UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

 

Investment Company Act file number: 811-21413

 

Name of Fund: BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)

 

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

 

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Floating
Rate Income Strategies Fund, Inc., 55 East 52^nd Street, New York, NY 10055

 

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

 

Date of fiscal year end: 08/31/2015

 

Date of reporting period: 11/30/2014

 

Item 1 – Schedule of Investments

Consolidated Schedule of Investments November 30, 2014 (Unaudited)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
	(Percentages shown are based on Net Assets)

 

Notes to Schedule of Investments
(a)	Non-income producing security.
(b)	Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.
(c)	Variable rate security. Rate shown is as of report date.
(d)	When-issued security. Unsettled when-issued transactions were as follows:

 

		Counterparty											Value			Unrealized Appreciation/ (Depreciation)
		Bank of America Securities										$		806,788	$		16,788
		Credit Suisse Securities (USA) LLC										$		1,128,125	$		(60	)
		Deutsche Bank Securities, Inc.										$		971,600			—
		Jefferies & Co.										$		955,000			—

 

(e)	Zero-coupon bond.
(f)	Convertible security.
(g)	Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.
(h)	Represents a payment-in-kind security which may pay interest/dividends in additional par/shares and/or in cash. Rates shown are the current rate and possible payment rates.
(i)	Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.
(j)	Restricted security as to resale. As of report date, the Fund held restricted securities with a current value of $162,639 and an original cost of $1,177,928 which was less than 0.05% of its net assets.
(k)	Security is held by a wholly owned subsidiary.
(l)	Security is perpetual in nature and has no stated maturity date.
(m)	Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

 

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)

 

Affiliate

Shares Held at August 31, 2014

Net Activity

Shares Held at November 30, 2014

Income

BlackRock Liquidity Funds, TempFund, Institutional Class

3,456,864

(3,456,864)

_

$

62

 

Portfolio Abbreviations
CAD	Canadian Dollar
CLO	Collateralized Loan Obligation
DIP	Debtor-In-Possession
EUR	Euro
GBP	British Pound
PIK	Payment-In-Kind.
USD	U.S. Dollar

•	Forward foreign currency exchange contracts outstanding as of November 30, 2014 were as follows:

 

Currency Purchased				Currency Sold		Counterparty	Settlement Date		Unrealized Appreciation/ (Depreciation)
EUR		419,000		USD	521,995	Citibank N.A.	1/21/15	$	(821	)
GBP		660,000		USD	1,060,105	Deutsche Bank AG	1/21/15		(29,511	)
GBP		27,000		USD	43,311	UBS AG	1/21/15		(1,150	)
USD		2,658,464		CAD	2,986,000	Barclays Bank PLC	1/21/15		50,236
USD		2,313,116		EUR	1,813,000	JPMorgan Chase Bank N.A.	1/21/15		58,012
USD		7,219,715		GBP	4,528,000	Barclays Bank PLC	1/21/15		149,212
Total								$	225,978

 

 

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)

•	OTC options purchased as of November 30, 2014 were as follows:

 

Description

Counterparty

Put/ Call

Strike Price

Expiration Date

Contracts

Market Value

Marsico Parent Superholdco LLC

Goldman Sachs & Co.

Call

USD

942.86

12/14/19

44

—

•	Fair Value Measurements - Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. The three levels of the fair value hierarchy are as follows:
	•	Level 1 — unadjusted quoted prices in active markets/exchanges for identical assets or liabilities that the Fund has the ability to access
	•	Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)
	•	Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund's own assumptions used in determining the fair value of investments)
Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Trust’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to the Fund’s most recent financial statements as contained in its annual report. The following table summarizes the Fund's investments categorized in the disclosure hierarchy as of November 30, 2014:

				Level 1				Level 2				Level 3				Total
Assets:
Investments:
Long-Term Investments:
		Common Stocks	$		2,293,949		$		2,681,413		$		894,472		$	5,869,834
		Asset-Backed Securities			—				14,823,085				5,034,763			19,857,848
		Corporate Bonds			—				31,091,873				4,844,685			35,936,558
		Floating Rate Loan Interests			—				681,996,307				65,490,079			747,486,386
		Non-Agency Mortgage-Backed Securities			—				1,371,827				—			1,371,827
		Investment Companies			89,459				—				—			89,459
		Other Interests			163,497				—				1,858,753			2,022,250
		Preferred Securities			2,019,862				—				—			2,019,862
		Warrants			—				—				149,874			149,874
Liabilities:
	Unfunded Floating Rate Loan Interests				—				(1,035		)		—			(1,035	)
Total			$		4,566,767		$		731,963,470		$		78,272,626		$	814,802,863

 

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)

			Level 1				Level 2				Level 3				Total
Derivative Financial Instruments1
Assets:
	Foreign currency exchange contracts			—		$		257,460				—		$	257,460
Liabilities:
	Foreign currency exchange contracts			—				(31,482		)		—			(31,482	)
Total				—		$		225,978				—		$	225,978

1Derivative financial instruments are forward foreign currency exchange contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

The Fund may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial reporting purposes. As of November 30, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

			Level 1				Level 2				Level 3				Total
Assets:
	Foreign currency at value	$		12,770				—				—		$	12,770
Liabilities:
	Bank overdraft					$		(2,829,532		)		—			(2,829,532	)
	Bank borrowings payable			—				(230,000,000		)		—			(230,000,000	)
Total		$		12,770		$		(232,829,532		)		—		$	(232,816,762	)

 

There were no transfers between Level 1 and Level 2 during the period ended November 30, 2014.

Consolidated Schedule of Investments (continued)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)

A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

 

		Common Stocks			Asset-Backed Securities			Corporate Bonds			Floating Rate Loan Interests			Other Interests			Unfunded Floating Rate Loan Interests (Liabilities)			Warrants			Total
Assets:
Opening Balance, as of August 31, 2014		$	1,510,942		$	1,159,180		$	4,766,957		$	58,688,498		$	1,858,753		$	(374)		$	138,171		$	68,122,127
Transfers into Level 31		_			_			_			24,908,024			_			_			11,191			24,919,215
Transfers out of Level 32		_			(1,159,180)			_			(22,615,174)			_			_			_				(23,774,354)
Accrued discounts/ premiums		_			411			21,522			23,207			_			_			_			45,140
Net realized gain (loss)		_			_			_			13,983			_			_			_			13,983
Net change in unrealized appreciation/depreciation3		(616,470)			(11,388)			(29,548)			(689,572)			_			374			512			(1,346,092)
Purchases		_			5,045,740			85,754			8,237,392			_			_						14,340,486
Sales		_			_			_			(3,076,279)			_			_			_			(3,076,279)
Closing Balance, as of November 30, 2014		$	894,472		$	5,034,763		$	4,844,685		$	65,490,079		$	1,858,753		_			$	149,874		$	78,272,626
Net change in unrealized appreciation/depreciation on investments still held at November 30, 20143		$	(616,470)		$	(11,388)		$	(29,548)		$	(686,976)		_			_			$	512		$	(1,343,870)

 

1	As of August 31, 2014, the Fund used observable inputs in determining the value of certain investments. As of November 30, 2014, the Fund used significant unobservable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $24,534,012 transferred from Level 2 to Level 3 in the disclosure hierarchy.
2	As of August 31, 2014, the Fund used significant unobservable inputs in determining the value of certain investments. As of November 30, 2014, the Fund used observable inputs in determining the value of the same investments. As a result, investments with a beginning of period value of $23,774,354 transferred from Level 3 to Level 2 in the disclosure hierarchy.
3	Any difference between Net change in unrealized appreciation/depreciation and Net change in unrealized appreciation/depreciation on investments still held at November 30, 2014 is generally due to investments no longer held or categorized as Level 3 at period end.

 

Consolidated Schedule of Investments (concluded)	BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)

The following table summarizes the valuation techniques used and unobservable inputs utilized by the BlackRock Global Valuation Methodologies Committee (the "Global Valuation Committee") to determine the value of certain of the Fund's Level 3 investments as of November 30, 2014. The table does not include Level 3 investments with values based upon unadjusted third party pricing information in the amount of $68,920,778. A significant change in such third party pricing information could result in a significantly lower or higher value of such Level 3 investments.

	Value	Valuation Techniques	Unobservable Inputs	Range of Unobservable Inputs Utilized
Assets:
Common Stocks	$    894,469	Market Comparable Companies	Last 12 Months EBITDA Multiple1	6.75x
			Illiquidity Discount2	17.50%
			Last 12 Months EBITDA Multiple3	5.13x - 5.88x
			Current Fiscal Year EBITDA Multiple3	4.63 - 6.25x
			Discontinued Operations Expected Sale Proceeds1	$1504
Corporate Bonds	3,928,902	Market Comparable Companies	Last 12 Months EBITDA Multiple1	6.75x
			Illiquidity Discount2	17.50%
	915,783	Market Comparable Companies	Internal Rate of Return2	9.50%
Floating Rate Loan Interests	1,604,070	Market Comparable Yield Analysis	Yield2	10.00%
Other Interests	1,858,750	Market Comparable Companies	Tangible Book Value Multiple1	1.35x
Warrants	138,171	Market Comparable Companies	Last 12 Months EBITDA Multiple1	6.75x
			Illiquidity Discount2	17.50%
	11,703	Last Dealer Mark - Adjusted	Delta Adjustment Based on Daily Movement
			in the Common Equity	120.00%
Total	$ 9,351,848

 

 

¹ For the period ended in November 30, 2014, the valuation technique for an investment classified as other interests changed to a market approach. The investment was previously valued using an income approach. Market information became available for this investment which is considered to be a more relevant measure of fair value for this investment.

² Increase in unobservable input may result in a significant increase to value, while a decrease in the unobservable input may result in a significant decrease to value.

³ Decrease in unobservable input may result in a significant increase to value, while an increase in the unobservable input may result in a significant decrease to value.

⁴ Amount is stated in millions.

 

 

Item 2 – Controls and Procedures

2(a) –

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

 

2(b) –

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

 

Item 3 – Exhibits

Certifications – Attached hereto

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

BlackRock Floating Rate Income Strategies Fund, Inc.

 

	By:	/s/ John M. Perlowski
		John M. Perlowski
		Chief Executive Officer (principal executive officer) of
		BlackRock Floating Rate Income Strategies Fund, Inc.

 

Date: January 22, 2015

 

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

 

	By:	/s/ John M. Perlowski
		John M. Perlowski
		Chief Executive Officer (principal executive officer) of
		BlackRock Floating Rate Income Strategies Fund, Inc.

 

Date: January 22, 2015

 

	By:	/s/ Neal J. Andrews
		Neal J. Andrews
		Chief Financial Officer (principal financial officer) of
		BlackRock Floating Rate Income Strategies Fund, Inc.

 

Date: January 22, 2015