UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-04182
Name of Fund: BlackRock International Value Fund of BlackRock Funds II
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Robert C. Doll, Jr., Chief Executive
Officer, BlackRock International Value Fund of BlackRock Funds II, 800
Scudders Mill Road, Plainsboro, NJ, 08536. Mailing address: P.O. Box
9011, Princeton, NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 06/30/07
Date of reporting period: 07/01/06 - 12/31/06
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES FIXED INCOME LIQUIDITY
REAL ESTATE
BlackRock International
Value Fund
OF BLACKROCK FUNDS II
SEMI-ANNUAL REPORT DECEMBER 31, 2006
(BLACKROCK logo)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
This report is transmitted to shareholders only. It is not authorized for
use as an offer of sale or a solicitation of an offer to buy shares of the
Fund unless accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return 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.
Investment in foreign securities involves special risks including fluctuating
foreign exchange rates, foreign government regulations, differing degrees of
liquidity and the possibility of substantial volatility due to adverse
political, economic or other developments.
BlackRock International Value Fund
Of BlackRock Funds II
P.O. Box 9011
Princeton, NJ 08543-9011
(GO PAPERLESS... logo)
It's Fast, Convenient, & Timely!
To sign up today, go to www.blackrock.com/edelivery.
BlackRock International Value Fund
Portfolio Information as of December 31, 2006
Percent of
Ten Largest Equity Holdings Net Assets
Vodafone Group Plc 2.9%
Royal Dutch Shell Plc Class B 2.8
Barclays Plc 2.4
HBOS Plc 2.3
Total SA 2.3
GlaxoSmithKline Plc 2.2
ENI SpA 2.2
ING Groep NV CVA 2.1
Aviva Plc 2.0
BNP Paribas 1.9
Percent of
Five Largest Industries Net Assets
Commercial Banks 21.0%
Oil, Gas & Consumable Fuels 10.9
Insurance 9.7
Automobiles 7.9
Capital Markets 4.4
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 ratings 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.
Percent of
Total
Geographic Allocation Investments
United Kingdom 18.8%
Japan 18.0
Germany 11.6
France 11.6
Italy 8.5
Switzerland 4.8
Australia 4.1
Netherlands 3.3
Sweden 2.7
Taiwan 2.7
Ireland 1.9
Spain 1.7
Finland 1.6
Norway 1.4
Singapore 1.2
Denmark 1.1
Hungary 0.9
Belgium 0.7
South Korea 0.6
Other* 2.8
* Includes portfolio holdings in short-term investments.
Officers and Trustees
Robert C. Doll, Jr., President and Trustee
James H. Bodurtha, Trustee
Kenneth A. Froot, Trustee
Joe Grills, Trustee
Herbert I. London, Trustee
Roberta Cooper Ramo, Trustee
Robert S. Salomon, Jr., Trustee
Donald C. Burke, Vice President and Treasurer
James A. Macmillan, Vice President and Senior
Portfolio Manager
Rob Weatherston, Vice President and Portfolio Manager
Jeffrey Hiller, Fund Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109-3661
Transfer Agent
PFPC Inc.
Wilmington, DE 19809
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
A Letter to Shareholders
Dear Shareholder
As 2007 begins, we are able to look back on 2006 as a volatile, but ultimately,
a positive year for most major markets. Returns for the annual and semi-annual
periods ended December 31, 2006, were as follows:
Total Returns as of December 31, 2006 6-month 12-month
U.S. equities (Standard & Poor's 500 Index) +12.74% +15.79%
Small cap U.S. equities (Russell 2000 Index) + 9.38 +18.37
International equities (MSCI Europe, Australasia, Far East Index) +14.69 +26.34
Fixed income (Lehman Brothers Aggregate Bond Index) + 5.09 + 4.33
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 4.55 + 4.84
High yield bonds (Credit Suisse High Yield Index) + 8.14 +11.92
After raising the target short-term interest rate 17 times between June 2004
and June 2006, the Federal Reserve Board (the Fed) finally opted to pause on
August 8, 2006. This left the federal funds rate at 5.25%, where it remained
through year-end. In interrupting its two-year interest rate-hiking campaign,
the Fed acknowledged that economic growth is slowing, led by a downturn in the
housing market, but has maintained a cautionary view on inflation.
Overall, it was a good 12 months for U.S. equities, despite a significant
correction in the middle of the year that was largely triggered by rising
interest rates, inflation fears, elevated oil prices and geopolitical
uncertainties. Nevertheless, strong corporate earnings, abundant liquidity and
record merger-and-acquisition activity provided a solid backdrop for stocks.
Many international equity markets (with the notable exception of Japan)
performed even better, outpacing U.S. stocks for the fifth consecutive year.
Strength was especially notable in European equities and select emerging
markets.
Bonds experienced a more modest annual return than stocks. Interest rates and
bond yields moved higher for much of the year as bond prices, which move
opposite of yields, declined. Prices began to improve in the summer as the
economy showed signs of weakening and the Fed paused. Notably, the Treasury
curve remained inverted for much of 2006. The 10-year Treasury yield ended
December at 4.71%, well below the federal funds rate.
As we begin a new year, investors are left with a few key questions: Will the
U.S. economy achieve a soft landing, will the Fed reverse its prior policy and
cut interest rates, and how might these outcomes impact the investment
climate. As you navigate the uncertainties inherent in the financial markets,
we encourage you to start the year by reviewing your investment goals with
your financial professional and making portfolio changes, as needed. For more
reflection on 2006 and our thoughts on the year ahead, please ask your
financial professional for a copy of "What's Ahead in 2007: An Investment
Perspective," or view it online at www.blackrock.com/funds. We thank you for
trusting BlackRock with your investment assets, and we look forward to
continuing to serve you in the new year and beyond.
Sincerely,
(Robert C. Doll, Jr.)
Robert C. Doll, Jr.
President and Trustee
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
A Discussion With Your Fund's Portfolio Managers
We are positive on the prospects for European and Asian equities and intend
to maintain our strategy of investing in stocks that we believe have low
valuations.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended December 31, 2006, BlackRock International
Value Fund's (formerly Merrill Lynch International Value Fund) Institutional,
Investor A, Investor B, Investor C and Class R Shares had total returns of
+12.06%, +11.93%, +11.45%, +11.51% and +11.78%, respectively. (Fund results
shown do not reflect sales charges and would be lower if sales charges were
included. Complete performance information can be found on pages 6 - 8 of this
report to shareholders.) For the same period, the benchmark Morgan Stanley
Capital International Europe, Australasia, Far East (MSCI EAFE) Index returned
+14.69% and the Lipper International Multi-Cap Value Funds category posted an
average return of +14.78%. (Funds in this Lipper category invest in a variety
of market-capitalization ranges without concentrating 75% of their equity
assets in any one market-cap range over an extended period of time. Multi-cap
funds typically have a certain percentage of their assets invested in
companies strictly outside the United States.)
International equity markets delivered healthy returns for the majority of the
semi-annual period. However, there was some regional divergence, with strong
performance in Europe and Asia partially offset by disappointing performance
in Japan. Companies have continued to deliver stronger-than-expected growth
and record profits driven by robust exports, increasing levels of investment
and generally positive momentum in consumer demand. Global monetary policy
remains accommodative despite increases in short-term interest rates from
central banks. Japan, for example, ended its zero-interest-rate policy with a
..25% increase in rates. Merger-and-acquisition activity has continued to be a
prominent theme, especially in Europe where there has been a high level of
corporate activity across a range of sectors. The oil price reached new highs
in the summer but corrected noticeably during the fall, giving further support
to equity markets during the period.
What factors most influenced Fund performance?
During the period, stock selection accounted for the majority of the Fund's
underperformance relative to the MSCI EAFE Index, while sector allocation had
a marginally positive effect. In terms of sector allocation, performance was
hindered by the portfolio's overweight position in the energy sector along
with an underweight exposure to real estate. However, this was offset by an
underweight in the poor-performing pharmaceutical industry and overweight
positions in automobiles and telecommunications.
A number of individual stocks contributed to Fund performance, especially
those in some of the more cyclically oriented sectors, such as capital goods
and materials. The Fund continued to benefit from its exposure to steel
companies, which have enjoyed robust global demand and increased pricing
power, especially in the more profitable high-grade steel. The Fund's holding
in specialty steel makers Vallourec and Mittal Steel Co. NV both contributed
to performance. Within the capital goods sector, holdings in U.K. defense
contractor BAE Systems Plc, German construction group Hochtief AG and French
construction and concessions company Vinci SA also were positive. The Fund
benefited from its exposure to the telecommunications sector via investments
in U.K. mobile operator Vodafone Group Plc and Swedish telecommunications
company TeliaSonera AB, both of which were among the portfolio's top-
performing stocks. The telecommunications sector, which had underperformed for
most of the year, experienced substantial earnings upgrades in the fourth
quarter as a result of strong earnings momentum and improved fundamentals.
Other stocks that contributed to the Fund's relative results were retail banks
Allied Irish Banks Plc and HBOS Plc, Swedish holding company Investor AB and
German insurance company Allianz AG and German power utility RWE AG.
The Fund's relative performance was hindered by an overweight exposure to the
energy sector, which underperformed as a result of sharp declines in oil and
commodity prices during the period. Unsurprisingly, the Fund's positions in
stocks leveraged to the oil price suffered the most. These included exploration
and production companies Australian Worldwide Exploration Ltd. and
Norwegian-based Statoil ASA, along with U.K. oil major Royal Dutch Shell Plc.
In addition, disappointing stock selection in the utility sector also
detracted from Fund returns. Among Spanish utilities, which the Fund did not
own, bid speculation sent prices sharply higher.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
The Fund's exposure to the Japanese consumer finance sector, through its
holding of Takefuji Corp., also hindered returns. The consumer finance sector
is one of the cheapest in the Japanese market; however, it has been subject to
regulatory change that has forced a lowering of the maximum lending rate, and
this has affected companies' earnings. Also within the Japanese financials
sector, the Fund's holdings in Mitsubishi UFJ Securities Co., Sumitomo Mitsui
Financial Group, Inc. and Sompo Japan Insurance, Inc. detracted from
performance, with returns being impacted by disappointing stock market
performance and a poor interest rate environment. Other stocks that had a
negative impact were Taiwan technology company Lite-On TechnologyCorp., German
industrial conglomerate Siemens AG and Italian telecommunications company
Telecom Italia SpA.
What changes were made to the portfolio during the period?
Our main transactions during the period resulted from "bottom-up" stock
picking, based on our evaluation of companies' individual share price
appreciation prospects. As such, the portfolio's exposure to the pharmaceutical
industry was increased through the purchase of GlaxoSmithKline Plc, which was
trading at an attractive valuation and offered an interesting new product
pipeline. Within the banking sector, we established new positions in Italian
and Danish retail banks Banca Intesa SpA and Danske Bank A/S, along with U.K.
bank Barclays Plc. These additions were funded through the sale of our position
in HSBC Holdings Plc, given our concerns over that company's U.S. consumer
finance business. We also purchased German re-insurer Munich Re and Swiss
investment bank UBS AG during the period, and increased exposure to the steel
industry through the purchase of Mittal Steel and Vallourec.
These purchases were partially funded by reducing exposure to food and staples
retailing through the sale of French hypermarket Carrefour SA, as well as
exiting positions in German industrial conglomerate Siemens and U.K. oil major
BP Plc.
How would you characterize the Fund's position at the close of the period?
At the end of the period, the Fund was overweight relative to the benchmark
MSCI EAFE Index in financials (banks, diversified financials and insurance),
automobile manufacturers and energy. We remain positive on the longer-term
fundamentals in the energy sector and have exposure predominately to
integrated oil majors, where we believe the valuations to be extremely
attractive. The Fund ended the period underweight in defensive sectors, such
as pharmaceuticals, food retailing and food, beverage and tobacco, along with
media and consumer durables and apparel.
In terms of regional and country allocations, the Fund ended the period
overweight in Germany, where we are increasingly optimistic on the prospects
for restructuring and reform at the company level. A number of German
companies in the portfolio are undergoing significant restructuring with
drastic cost cutting and the disposal of non-core assets. These include RWE
AG, BASF AG, Bayer AG, Allianz AG and Deutsche Post AG. Other overweight
country positions include Italy and France, predominately through banks and
energy companies. Within the Asian segment of the portfolio, we have positions
in Singapore, Taiwan and Hong Kong, and maintain significant exposure to Japan
based on our positive outlook for that country's economic recovery. We have
exposure to Australia through construction and resources.
We are positive on the prospects for European and Asian equities and believe
that the combination of low financing rates, strong earnings growth,
attractive valuations and corporate restructuring should enable markets to
continue their upward trend. We intend to maintain our strategy of investing
in stocks that we believe have low valuations.
James A. Macmillan
Vice President and Senior Portfolio Manager
Rob Weatherston
Vice President and Portfolio Manager
January 22, 2007
Effective October 2, 2006, the Fund's Class A, Class B, Class C and Class I
Shares were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively. Class R Shares did not change their designation.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Performance Data
About Fund Performance
Effective October 2, 2006, the Fund's Class A, Class B, Class C and Class I
Shares were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively. Class R Shares did not change their designation. As
previously communicated to shareholders, new sales charge schedules came into
effect at the same time for certain of these classes.
The Fund has multiple classes of shares.
* Institutional Shares are not subject to any front-end sales charge.
Institutional Shares bear no ongoing distribution or service fees and are
available only to eligible investors.
* Investor A Shares incur a maximum initial sales charge (front-end load) of
5.25% and a service fee of 0.25% per year (but no distribution fee).
* Investor B Shares are subject to a maximum contingent deferred sales charge
of 4.50% declining to 0% after six years. In addition, Investor B Shares are
subject to a distribution fee of 0.75% per year and a service fee of 0.25% per
year. These shares automatically convert to Investor A Shares after
approximately eight years. (There is no initial sales charge for automatic
share conversions.) All returns for periods greater than eight years reflect
this conversion.
* Investor C Shares are subject to a distribution fee of 0.75% per year and a
service fee of 0.25% per year. In addition, Investor C Shares are subject to a
1% contingent deferred sales charge if redeemed within one year of purchase.
* Class R Shares do not incur a maximum sales charge (front-end load) or
deferred sales charge. These shares are subject to a distribution fee of 0.25%
per year and a service fee of 0.25% per year. Class R Shares are available
only to certain retirement plans.
The returns for Investor A, Investor B, Investor C and Class R Shares, prior
to their respective inception dates (June 2, 1999, October 6, 2000, October 6,
2000 and January 3, 2003), are based upon performance of the Fund's
Institutional Shares. The returns for Investor A, Investor B, Investor C and
Class R Shares, however, are adjusted to reflect the distribution and service
(12b-1) fees applicable to each class of shares.
Performance information reflects past performance and does not guarantee
future results. Current performance may be lower or higher than the
performance data quoted. Refer to www.blackrock.com to obtain performance data
current to the most recent month-end. Performance results do not reflect the
deduction of taxes that a shareholder would pay on Fund distributions or the
redemption of Fund shares. The Fund may charge a 2% redemption fee for sales
or exchanges of shares within 30 days of purchase or exchange. Performance
data does not reflect this potential fee. Figures shown in each of the
following tables assume reinvestment of all dividends and capital gain
distributions, if any, at net asset value on the ex-dividend date. Investment
return and principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. Dividends paid
to each class of shares will vary because of the different levels of service,
distribution and transfer agency fees applicable to the classes, which are
deducted from the income available to be paid to shareholders.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Performance Data (continued)
Recent Performance Results
6-Month 12-Month 10-Year
As of December 31, 2006 Total Return Total Return Total Return
Institutional Shares* +12.06% +26.79% +150.26%
Investor A Shares* +11.93 +26.48 +144.19
Investor B Shares* +11.45 +25.48 +127.26
Investor C Shares* +11.51 +25.51 +127.17
Class R Shares* +11.78 +26.13 +139.43
MSCI EAFE Index** +14.69 +26.34 +110.09
* Investment results shown do not reflect sales charges. Results shown would be lower if a sales
charge was included. Cumulative total investment returns are based on changes in the Fund's net
asset values for the periods shown, and assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date.
** This unmanaged Index measures the total returns of developed foreign stock markets in Europe,
Australasia and the Far East (in U.S. dollars).
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Performance Data (concluded)
Total Return Based on a $10,000 Investment
A line graph illustrating the growth of a $10,000 investment in Institutional
Shares*++, Investor A Shares*++, Investor B Shares*++, Investor C Shares*++
and Class R Shares*++ compared to a similar investment in MSCI EAFE Index++++.
Values illustrated are as follows:
Institutional Shares*++
Date Value
December 1996 $10,000.00
December 1997 $10,530.00
December 1998 $11,206.00
December 1999 $13,831.00
December 2000 $14,129.00
December 2001 $12,319.00
December 2002 $10,523.00
December 2003 $14,569.00
December 2004 $17,747.00
December 2005 $19,738.00
December 2006 $25,026.00
Investor A Shares*++
Date Value
December 1996 $ 9,475.00
December 1997 $ 9,952.00
December 1998 $10,565.00
December 1999 $13,010.00
December 2000 $13,254.00
December 2001 $11,527.00
December 2002 $ 9,830.00
December 2003 $13,572.00
December 2004 $16,488.00
December 2005 $18,293.00
December 2006 $23,137.00
Investor B Shares*++
Date Value
December 1996 $10,000.00
December 1997 $10,425.00
December 1998 $10,984.00
December 1999 $13,423.00
December 2000 $13,637.00
December 2001 $11,770.00
December 2002 $ 9,959.00
December 2003 $13,650.00
December 2004 $16,454.00
December 2005 $18,112.00
December 2006 $22,726.00
Investor C Shares*++
Date Value
December 1996 $10,000.00
December 1997 $10,425.00
December 1998 $10,984.00
December 1999 $13,423.00
December 2000 $13,602.00
December 2001 $11,799.00
December 2002 $ 9,950.00
December 2003 $13,642.00
December 2004 $16,444.00
December 2005 $18,100.00
December 2006 $22,717.00
MSCI EAFE Index++++
Date Value
December 1996 $10,000.00
December 1997 $10,178.00
December 1998 $12,213.00
December 1999 $15,506.00
December 2000 $13,309.00
December 2001 $10,455.00
December 2002 $ 8,789.00
December 2003 $12,180.00
December 2004 $14,646.00
December 2005 $16,629.00
December 2006 $21,009.00
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
++ The Fund invests primarily in stocks of companies located outside of the
United States.
++++ This unmanaged Index measures the total returns of developed foreign stock
markets in Europe, Australasia and the Far East (in U.S. dollars).
Past performance is not indicative of future results.
Average Annual Total Return
Return
Institutional Shares
One Year Ended 12/31/06 +26.79%
Five Years Ended 12/31/06 +15.23
Ten Years Ended 12/31/06 + 9.61
Return Without Return With
Sales Charge Sales Charge*
Investor A Shares
One Year Ended 12/31/06 +26.48% +19.84%
Five Years Ended 12/31/06 +14.95 +13.72
Ten Years Ended 12/31/06 + 9.34 + 8.75
Return Return
Without CDSC With CDSC++++++
Investor B Shares++
One Year Ended 12/31/06 +25.48% +20.98%
Five Years Ended 12/31/06 +14.07 +13.83
Ten Years Ended 12/31/06 + 8.56 + 8.56
Return Return
Without CDSC With CDSC++++++
Investor C Shares++++
One Year Ended 12/31/06 +25.51% +24.51%
Five Years Ended 12/31/06 +14.00 +14.00
Ten Years Ended 12/31/06 + 8.55 + 8.55
Return
Class R Shares
One Year Ended 12/31/06 +26.13%
Five Years Ended 12/31/06 +14.79
Ten Years Ended 12/31/06 + 9.12
* Assuming maximum sales charge of 5.25%.
++ Maximum contingent deferred sales charge is 4.50% and is
reduced to 0% after six years.
++++ Maximum contingent deferred sales charge is 1% and is reduced
to 0% after one year.
++++++ Assuming payment of applicable contingent deferred sales charge.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses
related to transactions, including sales charges, redemption fees and exchange
fees; and (b) operating expenses including advisory fees, distribution fees
including 12b-1 fees, and other Fund expenses. The following example (which is
based on a hypothetical investment of $1,000 invested on July 1, 2006 and held
through December 31, 2006) is intended to assist shareholders both in
calculating expenses based on an investment in the Fund and in comparing these
expenses with similar costs of investing in other mutual funds.
The first table below provides 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 in the first line under
the heading entitled "Expenses Paid During the Period."
The second table below provides information about hypothetical account values
and hypothetical expenses based on the 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 this Fund 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 table are intended to highlight shareholders'
ongoing costs only and do not reflect any transactional expenses, such as
sales charges, redemption fees or exchange fees. Therefore, the second table
is useful in comparing ongoing expenses only, and will not help shareholders
determine the relative total expenses of owning different funds. If these
transactional expenses were included, shareholder expenses would have been
higher.
Expenses Paid
Beginning Ending During the Period*
Account Value Account Value July 1, 2006 to
July 1, December 31, December 31,
2006 2006 2006
Actual
Institutional $1,000 $1,120.60 $ 5.34
Investor A $1,000 $1,119.30 $ 6.66
Investor B $1,000 $1,114.50 $10.81
Investor C $1,000 $1,115.10 $10.81
Class R $1,000 $1,117.80 $ 7.97
Hypothetical (5% annual return before expenses)**
Institutional $1,000 $1,019.86 $ 5.09
Investor A $1,000 $1,018.62 $ 6.34
Investor B $1,000 $1,014.68 $10.30
Investor C $1,000 $1,014.68 $10.30
Class R $1,000 $1,017.37 $ 7.59
* For each class of the Fund, expenses are equal to the annualized expense ratio for the class
(1.01% for Institutional, 1.26% for Investor A, 2.05% for Investor B, 2.05% for Investor C and
1.51% for Class R), multiplied by the average account value over the period, multiplied by 182/365
(to reflect the one-half year period shown).
** 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.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Schedule of Investments as of December 31, 2006 (in U.S. dollars)
Shares
Industry Common Stocks Held Value
Australia--4.1%
Commercial Banks--0.9%
Australia & New Zealand Banking
Group Ltd. 792,307 $ 17,642,679
Construction Materials--0.6%
Boral Ltd. 1,886,194 11,360,013
Industrial Conglomerates--0.8%
CSR Ltd. 5,269,246 15,597,238
Metals & Mining--0.5%
Iluka Resources Ltd. 1,742,422 9,146,247
Oil, Gas & Consumable
Fuels--0.6%
Australian Worldwide Exploration
Ltd. (a) 4,873,200 11,732,269
Real Estate Investment Trusts
(REITs)--0.7%
Multiplex Group 3,990,514 12,568,102
Total Common Stocks in Australia 78,046,548
Belgium--0.7%
Leisure Equipment
& Products--0.7%
AGFA-Gevaert NV 480,811 12,287,639
Total Common Stocks in Belgium 12,287,639
Denmark--1.1%
Commercial Banks--1.1%
Danske Bank A/S 474,615 21,089,145
Total Common Stocks in Denmark 21,089,145
Finland--1.6%
Electric Utilities--1.6%
Fortum Oyj 1,088,747 30,985,922
Total Common Stocks in Finland 30,985,922
France--11.6%
Automobiles--2.6%
Peugeot SA 305,041 20,213,924
Renault SA 243,090 29,200,964
---------------
49,414,888
Commercial Banks--3.2%
BNP Paribas 332,723 36,300,648
Credit Agricole SA 578,576 24,332,957
---------------
60,633,605
Construction & Engineering--1.5%
Vinci SA 217,367 27,775,230
Insurance--0.8%
Assurances Generales de France (AGF) 99,035 15,439,289
Machinery--1.2%
Vallourec 78,295 22,768,647
Oil, Gas & Consumable Fuels--2.3%
Total SA 594,032 42,853,737
Total Common Stocks in France 218,885,396
Germany--11.7%
Air Freight & Logistics--1.2%
Deutsche Post AG 737,122 22,224,099
Automobiles--1.1%
Bayerische Motoren Werke AG 348,565 20,019,884
Shares
Industry Common Stocks Held Value
Germany (concluded)
Chemicals--2.6%
BASF AG 265,436 $ 25,876,112
Bayer AG 450,245 24,166,011
---------------
50,042,123
Construction & Engineering--1.2%
Hochtief AG 305,412 22,254,297
Electric Utilities--1.6%
E.ON AG 226,727 30,775,972
Insurance--2.7%
Allianz AG Registered Shares 133,667 27,306,851
Muenchener Rueckversicherungs AG
Registered Shares 135,939 23,403,293
---------------
50,710,144
Multi-Utilities--1.3%
RWE AG 217,746 24,000,780
Total Common Stocks in Germany 220,027,299
Hungary--0.9%
Oil, Gas & Consumable
Fuels--0.9%
Mol Magyar Olaj-es Gazipari Rt. 157,905 17,909,139
Total Common Stocks in Hungary 17,909,139
Ireland--1.9%
Commercial Banks--1.9%
Allied Irish Banks Plc 1,218,468 36,189,730
Total Common Stocks in Ireland 36,189,730
Italy--8.6%
Commercial Banks--4.2%
Banca Intesa SpA 3,875,078 29,924,370
Capitalia SpA 2,093,063 19,810,259
UniCredito Italiano SpA 3,374,274 29,575,842
---------------
79,310,471
Diversified Telecommunication
Services--2.2%
Telecom Italia SpA 5,989,277 18,105,002
Telecom Italia SpA (RNC) 9,438,740 23,947,275
---------------
42,052,277
Oil, Gas & Consumable
Fuels--2.2%
ENI SpA 1,195,212 40,200,649
Total Common Stocks in Italy 161,563,397
Japan--18.1%
Automobiles--4.2%
Honda Motor Co., Ltd. 514,000 20,299,987
Nissan Motor Co., Ltd. 2,071,000 24,937,969
Toyota Motor Corp. 500,400 33,470,728
---------------
78,708,684
Beverages--1.7%
Asahi Breweries Ltd. 2,021,000 32,351,624
Capital Markets--0.8%
Mitsubishi UFJ Securities Co. 1,434,000 15,929,986
Commercial Banks--2.6%
Mitsubishi UFJ Financial Group, Inc. 1,222 15,094,660
Sumitomo Mitsui Financial Group, Inc. 3,300 33,830,511
---------------
48,925,171
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Schedule of Investments (continued) (in U.S. dollars)
Shares
Industry Common Stocks Held Value
Japan (concluded)
Consumer Finance--1.1%
Takefuji Corp. 506,700 $ 20,054,258
Household Durables--1.1%
Sekisui House Ltd. 1,376,000 20,037,881
Insurance--1.2%
Sompo Japan Insurance, Inc. 1,848,000 22,594,345
Leisure Equipment &
Products--0.5%
Namco Bandai Holdings, Inc. 644,800 9,454,863
Metals & Mining--0.8%
Sumitomo Metal Industries Ltd. 3,685,000 16,008,949
Office Electronics--1.2%
Canon, Inc. 395,500 22,266,711
Oil, Gas & Consumable
Fuels--0.7%
Nippon Mining Holdings, Inc. 1,901,000 13,673,846
Pharmaceuticals--1.2%
Takeda Pharmaceutical Co., Ltd. 331,000 22,724,003
Trading Companies &
Distributors--0.5%
Sojitz Corp. (a) 3,232,000 9,831,385
Wireless Telecommunication
Services--0.5%
KDDI Corp. 1,307 8,863,065
Total Common Stocks in Japan 341,424,771
Netherlands--3.3%
Diversified Financial Services--2.1%
ING Groep NV CVA 883,954 39,194,792
Metals & Mining--1.2%
Mittal Steel Co. NV 536,839 22,655,591
Total Common Stocks in the Netherlands 61,850,383
Norway--1.4%
Oil, Gas & Consumable
Fuels--1.4%
Statoil ASA 964,089 25,551,018
Total Common Stocks in Norway 25,551,018
Singapore--1.1%
Commercial Banks--0.6%
United Overseas Bank Ltd. 959,000 12,130,139
Industrial Conglomerates--0.5%
Keppel Corp. Ltd. 848,000 9,730,921
Total Common Stocks in Singapore 21,861,060
South Korea--0.6%
Metals & Mining--0.6%
POSCO 36,369 12,083,894
Total Common Stocks in South Korea 12,083,894
Spain--1.7%
Commercial Banks--1.7%
Banco Bilbao Vizcaya Argentaria SA 1,305,450 31,432,127
Total Common Stocks in Spain 31,432,127
Shares
Industry Common Stocks Held Value
Sweden--2.7%
Diversified Financial
Services--1.7%
Investor AB 1,355,386 $ 33,261,249
Diversified Telecommunication
Services--1.0%
TeliaSonera AB 2,211,588 18,171,594
Total Common Stocks in Sweden 51,432,843
Switzerland--4.9%
Capital Markets--3.6%
Credit Suisse Group 496,888 34,763,810
UBS AG 532,567 32,364,864
---------------
67,128,674
Insurance--1.3%
Swiss Reinsurance Registered Shares 290,905 24,733,490
Total Common Stocks in Switzerland 91,862,164
Taiwan--2.7%
Computers & Peripherals--0.9%
Lite-On Technology Corp. 13,030,120 17,614,755
Semiconductors & Semiconductor
Equipment--1.2%
Advanced Semiconductor Engineering
Inc. (a) 10,743,000 12,198,588
Vanguard International Semiconductor
Corp. 13,502,442 10,110,774
---------------
22,309,362
Wireless Telecommunication
Services--0.6%
Taiwan Cellular Corp. 11,000,000 11,410,158
Total Common Stocks in Taiwan 51,334,275
United Kingdom--18.9%
Aerospace & Defense--1.6%
BAE Systems Plc 3,638,941 30,334,602
Commercial Banks--4.8%
Barclays Plc 3,220,844 46,036,382
HBOS Plc 1,980,979 43,907,118
---------------
89,943,500
Insurance--3.7%
Aviva Plc 2,375,331 38,230,025
Prudential Plc 2,291,302 31,381,860
---------------
69,611,885
Oil, Gas & Consumable
Fuels--2.8%
Royal Dutch Shell Plc Class B 1,541,917 54,040,911
Pharmaceuticals--2.2%
GlaxoSmithKline Plc 1,562,093 41,106,906
Specialty Retail--0.9%
Kesa Electricals Plc 2,605,799 17,308,897
Wireless Telecommunication
Services--2.9%
Vodafone Group Plc 19,613,000 54,338,683
Total Common Stocks in the
United Kingdom 356,685,384
Total Common Stocks
(Cost--$1,356,861,446)--97.6% 1,842,502,134
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Schedule of Investments (concluded) (in U.S. dollars)
Beneficial
Industry Other Interests (d) Interest Value
United Kingdom--0.0%
Electric Utilities--0.0%
British Energy Plc Deferred
Shares (a) $ 70,000 $ 0
Total Other Interests
(Cost--$0)--0.0% 0
Short-Term Beneficial
Securities Interest Value
BlackRock Liquidity Series, LLC
Cash Sweep Series, 5.26% (b)(c) $52,758,960 $ 52,758,960
Total Short-Term Securities
(Cost--$52,758,960)--2.8% 52,758,960
Total Investments (Cost--$1,409,620,406*)--100.4% 1,895,261,094
Liabilities in Excess of Other Assets--(0.4%) (7,658,565)
---------------
Net Assets--100.0% $ 1,887,602,529
===============
* The cost and unrealized appreciation (depreciation) of investments
as of December 31, 2006, as computed for federal income tax purposes,
were as follows:
Aggregate cost $ 1,428,635,670
=================
Gross unrealized appreciation $ 489,906,878
Gross unrealized depreciation (23,281,454)
-----------------
Net unrealized appreciation $ 466,625,424
=================
(a) Non-income producing security.
(b) Investments in companies considered to be an affiliate of the Fund,
for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
were as follows:
Net Interest
Affiliate Activity Income
BlackRock Liquidity Series, LLC
Cash Sweep Series $ 4,853,115 $792,986
(c) Represents the current yield as of December 31, 2006.
(d) Other interests represent beneficial interest in liquidation trusts and
other reorganization entities and are non-income producing.
o 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 ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes
of this report, which may combine industry sub-classifications for
reporting ease. Industries are shown as a percent of net assets.
o Forward foreign exchange contracts as of December 31, 2006,
were as follows:
Foreign Currency Settlement Unrealized
Purchased Date Appreciation
DKK 1,286,916 January 2007 $ 143
EUR 7,049,734 January 2007 52,782
----------
Total Unrealized Appreciation on Forward Foreign Exchange
Contracts--Net (USD Commitment--$9,482,845) $ 52,925
==========
o Currency Abbreviations:
DKK Danish Krone
EUR Euro
USD U.S. Dollar
See Notes to Financial Statements.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Statement of Assets and Liabilities
As of December 31, 2006
Assets
Investments in unaffiliated securities, at value (identified cost--$1,356,861,446) $ 1,842,502,134
Investments in affiliated securities, at value (identified cost--$52,758,960) 52,758,960
Foreign cash (cost--$3,359,003) 3,361,247
Unrealized appreciation on forward foreign exchange contracts 52,925
Receivables:
Dividends $ 5,265,252
Capital shares sold 4,067,920 9,333,172
---------------
Prepaid expenses 24,636
---------------
Total assets 1,908,033,074
---------------
Liabilities
Payables:
Securities purchased 9,533,787
Capital shares redeemed 8,502,318
Investment adviser 1,106,254
Other affiliates 854,855
Distributor 380,765 20,377,979
---------------
Accrued expenses 52,566
---------------
Total liabilities 20,430,545
---------------
Net Assets
Net assets $ 1,887,602,529
===============
Net Assets Consist of
Paid-in capital $ 1,453,064,132
Accumulated distributions in excess of investment income--net $ (17,467,796)
Accumulated realized capital losses--net (33,789,659)
Unrealized appreciation--net 485,795,852
---------------
Total accumulated earnings--net 434,538,397
---------------
Net Assets $ 1,887,602,529
===============
Net Asset Value
Institutional--Based on net assets of $1,113,954,376 and 35,805,618 shares outstanding* $ 31.11
===============
Investor A--Based on net assets of $347,718,156 and 11,205,936 shares outstanding* $ 31.03
===============
Investor B--Based on net assets of $87,379,488 and 2,864,567 shares outstanding* $ 30.50
===============
Investor C--Based on net assets of $291,260,686 and 9,652,289 shares outstanding* $ 30.18
===============
Class R--Based on net assets of $47,289,823 and 1,534,178 shares outstanding* $ 30.82
===============
* Unlimited shares of no par value authorized.
See Notes to Financial Statements.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Statement of Operations
For the Six Months Ended December 31, 2006
Investment Income
Dividends (net of $1,187,921 foreign withholding tax) $ 18,977,799
Interest (including $792,986 from affiliates) 796,274
---------------
Total income 19,774,073
---------------
Expenses
Investment advisory fees $ 6,431,079
Service and distribution fees--Investor C 1,308,685
Transfer agent fees--Institutional 887,244
Service and distribution fees--Investor B 407,578
Service fees--Investor A 394,952
Custodian fees 303,380
Transfer agent fees--Investor C 277,115
Transfer agent fees--Investor A 276,260
Accounting services 236,602
Service and distribution fees--Class R 101,087
Transfer agent fees--Investor B 86,758
Printing and shareholder reports 58,249
Registration fees 49,905
Transfer agent fees--Class R 35,313
Professional fees 34,834
Trustees' fees and expenses 26,975
Pricing fees 7,096
Other 31,735
---------------
Total expenses 10,954,847
---------------
Investment income--net 8,819,226
---------------
Realized & Unrealized Gain--Net
Realized gain on:
Investments (including adjustment from payment by affiliate in order to resolve
a regulatory issue relating to an investment of $9,637)--net 30,362,828
Foreign currency transactions--net 130,619 30,493,447
---------------
Change in unrealized appreciation/depreciation on:
Investments--net 158,945,884
Foreign currency transactions--net 44,918 158,990,802
--------------- ---------------
Total realized and unrealized gain--net 189,484,249
---------------
Net Increase in Net Assets Resulting from Operations $ 198,303,475
===============
See Notes to Financial Statements.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
December 31, June 30,
Increase (Decrease) in Net Assets: 2006 2006
Operations
Investment income--net $ 8,819,226 $ 25,542,303
Realized gain--net 30,493,447 153,809,270
Change in unrealized appreciation/depreciation--net 158,990,802 162,900,635
--------------- ---------------
Net increase in net assets resulting from operations 198,303,475 342,252,208
--------------- ---------------
Dividends & Distributions to Shareholders
Investment income--net:
Institutional (29,815,327) (18,492,514)
Investor A (8,496,598) (5,324,212)
Investor B (1,632,771) (943,196)
Investor C (5,402,216) (2,745,185)
Class R (1,030,544) (343,070)
Realized gain--net:
Institutional (64,289,079) (59,837,586)
Investor A (19,979,542) (19,528,047)
Investor B (5,329,305) (4,826,983)
Investor C (17,097,391) (13,774,731)
Class R (2,572,251) (1,455,288)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions to shareholders (155,645,024) (127,270,812)
--------------- ---------------
Capital Share Transactions
Net increase in net assets derived from capital share transactions 202,665,066 128,563,673
--------------- ---------------
Redemption Fee
Redemption fee 2,077 4,791
--------------- ---------------
Net Assets
Total increase in net assets 245,325,594 343,549,860
Beginning of period 1,642,276,935 1,298,727,075
--------------- ---------------
End of period* $ 1,887,602,529 $ 1,642,276,935
=============== ===============
* Undistributed (accumulated distributions in excess of) investment income--net $ (17,467,796) $ 20,090,434
=============== ===============
See Notes to Financial Statements.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Financial Highlights
Institutional
For the Six
The following per share data and ratios Months Ended
have been derived from information December 31, For the Year Ended June 30,
provided in the financial statements. 2006 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 30.55 $ 26.41 $ 23.54 $ 18.03 $ 20.63 $ 22.97
----------- ----------- ----------- ----------- ----------- -----------
Investment income--net*** .20 .56 .52 .31 .30 .29
Realized and unrealized gain (loss)--net 3.24** 6.19** 2.83** 5.71 (2.85) (.70)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 3.44 6.75 3.35 6.02 (2.55) (.41)
----------- ----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income--net (.90) (.62) (.48) (.51) (.05) (.76)
Realized gain--net (1.98) (1.99) -- -- -- (1.17)
----------- ----------- ----------- ----------- ----------- -----------
Total dividends and distributions (2.88) (2.61) (.48) (.51) (.05) (1.93)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 31.11 $ 30.55 $ 26.41 $ 23.54 $ 18.03 $ 20.63
=========== =========== =========== =========== =========== ===========
Total Investment Return
Based on net asset value per share 12.06%+++ 27.18%++ 14.59% 34.00% (12.38%) (1.14%)
=========== =========== =========== =========== =========== ===========
Ratios to Average Net Assets
Expenses 1.01%* 1.02% 1.08% 1.08% 1.07% 1.14%
=========== =========== =========== =========== =========== ===========
Investment income--net 1.29%* 1.97% 2.07% 1.47% 1.78% 1.42%
=========== =========== =========== =========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 1,113,954 $ 961,207 $ 800,990 $ 559,530 $ 463,071 $ 617,289
=========== =========== =========== =========== =========== ===========
Portfolio turnover 23% 81% 70% 75% 89% 45%
=========== =========== =========== =========== =========== ===========
* Annualized.
** Includes a redemption fee, which is less than $.01 per share.
*** Based on average shares outstanding.
++ For the year ended June 30, 2006, approximately +.21% of the Fund's Institutional Shares'
total investment return consisted of a payment by Fund Asset Management, L.P. in order to
resolve a regulatory issue relating to an investment.
+++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Financial Highlights (continued)
Investor A
For the Six
The following per share data and ratios Months Ended
have been derived from information December 31, For the Year Ended June 30,
provided in the financial statements. 2006 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 30.44 $ 26.33 $ 23.48 $ 17.98 $ 20.55 $ 22.89
----------- ----------- ----------- ----------- ----------- -----------
Investment income--net*** .16 .49 .50 .25 .39 .23
Realized and unrealized gain (loss)--net 3.24** 6.16** 2.77** 5.70 (2.96) (.70)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 3.40 6.65 3.27 5.95 (2.57) (.47)
----------- ----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income--net (.83) (.55) (.42) (.45) -- (.70)
Realized gain--net (1.98) (1.99) -- -- -- (1.17)
----------- ----------- ----------- ----------- ----------- -----------
Total dividends and distributions (2.81) (2.54) (.42) (.45) -- (1.87)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 31.03 $ 30.44 $ 26.33 $ 23.48 $ 17.98 $ 20.55
=========== =========== =========== =========== =========== ===========
Total Investment Return++
Based on net asset value per share 11.93%+++ 26.84%++++ 14.29% 33.67% (12.55%) (1.42%)
=========== =========== =========== =========== =========== ===========
Ratios to Average Net Assets
Expenses 1.26%* 1.27% 1.33% 1.33% 1.32% 1.38%
=========== =========== =========== =========== =========== ===========
Investment income--net 1.05%* 1.75% 1.94% 1.20% 2.30% 1.19%
=========== =========== =========== =========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 347,718 $ 320,926 $ 254,207 $ 42,238 $ 49,395 $ 97,769
=========== =========== =========== =========== =========== ===========
Portfolio turnover 23% 81% 70% 75% 89% 45%
=========== =========== =========== =========== =========== ===========
* Annualized.
** Includes a redemption fee, which is less than $.01 per share.
*** Based on average shares outstanding.
++ Total investment returns exclude the effect of sales charges.
++++ For the year ended June 30, 2006, approximately +.17% of the Fund's Investor A Shares'
total investment return consisted of a payment by Fund Asset Management, L.P. in order to
resolve a regulatory issue relating to an investment.
+++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Financial Highlights (continued)
Investor B
For the Six
The following per share data and ratios Months Ended
have been derived from information December 31, For the Year Ended June 30,
provided in the financial statements. 2006 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 29.88 $ 25.94 $ 23.24 $ 17.84 $ 20.57 $ 23.09
----------- ----------- ----------- ----------- ----------- -----------
Investment income--net*** .04 .26 .32 .17 .29 .10
Realized and unrealized gain (loss)--net 3.16** 6.07** 2.74** 5.57 (3.02) (.71)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 3.20 6.33 3.06 5.74 (2.73) (.61)
----------- ----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income--net (.60) (.40) (.36) (.34) -- (.74)
Realized gain--net (1.98) (1.99) -- -- -- (1.17)
----------- ----------- ----------- ----------- ----------- -----------
Total dividends and distributions (2.58) (2.39) (.36) (.34) -- (1.91)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 30.50 $ 29.88 $ 25.94 $ 23.24 $ 17.84 $ 20.57
=========== =========== =========== =========== =========== ===========
Total Investment Return++
Based on net asset value per share 11.45%+++ 25.84%++++ 13.45% 32.65% (13.27%) (2.10%)
=========== =========== =========== =========== =========== ===========
Ratios to Average Net Assets
Expenses 2.05%* 2.06% 2.12% 2.11% 2.06% 2.12%
=========== =========== =========== =========== =========== ===========
Investment income--net .27%* .95% 1.27% .81% 1.74% .48%
=========== =========== =========== =========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 87,379 $ 79,165 $ 62,261 $ 19,852 $ 5,343 $ 2,064
=========== =========== =========== =========== =========== ===========
Portfolio turnover 23% 81% 70% 75% 89% 45%
=========== =========== =========== =========== =========== ===========
* Annualized.
** Includes a redemption fee, which is less than $.01 per share.
*** Based on average shares outstanding.
++ Total investment returns exclude the effect of sales charges.
++++ For the year ended June 30, 2006, approximately +.21% of the Fund's Investor B Shares'
total investment return consisted of a payment by Fund Asset Management, L.P. in order to
resolve a regulatory issue relating to an investment.
+++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Financial Highlights (continued)
Investor C
For the Six
The following per share data and ratios Months Ended
have been derived from information December 31, For the Year Ended June 30,
provided in the financial statements. 2006 2006 2005 2004 2003 2002
Per Share Operating Performance
Net asset value, beginning of period $ 29.59 $ 25.72 $ 23.09 $ 17.70 $ 20.39 $ 22.91
----------- ----------- ----------- ----------- ----------- -----------
Investment income--net*** .04 .28 .37 .29 .17 .09
Realized and unrealized gain (loss)--net 3.15** 5.99** 2.65** 5.41 (2.86) (.70)
----------- ----------- ----------- ----------- ----------- -----------
Total from investment operations 3.19 6.27 3.02 5.70 (2.69) (.61)
----------- ----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income--net (.62) (.41) (.39) (.31) -- (.74)
Realized gain--net (1.98) (1.99) -- -- -- (1.17)
----------- ----------- ----------- ----------- ----------- -----------
Total dividends and distributions (2.60) (2.40) (.39) (.31) -- (1.91)
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 30.18 $ 29.59 $ 25.72 $ 23.09 $ 17.70 $ 20.39
=========== =========== =========== =========== =========== ===========
Total Investment Return++
Based on net asset value per share 11.51%+++ 25.86%++++ 13.41% 32.58% (13.19%) (2.10%)
=========== =========== =========== =========== =========== ===========
Ratios to Average Net Assets
Expenses 2.05%* 2.06% 2.12% 2.14% 2.07% 2.06%
=========== =========== =========== =========== =========== ===========
Investment income--net .25%* 1.01% 1.45% 1.38% 1.02% .47%
=========== =========== =========== =========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 291,261 $ 244,931 $ 164,317 $ 38,608 $ 2,672 $ 2,285
=========== =========== =========== =========== =========== ===========
Portfolio turnover 23% 81% 70% 75% 89% 45%
=========== =========== =========== =========== =========== ===========
* Annualized.
** Includes a redemption fee, which is less than $.01 per share.
*** Based on average shares outstanding.
++ Total investment returns exclude the effect of sales charges.
++++ For the year ended June 30, 2006, approximately +.17% of the Fund's Investor C Shares'
total investment return consisted of a payment by Fund Asset Management, L.P. in order to
resolve a regulatory issue relating to an investment.
+++ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Financial Highlights (concluded)
Class R
For the Six For the Period
The following per share data and ratios Months Ended For the Year Ended January 3, 2003++
have been derived from information December 31, June 30, to June 30,
provided in the financial statements. 2006 2006 2005 2004 2003
Per Share Operating Performance
Net asset value, beginning of period $ 30.24 $ 26.19 $ 23.39 $ 17.98 $ 16.79
----------- ----------- ----------- ----------- -----------
Investment income--net** .11 .50 .50 .52 .32
Realized and unrealized gain--net 3.22*** 6.04*** 2.70*** 5.38 .87
----------- ----------- ----------- ----------- -----------
Total from investment operations 3.33 6.54 3.20 5.90 1.19
----------- ----------- ----------- ----------- -----------
Less dividends and distributions:
Investment income--net (.77) (.50) (.40) (.49) --
Realized gain--net (1.98) (1.99) -- -- --
----------- ----------- ----------- ----------- -----------
Total dividends and distributions (2.75) (2.49) (.40) (.49) --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 30.82 $ 30.24 $ 26.19 $ 23.39 $ 17.98
=========== =========== =========== =========== ===========
Total Investment Return
Based on net asset value per share 11.78%+++ 26.52%++++ 14.03% 33.43% 7.09%+++
=========== =========== =========== =========== ===========
Ratios to Average Net Assets
Expenses 1.51%* 1.52% 1.58% 1.60% 1.55%*
=========== =========== =========== =========== ===========
Investment income--net .77%* 1.76% 1.96% 2.34% 3.04%*
=========== =========== =========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 47,290 $ 36,048 $ 16,951 $ 5,905 --+++++
=========== =========== =========== =========== ===========
Portfolio turnover 23% 81% 70% 75% 89%
=========== =========== =========== =========== ===========
* Annualized.
** Based on average shares outstanding.
*** Includes a redemption fee, which is less than $.01 per share.
++ Commencement of operations.
++++ For the year ended June 30, 2006, approximately +.16% of the Fund's Class R Shares'
total investment return consisted of a payment by Fund Asset Management, L.P. in order to
resolve a regulatory issue relating to an investment.
+++ Aggregate total investment return.
+++++ Amount is less than $1,000.
See Notes to Financial Statements.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Notes to Financial Statements
1. Significant Accounting Policies:
On September 29, 2006, Merrill Lynch International Value Fund was renamed
BlackRock International Value Fund (the "Fund"). The Fund is a series of
Mercury Funds II, which was renamed BlackRock Funds II (the "Trust") on
September 29, 2006. The Trust is registered under the Investment Company Act
of 1940, as amended, as a diversified, open-end management investment company,
which is organized as a Massachusetts business trust. The Fund's financial
statements are prepared in conformity with U.S. generally accepted accounting
principles, which may require the use of management accruals and estimates.
Actual results may differ from these estimates. These unaudited financial
statements reflect all adjustments, which are, in the opinion of management,
necessary to present a fair statement of the results for the interim period.
All such adjustments are of a normal, recurring nature. The Fund offers
multiple classes of shares. Effective October 2, 2006, Class I, Class A, Class
B and Class C Shares were redesignated Institutional, Investor A, Investor B
and Investor C Shares, respectively. Class R Shares did not change their
designation. Institutional Shares are sold without a sales charge and only to
certain eligible investors. Investor A Shares are sold with a front-end sales
charge. Investor B and Investor C Shares may be subject to a contingent
deferred sales charge. Class R Shares are sold only to certain retirement
plans. All classes of shares have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except that Investor A,
Investor B, Investor C and Class R Shares bear certain expenses related to the
account maintenance of such shares, and Investor B, Investor C and Class R
Shares also bear certain expenses related to the distribution of such shares.
Each class has exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures (except that Investor B
shareholders may vote on certain changes to the Investor A distribution plan).
Income, expenses (other than expenses attributable to a specific class) and
realized and unrealized gains and losses are allocated daily to each class
based on its relative net assets. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Equity securities held by the Fund that are
traded on stock exchanges or the NASDAQ Global Market are valued at the last
sale price or official close price on the exchange, as of the close of business
on the day the securities are being valued or, lacking any sales, at the last
available bid price for long positions, and at the last available asked price
for short positions. In cases where equity securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Trustees of the Trust.
Long positions traded in the over-the-counter ("OTC") markets, NASDAQ Capital
Market or Bulletin Board are valued at the last available bid price or yield
equivalent obtained from one or more dealers or pricing services approved by
the Board of Trustees of the Trust. Short positions traded in the OTC markets
are valued at the last available asked price. Portfolio securities that are
traded both in the OTC markets and on a stock exchange are valued according to
the broadest and most representative market.
Options written or purchased are valued at the last sale price in the case of
exchange-traded options. Options traded in the OTC markets are valued at the
last asked price (options written) or the last bid price (options purchased).
Swap agreements are valued based upon quoted fair valuations received daily by
the Fund from a pricing service or counterparty. Financial futures contracts
and options thereon, which are traded on exchanges, are valued at their last
sale price as of the close of such exchanges. Obligations with remaining
maturities of 60 days or less are valued at amortized cost unless BlackRock
Advisors, LLC (the "Manager"), an indirect, wholly owned subsidiary of
BlackRock, Inc., believes that this method no longer produces fair valuations.
Valuation of other short-term investment vehicles is generally based on the
net asset value of the underlying investment vehicle or amortized cost.
Repurchase agreements are valued at cost plus accrued interest. The Fund
employs pricing services to provide certain securities prices for the Fund.
Securities and assets for which market quotations are not readily available
are valued at fair value as determined in good faith by or under the direction
of the Board of Trustees of the Trust, including valuations furnished by the
pricing services retained by the Fund, which may use a matrix system for
valuations. The procedures of a pricing service and its valuations are
reviewed by the officers of the Trust under the general supervision of the
Trust's Board of Trustees. Such valuations and procedures will be reviewed
periodically by the Board of Trustees of the Trust.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Notes to Financial Statements (continued)
Generally, trading in foreign securities, as well as U.S. government
securities, money market instruments and certain fixed income securities, is
substantially completed each day at various times prior to the close of
business on the New York Stock Exchange ("NYSE"). The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates will generally be
determined as of the close of business on the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of business on
the NYSE that may not be reflected in the computation of the Fund's net asset
value. 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 securities, those securities will be valued at their
fair value as determined in good faith by the Trust's Board of Trustees or by
the Manager using a pricing service and/or procedures approved by the Trust's
Board of Trustees.
(b) Derivative financial instruments--The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the
securities markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
* Forward foreign exchange contracts--The Fund may enter into forward foreign
exchange contracts as a hedge against either specific transactions or
portfolio positions. The contract is marked-to-market daily and the change in
market value is recorded by the Fund as an unrealized gain or loss. When the
contract is closed, the Fund 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.
(c) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized.
Assets and liabilities denominated in foreign currencies are valued at the
exchange rate at the end of the period. Foreign currency transactions are the
result of settling (realized) or valuing (unrealized) assets or liabilities
expressed in foreign currencies into U.S. dollars. Realized and unrealized
gains or losses from investments include the effects of foreign exchange rates
on investments. The Fund invests in foreign securities, which may involve a
number of risk factors and special considerations not present with investments
in securities of U.S. corporations.
(d) Income taxes--It is the Fund's policy to comply with the requirements of
the Internal Revenue Code 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. Under the applicable
foreign tax law, withholding taxes may be imposed on interest, dividends and
capital gains at various rates.
(e) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security 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 Fund has determined the ex-dividend date.
Interest income is recognized on the accrual basis.
(f) Prepaid registration fees--Prepaid registration fees are charged to
expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(h) Securities lending--The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. The market
value of the loaned securities is determined at the close of business of the
Fund and any additional required collateral is delivered to the Fund on the
next business day. Where the Fund receives securities as collateral for the
loaned securities, it collects a fee from the borrower. The Fund typically
receives the income on the loaned securities but does not receive the income
on the collateral. Where the Fund receives cash collateral, it may invest such
collateral and retain the amount earned on such investment, net of any amount
rebated to the borrower. Loans of securities are terminable at any time and
the borrower, after notice, is required to return borrowed securities within
five business days. The Fund may pay reasonable finder's, lending agent,
administrative and custodial fees in connection with its loans. In the event
that the borrower defaults on its obligation to return borrowed securities
because of insolvency or for any other reason, the Fund could experience
delays and costs in gaining access to the collateral. The Fund also could
suffer a loss where the value of the collateral falls below the market value
of the borrowed securities, in the event of borrower default or in the event
of losses on investments made with cash collateral.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Notes to Financial Statements (continued)
(i) Recent accounting pronouncements--In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes - an interpretation of FASB Statement No.
109." FIN 48 prescribes the minimum recognition threshold a tax position must
meet in connection with accounting for uncertainties in income tax positions
taken or expected to be taken by an entity including mutual funds before being
measured and recognized in the financial statements. Adoption of FIN 48 is
required for the last net asset value calculation in the first required
financial statement reporting period for fiscal years beginning after December
15, 2006. The impact on the Fund's financial statements, if any, is currently
being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards
No. 157, "Fair Value Measurements," ("FAS 157"), was issued and is effective
for fiscal years beginning after November 15, 2007. FAS 157 defines fair
value, establishes a framework for measuring fair value and expands disclosures
about fair value measurements. Management is currently evaluating the
implication of FAS 157. At this time its impact on the Fund's financial
statements has not been determined.
2. Investment Advisory Agreement and Transactions with Affiliates:
On September 29, 2006, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill
Lynch") combined Merrill Lynch's investment management business, Merrill Lynch
Investment Managers, L.P. ("MLIM"), and its affiliates, including Fund Asset
Management, L.P. ("FAM"), with BlackRock, Inc. to create a new independent
company. Merrill Lynch has a 49.8% economic interest and a 45% voting interest
in the combined company and The PNC Financial Services Group, Inc. ("PNC"),
has approximately a 34% economic and voting interest. The new company operates
under the BlackRock name and is governed by a board of directors with a
majority of independent members.
On August 31, 2006, shareholders of the Fund approved a new Investment
Advisory Agreement with the Manager. BlackRock Advisors, Inc. was recently
reorganized into a limited liability company and renamed BlackRock Advisors,
LLC. The new Investment Advisory Agreement between the Fund and the Manager
became effective on September 29, 2006. Prior to September 29, 2006, FAM was
the Fund's Manager. The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly owned subsidiary of Merrill Lynch, which is the
limited partner. The Fund has also entered into separate Distribution
Agreements and Distribution Plans with FAM Distributors, Inc. ("FAMD") and
BlackRock Distributors, Inc. ("BDI") (collectively, the "Distributor"). FAMD
is a wholly owned subsidiary of Merrill Lynch Group, Inc. and BDI is an
affiliate of BlackRock, Inc.
The Manager is responsible for the management of the Fund's investments and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Fund. For such services, the Fund
pays a monthly fee at an annual rate of .75% of the average daily value of the
Fund's net assets not exceeding $2 billion, .70% of the average daily value of
the Fund's net assets in excess of $2 billion but not exceeding $4 billion
and .65% of the average daily value of the Fund's net assets in excess of
$4 billion.
In addition, the Manager has entered into a sub-advisory agreement with
BlackRock Investment Management International Limited, an affiliate of the
Manager, under which the Manager pays the Sub-Adviser for services it provides
a fee that is a percentage of the management fee paid by the Fund to the
Manager. Prior to September 29, 2006, FAM had Sub-Advisory Agreements with
Merrill Lynch Investment Managers International Limited ("MLIMIL") and Merrill
Lynch Asset Management U.K. Limited ("MLAM U.K."), affiliated advisers that
are indirect subsidiaries of Merrill Lynch.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance fees ("service fees") and distribution fees. The
fees are accrued daily and paid monthly at the annual rates based upon the
average daily net assets of the shares as follows:
Service Distribution
Fee Fee
Investor A .25% --
Investor B .25% .75%
Investor C .25% .75%
Class R .25% .25%
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Notes to Financial Statements (continued)
Pursuant to sub-agreements with each Distributor, selected dealers also
provide account maintenance and distribution services to the Fund. The ongoing
service fee compensates the Distributors and selected dealers for providing
account maintenance services to Investor A, Investor B, Investor C and Class R
shareholders. The ongoing distribution fee compensates the Distributors and
the broker-dealers for providing shareholder and distribution-related services
to Investor B, Investor C and Class R shareholders.
For the six months ended December 31, 2006, FAMD, the Fund's sole Distributor
until September 29, 2006, and BDI earned underwriting discounts and direct
commissions and Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"),
an affiliate of FAM and the Manager, earned dealer concessions on sales of the
Fund's Institutional and Investor A Shares as follows:
FAMD MLPF&S BDI
Institutional $ -- $ -- $ --
Investor A $ 10,737 $ 136,872 $ 5
For the six months ended December 31, 2006, MLPF&S received contingent
deferred sales charges of $4,773 and $3,225 relating to transactions in
Investor B and Investor C Shares, respectively.
In addition, MLPF&S received $15,576 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended
December 31, 2006.
BlackRock maintains a call center, which is responsible for providing certain
shareholder services to the Fund, such as responding to shareholder inquiries
and processing transactions based upon instructions from shareholders with
respect to the subscription and redemption of Fund shares. During the period
September 29, 2006 to December 31, 2006, the following amounts have been
accrued by the Fund to reimburse BlackRock for costs incurred running the call
center, which are a component of the transfer agent fees in the accompanying
Statement of Operations.
Call Center
Fees
Institutional $4,251
Investor A $1,572
Investor B $ 396
Investor C $1,079
Class R $ 68
Effective September 29, 2006, PFPC Inc., an indirect, wholly owned subsidiary
of PNC and an affiliate of the Manager, became the Fund's transfer agent.
Prior to September 29, 2006, the Fund's transfer agent was Financial Data
Services, Inc. ("FDS"), a wholly owned subsidiary of Merrill Lynch.
MLIM reimbursed the Fund $9,637 in order to resolve a regulatory issue
relating to an investment.
For the six months ended December 31, 2006, the Fund reimbursed MLIM and the
Manager $8,426, and $8,425, respectively, for certain accounting services.
Prior to September 29, 2006, certain officers and/or trustees of the Trust
were officers and/or directors of FAM, PSI, FAMD, FDS, Merrill Lynch, MLIM,
MLIMIL and/or MLAM U.K.
Commencing September 29, 2006, certain officers and/or trustees of the Trust
are officers and/or directors of BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
six months ended December 31, 2006 were $446,651,420 and $398,623,498,
respectively.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$202,665,066 and $128,563,673 for the six months ended December 31, 2006 and
the year ended June 30, 2006, respectively.
Transactions in capital shares for each class were as follows:
Institutional Shares for
the Six Months Ended Dollar
December 31, 2006 Shares Amount
Shares sold 4,759,775 $ 144,516,642
Shares issued to shareholders in
reinvestment of dividends and
distributions 3,129,989 91,243,577
-------------- ---------------
Total issued 7,889,764 235,760,219
Shares redeemed (3,547,058) (107,489,525)
-------------- ---------------
Net increase 4,342,706 $ 128,270,694
============== ===============
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Notes to Financial Statements (continued)
Institutional Shares for the Dollar
Year Ended June 30, 2006 Shares Amount
Shares sold 7,769,376 $ 223,022,198
Shares issued to shareholders in
reinvestment of dividends and
distributions 2,828,499 75,709,098
-------------- ---------------
Total issued 10,597,875 298,731,296
Shares redeemed (9,460,879) (267,112,761)
-------------- ---------------
Net increase 1,136,996 $ 31,618,535
============== ===============
Investor A Shares for
the Six Months Ended Dollar
December 31, 2006 Shares Amount
Shares sold 1,213,537 $ 36,611,830
Automatic conversion of shares 68,920 2,109,010
Shares issued to shareholders in
reinvestment of dividends and
distributions 927,989 26,958,673
-------------- ---------------
Total issued 2,210,446 65,679,513
Shares redeemed (1,545,962) (46,973,841)
-------------- ---------------
Net increase 664,484 $ 18,705,672
============== ===============
Investor A Shares for the Dollar
Year Ended June 30, 2006 Shares Amount
Shares sold 2,343,423 $ 65,898,332
Automatic conversion of shares 262,948 7,296,422
Shares issued to shareholders in
reinvestment of dividends and
distributions 884,011 23,605,077
-------------- ---------------
Total issued 3,490,382 96,799,831
Shares redeemed (2,602,866) (72,617,918)
-------------- ---------------
Net increase 887,516 $ 24,181,913
============== ===============
Investor B Shares for
the Six Months Ended Dollar
December 31, 2006 Shares Amount
Shares sold 679,911 $ 20,122,394
Shares issued to shareholders in
reinvestment of dividends and
distributions 232,779 6,626,498
-------------- ---------------
Total issued 912,690 26,748,892
-------------- ---------------
Automatic conversion of shares (70,298) (2,109,010)
Shares redeemed (627,627) (18,530,531)
-------------- ---------------
Total redeemed (697,925) (20,639,541)
-------------- ---------------
Net increase 214,765 $ 6,109,351
============== ===============
Investor B Shares for the Dollar
Year Ended June 30, 2006 Shares Amount
Shares sold 1,288,052 $ 35,806,069
Shares issued to shareholders in
reinvestment of dividends and
distributions 205,987 5,424,023
-------------- ---------------
Total issued 1,494,039 41,230,092
-------------- ---------------
Automatic conversion of shares (267,121) (7,296,422)
Shares redeemed (977,725) (27,177,426)
-------------- ---------------
Total redeemed (1,244,846) (34,473,848)
-------------- ---------------
Net increase 249,193 $ 6,756,244
============== ===============
Investor C Shares for
the Six Months Ended Dollar
December 31, 2006 Shares Amount
Shares sold 1,735,839 $ 50,857,723
Shares issued to shareholders in
reinvestment of dividends and
distributions 758,236 21,372,941
-------------- ---------------
Total issued 2,494,075 72,230,664
Shares redeemed (1,118,286) (32,761,393)
-------------- ---------------
Net increase 1,375,789 $ 39,469,271
============== ===============
Investor C Shares for the Dollar
Year Ended June 30, 2006 Shares Amount
Shares sold 3,395,024 $ 93,383,656
Shares issued to shareholders in
reinvestment of dividends and
distributions 587,241 15,322,598
-------------- ---------------
Total issued 3,982,265 108,706,254
Shares redeemed (2,093,364) (58,042,166)
-------------- ---------------
Net increase 1,888,901 $ 50,664,088
============== ===============
Class R Shares for the
Six Months Ended Dollar
December 31, 2006 Shares Amount
Shares sold 448,247 $ 13,434,461
Shares issued to shareholders in
reinvestment of dividends and
distributions 124,797 3,601,265
-------------- ---------------
Total issued 573,044 17,035,726
Shares redeemed (230,800) (6,925,648)
-------------- ---------------
Net increase 342,244 $ 10,110,078
============== ===============
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Notes to Financial Statements (concluded)
Class R Shares for the Dollar
Year Ended June 30, 2006 Shares Amount
Shares sold 788,684 $ 22,354,493
Shares issued to share-
holders in reinvestment
of dividends and
distributions 67,457 1,792,621
-------------- ---------------
Total issued 856,141 24,147,114
Shares redeemed (311,421) (8,804,221)
-------------- ---------------
Net increase 544,720 $ 15,342,893
============== ===============
The Fund charges a 2% redemption fee on the proceeds (calculated at market
value) of a redemption (either by sale or exchange) of Fund shares made within
30 days of purchase or exchange. The redemption fee is paid to the Fund and is
intended to offset the trading costs, market impact and other costs associated
with short-term trading into and out of the Fund.
5. Short-Term Borrowings:
The Trust, on behalf of the Fund, along with certain other funds managed by
the Manager and its affiliates (or FAM and its affiliates), is a party to a
$500,000,000 credit agreement with a group of lenders. The Fund may borrow
under the credit agreement to fund shareholder redemptions and for other
lawful purposes other than for leverage. The Fund may borrow up to the maximum
amount allowable under the Fund's current prospectus and statement of
additional information, subject to various other legal, regulatory or
contractual limits. On November 22, 2006 the credit agreement was renewed for
one year under substantially the same terms. The Fund pays a commitment fee of
..06% per annum based on the Fund's pro rata share of the unused portion of the
credit agreement. Amounts borrowed under the credit agreement bear interest at
a rate equal to, at each Fund's election, the federal funds rate plus .35% or
a base rate as defined in the credit agreement. The Fund did not borrow under
the credit agreement during the six months ended December 31, 2006.
6. Capital Loss Carryforward:
On June 30, 2006, the Fund had a net capital loss carryforward of $42,315,428,
all of which expires in 2010. Subject to limitations, this amount will be
available to offset like amounts of future taxable gains.
Proxy Results
During the six-month period ended December 31, 2006, BlackRock International
Value Fund's shareholders voted on the following proposals. On August 15,
2006, a special shareholders' meeting was adjourned with respect to the
proposals until August 31, 2006, at which time they were approved. A
description of the proposals and number of shares voted are as follows:
Shares Voted Shares Voted Shares Voted
For Against Abstain
To approve a new investment advisory agreement with
BlackRock Advisors, Inc. 27,251,535 454,385 425,480
To approve a contingent subadvisory agreement with
BlackRock Advisors, Inc. 27,240,480 474,877 416,043
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Disclosure of Investment Advisory Agreement
BlackRock Investment Advisory Agreement--Matters Considered by the Board
The following disclosure appeared in the June 30, 2006 Annual Report of the
Fund and is the discussion referred to in "New BlackRock Sub-Advisory
Agreement - Matters Considered by the Board" below. The term "Investment
Adviser" as used herein refers to Merrill Lynch Investment Managers, L.P.
In connection with the Transaction between Merrill Lynch and BlackRock, the
Fund's Board of Trustees considered a new investment advisory agreement (the
"New Investment Advisory Agreement") between the Fund and BlackRock Advisors,
Inc. or its successor ("BlackRock Advisors"). If the New Investment Advisory
Agreement is approved by the Fund's shareholders, it will become effective
upon the closing of the Transaction, which is expected in the third quarter
of 2006.
The Board discussed the New Investment Advisory Agreement at telephonic and
in-person meetings held during April and May 2006. The Board, including the
independent trustees, approved the New Investment Advisory Agreement at a
meeting held on May 9, 2006.
To assist the Board in its consideration of the New Investment Advisory
Agreement, BlackRock provided materials and information about BlackRock,
including its financial condition and asset management capabilities and
organization, and Merrill Lynch provided materials and information about the
Transaction. The independent trustees, through their independent legal
counsel, also requested and received additional information from Merrill Lynch
and BlackRock in connection with their consideration of the New Investment
Advisory Agreement. The additional information was provided in advance of the
May 9, 2006 meeting. In addition, the independent trustees consulted with
their counsel and Fund counsel on numerous occasions, discussing, among other
things, the legal standards and certain other considerations relevant to the
trustees' deliberations.
At the Board meetings, the trustees discussed with Merrill Lynch management
and certain BlackRock representatives the Transaction, its strategic rationale
and BlackRock's general plans and intentions regarding the Fund. At these
Board meetings, representatives of Merrill Lynch and BlackRock made
presentations to and responded to questions from the Board. The trustees also
inquired about the plans for and anticipated roles and responsibilities of
certain employees and officers of the Investment Adviser and certain
affiliates being transferred to BlackRock in connection with the Transaction.
The independent trustees of the Board also conferred separately and with their
counsel about the Transaction and other matters related to the Transaction on
a number of occasions, including in connection with the April and May 2006
meetings. After the presentations and after reviewing the written materials
provided, the independent trustees met in executive sessions with their
counsel to consider the New Investment Advisory Agreement.
In connection with the Board's review of the New Investment Advisory
Agreement, Merrill Lynch and/or BlackRock advised the trustees about a variety
of matters. The advice included the following, among other matters:
* that there is not expected to be any diminution in the nature, quality and
extent of services provided to the Fund and its shareholders by BlackRock
Advisors, including compliance services;
* that operation of New BlackRock as an independent investment management
firm will enhance its ability to attract and retain talented professionals;
* that the Fund should benefit from having access to BlackRock's state of the
art technology and risk management analytic tools, including investment
tools, provided under the BlackRock Solutions (R) brand name;
* that BlackRock has no present intention to alter any applicable expense
waivers or reimbursements currently in effect and, while it reserves the
right to do so in the future, it would seek the approval of the Board
before making any changes;
* that BlackRock and Merrill Lynch will enter into an agreement, for an
initial three-year period and automatically renewable from year to year
thereafter, in connection with the Transaction under which Merrill Lynch-
affiliated broker-dealers will continue to offer the Fund as an investment
product;
* that BlackRock Advisors will have substantially the same access to the
Merrill Lynch sales force when distributing shares of the Fund as is
currently provided to the Investment Adviser and that other arrangements
between the Investment Adviser and Merrill Lynch sales channels will be
preserved;
* that the Fund will have access to BlackRock's network of third party
brokers, retirement plan platforms and registered investment advisers;
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Disclosure of Investment Advisory Agreement (continued)
* that in connection with the Transaction, Merrill Lynch and BlackRock have
agreed to conduct, and use reasonable best efforts to cause their
respective affiliates to conduct, their respective businesses in compliance
with the conditions of Section 15(f) of the Investment Company Act of 1940
(the "1940 Act") in relation to any public funds advised by BlackRock or
the Investment Adviser (or its affiliates), respectively; and
* that Merrill Lynch and BlackRock would derive benefits from the Transaction
and that, as a result, they have a different financial interest in the
matters that were being considered than do Fund shareholders.
The trustees considered the information provided by Merrill Lynch and
BlackRock above, and, among other factors, the following:
* the potential benefits to Fund shareholders from being part of a combined
fund family with BlackRock-sponsored funds, including possible economies of
scale and access to investment opportunities;
* the potential for expanding distribution of Fund shares through improved
access to third party distribution;
* the reputation, financial strength and resources of BlackRock and its
investment advisory subsidiaries and the anticipated financial strength and
resources of New BlackRock;
* the compliance policies and procedures of BlackRock Advisors;
* the terms and conditions of the New Investment Advisory Agreement,
including the fact that the Fund's advisory fee schedule will not increase
by virtue of the New Investment Advisory Agreement and, because breakpoints
were added to the Fund's advisory fee schedule, will lower the Fund's
average fee rate if the Fund grows in size;
* that in November 2005, the Board performed a full annual review of the
investment advisory agreement currently in effect for the Fund (the
"Current Investment Advisory Agreement") as required by the 1940 Act and
has determined that the Investment Adviser has the capabilities, resources
and personnel necessary to provide the advisory and administrative services
currently provided to the Fund; and that the advisory and/or management
fees paid by the Fund, taking into account any applicable agreed-upon fee
waivers and break points, represent reasonable compensation to the
Investment Adviser in light of the services provided, the costs to the
Investment Adviser of providing those services, economies of scale, the
fees and other expenses paid by similar funds (including information
provided by Lipper Inc. ["Lipper"]), and such other matters as the trustees
have considered relevant in the exercise of their reasonable judgment; and
* that Merrill Lynch agreed to pay all expenses of the Fund in connection
with the Board's consideration of the New Investment Advisory Agreement and
related agreements and all costs of shareholder approval of the New
Investment Advisory Agreement and as a result the Fund would bear no costs
in obtaining shareholder approval of the New Investment Advisory Agreement.
Certain of these considerations are discussed in more detail below.
In its review of the New Investment Advisory Agreement, the Board assessed the
nature, scope and quality of the services to be provided to the Fund by the
personnel of BlackRock Advisors and its affiliates, including administrative
services, shareholder services, oversight of fund accounting, marketing
services and assistance in meeting legal and regulatory requirements. In its
review of the New Investment Advisory Agreement, the Board also considered a
range of information in connection with its oversight of the services to be
provided by BlackRock Advisors and its affiliates. Among the matters
considered were: (a) fees (in addition to management fees) to be paid to
BlackRock Advisors and its affiliates by the Fund; (b) Fund operating expenses
paid to third parties; (c) the resources devoted to and compliance reports
relating to the Fund's investment objective, policies and restrictions, and
its compliance with its Code of Ethics and BlackRock Advisors' compliance
policies and procedures; and (d) the nature, cost and character of non-
investment management services to be provided by BlackRock Advisors and its
affiliates.
In the period prior to the Board meetings to consider renewal of the Current
Investment Advisory Agreement, the Board had requested and received materials
specifically relating to the Current Investment Advisory Agreement. These
materials included (a) information compiled by Lipper on the fees and expenses
and the investment performance of the Fund as compared to a comparable group
of funds as classified by Lipper; (b) a discussion by the Fund's portfolio
management team on investment strategies used by the Fund during its most
recent fiscal year; (c) information on the profitability to the Investment
Adviser of the Current Investment Advisory Agreement and other payments
received by the Investment Adviser and its affiliates from the Fund; and (d)
information provided by the Investment Adviser concerning services related to
the valuation and pricing of Fund portfolio holdings, allocation of Fund
brokerage fees, the Fund's portfolio turnover statistics, and direct and
indirect benefits to the Investment Adviser and its affiliates from their
relationship with the Fund.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
In their deliberations, the trustees considered information received in
connection with their most recent continuation of the Current Investment
Advisory Agreement, in addition to information provided by BlackRock and
BlackRock Advisors in connection with their evaluation of the terms and
conditions of the New Investment Advisory Agreement. The trustees did not
identify any particular information that was all-important or controlling. The
trustees, including a majority of the independent trustees, concluded that the
terms of the New Investment Advisory Agreement are appropriate, that the fees
to be paid are reasonable in light of the services to be provided to the Fund,
and that the New Investment Advisory Agreement should be approved and
recommended to Fund shareholders.
Nature, Quality and Extent of Services Provided--The Board reviewed the
nature, extent and quality of services provided by the Investment Adviser,
including the investment advisory services and the resulting performance of
the Fund, as well as the nature, quality and extent of services expected to be
provided by BlackRock Advisors. The Board focused primarily on the Investment
Adviser's investment advisory services and the Fund's investment performance,
but also considered certain areas in which both the Investment Adviser and the
Fund receive services as part of the Merrill Lynch complex. The Board compared
the Fund's performance - both including and excluding the effects of fees and
expenses - to the performance of a comparable group of mutual funds, and the
performance of a relevant index or combination of indexes. While the Board
reviews performance data at least quarterly, consistent with the Investment
Adviser's investment goals, the Board attaches more importance to performance
over relatively long periods of time, typically three to five years.
In evaluating the nature, quality and extent of the services to be provided by
BlackRock Advisors under the New Investment Advisory Agreement, the trustees
considered, among other things, the expected impact of the Transaction on the
operations, facilities, organization and personnel of New BlackRock and how it
would affect the Fund; the ability of BlackRock Advisors to perform its duties
after the Transaction; and any anticipated changes to the current investment
and other practices of the Fund.
The trustees were given information with respect to the potential benefits to
the Fund and its shareholders from having access to BlackRock's state of the
art technology and risk management analytic tools, including the investment
tools provided under the BlackRock Solutions brand name.
The trustees were advised that, as a result of Merrill Lynch's equity interest
in BlackRock after the Transaction, the Fund will continue to be subject to
restrictions concerning certain transactions involving Merrill Lynch
affiliates (for example, transactions with a Merrill Lynch broker-dealer
acting as principal) absent revised or new regulatory relief. The trustees
were advised that a revision of existing regulatory relief with respect to
these restrictions was being sought from the Securities and Exchange
Commission and were advised of the possibility of receipt of such revised
regulatory relief. There can be no assurance that such relief will be
obtained.
Based on their review of the materials provided and the assurances they had
received from the management of Merrill Lynch and of BlackRock, the trustees
determined that the nature and quality of services to be provided to the Fund
under the New Investment Advisory Agreement were expected to be as good or
better than that provided under the Current Investment Advisory Agreement. It
was noted, however, that it is expected that there will be changes in
personnel following the Transaction and the combination of the operations of
the Investment Adviser and its affiliates with those of BlackRock. The
trustees noted that if current portfolio managers or other personnel cease to
be available, the Board would consider all available options, which could
include seeking the investment advisory or other services of BlackRock
affiliates. Accordingly, the trustees concluded that, overall, they were
satisfied at the present time with assurances from BlackRock and BlackRock
Advisors as to the expected nature, extent and quality of the services to be
provided to the Fund under the New Investment Advisory Agreement.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Disclosure of Investment Advisory Agreement (concluded)
Costs of Services Provided and Profitability--It was noted that, in
conjunction with the recent review of the Current Investment Advisory
Agreement, the trustees had received, among other things, a report from Lipper
comparing the Fund's fees, expenses and performance to those of a peer group
selected by Lipper, and information as to the fees charged by the Investment
Adviser or its affiliates to other registered investment company clients for
investment management services. The Board reviewed the Fund's contractual
management fee rate and actual management fee rate as a percentage of total
assets at common asset levels - the actual rate includes advisory fees and the
effects of any fee waivers - compared to the other funds in its Lipper
category. They also compared the Fund's total expenses to those of other
comparable funds. The information showed that the Fund had fees and expenses
within the range of fees and expenses of comparable funds. The Board concluded
that the Fund's management fee and fee rate and overall expense ratio are
reasonable compared to those of other comparable funds.
In evaluating the costs of the services to be provided by BlackRock Advisors
under the New Investment Advisory Agreement, the trustees considered, among
other things, whether advisory fees or other expenses would change as a result
of the Transaction. Based on their review of the materials provided and the
fact that the New Investment Advisory Agreement is substantially similar to
the Current Investment Advisory Agreement in all material respects, including
the rate of compensation, the trustees determined that the Transaction should
not increase the total fees pay-able, including any fee waivers or after any
expense caps or expense reimbursements, for advisory and administrative
services. The trustees noted that it was not possible to predict how the
Transaction would affect BlackRock Advisors' profitability from its
relationship with the Fund.
The trustees discussed with BlackRock Advisors its general methodology to be
used in determining its profitability with respect to its relationship with
the Fund and noted that they expect to receive profitability information from
BlackRock Advisors on at least an annual basis.
Fees and Economies of Scale--The Board considered the extent to which
economies of scale might be realized as the assets of the Fund increase and
whether there should be changes in the management fee rate or structure in
order to enable the Fund to participate in these economies of scale.
Breakpoints were added to the Fund's fee schedule that would have the effect
of lowering the Fund's average fee rates if the Fund grows in size. Otherwise,
the Board determined that changes were not currently necessary and that the
Fund appropriately participated in these economies of scale.
In reviewing the Transaction, the trustees considered, among other things,
whether advisory fees or other expenses would change as a result of the
Transaction. Based on the fact that the New Investment Advisory Agreement is
substantially similar to the Current Investment Advisory Agreement in all
material respects, including the rate of compensation, the trustees determined
that as a result of the Transaction, the Fund's total advisory fees would be
no higher than the fees under its Current Investment Advisory Agreement. The
trustees concluded that, because the rates for advisory fees for the Fund
would be no higher than its current fee rates, the proposed management fee
structure, including any fee waivers and the addition of breakpoints that
would have the effect of lowering the Fund's average fee rates if the Fund
grows in size, was reasonable and that no additional changes were currently
necessary.
Fall-Out Benefits--The trustees considered whether the Fund would generate any
fall-out benefits to BlackRock Advisors. Fall-out benefits are indirect
profits from other activities that accrue to the adviser or its affiliates
solely because of the existence of the Fund. In evaluating the fall-out
benefits to be received by BlackRock Advisors under the New Investment
Advisory Agreement, the trustees considered whether the Transaction would have
an impact on the fall-out benefits received by the Investment Adviser by
virtue of the Current Investment Advisory Agreement. Based on their review of
the materials provided, including materials received in connection with their
most recent approval or continuance of the Current Investment Advisory
Agreement, and their discussions with management of the Investment Adviser and
BlackRock, the trustees determined that those benefits could include increased
ability for BlackRock to distribute shares of its funds and other investment
products and to obtain research services using the Fund's portfolio
transaction brokerage commissions. The trustees noted that any such benefits
were difficult to quantify with certainty at this time, and indicated that
they would continue to evaluate them going forward.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Investment Performance--The trustees considered investment performance for the
Fund. The trustees compared the Fund's performance - both including and
excluding the effects of fees and expenses - to the performance of a
comparable group of mutual funds, and the performance of a relevant index or
combination of indexes. The comparative information received from Lipper
showed Fund performance at various levels within the range of performance of
comparable funds over different time periods. The trustees believed the Fund's
performance was satisfactory. The Board noted BlackRock's considerable
investment management experience and capabilities, but was unable to predict
what effect, if any, consummation of the Transaction would have on the future
performance of the Fund.
Conclusion--After the independent trustees of the Fund deliberated in
executive session, the entire Board, including the independent trustees,
approved the New Investment Advisory Agreement, concluding that the advisory
fee rate was reasonable in relation to the services provided and that the New
Investment Advisory Agreement was in the best interests of the shareholders.
In approving the New Investment Advisory Agreement, the Board noted that it
anticipated reviewing the continuance of the agreement in advance of the
expiration of the initial two-year period.
Contingent BlackRock Sub-Advisory Agreement--Matters Considered by the Board
At the telephonic and in-person meetings held during April and May 2006 at
which the Board of Trustees discussed and approved the New Investment Advisory
Agreement, the Board, including the independent trustees, also discussed and
approved a contingent sub-advisory agreement (the "Contingent Sub-Advisory
Agreement") between the Investment Adviser and BlackRock Advisors (the
"BlackRock Sub-Adviser"). The Contingent Sub-Advisory Agreement is intended to
ensure that the Fund operate with efficient portfolio management services
until the closing of the Transaction, in the event that the Board deems it
necessary and in the best interests of the Fund and its shareholders that the
BlackRock Sub-Adviser assist in managing the operations of the Fund during the
interim period until the closing of the Transaction. If shareholders approve
the Contingent Sub-Advisory Agreement, it will take effect only upon
recommendation from the Investment Adviser and upon subsequent approval of the
Board in the period up to the closing of the Transaction. The effectiveness of
the Contingent Sub-Advisory Agreement, therefore, would be contingent on
further Board approval after shareholders approve it. Pursuant to the
Contingent Sub-Advisory Agreement, the BlackRock Sub-Adviser would receive a
monthly fee from the Investment Adviser equal to 50% of the advisory fee
received by the Investment Adviser.
The Investment Adviser would pay the BlackRock Sub-Adviser out of its own
resources. There would be no increase in Fund expenses as a result of the
Contingent Sub-Advisory Agreement.
In making its approval at the May in-person meeting, the Board considered the
Contingent Sub-Advisory Agreement in conjunction with the New Investment
Advisory Agreement and reviewed the same information and factors discussed
above, and came to the same conclusions. The Board also considered in
conjunction with the Contingent Sub-Advisory Agreement the necessity of
ensuring that the Fund operate with effective management services until the
closing of the Transaction. In reviewing the sub-advisory fee rate provided in
the Contingent Sub-Advisory Agreement, the Board took note of the fact that
both the Investment Adviser and the BlackRock Sub-Adviser would have
significant responsibilities under their respective advisory agreements. The
Investment Adviser would remain responsible for oversight of the Fund's
operations and administration and the BlackRock Sub-Adviser would provide
advisory services to the Fund under the Contingent Sub-Advisory Agreement. The
Board also took into account the expected short duration of the term of any
Contingent Sub-Advisory Agreement and the fact that total advisory fees paid
by the Fund would not increase as a result of the Contingent Sub-Advisory
Agreement. Under all of the circumstances, the Board concluded that it was a
reasonable allocation of fees for the BlackRock Sub-Adviser to receive 50% of
the advisory fee paid by the Fund to the Investment Adviser.
After the independent trustees deliberated in executive session, the entire
Board, including the independent trustees, approved the Contingent Sub-
Advisory Agreement, concluding that the advisory fee was reasonable in
relation to the services provided and that the Contingent Sub-Advisory
Agreement was in the best interests of shareholders.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
Disclosure of New Sub-Advisory Agreement
New BlackRock Sub-Advisory Agreement--Matters Considered by the Board
At an in-person meeting held on August 22 - 23, 2006, the Board of Trustees,
including the independent trustees, discussed and approved the sub-advisory
agreement with respect to the Fund between BlackRock Advisors, LLC (previously
organized as BlackRock Advisors, Inc.) ("BlackRock Advisors") and its
affiliate, BlackRock Investment Management International Limited (the "Sub-
Adviser") (the "BlackRock Sub-Advisory Agreement"). The BlackRock Sub-Advisory
Agreement became effective on September 29, 2006, at the same time the New
Investment Advisory Agreement with BlackRock Advisors (which had been approved
by the Fund's shareholders) became effective.
Pursuant to the BlackRock Sub-Advisory Agreement, the Sub-Adviser receives a
monthly fee from BlackRock Advisors at an annual rate equal to 74% of the
advisory fee received by BlackRock Advisors from the Fund. BlackRock Advisors
pays the Sub-Adviser out of its own resources, and there is no increase in
Fund expenses as a result of the BlackRock Sub-Advisory Agreement.
In approving the BlackRock Sub-Advisory Agreement at the August in-person
meeting, the Board reviewed its considerations in connection with its approval
of the New Investment Advisory Agreement in May 2006. The Board relied on the
same information and considered the same factors as those discussed above in
connection with the approval of the New Investment Advisory Agreement, and
came to the same conclusions. In reviewing the sub-advisory fee rate provided
for in the BlackRock Sub-Advisory Agreement, the Board noted the fact that
both BlackRock Advisors and the Sub-Adviser have significant responsibilities
under their respective advisory agreements. Under the New Investment Advisory
Agreement, BlackRock Advisors remains responsible for the overall management
of the Fund and for oversight of the Fund's operations and administration.
Under the BlackRock Sub-Advisory Agreement, the Sub-Adviser provides advisory
services to the Fund and is responsible for the day-to-day management of the
Fund's portfolio. The Board also took into account the fact that there is no
increase in total advisory fees paid by the Fund as a result of the BlackRock
Sub-Advisory Agreement. Based on its considerations, the Board concluded that
it was a reasonable allocation of fees for the Sub-Adviser to receive a fee at
an annual rate equal to 74% of the advisory fee paid by the Fund to BlackRock
Advisors.
After the independent trustees deliberated in executive session, the entire
Board, including the independent trustees, approved the BlackRock Sub-Advisory
Agreement, concluding that the sub-advisory fee was reasonable in relation to
the services provided and that the BlackRock Sub-Advisory Agreement was in the
best interests of the Fund's shareholders.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former
fund investors and individual clients (collectively, "Clients") and to
safeguarding their nonpublic personal information. The following information
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 nonpublic information from and about
you from different sources, including the following: (i) information we
receive from you or, if applicable, your financial intermediary, on
applications, 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 Web sites.
BlackRock does not sell or disclose to nonaffiliated third parties any
nonpublic personal information about its Clients, except as permitted by law
or as is necessary to service Client accounts. These nonaffiliated 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
nonpublic 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 nonpublic personal information of its Clients, including procedures
relating to the proper storage and disposal of such information.
Availability of Additional Information
Electronic copies of most financial reports and prospectuses are available on
the Fund's Web site or shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Fund's electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment
advisers, banks or brokerages may offer this service.
Shareholders Who Hold Accounts Directly with BlackRock:
1) Access the BlackRock Web site at
http://www.blackrock.com/edelivery
2) Select eDelivery under the More Information section
3) Log into your account
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it 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 contact the Fund at
(800) 441-7762.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
BlackRock Funds (concluded)
Availability of Additional Information (concluded)
Availability of Proxy Voting Policies and Procedures
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Trustees.
A description of the policies and procedures that BlackRock and its affiliates
use to determine how to vote proxies relating to portfolio securities is
available without charge, upon request, on our Web site at www.blackrock.com,
by calling (800) 441-7762, or on the Web site of the Securities and Exchange
Commission (the "Commission") at http://www.sec.gov.
Availability of Proxy Voting Record
Information on how proxies relating to the Fund's voting securities were
voted (if any) by BlackRock during the most recent 12-month period ended
June 30 is available, upon request and without charge, on our Web site at
www.blackrock.com, by calling (800) 441-7762 or on the Web site of the
Commission at http://www.sec.gov.
Availability of Quarterly Portfolio Schedule
The Fund files its complete schedule of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on Form N-Q. The Fund's
Forms N-Q are available on the Commission's Web site at http://www.sec.gov and
may be reviewed and copied at the Commission's Public Reference Room in
Washington, D.C. Information regarding the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330. The Fund's Forms N-Q may also
be obtained upon request, without charge, by calling (800) 441-7762.
Shareholder Privileges
Account Information
Call us at (800) 441-7762 8:00 AM - 6:00 PM EST to get information about your
account balances, recent transactions and share prices. You can also reach us
on the Web at www.blackrock.com.
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange to have
$50 or more automatically deducted from their checking or savings account and
invested in any of the BlackRock portfolios.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $50 or more from their BlackRock portfolios, as
long as their account is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
A World-Class Mutual Fund Family
BlackRock now offers an expanded lineup of open-end mutual funds. Our range
includes more than 85 funds crossing all investment styles and managed by
experts in equity, fixed income and tax-exempt investing.
Equity Portfolios
BlackRock All-Cap Global Resources Portfolio
BlackRock Aurora Portfolio
BlackRock Asset Allocation Portfolio++
BlackRock Balanced Capital Fund++
BlackRock Basic Value Fund
BlackRock Developing Capital Markets Fund
BlackRock Equity Dividend Fund
BlackRock EuroFund
BlackRock Focus Twenty Fund
BlackRock Focus Value Fund
BlackRock Fundamental Growth Fund
BlackRock Global Allocation Fund++
BlackRock Global Dynamic Equity Fund
BlackRock Global Financial Services Fund
BlackRock Global Growth Fund
BlackRock Global Opportunities Portfolio
BlackRock Global Resources Portfolio*
BlackRock Global Science & Technology
Opportunities Portfolio
BlackRock Global SmallCap Fund
BlackRock Global Technology Fund
BlackRock Global Value Fund
BlackRock Healthcare Fund
BlackRock Health Sciences Opportunities Portfolio
BlackRock Index Equity Portfolio*
BlackRock International Fund
BlackRock International Index Fund
BlackRock International Opportunities Portfolio*
BlackRock International Value Fund
BlackRock Investment Trust
BlackRock Large Cap Core Fund
BlackRock Large Cap Growth Fund
BlackRock Large Cap Value Fund
BlackRock Latin America Fund
BlackRock Capital Appreciation Portfolio
BlackRock Mid-Cap Growth Equity Portfolio
BlackRock Mid-Cap Value Equity Portfolio
BlackRock Mid Cap Value Opportunities Fund
BlackRock Natural Resources Trust
BlackRock Pacific Fund
BlackRock Small Cap Core Equity Portfolio
BlackRock Small Cap Growth Equity Portfolio
BlackRock Small Cap Growth Fund II
BlackRock Small Cap Index Fund
BlackRock Small Cap Value Equity Portfolio*
BlackRock Small/Mid-Cap Growth Portfolio
BlackRock S&P 500 Index Fund
BlackRock U.S. Opportunities Portfolio
BlackRock Utilities and Telecommunications Fund
BlackRock Value Opportunities Fund
Fixed Income Portfolios
BlackRock Bond Fund
BlackRock Enhanced Income Portfolio
BlackRock GNMA Portfolio
BlackRock Government Income Portfolio
BlackRock High Income Fund
BlackRock High Yield Bond Portfolio
BlackRock Inflation Protected Bond Portfolio
BlackRock Intermediate Bond Portfolio
BlackRock Intermediate Bond Portfolio II
BlackRock Intermediate Government
Bond Portfolio
BlackRock International Bond Portfolio
BlackRock Low Duration Bond Portfolio
BlackRock Managed Income Portfolio
BlackRock Real Investment Fund
BlackRock Short-Term Bond Fund
BlackRock Total Return Portfolio
BlackRock Total Return Portfolio II
BlackRock World Income Fund
Municipal Bond Portfolios
BlackRock AMT-Free Municipal Bond Portfolio
BlackRock California Insured Municipal Bond Fund
BlackRock Delaware Municipal Bond Portfolio
BlackRock Florida Municipal Bond Fund
BlackRock High Yield Municipal Fund
BlackRock Intermediate Municipal Fund
BlackRock Kentucky Municipal Bond Portfolio
BlackRock Municipal Insured Fund
BlackRock National Municipal Fund
BlackRock New Jersey Municipal Bond Fund
BlackRock New York Municipal Bond Fund
BlackRock Ohio Municipal Bond Portfolio
BlackRock Pennsylvania Municipal Bond Fund
BlackRock Short-Term Municipal Fund
Money Market Portfolios
BlackRock Money Market Portfolio
BlackRock Municipal Money Market Portfolio+++
BlackRock NC Municipal MM Portfolio+++
BlackRock NJ Municipal MM Portfolio+++
BlackRock OH Municipal MM Portfolio+++
BlackRock PA Municipal MM Portfolio+++
BlackRock Summit Cash Reserves Fund*
BlackRock U.S. Treasury MM Portfolio
BlackRock VA Municipal MM Portfolio+++
* See the prospectus for information on specific
limitations on investments in the fund.
++ Mixed asset fund.
+++ Tax-exempt fund.
BlackRock mutual funds are distributed by BlackRock Distributors, Inc. and
certain funds are also distributed by FAM Distributors, Inc. You should
consider the investment objectives, risks, charges and expenses of the funds
under consideration carefully before investing. Each fund's prospectus
contains this and other information and is available at www.blackrock.com or
by calling 800-882-0052 or from your financial advisor. The prospectus should
be read carefully before investing.
BLACKROCK INTERNATIONAL VALUE FUND DECEMBER 31, 2006
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
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
Not Applicable
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 - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
11(b) - As of September 29, 2006, with the conclusion of the combination of
Merrill Lynch's asset management business with BlackRock, the
registrant was migrated to BlackRock's trading and compliance
monitoring systems, and various personnel changes occurred. In
conjunction with these business improvements, there were no changes
in the registrants internal control over financial reporting (as
defined in Rule 30a-3(d) under Act (17 CFR 270.30a-3(d)) that
occurred during the last fiscal half-year of the period covered by
this report that has materially affected, or is reasonably likely to
affect, the registrant's internal control over financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(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.
BlackRock International Value Fund of BlackRock Funds II
By: /s/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock International Value Fund of BlackRock Funds II
Date: February 20, 2007
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/ Robert C. Doll, Jr.
-----------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock International Value Fund of BlackRock Funds II
Date: February 20, 2007
By: /s/ Donald C. Burke
--------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock International Value Fund of BlackRock Funds II
Date: February 20, 2007