N-CSRS 1 br7525.txt BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II INC UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS 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: (800) 882-0052 Date of fiscal year end: 02/31/08 Date of reporting period: 03/01/07 - 08/31/07 Item 1 - Report to Stockholders EQUITIES FIXED INCOME REAL ESTATE LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS BlackRock Floating Rate Income Strategies Fund II, Inc. (FRB) SEMI-ANNUAL REPORT AUGUST 31, 2007 (UNAUDITED) (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. BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 A Letter to Shareholders Dear Shareholder Financial markets embarked on a wild ride during the August reporting period. Subprime mortgage troubles intensified in the final months of the period, spawning a widespread credit and liquidity crisis that crept into other areas of the market. The U.S. Federal Reserve Board (the Fed) and other countries' central banks stepped in to inject liquidity into the markets and bolster investor confidence. In August, the Fed cut the discount rate, the rate charged to banks to borrow money directly from the Fed, from 6.25% to 5.75%. Another .50% cut in the discount rate came on September 18, along with a .50% cut in the more widely followed federal funds rate. This brought the target short-term interest rate, which had remained unchanged at 5.25% for over a year, to 4.75%. Although heightened volatility has been a recurring theme throughout the past year, the global economy (excluding the U.S. housing market) remained quite healthy. In general, equity market fundamentals also held firm - second- quarter corporate earnings exceeded expectations (although future earnings could be at risk if the economy weakens), dividend payouts and share buybacks continued to grow, and valuations remained attractive. These tailwinds generally prevailed over such headwinds as a slowing U.S. economy and troubled housing market, although the more recent credit crunch dampened corporate merger-and-acquisition activity, a key source of strength for equity markets. Stocks recorded their second-worst day of the year in August, yet remained comfortably in the black year-to-date. Meanwhile, mixed economic signals and the credit market debacle made for a volatile backdrop for fixed income, with investors fleeing from bonds associated with the housing and credit markets in favor of higher-quality Treasury issues. As a result, the 10-year Treasury yield, which touched 5.30% in June (its highest level in five years), fell to 4.54% by period-end, while prices correspondingly rose. Against this backdrop, financial markets posted mixed results for the six- and 12-month periods ended August 31, 2007:
Total Returns as of August 31, 2007 6-month 12-month U.S. equities (S&P 500 Index) +5.70% +15.13% Small cap U.S. equities (Russell 2000 Index) +0.54 +11.36 International equities (MSCI Europe, Australasia, Far East Index) +5.83 +18.71 Fixed income (Lehman Brothers U.S. Aggregate Bond Index) +1.54 + 5.26 Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) -0.57 + 2.30 High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Cap Index) -1.71 + 6.46
Past performance is no guarantee of future results. Index performance shown for illustrative purposes only. You cannot invest directly in an index. As you navigate market volatility, we encourage you to review your investment goals with your financial professional and to make portfolio changes, as needed. For more market insight, we invite you to visit www.blackrock.com/funds. We thank you for entrusting BlackRock with your investment assets, and we look forward to continuing to serve you in the months and years ahead. Sincerely, (Robert C. Doll, Jr.) Robert C. Doll, Jr. Fund President and Director THIS PAGE NOT PART OF YOUR FUND REPORT BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Fund Summary as of August 31, 2007 (Unaudited) Fund Information Symbol on New York Stock Exchange FRB Initial Offering Date July 30, 2004 Yield on Closing Market Price as of 8/31/07 ($16.57)* 8.75% Current Monthly Distribution per share of Common Stock** $.120834 Current Annualized Distribution per share of Common Stock** $1.45 Leverage as of 8/31/07*** 22% * Yield on closing market price is calculated by dividing the current annualized distribution per share by the closing market price. Past performance does not guarantee future results. ** The distribution is not constant and is subject to change. A portion of the distribution may be deemed a tax return of capital or net realized gain at fiscal year end. *** As a percentage of net assets, which is the total assets of the Fund (including any assets attributable to any borrowing that may be outstanding) minus the sum of accrued liabilities (other than debt representing financial leverage). The table below summarizes the changes in the Fund's market price and net asset value per share: 8/31/07 2/28/07 Change High Low Market Price $16.57 $18.50 (10.43%) $19.02 $14.60 Net Asset Value $18.07 $19.28 (6.28%) $19.32 $17.94 The following charts show the portfolio composition and credit quality allocations of the Fund's long-term investments: Portfolio Composition Asset Mix 8/31/07 2/28/07 Floating Rate Loan Interests 67% 75% Corporate Bonds 32 24 Common Stocks 1 1 Credit Quality Allocations* Credit Rating 8/31/07 2/28/07 BBB/Baa 1% 1% BB/Ba 30 30 B/B 51 58 CCC/Caa 9 3 NR (Not Rated) 8 7 Other** 1 1 * Using the highest of S&P's or Moody's ratings. ** Includes portfolio holdings in common stocks. BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Schedule of Investments as of August 31, 2007 (Unaudited) (in U.S. dollars) Face Amount Floating Rate Loan Interests** Value Aerospace & Defense--2.0% Hawker Beechcraft: USD 54,610 Letter of Credit, 5.26% due 3/31/2014 $ 51,879 643,777 Term Loan B, 7.36% - 7.508% due 3/31/2014 611,588 1,476,254 IAP Worldwide Services, Inc. First Lien Term Loan, 11.687% due 12/20/2012 1,268,102 Vought Aircraft Industries, Inc.: 1,640,471 Term Loan, 7.83% due 12/22/2011 1,585,105 320,000 Tranche B Line of Credit Deposit, 7.822% due 12/22/2010 309,200 -------------- 3,825,874 Airlines--0.7% 497,500 United Air Lines, Inc. Term Loan B, 7.625% due 1/30/2014 466,510 1,000,000 US Airways Group, Inc. Term Loan B, 7.86% due 3/22/2014 939,375 -------------- 1,405,885 Auto Components--1.9% 250,000 Delphi Automotive Systems Term Loan B, 7.625% due 12/31/2007 245,833 987,500 GPX International Tire Corp. Term Loan B, 10.33% - 10.35% due 4/06/2012 948,000 1,302,793 GenTek, Inc. First Lien Term Loan, 7.36% - 7.61% due 2/28/2011 1,263,709 Metaldyne Corp.: 57,692 Letter of Credit, 5.17% - 9.125% due 1/15/2012 56,250 392,308 Term Loan B, 9.125% due 1/15/2014 382,500 750,000 Visteon Corp. Term Loan B, 8.38% due 6/13/2013 690,469 -------------- 3,586,761 Beverages--0.3% EUR 500,000 Culligan International Second Lien Term Loan, 7.815% due 10/24/2012 578,956 Building Products--0.7% USD 1,351,429 Associated Materials, Inc. Term Loan, 7.86% - 7.90% due 8/29/2010 1,283,857 Chemicals--4.8% 500,000 BOC Edwards Ltd. Term Loan B, 7.541% due 5/21/2014 457,500 250,000 Huish Detergents, Inc. First Lien Term Loan, 7.51% due 4/15/2014 229,375 500,000 ISP Chemco Term Loan B, 7.125% - 7.313% due 5/25/2014 479,584 500,000 KIK Custom Products First Lien Term Loan, 7.61% due 5/30/2014 455,000 3,881,250 Rockwood Specialties Group, Inc. Tranche D Term Loan, 6.857% due 7/30/2012 3,752,684 GBP 1,000,000 Viridian Group Plc Term Loan, 8.234% - 10.358% due 12/21/2012 1,964,837 USD 2,000,000 Wellman, Inc. Second Lien Term Loan, 12.106% due 2/10/2010 1,740,000 -------------- 9,078,980 Face Amount Floating Rate Loan Interests** Value Commercial Services & Supplies--4.0% USD 1,225,502 Amsted Industries, Inc. Term Loan B, 7.35% due 3/28/2013 $ 1,198,695 Aramark Corp.: 59,257 Letter of Credit, 5.36% due 1/30/2014 57,020 842,279 Term Loan B, 7.36% due 1/30/2014 810,483 498,750 Brickman Group, Inc. Term Loan, 7.34% due 1/30/2014 472,566 756,000 Camelbak Products LLC First Lien Term Loan, 9.15% - 9.37% due 8/04/2011 701,190 118,228 EnergySolutions Term Loan C, 7.66% due 6/07/2013 113,056 500,000 Jason, Inc. Term Loan B, 8.03% - 9.50% due 4/30/2010 475,000 705,394 John Maneely Co. Term Loan B, 8.61% due 12/15/2013 631,033 Kion GmbH: 250,000 Term Loan B, 7.58% due 3/15/2015 236,945 250,000 Term Loan C, 7.83% due 3/15/2016 237,500 142,403 Metokote Corp. Second Lien Term Loan, 8.36% - 8.55% due 11/27/2011 140,267 498,750 RiskMetrics Group, Inc. Term Loan, 7.61% due 1/15/2014 485,034 1,000,000 Synargo Technologies Term Loan B, 7.32% due 3/31/2014 970,000 990,037 West Corp. Term Loan B, 7.735% - 7.88% due 10/31/2013 954,973 -------------- 7,483,762 Computers & Peripherals--2.0% Intergraph Corp. Term Loan: 439,226 7.503% due 5/15/2014 420,010 500,000 11.506% due 11/15/2014 478,125 Reynolds and Reynolds Co.: 1,911,829 First Lien Term Loan, 7.36% due 10/31/2012 1,828,187 1,000,000 Second Lien Term Loan, 10.86% due 10/31/2013 990,000 -------------- 3,716,322 Construction & Engineering--0.3% 498,750 BakerCorp Term Loan C, 7.61% - 7.79% due 5/15/2014 481,917 Construction Materials--1.4% 1,345,703 Headwaters, Inc. Term Loan B-1, 7.36% due 4/30/2011 1,312,061 1,455,000 Nortek, Inc. Term Loan, 7.61% due 8/27/2011 1,387,706 -------------- 2,699,767 Containers & Packaging--2.2% 1,119,787 Anchor Glass Container Corp. Term Loan B, 7.61% - 7.791% due 5/03/2013 1,086,193 540,000 Berry Plastics Corp. Term Loan B, 11.61% due 6/15/2014 464,400 498,750 Consolidated Container First Lien Term Loan, 7.59% due 4/15/2014 460,097 997,500 Graham Packaging Term Loan B, 7.625% due 4/15/2011 969,238 BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Schedule of Investments (continued) (in U.S. dollars) Face Amount Floating Rate Loan Interests** Value Containers & Packaging (concluded) Smurfit-Stone Container Corp.: USD 756,448 Term Loan B, 7.375% due 11/01/2011 $ 740,019 418,407 Term Loan C, 7.375% due 11/01/2011 409,319 -------------- 4,129,266 Distributors--0.5% 997,500 Keystone Automotive Operations, Inc. Term Loan B, 8.828% - 9% due 1/15/2012 910,219 Diversified Financial Services--0.5% 1,000,000 JG Wentworth Manufacturing Term Loan B, 7.61% due 4/15/2014 927,500 Diversified Telecommunication Services--0.2% 500,000 Hawaiian Telcom Term Loan C, 7.61% due 5/25/2014 473,500 Electrical Equipment--0.4% Generac Portable Products, Inc.: 495,000 First Lien Term Loan, 7.86% due 11/15/2013 437,722 500,000 Second Lien Term Loan, 11.36% due 5/15/2014 332,917 -------------- 770,639 Energy Equipment & Services--2.5% 1,000,000 Bobcat Gas Storage Term Loan B, 7.485% due 9/15/2014 950,000 748,125 Brock Holdings Term Loan, 7.36% due 2/28/2014 716,330 Dresser, Inc.: 1,000,000 First Lien Term Loan, 8.01% - 8.038% due 5/15/2014 960,625 500,000 Second Lien Term Loan, 11.129% due 5/04/2015 472,500 EnergySolutions: 12,579 Letter of Credit, 7.839% due 6/07/2013 12,028 246,636 Term Loan B, 7.66% due 6/07/2013 235,845 985,000 Key Energy Services, Inc. Term Loan B, 7.856% - 8.065% due 6/30/2012 962,838 493,750 MEG Energy Corp. Term Loan B, 7.36% due 4/03/2013 476,469 -------------- 4,786,635 Food & Staples Retailing--1.9% 775,833 Advance Food Co. Term Loan B, 7.11% due 3/31/2014 729,283 498,747 DS Waters LP Term Loan B, 7.61% - 7.753% due 3/31/2012 468,822 Dole Food Co., Inc.: 139,535 Letter of Credit, 5.23% due 4/12/2013 131,163 310,029 Term Loan B, 7.438% - 9.25% due 4/12/2013 291,427 1,033,430 Term Loan C, 7.438% - 9.25% due 4/04/2013 971,424 Sturm Foods, Inc.: 498,750 First Lien Term Loan, 7.875% - 7.938% due 1/30/2014 463,838 500,000 Second Lien Term Loan, 11.438% due 6/30/2014 466,250 -------------- 3,522,207 Face Amount Floating Rate Loan Interests** Value Food Products--1.5% USD 2,984,772 Chiquita Brands International Term Loan C, 8.563% due 6/28/2012 $ 2,905,177 Health Care Providers & Services--1.2% 1,000,000 DaVita, Inc. Term Loan B, 6.86% - 7.01% due 7/30/2012 967,500 1,496,250 Health Management Associates, Inc. Term Loan B, 7.11% due 1/15/2014 1,403,203 -------------- 2,370,703 Hotels, Restaurants & Leisure--3.4% 318,182 Golden Nugget, Inc. Term Loan, 7.51% - 7.59% due 5/30/2014 301,477 480,568 Green Valley Ranch Gaming LLC Term Loan, 7.36% - 7.565% due 2/16/2014 456,540 60,185 Lake Las Vegas Resort Revolving Credit, 15.46% due 12/14/2012 54,167 439,815 Lake Las Vegas Resort Term Loan B, 15.46% due 12/14/2012 395,834 800,000 Las Vegas Sands Term Loan B, 7.11% due 5/04/2014 759,100 465,000 QCE LLC First Lien Term Loan, 7.61% due 5/05/2013 442,913 500,000 Riviera Holdings Corp. Term Loan B, 7.36% due 5/11/2017 485,000 Trump Entertainment Resorts Holdings LP: 982,500 Delay Draw Term Loan, 7.86% - 8.01% due 4/28/2012 961,622 230,000 Revolving Credit, 7.83% due 5/01/2010 218,500 982,500 Term Loan B-1, 7.86% - 7.90% due 5/01/2012 961,622 Venetian Macau US Finance Co. LLC: 500,000 Delay Draw Term Loan, 7.61% - 7.76% due 5/25/2012 482,857 1,000,000 Term Loan B, 7.61% due 5/25/2013 965,714 -------------- 6,485,346 Household Durables--1.4% 1,000,000 American Residential Services Second Lien Term Loan, 12% due 4/17/2015 990,000 1,740,440 Simmons Co. Tranche B Term Loan, 7.25% - 7.56% due 12/19/2011 1,688,226 -------------- 2,678,226 IT Services--1.6% 1,228,785 Activant Solutions Term Loan B, 7.375% due 5/02/2013 1,145,842 1,000,000 Audio Visual Services Corp. Term Loan B, 7.61% due 2/28/2014 940,000 997,500 Mitchell International, Inc. Term Loan B, 7.375% due 3/31/2014 958,847 -------------- 3,044,689 Independent Power Producers & Energy Traders--0.8% 1,445,289 Calpine Generating Company LLC Term Loan, 11.07% due 3/12/2010 1,503,101 BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Schedule of Investments (continued) (in U.S. dollars) Face Amount Floating Rate Loan Interests** Value Insurance--0.3% USD 500,000 USI Holdings Corp. Term Loan B, 7.95% due 5/15/2014 $ 467,500 Internet Software & Services--0.5% 974,026 Billing Services Group LLC First Lien Term Loan, 7.938% due 5/05/2012 964,286 Leisure Equipment & Products--2.3% 1,975,000 24 Hour Fitness Term Loan B, 7.86% - 7.88% due 6/08/2014 1,940,438 2,541,383 True Temper Sports, Inc. Term Loan B, 8.538% - 8.745% due 3/15/2011 2,414,314 -------------- 4,354,752 Machinery--2.5% 1,378,457 Blount, Inc. Term Loan B, 7.07% - 7.11% due 8/09/2010 1,343,996 Navistar International Transportation Corp.: 400,000 Revolving Credit, 5.17% - 8.61% due 1/19/2012 384,000 1,100,000 Term Loan, 8.61% due 1/19/2012 1,056,000 1,990,000 OshKosh Truck Corp. Term Loan B, 7.11% due 11/30/2013 1,908,535 -------------- 4,692,531 Media--24.9% 300,000 Affinion Group, Inc. Term Loan, 11.678% due 3/01/2012 277,000 1,119,375 Alix Partners Term Loan B, 7.36% due 10/30/2013 1,096,987 500,000 Bresnan Telecommunications Term Loan B, 7.36% due 9/29/2013 480,178 1,000,000 Cequel Communications LLC Second Lien Term Loan, 9.856% due 3/31/2015 965,000 5,500,000 Charter Communications, Inc. Term Loan B, 7.361% due 4/30/2014 5,195,047 1,000,000 Clarke American Corp. Term Loan B, 7.86% due 6/30/2014 912,500 1,000,000 GateHouse Media, Inc. Term Loan B, 7.51% due 9/15/2014 905,000 1,000,000 Gray Communications Systems, Inc. Term Loan B, 6.86% due 9/18/2014 936,875 1,000,000 Hanley-Wood LLC Term Loan B, 7.59% - 7.61% due 3/07/2014 896,667 3,980,000 Idearc, Inc. Term Loan B, 7.36% due 11/15/2014 3,846,129 Insight Midwest Holdings LLC: 2,250,000 Delay Draw Term Loan, 7.11% due 4/03/2014 2,186,368 750,000 Term Loan B, 7.36% due 4/06/2014 728,789 3,830,950 Intelsat Corp. Term Loan B, 7.36% due 1/03/2014 3,702,613 1,960,187 Intelsat Ltd. Term Loan B, 7.36% due 12/03/2013 1,903,832 500,000 Knology, Inc. Term Loan B, 7.61% due 3/15/2012 482,500 1,000,000 LodgeNet Entertainment Corp. Term Loan, 7.36% due 4/04/2014 951,667 248,125 MediMedia International Term Loan B, 7.522% - 7.63% due 11/15/2013 238,820 1,965,000 Mediacom Broadband Group Tranche A Term Loan, 7.02% - 7.07% due 3/31/2010 1,837,275 Face Amount Floating Rate Loan Interests** Value Media (concluded) USD 3,144,200 Mediacom LLC Term Loan C, 7.32% due 1/31/2015 $ 2,964,531 3,181,250 Metro-Goldwyn-Mayer Studios, Inc. Term Loan B, 8.61% due 4/08/2012 2,995,436 387,000 Multicultural Radio Broadcasting Inc. Term Loan, 8.288% due 12/15/2012 375,390 748,124 NEP Supershooters, LP Term Loan B, 7.61% due 2/13/2014 711,965 750,000 National Cinemedia LLC Term Loan B, 7.11% due 2/28/2015 705,000 NextMedia Group, Inc.: 518,844 Delay Draw Term Loan, 7.33% due 11/15/2012 487,714 977,399 First Lien Term Loan, 7.569% due 11/15/2012 918,755 992,500 Nielsen Finance LLC Term Loan B, 7.36% due 8/15/2013 953,076 EUR 500,000 PagesJaunes Group Term Loan C, 6.89% due 1/11/2016 646,643 USD 1,750,000 Paxson Communications Corp. First Lien Term Loan, 8.61% due 1/15/2012 1,693,125 497,500 Penton Media Term Loan, 7.61% due 2/15/2013 470,138 EUR 500,000 ProSiebenSat.1 Media AG Term Loan B, 6.796% due 6/30/2015 620,675 USD 1,714,631 RH Donnelley, Inc. Term Loan D-2, 6.86% - 7.05% due 8/30/2011 1,656,286 1,000,000 San Juan Cable Term Loan B, 11.82% due 3/15/2013 957,500 2,449,875 Spanish Broadcasting System, Inc. Tranche 2 First Lien Term Loan B, 7.11% due 6/10/2012 2,309,007 1,409,396 Univision Communications, Inc. Delay Draw Term Loan, 7.61% due 9/30/2014 1,301,342 -------------- 47,309,830 Multi-Utilities--5.8% 500,000 Brand Energy Term Loan B, 7.625% - 7.813% due 2/15/2015 484,166 MACH Gen LLC: 70,313 Letter of Credit, 7.36% due 2/22/2014 66,855 676,289 Term Loan, 7.50% due 2/22/2014 643,038 985,128 NE Energy Term Loan B, 7.86% due 10/31/2013 954,753 4,165,826 Riverside Energy Center Term Loan, 9.815% due 6/24/2011 4,131,112 Rocky Mountain Energy Center LLC: 339,834 Credit Linked Deposit, 5.22% due 6/24/2011 337,002 2,558,398 Term Loan, 9.815% due 6/24/2011 2,537,079 Wolf Hollow I LP: 471,660 First Lien Term Loan, 7.61% due 6/22/2012 424,494 400,000 Letter of Credit, 7.75% due 6/22/2012 360,000 100,000 Revolving Credit, 7.57% - 7.755% due 6/22/2012 90,000 1,000,000 Second Lien Term Loan, 9.864% due 12/22/2012 940,000 -------------- 10,968,499 BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Schedule of Investments (continued) (in U.S. dollars) Face Amount Floating Rate Loan Interests** Value Multiline Retail--0.4% USD 822,785 Neiman Marcus Group, Inc. Term Loan, 7.09% - 7.11% due 4/06/2013 $ 797,808 Oil, Gas & Consumable Fuels--2.0% Coffeyville Resources LLC: 162,162 Letter of Credit, 5.26% due 12/21/2013 156,030 833,654 Term Loan B, 8.609% - 10.50% due 12/21/2013 802,132 989,940 Helix Energy Solutions Term Loan B, 7.33% - 7.541% due 7/01/2013 957,458 1,000,000 SandRidge Energy, Inc. Term Loan B, 8.985% due 3/01/2014 987,500 928,571 Western Refining Co. LP Term Loan B, 7.07% due 3/15/2014 882,143 -------------- 3,785,263 Paper & Forest Products--0.8% Cenveo, Inc.: 957 Delay Draw Term Loan, 7.11% due 9/07/2013 911 28,699 Term Loan C, 7.10% due 9/07/2013 27,335 985,000 Georgia-Pacific Corp. First Lien Term Loan B, 7.264% due 12/20/2012 941,149 585,000 Verso Paper Holdings LLC Term Loan B, 11.606% due 2/01/2013 582,075 -------------- 1,551,470 Pharmaceuticals--0.8% Pharmaceutical Technologies & Services (PTS): 1,000,000 Term Loan, 7.61% due 4/15/2014 912,500 EUR 500,000 Term Loan, 6.414% due 4/15/2014 647,068 -------------- 1,559,568 Real Estate Management & Development--0.9% USD 493,750 Mattamy Group Term Loan B, 7.813% due 4/11/2013 476,469 1,242,424 Realogy Corp. Letter of Credit, 8.35% due 9/22/2014 1,126,465 -------------- 1,602,934 Road & Rail--0.9% 1,000,000 Rail America, Inc. Term Loan, 7.81% due 8/14/2008 967,500 883,721 Swift Transportation Co., Inc. Term Loan B, 8.375% due 5/15/2014 781,172 -------------- 1,748,672 Specialty Retail--1.5% 1,000,000 ADESA, Inc. Term Loan B, 7.61% due 10/30/2013 935,625 500,000 Burlington Coat Factory Warehouse Corp. Term Loan B, 7.76% due 4/15/2013 468,035 1,000,000 Claire's Stores Term Loan B, 8.11% due 5/24/2014 915,417 498,750 Mattress Giant Term Loan B, 7.61% due 2/28/2014 473,813 -------------- 2,792,890 Face Amount Floating Rate Loan Interests** Value Textiles, Apparel & Luxury Goods--0.5% USD 498,750 David's Bridal, Inc. Term Loan B, 7.36% due 1/30/2014 $ 463,838 497,155 Renfro Corp. Term Loan B, 8.61% - 8.76% due 9/30/2013 479,755 -------------- 943,593 Trading Companies & Distributors--0.6% United Rentals, Inc.: 1,096,251 Term Loan, 7.32% due 2/14/2011 1,081,862 99,261 Tranche B Credit Linked Deposit, 5.66% due 2/14/2011 97,958 -------------- 1,179,820 Wireless Telecommunication Services--1.0% 997,500 American Cellular Network Term Loan B, 7.36% due 3/15/2014 986,777 498,750 Crown Castle Operating Co. Term Loan, 6.82% - 6.84% due 3/15/2014 473,812 500,000 IPC Systems First Lien Term Loan, 7.61% due 5/25/2014 444,167 -------------- 1,904,756 Total Floating Rate Loan Interests (Cost--$162,929,291)--81.9% 155,273,461 Corporate Bonds Auto Components--0.3% 500,000 The Goodyear Tire & Rubber Co., 9.135% due 12/01/2009 (a)(b) 500,000 Biotechnology--0.3% 500,000 Angiotech Pharmaceuticals, Inc., 9.371% due 12/01/2013 (b) 495,000 Building Products--2.7% 3,000,000 CPG International I, Inc., 12.13% due 7/01/2012 (b) 3,015,000 2,500,000 Masonite International Corp., 11% due 4/06/2015 2,037,500 -------------- 5,052,500 Chemicals--2.5% 1,646,000 GEO Specialty Chemicals, Inc., 13.85% due 12/31/2009 (b)(c) 1,357,950 1,000,000 Hexion U.S. Finance Corp., 10.058% due 11/15/2014 (b) 1,020,000 2,000,000 MacDermid, Inc., 9.50% due 4/15/2017 (a) 1,860,000 580,000 NOVA Chemicals Corp., 8.484% due 11/15/2013 (b) 562,600 -------------- 4,800,550 Commercial Services & Supplies--0.1% 100,000 Sally Holdings LLC, 10.50% due 11/15/2016 95,500 150,000 Yankee Acquisition Corp., 9.75% due 2/15/2017 134,250 -------------- 229,750 BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Schedule of Investments (continued) (in U.S. dollars) Face Amount Corporate Bonds Value Computers & Peripherals--1.0% USD 2,000,000 Quantum Corp., 4.375% due 8/01/2010 (c) $ 1,950,000 Containers & Packaging--3.6% 850,000 Berry Plastics Holding Corp., 9.235% due 9/15/2014 (b) 841,500 5,000,000 Clondalkin Acquisition BV, 7.359% due 12/15/2013 (a)(b) 4,750,000 1,240,000 Packaging Dynamics Finance Corp., 10% due 5/01/2016 (a) 1,241,550 -------------- 6,833,050 Diversified Financial Services--0.3% 500,000 Ford Motor Credit Co. LLC, 9.81% due 4/15/2012 (b) 503,677 Diversified Telecommunication Services--0.4% 800,000 Qwest Corp., 8.61% due 6/15/2013 (b) 844,000 Electric Utilities--0.7% 1,325,000 Edison Mission Energy, 7.50% due 6/15/2013 1,334,937 Electronic Equipment & Instruments--0.8% 1,590,000 NXP BV, 8.11% due 10/15/2013 (b) 1,440,937 100,000 Sanmina-SCI Corp., 8.125% due 3/01/2016 86,500 -------------- 1,527,437 Energy Equipment & Services--2.1% 2,000,000 Ocean RIG ASA, 9.36% due 4/04/2011 (b) 1,975,000 2,000,000 Parker Drilling Co., 10.33% due 9/01/2010 (b) 2,017,500 -------------- 3,992,500 Food & Staples Retailing--0.3% 250,000 AmeriQual Group LLC, 9.50% due 4/01/2012 (a) 232,500 360,000 Rite Aid Corp., 9.375% due 12/15/2015 (a) 327,600 -------------- 560,100 Health Care Equipment & Supplies--0.2% 500,000 The Cooper Cos, Inc., 7.125% due 2/15/2015 477,500 Health Care Providers & Services--0.6% 1,125,000 Tenet Healthcare Corp., 6.50% due 6/01/2012 933,750 230,000 Universal Hospital Services, Inc., 8.759% due 6/01/2015 (a)(b) 221,950 -------------- 1,155,700 Hotels, Restaurants & Leisure--4.5% 4,000,000 American Real Estate Partners LP, 7.125% due 2/15/2013 (a) 3,760,000 225,000 Galaxy Entertainment Finance Co. Ltd., 10.409% due 12/15/2010 (a)(b) 227,250 2,000,000 Landry's Restaurants, Inc. Series B, 7.50% due 12/15/2014 2,002,500 1,565,000 Little Traverse Bay Bands of Odawa Indians, 10.25% due 2/15/2014 (a) 1,572,825 950,000 Travelport LLC, 10.246% due 9/01/2014 (b) 950,000 -------------- 8,512,575 IT Services--1.1% 2,000,000 SunGard Data Systems, Inc., 10.25% due 8/15/2015 2,060,000 BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Schedule of Investments (continued) (in U.S. dollars) Face Amount Corporate Bonds Value Independent Power Producers & Energy Traders--1.0% USD 2,000,000 NRG Energy, Inc., 7.25% due 2/01/2014 $ 1,980,000 Machinery--0.2% 318,000 Invensys Plc, 9.875% due 3/15/2011 (a) 337,875 Media--3.7% 2,500,000 Charter Communications Holdings II LLC, 10.25% due 9/15/2010 2,525,000 Intelsat Bermuda Ltd. (b): 325,000 11.409% due 6/15/2013 333,937 2,650,000 8.886% due 1/15/2015 2,669,875 450,000 Quebecor Media, Inc., 7.75% due 3/15/2016 428,062 175,000 Quebecor World Capital Corp., 8.75% due 3/15/2016 (a) 157,500 1,000,000 TL Acquisitions, Inc., 10.50% due 1/15/2015 (a) 942,500 -------------- 7,056,874 Metals & Mining--1.5% 180,000 FMG Finance Pty Ltd., 9.621% due 9/01/2011 (a)(b) 186,300 Freeport-McMoRan Copper & Gold, Inc.: 1,580,000 8.564% due 4/01/2015 (b) 1,627,400 1,055,000 8.375% due 4/01/2017 1,123,575 -------------- 2,937,275 Paper & Forest Products--3.4% 2,000,000 Abitibi-Consolidated, Inc., 8.86% due 6/15/2011 (b) 1,720,000 2,000,000 Bowater, Inc., 8.36% due 3/15/2010 (b) 1,800,000 3,000,000 Verso Paper Holdings LLC Series B, 9.106% due 8/01/2014 (b) 2,985,000 -------------- 6,505,000 Real Estate Management & Development--0.9% 2,000,000 Realogy Corp., 11% due 4/15/2014 (a)(e) 1,620,000 Road & Rail--0.8% 1,000,000 Atlantic Express Transportation Corp., 12.609% due 4/15/2012 (b) 970,000 675,000 St. Acquisition Corp., 13.107% due 5/15/2015 (a)(b) 469,125 -------------- 1,439,125 Semiconductors & Semiconductor Equipment--2.8% 3,000,000 Avago Technologies Finance Pte. Ltd., 11.08% due 6/01/2013 (b) 3,045,000 700,000 Freescale Semiconductor, Inc., 9.235% due 12/15/2014 (b) 644,000 1,690,000 Spansion, Inc., 8.746% due 6/01/2013 (a)(b) 1,605,500 -------------- 5,294,500 Specialty Retail--1.8% 250,000 Autonation, Inc., 7.36% due 4/15/2013 (b) 235,000 350,000 General Nutrition Centers, Inc., 9.85% due 3/15/2014 (a)(e) 316,387 3,000,000 Michaels Stores, Inc., 11.375% due 11/01/2016 (a) 2,917,500 -------------- 3,468,887 BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Schedule of Investments (concluded) (in U.S. dollars) Face Amount Corporate Bonds Value Wireless Telecommunication Services--1.9% USD 2,000,000 Cricket Communications, Inc., 9.375% due 11/01/2014 $ 1,960,000 1,349,000 Digicel Group Ltd., 9.125% due 1/15/2015 (a)(e) 1,232,716 325,000 Dobson Communications Corp., 9.61% due 10/15/2012 (b) 331,500 -------------- 3,524,216 Total Corporate Bonds (Cost--$78,642,691)--39.5% 74,993,028 Shares Held Common Stocks Value Chemicals--0.0% 10,732 GEO Specialty Chemicals, Inc. (d) $ 10,732 Electrical Equipment--0.1% 13,053 Medis Technologies Ltd. (d) 137,709 Semiconductors & Semiconductor Equipment--0.7% 52,413 Cypress Semiconductor Corp. (d) 1,312,421 Total Common Stocks (Cost--$1,422,616)--0.8% 1,460,862 Total Investments (Cost--$242,994,598*)--122.2% 231,727,351 Liabilities in Excess of Other Assets--(22.2%) (42,069,426) -------------- Net Assets--100.0% $ 189,657,925 ============== * The cost and unrealized appreciation (depreciation) of investments as of August 31, 2007, as computed for federal income tax purposes, were as follows: Aggregate cost $ 242,994,598 ================= Gross unrealized appreciation $ 707,273 Gross unrealized depreciation (11,974,520) ----------------- Net unrealized depreciation $ (11,267,247) ================= ** 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. o Forward foreign exchange contracts sold as of August 31, 2007 were as follows: Foreign Currency Settlement Unrealized Sold Date Appreciation EUR 2,593,500 October 2007 $ 37,657 GBP 600,000 October 2007 7,906 --------- Total Unrealized Appreciation on Forward Foreign Exchange Contracts (USD Commitment--$4,794,273) $ 45,563 ========= 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 -- $ 115,404 o Swaps outstanding as of August 31, 2007 were as follows: Unrealized Notional Appreciation Amount (Depreciation) Sold credit default protection on Ford Motor Co. and receive 3.80% Broker, UBS Warburg Expires March 2010 $5,000,000 $(337,445) Bought a credit default protection on LCDX Index and pay 1.20% Broker, JPMorgan Chase Expires June 2012 $1,500,000 (17,100) Bought credit default protection on LCDX Index and pay 1.20% Broker, Morgan Stanley Expires June 2012 $1,500,000 (17,101) Sold credit default protection on LCDX Index and receive 1.20% Broker, Morgan Stanley Expires June 2012 $1,500,000 32,201 Sold credit default protection on Dow Jones CDX North America High Yield Series 8 and receive 2.75% Broker, JPMorgan Chase Expires June 2012 $1,600,000 (4,932) Sold credit default protection on Dow Jones CDX North America High Yield Index Series 8 and receive 2.75% Broker, JPMorgan Chase Expires June 2012 $1,600,000 (3,932) ---------- Total $(348,309) ========== * Currency Abbreviations: EUR Euro GBP British Pound USD U.S. Dollar See Notes to Financial Statements. BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Statement of Assets, Liabilities and Capital
As of August 31, 2007 (Unaudited) Assets Investments in unaffiliated securities, at value (identified cost--$242,994,598) $ 231,727,351 Cash 7,654,167 Foreign cash (cost--$1,164) 1,168 Unrealized appreciation on swaps 32,201 Unrealized appreciation on foreign exchange contracts 45,563 Swap premiums paid 181,093 Receivables: Interest $ 3,369,125 Securities sold 1,505,392 Swaps 216,445 Commitment fees 27,234 5,118,196 --------------- Prepaid expenses 3,505 --------------- Total assets 244,763,244 --------------- Liabilities Loans 53,000,000 Unfunded loan commitment 298,055 Unrealized depreciation on swaps 380,510 Swap premiums received 251,627 Payables: Securities purchased 681,125 Investment adviser 171,872 Dividends to shareholders 143,269 Interest on loans 82,359 Swaps 10,400 Other affiliates 1,799 1,090,824 --------------- Accrued expenses 84,303 --------------- Total liabilities 55,105,319 --------------- Net Assets Net assets $ 189,657,925 =============== 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 $ 2,440,797 Accumulated realized capital losses--net (1,151,631) Unrealized depreciation--net (11,800,867) --------------- Total accumulated losses--net (10,511,701) --------------- Total capital--Equivalent to $18.07 net asset value per share of Common Stock (market price--$16.57) $ 189,657,925 =============== See Notes to Financial Statements.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Statement of Operations
For the Six Months Ended August 31, 2007 (Unaudited) Investment Income Interest (including $115,404 from affiliates) $ 10,970,938 Facility and other fees 91,748 --------------- Total income 11,062,686 --------------- Expenses Loan interest expense $ 1,742,436 Investment advisory fees 994,637 Professional fees 57,781 Borrowing costs 55,539 Accounting services 35,854 Printing and shareholder reports 19,651 Directors' fees and expenses 19,454 Transfer agent fees 18,119 Custodian fees 10,032 Listing fees 4,833 Pricing services 4,762 Other 17,182 --------------- Total expenses 2,980,280 --------------- Investment income--net 8,082,406 --------------- Realized & Unrealized Gain (Loss)--Net Realized gain (loss) on: Investments--net 566,377 Swaps--net 155,327 Foreign currency transactions--net (116,533) 605,171 --------------- Change in unrealized appreciation/depreciation on: Investments--net (13,513,467) Swaps--net (368,969) Unfunded corporate loans--net 49,936 Foreign currency transactions--net 48,944 (13,783,556) --------------- --------------- Total realized and unrealized loss--net (13,178,385) --------------- Net Decrease in Net Assets Resulting from Operations $ (5,095,979) =============== See Notes to Financial Statements.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Statements of Changes in Net Assets
For the Six For the Months Ended Year Ended August 31, 2007 February 28, Increase (Decrease) in Net Assets: (Unaudited) 2007 Operations Investment income--net $ 8,082,406 $ 16,232,774 Realized gain--net 605,171 197,727 Change in unrealized depreciation--net (13,783,556) (1,508,938) --------------- --------------- Net increase (decrease) in net assets resulting from operations (5,095,979) 14,921,563 --------------- --------------- Dividends to Shareholders Investment income--net (7,610,316) (16,114,520) --------------- --------------- Net decrease from dividends to shareholders (7,610,316) (16,114,520) --------------- --------------- Net Assets Total decrease in net assets (12,706,295) (1,192,957) Beginning of period 202,364,220 203,557,177 --------------- --------------- End of period* $ 189,657,925 $ 202,364,220 =============== =============== * Undistributed investment income--net $ 2,440,797 $ 1,968,707 =============== =============== See Notes to Financial Statements.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Statement of Cash Flows
For the Six Months Ended August 31, 2007 (Unaudited) Cash Provided by Operating Activities Net decrease in net assets resulting from operations $ (5,095,979) Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities: Increase in other receivables and prepaid expenses (559,256) Increase in other liabilities 71,413 Realized and unrealized loss--net 13,145,633 Amortization of premium and discount (8,515) Unrealized loss on futures contracts--net (113,188) Proceeds from sales and paydowns of long-term securities 96,619,941 Purchases of long-term securities (103,638,083) --------------- Cash provided by operating activities 421,966 --------------- Cash Used for Financing Activities Cash receipts from borrowings 75,000,000 Cash payments on borrowings (69,000,000) Dividends paid to shareholders (7,650,596) --------------- Cash used for financing activities (1,650,596) --------------- Cash Net decrease in cash (1,228,630) Cash at beginning of period 8,883,965 --------------- Cash at end of period $ 7,655,335 =============== Cash Flow Information Cash paid for interest $ 1,691,445 =============== See Notes to Financial Statements.
BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Financial Highlights
For the Six For the Period The following per share data and ratios Months Ended For the Year Ended July 30, 2004++ to have been derived from information August 31, 2007 February 28, February 28, provided in the financial statements. (Unaudited) 2007 2006 2005 Per Share Operating Performance Net asset value, beginning of period $ 19.28 $ 19.39 $ 19.74 $ 19.10 ------------ ------------ ------------ ------------ Investment income--net*** .77 1.55 1.33 .58 Realized and unrealized gain (loss)--net (1.25) (.12) (.31) .57 ------------ ------------ ------------ ------------ Total from investment operations (.48) 1.43 1.02 1.15 ------------ ------------ ------------ ------------ Less dividends and distributions from: Investment income--net (.73) (1.54) (1.27) (.47) Realized gain--net -- -- (.10) (.01) ------------ ------------ ------------ ------------ Total dividends and distributions (.73) (1.54) (1.37) (.48) ------------ ------------ ------------ ------------ Offering costs resulting from the issuance of Common Stock -- -- -- (.03) ------------ ------------ ------------ ------------ Net asset value, end of period $ 18.07 $ 19.28 $ 19.39 $ 19.74 ============ ============ ============ ============ Market price per share, end of period $ 16.57 $ 18.50 $ 17.76 $ 19.44 ============ ============ ============ ============ Total Investment Return** Based on net asset value per share (2.46%)+++ 8.31% 6.07% 5.97%+++ ============ ============ ============ ============ Based on market price per share (6.78%)+++ 13.47% (1.35%) (.34%)+++ ============ ============ ============ ============ Ratios to Average Net Assets Expenses, net of waiver and excluding interest expense 1.21%* 1.22% 1.25% .92%* ============ ============ ============ ============ Expenses, net of waiver 2.92%* 2.87% 2.46% 1.30%* ============ ============ ============ ============ Expenses 2.92%* 2.87% 2.46% 1.48%* ============ ============ ============ ============ Investment income--net 7.93%* 8.03% 6.88% 5.11%* ============ ============ ============ ============ Leverage Amount of borrowings, end of period (in thousands) $ 53,000 $ 47,000 $ 61,400 $ 60,300 ============ ============ ============ ============ Average amount of borrowings outstanding during the period (in thousands) $ 60,668 $ 61,022 $ 63,725 $ 29,072 ============ ============ ============ ============ Average amount of borrowings outstanding per share during the period*** $ 5.78 $ 5.81 $ 6.07 $ 2.80 ============ ============ ============ ============ Supplemental Data Net assets, end of period (in thousands) $ 189,658 $ 202,364 $ 203,557 $ 207,255 ============ ============ ============ ============ Portfolio turnover 37% 65% 72% 30% ============ ============ ============ ============ * 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. AUGUST 31, 2007 Notes to Financial Statements (Unaudited) 1. Significant Accounting Policies: BlackRock Floating Rate Income Strategies Fund II, Inc. (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. These unaudited financial statements reflect all such adjustments, which are, in the opinion of management, necessary to present a fair statement of the results for the interim period. All such adjustments are of a normal, recurring nature. 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. The Fund's investments in loan participation interests involve the risk of insolvency of the financial intermediaries who are parties to the transactions. (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. Valuation of 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. AUGUST 31, 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. The counterparty for certain instruments may pledge cash or securities as collateral. * 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. * Forward foreign exchange contracts--The Fund may enter into forward foreign exchange contracts as a hedge against either specific transactions or portfolio positions. The contract is marked-to-market daily and the change in market value is recorded by the Fund as an unrealized gain or loss. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. (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. AUGUST 31, 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. The Fund earns facility and other fees on loan participation interests. Other fees earned include amendment, consent and prepayment fees. (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--Effective August 31, 2007, the Fund implemented Financial Accounting Standards Board ("FASB") 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. Management has evaluated the application of FIN 48 to the Fund, and has determined that the adoption of FIN 48 does not have a material impact on the Fund's financial statements. The Fund files U.S. and various state tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund's tax returns remains open for the years ended February 28, 2005 through February 28, 2007. 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, Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("FAS 159"), was issued and 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. AUGUST 31, 2007 Notes to Financial Statements (continued) 2. Investment Advisory Agreement and Transactions with Affiliates: The Fund has entered into an Investment Advisory Agreement with the Manager. Merrill Lynch & Co., Inc. ("Merrill Lynch") and The PNC Financial Services Group Inc. are the principal owners of BlackRock, Inc. 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 at an annual rate 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"), a wholly owned subsidiary of Merrill Lynch, or its affiliates. Pursuant to that order, the Fund has retained BlackRock Investment Management LLC ("BIM"), an affiliate of the Manager, as the securities lending agent for a fee based on a share of the returns on investment of cash collateral. 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 six months ended August 31, 2007, the Fund reimbursed the Manager $1,997 for certain accounting services. 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 six months ended August 31, 2007 were $93,338,738 and $96,453,177, respectively. 4. Capital Share 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 August 31, 2007, the Fund had unfunded loan commitments of approximately $10,285,000, 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 Advance Food Co. $ 222 $ 209 Alon U.S.A. $ 111 $ 106 Aquila, Inc. $3,000 $3,043 Cenveo, Inc. $ 145 $ 138 Gray Communications Systems, Inc. $ 287 $ 269 Golden Nugget, Inc. $ 182 $ 172 Las Vegas Sands $ 400 $ 380 LSP General Finance Co. $ 71 $ 68 MEG Energy Corp. $ 500 $ 478 Spanish Broadcasting System, Inc. $2,500 $2,421 Trump Entertainment Delay Draw $ 7 $ 7 Trump Entertainment Resorts Holdings LP $1,770 $1,682 Univision Communications, Inc. $ 90 $ 84 Vought Aircraft Industries, Inc. $1,000 $ 930 BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Notes to Financial Statements (concluded) 6. Short-Term Borrowings: On May 16, 2007, the Fund renewed its revolving credit and security agreement funded by a commercial paper asset securitization program with Citicorp North America, Inc. ("Citicorp"), as Agent, certain secondary backstop lenders, and certain asset securitization conduits as lenders (the "Lenders"). The agreement was renewed for one year and has a maximum limit of $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 2.91% and the average borrowing was approximately $60,668,000 for the six months ended August 31, 2007. 7. Capital Loss Carryforward: 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. 8. Subsequent Event: The Fund paid an ordinary income dividend to holders of Common Stock in the amount of $.123350 per share on September 28, 2007 to shareholders of record on September 14, 2007. BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Proxy Results During the six-month period ended August 31, 2007, the shareholders of BlackRock Floating Rate Income Strategies Fund II, Inc. voted on the following proposal, which was approved at an annual shareholders' meeting on August 16, 2007. This proposal was part of the reorganization of the Fund's Board of Directors to take effect on or about November 1, 2007. A description of the proposal and number of shares voted are as follows:
Shares Voted Shares Withheld For From Voting To elect the Fund's Board of Directors: G. Nicholas Beckwith, III 7,504,679 138,859 Richard E. Cavanagh 7,509,444 134,095 Richard S. Davis 7,507,597 135,942 Kent Dixon 7,489,332 154,206 Frank J. Fabozzi 7,506,179 137,359 Kathleen F. Feldstein 7,489,562 153,977 James T. Flynn 7,494,444 149,095 Henry Gabbay 7,509,444 134,095 Jerrold B. Harris 7,509,444 134,095 R. Glenn Hubbard 7,509,409 134,130 W. Carl Kester 7,511,444 132,095 Karen P. Robards 7,510,444 133,095 Robert S. Salomon, Jr. 7,494,372 149,167
Officers and Directors Robert C. Doll, Jr., Fund President and Director Ronald W. Forbes, Director Cynthia A. Montgomery, Director Jean Margo Reid, Director Roscoe S. Suddarth, Director Richard R. West, Director Donald C. Burke, Vice President and Treasurer Karen Clark, Fund Chief Compliance Officer Alice A. Pellegrino, Fund Secretary Howard Surloff, Fund Secretary (Effective September 1, 2007) 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 BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 BlackRock Privacy Principles BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, "Clients") and to safeguarding their 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. Availability of Quarterly Schedule of Investments The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission ("SEC") for the first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Electronic Delivery Electronic copies of most financial reports and prospectuses are available on the Fund's Web site. Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund's electronic delivery program. Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages: Please contact your financial advisor to enroll. Please note that not all investment advisers, banks or brokerages may offer this service. BLACKROCK FLOATING RATE INCOME STRATEGIES FUND II, INC. AUGUST 31, 2007 Item 2 - Code of Ethics - Not Applicable to this semi-annual report Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual report Item 4 - Principal Accountant Fees and Services - Not Applicable to this semi-annual report Item 5 - Audit Committee of Listed Registrants - Not Applicable to this semi-annual report Item 6 - Schedule of Investments - The registrant's Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form. Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies - Not Applicable to this semi-annual report Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not Applicable to this semi-annual report Item 9 - Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers - Not Applicable Item 10 - Submission of Matters to a Vote of Security Holders - The registrant's Nominating Committee will consider nominees to the Board recommended by shareholders when a vacancy becomes available. Shareholders who wish to recommend a nominee should send nominations which include biographical information and set forth the qualifications of the proposed nominee to the registrant's Secretary. There have been no material changes to these procedures. Item 11 - Controls and Procedures 11(a) - The registrant's principal executive and principal financial officers or persons performing similar functions have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act")) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 13a-15(b) under the Securities and Exchange Act of 1934, as amended. 11(b) - There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12 - Exhibits attached hereto 12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report 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 (principal executive officer) of BlackRock Floating Rate Income Strategies Fund II, Inc. Date: October 22, 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 (principal executive officer) of BlackRock Floating Rate Income Strategies Fund II, Inc. Date: October 22, 2007 By: /s/ Donald C. Burke ------------------- Donald C. Burke, Chief Financial Officer (principal financial officer) of BlackRock Floating Rate Income Strategies Fund II, Inc. Date: October 22, 2007