UNITEDSTATES
SECURITIESANDEXCHANGECOMMISSION
Washington,D.C.20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

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: 08/31/2011

Date of reporting period: 02/28/2011

Item 1 – Report to Stockholders

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February 28, 2011

Semi-Annual Report (Unaudited)

BlackRock Defined Opportunity Credit Trust (BHL)

BlackRock Diversified Income Strategies Fund, Inc. (DVF)

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

BlackRock Limited Duration Income Trust (BLW)

BlackRock Senior Floating Rate Fund, Inc.

BlackRock Senior Floating Rate Fund II, Inc.

Not FDIC Insured • No Bank Guarantee • May Lose Value

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Table of Contents

 

2 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Dear Shareholder

Over the past 12 months, we have seen a sluggish, stimulus-driven economic recovery at long last gain real traction, accelerate, and transition into a con-
sumption-driven expansion. For the most part, 2010 was plagued with widely fluctuating economic data, but as the year drew to a close, it became clear
that cyclical stimulus had beaten out structural problems as economic data releases generally became more positive and financial markets showed signs
of continuing improvement. Although the sovereign debt crises and emerging market inflation that troubled the global economy in 2010 remain a challenge,
overall investor sentiment considerably improved. Near the end of the period, geopolitical tensions across the Middle East North Africa (“MENA”) region
along with rising oil prices introduced new cause for concern about the future of the global economy. As of this writing, economic news remains fairly
positive although we face additional uncertainties related to the aftermath of the devastating earthquake in Japan, with particular focus on the damage
to nuclear power plants.

In the United States, strength from the corporate sector and increasing consumer spending have been key drivers of economic growth, while the housing
and labor markets have been the heaviest burdens. While housing has yet to show any meaningful sign of improvement, labor statistics have delivered a
mixed bag month after month, but became increasingly encouraging toward the end of the period when the unemployment rate fell to its lowest level
since April 2009.

Global equity markets experienced uneven growth and high volatility over the course of 2010, but ended the year strong. Following a strong start to 2011,
stocks lost their momentum on the back of geopolitical events in the MENA region and a sharp rise in oil prices. Overall, equities posted strong returns
for the 12-month period. US stocks outpaced most international markets and small cap stocks outperformed large caps as investors moved into
higher-risk assets.

Fixed income markets saw yields trend lower over most of 2010, until the fourth quarter brought an abrupt reversal in sentiment and risk tolerance that
drove yields sharply upward (pushing bond prices down) through year end. Improving economic data continued to pressure fixed income yields in 2011;
however, escalating geopolitical risks have acted as a counterweight, restoring relative stability to yield movements. Nevertheless, the yield curve remained
steep and higher-risk sectors outperformed the fixed income market.

The tax-exempt municipal market enjoyed a powerful rally during the period of low interest rates in 2010; however, when the yield trend reversed, the market
was dealt an additional blow as it became evident that the Build America Bond program would expire at year end. In addition, negative headlines regarding
fiscal challenges faced by state and local governments damaged investor confidence and further heightened volatility in the municipal market. Tax-exempt
mutual funds experienced heavy outflows, resulting in wider quality spreads and further downward pressure on municipal bond prices. These headwinds
began to abate as the period came to a close and municipals finally posted gains in February, following a five-month run of negative performance.

Cash investments, as represented by the 3-month Treasury bill, returned only a fraction over 0% for the 12-month period as short-term interest rates
remained low. Yields on money market securities remain near all-time lows.

While no one can peer into a crystal ball and eliminate the uncertainties presented by the economic landscape and financial markets, BlackRock can offer
investors the next best thing: partnership with the world’s largest asset management firm and a unique global perspective that allows us to identify trends
early and capitalize on market opportunities. For additional market perspective and investment insight, visit www.blackrock.com/shareholdermagazine,
where you’ll find the most recent issue of our award-winning Shareholder® magazine, as well as its quarterly companion newsletter, Shareholder
Perspectives. As always, we thank you for entrusting BlackRock with your investments, and we look forward to your continued partnership in the
months and years ahead.

THIS PAGE NOT PART OF YOUR FUND REPORT 3

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Fund Summary as of February 28, 2011 BlackRock Defined Opportunity Credit Trust

Investment Objective

BlackRock Defined Opportunity Credit Trust’s (BHL) (the “Fund”) primary investment objective is high current income, with a secondary objective of long-
term capital appreciation. The Fund seeks to achieve its investment objectives by investing substantially all of its assets in loan and debt instruments and
loan-related and debt-related instruments (collectively "credit securities"). The Fund invests, under normal market conditions, at least 80% of its assets in
any combination of the following credit securities: (i) senior secured floating rate and fixed rate loans; (ii) second lien or other subordinated or unsecured
floating rate and fixed rate loans or debt; (iii) credit securities that are rated below investment grade quality; and (iv) investment grade corporate bonds.
The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objectives will be achieved.

Portfolio Management Commentary

How did the Fund perform?

• For the six months ended February 28, 2011, the Fund returned 17.57%
based on market price and 8.77% based on net asset value (“NAV”). For
the same period, the Lipper Loan Participation Funds category posted an
average return of 14.91% based on market price and 9.11% based on NAV.
All returns reflect reinvestment of dividends. The Fund moved from a dis-
count to NAV to a premium by period end, which accounts for the difference
between performance based on price and performance based on NAV.
The following discussion relates to performance based on NAV.

What factors influenced performance?

• The bank loan sector posted strong returns as risk assets rallied during the
period. Lower-quality sectors and credits outperformed their higher-quality
counterparts and the high yield sector outperformed bank loans. Because
the Fund invests primarily in bank loans, and it held an average of 10%
of its portfolio in corporate bonds during the period, the use of leverage had
a positive impact on returns as these sectors advanced. However, the Fund
maintains a lower level of leverage (at an average amount between 18%
and 23%) than the average level maintained by the leveraged funds in its
Lipper category, which detracted from performance on a relative basis. In
addition, the Fund maintains a relatively conservative portfolio, weighted
toward higher-quality speculative investments, which detracted from
performance as lower quality outperformed during the period.

• Conversely, the Fund’s greater allocation to high yield bonds relative to its
Lipper category competitors had a positive impact on performance.

Describe recent portfolio activity.

• During the period, the Fund modestly increased its level of risk and use of
leverage as market conditions improved. In particular, the Fund increased
exposure to lower-quality credits and sectors that are more favorably
impacted by rising commodity prices and an improving economy.

Describe portfolio positioning at period end.

• At period end, the Fund held 86% of its total portfolio in floating rate loan
interests and 10% in corporate bonds, with the remainder in asset-backed
securities, common stocks and equity equivalents. Cash positions were neg-
ligible for most of the period. The Fund ended the period with leverage at
approximately 21% of its total managed assets.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.

4 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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BlackRock Defined Opportunity Credit Trust

¹ 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.
² The distribution rate is not constant and is subject to change.
³ Represents loan outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrowings) minus the sum of
liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging
on page 16.

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

The following unaudited charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations of the Fund’s corporate
bond investments:

 

 

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 5

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Fund Summary as of February 28, 2011 BlackRock Diversified Income Strategies Fund, Inc.

Investment Objective

BlackRock Diversified Income Strategies Fund, Inc.’s (DVF) (the “Fund”) investment objective is to provide shareholders with high current income. The Fund
seeks to achieve its investment objective by investing primarily in floating rate debt securities and instruments, including floating rate loans, bonds, certain
preferred securities (including certain convertible preferred securities), notes or other debt securities or instruments which pay a floating or variable rate of
interest until maturity. The Fund considers floating rate debt securities to include fixed rate debt securities held by the Fund where the Fund has entered into
certain derivative transactions at either the portfolio level or with respect to an individual security held by the Fund, including interest rate swap agreements,
in an attempt to convert the fixed rate payments it receives with respect to such securities into floating rate payments. The Fund may invest, under normal
market conditions, a substantial portion of its assets in below investment grade quality securities. The Fund may invest directly in such securities or
synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

Portfolio Management Commentary

How did the Fund perform?

• For the six months ended February 28, 2011, the Fund returned 10.13%
based on market price and 8.93% based on NAV. For the same period,
the Lipper Loan Participation Funds category posted an average return of
14.91% based on market price and 9.11% based on NAV. All returns reflect
reinvestment of dividends. The Fund moved from a discount to NAV to a
premium by period end, which accounts for the difference between
performance based on price and performance based on NAV. The
following discussion relates to performance based on NAV.

What factors influenced performance?

• The bank loan sector posted strong returns as risk assets rallied during the
period. Lower-quality sectors and credits outperformed their higher-quality
counterparts and the high yield sector outperformed bank loans. Because
the Fund invests primarily in bank loans, and it held an average of 14%
of its portfolio in corporate bonds during the period, the use of leverage had
a positive impact on returns as these sectors advanced. However, the Fund
maintains a lower level of leverage (at an average amount between 20%
and 26%) than the average level maintained by the leveraged funds in its
Lipper category, which detracted from performance on a relative basis. In
addition, the Fund maintains a relatively conservative portfolio, weighted
toward higher-quality speculative investments, which detracted from per-
formance as lower quality outperformed during the period.

• Conversely, the Fund’s greater allocation to high yield bonds relative to its
Lipper category competitors had a positive impact on performance.

Describe recent portfolio activity.

• During the period, the Fund modestly increased its level of risk and use of
leverage as market conditions improved. In particular, the Fund increased
exposure to lower-quality credits and sectors that are more favorably
impacted by rising commodity prices and an improving economy.

Describe portfolio positioning at period end.

• At period end, the Fund held 80% of its total portfolio in floating rate loan
interests and 14% in corporate bonds, with the remainder in asset-backed
securities, common stocks and equity equivalents. Cash positions were neg-
ligible for most of the period. The Fund ended the period with leverage at
approximately 21% of its total managed assets.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.

6 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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BlackRock Diversified Income Strategies Fund, Inc.

¹ 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.
² The distribution rate is not constant and is subject to change.
³ Represents loan outstanding as a percentage of total managed assets, which is the total assets of the Fund (including assets attributable to borrowings) minus the sum of liabilities
(other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and Risks of Leveraging on page 16.

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

The following charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations of the Fund’s corporate bond investments:

 

 

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 7

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Fund Summary as of February 28, 2011 BlackRock Floating Rate Income Strategies Fund, Inc.

Investment Objective

BlackRock Floating Rate Income Strategies Fund, Inc.’s (FRA) (the “Fund”) investment objective is to provide shareholders with 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. The Fund seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its assets in floating rate debt
securities, including floating or variable rate debt securities that pay interest at rates that adjust whenever a specified interest rate changes and/or which
reset on predetermined dates (such as the last day of a month or calendar quarter). The Fund invests a substantial portion of its investments in floating rate
debt securities consisting of secured or unsecured senior floating rate loans that are rated below investment grade. The Fund may invest directly in such
securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

Portfolio Management Commentary

How did the Fund perform?

• For the six months ended February 28, 2011, the Fund returned 8.59%
based on market price and 9.47% based on NAV. For the same period, the
closed-end Lipper Loan Participation Funds category posted an average
return of 14.91% based on market price and 9.11% based on NAV. All
returns reflect reinvestment of dividends. The Fund's premium to NAV,
which narrowed during the period, accounts for the difference between
performance based on price and performance based on NAV. The
following discussion relates to performance based on NAV.

What factors influenced performance?

• The bank loan sector posted strong returns as risk assets rallied during the
period. Lower-quality sectors and credits outperformed their higher-quality
counterparts and the high yield sector outperformed bank loans. Because
the Fund invests primarily in bank loans, and it held an average of 15% of
its portfolio in corporate bonds during the period, the use of leverage had a
positive impact on returns (on an absolute basis) as these sectors
advanced. Holding a greater allocation to high yield bonds relative to its
Lipper category competitors drove the Fund’s outperformance.

• The Fund maintains a relatively conservative portfolio, weighted toward
higher-quality speculative investments, which detracted from performance as
lower quality outperformed during the period. In addition, the Fund main-
tains a lower level of leverage (at an average amount between 18% and
22% of its total managed assets) than the average level maintained by
its Lipper category competitors, which detracted from performance on a
relative basis.

Describe recent portfolio activity.

• During the period, the Fund modestly increased its level of risk and use of
leverage as market conditions improved. In particular, the Fund increased
exposure to lower-quality credits and sectors that are more favorably
impacted by rising commodity prices and an improving economy.

Describe portfolio positioning at period end.

• At period end, the Fund held 81% of its total portfolio in floating rate loan
interests and 15% in corporate bonds, with the remainder in asset-backed
securities, common stocks and equity equivalents. Cash positions were neg-
ligible for most of the period. The Fund ended the period with leverage at
approximately 18% of its total managed assets.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.

8 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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BlackRock Floating Rate Income Strategies Fund, Inc.

¹ 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.
² The distribution rate is not constant and is subject to change.
³ Represents loan outstanding as a percentage of managed assets, which is the total assets of the Fund (including any assets attributable to borrowings) that may be outstanding,
minus the sum of accrued liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits
and Risks of Leveraging on page 16.

The table below summarizes the changes in the Fund’s market price and NAV per share:

 

The following charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations of the Fund’s corporate bond investments:

 

 

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 9

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Fund Summary as of February 28, 2011 BlackRock Limited Duration Income Trust

Investment Objective

BlackRock Limited Duration Income Trust’s (BLW) (the “Fund”) investment objective is to provide current income and capital appreciation. The Fund seeks
to achieve its investment objective by investing primarily in three distinct asset classes:

• intermediate duration, investment grade corporate bonds, mortgage-related securities and asset-backed securities and US Government and agency securities;

• senior, secured floating rate loans made to corporate and other business entities; and

• US dollar-denominated securities of US and non-US issuers rated below investment grade, and to a limited extent, in non-US dollar denominated
securities of non-US issuers rated below investment grade.

The Fund’s portfolio normally has an average portfolio duration of less than five years (including the effect of anticipated leverage), although it may be
longer from time to time depending on market conditions. The Fund may invest directly in such securities or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

Portfolio Management Commentary

How did the Fund perform?

• For the six months ended February 28, 2011, the Fund returned 5.33%
based on market price and 8.73% based on NAV. For the same period, the
closed-end Lipper High Current Yield Funds (Leveraged) category posted
an average return of 9.98% based on market price and 12.87% based on
NAV. All returns reflect reinvestment of dividends. The Fund's discount to
NAV, which widened during the period, accounts for the difference between
performance based on price and performance based on NAV. The following
discussion relates to performance based on NAV.

What factors influenced performance?

• High yield bonds delivered strong performance as risk assets rallied during
the period. While the Fund’s average allocation to high yield contributed to
performance on an absolute basis, its average allocation to bank loans and
to investment grade credit, both of which sectors underperformed high yield,
hurt performance relative to its Lipper category competitors, which invest pri-
marily in high yield bonds. The Fund maintained leverage at an average
amount between 20% and 22% of its total managed assets, which
detracted from relative performance versus competitors that maintained
higher levels of leverage, as would be expected when markets are advanc-
ing.

• Security selection within the Fund’s high yield allocation had a positive
impact on performance, as did a bias toward lower-quality credits. Within
the Fund’s investment grade segment, limited exposure to corporate bonds
and a large allocation to securitized assets proved beneficial. In addition,
the Fund’s relatively modest portfolio duration and exposure to more
credit-sensitive sectors benefited performance as interest rates rose
during the period.

Describe recent portfolio activity.

• Over the period, the Fund shifted its overall positioning from a more conser-
vative stance to that which is more consistent with a gradually improving
economy. In particular, the Fund increased exposure to lower-quality credits
and sectors that are more favorably impacted by higher commodity prices
and an improving economy.

Describe portfolio positioning at period end.

• At period end, the Fund held 38% of its total portfolio in corporate bonds,
38% in floating rate loan interests, 10% in non-agency mortgage-backed
securities, 8% in U.S. government sponsored agency securities, and 4% in
asset-backed securities. The remainder of the portfolio was invested in tax-
able municipal bonds, equities and equity equivalents, while the Fund’s
cash position was negligible. The Fund ended the period with leverage at
approximately 21% of its total managed assets.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.

10 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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BlackRock Limited Duration Income Trust

¹ 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.
² A change in the distribution rate was declared on March 1, 2011. The Monthly Distribution per Share was increased to $0.10. The Yield on Closing Market Price, Current Monthly
Distribution per Share and Current Annualized Distribution per Share do not reflect the new distribution rate. The new distribution rate is not constant and is subject to further
change in the future.
³ Represents reverse repurchase agreements outstanding as a percentage of total managed assets, which is the total assets of the Fund (including any assets attributable to borrow-
ing) minus the sum of liabilities (other than borrowings representing financial leverage). For a discussion of leveraging techniques utilized by the Fund, please see The Benefits and
Risks of Leveraging on page 16.

The table below summarizes the Fund’s market price and net asset value per share:

 

The following unaudited charts show the portfolio composition of the Fund’s long-term investments and credit quality allocations of the Fund’s corporate
bond and US government securities investments:

 

⁴ Using the higher of S&P’s or Moody’s ratings.
⁵ Includes US Government Sponsored Agency securities and US Treasury Obligations,
which are deemed AAA/Aaa by the investment advisor.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 11

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Fund Summary as of February 28, 2011 BlackRock Senior Floating Rate Fund, Inc.

Investment Objective

BlackRock Senior Floating Rate Fund, Inc.’s (the “Fund”) investment objective is to provide as high a level of current income and such preservation of
capital as is consistent with investment in senior collateralized corporate loans (“corporate loans”) primarily in the form of participation interests, as defined
below, in corporate loans made by banks or other financial institutions. The Fund seeks to achieve its investment objective by investing its assets in the
Master Senior Floating Rate LLC ("Master LLC"), a separate closed-end, non-diversified management investment company. Master LLC may invest in a
corporate loan either by participating as a co-lender at the time the loan is originated or by buying a participation or assignment interest in the corporate
loan from a co-lender or a participant (collectively, “participation interests”). Master LLC invests, under normal market conditions, at least 80% of its assets
in corporate loans or participating in such loans that have floating or variable interest rates and, under normal market conditions, at least 65% of its
assets in floating rate or variable rate loans made to corporate borrowers or participating in such loans. Master LLC may invest directly in such securities
or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

Portfolio Management Commentary

How did the Fund perform?

• For the six months ended February 28, 2011, through its investment in
the Master LLC, the Fund returned 6.61% based on NAV while the closed-
end Lipper Loan Participation Funds category posted an average NAV return
of 9.11% for the same period. All returns reflect reinvestment of dividends.

What factors influenced performance?

• The bank loan sector posted strong returns as risk assets rallied during the
period. Lower-quality sectors and credits outperformed their higher-quality
counterparts and the high yield sector outperformed bank loans. Because
the Master LLC does not employ leverage, the Fund is expected to underper-
form its Lipper category under strong market conditions as the category
includes many leveraged competitors. The Fund performed as expected
relative to its Lipper category as the bank loan and high yield sectors
advanced over the period.

• The Master LLC maintains a relatively conservative portfolio, weighted
toward higher-quality credits and loan structures. This strategy had a nega-
tive impact on relative performance as lower quality outperformed during
the period.

• Conversely, the Master LLC’s greater allocation to high yield bonds (averag-
ing 11% of the portfolio during the period) relative to the Fund’s Lipper
category competitors had a positive impact on performance as high yield
outperformed the bank loan sector.

• The Master LLC frequently held cash committed for pending transactions;
these cash balances did not have a significant impact on performance.

Describe recent portfolio activity.

• During the period, the Master LLC modestly increased its level of risk as
market conditions improved. In particular, the Master LLC increased expo-
sure to lower-quality credits and sectors that are more favorably impacted
by rising commodity prices and an improving economy.

Describe portfolio positioning at period end.

• At period end, the Master LLC held 88% of its total portfolio in floating
rate loan interests and 12% in corporate bonds.

• Effective March 21, 2011, the Fund merged into BlackRock Floating
Rate Income Portfolio, please refer to Notes 1 and 10 of the Notes to
Financial Statements.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.

12 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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BlackRock Senior Floating Rate Fund, Inc.

¹ The Fund is a continuously offered closed-end fund that does not trade on an exchange.
² Yield based on net asset value is calculated by dividing the current annualized distribution per share by the net asset value. Past performance does not guarantee future results.
³ The distribution rate is not constant and is subject to change.

The table below summarizes the change in the Fund’s NAV per share:

 

Expense Example for Continuously Offered Closed-End Funds

⁴ Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown).
Because the Fund is a feeder fund, the expense table reflects the expenses of both the feeder fund and the Master LLC in which it invests.
⁵ Hypothetical 5% annual return before expenses is calculated by multiplying the number of days in the most recent fiscal half year divided by 365.
See “Disclosure of Expenses for Continuously Offered Closed-End Funds” on page 17 for futher information on how expenses were calculated.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 13

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Fund Summary as of February 28, 2011 BlackRock Senior Floating Rate Fund II, Inc.

Investment Objective

BlackRock Senior Floating Rate Fund II, Inc.’s (the “Fund”) investment objective is to provide as high a level of current income and such preservation of
capital as is consistent with investment in senior collateralized corporate loans (“corporate loans”) primarily in the form of participation interests, as defined
below, in corporate loans made by banks or other financial institutions. The Fund seeks to achieve its investment objective by investing its assets in the
Master Senior Floating Rate LLC ("Master LLC"), a separate closed-end, non-diversified management investment company. Master LLC may invest in a
corporate loan either by participating as a co-lender at the time the loan is originated or by buying a participation or assignment interest in the corporate
loan from a co-lender or a participant (collectively, “participation interests”). Master LLC invests, under normal market conditions, at least 80% of its assets
in corporate loans or participating in such loans that have floating or variable interest rates and, under normal market conditions, at least 65% of its
assets in floating rate or variable rate loans made to corporate borrowers or participating in such loans. Master LLC may invest directly in such securities
or synthetically through the use of derivatives.

No assurance can be given that the Fund’s investment objective will be achieved.

Portfolio Management Commentary

How did the Fund perform?

• For the six months ended February 28, 2011, through its investment in
the Master LLC, the Fund returned 6.61% based on NAV while the closed-
end Lipper Loan Participation Funds category posted an average NAV return
of 9.11% for the same period. All returns reflect reinvestment of dividends.

What factors influenced performance?

• The bank loan sector posted strong returns as risk assets rallied during the
period. Lower-quality sectors and credits outperformed their higher-quality
counterparts and the high yield sector outperformed bank loans. Because
the Master LLC does not employ leverage, the Fund is expected to underper-
form its Lipper category under strong market conditions as the category
includes many leveraged competitors. The Fund performed as expected
relative to its Lipper category as the bank loan and high yield sectors
advanced over the period.

• The Master LLC maintains a relatively conservative portfolio, weighted
toward higher-quality credits and loan structures. This strategy had a nega-
tive impact on relative performance as lower quality outperformed during
the period.

• Conversely, the Master LLC’s greater allocation to high yield bonds (averag-
ing 11% of the portfolio during the period) relative to the Fund’s Lipper
category competitors had a positive impact on performance as high yield
outperformed the bank loan sector.

• The Master LLC frequently held cash committed for pending transactions;
these cash balances did not have a significant impact on performance.

Describe recent portfolio activity.

• During the period, the Master LLC modestly increased its level of risk as
market conditions improved. In particular, the Master LLC increased expo-
sure to lower-quality credits and sectors that are more favorably impacted
by rising commodity prices and an improving economy.

Describe portfolio positioning at period end.

• At period end, the Master LLC held 88% of its total portfolio in floating
rate loan interests and 12% in corporate bonds.

• Effective March 21, 2011, the Fund merged into BlackRock Floating
Rate Income Portfolio, please refer to Notes 1 and 10 of the Notes to
Financial Statements.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These
views are not intended to be a forecast of future events and are no guarantee of future results.

14 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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BlackRock Senior Floating Rate Fund II, Inc.

¹ The Fund is a continuously offered closed-end fund that does not trade on an exchange.
² Yield based on net asset value is calculated by dividing the current annualized distribution per share by the net asset value. Past performance does not guarantee future results.
³ The distribution rate is not constant and is subject to change.

The table below summarizes the change in the Fund’s NAV per share:

 

Expense Example for Continuously Offered Closed-End Funds

⁴ Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown).
Because the Fund is a feeder fund, the expense table reflects the expenses of both the feeder fund and the Master LLC in which it invests.
⁵ Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.
See “Disclosure of Expenses for Continuously Offered Closed-End Funds” on page 17 for futher information on how expenses were calculated.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 15

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The Benefits and Risks of Leveraging

BHL, DVF, FRA and BLW may utilize leverage to seek to enhance the yield
and NAV. However, these objectives cannot be achieved in all interest
rate environments.

The Funds may utilize leverage by borrowing through a credit facility, partici-
pation in the TALF, or through entering into reverse repurchase agreements
and treasury roll transactions. In general, the concept of leveraging is based
on the premise that the financing cost of assets to be obtained from lever-
age, which will be based on short-term interest rates, will normally be lower
than the income earned by each Fund on its longer-term portfolio invest-
ments. To the extent that the total assets of each Fund (including the
assets obtained from leverage) are invested in higher-yielding portfolio
investments, each Fund’s shareholders will benefit from the incremental
net income.

The interest earned on securities purchased with the proceeds from lever-
age is paid to shareholders in the form of dividends, and the value of these
portfolio holdings is reflected in the per share NAV. However, in order to
benefit shareholders, the yield curve must be positively sloped; that is,
short-term interest rates must be lower than long-term interest rates. If the
yield curve becomes negatively sloped, meaning short-term interest rates
exceed long-term interest rates, income to shareholders will be lower than if
the Funds had not used leverage.

To illustrate these concepts, assume a Fund’s capitalization is $100 million
and it borrows for an additional $30 million, creating a total value of $130
million available for investment in long-term securities. If prevailing short-
term interest rates are 3% and long-term interest rates are 6%, the yield
curve has a strongly positive slope. In this case, the Fund pays borrowing
costs and interest expense on the $30 million of borrowings based on the
lower short-term interest rates. At the same time, the securities purchased
by the Fund with assets received from the borrowings earn income based
on long-term interest rates. In this case, the borrowing costs and interest
expense of the borrowings is significantly lower than the income earned
on the Fund’s long-term investments, and therefore the shareholders are
the beneficiaries of the incremental net income.

If short-term interest rates rise, narrowing the differential between short-term
and long-term interest rates, the incremental net income pickup will be
reduced or eliminated completely. Furthermore, if prevailing short-term inter-
est rates rise above long-term interest rates of 6%, the yield curve has a
negative slope. In this case, the Fund pays interest expense on the higher
short-term interest rates whereas the Fund’s total portfolio earns income
based on lower long-term interest rates.

Furthermore, the value of the Funds’ portfolio investments generally varies
inversely with the direction of long-term interest rates, although other
factors can influence the value of portfolio investments. In contrast, the
redemption value of the Funds’ borrowings does not fluctuate in relation
to interest rates. As a result, changes in interest rates can influence the
Funds’ NAV positively or negatively in addition to the impact on Fund
performance from leverage from borrowings discussed above.

The use of leverage may enhance opportunities for increased income to
the Funds and shareholders, but as described above, it also creates risks
as short or long-term interest rates fluctuate. Leverage also will generally
cause greater changes in the Funds’ NAVs, market prices and dividend
rates than comparable portfolios without leverage. If the income derived
from securities purchased with assets received from leverage exceeds the
cost of leverage, each 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, each Fund’s net income will
be less than if leverage had not been used, and therefore the amount
available for distribution to shareholders will be reduced. Each Fund
may be required to sell portfolio securities at inopportune times or at dis-
tressed values in order to comply with regulatory requirements applicable
to the use of leverage or as required by the terms of leverage instruments,
which may cause a Fund to incur losses. The use of leverage may limit
each Fund’s ability to invest in certain types of securities or use certain
types of hedging strategies. Each Fund will incur expenses in connection
with the use of leverage, all of which are borne by shareholders and may
reduce income.

Under the Investment Company Act of 1940, the Funds are permitted
to borrow through their credit facility, through participation in the TALF or
entering into reverse repurchase agreements up to 33 ¹ / ₃ % of their total man-
aged assets. As of February 28, 2011, the Funds had outstanding leverage
from borrowings as a percentage of their total managed assets as follows:

 

16 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Derivative Financial Instruments

The Funds may invest in various derivative instruments, including swaps,
financial futures contracts, foreign currency exchange contracts and
options, as specified in Note 2 of the Notes to Financial Statements,
which may constitute forms of economic leverage. Such instruments are
used to obtain exposure to a market without owning or taking physical cus-
tody of securities or to hedge market, interest rate, credit, equity and/or
foreign currency exchange rate risks. Such derivative instruments involve
risks, including the imperfect correlation between the value of a derivative
instrument and the underlying asset, possible default of the counterparty
to the transaction or illiquidity of the derivative instrument. The Funds’
ability to use a derivative instrument successfully depends on the invest-
ment advisor’s ability to predict pertinent market movements accurately,
which cannot be assured. The use of derivative instruments may result in
losses greater than if they had not been used, may require a Fund to sell
or purchase portfolio investments at inopportune times or for distressed
values, may limit the amount of appreciation a Fund can realize on an
investment, may result in lower dividends paid to shareholders or may
cause a Fund to hold an investment that it might otherwise sell. The
Funds’ investments in these instruments are discussed in detail in the
Notes to Financial Statements.

Disclosure of Expenses for Continuously Offered Closed-End Funds

Shareholders of BlackRock Senior Floating Rate Fund, Inc. and
BlackRock Senior Floating Rate Fund II, Inc. may incur the following charges:
(a) expenses related to transactions, including early withdrawal fees; and
(b) operating expenses including administration fees, and other Fund
expenses. The examples on the previous pages (which are based on a hypo-
thetical investment of $1,000 invested on September 1, 2010 and held
through February 28, 2011) are intended to assist shareholders both in
calculating expenses based on an investment in each Fund and in compar-
ing these expenses with similar costs of investing in other mutual funds.

The tables provide information about actual account values and actual
expenses. In order to estimate the expenses a shareholder paid during
the period covered by this report, shareholders can divide their account
value by $1,000 and then multiply the result by the number corresponding
to their Fund under the heading entitled “Expenses Paid During the Period.”

The tables also provide information about hypothetical account values and
hypothetical expenses based on each Fund’s actual expense ratio and an
assumed rate of return of 5% per year before expenses. In order to assist
shareholders in comparing the ongoing expenses of investing in these
Funds and other funds, compare the 5% hypothetical example with the 5%
hypothetical examples that appear in other funds’ shareholder reports.

The expenses shown in the tables are intended to highlight shareholders’
ongoing costs only and do not reflect any transactional expenses, such
as early withdrawal fees. Therefore, the hypothetical examples are useful
in comparing ongoing expenses only, and will not help shareholders deter-
mine the relative total expenses of owning different funds. If these trans-
actional expenses were included, shareholder expenses would have
been higher.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 17

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Schedule of Investments February 28, 2011 (Unaudited)
BlackRock Defined Opportunity Credit Trust (BHL)
(Percentages shown are based on Net Assets)

 

 

 

18 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (continued)
BlackRock Defined Opportunity Credit Trust (BHL)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 19

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Schedule of Investments (continued)
BlackRock Defined Opportunity Credit Trust (BHL)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

20 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (continued)
BlackRock Defined Opportunity Credit Trust (BHL)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 21

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Schedule of Investments (continued)
BlackRock Defined Opportunity Credit Trust (BHL)
(Percentages shown are based on Net Assets)

 

* The cost and unrealized appreciation (depreciation) of investments as of
February 28, 2011, as computed for federal income tax purposes, were as follows:

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

(d) Non-income producing security.
(e) Other interests represent beneficial interest in liquidation trusts and other reorgani-
zation entities and are non-income producing.
(f) Amount is less than $1,000.
(g) Investments in companies considered to be an affiliate of the Fund during the
period, for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
as amended, were as follows:

(h) Represents the current yield as of report date.
• 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 rating group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report, which may combine such
industry sub-classifications for reporting ease.
• Foreign currency exchange contracts as of February 28, 2011 were as follows:

• Fair Value Measurements — Various inputs are used in determining the fair value of
investments and derivatives. These inputs are summarized in three broad levels for
financial statement purposes as follows:
• Level 1 — price quotations in active markets/exchanges for identical assets
and liabilities
• Level 2 — other observable inputs (including, but not limited to: quoted prices for
similar assets or liabilities in markets that are active, quoted prices for identical or
similar assets or liabilities in markets that are not active, inputs other than quoted
prices that are observable for the assets or liabilities (such as interest rates, yield
curves, volatilities, prepayment speeds, loss severities, credit risks and default
rates) or other market-corroborated inputs)

See Notes to Financial Statements.

22 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (concluded)
BlackRock Defined Opportunity Credit Trust (BHL)

• 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
and derivatives)

The inputs or methodologies used for valuing securities are not necessarily an indica-
tion of the risk associated with investing in those securities. For information about the
Fund's policy regarding valuation of investments and derivatives and other significant
accounting policies, please refer to Note 1 of the Notes to Financial Statements.
The following tables summarize the inputs used as of February 28, 2011 in deter-
mining the fair valuation of the Fund's investments and derivatives:

 

¹ Derivative financial instruments are foreign currency exchange contracts. Foreign
currency exchange contracts are valued at the unrealized appreciation/depreci-
ation on the instrument.

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

² Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in the unrealized appreciation/depreciation on the
securities still held on February 28, 2011 was $(148,175).
³ The Fund’s policy is to recognize transfers in and transfers out as of the end of the period of the event or the change in circumstances that caused the transfer.
The following is a reconciliation of Level 3 derivative financial instruments for which
significant unobservable inputs were used in determining fair value:

⁴ Included in the related net change in unrealized appreciation/depreciation in
the Statements of Operations. The change in unrealized appreciation/deprecia-
tion on securities still held at February 28, 2011 was $42,183.
⁵ The Fund’s policy is to recognize transfers in and transfers out as of the end of
the period of the event or the change in circumstances that caused the transfer.

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 23

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Schedule of Investments February 28, 2011 (Unaudited)
BlackRock Diversified Income Strategies Fund, Inc. (DVF)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

24 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (continued)
BlackRock Diversified Income Strategies Fund, Inc. (DVF)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 25

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Schedule of Investments (continued)
BlackRock Diversified Income Strategies Fund, Inc. (DVF)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

26 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (continued)
BlackRock Diversified Income Strategies Fund, Inc. (DVF)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 27

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Schedule of Investments (continued)
BlackRock Diversified Income Strategies Fund, Inc. (DVF)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

28 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (continued)
BlackRock Diversified Income Strategies Fund, Inc. (DVF)
(Percentages shown are based on Net Assets)

* The cost and unrealized appreciation (depreciation) of investments as of
February 28, 2011, as computed for federal income tax purposes, were as follows:

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

(d) Non-income producing security.
(e) Convertible security.
(f) Represents a zero-coupon bond. Rate shown reflects the current yield as of
report date.
(g) Represents a payment-in-kind security which may pay interest/dividends in
additional par/shares.
(h) Issuer filed for bankruptcy and/or is in default of interest payments.
(i) Other interests represent beneficial interest in liquidation trusts and other reorgani-
zation entities and are non-income producing.
(j) Amount is less than $1,000.
(k) The investment is held by a wholly owned taxable subsidiary of the Fund.
(l) Warrants entitle the Fund to purchase a predetermined number of shares of com-
mon 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.
(m) Investments in companies considered to be an affiliate of the Fund during the
period, for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
as amended, were as follows:

(n) Represents the current yield as of report date.

• 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 rating group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report, which may combine such
industry sub-classifications for reporting ease.
• Foreign currency exchange contracts as of February 28, 2011 were as follows:

• Fair Value Measurements — Various inputs are used in determining the fair value of
investments and derivatives. These inputs are summarized in three broad levels for
financial statement purposes which are as follows:
• Level 1 — price quotations in active markets/exchanges for identical assets
and liabilities
• Level 2 — other observable inputs (including, but not limited to: quoted prices for
similar assets or liabilities in markets that are active, quoted prices for identical
or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
default rates) or other market-corroborated inputs)
• Level 3 — unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
Fund's own assumptions used in determining the fair value of investments and
derivatives)

The inputs or methodologies used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. For information
about the Fund's policy regarding valuation of investments and derivatives and
other significant accounting policies, please refer to Note 1 of the Notes to
Financial Statements.

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 29

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Schedule of Investments (concluded)
BlackRock Diversified Income Strategies Fund, Inc. (DVF)

The following tables summarize the inputs used as of February 28, 2011 in deter-
mining the fair valuation of the Fund's investments and derivatives:

 

¹ Derivative financial instruments are foreign currency exchange contracts.
Foreign currency exchange contracts are shown at the unrealized appreciation/
depreciation on the instrument.

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

² Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in the unrealized appreciation/depreciation on the
securities still held on February 28, 2011 was $(41,679).
³ The Fund’s policy is to recognize transfers in and transfers out as of the end of the period of the event or the change in circumstances that caused the transfer.

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

⁴ Included in the related net change in unrealized appreciation/depreciation
on the Statements of Operations. The change in the unrealized appreciation/
depreciation on the securities still held on February 28, 2011 was $42,183.
⁵ The Fund’s policy is to recognize transfers in and transfers out as of the end of
the period of the event or the change in circumstances that caused the transfer.

See Notes to Financial Statements.

30 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments February 28, 2011 (Unaudited)
 BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 31

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

 

 

See Notes to Financial Statements.

32 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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

 

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 33

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

 

 

See Notes to Financial Statements.

34 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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

 

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 35

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

* The cost and unrealized appreciation (depreciation) of investments as of
February 28, 2011, as computed for federal income tax purposes, were as follows:

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

(d) Non-income producing security.
(e) Represents a payment-in-kind security which may pay interest/dividends in
additional par/shares.
(f) Convertible security.
(g) Represents a zero-coupon bond. Rate shown reflects the current yield as of
report date.
(h) Issuer filed for bankruptcy and/or is in default of interest payments.
(i) Other interests represent beneficial interest in liquidation trusts and other reorgani-
zation entities and are non-income producing.
(j) Amount is less than $1,000.
(k) The investment is held by a wholly owned taxable subsidiary of the Fund.
(l) Warrants entitle the Fund to purchase a predetermined number of shares of com-
mon 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.
(m) Investments in companies considered to be an affiliate of the Fund during the
period, for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
as amended, were as follows:

(n) Represents the current yield as of report date.

• Foreign currency exchange contracts as of February 28, 2011 were as follows:

• 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 rating group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report, which may combine such
industry sub-classifications for reporting ease.

• Fair Value Measurements — Various inputs are used in determining the fair value of
investments and derivatives. These inputs are summarized in three broad levels for
financial statement purposes as follows:
• Level 1 — price quotations in active markets/exchanges for identical assets
and liabilities
• Level 2 — other observable inputs (including, but not limited to: quoted prices for
similar assets or liabilities in markets that are active, quoted prices for identical
or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
default rates) or other market-corroborated inputs)
• Level 3 — unobservable inputs based on the best information available in the
circumstances, to the extent observable inputs are not available (including the
Fund's own assumptions used in determining the fair value of investments
and derivatives)
The inputs or methodologies used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. For information
about the Fund's policy regarding valuation of investments and derivatives and
other significant accounting policies, please refer to Note 1 of the Notes to
Financial Statements.

See Notes to Financial Statements.

36 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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

The following tables summarize the inputs used as of February 28, 2011 in deter-
mining the fair valuation of the Fund's investments and derivatives:

 

¹ Derivative financial instruments are foreign currency exchange contracts.
Foreign currency exchange contracts are shown at the unrealized appreciation/
depreciation on the instrument and options are shown at value.

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

² Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in the unrealized appreciation/depreciation on the
securities still held on February 28, 2011 was $1,866,252.
³ The Fund’s policy is to recognize transfers in and transfers out as of the end of the period of the event or the change in circumstances that caused the transfer.

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

⁴ Included in the related net change in unrealized appreciation/depreciation
on the Statements of Operations. The change in the unrealized appreciation/
depreciation on the securities still held on February 28, 2011 was $64,540.
⁵ The Fund’s policy is to recognize transfers in and transfers out as of the end of
the period of the event or the change in circumstances that caused the transfer.

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 37

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Schedule of Investments February 28, 2011 (Unaudited)
BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

38 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (continued)
BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 39

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Schedule of Investments (continued)
BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

40 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (continued)
BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 41

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Schedule of Investments (continued)
BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

42 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (continued)
BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 43

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Schedule of Investments (continued)
BlackRock Limited Duration Income Trust (BLW)
(Percentages shown are based on Net Assets)

 

* The cost and unrealized appreciation (depreciation) of investments as of February 28,
2011, as computed for federal income tax purposes, were as follows:

(a) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
(b) Variable rate security. Rate shown is as of report date.
(c) Non-income producing security.
(d) All or a portion of security has been pledged as collateral in connection with open
reverse repurchase agreements.
(e) Convertible security.
(f) Represents a zero-coupon bond. Rate shown reflects the current yield as of
report date.
(g) Represents a step-down bond that pays an initial coupon rate for the first period
and then a lower coupon rate for the following periods. Rate shown is as of
report date.
(h) Issuer filed for bankruptcy and/or is in default of interest payments.
(i) Represents a payment-in-kind security which may pay interest/dividends in
additional par/shares.
(j) Other interests represent beneficial interest in liquidation trusts and other reorgani-
zation entities and are non-income producing.
(k) Amount is less than $1,000.
(l) The investment is held by a wholly owned taxable subsidiary of the Fund.
(m) Security is perpetual in nature and has no stated maturity date.
(n) Represents or includes a to-be-announced (“TBA”) transaction. Unsettled TBA
transactions as of report date were as follows:

 

See Notes to Financial Statements.

44 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (continued)
BlackRock Limited Duration Income Trust (BLW)

(o) Warrants entitle the Fund to purchase a predetermined number of shares of com-
mon 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.
(p) Represents the current yield as of report date.
(q) Investments in companies considered to be an affiliate of the Fund during the
period, for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
as amended, were as follows:

• 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 rating group indexes, and/or as defined by Fund management.
This definition may not apply for purposes of this report, which may combine such
industry sub-classifications for reporting ease.

• Financial futures contracts sold as of February 28, 2011 were as follows:

 

 

 

• Foreign currency exchange contracts as of February 28, 2011 were as follows:

 

• Reverse repurchase agreements outstanding as of February 28, 2011 were as follows:

• Reverse repurchase agreements outstanding as of February 28, 2011 were as follows
(continued):

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 45

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Schedule of Investments (continued)
BlackRock Limited Duration Income Trust (BLW)

• Reverse repurchase agreements outstanding as of February 28, 2011 were as follows
(concluded):

 

• Fair Value Measurements — Various inputs are used in determining the fair value of
investments and derivatives. These inputs are summarized in three broad levels for
financial statement purposes as follows:
• Level 1 — price quotations in active markets/exchanges for identical assets
and liabilities
• Level 2 — other observable inputs (including, but not limited to: quoted prices for
similar assets or liabilities in markets that are active, quoted prices for identical
or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
default rates) or other market-corroborated inputs)
• Level 3 — unobservable inputs based on the best information available in the cir-
cumstances, to the extent observable inputs are not available (including the
Fund’s own assumptions used in determining the fair value of investments and
derivatives)
The inputs or methodologies used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. For information
about the Fund’s policy regarding valuation of investments and derivatives and
other significant accounting policies, please refer to Note 1 of the Notes to
Financial statements.

The following tables summarize the inputs used as of February 28, 2011 in deter-
mining the fair valuation of the Fund’s investments and derivatives:

¹ Derivative financial instruments are swaps, financial futures contracts, foreign
currency exchange contracts and options. Swaps, financial futures contracts and
foreign currency exchange contracts are shown at the unrealized appreciation/
depreciation on the instrument and options are shown at value.

See Notes to Financial Statements.

46 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (concluded)
BlackRock Limited Duration Income Trust (BLW)

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

² Included in the related net change in unrealized appreciation/depreciation in the Statement of Operations. The change in unrealized appreciation/depreciation on securities still
held at February 28, 2011 was $(10,493,713).
³ The Fund’s policy is to recognize transfers in and transfers out as of the end of the period of the event or the change in circumstances that caused the transfer.

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

⁴ Included in the related net change in unrealized appreciation/depreciation
on the Statements of Operations. The change in the unrealized appreciation/
depreciation on the securities still held on February 28, 2011 was $155,269.
⁵ The Fund’s policy is to recognize transfers in and transfers out as of the end of
the period of the event or the change in circumstances that caused the transfer.

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 47

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Statements of Assets and Liabilities

 

See Notes to Financial Statements.

48 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Statements of Assets and Liabilities (concluded)

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 49

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Statements of Operations

 

See Notes to Financial Statements.

50 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Statements of Operations (concluded)

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 51

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Statements of Changes in Net Assets

 

See Notes to Financial Statements.

52 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Statements of Changes in Net Assets (continued)

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 53

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Statements of Changes in Net Assets (concluded)

 

See Notes to Financial Statements.

54 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Statements of Cash Flows

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 55

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Financial Highlights BlackRock Defined Opportunity Credit Trust (BHL)

¹ Commencement of operations
² Net asset value, beginning of period, reflects a deduction of $0.675 per share sales charge from initial offering price of $15.00 per share.
³ Based on average shares outstanding.
⁴ Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable,
total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.
⁵ Aggregate total investment return.
⁶ Annualized.

See Notes to Financial Statements.

56 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Financial Highlights BlackRock Diversified Income Strategies Fund, Inc. (DVF)

¹ Based on average shares outstanding.
² Amount is less than $(0.01) per share.
³ Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable,
total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.
⁴ Aggregate total investment return.
⁵ Annualized.

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 57

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Financial Highlights BlackRock Floating Rate Income Strategies Fund, Inc. (FRA)

 

¹ Based on average shares outstanding.
² Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns. Where applicable,
total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.
³ Aggregate total investment return.
⁴ Annualized.

See Notes to Financial Statements.

58 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Financial Highlights BlackRock Limited Duration Income Trust (BLW)

¹ Based on average shares outstanding.
² Total investment returns based on market value, which can be significantly greater or lesser than the net asset value, may result in substantially different returns.
Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.
³ Aggregate total investment return.
⁴ Annualized.
⁵ Includes mortgage dollar roll transactions. Excluding these transactions, the portfolio turnover would have been 48%.
⁶ Includes mortgage dollar roll transactions. Excluding these transactions, the portfolio turnover would have been 113%.
⁷ Includes mortgage dollar roll transactions. Excluding these transactions, the portfolio turnover would have been 79%.
⁸ Includes TBA transactions. Excluding these transactions, the portfolio turnover would have been 24%.

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 59

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Financial Highlights BlackRock Senior Floating Rate Fund, Inc.

¹ Based on average shares outstanding.
² Where applicable, total investment returns exclude the early withdrawal charge, but do include the reinvestment of dividends and distributions. The Fund is a continuously offered
closed-end fund, the shares of which are offered at net asset value. No secondary market for the Fund’s shares exists.
³ Aggregate total investment return.
⁴ During the year ended August 31, 2008, the Fund recorded a refund related to overpayments of prior years’ tender offer fees, which increased net investment income per
share $0.02 and increased total investment return 0.24%. The expense ratio excluding the refund was 1.46%.
⁵ Includes the Fund’s share of the Master LLC’s allocated expenses and/or net investment income.
⁶ Annualized.

See Notes to Financial Statements.

60 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Financial Highlights BlackRock Senior Floating Rate Fund II, Inc.

¹ Based on average shares outstanding.
² Where applicable, total investment returns exclude the early withdrawal charge, but do include the reinvestment of dividends and distributions. The Fund is a continuously offered
closed-end fund, the shares of which are offered at net asset value. No secondary market for the Fund’s shares exists.
³ Aggregate total investment return.
⁴ During the year ended August 31, 2008, the Fund recorded a refund related to overpayments of prior years’ tender offer fees, which increased net investment income per
share $0.02 and increased total investment return 0.11%. The expense ratio excluding the refund was 1.64%.
⁵ Includes the Fund’s share of the Master LLC’s allocated expenses and/or net investment income.
⁶ Annualized.

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 61

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Notes to Financial Statements (Unaudited)

1. Organization and Significant Accounting Policies:

BlackRock Defined Opportunity Credit Trust (“BHL”), BlackRock Diversified
Income Strategies Fund, Inc. (“DVF”), BlackRock Floating Rate Income
Strategies Fund, Inc. (“FRA”), BlackRock Limited Duration Income Trust
(“BLW”), BlackRock Senior Floating Rate Fund, Inc. (“Senior Floating Rate”)
and BlackRock Senior Floating Rate Fund II, Inc. (“Senior Floating Rate II”)
(collectively, the “Funds” or individually as a “Fund”) are registered under
the Investment Company Act of 1940, as amended (the “1940 Act”). BHL
and BLW are organized as Delaware Statutory trusts. DVF, FRA, Senior
Floating Rate and Senior Floating Rate II are organized as Maryland corp-
orations. BHL, DVF, FRA and BLW are registered as diversified, closed-end
management investment companies. Senior Floating Rate and Senior
Floating Rate II are registered as continuously offered, non-diversified,
closed-end management investment companies. The Funds’ financial state-
ments are prepared in conformity with accounting principles generally
accepted in the United States of America (“US GAAP”), which may require
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates. Each Fund’s Board of Directors/Trustees are
collectively referred to throughout this report as the “Board of Directors” or
the “Board”. The Funds determine and make available for publication the
net asset values of their Common Shares on a daily basis.

Senior Floating Rate and Senior Floating Rate II seek to achieve their
investment objectives by investing all their assets in the Master Senior
Floating Rate LLC (the “Master LLC”), which has the same investment
objective and strategies as these Funds. The value of each Fund’s invest-
ment in the Master LLC reflects each Fund’s proportionate interest in the
net assets of the Master LLC. The performance of each Fund is directly
affected by the performance of the Master LLC. The financial statements of
the Master LLC, including the Schedule of Investments, are included else-
where in this report and should be read in conjunction with Senior Floating
Rate and Senior Floating Rate II’s financial statements. The percentage of
the Master LLC owned by Senior Floating Rate and Senior Floating Rate II
at February 28, 2011 was 67% and 33%, respectively.

Reorganizations: On September 2, 2010, the Board of each of Senior
Floating Rate and Senior Floating Rate II (the “Senior Floating Rate Funds”)
and on September 17, 2010 the Board of Trustees of BlackRock Funds II
approved the reorganization of each Senior Floating Rate Fund into the
BlackRock Floating Rate Income Portfolio, a series of BlackRock Funds II
(“Floating Rate Income Portfolio”), with the BlackRock Floating Rate
Income Portfolio being the legal surviving fund (the “Reorganizations”).
The Reorganizations were effective on March 21, 2011, see Note 10 for
more details.

The following is a summary of significant accounting policies followed by
the Funds:

Valuation: US GAAP defines fair value as the price the Funds would receive
to sell an asset or pay to transfer a liability in an orderly transaction
between market participants at the measurement date. The Funds fair value
their financial instruments at market value using independent dealers or
pricing services under policies approved by the Board. The Funds value
their bond investments on the basis of last available bid prices or current
market quotations provided by dealers or pricing services. Floating rate
loan interests are valued at the mean of the bid prices from one or more
brokers or dealers as obtained from a pricing service. In determining the
value of a particular investment, pricing services may use certain informa-
tion with respect to transactions in such investments, quotations from
dealers, pricing matrixes, market transactions in comparable investments,
various relationships observed in the market between investments and
calculated yield measures. Asset-backed and mortgage-backed securities
are valued by independent pricing services using models that consider esti-
mated cash flows of each tranche of the security, establish a benchmark
yield and develop an estimated tranche specific spread to the benchmark
yield based on the unique attributes of the tranche. Financial futures
contracts traded on exchanges are valued at their last sale price. To-be-
announced (“TBA”) commitments are valued on the basis of last available
bid prices or current market quotations provided by pricing services. Swap
agreements are valued utilizing quotes received daily by the Funds’ pricing
service or through brokers, which are derived using daily swap curves and
models that incorporate a number of market data factors, such as dis-
counted cash flows and trades and values of the underlying reference
instruments. Investments in open-end registered investment companies
are valued at net asset value each business day. Short-term securities
with remaining maturities of 60 days or less may be valued at amortized
cost, which approximates fair value.

Equity investments traded on a recognized securities exchange or the
NASDAQ Global Market System (“NASDAQ”) are valued at the last reported
sale price that day or the NASDAQ official closing price, if applicable. For
equity investments traded on more than one exchange, the last reported
sale price on the exchange where the stock is primarily traded is used.
Equity investments traded on a recognized exchange for which there were
no sales on that day are valued at the last available bid price. If no bid
price is available, the prior day’s price will be used, unless it is determined
that such prior day’s price no longer reflects the fair value of the security.

Securities and other assets and liabilities denominated in foreign curren-
cies are translated into US dollars using exchange rates determined as of
the close of business on the New York Stock Exchange (“NYSE”). Foreign
currency exchange contracts are valued at the mean between the bid and
ask prices and are determined as of the close of business on the NYSE.
Interpolated values are derived when the settlement date of the contract is
an interim date for which quotations are not available.

Exchange-traded options are valued at the mean between the last bid and
ask prices at the close of the options market in which the options trade. An
exchange-traded option for which there is no mean price is valued at the
last bid price. If no bid price is available, the prior day’s price will be used,
unless it is determined that the prior day’s price no longer reflects the fair

62 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Notes to Financial Statements (continued)

value of the option. Over-the-counter (“OTC”) options are valued by an
independent pricing service using a mathematical model which incorpo-
rates a number of market data factors, such as the trades and prices of
the underlying instruments.

In the event that application of these methods of valuation results in a
price for an investment which is deemed not to be representative of the
market value of such investment or is not available, the investment will
be valued in accordance with a policy approved by the Board as reflecting
fair value (“Fair Value Assets”). When determining the price for Fair Value
Assets, the investment advisor and/or the sub-advisor seeks to determine
the price that each Fund might reasonably expect to receive from the cur-
rent sale of that asset in an arm’s-length transaction. Fair value determina-
tions shall be based upon all available factors that the investment advisor
and/or sub-advisor deems relevant. The pricing of all Fair Value Assets is
subsequently reported to the Board or a committee thereof.

Generally, trading in foreign instruments is substantially completed
each day at various times prior to the close of business on the NYSE.
Occasionally, events affecting the values of such instruments may occur
between the foreign market close and the close of business on the NYSE
that may not be reflected in the computation of each Fund’s net assets.
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 instruments, those instruments may be Fair Value
Assets and be valued at their fair value, as determined in good faith by
the investment advisor using a pricing service and/or policies approved
by the Board.

Senior Floating Rate and Senior Floating Rate II record their investments in
the Master LLC at fair value based on each Fund’s proportionate interest in
the net assets of the Master LLC. Valuation of securities held by the Master
LLC, including categorization of fair value measurements, is discussed in
Note 1 of the Master LLC’s Notes to Financial Statements, which are
included elsewhere in this report.

Foreign Currency Transactions: The Funds’ books and records are main-
tained in US dollars. Purchases and sales of investment securities are
recorded at the rates of exchange prevailing on the date the transactions
are entered into. Generally, when the US dollar rises in value against a
foreign currency, the Funds’ investments denominated in that currency
will lose value because its currency is worth fewer US dollars; the
opposite effect occurs if the US dollar falls in relative value.

The Funds report realized currency gains (losses) on foreign currency
related transactions as components of net realized gain (loss) for financial
reporting purposes, whereas such components are treated as ordinary
income for federal income tax purposes.

Asset-Backed and Mortgage-Backed Securities: Certain Funds may invest
in asset-backed securities. Asset-backed securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in an underlying pool of assets, or as debt instruments, which are
also known as collateralized obligations, and are generally issued as the
debt of a special purpose entity organized solely for the purpose of owning
such assets and issuing such debt. Asset-backed securities are often
backed by a pool of assets representing the obligations of a number of dif-
ferent parties. The yield characteristics of certain asset-backed securities
may differ from traditional debt securities. One such major difference is
that all or a principal part of the obligations may be prepaid at any time
because the underlying assets (i.e., loans) may be prepaid at any time. As
a result, a decrease in interest rates in the market may result in increases
in the level of prepayments as borrowers, particularly mortgagors, refinance
and repay their loans. An increased prepayment rate with respect to an
asset-backed security subject to such a prepayment feature will have the
effect of shortening the maturity of the security. If a Fund has purchased
such an asset-backed security at a premium, a faster than anticipated
prepayment rate could result in a loss of principal to the extent of the
premium paid.

Certain Funds may purchase certain mortgage pass-through securities.
There are a number of important differences among the agencies and
instrumentalities of the US government that issue mortgage-related
securities and among the securities that they issue. For example, mortgage-
related securities guaranteed by Ginnie Mae are guaranteed as to the
timely payment of principal and interest by Ginnie Mae and such guarantee
is backed by the full faith and credit of the United States. However,
mortgage-related securities issued by Freddie Mac and Fannie Mae, inc-
luding Freddie Mac and Fannie Mae guaranteed Mortgage Pass-Through
Certificates, which are solely the obligations of Freddie Mac and Fannie
Mae, are not backed by or entitled to the full faith and credit of the
United States and are supported by the right of the issuer to borrow
from the Treasury.

Zero-Coupon Bonds: Certain Funds may invest in zero-coupon bonds, which
are normally issued at a significant discount from face value and do not
provide for periodic interest payments. Zero-coupon bonds may experience
greater volatility in market value than similar maturity debt obligations
which provide for regular interest payments.

Preferred Stock: Certain Funds may invest in preferred stocks. Preferred
stock has a preference over common stock in liquidation (and generally
in receiving dividends as well) but is subordinated to the liabilities of the
issuer in all respects. As a general rule, the market value of preferred stock
with a fixed dividend rate and no conversion element varies inversely with
interest rates and perceived credit risk, while the market price of convertible
preferred stock generally also reflects some element of conversion value.
Because preferred stock is junior to debt securities and other obligations of
the issuer, deterioration in the credit quality of the issuer will cause greater
changes in the value of a preferred stock than in a more senior debt
security with similar stated yield characteristics. Unlike interest payments

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 63

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Notes to Financial Statements (continued)

on debt securities, preferred stock dividends are payable only if declared
by the issuer’s board of directors. Preferred stock also may be subject to
optional or mandatory redemption provisions.

Floating Rate Loan Interests: Certain Funds may invest in floating rate loan
interests. The floating rate loan interests the Funds hold are typically issued
to companies (the “borrower”) by banks, other financial institutions, and
privately and publicly offered corporations (the “lender”). Floating rate loan
interests are generally non-investment grade, often involve borrowers whose
financial condition is troubled or uncertain and companies that are highly
leveraged. The Funds may invest in obligations of borrowers who are in
bankruptcy proceedings. Floating rate loan interests may include fully
funded term loans or revolving lines of credit. Floating rate loan interests
are typically senior in the corporate capital structure of the borrower.
Floating rate loan interests generally pay interest at rates that are periodi-
cally determined by reference to a base lending rate plus a premium. The
base lending rates are generally the lending rate offered by one or more
European banks, such as LIBOR (London Inter Bank Offered Rate), the
prime rate offered by one or more US banks or the certificate of deposit
rate. Floating rate loan interests may involve foreign borrowers, and invest-
ments may be denominated in foreign currencies. The Funds consider these
investments to be investments in debt securities for purposes of their
investment policies.

When a Fund buys a floating rate loan interest it may receive a facility
fee and when it sells a floating rate loan interest it may pay a facility fee.
On an ongoing basis, the Funds may receive a commitment fee based on
the undrawn portion of the underlying line of credit amount of a floating
rate loan interest. The Funds earn and/or pay facility and other fees on
floating rate loan interests, which are shown as facility and other fees in
the Statements of Operations. Facility and commitment fees are typically
amortized to income over the term of the loan or term of the commitment,
respectively. Consent and amendment fees are recorded to income as
earned. Prepayment penalty fees, which may be received by the Funds
upon the prepayment of a floating rate loan interest by a borrower, are
recorded as realized gains. The Funds may invest in multiple series or
tranches of a loan. A different series or tranche may have varying terms
and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s
option. The Funds may invest in such loans in the form of participations in
loans (“Participations”) or assignments (“Assignments”) of all or a portion
of loans from third parties. Participations typically will result in the Funds
having a contractual relationship only with the lender, not with the bor-
rower. The Funds will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the lender selling
the Participation and only upon receipt by the lender of the payments
from the borrower. In connection with purchasing Participations, the Funds
generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement, nor any rights of offset against the borrower,
and the Funds may not benefit directly from any collateral supporting the
loan in which it has purchased the Participation. As a result, the Funds will
assume the credit risk of both the borrower and the lender that is selling
the Participation. The Funds’ investment in loan participation interests
involves the risk of insolvency of the financial intermediaries who are
parties to the transactions. In the event of the insolvency of the lender
selling the Participation, the Funds may be treated as general creditors of
the lender and may not benefit from any offset between the lender and the
borrower. Assignments typically result in the Funds having a direct contrac-
tual relationship with the borrower, and the Funds may enforce compliance
by the borrower with the terms of the loan agreement.

Forward Commitments and When-Issued Delayed Delivery Securities:
Certain Funds may purchase securities on a when-issued basis and may
purchase or sell securities on a forward commitment basis. Settlement of
such transactions normally occurs within a month or more after the pur-
chase or sale commitment is made. The Funds may purchase securities
under such conditions with the intention of actually acquiring them, but
may enter into a separate agreement to sell the securities before the settle-
ment date. Since the value of securities purchased may fluctuate prior to
settlement, the Funds may be required to pay more at settlement than the
security is worth. In addition, the Funds are not entitled to any of the inter-
est earned prior to settlement. When purchasing a security on a delayed
delivery basis, the Funds assume the rights and risks of ownership of the
security, including the risk of price and yield fluctuations. In the event of
default by the counterparty, the Funds’ maximum amount of loss is the
unrealized appreciation of unsettled when-issued transactions, which is
shown in the Schedules of Investments, if any.

TBA Commitments: Certain Funds may enter into TBA commitments. TBA
commitments are forward agreements for the purchase or sale of mort-
gage-backed securities for a fixed price, with payment and delivery on an
agreed upon future settlement date. The specific securities to be delivered
are not identified at the trade date; however, delivered securities must meet
specified terms, including issuer, rate and mortgage terms. The Funds gen-
erally enter into TBA commitments with the intent to take possession of
or deliver the underlying mortgage-backed securities but can extend the
settlement or roll the transaction. TBA commitments involve a risk of loss
if the value of the security to be purchased or sold declines or increases,
respectively, prior to settlement date.

Mortgage Dollar Roll Transactions: Certain Funds may sell TBA mortgage-
backed securities and simultaneously contract to repurchase substantially
similar (same type, coupon and maturity) securities on a specific future
date at an agreed upon price. During the period between the sale and
repurchase, the Funds will not be entitled to receive interest and principal
payments on the securities sold. The Funds account for dollar roll
transactions as purchases and sales and realize gains and losses on these
transactions. These transactions may increase the Funds’ portfolio turnover
rate. Mortgage dollar rolls involve the risk that the market value of the
securities that the Funds are required to purchase may decline below
the agreed upon repurchase price of those securities.

64 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Notes to Financial Statements (continued)

Reverse Repurchase Agreements: Certain Funds may enter into reverse
repurchase agreements with qualified third party broker-dealers. In a
reverse repurchase agreement, the Funds sell securities to a bank or bro-
ker-dealer and agree to repurchase the same securities at a mutually
agreed upon date and price. Certain agreements have no stated maturity
and can be terminated by either party at any time. Interest on the value of
the reverse repurchase agreements issued and outstanding is based upon
competitive market rates determined at the time of issuance. The Funds
may utilize reverse repurchase agreements when it is anticipated that the
interest income to be earned from the investment of the proceeds of the
transaction is greater than the interest expense of the transaction. Reverse
repurchase agreements involve leverage risk and also the risk that the
market value of the securities that the Funds are obligated to repurchase
under the agreement may decline below the repurchase price. In the event
the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, the Funds’ use of the proceeds of the
agreement may be restricted while the other party, or its trustee or receiver,
determines whether or not to enforce the Funds’ obligation to repurchase
the securities.

Segregation and Collateralization: In cases in which the 1940 Act and the
interpretive positions of the Securities and Exchange Commission (“SEC’)
require that the Funds either deliver collateral or segregate assets in con-
nection with certain investments (e.g., dollar rolls, TBA sale commitments,
financial futures contracts, foreign currency exchange contracts and swaps)
or certain borrowings (e.g., reverse repurchase agreements, TALF loans
and loan payable), the Funds will, consistent with SEC rules and/or
certain interpretive letters issued by the SEC, segregate collateral or desig-
nate on their books and records cash or other liquid securities having
a market value at least equal to the amount that would otherwise be
required to be physically segregated. Furthermore, based on requirements
and agreements with certain exchanges and third party broker-dealers,
each party has requirements to deliver/deposit securities as collateral for
certain investments.

Investment Transactions and Investment Income: For financial reporting
purposes, investment transactions are recorded on the dates the transac-
tions are entered into (the trade dates). For financial reporting purposes,
contributions to and withdrawals from the Master LLC are accounted for
on a trade basis. Realized gains and losses on investment transactions
are determined on the identified cost basis. Dividend income is recorded
on the ex-dividend dates. Dividends from foreign securities where the
ex-dividend date may have passed are subsequently recorded when the
Funds are informed of the ex-dividend date. Interest income, including
amortization and accretion of premiums and discounts on debt securities,
is recognized on the accrual basis. Consent fees are compensation for
agreeing to changes in the terms of debt instruments and are included
in facility and other fees in the Statements of Operations.

Senior Floating Rate and Senior Floating Rate II record daily their propor-
tionate share of the Master LLC’s income, expenses and realized and unre-
alized gains and losses. In addition, both Funds accrue their own expenses.

Dividends and Distributions: Dividends from net investment income are
declared and paid monthly. Distributions of capital gains are recorded on
the ex-dividend dates. If the total dividends and distributions made in any
tax year exceeds net investment income and accumulated realized capital
gains, a portion of the total distribution may be treated as a tax return of
capital. The amount and timing of dividends and distributions are deter-
mined in accordance with federal income tax regulations, which may differ
from US GAAP.

Income Taxes: It is each Fund’s policy to comply with the requirements of
the Internal Revenue Code of 1986, as amended, 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.

Certain Funds have wholly owned taxable subsidiaries organized as limited
liability companies (the “Taxable Subsidiaries”) each of which holds one
of the investments listed in the Schedules of Investments. The Taxable
Subsidiaries allow a Fund to hold an investment that is organized as an
operating partnership while still satisfying Regulated Investment Company
tax requirements. Income earned on the investments held by the Taxable
Subsidiaries is taxable to such subsidiaries. Income tax expense, if any, of
the Taxable Subsidiaries is reflected in the value of the investments held by
the Taxable Subsidiaries.

Each Fund files US federal and various state and local tax returns. No
income tax returns are currently under examination. The statute of limita-
tions on the Funds’ US federal tax returns remains open for each of the two
years ended August 31, 2010 and the period ended August 31, 2008 for
BHL, the four years ended August 31, 2010 for DVF, FRA, Senior Floating
Rate and Senior Floating Rate II and the two years ended August 31,
2010, the period ended August 31, 2008 and the year ended October 31,
2007 for BLW. The statutes of limitations on the Funds’ state and local tax
returns may remain open for an additional year depending upon the juris-
diction. Management does not believe there are any uncertain tax positions
that require recognition of a tax liability.

Deferred Compensation and BlackRock Closed-End Share Equivalent
Investment Plan: Under the deferred compensation plan approved by each
Fund’s Board, non-interested Directors (“Independent Directors”) may defer
a portion of their annual complex-wide compensation. Deferred amounts
earn an approximate return as though equivalent dollar amounts had been
invested in common shares of certain other BlackRock Closed-End Funds
selected by the Independent Directors. This has approximately the same
economic effect for the Independent Directors as if the Independent
Directors had invested the deferred amounts directly in certain other
BlackRock Closed-End Funds.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 65

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Notes to Financial Statements (continued)

The deferred compensation plan is not funded and obligations there-under
represent general unsecured claims against the general assets of each
Fund. Each Fund may, however, elect to invest in common shares of certain
other BlackRock Closed-End Funds selected by the Independent Directors
in order to match its deferred compensation obligations. Investments to
cover each Fund’s deferred compensation liability, if any, are included in
other assets in the Statements of Assets and Liabilities. Dividends and dis-
tributions from the BlackRock Closed-End Fund investments under the plan
are included in dividends — affiliated in the Statements of Operations.

Other: Expenses directly related to a Fund are charged to that Fund. Other
operating expenses shared by several funds are pro rated among those
funds on the basis of relative net assets or other appropriate methods. The
Funds have an arrangement with the custodians whereby fees may be
reduced by credits earned on uninvested cash balances, which if applica-
ble are shown as fees paid indirectly in the Statements of Operations. The
custodians impose fees on overdrawn cash balances, which can be offset
by accumulated credits earned or may result in additional custody charges.

2. Derivative Financial Instruments:

The Funds engage in various portfolio investment strategies using derivative
contracts both to increase the returns of the Funds and to economically
hedge, or protect, their exposure to certain risks such as credit risk, interest
rate risk or foreign currency exchange rate risk. These contracts may be
transacted on an exchange or OTC.

Losses may arise if the value of the contract decreases due to an unfavor-
able change in the market rates or values of the underlying instrument or if
the counterparty does not perform under the contract. The Funds’ maximum
risk of loss from counterparty credit risk on OTC derivatives is generally the
aggregate unrealized gain netted against any collateral pledged by/posted
to the counterparty. For OTC options purchased, the Funds bear the risk of
loss in the amount of the premiums paid plus the positive change in mar-
ket values net of any collateral received on the options should the counter-
party fail to perform under the contracts. Options written by the Funds do
not give rise to counterparty credit risk, as options written obligate the
Funds to perform and not the counterparty. Counterparty risk related to
exchange-traded financial futures contracts and options is deemed to be
minimal due to the protection against defaults provided by the exchange
on which these contracts trade.

The Funds may mitigate counterparty risk by procuring collateral and
through netting provisions included within an International Swaps and
Derivatives Association, Inc. (“ISDA”) Master Agreement implemented
between a Fund and each of its respective counterparties. The ISDA Master
Agreement allows each Fund to offset with each separate counterparty
certain derivative financial instrument’s payables and/or receivables
with collateral held. The amount of collateral moved to/from applicable
counterparties is generally based upon minimum transfer amounts of
up to $500,000. To the extent amounts due to the Funds from their
counterparties are not fully collateralized contractually or otherwise, the
Funds bear the risk of loss from counterparty non-performance. See Note 1
“Segregation and Collateralization” for information with respect to collateral
practices. In addition, the Funds manage counterparty risk by entering into
agreements only with counterparties that it believes have the financial
resources to honor their obligations and by monitoring the financial stability
of those counterparties.

Certain ISDA Master Agreements allow counterparties to OTC derivatives to
terminate contracts prior to maturity in the event the Funds’ net assets
decline by a stated percentage or the Funds fail to meet the terms of its
ISDA Master Agreements, which would cause the Funds to accelerate
payment of any net liability owed to the counterparty.

Financial Futures Contracts: The Funds purchase or sell financial futures
contracts and options on financial futures contracts to gain exposure to, or
economically hedge against, changes in interest rates (interest rate risk).
Financial futures contracts are agreements between the Funds and the
counterparty to buy or sell a specific quantity of an underlying instrument
at a specified price and at a specified date. Depending on the terms of
the particular contract, futures contracts are settled either through physical
delivery of the underlying instrument on the settlement date or by payment
of a cash settlement amount on settlement date. Pursuant to the contract,
the Funds agree 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 margin variation and are recorded by the Funds
as unrealized appreciation or depreciation. When the contract is closed,
the Funds record 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. The use of financial futures contracts involves the risk
of an imperfect correlation in the movements in the price of financial
futures contracts, interest rates and the underlying assets.

Foreign Currency Exchange Contracts: The Funds enter into foreign cur-
rency exchange contracts as an economic hedge against either specific
transactions or portfolio instruments or to obtain exposure to foreign cur-
rencies (foreign currency exchange rate risk). A foreign currency exchange
contract is an agreement between two parties to buy and sell a currency at
a set exchange rate on a future date. Foreign currency exchange contracts,
when used by the Funds, help to manage the overall exposure to the cur-
rency backing some of the investments held by the Funds. The contract is
marked-to-market daily and the change in market value is recorded by the
Funds as an unrealized gain or loss. When the contract is closed, the Funds
record 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. The use
of foreign currency exchange contracts involves the risk that the value of
a foreign currency exchange contract changes unfavorably due to move-
ments in the value of the referenced foreign currencies and the risk that

66 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Notes to Financial Statements (continued)

a counterparty to the contract does not perform its obligations under
the agreement.

Options: The Funds purchase and write call and put options to increase
or decrease their exposure to underlying instruments (interest rate risk)
and/or, in the case of options written, to generate gains from options
premiums. A call option gives the purchaser of the option the right (but
not the obligation) to buy, and obligates the seller to sell (when the option
is exercised), the underlying instrument at the exercise price at any time or
at a specified time during the option period. A put option gives the holder
the right to sell and obligates the writer to buy the underlying instrument
at the exercise price at any time or at a specified time during the option
period. When the Funds purchase (write) an option, an amount equal
to the premium paid (received) by the Funds is reflected as an asset
(liability). The amount of the asset (liability) is subsequently marked-
to-market to reflect the current market value of the option purchased
(written). When an instrument 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 instrument acquired or deducted from
(or added to) the proceeds of the instrument sold. When an option expires
(or the Funds enter into a closing transaction), the Funds realize 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 exceeds the
premiums received or paid). When the Funds write a call option, such
option is “covered,” meaning that the Funds hold the underlying instrument
subject to being called by the option counterparty. When the Funds write
a put option, such option is covered by cash in an amount sufficient to
cover the obligation.

In purchasing and writing options, the Funds bear the risk of an unfavor-
able change in the value of the underlying instrument or the risk that the
Funds may not be able to enter into a closing transaction due to an illiquid
market. Exercise of a written option could result in the Funds purchasing or
selling a security at a price different from the current market value.

Swaps: The Funds enter into swap agreements, in which the Funds and a
counterparty agree to make periodic net payments on a specified notional
amount. These periodic payments received or made by the Funds are
recorded in the Statements of Operations as realized gains or losses,
respectively. Any upfront fees paid are recorded as assets and any upfront
fees received are recorded as liabilities and amortized over the term of the
swap. Swaps are marked-to-market daily and changes in value are
recorded as unrealized appreciation (depreciation). When the swap is ter-
minated, the Funds will record a realized gain or loss equal to the differ-
ence between the proceeds from (or cost of) the closing transaction and
the Funds’ basis in the contract, if any. Generally, the basis of the contracts
is the premium received or paid. Swap transactions involve, to varying
degrees, elements of interest rate, credit and market risk in excess of the
amounts recognized in the Statements of Assets and Liabilities. Such risks
involve the possibility that there will be no liquid market for these agree-
ments, that the counterparty to the agreements may default on its obliga-
tion to perform or disagree as to the meaning of the contractual terms in
the agreements, and that there may be unfavorable changes in interest
rates and/or market values associated with these transactions.

• Credit default swaps — The Funds enter into credit default swaps to
manage their exposure to the market or certain sectors of the market,
to reduce its risk exposure to defaults of corporate and/or sovereign
issuers or to create exposure to corporate and/or sovereign issuers to
which they are not otherwise exposed (credit risk). The Funds enter into
credit default swap agreements to provide a measure of protection
against the default of an issuer (as buyer of protection) and/or gain
credit exposure to an issuer to which it is not otherwise exposed (as
seller of protection). The Funds may either buy or sell (write) credit
default swaps on single-name issuers (corporate or sovereign), a
combination or basket of single-name issuers or traded indexes.
Credit default swaps on single-name issuers are agreements in which
the buyer pays fixed periodic payments to the seller in consideration
for a guarantee from the seller to make a specific payment should a
negative credit event take place with respect to the referenced entity
(e.g., bankruptcy, failure to pay, obligation accelerators, repudiation,
moratorium or restructuring). Credit default swaps on traded indexes
are agreements in which the buyer pays fixed periodic payments to
the seller in consideration for a guarantee from the seller to make a
specific payment should a write-down, principal or interest shortfall or
default of all or individual underlying securities included in the index
occurs. As a buyer, if an underlying credit event occurs, the Funds will
either receive from the seller an amount equal to the notional amount
of the swap and deliver the referenced security or underlying securities
comprising the index or receive a net settlement of cash equal to the
notional amount of the swap less the recovery value of the security or
underlying securities comprising the index. As a seller (writer), if an
underlying credit event occurs, the Funds will either pay the buyer an
amount equal to the notional amount of the swap and take delivery
of the referenced security or underlying securities comprising the index
or pay a net settlement of cash equal to the notional amount of the
swap less the recovery value of the security or underlying securities
comprising the index.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 67

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Notes to Financial Statements (continued)

 

68 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Notes to Financial Statements (continued)

For the six months ended February 28, 2011 the average quarterly balances of outstanding derivative financial instruments were as follows:

 

3. Investment Advisory Agreement and Other Transactions
with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America
Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest
stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership
structure, PNC is an affiliate of the Funds for 1940 Act purposes, but
BAC and Barclays are not.

BHL, DVF, FRA and BLW entered into an Investment Advisory Agreement
with BlackRock Advisors, LLC (the “Manager”), the Funds’ investment advi-
sor, an indirect, wholly owned subsidiary of BlackRock, to provide invest-
ment advisory and administration services. The Manager is responsible for
the management of each Fund’s portfolio and provides the necessary per-
sonnel, facilities, equipment and certain other services necessary to the
operations of each Fund. For such services, each Fund pays the Manager a
monthly fee at an annual rate of each Fund’s average daily net assets, plus
the proceeds of any outstanding borrowings used for leverage as follows:

 

The Manager voluntarily agreed to waive its investment advisory fees by
the amount of investment advisory fees each Fund pays to the Manager
indirectly through its investment in affiliated money market funds, however
the Manager does not waive its investment advisory fees by the amount
of investment advisory fees paid through each Fund’s investment in other
affiliated investment companies, if any. These amounts are shown as fees
waived by advisor in the Statements of Operations. For the six months
ended February 28, 2011, the amounts waived were as follows:

 

The Manager, on behalf of BHL, DVF, FRA and BLW, entered into a sub-
advisory agreement with BlackRock Financial Management, Inc. (“BFM”),
an affiliate of the Manager. The Manager pays BFM for services it provides,
a monthly fee that is a percentage of the investment advisory fees paid by
each Fund to the Manager.

For the six months ended February 28, 2011, certain Funds reimbursed
the Manager for certain accounting services, which are included in
accounting services in the Statements of Operations. The reimbursements
were as follows:

 

Senior Floating Rate and Senior Floating Rate II entered into an
Administration Agreement with the Manager. The administration fee paid
to the Manager is calculated daily and paid monthly based on an annual
rate of 0.25% and 0.40%, respectively, of the average daily value of these
Fund’s net assets for the performance of administrative services (other
than investment advice and related portfolio activities) necessary for the
operation of these Funds.

For Senior Floating Rate II, the Manager voluntarily agreed to waive
expenses in order to limit total annual Fund operating expenses (excluding
interest expense, acquired fund fees and expenses and certain other
expenses) to 1.83% of the Fund’s average daily net assets. This voluntary
waiver may be reduced or discontinued at any time without notice.

Senior Floating Rate and Senior Floating Rate II entered into a separate
Distribution Agreement and Distribution Plan with BlackRock Investments,
LLC (“BRIL”), which is an affiliate of BlackRock.

For the six months ended February 28, 2011, BRIL received early with-
drawal charges for Senior Floating Rate and Senior Floating Rate II in the
amount of $57,184 and $3,990, respectively relating to the tender of each
Fund’s shares.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 69

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Notes to Financial Statements (continued)

Senior Floating Rate and Senior Floating Rate II may earn income on
positive cash balances in demand deposit accounts that are maintained
by the transfer agent on behalf of the Funds. These amounts are included
in dividends – affiliated in the Statements of Operations.

Certain officers and/or trustees of the Funds are officers and/or directors
of BlackRock or its affiliates. The Funds reimburse the Manager for com-
pensation paid to the Funds’ Chief Compliance Officer.

4. Investments:

Purchases and sales of investments including paydowns and mortgage dol-
lar roll transactions and excluding short-term securities and US government
securities for the six months ended February 28, 2011, were as follows:

 

For the six months ended February 28, 2011, purchases and sales
of US government securities for BLW were $2,513,922 and $3,382,238,
respectively.

For the six months ended February 28, 2011, purchases and sales for BLW
attributable to mortgage dollar rolls were $49,508,781 and $49,664,770,
respectively.

5. Commitments:

The Funds may invest in floating rate loan interests. In connection with
these investments, the Funds may also enter into unfunded loan commit-
ments (“commitments”). Commitments may obligate the Funds to furnish
temporary financing to a borrower until permanent financing can be

arranged. In connection with these commitments, the Funds earn a com-
mitment fee, typically set as a percentage of the commitment amount.
Such fee income, which is classified in the Statements of Operations as
facility and other fees, is recognized ratably over the commitment period.

As of February 28, 2011, the Funds had the following unfunded loan com-
mitments:

 

6. Capital Loss Carryforwards:

As of August 31, 2010, the Funds had capital carry loss carryforwards available to offset future realized capital gains through the indicated
expiration dates:

 

Under the recently enacted Regulated Investment Company Modernization
Act of 2010, capital losses incurred by the Funds after August 31, 2011
will not be subject to expiration. In addition, these losses must be utilized
prior to the losses incurred in pre-enactment taxable years.

70 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Notes to Financial Statements (continued)

7. Concentration, Market and Credit Risk:

In the normal course of business, the Funds invest in securities and
enter into transactions where risks exist due to fluctuations in the market
(market risk) or failure of the issuer of a security to meet all its obligations
(issuer credit risk). The value of securities held by the Funds may decline
in response to certain events, including those directly involving the issuers
whose securities are owned by the Funds; conditions affecting the general
economy; overall market changes; local, regional or global political, social
or economic instability; and currency and interest rate and price fluctua-
tions. Similar to issuer credit risk, the Funds may be exposed to counter-
party credit risk, or the risk that an entity with which the Funds have
unsettled or open transactions may fail to or be unable to perform on its
commitments. The Funds manage counterparty credit risk by entering into
transactions only with counterparties that they believe have the financial
resources to honor their obligations and by monitoring the financial stability
of those counterparties. Financial assets, which potentially expose the
Funds to market, issuer and counterparty credit risks, consist principally of
financial instruments and receivables due from counterparties. The extent
of the Funds’ exposure to market, issuer and counterparty credit risks with
respect to these financial assets is generally approximated by their value
recorded in the Funds’ Statements of Assets and Liabilities, less any collat-
eral held by the Funds.

Certain Funds invest a significant portion of their assets in securities
backed by commercial or residential mortgage loans or in issuers that hold
mortgage and other asset-backed securities. Please see the Schedules of
Investments for these securities. Changes in economic conditions, including
delinquencies and/or defaults on assets underlying these securities, can
affect the value, income and/or liquidity of such positions.

8. Capital Share Transactions:

BHL and BLW are authorized to issue an unlimited number of shares, par
value $0.001, all of which were initially classified as Common Shares. DVF
and FRA are authorized to issue 200 million shares, par value $0.10, all of
which were initially classified as Common Shares. The Board is authorized,
however, to classify and reclassify any unissued shares without approval of
Common Shareholders.

For the six months ended February 28, 2011 and the year ended August
31, 2010, shares issued and outstanding increased by the following
amounts as a result of dividend reinvestment:

 

At February 28, 2011, the shares owned by affiliates of the Manager of the
Funds were as follows:

 

Transactions in capital shares, with respect to Senior Floating Rate and Senior Floating Rate II, were as follows:

 

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 71

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Notes to Financial Statements (continued)

9. Borrowings:

On March 4, 2010, BHL, DVF and FRA entered into a senior committed
secured, 364-day revolving line of credit and a separate security agreement
(the “SSB Agreement”) with State Street Bank and Trust Company (“SSB”).
The Funds have granted a security interest in substantially all of their
assets to SSB. The SSB Agreement allowed for the following maximum
commitment amounts:

 

Advances were made by SSB to the Funds, at the Funds’ option of (a)
the higher of (i) 1.0% above the Fed Funds rate and (ii) 1.0% above
the Overnight LIBOR or (b) 1.0% above the 7-day, 30-day, 60-day or
90-day LIBOR.

Effective March 3, 2011, the SSB Agreement was renewed for 364
days. The SSB Agreement allows for the following maximum commitment
amounts:

 

Advances are made by SSB to the Funds at the Funds’ option of (a) the
higher of (i) 0.80% above the Fed Funds rate and (ii) 0.80% above the
Overnight LIBOR or (b) 0.80% above the 7-day, 30-day, 60-day or 90-day
LIBOR. In addition, the Funds pay a facility fee and a commitment fee
based on SSB’s total commitment to the Funds. The fees associated with
each of the agreements are included in the Statements of Operations as
borrowing costs. Advances to the Funds as of February 28, 2011 are
shown in the Statements of Assets and Liabilities as loan payable.

The Funds may not declare dividends or make other distributions on shares
or purchase any such shares if, at the time of the declaration, distribution
or purchase, asset coverage with respect to the outstanding short-term
borrowings is less than 300%.

During the six months ended February 28, 2011, BLW borrowed under the
Term Asset-Backed Securities Loan Facility (“TALF”). The TALF program was
launched by the US Department of Treasury and the Federal Reserve Board
as a credit facility designed to restore liquidity to the market for asset-
backed securities. The Federal Reserve Bank of New York (“FRBNY”) pro-
vided up to $1 trillion in non-recourse loans to support the issuance of
certain AAA-rated asset-backed securities and commercial mortgage-
backed securities (“Eligible Securities”). The Fund posted as collateral
already-held Eligible Securities, which were all commercial mortgage-
backed securities, in return for non-recourse, 5-year term loans (“TALF
loans”) in an amount equal to approximately 85% of the value of such
Eligible Securities.

The non-recourse provision of the TALF loans allowed the Fund to satisfy
loan obligations with Eligible Securities, subject to certain conditions, even
if the value of the Eligible Securities falls below the outstanding amount of
the loan. The Fund can repay TALF loans prior to the maturity dates with no
penalty. Principal and interest due on the loans will typically be paid with
principal paydowns and interest received from the Eligible Securities. Credit
agreements underlying each loan contain provisions to address instances
in which interest payments on Eligible Securities fall short of amounts due
to the FRBNY. The Fund paid to the FRBNY a one time administration fee
of 0.20% of the amount borrowed, which was expensed as incurred in
the current period by the Fund and is included in borrowing costs in the
Statements of Operations. The Fund also paid a financing fee equal to
the 5-year LIBOR swap rate plus 1.00% on the outstanding loan amount
payable monthly, which is included in interest expense in the Statements
of Operations.

During the six months ended February 28, 2011, the Fund repaid its out-
standing TALF loans and the Eligible Securities posted as collateral were
returned to the Fund. The Fund financed the repayment of the TALF loans
by entering into reverse repurchase agreements.

Since the Fund had the ability to potentially satisfy TALF loan obligations
by surrendering Eligible Securities, potential losses by the Fund associated
with the TALF loans were limited to the difference between the amount
of Eligible Securities posted at the time of loan initiation and the loan
proceeds received by the Fund.

The Fund elected to account for the outstanding TALF loans at fair value.
The Fund elected to fair value its TALF loans to more closely align changes
in the value of the TALF loans with changes in the value of the Eligible
Securities and to reduce the potential volatility in the Statements of
Operations which could result if only the Eligible Securities were fair valued.
The TALF loans were valued utilizing quotations received from a board
approved pricing service. TALF-eligible Asset-Backed Securities/Collateralized
Mortgage-Backed Securities (“ABS/CMBS”) value may be affected by his-
toric defaults and prepayments on the asset pool, expected future defaults
and prepayments, current interest rate levels, current and forward modeled
ABS/CMBS spread levels. Accordingly, TALF loan valuation methodologies
may include, but are not limited to, the following inputs: (i) ABS/CMBS
prepayment assumptions, (ii) discount rates and (iii) the non-recourse
put option valuation. The resulting TALF loan valuation combines the
present value of the future loan cash flows, plus the value of the non-
recourse option.

For the six months ended February 28, 2011, the daily weighted average
interest rates for Funds with loans under the revolving credit agreements
were as follows:

 

72 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Notes to Financial Statements (concluded)

For the six months ended February 28, 2011, the daily weighted average
interest rate for BLW for reverse repurchase agreements and TALF loans was
as follows:

 

10. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the
Funds’ financial statements was completed through the date the financial
statements were issued and the following items were noted:

Each Fund paid a net investment income dividend on March 31, 2011 to
shareholders of record on March 15, 2011 as follows:

 

Senior Floating Rate and Senior Floating Rate II paid a net investment
income dividend on March 17, 2011 to shareholders of record on March
15, 2011 as follows:

 

The Board and shareholders of each of Senior Floating Rate and Senior
Floating Rate II (individually, a “Target Fund” and collectively the “Target
Funds”) and the Board and shareholders of Floating Rate Income Portfolio,
a series of BlackRock Funds II (“Floating Rate Income Portfolio”), approved
the reorganizations of each Target Fund into Floating Rate Income Portfolio,
pursuant to which Floating Rate Income Portfolio acquired substantially all
of the assets and assumed substantially all of the liabilities of the Target
Funds in exchange for an equal aggregate value of the Floating Rate
Income Portfolio shares.

In connection with the acquisition, Floating Rate Income Portfolio is the
legal surviving entity in the reorganization. Senior Floating Rate is the
accounting or continuing portfolio for purposes of maintaining the financial
statements and performance history in the post-reorganization fund.

Each shareholder of the Target Funds received Floating Rate Income
Portfolio’s shares equal to the net asset value of their Target Fund shares,
as determined at the close of business on March 18, 2011. The Senior
Floating Rate’s Common Shares were exchanged for Floating Rate Income
Portfolio’s Investor A Shares and the Senior Floating Rate II’s Common
Shares were exchanged for Floating Rate Income Portfolio’s newly estab-
lished Investor C1 Shares.

The reorganizations were accomplished by a tax-free exchange of shares of
Floating Rate Income Portfolio in the following amounts and at the follow-
ing conversion ratios:

 

Each Target Fund’s net assets and composition of net assets on March 18,
2011, the date of the merger, were as follows:

 

For financial reporting purposes, assets received and shares issued by
Floating Rate Income Portfolio were recorded at fair value; however, the
cost basis of the investments received from the Target Funds was carried
forward to align ongoing reporting of Floating Rate Income Portfolio’s real-
ized and unrealized gains and losses with amounts distributable to share-
holders for tax purposes.

The aggregate net assets of Floating Rate Income Portfolio immediately
after the acquisition amounted to $773,541,752. Each Target Fund’s fair
value and cost of investments prior to the reorganization were as follows:

 

The purpose of these transactions was to combine three funds managed
by the Manager with the same or substantially similar (but not identical)
investment objectives, investment policies, strategies, risks and restrictions.
Each reorganization was a tax-free event and was effective on
March 21, 2011.

Assuming the acquisition had been completed on September 1, 2010, the
beginning of the annual reporting period of Floating Rate Income Portfolio,
the pro forma results of operations for the six months ended February 28,
2011 are as follows:

• Net investment income: $12,617,143

• Net realized and change in unrealized gain/loss on investments:
$22,898,023

• Net increase in net assets resulting from operations: $35,515,166

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 73

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Master Portfolio Summary as of February 28, 2011
Master Senior Floating Rate LLC

Portfolio Composition

 

74 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments February 28, 2010 (Unaudited)
Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)

 

 

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 75

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Schedule of Investments (continued)
Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

76 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (continued)
Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)

 

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 77

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Schedule of Investments (continued)
Master Senior Floating Rate LLC
(Percentages shown are based on Net Assets)

 

 

* The cost and unrealized appreciation (depreciation) of investments as of February 28,
2011, as computed for federal income tax purposes, were as follows:

 

See Notes to Financial Statements.

78 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Schedule of Investments (continued)
Master Senior Floating Rate LLC

(a) Non-income producing security.
(b) Security exempt from registration under Rule 144A of the Securities Act of 1933.
These securities may be resold in transactions exempt from registration to qualified
institutional investors.
(c) Convertible security.
(d) Represents a payment-in-kind security which may pay interest/dividends in
additional par/shares.
(e) Variable rate security. Rate shown is as of report date.
(f) Other interests represent beneficial interest in liquidation trusts and other reorgani-
zation entities and are non-income producing.
(g) The investment is held by a wholly owned taxable subsidiary of the Master LLC.
(h) Warrants entitle the Master LLC 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.
(i) Investments in companies considered to be an affiliate of the Master LLC during the
period, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as
amended, were as follows:

(j) Represents the current yield as of report date.

• Foreign currency exchange contracts as of February 28, 2011 were as follows:

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

• Fair Value Measurements — Various inputs are used in determining the fair value of
investments and derivatives. These inputs are summarized in three broad levels for
financial statement purposes as follows:
• Level 1 — price quotations in active markets/exchanges for identical assets
and liabilities
• Level 2 — other observable inputs (including, but not limited to: quoted prices for
similar assets or liabilities in markets that are active, quoted prices for identical
or similar assets or liabilities in markets that are not active, inputs other than
quoted prices that are observable for the assets or liabilities (such as interest
rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and
default rates) or other market-corroborated inputs)
• Level 3 — unobservable inputs based on the best information available in the cir-
cumstances, to the extent observable inputs are not available (including the
Master LLC’s own assumptions used in determining the fair value of investments
and derivatives)
The inputs or methodologies used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. For information
about the Master LLC’s policy regarding valuation of investments and derivatives
and other significant accounting policies, please refer to Note 1 of the Notes to
Financial Statements.

The following tables summarize the inputs used as of February 28, 2011 in deter-
mining the fair valuation of the Master LLC’s investments and derivatives:

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

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 79

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Schedule of Investments (concluded) Master Senior Floating Rate LLC

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

² Included in the related net change in unrealized appreciation/depreciation in the Statement of Operations. The change in the unrealized appreciation/depreciation on securities
still held on February 28, 2011 was $735,928.
³ The Master LLC’s policy is to recognize transfers in and transfers out as of the end of the period of the event or the change in circumstances that caused the transfer.

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

⁴ Included in the related net change in unrealized appreciation/depreciation in the
Statement of Operations. The change in the unrealized appreciation/depreciation
on securities still held on February 28, 2011 was $138,783.
⁵ The Master LLC’s policy is to recognize transfers in and transfers out as of the
end of the period of the event or the change in circumstances that caused
the transfer.

80 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Statement of Assets and Liabilities Master Senior Floating Rate LLC

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 81

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Statement of Operations Master Senior Floating Rate LLC

 

Statements of Changes in Net Assets Master Senior Floating Rate LLC

 

See Notes to Financial Statements.

82 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Statement of Cash Flows Master Senior Floating Rate LLC

 

See Notes to Financial Statements.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 83

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Financial Highlights Master Senior Floating Rate LLC

 

See Notes to Financial Statements.

84 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Notes to Financial Statements (Unaudited)
Master Senior Floating Rate LLC

1. Organization and Significant Accounting Policies:

Master Senior Floating Rate LLC (the “Master LLC”) is registered under the
Investment Company Act of 1940, as amended (the “1940 Act”), and is
organized as a Delaware limited liability company. The Limited Liability
Company Agreement permits the Board of Directors (the “Board”) to issue
non transferable interests in the Master LLC, subject to certain limitations.
The Master LLC’s financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America
(“US GAAP”), which may require management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.

On September 2, 2010, the Board of each of Senior Floating Rate
and Senior Floating Rate II (the "Senior Floating Rate Funds") and on
September 17, 2010 the Board of Trustees of BlackRock Funds II approved
the reorganization of each Senior Floating Rate Fund into the BlackRock
Floating Rate Income Portfolio, a series of BlackRock Funds II, with the
BlackRock Floating Rate Income Portfolio being the surviving fund
(the “Reorganizations”).

Each Senior Floating Rate Fund is a "feeder" fund that invests all of its
assets in the Master LLC. In connection with the Reorganizations, the Board
of the Master LLC approved the liquidation and dissolution of the Master
LLC and the distribution of its assets.

The following is a summary of significant accounting policies followed by
the Master LLC:

Valuation: US GAAP defines fair value as the price the Master LLC would
receive to sell an asset or pay to transfer a liability in an orderly transaction
between market participants at the measurement date. The Master LLC fair
values its financial instruments at market value using independent dealers
or pricing services under policies approved by the Board. The Master LLC
values its bond investments on the basis of last available bid prices or cur-
rent market quotations provided by dealers or pricing services. Floating rate
loan interests are valued at the mean of the bid prices from one or more
brokers or dealers as obtained from a pricing service. In determining the
value of a particular investment, pricing services may use certain informa-
tion with respect to transactions in such investments, quotations from deal-
ers, pricing matrixes, market transactions in comparable investments,
various relationships observed in the market between investments and cal-
culated yield measures. Investments in open-end registered investment
companies are valued at net asset value each business day. Short-term
securities with remaining maturities of 60 days or less may be valued at
amortized cost, which approximates fair value.

Equity investments traded on a recognized securities exchange or the
NASDAQ Global Market System (“NASDAQ”) are valued at the last reported
sale price that day or the NASDAQ official closing price, if applicable. For
equity investments traded on more than one exchange, the last reported
sale price on the exchange where the stock is primarily traded is used.
Equity investments traded on a recognized exchange for which there were
no sales on that day are valued at the last available bid price. If no bid
price is available, the prior day’s price will be used, unless it is determined
that such prior day’s price no longer reflects the fair value of the security.

Securities and other assets and liabilities denominated in foreign curren-
cies are translated into US dollars using exchange rates determined as of
the close of business on the New York Stock Exchange (“NYSE”). Foreign
currency exchange contracts are valued at the mean between the bid and
ask prices and are determined as of the close of business on the NYSE.
Interpolated values are derived when the settlement date of the contract
is an interim date for which quotations are not available.

In the event that application of these methods of valuation results in a
price for an investment which is deemed not to be representative of the
market value of such investment or is not available, the investment will
be valued in accordance with a policy approved by the Board as reflecting
fair value (“Fair Value Assets”). When determining the price for Fair Value
Assets, the investment advisor and/or the sub-advisor seeks to determine
the price that the Master LLC might reasonably expect to receive from the
current sale of that asset in an arm’s-length transaction. Fair value det-
erminations shall be based upon all available factors that the investment
advisor and/or sub-advisor deems relevant. The pricing of all Fair Value
Assets is subsequently reported to the Board or a committee thereof.

Generally, trading in foreign instruments is substantially completed
each day at various times prior to the close of business on the NYSE.
Occasionally, events affecting the values of such instruments may occur
between the foreign market close and the close of business on the NYSE
that may not be reflected in the computation of the Master LLC’s net
assets. If events (for example, a company announcement, market volatility
or a natural disaster) occur during such periods that are expected to mate-
rially affect the value of such instruments, those instruments may be Fair
Value Assets and be valued at their fair value, as determined in good faith
by the investment advisor using a pricing service and/or policies approved
by the Board.

Foreign Currency Transactions: The Master LLC’s books and records are
maintained in US dollars. Purchases and sales of investment securities are
recorded at the rates of exchange prevailing on the date the transactions
are entered into. Generally, when the US dollar rises in value against a for-
eign currency, the Master LLC’s investments denominated in that currency
will lose value because its currency is worth fewer US dollars; the opposite
effect occurs if the US dollar falls in relative value.

The Master LLC reports realized currency gains (losses) on foreign currency
related transactions as components of net realized gain (loss) for financial
reporting purposes, whereas such components are treated as ordinary
income for federal income tax purposes.

Floating Rate Loan Interests: The Master LLC may invest in floating rate
loan interests. The floating rate loan interests the Master LLC holds are
typically issued to companies (the “borrower”) by banks, other financial
institutions, and privately and publicly offered corporations (the “lender”).
Floating rate loan interests are generally non-investment grade, often
involve borrowers whose financial condition is troubled or uncertain and

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 85

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Notes to Financial Statements (continued)
Master Senior Floating Rate LLC

companies that are highly leveraged. The Master LLC may invest in obliga-
tions of borrowers who are in bankruptcy proceedings. Floating rate loan
interests may include fully funded term loans or revolving lines of credit.
Floating rate loan interests are typically senior in the corporate capital
structure of the borrower. Floating rate loan interests generally pay interest
at rates that are periodically determined by reference to a base lending
rate plus a premium. The base lending rates are generally the lending rate
offered by one or more European banks, such as LIBOR (London Inter Bank
Offered Rate), the prime rate offered by one or more US banks or the
certificate of deposit rate. Floating rate loan interests may involve foreign
borrowers, and investments may be denominated in foreign currencies.
The Master LLC considers these investments to be investments in debt
securities for purposes of its investment policies.

When the Master LLC buys a floating rate loan interest it may receive a
facility fee and when it sells a floating rate loan interest it may pay a facility
fee. On an ongoing basis, the Master LLC may receive a commitment fee
based on the undrawn portion of the underlying line of credit amount of a
floating rate loan interest. The Master LLC earns and/or pays facility and
other fees on floating rate loan interests, which are shown as facility and
other fees in the Statement of Operations. Facility and commitment fees
are typically amortized to income over the term of the loan or term of the
commitment, respectively. Consent and amendment fees are recorded to
income as earned. Prepayment penalty fees, which may be received by the
Master LLC upon the prepayment of a floating rate loan interest by a bor-
rower, are recorded as realized gains. The Master LLC may invest in multiple
series or tranches of a loan. A different series or tranche may have varying
terms and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s
option. The Master LLC may invest in such loans in the form of participa-
tions in loans (“Participations”) or assignments (“Assignments”) of all or a
portion of loans from third parties. Participations typically will result in the
Master LLC having a contractual relationship only with the lender, not with
the borrower. The Master LLC will have the right to receive payments of prin-
cipal, interest and any fees to which it is entitled only from the lender sell-
ing the Participation and only upon receipt by the lender of the payments
from the borrower. In connection with purchasing Participations, the Master
LLC generally will have no right to enforce compliance by the borrower
with the terms of the loan agreement, nor any rights of offset against the
borrower, and the Master LLC may not benefit directly from any collateral
supporting the loan in which it has purchased the Participation. As a result,
the Master LLC will assume the credit risk of both the borrower and the
lender that is selling the Participation. The Master LLC’s investment in
loan participation interests involves the risk of insolvency of the financial
intermediaries who are parties to the transactions. In the event of the
insolvency of the lender selling the Participation, the Master LLC may be
treated as general creditors of the lender and may not benefit from any
offset between the lender and the borrower. Assignments typically result in
the Master LLC having a direct contractual relationship with the borrower,
and the Master LLC may enforce compliance by the borrower with the
terms of the loan agreement.

Segregation and Collateralization: In cases in which the 1940 Act and the
interpretive positions of the Securities and Exchange Commission (“SEC”)
require that the Master LLC either delivers collateral or segregates assets in
connection with certain investments (e.g., foreign currency exchange con-
tracts), the Master LLC will, consistent with SEC rules and/or certain inter-
pretive letters issued by the SEC, segregate collateral or designate on its
books and records cash or other liquid securities having a market value at
least equal to the amount that would otherwise be required to be physi-
cally segregated. Furthermore, based on requirements and agreements with
certain exchanges and third party broker-dealers, each party has require-
ments to deliver/deposit securities as collateral for certain investments.

Investment Transactions and Investment Income: For financial reporting
purposes, investment transactions are recorded on the dates the transac-
tions are entered into (the trade dates). Realized gains and losses on
investment transactions are determined on the identified cost basis.
Dividend income is recorded on the ex-dividend dates. Dividends from for-
eign securities where the ex-dividend date may have passed are subse-
quently recorded when the Master LLC is informed of the ex-dividend date.
Interest income, including amortization and accretion of premiums and dis-
counts on debt securities, is recognized on the accrual basis. Consent fees
are compensation for agreeing to changes in the terms of debt instruments
and are included in facility and other fees in the Statement of Operations.

Income Taxes: The Master LLC is classified as a partnership for federal
income tax purposes. As such, each investor in the Master LLC is treated
as the owner of its proportionate share of net assets, income, expenses
and realized and unrealized gains and losses of the Master LLC. Therefore,
no federal income tax provision is required. It is intended that the Master
LLC’s assets will be managed so an investor in the Master LLC can satisfy
the requirements of Subchapter M of the Internal Revenue Code of 1986,
as amended.

The Master LLC files US federal and various state and local tax returns. No
income tax returns are currently under examination. The statute of limita-
tions on the Master LLC’s US federal tax returns remains open for each of
the four years ended August 31, 2010. The statutes of limitations on the
Master LLC’s state and local tax returns may remain open for an additional
year depending upon the jurisdiction. Management does not believe there
are any uncertain tax positions that require recognition of a tax liability.

Other: Expenses directly related to the Master LLC are charged to the
Master LLC. Other operating expenses shared by several funds are pro
rated among those funds on the basis of relative net assets or other
appropriate methods. The Master LLC has an arrangement with the
custodian whereby fees may be reduced by credits earned on uninvested
cash balances, which if applicable are shown as fees paid indirectly in
the Statement of Operations. The custodian imposes fees on overdrawn
cash balances, which can be offset by accumulated credits earned or
may result in additional custody charges.

86 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Notes to Financial Statements (continued)
Master Senior Floating Rate LLC

2. Derivative Financial Instruments:

The Master LLC engages in various portfolio investment strategies using
derivative contracts both to increase the returns of the Master LLC and to
economically hedge, or protect, its exposure to certain risks such as credit
risk and foreign currency exchange rate risk. These contracts may be trans-
acted on an exchange or over–the-counter (“OTC”).

Losses may arise if the value of the contract decreases due to an unfavor-
able change in the market rates or values of the underlying instrument or
if the counterparty does not perform under the contract. The Master LLC’s
maximum risk of loss from counterparty credit risk on OTC derivatives is
generally the aggregate unrealized gain netted against any collateral
pledged by/posted to the counterparty.

The Master LLC may mitigate counterparty risk by procuring collateral and
through netting provisions included within an International Swaps and
Derivatives Association, Inc. (“ISDA”) Master Agreement implemented
between the Master LLC and each of its respective counterparties. The
ISDA Master Agreement allows the Master LLC to offset with each separate
counterparty certain derivative financial instrument’s payables and/or
receivables with collateral held. The amount of collateral moved to/from
applicable counterparties is generally based upon minimum transfer
amounts of up to $500,000. To the extent amounts due to the Master LLC
from its counterparties are not fully collateralized contractually or other-
wise, the Master LLC bears the risk of loss from counterparty non-perfor-
mance. See Note 1 “Segregation and Collateralization” for information
with respect to collateral practices. In addition, the Master LLC manages
counterparty risk by entering into agreements only with counterparties
that it believes have the financial resources to honor its obligations and
by monitoring the financial stability of those counterparties.

Certain ISDA Master Agreements allow counterparties to OTC derivatives
to terminate derivative contracts prior to maturity in the event the Master
LLC’s net assets decline by a stated percentage or the Master LLC fails
to meet the terms of its ISDA Master Agreements, which would cause
the Master LLC to accelerate payment of any net liability owed to
the counterparty.

Foreign Currency Exchange Contracts: The Master LLC enters into foreign
currency exchange contracts as an economic hedge against either specific
transactions or portfolio instruments or to obtain exposure to foreign cur-
rencies (foreign currency exchange rate risk). A foreign currency exchange
contract is an agreement between two parties to buy and sell a currency at
a set exchange rate on a future date. Foreign currency exchange contracts,
when used by the Master LLC, help to manage the overall exposure to the
currency backing some of the investments held by the Master LLC. The
contract is marked-to-market daily and the change in market value is
recorded by the Master LLC as an unrealized gain or loss. When the con-
tract is closed, the Master LLC 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. The use of foreign currency exchange contracts
involves the risk that the value of a foreign currency exchange contract
changes unfavorably due to movements in the value of the referenced
foreign currencies and the risk that a counterparty to the contract does
not perform its obligations under the agreement.

 

For the six months ended February 28, 2011, the average quarterly
balances of outstanding derivative financial instruments were as follows:

 

3. Investment Advisory Agreement and Other Transactions
with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”), Bank of America
Corporation (“BAC”) and Barclays Bank PLC (“Barclays”) are the largest
stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership
structure, PNC is an affiliate of the Master LLC for 1940 Act purposes,
but BAC and Barclays are not.

The Master LLC, entered into an Investment Advisory Agreement with
BlackRock Advisors, LLC (the “Manager”), the Master LLC’s investment advi-
sor, an indirect, wholly owned subsidiary of BlackRock, to provide invest-
ment advisory and administration services. The Manager is responsible for

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 87

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Notes to Financial Statements (concluded)
Master Senior Floating Rate LLC

the management of the Master LLC’s portfolio and provides the necessary
personnel, facilities, equipment and certain other services necessary to the
operations of the Master LLC. For such services, the Master LLC pays the
Manager a monthly fee at an annual rate of 0.95% of the Master LLC’s
average daily net assets.

The Manager voluntarily agreed to waive its investment advisory fees by the
amount of investment advisory fees the Master LLC pays to the Manager
indirectly through its investment in affiliated money market funds, however
the Manager does not waive its investment advisory fees by the amount of
investment advisory fees paid through the Master LLC’s investment in other
affiliated investment companies, if any. This amount is shown as fees
waived by advisor in the Statement of Operations.

The Manager entered into a sub-advisory agreement with BlackRock
Financial Management, Inc. (“BFM”) an affiliate of the Manager. The
Manager pays BFM for services it provides, a monthly fee that is a percent-
age of the investment advisory fees paid by the Master LLC to the Manager.

For the six months ended February 28, 2011, the Master LLC reimbursed
the Manager $4,580 for certain accounting services, which are included in
accounting services in the Statement of Operations.

Certain officers and/or directors of the Master LLC are officers and/or
directors of BlackRock or its affiliates.

4. Investments:

Purchases and sales of investments including paydowns and excluding
short-term securities for the six months ended February 28, 2011, were
$280,936,066 and $292,119,631, respectively.

5. Commitments:

The Master LLC may invest in floating rate loan interests. In connection with
these investments, the Master LLC may also enter into unfunded loan com-
mitments (“commitments”). Commitments may obligate the Master LLC to
furnish temporary financing to a borrower until permanent financing can be
arranged. In connection with these commitments, the Master LLC earns a
commitment fee, typically set as a percentage of the commitment amount.
Such fee income, which is classified in the Statement of Operations as
facility and other fees, is recognized ratably over the commitment period.
As of February 28, 2011, the Master LLC had the following unfunded loan
commitments:

 

6. Market and Credit Risk:

In the normal course of business, the Master LLC invests in securities and
enters into transactions where risks exist due to fluctuations in the market
(market risk) or failure of the issuer of a security to meet all its obligations
(issuer credit risk). The value of securities held by the Master LLC may
decline in response to certain events, including those directly involving the
issuers whose securities are owned by the Master LLC; conditions affecting
the general economy; overall market changes; local, regional or global
political, social or economic instability; and currency and interest rate and
price fluctuations. Similar to issuer credit risk, the Master LLC may be
exposed to counterparty credit risk, or the risk that an entity with which the
Master LLC has unsettled or open transactions may fail to or be unable to
perform on its commitments. The Master LLC manages counterparty credit
risk by entering into transactions only with counterparties that it believes
have the financial resources to honor their obligations and by monitoring
the financial stability of those counterparties. Financial assets, which
potentially expose the Master LLC to market, issuer and counterparty credit
risks, consist principally of financial instruments and receivables due from
counterparties. The extent of the Master LLC’s exposure to market, issuer
and counterparty credit risks with respect to these financial assets is gener-
ally approximated by their value recorded in the Master LLC’s Statement of
Assets and Liabilities, less any collateral held by the Master LLC.

7. Borrowings:

The Master LLC, along with certain other funds managed by the Manager
and its affiliates, is a party to a $500 million credit agreement with a group
of lenders, which expired in November 2010. The Master LLC may borrow
under the credit agreement to fund shareholder redemptions. Effective
November 2009, the credit agreement had the following terms: 0.02%
upfront fee on the aggregate commitment amount which was allocated to
the Master LLC based on its net assets as of October 31, 2009, a commit-
ment fee of 0.10% per annum based on the Master LLC’s pro rata share of
the unused portion of the credit agreement and interest at a rate equal to
the higher of (a) the one-month LIBOR plus 1.25% per annum and (b) the
Fed Funds rate plus 1.25% per annum on amounts borrowed. In addition,
the Master LLC paid administration and arrangement fees which were
allocated to the Master LLC based on its net assets as of October 31,
2009. Effective November 2010, the credit agreement was renewed until
November 2011 with the following terms: a commitment fee of 0.08% per
annum based on the Master LLC’s pro rata share of the unused portion of
the credit agreement and interest at a rate equal to the higher of (a) the
one-month LIBOR plus 1.00% per annum and (b) the Fed Funds rate plus
1.00% per annum on amounts borrowed. In addition, the Master LLC paid
administration and arrangement fees which were allocated to the Master
LLC based on its net assets as of October 31, 2010. The Master LLC did
not borrow under the credit agreement during the six months ended
February 28, 2011.

8. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the
Master LLC’s Financial statements was completed through the date the
Financial Statements were issued and the following items were noted:

As described in Note 1, pursuant to the Reorganization, on March 21,
2011, Floating Rate Income Portfolio acquired all of the assets and certain
stated liabilities of the Senior Floating Rate Funds. In connection with the
Reorganizations, the Master LLC distributed its assets and will be dissolved.

88 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Officers and Directors

Richard E. Cavanagh, Chairman of the Board and Director
Karen P. Robards, Vice Chair of the Board, Chair of the Audit Committee
and Director
Richard S. Davis, Director
Frank J. Fabozzi, Director and Member of the Audit Committee
Kathleen F. Feldstein, Director
James T. Flynn, Director and Member of the Audit Committee
Henry Gabbay, Director
Jerrold B. Harris, Director
R. Glenn Hubbard, Director
W. Carl Kester, Director and Member of the Audit Committee
John M. Perlowski, President and Chief Executive Officer
Brendan Kyne, Vice President
Anne F. Ackerley, Vice President
Neal Andrews, Chief Financial Officer
Jay Fife, Treasurer
Brian Kindelan, Chief Compliance Officer
Ira Shapiro, Secretary

Investment Advisor
BlackRock Advisors, LLC
Wilmington, DE 19809

Sub-Advisor
BlackRock Financial
Management, Inc.
New York, NY 10055

Custodians
State Street Bank
and Trust Company¹
Boston, MA 02111

The Bank of New York Mellon²
New York, NY 10286

Transfer Agents
Common Shares
Computershare Trust Company, N.A.¹
Providence, RI 02940

BNY Mellon Shareowner Services²
Jersey City, NJ 07310

Accounting Agent
State Street Bank
and Trust Company
Princeton, NJ 08540

Independent Registered
Public Accounting Firm
Deloitte & Touche LLP
Princeton, NJ 08540

Legal Counsel
Skadden, Arps, Slate,
Meagher & Flom LLP
New York, NY 10036

Address of the Funds
100 Bellevue Parkway
Wilmington, DE 19809
¹ For BHL, DVF, FRA, and BLW.
² For Senior Floating Rate and
Senior Floating Rate II.

Effective February 11, 2011, John M. Perlowski became
President and Chief Executive Officer of the Funds and
Master LLC.

Effective November 10, 2010, Ira Shapiro became
Secretary of the Funds and Master LLC.

Additional Information

Section 19(a) Notices

These reported amounts and sources of distributions are estimates and are not provided for tax reporting purposes. The actual amounts and sources for tax
reporting purposes will depend upon each Fund’s investment results during the year and may be subject to changes based on tax regulations. Each Fund
will provide a Form 1099-DIV for the calendar year that will explain the character of these dividends and distributions for federal income tax purposes.

 

Each Fund estimates that it has distributed more than the amount of earned income and net realized gains; therefore, a portion of the distribution may be
a return of capital. A return of capital may occur, for example, when some or all of the shareholder’s investment in a Fund is returned to the shareholder.
A return of capital does not necessarily reflect a Fund’s investment performance and should not be confused with ‘yield’ or ‘income.’

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 89

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Additional Information (continued)

Proxy Results

The Annual Meeting of Shareholders was held on September 2, 2010 for shareholders of record on July 6, 2010, to elect trustee/director nominees for
each Trust/Fund. There were no broker non-votes with regard to any of the Trusts/Funds.

 

For the Trusts listed above, Trustees whose term of office continued after the Annual Meeting of Shareholders because they were not up for election are
Richard S. Davis, Frank J. Fabozzi, James T. Flynn, R. Glenn Hubbard, W. Carl Kester and Karen P. Robards.

 

At a special meeting held on March 11, 2011, shareholders of Senior Floating Rate and Senior Floating Rate II approved the Reorganizations of Senior
Floating Rate and Senior Floating Rate II into Floating Rate Income Portfolio, pursuant to which Floating Rate Income Portfolio acquired substantially all of
the assets and assumed substantially all of the liabilities of Senior Floating Rate and Senior Floating Rate II in exchange for an equal aggregate value of the
Floating Rate Income Portfolio shares. The results were as follows:

 

Dividend Policy

The Funds’ dividend policy is to distribute all or a portion of their net
investment income to its shareholders on a monthly basis. In order to pro-
vide shareholders with a more stable level of dividend distributions, the
Funds may at times pay out less than the entire amount of net investment
income earned in any particular month and may at times in any particular
month pay out such accumulated but undistributed income in addition to
net investment income earned in that month. As a result, the dividends
paid by the Funds for any particular month may be more or less than the
amount of net investment income earned by the Funds during such month.
The Funds’ current accumulated but undistributed net investment income,
if any, is disclosed in the Statements of Assets and Liabilities, which com-
prises part of the financial information included in this report.

90 SEMI-ANNUAL REPORT FEBRUARY 28, 2011

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Additional Information (concluded)

General Information

Electronic Delivery
Electronic copies of most financial reports are available on the Funds’ web-
sites or shareholders can sign up for e-mail notifications of quarterly state-
ments, annual and semi-annual reports by enrolling in the Funds’ electronic
delivery program.

Shareholders Who Hold Accounts with Investment Advisors, Banks
or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisors, banks or brokerages may offer this service.

Householding
The Funds will mail only one copy of shareholder documents, including
annual and semi-annual reports and proxy statements, to shareholders
with multiple accounts at the same address. This practice is commonly
called “householding” and is intended to reduce expenses and eliminate
duplicate mailings of shareholder documents. Mailings of your shareholder
documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be
combined with those for other members of your household, please
call (800) 441-7762.

Availability of Quarterly Schedule of Investments
Each Fund/Master LLC 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 Funds’/Master LLC’s Forms
N-Q are available on the SEC’s website at http://www.sec.gov and 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 (800) SEC-0330. Each Fund’s/Master
LLC’s Forms N-Q may also be obtained upon request and without charge
by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that each Fund/Master LLC
uses to determine how to vote proxies relating to portfolio securities is
available (1) without charge, upon request, by calling (800) 441-7762; (2)
at www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record
Information about how the Funds/Master LLC voted proxies relating to
securities held in each Fund’s/Master LLC’s portfolio during the most
recent 12-month period ended June 30 is available upon request and
without charge (1) at www.blackrock.com or by calling (800) 441-7762
and (2) on the SEC’s website at http://www.sec.gov.

Availability of Fund Updates

BlackRock will update performance and certain other data for the Funds
on a monthly basis on its website in the “Closed-end Funds” section of
http://www.blackrock.com. Investors and others are advised to periodically
check the website for updated performance information and the release of
other material information about the Funds.

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and for-
mer fund investors and individual clients (collectively, “Clients”) and to
safeguarding their non-public personal information. The following infor-
mation 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 non-public information from and
about you from different sources, including the following: (i) information we
receive from you or, if applicable, your financial intermediary, on applica-
tions, 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 websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-
public personal information about its Clients, except as permitted by law
or as is necessary to respond to regulatory requests or to service Client
accounts. These non-affiliated 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 non-public 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 non-public personal information of its Clients, including pro-
cedures relating to the proper storage and disposal of such information.

SEMI-ANNUAL REPORT FEBRUARY 28, 2011 91

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This report is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Funds unless accompanied or

preceded by the Funds’ current prospectus. Past performance results shown in this report should not be considered a representation

of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth

more or less than their original cost. Statements and other information herein are as dated and are subject to change.

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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 – Investments
(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under
Item 1 of this Form.
(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous
Form N-CSR filing.

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
(a) Not Applicable to this semi-annual report
(b) As of the date of this filing, there have been no changes in any of the portfolio managers identified in
the most recent annual report on Form N-CSR.

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 – There have been no material changes to these
procedures.

Item 11 – Controls and Procedures

(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.

(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

(a)(1) – Code of Ethics – Not Applicable to this semi-annual report

(a)(2) – Certifications – Attached hereto

(a)(3) – Not Applicable

(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.

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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: May 4, 2011

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: May 4, 2011

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

Date: May 4, 2011

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