007, the Fund's average amount outstanding was
approximately $2,690,000 and daily weighted average interest rate was 5%.
BlackRock Preferred Income Strategies Fund, Inc.
For the year ended October 31, 2007, the Fund's average amount outstanding was
approximately $14,375,000 and daily weighted average interest rate was 5.14%.
24 ANNUAL REPORT OCTOBER 31, 2007
Notes to Financial Statements (concluded)
6. Distributions to Shareholders:
Each Fund paid an ordinary income dividend to holders of Common Stock on
November 30, 2007 to shareholders of record on November 15, 2007. The amount of
the ordinary income dividend per share was as follows:
--------------------------------------------------------------------------------
Per Share
Amount
--------------------------------------------------------------------------------
BlackRock Preferred and Corporate Income Strategies Fund, Inc. ..... $.133333
BlackRock Preferred Income Strategies, Inc. ........................ $.114583
--------------------------------------------------------------------------------
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
The tax character of distributions paid during the fiscal years ended October
31, 2007 and October 31, 2006 was as follows:
--------------------------------------------------------------------------------
10/31/2007 10/31/2006
--------------------------------------------------------------------------------
Distributions paid from:
Ordinary income .............................. $19,378,907 $23,770,856
Tax return of capital ........................ 4,335,991 --
---------------------------
Total distributions ............................ $23,714,898 $23,770,856
===========================
As of October 31, 2007, the components of accumulated losses on a tax basis were
as follows:
-----------------------------------------------------------------------------
Undistributed ordinary income -- net ........................ --
Undistributed long-term capital gains -- net ................ --
------------
Total undistributed income -- net ........................... --
Capital loss carryforward ................................... $(31,784,984)*
Unrealized losses -- net .................................... (6,483,631)**
------------
Total accumulated losses -- net ............................. $(38,268,615)
============
* At October 31, 2007, the Fund had a net capital loss carryforward of
$31,784,984, of which $1,276,621 expires in 2011, $10,243,141 expires in
2012, $5,058,900 expires in 2013, $8,481,628 expires in 2014 and
$6,724,694 expires in 2015. These amounts will be available to offset like
amounts of any future taxable gains.
** The difference between book-basis and tax-basis net unrealized losses is
attributable primarily to the tax deferral of losses on wash sales,
realization for tax purposes of unrealized gains (losses) on certain
futures contracts, the realization for tax purposes of unrealized gains on
investments in passive foreign investment companies and the timing of
income recognition on partnership interests.
BlackRock Preferred Income Strategies Fund, Inc.
The tax character of distributions paid during the fiscal years ended October
31, 2007 and October 31, 2006 was as follows:
--------------------------------------------------------------------------------
10/31/2007 10/31/2006
--------------------------------------------------------------------------------
Distributions paid from:
Ordinary income ........................... $76,611,467 $87,672,454
Tax return of capital ..................... 8,692,071 3,547,483
---------------------------
Total distributions ......................... $85,303,538 $91,219,937
===========================
As of October 31, 2007, the components of accumulated losses on a tax basis were
as follows:
-----------------------------------------------------------------------------
Undistributed ordinary income -- net ....................... --
Undistributed long-term capital gains -- net ............... --
-------------
Total undistributed income -- net .......................... --
Capital loss carryforward .................................. $(112,373,074)*
Unrealized losses -- net ................................... (28,846,626)**
-------------
Total accumulated losses -- net ............................ $(141,219,700)
=============
* At October 31, 2007, the Fund had a net capital loss carryforward of
$112,373,074, of which $62,733,648 expires in 2012, $17,911,331 expires in
2013, $12,145,117 expires in 2014 and $19,582,978 expires in 2015. These
amounts will be available to offset like amounts of any future taxable
gains.
** The difference between book-basis and tax-basis net unrealized losses is
attributable primarily to the tax deferral of losses on wash sales, the
realization for tax purposes of unrealized gains on investments in passive
foreign investment companies, the realization for tax purposes of
unrealized gains (losses) on certain futures contracts and the timing of
income recognition on partnership interests.
ANNUAL REPORT OCTOBER 31, 2007 25
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of BlackRock Preferred and Corporate
Income Strategies Fund, Inc. and of BlackRock Preferred Income Strategies Fund,
Inc.:
We have audited the accompanying statements of net assets, including the
schedules of investments, of BlackRock Preferred and Corporate Income Strategies
Fund, Inc. and of BlackRock Preferred Income Strategies Fund, Inc. (the "Funds")
as of October 31, 2007, and the related statements of operations for the year
then ended and the statements of changes in net assets and the financial
highlights for each of the two years in the period then ended. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The respective
financial statements of each of the Funds for the year ended October 31, 2005
and the financial highlights for each of the Funds for each of the two years in
the period ended October 31, 2005 and for the period March 28, 2003 through
October 31, 2003, were audited by other auditors whose report, dated December 9,
2005, expressed an unqualified opinion on those financial statements and
financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Funds
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 Funds' 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
custodians 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 respective financial
positions of BlackRock Preferred and Corporate Income Strategies Fund, Inc. and
of BlackRock Preferred Income Strategies Fund, Inc. as of October 31, 2007, the
results of their operations for the year then ended, the changes in their net
assets, and their financial highlights for each of the two years then ended, in
conformity with U.S. generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
December 27, 2007
26 ANNUAL REPORT OCTOBER 31, 2007
Important Tax Information
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
The following information is provided with respect to the ordinary income
distributions paid by BlackRock Preferred and Corporate Income Strategies Fund,
Inc. during the fiscal year ended October 31, 2007:
Common Stock Shareholders:
------------------------------------------------------------------------------------------------------------------------------------
Qualified Dividend Dividends Received Interest-Related
Income for Deductions for Dividends for Non-
Payable Date Individuals* Corporations* U.S. Residents**
------------------------------------------------------------------------------------------------------------------------------------
November 1, 2006 ........................................ 19.77% 15.14% 46.16%
November 30, 2006 - January 9, 2007 ..................... 17.44% 15.46% 36.43%
February 28, 2007 - October 31, 2007 .................... 24.76% 14.59% 77.24%
------------------------------------------------------------------------------------------------------------------------------------
Preferred Stock Shareholders:
------------------------------------------------------------------------------------------------------------------------------------
Qualified Dividend Dividends Received Interest-Related
Income for Deductions for Dividends for
Individuals* Corporations* Non-U.S. Residents**
---------------------------------- --------------------------------- ----------------------------------
November 2006 - January 2007 - November 2006 - January 2007- November 2006 - January 2007 -
Payable Date December 2006 October 2007 December 2006 October 2007 December 2006 October 2007
------------------------------------------------------------------------------------------------------------------------------------
Series M-7 ........ 17.44% 22.98% 15.46% 14.85% 36.43% 67.12%
Series T-7 ........ 17.44% 22.84% 15.46% 14.77% 36.43% 66.67%
------------------------------------------------------------------------------------------------------------------------------------
* The Fund hereby designates the percentage indicated above or the maximum
amount allowable by law.
** Represents the portion of the taxable ordinary income dividends eligible
for tax exemption from U.S. withholding tax for nonresident aliens and
foreign corporations.
BlackRock Preferred Income Strategies Fund, Inc.
The following information is provided with respect to the ordinary income
distributions paid by BlackRock Preferred Income Strategies Fund, Inc. during
the fiscal year ended October 31, 2007:
Common Stock Shareholders:
------------------------------------------------------------------------------------------------------------------------------------
Qualified Dividend Dividends Received Interest-Related
Income for Deductions for Dividends for Non-
Payable Date Individuals* Corporations* U.S. Residents**
------------------------------------------------------------------------------------------------------------------------------------
November 1, 2006 -- January 9, 2007 ..................... 21.80% 20.04% 32.97%
February 28, 2007 -- October 31, 2007 ................... 27.09% 15.43% 67.65%
------------------------------------------------------------------------------------------------------------------------------------
Preferred Stock Shareholders:
------------------------------------------------------------------------------------------------------------------------------------
Qualified Dividend Dividends Received Interest-Related
Income for Deductions for Dividends for
Individuals* Corporations* Non-U.S. Residents**
---------------------------------- ---------------------------------- ----------------------------------
November 2006 - January 2007 - November 2006 - January 2007 - November 2006 - January 2007 -
Payable Date December 2006 October 2007 December 2006 October 2007 December 2006 October 2007
------------------------------------------------------------------------------------------------------------------------------------
Series M-7 ........ 21.80% 25.79% 20.04% 16.56% 32.97% 59.13%
Series T-7 ........ 21.80% 25.85% 20.04% 16.50% 32.97% 59.57%
Series W-7 ........ 21.80% 25.88% 20.04% 16.48% 32.97% 59.71%
Series TH-7 ....... 21.80% 25.78% 20.04% 16.57% 32.97% 59.10%
Series F-7 ........ 21.80% 25.79% 20.04% 16.56% 32.97% 59.18%
Series W-28 ....... 21.80% 25.78% 20.04% 16.56% 32.97% 59.11%
Series TH-28 ...... 21.80% 25.78% 20.04% 16.56% 32.97% 59.11%
------------------------------------------------------------------------------------------------------------------------------------
* The Fund hereby designates the percentage indicated above or the maximum
amount allowable by law.
** Represents the portion of the taxable ordinary income dividends eligible
for tax exemption from U.S. withholding tax for nonresident aliens and
foreign corporations.
ANNUAL REPORT OCTOBER 31, 2007 27
Automatic Dividend Reinvestment Plan
How the Plan Works -- The Funds offer a Dividend Reinvestment Plan (the "Plan")
under which income and capital gains dividends paid by each Fund are
automatically reinvested in additional shares of Common Stock of each Fund. The
Plan is administered on behalf of the shareholders by Computershare Trust
Company, N.A. (the "Plan Agent"). Under the Plan, whenever the Funds declare a
dividend, participants in the Plan will receive the equivalent in shares of
Common Stock of each Fund. The Plan Agent will acquire the shares for the
participant's account either (i) through receipt of additional unissued but
authorized shares of each Fund ("newly issued shares") or (ii) by purchase of
outstanding shares of Common Stock on the open market on the New York Stock
Exchange or elsewhere. If, on the dividend payment date, each Fund's net asset
value per share is equal to or less than the market price per share plus
estimated brokerage commissions (a condition often referred to as a "market
premium"), the Plan Agent will invest the dividend amount in newly issued
shares. If the Funds' net asset value per share is greater than the market price
per share (a condition often referred to as a "market discount"), the Plan Agent
will invest the dividend amount by purchasing on the open market additional
shares. If the Plan Agent is unable to invest the full dividend amount in open
market purchases, or if the market discount shifts to a market premium during
the purchase period, the Plan Agent will invest any uninvested portion in newly
issued shares. The shares acquired are credited to each shareholder's account.
The amount credited is determined by dividing the dollar amount of the dividend
by either (i) when the shares are newly issued, the net asset value per share on
the date the shares are issued or (ii) when shares are purchased in the open
market, the average purchase price per share.
Participation in the Plan -- Participation in the Plan is automatic, that is, a
shareholder is automatically enrolled in the Plan when he or she purchases
shares of Common Stock of the Funds unless the shareholder specifically elects
not to participate in the Plan. Shareholders who elect not to participate will
receive all dividend distributions in cash. Shareholders who do not wish to
participate in the Plan, must advise the Plan Agent in writing (at the address
set forth below) that they elect not to participate in the Plan. Participation
in the Plan is completely voluntary and may be terminated or resumed at any time
without penalty by writing to the Plan Agent.
Benefits of the Plan -- The Plan provides an easy, convenient way for
shareholders to make additional, regular investments in the Funds. The Plan
promotes a long-term strategy of investing at a lower cost. All shares acquired
pursuant to the Plan receive voting rights. In addition, if the market price
plus commissions of each Fund's shares is above the net asset value,
participants in the Plan will receive shares of the Funds for less than they
could otherwise purchase them and with a cash value greater than the value of
any cash distribution they would have received. However, there may not be enough
shares available in the market to make distributions in shares at prices below
the net asset value. Also, since each Fund does not redeem shares, the price on
resale may be more or less than the net asset value.
Plan Fees -- There are no enrollment fees or brokerage fees for participating in
the Plan. The Plan Agent's service fees for handling the reinvestment of
distributions are paid for by the Funds. However, brokerage commissions may be
incurred when the Funds purchase shares on the open market and shareholders will
pay a pro rata share of any such commissions.
Tax Implications -- The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income tax that may
be payable (or required to be withheld) on such dividends. Therefore, income and
capital gains may still be realized even though shareholders do not receive
cash.
Contact Information -- All correspondence concerning the Plan, including any
questions about the Plan, should be directed to the Plan Agent at Computershare
Trust Company, N.A., P.O. Box 43010, Providence, RI 02940-3010, Telephone:
800-426-5523.
28 ANNUAL REPORT OCTOBER 31, 2007
Officers and Directors as of October 31, 2007
Number of
Funds and
Portfolios in
Position(s) Length of Fund Complex Other Public
Name, Address Held with Time Overseen by Directorships
and Year of Birth Funds Served Principal Occupation(s) During Past 5 Years Director Held by Director
====================================================================================================================================
Interested Trustee
------------------------------------------------------------------------------------------------------------------------------------
Robert C. Doll, Jr.* Fund 2005 to Vice Chairman and Director of BlackRock, 120 Funds None
P.O. Box 9011 President 2007 Inc., Global Chief Investment Officer for 161 Portfolios
Princeton, NJ 08543-9011 and Equities, Chairman of the BlackRock Retail
1954 Director Operating Committee, and member of the
BlackRock Executive Committee since 2006;
President of the funds advised by Merrill
Lynch Investment Managers, L.P. ("MLIM") and
its affiliates ("MLIM/FAM-advised funds")
from 2005 to 2006 and Chief Investment
Officer thereof from 2001 to 2006; President
of MLIM and Fund Asset Management, L.P.
("FAM") from 2001 to 2006; Co-Head (Americas
Region) thereof from 2000 to 2001 and Senior
Vice President from 1999 to 2001; President
and Director of Princeton Services, Inc.
("Princeton Services") and President of
Princeton Administrators, L.P. ("Princeton
Administrators") from 2001 to 2006; Chief
Investment Officer of OppenheimerFunds, Inc.
in 1999 and Executive Vice President thereof
from 1991 to 1999.
---------------------------------------------------------------------------------------------------------
* Mr. Doll is a director, trustee or member of an advisory board of certain other investment
companies for which BlackRock Advisors, LLC and its affiliates act as investment adviser. Mr.
Doll is an "interested person," as defined in the Investment Company Act, of the Fund based on
his positions with BlackRock, Inc. and its affiliates. Directors serve until their resignation,
removal or death, or until December 31 of the year in which they turn 72. As Fund President, Mr.
Doll serves at the pleasure of the Board of Directors.
====================================================================================================================================
Independent Directors*
------------------------------------------------------------------------------------------------------------------------------------
David O. Beim** Director 2003 to Professor of Finance and Economics at the 17 Funds None
P.O. Box 9095 2007 Columbia University Graduate School of 24 Portfolios
Princeton, NJ 08543-9095 Business since 1991; Chairman of Outward
1940 Bound U.S.A. from 1997 to 2001; Chairman of
Wave Hill, Inc. from 1990 to 2006; Trustee
of Phillips Exeter Academy from 2002 to
present.
------------------------------------------------------------------------------------------------------------------------------------
James T. Flynn Director 2003 to Chief Financial Officer of JPMorgan & Co., 17 Funds None
P.O. Box 9095 present Inc. from 1990 to 1995 and an employee of 24 Portfolios
Princeton, NJ 08543-9095 JPMorgan in various capacities from 1967 to
1939 1995.
------------------------------------------------------------------------------------------------------------------------------------
W. Carl Kester Director 2003 to Deputy Dean for Academic Affairs, Harvard 17 Funds None
P.O. Box 9095 present Business School since 2006; Mizuho Financial 24 Portfolios
Princeton, NJ 08543-9095 Group Professor of Finance, Harvard Business
1951 School; Unit Head, Finance from 2005 to
2006; Senior Associate Dean and Chairman of
the MBA Program of Harvard Business School,
1999 to 2005, Member of the faculty of
Harvard Business School since 1981;
Independent Consultant since 1978.
------------------------------------------------------------------------------------------------------------------------------------
Karen P. Robards*** Director 2003 to Partner of Robards & Company, LLC., a 17 Funds AtriCure, Inc.
P.O. Box 9095 present financial advisory firm since 1987; formerly 24 Portfolios (medical devices);
Princeton, NJ 08543-9095 an investment banker with Morgan Stanley for Care Investment
1950 more than ten years; Director of Enable Trust, Inc.
Medical Corp. from 1996 to 2005; Director of
AtriCure, Inc., since 2000; Director of Care
Investment Trust, Inc. (a health care REIT),
since 2007; Co-founder and Director of the
Cooke Center for Learning and Development, a
not-for-profit organization, since 1987.
---------------------------------------------------------------------------------------------------------
* Directors serve until their resignation, removal or death, or until December 31 of the year in
which they turn 72.
** Chairman of the Audit Committee.
*** Chair of the Board of Directors.
ANNUAL REPORT OCTOBER 31, 2007 29
Officers and Directors (concluded)
Position(s) Length of
Name, Address Held with Time
and Year of Birth Funds Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
------------------------------------------------------------------------------------------------------------------------------------
Donald C. Burke Vice 2003 to Managing Director of BlackRock, Inc. since 2006; Managing Director of Merrill Lynch
P.O. Box 9011 President 2007 Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P. ("FAM") in 2006;
Princeton, NJ 08543-9011 and First Vice President of MLIM and FAM from 1997 to 2005 and Treasurer thereof from
1960 Treasurer 1999 to 2006; Vice President of MLIM and FAM from 1990 to 1997.
------------------------------------------------------------------------------------------------------------------------------------
Karen Clark Chief 2007 Managing Director of BlackRock, Inc. and Chief Compliance Officer of certain
P.O. Box 9011 Compliance BlackRock-advised funds since 2007; Director of BlackRock, Inc. from 2005 to 2007;
Princeton, NJ 08543-9011 Officer Principal and Senior Compliance Officer, State Street Global Advisors, from 2001 to
1965 2005; Principal Consultant, PricewaterhouseCoopers, LLP from 1998 to 2001; Branch
Chief, Division of Investment Management and Office of Compliance Inspections and
Examinations, U.S. Securities and Exchange Commission, from 1993 to 1998.
------------------------------------------------------------------------------------------------------------------------------------
Howard Surloff Secretary 2007 Managing Director of BlackRock Inc. and General Counsel of U.S. Funds at BlackRock,
P.O. Box 9011 Inc. since 2006; General Counsel (U.S.) of Goldman Sachs Asset Management from 1993
Princeton, NJ 08543-9011 to 2006.
1965
---------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors.
------------------------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and
Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Common Stock:
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
Preferred Stock:
The Bank of New York Mellon
101 Barclay Street -- 7 West
New York, NY 10286
Accounting Agent
State Street Bank and
Trust Company
Princeton, NJ 08540
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Princeton, NJ 08540
Legal Counsel
Sidley Austin llp
New York, NY 10019
30 ANNUAL REPORT OCTOBER 31, 2007
The Benefits and Risks of Leveraging
The Funds utilize leverage through the issuance of Preferred Stock. The concept
of leverage is based on the premise that the cost of assets to be obtained from
leverage will be based on short-term interest or dividend rates on the Preferred
Stock, which normally will be lower than the income earned by each Fund on its
longer-term portfolio investments. To the extent that the total assets of each
Fund (including the assets obtained from leverage) are invested in
higher-yielding portfolio investments, each Fund's Common Stock shareholders
will be the beneficiaries of the incremental yield.
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 the dividend rates on any Preferred Stock may reduce
the Common Stock's 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 Fund's net income will be greater
than if leverage had not been used. Conversely, if the income from the
securities purchased is not sufficient to cover the cost of leverage, each
Fund's net income will be less than if leverage had not been used, and therefore
the amount available for distribution to Common Stock shareholders will be
reduced.
Additional Information
Proxy Results BlackRock Preferred and Corporate Income Strategies Fund, Inc.
During the six-month period ended October 31, 2007, the Common Stock and Auction
Market Preferred Stock (Series M7 and T7) shareholders of BlackRock Preferred
and Corporate Income Strategies Fund, Inc. voted on the following proposal,
which was approved at an annual shareholders' meeting on August 16, 2007. This
proposal was part of the reorganization of the Fund's Board of Directors to take
effect on or about November 1, 2007. A description of the proposal and number of
shares voted are as follows:
------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
------------------------------------------------------------------------------------------------------------------------
To elect the Fund's Directors: G. Nicholas Beckwith, III 8,762,137 166,292
Richard E. Cavanagh 8,762,900 165,529
Richard S. Davis 8,764,137 164,292
Kent Dixon 8,762,900 165,529
Kathleen F. Feldstein 8,762,748 165,681
James T. Flynn 8,764,066 164,363
Henry Gabbay 8,762,085 166,344
Jerrold B. Harris 8,762,066 166,363
R. Glenn Hubbard 8,761,053 167,376
Karen P. Robards 8,762,337 166,092
Robert S. Salomon, Jr. 8,762,637 165,792
------------------------------------------------------------------------------------------------------------------------
During the six-month period ended October 31, 2007, the Auction Market Preferred
Stock shareholders (Series M7 and T7) of BlackRock Preferred and Corporate
Income Strategies Fund, Inc. voted on the following proposal, which was approved
at an annual shareholders' meeting on August 16, 2007. This proposal was part of
the reorganization of the Fund's Board of Directors to take effect on or about
November 1, 2007. A description of the proposal and number of shares voted are
as follows:
------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
------------------------------------------------------------------------------------------------------------------------
To elect the Fund's Directors: Frank J. Fabozzi and W. Carl Kester 3,279 36
------------------------------------------------------------------------------------------------------------------------
ANNUAL REPORT OCTOBER 31, 2007 31
Additional Information (continued)
Proxy Results BlackRock Preferred Income Strategies Fund, Inc.
During the six-month period ended October 31, 2007, the Common Stock and Auction
Market Preferred Stock (Series M7, T7, W7, TH7, F7, W28 and TH28) shareholders
of BlackRock Preferred Income Strategies Fund, Inc. voted on the following
proposal, which was approved at an annual shareholders' meeting on August 16,
2007. This proposal was part of the reorganization of the Fund's Board of
Directors to take effect on or about November 1, 2007. A description of the
proposal and number of shares voted are as follows:
------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
------------------------------------------------------------------------------------------------------------------------
To elect the Fund's Directors: G. Nicholas Beckwith, III 36,284,009 977,694
Richard E. Cavanagh 36,289,593 972,110
Richard S. Davis 36,287,509 974,194
Kent Dixon 36,280,940 980,763
Kathleen F. Feldstein 36,276,812 984,891
James T. Flynn 36,278,770 982,933
Henry Gabbay 36,287,324 974,379
Jerrold B. Harris 36,286,401 975,302
R. Glenn Hubbard 36,283,719 977,984
Karen P. Robards 36,287,492 974,211
Robert S. Salomon, Jr. 36,273,995 987,708
------------------------------------------------------------------------------------------------------------------------
During the six-month period ended October 31, 2007, the Auction Market Preferred
Stock shareholders (Series M7, T7, W7, TH7, F7, W28 and TH28) of BlackRock
Preferred Income Strategies Fund, Inc. voted on the following proposal, which
was approved at an annual shareholders' meeting on August 16, 2007. This
proposal was part of the reorganization of the Fund's Board of Directors to take
effect on or about November 1, 2007. A description of the proposal and number of
shares voted are as follows:
------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Withheld
For From Voting
------------------------------------------------------------------------------------------------------------------------
To elect the Fund's Directors: Frank J. Fabozzi 19,144 121
W. Carl Kester 19,140 125
------------------------------------------------------------------------------------------------------------------------
32 ANNUAL REPORT OCTOBER 31, 2007
Additional Information (continued)
Fund Certifications
In September 2007, BlackRock Preferred and Corporate Income Strategies Fund,
Inc. and BlackRock Preferred Income Strategies Fund, Inc. filed their Chief
Executive Officer Certifications for the prior year with the New York Stock
Exchange pursuant to Section 303A. 12(a) of the New York Stock Exchange
Corporate Governance Listing Standards.
The Funds' Chief Executive Officer and Chief Financial Officer Certifications
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 were filed with the
Funds' Form N-CSR and are available on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
Availability of Quarterly Schedules of Investments
The Funds file their complete schedules of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters of
each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the SEC's
Web site at http://www.sec.gov. The Funds' Forms N-Q may also be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Electronic Delivery
Electronic copies of most financial reports and prospectuses are available on
the Funds' Web site. Shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Funds' electronic delivery program.
Shareholders Who Hold Accounts with Investment Advisers, Banks or brokerages:
Please contact your financial adviser to enroll. Please note that not all
investment advisers, banks or brokerages may offer this service.
ANNUAL REPORT OCTOBER 31, 2007 33
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 Web sites.
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.
34 ANNUAL REPORT OCTOBER 31, 2007
This report, including the financial information herein, is transmitted to
shareholders of BlackRock Preferred and Corporate Income Strategies Fund, Inc.
and BlackRock Preferred Income Strategies Fund, Inc. for their information. This
is not a prospectus. The Funds leverage their Common Stock to provide Common
Stock shareholders with potentially higher rates of return. Leverage creates
risk for Common Stock shareholders, including the likelihood of greater
volatility of net asset value and market price of Common Stock shares, and the
risk that fluctuations in short-term interest rates may reduce the Common
Stock's yield. Past performance results shown in this report should not be
considered a representation of future performance. Statements and other
information herein are as dated and are subject to change.
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-441-7762; (2) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's Web site
at http://www.sec.gov. 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 (1) at www.blackrock.com and (2) on the Securities
and Exchange Commission's Web site at http://www.sec.gov.
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
BlackRock Preferred Income Strategies Fund, Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
BLACKROCK
#PCPIS-10/07
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: independent:
David O. Beim (term ended effective November 1, 2007)
W. Carl Kester
James T. Flynn
Karen P. Robards
Robert S. Salomon, Jr. (term began effective November 1, 2007)
Kent Dixon (term began effective November 1, 2007)
Frank J. Fabozzi (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. Kester's
financial consulting services present a breadth and level of
complexity of accounting issues that are generally comparable to the
breadth and complexity of issues that can reasonably be expected to
be raised by the registrant's financial statements.
Ms. Robards has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions. Ms.
Robards has been President of Robards & Company, a financial
advisory firm, since 1987. Ms. Robards was formerly an investment
banker for more than 10 years where she was responsible for
evaluating and assessing the performance of companies based on their
financial results. Ms. Robards has over 30 years of experience
analyzing financial statements. She also is 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 (b) Audit-Related Fees(1) (c) Tax Fees(2) (d) All Other Fees(3)
----------------------------------------------------------------------------------------------------------------------------------
Current Previous Current Previous Current Previous Current Previous
Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal
Entity Name End Year End End Year End End Year End End Year End
----------------------------------------------------------------------------------------------------------------------------------
BlackRock Preferred
Income Strategies $41,000 $41,000 $3,500 $3,500 $6,100 $6,000 $1,042 $0
Fund, Inc.
----------------------------------------------------------------------------------------------------------------------------------
1 The nature of the services include assurance and related services reasonably
related to the performance of the audit of financial statements not included in
Audit Fees.
2 The nature of the services include tax compliance, tax advice and tax
planning.
3 The nature of the services include a review of compliance procedures and
attestation thereto.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to
the registrant's affiliated service providers that relate directly
to the operations and the financial reporting of the registrant.
Certain of these non-audit services that the Committee believes are
a) consistent with the SEC's auditor independence rules and b)
routine and recurring services that will not impair the independence
of the independent accountants may be approved by the Committee
without consideration on a specific case-by-case basis ("general
pre-approval"). However, such services will only be deemed
pre-approved provided that any individual project does not exceed
$5,000 attributable to the registrant or $50,000 for all of the
registrants the Committee oversees. Any proposed services exceeding
the pre-approved cost levels will require specific pre-approval by
the Committee, as will any other services not subject to general
pre-approval (e.g., unanticipated but permissible services). The
Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board
meeting.
(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 Previous Fiscal
Entity Name Year End Year End
--------------------------------------------------------------------
BlackRock Preferred Income
Strategies Fund, Inc. $295,142 $2,928,083
--------------------------------------------------------------------
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any non-affiliated
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by the registrant's 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 accountant's 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 registrant's 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)):
David O. Beim (term ended effective November 1, 2007)
W. Carl Kester
James T. Flynn
Karen P. Robards
Robert S. Salomon, Jr. (term began effective November 1, 2007)
Kent Dixon (term began effective November 1, 2007)
Frank J. Fabozzi (term began effective November 1, 2007)
Item 6 - Schedule of Investments - The registrant's 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 Fund's portfolio during the most recent 12 month period
ended June 30 is available without charge (1) at www.blackrock.com
and (2) on the Commission's web site at http://www.sec.gov.
Proxy Voting Policies and Procedures
For BlackRock Advisors, LLC
And Its Affiliated SEC Registered Investment Advisers
September 30, 2006
Table of Contents
Page
----
Introduction.................................................................
Scope of Committee Responsibilities..........................................
Special Circumstances........................................................
Voting Guidelines............................................................
Boards of Directors....................................................
Auditors...............................................................
Compensation and Benefits..............................................
Capital Structure......................................................
Corporate Charter and By-Laws..........................................
Corporate Meetings.....................................................
Investment Companies...................................................
Environmental and Social Issues........................................
Notice to Clients............................................................
Proxy Voting Policies and Procedures
These Proxy Voting Policies and Procedures ("Policy") for BlackRock
Advisors, LLC and its affiliated U.S. registered investment advisers(1)
("BlackRock") reflect our duty as a fiduciary under the Investment Advisers Act
of 1940 (the "Advisers Act") to vote proxies in the best interests of our
clients. BlackRock serves as the investment manager for investment companies,
other commingled investment vehicles and/or separate accounts of institutional
and other clients. The right to vote proxies for securities held in such
accounts belongs to BlackRock's clients. Certain clients of BlackRock have
retained the right to vote such proxies in general or in specific
circumstances.(2) Other clients, however, have delegated to BlackRock the right
to vote proxies for securities held in their accounts as part of BlackRock's
authority to manage, acquire and dispose of account assets.
When BlackRock votes proxies for a client that has delegated to BlackRock
proxy voting authority, BlackRock acts as the client's agent. Under the Advisers
Act, an investment adviser is a fiduciary that owes each of its clients a duty
of care and loyalty with respect to all services the adviser undertakes on the
client's behalf, including proxy voting. BlackRock is therefore subject to a
fiduciary duty to vote proxies in a manner BlackRock believes is consistent with
the client's best interests,(3) whether or not the client's proxy voting is
subject to the fiduciary standards of the Employee Retirement Income Security
Act of 1974 ("ERISA").(4) When voting proxies for client accounts (including
investment companies), BlackRock's primary objective is to make voting decisions
solely in the best interests of clients and ERISA clients' plan beneficiaries
and participants. In fulfilling its obligations to clients, BlackRock will seek
to act in a manner that it believes is most likely to enhance the economic value
of the underlying securities held in client accounts.(5) It is imperative that
BlackRock considers the interests of its clients, and not the interests of
BlackRock, when voting proxies and that real (or perceived) material conflicts
that may arise between BlackRock's interest and those of BlackRock's clients are
properly addressed and resolved.
----------
(1) The Policy does not apply to BlackRock Asset Management U.K. Limited and
BlackRock Investment Managers International Limited, which are U.S. registered
investment advisers based in the United Kingdom.
(2) In certain situations, a client may direct BlackRock to vote in accordance
with the client's proxy voting policies. In these situations, BlackRock will
seek to comply with such policies to the extent it would not be inconsistent
with other BlackRock legal responsibilities.
(3) Letter from Harvey L. Pitt, Chairman, SEC, to John P.M. Higgins, President,
Ram Trust Services (February 12, 2002) (Section 206 of the Investment Advisers
Act imposes a fiduciary responsibility to vote proxies fairly and in the best
interests of clients); SEC Release No. IA-2106 (February 3, 2003).
(4) DOL Interpretative Bulletin of Sections 402, 403 and 404 of ERISA at 29
C.F.R. 2509.94-2.
(5) Other considerations, such as social, labor, environmental or other
policies, may be of interest to particular clients. While BlackRock is cognizant
of the importance of such considerations, when voting proxies it will generally
take such matters into account only to the extent that they have a direct
bearing on the economic value of the underlying securities. To the extent that a
BlackRock client desires to pursue a particular social, labor, environmental or
other agenda through the proxy votes made for its securities held through
BlackRock as investment adviser, BlackRock encourages the client to consider
retaining direct proxy voting authority or to appoint independently a special
proxy voting fiduciary other than BlackRock.
1
Advisers Act Rule 206(4)-6 was adopted by the SEC in 2003 and requires,
among other things, that an investment adviser that exercises voting authority
over clients' proxy voting adopt policies and procedures reasonably designed to
ensure that the adviser votes proxies in the best interests of clients,
discloses to its clients information about those policies and procedures and
also discloses to clients how they may obtain information on how the adviser has
voted their proxies.
In light of such fiduciary duties, the requirements of Rule 206(4)-6, and
given the complexity of the issues that may be raised in connection with proxy
votes, BlackRock has adopted these policies and procedures. BlackRock's Equity
Investment Policy Oversight Committee, or a sub-committee thereof (the
"Committee"), addresses proxy voting issues on behalf of BlackRock and its
clients.(6) The Committee is comprised of senior members of BlackRock's
Portfolio Management Group and advised by BlackRock's Legal and Compliance
Department.
----------
(6) Subject to the Proxy Voting Policies of Merrill Lynch Bank & Trust Company
FSB, the Committee may also function jointly as the Proxy Voting Committee for
Merrill Lynch Bank & Trust Company FSB trust accounts managed by personnel
dually-employed by BlackRock.
2
I. Scope of Committee Responsibilities
The Committee shall have the responsibility for determining how to address
proxy votes made on behalf of all BlackRock clients, except for clients who have
retained the right to vote their own proxies, either generally or on any
specific matter. In so doing, the Committee shall seek to ensure that proxy
votes are made in the best interests of clients, and that proxy votes are
determined in a manner free from unwarranted or inappropriate influences. The
Committee shall also oversee the overall administration of proxy voting for
BlackRock accounts.(7)
The Committee shall establish BlackRock's proxy voting guidelines, with
such advice, participation and research as the Committee deems appropriate from
portfolio managers, proxy voting services or other knowledgeable interested
parties. As it is anticipated that there will not necessarily be a "right" way
to vote proxies on any given issue applicable to all facts and circumstances,
the Committee shall also be responsible for determining how the proxy voting
guidelines will be applied to specific proxy votes, in light of each issuer's
unique structure, management, strategic options and, in certain circumstances,
probable economic and other anticipated consequences of alternative actions. In
so doing, the Committee may determine to vote a particular proxy in a manner
contrary to its generally stated guidelines.
The Committee may determine that the subject matter of certain proxy
issues are not suitable for general voting guidelines and requires a
case-by-case determination, in which case the Committee may elect not to adopt a
specific voting guideline applicable to such issues. BlackRock believes that
certain proxy voting issues - such as approval of mergers and other significant
corporate transactions - require investment analysis akin to investment
decisions, and are therefore not suitable for general guidelines. The Committee
may elect to adopt a common BlackRock position on certain proxy votes that are
akin to investment decisions, or determine to permit portfolio managers to make
individual decisions on how best to maximize economic value for the accounts for
which they are responsible (similar to normal buy/sell investment decisions made
by such portfolio managers).(8)
While it is expected that BlackRock, as a fiduciary, will generally seek
to vote proxies over which BlackRock exercises voting authority in a uniform
manner for all BlackRock clients, the Committee, in conjunction with the
portfolio manager of an account, may determine that the specific circumstances
of such account require that such account's proxies be voted differently due to
such account's investment objective or other factors that differentiate it from
other accounts. In addition, on proxy votes that are akin to investment
decisions, BlackRock believes portfolio managers may from time to time
----------
(7) The Committee may delegate day-to-day administrative responsibilities to
other BlackRock personnel and/or outside service providers, as appropriate.
(8) The Committee will normally defer to portfolio managers on proxy votes that
are akin to investment decisions except for proxy votes that involve a material
conflict of interest, in which case it will determine, in its discretion, the
appropriate voting process so as to address such conflict.
3
legitimately reach differing but equally valid views, as fiduciaries for
BlackRock's clients, on how best to maximize economic value in respect of a
particular investment.
The Committee will also be responsible for ensuring the maintenance of
records of each proxy vote, as required by Advisers Act Rule 204-2.(9) All
records will be maintained in accordance with applicable law. Except as may be
required by applicable legal requirements, or as otherwise set forth herein, the
Committee's determinations and records shall be treated as proprietary,
nonpublic and confidential.
The Committee shall be assisted by other BlackRock personnel, as may be
appropriate. In particular, the Committee has delegated to the BlackRock
Operations Department responsibility for monitoring corporate actions and
ensuring that proxy votes are submitted in a timely fashion. The Operations
Department shall ensure that proxy voting issues are promptly brought to the
Committee's attention and that the Committee's proxy voting decisions are
appropriately disseminated and implemented.
To assist BlackRock in voting proxies, the Committee may retain the
services of a firm providing such services. BlackRock has currently retained
Institutional Shareholder Services ("ISS") in that role. ISS is an independent
adviser that specializes in providing a variety of fiduciary-level proxy-related
services to institutional investment managers, plan sponsors, custodians,
consultants, and other institutional investors. The services provided to
BlackRock may include, but are not limited to, in-depth research, voting
recommendations (which the Committee is not obligated to follow), vote
execution, and recordkeeping.
----------
(9) The Committee may delegate the actual maintenance of such records to an
outside service provider. Currently, the Committee has delegated the maintenance
of such records to Institutional Shareholder Services.
4
II. Special Circumstances
Routine Consents. BlackRock may be asked from time to time to consent to
an amendment to, or grant a waiver under, a loan agreement, partnership
agreement, indenture or other governing document of a specific financial
instrument held by BlackRock clients. BlackRock will generally treat such
requests for consents not as "proxies" subject to these Proxy Voting Policies
and Procedures but as investment matters to be dealt with by the responsible
BlackRock investment professionals would, provided that such consents (i) do not
relate to the election of a board of directors or appointment of auditors of a
public company, and (ii) either (A) would not otherwise materially affect the
structure, management or control of a public company, or (B) relate to a company
in which BlackRock clients hold only interests in bank loans or debt securities
and are consistent with customary standards and practices for such instruments.
Securities on Loan. Registered investment companies that are advised by
BlackRock as well as certain of our advisory clients may participate in
securities lending programs. Under most securities lending arrangements,
securities on loan may not be voted by the lender (unless the loan is recalled).
BlackRock believes that each client has the right to determine whether
participating in a securities lending program enhances returns, to contract with
the securities lending agent of its choice and to structure a securities lending
program, through its lending agent, that balances any tension between loaning
and voting securities in a matter that satisfies such client. If client has
decided to participate in a securities lending program, BlackRock will therefore
defer to the client's determination and not attempt to seek recalls solely for
the purpose of voting routine proxies as this could impact the returns received
from securities lending and make the client a less desirable lender in a
marketplace. Where a client retains a lending agent that is unaffiliated with
BlackRock, BlackRock will generally not seek to vote proxies relating to
securities on loan because BlackRock does not have a contractual right to recall
such loaned securities for the purpose of voting proxies. Where BlackRock or an
affiliate acts as the lending agent, BlackRock will also generally not seek to
recall loaned securities for proxy voting purposes, unless the portfolio manager
responsible for the account or the Committee determines that voting the proxy is
in the client's best interest and requests that the security be recalled.
Voting Proxies for Non-US Companies. While the proxy voting process is
well established in the United States, voting proxies of non-US companies
frequently involves logistical issues which can affect BlackRock's ability to
vote such proxies, as well as the desirability of voting such proxies. These
issues include (but are not limited to): (i) untimely notice of shareholder
meetings, (ii) restrictions on a foreigner's ability to exercise votes, (iii)
requirements to vote proxies in person, (iv) "shareblocking" (requirements that
investors who exercise their voting rights surrender the right to dispose of
their holdings for some specified period in proximity to the shareholder
meeting), (v) potential difficulties in translating the proxy, and (vi)
requirements to provide local agents with unrestricted powers of attorney to
facilitate voting instructions.
5
As a consequence, BlackRock votes proxies of non-US companies only on a
"best-efforts" basis. In addition, the Committee may determine that it is
generally in the best interests of BlackRock clients not to vote proxies of
companies in certain countries if the Committee determines that the costs
(including but not limited to opportunity costs associated with shareblocking
constraints) associated with exercising a vote generally are expected to
outweigh the benefit the client will derive by voting on the issuer's proposal.
If the Committee so determines in the case of a particular country, the
Committee (upon advice from BlackRock portfolio managers) may override such
determination with respect to a particular issuer's shareholder meeting if the
Committee believes the benefits of seeking to exercise a vote at such meeting
outweighs the costs, in which case BlackRock will seek to vote on a best-efforts
basis.
Securities Sold After Record Date. With respect to votes in connection
with securities held on a particular record date but sold from a client account
prior to the holding of the related meeting, BlackRock may take no action on
proposals to be voted on in such meeting.
Conflicts of Interest. From time to time, BlackRock may be required to
vote proxies in respect of an issuer that is an affiliate of BlackRock (a
"BlackRock Affiliate"), or a money management or other client of BlackRock (a
"BlackRock Client").(10) In such event, provided that the Committee is aware of
the real or potential conflict, the following procedures apply:
o The Committee intends to adhere to the voting guidelines set forth
herein for all proxy issues including matters involving BlackRock
Affiliates and BlackRock Clients. The Committee may, in its
discretion for the purposes of ensuring that an independent
determination is reached, retain an independent fiduciary to advise
the Committee on how to vote or to cast votes on behalf of
BlackRock's clients; and
o if the Committee determines not to retain an independent fiduciary,
or does not desire to follow the advice of such independent
fiduciary, the Committee shall determine how to vote the proxy after
consulting with the BlackRock Legal and Compliance Department and
concluding that the vote cast is in the client's best interest
notwithstanding the conflict.
----------
(10) Such issuers may include investment companies for which BlackRock provides
investment advisory, administrative and/or other services.
6
III. Voting Guidelines
The Committee has determined that it is appropriate and in the best
interests of BlackRock's clients to adopt the following voting guidelines, which
represent the Committee's usual voting position on certain recurring proxy
issues that are not expected to involve unusual circumstances. With respect to
any particular proxy issue, however, the Committee may elect to vote differently
than a voting guideline if the Committee determines that doing so is, in the
Committee's judgment, in the best interest of its clients. The guidelines may be
reviewed at any time upon the request of any Committee member and may be amended
or deleted upon the vote of a majority of voting Committee members present at a
Committee meeting for which there is a quorum.
7
A. Boards of Directors
These proposals concern those issues submitted to shareholders relating to
the composition of the Board of Directors of companies other than investment
companies. As a general matter, the Committee believes that a company's Board of
Directors (rather than shareholders) is most likely to have access to important,
nonpublic information regarding a company's business and prospects, and is
therefore best-positioned to set corporate policy and oversee management. The
Committee therefore believes that the foundation of good corporate governance is
the election of qualified, independent corporate directors who are likely to
diligently represent the interests of shareholders and oversee management of the
corporation in a manner that will seek to maximize shareholder value over time.
In individual cases, the Committee may look at a Director nominee's history of
representing shareholder interests as a director of other companies, or other
factors to the extent the Committee deems relevant.
The Committee's general policy is to vote:
--------------------------------------------------------------------------------
# VOTE and DESCRIPTION
--------------------------------------------------------------------------------
A.1 FOR nominees for director of United States companies in uncontested
elections, except for nominees who
o have missed at least two meetings and, as a result, attended less
than 75% of meetings of the Board of Directors and its committees
the previous year, unless the nominee missed the meeting(s) due to
illness or company business
o voted to implement or renew a "dead-hand" poison pill
o ignored a shareholder proposal that was approved by either a
majority of the shares outstanding in any year or by the majority of
votes cast for two consecutive years
o failed to act on takeover offers where the majority of the
shareholders have tendered their shares
o are corporate insiders who serve on the audit, compensation or
nominating committees or on a full Board that does not have such
committees composed exclusively of independent directors
o on a case-by-case basis, have served as directors of other companies
with allegedly poor corporate governance
o sit on more than six boards of public companies
--------------------------------------------------------------------------------
A.2 FOR nominees for directors of non-U.S. companies in uncontested elections,
except for nominees from whom the Committee determines to withhold votes
due to the nominees' poor records of representing shareholder interests,
on a case-by-case basis
--------------------------------------------------------------------------------
A.3 FOR proposals to declassify Boards of Directors, except where there exists
a legitimate purpose for classifying boards
--------------------------------------------------------------------------------
A.4 AGAINST proposals to classify Boards of Directors, except where there
exists a legitimate purpose for classifying boards
--------------------------------------------------------------------------------
8
--------------------------------------------------------------------------------
A.5 AGAINST proposals supporting cumulative voting
--------------------------------------------------------------------------------
A.6 FOR proposals eliminating cumulative voting
--------------------------------------------------------------------------------
A.7 FOR proposals supporting confidential voting
--------------------------------------------------------------------------------
A.8 FOR proposals seeking election of supervisory board members
--------------------------------------------------------------------------------
A.9 AGAINST shareholder proposals seeking additional representation of women
and/or minorities generally (i.e., not specific individuals) to a Board of
Directors
--------------------------------------------------------------------------------
A.10 AGAINST shareholder proposals for term limits for directors
--------------------------------------------------------------------------------
A.11 FOR shareholder proposals to establish a mandatory retirement age for
directors who attain the age of 72 or older
--------------------------------------------------------------------------------
A.12 AGAINST shareholder proposals requiring directors to own a minimum amount
of company stock
--------------------------------------------------------------------------------
A.13 FOR proposals requiring a majority of independent directors on a Board of
Directors
--------------------------------------------------------------------------------
A.14 FOR proposals to allow a Board of Directors to delegate powers to a
committee or committees
--------------------------------------------------------------------------------
A.15 FOR proposals to require audit, compensation and/or nominating committees
of a Board of Directors to consist exclusively of independent directors
--------------------------------------------------------------------------------
A.16 AGAINST shareholder proposals seeking to prohibit a single person from
occupying the roles of chairman and chief executive officer
--------------------------------------------------------------------------------
A.17 FOR proposals to elect account inspectors
--------------------------------------------------------------------------------
A.18 FOR proposals to fix the membership of a Board of Directors at a specified
size
--------------------------------------------------------------------------------
A.19 FOR proposals permitting shareholder ability to nominate directors
directly
--------------------------------------------------------------------------------
A.20 AGAINST proposals to eliminate shareholder ability to nominate directors
directly
--------------------------------------------------------------------------------
A.21 FOR proposals permitting shareholder ability to remove directors directly
--------------------------------------------------------------------------------
A.22 AGAINST proposals to eliminate shareholder ability to remove directors
directly
--------------------------------------------------------------------------------
9
B. Auditors
These proposals concern those issues submitted to shareholders related to
the selection of auditors. As a general matter, the Committee believes that
corporate auditors have a responsibility to represent the interests of
shareholders and provide an independent view on the propriety of financial
reporting decisions of corporate management. While the Committee will generally
defer to a corporation's choice of auditor, in individual cases, the Committee
may look at an auditors' history of representing shareholder interests as
auditor of other companies, to the extent the Committee deems relevant.
The Committee's general policy is to vote:
--------------------------------------------------------------------------------
B.1 FOR approval of independent auditors, except for
o auditors that have a financial interest in, or material association
with, the company they are auditing, and are therefore believed by
the Committee not to be independent
o auditors who have rendered an opinion to any company which in the
Committee's opinion is either not consistent with best accounting
practices or not indicative of the company's financial situation
o on a case-by-case basis, auditors who in the Committee's opinion
provide a significant amount of non-audit services to the company
--------------------------------------------------------------------------------
B.2 FOR proposals seeking authorization to fix the remuneration of auditors
--------------------------------------------------------------------------------
B.3 FOR approving internal statutory auditors
--------------------------------------------------------------------------------
B.4 FOR proposals for audit firm rotation, except for proposals that would
require rotation after a period of less than 5 years
--------------------------------------------------------------------------------
10
C. Compensation and Benefits
These proposals concern those issues submitted to shareholders related to
management compensation and employee benefits. As a general matter, the
Committee favors disclosure of a company's compensation and benefit policies and
opposes excessive compensation, but believes that compensation matters are
normally best determined by a corporation's board of directors, rather than
shareholders. Proposals to "micro-manage" a company's compensation practices or
to set arbitrary restrictions on compensation or benefits will therefore
generally not be supported.
The Committee's general policy is to vote:
--------------------------------------------------------------------------------
C.1 IN ACCORDANCE WITH THE RECOMMENDATION OF ISS on compensation plans if the
ISS recommendation is based solely on whether or not the company's plan
satisfies the allowable cap as calculated by ISS. If the recommendation of
ISS is based on factors other than whether the plan satisfies the
allowable cap the Committee will analyze the particular proposed plan.
This policy applies to amendments of plans as well as to initial
approvals.
--------------------------------------------------------------------------------
C.2 FOR proposals to eliminate retirement benefits for outside directors
--------------------------------------------------------------------------------
C.3 AGAINST proposals to establish retirement benefits for outside directors
--------------------------------------------------------------------------------
C.4 FOR proposals approving the remuneration of directors or of supervisory
board members
--------------------------------------------------------------------------------
C.5 AGAINST proposals to reprice stock options
--------------------------------------------------------------------------------
C.6 FOR proposals to approve employee stock purchase plans that apply to all
employees. This policy applies to proposals to amend ESPPs if the plan as
amended applies to all employees.
--------------------------------------------------------------------------------
C.7 FOR proposals to pay retirement bonuses to directors of Japanese companies
unless the directors have served less than three years
--------------------------------------------------------------------------------
C.8 AGAINST proposals seeking to pay outside directors only in stock
--------------------------------------------------------------------------------
C.9 FOR proposals seeking further disclosure of executive pay or requiring
companies to report on their supplemental executive retirement benefits
--------------------------------------------------------------------------------
C.10 AGAINST proposals to ban all future stock or stock option grants to
executives
--------------------------------------------------------------------------------
C.11 AGAINST option plans or grants that apply to directors or employees of
"related companies" without adequate disclosure of the corporate
relationship and justification of the option policy
--------------------------------------------------------------------------------
C.12 FOR proposals to exclude pension plan income in the calculation of
earnings used in determining executive bonuses/compensation
--------------------------------------------------------------------------------
11
D. Capital Structure
These proposals relate to various requests, principally from management,
for approval of amendments that would alter the capital structure of a company,
such as an increase in authorized shares. As a general matter, the Committee
will support requests that it believes enhance the rights of common shareholders
and oppose requests that appear to be unreasonably dilutive.
The Committee's general policy is to vote:
--------------------------------------------------------------------------------
D.1 AGAINST proposals seeking authorization to issue shares without preemptive
rights except for issuances up to 10% of a non-US company's total
outstanding capital
--------------------------------------------------------------------------------
D.2 FOR management proposals seeking preemptive rights or seeking
authorization to issue shares with preemptive rights
--------------------------------------------------------------------------------
D.3 FOR management proposals approving share repurchase programs
--------------------------------------------------------------------------------
D.4 FOR management proposals to split a company's stock
--------------------------------------------------------------------------------
D.5 FOR management proposals to denominate or authorize denomination of
securities or other obligations or assets in Euros
--------------------------------------------------------------------------------
D.6 FOR proposals requiring a company to expense stock options (unless the
company has already publicly committed to do so by a certain date).
--------------------------------------------------------------------------------
12
E. Corporate Charter and By-Laws
These proposals relate to various requests for approval of amendments to a
corporation's charter or by-laws, principally for the purpose of adopting or
redeeming "poison pills". As a general matter, the Committee opposes poison pill
provisions.
The Committee's general policy is to vote:
--------------------------------------------------------------------------------
E.1 AGAINST proposals seeking to adopt a poison pill
--------------------------------------------------------------------------------
E.2 FOR proposals seeking to redeem a poison pill
--------------------------------------------------------------------------------
E.3 FOR proposals seeking to have poison pills submitted to shareholders for
ratification
--------------------------------------------------------------------------------
E.4 FOR management proposals to change the company's name
--------------------------------------------------------------------------------
13
F. Corporate Meetings
These are routine proposals relating to various requests regarding the
formalities of corporate meetings.
The Committee's general policy is to vote:
--------------------------------------------------------------------------------
F.1 AGAINST proposals that seek authority to act on "any other business that
may arise"
--------------------------------------------------------------------------------
F.2 FOR proposals designating two shareholders to keep minutes of the meeting
--------------------------------------------------------------------------------
F.3 FOR proposals concerning accepting or approving financial statements and
statutory reports
--------------------------------------------------------------------------------
F.4 FOR proposals approving the discharge of management and the supervisory
board
--------------------------------------------------------------------------------
F.5 FOR proposals approving the allocation of income and the dividend
--------------------------------------------------------------------------------
F.6 FOR proposals seeking authorization to file required documents/other
formalities
--------------------------------------------------------------------------------
F.7 FOR proposals to authorize the corporate board to ratify and execute
approved resolutions
--------------------------------------------------------------------------------
F.8 FOR proposals appointing inspectors of elections
--------------------------------------------------------------------------------
F.9 FOR proposals electing a chair of the meeting
--------------------------------------------------------------------------------
F.10 FOR proposals to permit "virtual" shareholder meetings over the Internet
--------------------------------------------------------------------------------
F.11 AGAINST proposals to require rotating sites for shareholder meetings
--------------------------------------------------------------------------------
14
G. Investment Companies
These proposals relate to proxy issues that are associated solely with
holdings of shares of investment companies, including, but not limited to,
investment companies for which BlackRock provides investment advisory,
administrative and/or other services. As with other types of companies, the
Committee believes that a fund's Board of Directors (rather than its
shareholders) is best-positioned to set fund policy and oversee management.
However, the Committee opposes granting Boards of Directors authority over
certain matters, such as changes to a fund's investment objective, that the
Investment Company Act of 1940 envisions will be approved directly by
shareholders.
The Committee's general policy is to vote:
--------------------------------------------------------------------------------
G.1 FOR nominees for director of mutual funds in uncontested elections, except
for nominees who
o have missed at least two meetings and, as a result, attended less
than 75% of meetings of the Board of Directors and its committees
the previous year, unless the nominee missed the meeting due to
illness or fund business
o ignore a shareholder proposal that was approved by either a majority
of the shares outstanding in any year or by the majority of votes
cast for two consecutive years
o are interested directors who serve on the audit or nominating
committees or on a full Board that does not have such committees
composed exclusively of independent directors
o on a case-by-case basis, have served as directors of companies with
allegedly poor corporate governance
--------------------------------------------------------------------------------
G.2 FOR the establishment of new series or classes of shares
--------------------------------------------------------------------------------
G.3 AGAINST proposals to change a fund's investment objective to
nonfundamental
--------------------------------------------------------------------------------
G.4 FOR proposals to establish a master-feeder structure or authorizing the
Board to approve a master-feeder structure without a further shareholder
vote
--------------------------------------------------------------------------------
G.5 AGAINST a shareholder proposal for the establishment of a director
ownership requirement
--------------------------------------------------------------------------------
G.6 FOR classified boards of closed-end investment companies
--------------------------------------------------------------------------------
15
H. Environmental and Social Issues
These are shareholder proposals to limit corporate conduct in some manner
that relates to the shareholder's environmental or social concerns. The
Committee generally believes that annual shareholder meetings are inappropriate
forums for the discussion of larger social issues, and opposes shareholder
resolutions "micromanaging" corporate conduct or requesting release of
information that would not help a shareholder evaluate an investment in the
corporation as an economic matter. While the Committee is generally supportive
of proposals to require corporate disclosure of matters that seem relevant and
material to the economic interests of shareholders, the Committee is generally
not supportive of proposals to require disclosure of corporate matters for other
purposes.
The Committee's general policy is to vote:
--------------------------------------------------------------------------------
H.1 AGAINST proposals seeking to have companies adopt international codes of
conduct
--------------------------------------------------------------------------------
H.2 AGAINST proposals seeking to have companies provide non-required reports
on:
o environmental liabilities;
o bank lending policies;
o corporate political contributions or activities;
o alcohol advertising and efforts to discourage drinking by minors;
o costs and risk of doing business in any individual country;
o involvement in nuclear defense systems
--------------------------------------------------------------------------------
H.3 AGAINST proposals requesting reports on Maquiladora operations or on CERES
principles
--------------------------------------------------------------------------------
H.4 AGAINST proposals seeking implementation of the CERES principles
--------------------------------------------------------------------------------
16
Notice to Clients
BlackRock will make records of any proxy vote it has made on behalf of a
client available to such client upon request.(11) BlackRock will use its best
efforts to treat proxy votes of clients as confidential, except as it may decide
to best serve its clients' interests or as may be necessary to effect such votes
or as may be required by law.
BlackRock encourage clients with an interest in particular proxy voting
issues to make their views known to BlackRock, provided that, in the absence of
specific written direction from a client on how to vote that client's proxies,
BlackRock reserves the right to vote any proxy in a manner it deems in the best
interests of its clients, as it determines in its sole discretion.
These policies are as of the date indicated on the cover hereof. The
Committee may subsequently amend these policies at any time, without notice.
----------
(11) Such request may be made to the client's portfolio or relationship manager
or addressed in writing to Secretary, BlackRock Equity Investment Policy
Oversight Committee, Legal and Compliance Department, BlackRock Inc., 40 East
52nd Street, New York, New York 10022.
17
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
as of October 31, 2007.
(a)(1) BlackRock Preferred Income Strategies, Inc. is managed by a
team of investment professionals comprised of Scott Amero, Managing
Director at BlackRock, John D. Burger, CFA, Managing Director at
BlackRock and Daniel Chen, CFA, Director at BlackRock. Each is a
member of BlackRock's fixed income portfolio management group. Mr.
Amero is responsible for setting the Fund's overall investment
strategy and overseeing the management of the Fund. Messrs. Burger
and Chen are the Fund's co-portfolio managers and are responsible
for the day-to-day management of the Fund's portfolio and the
selection of its investments. Messrs. Amero and Chen have been
members of the Fund's management team since 2006. Mr. Burger has
been a portfolio manager of the Fund since 2003.
Scott Amero is co-head of BlackRock's fixed income portfolio
management group. He is a member of the Management Committee and
co-chair of the Fixed Income 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 fixed
income research. He is also a director of Anthracite Capital, Inc.,
BlackRock's publicly-traded real estate investment trust. Mr. Amero
has been with BlackRock since 1990.
John D. Burger joined BlackRock in 2006. Prior to joining BlackRock,
he was a Managing Director of Merrill Lynch Investment Managers
("MLIM") from 2002 to 2006 and a Director of MLIM from 1996 to 2004.
From 1992 to 1996, he was a portfolio manager of MLIM.
Daniel Chen has been a portfolio manager at BlackRock since 2002 and
is a member of BlackRock's fixed income portfolio management group.
He has been responsible for managing total return client portfolios,
with a sector emphasis on corporate bonds. Mr. Chen has been with
BlackRock since 1999.
(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 Other Other
(i) Name of Registered Pooled Registered Pooled
Portfolio Investment Investment Other Investment Investment Other
Manager Companies Vehicles Accounts Companies Vehicles Accounts
-------------------------------------------------------------------------------------------------------------------------------
Scott Amero 48 38 258 0 3 21
-------------------------------------------------------------------------------------------------------------------------------
$39,618,068,696 $6,954,333,971 $95,887,026,723 $0 $2,577,310,124 $6,366,579,342
-------------------------------------------------------------------------------------------------------------------------------
John D. Burger, CFA 3 1 54 0 0 0
-------------------------------------------------------------------------------------------------------------------------------
$2,613,489,195 $82,352,007 $12,920,752,902 $0 $0 $0
-------------------------------------------------------------------------------------------------------------------------------
Daniel Chen, CFA 4 1 2 0 0 0
-------------------------------------------------------------------------------------------------------------------------------
$1,618,528,802 $82,352,007 $276,119,420 $0 $0 $0
-------------------------------------------------------------------------------------------------------------------------------
(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 BlackRock's (or its affiliates') officers,
directors or employees are directors or officers, or companies as to
which BlackRock or any of its affiliates or the officers, directors
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 BlackRock's 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 manager's 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.
BlackRock's 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 manager's
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 Income and Preferred Stock 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 Company's 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 manager's financial
interests with those of the Company's 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 Company's performance.
Portfolio managers, therefore, have a direct incentive to protect
the Company's 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,
Mr. Burger did not beneficially own any stock issued by the
Fund. As of October 31, 2007, Mr. Amero beneficially owned
stock issued by the Fund in the range of over $1,000,000 and
Mr. Chen beneficially owned stock issued by the Fund in the
range of $1 to $10,000.
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
registrant's 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
registrant's Secretary. There have been no material changes to these
procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial
officers or persons performing similar functions have concluded that
the registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act")) are effective as of a date within 90 days of the
filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
13a-15(b) under the Securities and Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BlackRock Preferred Income Strategies Fund, Inc.
By: /s/ Donald C. Burke
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Donald C. Burke,
Chief Executive Officer (principal executive officer) of
BlackRock Preferred Income Strategies Fund, Inc.
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
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Donald C. Burke,
Chief Executive Officer (principal executive officer) of
BlackRock Preferred Income Strategies Fund, Inc.
Date: December 19, 2007
By: /s/ Neal J. Andrews
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Neal J. Andrews,
Chief Financial Officer (principal financial officer) of
BlackRock Preferred Income Strategies Fund, Inc.
Date: December 19, 2007