BLACKROCK FUND INVESTORS II
(IN LIQUIDATION)
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SEMI-ANNUAL REPORT
JUNE 30, 1999 (UNAUDITED)
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BLACKROCK FUND INVESTORS II (IN LIQUIDATION)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
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ASSETS
Investment in BlackRock Asset Investors, at estimated
fair value (cost $27,198,408) (Notes 1 and 3) $ 23,370,675
Cash 108,076
Notes receivable (Note 4) 21,000
Interest receivable from BAI preferred shares 12,179
Other assets 1,051
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Total assets 23,512,981
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LIABILITIES
Master administration fee payable (Note 2) 40,000
Notes payable (Note 4) 21,000
Other accrued expenses 119,484
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Total liabilities 180,484
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NET ASSETS $ 23,332,497
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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 27,158,683
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27,160,230
Net unrealized depreciation on investments (3,827,733)
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Total net assets $ 23,332,497
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Net asset value per share $ 150.84
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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 (IN LIQUIDATION)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
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NET INVESTMENT LOSS
Interest income (net of interest expense of $686) $ 1,106
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Expenses
Master administration (Note 2) 40,000
Directors 31,000
Professional services 10,000
Transfer Agent 3,000
Custodian 2,000
Miscellaneous 6,440
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Total expenses 92,440
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Net investment loss (91,334)
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REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 3)
Net realized gain on investments 6,866,517
Net change in unrealized depreciation on investments (1,046,520)
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Net realized and unrealized gain 5,819,997
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 5,728,663
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See Notes to Financial Statements.
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BLACKROCK FUND INVESTORS II (IN LIQUIDATION)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
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INCREASE (DECREASE) IN CASH
Cash flows used for operating activities:
Dividends and interest received $ 1,186
Expenses paid (109,715)
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Net cash flows used for operating activities (108,529)
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Cash flows provided by financing activities:
Distributions received 17,190,227
Distributions to shareholders (17,140,227)
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Net cash flows provided by financing activities 50,000
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Net decrease in cash (58,529)
Cash beginning of period 166,605
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Cash end of period $ 108,076
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RECONCILIATION OF NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS TO NET CASH
FLOWS USED FOR OPERATING ACTIVITIES
Net increase in net assets resulting from operations $ 5,728,663
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Increase in unrealized depreciation 1,046,520
Net realized gain on investments (6,866,517)
Decrease in other assets 545
Decrease in other accrued expenses (17,740)
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Total adjustments (5,837,192)
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Net cash flows used for operating activities $ (108,529)
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See Notes to Financial Statements.
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BLACKROCK FUND INVESTORS II (IN LIQUIDATION)
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
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<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, 1999 DECEMBER 31, 1998
------------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income (loss) $ (91,334) $ 2,619,888
Net realized gain 6,866,517 --
Net change in unrealized depreciation
on investments (1,046,520) (344,630)
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Net increase in net assets resulting
from operations 5,728,663 2,275,258
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Dividends and distributions to shareholders from:
Net investment income -- (2,619,888)
Net realized gain (6,775,183) --
Return of capital (10,365,044) (14,044,429)
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Total dividends and distributions to shareholders (17,140,227) (16,664,317)
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Net decrease (11,411,564) (14,389,059)
NET ASSETS
Beginning of period 34,744,061 49,133,120
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End of period $ 23,332,497 $ 34,744,061
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</TABLE>
See Notes to Financial Statements.
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<TABLE>
<CAPTION>
BLACKROCK FUND INVESTORS II (IN LIQUIDATION)
STATEMENTS OF FINANCIAL HIGHLIGHTS (UNAUDITED)
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FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE YEAR MARCH 29, 1995*
MONTHS ENDED ENDED ENDED ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period $ 224.61 $ 317.64 $ 702.84 $ 722.26 $ 1,000.00
-------- -------- -------- -------- ----------
Net investment income (loss) (a) (0.59) 16.94 210.60 221.06 (45.98)
Net realized and unrealized gain (loss) (a) 37.63 (2.23) (18.04) 34.03 (231.76)
-------- -------- -------- -------- ----------
Net increase (decrease) from
investment operations 37.04 14.71 192.56 255.09 (277.74)
-------- -------- -------- ------- ----------
Less dividends and distributions:
Net investment income -- (16.94) (197.13) (150.60) --
In excess of net investment income -- -- -- (4.65) --
Net realized gain (43.80) -- -- (18.89) --
Return of capital (67.01) (90.80) (380.63) (100.37) --
-------- -------- -------- -------- ----------
(110.81) (107.74) (577.76) (274.51) --
-------- -------- -------- -------- ----------
Net asset value, end of period $ 150.84 $ 224.61 $ 317.64 $ 702.84 $ 722.26
======== ======== ======== ========= ==========
TOTAL INVESTMENT RETURN (B) 16.49% 4.63% 27.40% 51.31% (27.77)%
RATIOS TO AVERAGE NET ASSETS:
Expenses (d) 0.56%(c) 0.73% 0.40% 0.95% 4.70%(c)
Net investment income (loss) (d) (0.55)%(c) 5.87% 30.69% 29.76% (4.70)%(c)
SUPPLEMENTAL DATA:
Average net assets (in thousands) $33,292 $44,616 $100,515 $41,100 $9,460
Portfolio turnover -- -- -- -- --
Net assets, end of period (in thousands) $23,332 $34,744 $ 49,133 $72,374 $19,869
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</TABLE>
* Commencement of investment operations.
(a) Calculated based on average shares.
(b) The Fund is not a publicly traded entity, therefore, total investment
return is calculated assuming a purchase of a common share at net asset
value per share on the first day and a sale at net asset value per share on
tha last day of the period reported. 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 0.17% and (0.16)%,
respectively, for the six months ended June 30, 1999. The ratio of expenses
and net investment income to total investor capital commitments of
$112,078,123 on an annualized basis is 0.29% and 2.34%, respectively, for
the year ended December 31, 1998. The ratio of expenses and net investment
income to total investor capital commitments of $112,078,123 on an
annualized basis is 0.36% and 27.52%, respectively, for the year ended
December 31, 1997. 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 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 (IN LIQUIDATION)
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 Board of Trustees of Fund II ("Trustees") approved a plan of
liquidation ("Plan") on September 18, 1997 which was adopted by the shareholders
on October 3, 1997 ("Adoption Date"). The Plan term runs two years from the
Adoption Date. The plan requires the Trustees to oversee the complete and
orderly liquidation of Fund II and wind-up the Trust. Any remaining assets and
liabilities may be deposited in a voting trust at any time before the end of the
Plan term. The liquidation of Fund II in accordance with the Plan, will result
in distributions paid subsequent to the Adoption Date being characterized for
tax purposes first as a return of capital until a shareholder's basis is reduced
to zero, and then as capital gain. The character of distributions paid
subsequent to the Adoption Date are determined in accordance with income tax
regulations which may differ from Generally Accepted Accounting Principals.
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% at June 30, 1999). 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 Consolidated Financial Statements which are included elsewhere
in this report.
Short-term securities which mature in 60 days or less are valued at
amortized cost, if their term to maturity from date of purchase was 60 days or
less. Short-term securities with a term to maturity greater than 60 days from
the date of purchase are valued at current market quotations until maturity.
In connection with transactions in repurchase agreements, the custodian for
Fund I takes possession of the underlying collateral securities, the value of
which at least equals the principal amount of the repurchase transaction,
including interest. To the extent that any repurchase transaction exceeds one
business day, the value of the collateral is marked to market on a daily basis
to ensure the adequacy of the collateral. If the seller defaults and the value
of the collateral declines or if bankruptcy proceedings are commenced with
respect to the seller of the security, realization of the collateral by Fund I
may be delayed or limited.
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.
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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.
MASTER ADMINISTRATION, ADMINISTRATION AND OTHER EXPENSES: Master administration
and other expenses are recorded on the accrual basis.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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 bears 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
For the six months ended June 30, 1999, there were no purchases or sales of
investment securities, other than short-term investments. The federal income tax
basis of the investments at June 30, 1999 was substantially the same as the
basis for financial reporting.
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NOTE 4. NOTES
Fund II holds a note with a principal amount of $21,000 from BAI. The note
pays interest at a per annum rate of 2.50% over the yield of the one-year
constant maturity Treasury, redeemable annually by Fund II and due on
dissolution of BAI.
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.
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TRUSTEES
Laurence D. Fink, CHAIRMAN
John C. Deterding
Donald G. Drapkin
Wesley R. Edens
Charles Froland
James Grosfeld
Laurence E. Hirsch
Thomas Ruggels
Kendrick R. Wilson, II
OFFICERS
Ralph L. Schlosstein, PRESIDENT
Wesley R. Edens, CHIEF OPERATING OFFICER
Robert I. Kauffman, MANAGING DIRECTOR
Randal A. Nardone, MANAGING DIRECTOR AND ASSISTANT SECRETARY
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, 1999 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
