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 811-21464
Name of Fund: BlackRock Floating Rate Income Strategies Fund II, 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 Floating Rate Income Strategies Fund II, 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: (609) 282-2800
Date of fiscal year end: 02/28/07
Date of reporting period: 03/01/06 - 02/28/07
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED INCOME LIQUIDITY
REAL ESTATE
BlackRock Floating Rate
Income Strategies Fund II, Inc.
ANNUAL REPORT FEBRUARY 28, 2007
(BLACKROCK logo)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock Floating Rate Income Strategies Fund II, Inc. seeks a high current
income and such preservation of capital as is consistent with investment in a
diversified, leveraged portfolio consisting primarily of floating rate debt
securities and instruments.
This report, including the financial information herein, is transmitted for
use only to the shareholders of BlackRock Floating Rate Income Strategies
Fund II, Inc. for their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the Fund or any
securities mentioned in this report. Past performance results shown in this
report should not be considered a representation of future performance. The
Fund leverages 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. 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 Floating Rate Income Strategies Fund II, Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
(GO PAPERLESS... logo)
It's Fast, Convenient, & Timely!
BlackRock Floating Rate Income Strategies Fund II, Inc.
The Benefits and Risks of Leveraging
BlackRock Floating Rate Income Strategies Fund II, 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. To the extent that 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
will be the beneficiaries of the incremental yield.
Leverage creates risks for holders of Common Stock including the likelihood of
greater net asset value and market price volatility. In addition, there is the
risk that fluctuations in interest rates on borrowings (or in the dividend
rates on any Preferred Stock, if the Fund were to issue the Preferred Stock)
may reduce the Common Stock's yield and negatively impact its 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.
Announcement of Annual Stockholders Meeting
The Fund has determined that its annual stockholders meeting originally
scheduled to be held in April 2007 will be postponed and will be held in
September 2007. Proposals of stockholders intended to be presented at the
meeting must be received by the Fund by May 15, 2007 for inclusion in the
Fund's proxy statement and form of proxy for that meeting. The persons named
as proxies in the proxy materials for the Fund's 2007 annual meeting of stock
holders may exercise discretionary authority with respect to any stockholder
proposal presented at such meeting if written notice of such proposal has not
been received by the Fund by July 1, 2007. Written proposals and notices
should be sent to the Secretary of the Fund, 800 Scudders Mill Road,
Plainsboro, New Jersey 08536.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
A Letter to Shareholders
Dear Shareholder
The new year began on a positive note for most financial markets, continuing
the momentum from the fourth quarter of 2006. At the end of February, however,
global equity markets registered their first significant decline since last
summer. The market jitters were triggered by a significant setback in the
Chinese market and were exacerbated by several concerns, notably a weakening
economy, some disappointing corporate earnings announcements, geopolitical
concerns related to Iran's nuclear program and increasing delinquencies in the
subprime mortgage market. Despite the recent spate of volatility, underlying
stock market fundamentals appear quite sound, supported by a generally good
global economic backdrop, tame inflation, relatively low interest rates and
attractive valuations.
Not unlike the equity market, the bond market also has seen volatility
recently as observers have attempted to interpret mixed economic signals. A
bond market rally late last year reversed early in 2007 as the economic data
strengthened. Prices improved (and yields fell) again in February as equities
struggled. Notably, the Treasury curve remained inverted for much of 2006 and
into 2007. The 30-year Treasury yield stood at 4.68% on February 28, 2007,
while the one-month Treasury offered the highest yield on the curve at 5.24%.
For its part, the Federal Reserve Board (the Fed) has left the target short-
term interest rate on hold at 5.25% since first pausing on August 8, 2006.
Although the central bankers continue to express concern about potential
inflationary pressures, they also have made reference to signs of economic
weakness in their public statements. Most observers expect the Fed to keep
interest rates on hold for now, but acknowledge that the combination of a mild
economic slowdown and moderating inflation could prompt an interest rate cut
later in 2007.
Notwithstanding the volatility along the way, most major market indexes
managed to post positive returns for the annual and semi-annual reporting
periods ended February 28, 2007:
Total Returns as of February 28, 2007 6-month 12-month
U.S. equities (Standard & Poor's 500 Index) + 8.93% +11.97%
Small cap U.S. equities (Russell 2000 Index) +10.76 + 9.87
International equities (MSCI Europe, Australasia, Far East Index) +12.17 +21.07
Fixed income (Lehman Brothers Aggregate Bond Index) + 3.66 + 5.54
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 2.89 + 4.96
High yield bonds (Credit Suisse High Yield Index) + 8.62 +12.36
If the recent market movements are any guide, 2007 could be a year of enhanced
market volatility. As you navigate the uncertainties of the financial markets,
we encourage you to review your investment goals with your financial
professional and to make portfolio changes, as needed. We thank you for
trusting BlackRock with your investment assets, and we look forward to
continuing to serve you in the months and years ahead.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
Fund President and Director
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
A Discussion With Your Fund's Portfolio Managers
Fund performance during the fiscal year benefited most from our use of
leverage in what was a relatively strong period for non-investment grade
markets.
How did the Fund perform during the fiscal year in light of the existing
market conditions?
For the 12-month period ended February 28, 2007, the Common Stock of BlackRock
Floating Rate Income Strategies Fund II, Inc. had net annualized yields of
8.03% and 8.37%, based on a year-end per share net asset value of $19.28 and a
per share market price of $18.50, respectively, and $1.548 per share income
dividends. For the same period, the total investment return on the Fund's
Common Stock was +8.31%, based on a change in per share net asset value from
$19.39 to $19.28, and assuming reinvestment of all distributions. The Fund's
unmanaged benchmark, which is comprised 80% of the Credit Suisse Leveraged
Loan Index and 20% of the Credit Suisse High Yield Index, returned +8.52% for
the 12-month period.
For the six-month period ended February 28, 2007, the total investment return
on the Fund's Common Stock was +5.20%, based on a change in per share net
asset value from $19.23 to $19.28, and assuming reinvestment of all
distributions. The composite benchmark returned +5.06% for the six-month
period.
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 dividends, 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 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 leveraged loan market, as measured by the Credit Suisse Leveraged Loan
Index, returned +7.57% for the annual period, while the high yield bond
market, as measured by the Credit Suisse High Yield Index, returned +12.36%.
Despite some volatility late in the reporting period, the non-investment grade
markets continued to post strong results. The leveraged loan market posted
positive returns in all of the past 12 months, while the high yield market saw
positive returns in 11 of the past 12 months. The markets have been aided by
the continuation of historically low default rates and strong inflows into the
asset classes, both of which have helped to support the prices of the
underlying issues.
Support for the leveraged loan market also came from soaring investor demand,
which pushed spreads to new lows. The primary driver of this demand is
collateralized loan obligations (CLOs), which now account for approximately
two-thirds of the leveraged loan market. The cost of funding for these CLOs
has dropped dramatically over the past few years, enabling the structured
finance vehicles to absorb bank loans at increasingly tighter spreads and
still achieve their targeted equity returns. The fact that default rates are
at historic lows also has assisted this trend. To supply the CLO juggernaut,
the demand for bank loans has been so voracious that we've actually seen bond
deals migrate to the loan market, a reversal of historic flows that typically
saw deals move from loans into bonds. This trend has marginally curtailed the
supply of high yield bonds, keeping spreads there tighter than they otherwise
would be.
What factors most influenced Fund performance?
The portfolio is very well diversified among industries and issuers and has
generally favored the higher-rated tier of the high yield spectrum. In the
first half of the fiscal period, prior to the combination of Merrill Lynch
Investment Managers and BlackRock, the Fund had a fairly high cash position,
made relatively low use of leverage and was more conservatively positioned
versus the bank loan and high yield markets in general. The conservative
positioning early in the period hindered performance. The Fund later increased
its use of leverage, reduced its cash position and has been positioned more in
line with the representative bank loan and high yield markets, and this has
benefited performance amid the markets' strength.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
What changes were made to the Fund during the period?
During the period, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill
Lynch") combined Merrill Lynch's investment management business, Merrill Lynch
Investment Managers, L.P. and its affiliates, including Fund Asset Management,
L.P., with BlackRock, Inc. to form a new independent company. While this
resulted in some additions to the portfolio management team, there was no
change in the overall investment philosophy or focus of the Fund. The Fund
finished the period by making more extensive use of its leverage lines. (For a
complete explanation of the benefits and risks of leveraging, refer to page 2
of this report to shareholders.)
How would you characterize the Fund's position at the close of the period?
While volatility picked up at the end of the period, resulting in an investor
flight to quality, fundamental and technical valuations remained favorable for
the leveraged loan and high yield markets. Even with the noise at the end of
the reporting period, the leveraged loan market posted a return of +.74% in
February, while the high yield market posted a return of better than +1%. This
marked the seventh month out of eight in which the Credit Suisse High Yield
Index posted monthly returns in excess of 1% and the eighth consecutive month
that the Credit Suisse Leveraged Loan Index posted returns of at least +.50%.
Market fundamentals remain very strong, with default rates near historical
lows and a new-issue calendar that is just beginning to satisfy the non-
investment grade investor.
By and large, borrowers continue to have access to strong liquidity, another
force keeping default rates low. Moreover, earnings are expected to grow
strongly over the near-term. In our view, with such conditions in place for
the bank loan market, investors appear encouraged and ready to support new
deals and further spread tightening in the sector.
Kevin J. Booth
Portfolio Manager
Mark J. Williams
Portfolio Manager
April 3, 2007
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Portfolio Information
As of February 28, 2007
Percent of
Ten Largest Holdings Net Assets
Intelsat Corp. Term Loan B, 7.86%
due 1/03/2014 3.9%
Calpine Generating Co. LLC Second Lien
Term Loan, 11.07% due 3/12/2010 3.4
Charter Communications, Inc. Term Loan,
7.985% due 4/28/2013 3.0
Graham Packaging Co. LP Term Loan B,
7.625% - 7.688% due 10/07/2011 2.8
Metro-Goldwyn-Mayer Studios, Inc. Term Loan B,
8.614% due 4/30/2011 2.7
Rockwood Specialties Group, Inc. Tranche E Term
Loan, 7.36% due 12/10/2012 2.3
Intelsat Bermuda Ltd., 8.872% due 1/15/2015 2.3
Riverside Energy Center Term Loan, 9.61%
due 6/24/2011 2.1
Idearc Inc. Term Loan, 7.33% due 11/15/2014 2.0
American Real Estate Partners LP, 7.125%
due 2/15/2013 1.9
Percent of
Five Largest Industries Net Assets
Cable--U.S. 18.2%
Utility 16.3
Diversified Media 7.6
Housing 6.6
Manufacturing 6.4
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 defintion
may not apply for purposes of this report which may combine
industry sub-classifications for reporting ease.
Percent of
Total
Quality Ratings by S&P/Moody's Investments
BBB/Baa 0.7%
BB/Ba 30.2
B/B 58.0
CCC/Caa 3.5
NR (Not Rated) 7.1
Other* 0.5
* Includes portfolio holdings in common stocks.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Schedule of Investments as of February 28, 2007 (in U.S. dollars)
Face
Amount Floating Rate Loan Interests** Value
Aerospace & Defense--3.3%
USD 1,584,000 IAP Worldwide Services, Inc. First Lien Term
Loan, 9.688% due 12/30/2012 $ 1,586,970
1,392,708 K&F Industries, Inc. Term Loan C, 7.32%
due 11/18/2013 1,399,237
1,634,615 Standard Aero Holdings Term Loan,
7.57% - 7.61% due 8/24/2012 1,641,767
Vought Aircraft Industries, Inc.:
1,648,376 Term Loan, 7.88% due 12/22/2011 1,658,679
320,000 Tranche B Line of Credit Deposit,
7.82% due 12/22/2010 322,533
--------------
6,609,186
Airlines--0.7%
1,000,000 Delta Air Lines Debtor in Possession Term
Loan B, 10.098% due 3/16/2008 1,004,583
500,000 United Air Lines, Inc. Term Loan B, 7.375%
due 1/30/2014 502,032
--------------
1,506,615
Automotive--4.4%
250,000 Delphi Automotive Systems Term Loan, 7.625%
due 12/31/2007 250,629
992,500 GPX International Tire Corp. Term Loan B,
7.82% - 7.92% due 4/06/2012 982,575
1,492,500 JL French Corp. First Lien Term Loan B, 8.375%
due 6/05/2011 1,454,255
1,000,000 Keystone Automotive Operations Inc. Term Loan,
8.82% due 1/15/2012 1,007,500
Metaldyne Corp.:
57,692 Letter of Credit, 8.92% - 9.125%
due 1/15/2012 58,317
418,269 Term Loan, 9.125% due 1/15/2014 422,800
Navistar International Transportation Corp.:
400,000 Revolving Credit, 5.22% - 8.61%
due 6/30/2012 406,600
1,100,000 Term Loan, 8.61% due 6/30/2012 1,118,150
2,000,000 OshKosh Truck Corp. Term Loan B, 7.35%
due 11/30/2013 2,015,714
1,250,000 Visteon Corp. Term Loan, 8.38%
due 6/13/2013 1,261,875
--------------
8,978,415
Broadcasting--4.2%
1,470,000 Entravision Communications Term Loan B, 6.86%
due 3/29/2013 1,474,288
400,000 Multicultural Radio Broadcasting Inc. Term
Loan, 10% due 12/15/2012 401,000
750,000 NEP II, Inc. Term Loan B, 7.595% due 2/13/2014 757,266
NextMedia Group, Inc.:
518,844 Delay Draw Term Loan, 7.32% due 11/15/2012 517,547
1,167,399 Term Loan, 7.32% due 11/15/2012 1,164,481
1,750,000 Paxson Communications Corp. First Lien Term
Loan, 8.61% due 1/15/2012 1,789,375
2,462,406 Spanish Broadcasting System, Inc. First Lien
Term Loan B, 7.12% due 6/10/2012 2,466,511
--------------
8,570,468
Cable--U.S.--14.2%
1,950,000 Bragg Communications Term Loan B, 7.11%
due 8/31/2011 1,954,875
Cequel Communications:
1,293,103 First Lien Term Loan A, 7.61%
due 11/05/2013 1,305,428
1,000,000 Second Lien Term Loan A, 9.86%
due 5/04/2014 1,024,375
Face
Amount Floating Rate Loan Interests** Value
Cable--U.S. (concluded)
USD 6,000,000 Charter Communications, Inc. Term Loan,
7.985% due 4/28/2013 $ 6,038,628
3,000,000 Insight Midwest Holdings LLC, Term Loan B,
7.61% due 4/06/2014 3,027,750
7,860,300 Intelsat Corp. Term Loan B, 7.86%
due 1/03/2014 7,933,448
1,970,063 Intelsat Ltd. Term Loan B, 7.61% due 6/27/2013 1,987,793
2,265,000 MCC Iowa LLC Tranche A Term Loan, 7.37%
due 3/31/2010 2,245,181
3,160,000 Mediacom LLC Term Loan C, 7.12% - 7.27%
due 1/31/2015 3,165,078
--------------
28,682,556
Chemicals--3.2%
4,655,000 Rockwood Specialties Group, Inc. Tranche
E Term Loan, 7.36% due 12/10/2012 4,691,658
2,000,000 Wellman, Inc. Second Lien Term Loan, 12.11%
due 2/10/2010 1,724,000
--------------
6,415,658
Consumer--Durables--0.9%
1,740,440 Simmons Co. Tranche D Term Loan,
7.375% - 7.438% due 12/19/2011 1,750,592
Consumer--Non-Durables--1.2%
756,000 Camelbak Products LLC First Lien Term Loan,
9.16% due 8/04/2011 745,920
1,193,749 Culligan International Co. Term Loan, 7.07%
due 9/30/2011 1,195,241
440,431 Renfro Corp. Term Loan B, 8.60% - 8.62%
due 9/30/2013 443,734
--------------
2,384,895
Diversified Media--7.5%
300,000 Affinion Group Term Loan, 11.66% due 3/01/2012 296,750
1,125,000 Alix Partners Term Loan, 7.86% due 10/30/2013 1,132,734
4,000,000 Idearc Inc. Term Loan, 7.33% due 11/15/2014 4,032,500
250,000 MediMedia International Term Loan,
7.772% - 7.86% due 11/15/2013 250,938
5,458,750 Metro-Goldwyn-Mayer Studios, Inc. Term
Loan B, 8.614% due 4/30/2011 5,503,528
1,000,000 Nielsen Finance LLC Term Loan, 8.125%
due 8/15/2013 1,009,010
EUR 500,000 PagesJaunes Group Term Loan C, 8.07%
due 1/11/2016 674,139
USD 500,000 Penton Media Term Loan, 7.625% due 2/15/2013 504,584
1,757,174 RH Donnelley, Inc. Tranche D-2 Term Loan,
6.85% - 6.89% due 8/30/2011 1,757,783
--------------
15,161,966
Energy--Exploration & Production--0.7%
994,970 Helix Energy Solutions Term Loan,
7.32% - 7.36% due 7/01/2013 999,945
496,250 MEG Energy Corp. Term Loan, 7.375%
due 4/03/2013 499,429
--------------
1,499,374
Energy--Other--2.0%
Alon USA, Inc.:
884,444 Paramount Facility, 7.57% - 7.931%
due 6/22/2013 889,419
110,556 Term Loan, 7.57% - 7.62%
due 6/22/2013 111,177
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Floating Rate Loan Interests** Value
Energy--Other (concluded)
Coffeyville Resources LLC:
USD 162,162 Letter of Credit, 8.36% due 12/21/2013 $ 164,257
837,838 Term Loan B, 8.36% due 12/21/2013 848,660
1,000,000 Exco Resources, Inc. Term Loan,
10.938% - 11.375% due 10/31/2011 1,008,750
990,000 Key Energy Services, Inc. Term Loan B,
7.86% - 7.864% due 6/30/2012 996,188
--------------
4,018,451
Financial--0.2%
500,000 Harbinger Capital Partners Term Loan B,
7.57% due 2/28/2014 505,000
Food & Tobacco--3.6%
Aramark Corp.:
65,841 Letter of Credit, 7.445% due 1/30/2014 66,491
934,159 Term Loan, 7.445% due 1/30/2014 943,383
3,000,000 Chiquita Brands International Term Loan C,
8.375% due 6/28/2012 3,042,501
921,525 Commonwealth Brands Term Loan, 7.625%
due 12/22/2012 924,980
Dole Food Co., Inc.:
139,535 Credit Linked Deposit, 5.23% - 9.25%
due 4/12/2013 139,604
1,038,663 Term Loan C, 7.438% due 4/12/2013 1,039,182
311,599 Tranche B, 7.438% due 4/12/2013 311,755
498,750 Quiznos LLC First Lien Term Loan, 7.63%
due 5/05/2013 500,759
250,000 Sturm Foods Inc. Term Loan, 7.875%
due 1/30/2014 250,938
--------------
7,219,593
Gaming--3.1%
400,000 Edge-Star Partners LLC First Lien Term Loan,
9.36% due 11/18/2007 400,000
481,818 Green Valley Ranch Gaming LLC Term Loan,
7.36% due 1/29/2012 487,038
985,000 Trump Entertainment Resorts Holdings LP Term
Loan B-1, 7.87% due 5/01/2012 992,388
Venetian Casino Resort LLC:
1,000,000 Delay Draw Term Loan B, 7.12%
due 6/15/2011 1,007,212
2,400,000 Term Loan, 7.12% due 6/15/2011 2,417,309
1,000,000 Venetian Macau U.S. Finance Co. LLC Term
Loan B, 8.12% due 5/25/2013 1,010,125
--------------
6,314,072
Health Care--4.6%
Community Health Systems, Inc. Term Loan:
1,955,000 7.07% - 7.10% due 8/19/2011 1,964,470
1,496,250 7.06% due 12/15/2013 1,503,498
2,000,000 DaVita, Inc. Term Loan, 6.82% due 7/30/2012 2,010,500
334,513 Duloxetine Royalty First Lien Term Loan,
9.86% due 10/18/2013 334,513
918,919 Gentiva Health Services, Inc. Term Loan,
7.57% - 7.62% due 3/31/2013 920,642
1,000,000 HCA Inc. Term Loan A, 7.614% due 11/17/2012 1,011,417
1,500,000 Health Management Associates, Inc. Term
Loan B, 7.07% due 1/15/2014 1,510,782
--------------
9,255,822
Face
Amount Floating Rate Loan Interests** Value
Housing--3.8%
USD 1,665,714 Associated Materials, Inc. Term Loan,
7.88% - 9.75% due 8/29/2010 $ 1,674,043
1,845,703 Headwaters, Inc. First Lien Term Loan,
7.32% due 4/30/2011 1,849,164
2,147,815 Lake at Las Vegas Joint Venture First Lien
Term Loan, 10% - 12% due 11/01/2009 2,160,472
496,250 Mattamy Group Term Loan, 7.625%
due 4/11/2013 498,421
1,462,500 Nortek, Inc. Term Loan B, 7.35%
due 8/27/2011 1,469,813
--------------
7,651,913
Information Technology--2.9%
1,228,785 Activant Solutions Term Loan, 7.375%
due 5/02/2013 1,229,553
Dealer Comp Services:
1,995,000 First Lien Term Loan, 7.845%
due 10/31/2012 2,013,526
1,000,000 Second Lien Term Loan, 10.845%
due 10/31/2013 1,028,438
Intergraph Corp:
500,000 Second Lien Term Loan, 11.37%
due 11/15/2014 503,437
500,000 Term Loan 7.87% due 5/15/2014 503,438
500,000 SunGard Data Systems, Inc. Term Loan, 7.36%
due 2/28/2014 504,727
--------------
5,783,119
Leisure--2.6%
1,985,000 24 Hour Fitness Term Loan B, 7.86% - 7.87%
due 6/08/2012 1,996,579
750,000 National Cinemedia LLC Term Loan B, 7.09%
due 2/28/2015 755,625
2,541,383 True Temper Sports, Inc. Term Loan B,
8.61% - 8.67% due 3/15/2011 2,541,383
--------------
5,293,587
Manufacturing--4.7%
1,233,100 Amsted Industries, Inc. Term Loan B,
7.36% - 7.37% due 3/28/2013 1,240,036
1,385,454 Blount, Inc. US Term Loan B, 7.07%
due 8/09/2010 1,386,754
500,000 Brand Energy Term Loan B, 7.625%
due 2/15/2014 505,625
1,398,211 GenTek, Inc. First Lien Term Loan,
7.32% - 7.36% due 2/28/2011 1,398,649
744,163 John Maneely Co. Term Loan,
8.595% - 8.622% due 12/15/2013 752,380
1,939,194 Metokote Corp. First Lien Term Loan,
8.32% - 8.37% due 11/27/2011 1,934,346
2,262,105 Mueller Group LLC Term Loan B,
7.36% due 10/03/2012 2,281,899
--------------
9,499,689
Packaging--3.7%
1,822,906 Anchor Glass Container Corp. Term Loan B,
7.614% - 7.62% due 5/03/2013 1,818,349
5,693,927 Graham Packaging Co. LP Term Loan B,
7.625% - 7.688% due 10/07/2011 5,753,406
--------------
7,571,755
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Floating Rate Loan Interests** Value
Paper--1.4%
USD 705,702 Boise Cascade Holdings LLC Term Loan,
7.094% - 7.125% due 10/28/2011 $ 710,554
990,000 Georgia-Pacific Corp. First Lien Term Loan,
7.345% - 7.364% due 2/14/2013 998,663
Smurfit-Stone Container Corp.:
756,448 Term Loan B, 7.375% due 11/01/2011 763,325
461,176 Term Loan C, 7.375% due 11/01/2011 465,369
--------------
2,937,911
Retail--1.6%
500,000 Burlington Coat Factory Warehouse Corp. Term
Loan B, 7.61% due 4/15/2013 500,205
500,000 David's Bridal Inc. Term Loan B, 7.40%
due 1/30/2014 501,354
781,867 General Nutrition Centers, Inc. Tranche B Term
Loan, 8.07% due 12/05/2009 784,799
500,000 Mattress Giant Term Loan B, 7.61% - 7.64%
due 2/28/2014 500,000
860,760 The Neiman Marcus Group, Inc. Term Loan,
7.595% - 7.603% due 4/06/2013 870,174
--------------
3,156,532
Service--4.0%
1,000,000 Billing Services Group LLC First Lien Term
Loan, 7.875% due 5/05/2012 990,000
500,000 Brickman Group, Inc. Term Loan,
7.36% - 7.399% due 1/23/2014 502,187
750,000 Brock Holdings Term Loan, 7.32% due 2/28/2014 757,266
EnergySolutions:
12,579 Letter of Credit, 7.57% due 6/07/2013 12,689
264,268 Term Loan B, 7.63% due 6/07/2013 266,581
119,370 Term Loan, 7.63% - 7.639% due 6/07/2013 120,414
500,000 Kenan Transport Co. Term Loan C, 8.364%
due 12/16/2011 503,125
750,000 Pearson Government Solutions Term Loan, 7.61%
due 2/28/2013 759,375
990,158 RGIS Inventory Specialists Term Loan B, 7.864%
due 12/31/2012 989,540
500,000 RiskMetrics Group Holdings LLC Term Loan,
7.595% due 1/15/2014 505,000
United Rentals, Inc.:
1,101,916 Term Loan, 7.32% due 2/14/2011 1,113,624
99,261 Tranche B Credit Linked Deposit, 5.322%
due 2/14/2011 100,316
1,490,000 Vanguard Car Rental Term Loan, 8.32% - 8.36%
due 5/15/2013 1,503,969
--------------
8,124,086
Steel--0.2%
500,000 McJunkin Corp. Term Loan, 7.595%
due 1/30/2014 505,000
Utility--12.9%
1,500,000 Calpine Corp. Second Priority Debtor in
Possession Term Loan, 9.364% due 12/20/2007 1,512,499
Calpine Generating Co. LLC:
6,500,000 Second Lien Term Loan, 11.07% due 3/12/2010 6,781,125
2,000,000 Term Loan, 9.10% due 4/01/2009 2,027,222
Generac Portable Products, Inc.:
495,000 Term Loan, 7.82% due 11/15/2013 495,928
500,000 Second Lien Term Loan, 11.36% due 5/15/2014 498,750
LSP Gen Finance Co. LLC:
1,682,170 First Lien Term Loan, 7.114% due 5/04/2013 1,686,376
500,000 Second Lien Term Loan, 8.864% due 5/04/2014 507,500
Face
Amount Floating Rate Loan Interests** Value
Utility (concluded)
USD 1,427,677 LSP Kendall Energy Term Loan, 7.364%
due 10/07/2013 $ 1,421,134
MACH Gen LLC:
70,313 Letter of Credit, 7.323% due 2/22/2014 70,664
679,688 Term Loan, 7.36% due 2/22/2014 682,576
1,000,000 NE Energy Term Loan B, 7.87% due 10/31/2013 1,012,000
4,223,655 Riverside Energy Center Term Loan, 9.61%
due 6/24/2011 4,308,127
Rocky Mountain Energy Center LLC:
339,834 Credit Linked Deposit, 5.26% due 6/24/2011 346,630
2,689,202 Term Loan, 9.61% due 6/24/2011 2,742,986
Wolf Hollow I LP:
477,227 First Lien Term Loan, 7.617% due 6/22/2012 467,682
500,000 Letter of Credit, 7.57% due 6/22/2012 490,000
1,000,000 Second Lien Term Loan, 9.864%
due 12/22/2012 1,000,000
--------------
26,051,199
Wireless Communications--0.5%
1,000,000 West Corp. Term Loan, 7.763% - 8.11%
due 10/31/2013 1,008,194
Total Floating Rate Loan Interests
(Cost--$185,288,955)--92.1% 186,455,648
Corporate Bonds
Automotive--0.6%
250,000 AutoNation, Inc., 7.36% due 4/15/2013 (b) 253,750
500,000 Ford Motor Credit Co., 9.81% due 4/15/2012 (b) 540,737
500,000 The Goodyear Tire & Rubber Co., 9.14%
due 12/01/2009 (a)(b) 505,000
--------------
1,299,487
Cable--U.S.--4.0%
2,500,000 Charter Communications Holdings II LLC,
10.25% due 9/15/2010 2,631,250
Intelsat Bermuda Ltd. (a)(b):
325,000 11.354% due 6/15/2013 348,562
4,505,000 8.872% due 1/15/2015 4,611,994
450,000 Quebecor Media, Inc., 7.75% due 3/15/2016 461,250
--------------
8,053,056
Chemicals--1.2%
1,646,000 GEO Specialty Chemicals, Inc., 13.86%
due 12/31/2009 (b) 1,357,950
Momentive Performance Materials, Inc. (a):
175,000 9.75% due 12/01/2014 183,312
250,000 11.50% due 12/01/2016 260,000
580,000 NOVA Chemicals Corp., 8.502%
due 11/15/2013 (b) 580,000
--------------
2,381,262
Diversified Media--0.1%
175,000 Quebecor World Capital Corp., 8.75%
due 3/15/2016 (a) 178,937
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Schedule of Investments (continued) (in U.S. dollars)
Face
Amount Corporate Bonds Value
Energy--Exploration & Production--0.2%
USD 365,000 Stone Energy Corp., 8.11%
due 7/15/2010 (a)(b) $ 365,456
Energy--Other--1.0%
2,000,000 Ocean RIG ASA, 9.36% due 4/04/2011 (b) 2,000,000
Financial--2.1%
4,000,000 American Real Estate Partners LP, 7.125%
due 2/15/2013 (a) 3,940,000
385,000 NCO Group, Inc., 10.23%
due 11/15/2013 (a)(b) 386,925
--------------
4,326,925
Food & Tobacco--1.1%
250,000 AmeriQual Group LLC, 9.50%
due 4/01/2012 (a)(b) 260,625
2,000,000 Landry's Restaurants, Inc. Series B, 7.50%
due 12/15/2014 1,990,000
--------------
2,250,625
Gaming--3.0%
225,000 Galaxy Entertainment Finance Co. Ltd.,
10.354% due 12/15/2010 (a)(b) 238,500
1,565,000 Little Traverse Bay Bands of Odawa Indians,
10.25% due 2/15/2014 (a) 1,611,950
1,000,000 Pinnacle Entertainment, Inc., 8.25%
due 3/15/2012 1,030,000
3,000,000 Poster Financial Group, Inc., 8.75%
due 12/01/2011 3,120,000
--------------
6,000,450
Health Care--0.5%
500,000 Angiotech Pharmaceuticals, Inc., 9.11%
due 12/01/2013 (a)(b) 516,250
500,000 The Cooper Cos., Inc., 7.125%
due 2/15/2015 (a) 505,000
--------------
1,021,250
Housing--2.8%
3,000,000 CPG International, Inc., 12.117%
due 7/01/2012 (b) 3,090,000
2,500,000 Masonite International Corp., 11%
due 4/06/2015 (a) 2,493,750
--------------
5,583,750
Information Technology--1.3%
700,000 Freescale Semiconductor, Inc., 9.23%
due 12/15/2014 (a)(b) 707,000
2,000,000 Quantum Corp., 4.375% due 8/01/2010 (c) 1,880,000
--------------
2,587,000
Leisure--0.5%
950,000 Travelport, Inc., 9.985% due 9/01/2014 (a)(b) 980,875
Manufacturing--1.6%
3,000,000 International Rectifier Corp., 4.25%
due 7/15/2007 (c) 2,970,000
318,000 Invensys Plc, 9.875% due 3/15/2011 (a) 341,850
--------------
3,311,850
Metal--Other--0.0%
100,000 FMG Finance Pty Ltd., 9.369%
due 9/01/2011 (a)(b) 105,000
Face
Amount Corporate Bonds Value
Packaging--1.1%
USD 850,000 Berry Plastics Holding Corp., 9.23%
due 9/15/2014 (a)(b) $ 877,625
1,240,000 Packaging Dynamics Finance Corp., 10%
due 5/01/2016 (a) 1,302,000
--------------
2,179,625
Paper--3.5%
2,000,000 Abitibi-Consolidated, Inc., 8.855%
due 6/15/2011 (b) 2,010,000
2,000,000 Bowater, Inc., 8.355% due 3/15/2010 (b) 2,020,000
3,000,000 Verso Paper Holdings LLC, 9.11%
due 8/01/2014 (a)(b) 3,090,000
--------------
7,120,000
Retail--1.0%
1,800,000 The Neiman Marcus Group, Inc., 9%
due 10/15/2015 (e) 1,980,000
Service--0.0%
100,000 Sally Holdings LLC, 10.50%
due 11/15/2016 (a) 103,500
Telecommunications--0.4%
800,000 Qwest Corp., 8.605% due 6/15/2013 (b) 873,000
Utility--3.4%
1,325,000 Edison Mission Energy, 7.50%
due 6/15/2013 1,384,625
250,000 El Paso Performance-Linked Trust, 7.75%
due 7/15/2011 (a) 265,625
2,000,000 NRG Energy, Inc., 7.25% due 2/01/2014 2,040,000
3,000,000 Reliant Energy, Inc., 6.75% due 12/15/2014 3,112,500
--------------
6,802,750
Wireless Communications--0.3%
200,000 Digicel Group Ltd., 9.125%
due 1/15/2015 (a)(e) 194,750
325,000 Dobson Communications Corp., 9.61%
due 10/15/2012 (b) 335,562
--------------
530,312
Total Corporate Bonds
(Cost--$58,763,804)--29.7% 60,035,110
Shares
Held Common Stocks
Chemicals--0.0%
10,732 GEO Specialty Chemicals, Inc. (d) 10,732
Information Technology--0.5%
52,413 Cypress Semiconductor Corp. (d) 995,855
Manufacturing--0.1%
13,053 Medis Technologies Ltd. (d) 224,250
Total Common Stocks
(Cost--$1,422,616)--0.6% 1,230,837
Total Investments (Cost--$245,475,375*)--122.4% 247,721,595
Liabilities in Excess of Other Assets--(22.4%) (45,357,375)
--------------
Net Assets--100.0% $ 202,364,220
==============
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Schedule of Investments (concluded) (in U.S. dollars)
* The cost and unrealized appreciation (depreciation) of investments
as of February 28, 2007, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 245,448,458
===============
Gross unrealized appreciation $ 3,246,202
Gross unrealized depreciation (973,065)
---------------
Net unrealized appreciation $ 2,273,137
===============
** Floating rate loan interests in which the Fund invests generally pay
interest at rates that are periodically redetermined 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.
(a) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
(b) Floating rate security.
(c) Convertible security.
(d) Non-income producing security.
(e) Represents a pay-in-kind security, which may pay interest/dividends in
additional face/shares.
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 defintion 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 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 $(161,867) $278,518
o Swaps outstanding as of February 28, 2007 were as follows:
Notional Unrealized
Amount Appreciation
Sold credit default protection on Ford
Motor Company and receive 3.80%
Broker, UBS Warburg
Expires March 2010 $5,000,000 $20,660
o Currency Abbreviations:
EUR Euro
USD U.S. Dollar
See Notes to Financial Statements.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Statement of Assets, Liabilities and Capital
As of February 28, 2007
Assets
Investments in unaffiliated securities, at value (identified cost--$245,475,375) $ 247,721,595
Cash 8,883,965
Unrealized appreciation on swaps 20,660
Receivables:
Interest $ 2,808,865
Securities sold 1,115,819
Principal paydowns 556,337
Commitment fees 27,739
Swaps 26,917 4,535,677
---------------
Prepaid expenses and other assets 4,004
---------------
Total assets 261,165,901
---------------
Liabilities
Loans 47,000,000
Unfunded loan commitment 368,742
Payables:
Securities purchased 10,980,470
Dividends to shareholders 183,549
Investment adviser 146,505
Interest on loans 31,368
Other affiliates 1,615 11,343,507
---------------
Accrued expenses and other liabilities 89,432
---------------
Total liabilities 58,801,681
---------------
Net Assets
Net assets $ 202,364,220
===============
Capital
Common Stock, par value $.10 per share; 200,000,000 shares authorized
(10,496,930 shares issued and outstanding) $ 1,049,693
Paid-in capital in excess of par 199,119,933
Undistributed investment income--net $ 1,968,707
Accumulated realized capital losses--net (1,756,802)
Unrealized appreciation--net 1,982,689
---------------
Total accumulated earnings--net 2,194,594
---------------
Total capital--Equivalent to $19.28 net asset value per share of Common Stock
(market price--$18.50) $ 202,364,220
===============
See Notes to Financial Statements.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Statement of Operations
For the Year Ended February 28, 2007
Investment Income
Interest (including $278,518 from affiliates) $ 21,753,349
Facility and other fees 285,113
---------------
Total income 22,038,462
---------------
Expenses
Loan interest expense $ 3,344,187
Investment advisory fees 1,973,748
Borrowing costs 124,722
Professional fees 92,970
Accounting services 90,645
Directors' fees and expenses 43,605
Printing and shareholder reports 35,081
Transfer agent fees 34,152
Custodian fees 18,004
Pricing services 16,580
Listing fees 16,572
Other 15,422
---------------
Total expenses 5,805,688
---------------
Investment income--net 16,232,774
---------------
Realized & Unrealized Gain (Loss)--Net
Realized gain on:
Investments--net 170,810
Swaps--net 26,917 197,727
---------------
Change in unrealized appreciation/depreciation on:
Investments--net (1,388,412)
Swaps--net 20,660
Unfunded corporate loans--net (137,841)
Foreign currency transactions--net (3,345) (1,508,938)
--------------- ---------------
Total realized and unrealized loss--net (1,311,211)
---------------
Net Increase in Net Assets Resulting from Operations $ 14,921,563
===============
See Notes to Financial Statements.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Statements of Changes in Net Assets
For the Year Ended
February 28,
Increase (Decrease) in Net Assets: 2007 2006
Operations
Investment income--net $ 16,232,774 $ 14,008,010
Realized gain (loss)--net 197,727 (1,954,529)
Change in unrealized appreciation/depreciation--net (1,508,938) (1,368,145)
--------------- ---------------
Net increase in net assets resulting from operations 14,921,563 10,685,336
--------------- ---------------
Dividends & Distributions to Shareholders
Dividends and distributions to shareholders:
Investment income--net (16,114,520) (13,283,655)
Realized gain--net -- (1,099,532)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions to shareholders (16,114,520) (14,383,187)
--------------- ---------------
Net Assets
Total decrease in net assets (1,192,957) (3,697,851)
Beginning of year 203,557,177 207,255,028
--------------- ---------------
End of year* $ 202,364,220 $ 203,557,177
=============== ===============
* Undistributed investment income--net $ 1,968,707 $ 1,850,453
=============== ===============
See Notes to Financial Statements.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Statement of Cash Flows
For the Year Ended February 28, 2007
Cash Provided by Operating Activities
Net increase in net assets resulting from operations $ 14,921,563
Adjustments to reconcile net increase in net assets resulting from operations to net cash
provided by operating activities:
Decrease in other receivables 112,711
Decrease in prepaid expenses and other assets 523
Decrease in other liabilities (1,370)
Realized and unrealized loss--net 1,459,887
Unrealized loss on foreign currency transactions--net (3,345)
Amortization of premium and discount (243,205)
Proceeds from sales and paydowns of long-term securities 182,076,483
Purchases of long-term securities (161,852,259)
Net proceeds from sales of short-term investments 162,585
---------------
Cash provided by operating activities 36,633,573
---------------
Cash Used for Financing Activities
Cash receipts from borrowings 119,200,000
Cash payments on borrowings (133,600,000)
Dividends paid to shareholders (16,221,717)
---------------
Cash used for financing activities (30,621,717)
---------------
Cash
Net increase in cash 6,011,856
Cash at beginning of year 2,872,109
---------------
Cash at end of year $ 8,883,965
===============
Cash Flow Information
Cash paid for interest $ 3,345,190
===============
See Notes to Financial Statements.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Financial Highlights
For the Period
For the Year Ended July 30, 2004++ to
The following per share data and ratios have been derived February 28, February 28,
from information provided in the financial statements. 2007 2006 2005
Per Share Operating Performance
Net asset value, beginning of period $ 19.39 $ 19.74 $ 19.10
----------- ----------- -----------
Investment income--net*** 1.55 1.33 .58
Realized and unrealized gain (loss)--net (.12) (.31) .57
----------- ----------- -----------
Total from investment operations 1.43 1.02 1.15
----------- ----------- -----------
Less dividends and distributions from:
Investment income--net (1.54) (1.27) (.47)
Realized gain--net -- (.10) (.01)
----------- ----------- -----------
Total dividends and distributions (1.54) (1.37) (.48)
----------- ----------- -----------
Offering costs resulting from the issuance of Common Stock -- -- (.03)
----------- ----------- -----------
Net asset value, end of period $ 19.28 $ 19.39 $ 19.74
=========== =========== ===========
Market price per share, end of period $ 18.50 $ 17.76 $ 19.44
=========== =========== ===========
Total Investment Return**
Based on net asset value per share 8.31% 6.07% 5.97%+++
=========== =========== ===========
Based on market price per share 13.47% (1.35%) (.34%)+++
=========== =========== ===========
Ratios to Average Net Assets
Expenses, net of waiver and excluding interest expense 1.22% 1.25% .92%*
=========== =========== ===========
Expenses, net of waiver 2.87% 2.46% 1.30%*
=========== =========== ===========
Expenses 2.87% 2.46% 1.48%*
=========== =========== ===========
Investment income--net 8.03% 6.88% 5.11%*
=========== =========== ===========
Leverage
Amount of borrowings, end of period (in thousands) $ 47,000 $ 61,400 $ 60,300
=========== =========== ===========
Average amount of borrowings outstanding during the period (in thousands) $ 61,022 $ 63,725 $ 29,072
=========== =========== ===========
Average amount of borrowings outstanding per share during the period*** $ 5.81 $ 6.07 $ 2.80
=========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 202,364 $ 203,557 $ 207,255
=========== =========== ===========
Portfolio turnover 65.19% 72.49% 29.68%
=========== =========== ===========
* Annualized.
** Total investment returns based on market price, which can be significantly greater
or lesser than the net asset value, may result in substantially different returns.
Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
++ Commencement of operations.
+++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Notes to Financial Statements
1. Significant Accounting Policies:
On September 29, 2006, Floating Rate Income Strategies Fund II, Inc. was
renamed BlackRock Floating Rate Income Strategies Fund II, 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 FRB.
(a) Corporate debt obligations--The Fund invests principally in floating rate
obligations of companies, including floating rate loans made by banks and
other financial institutions and both privately and publicly offered corporate
bonds and notes. Because agents and intermediaries are primarily commercial
banks or other financial institutions, the Fund's investment in floating rate
loans could be considered concentrated in financial institutions.
(b) Valuation of investments--Floating rate loans are valued in accordance
with guidelines established by the Fund's Board of Directors. As of October 2,
2006, floating rate loan interests are valued at the mean between the last
available bid prices from one or more brokers or dealers as obtained from Loan
Pricing Corporation. Previously, floating rate loan interests were valued at
the mean between the last available bid and asked prices as obtained from the
same pricing source. This change had no significant effect on the valuation of
these loans. For the limited number of floating rate loans for which no
reliable price quotes are available, such floating rate loans may be valued by
Loan Pricing Corporation through the use of pricing matrixes to determine
valuations. If the pricing service does not provide a value for a floating
rate loan, BlackRock Advisors, LLC (the "Manager"), an indirect, wholly owned
subsidiary of BlackRock, Inc., will value the floating rate loan at fair
value, which is intended to approximate market value.
Debt securities are traded primarily in over-the-counter ("OTC") markets and
are valued at the last available bid price in the OTC market or on the basis
of values obtained by a pricing service. Pricing services use valuation
matrixes that incorporate both dealer-supplied valuations and valuation
models. The procedures of the pricing service and its valuations are reviewed
by the officers of 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.
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 on which such securities are traded, 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 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 in securities traded in the OTC market, NASDAQ Capital Market or
Bulletin Board are valued at the last available bid price or yield equivalent
obtained from one or more dealers or pricing services approved by the Board of
Directors of the Fund. Short positions traded in the OTC market are valued at
the last available asked price. Portfolio securities that are traded both in
the OTC market and on a stock exchange are valued according to the broadest
and most representative market. When the Fund writes an option, the amount of
the premium received is recorded on the books of the Fund as an asset and an
equivalent liability. The amount of the liability is subsequently valued to
reflect the current market value of the option written, based on the last sale
price in the case of exchange-traded options or, in the case of options traded
in the OTC market, the last asked price. Options purchased are valued at the
last sale price in the case of exchange traded options or, in the case of
options traded in the OTC market, last bid price. Swap agreements are valued
based upon quoted fair valuations received daily by the Fund from a pricing
service or counterparty. Other investments, including financial futures
contracts and related options, are stated at market value. Obligations with
remaining maturities of 60 days or less are valued at amortized cost unless
the Manager believes that this method no longer produces fair valuations.
Valuation of other short-term investment vehicles is generally based on the
net asset value of the underlying investment vehicle or amortized cost.
Repurchase agreements will be valued at cost plus accrued interest.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Notes to Financial Statements (continued)
Generally, trading in foreign securities, as well as U.S. government
securities, money market instruments and certain fixed income 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 the Manager using a
pricing service and/or procedures approved by the Fund's Board of Directors.
(c) 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 index or if the counterparty does not perform under the contract.
* 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.
* 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 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 is less than or exceeds the premiums paid or
received).
Written and purchased options are non-income producing investments.
* 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 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.
(d) 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 into 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.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Notes to Financial Statements (continued)
(e) 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. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates.
(f) 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. Interest income is recognized on the accrual basis. The
Fund amortizes all premiums and discounts on debt securities.
(g) Dividends and distributions--Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on the
ex-dividend dates. The Fund may at times pay out less than the entire amount
of net investment income earned in any particular period and may at times pay
out such accumulated undistributed income in other periods to permit the Fund
to maintain a more stable level of dividends.
(h) 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 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.
(i) Recent accounting pronouncements--In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
109." FIN 48 prescribes the minimum recognition threshold a tax position must
meet in connection with accounting for uncertainties in income tax positions
taken or expected to be taken by an entity including mutual funds before being
measured and recognized in the financial statements. Adoption of FIN 48 is
required for the last net asset value calculation in the first required
financial statement reporting period for fiscal years beginning after December
15, 2006. The impact on the Fund's financial statements, if any, is currently
being assessed.
In September 2006, Statement of Financial Accounting Standard 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.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Notes to Financial Statements (continued)
2. Investment Advisory Agreement and Transactions with Affiliates:
On September 29, 2006, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill
Lynch") and its affiliates, 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 the Manager. 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
Fund's Manager. The general partner of FAM is Princeton Services, Inc.
("PSI"), 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 of .75% of the average daily value of the Fund's net assets
plus the proceeds of any outstanding borrowings used for leverage. In
addition, the Manager has entered into a Sub-Advisory Agreement with BlackRock
Financial Management, Inc., an affiliate of the Manager, under which the
Manager pays the Sub-Adviser for services it provides a monthly fee that is a
percentage of the management fee paid by the Fund to the Manager.
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to Merrill Lynch,
Pierce, Fenner and Smith Incorporated ("MLPF&S"), an affiliate of the Manager,
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 MLIM,
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.
For the year ended February 28, 2007, the Fund reimbursed FAM and the Manager
$2,617 and $1,615, respectively, for certain accounting services.
Prior to September 29, 2006, certain officers and/or directors of the Fund
were officers and/or directors of MLIM, FAM, PSI, 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 February 28, 2007 were $167,864,547 and
$183,718,823, respectively.
4. Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital stock, par value
$.10 per share, all of which are 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.
5. Unfunded Loan Commitments:
As of February 28, 2007, the Fund had unfunded loan commitments of
approximately $17,231,000, which would be extended at the option of the
borrower pursuant to the following loan agreements:
(in Thousands)
Value of
Unfunded Underlying
Borrower Commitment Loan
ALON U.S.A., Inc. $ 111 $ 112
Aquila, Inc. $3,000 $2,970
Calpine Corp. $1,500 $1,496
LSP General Finance Co. LLC $ 71 $ 71
MGM Mirage Revolving Line
of Credit $5,000 $4,844
MEG Energy Corp. $ 500 $ 497
Renfro Corp. $ 59 $ 59
Spanish Broadcasting System, Inc. $2,500 $2,419
Trump Entertainment Delay Draw $ 990 $ 998
Trump Entertainment Resorts
Holdings LP $2,000 $1,940
Venetian Macau U.S. Finance Co. $ 500 $ 501
Vought Aircraft Industries, Inc. $1,000 $ 955
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Notes to Financial Statements (concluded)
6. Short-Term Borrowings:
On May 22, 2006, 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 $100,000,000.
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.
The weighted average annual interest rate was 5.48% and the average borrowing
was approximately $61,022,000 for the year ended February 28, 2007.
7. Distributions to Shareholders:
The Fund paid an ordinary income dividend to holders of Common Stock in the
amount of $.120834 per share on March 30, 2007 to shareholders of record on
March 15, 2007.
The tax character of distributions paid during the fiscal years ended February
28, 2007 and February 28, 2006 was as follows:
2/28/2007 2/28/2006
Distributions paid from:
Ordinary income $ 16,114,520 $ 14,383,187
--------------- ---------------
Total taxable distributions $ 16,114,520 $ 14,383,187
=============== ===============
As of February 28, 2007, the components of accumulated earnings on a
tax basis were as follows:
Undistributed ordinary income--net $ 1,968,707
Undistributed long-term capital gains--net --
---------------
Total undistributed earnings--net 1,968,707
Capital loss carryforward (1,783,719)*
Unrealized gains--net 2,009,606**
---------------
Total accumulated earnings--net $ 2,194,594
===============
* On February 28, 2007, the Fund had a net capital loss carryforward
of $1,783,719, of which $467,774 expires in 2014 and $1,315,945
expires in 2015. 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 accounting treatment of
swap payments.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
BlackRock Floating Rate Income Strategies Fund II, Inc.:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of BlackRock Floating Rate Income
Strategies Fund II, Inc. (formerly Floating Rate Income Strategies Fund II,
Inc.) as of February 28, 2007, 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 the respective periods 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 February 28, 2007,
by correspondence with the custodian and financial intermediaries; where
replies were not received from financial intermediaries, 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 Floating Rate Income Strategies Fund II, Inc. as of February 28,
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 the respective periods then
ended, in conformity with accounting principles generally accepted in the
United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
April 23, 2007
Fund Certification (unaudited)
In February 2007, 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 by BlackRock Floating Rate Income Strategies Fund II, Inc.
for the fiscal year ended February 28, 2007:
Interest-Related Dividends for Non-U.S. Residents
Month Paid: March 2006 82.16%*
April 2006 85.00%*
May 2006 - January 2007 89.78%*
February 2007 63.29%*
* Represents the portion of the taxable ordinary income dividends eligible
for exemption from U.S. withholding tax for nonresident aliens and foreign
corporations.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 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 FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
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. Doll, Jr.* President 2005 to Vice Chairman and Director of BlackRock, Inc., 122 Funds None
P.O. Box 9011 and present Global Chief Investment Officer for Equities, 168 Portfolios
Princeton, Director Chairman of the BlackRock Retail Operating
NJ 08543-9011 Committee, and member of the BlackRock
Age: 52 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. 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.
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.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 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*
Ronald W. Forbes** Director 2004 to Professor Emeritus of Finance, School of 47 Funds None
P.O. Box 9095 present Business, State University of New York at 49 Portfolios
Princeton, Albany since 2000 and Professor thereof from
NJ 08543-9095 1989 to 2000; International Consultant, Urban
Age: 66 Institute, Washington, D.C. from 1995 to 1999.
Cynthia A. Montgomery++ Director 2004 to Professor, Harvard Business School since 1989; 47 Funds Newell
P.O. Box 9095 present Associate Professor, J.L. Kellogg Graduate 49 Portfolios Rubbermaid, Inc.
Princeton, School of Management, Northwestern University (manufacturing).
NJ 08543-9095 from 1985 to 1989; Associate Professor, Graduate
Age: 54 School of Business Administration, University of
Michigan from 1979 to 1985; Director, Harvard
Business School Publishing since 2005; Director,
McLean Hospital since 2005.
Jean Margo Reid Director 2004 to Self-employed consultant since 2001; Counsel 47 Funds None
P.O. Box 9095 present of Alliance Capital Management (investment 49 Portfolios
Princeton, adviser) in 2000; General Counsel, Director
NJ 08543-9095 and Secretary of Sanford C. Bernstein & Co.,
Age: 61 Inc. (investment adviser/broker-dealer) from
1997 to 2000; Secretary, Sanford C. Bernstein
Fund, Inc. from 1994 to 2000; Director and
Secretary of SCB, Inc. since 1998; Director and
Secretary of SCB Partners, Inc. since 2000;
Director of Covenant House from 2001 to 2004.
Roscoe S. Suddarth Director 2004 to President, Middle East Institute, from 1995 to 47 Funds None
P.O. Box 9095 present 2001; Foreign Service Officer, United States 49 Portfolios
Princeton, Foreign Service, from 1961 to 1995 and Career
NJ 08543-9095 Minister from 1989 to 1995; Deputy Inspector
Age: 71 General, U.S. Department of State, from 1991 to
1994; U.S. Ambassador to the Hashemite Kingdom
of Jordan from 1987 to 1990.
Richard R. West Director 2004 to Professor of Finance from 1984 to 1995, Dean 47 Funds Bowne & Co.,
P.O. Box 9095 present from 1984 to 1993 and since 1995 Dean 49 Portfolios Inc. (financial
Princeton, Emeritus of New York University's Leonard N. printers);
NJ 08543-9095 Stern School of Business Administration. Vornado Realty
Age: 69 Trust (real
estate company);
Alexander's, Inc.
(real estate
company).
* Directors serve until their resignation, removal or death,
or until December 31 of the year in which they turn 72.
** Chairman of the Board of Directors and the Audit Committee.
++ Chair of the Nominating Committee.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
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. Burke Vice 2004 to Managing Director of BlackRock, Inc. since 2006; Managing Director of Merrill
P.O. Box 9011 President present Lynch Investment Managers, L.P. ("MLIM") and Fund Asset Management, L.P.
Princeton, and ("FAM") in 2006; First Vice President of MLIM and FAM from 1997 to 2005 and
NJ 08543-9011 Treasurer Treasurer thereof from 1999 to 2006; Vice President of MLIM and FAM from 1990
Age: 46 to 1997.
Jeffrey Hiller Fund Chief 2004 to Managing Director of BlackRock, Inc. and Fund Chief Compliance Officer since
P.O. Box 9011 Compliance present 2006; Chief Compliance Officer of the MLIM/FAM-advised funds and First Vice
Princeton, Officer President and Chief Compliance Officer of MLIM (Americas Region) from 2004 to
NJ 08543-9011 2006; Chief Compliance Officer of the IQ Funds since 2004; Global Director of
Age: 55 Compliance at Morgan Stanley Investment Management from 2002 to 2004; Managing
Director and Global Director of Compliance at Citigroup Asset Management from
2000 to 2002; Chief Compliance Officer at Soros Fund Management in 2000; Chief
Compliance Officer at Prudential Financial from 1995 to 2000; Senior Counsel in
the Securities and Exchange Commission's Division of Enforcement in Washington,
D.C. from 1990 to 1995.
Alice A. Pellegrino Secretary 2004 to Director of BlackRock, Inc. since 2006; Director (Legal Advisory) of MLIM from
P.O. Box 9011 present 2002 to 2006; Vice President of MLIM from 1999 to 2002; Attorney associated
Princeton, with MLIM from 1997 to 1999; Secretary of MLIM, FAM, FAM Distributors, Inc. and
NJ 08543-9011 Princeton Services from 2004 to 2006.
Age: 46
* 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
FRB
Effective January 1, 2007, Edward D. Zinbarg retired as a Director of
BlackRock Floating Rate Income Strategies Fund II, Inc. The Fund's Board of
Directors wishes Mr. Zinbarg well in his retirement.
Effective April 13, 2007, Jeffrey Hiller resigned his position as Chief
Compliance Officer of the Fund. Also effective April 13, 2007, Karen Clark was
appointed Chief Compliance Officer of the Fund. Ms. Clark has been a Managing
Director of BlackRock, Inc. since 2007. She was a Director thereof from 2005
to 2007. Prior to that, Ms. Clark was a principal and senior compliance
officer at State Street Global Advisors from 2001 to 2005. Ms. Clark was a
principal consultant with PricewaterhouseCoopers, LLP from 1998 to 2001. From
1993 to 1998, Ms. Clark was Branch Chief, Division of Investment Management
and Office of Compliance Examinations, with the U.S. Securities and Exchange
Commission.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
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 calling1-800-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.
To enroll:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment
advisers, banks or brokerages may offer this service.
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 nonpublic 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 nonpublic 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 nonaffiliated third parties any
nonpublic personal information about its Clients, except as permitted by law
or as is necessary to service Client accounts. These nonaffiliated 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
nonpublic 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 nonpublic personal information of its Clients, including procedures
relating to the proper storage and disposal of such information.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. FEBRUARY 28, 2007
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)
Ronald W. Forbes, (2) Richard R. West, and (3) Edward D. Zinbarg
(retired as of December 31, 2006).
Item 4 - Principal Accountant Fees and Services
(a) Audit Fees - Fiscal Year Ending February 28, 2007 - $40,200
Fiscal Year Ending February 28, 2006 - $40,200
(b) Audit-Related Fees -
Fiscal Year Ending February 28, 2007 - $8,000
Fiscal Year Ending February 28, 2006 - $8,000
The nature of the services include agreed upon procedures related to
the credit facility.
(c) Tax Fees - Fiscal Year Ending February 28, 2007 - $6,100
Fiscal Year Ending February 28, 2006 - $6,000
The nature of the services include tax compliance, tax advice and
tax planning.
(d) All Other Fees - Fiscal Year Ending February 28, 2007 - $0
Fiscal Year Ending February 28, 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 Ending February 28, 2007 - $3,034,617
Fiscal Year Ending February 28, 2006 - $4,944,454
(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)):
Ronald W. Forbes
Cynthia A. Montgomery
Jean Margo Reid
Roscoe S. Suddarth
Richard R. West
Edward D. Zinbarg (retired as of December 31, 2006)
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies -
Proxy Voting Policies and Procedures
------------------------------------
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:
* 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.
* 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.
* 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.
* 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.
* 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.
* Routine proposals related to requests regarding the formalities of
corporate meetings.
* 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.
* 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 February 28 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 February 28, 2007.
(a)(1) The Fund is managed by a team of investment professionals
that is responsible for the day-to-day management of the Fund's
portfolio. The lead members of this team are Mark J. Williams,
Managing Director at BlackRock, and Kevin J. Booth, Managing
Director at BlackRock. Mr. Williams and Mr. Booth each has been a
portfolio manager of the Fund since 2006. Mr. Williams is
responsible for setting the Fund's overall investment strategy and
overseeing the management of the Fund as of October 2, 2006. Mr.
Booth is responsible for the day-to-day management of the Fund's
portfolio and the selection of its investments.
Mr. Williams is the head of BlackRock's bank loan group and a member
of the Investment Strategy Group. His primary responsibility is
originating and evaluating bank loan investments for the firm's
collateralized bond obligations. He is also involved in the
evaluation and sourcing of mezzanine investments. Prior to joining
BlackRock in 1998, Mr. Williams spent eight years with PNC Bank's
New York office and was a founding member of the bank's Leveraged
Finance Group. In that capacity he was responsible for structuring
proprietary middle market leveraged deals and sourcing and
evaluating broadly syndicated leveraged loans in the primary and
secondary markets for PNC Bank's investment portfolio. From 1984
until 1990, Mr. Williams worked in PNC Bank's Philadelphia office in
a variety of marketing and corporate finance positions.
Mr. Booth is a member of BlackRock's bank loan group. He joined
BlackRock in 2006. Prior to joining BlackRock, Mr. Booth was a
Managing Director (Global Fixed Income) of Merrill Lynch Investment
Managers, L.P. ("MLIM") since 2006 and a member of MLIM's bank loan
group from 2000 to 2006. He was a Director of MLIM from 2000 to 2006
and was a Vice President of MLIM from 1994 to 2000. He has been
portfolio manager with BlackRock or MLIM since 2000.
(a)(2) As of February 28, 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
Kevin J.
Booth 9 2 1 0 2 0
$ 5,606,674,638 $ 529,770,486 $ 56,698,833 $ 0 $ 529,770,486 $ 0
Mark J.
Williams 8 18 1 0 10 0
$ 4,854,543,445 $ 6,003,278,704 $ 158,013,679 $ 0 $ 3,985,661,008 $ 0
(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 February 28, 2007:
Compensation Program
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 a 401(k) plan, the BlackRock Retirement Savings Plan (RSP)
and the BlackRock Employee Stock Purchase Plan (ESPP). The employer
contribution components of the RSP include a company match equal to
50% of the first 6% of eligible pay contributed to the plan capped
at $4,000 per year, and a company retirement contribution equal to
3% of eligible compensation, plus an additional contribution of 2%
for any year in which BlackRock has positive net operating income.
The RSP offers a range of investment options, including registered
investment companies managed by the firm. Company contributions
follow the investment direction set by participants for their own
contributions or absent, employee investment direction, are invested
into a stable value fund. The ESPP allows for investment in
BlackRock common stock at a 5% discount on the fair market value of
the stock on the purchase date. Annual participation in the ESPP
is limited to the purchase of 1,000 shares or a dollar value of
$25,000. Each portfolio manager is eligible to participate in these
plans.
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. 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.
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 February 28, 2007,
Messrs. Booth and Williams do not beneficially own 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 - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
11(b) - As of September 29, 2006, with the conclusion of the combination of
Merrill Lynch's asset management business with BlackRock, the
registrant was migrated to BlackRock's trading and compliance
monitoring systems, and various personnel changes occurred. In
conjunction with these business improvements, there were no changes
in the registrants internal control over financial reporting (as
defined in Rule 30a-3(d) under Act (17 CFR 270.30a-3(d)) that
occurred during the last fiscal half-year of the period covered by
this report that has materially affected, or is reasonably likely to
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 Floating Rate Income Strategies Fund II, Inc.
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Floating Rate Income Strategies Fund II, Inc.
Date: April 23, 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 Floating Rate Income Strategies Fund II, Inc.
Date: April 23, 2007
By: /s/ Donald C. Burke
-------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock Floating Rate Income Strategies Fund II, Inc.
Date: April 23, 2007