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 811-02809
811-10095
Name of Fund: BlackRock Value Opportunities Fund, Inc.
Master Value Opportunities Trust
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 Value Opportunities Fund, Inc. and Master Value
Opportunities Trust, 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: 03/31/07
Date of reporting period: 04/01/06 - 09/30/06
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES
FIXED INCOME LIQUIDITY REAL ESTATE
BlackRock Value Opportunities BLACKROCK
Fund, Inc.
SEMI-ANNUAL REPORT | SEPTEMBER 30, 2006
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock Value Opportunities Fund, Inc.
Portfolio Information of Master Value Opportunities Trust as of September 30,
2006
- --------------------------------------------------------------------------------
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
Triumph Group, Inc. .................................................. 2.5%
Medicis Pharmaceutical Corp. Class A ................................. 2.5
Conseco, Inc. ........................................................ 2.3
First Midwest Bancorp, Inc. .......................................... 2.2
Allied Waste Industries, Inc. ........................................ 2.1
Denbury Resources, Inc. .............................................. 2.0
Crescent Real Estate EQT Co. ......................................... 1.9
Foot Locker, Inc. .................................................... 1.8
Smurfit-Stone Container Corp. ........................................ 1.7
Webster Financial Corp. .............................................. 1.7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percent of
Five Largest Industries Net Assets
- --------------------------------------------------------------------------------
Commercial Banks ..................................................... 6.5%
Real Estate Investment Trusts (REITs) ................................ 6.4
Software ............................................................. 6.1
Communications Equipment ............................................. 4.5
Aerospace & Defense .................................................. 4.3
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percent of
Sector Weightings Total Investments
- --------------------------------------------------------------------------------
Financials .......................................................... 19.2%
Information Technology .............................................. 15.6
Industrials ......................................................... 12.8
Consumer Discretionary .............................................. 11.1
Health Care ......................................................... 9.2
Energy .............................................................. 6.5
Materials ........................................................... 2.9
Consumer Staples .................................................... 0.7
Utilities ........................................................... 0.6
Telecommunication Services .......................................... 0.1
Other* .............................................................. 21.3
- --------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments, certain
exchange-traded funds and warrants.
For Trust compliance purposes, the Trust'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 Trust 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.
Proxy Results
During the six-month period ended September 30, 2006, BlackRock Value
Opportunities Fund, Inc.'s shareholders voted on the following proposals. On
August 15, 2006, the meeting was adjourned with respect to Proposals 1 and 3
until August 31, 2006, at which time they passed. A description of the proposals
and number of shares voted were as follows:
- --------------------------------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- --------------------------------------------------------------------------------------------------------------------------
1. To approve a new investment advisory agreement
with BlackRock Advisors, Inc. 59,722,172 1,124,519 1,111,271
- --------------------------------------------------------------------------------------------------------------------------
3. To approve a contingent subadvisory agreement
with BlackRock Advisors, Inc. 59,603,249 1,182,471 1,172,241
- --------------------------------------------------------------------------------------------------------------------------
2 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
A Letter to Shareholders
Dear Shareholder
It is my pleasure to welcome you to BlackRock.
On September 29, 2006, BlackRock, Inc. ("BlackRock") and Merrill Lynch
Investment Managers, L.P. ("MLIM") united to form one of the largest asset
management firms in the world. Now with more than $1 trillion in assets under
management, over 4,000 employees in 18 countries and representation in key
markets worldwide, BlackRock's global presence means greater depth and scale to
serve you.
The new BlackRock unites some of the finest money managers in the industry. Our
ranks include more than 500 investment professionals globally -- portfolio
managers, research analysts, risk management professionals and traders. With
offices strategically located around the world, our investment professionals
have in-depth local knowledge and the ability to leverage our global presence
and robust infrastructure to deliver focused investment solutions. BlackRock's
professional investors are supported by disciplined investment processes and
best-in-class technology, ensuring that our portfolio managers are well equipped
to research, uncover and capitalize on the opportunities the world's markets
have to offer.
The BlackRock culture emphasizes excellence, teamwork and integrity in the
management of a variety of equity, fixed income, cash management, alternative
investment and real estate products. Our firm's core philosophy is grounded in
the belief that experienced investment and risk professionals using disciplined
investment processes and sophisticated analytical tools can consistently add
value to client portfolios.
As you probably are aware, most former MLIM investment products now carry the
"BlackRock" name. This is reflected in newspapers and online fund reporting
resources. Your account statements, as of the October month-end reporting
period, also reflect the BlackRock name. Unless otherwise communicated to you,
your funds maintain the same investment objectives that they did prior to the
combination of MLIM and BlackRock. Importantly, this union does not affect your
brokerage account or your relationship with your financial advisor. Clients of
Merrill Lynch remain clients of Merrill Lynch.
We view this combination of asset management leaders as a complementary union
that reinforces our commitment to shareholders. Individually, each firm made
investment performance its single most important mission. Together, we are even
better prepared to capitalize on market opportunities on behalf of our
shareholders. Our focus on investment excellence is accompanied by an unwavering
commitment to service, enabling us to assist clients, in cooperation with their
financial professionals, in working toward their investment goals. We thank you
for allowing us the opportunity, and we look forward to serving your investment
needs in the months and years ahead as the new BlackRock.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
Vice Chairman
BlackRock, Inc.
Data, including assets under management, are as of June 30, 2006.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 3
A Discussion With Your Fund's Portfolio Manager
Despite a six-month period of underperformance, we believe small cap
stocks should do well in the months ahead, supported by continued
merger-and-acquisition activity, lower energy prices and resilience in consumer
spending.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended September 30, 2006, BlackRock Value Opportunities
Fund, Inc.'s (formerly Merrill Lynch Value Opportunities Fund, Inc.) Class A,
Class B, Class C, Class I and Class R Shares had total returns of -4.14%,
- -4.50%, -4.53%, -4.06% and -4.29%, 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 and 7 of this report to
shareholders.) Fund returns were competitive with the -4.61% return of the
benchmark Russell 2000 Index, but lagged the -3.20% average return of the Lipper
Small-Cap Value Funds category for the same period. (Funds in this Lipper
category seek long-term growth of capital by investing in small capitalization
companies that are considered to be undervalued relative to a major unmanaged
stock index.)
The six-month period was challenging for small-capitalization stocks. While the
Russell 2000 Index declined 4.61%, large cap stocks, as measured by the Standard
& Poor's 500 Index, advanced 4.14%. Market gyrations throughout the period
resulted in strong gains in the earlier part of 2006, but took a negative spin
mid-year that culminated in a major correction spanning all capitalization
ranges, investment styles and domestic as well as international markets. The
correction can be attributed to several factors but, for the most part, investor
concerns that the Federal Reserve Board (the Fed) may have tightened monetary
policy too aggressively took a toll on stock prices. By period-end, the price of
crude oil had dropped from an earlier high of $78 per barrel to the
$60-per-barrel range. This, together with softness in the housing market,
enabled the Fed to stop raising interest rates without fear of igniting
inflation.
Given more pronounced sensitivity to changes in the economy, small cap stocks
were highly volatile during the period. High-beta small caps were the worst
performers in the period, while more defensive sectors, such as consumer
staples, posted modestly positive returns. The energy sector, in particular, was
a leading performer through June 30, 2006, but then weakened dramatically in the
quarter ended September 30. The sharpest declines occurred in natural gas
prices, where the price per British thermal unit declined nearly 30% in the
September quarter. An uneventful hurricane season, signs of a weakening U.S.
economy and the liquidation by hedge fund Amaranth Advisors LLC of large energy
positions gone awry, all contributed to sharp declines in energy commodity
prices.
What factors most influenced Fund performance?
The portfolio was positioned more defensively than the Russell 2000 Index, a
factor that contributed to performance given the turbulent market backdrop. We
also saw a slight benefit from sector positioning, although the most positive
factor behind performance in the period stemmed from favorable stock selection
in the information technology sector. The portfolio's best performers were
technology names Anixter International Inc., a distributor of networking
products, and Convergys Corp., a provider of billing services and customer care.
We significantly reduced both investments following their strong performance.
J.M. Smucker Co., a more defensive consumer staples stock, also was among our
top performers in the period. Smucker is a worldwide food products company that
performed well after first quarter earnings came in ahead of analysts'
expectations; we locked in profits and exited the position.
Valassis Communications, Inc., a provider of marketing products and services,
was the Fund's worst-performing stock, suffering amid a troubled merger
agreement with direct marketer ADVO. Angiotech Pharmaceuticals, Inc., a provider
of coatings for medical stents, was another notable detractor. Recent headlines
about possible medical complications associated with stents caused stent
manufacturers to trade lower. Suppliers of stent-related products also suffered.
Such issues are difficult, if not impossible, to anticipate, but Angiotech has
other promising products that support our continued investment in the company.
From a sector perspective, the influence of energy stocks is noteworthy.
Although energy stocks were not a major source of underperformance, the sector
has boosted portfolio results over the past few years. We did not benefit from
the energy tailwind during this six-month period. Additionally, our stock
selection in the financial services sector provided disappointing results,
detracting from the Fund's performance relative to the Russell 2000 Index.
4 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
What changes were made to the portfolio during the period?
Given our slightly defensive posture, we used market weakness as an opportunity
to become more aggressive in our positioning. Within the Russell 2000 Index, the
information technology sector declined about 10% during the six-month period. We
took advantage of lower share prices and increased our technology exposure,
moving from a slightly underweight position to a market weighting. We purchased
shares of McAfee Inc., a provider of anti-virus software, at what we believe to
be very attractive levels. We previously had invested in shares of McAfee and,
although the company has faced some hardships, we believe the challenges are
more than reflected in the stock price. Also in the technology sector, we
initiated a position in webMethods Inc., a developer of business integration
software. Shares of webMethods served as a replacement for our prior investment
in FileNet Corp., a document management software provider that was acquired by
International Business Machines Corp. Other technology sector changes included
the elimination of our investment in CommScope, Inc., a provider of cable and
wiring products.
In the industrials sector, we dramatically reduced exposure to truckload
carriers based on our concern that freight volumes were starting to slow. The
trucking industry is highly sensitive to changes in the overall economy, and we
were seeing signs of a slowdown emerge. Accordingly, we trimmed our holdings in
Swift Transportation Co., Inc. and U.S. Xpress Enterprises, Inc., and we
liquidated our position in J.B. Hunt Transport Services, Inc.
On balance, most portfolio changes during the period were stock-specific rather
than driven by particular investment themes. One notable addition was OGE Energy
Corp., a utility stock with a reasonable valuation and attractive dividend
yield. We consider OGE Energy to be a company with solid management and a
favorable rate base; as such, it has become the Fund's largest investment in the
utility sector. Other deletions from the list of portfolio holdings resulted
from continued brisk merger-and-acquisition activity. FileNet Corp., MatrixOne,
Inc., CarrAmerica Realty Corp. and Net IQ Corp. are all examples of investment
positions that were eliminated as a direct result of take-over announcements.
How would you characterize the portfolio's position at the close of the period?
At September 30, 2006, the portfolio was most overweight relative to the Russell
2000 Index in energy (8% versus 5%) and industrials (15% versus 14%). The
portfolio's largest absolute exposure was in financial services, at about 23% of
net assets, followed by information technology at nearly 19%.
Although we remain optimistic about the prospects for small cap stocks, we
acknowledge that the market is approaching a delicate juncture. The Fed has
hiked interest rates 17 times since June 2004, and the U.S. economy is showing
early signs of slowing, with evidence most apparent in recent commentary out of
the industrials and basic materials sectors. The critical question centers on
how abruptly the economy will slow. The Fed interrupted its monetary tightening
campaign at its August 8 meeting and remained at a pause following the September
meeting, allowing time to see how the economy responds to its two-year
tightening campaign. We believe the economy will experience a soft landing, and
have positioned the portfolio accordingly. Merger-and-acquisition activity is
expected to continue at a robust pace, and small cap stocks should continue to
perform well in such an environment.
R. Elise Baum, CFA
Vice President and Portfolio Manager
October 12, 2006
- --------------------------------------------------------------------------------
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 remain the same.
- --------------------------------------------------------------------------------
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 5
Performance Data
About Fund Performance
The Fund has multiple classes of shares:
o Class A Shares incur a maximum initial sales charge (front-end load) of
5.25% and an account maintenance fee of 0.25% per year (but no
distribution fee).
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4%, declining to 0% after six years. In addition, Class B Shares are
subject to a distribution fee of 0.75% per year and an account maintenance
fee of 0.25% per year. These shares automatically convert to Class 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.
o Class C Shares are subject to a distribution fee of 0.75% per year and an
account maintenance fee of 0.25% per year. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within one
year of purchase.
o Class I Shares are not subject to any front-end sales charge. Class I
Shares bear no ongoing distribution or account maintenance fees and are
available only to eligible investors.
o 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 an account maintenance fee of 0.25% per year. Class R
Shares are available only to certain retirement plans. Prior to inception,
Class R Share performance results are those of the Class I Shares (which
have no distribution or account maintenance fees) restated for Class R
Share fees.
None of the past results shown should be considered a representation of future
performance. 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 exchange 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 account maintenance, distribution and
transfer agency fees applicable to each class, which are deducted from the
income available to be paid to shareholders.
Recent Performance Results
6-Month 12-Month 10-Year
As of September 30, 2006 Total Return Total Return Total Return
================================================================================
Class A Shares* -4.14% +7.79% +254.76%
- --------------------------------------------------------------------------------
Class B Shares* -4.50 +6.96 +233.44
- --------------------------------------------------------------------------------
Class C Shares* -4.53 +6.97 +227.98
- --------------------------------------------------------------------------------
Class I Shares* -4.06 +8.01 +263.61
- --------------------------------------------------------------------------------
Class R Shares* -4.29 +7.46 +245.19
- --------------------------------------------------------------------------------
Russell 2000(R) Index** -4.61 +9.92 +138.05
- --------------------------------------------------------------------------------
* 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 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.
** An unmanaged broad-based Index comprised of approximately 2,000
small-capitalization common stocks from various industrial sectors.
Russell 2000 is a registered trademark of the Frank Russell Company.
6 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Performance Data (concluded)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class A, Class
B, Class C, Class I and Class R Shares compared to growth of an investment in
the Russell 2000 Index. Values are from September 1996 to September 2006.
Russell 2000
Class A Shares*+ Class B Shares*+ Class C Shares*+ Class I Shares*+ Class R Shares*+ Index++
9/96 $ 9,475 $10,000 $10,000 $10,000 $10,000 $10,000
9/97 $13,903 $14,557 $14,559 $14,708 $14,636 $13,319
9/98 $10,072 $10,465 $10,461 $10,681 $10,575 $10,786
9/99 $12,926 $13,324 $13,320 $13,740 $13,536 $12,843
9/00 $18,618 $19,041 $19,039 $19,846 $19,455 $15,847
9/01 $18,255 $18,530 $18,523 $19,507 $19,028 $12,486
9/02 $16,723 $16,838 $16,839 $17,908 $17,381 $11,325
9/03 $22,165 $22,147 $22,135 $23,800 $22,940 $15,458
9/04 $26,249 $26,039 $26,018 $28,261 $27,096 $18,360
9/05 $31,183 $30,933 $30,660 $33,664 $32,123 $21,656
9/06 $33,613 $33,344 $32,798 $36,361 $34,519 $23,805
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
+ The Fund invests all of its assets in Master Value Opportunities Trust.
The Trust invests in a diversified portfolio of securities, primarily
common stocks, of relatively small companies which the Trust's management
believes have special investment value, and emerging growth companies
regardless of size.
++ This unmanaged Index is comprised of approximately 2,000
small-capitalization common stocks from various industrial sectors.
Past performance is not indicative of future results.
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
One Year Ended 9/30/06 + 7.79% + 2.14%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/06 +12.99 +11.77
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/06 +13.50 +12.89
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC++
================================================================================
Class B Shares+
================================================================================
One Year Ended 9/30/06 + 6.96% + 3.46%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/06 +12.12 +11.87
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/06 +12.80 +12.80
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC++
================================================================================
Class C Shares***
================================================================================
One Year Ended 9/30/06 + 6.97% + 6.10%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/06 +12.11 +12.11
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/06 +12.61 +12.61
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class I Shares Return
================================================================================
One Year Ended 9/30/06 + 8.01%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/06 +13.26
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/06 +13.78
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class R Shares Return
================================================================================
One Year Ended 9/30/06 + 7.46%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/06 +12.65
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/06 +13.19
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
*** Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
+ Maximum contingent deferred sales charge is 4% and is reduced to 0% after
six years.
++ Assuming payment of applicable contingent deferred sales charge.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 7
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 April 1, 2006 and held through
September 30, 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 April 1, 2006 to
April 1, 2006 September 30, 2006 September 30, 2006
===========================================================================================================================
Actual
===========================================================================================================================
Class A $1,000 $ 958.60 $ 6.01
- ---------------------------------------------------------------------------------------------------------------------------
Class B $1,000 $ 955.00 $ 9.75
- ---------------------------------------------------------------------------------------------------------------------------
Class C $1,000 $ 954.70 $ 9.80
- ---------------------------------------------------------------------------------------------------------------------------
Class I $1,000 $ 959.40 $ 4.79
- ---------------------------------------------------------------------------------------------------------------------------
Class R $1,000 $ 957.10 $ 7.22
===========================================================================================================================
Hypothetical (5% annual return before expenses)**
===========================================================================================================================
Class A $1,000 $1,018.77 $ 6.19
- ---------------------------------------------------------------------------------------------------------------------------
Class B $1,000 $1,014.93 $10.05
- ---------------------------------------------------------------------------------------------------------------------------
Class C $1,000 $1,014.88 $10.10
- ---------------------------------------------------------------------------------------------------------------------------
Class I $1,000 $1,020.01 $ 4.94
- ---------------------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,017.52 $ 7.44
- ---------------------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (1.23% for Class A, 2.00% for Class B, 2.01% for Class
C, .98% for Class I and 1.48% for Class R), multiplied by the average
account value over the period, multiplied by 182/365 (to reflect the
one-half year period shown). Because the Fund is a feeder fund, the
expense table example reflects the expenses of both the feeder fund and
the master trust in which it invests.
** 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.
8 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Statement of Assets and Liabilities BlackRock Value Opportunities Fund, Inc.
As of September 30, 2006
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investment in Master Value Opportunities Trust (the "Trust"), at value
(identified cost--$2,517,933,949) ............................................. $ 2,727,008,944
Prepaid registration fees ...................................................... 44,092
---------------
Total assets ................................................................... 2,727,053,036
---------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Payables:
Distributor ................................................................. $ 1,098,729
Other affiliates ............................................................ 1,037,012
Administrative fees ......................................................... 523,781 2,659,522
---------------
Accrued expenses ............................................................... 146,124
---------------
Total liabilities .............................................................. 2,805,646
---------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ..................................................................... $ 2,724,247,390
===============
===================================================================================================================================
Net Assets Consist of+
- -----------------------------------------------------------------------------------------------------------------------------------
Class A Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .. $ 2,924,449
Class B Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .. 2,881,914
Class C Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .. 2,555,177
Class I Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .. 3,154,637
Class R Shares of Common Stock, $.10 par value, 100,000,000 shares authorized .. 211,478
Paid-in capital in excess of par ............................................... 2,360,340,933
Accumulated investment loss--net ............................................... $ (5,124,746)
Undistributed realized capital gains allocated from the Trust--net ............. 148,228,553
Unrealized appreciation allocated from the Trust--net .......................... 209,074,995
---------------
Total accumulated earnings--net ................................................ 352,178,802
---------------
Net Assets ..................................................................... $ 2,724,247,390
===============
===================================================================================================================================
Net Asset Value+
- -----------------------------------------------------------------------------------------------------------------------------------
Class A--Based on net assets of $719,276,459 and 29,244,492 shares outstanding . $ 24.60
===============
Class B--Based on net assets of $631,877,930 and 28,819,144 shares outstanding . $ 21.93
===============
Class C--Based on net assets of $541,604,995 and 25,551,773 shares outstanding . $ 21.20
===============
Class I--Based on net assets of $785,269,721 and 31,546,374 shares outstanding . $ 24.89
===============
Class R--Based on net assets of $46,218,285 and 2,114,778 shares outstanding ... $ 21.85
===============
+ Effective October 2, 2006, Class A, Class B, Class C and Class I Shares
were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively.
See Notes to Financial Statements.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 9
Statement of Operations BlackRock Value Opportunities Fund, Inc.
For the Six Months Ended September 30, 2006
===================================================================================================================================
Investment Income--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income allocated from the Trust:
Dividends ................................................................... $ 14,892,827
Securities lending--net ..................................................... 673,655
Interest from affiliates .................................................... 608,700
Expenses .................................................................... (7,185,375)
---------------
Total income ................................................................... 8,989,807
---------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Administration fees ............................................................ $ 3,548,313
Account maintenance and distribution fees--Class B+ ............................ 3,423,353
Account maintenance and distribution fees--Class C+ ............................ 2,759,246
Account maintenance fees--Class A+ ............................................. 906,681
Transfer agent fees--Class I+ .................................................. 897,018
Transfer agent fees--Class B+ .................................................. 790,805
Transfer agent fees--Class A+ .................................................. 779,762
Transfer agent fees--Class C+ .................................................. 675,677
Account maintenance and distribution fees--Class R ............................. 106,338
Printing and shareholder reports ............................................... 76,685
Registration fees .............................................................. 49,815
Transfer agent fees--Class R ................................................... 45,719
Professional fees .............................................................. 27,352
Directors' fees and expenses ................................................... 15,610
Other .......................................................................... 12,179
---------------
Total expenses ................................................................. 14,114,553
---------------
Investment loss--net ........................................................... (5,124,746)
---------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) Allocated from the Trust--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments--net .............................................................. 158,376,090
Foreign currency transactions--net ............................................ (194) 158,375,896
---------------
Change in unrealized appreciation--net ......................................... (285,810,222)
---------------
Total realized and unrealized loss--net ........................................ (127,434,326)
---------------
Net Decrease in Net Assets Resulting from Operations ........................... $ (132,559,072)
===============
+ Effective October 2, 2006, Class A, Class B, Class C and Class I Shares
were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively.
See Notes to Financial Statements.
10 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Statements of Changes in Net Assets BlackRock Value Opportunities Fund, Inc.
For the Six For the
Months Ended Year Ended
September 30, March 31,
Increase (Decrease) in Net Assets: 2006 2006
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment loss--net ........................................................... $ (5,124,746) $ (11,942,974)
Realized gain--net ............................................................. 158,375,896 562,837,108
Change in unrealized appreciation--net ......................................... (285,810,222) 130,184,338
-----------------------------------
Net increase in net assets resulting from operations ........................... (132,559,072) 681,078,472
-----------------------------------
===================================================================================================================================
Distributions to Shareholders+
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain--net:
Class A ..................................................................... (60,975,282) (99,431,727)
Class B ..................................................................... (61,007,514) (116,197,410)
Class C ..................................................................... (51,875,586) (82,656,784)
Class I ..................................................................... (69,641,434) (151,044,604)
Class R ..................................................................... (4,066,041) (4,363,485)
-----------------------------------
Net decrease in net assets resulting from distributions to shareholders ........ (247,565,857) (453,694,010)
-----------------------------------
===================================================================================================================================
Capital Share Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets derived from capital share transactions .. 45,460,660 (170,503,936)
-----------------------------------
===================================================================================================================================
Redemption Fees
- -----------------------------------------------------------------------------------------------------------------------------------
Redemption fees ................................................................ 3,571 2,767
-----------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ........................................ (334,660,698) 56,883,293
Beginning of period ............................................................ 3,058,908,088 3,002,024,795
-----------------------------------
End of period* ................................................................. $ 2,724,247,390 $ 3,058,908,088
===================================
* Accumulated investment loss--net .......................................... $ (5,124,746) --
===================================
+ Effective October 2, 2006, Class A, Class B, Class C and Class I Shares
were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively.
Notes to Financial Statements.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 11
Financial Highlights BlackRock Value Opportunities Fund, Inc.
Class A@@
----------------------------------------------------------------------------------------
For the Six
The following per share data and ratios Months Ended For the Year Ended March 31,
have been derived from information Sept. 30, -----------------------------------------------------------------------
provided in the financial statements. 2006 2006 2005 2004 2003 2002
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 28.15 $ 26.01 $ 26.96 $ 17.15 $ 24.45 $ 19.73
----------------------------------------------------------------------------------------
Investment loss--net*** ................ (.01) (.04) (.10) (.08) (.09) (.07)
Realized and unrealized gain (loss)--net (1.27)**** 6.31**** .97**** 9.89 (6.73) 6.08
----------------------------------------------------------------------------------------
Total from investment operations ....... (1.28) 6.27 .87 9.81 (6.82) 6.01
----------------------------------------------------------------------------------------
Less distributions from realized gain .. (2.27) (4.13) (1.82) -- (.48) (1.29)
----------------------------------------------------------------------------------------
Net asset value, end of period ......... $ 24.60 $ 28.15 $ 26.01 $ 26.96 $ 17.15 $ 24.45
========================================================================================
====================================================================================================================================
Total Investment Return*
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... (4.14%)@ 25.76% 3.77% 57.20% (28.09%) 31.17%
========================================================================================
====================================================================================================================================
Ratios to Average Net Assets**
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 1.23%+ 1.27% 1.25% 1.27% 1.33% 1.25%
========================================================================================
Investment loss--net ................... (.09%)+ (.14%) (.39%) (.34%) (.48%) (.30%)
========================================================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 719,276 $ 760,307 $ 643,904 $ 620,193 $ 347,736 $ 467,733
========================================================================================
Portfolio turnover of the Trust ........ 35.81% 77.26% 74.31% 80.35% 68.27% 54.14%
========================================================================================
* Total investment returns exclude the effects of sales charges.
** Includes the Fund's share of the Trust's allocated expenses and/or
investment loss--net.
*** Based on average shares outstanding.
**** Includes redemption fees, which are less than $.01 per share.
+ Annualized.
@ Aggregate total investment return.
@@ Effective October 2, 2006, Class A Shares were redesignated Investor A
Shares.
See Notes to Financial Statements.
12 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Financial Highlights (continued) BlackRock Value Opportunities Fund, Inc.
Class B@@
----------------------------------------------------------------------------------------
For the Six
The following per share data and ratios Months Ended For the Year Ended March 31,
have been derived from information Sept. 30, -----------------------------------------------------------------------
provided in the financial statements. 2006 2006 2005 2004 2003 2002
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 25.36 $ 23.66 $ 24.69 $ 15.82 $ 22.74 $ 18.44
----------------------------------------------------------------------------------------
Investment loss--net*** ................ (.10) (.22) (.27) (.24) (.23) (.22)
Realized and unrealized gain (loss)--net (1.15)**** 5.72**** .88**** 9.11 (6.25) 5.67
----------------------------------------------------------------------------------------
Total from investment operations ....... (1.25) 5.50 .61 8.87 (6.48) 5.45
----------------------------------------------------------------------------------------
Less distributions from realized gain .. (2.18) (3.80) (1.64) -- (.44) (1.15)
----------------------------------------------------------------------------------------
Net asset value, end of period ......... $ 21.93 $ 25.36 $ 23.66 $ 24.69 $ 15.82 $ 22.74
========================================================================================
====================================================================================================================================
Total Investment Return*
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... (4.50%)@ 24.82% 2.96% 56.07% (28.70%) 30.22%
========================================================================================
====================================================================================================================================
Ratios to Average Net Assets**
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 2.00%+ 2.03% 2.02% 2.04% 2.10% 2.01%
========================================================================================
Investment loss--net ................... (.86%)+ (.91%) (1.17%) (1.11%) (1.26%) (1.04%)
========================================================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 631,878 $ 762,340 $ 809,643 $ 951,562 $ 640,017 $1,003,961
========================================================================================
Portfolio turnover of the Trust ........ 35.81% 77.26% 74.31% 80.35% 68.27% 54.14%
========================================================================================
* Total investment returns exclude the effects of sales charges.
** Includes the Fund's share of the Trust's allocated expenses and/or
investment loss--net.
*** Based on average shares outstanding.
**** Includes redemption fees, which are less than $.01 per share.
+ Annualized.
@ Aggregate total investment return.
@@ Effective October 2, 2006, Class B Shares were redesignated Investor B
Shares.
See Notes to Financial Statements.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 13
Financial Highlights (continued) BlackRock Value Opportunities Fund, Inc.
Class C@@
----------------------------------------------------------------------------------------
For the Six
The following per share data and ratios Months Ended For the Year Ended March 31,
have been derived from information Sept. 30, -----------------------------------------------------------------------
provided in the financial statements. 2006 2006 2005 2004 2003 2002
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 24.62 $ 23.10 $ 24.18 $ 15.50 $ 22.30 $ 18.13
----------------------------------------------------------------------------------------
Investment loss--net*** ................ (.10) (.22) (.27) (.23) (.23) (.23)
Realized and unrealized gain (loss)--net (1.12)**** 5.57**** .86**** 8.91 (6.13) 5.58
----------------------------------------------------------------------------------------
Total from investment operations ....... (1.22) 5.35 .59 8.68 (6.36) 5.35
----------------------------------------------------------------------------------------
Less distributions from realized gain .. (2.20) (3.83) (1.67) -- (.44) (1.18)
----------------------------------------------------------------------------------------
Net asset value, end of period ......... $ 21.20 $ 24.62 $ 23.10 $ 24.18 $ 15.50 $ 22.30
========================================================================================
====================================================================================================================================
Total Investment Return*
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... (4.53%)@ 24.82% 2.95% 56.00% (28.69%) 30.23%
========================================================================================
====================================================================================================================================
Ratios to Average Net Assets**
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... 2.01%+ 2.05% 2.03% 2.05% 2.12% 2.02%
========================================================================================
Investment loss--net ................... (.87%)+ (.92%) (1.18%) (1.13%) (1.27%) (1.11%)
========================================================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 541,605 $ 580,318 $ 524,132 $ 539,393 $ 334,720 $ 504,537
========================================================================================
Portfolio turnover of the Trust ........ 35.81% 77.26% 74.31% 80.35% 68.27% 54.14%
========================================================================================
* Total investment returns exclude the effects of sales charges.
** Includes the Fund's share of the Trust's allocated expenses and/or
investment loss--net.
*** Based on average shares outstanding.
**** Includes redemption fees, which are less than $.01 per share.
+ Annualized.
@ Aggregate total investment return.
@@ Effective October 2, 2006, Class C Shares were redesignated Investor C
Shares.
See Notes to Financial Statements.
14 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Financial Highlights (continued) BlackRock Value Opportunities Fund, Inc.
Class I@@
----------------------------------------------------------------------------------------
For the Six
The following per share data and ratios Months Ended For the Year Ended March 31,
have been derived from information Sept. 30, -----------------------------------------------------------------------
provided in the financial statements. 2006 2006 2005 2004 2003 2002
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ... $ 28.46 $ 26.28 $ 27.22 $ 17.27 $ 24.58 $ 19.81
----------------------------------------------------------------------------------------
Investment loss--net*** ................ .02 .03 (.04) (.02) (.05) (.01)
Realized and unrealized gain (loss)--net (1.29)**** 6.39**** .97**** 9.97 (6.77) 5.84
----------------------------------------------------------------------------------------
Total from investment operations ....... (1.27) 6.42 .93 9.95 (6.82) 5.83
----------------------------------------------------------------------------------------
Less distributions from realized gain .. (2.30) (4.24) (1.87) -- (.49) (1.06)
----------------------------------------------------------------------------------------
Net asset value, end of period ......... $ 24.89 $ 28.46 $ 26.28 $ 27.22 $ 17.27 $ 24.58
========================================================================================
====================================================================================================================================
Total Investment Return*
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ..... (4.06%)@ 26.13% 3.99% 57.61% (27.93%) 31.56%
========================================================================================
====================================================================================================================================
Ratios to Average Net Assets**
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... .98%+ 1.02% 1.00% 1.02% 1.07% .99%
========================================================================================
Investment income (loss)--net .......... .15%+ .11% (.15%) (.09%) (.24%) (.03%)
========================================================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 785,270 $ 916,562 $1,005,642 $1,072,299 $ 607,484 $1,259,688
========================================================================================
Portfolio turnover of the Trust ........ 35.81% 77.26% 74.31% 80.35% 68.27% 54.14%
========================================================================================
* Total investment returns exclude the effects of sales charges.
** Includes the Fund's share of the Trust's allocated expenses and/or
investment income (loss)--net.
*** Based on average shares outstanding.
**** Includes redemption fees, which are less than $.01 per share.
+ Annualized.
@ Aggregate total investment return.
@@ Effective October 2, 2006, Class I Shares were redesignated Institutional
Shares.
See Notes to Financial Statements.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 15
Financial Highlights (concluded) BlackRock Value Opportunities Fund, Inc.
Class R
------------------------------------------------------------------------------
For the For the Period
Six Months For the Year Ended February 4,
The following per share data and ratios Ended March 31, 2003+
have been derived from information Sept. 30, -------------------------------------------- to March 31,
provided in the financial statements. 2006 2006 2005 2004 2003
====================================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............. $ 25.31 $ 23.80 $ 24.93 $ 15.87 $ 16.12
------------------------------------------------------------------------------
Investment loss--net*** .......................... (.04) (.09) (.15) (.12) --@@@
Realized and unrealized gain (loss)--net ......... (1.16)**** 5.73**** .88**** 9.18 (.25)
------------------------------------------------------------------------------
Total from investment operations ................. (1.20) 5.64 .73 9.06 (.25)
------------------------------------------------------------------------------
Less distributions from realized gain--net ....... (2.26) (4.13) (1.86) -- --
------------------------------------------------------------------------------
Net asset value, end of period ................... $ 21.85 $ 25.31 $ 23.80 $ 24.93 $ 15.87
==============================================================================
====================================================================================================================================
Total Investment Return**
- ------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............... (4.29%)@ 25.43% 3.53% 57.09% (1.55%)@
==============================================================================
====================================================================================================================================
Ratios to Average Net Assets++
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses ......................................... 1.48%* 1.51% 1.50% 1.52% 1.66%*
==============================================================================
Investment loss--net ............................. (.33%)* (.39%) (.61%) (.59%) (.65%)*
==============================================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ......... $ 46,218 $ 39,382 $ 18,703 $ 3,160 --@@
==============================================================================
Portfolio turnover of the Trust .................. 35.81% 77.26% 74.31% 80.35% 68.27%
==============================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
**** Includes redemption fees, which are less than $.01 per share.
+ Commencement of operations.
++ Includes the Fund's share of the Trust's allocated expenses and/or
investment loss--net.
@ Aggregate total investment return.
@@ Amount is less than $1,000.
@@@ Amount is less than $(.01) per share.
See Notes to Financial Statements.
16 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements BlackRock Value Opportunities Fund, Inc.
1. Significant Accounting Policies:
On September 29, 2006, Merrill Lynch Value Opportunities Fund, Inc. was renamed
BlackRock Value Opportunities Fund, Inc. (the "Fund"). The Fund is registered
under the Investment Company Act of 1940, as amended, as a diversified, open-end
investment company. The Fund seeks to achieve its investment objective by
investing all of its assets in Master Value Opportunities Trust (the "Trust")
which has the same investment objective and strategies as the Fund. The value of
the Fund's investment in the Trust reflects the Fund's proportionate interest in
the net assets of the Trust. The performance of the Fund is directly affected by
the performance of the Trust. The financial statements of the Trust, including
the Schedule of Investments, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements. 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 percentage of the Trust
owned by the Fund at September 30, 2006 was 100%. The Fund offers multiple
classes of shares. Class A Shares are sold with a front-end sales charge. Shares
of Class B and Class C may be subject to a contingent deferred sales charge.
Class I Shares are sold only to certain eligible investors. 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 Class A, Class B, Class C and Class R Shares bear
certain expenses related to the account maintenance of such shares, and Class B,
Class 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 Class B shareholders may vote on certain changes to the Class A
distribution plan). Effective October 2, 2006, 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 were not redesignated.
Income, expenses (other than expenses attributed 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 -- The Fund records its investment in the Trust at
fair value. Valuation of securities held by the Trust is discussed in Note 1(a)
of the Trust's Notes to Financial Statements, which are included elsewhere in
this report.
(b) Investment income and expenses -- The Fund records daily its proportionate
share of the Trust's income, expenses and realized and unrealized gains and
losses. In addition, the Fund accrues its own expenses.
(c) 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 shareholders. Therefore,
no federal income tax provision is required.
(d) Recent accounting pronouncement -- In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48") entitled
"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 fiscal years beginning after December 15, 2006. The
impact on the Fund's financial statements, if any, is currently being assessed.
(e) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(f) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(g) Investment transactions -- Investment transactions in the Trust are
accounted for on a trade date basis.
2. Transactions with Affiliates:
The Fund has entered into an Administration Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner. The Fund pays a monthly fee at an annual
rate of .25% of the Fund's average daily net assets for the performance of
administrative services (other than investment advice and related portfolio
activities) necessary for the operation of the Fund.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 17
Notes to Financial Statements (continued)
BlackRock Value Opportunities Fund, Inc.
The Fund has entered into an Investment Advisory Agreement with FAM, whereby the
Fund may pay a monthly management fee based upon the average daily value of the
Fund's net assets at the following annual rates: .50% of the average daily net
assets of the Fund for the first $1 billion; .475% of the daily net assets from
$1 billion to $1.5 billion and .45% of the average daily net assets above $1.5
billion. However, the Investment Adviser has entered into a contractual
agreement with the Fund pursuant to which the management fee will not be charged
to the Fund so long as the Fund remains invested in the Trust. As a result, the
management fee has not been accrued and will not be payable by the Fund for the
period covered by this report.
The Fund has also entered into a Distribution Agreement and Distribution Plan
with FAM Distributors, Inc. ("FAMD" or the "Distributor"), a wholly owned
subsidiary of Merrill Lynch Group, Inc. Pursuant to the Distribution Plan
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 and
distribution fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares of the Fund as follows:
- --------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- --------------------------------------------------------------------------------
Class A ................................. .25% --
Class B ................................. .25% .75%
Class C ................................. .25% .75%
Class R ................................. .25% .25%
- --------------------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), an affiliate of FAM, also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class A, Class B, Class C and Class R shareholders. The
ongoing distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B, Class C and Class R
shareholders.
For the six months ended September 30, 2006, FAMD earned underwriting discounts
and direct commissions and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class I Shares as follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S
- --------------------------------------------------------------------------------
Class A .............................................. $7,870 $102,092
Class I .............................................. $ 36 $ 36
- --------------------------------------------------------------------------------
For the six months ended September 30, 2006, MLPF&S received contingent deferred
sales charges of $186,449 and $12,225 relating to transactions in Class B and
Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of $348 relating
to transactions subject to front-end sales charge waivers in Class A Shares.
Financial Data Services, Inc. ("FDS"), an indirect, wholly owned subsidiary of
ML & Co., is the Fund's transfer agent.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including FAM, to the
investment management business of BlackRock, Inc. The transaction closed on
September 29, 2006.
On August 31, 2006, shareholders of the Fund approved a new Investment Advisory
Agreement for the Trust with BlackRock Advisors Inc., (the "Manager") a wholly
owned subsidiary of BlackRock, Inc. BlackRock Advisors, Inc. was reorganized
into BlackRock Advisors, LLC. The new advisory agreement became effective on
September 29, 2006 and the investment advisory fee is unchanged. In addition,
the Manager will provide administrative services and the administrative fee is
unchanged. Effective September 29, 2006, the Fund's Investment Advisory
Agreement was terminated.
In connection with the closing, the Trust's Transfer Agent became PFPC, Inc., an
affiliate of the Manager. In addition BlackRock Distributors, Inc., an affiliate
of BlackRock, Inc., became an additional distributor.
Prior to closing, certain officers and/or directors of the Fund are officers
and/or directors of FAM, PSI, FAMD, FDS, and/or ML & Co.
Commencing September 29, 2006, certain officers and/or directors of the Fund are
officers and/or directors of BlackRock, Inc. or its affiliates.
3. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share transactions
was $45,460,660 and ($170,503,936) for the six months ended September 30, 2006
and March 31, 2006, respectively.
Effective October 2, 2006, 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 were not redesignated.
18 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements (concluded)
BlackRock Value Opportunities Fund, Inc.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended September 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 2,662,135 $ 68,978,416
Automatic conversion of shares ............. 1,091,589 28,689,988
Shares issued to shareholders in
reinvestment of distributions ............ 2,471,936 57,892,744
-------------------------------
Total issued ............................... 6,225,660 155,561,148
Shares redeemed ............................ (3,988,114) (103,498,501)
-------------------------------
Net increase ............................... 2,237,546 $ 52,062,647
===============================
- -------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 4,970,290 $ 133,530,402
Automatic conversion of shares ............. 2,435,396 65,585,278
Shares issued to shareholders in
reinvestment of distributions ............ 3,576,373 94,401,097
-------------------------------
Total issued ............................... 10,982,059 293,516,777
Shares redeemed ............................ (8,733,796) (233,245,026)
-------------------------------
Net increase ............................... 2,248,263 $ 60,271,751
===============================
- -------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended September 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 2,057,563 $ 48,348,168
Shares issued to shareholders in
reinvestment of distributions ............ 2,777,314 58,073,638
-------------------------------
Total issued ............................... 4,834,877 106,421,806
-------------------------------
Automatic conversion of shares ............. (1,216,490) (28,689,988)
Shares redeemed ............................ (4,855,652) (112,610,697)
-------------------------------
Total redeemed ............................. (6,072,142) (141,300,685)
-------------------------------
Net decrease ............................... (1,237,265) $ (34,878,879)
===============================
- -------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 4,630,190 $ 112,055,715
Shares issued to shareholders in
reinvestment of distributions ............ 4,593,369 109,836,852
-------------------------------
Total issued ............................... 9,223,559 221,892,567
-------------------------------
Automatic conversion of shares ............. (2,686,557) (65,585,278)
Shares redeemed ............................ (10,695,576) (258,951,920)
-------------------------------
Total redeemed ............................. (13,382,133) (324,537,198)
-------------------------------
Net decrease ............................... (4,158,574) $(102,644,631)
===============================
- -------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended September 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 2,382,176 $ 54,161,212
Shares issued to shareholders in
reinvestment of distributions ............ 2,386,299 48,250,965
-------------------------------
Total issued ............................... 4,768,475 102,412,177
Shares redeemed ............................ (2,789,735) (62,492,454)
-------------------------------
Net increase ............................... 1,978,740 $ 39,919,723
===============================
- -------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 4,186,981 $ 98,758,950
Shares issued to shareholders in
reinvestment of distributions ............ 3,271,117 75,944,387
-------------------------------
Total issued ............................... 7,458,098 174,703,337
Shares redeemed ............................ (6,574,936) (154,735,660)
-------------------------------
Net increase ............................... 883,162 $ 19,967,677
===============================
- -------------------------------------------------------------------------------
Class I Shares for the Six Months Dollar
Ended September 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 2,594,225 $ 68,890,099
Shares issued to shareholders in
reinvestment of distributions ............ 2,787,551 66,037,085
-------------------------------
Total issued ............................... 5,381,776 134,927,184
Shares redeemed ............................ (6,042,467) (159,243,942)
-------------------------------
Net decrease ............................... (660,691) $ (24,316,758)
===============================
- -------------------------------------------------------------------------------
Class I Shares for the Year Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 6,890,063 $ 186,278,745
Shares issued to shareholders in
reinvestment of distributions ............ 5,357,055 142,948,755
-------------------------------
Total issued ............................... 12,247,118 329,227,500
Shares redeemed ............................ (18,299,747) (496,011,156)
-------------------------------
Net decrease ............................... (6,052,629) $(166,783,656)
===============================
- -------------------------------------------------------------------------------
Class R Shares for the Six Months Dollar
Ended September 30, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 613,894 $ 14,384,982
Shares issued to shareholders in
reinvestment of distributions ............ 194,990 4,059,690
-------------------------------
Total issued ............................... 808,884 18,444,672
Shares redeemed ............................ (249,938) (5,770,745)
-------------------------------
Net increase ............................... 558,946 $ 12,673,927
===============================
- -------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended March 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold ................................ 957,085 $ 23,258,712
Shares issued to shareholders in
reinvestment of distributions ............ 182,392 4,341,509
-------------------------------
Total issued ............................... 1,139,477 27,600,221
Shares redeemed ............................ (369,623) (8,915,298)
-------------------------------
Net increase ............................... 769,854 $ 18,684,923
===============================
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.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 19
Schedule of Investments Master Value Opportunities Trust
Shares
Held Common Stocks Value
===============================================================================
Aerospace & Defense--4.3%
159,700 BE Aerospace, Inc. (e) $ 3,368,073
413,400 Curtiss-Wright Corp. 12,546,690
1,497,000 EDO Corp. (a) 34,251,360
1,599,500 Triumph Group, Inc. (a) 67,738,825
--------------
117,904,948
===============================================================================
Auto Components--1.1%
1,790,000 American Axle & Manufacturing Holdings, Inc.
(d) 29,875,100
===============================================================================
Biotechnology--3.1%
2,607,500 Angiotech Pharmaceuticals, Inc. (e) 22,867,775
463,400 Applera Corp.--Celera Genomics Group (e) 6,450,528
129,800 Cephalon, Inc. (e) 8,015,150
547,000 Human Genome Sciences, Inc. (d)(e) 6,312,380
268,673 ImmunoGen, Inc. (e) 951,102
2,045,119 Maxygen, Inc. (a)(e) 16,994,939
1,211,800 NPS Pharmaceuticals, Inc. (e) 4,616,958
1,596,576 Neurogen Corp. (e) 10,760,922
1,682,440 Vical, Inc. (a)(e) 8,496,322
--------------
85,466,076
===============================================================================
Capital Markets--2.2%
659,700 Knight Capital Group, Inc. Class A (e) 12,006,540
1,339,800 WP Stewart & Co. Ltd. 16,693,908
1,276,200 Waddell & Reed Financial, Inc. Class A 31,585,950
--------------
60,286,398
===============================================================================
Chemicals--0.5%
529,300 Valspar Corp. 14,079,380
===============================================================================
Commercial Banks--6.5%
120,600 Banner Corp. 4,949,424
1,861,500 The Colonial BancGroup, Inc. 45,606,750
346,700 First Merchants Corp. 8,199,455
1,574,000 First Midwest Bancorp, Inc. 59,638,860
284,200 Greater Bay Bancorp (d) 8,017,282
166,050 MetroCorp Bancshares, Inc. 3,767,675
318,200 Mid-State Bancshares 8,705,952
1,161,045 Old National Bancorp 22,175,960
283,450 Sterling Financial Corp. 9,192,284
429,200 Texas Capital Bancshares, Inc. (e) 8,034,624
--------------
178,288,266
===============================================================================
Commercial Services & Supplies--3.9%
5,192,800 Allied Waste Industries, Inc. (d)(e) 58,522,856
1,008,400 Casella Waste Systems, Inc. (e) 10,426,856
943,200 Cornell Cos., Inc. (a)(e) 16,298,496
170,600 Heidrick & Struggles International, Inc. (e) 6,141,600
799,200 Tetra Tech, Inc. (e) 13,922,064
--------------
105,311,872
===============================================================================
Communications Equipment--4.5%
4,730,900 Andrew Corp. (e) 43,666,207
909,700 Dycom Industries, Inc. (d)(e) 19,558,550
4,205,183 Extreme Networks Inc. (e) 15,264,814
2,936,900 Harmonic Inc. (e) 21,586,215
48,300 Riverbed Technology, Inc. (e) 941,850
1,359,400 Tellabs, Inc. (e) 14,899,024
3,725,500 Westell Technologies, Inc. Class A (a)(e) 7,786,295
--------------
123,702,955
===============================================================================
Construction & Engineering--0.8%
940,200 Chicago Bridge & Iron Co. NV 22,621,212
===============================================================================
Containers & Packaging--1.7%
4,225,400 Smurfit-Stone Container Corp. (d)(e) 47,324,480
===============================================================================
Diversified Consumer Services--1.5%
2,306,000 Corinthian Colleges, Inc. (d)(e) 24,927,860
878,900 Universal Technical Institute, Inc. (e) 15,723,521
--------------
40,651,381
===============================================================================
Diversified Telecommunication Services--0.1%
470,042 Vonage Holdings Corp. (d)(e) 3,233,889
===============================================================================
Electrical Equipment--0.1%
1,312,200 Global Power Equipment Group, Inc. (d)(e) 2,794,986
===============================================================================
Electronic Equipment & Instruments--2.7%
588,000 Anixter International, Inc. (d)(e) 33,204,360
2,124,900 Ingram Micro, Inc. Class A (e) 40,713,084
--------------
73,917,444
===============================================================================
Energy Equipment & Services--3.5%
2,088,000 Dresser-Rand Group, Inc. (d)(e) 42,595,200
1,744,600 Key Energy Services, Inc. (e) 23,726,560
925,300 Rowan Cos., Inc. 29,267,239
--------------
95,588,999
===============================================================================
Food & Staples Retailing--0.3%
251,500 BJ's Wholesale Club, Inc. (e) 7,338,770
===============================================================================
Food Products--0.5%
540,600 Smithfield Foods, Inc. (d)(e) 14,607,012
===============================================================================
Health Care Equipment & Supplies--2.7%
229,300 Alphatec Holdings, Inc. (e) 1,290,959
233,480 Cutera, Inc. (e) 6,208,233
4,216,472 OraSure Technologies, Inc. (a)(e) 33,900,435
200,800 Syneron Medical Ltd. (d)(e) 4,638,480
1,151,674 Wright Medical Group, Inc. (e) 27,928,095
--------------
73,966,202
===============================================================================
Health Care Providers & Services--0.6%
1,848,200 Hooper Holmes, Inc. (e) 6,228,434
252,200 LifePoint Hospitals, Inc. (e) 8,907,704
--------------
15,136,138
===============================================================================
Health Care Technology--0.8%
1,362,206 Emdeon Corp. (e) 15,951,432
692,963 Merge Technologies, Inc. (d)(e) 4,767,585
--------------
20,719,017
===============================================================================
Hotels, Restaurants & Leisure--2.0%
214,800 Ambassadors Group, Inc. 6,074,544
331,600 Ambassadors International, Inc. 10,475,244
400,643 Bob Evans Farms, Inc. (d) 12,131,470
405,000 OSI Restaurant Partners, Inc. (d) 12,842,550
773,500 Ryan's Restaurant Group, Inc. (e) 12,275,445
--------------
53,799,253
===============================================================================
Household Durables--1.1%
1,552,900 Furniture Brands International, Inc. (d) 29,567,216
===============================================================================
IT Services--2.8%
2,456,200 The BISYS Group, Inc. (e) 26,674,332
1,893,700 Convergys Corp. (e) 39,104,905
138,000 Hewitt Associates, Inc. Class A (e) 3,347,880
264,000 Sabre Holdings Corp. Class A 6,174,960
--------------
75,302,077
===============================================================================
20 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Schedule of Investments (continued) Master Value Opportunities Trust
Shares
Held Common Stocks Value
===============================================================================
Insurance--4.3%
78,900 AmerUs Group Co. $ 5,365,989
93,900 American National Insurance Co. 10,883,010
2,938,200 Conseco, Inc. (d)(e) 61,672,818
294,400 HCC Insurance Holdings, Inc. 9,679,872
13,659 Harleysville Group Inc. 477,928
282,600 IPC Holdings, Ltd. 8,596,692
754,171 Presidential Life Corp. 16,870,805
331,200 Scottish Re Group Ltd. 3,600,144
--------------
117,147,258
===============================================================================
Internet & Catalog Retail--0.6%
2,731,920 1-800-FLOWERS.COM, Inc. Class A (a)(e) 14,369,899
55,200 Shutterfly, Inc. (e) 858,360
--------------
15,228,259
===============================================================================
Internet Software & Services--0.9%
118,600 DivX, Inc. (d)(e) 2,819,122
3,140,172 SupportSoft, Inc. (a)(e) 13,722,552
129,506 Vignette Corp. (e) 1,753,511
945,900 webMethods, Inc. (e) 7,236,135
--------------
25,531,320
===============================================================================
Life Sciences Tools & Services--1.3%
821,000 Affymetrix, Inc. (d)(e) 17,700,760
406,200 Charles River Laboratories
International, Inc. (d)(e) 17,633,142
--------------
35,333,902
===============================================================================
Machinery--2.9%
581,400 AGCO Corp. (d)(e) 14,738,490
274,700 Kaydon Corp. (d) 10,169,394
1,165,900 Timken Co. 34,720,502
1,401,600 Wabash National Corp. (d) 19,187,904
--------------
78,816,290
===============================================================================
Media--3.3%
2,879,100 The Reader's Digest Association, Inc. Class A
(d) 37,313,136
513,200 Scholastic Corp. (e) 15,986,180
2,087,900 Valassis Communications, Inc. (d)(e) 36,851,435
--------------
90,150,751
===============================================================================
Metals & Mining--1.0%
292,400 Reliance Steel & Aluminum Co. 9,397,736
377,800 Steel Dynamics, Inc. (d) 19,060,010
--------------
28,457,746
===============================================================================
Multi-Utilities--0.7%
512,800 OGE Energy Corp. 18,517,208
===============================================================================
Multiline Retail--0.4%
336,300 Dollar Tree Stores, Inc. (d)(e) 10,411,848
===============================================================================
Oil, Gas & Consumable Fuels--4.3%
616,100 Cabot Oil & Gas Corp. Class A (d) 29,529,673
1,912,600 Denbury Resources, Inc. (e) 55,274,140
737,291 Plains Exploration & Production Co. (d)(e) 31,637,157
--------------
116,440,970
===============================================================================
Paper & Forest Products--0.2%
158,200 Neenah Paper, Inc. (d) 5,415,186
===============================================================================
Pharmaceuticals--2.5%
2,079,700 Medicis Pharmaceutical Corp. Class A (d) 67,278,295
===============================================================================
Real Estate Investment Trusts (REITs)--6.4%
1,088,700 Brandywine Realty Trust (d) 35,437,185
2,429,000 Crescent Real Estate EQT Co. 52,976,490
3,793,800 Friedman Billings Ramsey Group, Inc. Class A
(d) 30,464,214
1,443,200 Lexington Corporate Properties Trust 30,566,976
80,300 New Plan Excel Realty Trust 2,172,115
593,900 Rayonier, Inc. 22,449,420
--------------
174,066,400
===============================================================================
Road & Rail--2.3%
283,000 Kansas City Southern (d)(e) 7,728,730
1,260,600 RailAmerica, Inc. (e) 13,765,752
753,500 Swift Transportation Co., Inc. (d)(e) 17,873,020
664,700 U.S. Xpress Enterprises, Inc. Class A (a)(e) 15,387,805
368,621 Vitran Corp., Inc. (e) 6,819,489
--------------
61,574,796
===============================================================================
Semiconductors & Semiconductor Equipment--1.5%
631,900 Actel Corp. (e) 9,826,045
1,837,500 Genesis Microchip Inc. (a)(d)(e) 21,627,375
611,000 Zoran Corp. (e) 9,824,880
--------------
41,278,300
===============================================================================
Software--6.1%
3,872,747 Agile Software Corp. (a)(e) 25,289,038
2,174,277 Bottomline Technologies, Inc. (a)(e) 21,220,943
170,300 CommVault Systems, Inc. (e) 3,065,400
617,200 Hyperion Solutions Corp. (e) 21,281,056
2,880,500 InterVoice, Inc. (a)(e) 18,262,370
415,500 McAfee, Inc. (e) 10,163,130
5,555,900 Novell, Inc. (d)(e) 34,002,108
496,900 Progress Software Corp. (e) 12,919,400
2,317,271 TIBCO Software, Inc. (e) 20,809,094
--------------
167,012,539
===============================================================================
Specialty Retail--3.1%
1,976,300 Foot Locker, Inc. 49,901,575
1,862,800 RadioShack Corp. (d) 35,952,040
--------------
85,853,615
===============================================================================
Textiles, Apparel & Luxury Goods--0.1%
149,800 Kenneth Cole Productions, Inc. Class A 3,650,626
===============================================================================
Thrifts & Mortgage Finance--3.5%
255,100 Anchor Bancorp Wisconsin, Inc. 7,285,656
544,600 Dime Community Bancshares, Inc. 8,021,958
316,000 Fidelity Bankshares, Inc. (d) 12,327,160
156,600 FirstFed Financial Corp. (e) 8,882,352
572,600 Franklin Bank Corp. (e) 11,383,288
996,400 Webster Financial Corp. 46,940,404
--------------
94,840,818
===============================================================================
Trading Companies & Distributors--1.0%
1,151,500 United Rentals, Inc. (e) 26,772,375
- -------------------------------------------------------------------------------
Total Common Stocks
(Cost--$2,359,833,170)--93.7% 2,555,261,573
===============================================================================
Exchange-Traded Funds
===============================================================================
249,900 iShares Dow Jones US Real Estate Index Fund
(d) 19,279,785
346,400 iShares Russell 2000 Index Fund (d) 24,930,408
128,000 iShares Russell Microcap Index Fund (d) 6,841,600
358,800 iShares S&P SmallCap 600/BARRA Value
Index Fund (d) 25,055,004
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 21
Schedule of Investments (concluded) Master Value Opportunities Trust
Shares
Held Exchange-Traded Funds Value
===============================================================================
176,300 iShares S&P SmallCap 600 Index Fund (d) $ 10,819,531
251,600 Powershares Zacks Micro Cap Portfolio (e) 4,121,208
- -------------------------------------------------------------------------------
Total Exchange-Traded Funds
(Cost--$75,465,385)--3.3% 91,047,536
===============================================================================
Warrants (f)(h)
===============================================================================
Capital Markets--1.7%
943,000 UBS AG (expires 4/30/2007) 45,858,090
- -------------------------------------------------------------------------------
Total Warrants (Cost--$47,793,649)--1.7% 45,858,090
===============================================================================
Beneficial
Interest Short-Term Securities
===============================================================================
$ 24,081,787 BlackRock Liquidity Series, LLC
Cash Sweep Series I, 5.18% (b)(g) 24,081,787
535,402,379 BlackRock Liquidity Series, LLC
Money Market Series, 5.33% (b)(c)(g) 535,402,379
- -------------------------------------------------------------------------------
Total Short-Term Securities
(Cost--$559,484,166)--20.5% 559,484,166
===============================================================================
Total Investments (Cost--$3,042,576,370*)--119.2% 3,251,651,365
Liabilities in Excess of Other Assets--(19.2%) (524,642,421)
--------------
Net Assets--100.0% $2,727,008,944
==============
* The cost and unrealized appreciation (depreciation) of investments as of
September 30, 2006, as computed for federal income tax purposes, were as
follows:
Aggregate cost ................................... $3,052,723,593
==============
Gross unrealized appreciation .................... $ 377,541,935
Gross unrealized depreciation .................... (178,614,163)
--------------
Net unrealized appreciation ...................... $ 198,927,772
==============
(a) Investments in companies (whereby the Trust held 5% or more of the
companies' outstanding securities) that are considered to be an affiliate,
for purposes of Section 2(a)(3) of the Investment Company Act of 1940,
were as follows:
---------------------------------------------------------------------------------------------------------------------
Net Share Purchase Sales Realized Dividend
Affiliate Activity Cost Cost Gain (Loss) Income
---------------------------------------------------------------------------------------------------------------------
1-800-FLOWERS.COM, Inc. Class A 861,475 $ 6,854,782 $ 2,144,651 $ (116,131) +
Agile Software Corp. 738,404 $ 6,615,448 $ 3,376,161 $ (274,125) +
Bottomline Technologies, Inc. 1,385,977 $13,392,127 $ 853,206 $ (182,918) +
Cornell Cos., Inc. (218,000) $ 217,544 $ 3,415,815 $ 420,609 +
EDO Corp. 1,243,800 $33,251,409 $ 197,804 $ (50,156) $73,521
Genesis Microchip, Inc. 1,837,500 $27,252,250 $ 4,465,004 $ (746,534) +
InterVoice, Inc. 1,520,500 $10,210,695 -- -- +
Maxygen, Inc. (274,100) -- $ 3,698,194 $ (1,523,474) +
OraSure Technologies, Inc. 1,196,672 $14,569,669 $ 6,056,167 $ (1,480,405) +
SupportSoft, Inc. 719,700 $ 3,069,921 -- -- +
Triumph Group, Inc. (223,300) $ 2,665,761 $11,076,025 $ 2,872,318 $61,412
U.S. Xpress Enterprises, Inc. Class A (402,900) $ 2,329,719 $ 9,358,425 $ 3,960,694 +
Vical, Inc. 154,250 $ 1,003,434 $ 290,439 $ (80,739) +
Westell Technologies, Inc. Class A 1,771,300 $ 5,480,937 -- -- +
---------------------------------------------------------------------------------------------------------------------
+ Non-income producing security.
(b) Investments in companies considered to be an affiliate of the Trust, 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 I $ (3,457,736) $608,700
BlackRock Liquidity Series, LLC
Money Market Series $104,539,252 $673,655
--------------------------------------------------------------------------
(c) Security was purchased with the cash proceeds from securities loans.
(d) Security, or a portion of security, is on loan.
(e) Non-income producing security.
(f) Warrants entitle the Trust to purchase a predetermined number of shares of
common stock and are non-income producing. The purchase price and number
of shares are subject to adjustment under certain conditions until the
expiration date.
(g) Represents the current yield as of September 30, 2006.
(h) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
o For Trust compliance purposes, the Trust'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 Trust 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.
See Notes to Financial Statements.
22 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Statement of Assets and Liabilities Master Value Opportunities Trust
As of September 30, 2006
===================================================================================================================================
Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (including securities loaned
of $514,793,483) (identified cost--$2,164,829,489) ............................ $ 2,376,820,545
Investments in affiliated securities, at value (identified cost--$877,746,881) . 874,830,820
Receivables:
Securities sold ............................................................. $ 35,994,506
Contributions ............................................................... 3,754,184
Dividends ................................................................... 2,178,329
Securities lending .......................................................... 91,559 42,018,578
---------------
Prepaid expenses ............................................................... 46,534
---------------
Total assets ................................................................... 3,293,716,477
---------------
===================================================================================================================================
Liabilities
- -----------------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ...................................... 535,402,379
Bank overdraft ................................................................. 2,279,696
Payables:
Securities purchased ........................................................ 23,166,675
Withdrawals ................................................................. 4,566,043
Investment adviser .......................................................... 991,356
Other affiliates ............................................................ 29,916 28,753,990
---------------
Accrued expenses ............................................................... 271,468
---------------
Total liabilities .............................................................. 566,707,533
---------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets ..................................................................... $ 2,727,008,944
===============
===================================================================================================================================
Net Assets Consist of
- -----------------------------------------------------------------------------------------------------------------------------------
Investors' capital ............................................................. $ 2,517,933,949
Unrealized appreciation--net ................................................... 209,074,995
---------------
Net Assets ..................................................................... $ 2,727,008,944
===============
See Notes to Financial Statements.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 23
Statement of Operations Master Value Opportunities Trust
For the Six Months Ended September 30, 2006
===================================================================================================================================
Investment Income
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends (including $134,933 from affiliates and net of $10,221 foreign
withholding tax) .............................................................. $ 14,892,827
Securities lending--net ........................................................ 673,655
Interest from affiliates ....................................................... 608,700
---------------
Total income ................................................................... 16,175,182
---------------
===================================================================================================================================
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ....................................................... $ 6,703,984
Accounting services ............................................................ 268,646
Custodian fees ................................................................. 107,679
Professional fees .............................................................. 43,491
Trustees' fees and expenses .................................................... 23,256
Printing and shareholder reports ............................................... 1,525
Pricing fees ................................................................... 742
Other .......................................................................... 36,052
---------------
Total expenses ................................................................. 7,185,375
---------------
Investment income--net ......................................................... 8,989,807
---------------
===================================================================================================================================
Realized & Unrealized Gain (Loss)--Net
- -----------------------------------------------------------------------------------------------------------------------------------
Realized gain (loss) on:
Investments (including $2,799,139 from affiliates)--net ..................... 158,376,090
Foreign currency transactions--net .......................................... (194) 158,375,896
---------------
Change in unrealized appreciation on investments--net .......................... (285,810,222)
---------------
Total realized and unrealized loss--net ........................................ (127,434,326)
---------------
Net Decrease in Net Assets Resulting from Operations ........................... $ (118,444,519)
===============
See Notes to Financial Statements.
24 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Statements of Changes in Net Assets Master Value Opportunities Trust
For the Six For the
Months Ended Year Ended
September 30, March 31,
Increase (Decrease) in Net Assets: 2006 2006
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Investment income--net ......................................................... $ 8,989,807 $ 18,479,530
Realized gain--net ............................................................. 158,375,896 562,837,108
Change in unrealized appreciation--net ......................................... (285,810,222) 130,184,338
-----------------------------------
Net increase (decrease) in net assets resulting from operations ................ (118,444,519) 711,500,976
-----------------------------------
===================================================================================================================================
Capital Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Proceeds from contributions .................................................... 254,762,878 553,882,524
Fair value of withdrawals ...................................................... (471,171,815) (1,209,469,692)
-----------------------------------
Net decrease in net assets derived from capital transactions ................... (216,408,937) (655,587,168)
-----------------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets ........................................ (334,853,456) 55,913,808
Beginning of period ............................................................ 3,061,862,400 3,005,948,592
-----------------------------------
End of period .................................................................. $ 2,727,008,944 $ 3,061,862,400
===================================
See Notes to Financial Statements.
Financial Highlights Master Value Opportunities Trust
For the Six
The following ratios have been Months Ended For the Year Ended March 31,
derived from information provided Sept. 30, -----------------------------------------------------------------
in the financial statements. 2006 2006 2005 2004 2003 2002
====================================================================================================================================
Total Investment Return
- ------------------------------------------------------------------------------------------------------------------------------------
Total investment return ................ (3.83%)@ 26.66% 4.48% 58.26% (27.31%)+ 32.13%
================================================================================
====================================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses ............................... .51%* .51% .50% .51% .51% .52%
================================================================================
Investment income--net ................. .63%* .62% .35% .42% .32% .44%
================================================================================
====================================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $2,727,009 $3,061,862 $3,005,949 $3,189,311 $1,932,417 $3,248,959
================================================================================
Portfolio turnover ..................... 35.81% 77.26% 74.31% 80.35% 68.27% 54.14%
================================================================================
* Annualized.
+ FAM fully reimbursed the Trust for a loss on a transaction not meeting the
Trust's investment guidelines, which had no impact on total return.
@ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 25
Notes to Financial Statements Master Value Opportunities Trust
1. Significant Accounting Policies:
Master Value Opportunities Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, and is organized as a Delaware
statutory trust. The Declaration of Trust permits the Trustees to issue
nontransferable interests in the Trust, subject to certain limitations. The
Trust'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 following is
a summary of significant accounting policies followed by the Trust.
(a) Valuation of investments -- Equity securities that are held by the Trust
that are traded on stock exchanges or the Nasdaq National 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 in securities traded in the over-the-counter ("OTC") market,
Nasdaq Small Cap 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 market
are valued at the last available asked price. Trust securities that are traded
both in the OTC market and on a stock exchange are valued according to the
broadest and most representative market.
Options written are valued at the last sale price in the case of exchange-traded
options or, in the case of options traded in the OTC market, the last asked
price. Options purchased are valued at their last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC market, the
last bid price. Swap agreements are valued daily based upon quoted fair
valuations received daily by the Trust 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 the Investment Adviser 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 Trust
employs certain pricing services to provide certain securities prices for the
Trust. 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 Trust, 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.
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 assets of the Trust are determined as of such times. Foreign currency
exchange rates also are generally determined prior to the close of business on
the NYSE. As of October 2, 2006, foreign currency exchange rates will be
determined at 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 Trust's net assets. If events
(for example, a company announcement, market volatility or a natural disaster)
occur during such periods that are expected to materially affect the value of
such securities, those securities may be valued at their fair value as
determined in good faith by the Trust's Board of Trustees or by the Investment
Adviser using a pricing service and/or procedures approved by the Trust's Board
of Trustees.
(b) Derivative financial instruments -- The Trust may engage in various
portfolio investment strategies both to increase the return of the Trust and to
hedge, and protect its exposure to interest rate movements and movements in the
securities market. Losses may arise due to changes in the value of the contract
or if the counterparty does not perform under the contract.
o Financial futures contracts -- The Trust may purchase or sell financial
futures contracts and options on such futures contracts. Futures contracts
are contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract,
26 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements (continued) Master Value Opportunities Trust
the Trust deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected. Pursuant to
the contract, the Trust agrees to receive from or pay to the broker an
amount of cash equal to the daily fluctuation in value of the contract.
Such receipts or payments are known as variation margin and are recorded
by the Trust as unrealized gains or losses. When the contract is closed,
the Trust records a realized gain or loss equal to the difference between
the value of the contract at the time it was opened and the value at the
time it was closed.
o Options -- The Trust may write put and covered call options and purchase
and write call and put options. When the Trust writes an option, an amount
equal to the premium received by the Trust is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option
written. When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or deducted
from) the basis of the security acquired or deducted from (or added to)
the proceeds of the security sold. When an option expires (or the Trust
enters into a closing transaction), the Trust realizes a gain or loss on
the option to the extent of the premiums received or paid (or a gain or
loss to the extent that the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
o Forward foreign exchange contracts -- The Trust 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 Trust as an unrealized gain or
loss. When the contract is closed, the Trust 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.
o Foreign currency options and futures -- The Trust may purchase or sell
listed or OTC foreign currency options, foreign currency futures and
related options on foreign currency futures as a short or long hedge
against possible variations in foreign exchange rates. Such transactions
may be effected with respect to hedges on non-U.S. dollar-denominated
securities owned by the Trust, sold by the Trust but not yet delivered, or
committed or anticipated to be purchased by the Trust.
(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 Trust 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 -- The Trust is considered as a "pass-through" entity for
federal income tax purposes. As such, each investor in the Trust is treated as
owner of its proportionate share of the net assets, income, expenses and
realized and unrealized gains and losses of the Trust. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates. Therefore, no federal income tax provision is
required. It is intended that the Trust's assets will be managed so an investor
in the Trust can satisfy the requirements of Subchapter M of the Internal
Revenue Code.
(e) Recent accounting pronouncement -- In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48") entitled
"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 fiscal years beginning after December 15, 2006. The
impact on the Trust's financial statements, if any, is currently being assessed.
(f) 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.
Interest income is recognized on the accrual basis.
(g) Securities lending -- The Trust 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.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 27
Notes to Financial Statements (continued) Master Value Opportunities Trust
The market value of the loaned securities is determined at the close of business
of the Trust and any additional required collateral is delivered to the Trust on
the next business day. Where the Trust receives securities as collateral for the
loaned securities, it collects a fee from the borrower. The Trust typically
receives the income on the loaned securities but does not receive the income on
the collateral. Where the Trust 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 Trust 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 Trust could experience delays
and costs in gaining access to the collateral. The Trust 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.
(h) Bank overdraft -- The Trust recorded a bank overdraft reflecting an
overnight overdraft, which resulted from an unpaid corporate event.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust has entered into an Investment Advisory Agreement with Fund Asset
Management, L.P. ("FAM"). The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect, wholly owned subsidiary of Merrill Lynch & Co., Inc. ("ML
& Co."), which is the limited partner.
FAM is responsible for the management of the Trust's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Trust. For such services, the Trust pays a monthly fee
upon the average daily value of the Trust's net assets at the following annual
rates: .50% of the Trust's average net assets not exceeding $1 billion, and
..475% of average daily net assets in excess of $1 billion but not exceeding $1.5
billion; and .45% of average daily net assets in excess of $1.5 billion.
The Trust has received an exemptive order from the Securities and Exchange
Commission permitting it to lend Trust securities to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), an affiliate of FAM, or its affiliates.
As of September 30, 2006, the Trust lent securities with a value of $13,035,236
to MLPF&S or its affiliates. Pursuant to that order, the Trust also has retained
Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, as
the securities lending agent for a fee based on a share of the returns on
investment of cash collateral. MLIM, LLC may, on behalf of the Trust, invest
cash collateral received by the Trust for such loans, among other things, in a
private investment company managed by MLIM, LLC or in registered money market
funds advised by Merrill Lynch Investment Managers, L.P. ("MLIM"), an affiliate
of FAM. For the six months ended September 30, 2006, MLIM, LLC received $289,734
in securities lending agent fees.
In addition, MLPF&S received $246,199 in commissions on the execution of Trust
security transactions for the Trust for the six months ended September 30, 2006.
For the six months ended September 30, 2006, the Trust reimbursed FAM $30,946
for certain accounting services.
In February 2006, ML & Co. and BlackRock, Inc. entered into an agreement to
contribute ML & Co.'s investment management business, including FAM, to the
investment management business of BlackRock, Inc. The transaction closed on
September 29, 2006.
On August 31, 2006, the shareholders of the investors of the Trust approved a
new Investment Advisory Agreement with BlackRock Advisors, Inc., (the "Manager")
a wholly owned subsidiary of BlackRock, Inc. BlackRock Advisors, Inc. was
reorganized into BlackRock Advisors, LLC. The new advisory agreement became
effective on September 29, 2006 and the investment advisory fee is unchanged. In
addition, the Manager has entered into a sub-advisory agreement with BlackRock
Investment Management, LLC, an affiliate of the Manager, under which the Manager
pays the Sub-Adviser for services it provides a fee equal to 74% of the
management fee paid to the Manager.
In connection with the closing, MLIM, LLC, the security lending agent, became
BlackRock Investment Management, LLC.
Prior to the closing, certain officers and/or trustees of the Trust are officers
and/or directors of FAM, PSI, ML & Co., MLIM, and/or MLIM, LLC.
Commencing September 29, 2006, certain officers and/or trustees of the Trust are
officers and/or directors of BlackRock, Inc. or its affiliates.
28 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Notes to Financial Statements (concluded) Master Value Opportunities Trust
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended September 30, 2006 were $1,016,735,357 and $1,214,986,498,
respectively.
4. Short-Term Borrowings:
The Trust, along with certain other funds managed by FAM and its affiliates, is
a party to a $500,000,000 credit agreement with a group of lenders, which
expires November 2006. The Trust may borrow under the credit agreement to fund
Shareholder redemptions and for other lawful purposes other than for leverage.
The Trust may borrow up to the maximum amount allowable under the Trust's
current prospectus and statement of additional information, subject to various
other legal, regulatory or contractual limits. The Trust pays a commitment fee
of .07% per annum based on the Trust'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 .50% or
a base rate as defined in the credit agreement. The Trust did not borrow under
the credit agreement during the six months ended September 30, 2006.
Officers and Directors/Trustees
Robert C. Doll, Jr., President and Director/Trustee
Donald W. Burton, Director/Trustee
John Francis O'Brien, Director/Trustee
David H. Walsh, Director/Trustee
Fred G. Weiss, Director/Trustee
Donald C. Burke, Vice President and Treasurer
R. Elise Baum, Vice President and Portfolio Manager
Jeffrey Hiller, Fund Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
Pre Transaction
(Until September 29, 2006)
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
Post Transaction
(After September 29, 2006)
PFPC Inc.
Wilmington, DE 19809
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 29
Disclosure of Investment Advisory Agreement
Disclosure of FAM Management Agreements
The Board of Directors of the Fund and the Board of Trustees of the Trust (the
"Boards") met in August 2006 to consider approval of the Fund's and the Trust's
investment advisory agreements with Fund Asset Management, L.P., the Fund's and
the Trust's investment adviser at that time ("FAM").
Activities and Composition of the Boards
All but one member of the Boards is an independent director/trustee whose only
affiliation with FAM or other Merrill Lynch affiliates was as a director/trustee
of the Fund and the Trust and as a trustee or director of certain other funds
advised by FAM or its affiliates. The Chairman is an independent
director/trustee. New director/trustee nominees are chosen by a Nominating
Committee comprised entirely of independent directors/trustees. All independent
directors/trustees also are members of each Board's Audit Committee, and the
independent directors/trustees meet in executive session at each in-person Board
meeting. Each Board and each Board's Audit Committee meet in person for at least
two days each quarter and conduct other in-person and telephone meetings
throughout the year, some of which are formal Board meetings and some of which
are informational meetings. Independent counsel to the independent
directors/trustees attends all in-person Board and Audit Committee meetings and
other meetings at the independent directors'/trustees' request.
FAM Investment Advisory Agreements -- Matters Considered by the Boards
Every year, the Boards consider approval of the Fund's and the Trust's
investment advisory agreements. The Boards assess the nature, scope and quality
of the services provided to the Fund and the Trust by the personnel of the
investment adviser and its affiliates, including administrative services,
shareholder services, oversight of fund accounting, marketing services and
assistance in meeting legal and regulatory requirements. The Boards also receive
and assess information regarding the services provided to the Fund and the Trust
by certain unaffiliated service providers.
At various times throughout the year, the Boards also consider a range of
information in connection with their oversight of the services provided by the
investment adviser and its affiliates. Among the matters considered are: (a)
fees (in addition to management fees) paid to the investment adviser and its
affiliates by the Fund and/or the Trust, such as transfer agency fees and fees
for marketing and distribution; (b) Fund/Trust operating expenses paid to third
parties; (c) the resources devoted to and compliance reports relating to the
Fund's/Trust's investment objective, policies and restrictions, and the
Fund's/Trust's compliance with its Code of Ethics and compliance policies and
procedures; and (d) the nature, cost and character of non-investment management
services provided by the investment adviser and its affiliates.
The Boards noted their view of FAM as one of the most experienced global asset
management firms and considered the overall services provided by FAM to be of
high quality. The Boards also noted their view of FAM as financially sound and
well managed and noted FAM's affiliation with one of America's largest financial
firms. The Boards work closely with the investment adviser in overseeing the
investment adviser's efforts to achieve good performance. As part of this
effort, the Boards discuss portfolio manager effectiveness and, when performance
is not satisfactory, discuss with the investment adviser taking steps such as
changing investment personnel.
Annual Consideration of Approval by the Boards -- In the period prior to the
Board meeting to consider renewal of the investment advisory agreements, the
Boards request and receive materials specifically relating to the investment
advisory agreements. These materials include (a) information compiled by Lipper
Inc. ("Lipper") on the fees and expenses and the investment performance of the
Fund and the Trust as compared to a comparable group of funds as classified by
Lipper; (b) sales and redemption data for the Fund; (c) a discussion by the
Fund's/Trust's portfolio management team of investment strategies used by the
Fund/Trust during its most recent fiscal year; (d) information on the
profitability to the investment adviser and its affiliates of the investment
advisory agreements and other relationships with the Fund and the Trust; and (e)
information provided by the investment adviser concerning investment advisory
fees charged to other clients, such as retail insurance funds, retail offshore
funds and institutional clients, under similar investment mandates. The Boards
also consider other matters they deem important to the approval process, such as
payments made to the investment adviser or its affiliates relating to the
distribution of Fund shares, services related to the valuation and pricing of
Fund/Trust portfolio holdings, allocation of Fund/Trust brokerage fees
(including the related benefits to the investment adviser of "soft dollars"),
the Fund's/Trust's portfolio turnover statistics, and direct and indirect
benefits to the investment adviser and its affiliates from their relationship
with the Fund and the Trust. The Boards did not identify any particular
information as controlling, and each member of the Boards attributed different
weights to the various items considered.
Certain Specific Renewal Data
In connection with the most recent renewal of the Fund's and the Trust's
investment advisory agreements with FAM (the "FAM Investment Advisory
Agreements") in August 2006, the independent directors'/trustees' and Boards'
review included the following:
30 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Services Provided by the Investment Adviser -- The Boards reviewed the nature,
extent and quality of services provided by FAM, including the investment
advisory services and the resulting performance of the Fund and the Trust. The
Boards focused primarily on FAM's investment advisory services and the
Fund's/Trust's investment performance. The Boards compared Fund/Trust
performance -- both including and excluding the effects of the Fund's/Trust's
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
Boards review performance data at least quarterly, consistent with the
investment adviser's investment goals, the Boards attach more importance to
performance over relatively long periods of time, typically three to five years.
For the periods ended May 31, 2006, the Boards noted that the Fund's/Trust's
performance after fees and expenses ranked in the first quintile for the
one-year period, the fourth quintile for the three-year period and the fifth
quintile for the five-year period. Considering these factors, the Boards
concluded that the Fund's/Trust's performance supported the continuation of the
FAM Investment Advisory Agreements, but determined to monitor the Fund's/Trust's
performance closely to ensure that the Fund's/Trust's recent improvement
continued.
FAM's Personnel and Investment Process -- The Boards reviewed the Fund's/Trust's
investment objectives and strategies. The Boards discussed with FAM's senior
management responsible for investment operations and the senior management of
FAM's equity investing group the strategies being used to achieve the stated
objectives. Among other things, the Boards considered the size, education and
experience of FAM's investment staff, its use of technology, and FAM's approach
to training and retaining portfolio managers and other research, advisory and
management personnel. The Boards also reviewed FAM's compensation policies and
practices with respect to the Fund's/Trust's portfolio managers. The Boards also
considered the experience of the Fund's/Trust's portfolio managers and noted
that Ms. Baum, the Fund's/Trust's senior portfolio manager, has more than ten
years of portfolio management experience. Moreover, the Boards considered the
extensive experience of FAM and its investment staff in analyzing and managing
the types of investments used by the Fund and the Trust. The Board concluded
that the Fund and the Trust benefit from that expertise.
Management Fees and Other Expenses -- The Boards reviewed the Fund's/Trust'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 and
administrative service fees and the effects of any fee waivers -- compared to
the other funds in its Lipper category. The Boards also compared the
Fund's/Trust's total expenses to those of other comparable funds. The Boards
considered the services provided to and the fees charged by FAM to other types
of clients with similar investment mandates, including a retail insurance fund,
a retail offshore fund and an institutional client. The Boards noted that the
fees charged for these accounts exceeded those being charged to the Fund/Trust.
The Boards noted that the Fund's/Trust's actual management fee rate was lower
than the median of actual management fee rates charged by comparable funds, as
classified by Lipper, and the Fund's/Trust's total expenses were slightly lower
than the median of total expenses for comparable funds. The Boards concluded
that the Fund's/Trust's management fee rate and overall expense ratio were
acceptable when compared to those of other comparable funds.
Profitability -- The Boards consider the cost of the services provided to the
Fund and the Trust by the investment adviser and the investment adviser's and
its affiliates' profits relating to the management and distribution of the Fund
and the Trust and the funds advised by the investment adviser and its
affiliates. As part of its analysis, the Boards reviewed FAM's methodology in
allocating its costs to the management of the Fund and the Trust and concluded
that there was a reasonable basis for the allocation. The Boards concluded that
the profits of FAM and its affiliates were acceptable in relation to the nature
and quality of services provided and given the level of fees and expenses
overall.
Economies of Scale -- The Boards considered the extent to which economies of
scale might be realized as the assets of the Fund and the Trust increase and
whether there should be changes in the management fee rate or structure in order
to enable the Fund and the Trust to participate in these economies of scale. The
Board concluded that the Fund's management fee, which includes a series of
breakpoints, appropriately allows shareholders to participate in the benefit of
economies of scale. The Boards also considered FAM's agreement to waive the
Fund's advisory fee in the amount of the Fund's share of the investment advisory
fee paid by the Trust. The Boards determined that the management fee structure
was reasonable and that no changes were currently necessary.
Conclusion -- After the independent directors/trustees deliberated in executive
session, the entire Board of each of the Fund and the Trust, including all of
the independent directors/trustees, approved the renewal of the existing FAM
Investment Advisory Agreements, concluding that the advisory fees were
reasonable in relation to the services provided and that a contract renewal was
in the best interests of the shareholders.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 31
Disclosure of New Investment Advisory Agreement
New BlackRock Investment Advisory Agreement -- Matters Considered by the Board
BlackRock Value Opportunities Fund, Inc. is a "feeder" fund that invests all its
assets in the Master Value Opportunities Trust, which has the same investment
objectives and strategies as the Fund. All investments are made at the Trust
level.
In connection with the combination of Merrill Lynch's investment advisory
business, including Fund Asset Management, L.P. (the "Previous Investment
Adviser"), with that of BlackRock, Inc. ("BlackRock") to create a new
independent company ("New BlackRock") (the "Transaction"), the Board of Trustees
of the Trust considered and approved a new investment advisory agreement between
the Trust and BlackRock Advisors, LLC ("BlackRock Advisors"). The Fund's
shareholders subsequently approved the Trust's BlackRock Investment Advisory
Agreement and it became effective on September 29, 2006, replacing the Trust's
investment advisory agreement with the Previous Investment Adviser.
In addition, in connection with the Transaction, the Board of Directors of the
Fund considered and approved a new investment advisory agreement between the
Fund and BlackRock Advisors (together with the new advisory agreement for the
Trust, the "BlackRock Investment Advisory Agreements"). The Fund's shareholders
subsequently approved the Fund's BlackRock Investment Advisory Agreement and it
became effective on September 29, 2006, replacing the Fund's investment advisory
agreement with the Previous Investment Adviser (together with the Trust's
investment advisory agreement with the Previous Investment Adviser, the
"Previous Investment Advisory Agreements").
The Boards discussed the BlackRock Investment Advisory Agreements at telephonic
and in-person meetings held during April and May 2006. The Boards, including the
independent directors/trustees, approved the BlackRock Investment Advisory
Agreements at in-person meetings held on May 8, 2006.
To assist the Boards in their consideration of the BlackRock Investment Advisory
Agreements, 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 directors/trustees, through their independent legal
counsel, also requested and received additional information from Merrill Lynch
and BlackRock in connection with their consideration of the BlackRock Investment
Advisory Agreements. The additional information was provided in advance of the
May 8, 2006 meetings. In addition, the independent directors consulted with
their counsel and counsel for the Fund and the Trust on numerous occasions,
discussing, among other things, the legal standards and certain other
considerations relevant to each Board's deliberations.
At the Board meetings, the directors/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 and
the Trust. At these Board meetings, representatives of Merrill Lynch and
BlackRock made presentations to and responded to questions from the Boards. Each
Board also inquired about the plans for and anticipated roles and
responsibilities of certain employees and officers of the Previous Investment
Adviser, and of its affiliates, to be transferred to BlackRock in connection
with the Transaction. The independent directors/trustees 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 directors/trustees met
in executive sessions with their counsel to consider the BlackRock Investment
Advisory Agreements.
In connection with the Boards' review of the BlackRock Investment Advisory
Agreements, Merrill Lynch and/or BlackRock advised the Boards about a variety of
matters. The advice included the following, among other matters:
o that there was not expected to be any diminution in the nature, quality
and extent of services provided to the Fund and the Trust and their
shareholders by BlackRock Advisors, including compliance services;
o that operation of New BlackRock as an independent investment management
firm would enhance its ability to attract and retain talented
professionals;
o that the Fund and the Trust were expected to 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;
o that BlackRock had no present intention to alter any applicable expense
waivers or reimbursements that were currently in effect and, while it
reserved the right to do so
32 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
in the future, it would seek the approval of each Board before making any
changes;
o that BlackRock and Merrill Lynch would 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 would continue to offer the Fund as an
investment product;
o that BlackRock Advisors would have substantially the same access to the
Merrill Lynch sales force when distributing shares of the Fund as was
currently being provided to the Previous Investment Adviser and that other
arrangements between the Previous Investment Adviser and Merrill Lynch
sales channels would be preserved;
o that the Fund would have access to BlackRock's network of third party
brokers, retirement plan platforms and registered investment advisers;
o that in connection with the Transaction, Merrill Lynch and BlackRock had
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 Previous Investment Adviser (or affiliates),
respectively; and
o that Merrill Lynch and BlackRock would derive benefits from the
Transaction and that, as a result, they had a financial interest in the
matters being considered that was different from that of Fund or Trust
shareholders.
The directors considered the information provided by Merrill Lynch and BlackRock
above, and, among other factors, the following:
o the potential benefits to Fund and Trust shareholders from being part of a
combined fund family with BlackRock-sponsored funds, including possible
economies of scale and access to investment opportunities;
o the potential for expanding distribution of Fund shares through improved
access to third party distribution;
o the reputation, financial strength and resources of BlackRock and its
investment advisory subsidiaries and the anticipated financial strength
and resources of New BlackRock;
o the compliance policies and procedures of BlackRock Advisors;
o the terms and conditions of the BlackRock Investment Advisory Agreements,
including the fact that the schedule of the Fund's/Trust's total advisory
fees would not increase under the BlackRock Investment Advisory Agreement,
but would remain the same;
o that in August 2005, each Board had performed a full annual review of each
respective Previous Investment Advisory Agreement, as required by the 1940
Act, and had determined that the Previous Investment Adviser had the
capabilities, resources and personnel necessary to provide the advisory
and administrative services that were then being provided to the
Fund/Trust; and that the advisory and/or management fees paid by the
Fund/Trust, taking into account any applicable agreed-upon fee waivers and
breakpoints, had represented reasonable compensation to the Previous
Investment Adviser in light of the services provided, the costs to the
Previous 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 directors/trustees had considered relevant in the exercise of their
reasonable judgment; and
o that Merrill Lynch had agreed to pay all expenses of the Fund and Trust in
connection with the Board's consideration of the BlackRock Investment
Advisory Agreements and related agreements and all costs of shareholder
approval of the BlackRock Investment Advisory Agreements and as a result
the Fund and the Trust would bear no costs in obtaining shareholder
approval of the BlackRock Investment Advisory Agreements.
Certain of these considerations are discussed in more detail below.
In their review of the BlackRock Investment Advisory Agreements, the Boards
assessed the nature, quality and scope of the services to be provided to the
Fund and the Trust 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 their review of the BlackRock Investment Advisory Agreement,
the Boards also considered a range of information in connection with their
oversight of the services to be provided by BlackRock Advisors and its
affiliates. Among the matters considered were:
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 33
Disclosure of New Investment Advisory Agreement (continued)
(a) fees (in addition to management fees) to be paid to BlackRock Advisors and
its affiliates by the Fund and the Trust; (b) Fund and Trust operating expenses
paid to third parties; (c) the resources devoted to and compliance reports
relating to the Fund's and the Trust's investment objective, policies and
restrictions, and their compliance with their 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 Previous
Investment Advisory Agreements, the Boards had requested and received materials
specifically relating to the Previous Investment Advisory Agreements. 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 Trust's portfolio
management team on investment strategies used by the Trust during its most
recent fiscal year; (c) information on the profitability to the Previous
Investment Adviser of the Previous Investment Advisory Agreements and other
payments received by the Previous Investment Adviser and its affiliates from the
Fund and the Trust; and (d) information provided by the Previous Investment
Adviser concerning services related to the valuation and pricing of the Trust's
portfolio holdings, allocation of Trust brokerage fees, the Trust's portfolio
turnover statistics, and direct and indirect benefits to the Previous Investment
Adviser and its affiliates from their relationship with the Fund and the Trust.
In their deliberations, the Boards considered information received in connection
with their most recent approval of the continuance of the Previous Investment
Advisory Agreements, in addition to information provided by BlackRock and
BlackRock Advisors in connection with their evaluation of the terms and
conditions of the BlackRock Investment Advisory Agreements. The
directors/trustees did not identify any particular information that was
all-important or controlling, and each director/trustee attributed different
weights to the various factors. The directors/trustees made their determinations
separately in respect of the Fund and the Trust. The Boards, including a
majority of each Board's independent directors/trustees, concluded that the
terms of the BlackRock Investment Advisory Agreements are appropriate, that the
fees to be paid are reasonable in light of the services to be provided to the
Fund/Trust, and that the BlackRock Investment Advisory Agreements should be
approved and recommended to Fund/Trust shareholders.
Nature, Quality and Extent of Services Provided -- Each Board reviewed the
nature, quality and extent of services provided by the Previous Investment
Adviser, including the investment advisory services and the resulting
performance of the Fund and the Trust, as well as the nature, quality and extent
of services expected to be provided by BlackRock Advisors. Each Board focused
primarily on the Previous Investment Adviser's investment advisory services and
the investment performance of the Fund and the Trust, but also considered
certain areas in which both the Previous Investment Adviser and the Fund/Trust
received services as part of the Merrill Lynch complex. The Boards 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 Previous
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 BlackRock Investment Advisory Agreements, each
Board considered, among other things, the expected impact of the Transaction on
the operations, facilities, organization and personnel of BlackRock Advisors and
how it would affect the Fund and the Trust; the ability of BlackRock Advisors to
perform its duties after the Transaction; and any anticipated changes to the
investment and other practices of the Fund or the Trust.
Each Board was given information with respect to the potential benefits to the
Fund and the Trust and their 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 Boards were advised that, as a result of Merrill Lynch's equity interest in
BlackRock after the Transaction, the Fund and the Trust would 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 Boards 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.
Based on their review of the materials provided and the assurances they had
received from the management of
34 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
Merrill Lynch and of BlackRock, the directors/trustees determined that the
nature and quality of services to be provided to the Fund/Trust under the
BlackRock Investment Advisory Agreements were expected to be as good as or
better than that provided under the Previous Investment Advisory Agreements. The
directors/trustees were advised that BlackRock Advisors did not plan to change
the Fund's/Trust's portfolio management team upon the closing of the
transaction. It was noted, however, that other changes in personnel were
expected to follow the Transaction and the combination of the operations of the
Previous Investment Adviser and its affiliates with those of BlackRock. The
directors/trustees noted that if portfolio managers or other personnel were to
cease to be available prior to the closing of the Transaction, each Board would
consider all available options, including seeking the investment advisory or
other services of BlackRock affiliates. Accordingly, each Board concluded that,
overall, the Board was satisfied at the present time with assurances from
BlackRock and BlackRock Advisors as to the expected nature, quality and extent
of the services to be provided to the Fund/Trust under the BlackRock Investment
Advisory Agreements.
Costs of Services Provided and Profitability -- It was noted that, in
conjunction with the recent review of the Previous Investment Advisory
Agreements, the Boards had received, among other things, a report from Lipper
comparing the Fund's fees and expenses to those of a peer group selected by
Lipper, and information as to the fees charged by the Previous Investment
Adviser or its affiliates to other registered investment company clients for
investment management services. Each Board reviewed the Fund's/Trust'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 the Fund's
Lipper category. Each Board 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. Each Board
considered the services to be provided by and the fees to be charged by
BlackRock Advisors to other funds with similar investment mandates and noted
that the fees charged by BlackRock Advisors in those cases, including fee
waivers and expense reimbursements, were generally comparable to those being
charged to the Fund/Trust. The Boards also noted that, as a general matter,
according to the information provided by BlackRock, fees charged to
institutional clients were lower than the fees charged to the Fund, but
BlackRock Advisors provided less extensive services to such clients. Each Board
concluded that the Fund's/Trust'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 BlackRock Investment Advisory Agreements, the Boards considered, among
other things, whether advisory and administrative fees or other expenses would
change as a result of the Transaction. Based on their review of the materials
provided and the fact that each BlackRock Investment Advisory Agreement, as well
as a new administration agreement between the Fund and BlackRock Advisors as
administrator, is substantially similar to its corresponding previous agreement
in all material respects, including the rate of compensation, the Boards
determined that the Transaction should not increase the total fees payable,
including any fee waivers and expense reimbursements, for advisory and
administrative services. The Boards noted that it was not possible to predict
with certainty New BlackRock's future profitability from its relationship with
the Fund and the Trust.
Each Board discussed with BlackRock Advisors its general methodology to be used
in determining New BlackRock's profitability with respect to its relationship
with the Fund and the Trust. The directors noted that they expect to receive
profitability information from New BlackRock on at least an annual basis and
thus be in a position to evaluate whether any adjustments in the Fund's/Trust's
fees and/or fee breakpoints would be appropriate.
Fees and Economies of Scale -- Each Board considered the extent to which
economies of scale might be realized as the assets of the Fund and the Trust
increase and whether there should be changes in the management fee rate or
structure in order to enable the Fund and the Trust to participate in these
economies of scale. Each Board determined that changes were not currently
necessary and that the Fund and the Trust appropriately participated in these
economies of scale.
In reviewing the Transaction, the directors considered, among other things,
whether advisory and administrative fees or other expenses would change as a
result of the Transaction. Based on the fact that the BlackRock Investment
Advisory Agreements and new administrative agreement are substantially similar
to the Previous Investment Advisory Agreement and the Fund's administrative
agreement with the Previous Investment Adviser (the "FAM Administrative
Agreement") in all material respects, including the rates of compensation, each
Board determined that as a result of the Transaction, the Fund's/Trust's total
advisory and administrative fees would be no higher than the fees under the
Previous
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 35
Disclosure of New Investment Advisory Agreement (concluded)
Investment Advisory Agreement and the FAM Administrative Agreement. Each Board
noted that in conjunction with the Boards' most recent deliberations concerning
the Previous Investment Advisory Agreements, the directors/trustees had
determined that the total fees for advisory and administrative services for the
Fund and the Trust were reasonable in light of the services provided. It was
noted that in conjunction with the recent review of the Previous Investment
Advisory Agreements, the Boards 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 Previous
Investment Adviser to other registered investment company clients for investment
management services. Each Board concluded that because the rates for advisory
and administrative fees for the Fund/Trust would be no higher than the fee rates
in effect at the time, the proposed management fee structures, including any fee
waivers, were reasonable and that no additional changes were currently
necessary.
Fall-Out Benefits -- In evaluating the fall-out benefits to be received by
BlackRock Advisors under the BlackRock Investment Advisory Agreements, each
Board considered whether BlackRock Advisors would experience such benefits to
the same extent that the Previous Investment Adviser was experiencing such
benefits under the Previous Investment Advisory Agreements. Based on their
review of the materials provided, including materials received in connection
with their most recent approval of the continuance of the Previous Investment
Advisory Agreements, and their discussions with management of the Previous
Investment Adviser and BlackRock, the directors/trustees determined that
BlackRock Advisors' fall-out benefits could include increased ability for
BlackRock to distribute shares of its funds and other investment products and to
obtain research services using the Trust's portfolio transaction brokerage
commissions. The directors/trustees also considered possible benefits stemming
from the proposal that PFPC Financial Services, an affiliate of BlackRock, serve
as transfer agent for the Fund following the Transaction. Each Board noted that
fall-out benefits were difficult to quantify with certainty at this time, and
indicated that the Board would continue to evaluate them going forward.
Investment Performance -- Each Board considered investment performance for the
Fund and the Trust. Each 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. The comparative information received from Lipper showed
Fund performance at various levels within the range of performance of comparable
funds over different time periods. While the Boards review performance data at
least quarterly, consistent with the Previous Investment Adviser's investment
goals, each Board attaches more importance over relatively long periods of time,
typically three to five years. The directors/trustees believed the Fund's
performance was satisfactory. Also, each Board took into account the investment
performance of funds advised by BlackRock Advisors. Each Board considered
comparative information from Lipper which showed that the performance of the
funds advised by BlackRock Advisors was within the range of performance of
comparable funds over different time periods. The Boards noted BlackRock's
considerable investment management experience and capabilities, but were unable
to predict what effect, if any, consummation of the Transaction would have on
the future performance of the Fund.
Conclusion -- After the independent directors of the Fund and the independent
trustees of the Trust deliberated in executive session, each entire Board,
including the independent directors/trustees, approved the BlackRock Investment
Advisory Agreements, concluding that the advisory fee rate was reasonable in
relation to the services provided and that each BlackRock Investment Advisory
Agreement was in the best interests of the Fund's/Trust's shareholders. In
approving the BlackRock Investment Advisory Agreements, each Board noted that it
anticipated reviewing the continuance of the agreements in advance of the
expiration of the initial two-year period.
New BlackRock Sub-Advisory Agreement -- Matters Considered by the Board
At an in-person meeting held on August 16-17, 2006, the Board of Directors of
the Fund, including the independent directors, and the Board of Trustees of the
Trust, including the independent trustees, discussed and approved the
sub-advisory agreement (the "BlackRock Sub-Advisory Agreement") between
BlackRock Advisors and its affiliate, BlackRock Investment Management, LLC (the
"Sub-Adviser"). The BlackRock Sub-Advisory Agreement became effective on
September 29, 2006, at the same time the BlackRock Investment Advisory
Agreements became effective.
Pursuant to the BlackRock Sub-Advisory Agreement, the Sub-Adviser receives a
monthly fee from BlackRock Advisors equal to 74% of the advisory fee received by
BlackRock Advisors from the Trust. BlackRock Advisors pays the Sub-Adviser out
of its own resources, and there is no increase in Fund or Trust expenses as a
result of the BlackRock Sub-Advisory Agreement.
36 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006
In approving the BlackRock Sub-Advisory Agreement at the August in-person
meeting, each Board reviewed its considerations in connection with its approval
of the BlackRock Investment Advisory Agreements in May 2006. The Boards relied
on the same information and considered the same factors as those discussed above
in connection with the approval of the BlackRock Investment Advisory Agreements.
In reviewing the sub-advisory fee rate provided in the BlackRock Sub-Advisory
Agreement, the Boards noted the fact that both BlackRock Advisors and the
Sub-Adviser have significant responsibilities under their respective advisory
agreements. BlackRock Advisors remains responsible for oversight of the Fund's
and the Trust's operations and administration, and the Sub-Adviser provides
advisory services to the Fund/Trust and is responsible for the day-to-day
management of the Fund's/Trust's portfolio under the BlackRock Sub-Advisory
Agreement. The Boards also took into account the fact that there is no increase
in total advisory fees paid by the Fund or the Trust as a result of the
BlackRock Sub-Advisory Agreement. Under all of the circumstances, each Board
concluded that it was a reasonable allocation of fees for the Sub-Adviser to
receive 74% of the advisory fee paid by the Trust to BlackRock Advisors.
After the independent directors of the Fund and the independent trustees of the
Trust deliberated in executive session, each entire Board, including the
independent directors/ 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 Fund/Trust shareholders.
BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 37
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 Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's Web site at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
Electronic copies of most financial reports and prospectuses are available on
the Fund's Web site. 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 adviser. 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) Log into your account
38 BLACKROCK VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 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.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 Legacy 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. 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 VALUE OPPORTUNITIES FUND, INC. SEPTEMBER 30, 2006 39
This report 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.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available (1) without
charge, upon request, by calling toll-free 1-800-441-7762; (2) at
www.blackrock.com; and (3) on the Securities and Exchange Commission's Web site
at http://www.sec.gov. Information about how the Fund voted proxies relating to
securities held in the Fund's portfolio during the most recent 12-month period
ended June 30 is available (1) at www.blackrock.com and (2) on the Securities
and Exchange Commission's Web site at http://www.sec.gov.
BlackRock Value Opportunities Fund, Inc.
Box 9011
Princeton, NJ 08543-9011
BLACKROCK
#10253-9/06
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 - The registrant's
Nominating Committee will consider nominees to the Board recommended
by shareholders when a vacancy becomes available. Shareholders who
wish to recommend a nominee should send nominations which include
biographical information and sets forth the qualifications of the
proposed nominee to the registrant's Secretary. There have been no
material changes to these procedures.
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) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 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 materially 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 Value Opportunities Fund, Inc. and Master Value Opportunities Trust
By: /s/ Robert C. Doll, Jr.
-----------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Value Opportunities Fund, Inc. and Master Value Opportunities
Trust
Date: November 17, 2006
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 Value Opportunities Fund, Inc. and Master Value Opportunities
Trust
Date: November 17, 2006
By: /s/ Donald C. Burke,
-----------------------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock Value Opportunities Fund, Inc. and Master Value Opportunities
Trust
Date: November 17, 2006