February 10, 2006 Securities and Exchange Commission Attn: Filing Desk, Stop 1-4 450 Fifth Street, N.W Washington, DC 20549 RE: Rule 17f-2 BlackRock Kelso Capital Corporation Registration No. 000-51327, CIK No. 0001326003 Ladies and Gentlemen: On behalf of our client, BLACKROCK KELSO CAPITAL CORPORATION, we are filing electronically one copy of the EDGARized version of our examination report dated January 13, 2006, submitted pursuant to the requirements of subsections (b) and (c) of Rule 17f-2 under the Investment Company Act of 1940 as of October 31, 2005. Yours truly, /s/ Tim Mundy Tim Mundy Partner Enclosure
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors of BlackRock Kelso Capital Corporation: We have examined management's assertion included in the accompanying Management Statement Regarding Compliance with Certain Provisions of the Investment Company Act of 1940 that BlackRock Kelso Capital Corporation (the "Company") complied with the requirements of subsections (b) and (c) of Rule 17f-2 under the Investment Company Act of 1940 ("the Act") as of October 31, 2005. Management is responsible for the Company's compliance with those requirements. Our responsibility is to express an opinion on management's assertion about the Company's compliance based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants, as adopted by the Public Company Accounting Oversight Board (United States), and, accordingly, included examining, on a test basis, evidence about the Company's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. Included among our procedures were the following tests performed as of October 31, 2005, and with respect to agreement of security purchases and sales, for the period from July 25, 2005 (inception of operations) through October 31, 2005: o Confirmation of all securities held by institutions in book entry form for the account of PNC Bank, on behalf of PFPC Trust Company (the "Custodian" of the Company), by The Depository Trust Company and The Federal Reserve System; o Confirmation of all securities hypothecated, pledged, placed in escrow, or out for transfer with brokers, pledgees and/or transfer agents; o Reconciliation of all such securities to the books and records of the Company and the Custodian; and o Agreement of one security purchase since the inception of operations from the books and records of the Company to broker confirmations. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination on the Company's compliance with specified requirements.
In our opinion, management's assertion that the Company complied with the requirements of subsections (b) and (c) of Rule 17f-2 of the Investment Company Act of 1940 as of October 31, 2005 with respect to securities reflected in the investment account of the Company is fairly stated, in all material respects. This report is intended solely for the information and use of management and the Board of Directors of the Company, the Company's investment advisor and the Securities and Exchange Commission and is not intended to be and should not be used by anyone other than these specified parties. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania January 13, 2006
MANAGEMENT STATEMENT REGARDING COMPLIANCE WITH RULE 17F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940 We, as officers of BlackRock Kelso Capital Corporation (the "Company"), are responsible for complying with the requirements of subsections (b) and (c) of Rule 17f-2, "Custody of Investments by Registered Management Investment Companies," under the Investment Company Act of 1940. We are also responsible for establishing and maintaining effective internal controls over compliance with those requirements. We have performed an evaluation of the Company's compliance with the requirements of subsections (b) and (c) of Rule 17f-2 as of October 31, 2005, and from July 25, 2005 (inception of operations) through October 31, 2005. Based on this evaluation, we assert that the Company was in compliance with the requirements of subsections (b) and (c) of Rule 17f-2 under the Investment Company Act of 1940 as of October 31, 2005, and from July 25, 2005 (inception of operations), through October 31, 2005, with respect to securities reflected in the investment account of the Company. /s/ James R. Maher - ---------------------------------------- James R. Maher, Chief Executive Officer /s/ Frank D. Gordon - ---------------------------------------- Frank D. Gordon, Chief Financial Officer
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-17F-2 Certificate of Accounting of Securities and Similar Investments in the Custody of Management Investment Companies Pursuant to Rule 17f-2 [17 CFR 270.17f-2] - -------------------------------------------------------------------------------------------------------------- 1. Investment Company Act File Number: Date examination completed: 000-51327 OCTOBER 31, 2005 - -------------------------------------------------------------------------------------------------------------- 2. State identification Number: ---------------------------------------------------------------------------------------------------------- AL AK AZ AR CA CO ---------------------------------------------------------------------------------------------------------- CT DE DC FL GA HI ---------------------------------------------------------------------------------------------------------- ID IL IN IA KS KY ---------------------------------------------------------------------------------------------------------- LA ME MD MA MI MN ---------------------------------------------------------------------------------------------------------- MS MO MT NE NV NH ---------------------------------------------------------------------------------------------------------- NJ NM NY NC ND OH ---------------------------------------------------------------------------------------------------------- OK OR PA RI SC SD ---------------------------------------------------------------------------------------------------------- TN TX UT VT VA WA ---------------------------------------------------------------------------------------------------------- WV WI WY PUERTO RICO ---------------------------------------------------------------------------------------------------------- Other (specify): - -------------------------------------------------------------------------------------------------------------- 3. Exact name of investment company as specified in registration statement: BLACKROCK KELSO CAPITAL CORPORATION - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- 4. Address of principal executive officer (number, street, city, state, zip code): 40 East 52nd Street, New York, NY 10022 - --------------------------------------------------------------------------------------------------------------