BlackRock Fund Investors II
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Annual Report
December 31, 1995
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BlackRock Fund Investors II
Statement of Assets and Liabilities
December 31, 1995
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Assets
Investment in BlackRock Asset Investors, at estimated
fair value (cost $21,773,223) (Note 1) $ 20,203,440
Notes receivable (Note 4) 21,000
Deferred organization expenses and other assets (Note 1) 64,603
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20,289,043
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Liabilities
Payable to BlackRock Asset Investors 236,600
Payable for organization expenses 65,014
Master administration fee payable (Note 2) 47,478
Notes payable (Note 4) 21,000
Directors' fee payable 27,154
Other accrued expenses 23,166
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420,412
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Net Assets $ 19,868,631
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Net assets were comprised of:
Shares of beneficial interest, at par (Note 4) $ 275
Paid-in capital in excess of par 24,265,397
Receivable for shares of beneficial interest (Note 4) (2,490,040)
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21,775,632
Net investment loss (337,218)
Net unrealized depreciation on investments (1,569,783)
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Net assets, December 31, 1995 $ 19,868,631
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Net asset value per share $ 722.26
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Total shares outstanding at end of period 27,508.97
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See Notes to Financial Statements.
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BlackRock Fund Investors II
Statement of Operations
For the Period March 29, 1995* through December 31,1995
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Net Investment Loss
Income
Interest (net of interest expense of $1,365) $ --
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Expenses
Master administration (Note 2) 239,501
Directors 60,791
Amortization of deferred organization expenses 11,345
Audit 8,302
Legal 5,837
Custodian 5,672
Transfer agent 3,970
Miscellaneous 1,800
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Total expenses 337,218
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Net investment loss 337,218
Realized and Unrealized Loss
on Investments (Note 3)
Net unrealized depreciation on investments (1,569,783)
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Net Decrease In Net Assets
Resulting from Operations $ (1,907,001)
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*Commencement of investment operations.
See Notes to Financial Statements.
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BlackRock Fund Investors II
Statement of Cash Flows
For the Period March 29, 1995* through December 31, 1995
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Increase (Decrease) in Cash Cash flows used for operating activities:
Interest received $ 1,365
Expenses paid (3,774)
Purchase of long-term portfolio investments (21,773,223)
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Net cash flows used for operating activities (21,775,632)
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Cash flows provided by financing activities:
Proceeds from Fund shares issued 21,775,632
Proceeds from notes sold 21,000
Cost of notes purchased (21,000)
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Net cash flows provided by financing activities 21,775,632
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Net increase in cash --
Cash, beginning of period --
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Cash, end of period $ --
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Reconciliation of Net Decrease in Net
Assets Resulting from Operations
to Net Cash Flows Used for
Operating Activities
Net decrease in net assets resulting from operations $ (1,907,001)
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Increase in investments (21,773,223)
Increase in unrealized depreciation 1,569,783
Increase in deferred organization expenses and
other assets (64,603)
Increase in accrued expenses and other liabilities 399,412
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Total adjustments (19,868,631)
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Net cash flows used for operating activities $(21,775,632)
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* Commencement of investment operations.
See Notes to Financial Statements.
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BlackRock Fund Investors II
Statement of Changes in Net Assets
For the Period March 29, 1995* through December 31, 1995
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Increase (Decrease) in Net Assets
Operations:
Net investment loss $ (337,218)
Net unrealized depreciation
on investments (1,569,783)
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Net decrease in net assets resulting
from operations (1,907,001)
Proceeds from shares of beneficial interest issued 21,775,632
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Net increase 19,868,631
Net Assets
Beginning of period --
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End of period $ 19,868,631
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* Commencement of investment operations.
See Notes to Financial Statements.
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BlackRock Fund Investors II
Financial Highlights
For the Period March 29, 1995* through December 31, 1995
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PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period $ 1,000.00
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Net investment loss (45.98)
Net unrealized loss on investments (231.76)
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Net decrease from investment operations (277.74)
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Net asset value, end of period $ 722.26
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TOTAL INVESTMENT RETURN (a) (27.77%)
RATIOS TO AVERAGE NET ASSETS:
Expenses (4.70%)(b)(c)
Net investment loss (4.70%)(b)(c)
SUPPLEMENTAL DATA:
Average net assets (in thousands) $9,460
Portfolio turnover --
Net assets, end of period (in thousands) $19,869
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* Commencement of investment operations.
(a) Total investment return is calculated assuming a purchase of a share of
beneficial interest at net asset value per share on the first day and a
sale at net asset value per share on the last day of the period reported.
Dividends are assumed, for purposes of this calculation, to be reinvested at
the net asset value per share on the payment date. Total investment return
for periods of less than one full year are not annualized.
(b) Annualized.
(c) The ratio of expenses and net investment loss to total investor capital
commitments of $112,078,123 on an anuualized basis is 0.39% and 0.39%,
respectively.
Contained above is audited operating performance based on an average share
of beneficial interest outstanding, total investment return, ratios to
average net assets and other supplemental data, for the period indicated.
This information has been determined based upon financial information
provided in the financial statementss.
See Notes to Financial Statements.
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BlackRock Fund Investors II
Notes to Financial Statements
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Note 1. Organization and Accounting Policies
BlackRock Fund Investors II ("Fund II") is a non-diversified closed-end
investment company organized as a Delaware business trust. Fund II invests all
of its investable assets in BlackRock Asset Investors ("BAI" or the "Trust")
which is a Delaware business trust registered under the Investment Company Act
of 1940 as a non-diversified closed-end investment company and has the same
investment objective as Fund II. The value of Fund II's investment in BAI
reflects Fund II's proportionate interest in the net assets of BAI. The
performance of Fund II is directly affected by the performance of BAI. The
financial statements of BAI are included in this report and should be read in
conjunction with Fund II's financial statements.
The following is a summary of significant accounting policies followed by
Fund II.
Securities Valuation: Fund II's interest in BAI is valued by Fund II at its
proportionate interest in the net asset value of BAI (20.00% at December 31,
1995). Valuation of securities by BAI is discussed in Note 1 of BAI's Notes to
Financial Statements which are included elsewhere in this report.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and Fund II amortizes premium or accretes discount on securities
purchased using the interest method.
Taxes: It is Fund II's intention to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. Therefore, no federal
income or excise tax provision is required.
Dividends and Distributions: Fund II declares and distributes dividends at least
annually first from net investment income, then from realized short-term capital
gains and other sources. Fund II also expects to pay distributions in the form
of return of paid-in capital. Net long-term capital gains, if any, in excess of
loss carryforwards are distributed at least annually. Dividends and
distributions are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
Master Administation, Administration and Other Expenses: Master administration
and other expenses are recorded on the accrual basis.
Deferred Organization Expenses: A total of $75,016 was incurred in connection
with the organization of Fund II. These costs have been deferred and are being
amortized ratably over a period of 60 months from the date Fund II commenced
investment operations.
Note 2. Agreements
Fund II has a Master Administration Agreement with BlackRock Financial
Management, Inc. (the "Master Administrator") which provides that during the
Commitment Period the Trust will pay to the Master Administrator for its
services (which are solely administrative in nature) a semi-annual fee, in
arrears, in an amount equal to .25% of the aggregate Capital Commitments, on an
annualized basis. Subsequent to the Commitment Period, the semi-
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annual fee payable in arrears to the Master Administrator is .25% of the
weighted average capital invested during the relevant period on an annualized
basis.
Fund II has also entered into an Administration Agreement with State Street
Bank and Trust Company ("State Street"). For its services under the
Administration Agreement, State Street receives no fees from Fund II.
Pursuant to the agreements, the Master Administrator provides various
administrative services, provides office space and pays the compensation of
officers of Fund II, who are affiliated persons of the Master Administrator.
State Street pays occupancy and certain clerical and accounting costs of Fund
II. Fund II bear all other costs and expenses.
Certain trustees of BAI and Fund II, who are not interested parties, are
paid a fee for their services in the amount of $40,000 each on an annual basis
plus telephonic meeting fees not to exceed $500 annually and certain
out-of-pocket expenses.
Note 3. Portfolio Securities
Purchases of investment securities for the period ended December 31, 1995
aggregated $21,773,223. The federal income tax basis of the investments of Fund
II at December 31, 1995 was substantially the same as the basis for financial
reporting.
Note 4. Notes
Fund II has issued and sold notes in the aggregate amount of $21,000 paying
interest at a per annum rate of 2.50% over the yield of the one-year constant
maturity Treasury, redeemable annually by the holder and due on dissolution of
the Fund II.
Note 5. Capital
Fund II has obtained capital commitments from investors in the form of
subscription agreements to engage in the real estate debt investment activities
described herein. When notified by Fund II, in accordance with the Declaration
of Trust, the investors shall make capital contributions as are required to
satisfy their outstanding capital commitments. Fund II must give fourteen days
advance notice before contributions are due. As of December 31, 1995, the total
outstanding capital commitments from investors was $112,078,123 of which
$21,775,632 had been called and received. On December 29, 1995, Fund II made a
capital call, received on January 12, 1996, totaling $2,490,040 which is
recorded net in the capital account of Fund II at December 31, 1995.
Note 6. Quarterly Data (Unaudited)
<TABLE>
<CAPTION>
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Net realized and
unrealized
Net investment loss on Dividends and Period end
Quarterly Total loss investments Distributions net asset
Period income Amount Per Share Amount Per Share Amount Per Share value
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 29, 1995*
to April 30, 1995 - ($74,377) ($17.48) ($375,959) ($88.37) - - $894.15
May 1, 1995
to June 30, 1995 - ($58,098) ($10.73) ($238,124) ($46.38) - - $841.41
July 1, 1995
to Sept. 30, 1995 - ($90,125) ($12.61) ($519,029) ($74.99) - - $757.23
October 1, 1995
to Dec. 31, 1995 - ($114,618) ($5.16) ($436,665) ($22.02) - - $722.26
<FN>
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* Commencement of investment operations.
</FN>
</TABLE>
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BLACKROCK FUND INVESTORS II
REPORT OF INDEPENDENT AUDITORS
The Shareholders and Board of Trustees of
BlackRock Fund Investors II:
We have audited the accompanying statement of assets and liabilities of
BlackRock Fund Investors II as of December 31, 1995 and the related statements
of operations, cash flows, changes in net assets and financial highlights for
the period March 29, 1995 (commencement of investment operations) to December
31, 1995. These financial statements are the responsibility of the Trustis
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1995, by
correspondence with BlackRock Asset Investors. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of BlackRock Fund Investors II as of December
31, 1995, and the results of its operations, its cash flows, the changes in its
net assets and the financial highlights for the period March 29, 1995
(commencement of operations) to December 31, 1995 in conformity with generally
accepted accounting principles.
As explained in Note 1, the financial statements include investment in BlackRock
Asset Investors valued at $20,203,446 (101.7% of net assets), whose value of
underlying investments have been estimated by the Board of Trustees in the
absence of readily ascertainable market values. We have reviewed the procedures
used by the Board of Trustees in arriving at its estimate of value of such
investments and have inspected underlying documentation, and, in the
circumstances, we believe the procedures are reasonable and the documentation
appropriate. However, because of the inherent uncertainty of valuation, those
estimated values may differ significantly from the values that would have been
used had a ready market for the investments existed, and the differences could
be material.
Deloitte & Touche LLP
New York, New York
February 9, 1996
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Trustees
Laurence D. Fink, Chairman
John C. Deterding
Charles Froland
Donald G. Drapkin
Wesley R. Edens
James Grosfeld
Philip Halpern
Laurence E. Hirsch
Kendrick R. Wilson, III
Officers
Ralph L. Schlosstein, President
Wesley R. Edens, Chief Operating Officer
John R. Herbert, Managing Director
Robert I. Kauffman, Managing Director
Randal A. Nardone, Managing Director
Erik P. Nygaard, Managing Director
Henry Gabbay, Treasurer
Susan L. Wagner, Secretary
James Kong, Assistant Treasurer
J. Robert Small, Managing Director and Assistant Secretary
Master Administrator
BlackRock Financial Management, Inc.
345 Park Avenue
New York, NY 10154
Administrator, Custodian and Transfer Agent
State Street Bank and Trust Company
Two Heritage Drive
North Quincy, MA 02171
Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1431
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Trust shares.
BlackRock Fund Investors II
Two Heritage Drive
North Quincy, MA 02171
