UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-21280

Name of Fund: BlackRock Credit Allocation Income Trust III (BPP)

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Credit

Allocation Income Trust III, 55 East 52 nd Street, New York, NY 10055

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

Date of fiscal year end: 10/31/2012

Date of reporting period: 07/31/2012

Item 1 – Schedule of Investments

 

 

Schedule of Investments July 31, 2012 (Unaudited)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

    

Par

(000)

     Value  
Asset-Backed Securities              

 

 

American Airlines Pass-Through
Trust, Series 2011-2, Class A,

   

  

8.63%, 4/15/23

   USD 257       $ 270,679   

Atrium CDO Corp., Series 5A,
Class A4, 0.86%,

   

  

7/20/20 (a)(b)

     1,300         1,095,250   

Continental Airlines Pass-Through
Certificates, Series 2009-2, Class B,

   

  

9.25%, 11/10/18

     606         663,610   

 

 

Total Asset-Backed Securities – 0.8%

  

     2,029,539   

 

 
  
     

Corporate Bonds

     

 

 

Aerospace & Defense — 0.8%

     

BE Aerospace, Inc., 5.25%,

     

4/01/22

     825         866,250   

Huntington Ingalls Industries, Inc.:

     

6.88%, 3/15/18

     290         308,850   

7.13%, 3/15/21

     300         322,125   

Kratos Defense & Security

     

Solutions, Inc., 10.00%, 6/01/17

     460         494,500   
     

 

 

 
        1,991,725   

 

 

Airlines — 0.2%

     

Delta Air Lines, Inc., Series 2002-1,
Class G-1, 6.72%,

   

  

7/02/24

     520         561,439   

 

 

Auto Components — 0.8%

     

Delphi Corp., 6.13%, 5/15/21

     280         305,550   

Icahn Enterprises LP:

     

7.75%, 1/15/16

     290         304,863   

8.00%, 1/15/18

     1,130         1,200,625   
     

 

 

 
        1,811,038   

 

 

Beverages — 1.0%

     

Anheuser-Busch InBev
Worldwide, Inc. (c):

   

  

1.38%, 7/15/17

     500         504,987   

2.50%, 7/15/22

     700         713,636   

Constellation Brands, Inc., 7.25%,

     

5/15/17

     955         1,101,831   
     

 

 

 
        2,320,454   

 

 

Building Products — 0.3%

     

Building Materials Corp. of America (a):

  

  

7.00%, 2/15/20

     180         196,200   

6.75%, 5/01/21

     520         568,100   
     

 

 

 
        764,300   

 

 

Capital Markets — 4.2%

     

Ameriprise Financial, Inc., 5.30%,

     

3/15/20 (c)

     1,500         1,738,842   

E*Trade Financial Corp., 12.50%,

     

11/30/17

     900         1,030,500   

The Goldman Sachs Group, Inc. (c):

     

6.25%, 9/01/17

     625         705,327   
    

Par

(000)

     Value  

Corporate Bonds

     

 

 

Capital Markets (concluded)

     

The Goldman Sachs Group,
Inc. (c) (concluded):

     

5.75%, 1/24/22

   USD 800       $ 873,859   

6.25%, 2/01/41

     2,150         2,347,819   

Morgan Stanley:

     

0.94%, 10/15/15 (b)

     1,325         1,210,223   

5.50%, 7/28/21 (c)

     840         848,889   

Murray Street Investment Trust I,

     

4.65%, 3/09/17 (d)

     300         308,373   

UBS AG, 2.25%, 1/28/14 (c)

     775         783,407   
     

 

 

 
        9,847,239   

 

 

Chemicals — 1.5%

     

Celanese US Holdings LLC, 5.88%,

  

  

6/15/21

     760         822,700   

Hexion US Finance Corp., 6.63%,

     

4/15/20

     370         378,325   

Huntsman International LLC,

     

8.63%, 3/15/21

     285         327,750   

Ineos Finance Plc (a):

     

8.38%, 2/15/19

     155         160,425   

7.50%, 5/01/20

     355         360,325   

LyondellBasell Industries NV,

     

5.75%, 4/15/24

     915         1,036,237   

Solutia, Inc., 7.88%, 3/15/20

     283         334,648   
     

 

 

 
        3,420,410   

 

 

Commercial Banks — 5.3%

     

Amsouth Bank, Series AI, 4.85%,

     

4/01/13

     525         535,500   

Asciano Finance Ltd., 5.00%,

     

4/07/18 (a)

     425         447,542   

Associated Banc-Corp, 5.13%,

     

3/28/16

     1,070         1,152,912   

Branch Banking & Trust Co. (b):

     

0.79%, 9/13/16

     550         520,545   

0.77%, 5/23/17

     325         301,140   

CIT Group, Inc.:

     

7.00%, 5/02/16 (a)

     720         723,600   

7.00%, 5/02/17 (a)

     184         185,199   

4.25%, 8/15/17

     660         660,000   

5.25%, 3/15/18

     580         614,075   

5.50%, 2/15/19 (a)

     500         527,500   

5.00%, 8/15/22

     250         250,000   

Discover Bank, 8.70%, 11/18/19

     550         695,312   

HSBC Finance Corp., 6.68%,

     

1/15/21 (c)

     750         836,292   

Regions Financial Corp.:

     

4.88%, 4/26/13

     1,225         1,247,969   

5.75%, 6/15/15

     850         906,312   

RESPARCS Funding LP I,
8.00% (e)

     4,000         1,082,000   

Wachovia Bank NA, 6.60%,

     

1/15/38 (c)

     1,400         1,908,623   
     

 

 

 
        12,594,521   

 

 
 

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    1        

 

 

Schedule of Investments (continued)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

 

    

Par

(000)

     Value  

Corporate Bonds

     

 

 

Commercial Services & Supplies — 3.9%

  

  

Aviation Capital Group Corp. (a):

     

7.13%, 10/15/20 (c)

   USD      4,500       $ 4,621,396   

6.75%, 4/06/21

     1,125         1,127,779   

Casella Waste Systems, Inc.,

     

7.75%, 2/15/19

     336         333,480   

Clean Harbors, Inc.:

     

7.63%, 8/15/16

     594         619,245   

5.25%, 8/01/20 (a)

     224         231,000   

Corrections Corp. of America,

     

7.75%, 6/01/17

     1,600         1,733,000   

Covanta Holding Corp., 6.38%,

     

10/01/22

     320         343,450   

Mobile Mini, Inc., 7.88%, 12/01/20

     135         142,594   
     

 

 

 
        9,151,944   

 

 

Communications Equipment — 1.1%

  

  

Avaya, Inc., 9.75%, 11/01/15 (c)

     400         312,000   

Brocade Communications
Systems, Inc., 6.88%,
1/15/20 (c)

     1,450         1,573,250   

Hughes Satellite Systems Corp.,

     

6.50%, 6/15/19

     210         225,750   

Zayo Group LLC /Zayo Capital, Inc.,

  

  

8.13%, 1/01/20 (a)

     360         380,700   
     

 

 

 
        2,491,700   

 

 

Construction Materials — 0.2%

  

  

HD Supply, Inc., 8.13%,
4/15/19 (a)

     430         468,700   

 

 

Consumer Finance — 5.6%

  

  

American Express Credit Corp.,

     

2.75%, 9/15/15 (c)

     2,900         3,058,079   

Capital One Bank USA NA, 8.80%,

  

  

7/15/19

     1,625         2,093,010   

Daimler Finance North America LLC, 2.63%, 9/15/16 (a)(c)

     1,650         1,717,305   

Experian Finance Plc, 2.38%,

     

6/15/17 (a)(c)

     350         353,830   

Ford Motor Credit Co. LLC:

     

7.00%, 4/15/15

     1,420         1,579,750   

8.00%, 12/15/16

     585         691,447   

Inmarsat Finance Plc, 7.38%,

     

12/01/17 (a)

     870         939,600   

SLM Corp., 6.25%, 1/25/16

     2,365         2,506,900   

Toll Brothers Finance Corp.,
5.88%, 2/15/22

     200         213,336   
     

 

 

 
        13,153,257   

 

 

Containers & Packaging — 1.3%

  

  

Ardagh Packaging Finance Plc (a):

  

  

7.38%, 10/15/17

     200         214,250   

9.13%, 10/15/20

     205         215,250   

Ball Corp.:

     

7.13%, 9/01/16

     850         923,313   
    

Par

(000)

     Value  

Corporate Bonds

     

 

 

Containers & Packaging (concluded)

  

  

Ball Corp. (concluded):

     

6.75%, 9/15/20

   USD      1,070       $ 1,185,025   

Crown Americas LLC, 6.25%,

     

2/01/21

     400         442,000   

Sealed Air Corp., 8.38%,
9/15/21 (a)

     65         74,100   
     

 

 

 
        3,053,938   

 

 

Diversified Financial Services — 8.8%

  

  

Ally Financial, Inc.:

     

4.50%, 2/11/14

     400         412,500   

8.30%, 2/12/15

     780         866,775   

8.00%, 11/01/31

     810         969,975   

Bank of America Corp. (c):

     

3.75%, 7/12/16

     925         958,022   

5.30%, 3/15/17

     2,440         2,620,577   

5.00%, 5/13/21

     3,625         3,907,601   

Citigroup, Inc. (c):

     

6.38%, 8/12/14

     625         675,118   

4.59%, 12/15/15

     475         505,381   

8.50%, 5/22/19

     550         698,337   

Countrywide Financial Corp., 6.25%,

  

  

5/15/16 (c)

     1,569         1,667,507   

DPL, Inc., 7.25%, 10/15/21 (a)

     520         591,500   

General Electric Capital Corp.,

     

6.25% (b)(e)

     1,300         1,329,796   

General Motors Financial Co., Inc.,

  

  

6.75%, 6/01/18

     250         275,243   

ING Bank NV, 5.00%,
6/09/21 (a)(c)

     1,150         1,235,997   

Intesa Sanpaolo SpA:

     

2.38%, 12/21/12

     1,700         1,664,835   

6.50%, 2/24/21 (a)

     200         180,048   

Moody’s Corp., 6.06%, 9/07/17

     1,500         1,605,250   

Reynolds Group Issuer, Inc.:

     

7.13%, 4/15/19

     115         122,188   

7.88%, 8/15/19

     320         352,800   

9.88%, 8/15/19 (a)

     145         153,700   

WMG Acquisition Corp., 9.50%,

     

6/15/16

     100         109,625   
     

 

 

 
        20,902,775   

 

 

Diversified Telecommunication Services — 4.1%

  

  

AT&T, Inc., 6.30%, 1/15/38 (c)

     2,000         2,656,534   

Level 3 Financing, Inc.:

     

8.13%, 7/01/19

     1,577         1,659,792   

8.63%, 7/15/20

     370         396,825   

Telecom Italia Capital SA, 6.18%,

     

6/18/14

     500         507,500   

Telefonica Emisiones SAU,
5.46%, 2/16/21

     660         593,997   

Verizon Communications, Inc. (c):

     

1.95%, 3/28/14

     1,775         1,816,743   

7.35%, 4/01/39

     1,150         1,740,034   
 

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    2

 

 

Schedule of Investments (continued)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

 

    

Par

(000)

     Value  

Corporate Bonds

     

 

 

Diversified Telecommunication Services (concluded)

  

Windstream Corp., 7.88%,

     

11/01/17

   USD 400       $ 439,500   
     

 

 

 
        9,810,925   

 

 

Electric Utilities — 3.2%

     

CMS Energy Corp., 5.05%, 3/15/22

     550         586,332   

Duke Energy Corp., 3.55%,

     

9/15/21

     825         892,414   

Great Plains Energy, Inc., 5.29%,

     

6/15/22 (d)

     800         884,230   

Mirant Mid Atlantic Pass Through Trust, Series B, 9.13%, 6/30/17

     248         262,842   

Nisource Finance Corp.:

     

6.40%, 3/15/18

     500         588,751   

5.25%, 2/15/43

     550         601,126   

Oncor Electric Delivery Co. LLC (a)(c):

  

  

4.10%, 6/01/22

     600         637,903   

5.30%, 6/01/42

     400         454,367   

Progress Energy, Inc., 7.00%,

     

10/30/31 (c)

     2,000         2,695,396   
     

 

 

 
        7,603,361   

 

 

Electronic Equipment, Instruments & Components — 0.3%

  

Jabil Circuit, Inc., 8.25%, 3/15/18

     400         480,000   

NXP BV, 3.21%, 10/15/13 (b)

     198         197,258   
     

 

 

 
        677,258   

 

 

Energy Equipment & Services — 3.4%

  

  

Atwood Oceanics, Inc., 6.50%,

     

2/01/20

     55         58,575   

Cie Generale de Geophysique - Veritas, 6.50%, 6/01/21

     340         350,200   

Energy Transfer Partners LP,

     

5.20%, 2/01/22

     1,500         1,657,552   

Ensco Plc, 4.70%, 3/15/21

     960         1,076,883   

Frac Tech Services LLC, 8.13%,

     

11/15/18 (a)

     525         532,875   

Hornbeck Offshore Services, Inc.,

     

5.88%, 4/01/20 (a)

     135         135,000   

Key Energy Services, Inc., 6.75%,

     

3/01/21

     360         360,900   

MEG Energy Corp. (a):

     

6.50%, 3/15/21

     465         482,438   

6.38%, 1/30/23

     110         112,613   

Oil States International, Inc., 6.50%,

     

6/01/19

     245         257,863   

Peabody Energy Corp., 6.25%,

     

11/15/21 (a)

     755         745,562   

Precision Drilling Corp., 6.50%,

     

12/15/21

     210         218,400   

Transocean, Inc.:

     

6.50%, 11/15/20

     545         650,831   

6.38%, 12/15/21

     660         794,007   
    

Par

(000)

     Value  

Corporate Bonds

     

 

 

Energy Equipment & Services (concluded)

  

  

Transocean, Inc. (concluded):

     

6.80%, 3/15/38

   USD 475       $ 588,136   
     

 

 

 
        8,021,835   

 

 

Food Products — 1.2%

     

Kraft Foods Group, Inc., 5.00%,

     

6/04/42 (a)

     625         704,954   

Kraft Foods, Inc.:

     

6.50%, 8/11/17

     800         982,928   

6.13%, 8/23/18

     800         992,624   

Smithfield Foods, Inc., 10.00%,

     

7/15/14

     187         220,193   
     

 

 

 
        2,900,699   

 

 

Gas Utilities — 0.2%

     

El Paso Natural Gas Co., 8.63%,

     

1/15/22

     335         431,741   

 

 

Health Care Equipment & Supplies — 0.6%

  

  

Fresenius US Finance II, Inc.,

     

9.00%, 7/15/15 (a)

     1,000         1,153,750   

Teleflex, Inc., 6.88%, 6/01/19

     240         255,000   
     

 

 

 
        1,408,750   

 

 

Health Care Providers & Services — 3.8%

  

  

Aetna, Inc., 6.75%, 12/15/37 (c)

     850         1,176,231   

Aviv Healthcare Properties LP,

     

7.75%, 2/15/19

     220         227,425   

HCA, Inc.:

     

8.50%, 4/15/19

     105         118,322   

6.50%, 2/15/20

     1,145         1,279,537   

7.25%, 9/15/20

     1,645         1,838,287   

INC Research LLC, 11.50%,

     

7/15/19 (a)

     340         336,600   

inVentiv Health, Inc., 10.00%,

     

8/15/18 (a)

     135         111,375   

Tenet Healthcare Corp.:

     

10.00%, 5/01/18

     745         864,200   

8.88%, 7/01/19

     550         623,563   

UnitedHealth Group, Inc., 6.88%,

     

2/15/38 (c)

     1,725         2,481,806   
     

 

 

 
        9,057,346   

 

 

Health Care Technology — 1.4%

     

Amgen, Inc.:

     

5.15%, 11/15/41 (c)

     2,015         2,230,351   

5.65%, 6/15/42

     20         23,463   

5.38%, 5/15/43 (c)

     825         940,684   
     

 

 

 
        3,194,498   

 

 

Household Durables — 0.4%

     

Beazer Homes USA, Inc., 6.63%,

     

4/15/18 (a)

     335         340,444   

Standard Pacific Corp., 8.38%,

     

1/15/21

     435         488,287   
     

 

 

 
        828,731   

 

 
 

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    3

 

 

Schedule of Investments (continued)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

    

Par

(000)

     Value  

Corporate Bonds

     

 

 

Independent Power Producers & Energy Traders — 1.1%

  

The AES Corp.:

     

9.75%, 4/15/16

   USD 480       $ 577,200   

7.38%, 7/01/21 (a)

     70         80,062   

Calpine Corp., 7.25%,
10/15/17 (a)

     220         238,150   

Energy Future Intermediate Holding Co. LLC, 10.00%, 12/01/20

     915         1,007,644   

Exelon Generation Co. LLC, 4.00%, 10/01/20

     93         96,340   

Laredo Petroleum, Inc.:

     

9.50%, 2/15/19

     140         158,200   

7.38%, 5/01/22 (a)

     130         137,150   

QEP Resources, Inc., 5.38%,

     

10/01/22

     280         287,700   
     

 

 

 
        2,582,446   

 

 

Industrial Conglomerates — 0.3%

  

  

The ADT Corp., 4.88%,
7/15/42 (a)

     645         690,082   

 

 

Insurance — 5.4%

     

American International Group, Inc. (c):

  

  

3.80%, 3/22/17

     725         753,511   

8.25%, 8/15/18

     300         369,605   

6.40%, 12/15/20

     1,235         1,444,885   

Aon Corp., 5.00%, 9/30/20 (c)

     1,500         1,699,368   

Fairfax Financial Holdings Ltd.,

     

5.80%, 5/15/21 (a)

     1,500         1,529,824   

Forethought Financial Group, Inc.,

     

8.63%, 4/15/21 (a)

     525         548,361   

Genworth Financial, Inc., 7.63%,

     

9/24/21

     480         470,013   

Manulife Financial Corp., 4.90%,

     

9/17/20 (c)

     1,075         1,163,959   

MPL 2 Acquisition Canco, Inc.,

     

9.88%, 8/15/18 (a)

     210         176,925   

Principal Financial Group, Inc.,

     

8.88%, 5/15/19 (c)

     475         631,662   

Prudential Financial, Inc., 6.63%, 12/01/37 (c)

     1,725         2,063,245   

XL Group Ltd., 5.75%,
10/01/21 (c)

     1,740         1,991,642   
     

 

 

 
        12,843,000   

 

 

IT Services — 1.0%

     

Ceridian Corp., 8.88%, 7/15/19 (a)

     845         889,363   

Epicor Software Corp., 8.63%, 5/01/19

     340         348,500   

First Data Corp.:

     

7.38%, 6/15/19 (a)(c)

     455         474,906   

8.25%, 1/15/21 (a)

     40         39,900   

12.63%, 1/15/21

     340         343,400   
    

Par

(000)

     Value  

Corporate Bonds

     

 

 

IT Services (concluded)

     

SunGard Data Systems, Inc., 7.38%, 11/15/18

   USD 350       $ 371,875   
     

 

 

 
        2,467,944   

 

 

Life Sciences Tools & Services — 1.9%

  

  

Bio-Rad Laboratories, Inc., 8.00%, 9/15/16

     1,830         2,003,850   

Life Technologies Corp., 6.00%, 3/01/20

     2,000         2,390,590   
     

 

 

 
        4,394,440   

 

 

Machinery — 1.1%

     

Ingersoll-Rand Global Holding Co., Ltd., 9.50%, 4/15/14

     1,725         1,955,110   

UR Merger Sub Corp. (a):

     

5.75%, 7/15/18

     114         119,130   

7.38%, 5/15/20

     290         306,675   

7.63%, 4/15/22

     267         284,021   
     

 

 

 
        2,664,936   

 

 

Media — 9.5%

     

AMC Networks, Inc., 7.75%,

     

7/15/21

     190         215,175   

CCH II LLC, 13.50%, 11/30/16

     1,128         1,249,260   

Comcast Corp., 6.30%, 11/15/17 (c)

     1,725         2,119,673   

Cox Communications, Inc., 8.38%,

     

3/01/39 (a)

     1,725         2,596,473   

CSC Holdings LLC:

     

8.50%, 4/15/14

     330         363,825   

8.63%, 2/15/19

     580         680,050   

DIRECTV Holdings LLC, 5.00%, 3/01/21

     1,250         1,431,707   

DISH DBS Corp., 7.00%, 10/01/13

     850         895,688   

Intelsat Jackson Holdings SA,
7.25%, 4/01/19

     150         160,313   

Intelsat Luxemburg SA:

     

11.25%, 2/04/17

     430         447,200   

11.50%, 2/04/17 (f)

     190         197,600   

The Interpublic Group of Cos., Inc., 10.00%, 7/15/17

     575         646,875   

The New York Times Co., 6.63%, 12/15/16

     1,725         1,802,625   

News America, Inc., 6.15%, 3/01/37

     1,325         1,607,619   

Time Warner Cable, Inc., 6.75%, 6/15/39

     1,950         2,549,044   

Time Warner, Inc., 7.70%, 5/01/32

     2,000         2,779,074   

Unitymedia Hessen GmbH & Co.
KG (a):

     

8.13%, 12/01/17

     763         827,855   

7.50%, 3/15/19

     500         529,517   
 

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    4

 

 

Schedule of Investments (continued)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

    

Par

(000)

     Value  

Corporate Bonds

     

 

 

Media (concluded)

     

Virgin Media Secured Finance Plc,

  

  

6.50%, 1/15/18

   USD      1,300       $ 1,430,000   
     

 

 

 
        22,529,573   

 

 

Metals & Mining — 2.0%

     

AngloGold Ashanti Holdings Plc,

     

5.13%, 8/01/22

     700         718,448   

Barrick Gold Corp., 2.90%,

     

5/30/16 (c)

     550         578,156   

FMG Resources August 2006 Property Ltd. (a):

  

  

6.88%, 2/01/18

     50         50,500   

6.88%, 4/01/22

     40         39,900   

Freeport-McMoRan Copper & Gold, Inc., 3.55%, 3/01/22

     675         681,421   

Freeport-McMoRan Corp., 7.13%,

     

11/01/27

     1,400         1,764,661   

New Gold, Inc., 7.00%,
4/15/20 (a)

     65         67,763   

Novelis, Inc., 8.75%, 12/15/20

     470         521,700   

Teck Resources Ltd., 10.75%,

     

5/15/19

     190         229,900   
     

 

 

 
        4,652,449   

 

 

Multi-Utilities — 1.5%

     

CenterPoint Energy, Inc.:

     

5.95%, 2/01/17

     1,500         1,725,798   

6.50%, 5/01/18

     1,600         1,926,442   
     

 

 

 
        3,652,240   

 

 

Oil, Gas & Consumable Fuels — 12.9%

  

  

Alpha Natural Resources, Inc. (c):

  

  

6.00%, 6/01/19

     50         43,500   

6.25%, 6/01/21

     70         60,550   

Berry Petroleum Co., 6.38%,

     

9/15/22

     205         217,300   

BP Capital Markets Plc (c):

     

3.88%, 3/10/15

     700         754,767   

3.20%, 3/11/16

     925         992,558   

Chesapeake Energy Corp. (c):

     

6.63%, 8/15/20

     235         233,825   

6.13%, 2/15/21

     215         210,163   

Chesapeake Midstream Partners LP:

  

  

5.88%, 4/15/21

     285         284,287   

6.13%, 7/15/22

     230         231,725   

Concho Resources, Inc., 5.50%,

     

10/01/22

     205         207,563   

CONSOL Energy, Inc., 6.38%,

     

3/01/21

     220         214,500   

Copano Energy LLC, 7.13%,

     

4/01/21

     240         249,000   

DCP Midstream LLC, 4.75%, 9/30/21 (a)

     158         167,752   

El Paso Pipeline Partners Operating Co. LLC:

  

  

6.50%, 4/01/20

     680         799,025   
    

Par

(000)

     Value  

Corporate Bonds

     

 

 

Oil, Gas & Consumable Fuels (continued)

  

  

El Paso Pipeline Partners Operating Co. LLC (concluded):

   

  

5.00%, 10/01/21

   USD 300       $ 327,239   

Enbridge Energy Partners LP,

     

9.88%, 3/01/19

     1,000         1,372,332   

Energy Transfer Partners LP,

     

6.50%, 2/01/42

     650         740,565   

Energy XXI Gulf Coast, Inc., 7.75%,

     

6/15/19

     500         525,000   

Enterprise Products Operating LLC,

     

6.65%, 4/15/18

     2,000         2,418,548   

EP Energy LLC / EP Energy Finance, Inc., 6.88%, 5/01/19 (a)

     230         245,525   

Forest Oil Corp., 8.50%, 2/15/14

     600         627,000   

Kinder Morgan Energy Partners LP,

     

6.85%, 2/15/20 (c)

     2,000         2,471,628   

Kodiak Oil & Gas Corp., 8.13%,

     

12/01/19 (a)

     90         95,850   

Linn Energy LLC:

     

6.25%, 11/01/19 (a)

     545         539,550   

7.75%, 2/01/21

     220         232,100   

Marathon Petroleum Corp., 3.50%,

     

3/01/16

     650         688,213   

MarkWest Energy Partners LP,

     

6.25%, 6/15/22

     255         267,112   

Newfield Exploration Co.:

     

6.88%, 2/01/20

     275         301,125   

5.63%, 7/01/24

     200         213,250   

Nexen, Inc., 6.40%, 5/15/37

     670         850,682   

Oasis Petroleum, Inc.:

     

7.25%, 2/01/19

     130         135,200   

6.50%, 11/01/21

     145         146,088   

OGX Petroleo e Gas Participacoes SA, 8.50%, 6/01/18 (a)(c)

     215         189,469   

ONEOK Partners LP, 8.63%,

     

3/01/19

     1,725         2,259,308   

Petrobras International Finance Co.:

     

3.88%, 1/27/16

     1,800         1,871,257   

5.38%, 1/27/21

     1,075         1,202,583   

Petrohawk Energy Corp., 10.50%,

     

8/01/14

     300         330,798   

Petroleum Geo-Services ASA,

     

7.38%, 12/15/18 (a)

     310         322,400   

Phillips 66, 2.95%, 5/01/17 (a)

     515         540,193   

Pioneer Natural Resources Co.:

     

6.65%, 3/15/17

     320         375,920   

6.88%, 5/01/18

     240         289,470   

Premier Oil Plc, 5.00%, 6/09/18

     1,625         1,681,875   

Range Resources Corp.:

     

6.75%, 8/01/20

     255         280,500   

5.75%, 6/01/21

     160         170,000   

Ruby Pipeline LLC, 6.00%,

     

4/01/22 (a)

     1,425         1,548,932   
 

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    5

 

 

Schedule of Investments (continued)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

   

Par

(000)

    Value  

Corporate Bonds

   

 

 

Oil, Gas & Consumable Fuels (concluded)

  

 

Samson Investment Co., 9.75%,
2/15/20 (a)

  USD 30      $ 31,125   

SandRidge Energy, Inc.:

   

7.50%, 3/15/21

    95        96,900   

8.13%, 10/15/22 (a)

    105        109,200   

SM Energy Co.:

   

6.63%, 2/15/19

    110        113,850   

6.50%, 11/15/21

    165        170,775   

6.50%, 1/01/23 (a)

    105        107,100   

Targa Resources Partners LP,
6.88%, 2/01/21

    180        189,900   

Tennessee Gas Pipeline Co.,
8.00%, 2/01/16

    400        471,751   

Western Gas Partners LP, 5.38%,
6/01/21

    725        815,125   

The Williams Cos., Inc., 8.75%,
3/15/32

    422        587,211   
   

 

 

 
          30,619,164   

 

 

Paper & Forest Products — 2.6%

  

 

Boise Paper Holdings LLC:

   

9.00%, 11/01/17

    60        67,050   

8.00%, 4/01/20

    235        264,962   

International Paper Co.:

   

7.50%, 8/15/21

        1,625        2,118,784   

8.70%, 6/15/38

    900        1,317,955   

7.30%, 11/15/39

    1,725        2,268,182   

Longview Fibre Paper & Packaging,
Inc., 8.00%, 6/01/16 (a)

    160        165,200   
   

 

 

 
      6,202,133   

 

 

Pharmaceuticals — 1.4%

  

 

Merck & Co., Inc., 6.50%,
12/01/33

    990        1,498,170   

Pfizer, Inc., 7.20%, 3/15/39 (c)

    235        380,201   

Roche Holdings, Inc., 7.00%,
3/01/39 (a)(c)

    865        1,345,274   

Valeant Pharmaceuticals
International, 6.50%, 7/15/16 (a)

    125        132,500   
   

 

 

 
      3,356,145   

 

 

Professional Services — 0.0%

  

 

FTI Consulting, Inc., 7.75%,
10/01/16

    100        103,250   

 

 

Real Estate Investment Trusts (REITs) — 2.9%

  

 

AvalonBay Communities, Inc.,
6.10%, 3/15/20 (c)

    1,725        2,120,943   

Developers Diversified Realty Corp.:

   

4.75%, 4/15/18

    315        335,222   

7.88%, 9/01/20

    375        463,054   

ERP Operating LP, 5.75%, 6/15/17

    1,715        2,021,687   

HCP, Inc., 5.38%, 2/01/21

    500        580,731   
   

Par

(000)

    Value  

Corporate Bonds

   

 

 

Real Estate Investment Trusts (REITs) (concluded)

  

 

UDR, Inc., 4.25%, 6/01/18

  USD 725      $ 789,404   

Ventas Realty LP / Ventas Capital
Corp., 4.75%, 6/01/21

    550        603,551   
   

 

 

 
      6,914,592   

 

 

Real Estate Management & Development — 0.2%

  

 

Realogy Corp., 7.63%, 1/15/20 (a)(c)

    295        316,756   

Shea Homes LP, 8.63%, 5/15/19

    230        250,125   
   

 

 

 
      566,881   

 

 

Road & Rail – 1.5%

  

 

Florida East Coast Railway Corp.,
8.13%, 2/01/17

    80        84,200   

The Hertz Corp., 6.75%, 4/15/19

    188        197,400   

Norfolk Southern Corp., 6.00%,
3/15/05 (c)

        2,500        3,201,935   
   

 

 

 
      3,483,535   

 

 

Semiconductors & Semiconductor Equipment — 0.6%

  

Advanced Micro Devices, Inc.,
7.75%, 8/01/20

    400        419,000   

KLA-Tencor Corp., 6.90%, 5/01/18

    918        1,103,585   
   

 

 

 
      1,522,585   

 

 

Software — 0.2%

   

Infor US, Inc., (FKA Lawson Software,
Inc.), 9.38%, 4/01/19 (a)

    220        235,400   

Symantec Corp., 2.75%, 6/15/17

    300        304,078   
   

 

 

 
      539,478   

 

 

Specialty Retail — 1.5%

   

AutoNation, Inc., 6.75%, 4/15/18

    940            1,044,575   

Limited Brands, Inc., 7.00%,
5/01/20

    470        522,287   

QVC, Inc. (a):

   

7.38%, 10/15/20

    50        55,934   

5.13%, 7/02/22

    710        739,954   

Sally Holdings LLC / Sally Capital,
Inc., 6.88%, 11/15/19

    290        323,713   

VF Corp., 5.95%, 11/01/17 (c)

    725        863,814   
   

 

 

 
      3,550,277   

 

 

Tobacco — 2.8%

   

Altria Group, Inc., 10.20%, 2/06/39 (c)

    1,919        3,324,504   

BAT International Finance Plc,
3.25%, 6/07/22 (a)

    675        691,013   

Lorillard Tobacco Co., 3.50%,
8/04/16

    1,175        1,244,941   

Philip Morris International, Inc.,
2.50%, 5/16/16 (c)

    1,225        1,292,344   
   

 

 

 
      6,552,802   

 

 
 

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    6        

 

 

Schedule of Investments (continued)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

   

Par

(000)

    Value  

Corporate Bonds

   

 

 

Trading Companies & Distributors — 0.2%

  

 

Doric Nimrod Air Finance Alpha Ltd., Series 2012-1, Class A, 5.13%, 11/30/24 (a)

  USD 465      $ 471,975   

 

 

Transportation Infrastructure — 1.0%

  

 

Penske Truck Leasing Co. LP / PTL Finance Corp. (a):

   

3.75%, 5/11/17

        1,475        1,495,752   

4.88%, 7/11/22

    800        799,044   
   

 

 

 
      2,294,796   

 

 

Wireless Telecommunication Services — 5.2%

  

 

America Movil SAB de CV, 2.38%, 9/08/16 (c)

    1,780        1,836,130   

American Tower Corp.:

   

4.50%, 1/15/18

    925        992,008   

5.05%, 9/01/20

    500        536,276   

Cricket Communications, Inc., 7.75%, 5/15/16

    325        344,500   

Crown Castle International Corp., 9.00%, 1/15/15

    430        468,969   

Crown Castle Towers LLC (a):

   

5.50%, 1/15/37

    575        642,137   

4.17%, 8/15/37

    1,000        1,062,158   

6.11%, 1/15/40

    625        736,004   

Nextel Communications, Inc., Series E, 6.88%, 10/31/13

    127        127,476   

SBA Telecommunications, Inc., 5.75%, 7/15/20 (a)

    120        126,300   

SBA Tower Trust, 5.10%, 4/15/42 (a)

    2,500        2,734,420   

Sprint Capital Corp., 6.88%, 11/15/28

    480        429,600   

Sprint Nextel Corp. (a):

   

9.00%, 11/15/18

    760        887,300   

7.00%, 3/01/20

    1,290        1,406,100   
   

 

 

 
      12,329,378   

 

 

Total Corporate Bonds – 110.4%

  

    261,452,685   

 

 
   
   
   

Floating Rate Loan Interests (b)

   

 

 

Oil, Gas & Consumable Fuels — 0.1%

  

 

Chesapeake Energy Corp., Unsecured Term Loan, 8.50%, 12/01/17

    280        279,185   

 

 
   
   

Municipal Bonds – 0.9%

  

 

 

 

Metropolitan Transportation Authority, RB, Build America Bonds, 6.55%, 11/15/31

    1,675        2,153,916   

 

 
   

Par

(000)

    Value  

Preferred Securities

   

 

 

Capital Trusts

   
   

 

 

Capital Markets — 4.0%

  

 

RBS Capital Trust I, 4.71% (b)(e)

  USD 500      $ 302,500   

RBS Capital Trust II, 6.43% (b)(e)

    625        471,875   

State Street Capital Trust III, 5.46% (b)(e)

    1,385        1,392,479   

State Street Capital Trust IV, 1.47%, 6/15/37 (b)

        9,675            7,216,157   
   

 

 

 
      9,383,011   

 

 

Commercial Banks — 2.3%

  

 

Barclays Bank Plc (a)(b)(e):

   

5.93%

    1,700        1,551,250   

7.43%

    325        324,332   

BNP Paribas, 7.20% (a)(b)(c)(e)

    700        634,200   

Credit Agricole SA, 8.38% (a)(b)(c)(e)

    725        634,375   

Dresdner Funding Trust I, 8.15%,
6/30/31 (a)

    595        484,925   

National City Preferred Capital Trust I, 12.00% (b)(e)

    600        617,652   

NBP Capital Trust III, 7.38% (e)

    2,000        1,320,000   
   

 

 

 
      5,566,734   

 

 

Consumer Finance — 0.3%

  

 

Capital One Capital V, 10.25%, 8/15/39

    750        776,250   

 

 

Diversified Financial Services — 3.5%

  

 

JPMorgan Chase Capital XXI, Series U, 1.42%, 2/02/37 (b)

    7,125        4,916,506   

JPMorgan Chase Capital XXIII, 1.47%, 5/15/47 (b)

    4,790        3,321,228   
   

 

 

 
      8,237,734   

 

 

Electric Utilities — 0.4%

  

 

PPL Capital Funding, 6.70%, 3/30/67 (b)

    900        920,250   

 

 

Insurance — 8.0%

  

 

The Allstate Corp., 6.50%, 5/15/67 (b)

    900        927,000   

American General Capital II, 8.50%, 7/01/30

    100        109,027   

American International Group, Inc., 8.18%, 5/15/68 (b)

    400        456,000   

AXA SA, 6.38% (a)(b)(e)

    900        731,250   

The Chubb Corp., 6.38%, 3/29/67 (b)

    900        940,500   

Liberty Mutual Group, Inc., 10.75%,
6/15/88 (a)(b)

    900        1,246,500   

Lincoln National Corp., 7.00%,
5/17/66 (b)

    900        893,250   

MetLife, Inc., 6.40%, 12/15/66

    1,400        1,462,268   

Mitsui Sumitomo Insurance Co., Ltd., 7.00%, 3/15/72 (a)(b)

    700        737,973   
 

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    7

 

 

Schedule of Investments (continued)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

   

Par

(000)

    Value  

Capital Trusts

   

 

 

Insurance (concluded)

  

 

Northwestern Mutual Life Insurance, 6.06%, 3/30/40 (a)(c)

  USD 1,800      $ 2,338,330   

Prudential Plc, 6.50% (e)

    6,000        5,754,000   

Reinsurance Group of America, 6.75%, 12/15/65 (b)

    1,300        1,230,221   

Swiss Re Capital I LP, 6.85% (a)(b)(e)

        1,000        978,015   

ZFS Finance (USA), Trust II, 6.45%, 12/15/65 (a)(b)

    1,150        1,184,500   
   

 

 

 
          18,988,834   

 

 

Oil, Gas & Consumable Fuels — 0.4%

  

 

TransCanada PipeLines Ltd., 6.35%, 5/15/67 (b)

    900        939,495   

 

 

Total Capital Trusts – 18.9%

  

    44,812,308   

 

 
   
   
    Shares        

Preferred Stocks

   

 

 

Aerospace & Defense — 0.1%

  

 

United Technologies Corp., 7.50% (g)

    4,400        232,100   

 

 

Diversified Financial Services — 0.5%

  

 

Ally Financial, Inc., 7.00% (a)

    1,250        1,123,281   

 

 

Total Preferred Stocks – 0.6%

  

    1,355,381   

 

 
   
   
   

Trust Preferreds

   

 

 

Diversified Financial Services — 0.3%

  

 

GMAC Capital Trust I,
Series 2, 8.13% (b)

    26,490        645,826   

 

 

Machinery — 0.4%

  

 

Stanley Black & Decker, Inc., 5.75%

    30,000        756,300   

 

 

Total Trust Preferreds – 0.7%

  

    1,402,126   

 

 

Total Preferred Securities – 20.2%

  

    47,569,815   

 

 
   
   
   

Par

(000)

       

US Government Sponsored Agency Securities – 0.3%

  

 

 

Fannie Mae, 2.61%, 10/09/19 (c)(h)

  USD 805        668,069   

 

 
   

Par

(000)

    Value  

US Treasury Obligations

   

 

 

US Treasury Bonds (c):

  

3.75%, 8/15/41

  USD 713      $ 890,470   

3.13%, 11/15/41

    335        373,525   

3.13%, 2/15/42

    1,600        1,783,000   

3.00%, 5/15/42

    1,700        1,848,750   

US Treasury Notes:

   

0.88%, 12/31/16 (c)

        9,300        9,445,312   

0.63%, 5/31/17 (c)

    455        456,102   

1.75%, 5/15/22

    70        71,652   

 

 

Total US Treasury Obligations – 6.3%

  

      14,868,811   

 

 
   
   
    Shares        

Warrants (i)

   

 

 

Media — 0.0%

  

 

Cumulus Media, Inc. (Issued/Exercisable 9/16/11, 0.01 Share for 1 Warrant, Expires 6/03/30, Strike Price $2.80)

    2,345        13,060   

 

 

Total Long-Term Investments

(Cost – $311,987,627) – 139.0%

      329,035,080   

 

 
   
   
   

Notional

Amount

(000)

       

Options Purchased

   

 

 

Over-the-Counter Interest Rate Call Swaptions — 0.1%

  

Pay a fixed rate of 2.36% and receive a floating rate based on 3-month LIBOR, Expires 10/17/12, Broker Barclays Plc

  USD 300        10,606   

Pay a fixed rate of 0.71% and receive a floating rate based on 3-month LIBOR, Expires 6/28/13, Broker Deutsche Bank AG

    17,900        100,025   

Pay a fixed rate of 1.16% and receive a floating rate based on 3-month LIBOR, Expires 7/11/13, Broker Citigroup, Inc.

    3,900        51,533   

Receive a fixed rate of 2.61% and pay a floating rate based on 3-month LIBOR, expires 1/13/14, Broker Credit Suisse Group AG

    500        37,774   
   

 

 

 
      199,938   

 

 

 

 

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    8

 

 

Schedule of Investments (continued)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

(Percentages shown are based on Net Assets)

 

   

Notional

Amount

(000)

    Value  

Options Purchased

   

 

 

Over-the-Counter Interest Rate Put Swaptions — 0.0%

  

Pay a fixed rate of 2.36% and receive a floating rate based on 3-month LIBOR, Expires 10/17/12, Broker Barclays Plc

  USD 300      $ 11,512   

Pay a fixed rate of 0.71% and receive a floating rate based on 3-month LIBOR, Expires 6/28/13, Broker Deutsche Bank AG

        17,900        31,406   

Pay a fixed rate of 1.16% and receive a floating rate based on 3-month LIBOR, Expires 7/11/13, Broker Citigroup, Inc.

    3,900        39,626   

Pay a fixed rate of 2.61% and receive a floating rate based on 3-month LIBOR, Expires 1/13/14, Broker Credit Suisse Group AG

    500        9,587   

Pay a fixed rate of 4.50% and receive a floating rate based on 3-month LIBOR, Expires 2/02/17, Broker Deutsche Bank AG

    2,300        52,164   
   

 

 

 
      144,295   

 

 

Total Options Purchased

(Cost – $ 361,975) – 0.1%

      344,233   

 

 

Total Investments Before Options Written

(Cost – $312,349,602*) – 139.1%

  

  

    329,379,313   

 

 
   
   
   

Options Written

  

 

 

 

Over-the-Counter Interest Rate Call Swaptions — (0.5)%

  

Pay a fixed rate of 4.75% and receive a floating rate based on 3-month LIBOR, Expires 3/24/14, Broker Citigroup, Inc.

    5,000        (1,249,147)   

Pay a fixed rate of 1.40% and receive a floating rate based on 3-month LIBOR, Expires 5/08/14, Broker Citigroup, Inc.

    1,300        (22,867)   

Pay a fixed rate of 1.00% and receive a floating rate based on 3-month LIBOR, Expires 7/11/14, Broker Credit Suisse Group AG

    4,100        (29,103)   
   

 

 

 
      (1,301,117)   

 

 

Over-the-Counter Interest Rate Put Swaptions — (0.1)%

  

Receive a fixed rate of 4.75% and pay a floating rate based on 3-month LIBOR, Expires 3/24/14, Broker Citigroup, Inc.

    5,000        (14,171)   
   

Notional

Amount

(000)

    Value  

Options Written

   

 

 

Over-the-Counter Interest Rate Put Swaptions (concluded)

  

Receive a fixed rate of 2.40% and pay a floating rate based on 3-month LIBOR, Expires 5/08/14, Broker Citigroup, Inc.

  USD 1,300      $ (9,028)   

Pay a fixed rate of 2.00% and receive a floating rate based on 3-month LIBOR, Expires 7/11/14, Broker Credit Suisse Group AG

        4,100        (48,565)   

Receive a fixed rate of 6.00% and pay a floating rate based on 3-month LIBOR, Expires 2/02/17, Broker Deutsche Bank AG

    4,600        (52,641)   
   

 

 

 
      (124,405)   

 

 

Total Options Written

(Premiums Received – $787,060) – (0.6)%

  

  

    (1,425,522)   

 

 

 

Total Investments, Net of Options
Written – 138.5%

    

    327,953,791   

 

Liabilities in Excess of Other Assets – (38.5)%

  

    (91,211,957)   
   

 

 

 

 

Net Assets – 100.0%

    $     236,741,834   
   

 

 

 

 

 

* As of July 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

Tax cost

   $ 312,206,739   
  

 

 

 

Gross unrealized appreciation

   $      25,600,467   

Gross unrealized depreciation

     (8,427,893)   
  

 

 

 

Net unrealized appreciation

   $ 17,172,574   
  

 

 

 

 

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.
(b) Variable rate security. Rate shown is as of report date.
(c) All or a portion of security has been pledged as collateral in connection with open reverse repurchase agreements.
(d) Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.
(e) Security is perpetual in nature and has no stated maturity date.
(f) Represents a payment-in-kind security which may pay interest/dividends in additional par/shares.
(g) Convertible security.
(h) Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.
(i) Warrants entitle the Trust to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.
 

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    9

 

 

Schedule of Investments (continued)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

 

Portfolio Abbreviations

To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:

 

Fannie Mae

   Federal National Mortgage Association

FKA

   Formerly Known As

LIBOR

   London Interbank Offered Rate

RB

   Revenue Bonds

USD

   US Dollar

 

• For Trust compliance purposes, the Trust’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by Trust management. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.
 

 

• Reverse repurchase agreements outstanding as of July 31, 2012 were as follows:

 

Counterparty   

Interest

Rate

  

Trade

Date

  

Maturity

Date 1

  

Net closing

Amount

  

Face

Amount

UBS Securities LLC

   (1.25)%    2/02/12    Open    $                248,441    $                250,012

Barclays Capital, Inc.

   0.35%    4/03/12    Open            7,503,541            7,494,797

BNP Paribas Securities Corp.

   0.11%    4/03/12    Open    628,230    628,000

BNP Paribas Securities Corp.

   0.10%    4/03/12    Open    779,212    778,952

UBS Securities LLC

   0.38%    4/04/12    Open    7,084,012    7,075,125

UBS Securities LLC

   0.35%    4/04/12    Open    8,711,817    8,701,750

UBS Securities LLC

   0.30%    4/04/12    Open    2,405,783    2,403,400

UBS Securities LLC

   0.31%    4/04/12    Open    477,864    477,375

UBS Securities LLC

   0.10%    4/16/12    Open    348,103    348,000

Barclays Capital, Inc.

   0.35%    4/25/12    Open    2,074,037    2,072,063

UBS Securities LLC

   0.25%    5/01/12    Open    590,127    589,750

UBS Securities LLC

   0.38%    5/01/12    Open    1,516,596    1,515,125

UBS Securities LLC

   0.37%    5/01/12    Open    1,727,820    1,726,188

UBS Securities LLC

   0.00%    5/07/12    Open    174,687    174,687

Barclays Capital, Inc.

   0.35%    5/08/12    Open    812,921    812,250

UBS Securities LLC

   0.25%    5/10/12    Open    410,191    409,955

UBS Securities LLC

   0.34%    5/11/12    Open    1,062,385    1,061,563

Credit Suisse Securities (USA) LLC

   0.35%    5/14/12    Open    797,487    796,875

UBS Securities LLC

   0.34%    5/14/12    Open    3,518,213    3,515,590

Credit Suisse Securities (USA) LLC

   0.35%    5/15/12    Open    803,953    803,344

Deutsche Bank Securities Inc.

   (1.00)%    5/16/12    Open    199,323    199,750

Credit Suisse Securities (USA) LLC

   0.35%    5/18/12    Open    1,727,859    1,726,600

BNP Paribas Securities Corp.

   0.21%    5/21/12    Open    1,714,720    1,714,000

Credit Suisse Securities (USA) LLC

   0.35%    5/22/12    Open    1,225,189    1,224,344

Credit Suisse Securities (USA) LLC

   0.35%    5/24/12    Open    821,614    821,063

Deutsche Bank Securities, Inc.

   0.19%    5/29/12    Open    354,382    354,262

UBS Securities LLC

   0.34%    5/31/12    Open    1,609,692    1,608,750

Barclays Capital, Inc.

   0.35%    6/05/12    Open    2,908,077    2,906,466

Credit Suisse Securities (USA) LLC

   0.35%    6/05/12    Open    1,085,414    1,084,813

Deutsche Bank Securities Inc.

   (1.50)%    6/07/12    Open    55,348    55,475

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    10

 

 

Schedule of Investments (continued)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

 

• Reverse repurchase agreements outstanding as of July 31, 2012 were as follows (concluded):

 

Counterparty   

Interest

Rate

  

Trade

Date

  

Maturity

Date 1

  

Net closing

Amount

    

Face

Amount

 

Deutsche Bank Securities Inc.

   (1.50)%    6/11/12    Open    $                 39,416       $                 39,500   

Merrill Lynch

   0.20%    6/12/12    Open      438,472         438,350   

Credit Suisse Securities (USA) LLC

   0.35%    6/20/12    Open      3,378,523         3,377,144   

Credit Suisse Securities (USA) LLC

   0.38%    6/20/12    Open      12,331,146         12,325,682   

Credit Suisse Securities (USA) LLC

   (0.25)%    6/28/12    Open      525,282         525,406   

UBS Securities LLC

   0.32%    6/29/12    Open      1,729,507         1,729,000   

BNP Paribas Securities Corp.

   0.15%    7/05/12    Open      1,279,644         1,279,500   

Deutsche Bank Securities Inc.

   0.26%    7/05/12    Open      9,406,459         9,404,625   

Credit Suisse Securities (USA) LLC

   0.35%    7/10/12    Open      810,773         810,600   

Credit Suisse Securities (USA) LLC

   0.35%    7/11/12    Open      553,550         553,437   

Credit Suisse Securities (USA) LLC

   0.35%    7/12/12    Open      997,444         997,250   

Credit Suisse Securities (USA) LLC

   0.35%    7/13/12    Open      1,749,023         1,748,700   

Credit Suisse Securities (USA) LLC

   0.35%    7/16/12    Open      670,354         670,250   

Credit Suisse Securities (USA) LLC

   0.35%    7/25/12    Open      2,799,065         2,798,893   

Credit Suisse Securities (USA) LLC

   0.35%    7/26/12    Open      2,143,427         2,143,281   

Credit Suisse Securities (USA) LLC

   0.30%    7/25/12    Open      2,932,796         2,932,625   

Credit Suisse Securities (USA) LLC

   0.35%    7/31/12    Open      597,912         597,906   

 

 

Total

            $             95,759,831       $             95,702,473   
           

 

 

 

 

1  

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

• Financial futures contracts purchased as of July 31, 2012 were as follows:

 

Contracts    Issue    Exchange    Expiration   

Notional

Value

    

Unrealized

Appreciation

91

   5-Year US Treasury Note    Chicago Board of Trade    September 2012    USD 11,355,094       $        92,260

20

   30-Year US Treasury Bond    Chicago Board of Trade    September 2012    USD         3,020,625       75,789

 

Total

               $      168,049
              

 

 

• Financial futures contracts sold as of July 31, 2012 were as follows:

 

Contracts    Issue    Exchange    Expiration   

Notional

Value

    

Unrealized

Depreciation

250

   10-Year US Treasury Note    Chicago Board of Trade    September 2012    USD 33,664,063       $   (476,133)

48

  

Ultra Long Term US

Treasury Bond

   Chicago Board of Trade    September 2012    USD         8,280,000       (383,854)

 

Total

               $   (859,987)
              

 

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    11

 

 

Schedule of Investments (continued)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

 

• Credit default swaps on single-name issues - buy protection outstanding as of July 31, 2012 were as follows:

 

Issuer   

Pay

Fixed

Rate

   Counterparty   

Expiration

Date

  

Notional

Amount

(000)

    

Unrealized

Appreciation

(Depreciation)

 

The New York Times Co.

   1.00%    Barclays Plc    12/20/16    USD 1,725       $ (14,400)   

Southwest Airlines Co.

   1.00%    Goldman Sachs Group, Inc.    12/20/16    USD 570         (17,736)   

Southwest Airlines Co.

   1.00%    Royal Bank of Scotland Plc    12/20/16    USD 570         (19,832)   

Time Warner, Inc.

   1.00%    Credit Suisse Group AG    3/20/17    USD         3,500         (1,659)   

General Dynamics Corp.

   1.00%    Credit Suisse Group AG    9/20/17    USD 800         (2,886)   

Hewlett-Packard Co.

   1.00%    Credit Suisse Group AG    9/20/17    USD 390         10,981   

Lockheed Martin Corp.

   1.00%    Credit Suisse Group AG    9/20/17    USD 800         (4,753)   

Northrop Grumman Corp.

   1.00%    Credit Suisse Group AG    9/20/17    USD 675         (3,121)   

Raytheon Co.

   1.00%    Credit Suisse Group AG    9/20/17    USD 675         (2,783)   

Viacom, Inc.

   1.00%    Credit Suisse Group AG    9/20/17    USD 1,775         (6,836)   

Hewlett-Packard Co.

   1.00%    JPMorgan Chase & Co.    9/20/17    USD 300                 6,785   

 

 

Total

               $ (56,240)   
              

 

 

 

 

• Credit default swaps on single-name issues - sold protection outstanding as of July 31, 2012 were as follows:

 

Issuer   

Receive

Fixed

Rate

   Counterparty   

Expiration

Date

  

Issuer

Credit

Rating 2

  

Notional

Amount

(000) 3

    

Unrealized

Appreciation

(Depreciation)

 

DIRECTV Holdings LLC

   1.00%    Credit Suisse Group AG    3/20/17    BBB    USD 3,500       $ 86,834   

Anadarko Petroleum Corp.

   1.00%    Credit Suisse Group AG    6/20/17    BBB-    USD 495         10,034   

Comcast Corp.

   1.00%    Credit Suisse Group AG    9/20/17    BBB+    USD 1,775         4,122   

MetLife, Inc.

   1.00%    Deutsche Bank AG    3/20/18    A-    USD         425         (11,615)   

 

 

Total

                  $ 89,375   
                 

 

 

 

 

2  

Using Standard & Poor’s ratings.

 

3  

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

 

• Interest rate swaps outstanding as of July 31, 2012 were as follows:

 

Fixed

Rate

  

Floating

Rate

   Counterparty   

Expiration

Date

  

Notional

Amount

(000)

    

Unrealized

Appreciation

(Depreciation)

 

1.18% 4

   3-month LIBOR    Deutsche Bank AG    4/11/17    USD 10,100       $ (205,967)   

1.10% 4

   3-month LIBOR    Citigroup, Inc.    5/22/17    USD 13,600         (216,573)   

1.10% 4

   3-month LIBOR    Deutsche Bank AG    5/29/17    USD 600         (9,690)   

4.03% 4

   3-month LIBOR    UBS AG    4/18/22    USD       1,000         (190,269)   

2.05% 5

   3-month LIBOR    Credit Suisse Group AG    5/02/22    USD 1,100         46,983   

2.06% 5

   3-month LIBOR    Credit Suisse Group AG    5/08/22    USD 3,400         148,924   

1.80% 5

   3-month LIBOR    Citigroup, Inc.    6/01/22    USD 1,000         19,438   

1.76% 5

   3-month LIBOR    Citigroup, Inc.    6/25/22    USD 1,200         17,967   

2.48% 4

   3-month LIBOR    Credit Suisse Group AG    7/05/42    USD 1,100         (30,632)   

2.26% 4

   3-month LIBOR    Goldman Sachs Group, Inc.    7/26/42    USD 500                 11,132   

 

 

Total

               $ (408,687)   
              

 

 

 

 

4  

Trust pays a fixed rate and receives floating rate.

5

Trust pays a floating rate and receives fixed rate.

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    12

 

 

Schedule of Investments (continued)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

 

• Fair Value Measurements - Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes as follows:

 

  • Level 1 – unadjusted price quotations in active markets/exchanges for identical assets and liabilities

 

  • Level 2 – other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

 

  • Level 3 – unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Trust’s own assumptions used in determining the fair value of investments and derivative financial instruments)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Trust’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Trust’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to the Trust’s most recent financial statements as contained in its semi-annual report.

The following tables summarize the Trust’s investments and derivative financial instruments categorized in the disclosure hierarchy as of July 31, 2012:

      Level 1     Level 2     Level 3     Total  

Assets:

       

Investments:

       

Long Term Investments

       

Asset-Backed Securities

    –      $ 934,289      $  1,095,250      $ 2,029,539   

Corporate Bonds

    –        259,770,810        1,681,875        261,452,685   

Floating Rate Loan Interests

    –        279,185        –        279,185   

Municipal Bonds

    –        2,153,916        –        2,153,916   

Preferred Securities

  $  877,926        46,691,889        –        47,569,815   
      Level 1     Level 2     Level 3     Total  

Assets: (concluded)

  

     

Investments:

       

Long Term Investments

       

US

Government Sponsored Agency Securities

    –        668,069        –        668,069   

US Treasury Obligations

    –        14,868,811        –        14,868,811   

Warrants

    –        13,060        –        13,060   

Total

  $   877,926      $   325,380,029      $ 2,777,125      $   329,035,080   
       
      Level 1     Level 2     Level 3     Total  

Derivative Financial Instruments 1

  

 

Assets:

       

Interest rate contracts

  $ 168,049      $ 588,677        –      $ 756,726   

Credit contracts

    –        118,756        –        118,756   

Liabilities:

       

Interest rate Contracts

    (859,987)        (2,078,653)        –        (2,938,640)   

Credit contracts

    –        (85,621)        –        (85,621)   

Total

  $ (691,938)      $ (1,456,841)        –      $ (2,148,779)   

 

1  

Derivative financial instruments are swaps, financials futures contracts and options. Swap and financial futures are valued at the unrealized appreciation/depreciation on the instrument and options are shown at value.

Certain of the Trust’s assets and liabilities are held at carrying or face amount, which approximates fair value for financial reporting purposes. As of July 31, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

      Level 1     Level 2     Level 3     Total  

Assets:

       

Cash pledged as collateral for financial futures contracts.

  $ 436,000        –        –      $ 436,000   

Cash pledged as collateral for Swaps

    891,000        –        –        891,000   

Foreign currency

    442        –        –        442   

Liabilities:

       

Bank overdraft.

    –      $ (93,298)        –        (93,298)   

Cash received as collateral for Reverse Repurchase Agreements

    –        (520,000)        –        (520,000)   

Reverse Repurchase Agreements

    –        (95,702,473)        –        (95,702,473)   
       

Total

  $ 1,327,442      $ (96,315,771)        –      $ (94,988,329)   
 

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    13

 

 

Schedule of Investments (concluded)

 

 

BlackRock Credit Allocation Income Trust III (BPP)

 

There were no transfers between Level 1 and Level 2 during the period ended July 31, 2012.

Certain of the Trust’s investments are categorized as Level 3 and were valued utilizing transaction prices or third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in the unobservable inputs could result in a significantly lower or higher value in such Level 3 investments.

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

  

 

 

 
     Asset-Backed
Securities 		     Corporate
Bonds 		    Total  
  

 

 

 

Assets:

       

Opening Balance, as of

October 31, 2011

   $ 1,007,500       $ 1,690,000      $ 2,697,500   

Transfers into Level 3 1

     –         –        –   

Transfers out of Level 3 1

     –         –        –   

Accrued

discounts/premiums

     13,877         –        13,877   

Net realized gain (loss)

     –         –     

Net change in unrealized

appreciation/depreciation 2

     73,873         (8,125 )      65,748   

Purchases

     –         –        –   

Sales

     –         –        –   
  

 

 

 

Closing Balance, as of

July 31, 2012

   $ 1,095,250       $ 1,681,875      $ 2,777,125   
  

 

 

 

 

1  

Transfers into and transfers out of Level 3 represent the value as of the beginning of the reporting period.

2  

The change in unrealized appreciation/depreciation on investments still held as of July 31, 2012 was $65,748.

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

 

 
     Credit
Contracts 		 

 

 

Assets:

  

Opening Balance, as of October 31, 2011

   $ 2,351   

Transfers into Level 3 1

     –   

Transfers out of Level 3 1

     –   

Accrued discounts/premium

     –   

Net realized gain (loss)

     –   

Net change in unrealized

appreciation/depreciation 3

     (2,351 ) 

Purchases

     –   

Issues 4

     –   

Sales

     –   

Settlements 5

     –   
  

 

 

 

Closing Balance, as of July 31, 2012

   $ –   
  

 

 

 

 

3

The change in unrealized appreciation/depreciation on derivative financial instruments still held as of July 31, 2012 was $0.

4  

Issues represent upfront cash received on certain derivative financial instruments.

5

Settlements represent periodic contractual cash flows and/or cash flows to terminate certain derivative financial instruments.

A reconciliation of Level 3 investments and derivative financial instruments is presented when the Trust had a significant amount of Level 3 investments and derivative financial instruments at the beginning and/or end of the period in relation to net assets.

 

 

                 
      BLACKROCK CREDIT ALLOCATION INCOME TRUST III       JULY 31, 2012    14

Item 2 – Controls and Procedures

 

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

2(b) –

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

Item 3 – Exhibits

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 Credit Allocation Income Trust III

 

By:  

/s/ John M. Perlowski

  John M. Perlowski
  Chief Executive Officer (principal executive officer) of BlackRock Credit Allocation Income Trust III

Date: September 25, 2012

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

 

By:  

/s/ John M. Perlowski

  John M. Perlowski
  Chief Executive Officer (principal executive officer) of BlackRock Credit Allocation Income Trust III

Date: September 25, 2012

 

By:  

/s/ Neal J. Andrews

  Neal J. Andrews
  Chief Financial Officer (principal financial officer) of BlackRock Credit Allocation Income Trust III

Date: September 25, 2012

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