UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
Washington,D.C.20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number 811-21349

Name of Fund: BlackRock Limited Duration Income Trust (BLW)

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock
Limited Duration Income Trust, 55 East 52^nd Street, New York, NY 10055

Registrant’s telephone number, including area code: (800) 882-0052, Option 4

Date of fiscal year end: 08/31/2011

Date of reporting period: 08/31/2011

Item 1 – Report to Stockholders

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Annual Report

BlackRock Defined Opportunity Credit Trust (BHL)

BlackRock Diversified Income Strategies Fund, Inc. (DVF)

BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)

BlackRock Limited Duration Income Trust (BLW)

Not FDIC Insured • No Bank Guarantee • May Lose Value

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2 ANNUAL REPORT AUGUST 31, 2011

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Dear Shareholder

Market volatility has been extraordinary in recent months. Government debt and deficit issues in both
the US and Europe have taken a toll on investor sentiment while weaker-than-expected US economic
data raised concerns of another recession. Political instability and concerns that central banks have
nearly exhausted their stimulus measures have further compounded investor uncertainty.Although
markets remain volatile and conditions are highly uncertain, BlackRock remains focused on finding
opportunities in this environment.

The pages that follow reflect your fund’s reporting period ended August 31, 2011.Accordingly, the
following discussion is intended to provide you with additional perspective on the performance of
your investments during that period.

One year ago, the global economy appeared to solidly be in recovery mode and investors were opti-
mistic given the anticipated second round of quantitative easing from the US Federal Reserve (the
“Fed”). Stock markets rallied despite the ongoing sovereign debt crisis in Europe and inflationary pres-
sures looming over emerging markets. Fixed income markets, however, saw yields move sharply upward
(pushing prices down) especially on the long end of the historically steep yield curve.While high yield
bonds benefited from the risk rally, most fixed income sectors declined in the fourth quarter.The tax-
exempt municipal market faced additional headwinds as it became evident that the Build America
Bond program would not be extended and municipal finance troubles abounded.

The new year brought spikes of volatility as political turmoil swept across the Middle East/North Africa
region and as prices of oil and other commodities soared. Natural disasters in Japan disrupted indus-
trial supply chains and concerns mounted over US debt and deficit issues. Equities generally performed
well early in the year, however, as investors chose to focus on the continuing stream of strong corporate
earnings and positive economic data. Credit markets were surprisingly resilient in this environment and
yields regained relative stability in 2011.The tax-exempt market saw relief from its headwinds and
steadily recovered from its fourth-quarter lows. Equities, commodities and high yield bonds outpaced
higher-quality assets as investors increased their risk tolerance.

However, longer-term headwinds had been brewing. Inflationary pressures intensified in emerging
economies, many of which were overheating, and the European debt crisis continued to escalate.
Markets were met with a sharp reversal in May when political unrest in Greece pushed the nation closer
to defaulting on its debt.This development rekindled fears about the broader debt crisis and its further
contagion among peripheral European countries. Concurrently, it became evident that the pace of global
economic growth had slowed as higher oil prices and supply chain disruptions finally showed up in
economic data. By mid-summer, confidence in policymakers was tarnished as the prolonged US debt
ceiling debate revealed the degree of polarization in Washington, DC.The downgrade of the US govern-
ment’s credit rating on August 5 was the catalyst for the recent turmoil in financial markets. Extreme
volatility persisted as Europe’s debt and banking crisis deepened and US economic data continued
to weaken. Investors fled from riskier assets, pushing stock and high yield bond indices into negative
territory for the six-month period ended August 31, while lower-risk investments including US Treasuries,
municipal securities and investment grade corporate bonds posted gains.Twelve-month returns on all
asset classes remained positive. Continued low short-term interest rates kept yields on money market
securities near their all-time lows.

“BlackRock remains focused
on managing risk and finding
opportunities in all market
environments.”

Rob Kapito
President, BlackRock Advisors, LLC

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

THIS PAGE NOT PART OF YOUR FUND REPORT 3

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Fund Summary as of August 31, 2011 BlackRock Defined Opportunity Credit Trust

Investment Objective

BlackRock Defined Opportunity Credit Trust’s (BHL) (the “Fund”) primary investment objective is to provide high current income, with a secondary objective
of long-term capital appreciation. The Fund seeks to achieve its investment objectives by investing substantially all of its assets in loan and debt instruments
and loan-related and debt-related instruments (collectively "credit securities"). The Fund invests, under normal market conditions, at least 80% of its assets
in any combination of the following credit securities: (i) senior secured floating rate and fixed rate loans; (ii) second lien or other subordinated or unsecured
floating rate and fixed rate loans or debt; (iii) credit securities that are rated below investment grade quality; and (iv) investment grade corporate bonds.
The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objectives will be achieved.

Portfolio Management Commentary

How did the Fund perform?
• For the 12 months ended August 31, 2011, the Fund returned 4.17%
based on market price and 2.93% based on net asset value (“NAV”).
For the same period, the closed-end Lipper Loan Participation Funds cate-
gory posted an average return of 1.16% based on market price and 3.79%
based on NAV. All returns reflect reinvestment of dividends. The Fund's dis-
count to NAV, which narrowed during the period, accounts for the difference
between performance based on price and performance based on NAV. The
following discussion relates to performance based on NAV.

What factors influenced performance?
• Positive Fund performance was predominantly driven by security selection
within the higher-quality tiers of the market. Security selection continued
to reflect the higher-quality bias the Fund has employed over the last two
years, which has focused on sectors classified as “recession-resistant”
and not heavily reliant on a strong consumer, such as chemicals and non-
captive diversified (industrials). The Fund’s exposure to high yield bonds
was another contributor to performance as the asset class performed well
over the period.

• Toward the end of 2010, the market was priced for slow-but-modest
growth. Credit fundamentals had materially improved and refinancing
was easier for non-investment grade issuers given a robust capital market.
Default activity was muted and expected to remain benign throughout
2011. In this environment, lower-quality loans staged a significant rally
and managed to outperform their higher-quality counterparts. Therefore,
the Fund’s limited exposure to low-quality credits negatively impacted
returns. The Fund uses foreign currency exchange contracts to manage
currency risk in the portfolio. The net effect of the contracts during the
period was negative.

Describe recent portfolio activity.
• During the period, the Fund did not deviate from its higher quality bias in
terms of loan structure, overall credit quality and liquidity. This focus was
even more pressing in 2011, when loans traded close to par and gave
investors no incentive to forgo credit quality in order to pick up yield. Prior
to the correction in the last month of the period, when fund management
believed market conditions were weakening, fund management sold some
of the Fund’s lower-quality securities, therefore raising the cash reserve
level. Becoming more conservative overall, fund management continued to
navigate the market for deals, targeting issuers with superior credit funda-
mentals (i.e., stable income streams and attractive downside protection).

Describe portfolio positioning at period end.
• At period end, the Fund held 86% of its total portfolio in floating rate loan
interests (bank loans) and 11% in corporate bonds, with the remainder in
asset-backed securities, other interests and common stocks. The Fund
ended the period with leverage at 27% of its total managed assets.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changesin market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.

4 ANNUAL REPORT AUGUST 31, 2011

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¹ Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results.
² The distribution rate is not constant and is subject to change.
³ Represents loan outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowings) minus the sum of
liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by theFund, please see The Benefits and Risks of Leveraging
on page 12.

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

The following charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations of the Fund’s corporate bond investments:

 

 

ANNUAL REPORT AUGUST 31, 2011 5

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Fund Summary as of August 31, 2011 BlackRock Diversified Income Strategies Fund, Inc.

Investment Objective

BlackRock Diversified Income Strategies Fund, Inc.’s (DVF) (the “Fund”) investment objective is to provide shareholders with high current income. The Fund
seeks to achieve its investment objective by investing primarily in floating rate debt securities and instruments, including floating rate loans, bonds, certain
preferred securities (including certain convertible preferred securities), notes or other debt securities or instruments which pay a floating or variable rate of
interest until maturity. The Fund considers floating rate debt securities to include fixed rate debt securities held by the Fund where the Fund has entered into
certain derivative transactions at either the portfolio level or with respect to an individual security held by the Fund, including interest rate swap agreements,
in an attempt to convert the fixed rate payments it receives with respect to such securities into floating rate payments. The Fund may invest, under normal
market conditions, a substantial portion of its assets in below investment grade quality securities. The Fund may invest directly in such securities or syntheti-
cally through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

Portfolio Management Commentary

How did the Fund perform?
• For the 12 months ended August 31, 2011, the Fund returned 0.91%
based on market price and 4.30% based on NAV. For the same period,
the closed-end Lipper Loan Participation Funds category posted an average
return of 1.16% based on market price and 3.79% based on NAV. All
returns reflect reinvestment of dividends. The Fund's discount to NAV, which
widened during the period, accounts for the difference between perform-
ance based on price and performance based on NAV. The following discus-
sion relates to performance based on NAV.

What factors influenced performance?
• Positive Fund performance was predominantly driven by security selection
within the higher-quality tiers of the market. Security selection continued
to reflect the higher-quality bias the Fund has employed over the last two
years, which has focused on sectors classified as “recession-resistant” and
not heavily reliant on a strong consumer, such as chemicals and non-cap-
tive diversified (industrials). The Fund’s exposure to high yield bonds was
another contributor to performance as the asset class performed well over
the period.

• Toward the end of 2010, the market was priced for slow-but-modest
growth. Credit fundamentals had materially improved and refinancing
was easier for non-investment grade issuers given a robust capital market.
Default activity was muted and expected to remain benign throughout
2011. In this environment, lower-quality loans staged a significant rally
and managed to outperform their higher-quality counterparts. Therefore,
the Fund’s limited exposure to low-quality credits negatively
impacted returns. The Fund uses foreign currency exchange contracts to
manage currency risk in the portfolio. The net effect of the contracts during
the period was negative.

Describe recent portfolio activity.
• During the period, the Fund did not deviate from its higher quality bias in
terms of loan structure, overall credit quality and liquidity. This focus was
even more pressing in 2011, when loans traded close to par and gave
investors no incentive to forgo credit quality in order to pick up yield. Prior
to the correction in the last month of the period, when fund management
believed market conditions were weakening, fund management sold some
of the Fund’s lower-quality securities, therefore raising the cash reserve
level. Becoming more conservative overall, fund management continued to
navigate the market for deals, targeting issuers with superior credit funda-
mentals (i.e., stable income streams and attractive downside protection).

Describe portfolio positioning at period end.
• At period end, the Fund held 80% of its total portfolio in floating rate loan
interests (bank loans) and 14% in corporate bonds, with the remainder in
asset-backed securities, common stocks and other interests. The Fund
ended the period with leverage at 27% of its total managed assets.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changesin market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.

6 ANNUAL REPORT AUGUST 31, 2011

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¹ Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results.
² The distribution rate is not constant and is subject to change.
³ Represents loan outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowings) minus the sum of lia-
bilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on
page 12.

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

The following charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations of the Fund’s corporate bond investments:

 

 

ANNUAL REPORT AUGUST 31, 2011 7

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Fund Summary as of August 31, 2011 BlackRock Floating Rate Income Strategies Fund, Inc.

Investment Objective

BlackRock Floating Rate Income Strategies Fund, Inc.’s (FRA) (the “Fund”) investment objective is to provide shareholders with high current income and
such preservation of capital as is consistent with investment in a diversified, leveraged portfolio consisting primarily of floating rate debt securities and
instruments. The Fund seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its assets in floating rate debt
securities, including floating or variable rate debt securities that pay interest at rates that adjust whenever a specified interest rate changes and/or which
reset on predetermined dates (such as the last day of a month or calendar quarter). The Fund invests a substantial portion of its investments in floating rate
debt securities consisting of secured or unsecured senior floating rate loans that are rated below investment grade. The Fund may invest directly in such
securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

Portfolio Management Commentary

How did the Fund perform?
• For the 12 months ended August 31, 2011, the Fund returned (2.91)%
based on market price and 4.04% based on NAV. For the same period, the
closed-end Lipper Loan Participation Funds category posted an average
return of 1.16% based on market price and 3.79% based on NAV. All
returns reflect reinvestment of dividends. The Fund moved from a premium
to NAV to a discount by period-end, which accounts for the difference
between performance based on price and performance based on NAV. The
following discussion relates to performance based on NAV.

What factors influenced performance?
• Positive Fund performance was predominantly driven by security selection
within the higher-quality tiers of the market. Security selection continued to
reflect the higher-quality bias the Fund has employed over the last two
years, which has focused on sectors classified as “recession-resistant” and
not heavily reliant on a strong consumer, such as chemicals and non-cap-
tive diversified (industrials). The Fund’s exposure to high yield bonds was
another contributor to performance as the asset class performed well over
the period.

• Toward the end of 2010, the market was priced for slow-but-modest growth.
Credit fundamentals had materially improved and refinancing was easier for
non-investment grade issuers given a robust capital market. Default activity
was muted and expected to remain benign throughout 2011. In this
environment, lower-quality loans staged a significant rally and managed to
outperform their higher-quality counterparts. Therefore, the Fund’s limited
exposure to low-quality credits negatively impacted returns.

Describe recent portfolio activity.
• During the period, the Fund did not deviate from its higher quality bias in
terms of loan structure, overall credit quality and liquidity. This focus was
even more pressing in 2011, when loans traded close to par and gave
investors no incentive to forgo credit quality in order to pick up yield. Prior
to the correction in the last month of the period, when fund management
believed market conditions were weakening, fund management sold some
of the Fund’s lower-quality securities, therefore raising the cash reserve
level. Becoming more conservative overall, fund management continued to
navigate the market for deals, targeting issuers with superior credit funda-
mentals (i.e., stable income streams and attractive downside protection).

Describe portfolio positioning at period end.
• At period end, the Fund held 81% of its total portfolio in floating rate loan
interests (bank loans) and 15% in corporate bonds, with the remainder in
asset-backed securities, other interests and common stocks. The Fund
ended the period with leverage at 26% of its total managed assets.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changesin market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.

8 ANNUAL REPORT AUGUST 31, 2011

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¹ Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results.
² The distribution rate is not constant and is subject to change.
³ Represents loan outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowings) minus the sum of lia-
bilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on
page 12.

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

The following charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations of the Fund’s corporate bond investments:

 

 

ANNUAL REPORT AUGUST 31, 2011 9

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Fund Summary as of August 31, 2011 BlackRock Limited Duration Income Trust

Investment Objective

BlackRock Limited Duration Income Trust’s (BLW) (the “Fund”) investment objective is to provide current income and capital appreciation. The Fund seeks
to achieve its investment objective by investing primarily in three distinct asset classes:

• intermediate duration, investment grade corporate bonds, mortgage-related securities and asset-backed securities and US Government and agency securities;
• senior, secured floating rate loans made to corporate and other business entities; and
• US dollar-denominated securities of US and non-US issuers rated below investment grade, and to a limited extent, in non-US dollar denominated
securities of non-US issuers rated below investment grade.

The Fund’s portfolio normally has an average portfolio duration of less than five years (including the effect of anticipated leverage), although it may be
longer from time to time depending on market conditions. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

Portfolio Management Commentary

How did the Fund perform?
• For the 12 months ended August 31, 2011, the Fund returned 2.77%
based on market price and 5.85% based on NAV. For the same period,
the closed-end Lipper High Current Yield Funds (Leveraged) category posted
an average return of 11.37% based on market price and 9.65% based on
NAV. All returns reflect reinvestment of dividends. The Fund's discount to
NAV, which widened during the period, accounts for the difference between
performance based on price and performance based on NAV. The following
discussion relates to performance based on NAV.

What factors influenced performance?
• The Fund invests in high yield bonds, floating rate loan interests and
investment grade bonds, whereas most funds in the Lipper category invest
primarily in high yield bonds. The largest detractor from performance for the
period was the Fund’s allocation to bank loans and investment grade bonds,
both of which underperformed high yield bonds for the 12-month period.
During the period, the Fund maintained leverage at an average of 23%,
which was below the average level for the Lipper category. This lower average
leverage detracted from Fund performance, as would be expected in a
rising market.

• Lower-quality and higher-beta segments (those with higher sensitivity to
market volatility) outperformed higher-quality and lower-beta segments for
the period, despite a sharp reversal in August 2011. The Fund’s limited
exposure to high yield credits near the high end of the quality range helped
performance over the period, although an underexposure to lower-quality
credits slightly detracted.

Describe recent portfolio activity.
• During the first half of the period, the Fund shifted its overall positioning
from a more conservative stance to one that was more consistent with a
gradually improving economy. As the US economic outlook worsened and
the potential for contagion from the continued debt crisis in Europe
increased, Fund positioning once again became more conservative.
Specifically, the Fund reduced positions in more cyclical credits and
increased exposure to market sectors with stronger assets and more
stable cash flows. These adjustments detracted from performance initially
but were positive for performance in the August sell-off.

Describe portfolio positioning at period end.
• At period end, the Fund held 40% of its total portfolio in high yield bonds,
31% in floating rate loan interests (bank loans), 11% in US Government
sponsored agency securities and 10% in non-agency mortgage-backed
securities. The remainder of the portfolio was invested in asset-backed secu-
rities, taxable municipal bonds, common stocks and other interests, while
the Fund’s cash position was negligible. The Fund ended the period with
leverage at 29% of its total managed assets.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changesin market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.

10 ANNUAL REPORT AUGUST 31, 2011

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¹ Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results.
² The distribution rate is not constant and is subject to change.
³ Represents reverse repurchase agreements outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrow-
ing) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and
Risks of Leveraging on page 12.

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

The following charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations of the Fund’s corporate bond and
US government securities investments:

 

 

ANNUAL REPORT AUGUST 31, 2011 11

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The Benefits and Risks of Leveraging

The Funds may utilize leverage to seek to enhance the yield and NAV.
However, these objectives cannot be achieved in all interest rate
environments.

The Funds may utilize leverage by borrowing through a credit facility or
through entering into reverse repurchase agreements. In general, the con-
cept of leveraging is based on the premise that the financing cost of assets
to be obtained from leverage, which will be based on short-term interest
rates, will normally 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 shareholders will benefit from
the incremental net income.

The interest earned on securities purchased with the proceeds from lever-
age is paid to shareholders in the form of dividends, and the value of these
portfolio holdings is reflected in the per share NAV. However, in order to
benefit shareholders, the yield curve must be positively sloped; that is,
short-term interest rates must be lower than long-term interest rates. If the
yield curve becomes negatively sloped, meaning short-term interest rates
exceed long-term interest rates, income to shareholders will be lower than if
the Funds had not used leverage.

To illustrate these concepts, assume a Fund’s capitalization is $100 million
and it borrows for an additional $30 million, creating a total value of $130
million available for investment in long-term securities. If prevailing short-
term interest rates are 3% and long-term interest rates are 6%, the yield
curve has a strongly positive slope. In this case, the Fund pays borrowing
costs and interest expense on the $30 million of borrowings based on the
lower short-term interest rates. At the same time, the securities purchased
by the Fund with assets received from the borrowings earn income based
on long-term interest rates. In this case, the borrowing costs and interest
expense of the borrowings is significantly lower than the income earned
on the Fund’s long-term investments, and therefore the Fund’s shareholders
are the beneficiaries of the incremental net income.

If short-term interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental net income pickup will be
reduced or eliminated completely. Furthermore, if prevailing short-term
interest rates rise above long-term interest rates, the yield curve has a
negative slope. In this case, the Fund pays higher short-term interest rates
whereas the Fund’s total portfolio earns income based on lower long-term
interest rates.

Furthermore, the value of the Funds’ portfolio investments generally varies
inversely with the direction of long-term interest rates, although other
factors can influence the value of portfolio investments. In contrast, the
redemption value of the Funds’ borrowings does not fluctuate in relation
to interest rates. As a result, changes in interest rates can influence the
Funds’ NAV positively or negatively in addition to the impact on Fund
performance from leverage from borrowings discussed above.

The use of leverage may enhance opportunities for increased income to
the Funds, but as described above, it also creates risks as short- or long-
term interest rates fluctuate. Leverage also will generally cause greater
changes in the Funds’ NAVs, market prices and dividend rates than comp-
arable portfolios without leverage. If the income derived from securities
purchased with assets received from leverage exceeds the cost of leverage,
the Funds’ 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 lever-
age had not been used, and therefore the amount available for distribution
to shareholders will be reduced. Each Fund may be required to sell portfo-
lio securities at inopportune times or at distressed values in order to com-
ply with regulatory requirements applicable to the use of leverage or as
required by the terms of leverage instruments, which may cause a Fund to
incur losses. The use of leverage may limit each Fund’s ability to invest in
certain types of securities or use certain types of hedging strategies. Each
Fund will incur expenses in connection with the use of leverage, all of which
are borne by shareholders and may reduce income.

Under the Investment Company Act of 1940, the Funds are permitted
to borrow through their credit facility or by entering into reverse repurchase
agreements up to 33 ¹ / ₃ % of their total managed assets. As of August 31,
2011, the Funds had outstanding leverage from borrowings as a percent-
age of their total managed assets as follows:

 

Derivative Financial Instruments

The Funds may invest in various derivative financial instruments, including
financial futures contracts, foreign currency exchange contracts, options
and swaps as specified in Note 2 of the Notes to Financial Statements,
which may constitute forms of economic leverage. Such derivative financial
instruments are used to obtain exposure to a market without owning or tak-
ing physical custody of securities or to hedge market, equity, credit, interest
rate and/or foreign currency exchange rate risks. Derivative financial instru-
ments involve risks, including the imperfect correlation between the value of
a derivative financial instrument and the underlying asset, possible default
of the counterparty to the transaction or illiquidity of the derivative financial
instrument. The Funds’ ability to use a derivative financial instrument suc-
cessfully depends on the investment advisor’s ability to predict pertinent
market movements accurately, which cannot be assured. The use of deriva-
tive financial instruments may result in losses greater than if they had not
been used, may require a Fund to sell or purchase portfolio investments at
inopportune times or for distressed values, may limit the amount of appre-
ciation a Fund can realize on an investment, may result in lower dividends
paid to shareholders or may cause a Fund to hold an investment that it
might otherwise sell. The Funds’ investments in these instruments are
discussed in detail in the Notes to Financial Statements.

12 ANNUAL REPORT AUGUST 31, 2011

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BlackRock Defined Opportunity Credit Trust (BHL)
Schedule of Investments August 31, 2011
(Percentages shown are based on Net Assets)

 

 

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 13

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BlackRock Defined Opportunity Credit Trust (BHL)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

14 ANNUAL REPORT AUGUST 31, 2011

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BlackRock Defined Opportunity Credit Trust (BHL)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 15

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BlackRock Defined Opportunity Credit Trust (BHL)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

16 ANNUAL REPORT AUGUST 31, 2011

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BlackRock Defined Opportunity Credit Trust (BHL)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

* The cost and unrealized appreciation (depreciation) of investments as of
August 31, 2011, as computed for federal income tax purposes, were as follows:

(a) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
(b) Variable rate security. Rate shown is as of report date.
(c) Non-income producing security.
(d) Represents a payment-in-kind security which may pay interest/dividends in
additional face/shares.
(e) Other interests represent beneficial interest in liquidation trusts and other
reorganization entities and are non-income producing.
(f) Amount is less than $500.
(g) Investments in companies considered to be an affiliate of the Fund during the
year, for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
as amended, were as follows:

(h) Represents the current yield as of report date.
• 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 rating group indexes, and/or as defined by Fund management.
These definitions may not apply for purposes of this report, which may combine
such industry sub-classifications for reporting ease.
• Foreign currency exchange contracts as of August 31, 2011 were as follows:

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 17

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BlackRock Defined Opportunity Credit Trust (BHL)
Schedule of Investments (concluded)

• Fair Value Measurements — Various inputs are used in determining the fair value of
investments and derivative financial instruments. These inputs are categorized in three
broad levels for financial statement purposes as follows:
• Level 1 — price quotations in active markets/exchanges for identical assets
and liabilities
• Level 2 — other observable inputs (including, but not limited to: quoted prices for
similar assets or liabilities in markets that are active, quoted prices for identical or
similar assets or liabilities in markets that are not active, inputs other than quoted
prices that are observable for the assets or liabilities (such as interest rates, yield
curves, volatilities, prepayment speeds, loss severities, credit risks and default
rates) or other market-corroborated inputs)
• Level 3 — unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
Fund's own assumptions used in determining the fair value of investments and
derivative financial instruments)
The categorization of a value determined for investments and derivative financial
instruments is based on the pricing transparency of the investment and derivative
financial instrument and does not necessarily correspond to the Fund’s perceived risk
of investing in those securities. For information about the Fund’s policy regarding val-
uation of investments and derivative financial instruments and other significant
accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the inputs used as of August 31, 2011 in determin-
ing the fair valuation of the Fund’s investments and derivative financial instruments:

 

 

The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

² Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on investments
still held on August 31, 2011 was $(629,494).
³ The Fund’s policy is to recognize transfers in and transfers out as of the beginning of the period of the event or the change in circumstances that caused the transfer.
A reconciliation of Level 3 investments and derivative financial instruments is presented when the Fund had a significant amount of Level 3 investments and derivative financial
instruments at the beginning and/or end of the year in relation to net assets.

See Notes to Financial Statements.

18 ANNUAL REPORT AUGUST 31, 2011

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BlackRock Diversified Income Strategies Fund, Inc. (DVF)
Schedule of Investments August 31, 2011
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 19

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BlackRock Diversified Income Strategies Fund, Inc. (DVF)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

20 ANNUAL REPORT AUGUST 31, 2011

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BlackRock Diversified Income Strategies Fund, Inc. (DVF)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 21

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BlackRock Diversified Income Strategies Fund, Inc. (DVF)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

22 ANNUAL REPORT AUGUST 31, 2011

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BlackRock Diversified Income Strategies Fund, Inc. (DVF)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 23

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BlackRock Diversified Income Strategies Fund, Inc. (DVF)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

* The cost and unrealized appreciation (depreciation) of investments as of
August 31, 2011, as computed for federal income tax purposes, were as follows:

 

 

• Investments in companies considered to be an affiliate of the Fund during the
period, for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
as amended, were as follows:

 

• 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 rating group indexes, and/or as defined by Fund management.
These definitions may not apply for purposes of this report, which may combine
such industry sub-classifications for reporting ease.
• Foreign currency exchange contracts as of August 31, 2011 were as follows:

 

• Fair Value Measurements — Various inputs are used in determining the fair value of
investments and derivative financial instruments. These inputs are categorized in
three broad levels for financial statement purposes as follows:
• Level 1 — price quotations in active markets/exchanges for identical assets
and liabilities
• Level 2 — other observable inputs (including, but not limited to: quoted prices for
similar assets or liabilities in markets that are active, quoted prices for identical
or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
default rates) or other market-corroborated inputs)
• Level 3 — unobservable inputs based on the best information available in the cir-
cumstances, to the extent observable inputs are not available (including the
Fund's own assumptions used in determining the fair value of investments and
derivative financial instruments)

The categorization of a value determined for investments and derivative financial
instruments is based on the pricing transparency of the investment and derivative
financial instrument and does not necessarily correspond to the Fund’s perceived
risk of investing in those securities. For information about the Fund’s policy regarding
valuation of investments and derivative financial instruments and other significant
accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

24 ANNUAL REPORT AUGUST 31, 2011

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BlackRock Diversified Income Strategies Fund, Inc. (DVF)
Schedule of Investments (concluded)

The following tables summarize the inputs used as of August 31, 2011 in determin-
ing the fair valuation of the Fund’s investments and derivative financial instruments:

 

 

The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

² Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on investments
still held on August 31, 2011 was $(641,187).
³ The Fund’s policy is to recognize transfers in and transfers out as of the beginning of the period of the event or the change in circumstances that caused the transfer.
A reconciliation of Level 3 investments and derivative financial instruments is presented when the Fund had a significant amount of Level 3 investments and derivative financial
instruments at the beginning and/or end of the year in relation to net assets.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 25

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 BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
Schedule of Investments August 31, 2011
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

26 ANNUAL REPORT AUGUST 31, 2011

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BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 27

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BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

28 ANNUAL REPORT AUGUST 31, 2011

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BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 29

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BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

30 ANNUAL REPORT AUGUST 31, 2011

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BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

* The cost and unrealized appreciation (depreciation) of investments as of
August 31, 2011, as computed for federal income tax purposes, were as follows:

(a) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
(b) Variable rate security. Rate shown is as of report date.
(c) Non-income producing security.
(d) Represents a payment-in-kind security which may pay interest/dividends in
additional par/shares.
(e) Convertible security.
(f) Represents a zero-coupon bond. Rate shown reflects the current yield as of
report date.
(g) Other interests represent beneficial interests in liquidation trusts and other
reorganization or private entities.
(h) Amount is less than $500.
(i) The investment is held as a wholly owned subsidiary of the Fund.
(j) Warrants entitle the Fund to purchase a predetermined number of shares of com-
mon stock and are non-income producing. The purchase price and number of
shares are subject to adjustment under certain conditions until the expiration date,
if any.
(k) Investments in companies considered to be an affiliate of the Fund during the
year, for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
as amended, were as follows:

(l) Represents the current yield as of report date.

• Foreign currency exchange contracts as of August 31, 2011 were as follows:

 

• 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 rating group indexes, and/or as defined by Fund management.
These definitions may not apply for purposes of this report, which may combine
such industry sub-classifications for reporting ease.
• Fair Value Measurements — Various inputs are used in determining the fair value of
investments and derivative financial instruments. These inputs are categorized in
three broad levels for financial statement purposes as follows:
• Level 1 — price quotations in active markets/exchanges for identical assets
and liabilities
• Level 2 — other observable inputs (including, but not limited to: quoted prices for
similar assets or liabilities in markets that are active, quoted prices for identical
or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
default rates) or other market-corroborated inputs)
• Level 3 — unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
Fund’s own assumptions used in determining the fair value of investments and
derivative financial instruments)

The categorization of a value determined for investments and derivative financial
instruments is based on the pricing transparency of the investment and derivative
financial instrument and does not necessarily correspond to the Fund’s perceived
risk of investing in those securities. For information about the Fund’s policy regarding
valuation of investments and derivative financial instruments and other significant
accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 31

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BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
Schedule of Investments (concluded)

The following tables summarize the inputs used as of August 31, 2011 in determin-
ing the fair valuation of the Fund’s investments and derivative financial instruments:

 

 

The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

² Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on investments
still held on August 31, 2011 was $(546,270).
³ The Fund’s policy is to recognize transfers in and transfers out as of the beginning of the period of the event or the change in circumstances that caused the transfer.
A reconciliation of Level 3 investments and derivative financial instruments is presented when the Fund had a significant amount of Level 3 investments and derivative financial
instruments at the beginning and/or end of the year in relation to net assets.

See Notes to Financial Statements.

32 ANNUAL REPORT AUGUST 31, 2011

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BlackRock Limited Duration Income Trust (BLW)
Schedule of Investments August 31, 2011
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 33

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BlackRock Limited Duration Income Trust (BLW)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

34 ANNUAL REPORT AUGUST 31, 2011

---

BlackRock Limited Duration Income Trust (BLW)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 35

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BlackRock Limited Duration Income Trust (BLW)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

36 ANNUAL REPORT AUGUST 31, 2011

---

BlackRock Limited Duration Income Trust (BLW)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 37

---

BlackRock Limited Duration Income Trust (BLW)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

38 ANNUAL REPORT AUGUST 31, 2011

---

BlackRock Limited Duration Income Trust (BLW)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 39

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BlackRock Limited Duration Income Trust (BLW)
Schedule of Investments (continued)
(Percentages shown are based on Net Assets)

* The cost and unrealized appreciation (depreciation) of investments as of August 31,
2011, as computed for federal income tax purposes, were as follows:

(a) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
(b) Variable rate security. Rate shown is as of report date.
(c) Non-income producing security.
(d) All or a portion of security has been pledged as collateral in connection with open
reverse repurchase agreements.
(e) Represents a step-down bond that pays an initial coupon rate for the first period
and then a lower coupon rate for the following periods. Rate shown is as of
report date.
(f) Represents a payment-in-kind security which may pay interest/dividends in
additional par/shares.
(g) Represents a zero-coupon bond. Rate shown reflects the current yield as of
report date.
(h) Convertible security.
(i) Issuer filed for bankruptcy and/or is in default of interest payments.
(j) Other interests represent beneficial interests in liquidation trusts and other
reorganization or private entities.
(k) The investment is held by a wholly owned subsidiary of the Fund.
(l) Amount is less than $500.
(m) Security is perpetual in nature and has no stated maturity date.
(n) Represents or includes a to-be-announced (“TBA”) transaction. Unsettled TBA
transactions as of report date were as follows:

(o) Warrants entitle the Fund to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number of
shares are subject to adjustment under certain conditions until the expiration date,
if any.
(p) Represents the current yield as of report date.
(q) Investments in companies considered to be an affiliate of the Fund during the
year, for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
as amended, were as follows:

• 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 rating group indexes, and/or as defined by Fund management.
These definitions may not apply for purposes of this report, which may combine
such industry sub-classifications for reporting ease.
• Financial futures contracts purchased as of August 31, 2011 were as follows:

 

See Notes to Financial Statements.

40 ANNUAL REPORT AUGUST 31, 2011

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BlackRock Limited Duration Income Trust (BLW)
Schedule of Investments (continued)

• Foreign currency exchange contracts as of August 31, 2011 were as follows:

• Credit default swaps on single-name issues — sold protection outstanding as of
August 31, 2011 were as follows:

² The maximum potential amount the Fund may pay should a negative credit
event take place as defined under the terms of agreement.

• Credit default swaps on traded indexes — buy protection outstanding as of August 31,
2011 were as follows:

 

• Reverse repurchase agreements outstanding as of August 31, 2011 were as follows:

 

• Reverse repurchase agreements outstanding as of August 31, 2011 were as follows
(continued):

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 41

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BlackRock Limited Duration Income Trust (BLW)
Schedule of Investments (continued)

• Reverse repurchase agreements outstanding as of August 31, 2011 were as follows
(concluded):

¹ Certain agreements have no stated maturity and can be terminated by either party
at any time.

• Fair Value Measurements — Various inputs are used in determining the fair value of
investments and derivative financial instruments. These inputs are categorized in
three broad levels for financial statement purposes as follows:
• Level 1 — price quotations in active markets/exchanges for identical assets
and liabilities
• Level 2 — other observable inputs (including, but not limited to: quoted prices for
similar assets or liabilities in markets that are active, quoted prices for identical
or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
default rates) or other market-corroborated inputs)
• Level 3 — unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
Fund’s own assumptions used in determining the fair value of investments and
derivative financial instruments)

The categorization of a value determined for investments and derivative financial
instruments is based on the pricing transparency of the investment and derivative
financial instrument and does not necessarily correspond to the Fund’s perceived
risk of investing in those securities. For information about the Fund’s policy regarding
valuation of investments and derivative financial instruments and other significant
accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the inputs used as of August 31, 2011 in determin-
ing the fair valuation of the Fund’s investments and derivative financial instruments:

 

¹ Derivative financial instruments are swaps, financial futures contracts, foreign
currency exchange contracts and options. Swaps, financial futures contacts and
foreign currency exchange contracts are valued at the unrealized appreciation/
depreciation on the instrument and options are shown at value.

See Notes to Financial Statements.

42 ANNUAL REPORT AUGUST 31, 2011

---

Schedule of Investments (concluded) BlackRock Limited Duration Income Trust (BLW)

The following table is a reconciliation of Level 3 derivative financial instruments for
which significant unobservable inputs were used in determining fair value:

 

⁴ Included in the related net change in unrealized appreciation/depreciation
in the Statements of Operations. The change in unrealized appreciation/
depreciation on derivative financial instruments still held on August 31, 2011
was $(3,846).
⁵ Issuances represent upfront cash received on certain derivative financial
instruments.
⁶ Settlements represent periodic contractual cash flows and/or cash flows to
terminate certain derivative financial instruments.
⁷ The Fund’s policy is to recognize transfers in and transfers out as of the
beginning of the period of the event or the change in circumstances that
caused the transfer.
A reconciliation of Level 3 investments and derivative financial instruments is
presented when the Fund had a significant amount of Level 3 investments and
derivative financial instruments at the beginning and/or end of the year in relation
to net assets.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 43

---

 

See Notes to Financial Statements.

44 ANNUAL REPORT AUGUST 31, 2011

---

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 45

---

 

See Notes to Financial Statements.

46 ANNUAL REPORT AUGUST 31, 2011

---

 

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 47

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See Notes to Financial Statements.

48 ANNUAL REPORT AUGUST 31, 2011

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¹ Commencement of operations.
² Net asset value, beginning of period, reflects a deduction of $0.675 per share sales charge from initial offering price of $15.00 per share.
³ Based on average shares outstanding.
⁴ 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. Where applicable,
total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.
⁵ Aggregate total investment return.
⁶ Annualized.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 49

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¹ Based on average shares outstanding.
² 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. Where applicable,
total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

See Notes to Financial Statements.

50 ANNUAL REPORT AUGUST 31, 2011

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¹ Based on average shares outstanding.
² 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. Where applicable,
total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

See Notes to Financial Statements.

ANNUAL REPORT AUGUST 31, 2011 51

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¹ Based on average shares outstanding.
² 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.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.
³ Aggregate total investment return.
⁴ Annualized.
⁵ Includes mortgage dollar roll and TBA transactions. Excluding these transactions, the portfolio turnover would have been 87%.
⁶ Includes mortgage dollar roll transactions. Excluding these transactions, the portfolio turnover would have been 113%.
⁷ Includes mortgage dollar roll transactions. Excluding these transactions, the portfolio turnover would have been 79%.
⁸ Includes TBA transactions. Excluding these transactions, the portfolio turnover would have been 24%.

See Notes to Financial Statements.

52 ANNUAL REPORT AUGUST 31, 2011

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Notes to Financial Statements

1. Organization and Significant Accounting Policies:
BlackRock Defined Opportunity Credit Trust (“BHL”), BlackRock Diversified
Income Strategies Fund, Inc. (“DVF”), BlackRock Floating Rate Income
Strategies Fund, Inc. (“FRA”) and BlackRock Limited Duration Income Trust
(“BLW”) (collectively, the “Funds” or individually as a “Fund”) are registered
under the Investment Company Act of 1940, as amended (the “1940 Act”),
as diversified, closed-end management investment companies. BHL and
BLW are organized as Delaware Statutory trusts. DVF and FRA are organ-
ized as Maryland corporations. The Funds’ financial statements are pre-
pared in conformity with accounting principles generally accepted in the
United States of America (“US GAAP”), which may require management to
make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ from
those estimates. The Board of Directors and the Board of Trustees of the
Funds are referred to throughout this report as the “Board of Directors” or
the “Board”. The Funds determine and make available for publication the
net asset values on a daily basis.

The following is a summary of significant accounting policies followed by
the Funds:

Valuation: US GAAP defines fair value as the price the Funds would receive
to sell an asset or pay to transfer a liability in an orderly transaction
between market participants at the measurement date. The Funds fair value
their financial instruments at market value using independent dealers or
pricing services under policies approved by the Board. The Funds value
their bond investments on the basis of last available bid prices or current
market quotations provided by dealers or pricing services. Floating rate
loan interests are valued at the mean of the bid prices from one or more
brokers or dealers as obtained from a pricing service. In determining the
value of a particular investment, pricing services may use certain informa-
tion with respect to transactions in such investments, quotations from
dealers, pricing matrixes, market transactions in comparable investments,
various relationships observed in the market between investments and
calculated yield measures. Asset-backed and mortgage-backed securities
are valued by independent pricing services using models that consider
estimated cash flows of each tranche of the security, establish a bench-
mark yield and develop an estimated tranche specific spread to the bench-
mark yield based on the unique attributes of the tranche. Financial futures
contracts traded on exchanges are valued at their last sale price. To-be-
announced (“TBA”) commitments are valued on the basis of last available
bid prices or current market quotations provided by pricing services.
Swap agreements are valued utilizing quotes received daily by the Funds’
pricing service or through brokers, which are derived using daily swap
curves and models that incorporate a number of market data factors, such
as discounted cash flows, trades and values of the underlying reference
instruments. Investments in open-end registered investment companies
are valued at net asset value each business day. Short-term securities with
remaining maturities of 60 days or less may be valued at amortized cost,
which approximates fair value.

Equity investments traded on a recognized securities exchange or the
NASDAQ Global Market System (“NASDAQ”) are valued at the last reported
sale price that day or the NASDAQ official closing price, if applicable. For
equity investments traded on more than one exchange, the last reported
sale price on the exchange where the stock is primarily traded is used.
Equity investments traded on a recognized exchange for which there were
no sales on that day are valued at the last available bid (long positions)
or ask (short positions) price. If no bid or ask price is available, the prior
day’s price will be used, unless it is determined that such prior day’s price
no longer reflects the fair value of the security.

Securities and other assets and liabilities denominated in foreign curren-
cies are translated into US dollars using exchange rates determined as of
the close of business on the NYSE. Foreign currency exchange contracts
are valued at the mean between the bid and ask prices and are deter-
mined as of the close of business on the NYSE. Interpolated values are
derived when the settlement date of the contract is an interim date for
which quotations are not available.

Exchange-traded options are valued at the mean between the last bid
and ask prices at the close of the options market in which the options
trade. An exchange-traded option for which there is no mean price is
valued at the last bid (long positions) or ask (short positions) price. If no
bid or ask price is available, the prior day’s price will be used, unless it is
determined that the prior day’s price no longer reflects the fair value of the
option. Over-the-counter (“OTC”) options are valued by an independent
pricing service using a mathematical model which incorporates a number
of market data factors, such as the trades and prices of the underlying
instruments.

In the event that application of these methods of valuation results in a
price for an investment which is deemed not to be representative of the
market value of such investment or if a price is not available, the invest-
ment will be valued in accordance with a policy approved by the Board
as reflecting fair value (“Fair Value Assets”). When determining the price
for Fair Value Assets, the investment advisor and/or the sub-advisor seeks
to determine the price that each Fund might reasonably expect to receive
from the current sale of that asset in an arm’s-length transaction. Fair value
determinations shall be based upon all available factors that the invest-
ment advisor and/or sub-advisor deems relevant. The pricing of all Fair
Value Assets is subsequently reported to the Board or a committee thereof.

Generally, trading in foreign instruments is substantially completed
each day at various times prior to the close of business on the NYSE.
Occasionally, events affecting the values of such instruments may occur
between the foreign market close and the close of business on the NYSE
that may not be reflected in the computation of each Fund’s net assets.
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 instruments, those instruments may be Fair Value
Assets and be valued at their fair value, as determined in good faith by
the investment advisor using a pricing service and/or policies approved by
the Board.

ANNUAL REPORT AUGUST 31, 2011 53

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Notes to Financial Statements (continued)

Foreign Currency Transactions: The Funds’ books and records are main-
tained in US dollars. Purchases and sales of investment securities are
recorded at the rates of exchange prevailing on the respective date of such
transactions. Generally, when the US dollar rises in value against a foreign
currency, the Funds’ investments denominated in that currency will lose
value because its currency is worth fewer US dollars; the opposite effect
occurs if the US dollar falls in relative value.

The Funds do not isolate the portion of the results of operations arising as
a result of changes in the foreign exchange rates from the changes in the
market prices of investments held or sold for financial reporting purposes.
Accordingly, the effects of changes in foreign currency exchange rates on
investments are not segregated on the Statements of Operations from the
effects of changes in market prices of those investments but are included
as a component of net realized and unrealized gain (loss) from invest-
ments. The Funds report realized currency gains (losses) on foreign cur-
rency related transactions as components of net realized gain (loss) for
financial reporting purposes, whereas such components are treated as
ordinary income for federal income tax purposes.

Asset-Backed and Mortgage-Backed Securities: Certain Funds may invest
in asset-backed securities. Asset-backed securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in an underlying pool of assets, or as debt instruments, which are
also known as collateralized obligations, and are generally issued as the
debt of a special purpose entity organized solely for the purpose of owning
such assets and issuing such debt. Asset-backed securities are often
backed by a pool of assets representing the obligations of a number of
different parties. The yield characteristics of certain asset-backed securities
may differ from traditional debt securities. One such major difference is
that all or a principal part of the obligations may be prepaid at any time
because the underlying assets (i.e., loans) may be prepaid at any time. As
a result, a decrease in interest rates in the market may result in increases
in the level of prepayments as borrowers, particularly mortgagors, refinance
and repay their loans. An increased prepayment rate with respect to an
asset-backed security subject to such a prepayment feature will have the
effect of shortening the maturity of the security. If a Fund has purchased
such an asset-backed security at a premium, a faster than anticipated
prepayment rate could result in a loss of principal to the extent of the
premium paid.

Certain Funds may purchase certain mortgage pass-through securities.
There are a number of important differences among the agencies and
instrumentalities of the US government that issue mortgage-related
securities and among the securities that they issue. For example, mortgage-
related securities guaranteed by Ginnie Mae are guaranteed as to the
timely payment of principal and interest by Ginnie Mae and such guarantee
is backed by the full faith and credit of the United States. However,
mortgage-related securities issued by Freddie Mac and Fannie Mae,
including Freddie Mac and Fannie Mae guaranteed Mortgage Pass-Through
Certificates, which are solely the obligations of Freddie Mac and Fannie
Mae, are not backed by or entitled to the full faith and credit of the
United States but are supported by the right of the issuer to borrow from
the Treasury.

Zero-Coupon Bonds: Certain Funds may invest in zero-coupon bonds, which
are normally issued at a significant discount from face value and do not
provide for periodic interest payments. Zero-coupon bonds may experience
greater volatility in market value than similar maturity debt obligations
which provide for regular interest payments.

Preferred Stock: Certain Funds may invest in preferred stocks. Preferred
stock has a preference over common stock in liquidation (and generally
in receiving dividends as well) but is subordinated to the liabilities of the
issuer in all respects. As a general rule, the market value of preferred stock
with a fixed dividend rate and no conversion element varies inversely with
interest rates and perceived credit risk, while the market price of convertible
preferred stock generally also reflects some element of conversion value.
Because preferred stock is junior to debt securities and other obligations of
the issuer, deterioration in the credit quality of the issuer will cause greater
changes in the value of a preferred stock than in a more senior debt
security with similar stated yield characteristics. Unlike interest payments
on debt securities, preferred stock dividends are payable only if declared
by the issuer’s board of directors. Preferred stock also may be subject to
optional or mandatory redemption provisions.

Floating Rate Loan Interests: Certain Funds may invest in floating rate loan
interests. The floating rate loan interests the Funds hold are typically issued
to companies (the “borrower”) by banks, other financial institutions, and
privately and publicly offered corporations (the “lender”). Floating rate loan
interests are generally non-investment grade, often involve borrowers whose
financial condition is troubled or uncertain and companies that are highly
leveraged. The Funds may invest in obligations of borrowers who are in
bankruptcy proceedings. Floating rate loan interests may include fully
funded term loans or revolving lines of credit. Floating rate loan interests
are typically senior in the corporate capital structure of the borrower.
Floating rate loan interests generally pay interest at rates that are periodi-
cally determined by reference to a base lending rate plus a premium. The
base lending rates are generally the lending rate offered by one or more
European banks, such as LIBOR (London Interbank Offered Rate), the
prime rate offered by one or more US banks or the certificate of deposit
rate. Floating rate loan interests may involve foreign borrowers, and invest-
ments may be denominated in foreign currencies. The Funds consider these
investments to be investments in debt securities for purposes of their
investment policies.

When a Fund purchases a floating rate loan interest it may receive a facility
fee and when it sells a floating rate loan interest it may pay a facility fee.
On an ongoing basis, the Funds may receive a commitment fee based on
the undrawn portion of the underlying line of credit amount of a floating
rate loan interest. Facility and commitment fees are typically amortized
to income over the term of the loan or term of the commitment, respec-

54 ANNUAL REPORT AUGUST 31, 2011

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Notes to Financial Statements (continued)

tively. Consent and amendment fees are recorded to income as earned.
Prepayment penalty fees, which may be received by the Funds upon the
prepayment of a floating rate loan interest by a borrower, are recorded
as realized gains. The Funds may invest in multiple series or tranches of
a loan. A different series or tranche may have varying terms and carry
different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s
option. The Funds may invest in such loans in the form of participations
in loans (“Participations”) or assignments (“Assignments”) of all or a
portion of loans from third parties. Participations typically will result in
the Funds having a contractual relationship only with the lender, not with
the borrower. The Funds will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the lender selling the
Participation and only upon receipt by the lender of the payments from the
borrower. In connection with purchasing Participations, the Funds generally
will have no right to enforce compliance by the borrower with the terms of
the loan agreement, nor any rights of offset against the borrower, and the
Funds may not benefit directly from any collateral supporting the loan
in which it has purchased the Participation. As a result, the Funds will
assume the credit risk of both the borrower and the lender that is selling
the Participation. The Funds’ investment in loan participation interests
involves the risk of insolvency of the financial intermediaries who are
parties to the transactions. In the event of the insolvency of the lender
selling the Participation, the Funds may be treated as general creditors
of the lender and may not benefit from any offset between the lender
and the borrower. Assignments typically result in the Funds having a direct
contractual relationship with the borrower, and the Funds may enforce
compliance by the borrower with the terms of the loan agreement.

Forward Commitments and When-Issued Delayed Delivery Securities:
Certain Funds may purchase securities on a when-issued basis and may
purchase or sell securities on a forward commitment basis. Settlement of
such transactions normally occurs within a month or more after the pur-
chase or sale commitment is made. The Funds may purchase securities
under such conditions with the intention of actually acquiring them, but
may enter into a separate agreement to sell the securities before the
settlement date. Since the value of securities purchased may fluctuate
prior to settlement, the Funds may be required to pay more at settlement
than the security is worth. In addition, the Funds are not entitled to any of
the interest earned prior to settlement. When purchasing a security on a
delayed delivery basis, the Funds assume the rights and risks of ownership
of the security, including the risk of price and yield fluctuations. In the event
of default by the counterparty, the Funds’ maximum amount of loss is the
unrealized appreciation of unsettled when-issued transactions, which is
shown in the Schedules of Investments.

TBA Commitments: Certain Funds may enter into TBA commitments. TBA
commitments are forward agreements for the purchase or sale of mort-
gage-backed securities for a fixed price, with payment and delivery on an
agreed upon future settlement date. The specific securities to be delivered
are not identified at the trade date; however, delivered securities must
meet specified terms, including issuer, rate and mortgage terms. The Funds
generally enter into TBA commitments with the intent to take possession
of or deliver the underlying mortgage-backed securities but can extend the
settlement or roll the transaction. TBA commitments involve a risk of loss
if the value of the security to be purchased or sold declines or increases,
respectively, prior to settlement date.

Mortgage Dollar Roll Transactions: Certain Funds may sell TBA mortgage-
backed securities and simultaneously contract to repurchase substantially
similar (same type, coupon and maturity) securities on a specific future
date at an agreed upon price. During the period between the sale and
repurchase, the Funds will not be entitled to receive interest and principal
payments on the securities sold. The Funds account for mortgage dollar
roll transactions as purchases and sales and realize gains and losses on
these transactions. These transactions may increase the Funds’ portfolio
turnover rate. Mortgage dollar rolls involve the risk that the market value of
the securities that the Funds are required to purchase may decline below
the agreed upon repurchase price of those securities.

Reverse Repurchase Agreements: Certain Funds may enter into reverse
repurchase agreements with qualified third party broker-dealers. In a
reverse repurchase agreement, the Funds sell securities to a bank or bro-
ker-dealer and agree to repurchase the same securities at a mutually
agreed upon date and price. Certain agreements have no stated maturity
and can be terminated by either party at any time. Interest on the value of
the reverse repurchase agreements issued and outstanding is based upon
competitive market rates determined at the time of issuance. The Funds
may utilize reverse repurchase agreements when it is anticipated that the
interest income to be earned from the investment of the proceeds of the
transaction is greater than the interest expense of the transaction. Reverse
repurchase agreements involve leverage risk and also the risk that the
market value of the securities that the Funds are obligated to repurchase
under the agreement may decline below the repurchase price. In the event
the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, the Funds’ use of the proceeds of the
agreement may be restricted while the other party, or its trustee or receiver,
determines whether or not to enforce the Funds’ obligation to repurchase
the securities.

Segregation and Collateralization: In cases in which the 1940 Act and
the interpretive positions of the Securities and Exchange Commission
(“SEC”) require that the Funds either deliver collateral or segregate assets
in connection with certain investments (e.g., dollar rolls, TBA sale commit-
ments, financial futures contracts, foreign currency exchange contracts and
swaps), or certain borrowings (e.g., reverse repurchase agreements and
loans payable), the Funds will, consistent with SEC rules and/or certain
interpretive letters issued by the SEC, segregate collateral or designate on
their books and records cash or liquid securities having a market value at
least equal to the amount that would otherwise be required to be physi-
cally segregated. Furthermore, based on requirements and agreements
with certain exchanges and third party broker-dealers, each party to such
transactions has requirements to deliver/deposit securities as collateral for
certain investments.

ANNUAL REPORT AUGUST 31, 2011 55

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Notes to Financial Statements (continued)

Investment Transactions and Investment Income: For financial reporting
purposes, investment transactions are recorded on the dates the trans-
actions are entered into (the trade dates). Realized gains and losses
on investment transactions are determined on the identified cost basis.
Dividend income is recorded on the ex-dividend dates. Dividends from
foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Funds are informed of the ex-dividend
date. Upon notification from issuers, some of the dividend income
received from a real estate investment trust may be redesignated as a
reduction of cost of the related investment and/or realized gain. Interest
income, including amortization and accretion of premiums and discounts
on debt securities, is recognized on the accrual basis. Consent fees are
compensation for agreeing to changes in the terms of debt instruments
and are included in interest income in the Statements of Operations.

Dividends and Distributions: Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates. If the total dividends and distributions made in any
tax year exceeds net investment income and accumulated realized capital
gains, a portion of the total distribution may be treated as a tax return of
capital. The amount and timing of dividends and distributions are deter-
mined in accordance with federal income tax regulations, which may differ
from US GAAP.

Income Taxes: It is each Fund’s policy to comply with the requirements of
the Internal Revenue Code of 1986, as amended, 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.

Each Fund files US federal and various state and local tax returns. No
income tax returns are currently under examination. The statute of limita-
tions on the Funds’ US federal tax returns remains open for each of the
three years ended August 31, 2011 and the period ended August 31,
2008 for BHL, the four years ended August 31, 2011 for DVF and FRA
and for the three years ended August 31, 2011 and the period ended
August 31, 2008 for BLW. The statutes of limitations on the Funds’ state
and local tax returns may remain open for an additional year depending
upon the jurisdiction. Management does not believe there are any
uncertain tax positions that require recognition of a tax liability.

DVF, FRA and BLW have wholly owned taxable subsidiaries organized as a
limited liability companies (the “Taxable Subsidiaries”) which are listed in
the Schedules of Investments. The Taxable Subsidiaries enable a Fund to
hold an investment that is organized as an operating partnership while still
satisfying Regulated Investment Company tax requirements. Income earned
on the investments held by the Taxable Subsidiaries is taxable to such
subsidiaries. An income tax provision for all income, including realized and
unrealized gains, if any, of the Taxable Subsidiaries is reflected in the value
of the Taxable Subsidiaries.

Recent Accounting Standard: In May 2011, the Financial Accounting
Standards Board issued amended guidance to improve disclosure about
fair value measurements which will require the following disclosures for
fair value measurements categorized as Level 3: quantitative information
about the unobservable inputs and assumptions used in the fair value
measurement, a description of the valuation policies and procedures and
a narrative description of the sensitivity of the fair value measurement to
changes in unobservable inputs and the interrelationships between those
unobservable inputs. In addition, the amounts and reasons for all transfers
in and out of Level 1 and Level 2 will be required to be disclosed. The
amended guidance is effective for financial statements for fiscal years
beginning after December 15, 2011, and interim periods within those fiscal
years. Management is evaluating the impact of this guidance on the Funds’
financial statements and disclosures.

Deferred Compensation and BlackRock Closed-End Share Equivalent
Investment Plan: Under the deferred compensation plan approved by each
Fund’s Board, independent Directors (“Independent Directors”) may defer
a portion of their annual complex-wide compensation. Deferred amounts
earn an approximate return as though equivalent dollar amounts had been
invested in common shares of certain other BlackRock Closed-End Funds
selected by the Independent Directors. This has approximately the same
economic effect for the Independent Directors as if the Independent
Directors had invested the deferred amounts directly in certain other
BlackRock Closed-End Funds.

The deferred compensation plan is not funded and obligations there-under
represent general unsecured claims against the general assets of each
Fund. Each Fund may, however, elect to invest in common shares of certain
other BlackRock Closed-End Funds selected by the Independent Directors
in order to match its deferred compensation obligations. Investments to
cover each Fund’s deferred compensation liability, if any, are included in
other assets in the Statements of Assets and Liabilities. Dividends and dis-
tributions from the BlackRock Closed-End Fund investments under the plan
are included in dividends — affiliated in the Statements of Operations.

Other: Expenses directly related to a Fund are charged to that Fund. Other
operating expenses shared by several funds are pro rated among those
funds on the basis of relative net assets or other appropriate methods.

The Funds have an arrangement with the custodians whereby fees may
be reduced by credits earned on uninvested cash balances, which, if
applicable, are shown as fees paid indirectly in the Statements of
Operations. The custodians impose fees on overdrawn cash balances,
which can be offset by accumulated credits earned or may result in
additional custody charges.

56 ANNUAL REPORT AUGUST 31, 2011

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Notes to Financial Statements (continued)

2. Derivative Financial Instruments:
The Funds engage in various portfolio investment strategies using derivative
contracts both to increase the returns of the Funds and to economically
hedge, or protect, their exposure to certain risks such as credit risk, interest
rate risk or foreign currency exchange rate risk. These contracts may be
transacted on an exchange or OTC.

Losses may arise if the value of the contract decreases due to an unfavor-
able change in the market rates or values of the underlying instrument
or if the counterparty does not perform under the contract. The Funds’
maximum risk of loss from counterparty credit risk on OTC derivatives
is generally the aggregate unrealized gain netted against any collateral
pledged by/posted to the counterparty. For OTC options purchased, the
Funds bear the risk of loss in the amount of the premiums paid plus
the positive change in market values net of any collateral received on
the options should the counterparty fail to perform under the contracts.
Options written by the Funds do not give rise to counterparty credit risk,
as options written obligate the Funds to perform and not the counterparty.
Counterparty risk related to exchange-traded financial futures contracts
and options is deemed to be minimal due to the protection against
defaults provided by the exchange on which these contracts trade.

The Funds may mitigate counterparty risk by procuring collateral and
through netting provisions included within an International Swaps and
Derivatives Association, Inc. master agreement (“ISDA Master Agreement”)
implemented between a Fund and each of its respective counterparties.
The ISDA Master Agreement allows each Fund to offset with each separate
counterparty certain derivative financial instrument’s payables and/or
receivables with collateral held. The amount of collateral moved to/from
applicable counterparties is generally based upon minimum transfer
amounts of up to $500,000. To the extent amounts due to the Funds from
their counterparties are not fully collateralized contractually or otherwise,
the Funds bear the risk of loss from counterparty non-performance. See
Note 1 “Segregation and Collateralization” for information with respect to
collateral practices. In addition, the Funds manage counterparty risk by
entering into agreements only with counterparties that they believe have
the financial resources to honor their obligations and by monitoring the
financial stability of those counterparties.

Certain ISDA Master Agreements allow counterparties to OTC derivatives to
terminate derivative contracts prior to maturity in the event the Funds’ net
assets decline by a stated percentage or the Funds fail to meet the terms
of their ISDA Master Agreements, which would cause the Funds to
accelerate payment of any net liability owed to the counterparty.

Financial Futures Contracts: The Funds purchase or sell financial futures
contracts and options on financial futures contracts to gain exposure to,
or economically hedge against, changes in interest rates (interest rate risk).
Financial futures contracts are agreements between the Funds and
counterparty to buy or sell a specific quantity of an underlying instrument
at a specified price and at a specified date. Depending on the terms of
the particular contract, futures contracts are settled either through physical
delivery of the underlying instrument on the settlement date or by payment
of a cash settlement amount on the settlement date. Pursuant to the
contract, the Funds agree 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 margin variation and are recorded by the Funds
as unrealized appreciation or depreciation. When the contract is closed,
the Funds record 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. The use of financial futures contracts involves the risk of
an imperfect correlation in the movements in the price of financial futures
contracts, interest rates and the underlying assets.

Foreign Currency Exchange Contracts: The Funds enter into foreign
currency exchange contracts as an economic hedge against either specific
transactions or portfolio instruments or to obtain exposure to foreign cur-
rencies (foreign currency exchange rate risk). A foreign currency exchange
contract is an agreement between two parties to buy and sell a currency at
a set exchange rate on a future date. Foreign currency exchange contracts,
when used by the Funds, help to manage the overall exposure to the cur-
rencies, in which some of the investments held by the Funds are denomi-
nated. The contract is marked-to-market daily and the change in market
value is recorded by the Funds as an unrealized gain or loss. When the
contract is closed, the Funds record a realized gain or loss equal to the
difference between the value at the time it was opened and the value at
the time it was closed. The use of foreign currency exchange contracts
involves the risk that the value of a foreign currency exchange contract
changes unfavorably due to movements in the value of the referenced
foreign currencies and the risk that a counterparty to the contract does
not perform its obligations under the agreement.

Options: The Funds purchase and write call and put options to increase
or decrease their exposure to underlying instruments (interest rate risk)
and/or, in the case of options written, to generate gains from options
premiums. A call option gives the purchaser of the option the right (but not
the obligation) to buy, and obligates the seller to sell (when the option is
exercised), the underlying instrument at the exercise price or strike price at
any time or at a specified time during the option period. A put option gives
the holder the right to sell and obligates the writer to buy the underlying
instrument at the exercise price or strike price at any time or at a specified
time during the option period. When the Funds purchase (write) an option,
an amount equal to the premium paid (received) by the Funds is reflected
as an asset (liability). The amount of the asset (liability) is subsequently
marked-to-market to reflect the current market value of the option pur-
chased (written). When an instrument 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 instrument acquired or deducted from
(or added to) the proceeds of the instrument sold. When an option expires
(or the Funds enter into a closing transaction), the Funds realize 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

ANNUAL REPORT AUGUST 31, 2011 57

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Notes to Financial Statements (continued)

premiums received or paid). When the Funds write a call option, such
option is “covered,” meaning that the Funds hold the underlying instrument
subject to being called by the option counterparty. When the Funds write a
put option, such option is covered by cash in an amount sufficient to cover
the obligation.

In purchasing and writing options, the Funds bear the risk of an unfavor-
able change in the value of the underlying instrument or the risk that the
Funds may not be able to enter into a closing transaction due to an illiquid
market. Exercise of a written option could result in the Funds purchasing or
selling a security at a price different from the current market value.

Swaps: The Funds enter into swap agreements, in which the Funds and a
counterparty agree to make periodic net payments on a specified notional
amount. These periodic payments received or made by the Funds are
recorded in the Statements of Operations as realized gains or losses,
respectively. Any upfront fees paid are recorded as assets and any upfront
fees received are recorded as liabilities and amortized over the term
of the swap. Swaps are marked-to-market daily and changes in value are
recorded as unrealized appreciation (depreciation). When the swap is
terminated, the Funds will record a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction
and the Funds’ basis in the contract, if any. Generally, the basis of the
contracts is the premium received or paid. Swap transactions involve, to
varying degrees, elements of interest rate, credit and market risk in excess
of the amounts recognized in the Statements of Assets and Liabilities.
Such risks involve the possibility that there will be no liquid market for
these agreements, that the counterparty to the agreements may default on
its obligation to perform or disagree as to the meaning of the contractual
terms in the agreements, and that there may be unfavorable changes in
interest rates and/or market values associated with these transactions.

• Credit default swaps — The Funds enter into credit default swaps to
manage their exposure to the market or certain sectors of the market,
to reduce its risk exposure to defaults of corporate and/or sovereign
issuers or to create exposure to corporate and/or sovereign issuers to
which they are not otherwise exposed (credit risk). The Funds enter into
credit default swap agreements to provide a measure of protection
against the default of an issuer (as buyer of protection) and/or gain
credit exposure to an issuer to which it is not otherwise exposed (as
seller of protection). The Funds may either buy or sell (write) credit
default swaps on single-name issuers (corporate or sovereign), a
combination or basket of single-name issuers or traded indexes.
Credit default swaps on single-name issuers are agreements in which
the buyer pays fixed periodic payments to the seller in consideration
for a guarantee from the seller to make a specific payment should a
negative credit event take place with respect to the referenced entity
(e.g., bankruptcy, failure to pay, obligation accelerators, repudiation,
moratorium or restructuring). Credit default swaps on traded indexes
are agreements in which the buyer pays fixed periodic payments to
the seller in consideration for a guarantee from the seller to make a
specific payment should a write-down, principal or interest shortfall or
default of all or individual underlying securities included in the index
occurs. As a buyer, if an underlying credit event occurs, the Funds will
either receive from the seller an amount equal to the notional amount
of the swap and deliver the referenced security or underlying securities
comprising the index or receive a net settlement of cash equal to the
notional amount of the swap less the recovery value of the security or
underlying securities comprising the index. As a seller (writer), if an
underlying credit event occurs, the Funds will either pay the buyer an
amount equal to the notional amount of the swap and take delivery
of the referenced security or underlying securities comprising the index
or pay a net settlement of cash equal to the notional amount of the
swap less the recovery value of the security or underlying securities
comprising the index.

* Includes cumulative appreciation/depreciation on financial futures contracts as reported in the Schedules of Investments. Only current day’s margin variation is reported within the
Statements of Assets and Liabilities.

58 ANNUAL REPORT AUGUST 31, 2011

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Notes to Financial Statements (continued)

 

 

 

ANNUAL REPORT AUGUST 31, 2011 59

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Notes to Financial Statements (continued)

For the year ended August 31, 2011, the average quarterly balances of outstanding derivative financial instruments were as follows:

 

3. Investment Advisory Agreement and Other Transactions
with Affiliates:
The PNC Financial Services Group, Inc. ("PNC") and Barclays Bank PLC
("Barclays") are the largest stockholders of BlackRock, Inc. ("BlackRock").
Due to the ownership structure, PNC is an affiliate for 1940 Act purposes,
but Barclays is not.

Each Fund entered into an Investment Advisory Agreement with BlackRock
Advisors, LLC (the “Manager”), the Funds' investment advisor, an indirect,
wholly owned subsidiary of BlackRock, to provide investment advisory and
administration services. 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 the Manager a monthly fee based
on a percentage of each Fund’s average daily net assets, plus the proceeds
of any outstanding borrowings used for leverage as follows:

 

The Manager voluntarily agreed to waive its investment advisory fees by
the amount of investment advisory fees each Fund pays to the Manager
indirectly through its investment in affiliated money market funds, however
the Manager does not waive its investment advisory fees by the amount
of investment advisory fees paid in connection with each Fund's investment
in other affiliated investment companies, if any. These amounts are shown
as, or included in, fees waived by advisor in the Statements of Operations.
For the year ended August 31, 2011, the amounts waived were as follows:

 

The Manager entered into a sub-advisory agreement with BlackRock
Financial Management, Inc. (“BFM”), an affiliate of the Manager. The
Manager pays BFM, for services it provides, a monthly fee that is a percent-
age of the investment advisory fees paid by each Fund to the Manager.

For the year ended August 31, 2011, each Fund reimbursed the Manager
for certain accounting services, which is included in accounting services
in the Statements of Operations. The reimbursements were as follows:

 

Effective January 1, 2011, the Funds no longer reimburse the Manager for
accounting services.

Certain officers and/or directors of the Funds are officers and/or directors
of BlackRock or its affiliates. The Funds reimburse the Manager for com-
pensation paid to the Funds’ Chief Compliance Officer.

4. Investments:
Purchases and sales of investments including paydowns, mortgage dollar
roll transactions and TBA transactions and excluding short-term securities
and US government securities for the year ended August 31, 2011, were
as follows:

 

60 ANNUAL REPORT AUGUST 31, 2011

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Notes to Financial Statements (continued)

For the year ended August 31, 2011, purchases and sales of US
government securities for BLW were $25,829,399 and $25,190,604,
respectively.

For the year ended August 31, 2011, purchases and sales of mortgage
dollar rolls for BLW were $158,340,141 and $158,868,996, respectively.

Transactions in options written for the year ended August 31, 2011 were
as follows:

 

5. Income Tax Information:
Reclassifications: US GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax
reporting. These reclassifications have no effect on net assets or net asset values per share. The following permanent differences as of August 31, 2011
attributable to the accounting for swap agreements, amortization methods on fixed income securities, foreign currency transactions, net paydown losses
and income recognized from pass-through entities were reclassified to the following accounts:

 

The tax character of distributions paid during the fiscal years ended August 31, 2011 and August 31, 2010 was as follows:

 

As of August 31, 2011, the tax components of accumulated net losses were as follows:

* The differences between book-basis and tax-basis net unrealized losses were attributable primarily to the tax deferral of losses on wash sales, amortization methods for premiums
and discounts on fixed income securities, the accrual of income on securities in default, the realization for tax purposes of unrealized gains/losses on certain futures and foreign
currency contracts, the deferral of post-October currency and capital losses for tax purposes, the timing and recognition of partnership income, the accounting for swap agreements,
the deferral of compensation to directors and investments in wholly owned subsidiaries.

As of August 31, 2011, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates
as follows:

 

Under the recently enacted Regulated Investment Company Modernization Act of 2010, capital losses incurred by the Funds after August 31, 2011 will not
be subject to expiration. In addition, any such losses must be utilized prior to the losses incurred in pre-enactment taxable years.

ANNUAL REPORT AUGUST 31, 2011 61

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Notes to Financial Statements (continued)

6. Borrowings:
On March 4, 2010, BHL, DVF and FRA entered into a senior committed
secured, 364-day revolving line of credit and a separate security agreement
(the “SSB Agreement”) with State Street Bank and Trust Company (“SSB”).
The Funds have granted a security interest in substantially all of their
assets to SSB. The SSB Agreement allowed for the following maximum
commitment amounts:

 

Advances were made by SSB to the Funds, at the Funds’ option of (a)
the higher of (i) 1.0% above the Fed Funds rate or (ii) 1.0% above
the Overnight LIBOR or (b) 1.0% above the 7-day, 30-day, 60-day or
90-day LIBOR.

Effective March 3, 2011, the SSB Agreement was renewed for 364
days. The SSB Agreement allows for the following maximum commitment
amounts:

 

Advances are made by SSB to the Funds at the Funds’ option of (a) the
higher of (i) 0.80% above the Fed Funds rate or (ii) 0.80% above the
Overnight LIBOR or (b) 0.80% above the 7-day, 30-day, 60-day or 90-day
LIBOR. In addition, the Funds pay a facility fee and a commitment fee
based on SSB’s total commitment to the Funds. The fees associated with
each of the agreements are included in the Statements of Operations as
borrowing costs. Advances to the Funds as of August 31, 2011 are shown
in the Statements of Assets and Liabilities as loan payable.

The Funds may not declare dividends or make other distributions on shares
or purchase any such shares if, at the time of the declaration, distribution
or purchase, asset coverage with respect to the outstanding short-term
borrowings is less than 300%.

During the year ended August 31, 2011, BLW borrowed under the Term
Asset-Backed Securities Loan Facility (“TALF”). The TALF program was
launched by the US Department of Treasury and the Federal Reserve
Board as a credit facility designed to restore liquidity to the market for
asset-backed securities. The Federal Reserve Bank of New York (“FRBNY”)
provided up to $1 trillion in non-recourse loans to support the issuance
of certain AAA-rated asset-backed securities and commercial mortgage-
backed securities (“Eligible Securities”). The Fund posted as collateral
already-held Eligible Securities, which were all commercial mortgage-
backed securities, in return for non-recourse, 5-year term loans (“TALF
loans”) in an amount equal to approximately 85% of the value of such
Eligible Securities.

The non-recourse provision of the TALF loans allowed the Fund to satisfy
loan obligations with Eligible Securities, subject to certain conditions, even
if the value of the Eligible Securities falls below the outstanding amount of
the loan. The Fund was able to repay TALF loans prior to the maturity dates
with no penalty. Principal and interest due on the loans will typically be
paid with principal paydowns and interest received from the Eligible
Securities. Credit agreements underlying each loan contain provisions to
address instances in which interest payments on Eligible Securities fall
short of amounts due to the FRBNY. The Fund paid to the FRBNY a one
time administration fee of 0.20% of the amount borrowed. The Fund also
paid a financing fee equal to the 5-year LIBOR swap rate plus 1.00% on
the outstanding loan amount payable monthly, which is included in interest
expense in the Statements of Operations.

During the year ended August 31, 2011, the Fund repaid its outstanding
TALF loans and the Eligible Securities posted as collateral were returned to
the Fund. The Fund financed the repayment of the TALF loans by entering
into reverse repurchase agreements.

Since the Fund had the ability to potentially satisfy TALF loan obligations
by surrendering Eligible Securities, potential losses by the Fund associated
with the TALF loans were limited to the difference between the amount
of Eligible Securities posted at the time of loan initiation and the loan
proceeds received by the Fund.

The Fund elected to account for the outstanding TALF loans at fair value.
The Fund elected to fair value its TALF loans to more closely align changes
in the value of the TALF loans with changes in the value of the Eligible
Securities and to reduce the potential volatility in the Statements of
Operations which could result if only the Eligible Securities were fair
valued. The TALF loans were valued utilizing quotations received from a
board approved pricing service. TALF-eligible Asset-Backed Securities/
Collateralized Mortgage-Backed Securities (“ABS/CMBS”) value may be
affected by historic defaults and prepayments on the asset pool, expected
future defaults and prepayments, current interest rate levels, current and
forward modeled ABS/CMBS spread levels. Accordingly, TALF loan valuation
methodologies may include, but are not limited to, the following inputs:
(i) ABS/CMBS prepayment assumptions, (ii) discount rates and (iii) the
non-recourse put option valuation. The resulting TALF loan valuation com-
bines the present value of the future loan cash flows, plus the value of the
nonrecourse option. The change in unrealized gain or loss associated with
fair valuing the TALF loans is reflected in the Statements of Operations.

For the year ended August 31, 2011, the daily weighted average interest
rate for BLW with borrowings from reverse repurchase agreements and TALF
loans was as follows:

 

62 ANNUAL REPORT AUGUST 31, 2011

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Notes to Financial Statements (concluded)

For the year ended August 31, 2011, the daily weighted average interest
rates for Funds with loans under the revolving credit agreements were
as follows:

 

7. Commitments:
The Funds may invest in floating rate loan interests. In connection with
these investments, the Funds may also enter into unfunded floating rate
loan interests (“commitments”). Commitments may obligate the Funds to
furnish temporary financing to a borrower until permanent financing can
be arranged. In connection with these commitments, the Funds earn a
commitment fee, typically set as a percentage of the commitment amount.
Such fee income, which is classified in the Statements of Operations as
facility and other fees, is recognized ratably over the commitment period.
Unfunded floating rate loan interests are marked-to-market daily, and any
unrealized appreciation or depreciation is included in the Statements of
Assets and Liabilities and Statements of Operations.

As of August 31, 2011, the Funds had the following unfunded floating rate
loan interests:

 

8. Concentration, Market and Credit Risk:
In the normal course of business, the Funds invest in securities and
enter into transactions where risks exist due to fluctuations in the market
(market risk) or failure of the issuer of a security to meet all its obligations
(issuer credit risk). The value of securities held by the Funds may decline
in response to certain events, including those directly involving the issuers
whose securities are owned by the Funds; conditions affecting the general
economy; overall market changes; local, regional or global political, social
or economic instability; and currency and interest rate and price fluctua-
tions. Similar to issuer credit risk, the Funds may be exposed to counterparty
credit risk, or the risk that an entity with which the Funds have unsettled or
open transactions may fail to or be unable to perform on its commitments.

The Funds manage counterparty credit risk by entering into transactions
only with counterparties that they believe have the financial resources to
honor their obligations and by monitoring the financial stability of those
counterparties. Financial assets, which potentially expose the Funds to
market, issuer and counterparty credit risks, consist principally of financial
instruments and receivables due from counterparties. The extent of the
Funds' exposure to market, issuer and counterparty credit risks with respect
to these financial assets is generally approximated by their value recorded
in the Funds' Statements of Assets and Liabilities, less any collateral held
by the Funds.

The Funds invest a significant portion of their assets in securities backed
by commercial or residential mortgage loans or in issuers that hold mort-
gage and other asset-backed securities. Please see the Schedules of
Investments for these securities. Changes in economic conditions, including
delinquencies and/or defaults on assets underlying these securities, can
affect the value, income and/or liquidity of such positions.

9. Capital Share Transactions:
BHL and BLW are authorized to issue an unlimited number of shares, par
value $0.001, all of which were initially classified as Common Shares. DVF
and FRA are authorized to issue 200 million shares, par value $0.10, all of
which were initially classified as Common Shares. The Board is authorized,
however, to classify and reclassify any unissued shares without approval of
Common Shareholders.

For the years shown, shares issued and outstanding increased by the
following amounts as a result of dividend reinvestment:

 

At August 31, 2011, the shares owned by affiliates of the Manager of the
Funds were as follows:

 

10. Subsequent Events:
Management's evaluation of the impact of all subsequent events on the
Funds' financial statements was completed through the date the financial
statements were issued and the following item was noted:

The Funds paid a net investment income dividend in the following
amounts per share on September 30, 2011 to shareholders of record
on September 15, 2011:

 

ANNUAL REPORT AUGUST 31, 2011 63

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of BlackRock
Diversified Income Strategies Fund, Inc. and BlackRock
Floating Rate Income Strategies Fund, Inc. and to the
Shareholders and Board of Trustees of BlackRock Defined
Opportunity Credit Trust and BlackRock Limited Duration
Income Trust:

We have audited the accompanying statements of assets and liabilities of
BlackRock Defined Opportunity Credit Trust, BlackRock Diversified Income
Strategies Fund, Inc., BlackRock Floating Rate Income Strategies Fund, Inc.,
and BlackRock Limited Duration Income Trust (collectively the “Funds”),
including the schedules of investments, as of August 31, 2011, and the
related statements of operations and cash flows for the year then ended,
the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Funds’ management. Our responsibility is to express
an opinion on these financial statements and financial highlights based
on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements and financial highlights are free of
material misstatement. The Funds are not required to have, nor were we
engaged to perform an audit of their internal control over financial report-
ing. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Funds’ internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and signifi-
cant estimates made by management, as well as evaluating the overall
financial statement presentation. Our procedures included confirmation
of securities owned as of August 31, 2011, by correspondence with the
custodians, brokers and agent banks; where replies were not received
from brokers or agent banks, we performed other auditing procedures.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial positions of
BlackRock Defined Opportunity Credit Trust, BlackRock Diversified Income
Strategies Fund, Inc., BlackRock Floating Rate Income Strategies Fund, Inc.
and BlackRock Limited Duration Income Trust as of August 31, 2011, the
results of their operations and their cash flows for the year then ended, the
changes in their net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods presented, in
conformity with accounting principles generally accepted in the United
States of America.

Deloitte & Touche LLP
Boston, Massachusetts
October 28, 2011

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Funds for the taxable yearended August 31, 2011.

 

64 ANNUAL REPORT AUGUST 31, 2011

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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements

The Board of Directors or Trustees, as applicable (each, a “Board,” collec-
tively, the “Boards,” and the members of which are referred to as “Board
Members”) of BlackRock Defined Opportunity Credit Trust (“BHL”),
BlackRock Diversified Income Strategies Fund, Inc. (“DVF”), BlackRock
Floating Rate Income Strategies Fund, Inc. (“FRA”) and BlackRock Limited
Duration Income Trust (“BLW” and together with BHL, DVF and FRA, each
a “Fund,” and, collectively, the “Funds”) met on April 14, 2011 and May
12–13, 2011 to consider the approval of each Fund’s investment advisory
agreement (each, an “Advisory Agreement”) with BlackRock Advisors, LLC
(the “Manager”), each Fund’s investment advisor. The Board of each Fund
also considered the approval of the sub-advisory agreement (each, a “Sub-
Advisory Agreement”) between the Manager and BlackRock Financial
Management, Inc. (the “Sub-Advisor”), with respect to each Fund. The
Manager and the Sub-Advisor are referred to herein as “BlackRock.” The
Advisory Agreements and the Sub-Advisory Agreements are referred to
herein as the “Agreements.”

Activities and Composition of the Board
Each Board consists of eleven individuals, nine of whom are not “interested
persons” of such Fund as defined in the Investment Company Act of 1940
(the “1940 Act”) (the “Independent Board Members”). The Board Members
are responsible for the oversight of the operations of the Funds and per-
form the various duties imposed on the directors of investment companies
by the 1940 Act. The Independent Board Members have retained inde-
pendent legal counsel to assist them in connection with their duties. The
Chairman of the Board is an Independent Board Member. Each Board has
established five standing committees: an Audit Committee, a Governance
and Nominating Committee, a Compliance Committee, a Performance
Oversight Committee and an Executive Committee, each of which is
composed of Independent Board Members (except for the Executive
Committee, which also has one interested Board Member) and is chaired
by an Independent Board Member. Each Board also established an ad
hoc committee, the Joint Product Pricing Committee, which consisted of
Independent Board Members and the directors/trustees of the boards of
certain other BlackRock-managed funds, who were not “interested persons”
of their respective funds.

The Agreements
Pursuant to the 1940 Act, the Boards are required to consider the continu-
ation of the Agreements on an annual basis. In connection with this
process, the Boards assessed, among other things, the nature, scope and
quality of the services provided to the Funds by BlackRock, its personnel
and its affiliates, including investment management, administrative and
shareholder services, oversight of fund accounting and custody, marketing
services, risk oversight, compliance program and assistance in meeting
applicable legal and regulatory requirements.

The Boards, acting directly and through their respective committees, con-
sidered at each of their meetings, and from time to time as appropriate,
factors that are relevant to its annual consideration of the renewal of the
Agreements, including the services and support provided by BlackRock to
the Funds and their shareholders. Among the matters the Boards consid-
ered were: (a) investment performance for one-, three- and five-year peri-
ods, as applicable, against peer funds, and applicable benchmarks, if any,
as well as senior management’s and portfolio managers’ analysis of the
reasons for any over performance or underperformance against their peers
and/or benchmark, as applicable; (b) fees, including advisory and other
amounts paid to BlackRock and its affiliates by the Funds for services
such as call center and fund accounting; (c) Fund operating expenses
and how BlackRock allocates expenses to the Funds; (d) the resources
devoted to, risk oversight of, and compliance reports relating to, implemen-
tation of the Funds’ investment objectives, policies and restrictions; (e) the
Funds’ compliance with its Code of Ethics and other compliance policies
and procedures; (f) the nature, cost and character of non-investment man-
agement services provided by BlackRock and its affiliates; (g) BlackRock’s
and other service providers’ internal controls and risk and compliance
oversight mechanisms; (h) BlackRock’s implementation of the proxy voting
policies approved by the Boards; (i) execution quality of portfolio transac-
tions; (j) BlackRock’s implementation of the Funds’ valuation and liquidity
procedures; (k) an analysis of contractual and actual management fee
ratios for products with similar investment objectives across the open-end
fund, closed-end fund and institutional account product channels, as
applicable; (l) BlackRock’s compensation methodology for its investment
professionals and the incentives it creates; and (m) periodic updates on
BlackRock’s business.

Board Considerations in Approving the Agreements
The Approval Process: Prior to the April 14, 2011 meeting, the Boards
requested and received materials specifically relating to the Agreements.
The Boards are engaged in a process with BlackRock to review periodically
the nature and scope of the information provided to better assist their
deliberations. The materials provided in connection with the April meeting
included (a) information independently compiled and prepared by Lipper,
Inc. (“Lipper”) on Fund fees and expenses and the investment performance
of the Funds as compared with a peer group of funds as determined by
Lipper and, with respect to BHL, DVF and FRA, a customized peer group
selected by BlackRock (collectively, “Peers”), as well as the gross invest-
ment performance of BLW as compared with its custom benchmark; (b)
information on the profitability of the Agreements to BlackRock and a dis-
cussion of fall-out benefits to BlackRock and its affiliates and significant
shareholders; (c) a general analysis provided by BlackRock concerning
investment management fees (a combination of the advisory fee and the
administration fee, if any) charged to other clients, such as institutional
clients and open-end funds, under similar investment mandates, as appli-
cable; (d) the impact of economies of scale; (e) a summary of aggregate
amounts paid by each Fund to BlackRock and (f) if applicable, a compari-
son of management fees to similar BlackRock closed-end funds, as classi-
fied by Lipper.

At an in-person meeting held on April 14, 2011, the Boards reviewed
materials relating to their consideration of the Agreements. As a result of
the discussions that occurred during the April 14, 2011 meeting, and as a
culmination of the Boards’ year-long deliberative process, the Boards pre-
sented BlackRock with questions and requests for additional information.
BlackRock responded to these requests with additional written information
in advance of the May 12-13, 2011 Board meeting.

ANNUAL REPORT AUGUST 31, 2011 65

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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)

At an in-person meeting held on May 12–13, 2011, each Board, including
the Independent Board Members, unanimously approved the continuation
of the Advisory Agreement between the Manager and its Fund and the Sub-
Advisory Agreement between the Manager and the Sub-Advisor with respect
to its Fund, each for a one-year term ending June 30, 2012. In approving
the continuation of the Agreements, the Boards considered: (a) the nature,
extent and quality of the services provided by BlackRock; (b) the invest-
ment performance of the Funds and BlackRock; (c) the advisory fee and
the cost of the services and profits to be realized by BlackRock and its
affiliates from their relationship with the Funds; (d) economies of scale;
(e) fall-out benefits to BlackRock as a result of its relationship with the
Funds; and (f) other factors deemed relevant by the Board Members.

The Boards also considered other matters they deemed important to the
approval process, such as services related to the valuation and pricing of
Fund portfolio holdings, direct and indirect benefits to BlackRock and its
affiliates and significant shareholders from their relationship with Funds
and advice from independent legal counsel with respect to the review
process and materials submitted for the Boards’ review. The Boards noted
the willingness of BlackRock personnel to engage in open, candid discus-
sions with the Boards. The Boards did not identify any particular informa-
tion as controlling, and each Board Member may have attributed different
weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The
Boards, including the Independent Board Members, reviewed the nature,
extent and quality of services provided by BlackRock, including the invest-
ment advisory services and the resulting performance of the Funds.
Throughout the year, the Boards compared Fund performance to the
performance of a comparable group of closed-end funds and/or the
performance of a relevant benchmark, if any. The Boards met with
BlackRock’s senior management personnel responsible for investment
operations, including the senior investment officers. Each Board also
reviewed the materials provided by its Fund’s portfolio management team
discussing Fund performance and the Fund’s investment objective, strate-
gies and outlook.

The Boards considered, among other factors, the number, education and
experience of BlackRock’s investment personnel generally and their Funds’
portfolio management teams, investments by portfolio managers in the
funds they manage, BlackRock’s portfolio trading capabilities, BlackRock’s
use of technology, BlackRock’s commitment to compliance, BlackRock’s
credit analysis capabilities, BlackRock’s risk analysis capabilities and
BlackRock’s approach to training and retaining portfolio managers and
other research, advisory and management personnel. The Boards engaged
in a review of BlackRock’s compensation structure with respect to their
Funds’ portfolio management teams and BlackRock’s ability to attract and
retain high-quality talent and create performance incentives.

In addition to advisory services, the Boards considered the quality of the
administrative and non-investment advisory services provided to the Funds.
BlackRock and its affiliates provide the Funds with certain services (in
addition to any such services provided to the Funds by third parties) and
officers and other personnel as are necessary for the operations of the
Funds. In addition to investment advisory services, BlackRock and its
affiliates provide the Funds with other services, including (i) preparing
disclosure documents, such as the prospectus and the statement of
additional information in connection with the initial public offering and
periodic shareholder reports; (ii) preparing communications with analysts
to support secondary market trading of the Funds; (iii) assisting with daily
accounting and pricing; (iv) preparing periodic filings with regulators and
stock exchanges; (v) overseeing and coordinating the activities of other
service providers; (vi) organizing Board meetings and preparing the materi-
als for such Board meetings; (vii) providing legal and compliance support;
and (viii) performing other administrative functions necessary for the oper-
ation of the Funds, such as tax reporting, fulfilling regulatory filing require-
ments and call center services. The Boards reviewed the structure and
duties of BlackRock’s fund administration, accounting, legal and compli-
ance departments and considered BlackRock’s policies and procedures
for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Fund and BlackRock: The Boards,
including the Independent Board Members, also reviewed and considered
the performance history of their Funds. In preparation for the April 14,
2011 meeting, the Boards worked with BlackRock and Lipper to develop
a template for, and was provided with reports independently prepared by
Lipper, which included a comprehensive analysis of each Fund’s perform-
ance. The Boards also reviewed a narrative and statistical analysis of the
Lipper data that was prepared by BlackRock, which analyzed various fac-
tors that affect Lipper’s rankings. In connection with its review, each Board
received and reviewed information regarding the investment performance
of its Fund as compared to funds in that Fund’s applicable Lipper category
and, with respect to BHL, DVF and FRA, a customized peer group selected
by BlackRock, and with respect to BLW, the gross investment performance
of BLW as compared with its custom benchmark. The Boards were provided
with a description of the methodology used by Lipper to select peer funds.
The Boards and each Board’s Performance Oversight Committee regularly
review, and meet with Fund management to discuss, the performance of
the Funds throughout the year.

The Board of BHL noted that, in general, the Fund performed better than
its Peers in that the Fund’s performance was above the median of its
Customized Lipper Peer Group for the since-inception period but lower
than the median in the one-year period reported.

The Board of BLW noted that the Fund’s gross performance exceeded
its custom benchmark during two of the one-, three- and five-year
periods reported.

The Board of DVF noted that the Fund performed below the median of its
Customized Lipper Peer Group in the three- and five-year periods reported,
but that the Fund performed at or above the median of its Customized
Lipper Peer Group in the one-year period reported. The Board of DVF and
BlackRock reviewed and discussed the reasons for the Fund’s underperfor-
mance during the three- and five-year periods compared with its Peers. The
Board of DVF was informed that, among other things, the primary factor
impacting relative performance over the three- and five-year periods was
the Fund’s performance in the difficult market years of 2007 and 2008.

66 ANNUAL REPORT AUGUST 31, 2011

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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (continued)

Performance in 2008 was impacted by the Fund’s credit positioning,
which was biased towards lower credit ratings, higher yield and higher
beta credits.

The Board of FRA noted that the Fund performed below the median of
its Customized Lipper Peer Group in the one- and three-year periods
reported, but that the Fund performed at or above the median of its
Customized Lipper Peer Group in the five-year period reported. The Board
of FRA and BlackRock reviewed and discussed the reasons for the Fund’s
underperformance during the one- and three-year periods compared with
its Peers. The Board of FRA was informed that, among other things, in gen-
eral the Fund’s portfolio management team runs a conservative investment
style that is biased towards the higher credit tiers and higher quality credits
in terms of cash flow, asset quality, collateral, and loan structure. The
Fund’s portfolio management team believes this leads to superior risk-
adjusted performance over longer periods but can cause the Fund to trail
the average fund in up markets such as 2009 and 2010.

The Board of each of DVF and FRA discussed with BlackRock its strategy
for improving the respective Fund’s performance and BlackRock’s commit-
ment to providing the resources necessary to assist the Fund’s portfolio
managers and to improve the Fund’s performance.

The Boards noted that BlackRock has made changes to the organization of
the overall fixed income group management structure designed to result in
a strengthened leadership team.

C. Consideration of the Advisory/Management Fees and the Cost of the
Services and Profits to be Realized by BlackRock and its Affiliates from
their Relationship with the Fund: Each Board, including the Independent
Board Members, reviewed its Fund’s contractual management fee ratio
compared with the other funds in its Lipper category. It also compared
the Fund’s total expense ratio, as well as actual management fee ratio,
to those of other funds in its Lipper category. The Boards considered the
services provided and the fees charged by BlackRock to other types of
clients with similar investment mandates, including separately managed
institutional accounts.

The Boards received and reviewed statements relating to BlackRock’s finan-
cial condition and profitability with respect to the services it provided the
Funds. The Boards were also provided with a profitability analysis that
detailed the revenues earned and the expenses incurred by BlackRock for
services provided to the Funds. The Boards reviewed BlackRock’s profitabil-
ity with respect to the Funds and other funds the Boards currently oversee
for the year ended December 31, 2010 compared to available aggregate
profitability data provided for the years ended December 31, 2009, and
December 31, 2008. The Boards reviewed BlackRock’s profitability with
respect to other fund complexes managed by the Manager and/or its affili-
ates. The Boards reviewed BlackRock’s assumptions and methodology of
allocating expenses in the profitability analysis, noting the inherent limita-
tions in allocating costs among various advisory products. The Boards rec-
ognized that profitability may be affected by numerous factors including,
among other things, fee waivers and expense reimbursements by the
Manager, the types of funds managed, expense allocations and business
mix, and the difficulty of comparing profitability as a result of those factors.

The Boards noted that, in general, individual fund or product line profitabil-
ity of other advisors is not publicly available. The Boards considered
BlackRock’s overall operating margin, in general, compared to the operating
margin for leading investment management firms whose operations include
advising closed-end funds, among other product types. That data indicates
that operating margins for BlackRock, in general and with respect to its reg-
istered funds, are generally consistent with margins earned by similarly sit-
uated publicly traded competitors. In addition, the Boards considered,
among other things, certain third party data comparing BlackRock’s operat-
ing margin with that of other publicly-traded asset management firms. That
third party data indicates that larger asset bases do not, in themselves,
translate to higher profit margins.

In addition, the Boards considered the cost of the services provided to the
Funds by BlackRock, and BlackRock’s and its affiliates’ profits relating to
the management of the Funds and the other funds advised by BlackRock
and its affiliates. As part of its analysis, the Boards reviewed BlackRock’s
methodology in allocating its costs to the management of the Funds. The
Boards also considered whether BlackRock has the financial resources
necessary to attract and retain high quality investment management per-
sonnel to perform its obligations under the Agreements and to continue to
provide the high quality of services that is expected by the Boards.

The Board of each of DVF, FRA and BLW noted that its respective Fund’s
contractual management fee ratio (a combination of the advisory fee and
the administration fee, if any) was lower than or equal to the median con-
tractual management fee ratio paid by the Fund's Peers, in each case
before taking into account any expense reimbursements or fee waivers.

The Board of BHL noted that the Fund’s contractual management fee ratio
(a combination of the advisory fee and the administration fee, if any) was
above the median contractual management fee ratio paid by the Fund’s
Peers, in each case before taking into account any expense reimburse-
ments or fee waivers. The Board of BHL also noted, however, that the
Fund’s actual management fee ratio, after giving effect to any expense
reimbursements or fee waivers by BlackRock, was lower than or equal to
the median actual management fee ratio paid by the Fund’s Peers, after
giving effect to any expense reimbursements or fee waivers.

D. Economies of Scale: Each Board, including the Independent Board
Members, considered the extent to which economies of scale might be
realized as the assets of its Fund increase. Each Board also considered the
extent to which its Fund benefits from such economies and whether there
should be changes in the advisory fee rate or structure in order to enable
the Fund to participate in these economies of scale, for example through
the use of breakpoints in the advisory fee based upon the asset level of
the Fund. Based on the ad hoc Joint Product Pricing Committees’ and the
Boards’ review and consideration of this issue, the Boards concluded that
closed-end funds are typically priced at scale at a fund’s inception; there-
fore, the implementation of breakpoints was not necessary.

The Boards noted that most closed-end funds do not have fund level
breakpoints because closed-end funds generally do not experience sub-
stantial growth after the initial public offering. The Boards noted that only
one closed-end fund in the Fund Complex has breakpoints in its advisory
fee structure.

ANNUAL REPORT AUGUST 31, 2011 67

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Disclosure of Investment Advisory Agreements and Sub-Advisory Agreements (concluded)

E. Other Factors Deemed Relevant by the Board Members: The Boards,
including the Independent Board Members, also took into account other
ancillary or “fall-out” benefits that BlackRock or its affiliates and significant
shareholders may derive from their respective relationships with the Funds,
both tangible and intangible, such as BlackRock’s ability to leverage its
investment professionals who manage other portfolios and risk manage-
ment personnel, an increase in BlackRock’s profile in the investment
advisory community, and the engagement of BlackRock’s affiliates as
service providers to the Funds, including securities lending services. The
Boards also considered BlackRock’s overall operations and its efforts to
expand the scale of, and improve the quality of, its operations. The Boards
also noted that BlackRock may use and benefit from third party research
obtained by soft dollars generated by certain registered fund transactions
to assist in managing all or a number of its other client accounts. The
Boards further noted that BlackRock’s funds may invest in affiliated
ETFs without any offset against the management fees payable by the
funds to BlackRock.

In connection with its consideration of the Agreements, the Boards also
received information regarding BlackRock’s brokerage and soft dollar prac-
tices. The Boards received reports from BlackRock which included informa-
tion on brokerage commissions and trade execution practices throughout
the year.

The Boards noted the competitive nature of the closed-end fund market-
place and that shareholders are able to sell their Fund shares in the sec-
ondary market if they believe that the Fund’s fees and expenses are too
high or if they are dissatisfied with the performance of the Fund.

Conclusion
Each Board, including the Independent Board Members, unanimously
approved the continuation of the Advisory Agreement between the Manager
and its Fund for a one-year term ending June 30, 2012 and the Sub-
Advisory Agreement between the Manager and the Sub-Advisor, with
respect to its Fund, for a one-year term ending June 30, 2012. As part
of its approval, the Boards considered the detailed review of BlackRock’s
fee structure, as it applies to the Funds, conducted by the ad hoc Joint
Product Pricing Committee. Based upon their evaluations of all of the
aforementioned factors in their totality, the Boards, including the
Independent Board Members, were satisfied that the terms of the
Agreements were fair and reasonable and in the best interest of the
Funds and their shareholders. In arriving at their decision to approve the
Agreements, the Boards did not identify any single factor or group of
factors as all-important or controlling, but considered all factors together,
and different Board Members may have attributed different weights to
the various factors considered. The Independent Board Members were
also assisted by the advice of independent legal counsel in making these
determinations. The contractual fee arrangements for the Funds reflect
the results of several years of review by the Board Members and predeces-
sor Board Members, and discussions between such Board Members
(and predecessor Board Members) and BlackRock. As a result, the Board
Members’ conclusions may be based in part on their consideration of
these arrangements in prior years.

68 ANNUAL REPORT AUGUST 31, 2011

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Automatic Dividend Reinvestment Plans

Pursuant to each Fund’s Dividend Reinvestment Plan (the “Reinvestment
Plan”), Common Shareholders are automatically enrolled to have all distri-
butions of dividends and capital gains reinvested by Computershare Trust
Company, N.A. (the “Reinvestment Plan Agent”) in the respective Fund’s
shares pursuant to the Reinvestment Plan. Shareholders who do not partic-
ipate in the Reinvestment Plan will receive all distributions in cash paid by
check and mailed directly to the shareholders of record (or if the shares
are held in street name or other nominee name, then to the nominee) by
the Reinvestment Plan Agent, which serves as agent for the shareholders in
administering the Reinvestment Plan.

After the Funds declare a dividend or determine to make a capital gain
distribution, the Reinvestment Plan Agent will acquire shares for the part-
icipants’ accounts, depending upon the following circumstances, either
(i) through receipt of unissued but authorized shares from the Fund (“newly
issued shares”) or (ii) by purchase of outstanding shares on the open mar-
ket or on the Fund’s primary exchange (“open-market purchases”). If, on
the dividend payment date, the net asset value per share (“NAV”) is equal
to or less than the market price per share plus estimated brokerage com-
missions (such condition often referred to as a “market premium”), the
Reinvestment Plan Agent will invest the dividend amount in newly issued
shares on behalf of the participants. The number of newly issued shares to
be credited to each participant’s account will be determined by dividing
the dollar amount of the dividend by the NAV on the date the shares are
issued. However, if the NAV is less than 95% of the market price on the div-
idend payment date, the dollar amount of the dividend will be divided by
95% of the market price on the dividend payment date. If, on the dividend
payment date, the NAV is greater than the market price per share plus esti-
mated brokerage commissions (such condition often referred to as a “mar-
ket discount”), the Reinvestment Plan Agent will invest the dividend amount
in shares acquired on behalf of the participants in open-market purchases.
If the Reinvestment Plan Agent is unable to invest the full dividend amount
in open-market purchases, or if the market discount shifts to a market
premium during the purchase period, the Reinvestment Plan Agent will
invest any un-invested portion in newly issued shares. Investments in
newly issued shares made in this manner would be made pursuant to
the same process described above and the date of issue for such newly
issued shares will substitute for the dividend payment date.

Participation in the Reinvestment Plan is completely voluntary and may be
terminated or resumed at any time without penalty by notice if received
and processed by the Reinvestment Plan Agent prior to the dividend record
date. Additionally, the Reinvestment Plan Agent seeks to process notices
received after the record date but prior to the payable date and such
notices often will become effective by the payable date. Where late notices
are not processed by the applicable payable date, such termination or
resumption will be effective with respect to any subsequently declared
dividend or other distribution.

The Reinvestment Plan Agent’s fees for the handling of the reinvestment
of dividends and distributions will be paid by each Fund. However, each
participant will pay a pro rata share of brokerage commissions incurred
with respect to the Reinvestment Plan Agent’s open market purchases in
connection with the reinvestment of dividends and distributions. The auto-
matic reinvestment of dividends and distributions will not relieve partici-
pants of any federal income tax that may be payable on such dividends
or distributions.

Each Fund reserves the right to amend or terminate the Reinvestment Plan.
There is no direct service charge to participants in the Reinvestment Plan;
however, each Fund reserves the right to amend the Reinvestment Plan to
include a service charge payable by the participants. Participants that
request a sale of shares through the Reinvestment Plan Agent are subject
to a $2.50 sales fee and a $0.15 per share sold brokerage commission.
All correspondence concerning the Reinvestment Plan should be directed
to the Reinvestment Plan Agent: Computershare Trust Company, N. A., P. O.
Box 43078, Providence, RI 02940-3078, Telephone: (800) 699-1BFM.
All overnight correspondence should be directed to the Reinvestment
Plan Agent at 250 Royall Street, Canton, MA 02021.

ANNUAL REPORT AUGUST 31, 2011 69

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70 ANNUAL REPORT AUGUST 31, 2011

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ANNUAL REPORT AUGUST 31, 2011 71

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Effective April 14, 2011, Michael J. Castellano became Director of the Funds and Member of the Audit Committee.
Effective July 28, 2011, Richard S. Davis resigned as Director of the Funds, and Paul L. Audet became Director of the Funds.

72 ANNUAL REPORT AUGUST 31, 2011

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Additional Information

Proxy Results

The Annual Meeting of Shareholders was held on July 28, 2011 for shareholders of record on May 31, 2011 to elect director nominees for each Fund. There
were no broker non-votes with regard to any of the Funds.

Approved the Class I Directors as follows:

 

 

For the Funds listed above, Directors whose term of office continued after
the Annual Meeting of Shareholders because they were not up for election
are Richard E. Cavanagh, Frank J. Fabozzi, Kathleen F. Feldstein, James T.
Flynn, Henry Gabbay, Jerrold B. Harris and Karen P. Robards.

Approved the Directors as follows:

 

ANNUAL REPORT AUGUST 31, 2011 73

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Additional Information (continued)

Fund Certification

Certain Funds are listed for trading on the NYSE and have filed with the
NYSE their annual chief executive officer certification regarding compliance
with the NYSE’s listing standards. The Funds filed with the SEC the certifica-
tion of their chief executive officer and chief financial officer required by
section 302 of the Sarbanes-Oxley Act.

Dividend Policy

The Funds’ dividend policy is to distribute all or a portion of their net
investment income to its shareholders on a monthly basis. In order to pro-
vide shareholders with a more stable level of dividend distributions, the
Funds may at times pay out less than the entire amount of net investment
income earned in any particular month and may at times in any particular
month pay out such accumulated but undistributed income in addition to
net investment income earned in that month. As a result, the dividends
paid by the Funds for any particular month may be more or less than the
amount of net investment income earned by the Funds during such month.
The Funds’ current accumulated but undistributed net investment income,
if any, is disclosed in the Statements of Assets and Liabilities, which com-
prises part of the financial information included in this report.

General Information

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

During the period, there were no material changes in the Funds’ investment
objectives or policies or to the Funds’ charters or by-laws that would delay
or prevent a change of control of the Funds that were not approved by
shareholders or in the principal risk factors associated with investment in
the Funds. There have been no changes in the persons who are primarily
responsible for the day-to-day management of the Funds’ portfolios.

Quarterly performance, semi-annual and annual reports and other informa-
tion regarding the Funds may be found on BlackRock’s website, which can
be accessed at http://www.blackrock.com. This reference to BlackRock’s
website is intended to allow investors public access to information regard-
ing the Funds and does not, and is not intended to, incorporate BlackRock’s
website into this report.

Electronic Delivery
Electronic copies of most financial reports are available on the Funds’ web-
sites or shareholders can sign up for e-mail notifications of quarterly state-
ments, annual and semi-annual reports by enrolling in the Funds’ electronic
delivery program.

Shareholders Who Hold Accounts with Investment Advisors, Banks
or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisors, banks or brokerages may offer this service.

Householding
The Funds will mail only one copy of shareholder documents, including
annual and semi-annual reports and proxy statements, to shareholders
with multiple accounts at the same address. This practice is commonly
called “householding” and is intended to reduce expenses and eliminate
duplicate mailings of shareholder documents. Mailings of your shareholder
documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be
combined with those for other members of your household, please
call (800) 441-7762.

Availability of Quarterly Schedule of Investments
Each Fund files its complete schedule of portfolio holdings with the SEC
for the first and third quarters of each fiscal year on Form N-Q. The Funds’
Forms N-Q are available on the SEC’s website at http://www.sec.gov and
may also be reviewed and copied at the SEC’s Public Reference Room in
Washington, DC. Information on how to access documents on the SEC’s
website without charge may be obtained by calling (800) SEC-0330. Each
Fund’s Forms N-Q may also be obtained upon request and without charge
by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that each Fund uses to
determine how to vote proxies relating to portfolio securities is available
(1) without charge, upon request, by calling (800) 441-7762;
(2) at http://www.blackrock.com; and (3) on the SEC’s website
at http://www.sec.gov.

Availability of Proxy Voting Record
Information about how the Funds voted proxies relating to securities
held in each Fund’s portfolio during the most recent 12-month period
ended June 30 is available upon request and without charge (1) at
http://www.blackrock.com or by calling (800) 441-7762 and
(2) on the SEC’s website at http://www.sec.gov.

Availability of Fund Updates
BlackRock will update performance and certain other data for the Funds
on a monthly basis on its website in the “Closed-end Funds” section of
http://www.blackrock.com. Investors and others are advised to periodically
check the website for updated performance information and the release of
other material information about the Funds.

74 ANNUAL REPORT AUGUST 31, 2011

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Additional Information (concluded)

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and for-
mer fund investors and individual clients (collectively, “Clients”) and to
safeguarding their non-public personal information. The following infor-
mation 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 applica-
tions, forms or other documents; (ii) information about your transactions
with us, our affiliates, or others; (iii) information we receive from a consumer
reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-
public personal information about its Clients, except as permitted by law
or as is necessary to respond to regulatory requests or to service Client
accounts. These non-affiliated third parties are required to protect the
confidentiality and security of this information and to use it only for its
intended purpose.

We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services
that may be of interest to you. In addition, BlackRock restricts access
to non-public personal information about its Clients to those BlackRock
employees with a legitimate business need for the information. BlackRock
maintains physical, electronic and procedural safeguards that are designed
to protect the non-public personal information of its Clients, including pro-
cedures relating to the proper storage and disposal of such information.

ANNUAL REPORT AUGUST 31, 2011 75

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This report is transmitted to shareholders only. It is not a prospectus. Past performance results shown in this report should not
be considered a representation of future performance. The Funds have leveraged their Common Shares, which creates risks for
Common Shareholders, including the likelihood of greater volatility of net asset value and market price of Common Shares, and
the risk that fluctuations in short-term interest rates may reduce the Common Shares’ yield. Statements and other information
herein are as dated and are subject to change.

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Item 2 – Code of Ethics – The registrant (or the “Fund”) has adopted a code of ethics, as of the end
of the period covered by this report, applicable to the registrant’s principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing
similar functions. During the period covered by this report, there have been no amendments
to or waivers granted under the code of ethics. A copy of the code of ethics is available
without charge at www.blackrock.com.

Item 3 – Audit Committee Financial Expert – The registrant’s board of directors (the “board of
directors”), has determined that (i) the registrant has the following audit committee financial
experts serving on its audit committee and (ii) each audit committee financial expert is
independent:

Frank J. Fabozzi
James T. Flynn
W. Carl Kester
Karen P. Robards

The registrant’s board of directors has determined that W. Carl Kester and Karen P. Robards
qualify as financial experts pursuant to Item 3(c)(4) of Form N-CSR.

Prof. Kester has a thorough understanding of generally accepted accounting principles,
financial statements and internal control over financial reporting as well as audit committee
functions. Prof. Kester has been involved in providing valuation and other financial
consulting services to corporate clients since 1978. Prof. Kester’s financial consulting
services present a breadth and level of complexity of accounting issues that are generally
comparable to the breadth and complexity of issues that can reasonably be expected to be
raised by the registrant’s financial statements.

Ms. Robards has a thorough understanding of generally accepted accounting principles,
financial statements and internal control over financial reporting as well as audit committee
functions. Ms. Robards has been President of Robards & Company, a financial advisory
firm, since 1987. Ms. Robards was formerly an investment banker for more than 10 years
where she was responsible for evaluating and assessing the performance of companies based
on their financial results. Ms. Robards has over 30 years of experience analyzing financial
statements. She also is a member of the audit committee of one publicly held company and
a non-profit organization.

Under applicable securities laws, a person determined to be an audit committee financial
expert will not be deemed an “expert” for any purpose, including without limitation for the
purposes of Section 11 of the Securities Act of 1933, as a result of being designated or
identified as an audit committee financial expert. The designation or identification as an
audit committee financial expert does not impose on such person any duties, obligations, or
liabilities greater than the duties, obligations, and liabilities imposed on such person as a
member of the audit committee and board of directors in the absence of such designation or
identification. The designation or identification of a person as an audit committee financial
expert does not affect the duties, obligations, or liability of any other member of the audit
committee or board of directors.

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Item 4 – Principal Accountant Fees and Services

The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the
last two fiscal years for the services rendered to the Fund:

 

The following table presents fees billed by D&T that were required to be approved by the
registrant’s audit committee (the “Committee”) for services that relate directly to the
operations or financial reporting of the Fund and that are rendered on behalf of BlackRock
Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled
by, or under common control with BlackRock (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another investment
adviser) that provide ongoing services to the Fund (“Fund Service Providers”):

 

(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The Committee has adopted policies and procedures with regard to the pre-approval
of services. Audit, audit-related and tax compliance services provided to the registrant on
an annual basis require specific pre-approval by the Committee. The Committee also must
approve other non-audit services provided to the registrant and those non-audit services
provided to the Investment Adviser and Fund Service Providers that relate directly to the
operations and the financial reporting of the registrant. Certain of these non-audit services
that the Committee believes are a) consistent with the SEC’s auditor independence rules and
b) routine and recurring services that will not impair the independence of the independent
accountants may be approved by the Committee without consideration on a specific case-
by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months
from the date of the pre-approval, unless the Committee provides for a different period. Tax
or other non-audit services provided to the registrant which have a direct impact on the
operations or financial reporting of the registrant will only be deemed pre-approved
provided that any individual project does not exceed $10,000 attributable to the registrant or
$50,000 per project. For this purpose, multiple projects will be aggregated to determine if
they exceed the previously mentioned cost levels.

Any proposed services exceeding the pre-approved cost levels will require specific
pre-approval by the Committee, as will any other services not subject to general pre-
approval (e.g., unanticipated but permissible services). The Committee is informed of each
service approved subject to general pre-approval at the next regularly scheduled in-person

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board meeting. At this meeting, an analysis of such services is presented to the Committee
for ratification. The Committee may delegate to the Committee Chairman the authority to
approve the provision of and fees for any specific engagement of permitted non-audit
services, including services exceeding pre-approved cost levels.

(e)(2) None of the services described in each of Items 4(b) through (d) were approved by
the Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X.

(f) Not Applicable

(g) The aggregate non-audit fees paid to the accountant for services rendered by the
accountant to the registrant, the Investment Adviser and the Fund Service Providers were:

 

Additionally, SAS No. 70 fees for the current and previous fiscal years of $3,030,000 and
$2,950,000, respectively, were billed by D&T to the Investment Adviser.

(h) The Committee has considered and determined that the provision of non-audit services
that were rendered to the Investment Adviser, and the Fund Service Providers that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant’s independence.

Item 5 – Audit Committee of Listed Registrants

(a) The following individuals are members of the registrant’s separately-designated
standing audit committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):

Michael Castellano
Frank J. Fabozzi
James T. Flynn
W. Carl Kester
Karen P. Robards

(b) Not Applicable

Item 6 – Investments
(a) The registrant’s Schedule of Investments is included as part of the Report to
Stockholders filed under Item 1 of this Form.
(b) Not Applicable due to no such divestments during the semi-annual period covered since
the previous Form N-CSR filing.

Item 7 – Disclosure of Proxy Voting Policies and Procedures for Closed-End Management
Investment Companies – The board of directors has delegated the voting of proxies for the
Fund’s portfolio securities to the Investment Adviser pursuant to the Investment Adviser’s
proxy voting guidelines. Under these guidelines, the Investment Adviser will vote proxies
related to Fund securities in the best interests of the Fund and its stockholders. From time to

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time, a vote may present a conflict between the interests of the Fund’s stockholders, on the
one hand, and those of the Investment Adviser, or any affiliated person of the Fund or the
Investment Adviser, on the other. In such event, provided that the Investment Adviser’s
Equity Investment Policy Oversight Committee, or a sub-committee thereof (the “Oversight
Committee”) is aware of the real or potential conflict or material non-routine matter and if
the Oversight Committee does not reasonably believe it is able to follow its general voting
guidelines (or if the particular proxy matter is not addressed in the guidelines) and vote
impartially, the Oversight Committee may retain an independent fiduciary to advise the
Oversight Committee on how to vote or to cast votes on behalf of the Investment Adviser’s
clients. If the Investment Adviser determines not to retain an independent fiduciary, or does
not desire to follow the advice of such independent fiduciary, the Oversight Committee shall
determine how to vote the proxy after consulting with the Investment Adviser’s Portfolio
Management Group and/or the Investment Adviser’s Legal and Compliance Department
and concluding that the vote cast is in its client’s best interest notwithstanding the conflict.
A copy of the Fund’s Proxy Voting Policy and Procedures are attached as Exhibit
99.PROXYPOL. Information on how the Fund voted proxies relating to portfolio securities
during the most recent 12-month period ended June 30 is available without charge, (i) at
www.blackrock.com and (ii) on the SEC’s website at http://www.sec.gov.

Item 8 – Portfolio Managers of Closed-End Management Investment Companies – as of August 31,
2011.

(a)(1) The Fund is managed by a team of investment professionals comprised of Leland
Hart, Managing Director at BlackRock, James E. Keenan, Managing Director at BlackRock
and C. Adrian Marshall, Director at BlackRock. Messrs. Hart, Keenan and Marshall are the
Fund’s co-portfolio managers and are responsible for the day-to-day management of the
Fund’s portfolio and the selection of its investments. Mr. Keenan has been a member of the
Fund’s portfolio management team since 2007. Messrs. Hart and Marshall have been
members of the Fund’s portfolio management team since 2009.

 

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(a)(2) As of August 31, 2011:

 

(iv) Potential Material Conflicts of Interest

BlackRock has built a professional working environment, firm-wide compliance culture
and compliance procedures and systems designed to protect against potential incentives that
may favor one account over another. BlackRock has adopted policies and procedures that
address the allocation of investment opportunities, execution of portfolio transactions,
personal trading by employees and other potential conflicts of interest that are designed to
ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock
furnishes investment management and advisory services to numerous clients in addition to
the Fund, and BlackRock may, consistent with applicable law, make investment
recommendations to other clients or accounts (including accounts which are hedge funds or
have performance or higher fees paid to BlackRock, or in which portfolio managers have a
personal interest in the receipt of such fees), which may be the same as or different from
those made to the Fund. In addition, BlackRock, its affiliates and significant shareholders
and any officer, director, shareholder or employee may or may not have an interest in the
securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, or
any of its affiliates or significant shareholders, or any officer, director, shareholder,
employee or any member of their families may take different actions than those
recommended to the Fund by BlackRock with respect to the same securities. Moreover,
BlackRock may refrain from rendering any advice or services concerning securities of
companies of which any of BlackRock’s (or its affiliates’ or significant shareholders’)
officers, directors or employees are directors or officers, or companies as to which
BlackRock or any of its affiliates or significant shareholders or the officers, directors and
employees of any of them has any substantial economic interest or possesses material non-
public information. Certain portfolio managers also may manage accounts whose
investment strategies may at times be opposed to the strategy utilized for a fund. It should
also be noted that Messrs. Hart, Keenan and Marshall may be managing certain hedge fund
and/or long only accounts, or may be part of a team managing certain hedge fund and/or
long only accounts, subject to incentive fees. Messrs. Hart, Keenan and Marshall may
therefore be entitled to receive a portion of any incentive fees earned on such accounts.
Additional portfolio managers may in the future manage other such accounts or funds and
may be entitled to receive incentive fees.

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

(a)(3) As of August 31, 2011:

Portfolio Manager Compensation Overview

BlackRock’s financial arrangements with its portfolio managers, its competitive
compensation and its career path emphasis at all levels reflect the value senior management
places on key resources. Compensation may include a variety of components and may vary
from year to year based on a number of factors. The principal components of compensation
include a base salary, a performance-based discretionary bonus, participation in various
benefits programs and one or more of the incentive compensation programs established by
BlackRock.

Base compensation. Generally, portfolio managers receive base compensation based on
their position with BlackRock.

Discretionary Incentive Compensation. Discretionary incentive compensation is a
function of several components: the performance of BlackRock, Inc., the performance of the
portfolio manager’s group within BlackRock, the investment performance, including risk-
adjusted returns, of the firm’s assets under management or supervision by that portfolio
manager relative to predetermined benchmarks, and the individual’s performance and
contribution to the overall performance of these portfolios and BlackRock. In most cases,
these benchmarks are the same as the benchmark or benchmarks against which the
performance of the Fund or other accounts managed by the portfolio managers are
measured. BlackRock’s Chief Investment Officers determine the benchmarks against which
the performance of funds and other accounts managed by each portfolio manager is
compared and the period of time over which performance is evaluated. With respect to the
portfolio managers, such benchmarks include the following:

 

Among other things, BlackRock’s Chief Investment Officers make a subjective
determination with respect to each portfolio manager’s compensation based on the

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performance of the Funds and other accounts managed by each portfolio manager relative to
the various benchmarks.

Performance of fixed income funds is measured on both a pre-tax and after-tax basis over
various time periods including 1-, 3- and 5-year periods, as applicable. With respect to the
performance of the other listed Index and Multi-Asset Funds, performance is measured on,
among other things, a pre-tax basis over various time periods including 1-, 3- and 5-year
periods, as applicable.

Distribution of Discretionary Incentive Compensation

Discretionary incentive compensation is distributed to portfolio managers in a combination
of cash and BlackRock, Inc. restricted stock units which vest ratably over a number of
years. For some portfolio managers, discretionary incentive compensation is also
distributed in deferred cash awards that notionally track the returns of select BlackRock
investment products they manage and that vest ratably over a number of years. The
BlackRock, Inc. restricted stock units, upon vesting, will be settled in BlackRock, Inc.
common stock. Typically, the cash bonus, when combined with base salary, represents
more than 60% of total compensation for the portfolio managers. Paying a portion of
annual bonuses in stock puts compensation earned by a portfolio manager for a given year
“at risk” based on BlackRock’s ability to sustain and improve its performance over future
periods. Providing a portion of annual bonuses in deferred cash awards that notionally track
the BlackRock investment products they manage provides direct alignment with investment
product results.

Long-Term Incentive Plan Awards — From time to time long-term incentive equity
awards are granted to certain key employees to aid in retention, align their interests with
long-term shareholder interests and motivate performance. Equity awards are generally
granted in the form of BlackRock, Inc. restricted stock units that, once vested, settle in
BlackRock, Inc. common stock. Messrs. Hart, Keenan and Marshall have each received
long-term incentive awards.

Deferred Compensation Program — A portion of the compensation paid to
eligible BlackRock employees may be voluntarily deferred into an account that tracks the
performance of certain of the firm’s investment products. Each participant in the deferred
compensation program is permitted to allocate his deferred amounts among various
BlackRock investment options. Messrs. Messrs. Hart, Keenan and Marshall have each
participated in the deferred compensation program.

Other compensation benefits. In addition to base compensation and discretionary
incentive compensation, portfolio managers may be eligible to receive or participate in one
or more of the following incentive savings plans. BlackRock, Inc. has created a variety of
incentive savings plans in which BlackRock, Inc. employees are eligible to participate,
including a 401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock
Employee Stock Purchase Plan (ESPP). The employer contribution components of the RSP
include a company match equal to 50% of the first 8% of eligible pay contributed to the plan
capped at $5,000 per year, and a company retirement contribution equal to 3-5% of eligible
compensation. The RSP offers a range of investment options, including registered
investment companies and collective investment funds managed by the firm. BlackRock
contributions follow the investment direction set by participants for their own contributions
or, absent participant investment direction, are invested into an index target date fund that

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corresponds to, or is closest to, the year in which the participant attains age 65. The ESPP
allows for investment in BlackRock, Inc. common stock at a 5% discount on the fair market
value of the stock on the purchase date. Annual participation in the ESPP is limited to the
purchase of 1,000 shares or a dollar value of $25,000. Each portfolio manager is eligible to
participate in these plans.

(a)(4) Beneficial Ownership of Securities – As of August 31, 2011.

 

(b) Not Applicable

Item 9 – Purchases of Equity Securities by Closed-End Management Investment Company and
Affiliated Purchasers – Not Applicable due to no such purchases during the period covered
by this report.

Item 10 – Submission of Matters to a Vote of Security Holders – There have been no material
changes to these procedures.

Item 11 – Controls and Procedures

(a) – The registrant’s principal executive and principal financial officers, or persons
performing similar functions, have concluded that the registrant’s disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as
amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this
report based on the evaluation of these controls and procedures required by Rule 30a-3(b)
under the 1940 Act and Rule 13a-15(b) under the Securities Exchange Act of 1934, as
amended.

(b) – There were no changes in the registrant’s internal control over financial reporting (as
defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter
of the period covered by this report that have materially affected, or are reasonably likely to
materially affect, the registrant’s internal control over financial reporting.

Item 12 – Exhibits attached hereto

(a)(1) – Code of Ethics – See Item 2

(a)(2) – Certifications – Attached hereto

(a)(3) – Not Applicable

(b) – Certifications – Attached hereto

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

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BlackRock Limited Duration Income Trust

By: /S/ John M. Perlowski
John M. Perlowski
Chief Executive Officer (principal executive officer) of
BlackRock Limited Duration Income Trust

Date: November 4, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.

By: /S/ John M. Perlowski
John M. Perlowski
Chief Executive Officer (principal executive officer) of
BlackRock Limited Duration Income Trust

Date: November 4, 2011

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

Date: November 4, 2011

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