BLACKROCK FUND INVESTORS II
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SEMI-ANNUAL REPORT
JUNE 30, 1997 (UNAUDITED)
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BLACKROCK FUND INVESTORS II
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
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ASSETS
Investment in BlackRock Asset Investors,
at estimated fair value
(cost $109,716,226) (Notes 1 and 3) $ 110,726,680
Repurchase agreement dated 6/30/97
with State Street Bank and Trust, Co.
5.60% due 7/1/97, collateralized
by $400,00 United States Treasury Note
4.75% due 10/31/98 (market value $397,201)
(repurchase proceeds $385,060
(cost $385,000) 385,000
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Total investments (cost $110,101,226) 111,111,680
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Cash 6,445
Notes receivable (Note 4) 21,000
Deferred organization expenses
and other assets (Note 1) 42,889
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Total assets 111,182,014
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LIABILITIES
Master administration fee payable (Note 2) 143,230
Notes payable (Note 4) 21,000
Other accrued expenses 6,619
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Total liabilities 170,849
NET ASSETS $ 111,011,165
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Net assets were comprised of:
Shares of beneficial interest, at par (Note 5) $ 1,547
Paid-in capital in excess of par 110,445,817
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110,447,364
Distributions in excess of
net investment income (446,653)
Net unrealized appreciation on
investment companies 1,010,454
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Total net assets $ 111,011,165
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Net asset value per share $ 717.67
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Total shares outstanding at end of period 154,683.67
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See Notes to Financial Statements.
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BLACKROCK FUND INVESTORS II
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
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NET INVESTMENT INCOME
Income
Interest (net of interest expense of $838) $ 12,444
Dividend income 4,597,386
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Total income 4,609,830
Expenses
Master administration (Note 2) 138,946
Directors 31,241
Amortization of deferred
organization expenses 7,440
Audit 4,960
Transfer Agent 2,603
Custodian 2,479
Amortization of prepaid insurance 1,644
Legal 1,488
Miscellaneous 4,711
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Total expenses 195,512
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Net investment income 4,414,318
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UNREALIZED GAIN
ON INVESTMENTS (NOTE 3)
Net change in unrealized appreciation
on investment companies 2,188,887
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Net unrealized gain 2,188,887
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $6,603,205
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See Notes to Financial Statements.
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BLACKROCK FUND INVESTORS II
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
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INCREASE (DECREASE) IN CASH
Cash flows provided by operating activities:
Dividends and interest received $ 4,610,709
Expenses paid (408,108)
Paid to affiliates (30,198)
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Net cash flows provided by operating activities 4,172,403
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Net purchase of investments (36,206,942)
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Cash flows provided by financing activities:
Proceeds from Fund shares issued 36,541,941
Distributions to shareholders (4,507,569)
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Net cash flows provided by financing activities 32,034,372
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Net decrease in cash (167)
Cash beginning of period 6,612
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Cash end of period
6,445
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RECONCILIATION OF NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS
TO NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES
Net increase in net assets resulting from operations $ 6,603,205
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Increase in unrealized appreciation (2,188,887)
Decrease in deferred organization expenses and other assets 7,493
Decrease in payable to BAI (7,966)
Decrease in accrued expenses and other liabilities (241,442)
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Total adjustments (2,430,802)
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Net cash flows provided by operating activities $ 4,172,403
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See Notes to Financial Statements.
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BLACKROCK FUND INVESTORS II
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
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<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, 1997 DECEMBER 31, 1996
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INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income $ 4,414,318 $ 12,231,783
Net realized gain -- 1,491,772
Net change in unrealized appreciation
on investment companies 2,188,887 391,350
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Net increase in net assets resulting
from operations 6,603,205 14,114,905
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Dividends and distributions to shareholders from:
Net investment income (4,507,569) (11,894,565)
In excess of net investment income -- (367,153)
Net realized gain -- (1,491,772)
Return of capital -- (7,928,081)
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Total dividends and distributions to shareholders (4,507,569) (21,681,571)
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Fund share transactions:
Proceeds from shares issued 36,541,941 60,071,623
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Net increase in net assets resulting
from fund share transactions 36,541,941 60,071,623
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Net increase 38,637,577 52,504,957
NET ASSETS
Beginning of period 72,373,588 19,868,631
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End of period $ 111,011,165 $ 72,373,588
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</TABLE>
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See Notes to Financial Statements.
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BLACKROCK FUND INVESTORS II
FINANCIAL HIGHLIGHTS (UNAUDITED)
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<TABLE>
<CAPTION>
MARCH 29, 1995*
FOR THE SIX MONTHS FOR THE YEAR ENDED THROUGH
ENDED JUNE 30, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
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PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C>
Net asset value, beginning of period $ 702.84 $ 722.26 $ 1,000.00
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Net investment income (loss) (a) 28.54 221.06 (45.98)
Net realized and unrealized gain (loss) (a) 15.43 34.03 (231.76)
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Net increase (decrease) from investment operations 43.97 255.09 (277.74)
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Less dividends and distributions:
Net investment income (29.14) (150.60) --
In excess of net investment income -- (4.65) --
Net realized gain -- (18.89) --
Return of capital -- (100.37) --
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(29.14) (274.51) --
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Net asset value, end of period $ 717.67 $ 702.84 $ 722.26
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TOTAL INVESTMENT RETURN (B) 6.27% 51.31% (27.77)%
RATIOS TO AVERAGE NET ASSETS:
Expenses (d) 0.40% (c) 0.95% 4.70% (c)
Net investment income (loss) (d) 8.97% (c) 29.76% (4.70)% (c)
SUPPLEMENTAL DATA:
Average net assets (in thousands) $99,196 $41,100 $9,460
Portfolio turnover -- -- --
Net assets, end of period (in thousands) $111,011 $72,374 $19,869
</TABLE>
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* Commencement of investment operations.
(a) Calculated based on average shares.
(b) 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.
(c) Annualized.
(d) The ratio of expenses and net investment income to total investor capital
commitments of $112,078,123 on an annualized basis is 0.35% and 7.94%,
respectively, for the six months ended June 30, 1997. The ratio of expenses
and net investment loss to total investor capital commitments of
$112,078,123 on an annualized basis is 0.35% and 10.91%, respectively, for
the year ended December 31, 1996. The ratio of expenses and net investment
loss to total investor capital commitments of $112,078,123 on an annualized
basis is 0.39% and (0.39)%, respectively, for the year ended December 31,
1995.
Contained above is the unaudited 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 statements.
See Notes to Financial Statements.
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BLACKROCK FUND INVESTORS II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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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 common shares is valued by Fund
II at its proportionate interest in the net asset value of BAI (approximately
20.00% at June 30, 1997). Fund II also holds 306 BAI preferred shares which are
valued at cost ($153,000). 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. Dividends and distributions received from
BAI are recorded based on the character of the dividend or distribution
received.
TAXES: It is Fund II's intention to continue 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.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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 ADMINISTRATION, 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.
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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-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, which is split ratably between BAI, Fund II, BlackRock Fund
Investors I and BlackRock Fund Investors III, 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 and proceeds from sales of investment securities other than
short-term investments for the period ended June 30, 1997 amounted to
$36,541,941 and $0, respectively. The federal income tax basis of the
investments of Fund II at June 30, 1997 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 June 30, 1997, the total
capital commitments from investors was $112,078,123 of which $110,461,135 had
been called and received.
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TRUSTEES
Laurence D. Fink, CHAIRMAN
Terry Blaney
John C. Deterding
Donald G. Drapkin
Wesley R. Edens
Charles Froland
James Grosfeld
Laurence E. Hirsch
Kendrick R. Wilson, III
OFFICERS
Ralph L. Schlosstein, PRESIDENT
Wesley R. Edens, CHIEF OPERATING OFFICER
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
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 LLP
919 Third Avenue
New York, NY 10022
The accompanying financial statements as of June 30, 1997 were not audited and
accordingly, no opinion is expressed on them. 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
