UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21341
Name of Fund: BlackRock Preferred and Corporate Income Strategies Fund, Inc.
(PSW)
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Donald C. Burke, Chief Executive Officer,
BlackRock Preferred and Corporate 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: 10/31/2008
Date of reporting period: 11/01/2007 - 04/30/2008
Item 1 - Report to Stockholders
EQUITIES FIXED INCOME REAL ESTATE
LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
------------------------------------
Semi-Annual Report BLACKROCK
APRIL 30, 2008 | (UNAUDITED)
------------------------------------
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
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Table of Contents
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Page
--------------------------------------------------------------------------------
A Letter to Shareholders ............................................... 3
Semi-Annual Report:
Fund Summary ........................................................... 4
The Benefits and Risks of Leveraging ................................... 6
Swap Agreements ........................................................ 6
Financial Statements:
Schedule of Investments ............................................. 7
Statements of Assets and Liabilities ................................ 15
Statements of Operations ............................................ 17
Statements of Changes in Net Assets ................................. 18
Financial Highlights ................................................... 20
Notes to Financial Statements .......................................... 22
Officers and Directors ................................................. 28
Additional Information ................................................. 29
2 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
A Letter to Shareholders
Dear Shareholder
Over the past several months, financial markets have been buffeted by the
housing recession, the credit market unraveling and related liquidity freeze and
steadily rising commodity prices. Counterbalancing these difficulties were
booming export activity, a robust non-financial corporate sector and, notably,
aggressive and timely monetary and fiscal policy actions.
Amid the market tumult, the Federal Reserve Board (the "Fed") intervened with a
series of moves to bolster liquidity and ensure financial market stability.
Since September 2007, the central bank slashed the target federal funds rate 325
basis points (3.25%), bringing the rate to 2.0% as of period-end. Of greater
magnitude, however, were the Fed's other policy decisions, which included
opening the discount window directly to broker dealers and investment banks and
backstopping the unprecedented rescue of Bear Stearns.
The Fed's response to the financial crisis helped to improve credit conditions
and investor mood. After hitting a low point on March 17 (coinciding with the
collapse of Bear Stearns), equity markets found a welcome respite in April, when
the S&P 500 Index of U.S. stocks posted positive monthly performance for the
first time since October 2007. International markets, which outpaced those of
the U.S. for much of 2007, saw a reversal in that trend, as effects of the
credit crisis and downward pressures on growth were far-reaching.
In contrast to equity markets, Treasury securities rallied (yields fell as
prices correspondingly rose), as a broad "flight-to-quality" theme persisted.
The yield on 10-year Treasury issues, which touched 5.30% in June 2007 (its
highest level in five years), fell to 4.04% by year-end and to 3.77% by April
30. Treasury issues relinquished some of their gains in April, however, as
investor appetite for risk returned and other high-quality fixed income sectors
outperformed.
Problems within the monoline insurance industry and the failure of auctions for
auction rate securities plagued the municipal bond market, driving yields higher
and prices lower across the curve. However, in conjunction with the more recent
shift in sentiment, the sector delivered strong performance in the final month
of the reporting period.
Overall, the major benchmark indexes generated results that generally reflected
heightened investor risk aversion:
Total Returns as of April 30, 2008 6-month 12-month
---------------------------------------------------------------------------------------------------------
U.S. equities (S&P 500 Index) - 9.64% - 4.68%
---------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) -12.92 -10.96
---------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) - 9.21 - 1.78
---------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers U.S. Aggregate Index) + 4.08 + 6.87
---------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 1.47 + 2.79
---------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Capped Index) - 0.73 - 0.80
---------------------------------------------------------------------------------------------------------
Past performance is no guarantee of future results. Index performance shown for
illustrative purposes only. You cannot invest directly in an index.
As you navigate today's volatile markets, we encourage you to review your
investment goals with your financial professional and to make portfolio changes,
as needed. For more up-to-date commentary on the economy and financial markets,
we invite you to visit www.blackrock.com/funds. As always, we thank you for
entrusting BlackRock with your investment assets, and we look forward to
continuing to serve you in the months and years ahead.
Sincerely,
/s/ Rob Kapito
Rob Kapito
President, BlackRock Advisors, LLC
THIS PAGE NOT PART OF YOUR FUND REPORT
3
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Fund Summary April 30, 2008
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.
--------------------------------------------------------------------------------
Performance
--------------------------------------------------------------------------------
For the six months ended April 30, 2008, the Fund returned -4.67% based on
market price, with dividends reinvested. The Fund's return based on net asset
value ("NAV") was -12.34%, with dividends reinvested. For the same period,
the Lipper Income & Preferred Stock Funds (closed-end) category posted an
average return of -10.71% on a NAV basis. During the period, preferred bond
funds came under pressure as a result of adverse financial market conditions
and concerns about credit quality. Financial issuers, which constitute a
majority of the preferred market, were especially affected.
--------------------------------------------------------------------------------
Fund Information
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange .............................. PSW
Initial Offering Date .......................................... August 1, 2003
Yield on Closing Market Price as of April 30, 2008 ($15.82)* ... 7.84%
Current Monthly Distribution per share of Common Stock** ....... $0.1033
Current Annualized Distribution per share of Common Stock** .... $1.2396
Leverage as of April 30, 2008*** ............................... 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.
*** 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:
-----------------------------------------------------------------------------
4/30/08 10/31/07 Change High Low
-----------------------------------------------------------------------------
Market Price ............... $ 15.82 $ 17.29 (8.50%) $17.50 $14.21
Net Asset Value ............ $ 16.44 $ 19.54 (15.86%) $19.57 $15.91
-----------------------------------------------------------------------------
The following charts show the portfolio composition and credit quality
allocations of the Fund's long-term investments:
-----------------------------------------------------------------------------
Portfolio Composition
-----------------------------------------------------------------------------
Asset Mix 4/30/08 10/31/07
-----------------------------------------------------------------------------
Corporate Bonds ....................................... 37% 42%
Preferred Stocks ...................................... 26 22
Capital Trusts ........................................ 22 19
Trust Preferreds ...................................... 8 9
Real Estate Investment Trusts ......................... 5 7
Exchange-Traded Funds ................................. 2 --
U.S. Government Obligations ........................... -- 1
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Credit Quality Allocations*
-----------------------------------------------------------------------------
Credit Rating 4/30/08 10/31/07
-----------------------------------------------------------------------------
AAA/Aaa ............................................... -- 3%
AA/Aa ................................................. 12% 12
A/A ................................................... 28 21
BBB/Baa ............................................... 21 30
BB/Ba ................................................. 5 4
Not Rated ............................................. 2 2
Other** ............................................... 32 28
-----------------------------------------------------------------------------
* Using the higher of Standard & Poor's or Moody's Investors Service
ratings.
** Includes portfolio holdings in Preferred Stocks, Real Estate Investment
Trusts and exchange-traded funds.
4 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Fund Summary April 30, 2008
BlackRock Preferred Income Strategies Fund, Inc.
--------------------------------------------------------------------------------
Investment Objective
--------------------------------------------------------------------------------
BlackRock Preferred Income Strategies Fund, Inc. (PSY) seeks to provide
shareholders 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.
--------------------------------------------------------------------------------
Performance
--------------------------------------------------------------------------------
For the six months ended April 30, 2008, the Fund returned -2.27% based on
market price, with dividends reinvested. The Fund's return based on NAV was
-13.73%, with dividends reinvested. For the same period, the Lipper Income &
Preferred Stock Funds (closed-end) category posted an average return of
-10.71% on a NAV basis. During the period, preferred bond funds came under
pressure as a result of adverse financial market conditions and concerns
about credit quality. Financial issuers, which constitute a majority of the
preferred market, were especially affected.
--------------------------------------------------------------------------------
Fund Information
--------------------------------------------------------------------------------
Symbol on New York Stock Exchange .............................. PSY
Initial Offering Date .......................................... March 28, 2003
Yield on Closing Market Price as of April 30, 2008 ($15.86)* ... 8.67%
Current Monthly Distribution per share of Common Stock** ....... $0.114583
Current Annualized Distribution per share of Common Stock** .... $1.374996
Leverage as of April 30, 2008*** ............................... 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.
*** 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:
-----------------------------------------------------------------------------
4/30/08 10/31/07 Change High Low
-----------------------------------------------------------------------------
Market Price ............... $ 15.86 $ 16.94 (6.38%) $17.65 $14.53
Net Asset Value ............ $ 16.47 $ 19.93 (17.36%) $19.95 $16.08
-----------------------------------------------------------------------------
The following charts show the portfolio composition and credit quality
allocations of the Fund's long-term investments:
-----------------------------------------------------------------------------
Portfolio Composition
-----------------------------------------------------------------------------
Asset Mix 4/30/08 10/31/07
-----------------------------------------------------------------------------
Corporate Bonds ........................................ 34% 38%
Capital Trusts ......................................... 29 25
Preferred Stocks ....................................... 26 25
Trust Preferreds ....................................... 7 8
Real Estate Investment Trusts .......................... 2 3
Exchange-Traded Funds .................................. 2 --
U.S. Government Obligations ............................ -- 1
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Credit Quality Allocations*
-----------------------------------------------------------------------------
Credit Rating 4/30/08 10/31/07
-----------------------------------------------------------------------------
AAA/Aaa ................................................ -- 1%
AA/Aa .................................................. 14% 13
A/A .................................................... 32 29
BBB/Baa ................................................ 19 23
BB/Ba .................................................. 3 2
Not Rated .............................................. 2 3
Other** ................................................ 30 29
-----------------------------------------------------------------------------
* Using the higher of Standard & Poor's or Moody's Investors Service
ratings.
** Includes portfolio holdings in Preferred Stocks, Real Estate Investment
Trusts and exchange-traded funds.
SEMI-ANNUAL REPORT APRIL 30, 2008 5
================================================================================
The Benefits and Risks of Leveraging
BlackRock Preferred and Corporate Income Strategies Fund, Inc. and BlackRock
Preferred Income Strategies Fund, Inc. (each a "Fund" and, collectively, 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 Common Stock shareholders, including the likelihood
of greater NAV 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 NAV 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.
As of April 30, 2008, BlackRock Preferred and Corporate Income Strategies Fund,
Inc. and BlackRock Preferred Income Strategies Fund, Inc. each had leverage
amounts of 45% of managed assets.
--------------------------------------------------------------------------------
Swap Agreements
--------------------------------------------------------------------------------
The Fund may invest in swap agreements, which are over-the-counter contracts in
which one party agrees to make periodic payments based on the change in market
value of a specified bond, basket of bonds or index in return for periodic
payments based on a fixed or variable interest rate or the change in market
value of a different bond, basket of bonds or index. Swap agreements may be used
to obtain exposure to a bond or market without owning or taking physical custody
of securities. Swap agreements involve the risk that the party with whom the
Fund has entered into the swap will default on its obligation to pay the Fund
and the risk that the Fund will not be able to meet its obligations to pay the
other party to the agreement.
6 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Schedule of Investments April 30, 2008 (Unaudited)
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par
Capital Trusts (000) Value
--------------------------------------------------------------------------------
Capital Markets -- 3.4%
Credit Suisse Guernsey Ltd. Series 1, 3.755%
(a)(b) $ 1,400 $ 1,119,538
Lehman Brothers Holdings Capital Trust V, 3.915%
(a)(b) 1,600 1,088,461
State Street Capital Trust III, 8.25% (a)(b) 980 976,681
State Street Capital Trust IV, 3.80%, 6/01/67 (a) 3,390 2,574,261
------------
5,758,941
================================================================================
Commercial Banks -- 9.7%
Abbey National Capital Trust I, 8.963% (a)(b) 725 774,676
BB&T Capital Trust IV, 6.82%, 6/12/77 (a) 4,600 4,045,516
Barclays Bank Plc, 5.926%, (a)(b)(c) 1,585 1,338,282
First Empire Capital Trust II, 8.277%, 6/01/27 910 913,899
Hubco Capital Trust II Series B, 7.65%, 6/15/28 1,500 1,559,839
Huntington Capital III, 6.65%, 5/15/37 (a) 975 704,893
Regions Financing Trust II, 6.625%,
5/15/47 (a) 1,430 1,001,465
Royal Bank of Scotland Group Plc, 7.648% (a)(b) 980 827,994
Wachovia Corp. Series K, 7.98% (a)(b) 5,335 5,248,786
------------
16,415,350
================================================================================
Consumer Finance -- 0.6%
MBNA Capital A, 8.278%, 12/01/26 910 922,614
================================================================================
Diversified Financial Services -- 10.4%
Bank of America Corp. Series M, 8.125% (a)(b) 3,800 3,883,524
Citigroup, Inc., 8.40% (b) 5,800 5,870,064
Farm Credit Bank of Texas Series 1, 7.561% (a)(b) 3,000 2,925,210
JPMorgan Chase & Co., 7.90% (b) 3,500 3,565,450
JPMorgan Chase Capital XXIII, 4.065%,
5/15/77 (a) 1,830 1,399,901
------------
17,644,149
================================================================================
Insurance -- 10.9%
AON Corp., 8.205%, 1/01/27 3,990 3,762,818
Ace Capital Trust II, 9.70%, 4/01/30 1,510 1,741,735
Farmers Exchange Capital, 7.05%, 7/15/28 (c) 9,110 8,358,881
Genworth Financial, Inc., 6.15%, 11/15/66 (a) 750 628,081
Mangrove Bay Pass-Through Trust, 6.102%,
7/15/33 (a)(c) 3,000 2,157,180
Oil Casualty Insurance Ltd., 8%, 9/15/34 (c) 915 796,107
Zenith National Insurance Capital Trust I, 8.55%
(c)(d) 1,000 945,000
------------
18,389,802
================================================================================
Multi-Utilities -- 0.7%
Dominion Resources Capital Trust I,
7.83%, 12/01/27 1,200 1,227,649
================================================================================
Thrifts & Mortgage Finance -- 0.4%
Webster Capital Trust IV, 7.65%, 6/15/37 (a) 975 714,586
--------------------------------------------------------------------------------
Total Capital Trusts -- 36.1% 61,073,091
================================================================================
================================================================================
Preferred Stocks Shares
--------------------------------------------------------------------------------
Capital Markets -- 0.2%
Deutsche Bank Contingent Capital Trust II, 6.55% 15,000 333,000
--------------------------------------------------------------------------------
Commercial Banks -- 6.7%
Barclays Bank Plc, 8.125% 50,000 1,267,500
First Tennessee Bank NA, 3.90% (a)(c) 1,176 844,515
Provident Financial Group, Inc., 7.75% 42,000 1,080,190
================================================================================
Preferred Stocks Shares Value
--------------------------------------------------------------------------------
Commercial Banks (concluded)
Santander Finance Preferred
SA Unipersonal:
6.50% 134,000 $ 2,843,319
6.80% 110,000 2,447,500
Sovereign Bancorp, Inc. Series C, 7.30% (e) 1,400 27,020
Wachovia Corp. Series J, 8% 112,500 2,830,500
------------
11,340,544
================================================================================
Consumer Finance -- 1.2%
Capital One Capital II, 7.50%, 6/15/66 2,325,500 1,995,300
================================================================================
Diversified Financial Services -- 6.6%
Citigroup, Inc. Series AA, 8.125% 130,000 3,295,500
Citigroup, Inc. Series T, 6.50% (f)(g) 60,000 3,129,000
Cobank ACB, 7% (c) 38,000 1,712,508
JPMorgan Chase Capital XXI Series U, 3.80% (a) 3,870,000 2,985,651
------------
11,122,659
================================================================================
Electric Utilities -- 2.2%
Alabama Power Co., 6.50% 25,000 618,750
Entergy Arkansas, Inc., 6.45% 28,800 717,301
Entergy Louisiana LLC, 6.95% 22,650 2,393,199
------------
3,729,250
================================================================================
Insurance -- 12.5%
AXA SA, 6.379% (a)(c) 3,585,000 3,083,792
Aspen Insurance Holdings Ltd., 7.401% (a) 55,000 1,201,750
Axis Capital Holdings Ltd:
Series A, 7.25% 35,000 834,050
Series B, 7.50% (a) 9,000 865,688
Endurance Specialty Holdings Ltd.
Series A, 7.75% 35,200 832,480
Financial Security Assurance Holdings Ltd.,
6.40% (a)(c) 1,740,000 1,259,814
Great West Life & Annuity Insurance Co.,
7.153% (a)(c) 2,000,000 1,822,568
MetLife, Inc., 6.40% 4,225,000 3,802,661
MetLife, Inc. Series B, 6.50% 170,000 3,915,100
PartnerRe Finance II, 6.44% (a) 1,450,000 1,156,510
RenaissanceRe Holding Ltd. Series D, 6.60% 110,000 2,348,500
------------
21,122,913
================================================================================
Multi-Utilities -- 1.2%
Dominion Resources, Inc., 7.50% (a) 2,100,000 1,947,620
================================================================================
Oil, Gas & Consumable Fuels -- 0.5%
Enterprise Products Operating LP, 8.375% (a) 825,000 821,154
================================================================================
Thrifts & Mortgage Finance -- 9.3%
Fannie Mae, 8.25% 190,000 4,757,600
Fannie Mae Series L, 5.125% 6,000 205,500
Fannie Mae Series O, 7% (a) 100,000 4,581,250
Freddie Mac Series:
U, 5.90% 50,000 1,000,000
V, 5.57% 75,000 1,422,660
Y, 6.55% 100,000 2,305,000
Z, 8.375% 55,000 1,408,000
------------
15,680,010
================================================================================
Wireless Telecommunication Services -- 1.6%
Centaur Funding Corp., 9.08% (c) 2,720 2,731,900
--------------------------------------------------------------------------------
Total Preferred Stocks -- 41.9% 70,824,350
================================================================================
See Notes to Financial Statements.
SEMI-ANNUAL REPORT APRIL 30, 2008 7
================================================================================
Schedule of Investments (continued)
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Real Estate Investment Trusts Shares Value
--------------------------------------------------------------------------------
Real Estate Investment Trusts (REITs) -- 7.2%
BRE Properties, Inc. Series D, 6.75% 10,000 $ 216,200
First Industrial Realty Trust, Inc., 6.236% (a) 610 629,825
HCP, Inc. Series F, 7.10% 17,000 374,340
HRPT Properties Trust:
Series B, 8.75% 247,917 6,202,883
Series C, 7.125% 125,000 2,688,750
iStar Financial, Inc. Series I, 7.50% 59,500 941,290
Public Storage, Inc. Series I, 7.25% 40,000 960,000
Public Storage Series F, 6.45% 10,000 211,000
--------------------------------------------------------------------------------
Total Real Estate Investment Trusts -- 7.2% 12,224,288
================================================================================
================================================================================
Par
Trust Preferreds (000)
--------------------------------------------------------------------------------
Diversified Financial Services -- 1.0%
Citigroup Capital XVII, 6.35%, 3/15/67 (a)(g) $ 1,980 1,674,171
================================================================================
Electric Utilities -- 0.7%
PPL Energy Supply LLC, 7%, 7/15/46 1,235 1,230,383
================================================================================
Gas Utilities -- 5.9%
Southwest Gas Capital II, 7.70%, 9/15/43 10,000 9,902,697
================================================================================
Insurance -- 2.1%
ABN AMRO North America Capital Funding
Trust II, 2.855% (a)(b)(c)(d) 2,000 1,361,435
Lincoln National Capital VI Series F,
6.75%, 9/11/52 2,250 2,172,397
------------
3,533,832
================================================================================
Media -- 3.1%
Comcast Corp., 6.625%, 5/15/56 5,875 5,239,419
================================================================================
Thrifts & Mortgage Finance -- 0.5%
Countrywide Financial Corp., 6.75%, 4/01/33 1,250 926,988
--------------------------------------------------------------------------------
Total Trust Preferreds -- 13.3% 22,507,490
================================================================================
Total Preferred Securities -- 98.5% 166,629,219
================================================================================
================================================================================
Corporate Bonds
================================================================================
Building Products -- 0.5%
C8 Capital SPV Ltd., 6.64% (a)(b)(c) 980 910,695
================================================================================
Capital Markets -- 3.9%
Ameriprise Financial, Inc., 7.518%, 6/01/66 (a) 1,900 1,754,855
The Bear Stearns Cos., Inc., 6.40%, 10/02/17 1,000 1,031,713
Credit Suisse Guernsey Ltd., 5.86% (a)(b) 1,970 1,667,428
Lehman Brothers Holdings, Inc.:
4.50%, 9/15/22 (a) 330 320,211
6.875%, 7/17/37 1,950 1,807,835
------------
6,582,042
================================================================================
Par
Corporate Bonds (000) Value
--------------------------------------------------------------------------------
Commercial Banks -- 18.7%
BNP Paribas, 7.195% (a)(b)(c) $ 7,000 $ 6,566,903
Bank of Ireland Capital Funding II, LP,
5.571% (a)(b)(c) 2,015 1,500,746
Bank of Ireland Capital Funding III, LP,
6.107% (a)(b)(c) 2,150 1,632,723
Barclays Bank Plc (a)(b)(c):
7.70% 3,000 3,062,433
7.434% 1,325 1,269,987
Credit Agricole SA, 6.637% (a)(b)(c) 7,945 6,514,694
Royal Bank of Scotland Group Plc (b)(c):
9.118% 1,200 1,213,145
6.99% (a) 1,400 1,285,014
Series MTN, 7.64% (a) 1,900 1,788,404
Societe Generale, 5.922% (a)(b)(c) 4,600 3,930,143
Standard Chartered Bank, 7.014% (a)(b)(c) 2,350 2,168,159
SunTrust Preferred Capital I, 5.853% (a)(b) 1,050 798,000
------------
31,730,351
================================================================================
Diversified Financial Services -- 6.3%
Bank of America Corp. Series K, 8% (a)(b) 6,310 6,419,655
Citigroup, Inc., 8.30%, 12/21/77 (a) 1,317 1,344,571
JPMorgan Chase Capital XXV, 6.80%, 10/01/37 3,125 2,961,516
------------
10,725,742
================================================================================
Electric Utilities -- 0.8%
PPL Capital Funding, 6.70%, 3/30/67 (a) 1,500 1,278,389
================================================================================
Gas Utilities -- 1.1%
Southern Union Co., 7.20%, 11/01/66 (a) 2,350 1,918,178
================================================================================
Insurance -- 24.7%
The Allstate Corp., 6.50%, 5/15/57 (a) 3,200 2,935,584
The Allstate Corp. Series B, 6.125%, 5/15/67 (a) 2,625 2,438,145
American International Group, Inc.,
6.25%, 3/15/87 (g) 2,800 2,468,732
Chubb Corp., 6.375%, 3/29/67 (a) 4,475 4,175,412
Everest Reinsurance Holdings, Inc., 6.60%,
5/01/67 (a) 3,560 2,894,825
Liberty Mutual Group, Inc., 7%, 3/15/37 (a)(c) 2,550 2,350,682
Lincoln National Corp. (a):
7%, 5/17/66 3,000 2,764,428
6.05%, 4/20/67 1,250 1,073,845
Nationwide Life Global Funding I,
6.75%, 5/15/67 2,450 1,994,721
Oil Insurance Ltd., 7.558% (a)(b)(c) 1,000 873,690
Progressive Corp., 6.70%, 6/15/37 (a) 2,900 2,593,290
QBE Capital Funding II LP, 6.797% (a)(b)(c) 2,120 1,821,050
Reinsurance Group of America, 6.75%,
12/15/65 (a) 700 555,551
Swiss Re Capital I LP, 6.854% (a)(b)(c) 2,225 2,018,972
The Travelers Cos., Inc., 6.25%, 3/15/67 (a) 5,750 5,032,699
ZFS Finance (USA) Trust II, 6.45%,
12/15/65 (a)(c) 1,800 1,585,606
See Notes to Financial Statements.
8 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Schedule of Investments (continued)
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par
Corporate Bonds (000) Value
--------------------------------------------------------------------------------
Insurance (concluded)
ZFS Finance (USA) Trust IV, 5.875%,
5/09/32 (a)(c) $ 500 $ 458,380
ZFS Finance (USA) Trust V, 6.50%,
5/09/67 (a)(c) 4,355 3,836,415
------------
41,872,027
================================================================================
Multi-Utilities -- 0.3%
Puget Sound Energy, Inc. Series A, 6.974%,
6/01/67 (a) 475 428,068
================================================================================
Oil, Gas & Consumable Fuels -- 2.6%
Conoco Funding Co., 6.35%, 10/15/11 1,510 1,613,400
Plains All American Pipeline LP, 6.50%,
5/01/18 (c) 800 803,411
TransCanada PipeLines Ltd., 6.35%,
5/15/67 (a) 2,150 1,910,853
------------
4,327,664
================================================================================
Thrifts & Mortgage Finance -- 0.3%
Washington Mutual Preferred Funding Delaware,
6.534% (a)(b)(c) 800 460,056
--------------------------------------------------------------------------------
Total Corporate Bonds -- 59.2% 100,233,212
================================================================================
Exchange-Traded Funds Shares Value
--------------------------------------------------------------------------------
UltraShort Financials ProShares 46,000 $ 4,657,960
--------------------------------------------------------------------------------
Total Exchange-Traded Funds -- 2.8% 4,657,960
================================================================================
Total Long-Term Investments
(Cost -- $295,281,096) -- 160.5% 271,520,391
================================================================================
================================================================================
Beneficial
Interest
Short-Term Securities (000)
--------------------------------------------------------------------------------
BlackRock Liquidity Series, LLC Cash Sweep
Series, 3.03% (h)(i) $ 35,107 35,106,666
--------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $35,106,666) -- 20.7% 35,106,666
================================================================================
Total Investments
(Cost -- $330,387,762*) -- 181.2% 306,627,057
Liabilities in Excess of Other Assets -- (0.5%) (866,289)
Preferred Stock,
at Redemption Value -- (80.7%) (136,517,798)
------------
Net Assets Applicable to Common Stock -- 100.0% $169,242,970
============
--------------------------------------------------------------------------------
* The cost and unrealized appreciation (depreciation) of investments as of
April 30, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost ........................................... $330,381,803
============
Gross unrealized appreciation ............................ $ 1,676,011
Gross unrealized depreciation ............................ (25,430,757)
------------
Net unrealized depreciation .............................. $(23,754,746)
============
(a) Variable rate security. Rate shown is as of report date. Maturity shown is
the final maturity date.
(b) Security is perpetual in nature and has no stated maturity date. In
certain instances, a final maturity date may be extended and/or the final
payment may be deferred at the issuers option for a specified time without
default.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. Unless otherwise
indicative these securities are not considered to be illiquid.
(d) Illiquid security.
(e) Depositary receipts.
(f) Convertible security.
(g) All or a portion of the security has been pledged as collateral in
connection with open financial futures contracts.
(h) 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
Activity Interest
Affiliate (000) Income
--------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series $ 12,151 $ 643,631
--------------------------------------------------------------------------
(i) Represents the current yield as of report date.
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.
o Financial futures contracts sold as of April 30,2008 were as follows:
--------------------------------------------------------------------------
Unrealized
Number of Expiration Face Appreciation
Contracts Issue Date Value (Depreciation)
--------------------------------------------------------------------------
5-Year June
189 U.S. Treasury Bond 2008 $ 21,146,912 $ (18,135)
10-Year June
125 U.S. Treasury Bond 2008 14,894,257 $ 417,694
30-Year June
974 U.S. Treasury Bond 2008 114,250,295 $ 398,826
--------------------------------------------------------------------------
Total Net Unrealized Appreciation $ 798,385
=============
See Notes to Financial Statements.
SEMI-ANNUAL REPORT APRIL 30, 2008 9
================================================================================
Schedule of Investments (concluded)
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
o Swaps outstanding as of April 30, 2008 were as follows:
--------------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
(000) (Depreciation)
--------------------------------------------------------------------------------
Receive a fixed rate of 3.1925% and pay a
floating rate based on 3-month USD LIBOR
Broker, Citibank N.A.
Expires April 2010 $ 74,700 $ 113,974
Receive a fixed rate of 3.193% and pay a
floating rate based on 3-month USD LIBOR
Broker, Deutsche Bank AG
Expires April 2010 99,600 152,948
Bought credit default protection on Capital One
Financial Corp. and pay 4.175%
Broker, Citibank N.A.
Expires March 2013 1,000 (77,819)
Bought credit default protection on Capital One
Financial Corp. and pay 4.2%
Broker, Deutsche Bank AG
Expires March 2013 2,000 (157,700)
Bought credit default protection on American
Express Company and pay 2.10%
Broker, JPMorgan Chase
Expires March 2013 2,000 (92,840)
Bought credit default protection on Lehman
Brothers Holdings, Inc. and pay 4.95%
Broker, Deutsche Bank AG
Expires March 2013 1,000 (139,122)
Receive a fixed rate of 3.8925% and pay a
floating rate based on 3-month USD LIBOR
Broker, Lehman Brothers Special Finance
Expires April 2013 19,900 87,495
Bought credit default protection on Kimco Realty
Corp. and pay 2.4%
Broker, Goldman Sachs & Co.
Expires March 2018 1,000 (82,377)
Bought credit default protection on Mack-Cali
Realty L.P. and pay 3.1%
Broker, Goldman Sachs & Co.
Expires March 2018 1,000 (55,731)
Bought credit default protection on ERP
Operating Limited Partnership and pay 2.35%
Broker, Goldman Sachs & Co.
Expires March 2018 1,000 (95,644)
--------------------------------------------------------------------------------
Total $ (346,816)
=============
See Notes to Financial Statements.
10 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Schedule of Investments April 30, 2008 (Unaudited)
BlackRock Preferred Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par
Capital Trusts (000) Value
--------------------------------------------------------------------------------
Capital Markets -- 3.4%
Credit Suisse Guernsey Ltd, Series 1,
3.755% (a)(b) $ 5,800 $ 4,638,086
Lehman Brothers Holdings Capital Trust V,
3.915% (a)(b) 6,400 4,353,843
State Street Capital Trust III, 8.25% (a)(b) 4,000 3,986,453
State Street Capital Trust IV, 3.80%, 6/01/67 (a) 12,535 9,518,690
------------
22,497,072
================================================================================
Commercial Banks -- 19.5%
ABN AMRO North America Holding Preferred
Capital Repackaging Trust I, 6.523% (a)(b)(c) 12,035 11,843,126
Abbey National Capital Trust I, 8.963% (a)(b) 2,811 3,003,607
BB&T Capital Trust IV, 6.82%, 6/12/77 (a) 18,350 16,138,091
Bank One Capital III, 8.75%, 9/01/30 2,000 2,180,868
Barclays Bank Plc, 5.926% (a)(b)(c) 6,115 5,163,151
First Empire Capital Trust II, 8.277%, 6/01/27 3,630 3,645,555
HSBC America Capital Trust I, 7.808%,
12/15/26 (c) 2,000 2,014,218
HSBC Capital Funding LP/Jersey Channel
Islands, 10.176% (a)(b)(c) 15,835 19,610,919
HSBC Finance Capital Trust IX, 5.911%,
11/30/35 (a) 7,300 6,066,242
Hubco Capital Trust II Series B, 7.65%, 6/15/28 12,275 12,764,685
Huntington Capital III, 6.65%, 5/15/37 (a) 3,850 2,783,423
NationsBank Capital Trust III, 3.263%,
1/15/27 (a) 13,470 10,133,643
Regions Financing Trust II, 6.625%, 5/15/47 (a) 5,705 3,995,354
Royal Bank of Scotland Group Plc, 7.648% (a)(b) 3,930 3,320,426
SunTrust Preferred Capital I, 5.853% (a)(b) 4,175 3,173,000
Wachovia Corp, Series K, 7.98% (a)(b) 24,650 24,251,656
------------
130,087,964
================================================================================
Consumer Finance -- 0.7%
MBNA Capital A, 8.278%, 12/01/26 4,630 4,694,181
================================================================================
Diversified Financial Services -- 11.9%
AgFirst Farm Credit Bank, 8.393%, 12/15/16 (a)(d) 15,000 12,610,935
Bank of America Corp., Series M, 8.125% (a)(b) 15,200 15,534,096
Citigroup, Inc., 8.40% (a)(b) 23,000 23,277,840
Farm Credit Bank of Texas Series 1,
7.561%, (a)(b) 9,000 8,775,630
JPMorgan Chase & Co., 7.90% (a)(b) 13,000 13,243,100
JPMorgan Chase Capital XXIII, 4.065%,
5/15/77 (a) 8,375 6,406,649
------------
79,848,250
================================================================================
Electric Utilities -- 0.8%
SWEPCO Capital I, 5.25%, 10/01/43 (a) 5,000 5,027,690
================================================================================
Insurance -- 10.6%
AON Corp., 8.205%, 1/01/27 12,175 11,481,780
Ace Capital Trust II, 9.70%, 4/01/30 11,300 13,034,177
Farmers Exchange Capital, 7.05%, 7/15/28 (c) 15,000 13,763,250
GE Global Insurance Holding Corp.,
7.75%, 6/15/30 10,000 10,587,070
Genworth Financial, Inc., 6.15%, 11/15/66 (a) 3,000 2,512,323
ING Capital Funding Trust III, 8.439% (a)(b) 6,066 6,092,575
Oil Casualty Insurance Ltd., 8%, 9/15/34 (c) 3,605 3,136,574
Par
Capital Trusts (000) Value
--------------------------------------------------------------------------------
Insurance (concluded)
Principal Life Insurance Co., 8%, 3/01/2044
(Surplus Notes) (c) $ 6,325 $ 6,917,690
Zenith National Insurance Capital Trust I, 8.55%,
8/01/28 (c)(d) 3,750 3,543,750
------------
71,069,189
================================================================================
Multi-Utilities -- 1.5%
Dominion Resources Capital Trust I,
7.83%, 12/01/27 10,000 10,230,410
================================================================================
Road & Rail -- 0.5%
BNSF Funding Trust I, 6.613%, 12/15/55 (a) 3,750 3,442,980
================================================================================
Thrifts & Mortgage Finance -- 0.4%
Webster Capital Trust IV, 7.65%, 6/15/37 (a) 3,875 2,840,022
--------------------------------------------------------------------------------
Total Capital Trusts -- 49.3% 329,737,758
================================================================================
================================================================================
Preferred Stocks Shares
--------------------------------------------------------------------------------
Capital Markets -- 0.2%
Deutsche Bank Contingent Capital Trust II, 6.55% 72,200 1,602,840
================================================================================
Commercial Banks -- 8.5%
Barclays Bank Plc, 8.125% 225,000 5,703,750
First Tennessee Bank NA, 3.90% (c) 4,650 3,339,281
Provident Financial Group, Inc., 7.75% 166,800 4,289,896
SG Preferred Capital II, 6.302% (a) 23,000 21,806,875
Santander Finance Preferred SA Unipersonal:
6.50% 374,000 7,935,831
6.80% 208,600 4,641,350
Sovereign Bancorp, Inc. Series C, 7.30% (e) 48,000 926,400
Wachovia Corp., Series J, 8% 325,000 8,177,000
------------
56,820,383
================================================================================
Diversified Financial Services -- 5.9%
Citigroup, Inc.:
Series AA, 8.125% 326,400 8,274,240
Series T, 6.50% (f) 240,000 12,516,000
Cobank ACB, 7% (c) 152,000 6,850,032
JPMorgan Chase Capital XXI Series U,
3.80% (a) 15,525,000 11,977,320
------------
39,617,592
================================================================================
Electric Utilities -- 2.2%
Alabama Power Co.:
5.83% 14,000 336,000
6.50% 145,000 3,588,750
Entergy Arkansas, Inc., 6.45% 114,400 2,849,281
Entergy Louisiana LLC, 6.95% 49,850 5,267,151
Interstate Power & Light Co. Series B, 8.375% 80,000 2,344,000
------------
14,385,182
================================================================================
See Notes to Financial Statements.
SEMI-ANNUAL REPORT APRIL 30, 2008 11
================================================================================
Schedule of Investments (continued)
BlackRock Preferred Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Preferred Stocks Shares Value
--------------------------------------------------------------------------------
Insurance -- 15.9%
ACE Ltd. Series C, 7.80% 400,000 $ 9,880,000
AXA SA, 6.379% (a)(c) 13,470,000 11,586,800
Aspen Insurance Holdings Ltd., 7.401% (a) 194,000 4,238,900
Axis Capital Holdings Ltd.:
Series A, 7.25% 129,300 3,081,219
Series B, 7.50% (a) 36,000 3,462,750
Endurance Specialty Holdings Ltd.
Series A, 7.75% 139,200 3,292,080
Financial Security Assurance Holdings Ltd.,
6.40% (a)(c) 6,930,000 5,017,535
Great West Life & Annuity Insurance Co.,
7.153% (a)(c) 7,500,000 6,834,630
MetLife, Inc.:
6.40%, 12/15/66 16,825,000 15,143,139
Series B, 6.50% 764,400 17,604,132
PartnerRe Finance II, 6.44% (a) 5,700,000 4,546,280
Prudential Plc, 6.50% 92,400 2,042,040
RenaissanceRe Holding Ltd. Series D, 6.60% 435,000 9,287,250
Zurich RegCaPS Funding Trust, 6.58% (a)(c) 9,800 9,634,625
------------
105,651,380
================================================================================
Multi-Utilities -- 1.7%
Dominion Resources, Inc., 7.50% (a) 8,400,000 7,790,479
Pacific Gas & Electric Co. Series A, 6% 140,000 3,591,000
------------
11,381,479
================================================================================
Thrifts & Mortgage Finance -- 8.6%
Fannie Mae:
8.25% 749,025 18,755,586
Series L, 5.125% 264,650 9,064,263
Series O, 7% (a) 112,148 5,137,780
Freddie Mac:
Series Q, 3.85% (a) 120,000 3,660,000
Series U, 5.90% 225,000 4,500,000
Series V, 5.57% 325,000 6,164,860
Series Y, 6.55% 216,600 4,992,630
Series Z, 8.375% 215,000 5,504,000
------------
57,779,119
================================================================================
Wireless Telecommunication Services -- 0.4%
Centaur Funding Corp., 9.08% (c) 2,423 2,433,601
--------------------------------------------------------------------------------
Total Preferred Stocks -- 43.4% 289,671,576
================================================================================
================================================================================
Real Estate Investment Trusts
================================================================================
Real Estate Investment Trusts (REITs) -- 4.1%
BRE Properties, Inc. Series D, 6.75% 35,000 756,700
Developers Diversified Realty Corp., 8% 400,000 9,660,000
First Industrial Realty Trust, Inc., 6.236% (a) 2,390 2,467,675
Firstar Realty LLC, 8.875% (c) 4,000 3,781,250
HCP, Inc. Series F, 7.10% 50,000 1,101,000
Kimco Realty Corp. Series F, 6.65% 50,000 1,115,000
Public Storage Series F, 6.45% 40,000 844,000
Public Storage, Inc. Series I, 7.25% 160,000 3,840,000
Sovereign Real Estate Investment Corp., 12% (c) 3,857 3,857,000
--------------------------------------------------------------------------------
Total Real Estate Investment Trusts -- 4.1% 27,422,625
================================================================================
Par
Trust Preferreds (000) Value
--------------------------------------------------------------------------------
Commercial Banks -- 0.2%
KeyCorp Capital IX, 6.75% $ 1,868 $ 1,513,920
================================================================================
Communications Equipment -- 0.3%
Corporate-Backed Trust Certificates, Motorola
Debenture Backed Series 2002-14, 8.375%,
11/15/28 2,000 1,870,127
================================================================================
Consumer Finance -- 2.1%
Capital One Capital II, 7.50%, 6/15/66 16,702 14,330,468
================================================================================
Diversified Financial Services -- 0.9%
Citigroup Capital XVII, 6.35%, 3/15/67 7,048 5,958,336
================================================================================
Electric Utilities -- 1.5%
Georgia Power Co. Series O, 1.475%, 4/15/33 1,250 1,210,611
HECO Capital Trust III, 6.50%, 3/18/34 1,250 1,161,265
National Rural Utilities Cooperative Finance
Corp., 6.75%, 2/15/43 1,250 1,220,500
PPL Energy Supply LLC, 7%, 7/15/46 (a) 5,835 5,813,186
Virginia Power Capital Trust II, 1.844%, 7/30/42 950 950,947
------------
10,356,509
================================================================================
Gas Utilities -- 0.9%
Southwest Gas Capital II, 7.70%, 9/15/43 5,750 5,694,051
================================================================================
Insurance -- 2.8%
ABN AMRO North America Capital Funding Trust II,
2.855% (a)(b)(c)(d) 11,000 7,490,357
Lincoln National Capital VI Series F,
6.75%, 9/11/52 5,000 4,827,548
W.R. Berkley Capital Trust II, 6.75%, 7/26/45 7,375 6,537,689
------------
18,855,594
================================================================================
Media -- 3.1%
Comcast Corp., 6.625%, 5/15/56 23,375 20,846,666
================================================================================
Thrifts & Mortgage Finance -- 0.5%
Countrywide Financial Corp., 6.75%, 4/01/33 4,250 3,177,059
--------------------------------------------------------------------------------
Total Trust Preferreds -- 12.3% 82,602,730
================================================================================
Total Preferred Securities -- 109.1% 729,434,689
================================================================================
================================================================================
Corporate Bonds
================================================================================
Building Products -- 0.4%
C8 Capital SPV Ltd., 6.64% (a)(b)(c) 3,915 3,638,131
================================================================================
Capital Markets -- 4.7%
Ameriprise Financial, Inc., 7.518%, 6/01/66 (a) 7,600 7,019,421
The Bear Stearns Cos., Inc., 6.40%, 10/02/17 7,750 7,995,776
Credit Suisse Guernsey Ltd., 5.86% (a)(b) 9,045 7,655,778
Lehman Brothers Holdings, Inc.:
4.50%, 9/15/22 (a) 1,310 1,271,142
6.875%, 7/17/37 7,800 7,231,341
------------
31,173,458
================================================================================
See Notes to Financial Statements.
12 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Schedule of Investments (continued)
BlackRock Preferred Income Strategies Fund, Inc.
(Percentages shown are based on Net Assets)
Par
Corporate Bonds (000) Value
--------------------------------------------------------------------------------
Commercial Banks -- 18.3%
BNP Paribas, 7.195% (a)(b)(c)(g) $ 23,025 $ 21,600,420
Bank of Ireland Capital Funding II, LP,
5.571% (a)(b)(c) 8,065 6,006,707
Bank of Ireland Capital Funding III, LP,
6.107% (a)(b)(c) 8,575 6,511,906
Barclays Bank Plc (a)(b)(c):
7.43% 5,250 5,032,025
7.7% 13,000 13,270,544
Credit Agricole SA, 6.637% (a)(b)(c) 31,800 26,075,173
HBOS Plc, 6.657% (a)(b)(c) 5,000 3,687,000
Royal Bank of Scotland Group Plc (b):
6.99% (c) 5,575 5,117,109
9.12% 4,800 4,852,579
Series MTN, 7.64% 7,500 7,059,488
Societe Generale, 5.922% (a)(b)(c) 17,250 14,738,037
Standard Chartered Bank, 7.014% (a)(b)(c) 9,575 8,834,096
------------
122,785,084
================================================================================
Diversified Financial Services -- 3.3%
Bank of America Corp., Series K, 8% (a)(b) 11,895 12,101,711
Citigroup, Inc., 8.30%, 12/21/77 (a) 4,000 4,083,740
JPMorgan Chase Capital XXV, 6.80%, 10/01/37 6,150 5,828,263
------------
22,013,714
================================================================================
Electric Utilities -- 0.8%
PPL Capital Funding, 6.70%, 3/30/67 (a) 5,925 5,049,635
================================================================================
Gas Utilities -- 1.8%
Southern Union Co., 7.20%, 11/01/66 (a) 14,400 11,753,942
================================================================================
Insurance -- 24.1%
The Allstate Corp. (a):
6.50%, 5/15/57 12,775 11,719,402
Series B, 6.125%, 5/15/67 10,450 9,706,138
American International Group, Inc.,
6.25%, 3/15/87 11,220 9,892,562
Chubb Corp., 6.375%, 3/29/67 (a) 17,700 16,515,038
Everest Reinsurance Holdings, Inc.,
6.60%, 5/01/67 (a) 14,280 11,611,825
Liberty Mutual Group, Inc., 7%, 3/15/37 (a)(c) 10,150 9,356,635
Lincoln National Corp. (a):
7%, 5/17/66 12,000 11,057,712
6.05%, 4/20/67 5,025 4,316,857
Nationwide Life Global Funding I,
6.75%, 5/15/67 9,675 7,877,114
Oil Insurance Ltd., 7.558% (a)(b)(c) 5,000 4,368,450
Progressive Corp., 6.70%, 6/15/37 (a) 11,650 10,417,873
QBE Capital Funding II LP, 6.797% (a)(b)(c) 8,525 7,322,856
Reinsurance Group of America, 6.75%,
12/15/65 (a) 3,000 2,380,932
Structured Asset Repackaged Trust Series
2004-1, 5.417%, 4/21/11 525 503,446
Swiss Re Capital I LP, 6.854% (a)(b)(c) 8,875 8,053,202
The Travelers Cos., Inc., 6.25%, 3/15/67 (a) 22,850 19,999,508
ZFS Finance (USA) (a)(b):
Trust IV, 5.875%, 5/09/32 1,300 1,191,788
Trust V, 6.50%, 5/09/67 17,110 15,072,575
------------
161,363,913
================================================================================
Par
Corporate Bonds (000) Value
--------------------------------------------------------------------------------
Multi-Utilities -- 0.2%
Puget Sound Energy, Inc. Series A, 6.974%,
6/01/67 (b) $ 1,825 $ 1,644,684
================================================================================
Oil, Gas & Consumable Fuels -- 3.2%
Conoco Funding Co., 6.35%, 10/15/11 6,100 6,517,710
Enterprise Products Operating LP, 8.375%,
8/01/66 (a) 4,225 4,205,303
Plains All American Pipeline LP, 6.50%,
5/01/18 (c) 3,145 3,158,410
TransCanada PipeLines Ltd., 6.35%, 5/15/67 (a) 8,300 7,376,783
--------------
21,258,206
================================================================================
Thrifts & Mortgage Finance -- 0.9%
Roslyn Real Estate Asset Corp. Series D,
8.88% (a)(b) --(h) 4,016,250
Washington Mutual Preferred Funding Delaware,
6.534% (a)(b)(c) 3,200 1,840,224
--------------
5,856,474
--------------------------------------------------------------------------------
Total Corporate Bonds -- 57.7% 386,537,241
================================================================================
================================================================================
U.S. Government Obligations
================================================================================
U.S. Treasury Bond, 5.00%, 5/15/37 1,050 1,137,939
--------------------------------------------------------------------------------
Total U.S. Government Obligations -- 0.2% 1,137,939
================================================================================
================================================================================
Exchange-Traded Funds Shares
--------------------------------------------------------------------------------
UltraShort Financials ProShares 235,000 23,796,100
--------------------------------------------------------------------------------
Total Exchange-Traded Funds -- 3.6% 23,796,100
================================================================================
Total Long-Term Investments
(Cost -- $1,258,194,321) -- 170.6% 1,140,905,969
================================================================================
================================================================================
Beneficial
Interest
Short-Term Securities (000)
--------------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series, 3.03% (i)(j) $ 85,380 85,380,027
--------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $85,380,027) -- 12.8% 85,380,027
================================================================================
Total Investments
(Cost -- $1,343,574,348*) -- 183.4% 1,226,285,996
Liabilities in Excess of Other Assets -- (1.1%) (7,243,559)
Preferred Stock, at Redemption Value -- (82.3%) (550,448,020)
--------------
Net Assets Applicable to Common Stock -- 100.0% $ 668,594,417
==============
See Notes to Financial Statements.
SEMI-ANNUAL REPORT APRIL 30, 2008 13
================================================================================
Schedule of Investments (concluded)
BlackRock Preferred Income Strategies Fund, Inc.
* The cost and unrealized appreciation (depreciation) of investments, as of
April 30, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost ........................................ $ 1,341,403,679
===============
Gross unrealized appreciation ......................... $ 6,435,562
Gross unrealized depreciation ......................... (121,534,897)
---------------
Net unrealized depreciation ........................... $ (115,099,335)
===============
(a) Variable rate security. Rate shown is as of report date. Maturity shown is
the final maturity date.
(b) Security is a perpetual in nature and has no state maturity date. In
certain instances, a final maturity date may be extended and/or the final
payment may be deferred at the issuer's option for a specified time
without default.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional investors. Unless otherwise
indicated, these securities are not considered to be illiquid.
(d) Security is illiquid.
(e) Depositary receipts.
(f) Convertible security.
(g) All or a portion of the security has been pledged as collateral in
connection with open financial futures contracts.
(h) Amount is less than $1,000.
(i) 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
Activity Interest
Affiliate (000) Income
--------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series $31,115 $1,449,958
--------------------------------------------------------------------------
(j) Represents the current yield as of report date.
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.
o Financial futures contracts sold as of April 30,2008 were as follows:
--------------------------------------------------------------------------------------
Unrealized
Number of Expiration Face Appreciation
Contracts Issue Date Amount (Depreciation)
--------------------------------------------------------------------------------------
5-Year June
749 U.S. Treasury Notes 2008 $ 83,804,431 $ (71,866)
10-Year June
499 U.S. Treasury Notes 2008 59,457,871 1,667,433
30-Year June
3,892 U.S. Treasury Notes 2008 453,960,060 (978,252)
--------------------------------------------------------------------------------------
Total Net Unrealized Appreciation $ 617,315
==============
o Swaps outstanding as of April 30,2008 were as follows:
--------------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
(000) (Depreciation)
--------------------------------------------------------------------------------
Receive a fixed rate of 3.1925% and pay a
floating rate based on 3-month USD LIBOR
Broker, Citibank NA
Expires April 2010 $295,900 $ 451,469
Receive a fixed rate of 3.193% and pay a
floating rate based on 3-month USD LIBOR
Broker, Deutsche Bank AG London
Expires April 2010 394,500 605,804
Bought credit default protection on Capital One
Financial Corp, and pay 4.175%
Broker, Citibank NA
Expires March 2013 14,000 (1,107,326)
Bought credit default protection on American
Express Company, and pay 2.10%
Broker JPMorgan Chase
Expires March 2013 8,000 (371,360)
Bought credit default protection on Lehman
Brothers Holdings, Inc., and pay 4.95%
Broker, Deutsche Bank AG London
Expires March 2013 4,000 (556,488)
Receive a fixed rate of 3.8925% and pay a
floating rate based on 3-month USD LIBOR
Broker, Lehman Brothers Special Finance
Expires April 2013 78,900 346,904
Bought credit default protection on Kimco Realty
Corp. and pay 2.4%
Broker, Goldman Sachs & Co.
Expires March 2018 6,000 (494,262)
Bought credit default protection on Mack-Cali
Realty, L.P. and pay 3.1%
Broker, Goldman Sachs & Co.
Expires March 2018 5,000 (278,655)
Bought credit default protection on ERP
Operating Limited Partnership and pay 2.35%
Broker, Goldman Sachs & Co.
Expires March 2018 6,000 (573,864)
--------------------------------------------------------------------------------
Total $ (1,977,778)
=============
See Notes to Financial Statements.
14 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Statements of Assets and Liabilities
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
April 30, 2008 (Unaudited) Fund, Inc. Fund, Inc.
------------------------------------------------------------------------------------------------------------------------------------
Assets
------------------------------------------------------------------------------------------------------------------------------------
Investments at value -- unaffiliated(1) ....................................................... $ 271,520,391 $ 1,140,905,969
Investments at value -- affiliated(2) ......................................................... 35,106,666 85,380,027
Unrealized appreciation on swaps .............................................................. 354,417 1,404,177
Interest receivable ........................................................................... 4,082,869 17,815,140
Dividends receivable .......................................................................... 234,719 253,344
Swaps payable ................................................................................. 158,491 627,854
Other assets .................................................................................. -- 18,348
Prepaid expenses .............................................................................. 1,813 30,353
----------------------------------
Total assets .................................................................................. 311,459,366 1,246,435,212
----------------------------------
====================================================================================================================================
Liabilities
------------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on swaps .............................................................. 701,233 3,381,955
Bank overdraft ................................................................................ 46,691 4,382,346
Investments purchased payable ................................................................. 3,623,330 14,242,958
Margin variation payable ...................................................................... 878,641 3,508,609
Swaps payable ................................................................................. 176,253 722,375
Investment advisory fees payable .............................................................. 148,594 593,801
Income dividends payable -- common shares ..................................................... 83,684 395,197
Officer and Directors' fees payable ........................................................... 279 18,647
Other affiliates payable ...................................................................... 1,816 7,288
Other accrued expenses ........................................................................ 38,077 139,599
----------------------------------
Total liabilities ............................................................................. 5,698,598 27,392,775
----------------------------------
====================================================================================================================================
Preferred Stock
------------------------------------------------------------------------------------------------------------------------------------
Preferred Stock, at redemption value, par value $0.10 per share(3) at $25,000 per share
liquidation preference ..................................................................... 136,517,798 550,448,020
----------------------------------
====================================================================================================================================
Net Assets Applicable to Common Stock
------------------------------------------------------------------------------------------------------------------------------------
Net Assets applicable to Common Stock shareholders ............................................ $ 169,242,970 $ 668,594,417
==================================
SEMI-ANNUAL REPORT APRIL 30, 2008 15
================================================================================
Statements of Assets and Liabilities (concluded)
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
April 30, 2008 (Unaudited) Fund, Inc. Fund, Inc.
-----------------------------------------------------------------------------------------------------------------
Analysis of Net Assets Applicable to Common Stock
-----------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.10 per share(4) ................................ $ 1,029,188 $ 4,060,654
Paid-in capital in excess of par .......................................... 238,394,096 946,570,410
Undistributed net investment income ....................................... 906,078 1,235,281
Accumulated net realized loss ............................................. (47,777,256) (164,623,113)
Net unrealized appreciation/depreciation .................................. (23,309,136) (118,648,815)
-----------------------------------
Net Assets ................................................................ $ 169,242,970 $ 668,594,417
===================================
Net asset value per share of Common Stock(4) .............................. $ 16.44 $ 16.47
===================================
(1) Investments at cost-- unaffiliated .................................. $ 295,281,096 $ 1,258,194,321
===================================
(2) Investments at cost-- affiliated .................................... $ 35,106,666 $ 85,380,027
===================================
(3) Preferred Stock 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
===================================
(4) Common Stock issued and outstanding ................................. 10,291,881 40,606,540
===================================
See Notes to Financial Statements.
16 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Statements of Operations
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
Six Months Ended April 30, 2008 (Unaudited) Fund, Inc. Fund, Inc.
-----------------------------------------------------------------------------------------------------------------
Investment Income
-----------------------------------------------------------------------------------------------------------------
Interest ................................................................... $ 7,768,096 $ 32,516,326
Interest from affiliates ................................................... 643,631 1,449,958
Dividends(1) ............................................................... 2,090,474 7,181,205
----------------------------------
Total income ............................................................... 10,502,201 41,147,489
----------------------------------
=================================================================================================================
Expenses
-----------------------------------------------------------------------------------------------------------------
Investment advisory ........................................................ 943,983 3,791,176
Commissions for Preferred Stock ............................................ 182,022 695,019
Professional ............................................................... 41,491 78,882
Accounting services ........................................................ 33,600 133,212
Transfer agent ............................................................. 16,847 34,155
Custodian .................................................................. 11,118 24,146
Officer and Directors ...................................................... 9,632 36,604
Printing ................................................................... 9,081 32,493
Registration ............................................................... 4,654 6,609
Miscellaneous .............................................................. 28,304 53,698
----------------------------------
Total expenses excluding interest expense .................................. 1,280,732 4,885,994
Interest expense ........................................................... 10,175 6,272
----------------------------------
Total expenses ............................................................. 1,290,907 4,892,266
----------------------------------
Net investment income ...................................................... 9,211,294 36,255,223
----------------------------------
=================================================================================================================
Realized and Unrealized Gain (Loss)
-----------------------------------------------------------------------------------------------------------------
Net realized loss from:
Investments ............................................................. (9,230,268) (26,438,959)
Financial futures contracts and swaps ................................... (6,597,909) (26,061,040)
Borrowed bonds .......................................................... (196,096) (1,194,394)
----------------------------------
(16,024,273) (53,694,393)
----------------------------------
Net change in unrealized appreciation/depreciation on:
Investments ............................................................. (16,278,018) (84,101,957)
Financial futures contracts and swaps ................................... 1,089,814 1,270,949
Borrowed bonds .......................................................... 16,010 503,414
----------------------------------
(15,172,194) (82,327,594)
----------------------------------
Total realized and unrealized loss ......................................... (31,196,467) (136,021,987)
----------------------------------
=================================================================================================================
Dividends to Preferred Stock Shareholders from
-----------------------------------------------------------------------------------------------------------------
Net investment income ...................................................... (3,238,522) (13,133,268)
----------------------------------
Net Decrease in Net Assets Applicable to Common Stock Shareholders Resulting
from Operations ......................................................... $ (25,223,695) $(112,900,032)
==================================
(1) Withholding tax ...................................................... $ 9,433 $ 26,252
==================================
See Notes to Financial Statements.
SEMI-ANNUAL REPORT APRIL 30, 2008 17
================================================================================
Statements of Changes in Net Assets
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
Six Months
Ended April 30, Year Ended
2008 October 31,
Increase (Decrease) in Net Assets: (Unaudited) 2007
------------------------------------------------------------------------------------------------------------------------------------
Operations
------------------------------------------------------------------------------------------------------------------------------------
Net investment income .......................................................................... $ 9,211,294 $ 20,683,793
Net realized loss .............................................................................. (16,024,273) (6,921,885)
Net change in unrealized appreciation/depreciation ............................................. (15,172,194) (17,907,405)
Dividends to Preferred Stock shareholders from net investment income ........................... (3,238,522) (7,254,700)
---------------------------------
Net decrease in net assets applicable to Common Stock shareholders resulting from
operations .................................................................................. (25,223,695) (11,400,197)
---------------------------------
====================================================================================================================================
Dividends and Distributions to Common Stock Shareholders
------------------------------------------------------------------------------------------------------------------------------------
Net investment income .......................................................................... (6,688,004) (12,124,207)
Tax return of capital .......................................................................... -- (4,335,991)
---------------------------------
Decrease in net assets resulting from dividends and distributions to Common Stock
shareholders ................................................................................ (6,688,004) (16,460,198)
---------------------------------
====================================================================================================================================
Common Stock Transactions
------------------------------------------------------------------------------------------------------------------------------------
Reinvestment of Common Stock dividends ......................................................... -- 281,127
---------------------------------
====================================================================================================================================
Net Assets Applicable to Common Stock Shareholders
------------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets applicable to Common Stock shareholders ........................... (31,911,699) (27,579,268)
Beginning of period ............................................................................ 201,154,669 228,733,937
---------------------------------
End of period .................................................................................. $ 169,242,970 $ 201,154,669
=================================
End of period undistributed net investment income .............................................. $ 906,078 $ 1,621,310
=================================
See Notes to Financial Statements.
18 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Statements of Changes in Net Assets
BlackRock Preferred Income Strategies Fund, Inc.
Six Months
Ended April 30, Year Ended
2008 October 31,
Increase (Decrease) in Net Assets: (Unaudited) 2007
------------------------------------------------------------------------------------------------------------------------------------
Operations
------------------------------------------------------------------------------------------------------------------------------------
Net investment income .......................................................................... $ 36,255,223 $ 81,859,216
Net realized loss .............................................................................. (53,694,393) (16,858,784)
Net change in unrealized appreciation/depreciation ............................................. (82,327,594) (78,182,156)
Dividends to Preferred Stock shareholders from net investment income ........................... (13,133,268) (29,469,686)
---------------------------------
Decrease in net assets applicable to Common Stock shareholders resulting from
operations .................................................................................. (112,900,032) (42,651,410)
---------------------------------
====================================================================================================================================
Dividends and Distributions to Common Stock Shareholders from
------------------------------------------------------------------------------------------------------------------------------------
Net investment income .......................................................................... (27,916,915) (47,141,781)
Tax return of capital .......................................................................... -- (8,692,071)
---------------------------------
Decrease in net assets resulting from dividends and distributions to Common Stock
shareholders ................................................................................ (27,916,915) (55,833,852)
---------------------------------
====================================================================================================================================
Net Assets Applicable to Common Stock Shareholders
------------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets applicable to Common Stock shareholders ........................... (140,816,947) (98,485,262)
Beginning of period ............................................................................ 809,411,364 907,896,626
---------------------------------
End of period .................................................................................. $ 668,594,417 $ 809,411,364
=================================
End of period undistributed net investment income .............................................. $ 1,235,281 $ 6,030,241
=================================
See Notes to Financial Statements.
SEMI-ANNUAL REPORT APRIL 30, 2008 19
================================================================================
Financial Highlights
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
Six Months Period
Ended April 30, Year Ended October 31, August 1, 2003(1)
2008 ---------------------------------------------- to October 31,
(Unaudited) 2007 2006 2005 2004 2003
------------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Performance
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ....... $ 19.54 $ 22.25 $ 22.36 $ 23.69 $ 24.38 $ 23.88
-------------------------------------------------------------------------------------
Net investment income ...................... 0.90(2) 2.01(2) 2.14(2) 2.16 2.19 0.39
Net realized and unrealized gain (loss) .... (3.04) (2.41) 0.07 (1.09) (0.70) 0.67
Dividends to Preferred Stock shareholders
from net investment income .............. (0.31) (0.71) (0.63) (0.40) (0.18) (0.03)
-------------------------------------------------------------------------------------
Net increase (decrease) from investment
operations .............................. (2.45) (1.11) 1.58 0.67 1.31 1.03
-------------------------------------------------------------------------------------
Dividends and distribution to Common Stock
shareholders from:
Net investment income ................... (0.65) (1.18) (1.69) (2.00) (2.00) (0.33)
Tax return of capital ................... -- (0.42) -- -- -- --
-------------------------------------------------------------------------------------
Total dividends and distributions to
Common Stock shareholders ............... (0.65) (1.60) (1.69) (2.00) (2.00) (0.33)
-------------------------------------------------------------------------------------
Capital charges with respect to issuance of
Common Stock ............................ -- -- -- -- -- (0.04)
Capital charges with respect to issuance of
Preferred Stock ......................... -- -- -- -- -- (0.16)
-------------------------------------------------------------------------------------
Net asset value, end of period ............. $ 16.44 $ 19.54 $ 22.25 $ 22.36 $ 23.69 $ 24.38
=====================================================================================
Market price, end of period ................ $ 15.82 $ 17.29 $ 21.26 $ 21.03 $ 22.84 $ 23.60
=====================================================================================
------------------------------------------------------------------------------------------------------------------------------------
Total Investment Return(3)
------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value ................... (12.34%)(4) (5.03%) 7.97% 3.25% 5.86% 3.53%(4)
=====================================================================================
Based on market price ...................... (4.67%)(4) (12.05%) 9.69% .73% 5.44% (4.33%)(4)
=====================================================================================
------------------------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets of Common
Stock
------------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver and excluding
interest expense(5) ..................... 1.43%(6) 1.29% 1.29% 1.26% 1.26% 0.49%(6)
=====================================================================================
Total expenses after waiver(5) ............. 1.44%(6) 1.32% 1.29% 1.26% 1.26% 0.49%(6)
=====================================================================================
Total expenses(5) .......................... 1.44%(6) 1.32% 1.29% 1.26% 1.27% 1.11%(6)
=====================================================================================
Total net investment income(5) ............. 10.27%(6) 9.38% 9.70% 9.23% 9.04% 6.79%(6)
=====================================================================================
Dividends to Preferred Stock
shareholders ............................ 3.61%(6) 3.29% 2.84% 1.71% 0.76% 0.50%(6)
=====================================================================================
Net investment income to Common Stock
shareholders ............................ 6.66%(6) 6.09% 6.86% 7.52% 8.28% 6.29%(6)
=====================================================================================
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Data
------------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock,
end of period (000) ..................... $ 169,243 $201,155 $228,734 $229,850 $243,492 $ 250,631
=====================================================================================
Preferred Stock outstanding at liquidation
preference, end of period (000) ......... $ 136,500 $136,500 $136,500 $136,500 $136,500 $ 136,500
=====================================================================================
Portfolio turnover ......................... 44% 88% 19% 25% 27% 12%
=====================================================================================
Asset coverage (000) ....................... $ 2,240 $ 2,474 $ 2,676 $ 2,684 $ 2,784 $ 2,836
=====================================================================================
(1) Commencement of operations.
(2) Based on average shares outstanding.
(3) Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales charges.
(4) Aggregate total investment return.
(5) Do not reflect the effect of dividends to Preferred Stock
shareholders.
(6) Annualized.
See Notes to Financial Statements.
20 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Financial Highlights (concluded)
BlackRock Preferred Income Strategies Fund, Inc.
Six Months Period
Ended April 30, Year Ended October 31, March 28, 2003(1)
2008 --------------------------------------------------- to October 31,
(Unaudited) 2007 2006 2005 2004 2003
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ....... $ 19.93 $ 22.36 $ 22.26 $ 23.48 $ 24.53 $ 23.88
-------------------------------------------------------------------------------------
Net investment income ...................... 0.89(2) 2.02(2) 2.03(2) 2.09(2) 2.14(2) 1.14
Net realized and unrealized gain (loss) .... (3.34) (2.35) 0.32 (0.91) (0.78) 0.61
Dividends and distributions to Preferred
Stock shareholders from:
Net investment income ................... (0.32) (0.73) (0.65) (0.40) (0.18) (0.07)
Net realized gain ....................... -- -- -- -- (0.01) --
-------------------------------------------------------------------------------------
Net increase (decrease) from investment
operations .............................. (2.77) (1.06) 1.70 0.78 1.17 1.68
-------------------------------------------------------------------------------------
Dividends and distributions to Common
Stock shareholders from:
Net investment income ................... (0.69) (1.16) (1.51) (2.00) (2.13) (0.87)
Net realized gain ....................... -- -- -- -- (0.09) --
Tax return of capital ................... -- (0.21) (0.09) -- -- --
-------------------------------------------------------------------------------------
Total dividends and distributions to
Common Stock shareholders ............... (0.69) (1.37) (1.60) (2.00) (2.22) (0.87)
-------------------------------------------------------------------------------------
Capital charges with respect to issuance
of Common Stock ......................... -- -- -- -- -- (0.01)
-------------------------------------------------------------------------------------
Capital charges with respect to issuance
of Preferred Stock ...................... -- -- -- -- -- (0.15)
-------------------------------------------------------------------------------------
Net asset value, end of period ............. $ 16.47 $ 19.93 $ 22.36 $ 22.26 $ 23.48 $ 24.53
=====================================================================================
Market price, end of period ................ $ 15.86 $ 16.94 $ 20.12 $ 21.20 $ 22.87 $ 23.69
=====================================================================================
===================================================================================================================================
Total Investment Return(3)
-----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value ................... (13.73%)(4) (4.35%) 8.77% 3.73% 5.22% 6.47%(4)
=====================================================================================
Based on market price ...................... (2.27%)(4) (9.65%) 2.77% 1.43% 6.12% (1.80%)(4)
=====================================================================================
===================================================================================================================================
Ratios to Average Net Assets of Common
Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses after waiver and excluding
interest expense(5) ..................... 1.36%(6) 1.23% 1.23% 1.20% 1.19% 0.79%(6)
=====================================================================================
Total expenses after waiver(5) ............. 1.36%(6) 1.27% 1.23% 1.20% 1.19% 0.79%(6)
=====================================================================================
Total expenses(5) .......................... 1.36%(6) 1.27% 1.23% 1.20% 1.19% 1.05%(6)
=====================================================================================
Total net investment income(5) ............. 10.09%(6) 9.29% 9.26% 8.96% 8.93% 8.31%(6)
=====================================================================================
Dividends to Preferred Stock shareholders .. 3.66%(6) 3.34% 2.96% 1.73% 0.74% 0.49%(6)
=====================================================================================
Net investment income to Common Stock
shareholders ............................ 6.43%(6) 5.95% 6.30% 7.23% 8.19% 7.82%(6)
=====================================================================================
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock,
end of period (000) ..................... $ 668,594 $ 809,411 $ 907,897 $ 903,601 $ 952,973 $ 995,722
=====================================================================================
Preferred Stock outstanding at liquidation
preference, end of period (000) ........ $ 550,000 $ 550,000 $ 550,000 $ 550,000 $ 550,000 $ 550,000
=====================================================================================
Portfolio turnover ......................... 41% 81% 18% 28% 23% 27%
=====================================================================================
Asset coverage (000) ....................... $ 2,216 $ 2,472 $ 2,651 $ 2,643 $ 2,733 $ 2,810
=====================================================================================
(1) Commencement of operations.
(2) Based on average shares outstanding.
(3) Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, may result
in substantially different returns. Total investment returns exclude
the effects of sales charges.
(4) Aggregate total investment return.
(5) Do not reflect the effect of dividends to Preferred Stock
shareholders.
(6) Annualized.
See Notes to Financial Statements.
SEMI-ANNUAL REPORT APRIL 30, 2008 21
================================================================================
Notes to Financial Statements (Unaudited)
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
(the "1940 Act"), as diversified, closed-end management investment companies.
The Funds' financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. The Funds determine and make available for publication the net
asset value of its Common Stock on a daily basis.
The following is a summary of significant accounting policies followed by the
Funds:
Valuation of Investments: The Funds value their bond investments on the basis of
last available bid price or current market quotations provided by dealers or
pricing services selected under the supervision of each of the Fund's Board of
Directors (the "Board"). Financial futures contracts are traded on exchanges and
are valued at their last sale price. Swap agreements are valued by quoted fair
values received daily by each of the Fund's pricing service. Short-term
securities may be valued at amortized cost. Investments in open-end investment
companies are valued at net asset value each business day. In determining the
value of a particular investment, pricing services may use certain information
with respect to transactions in such investments, quotations from dealers,
pricing matrixes, market transactions in comparable investments, various
relationships observed in the market between investments and calculated yield
measures based on valuation technology commonly employed in the market for such
investments.
Equity investments traded on a recognized securities exchange or the NASDAQ
Global Market System are valued at the last reported sale price that day or the
NASDAQ official closing price, if applicable. Equity investments traded on a
recognized securities exchange for which there were no sales on that day are
valued at the last available bid price.
In the event that application of these methods of valuation results in a price
for an investment which is deemed not to be representative of the market value
of such investment, the investment will be valued by a method approved by the
Board as reflecting fair value ("Fair Value Assets"). When determining the price
for Fair Value Assets, the investment advisor and/or sub-advisor seeks to
determine the price that the Funds might reasonably expect to receive from the
current sale of that asset in an arm's length transaction. Fair value
determinations shall be based upon all available factors that the investment
advisor and/or subadvisor deems relevant. The pricing of all Fair Value Assets
is subsequently reported to the Board or a committee thereof.
Derivative Financial Instruments: Each Fund may engage in various portfolio
investment strategies 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 if the value of the contract decreases due to an
unfavorable change in the price of the underlying security, or if the
counterparty does not perform under the contract.
o Financial futures contracts -- Each Fund may purchase or sell
financial futures contracts and options on such financial futures
contracts. Futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or
yield. Upon entering into a contract, the 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 recognized 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. These periodic
payments received or made by the Fund are recorded in the
accompanying Statement of Operations as realized gains or losses,
respectively. Gains or losses are realized upon termination of the
swap agreements. Swaps are marked-to-market daily and changes in
value are recorded as unrealized appreciation (depreciation). When
the swap is terminated, the Fund will record a realized gain or loss
equal to the difference between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract, if any.
22 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Notes to Financial Statements (continued)
o Credit default swaps -- Credit default swaps are agreements in which
one party pays fixed periodic payments to a counterparty in
consideration for a guarantee from the counterparty to make a
specific payment should a negative credit event take place.
o Interest rate swaps -- Interest rate swaps are agreements in which
one party pays a floating rate of interest on a notional principal
amount and receives a fixed rate of interest on the same notional
principal amount for a specified period of time. Alternatively, a
party may pay a fixed rate and receive a floating rate. Interest
rate swaps are efficient as asset/liability management tools. In
more complex swaps, the notional principal amount may decline (or
amortize) over time.
o Total return swaps -- Total return swaps are agreements in which one
party commits to pay interest in exchange for a market-linked
return. To the extent the total return of the security or index
underlying the transaction exceeds or falls short of the offsetting
interest rate obligation, the Fund will receive a payment from or
make a payment to the counterparty.
Segregation: In cases in which the 1940 Act and the interpretive positions of
the Securities and Exchange Commission ("SEC") require that each of the Fund's
segregate assets in connection with certain investments (e.g., swaps and
futures), the Fund will, consistent with certain interpretive letters issued by
the SEC, designate on its books and records cash or other liquid debt securities
having a market value at least equal to the amount that would otherwise be
required to be physically segregated.
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 the underlying
collateral, securities or cash to settle such short positions. The value of the
underlying collateral securities or cash approximates the principal amount of
the bonds borrowed transaction, including accrued interest. 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.
Capital Trusts: These securities are typically issued by corporations, generally
in the form of interest-bearing notes with preferred securities characteristics,
or by an affiliated business trust of a corporation, generally in the form of
beneficial interests in subordinated debentures or similarly structured
securities. The securities can be structured as either fixed or adjustable
coupon securities that can have either a perpetual or stated maturity date.
Dividends can be deferred without creating an event of default or acceleration,
although maturity cannot take place unless all cumulative payment obligations
have been met. The deferral of payments does not affect the purchase or sale of
these securities in the open market. Payments on these securities are treated as
interest rather than dividends for Federal income tax purposes. These securities
can have a rating that is slightly below that of the issuing company's senior
debt securities.
Preferred Stock: Each Fund may invest in preferred stocks. Preferred stock has a
preference over common stock in liquidation (and generally in receiving
dividends as well) but is subordinated to the liabilities of the issuer in all
respects. As a general rule, the market value of preferred stock with a fixed
dividend rate and no conversion element varies inversely with interest rates and
perceived credit risk, while the market price of convertible preferred stock
generally also reflects some element of conversion value. Because preferred
stock is junior to debt securities and other obligations of the issuer,
deterioration in the credit quality of the issuer will cause greater changes in
the value of a preferred stock than in a more senior debt security with similar
stated yield characteristics. Unlike interest payments on debt securities,
preferred stock dividends are payable only if declared by the issuer's board of
directors. Preferred stock also may be subject to optional or mandatory
redemption provisions.
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.
SEMI-ANNUAL REPORT APRIL 30, 2008 23
================================================================================
Notes to Financial Statements (continued)
Reverse Repurchase Agreements: Each Fund may enter into reverse repurchase
agreements with qualified third party broker-dealers. Interest on the value of
the reverse repurchase agreements issued and outstanding is based upon
competitive market rates at the time of issuance and is included within the
related liability on the Statements of Assets and Liabilities. At the time the
Fund enters into a reverse repurchase agreement, it identifies for segregation
certain liquid securities having a value not less than the repurchase price,
including accrued interest, of the reverse repurchase agreement. The Funds may
utilize reverse repurchase agreements when it is anticipated that the interest
income to be earned from the investment of the proceeds of the transaction is
greater than the interest expense of the transaction.
Income Taxes: It is each of the 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. Under the applicable
foreign tax laws, a withholding tax may be imposed on interest, dividends and
capital gains at various rates.
Effective April 30, 2008, each of the Funds implemented Financial Accounting
Standards Board ("FASB") Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes -- an interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48
prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity, including investment companies, before being
measured and recognized in the financial statements. The investment advisor has
evaluated the application of FIN 48 to the Funds, and has determined that the
adoption of FIN 48 does not have a material impact on the Funds' financial
statements. Each Fund files U.S. federal and various state and local tax
returns. No income tax returns are currently under examination. The statute of
limitations on the Funds' U.S. federal tax returns remain open for the years
ended October 31, 2004 through October 31, 2006. The statutes of limitations on
each of the Fund's state and local tax returns may remain open for an additional
year depending upon the jurisdiction.
Investment Transactions and Investment Income: Investment transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Funds amortize all
premiums and discounts on debt securities.
Dividends and Distributions: Dividends from net investment income are declared
and paid monthly. Distributions of capital gains are recorded on the ex-dividend
dates. If the total dividends and distributions made in any tax year exceeds net
investment income and accumulated realized gains, a portion of the total
distribution may be treated as a tax return of capital.
Recent Accounting Pronouncements: In September 2006, Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"), was issued
and is effective for fiscal years beginning after November 15, 2007. FAS 157
defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. The impact on each of the Fund's
financial statement disclosures, if any, is currently being assessed.
In addition, in February 2007, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for 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. The impact on each of the Fund's
financial statement disclosure, if any, is currently being assessed.
In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures
about Derivative Instruments and Hedging Activities -- an amendment of FASB
Statement No. 133" ("FAS 161"), was issued and is effective for fiscal years
beginning after November 15, 2008. FAS 161 is intended to improve financial
reporting for derivative instruments by requiring enhanced disclosure that
enables investors to understand how and why an entity uses derivatives, how
derivatives are accounted for, and how derivative instruments affect an entity's
results of operations and financial position. The investment advisor is
currently evaluating the implications of FAS 161 and the impact on each of the
Fund's financial statement disclosures, if any, is currently being assessed.
24 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Notes to Financial Statements (continued)
Deferred Compensation and BlackRock Closed-End Share Equivalent Investment Plan:
Under the deferred compensation plan approved by the Fund's Board,
non-interested Directors ("Independent Directors") may defer a portion of their
annual complex-wide compensation. Deferred amounts earn an approximate return as
though equivalent dollar amounts have been invested in common shares of other
certain BlackRock Closed-End Funds selected by the Independent Directors. This
has approximately the same economic effect for the Independent Directors as if
the Independent Directors had invested the deferred amounts directly in other
certain BlackRock Closed-End Funds.
The deferred compensation plan is not funded and obligations thereunder
represent general unsecured claims against the general assets of the Fund. Each
Fund may, however, elect to invest in common shares of other certain BlackRock
Closed-End Funds selected by the Independent Directors in order to match its
deferred compensation obligations. Investments to cover the Fund's deferred
compensation liability are included in other assets on the Statements of Assets
and Liabilities.
Other: Expenses directly related to one of the Funds are charged to that Fund.
Other operating expenses shared by several funds are prorated among those funds
on the basis of relative net assets or appropriate methods.
Bank Overdrafts:
Each Fund recorded a bank overdraft, which resulted from management estimates of
available cash.
2. Investment Advisory Agreement and Other Transactions with Affiliates:
Each Fund has entered into an Investment Advisory Agreement with BlackRock
Advisors, LLC (the "Advisor"), an indirect, wholly owned subsidiary of
BlackRock, Inc., to provide investment advisory and administration services.
Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC Financial Services
Group, Inc. are principal owners of BlackRock, Inc.
The Advisor is responsible for the management of each Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of each Fund. For such services, each Fund
pays the Advisor a monthly fee at an annual rate of 0.60% of the average daily
value of each Fund's net assets (including proceeds from the issuance of
Preferred Stock) plus the proceeds of any outstanding borrowings used for
leverage.
In addition, the Advisor has entered into a separate sub-advisory agreement with
BlackRock Financial Management, Inc. ("BFM"), an affiliate of the Advisor, under
which the Advisor pays BFM for services it provides, a monthly fee that is a
percentage of the investment advisory fee paid by each Fund to the Advisor. For
the six months ended April 30, 2008, each Fund reimbursed the Advisor for
certain accounting services, which are included in accounting services expenses
in the Statements of Operations as follows:
--------------------------------------------------------------------------------
Six Months
Ended
April 30, 2008
--------------------------------------------------------------------------------
BlackRock Preferred and Corporate Income Strategies
Fund, Inc. ................................................. $ 2,897
BlackRock Preferred Income Strategies Fund, Inc. .............. $ 10,989
--------------------------------------------------------------------------------
Certain officers and/or directors of the Funds are officers and/or directors of
BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales (including paydowns) of investments, excluding short-term
securities, for the six months ended April 30, 2008 were as follows:
-------------------------------------------------------------------------------
BlackRock
Preferred and BlackRock
Corporate Preferred
Income Income
Strategies Strategies
Fund, Inc. Fund, Inc.
-------------------------------------------------------------------------------
Total Purchases ............................... $ 125,067,803 $ 500,200,095
Total Sales ................................... $ 137,981,551 $ 522,955,279
-------------------------------------------------------------------------------
4. Capital Stock Transactions:
Each Fund is authorized to issue 200,000,000 shares of stock, including
Preferred Stock, par value $0.10 per share, all of which were initially
classified as Common Stock. Each Fund's Board is authorized, however, to
reclassify any unissued shares of stock without approval of holders of Common
Stock. At April 30, 2008, the shares owned by an affiliate of the Advisor of
BlackRock Preferred & Corporate Income Strategies Fund, Inc. and BlackRock
Preferred Income Strategies Fund, Inc. were 6,192 and 6,338, respectively.
BlackRock Preferred & Corporate Income Strategies Fund, Inc.
Shares issued and outstanding during the six months ended April 30, 2008
remained constant and during the year ended October 31, 2007 increased by 12,692
as a result of dividend reinvestment.
BlackRock Preferred Income Strategies Fund, Inc.
Shares issued and outstanding during the six months ended April 30, 2008 and the
year ended October 31, 2007, remained constant.
SEMI-ANNUAL REPORT APRIL 30, 2008 25
================================================================================
Notes to Financial Statements (continued)
Preferred Stock
Preferred Stock of the Funds have a par value of $0.10 per share and liquidation
preference of $25,000 per share, plus accrued and unpaid dividends, that entitle
their holders to receive cash dividends at varying annualized rates for each
dividend period. The yields in effect at April 30, 2008 were as follows:
-------------------------------------------------------------------------------
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
Fund, Inc. Fund, Inc.
-------------------------------------------------------------------------------
Series M7 ..................................... 4.009% 4.009%
Series T7 ..................................... 3.958 3.958
Series W7 ..................................... -- 4.084
Series TH7 .................................... -- 4.066
Series F7 ..................................... -- 4.039
Series W28 .................................... -- 3.977
Series TH28 ................................... -- 4.136
-------------------------------------------------------------------------------
Each Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate of 0.25%, calculated on the aggregate principal amount. For
the six months ended April 30, 2008, MLPF&S earned commissions as follows:
-------------------------------------------------------------------------------
Commissions
-------------------------------------------------------------------------------
BlackRock Preferred and Corporate Income Strategies
Fund, Inc. ................................................... $ 92,615
BlackRock Preferred Income Strategies Fund, Inc. ................ $ 283,800
-------------------------------------------------------------------------------
Dividends on seven-day Preferred Stock are cumulative at a rate which is reset
every seven days based on the results of an auction. Dividends on 28-day
Preferred Stock are cumulative at a rate which is reset every 28 days based on
the results of an auction. If the Preferred Stock fails to clear the auction on
an auction date, each Fund is required to pay the maximum applicable rate on the
Preferred Stock to holders of such shares for each successive dividend period
until such time as the stock is successfully auctioned. The maximum applicable
rate on the Preferred Stock is 125% times or 1.25% plus the Telerate/BBA LIBOR
rate. During the six months ended April 30, 2008, the Preferred Stock of each
Fund was successfully auctioned at each auction date until February 13, 2008.
The low, high and average dividend rates on the Preferred Stock for each Fund
for the six months ended April 30, 2008 were as follows:
-------------------------------------------------------------------------------
Series Low High Average
-------------------------------------------------------------------------------
BlackRock Preferred and
Corporate Income
Strategies Fund, Inc.: M7 3.853% 5.750% 4.625%
T7 3.880 5.750 4.685
-------------------------------------------------------------------------------
BlackRock Preferred
Income Strategies
Fund, Inc.: M7 3.853 5.750 4.577
T7 3.796 5.750 4.668
W7 3.936 5.850 4.627
TH7 3.850 5.600 4.591
W28 3.977 6.100 4.860
TH28 3.954 5.750 4.851
F7 3.790 5.750 4.546
-------------------------------------------------------------------------------
Since February 13, 2008, the Preferred Stock of the Funds failed to clear any of
its auctions. As a result, the Preferred Stock dividend rates were reset to the
maximum applicable rate, which ranged from 3.853% to 4.403%.A failed auction is
not an event of default for the Funds but it is a liquidity event for the
holders of the Preferred Stock. A failed auction occurs when there are more
sellers of a fund's auction rate preferred stock than buyers. It is impossible
to predict how long this imbalance will last. An auction for the Funds'
Preferred Stock may not occur for some time, if ever, and even if liquidity does
resume, holders of the Preferred Stock may not have the ability to sell the
Preferred Stock at its liquidation preference.
A Fund may not declare dividends or make other distributions on Common Stock or
purchase any such shares if, at the time of the declaration, distribution or
purchase, asset coverage with respect to the outstanding Preferred Stock is less
than 200%.
The Preferred Stock is redeemable at the option of each Fund, in whole or in
part, on any dividend payment date at $25,000 per share plus any accumulated
unpaid dividends whether or not declared. The Preferred Stock is also subject to
mandatory redemption at $25,000 per share plus any accumulated or unpaid
dividends, whether or not declared, if certain requirements relating to the
composition of the assets and liabilities of a Fund, as set forth in each Fund's
Articles Supplementary, are not satisfied.
26 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Notes to Financial Statements (concluded)
The holders of Preferred Stock have voting rights equal to the holders of Common
Stock (one vote per share) and will vote together with holders of Common Stock
(one vote per share) as a single class. However, holders of Preferred Stock,
voting as a separate class, are also entitled to elect two Directors for each
Fund. In addition, the 1940 Act requires that along with approval by
shareholders that might otherwise be required, the approval of the holders of a
majority of any outstanding Preferred Stock, voting separately as a class would
be required to (a) adopt any plan of reorganization that would adversely affect
the Preferred Stock, (b) change a Fund's subclassification as a closed-end
investment company or change its fundamental investment restrictions or (c)
change its business so as to cease to be an investment company.
5. Reverse Repurchase Agreements:
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
For the six months ended April 30, 2008 the Fund's average amount of reverse
repurchase agreements outstanding was approximately $314,000 and daily weighted
average interest rate was 4.82%.
BlackRock Preferred Income Strategies Fund, Inc.
For the six months ended April 30, 2008 the Fund's average amount of reverse
repurchase agreements outstanding was approximately $722,000 and daily weighted
average interest rate was 3.82%.
6. Capital Loss Carryforward:
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
As of October 31, 2007, the Fund had a 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 future realized capital gains.
BlackRock Preferred Income Strategies Fund, Inc.
As of October 31, 2007, the Fund had a 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 future realized capital gains.
7. Subsequent Event:
Each Fund paid a tax-exempt income dividend to holders of Common Stock per share
on May 30, 2008 to shareholders of record on May 15, 2008, as follows:
-------------------------------------------------------------------------------
BlackRock Preferred and Corporate Income Strategies Fund, Inc. ... $ 0.103300
BlackRock Preferred and Income Strategies Fund, Inc. ............. $ 0.114583
-------------------------------------------------------------------------------
The dividends declared on Preferred Stock for the period May 1, 2008 to May 31,
2008 for each Fund were as follows:
-------------------------------------------------------------------------------
Series Dollar Amount
-------------------------------------------------------------------------------
BlackRock Preferred and Corporate Income Strategies
Fund, Inc.: M7 $ 194,895
T7 $ 146,874
-------------------------------------------------------------------------------
BlackRock Preferred Income Strategies Fund, Inc.: M7 $ 153,748
T7 $ 204,512
W7 $ 258,608
TH7 $ 256,452
W28 $ 309,320
TH28 $ 321,680
F7 $ 214,172
-------------------------------------------------------------------------------
On June 2, 2008, the Funds announced the following redemptions of Preferred
Stock at a price of $25,000 per share plus any accrued and unpaid dividends
through the redemption date:
-------------------------------------------------------------------------------
Shares
Redemption to be Aggregate
Series Date Redeemed Price
-------------------------------------------------------------------------------
BlackRock Preferred and
Corporate Income
Strategies Fund, Inc.: M7 6/10/2008 1,365 $ 34,125,000
T7 6/11/2008 1,365 $ 34,125,000
-------------------------------------------------------------------------------
BlackRock Preferred
Income Strategies
Fund, Inc.: M7 6/10/2008 1,400 $ 35,000,000
T7 6/11/2008 1,400 $ 35,000,000
W7 6/5/2008 1,400 $ 35,000,000
TH7 6/6/2008 1,400 $ 35,000,000
F7 6/9/2008 1,400 $ 35,000,000
W28 6/5/2008 2,000 $ 50,000,000
TH28 6/20/2008 2,000 $ 50,000,000
-------------------------------------------------------------------------------
The Funds will finance the Preferred Stock redemptions with cash received from
reverse repurchase agreement transactions.
SEMI-ANNUAL REPORT APRIL 30, 2008 27
================================================================================
Officers and Directors
G. Nicholas Beckwith, III, Director
Richard E. Cavanagh, Director
Richard S. Davis, Director
Kent Dixon, Director
Frank J. Fabozzi, Director
Kathleen F. Feldstein, Director
James T. Flynn, Director
Henry Gabbay, Director
Jerrold B. Harris, Director
R. Glenn Hubbard, Director
W. Carl Kester, Director
Karen P. Robards, Director
Robert S. Salomon, Jr., Director
Donald C. Burke, Fund President and Chief Executive Officer
Anne F. Ackerley, Vice President
Neal J. Andrews, Chief Financial Officer
Jay M. Fife, Treasurer
Brian P. Kindelan, Chief Compliance Officer of the Funds
Howard Surloff, Secretary
Custodian
State Street Bank and Trust Company
Boston, MA 02101
Transfer Agents
Common Stock:
Computershare Trust Company, N.A.
Providence, RI 02940
Preferred Stock:
BNY Mellon Shareowner Services
Jersey City, NJ 07310
Accounting Agent
State Street Bank and Trust Company
Princeton, NJ 08540
Independent Registered Public Accounting Firm
Deloitte & Touche LLP
Princeton, NJ 08540
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
New York, NY 10036
28 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Additional Information
--------------------------------------------------------------------------------
Availability of Quarterly Schedule of Investments
--------------------------------------------------------------------------------
The Funds file their complete schedule 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 website at
http://www.sec.gov and may also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the Public
Reference Room may be obtained by calling (800) SEC-0330. The Funds' Forms N-Q
may also be obtained upon request and without charge by calling (800) 441-7762.
--------------------------------------------------------------------------------
Electronic Delivery
--------------------------------------------------------------------------------
Electronic copies of most financial reports are available on the Funds' websites
or shareholders can sign up for e-mail notifications of quarterly statements,
annual and semi-annual reports by enrolling in the Funds' electronic delivery
program.
Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisors, banks or brokerages may offer this service.
--------------------------------------------------------------------------------
General Information
--------------------------------------------------------------------------------
The Funds will mail only one copy of shareholder documents, including annual and
semi-annual reports and proxy statements, to shareholders with multiple accounts
at the same address. This practice is commonly called "householding" and it is
intended to reduce expenses and eliminate duplicate mailings of shareholder
documents. Mailings of your shareholder documents may be householded
indefinitely unless you instruct us otherwise. If you do not want the mailing of
these documents to be combined with those for other members of your household,
please contact the Funds at (800) 441-7762.
Quarterly performance, semi-annual and annual reports and other information
regarding the Funds may be found on BlackRock's website, which can be accessed
at http://www.blackrock.com. This reference to BlackRock's website is intended
to allow investors public access to information regarding the Funds and does
not, and is not intended to, incorporate BlackRock's website into this report.
SEMI-ANNUAL REPORT APRIL 30, 2008 29
================================================================================
Additional Information (continued)
--------------------------------------------------------------------------------
Deposit Securities
--------------------------------------------------------------------------------
Effective May 30, 2008, following approval by the Funds' Board and the
applicable ratings agencies, the definition of "Deposited Securities" in the
Funds' Articles Supplementary was amended in order to facilitate the redemption
of the Funds' Preferred Stock. The following phrase was added to the definition
of "Deposit Securities" found in the Funds' Articles Supplementary:
; provided, however, that solely in connection with any redemption of
AMPS, the term Deposit Securities shall include (i) any committed
financing pursuant to a credit agreement, reverse repurchase agreement
facility or similar credit arrangement, in each case which makes available
to the Corporation, no later than the day preceding the applicable
redemption date, cash in an amount not less than the aggregate amount due
to Holders by reason of the redemption of their shares of AMPS on such
redemption date; and (ii) cash amounts due and payable to the Corporation
out of a sale of its securities if such cash amount is not less than the
aggregate amount due to Holders by reason of the redemption of their
shares of AMPS on such redemption date and such sale will be settled not
later than the day preceding the applicable redemption date.
--------------------------------------------------------------------------------
BlackRock Privacy Principles
--------------------------------------------------------------------------------
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their non-public personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any
non-public personal information about its Clients, except as permitted by law or
as is necessary to respond to regulatory requests or to service Client accounts.
These non-affiliated third parties are required to protect the confidentiality
and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to non-public
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the non-public
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
30 SEMI-ANNUAL REPORT APRIL 30, 2008
================================================================================
Additional Information (concluded)
--------------------------------------------------------------------------------
Section 19 Notices (Unaudited)
--------------------------------------------------------------------------------
The amounts and sources of distributions reported are only estimates and are not
being provided for tax reporting purposes. The actual amounts and sources for
tax reporting purposes will depend upon the Fund's investment experience during
the remainder of its fiscal year and may be subject to changes based on the tax
regulations. The Fund will send you a Form 1099-DIV for the calendar year that
will tell you how to report these distributions for federal income tax purposes.
------------------------------------------------------------------------------------------------------------------------
Total Fiscal Year to Date Cumulative Percentage of Fiscal Year to Date Cumulative
Distributions by Character Distributions by Character
------------------------------------------- --------------------------------------------
Net Net
Net Realized Return Total Per Net Realized Return Total Per
Investment Capital of Common Investment Capital of Common
Fund Income Gains Capital Share Income Gains Capital Share
------------------------------------------------------------------------------------------------------------------------
BlackRock Preferred
and Corporate Income
Strategies Fund, Inc. $ 0.57 $ -- $ 0.12 $ 0.69 83% --% 17% 100%
BlackRock Preferred
Income Strategies
Fund, Inc. 0.61 -- 0.04 0.65 94 -- 6 100
------------------------------------------------------------------------------------------------------------------------
Each Fund estimates that it has distributed more than its income and net
realized gains; therefore, a portion of the distribution may be a return of
capital. A return of capital may occur, for example, when some or all of the
money that you invested in the Fund is paid back to the shareholder. A return of
capital does not necessarily reflect the Fund's investment performance and
should not be confused with 'yield' or 'income'.
SEMI-ANNUAL REPORT APRIL 30, 2008 31
GO
[PAPERLESS LOGO]
It's Fast, Convenient, & Timely!
This report is transmitted to shareholders only. It is not a prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. The Funds leverage their Common Stock,
which creates risks 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 dividend rates of the Preferred
Stock, currently set at the maximum reset rate as a result of failed auctions,
may affect the yield to Common Stock shareholders. 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 (800) 441-7762; (2) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's website
at http://www.sec.gov. Information about how the Funds voted proxies relating to
securities held in the Funds' portfolios during the most recent 12-month period
ended June 30 is available upon request and without charge (1) at
www.blackrock.com or by calling (800) 441-7762 and (2) on the Securities and
Exchange Commission's website at http://www.sec.gov.
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
BlackRock Preferred Income Strategies Fund, Inc.
100 Bellevue Parkway
Wilmington, DE 19809
BLACKROCK
#PCPIS-4/08
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable to this
semi-annual report
Item 6 - Investments (a) The registrant's Schedule of Investments is included
as part of the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable due to no such divestments during the semi-annual
period covered since the previous Form N-CSR filing.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable to this semi-annual
report
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable to this semi-annual report
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - 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 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 - Not Applicable to this semi-annual report
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 and Corporate Income Strategies Fund, Inc.
By: /s/ Donald C. Burke
-------------------------------
Donald C. Burke
Chief Executive Officer of
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
Date: June 23, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/ Donald C. Burke
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Donald C. Burke
Chief Executive Officer (principal executive officer) of
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
Date: June 23, 2008
By: /s/ Neal J. Andrews
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Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
Date: June 23, 2008