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 811-21286
Name of Fund: BlackRock Preferred Income Strategies Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, BlackRock Preferred Income Strategies Fund, Inc., 800 Scudders
Mill Road, Plainsboro, NJ 08536. Mailing address: P.O. Box 9011,
Princeton, NJ 08543-9011
Registrant's telephone number, including area code: (800) 882-0052
Date of fiscal year end: 10/31/07
Date of reporting period: 11/01/06 - 04/30/07
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES
FIXED INCOME LIQUIDITY REAL ESTATE
Semi-Annual Reports BLACKROCK
(Unaudited)
APRIL 30, 2007
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
BlackRock Preferred Income Strategies Fund, Inc.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
BlackRock Preferred Income Strategies Fund, Inc.
The Benefits and Risks of Leveraging
The Funds utilize leveraging through the issuance of Preferred Stock. The
concept of leverage is based on the premise that the cost of assets to be
obtained from leverage will be based on short-term interest or dividend rates on
the Preferred Stock, which normally will be lower than the income earned by each
Fund on its longer-term portfolio investments. To the extent that the total
assets of each Fund (including the assets obtained from leverage) are invested
in higher-yielding portfolio investments, each Fund's Common Stock shareholders
will be the beneficiaries of the incremental yield.
Leverage creates risks for holders of Common Stock including the likelihood of
greater net asset value and market price volatility. In addition, there is the
risk that fluctuations in the dividend rates on any Preferred Stock may reduce
the Common Stock's yield and negatively impact its net asset value and market
price. If the income derived from securities purchased with assets received from
leverage exceeds the cost of leverage, each Fund's net income will be greater
than if leverage had not been used. Conversely, if the income from the
securities purchased is not sufficient to cover the cost of leverage, each
Fund's net income will be less than if leverage had not been used, and therefore
the amount available for distribution to Common Stock shareholders will be
reduced.
Portfolio Information as of April 30, 2007
Percent of
BlackRock Preferred and Corporate Income Total
Strategies Fund, Inc.'s Asset Mix Investments
--------------------------------------------------------------------------------
Preferred Stocks ................................................ 27.2%
Capital Trusts .................................................. 25.2
Corporate Bonds ................................................. 21.4
Real Estate Investment Trusts ................................... 7.9
Trust Preferreds ................................................ 7.2
Other* .......................................................... 11.1
--------------------------------------------------------------------------------
Percent of
BlackRock Preferred Income Strategies Total
Fund, Inc.'s Asset Mix Investments
--------------------------------------------------------------------------------
Preferred Stocks ................................................ 30.4%
Capital Trusts .................................................. 24.8
Corporate Bonds ................................................. 20.3
Trust Preferreds ................................................ 7.8
Real Estate Investment Trusts ................................... 6.2
Other* .......................................................... 10.5
--------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments.
2 SEMI-ANNUAL REPORTS APRIL 30, 2007
A Letter to Shareholders
Dear Shareholder
In its first four months, 2007 could already be termed an eventful year for
investors. For most financial markets, 2007 opened just as 2006 ended -- on a
positive trajectory. Then, at the end of February and into March, global equity
markets registered their first significant decline since last summer. The market
jitters were triggered by a significant setback in the Chinese market and were
exacerbated by worries of a weakening economy, escalating geopolitical concerns
and rising delinquencies in the subprime mortgage market. Still, underlying
stock market fundamentals appeared quite sound, supported by a generally
favorable global economic backdrop, tame inflation, slowing but still positive
earnings growth, relatively low interest rates and attractive valuations. These
conditions prevailed later, and the Dow Jones Industrial Average crossed the
13,000 mark for the first time in its history in late April.
Not unlike the equity market, the bond market also experienced volatility as
observers attempted to interpret mixed economic signals. A bond market rally
(falling yields and rising prices) late last year reversed itself early in 2007
amid some transitory signs of economic strength. Overall, yields have fluctuated
month to month but ended April little changed from the beginning of the year.
However, compared to one year ago, yields on 30-year Treasury bonds fell 36
basis points (.36%) and 10-year yields fell 44 basis points, while prices
correspondingly rose.
For its part, the Federal Reserve Board (the Fed) has left the target short-term
interest rate on hold at 5.25% since first pausing in its interest rate-hiking
campaign on August 8, 2006. The central bankers continue to express concern
about potential inflationary pressures, but also acknowledge signs of economic
weakness. Given this relatively "balanced" assessment, most observers believe
the Fed will keep interest rates on hold for now.
Against this backdrop, most major market indexes posted positive returns for the
annual and semi-annual reporting periods ended April 30, 2007:
Total Returns as of April 30, 2007 6-month 12-month
===================================================================================================================
U.S. equities (Standard & Poor's 500 Index) + 8.60% +15.24%
-------------------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) + 6.86 + 7.83
-------------------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) +15.46 +19.81
-------------------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) + 2.64 + 7.36
-------------------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 1.59 + 5.78
-------------------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index) + 6.96 +11.72
-------------------------------------------------------------------------------------------------------------------
If the first four months are any guide, 2007 could be a year of enhanced market
volatility. As you navigate the uncertainties, we encourage you to review your
investment goals with your financial professional and to make portfolio changes,
as needed. For more insight, we invite you to view "What's Ahead in 2007: An
Investment Perspective" and "Are You Prepared for Volatility?" at
www.blackrock.com/funds. We thank you for entrusting BlackRock with your
investment assets, and we look forward to continuing to serve you in the months
and years ahead.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
Fund President and Director
SEMI-ANNUAL REPORTS APRIL 30, 2007 3
A Discussion With Your Funds' Portfolio Managers
We continue to seek to diversify the Funds' holdings and maintain a
positive outlook for preferred securities given the attractive valuations and
good liquidity in the market.
How did the Funds perform during the period in light of the existing market
conditions?
For the six-month period, the Common Stock of BlackRock Preferred and Corporate
Income Strategies Fund, Inc. had net annualized yields of 7.29% and 7.31%, based
on a period-end per share net asset value of $22.12 and a per share market price
of $22.08, respectively, and $.800 per share income dividends. The total
investment return on the Fund's Common Stock was +3.07%, based on a change in
per share net asset value from $22.25 to $22.12, and assuming reinvestment of
all distributions.
For the same six-month period ended April 30, 2007, the Common Stock of
BlackRock Preferred Income Strategies Fund, Inc. had net annualized yields of
6.19% and 6.67%, based on a period-end per share net asset value of $22.39 and a
per share market price of $20.80, respectively, and $.687 per share income
dividends. For the same period, the total investment return on the Fund's Common
Stock was +3.47%, based on a change in per share net asset value from $22.36 to
$22.39, and assuming reinvestment of all distributions.
For the six months ended April 30, 2007, the Funds' benchmark, the Merrill Lynch
Preferred Stock Fixed Rate Index, returned +3.52%, while the broader-market
Merrill Lynch U.S. Corporate Master Index and the Merrill Lynch U.S.
Treasury/Agency Master Index returned +2.83% and +2.26%, respectively.
For a description of the Funds' total investment returns based on a change in
the per share market value of the Funds' Common Stock (as measured by the
trading price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of distributions, please refer to the Financial Highlights section
of this report. As closed-end funds, the Funds' shares may trade in the
secondary market at a premium or discount to their net asset values. As a
result, total investment returns based on changes in the market value of the
Funds' Common Stock can vary significantly from total investment returns based
on changes in the Funds' net asset values.
Long-term bond yields traded in a relatively narrow range over the past six
months and, despite ample volatility, ended the period with little change.
Overall, financial conditions remained fairly balanced, with moderate economic
activity and relatively tame inflationary pressures. Recent commentary from the
Federal Reserve Board (the Fed) has supported the narrow trading range. The
federal funds rate remained at 5.25% at the end of the semi-annual period, where
it has been since June 2006.
The 30-year U.S. Treasury bond yield stood at 4.81% on April 30, 2007, an
increase of nine basis points (.09%) over the past six months. The 10-year U.S.
Treasury note yield increased just two basis points during the period to 4.63%.
Meanwhile, yields on one-month Treasury bills declined 38 basis points from
5.18% to 4.80%, while two-year yields fell 11 basis points to 4.60% during the
period.
Late in the six-month period, fears of a slowdown in economic growth were
exacerbated by turmoil in the subprime mortgage market. In addition, inflation
-- although moderate by historic standards -- remained above the Fed's implicit
comfort zone. In response, bond prices on the front end of the yield curve
rallied on increased expectations of a Fed interest rate cut. Meanwhile, the
long end of the curve sold off on inflation fears. The net result was a slight
steepening of the yield curve, which has been flat to inverted for some time.
Concerns about the strength of the U.S. economy were not solely driven by fears
of spillover from the subprime mortgage market. Recent non-housing-related
economic data -- including payrolls, durable goods orders and retail sales --
showed signs of weakening.
The most recent Consumer Price Index (CPI) data from the U.S. Department of
Labor reflected a notable surge in the overall rate of inflation, but just a
marginal increase in core inflation. The CPI advanced at a seasonally adjusted
rate of .6% in March 2007, following a rise of .4% in February. The significant
increase resulted primarily from a 5.9% jump in energy costs for the month,
spurred by a 12% rise in gasoline prices. However, the CPI for all items
excluding food and energy was up just .1% for the month. The overall CPI rose at
an unadjusted rate of 2.8% over the previous 12 months.
The preliminary estimate of first-quarter 2007 gross domestic product (GDP)
growth came in at 1.3%, which was weaker than expected and would be the slowest
pace in four years. U.S. consumer confidence declined to its lowest level in
eight months in April on concerns about rising gasoline prices and a wave of
mortgage defaults. Personal consumption fell .2%, partly due to the significant
increase in gasoline prices during
4 SEMI-ANNUAL REPORTS APRIL 30, 2007
the month of March. Although manufacturing and industrial production data were
weaker, durable goods orders bounced back dramatically in March. While housing
starts unexpectedly rose for a second consecutive month in March, home sales
data were disappointing. Existing home sales fell more than 8% and sales of new
homes failed to bounce back as briskly as expected from their depressed levels
of February.
What factors most influenced the Funds' performance?
Overweight positions in $25 par preferred securities had a negative effect on
each Fund's results, as these issues underperformed during the six-month period.
The portfolios' substantial cash position also detracted from performance
relative to the Funds' peers. We raised each Fund's cash allocation to
approximately 5% in March 2007, in anticipation that there will be a notable
increase in the supply of new preferred issues in the near future. We intend to
use the cash to purchase new securities.
The Funds' results benefited from overweight positions in hybrid securities,
which generally pay a fixed rate of interest similar to a bond but are
influenced significantly by the price movements of the common stock of the
issuing company. Another positive contributor was our use of net asset value
hedges in the first half of the semi-annual period to shorten the portfolios'
durations. The goal was to reduce the risk of loss in value associated with
rising interest rates. Finally, we had minimal exposure to securities of
companies that we believe could be affected by the troubled subprime mortgage
market, and this proved advantageous.
What changes were made to the portfolios during the period?
Early in the six-month period, we added to the portfolios' positions in
preferred securities, particularly issues eligible for QDI (qualified dividend
income) and DRD (dividends received deduction). We also added selectively to our
holdings in new issues in the high yield market. The Funds moved out of real
estate investment trust preferreds as event risk remained high and valuations
became less attractive. Toward the end of the six-month period, we reduced
holdings that we felt could be affected by the weak subprime mortgage market.
In early 2007, we reduced our net asset value hedges and increased the Funds'
durations by approximately two years. At the end of the period, each portfolio's
duration was 6.5 years, which was slightly long relative to the benchmark
Merrill Lynch Preferred Stock Fixed Rate Index.
We continued to employ leveraging strategies through the period and, at April
30, 2007, both Funds had leverage positions of approximately 36% of total net
assets. (For a more complete explanation of the benefits and risks of
leveraging, see page 2 of this report to shareholders.)
How would you characterize the Funds' positions at the close of the period?
We continue to seek to diversify the holdings in the preferred shares with
secondary issues and through the new-issue calendar, which remains strong. We
also will continue to look at hybrid and DRD preferreds for market opportunity.
We maintain our positive outlook because of attractive valuations and good
liquidity in the market. We anticipate some choppiness in the financials sector
due to the impact of the subprime mortgage market. We intend to continue to add
new names to the portfolio, particularly if attractive offerings arise in the
primary market.
John Burger
Vice President and Portfolio Manager
Scott Amero
Portfolio Manager
Daniel Chen
Portfolio Manager
May 11, 2007
SEMI-ANNUAL REPORTS APRIL 30, 2007 5
Schedule of Investments As of April 30, 2007 (Unaudited)
BlackRock Preferred and Corporate Income Strategies Fund, Inc. (in U.S. dollars)
Preferred Securities
Face
Amount Capital Trusts Value
================================================================================
Capital Markets -- 1.5%
$ 3,390,000 State Street Capital Trust IV, 6.355%
due 6/01/2067 (b) $ 3,402,546
================================================================================
Commercial Banks -- 6.0%
2,000,000 Cullen/Frost Capital Trust I, 6.91%
due 3/01/2034 (b) 2,057,774
5,000,000 First Chicago NBD Institutional Capital I, 5.906%
due 2/01/2027 (b) 4,885,715
910,000 First Empire Capital Trust II, 8.277%
due 6/01/2027 949,094
3,000,000 Hubco Capital Trust I Series B, 8.98%
due 2/01/2027 3,140,772
1,500,000 Hubco Capital Trust II Series B, 7.65%
due 6/15/2028 1,575,000
1,050,000 SunTrust Preferred Capital I, 5.853% (b)(d) 1,067,174
-----------
13,675,529
================================================================================
Consumer Finance -- 2.1%
3,470,000 Capital One Capital III, 7.686% due 8/15/2036 3,748,617
910,000 MBNA Capital A, 8.278% due 12/01/2026 951,614
-----------
4,700,231
================================================================================
Diversified Financial Services -- 1.5%
3,000,000 Farm Credit Bank of Texas Series 1, 7.561% (b)(d) 3,312,570
================================================================================
Gas Utilities -- 4.1%
9,000,000 AGL Capital Trust I Series B, 8.17% due 6/01/2037 9,377,046
================================================================================
Insurance -- 15.2%
3,990,000 AON Corp., 8.205% due 1/01/2027 4,483,004
9,000,000 AXA, 8.60% due 12/15/2030 11,573,181
1,510,000 Ace Capital Trust II, 9.70% due 4/01/2030 2,022,489
9,110,000 Farmers Exchange Capital, 7.05%
due 7/15/2028 (f) 9,403,406
750,000 Genworth Financial, Inc., 6.15%
due 11/15/2066 (b) 742,006
3,000,000 Mangrove Bay Pass-Through Trust, 6.102%
due 7/15/2033 (b)(f) 2,946,990
915,000 Oil Casualty Insurance Ltd., 8% due 9/15/2034 (f) 917,492
1,000,000 Zenith National Insurance Capital Trust I, 8.55%
due 8/01/2028 (f) 1,030,000
1,400,000 Zurich Capital Trust I, 8.376% due 6/01/2037 (f) 1,461,823
-----------
34,580,391
================================================================================
Multi-Utilities -- 0.5%
1,200,000 Dominion Resources Capital Trust I, 7.83%
due 12/01/2027 1,224,100
================================================================================
Oil, Gas & Consumable Fuels -- 2.9%
6,000,000 Pemex Project Funding Master Trust, 7.375%
due 12/15/2014 6,708,000
================================================================================
Thrifts & Mortgage Finance -- 6.8%
1,465,000 Dime Capital Trust I Series A, 9.33%
due 5/06/2027 1,538,014
6,735,000 Greenpoint Capital Trust I, 9.10% due 6/01/2027 7,056,044
760,000 ML Capital Trust I, 9.875% due 3/01/2027 797,521
5,900,000 Sovereign Capital Trust, 9% due 4/01/2027 6,128,761
-----------
15,520,340
================================================================================
Total Capital Trusts
(Cost -- $90,262,017) -- 40.6% 92,500,753
================================================================================
Shares
Held Preferred Stocks
================================================================================
Capital Markets -- 2.4%
1,900,000 Ameriprise Financial, Inc., 7.518% (b) 2,062,110
130,000 Deutsche Bank Capital Funding Trust VIII, 6.375% 3,347,500
-----------
5,409,610
================================================================================
Commercial Banks -- 8.4%
1,000,000 Barclays Bank Plc, 6.278% (b) 980,894
1,176 First Tennessee Bank NA, 3.90% (b)(f) 1,207,973
1,900,000 ICICI Bank Ltd., 7.25% (b)(f) 1,973,975
15,000 KeyCorp Capital IX, 6.75% 382,800
42,000 Provident Financial Group, Inc., 7.75% 1,085,440
5,400,000 Resona Preferred Global Securities Ltd.,
7.191% (b)(f) 5,708,237
1,200,000 Royal Bank of Scotland Group Plc, 9.118% 1,324,747
149,000 Santander Finance Preferred SA
Unipersonal, 6.50% (f) 3,715,688
100,000 Santander Finance Preferred SA
Unipersonal, 6.80% (f) 2,540,630
12,000 Sovereign Bancorp, Inc. Series C, 7.30% (a) 324,960
-----------
19,245,344
================================================================================
Diversified Financial Services -- 3.4%
38,000 Cobank ACB, 7% (f) 1,958,748
5,700,000 JPMorgan Chase Capital XXI Series U, 6.305% (b) 5,765,157
-----------
7,723,905
================================================================================
Electric Utilities -- 1.7%
28,800 Entergy Arkansas, Inc., 6.45% 733,501
22,650 Entergy Louisiana LLC, 6.95% 2,255,530
36,000 PPL Electric Utilities Corp., 6.25% 946,127
-----------
3,935,158
================================================================================
Gas Utilities -- 2.6%
234,300 Southern Union Co., 7.55% 6,033,225
================================================================================
Insurance -- 10.3%
120,000 ACE Ltd. Series C, 7.80% 3,092,400
1,500,000 AXA SA, 6.379% (b)(f) 1,459,996
45,000 Aspen Insurance Holdings Ltd., 7.401% (b) 1,157,346
Axis Capital Holdings Ltd.:
35,000 Series A, 7.25% 908,250
9,000 Series B, 7.50% (b) 973,688
35,200 Endurance Specialty Holdings Ltd. Series A, 7.75% 935,968
1,740,000 Financial Security Assurance Holdings Ltd.,
6.40% (b)(f) 1,720,705
2,000,000 Great West Life & Annuity Insurance Co.,
7.153% (b)(f) 2,111,888
MetLife, Inc.:
2,625,000 6.40% 2,619,915
70,000 Series B, 6.50% 1,842,400
1,000,000 Oil Insurance Ltd., 7.558% (b)(f) 1,049,730
1,450,000 PartnerRe Finance II, 6.44% (b) 1,455,037
165,000 RenaissanceRe Holding Ltd. Series D, 6.60% 4,037,550
-----------
23,364,873
================================================================================
Multi-Utilities -- 1.0%
2,100,000 Dominion Resources, Inc., 7.50% (b) 2,283,754
================================================================================
Oil, Gas & Consumable Fuels -- 0.4%
825,000 Enterprise Products Operating LP, 8.375% (b) 913,556
================================================================================
6 SEMI-ANNUAL REPORTS APRIL 30, 2007
Schedule of Investments (continued)
BlackRock Preferred and Corporate Income Strategies Fund, Inc. (in U.S. dollars)
Preferred Securities (continued)
Shares
Held Preferred Stocks Value
================================================================================
Thrifts & Mortgage Finance -- 12.3%
Fannie Mae:
6,000 Series L, 5.125% $ 287,340
305,000 Series O, 7% (b) 16,031,563
Freddie Mac:
80,000 5.66% 2,001,600
220,000 Series V, 5.57% 5,504,400
160,000 Washington Mutual Capital Trust 2001 Series K,
6.09% (b) 4,120,000
------------
27,944,903
================================================================================
Wireless Telecommunication Services -- 1.4%
2,720 Centaur Funding Corp., 9.08% (f) 3,206,200
--------------------------------------------------------------------------------
Total Preferred Stocks
(Cost -- $98,018,251) -- 43.9% 100,060,528
================================================================================
================================================================================
Real Estate Investment Trusts
================================================================================
Real Estate -- 12.7%
63,800 Alexandria Real Estate Equities, Inc. Series C,
8.375% 1,665,818
80,000 CBL & Associates Properties, Inc. Series C, 7.75% 2,044,000
610 First Industrial Realty Trust, Inc., 6.236% (b) 613,813
HRPT Properties Trust:
425,000 Series B, 8.75% 10,727,000
125,000 Series C, 7.125% 3,193,750
112,000 Health Care Property Investors, Inc. Series F,
7.10% 2,826,880
44,000 Health Care REIT, Inc. Series F, 7.625% 1,135,750
60,000 iStar Financial, Inc. Series I, 7.50% 1,516,200
PS Business Parks, Inc.:
18,400 Series K, 7.95% 487,600
16,000 Series M, 7.20% 406,880
Public Storage, Inc.:
110,000 6.75% 2,791,800
40,000 Series I, 7.25% 1,036,252
14,800 Regency Centers Corp. Series D, 7.25% 381,100
--------------------------------------------------------------------------------
Total Real Estate Investment Trusts
(Cost -- $29,094,750) -- 12.7% 28,826,843
================================================================================
================================================================================
Face
Amount Trust Preferreds
================================================================================
Commercial Banks -- 0.3%
$ 700,000 National City Capital Trust II, 6.625% due 11/15/2066 695,550
================================================================================
Consumer Finance -- 1.1%
2,325,500 Capital One Capital II, 7.50% due 6/15/2066 2,430,662
================================================================================
Diversified Financial Services -- 0.9%
2,000,000 Citigroup Capital XVII, 6.35% due 3/15/2067 1,976,636
================================================================================
Electric Utilities -- 0.5%
1,235,000 PPL Energy Supply LLC, 7% due 7/15/2046 1,274,415
================================================================================
Gas Utilities -- 4.5%
10,000,000 Southwest Gas Capital II, 7.70% due 9/15/2043 10,220,563
================================================================================
Insurance -- 1.9%
2,000,000 ABN AMRO North America Capital Funding
Trust II, 5.41% (b)(d)(f) 1,991,499
2,250,000 Lincoln National Capital VI Series F, 6.75%
due 9/11/2052 2,261,366
------------
4,252,865
================================================================================
Thrifts & Mortgage Finance -- 2.5%
5,845,000 Countrywide Financial Corp., 1.50% due 4/01/2033 5,754,033
--------------------------------------------------------------------------------
Total Trust Preferreds
(Cost -- $26,217,464) -- 11.7% 26,604,724
--------------------------------------------------------------------------------
Total Preferred Securities
(Cost -- $243,592,482) -- 108.9% 247,992,848
================================================================================
================================================================================
Corporate Bonds
================================================================================
Commercial Banks -- 3.3%
5,325,000 Societe Generale, 5.922% (b)(d)(f) 5,333,531
2,125,000 Woori Bank, 6.208% due 5/02/2067 (b)(f) 2,119,959
------------
7,453,490
================================================================================
Containers & Packaging -- 2.2%
5,000,000 Sealed Air Corp., 6.875% due 7/15/2033 (f) 5,008,370
================================================================================
Diversified Financial Services -- 0.4%
975,000 C10 Capital SPV Ltd., 6.722% (b)(d)(f) 973,654
================================================================================
Diversified Telecommunication Services -- 2.3%
4,000,000 France Telecom SA, 8.50% due 3/01/2031 5,268,564
================================================================================
Electric Utilities -- 3.3%
5,000,000 Energy East Corp., 6.75% due 9/15/2033 5,284,375
2,300,000 PPL Capital Funding, 6.70% due 3/30/2067 (b) 2,301,458
------------
7,585,833
================================================================================
Foreign Government Obligations -- 2.3%
5,032,000 Mexico Government International Bond, 5.875%
due 1/15/2014 5,190,508
================================================================================
Gas Utilities -- 0.4%
1,000,000 Southern Union Co., 7.20% due 11/01/2066 (b) 1,016,574
================================================================================
Insurance -- 7.8%
3,100,000 American International Group, Inc., 6.25%
due 3/15/2037 3,085,579
2,250,000 Chubb Corp., 6.375% due 3/29/2067 (b) 2,277,130
2,610,000 Everest Reinsurance Holdings, Inc., 6.60%
due 5/01/2067 (b) 2,619,401
2,550,000 Liberty Mutual Group, Inc., 7% due 3/15/2037 (b)(f) 2,562,260
700,000 Reinsurance Group of America, 6.75%
due 12/15/2065 (b) 703,102
3,400,000 The Travelers Cos., Inc., 6.25% due 3/15/2067 (b) 3,404,638
1,425,000 XL Capital Ltd. Series E, 6.50% (b)(d) 1,406,503
1,800,000 ZFS Finance (USA) Trust II, 6.45%
due 12/15/2065 (b)(f) 1,820,835
------------
17,879,448
================================================================================
SEMI-ANNUAL REPORTS APRIL 30, 2007 7
Schedule of Investments (concluded)
BlackRock Preferred and Corporate Income Strategies Fund, Inc. (in U.S. dollars)
Face
Amount Corporate Bonds Value
===============================================================================
Media -- 5.0%
$ 3,000,000 Comcast Corp., 7.05% due 3/15/2033 $ 3,255,069
2,000,000 TCI Communications, Inc., 8.75% due 8/01/2015 2,400,186
5,000,000 Time Warner, Inc., 7.625% due 4/15/2031 (g) 5,655,590
------------
11,310,845
===============================================================================
Oil, Gas & Consumable Fuels -- 2.0%
2,400,000 Pioneer Natural Resources Co., 6.65%
due 3/15/2017 2,352,278
2,150,000 TransCanada PipeLines Ltd., 6.35% due 5/15/2067 2,146,152
------------
4,498,430
===============================================================================
Wireless Telecommunication Services -- 5.5%
5,000,000 AT&T Wireless Services, Inc., 8.75% due 3/01/2031 6,542,285
5,000,000 Sprint Capital Corp., 8.75% due 3/15/2032 5,900,730
------------
12,443,015
-------------------------------------------------------------------------------
Total Corporate Bonds
(Cost -- $76,309,229) -- 34.5% 78,628,731
Beneficial
Interest Short-Term Securities
===============================================================================
40,922,158 BlackRock Liquidity Series, LLC Cash Sweep Series,
5.26% (c)(e) 40,922,158
-------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $40,922,158) -- 18.0% 40,922,158
===============================================================================
Total Investments (Cost -- $360,823,869*) -- 161.4% 367,543,737
Liabilities in Excess of Other Assets -- (1.4%) (3,247,205)
Preferred Stock, at Redemption Value -- (60.0%) (136,627,851)
------------
Net Assets Applicable to Common Stock -- 100.0% $227,668,681
============
* The cost and unrealized appreciation (depreciation) of investments as of
April 30, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost ........................................ $ 360,336,152
=============
Gross unrealized appreciation ......................... $ 10,464,310
Gross unrealized depreciation ......................... (3,256,725)
-------------
Net unrealized appreciation ........................... $ 7,207,585
=============
(a) Depositary receipts.
(b) Floating rate security.
(c) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series $19,735,699 $956,677
--------------------------------------------------------------------------
(d) The security is a perpetual bond and has no stated maturity date.
(e) Represents the current yield as of April 30, 2007.
(f) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(g) All or a portion of security held as collateral with open financial
futures contracts.
o Financial futures contracts purchased as of April 30, 2007 were as
follows:
--------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Depreciation
--------------------------------------------------------------------------
5-Year
793 U.S. Treasury Notes June 2007 $84,128,682 $(206,979)
--------------------------------------------------------------------------
Total Unrealized Depreciation $(206,979)
=========
o Financial futures contracts sold as of April 30, 2007 were as follows:
--------------------------------------------------------------------------
Unrealized
Number of Expiration Face Appreciation
Contracts Issue Date Value (Depreciation)
--------------------------------------------------------------------------
94 10-Year
U.S. Treasury Bonds June 2007 $10,172,676 $ (10,168)
134 30-Year
U.S. Treasury Bonds June 2007 $15,103,797 129,297
--------------------------------------------------------------------------
Total Unrealized Appreciation -- Net $ 119,129
=========
o Swaps outstanding as of April 30, 2007 were as follows:
--------------------------------------------------------------------------
Unrealized
Notional Appreciation
Amount (Depreciation)
--------------------------------------------------------------------------
Sold credit default protection on a basket of
preferred securities and receive 2.03%
Broker, Lehman Brothers Special Finance
Expires September 2007 $ 9,000,000 $ 82,035
Pay a fixed rate of 5.132% and receive
a floating rate based on 3-month LIBOR
Broker, JPMorgan Chase
Expires September 2016 $25,000,000 24,901
Pay a fixed rate of 5.2735% and receive
a floating rate based on 3-month LIBOR
Broker, Lehman Brothers Special Finance
Expires February 2017 $36,000,000 (306,705)
==========================================================================
Total $(199,769)
=========
o For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report, which may combine industry sub- classifications for reporting
ease. Industries are shown as a percent of net assets.
See Notes to Financial Statements.
8 SEMI-ANNUAL REPORTS APRIL 30, 2007
Schedule of Investments As of April 30, 2007 (Unaudited)
BlackRock Preferred Income Strategies Fund, Inc. (in U.S. dollars)
Preferred Securities
Face
Amount Capital Trusts Value
================================================================================
Capital Markets -- 1.5%
$13,535,000 State Street Capital Trust IV, 6.355%
due 6/01/2067 (b) $ 13,585,093
================================================================================
Commercial Banks -- 12.3%
12,035,000 ABN AMRO North America Holding Preferred
Capital Repackaging Trust I, 6.523% (a)(b)(c) 12,625,112
2,000,000 Bank One Capital III, 8.75% due 9/01/2030 2,632,156
16,455,000 Chase Capital II Series B, 5.856%
due 2/01/2027 (b) 16,077,391
3,630,000 First Empire Capital Trust II, 8.277%
due 6/01/2027 3,785,945
2,000,000 HSBC America Capital Trust I, 7.808%
due 12/15/2026 (a) 2,082,486
15,835,000 HSBC Capital Funding LP/Jersey Channel Islands,
10.176% (a)(b)(c) 23,119,813
7,300,000 HSBC Finance Capital Trust IX, 5.911%
due 11/30/2035 (b) 7,324,418
12,275,000 Hubco Capital Trust II Series B, 7.65%
due 6/15/2028 12,888,750
2,000,000 Lloyds TSB Bank Plc, 6.90% (c) 2,007,320
18,470,000 NationsBank Capital Trust III, 5.906%
due 1/15/2027 (b) 18,110,426
2,000,000 Republic New York Corp., 7.53% due 12/04/2026 2,077,710
4,500,000 ST George Funding Co. LLC, 8.485% (a)(c) 4,702,549
4,175,000 SunTrust Preferred Capital I, 5.853% (b)(c) 4,243,286
------------
111,677,362
================================================================================
Consumer Finance -- 2.2%
13,670,000 Capital One Capital III, 7.686% due 8/15/2036 14,767,605
4,630,000 MBNA Capital A, 8.278% due 12/01/2026 4,841,730
------------
19,609,3353
================================================================================
Diversified Financial Services -- 2.9%
15,000,000 AgFirst Farm Credit Bank, 8.393%
due 12/15/2016 (b) 16,586,055
9,000,000 Farm Credit Bank of Texas Series 1, 7.561% (b)(c) 9,937,710
------------
26,523,765
================================================================================
Electric Utilities -- 0.5%
5,000,000 SWEPCO Capital I, 5.25% due 10/01/2043 (b) 4,972,700
================================================================================
Gas Utilities -- 0.6%
5,000,000 AGL Capital Trust I Series B, 8.17% due 6/01/2037 5,209,470
================================================================================
Insurance -- 14.1%
12,175,000 AON Corp., 8.205% due 1/01/2027 13,679,343
23,725,000 AXA, 8.60% due 12/15/2030 (Surplus Notes) 30,508,191
11,300,000 Ace Capital Trust II, 9.70% due 4/01/2030 15,135,186
15,000,000 Farmers Exchange Capital, 7.05%
due 7/15/2028 (a) 15,483,105
10,000,000 GE Global Insurance Holding Corp., 7.75%
due 6/15/2030 12,224,160
1,000,000 GenAmerica Capital I, 8.525% due 6/30/2027 (a) 1,046,124
3,000,000 Genworth Financial, Inc., 6.15% due 11/15/2066 (b) 2,968,023
6,066,000 ING Capital Funding Trust III, 8.439% (b)(c) 6,689,742
3,605,000 Oil Casualty Insurance Ltd., 8% due 9/15/2034 (a) 3,614,820
6,325,000 Principal Life Insurance Co., 8% due 3/01/2044
(Surplus Notes) (a) 6,832,151
3,750,000 Zenith National Insurance Capital Trust I, 8.55%
due 8/01/2028 (a) 3,862,500
15,600,000 Zurich Capital Trust I, 8.376% due 6/01/2037 (a) 16,288,880
------------
128,332,225
================================================================================
Multi-Utilities -- 3.1%
10,000,000 Dominion Resources Capital Trust I, 7.83%
due 12/01/2027 10,200,830
15,000,000 Dominion Resources Capital Trust III, 8.40%
due 1/15/2031 18,078,720
------------
28,279,550
================================================================================
Road & Rail -- 0.4%
3,750,000 BNSF Funding Trust I, 6.613% due 12/15/2055 (b) 3,583,001
================================================================================
Thrifts & Mortgage Finance -- 2.6%
1,000,000 Astoria Capital Trust I, 9.75% due 11/01/2029 (a) 1,121,500
5,760,000 Dime Capital Trust I Series A, 9.33% due 5/06/2027 6,047,073
12,765,000 Greenpoint Capital Trust I, 9.10% due 6/01/2027 13,373,482
3,005,000 ML Capital Trust I, 9.875% due 3/01/2027 3,153,357
------------
23,695,412
--------------------------------------------------------------------------------
Total Capital Trusts
(Cost -- $357,720,879) -- 40.2% 365,467,913
================================================================================
================================================================================
Shares
Held Preferred Stocks
================================================================================
Capital Markets -- 2.3%
7,600,000 Ameriprise Financial, Inc., 7.518%
due 6/01/2066 (b) 8,248,440
510,000 Deutsche Bank Capital Funding Trust VIII, 6.375% 13,132,500
------------
21,380,940
================================================================================
Commercial Banks -- 11.4%
4,000,000 Barclays Bank Plc, 6.278% (b) 3,923,576
4,650 First Tennessee Bank NA, 3.90% (a)(b) 4,776,422
5,000,000 HBOS Plc, 5.92% (a)(b) 4,922,500
8,000,000 ICICI Bank Ltd., 7.25% (a)(b) 8,311,472
159,000 KeyCorp Capital IX, 6.75% 4,057,680
166,800 Provident Financial Group, Inc., 7.75% 4,310,746
20,000,000 Resona Preferred Global Securities Ltd.,
7.191% (a)(b) 21,141,620
4,800,000 Royal Bank of Scotland Group Plc, 9.118% 5,298,989
23,000 SG Preferred Capital II, 6.302% (b) 24,293,750
Santander Finance Preferred SA Unipersonal (a):
599,000 6.50% 14,937,563
250,000 6.80% 6,351,575
48,000 Sovereign Bancorp, Inc. Series C, 7.30% (d) 1,299,840
------------
103,625,733
================================================================================
Diversified Financial Services -- 3.5%
152,000 Cobank ACB, 7% 7,834,992
23,900,000 JPMorgan Chase Capital XXI Series U, 6.305% (b) 24,173,201
------------
32,008,193
================================================================================
Electric Utilities -- 1.8%
14,000 Alabama Power Co., 5.83% 346,920
114,400 Entergy Arkansas, Inc., 6.45% 2,913,631
49,850 Entergy Louisiana LLC, 6.95% 4,964,158
80,000 Interstate Power & Light Co. Series B, 8.375% 2,624,000
204,000 PPL Electric Utilities Corp., 6.25% 5,361,385
------------
16,210,094
================================================================================
SEMI-ANNUAL REPORTS APRIL 30, 2007 9
Schedule of Investments (continued)
BlackRock Preferred Income Strategies Fund, Inc. (in U.S. dollars)
Preferred Securities (continued)
Shares
Held Preferred Stocks Value
================================================================================
Gas Utilities -- 1.2%
423,200 Southern Union Co., 7.55% $ 10,897,400
================================================================================
Insurance -- 13.8%
880,000 ACE Ltd. Series C, 7.80% 22,677,600
5,950,000 AXA SA, 6.379% (a)(b) 5,791,320
100,000 Aegon NV Series 1, 6.235% (b) 2,562,000
165,000 Aspen Insurance Holdings Ltd., 7.401% (b) 4,243,602
Axis Capital Holdings Ltd.:
140,000 Series A, 7.25% 3,633,000
36,000 Series B, 7.50% (b) 3,894,750
139,200 Endurance Specialty Holdings Ltd. Series A, 7.75% 3,701,328
6,930,000 Financial Security Assurance Holdings Ltd.,
6.40% (a)(b) 6,853,153
7,500,000 Great West Life & Annuity Insurance Co.,
7.153% (a)(b) 7,919,580
MetLife, Inc.:
10,425,000 6.40% 10,404,807
493,000 Series B, 6.50% 12,975,760
5,000,000 Oil Insurance Ltd., 7.558% (a)(b) 5,248,650
5,700,000 PartnerRe Finance II, 6.44% (b) 5,719,802
140,000 Prudential Plc, 6.50% 3,599,400
660,000 RenaissanceRe Holding Ltd. Series D, 6.60% 16,150,200
9,800 Zurich RegCaPS Funding Trust, 6.58% (a)(b) 10,121,563
------------
125,496,515
================================================================================
Multi-Utilities -- 1.4%
8,400,000 Dominion Resources, Inc., 7.50% (b) 9,135,017
140,000 Pacific Gas & Electric Co. Series A, 6% 3,544,800
------------
12,679,817
================================================================================
Oil, Gas & Consumable Fuels -- 0.5%
4,225,000 Enterprise Products Operating LP, 8.375%
due 8/01/2066 (b) 4,678,516
================================================================================
Thrifts & Mortgage Finance -- 13.0%
Fannie Mae:
264,650 Series L, 5.125% 12,674,089
1,210,000 Series O, 7% (b) 63,600,625
Freddie Mac:
305,000 5.66% 7,631,100
190,000 Series Q, 3.85% (b) 8,550,000
855,000 Series V, 5.57% 21,392,100
4,000,000 Roslyn Real Estate Asset Corp. Series D, 9%
due 1/01/2049 (b) 3,979,466
------------
117,827,380
================================================================================
Wireless Telecommunication Services -- 0.3%
2,423 Centaur Funding Corp., 9.08% 2,856,111
--------------------------------------------------------------------------------
Total Preferred Stocks
(Cost -- $438,419,927) -- 49.2% 447,660,699
================================================================================
================================================================================
Shares
Held Real Estate Investment Trusts Value
================================================================================
Real Estate -- 10.1%
251,400 Alexandria Real Estate Equities, Inc. Series C,
8.375% 6,564,054
200,000 CBL & Associates Properties, Inc. Series C, 7.75% 5,110,000
400,000 Developers Diversified Realty Corp., 8% 10,280,000
80,000 Duke Realty Corp. Series K, 6.50% 2,020,000
2,390 First Industrial Realty Trust, Inc., 6.236% (b) 2,404,937
4,000 Firstar Realty LLC, 8.875% (a) 5,207,500
448,000 Health Care Property Investors, Inc. Series F,
7.10% 11,307,520
172,800 Health Care REIT, Inc. Series F, 7.625% 4,460,400
100,000 Kimco Realty Corp. Series F, 6.65% 2,525,000
PS Business Parks, Inc.:
72,000 Series K, 7.95% 1,908,000
64,000 Series M, 7.20% 1,627,520
Public Storage, Inc.:
160,000 Series I, 7.25% 4,145,008
445,000 Series L, 6.75% 11,294,100
Regency Centers Corp.:
607,550 Series C, 7.45% 15,462,147
58,000 Series D, 7.25% 1,493,500
3,857 Sovereign Real Estate Investment Corp., 12% (a) 5,727,645
--------------------------------------------------------------------------------
Total Real Estate Investment Trusts
(Cost -- $89,523,035) -- 10.1% 91,537,331
================================================================================
Face
Amount Trust Preferreds
================================================================================
Commercial Banks -- 0.3%
2,790,000 National City Capital Trust II, 6.625%
due 11/15/2066 32,788,686
================================================================================
Communications Equipment -- 0.2%
2,000,000 Corporate-Backed Trust Certificates, 8.375%
due 11/15/2028 2,012,107
================================================================================
Consumer Finance -- 1.9%
16,702,000 Capital One Capital II, 7.50% due 6/15/2066 17,457,619
================================================================================
Diversified Financial Services -- 0.8%
7,625,000 Citigroup Capital XVII, 6.35% due 3/15/2067 7,535,923
================================================================================
Electric Utilities -- 2.2%
4,750,000 Georgia Power Co. Series O, 1.475%
due 4/15/2033 4,601,234
3,000,000 HECO Capital Trust III, 6.50% due 3/18/2034 3,055,184
5,000,000 National Rural Utilities Cooperative Finance Corp.,
6.75% due 2/15/2043 5,015,234
5,835,000 PPL Energy Supply LLC, 7% due 7/15/2046 6,021,272
950,000 Virginia Power Capital Trust II, 1.844%
due 7/30/2042 955,109
------------
19,648,033
================================================================================
Gas Utilities -- 0.7%
500,000 Dominion CNG Capital Trust I, 1.95%
due 10/31/2041 501,456
5,750,000 Southwest Gas Capital II, 7.70% due 9/15/2043 5,874,418
------------
6,375,874
================================================================================
10 SEMI-ANNUAL REPORTS APRIL 30, 2007
Schedule of Investments (continued)
BlackRock Preferred Income Strategies Fund, Inc. (in U.S. dollars)
Preferred Securities (concluded)
Face
Amount Trust Preferreds Value
===============================================================================
Insurance -- 2.7%
$11,000,000 ABN AMRO North America Capital Funding
Trust II, 5.41% (a)(b)(c) $ 10,948,954
7,375,000 Berkley W R Capital Trust, 6.75% due 7/26/2045 7,415,254
1,000,000 Everest Re Capital Trust, 1.963% due 11/15/2032 1,005,918
5,000,000 Lincoln National Capital VI Series F, 6.75%
due 9/11/2052 5,023,423
--------------
24,393,549
===============================================================================
Multi-Utilities -- 0.1%
397,425 PSEG Funding Trust II, 8.75% due 12/31/2032 405,402
===============================================================================
Thrifts & Mortgage Finance -- 3.7%
28,362,500 Countrywide Financial Corp., 1.50% due 4/01/2033 27,922,828
6,000,000 Dime Community Capital I, 7% due 4/14/2034 5,820,000
--------------
33,742,828
-------------------------------------------------------------------------------
Total Trust Preferreds
(Cost -- $113,531,849) -- 12.6% 114,360,021
-------------------------------------------------------------------------------
Total Preferred Securities
(Cost -- $999,195,690) -- 112.1% 1,019,025,964
===============================================================================
===============================================================================
Corporate Bonds
===============================================================================
Automobiles -- 2.2%
16,000,000 DaimlerChrysler NA Holding Corp.,
8.50% due 1/18/2031 20,160,880
===============================================================================
Commercial Banks -- 3.3%
21,250,000 Societe Generale, 5.922% (a)(b)(c) 21,284,042
8,500,000 Woori Bank, 6.208% due 5/02/2067 (a)(b) 8,479,834
--------------
29,763,876
===============================================================================
Diversified Financial Services -- 0.4%
3,850,000 C10 Capital SPV Ltd., 6.722% (a)(b)(c) 3,844,687
===============================================================================
Diversified Telecommunication Services -- 3.7%
25,500,000 France Telecom SA, 8.50% due 3/01/2031 33,587,095
===============================================================================
Electric Utilities -- 4.4%
16,575,000 Duke Energy Field Services LLC, 8.125%
due 8/16/2030 20,278,767
10,000,000 FirstEnergy Corp. Series B, 6.45% due 11/15/2011 10,488,160
9,125,000 PPL Capital Funding, 6.70% due 3/30/2067 (b) 9,130,785
--------------
39,897,712
===============================================================================
Energy Equipment & Services -- 0.9%
8,300,000 Trans-Canada Pipeline, 6.60% due 5/15/2067 8,285,143
===============================================================================
Gas Utilities -- 0.4%
4,000,000 Southern Union Co., 7.20% due 11/01/2066 (b) 4,066,296
===============================================================================
Insurance -- 7.2%
12,395,000 American International Group, Inc., 6.25%
due 3/15/2087 12,337,338
9,100,000 Chubb Corp., 6.375% due 3/29/2067 (b) 9,209,728
10,430,000 Everest Reinsurance Holdings, Inc., 6.60%
due 5/01/2067 (b) 10,467,569
10,150,000 Liberty Mutual Group, Inc., 7%
due 3/15/2037 (a)(b) 10,198,801
3,000,000 Reinsurance Group of America, 6.75%
due 12/15/2065 (b) 3,013,293
660,120 START 2004-1, 5.417% due 4/21/2011 659,707
13,550,000 Travelers Cos., Inc./The, 6.25% due 3/15/2067 (b) 13,568,482
5,725,000 XL Capital Ltd. Series E, 6.50% (b)(c) 5,650,690
--------------
65,105,608
===============================================================================
Media -- 3.5%
5,000,000 Comcast Corp., 7.05% due 3/15/2033 5,425,115
Time Warner, Inc.:
5,000,000 7.625% due 4/15/2031 (g) 5,655,590
18,000,000 7.70% due 5/01/2032 20,568,024
--------------
31,648,729
===============================================================================
Oil, Gas & Consumable Fuels -- 1.0%
9,500,000 Pioneer Natural Resources Co., 6.65%
due 3/15/2017 9,311,102
===============================================================================
Wireless Telecommunication Services -- 5.9%
18,000,000 AT&T Wireless Services, Inc., 8.75%
due 3/01/2031 23,552,226
Sprint Capital Corp.:
2,000,000 6.90% due 5/01/2019 2,060,878
24,000,000 8.75% due 3/15/2032 28,323,504
--------------
53,936,608
-------------------------------------------------------------------------------
Total Corporate Bonds
(Cost -- $287,641,826) -- 32.9% 299,607,736
===============================================================================
===============================================================================
Beneficial
Interest Short-Term Securities
===============================================================================
$155,280,103 BlackRock Liquidity Series, LLC Cash Sweep Series,
5.26% (e)(f) 155,280,103
-------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $155,280,103) -- 17.1% 155,280,103
===============================================================================
Total Investments (Cost -- $1,442,117,619*) -- 162.1% 1,473,913,803
Liabilities in Excess of Other Assets -- (1.6%) (14,139,590)
Preferred Stock, at Redemption Value -- (60.5%) (550,548,663)
--------------
Net Assets Applicable to Common Stock -- 100.0% $ 909,225,550
==============
SEMI-ANNUAL REPORTS APRIL 30, 2007 11
Schedule of Investments (concluded)
BlackRock Preferred Income Strategies Fund, Inc. (in U.S. dollars)
* The cost and unrealized appreciation (depreciation) of investments as of
April 30, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost ...................................... $ 1,440,371,930
===============
Gross unrealized appreciation ....................... $ 44,088,413
Gross unrealized depreciation ....................... (10,546,540)
---------------
Net unrealized appreciation ......................... $ 33,541,873
===============
(a) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(b) Floating rate security.
(c) The security is a perpetual bond and has no stated maturity date.
(d) Depositary receipts.
(e) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series $134,738,602 $2,478,788
--------------------------------------------------------------------------
(f) Represents the current yield as of April 30, 2007.
(g) All or a portion of security held as collateral in connection with open
financial futures contracts.
o Financial futures contracts purchased as of April 30, 2007 were as
follows:
--------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Depreciation
--------------------------------------------------------------------------
3,170 5-Year
U.S. Treasury Notes June 2007 $336,303,786 $(828,630)
--------------------------------------------------------------------------
Total Unrealized Depreciation $(828,630)
=========
o Financial futures contracts sold as of April 30, 2007 were as follows:
--------------------------------------------------------------------------
Number of Expiration Face Unrealized
Contracts Issue Date Value Appreciation
--------------------------------------------------------------------------
1,363 10-Year
U.S. Treasury Notes June 2007 $147,868,256 $ 217,022
651 30-Year
U.S. Treasury Bonds June 2007 $ 73,356,114 $ 606,864
--------------------------------------------------------------------------
Total Unrealized Appreciation $ 823,886
==========
o Swaps outstanding as of April 30, 2007 were as follows:
--------------------------------------------------------------------------
Unrealized
Notional Appreciation
Amount (Depreciation)
--------------------------------------------------------------------------
Sold credit default protection on a basket of
preferred securities and receive 2.03%
Broker, Lehman Brothers Special Finance
Expires September 2007 $ 36,000,000 $ 328,140
Pay a fixed rate of 5.132% and receive a
floating rate based on 3-month LIBOR
Broker, JPMorgan Chase
Expires September 2016 $125,000,000 133,153
Pay a fixed rate of 5.2735% and receive a
floating rate based on 3-month LIBOR
Broker, Lehman Brothers Special Finance
Expires February 2017 $143,000,000 (1,239,325)
--------------------------------------------------------------------------
Total $ (778,032)
===========
o For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease. Industries are shown as a percent of net assets.
See Notes to Financial Statements.
12 SEMI-ANNUAL REPORTS APRIL 30, 2007
Statements of Net Assets
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
As of April 30, 2007 (Unaudited) Fund, Inc. Fund, Inc.
==================================================================================================================================
Assets
----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value* .............................. $ 326,621,579 $1,318,633,700
Investments in affiliated securities, at value** ............................... 40,922,158 155,280,103
Unrealized appreciation on swaps ............................................... 106,936 461,293
Interest receivable ............................................................ 4,019,363 16,309,076
Receivable for securities sold ................................................. 915,761 3,406,548
Dividends receivable ........................................................... 313,903 234,895
Receivable for swaps ........................................................... 29,170 135,595
Variation margin ............................................................... 89,215 --
Prepaid expenses ............................................................... 26,386 63,356
-------------------------------
Total assets ................................................................... 373,044,471 1,494,524,566
-------------------------------
==================================================================================================================================
Liabilities
----------------------------------------------------------------------------------------------------------------------------------
Unrealized depreciation on swaps ............................................... 306,705 1,239,325
Bank overdraft ................................................................. 69,359 430,337
Payable for securities purchased ............................................... 7,893,676 31,265,252
Payable to investment adviser .................................................. 179,266 718,342
Dividends payable to Common Stock shareholders ................................. 137,302 496,147
Payable for variation margin ................................................... -- 218,876
Payable for other affiliates ................................................... 4,102 16,324
Accrued expenses ............................................................... 157,529 365,750
-------------------------------
Total liabilities .............................................................. 8,747,939 34,750,353
-------------------------------
==================================================================================================================================
Preferred Stock
----------------------------------------------------------------------------------------------------------------------------------
Preferred Stock, at redemption value, par value $.10 per share+ of AMPS@
at $25,000 per share liquidation preference .................................. 136,627,851 550,548,663
-------------------------------
==================================================================================================================================
Net Assets Applicable to Common Stock
----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock ............................... $ 227,668,681 $ 909,225,550
===============================
SEMI-ANNUAL REPORTS APRIL 30, 2007 13
Statements of Net Assets (concluded)
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
As of April 30, 2007 (Unaudited) Fund, Inc. Fund, Inc.
==================================================================================================================================
Analysis of Net Assets Applicable to Common Stock
----------------------------------------------------------------------------------------------------------------------------------
Accumulated distributions in excess of investment income -- net ..... $ (1,794,207) $ (3,062,113)
Accumulated realized capital losses -- net .......................... (20,728,636) (78,048,880)
Unrealized appreciation -- net ...................................... 6,432,249 31,013,408
-------------------------------
Total accumulated losses -- net ..................................... (16,090,594) (50,097,585)
-------------------------------
Common Stock, par value $.10 per share++ ............................ 1,029,188 4,060,654
Paid-in capital in excess of par .................................... 242,730,087 955,262,481
-------------------------------
Net Assets .......................................................... $ 227,668,681 $ 909,225,550
===============================
Net asset value per share of Common Stock ........................... $ 22.12 $ 22.39
-------------------------------
Market price ........................................................ $ 22.08 $ 20.80
-------------------------------
* Identified cost on unaffiliated securities .................... $ 319,901,711 $1,286,837,516
===============================
** Identified cost on affiliated securities ...................... $ 40,922,158 $ 155,280,103
===============================
+ Preferred Stock authorized, issued and outstanding:
Series M7 Shares ........................................... 2,730 2,800
-------------------------------
Series T7 Shares ........................................... 2,730 2,800
-------------------------------
Series W7 Shares ........................................... -- 2,800
-------------------------------
Series TH7 Shares .......................................... -- 2,800
-------------------------------
Series F7 Shares ........................................... -- 2,800
-------------------------------
Series W28 Shares .......................................... -- 4,000
-------------------------------
Series TH28 Shares ......................................... -- 4,000
-------------------------------
++ Common Stock issued and outstanding ........................... 10,291,881 40,606,540
===============================
@ Auction Market Preferred Stock.
See Notes to Financial Statements.
14 SEMI-ANNUAL REPORTS APRIL 30, 2007
Statements of Operations
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
For the Six Months Ended April 30, 2007 (Unaudited) Fund, Inc. Fund, Inc.
==================================================================================================================================
Investment Income
----------------------------------------------------------------------------------------------------------------------------------
Interest* ........................................................... $ 8,392,428 $ 31,832,015
Dividends ........................................................... 3,072,368 13,331,624
-------------------------------
Total income ........................................................ 11,464,796 45,163,639
-------------------------------
==================================================================================================================================
Expenses
----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ............................................ 1,086,887 4,351,935
Commission fees ..................................................... 174,027 691,333
Accounting services ................................................. 65,334 179,227
Transfer agent fees ................................................. 27,688 75,531
Professional fees ................................................... 34,122 42,377
Trustees' fees and expenses ......................................... 16,085 50,284
Printing and shareholder reports .................................... 9,975 37,721
Custodian fees ...................................................... 10,129 25,058
Listing fees ........................................................ 4,661 7,014
Pricing fees ........................................................ 5,121 5,984
Other ............................................................... 17,855 32,265
-------------------------------
Total expenses ...................................................... 1,451,884 5,498,729
-------------------------------
Investment income -- net ............................................ 10,012,912 39,664,910
-------------------------------
==================================================================================================================================
Realized & Unrealized Gain (Loss) -- Net
----------------------------------------------------------------------------------------------------------------------------------
Realized gain on:
Investments -- net .............................................. 2,751,397 11,560,220
Financial futures contracts and swaps -- net .................... 963,606 3,116,397
-------------------------------
Total realized gain -- net .......................................... 3,715,003 14,676,617
-------------------------------
Change in unrealized appreciation/depreciation on:
Investments -- net .............................................. (3,449,597) (11,147,467)
Financial futures contracts and swaps -- net .................... 111,383 299,940
-------------------------------
Total change in unrealized appreciation/depreciation -- net ......... (3,338,214) (10,847,527)
-------------------------------
Total realized and unrealized gain -- net ........................... 376,789 3,829,090
-------------------------------
==================================================================================================================================
Dividends to Preferred Stock Shareholders
----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ............................................ (3,509,370) (14,248,161)
-------------------------------
Net Increase in Net Assets Resulting from Operations ................ $ 6,880,331 $ 29,245,839
===============================
* Interest from affiliates ........................................ $ 956,677 $ 2,478,788
===============================
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2007 15
Statements of Changes in Net Assets
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
For the Six
Months Ended For the
April 30, Year Ended
2007 October 31,
Increase (Decrease) in Net Assets: (Unaudited) 2006
==================================================================================================================================
Operations
----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ....................................................... $ 10,012,912 $ 21,981,944
Realized gain (loss) -- net .................................................... 3,715,003 (7,435,088)
Change in unrealized appreciation/depreciation -- net .......................... (3,338,214) 8,108,246
Dividends to Preferred Stock shareholders ...................................... (3,509,370) (6,435,477)
-------------------------------
Net increase in net assets resulting from operations ........................... 6,880,331 16,219,625
-------------------------------
==================================================================================================================================
Dividends to Common Stock Shareholders
----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ....................................................... (8,226,714) (17,335,379)
-------------------------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (8,226,714) (17,335,379)
-------------------------------
==================================================================================================================================
Common Stock Transactions
----------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to Common Stock shareholders in reinvestment of dividends 281,127 --
-------------------------------
Net increase in net assets derived from Common Stock transactions .............. 281,127 --
-------------------------------
==================================================================================================================================
Net Assets Applicable to Common Stock
----------------------------------------------------------------------------------------------------------------------------------
Total decrease in net assets applicable to Common Stock ........................ (1,065,256) (1,115,754)
Beginning of period ............................................................ 228,733,937 229,849,691
-------------------------------
End of period* ................................................................. $ 227,668,681 $ 228,733,937
===============================
* Accumulated distributions in excess of investment income -- net .......... $ (1,794,207) $ (71,035)
===============================
See Notes to Financial Statements.
16 SEMI-ANNUAL REPORTS APRIL 30, 2007
Statements of Changes in Net Assets
BlackRock Preferred Income Strategies Fund, Inc.
For the Six
Months Ended For the
April 30, Year Ended
2007 October 31,
Increase (Decrease) in Net Assets: (Unaudited) 2006
==================================================================================================================================
Operations
----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ....................................................... $ 39,664,910 $ 82,582,439
Realized gain (loss) -- net .................................................... 14,676,617 (9,358,240)
Change in unrealized appreciation/depreciation -- net .......................... (10,847,527) 21,990,144
Dividends to Preferred Stock shareholders ...................................... (14,248,161) (26,423,012)
-------------------------------
Net increase in net assets resulting from operations ........................... 29,245,839 68,791,331
-------------------------------
==================================================================================================================================
Dividends to Common Stock Shareholders
----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ....................................................... (27,916,915) (61,249,442)
Tax return of capital .......................................................... -- (3,547,483)
-------------------------------
Net decrease in net assets resulting from dividends to Common Stock shareholders (27,916,915) (64,796,925)
-------------------------------
==================================================================================================================================
Common Stock Transactions
----------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to Common Stock shareholders in reinvestment of dividends -- 301,458
-------------------------------
Net increase in net assets derived from Common Stock transactions .............. -- 301,458
-------------------------------
==================================================================================================================================
Net Assets Applicable to Common Stock
----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets applicable to Common Stock ........................ 1,328,924 4,295,864
Beginning of period ............................................................ 907,896,626 903,600,762
-------------------------------
End of period* ................................................................. $ 909,225,550 $ 907,896,626
===============================
* Accumulated distributions in excess of investment income -- net .......... $ (3,062,113) $ (561,947)
===============================
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2007 17
Financial Highlights
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
For the Six
Months Ended For the Year Ended
April 30, October 31, For the Period
The following per share data and ratios have been derived 2007 ---------------------------------- August 1, 2003+
from information provided in the financial statements. (Unaudited) 2006 2005 2004 to Oct. 31, 2003
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................ $ 22.25 $ 22.36 $ 23.69 $ 24.38 $ 23.88
------------------------------------------------------------------
Investment income -- net ............................ .97@@ 2.14@@ 2.16 2.19 .39
Realized and unrealized gain (loss) -- net .......... .04 .07 (1.09) (.70) .67
Dividends to Preferred Stock shareholders from
investment income -- net .......................... (.34) (.63) (.40) (.18) (.03)
------------------------------------------------------------------
Total from investment operations .................... .67 1.58 .67 1.31 1.03
------------------------------------------------------------------
Less dividends to Common Stock shareholders from
investment income -- net .......................... (.80) (1.69) (2.00) (2.00) (.33)
------------------------------------------------------------------
Offering costs resulting from the issuance of Common
Stock ............................................. -- -- -- -- (.04)
------------------------------------------------------------------
Offering and underwriting costs resulting from the
issuance of Preferred Stock ....................... -- -- -- -- (.16)
------------------------------------------------------------------
Net asset value, end of period ...................... $ 22.12 $ 22.25 $ 22.36 $ 23.69 $ 24.38
==================================================================
Market price per share, end of period ............... $ 22.08 $ 21.26 $ 21.03 $ 22.84 $ 23.60
==================================================================
===================================================================================================================================
Total Investment Return**
-----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................. 3.07%@ 7.97% 3.25% 5.86% 3.53%@
==================================================================
Based on market price per share ..................... 7.67%@ 9.69% .73% 5.44% (4.33%)@
==================================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver*** .................... 1.28%* 1.29% 1.26% 1.26% .49%*
==================================================================
Total expenses*** ................................... 1.28%* 1.29% 1.26% 1.27% 1.11%*
==================================================================
Total investment income -- net*** ................... 8.82%* 9.70% 9.23% 9.04% 6.79%*
==================================================================
Amount of dividends to Preferred Stock shareholders . 3.09%* 2.84% 1.71% .76% .50%*
==================================================================
Investment income to Common Stock shareholders -- net 5.73%* 6.86% 7.52% 8.28% 6.29%*
==================================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders ........... 5.18%* 4.71% 3.01% 1.39% 1.11%*
==================================================================
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of period
(in thousands) .................................... $227,669 $228,734 $229,850 $243,492 $250,631
==================================================================
Preferred Stock outstanding, end of period
(in thousands) .................................... $136,500 $136,500 $136,500 $136,500 $136,500
==================================================================
Portfolio turnover .................................. 30.75% 19.23% 25.44% 27.11% 11.51%
==================================================================
===================================================================================================================================
Leverage
-----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ........................... $ 2,668 $ 2,676 $ 2,684 $ 2,784 $ 2,836
==================================================================
===================================================================================================================================
Dividends Per Share on Preferred Stock Outstanding++
-----------------------------------------------------------------------------------------------------------------------------------
Series M7 -- Investment income -- net ............... $ 642 $ 1,180 $ 747 $ 347 $ 55
==================================================================
Series T7 -- Investment income -- net ............... $ 643 $ 1,178 $ 759 $ 346 $ 50
==================================================================
* Annualized.
** 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.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Commencement of operations.
++ The Fund's Preferred Stock was issued on August 26, 2003.
@ Aggregate total investment return.
@@ Based on average shares outstanding.
See Notes to Financial Statements.
18 SEMI-ANNUAL REPORTS APRIL 30, 2007
Financial Highlights (concluded)
BlackRock Preferred Income Strategies Fund, Inc.
For the Six
Months Ended For the Year Ended
April 30, October 31, For the Period
The following per share data and ratios have been derived 2007 ---------------------------------- March 28, 2003+
from information provided in the financial statements. (Unaudited) 2006 2005 2004 to Oct. 31, 2003
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................ $ 22.36 $ 22.26 $ 23.48 $ 24.53 $ 23.88
------------------------------------------------------------------
Investment income -- net ............................ .98@@ 2.03@@ 2.09@@ 2.14@@ 1.14
------------------------------------------------------------------
Realized and unrealized gain (loss) -- net .......... .09 .32 (.91) (.78) .61
Dividends and distributions to Preferred Stock
shareholders:
Investment income -- net ........................ (.35) (.65) (.40) (.18) (.07)
Realized gain -- net ............................ -- -- -- (.01) --
------------------------------------------------------------------
Total from investment operations .................... .72 1.70 .78 1.17 1.68
------------------------------------------------------------------
Less dividends and distributions to Common Stock
shareholders:
Investment income -- net ........................ (.69) (1.51) (2.00) (2.13) (.87)
Realized gain -- net ............................ -- -- -- (.09) --
Tax return of capital ........................... -- (.09) -- -- --
------------------------------------------------------------------
Total dividends and distributions to Common Stock
shareholders ...................................... (.69) (1.60) (2.00) (2.22) (.87)
------------------------------------------------------------------
Offering costs resulting from the issuance of
Common Stock ...................................... -- -- -- -- (.01)
------------------------------------------------------------------
Offering and underwriting costs resulting from the
issuance of Preferred Stock ....................... -- -- -- -- (.15)
------------------------------------------------------------------
Net asset value, end of period ...................... $ 22.39 $ 22.36 $ 22.26 $ 23.48 $ 24.53
==================================================================
Market price per share, end of period ............... $ 20.80 $ 20.12 $ 21.20 $ 22.87 $ 23.69
==================================================================
===================================================================================================================================
Total Investment Return**
-----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .................. 3.47%@ 8.77% 3.73% 5.22% 6.47%@
==================================================================
Based on market price per share ..................... 6.83%@ 2.77% 1.43% 6.12% (1.80%)@
==================================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Common Stock
-----------------------------------------------------------------------------------------------------------------------------------
Total expenses, net of waiver*** .................... 1.21%* 1.23% 1.20% 1.19% .79%*
==================================================================
Total expenses*** ................................... 1.21%* 1.23% 1.20% 1.19% 1.05%*
==================================================================
Total investment income -- net*** ................... 8.76%* 9.26% 8.96% 8.93% 8.31%*
==================================================================
Amount of dividends to Preferred Stock shareholders . 3.15%* 2.96% 1.73% .74% .49%*
==================================================================
Investment income to Common Stock shareholders -- net 5.61%* 6.30% 7.23% 8.19% 7.82%*
==================================================================
===================================================================================================================================
Ratios Based on Average Net Assets of Preferred Stock
-----------------------------------------------------------------------------------------------------------------------------------
Dividends to Preferred Stock shareholders ........... 5.22%* 4.80% 2.97% 1.32% 1.05%*
==================================================================
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to Common Stock, end of period
(in thousands) .................................... $909,226 $907,897 $903,601 $952,973 $995,722
==================================================================
Preferred Stock outstanding, end of period
(in thousands) .................................... $550,000 $550,000 $550,000 $550,000 $550,000
==================================================================
Portfolio turnover .................................. 29.12% 17.73% 27.96% 22.56% 27.31%
==================================================================
===================================================================================================================================
Leverage
-----------------------------------------------------------------------------------------------------------------------------------
Asset coverage per $1,000 ........................... $ 2,653 $ 2,651 $ 2,643 $ 2,733 $ 2,810
==================================================================
===================================================================================================================================
Dividends Per Share on Preferred Stock Outstanding++
-----------------------------------------------------------------------------------------------------------------------------------
Series M7 -- Investment income -- net ............... $ 644 $ 1,180 $ 744 $ 330 $ 127
==================================================================
Series T7 -- Investment income -- net ............... $ 642 $ 1,175 $ 757 $ 329 $ 122
==================================================================
Series W7 -- Investment income -- net ............... $ 640 $ 1,183 $ 734 $ 327 $ 122
==================================================================
Series TH7 -- Investment income -- net .............. $ 642 $ 1,179 $ 737 $ 320 $ 184
==================================================================
Series F7 -- Investment income -- net ............... $ 636 $ 1,178 $ 740 $ 326 $ 125
==================================================================
Series W28 -- Investment income -- net .............. $ 658 $ 1,221 $ 751 $ 338 $ 105
==================================================================
Series TH28 -- Investment income -- net ............. $ 661 $ 1,258 $ 733 $ 324 $ 95
==================================================================
* Annualized.
** 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.
*** Do not reflect the effect of dividends to Preferred Stock shareholders.
+ Commencement of operations.
++ The Fund's Preferred Stock was issued on May 16, 2003.
@ Aggregate total investment return.
@@ Based on average shares outstanding.
See Notes to Financial Statements.
SEMI-ANNUAL REPORTS APRIL 30, 2007 19
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, as
diversified, closed-end management investment companies. The Funds' financial
statements are prepared in conformity with U.S. generally accepted accounting
principles, which may require the use of management accruals and estimates.
Actual results may differ from these estimates. These unaudited financial
statements reflect all adjustments, which are, in the opinion of management,
necessary to present a fair statement of the results for the interim period. All
such adjustments are of a normal, recurring nature. The Funds' Common Stock
shares are listed on the New York Stock Exchange ("NYSE") under the symbol PSW
for BlackRock Preferred and Corporate Income Strategies Fund, Inc. and PSY for
BlackRock Preferred Income Strategies Fund, Inc. The following is a summary of
significant accounting policies followed by the Funds.
(a) Valuation of investments -- Debt securities are traded primarily in the
over-the-counter ("OTC") markets and are valued at the last available bid price
in the OTC market or on the basis of values obtained by a pricing service.
Pricing services use valuation matrixes that incorporate both dealer-supplied
valuations and valuation models. The procedures of the pricing service and its
valuations are reviewed by the officers of each of the Funds under the general
direction of the respective Board of Directors. Such valuations and procedures
will be reviewed periodically by the Board of Directors of the respective Funds.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. Options traded in the OTC market are valued at the last
asked price (options written) or the last bid price (options purchased).
Financial futures contracts and options thereon, which are traded on exchanges,
are valued at their closing prices as of the close of such exchanges. Swap
agreements are valued based upon quoted fair valuations received daily by each
Fund from a pricing service or counterparty. Valuation of short-term investment
vehicles is generally based on the net asset value of the underlying investment
vehicle or amortized cost. Repurchase agreements are valued at cost plus accrued
interest. Investments in open-end investment companies are valued at their net
asset value each business day. Securities and other assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of each Fund's Board of Directors.
Equity securities held by the Funds that are traded on stock exchanges or the
NASDAQ Global Market are valued at the last sale price or official close price
on the exchange, as of the close of business on the day the securities are being
valued or, lacking any sales, at the last available bid price for long
positions, and at the last available asked price for short positions. In cases
where equity securities are traded on more than one exchange, the securities are
valued on the exchange designated as the primary market by or under the
authority of the Board of Directors of each Fund. Long positions traded in the
OTC markets, NASDAQ Capital Market or Bulletin Board are valued at the last
available bid price or yield equivalent obtained from one or more dealers or
pricing services approved by the Board of Directors of each Fund. Short
positions traded in the OTC markets are valued at the last available asked
price. Portfolio securities that are traded both in the OTC markets and on a
stock exchange are valued according to the broadest and most representative
market.
Generally, trading in foreign securities, as well as U.S. government securities,
and money market instruments, is substantially completed each day at various
times prior to the close of business on the NYSE. The values of such securities
used in computing the net asset value of the Funds' shares are determined as of
such times. Foreign currency exchange rates will generally be determined as of
the close of business on the NYSE. Occasionally, events affecting the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of business on the NYSE that may not be
reflected in the computation in each of the Funds' net asset value. If events
(for example, a company announcement, market volatility or a natural disaster)
occur during such periods that are expected to materially affect the value of
such securities, those securities will be valued at their fair value as
determined in good faith by each Fund's Board of Directors or by BlackRock
Advisors, LLC (the "Manager"), an indirect, wholly owned subsidiary of
BlackRock, Inc., using a pricing service and/or procedures approved by each
Fund's Board of Directors.
(b) Derivative financial instruments -- Each Fund may engage in various
portfolio investment strategies both to increase the return of each Fund and to
hedge, or protect, its exposure to interest rate movements and movements in the
securities markets. Losses may arise due to changes in the value of the contract
or if the counterparty does not perform under the contract.
20 SEMI-ANNUAL REPORTS APRIL 30, 2007
Notes to Financial Statements (continued)
o Options -- Each Fund may write and purchase call and put options. When the
Fund writes an option, an amount equal to the premium received by the Fund
is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market
value of the option written. When a security is purchased or sold through
an exercise of an option, the related premium paid (or received) is added
to (or deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option expires
(or the Fund enters into a closing transaction), the Fund realizes a gain
or loss on the option to the extent of the premiums received or paid (or
gain or loss to the extent the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
o Financial futures contracts -- Each Fund may purchase or sell financial
futures contracts and options on such financial futures contracts.
Financial futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield.
Upon entering into a contract, the Fund deposits, and maintains as
collateral, such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed.
o Swaps -- Each Fund may enter into swap agreements, which are OTC contracts
in which the Fund and a counterparty agree to make periodic net payments
on a specified notional amount. The net payments can be made for a set
period of time or may be triggered by a predetermined credit event. The
net periodic payments may be based on a fixed or variable interest rate;
the change in market value of a specified security, basket of securities,
or index; or the return generated by a security. These periodic payments
received or made by the Fund are recorded in the accompanying Statements
of Operations as realized gains or losses, respectively. Gains or losses
are also realized upon termination of the swap agreements. Swaps are
marked-to-market daily and changes in value are recorded as unrealized
appreciation (depreciation). Risks include changes in the returns of the
underlying instruments, failure of the counterparties to perform under the
contracts' terms and the possible lack of liquidity with respect to the
swap agreements.
(c) Income taxes -- It is each Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are 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.
(e) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates. A portion of the dividends paid by BlackRock Preferred Income
Strategies Fund, Inc. during the year ended October 31, 2006 are characterized
as a tax return of capital.
(f) Securities lending -- Each Fund may lend securities to financial
institutions that provide cash or securities issued or guaranteed by the U.S.
government as collateral, which will be maintained at all times in an amount
equal to at least 100% of the current market value of the loaned securities. The
market value of the loaned securities is determined at the close of business of
the Fund and any additional required collateral is delivered to the Fund on the
next business day. Where the Fund receives securities as collateral for the
loaned securities, it collects a fee from the borrower. The Fund typically
receives the income on the loaned securities but does not receive the income on
the collateral. Where the Fund receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities within five
business days. The Fund may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason, the Fund could experience delays
and costs in gaining access to the collateral. The Fund also could suffer a
SEMI-ANNUAL REPORTS APRIL 30, 2007 21
Notes to Financial Statements (continued)
loss where the value of the collateral falls below the market value of the
borrowed securities, in the event of borrower default or in the event of losses
on investments made with cash collateral.
(g) Bank overdraft -- Each Fund recorded a bank overdraft which resulted from
management estimates of available cash.
(h) Recent accounting pronouncements -- In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109."
FIN 48 prescribes the minimum recognition threshold a tax position must meet in
connection with accounting for uncertainties in income tax positions taken or
expected to be taken by an entity, including mutual funds, before being measured
and recognized in the financial statements. Adoption of FIN 48 is required for
the last net asset value calculation in the first required financial statement
reporting period for fiscal years beginning after December 15, 2006. The impact
on each Fund's financial statements, if any, is currently being assessed.
In September 2006, "Statement of Financial Accounting Standards No. 157, Fair
Value Measurements" ("FAS 157"), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. At this time, management is evaluating the implications of FAS 157
and its impact on each Fund's financial statements, if any, has not been
determined.
In addition, in February 2007, the FASB issued "Statement of Financial
Accounting Standards No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities" ("FAS 159"), which is effective for fiscal years
beginning after November 15, 2007. Early adoption is permitted as of the
beginning of a fiscal year that begins on or before November 15, 2007, provided
the entity also elects to apply the provisions of FAS 157. FAS 159 permits
entities to choose to measure many financial instruments and certain other items
at fair value that are not currently required to be measured at fair value. FAS
159 also establishes presentation and disclosure requirements designed to
facilitate comparisons between entities that choose different measurement
attributes for similar types of assets and liabilities. At this time, management
is evaluating the implications of FAS 159 and its impact on each Fund's
financial statements, if any, has not been determined.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Investment Advisory Agreement between each Fund and the Manager became
effective on September 29, 2006. Prior to September 29, 2006, Fund Asset
Management, L.P. ("FAM") was each Fund's manager. The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect, wholly owned subsidiary of
Merrill Lynch & Co. ("Merrill Lynch"), which is the limited partner. Merrill
Lynch and The PNC Financial Services Group, Inc. are the principal owners of
BlackRock, Inc.
The Manager is responsible for the management of each Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of each Fund. For such services, each Fund
pays a monthly fee at an annual rate of .60% of each Fund's average daily net
assets (including proceeds from the issuance of Preferred Stock) plus the
proceeds of any outstanding borrowings used for leverage. In addition, the
Manager has entered into a sub-advisory agreement with BlackRock Financial
Management, Inc., an affiliate of the Manager, under which the Manager pays the
sub-adviser for services it provides to each Fund a fee at an annual rate equal
to a percentage of the management fee paid by each Fund to the Manager.
The Funds have received an exemptive order from the Securities and Exchange
Commission permitting them to lend portfolio securities to Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of
Merrill Lynch, or its affiliates. Pursuant to that order, the Funds have
retained BlackRock Investment Management, LLC ("BIM"), an affiliate of the
Manager, as the securities lending agent for a fee based on a share of the
returns on investment of cash collateral. Prior to September 29, 2006, BIM was
organized as Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate
of FAM, and MLIM, LLC was the securities lending agent. BIM may, on behalf of
the Funds, invest cash collateral received by the Funds for such loans, among
other things, in a private investment company managed by the Manager or in
registered money market funds advised by the Manager or its affiliates.
22 SEMI-ANNUAL REPORTS APRIL 30, 2007
Notes to Financial Statements (concluded)
The Funds reimbursed the Manager for certain accounting services. The
reimbursements were as follows:
--------------------------------------------------------------------------------
For the
Six Months
Ended
30, 2007
--------------------------------------------------------------------------------
BlackRock Preferred and Corporate Income
Strategies Fund, Inc. ............................................ $ 3,496
BlackRock Preferred Income
Strategies Fund, Inc. ............................................ $13,851
--------------------------------------------------------------------------------
Certain officers and/or directors of the Funds are officers and/or directors of
BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 2007 were as follows:
--------------------------------------------------------------------------------
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
Fund, Inc. Fund, Inc.
--------------------------------------------------------------------------------
Total Purchases ........................... $102,013,860 $400,420,942
Total Sales ............................... $100,383,732 $446,238,243
--------------------------------------------------------------------------------
4. Stock Transactions:
Each Fund is authorized to issue 200,000,000 shares of stock, including
Preferred Stock, par value $.10 per share, all of which were initially
classified as Common Stock. Each Fund's Board of Directors is authorized,
however, to reclassify any unissued shares of stock without approval of holders
of Common Stock.
BlackRock Preferred & Corporate Income Strategies Fund, Inc.
Shares issued and outstanding during the six months ended April 30, 2007
increased by 12,692 as a result of dividend reinvestment and during the year
ended October 31, 2006 remained constant.
BlackRock Preferred Income Strategies Fund, Inc.
Shares issued and outstanding during the six months ended April 30, 2007
remained constant and during the year ended October 31, 2006 increased by 13,470
as a result of dividend reinvestment.
Preferred Stock
Auction Market Preferred Stock are redeemable shares of Preferred Stock of the
Funds, with a par value of $.10 per share and liquidation preference of $25,000
per share, plus accrued and unpaid dividends, that entitle their holders to
receive cash dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at April 30, 2007 were as follows:
--------------------------------------------------------------------------------
BlackRock BlackRock
Preferred and Preferred
Corporate Income Income
Strategies Strategies
Fund, Inc. Fund, Inc.
--------------------------------------------------------------------------------
Series M7 .................................. 5.22% 5.22%
Series T7 .................................. 5.22% 5.22%
Series W7 .................................. -- 5.20%
Series TH7 ................................. -- 5.25%
Series F7 .................................. -- 5.23%
Series W28 ................................. -- 5.27%
Series TH28 ................................ -- 5.238%
--------------------------------------------------------------------------------
Each Fund pays commissions to certain broker-dealers at the end of each auction
at an annual rate ranging from .25% to .375%, calculated on the proceeds of each
auction. For the six months ended April 30, 2007, MLPF&S earned commissions as
follows:
--------------------------------------------------------------------------------
Commissions
--------------------------------------------------------------------------------
BlackRock Preferred and Corporate Income
Strategies Fund, Inc. .......................................... $110,673
BlackRock Preferred Income Strategies Fund, Inc. ................. $269,806
--------------------------------------------------------------------------------
5. Capital Loss Carryforward:
BlackRock Preferred & Corporate Income Strategies Fund, Inc.
At October 31, 2006, the Fund had a net capital loss carryforward of
$25,060,290, of which $1,276,621 expires in 2011, $10,243,141 expires in 2012,
$5,058,900 expires in 2013 and $8,481,628 expires in 2014. This amount will be
available to offset like amounts of any future taxable gains.
BlackRock Preferred Income Strategies Fund, Inc.
At October 31, 2006, the Fund had a net capital loss carryforward of
$92,790,096, of which $62,733,648 expires in 2012, $17,911,331 expires in 2013
and $12,145,117 expires in 2014. This amount will be available to offset like
amounts of any future taxable gains.
SEMI-ANNUAL REPORTS APRIL 30, 2007 23
Officers and Directors
Robert C. Doll, Jr., Fund President and Director
David O. Beim, Director
James T. Flynn, Director
W. Carl Kester, Director
Karen P. Robards, Director
Donald C. Burke, Vice President and Treasurer
John Burger, Vice President
Karen Clark, Fund Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agents
Common Stock:
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
Preferred Stock:
The Bank of New York
101 Barclay Street -- 7 West
New York, NY 10286
Investment Objectives
NYSE Symbol 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.
NYSE Symbol BlackRock Preferred Income Strategies Fund, Inc. seeks to
PSY provide shareholders with high current income. The secondary
objective of the Fund is to seek to provide shareholders with
capital appreciation. The Fund seeks to achieve its objectives
by investing primarily in a portfolio of preferred securities,
including convertible preferred securities that may be converted
into common stock or other securities of the same or a different
issuer.
24 SEMI-ANNUAL REPORTS APRIL 30, 2007
Availability of Quarterly Schedules of Investments
The Funds file their complete schedules of portfolio holdings with the
Securities and Exchange Commission ("SEC") for the first and third quarters of
each fiscal year on Form N-Q. The Funds' Forms N-Q are available on the SEC's
Web site at http://www.sec.gov. The Funds' Forms N-Q may also be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
Electronic Delivery
Electronic copies of most financial reports and prospectuses are available on
the Funds' Web site. Shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Funds' electronic delivery program.
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisers, banks or brokerages may offer this service.
SEMI-ANNUAL REPORTS APRIL 30, 2007 25
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their non-public personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our Web sites.
BlackRock does not sell or disclose to non-affiliated third parties any
non-public personal information about its Clients, except as permitted by law or
as is necessary to respond to regulatory requests or to service Client accounts.
These non-affiliated third parties are required to protect the confidentiality
and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to non-public
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the non-public
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
26 SEMI-ANNUAL REPORTS APRIL 30, 2007
These reports, including the financial information herein, are transmitted to
shareholders of BlackRock Preferred and Corporate Income Strategies Fund, Inc.
and BlackRock Preferred Income Strategies Fund, Inc. for their information. This
is not a prospectus. The Funds leverage their Common Stock to provide Common
Stock shareholders with potentially higher rates of return. Leverage creates
risk for Common Stock shareholders, including the likelihood of greater
volatility of net asset value and market price of Common Stock shares, and the
risk that fluctuations in short-term interest rates may reduce the Common
Stock's yield. Past performance results shown in these reports should not be
considered a representation of future performance. Statements and other
information herein are as dated and are subject to change.
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-441-7762; (2) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's Web site
at http://www.sec.gov. Information about how the Funds voted proxies relating to
securities held in the Funds' portfolios during the most recent 12-month period
ended June 30 is available (1) at www.blackrock.com and (2) on the Securities
and Exchange Commission's Web site at http://www.sec.gov.
BlackRock Preferred and Corporate Income Strategies Fund, Inc.
BlackRock Preferred Income Strategies Fund, Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
BLACKROCK
#PCPIS-4/07
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 - Schedule of Investments - The registrant's Schedule of Investments is
included as part of the Report to Stockholders filed under Item 1 of
this form.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - 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 Committee will consider nominees to the Board recommended
by shareholders when a vacancy becomes available. Shareholders who
wish to recommend a nominee should send nominations which include
biographical information and set forth the qualifications of the
proposed nominee to the registrant's Secretary. There have been no
material changes to these procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial officers
or persons performing similar functions have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act")) are effective as of a date within 90 days of the filing
of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
13a-15(b) under the Securities and Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) 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 Income Strategies Fund, Inc.
By: /s/ Robert C. Doll, Jr.
------------------------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Preferred Income Strategies Fund, Inc.
Date: June 19, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert C. Doll, Jr.
------------------------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Preferred Income Strategies Fund, Inc.
Date: June 19, 2007
By: /s/ Donald C. Burke
------------------------------------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock Preferred Income Strategies Fund, Inc.
Date: June 19, 2007