UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-08497
Name of Fund: BlackRock Corporate High Yield Fund III, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, BlackRock Corporate High Yield Fund III, Inc., 800 Scudders Mill
Road, Plainsboro, NJ 08536. Mailing address: P.O. Box 9011, Princeton,
NJ 08543-9011
Registrant's telephone number, including area code: (800) 882-0052
Date of fiscal year end: 05/31/07
Date of reporting period: 06/01/06 - 05/31/07
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES
FIXED INCOME LIQUIDITY REAL ESTATE
BlackRock Corporate High Yield BLACKROCK
Fund III, Inc.
ANNUAL REPORT | MAY 31, 2007
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock Corporate High Yield Fund III, Inc.
The Benefits and Risks of Leveraging
BlackRock Corporate High Yield Fund III, Inc. utilizes leveraging through
borrowings or issuance of short-term debt securities or shares of Preferred
Stock. The concept of leveraging is based on the premise that the cost of assets
to be obtained from leverage will be based on short-term interest rates, which
normally will be lower than the income earned by the Fund on its longer-term
portfolio investments. Since the total assets of the Fund (including the assets
obtained from leverage) are invested in higher-yielding portfolio investments,
the Fund's Common Stock shareholders are the beneficiaries of the incremental
yield.
Leverage creates risks for holders of Common Stock including the likelihood of
greater net asset value and market price volatility. In addition, there is the
risk that fluctuations in interest rates on borrowings (or in the dividend rates
on any Preferred Stock, if the Fund were to issue Preferred Stock) may reduce
the Common Stock's yield and negatively impact its net asset value and market
price. If the income derived from securities purchased with assets received from
leverage exceeds the cost of leverage, the Fund's net income will be greater
than if leverage had not been used. Conversely, if the income from the
securities purchased is not sufficient to cover the cost of leverage, the Fund's
net income will be less than if leverage had not been used, and therefore the
amount available for distribution to Common Stock shareholders will be reduced.
2 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
A Letter to Shareholders
Dear Shareholder
The 12 months from May 2006 to May 2007 took global equities on an extraordinary
ride. A sharp correction at the start, the first in almost four years, gave way
to strength in the latter half of 2006 and early 2007. This rally was
interrupted by another set-back at the end of February, before markets resumed
their upward march through May 31. Ultimately, the tailwinds of a generally
favorable global economic backdrop, tame inflation, relatively low interest
rates, still positive earnings growth and attractive valuations prevailed over
the headwinds of a weakening U.S. economy, slowing housing market, escalating
geopolitical concerns and high energy prices. In fact, both the Dow Jones
Industrial Average and the Standard & Poor's 500 Index touched new record highs
following the most recent correction.
Mixed economic signals led to volatile behavior in fixed income markets as well.
However, from the beginning of 2007 through May 31, short-term bond yields
generally fell while longer-term yields increased. This resulted in some
re-steepening of the yield curve, which had been flat to inverted throughout
2006. On a year-over-year basis, yields on 30-year Treasury bonds fell 20 basis
points (.20%) and 10-year yields fell 22 basis points, while bond prices
correspondingly rose. Meanwhile, the Federal Reserve Board (the Fed) has left
the federal funds rate at 5.25% since first pausing in August 2006. While
first-quarter gross domestic product growth of 0.6% represented the slowest rate
of expansion since 2002, the Fed reiterated its view that inflation, not a
slowing economy, remains its primary concern. Many observers interpreted the
Fed's reaction to mean that the economy has hit its low and is bound for renewed
strength, therefore reducing the likelihood of an interest rate cut in the near
future.
Against this backdrop, most major market indexes posted positive returns for the
annual and semi-annual reporting periods ended May 31, 2007, with equities
exhibiting particular strength:
Total Returns as of May 31, 2007 6-month 12-month
===============================================================================================================
U.S. equities (Standard & Poor's 500 Index) +10.29% +22.79%
---------------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) + 8.39 +18.92
---------------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) +14.08 +26.84
---------------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) + 0.69 + 6.66
---------------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.30 + 4.84
---------------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index) + 6.02 +12.64
---------------------------------------------------------------------------------------------------------------
We expect market volatility to linger throughout the remainder of 2007. As you
navigate the uncertainties, we encourage you to review your investment goals
with your financial professional and to make portfolio changes, as needed. For
more insight, we invite you to view "What's Ahead in 2007: An Investment
Perspective" and "Are You Prepared for Volatility?" at www.blackrock.com/funds.
We thank you for entrusting BlackRock with your investment assets, and we look
forward to continuing to serve you in the months and years ahead.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
Fund President and Director
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 3
A Discussion With Your Fund's Portfolio Managers
The Fund outperformed the Credit Suisse High Yield Index and its comparable
Lipper category average for the fiscal year.
How did the Fund perform during the fiscal year in light of the existing market
conditions?
For the 12-month period ended May 31, 2007, the Common Stock of BlackRock
Corporate High Yield Fund III, Inc. had net annualized yields of 7.52% and
7.92%, based on a year-end per share net asset value of $8.99 and a per share
market price of $8.53, respectively, and $.676 per share income dividends. For
the same period, the total investment return on the Fund's Common Stock was
+15.51%, based on a change in per share net asset value from $8.46 to $8.99, and
assuming reinvestment of all distributions. The high yield bond market, as
measured by the Credit Suisse High Yield Index, returned +13.21% for the
12-month period, while the Fund's comparable Lipper category of High Current
Yield Funds (Leveraged) had an average return of +14.61%. (Funds in this Lipper
category aim for relatively high current yield from investment in fixed income
securities, have no quality or maturity restrictions, and tend to invest in
lower-grade debt issues.)
For the six-month period ended May 31, 2007, the total investment return on the
Fund's Common Stock was +8.68%, based on a change in per share net asset value
from $8.61 to $8.99, and assuming reinvestment of all distributions. The Credit
Suisse High Yield Index returned +6.53% for the period, while the Lipper High
Current Yield Funds (Leveraged) category had an average return of +7.59%.
For a description of the Fund's total investment return based on a change in the
per share market value of the Fund's Common Stock (as measured by the trading
price of the Fund's shares on the New York Stock Exchange), and assuming
reinvestment of distributions, please refer to the Financial Highlights section
of this report. As a closed-end fund, the Fund's shares may trade in the
secondary market at a premium or a discount to the Fund's net asset value. As a
result, total investment returns based on changes in the market value of the
Fund's Common Stock can vary significantly from total investment returns based
on changes in the Fund's net asset value.
The high yield market moved upward over the past 12 months, although it did
encounter weakness early on in June 2006. The market managed to post positive
returns in each of the next 11 months, aided by the continuation of historically
low default rates and relatively low new-issue supply. Additionally, the high
yield market continued to experience significant inflows as low overall
volatility and strong U.S. equity market returns motivated investors to seek
higher-yielding assets.
As measured by the Credit Suisse High Yield Index, the yield spreads of high
yield bonds versus those of 10-year U.S. Treasury securities decreased from 329
basis points (3.29%) on May 31, 2006, to 238 basis points at May 31, 2007.
High yield securities and the Fund significantly outperformed U.S. Treasury
issues, which returned +5.97% for the 12-month period, as measured by the
Merrill Lynch 10-Year U.S. Treasury Securities Index. Accordingly, the
higher-quality sector of the high yield market, which is more closely correlated
with Treasury issues, lagged during the period while lower-quality issues
outperformed.
Against this backdrop, the Fund's exposure to lower-quality credits benefited
performance. In the latter half of the fiscal year, after a new management team
assumed responsibility for the portfolio, its overweight position in issues
rated B and CCC was beneficial to performance. Conversely, an underweight
exposure to BB-rated issues detracted from performance, as all segments of the
high yield market performed well. Also in the latter six months, the Fund's
overweight positions in the media (non-cable), technology, aerospace/defense,
consumer service and chemical sectors were the strongest positive contributors
to performance. Underweight positions in automotives, supermarkets and home
construction were the biggest detractors.
What changes were made to the portfolio during the period?
A new management team assumed responsibility for the day-to-day management of
the Fund's portfolio in October 2006 and implemented its longstanding strategy
of investing in securities of higher-quality companies with good pricing power
and strong fundamentals. Having said that, the management team did increase
allocations to certain lower-quality credit tiers, establishing overweight
positions in B-rated and CCC-rated credits in an effort to capitalize on
positive returns being generated by these segments of the high yield market. As
mentioned earlier, the increased emphasis on lower-quality issues benefited
performance in the second half of the fiscal year.
4 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
From a sector perspective, we moved the portfolio to overweight positions versus
the benchmark in the media (non-cable), gaming and paper industries. We
maintained the portfolio's underweight exposure to electric utilities, media
(cable), supermarkets and lodging.
The Fund's leverage position earned an incremental yield on the investments we
made with the borrowed funds. For the year ended May 31, 2007, the average
amount borrowed was $134.7 million, and the daily weighted average interest rate
was 5.52%. While leveraging will enhance the Fund's total return in a strong
market, the converse also is true in a weak market. (For a more complete
discussion of the benefits and risks of leveraging, see page 2 of this report to
shareholders.)
How would you characterize the Fund's position at the close of the period?
Volatility picked up somewhat in the second quarter of 2007, resulting in an
investor flight to quality. However, fundamental and technical valuations
remained favorable for the high yield market, with default rates below 1% and a
new-issue calendar that was just beginning to satisfy the high yield investor.
The Fund had an average credit rating of B at the end of the period, consistent
with the rating of the Credit Suisse High Yield Index and unchanged from the
beginning of the period.
At May 31, 2007, 92.7% of the Fund's net assets was invested in high yield
bonds. The portfolio was overweight relative to the benchmark in the media
(non-cable), retail and aerospace/defense sectors. The Fund's primary
underweights were in the information technology, automotive, financials and
housing sectors. Floating rate securities, including bank loans, accounted for
2.4% of non-cash investments at period-end.
We retain our emphasis on investing in securities of higher-quality companies
with good pricing power and strong fundamentals. Going forward, we will continue
to focus on increasing the Fund's net asset value with the intention of
producing a competitive total return for shareholders. The turmoil in the
subprime mortgage market in the first half of 2007 has not had a direct effect
on Fund performance, but we maintain the portfolio's underweight exposure to
securities issued by homebuilders.
Scott Amero
Portfolio Manager
Kevin Booth, CFA
Portfolio Manager
Jeffrey Gary
Portfolio Manager
James Keenan, CFA
Portfolio Manager
June 27, 2007
--------------------------------------------------------------------------------
We are pleased to announce that Kevin Booth, CFA, and James E. Keenan, CFA, have
joined the Fund's portfolio management team and, together with Mr. Amero and Mr.
Gary, are jointly responsible for the day-to-day management of the Fund's
portfolio and the selection of its investments. Mr. Booth is a Managing Director
with BlackRock Financial Management and co-head of the high yield team within
the Fixed Income Portfolio Management Group. Mr. Booth joined BlackRock
following the merger with Merrill Lynch Investment Managers (MLIM) in 2006. He
was a Managing Director (Global Fixed Income) with MLIM in 2006, a Director from
1998 to 2006 and Vice President from 1991 to 1998. Mr. Booth has been a
portfolio manager with BlackRock or MLIM since 1992, and was a member of MLIM's
bank loan group from 2000 to 2006. Mr. Keenan is a Director with BlackRock
Financial Management and co-head of the high yield team within the Fixed Income
Portfolio Management Group. Mr. Keenan has been with the firm since 2004 as a
Portfolio Manager on the high yield team. Prior to that, he was a senior high
yield trader at Columbia Management Group from 2003 to 2004. Mr. Keenan began
his investment career at UBS Global Asset Management, where he held roles as a
trader, research analyst and portfolio analyst from 1998 through 2003.
--------------------------------------------------------------------------------
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 5
Portfolio Information
As of May 31, 2007
Percent of
Ten Largest Holdings Total Assets
--------------------------------------------------------------------------------
Realogy Corp.* ............................................. 1.5%
L-3 Communications Corp.* .................................. 1.3
Freescale Semiconductor, Inc.* ............................. 1.2
Freeport-McMoRan Copper & Gold, Inc.* ...................... 1.0
SunGard Data Systems, Inc.* ................................ 1.0
CCH I, LLC ................................................. 1.0
AutoNation, Inc.* .......................................... 0.9
Michaels Stores, Inc.* ..................................... 0.9
Reliant Energy, Inc. ....................................... 0.9
Nielson Finance LLC* ....................................... 0.9
--------------------------------------------------------------------------------
* Includes combined holdings.
--------------------------------------------------------------------------------
Percent of
Five Largest Industries Total Investments
--------------------------------------------------------------------------------
Cable -- U.S. .............................................. 7.4%
Diversified Media .......................................... 6.3
Service .................................................... 5.8
Paper ...................................................... 5.6
Information Technology ..................................... 5.4
--------------------------------------------------------------------------------
For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report which may combine industry sub-classifications for reporting
ease.
--------------------------------------------------------------------------------
Percent of
Five Largest Foreign Countries* Total Investments
--------------------------------------------------------------------------------
Canada ..................................................... 6.0%
Bermuda .................................................... 1.7
Netherlands ................................................ 0.9
United Kingdom ............................................. 0.7
Denmark .................................................... 0.6
--------------------------------------------------------------------------------
* All holdings are denominated in U.S. dollars.
--------------------------------------------------------------------------------
Quality Ratings by Percent of
S&P/Moody's Total Investments
--------------------------------------------------------------------------------
BBB/Baa .................................................... 1.0%
BB/Ba ...................................................... 22.9
B/B ........................................................ 54.5
CCC/Caa .................................................... 15.5
NR (Not Rated) ............................................. 3.2
Other* ..................................................... 2.9
--------------------------------------------------------------------------------
* Includes portfolio holdings in common stocks, preferred stocks, warrants,
short-term investments and other interests.
6 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
Schedule of Investments (in U.S. dollars)
Face
Amount Corporate Bonds Value
===============================================================================
Aerospace & Defense -- 4.4%
$1,947,000 Alliant Techsystems, Inc., 2.75%
due 9/15/2011 (b)(i) $ 2,299,894
560,000 Bombardier, Inc., 8% due 11/15/2014 (i) 596,400
1,425,000 DRS Technologies, Inc., 6.875% due 11/01/2013 1,435,687
975,000 Esterline Technologies Corp., 7.75%
due 6/15/2013 1,006,687
L-3 Communications Corp.:
1,425,000 7.625% due 6/15/2012 1,474,875
1,625,000 5.875% due 1/15/2015 1,584,375
1,380,000 3% due 8/01/2035 (b)(i) 1,528,350
1,375,000 Series B, 6.375% due 10/15/2015 1,371,562
855,000 Standard Aero Holdings, Inc., 8.25%
due 9/01/2014 921,263
470,000 TransDigm, Inc., 7.75% due 7/15/2014 (i) 488,800
1,950,000 Vought Aircraft Industries, Inc., 8%
due 7/15/2011 2,001,188
-----------
14,709,081
===============================================================================
Airlines -- 0.4%
Continental Airlines, Inc.:
999,772 Series 1997-4-B, 6.90% due 7/02/2018 992,274
41,100 Series 1998-1-C, 6.541% due 9/15/2009 41,049
462,404 Series 2001-1 Class C, 7.033% due 12/15/2012 457,780
-----------
1,491,103
===============================================================================
Automotive -- 4.3%
555,000 Accuride Corp., 8.50% due 2/01/2015 570,262
350,000 Asbury Automotive Group, Inc., 7.625%
due 3/15/2017 (i) 350,000
AutoNation, Inc.:
2,875,000 7.356% due 4/15/2013 (d) 2,903,750
1,525,000 7% due 4/15/2014 1,540,250
785,000 Ford Capital BV, 9.50% due 6/01/2010 804,625
Ford Motor Co.:
435,000 7.45% due 7/16/2031 357,787
700,000 8.90% due 1/15/2032 621,250
710,000 Ford Motor Credit Co., 8.105% due 1/13/2012 (d) 713,460
200,000 Ford Motor Credit Co. LLC, 7.80% due 6/01/2012 199,019
General Motors Acceptance Corp.:
600,000 7.25% due 3/02/2011 611,611
250,000 8% due 11/01/2031 274,651
The Goodyear Tire & Rubber Co.:
70,000 7.857% due 8/15/2011 73,150
925,000 8.625% due 12/01/2011 (i) 999,000
900,000 Group 1 Automotive, Inc., 2.25%
due 6/15/2036 (b)(k) 806,625
470,000 Keystone Automotive Operations, Inc., 9.75%
due 11/01/2013 418,300
2,135,000 Lear Corp., 8.75% due 12/01/2016 2,049,600
1,110,000 United Auto Group, Inc., 7.75%
due 12/15/2016 (i) 1,121,100
-----------
14,414,440
===============================================================================
Broadcasting -- 5.0%
1,850,000 Allbritton Communications Co., 7.75%
due 12/15/2012 1,907,813
1,125,000 Barrington Broadcasting Group LLC,10.50%
due 8/15/2014 (i) 1,192,500
510,000 Bonten Media Acquisition Co., 9%
due 6/01/2015 (g)(i) 513,700
2,000,000 CMP Susquehanna Corp., 9.875%
due 5/15/2014 (i) 2,040,000
270,000 Local TV Finance LLC, 9.25% due 6/15/2015 (g)(i) 272,347
400,000 Nexstar Finance, Inc., 7% due 1/15/2014 407,000
2,975,000 Paxson Communications Corp., 8.606%
due 1/15/2012 (d)(i) 3,038,219
2,475,000 Salem Communications Corp., 7.75%
due 12/15/2010 2,530,688
1,575,000 Sinclair Broadcast Group, Inc., 8% due 3/15/2012 1,638,000
500,000 Sirius Satellite Radio, Inc., 9.625% due 8/01/2013 501,250
1,485,000 Umbrella Acquisition, 9.75% due 3/15/2015 (g)(i) 1,536,975
1,225,000 Young Broadcasting, Inc., 10% due 3/01/2011 1,246,438
-----------
16,824,930
===============================================================================
Cable -- U.S. -- 8.5%
4,165,000 CCH I, LLC, 11% due 10/01/2015 4,527,325
2,275,000 CSC Holdings, Inc. Series B, 7.625%
due 4/01/2011 2,331,875
Cablevision Systems Corp. Series B:
75,000 9.82% due 4/01/2009 (d) 79,406
475,000 8% due 4/15/2012 482,125
3,430,000 Charter Communications Holdings II LLC, 10.25%
due 9/15/2010 3,652,950
1,975,000 Echostar DBS Corp., 7.125% due 2/01/2016 2,026,844
Intelsat Bermuda Ltd.:
240,000 11.409% due 6/15/2013 (d) 256,500
680,000 8.872% due 1/15/2015 (d) 695,300
700,000 11.25% due 6/15/2016 799,750
1,125,000 Intelsat Corp., 9% due 6/15/2016 1,231,875
360,000 Intelsat Ltd., 6.50% due 11/01/2013 307,800
2,150,000 Intelsat Subsidiary Holding Co. Ltd., 8.625%
due 1/15/2015 2,303,187
571,000 Loral Spacecom Corp., 14% due 11/15/2015 (g) 614,976
2,425,000 Mediacom LLC, 9.50% due 1/15/2013 2,503,812
2,193,000 PanAmSat Corp., 9% due 8/15/2014 2,368,440
2,000,000 Quebecor Media, Inc., 7.75% due 3/15/2016 2,100,000
1,900,000 Rainbow National Services LLC, 10.375%
due 9/01/2014 (i) 2,132,750
-----------
28,414,915
===============================================================================
Chemicals -- 4.5%
880,000 American Pacific Corp., 9% due 2/01/2015 (i) 887,700
Hexion U.S. Finance Corp.:
525,000 9.75% due 11/15/2015 565,687
625,000 9.86% due 11/15/2014 (d)(i) 653,125
820,000 Ineos Group Holdings Plc, 8.50%
due 2/15/2016 (i) 825,125
625,000 Innophos Holdings, Inc., 9.50% due 4/15/2012 (i) 637,500
825,000 Innophos, Inc., 8.875% due 8/15/2014 870,375
455,000 Key Plastics LLC and Key Plastics Finance Corp.,
11.75% due 3/15/2013 (i) 457,275
1,700,000 MacDermid, Inc., 9.50% due 4/15/2017 (i) 1,793,500
2,330,000 Momentive Performance Materials, Inc., 10.125%
due 12/01/2014 (g)(i) 2,434,850
2,065,000 NOVA Chemicals Corp., 8.484%
due 11/15/2013 (d) 2,095,975
Nalco Co.:
1,200,000 7.75% due 11/15/2011 1,242,000
1,200,000 8.875% due 11/15/2013 1,287,000
724,000 Nalco Finance Holdings, Inc., 10.065%
due 2/01/2014 (a) 655,220
Terra Capital, Inc. Series B, 7% due 2/01/2017 551,375
-----------
14,956,707
===============================================================================
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 7
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Corporate Bonds Value
===============================================================================
Consumer -- Durables -- 0.0%
$ 50,000 Simmons Bedding Co., 7.875% due 1/15/2014 $ 51,000
===============================================================================
Consumer -- Non-Durables -- 3.3%
2,025,000 American Greetings Corp., 7.375%
due 6/01/2016 2,068,031
1,400,000 Chattem, Inc., 7% due 3/01/2014 1,403,500
700,000 Church & Dwight Co., Inc., 6% due 12/15/2012 687,750
3,575,000 Hines Nurseries, Inc., 10.25% due 10/01/2011 2,860,000
2,000,000 Levi Strauss & Co., 8.875% due 4/01/2016 2,122,500
2,000,000 Quiksilver, Inc., 6.875% due 4/15/2015 1,947,500
-----------
11,089,281
===============================================================================
Diversified Media -- 8.5%
1,340,000 Affinion Group, Inc., 11.50% due 10/15/2015 1,497,450
225,000 American Media Operations, Inc. Series B, 10.25%
due 5/01/2009 220,781
350,000 CBD Media Holdings LLC, 9.25% due 7/15/2012 371,000
2,600,000 CBD Media, Inc., 8.625% due 6/01/2011 2,671,500
1,600,000 Cadmus Communications Corp., 8.375%
due 6/15/2014 1,620,000
380,000 CanWest Media, Inc., 8% due 9/15/2012 392,350
1,367,000 Dex Media West LLC, 9.875% due 8/15/2013 1,484,904
2,010,000 Idearc, Inc., 8% due 11/15/2016 2,082,862
2,013,000 Liberty Media Corp., 0.75% due 3/30/2023 (b) 2,503,669
280,000 Network Communications, Inc., 10.75%
due 12/01/2013 297,150
Nielsen Finance LLC (i):
3,000,000 10% due 8/01/2014 3,270,000
1,060,000 9.919% due 8/01/2016 (a) 771,150
3,328,000 Primedia, Inc., 8% due 5/15/2013 3,519,360
2,845,000 Quebecor World, Inc., 9.75% due 1/15/2015 (i) 3,015,700
RH Donnelley Corp.:
1,400,000 Series A-2, 6.875% due 1/15/2014 1,379,000
1,300,000 Series A-3, 8.875% due 1/15/2016 1,400,750
1,800,000 Universal City Florida Holding Co. I, 10.106%
due 5/01/2010 (d) 1,858,500
-----------
28,356,126
===============================================================================
Energy -- Exploration & Production -- 4.5%
510,000 Berry Petroleum Co., 8.25% due 11/01/2016 521,475
1,550,000 Chaparral Energy, Inc., 8.50% due 12/01/2015 1,553,875
1,710,000 Compton Petroleum Finance Corp., 7.625%
due 12/01/2013 1,727,100
2,450,000 Corral Finans AB, 6.855% due 4/15/2010 (g)(i) 2,457,548
2,800,000 EXCO Resources, Inc., 7.25% due 1/15/2011 2,828,000
2,000,000 Encore Acquisition Co., 6.25% due 4/15/2014 1,862,500
1,725,000 OPTI Canada, Inc., 8.25% due 12/15/2014 (i) 1,832,813
780,000 Sabine Pass LNG LP, 7.50% due 11/30/2016 (i) 799,500
1,370,000 Stone Energy Corp., 8.106% due 7/15/2010 (d)(i) 1,370,000
-----------
14,952,811
===============================================================================
Energy -- Other -- 2.8%
2,300,000 Aleris International, Inc., 9%
due 12/15/2014 (g)(i) 2,367,663
1,100,000 Copano Energy LLC, 8.125% due 3/01/2016 1,146,750
380,000 KCS Energy, Inc., 7.125% due 4/01/2012 380,000
720,000 North American Energy Partners, Inc., 8.75%
due 12/01/2011 741,600
2,000,000 Ocean RIG ASA, 9.35% due 4/04/2011 (d) 1,995,000
2,690,000 SemGroup LP, 8.75% due 11/15/2015 (i) 2,814,413
-----------
9,445,426
===============================================================================
Financial -- 0.6%
American Real Estate Partners LP:
185,000 7.125% due 2/15/2013 181,763
1,200,000 7.125% due 2/15/2013 (i) 1,179,000
680,000 USI Holdings Corp., 9.23% due 11/15/2014 (d)(i) 681,700
-----------
2,042,463
===============================================================================
Food & Tobacco -- 3.4%
800,000 AmeriQual Group LLC, 9.50% due 4/01/2012 (i) 824,000
1,500,000 Constellation Brands, Inc., 8.125% due 1/15/2012 1,548,750
3,000,000 Cott Beverages USA, Inc., 8% due 12/15/2011 3,078,750
3,024,000 Del Monte Corp., 8.625% due 12/15/2012 3,175,200
200,000 Landry's Restaurants, Inc. Series B, 7.50%
due 12/15/2014 199,000
2,000,000 National Beef Packing Co. LLC, 10.50%
due 8/01/2011 2,105,000
505,000 Swift & Co., 12.50% due 1/01/2010 527,725
-----------
11,458,425
===============================================================================
Gaming -- 6.8%
Caesars Entertainment, Inc.:
1,350,000 7.875% due 3/15/2010 1,412,437
100,000 8.125% due 5/15/2011 105,875
785,000 French Lick Resorts & Casino LLC, 10.75%
due 4/15/2014 (i) 663,325
Galaxy Entertainment Finance Co. Ltd. (i):
300,000 10.409% due 12/15/2010 (d) 316,500
550,000 9.875% due 12/15/2012 598,125
595,000 Greektown Holdings, LLC, 10.75%
due 12/01/2013 (i) 642,600
2,895,000 Harrah's Operating Co., Inc., 5.75%
due 10/01/2017 2,402,850
1,550,000 Inn of the Mountain Gods Resort & Casino, 12%
due 11/15/2010 1,677,875
1,290,000 Little Traverse Bay Bands of Odawa Indians,
10.25% due 2/15/2014 (i) 1,341,600
475,000 MGM Mirage, 6.75% due 4/01/2013 466,687
2,025,000 Penn National Gaming, Inc., 6.875%
due 12/01/2011 2,040,187
2,575,000 Poster Financial Group, Inc., 8.75%
due 12/01/2011 2,703,750
975,000 San Pasqual Casino, 8% due 9/15/2013 (i) 1,004,250
Station Casinos, Inc.:
1,225,000 6.50% due 2/01/2014 1,134,656
1,625,000 7.75% due 8/15/2016 1,677,813
650,000 6.625% due 3/15/2018 585,000
2,060,000 Tropicana Entertainment, LLC, 9.625%
due 12/15/2014 (i) 2,080,600
1,800,000 Wynn Las Vegas LLC, 6.625% due 12/01/2014 1,806,750
-----------
22,660,880
===============================================================================
Health Care -- 6.3%
300,000 Accellent, Inc., 10.50% due 12/01/2013 309,375
1,140,000 Angiotech Pharmaceuticals, Inc., 9.11%
due 12/01/2013 (d) 1,185,600
600,000 The Cooper Cos., Inc., 7.125% due 2/15/2015 (i) 612,000
2,000,000 Elan Finance Plc, 9.36% due 11/15/2011 (d) 2,040,000
1,900,000 HealthSouth Corp., 11.354% due 6/15/2014 (d)(i) 2,071,000
Omnicare, Inc.:
725,000 6.75% due 12/15/2013 714,125
800,000 Series OCR, 3.25% due 12/15/2035 (b) 681,000
8 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Corporate Bonds Value
===============================================================================
Health Care (concluded)
$ 930,000 PTS Acquisition Corp., 9.50%
due 4/15/2015 (g)(i) $ 955,575
Tenet Healthcare Corp.:
740,000 6.50% due 6/01/2013 689,125
2,260,000 9.875% due 7/01/2014 2,316,500
825,000 Triad Hospitals, Inc., 7% due 5/15/2012 858,000
3,000,000 US Oncology, Inc., 9% due 8/15/2012 3,135,000
1,550,000 United Surgical Partners International, Inc.,
8.875% due 5/01/2017 (i) 1,602,313
Universal Hospital Services, Inc. (i):
330,000 8.50% due 6/01/2015 (g) 336,937
310,000 8.759% due 6/01/2015 (d) 314,650
1,000,000 VWR International, Inc., 8% due 4/15/2014 1,076,250
2,000,000 Vanguard Health Holding Co. II, LLC, 9%
due 10/01/2014 2,095,000
-----------
20,992,450
===============================================================================
Housing -- 5.0%
3,025,000 Forest City Enterprises, Inc., 7.625%
due 6/01/2015 3,085,500
Goodman Global Holding Co., Inc.:
699,000 8.36% due 6/15/2012 (d) 706,864
1,350,000 7.875% due 12/15/2012 1,373,625
385,000 Masonite Corp., 11% due 4/06/2015 (i) 363,825
545,000 Nortek, Inc., 8.50% due 9/01/2014 540,913
950,000 Ply Gem Industries, Inc., 9% due 2/15/2012 881,125
Realogy Corp. (i):
1,510,000 10.50% due 4/15/2014 1,515,662
2,390,000 11% due 4/15/2014 (g) 2,378,050
3,410,000 12.375% due 4/15/2015 3,324,750
1,600,000 Standard-Pacific Corp., 9.25% due 4/15/2012 1,588,000
1,000,000 Texas Industries, Inc., 7.25% due 7/15/2013 1,035,000
-----------
16,793,314
===============================================================================
Information Technology -- 6.7%
Amkor Technology, Inc.:
280,000 7.75% due 5/15/2013 274,750
1,370,000 9.25% due 6/01/2016 1,435,075
600,000 BMS Holdings, Inc., 12.40%
due 2/15/2012 (d)(g)(i) 571,886
215,000 Compagnie Generale de Geophysique SA, 7.50%
due 5/15/2015 224,944
320,000 Compagnie Generale de Geophysique-Veritas,
7.75% due 5/15/2017 337,600
270,000 Cypress Semiconductor Corp., 1%
due 9/15/2009 (b)(i) 286,875
Freescale Semiconductor, Inc. (i):
5,010,000 9.125% due 12/15/2014 (g) 4,959,900
490,000 9.235% due 12/15/2014 (d) 490,612
1,915,000 Nortel Networks Ltd., 9.606%
due 7/15/2011 (d)(i) 2,063,413
Sanmina-SCI Corp.:
55,000 6.75% due 3/01/2014 51,838
1,135,000 8.125% due 3/01/2016 1,103,788
1,215,000 Spansion, Inc., 8.485% due 6/01/2013 (d)(i) 1,230,188
SunGard Data Systems, Inc.:
2,180,000 9.125% due 8/15/2013 2,316,250
2,105,000 10.25% due 8/15/2015 (i) 2,302,344
235,000 Telcordia Technologies, Inc., 10%
due 3/15/2013 (i) 218,550
1,391,859 UGS Capital Corp. II,10.348% due 6/01/2011 (g)(i) 1,430,135
1,400,000 UGS Corp., 10% due 6/01/2012 1,525,128
1,550,000 Viasystems, Inc., 10.50% due 1/15/2011 1,581,000
-----------
22,404,276
===============================================================================
Leisure -- 1.2%
1,525,000 FelCor Lodging LP, 8.50% due 6/01/2011 1,627,937
2,000,000 Great Canadian Gaming Corp., 7.25%
due 2/15/2015 (i) 2,025,000
Travelport, Inc. (i):
90,000 9.875% due 9/01/2014 96,975
370,000 9.985% due 9/01/2014 (d) 383,875
-----------
4,133,787
===============================================================================
Manufacturing -- 4.6%
1,280,000 AGY Holding Corp., 11% due 11/15/2014 (i) 1,342,400
380,000 Belden CDT, Inc., 7% due 3/15/2017 (i) 389,068
2,175,000 CPI Holdco, Inc., 11.151% due 2/01/2015 (d)(i) 2,245,687
1,200,000 Coleman Cable, Inc., 9.875% due 10/01/2012 (i) 1,258,500
1,690,000 Jarden Corp., 7.50% due 5/01/2017 1,723,800
NXP BV:
1,315,000 8.106% due 10/15/2013 1,354,450
2,310,000 9.50% due 10/15/2015 2,390,850
RBS Global, Inc.:
470,000 9.50% due 8/01/2014 505,250
1,000,000 11.75% due 8/01/2016 (i) 1,127,500
560,000 8.875% due 9/01/2016 583,800
530,000 Sensata Technologies BV, 8% due 5/01/2014 535,300
1,865,000 Trimas Corp., 9.875% due 6/15/2012 1,951,256
-----------
15,407,861
===============================================================================
Metal -- Other -- 3.8%
FMG Finance Pty Ltd. (i):
535,000 10% due 9/01/2013 600,537
770,000 10.625% due 9/01/2016 924,962
1,975,000 Foundation PA Coal Co., 7.25% due 8/01/2014 1,999,687
Freeport-McMoRan Copper & Gold, Inc.:
1,150,000 8.564% due 4/01/2015 (d) 1,211,812
3,400,000 8.375% due 4/01/2017 3,714,500
2,175,000 Indalex Holding Corp. Series B, 11.50%
due 2/01/2014 2,308,219
1,975,000 Novelis, Inc., 7.25% due 2/15/2015 2,083,625
-----------
12,843,342
===============================================================================
Packaging -- 3.7%
Berry Plastics Holding Corp.:
1,370,000 8.875% due 9/15/2014 1,404,250
1,915,000 9.235% due 9/15/2014 (d) 1,960,481
2,200,000 Graham Packing Co., Inc., 9.875%
due 10/15/2014 2,266,000
420,000 Impress Holdings B.V., 8.481%
due 9/15/2013 (d)(i) 429,450
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 9
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Corporate Bonds Value
===============================================================================
Packaging (concluded)
Owens-Brockway Glass Container, Inc.:
$2,637,000 8.875% due 2/15/2009 $ 2,696,333
1,000,000 8.25% due 5/15/2013 1,055,000
1,355,000 Packaging Dynamics Finance Corp., 10%
due 5/01/2016 (i) 1,368,550
1,200,000 Pregis Corp., 12.375% due 10/15/2013 (i) 1,356,000
-----------
12,536,064
===============================================================================
Paper -- 7.4%
Abitibi-Consolidated, Inc.:
2,000,000 8.86% due 6/15/2011 (d) 1,885,000
820,000 6% due 6/20/2013 680,600
195,000 8.85% due 8/01/2030 165,506
1,000,000 Ainsworth Lumber Co. Ltd., 9.10%
due 10/01/2010 (d) 820,000
1,975,000 Boise Cascade LLC, 8.231% due 10/15/2012 (d) 1,975,000
1,240,000 Bowater Canada Finance Corp., 7.95%
due 11/15/2011 1,195,050
2,825,000 Bowater, Inc., 8.36% due 3/15/2010 (d) 2,828,531
3,200,000 Domtar, Inc., 7.125% due 8/15/2015 3,220,000
Graphic Packaging International Corp.:
1,050,000 8.50% due 8/15/2011 1,093,312
640,000 9.50% due 8/15/2013 680,800
NewPage Corp.:
1,450,000 11.606% due 5/01/2012 (d) 1,611,313
1,755,000 12% due 5/01/2013 1,948,050
885,000 Norske Skog Canada Ltd. Series D, 8.625%
due 6/15/2011 887,213
2,000,000 Rock-Tenn Co., 8.20% due 8/15/2011 2,120,000
241,000 Smurfit Kappa Funding Plc, 9.625%
due 10/01/2012 254,255
2,375,000 Smurfit-Stone Container Enterprises, Inc., 8%
due 3/15/2017 (i) 2,392,813
Verso Paper Holdings LLC (i):
950,000 9.125% due 8/01/2014 1,007,000
115,000 11.375% due 8/01/2016 123,050
-----------
24,887,493
===============================================================================
Retail -- 4.8%
310,000 Beverages & More, Inc., 9.25% due 3/01/2012 (i) 316,975
945,000 Buffets, Inc., 12.50% due 11/01/2014 963,900
340,000 Burlington Coat Factory Warehouse Corp.,
11.125% due 4/15/2014 353,600
Claire's Stores, Inc. (i):
470,000 9.25% due 6/01/2015 465,887
470,000 10.50% due 6/01/2017 460,012
General Nutrition Centers, Inc. (g)(i):
1,760,000 9.85% due 3/15/2014 1,732,526
1,420,000 10.75% due 3/15/2015 1,388,064
Michaels Stores, Inc. (i):
1,700,000 10% due 11/01/2014 1,836,000
2,110,000 11.375% due 11/01/2016 2,331,550
Neiman Marcus Group, Inc.:
1,125,000 9% due 10/15/2015 (g) 1,234,688
1,050,000 10.375% due 10/15/2015 1,181,250
Rite Aid Corp.:
1,440,000 9.375% due 12/15/2015 (i) 1,447,200
2,500,000 7.50% due 3/01/2017 2,493,750
-----------
16,205,402
===============================================================================
Service --8.0%
2,000,000 Ashtead Capital, Inc., 9% due 8/15/2016 (i) 2,165,000
Avis Budget Car Rental LLC:
600,000 7.625% due 5/15/2014 (i) 622,500
2,800,000 7.86% due 5/15/2014 2,898,000
Clarke American Corp. (i):
420,000 9.50% due 5/15/2015 428,400
350,000 10.105% due 5/15/2015 (d) 351,750
3,000,000 Corrections Corp. of America, 7.50%
due 5/01/2011 3,075,000
625,000 DI Finance Series B, 9.50% due 2/15/2013 670,312
1,750,000 Dycom Industries, Inc., 8.125% due 10/15/2015 1,841,875
1,480,000 Mac-Gray Corp., 7.625% due 8/15/2015 1,502,200
1,385,000 PNA Intermediate Holding Corp., 12.36%
due 2/15/2013 (d)(i) 1,412,700
Sally Holdings LLC (i):
535,000 9.25% due 11/15/2014 555,063
1,780,000 10.50% due 11/15/2016 1,844,525
3,000,000 Service Corp. International, 7% due 6/15/2017 2,981,250
1,200,000 United Rentals North America, Inc., 7.75%
due 11/15/2013 1,245,000
3,000,000 Waste Services, Inc., 9.50% due 4/15/2014 3,168,750
Yankee Acquisition Corp.:
130,000 8.50% due 2/15/2015 132,925
1,720,000 9.75% due 2/15/2017 1,758,700
-----------
26,653,950
===============================================================================
Steel -- 0.9%
1,950,000 Chaparral Steel Co., 10% due 7/15/2013 2,174,250
689,000 UCAR Finance, Inc., 10.25% due 2/15/2012 726,895
-----------
2,901,145
===============================================================================
Telecommunications -- 4.3%
2,025,000 Inmarsat Finance Plc, 7.625% due 6/30/2012 2,116,125
2,900,000 LCI International, Inc., 7.25% due 6/15/2007 2,900,000
2,400,000 Nordic Telephone Co. Holdings ApS, 8.875%
due 5/01/2016 (i) 2,601,000
794,939 ProtoStar I Ltd., 12.50% due 10/15/2012 (b)(d)(i) 858,534
350,000 Qwest Communications International, Inc.,
7.50% due 2/15/2014 361,375
Qwest Corp.:
1,550,000 8.61% due 6/15/2013 (d) 1,697,250
525,000 7.625% due 6/15/2015 556,500
3,000,000 Windstream Corp., 8.125% due 8/01/2013 3,225,000
-----------
14,315,784
===============================================================================
Transportation -- 2.4%
370,000 Britannia Bulk Plc, 11% due 12/01/2011 375,550
1,525,000 Navios Maritime Holdings, Inc., 9.50%
due 12/15/2014 (i) 1,618,406
1,400,000 OMI Corp., 7.625% due 12/01/2013 1,442,000
2,250,000 ST Acquisition Corp., 12.50% due 5/15/2017 (i) 2,221,875
2,325,000 Teekay Shipping Corp., 8.875% due 7/15/2011 2,481,938
-----------
8,139,769
===============================================================================
Utility -- 7.2%
2,100,000 The AES Corp., 8.75% due 5/15/2013 (i) 2,228,625
1,327,000 CenterPoint Energy, Inc. Series B, 3.75%
due 5/15/2023 (b) 2,240,971
10 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Corporate Bonds Value
===============================================================================
Utility (concluded)
$2,509,000 ESI Tractebel Acquisition Corp. Series B, 7.99%
due 12/30/2011 $ 2,548,971
1,875,000 Edison Mission Energy, 7.50% due 6/15/2013 1,926,562
1,320,000 El Paso Performance-Linked Trust, 7.75%
due 7/15/2011 (i) 1,395,900
2,600,000 Mirant North America LLC, 7.375%
due 12/31/2013 2,749,500
NRG Energy, Inc.:
1,625,000 7.25% due 2/01/2014 1,669,687
1,475,000 7.375% due 2/01/2016 1,530,312
420,000 NSG Holdings LLC, 7.75% due 12/15/2025 (i) 442,050
3,800,000 Reliant Energy, Inc., 9.50% due 7/15/2013 4,118,250
1,200,000 Sierra Pacific Resources, 8.625% due 3/15/2014 1,289,236
2,046,688 Tenaska Alabama Partners LP, 7%
due 6/30/2021 (i) 2,141,931
-----------
24,281,995
===============================================================================
Wireless Communications -- 6.0%
1,650,000 Centennial Cellular Operating Co. LLC, 10.125%
due 6/15/2013 1,784,062
1,370,000 Centennial Communications Corp., 11.099%
due 1/01/2013 (d) 1,440,212
1,350,000 Cricket Communications, Inc., 9.375%
due 11/01/2014 1,431,000
Digicel Group Ltd. (i):
850,000 8.875% due 1/15/2015 842,562
2,200,000 9.125% due 1/15/2015 (g) 2,161,500
1,200,000 Dobson Communications Corp., 9.606%
due 10/15/2012 (d) 1,236,000
620,000 iPCS, Inc., 7.48% due 5/01/2013 (d)(i) 621,550
3,330,000 MetroPCS Wireless, Inc., 9.25%
due 11/01/2014 (i) 3,528,800
Orascom Telecom Finance SCA:
210,000 7.875% due 2/08/2014 206,766
380,000 7.875% due 2/08/2014 (i) 371,925
2,600,000 Rural Cellular Corp., 8.25% due 3/15/2012 2,736,500
West Corp.:
750,000 9.50% due 10/15/2015 789,375
2,850,000 11% due 10/15/2016 3,085,125
-----------
20,235,377
-------------------------------------------------------------------------------
Total Corporate Bonds
(Cost -- $420,807,276) -- 129.3% 433,599,597
===============================================================================
===============================================================================
Floating Rate Loan Interests (l)
===============================================================================
Chemicals -- 0.8%
2,830,000 Wellman, Inc. Second Lien Term Loan, 12.106%
due 2/10/2010 2,599,556
===============================================================================
Consumer -- Non-Durables -- 0.2%
Spectrum Brands:
24,970 Letter of Credit, 5.17% due 4/15/2013 25,230
505,139 Term Loan B-1, 9.32% due 4/15/2013 510,401
89,891 Term Loan B-2, 9.32% due 4/15/2013 90,116
-----------
625,747
===============================================================================
Diversified Media -- 0.1%
400,000 Affinion Group Term Loan, 11.66% due 3/01/2012 400,000
===============================================================================
Energy -- Exploration & Production -- 0.3%
1,000,000 SandRidge Energy Term Loan, 8.625%
due 3/01/2015 1,030,000
===============================================================================
Health Care -- 0.4%
1,440,000 Rotech Healthcare, Inc. Term Loan B, 11.36%
due 9/26/2011 1,440,000
===============================================================================
Leisure -- 1.1%
3,790,000 Travelport, Inc. Term Loan, 12.35% due 3/22/2012 3,794,738
===============================================================================
Manufacturing -- 0.1%
350,000 Rexnord Corp. Payment In Kind Term Loan,
12.36% due 3/02/2013 (g) 340,813
-------------------------------------------------------------------------------
Total Floating Rate Loan Interests
(Cost -- $10,235,451) -- 3.0% 10,230,854
===============================================================================
===============================================================================
Shares
Held Common Stocks
===============================================================================
Cable -- U.S. -- 1.2%
82,737 Loral Space & Communications Ltd. (c) 3,880,365
===============================================================================
Information Technology -- 0.6%
98,040 Cypress Semiconductor Corp. 2,104,919
===============================================================================
Manufacturing -- 0.3%
70,784 Medis Technologies Ltd. (c) 1,034,154
===============================================================================
Paper -- 0.1%
203,785 Western Forest Products, Inc. (c) 428,680
-------------------------------------------------------------------------------
Total Common Stocks
(Cost -- $8,246,278) -- 2.2% 7,448,118
===============================================================================
Preferred Stocks
===============================================================================
Cable -- U.S. -- 0.4%
6,402 Loral Spacecom Corp. Series A, 12% (g) 1,320,413
===============================================================================
Energy -- Exploration & Production -- 0.6%
175 EXCO Resources, Inc., 11% 1,750,000
43 EXCO Resources, Inc., 7% (b) 430,000
-----------
2,180,000
-------------------------------------------------------------------------------
Total Preferred Stocks
(Cost -- $3,445,640) -- 1.0% 3,500,413
===============================================================================
===============================================================================
Warrants (h)
===============================================================================
Health Care -- 0.0%
32,042 HealthSouth Corp. (expires 1/16/2014) 25,634
===============================================================================
Paper -- 0.0%
700 MDP Acquisitions Plc (expires 10/01/2013) 90,699
===============================================================================
Wireless Communications -- 0.2%
825 American Tower Corp. (expires 8/01/2008) 502,351
-------------------------------------------------------------------------------
Total Warrants
(Cost -- $53,675) -- 0.2% 618,684
===============================================================================
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 11
Schedule of Investments (concluded) (in U.S. dollars)
Beneficial
Interest Other Interests (e) Value
===============================================================================
Cable -- U.S. -- 0.0%
$ 750,000 Adelphia Escrow $ 75
940,601 Adelphia Recovery Trust 3,001
--------------------------------------------------------------------------------
Total Other Interests
(Cost -- $3,075) -- 0.0% 3,076
===============================================================================
===============================================================================
Beneficial
Interest Short-Term Securities Value
===============================================================================
$1,569,706 BlackRock Liquidity Series, LLC Cash Sweep
Series, 5.26% (f)(j) $ 1,569,706
-------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $1,569,706) -- 0.5% 1,569,706
===============================================================================
Total Investments (Cost -- $444,361,101*) -- 136.2% 456,970,448
Liabilities in Excess of Other Assets -- (36.2%) (121,490,975)
-------------
Net Assets -- 100.0% $ 335,479,473
=============
* The cost and unrealized appreciation (depreciation) of investments as of
May 31, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost ......................................... $ 444,764,556
=============
Gross unrealized appreciation .......................... $ 16,976,641
Gross unrealized depreciation .......................... (4,770,749)
-------------
Net unrealized appreciation ............................ $ 12,205,892
=============
(a) Represents a step bond; the interest rate shown reflects the effective
yield at the time of purchase.
(b) Convertible security.
(c) Non-income producing security.
(d) Floating rate security.
(e) "Other interests" represent beneficial interest in liquidation trusts and
other reorganization entities and are non-income producing.
(f) Represents the current yield as of May 31, 2007.
(g) Represents a pay-in-kind security which may pay interest/dividends in
additional face/shares.
(h) 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.
(i) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(j) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Net Interest
Affiliate Activity Income
--------------------------------------------------------------------------
BlackRock Liquidity Series LLC,
Cash Sweep Series $1,412,588 $614,108
--------------------------------------------------------------------------
(k) Represents a step bond.
(l) Floating rate loan interests in which the Fund invests generally pay
interest at rates that are periodically determined by reference to a base
lending rate plus a premium. The base lending rates are generally (i) the
lending rate offered by one or more major European banks, such as LIBOR
(London InterBank Offered Rate), (ii) the prime rate offered by one or
more major U.S. banks or (iii) the certificate of deposit rate.
o For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report which may combine industry sub-classifications for reporting
ease. Industries are shown as a percent of net assets. These industry
classifications are unaudited.
o Swaps outstanding as of May 31, 2007 were as follows:
--------------------------------------------------------------------------
Notional Unrealized
Amount Appreciation
--------------------------------------------------------------------------
Sold credit default protection on General
Motors Corp. and receive 4.40%
Broker, Morgan Stanley Capital Services,
Inc. Expires June 2007 $ 400,000 $ 920
Sold credit default protection on General
Motors Corp. and receive 8.00%
Broker, Morgan Stanley Capital Services,
Inc. Expires June 2007 $ 400,000 1,750
Sold credit default protection on Ford
Motor Co. and receive 3.80%
Broker, JPMorgan Chase
Expires March 2010 $3,000,000 26,703
Sold credit default protection on Ford
Motor Co. and receive 3.80%
Broker, UBS Warburg
Expires March 2010 $1,000,000 8,901
Sold credit default protection on Ford
Motor Co. and receive 5.00%
Broker, Goldman Sachs & Co.
Expires June 2010 $4,000,000 146,400
Sold credit default protection on Primedia,
Inc. and receive 2.45%
Broker, Lehman Brothers Special Finance
Expires March 2012 $1,000,000 40,348
--------------------------------------------------------------------------
Total $225,022
========
See Notes to Financial Statements.
12 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
Statement of Assets, Liabilities and Capital
As of May 31, 2007
===================================================================================================================================
Assets
-----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified cost -- $442,791,395) $ 455,400,742
Investments in affiliated securities, at value (identified cost -- $1,569,706) ... 1,569,706
Cash ............................................................................. 788,179
Unrealized appreciation on swaps ................................................. 225,022
Receivables:
Interest ..................................................................... $ 9,547,455
Securities sold .............................................................. 3,513,868
Swaps ........................................................................ 76,373 13,137,696
-------------
Prepaid expenses ................................................................. 2,605
-------------
Total assets ..................................................................... 471,123,950
-------------
===================================================================================================================================
Liabilities
-----------------------------------------------------------------------------------------------------------------------------------
Loans ............................................................................ 129,700,000
Payables:
Securities purchased ......................................................... 5,297,442
Investment adviser ........................................................... 236,621
Interest on loans ............................................................ 138,992
Dividends to shareholders .................................................... 126,059
Other affiliates ............................................................. 4,068 5,803,182
-------------
Accrued expenses ................................................................. 141,295
-------------
Total liabilities ................................................................ 135,644,477
-------------
===================================================================================================================================
Net Assets
-----------------------------------------------------------------------------------------------------------------------------------
Net Assets ....................................................................... $ 335,479,473
===================================================================================================================================
Capital
-----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.10 par value, 200,000,000 shares authorized ...................... $ 3,731,650
Paid-in capital in excess of par ................................................. 540,794,598
Undistributed investment income -- net ........................................... $ 4,631,323
Accumulated realized capital losses -- net (226,512,467)
Unrealized appreciation -- net ................................................... 12,834,369
-------------
Total accumulated losses -- net .................................................. (209,046,775)
-------------
Total -- Equivalent to $8.99 per share based on 37,316,497 shares of capital stock
outstanding (market price -- $8.53) ............................................ $ 335,479,473
=============
See Notes to Financial Statements.
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 13
Statement of Operations
For the Year Ended May 31, 2007
===================================================================================================================================
Investment Income
-----------------------------------------------------------------------------------------------------------------------------------
Interest (including $614,108 from affiliates) .................................... $ 37,036,168
Dividends ........................................................................ 223,104
Other ............................................................................ 215,464
-------------
Total income ..................................................................... 37,474,736
-------------
===================================================================================================================================
Expenses
-----------------------------------------------------------------------------------------------------------------------------------
Loan interest expense ............................................................ $ 7,544,761
Investment advisory fees ......................................................... 2,741,802
Borrowing costs .................................................................. 169,422
Accounting services .............................................................. 119,440
Professional fees ................................................................ 76,346
Transfer agent fees .............................................................. 55,052
Printing and shareholder reports ................................................. 48,974
Pricing services ................................................................. 34,218
Custodian fees ................................................................... 27,507
Directors' fees and expenses ..................................................... 19,338
Listing fees ..................................................................... 13,019
Other ............................................................................ 36,454
-------------
Total expenses ................................................................... 10,886,333
-------------
Investment income -- net ......................................................... 26,588,403
-------------
===================================================================================================================================
Realized & Unrealized Gain -- Net
-----------------------------------------------------------------------------------------------------------------------------------
Realized gain on:
Investments -- net ........................................................... 4,377,681
Swaps -- net ................................................................. 338,395 4,716,076
-------------
Change in unrealized appreciation/depreciation on:
Investments -- net ........................................................... 13,340,560
Swaps -- net ................................................................. 212,307 13,552,867
Total realized and unrealized gain -- net ........................................ 18,268,943
-------------------------------
Net Increase in Net Assets Resulting from Operations ............................. $ 44,857,346
=============
See Notes to Financial Statements.
14 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
Statements of Changes in Net Assets
For the Year Ended May 31,
-------------------------------
Increase (Decrease) in Net Assets: 2007 2006
===================================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ......................................................... $ 26,588,403 $ 26,913,122
Realized gain (loss) -- net ...................................................... 4,716,076 (526,078)
Change in unrealized appreciation/depreciation -- net ............................ 13,552,867 1,393,065
-------------------------------
Net increase in net assets resulting from operations ............................. 44,857,346 27,780,109
-------------------------------
===================================================================================================================================
Dividends to Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from investment income -- net .......................... (25,076,686) (27,760,574)
-------------------------------
===================================================================================================================================
Capital Stock Transactions
-----------------------------------------------------------------------------------------------------------------------------------
Value of shares issued to Common Stock shareholders in reinvestment of dividends -- 53,598
-------------------------------
Net increase in net assets resulting from capital stock transactions ............. -- 53,598
-------------------------------
===================================================================================================================================
Net Assets
-----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ..................................................... 19,780,660 73,133
Beginning of year ................................................................ 315,698,813 315,625,680
-------------------------------
End of year* ..................................................................... $ 335,479,473 $ 315,698,813
===============================
* Undistributed investment income -- net ..................................... $ 4,631,323 $ 2,663,448
===============================
See Notes to Financial Statements.
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 15
Statement of Cash Flows
For the Year Ended May 31, 2007
===================================================================================================================================
Cash Provided by Operating Activities
-----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations ................................................. $ 44,857,346
Adjustments to reconcile net increase in net assets resulting from operations to
net cash provided by operating activities:
Increase in other receivables .................................................................... (2,987)
Increase in other liabilities .................................................................... 135,481
Realized and unrealized gain -- net .............................................................. (16,407,685)
Amortization of premium and discount ............................................................. (254,506)
Paid in-kind income .............................................................................. (176,336)
Proceeds from sales and paydowns of long-term securities ............................................. 279,385,291
Purchases of long-term securities .................................................................... (270,418,328)
Net purchases of short-term investments .............................................................. (1,412,588)
-------------
Cash provided by operating activities ................................................................ 35,705,688
-------------
===================================================================================================================================
Cash Used for Financing Activities
-----------------------------------------------------------------------------------------------------------------------------------
Cash receipts from borrowings ........................................................................ 60,100,000
Cash payments on borrowings .......................................................................... (71,400,000)
Dividends paid to shareholders ....................................................................... (25,101,924)
-------------
Cash used for financing activities ................................................................... (36,401,924)
-------------
===================================================================================================================================
Cash
-----------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash ................................................................................. (696,236)
Cash at beginning of year ............................................................................ 1,484,415
-------------
Cash at end of year .................................................................................. $ 788,179
=============
===================================================================================================================================
Cash Flow Information
-----------------------------------------------------------------------------------------------------------------------------------
Cash paid for interest ............................................................................... $ 7,544,820
=============
See Notes to Financial Statements.
16 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
The following per share data and ratios have For the Year Ended May 31,
been derived from information provided in ---------------------------------------------------------------------
the financial statements. 2007 2006 2005 2004 2003
===================================================================================================================================
Per Share Operating Performance
-----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year .......... $ 8.46 $ 8.46 $ 8.43 $ 7.86 $ 7.68
---------------------------------------------------------------------
Investment income -- net* ................... .71 .72 .85 .88 .92
Realized and unrealized gain -- net ......... .49 .02 .07 .58 .17
---------------------------------------------------------------------
Total from investment operations ............ 1.20 .74 .92 1.46 1.09
---------------------------------------------------------------------
Less dividends from investment income -- net (.67) (.74) (.89) (.89) (.91)
---------------------------------------------------------------------
Recovery of previously expensed offering
costs resulting from issuance of
Common Stock .............................. -- -- -- --+ --
---------------------------------------------------------------------
Net asset value, end of year ................ $ 8.99 $ 8.46 $ 8.46 $ 8.43 $ 7.86
=====================================================================
Market price per share, end of year ......... $ 8.53 $ 7.36 $ 8.38 $ 7.97 $ 8.36
=====================================================================
===================================================================================================================================
Total Investment Return**
-----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .......... 15.51% 9.78% 11.24% 19.33% 16.46%
=====================================================================
Based on market price per share ............. 25.98% (3.59%) 16.55% 6.07% 15.73%
=====================================================================
===================================================================================================================================
Ratios to Average Net Assets
-----------------------------------------------------------------------------------------------------------------------------------
Expenses, excluding interest expense ........ 1.04% 1.00% .99% 1.01% 1.04%
=====================================================================
Expenses .................................... 3.38% 2.49% 1.81% 1.51% 1.59%
=====================================================================
Investment income -- net .................... 8.25% 8.45% 9.71% 10.48% 13.35%
=====================================================================
===================================================================================================================================
Leverage
-----------------------------------------------------------------------------------------------------------------------------------
Amount of borrowings outstanding, end of year
(in thousands) ............................ $ 129,700 $ 141,000 $ 107,800 $ 109,600 $ 98,800
=====================================================================
Average amount of borrowings outstanding
during the year (in thousands) ............ $ 134,704 $ 109,144 $ 112,501 $ 112,297 $ 75,558
=====================================================================
Average amount of borrowings outstanding per
share during the year* .................... $ 3.61 $ 2.93 $ 3.02 $ 3.03 $ 2.07
=====================================================================
===================================================================================================================================
Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (in thousands) ...... $ 335,479 $ 315,699 $ 315,626 $ 313,583 $ 289,820
=====================================================================
Portfolio turnover .......................... 61.54% 56.00% 54.64% 82.54% 76.61%
=====================================================================
* Based on average shares outstanding.
** Total investment returns based on market value, which can be significantly
greater or lesser than net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
+ Amount is less than $.01 per share.
See Notes to Financial Statements.
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 17
Notes to Financial Statements
1. Significant Accounting Policies:
On September 29, 2006, Corporate High Yield Fund III, Inc. was renamed BlackRock
Corporate High Yield Fund III, Inc. (the "Fund"). The Fund is registered under
the Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. The Fund's financial statements are prepared in
conformity with U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. The Fund determines and makes available for publication the net
asset value of its Common Stock on a daily basis. The Fund's Common Stock shares
are listed on the New York Stock Exchange ("NYSE") under the symbol CYE. The
following is a summary of significant accounting policies followed by the Fund.
(a) Valuation of investments -- Debt securities are traded primarily in the
over-the-counter ("OTC") markets and are valued at the last available bid price
in the OTC market or on the basis of values obtained by a pricing service.
Floating rate loan interests are valued at the mean between the last available
bid and asked prices from one or more brokers or dealers as obtained by a
pricing service. Pricing services use valuation matrixes that incorporate both
dealer-supplied valuations and valuation models. The procedures of the pricing
service and its valuations are reviewed by the officers of the Fund under the
general direction of the Board of Directors. Such valuations and procedures will
be reviewed periodically by the Board of Directors of the Fund. Financial
futures contracts and options thereon, which are traded on exchanges, are valued
at their closing prices as of the close of such exchanges. Options written or
purchased are valued at the last sale price in the case of exchange-traded
options. Options traded in the OTC market are valued at the last asked price
(options written) or the last bid price (options purchased). Swap agreements are
valued based upon quoted fair valuations received daily by the Fund from a
pricing service or counterparty. Valuation of short-term investment vehicles is
generally based on the net asset value of the underlying investment vehicle or
amortized cost. Repurchase agreements are valued at cost plus accrued interest.
Investments in open-end investment companies are valued at their net asset value
each business day. Securities and other assets for which market quotations are
not readily available are valued at fair value as determined in good faith by or
under the direction of the Board of Directors of the Fund.
Equity securities held by the Fund that are traded on stock exchanges or the
NASDAQ Global Market are valued at the last sale price or official close price
on the exchange, as of the close of business on the day the securities are being
valued or, lacking any sales, at the last available bid price for long
positions, and at the last available asked price for short positions. In cases
where equity securities are traded on more than one exchange, the securities are
valued on the exchange designated as the primary market by or under the
authority of the Board of Directors of the Fund. Long positions traded in the
OTC markets, NASDAQ Capital Market or Bulletin Board are valued at the last
available bid price obtained from one or more dealers or pricing services
approved by the Board of Directors of the Fund. Short positions traded in the
OTC markets are valued at the last available asked price. Portfolio securities
that are traded both in the OTC markets and on a stock exchange are valued
according to the broadest and most representative market.
Generally, trading in foreign securities is substantially completed each day at
various times prior to the close of business on the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates will generally be
determined as of the close of business on the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of business on the
NYSE that may not be reflected in the computation of the Fund's net asset value.
If events (for example, a company announcement, market volatility or a natural
disaster) occur during such periods that are expected to materially affect the
value of such securities, those securities will be valued at their fair value as
determined in good faith by the Fund's Board of Directors or by BlackRock
Advisors, LLC (the "Manager"), an indirect, wholly owned subsidiary of
BlackRock, Inc., using a pricing service and/or procedures approved by the
Fund's Board of Directors.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract due to an
unfavorable change in the price of the underlying security or if the
counterparty does not perform under the contract.
o Options -- The Fund may write and purchase call and put options. When the
Fund writes an option, an amount equal to the premium received by the Fund
is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market
value of the option written. When a
18 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
Notes to Financial Statements (continued)
security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from) the
basis of the security acquired or deducted from (or added to) the proceeds
of the security sold. When an option expires (or the Fund enters into a
closing transaction), the Fund realizes a gain or loss on the option to
the extent of the premiums received or paid (or gain or loss to the extent
the cost of the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such financial futures contracts.
Financial futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield.
Upon entering into a contract, the Fund deposits, and maintains as
collateral, such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed.
o Swaps -- The Fund may enter into swap agreements, which are OTC contracts
in which the Fund and a counterparty agree to make periodic net payments
on a specified notional amount. The net payments can be made for a set
period of time or may be triggered by a predetermined credit event. The
net periodic payments may be based on a fixed or variable interest rate;
the change in market value of a specified security, basket of securities,
or index; or the return generated by a security. These periodic payments
received or made by the Fund are recorded in the accompanying Statement of
Operations as realized gains or losses, respectively. Gains or losses are
also realized upon termination of the swap agreements. Swaps are
marked-to-market daily and changes in value are recorded as unrealized
appreciation (depreciation). Risks include changes in the returns of the
underlying instruments, failure of the counterparties to perform under the
contracts' terms and the possible lack of liquidity with respect to the
swap agreements.
(c) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies to U.S. dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments. The
Fund invests in foreign securities, which may involve a number of risk factors
and special considerations not present with investments in securities of U.S.
corporations.
(d) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(e) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis. The Fund amortizes all
premiums and discounts on debt securities.
(f) Dividends and distributions -- Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates.
(g) Securities lending -- The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. The market value of
the loaned securities is determined at the close of business of the Fund and any
additional required collateral is delivered to the Fund on the next business
day. Where the Fund receives securities as collateral for the loaned securities,
it collects a fee from the borrower. The Fund typically receives the income on
the loaned securities but does not receive the income on the collateral. Where
the Fund receives cash collateral, it may invest such collateral and retain the
amount earned on such investment, net of any amount rebated to the borrower.
Loans of securities are terminable at any time and the borrower, after notice,
is required to return borrowed securities within five business days. The Fund
may pay reasonable finder's, lending agent, administrative and custodial fees in
connection with its loans. In the event that the borrower
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 19
Notes to Financial Statements (continued)
defaults on its obligation to return borrowed securities because of insolvency
or for any other reason, the Fund could experience delays and costs in gaining
access to the collateral. The Fund also could suffer a loss where the value of
the collateral falls below the market value of the borrowed securities, in the
event of borrower default or in the event of losses on investments made with
cash collateral.
(h) Recent accounting pronouncements -- In July 2006, the Financial Accounting
Standards Board released FASB Interpretation No. 48 ("FIN 48"), "Accounting for
Uncertainty in Income Taxes." FIN 48 provides guidance for how uncertain tax
positions should be recognized, measured, presented and disclosed in financial
statements. FIN 48 requires the evaluation of tax positions taken in the course
of preparing the Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
benefits of positions not deemed to meet the more-likely-than-not threshold
would be booked as a tax expense in the current year and recognized as: a
liability for unrecognized tax benefits; a reduction of an income tax refund
receivable; a reduction of deferred tax asset; an increase in deferred tax
liability; or a combination thereof. Adoption of FIN 48 is required for the last
net asset value calculation in the first required financial statement reporting
period for fiscal years beginning after December 15, 2006. The impact on the
Fund's financial statements, if any, is currently being assessed.
In September 2006, Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. At this time, management is evaluating the implications of FAS 157
and its impact on the Fund's financial statements, if any, has not been
determined.
In addition, in February 2007, FASB issued Statement of Financial Accounting
Standards No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities" ("FAS 159"), which is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provisions of FAS 157. FAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. FAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. At this time, management is evaluating
the implications of FAS 159 and its impact on the Fund's financial statements,
if any, has not been determined.
(i) Reclassification -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $456,158 has been reclassified between accumulated net realized capital
losses and undistributed net investment income as a result of permanent
differences attributable to amortization methods of premiums and discounts on
fixed income securities and accounting for swap agreements. This
reclassification has no effect on net assets or net asset values per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
On September 29, 2006, Merrill Lynch & Co., Inc. ("Merrill Lynch") combined
Merrill Lynch's investment management business, Merrill Lynch Investment
Managers, L.P. ("MLIM"), and its affiliates, including Fund Asset Management,
L.P. ("FAM"), with BlackRock, Inc. to create a new independent company. Merrill
Lynch has a 49.8% economic interest and a 45% voting interest in the combined
company and The PNC Financial Services Group, Inc., has approximately a 34%
economic and voting interest. The new company operates under the BlackRock name
and is governed by a board of directors with a majority of independent members.
On August 15, 2006, shareholders of the Fund approved a new Investment Advisory
Agreement with BlackRock Advisors, Inc. BlackRock Advisors, Inc. was reorganized
into a limited liability company and renamed BlackRock Advisors, LLC. The new
Investment Advisory Agreement between the Fund and the Manager became effective
on September 29, 2006. Prior to September 29, 2006, FAM was the manager. The
general partner of FAM is an indirect, wholly owned subsidiary of Merrill Lynch,
which is the limited partner.
The Manager is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Fund. For such services, the Fund
pays a monthly fee at an annual rate of .60% of the Fund's average daily net
assets plus the proceeds of any outstanding principal borrowed. In addition, the
Manager has entered into a sub-advisory agreement with BlackRock Financial
Management, Inc., an affiliate of the Manager, under which the Manager pays the
Sub-Adviser for services it provides a fee that is a percentage of the
management fee paid by the Fund to the Manager. Prior to September 29, 2006, FAM
had a
20 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
Notes to Financial Statements (concluded)
Sub-Advisory Agreement with Merrill Lynch Asset Management U.K. Limited ("MLAM
U.K."), an affiliate of FAM.
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), a wholly owned subsidiary of Merrill
Lynch, or its affiliates. Pursuant to that order, the Fund has retained
BlackRock Investment Management, LLC ("BIM"), an affiliate of the Manager, as
the securities lending agent for a fee based on a share of the returns on
investment of cash collateral. Prior to September 29, 2006, BIM was organized as
Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, and
MLIM, LLC was the securities lending agent. BIM may, on behalf of the Fund,
invest cash collateral received by the Fund for such loans, among other things,
in a private investment company managed by the Manager or in registered money
market funds advised by the Manager or its affiliates.
In addition, MLPF&S received $625 in commissions on the execution of portfolio
security transactions for the Fund for the year ended May 31, 2007.
For the year ended May 31, 2007, the Fund reimbursed FAM and the Manager $2,457
and $4,068, respectively, for certain accounting services.
Prior to September 29, 2006, certain officers and/or directors of the Fund were
officers and/or directors of FAM, MLIM, PSI, MLAM U.K., Merrill Lynch, and/or
MLIM, LLC.
Commencing September 29, 2006, certain officers and/or directors of the Fund are
officers and/or directors of BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales (including paydowns) of investments, excluding short-term
securities, for the year ended May 31, 2007 were $271,135,381 and $282,885,409,
respectively.
4. Capital Share Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, par value
$.10, all of which were initially classified as Common Stock. The Board of
Directors is authorized, however, to classify and reclassify any unissued shares
of capital stock without approval of the holders of Common Stock.
Shares issued and outstanding during the year ended May 31, 2007 remained
constant. Shares issued and outstanding during the year ended May 31, 2006
increased by 6,358, as a result of dividend reinvestment.
5. Short-Term Borrowings:
On May 18, 2007, the Fund renewed its revolving credit and security agreement
funded by a commercial paper asset securitization program with Citicorp North
America, Inc. ("Citicorp") as agent, certain secondary backstop lenders, and
certain asset securitization conduits as lenders (the "Lenders"). The agreement
was renewed for one year and has a maximum limit of $160,000,000. Under the
Citicorp program, the conduits will fund advances to the Fund through the
issuance of highly rated commercial paper. As security for its obligations to
the Lenders under the revolving securitization facility, the Fund has granted a
security interest in substantially all of its assets to and in favor of the
Lenders. The interest rate on the Fund's borrowings is based on the interest
rate carried by the commercial paper plus a program fee. The Fund pays
additional borrowing costs including a backstop commitment fee.
For the year ended May 31, 2007, the average amount borrowed was approximately
$134,704,000, and the daily weighted average interest rate was 5.52%.
6. Distributions to Shareholders:
The Fund paid an ordinary income dividend in the amount of $.060000 per share on
June 15, 2007 to shareholders of record on June 29, 2007.
The tax character of distributions paid during the fiscal years ended May 31,
2007 and May 31, 2006 was as follows:
--------------------------------------------------------------------------------
5/31/2007 5/31/2006
--------------------------------------------------------------------------------
Distributions paid from:
Ordinary income ................................ $25,076,686 $27,760,574
--------------------------
Total taxable distributions ...................... $25,076,686 $27,760,574
==========================
As of May 31, 2007, the components of accumulated losses on a tax basis were as
follows:
-----------------------------------------------------------------------------
Undistributed ordinary income -- net ....................... $ 5,188,275
Undistributed long-term capital gains -- net ............... --
Total undistributed earnings -- net ........................ 5,188,275
Capital loss carryforward .................................. (226,665,964)*
Unrealized gains -- net .................................... 12,430,914**
Total accumulated losses -- net ............................ $(209,046,775)
* On May 31, 2007, the Fund had a net capital loss carryforward of
$226,665,964, of which $18,095,581 expires in 2008, $34,200,029 expires in
2009, $52,918,036 expires in 2010, $119,513,437 expires in 2011 and
$1,938,881 expires in 2012. This amount will be available to offset like
amounts of any future taxable gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales, the
difference between book and tax amortization methods for premiums and
discounts on fixed income securities, the book/tax differences in the
accrual of income on securities in default and the accounting for swap
agreements.
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 21
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of BlackRock Corporate High Yield
Fund III, Inc.:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of BlackRock Corporate High Yield Fund
III, Inc. (formerly Corporate High Yield Fund III, Inc.) as of May 31, 2007, 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 five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Fund's 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 Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of May 31, 2007, by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
BlackRock Corporate High Yield Fund III, Inc. as of May 31, 2007, the results of
its operations and its cash flows for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and its financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
July 25, 2007
Fund Certification (Unaudited)
In September 2006, the Fund filed its Chief Executive Officer Certification with
the New York Stock Exchange pursuant to Section 303A.12(a) of the New York Stock
Exchange Corporate Governance Listing Standards.
The Fund's Chief Executive Officer and Chief Financial Officer Certifications
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 were filed with the
Fund's Form N-CSR and are available on the Securities and Exchange Commission's
Web site at http://www.sec.gov.
Important Tax Information (Unaudited)
The following information is provided with respect to the ordinary income
distributions paid monthly by BlackRock Corporate High Yield Fund III, Inc. for
the fiscal year ended May 31, 2007:
================================================================================
Interest-Related Dividends for Non-U.S. Residents
================================================================================
Month Paid: June 2006 ........................................ 80.99%*
July 2006 ........................................ 90.90%*
August 2006 - January 2007 ....................... 94.54%*
February 2007 - May 2007 ......................... 76.80%*
* Represents the portion of the taxable ordinary income dividends eligible
for exemption from U.S. withholding tax for nonresident aliens and foreign
corporations.
22 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
Automatic Dividend Reinvestment Plan
How the Plan Works -- The Fund offers a Dividend Reinvestment Plan (the "Plan")
under which income and capital gains dividends paid by the Fund are
automatically reinvested in additional shares of Common Stock of the Fund. The
Plan is administered on behalf of the shareholders by Computershare Trust
Company, N.A. (the "Plan Agent"). Under the Plan, whenever the Fund declares a
dividend, participants in the Plan will receive the equivalent in shares of
Common Stock of the Fund. The Plan Agent will acquire the shares for the
participant's account either (i) through receipt of additional unissued but
authorized shares of the Fund ("newly issued shares") or (ii) by purchase of
outstanding shares of Common Stock on the open market on the New York Stock
Exchange or elsewhere. If, on the dividend payment date, the Fund's net asset
value per share is equal to or less than the market price per share plus
estimated brokerage commissions (a condition often referred to as a "market
premium"), the Plan Agent will invest the dividend amount in newly issued
shares. If the Fund's net asset value per share is greater than the market price
per share (a condition often referred to as a "market discount"), the Plan Agent
will invest the dividend amount by purchasing on the open market additional
shares. If the Plan Agent is unable to invest the full dividend amount in open
market purchases, or if the market discount shifts to a market premium during
the purchase period, the Plan Agent will invest any uninvested portion in newly
issued shares. The shares acquired are credited to each shareholder's account.
The amount credited is determined by dividing the dollar amount of the dividend
by either (i) when the shares are newly issued, the net asset value per share on
the date the shares are issued or (ii) when shares are purchased in the open
market, the average purchase price per share.
Participation in the Plan -- Participation in the Plan is automatic, that is, a
shareholder is automatically enrolled in the Plan when he or she purchases
shares of Common Stock of the Fund unless the shareholder specifically elects
not to participate in the Plan. Shareholders who elect not to participate will
receive all dividend distributions in cash. Shareholders who do not wish to
participate in the Plan must advise the Plan Agent in writing (at the address
set forth below) that they elect not to participate in the Plan. Participation
in the Plan is completely voluntary and may be terminated or resumed at any time
without penalty by writing to the Plan Agent.
Benefits of the Plan -- The Plan provides an easy, convenient way for
shareholders to make additional, regular investments in the Fund. The Plan
promotes a long-term strategy of investing at a lower cost. All shares acquired
pursuant to the Plan receive voting rights. In addition, if the market price
plus commissions of the Fund's shares is above the net asset value, participants
in the Plan will receive shares of the Fund for less than they could otherwise
purchase them and with a cash value greater than the value of any cash
distribution they would have received. However, there may not be enough shares
available in the market to make distributions in shares at prices below the net
asset value. Also, since the Fund does not redeem shares, the price on resale
may be more or less than the net asset value.
Plan Fees -- There are no enrollment fees or brokerage fees for participating in
the Plan. The Plan Agent's service fees for handling the reinvestment of
distributions are paid for by the Fund. However, brokerage commissions may be
incurred when the Fund purchases shares on the open market and shareholders will
pay a pro rata share of any such commissions.
Tax Implications -- The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income tax that may
be payable (or required to be withheld) on such dividends. Therefore, income and
capital gains may still be realized even though shareholders do not receive
cash. The value of shares acquired pursuant to the Plan will generally be
excluded from gross income to the extent that the cash amount reinvested would
be excluded from gross income. If, when the Fund's shares are trading at a
market premium, the Fund issues shares pursuant to the Plan that have a greater
fair market value than the amount of cash reinvested, it is possible that all or
a portion of the discount from the market value (which may not exceed 5% of the
fair market value of the Fund's shares) could be viewed as a taxable
distribution. If the discount is viewed as a taxable distribution, it is also
possible that the taxable character of this discount would be allocable to all
the shareholders, including shareholders who do not participate in the Plan.
Thus, shareholders who do not participate in the Plan might be required to
report as ordinary income a portion of their distributions equal to their
allocable share of the discount.
Contact Information -- All correspondence concerning the Plan, including any
questions about the Plan, should be directed to the Plan Agent at Computershare
Trust Company, N.A., P.O. Box 43010, Providence, RI 02940-3010, Telephone:
800-426-5523.
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 23
Officers and Directors
Number of
Funds and
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Interested Director
------------------------------------------------------------------------------------------------------------------------------------
Robert C. P.O. Box 9011 Fund 2005 to Vice Chairman and Director of BlackRock, Inc., 122 Funds None
Doll, Jr.* Princeton, NJ President present Global Chief Investment Officer for Equities, 168 Portfolios
08543-9011 and Chairman of the BlackRock Retail Operating
Director Committee, and member of the BlackRock Executive
Committee since 2006; President of the funds
advised by Merrill Lynch Investment Managers, L.P.
("MLIM") and its affiliates ("MLIM/FAM-advised
funds") from 2005 to 2006 and Chief Investment
Officer thereof from 2001 to 2006; President of
MLIM and Fund Asset Management, L.P. ("FAM") from
2001 to 2006; Co-Head (Americas Region) thereof
from 2000 to 2001 and Senior Vice President from
1999 to 2001; President and Director of Princeton
Services, Inc. ("Princeton Services") and
President of Princeton Administrators, L.P.
("Princeton Administrators") from 2001 to 2006;
Chief Investment Officer of OppenheimerFunds, Inc.
in 1999 and Executive Vice President thereof from
1991 to 1999.
------------------------------------------------------------------------------------------------------------------------
* Mr. Doll is a director, trustee or member of an advisory board of certain other investment companies for which
BlackRock Advisors, LLC and its affiliates act as investment adviser. Mr. Doll is an "interested person," as
defined in the Investment Company Act, of the Fund based on his positions with BlackRock, Inc. and its affiliates.
Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
As Fund President, Mr. Doll serves at the pleasure of the Board of Directors.
====================================================================================================================================
Independent Directors*
------------------------------------------------------------------------------------------------------------------------------------
James H. P.O. Box 9095 Director 2002 to Director, The China Business Group, Inc. since 37 Funds None
Bodurtha** Princeton, NJ present 1996 and Executive Vice President thereof from 57 Portfolios
08543-9095 1996 to 2003; Chairman of the Board, Berkshire
Age: 63 Holding Corporation since 1980; Partner, Squire,
Sanders & Dempsey from 1980 to 1993.
------------------------------------------------------------------------------------------------------------------------------------
Kenneth A. P.O. Box 9095 Director 2005 to Professor, Harvard University since 1992; 37 Funds None
Froot Princeton, NJ present Professor, Massachusetts Institute of Technology 57 Portfolios
08543-9095 from 1986 to 1992.
Age: 49
------------------------------------------------------------------------------------------------------------------------------------
Joe P.O. Box 9095 Director 1998 to Member of the Committee of Investment of 37 Funds Kimco
Grills** Princeton, NJ present Employee Benefit Assets of the Association of 57 Portfolios Realty
08543-9095 Financial Professionals ("CIEBA") since 1986;
Age: 72 Member of CIEBA's Executive Committee since 1988
and its Chairman from 1991 to 1992; Assistant
Treasurer of International Business Machines
Corporation ("IBM") and Chief Investment Officer
of IBM Retirement Funds from 1986 to 1993; Member
of the Investment Advisory Committee of the State
of New York Common Retirement Fund from 1989 to
2006; Member of the Investment Advisory Committee
of the Howard Hughes Medical Institute from 1997
to 2000; Director, Duke University Management
Company from 1992 to 2004, Vice Chairman thereof
from 1998 to 2004, and Director Emeritus thereof
since 2004; Director, LaSalle Street Fund from
1995 to 2001; Director, Kimco Realty Corporation
since 1997; Member of the Investment Advisory
Committee of the Virginia Retirement System since
1998, Vice Chairman thereof from 2002 to 2005, and
Chairman thereof since 2005; Director, Montpelier
Foundation since 1998, its Vice Chairman from 2000
to 2006, and Chairman, thereof, since 2006; Member
of the Investment Committee of the Woodberry
Forest School since 2000; Member of the Investment
Committee of the National Trust for Historic
Preservation since 2000.
24 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
Officers and Directors (continued)
Number of
Funds and
Portfolios in Other Public
Position(s) Length of Fund Complex Directorships
Held with Time Overseen by Held by
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Independent Directors* (concluded)
------------------------------------------------------------------------------------------------------------------------------------
Herbert I. P.O. Box 9095 Director 2002 to Professor Emeritus, New York University since 37 Funds None
London Princeton, NJ present 2005; John M. Olin Professor of Humanities, New 57 Portfolios
08543-9095 York University from 1993 to 2005 and Professor
Age: 68 thereof from 1980 to 2005; President, Hudson
Institute since 1997 and Trustee thereof since
1980; Dean, Gallatin Division of New York
University from 1976 to 1993; Distinguished
Fellow, Herman Kahn Chair, Hudson Institute from
1984 to 1985; Chairman of the Board of Directors
of Vigilant Research, Inc. since 2006; Member of
the Board of Directors for Grantham University
since 2006; Director of AIMS since 2006; Director
of Reflex Security since 2006; Director of
InnoCentive, Inc. since 2006; Director of Cerego,
LLC since 2005; Director, Damon Corp. from 1991 to
1995; Overseer, Center for Naval Analyses from
1983 to 1993.
------------------------------------------------------------------------------------------------------------------------------------
Roberta P.O. Box 9095 Director 2002 to Shareholder, Modrall, Sperling, Roehl, Harris & 37 Funds None
Cooper Princeton, NJ present Sisk, P.A. since 1993; President, American Bar 57 Portfolios
Ramo 08543-9095 Association from 1995 to 1996 and Member of the
Age: 64 Board of Governors thereof from 1994 to 1997;
Shareholder, Poole, Kelly & Ramo, Attorneys at Law
P.C. from 1977 to 1993; Director of ECMC Group
(service provider to students, schools and
lenders) since 2001; Director, United New Mexico
Bank (now Wells Fargo) from 1983 to 1988;
Director, First National Bank of New Mexico (now
Wells Fargo) from 1975 to 1976; Vice President,
American Law Institute since 2004.
------------------------------------------------------------------------------------------------------------------------------------
Robert S. P.O. Box 9095 Director 1998 to Principal of STI Management (investment adviser) 37 Funds None
Salomon, Princeton, NJ present from 1994 to 2005; Chairman and CEO of Salomon 57 Portfolios
Jr. 08543-9095 Brothers Asset Management Inc. from 1992 to 1995;
Age: 70 Chairman of Salomon Brothers Equity Mutual Funds
from 1992 to 1995; regular columnist with Forbes
Magazine from 1992 to 2002; Director of Stock
Research and U.S. Equity Strategist at Salomon
Brothers Inc. from 1975 to 1991; Trustee,
Commonfund from 1980 to 2001.
------------------------------------------------------------------------------------------------------------------------
* Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
** Co-Chairman of the Board of Directors and the Audit Committee.
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 25
Officers and Directors (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers*
------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 1993 to Managing Director of BlackRock, Inc. since 2006; Managing Director of Merrill Lynch
Burke Princeton, NJ President present Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P. ("FAM") in 2006;
08543-9011 and and First Vice President of MLIM and FAM from 1997 to 2005 and Treasurer thereof from
Age: 46 Treasurer 1999 to 1999 to 2006; Vice President of MLIM and FAM from 1990 to 1997.
present
------------------------------------------------------------------------------------------------------------------------------------
Karen P.O. Box 9011 Fund Chief 2007 to Managing Director of BlackRock, Inc. and Chief Compliance Officer of certain
Clark Princeton, NJ Compliance present BlackRock-advised funds since 2007; Director of BlackRock, Inc. from 2005 to 2007;
08543-9011 Officer Principal and Senior Compliance Officer, State Street Global Advisors, from 2001 to
Age: 42 2005; Principal Consultant, PricewaterhouseCoopers, LLP from 1998 to 2001; and
Branch Chief, Division of Investment Management and Office of Compliance
Inspections and Examinations, U.S. Securities and Exchange Commission, from 1993 to
1998.
------------------------------------------------------------------------------------------------------------------------------------
Alice A. P.O. Box 9011 Secretary 2004 to Director of BlackRock, Inc. since 2006; Director (Legal Advisory) of MLIM from 2002
Pellegrino Princeton, NJ present to 2006; Vice President of MLIM from 1999 to 2002; Attorney associated with MLIM
08543-9011 from 1997 to 1999; Secretary of MLIM, FAM, FAM Distributors, Inc. and Princeton
Age: 47 Services from 2004 to 2006.
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors.
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Computershare Trust Company, N.A.
P.O. Box 43010
Providence, RI 02940-3010
NYSE Symbol
CYE
26 BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their non-public personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our Web sites.
BlackRock does not sell or disclose to non-affiliated third parties any
non-public personal information about its Clients, except as permitted by law or
as is necessary to respond to regulatory requests or to service Client accounts.
These non-affiliated third parties are required to protect the confidentiality
and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to non-public
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the non-public
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
Electronic copies of most financial reports and prospectuses are available on
the Fund's Web site. Shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Fund's electronic delivery program.
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisers, banks or brokerages may offer this service.
BLACKROCK CORPORATE HIGH YIELD FUND III, INC. MAY 31, 2007 27
BlackRock Corporate High Yield Fund III, Inc. seeks to provide shareholders with
current income by investing primarily in a diversified portfolio of fixed income
securities that are rated in the lower rating categories of the established
rating services (Ba or lower by Moody's Investors Service, Inc. or BB or lower
by Standard & Poor's Corporation) or are unrated securities of comparable
quality.
This report, including the financial information herein, is transmitted to
shareholders of BlackRock Corporate High Yield Fund III, Inc. for their
information. It is not a prospectus. The Fund has leveraged its Common Stock to
provide Common Stock shareholders with a potentially higher rate of return.
Leverage creates risk for Common Stock shareholders, including the likelihood of
greater volatility of net asset value and market price of Common Stock shares,
and the risk that fluctuations in short-term interest rates may reduce the
Common Stock's yield. Past performance results shown in this report should not
be considered a representation of future performance. Statements and other
information herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-441-7762; (2) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's Web site
at http://www.sec.gov. Information about how the Fund voted proxies relating to
securities held in the Fund's portfolio during the most recent 12-month period
ended June 30 is available (1) at www.blackrock.com and (2) on the Securities
and Exchange Commission's Web site at http://www.sec.gov.
BlackRock Corporate High Yield Fund III, Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
BLACKROCK
#COYIII-5/07
Item 2 - Code of Ethics - The registrant has adopted a code of ethics, as of
the end of the period covered by this report, that applies to the
registrant's principal executive officer, principal financial officer
and principal accounting officer, or persons performing similar
functions. 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
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: (1) Joe Grills
and (2) Robert S. Salomon, Jr.
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ended May 31, 2007 - $38,850
Fiscal Year Ended May 31, 2006 - $38,850
(b) Audit-Related Fees - Fiscal Year Ended May 31, 2007 - $8,000
Fiscal Year Ended May 31, 2006 - $8,000
The nature of the services include assurance and related services
reasonably related to the performance of the audit of financial
statements not included in Audit Fees.
(c) Tax Fees - Fiscal Year Ended May 31, 2007 - $6,100
Fiscal Year Ended May 31, 2006 - $6,000
The nature of the services include tax compliance, tax advice and tax
planning.
(d) All Other Fees - Fiscal Year Ended May 31, 2007 - $0
Fiscal Year Ended May 31, 2006 - $0
(e)(1) The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to
the registrant's affiliated service providers that relate directly to
the operations and the financial reporting of the registrant. Certain
of these non-audit services that the Committee believes are a)
consistent with the SEC's auditor independence rules and b) routine
and recurring services that will not impair the independence of the
independent accountants may be approved by the Committee without
consideration on a specific case-by-case basis ("general
pre-approval"). However, such services will only be deemed
pre-approved provided that any individual project does not exceed
$5,000 attributable to the registrant or $50,000 for all of the
registrants the Committee oversees. Any proposed services exceeding
the pre-approved cost levels will require specific pre-approval by the
Committee, as will any other services not subject to general
pre-approval (e.g., unanticipated but permissible services). The
Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board meeting.
(e)(2) 0%
(f) Not Applicable
(g) Fiscal Year Ended May 31, 2007 - $2,933,417
Fiscal Year Ended May 31, 2006 - $3,138,717
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant
to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $1,739,500, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals are
members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act (15 U.S.C. 78c(a)(58)(A)):
James H. Bodurtha
Kenneth A. Froot
Joe Grills
Herbert I. London
Roberta Cooper Ramo
Robert S. Salomon, Jr.
Item 6 - Schedule of Investments - The registrant's Schedule of Investments is
included as part of the Report to Stockholders filed under Item 1 of
this form.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Proxy Voting Policies and Procedures
Applicable to the Fund
Each Fund's Board of Directors has delegated to the Manager authority
to vote all proxies relating to the Fund's portfolio securities. The
Manager has adopted policies and procedures (the "Proxy Voting
Procedures") with respect to the voting of proxies related to the
portfolio securities held in the account of one or more of its
clients, including a Fund. Pursuant to these Proxy Voting Procedures,
the Manager's primary objective when voting proxies is to make proxy
voting decisions solely in the best interests of each Fund and its
shareholders, and to act in a manner that the Manager believes is most
likely to enhance the economic value of the securities held by the
Fund. The Proxy Voting Procedures are designed to ensure that the
Manager considers the interests of its clients, including each Fund,
and not the interests of the Manager, when voting proxies and that
real (or perceived) material conflicts that may arise between the
Manager's interest and those of the Manager's clients are properly
addressed and resolved.
In order to implement the Proxy Voting Procedures, the Manager has
formed a Proxy Voting Committee (the "Committee"). The Committee,
which is a subcommittee of the Manager's Equity Investment Policy
Oversight Committee ("EIPOC"), is comprised of a senior member of the
Manager's equity management group who is also a member of EIPOC, one
or more other senior investment professionals appointed by EIPOC,
portfolio managers and investment analysts appointed by EIPOC and any
other personnel EIPOC deems appropriate. The Committee will also
include two non-voting representatives from the Manager's Legal
Department appointed by the Manager's General Counsel. The Committee's
membership shall be limited to full-time employees of the Manager. No
person with any investment banking, trading, retail brokerage or
research responsibilities for the Manager's affiliates may serve as a
member of the Committee or participate in its decision making (except
to the extent such person is asked by the Committee to present
information to the Committee on the same basis as other interested
knowledgeable parties not affiliated with the Manager might be asked
to do so). The Committee determines how to vote the proxies of all
clients, including a Fund, that have delegated proxy voting authority
to the Manager and seeks to ensure that all votes are consistent with
the best interests of those clients and are free from unwarranted and
inappropriate influences. The Committee establishes general proxy
voting policies for the Manager and is responsible for determining how
those policies are applied to specific proxy votes, in light of each
issuer's unique structure, management, strategic options and, in
certain circumstances, probable economic and other anticipated
consequences of alternate actions. In so doing, the Committee may
determine to vote a particular proxy in a manner contrary to its
generally stated policies. In addition, the Committee will be
responsible for ensuring that all reporting and recordkeeping
requirements related to proxy voting are fulfilled.
The Committee may determine that the subject matter of a recurring
proxy issue is not suitable for general voting policies and requires a
case-by-case determination. In such cases, the Committee may elect not
to adopt a specific voting policy applicable to that issue. The
Manager believes that certain proxy voting issues require investment
analysis - such as approval of mergers and other significant corporate
transactions - akin to investment decisions, and are, therefore, not
suitable for general guidelines. The Committee may elect to adopt a
common position for the Manager on certain proxy votes that are akin
to investment decisions, or determine to permit the portfolio manager
to make individual decisions on how best to maximize economic value
for a Fund (similar to normal buy/sell investment decisions made by
such portfolio managers). While it is expected that the Manager will
generally seek to vote proxies over which the Manager exercises voting
authority in a uniform manner for all the Manager's clients, the
Committee, in conjunction with a Fund's portfolio manager, may
determine that the Fund's specific circumstances require that its
proxies be voted differently.
To assist the Manager in voting proxies, the Committee has retained
Institutional Shareholder Services ("ISS"). ISS is an independent
adviser that specializes in providing a variety of fiduciary-level
proxy-related services to institutional investment managers, plan
sponsors, custodians, consultants, and other institutional investors.
The services provided to the Manager by ISS include in-depth research,
voting recommendations (although the Manager is not obligated to
follow such recommendations), vote execution, and recordkeeping. ISS
will also assist the Fund in fulfilling its reporting and
recordkeeping obligations under the Investment Company Act.
The Manager's Proxy Voting Procedures also address special
circumstances that can arise in connection with proxy voting. For
instance, under the Proxy Voting Procedures, the Manager generally
will not seek to vote proxies related to portfolio securities that are
on loan, although it may do so under certain circumstances. In
addition, the Manager will vote proxies related to securities of
foreign issuers only on a best efforts basis and may elect not to vote
at all in certain countries where the Committee determines that the
costs associated with voting generally outweigh the benefits. The
Committee may at any time override these general policies if it
determines that such action is in the best interests of a Fund.
From time to time, the Manager may be required to vote proxies in
respect of an issuer where an affiliate of the Manager (each, an
"Affiliate"), or a money management or other client of the Manager,
including investment companies for which the Manager provides
investment advisory, administrative and/or other services (each, a
"Client"), is involved. The Proxy Voting Procedures and the Manager's
adherence to those procedures are designed to address such conflicts
of interest. The Committee intends to strictly adhere to the Proxy
Voting Procedures in all proxy matters, including matters involving
Affiliates and Clients. If, however, an issue representing a
non-routine matter that is material to an Affiliate or a widely known
Client is involved such that the Committee does not reasonably believe
it is able to follow its guidelines (or if the particular proxy matter
is not addressed by the guidelines) and vote impartially, the
Committee may, in its discretion for the purposes of ensuring that an
independent determination is reached, retain an independent fiduciary
to advise the Committee on how to vote or to cast votes on behalf of
the Manager's clients.
In the event that the Committee determines not to retain an
independent fiduciary, or it does not follow the advice of such an
independent fiduciary, the Committee may pass the voting power to a
subcommittee, appointed by EIPOC (with advice from the Secretary of
the Committee), consisting solely of Committee members selected by
EIPOC. EIPOC shall appoint to the subcommittee, where appropriate,
only persons whose job responsibilities do not include contact with
the Client and whose job evaluations would not be affected by the
Manager's relationship with the Client (or failure to retain such
relationship). The subcommittee shall determine whether and how to
vote all proxies on behalf of the Manager's clients or, if the proxy
matter is, in their judgment, akin to an investment decision, to defer
to the applicable portfolio managers, provided that, if the
subcommittee determines to alter the Manager's normal voting
guidelines or, on matters where the Manager's policy is case-by-case,
does not follow the voting recommendation of any proxy voting service
or other independent fiduciary that may be retained to provide
research or advice to the Manager on that matter, no proxies relating
to the Client may be voted unless the Secretary, or in the Secretary's
absence, the Assistant Secretary of the Committee concurs that the
subcommittee's determination is consistent with the Manager's
fiduciary duties.
In addition to the general principles outlined above, the Manager has
adopted voting guidelines with respect to certain recurring proxy
issues that are not expected to involve unusual circumstances. These
policies are guidelines only, and the Manager may elect to vote
differently from the recommendation set forth in a voting guideline if
the Committee determines that it is in a Fund's best interest to do
so. In addition, the guidelines may be reviewed at any time upon the
request of a Committee member and may be amended or deleted upon the
vote of a majority of Committee members present at a Committee meeting
at which there is a quorum.
The Manager has adopted specific voting guidelines with respect to the
following proxy issues:
o Proposals related to the composition of the board of directors of
issuers other than investment companies. As a general matter, the
Committee believes that a company's board of directors (rather than
shareholders) is most likely to have access to important, nonpublic
information regarding a company's business and prospects, and is,
therefore, best-positioned to set corporate policy and oversee
management. The Committee, therefore, believes that the foundation of
good corporate governance is the election of qualified, independent
corporate directors who are likely to diligently represent the
interests of shareholders and oversee management of the corporation in
a manner that will seek to maximize shareholder value over time. In
individual cases, the Committee may look at a nominee's number of
other directorships, history of representing shareholder interests as
a director of other companies or other factors, to the extent the
Committee deems relevant.
o Proposals related to the selection of an issuer's independent
auditors. As a general matter, the Committee believes that corporate
auditors have a responsibility to represent the interests of
shareholders and provide an independent view on the propriety of
financial reporting decisions of corporate management. While the
Committee will generally defer to a corporation's choice of auditor,
in individual cases, the Committee may look at an auditors' history of
representing shareholder interests as auditor of other companies, to
the extent the Committee deems relevant.
o Proposals related to management compensation and employee benefits.
As a general matter, the Committee favors disclosure of an issuer's
compensation and benefit policies and opposes excessive compensation,
but believes that compensation matters are normally best determined by
an issuer's board of directors, rather than shareholders. Proposals to
"micro-manage" an issuer's compensation practices or to set arbitrary
restrictions on compensation or benefits will, therefore, generally
not be supported.
o Proposals related to requests, principally from management, for
approval of amendments that would alter an issuer's capital structure.
As a general matter, the Committee will support requests that enhance
the rights of common shareholders and oppose requests that appear to
be unreasonably dilutive.
o Proposals related to requests for approval of amendments to an
issuer's charter or by-laws. As a general matter, the Committee
opposes poison pill provisions.
o Routine proposals related to requests regarding the formalities of
corporate meetings.
o Proposals related to proxy issues associated solely with holdings of
investment company shares. As with other types of companies, the
Committee believes that a fund's board of directors (rather than its
shareholders) is best positioned to set fund policy and oversee
management. However, the Committee opposes granting boards of
directors authority over certain matters, such as changes to a fund's
investment objective, which the Investment Company Act envisions will
be approved directly by shareholders.
o Proposals related to limiting corporate conduct in some manner that
relates to the shareholder's environmental or social concerns. The
Committee generally believes that annual shareholder meetings are
inappropriate forums for discussion of larger social issues, and
opposes shareholder resolutions "micromanaging" corporate conduct or
requesting release of information that would not help a shareholder
evaluate an investment in the corporation as an economic matter. While
the Committee is generally supportive of proposals to require
corporate disclosure of matters that seem relevant and material to the
economic interests of shareholders, the Committee is generally not
supportive of proposals to require disclosure of corporate matters for
other purposes.
Information about how a Fund voted proxies relating to securities held
in the Fund's portfolio during the most recent 12 month period ended
June 30 is available without charge (1) at www.blackrock.com and (2)
on the Commission's web site at http://www.sec.gov.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - as
of June 14, 2007.
(a)(1) The Fund is managed by a team of investment professionals
comprised of Scott Amero, Managing Director at BlackRock, Jeff Gary,
CPA, Managing Director at BlackRock, Kevin J. Booth, CFA, Managing
Director at BlackRock and James E. Keenan, CFA, Director at BlackRock.
Each is a member of BlackRock's fixed income portfolio management
group. Messrs. Amero and Gary are responsible for setting the Fund's
overall credit strategy. Messrs. Booth and Keenan are the Fund's
co-portfolio managers and are responsible for the day-to-day
management of the Fund's portfolio and the selection of its
investments. Messrs. Amero and Gary have been members of the Fund's
management team since 2006 and Mr. Keenan has been the Fund's
portfolio manager since 2006 and Mr. Booth has been the Fund's
portfolio manager since 2007.
Jeff Gary is the head of BlackRock's high yield team within the Fixed
Income Portfolio Management Group. Prior to joining BlackRock in 2003,
Mr. Gary was a Managing Director and portfolio manager with AIG
(American General) Investment Group.
Scott Amero is co-head of BlackRock's fixed income portfolio
management group. He is a member of the Management Committee and the
Investment Strategy Group. Mr. Amero is a senior strategist and
portfolio manager with responsibility for overseeing all fixed income
sector strategy and the overall management of client portfolios. He is
also the head of global credit research. He is a director of
Anthracite Capital, Inc., BlackRock's publicly-traded real estate
investment trust. Mr. Amero has been with BlackRock since 1990.
Kevin Booth is co-head of the high yield team within BlackRock's Fixed
Income Portfolio Management Group. His primary responsibilities are
managing portfolios and directing investment strategy. He specializes
in hybrid high yield portfolios, consisting of leveraged bank loans,
high yield bonds, and distressed obligations. Prior to joining
BlackRock, Mr. Booth was a Managing Director (Global Fixed Income) of
Merrill Lynch Investment Managers ("MLIM") in 2006, a Director from
1998 to 2006 and was a Vice President of MLIM from 1991 to 1998. He
has been a portfolio manager with BlackRock or MLIM since 1992, and
was a member of MLIM's bank loan group from 2000 to 2006.
James Keenan is a high yield portfolio manager and trader within
BlackRock's Fixed Income Portfolio Management Group. His primary
responsibilities are managing client portfolios, executing trades and
ensuring consistency across high yield portfolios. Mr. Keenan has been
with BlackRock since 2004. Prior to joining BlackRock, he was a senior
high yield trader at Columbia Management Group. Mr. Keenan began his
investment career at UBS Global Asset Management where he held roles
as a trader, research analyst and a portfolio analyst from 1998
through 2003.
(a)(2) As of June 14, 2007:
---------------------------------------------------------------------------------------------------------------------------
(iii) Number of Other Accounts and
(ii) Number of Other Accounts Managed Assets for Which Advisory Fee is
and Assets by Account Type Performance-Based
---------------------------------------------------------------------------------------------------------------------------
Other Other
(i) Name of Registered Other Pooled Registered Other Pooled
Portfolio Investment Investment Other Investment Investment Other
Manager Companies Vehicles Accounts Companies Vehicles Accounts
---------------------------------------------------------------------------------------------------------------------------
Scott Amero 33 40 298 0 3 23
---------------------------------------------------------------------------------------------------------------------------
$24,713,551,744 $9,434,093,818 $108,814,650,898 $0 $1,864,784,629 $6,936,815,912
---------------------------------------------------------------------------------------------------------------------------
Jeff Gary 16 9 32 0 3 9
---------------------------------------------------------------------------------------------------------------------------
$8,184,343,689 $7,026,319,752 $4,921,454,535 $0 $1,009,712,752 $985,272,142
---------------------------------------------------------------------------------------------------------------------------
Kevin Booth 21 8 8 0 2 3
---------------------------------------------------------------------------------------------------------------------------
$11,447,089,763 $3,612,722,677 $1,583,341,688 $0 $534,630,572 $542,182,282
---------------------------------------------------------------------------------------------------------------------------
James Keenan 16 7 25 0 1 4
---------------------------------------------------------------------------------------------------------------------------
$8,184,343,689 $2,556,314,911 $4,414,087,682 $0 $440,758,095 $693,091,624
---------------------------------------------------------------------------------------------------------------------------
(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 any officer, director, stockholder or
employee may or may not have an interest in the securities whose
purchase and sale BlackRock recommends to the Fund. BlackRock, or any
of its affiliates, or any officer, director, stockholder, employee or
any member of their families may take different actions than those
recommended to the Fund by BlackRock with respect to the same
securities. Moreover, BlackRock may refrain from rendering any advice
or services concerning securities of companies of which any of
BlackRock's (or its affiliates') officers, directors or employees are
directors or officers, or companies as to which BlackRock or any of
its affiliates or the officers, directors and employees of any of them
has any substantial economic interest or possesses material non-public
information. Each portfolio manager also may manage accounts whose
investment strategies may at times be opposed to the strategy utilized
for the Fund. In this connection, it should be noted that certain
portfolio managers currently manage certain accounts that are subject
to performance fees. In addition, certain portfolio managers assist in
managing certain hedge funds and may be entitled to receive a portion
of any incentive fees earned on such funds and a portion of such
incentive fees may be voluntarily or involuntarily deferred.
Additional portfolio managers may in the future manage other such
accounts or funds and may be entitled to receive incentive fees.
As a fiduciary, BlackRock owes a duty of loyalty to its clients and
must treat each client fairly. When BlackRock purchases or sells
securities for more than one account, the trades must be allocated in
a manner consistent with its fiduciary duties. BlackRock attempts to
allocate investments in a fair and equitable manner among client
accounts, with no account receiving preferential treatment. To this
end, BlackRock has adopted a policy that is intended to ensure that
investment opportunities are allocated fairly and equitably among
client accounts over time. This policy also seeks to achieve
reasonable efficiency in client transactions and provide BlackRock
with sufficient flexibility to allocate investments in a manner that
is consistent with the particular investment discipline and client
base.
(a)(3) As of May 31, 2007:
Portfolio Manager Compensation
Portfolio Manager Compensation
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 discretionary bonus,
participation in various benefits programs and one or more of the
incentive compensation programs established by BlackRock such as its
Long-Term Retention and Incentive Plan and Restricted Stock Program.
Base compensation
Generally, portfolio managers receive base compensation based on their
seniority and/or their position with the firm.
Discretionary compensation
In addition to base compensation, portfolio managers may receive
discretionary compensation, which can be a substantial portion of
total compensation. Discretionary compensation can include a
discretionary cash bonus as well as one or more of the following:
Long-Term Retention and Incentive Plan (LTIP)
The LTIP is a long-term incentive plan that seeks to reward certain
key employees. The plan provides for the grant of awards that are
expressed as an amount of cash that, if properly vested and subject to
the attainment of certain performance goals, will be settled in cash
and/or in BlackRock, Inc. common stock.
Deferred Compensation Program
A portion of the compensation paid to each portfolio manager may be
voluntarily deferred by the portfolio manager into an account that
tracks the performance of certain of the firm's investment products.
Each portfolio manager is permitted to allocate his deferred amounts
among various options, including to certain of the firm's hedge funds
and other unregistered products. In addition, prior to 2005, a portion
of the annual compensation of certain senior managers was mandatorily
deferred in a similar manner for a number of years. Beginning in 2005,
a portion of the annual compensation of certain senior managers was
paid in the form of BlackRock, Inc. restricted stock units which vest
ratably over a number of years.
Options and Restricted Stock Awards
While incentive stock options are not currently being awarded to
BlackRock employees, BlackRock, Inc. previously granted stock options
to key employees, including certain portfolio managers who may still
hold unexercised or unvested options. BlackRock, Inc. also has a
restricted stock award program designed to reward certain key
employees as an incentive to contribute to the long-term success of
BlackRock. These awards vest over a period of years.
Incentive Savings Plans
BlackRock, Inc. has created a variety of incentive savings plans in
which BlackRock employees are eligible to participate, including an
Employee Stock Purchase Plan (ESPP) and a 401(k) plan. The 401(k) plan
may involve a company match of the 50% employee's pre-tax contribution
of up to 6% of the employee's salary, limited to $4,000 per year.
BlackRock also offers a Company Retirement Contribution equal to 3% to
5% of eligible compensation, depending on BlackRock, Inc.'s overall
net operating income. The company match is made in cash. The firm's
401(k) plan offers a range of investment options, including registered
investment companies managed by the firm. Each portfolio manager is
eligible to participate in these plans.
Annual incentive compensation for each portfolio manager 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 and income
generation, of the firm's assets under management or supervision by
that portfolio manager relative to predetermined benchmarks, and the
individual's teamwork and contribution to the overall performance of
these portfolios and BlackRock. Unlike many other firms, portfolio
managers at BlackRock compete against benchmarks rather than each
other. In most cases, including for the portfolio managers of the
Registrant, these benchmarks are the same as the benchmark or
benchmarks against which the investment performance, including
risk-adjusted returns and income generation, of the Registrant or
other accounts are measured. These benchmarks include customized
benchmarks, Lipper peer groups and a subset of other closed-end
taxable debt funds. A group of BlackRock, Inc.'s officers determines
which benchmarks against which to compare the performance of funds and
other accounts managed by each portfolio manager. With respect to the
Registrant, such benchmarks include the CSFB High Yield Index.
The group of BlackRock, Inc.'s officers then makes a subjective
determination with respect to the portfolio manager's compensation
based on the performance of the funds and other accounts managed by
each portfolio manager relative to the various benchmarks. This
determination may take into consideration the fact that a benchmark
may not perfectly correlate to the way the Registrant or other
accounts are managed, even if it is the benchmark that is most
appropriate for the Registrant or other account. For example, a
benchmark's return may be based on the total return of the securities
comprising the benchmark, but the Registrant or other account may be
managed to maximize income and not total return. Senior portfolio
managers who perform additional management functions within BlackRock
may receive additional compensation for serving in these other
capacities.
(a)(4) Beneficial Ownership of Securities. As of May 31, 2007, none of
Messrs. Amero, Gary, Baumgarten and Keenan beneficially owned any
stock issued by the Fund.
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - The registrant's
Nominating Committee will consider nominees to the Board recommended
by shareholders when a vacancy becomes available. Shareholders who
wish to recommend a nominee should send nominations which include
biographical information and set forth the qualifications of the
proposed nominee to the registrant's Secretary. There have been no
material changes to these procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial officers
or persons performing similar functions have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act")) are effective as of a date within 90 days of the filing
of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
13a-15(b) under the Securities and Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter
of the period covered by this report that have materially affected, or
are reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BlackRock Corporate High Yield Fund III, Inc.
By: /s/ Robert C. Doll, Jr.
---------------------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Corporate High Yield Fund III, Inc.
Date: July 24, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert C. Doll, Jr.
---------------------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Corporate High Yield Fund III, Inc.
Date: July 24, 2007
By: /s/ Donald C. Burke
---------------------------------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock Corporate High Yield Fund III, Inc.
Date: July 24, 2007