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 811-03450
Name of Fund: BlackRock Focus Value Fund, Inc.
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 Focus Value Fund, Inc., 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: 07/31/07
Date of reporting period: 08/01/06 - 01/31/07
Item 1 - Report to Stockholders
ALTERNATIVES BLACKROCK SOLUTIONS EQUITIES
FIXED INCOME LIQUIDITY REAL ESTATE
BlackRock BLACKROCK
Focus Value Fund, Inc.
SEMI-ANNUAL REPORT
JANUARY 31, 2007 | (UNAUDITED)
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
BlackRock Focus Value Fund, Inc.
Officers and Directors
Robert C. Doll, Jr., President and Director
James H. Bodurtha, Director
Kenneth A. Froot, Director
Joe Grills, Director
Herbert I. London, Director
Roberta Cooper Ramo, Director
Robert S. Salomon, Jr., Director
Donald C. Burke, Vice President and Treasurer
Robert J. Martorelli, Vice President and Co-Portfolio Manager
Kevin M. Rendino, Vice President and Co-Portfolio Manager
Jeffrey Hiller, Fund Chief Compliance Officer
Alice A. Pellegrino, Secretary
Custodian
JPMorgan Chase Bank, N.A.
3 Chase Metrotech Center
Brooklyn, NY 11245
Transfer Agent
PFPC Inc.
Wilmington, DE 19809
800-637-3863
2 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
A Letter to Shareholders
Dear Shareholder
The new year began on a positive note for most financial markets, continuing the
momentum from the fourth quarter of 2006. Returns for the annual and semi-annual
periods ended January 31, 2007 were as follows:
Total Returns as of January 31, 2007 6-month 12-month
==============================================================================================================
U.S. equities (Standard & Poor's 500 Index) +13.75% +14.51%
- --------------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) +14.95 +10.44
- --------------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) +14.33 +19.84
- --------------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers Aggregate Bond Index) + 3.65 + 4.28
- --------------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 3.06 + 4.29
- --------------------------------------------------------------------------------------------------------------
High yield bonds (Credit Suisse High Yield Index) + 8.45 +11.76
- --------------------------------------------------------------------------------------------------------------
After raising the target short-term interest rate 17 times between June 2004 and
June 2006, the Federal Reserve Board (the Fed) finally opted to pause on August
8, 2006. This left the target rate at 5.25%, where it remained through
period-end. In interrupting its interest rate-hiking campaign, the Fed initially
acknowledged that economic growth was slowing, but maintained a cautionary view
on inflation. Most recently, the central bankers have pointed to a firming in
economic data and moderation in inflation, causing many to believe the Fed will
likely remain on hold for the time being.
Overall, 2006 was a good year for U.S. equities, despite a mid-year correction
that was largely triggered by rising interest rates, inflation fears, elevated
oil prices and geopolitical uncertainties. Nevertheless, strong corporate
earnings, abundant liquidity and record merger-and-acquisition activity provided
a solid backdrop for stocks. Many international markets (with the notable
exception of Japan) performed even better, outpacing U.S. stocks for the fifth
consecutive year. European equities and select emerging markets fared
particularly well. This broad equity strength carried into January.
For much of 2006, bond yields moved higher as their prices declined. Prices
began to improve (yields fell) in the summer as the economy showed signs of
weakening and the Fed paused. Notably, the Treasury curve remained inverted for
much of 2006 and into 2007. The 30-year Treasury yield stood at 4.93% at January
31, 2007, while the six-month Treasury offered the highest yield on the curve at
5.16% -- both still below the federal funds rate.
As 2007 began, investors were left with a few key questions: Will the U.S.
economy achieve a soft landing, will the Fed reverse its prior policy and cut
interest rates, and how might these outcomes impact the investment climate. As
you navigate these and other uncertainties inherent in the financial markets, we
encourage you to review your investment goals with your financial professional
and to make portfolio changes, as needed. For more reflection on 2006 and our 10
predictions for 2007, please ask your financial professional for a copy of
"What's Ahead in 2007: An Investment Perspective," or view it online at
www.blackrock.com/funds. We thank you for trusting BlackRock with your
investment assets, and we look forward to continuing to serve you in the months
and years ahead.
Sincerely,
/s/ Robert C. Doll, Jr.
Robert C. Doll, Jr.
Fund President and Director
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 3
A Discussion With Your Fund's Portfolio Managers
The Fund outperformed its benchmark and comparable Lipper category average
for the period, benefiting from a shift toward attractively valued larger-cap
stocks, which led the market off the bottom of a dramatic mid-2006 correction.
How did the Fund perform during the period in light of the existing market
conditions?
For the six-month period ended January 31, 2007, BlackRock Focus Value Fund,
Inc.'s (formerly Merrill Lynch Focus Value Fund, Inc.) Institutional, Investor
A, Investor B, Investor C and Class R Shares had total returns of +15.24%,
+15.08%, +14.62%, +14.73% and +14.95%, 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.) This compared to a return of +13.43% for the benchmark Russell
1000 Value Index and an average return of +13.48% for the Lipper Multi-Cap Value
Funds category for the same period. (Funds in this Lipper category invest in
companies in a variety of market-capitalization ranges that are considered to be
undervalued relative to a major unmanaged stock index.)
The six-month period was a very strong one for equities, with the broad-market
S&P 500 Index advancing 13.75%. The groundwork for the positive performance was
laid when, in August, the Federal Reserve Board (the Fed) finally ended its
two-year streak of interest rate increases. Oil prices, after reaching an
all-time high near $78 per barrel in July, also began to recede and ended 2006
where they started the year -- at $61 per barrel. After a far-reaching market
correction in the middle of 2006, which hit market leaders such as energy and
materials stocks particularly hard, a different collection of companies started
to outperform. From June to year-end, it was large cap, multinational companies
that dominated. Given the relative outperformance of smaller-capitalization
stocks over the past few years, valuations on these big names had become
incredibly attractive from a risk/reward standpoint, prompting us to increase
our exposure. This move proved advantageous, as many of our top performers for
this six-month reporting period were just those types of companies: Morgan
Stanley (with a market capitalization of $85 billion), General Electric Co.
($380 billion), Exxon Mobil Corp. ($420 billion), Time Warner, Inc. ($87
billion), Comcast Corp. ($90 billion) and Tyco International Ltd. ($60 billion).
For the most part, Fund performance during the period was driven by favorable
security selection. However, from a sector perspective, we saw very strong
results in information technology (IT) and financials. In IT, the Fund benefited
from our overweight position and strong performance from a number of individual
stocks, including International Business Machines Corp., Unisys Corp., Sun
Microsystems, Inc. and Parametric Technology Corp. In financials, our focus on
capital markets-related companies proved advantageous, as these companies
benefited from the strong equity markets. In addition to Morgan Stanley, The
Bank of New York Co., Inc. also was a top performer in the financials sector.
What changes were made to the portfolio during the period?
Reflecting our increased emphasis on large cap, multinational names, the Fund's
average market cap ended the period near $70 billion, up from approximately $40
billion at the start of 2006. It has been many years since we have seen
large-capitalization companies look as attractive as they have recently based on
all measures, including price-to-book and price-to-earnings ratios.
One of the biggest shifts in the portfolio over the past six months involved
deemphasizing economically sensitive sectors, such as consumer discretionary,
materials and industrials, and turning some of that focus toward IT. This
reflects the changing leadership in the marketplace and the specific values we
have been able to find. We had been overweight in economically sensitive
industry groups since the 2001-2002 timeframe. Coming out of an economic
slowdown, those industries that had the most leverage to an improving business
climate showed the greatest earnings growth. In today's more mature business
cycle, we believe these types of companies will find it difficult to perform
during the period of slowing earnings growth that we envision going forward. As
a result, we trimmed our exposure to the consumer discretionary group by selling
The Gap, Inc. and Foot Locker, Inc., and reduced our weightings in materials and
industrials by disposing of International Paper Co. and selling a portion of our
positions in E.I. du Pont de Nemours & Co., Raytheon Co. and Waste Management,
Inc.
At the same time, we increased exposure to the IT sector with the addition of
positions in Analog Devices, Inc., Motorola, Inc. and Sun Microsystems, Inc. We
also significantly increased the Fund's exposure to Xerox Corp. For the most
part, IT has been one of the most "unloved" sectors since the technology bubble
implosion in 2001. Earnings estimates for the first half of 2007 indicate that
IT is
4 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
expected to be the fastest-growing sector in the S&P 500 Index. Whereas earnings
growth estimates for many industries are down for the first half of the year, IT
estimates are up double-digit percentages. With productivity figures and the
economy slowing somewhat for the first time in several years, we believe
spending on technology will increase. Arguably, there is no better avenue for
the advancement of worker productivity than through IT. Other notable happenings
in the IT industry include a new product cycle from Microsoft (that is, Vista),
as well as some exciting innovations in home entertainment, including flat panel
technology, high-definition TV and PC on TV. Additionally, there are a number of
other factors that make the group attractive from an investment standpoint.
First, companies are running their businesses more prudently than in the past by
carefully managing inventories, maintaining strong balance sheets and shifting
their capital-intensive manufacturing plants to outside manufacturers. Second,
the weak dollar benefits most technology companies since they derive a good
portion of their sales offshore. Finally, IT is the one sector where
share-buyback activity has resulted in a noticeable decline in shares
outstanding, thereby enhancing earnings leverage.
Despite our migration away from some of the economically sensitive areas of the
market, we have not abandoned some of the smaller, cyclically oriented sectors
and names that we believe still have tremendous potential. While the economy has
slowed somewhat, it remains reasonably resilient and should continue to benefit
these types of companies. We view the current economic environment as a
"Goldilocks" scenario ("not too hot, not too cold"). As such, we believe it
makes sense to have representation in the more stable names that can benefit in
a "not too hot" environment as well as the smaller, high-growth potential
companies that can perform well under a "not too cold" scenario.
How would you characterize the Fund's position at the close of the period?
At period-end, the portfolio was overweight versus the Russell 1000 Value Index
in IT, industrials and materials, although the level of the overweighting in the
latter two groups is declining. The Fund had underweights at period-end in
financials, utilities and energy.
We believe the Fed's policy, to date, has struck the proper balance of fending
off inflation while allowing the economic recovery to continue at a moderate
pace. We are encouraged by the economy, which has led to healthy corporate
profits, strong corporate balance sheets and an active merger-and-acquisition
landscape. This backdrop has translated into very healthy equity markets. We
believe these factors should remain in place, but are mindful that weakness in
the housing market could lead to a slower rate of growth in the future.
Additionally, the true impact of the 17 interest rate increases by the Fed may
have yet to be felt. Finally, the political change in Congress during the
midterm elections also may create new uncertainties regarding policy changes.
The previously mentioned slowdown, coupled with falling commodity prices, leads
us to believe that the long-awaited "Goldilocks" economy has taken hold.
Given this environment, we have migrated toward the larger end of the
market-capitalization spectrum. We are of the opinion that large-capitalization
companies offer a more compelling value proposition as we enter a potentially
slower phase of economic recovery. In an environment of slower, non-recessionary
growth, the markets should gravitate toward larger-capitalization issuers whose
earnings streams are relatively predictable due to the diversification of their
increasingly global businesses. These companies also are generating a large
amount of free cash flow (and are deploying it in shareholder-friendly ways),
and trade at very modest valuation levels. Additionally, the lower dollar, a
by-product of the economic slowdown, also helps exporting companies. As a
result, we have moved the Fund away from smaller- capitalization, domestic
companies and toward larger, multinational corporations.
Robert J. Martorelli
Vice President and Co-Portfolio Manager
Kevin M. Rendino
Vice President and Co-Portfolio Manager
February 12, 2007
- --------------------------------------------------------------------------------
Effective October 2, 2006, the Fund's Class A, Class B, Class C and Class I
Shares were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively. Class R Shares did not change their designation
- --------------------------------------------------------------------------------
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 5
Performance Data
About Fund Performance
Effective October 2, 2006, the Fund's Class A, Class B, Class C and Class I
Shares were redesignated Investor A, Investor B, Investor C and Institutional
Shares, respectively. Class R Shares did not change their designation. As
previously communicated to shareholders, new sales charge schedules came into
effect at the same time for certain of these classes.
The Fund has multiple classes of shares:
o Institutional Shares are not subject to any front-end sales charge.
Institutional Shares bear no ongoing distribution or service fees and are
available only to eligible investors.
o Investor A Shares incur a maximum initial sales charge (front-end load) of
5.25% and a service fee of 0.25% per year (but no distribution fee).
o Investor B Shares are subject to a maximum contingent deferred sales
charge of 4.50% declining to 0% after six years. In addition, Investor B
Shares are subject to a distribution fee of 0.75% per year and a service
fee of 0.25% per year. These shares automatically convert to Investor A
Shares after approximately eight years. (There is no initial sales charge
for automatic share conversions.) All returns for periods greater than
eight years reflect this conversion.
o Investor C Shares are subject to a distribution fee of 0.75% per year and
a service fee of 0.25% per year. In addition, Investor C Shares are
subject to a 1% contingent deferred sales charge if redeemed within one
year of purchase.
o Class R Shares do not incur a maximum initial sales charge (front-end
load) or deferred sales charge. These shares are subject to a distribution
fee of 0.25% per year and a service fee of 0.25% per year. Class R Shares
are available only to certain retirement plans. Prior to inception, Class
R Share performance results are those of Institutional Shares (which have
no distribution or service fees) restated for Class R Share fees.
Performance information reflects past performance and does not guarantee future
results. Current performance may be lower or higher than the performance data
quoted. Refer to www.blackrock.com to obtain performance data current to the
most recent month-end. Performance results do not reflect the deduction of taxes
that a shareholder would pay on fund distributions or the redemption of fund
shares. Figures shown in each of the following tables assume reinvestment of all
dividends and capital gain distributions, if any, at net asset value on the
ex-dividend date. Investment return and principal value of shares will fluctuate
so that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the different
levels of service, distribution and transfer agency fees applicable to each
class, which are deducted from the income available to be paid to shareholders.
The Fund's Manager waived a portion of its investment advisory fee. Without such
a waiver, the Fund's performance would have been lower.
Recent Performance Results
6-Month 12-Month 10-Year
As of January 31, 2007 Total Return Total Return Total Return
=======================================================================================================
Institutional Shares* +15.24% +18.93% +205.96%
- -------------------------------------------------------------------------------------------------------
Investor A Shares* +15.08 +18.63 +198.35
- -------------------------------------------------------------------------------------------------------
Investor B Shares* +14.62 +17.70 +180.55
- -------------------------------------------------------------------------------------------------------
Investor C Shares* +14.73 +17.80 +176.10
- -------------------------------------------------------------------------------------------------------
Class R Shares* +14.95 +18.40 +192.97
- -------------------------------------------------------------------------------------------------------
Russell 1000(R) Value Index** +13.43 +19.18 +174.24
- -------------------------------------------------------------------------------------------------------
S&P 500(R) Index*** +13.75 +14.51 +114.47
- -------------------------------------------------------------------------------------------------------
* Investment results shown do not reflect sales charges; results 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.
** This unmanaged Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth
values.
*** This unmanaged Index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues), representing
about 75% of NYSE market capitalization and 30% of NYSE issues. Russell
1000 is a registered trademark of the Frank Russell Company.
S&P 500 is a registered trademark of the McGraw-Hill Companies.
6 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Performance Data (concluded)
Edgar description for BlackRock Focus Value Fund, Inc.
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Institutional,
Investor A, Investor B, Investor C & Class R Shares compared to growth of an
investment in the Russell 1000 Value Index and the S&P 500 Index. Values are
from January 1997 to January 2007:
BR Focus BR Focus BR Focus BR Focus BR Focus
Value Value Value Value Value
Fund, Inc Fund, Inc. Fund, Inc. Fund, Inc. Fund, Inc. Russell 1000
Institutional Investor A Investor B Investor C Class R Value S&P 500
Shares*+ Shares*+ Shares*+ Shares*+ Shares*+ Index++ Index+++
1/97 $10,000 $ 9,475 $10,000 $10,000 $10,000 $10,000 $10,000
1/98 $12,115 $11,443 $11,991 $11,986 $12,055 $12,711 $12,691
1/99 $12,894 $12,148 $12,635 $12,630 $12,765 $15,028 $16,814
1/00 $18,075 $16,995 $17,533 $17,519 $17,806 $15,482 $18,554
1/01 $19,934 $18,702 $19,131 $19,121 $19,540 $17,192 $18,387
1/02 $19,558 $18,286 $18,589 $18,565 $19,076 $16,045 $15,418
1/03 $15,116 $14,106 $14,215 $14,207 $14,686 $13,329 $11,869
1/04 $21,573 $20,078 $20,082 $20,070 $20,973 $18,074 $15,972
1/05 $23,208 $21,547 $21,384 $21,363 $22,442 $20,323 $16,967
1/06 $25,726 $23,828 $23,648 $23,438 $24,744 $23,010 $18,729
1/07 $30,596 $28,269 $28,055 $27,610 $29,297 $27,424 $21,447
* Assuming maximum sales charge, if any, transaction costs and other
operating expenses, including advisory fees.
+ The Fund invests in a diversified portfolio of equity and fixed income
securities, including municipal securities, of issues in weak financial
condition or experiencing poor operating results that management of the
Fund believes are undervalued relative to management's assessment of the
current or prospective condition of such issuers.
++ This unmanaged Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth
values.
+++ This unmanaged Index covers 500 industrial, utility, transportation and
financial companies of the U.S. markets (mostly NYSE issues), representing
about 75% of NYSE market capitalization and 30% of NYSE issues.
Past performance is not indicative of future results.
Average Annual Total Return
Return
================================================================================
Institutional Shares
================================================================================
One Year Ended 1/31/07 +18.93%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/07 + 9.36
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/07 +11.83
- --------------------------------------------------------------------------------
Return Without Return With
Sales Charge Sales Charge*
===============================================================================
Investor A Shares
===============================================================================
One Year Ended 1/31/07 +18.63% +12.41%
- -------------------------------------------------------------------------------
Five Years Ended 1/31/07 + 9.10 + 7.93
- -------------------------------------------------------------------------------
Ten Years Ended 1/31/07 +11.55 +10.95
- -------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC+++
================================================================================
Investor B Shares+
================================================================================
One Year Ended 1/31/07 +17.70% +13.20%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/07 + 8.24 + 7.95
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/07 +10.87 +10.87
- --------------------------------------------------------------------------------
Return Return
Without CDSC With CDSC+++
================================================================================
Investor C Shares++
================================================================================
One Year Ended 1/31/07 +17.80% +16.80%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/07 + 8.26 + 8.26
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/07 +10.69 +10.69
- --------------------------------------------------------------------------------
Return
================================================================================
Class R Shares
================================================================================
One Year Ended 1/31/07 +18.40%
- --------------------------------------------------------------------------------
Five Years Ended 1/31/07 + 8.96
- --------------------------------------------------------------------------------
Ten Years Ended 1/31/07 +11.35
- --------------------------------------------------------------------------------
* Assuming maximum sales charge of 5.25%.
+ Maximum contingent deferred sales charge is 4.50% and is reduced to 0%
after six years.
++ Maximum contingent deferred sales charge is 1% and is reduced to 0% after
one year.
+++ Assuming payment of applicable contingent deferred sales charge.
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 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 August 1, 2006 and held through
January 31, 2007) 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 August 1, 2006 to
August 1, 2006 January 31, 2007 January 31, 2007
==========================================================================================================================
Actual
==========================================================================================================================
Institutional $1,000 $1,152.40 $ 5.37
- --------------------------------------------------------------------------------------------------------------------------
Investor A $1,000 $1,150.80 $ 6.72
- --------------------------------------------------------------------------------------------------------------------------
Investor B $1,000 $1,146.20 $10.87
- --------------------------------------------------------------------------------------------------------------------------
Investor C $1,000 $1,147.30 $10.88
- --------------------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,149.50 $ 8.07
==========================================================================================================================
Hypothetical (5% annual return before expenses)**
==========================================================================================================================
Institutional $1,000 $1,020.21 $ 5.04
- --------------------------------------------------------------------------------------------------------------------------
Investor A $1,000 $1,018.95 $ 6.31
- --------------------------------------------------------------------------------------------------------------------------
Investor B $1,000 $1,015.07 $10.21
- --------------------------------------------------------------------------------------------------------------------------
Investor C $1,000 $1,015.07 $10.21
- --------------------------------------------------------------------------------------------------------------------------
Class R $1,000 $1,017.69 $ 7.58
- --------------------------------------------------------------------------------------------------------------------------
* For each class of the Fund, expenses are equal to the annualized expense
ratio for the class (.99% for Institutional, 1.24% for Investor A, 2.01%
for Investor B, 2.01% for Investor C and 1.49% for Class R), multiplied by
the average account value over the period, multiplied by 184/365 (to
reflect the one-half year period shown).
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 365.
8 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Portfolio Information
As of January 31, 2007
Percent of
Ten Largest Equity Holdings Net Assets
- --------------------------------------------------------------------------------
JPMorgan Chase & Co. ............................................ 4.0%
Citigroup, Inc. ................................................. 3.5
Chevron Corp. ................................................... 3.2
American International Group, Inc. .............................. 2.8
International Business Machines Corp. ........................... 2.8
AT&T Inc. ....................................................... 2.8
Exxon Mobil Corp. ............................................... 2.7
Comcast Corp. Special Class A ................................... 2.7
Xerox Corp. ..................................................... 2.7
GlobalSantaFe Corp. ............................................. 2.6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Percent of
Total
Investment Criteria Investments
- --------------------------------------------------------------------------------
Earnings Turnaround ............................................. 38.6%
Operational Restructuring ....................................... 25.9
Price-to-Book ................................................... 9.4
Above-Average Yield ............................................. 8.8
Price-to-Earnings Per Share ..................................... 8.3
Discount to Assets .............................................. 4.2
Other* .......................................................... 4.8
- --------------------------------------------------------------------------------
* Includes portfolio holdings in short-term investments and options written.
Percent of
Five Largest Industries* Net Assets
- --------------------------------------------------------------------------------
Diversified Financial Services .................................. 9.0%
Insurance ....................................................... 7.6
Oil, Gas & Consumable Fuels ..................................... 7.2
Media ........................................................... 6.7
Pharmaceuticals ................................................. 5.4
- --------------------------------------------------------------------------------
* For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease.
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 9
Schedule of Investments as of January 31, 2007 (Unaudited)
Shares
Industry Common Stocks Held Value
===============================================================================
Above-Average Yield -- 9.2%
- -------------------------------------------------------------------------------
Commercial Services &
Supplies -- 1.6%
Waste Management, Inc. 152,700 $ 5,799,546
-----------------------------------------------------------------------
Diversified Telecommunication
Services -- 2.8%
AT&T Inc. 261,300 9,832,719
-----------------------------------------------------------------------
Food Products -- 1.9%
General Mills, Inc. 116,600 6,674,184
-----------------------------------------------------------------------
Pharmaceuticals -- 2.0%
Pfizer, Inc. 278,000 7,294,720
-----------------------------------------------------------------------
Trading Companies &
Distributors -- 0.9%
UAP Holding Corp. 121,630 3,046,831
-----------------------------------------------------------------------
Total Above-Average Yield 32,648,000
=======================================================================
===============================================================================
Discount to Assets -- 4.3%
- --------------------------------------------------------------------------------
Diversified Telecommunication
Services -- 1.7%
Verizon Communications, Inc. 155,500 5,989,860
-----------------------------------------------------------------------
Energy Equipment &
Services -- 2.6%
GlobalSantaFe Corp. 162,900 9,449,829
-----------------------------------------------------------------------
Total Discount to Assets 15,439,689
=======================================================================
===============================================================================
Earnings Turnaround -- 39.9%
- -------------------------------------------------------------------------------
Aerospace & Defense -- 1.6%
Northrop Grumman Corp. 79,500 5,639,730
-----------------------------------------------------------------------
Capital Markets -- 2.5%
Morgan Stanley 107,800 8,924,762
-----------------------------------------------------------------------
Commercial Banks -- 1.5%
Wachovia Corp. 98,100 5,542,650
-----------------------------------------------------------------------
Communications
Equipment -- 0.9%
Motorola, Inc. 155,400 3,084,690
-----------------------------------------------------------------------
Computers & Peripherals -- 3.9%
International Business Machines Corp. 101,700 10,083,555
Sun Microsystems, Inc. (b) 576,200 3,825,968
------------
13,909,523
-----------------------------------------------------------------------
Diversified Financial
Services -- 1.5%
Bank of America Corp. 104,401 5,489,405
-----------------------------------------------------------------------
Food & Staples Retailing -- 4.4%
The Kroger Co. 303,100 7,759,360
The Topps Co., Inc. 823,302 8,101,292
------------
15,860,652
-----------------------------------------------------------------------
Food Products -- 2.2%
Unilever NV (a) 289,600 7,729,424
-----------------------------------------------------------------------
Health Care Equipment &
Supplies -- 2.0%
Baxter International, Inc. 143,900 7,146,074
-----------------------------------------------------------------------
Industrial Conglomerates -- 2.0%
General Electric Co. 197,100 7,105,455
-----------------------------------------------------------------------
Metals & Mining -- 1.5%
Alcoa, Inc. 171,100 5,526,530
-----------------------------------------------------------------------
Oil, Gas & Consumable
Fuels -- 4.0%
Exxon Mobil Corp. 132,000 9,781,200
Peabody Energy Corp. 107,000 4,368,810
------------
14,150,010
-----------------------------------------------------------------------
Pharmaceuticals -- 2.5%
Bristol-Myers Squibb Co. 133,100 3,831,949
GlaxoSmithKline Plc (a) 93,400 5,055,742
------------
8,887,691
-----------------------------------------------------------------------
Semiconductors & Semiconductor
Equipment -- 4.7%
Analog Devices, Inc. 163,200 5,344,800
LSI Logic Corp. (b) 826,900 7,772,860
Intel Corp. 169,900 3,561,104
------------
16,678,764
-----------------------------------------------------------------------
Software -- 4.7%
Borland Software Corp. (b) 1,447,000 7,900,620
Parametric Technology Corp. (b) 454,700 9,012,154
------------
16,912,774
-----------------------------------------------------------------------
Total Earnings Turnaround 142,588,134
=======================================================================
===============================================================================
Operational Restructuring -- 26.9%
- -------------------------------------------------------------------------------
Aerospace & Defense -- 2.1%
Raytheon Co. 141,900 7,364,610
-----------------------------------------------------------------------
Capital Markets -- 2.6%
The Bank of New York Co., Inc. 228,800 9,154,288
-----------------------------------------------------------------------
Chemicals -- 2.4%
E.I. du Pont de Nemours & Co. 171,600 8,504,496
-----------------------------------------------------------------------
Diversified Financial
Services -- 4.0%
JPMorgan Chase & Co. 279,640 14,242,065
-----------------------------------------------------------------------
IT Services -- 2.1%
Unisys Corp. (b) 859,500 7,408,890
-----------------------------------------------------------------------
Industrial Conglomerates -- 2.6%
Tyco International Ltd. 291,300 9,286,644
-----------------------------------------------------------------------
Media -- 5.0%
Comcast Corp. Special Class A (b) 221,600 9,630,736
Time Warner, Inc. (f) 368,100 8,050,347
------------
17,681,083
-----------------------------------------------------------------------
Office Electronics -- 2.7%
Xerox Corp. (b) 549,700 9,454,840
-----------------------------------------------------------------------
Paper & Forest Products -- 0.2%
Louisiana-Pacific Corp. 24,900 570,459
-----------------------------------------------------------------------
Pharmaceuticals -- 0.9%
Johnson & Johnson 56,000 3,740,800
-----------------------------------------------------------------------
Wireless Telecommunication
Services -- 2.3%
Sprint Nextel Corp. 455,700 8,125,131
-----------------------------------------------------------------------
Total Operational Restructuring 95,533,306
=======================================================================
10 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Schedule of Investments (concluded)
Shares
Industry Common Stocks Held Value
===============================================================================
Price-to-Book -- 9.7%
- --------------------------------------------------------------------------------
Diversified Financial
Services -- 3.5%
Citigroup, Inc. 223,400 $ 12,316,042
-----------------------------------------------------------------------
Insurance -- 6.2%
American International Group, Inc. 148,000 10,130,620
Genworth Financial, Inc. Class A 148,900 5,196,610
The St. Paul Travelers Cos., Inc. 136,645 6,948,398
------------
22,275,628
-----------------------------------------------------------------------
Total Price-to-Book 34,591,670
=======================================================================
===============================================================================
Price-to-Earnings Per Share -- 8.6%
- -------------------------------------------------------------------------------
Containers & Packaging -- 2.3%
Packaging Corp. of America 354,000 8,085,360
-----------------------------------------------------------------------
Insurance -- 1.4%
XL Capital Ltd. Class A (f) 74,800 5,161,200
-----------------------------------------------------------------------
Media -- 1.7%
Gannett Co., Inc. 104,900 6,098,886
-----------------------------------------------------------------------
Oil, Gas & Consumable
Fuels -- 3.2%
Chevron Corp. 154,800 11,281,824
-----------------------------------------------------------------------
Total Price-to-Earnings Per Share 30,627,270
=======================================================================
Total Common Stocks
(Cost -- $270,174,331) -- 98.6% 351,428,069
=======================================================================
Beneficial
Industry Other Interests (c) Interest Value
===============================================================================
Financial Restructuring -- 0.0%
- -------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels -- 0.0%
WRT Energy Corp. (Litigation Trust
Certificates) (g) $ 1,981,437 $ 0
-----------------------------------------------------------------------
Total Other Interests
(Cost -- $202,416) -- 0.0% 0
=======================================================================
===============================================================================
Short-Term Securities
===============================================================================
BlackRock Liquidity Series, LLC
Cash Sweep Series, 5.29% (d)(h) $12,125,219 12,125,219
BlackRock Liquidity Series, LLC
Money Market Series, 5.29% (d)(e)(h) 5,908,200 5,908,200
-----------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $18,033,419) -- 5.1% 18,033,419
=======================================================================
Total Investments
(Cost -- $288,410,166) -- 103.7% $369,461,488
=======================================================================
===============================================================================
Number of
Options Written Contracts
===============================================================================
Call Options Written
Sprint Nextel Corp., expiring
January 2008 at USD 20 2,000 (260,000)
-----------------------------------------------------------------------
Total Options Written
(Premiums Received -- $238,992) -- (0.1%) (260,000)
=======================================================================
Total Investments, Net of Options Written
(Cost -- $288,171,174*) -- 103.6% 369,201,488
Liabilities in Excess of Other Assets -- (3.6%) (12,828,802)
------------
Net Assets -- 100.0% $356,372,686
============
* The cost and unrealized appreciation (depreciation) of investments, net of
options written, as of January 31, 2007, as computed for federal income
tax purposes, were as follows:
Aggregate cost ......................................... $289,527,874
============
Gross unrealized appreciation .......................... $ 80,977,165
Gross unrealized depreciation .......................... (1,303,551)
------------
Net unrealized appreciation ............................ $ 79,673,614
============
(a) Depositary receipts.
(b) Non-income producing security.
(c) Other interests represent beneficial interest in liquidation trusts and
other reorganization entities and are non-income producing.
(d) Investments in companies considered to be an affiliate of the Fund, for
purposes of Section 2(a)(3) of the Investment Company Act of 1940, were as
follows:
--------------------------------------------------------------------------
Affiliate Net Activity Interest Income
--------------------------------------------------------------------------
BlackRock Liquidity Series, LLC
Cash Sweep Series $ 7,778,601 $246,607
BlackRock Liquidity Series, LLC
Money Market Series $(41,301,500) $ 15,332
--------------------------------------------------------------------------
(e) Security was purchased with the cash proceeds from securities loans.
(f) Security, or a portion of security, is on loan.
(g) Restricted security as to resale, representing 0.0% of net assets, was as
follows:
--------------------------------------------------------------------------
Acquisition
Issue Date Cost Value
--------------------------------------------------------------------------
WRT Energy Corp.
(Litigation Trust Certificates) 7/10/1997 $202,416 $0
--------------------------------------------------------------------------
(h) Represents the current yield as of January 31, 2007.
o For Fund compliance purposes, the Fund's industry classifications refer to
any one or more of the industry sub-classifications used by one or more
widely recognized market indexes or ratings group indexes, and/or as
defined by Fund management. This definition may not apply for purposes of
this report, which may combine industry sub-classifications for reporting
ease. Industries are shown as a percent of net assets.
See Notes to Financial Statements.
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 11
Statement of Assets and Liabilities
As of January 31, 2007 (Unaudited)
==============================================================================================================================
Assets
- ------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (including securities loaned
of $5,654,997) (identified cost -- $270,376,747) ................................... $351,428,069
Investments in affiliated securities, at value (identified cost -- $18,033,419) ...... 18,033,419
Receivables:
Dividends .......................................................................... $ 383,887
Capital shares sold ................................................................ 94,783
Securities lending ................................................................. 1,356 480,026
------------
Prepaid expenses ..................................................................... 21,242
------------
Total assets ......................................................................... 369,962,756
------------
==============================================================================================================================
Liabilities
- ------------------------------------------------------------------------------------------------------------------------------
Collateral on securities loaned, at value ............................................ 5,908,200
Options written, at value (premiums received -- $238,992) ............................ 260,000
Payables:
Securities purchased ............................................................. 3,838,687
Capital shares redeemed .......................................................... 3,180,231
Investment adviser ............................................................... 226,116
Distributor ...................................................................... 75,760
Other affiliates ................................................................. 3,235 7,324,029
------------
Accrued expenses and other liabilities ............................................... 97,841
------------
Total liabilities .................................................................... 13,590,070
------------
==============================================================================================================================
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Net assets ........................................................................... $356,372,686
============
==============================================================================================================================
Net Assets Consist of
- ------------------------------------------------------------------------------------------------------------------------------
Institutional Shares of Common Stock, $.10 par value, 50,000,000 shares authorized ... $ 1,110,792
Investor A Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ..... 895,512
Investor B Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ..... 173,739
Investor C Shares of Common Stock, $.10 par value, 50,000,000 shares authorized ...... 197,145
Class R Shares of Common Stock, $.10 par value, 100,000,000 shares authorized ........ 5,388
Paid-in capital in excess of par ..................................................... 264,916,210
Undistributed investment income -- net ............................................... $ 326,177
Undistributed realized capital gains -- net .......................................... 7,717,409
Unrealized appreciation -- net ....................................................... 81,030,314
------------
Total accumulated earnings -- net .................................................... 89,073,900
------------
Net Assets ........................................................................... $356,372,686
============
==============================================================================================================================
Net Asset Value
- ------------------------------------------------------------------------------------------------------------------------------
Institutional -- Based on net assets of $169,776,501 and 11,107,921 shares outstanding $ 15.28
============
Investor A -- Based on net assets of $135,500,239 and 8,955,122 shares outstanding ... $ 15.13
============
Investor B -- Based on net assets of $23,928,711 and 1,737,387 shares outstanding .... $ 13.77
============
Investor C -- Based on net assets of $26,410,785 and 1,971,445 shares outstanding .... $ 13.40
============
Class R -- Based on net assets of $756,450 and 53,879 shares outstanding ............. $ 14.04
============
See Notes to Financial Statements.
12 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Statement of Operations
For the Six Months Ended January 31, 2007 (Unaudited)
==============================================================================================================================
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Dividends (net of $26,484 foreign withholding tax) ................................... $ 3,370,501
Interest from affiliates ............................................................. 246,607
Securities lending -- net ............................................................ 15,332
------------
Total income ......................................................................... 3,632,440
------------
==============================================================================================================================
Expenses
- ------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ............................................................. $ 1,745,162
Service fees -- Investor A ........................................................... 166,153
Service and distribution fees -- Investor B .......................................... 126,519
Service and distribution fees -- Investor C .......................................... 126,333
Transfer agent fees -- Institutional ................................................. 99,112
Transfer agent fees -- Investor A .................................................... 79,856
Accounting services .................................................................. 66,713
Professional fees .................................................................... 41,054
Printing and shareholder reports ..................................................... 30,017
Registration fees .................................................................... 25,708
Transfer agent fees -- Investor C .................................................... 17,802
Transfer agent fees -- Investor B .................................................... 17,635
Custodian fees ....................................................................... 16,119
Directors' fees and expenses ......................................................... 9,637
Service and distribution fees -- Class R ............................................. 1,561
Pricing fees ......................................................................... 515
Transfer agent fees -- Class R ....................................................... 376
Other ................................................................................ 15,380
------------
Total expenses before waiver ......................................................... 2,585,652
Waiver of expenses ................................................................... (436,290)
------------
Total expenses after waiver .......................................................... 2,149,362
------------
Investment income -- net ............................................................. 1,483,078
------------
==============================================================================================================================
Realized & Unrealized Gain (Loss) -- Net
- ------------------------------------------------------------------------------------------------------------------------------
Realized gain on investments -- net .................................................. 13,905,143
Change in unrealized appreciation/depreciation on:
Investments -- net ................................................................. 33,369,813
Options written -- net ............................................................. (21,008) 33,348,805
---------------------------
Total realized and unrealized gain -- net ............................................ 47,253,948
------------
Net Increase in Net Assets Resulting from Operations ................................. $ 48,737,026
============
See Notes to Financial Statements.
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 13
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
January 31, 2007 July 31,
Increase (Decrease) in Net Assets: (Unaudited) 2006
==============================================================================================================================
Operations
- ------------------------------------------------------------------------------------------------------------------------------
Investment income -- net ............................................................. $ 1,483,078 $ 1,969,732
Realized gain -- net ................................................................. 13,905,143 34,404,256
Change in unrealized appreciation/depreciation -- net ................................ 33,348,805 (10,674,982)
---------------------------
Net increase in net assets resulting from operations ................................. 48,737,026 25,699,006
---------------------------
==============================================================================================================================
Dividends & Distributions to Shareholders
- ------------------------------------------------------------------------------------------------------------------------------
Investment income -- net:
Institutional ...................................................................... (1,957,773) (662,437)
Investor A ......................................................................... (1,141,424) (191,705)
Investor B ......................................................................... (6,674) --
Investor C ......................................................................... (16,998) --
Class R ............................................................................ (3,740) (137)
Realized gain -- net:
Institutional ...................................................................... (15,804,834) (5,610,608)
Investor A ......................................................................... (12,916,921) (4,562,017)
Investor B ......................................................................... (2,615,218) (1,348,179)
Investor C ......................................................................... (2,686,481) (1,129,292)
Class R ............................................................................ (59,583) (18,151)
---------------------------
Net decrease in net assets resulting from dividends and distributions to shareholders (37,209,646) (13,522,526)
---------------------------
==============================================================================================================================
Capital Share Transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets derived from capital share transactions ........ 9,677,669 (60,080,064)
---------------------------
==============================================================================================================================
Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets .............................................. 21,205,049 (47,903,584)
Beginning of period .................................................................. 335,167,637 383,071,221
---------------------------
End of period* ....................................................................... $356,372,686 $335,167,637
===========================
* Undistributed investment income -- net ........................................... $ 326,177 $ 1,969,708
===========================
See Notes to Financial Statements.
14 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Financial Highlights
Institutional
-----------------------------------------------------------------------
For the Six
Months Ended
January 31, For the Year Ended July 31,
The following per share data and ratios have been derived 2007 --------------------------------------------------------
from information provided in the financial statements. (Unaudited) 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........... $ 14.84 $ 14.27 $ 12.16 $ 10.36 $ 8.60 $ 12.04
---------------------------------------------------------------------
Investment income -- net** ..................... .08 .12 .07 .04 --+ .01
Realized and unrealized gain (loss) -- net ..... 2.05 .99 2.04 1.76 1.76 (2.71)
---------------------------------------------------------------------
Total from investment operations ............... 2.13 1.11 2.11 1.80 1.76 (2.70)
---------------------------------------------------------------------
Less dividends and distributions from:
Investment income -- net ..................... (.18) (.06) -- -- -- --
Realized gain -- net ......................... (1.51) (.48) -- -- -- (.74)
---------------------------------------------------------------------
Total dividends and distributions .............. (1.69) (.54) -- -- -- (.74)
---------------------------------------------------------------------
Net asset value, end of period ................. $ 15.28 $ 14.84 $ 14.27 $ 12.16 $ 10.36 $ 8.60
=====================================================================
==================================================================================================================================
Total Investment Return
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............. 15.24%@ 8.06% 17.35% 17.37% 20.47% (22.95%)
=====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver ........................ .99%* 1.01% 1.01% 1.09% 1.17% 1.16%
=====================================================================
Expenses ....................................... 1.24%* 1.26% 1.26% 1.26% 1.32% 1.28%
=====================================================================
Investment income -- net ....................... 1.09%* .83% .52% .33% .02% .14%
=====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ....... $169,777 $158,175 $173,121 $172,024 $161,723 $154,734
=====================================================================
Portfolio turnover ............................. 26.78% 99.76% 72.41% 91.79% 54.67% 123.59%
=====================================================================
* Annualized.
** Based on average shares outstanding.
+ Amount is less than $.01 per share.
@ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 15
Financial Highlights (continued)
Investor A
-----------------------------------------------------------------------
For the Six
Months Ended
January 31, For the Year Ended July 31,
The following per share data and ratios have been derived 2007 --------------------------------------------------------
from information provided in the financial statements. (Unaudited) 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........... $ 14.68 $ 14.12 $ 12.06 $ 10.30 $ 8.58 $ 12.01
---------------------------------------------------------------------
Investment income (loss) -- net*** ............. .06 .08 .04 .01 (.02) (.01)
Realized and unrealized gain (loss) -- net ..... 2.03 .98 2.02 1.75 1.74 (2.70)
---------------------------------------------------------------------
Total from investment operations ............... 2.09 1.06 2.06 1.76 1.72 (2.71)
---------------------------------------------------------------------
Less dividends and distributions from:
Investment income -- net ..................... (.13) (.02) -- -- -- --
Realized gain -- net ......................... (1.51) (.48) -- -- -- (.72)
---------------------------------------------------------------------
Total dividends and distributions .............. (1.64) (.50) -- -- -- (.72)
---------------------------------------------------------------------
Net asset value, end of period ................. $ 15.13 $ 14.68 $ 14.12 $ 12.06 $ 10.30 $ 8.58
=====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............. 15.08%+ 7.79% 17.08% 17.09% 20.05% (23.06%)
=====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver ........................ 1.24%* 1.26% 1.26% 1.34% 1.42% 1.41%
=====================================================================
Expenses ....................................... 1.49%* 1.51% 1.51% 1.51% 1.57% 1.54%
=====================================================================
Investment income (loss) -- net ................ .84%* .58% .27% .08% (.23%) (.12%)
=====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ....... $135,500 $126,028 $135,696 $136,688 $120,193 $109,033
=====================================================================
Portfolio turnover ............................. 26.78% 99.76% 72.41% 91.79% 54.67% 123.59%
=====================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
+ Aggregate total investment return.
See Notes to Financial Statements.
16 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Financial Highlights (continued)
Investor B
-----------------------------------------------------------------------
For the Six
Months Ended
January 31, For the Year Ended July 31,
The following per share data and ratios have been derived 2007 --------------------------------------------------------
from information provided in the financial statements. (Unaudited) 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........... $ 13.37 $ 12.98 $ 11.17 $ 9.62 $ 8.07 $ 11.36
---------------------------------------------------------------------
Investment income (loss) -- net*** ............. .01 (.03) (.06) (.08) (.09) (.09)
Realized and unrealized gain (loss) -- net ..... 1.84 .90 1.87 1.63 1.64 (2.54)
---------------------------------------------------------------------
Total from investment operations ............... 1.85 .87 1.81 1.55 1.55 (2.63)
---------------------------------------------------------------------
Less dividends and distributions from:
Investment income -- net ..................... --+ -- -- -- -- --
Realized gain -- net ......................... (1.45) (.48) -- -- -- (.66)
---------------------------------------------------------------------
Total dividends and distributions .............. (1.45) (.48) -- -- -- (.66)
---------------------------------------------------------------------
Net asset value, end of period ................. $ 13.77 $ 13.37 $ 12.98 $ 11.17 $ 9.62 $ 8.07
=====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............. 14.62%@ 6.97% 16.20% 16.11% 19.21% (23.69%)
=====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver ........................ 2.01%* 2.03% 2.03% 2.11% 2.20% 2.18%
=====================================================================
Expenses ....................................... 2.26%* 2.28% 2.28% 2.27% 2.35% 2.30%
=====================================================================
Investment income (loss) -- net ................ .09%* (.21%) (.50%) (.70%) (1.02%) (.89%)
=====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ....... $ 23,929 $ 26,537 $ 42,351 $ 57,812 $ 67,382 $ 79,617
=====================================================================
Portfolio turnover ............................. 26.78% 99.76% 72.41% 91.79% 54.67% 123.59%
=====================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
+ Amount is less than ($.01) per share.
@ Aggregate total investment return.
See Notes to Financial Statements.
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 17
Financial Highlights (continued)
Investor C
-----------------------------------------------------------------------
For the Six
Months Ended
January 31, For the Year Ended July 31,
The following per share data and ratios have been derived 2007 --------------------------------------------------------
from information provided in the financial statements. (Unaudited) 2006 2005 2004 2003 2002
==================================================================================================================================
Per Share Operating Performance
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........... $ 13.07 $ 12.71 $ 10.94 $ 9.42 $ 7.90 $ 11.17
---------------------------------------------------------------------
Investment income (loss) -- net*** ............. --+ (.03) (.06) (.08) (.08) (.09)
Realized and unrealized gain (loss) -- net ..... 1.82 .87 1.83 1.60 1.60 (2.50)
---------------------------------------------------------------------
Total from investment operations ............... 1.82 .84 1.77 1.52 1.52 (2.59)
---------------------------------------------------------------------
Less dividends and distributions from:
Investment income -- net ..................... (.01) -- -- -- -- --
Realized gain -- net ......................... (1.48) (.48) -- -- -- (.68)
---------------------------------------------------------------------
Total dividends and distributions .............. (1.49) (.48) -- -- -- (.68)
---------------------------------------------------------------------
Net asset value, end of period ................. $ 13.40 $ 13.07 $ 12.71 $ 10.94 $ 9.42 $ 7.90
=====================================================================
==================================================================================================================================
Total Investment Return**
- ----------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ............. 14.73%@ 6.88% 16.18% 16.14% 19.24% (23.73%)
=====================================================================
==================================================================================================================================
Ratios to Average Net Assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver ........................ 2.01%* 2.03% 2.04% 2.12% 2.21% 2.19%
=====================================================================
Expenses ....................................... 2.26%* 2.28% 2.29% 2.28% 2.36% 2.32%
=====================================================================
Investment income (loss) -- net ................ .07%* (.21%) (.50%) (.70%) (1.02%) (.88%)
=====================================================================
==================================================================================================================================
Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ....... $ 26,411 $ 23,819 $ 31,391 $ 34,179 $ 31,492 $ 31,763
=====================================================================
Portfolio turnover ............................. 26.78% 99.76% 72.41% 91.79% 54.67% 123.59%
=====================================================================
* Annualized.
** Total investment returns exclude the effects of sales charges.
*** Based on average shares outstanding.
+ Amount is less than $.01 per share.
@ Aggregate total investment return.
See Notes to Financial Statements.
18 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Financial Highlights (concluded)
Class R
-------------------------------------------------------------------
For the Six For the Year Ended For the Period
Months Ended July 31, January 3, 2003+
The following per share data and ratios have been derived January 31, 2007 --------------------------------- to July 31,
from information provided in the financial statements. (Unaudited) 2006 2005 2004 2003
==============================================================================================================================
Per Share Operating Performance
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............ $ 13.71 $ 13.23 $ 11.33 $ 9.71 $ 8.67
----------------------------------------------------------------
Investment income (loss) -- net** ............... .04 .05 --@@@ --@@ .04
Realized and unrealized gain -- net ............. 1.89 .91 1.90 1.62 1.00
----------------------------------------------------------------
Total from investment operations ................ 1.93 .96 1.90 1.62 1.04
----------------------------------------------------------------
Less dividends and distributions from:
Investment income -- net ...................... (.09) --@@ -- -- --
Realized gain -- net .......................... (1.51) (.48) -- -- --
----------------------------------------------------------------
Total dividends and distributions ............... (1.60) (.48) -- -- --
----------------------------------------------------------------
Net asset value, end of period .................. $ 14.04 $ 13.71 $ 13.23 $ 11.33 $ 9.71
================================================================
==============================================================================================================================
Total Investment Return
- ------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share .............. 14.95%@ 7.56% 16.77% 16.68% 12.00%@
================================================================
==============================================================================================================================
Ratios to Average Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
Expenses, net of waiver ......................... 1.49%* 1.51% 1.51% 1.57% 1.67%*
================================================================
Expenses ........................................ 1.74%* 1.76% 1.76% 1.75% 1.82%*
================================================================
Investment income (loss) -- net ................. .59%* .34% .03% (.05%) (.27%)*
================================================================
==============================================================================================================================
Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ........ $ 756 $ 609 $ 513 $ 389 $ --++
================================================================
Portfolio turnover .............................. 26.78% 99.76% 72.41% 91.79% 54.67%
================================================================
* Annualized.
** Based on average shares outstanding.
+ Commencement of operations.
++ Amount is less than $1,000.
@ Aggregate total investment return.
@@ Amount is less than $(.01) per share.
@@@ Amount is less than $.01 per share.
See Notes to Financial Statements.
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 19
Notes to Financial Statements (Unaudited)
1. Significant Accounting Policies:
On September 29, 2006, Merrill Lynch Focus Value Fund, Inc. was renamed
BlackRock Focus Value Fund, Inc. (the "Fund"). The Fund is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The Fund's financial statements are prepared in
conformity with U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. These unaudited financial statements reflect all adjustments,
which are, in the opinion of management, necessary to present a fair statement
of the results for the interim period. All such adjustments are of a normal,
recurring nature. The Fund offers multiple classes of shares. Effective October
2, 2006, Class I, Class A, Class B and Class C Shares were redesignated
Institutional, Investor A, Investor B and Investor C Shares, respectively. Class
R Shares did not change their designation. Institutional Shares are sold without
a sales charge and only to certain eligible investors. Investor A Shares are
sold with a front-end sales charge. Shares of Investor B and Investor C may be
subject to a contingent deferred sales charge. Class R Shares are sold only to
certain retirement plans. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
Investor A, Investor B, Investor C and Class R Shares bear certain expenses
related to the shareholder servicing of such shares, and Investor B, Investor C
and Class R Shares also bear certain expenses related to the distribution of
such shares. Each class has exclusive voting rights with respect to matters
relating to its shareholder servicing and distribution expenditures (except that
Investor B shareholders may vote on certain changes to the Investor A
distribution plan). Income, expenses (other than expenses attributable to a
specific class) and realized and unrealized gains and losses are allocated daily
to each class based on its relative net assets. The following is a summary of
significant accounting policies followed by the Fund.
(a) Valuation of investments -- Equity securities held by the Fund that are
traded on stock exchanges or the NASDAQ Global Market are valued at the last
sale price or official close price on the exchange, as of the close of business
on the day the securities are being valued or, lacking any sales, at the last
available bid price for long positions, and at the last available asked price
for short positions. In cases where equity securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Directors of the Fund.
Long positions traded in the over-the-counter ("OTC") market, NASDAQ Capital
Market or Bulletin Board are valued at the last available bid price or yield
equivalent obtained from one or more dealers or pricing services approved by the
Board of Directors of the Fund. Short positions traded in the OTC market are
valued at the last available asked price. Portfolio 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 or purchased are valued at the last sale price in the case of
exchange-traded options. Options traded in the OTC market are valued at the last
asked price (options written) or the last bid price (options purchased). Swap
agreements are valued by quoted fair valuations received daily by the Fund from
a pricing service or counterparty. Financial futures contracts and options
thereon, which are traded on exchanges, are valued at their last sale price as
of the close of such exchanges. Obligations with remaining maturities of 60 days
or less are valued at amortized cost unless BlackRock Advisors, LLC (the
"Manager"), an indirect, wholly owned subsidiary of BlackRock, Inc., believes
that this method no longer produces fair valuations. Valuation of other
short-term investment vehicles is generally based on the net asset value of the
underlying investment vehicle or amortized cost.
Repurchase agreements are valued at cost plus accrued interest. The Fund employs
pricing services to provide certain securities prices for the Fund. Securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Directors of the Fund, including valuations furnished by the pricing services
retained by the Fund, which may use a matrix system for valuations. The
procedures of a pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Fund's Board of Directors. Such
valuations and procedures will be reviewed periodically by the Board of
Directors of the Fund.
Generally, trading in foreign securities, as well as U.S. government securities,
money market instruments and certain fixed income securities, is substantially
completed each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The values of such securities used in computing
the net asset value of the Fund's shares are determined as of such times.
Foreign currency exchange rates will generally be determined as of the close of
business on the NYSE. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which they are
determined and the close of business on the NYSE that may not be reflected in
the computation of the Fund's net asset value. If events (for example, a company
announcement, market volatility or a natural disaster) occur during such periods
that are expected to materially affect the
20 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Notes to Financial Statements (continued)
value of such securities, those securities will be valued at their fair value as
determined in good faith by the Fund's Board of Directors or by the Manager
using a pricing service and/or procedures approved by the Fund's Board of
Directors.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and to hedge, or
protect, its exposure to interest rate movements and movements in the securities
markets. Losses may arise due to changes in the value of the contract due to an
unfavorable change in price of the underlying security or if the counterparty
does not perform under the contract.
o Options -- The Fund may write and purchase call and put options. When the
Fund writes an option, an amount equal to the premium received by the Fund
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 Fund enters into a closing transaction), the Fund realizes a gain
or loss on the option to the extent of the premiums received or paid (or
gain or loss to the extent the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
(c) Foreign currency transactions -- Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into U.S. dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on investments.
The Fund invests in foreign securities, which may involve a number of risk
factors and special considerations not present with investments in securities of
U.S. corporations.
(d) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates.
(e) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Dividends from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Fund has determined the ex-dividend date.
Interest income is recognized on the accrual basis.
(f) Prepaid registration fees -- Prepaid registration fees are charged to
expense as the related shares are issued.
(g) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
(h) Securities lending -- The Fund may lend securities to financial institutions
that provide cash or securities issued or guaranteed by the U.S. government as
collateral, which will be maintained at all times in an amount equal to at least
100% of the current market value of the loaned securities. The market value of
the loaned securities is determined at the close of business of the Fund and any
additional required collateral is delivered to the Fund on the next business
day. Where the Fund receives securities as collateral for the loaned securities,
it collects a fee from the borrower. The Fund typically receives the income on
the loaned securities but does not receive the income on the collateral. Where
the Fund receives cash collateral, it may invest such collateral and retain the
amount earned on such investment, net of any amount rebated to the borrower.
Loans of securities are terminable at any time and the borrower, after notice,
is required to return borrowed securities within five business days. The Fund
may pay reasonable finder's, lending agent, administrative and custodial fees in
connection with its loans. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or for any other
reason, the Fund could experience delays and costs in gaining access to the
collateral. The Fund also could suffer a loss where the value of the collateral
falls below the market value of the borrowed securities, in the event of
borrower default or in the event of losses on investments made with cash
collateral.
(i) Recent accounting pronouncements -- In July 2006, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 48 ("FIN 48"), "Accounting
for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109."
FIN 48 prescribes the minimum recognition threshold a
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 21
Notes to Financial Statements (continued)
tax position must meet in connection with accounting for uncertainties in income
tax positions taken or expected to be taken by an entity including mutual funds
before being measured and recognized in the financial statements. Adoption of
FIN 48 is required for the last net asset value calculation in the first
required financial statement reporting period for fiscal years beginning after
December 15, 2006. The impact on the Fund's financial statements, if any, is
currently being assessed.
In addition, in September 2006, Statement of Financial Accounting Standards No.
157, "Fair Value Measurements" ("FAS 157"), was issued and is effective for
fiscal years beginning after November 15, 2007. FAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the implications of
FAS 157. At this time, its impact on the Fund's financial statements has not
been determined.
2. Investment Advisory Agreement and Transactions with Affiliates:
On September 29, 2006, BlackRock, Inc. and Merrill Lynch & Co., Inc. ("Merrill
Lynch") combined Merrill Lynch's investment management business, Merrill Lynch
Investment Managers, L.P. ("MLIM"), and its affiliates, including Fund Asset
Management, L.P. ("FAM"), with BlackRock, Inc. to create a new independent
company. Merrill Lynch has a 49.8% economic interest and a 45% voting interest
in the combined company and The PNC Financial Services Group, Inc. ("PNC"), has
approximately a 34% economic and voting interest. The new company operates under
the BlackRock name and is governed by a board of directors with a majority of
independent members.
On August 15, 2006, shareholders of the Fund approved a new Investment Advisory
Agreement with the Manager. BlackRock Advisors, Inc. was recently reorganized
into a limited liability company and renamed BlackRock Advisors, LLC. The new
Investment Advisory Agreement between the Fund and the Manager became effective
on September 29, 2006. Prior to September 29, 2006, FAM was the Fund's manager.
The general partner of FAM is Princeton Services, Inc. ("PSI"), an indirect,
wholly owned subsidiary of Merrill Lynch, which is the limited partner. The Fund
has also entered into separate Distribution Agreements and Distribution Plans
with FAM Distributors, Inc. ("FAMD") and BlackRock Distributors, Inc. ("BDI")
(collectively, the "Distributor"). FAMD is a wholly owned subsidiary of Merrill
Lynch Group, Inc. and BDI is an affiliate of BlackRock, Inc.
The Manager is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Fund. For such services, the Fund
pays a monthly fee at an annual rate of 1.00% of the average daily value of the
Fund's net assets. The Manager (and previously FAM) has contractually agreed to
waive .25% of its fee resulting in an annual fee equal to .75% of the average
daily value of the Fund's net assets. This contractual waiver agreement has a
one-year term and is automatically renewable year to year unless terminated by
the Manager. For the period August 1, 2006 to September 29, 2006, FAM earned
fees of $548,474, of which $137,119 was waived. For the period September 29,
2006 to January 31, 2007, the Manager earned fees of $1,196,688, of which
$299,171 was waived.
In addition, the Manager has entered into a Sub-Advisory Agreement with
BlackRock Investment Management, LLC ("BIM"), an affiliate of the Manager, under
which the Manager pays the Sub-Adviser for services it provides a monthly fee at
an annual rate that is a percentage of the management fee paid by the Fund to
the Manager. Prior to September 29, 2006, FAM had a Sub-Advisory Agreement with
Merrill Lynch Asset Management U.K. Limited ("MLAM U.K."), an affiliate of FAM.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing service fees and distribution fees. The fees are accrued daily and paid
monthly at annual rates based upon the average daily net assets of the shares as
follows:
- --------------------------------------------------------------------------------
Service Distribution
Fee Fee
- --------------------------------------------------------------------------------
Investor A ....................................... .25% --
Investor B........................................ .25% .75%
Investor C........................................ .25% .75%
Class R........................................... .25% .25%
- --------------------------------------------------------------------------------
Pursuant to sub-agreements with each Distributor, broker-dealers, including
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a wholly owned
subsidiary of Merrill Lynch, and each Distributor provide shareholder servicing
and distribution services to the Fund. The ongoing service fee compensates the
Distributor and each broker-dealer (including MLPF&S) for providing shareholder
services to Investor A, Investor B, Investor C and Class R shareholders. The
ongoing distribution fee compensates the Distributor and MLPF&S for providing
shareholder services and distribution-related services to Investor B, Investor C
and Class R shareholders.
For the six months ended January 31, 2007, FAMD, the Fund's sole Distributor
until September 29, 2006, and BDI earned underwriting discounts and direct
commissions and
22 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Notes to Financial Statements (continued)
MLPF&S and BDI earned dealer concessions on sales of the Fund's Investor A
Shares as follows:
- --------------------------------------------------------------------------------
FAMD MLPF&S BDI
- --------------------------------------------------------------------------------
Investor A.................................... $1,178 $12,224 $47
- --------------------------------------------------------------------------------
For the six months ended January 31, 2007, MLPF&S received contingent deferred
sales charges of $5,202 and $431 relating to transactions in Investor B and
Investor C Shares, respectively. Furthermore, MLPF&S received contingent
deferred sales charges of $28 relating to transactions subject to front-end
sales charge waivers on Investor A Shares.
The Manager maintains a call center, which is responsible for providing certain
shareholder services to the Fund, such as responding to shareholder inquiries
and processing transactions based upon instructions from shareholders with
respect to the subscription and redemption of Fund shares. During the period
September 29, 2006 to January 31, 2007, the following amounts have been accrued
by the Fund to reimburse the Manager for costs incurred running the call center,
which are a component of the transfer agent fees in the accompanying Statement
of Operations.
- --------------------------------------------------------------------------------
Call Center
Fees
- --------------------------------------------------------------------------------
Institutional ............................................... $1,421
Investor A .................................................. $1,165
Investor B .................................................. $ 304
Investor C .................................................. $ 229
Class R ..................................................... $ 6
- --------------------------------------------------------------------------------
The Fund has received an exemptive order from the Securities and Exchange
Commission permitting it to lend portfolio securities to MLPF&S or its
affiliates. Pursuant to that order, the Fund has retained BIM as the securities
lending agent for a fee based on a share of the returns on investment of cash
collateral. Prior to September 29, 2006, BIM was organized as Merrill Lynch
Investment Managers, LLC ("MLIM, LLC"), an affiliate of FAM, and MLIM, LLC was
the securities lending agent. BIM may, on behalf of the Fund, invest cash
collateral received by the Fund for such loans, among other things, in a private
investment company managed by the Manager or in registered money market funds
advised by the Manager or its affiliates. For the six months ended January 31,
2007, BIM received $6,208 in securities lending agent fees.
In addition, MLPF&S received $75,637 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended January
31, 2007.
For the six months ended January 31, 2007, the Fund reimbursed FAM and the
Manager $1,069 and $2,139, respectively, for certain accounting services.
Effective September 29, 2006, PFPC Inc., an indirect, wholly owned subsidiary of
PNC and an affiliate of the Manager, became the Fund's transfer agent. Prior to
September 29, 2006, the Fund's transfer agent was Financial Data Services, Inc.
("FDS"), a wholly owned subsidiary of Merrill Lynch.
Prior to September 29, 2006, certain officers and/or directors of the Fund were
officers and/or directors of FAM, PSI, MLAM U.K., FDS, FAMD, Merrill Lynch,
MLIM, and/or MLIM, LLC.
Commencing September 29, 2006, certain officers and/or directors of the Fund are
officers and/or directors of BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended January 31, 2007 were $90,510,602 and $112,868,537, respectively.
Transactions in call options written for the six months ended January 31, 2007
were as follows:
- -------------------------------------------------------------------------------
Number of Premiums
Contracts Received
- -------------------------------------------------------------------------------
Outstanding call options written,
beginning of period .................... -- --
Options written .......................... 2,000 $ 238,992
-------------------------------
Outstanding call options written,
end of period .......................... 2,000 $ 238,992
===============================
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share transactions
was $9,677,669 and $(60,080,064) for the six months ended January 31, 2007 and
the year ended July 31, 2006, respectively.
Transactions in capital shares for each class were as follows:
- -------------------------------------------------------------------------------
Institutional Shares for the Six Months Dollar
Ended January 31, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 390,544 $ 5,699,124
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 848,081 12,221,490
-------------------------------
Total issued ............................. 1,238,625 17,920,614
Shares redeemed .......................... (788,090) (11,770,202)
-------------------------------
Net increase ............................. 450,535 $ 6,150,412
===============================
- -------------------------------------------------------------------------------
Institutional Shares for the Year Dollar
Ended July 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 471,851 $ 6,632,904
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 399,615 5,505,500
-------------------------------
Total issued ............................. 871,466 12,138,404
Shares redeemed .......................... (2,344,047) (33,086,613)
-------------------------------
Net decrease ............................. (1,472,581) $(20,948,209)
===============================
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 23
Notes to Financial Statements (concluded)
- -------------------------------------------------------------------------------
Investor A Shares for the Six Months Dollar
Ended January 31, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 672,702 $ 9,927,999
Automatic conversion of shares ........... 56,030 831,988
Shares issued to shareholders
in reinvestment of dividends
and distributions ...................... 791,317 11,291,456
-------------------------------
Total issued ............................. 1,520,049 22,051,443
Shares redeemed .......................... (1,152,040) (17,088,492)
-------------------------------
Net increase ............................. 368,009 $ 4,962,951
===============================
- -------------------------------------------------------------------------------
Investor A Shares for the Year Dollar
Ended July 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 517,347 $ 7,262,405
Automatic conversion of shares ........... 535,965 7,437,583
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 310,746 4,247,406
-------------------------------
Total issued ............................. 1,364,058 18,947,394
Shares redeemed .......................... (2,389,363) (33,629,756)
-------------------------------
Net decrease ............................. (1,025,305) $(14,682,362)
===============================
- -------------------------------------------------------------------------------
Investor B Shares for the Six Months Dollar
Ended January 31, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 155,854 $ 2,087,457
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 159,618 2,072,092
-------------------------------
Total issued ............................. 315,472 4,159,549
-------------------------------
Automatic conversion of shares ........... (61,569) (831,988)
Shares redeemed .......................... (501,704) (6,756,045)
-------------------------------
Total redeemed ........................... (563,273) (7,588,033)
-------------------------------
Net decrease ............................. (247,801) $ (3,428,484)
===============================
- -------------------------------------------------------------------------------
Investor B Shares for the Year Dollar
Ended July 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 168,871 $ 2,162,223
Shares issued to shareholders in
reinvestment of distributions .......... 97,123 1,216,215
-------------------------------
Total issued ............................. 265,994 3,378,438
-------------------------------
Automatic conversion of shares ........... (585,261) (7,437,583)
Shares redeemed .......................... (958,367) (12,280,439)
-------------------------------
Total redeemed ........................... (1,543,628) (19,718,022)
-------------------------------
Net decrease ............................. (1,277,634) $(16,339,584)
===============================
- -------------------------------------------------------------------------------
Investor C Shares for the Six Months Dollar
Ended January 31, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 129,601 $ 1,694,179
Shares issued to shareholders
in reinvestment of dividends
and distributions ...................... 176,434 2,230,538
-------------------------------
Total issued ............................. 306,035 3,924,717
Shares redeemed .......................... (156,428) (2,059,186)
-------------------------------
Net increase ............................. 149,607 $ 1,865,531
===============================
- -------------------------------------------------------------------------------
Investor C Shares for the Year Dollar
Ended July 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 108,720 $ 1,373,768
Shares issued to shareholders in
reinvestment of distributions .......... 81,723 1,001,868
-------------------------------
Total issued ............................. 190,443 2,375,636
Shares redeemed .......................... (839,093) (10,562,949)
-------------------------------
Net decrease ............................. (648,650) $ (8,187,313)
===============================
- -------------------------------------------------------------------------------
Class R Shares for the Six Months Dollar
Ended January 31, 2007 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 25,293 $ 349,476
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 4,708 62,410
-------------------------------
Total issued ............................. 30,001 411,886
Shares redeemed .......................... (20,550) (284,627)
-------------------------------
Net increase ............................. 9,451 $ 127,259
===============================
- -------------------------------------------------------------------------------
Class R Shares for the Year Dollar
Ended July 31, 2006 Shares Amount
- -------------------------------------------------------------------------------
Shares sold .............................. 19,842 $ 264,538
Shares issued to shareholders in
reinvestment of dividends
and distributions ...................... 1,429 18,289
-------------------------------
Total issued ............................. 21,271 282,827
Shares redeemed .......................... (15,570) (205,423)
-------------------------------
Net increase ............................. 5,701 $ 77,404
===============================
5. Short-Term Borrowings:
The Fund, along with certain other funds managed by the Manager and its
affiliates (or FAM and its affiliates), is party to a $500,000,000 credit
agreement with a group of lenders. The Fund may borrow under the credit
agreement to fund shareholder redemptions and for other lawful purposes other
than for leverage. The Fund may borrow up to the maximum amount allowable under
the Fund's current prospectus and statement of additional information, subject
to various other legal, regulatory or contractual limits. On November 22, 2006,
the credit agreement was renewed for one year under substantially the same
terms. The Fund pays a commitment fee of .06% per annum based on the Fund's pro
rata share of the unused portion of the credit agreement. Amounts borrowed under
the credit agreement bear interest at a rate equal to, at each Fund's election,
the federal funds rate plus .35% or a base rate as defined in the credit
agreement. The Fund did not borrow under the credit agreement during the six
months ended January 31, 2007.
24 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Disclosure of Investment Advisory Agreement
BlackRock Investment Advisory Agreement -- Matters Considered by the Board
The following disclosure appeared in the July 31, 2006 Annual Report of the Fund
and is the discussion referred to in "New BlackRock Sub-Advisory Agreement --
Matters Considered by the Board" below. The term "Investment Adviser" as used
herein refers to Fund Asset Management, L.P.
In connection with the Transaction between Merrill Lynch and BlackRock, the
Fund's Board of Directors considered a new investment advisory agreement (the
"New Investment Advisory Agreement") between the Fund and BlackRock Advisors,
Inc. or its successor ("BlackRock Advisors"). The New Investment Advisory
Agreement has been approved by the Fund's shareholders and is expected to become
effective upon the closing of the Transaction in the third quarter of 2006.
The Board discussed the New Investment Advisory Agreement at telephonic and
in-person meetings held during April and May 2006. The Board, including the
independent directors, approved the New Investment Advisory Agreement at a
meeting held on May 9, 2006.
To assist the Board in its consideration of the New Investment Advisory
Agreement, BlackRock provided materials and information about BlackRock,
including its financial condition and asset management capabilities and
organization, and Merrill Lynch provided materials and information about the
Transaction. The independent directors, through their independent legal counsel,
also requested and received additional information from Merrill Lynch and
BlackRock in connection with their consideration of the New Investment Advisory
Agreement. The additional information was provided in advance of the May 9, 2006
meeting. In addition, the independent directors consulted with their counsel and
Fund counsel on numerous occasions, discussing, among other things, the legal
standards and certain other considerations relevant to the directors'
deliberations.
At the Board meetings, the directors discussed with Merrill Lynch management and
certain BlackRock representatives the Transaction, its strategic rationale and
BlackRock's general plans and intentions regarding the Fund. At these Board
meetings, representatives of Merrill Lynch and BlackRock made presentations to
and responded to questions from the Board. The directors also inquired about the
plans for and anticipated roles and responsibilities of certain employees and
officers of the Investment Adviser and certain affiliates being transferred to
BlackRock in connection with the Transaction. The independent directors of the
Board also conferred separately and with their counsel about the Transaction and
other matters related to the Transaction on a number of occasions, including in
connection with the April and May 2006 meetings. After the presentations and
after reviewing the written materials provided, the independent directors met in
executive sessions with their counsel to consider the New Investment Advisory
Agreement.
In connection with the Board's review of the New Investment Advisory Agreement,
Merrill Lynch and/or BlackRock advised the directors about a variety of matters.
The advice included the following, among other matters:
o that there is not expected to be any diminution in the nature, quality and
extent of services provided to the Fund and its shareholders by BlackRock
Advisors, including compliance services;
o that operation of New BlackRock as an independent investment management
firm will enhance its ability to attract and retain talented
professionals;
o that the Fund should benefit from having access to BlackRock's state of
the art technology and risk management analytic tools, including
investment tools, provided under the BlackRock Solutions(R) brand name;
o that BlackRock has no present intention to alter any applicable expense
waivers or reimbursements currently in effect and, while it reserves the
right to do so in the future, it would seek the approval of the Board
before making any changes;
o that BlackRock and Merrill Lynch will enter into an agreement, for an
initial three-year period and automatically renewable from year to year
thereafter, in connection with the Transaction under which Merrill
Lynch-affiliated broker-dealers will continue to offer the Fund as an
investment product;
o that BlackRock Advisors will have substantially the same access to the
Merrill Lynch sales force when distributing shares of the Fund as is
currently provided to the Investment Adviser and that other arrangements
between the Investment Adviser and Merrill Lynch sales channels will be
preserved;
o that the Fund will have access to BlackRock's network of third party
brokers, retirement plan platforms and registered investment advisers;
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 25
Disclosure of Investment Advisory Agreement (continued)
o that in connection with the Transaction, Merrill Lynch and BlackRock have
agreed to conduct, and use reasonable best efforts to cause their
respective affiliates to conduct, their respective businesses in
compliance with the conditions of Section 15(f) of the Investment Company
Act of 1940 (the "1940 Act") in relation to any public funds advised by
BlackRock or the Investment Adviser (or its affiliates), respectively; and
o that Merrill Lynch and BlackRock would derive benefits from the
Transaction and that, as a result, they have a different financial
interest in the matters that were being considered than do Fund
shareholders.
The directors considered the information provided by Merrill Lynch and BlackRock
above, and, among other factors, the following:
o the potential benefits to Fund shareholders from being part of a combined
fund family with BlackRock-sponsored funds, including possible economies
of scale and access to investment opportunities;
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 New Investment Advisory Agreement,
including the fact that the schedule of the Fund's total advisory fees
will not increase by virtue of the New Investment Advisory Agreement, but
will remain the same;
o that in February 2006, the Board performed a full annual review of the
investment advisory agreement currently in effect for the Fund (the
"Current Investment Advisory Agreement") as required by the 1940 Act and
has determined that the Investment Adviser has the capabilities, resources
and personnel necessary to provide the advisory and administrative
services currently provided to the Fund; and that the advisory and/or
management fees paid by the Fund, taking into account any applicable
agreed-upon fee waivers and breakpoints, represent reasonable compensation
to the Investment Adviser in light of the services provided, the costs to
the Investment Adviser of providing those services, economies of scale,
the fees and other expenses paid by similar funds (including information
provided by Lipper Inc. ["Lipper"]), and such other matters as the
directors have considered relevant in the exercise of their reasonable
judgment; and
o that Merrill Lynch agreed to pay all expenses of the Fund in connection
with the Board's consideration of the New Investment Advisory Agreement
and related agreements and all costs of shareholder approval of the New
Investment Advisory Agreement and as a result the Fund would bear no costs
in obtaining shareholder approval of the New Investment Advisory
Agreement.
Certain of these considerations are discussed in more detail below.
In its review of the New Investment Advisory Agreement, the Board assessed the
nature, scope and quality of the services to be provided to the Fund by the
personnel of BlackRock Advisors and its affiliates, including administrative
services, shareholder services, oversight of fund accounting, marketing services
and assistance in meeting legal and regulatory requirements. In its review of
the New Investment Advisory Agreement, the Board also considered a range of
information in connection with its oversight of the services to be provided by
BlackRock Advisors and its affiliates. Among the matters considered were: (a)
fees (in addition to management fees) to be paid to BlackRock Advisors and its
affiliates by the Fund; (b) Fund operating expenses paid to third parties; (c)
the resources devoted to and compliance reports relating to the Fund's
investment objective, policies and restrictions, and its compliance with its
Code of Ethics and BlackRock Advisors' compliance policies and procedures; and
(d) the nature, cost and character of non-investment management services to be
provided by BlackRock Advisors and its affiliates.
In the period prior to the Board meetings to consider renewal of the Current
Investment Advisory Agreement, the Board had requested and received materials
specifically relating to the Current Investment Advisory Agreement. These
materials included (a) information compiled by Lipper on the fees and expenses
and the investment performance of the Fund as compared to a comparable group of
funds as classified by Lipper; (b) a discussion by the Fund's portfolio
management team on investment strategies used by the Fund during its most recent
fiscal year; (c) information on the profitability to the Investment Adviser of
the Current Investment Advisory Agreement and other payments received by the
Investment
26 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Adviser and its affiliates from the Fund; and (d) information provided by the
Investment Adviser concerning services related to the valuation and pricing of
Fund portfolio holdings, allocation of Fund brokerage fees, the Fund's portfolio
turnover statistics, and direct and indirect benefits to the Investment Adviser
and its affiliates from their relationship with the Fund.
In their deliberations, the directors considered information received in
connection with their most recent continuation of the Current Investment
Advisory Agreement, in addition to information provided by BlackRock and
BlackRock Advisors in connection with their evaluation of the terms and
conditions of the New Investment Advisory Agreement. The directors did not
identify any particular information that was all-important or controlling. The
directors, including a majority of the independent directors, concluded that the
terms of the New Investment Advisory Agreement are appropriate, that the fees to
be paid are reasonable in light of the services to be provided to the Fund, and
that the New Investment Advisory Agreement should be approved and recommended to
Fund shareholders.
Nature, Quality and Extent of Services Provided -- The Board reviewed the
nature, extent and quality of services provided by the Investment Adviser,
including the investment advisory services and the resulting performance of the
Fund, as well as the nature, quality and extent of services expected to be
provided by BlackRock Advisors. The Board focused primarily on the Investment
Adviser's investment advisory services and the Fund's investment performance,
but also considered certain areas in which both the Investment Adviser and the
Fund receive services as part of the Merrill Lynch complex. The Board compared
the Fund's performance -- both including and excluding the effects of fees and
expenses -- to the performance of a comparable group of mutual funds, and the
performance of a relevant index or combination of indexes. While the Board
reviews performance data at least quarterly, consistent with the Investment
Adviser's investment goals, the Board attaches more importance to performance
over relatively long periods of time, typically three to five years.
In evaluating the nature, quality and extent of the services to be provided by
BlackRock Advisors under the New Investment Advisory Agreement, the directors
considered, among other things, the expected impact of the Transaction on the
operations, facilities, organization and personnel of New BlackRock and how it
would affect the Fund; the ability of BlackRock Advisors to perform its duties
after the Transaction; and any anticipated changes to the current investment and
other practices of the Fund.
The directors were given information with respect to the potential benefits to
the Fund and its shareholders from having access to BlackRock's state of the art
technology and risk management analytic tools, including the investment tools
provided under the BlackRock Solutions(R) brand name.
The directors were advised that, as a result of Merrill Lynch's equity interest
in BlackRock after the Transaction, the Fund will continue to be subject to
restrictions concerning certain transactions involving Merrill Lynch affiliates
(for example, transactions with a Merrill Lynch broker-dealer acting as
principal) absent revised or new regulatory relief. The directors were advised
that a revision of existing regulatory relief with respect to these restrictions
was being sought from the Securities and Exchange Commission and were advised of
the possibility of receipt of such revised regulatory relief. There can be no
assurance that such relief will be obtained.
Based on their review of the materials provided and the assurances they had
received from the management of Merrill Lynch and of BlackRock, the directors
determined that the nature and quality of services to be provided to the Fund
under the New Investment Advisory Agreement were expected to be as good as or
better than that provided under the Current Investment Advisory Agreement. It
was noted, however, that it is expected that there will be changes in personnel
following the Transaction and the combination of the operations of the
Investment Adviser and its affiliates with those of BlackRock. The directors
noted that if current portfolio managers or other personnel cease to be
available, the Board would consider all available options, which could include
seeking the investment advisory or other services of BlackRock affiliates.
Accordingly, the directors concluded that, overall, they were satisfied at the
present time with assurances from BlackRock and BlackRock Advisors as to the
expected nature, extent and quality of the services to be provided to the Fund
under the New Investment Advisory Agreement.
Costs of Services Provided and Profitability -- It was noted that, in
conjunction with the recent review of the Current Investment Advisory Agreement,
the directors had received, among other things, a report from Lipper comparing
the Fund's fees, expenses and performance to those of a peer group selected by
Lipper, and information as to the fees charged by the Investment Adviser or its
affiliates to other registered investment company clients for investment
management services. The Board reviewed the Fund's contractual management fee
rate and actual management fee rate as a percentage of total assets at common
asset levels -- the
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 27
Disclosure of Investment Advisory Agreement (concluded)
actual rate includes advisory fees and the effects of any fee waivers --
compared to the other funds in its Lipper category. They also compared the
Fund's total expenses to those of other comparable funds. The information showed
that the Fund had fees and expenses within the range of fees and expenses of
comparable funds. The Board 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. The Board 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. The Board
concluded that the Fund's management fee and fee rate and overall expense ratio
are reasonable compared to those of other comparable funds.
In evaluating the costs of the services to be provided by BlackRock Advisors
under the New Investment Advisory Agreement, the directors considered, among
other things, whether advisory fees or other expenses would change as a result
of the Transaction. Based on their review of the materials provided and the fact
that the New Investment Advisory Agreement is substantially similar to the
Current Investment Advisory Agreement in all material respects, including the
rate of compensation, the directors determined that the Transaction should not
increase the total fees payable, including any fee waivers or after any expense
caps or expense reimbursements, for advisory and administrative services. The
directors noted that it was not possible to predict how the Transaction would
affect BlackRock Advisors' profitability from its relationship with the Fund.
The directors discussed with BlackRock Advisors its general methodology to be
used in determining its profitability with respect to its relationship with the
Fund and noted that they expect to receive profitability information from
BlackRock Advisors on at least an annual basis.
Fees and Economies of Scale -- The Board considered the extent to which
economies of scale might be realized as the assets of the Fund increase and
whether there should be changes in the management fee rate or structure in order
to enable the Fund to participate in these economies of scale. The Board
determined that changes were not currently necessary and that the Fund
appropriately participated in these economies of scale.
In reviewing the Transaction, the directors considered, among other things,
whether advisory fees or other expenses would change as a result of the
Transaction. Based on the fact that the New Investment Advisory Agreement is
substantially similar to the Current Investment Advisory Agreement in all
material respects, including the rate of compensation, the directors determined
that as a result of the Transaction, the Fund's total advisory fees would be no
higher than the fees under its Current Investment Advisory Agreement. The
directors concluded that, because the rates for advisory fees for the Fund would
be no higher than its current fee rates, the proposed management fee structure,
including any fee waivers, was reasonable and that no additional changes were
currently necessary.
Fall-Out Benefits -- The directors considered whether the Fund would generate
any fall-out benefits to BlackRock Advisors. Fall-out benefits are indirect
profits from other activities that accrue to the adviser or its affiliates
solely because of the existence of the Fund. In evaluating the fall-out benefits
to be received by BlackRock Advisors under the New Investment Advisory
Agreement, the directors considered whether the Transaction would have an impact
on the fall-out benefits received by the Investment Adviser by virtue of the
Current Investment Advisory Agreement. Based on their review of the materials
provided, including materials received in connection with their most recent
approval or continuance of the Current Investment Advisory Agreement, and their
discussions with management of the Investment Adviser and BlackRock, the
directors determined that those benefits could include increased ability for
BlackRock to distribute shares of its funds and other investment products and to
obtain research services using the Fund's portfolio transaction brokerage
commissions. The directors noted that any such benefits were difficult to
quantify with certainty at this time, and indicated that they would continue to
evaluate them going forward.
Investment Performance -- The directors considered investment performance for
the Fund. The directors 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
28 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
at various levels within the range of performance of comparable funds over
different time periods. The directors believed the Fund's performance was
satisfactory. Also, the directors took into account the investment performance
of funds currently advised by BlackRock Advisors. The 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 Board noted BlackRock's
considerable investment management experience and capabilities, but was unable
to predict what effect, if any, consummation of the Transaction would have on
the future performance of the Fund.
Conclusion -- After the independent directors of the Fund deliberated in
executive session, the entire Board, including the independent directors,
approved the New Investment Advisory Agreement, concluding that the advisory fee
rate was reasonable in relation to the services provided and that the New
Investment Advisory Agreement was in the best interests of the shareholders. In
approving the New Investment Advisory Agreement, the Board noted that it
anticipated reviewing the continuance of the agreement in advance of the
expiration of the initial two-year period.
Contingent BlackRock Sub-Advisory Agreement -- Matters Considered by the Board
At the telephonic and in-person meetings held during April and May 2006 at which
the Board of Directors discussed and approved the New Investment Advisory
Agreement, the Board, including the independent directors, also discussed and
approved a contingent sub-advisory agreement (the "Contingent Sub-Advisory
Agreement") between the Investment Adviser and BlackRock Advisors (the
"BlackRock Sub-Adviser"). The Contingent Sub-Advisory Agreement is intended to
ensure that the Fund operates with efficient portfolio management services until
the closing of the Transaction, in the event that the Board deems it necessary
and in the best interests of the Fund and its shareholders that the BlackRock
Sub-Adviser assist in managing the operations of the Fund during the interim
period until the closing of the Transaction. The Contingent Sub-Advisory
Agreement would take effect only upon recommendation from the Investment Adviser
and upon subsequent approval of the Board in the period up to the closing of the
Transaction. The effectiveness of the Contingent Sub-Advisory Agreement,
therefore, is contingent on further Board approval. Pursuant to the Contingent
Sub-Advisory Agreement, the BlackRock Sub-Adviser would receive a monthly fee
from the Investment Adviser equal to 50% of the advisory fee received by the
Investment Adviser. The Investment Adviser would pay the BlackRock Sub-Adviser
out of its own resources. There would be no increase in Fund expenses as a
result of the Contingent Sub-Advisory Agreement.
In making its approval at the May in-person meeting, the Board considered the
Contingent Sub-Advisory Agreement in conjunction with the New Investment
Advisory Agreement and reviewed the same information and factors discussed
above, and came to the same conclusions. The Board also considered in
conjunction with the Contingent Sub-Advisory Agreement the necessity of ensuring
that the Fund operates with effective management services until the closing of
the Transaction. In reviewing the sub-advisory fee rate provided in the
Contingent Sub-Advisory Agreement, the Board took note of the fact that both the
Investment Adviser and the BlackRock Sub-Adviser would have significant
responsibilities under their respective advisory agreements. The Investment
Adviser would remain responsible for oversight of the Fund's operations and
administration and the BlackRock Sub-Adviser would provide advisory services to
the Fund under the Contingent Sub-Advisory Agreement. The Board also took into
account the expected short duration of the term of any Contingent Sub-Advisory
Agreement and the fact that total advisory fees paid by the Fund would not
increase as a result of the Contingent Sub-Advisory Agreement. Under all of the
circumstances, the Board concluded that it was a reasonable allocation of fees
for the BlackRock Sub-Adviser to receive 50% of the advisory fee paid by the
Fund to the Investment Adviser.
After the independent directors deliberated in executive session, the entire
Board, including the independent directors, approved the Contingent Sub-Advisory
Agreement, concluding that the advisory fee was reasonable in relation to the
services provided and that the Contingent Sub-Advisory Agreement was in the best
interests of shareholders.
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 29
Disclosure of Sub-Advisory Agreement
New BlackRock Sub-Advisory Agreement -- Matters Considered by the Board
At an in-person meeting held on August 22-23, 2006, the Board of Directors,
including the independent directors, discussed and approved the sub-advisory
agreement with respect to the Fund between BlackRock Advisors, LLC (previously
organized as BlackRock Advisors, Inc.) ("BlackRock Advisors") and its affiliate,
BlackRock Investment Management, LLC (the "Sub-Adviser") (the "BlackRock
Sub-Advisory Agreement"). The BlackRock Sub-Advisory Agreement became effective
on September 29, 2006, at the same time the New Investment Advisory Agreement
with BlackRock Advisors (which had been approved by the Fund's shareholders)
became effective.
Pursuant to the BlackRock Sub-Advisory Agreement, the Sub-Adviser receives a
monthly fee from BlackRock Advisors at an annual rate equal to 74% of the
advisory fee received by BlackRock Advisors from the Fund. BlackRock Advisors
pays the Sub-Adviser out of its own resources, and there is no increase in Fund
expenses as a result of the BlackRock Sub-Advisory Agreement.
In approving the BlackRock Sub-Advisory Agreement at the August in-person
meeting, the Board reviewed its considerations in connection with its approval
of the New Investment Advisory Agreement in May 2006. The Board relied on the
same information and considered the same factors as those discussed above in
connection with the approval of the New Investment Advisory Agreement, and came
to the same conclusions. The Board considered all relevant factors and did not
identify any particular information that was all-important or controlling. In
reviewing the sub-advisory fee rate provided for in the BlackRock Sub-Advisory
Agreement, the Board noted the fact that both BlackRock Advisors and the
Sub-Adviser have significant responsibilities under their respective advisory
agreements. Under the New Investment Advisory Agreement, BlackRock Advisors
remains responsible for the overall management of the Fund and for oversight of
the Fund's operations and administration. Under the BlackRock Sub-Advisory
Agreement, the Sub-Adviser provides advisory services to the Fund and is
responsible for the day-to-day management of the Fund's portfolio. The Board
also took into account the fact that there is no increase in total advisory fees
paid by the Fund as a result of the BlackRock Sub-Advisory Agreement. Based on
its considerations, the Board concluded that it was a reasonable allocation of
fees for the Sub-Adviser to receive a fee at an annual rate equal to 74% of the
advisory fee paid by the Fund to BlackRock Advisors.
After the independent directors deliberated in executive session, the entire
Board, including the independent directors, approved the BlackRock Sub-Advisory
Agreement, concluding that the sub-advisory fee was reasonable in relation to
the services provided and that the BlackRock Sub-Advisory Agreement was in the
best interests of the Fund's shareholders.
30 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Proxy Results
During the six-month period ended January 31, 2007, BlackRock Focus Value Fund
Inc.'s shareholders voted on the following proposals, which were approved at a
special shareholders' meeting on August 15, 2006. A description of the proposals
and number of shares voted are as follows:
- ---------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
- ---------------------------------------------------------------------------------------------------
To approve a new investment advisory agreement
with BlackRock Advisors, Inc. 12,185,042 565,393 315,296
- ---------------------------------------------------------------------------------------------------
To approve a contingent sub-advisory agreement
with BlackRock Advisors, Inc. 12,185,752 558,666 321,313
- ---------------------------------------------------------------------------------------------------
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 31
BlackRock Funds
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their nonpublic personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal nonpublic information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our Web sites.
BlackRock does not sell or disclose to nonaffiliated third parties any nonpublic
personal information about its Clients, except as permitted by law or as is
necessary to service Client accounts. These nonaffiliated third parties are
required to protect the confidentiality and security of this information and to
use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to nonpublic
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the nonpublic
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
Availability of Additional Information
Electronic copies of most financial reports and prospectuses are available on
the Fund's Web site or shareholders can sign up for e-mail notifications of
quarterly statements, annual and semi-annual reports and prospectuses by
enrolling in the Fund's electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment
advisers, banks or brokerages may offer this service.
Shareholders Who Hold Accounts Directly with BlackRock:
1) Access the BlackRock Web site at http://www.blackrock.com/edelivery
2) Select eDelivery under the More Information section
3) Log into your account
The Fund will mail only one copy of shareholder documents, including
prospectuses, annual and semi-annual reports and proxy statements, to
shareholders with multiple accounts at the same address. This practice is
commonly called "householding" and it is intended to reduce expenses and
eliminate duplicate mailings of shareholder documents. Mailings of your
shareholder documents may be householded indefinitely unless you instruct us
otherwise. If you do not want the mailing of these documents to be combined with
those for other members of your household, please contact the Fund at (800)
441-7762.
32 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
Availability of Additional Information (concluded)
Availability of Proxy Voting Policies and Procedures
The Fund has delegated proxy voting responsibilities to BlackRock and its
affiliates, subject to the general oversight of the Fund's Board of Directors. A
description of the policies and procedures that BlackRock and its affiliates use
to determine how to vote proxies relating to portfolio securities is available
without charge, upon request, on our Web site at www.blackrock.com, by calling
(800) 441-7762, or on the Web site of the Securities and Exchange Commission
(the "Commission") at http://www.sec.gov.
Availability of Proxy Voting Record
Information on how proxies relating to the Fund's voting securities were voted
(if any) by BlackRock during the most recent 12-month period ended June 30 is
available, upon request and without charge, on our Web site at
www.blackrock.com, by calling (800) 441-7762 or on the Web site of the
Commission at http://www.sec.gov.
Availability of Quarterly Portfolio Schedule
The Fund files its complete schedule of portfolio holdings for the first and
third quarters of its fiscal year with the Commission on Form N-Q. The Fund's
Forms N-Q are available on the Commission's Web site at http://www.sec.gov and
may be reviewed and copied at the Commission's Public Reference Room in
Washington, D.C. Information regarding the operation of the Public Reference
Room may be obtained by calling (800) SEC-0330. The Fund's Forms N-Q may also be
obtained upon request, without charge, by calling (800) 441-7762.
Shareholder Privileges
Account Information
Call us at (800) 441-7762 8:00 AM - 6:00 PM EST to get information about your
account balances, recent transactions and share prices. You can also reach us on
the Web at www.blackrock.com.
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange to have $50
or more automatically deducted from their checking or savings account and
invested in any of the BlackRock portfolios.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $50 or more from their BlackRock portfolios, as
long as their account is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover,
Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007 33
A World-Class Mutual Fund Family
BlackRock now offers an expanded lineup of open-end mutual funds. Our range
includes more than 85 funds crossing all investment styles and managed by
experts in equity, fixed income and tax-exempt investing.
Equity Portfolios
BlackRock All-Cap Global Resources Portfolio
BlackRock Aurora Portfolio
BlackRock Asset Allocation Portfolio+
BlackRock Balanced Capital Fund+
BlackRock Basic Value Fund
BlackRock Developing Capital Markets Fund
BlackRock Equity Dividend Fund
BlackRock EuroFund
BlackRock Focus Twenty Fund
BlackRock Focus Value Fund
BlackRock Fundamental Growth Fund
BlackRock Global Allocation Fund+
BlackRock Global Dynamic Equity Fund
BlackRock Global Financial Services Fund
BlackRock Global Growth Fund
BlackRock Global Opportunities Portfolio
BlackRock Global Resources Portfolio*
BlackRock Global Science & Technology Opportunities Portfolio
BlackRock Global SmallCap Fund
BlackRock Global Technology Fund
BlackRock Global Value Fund
BlackRock Healthcare Fund
BlackRock Health Sciences Opportunities Portfolio
BlackRock Index Equity Portfolio*
BlackRock International Fund
BlackRock International Index Fund
BlackRock International Opportunities Portfolio*
BlackRock International Value Fund
BlackRock Investment Trust
BlackRock Large Cap Core Fund
BlackRock Large Cap Growth Fund
BlackRock Large Cap Value Fund
BlackRock Latin America Fund
BlackRock Capital Appreciation Portfolio
BlackRock Mid-Cap Growth Equity Portfolio
BlackRock Mid-Cap Value Equity Portfolio
BlackRock Mid Cap Value Opportunities Fund
BlackRock Natural Resources Trust
BlackRock Pacific Fund
BlackRock Small Cap Core Equity Portfolio
BlackRock Small Cap Growth Equity Portfolio
BlackRock Small Cap Growth Fund II
BlackRock Small Cap Index Fund
BlackRock Small Cap Value Equity Portfolio*
BlackRock Small/Mid-Cap Growth Portfolio
BlackRock S&P 500 Index Fund
BlackRock U.S. Opportunities Portfolio
BlackRock Utilities and Telecommunications Fund
BlackRock Value Opportunities Fund
Fixed Income Portfolios
BlackRock Bond Fund
BlackRock Enhanced Income Portfolio
BlackRock GNMA Portfolio
BlackRock Government Income Portfolio
BlackRock High Income Fund
BlackRock High Yield Bond Portfolio
BlackRock Inflation Protected Bond Portfolio
BlackRock Intermediate Bond Portfolio
BlackRock Intermediate Bond Portfolio II
BlackRock Intermediate Government Bond Portfolio
BlackRock International Bond Portfolio
BlackRock Low Duration Bond Portfolio
BlackRock Managed Income Portfolio
BlackRock Real Investment Fund
BlackRock Short-Term Bond Fund
BlackRock Total Return Portfolio
BlackRock Total Return Portfolio II
BlackRock World Income Fund
Municipal Bond Portfolios
BlackRock AMT-Free Municipal Bond Portfolio
BlackRock California Insured Municipal Bond Fund
BlackRock Delaware Municipal Bond Portfolio
BlackRock Florida Municipal Bond Fund
BlackRock High Yield Municipal Fund
BlackRock Intermediate Municipal Fund
BlackRock Kentucky Municipal Bond Portfolio
BlackRock Municipal Insured Fund
BlackRock National Municipal Fund
BlackRock New Jersey Municipal Bond Fund
BlackRock New York Municipal Bond Fund
BlackRock Ohio Municipal Bond Portfolio
BlackRock Pennsylvania Municipal Bond Fund
BlackRock Short-Term Municipal Fund
Money Market Portfolios
BlackRock Money Market Portfolio
BlackRock Municipal Money Market Portfolio@
BlackRock NC Municipal MM Portfolio@
BlackRock NJ Municipal MM Portfolio@
BlackRock OH Municipal MM Portfolio@
BlackRock PA Municipal MM Portfolio@
BlackRock Summit Cash Reserves Fund*
BlackRock U.S. Treasury MM Portfolio
BlackRock VA Municipal MM Portfolio@
* See the prospectus for information on specific limitations on investments
in the fund.
+ Mixed asset fund.
@ Tax-exempt fund.
BlackRock mutual funds are distributed by BlackRock Distributors, Inc. and
certain funds are also distributed by FAM Distributors, Inc. You should consider
the investment objectives, risks, charges and expenses of the funds under
consideration carefully before investing. Each fund's prospectus contains this
and other information and is available at www.blackrock.com or by calling
800-882-0052 or from your financial advisor. The prospectus should be read
carefully before investing.
34 BLACKROCK FOCUS VALUE FUND, INC. JANUARY 31, 2007
This report is transmitted to shareholders only. It is not authorized for use as
an offer of sale or a solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past performance
results shown in this report should not be considered a representation of future
performance. Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject to change.
BlackRock Focus Value Fund, Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
BLACKROCK
#10263-1/07
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this semi-annual
report
Item 4 - Principal Accountant Fees and Services - Not Applicable to this
semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Schedule of Investments - Not Applicable
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - Not Applicable
Item 8 - Portfolio Managers of Closed-End Management Investment Companies - Not
Applicable
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable
Item 10 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 11 - Controls and Procedures
11(a) - The registrant's certifying officers have reasonably designed such
disclosure controls and procedures to ensure material information
relating to the registrant is made known to us by others particularly
during the period in which this report is being prepared. The
registrant's certifying officers have determined that the registrant's
disclosure controls and procedures are effective based on our evaluation
of these controls and procedures as of a date within 90 days prior to
the filing date of this report.
11(b) - As of September 29, 2006, with the conclusion of the combination of
Merrill Lynch's asset management business with BlackRock, the registrant
was migrated to BlackRock's trading and compliance monitoring systems,
and various personnel changes occurred. In conjunction with these
business improvements, there were no changes in the registrants internal
control over financial reporting (as defined in Rule 30a-3(d) under Act
(17 CFR 270.30a-3(d)) that occurred during the last fiscal half-year of
the period covered by this report that has materially affected, or is
reasonably likely to affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - Not Applicable to this semi-annual report
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BlackRock Focus Value Fund, Inc.
By: /s/ Robert C. Doll, Jr.
--------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Focus Value Fund, Inc.
Date: March 26, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert C. Doll, Jr.
--------------------------------
Robert C. Doll, Jr.,
Chief Executive Officer of
BlackRock Focus Value Fund, Inc.
Date: March 26, 2007
By: /s/ Donald C. Burke
--------------------------------
Donald C. Burke,
Chief Financial Officer of
BlackRock Focus Value Fund, Inc.
Date: March 26, 2007