UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number 811-22061

Name of Fund: BlackRock Funds II

BlackRock Aggressive Growth Prepared Portfolio

BlackRock Conservative Prepared Portfolio

BlackRock Core Bond Portfolio

BlackRock GNMA Portfolio

BlackRock Growth Prepared Portfolio

BlackRock High Yield Bond Portfolio

BlackRock Inflation Protected Bond Portfolio

BlackRock Long Duration Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Moderate Prepared Portfolio

BlackRock Secured Credit Portfolio

BlackRock U.S. Government Bond Portfolio

Fund Address:  100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Funds II, 55

             East 52^nd Street, New York, NY 10055

Registrant’s telephone number, including area code: (800) 441-7762

Date of fiscal year end: 09/30/2012

Date of reporting period: 09/30/2012

Item 1 – Report to Stockholders

September 30, 2012

      Annual Report

BlackRock Funds II

u BlackRock GNMA Portfolio

u BlackRock Inflation Protected Bond Portfolio

u BlackRock Long Duration Bond Portfolio

u BlackRock Secured Credit Portfolio

u BlackRock U.S. Government Bond Portfolio

      Not FDIC Insured § No Bank Guarantee § May Lose Value

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Fund Summaries		4
About Fund Performance		14
Disclosure of Expenses		14
The Benefits and Risks of Leveraging		15
Derivative Financial Instruments		15
Financial Statements:
Schedules of Investments		16
Statements of Assets and Liabilities		49
Statements of Operations		51
Statements of Changes in Net Assets		52
Financial Highlights		55
Notes to Financial Statements		70
Report of Independent Registered Public Accounting Firm		93
Important Tax Information		93
Disclosure of Investment Advisory Agreement and Sub-Advisory Agreements		94
Officers and Trustees		99
Additional Information		102
A World-Class Mutual Fund Family		104

2     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Dear Shareholder

Late in the summer of 2011, financial markets were upended by sovereign debt turmoil in the United States and Europe as well as growing concerns about the future of the global economy. Investor confidence had crumbled. However, the fourth quarter of 2011 brought improving economic data and more concerted efforts among European leaders toward stemming the region’s debt crisis, gradually drawing investors back to the markets. Improving sentiment carried over into early 2012 as investors felt some relief from the world’s financial woes. Volatility abated and risk assets (including stocks, commodities and high yield bonds) moved boldly higher through the first two months of 2012, while climbing Treasury yields pressured higher-quality fixed income assets.

Markets reversed course in the spring when Europe’s debt problems boiled over once again. High levels of volatility returned as political instability in Greece threatened the country’s membership in the eurozone. Spain faced severe deficit issues while the nation’s banks clamored for liquidity. Yields on Spanish and Italian government debt rose to levels deemed unsustainable. European leaders conferred and debated vehemently over the need for fiscal integration among the 17 nations comprising the euro currency bloc as a means to resolve the crisis for the long term.

Alongside the drama in Europe, investors were discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key powerhouse for global growth, became particularly worrisome. In the United States, disappointing jobs reports dealt a crushing blow to investor sentiment. Risk assets sold off in the second quarter as investors again retreated to safe haven assets.

Despite ongoing concerns about the health of the global economy and the debt crisis in Europe, most asset classes enjoyed a robust summer rally powered mainly by expectations for policy stimulus from central banks in Europe and the United States. Although global economic data continued to be mixed, the spate of downside surprises seen in the second quarter had receded and, outside of Europe, the risk of recession largely subsided. Additionally, in response to growing debt pressures, the European Central Bank allayed investors’ fears by stating its conviction to hold the eurozone together. Early in September, the European Central Bank announced a plan to purchase sovereign debt in the eurozone’s most troubled nations. Later that month, the US Federal Reserve announced its long-awaited - and surprisingly aggressive – stimulus program, committing to purchase $40 billion of agency mortgage-backed securities per month until the US economy exhibits enough strength to sustain real growth and improving labor market conditions. These central bank actions boosted risk assets globally as investors increased their risk appetites in their search for higher returns.

All asset classes performed well for the 12-month period ended September 30, 2012, with particularly strong returns from US stocks and high yield bonds. For the six-month period ended September 30, 2012, fixed income investments outperformed equities. US Treasury bonds posted exceptional gains by historical standards and outperformed investment-grade corporate bonds and tax-exempt municipals. High yield bonds also generated solid returns. US stocks finished the six-month period with modest gains, while international and emerging market stocks lagged other asset classes amid ongoing uncertainty. Near-zero short term interest rates continued to keep yields on money market securities near their all-time lows.

The financial world is more uncertain than ever, but there are new avenues of opportunity - new ways to invest and new markets in which to invest. We believe it’s our responsibility to help investors adapt to today’s new world of investing and build the portfolios these times require. We encourage you to visit www.blackrock.com/newworld, for more information.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

“The financial world is more uncertain than ever, but there are new avenues of opportunity.”

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of September 30, 2012

	6-month	12-month
US large cap equities (S&P 500® Index)	3.43%	30.20%
US small cap equities (Russell 2000® Index)	1.60	31.91
International equities (MSCI Europe, Australasia, Far East Index)	(0.70)	13.75
Emerging market equities (MSCI Emerging Markets Index)	(1.84)	16.93
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)	0.06	0.07
US Treasury securities (BofA Merrill Lynch 10- Year US Treasury Index)	6.78	5.66
US investment grade bonds (Barclays US Aggregate Bond Index)	3.68	5.16
Tax-exempt municipal bonds (S&P Municipal Bond Index)	4.50	8.84
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)	6.40	19.35

Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

    THIS PAGE NOT PART OF YOUR FUND REPORT 3

  Fund Summary as of September 30, 2012   BlackRock GNMA Portfolio

    Investment Objective

BlackRock GNMA Portfolio’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

    Portfolio Management Commentary

How did the Fund perform?

— For the 12-month period ended September 30, 2012, the Fund outperformed its benchmark, the Barclays GNMA MBS Index.

What factors influenced performance?

— The largest contributor to performance during the period was the Fund’s positioning within the agency mortgage-backed securities (“MBS”) coupon stack (the range of coupon rates offered). Specifically, overweights relative to the benchmark index in high-coupon and low-coupon issues had a positive impact, as did a corresponding underweight in middle coupons. Additionally, exposures to inverse interest-only Ginnie Mae (“GNMA”) mortgages and call-protected mortgages added to Fund returns during the period.

— Conversely, the Fund’s short duration bias was a negative factor when interest rates fell in late 2011 and again in the second quarter of 2012. Also detracting from performance was the Fund’s exposure to Fannie Mae and Freddie Mac issues, as these instruments under performed GNMA issues in late 2011.

Describe recent portfolio activity.

— For the majority of the 12-month period, the Fund maintained overweights in 30-year issues on the low and high ends of the coupon stack and 15-year lower coupons, and an underweight in 30-year middle coupons. The Fund tactically traded exposure within middle coupons where certain segments that had underperformed presented attractive buying opportunities.

— Later in the period, the Fund moved to a generally neutral position in lower coupons after prices rallied on the announcement of the US Federal Reserve’s MBS purchase program. The Fund closed its underweight in middle-coupon GNMA issues as it appeared that prepayment activity had peaked. Finally, the Fund added exposure outside the benchmark index to high-coupon Fannie Mae issues, as refinancing risk diminished for these securities.

Describe Fund positioning at period end.

— Despite historically high prices in MBS, the presence of the US Federal Reserve in the market continues to support valuations. As of period end, the Fund continues to actively manage its allocations with consideration of prepayment expectations. Relative to the Barclays GNMA MBA Index, the Fund held a neutral weight in low and middle coupons, while continuing to avoid select middle-coupon Fannie Mae issues given concerns about continued high prepayment activity in this segment. The Fund held its largest overweight in 30-year high-coupon GNMA issues given the expectation that underlying borrowers in this space are less likely to refinance. The Fund ended the period with a neutral duration position relative to the benchmark index.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

    Portfolio Information

Portfolio Composition	Percent of Long-Term Investments
U.S. Government Sponsored Agency Securities	100%

Credit Quality Allocation1	Percent of Long-Term Investments
AAA/Aaa2	100%

¹  Using the higher of Standard & Poor’s (“S&P’s”) or Moody’s rating.

²  Includes US Government Sponsored Agency Securities which are deemed AAA/Aaa by the investment advisor.

4     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

BlackRock GNMA Portfolio

Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees. Institutional Shares do not have a sales charge.   ²  The Fund normally invests at least 80% of its assets in GNMA securities.   ³   An unmanaged index comprised of mortgage-backed pass through securities of GNMA.

Performance Summary for the Period Ended September 30, 2012

							Average Annual Total Returns4
							1 Year						5 Years						10 Years
	Standardized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
BlackRock		1.66	%		3.19	%		5.59	%		N/A			7.58	%		N/A			5.68	%		N/A
Institutional		1.63			3.17			5.45			N/A			7.56			N/A			5.62			N/A
Service		1.29			2.99			5.19			N/A			7.21			N/A			5.30			N/A
Investor A		1.23			2.99			5.18			0.95	%		7.18			6.30	%		5.23			4.80	%
Investor B		0.53			2.57			4.34			(0.16	)		6.33			6.02			4.68			4.68
Investor C		0.54			2.61			4.39			3.39			6.39			6.39			4.46			4.46
Barclays GNMA MBS Index		–			2.31			4.00			N/A			6.76			N/A			5.38			N/A

4 Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 14 for a detailed description of share classes, including any related sales charges and fees.

N/A - Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Expense Example

	Actual									Hypothetical7
					Including Interest Expense and Fees		Excluding Interest Expense and Fees					Including Interest Expense and Fees				Excluding Interest Expense and Fees
	Beginning Account Value April 1, 2012		Ending Account Value September 30, 2012		Expenses Paid During the Period5		Expenses Paid During the Period6		Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012		Expenses Paid During the Period5		Ending Account Value September 30, 2012		Expenses Paid During the Period6
BlackRock		$1,000.00		$1,031.90		$2.69		$2.64			$1,000.00		$1,022.35		$2.68		$1,022.40		$2.63
Institutional		$1,000.00		$1,031.70		$2.84		$2.79			$1,000.00		$1,022.20		$2.83		$1,022.25		$2.78
Service		$1,000.00		$1,029.90		$4.62		$4.57			$1,000.00		$1,020.45		$4.60		$1,020.50		$4.55
Investor A		$1,000.00		$1,029.90		$4.62		$4.52			$1,000.00		$1,020.45		$4.60		$1,020.55		$4.50
Investor B		$1,000.00		$1,025.70		$8.76		$8.71			$1,000.00		$1,016.35		$8.72		$1,016.40		$8.67
Investor C		$1,000.00		$1,026.10		$8.46		$8.36			$1,000.00		$1,016.65		$8.42		$1,016.75		$8.32

⁵  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.53% for BlackRock, 0.56% for Institutional, 0.91% for Service, 0.91% for Investor A, 1.73% for Investor B and 1.67% for Investor C), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁶  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.52% for BlackRock, 0.55% for Institutional, 0.90% for Service, 0.89% for Investor A, 1.72% for Investor B and 1.65% for Investor C), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁷  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 14 for further information on how expenses were calculated.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 5

  Fund Summary as of September 30, 2012   BlackRock Inflation Protected Bond Portfolio

  Investment Objective

BlackRock Inflation Protected Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize real return, consistent with preservation of real capital and prudent investment management.

  Portfolio Management Commentary

How did the Fund perform?

— For the 12-month period ended September 30, 2012, the Fund underperformed its benchmark, the Barclays Global Real: US TIPS Index.

What factors influenced performance?

— Relative to the benchmark index, the Fund’s shorter duration (lower sensitivity to interest rates) and underweight to short-dated US Treasury inflation-protected securities (“TIPS”) detracted from performance in the fourth quarter of 2011 as markets were highly volatile due to ongoing debt problems in Europe. The Fund’s shorter duration stance detracted again in the second quarter of 2012 as interest rates moved lower. The Fund’s long breakeven position (the spread between real and nominal yields) in Germany also had a negative impact. The Fund’s overweight to the long end of the US yield curve hindered returns in the third quarter of 2012, as the intermediate portion of the curve outperformed leading up to the US Federal Reserve’s announcement of a third round of monetary stimulus. Similarly, the Fund’s breakeven steepening position had a negative impact as inflation expectations drove outperformance in the intermediate portion of the curve versus the long end.

— Conversely, the Fund’s real yield curve-flattening bias and nominal yield curve-steepening bias in the 10- to 30-year range had a slightly positive impact on performance in the volatile fourth quarter of 2011. (The “real” yield curve reflects the yields on US TIPS across a range of maturities, whereas the “nominal” yield curve refers to traditional non-inflation-linked US Treasury securities.) Risk sectors rallied in early 2012 as the debt crisis in Europe appeared to stabilize. In March, the US Federal Reserve stated that another bond-buying program to spur economic growth was not deemed warranted at that time. In response, real rates moved higher and the Fund’s shorter duration bias contributed positively to performance. Additionally, the Fund’s long breakeven position and tactical overweight to TIPS on the short end of the yield curve proved

beneficial as oil prices rose. An allocation to Italian inflation-linked bonds also had a positive impact. As economic data began to slow in the latter half of the period and the European Central Bank continued to support peripheral European nations, the Fund’s long position in Italian real rates added to returns. The Fund also benefited from its overweight to TIPS as a third round of monetary stimulus from the US Federal Reserve drove inflation expectations higher.

Describe recent portfolio activity.

— Throughout the 12-month period, the Fund maintained its real yield curve-flattening and nominal yield curve-steepening positions between the 10-year and 30-year points on the curve. On a tactical basis, the Fund took advantage of opportunities to actively position around TIPS auctions and buybacks across the yield curve. During the first quarter of 2012, the Fund moved to an overweight TIPS position on the short end of the yield curve in order to hedge against the potential of energy prices rising further due to tensions in the Middle East. In addition, the Fund took some profits as it reduced its Italian debt position. The Fund tactically traded its long 10-year German breakeven position on the view that Germany would bear the brunt of the support needed to preserve the European Union. Following the announcement of a third round of monetary stimulus from the US Federal Reserve in September, the Fund added exposure to the long end of the real yield curve.

Describe Fund positioning at period end.

— The Fund ended the period with a duration of 8.08 years, which was slightly shorter than the Barclays Global Real: US TIPS Index. The Fund maintained its breakeven steepening bias as inflation insurance continued to appear cheaper on the long end of the yield curve. The Fund also continued to hold an overweight in US real interest rates on the long end of the curve given attractive valuations.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

  Portfolio Information

Portfolio Composition	Percent of Long-Term Investments
U.S. Treasury Obligations	99%
Non-Agency Mortgage-Backed Securities	1

Credit Quality Allocation1	Percent of Long-Term Investments
AAA/Aaa2	100%

¹ Using the higher of S&P’s or Moody’s rating.

² Includes US Treasury Obligations which are deemed AAA/Aaa by the investment advisor.

6     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

BlackRock Inflation Protected Bond Portfolio

  Total Return Based on a $10,000 Investment

¹ Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees. Institutional Shares do not have a sales charge.   ² The Fund normally invests at least 80% of its assets in inflation-indexed bonds of varying maturities issued by the US and non-US governments, their agencies or instrumentalities, and US and non-US corporations.   ³ An unmanaged market index made up of US Treasury Inflation Linked Indexed securities.   ⁴ Commencement of operations.

  Performance Summary for the Period Ended September 30, 2012

								Average Annual Total Returns5
							1 Year						5 Years						Since Inception6
	Standardized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
BlackRock		(3.92	)%		4.85	%		8.86	%		N/A			8.21	%		N/A			7.28	%		N/A
Institutional		(4.03	)		4.84			8.76			N/A			8.06			N/A			7.21			N/A
Service		(4.33	)		4.69			8.38			N/A			7.77			N/A			6.72			N/A
Investor A		(4.17	)		4.63			8.33			4.04	%		7.76			6.88	%		6.87			6.34	%
Investor B		(5.02	)		4.25			7.55			3.05			6.89			6.58			6.18			6.18
Investor C		(5.02	)		4.24			7.62			6.62			6.96			6.96			6.15			6.15
Barclays Global Real: US TIPS Index		–			5.34			9.10			N/A			7.93			N/A			6.88			N/A

⁵  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 14 for a detailed description of share classes, including any related sales charges and fees.

⁶  The Fund commenced operations on June 28, 2004.

N/A - Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

  Expense Example

	Actual								Hypothetical9
					Including Interest Expense and Fees		Excluding Interest Expense and Fees				Including Interest Expense and Fees				Excluding Interest Expense and Fees
	Beginning Account Value April 1, 2012		Ending Account Value September 30, 2012		Expenses Paid During the Period7		Expenses Paid During the Period8		Beginning Account Value April 1, 2012		Ending Account Value September 30, 2012		Expenses Paid During the Period7		Ending Account Value September 30, 2012		Expenses Paid During the Period8
BlackRock		$1,000.00		$1,048.50		$1.64		$1.64		$1,000.00		$1,023.40		$1.62		$1,023.40		$1.62
Institutional		$1,000.00		$1,048.40		$2.20		$2.15		$1,000.00		$1,022.85		$2.17		$1,022.90		$2.12
Service		$1,000.00		$1,046.90		$3.84		$3.84		$1,000.00		$1,021.25		$3.79		$1,021.25		$3.79
Investor A		$1,000.00		$1,046.30		$3.89		$3.89		$1,000.00		$1,021.20		$3.84		$1,021.20		$3.84
Investor B		$1,000.00		$1,042.50		$7.66		$7.66		$1,000.00		$1,017.50		$7.57		$1,017.50		$7.57
Investor C		$1,000.00		$1,042.40		$7.40		$7.40		$1,000.00		$1,017.75		$7.31		$1,017.75		$7.31

⁷  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.32% for BlackRock, 0.43% for Institutional, 0.75% for Service, 0.76% for Investor A, 1.50% for Investor B and 1.45% for Investor C), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁸  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.32% for BlackRock, 0.42% for Institutional, 0.75% for Service, 0.76% for Investor A, 1.50% for Investor B and 1.45% for Investor C), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁹  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 14 for further information on how expenses were calculated.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 7

  Fund Summary as of September 30, 2012   BlackRock Long Duration Bond Portfolio

  Investment Objective

BlackRock Long Duration Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

  Portfolio Management Commentary

How did the Fund perform?

— For the 12-month period ended September 30, 2012, the Fund outperformed its benchmark, the Barclays Long Government/Credit Index.

What factors influenced performance?

— The Fund benefited from its diversified exposure to spread sectors versus government-related debt. In particular, the Fund’s overweight relative to the benchmark index in investment grade credit contributed positively to returns, as did allocations to high yield credit and commercial mortgage-backed securities (“CMBS”), neither of which are represented in the benchmark index. Within investment grade credit, security selection among industrial names aided performance due to an overweight to the higher-beta (greater sensitivity to market movements) technology, media and telecommunications space. The Fund’s overweight to financials boosted returns later in the period. The Fund also benefited from active duration management (sensitivity to interest rate movements) and yield curve positioning relative to the benchmark index.

— Detracting from relative performance was the Fund’s underweight to global sovereign debt in the latter half of the period as investor confidence improved due primarily to aggressive accommodative monetary policy measures from the European Central Bank. Also hindering returns was the Fund’s underweight to US Treasuries, which appreciated amid heightened market uncertainty. However, on the whole, the Fund’s overweight to spread sectors versus US Treasuries was a net positive to performance for the reporting period.

Describe recent portfolio activity.

— During the 12-month period, robust investor demand for yield, low US Treasury yields and attractive corporate fundamentals drove corporate credit spreads tighter despite the challenging liquidity environment. In light of these market dynamics, the Fund increased modestly its overweight in financials, favoring US life insurance companies over banks

and brokers. In industrials, the Fund reduced exposure to the technology, media and telecommunications sectors and maintained underweight exposure to consumer cyclicals and neutral-to-underweight exposure to non-cyclical sectors. The Fund moved to an overweight in utilities, favoring US-based natural gas pipeline and electric industries where cash flows tend to be more dependable than other industries. Also during the period, the Fund maintained an underweight to foreign government agency and sovereign debt.

— The Fund allocated to securities on the short end of the yield curve and the very long end of the curve, based upon attractive relative valuations. In terms of credit quality, the Fund sought to tactically allocate to lower-rated investment grade bonds and crossover names (i.e., bonds that have the ability to be upgraded to investment grade).

Describe Fund positioning at period end.

— As of period end, investor demand for income coupled with strong corporate balance sheets continued to support a positive case for investing in credit sectors versus government bonds. The Fund maintained a positive view on both investment grade and high yield credit. Recent default activity has been minimal and is expected to remain low.

— Relative to the Barclays Long Government/Credit Index, the Fund held a slightly short duration bias at period end. The Fund was overweight in investment grade credit and held out-of-index positions in select high yield credits and securitized products. The Fund maintained a meaningful overweight to financials and continued to favor US money center banks and leading life insurance companies given improving underlying fundamentals. In the securitized sectors, the Fund maintained relatively small allocations across asset-backed securities, mortgage-backed securities, and CMBS.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

  Portfolio Information

Portfolio Composition	Percent of Long-Term Investments
Corporate Bonds		56	%
U.S. Treasury Obligations		24
Taxable Municipal Bonds		5
U.S. Government Sponsored Agency Securities		4
Asset-Backed Securities		3
Preferred Securities		3
Foreign Government Obligations		2
Foreign Agency Obligations		2
Non-Agency Mortgage-Backed Securities		1

Credit Quality Allocation1	Percent of Long-Term Investments
AAA/Aaa2		31	%
AA/Aa		8
A		25
BBB/Baa		32
BB/Ba		3
B		1

¹  Using the higher of S&P’s or Moody’s rating.

² Includes US Government Sponsored Agency Securities and US Treasury Obligations which are deemed AAA/Aaa by the investment advisor.

8     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

BlackRock Long Duration Bond Portfolio

  Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees. Institutional Shares do not have a sales charge.   ²  The Fund normally invests at least 80% of its assets in bonds and maintains an average portfolio duration that is within ±20% of the duration of the Barclays Long Government/Credit Index (the benchmark).   ³  An unmanaged index comprised of US government securities or investment grade credit securities from the more comprehensive Barclays US Aggregate Bond Index. This index concentrates on long maturity bonds and thus excludes all maturities from the broader index that are less than 10 years.   ⁴  Commencement of operations.

  Performance Summary for the Period Ended September 30, 2012

							Average Annual Total Returns5
							1 Year						Since Inception6
	Standardized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
BlackRock		3.13	%		11.73	%		13.61	%		N/A			11.29	%		N/A
Institutional		3.03			11.60			13.43			N/A			11.16			N/A
Investor A		2.68			11.51			13.07			8.51	%		10.84			9.92	%
Barclays Long Government/Credit Index		–			10.65			11.08			N/A			10.54			N/A

⁵  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 14 for a detailed description of share classes, including any related sales charges and fees.

⁶  The Fund commenced operations on October 19, 2007.

N/A - Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

  Expense Example

	Actual									Hypothetical8
	Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012			Expenses Paid During the Period7			Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012			Expenses Paid During the Period7			Annualized Expense Ratio
BlackRock		$	1,000.00		$	1,117.30		$	2.38		$	1,000.00		$	1,022.75		$	2.28		0.45	%
Institutional		$	1,000.00		$	1,116.00		$	2.91		$	1,000.00		$	1,022.25		$	2.78		0.55	%
Investor A		$	1,000.00		$	1,115.10		$	4.55		$	1,000.00		$	1,020.70		$	4.34		0.86	%

⁷  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁸  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 14 for further information on how expenses were calculated.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 9

  Fund Summary as of September 30, 2012   BlackRock Secured Credit Portfolio

Investment Objective

BlackRock Secured Credit Portfolio’s (the “Fund”) investment objective is to seek to provide high current income, with a secondary objective of long-term capital appreciation.

On July 2, 2012, the Fund changed its strategy and investment objective from “to seek to maximize total return, consistent with income generation and prudent investment management” (the “multi-sector bond strategy”) to “to seek to provide high current income, with a secondary objective of long-term capital appreciation” (the “secured credit strategy”). With the new strategy, the Fund will invest most of its assets in secured instruments, including bank loans and bonds, issued primarily by below-investment-grade issuers. The Fund also changed its name from “BlackRock Multi-Sector Bond Fund” to “BlackRock Secured Credit Portfolio”. In addition, the Fund changed its performance benchmark from the Barclays US Universal Index to the S&P Leveraged Loan Index. The benchmark change reflects the Fund’s new investment guidelines.

Portfolio Management Commentary

How did the Fund perform?

— For the 12-month period ended September 30, 2012, the Fund generated a positive return. For the first nine months of the period through July 2, 2012, under the multisector bond strategy, the Fund outperformed the Barclays US Universal Index. For the three months following the change to the secured credit strategy, the Fund underperformed the S&P Leveraged Loan Index. The following discussion of relative performance regarding the multi-sector bond strategy pertains to the Barclays US Universal Index, while the discussion of relative performance regarding the secured credit strategy pertains to the S&P Leveraged Loan Index.

What factors influenced performance?

— For the first nine months of the period through July 2, 2012 under the multi-sector bond strategy, the Fund benefited from its diversified exposure to high-quality spread sectors, which performed well despite heightened investor anxiety during the period. The largest contribution to performance came from the Fund’s allocation to investment grade and high yield corporate credits. The Fund also benefited from its allocation to securitized assets, including commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”). Within CMBS, the Fund favored recently issued higher-quality multi-family property securities, which performed well as the underlying fundamentals continued to improve in a strong rental market. Additional positive return contributions came from active trading in agency mortgage-backed securities (“MBS”) and an allocation to the non-agency residential MBS sector. Toward the end of the second quarter of 2012, the Fund began selling positions in preparation for the transition to the new strategy. This activity resulted in an elevated cash balance in the Fund, which detracted from performance relative to the benchmark index as bond markets generally advanced.

— In the last three months of the period, under the secured credit strategy, security selection within the electric, health care and media (non-cable) sectors negatively impacted

performance, while selection within independent energy and packaging contributed positively to returns. In addition, US Treasury and non-agency residential MBS positions that had been established under the multi-sector bond strategy boosted gains in the third quarter of 2012.

Describe recent portfolio activity.

— During the first nine months of the period under the multi-sector bond strategy, the Fund actively managed duration (sensitivity to interest rate movements) while maintaining a short duration stance relative to the benchmark index. The Fund tactically managed investment grade credits throughout this period, cautiously seeking to take advantage of relative value opportunities in the market. The Fund also actively traded in the agency MBS space by alternating exposure to high and low coupons as market conditions changed. As discussed above, the Fund began selling positions and increasing liquidity toward the end of the second quarter in preparation for its transition to the secured credit strategy. In the last three months of the period, pursuant to the new strategy, the Fund invested its assets primarily in secured instruments, including bank loans and bonds in various credit quality tiers. The Fund targeted opportunities across the secured credit space with a focus on companies that exhibit stable fundamentals, earnings visibility and consistent cash flows, and are backed by high-quality assets.

Describe Fund positioning at period end.

— At period end, the Fund held 64% in floating rate loan interests and 34% in corporate bonds, with the remainder in non-agency MBS. The Fund’s largest sector exposures included health care, technology and media (non-cable).

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

Portfolio Composition	Percent of Long-Term Investments
Floating Rate Loan Interests		64	%
Corporate Bonds		34
Non-Agency Mortgage-Backed Securities		2

Credit Quality Allocation1	Percent of Long-Term Investments
BBB/Baa		5	%
BB/Ba		48
B		42
CCC/Caa		3
D		1
Not Rated		1

¹Using the higher of S&P’s or Moody’s rating.

10     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

	BlackRock Secured Credit Portfolio
Total Return Based on a $10,000 Investment

1  Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees. Institutional Shares do not have a sales charge.

2  The Fund normally invests at least 80% of its assets in secured instruments, including bank loans and bonds, issued primarily, but not exclusively, by below investment grade issuers. The Fund’s total returns prior to July 2, 2012, are the returns of the Fund when it followed a different investment objective and different investment strategies under the name BlackRock Multi- Sector Bond Portfolio.

³  An unmanaged composite index tracks returns in the leveraged loan market, capturing a broad cross-section of the US leveraged loan market, including dollar-denominated and US-syndicated loans to overseas issuers. The Fund now uses this index as its benchmark rather than the Barclays US Universal Index because Fund management believes it is more relevant to the Fund’s new investment strategies.

⁴ An unmanaged, market value weighted index of fixed income securities issued in US dollars, including US government and investment grade debt, non-investment grade debt, asset- backed and mortgage-backed securities, Eurobonds, 144A securities and emerging market debt with maturities of at least one year.

⁵  Commencement of operations.

Performance Summary for the Period Ended September 30, 2012
							Average Annual Total Returns6
							1 Year						Since Inception7
	Standardized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		4.98	%		4.55	%		8.74	%		N/A			6.69	%		N/A
Investor A.		4.53			4.32			8.37			5.68	%		6.39			5.34	%
Investor C		3.99			4.03			7.67			6.67			5.64			5.64
S&P Leveraged All Loan Index.		–			4.20			11.25			N/A			6.64			N/A
Barclays US Universal Index		–			4.04			6.45			N/A			6.77			N/A

⁶  Assuming maximum sales charges, if any. Total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 14 for a detailed description of share classes, including any related sales charges and fees.

⁷  The Fund commenced operations on February 26, 2010.

N/A - Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Expense Example
	Actual				Hypothetical10
			Including Interest Expense and Fees	Excluding Interest Expense and Fees		Including Interest Expense and Fees		Excluding Interest Expense and Fees
	Beginning Account Value April 1, 2012	Ending Account Value September 30, 2012	Expenses Paid During the Period8	Expenses Paid During the Period9	Beginning Account Value April 1, 2012	Ending Account Value September 30, 2012	Expenses Paid During the Period8	Ending Account Value September 30, 2012	Expenses Paid During the Period9
Institutional	$1,000.00	$1,045.50	$3.68	$3.58	$1,000.00	$1,021.40	$3.64	$1,021.50	$3.54
Investor A.	$1,000.00	$1,043.20	$4.95	$4.85	$1,000.00	$1,020.15	$4.90	$1,020.25	$4.80
Investor C	$1,000.00	$1,040.30	$8.77	$8.67	$1,000.00	$1,016.40	$8.67	$1,016.50	$8.57

⁸  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.72% for Institutional, 0.97% for Investor A and 1.72% for Investor C), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁹  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.70% for Institutional, 0.95% for Investor A and 1.70% for Investor C), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

¹⁰  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 14 for further information on how expenses were calculated.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 11

Fund Summary as of September 30, 2012   BlackRock U.S. Government Bond Portfolio

Investment Objective

BlackRock U.S. Government Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

Portfolio Management Commentary

How did the Fund perform?

— For the 12-month period ended September 30, 2012, the Fund’s Institutional Shares outperformed the benchmark, the Barclays US Government/Mortgage Index, while all other share classes of the Fund underperformed the benchmark index.

What factors influenced performance?

— Relative to the benchmark index, the Fund’s duration (sensitivity to interest rate movements) and yield curve positioning detracted from performance as interest rates exhibited significant volatility throughout the period. A position in Australian dollars also had a slight negative impact on performance earlier in the period.

— The Fund uses interest rate derivative instruments, which may include futures contracts, options, swaps and swaptions, mainly for the purpose of managing risks relating to portfolio duration and yield curve positioning. During the period, the use of derivatives had an overall negative impact on Fund returns.

— Positive performance came from the Fund’s exposure to agency mortgage-backed securities (“MBS”), which performed well during the period, helped largely by the US Federal Reserve’s conditional commitment to keep interest rates low and anticipation for and ultimately the

implementation of a third round of monetary stimulus in the form of an MBS purchase program. Security selection within agency MBS also contributed positively to performance for the period.

Describe recent portfolio activity.

— During the 12-month period, the Fund maintained an overweight in agency MBS given the anticipation of further central bank stimulus measures and the attractive carry (income) offered by the sector. The Fund tactically traded within its US Treasury allocation while maintaining an underweight position in the sector overall. The Fund maintained a short duration position versus the benchmark index.

Describe Fund positioning at period end.

— Despite historically high prices in MBS, the presence of the US Federal Reserve in the market continued to support valuations. As of period end, the Fund remained underweight in US Treasuries relative to the Barclays US Government/Mortgage Index, and overweight in agency MBS, particularly within select lower-coupon issues. The Fund continued to actively manage its allocations within MBS with consideration of prepayment expectations. The Fund ended the period with a short duration versus the benchmark index.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

Portfolio Information

Portfolio Composition	Percent of Long-Term Investments
U.S. Government Sponsored Agency Securities		77	%
U.S. Treasury Obligations		23

Credit Quality Allocation1	Percent of Long-Term Investments
AAA/Aaa2		100	%

¹ Using the higher of S&P’s or Moody’s rating.

² Includes US Government Sponsored Agency Securities and US Treasury Obligations which are deemed AAA/Aaa by the investment advisor.

12     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

BlackRock U.S. Government Bond Portfolio

  Total Return Based on a $10,000 Investment

  ¹ Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees. Institutional Shares do not have a sales charge.   ² The Fund normally invests at least 80% of its assets in bonds that are issued or guaranteed by the US government and its agencies and maintains an average portfolio duration that is within ±20% of the duration of the Barclays US Government/Mortgage Index (the benchmark).   ³ This index measures debt issued by the U.S. Government, and its agencies, as well as mortgage-backed pass-through securities of GNMA, Fannie Mae and Freddie Mac.

  Performance Summary for the Period Ended September 30, 2012

							Average Annual Total Returns4
							1 Year						5 Years						10 Years
	Standardized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		1.20	%		2.84	%		3.51	%		N/A			5.66	%		N/A			4.35	%		N/A
Service		1.01			2.65			3.22			N/A			5.38			N/A			4.06			N/A
Investor A		0.89			2.67			3.15			(1.00	)%		5.26			4.40	%		3.92			3.50	%
Investor B		0.15			2.26			2.19			(2.31	)		4.37			4.04			3.36			3.36
Investor B1		0.28			2.45			2.69			(1.31	)		4.80			4.46			3.49			3.49
Investor C		0.13			2.26			2.23			1.23			4.43			4.43			3.12			3.12
Investor C1		0.33			2.38			2.49			1.49			4.71			4.71			3.41			3.41
Class R		0.64			2.47			2.74			N/A			5.04			N/A			3.74			N/A
Barclays US Government/Mortgage Index		–			2.79			3.28			N/A			6.19			N/A			4.99			N/A

⁴  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 14 for a detailed description of share classes, including any related sales charges and fees.

  N/A - Not applicable as share class and index do not have a sales charge.

  Past performance is not indicative of future results.

  Expense Example

	Actual						Hypothetical6
	Beginning Account Value April 1, 2012		Ending Account Value September 30, 2012		Expenses Paid During the Period5		Beginning Account Value April 1, 2012		Ending Account Value September 30, 2012		Expenses Paid During the Period5		Annualized Expense Ratio
Institutional		$1,000.00		$1,028.40		$3.14		$1,000.00		$1,021.90		$3.13		0.62%
Service		$1,000.00		$1,026.50		$4.10		$1,000.00		$1,020.95		$4.09		0.81%
Investor A		$1,000.00		$1,026.70		$4.71		$1,000.00		$1,020.35		$4.70		0.93%
Investor B		$1,000.00		$1,022.60		$9.20		$1,000.00		$1,015.90		$9.17		1.82%
Investor B1		$1,000.00		$1,024.50		$7.14		$1,000.00		$1,017.95		$7.11		1.41%
Investor C		$1,000.00		$1,022.60		$8.85		$1,000.00		$1,016.25		$8.82		1.75%
Investor C1		$1,000.00		$1,023.80		$7.64		$1,000.00		$1,017.45		$7.62		1.51%
Class R		$1,000.00		$1,024.70		$6.12		$1,000.00		$1,018.95		$6.11		1.21%

⁵  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁶  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

  See “Disclosure of Expenses” on page 14 for further information on how expenses were calculated.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 13

About Fund Performance

— BlackRock and Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to eligible investors. Prior to July 18, 2011, U.S. Government Bond Portfolio’s BlackRock Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect BlackRock Shares fees. Effective November 10, 2011, BlackRock Shares of U.S. Government Bond Portfolio were closed to all purchases.

— Service Shares are not subject to any sales charge (front-end load) or deferred sales charge. Service Shares are subject to a service fee of 0.25% per year (but no distribution fee).

— Investor A Shares are subject to a maximum initial sales charge (front-end load) of 4.00% for all Funds included in this report, except for BlackRock Secured Credit Portfolio, which is subject to an initial sales charge of 2.50%. Investor A Shares are subject to a service fee of 0.25% per year (but no distribution fee).

— Investor B Shares are subject to a maximum contingent deferred sales charge (“CDSC”) 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. Investor B Shares automatically convert to Investor A Shares after approximately seven years. (There is no initial sales charge for automatic share conversions.) All returns for periods greater than seven years reflect this conversion.

— Investor B1 Shares are subject to a maximum contingent deferred sales charge of 4.00% declining to 0% after six years and a distribution fee of 0.50% per year and a service fee of 0.25% per year. Investor B1 Shares automatically convert to Investor A Shares after approximately ten years. (There is no initial sales charge for automatic share conversions.) Prior to July 18, 2011, U.S. Government Bond Portfolio’s Investor B1 Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Investor B1 Shares fees.

— Investor C and Investor C1 Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, Investor C and Investor C1 Shares are subject to a distribution fee of 0.75% and 0.55% per year, respectively, and a service fee of 0.25% per year. Prior to July 18, 2011, U.S. Government Bond

Portfolio’s Investor C1 Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Investor C1 Shares fees.

— Class R Shares are not subject to any 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. These shares are available only to certain retirement and other similar plans. Prior to July 18, 2011, U.S. Government Bond Portfolio’s Class R Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Class R Share fees.

Investor B, B1 and C1 Shares are only available through exchanges, dividend reinvestment by existing shareholders or for purchase by certain qualified employee benefit plans.

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/funds 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. Secured Credit Portfolio may charge a 2% redemption fee for sales or exchanges of shares within 30 days of purchase or exchange. Performance data does not reflect this potential fee. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) 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. BlackRock Advisors, LLC (the “Manager”), the Funds’ investment advisor, waived and/or reimbursed a portion of each Fund’s expenses. Without such waiver and/or reimbursement, a Fund’s performance would have been lower. The Manager is under no obligation to waive or reimburse or to continue waiving or reimbursing its fees after the applicable termination date. See Note 3 of the Notes to Financial Statements for additional information on waivers and reimbursements. 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.

Disclosure of Expenses

Shareholders of these Funds may incur the following charges: (a) expenses related to transactions, including sales charges, redemption fees and exchange fees; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other Fund expenses. The expense examples on the previous pages (which are based on a hypothetical investment of $1,000 invested on April 1, 2012 and held through September 30, 2012) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other mutual funds. The expense examples provide 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 corresponding to their Fund and share class under the headings entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on a 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 these Funds 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 expense examples are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges, redemption fees and exchange fees, if any. Therefore, the hypothetical examples are 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.

14     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

The Benefits and Risks of Leveraging

The Funds may utilize leverage to seek to enhance their yields and NAVs. However, these objectives cannot be achieved in all interest rate environments.

The Funds may utilize leverage by entering into reverse repurchase agreements and treasury roll transactions. In general, the concept of leveraging is based on the premise that the financing cost of assets to be obtained from leverage, which will be based on short-term interest rates, will normally be lower than the income earned by each Fund on its longer-term portfolio investments. To the extent that the total assets of each Fund (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, each Fund’s shareholders will benefit from the incremental net income.

The interest earned on securities purchased with the proceeds from leverage is paid to shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share NAV. However, in order to benefit shareholders, the yield curve must be positively sloped; that is, short-term interest rates must be lower than long-term interest rates. If the yield curve becomes negatively sloped, meaning short-term interest rates exceed long-term interest rates, income to shareholders will be lower than if the Funds had not used leverage.

If short-term interest rates rise, narrowing the differential between short-term and long-term interest rates, the incremental net income pickup will be reduced or eliminated completely. Furthermore, if prevailing short-term interest rates rise above long-term interest rates, the yield curve has a negative slope. In this case, the Funds pay higher short-term interest rates whereas the Funds’ total portfolio earns income based on lower

long-term interest rates.

Furthermore, the value of the Funds’ portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. As a result, changes in interest rates can influence the Funds’ NAV positively or negatively in addition to the impact on the Funds’ performance from leverage.

The use of leverage may enhance opportunities for increased income to the Funds, but as described above, it also creates risks as short-or long-term interest rates fluctuate. Leverage also will generally cause greater changes in the Funds’ NAV and dividend rate than a comparable portfolio without leverage. If the income derived from securities purchased with assets received from leverage exceeds the cost of leverage, the Funds’ net income will be greater than if leverage had not been used. Conversely, if the income from the securities purchased is not sufficient to cover the cost of leverage, each Fund’s net income will be less than if leverage had not been used, and therefore the amount available for distribution to shareholders will be reduced. Each Fund may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of leverage instruments, which may cause a Fund to incur losses. The use of leverage may limit each Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. Each Fund will incur expenses in connection with the use of leverage, all of which are borne by Fund shareholders and may reduce income.

Derivative Financial Instruments

The Funds may invest in various derivative financial instruments, including financial futures contracts, foreign currency exchange contracts, options and swaps, as specified in Note 2 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, equity, credit, interest rate, foreign currency exchange rate and/or other risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument.

The Funds’ ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require a Fund to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation a Fund can realize on an investment, may result in lower dividends paid to shareholders or may cause a Fund to hold an investment that it might otherwise sell. The Funds’ investments in these instruments are discussed in detail in the Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 15

  Schedule of Investments September 30, 2012   BlackRock GNMA Portfolio (Percentages shown are based on Net Assets)

Project Loans – 0.0%	Par (000)		Value
Federal Housing Authority, Merrill Lynch Project, Pool 42, 7.43%, 9/25/22	$	2	$	2,274
U.S. Government Sponsored Agency Securities
Collateralized Mortgage Obligations – 3.3%
Fannie Mae:
Series 1996-48, Class Z, 7.00%, 11/25/26		957		1,105,945
Series 2003-9, Class EA, 4.50%, 10/25/17		2,806		2,868,775
Series 2012-25, Class A, 6.50%, 6/25/30		12,599		12,814,305
Ginnie Mae:
Series 2002-45, Class PG, 6.00%, 3/17/32		3,689		3,918,258
Series 2009-31, Class PT, 4.82%, 5/20/39 (a)		1,564		1,734,187
Series 2009-122, Class PY, 6.00%, 12/20/39		5,369		6,053,706
Series 2011-71, Class GF, 0.42%, 8/16/31 (a)		20,173		20,265,520
				48,760,696
Interest Only Collateralized Mortgage Obligations – 0.2%
Fannie Mae, Series 2012-60, Class SJ, 6.43%, 1/25/42 (a)		15,347		3,097,954
Mortgage-Backed Securities – 232.4%
Fannie Mae Mortgage-Backed Securities:
2.50%, 10/01/27 (b)		72,000		75,616,875
3.00%, 10/01/27-10/01/42 (b)		78,900		83,416,719
3.28%, 2/01/41		121		129,558
3.40%, 4/01/41		195		208,811
3.50%, 9/01/42-10/01/42 (b)		68,225		73,150,319
4.00%, 12/01/40-10/01/42 (b)		140,567		151,641,454
4.49%, 7/01/37		120		130,076
4.50%, 8/01/41-10/01/42 (b)		101,118		109,414,937
4.70%, 6/01/35-5/01/36		172		186,816
4.94%, 10/01/33-5/01/34		371		407,095
5.00%, 1/01/21-10/01/42 (b)		108,719		118,584,372
5.07%, 12/01/33		117		128,606
5.19%, 4/01/33-3/01/34		1,527		1,688,508
5.30%, 1/01/36-3/01/37		4,661		5,140,974
5.32%, 10/01/32-2/01/34		1,009		1,117,407
5.44%, 12/01/33		157		173,910
5.50%, 12/01/32-10/01/42 (b)		24,215		26,564,383
5.69%, 8/01/32-2/01/33		1,358		1,529,791
6.00%, 5/01/38-10/01/42 (b)		385,079		425,584,631
6.07%, 7/01/32-8/01/32		558		636,685
6.50%, 9/01/28-8/01/35		8,875		10,442,682
8.00%, 8/01/14		8		8,055
8.50%, 1/20/18		1,197		1,279,959

U.S. Government Sponsored Agency Securities	Par (000)			Value
Mortgage-Backed Securities (concluded)
Freddie Mac Mortgage-Backed Securities:
3.50%, 8/01/20-9/01/26	$	21,600		$	22,874,337
4.00%, 6/01/13-6/01/26		35,700			37,998,472
4.50%, 10/01/35		38			40,761
5.00%, 5/01/35-12/01/38		998			1,083,664
5.49%, 8/01/37-6/01/38 (c)		6,462			7,078,910
5.60%, 8/01/37-9/01/38		7,742			8,529,841
5.88%, 11/01/37-1/01/39		1,600			1,764,033
6.00%, 11/01/13-8/01/16		8			8,646
7.50%, 2/01/27-3/01/27		3			3,523
9.00%, 12/01/19		–  (d	)		169
Ginnie Mae Mortgage-Backed Securities:
2.75%, 11/15/41		374			387,654
3.00%, 11/20/41-10/15/42 (b)		78,316			83,859,130
3.25%, 11/15/41-7/15/42		14,407			15,452,851
3.40%, 12/15/40-4/15/41		6,079			6,520,557
3.50%, 12/15/40-10/15/42 (b)		425,284			465,668,418
4.00%, 3/15/41-10/15/42 (b)		268,776			296,352,956
4.49%, 7/15/40-12/15/40		3,412			3,769,947
4.50%, 12/15/34-10/15/42 (b)		533,317			586,449,749
4.63%, 8/15/33-6/20/40		14,751			16,314,856
4.70%, 2/20/36-3/20/37		628			696,833
4.75%, 4/15/33-6/15/34		2,229			2,458,982
4.96%, 11/15/35-7/15/36		7,786			8,557,950
5.00%, 9/15/28-10/15/42 (b)		315,186			349,995,192
5.13%, 12/15/32-3/15/34		5,169			5,740,059
5.25%, 4/15/33-3/15/34		5,354			5,945,001
5.30%, 12/20/35-2/20/37		3,381			3,756,921
5.35%, 11/15/32-12/15/32		366			406,344
5.38%, 10/15/32-3/15/34		2,994			3,324,503
5.45%, 9/15/32-12/15/32		1,348			1,496,947
5.49%, 5/15/32-8/15/38		7,778			8,637,393
5.50%, 7/15/16-12/15/38		54,562			61,103,034
5.60%, 7/20/37-9/20/38		4,023			4,495,501
5.65%, 6/15/36-2/15/37		3,236			3,602,929
5.75%, 3/15/28-11/15/32		4,327			4,844,886
5.88%, 10/20/37-1/20/39		5,874			6,563,177
6.00%, 7/15/16-5/20/42		170,865			194,071,230
6.13%, 7/15/32-8/15/32		1,239			1,414,534
6.50%, 5/15/16-10/15/42 (b)		132,030			152,950,427
7.00%, 3/20/24-5/15/31		125			148,210
7.50%, 2/15/22-9/15/30		795			880,645
8.00%, 3/15/17-5/15/30		270			304,429
8.50%, 6/15/16-2/15/25		114			123,225
9.00%, 4/15/16-10/15/21		148			155,039
9.50%, 6/15/16-9/15/22		236			250,513

    Portfolios Abbreviations

To simplify the listings of portfolio holdings in the Schedules of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:	AKA	Also known as	GO	General Obligation
	AUD	Australian Dollar	JPY	Japanese Yen
	BRL	Brazilian Real	LIBOR	London Interbank Offered Rate
	CAD	Canadian Dollar	NOK	Norwegian Krone
	CBA	Canadian Bankers Acceptance	RB	Revenue Bond
	EUR	Euro	SEK	Swedish Krona
	EURIBOR	Euro Interbank Offered Rate	TBA	To-Be-Announced
	FKA	Formerly known as	USD	United States Dollar
	GBP	British Pound

See Notes to Financial Statements.

16     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments (continued)   BlackRock GNMA Portfolio (Percentages shown are based on Net Assets)

U.S. Government Sponsored Agency Securities	Par (000)		Value
Mortgage-Backed Securities (concluded)
10.00%, 2/15/16-6/15/18	$	88	$	89,278
11.50%, 5/15/13-12/15/15		4		4,155
12.00%, 6/15/15		3		2,693
14.50%, 4/15/13		1		1,041
				3,463,362,168
Total U.S. Government Sponsored Agency Securities – 235.9%				3,515,220,818
Total Long-Term Investments
(Cost – $3,475,010,105) – 235.9%				3,515,223,092
Short-Term Securities	Shares
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (e)(f)		24,007,600		24,007,600
Total Short-Term Securities
(Cost – $24,007,600) – 1.6%				24,007,600
Options Purchased	Notional Amount (000)
Over-the-Counter Interest Rate Call Swaptions – 0.0%
Receive a fixed rate of 2.70% and pay a floating rate based on 3-month LIBOR, Expires 3/11/13, Broker Bank of America Corp.	$	5,750		306,544
Over-the-Counter Interest Rate Put Swaptions – 0.1%
Pay a fixed rate of 1.50% and receive a floating rate based on 3-month LIBOR, Expires 7/11/13, Broker Bank of America Corp.		39,750		127,661
Pay a fixed rate of 1.50% and receive a floating rate based on 3-month LIBOR, Expires 8/23/13, Broker Deutsche Bank AG		42,300		181,772
Pay a fixed rate of 2.70% and receive a floating rate based on 3-month LIBOR, Expires 3/11/13, Broker Bank of America Corp.		5,750		257,689
Pay a fixed rate of 2.75% and receive a floating rate based on 3-month LIBOR, Expires 6/06/13, Broker UBS AG		2,500		135,816
Pay a fixed rate of 3.25% and receive a floating rate based on 3-month LIBOR, Expires 6/06/13, Broker UBS AG		5,000		105,424
Pay a fixed rate of 3.75% and receive a floating rate based on 3-month LIBOR, Expires 6/06/13, Broker UBS AG		10,000		72,221
Pay a fixed rate of 4.25% and receive a floating rate based on 3-month LIBOR, Expires 6/06/13, Broker UBS AG		20,000		46,460
Pay a fixed rate of 4.50% and receive a floating rate based on 3-month LIBOR, Expires 3/27/17, Broker Deutsche Bank AG		30,600		755,511
				1,682,554
Total Options Purchased
(Cost – $3,247,291) – 0.1%				1,989,098
Total Investments Before TBA Sale Commitments and Options Written
(Cost – $3,502,264,996) – 237.6%				3,541,219,790

TBA Sale Commitments (b)	Par (000)		Value
Fannie Mae Mortgage-Backed Securities:
2.50%, 10/01/27	$	72,000	$	(75,616,875	)
3.00%, 10/01/27-10/01/42		51,700		(54,689,031	)
3.50%, 10/01/42		59,000		(63,259,062	)
4.00%, 10/01/42		139,500		(150,267,656	)
4.50%, 10/01/42		100,000		(108,201,875	)
5.00%, 10/01/42		108,600		(118,355,438	)
5.50%, 10/01/42		23,000		(25,213,750	)
6.00%, 10/01/42		204,700		(225,971,594	)
Freddie Mac Mortgage-Backed Securities:
3.50%, 10/01/27		21,600		(22,842,000	)
4.00%, 10/01/27		35,700		(37,975,875	)
Ginnie Mae Mortgage-Backed Securities:
3.00%, 10/15/42		50,000		(53,531,250	)
3.50%, 10/15/42		228,300		(249,706,188	)
4.00%, 10/15/42		41,000		(45,202,500	)
4.50%, 10/15/42		100,000		(109,750,000	)
5.00%, 10/15/42		162,000		(178,688,000	)
5.50%, 10/15/42		4,300		(4,782,406	)
6.00%, 10/15/42		20,600		(23,310,136	)
Total TBA Sale Commitments (Proceeds – $1,542,978,412) – (103.8)%
				(1,547,363,636	)
Options Written	Notional Amount (000)
Over-the-Counter Interest Rate Call Swaptions – (1.0)%
Pay a fixed rate of 1.00% and receive a floating rate based on 3-month LIBOR, Expires 7/11/14, Broker Bank of America Corp.		39,750		(233,006	)
Pay a fixed rate of 1.15% and receive a floating rate based on 3-month LIBOR, Expires 8/26/14, Broker Deutsche Bank AG		42,300		(359,195	)
Pay a fixed rate of 1.15% and receive a floating rate based on 3-month LIBOR, Expires 9/11/14, Broker Bank of America Corp.		32,050		(269,290	)
Pay a fixed rate of 3.77% and receive a floating rate based on 3-month LIBOR, Expires 11/23/12, Broker UBS AG		11,800		(2,241,598	)
Pay a fixed rate of 4.03 and receive a floating rate based on 3-month LIBOR, Expires 12/03/12, Broker Deutsche Bank AG		19,200		(4,089,773	)
Pay a fixed rate of 4.52% and receive a floating rate based on 3-month LIBOR, Expires 3/01/13, Broker UBS AG		7,200		(1,810,325	)
Pay a fixed rate of 5.08% and receive a floating rate based on 3-month LIBOR, Expires 2/10/14, Broker Bank of America Corp.		11,400		(3,105,615	)
Pay a fixed rate of 5.25% and receive a floating rate based on 3-month LIBOR, Expires 1/27/15, Broker Citigroup, Inc.		8,600		(2,223,121	)
				(14,331,923	)
Over-the-Counter Interest Rate Put Swaptions – (0.1)%
Receive a fixed rate of 2.00% and pay a floating rate based on 3-month LIBOR, Expires 7/11/14, Broker Bank of America Corp.		39,750		(341,210	)

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 17

  Schedule of Investments (continued)   BlackRock GNMA Portfolio (Percentages shown are based on Net Assets)

Options Written	Notional Amount (000)		Value
Over-the-Counter Interest Rate Put Swaptions (concluded)
Receive a fixed rate of 2.15% and pay a floating rate based on 3-month LIBOR, Expires 8/26/14, Broker Deutsche Bank AG	$	42,300	$	(357,266	)
Receive a fixed rate of 2.15% and pay a floating rate based on 3-month LIBOR, Expires 9/11/14, Broker Bank of America Corp.		32,050		(288,091	)
Receive a fixed rate of 3.77% and pay a floating rate based on 3-month LIBOR, Expires 11/23/12, Broker UBS AG		11,800		(1	)
Receive a fixed rate of 4.03 and pay a floating rate based on 3-month LIBOR, Expires 12/03/12, Broker Deutsche Bank AG		19,200		(2	)
Receive a fixed rate of 4.52% and pay a floating rate based on 3-month LIBOR, Expires 3/01/13, Broker UBS AG		7,200		(22	)
Receive a fixed rate of 5.08% and pay a floating rate based on 3-month LIBOR, Expires 2/10/14, Broker Bank of America Corp.		11,400		(10,615	)
Receive a fixed rate of 5.25% and pay a floating rate based on 3-month LIBOR, Expires 1/27/15, Broker Citigroup, Inc.		8,600		(34,972	)
Receive a fixed rate of 6.00% and pay a floating rate based on 3-month LIBOR, Expires 3/27/17, Broker Deutsche Bank AG		61,200		(668,769	)
				(1,700,948	)
Total Options Written
(Premiums Received – $10,051,292) – (1.1)%				(16,032,871	)
Total Investments Net of TBA Sale Commitments and Options Written – 132.7%				1,977,823,283
Liabilities in Excess of Other Assets – (32.7)%				(487,672,023	)
Net Assets – 100.0%			$	1,490,151,260

(a) Variable rate security. Rate shown is as of report date.

(b) Represents or includes a TBA transaction. Unsettled TBA transactions as of September 30, 2012 were as follows:

Counterparty	Value			Unrealized Appreciation (Depreciation)
Bank of America Corp.	$	132,775,875		$	492,992
Barclays Plc	$	4,432,313		$	27,273
Citigroup, Inc.	$	328,009,520		$	1,068,332
Credit Suisse Group AG	$	36,114,531		$	(97,480	)
Deutsche Bank AG	$	(89,917,781	)	$	542,910
Goldman Sachs Group, Inc.	$	(38,579,719	)	$	(606,661	)
JPMorgan Chase & Co.	$	(159,614,000	)	$	732,047
Morgan Stanley	$	86,504,529		$	227,336
Nomura Securities International, Inc.	$	25,972,500		$	18,750
UBS AG	$	26,096,063		$	116,079

(c) All or a portion of security has been pledged as collateral in connection with swaps.

(d) Par is less than $500.

(e) Investments in issuers considered to be an affiliate of the Fund during the year ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at September 30, 2011		Net Activity			Shares Held at September 30, 2012		Income
BlackRock Liquidity Funds, TempFund, Institutional Class		38,765,948		(14,758,348	)		24,007,600	$	43,084

(f) Represents the current yield as of report date.

— Financial futures contracts purchased as of September 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
1,221	U.S. Treasury Notes (2 Year)	Chicago Board Options	December 2012		$269,268,656		$63,070
121	U.S. Treasury Notes (5 Year)	Chicago Board Options	December 2012		$  15,080,570		64,481
7	U.S. Treasury Notes (10 Year)	Chicago Board Options	December 2012		$       934,391		(681	)
96	Ultra Treasury Bonds	Chicago Board Options	December 2012		$  15,861,000		192,138
Total							$319,008

— Financial futures contracts sold as of September 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Depreciation
15	Euro Dollar Futures	Chicago Mercantile	December 2012	$	3,738,000	$	(6,342	)
15	Euro Dollar Futures	Chicago Mercantile	March 2013	$	3,737,813		(7,092	)
15	Euro Dollar Futures	Chicago Mercantile	June 2013	$	3,737,250		(7,280	)
13	Euro Dollar Futures	Chicago Mercantile	September 2013	$	3,238,625		(6,255	)
13	Euro Dollar Futures	Chicago Mercantile	December 2013	$	3,237,812		(5,984	)
13	Euro Dollar Futures	Chicago Mercantile	March 2014	$	3,237,162		(5,822	)
13	Euro Dollar Futures	Chicago Mercantile	June 2014	$	3,235,863		(5,497	)

See Notes to Financial Statements.

18     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments (continued)   BlackRock GNMA Portfolio

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Depreciation
8	Euro Dollar Futures	Chicago Mercantile	September 2014	$	1,990,300		$  (3,183)
8	Euro Dollar Futures	Chicago Mercantile	December 2014	$	1,989,100		(3,383	)
8	Euro Dollar Futures	Chicago Mercantile	March 2015	$	1,988,000		(3,583	)
8	Euro Dollar Futures	Chicago Mercantile	June 2015	$	1,986,500		(3,883	)
Total							$(58,304)

— Interest rate swaps outstanding as of September 30, 2012 were as follows:

Fixed Rate	Floating Rate	Counterparty	Expiration Date	Notional Amount (000)		Unrealized Appreciation (Depreciation)
0.39%1	3-month LIBOR	Credit Suisse Group AG	9/14/14	USD	399,100	$	(151,564	)
0.85%2	3-month LIBOR	Bank of America Corp.	7/13/17	USD	22,300		150,324
0.88%2	3-month LIBOR	Deutsche Bank AG	8/28/17	USD	28,300		184,102
1.53%2	3-month LIBOR	JPMorgan Chase & Co.	5/15/19	USD	48,000		1,527,830
1.15%1	3-month LIBOR	JPMorgan Chase & Co.	7/30/19	USD	48,000		(30,598	)

— Total return swaps outstanding as of September 30, 2012 were as follows:

Fixed Rate	Floating Rate	Counterparty	Expiration Date	Notional Amount (000)		Unrealized Appreciation (Depreciation)
2.17%2	3-month LIBOR	Citigroup, Inc.	9/13/21	USD	7,500		$   407,318
2.20%2	3-month LIBOR	Deutsche Bank AG	11/04/21	USD	19,400		1,220,187
2.21%2	3-month LIBOR	Deutsche Bank AG	12/08/21	USD	12,900		791,419
2.07%2	3-month LIBOR	Citigroup, Inc.	5/01/22	USD	19,400		896,306
2.67%1	3-month LIBOR	Barclays Plc	11/25/41	USD	500		(12,043)
3.00%1	3-month LIBOR	JPMorgan Chase & Co.	3/16/42	USD	1,750		(151,738)
2.65%2	3-month LIBOR	JPMorgan Chase & Co.	5/16/42	USD	4,000		81,426
2.59%1	3-month LIBOR	Deutsche Bank AG	5/21/42	USD	16,000		(91,073)
2.50%2	3-month LIBOR	Bank of America Corp.	6/11/42	USD	16,000		(220,403)
2.65%1	3-month LIBOR	Credit Suisse Group AG	9/26/42	USD	20,700		(208,965)
Total							$4,392,528

¹  Fund pays the fixed rate and receives the floating rate.

²  Fund pays the floating rate and receives the fixed rate.

Reference Entity	Floating Rate	Counterparty	Expiration Date	Notional Amount (000)		Unrealized Appreciation (Depreciation)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR1	Barclays Plc	1/12/40	USD	5,343		$  (10,018)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR2	Citigroup, Inc.	1/12/40	USD	7,501		(61,009	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR2	JPMorgan Chase & Co.	1/12/40	USD	15,104		(45,043	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR1	JPMorgan Chase & Co.	1/12/40	USD	4,829		(6,791	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR2	Barclays Plc	1/12/41	USD	5,343		10,018
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR2	JPMorgan Chase & Co.	1/12/41	USD	4,875		7,617
Total							$(105,226)

¹  Fund pays the total return of the reference entity and receives the floating rate.

²  Fund pays the floating rate and receives the total return of the reference entity.

— Fair Value Measurements - Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

— Level 1 - unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

— Level 2 - other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

— Level 3 - unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 19

  Schedule of Investments (concluded)   BlackRock GNMA Portfolio

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of September 30, 2012:

	Level 1	Level 2			Level 3	Total
Assets:
Investments:
Long-Term Investments:
Project Loans	–		–		$ 2,274	$	2,274
U.S. Government Sponsored Agency Securities	–	$	3,515,220,818		–		3,515,220,818
Short-Term Securities	$24,007,600		–		–		24,007,600
Liabilities:
Investments in Securities:
TBA Sale Commitments	–		(1,547,363,636	)	–		(1,547,363,636	)
Total	24,007,600	$	1,967,857,182		$ 2,274	$	1,991,867,056

	Level 1			Level 2			Level 3	Total
Derivative Financial Instruments1
Assets:
Interest rate contracts	$	319,689		$	7,265,645		–	$	7,585,334
Liabilities:
Interest rate contracts		(58,985	)		(17,022,116	)	–		(17,081,101	)
Total	$	260,704		$	(9,756,471	)	–	$	(9,495,767	)

¹  Derivative financial instruments are swaps, financial futures contracts and options. Swaps and financial futures contracts are valued at the unrealized appreciation/ depreciation on the instrument and options are shown at value.

Certain of the Fund’s assets and liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of September 30, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2		Level 3	Total
Assets:
Cash	$	6,191,643		–	–	$	6,191,643
Cash pledged as collateral for financial futures contracts		1,272,000		–	–		1,272,000
Cash pledged as collateral for swap contracts		10,938,000		–	–		10,938,000
Liabilities:
Cash received as collateral for swap contracts		–		$(1,200,000)	–		(1,200,000	)
Total	$	18,401,643		$(1,200,000)	–	$	17,201,643

Certain of the Fund’s investments are categorized as Level 3 and were valued utilizing transaction prices or third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in the unobservable inputs could result in a significantly lower or higher value in such Level 3 investments.

There were no transfers between levels during the year ended September 30, 2012.

See Notes to Financial Statements.

20     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Schedule of Investments September 30, 2012   BlackRock Inflation Protected Bond Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities – 0.0%	Par (000)		Value
Bear Stearns Asset-Backed Securities Trust, Series 2007-2, Class A1, 0.41%, 1/25/47 (a)	USD	109	$	106,878
Corporate Bonds
Banks – 0.0%
International Bank for Reconstruction & Development, 2.33%, 12/10/13 (a)		265		267,019
Diversified Financial Services – 0.1%
The Bear Stearns Cos. LLC, 3.46%, 3/10/14 (a)		340		350,649
Citigroup Funding, Inc., 2.11%, 5/28/13 (a)		5,491		5,481,171
				5,831,820
Total Corporate Bonds – 0.1%				6,098,839
Foreign Government Obligations
Greece – 0.1%
Hellenic Republic:
2.00%, 2/24/23-2/24/42 (b)	EUR	4,550		1,141,645
16.84%, 10/15/42 (a)		4,550		35,372
				1,177,017
Italy – 0.2%
Buoni Poliennali Del Tesoro, 2.15%, 9/15/14		7,285		11,456,463
Total Foreign Government Obligations – 0.3%				12,633,480
Non-Agency Mortgage-Backed Securities
Collateralized Mortgage Obligations – 0.4%
GSMPS Mortgage Loan Trust, Series 2005-RP2, Class 1AF, 0.57%, 3/25/35 (a)(c)	USD	15,139		12,518,640
Luminent Mortgage Trust, Series 2007-2, Class 1A2, 0.50%, 5/25/37 (a)		17,080		9,975,258
				22,493,898
Commercial Mortgage-Backed Securities – 0.3%
GS Mortgage Securities Corp. II, Series 2007-GG10, Class A4, 5.98%, 8/10/45 (a)		12,000		13,742,520
LB-UBS Commercial Mortgage Trust, Series 2003-C5, Class A3, 4.25%, 7/15/27		240		242,877
				13,985,397
Total Non-Agency Mortgage-Backed Securities – 0.7%				36,479,295
U.S. Government Sponsored Agency Securities
Mortgage-Backed Securities – 0.0%
Fannie Mae Mortgage-Backed Securities, 2.62%, 6/01/34 (a)		119		126,035

U.S. Treasury Obligations	Par (000)		Value
U.S. Treasury Inflation Indexed Bonds:
2.38%, 1/15/25-1/15/27 (d)	USD	388,803	$	530,089,542
2.00%, 1/15/26		52,501		68,981,047
1.75%, 1/15/28 (d)		146,844		190,129,118
3.63%, 4/15/28 (d)		153,026		242,893,587
2.50%, 1/15/29 (d)(e)		109,197		156,194,679
3.88%, 4/15/29 (d)		173,807		288,532,823
3.38%, 4/15/32		17,004		28,232,318
2.13%, 2/15/40-2/15/41 (d)(e)		259,171		379,513,497
0.75%, 2/15/42		196,099		213,058,161
U.S. Treasury Inflation Indexed Notes:
0.63%, 4/15/13-7/15/21		170,471		186,645,688
1.88%, 7/15/13-7/15/19		276,465		300,824,506
2.00%, 1/15/14-1/15/16		194,324		207,481,255
1.25%, 4/15/14-7/15/20		173,068		180,264,222
1.63%, 1/15/15-1/15/18		55,303		59,348,469
0.50%, 4/15/15		314,178		330,083,597
0.13%, 4/15/16-7/15/22 (f)		1,412,228		1,514,458,208
2.50%, 7/15/16		125,367		145,553,076
2.38%, 1/15/17 (d)(e)		47,723		55,974,042
2.63%, 7/15/17		7,571		9,148,926
2.13%, 1/15/19		78,321		96,108,559
1.38%, 1/15/20		119,663		143,174,782
1.13%, 1/15/21		70,635		83,620,055
Total U.S. Treasury Obligations – 100.8%				5,410,310,157
Total Long-Term Investments
(Cost – $4,975,799,490) – 101.9%				5,465,754,684
Short-Term Securities	Shares
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (g)(h)		11,001,319		11,001,319
Total Short-Term Securities
(Cost – $11,001,319) – 0.2%				11,001,319
Options Purchased	Contracts
Exchange-Traded Put Options – 0.0%
U.S. Treasury Bonds (30 Year), Strike Price USD 144, Expires 11/23/12		252		189,000
	Notional Amount (000)
Over-the-Counter Call Options – 0.0%
USD Currency, Strike Price JPY 100, Expires 3/28/13, Broker Citigroup, Inc.	USD	47,725		11,678
USD Currency, Strike Price JPY 80.25, Expires 11/02/12, Broker Bank of America Corp.		51,070		75,284
				86,962
Over-the-Counter Put Options – 0.0%
EUR Currency, Strike Price USD 1.25, Expires
12/27/12, Broker Deutsche Bank AG	EUR	41,435		400,837

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 21

Schedule of Investments (continued)   BlackRock Inflation Protected Bond Portfolio (Percentages shown are based on Net Assets)

Options Purchased	Notional Amount (000)		Value
Over-the-Counter Put Options (concluded)
EUR Currency, Strike Price USD 1.29, Expires 12/14/12, Broker UBS AG	EUR	41,435	$	925,267
				1,326,104
Over-the-Counter Interest Rate Call Swaptions – 0.0%
Receive a fixed rate of 2.35% and pay a floating rate based on 3-month LIBOR, Expires 11/09/12, Broker Credit Suisse Group AG	USD	54,900		302,433
Receive a fixed rate of 2.65% and pay a floating rate based on 3-month LIBOR, Expires 3/06/13, Broker JPMorgan Chase & Co.		40,500		1,911,199
				2,213,632
Over-the-Counter Interest Rate Put Swaptions – 0.2%
Pay a fixed rate of 2.50% and receive a floating rate based on 3-month LIBOR, Expires 6/08/22, Broker Deutsche Bank AG	EUR	43,500		6,970,845
Pay a fixed rate of 2.65% and receive a floating rate based on 3-month LIBOR, Expires 3/06/13, Broker JPMorgan Chase & Co.	USD	40,500		1,985,071
Pay a fixed rate of 3.90% and receive a floating rate based on 3-month LIBOR, Expires 9/09/13, Broker Citigroup, Inc.		42,300		63,560
				9,019,476
Total Options Purchased
(Cost – $ 13,929,534) – 0.2%				12,835,174
Total Investments Before Options Written
(Cost – $ 5,000,730,343) – 102.3%				5,489,591,177
Options Written
Over-the-Counter Put Options – (0.0)%
EUR Currency, Strike Price USD 1.29, Expires 12/14/12, Broker Deutsche Bank AG	EUR	41,435		(925,267	)
USD Currency, Strike Price JPY 76.25, Expires 11/02/12, Broker Bank of America Corp.	USD	51,070		(86,671	)
				(1,011,938	)
Over-the-Counter Interest Rate Call Swaptions – (0.3)%
Pay a fixed rate of 1.15% and receive a floating rate based on 3-month LIBOR, Expires 7/07/14, Broker Deutsche Bank AG		49,800		(436,701	)
Pay a fixed rate of 1.25% and receive a floating rate based on 3-month LIBOR, Expires 6/27/14, Broker Credit Suisse Group AG		30,000		(335,199	)
Pay a fixed rate of 1.25% and receive a floating rate based on 3-month LIBOR, Expires 8/18/14, Broker Credit Suisse Group AG		119,000		(1,281,820	)
Pay a fixed rate of 2.15% and receive a floating rate based on 3-month LIBOR, Expires 9/09/13, Broker Citigroup, Inc.		42,300		(1,588,060	)
Pay a fixed rate of 2.41% and receive a floating rate based on 3-month LIBOR, Expires 8/16/13, Broker JPMorgan Chase & Co.		35,000		(2,313,010	)
Pay a fixed rate of 3.90% and receive a floating rate based on 3-month LIBOR, Expires 6/09/14, Broker Royal Bank of Scotland Group Plc		62,500		(7,603,569	)
				(13,558,359	)

Options Written	Notional Amount (000)		Value
Over-the-Counter Interest Rate Put Swaptions – (0.1)%
Receive a fixed rate of 2.00% and pay a floating rate based on 3-month LIBOR, Expires 9/08/14, Broker JPMorgan Chase & Co.	USD	316,200	$	(3,270,552	)
Receive a fixed rate of 2.15% and pay a floating rate based on 3-month LIBOR, Expires 7/07/14, Broker Deutsche Bank AG		49,800		(354,392	)
Receive a fixed rate of 2.25% and pay a floating rate based on 3-month LIBOR, Expires 6/27/14, Broker Credit Suisse Group AG		30,000		(186,000	)
Receive a fixed rate of 2.25% and pay a floating rate based on 3-month LIBOR, Expires 8/18/14, Broker Credit Suisse Group AG		119,000		(886,431	)
Receive a fixed rate of 2.41% and pay a floating rate based on 3-month LIBOR, Expires 8/16/13, Broker JPMorgan Chase & Co.		35,000		(28,168	)
Receive a fixed rate of 3.90% and pay a floating rate based on 3-month LIBOR, Expires 6/09/14, Broker Royal Bank of Scotland Group Plc		62,500		(75,156	)
Receive a fixed rate of 4.50% and pay a floating rate based on 3-month LIBOR, Expires 6/08/22, Broker Deutsche Bank AG	EUR	43,500		(2,341,877	)
				(7,142,576	)
Total Options Written (Premiums Received – $18,981,563) – (0.4)%				(21,712,873	)
Total Investments Net of Options Written – 101.9%				5,467,878,304
Liabilities in Excess of Other Assets – (1.9)%				(101,522,341	)
Net Assets – 100.0%			$	5,366,355,963

(a) Variable rate security. Rate shown is as of report date.

(b) Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.

(c) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(d) All or a portion of security has been pledged as collateral in connection with swaps.

(e) All or a portion of security has been pledged as collateral in connection with open financial futures contracts.

(f) All or a portion of security has been pledged as collateral in connection with open reverse repurchase agreements.

(g) Investments in issuers considered to be an affiliate of the Fund during the year ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at September 30, 2011		Net Activity			Shares Held at September 30, 2012		Income		Realized Gain
BlackRock Liquidity Funds, TempFund, Institutional Class		34,167,549		(23,166,230	)		11,001,319		$108,164		$3,070

(h) Represents the current yield as of report date.

See Notes to Financial Statements.

22     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Schedule of Investments (continued)   BlackRock Inflation Protected Bond Portfolio

• 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. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

• Reverse repurchase agreements outstanding as of September 30, 2012 were as follows:

Counterparty	Interest Rate			Trade Date		Maturity Date		Face Value		Face Value Including Accrued Interest
Credit Suisse Group AG		0.22	%		7/06/12		Open	$	113,793,750	$	113,854,250

• Foreign currency exchange contracts as of September 30, 2012 were as follows:

Currency Purchased	Currency Sold		Counter party	Settlement Date		Un- realized Appre- ciation (Depre- ciation)
USD 5,365,581	JPY	417,410,000	UBS AG		10/17/12	$	16,913
EUR 11,000,000	USD	14,072,091	Deutsche Bank AG		10/22/12		66,945
EUR 75,000,000	USD	91,527,525	UBS AG		10/22/12		4,874,990
USD107,613,376	EUR	87,776,000	Citigroup, Inc.		10/22/12		(5,210,986	)
USD 27,532,122	EUR	22,380,000	UBS AG		11/07/12		(1,239,233	)
USD 62,256,037	JPY	4,890,000,000	JPMorgan Chase & Co.		12/04/12		(442,592	)
Total							$(1,933,963	)

• Financial futures contracts purchased as of September 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation
653	U.S. Treasury Notes (2 Year)	Chicago Board Options	December 2012	USD	144,006,906	$	93,144
628	U.S. Treasury Notes (5 Year)	Chicago Board Options	December 2012	USD	78,269,407		315,214
3,694	U.S. Treasury Notes (10 Year)	Chicago Board Options	December 2012	USD	493,091,281		3,032,236
Total						$	3,440,594

• Financial futures contracts sold as of September 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Depreciation
2,059	U.S. Treasury Bonds (30 Year)	Chicago Board Options	December 2012	USD	307,563,125	$	(114,072	)
735	Ultra Treasury Bonds	Chicago Board Options	December 2012	USD	121,435,781		(1,510,781	)
127	Euro-Bund	Eurex	December 2012	USD	23,137,051		(48,345	)
205	Gilt British	London	December 2012	USD	39,929,445		(352,527	)
Total						$	(2,025,725	)

• Interest rate swaps outstanding as of September 30, 2012 were as follows:

Fixed Rate	Floating Rate	Counterparty/ Exchange	Ex- piration Date	Notional Amount (000)		Unrealized Appre- ciation (Depre- ciation)
0.44%1	3-month LIBOR	Chicago Mercantile	8/30/14	USD	262,900	$	(300,920	)
0.86%2	3-month LIBOR	Chicago Mercantile	8/30/17	USD	91,600		415,933
0.86%1	3-month LIBOR	Deutsche Bank AG	9/19/17	USD	91,700		(432,469	)
2.06%2	3-month LIBOR	Barclays Plc	5/08/22	USD	27,900		1,238,998
2.49%1	3-month LIBOR	Deutsche Bank AG	7/09/42	USD	14,000		285,457
2.46%1	3-month LIBOR	Deutsche Bank AG	8/07/42	USD	6,700		179,926
2.48%1	3-month LIBOR	JPMorgan Chase & Co.	8/07/42	USD	11,700		286,670
2.51%1	3-month LIBOR	Deutsche Bank AG	8/10/42	USD	5,100		91,662
2.71%1	3-month LIBOR	Credit Suisse Group AG	8/21/42	USD	12,000		(292,927	)
2.77%2	3-month LIBOR	JPMorgan Chase & Co.	9/18/42	USD	10,000		375,901
Total						$	1,848,231

¹  Fund pays the fixed rate and receives the floating rate.

²  Fund pays the floating rate and receives the fixed rate.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 23

Schedule of Investments (continued)   BlackRock Inflation Protected Bond Portfolio

• Total return swaps outstanding as of September 30, 2012 were as follows:

Reference Entity	Fixed Rate/ Floating Rate	Counterparty		Expiration Date		Notional Amount (000)		Unrealized Appreciation (Depreciation)
Change in Return of the Consumer Price Index for All Urban Consumers	1.84%1		Morgan Stanley		10/25/15	USD	49,555	$	1,106,068
Change in Return of the Consumer Price Index for All Urban Consumers	2.47%2		Morgan Stanley		10/25/20	USD	26,130		(322,261	)
Change in Return of the Consumer Price Index for All Urban Consumers	2.67%2		Deutsche Bank AG		6/23/21	USD	47,965		1,166,940
Change in Return of the Consumer Price Index for All Urban Consumers	3-month LIBOR plus 0.675%1		Deutsche Bank AG		2/15/41	USD	15,000		(1,277,369	)
Total								$	673,378

¹  Fund pays the fixed rate/floating rate and receives the total return of the reference entity. Net payment made at termination.

²  Fund pays the total return of the reference entity and receives the fixed rate. Net payment made at termination.

• Inflation indexed caps outstanding as of September 30, 2012 were as follows:

Reference Entity	Fund Pays	Fund Receives	Counterparty	Expiration Date		Notional Amount (000)		Value			Unrealized Appreciation
US Consumer Price Index Urban Consumers NSA (USCPIU)	Maximum of USCPIU minus 1.85% or $0	Upfront premium	Citigroup, Inc.		5/29/13	USD	50,000	$	(77,773	)	$	72,227
Eurostat Eurozone HICP Ex Tobacco Unrevised Series NSA (HICPx)	Maximum of HICPX for January 2022 divided by HIPCX for January 2012 minus 2.50% or $0	Upfront premium and payment at expiration	Deutsche Bank AG		4/26/22	EUR	14,495	$	(933,975	)		80,676
Total								$	(1,011,748	)	$	152,903

• Fair Value Measurements – Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 – unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

• Level 2 – other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 – unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

See Notes to Financial Statements.

24     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments (concluded)   BlackRock Inflation Protected Bond Portfolio

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of September 30, 2012:

	Level 1		Level 2		Level 3	Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		–	$	106,878	–	$	106,878
Corporate Bonds		–		6,098,839	–		6,098,839
Foreign Government Obligations		–		12,633,480	–		12,633,480
Non-Agency Mortgage-Backed Securities		–		36,479,295	–		36,479,295
U.S. Government Sponsored Agency Securities		–		126,035	–		126,035
U.S. Treasury Obligations		–		5,410,310,157	–		5,410,310,157
Short-Term Securities	$	11,001,319		–	–		11,001,319
Total	$	11,001,319	$	5,465,754,684	–	$	5,476,756,003

	Level 1			Level 2			Level 3	Total
Derivative Financial Instruments1
Assets:
Foreign currency exchange contracts		–		$	6,371,914		–	$	6,371,914
Interest rate contracts	$	3,629,594			14,107,655		–		17,737,249
Other contracts		–			2,425,911		–		2,425,911
Liabilities:
Foreign currency exchange contracts		–			(7,904,749	)	–		(7,904,749	)
Interest rate contracts		(2,025,725	)		(21,727,251	)	–		(23,752,976	)
Other contracts		–			(1,599,630	)	–		(1,599,630	)
Total	$	1,603,869		$	(8,326,150	)	–	$	(6,722,281	)

¹ Derivative financial instruments are swaps, financial futures contracts, foreign currency exchange contracts and options. Swaps, financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/ depreciation on the instrument and options are shown at value.

Certain of the Fund’s assets and liabilities are held at carrying amount or face value, which approximates fair value for financial statement purposes. As of September 30, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3	Total
Assets:
Foreign currency at value	$	879,402		–		–	$	879,402
Cash pledged as collateral for financial futures contracts		3,061,000		–		–		3,061,000
Cash pledged as collateral for swap contracts		5,843,000		–		–		5,843,000
Liabilities:
Reverse repurchase agreements		–	$	(113,793,750	)	–		(113,793,750	)
Bank overdraft		–		(531,352	)	–		(531,352	)
Cash received as collateral for swap contracts		–		(3,100,000	)	–		(3,100,000	)
Total	$	9,783,402	$	(117,425,102	)	–	$	(107,641,700	)

There were no transfers between levels during the year ended September 30, 2012.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 25

Schedule of Investments September 30, 2012   BlackRock Long Duration Bond Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities	Par (000)		Value
321 Henderson Receivables I LLC, Series 2010-2A, Class A, 4.07%, 1/15/48 (a)	USD	409	$	428,508
AmeriCredit Automobile Receivables Trust, Series 2012-2, Class A2, 0.76%, 10/08/15		840		842,041
Countrywide Asset-Backed Certificates:
Series 2006-11, Class 1AF2, 5.59%, 9/25/46 (b)		506		463,587
Series 2006-13, Class 3AV2, 0.37%, 1/25/37 (b)		440		347,816
PFS Financing Corp., Series 2012-AA, Class A, 1.42%, 2/15/16 (a)(b)		650		652,219
Santander Consumer Acquired Receivables Trust, Series 2011-WO, Class C, 3.19%, 10/15/15 (a)		1,100		1,132,496
Santander Drive Auto Receivables Trust:
Series 2011-2, Class A2, 1.04%, 4/15/14		550		551,024
Series 2012-1, Class C, 3.78%, 11/15/17		500		524,299
Series 2012-5, Class A3, 0.83%, 12/15/16		775		779,296
Scholar Funding Trust, Series 2011-A, Class A, 1.35%, 10/28/43 (a)(b)		614		601,006
SLM Student Loan Trust:
Series 2004-B, Class A2, 0.59%, 6/15/21 (b)		870		848,109
Series 2012-C, Class A2, 3.31%, 10/15/46 (a)		765		808,394
Series 2012-D, Class A2, 2.95%, 2/15/46 (a)		600		623,699
Total Asset-Backed Securities – 3.1%				8,602,494
Corporate Bonds
Aerospace & Defense – 0.8%
B/E Aerospace, Inc., 5.25%, 4/01/22		525		546,000
Huntington Ingalls Industries, Inc., 6.88%, 3/15/18		575		623,156
L-3 Communications Corp., Series B, 6.38%, 10/15/15		2		2,023
United Technologies Corp.:
6.70%, 8/01/28		148		202,416
6.13%, 7/15/38		375		508,683
4.50%, 6/01/42		390		437,106
				2,319,384
Airlines – 0.1%
Continental Airlines Pass-Through Trust, Series 2009-2, Class A, 7.25%, 11/10/19		349		398,705
Auto Components – 0.1%
Delphi Corp., 5.88%, 5/15/19		350		378,000
Automobiles – 0.6%
Daimler Finance North America LLC, 1.65%, 4/10/15 (a)		750		760,447
Ford Motor Co., 7.40%, 11/01/46		355		426,000
Volkswagen International Finance NV, 1.63%, 3/22/15 (a)		625		635,272
				1,821,719
Beverages – 0.3%
SABMiller Holdings, Inc., 2.45%, 1/15/17 (a)		725		758,322

Corporate Bonds	Par (000)		Value
Biotechnology – 0.8%
Amgen, Inc.:
5.15%, 11/15/41	USD	875	$	974,998
5.38%, 5/15/43		1,125		1,303,692
				2,278,690
Capital Markets – 1.6%
The Goldman Sachs Group, Inc.:
6.75%, 10/01/37		1,522		1,630,491
6.25%, 2/01/41		325		376,015
Morgan Stanley, 6.38%, 7/24/42		650		715,887
State Street Corp., 4.96%, 3/15/18		550		607,885
UBS AG, 7.63%, 8/17/22		1,100		1,150,116
				4,480,394
Chemicals – 0.3%
The Dow Chemical Co.:
9.40%, 5/15/39		153		247,708
5.25%, 11/15/41		250		283,674
Ecolab, Inc., 5.50%, 12/08/41		250		310,914
				842,296
Commercial Banks – 2.3%
Amsouth Bank, Series AI, 5.20%, 4/01/15		550		572,000
Barclays Bank Plc, 5.14%, 10/14/20		275		280,592
CIT Group, Inc.:
4.75%, 2/15/15 (a)		550		573,375
5.00%, 5/15/17		375		400,312
HSBC Bank Plc, 7.65%, 5/01/25		350		451,579
HSBC Bank USA, N.A., 5.88%, 11/01/34		250		283,893
HSBC Holdings Plc:
6.50%, 5/02/36		300		351,450
6.50%, 9/15/37		875		1,034,869
ING Bank NV, 5.00%, 6/09/21 (a)		975		1,083,352
Itau Unibanco Holding SA/Cayman Island, 5.75%, 1/22/21 (a)		175		185,062
Wachovia Bank, N.A., 6.60%, 1/15/38		921		1,280,151
				6,496,635
Commercial Services & Supplies – 0.2%
The ADT Corp., 4.88%, 7/15/42 (a)		630		681,998
Communications Equipment – 0.1%
Brocade Communications Systems, Inc., 6.88%, 1/15/20		370		399,600
Consumer Finance – 1.0%
Capital One Financial Corp.:
2.15%, 3/23/15		390		399,883
4.75%, 7/15/21		575		652,785
Discover Bank, 8.70%, 11/18/19		500		645,593
SLM Corp.:
5.00%, 10/01/13		400		414,500
5.38%, 5/15/14		325		342,313
6.25%, 1/25/16		415		450,275
				2,905,349
Containers & Packaging – 0.2%
Bemis Co., Inc., 6.80%, 8/01/19		461		560,871
Diversified Financial Services – 4.6%
Ally Financial, Inc., 4.50%, 2/11/14		775		792,437
Bank of America Corp.:
7.38%, 5/15/14		410		448,807
6.00%, 9/01/17		2,090		2,417,461
Bank of America, N.A., 5.30%, 3/15/17		420		466,386

See Notes to Financial Statements.

26     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments (continued)   BlackRock Long Duration Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Diversified Financial Services (concluded)
Citigroup, Inc.:
5.30%, 10/17/12	USD	129	$	129,247
6.00%, 10/31/33		100		107,807
6.13%, 8/25/36		100		108,585
5.88%, 1/30/42		575		692,757
FMR LLC, 6.45%, 11/15/39 (a)		369		441,966
Ford Motor Credit Co. LLC:
3.88%, 1/15/15		650		679,312
7.00%, 4/15/15		642		719,040
5.00%, 5/15/18		375		409,396
General Electric Capital Corp., 5.88%, 1/14/38		1,367		1,629,001
Icahn Enterprises LP/Icahn Enterprises Finance Corp.:
7.75%, 1/15/16		302		314,835
8.00%, 1/15/18		140		150,150
JPMorgan Chase & Co., 3.25%, 9/23/22		2,650		2,686,819
JPMorgan Chase Bank, N.A., 6.00%, 7/05/17		387		453,767
Merrill Lynch & Co., Inc., 7.75%, 5/14/38		225		282,568
				12,930,341
Diversified Telecommunication Services – 2.3%
AT&T Inc.:
6.15%, 9/15/34		950		1,208,174
6.50%, 9/01/37		609		810,768
6.40%, 5/15/38		3		3,963
BellSouth Corp., 6.88%, 10/15/31		325		405,435
Qwest Corp., 3.64%, 6/15/13 (b)		23		23,124
Telecom Italia Capital SA:
6.00%, 9/30/34		232		205,320
7.20%, 7/18/36		222		217,560
Telefonica Emisiones SAU:
3.99%, 2/16/16		625		621,875
6.42%, 6/20/16		56		59,150
7.05%, 6/20/36		540		526,500
Verizon Communications, Inc.:
5.85%, 9/15/35		725		916,792
8.95%, 3/01/39		884		1,540,435
Windstream Corp., 8.13%, 8/01/13		27		28,350
				6,567,446
Electric Utilities – 5.4%
Alabama Power Co.:
Series 1, 5.65%, 3/15/35		185		202,640
6.00%, 3/01/39		534		705,484
American Transmission Systems, Inc., 5.25%, 1/15/22 (a)		608		705,431
Carolina Power & Light Co., 6.30%, 4/01/38		222		304,643
Duke Energy Carolinas LLC:
6.10%, 6/01/37		350		453,682
6.00%, 1/15/38		406		533,149
E.ON International Finance BV, 6.65%, 4/30/38 (a)		663		914,055
Exelon Generation Co. LLC, 4.25%, 6/15/22 (a)		851		900,420
Florida Power Corp.:
6.35%, 9/15/37		112		151,865
6.40%, 6/15/38		867		1,192,904
Massachusetts Electric Co., 5.90%, 11/15/39 (a)		302		393,665
MidAmerican Energy Co., 5.80%, 10/15/36		1,068		1,379,473
MidAmerican Energy Holdings Co.:
6.13%, 4/01/36		296		378,696
5.95%, 5/15/37		867		1,086,582
6.50%, 9/15/37		148		198,186
Mississippi Power Co., Series 12-A, 4.25%, 3/15/42		300		307,856

Corporate Bonds	Par (000)		Value
Electric Utilities (concluded)
Niagara Mohawk Power Corp., 4.88%, 8/15/19 (a)	USD	350	$	403,537
Ohio Power Co., Series D, 6.60%, 3/01/33		321		420,840
Oncor Electric Delivery Co. LLC, 5.30%, 6/01/42		820		895,996
Public Service Co. of Colorado, Series 17,
6.25%, 9/01/37		616		868,163
Southern California Edison Co., Series 2008-A,
5.95%, 2/01/38		463		622,495
The Toledo Edison Co.:
7.25%, 5/01/20		315		412,944
6.15%, 5/15/37		56		69,994
Virginia Electric & Power Co.:
Series A, 6.00%, 5/15/37		737		992,430
8.88%, 11/15/38		350		602,544
				15,097,674
Energy Equipment & Services – 1.4%
Ensco Plc, 4.70%, 3/15/21		965		1,089,937
Halliburton Co., 7.45%, 9/15/39		370		565,647
Transocean, Inc.:
6.38%, 12/15/21		1,410		1,687,516
3.80%, 10/15/22		200		201,035
6.80%, 3/15/38		271		325,877
				3,870,012
Food & Staples Retailing – 1.3%
CVS Caremark Corp., 6.25%, 6/01/27		834		1,093,311
Tesco Plc, 6.15%, 11/15/37 (a)		525		671,728
Walgreen Co., 4.40%, 9/15/42		300		309,333
Wal-Mart Stores, Inc.:
6.50%, 8/15/37		495		709,159
6.20%, 4/15/38		670		923,676
				3,707,207
Food Products – 0.9%
Kraft Foods Group, Inc.:
6.88%, 1/26/39 (a)		1,224		1,670,535
5.00%, 6/04/42 (a)		450		502,010
Mondelez International, Inc., 6.50%, 2/09/40		200		270,906
				2,443,451
Health Care Equipment & Supplies – 0.5%
Covidien International Finance SA, 6.55%, 10/15/37		922		1,310,993
Health Care Providers & Services – 0.6%
HCA, Inc., 7.25%, 9/15/20		491		549,920
WellPoint, Inc.:
3.30%, 1/15/23		925		935,574
6.38%, 6/15/37		203		251,126
				1,736,620
Hotels, Restaurants & Leisure – 0.6%
MGM Resorts International, 13.00%, 11/15/13		60		67,650
Universal City Development Partners Ltd./UCDP
Finance, Inc.:
8.88%, 11/15/15		244		256,997
10.88%, 11/15/16		275		318,168
Yum! Brands, Inc.:
5.30%, 9/15/19		442		516,319
6.88%, 11/15/37		315		430,636
				1,589,770

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 27

  Schedule of Investments (continued)   BlackRock Long Duration Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Household Products – 0.2%
Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA, 7.88%, 8/15/19	USD	550	$	594,000
Insurance – 3.2%
American International Group, Inc.:
4.88%, 9/15/16		850		948,807
3.80%, 3/22/17		900		968,051
6.40%, 12/15/20		340		414,151
4.88%, 6/01/22		1,500		1,690,435
Genworth Financial, Inc., 7.63%, 9/24/21		325		331,706
ING Verzekeringen NV, 2.09%, 6/21/21 (b)	EUR	130		160,374
International Lease Finance Corp., 6.50%, 9/01/14 (a)	USD	107		115,025
Massachusetts Mutual Life Insurance Co., 8.88%, 6/01/39 (a)		406		599,030
Metropolitan Life Global Funding I, 2.00%, 1/10/14 (a)		1,405		1,425,530
Prudential Financial, Inc., 6.63%, 12/01/37		1,304		1,623,636
Teachers Insurance & Annuity Association of America, 6.85%, 12/16/39 (a)		554		760,743
				9,037,488
IT Services – 0.2%
International Business Machines Corp.:
5.60%, 11/30/39		26		34,655
4.00%, 6/20/42		497		542,075
				576,730
Life Sciences Tools & Services – 0.2%
Life Technologies Corp., 6.00%, 3/01/20		350		416,303
Machinery – 0.6%
AGCO Corp., 5.88%, 12/01/21		750		821,955
Xylem, Inc., 3.55%, 9/20/16		795		849,503
				1,671,458
Media – 5.2%
CCH II LLC/CCH II Capital Corp., 13.50%, 11/30/16		300		325,500
Comcast Corp.:
6.45%, 3/15/37		750		966,022
6.95%, 8/15/37		314		427,467
6.40%, 5/15/38		922		1,180,733
COX Communications, Inc.:
6.95%, 6/01/38 (a)		296		382,705
8.38%, 3/01/39 (a)		293		446,105
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc.:
3.80%, 3/15/22		1,275		1,312,057
6.00%, 8/15/40		336		374,451
DISH DBS Corp., 6.63%, 10/01/14		668		724,780
Grupo Televisa SAB, 6.63%, 1/15/40		609		803,437
News America, Inc.:
6.40%, 12/15/35		355		439,902
6.15%, 3/01/37		500		599,185
6.65%, 11/15/37		536		680,153
Shaw Communications, Inc.:
5.65%, 10/01/19	CAD	498		569,906
6.75%, 11/09/39		498		554,851
Time Warner Cable, Inc.:
6.55%, 5/01/37	USD	958		1,203,867
7.30%, 7/01/38		922		1,254,385
4.50%, 9/15/42		1,150		1,146,869
Time Warner Cos., Inc.:
7.57%, 2/01/24		12		16,031
6.95%, 1/15/28		406		525,260

Corporate Bonds	Par (000)		Value
Media (concluded)
Time Warner Entertainment Co. LP, 8.38%, 3/15/23	USD	19	$	26,768
Time Warner, Inc.:
7.63%, 4/15/31		12		16,763
7.70%, 5/01/32		571		801,883
				14,779,080
Metals & Mining – 1.1%
AngloGold Ashanti Holdings Plc, 6.50%, 4/15/40		463		467,630
Barrick North America Finance LLC, 5.70%, 5/30/41		850		973,324
Rio Tinto Finance USA Ltd.:
9.00%, 5/01/19		170		232,459
7.13%, 7/15/28		140		188,532
Southern Copper Corp., 6.75%, 4/16/40		441		507,242
Teck Resources Ltd.:
5.20%, 3/01/42		375		352,651
5.40%, 2/01/43		450		439,089
				3,160,927
Multiline Retail – 0.3%
Dollar General Corp., 4.13%, 7/15/17		300		313,500
Target Corp., 7.00%, 1/15/38		275		403,397
				716,897
Multi-Utilities – 0.4%
NiSource Finance Corp., 5.25%, 2/15/43		675		753,282
Sempra Energy, 6.00%, 10/15/39		277		358,937
				1,112,219
Oil, Gas & Consumable Fuels – 7.4%
Access Midstream Partners LP/ACMP Finance Corp., 6.13%, 7/15/22		475		502,313
Anadarko Petroleum Corp., 6.45%, 9/15/36		450		557,524
Canadian Natural Resources Ltd., 6.75%, 2/01/39		130		178,970
Cenovus Energy, Inc., 6.75%, 11/15/39		730		986,318
ConocoPhillips Canada Funding Co. I, 5.95%, 10/15/36		1,180		1,529,698
DCP Midstream LLC, 5.35%, 3/15/20 (a)		176		193,109
El Paso Natural Gas Co., 8.63%, 1/15/22		590		795,059
El Paso Pipeline Partners Operating Co. LLC, 6.50%, 4/01/20		850		1,008,386
Energy Transfer Partners LP, 6.50%, 2/01/42		2,130		2,457,871
Enterprise Products Operating LLC:
1.25%, 8/13/15		500		504,298
6.45%, 9/01/40		700		869,522
5.70%, 2/15/42		160		184,881
4.45%, 2/15/43		800		791,278
Kinder Morgan Energy Partners LP:
6.50%, 9/01/39		866		1,047,301
6.38%, 3/01/41		650		794,333
5.00%, 8/15/42		450		467,253
Marathon Petroleum Corp., 6.50%, 3/01/41		225		275,635
MEG Energy Corp., 6.50%, 3/15/21 (a)		490		524,300
Nexen, Inc.:
5.88%, 3/10/35		500		591,267
6.40%, 5/15/37		50		63,470
7.50%, 7/30/39		550		783,804
ONEOK Partners LP, 6.65%, 10/01/36		203		241,959
Petrohawk Energy Corp.:
10.50%, 8/01/14		360		391,500
7.88%, 6/01/15		40		41,669
6.25%, 6/01/19		545		613,806
Pioneer Natural Resources Co., 5.88%, 7/15/16		450		512,653

See Notes to Financial Statements.

28     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments (continued)   BlackRock Long Duration Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Oil, Gas & Consumable Fuels (concluded)
Plains All American Pipeline LP/PAA Finance Corp., 6.70%, 5/15/36	USD	500	$	638,667
SandRidge Energy, Inc., 7.50%, 3/15/21		145		149,350
Shell International Finance BV, 6.38%, 12/15/38		252		362,930
Tennessee Gas Pipeline Co., 7.00%, 10/15/28		12		16,033
Valero Energy Corp., 6.63%, 6/15/37		401		483,993
Western Gas Partners LP, 4.00%, 7/01/22		502		523,395
The Williams Cos., Inc.:
7.75%, 6/15/31		171		218,727
8.75%, 3/15/32		356		493,867
Williams Partners LP:
5.25%, 3/15/20		442		512,198
4.00%, 11/15/21		500		538,080
				20,845,417
Paper & Forest Products – 0.7%
International Paper Co.:
7.50%, 8/15/21		977		1,282,502
6.00%, 11/15/41		575		700,658
				1,983,160
Pharmaceuticals – 2.3%
GlaxoSmithKline Capital, Inc., 6.38%, 5/15/38		738		1,052,636
Merck & Co., Inc., 6.55%, 9/15/37		758		1,121,490
Roche Holdings, Inc., 7.00%, 3/01/39 (a)		425		640,437
Teva Pharmaceutical Finance Co. LLC, 6.15%, 2/01/36		967		1,277,540
Watson Pharmaceuticals, Inc., 3.25%, 10/01/22		440		445,636
Wyeth LLC:
6.00%, 2/15/36		148		199,914
5.95%, 4/01/37		1,216		1,647,973
				6,385,626
Real Estate Investment Trusts (REITs) – 0.9%
American Tower Corp.:
4.50%, 1/15/18		850		937,961
5.90%, 11/01/21		205		243,202
4.70%, 3/15/22		720		789,787
HCP, Inc., 6.75%, 2/01/41		450		583,733
				2,554,683
Road & Rail – 0.9%
Burlington Northern Santa Fe LLC, 4.38%, 9/01/42		400		423,205
Kansas City Southern de Mexico SA de CV, 8.00%, 2/01/18		1,115		1,243,225
Penske Truck Leasing Co. LP/PTL Finance Corp., 3.13%, 5/11/15 (a)		825		844,042
				2,510,472
Software – 0.4%
Oracle Corp., 5.38%, 7/15/40		765		975,876
Tobacco – 1.1%
Altria Group, Inc.:
9.95%, 11/10/38		330		554,849
10.20%, 2/06/39		458		784,808
Lorillard Tobacco Co., 3.50%, 8/04/16		525		555,686
Philip Morris International, Inc., 2.50%, 5/16/16		1,225		1,294,099
				3,189,442
Wireless Telecommunication Services – 2.2%
Alltel Corp., 7.88%, 7/01/32		792		1,251,381

Corporate Bonds	Par (000)		Value
Wireless Telecommunication Services (concluded)
America Movil SAB de CV:
5.00%, 10/16/19	USD	350	$	408,910
3.13%, 7/16/22		400		412,193
6.13%, 11/15/37		554		711,762
Crown Castle Towers LLC, 6.11%, 1/15/40 (a)		850		1,023,726
Rogers Communications, Inc., 7.50%, 8/15/38		315		454,425
SBA Tower Trust, 4.25%, 4/15/15 (a)		663		698,382
Sprint Nextel Corp., 9.00%, 11/15/18 (a)		625		750,000
Vodafone Group Plc, 6.15%, 2/27/37		376		505,773
				6,216,552
Total Corporate Bonds – 53.3%				150,301,807
Foreign Agency Obligations
EDF SA, 5.60%, 1/27/40 (a)		414		478,981
Petrobras International Finance Co.:
3.88%, 1/27/16		2,000		2,115,620
6.88%, 1/20/40		901		1,128,000
Statoil ASA, 5.25%, 4/15/19		608		738,539
Total Foreign Agency Obligations – 1.6%				4,461,140
Foreign Government Obligations
Brazil – 0.5%
Federative Republic of Brazil, 7.13%, 1/20/37		851		1,282,883
Colombia – 0.3%
Republic of Colombia, 4.38%, 7/12/21		850		978,775
Israel – 0.1%
AID-Israel, 5.50%, 9/18/23		240		316,553
Mexico – 0.8%
United Mexican States:
5.13%, 1/15/20		330		394,350
3.63%, 3/15/22		900		981,450
4.75%, 3/08/44		246		273,675
5.75%, 10/12/10		412		492,340
				2,141,815
Peru – 0.2%
Republic of Peru, 5.63%, 11/18/50		525		683,813
Total Foreign Government Obligations – 1.9%				5,403,839
Non-Agency Mortgage-Backed Securities
Collateralized Mortgage Obligations – 0.6%
Countrywide Alternative Loan Trust, Series 2005-21CB, Class A17, 6.00%, 6/25/35		299		289,766
Credit Suisse Mortgage Capital Certificates, Series 2009-13R, Class 3A1, 2.50%, 11/26/36 (a)(b)		270		273,698
FREMF Mortgage Trust, Series 2012-K705, Class B, 4.31%, 9/25/44 (a)(b)		560		593,884
HomeBanc Mortgage Trust, Series 2006-2, Class A1, 0.40%, 12/25/36 (b)		137		93,999

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 29

  Schedule of Investments (continued)   BlackRock Long Duration Bond Portfolio (Percentages shown are based on Net Assets)

Non-Agency Mortgage-Backed Securities	Par (000)		Value
Collateralized Mortgage Obligations (concluded)
Structured Asset Securities Corp., Series 2005-5, Class 2A4, 5.50%, 4/25/35	USD	517	$	529,989
				1,781,336
Commercial Mortgage-Backed Securities – 0.9%
Bear Stearns Commercial Mortgage Securities, Series 2007-PW16, Class A4, 5.91%, 6/11/40 (b)		600		707,685
Credit Suisse First Boston Mortgage Securities Corp., Series 2002-CP5, Class A2, 4.94%, 12/15/35		17		17,460
GE Capital Commercial Mortgage Corp., Series 2005-C1, Class A3, 4.58%, 6/10/48		141		142,761
Greenwich Capital Commercial Funding Corp., Series 2005-GG3, Class AAB, 4.62%, 8/10/42		95		96,824
GS Mortgage Securities Corp. II:
Series 2007-GG10, Class A4, 5.98%, 8/10/45 (b)		524		600,418
Series 2012-ALOH, Class A, 3.55%, 4/10/34 (a)		530		572,455
JPMorgan Chase Commercial Mortgage
Securities Corp., Series 2002-C2, Class A2, 5.05%, 12/12/34		446		445,588
				2,583,191
Total Non-Agency Mortgage-Backed Securities – 1.5%				4,364,527
Preferred Securities
Capital Trusts
Commercial Banks – 0.2%
Northgroup Preferred Capital Corp., 6.38% (a)(b)(c)		205		204,194
Royal Bank of Scotland Group Plc, 7.64% (b)(c)		400		327,000
				531,194
Diversified Financial Services – 0.9%
General Electric Capital Corp., 6.25% (b)(c)		1,300		1,372,189
JPMorgan Chase & Co., 7.90% (b)(c)		314		356,619
JPMorgan Chase Capital XXI, 1.39%, 2/02/37 (b)		525		364,575
ZFS Finance USA Trust V, 6.50%, 5/09/67 (a)(b)		370		391,275
				2,484,658
Insurance – 1.2%
American General Capital II, 8.50%, 7/01/30		100		122,480
Lincoln National Corp., 7.00%, 5/17/66 (b)		628		635,065
Lincoln National Corp., 6.05%, 4/20/67 (b)		236		230,985
MetLife, Inc., 6.40%, 12/15/36		1,142		1,198,051
New York Life Insurance Co., 6.75%, 11/15/39 (a)		461		639,279
Pacific Life Insurance Co., 9.25%, 6/15/39 (a)		424		561,716
Reinsurance Group of America, Inc., 6.75%, 12/15/65 (b)		37		36,103
XL Group Plc, 6.50% (b)(c)		187		172,040
				3,595,719
Total Capital Trusts – 2.3%				6,611,571

Preferred Stocks	Shares		Value
Machinery – 0.4%
Stanley Black & Decker, Inc., 0.04%		40,000	$	1,054,800
Total Preferred Stocks – 0.4%				1,054,800
Total Preferred Securities – 2.7%				7,666,371
Taxable Municipal Bonds	Par (000)
Chicago Transit Authority RB, Series B, 6.20%, 12/01/40	USD	390		440,033
City of Chicago, IL RB, 6.74%, 11/01/40		875		1,173,953
City of New York GO, 5.85%, 6/01/40		370		486,990
Los Angeles Department of Airports RB, 6.58%, 5/15/39		200		261,692
Los Angeles Department of Water & Power RB:
5.72%, 7/01/39		755		954,954
6.57%, 7/01/45		305		443,214
Metropolitan Transportation Authority, New York RB, 6.69%, 11/15/40		700		933,254
Municipal Electric Authority of Georgia RB, 6.64%, 4/01/57		1,197		1,405,398
New Jersey State Turnpike Authority RB, Series F, 7.41%, 1/01/40		371		552,211
New York City Municipal Water Finance Authority RB:
5.75%, 6/15/41		200		263,766
5.95%, 6/15/42		375		509,254
New York State Dormitory Authority RB, 5.63%, 3/15/39		500		624,265
Port Authority of New York & New Jersey RB:
5.65%, 11/01/40		430		542,028
4.46%, 10/01/62		550		553,531
State of California GO:
7.55%, 4/01/39		930		1,269,357
7.30%, 10/01/39		360		479,340
7.63%, 3/01/40		45		62,099
7.60%, 11/01/40		120		166,577
State of Illinois GO, 5.10%, 6/01/33		520		504,478
State of Illinois GO, Series 3, 6.73%, 4/01/35		575		655,494
University of California RB, 6.55%, 5/15/48		500		659,675
Total Taxable Municipal Bonds – 4.6%				12,941,563
U.S. Government Sponsored Agency Securities
Agency Obligations – 2.5%
Fannie Mae:
1.83%, 10/09/19 (d)(e)(f)		4,885		4,297,227
5.63%, 7/15/37		369		538,520
7.13%, 1/15/30		1,000		1,582,699
Freddie Mac, 2.38%, 1/13/22		535		561,236
U.S. Small Business Administration, Series 2004-P10A, Class 1, 4.50%, 2/01/14		21		21,188
				7,000,870

See Notes to Financial Statements.

30     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments (continued)   BlackRock Long Duration Bond Portfolio (Percentages shown are based on Net Assets)

U.S. Government Sponsored Agency Securities	Par (000)		Value
Collateralized Mortgage Obligations – 1.0%
Fannie Mae:
Series 2003-49, Class YD, 5.50%, 6/25/23	USD	153	$	167,685
Series 2011-52, Class KB, 5.50%, 6/25/41		450		539,545
Series 2011-52, Class LB, 5.50%, 6/25/41		450		530,561
Freddie Mac, Series 3859, Class JB, 5.00%, 5/15/41		600		689,155
Ginnie Mae:
Series 2006-6, Class C, 5.01%, 2/16/44 (b)		264		280,942
Series 2006-42, Class B, 5.22%, 8/16/46 (b)		459		495,760
				2,703,648
Mortgage-Backed Securities – 0.2%
Fannie Mae Mortgage-Backed Securities:
2.44%, 1/01/35 (b)		82		87,182
2.58%, 2/01/35 (b)		356		386,722
7.00%, 1/01/31		5		6,278
Freddie Mac Mortgage-Backed Securities,7.00%, 12/01/29-4/01/32		11		13,294
Ginnie Mae Mortgage-Backed Securities:
1.75%, 5/20/34 (b)		78		81,394
5.50%, 4/15/33-8/15/33		32		36,381
7.00%, 9/15/31-5/15/32		23		27,068
				638,319
Total U.S. Government Sponsored Agency Securities – 3.7%				10,342,837
U.S. Treasury Obligations
U.S. Treasury Bonds:
6.25%, 8/15/23		2,325		3,373,794
5.38%, 2/15/31 (d)(e)		5,500		7,955,233
4.50%, 2/15/36		1,862		2,483,623
4.38%, 11/15/39		357		471,986
3.13%, 11/15/41-2/15/42		14,269		15,186,348
3.00%, 5/15/42		7,275		7,543,266
U.S. Treasury Notes:
0.63%, 5/31/17		1,000		1,002,500
2.00%, 2/15/22		4,335		4,508,738
1.63%, 8/15/22		6,075		6,068,354
U.S. Treasury Strips:
2.54%, 11/15/27 (f)		8,341		5,690,230
2.91%, 5/15/38 (f)		4,161		1,983,351
2.96%, 11/15/39 (f)		6,383		2,878,752
3.00%, 2/15/41 (f)		10,025		4,307,582
Total U.S. Treasury Obligations – 22.5%				63,453,757
Total Long-Term Investments (Cost – $234,237,391) – 94.9%				267,538,335
Short-Term Securities		Shares
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (g)(h)		11,361,420		11,361,420
Total Short-Term Securities (Cost – $11,361,420) – 4.0%				11,361,420

Options Purchased	Notional Amount (000)		Value
Over-the-Counter Interest Rate Call Swaptions – 0.0%
Receive a fixed rate of 1.16% and pay a floating rate based on 3-month LIBOR, Expires 7/11/13, Broker Citigroup, Inc.	USD	4,700	$	59,823
Receive a fixed rate of 2.70% and pay a floating rate based on 3-month LIBOR, Expires 3/11/13, Broker Citigroup, Inc.		2,000		106,624
				166,447
Over-the-Counter Interest Rate Put Swaptions – 0.1%
Pay a fixed rate of 0.71% and receive a floating rate based on 3-month LIBOR, Expires 6/28/13, Broker Deutsche Bank AG		12,400		10,030
Pay a fixed rate of 1.16% and receive a floating rate based on 3-month LIBOR, Expires 7/11/13, Broker Citigroup, Inc.		4,700		30,824
Pay a fixed rate of 2.70% and receive a floating rate based on 3-month LIBOR, Expires 3/11/13, Broker Citigroup, Inc.		2,000		89,631
Pay a fixed rate of 4.50% and receive a floating rate based on 3-month LIBOR, Expires 2/02/17, Broker Deutsche Bank AG		2,500		58,863
Pay a fixed rate of 4.50% and receive a floating rate based on 6-month EURIBOR, Expires 10/21/13, Broker Deutsche Bank AG	EUR	1,800		4,035
Pay a fixed rate of 4.50% and receive a floating rate based on 6-month EURIBOR, Expires 12/12/13, Broker Credit Suisse Group AG		2,100		6,945
Pay a fixed rate of 4.50% and receive a floating rate based on 6-month EURIBOR, Expires 9/16/13, Broker Credit Suisse Group AG		1,800		2,960
				203,288
Total Options Purchased (Cost – $613,376) – 0.1%				369,735
Total Investments Before Options Written (Cost – $246,212,187) – 99.0%				279,269,490
Options Written
Over-the-Counter Interest Rate Call Swaptions – (0.0)%
Pay a fixed rate of 1.00% and receive a floating rate based on 3-month LIBOR, Expires 7/11/14, Broker Credit Suisse Group AG	USD	4,800		(28,137	)
Pay a fixed rate of 1.15% and receive a floating rate based on 3-month LIBOR, Expires 9/12/14, Broker Citigroup, Inc.		7,500		(63,080	)
Pay a fixed rate of 1.40% and receive a floating rate based on 3-month LIBOR, Expires 5/08/14, Broker Citigroup, Inc.		1,500		(23,858	)
				(115,075	)
Over-the-Counter Interest Rate Put Swaptions – (0.1)%
Receive a fixed rate of 2.00% and pay a floating rate based on 3-month LIBOR, Expires 7/11/14, Broker Credit Suisse Group AG		4,800		(41,203	)

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 31

  Schedule of Investments (continued)   BlackRock Long Duration Bond Portfolio (Percentages shown are based on Net Assets)

Options Written	Notional Amount (000)		Value
Over-the-Counter Interest Rate Put Swaptions (concluded)
Receive a fixed rate of 2.15% and pay a floating rate based on 3-month LIBOR, Expires 9/12/14, Broker Citigroup, Inc.		USD 7,500	$	(67,637	)
Receive a fixed rate of 2.40% and pay a floating rate based on 3-month LIBOR, Expires 5/08/14, Broker Citigroup, Inc.		1,500		(6,412	)
Receive a fixed rate of 6.00% and pay a floating rate based on 3-month LIBOR, Expires 2/02/17, Broker Deutsche Bank AG		5,000		(51,509	)
				(166,761	)
Total Options Written (Premiums Received – $379,260) – (0.1)%				(281,836	)
Total Investments Net of Options Written – 98.9%				278,987,654
Other Assets Less Liabilities – 1.1%				3,085,303
Net Assets – 100.0%			$	282,072,957

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(b) Variable rate security. Rate shown is as of report date.

(c) Security is perpetual in nature and has no stated maturity date.

(d) All or a portion of security has been pledged as collateral in connection with swaps.

(e) All or a portion of security has been pledged as collateral in connection with open financial futures contracts.

(f) Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

(g) Investments in issuers considered to be an affiliate of the Fund during the year ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at September 30, 2011		Net Activity		Shares Held at September 30, 2012		Income
BlackRock Liquidity Funds, TempFund, Institutional Class		5,745,628		5,615,792		11,361,420	$	18,695

(h) Represents the current yield as of report date.

— 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. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

— Foreign currency exchange contracts as of September 30, 2012 were as follows:

Currency Purchased	Currency Sold	Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD 1,272,262	CAD 1,293,500	Royal Bank of Scotland Group Plc		10/17/12	$	(42,932	)
USD 2,184,013	AUD 2,100,000	Citigroup, Inc.		10/31/12		12,548
Total					$	(30,384	)

— Financial futures contracts purchased as of September 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
289	U.S. Treasury Bonds (30 Year)	Chicago Board Options	December 2012	USD	43,169,375	$	39,173
278	Ultra Treasury Bonds	Chicago Board Options	December 2012	USD	45,930,812		(522,339	)
Total						$	(483,166	)

— Financial futures contracts sold as of September 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Depreciation
44	U.S. Treasury Notes (2 Year)	Chicago Board Options	December 2012		USD   9,703,375	$	(12,978	)
71	U.S. Treasury Notes (5 Year)	Chicago Board Options	December 2012		USD   8,848,930		(33,072	)
215	U.S. Treasury Notes (10 Year)	Chicago Board Options	December 2012		USD 28,699,141		(157,889	)
1	Euro-Bund	Eurex	December 2012		USD      182,181		(808	)
Total						$	(204,747	)

— Interest rate swaps outstanding as of September 30, 2012 were as follows:

Fixed Rate	Floating Rate	Counterparty/ Exchange	Expiration Date	Notional Amount (000)		Unrealized Appreciation (Depreciation)
0.44%1	3-month LIBOR	Chicago Mercantile Exchange	8/29/14		USD 6,600	$	(7,846	)
1.76%1	3-month LIBOR	Deutsche Bank AG	7/05/22		USD 1,500		(16,610	)
1.73%1	3-month LIBOR	Deutsche Bank AG	7/09/22		USD 1,510		(12,433	)
2.48%1	3-month LIBOR	Credit Suisse Group AG	7/05/42		USD 1,300		27,092
2.25%1	3-month LIBOR	Credit Suisse Group AG	7/27/42		USD 1,000		74,249
2.46%1	3-month LIBOR	Deutsche Bank AG	8/07/42		USD 1,300		34,911
2.51%1	3-month LIBOR	Credit Suisse Group AG	8/10/42		USD    700		12,734
Total						$	112,097

¹ Fund pays the fixed rate and receives the floating rate.

See Notes to Financial Statements.

32     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments (continued)   BlackRock Long Duration Bond Portfolio

— Credit default swaps on single-name issues - buy protection outstanding as of September 30, 2012 were as follows:

Issuer	Pay Fixed Rate		Counterparty	Expiration Date	Notional Amount (000)		Unrealized Depreciation
CIGNA Corp.		1.00%	Citigroup, Inc.	9/20/17	USD	675	$   (6,818)
General Dynamics Corp.		1.00%	Credit Suisse Group AG	9/20/17	USD	955	(2,796)
Lockheed Martin Corp.		1.00%	Credit Suisse Group AG	9/20/17	USD	955	(8,604)
Northrop Grumman Corp.		1.00%	Credit Suisse Group AG	9/20/17	USD	805	(3,179)
Raytheon Co.		1.00%	Credit Suisse Group AG	9/20/17	USD	805	(2,369)
Viacom, Inc.		1.00%	Credit Suisse Group AG	9/20/17	USD	975	(7,935)
Total							$(31,701)

— Credit default swaps on single-name issues - sold protection outstanding as of September 30, 2012 were as follows:

Issuer	Receive Fixed Rate	Counterparty	Expira- tion Date	Issuer Credit Rating1	Notional Amount (000)2	Unrealized Appreciation
MetLife, Inc.	5.00%	Deutsche Bank AG	6/20/15	A-	USD  575	$	16,880
Anadarko Petroleum Corp.	1.00%	Credit Suisse Group AG	6/20/17	BBB-	USD  780		16,686
WellPoint, Inc.	1.00%	Citigroup, Inc.	9/20/17	NR	USD  675		4,169
Comcast Corp.	1.00%	Credit Suisse Group AG	9/20/17	BBB+	USD  975		8,403
Total						$	46,138

¹ Using S&P’s rating.

² The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

— Fair Value Measurements - Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

— Level 1 - unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

— Level 2 - other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

— Level 3 - unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of September 30, 2012:

	Level 1	Level 2	Level 3	Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities	–	$8,602,494	–	$	8,602,494
Corporate Bonds	–	150,301,807	–		150,301,807
Foreign Agency Obligations	–	4,461,140	–		4,461,140
Foreign Govern- ment Obligations	–	5,403,839	–		5,403,839
Non-Agency Mortgage-Backed Securities	–	4,364,527	–		4,364,527
Preferred Securities	$1,054,800	6,611,571	–		7,666,371
Taxable Municipal Bonds	–	12,941,563	–		12,941,563
U.S. Government Sponsored Agency Securities	–	10,342,837	–		10,342,837
U.S. Treasury Obligations	–	63,453,757	–		63,453,757
Short-Term Securities	11,361,420	–	–		11,361,420
Total	$12,416,220	$266,483,535	–	$	278,899,755

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 33

  Schedule of Investments (concluded)   BlackRock Long Duration Bond Portfolio

	Level 1	Level 2		Level 3	Total
Derivative Financial Instruments1
Assets:
Credit contracts	–	$	46,138	–	$	46,138
Foreign currency exchange contracts.	–		12,548	–		12,548
Interest rate contracts	$  39,173		518,721	–		557,894
Liabilities:
Credit contracts	–		(31,701)	–		(31,701)
Foreign currency exchange contracts.	–		(42,932)	–		(42,932)
Interest rate contracts	(727,086)		(318,725)	–		(1,045,811)
Total	$(687,913)	$	184,049	–	$	(503,864)

¹ Derivative financial instruments are swaps, financial futures contracts, foreign currency exchange contracts and options. Swaps, financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/ depreciation on the instrument and options are shown at value.

Certain of the Fund’s assets are held at carrying amount, which approximates fair value for financial statement purposes. As of September 30, 2012, such assets are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2	Level 3	Total
Assets:
Cash	$	10,413	–	–	$	10,413
Foreign currency at value		1,374	–	–		1,374
Cash pledged as collateral for financial futures contracts		327,000	–	–		327,000
Cash pledged as collateral for swap contracts		30,000	–	–		30,000
Total	$	368,787	–	–	$	368,787

There were no transfers between levels during the year ended September 30, 2012.

See Notes to Financial Statements.

34     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments September 30, 2012   BlackRock Secured Credit Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Aerospace & Defense – 0.2%
Kratos Defense & Security Solutions, Inc., 10.00%, 6/01/17	USD	100	$	108,000
Airlines – 0.1%
Continental Airlines 2003-ERJ1 Pass-Through Trust, Series RJO3, 7.88%, 7/02/18		32		32,903
Building Products – 0.5%
Building Materials Corp. of America, 6.75%, 5/01/21 (a)		125		136,875
USG Corp., 9.75%, 1/15/18		120		129,600
				266,475
Chemicals – 2.0%
Ashland, Inc., 4.75%, 8/15/22 (a)		55		56,238
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance ULC, 9.00%, 11/15/20		75		66,938
INEOS Finance Plc, 7.50%, 5/01/20 (a)		375		380,625
LyondellBasell Industries NV, 5.75%, 4/15/24		250		284,375
Nufarm Australia Ltd., 6.38%, 10/15/19 (a)		30		30,000
Rockwood Specialties Group, Inc., 4.63%, 10/15/20		120		121,800
Tronox Finance LLC, 6.38%, 8/15/20 (a)		245		247,450
				1,187,426
Commercial Services & Supplies – 2.3%
ADS Waste Holdings, Inc., 8.25%, 10/01/20 (a)		26		26,520
Ceridian Corp., 8.88%, 7/15/19 (a)		305		329,400
Clean Harbors, Inc., 5.25%, 8/01/20 (a)		52		53,560
HD Supply, Inc.:
8.13%, 4/15/19 (a)		320		347,200
11.00%, 4/15/20 (a)		175		194,250
Hertz Holdings Netherlands BV, 8.50%, 7/31/15 (a)	EUR	250		345,357
Laureate Education, Inc., 9.25%, 9/01/19 (a)	USD	70		70,350
				1,366,637
Communications Equipment – 0.1%
Hughes Satellite Systems Corp., 6.50%, 6/15/19		75		80,250
Computers & Peripherals – 0.6%
CDW LLC/CDW Finance Corp., 8.00%, 12/15/18		300		331,500
Consumer Finance – 0.1%
Credit Acceptance Corp., 9.13%, 2/01/17		75		82,688
Containers & Packaging – 0.9%
Ardagh Packaging Finance Plc, 7.38%, 10/15/17 (a)		250		268,125
Berry Plastics Corp., 9.75%, 1/15/21		220		250,800
				518,925
Distributors – 0.1%
VWR Funding, Inc., 7.25%, 9/15/17 (a)		74		75,110
Diversified Financial Services – 1.4%
Doric Nimrod Air Finance Alpha Ltd. Pass-Through Trust, Series 2012-1, Class A, 5.13%, 11/30/24 (a)		200		208,000
Ford Motor Credit Co. LLC, 6.63%, 8/15/17		150		173,987
Icahn Enterprises LP/Icahn Enterprises Finance Corp., 8.00%, 1/15/18		375		402,187
Nuveen Investments, Inc., 9.13%, 10/15/17 (a)		38		37,715
				821,889
Diversified Telecommunication Services – 0.9%
Avaya, Inc., 7.00%, 4/01/19 (a)		100		93,000
Intelsat Jackson Holdings SA, 7.25%, 4/01/19		112		120,960

Corporate Bonds	Par (000)		Value
Diversified Telecommunication Services (concluded)
Level 3 Communications, Inc., 8.88%, 6/01/19 (a)	USD	60	$	63,000
Level 3 Financing, Inc., 8.13%, 7/01/19		260		276,250
				553,210
Electric Utilities – 1.2%
Energy Future Intermediate Holding Co. LLC/EFIH Finance, Inc.:
6.88%, 8/15/17 (a)		60		62,100
10.00%, 12/01/20		600		675,000
				737,100
Electronic Equipment, Instruments & Components – 0.1%
Belden, Inc., 5.50%, 9/01/22 (a)		40		40,900
Energy Equipment & Services – 0.4%
Seadrill Ltd., 5.63%, 9/15/17 (a)		210		211,575
Food Products – 0.2%
Post Holdings, Inc., 7.38%, 2/15/22 (a)		25		26,563
Smithfield Foods, Inc., 6.63%, 8/15/22		66		68,475
				95,038
Health Care Equipment & Supplies – 1.0%
Biomet, Inc.:
6.50%, 8/01/20 (a)		169		175,126
6.50%, 10/01/20 (a)		184		180,320
DJO Finance LLC/DJO Finance Corp., 8.75%, 3/15/18 (a)		50		53,188
Hologic, Inc., 6.25%, 8/01/20 (a)		97		102,820
Kinetic Concepts, Inc./KCI USA, Inc.:
10.50%, 11/01/18 (a)		75		79,313
12.50%, 11/01/19 (a)		20		18,800
				609,567
Health Care Providers & Services – 2.8%
CHS/Community Health Systems, Inc.:
5.13%, 8/15/18		290		300,875
7.13%, 7/15/20		41		43,742
DaVita, Inc., 5.75%, 8/15/22		84		87,360
HCA, Inc.:
6.50%, 2/15/20		67		74,538
5.88%, 3/15/22		665		720,694
Tenet Healthcare Corp., 8.88%, 7/01/19		350		395,500
				1,622,709
Hotels, Restaurants & Leisure – 1.4%
Caesars Entertainment Operating Co., Inc., 11.25%, 6/01/17		165		177,375
Caesars Operating Escrow LLC/Caesars Escrow Corp., 9.00%, 2/15/20 (a)		300		302,250
Diamond Resorts Corp., 12.00%, 8/15/18		125		134,687
MGM Resorts International, 10.38%, 5/15/14		110		123,750
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., 5.38%, 3/15/22 (a)		67		68,005
				806,067
Household Durables — 1.3%
Beazer Homes USA, Inc., 6.63%, 4/15/18 (a)		80		85,500
K Hovnanian Enterprises, Inc., 7.25%, 10/15/20 (a)		205		210,125
Shea Homes LP/Shea Homes Funding Corp., 8.63%, 5/15/19		200		223,000
Standard Pacific Corp., 8.38%, 1/15/21		200		228,250
				746,875

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 35

  Schedule of Investments (continued)   BlackRock Secured Credit Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Household Products – 1.6%
Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA:
9.88%, 8/15/19	USD	500	$	531,875
5.75%, 10/15/20 (a)		440		440,000
				971,875
Independent Power Producers & Energy Traders – 1.4%
Calpine Corp., 7.88%, 1/15/23 (a)		375		414,375
GenOn REMA LLC, Series B, 9.24%, 7/02/17		140		148,430
Mirant Mid Atlantic Pass-Through Trust B, 9.13%, 6/30/17		181		197,888
NRG Energy, Inc., 6.63%, 3/15/23 (a)		70		71,575
				832,268
Insurance – 0.0%
CNO Financial Group, Inc., 6.38%, 10/01/20 (a)		27		27,540
Internet Software & Services – 1.3%
ITC Deltacom, Inc., 10.50%, 4/01/16		75		80,250
Zayo Group LLC/Zayo Capital, Inc., 8.13%, 1/01/20		650		710,125
				790,375
Media – 2.3%
AMC Networks, Inc., 7.75%, 7/15/21		30		33,900
CCH II LLC/CCH II Capital Corp., 13.50%, 11/30/16		220		238,700
Cengage Learning Acquisitions, Inc., 11.50%, 4/15/20 (a)		150		160,500
Clear Channel Worldwide Holdings, Inc.:
9.25%, 12/15/17		500		536,250
Series B, 9.25%, 12/15/17		50		53,875
DISH DBS Corp., 5.88%, 7/15/22 (a)		110		112,750
Univision Communications, Inc., 7.88%, 11/01/20 (a)		75		80,250
WMG Acquisition Corp.:
9.50%, 6/15/16		50		54,437
11.50%, 10/01/18		55		61,875
				1,332,537
Metals & Mining – 0.5%
FMG Resources August 2006 Pty Ltd., 6.88%, 4/01/22 (a)		125		114,375
Novelis, Inc., 8.75%, 12/15/20		150		166,125
				280,500
Oil, Gas & Consumable Fuels – 3.1%
Denbury Resources, Inc., 8.25%, 2/15/20		15		16,913
Drill Rigs Holdings, Inc., 6.50%, 10/01/17 (a)		35		34,781
Energy Transfer Equity LP, 7.50%, 10/15/20		125		141,875
Linn Energy LLC/Linn Energy Finance Corp., 6.25%, 11/01/19 (a)		250		248,750
MarkWest Energy Partners LP/MarkWest Energy Finance Corp., 5.50%, 2/15/23		30		31,425
MEG Energy Corp.:
6.50%, 3/15/21 (a)		145		155,150
6.38%, 1/30/23 (a)		40		42,700
Offshore Group Investment Ltd., 11.50%, 8/01/15		240		265,200
PDC Energy, Inc., 7.75%, 10/15/22 (a)		45		45,000
Peabody Energy Corp., 6.25%, 11/15/21 (a)		250		248,750
Range Resources Corp., 7.25%, 5/01/18		160		169,200
Sabine Pass LNG LP, 7.50%, 11/30/16		225		243,000
SandRidge Energy, Inc.:
7.50%, 3/15/21 (a)		35		36,050
7.50%, 2/15/23 (a)		65		66,950
Tesoro Corp., 5.38%, 10/01/22		70		72,100

Corporate Bonds	Par (000)		Value
Oil, Gas & Consumable Fuels (concluded)
Tesoro Logistics LP/Tesoro Logistics Finance Corp., 5.88%, 10/01/20 (a)	USD	16	$	16,400
				1,834,244
Paper & Forest Products – 0.3%
Clearwater Paper Corp., 7.13%, 11/01/18		150		163,125
Pharmaceuticals – 0.2%
Catalent Pharma Solutions, Inc., 7.88%, 10/15/18 (a)		33		33,495
Valeant Pharmaceuticals International, 6.38%, 10/15/20 (a)		105		107,100
				140,595
Real Estate Investment Trusts (REITs) – 0.2%
Felcor Lodging LP, 6.75%, 6/01/19		110		117,975
Real Estate Management & Development – 1.4%
Realogy Corp.:
7.88%, 2/15/19 (a)		334		350,700
7.63%, 1/15/20 (a)		450		496,125
				846,825
Road & Rail – 0.1%
Florida East Coast Railway Corp., 8.13%, 2/01/17		50		52,625
Software – 1.5%
First Data Corp.:
7.38%, 6/15/19 (a)		565		582,656
6.75%, 11/01/20 (a)		105		104,344
8.25%, 1/15/21 (a)		125		124,687
Nuance Communications, Inc., 5.38%, 8/15/20 (a)		95		98,087
				909,774
Specialty Retail – 0.5%
Claire’s Stores, Inc., 9.00%, 3/15/19 (a)		139		144,213
Michaels Stores, Inc., 7.75%, 11/01/18 (a)		28		29,960
Party City Holdings, Inc., 8.88%, 8/01/20 (a)		51		54,315
Penske Automotive Group, Inc., 5.75%, 10/01/22 (a)		60		61,500
				289,988
Trading Companies & Distributors – 0.7%
UR Merger Sub Corp.:
5.75%, 7/15/18 (a)		125		132,031
7.63%, 4/15/22 (a)		250		273,750
				405,781
Wireless Telecommunication Services – 1.9%
Cricket Communications, Inc., 7.75%, 5/15/16		282		297,510
MetroPCS Wireless, Inc., 7.88%, 9/01/18		18		19,440
SBA Telecommunications, Inc., 5.75%, 7/15/20 (a)		28		29,400
Sprint Nextel Corp., 9.00%, 11/15/18 (a)		650		780,000
				1,126,350
Total Corporate Bonds – 34.6%				20,417,221

See Notes to Financial Statements.

36     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments (continued)   BlackRock Secured Credit Portfolio (Percentages shown are based on Net Assets)

Floating Rate Loan Interests (b)	Par (000)		Value
Advertising – 0.2%
Affinion Group, Inc., Tranche B Term Loan, 5.00%, 7/16/15	USD	100	$	91,105
Aerospace & Defense – 0.8%
Sequa Corp., Term Loan, 3.69% - 3.72%, 12/03/14		375		373,500
TransDigm, Inc., Tranche B-1 Term Loan, 4.00%, 2/14/17		10		10,018
Wesco Aircraft Hardware Corp., Tranche B Term Loan, 4.25%, 4/07/17		110		110,112
				493,630
Airlines – 0.7%
AWAS Finance Luxembourg S.à r.l., Loan, 5.25%, 6/10/16		244		247,544
Delta Air Lines, Inc., Term Loan 2011, 5.50%, 4/20/17		150		150,229
US Airways Group, Inc., Loan, 2.72%, 3/21/14		10		9,775
				407,548
Auto Components – 0.9%
Federal-Mogul Corp., Tranche B Term Loan, 2.16% - 2.17%, 12/29/14		249		242,444
The Goodyear Tire & Rubber Co., Loan (Second Lien), 4.75%, 4/30/19		250		252,187
Navistar, Inc., Tranche B Term Loan, 7.00%, 8/17/17		14		14,029
				508,660
Automobiles – 0.5%
KAR Auction Services, Inc., Term Loan, 5.00%, 5/19/17		275		275,458
Biotechnology – 0.6%
Alkermes, Inc., Term Loan B, 4.50%, 9/05/19		60		60,225
Grifols, Inc., New U.S. Tranche B Term Loan, 4.50%, 6/01/17		299		300,707
				360,932
Building Products – 2.0%
Armstrong World Industries, Inc., Term Loan B-1, 4.00%, 3/10/18		199		199,785
CPG International, Inc., Term Loan B, 6.25%, 9/21/19		290		290,090
Goodman Global, Inc., Initial Term Loan (First Lien), 5.75%, 10/28/16		500		500,000
Hupah Finance, Inc., Initial Term Loan, 6.27%, 1/21/19		199		202,242
				1,192,117
Capital Markets – 0.2%
American Capital Ltd. (FKA American Capital Strategies Ltd.), Loans, 5.50%, 8/22/16		125		125,000
Chemicals – 1.9%
Ascend Performance Materials Operations LLC, Term B Loan, 6.75%, 4/10/18		379		377,626
Ineos U.S. Finance LLC, Cash Dollar Term Loan, 6.50%, 5/04/18		100		100,697
PQ Corp. (FKA Niagara Acquisition, Inc.), Original Term Loan (First Lien), 3.97%, 7/30/14		330		328,433
Trinseo Materials Operating S.C.A. (FKA Styron S.à r.l.), Term Loan, 8.00%, 8/02/17		112		107,428
Univar, Inc., Term B Loan, 5.00%, 6/30/17		180		178,522
				1,092,706
Commercial Services & Supplies – 2.9%
ACCO Brands Corp., Term B Loan, 4.25%, 5/01/19		250		251,250

Floating Rate Loan Interests (b)	Par (000)		Value
Commercial Services & Supplies (concluded)
Altegrity, Inc. (FKA U.S. Investigations Services, Inc.):
Term Loan, 2.97%, 2/21/15	USD	135	$	126,113
Tranche D Term Loan, 7.75%, 2/21/15		175		174,051
Ceridian Corp., Extended US Term Loan, 5.98%, 5/09/17		75		75,266
Intelligrated, Inc., Term Loan (First Lien 2012), 6.75%, 7/30/18		100		100,625
Laureate Education, Inc., Extended Term Loan, 5.25%, 6/15/18		464		457,589
Nexeo Solutions LLC, Initial Loans, 5.00%, 9/08/17		199		196,916
Tomkins LLC/Tomkins, Inc. (FKA Pinafore LLC/Pinafore, Inc.), Term B-1 Loan, 4.25%, 9/29/16		324		324,849
				1,706,659
Communications Equipment – 0.4%
Commscope, Inc., Tranche 1 Term Loan, 4.25%, 1/14/18		249		250,035
Consumer Finance – 0.8%
Trans Union LLC, Replacement Term Loan, 5.50%, 2/10/18		449		453,722
Diversified Consumer Services – 0.9%
The ServiceMaster Co.:
Delayed Draw Term Loan, 2.72%, 7/24/14		39		39,158
Tranche A Term Loan, 2.73%, 7/24/14		396		394,231
Weight Watchers International, Inc., Term F Loan, 4.00%, 3/15/19		125		125,130
				558,519
Diversified Financial Services – 2.9%
Delos Aircraft, Inc., Term Loan, 4.75%, 4/12/16		225		227,531
GMACM Borrower LLC (RFC Borrower LLC), Term A-1 Loan, 5.00%, 11/18/13		275		275,687
Nuveen Investments, Inc., Extended First Lien Term Loan, 5.86% - 5.95%, 5/13/17		400		396,752
Reynolds Group Holdings, Inc., Term Loan D, 4.75%, 9/18/18		350		351,123
Springleaf Financial Funding Co. (FKA American General Finance Corp.), Initial Loan, 5.50%, 5/10/17		450		440,213
				1,691,306
Diversified Telecommunication Services – 5.4%
Avaya, Inc., Term B-1 Loan, 3.18%, 10/24/14		125		120,907
Bresnan Broadband Holdings LLC, Term B Loan, 4.50%, 12/14/17		299		300,361
Hawaiian Telcom Communications, Inc., Term B Loan, 7.00%, 2/28/17		175		177,079
Intelsat Jackson Holdings SA (FKA Intelsat Jackson Holdings Ltd.), Tranche B Term Loan, 5.25%, 4/02/18		873		873,340
Level 3 Financing, Inc.:
Term Loan B II, 4.75%, 8/01/19		715		715,000
Tranche B II Term Loan, 5.75%, 9/01/18		715		714,700
West Corp., Term B-6 Loan, 5.75%, 6/30/18		279		282,674
				3,184,061
Food & Staples Retailing – 1.1%
BJ’s Wholesale Club, Inc.:
Term Loan B, 5.75%, 9/29/18		135		135,506
Term Loan C, 9.75%, 3/29/19		80		80,760
Dunkin’ Brands, Inc., Term B-2 Loan, 4.00% - 5.25%, 11/23/17		314		313,467

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 37

  Schedule of Investments (continued)   BlackRock Secured Credit Portfolio (Percentages shown are based on Net Assets)

Floating Rate Loan Interests (b)	Par (000)		Value
Food & Staples Retailing (concluded)
U.S. Foods, Inc. (AKA U.S. Foodservice, Inc.), Extended Term Loan, 5.75%, 3/31/17	USD	147	$	144,814
				674,547
Food Products – 1.4%
Del Monte Foods Co., Initial Term Loan, 4.50%, 3/08/18		225		224,597
Dole Food Co., Inc., Tranche B-2 Term Loan, 5.00% - 6.00%, 7/08/18		134		134,388
Pinnacle Foods Finance LLC, Tranche E Term Loan, 4.75%, 10/17/18		199		199,499
Solvest Ltd. (Dole), Tranche C-2 Term Loan, 5.00% - 6.00%, 7/08/18		240		240,484
				798,968
Health Care Equipment & Supplies – 4.8%
Bausch & Lomb, Inc., Parent Term Loan, 5.25%, 5/17/19		449		453,458
Biomet, Inc., Dollar Term B-1 Loan, 3.97%, 7/25/17		135		135,062
BSN Medical, Inc. (FKA Boston Luxembourg III S.à r.l.), Facility B1, 1.90% - 6.00%, 8/28/19		180		180,900
ConvaTec, Inc., Dollar Term Loan, 5.00%, 12/22/16		250		250,273
DJO Finance LLC (ReAble Therapeutics Finance LLC), Tranche B-2 Term Loan (Extended), 5.22%, 11/01/16		499		498,796
Hologic, Inc., Tranche B Term Loan, 4.50%, 8/01/19		460		465,368
Immucor, Inc. (FKA IVD Acquisition Corp.), Term B-1 Loan, 5.75%, 8/19/18		424		428,177
Kinetic Concepts, Inc., Dollar Term B-1 Loan, 7.00%, 5/04/18		399		404,066
				2,816,100
Health Care Providers & Services – 3.4%
DaVita, Inc.: Term Loan B2, 4.00%, 8/19/19		135		135,096
Tranche B Term Loan, 4.50%, 10/20/16		250		250,703
Emdeon, Inc., Term B-1 Loan, 5.00%, 11/02/18		374		375,930
Emergency Medical Services Corp., Initial Term Loan, 5.25%, 5/25/18		287		289,008
HCA, Inc., Tranche B-2 Term Loan, 3.61%, 3/31/17		300		300,282
Health Management Associates, Inc., Term B Loan, 4.50%, 11/16/18		175		175,746
Iasis Healthcare LLC, Term B Loan, 5.00%, 5/03/18		175		174,775
Sheridan Holdings, Inc., Initial Term Loan (First Lien), 6.00%, 6/29/18		244		246,018
Universal Health Services, Inc., Tranche B Term Loan 2011, 3.75%, 11/15/16		64		64,581
				2,012,139
Health Care Technology – 0.7%
IMS Health, Inc., Tranche B Dollar Term Loan (2011), 4.50%, 8/26/17		274		275,441
MedAssets, Inc., Term Loan, 5.25%, 11/16/16		132		132,416
				407,857
Hotels, Restaurants & Leisure – 3.9%
Academy Ltd., Initial Term Loan, 6.00%, 8/03/18		299		299,994
Bass Pro Group LLC, Term Loan, 5.25%, 6/13/17		125		125,965
Boyd Gaming Corp., Increased Term Loan, 6.00%, 12/17/15		123		124,683

Floating Rate Loan Interests (b)	Par (000)		Value
Hotels, Restaurants & Leisure (concluded)
Caesars Entertainment Operating Co., Inc. (FKA Harrah’s Operating Co., Inc.):
Term B-1 Loan, 3.22%, 1/28/15	USD	60	$	58,114
Term B-2 Loan, 3.22%, 1/28/15		520		503,656
NP Opco LLC, Term Loan B, 5.50%, 9/15/19		185		185,289
Pilot Travel Centers LLC, First Amendment Tranche B Term Loan, 4.25%, 8/07/19		50		50,313
SeaWorld Parks & Entertainment, Inc. (FKA SW Acquisitions Co., Inc.), Term B Loan, 4.00%, 8/17/17		363		363,827
Six Flags Theme Parks, Inc., Tranche B Term Loan, 4.25%, 12/20/18		225		225,963
Wendy’s International, Inc., Term Loan B, 4.75%, 5/15/19		375		377,580
				2,315,384
Independent Power Producers & Energy Traders – 1.3%
The AES Corp., Initial Term Loan, 4.25%, 6/01/18		224		225,458
Calpine Corp., Term Loan, 4.50%, 4/01/18		145		144,769
Dynegy Midwest Generation LLC, Term Loan, 9.25%, 8/05/16		399		416,700
				786,927
Insurance – 0.9%
Asurion LLC (FKA Asurion Corp.), Term Loan (First Lien), 5.50%, 5/24/18		300		301,689
CNO Financial Group, Inc.:
Term Loan B, 5.00%, 9/28/16		95		95,237
Term Loan C, 0.00%, 9/28/18		125		125,187
				522,113
Internet Software & Services – 0.5%
Zayo Group LLC/Zayo Capital, Inc., Term Loan, 7.13%, 7/02/19		299		301,683
IT Services – 0.6%
Booz Allen Hamilton, Inc., Initial Tranche B Term Loan, 4.50%, 7/31/19		200		200,834
Neustar, Inc., Term Advance, 5.00%, 11/08/18		150		150,433
				351,267
Leisure Equipment & Products – 0.4%
FGI Operating Co. LLC, Term B Loan, 5.50%, 4/19/19		240		241,008
Life Sciences Tools & Services – 0.9%
Pharmaceutical Product Development, Inc. (Jaguar Holdings LLC), Term Loan, 6.25%, 12/05/18		499		502,983
Machinery – 1.7%
Rexnord LLC/RBS Global, Inc., Term B Loan, 5.00%, 4/01/18		224		225,346
Schaeffler AG:
Facility C2 (USD), 6.00%, 1/27/17		150		151,407
Term Loan B, 0.00%, 1/27/15	EUR	55		68,647
Sensata Technology BV/Sensata Technology Finance Co. LLC, Term Loan, 4.00%, 5/12/18	USD	125		125,152
Terex Corp., U.S. Term Loan, 5.50%, 4/28/17		199		200,183
Wabash National, Initial Term Loan, 6.00% - 7.00%, 5/08/19		199		201,494
				972,229
Media – 4.3%
Alpha Topco Ltd. (Formula One), Facility B (USD), 5.75%, 4/28/17		150		150,933
Charter Communications Operating LLC, Term D Loan, 4.00%, 5/15/19		249		250,256

See Notes to Financial Statements.

38     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments (continued)   BlackRock Secured Credit Portfolio (Percentages shown are based on Net Assets)

Floating Rate Loan Interests (b)	Par (000)		Value
Media (concluded)
Cumulus Media Holdings, Inc., Term Loan (First Lien), 5.75%, 9/17/18	USD	199	$	200,224
FoxCo Acquisition Sub, LLC, Term Loan B, 5.50%, 7/31/17		160		160,949
Gray Television, Inc., Term Loan B, 3.74%, 12/31/14		175		174,160
Kabel Deutschland GmbH, Facility F, 4.25%, 2/01/19		200		200,334
MTL Publishing LLC (EMI Music Publishing Group North America Holdings, Inc.), Term B Loan, 5.50%, 6/29/18		249		252,056
Newsday LLC, Fixed Rate Term Loan, 10.50%, 8/01/13		250		250,418
Nielsen Finance LLC, Class B Dollar Term Loan, 3.98%, 5/02/16		249		250,297
TWCC Holding Corp., Term Loan, 4.25%, 2/13/17		250		251,250
Univision Communications, Inc., Extended First Lien Term Loan, 4.47%, 3/31/17		260		256,445
WideOpenWest Finance LLC, Term Loan, 6.25%, 7/17/18		160		160,757
				2,558,079
Metals & Mining – 1.2%
Constellium Holdco BV, Initial Term Loan, 9.25%, 5/25/18		150		147,007
Novelis, Inc., Term Loan, 4.00%, 3/10/17		254		254,162
Walter Energy, Inc. (FKA Walter Industries, Inc.), B Term Loan, 4.00%, 4/02/18		300		298,314
				699,483
Oil, Gas & Consumable Fuels – 2.7%
Chesapeake Energy Corp., Loan, 8.50%, 12/02/17		425		426,084
EP Energy LLC (FKA Everest Acquisition LLC), Tranche B-1 Loan, 5.00%, 5/24/18		175		176,313
Gibson Energy ULC, Tranche B Term Loan, 4.75%, 6/15/18		324		327,427
MEG Energy Corp., Initial Term Loan, 4.00%, 3/18/18		249		250,071
Samson Resources Corp., Term Loan B, 6.00%, 9/25/18		65		65,352
Tervita Corp. (FKA CCS Corp.), Term Loan, 3.22%, 11/14/14		374		369,343
				1,614,590
Personal Products – 0.5%
NBTY, Inc., Term B-1 Loan, 4.25%, 10/01/17		150		150,396
Prestige Brands, Inc., Term B Loan, 5.25%, 1/31/19		168		169,209
				319,605
Pharmaceuticals – 3.7%
Aptalis Pharma, Inc. (FKA Axcan Intermediate Holdings, Inc.), Term B-1 Loan, 5.50%, 2/10/17		404		403,592
inVentiv Health, Inc. (FKA Ventive Health, Inc.), Term B-3 Loan, 6.75%, 5/15/18		224		217,138
Par Pharmaceutical Cos., Inc., Term Loan B, 5.00%, 8/02/19		425		424,044
Quintiles Transnational Corp., Term B Loan, 5.00%, 6/08/18		324		325,314
Valeant Pharmaceuticals International, Inc.:
Term Loan B, 4.75%, 9/12/19		175		174,125
Tranche B Term Loan, 4.75%, 2/13/19		324		324,996
Warner Chilcott Co. LLC, Term B-2 Loan, 4.25%, 3/15/18		58		58,317

Floating Rate Loan Interests (b)	Par (000)		Value
Pharmaceuticals (concluded)
Warner Chilcott Corp.:
Term B-1 Loan, 4.25%, 3/15/18	USD	117	$	116,634
Term Loan B1, 3.68%, 3/15/18		44		44,293
WC Luxco S.à r.l. (Warner Chilcott), Term B-3 Loan, 4.25%, 3/15/18		80		80,186
				2,168,639
Professional Services – 0.1%
On Assignment, Inc., Initial Term B Loan, 5.00%, 5/15/19		69		68,992
Real Estate Management & Development – 0.5%
Realogy Corp.:
Extended First Lien Term Loan, 4.48%, 10/10/16		288		283,550
Extended Synthetic Commitment, 0.07% - 4.40%, 10/10/16		22		22,142
				305,692
Road & Rail – 0.3%
RailAmerica, Inc., Initial Loan, 4.00%, 3/01/19		175		174,561
Semiconductors & Semiconductor Equipment – 0.6%
Freescale Semiconductor, Inc., Tranche B-1 Term Loan, 4.48%, 12/01/16		175		170,735
NXP BV/NXP Funding LLC, Tranche B Loan, 5.25%, 3/19/19		180		181,682
				352,417
Software – 3.5%
First Data Corp.:
2018 Dollar Term Loan, 4.22%, 3/26/18		225		213,655
Non Extending B-1 Term Loan, 2.97%, 9/24/14		6		5,528
Term Loan B-3, 5.39%, 9/30/18		230		225,591
Infor US, Inc. (FKA Lawson Software, Inc.), Term Loan B2, 5.25%, 4/05/18		623		624,996
Interactive Data Corp., Term B Loan, 4.50%, 2/11/18		425		426,947
Sabre, Inc., Non-Extended Initial Term Loan, 2.22%, 9/30/14		24		23,498
Sophia LP, Initial Term Loan, 6.25%, 7/19/18		270		273,371
SS&C Technologies, Inc.,/Sunshine Acquisition II, Inc.:
Funded Term B-1 Loan, 5.00%, 6/07/19		266		268,449
Funded Term B-2 Loan, 5.00%, 6/07/19		28		27,771
				2,089,806
Specialty Retail – 4.7%
General Nutrition Centers, Inc., Tranche B Term Loan, 5.25%, 3/02/18		330		329,576
The Gymboree Corp., Term Loan, 5.00%, 2/23/18		100		97,359
Harbor Freight Tools USA, Inc./Central Purchasing LLC, Initial Loan, 5.50%, 11/14/17		250		250,885
HD Supply, Inc., Term Loan, 7.25%, 10/12/17		505		520,403
J. Crew Group, Inc., Loan, 4.75%, 3/07/18		55		54,665
Jo-Ann Stores, Inc., Loan, 4.75%, 3/16/18		175		174,549
Michaels Stores, Inc., B-2 Term Loan, 4.88% - 4.94%, 7/31/16		380		383,120
The Neiman Marcus Group, Inc., Term Loan, 4.75%, 5/16/18		135		135,614
Party City Holdings, Inc., Term Loan, 5.75%, 7/27/19		275		278,231
PETCO Animal Supplies, Inc., New Loan, 4.50%, 11/24/17		325		326,017

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 39

  Schedule of Investments (continued)   BlackRock Secured Credit Portfolio (Percentages shown are based on Net Assets)

Floating Rate Loan Interests (b)	Par (000)		Value
Specialty Retail (concluded)
The Yankee Candle Co., Inc., Initial Term Loan, 5.25%, 4/02/19	USD	224	$	226,175
				2,776,594
Textiles, Apparel & Luxury Goods – 0.3%
Burlington Coat Factory Warehouse Corp., Term B-1 Loan, 5.50%, 2/23/17		150		151,383
Wireless Telecommunication Services – 0.6%
MetroPCS Wireless, Inc., Tranche B-3 Term Loan, 4.00%, 3/19/18		175		174,392
WaveDivision Holdings LLC, Term Loan B, 5.50%, 8/09/19		150		151,590
				325,982
Total Floating Rate Loan Interests – 65.7%				38,700,486
Non-Agency Mortgage-Backed Securities
Collateralized Mortgage Obligations – 1.7%
Adjustable Rate Mortgage Trust, Series 2007-1, Class 3A21, 5.87%, 3/25/37 (b)		70		68,478
Banc of America Funding Corp., Series 2005-H, Class 2A1, 2.95%, 11/20/35 (b)		516		407,673

Non-Agency Mortgage-Backed Securities	Par (000)		Value
Collateralized Mortgage Obligations (concluded)
Bear Stearns Adjustable Rate Mortgage Trust, Series 2004-8, Class 14A1, 5.26%, 11/25/34 (b)		USD 559	$	522,641
Total Non-Agency Mortgage-Backed Securities –1.7%				998,792
Total Long-Term Investments (Cost – $59,386,393) – 102.0%				60,116,499
Short-Term Securities	Shares
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (c)(d)		5,192,327		5,192,327
Total Short-Term Securities (Cost – $5,192,327) – 8.8%				5,192,327
Total Investments (Cost – $64,578,720) – 110.8%				65,308,826
Liabilities in Excess of Other Assets – (10.8)%				(6,390,342)
Net Assets – 100.0%			$	58,918,484

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(b) Variable rate security. Rate shown is as of report date.

(c) Investments in issuers considered to be an affiliate of the Fund during the year ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at September 30, 2011		Shares Purchased			Shares Sold			Shares Held at September 30, 2012		Value at September 30, 2012		Income		Realized Loss
BlackRock Liquidity Funds, TempFund, Institutional Class		176,263		5,016,064	1		–			5,192,327		$5,192,327	$	12,858		–
iShares JPMorgan USD Emerging Markets Bond Fund		5,000		–			(5,000	)		–		–	$	2,203	$	(15,052	)

¹Represents net shares purchased.

(d) Represents the current yield as of report date.

— 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. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

— Foreign currency exchange contracts as of September 30, 2012 were as follows:

Currency Purchased	Currency   Sold	Counterparty	Settlement Date	Unrealized Depreciation
EUR10,000	USD12,947	Deutsche Bank AG	10/22/12	$	(94	)
USD346,345	EUR282,500	Citigroup, Inc.	10/22/12		(16,771	)
Total				$	(16,865	)

— Fair Value Measurements - Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

— Level 1 - unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

• Level 2 - other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 - unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

See Notes to Financial Statements.

40     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments (continued)   BlackRock Secured Credit Portfolio

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of September 30, 2012:

	Level 1	Level 2		Level 3	Total
Assets:
Investments:
Long-Term Investments:
Corporate Bonds	–	$	20,417,221	–	$	20,417,221
Floating Rate Loan Interests	–		36,773,067	$ 1,927,419		38,700,486
Non-Agency Mortgage-Backed Securities	–		998,792	–		998,792
Short-Term Securities	$ 5,192,327		–	–		5,192,327
Total	$ 5,192,327	$	58,189,080	$ 1,927,419	$	65,308,826

	Level 1	Level 2			Level 3	Total
Derivative Financial Instruments1
Liabilities:
Foreign currency exchange contracts	–	$	(16,865	)	–	$	(16,865	)
Total	–	$	(16,865	)	–	$	(16,865	)

¹  Derivative financial instruments are foreign currency exchange contracts. Foreign currency exchange contracts are valued at the unrealized appreciation/ depreciation on the instrument.

Certain of the Fund’s assets are held at carrying amount, which approximates fair value for financial statement purposes. As of September 30, 2012, such assets are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2	Level 3	Total
Assets:
Cash	$	37,841	–	–	$	37,841
Foreign currency at value		3,232	–	–		3,232
Total	$	41,073	–	–	$	41,073

There were no transfers between Level 1 and Level 2 during the year ended September 30, 2012.

Certain of the Fund’s investments are categorized as Level 3 and were valued utilizing transaction prices or third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in the unobservable inputs could result in a significantly lower or higher value in such Level 3 investments.

A reconciliation of Level 3 investments and derivative financial instruments is presented when the Fund had a significant amount of Level 3 investments and derivative financial instruments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Asset-Backed Securities			Collateralized Debt Obligations			Floating Rate Loan Interests			U.S. Government Sponsored Agency Securities			Total
Assets:
Opening Balance, as of September 30, 2011	$	1,225,502		$	395,000			–			$  287,900		$	1,908,402
Transfers into Level 32		–			–			–			–			–
Transfers out of Level 32		–			–			–			–			–
Accrued discounts/premiums		25			1,066		$	974			–			2,065
Net realized gain (loss)		4,526			(47,939	)		38			(50,476	)		(93,851	)
Net change in unrealized appreciation/depreciation3		(418	)		49,373			6,568			48,660			104,183
Purchases		–			–			1,925,326			(8,466	)		1,916,860
Sales		(1,229,635	)		(397,500	)		(5,487	)		(277,618	)		(1,910,240	)
Closing Balance, as of September 30, 2012		–			–		$	1,927,419			–		$	1,927,419

² Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period.

³ Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of September 30, 2012 was $6,568.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 41

  Schedule of Investments (concluded)   BlackRock Secured Credit Portfolio

The following table is a reconciliation of Level 3 derivative financial instruments for which significant unobservable inputs were used in determining fair value:

	Credit Contracts
	Assets			Liabilities	Total
Opening Balance, as of September 30, 2011	$	405		–	$	405
Transfers into Level 34		–		–		–
Transfers out of Level 34		–		–		–
Accrued discounts/premiums		–		–		–
Net realized gain (loss)		2,260		–		2,260
Net change in unrealized appreciation/depreciation5		(405	)	–		(405	)
Purchases		–		–		–
Issues6		–		–		–
Sales		(2,260	)	–		(2,260	)
Settlements7		–		–		–
Closing Balance, as of September 30, 2012		–		–		–

⁴  Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period.

⁵  Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on swaps still held as of September 30, 2012 was $0.

⁶  Issues represent upfront cash received on certain derivative financial instruments.

⁷  Settlements represent periodic contractual cash flows and/or cash flows to terminate certain derivative financial instruments.

See Notes to Financial Statements.

42     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments September 30, 2012   BlackRock U.S. Government Bond Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities	Par (000)		Value
Conseco Financial Corp., Series 1997-5, Class A7, 7.13%, 5/15/29 (a)	USD	349	$	378,095
Fannie Mae REMIC Trust, Series 1996-W1, Class AL, 7.25%, 3/25/26 (a)		89		98,978
SLM Student Loan Trust:
Series 2008-5, Class A2, 1.55%, 10/25/16 (a)		1,917		1,930,479
Series 2008-5, Class A3, 1.75%, 1/25/18 (a)		1,130		1,156,808
Series 2008-5, Class A4, 2.15%, 7/25/23 (a)		3,040		3,204,695
U.S. Small Business Administration, Series 2003-10A, Class 1, 4.63%, 3/10/13		306		311,027
Total Asset-Backed Securities – 0.6%				7,080,082
Corporate Bonds
Oil, Gas & Consumable Fuels – 0.1%
ENSCO Offshore Co., 6.36%, 12/01/15		811		875,657
Non-Agency Mortgage-Backed Securities
Interest Only Commercial Mortgage-Backed Securities – 0.0%
WaMu Commercial Mortgage Securities Trust, Series 2005-C1A, Class X, 1.35%, 5/25/36 (a)(b)		4,519		80,064
Project Loans – 0.0%
Federal Housing Authority, USGI Project, Series 56, 7.46%, 1/01/23		84		82,310
U.S. Government Sponsored Agency Securities
Agency Obligations – 4.4%
Fannie Mae:
1.75%, 5/07/13		2,665		2,688,788
1.83%, 10/09/19 (c)(d)		4,400		3,870,583
4.13%, 4/15/14		2,400		2,542,231
6.63%, 11/15/30 (c)(e)		3,900		5,984,589
Federal Home Loan Bank:
3.63%, 10/18/13 (c)		10,750		11,131,012
4.00%, 9/06/13 (c)		9,100		9,421,949
Freddie Mac:
2.50%, 4/23/14		1,650		1,708,123
3.75%, 3/27/19		3,300		3,845,658
4.38%, 7/17/15		6,100		6,774,221
4.88%, 6/13/18		3,300		4,018,169
Small Business Administration Participation Certificates:
Series 1996-20H, 7.25%, 8/01/16		201		214,885
Series 1996-20J, 7.20%, 10/01/16		220		234,806
U.S. Small Business Administration, Series 1998-20J, Class 1, 5.50%, 10/01/18		559		604,529
				53,039,543
Collateralized Mortgage Obligations – 5.9%
Fannie Mae, Series 2002-T6, Class A1, 3.31%, 2/25/32		239		247,855
Freddie Mac, Series K013, Class A2, 3.97%, 1/25/21 (a)		25,020		28,894,147

U.S. Government Sponsored Agency Securities	Par (000)			Value
Collateralized Mortgage Obligations (concluded)
Ginnie Mae:
Series 2005-9, Class Z, 4.65%, 1/16/45 (a)	USD	7,109		$	7,893,400
Series 2005-10, Class ZB, 5.18%, 12/16/44 (a)		4,069			4,722,639
Series 2005-29, Class Z, 4.25%, 4/16/45 (a)		6,164			6,523,947
Series 2005-59, Class ZA, 4.96%, 3/16/46 (a)		12,291			14,144,138
Series 2005-67, Class Z, 4.72%, 8/16/45 (a)		7,650			8,279,012
					70,705,138
Interest Only Collateralized Mortgage Obligations – 1.0%
Fannie Mae:
Series 2011-66, Class SA, 6.38%, 11/25/39 (a)		4,505			419,506
Series 2011-127, Class PS, 6.43%, 8/25/41 (a)		15,429			2,424,993
Series 2012-88, Class SB, 6.45%, 7/25/42 (a)		21,021			4,051,764
Freddie Mac, Series 3919, Class QS, 6.48%, 8/15/30 (a)		10,004			1,836,376
Ginnie Mae:
Series 2004-10, 0.40%, 1/16/44 (a)		27,238			192,705
Series 2004-77, 0.44%, 9/16/44 (a)		62,954			677,637
Series 2005-9, 0.45%, 1/16/45 (a)		44,815			907,465
Series 2005-50, 0.69%, 6/16/45 (a)		17,216			423,541
Series 2006-30, 0.41%, 5/16/46 (a)		24,154			761,011
					11,694,998
Mortgage-Backed Securities – 144.6%
Fannie Mae Mortgage-Backed Securities:
2.50%, 10/01/27-10/01/42 (f)		125,900			132,133,938
3.00%, 10/01/27-10/01/42 (f)		281,200			297,000,407
3.05%, 3/01/41 (a)		1,577			1,654,803
3.15%, 3/01/41 (a)		2,052			2,150,112
3.30%, 12/01/40 (a)		2,552			2,705,911
3.33%, 6/01/41 (a)		3,671			3,890,188
3.48%, 9/01/41 (a)		2,657			2,813,382
3.50%, 1/01/27-10/01/42 (f)		102,433			109,878,226
4.00%, 2/01/25-10/01/42 (f)		150,829			162,608,895
4.50%, 2/01/25-10/01/42 (f)		287,919			311,849,513
5.00%, 9/01/33-10/01/42 (f)		154,653			168,741,900
5.50%, 9/01/34-10/01/42 (f)		57,470			63,281,123
6.00%, 5/01/33-10/01/42 (f)		134,897			149,213,562
6.50%, 5/01/40		13,552			15,442,956
Freddie Mac Mortgage-Backed Securities:
2.92%, 6/01/42 (a)		1,932			2,040,900
3.02%, 2/01/41 (a)		2,643			2,774,442
3.50%, 10/01/27-10/01/42 (f)		17,800			19,006,063
4.00%, 10/01/27-10/01/42 (f)		41,000			43,971,250
4.50%, 10/01/42 (f)		69,800			75,035,000
5.00%, 10/01/36-5/01/39		21,598			23,491,974
5.50%, 4/01/38-1/01/40		15,076			16,441,790
13.00%, 4/01/14		–  (g	)		42

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 43

  Schedule of Investments (continued)   BlackRock U.S. Government Bond Portfolio (Percentages shown are based on Net Assets)

U.S. Government Sponsored Agency Securities	Par (000)			Value
Mortgage-Backed Securities (concluded)
Ginnie Mae Mortgage-Backed Securities:
3.00%, 9/15/35	USD	98		$	97,951
3.50%, 9/20/42-10/15/42 (f)		24,600			26,922,481
4.00%, 9/15/40-8/15/42		23,179			25,564,040
4.50%, 1/20/40-10/15/42 (f)		42,154			46,674,558
5.00%, 10/20/39-10/15/42 (f)		23,461			25,960,488
7.00%, 6/15/23-3/15/24		–  (g	)		452
					1,731,346,347
Total U.S. Government Sponsored Agency Securities – 155.9%					1,866,786,026
U.S. Treasury Obligations
U.S. Treasury Bonds:
3.00%, 5/15/42		5			5,184
2.75%, 8/15/42		54,650			53,744,887
U.S. Treasury Inflation Indexed Bonds, 2.13%, 2/15/41		2,265			3,327,410
U.S. Treasury Inflation Indexed Notes, 0.13%, 4/15/17-7/15/22		8,125			8,797,011
U.S. Treasury Notes:
0.25%, 8/31/14-9/15/15		270,983			270,820,547
0.88%, 2/28/17		5			5,077
0.63%, 8/31/17-9/30/17		119,673			119,732,207
1.00%, 8/31/19		70,555			70,378,614
1.63%, 8/15/22		25,381			25,353,233
Total U.S. Treasury Obligations – 46.1%					552,164,170
Total Long-Term Investments
(Cost – $2,406,419,527) – 202.7%					2,427,068,309
Short-Term Securities	Shares
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (h)(i)		43,682,788			43,682,788
Total Short-Term Securities
(Cost – $43,682,788) – 3.6%					43,682,788
Options Purchased	Notional Amount (000)
Over-the-Counter Barrier Options – 0.0%
GBP Currency Put/USD Currency Call, Strike Price USD 1.62, Barrier Price USD 1.58, Expires 10/17/12, Broker BNP Paribas SA		GBP 1,743			10,415
USD Currency Put/BRL Currency Call, Strike Price BRL 2.05, Barrier Price BRL 2.01, Expires 10/09/12, Broker Barclays Plc		USD 2,491			11,581
USD Currency, Barrier Price CAD 1.01, Expires 12/17/12, Broker BNP Paribas SA		56			26,290
USD Currency, Barrier Price Range BRL 1.98-BRL 2.07, Expires 1/23/13, Broker BNP Paribas SA		798			50,349
					98,635
Over-the-Counter Interest Rate Call Swaptions – 0.0%
Receive a fixed rate of 1.07% and pay a floating rate based on 3-month LIBOR, Expires 7/25/13, Broker Deutsche Bank AG		33,900			326,593
Receive a fixed rate of 1.16% and pay a floating rate based on 3-month LIBOR, Expires 7/11/13, Broker Citigroup, Inc.		2,100			26,730

Options Purchased	Notional Amount (000)		Value
Over-the-Counter Interest Rate Call Swaptions (concluded)
Receive a fixed rate of 1.55% and pay a floating rate based on 3-month LIBOR, Expires 12/14/12, Broker JPMorgan Chase & Co.	USD	7,000	$	30,811
Receive a fixed rate of 2.25% and pay a floating rate based on 3-month LIBOR, Expires 11/09/12, Broker Bank of America Corp.		7,500		20,740
Receive a fixed rate of 2.68% and pay a floating rate based on 3-month LIBOR, Expires 3/11/13, Broker Citigroup, Inc.		3,300		168,802
				573,676
Over-the-Counter Interest Rate Put Swaptions – 0.1%
Pay a fixed rate of 1.07% and receive a floating rate based on 3-month LIBOR, Expires 7/25/13, Broker Deutsche Bank AG		33,900		290,201
Pay a fixed rate of 1.16% and receive a floating rate based on 3-month LIBOR, Expires 7/11/13, Broker Citigroup, Inc.		2,100		13,772
Pay a fixed rate of 2.13% and receive a floating rate based on 3-month LIBOR, Expires 3/21/13, Broker Deutsche Bank AG		57,600		9,544
Pay a fixed rate of 2.13% and receive a floating rate based on 3-month LIBOR, Expires 3/21/13, Broker Deutsche Bank AG		19,900		3,298
Pay a fixed rate of 2.30% and receive a floating rate based on 3-month LIBOR, Expires 11/23/12, Broker Citigroup, Inc.		17,400		12,358
Pay a fixed rate of 2.68% and receive a floating rate based on 3-month LIBOR, Expires 3/11/13, Broker Citigroup, Inc.		3,300		153,986
Pay a fixed rate of 4.50% and receive a floating rate based on 3-month LIBOR, Expires 3/20/17, Broker Deutsche Bank AG		7,000		171,718
				654,877
Total Options Purchased
(Cost – $2,954,754) – 0.1%				1,327,188
Total Investments Before TBA Sale Commitments and Options Written
(Cost – $2,453,057,069) – 206.4%				2,472,078,285
TBA Sale Commitments (f)	Par (000)
Fannie Mae Mortgage-Backed Securities:
2.50%, 10/01/27		110,700		(116,306,140	)
3.00%, 10/01/27-10/01/42		217,600		(229,844,860	)
3.50%, 10/01/27-10/01/42		69,200		(74,029,156	)
4.00%, 10/01/27-10/01/42		107,170		(115,387,497	)
4.50%, 10/01/27-10/01/42		250,300		(270,838,157	)
5.00%, 10/01/42		133,200		(145,156,782	)
5.50%, 10/01/42		27,000		(29,598,750	)
6.00%, 10/01/42		105,600		(116,565,250	)
Freddie Mac Mortgage-Backed Securities:
4.00%, 10/01/42		17,600		(18,914,500	)
4.50%, 10/01/42		34,900		(37,528,406	)

See Notes to Financial Statements.

44     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments (continued)   BlackRock U.S. Government Bond Portfolio (Percentages shown are based on Net Assets)

TBA Sale Commitments (f)	Par (000)		Value
Ginnie Mae Mortgage-Backed Securities:
3.50%, 10/15/42	USD	10,800	$	(11,805,750	)
4.00%, 10/15/42		2,100		(2,312,403	)
4.50%, 10/15/42		2,900		(3,182,750	)
Total TBA Sale Commitments
(Proceeds – $1,167,629,444) – (97.8)%				(1,171,470,401	)
Options Written	Notional Amount (000)
Over-the-Counter Barrier Options – (0.0)%
USD Currency, Barrier Price CAD 1.01, Expires 11/05/12, Broker BNP Paribas SA		56		(16,720	)
USD Currency, Barrier Price Range BRL 1.98-BRL 2.07, Expires 1/23/13, Broker Royal Bank of Scotland Group Plc		798		(50,349	)
				(67,069	)
Over-the-Counter Interest Rate Call Swaptions – (0.1)%
Pay a fixed rate of 1.00% and receive a floating rate based on 3-month LIBOR, Expires 7/10/14, Broker Bank of America Corp.		14,300		(83,616	)
Pay a fixed rate of 1.00% and receive a floating rate based on 3-month LIBOR, Expires 7/11/14, Broker Bank of America Corp.		18,300		(107,271	)
Pay a fixed rate of 1.00% and receive a floating rate based on 3-month LIBOR, Expires 7/14/14, Broker Bank of America Corp.		14,300		(83,870	)
Pay a fixed rate of 1.25% and receive a floating rate based on 3-month LIBOR, Expires 6/20/14, Broker Barclays Plc		9,700		(108,920	)
Pay a fixed rate of 1.43% and receive a floating rate based on 3-month LIBOR, Expires 7/28/14, Broker Deutsche Bank AG		6,100		(95,826	)
Pay a fixed rate of 2.05% and receive a floating rate based on 3-month LIBOR, Expires 4/14/14, Broker Deutsche Bank AG		7,600		(306,811	)
Pay a fixed rate of 3.65% and receive a floating rate based on 3-month LIBOR, Expires 3/27/17, Broker JPMorgan Chase & Co.		3,200		(312,132	)
Pay a fixed rate of 5.00% and receive a floating rate based on 3-month LIBOR, Expires 4/22/13, Broker JPMorgan Chase & Co.		2,300		(670,784	)
				(1,769,230	)
Over-the-Counter Interest Rate Put Swaptions – (0.1)%
Receive a fixed rate of 1.43% and pay a floating rate based on 3-month LIBOR, Expires 7/28/14, Broker Deutsche Bank AG		6,100		(104,356	)
Receive a fixed rate of 1.95% and pay a floating rate based on 3-month LIBOR, Expires 7/16/14, Broker Citigroup, Inc.		11,300		(103,928	)
Receive a fixed rate of 2.00% and pay a floating rate based on 3-month LIBOR, Expires 7/10/14, Broker Bank of America Corp.		14,300		(122,365	)
Receive a fixed rate of 2.00% and pay a floating rate based on 3-month LIBOR, Expires 7/11/14, Broker Bank of America Corp.		18,300		(157,086	)
Receive a fixed rate of 2.00% and pay a floating rate based on 3-month LIBOR, Expires 7/14/14, Broker Bank of America Corp.		14,300		(123,308	)
Receive a fixed rate of 2.05% and pay a floating rate based on 3-month LIBOR, Expires 4/14/14, Broker Deutsche Bank AG		7,600		(44,124	)

Options Written	Notional Amount (000)		Value
Over-the-Counter Interest Rate Put Swaptions (concluded)
Receive a fixed rate of 2.25% and pay a floating rate based on 3-month LIBOR, Expires 6/20/14, Broker Barclays Plc	USD	9,700	$	(58,515	)
Receive a fixed rate of 3.65% and pay a floating rate based on 3-month LIBOR, Expires 3/27/17, Broker JPMorgan Chase & Co.		3,200		(132,905	)
Receive a fixed rate of 5.00% and pay a floating rate based on 3-month LIBOR, Expires 4/22/13, Broker JPMorgan Chase & Co.		2,300		(15	)
Receive a fixed rate of 6.00% and pay a floating rate based on 3-month LIBOR, Expires 3/20/17, Broker Deutsche Bank AG		14,000		(151,767	)
				(998,369	)
Total Options Written
(Premiums Received – $3,154,145) – (0.2)%				(2,834,668	)
Total Investments Net of TBA Sale Commitments and Options Written – 108.4%				1,297,773,216
Liabilities in Excess of Other Assets – (8.4)%				(100,298,286	)
Net Assets – 100.0%			$	1,197,474,930

(a) Variable rate security. Rate shown is as of report date.

(b) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(c) All or a portion of security has been pledged as collateral in connection with swaps.

(d) Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

(e) All or a portion of security has been pledged as collateral in connection with open financial futures contracts.

(f) Represents or includes a TBA transaction. Unsettled TBA transactions as of September 30, 2012 were as follows:

Counterparty	Value			Unrealized Appreciation (Depreciation)
Bank of America Corp.	$	8,245,750		$	(193,359	)
Barclays Plc	$	(34,182,094	)	$	(371,111	)
BNP Paribas SA	$	(4,069,969	)	$	(44,699	)
Citigroup, Inc.	$	115,756,394		$	1,490,702
Credit Suisse Group AG	$	(64,060,316	)	$	(183,304	)
Deutsche Bank AG	$	(84,304,937	)	$	(4,404	)
Goldman Sachs Group, Inc.	$	(10,158,563	)	$	81,512
JPMorgan Chase & Co.	$	134,296,546		$	1,213,760
Morgan Stanley	$	25,739,441		$	139,102
Nomura Securities International, Inc.	$	26,890,359		$	(39,430	)
Royal Bank of Scotland Group Plc	$	(41,131,500	)	$	(454,286	)
UBS AG	$	8,844,688		$	36,672
Wells Fargo & Co.	$	5,278,219		$	22,969

(g) Par is less than $500.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 45

  Schedule of Investments (continued)   BlackRock U.S. Government Bond Portfolio

(h) Investments in issuers considered to be an affiliate of the Fund during the year ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at September 30, 2011		Net Activity	Shares Held at September 30, 2012	Income
BlackRock Liquidity Funds, TempFund, Institutional Class		174,900,544	(131,217,756)	43,682,788	$	34,611

(i) Represents the current yield as of report date.

— 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. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

— Foreign currency exchange contracts as of September 30, 2012 were as follows:

Currency Purchased		Currency Sold		Counterparty	Settle- ment Date	Unrealized Apprec- iation (Deprec- iation)
BRL	526,646	USD	259,355	Citigroup, Inc.	10/02/12	$	429
BRL	524,797	USD	259,176	UBS AG	10/02/12		(457	)
USD	259,176	BRL	526,646	Citigroup, Inc.	10/02/12		(455	)
USD	258,445	BRL	524,797	UBS AG	10/02/12		(427	)
AUD	1,950,000	USD	2,014,818	Citigroup, Inc.	10/03/12		6,937
CAD	2,950,000	USD	3,020,081	Citigroup, Inc.	10/03/12		(19,694	)
GBP	249,068	USD	403,830	JPMorgan Chase & Co.	10/09/12		(1,648	)
USD	403,402	GBP	249,068	Goldman Sachs Group, Inc.	10/09/12		1,221
USD	201,908	GBP	124,534	UBS AG	10/09/12		817
NOK	19,355,000	SEK	22,149,862	HSBC Holdings Plc	10/17/12		6,013
SEK	22,374,670	NOK	19,355,000	BNP Paribas SA	10/17/12		28,191
EUR	862,000	USD	1,118,049	UBS AG	10/22/12		(10,063	)

Total $ 10,864

— Financial futures contracts purchased as of September 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Apprec- iation (Deprec- iation)
87	U.S. Treasury Notes (2 Year)	Chicago Board Options	December 2012		USD 19,186,219	$10,227
323	U.S. Treasury Notes (5 Year)	Chicago Board Options	December 2012		USD 40,256,399	3,128
114	U.S. Treasury Notes (10 Year)	Chicago Board Options	December 2012		USD 15,217,219	(4,732)

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Apprec- iation (Deprec- iation)
54	Australian Dollar Futures	Chicago Mercantile	December 2012	USD	5,563,620	$	(31,437	)
500	3-month CBA	Montreal	December 2012	USD	125,534,025		(134,862	)
12	Euro Currency Futures	Chicago Mercantile	December 2012	USD	1,929,300		(3,524	)
Total						$	(161,200	)

— Financial futures contracts sold as of September 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration	Notional Value		Unrea- lized Apprec- iation (Deprec- iation)
37	U.S. Treasury Bonds (30 Year)	Chicago Board Options	December 2012	USD	5,526,875	$	(14,545	)
38	Ultra Treasury Bonds	Chicago Board Options	December 2012	USD	6,278,312		45,293
31	Canadian Dollar Futures	Chicago Mercantile	December 2012	USD	3,146,190		(5,653	)
28	Euro Dollar Futures	Chicago Mercantile	December 2012	USD	6,977,600		(862	)
12	Euro-Bund	Eurex	December 2012	USD	2,186,178		(3,655	)
16	Euro-OAT French Government Bond Futures	Eurex	December 2012	USD	2,754,119		(15,996	)
28	Euro Dollar Futures	Chicago Mercantile	March 2013	USD	6,977,250		(2,086	)
28	Euro Dollar Futures	Chicago Mercantile	June 2013	USD	6,976,200		(162	)
21	Euro Dollar Futures	Chicago Mercantile	September 2013	USD	5,231,625		(1,009	)
500	3-month CBA	Montreal	December 2013	USD	125,445,021		197,679
21	Euro Dollar Futures	Chicago Mercantile	December 2013	USD	5,230,313		(1,129	)
21	Euro Dollar Futures	Chicago Mercantile	March 2014	USD	5,229,262		(2,142	)
21	Euro Dollar Futures	Chicago Mercantile	June 2014	USD	5,227,162		(647	)
16	Euro Dollar Futures	Chicago Mercantile	September 2014	USD	3,980,600		(355	)
16	Euro Dollar Futures	Chicago Mercantile	December 2014	USD	3,978,200		(602	)
16	Euro Dollar Futures	Chicago Mercantile	March 2015	USD	3,976,000		(5,380	)
16	Euro Dollar Futures	Chicago Mercantile	June 2015	USD	3,973,000		(2,806	)
Total						$	185,943

See Notes to Financial Statements.

46     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments (continued)   BlackRock U.S. Government Bond Portfolio

— Interest rate swaps outstanding as of September 30, 2012 were as follows:

Fixed Rate	Floating Rate	Counterparty/ Exchange	Expiration Date	Notional Amount (000)		Unrealized Appreciation (Depreciation)
0.49%1	3-month LIBOR	Chicago Mercantile	8/22/14	USD	15,400	$	(35,338	)
0.44%1	3-month LIBOR	Chicago Mercantile	8/29/14	USD	15,400		(18,214	)
0.42%1	3-month LIBOR	Chicago Mercantile	9/04/14	USD	10,960		(9,956	)
0.42%2	3-month LIBOR	Citigroup, Inc.	10/01/14	USD	42,100		39,545
1.39%1	3-month LIBOR	Deutsche Bank AG	3/19/17	USD	42,100		(1,369,584	)
1.39%1	3-month LIBOR	Deutsche Bank AG	3/19/17	USD	18,200		(592,077	)
1.39%2	3-month LIBOR	Royal Bank of Scotland Group Plc	6/29/17	USD	4,100		140,099
0.82%1	3-month LIBOR	Citigroup, Inc.	7/18/17	USD	4,000		(20,271	)
1.74%2	3-month LIBOR	Deutsche Bank AG	3/30/18	USD	6,300		250,873
1.74%2	3-month LIBOR	Deutsche Bank AG	3/30/18	USD	700		27,875
1.20%2	3-month LIBOR	Deutsche Bank AG	8/30/18	USD	4,600		25,782
3.27%1	3-month LIBOR	Deutsche Bank AG	5/16/21	USD	25,020		(3,972,304	)
3.90%1	3-month LIBOR	UBS AG	3/21/22	USD	6,000		(998,773	)

Fixed Rate	Floating Rate	Counterparty/ Exchange	Expiration Date	Notional Amount (000)		Unrealized Appreciation (Depreciation)
2.82%1	3-month CBA	Deutsche Bank AG	5/18/22	CAD	6,800	$	(38,133	)
2.86%1	3-month CBA	Morgan Stanley	5/23/22	CAD	6,800		(47,787	)
1.81%2	3-month LIBOR	Citigroup, Inc.	6/22/22	USD	4,200		76,021
1.76%1	3-month LIBOR	Deutsche Bank AG	7/05/22	USD	4,200		(45,912	)
1.94%1	3-month LIBOR	Deutsche Bank AG	8/22/22	USD	3,900		(95,476	)
1.80%1	3-month LIBOR	Citigroup, Inc.	8/28/22	USD	3,900		(43,100	)
1.77%2	3-month LIBOR	Citigroup, Inc.	8/29/22	USD	3,900		30,325
1.73%1	3-month LIBOR	Bank of America Corp.	9/27/22	USD	1,500		(3,907	)
2.85%1	3-month LIBOR	Bank of America Corp.	2/09/42	USD	1,800		(102,648	)
2.52%1	3-month LIBOR	Deutsche Bank AG	9/04/42	USD	3,200		51,303
2.69%2	3-month LIBOR	Citigroup, Inc.	9/17/42	USD	500		10,100
Total						$	(6,741,557	)

¹  Fund pays the fixed rate and receives the floating rate.

²  Fund pays the floating rate and receives the fixed rate.

— Total return swaps outstanding as of September 30, 2012 were as follows:

Reference Entity	Fixed Rate/ Floating Rate	Counterparty	Expiration Date		Notional Amount (000)		Unrealized Appreciation (Depreciation)
Change in Return of the Consumer Price Index for All Urban Consumers	2.18%1	Bank of America Corp.		10/06/21	USD	6,385	$	(220,889	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR2	Barclays Plc		1/12/40	USD	5,035		(15,086	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR3	Citigroup, Inc.		1/12/40	USD	6,062		(49,309	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR3	JPMorgan Chase & Co.		1/12/40	USD	19,676		(58,678	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR2	JPMorgan Chase & Co.		1/12/40	USD	9,350		(13,148	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR3	Barclays Plc		1/12/41	USD	5,009		6,396
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR3	JPMorgan Chase & Co.		1/12/41	USD	9,416		14,714
Total							$	(336,000	)

1 Fund pays the total return of the reference entity and receives the fixed rate. Net payment made at termination.

2 Fund pays the total return of the reference entity and receives the floating rate.

3 Fund pays the floating rate and receives the total return of the reference entity.

— Fair Value Measurements - Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation tech-niques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

— Level 1 - unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

— Level 2 - other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and

    default rates) or other market-corroborated inputs)

— Level 3 - unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 47

  Schedule of Investments (concluded)   BlackRock U.S. Government Bond Portfolio

within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of September 30, 2012:

	Level 1	Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities	–	$	7,080,082			–	$	7,080,082
Corporate Bonds	–		875,657			–		875,657
Non-Agency Mortgage-Backed Securities	–		80,064			–		80,064
Project Loans	–		–		$	82,310		82,310
U.S. Government Sponsored Agency Securities	–		1,866,786,026			–		1,866,786,026
U.S. Treasury Obligations	–		552,164,170			–		552,164,170
Short-Term Securities	$43,682,788		–			–		43,682,788
Liabilities:
Investments in Securities:
TBA Sale Commitments	–		(1,171,470,401	)		–		(1,171,470,401	)
Total	$43,682,788	$	1,255,515,598		$	82,310	$	1,299,280,696

	Level 1			Level 2			Level 3	Total
Derivative Financial Instruments1
Assets:
Foreign currency exchange contracts	$	429		$	141,814		–	$	142,243
Interest rate contracts		256,327			1,901,586		–		2,157,913
Liabilities:
Foreign currency exchange contracts		(41,041	)		(99,386	)	–		(140,427	)
Interest rate contracts		(190,970	)		(10,297,300	)	–		(10,488,270	)
Other contracts		–			(220,889	)	–		(220,889	)
Total	$	24,745		$	(8,574,175	)	–	$	(8,549,430	)

¹  Derivative financial instruments are swaps, financial futures contracts and options. Swaps and financial futures contracts are valued at the unrealized appreciation/ depreciation on the instrument and options are shown at value.

Certain of the Fund’s assets and liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of September 30, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3	Total
Assets:
Cash	$	92,299,508		–		–	$	92,299,508
Foreign currency at value		5,251		–		–		5,251
Cash pledged as collateral for financial futures contracts		736,000		–		–		736,000
Cash pledged as collateral for swap contracts		8,413,000		–		–		8,413,000
Liabilities:
Cash received as collateral for swap contracts		–	$	(200,000	)	–		(200,000	)
Total	$	101,453,759	$	(200,000	)	–	$	101,253,759

Certain of the Fund’s investments are categorized as Level 3 and were valued utilizing transaction prices or third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in the unobservable inputs could result in a significantly lower or higher value in such Level 3 investments.

There were no transfers between levels during the year ended September 30, 2012.

See Notes to Financial Statements.

48     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Statements of Assets and Liabilities

September 30, 2012	BlackRock GNMA Portfolio			BlackRock Inflation Protected Bond Portfolio		BlackRock Long Duration Bond Portfolio		BlackRock Secured Credit Portfolio			BlackRock U.S. Government Bond Portfolio
Assets
Investments at value – unaffiliated1	$	3,517,212,190		$	5,478,589,858	$	267,908,070	$	60,116,499		$	2,428,395,497
Investments at value – affiliated2		24,007,600			11,001,319		11,361,420		5,192,327			43,682,788
Cash		6,191,643			–		10,413		37,841			92,299,508
Cash pledged as collateral for financial futures contracts		1,272,000			3,061,000		327,000		–			736,000
Cash pledged as collateral for swap contracts		10,938,000			5,843,000		30,000		–			8,413,000
Foreign currency at value3		–			879,402		1,374		3,232			5,251
Variation margin receivable		64,332			189,234		12,802		–			318,536
Investments sold receivable		460,345,924			2,600,464		1,242,351		689,640			73,999,874
TBA sale commitments receivable		1,542,978,412			–		–		–			1,167,629,444
Swap premiums paid		200,050			153,177		45,402		–			287,515
Unrealized appreciation on foreign currency exchange contracts		–			4,958,848		12,548		–			43,608
Unrealized appreciation on swaps		5,276,547			5,300,458		195,124		–			673,033
Capital shares sold receivable		7,124,719			16,846,215		198,925		65,894			3,587,147
Interest receivable		5,881,544			16,867,723		2,564,671		472,984			2,938,500
Receivable from Manager		45,814			195,293		6,574		36,740			17,632
Principal paydown receivable		33,837			–		–		–			35,717
Dividends receivable – affiliated		1,763			8,873		2,112		582			2,067
Prepaid expenses		86,186			157,115		32,355		12,566			59,057
Other assets		–			–		66,149		–			–
Total assets		5,581,660,561			5,546,651,979		284,017,290		66,628,305			3,823,124,174
Liabilities
Bank overdraft		–			531,352		–		–			–
Options written at value4		16,032,871			21,712,873		281,836		–			2,834,668
TBA sale commitments at value5		1,547,363,636			–		–		–			1,171,470,401
Reverse repurchase agreements		–			113,793,750		–		–			–
Cash received as collateral for swap contracts		1,200,000			3,100,000		–		–			200,000
Variation margin payable		–			78,985		98,450		–			130,146
Investments purchased payable		2,502,782,881			13,876,760		986,326		7,318,197			1,435,980,030
Swap premiums received		557,161			1,164,650		119,405		–			942,283
Unrealized depreciation on foreign currency exchange contracts		–			6,892,811		42,932		16,865			32,744
Unrealized depreciation on swaps		989,245			2,625,946		68,590		–			7,750,590
Interest expense payable		–			60,500		–		–			–
Income dividends payable		1,694,858			2		67,246		95,534			1,054,804
Capital shares redeemed payable		19,104,742			11,703,841		46,841		99,799			3,416,714
Investment advisory fees payable		484,460			1,021,676		68,549		–			420,189
Service and distribution fees payable		360,922			1,087,758		6,673		16,377			347,677
Other affiliates payable		117,829			272,656		25,491		81			111,463
Officer’s and Trustees’ fees payable		10,004			24,792		4,998		4,078			9,121
Other accrued expenses payable		810,692			2,347,664		126,996		158,890			948,414
Total liabilities		4,091,509,301			180,296,016		1,944,333		7,709,821			2,625,649,244
Net Assets	$	1,490,151,260		$	5,366,355,963	$	282,072,957	$	58,918,484		$	1,197,474,930
Net Assets Consist of
Paid-in capital	$	1,430,703,215		$	4,810,944,399	$	227,307,455	$	56,301,613		$	1,197,333,191
Undistributed (distributions in excess of) net investment income		(2,217,915	)		1,951,134		1,395,271		(78,669	)		(627,550	)
Accumulated net realized gain (loss)		28,529,963			65,255,454		20,740,552		1,982,029			(7,687,628	)
Net unrealized appreciation/depreciation		33,135,997			488,204,976		32,629,679		713,511			8,456,917
Net Assets	$	1,490,151,260		$	5,366,355,963	$	282,072,957	$	58,918,484		$	1,197,474,930
1 Investments at cost – unaffiliated	$	3,478,257,396		$	4,989,729,024	$	234,850,767	$	59,386,393		$	2,409,374,281
2 Investments at cost – affiliated		24,007,600			11,001,319		11,361,420		5,192,327			43,682,788
3 Foreign currency at cost		–			882,724		1,357		3,126			5,205
4 Premiums received		10,051,292			18,981,563		379,260		–			3,154,145
5 Proceeds from TBA sale commitments		1,542,978,412			–		–		–			1,167,629,444

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	49

Statements of Assets and Liabilities (concluded)

September 30, 2012	BlackRock GNMA Portfolio		BlackRock Inflation Protected Bond Portfolio		BlackRock Long Duration Bond Portfolio		BlackRock Secured Credit Portfolio		BlackRock U.S. Government Bond Portfolio
Net Asset Value
BlackRock
Net assets.	$	13,349,221	$	455,027,073	$	195,167,096		–		–
Shares outstanding6		1,275,009		37,917,293		15,988,921		–		–
Net asset value	$	10.47	$	12.00	$	12.21		–		–
Institutional
Net assets.	$	622,555,884	$	1,937,316,203	$	61,710,918	$	21,878,585	$	171,180,213
Shares outstanding6		59,327,303		158,429,121		5,065,168		2,076,640		15,645,828
Net asset value	$	10.49	$	12.23	$	12.18	$	10.54	$	10.94
Service
Net assets.	$	79,210,520	$	88,555,367		–		–	$	5,020,590
Shares outstanding6		7,557,116		7,258,996		–		–		459,136
Net asset value	$	10.48	$	12.20		–		–	$	10.93
Investor A
Net assets.	$	457,536,729	$	2,089,998,500	$	25,194,943	$	22,199,150	$	742,412,594
Shares outstanding6		43,421,562		172,906,353		2,065,312		2,107,872		67,706,940
Net asset value	$	10.54	$	12.09	$	12.20	$	10.53	$	10.97
Investor B
Net assets.	$	5,777,809	$	7,300,838		–		–	$	5,388,401
Shares outstanding6		550,154		611,963		–		–		493,022
Net asset value	$	10.50	$	11.93		–		–	$	10.93
Investor B1
Net assets.		–		–		–		–	$	17,792,967
Shares outstanding6		–		–		–		–		1,628,462
Net asset value		–		–		–		–	$	10.93
Investor C
Net assets.	$	311,721,097	$	788,157,982		–	$	14,840,749	$	101,143,981
Shares outstanding6		29,712,809		65,608,643		–		1,408,427		9,235,110
Net asset value	$	10.49	$	12.01		–	$	10.54	$	10.95
Investor C1
Net assets		–		–		–		–	$	118,369,258
Shares outstanding6		–		–		–		–		10,811,855
Net asset value		–		–		–		–	$	10.95
Class R
Net assets		–		–		–		–	$	36,166,926
Shares outstanding6		–		–		–		–		3,298,903
Net asset value		–		–		–		–	$	10.96

⁶  Unlimited number of shares authorized, $0.001 par value.

See Notes to Financial Statements.
50	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

Statements of Operations

Year Ended September 30, 2012	BlackRock GNMA Portfolio			BlackRock Inflation Protected Bond Portfolio			BlackRock Long Duration Bond Portfolio			BlackRock Secured Credit Portfolio			BlackRock U.S. Government Bond Portfolio
Investment Income
Interest.	$	36,062,388		$	91,326,625		$	11,432,709		$	2,533,744		$	26,957,676
Dividends – unaffiliated		–			–			7,986			5,184			–
Dividends – affiliated		43,084			108,164			18,695			15,061			34,611
Total income		36,105,472			91,434,789			11,459,390			2,553,989			26,992,287
Expenses
Investment advisory.		6,914,845			17,023,079			1,342,404			282,476			6,125,050
Service and distribution – class specific		4,053,857			12,471,044			54,640			195,022			4,506,662
Transfer agent – class specific		1,379,045			6,897,652			110,446			43,846			2,273,491
Administration		855,633			2,776,983			201,361			42,371			837,506
Custodian		428,537			189,671			38,245			67,866			428,061
Administration – class specific		316,847			772,033			67,103			14,118			286,964
Registration		137,098			355,684			36,177			40,633			100,831
Professional		75,970			97,454			70,496			136,385			95,077
Printing		52,089			229,713			19,688			28,407			104,052
Officer and Trustees		43,737			110,375			24,198			19,990			46,335
Miscellaneous		101,123			234,657			47,288			85,035			134,894
Recoupment of past waived fees – class specific		459			136,190			317			–			32,207
Total expenses excluding interest expense		14,359,240			41,294,535			2,012,363			956,149			14,971,130
Interest expense1		207,369			83,272			6,098			83,739			17,040
Total expenses		14,566,609			41,377,807			2,018,461			1,039,888			14,988,170
Less fees waived by Manager		(1,935,785	)		(5,762,134	)		(574,140	)		(260,624	)		(931,304	)
Less administration fees waived		–			–			–			(15,527	)		–
Less administration fees waived – class specific		(144,772	)		(370,256	)		(61,635	)		(14,115	)		(146,851	)
Less transfer agent fees waived – class specific		(13,857	)		(39,318	)		(957	)		(1,563	)		(12,279	)
Less transfer agent fees reimbursed – class specific		(414,630	)		(946,143	)		(23,566	)		(38,820	)		(545,804	)
Less fees paid indirectly		(201	)		(493	)		(3	)		(10	)		(224	)
Less expenses reimbursed by Manager		–			–			–			(34,948	)		–
Total expenses after fees waived, reimbursed and paid indirectly		12,057,364			34,259,463			1,358,160			674,281			13,351,708
Net investment income		24,048,108			57,175,326			10,101,230			1,879,708			13,640,579
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments – unaffiliated		49,400,625			124,439,789			18,861,461			1,598,099			34,808,075
Investments – affiliated		–			–			–			(15,052	)		–
Capital gain distributions received from affiliated investment companies		–			3,070			–			–			–
Securities sold short		–			–			56,841			(3,983	)		–
Options written		623,753			(11,863,938	)		(1,133,188	)		201,061			(781,180	)
Financial futures contracts		(4,773,274	)		(29,021,205	)		9,046,259			(153,686	)		(6,357,514	)
Swaps		(468,120	)		4,622,114			(373,720	)		349,827			(5,554,386	)
Foreign currency transactions		–			2,146,332			13,001			182,170			1,144,187
		44,782,984			90,326,162			26,470,654			2,158,436			23,259,182
Net change in unrealized appreciation/depreciation on:
Investments – unaffiliated		(14,166,173	)		186,069,131			(65,579	)		1,078,386			(8,341,801	)
Investments – affiliated		–			–			–			28,800			–
Options written		11,425,437			34,573,340			2,683,572			407,796			14,710,674
Financial futures contracts		(190,598	)		18,150,070			(5,708,300	)		(12,286	)		(109,123	)
Foreign currency translations		–			(523,179	)		(113,274	)		(197,142	)		(10,196	)
Swaps		(801,156	)		(9,588,496	)		(541,106	)		(853,842	)		(6,905,735	)
Borrowed bond agreements		–			–			–			(73,355	)		–
		(3,732,490	)		228,680,866			(3,744,687	)		378,357			(656,181	)
Total realized and unrealized gain		41,050,494			319,007,028			22,725,967			2,536,793			22,603,001
Net Increase in Net Assets Resulting from Operations	$	65,098,602		$	376,182,354		$	32,827,197		$	4,416,501		$	36,243,580

¹ See Note 6 of the Notes to Financial Statements for details of borrowings.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 51

Statements of Changes in Net Assets

	BlackRock GNMA Portfolio						BlackRock Inflation Protected Bond Portfolio
	Year Ended September 30,						Year Ended September 30,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011
Operations
Net investment income	$	24,048,108		$	26,848,514		$	57,175,326		$	135,371,611
Net realized gain		44,782,984			40,994,264			90,326,162			30,342,578
Net change in unrealized appreciation/depreciation		(3,732,490	)		2,452,376			228,680,866			129,922,297
Net increase in net assets resulting from operations		65,098,602			70,295,154			376,182,354			295,636,486
Dividends and Distributions to Shareholders From
Net investment income:
BlackRock		(820,031	)		(52,844	)		(7,758,074	)		(14,693,548	)
Institutional		(20,656,400	)		(15,632,590	)		(28,585,360	)		(45,127,948	)
Service		(2,047,911	)		(1,075,059	)		(1,459,613	)		(2,794,525	)
Investor A		(13,426,203	)		(9,597,197	)		(28,230,422	)		(52,426,986	)
Investor B		(182,372	)		(187,808	)		(105,133	)		(269,307	)
Investor C		(8,170,710	)		(6,322,839	)		(10,292,553	)		(19,546,813	)
Net realized gain:
BlackRock		(121,449	)		(34,487	)		(1,848,397	)		(11,424,800	)
Institutional		(5,841,341	)		(18,234,620	)		(6,535,363	)		(32,816,410	)
Service		(564,091	)		(1,337,050	)		(371,577	)		(2,228,150	)
Investor A		(4,035,155	)		(12,709,406	)		(7,865,102	)		(46,294,542	)
Investor B		(81,146	)		(359,632	)		(37,222	)		(342,161	)
Investor C		(3,356,857	)		(11,672,951	)		(3,342,670	)		(21,397,613	)
Decrease in net assets resulting from dividends and distributions to shareholders		(59,303,666	)		(77,216,483	)		(96,431,486	)		(249,362,803	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		379,131,090			(230,772,600	)		959,475,494			585,222,141
Net Assets
Total increase (decrease) in net assets		384,926,026			(237,693,929	)		1,239,226,362			631,495,824
Beginning of year		1,105,225,234			1,342,919,163			4,127,129,601			3,495,633,777
End of year	$	1,490,151,260		$	1,105,225,234		$	5,366,355,963		$	4,127,129,601
Undistributed (distributions in excess of) net investment income	$	(2,217,915	)	$	(2,201,749	)	$	1,951,134		$	(756,876	)

See Notes to Financial Statements.

52     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Statements of Changes in Net Assets (continued)

	BlackRock Long Duration Bond Portfolio						BlackRock Secured Credit Portfolio
	Year Ended September 30,						Year Ended September 30,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011
Operations
Net investment income	$	10,101,230		$	11,392,842		$	1,879,708		$	4,287,237
Net realized gain (loss)		26,470,654			4,479,252			2,158,436			(119,493)
Net realized gain from redemption-in-kind transactions		–			7,828,840			–			–
Net change in unrealized appreciation/depreciation		(3,744,687	)		6,312,631			378,357			(2,494,841)
Net increase in net assets resulting from operations		32,827,197			30,013,565			4,416,501			1,672,903
Dividends and Distributions to Shareholders From
Net investment income:
BlackRock		(7,830,940	)		(8,798,774	)		–			–
Institutional		(2,281,015	)		(1,903,115	)		(780,489	)		(2,760,055)
Investor A		(781,301	)		(531,117	)		(578,401	)		(663,358)
Investor C		–			–			(349,027	)		(427,968)
Net realized gain:
BlackRock		(6,893,127	)		(7,437,197	)		–			–
Institutional		(2,205,750	)		(2,041,654	)		(339,073	)		(1,124,174)
Investor A		(679,108	)		(583,835	)		(305,355	)		(280,323)
Investor C		–			–			(255,573	)		(252,051)
Decrease in net assets resulting from dividends and distributions to shareholders		(20,671,241	)		(21,295,692	)		(2,607,918	)		(5,507,929)
Capital Share Transactions
Net decrease in net assets derived from capital share transactions		(22,971,771	)		(5,503,754	)		(33,390,912	)		(18,230,838)
Redemption Fees
Redemption fees		–			–			486			–
Net Assets
Total increase (decrease) in net assets		(10,815,815	)		3,214,119			(31,581,843	)		(22,065,864)
Beginning of year		292,888,772			289,674,653			90,500,327			112,566,191
End of year	$	282,072,957		$	292,888,772		$	58,918,484		$	90,500,327
Undistributed (distributions in excess of) net investment income	$	1,395,271		$	2,152,411		$	(78,669	)	$	(421,159)

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	53

Statements of Changes in Net Assets (concluded)

	BlackRock U.S. Government Bond Portfolio
	Year Ended September 30,
Increase (Decrease) in Net Assets:	2012			2011
Operations
Net investment income	$	13,640,579		$	12,777,523
Net realized gain		23,259,182			38,035,717
Net change in unrealized appreciation/depreciation		(656,181	)		(8,399,035	)
Net increase in net assets resulting from operations		36,243,580			42,414,205
Dividends and Distributions to Shareholders From
Net investment income:
BlackRock		(3	)		(71	)
Institutional		(3,144,658	)		(4,633,671	)
Service		(87,851	)		(122,761	)
Investor A		(10,947,605	)		(8,189,685	)
Investor B		(46,071	)		(118,122	)
Investor B1		(319,613	)		(180,881	)
Investor C		(689,477	)		(952,936	)
Investor C1		(1,106,758	)		(436,920	)
Class R		(465,858	)		(161,299	)
Net realized gain:
Institutional		(2,786,535	)		(3,221,775	)
Service		(116,514	)		(70,893	)
Investor A		(11,970,783	)		(4,606,604	)
Investor B		(142,730	)		(150,359	)
Investor B1		(608,884	)		–
Investor C		(1,762,743	)		(950,398	)
Investor C1		(1,988,750	)		–
Class R		(623,065	)		–
Decrease in net assets resulting from dividends and distributions to shareholders		(36,807,898	)		(23,796,375	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(94,702,241	)		751,432,651
Net Assets
Total increase (decrease) in net assets		(95,266,559	)		770,050,481
Beginning of year		1,292,741,489			522,691,008
End of year	$	1,197,474,930		$	1,292,741,489
Undistributed (distributions in excess of) net investment income	$	(627,550	)	$	2,646,746

See Notes to Financial Statements.
54	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Financial Highlights   BlackRock GNMA Portfolio

	BlackRock															Institutional
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	10.44		$	10.45		$	10.28		$	9.73		$	9.44		$	10.47		$	10.47		$	10.31		$	9.75		$	9.45
Net investment income1		0.23			0.29			0.28			0.31			0.23			0.23			0.28			0.29			0.37			0.59
Net realized and unrealized gain		0.33			0.40			0.41			0.66			0.55			0.32			0.42			0.39			0.60			0.20
Net increase from investment operations		0.56			0.69			0.69			0.97			0.78			0.55			0.70			0.68			0.97			0.79
Dividends and distributions from:
Net investment income		(0.41	)		(0.34	)		(0.33	)		(0.42	)		(0.49	)		(0.41	)		(0.34	)		(0.33	)		(0.41	)		(0.49	)
Net realized gain		(0.12	)		(0.36	)		(0.19	)		–			–			(0.12	)		(0.36	)		(0.19	)		–			–
Total dividends and distributions		(0.53	)		(0.70	)		(0.52	)		(0.42	)		(0.49	)		(0.53	)		(0.70	)		(0.52	)		(0.41	)		(0.49	)
Net asset value, end of year	$	10.47		$	10.44		$	10.45		$	10.28		$	9.73		$	10.49		$	10.47		$	10.47		$	10.31		$	9.75
Total Investment Return2
Based on net asset value		5.59%			6.96%			6.95%			10.09%			8.36%			5.45%			7.02%			6.80%			10.17%			8.43%
Ratios to Average Net Assets
Total expenses		0.74%			0.78%			0.70%			0.81%			0.87%			0.82%			0.82%			0.81%			0.81%			0.97%
Total expenses after fees waived, reimbursed and paid indirectly		0.54%			0.52%			0.52%			0.51%			0.56%			0.57%			0.55%			0.55%			0.48%			0.57%
Total expenses after fees waived, reimbursed and paid indirectly excluding interest expense		0.52%			0.52%			0.52%			0.51%			0.45%			0.55%			0.55%			0.54%			0.48%			0.48%
Net investment income		2.18%			2.82%			2.85%			2.91%			4.98%			2.25%			2.71%			2.83%			3.63%			4.71%
Supplemental Data
Net assets, end of year (000)	$	13,349		$	5,587		$	781		$	40,982		$	353		$	622,556		$	462,058		$	557,610		$	578,224		$	272,840
Portfolio turnover		741%	3		743%	4		847%	5		1,435%	6		2,637%	7		741%	3		743%	4		847%	5		1,435%	6		2,637%	7

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 247%.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 213%.

⁵  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 265%.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 573%.

⁷  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 868%.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	55

  Financial Highlights (continued)   BlackRock GNMA Portfolio

	Service															Investor A
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	10.45		$	10.46		$	10.29		$	9.73		$	9.44		$	10.51		$	10.51		$	10.34		$	9.78		$	9.49
Net investment income1		0.20			0.24			0.26			0.33			0.51			0.20			0.24			0.26			0.33			0.53
Net realized and unrealized gain		0.32			0.41			0.39			0.61			0.24			0.32			0.42			0.39			0.61			0.21
Net increase from investment operations		0.52			0.65			0.65			0.94			0.75			0.52			0.66			0.65			0.94			0.74
Dividends and distributions from:
Net investment income		(0.37	)		(0.30	)		(0.29	)		(0.38	)		(0.46	)		(0.37	)		(0.30	)		(0.29	)		(0.38	)		(0.45	)
Net realized gain		(0.12	)		(0.36	)		(0.19	)		–			–			(0.12	)		(0.36	)		(0.19	)		–			–
Total dividends and distributions		(0.49	)		(0.66	)		(0.48	)		(0.38	)		(0.46	)		(0.49	)		(0.66	)		(0.48	)		(0.38	)		(0.45	)
Net asset value, end of year	$	10.48		$	10.45		$	10.46		$	10.29		$	9.73		$	10.54		$	10.51		$	10.51		$	10.34		$	9.78
Total Investment Return2
Based on net asset value		5.19%			6.55%			6.53%			9.83%			8.03%			5.18%			6.62%			6.50%			9.74%			7.91%
Ratios to Average Net Assets
Total expenses		1.11%			1.15%			1.10%			1.07%			1.16%			1.06%			1.07%			1.06%			1.09%			1.21%
Total expenses excluding recoupment of past waived fees		1.11%			1.15%			1.10%			1.07%			1.16%			1.06%			1.07%			1.06%			1.09%			1.21%
Total expenses after fees waived, reimbursed and paid indirectly		0.92%			0.90%			0.91%			0.81%			0.84%			0.91%			0.91%			0.90%			0.85%			0.89%
Total expenses after fees waived, reimbursed and paid indirectly excluding interest expense		0.90%			0.90%			0.90%			0.81%			0.75%			0.90%			0.91%			0.90%			0.85%			0.81%
Net investment income		1.88%			2.37%			2.50%			3.29%			4.34%			1.90%			2.36%			2.47%			3.22%			4.20%
Supplemental Data
Net assets, end of year (000)	$	79,211		$	35,929		$	43,281		$	29,809		$	15,688		$	457,537		$	323,201		$	370,680		$	312,343		$	61,896
Portfolio turnover		741%	3		743%	4		847%	5		1,435%	6		2,637%	7		741%	3		743%	4		847%	5		1,435%	6		2,637%	7

¹ Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 247%.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 213%.

⁵  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 265%.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 573%.

⁷  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 868%.

See Notes to Financial Statements.
56	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Financial Highlights (concluded)   BlackRock GNMA Portfolio

	Investor B															Investor C
				Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	10.47		$	10.48		$	10.31		$	9.75		$	9.45		$	10.46		$	10.47		$	10.30		$	9.74		$	9.45
Net investment income1		0.12			0.16			0.17			0.25			0.34			0.12			0.17			0.18			0.26			0.37
Net realized and unrealized gain		0.32			0.41			0.40			0.61			0.34			0.32			0.40			0.39			0.60			0.30
Net increase from investment operations		0.44			0.57			0.57			0.86			0.68			0.44			0.57			0.57			0.86			0.67
Dividends and distributions from:
Net investment income		(0.29	)		(0.22	)		(0.21	)		(0.30	)		(0.38	)		(0.29	)		(0.22	)		(0.21	)		(0.30	)		(0.38	)
Net realized gain		(0.12	)		(0.36	)		(0.19	)		–			–			(0.12	)		(0.36	)		(0.19	)		–			–
Total dividends and distributions		(0.41	)		(0.58	)		(0.40	)		(0.30	)		(0.38	)		(0.41	)		(0.58	)		(0.40	)		(0.30	)		(0.38	)
Net asset value, end of year	$	10.50		$	10.47		$	10.48		$	10.31		$	9.75		$	10.49		$	10.46		$	10.47		$	10.30		$	9.74
Total Investment Return2
Based on net asset value		4.34%			5.70%			5.67%			8.91%			7.20%			4.39%			5.74%			5.74%			8.99%			7.13%
Ratios to Average Net Assets
Total expenses		1.88%			1.87%			1.87%			1.88%			2.03%			1.82%			1.82%			1.81%			1.82%			1.98%
Total expenses after fees waived, reimbursed and paid indirectly		1.73%			1.71%			1.71%			1.64%			1.72%			1.67%			1.66%			1.65%			1.58%			1.66%
Total expenses after fees waived, reimbursed and paid indirectly excluding interest expense		1.71%			1.71%			1.71%			1.64%			1.62%			1.66%			1.66%			1.65%			1.57%			1.57%
Net investment income		1.12%			1.55%			1.66%			2.48%			3.60%			1.16%			1.60%			1.73%			2.52%			3.58%
Supplemental Data
Net assets, end of year (000)	$	5,778		$	7,518		$	11,961		$	20,119		$	10,556		$	311,721		$	270,931		$	358,606		$	365,279		$	43,229
Portfolio turnover		741%	3		743%	4		847%	5		1,435%	6		2,637%	7		741%	3		743%	4		847%	5		1,435%	6		2,637%	7

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 247%.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 213%.

⁵  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 265%.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 573%.

⁷  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 868%.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	57

  Financial Highlights   BlackRock Inflation Protected Bond Portfolio

	BlackRock															Institutional
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	11.27		$	11.19		$	10.46		$	9.84		$	9.87		$	11.49		$	11.40		$	10.66		$	10.04		$	10.06
Net investment income1		0.19			0.43			0.23			0.35			0.80			0.18			0.44			0.22			0.14			0.79
Net realized and unrealized gain (loss)		0.80			0.44			0.74			0.39			(0.10	)		0.82			0.43			0.76			0.60			(0.08	)
Net increase from investment operations		0.99			0.87			0.97			0.74			0.70			1.00			0.87			0.98			0.74			0.71
Dividends and distributions from:
Net investment income		(0.21	)		(0.43	)		(0.21	)		(0.12	)		(0.69	)		(0.21	)		(0.42	)		(0.21	)		(0.12	)		(0.69	)
Net realized gain		(0.05	)		(0.36	)		(0.03	)		(0.00	)2		(0.04	)		(0.05	)		(0.36	)		(0.03	)		(0.00	)2		(0.04	)
Total dividends and distributions		(0.26	)		(0.79	)		(0.24	)		(0.12	)		(0.73	)		(0.26	)		(0.78	)		(0.24	)		(0.12	)		(0.73	)
Net asset value, end of year	$	12.00		$	11.27		$	11.19		$	10.46		$	9.84		$	12.23		$	11.49		$	11.40		$	10.66		$	10.04
Total Investment Return3
Based on net asset value		8.86%			8.21%			9.45%			7.58%			6.97%			8.76%			8.10%			9.30%			7.40%			6.88%
Ratios to Average Net Assets
Total expenses		0.47%			0.50%			0.52%			0.59%			0.68%			0.56%			0.60%			0.58%			0.64%			0.69%
Total expenses excluding recoupment of past waived fees		0.47%			0.50%			0.52%			0.59%			0.68%			0.55%			0.59%			0.58%			0.64%			0.69%
Total expenses after fees waived, reimbursed and paid indirectly		0.32%			0.32%			0.32%			0.32%			0.34%			0.43%			0.43%			0.40%			0.39%			0.38%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.32%			0.32%			0.32%			0.31%			0.30%			0.43%			0.43%			0.40%			0.38%			0.34%
Net investment income		1.64%			3.94%			2.08%			3.43%			7.62%			1.49%			3.91%			2.00%			1.37%			7.38%
Supplemental Data
Net assets, end of year (000)	$	455,027		$	416,631		$	339,249		$	117,605		$	12,573		$	1,937,316		$	1,362,286		$	968,736		$	380,280		$	86,495
Portfolio turnover		120%			131%			213%			193%	4		249%	5		120%			131%			213%			193%	4		249%	5

¹  Based on average shares outstanding.

²  Less than $(0.01) per share.

³  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 176%.

⁵  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 144%.

See Notes to Financial Statements.
58	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Financial Highlights (continued)   BlackRock Inflation Protected Bond Portfolio

	Service															Investor A
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	11.49		$	11.40		$	10.67		$	10.06		$	10.09		$	11.39		$	11.30		$	10.57		$	9.97		$	10.00
Net investment income1		0.15			0.41			0.19			0.21			0.78			0.13			0.39			0.18			0.17			0.84
Net realized and unrealized gain (loss)		0.80			0.44			0.75			0.50			(0.11	)		0.81			0.45			0.76			0.53			(0.18	)
Net increase from investment operations		0.95			0.85			0.94			0.71			0.67			0.94			0.84			0.94			0.70			0.66
Dividends and distributions from:
Net investment income		(0.19	)		(0.40	)		(0.18	)		(0.10	)		(0.66	)		(0.19	)		(0.39	)		(0.18	)		(0.10	)		(0.65	)
Net realized gain		(0.05	)		(0.36	)		(0.03	)		(0.00	)2		(0.04	)		(0.05	)		(0.36	)		(0.03	)		(0.00	)2		(0.04	)
Total dividends and distributions		(0.24	)		(0.76	)		(0.21	)		(0.10	)		(0.70	)		(0.24	)		(0.75	)		(0.21	)		(0.10	)		(0.69	)
Net asset value, end of year	$	12.20		$	11.49		$	11.40		$	10.67		$	10.06		$	12.09		$	11.39		$	11.30		$	10.57		$	9.97
Total Investment Return3
Based on net asset value		8.38%			7.84%			8.98%			7.16%			6.49%			8.33%			7.83%			9.03%			7.11%			6.52%
Ratios to Average Net Assets
Total expenses		0.86%			0.85%			0.86%			0.91%			0.95%			0.95%			0.98%			0.95%			1.02%			0.99%
Total expenses excluding recoupment of past waived fees		0.86%			0.85%			0.86%			0.91%			0.95%			0.95%			0.98%			0.95%			1.02%			0.99%
Total expenses after fees waived, reimbursed and paid indirectly		0.73%			0.70%			0.69%			0.67%			0.64%			0.76%			0.76%			0.74%			0.70%			0.66%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.73%			0.70%			0.68%			0.66%			0.61%			0.76%			0.76%			0.74%			0.69%			0.63%
Net investment income		1.23%			3.61%			1.72%			2.04%			7.29%			1.12%			3.50%			1.69%			1.70%			7.89%
Supplemental Data
Net assets, end of year (000)	$	88,555		$	84,824		$	79,862		$	50,524		$	11,071		$	2,089,999		$	1,542,505		$	1,427,762		$	775,914		$	209,192
Portfolio turnover		120%			131%			213%			193%	4		249%	5		120%			131%			213%			193%	4		249%	5

¹  Based on average shares outstanding.

²  Less than $(0.01) per share.

³  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 176%.

⁵  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 144%.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	59

  Financial Highlights (concluded)   BlackRock Inflation Protected Bond Portfolio

	Investor B															Investor C
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	11.29		$	11.22		$	10.52		$	9.99		$	10.01		$	11.36		$	11.29		$	10.58		$	10.04		$	10.06
Net investment income (loss)1		0.05			0.29			0.11			(0.20	)		0.61			0.06			0.31			0.11			(0.02	)		0.68
Net realized and unrealized gain (loss)		0.79			0.45			0.74			0.81			(0.02	)		0.80			0.44			0.76			0.64			(0.09	)
Net increase from investment operations		0.84			0.74			0.85			0.61			0.59			0.86			0.75			0.87			0.62			0.59
Dividends and distributions from:
Net investment income		(0.15	)		(0.31	)		(0.12	)		(0.08	)		(0.57	)		(0.16	)		(0.32	)		(0.13	)		(0.08	)		(0.57	)
Net realized gain		(0.05	)		(0.36	)		(0.03	)		(0.00	)2		(0.04	)		(0.05	)		(0.36	)		(0.03	)		(0.00	)2		(0.04	)
Total dividends and distributions		(0.20	)		(0.67	)		(0.15	)		(0.08	)		(0.61	)		(0.21	)		(0.68	)		(0.16	)		(0.08	)		(0.61	)
Net asset value, end of year	$	11.93		$	11.29		$	11.22		$	10.52		$	9.99		$	12.01		$	11.36		$	11.29		$	10.58		$	10.04
Total Investment Return3
Based on net asset value		7.55%			6.98%			8.20%			6.08%			5.79%			7.62%			7.00%			8.29%			6.16%			5.77%
Ratios to Average Net Assets
Total expenses		1.63%			1.66%			1.67%			1.74%			1.79%			1.57%			1.60%			1.61%			1.70%			1.75%
Total expenses after fees waived, reimbursed and paid indirectly		1.51%			1.51%			1.50%			1.45%			1.45%			1.45%			1.45%			1.44%			1.45%			1.43%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.51%			1.51%			1.50%			1.44%			1.42%			1.44%			1.45%			1.44%			1.44%			1.39%
Net investment income (loss)		0.45%			2.66%			0.99%			(2.00)%			5.78%			0.50%			2.80%			0.98%			(0.15)%			6.38%
Supplemental Data
Net assets, end of year (000)	$	7,301		$	8,815		$	11,416		$	12,605		$	14,529		$	788,158		$	712,070		$	668,608		$	381,278		$	152,298
Portfolio turnover		120%			131%			213%			193%	4		249%	5		120%			131%			213%			193%	4		249%	5

¹  Based on average shares outstanding.

²  Less than $(0.01) per share.

³  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 176%.

⁵  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 144%.

See Notes to Financial Statements.
60	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Financial Highlights   BlackRock Long Duration Bond Portfolio

	BlackRock															Institutional
													Period October 19, 20071 to September 30,															Period October 19, 20071 to September 30,
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of period	$	11.68		$	11.45		$	10.54		$	9.06			$      10.00		$	11.66		$	11.43		$	10.54		$	9.05			$      10.00
Net investment income2		0.45			0.49			0.51			0.50			0.48			0.43			0.48			0.48			0.49			0.47
Net realized and unrealized gain (loss)		1.05			0.71			0.96			1.50			(0.95	)		1.04			0.71			0.96			1.51			(0.95	)
Net increase (decrease) from investment operations		1.50			1.20			1.47			2.00			(0.47	)		1.47			1.19			1.44			2.00			(0.48	)
Dividends and distributions from:
Net investment income		(0.44	)		(0.48	)		(0.52	)		(0.50	)		(0.47	)		(0.42	)		(0.47	)		(0.51	)		(0.49	)		(0.47	)
Net realized gain		(0.53	)		(0.49	)		(0.04	)		(0.02	)		–			(0.53	)		(0.49	)		(0.04	)		(0.02	)		–
Total dividends and distributions		(0.97	)		(0.97	)		(0.56	)		(0.52	)		(0.47	)		(0.95	)		(0.96	)		(0.55	)		(0.51	)		(0.47	)
Net asset value, end of period	$	12.21		$	11.68		$	11.45		$	10.54			$        9.06		$	12.18		$	11.66		$	11.43		$	10.54			$        9.05
Total Investment Return3
Based on net asset value		13.61%			11.96%			14.53%			22.65%			(4.97	)%4		13.43%			11.86%			14.24%			22.75%			(5.10	)%4
Ratios to Average Net Assets
Total expenses		0.69%			0.70%			0.68%			0.71%			1.01%	5		0.83%			0.84%			0.70%			0.72%			0.96%	5
Total expenses excluding recoupment of past waived fees		0.69%			0.70%			0.68%			0.71%			1.01%	5		0.83%			0.84%			0.70%			0.72%			0.96%	5
Total expenses after fees waived, reimbursed and paid indirectly		0.45%			0.45%			0.45%			0.42%			0.53%	5		0.55%			0.55%			0.49%			0.45%			0.53%	5
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.45%			0.45%			0.45%			0.41%			0.40%	5		0.55%			0.55%			0.49%			0.45%			0.42%	5
Net investment income		3.83%			4.59%			4.86%			5.16%			5.11%	5		3.71%			4.51%			4.62%			5.15%			4.96%	5
Supplemental Data
Net assets, end of period (000)	$	195,167		$	227,009		$	273,303		$	220,731			$  146,251		$	61,711		$	51,253		$	2,329		$	20,135			$    20,277
Portfolio turnover		86%	6		104%	7		137%	8		166%	9		652%	10		86%	6		104%	7		137%	8		166%	9		652%	10

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴  Aggregate total investment return.

⁵  Annualized.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 84%.

⁷  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 83%.

⁸  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 128%.

⁹  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 105%.

¹⁰  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 287%.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	61

  Financial Highlights (concluded)   BlackRock Long Duration Bond Portfolio

	Investor A
													Period
													October 19,
													20071 to
	Year Ended September 30,												September 30,
	2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of period	$	11.68		$	11.45		$	10.54		$	9.02		$	10.00
Net investment income2		0.39			0.44			0.47			0.47			0.44
Net realized and unrealized gain (loss)		1.05			0.71			0.95			1.54			(0.98	)
Net increase (decrease) from investment operations.		1.44			1.15			1.42			2.01			(0.54	)
Dividends and distributions from:
Net investment income		(0.39	)		(0.43	)		(0.47	)		(0.47	)		(0.44	)
Net realized gain		(0.53	)		(0.49	)		(0.04	)		(0.02	)		–
Total dividends and distributions		(0.92	)		(0.92	)		(0.51	)		(0.49	)		(0.44	)
Net asset value, end of period	$	12.20		$	11.68		$	11.45		$	10.54		$	9.02
Total Investment Return3
Based on net asset value		13.07%			11.47%			14.05%			22.81%			(5.70	)%4
Ratios to Average Net Assets
Total expenses		1.07%			1.12%			1.09%			1.02%			1.26%	5
Total expenses excluding recoupment of past waived fees		1.07%			1.11%			1.09%			1.02%			1.26%	5
Total expenses after fees waived, reimbursed and paid indirectly		0.85%			0.90%			0.88%			0.74%			0.81%	5
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.85%			0.90%			0.87%			0.74%			0.73%	5
Net investment income		3.33%			4.16%			4.42%			4.64%			4.59%	5
Supplemental Data
Net assets, end of period (000)	$	25,195		$	14,626		$	14,043		$	13,218		$	391
Portfolio turnover		86%	6		104%	7		137%	8		166%	9		652%	10

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴  Aggregate total investment return.

⁵  Annualized.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 84%.

⁷  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 83%.

⁸  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 128%.

⁹  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 105%.

¹⁰  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 287%.

See Notes to Financial Statements.
62	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Financial Highlights   BlackRock Secured Credit Portfolio

	Institutional									Investor A
							Period February 26, 20101  to September 30, 2010									Period
	Year Ended September 30,									Year Ended September 30,						February 26, 20101 to
	2012			2011						2012			2011			September 30, 2010
Per Share Operating Performance
Net asset value, beginning of period	$	10.20		$	10.56		$	10.00		$	10.20		$	10.55		$	10.00
Net investment income2		0.38			0.43			0.16			0.35			0.40			0.17
Net realized and unrealized gain (loss)		0.48	3		(0.25	)		0.53			0.48	3		(0.24	)		0.49
Net increase from investment operations		0.86			0.18			0.69			0.83			0.16			0.66
Dividends and distributions from:
Net investment income		(0.34	)		(0.39	)		(0.13	)		(0.32	)		(0.36	)		(0.11	)
Net realized gain		(0.18	)		(0.15	)		–			(0.18	)		(0.15	)		–
Total dividends and distributions		(0.52	)		(0.54	)		(0.13	)		(0.50	)		(0.51	)		(0.11	)
Net asset value, end of period	$	10.54		$	10.20		$	10.56		$	10.53		$	10.20		$	10.55
Total Investment Return4
Based on net asset value		8.74%			1.75%			6.91%	5		8.37%			1.59%			6.64%	5
Ratios to Average Net Assets
Total expenses		1.47%			1.13%			1.08%	6,7		1.76%			1.46%			1.41%	6,7
Total expenses after fees waived, reimbursed and paid indirectly		0.85%			0.86%			0.70%	7		1.10%			1.11%			0.94%	7
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.70%			0.70%			0.70%	7		0.95%			0.95%			0.94%	7
Net investment income		3.69%			4.13%			2.63%	7		3.42%			3.88%			2.72%	7
Supplemental Data
Net assets, end of period (000)	$	21,879		$	58,353		$	78,510		$	22,199		$	17,579		$	17,908
Portfolio turnover		507%	8		589%	9		349%	10		507%	8		589%	9		349%	10

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Includes redemption fees, which are less than $0.01 per share.

⁴  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Organization expenses were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses for Institutional and Investor A would have been 1.13% and 1.48% respectively.

⁷  Annualized.

⁸  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 316%.

⁹  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 373%.

¹⁰  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 236%.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	63

  Financial Highlights (concluded)   BlackRock Secured Credit Portfolio

	Investor C
									Period February 26, 20101  to September 30, 2010
	Year Ended September 30,
	2012				2011
Per Share Operating Performance
Net asset value, beginning of period		$	10.20			$	10.56			$	10.00
Net investment income2			0.27				0.32				0.12
Net realized and unrealized gain (loss)			0.49	3			(0.25	)			0.51
Net increase from investment operations			0.76				0.07				0.63
Dividends and distributions from:
Net investment income			(0.24	)			(0.28	)			(0.07	)
Net realized gain			(0.18	)			(0.15	)			–
Total dividends and distributions			(0.42	)			(0.43	)			(0.07	)
Net asset value, end of period		$	10.54			$	10.20			$	10.56
Total Investment Return4
Based on net asset value			7.67%				0.73%				6.29%	5
Ratios to Average Net Assets
Total expenses			2.51%				2.21%				2.14%	6,7
Total expenses after fees waived, reimbursed and paid indirectly			1.85%				1.86%				1.68%	7
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense			1.70%				1.70%				1.68%	7
Net investment income			2.65%				3.11%				1.97%	7
Supplemental Data
Net assets, end of period (000)		$	14,841			$	14,567			$	16,148
Portfolio turnover			507%	8			589%	9			349%	10

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Includes redemption fees, which are less than $0.01 per share.

⁴  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵  Aggregate total investment return.

⁶  Organization expenses were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses for Investor C would have been 2.21%.

⁷  Annualized.

⁸  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 316%.

⁹  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 373%.

¹⁰  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 236%.

See Notes to Financial Statements.
64	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Financial Highlights   BlackRock U.S. Government Bond Portfolio

	Institutional
	Year Ended September 30,
	2012				2011				2010				2009				2008
Per Share Operating Performance
Net asset value, beginning of year		$	10.94			$	10.99			$	10.61			$	10.33			$	10.23
Net investment income1			0.17				0.26				0.33				0.34				0.43
Net realized and unrealized gain			0.19				0.18				0.51				0.39				0.12
Net increase from investment operations			0.36				0.44				0.84				0.73				0.55
Dividends and distributions from:
Net investment income			(0.19	)			(0.29	)			(0.39	)			(0.39	)			(0.45	)
Net realized gain			(0.17	)			(0.20	)			(0.07	)			(0.06	)			–
Total dividends and distributions			(0.36	)			(0.49	)			(0.46	)			(0.45	)			(0.45	)
Net asset value, end of year		$	10.94			$	10.94			$	10.99			$	10.61			$	10.33
Total Investment Return2
Based on net asset value			3.51%				4.09%				8.19%				7.15%				5.44%
Ratios to Average Net Assets
Total expenses			0.83%				0.90%				0.91%				0.74%				0.89%
Total expenses after fees waived, reimbursed and paid indirectly			0.62%				0.62%				0.67%				0.61%				0.79%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense			0.62%				0.62%				0.62%				0.60%				0.60%
Net investment income			1.54%				2.47%				3.15%				3.30%				4.14%
Supplemental Data
Net assets, end of year (000)		$	171,180			$	178,609			$	182,794			$	180,032			$	209,968
Portfolio turnover			790%	3			794%	4			974%	5			646%	6			459%	7

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 474%.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 537%.

⁵  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 384%.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 496%.

⁷  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 174%.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	65

  Financial Highlights (continued)   BlackRock U.S. Government Bond Portfolio

	Service															Investor A
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	10.93		$	10.98		$	10.61		$	10.32		$	10.22		$	10.96		$	11.01		$	10.64		$	10.35		$	10.25
Net investment income1		0.14			0.23			0.31			0.31			0.39			0.13			0.22			0.29			0.30			0.39
Net realized and unrealized gain		0.20			0.18			0.49			0.40			0.13			0.21			0.18			0.50			0.39			0.12
Net increase from investment operations		0.34			0.41			0.80			0.71			0.52			0.34			0.40			0.79			0.69			0.51
Dividends and distributions from:
Net investment income		(0.17	)		(0.26	)		(0.36	)		(0.36	)		(0.42	)		(0.16	)		(0.25	)		(0.35	)		(0.34	)		(0.41	)
Net realized gain		(0.17	)		(0.20	)		(0.07	)		(0.06	)		–			(0.17	)		(0.20	)		(0.07	)		(0.06	)		–
Total dividends and distributions		(0.34	)		(0.46	)		(0.43	)		(0.42	)		(0.42	)		(0.33	)		(0.45	)		(0.42	)		(0.40	)		(0.41	)
Net asset value, end of year	$	10.93		$	10.93		$	10.98		$	10.61		$	10.32		$	10.97		$	10.96		$	11.01		$	10.64		$	10.35
Total Investment Return2
Based on net asset value		3.22%			3.91%			7.77%			6.94%			5.14%			3.15%			3.79%			7.64%			6.80%			5.00%
Ratios to Average Net Assets
Total expenses		1.07%			1.16%			1.18%			1.00%			1.14%			1.05%			1.08%			1.12%			1.07%			1.25%
Total expenses excluding recoupment of past waived fees		1.07%			1.15%			1.18%			1.00%			1.14%			1.05%			1.08%			1.12%			1.06%			1.25%
Total expenses after fees waived, reimbursed and paid indirectly		0.81%			0.89%			0.97%			0.91%			1.07%			0.96%			0.96%			1.06%			1.02%			1.19%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.81%			0.89%			0.92%			0.90%			0.88%			0.96%			0.95%			1.02%			1.01%			1.01%
Net investment income		1.34%			2.13%			2.88%			2.96%			3.73%			1.20%			1.99%			2.74%			2.84%			3.72%
Supplemental Data
Net assets, end of year (000)	$	5,021		$	7,369		$	4,030		$	3,141		$	775		$	742,413		$	767,193		$	267,436		$	267,495		$	244,461
Portfolio turnover		790%	3		794%	4		974%	5		646%	6		459%	7		790%	3		794%	4		974%	5		646%	6		459%	7

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 474%.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 537%.

⁵  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 384%.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 496%.

⁷  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 174%.

See Notes to Financial Statements.
66	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Financial Highlights (continued)   BlackRock U.S. Government Bond Portfolio

	Investor B																				Investor B1
																					Year				Period
	Year Ended September 30,																				Ended				July 18, 20111
	2012				2011				2010				2009				2008				September 30, 2012				to September 30, 2011
Per Share Operating Performance
Net asset value, beginning of period		$	10.93			$	10.98			$	10.61			$	10.33			$	10.23			$	10.93			$	10.64
Net investment income2			0.03				0.13				0.19				0.22				0.31				0.08				0.03
Net realized and unrealized gain			0.20				0.17				0.52				0.38				0.12				0.20				0.29
Net increase from investment operations			0.23				0.30				0.71				0.60				0.43				0.28				0.32
Dividends and distributions from:
Net investment income			(0.06	)			(0.15	)			(0.27	)			(0.26	)			(0.33	)			(0.11	)			(0.03	)
Net realized gain			(0.17	)			(0.20	)			(0.07	)			(0.06	)			–				(0.17	)			–
Total dividends and distributions			(0.23	)			(0.35	)			(0.34	)			(0.32	)			(0.33	)			(0.28	)			(0.03	)
Net asset value, end of period		$	10.93			$	10.93			$	10.98			$	10.61			$	10.33			$	10.93			$	10.93
Total Investment Return3
Based on net asset value			2.19%				2.88%				6.81%				5.89%				4.18%				2.69%				2.98%	4
Ratios to Average Net Assets
Total expenses			1.96%				2.01%				2.00%				1.89%				2.11%				1.78%				1.69%	5
Total expenses excluding recoupment of past waived fees			1.94%				1.93%				1.96%				1.87%				2.11%				1.76%				1.69%	5
Total expenses after fees waived, reimbursed and paid indirectly			1.85%				1.88%				1.93%				1.83%				1.98%				1.45%				1.45%	5
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense			1.85%				1.88%				1.88%				1.82%				1.81%				1.45%				1.45%	5
Net investment income			0.31%				1.21%				1.80%				2.10%				2.96%				0.70%				1.19%	5
Supplemental Data
Net assets, end of period (000)		$	5,388			$	10,306			$	9,864			$	18,660			$	24,552			$	17,793			$	48,148
Portfolio turnover			790%	6			794%	7			974%	8			646%	9			459%	10			790%	6			794%	7

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴  Aggregate total investment return.

⁵  Annualized.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 474%.

⁷  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 537%.

⁸  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 384%.

⁹  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 496%.

¹⁰  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 174%.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	67

  Financial Highlights (continued)   BlackRock U.S. Government Bond Portfolio

	Investor C
	Year Ended September 30,
	2012				2011				2010				2009				2008
Per Share Operating Performance
Net asset value, beginning of year		$	10.95			$	11.00			$	10.62			$	10.33			$	10.24
Net investment income1			0.04				0.13				0.21				0.22				0.31
Net realized and unrealized gain			0.20				0.18				0.51				0.40				0.11
Net increase from investment operations			0.24				0.31				0.72				0.62				0.42
Dividends and distributions from:
Net investment income			(0.07	)			(0.16	)			(0.27	)			(0.27	)			(0.33	)
Net realized gain			(0.17	)			(0.20	)			(0.07	)			(0.06	)			–
Total dividends and distributions			(0.24	)			(0.36	)			(0.34	)			(0.33	)			(0.33	)
Net asset value, end of year		$	10.95			$	10.95			$	11.00			$	10.62			$	10.33
Total Investment Return2
Based on net asset value			2.23%				2.88%				6.90%				6.03%				4.08%
Ratios to Average Net Assets
Total expenses			1.87%				1.89%				1.92%				1.82%				2.04%
Total expenses excluding recoupment of past waived fees			1.87%				1.89%				1.90%				1.82%				2.04%
Total expenses after fees waived, reimbursed and paid indirectly			1.78%				1.76%				1.87%				1.76%				1.98%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense			1.78%				1.76%				1.82%				1.75%				1.79%
Net investment income			0.38%				1.25%				1.96%				2.12%				2.93%
Supplemental Data
Net assets, end of year (000)		$	101,144			$	110,260			$	58,567			$	58,247			$	23,959
Portfolio turnover			790%	3			794%	4			974%	5			646%	6			459%	7

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 474%.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 537%.

⁵  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 384%.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 496%.

⁷  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 174%.

See Notes to Financial Statements.
68	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Financial Highlights (concluded)   BlackRock U.S. Government Bond Portfolio

	Investor C1								Class R
	Year Ended September 30, 2012				Period July 18, 20111 to September 30, 2011				Year Ended September 30, 2012				Period July 18, 20111 to September 30, 2011
Per Share Operating Performance
Net asset value, beginning of period		$	10.95			$	10.66			$	10.97			$	10.67
Net investment income2			0.07				0.02				0.10				0.03
Net realized and unrealized gain			0.20				0.30				0.19				0.31
Net increase from investment operations			0.27				0.32				0.29				0.34
Dividends and distributions from:
Net investment income			(0.10	)			(0.03	)			(0.13	)			(0.04	)
Net realized gain			(0.17	)			–				(0.17	)			–
Total dividends and distributions			(0.27	)			(0.03	)			(0.30	)			(0.04	)
Net asset value, end of period		$	10.95			$	10.95			$	10.96			$	10.97
Total Investment Return3
Based on net asset value			2.49%				2.96%	4			2.74%				3.12%	4
Ratios to Average Net Assets
Total expenses			1.77%				1.75%	5			1.41%				1.51%	5
Total expenses excluding recoupment of past waived fees			1.76%				1.75%	5			1.38%				1.51%	5
Total expenses after fees waived, reimbursed and paid indirectly			1.53%				1.53%	5			1.21%				1.21%	5
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense			1.53%				1.53%	5			1.21%				1.21%	5
Net investment income			0.63%				1.09%	5			0.95%				1.41%	5
Supplemental Data
Net assets, end of period (000)		$	118,369			$	130,322			$	36,167			$	40,523
Portfolio turnover			790%	6			794%	7			790%	6			794%	7

¹  Commencement of operations.

²  Based on average shares outstanding.

³  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴  Aggregate total investment return.

⁵  Annualized.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 474%.

⁷  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 537%.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	69

Notes to Financial Statements

1. Organization and Significant Accounting Policies:

BlackRock Funds II (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Massachusetts business trust. BlackRock GNMA Portfolio (“GNMA”), BlackRock Inflation Protected Bond Portfolio (“Inflation Protected Bond”), BlackRock Long Duration Bond Portfolio (“Long Duration Bond”), BlackRock Secured Credit Portfolio (formerly known as MultiSector Bond Portfolio) (“Secured Credit”), and BlackRock U.S. Government Bond Portfolio (formerly known as BlackRock Intermediate Government Bond Portfolio) (“U.S. Government Bond”) (collectively the “Funds” or individually, a “Fund”) are each a series of the Trust. Each of the Funds, except Inflation Protected Bond, is diversified. The Funds’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Funds offer multiple classes of shares. BlackRock and Institutional Shares are sold without a sales charge and only to certain eligible investors. Effective November 10, 2011, BlackRock Shares of U.S. Government Bond were closed to all purchases. Service Shares are sold without a sales charge. Investor A Shares are generally sold with a front-end sales charge. Investor B, Investor B1, Investor C and Investor C1 Shares may be subject to a CDSC. Class R Shares are sold without a sales charge and only to certain retirement and other similar plans. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Service, Investor A, Investor B, Investor B1, Investor C, Investor C1 and Class R Shares bear certain expenses related to the shareholder servicing of such shares, and Investor B, Investor B1, Investor C, Investor C1 and Class R Shares also bear certain expenses related to the distribution of such shares. Investor B Shares automatically convert to Investor A Shares after approximately seven years. Investor B1 Shares automatically convert to Investor A Shares after approximately ten years. Investor B, B1 and C1 Shares are only available through exchanges, dividend reinvestment by existing shareholders or for purchase by certain qualified employee benefit plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures (except that Investor B and Investor B1 shareholders may vote on material changes to the Investor A distribution and service plan).

Reorganization: The Board of Trustees of the Trust (the “Board”) on behalf of BlackRock Intermediate Government Bond Portfolio (“Intermediate Government Bond”) and the Board and shareholders of BlackRock Government Income Portfolio (the “Target Fund”) approved the reorganization of the Target Fund into Intermediate Government Bond pursuant to which Intermediate Government Bond acquired substantially all of the assets and assumed certain stated liabilities of the Target Fund in exchange for an equal aggregate value of Intermediate Government Bond shares.

In connection with the reorganization, effective July 18, 2011, Intermediate Government Bond changed its name to U.S. Government Bond, hereafter referred to as U.S. Government Bond.

Each shareholder of the Target Fund received shares of U.S. Government Bond with the same class designation and an amount equal to the aggregate NAV of such shareholder’s Target Fund shares, as determined at the close of business on July 15, 2011, except the Target Fund’s BlackRock, Investor B1, Investor C1 and Class R Shares were exchanged for U.S. Government Bond’s newly established BlackRock, Investor B1, Investor C1 and Class R Shares, respectively.

The reorganization was accomplished by a tax-free exchange of shares of U.S. Government Bond in the following amounts and at the following conversion ratios:

	Target Fund Shares Prior to Reorganization		Conversion Ratio		Shares of U.S. Government Bond
BlackRock		1,231		1.02319072		1,260
Institutional		3,738,046		1.02410182		3,828,140
Service		202,182		1.02405789		207,046
Investor A		48,992,338		1.02231009		50,085,362
Investor B		536,993		1.02582974		550,863
Investor B1		5,093,262		1.02542556		5,222,761
Investor C		5,550,177		1.02236425		5,674,303
Investor C1		12,255,789		1.02221409		12,528,040
Class R		3,844,229		1.02171978		3,927,725

The Target Fund’s net assets and composition of net assets on July 15, 2011, the date of the reorganization, were as follows:

Net Assets	Paid-in Capital		Accumulated Net Investment Income		Accumulated Net Realized Loss		Net Unrealized Appreciation
$874,795,010		$930,799,200		$812,448		$(59,192,330)		$2,375,692

For financial reporting purposes, assets received and shares issued by U.S. Government Bond were recorded at fair value; however, the cost basis of the investments received from the Target Fund was carried forward to align ongoing reporting of U.S. Government Bond’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

The aggregate net assets of U.S. Government Bond immediately after the acquisition amounted to $1,303,246,163. The Target Fund’s fair value and cost of investments prior to the reorganization were $1,754,648,174 and $1,745,414,818, respectively.

The purpose of the transaction was to combine two funds managed by the Manager, the investment advisor to both the Target Fund and U.S. Government Bond, with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was effective on July 18, 2011.

Assuming the acquisition had been completed on October 1, 2010, the beginning of the annual reporting period of U.S. Government Bond, the pro forma results of operations for the year ended September 30, 2011, were as follows:

• Net investment income: $30,874,306

• Net realized and change in unrealized gain/loss on investments: $8,140,095

• Net increase in net assets resulting from operations: $39,014,401

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Notes to Financial Statements (continued)

Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of the Target Fund that have been included in the U.S. Government Bond’s Statement of Changes in Net Assets since July 18, 2011.

Reorganization costs incurred by U.S. Government Bond in connection with the reorganization were expensed by U.S. Government Bond.

The following is a summary of significant accounting policies followed by the Funds:

Valuation: US GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds fair value their financial instruments at market value using independent dealers or pricing services under policies approved by the Board. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Funds for all financial instruments.

The Funds value their bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. Financial futures contracts traded on exchanges are valued at their last sale price. To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services. Swap agreements are valued utilizing quotes received daily by the Funds’ pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. Investments in open-end registered investment companies are valued at NAV each business day.

Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily

traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid price. If no bid price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security.

Securities and other assets and liabilities denominated in foreign currencies are translated into US dollars using exchange rates determined as of the close of business on the New York Stock Exchange (“NYSE”). Foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. Over-the-counter (“OTC”) options and swaptions are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

In the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor deems relevant consistent with the principles of fair value measurement which include the market approach, income approach and/or cost approach, as appropriate. A market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Trust’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses,

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Notes to Financial Statements (continued)

reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of each Fund’s net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to affect the value of such instruments materially, those instruments may be Fair Value Assets and valued at their fair value, as determined in good faith by the Global Valuation Committee using a pricing service and/or policies approved by the Board. Each business day, the Funds use a pricing service to assist with the valuation of certain foreign exchange-traded and OTC options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of business on the NYSE, which follows the close of the local markets.

Foreign Currency: The Funds’ books and records are maintained in US dollars. Purchases and sales of investment securities are recorded at the rates of exchange prevailing on the respective date of such transactions. Generally, when the US dollar rises in value against a foreign currency, the Funds’ investments denominated in that currency will lose value because that currency is worth fewer US dollars; the opposite effect occurs if the US dollar falls in relative value.

The Funds do not isolate the portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in foreign currency exchange rates on investments are not segregated on the Statements of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Funds report realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes.

Asset-Backed and Mortgage-Backed Securities: The Funds may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security subject to

such a prepayment feature will have the effect of shortening the maturity of the security. If a Fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

The Funds may purchase certain mortgage pass-through securities. There are a number of important differences among the agencies and instrumentalities of the US government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed Mortgage Pass-Through Certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States but are supported by the right of the issuer to borrow from the Treasury.

Collateralized Debt Obligations: The Funds may invest in collateralized debt obligations (“CDOs”), which include collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”). CBOs and CLOs are types of asset-backed securities. A CDO is an entity which is backed by a diversified pool of debt securities. (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches”, which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.

Inflation-Indexed Bonds: The Funds may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income on the Statements of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of US Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.

Multiple Class Pass-Through Securities: The Funds may invest in multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities. These

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Notes to Financial Statements (continued)

multiple class securities may be issued by Ginnie Mae, US government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by, and multiple class pass-through securities represent direct ownership interests in, a pool of residential or commercial mortgage loans or mortgage pass-through securities (the “Mortgage Assets”), the payments on which are used to make payments on the CMOs or multiple pass-through securities. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated pre-payments of principal, the Funds may not fully recoup their initial investment in IOs.

Stripped Mortgage-Backed Securities: The Funds may invest in stripped mortgage-backed securities issued by the US government, its agencies and instrumentalities. Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest (IOs) and principal (POs) distributions on a pool of Mortgage Assets. The Funds also may invest in stripped mortgage-backed securities that are privately issued.

Zero-Coupon Bonds: The Funds may invest in zero-coupon bonds, which are normally issued at a significant discount from face value and do not provide for periodic interest payments. Zero-coupon bonds may experience greater volatility in market value than similar maturity debt obligations which provide for regular interest payments.

Capital Trusts: The Funds may invest in capital trusts. These securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured as either fixed or adjustable coupon securities that can have either a perpetual or stated maturity date. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities.

Preferred Stock: The Funds may invest in preferred stocks. Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies

inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.

Floating Rate Loan Interests: The Funds may invest in floating rate loan interests. The floating rate loan interests the Funds hold are typically issued to companies (the “borrower”) by banks, other financial institutions, and privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged. The Funds may invest in obligations of borrowers who are in bankruptcy proceedings. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally the lending rate offered by one or more European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more US banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. The Funds consider these investments to be investments in debt securities for purposes of their investment policies.

When a Fund purchases a floating rate loan interest it may receive a facility fee and when it sells a floating rate loan interest it may pay a facility fee. On an ongoing basis, the Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by the Fund upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. The Fund may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s option. The Funds may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in the Funds having a contractual relationship only with the lender, not with the borrower. The Funds will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, the Funds generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower, and the Funds may not benefit directly from any

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 73

Notes to Financial Statements (continued)

collateral supporting the loan in which they have purchased the Participation. As a result, the Funds will assume the credit risk of both the borrower and the lender that is selling the Participation. The Funds’ investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, the Funds may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in the Funds having a direct contractual relationship with the borrower, and the Funds may enforce compliance by the borrower with the terms of the loan agreement.

Borrowed Bond Agreements: The Funds may enter into borrowed bond agreements. In a borrowed bond agreement, the Funds borrow a bond from a counterparty in exchange for cash collateral with the commitment that the security and the cash will be returned to the counterparty and the Funds, respectively, at a mutually agreed upon rate and date. Certain agreements have no stated maturity and can be terminated by either party at any time. Borrowed bond agreements are entered into primarily in connection with short sales of bonds. Earnings on cash collateral and compensation to the lender of the bond are based on agreed upon rates between the Funds and the counterparty. The value of the underlying cash collateral approximates the market value and accrued interest of the borrowed bond. To the extent that a borrowed bond transaction exceeds one business day, the value of the cash collateral in the possession of the counterparty is monitored on a daily basis to ensure the adequacy of the collateral. As the market value of the borrowed bond changes, the cash collateral is periodically increased or decreased with a frequency and in amounts prescribed in the borrowed bond agreement. Full realization of the collateral by the Funds may be limited if the value of an investment purchased with the cash collateral by the lender decreases. The Funds may also experience delays in gaining access to the collateral.

Short Sales: The Funds may enter into short sale transactions in which a Fund sells a security it does not hold in anticipation of a decline in the market price of that security. When the Fund makes a short sale, it will borrow the security sold short (borrowed bond) and deliver it to the counterparty to which it sold the security short. An amount equal to the proceeds 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 market value of the short sale. The Fund is required to repay the counterparty any interest received on the security sold short, which is shown as interest expense in the Statements of Operations. The Fund maintains a segregated account of securities or deposits cash with the broker-dealer as collateral for the short sales. The Fund may receive interest on its cash collateral deposited with the broker-dealer. The Fund is exposed to market risk based on the amount, if any, that the market value of the security increases beyond the market value at which the position was sold. Thus, a short sale of a security involves the risk that instead of declining, the price of the security sold short will rise. The short sale of securities involves the possibility of a theoretically unlimited loss since there is a theoretically unlimited potential for the market price of the security sold short to increase. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited as to the dollar amount, will be recognized upon the termination of a short sale if the market price is greater or less than the proceeds originally

received. There is no assurance the Fund will be able to close out a short position at a particular time or at an acceptable price.

Forward Commitments and When-Issued Delayed Delivery Securities: The Funds may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. The Funds may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the Funds may be required to pay more at settlement than the security is worth. In addition, the Funds are not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, the Funds assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, the Funds’ maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions, which is shown in the Schedules of Investments.

TBA Commitments: The Funds may enter into TBA commitments. TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed-upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. The Funds generally enter into TBA commitments with the intent to take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

Mortgage Dollar Roll Transactions: The Funds may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, the Funds will not be entitled to receive interest and principal payments on the securities sold. The Funds account for mortgage dollar roll transactions as purchases and sales and realize gains and losses on these transactions. These transactions increase the Funds’ portfolio turnover rate. Mortgage dollar rolls involve the risk that the market value of the securities that the Funds are required to purchase may decline below the agreed upon repurchase price of those securities.

Treasury Roll Transactions: The Funds may enter into treasury roll transactions. In a treasury roll transaction, the Funds sell a Treasury security to a counterparty with a simultaneous agreement to repurchase the same security at an agreed upon price and future settlement date. The Funds receive cash from the sale of the Treasury security to use for other investment purposes. The difference between the sale price and repurchase price represents net interest income or net interest expense reflective of an agreed upon rate between the Funds and the counterparty over the term of the borrowing. For US GAAP purposes, a treasury roll transaction is accounted for as a secured borrowing and not as a purchase or sale. During the term of the borrowing, interest income from the Treasury security and the related interest expense on the secured borrowing is recorded by the Funds on an accrual basis. The Funds will benefit from the transaction if the income earned on the

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Notes to Financial Statements (continued)

investment purchased with the cash received in the treasury roll transaction exceeds the interest expense incurred by the Funds. If the interest expense exceeds the income earned, the Funds net investment income and dividends to shareholders may be adversely impacted. Treasury roll transactions involve the risk that the market value of the securities that the Funds are required to repurchase may decline below the agreed upon repurchase price of those securities.

Reverse Repurchase Agreements: The Funds may enter into reverse repurchase agreements with qualified third party broker-dealers. In a reverse repurchase agreement, the Funds sell securities to a bank or broker-dealer and agree to repurchase the same securities at a mutually agreed upon date and price. Securities sold under reverse repurchase agreements are recorded as a liability in the Statements of Assets and Liabilities at face value including accrued interest. Due to the short term nature of the reverse repurchase agreements, face value approximates fair value. During the term of the reverse repurchase agreement, the Funds continue to receive the principal and interest payments on these securities. Certain agreements have no stated maturity and can be terminated by either party at any time. Interest on the value of the reverse repurchase agreements issued and outstanding is based upon competitive market rates determined at the time of issuance. The Funds may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk and also the risk that the market value of the securities that the Funds are obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Funds’ use of the proceeds of the agreement may be restricted while the other party, or its trustee or receiver, determines whether or not to enforce the Funds’ obligation to repurchase the securities.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that each Fund either deliver collateral or segregate assets in connection with certain investments (e.g., dollar rolls, TBA commitments, financial futures contracts, foreign currency exchange contracts, swaps and options written), or certain borrowings (e.g., reverse repurchase agreements and treasury roll transactions), each Fund will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, a Fund engaging in such transactions may have requirements to deliver/deposit securities to/with an exchange or broker-dealer as collateral for certain investments.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment 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 Funds are informed of the ex-dividend

date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis. Income and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets. Consent fees are compensation for agreeing to changes in the terms of debt instruments and are included in interest income in the Statements of Operations.

Redemptions-In-Kind: In the fiscal year ended September 30, 2011, Long Duration Bond transferred securities and cash to shareholders in connection with a redemption-in-kind transaction. For purposes of US GAAP, these transactions were treated as a sale of securities and the resulting gains and losses were recognized based on the market value of the securities on the date of the transfer. For tax purposes, no gains or losses were recognized. Gains and losses resulting from such redemptions-in-kind are shown as redemption-in-kind transactions in the Statements of Operations.

Dividends and Distributions: Dividends from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. The portion of distributions that exceeds a Fund’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of a Fund’s taxable income and net capital gains, but not in excess of a Fund’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. Capital losses carried forward from years beginning before 2011 do not reduce earnings and profits, even if such carried forward losses offset current year realized gains. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

Income Taxes: It is the Funds’ policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, 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.

Each Fund files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Funds’ US federal tax returns, with the exception of Secured Credit, remains open for each of the four years ended September 30, 2012. Secured Credit’s US federal tax returns remain open for the period ended September 30, 2010, and the years ended September 30, 2011 and September 30, 2012. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

Recent Accounting Standard: In December 2011, the Financial Accounting Standards Board issued guidance that will enhance current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 75

Notes to Financial Statements (continued)

investments and transactions in the financial statements. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Funds’ financial statement disclosures.

Other: Expenses directly related to a Fund or its classes are charged to that Fund or class. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Funds and other shared expenses pro rated to the Funds are allocated daily to each class based on its relative net assets or other appropriate methods.

The Funds have an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

2. Derivative Financial Instruments:

The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to economically hedge, or protect, their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk or other risk. These contracts may be transacted on an exchange or OTC.

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. The Funds’ maximum risk of loss from counterparty credit risk on OTC derivatives is generally the aggregate unrealized gain netted against any collateral pledged by/posted to the counterparty. For OTC options purchased, the Funds bear the risk of loss in the amount of the premiums paid plus the positive change in market value net of any collateral received on the options should the counterparty fail to perform under the contracts. Options written by the Funds do not give rise to counterparty credit risk, as options written obligate the Funds to perform and not the counterparty. Counterparty risk related to exchange-traded financial futures contracts, options and centrally cleared swaps is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

The Funds may mitigate counterparty risk by procuring collateral and through netting provisions included within an International Swaps and Derivatives Association, Inc. master agreement (“ISDA Master Agreement”) implemented between a Fund and each of its respective counterparties. An ISDA Master Agreement allows each Fund to offset with each separate counterparty certain derivative financial instrument’s payables and/or receivables with collateral held. The amount of collateral moved to/from applicable counterparties is generally based upon minimum transfer amounts of up to $500,000. To the extent amounts due to the Funds from their counterparties are not fully collateralized contractually or otherwise, the Funds bear the risk of loss from counterparty non-performance. See Note 1 “Segregation and Collateralization” for information with respect to collateral practices. In addition, the Funds manage counterparty risk by entering into agreements only with counterparties that they believe have the financial

resources to honor their obligations and by monitoring the financial stability of those counterparties.

Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Funds’ net assets decline by a stated percentage or the Funds fail to meet the terms of their ISDA Master Agreements, which would cause the Funds to accelerate payment of any net liability owed to the counterparty.

Financial Futures Contracts: The Funds may purchase or sell financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk) or foreign currencies (foreign currency exchange rate risk). Financial futures contracts are agreements between the Fund and counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Funds as unrealized appreciation or depreciation. When the contract is closed, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

Foreign Currency Exchange Contracts: Certain Funds enter into foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to foreign currencies (foreign currency exchange rate risk). A foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Foreign currency exchange contracts, when used by the Funds, help to manage the overall exposure to the currencies in which some of the investments held by the Funds are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Funds as an unrealized gain or loss. When the contract is closed, the Funds record a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies and the risk that a counterparty to the contract does not perform its obligations under the agreement.

Options: Certain Funds purchase and write call and put options to increase or decrease their exposure to underlying instruments (including credit risk and/or interest rate risk) and/or, in the case of options written, to generate gains from options premiums. A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised), the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder

76     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. When the Funds purchase (write) an option, an amount equal to the premium paid (received) by the Funds is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked-to-market to reflect the current market value of the option purchased (written). When an instrument 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 instrument acquired or deducted from (or added to) the proceeds of the instrument sold. When an option expires (or the Funds enter into a closing transaction), the Funds realize 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 premiums received or paid). When the Funds write a call option, such option is “covered,” meaning that the Funds hold the underlying instrument subject to being called by the option counterparty. When the Funds write a put option, such option is covered by cash in an amount sufficient to cover the obligation.

Options on swaps (swaptions) are similar to options on securities except that instead of selling or purchasing the right to buy or sell a security, the writer or purchaser of the swap option is granting or buying the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

Certain Funds also purchase or sell listed or OTC foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedge against possible variations in foreign exchange rates or to gain exposure to foreign currencies (foreign currency exchange rate risk). When foreign currency is purchased or sold through an exercise of a foreign currency option, the related premium paid (or received) is added to (or deducted from) the basis of the foreign currency acquired or deducted from (or added to) the proceeds of the foreign currency sold. Such transactions may be effected with respect to hedges on non-US dollar denominated instruments owned by the Funds but not yet delivered, or committed or anticipated to be purchased by the Funds.

U.S. Government Bond may also purchase and write a variety of options with non-standard payout structures or other features (“barrier options”). Barrier options are generally traded OTC. The types of barrier options the Funds may invest in include down-and-out options, double no-touch options and one-touch options. Down-and-out options are similar to standard options, except that the option expires worthless to the purchaser of the option if the price of the underlying security reaches a specific barrier price level prior to the option’s expiration date. Double no-touch options provide the purchaser of the option an agreed-upon payout if the price of the underlying asset does not reach or surpass predetermined barrier price levels prior to the option’s expiration date. One-touch options provide the purchaser of the option an agreed-upon payout if the price of the underlying asset reaches or surpasses predetermined barrier price levels prior to the option’s expiration date.

In purchasing and writing options, the Funds bear the risk of an unfavorable change in the value of the underlying instrument or the risk that the Funds may not be able to enter into a closing transaction due to an

illiquid market. Exercise of a written option could result in the Funds purchasing or selling a security at a price different from the current market value.

Swaps: Certain Funds enter into swap agreements, in which the Fund and a counterparty agree to either make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be executed on a registered financial and commodities exchange (“centrally cleared swaps”). In a centrally cleared swap, the Funds typically enter into an agreement with a counterparty; however, performance is guaranteed by the central clearinghouse reducing or eliminating the Fund’s exposure to the credit risk of the counterparty. These payments received or made by the Funds are recorded in the Statements of Operations as realized gains or losses, respectively. Any upfront fees paid are recorded as assets and any upfront fees received are recorded as liabilities and are shown as swap premiums paid and swap premiums received, respectively, on the Statements of Assets and Liabilities and amortized over the term of the swap. Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swaps, if any, is recorded as a receivable or payable for variation margin in the Statements of Assets and Liabilities. When the swap is terminated, the Funds will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Funds’ basis in the contract, if any. Generally, the basis of the contracts is the premium received or paid. Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

• Credit default swaps – Long Duration Bond enters into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which it is not otherwise exposed (credit risk). The Fund enters into credit default swap agreements to provide a measure of protection against the default of an issuer (as buyer of protection) and/or gain credit exposure to an issuer to which it is not otherwise exposed (as seller of protection). The Fund may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps on single-name issuers are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation accelerators, repudiation, moratorium or restructuring). Credit default swaps on traded indexes are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a write-down, principal or interest shortfall or default of all or individual underlying securities included in the index occurs. As a buyer, if an underlying credit event

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 77

Notes to Financial Statements (continued)

occurs, the Fund will either receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index or receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Fund will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

• Total return swaps – Certain Funds enter into total return swaps to obtain exposure to a security or market without owning such security or investing directly in that market or to transfer the risk/return of one market (e.g., fixed income) to another market (e.g., equity) (equity risk and/or interest rate risk). Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (coupons plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. To the extent the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Funds will receive a payment from or make a payment to the counterparty.

• Interest rate swaps – Certain Funds enter into interest rate swaps to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate risk by economically hedging the value of the fixed rate bonds which may decrease when interest rates rise (interest rate risk). Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, for another party’s stream of interest payments, either fixed or floating,

on the same notional amount for a specified period of time. In more complex swaps, the notional principal amount may decline (or amortize) over time.

• Interest rate and inflation rate caps and floors – Inflation Protected Bond enters into interest rate and inflation rates caps and floors to gain or reduce exposure to interest rates and/or inflation rates by economically hedging the value of the fixed rate bond which may decrease when interest rates (interest rate risk) and inflation rates (inflation rates) rise. Caps are agreements whereby one party agrees to make payments to the other, in return for a premium, to the extent that interest rates or inflation indexes exceed a specified rate, or “cap”. Floors are agreements whereby one party agrees to make payments to the other, in return for a premium, to the extent that interest rates or inflation indexes fall below a specified rate, or “floor”. When the Fund purchases (writes) a cap or floor, an amount equal to the premium paid (received) by the Fund is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked to market to reflect the current value of the cap or floor. The maximum potential amount of future payments that a Fund would be required to make under an interest rate or inflation rate cap would be the notional amount times the percentage increase in interest rates or inflation rates determined by the difference between the interest rate or inflation index’s current value and the value at the time the cap was entered into. The maximum potential amount of future payments that a Fund would be required to make under an interest rate or inflation rate floor would be the notional amount times the percentage increase in interest rates or inflation rates determined by the difference between the interest rate or inflation index’s current value and the value at the time the floor was entered into.

Derivative Financial Instruments Categorized by Risk Exposure:

	Fair Values of Derivative Financial Instruments as  of September 30, 2012
				Asset Derivatives
		GNMA		Inflation Protected Bond		Long Duration Bond		Secured Credit	U.S. Government Bond
	Statements of Assets and Liabilities Location					Value
Interest rate contracts	Net unrealized appreciation/ depreciation1 ; Unrealized appreciation on swaps; Swap premiums paid; Investments at value – unaffiliated2		$7,785,384		$17,737,249		$558,021	–		$2,445,428
Foreign currency exchange contracts	Net unrealized appreciation/ depreciation1 ; Unrealized appreciation on foreign currency exchange contracts; Investments at value – unaffiliated2		–		6,371,914		12,548	–		142,243
Credit contracts	Unrealized appreciation on swaps; Swap premiums paid		–		–		91,413	–		–
Other contracts	Unrealized appreciation on swaps; Swap premiums paid		–		2,579,088		–	–		–
Total			$7,785,384		$26,688,251		$661,982	–		$2,587,671

¹ Includes cumulative appreciation/depreciation on financial futures contracts and centrally cleared swaps as reported in the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

²  Includes options purchased at value as reported in the Schedules of Investments.

78     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

	Liability Derivatives
		GNMA		Inflation Protected Bond		Long Duration Bond		Secured Credit		U.S. Government Bond
	Statements of Assets and Liabilities Location					Value
Interest rate contracts	Net unrealized appreciation/ depreciation1 Unrealized depreciation on swaps; Swap premiums received; Options written at value	$	17,638,262	$	23,752,976	$	1,045,811		–	$	11,430,553
Foreign currency exchange contracts	Unrealized depreciation on foreign currency exchange contracts Options written at value		–		7,904,749		42,932	$	16,865		140,427
Credit contracts	Unrealized depreciation on swaps; Swap premiums received		–		–		151,106		–		–
Other contracts	Unrealized depreciation on swaps; Swap premiums received		–		2,764,280		–		–		220,889
Total		$	17,638,262	$	34,422,005	$	1,239,849	$	16,865	$	11,791,869

¹  Includes cumulative appreciation/depreciation on financial futures contracts and centrally cleared swaps as reported in the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

²  Includes options purchased at value as reported in the Schedules of Investments.

The Effect of Derivative Financial Instruments in the Statements of Operations Year Ended September 30, 2012
	Net Realized Gain (Loss) From
	GNMA			Inflation Protected Bond			Long Duration Bond			Secured Credit			U.S. Government Bond
Interest rate contracts:
Financial futures contracts	$	(4,773,274	)	$	(29,021,205	)	$	9,046,259		$	(149,434	)		$(4,170,386)
Swaps		(468,120	)		3,515,810			(492,735	)		(18,951	)		(5,479,084)
Options3		1,180,223			(9,660,909	)		(894,846	)		(144,002	)		(749,617)
Foreign currency exchange contracts:
Foreign currency transactions		–			15,709,506			(21,207	)		434,477			1,541,702
Financial futures contracts		–			–			–			(4,252	)		(2,186,672)
Options3		–			4,054,200			–			(137,084	)		(1,284,943)
Credit contracts:
Swaps		–			–			119,015			368,778			–
Options3		–			–			–			(6,010	)		–
Equity contracts:
Financial futures contracts		–			–			–			–			(456)
Other contracts:
Swaps		–			1,106,304			–			–			(75,302)
Total	$	(4,061,171	)	$	(14,296,294	)	$	7,756,486		$	343,522			$(12,404,758)
	Net Change in Unrealized Appreciation/Depreciation on
	GNMA			Inflation Protected Bond			Long Duration Bond			Secured Credit			U.S. Government Bond
Interest rate contracts:
Financial futures contracts	$	(190,598	)	$	18,150,070		$	(5,708,300	)	$	(12,286	)	$	132,788
Swaps		(801,156	)		(7,576,803	)		(566,958	)		(264,750	)		(6,648,131)
Options3		1,459,065			17,973,619			1,318,793			345,618			4,644,845
Foreign currency exchange contracts:
Foreign currency translations		–			(409,972	)		(112,335	)		(205,841	)		(43,014)
Financial futures contracts		–			–			–			–			(241,911)
Options3		–			(980,347	)		–			(102,936	)		(606,746)
Credit contracts:
Swaps		–			–			25,852			(487,077	)		–
Other contracts:
Swaps		–			(2,011,693	)		–			(102,015	)		(257,604)
Total	$	467,311		$	25,144,874		$	(5,042,948	)	$	(829,287	)		$(3,019,773)

³ Options purchased are included in the net realized gain (loss) from investments and net change in unrealized appreciation/depreciation on investments.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 79

Notes to Financial Statements (continued)

For the year ended September 30, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:

	GNMA		Inflation Protected Bond		Long Duration Bond		Secured Credit		U.S. Government Bond
Financial futures contracts:
Average number of contracts purchased		635		6,813		583		57		556
Average number of contracts sold		1,357		6,038		296		113		1,529
Average notional value of contracts purchased	$	115,722,783	$	1,022,236,955	$	88,705,500	$	10,443,708	$	94,720,586
Average notional value of contracts sold	$	265,710,977	$	1,011,862,064	$	45,278,137	$	22,067,835	$	295,752,709
Foreign currency exchange contracts:
Average number of contracts - US dollars purchased		–		6		3		10		5
Average number of contracts - US dollars sold		–		3		1		7		5
Average US dollar amounts purchased		–	$	215,878,196	$	2,604,997	$	2,380,869	$	18,812,039
Average US dollar amounts sold		–	$	75,749,130	$	561,291	$	1,534,550	$	20,229,828
Options:
Average number of option contracts purchased		1		5		–		6		4
Average number of option contracts written		1		4		–		3		2
Average notional value of option contracts purchased	$	95,202,500	$	292,153,618	$	1,211,750	$	11,609,242	$	154,672,572
Average notional value of option contracts written	$	68,232,500	$	238,914,258	$	–	$	3,927,460	$	52,569,311
Average number of swaption contracts purchased		9		6		12		6		11
Average number of swaption contracts written		21		15		12		5		16
Average notional value of swaption contracts purchased	$	199,350,000	$	252,537,254	$	51,929,371	$	9,461,637	$	289,325,000
Average notional value of swaption contracts written	$	466,425,000	$	862,112,254	$	46,075,000	$	3,307,000	$	203,150,000
Credit default swaps:
Average number of contracts - buy protection		–		–		2		5		–
Average number of contracts - sell protection		–		–		4		5		–
Average notional value - buy protection		–		–		1,292,500	$	1,430,236		–
Average notional value - sell protection		–		–	$	4,327,500	$	1,253,000		–
Interest rate swaps:
Average number of contracts - pays fixed rate		6		3		6		7		15
Average number of contracts - receives fixed rate		10		3		–		6		13
Average notional value - pays fixed rate	$	247,082,500	$	170,325,000	$	17,502,500	$	3,333,534	$	211,833,002
Average notional value - receives fixed rate	$	245,853,750	$	245,259,521	$	400,000	$	7,093,430	$	197,766,665
Total return swaps:
Average number of contracts		4		4		–		5		7
Average notional value	$	48,386,750	$	134,900,000		–	$	2,147,000	$	52,768,250
Inflation indexed caps:
Average number of contracts		–		1		–		–		–
Average notional value		–	$	34,242,563		–		–		–

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”) is the largest stockholder and an affiliate, for 1940 Act purposes, of BlackRock, Inc. (“BlackRock”).

The Trust, on behalf of the Funds, entered into an Investment Advisory Agreement with the Manager, the Funds’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the

management of each Fund’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Fund. For such services, each Fund pays the Manager a monthly fee based on a percentage of each Fund’s average daily net assets at the following annual rates:

Average Daily Net Assets	GNMA	Inflation Protected Bond	Long Duration Bond	Secured Credit	U.S. Government Bond
First $1 Billion	0.550%	0.400%	0.500%	0.500%	0.500%
$1 Billion – $2 Billion	0.500%	0.375%	0.450%	0.450%	0.450%
$2 Billion – $3 Billion	0.475%	0.350%	0.425%	0.425%	0.425%
Greater than $3 Billion	0.450%	0.325%	0.400%	0.400%	0.400%

80     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

The Manager contractually or voluntarily agreed to waive and/or reimburse fees or expenses, excluding interest expense, dividend expense, acquired fund fees and expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Funds’ business, in order to limit expenses. The expense limitations as a percentage of average daily net assets are as follows:

	GNMA						Inflation Protected Bond						Long Duration Bond			Secured Credit			U.S. Government Bond
	Contractual1			Voluntary2			Contractual1			Voluntary2			Contractual1			Contractual3			Contractual			Voluntary2,4
BlackRock		0.52	%		–			0.32	%		–			0.45	%		N/A			0.45	%5,6		–
Institutional		0.60	%		0.55	%		0.44	%		–			0.55	%		0.70	%		0.62	%1		–
Service		0.90	%		–			0.75	%		–			N/A			N/A			0.81	%5		–
Investor A		1.07	%		–			0.85	%		0.76	%		0.90	%		0.95	%		1.07	%1		0.90	%
Investor B		1.85	%		–			1.63	%		–			N/A			N/A			1.88	%1		1.76	%
Investor B1		N/A			N/A			N/A			N/A			N/A			N/A			1.45	%5		–
Investor C		1.82	%		–			1.62	%		–			N/A			1.70	%		1.82	%1		1.72	%
Investor C1		N/A			N/A			N/A			N/A			N/A			N/A			1.53	%5		–
Class R		1.93	%7		–			1.79	%7		–			2.22	%7		N/A			1.21	%5		–

¹  The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to February 1, 2013 unless approved by the Board, including a majority of the Independent Trustees.

²  The voluntary waiver or reimbursement may be reduced or discontinued at any time.

³  Effective June 30, 2012. The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to July 1, 2013 unless approved by the Board, including a majority of the Independent Trustees. Prior to June 30, 2012, the expense limitation was voluntary.

⁴  Effective June 1, 2012.

⁵  The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to February 1, 2014 unless approved by the Board, including a majority of the Independent Trustees.

⁶  BlackRock Shares closed on November 10, 2011.

⁷  There were no shares outstanding as of September 30, 2012.

These amounts are included in fees waived by Manager and shown as administration fees waived, administration fees waived – class specific, transfer agent fees waived – class specific, transfer agent fees reimbursed – class specific and expenses reimbursed by Manager, respectively, in the Statements of Operations.

For the year ended September 30, 2012, the amounts included in fees waived by Manager were as follows:

GNMA	$1,915,463
Inflation Protected Bond	$5,689,251
Long Duration Bond	$   564,710
Secured Credit	$   304,923
U.S. Government Bond	$   915,252

Class specific expense waivers or reimbursements are as follows:

Administration Fees Waived
	GNMA		Inflation Protected Bond		Long Duration Bond		Secured Credit		U.S. Government Bond
BlackRock		$    5,342		$108,972		$47,189		–		–
Institutional		128,580		17,917		14,129		$5,757		$43,247
Service		10,850		3,708		–		–		1,352
Investor A		–		239,659		317		4,639		49,381
Investor B		–		–		–		–		954
Investor B1		–		–		–		–		6,631
Investor C		–		–		–		3,719		15,186
Investor C1		–		–		–		–		23,077
Class R		–		–		–		–		7,023
Total		$144,772		$370,256		$61,635		$14,115		$146,851
Transfer Agent Fees Waived
	GNMA		Inflation Protected Bond		Long Duration Bond		Secured Credit		U.S. Government Bond
BlackRock		$     168		$1,824		$563		–		–
Institutional		12,973		1,072		273	$	741	$	1,355
Service		716		49		–		–		73
Investor A		–		36,373		121		351		7,362
Investor B		–		–		–		–		431
Investor B1		–		–		–		–		548
Investor C		–		–		–		471		1,035
Investor C1		–		–		–		–		1,108
Class R		–		–		–		–		367
Total		$13,857		$39,318		$957		$1,563		$12,279

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 81

Notes to Financial Statements (continued)

Transfer Agent Fees Reimbursed
	GNMA		Inflation Protected Bond		Long Duration Bond		Secured Credit		U.S. Government Bond
BlackRock	$	6,726	$	10,620	$	141		–		–
Institutional		395,593		62,059		22,547	$	13,931	$	189,377
Service		12,311		1,344		–		–		8,835
Investor A		–		872,120		878		13,285		45,675
Investor B		–		–		–		–		1,865
Investor B1		–		–		–		–		76,149
Investor C		–		–		–		11,604		6,427
Investor C1		–		–		–		–		178,257
Class R		–		–		–		–		39,219
Total	$	414,630	$	946,143	$	23,566	$	38,820	$	545,804

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each Fund’s investment in other affiliated investment companies, if any. These amounts are included in fees waived by Manager in the Statements of Operations. For the year ended September 30, 2012, the amounts waived were as follows:

GNMA	$	20,322
Inflation Protected Bond	$	72,883
Long Duration Bond	$	9,430
Secured Credit	$	6,176
U.S. Government Bond	$	16,052

With respect to each Fund, the Manager entered into separate sub-advisory agreements with BlackRock Financial Management, Inc. (“BFM”), an affiliate of the Manager. With respect to Secured Credit, the Manager entered into a separate sub-advisory agreement with BlackRock International Limited (“BIL”), an affiliate of the Manager. The Manager pays BFM and BIL for services they provide, a monthly fee that is a percentage of the investment advisory fees paid by the Funds to the Manager.

For each Fund excluding Secured Credit, if during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver or reimbursement from the Manager, are less than the expense limit for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of (a) the amount of fees waived or expenses reimbursed during those prior two fiscal years under the agreement and (b) the amount by which the expense limit for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that: (1) the Fund of which the share class is a part has more than $50 million in assets for the fiscal year and (2) the Manager or an affiliate continues to serve as the Fund’s investment advisor or administrator. In the event the expense

limit for a share class is changed subsequent to a fiscal year in which the Manager becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse the Manager shall be calculated by reference to the expense limit for that share class in effect at the time the Manager became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.

For the year ended September 30, 2012, the Manager recouped the following waivers previously recorded by the Funds:

	GNMA		Inflation Protected Bond		Long Duration Bond		U.S. Government Bond
Institutional		–	$	136,190		–		–
Service	$	459		–		–	$	78
Investor A		–		–	$	317		–
Investor B		–		–		–		1,713
Investor B1		–		–		–		6,744
Investor C		–		–		–		3,060
Investor C1		–		–		–		10,104
Class R		–		–		–		10,508
Total	$	459	$	136,190	$	317	$	32,207

On September 30, 2012, the amounts subject to possible future recoupment under the expense limitation agreement are as follows:

	Expiring September 30,
	2013		2014
GNMA	$	2,096,313	$	2,224,071
Inflation Protected Bond	$	5,934,543	$	5,898,663
Long Duration Bond	$	618,674	$	650,867
Secured Credit		–	$	111,238
U.S. Government Bond	$	1,079,262	$	1,506,278

The following waivers previously recorded by the Funds, which were subject to recoupment by the Manager, expired on September 30, 2012:

GNMA	$	2,152,002
Inflation Protected Bond	$	4,725,744
Long Duration Bond	$	606,083
U.S. Government Bond	$	598,882

82     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

The Trust, on behalf of the Funds, entered into a

Distribution Agreement and Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the Funds pay BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the shares of each Fund as follows:

	Service Fee	Distribution Fee
Service	0.25%	–
Investor A	0.25%	–
Investor B	0.25%	0.75%

	Service Fee	Distribution Fee
Investor B1	0.25%	0.50%
Investor C	0.25%	0.75%
Investor C1	0.25%	0.55%
Class R	0.25%	0.25%

Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing and distribution services to each Fund. The ongoing service and/or distribution fee compensates BRIL and each broker- dealer for providing shareholder servicing and/or

distribution related services to Service, Investor A, Investor B, Investor B1, Investor C and Investor C1 shareholders.

For the year ended September 30, 2012, the following table shows the class specific service and distribution fees borne directly by each class of each Fund:

	GNMA		Inflation Protected Bond		Long Duration Bond		Secured Credit		U.S. Government Bond
Service	$	144,411	$	224,912		–		–	$	13,743
Investor A		942,517		4,499,979	$	54,640	$	46,386		1,893,170
Investor B		65,561		79,804		–		–		79,274
Investor B1		–		–		–		–		244,030
Investor C		2,901,368		7,666,349		–		148,636		1,089,022
Investor C1		–		–		–		–		997,998
Class R		–		–		–		–		189,425
Total	$	4,053,857	$	12,471,044	$	54,640	$	195,022	$	4,506,662

For the year ended September 30, 2012, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each Fund’s Investor A Shares as follows:

GNMA	$	107,748
Inflation Protected Bond	$	162,685
Long Duration Bond	$	8,323
Secured Credit	$	5,323
U.S. Government Bond	$	18,012

For the year ended September 30, 2012, affiliates

received CDSCs asfollows:

	GNMA			Inflation Protected Bond			Secured Credit			U.S. Government Bond
Investor A		$	28,573		$	5,724		$	1,363		$	7,478
Investor B		$	7,074		$	4,604			N/A		$	6,451
Investor B1			N/A			N/A			N/A		$	908
Investor C		$	40,436		$	113,644		$	2,664		$	17,093
Investor C1			N/A			N/A			N/A		$	297

Pursuant to written agreements, certain financial

intermediaries, some of which may be affiliates, provide the Funds with sub-accounting, recordkeeping, sub-transfer agency and other administrative services

with respect to sub-accounts they service. For these services, these entities receive an annual fee per

shareholder account, which will vary depending on share class and/or net assets. For the year ended

September 30, 2012, the Funds paid the following to affiliates in return for these services, which are included in transfer agent – class specific in the Statements of Operations:

GNMA	$	188,508
Inflation Protected Bond	$	54,620
Long Duration Bond	$	71,145
U.S. Government Bond	$	236,536

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 83

Notes to Financial Statements (continued)

The Manager maintains a call center, which is responsible for providing certain shareholder services to the Funds, such as responding to shareholder inquiries and processing transactions based upon instructions from shareholders with respect to the subscription and redemption of Fund shares. For the year ended September 30, 2012, each Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent – class specific in the Statements of Operations:

	GNMA		Inflation Protected Bond		Long Duration Bond		Secured Credit		U.S. Government Bond
BlackRock	$	169	$	1,839	$	593		–		–
Institutional		12,973		7,901		274	$	743	$	1,395
Service		1,146		1,561		–		–		74
Investor A		8,867		36,465		445		352		27,948
Investor B		227		305		–		–		732
Investor B1		–		–		–		–		535
Investor C		4,918		11,941		–		470		2,121
Investor C1		–		–		–		–		1,146
Class R		–		–		–		–		423
Total	$	28,300	$	60,012	$	1,312	$	1,565	$	34,374
For the year ended September 30, 2012, the following table shows the class specific transfer agent fees borne directly by each class of each Fund:
	GNMA		Inflation Protected Bond		Long Duration Bond		Secured Credit		U.S. Government Bond
BlackRock	$	6,958	$	13,253	$	822		–		–
Institutional		565,118		1,580,679		79,840	$	16,127	$	304,429
Service		85,437		129,088		–		–		8,924
Investor A		386,538		4,365,831		29,784		14,953		1,127,358
Investor B		11,077		13,340		–		–		22,455
Investor B1		–		–		–		–		115,145
Investor C		323,917		795,461		–		12,766		232,329
Investor C1		–		–		–		–		377,838
Class R		–		–		–		–		85,013
Total	$	1,379,045	$	6,897,652	$	110,446	$	43,846	$	2,273,491

BNY Mellon Investment Servicing (US) Inc. (“BNYMIS”) and the Manager act as co-administrators for the Funds. For these services, the co-administrators receive a combined administration fee computed daily and payable monthly, based on a percentage of the average daily net assets of each Fund. The combined administration fee is paid at the following annual rates: 0.075% of the first $500 million, 0.065% of the next $500 million and 0.055% of the average daily net assets in excess of $1 billion. In addition, each of the share classes is charged an administration fee based on the following percentages of average daily net assets of each respective class: 0.025% of the first $500 million, 0.015% of the next $500 million and 0.005% of the average daily net assets in excess of $1 billion. In addition, BNYMIS and the Manager may have, at their discretion, voluntarily waived all or any portion of their administration fees for a Fund or a share class which are included in

administration fees waived and administration fees waived – class specific in the Statements of Operations. For the year ended September 30, 2012, the Funds paid the following to the Manager in return for these services, which are included in administration, administration – class specific and administration fees waived – class specific in the Statements of Operations:

GNMA	$	782,676
Inflation Protected Bond	$	2,480,813
Long Duration Bond	$	139,632
Secured Credit	$	2,048
U.S. Government Bond	$	736,872

84     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

For the year ended September 30, 2012, the following table shows the administration fees – class specific borne directly by each class of each Fund:

	GNMA		Inflation Protected Bond		Long Duration Bond		Secured Credit		U.S. Government Bond
BlackRock	$	5,342	$	109,041	$	47,472		–		–
Institutional		128,580		233,473		14,171	$	5,757	$	44,009
Service		14,407		22,480		–		–		1,367
Investor A		94,302		240,006		5,460		4,642		163,590
Investor B		1,643		1,999		–		–		1,979
Investor B1		–		–		–		–		8,134
Investor C		72,573		165,034		–		3,719		27,226
Investor C1		–		–		–		–		31,188
Class R		–		–		–		–		9,471
Total	$	316,847	$	772,033	$	67,103	$	14,118	$	286,964

During the year ended September 30, 2012, Secured Credit and U.S. Government Bond received reimbursements of $99 and $17,914, respectively, from an affiliate, which are included in capital share transactions on the Statements of Changes in Net Assets, relating to processing errors.

Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Trust’s Chief Compliance Officer.

4. Investments:

Purchases and sales of investments including paydowns, mortgage dollar roll and TBA transactions and excluding short-term securities and US government securities for the year ended September 30, 2012, were as follows:

	Purchases		Sales
GNMA	$	22,822,454,390	$	21,603,841,994
Inflation Protected Bond		-	$	20,976,808
Long Duration Bond	$	136,312,400	$	155,327,351
Secured Credit	$	425,541,646	$	529,971,945
U.S. Government Bond	$	15,917,291,475	$	16,435,039,364

Purchases and sales of US government securities for the year ended September 30, 2012, were as follows:

	Purchases		Sales
GNMA	$	382,905,594	$	390,091,961
Inflation Protected Bond	$	6,734,681,857	$	5,690,088,716
Long Duration Bond	$	88,942,517	$	117,742,065
Secured Credit	$	96,925,827	$	114,233,548
U.S. Government Bond	$	11,445,098,981	$	11,443,316,848

Purchases and sales of mortgage dollar rolls for the year ended September 30, 2012, were as follows:

	Purchases		Sales
GNMA	$	14,651,334,262	$	14,658,181,211
Long Duration Bond	$	4,596,715	$	4,609,133
Secured Credit	$	197,245,758	$	197,342,680
U.S. Government Bond	$	10,950,829,233	$	10,954,010,825

Transactions in options written for the year ended September 30, 2012, were as follows:

	GNMA
	Calls						Puts
	Notional (000)			Premiums Received			Contracts			Notional (000)			Premiums Received
Outstanding options, beginning of year		419,600		$	14,996,805			622			419,600		$	15,221,604
Options written		228,200			1,760,249			1,444			492,900			5,361,606
Options expired		–			–			(2,066	)		(117,000	)		(4,181,391	)
Options closed		(475,500	)		(12,676,479	)		–			(562,000	)		(10,431,102	)
Outstanding options, end of year		172,300		$	4,080,575			–			233,500		$	5,970,717

	Inflation Protected Bond
	Calls									Puts
	Contracts			Notional (000)			Premiums Received			Contracts			Notional (000)			Premiums Received
Outstanding options, beginning of year		–			731,985		$	24,931,178			580			738,685		$	25,367,230
Options written		11,690			704,020			10,129,034			7,888			1,483,305			21,373,506
Options expired		(11,592	)		(388,520	)		(8,350,827	)		(5,072	)		(326,185	)		(9,768,687	)
Options closed		(98	)		(708,885	)		(21,227,614	)		(3,396	)		(1,147,300	)		(23,472,257	)
Outstanding options, end of year		–			338,600		$	5,481,771			–			748,505		$	13,499,792

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 85

Notes to Financial Statements (continued)

								Long Duration Bond
				Calls									Puts
	Contracts			Notional (000)			Premiums Received			Contracts			Notional (000)			Premiums Received
Outstanding options, beginning of year		3			44,200		$	1,587,500			3			44,200		$	1,612,929
Options written		–			13,800			104,850			–			52,300			575,020
Options expired		(3)			–			(3,789	)		(3	)		(15,800	)		(491,108	)
Options closed		–			(44,200	)		(1,583,711	)		–			(61,900	)		(1,422,431	)
Outstanding options, end of year		–			13,800		$	104,850			–			18,800		$	274,410
								Secured Credit
					Calls									Puts
	Contracts			Notional (000)			Premiums Received			Contracts			Notional (000)			Premiums Received
Outstanding options, beginning of year		30			36,594		$	184,217			–			15,230		$	219,137
Options written		74			13,085			283,663			169			26,930			655,893
Options expired		(54)			(36,879	)		(136,968	)		(42	)		(17,322	)		(214,730	)
Options closed		(50)			(12,800	)		(330,912	)		(127	)		(24,838	)		(660,300	)
Outstanding options, end of year		–			–		$	–			–			–		$	–
								U.S. Government Bond
					Calls									Puts
	Contracts			Notional (000)			Premiums Received			Contracts			Notional (000)			Premiums Received
Outstanding options, beginning of year		1,740			229,600		$	8,682,954			–			378,140		$	8,311,657
Options written		2,475			204,793			6,100,822			1,480			565,868			9,260,232
Options expired		(2,036	)		(40,047	)		(1,124,319	)		(319	)		(320,123	)		(3,977,700	)
Options closed		(2,179	)		(318,546	)		(12,546,603	)		(1,161	)		(521,931	)		(11,552,898	)
Outstanding options, end of year		–			75,800		$	1,112,854			–			101,954		$	2,041,291

5. Income Tax Information:

US GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The following permanent differences as of September 30, 2012 attributable to foreign currency transactions, the accounting for swap agreements and the reclassification of distributions were reclassified to the following accounts:

	GNMA			Inflation Protected Bond			Long Duration Bond			Secured Credit			U.S. Government Bond
Paid in-capital		–			–			–			–		$	(12,508,802	)
Undistributed (distributions in excess of) net investment income	$	21,239,353		$	21,963,839		$	34,886		$	170,699		$	(106,981	)
Accumulated net realized gain (loss)	$	(21,239,353	)	$	(21,963,839	)	$	(34,886	)	$	(170,699	)	$	12,615,783

The tax character of distributions paid during the fiscal years ended September 30, 2012 and September 30, 2011 was as
follows:

	GNMA		Inflation Protected Bond		Long Duration Bond		Secured Credit		U.S. Government Bond
Ordinary income
9/30/12	$	59,303,666	$	96,431,486	$	12,638,256	$	2,086,168	$	36,807,898
9/30/11		68,868,433		225,084,392		14,233,007		5,351,388		23,796,375
Long-term capital gains
9/30/12		–		–		8,032,985		521,750		–
9/30/11		8,348,050		24,278,411		7,062,685		156,541		–
Total
9/30/12	$	59,303,666	$	96,431,486	$	20,671,241	$	2,607,918	$	36,807,898
9/30/11	$	77,216,483	$	249,362,803	$	21,295,692	$	5,507,929	$	23,796,375

86     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

As of September 30, 2012, the tax components of accumulated net earnings were as follows:

	GNMA		Inflation Protected Bond		Long Duration Bond		Secured Credit		U.S. Government Bond
Undistributed ordinary income	$	17,473,039	$	2,952,987	$	10,615,951	$	1,042,745		–
Undistributed long-term capital gains		10,554,529		63,810,460		10,831,233		843,750		–
Capital loss carryforwards		–		–		–		–	$	(6,163,605	)
Net unrealized gains1		31,420,477		488,648,117		33,318,318		730,376		6,378,825
Qualified late-year losses2		–		–		–		–		(73,481	)
Total	$	59,448,045	$	555,411,564	$	54,765,502	$	2,616,871	$	141,739

¹  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales, amortization methods for premiums and discounts on fixed income securities, the realization for tax purposes of unrealized gains/losses on certain futures, options, and foreign currency contracts, and the accounting for swap agreements.

²  The Fund has elected to defer certain qualified late-year losses and recognize such losses in the year ending September 30, 2013.

As of September 30, 2012, the following Fund had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

Expires September 30,	U.S. Government Bond
2015	$	2,719,997
2018		3,443,608
Total	$	6,163,605

During the year ended September 30, 2012, BlackRock U.S. Government Bond Portfolio utilized $27,240,830 of its capital loss carryforward.

As of September 30, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

	GNMA			Inflation Protected Bond			Long Duration Bond			Secured Credit			U.S. Government Bond
Tax cost	$	3,503,196,757		$	5,000,840,223		$	246,269,037		$	64,578,720		$	2,454,526,034
Gross unrealized appreciation	$	40,599,643		$	612,960,247		$	33,872,704		$	792,865		$	29,694,715
Gross unrealized depreciation		(2,576,610	)		(124,209,293	)		(872,251	)		(62,759	)		(12,142,464	)
Net unrealized appreciation	$	38,023,033		$	488,750,954		$	33,000,453		$	730,106		$	17,552,251

6. Borrowings:

For the year ended September 30, 2012, the average amount of outstanding transactions considered as borrowings and the daily weighted average interest rates in treasury rolls and reverse repurchase agreements were as follows:

	Average Borrowings		Daily Weighted Average Interest Rate
Inflation Protected Bond	$	41,308,876	0.14%
Secured Credit	$	563,663	0.13%
U.S. Government Bond	$	40,043,865	0.30%

For the year ended September 30, 2012, the average amount of borrowings and the daily weighted average interest rates in reverse repurchase agreements were as follows:

	Average Borrowings		Daily Weighted Average Interest Rate
GNMA	$	114,490,748	0.17%
Long Duration Bond	$	1,035,082	0.11%

The Trust, on behalf of the Funds, along with certain other funds managed by the Manager and its affiliates, is a party to a $500 million credit agreement with a group of lenders. The Funds may borrow under the credit agreement to fund shareholder redemptions. Effective November 2010 to November 2011, the credit agreement had the following terms: a commitment fee of 0.08% per annum based on the Funds’ pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 1.00% per annum or (b) the Fed Funds rate plus 1.00% per annum on amounts borrowed. In addition, the Funds paid administration and arrangement fees which were allocated to the Funds based on their net assets as of October 31, 2010. The credit agreement, which expired in November 2011, was renewed until November 2012. Effective November 2011 to November 2012, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the Funds’ pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Funds paid administration and arrangement fees which were allocated to the Funds based on their net assets as of October 31, 2011. The Funds did not borrow under the credit agreement during the year ended September 30, 2012.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 87

Notes to Financial Statements (continued)

7. Concentration, Market and Credit Risk:

In the normal course of business, the Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Funds; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Funds may

8. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

be exposed to counterparty credit risk, or the risk that an entity with which the Funds have unsettled or open transactions may fail to or be unable to perform on its commitments. The Funds manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in Statements of Assets and Liabilities, less any collateral held by the Funds.

	Year Ended September 30, 2012						Year Ended September 30, 2011
GNMA		Shares			Amount			Shares			Amount
BlackRock
Shares sold		4,905,138		$	50,941,326			493,781		$	5,150,849
Shares issued in reinvestment of dividends and distributions		83,938			871,813			8,323			85,144
Shares redeemed		(4,249,450	)		(44,270,646	)		(41,450	)		(421,723	)
Net increase		739,626		$	7,542,493			460,654		$	4,814,270
Institutional
Shares sold		30,997,337		$	322,996,029			11,117,854		$	115,380,929
Shares issued in reinvestment of dividends and distributions		1,763,554			18,337,519			2,371,000			24,207,666
Shares redeemed		(17,585,928	)		(183,037,148	)		(22,584,316	)		(232,582,028	)
Net increase (decrease)		15,174,963		$	158,296,400			(9,095,462	)	$	(92,993,433	)
Service
Shares sold		5,732,333		$	59,617,303			1,860,213		$	19,126,257
Shares issued in reinvestment of dividends and distributions		248,535			2,581,171			228,598			2,331,581
Shares redeemed		(1,860,824	)		(19,364,945	)		(2,789,569	)		(28,790,613	)
Net increase (decrease)		4,120,044		$	42,833,529			(700,758	)	$	(7,332,775	)
Investor A
Shares sold and automatic conversion of shares		24,301,810		$	254,169,631			11,119,463		$	115,874,332
Shares issued in reinvestment of dividends and distributions		1,395,646			14,570,279			1,739,607			17,838,301
Shares redeemed		(13,034,399	)		(136,286,191	)		(17,359,488	)		(179,123,971	)
Net increase (decrease)		12,663,057		$	132,453,719			(4,500,418	)	$	(45,411,338	)
Investor B
Shares sold		125,447		$	1,307,379			139,048		$	1,440,497
Shares issued in reinvestment of dividends and distributions		20,032			208,169			44,209			450,747
Shares redeemed and automatic conversion of shares		(313,130	)		(3,266,234	)		(606,780	)		(6,271,746	)
Net decrease		(167,651	)	$	(1,750,686	)		(423,523	)	$	(4,380,502	)

88     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

	Year Ended September 30, 2012						Year Ended September 30, 2011
GNMA (concluded)		Shares			Amount			Shares			Amount
Investor C
Shares sold		9,610,960		$	100,102,141			4,757,113		$	49,427,975
Shares issued in reinvestment of dividends and distributions		950,019			9,865,322			1,480,631			15,086,368
Shares redeemed		(6,743,448	)		(70,211,828	)		(14,594,524	)		(149,983,165	)
Net increase (decrease)		3,817,531		$	39,755,635			(8,356,780	)	$	(85,468,822	)
Total Net Increase (Decrease)		36,347,570		$	379,131,090			(22,616,287	)	$	(230,772,600	)
Inflation Protected Bond
BlackRock
Shares sold		13,701,244		$	160,320,489			10,340,134		$	114,497,767
Shares issued in reinvestment of dividends and distributions		814,719			9,513,173			2,410,590			26,088,728
Shares redeemed		(13,554,151	)		(158,600,524	)		(6,123,236	)		(67,920,305	)
Net increase		961,812		$	11,233,138			6,627,488		$	72,666,190
Institutional
Shares sold		91,414,134		$	1,087,828,424			73,354,938		$	822,556,864
Shares issued in reinvestment of dividends and distributions		2,512,341			29,919,308			5,731,202			63,257,716
Shares redeemed		(54,011,708	)		(643,343,112	)		(45,551,212	)		(511,937,881	)
Net increase		39,914,767		$	474,404,620			33,534,928		$	373,876,699
Service
Shares sold		3,473,872		$	41,271,672			5,400,278		$	60,747,650
Shares issued in reinvestment of dividends and distributions		143,859			1,710,751			436,498			4,815,437
Shares redeemed		(3,741,576	)		(44,555,487	)		(5,460,501	)		(61,857,433	)
Net increase (decrease)		(123,845	)	$	(1,573,064	)		376,275		$	3,705,654
Investor A
Shares sold		91,951,800		$	1,084,730,799			88,893,756		$	991,779,956
Shares issued in reinvestment of dividends and distributions		2,913,601			34,321,027			8,578,412			93,688,783
Shares redeemed		(57,432,359	)		(675,725,296	)		(88,363,127	)		(986,435,012	)
Net increase		37,433,042		$	443,326,530			9,109,041		$	99,033,727
Investor B
Shares sold		173,095		$	2,012,959			205,767		$	2,273,446
Shares issued in reinvestment of dividends and distributions		9,575			111,555			44,552			481,460
Shares redeemed		(351,455	)		(4,086,512	)		(487,364	)		(5,385,429	)
Net decrease		(168,785	)	$	(1,961,998	)		(237,045	)	$	(2,630,523	)

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 89

Notes to Financial Statements (continued)

	Year Ended September 30, 2012						Year Ended September 30, 2011
Inflation Protected Bond (concluded)		Shares			Amount			Shares			Amount
Investor C
Shares sold		16,195,630		$	189,890,848			18,523,975		$	206,569,545
Shares issued in reinvestment of dividends and distributions		1,045,680			12,275,419			3,380,452			36,821,256
Shares redeemed		(14,294,738	)		(168,119,999	)		(18,482,445	)		(204,820,407	)
Net increase		2,946,572		$	34,046,268			3,421,982		$	38,570,394
Total Net Increase		80,963,563		$	959,475,494			52,832,669		$	585,222,141
Long Duration Bond
BlackRock
Shares sold		957,549		$	10,890,070			3,799,925		$	38,822,110
Shares issued in reinvestment of dividends and distributions		1,221,723			13,965,744			1,497,993			15,658,810
Shares redeemed		(5,623,132	)		(65,566,046	)		(9,742,940	)1		(107,641,765	)
Net decrease		(3,443,860	)	$	(40,710,232	)		(4,445,022	)	$	(53,160,845	)
1 Including (7,479,974) representing redemptions-in-kind.
Institutional
Shares sold		1,147,949		$	13,495,321			4,381,994		$	49,510,804
Shares issued in reinvestment of dividends and distributions		378,679			4,318,351			340,694			3,505,474
Shares redeemed		(856,850	)		(10,071,790	)		(531,020	)		(5,619,285	)
Net increase		669,778		$	7,741,882			4,191,668		$	47,396,993
Investor A
Shares sold		2,884,466		$	34,733,478			264,467		$	2,859,684
Shares issued in reinvestment of dividends and distributions		124,908			1,432,650			104,654			1,077,218
Shares redeemed		(2,196,549	)		(26,169,549	)		(343,474	)		(3,676,804	)
Net increase		812,825		$	9,996,579			25,647		$	260,098
Total Net Decrease		(1,961,257	)	$	(22,971,771	)		(227,707	)	$	(5,503,754	)
Secured Credit
Institutional
Shares sold		991,000		$	10,173,456			811,578		$	8,414,042
Shares issued in reinvestment of dividends		69,189			706,839			88,867			915,277
Shares redeemed		(4,703,670	)		(48,045,043	)		(2,617,526	)		(26,903,571	)
Net decrease		(3,643,481	)	$	(37,164,748	)		(1,717,081	)	$	(17,574,252	)
Investor A
Shares sold and automatic conversion of shares		1,006,056		$	10,396,156			948,828		$	9,868,886
Shares issued in reinvestment of dividends		78,457			800,394			80,335			826,539
Shares redeemed		(700,594	)		(7,206,897	)		(1,002,404	)		(10,360,698	)
Net increase		383,919		$	3,989,653			26,759		$	334,727

90     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

	Year Ended September 30, 2012						Year Ended September 30, 2011
Secured Credit (concluded)	Shares			Amount			Shares			Amount
Investor C
Shares sold		414,370		$	4,246,215			617,207		$	6,399,829
Shares issued in reinvestment of dividends		48,249			491,327			55,325			569,414
Shares redeemed		(482,010	)		(4,953,359	)		(774,281	)		(7,960,556	)
Net decrease		(19,391	)	$	(215,817	)		(101,749	)	$	(991,313	)
Total Net Decrease		(3,278,953	)	$	(33,390,912	)		(1,792,071	)	$	(18,230,838	)
							Period July 18, 20112 to September 30, 2011
U.S. Government Bond							Shares			Amount
BlackRock
Shares transferred in the reorganization3		–			–			1,260		$	13,415
Shares sold		1,198		$	13,151			–			–
Shares issued in reinvestment of dividends		–			–			6			71
Shares redeemed		(2,396	)		(26,303	)		(68	)		(730	)
Net increase (decrease)		(1,198	)	$	(13,152	)		1,198		$	12,756
							Year Ended September 30, 2011
							Shares			Amount
Institutional
Shares issued in the reorganization3		–			–			3,828,140		$	40,756,290
Shares sold		3,631,050		$	39,406,413			1,700,417			18,128,546
Shares issued in reinvestment of dividends		350,254			3,778,492			434,519			4,590,587
Shares redeemed		(4,662,551	)		(50,613,264	)		(6,270,686	)		(66,545,754	)
Net decrease		(681,247	)	$	(7,428,359	)		(307,610	)	$	(3,070,331	)
Service
Shares issued in the reorganization3		–			–			207,046		$	2,203,178
Shares sold		210,318		$	2,276,266			221,217			2,336,141
Shares issued in reinvestment of dividends		18,489			199,316			17,454			185,093
Shares redeemed		(443,788	)		(4,780,356	)		(138,502	)		(1,480,583	)
Net increase (decrease)		(214,981	)	$	(2,304,774	)		307,215		$	3,243,829
Investor A
Shares issued in the reorganization3		–			–			50,085,362		$	534,526,007
Shares sold and automatic conversion of shares		14,765,804		$	160,755,163			5,801,452			62,551,236
Shares issued in reinvestment of dividends		1,722,148			18,628,598			962,445			10,265,352
Shares redeemed		(18,759,078	)		(204,114,074	)		(11,150,803	)		(120,008,457	)
Net increase (decrease)		(2,271,126	)	$	(24,730,313	)		45,698,456		$	487,334,138
Investor B
Shares issued in the reorganization3		–			–			550,863		$	5,860,580
Shares sold		80,403		$	870,600			73,866			797,818
Shares issued in reinvestment of dividends		15,116			162,601			21,797			230,498
Shares redeemed and automatic conversion of shares		(545,272	)		(5,909,858	)		(602,085	)		(6,407,623	)
Net increase (decrease)		(449,753	)	$	(4,876,657	)		44,441		$	481,273

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 91

Notes to Financial Statements (concluded)

	Year Ended September 30, 2012						Period July 18, 20112 to September 30, 2011
U.S. Government Bond (concluded)	Shares			Amount			Shares			Amount
Investor B1
Shares transferred in the reorganization3		–			–			5,222,761		$	55,564,431
Shares sold		298,824		$	3,239,771			73,670			798,923
Shares issued in reinvestment of dividends		71,249			767,076			13,212			143,221
Shares redeemed		(3,146,292	)		(34,134,314	)		(904,962	)		(9,825,838	)
Net increase (decrease)		(2,776,219	)	$	(30,127,467	)		4,404,681		$	46,680,737
							Year Ended September 30, 2011
							Shares			Amount
Investor C
Shares issued in the reorganization3		–			–			5,674,303		$	60,461,969
Shares sold		3,021,077		$	32,854,877			1,626,992			17,585,566
Shares issued in reinvestment of dividends		192,849			2,079,421			152,147			1,614,077
Shares redeemed		(4,047,817	)		(43,964,813	)		(2,709,675	)		(28,997,610	)
Net increase (decrease)		(833,891	)	$	(9,030,515	)		4,743,767		$	50,664,002
							Period July 18, 20112 to September 30, 2011
							Shares			Amount
Investor C1
Shares transferred in the reorganization3		–			–			12,528,040		$	133,491,278
Shares sold		1,653,600		$	17,935,619			336,089			3,635,272
Shares issued in reinvestment of dividends		249,079			2,686,102			34,675			376,459
Shares redeemed		(2,994,962	)		(32,511,823	)		(994,666	)		(10,827,067	)
Net increase (decrease)		(1,092,283	)	$	(11,890,102	)		11,904,138		$	126,675,942
Class R
Shares transferred in the reorganization3		–			–			3,927,725		$	41,917,862
Shares sold		1,206,959		$	13,115,353			287,527			3,127,575
Shares issued in reinvestment of dividends		100,448			1,085,987			17,850			193,895
Shares redeemed		(1,704,126	)		(18,502,242	)		(537,480	)		(5,829,027	)
Net increase (decrease)		(396,719	)	$	(4,300,902	)		3,695,622		$	39,410,305
Total Net Increase (Decrease)		(8,717,417	)	$	(94,702,241	)		70,491,908		$	751,432,651

²  Commencement of operations.

³  See Note 1 regarding the reorganization.

For Secured Credit, there is a 2% redemption fee on shares redeemed or exchanged that have been held for 30 days or less. The redemption fees are collected and retained by the Fund for the benefit of the remaining shareholders. The redemption fees are recorded as a credit to paid-in-capital.

9. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

92     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of BlackRock Funds II and Shareholders of BlackRock GNMA Portfolio, BlackRock Inflation Protected Bond Portfolio, BlackRock Long Duration Bond Portfolio, BlackRock Secured Credit Portfolio (formerly BlackRock Multi-Sector Bond Portfolio) and BlackRock U.S. Government Bond Portfolio:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the BlackRock GNMA Portfolio, BlackRock Inflation Protected Bond Portfolio, BlackRock Long Duration Bond Portfolio, BlackRock Secured Credit Portfolio (formerly BlackRock Multi-Sector Bond Portfolio) and BlackRock U.S. Government Bond Portfolio (collectively, the “Funds”), each a series of BlackRock Funds II, as of September 30, 2012, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial

reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2012, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds as of September 30, 2012, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Philadelphia, Pennsylvania

November 21, 2012

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid during the fiscal year ended September 30, 2012:

Interest-Related Dividends for Non-U.S. Residents1
	Payable Dates
	October 2011 - January 2012	February 2012 - September 2012
GNMA Portfolio	100.00%	100.00%
Inflation Protected Bond Portfolio	100.00%	100.00%
Long Duration Bond Portfolio	100.00%	100.00%
Secured Credit Portfolio	100.00%	100.00%
U.S. Government Bond Portfolio	100.00%	59.04%

¹  Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

Federal Obligation Interest2
GNMA Portfolio	0.00%
Inflation Protected Bond Portfolio	30.70%
Long Duration Bond Portfolio	15.75%
Secured Credit Portfolio	7.05%
U.S. Government Bond Portfolio	16.53%

²  The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.

Additionally, the following Funds distributed long-term capital gains per share to shareholders of record on December 20, 2011:

	Long-Term  Capital Gain
Long Duration Bond Portfolio	$0.393546
Secured Credit Portfolio	$0.103263

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 93

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreements

The Board of Trustees (the “Board,” and the members of which are referred to as “Board Members”) of BlackRock GNMA Portfolio (the “GNMA Portfolio”), BlackRock Inflation Protected Bond Portfolio (the “Inflation Protected Portfolio”), BlackRock Long Duration Bond Portfolio (the “Long Duration Portfolio”), BlackRock Secured Credit Portfolio (the “Secured Credit Portfolio”) and BlackRock U.S. Government Bond Portfolio (the “U.S. Government Portfolio”) (each, a “Fund,” and collectively, the “Funds”), each a series of BlackRock Funds II (the “Trust”), met on April 10, 2012 and
May 8-9, 2012 to consider the approval of the Trust’s investment advisory agreement (the “Advisory Agreement”), on behalf of each Fund, with BlackRock Advisors, LLC (the “Manager”), each Fund’s investment advisor. The Board also considered the approval of the sub-advisory agreements (collectively, the “Sub-Advisory Agreements”) between the Manager and BlackRock Financial Management, Inc. (the “Sub-Advisor”), with respect to each Fund. The Manager and the Sub-Advisor are referred to herein as “BlackRock.” The Advisory Agreement and the Sub-Advisory Agreements are referred to herein as the “Agreements.”

Activities and Composition of the Board

The Board consists of thirteen individuals, ten of whom are not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Funds and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chairman of the Board is an Independent Board Member. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Performance Oversight Committee and the Executive Committee, each of which also has one interested Board Member).

The Agreements

Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreements on an annual basis. The Board has four quarterly meetings per year, each extending over two days, and a fifth meeting to consider specific information surrounding the consideration of renewing the Agreements. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services provided to each Fund by BlackRock, its personnel and its affiliates, including investment management, administrative and shareholder services, oversight of fund accounting and custody, marketing services, risk oversight, compliance and assistance in meeting applicable legal and regulatory requirements.

The Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to each Fund and its shareholders. Among the matters the Board considered were: (a) investment performance for one-, three- and five-year periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as

senior management’s and portfolio managers’ analysis of the reasons for any over performance or underperformance against its peers and/or benchmark, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by each Fund for services, such as marketing and distribution, call center and fund accounting; (c) Fund operating expenses and how BlackRock allocates expenses to each Fund; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of each Fund’s investment objective, policies and restrictions; (e) each Fund’s compliance with its Code of Ethics and other compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of each Fund’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment objectives across the open-end fund, exchange traded fund (“ETF”), closed-end fund and institutional account product channels, as applicable; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.

The Board has engaged in an ongoing strategic review with BlackRock of opportunities to consolidate funds and of BlackRock’s commitment to investment performance. In addition, the Board requested, to the extent reasonably possible, an analysis of the risk and return relative to selected funds in peer groups. BlackRock provides information to the Board in response to specific questions. These questions covered issues such as profitability, investment performance and management fee levels. The Board considered the importance of: (i) managing fixed income assets with a view toward preservation of capital; (ii) portfolio managers’ investments in the funds they manage; (iii) BlackRock’s controls surrounding the coding of quantitative investment models; and (iv) BlackRock’s oversight of relationships with third party service providers.

Board Considerations in Approving the Agreements

The Approval Process: Prior to the April 10, 2012 meeting, the Board requested and received materials specifically relating to the Agreements. The Board is engaged in a process with its independent legal counsel and BlackRock to review periodically the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on Fund fees and expenses and the investment performance of each Fund as compared with a peer group of funds as determined by Lipper (collectively, “Peers”); (b) information on the profitability of the Agreements to BlackRock and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees (a combination of the advisory fee and the administration fee, if any) charged to other clients, such as institutional clients, ETFs and closed-end funds, under similar investment mandates, as well as the performance of such other clients, as applicable; (d) the existence, impact and sharing of potential economies of scale; (e) a summary of aggregate amounts paid by each Fund to BlackRock; (f) sales and redemption data regarding each Fund’s shares; and (g) if applicable, a comparison of management fees to similar BlackRock open-end funds, as classified by Lipper.

94     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreements (continued)

At an in-person meeting held on April 10, 2012, the Board reviewed materials relating to its consideration of the Agreements. As a result of the discussions that occurred during the April 10, 2012 meeting, and as a culmination of the Board’s year-long deliberative process, the Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the May 8-9, 2012 Board meeting.

At an in-person meeting held on May 8-9, 2012, the Board, including all the Independent Board Members, approved the continuation of the Advisory Agreement between the Manager and the Trust, on behalf of each Fund, and the Sub-Advisory Agreements between the Manager and the Sub-Advisor with respect to each Fund each for a one-year term ending June 30, 2013. In approving the continuation of the Agreements, the Board considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of each Fund and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with each Fund; (d) economies of scale; (e) fall-out benefits to BlackRock as a result of its relationship with each Fund; and (f) other factors deemed relevant by the Board Members.

The Board also considered other matters it deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to the distribution of Fund shares and securities lending, services related to the valuation and pricing of Fund portfolio holdings, direct and indirect benefits to BlackRock and its affiliates from their relationship with each Fund and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services to be Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of each Fund. Throughout the year, the Board compared Fund performance to the performance of a comparable group of mutual funds and/or the performance of a relevant benchmark, if any. The Board met with BlackRock’s senior management personnel responsible for investment operations, including the senior investment officers. The Board also reviewed the materials provided by each Fund’s portfolio management team discussing Fund performance and the Fund’s investment objective, strategies and outlook.

The Board considered, among other factors, the number, education and experience of BlackRock’s investment personnel generally and each Fund’s portfolio management team, investments by portfolio managers in the funds they manage, BlackRock’s portfolio trading capabilities, BlackRock’s use of technology, BlackRock’s commitment to compliance, BlackRock’s credit analysis capabilities, BlackRock’s risk analysis and oversight capabilities and BlackRock’s approach to training and retaining

portfolio managers and other research, advisory and management personnel. The Board engaged in a review of BlackRock’s compensation structure with respect to each Fund’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to each Fund. BlackRock and its affiliates provide each Fund with certain administrative, shareholder and other services (in addition to any such services provided to a Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. In particular, BlackRock and its affiliates provide each Fund with the following administrative services including, among others: (i) preparing disclosure documents, such as the prospectus, the statement of additional information and periodic shareholder reports; (ii) assisting with daily accounting and pricing; (iii) overseeing and coordinating the activities of other service providers; (iv) organizing Board meetings and preparing the materials for such Board meetings; (v) providing legal and compliance support; and (vi) performing other administrative functions necessary for the operation of the Fund, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Board reviewed the structure and duties of BlackRock’s fund administration, accounting, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of each Fund and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of each Fund. In preparation for the April 10, 2012 meeting, the Board worked with its independent legal counsel, BlackRock and Lipper to develop a template for, and was provided with, reports independently prepared by Lipper, which included a comprehensive analysis of each Fund’s performance. The Board also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with its review, the Board received and reviewed information regarding the investment performance of each Fund as compared to funds in the Fund’s applicable Lipper category. The Board was provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper representatives to review their methodology. The Board and the Board’s Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of each Fund throughout the year.

The Board noted that the GNMA Portfolio ranked in the third, second and second quartiles against its Lipper Performance Universe for the one-, three- and five-year periods reported, respectively. The Board and BlackRock reviewed and discussed the reasons for the GNMA Portfolio’s underperformance during the one-year period and will monitor closely the GNMA Portfolio’s performance in the coming year.

The Board noted that the Inflation Protected Portfolio ranked in the third, second and first quartiles against its Lipper Performance Universe for the one-, three- and five-year periods reported, respectively. The Board and BlackRock reviewed and discussed the reasons for the Inflation Protected Portfolio’s underperformance during the one-year period and will monitor closely the Inflation Protected Portfolio’s performance in the coming year.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 95

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreements (continued)

The Board noted that the Long Duration Portfolio ranked in the first quartile for the one-year period reported, and ranked one out of four funds and one out of three funds for the three-year and since-inception periods reported, respectively, against its Lipper Performance Universe.

The Board noted that the Secured Credit Portfolio ranked in the fourth quartile against its Lipper Performance Universe for each of the one-year and since-inception periods reported. The Board and BlackRock reviewed and discussed the reasons for the Secured Credit Portfolio’s underperformance during these periods compared with its Peers. The Board was informed that, among other things, the Secured Credit Portfolio maintained a shorter duration bias relative to its peer universe throughout most of the one-year and since-inception period. While this duration stance was beneficial in the earlier half of the period, the overall impact on performance for the one-year period was negative as interest rates declined to historically low levels in the latter half as a flight to quality rally occurred due to fears of a global economic slowdown and persistent sovereign debt problems in Europe. Additionally, the Secured Credit Portfolio’s positioning in the high yield bond and investment grade corporate credit markets negatively impacted performance as those asset classes lagged Treasuries during the flight to quality rally.

The Board and BlackRock discussed BlackRock’s strategy for improving the Secured Credit Portfolio’s performance and BlackRock’s commitment to providing the resources necessary to assist the Secured Credit Portfolio’s portfolio managers and to improve the Secured Credit Portfolio’s performance. The Board noted, in particular, that the Secured Credit Portfolio was undergoing a change in its investment strategy (such change became effective July 2, 2012) and, in that connection, was changing its name (the Fund’s former name was BlackRock Multi-Sector Bond Portfolio).

The Board noted that the U.S. Government Portfolio ranked in the third, first and third quartiles against its Lipper Performance Universe for the one-, three- and five-year periods reported, respectively. The Board and BlackRock reviewed and discussed the reasons for the U.S. Government Portfolio’s underperformance during the one- and five-year periods compared with its Peers. The Board was informed that, among other things, underperformance during the five-year period was primarily due to the U.S. Government Portfolio’s significant exposure to non-government debt during the financial crisis in 2008. Most notably the underperformance was due to a large allocation to non-agency mortgages and commercial mortgage backed securities, which both dramatically underperformed. For the one-year period the U.S. Government Portfolio’s underperformance compared to the peer group was primarily driven by its shorter duration positioning. The European sovereign debt crisis and growing concerns over slowing global growth drove U.S. Treasury prices higher benefitting those peers who maintained a greater exposure to Treasuries and longer durations.

The Board and BlackRock discussed BlackRock’s strategy for improving the U.S. Government Portfolio’s performance and BlackRock’s commitment to providing the resources necessary to assist the U.S. Government Portfolio’s portfolio managers and to improve the U.S. Government Portfolio’s performance.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with each Fund: The Board, including the Independent Board Members, reviewed each Fund’s contractual management fee rate compared with the other funds in its Lipper category. It also compared each Fund’s total expense ratio, as well as actual management fee rate, to those of other funds in its Lipper category. The Board considered the services provided and the fees charged by BlackRock to other types of clients with similar investment mandates, including separately managed institutional accounts.

The Board received and reviewed statements relating to BlackRock’s financial condition and profitability with respect to the services it provided each Fund. The Board was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to each Fund. The Board reviewed BlackRock’s profitability with respect to each Fund and other funds the Board currently oversees for the year ended December 31, 2011 compared to available aggregate profitability data provided for the years ended December 31, 2010 and December 31, 2009. The Board reviewed BlackRock’s profitability with respect to other fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, expense allocations and business mix, and the difficulty of comparing profitability as a result of those factors.

The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board considered BlackRock’s operating margin, in general, compared to the operating margin for leading investment management firms whose operations include advising open-end funds, among other product types. In addition, the Board considered, among other things, certain third party data comparing BlackRock’s operating margin with that of other publicly-traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, the Board considered the cost of the services provided to each Fund by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management and distribution of each Fund and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock’s methodology in allocating its costs to the management of each Fund. The Board also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreements and to continue to provide the high quality of services that is expected by the Board.

The Board noted that the GNMA Portfolio’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was above the median contractual management fee ratio paid by the GNMA Portfolio’s Peers, in each case before taking into account any

96     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreements (continued)

expense reimbursements or fee waivers. The Board also noted, however, that the GNMA Portfolio’s actual management fee ratio, after giving effect to any expense reimbursements or fee waivers by BlackRock, was lower than or equal to the median actual management fee ratio paid by the GNMA Portfolio’s Peers, after giving effect to any expense reimbursements or fee waivers. The Board further noted that the GNMA Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee ratio downward as the size of the GNMA Portfolio increases above certain contractually specified levels. In addition, the Board noted that BlackRock has contractually and/or voluntarily agreed to waive fees or reimburse expenses in order to limit, to a specified amount, the GNMA Portfolio’s total net expenses on a class-by-class basis, as applicable.

The Board noted that the Inflation Protected Portfolio’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was lower than or equal to the median contractual management fee ratio paid by the Inflation Protected Portfolio’s Peers, in each case before taking into account any expense reimbursements or fee waivers. The Board also noted that the Inflation Protected Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee ratio downward as the size of the Inflation Protected Portfolio increases above certain contractually specified levels. The Board further noted that BlackRock has contractually and/or voluntarily agreed to waive fees or reimburse expenses in order to limit, to a specified amount, the Inflation Protected Portfolio’s total net expenses on a class-by-class basis, as applicable.

The Board noted that the Long Duration Portfolio’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was lower than or equal to the median contractual management fee ratio paid by the Long Duration Portfolio’s Peers, in each case before taking into account any expense reimbursements or fee waivers. The Board also noted that the Long Duration Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee ratio downward as the size of the Long Duration Portfolio increases above certain contractually specified levels. The Board further noted that BlackRock has contractually agreed to waive fees or reimburse expenses in order to limit, to a specified amount, the Long Duration Portfolio’s total net expenses on a class-by-class basis, as applicable.

The Board noted that the Secured Credit Portfolio’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was above the median contractual management fee ratio paid by the Secured Credit Portfolio’s Peers, in each case before taking into account any expense reimbursements or fee waivers. The Board also noted, however, that the Secured Credit Portfolio’s actual management fee ratio, after giving effect to any expense reimbursements or fee waivers by BlackRock, was lower than or equal to the median actual management fee ratio paid by the Secured Credit Portfolio’s Peers, after giving effect to any expense reimbursements or fee waivers. The Board further noted that the Secured Credit Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee ratio downward as the size of the Secured Credit Portfolio increases above certain contractually specified levels. In addition, the Board noted that BlackRock has voluntarily agreed to waive fees or reimburse expenses in

order to limit, to a specified amount, the Secured Credit Portfolio’s total net expenses on a class-by-class basis, as applicable.

The Board noted that the U.S. Government Portfolio’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was above the median contractual management fee ratio paid by the U.S. Government Portfolio’s Peers, in each case before taking into account any expense reimbursements or fee waivers. The Board also noted that the U.S. Government Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee ratio downward as the size of the U.S. Government Portfolio increases above certain contractually specified levels. The Board further noted that BlackRock has contractually agreed to waive fees or reimburse expenses in order to limit, to a specified amount, the U.S. Government Portfolio’s total net expenses on a class-by-class basis, as applicable. Additionally, the Board noted that after discussions between the Board, including the Independent Board Members, and BlackRock, the Board and BlackRock agreed to voluntary waive fees or reimburse expenses in order to limit, to a specified amount, the U.S. Government Portfolio’s total net expenses on a class-by-class basis, as applicable, effective June 1, 2012.

D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of each Fund increase, as well as the existence of expense caps. The Board also considered the extent to which each Fund benefits from such economies and whether there should be changes in the advisory fee rate or structure in order to enable the Fund to participate in these economies of scale, for example through the use of revised breakpoints in the advisory fee based upon the asset level of the Fund. In its consideration, the Board Members took into account the existence of expense caps and further considered the continuation and/or implementation, as applicable, of such caps.

E. Other Factors Deemed Relevant by the Board Members: The Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with each Fund, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Fund, including for administrative, distribution, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Board further noted that it had considered the investment by BlackRock’s funds in ETFs without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Agreements, the Board also received information regarding BlackRock’s brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

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Disclosure of Investment Advisory Agreement and Sub-Advisory Agreements (concluded)

The Board noted the competitive nature of the open-end fund marketplace, and that shareholders are able to redeem their Fund shares if they believe that a Fund’s fees and expenses are too high or if they are dissatisfied with the performance of the Fund.

Conclusion

The Board, including all the Independent Board Members, approved the continuation of the Advisory Agreement between the Manager and the Trust, on behalf of each Fund, for a one-year term ending June 30, 2013, and the Sub-Advisory Agreements between the Manager and the Sub-Advisor with respect to each Fund for a one-year term ending June 30, 2013. Based upon its evaluation of all of the aforementioned factors in their totality, the Board, including the Independent Board Members, was satisfied that the terms of the Agreements were fair and reasonable and

in the best interest of each Fund and its shareholders. In arriving at its decision to approve the Agreements, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for each Fund reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

98     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Officers and Trustees

Name, Address, and Year of Birth	Position(s) Held with Trust	Length of Time Served as a Trustee2	Principal Occupation(s) During Past 5 Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Robert M. Hernandez 55 East 52nd Street New York, NY 10055 1944	Chairman of the Board and Trustee	Since 2007	Director, Vice Chairman and Chief Financial Officer of USX Corporation (energy and steel business) from 1991 to 2001; Director, TE Connectivity (electronics) from 2006 to 2012.	29 RICs consisting of 82 Portfolios	ACE Limited (insurance company); Eastman Chemical Company (chemicals); RTI International Metals, Inc. (metals)
Fred G. Weiss 55 East 52nd Street New York, NY 10055 1941	Vice Chairman of the Board and Trustee	Since 2007	Managing Director, FGW Associates (consulting and investment company) since 1997; Director and Treasurer, Michael J. Fox Foundation for Parkinson’s Research since 2000; Director, BTG International Plc (medical technology commercialization company) from 2001 to 2007.	29 RICs consisting of 82 Portfolios	Watson Pharmaceuticals Inc.
James H. Bodurtha 55 East 52nd Street New York, NY 10055 1944	Trustee	Since 2007	Director, The China Business Group, Inc. (consulting firm) since 1996 and Executive Vice President thereof from 1996 to 2003; Chairman of the Board, Berkshire Holding Corporation since 1980.	29 RICs consisting of 82 Portfolios	None
Bruce R. Bond 55 East 52nd Street New York, NY 10055 1946	Trustee	Since 2007	Trustee and Member of the Governance Committee, State Street Research Mutual Funds from 1997 to 2005; Board Member of Governance, Audit and Finance Committee, Avaya Inc. (computer equipment) from 2003 to 2007.	29 RICs consisting of 82 Portfolios	None
Donald W. Burton 55 East 52nd Street New York, NY 10055 1944	Trustee	Since 2007	Managing General Partner, The Burton Partnership, LP (an investment partnership) since 1979; Managing General Partner, The South Atlantic Venture Funds since 1983; Director, Lifestyle Family Fitness (fitness industry) since 2006; Director, IDology, Inc. (technology solutions) since 2006; Member of the Investment Advisory Council of the Florida State Board of Administration from 2001 to 2007.	29 RICs consisting of 82 Portfolios	Knology, Inc. (telecommunications); Capital Southwest (financial)
Honorable Stuart E. Eizenstat 55 East 52nd Street New York, NY 10055 1943	Trustee	Since 2007	Partner and Head of International Practice, Covington and Burling LLP (law firm) since 2001; International Advisory Board Member, The Coca Cola Company from 2002 to 2011; Advisory Board Member, Veracity Worldwide LLC (risk management) since 2007; Member of the International Advisory Board GML (energy) since 2003; Advisory Board Member, BT Americas (telecommunications) since 2004 to 2010.	29 RICs consisting of 82 Portfolios	Alcatel-Lucent (telecommunications); Global Specialty Metallurgical (metallurgical industry); UPS Corporation (delivery service)
Kenneth A. Froot 55 East 52nd Street New York, NY 10055 1957	Trustee	Since 2007	Professor, Harvard University since 1992.	29 RICs consisting of 82 Portfolios	None
John F. O’Brien 55 East 52nd Street New York, NY 10055 1943	Trustee	Since 2007	Chairman and Director, Woods Hole Oceanographic Institute since 2009 and Trustee thereof from 2003 to 2009; Director, Ameresco, Inc. (energy solutions company) from 2006 to 2007.	29 RICs consisting of 82 Portfolios	Cabot Corporation (chemicals); LKQ Corporation (auto parts manufacturing); TJX Companies, Inc. (retailer)
Roberta Cooper Ramo 55 East 52nd Street New York, NY 10055 1942	Trustee	Since 2007	Shareholder, Modrall, Sperling, Roehl, Harris & Sisk, P.A. (law firm) since 1993; Chairman of the Board, Cooper’s Inc., (retail) since 2000; Director ECMC Group (service provider to students, schools and lenders) since 2001; President, The American Law Institute (non-profit) since 2008; President, American Bar Association from 1995 to 1996.	29 RICs consisting of 82 Portfolios	None

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Officers and Trustees (continued)

Name, Address, and Year of Birth	Position(s) Held with Trust	Length of Time Served as a Trustee2	Principal Occupation(s) During Past 5 Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
David H. Walsh 55 East 52nd Street New York, NY 10055 1941	Trustee	Since 2007	Director, National Museum of Wildlife Art since 2007; Trustee, University of Wyoming Foundation since 2008; Director, Ruckleshaus Institute and Haub School of Natural Resources at the University of Wyoming from 2006 to 2008; Director, The American Museum of Fly Fishing since 1997; Director, The National Audubon Society from 1998 to 2005.	29 RICs consisting of 82 Portfolios	None
	1  Each Independent Trustee holds office until his or her successor is duly elected and qualifies or until his or her earlier death, resignation or removal as provided by the Trust’s by-laws or charter or statute. In no event may an Independent Trustee hold office beyond December 31 of the year in which he or she turns 74.
	2  Date shown is the earliest date a person has served for the Trust covered by this annual report. Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock Fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Trustees as joining the Trust’s Board in 2007, each Trustee first became a member of the board of other legacy MLIM or legacy BlackRock Funds as follows: James H. Bodurtha, 1995; Bruce R. Bond, 2005; Donald W. Burton, 2002; Stuart E. Eizenstat, 2001; Kenneth A. Froot, 2005; Robert M. Hernandez, 1996; John F. O’Brien, 2004; Roberta Cooper Ramo, 2000; David H. Walsh, 2003; and Fred G. Weiss, 1998.
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	159 RICs consisting of 286 Portfolios	None
Laurence D. Fink 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2007	Chairman and Chief Executive Officer of BlackRock since its formation in 1998 and of BlackRock’s predecessor entities since 1988 and Chairman of the Executive and Management Committees; Formerly Managing Director, The First Boston Corporation, Member of its Management Committee, Co-head of its Taxable Fixed Income Division and Head of its Mortgage and Real Estate Products Group; Chairman of the Board of several of BlackRock’s alternative investment vehicles; Director of several of BlackRock’s offshore funds; Member of the Board of Trustees of New York University, Chair of the Financial Affairs Committee and a member of the Executive Committee, the Ad Hoc Committee on Board Governance, and the Committee on Trustees; Co-Chairman of the NYU Hospitals Center Board of Trustees, Chairman of the Development/Trustee Stewardship Committee and Chairman of the Finance Committee; Trustee, The Boys’ Club of New York.	29 RICs consisting of 82 Portfolios	BlackRock
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	159 RICs consisting of 286 Portfolios	None
	3  Messrs. Audet and Fink are both “interested persons,” as defined in the 1940 Act, of the Trust based on their positions with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-ended funds. Interested Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

100     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Officers and Trustees (concluded)

Name, Address, and Year of Birth	Position(s) Held with Trust	Length of Time Served	Principal Occupation(s) During Past 5 Years
Trust Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resources Network (charitable foundation) since 2009.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009 and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2007	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2007	Chief Compliance Officer of the BlackRock-advised Funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Director of BlackRock since 2010; Assistant Secretary to the Funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1 Officers of the Trust serve at the pleasure of the Board of Trustees.
	Further information about the Trust’s Officers and Trustees is available in the Trust’s Statement of Additional Information, which can be obtained without charge by calling 1-800-441-7762.

Investment Advisor and Co-Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Sub-Advisor BlackRock Financial Management, Inc. New York, NY 10055	Accounting Agent, Co-Administrator and Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm Deloitte & Touche LLP Philadelphia, PA 19103
Address of the Trust 100 Bellevue Parkway Wilmington, DE 19809	Custodian The Bank of New York Mellon New York, NY 10286	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Willkie Farr & Gallagher LLP New York, NY 10019

Effective May 8, 2012, Ira P. Shapiro resigned as Secretary of the Trust and Benjamin Archibald became Secretary of the Trust.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 101

Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the Funds’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Funds’ electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly With BlackRock

1) Access the BlackRock website at http://www.blackrock.com/ edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

Householding

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 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 call the Funds at (800) 441-7762.

Availability of Quarterly Portfolio Schedule

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http:// www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http:// www.sec.gov.

Availability of Proxy Voting Record

Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available, upon request and without charge (1) at http://www.blackrock.com, or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http:// www.blackrock.com/funds.

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 funds.

Systematic Withdrawal Plan

Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance is at least $10,000.

Retirement Plans

Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRA’s, SEP IRA’s and 403(b) Plans.

102     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Additional Information (concluded)

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 non-public 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 non-public 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 websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated 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 non-public 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 non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 103

A World-Class Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.

Equity Funds
BlackRock ACWI ex-US Index Fund BlackRock All-Cap Energy & Resources Portfolio BlackRock Balanced Capital Fund† BlackRock Basic Value Fund BlackRock Capital Appreciation Fund BlackRock China Fund BlackRock Commodity Strategies Fund BlackRock Emerging Markets Fund BlackRock Emerging Markets Long/Short Equity Fund BlackRock Energy & Resources Portfolio BlackRock Equity Dividend Fund BlackRock EuroFund BlackRock Flexible Equity Fund BlackRock Focus Growth Fund BlackRock Global Allocation Fund†	BlackRock Global Dividend Income Portfolio BlackRock Global Opportunities Portfolio BlackRock Global SmallCap Fund BlackRock Health Sciences Opportunities Portfolio BlackRock Index Equity Portfolio BlackRock India Fund BlackRock International Fund BlackRock International Index Fund BlackRock International Opportunities Portfolio BlackRock Large Cap Core Fund BlackRock Large Cap Core Plus Fund BlackRock Large Cap Growth Fund BlackRock Large Cap Value Fund BlackRock Latin America Fund BlackRock Long-Horizon Equity Fund BlackRock Managed Volatility Portfolio†	BlackRock Mid-Cap Growth Equity Portfolio BlackRock Mid-Cap Value Opportunities Fund BlackRock Natural Resources Trust BlackRock Pacific Fund BlackRock Real Estate Securities Fund BlackRock Russell 1000 Index Fund BlackRock Science & Technology Opportunities Portfolio BlackRock Small Cap Growth Equity Portfolio BlackRock Small Cap Growth Fund II BlackRock Small Cap Index Fund BlackRock S&P 500 Index Fund BlackRock S&P 500 Stock Fund BlackRock U.S. Opportunities Portfolio BlackRock Value Opportunities Fund BlackRock World Gold Fund
Taxable Fixed Income Funds
BlackRock Bond Index Fund BlackRock Core Bond Portfolio BlackRock CoreAlpha Bond Fund BlackRock Emerging Market Local Debt Portfolio BlackRock Floating Rate Income Portfolio BlackRock Global Long/Short Credit Fund BlackRock GNMA Portfolio	BlackRock High Yield Bond Portfolio BlackRock Inflation Protected Bond Portfolio BlackRock International Bond Portfolio BlackRock Long Duration Bond Portfolio BlackRock Low Duration Bond Portfolio BlackRock Multi-Asset Income Portfolio† BlackRock Secured Credit Portfolio	BlackRock Strategic Income Opportunities Portfolio BlackRock Total Return Fund BlackRock US Government Bond Portfolio BlackRock US Mortgage Portfolio BlackRock World Income Fund
Municipal Fixed Income Funds
BlackRock California Municipal Bond Fund BlackRock High Yield Municipal Fund BlackRock Intermediate Municipal Fund	BlackRock National Municipal Fund BlackRock New Jersey Municipal Bond Fund BlackRock New York Municipal Bond Fund	BlackRock Pennsylvania Municipal Bond Fund BlackRock Short-Term Municipal Fund

Target Risk & Target Date Funds†
BlackRock Prepared Portfolios	LifePath Active Portfolios		LifePath Portfolios		LifePath Index Portfolios
Conservative Prepared Portfolio	2015	2035	Retirement	2040	Retirement	2040
Moderate Prepared Portfolio	2020	2040	2020	2045	2020	2045
Growth Prepared Portfolio	2025	2045	2025	2050	2025	2050
Aggressive Growth Prepared Portfolio	2030	2050	2030	2055	2030	2055
			2035		2035

  †   Mixed asset fund.

BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. 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) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.

104     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

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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 a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

Investment in foreign securities involves special risks including fluctuating foreign exchange rates, foreign government regulations, differing degrees of liquidity and the possibility of substantial volatility due to adverse political, economic or other developments.

Taxable5-9/12-AR

         September 30, 2012

Annual Report

BlackRock Funds II

u  BlackRock Core Bond Portfolio

u  BlackRock High Yield Bond Portfolio

u  BlackRock Low Duration Bond Portfolio

        Not  FDIC Insured ¡ No Bank Guarantee ¡ May Lose Value         

Table of Contents
	Page
Dear Shareholder		3
Annual Report:
Fund Summaries		4
About Fund Performance		10
Disclosure of Expenses		11
The Benefits and Risks of Leveraging		11
Derivative Financial Instruments		12
Financial Statements:
Schedules of Investments		13
Statements of Assets and Liabilities		54
Statements of Operations		57
Statements of Changes in Net Assets		58
Financial Highlights		60
Notes to Financial Statements		69
Report of Independent Registered Public Accounting Firm		92
Important Tax Information		92
Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement		93
Officers and Trustees		97
Additional Information		100
A World-Class Mutual Fund Family		102

 2   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Dear Shareholder

Late in the summer of 2011, financial markets were upended by sovereign debt turmoil in the United States and Europe as well as growing concerns about the future of the global economy. Investor confidence had crumbled. However, the fourth quarter of 2011 brought improving economic data and more concerted efforts among European leaders toward stemming the region’s debt crisis, gradually drawing investors back to the markets. Improving sentiment carried over into early 2012 as investors felt some relief from the world’s financial woes. Volatility abated and risk assets (including stocks, commodities and high yield bonds) moved boldly higher through the first two months of 2012, while climbing Treasury yields pressured higher-quality fixed income assets.

Markets reversed course in the spring when Europe’s debt problems boiled over once again. High levels of volatility returned as political instability in Greece threatened the country’s membership in the eurozone. Spain faced severe deficit issues while the nation’s banks clamored for liquidity. Yields on Spanish and Italian government debt rose to levels deemed unsustainable. European leaders conferred and debated vehemently over the need for fiscal integration among the 17 nations comprising the euro currency bloc as a means to resolve the crisis for the long term.

Alongside the drama in Europe, investors were discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key powerhouse for global growth, became particularly worrisome. In the United States, disappointing jobs reports dealt a crushing blow to investor sentiment. Risk assets sold off in the second quarter as investors again retreated to safe haven assets.

Despite ongoing concerns about the health of the global economy and the debt crisis in Europe, most asset classes enjoyed a robust summer rally powered mainly by expectations for policy stimulus from central banks in Europe and the United States. Although global economic data continued to be mixed, the spate of downside surprises seen in the second quarter had receded and, outside of Europe, the risk of recession largely subsided. Additionally, in response to growing debt pressures, the European Central Bank allayed investors’ fears by stating its conviction to hold the eurozone together. Early in September, the European Central Bank announced a plan to purchase sovereign debt in the eurozone’s most troubled nations. Later that month, the US Federal Reserve announced its long-awaited – and surprisingly aggressive – stimulus program, committing to purchase $40 billion of agency mortgage-backed securities per month until the US economy exhibits enough strength to sustain real growth and improving labor market conditions. These central bank actions boosted risk assets globally as investors increased their risk appetites in their search for higher returns.

All asset classes performed well for the 12-month period ended September 30, 2012, with particularly strong returns from US stocks and high yield bonds. For the six-month period ended September 30, 2012, fixed income investments outperformed equities. US Treasury bonds posted exceptional gains by historical standards and outperformed investment-grade corporate bonds and tax-exempt municipals. High yield bonds also generated solid returns. US stocks finished the six-month period with modest gains, while international and emerging market stocks lagged other asset classes amid ongoing uncertainty. Near-zero short term interest rates continued to keep yields on money market securities near their all-time lows.

The financial world is more uncertain than ever, but there are new avenues of opportunity – new ways to invest and new markets in which to invest. We believe it’s our responsibility to help investors adapt to today’s new world of investing and build the portfolios these times require. We encourage you to visit www.blackrock.com/newworld for more information.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

“The financial world is more uncertain than ever, but there are new avenues of opportunity.”

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of September 30, 2012

	6-month			12-month
US large cap equities		3.43	%		30.20	%
(S&P 500® Index)
US small cap equities		1.60			31.91
(Russell 2000® Index)
International equities		(0.70	)		13.75
(MSCI Europe, Australasia,
Far East Index)
Emerging market		(1.84	)		16.93
equities (MSCI Emerging
Markets Index)
3-month Treasury		0.06			0.07
bill (BofA Merrill Lynch
3-Month US Treasury
Bill Index)
US Treasury securities		6.78			5.66
(BofA Merrill Lynch 10-
Year US Treasury Index)
US investment grade		3.68			5.16
bonds (Barclays US
Aggregate Bond Index)
Tax-exempt municipal		4.50			8.84
bonds (S&P Municipal
Bond Index)
US high yield bonds		6.40			19.35
(Barclays US Corporate
High Yield 2% Issuer
Capped Index)

Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

  THIS PAGE NOT PART OF YOUR FUND REPORT 3 

Fund Summary as ofSeptember 30, 2012   BlackRock Core Bond Portfolio

  Investment Objective

BlackRock Core Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

  Portfolio Management Commentary

  How did the Fund perform?

• For the 12-month period ended September 30, 2012, the Fund outperformed its benchmark, the Barclays US Aggregate Bond Index.

  What factors influenced performance?

• The Fund benefited from its diversified exposure to high-quality spread sectors, which performed well despite heightened investor anxiety during the period. Whereas the first half of the reporting period was dominated by concerns about debt problems in Europe, the latter half was dominated by uncertainty around monetary policy in both the United States and Europe. In September, accommodative policy actions from the US and European central banks alleviated anxiety and increased investors’ risk appetite, despite lackluster fundamental economic data in the United States and the continuation of severe debt problems in Europe.

• The largest contribution to the Fund’s outperformance relative to its benchmark index was its overweight to securitized assets, including commercial mortgage-backed securities (“CMBS”) and asset-backed securities (“ABS”). Within CMBS, the Fund favored recently issued higher-quality multi-family securities, which performed well as the underlying fundamentals continued to improve in a strong rental market. Also having a positive impact was the Fund’s overweight to investment grade credit and security selection within industrials. Additional positive return contributions came from active trading in agency mortgage-backed securities (“MBS”), an allocation to the non-agency residential MBS sector, which is not represented in the benchmark index, and tactical exposures to sovereign debt and credit names in Europe.

• Slightly detracting from performance were the Fund’s currency hedges designed to provide downside protection against a global economic slowdown and volatility resulting from European debt concerns.

  Describe recent portfolio activity.

• Throughout the 12-month period, the Fund actively managed duration (sensitivity to interest rate movements) while maintaining a slightly short duration bias. Near the end of the period, the Fund reduced its yield curve-flattening bias, finishing the period with a neutral curve stance versus the benchmark index.

• The Fund tactically managed its corporate credit exposure throughout the period, cautiously seeking to take advantage of relative value opportunities in industrials and financials. However, following good performance in corporate credit early in 2012, the Fund began reducing exposure to investment grade debt toward period end while adding to its securitized credit allocation. The Fund also added a small position in Italian sovereign debt as it could potentially benefit from future monetary policy support from the European Central Bank.

• The Fund added exposure to CMBS, which continues to benefit from improving commercial real estate markets. Given a relative lack of liquidity in certain segments of the securitized market, the Fund reduced exposure to non-agency residential MBS and instead added exposure to the more liquid sectors such as auto loan ABS. The Fund also reduced its agency MBS allocation while shifting its positioning within the space toward lower-coupon and call-protected issues in light of increased refinancing activity in the mortgage market.

  Describe Fund positioning at period end.

• As of period end, the Fund maintained a slightly more cautious stance given the likelihood of financial market volatility increasing from the recent historically low levels. Headwinds for the remainder of 2012 include uncertainty around US political elections and the “fiscal cliff” (i.e., the expiration of the Bush-era tax cuts and other provisions coupled with automatic spending cuts at the turn of the year) as well as uncertainty around bailouts for the eurozone’s most debt-laden countries; however, the US economy appears well supported by monetary policy and resilient enough to grow at a modest pace.

• Relative to the Barclays US Aggregate Bond Index, the Fund remained generally underweight to government-related sectors in favor of non-government spread sectors. The Fund’s most significant overweights included investment grade credit, CMBS and ABS. Within the government space, the Fund maintained an underweight in US Treasuries and agency debentures, while holding an overweight in agency MBS. The Fund ended the period with a short duration versus the benchmark index.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.

These views are not intended to be a forecast of future events and are no guarantee of future results.

  Portfolio Information

Portfolio Composition	Percent of Long-Term Investments
U.S. Government Sponsored Agency Securities		57	%
Corporate Bonds		14
U.S. Treasury Obligations		13
Non-Agency Mortgage-Backed Securities		7
Asset-Backed Securities		5
Foreign Government Obligations		2
Foreign Agency Obligations		1
Preferred Securities		1

Credit Quality Allocation1	Percent of Long-Term Investments
AAA/Aaa2		78	%
AA/Aa		3
A		8
BBB/Baa		9
BB/Ba		1
B		1

¹Using the higher of Standard & Poor’s (“S&P’s”) or Moody’s rating.

²Includes US Government Sponsored Agency Securities and US  Treasury Obligations which are deemed AAA/Aaa by the investment   advisor.

 4   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

BlackRock Core Bond Portfolio

  Total Return Based on a $10,000 Investment

¹    Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees. Institutional Shares do not have a sales charge. ²    The Fund normally invests at least 80% of its assets in bonds and maintains an average portfolio duration that is within ±20% of the duration of the Barclays US Aggregate Bond Index (the benchmark). ³    This unmanaged market-weighted index is comprised of investment grade corporate bonds (rated BBB or better), mortgages and US Treasury and government agency issues with at least one year to maturity.

  Performance Summary for the Period Ended September 30, 2012

							Average Annual Total Returns4
							1 Year						5 Years						10 Years
	Standardized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
BlackRock		2.51	%		4.90	%		7.47	%		N/A			5.64	%		N/A			4.95	%		N/A
Institutional		2.41			4.74			7.36			N/A			5.51			N/A			4.82			N/A
Service		2.06			4.66			7.01			N/A			5.24			N/A			4.55			N/A
Investor A		1.99			4.67			7.01			2.76	%		5.24			4.39	%		4.51			4.09	%
Investor B		1.48			4.31			6.20			1.70			4.37			4.03			3.95			3.95
Investor C		1.36			4.31			6.26			5.26			4.47			4.47			3.68			3.68
Class R		1.83			4.53			6.82			N/A			4.93			N/A			4.19			N/A
Barclays US Aggregate Bond Index		–			3.68			5.16			N/A			6.53			N/A			5.32			N/A

⁴  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 10 for a detailed description of share classes, including any related sales charges and fees.

N/A - Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

  Expense Example

	Actual												Hypothetical7
							Including Interest Expense and Fees			Excluding Interest Expense and Fees						Including Interest Expense and Fees						Excluding Interest Expense and Fees
	Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012			Expenses Paid During the Period5			Expenses Paid During the Period6			Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012			Expenses Paid During the Period5			Ending Account Value September 30, 2012			Expenses Paid During the Period6
BlackRock		$	1,000.00		$	1,049.00		$	2.46		$	2.31		$	1,000.00		$	1,022.60		$	2.43		$	1,022.75		$	2.28
Institutional		$	1,000.00		$	1,047.40		$	3.02		$	2.87		$	1,000.00		$	1,022.05		$	2.98		$	1,022.20		$	2.83
Service		$	1,000.00		$	1,046.60		$	4.86		$	4.76		$	1,000.00		$	1,020.25		$	4.80		$	1,020.35		$	4.70
Investor A		$	1,000.00		$	1,046.70		$	4.71		$	4.55		$	1,000.00		$	1,020.40		$	4.65		$	1,020.55		$	4.50
Investor B		$	1,000.00		$	1,043.10		$	8.33		$	8.17		$	1,000.00		$	1,016.85		$	8.22		$	1,017.00		$	8.07
Investor C		$	1,000.00		$	1,043.10		$	8.43		$	8.27		$	1,000.00		$	1,016.75		$	8.32		$	1,016.90		$	8.17
Class R		$	1,000.00		$	1,045.30		$	6.14		$	5.98		$	1,000.00		$	1,019.00		$	6.06		$	1,019.15		$	5.91

⁵  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.48% for BlackRock, 0.59% for Institutional, 0.95% for Service, 0.92% for Investor A, 1.63% for Investor B, 1.65% for Investor C and 1.20% for Class R), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁶  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.45% for BlackRock, 0.56% for Institutional, 0.93% for Service, 0.89% for Investor A, 1.60% for Investor B, 1.62% for Investor C and 1.17% for Class R), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁷  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 5 

  Fund Summary as of September 30, 2012   BlackRock High Yield Bond Portfolio

  Investment Objective

BlackRock High Yield Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

  Portfolio Management Commentary

  How did the Fund perform?

• For the 12-month period ended September 30, 2012, the Fund generated positive double-digit returns, but underperformed its benchmark, the Barclays US Corporate High Yield 2% Issuer Capped Index.

  What factors influenced performance?

• High yield bonds performed well during the period as global sentiment improved and investors sought yield in a low interest-rate environment. The Fund benefited from security selection across the credit quality spectrum, with particular strength in mid-tier high yield credits where the Fund maintained an overweight relative to the benchmark index. The Fund’s underweight in higher-quality high yield bonds proved beneficial as these issues underperformed the mid-to-lower quality tiers of the high yield universe. From a sector perspective, security selection in the non-captive diversified financials, consumer service and electric sectors had a positive impact on performance. The Fund’s allocations to common stock and preferred securities also boosted returns for the period.

• Relative to the benchmark index, security selection and underweights in the home construction and gaming sectors detracted from performance, as did an underweight to the banking sector and security selection among paper names. Exposure to senior secured bank loans hindered relative returns as the asset class trailed the strong performance of high yield bonds.

  Describe recent portfolio activity.

• The Fund maintained a relatively conservative stance through the fourth quarter of 2011 until the easing of concerns around European sovereign debt problems and improving economic data lifted investor sentiment in

early 2012. The Fund began adding back risk in names with appealing risk-reward characteristics as global volatility declined and credit markets rallied in the New Year. However, as risk asset prices continued to surge in 2012, the Fund moderated its degree of risk-taking. The Fund’s view on high yield remained positive, but as valuations in the market paced higher and the potential for price appreciation had largely diminished, the Fund’s holdings became increasingly focused on higher-quality income-oriented credit names with stable fundamentals and an attractive coupon rate. With global growth concerns posing additional uncertainty, the Fund continued to favor issuers in mature industries that exhibit consistent cash flows and good earnings visibility. The Fund generally remained cautious of cyclical credits that tend to be more vulnerable to slower global growth and/or macroeconomic weakness, but continued to favor select equities and equity-like assets with a positive catalyst for capital appreciation.

  Describe Fund positioning at period end.

• At period end, the Fund remained underweight relative to the Barclays US Corporate High Yield 2% Issuer Capped Index in higher-quality high yield debt, while it was overweight in mid-tier quality and held a neutral weight in lower-quality issues. The Fund was overweight in the independent energy, chemicals and electric sectors, and underweight in banking and consumer-driven sectors such as retailers and technology. In addition to high yield bonds, the Fund also held small out-of-index allocations to floating rate loan interests (bank loans), common stocks, investment grade corporate bonds and preferred securities.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.

These views are not intended to be a forecast of future events and are no guarantee of future results.

  Portfolio Information

Portfolio Composition	Percent of Long-Term Investments
Corporate Bonds		78	%
Floating Rate Loan Interests		14
Common Stocks		5
Preferred Securities		3

Credit Quality Allocation1	Percent of Long-Term Investments
A		1	%
BBB/Baa		5
BB/Ba		30
B		46
CCC/Caa		9
Not Rated		9

¹Using the higher of S&P’s Moody’s rating.

 6   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

BlackRock High Yield Bond Portfolio

  Total Return Based on a $10,000 Investment

¹  Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees. Institutional Shares do not have a sales charge.

²  The Fund invests primarily in non-investment grade bonds with maturities of ten years or less. The Fund normally invests at least 80% of its assets in high yield bonds.

³  An unmanaged index comprised of issues that meet the following criteria: at least $150 million par value outstanding, maximum credit rating of Ba1, at least one year to maturity, and no one issuer represents more than 2 percent of the index.

  Performance Summary for the Period Ended September 30, 2012

							Average Annual Total Returns4
							1 Year						5 Years						10 Years
	Standardized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
BlackRock		5.73	%		6.02	%		18.99	%		N/A			8.66	%		N/A			10.71	%		N/A
Institutional		5.64			6.11			18.92			N/A			8.58			N/A			10.60			N/A
Service		5.34			5.82			18.52			N/A			8.20			N/A			10.26			N/A
Investor A		5.16			5.97			18.56			13.78	%		8.21			7.34	%		10.22			9.77	%
Investor B		4.53			5.37			17.58			13.08			7.40			7.10			9.65			9.65
Investor B1		4.87			5.55			17.94			13.94			7.72			7.42			9.71			9.71
Investor C		4.58			5.54			17.77			16.77			7.42			7.42			9.41			9.41
Investor C1		4.84			5.51			17.83			16.83			7.62			7.62			9.63			9.63
Class R		5.02			5.78			18.31			N/A			7.93			N/A			9.96			N/A
Barclays US Corporate High Yield 2% Issuer Capped Index		–			6.40			19.35			N/A			9.50			N/A			10.93			N/A

⁴  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 10 for a detailed description of share classes, including any related sales charges and fees.

N/A - Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

  Expense Example

	Actual									Hypothetical6
	Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012			Expenses Paid During the Period5			Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012			Expenses Paid During the Period5			Annualized Expense Ratio
BlackRock		$	1,000.00		$	1,060.20		$	2.94		$	1,000.00		$	1,022.15		$	2.88		0.57	%
Institutional		$	1,000.00		$	1,061.10		$	3.35		$	1,000.00		$	1,021.75		$	3.29		0.65	%
Service		$	1,000.00		$	1,058.20		$	4.73		$	1,000.00		$	1,020.40		$	4.65		0.92	%
Investor A		$	1,000.00		$	1,059.70		$	4.74		$	1,000.00		$	1,020.40		$	4.65		0.92	%
Investor B		$	1,000.00		$	1,053.70		$	9.34		$	1,000.00		$	1,015.90		$	9.17		1.82	%
Investor B1		$	1,000.00		$	1,055.50		$	7.50		$	1,000.00		$	1,017.70		$	7.36		1.46	%
Investor C		$	1,000.00		$	1,055.40		$	8.84		$	1,000.00		$	1,016.40		$	8.67		1.72	%
Investor C1		$	1,000.00		$	1,055.10		$	7.81		$	1,000.00		$	1,017.40		$	7.67		1.52	%
Class R		$	1,000.00		$	1,057.80		$	6.64		$	1,000.00		$	1,018.55		$	6.51		1.29	%

⁵  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁶  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 7 

Fund Summary as of September 30, 2012   BlackRock Low Duration Bond Portfolio

  Investment Objective

BlackRock Low Duration Bond Portfolio’s (the “Fund”) investment objective is to seek to maximize total return, consistent with income generation and prudent investment management.

  Portfolio Management Commentary

  How did the Fund perform?

• For the 12-month period ended September 30, 2012, the Fund outperformed its benchmark, the BofA Merrill Lynch 1-3 Year US Corporate & Government Index.

  What factors influenced performance?

• The Fund benefited from its diversified exposure across corporate credit, securitized credit and sovereign sectors, which performed well despite heightened investor anxiety during the period. Whereas the first half of the reporting period was dominated by concerns about debt problems in Europe; the latter half was dominated by uncertainty around monetary policy in both the United States and Europe. In September, accommodative policy actions from the US and European central banks alleviated anxiety and increased investors’ risk appetite, despite lackluster fundamental economic data in the United States and the continuation of severe debt problems in Europe.

• The Fund’s holdings appreciated amid continued spread compression in high-quality securitized sectors including commercial mortgage-backed securities (“CMBS”), agency mortgage-backed securities (“MBS”) and asset-backed securities (“ABS”). Within CMBS and MBS, the Fund’s preference for higher quality securities had a positive impact, while in the ABS space, sub-prime auto loans and student loans performed well. Positive returns in the Fund’s sovereign debt exposure came from positions in the United States and select core European countries. The Fund’s allocations to the investment grade and high yield credit sectors also contributed positively to performance.

• While the Fund’s overall exposure to the corporate and securitized credit sectors was a significant contributor to performance, positioning within financials and industrials detracted slightly from performance relative to the benchmark index.

  Describe recent portfolio activity.

• During the 12-month period, the Fund maintained an overweight to credits with terms of less than five years and a bias toward higher-beta (greater sensitivity to market movements) industrial names. The Fund added to positions in CMBS and new-issue sub-prime auto ABS. The Fund also increased exposure to MBS prior to the announcement of the US Federal Reserve’s MBS purchase program, which prompted spread compression in the sector. Despite this recent rally, the Fund favors lower-coupon agency MBS over higher quality credit and agency securities.

  Describe Fund positioning at period end.

• Relative to the BofA Merrill Lynch 1-3 Year US Corporate & Government Index, the Fund ended the period with a slightly shorter duration and a slight yield curve-flattening bias. The Fund’s positioning as of period end reflected the view that a combination of extremely accommodative monetary policy in the United States and other developed market economies as well as continued strong technical demand for spread-sector assets will support the front end of the yield curve.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions.

These views are not intended to be a forecast of future events and are no guarantee of future results.

  Portfolio Information

Portfolio Composition	Percent of Long-Term Investments
Corporate Bonds		39	%
U.S. Government Sponsored Agency Securities		21
Non-Agency Mortgage-Backed Securities		14
U.S. Treasury Obligations		14
Asset-Backed Securities		11
Taxable Municipal Bonds		1

Credit Quality Allocation1	Percent of Long-Term Investments
AAA/Aaa2		54	%
AA/Aa		4
A		16
BBB/Baa		21
BB/Ba		4
B		1

¹Using the higher of S&P’s or Moody’s rating.

²Includes US Government Sponsored Agency Securities and US  Treasury Obligations which are deemed AAA/Aaa by the  investment advisor.

 8   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

BlackRock Low Duration Bond Portfolio

  Total Return Based on a $10,000 Investment

¹    Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees. Institutional Shares do not have a sales charge. ²    The Fund invests primarily in investment grade bonds and maintains an average portfolio duration that is within ±1 year of the duration of the BofA Merrill Lynch 1-3 Year US Corporate & Government Index (the benchmark). ³     An unmanaged index comprised of investment grade corporate bonds and US Government Agency and US Treasury securities with maturities ranging from 1 to 3 years.

  Performance Summary for the Period Ended September 30, 2012

							Average Annual Total Returns4
							1 Year						5 Years						10 Years
	Standardized 30-Day Yields			6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
BlackRock		2.05	%		2.63	%		5.48	%		N/A			3.42	%		N/A			3.19	%		N/A
Institutional		2.01			2.60			5.43			N/A			3.37			N/A			3.12			N/A
Service		1.66			2.41			4.93			N/A			3.02			N/A			2.78			N/A
Investor A		1.62			2.42			4.94			2.59	%		2.99			2.52	%		2.75			2.52	%
Investor A1		1.81			2.50			5.12			4.04			3.18			2.98			2.92			2.82
Investor B		0.86			2.01			4.24			(0.26	)		2.22			1.85			2.23			2.23
Investor B3		1.05			2.08			4.23			0.23			2.17			1.80			1.91			1.91
Investor C		0.94			2.05			4.31			3.31			2.25			2.25			2.01			2.01
Investor C2		1.54			2.36			4.81			3.81			2.88			2.88			2.61			2.61
Investor C3		0.89			2.01			4.23			3.23			2.17			2.17			1.92			1.92
Class R		1.20			2.20			4.48			N/A			2.47			N/A			2.22			N/A
BofA Merrill Lynch 1-3 Year US Corporate & Government Index		–			0.82			1.52			N/A			3.27			N/A			3.21			N/A

⁴  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 10 for a detailed description of share classes, including any related sales charges and fees.

N/A - Not applicable as share class and index do not have a sales charge. Past performance is not indicative of future results.

  Expense Example

	Actual												Hypothetical7
							Including Interest Expense and Fees			Excluding Interest Expense and Fees						Including Interest Expense and Fees						Excluding Interest Expense and Fees
	Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012			Expenses Paid During the Period5			Expenses Paid During the Period6			Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012			Expenses Paid During the Period5			Ending Account Value September 30, 2012			Expenses Paid During the Period6
BlackRock		$	1,000.00		$	1,026.30		$	2.18		$	2.08		$	1,000.00		$	1,022.85		$	2.17		$	1,022.95		$	2.07
Institutional		$	1,000.00		$	1,026.00		$	2.38		$	2.28		$	1,000.00		$	1,022.65		$	2.38		$	1,022.75		$	2.28
Service		$	1,000.00		$	1,024.10		$	4.35		$	4.25		$	1,000.00		$	1,020.70		$	4.34		$	1,020.80		$	4.24
Investor A		$	1,000.00		$	1,024.20		$	4.20		$	4.10		$	1,000.00		$	1,020.85		$	4.19		$	1,020.95		$	4.09
Investor A1		$	1,000.00		$	1,025.00		$	3.34		$	3.24		$	1,000.00		$	1,021.70		$	3.34		$	1,021.80		$	3.23
Investor B		$	1,000.00		$	1,020.10		$	8.28		$	8.18		$	1,000.00		$	1,016.80		$	8.27		$	1,016.90		$	8.17
Investor B3		$	1,000.00		$	1,020.80		$	7.33		$	7.22		$	1,000.00		$	1,017.75		$	7.31		$	1,017.85		$	7.21
Investor C		$	1,000.00		$	1,020.50		$	7.83		$	7.73		$	1,000.00		$	1,017.25		$	7.82		$	1,017.35		$	7.72
Investor C2		$	1,000.00		$	1,023.60		$	4.86		$	4.76		$	1,000.00		$	1,020.20		$	4.85		$	1,020.30		$	4.75
Investor C3		$	1,000.00		$	1,020.10		$	8.23		$	8.13		$	1,000.00		$	1,016.85		$	8.22		$	1,016.95		$	8.12
Class R		$	1,000.00		$	1,022.00		$	6.37		$	6.27		$	1,000.00		$	1,018.70		$	6.36		$	1,018.80		$	6.26

⁵  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.43% for BlackRock, 0.47% for Institutional, 0.86% for Service, 0.83% for Investor A, 0.66% for Investor A1, 1.64% for Investor B, 1.45% for Investor B3, 1.55% for Investor C, 0.96% for Investor C2, 1.63% for Investor C3 and 1.26% for Class R), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁶  For each class of the Fund, expenses are equal to the annualized expense ratio for the class (0.41% for BlackRock, 0.45% for Institutional, 0.84% for Service, 0.81% for Investor A, 0.64% for Investor A1, 1.62% for Investor B, 1.43% for Investor B3, 1.53% for Investor C, 0.94% for Investor C2, 1.61% for Investor C3 and 1.24% for Class R), multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown).

⁷  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366. See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 9 

About Fund Performance

• BlackRock and Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to eligible investors.

• Service Shares are not subject to any sales charge (front-end load) or deferred sales charge. These shares are subject to a service fee of 0.25% per year (but no distribution fee).

• Investor A Shares are subject to a maximum initial sales charge (front-end load) of 4.00% for all Funds included in this report, except for BlackRock Low Duration Bond Portfolio (“Low Duration Bond”), which incurs an initial sales charge of 2.25%. These shares are subject to a service fee of 0.25% per year (but no distribution fee).

• Investor A1 Shares are subject to a maximum initial sales charge (front-end load) of 1.00% and a service fee of 0.10% per year (but no distribution fee). Prior to October 2, 2006, Low Duration Bond Investor A1 Shares performance results are those of Institutional Shares (which have no distribution fee or service fees) restated to reflect Investor A1 Share fees.

• Investor B Shares are subject to a maximum contingent deferred sales charge (“CDSC”) of 4.50% declining to 0% after six years. In addition, these 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 seven years. (There is no initial sales charge for automatic share conversions). All returns for periods greater than seven years reflect this conversion.

• Investor B1 Shares are subject to a maximum CDSC of 4.00% declining to 0% after six years and a distribution fee of 0.50% per year and a service fee of 0.25% per year. Prior to October 2, 2006, BlackRock High Yield Bond Portfolio’s (“High Yield Bond”) Investor B1 Shares performance results are those of Institutional Shares (which have no distribution fee or service fees) restated to reflect Investor B1 Share fees.

• Investor B3 Shares are subject to a maximum CDSC of 4%, declining to 0% after six years. In addition, these shares are subject to a distribution fee of 0.65% per year and a service fee of 0.25% per year. These shares automatically convert to Investor A Shares after approximately ten years. (There is no initial sales charge for automatic share conversions). Prior to July 18, 2011, Low Duration Bond’s Investor B3 Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Investor B3 Share fees.

• Investor C, Investor C1, Investor C2 and C3 Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75%, 0.55%, 0.30% and 0.65% per year, respectively, and a service fee of 0.25%, 0.25%, 0.10% and 0.25% per year, respectively. Prior to October 2, 2006, High Yield Bond’s Investor C1 Shares performance results are those of Institutional

Shares (which have no distribution or service fees) restated to reflect Investor C1 Share fees. Prior to October 2, 2006, Low Duration Bond’s Investor C2 Shares performance results were those of Institutional Shares (which have no distribution fee or service fees) restated to reflect Investor C2 Share fees. Prior to July 18, 2011, Low Duration Bond’s Investor C3 Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Investor C3 Share fees.

• Class R Shares are not subject to any 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 and other similar plans. Prior to October 2, 2006, High Yield Bond’s and BlackRock Core Bond Portfolio’s Class R Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Class R Share fees. Prior to July 18, 2011, Low Duration Bond’s Class R Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Class R Share fees.

Investor A1, B, B1, B3, C1, C2 and C3 Shares are only available through exchanges, dividend reinvestment by existing shareholders or for purchase by certain qualified employee benefit plans.

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/funds 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. Performance data does not reflect this potential fee. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the payable 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.

BlackRock Advisors, LLC (the “Manager”), the Funds’ investment advisor, waived and/or reimbursed a portion of each Fund’s expenses. Without such waiver and/or reimbursement, a Fund’s performance would have been lower. The Manager is under no obligation to waive or reimburse or to continue waiving or reimbursing its fees after the applicable termination date. See Note 3 of the Notes to Financial Statements for additional information on waivers and reimbursements. 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.

 10   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Disclosure of Expenses

Shareholders of each Fund may incur the following charges: (a) expenses related to transactions, including sales charges and exchange fees; and (b) operating expenses, including advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other Fund expenses. The expense examples on the previous pages (which are based on a hypothetical investment of $1,000 invested on April 1, 2012 and held through September 30, 2012) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense examples provide 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 corresponding to their Fund and share class under the headings entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on a 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 these Funds 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 expense examples are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges or exchange fees, if any. Therefore, the hypothetical examples are 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.

The Benefits and Risks of Leveraging

The Funds may utilize leverage to seek to enhance their yields and NAV. However, these objectives cannot be achieved in all interest rate environments.

The Funds may utilize leverage by entering into reverse repurchase agreements and/or treasury roll transactions. In general, the concept of leveraging is based on the premise that the financing cost of assets to be obtained from leverage, which will be based on short-term interest rates, will normally be lower than the income earned by each Fund on its longer-term portfolio investments. To the extent that the total assets of each Fund (including the assets obtained from leverage) are invested in higher-yielding portfolio investments, each Fund’s shareholders will benefit from the incremental net income.

The interest earned on securities purchased with the proceeds from leverage is paid to shareholders in the form of dividends, and the value of these portfolio holdings is reflected in the per share NAV. However, in order to benefit shareholders, the yield curve must be positively sloped; that is, short-term interest rates must be lower than long-term interest rates. If the yield curve becomes negatively sloped, meaning short-term interest rates exceed long-term interest rates, income to shareholders will be lower than if the Funds had not used leverage.

If short-term interest rates rise, narrowing the differential between short-term and long-term interest rates, the incremental net income pickup will be reduced or eliminated completely. Furthermore, if prevailing short-term interest rates rise above long-term interest rates, the yield curve has a negative slope. In this case, the Funds pay higher short-term interest rates whereas the Funds’ total portfolio earns income based on lower long-term interest rates.

Furthermore, the value of the Funds’ portfolio investments generally varies inversely with the direction of long-term interest rates, although other factors can influence the value of portfolio investments. As a result, changes in interest rates can influence the Funds’ NAVs positively or negatively in addition to the impact on the Funds’ performance from leverage.

The use of leverage may enhance opportunities for increased income to the Funds, but as described above, it also creates risks as short- or long-term interest rates fluctuate. Leverage also will generally cause greater changes in the Funds’ NAVs and dividend rates than comparable portfolios without leverage. If the income derived from securities purchased with assets received from leverage exceeds the cost of leverage, the Funds’ net income will be greater than if leverage had not been used. Conversely, if the income from the securities purchased is not sufficient to cover the cost of leverage, each Fund’s net income will be less than if leverage had not been used, and therefore the amount available for distribution to shareholders will be reduced. Each Fund may be required to sell portfolio securities at inopportune times or at distressed values in order to comply with regulatory requirements applicable to the use of leverage or as required by the terms of leverage instruments, which may cause a Fund to incur losses. The use of leverage may limit each Fund’s ability to invest in certain types of securities or use certain types of hedging strategies. Each Fund will incur expenses in connection with the use of leverage, all of which are borne by Fund shareholders and may reduce income.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 11 

Derivative Financial Instruments

The Funds may invest in various derivative financial instruments, including financial futures contracts, foreign currency exchange contracts, options and swaps, as specified in Note 2 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, credit, equity, interest rate, foreign currency exchange rate and/or other risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument.

The Funds’ ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require a Fund to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Funds can realize on an investment, may result in lower dividends paid to shareholders or may cause the Funds to hold an investment that they might otherwise sell. The Funds’ investments in these instruments are discussed in detail in the Notes to Financial Statements.

 12   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Schedule of Investments September 30, 2012   BlackRock Core Bond Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities		Par (000)		Value
321 Henderson Receivables I LLC:
Series 2010-1A, Class A, 5.56%, 7/15/59 (a)	USD		10,441	$	11,733,867
Series 2010-2A, Class A, 4.07%, 1/15/48 (a)			2,453		2,571,047
Series 2010-3A, Class A, 3.82%, 12/15/48 (a)			8,253		8,622,971
AH Mortgage Advance Co. Ltd., Series SART-3, Class 1A1, 2.98%, 3/13/43 (a)			4,825		4,856,589
AH Mortgage Advance Trust,
Series SART-1, Class A1R, 2.23%, 5/10/43 (a)			3,315		3,327,597
AmeriCredit Automobile Receivables Trust:
Series 2011-5, Class C, 3.44%, 10/08/17			3,450		3,601,217
Series 2012-2, Class C, 2.64%, 10/10/17			2,965		3,035,475
Series 2012-2, Class D, 3.38%, 4/09/18			4,000		4,105,112
Series 2012-3, Class C, 2.42%, 5/08/18			2,810		2,858,602
Series 2012-3, Class D, 3.03%, 7/09/18			1,860		1,886,897
Series 2012-4, Class B,
1.31%, 11/08/17			1,710		1,712,394
Series 2012-4, Class C, 1.93%, 8/08/18			2,670		2,675,180
Series 2012-4, Class D, 2.68%, 10/09/18			975		976,765
CarMax Auto Owner Trust:
Series 2012-1, Class B, 1.76%, 8/15/17			1,810		1,829,566
Series 2012-1, Class C, 2.20%, 10/16/17			1,085		1,101,484
Series 2012-1, Class D, 3.09%, 8/15/18			1,360		1,374,037
Chesapeake Funding LLC:
Series 2012-1A, Class B, 1.83%, 11/07/23 (a)(b)			2,620		2,626,760
Series 2012-1A, Class C, 2.23%, 11/07/23 (a)(b)			1,685		1,689,324
Conseco Financial Corp.,
Series 1996-7, Class A6, 7.65%, 10/15/27 (b)			49		48,774
Countrywide Asset-Backed Certificates,
Series 2007-12, Class 2A1, 0.57%, 8/25/47 (b)			955		944,272
Credit Acceptance Auto Loan Trust:
Series 2010-1, Class A, 2.06%, 4/16/18 (a)			6,005		6,006,165
Series 2012-2A, Class A, 1.52%, 3/16/20 (a)			3,875		3,874,341
DT Auto Owner Trust:
Series 2011-3A, Class C, 4.03%, 2/15/17 (a)			2,105		2,136,177
Series 2012-1A, Class B, 2.26%, 10/16/17 (a)			2,900		2,906,438
Series 2012-1A, Class C, 3.38%, 10/16/17 (a)			1,500		1,504,836
Series 2012-1A, Class D, 4.94%, 7/16/18 (a)			3,750		3,807,030
Series 2012-2A, Class B,
1.85%, 4/17/17 (a)			510		510,903

Asset-Backed Securities		Par (000)		Value
Series 2012-2A, Class C, 2.72%, 4/17/17 (a)	USD		200	$	200,431
Series 2012-2A, Class D, 4.35%, 3/15/19 (a)			1,320		1,323,911
Ford Credit Floorplan Master Owner Trust:
Series 2010-5, Class D, 2.41%, 9/15/15 (a)			1,560		1,578,420
Series 2011-2, Class C, 2.37%, 9/15/15			3,710		3,720,566
Series 2011-2, Class D, 2.86%, 9/15/15			2,575		2,582,187
Series 2012-1, Class C, 1.72%, 1/15/16 (b)			4,150		4,166,231
Series 2012-1, Class D, 2.32%, 1/15/16 (b)			3,890		3,915,285
Series 2012-2, Class C, 2.86%, 1/15/19			980		1,005,485
Series 2012-2, Class D, 3.50%, 1/15/19			1,725		1,755,134
Series 2012-4, Class C, 1.39%, 9/15/16			1,965		1,965,000
Series 2012-4, Class D, 2.09%, 9/15/16			3,430		3,430,000
Series 2012-5, Class C, 2.14%, 9/15/19			2,085		2,094,360
Series 2012-5, Class D, 2.73%, 9/15/19			2,980		2,992,602
GSAA Trust:
Series 2005-11, Class 2A1, 0.50%, 10/25/35 (b)			4,158		3,641,522
Series 2006-5, Class 2A1, 0.29%, 3/25/36 (b)			1,209		662,495
Home Equity Asset Trust,
Series 2007-2, Class 2A1, 0.33%, 7/25/37 (b)			1,619		1,597,526
Hyundai Auto Receivables Trust,
Series 2012-A, Class D, 2.61%, 5/15/18			2,420		2,453,911
IFC SBA Loan-Backed Adjustable Rate Certificate, Series 1997-1, Class A, 1.25%, 1/15/24 (a)(b)			141		140,831
Nelnet Student Loan Trust,
Series 2008-3, Class A4, 2.08%, 11/25/24 (b)			5,310		5,575,659
OZLM Funding Ltd.,
Series 2012-2A, Class A1, 1.87%, 10/30/23 (a)(b)			6,920		6,920,000
PFS Financing Corp.,
Series 2012-AA, Class A, 1.42%, 2/15/16 (a)(b)			4,160		4,174,202
Santander Consumer Acquired Receivables Trust:
Series 2011-S1A, Class B, 1.66%, 8/15/16 (a)			5,837		5,854,582
Series 2011-S1A, Class C, 2.01%, 8/15/16 (a)			3,772		3,785,313
Series 2011-WO, Class B, 2.32%, 4/15/15 (a)			18,477		18,741,036
Series 2011-WO, Class C, 3.19%, 10/15/15 (a)			6,140		6,321,388
Santander Drive Auto Receivables Trust:
Series 2011-S1A, Class B, 1.48%, 5/15/17 (a)			2,703		2,710,191
Series 2011-S1A, Class D, 3.10%, 5/15/17 (a)			5,062		5,081,538
Series 2012-1, Class B, 2.72%, 5/16/16			2,110		2,149,674

  Portfolio Abbreviations

To simplify the listings of portfolio holdings in the Schedules of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list:

AKA	Also Known As	EURIBOR	Euro Interbank Offered Rate
AUD	Australian Dollar	FKA	Formerly Known As
BRL	Brazilian Real	GBP	British Pound
CAD	Canadian Dollar	GO	General Obligation Bonds
CBA	Canadian Bankers Acceptance	LIBOR	London Interbank Offered Rate
CNY	Chinese Yuan	MXN	Mexican Peso
DIP	Debtor In Possession	NOK	Norwegian Krone
EBITDA	Earnings Before Interest, Taxes,	RB	Revenue Bonds
	Depreciations and Amortization	TBA	To-be-announced
EUR	Euro	USD	US Dollar

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	13

Schedule of Investments (continued) BlackRock Core Bond Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities	Par (000)		Value
Series 2012-1, Class C, 3.78%, 11/15/17		USD      2,845	$	2,983,264
Series 2012-2, Class C, 3.20%, 2/15/18		1,525		1,554,423
Series 2012-2, Class D, 3.87%, 2/15/18		2,315		2,382,767
Series 2012-3, Class B, 1.94%, 12/15/16		5,430		5,454,240
Series 2012-3, Class C, 3.01%, 4/16/18		7,400		7,503,844
Series 2012-3, Class D, 3.64%, 5/15/18		6,090		6,210,637
Series 2012-4, Class C, 2.94%, 12/15/17		5,135		5,246,922
Series 2012-4, Class D, 3.50%, 6/15/18		6,935		7,052,104
Series 2012-5, Class B, 1.56%, 8/15/18		4,130		4,140,775
Series 2012-5, Class C, 2.70%, 8/15/18		1,965		1,994,886
Series 2012-5, Class D, 3.30%, 9/17/18		1,665		1,711,355
Scholar Funding Trust, Series 2011-A, Class A, 1.35%, 10/28/43 (a)(b)		10,072		9,858,973
SLM Student Loan Trust:
Series 2003-B, Class A2, 0.79%, 3/15/22 (b)		5,234		5,097,429
Series 2004-B, Class A2, 0.59%, 6/15/21 (b)		8,657		8,443,772
Series 2005-B, Class A2, 0.57%, 3/15/23 (b)		3,915		3,798,337
Series 2008-5, Class A4, 2.15%, 7/25/23 (b)		7,925		8,354,345
Series 2011-C, Class A2B, 4.54%, 10/17/44 (a)		3,190		3,501,819
Series 2012-A, Class A1, 1.62%, 8/15/25 (a)(b)		2,797		2,827,216
Series 2012-B, Class A2, 3.48%, 10/15/30 (a)		10,000		10,616,730
Series 2012-C, Class A1, 1.32%, 8/15/23 (a)(b)		5,933		5,975,088
Series 2012-C, Class A2, 3.31%, 10/15/46 (a)		10,105		10,678,196
Series 2012-D, Class A2, 2.95%, 2/15/46 (a)		11,730		12,193,312
Structured Asset Securities Corp.:
Series 2003-AL1, Class A, 3.36%, 4/25/31 (a)		1,244		1,210,518
Series 2007-BC1, Class A2, 0.27%, 2/25/37 (b)		359		352,203
Structured Receivables Finance LLC, Series 2010-B, Class A, 3.73%, 8/15/36 (a)		4,799		5,004,288
U.S. Small Business Administration, Series 2003-10A, Class 1, 4.63%, 3/10/13		2,454		2,494,085
World Financial Network Credit Card Master Trust, Series 2012-C, Class A, 2.23%, 8/15/22		8,270		8,386,779
Total Asset-Backed Securities – 10.3%				327,891,607
Corporate Bonds
Auto Components – 0.1%
BorgWarner, Inc., 4.63%, 9/15/20		2,875		3,195,275
Beverages – 0.4%
Anheuser-Busch InBev Worldwide, Inc.:
2.50%, 7/15/22		2,700		2,738,243
3.75%, 7/15/42		2,880		2,887,088
Pernod-Ricard SA:
5.75%, 4/07/21 (a)		990		1,177,843
4.45%, 1/15/22 (a)		3,620		3,990,883
5.50%, 1/15/42 (a)		2,170		2,476,191
				13,270,248

Corporate Bonds	Par (000)		Value
Capital Markets – 1.2%
Credit Suisse AG, 5.40%, 1/14/20		USD      1,064	$	1,162,921
The Goldman Sachs Group, Inc., 5.75%, 1/24/22		32,519		37,457,856
				38,620,777
Commercial Banks – 1.4%
Canadian Imperial Bank of Commerce, 2.60%, 7/02/15 (a)		5,960		6,300,316
HSBC Bank Brasil SA - Banco Multiplo, 4.00%, 5/11/16 (a)		14,280		14,690,550
HSBC Bank Plc, 3.10%, 5/24/16 (a)		6,830		7,197,365
Sparebank 1 Boligkreditt AS, 2.30%, 6/30/18 (a)		8,650		9,028,005
The Toronto-Dominion Bank, 1.63%, 9/14/16 (a)		7,555		7,810,359
				45,026,595
Consumer Finance – 0.7%
Discover Bank:
8.70%, 11/18/19		3,035		3,918,750
7.00%, 4/15/20		715		861,213
SLM Corp.:
0.75%, 1/27/14 (b)		6,750		6,555,080
3.82%, 1/31/14 (b)		3,850		3,831,559
6.25%, 1/25/16		6,974		7,566,790
				22,733,392
Containers & Packaging – 0.1%
Rock-Tenn Co., 4.00%, 3/01/23 (a)		2,670		2,713,145
Diversified Financial Services – 4.8%
Bank of America Corp.:
6.50%, 8/01/16		2,760		3,191,968
3.88%, 3/22/17		4,875		5,246,173
5.65%, 5/01/18 (c)		20,745		23,652,951
7.63%, 6/01/19		2,850		3,558,883
5.70%, 1/24/22		11,880		13,953,785
BP Capital Markets Plc:
3.88%, 3/10/15		1,200		1,289,808
3.13%, 10/01/15		3,380		3,609,157
Caisse Centrale Desjardins du Quebec:
2.55%, 3/24/16 (a)		5,030		5,348,399
1.60%, 3/06/17 (a)		5,110		5,268,410
Citigroup, Inc.:
4.59%, 12/15/15		17,130		18,586,512
4.45%, 1/10/17		1,850		2,031,999
General Electric Capital Corp.,
5.30%, 2/11/21		2,665		3,058,266
JPMorgan Chase & Co.:
3.15%, 7/05/16		4,362		4,613,639
4.50%, 1/24/22		4,455		4,941,709
3.25%, 9/23/22		10,668		10,816,221
JPMorgan Chase Bank, N.A.:
6.00%, 7/05/17		17,085		20,032,590
6.00%, 10/01/17		965		1,141,957
Northern Rock Asset Management Plc, 5.63%, 6/22/17 (a)		2,970		3,337,389
Osprey Trust/Osprey I, Inc., 7.80%, 1/15/49 (a)(b)(d)(e)		2,375		–
Tiers Trust, Series 2012-01, 2.19%, 5/12/14 (a)(b)		18,120		18,120,000
ZFS Finance USA Trust V, 6.50%, 5/09/67 (a)(b)		2,409		2,547,518
				154,347,334

See Notes to Financial Statements.
14	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

Schedule of Investments (continued)   BlackRock Core Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Diversified Telecommunication Services – 0.4%
Verizon Communications, Inc.:
3.50%, 11/01/21		USD      4,350	$	4,799,042
6.40%, 2/15/38		6,041		8,141,824
				12,940,866
Electric Utilities – 1.4%
Alabama Power Co., 3.95%, 6/01/21		4,490		5,073,570
Carolina Power & Light Co., 5.30%, 1/15/19		2,425		2,929,126
The Cleveland Electric Illuminating Co.:
8.88%, 11/15/18		1,191		1,610,095
5.95%, 12/15/36		1,270		1,474,403
Duke Energy Carolinas LLC, 4.25%, 12/15/41		3,240		3,415,495
Exelon Generation Co. LLC, 4.25%, 6/15/22 (a)		1,764		1,866,441
Florida Power & Light Co.:
5.95%, 2/01/38		1,410		1,923,980
5.69%, 3/01/40		400		535,022
Florida Power Corp., 5.90%, 3/01/33		780		982,446
Georgia Power Co., 3.00%, 4/15/16		4,115		4,413,070
Jersey Central Power & Light Co., 7.35%, 2/01/19		2,500		3,207,637
MidAmerican Energy Holdings Co., 6.50%, 9/15/37		875		1,171,707
PacifiCorp:
5.50%, 1/15/19		3,600		4,402,984
6.25%, 10/15/37		4,200		5,755,033
Southern California Edison Co., Series 2008-A, 5.95%, 2/01/38		1,000		1,344,481
Trans-Allegheny Interstate Line Co., 4.00%, 1/15/15 (a)		2,605		2,729,120
				42,834,610
Electronic Equipment, Instruments & Components – 0.5%
Jabil Circuit, Inc., 8.25%, 3/15/18		13,030		15,473,125
Energy Equipment & Services – 1.0%
Ensco Plc, 3.25%, 3/15/16		1,740		1,856,411
Transocean, Inc.:
5.05%, 12/15/16		7,350		8,213,309
2.50%, 10/15/17		4,235		4,258,475
6.00%, 3/15/18		10,130		11,829,115
3.80%, 10/15/22		5,189		5,215,863
				31,373,173
Food Products – 0.9%
Kraft Foods Group, Inc.:
3.50%, 6/06/22 (a)		7,855		8,299,522
5.00%, 6/04/42 (a)		3,413		3,807,464
Mondelez International, Inc.:
6.50%, 8/11/17		10,565		12,989,509
6.50%, 2/09/40		2,713		3,674,843
				28,771,338
Health Care Equipment & Supplies – 0.7%
Boston Scientific Corp.:
4.50%, 1/15/15		1,805		1,929,940
6.25%, 11/15/15		10,860		12,315,251
6.40%, 6/15/16		1,555		1,800,077
5.13%, 1/12/17		6,311		7,070,447
				23,115,715
Health Care Providers & Services – 0.2%
Coventry Health Care, Inc., 5.45%, 6/15/21		2,936		3,437,216
UnitedHealth Group, Inc., 3.38%, 11/15/21		1,380		1,471,310
WellPoint, Inc., 3.30%, 1/15/23		612		618,996
				5,527,522

Corporate Bonds	Par (000)		Value
Hotels, Restaurants & Leisure – 0.2%
Wyndham Worldwide Corp., 4.25%, 3/01/22		USD      6,080	$	6,248,787
Independent Power Producers & Energy Traders – 0.2%
Ipalco Enterprises, Inc., 5.00%, 5/01/18		7,350		7,699,125
Insurance – 3.2%
Allianz Finance II BV, 5.75%, 7/08/41 (b)		EUR      3,400		4,416,749
American International Group, Inc.:
3.80%, 3/22/17		USD      7,542		8,112,266
5.45%, 5/18/17		3,790		4,321,222
4.88%, 6/01/22		5,780		6,513,811
AXA SA, 5.25%, 4/16/40 (b)		EUR      1,950		2,294,153
Hartford Life Global Funding Trusts, 0.57%, 6/16/14 (b)		USD    12,800		12,596,416
Lincoln National Corp., 7.00%, 6/15/40		2,500		3,115,027
Manulife Financial Corp., 3.40%, 9/17/15		11,650		12,198,529
Metropolitan Life Global Funding I:
2.50%, 1/11/13 (a)		11,365		11,427,360
5.13%, 6/10/14 (a)		3,625		3,887,646
Muenchener Rueckversicherungs AG, 6.00%, 5/26/41 (b)		EUR      2,500		3,471,048
New York Life Global Funding, 5.25%, 10/16/12 (a)		USD      4,825		4,833,710
Pricoa Global Funding I, 5.40%, 10/18/12 (a)		3,950		3,957,521
Prudential Financial, Inc.:
4.75%, 9/17/15		7,995		8,804,909
7.38%, 6/15/19		2,760		3,490,293
5.38%, 6/21/20		3,470		4,011,282
4.50%, 11/15/20		4,840		5,382,656
				102,834,598
Life Sciences Tools & Services – 0.0%
Life Technologies Corp., 6.00%, 3/01/20		635		755,292
Media – 3.8%
CBS Corp.:
4.63%, 5/15/18		1,635		1,860,792
8.88%, 5/15/19		3,650		4,892,438
5.75%, 4/15/20		2,610		3,138,092
Comcast Cable Communications Holdings, Inc.,
9.46%, 11/15/22		2,050		3,060,724
Comcast Corp.:
5.88%, 2/15/18		4,079		4,962,418
4.65%, 7/15/42		9,801		10,483,238
COX Communications, Inc., 8.38%, 3/01/39 (a)		8,375		12,751,306
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc.:
6.38%, 3/01/41		2,255		2,639,904
5.15%, 3/15/42		1,920		1,953,362
Discovery Communications LLC, 3.70%, 6/01/15		1,990		2,128,665
The Interpublic Group of Cos., Inc., 10.00%, 7/15/17		13,030		14,479,587
NBCUniversal Media LLC:
5.15%, 4/30/20		9,964		11,808,177
2.88%, 1/15/23		2,540		2,535,352
News America, Inc., 7.63%, 11/30/28		850		1,093,473
TCI Communications, Inc., 7.88%, 2/15/26		2,540		3,657,879
Time Warner Cable, Inc.:
5.50%, 9/01/41		3,410		3,858,708
4.50%, 9/15/42		10,452		10,423,539
Time Warner, Inc., 4.70%, 1/15/21		2,170		2,492,382
Virgin Media Secured Finance Plc, 6.50%, 1/15/18		19,931		21,824,445
				120,044,481

See Notes to Financial Statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 15 

Schedule of Investments (continued)   BlackRock Core Bond Portfolio
(Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Multiline Retail – 0.6%
Macy’s Retail Holdings, Inc.:
5.90%, 12/01/16		USD       7,875	$	9,193,960
7.45%, 7/15/17		7,386		9,132,516
				18,326,476
Multi-Utilities – 0.3%
CenterPoint Energy, Inc., 6.50%, 5/01/18		1,500		1,800,847
Dominion Resources, Inc., 1.95%, 8/15/16		5,432		5,614,233
SCANA Corp., 4.13%, 2/01/22		2,000		2,052,620
				9,467,700
Oil, Gas & Consumable Fuels – 2.4%
Anadarko Petroleum Corp.:
5.95%, 9/15/16		13,025		15,092,041
6.38%, 9/15/17		6,357		7,664,114
El Paso Pipeline Partners Operating Co. LLC, 6.50%, 4/01/20		3,140		3,725,095
Energy Transfer Partners LP, 6.50%, 2/01/42		7,790		8,989,115
Enterprise Products Operating LLC, Series L, 6.30%, 9/15/17		4,800		5,838,331
EOG Resources, Inc., 2.63%, 3/15/23		4,607		4,656,654
Nexen, Inc.:
6.40%, 5/15/37		1,820		2,310,321
7.50%, 7/30/39		7,075		10,082,575
Plains All American Pipeline LP/PAA Finance Corp., 8.75%, 5/01/19		840		1,129,509
Pride International, Inc., 6.88%, 8/15/20		2,435		3,082,527
Valero Energy Corp., 6.63%, 6/15/37		2,060		2,486,348
Western Gas Partners LP:
5.38%, 6/01/21		6,316		7,178,766
4.00%, 7/01/22		2,850		2,971,467
The Williams Cos., Inc., 7.88%, 9/01/21		1,375		1,802,808
				77,009,671
Paper & Forest Products – 0.9%
Georgia-Pacific LLC, 8.25%, 5/01/16 (a)		13,030		14,021,531
International Paper Co.:
4.75%, 2/15/22		5,405		6,137,496
6.00%, 11/15/41		5,640		6,872,543
				27,031,570
Pharmaceuticals – 0.2%
Teva Pharmaceutical Finance Co. BV, 3.65%, 11/10/21		1,750		1,897,025
Teva Pharmaceutical Finance IV BV, 3.65%, 11/10/21		4,250		4,607,059
				6,504,084
Real Estate Investment Trusts (REITs) – 0.3%
Ventas Realty LP/Ventas Capital Corp., 4.75%, 6/01/21		2,720		2,989,364
Vornado Realty LP, 5.00%, 1/15/22		6,845		7,574,116
				10,563,480
Road & Rail – 0.3%
Burlington Northern Santa Fe LLC:
3.05%, 9/01/22		5,785		5,987,585
4.38%, 9/01/42		2,262		2,393,225
				8,380,810
Tobacco – 0.2%
Philip Morris International, Inc.:
4.88%, 5/16/13		2,965		3,046,241
6.88%, 3/17/14		900		983,241
4.50%, 3/26/20		2,800		3,286,861
				7,316,343

Corporate Bonds	Par (000)		Value
Wireless Telecommunication Services – 1.2%
America Movil SAB de CV:
2.38%, 9/08/16		USD       7,285	$	7,580,691
3.13%, 7/16/22		3,063		3,156,366
4.38%, 7/16/42		2,765		2,867,758
Crown Castle Towers LLC, 6.11%, 1/15/40 (a)		16,615		20,010,840
SBA Tower Trust, 5.10%, 4/15/42 (a)		3,490		3,889,183
				37,504,838
Total Corporate Bonds – 27.6%				879,630,370
Foreign Agency Obligations
Eksportfinans ASA, 5.50%, 5/25/16		1,835		1,871,700
Hydro Quebec:
8.40%, 1/15/22		7,595		10,952,104
8.05%, 7/07/24		18,860		27,937,922
Kreditanstalt fuer Wiederaufbau, 1.38%, 7/15/13		6,400		6,450,560
Petrobras International Finance Co.:
3.88%, 1/27/16		14,340		15,168,995
5.75%, 1/20/20		20,420		23,274,675
Total Foreign Agency Obligations – 2.7%				85,655,956
Foreign Government Obligations
Germany – 1.4%
Federal Republic of Germany, 0.10%, 4/15/23		EUR       33,375		46,090,423
Italy – 2.0%
Buoni Poliennali Del Tesoro:
4.75%, 6/01/17		31,770		42,148,385
5.25%, 8/01/17		8,030		10,903,043
2.10%, 9/15/21		6,585		7,904,024
2.55%, 9/15/41		1,780		1,836,921
				62,792,373
Mexico – 0.3%
United Mexican States:
5.63%, 1/15/17		USD       4,800		5,611,200
5.13%, 1/15/20		1,850		2,210,750
7.50%, 4/08/33		640		974,400
				8,796,350
Poland – 0.1%
Republic of Poland, 5.13%, 4/21/21		2,970		3,460,050
Total Foreign Government Obligations – 3.8%				121,139,196
Non-Agency Mortgage-Backed Securities
Collateralized Mortgage Obligations – 2.3%
Bear Stearns Adjustable Rate Mortgage Trust, Series 2004-7, Class 4A, 3.08%, 10/25/34 (b)		821		785,434
Countrywide Alternative Loan Trust:
Series 2005-21CB, Class A17, 6.00%, 6/25/35		19,145		18,544,999
Series 2006-OA21, Class A1, 0.41%, 3/20/47 (b)		3,738		2,241,741

See Notes to Financial Statements.
16	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

Schedule of Investments (continued)   BlackRock Core Bond Portfolio (Percentages shown are based on Net Assets)

Non-Agency Mortgage-Backed Securities	Par (000)		Value
Collateralized Mortgage Obligations (concluded)
Countrywide Home Loan Mortgage Pass-Through Trust:
Series 2004-29, Class 1A1, 0.76%, 2/25/35 (b)		USD       964	$	869,328
Series 2006-OA5, Class 2A1, 0.42%, 4/25/46 (b)		4,407		2,824,642
Series 2006-OA5, Class 3A1, 0.42%, 4/25/46 (b)		5,512		3,789,648
Credit Suisse Mortgage Capital Certificates:
Series 2011-2R, Class 2A1, 2.62%, 7/27/36 (a)(b)		7,409		7,298,215
Series 2011-4R, Class 5A1, 5.07%, 5/27/36 (a)(b)		11,029		10,530,993
Series 2011-4R, Class 6A1, 2.95%, 5/27/36 (a)(b)		2,319		2,213,980
First Horizon Mortgage Pass-Through Trust,
Series 2005-AR3, Class 3A1, 2.60%, 8/25/35 (b)		2,185		1,963,012
FREMF Mortgage Trust:
Series 2012-K705, Class B, 4.31%, 9/25/44 (a)(b)		2,570		2,725,503
Series 2012-K706, Class C, 4.16%, 11/25/44 (a)(b)		1,435		1,374,859
HomeBanc Mortgage Trust:
Series 2005-4, Class A1, 0.49%, 10/25/35 (b)		7,287		5,283,671
Series 2006-2, Class A1, 0.40%, 12/25/36 (b)		1,468		1,010,492
JPMorgan Mortgage Trust:
Series 2006-S2, Class 2A2, 5.88%, 6/25/21		1,141		1,107,296
Series 2007-S1, Class 1A2, 5.50%, 3/25/22		896		891,166
MortgageIT Trust, Series 2004-1, Class A1, 1.00%, 11/25/34 (b)		2,259		2,146,987
Residential Accredit Loans, Inc.,
Series 2006-QO2, Class A1, 0.44%, 2/25/46 (b)		4,306		1,950,750
Structured Adjustable Rate Mortgage Loan Trust,
Series 2004-16, Class 3A1, 2.84%, 11/25/34 (b)		6,286		6,216,250
				73,768,966
Commercial Mortgage-Backed Securities – 9.7%
Banc of America Commercial Mortgage Trust:
Series 2007-1, Class AMFX, 5.48%, 1/15/49 (b)		514		529,975
Series 2007-3, Class AM, 5.89%, 6/10/49 (b)		3,840		4,069,210
Banc of America Merrill Lynch Commercial Mortgage, Inc.:
Series 2007-1, Class A4, 5.45%, 1/15/49		8,805		10,158,945
Series 2007-3, Class A4, 5.89%, 6/10/49 (b)		1,565		1,795,877
Series 2007-4, Class A3, 5.99%, 2/10/51 (b)		5,872		6,091,415
Banc of America Re-Remic Trust,
Series 2012-CLRN, Class A, 1.39%, 8/15/29 (a)(b)		2,484		2,499,401
Bear Stearns Commercial Mortgage Securities,
Series 2005-PW10, Class AM, 5.45%, 12/11/40 (b)		990		1,054,095
COBALT CMBS Commercial Mortgage Trust, Series 2006-C1, Class A4, 5.22%, 8/15/48		1,950		2,189,743
Commercial Mortgage Loan Trust,
Series 2008-LS1, Class A4B, 6.20%, 12/10/49 (b)		3,730		4,413,929

Non-Agency Mortgage-Backed Securities	Par (000)		Value
Commercial Mortgage-Backed Securities (continued)
Commercial Mortgage Pass-Through Certificates:
Series 2006-C8, Class AM, 5.35%, 12/10/46		USD       4,316	$	4,613,760
Series 2007-C4, Class A3, 5.96%, 9/15/39 (b)		5,045		5,270,925
Series 2008-C1, Class A2, 6.41%, 2/15/41 (b)		4,185		4,425,767
Series 2012-LTRT, Class A2, 3.40%, 10/05/30 (a)		8,385		8,678,475
Credit Suisse Mortgage Capital Certificates:
Series 2006-C4, Class A3, 5.47%, 9/15/39		2,695		3,040,523
Series 2010-RR2, Class 2A, 5.96%, 9/15/39 (a)(b)		10,710		12,186,748
Deutsche Bank ReREMIC Trust:
Series 2011-C32, Class A3A, 5.94%, 6/17/49 (a)(b)		3,115		3,610,690
Series 2012-EZ1, Class A, 0.95%, 9/24/45 (a)		14,405		14,430,884
Extended Stay America Trust, Series 2010-ESHA,
Class D, 5.50%, 11/05/27 (a)		1,950		1,965,551
GE Capital Commercial Mortgage Corp., Series 2007-C1, Class A2, 5.42%, 12/10/49		9,462		9,466,873
GMAC Commercial Mortgage Securities, Inc.:
Series 2003-C2, Class A2, 5.64%, 5/10/40 (b)		23,915		24,663,276
Series 2003-C3, Class A3, 4.65%, 4/10/40		12		12,223
Greenwich Capital Commercial Funding Corp.:
Series 2007-GG11, Class A4, 5.74%, 12/10/49		1,800		2,099,621
Series 2007-GG9, Class A2, 5.38%, 3/10/39		13,745		14,185,677
GS Mortgage Securities Corp. II:
Series 2006-GG8, Class AM, 5.59%, 11/10/39		1,470		1,612,475
Series 2007-GG10, Class A4, 5.98%, 8/10/45 (b)		3,424		3,920,740
Series 2012-ALOH, Class A, 3.55%, 4/10/34 (a)		9,640		10,412,203
Series 2012-SHOP, Class A, 2.93%, 6/05/31 (a)		3,650		3,838,621
Series 2012-SHOP, Class C, 3.63%, 6/05/31 (a)		1,670		1,710,140
JPMorgan Chase Commercial Mortgage Securities Corp.:
Series 2004-CB8, Class A1A, 4.16%, 1/12/39 (a)		8,064		8,323,306
Series 2004-LN2, Class A2, 5.12%, 7/15/41		4,370		4,647,364
Series 2006-CB14, Class AM, 5.64%, 12/12/44 (b)		2,390		2,490,256
Series 2007-CB18, Class A3, 5.45%, 6/12/47		721		766,729
Series 2007-CB20, Class AM, 6.09%, 2/12/51 (b)		8,198		9,117,693
Series 2007-LD11, Class A2, 5.99%, 6/15/49 (b)		10,156		10,490,190
Series 2008-C2, Class ASB, 6.13%, 2/12/51 (b)		4,215		4,583,701
Series 2012-CBX, Class A4, 3.48%, 6/16/45		1,850		2,012,730
Series 2012-HSBC, Class D, 4.67%, 7/05/32 (a)(b)		1,500		1,602,969

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	17

Schedule of Investments (continued)   BlackRock Core Bond Portfolio (Percentages shown are based on Net Assets)

Non-Agency Mortgage-Backed Securities	Par (000)		Value
Commercial Mortgage-Backed Securities (concluded)
LB-UBS Commercial Mortgage Trust:
Series 2007-C1, Class AM, 5.46%, 2/15/40		USD       2,740	$	2,945,092
Series 2007-C6, Class A4, 5.86%, 7/15/40 (b)		9,120		10,779,594
Series 2007-C7, Class A3, 5.87%, 9/15/45 (b)		8,285		9,868,678
Merrill Lynch Mortgage Trust:
Series 2003-KEY1, Class A4, 5.24%, 11/12/35 (b)		7,100		7,387,479
Series 2004-KEY2, Class A4, 4.86%, 8/12/39 (b)		2,000		2,136,844
Merrill Lynch/Countrywide Commercial Mortgage Trust, Series 2007-9, Class A4, 5.70%, 9/12/49		1,540		1,747,683
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2012-CKSV, Class A2, 3.28%,10/15/22 (a)		2,670		2,736,528
Morgan Stanley Capital I, Inc.:
Series 2004-HQ4, Class A7, 4.97%, 4/14/40		2,500		2,651,597
Series 2007-HQ12, Class A2FX, 5.76%, 4/12/49 (b)		3,022		3,175,909
Series 2007-IQ15, Class AM, 6.08%, 6/11/49 (b)		4,145		4,366,774
Morgan Stanley ReREMIC Trust:
Series 2009-IO, Class A1, 3.00%, 7/17/56 (a)		1,339		1,342,188
Series 2011-IO, Class A, 2.50%, 3/23/51 (a)		5,464		5,508,705
Series 2012-XA, Class A, 2.00%, 7/27/49		6,117		6,170,507
RBSCF Trust, Series 2010-RR3, Class WBTA, 6.12%, 2/16/51 (a)(b)		5,200		6,124,903
S2 Hospitality LLC, Series 2012-LV1, Class A, 4.50%, 4/15/25 (a)		4,374		4,398,340
UBS-Barclays Commercial Mortgage Trust, Series 2012-C3, Class A4, 3.09%, 8/10/49		4,395		4,573,296
Wachovia Bank Commercial Mortgage Trust, Series 2003-C6,Class A4, 5.13%, 8/15/35 (b)		19,398		19,901,111
Wells Fargo Reremic Trust, Series 2012-IO, Class A, 1.75%, 8/20/21 (a)		6,231		6,207,751
				309,005,679
Interest Only Commercial Mortgage-Backed Securities – 0.4%
Commercial Mortgage Pass- Through Certificates, Series 2012-CR1,Class XA, 2.45%, 5/15/45 (b)		43,908		6,061,477
Credit Suisse First Boston Mortgage Securities Corp.:
Series 1997-C1, Class AX, 1.31%, 6/20/29 (a)(b)		3,615		66,333
Series 1997-C2, Class AX, 0.29%, 1/17/35 (b)		1,480		2,519
JPMorgan Chase Commercial Mortgage Securities Corp., Series 2012-CBX, Class XA, 2.23%, 6/16/45 (b)		20,477		2,388,900
Morgan Stanley Capital I, Inc., Series 2012-C4, Class XA, 2.89%, 3/15/45 (a)(b)		39,861		5,816,543
WaMu Commercial Mortgage Securities Trust, Series 2005-C1A, Class X, 1.35%, 5/25/36 (a)(b)		12,138		215,071
				14,550,843
Total Non-Agency Mortgage-Backed Securities –12.4%				397,325,488

Preferred Securities	Par (000)		Value
Capital Trusts
Capital Markets – 0.2%
State Street Capital Trust III, 5.38% (b)(f)		USD       4,220	$	4,220,549
State Street Capital Trust IV, 1.39%, 6/01/77 (b)		710		525,941
				4,746,490
Commercial Banks – 0.2%
Fifth Third Capital Trust IV, 6.50%, 4/15/37 (b)		4,930		4,942,325
Consumer Finance – 0.2%
Capital One Capital VI, 8.88%, 5/15/40		5,825		5,922,639
Insurance – 0.6%
American International Group, Inc., 8.18%, 5/15/58 (b)		1,665		2,037,544
MetLife Capital Trust IV, 7.88%, 12/15/37 (a)		5,325		6,283,500
Prudential Financial, Inc., 5.88%, 9/15/42 (b)		6,026		6,176,650
Swiss Re Capital I LP, 6.85% (a)(b)(f)		5,575		5,672,563
XL Group Plc, 6.50% (b)(f)		507		466,440
				20,636,697
Total Capital Trusts – 1.2%				36,248,151
Trust Preferreds	Shares
Diversified Financial Services – 0.1%
Citigroup Capital XIII, 7.88%, 10/30/40		133,685		3,723,127
Total Preferred Securities – 1.3%				39,971,278
Project Loans	Par (000)
Federal Housing Authority:
USGI Project, Series 56, 7.46%, 1/01/23		USD 83	$	80,961
USGI Project, Series 87, 7.43%, 12/01/22		63		61,392
Total Project Loans – 0.0%				142,353
Taxable Municipal Bonds
New York City Municipal Water Finance Authority RB:
5.38%, 6/15/43		4,120		4,863,660
5.50%, 6/15/43		4,935		5,894,463
Total Taxable Municipal Bonds – 0.3%				10,758,123
U.S. Government Sponsored Agency Securities
Agency Obligations – 3.5%
Fannie Mae:
1.83%, 10/09/19 (g)		12,125		10,666,096
4.63%, 5/01/13		16,430		16,856,966
6.63%, 11/15/30		1,500		2,301,765
Federal Farm Credit Bank, 2.63%, 4/17/14		14,000		14,506,912
Federal Home Loan Bank, 5.63%, 6/13/16		4,550		5,320,361
Freddie Mac:
3.75%, 3/27/19		10,765		12,545,004
5.50%, 8/23/17		3,500		4,294,013
Resolution Funding Corp. Interest Strip:
1.20%, 7/15/18 (g)		4,575		4,268,731
1.26%, 10/15/18 (g)		4,575		4,240,988

See Notes to Financial Statements.
18	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

Schedule of Investments (continued)   BlackRock Core Bond Portfolio (Percentages shown are based on Net Assets)

U.S. Government Sponsored Agency Securities	Par (000)		Value
Agency Obligations (concluded)
Small Business Administration Participation Certificates:
Series 1996-20B, Class 1, 6.38%, 2/01/16	USD	267	$	280,933
Series 1996-20H, 7.25%, 8/01/16		230		245,044
Series 1996-20J, 7.20%, 10/01/16		156		166,872
Series 1996-20K, 6.95%, 11/01/16		439		467,854
Series 1997-20B, Class 1, 7.10%, 2/01/17		484		526,789
Series 1997-20F, Class 1, 7.20%, 6/01/17		115		125,978
Series 1997-20G, Class 1, 6.85%, 7/01/17		755		819,274
Tennessee Valley Authority, 5.25%, 9/15/39		24,965		33,094,153
				110,727,733
Collateralized Mortgage Obligations – 2.0%
Fannie Mae:
Series 2002-T6, Class A1, 3.31%, 2/25/32		617		639,117
Series 2004-88, Class HA, 6.50%, 7/25/34		1,086		1,161,070
Series 2005-29, Class AT, 4.50%, 4/25/35		381		405,007
Series 2005-29, Class WB, 4.75%, 4/25/35		1,581		1,716,487
Series 2005-48, Class AR, 5.50%, 2/25/35		1,688		1,859,470
Series 2005-62, Class CQ, 4.75%, 7/25/35		2,079		2,216,602
Series 2006-M2, Class A2A, 5.27%, 10/25/32 (b)		18,687		21,471,155
Freddie Mac:
Series 1591, Class PK, 6.35%, 10/15/23		2,061		2,301,340
Series 2594, Class TV, 5.50%, 3/15/14		1,437		1,477,576
Series 2825, Class VP, 5.50%, 6/15/15		1,337		1,394,679
Series 2864, Class NA, 5.50%, 1/15/31		1,861		1,902,222
Series 2996, Class MK, 5.50%, 6/15/35		55		61,501
Series K013, Class A2, 3.97%, 1/25/21 (b)		9,120		10,532,159
Series K017, Class A2, 2.87%, 12/25/21		17,095		18,269,444
				65,407,829
Federal Deposit Insurance Corporation Guaranteed – 0.3%
General Electric Capital Corp., 2.13%, 12/21/12		8,490		8,526,431
Interest Only Collateralized Mortgage Obligations – 0.3%
Fannie Mae:
Series 2011-123, Class CS, 6.39%, 10/25/41 (b)		20,069		2,860,754
Series 2012-94, Class IK, 4.00%, 9/25/42		20,077		3,351,292
Freddie Mac:
Series K019, Class X1, 1.89%, 3/25/22 (b)		9,878		1,213,919
Series K707, Class X1, 1.70%, 12/25/18 (b)		21,745		1,763,909
Series K710, Class X1, 1.92%, 5/25/19 (b)		16,511		1,613,847
				10,803,721
Mortgage-Backed Securities – 104.4%
Fannie Mae Mortgage-Backed Securities:
2.50%, 10/01/27 (h)		245,200		257,555,250
2.67%, 12/01/34 (b)		1,303		1,398,929
3.00%, 10/01/27-10/01/42 (h)		274,900		290,655,251

U.S. Government Sponsored Agency Securities	Par (000)			Value
Mortgage-Backed Securities (concluded)
3.05%, 3/01/41 (b)	USD	2,194		$	2,302,335
3.15%, 3/01/41 (b)		2,797			2,931,040
3.30%, 12/01/40 (b)		4,493			4,764,835
3.33%, 6/01/41 (b)		9,076			9,616,973
3.48%, 9/01/41 (b)		6,713			7,108,178
3.50%, 11/01/26-10/01/42 (h)		237,392			254,594,842
4.00%, 2/01/25-10/01/42 (h)		303,390			326,860,488
4.50%, 2/01/25-10/01/42 (h)		544,723			591,739,331
4.79%, 8/01/38 (b)		1,258			1,351,400
5.00%, 9/01/33-10/01/42 (h)		323,430			352,839,056
5.50%, 9/01/13-10/01/42 (h)		138,293			152,002,450
6.00%, 5/01/16-10/01/42 (h)		395,163			437,175,963
6.50%, 5/01/40		20,083			22,884,566
7.00%, 7/01/13-6/01/32		211			227,351
Freddie Mac Mortgage-Backed Securities:
3.02%, 2/01/41 (b)		3,671			3,853,391
3.50%, 10/01/27-10/01/42 (h)		33,400			35,666,937
4.00%, 10/01/27-10/01/42 (h)		88,200			94,608,843
4.50%, 10/01/42 (h)		133,200			143,190,000
5.00%, 10/01/36-5/01/39		35,998			39,155,683
5.15%, 11/01/38 (b)		275			296,927
5.50%, 4/01/13-1/01/40		31,097			33,906,504
6.00%, 12/01/13-12/01/32		2,131			2,287,912
6.50%, 8/01/13-7/01/17		42			45,031
8.00%, 11/01/22-10/01/25		6			6,872
Ginnie Mae Mortgage-Backed Securities:
3.50%, 9/20/42-10/15/42 (h)		46,600			50,999,382
4.00%, 1/15/41-10/15/42 (h)		49,468			54,560,585
4.50%, 5/20/40-10/15/42 (h)		96,033			106,325,346
5.00%, 10/20/39-10/15/42 (h)		45,319			50,147,576
5.50%, 3/15/32-11/15/33		25			27,785
6.00%, 12/15/36		444			503,866
7.00%, 3/15/13		–	(i)		148
7.50%, 11/15/29		1			512
9.00%, 7/15/18		1			661
9.50%, 11/15/16		6			6,594
					3,331,598,793
Principal Only Collateralized Mortgage Obligations – 0.0%
Fannie Mae, Series 1989-16, Class B, 0.91%, 3/25/19 (g)		29			27,024
Total U.S. Government Sponsored Agency Securities – 110.5%					3,527,091,531
U.S. Treasury Obligations
U.S. Treasury Bonds, 2.75%, 8/15/42 (j)		90,183			88,688,897
U.S. Treasury Inflation Indexed Bonds:
2.13%, 2/15/41		14,697			21,589,741
0.75%, 2/15/42		8,264			8,978,547
U.S. Treasury Inflation Indexed Notes, 0.13%, 4/15/17-7/15/22		21,650			23,438,763
U.S. Treasury Notes:
0.25%, 8/31/14-9/15/15 (j)		418,722			418,370,571
0.63%, 8/31/17 (j)		121,188			121,263,843
1.00%, 8/31/19 (j)		132,515			132,183,712
1.63%, 8/15/22 (j)		7,208			7,199,915
Total U.S. Treasury Obligations – 25.7%					821,713,989

See Notes to Financial Statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 19 

Schedule of Investments(continued)   BlackRock Core Bond Portfolio (Percentages shown are based on Net Assets)

			Value
Total Long-Term Investments (Cost – $6,072,862,531) – 194.6%			$	6,211,319,891
Options Purchased	Contracts
Exchange-Traded Call Options – 0.0%
Euro Dollar (3 Year) Mid-Curve, Strike Price USD 98.875, Expires 11/16/12		1,426		926,900
Options Purchased	Notional Amount (000)
Over-the-Counter Barrier Options – 0.0%
GBP Currency Put/USD Currency Call, Strike Price USD 1.62, Barrier Price USD 1.58, Expires 10/17/12, Broker BNP Paribas SA	GBP	2,311	$	13,805
USD Currency Put/BRL Currency Call, Strike Price BRL 2.05, Barrier Price BRL 2.01, Expires 10/09/12, Broker Barclays Plc	USD	3,301		15,350
				29,155
Over-the-Counter Put Options – 0.0%
AUD Currency, Strike Price USD 1.01, Expires 10/12/12, Broker Citigroup, Inc.	AUD	7,180		4,481
Over-the-Counter Interest Rate Call Swaptions – 0.0%
Receive a fixed rate of 1.07% and pay a floating rate based on 3-month LIBOR, Expires 7/25/13, Broker Deutsche Bank AG	USD	90,000		867,060
Receive a fixed rate of 1.16% and pay a floating rate based on 3-month LIBOR, Expires 7/11/13, Broker Citigroup, Inc.		5,400		68,733
Receive a fixed rate of 1.55% and pay a floating rate based on 3-month LIBOR, Expires 12/14/12, Broker JPMorgan Chase & Co.		18,800		82,750
Receive a fixed rate of 2.25% and pay a floating rate based on 3-month LIBOR, Expires 11/09/12, Broker Bank of America Corp.		20,100		55,585
Receive a fixed rate of 2.68% and pay a floating rate based on 3-month LIBOR, Expires 3/11/13, Broker Citigroup, Inc.		8,800		450,140
				1,524,268
Over-the-Counter Interest Rate Put Swaptions – 0.1%
Pay a fixed rate of 1.07% and receive a floatingrate based on 3-month LIBOR, Expires 7/25/13, Broker Deutsche Bank AG		90,000		770,445
Pay a fixed rate of 1.16% and receive a floatingrate based on 3-month LIBOR, Expires 7/11/13, Broker Citigroup, Inc.		5,400		35,414
Pay a fixed rate of 2.13% and receive a floatingrate based on 3-month LIBOR, Expires 3/21/13, Broker Deutsche Bank AG		54,300		8,997
Pay a fixed rate of 2.30% and receive a floatingrate based on 3-month LIBOR, Expires 11/23/12, Broker Citigroup, Inc.		25,300		17,968
Pay a fixed rate of 2.68% and receive a floatingrate based on 3-month LIBOR, Expires 3/11/13, Broker Citigroup, Inc.		8,800		410,630
Pay a fixed rate of 4.50% and receive a floatingrate based on 3-month LIBOR, Expires 3/20/17, Broker Deutsche Bank AG		19,100		468,546
				1,712,000
Total Options Purchased (Cost – $5,813,188) – 0.1%				4,196,804
Total Investments Before TBA Sale Commitments and Options Written (Cost – $6,078,675,719) – 194.7%				6,215,516,695

TBA Sale Commitments (h)	Par (000)		Value
Fannie Mae Mortgage-Backed Securities:
0.43%, 10/01/27	USD	15,800	$	(16,896,125	)
2.50%, 10/01/27		225,900		(237,305,328	)
3.00%, 10/01/27-10/01/42		210,500		(222,693,126	)
3.50%, 10/01/27-10/01/42		190,900		(204,332,969	)
4.50%, 10/01/27-10/01/42		474,600		(513,537,937	)
4.00%, 10/01/42		209,500		(225,670,781	)
5.00%, 10/01/42		279,800		(304,916,969	)
5.50%, 10/01/42		77,700		(85,178,625	)
6.00%, 10/01/42		335,000		(369,797,188	)
Freddie Mac Mortgage-Backed Securities:
4.00%, 10/01/42		38,700		(41,590,406	)
4.50%, 10/01/42		66,600		(71,615,812	)
Ginnie Mae Mortgage-Backed Securities:
3.50%, 10/15/42		20,500		(22,409,062	)
4.00%, 10/15/42		10,300		(11,355,750	)
4.50%, 10/15/42		21,400		(23,540,000	)
Total TBA Sale Commitments (Proceeds – $2,344,767,996) – (73.6)%				(2,350,840,078	)
Options Written	Contracts
Exchange-Traded Call Options – (0.0)%
Euro Dollar (3 Year) Mid-Curve, Strike Price USD 99.125, Expires 11/16/12		2,139		(441,169	)
Options Written	Notional Amount (000)
Over-the-Counter Interest Rate Call Swaptions – (0.8)%
Pay a fixed rate of 1.00% and receive a floating rate based on 3-month LIBOR, Expires 7/10/14, Broker Bank of America Corp.	USD	36,800		(215,181	)
Pay a fixed rate of 1.00% and receive a floating rate based on 3-month LIBOR, Expires 7/11/14, Broker Bank of America Corp.		47,000		(275,505	)
Pay a fixed rate of 1.00% and receive a floating rate based on 3-month LIBOR, Expires 7/14/14, Broker Bank of America Corp.		36,700		(215,246	)
Pay a fixed rate of 1.25% and receive a floating rate based on 3-month LIBOR, Expires 6/20/14, Broker Barclays Plc		24,800		(278,477	)
Pay a fixed rate of 1.43% and receive a floating rate based on 3-month LIBOR, Expires 7/28/14, Broker Deutsche Bank AG		16,200		(254,489	)
Pay a fixed rate of 3.65% and receive a floating rate based on 3-month LIBOR, Expires 3/27/17, Broker JPMorgan Chase & Co.		8,600		(838,854	)
Pay a fixed rate of 4.90% and receive a floating rate based on 3-month LIBOR, Expires 3/04/13, Broker Deutsche Bank AG		44,800		(12,829,031	)
Pay a fixed rate of 4.92% and receive a floating rate based on 3-month LIBOR, Expires 3/05/13, Broker Deutsche Bank AG		40,000		(11,544,316	)
				(26,451,099	)
Over-the-Counter Interest Rate Put Swaptions – (0.1)%
Receive a fixed rate of 1.43% and pay a floating rate based on 3-month LIBOR, Expires 7/28/14, Broker Deutsche Bank AG		16,200		(277,143	)
Receive a fixed rate of 1.95% and pay a floating rate based on 3-month LIBOR, Expires 7/16/14, Broker Citigroup, Inc.		29,000		(266,719	)
Receive a fixed rate of 2.00% and pay a floating rate based on 3-month LIBOR, Expires 7/10/14, Broker Bank of America Corp.		36,800		(314,898	)

See Notes to Financial Statements.
20	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

Schedule of Investments (continued)   BlackRock Core Bond Portfolio (Percentages shown are based on Net Assets)

Options Written	Notional Amount (000)		Value
Over-the-Counter Interest Rate Put Swaptions (concluded)
Receive a fixed rate of 2.00% and pay a floating rate based on 3-month LIBOR, Expires 7/11/14, Broker Bank of America Corp.	USD	47,000	$	(403,443	)
Receive a fixed rate of 2.00% and pay a floating rate based on 3-month LIBOR, Expires 7/14/14, Broker Bank of America Corp.		36,700		(316,460	)
Receive a fixed rate of 2.25% and pay a floating rate based on 3-month LIBOR, Expires 6/20/14, Broker Barclays Plc		24,800		(149,606	)
Receive a fixed rate of 3.65% and pay a floating rate based on 3-month LIBOR, Expires 3/27/17, Broker JPMorgan Chase & Co.		8,600		(357,182	)
Receive a fixed rate of 4.90% and pay a floating rate based on 3-month LIBOR, Expires 3/04/13, Broker Deutsche Bank AG		44,800		(22	)
Receive a fixed rate of 4.92% and pay a floating rate based on 3-month LIBOR, Expires 3/05/13, Broker Deutsche Bank AG		40,000		(20	)
Receive a fixed rate of 6.00% and pay a floating rate based on 3-month LIBOR, Expires 3/20/17, Broker Deutsche Bank AG		38,200		(414,107	)
				(2,499,600	)
Total Options Written (Premiums Received – $16,190,279) – (0.9)%				(29,391,868	)
Total Investments Net of TBA Sale Commitments and Options Written – 120.2%				3,835,284,749
Liabilities in Excess of Other Assets – (20.2)%				(643,545,256	)
Net Assets – 100.0%			$	3,191,739,493

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(b) Variable rate security. Rate shown is as of report date.

(c) All or a portion of security has been pledged as collateral in connection with swaps.

(d) Non-income producing security.

(e) Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.

(f) Security is perpetual in nature and has no stated maturity date.

(g) Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

(h) Represents or includes a TBA transaction. Unsettled TBA transactions as of September 30, 2012 were as follows:

Counterparty	Value			Unrealized Appreciation (Depreciation)
Bank of America Corp.	$	(106,993,750	)	$	(1,423,383	)
Barclays Plc	$	(6,052,094	)	$	157,899
BNP Paribas SA	$	(4,713,688	)	$	(53,629	)
Citigroup, Inc.	$	231,222,672		$	1,743,227
Credit Suisse Group AG	$	(160,766,813	)	$	(362,508	)
Deutsche Bank AG	$	(245,791,125	)	$	(241,855	)
Goldman Sachs Group, Inc.	$	(58,001,031	)	$	(648,722	)
JPMorgan Chase & Co.	$	200,786,375		$	2,175,500
Morgan Stanley	$	112,038,599		$	215,865
Nomura Securities International, Inc.	$	78,736,703		$	7,687
Royal Bank of Scotland Group Plc	$	(20,476,000	)	$	99,843
UBS AG	$	20,708,469		$	83,984
Wells Fargo & Co.	$	22,620,938		$	98,437

(i) Par is less than $500.

(j) All or a portion of security has been pledged as collateral in connection with open reverse repurchase agreements.

— Investments in issuers considered to be an affiliate of the Fund during the period, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at September 30, 2011	Net Activity	Shares Held at September 30, 2012	Income
BlackRock Liquidity Funds, TempFund, Institutional Class	–	–	–	$	16,583

— 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. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

— Reverse repurchase agreements outstanding as of September 30, 2012 were as follows:

Counterparty	Interest Rate			Trade Date		Maturity Date	Face Value		Face Value Including Accrued Interest
Credit Suisse Group AG		(0.18	)%		9/28/12	10/01/12	$	14,471,889	$	14,471,672
Bank of America Corp.		0.11	%		9/28/12	10/01/12		120,288,273		120,289,376
Credit Suisse Group AG		0.09	%		9/28/12	10/01/12		132,183,713		132,184,704
BNP Paribas SA		0.27	%		9/28/12	10/01/12		89,506,131		89,508,145
Deutsche Bank AG		0.28	%		9/28/12	10/01/12		124,843,750		124,846,663
Total							$	481,293,756	$	481,300,560

— Foreign currency exchange contracts as of September 30, 2012 were as follows:

Currency Purchased		Currency Sold		Counter- party	Settlement Date	Unre- alized Appre- ciation (Depre- ciation)
EUR	12,263,000	USD	15,759,917	Royal Bank of Scotland Group Plc	10/01/12		$    (1,352	)
BRL	688,285	USD	338,957	Citigroup, Inc.	10/02/12		560
BRL	685,870	USD	338,723	UBS AG	10/02/12		(597	)
USD	338,723	BRL	688,285	Citigroup, Inc.	10/02/12		(594	)
USD	337,767	BRL	685,870	UBS AG	10/02/12		(558	)
AUD	2,600,000	USD	2,686,424	Citigroup, Inc.	10/03/12		9,249
CAD	3,850,000	USD	3,941,462	Citigroup, Inc.	10/03/12		(25,702	)
EUR	698,000	USD	897,427	Citigroup, Inc.	10/03/12		(462	)
GBP	330,122	USD	535,248	JPMorgan Chase & Co.	10/09/12		(2,184	)
USD	534,681	GBP	330,122	Goldman Sachs Group, Inc.	10/09/12		1,618
USD	267,615	GBP	165,061	UBS AG	10/09/12		1,083
AUD	1,415,000	USD	1,468,140	Citigroup, Inc.	10/12/12		(2,357	)
AUD	2,175,000	USD	2,185,331	Goldman Sachs Group, Inc.	10/12/12		67,728
USD	3,609,422	AUD	3,590,000	Goldman Sachs Group, Inc.	10/12/12		(109,421	)

See Notes to Financial Statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 21 

  Schedule of Investments  (continued)   BlackRock Core Bond Portfolio

Currency Purchased		Currency Sold		Counterparty	Settle- ment Date	Unrea- lized Apprec- iation (Deprec- iation)
USD	27,235	AUD	26,000	Credit Suisse Group AG	10/17/12	$	315
USD	139,695	CAD	143,000	BNP Paribas SA	10/17/12		(5,704	)
USD	602,594	CAD	614,000	Credit Suisse Group AG	10/17/12		(21,704	)
USD	254,775	CAD	259,000	UBS AG	10/17/12		(8,569	)
USD	15,762,308	EUR	12,263,000	Royal Bank of Scotland Group Plc	10/17/12		665
CAD	16,208,635	AUD	15,900,000	Deutsche Bank AG	10/19/12		20,360
USD	9,095,924	AUD	8,705,000	UBS AG	10/19/12		84,655
USD	24,983,402	EUR	19,045,000	UBS AG	10/19/12		504,346
EUR	4,118,000	USD	5,341,215	UBS AG	10/22/12		(48,074	)
MXN	102,931,400	USD	7,930,000	Bank of America Corp.	10/22/12		45,178
MXN	51,104,885	USD	3,965,000	Royal Bank of Scotland Group Plc	10/22/12		(5,367	)
MXN	51,108,454	USD	3,965,000	Royal Bank of Scotland Group Plc	10/22/12		(5,091	)
USD	41,812,730	EUR	34,105,000	Citigroup, Inc.	10/22/12		(2,024,707	)
USD	16,341,168	EUR	13,068,000	Citigroup, Inc.	10/22/12		(456,006	)
USD	862,271	EUR	684,000	Citigroup, Inc.	10/22/12		(16,920	)
USD	897,590	EUR	698,000	Citigroup, Inc.	10/22/12		626
USD	15,948,666	EUR	12,316,000	Deutsche Bank AG	10/22/12		118,087
USD	11,567,112	EUR	9,265,000	Royal Bank of Scotland Group Plc	10/22/12		(341,812	)
USD	3,789,859	EUR	3,055,000	Royal Bank of Scotland Group Plc	10/22/12		(136,937	)
MXN	14,104,239	AUD	1,043,333	Deutsche Bank AG	12/19/12		12,215
MXN	14,111,063	AUD	1,043,333	Deutsche Bank AG	12/19/12		12,741
MXN	14,108,413	AUD	1,043,333	JPMorgan Chase & Co.	12/19/12		12,537
EUR	7,850,000	USD	9,516,178	Deutsche Bank AG	12/20/12		580,804
USD	15,967,417	EUR	13,060,000	Goldman Sachs Group, Inc.	12/20/12		(830,875	)
USD	7,977,781	CNY	51,345,000	Standard Chartered Bank	6/07/13		(40,748	)
USD	7,991,440	CNY	51,345,000	Standard Chartered Bank	6/07/13		(27,089	)
USD	7,915,567	CNY	51,000,000	Credit Suisse Group AG	8/19/13		(17,172	)
Total						$	(2,657,235	)

— Financial futures contracts purchased as of September 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration	Notional Value	Unre- alized Appre- ciation Depre- ciation
312	Australian Bonds (10 Year)	Sydney	December 2012	USD 311,692,260	$	1,159,470
44	Euro-OAT	Eurex	December 2012	USD     7,573,826		33,586

Contracts	Issue	Exchange	Expiration	Notional Value		Unre- alized Appre- ciation Depre- ciation
471	U.S. Treasury Notes (2 Year)	Chicago Board Options	December 2012	USD	103,870,219	$	25,528
73	U.S. Treasury Notes (5 Year)	Chicago Board Options	December 2012	USD	9,098,195		(135	)
178	Euro Dollar Futures	Chicago Mercantile	September 2015	USD	44,157,350		59,993
178	Euro Dollar Futures	Chicago Mercantile	December 2015	USD	44,101,725		71,275
178	Euro Dollar Futures	Chicago Mercantile	March 2016	USD	44,046,100		82,012
178	Euro Dollar Futures	Chicago Mercantile	June 2016	USD	43,981,575		91,722
Total						$	1,523,451

— Financial futures contracts sold as of September 30, 2012 were as follows:

Contr- acts	Issue	Exchange	Expiration	Notional Value		Unre- alized Appre- ciation (Depre- ciation)
998	Australian Bonds (3 Year)	Sydney	December 2012	USD	309,537,145	$	(974,943	)
375	Euro-Bund	Eurex	December 2012	USD	68,318,063		(440,173	)
2	Euro-Buxl	Eurex	December 2012	USD	342,286		(1,640	)
1,216	U.S. Treasury Notes (10 Year)	Chicago Board Options	December 2012	USD	162,317,000		(154,604	)
92	U.S. Treasury Bonds (30 Year)	Chicago Board Options	December 2012	USD	13,742,500		(4,499	)
275	Ultra Treasury Bonds	Chicago Board Options	December 2012	USD	45,435,156		518,756
Total						$	(1,057,103	)

See Notes to Financial Statements.

 22   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Schedule of Investments (continued)   BlackRock Core Bond Portfolio

— Interest rate swaps outstanding as of September 30, 2012 were as follows:

Fixed Rate	Floating Rate	Counterparty/ Exchange	Expiration Date	Notional Amount (000)		Unrealized Appreciation (Depreciation)
0.49%1	3-month LIBOR	Chicago Mercantile	8/22/14	USD	41,400	$	(101,771	)
0.44%1	3-month LIBOR	Chicago Mercantile	8/29/14	USD	41,000		(48,492	)
0.42%1	3-month LIBOR	Chicago Mercantile	9/04/14	USD	29,140		(26,471	)
0.42%2	3-month LIBOR	Citigroup, Inc.	10/01/14	USD	112,100		105,297
0.82%1	3-month LIBOR	Citigroup, Inc.	7/18/17	USD	10,200		(51,692	)
1.74%2	3-month LIBOR	Deutsche Bank AG	3/30/18	USD	4,100		163,267
1.20%2	3-month LIBOR	Deutsche Bank AG	8/30/18	USD	12,100		67,817
3.27%1	3-month LIBOR	Deutsche Bank AG	5/16/21	USD	8,580		(1,362,238	)
1.93%2	3-month LIBOR	Chicago Mercantile	8/21/22	USD	82,700		1,970,849
1.76%2	3-month LIBOR	Citigroup, Inc.	9/24/22	USD	6,300		34,822
2.52%1	3-month LIBOR	Deutsche Bank AG	9/04/42	USD	8,600		137,877
2.69%2	3-month LIBOR	Citigroup, Inc.	9/17/42	USD	1,200		24,241
Total						$	913,506

¹  Fund pays the fixed rate and receives the floating rate.

²  Fund pays the floating rate and receives the fixed rate.

— Credit default swaps on single-name issues - sold protection outstanding as of September 30, 2012 were as follows:

Issuer	Receive Fixed Rate	Counterparty	Expiration Date	Issuer Credit Rating1	Notional Amount (000)2		Unrea- lized Apprec- iation
MetLife, Inc.	1.00%	Deutsche Bank AG	9/20/16	A-	USD	3,340	$	134,459

Issuer	Receive Fixed Rate	Counter- party	Expiration Date		Issuer Credit Rating1	Notional Amount (000)2		Unrea- lized Apprec- iation
MetLife, Inc.	1.00%	Morgan Stanley		9/20/16	A-	USD	4,170	$	162,488
MetLife, Inc.	1.00%	Morgan Stanley		9/20/16	A-	USD	2,510		80,463
MetLife, Inc.	1.00%	Citigroup, Inc.		12/20/16	A-	USD	2,635		82,476
MetLife, Inc.	1.00%	Citigroup, Inc.		12/20/16	A-	USD	2,465		89,938
MetLife, Inc.	1.00%	Citigroup, Inc.		3/20/17	A-	USD	4,785		95,748
MetLife, Inc.	1.00%	UBS AG		3/20/17	A-	USD	4,375		87,544
Total								$	733,116

¹  Using Standard & Poor’s (“S&P’s”) rating.

²  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

— Credit default swaps on traded indexes - sold protection outstanding as of September 30, 2012 were as follows:

Index	Receive Fixed Rate	Counter- party	Expiration Date	Average Credit Rating1	Notional Amount (000)2		Unrea- lized Apprec- iation
CMBX.NA Series 2 AM	0.50%	Deutsche Bank AG	3/15/49	A-	USD	3,790	$	184,274
CMBX.NA Series 3 AAA	0.08%	Morgan Stanley	12/13/49	A+	USD	4,645		249,778
CMBX.NA Series 4 AAA	0.35%	Morgan Stanley	2/17/51	A-	USD	4,645		252,175
Total							$	686,227

¹  Using S&P’s rating of the underlying securities.

²  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

— Total return swaps outstanding as of September 30, 2012 were as follows:

Reference Entity	Floating Rate	Counterparty	Expiration Date		Notional Amount (000)			Unrealized Appreciation (Depreciation)
Change in Return of the Consumer Price Index for All Urban Consumers	2.18%1	Bank of America Corp.		10/06/21		USD	16,520	$	(571,509	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR2	Barclays Plc		1/12/40		USD	10,583		(31,711	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR2	Barclays Plc		1/12/40		USD	5,291		(4,961	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR3	Goldman Sachs Group, Inc.		1/12/40		USD	10,583		(79,467	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR3	JPMorgan Chase & Co.		1/12/40		USD	12,946		(38,608	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR2	JPMorgan Chase & Co.		1/12/40		USD	565		(795	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR3	Barclays Plc		1/12/41		USD	10,418		8,421
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR3	Barclays Plc		1/12/41		USD	5,276		4,946
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR3	JPMorgan Chase & Co.		1/12/41		USD	601		939
Total								$	(712,745	)

¹  Fund pays the total return of the reference entity and receives the fixed rate. Net payment made at termination.

²  Fund pays the total return of the reference entity and receives the floating rate.

³  Fund pays the floating rate and receives the total return of the reference entity.

See Notes to Financial Statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 23 

Schedule of Investments (continued)   BlackRock Core Bond Portfolio

• Fair Value Measurements – Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 - unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

• Level 2 - other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 - unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the year. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of September 30, 2012:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Invest- ments: Asset-Backed Securi- ties		–	$	313,477,147	$	14,414,460	$	327,891,607
Corporate Bonds		–		861,510,370		18,120,000		879,630,370
Foreign Agency Obligat- ions		–		85,655,956		–		85,655,956
Foreign Govern- ment Obliga- tions.		–		121,139,196		–		121,139,196
Non-Agency Mortgage-Backed Securi- ties		–		368,980,200		28,345,288		397,325,488
Preferred Securi- ties	$	3,723,127		36,248,151		–		39,971,278
Project Loans		–		–		142,353		142,353

	Level 1		Level 2			Level 3		Total
Taxable Munici- pal Bonds		–	$	10,758,123			–	$	10,758,123
U.S. Govern- ment Sponso- red Agency Secu- rities.		–		3,527,091,531			–		3,527,091,531
U.S. Trea- sury Obliga- tions.		–		821,713,989			–		821,713,989
Liabilities:
Inves- tments in Securi- ties: TBA Sale Commit- ments		–		(2,350,840,078	)		–		(2,350,840,078	)
Total	$	3,723,127	$	3,795,734,585		$	61,022,101	$	3,860,479,813

	Level 1			Level 2			Level 3	Total
Derivative Financial Instruments1
Assets:
Credit contracts		–		$	1,419,343		–	$	1,419,343
Foreign currency exchange contracts	$	560			1,505,843		–		1,506,403
Interest rate contracts		2,969,242			5,754,744		–		8,723,986
Liabilities:
Foreign currency exchange contracts		(2,372	)		(4,127,630	)	–		(4,130,002	)
Interest rate contracts		(2,017,163	)		(30,696,905	)	–		(32,714,068	)
Other contracts		–			(571,509	)	–		(571,509	)
Total	$	950,267		$	(26,716,114	)	–	$	(25,765,847	)

¹  Derivative financial instruments are swaps, financial futures contracts, foreign currency exchange contracts and options. Swaps, financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/ depreciation on the instrument and options are shown at value.

Certain of the Fund’s assets and liabilities are held at carrying amount or face value, which approximates fair value for financial statement purposes. As of September 30, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3	Total
Assets:
Cash	$	4,947,289		–		–	$	4,947,289
Foreign currency at value		8,508,824		–		–		8,508,824
Cash pledged as collateral for financial futures contracts		5,280,000		–		–		5,280,000
Cash pledged as collateral for swap contracts		26,030,000		–		–		26,030,000
Liabilities:
Reverse repurchase agreements		–	$	(481,293,756	)	–		(481,293,756	)
Cash received as collateral for swap contracts		–		(300,000	)	–		(300,000	)
Total	$	44,766,113	$	(481,593,756	)	–	$	(436,827,643	)

There were no transfers between Level 1 and Level 2 during the year ended September 30, 2012.

Certain of the Fund’s investments and derivative financial instruments are categorized as Level 3 and were valued utilizing transaction prices or third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in the unobservable inputs could result in a significantly lower or higher value in such Level 3 investments and derivative financial instruments.

See Notes to Financial Statements.

 24   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Schedule of Investments (concluded)   BlackRock Core Bond Portfolio

A reconciliation of Level 3 investments and derivative financial instruments is presented when the Fund had a significant amount of Level 3 investments and derivative financial instruments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Asset-Backed Securities				Corporate Bonds				Non-Agency Mortgage-Backed Securities				Project Loans				Total
Assets:
Opening Balance, as of September 30, 2011		$	44,847,995			$	5,937			$	1,970,374			$	154,980			$	46,979,286
Transfers into Level 32			–				–				–				–				–
Transfers out of Level 32			(30,473,353	)			–				(1,970,374	)			–				(32,443,727	)
Accrued discounts/premiums			817				(1,101	)			(3	)			(323	)			(610	)
Net realized gain (loss)			141,094				–				–				74				141,168
Net change in unrealized appreciation/depreciation3			(630,419	)			(11,118	)			236,668				(1,911	)			(406,780	)
Purchases			9,269,040				18,126,282				28,108,623				–				55,503,945
Sales			(8,740,714	)			–				–				(10,467	)			(8,751,181	)
Closing Balance, as of September 30, 2012		$	14,414,460			$	18,120,000			$	28,345,288			$	142,353			$	61,022,101

²  Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period. As of September 30, 2011, the Fund used significant unobservable inputs in determining the value of certain investments. As of September 30, 2012, the Fund used observable inputs in determining the value on the same investments. As a result, investments with a beginning of period value of $32,443,727 transferred from Level 3 to Level 2 in the disclosure hierarchy.

³  Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of September 30, 2012 was $473,926.

The following table is a reconciliation of Level 3 derivative financial instruments for which significant unobservable inputs were used in determining fair value:

	Credit Contracts
	Assets			Liabilities	Total
Opening Balance, as of September 30, 2011	$	13,854		–	$	13,854
Transfers into Level 34		–		–		–
Transfers out of Level 34		–		–		–
Accrued discounts/premiums		–		–		–
Net realized gain (loss)		77,383		–		77,383
Net change in unrealized appreciation/depreciation5		(13,854	)	–		(13,854	)
Purchases.		–		–		–
Issues6		–		–		–
Sales		(77,383	)	–		(77,383	)
Settlements7				–		–
Closing Balance, as of September 30, 2012		–		–		–

⁴  Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period.

⁵  Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on swaps still held as of September 30, 2012 was $0.

⁶  Issues represent upfront cash received on certain derivative financial instruments.

⁷  Settlements represent periodic contractual cash flows and/or cash flows to terminate certain derivative financial instruments.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	25

Consolidated Schedule of Investments September 30, 2012   BlackRock High Yield Bond Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities – 0.0%	Par (000)		Value
Carlyle Global Market Strategies,
Series 2011-1A, Class IN, 1.94%,
8/10/21 (a)(b)		USD    2,995	$  2,523,287
Collateralized Debt Obligations
EXUMR, Series 2006-4X, Class E,
4.37%, 12/22/49(c)(d)(e)		1,843	672,857
Fraser Sullivan CLO Ltd., Series 2011-5A, Class D,
4.48%, 2/23/21(a)(e)		4,000	3,560,000
Total Collateralized Debt Obligations – 0.0%			4,232,857
Common Stocks	Shares
Auto Components – 1.2%
Dana Holding Corp.		1,324,500	16,291,350
Delphi Corp. (c)		3,041,973	94,301,163
			110,592,513
Biotechnology – 0.0%
Ironwood Pharmaceuticals, Inc. (c)		175,338	2,240,820
Capital Markets – 0.4%
American Capital Ltd. (c)		2,704,037	30,663,780
E*Trade Financial Corp. (c)		628,700	5,538,847
Freedom Pay, Inc. (c)		314,534	3
			36,202,630
Chemicals – 0.1%
CF Industries Holdings, Inc.		25,280	5,618,227
Huntsman Corp.		365,500	5,456,915
			11,075,142
Commercial Banks – 0.4%
CIT Group, Inc. (c)		852,424	33,576,981
Commercial Services & Supplies – 0.0%
ADA-ES, Inc. (c)		55,110	1,301,147
Communications Equipment – 0.1%
Loral Space & Communications, Inc.		90,995	6,469,745
Diversified Financial Services – 0.0%
Adelphia Recovery Trust, Series ACC-1 INT		1,108,793	111
Adelphia Recovery Trust, Series ACC-4 INT (c)		34,394,678	3,439
Adelphia Recovery Trust, Series Arahova INT		242,876	2,429
Adelphia Recovery Trust, Series Frontiervision INT		131,748	1,317
Bankruptcy Management Solutions, Inc. (c)		5,718	–
			7,296
Diversified Telecommunication Services – 0.1%
Level 3 Communications, Inc. (c)		574,180	13,188,915
Electrical Equipment – 0.0%
Medis Technologies Ltd. (c)		852,625	3,411
Hotels, Restaurants & Leisure – 0.0%
Travelport LLC (c)		1,125,357	146,296
Insurance – 0.6%
American International Group, Inc. (c)		1,688,208	55,356,340
Machinery – 0.0%
Reunion Industries, Inc. (c)		8,341	917
Media – 1.1%
Belo Corp., Class A		456,847	3,577,112
Charter Communications, Inc., Class A (c)		1,224,623	91,932,449
Clear Channel Outdoor Holdings, Inc., Class A		148,418	887,540

Common Stocks	Shares		Value
Media (concluded)
DISH Network Corp., Class A		159,910	$	4,894,845
HMH Holdings (Education Media)		181,221		4,349,300
				105,641,246
Metals & Mining – 0.0%
African Minerals Ltd. (c)		736,359		3,531,556
Oil, Gas & Consumable Fuels – 0.5%
African Petroleum Corp. Ltd. (c)		5,561,495		6,922,733
Laricina Energy Ltd. (c)		376,471		16,275,066
Osum Oil Sands Corp. (c)		1,600,000		20,343,811
				43,541,610
Paper & Forest Products – 0.1%
Ainsworth Lumber Co. Ltd. (a)(c)		1,062,824		2,562,194
Ainsworth Lumber Co. Ltd. (c)		928,901		2,239,340
Western Forest Products, Inc. (c)		1,996,629		2,254,357
				7,055,891
Semiconductors & Semiconductor Equipment – 0.2%
NXP Semiconductor NV (c)		166,600		4,166,666
Spansion, Inc., Class A (c)		948,612		11,307,455
SunPower Corp. (c)		1,381		6,228
				15,480,349
Software – 0.2%
kCAD Holdings I Ltd. (c)		2,234,063,298		18,746,025
Total Common Stocks – 5.0%			464,158,830
Corporate Bonds	Par (000)
Advertising – 0.2%
Affinion Group, Inc., 7.88%, 12/15/18		USD    14,820		12,115,350
Checkout Holding Corp., 17.62%,
11/15/15 (a)(b)		9,280		5,475,200
				17,590,550
Aerospace & Defense – 1.1%
Huntington Ingalls Industries, Inc.:
6.88%, 3/15/18		6,040		6,545,850
7.13%, 3/15/21		17,940		19,307,925
Kratos Defense & Security Solutions, Inc., 10.00%, 6/01/17		16,158		17,450,640
Meccanica Holdings USA, Inc., 6.25%, 7/15/19 (a)		13,910		13,110,411
Sequa Corp.:
11.75%, 12/01/15 (a)		11,190		11,749,500
13.50%, 12/01/15 (a)		35,413		37,537,752
				105,702,078
Airlines – 1.1%
Air Lease Corp., 4.50%, 1/15/16 (a)		19,150		19,150,000
American Airlines Pass-Through Trust, Series 2011-2, Class A, 8.63%, 10/15/21		34,034		36,628,770
Continental Airlines Pass-Through Trust, Series 1999-1 Class B, 6.80%, 8/02/18		577		603,310
Delta Air Lines Pass-Through Trust,
Series 2009-1, Class B, 9.75%, 12/17/16		1,483		1,638,628
National Air Cargo Group, Inc.:
12.38%, 8/16/15		8,393		8,512,596
12.38%, 8/16/15		8,295		8,413,731

See Notes to Financial Statements.

 26   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Airlines (concluded)
U.S. Airways Pass-Through Trust:
Series 2011-1, Class C, 10.88%, 10/22/14	USD	13,381	$	13,715,634
Series 2012-1, Class C, 9.13%, 10/01/15		14,000		14,210,000
				102,872,669
Auto Components – 0.2%
Delphi Corp., 6.13%, 5/15/21		6,360		7,043,700
Icahn Enterprises LP, 4.00%, 8/15/13 (a)(e)(f)		2,290		2,293,435
IDQ Holdings, Inc., 11.50%, 4/01/17 (a)		4,740		5,036,250
Titan International, Inc., 7.88%, 10/01/17		6,190		6,561,400
				20,934,785
Automobiles – 0.2%
Jaguar Land Rover Plc, 8.25%, 3/15/20	GBP	11,839		20,599,296
Beverages – 0.1%
Constellation Brands, Inc., 6.00%, 5/01/22	USD	7,365		8,377,687
Refresco Group BV, 7.38%, 5/15/18	EUR	2,882		3,564,632
				11,942,319
Building Products – 0.8%
Building Materials Corp. of America:
7.00%, 2/15/20 (a)	USD	5,240		5,685,400
6.75%, 5/01/21 (a)		12,650		13,851,750
Buzzi Unicem SpA, 6.25%, 9/28/18	EUR	4,590		5,913,124
Interline Brands, Inc., 7.50%, 11/15/18	USD	3,670		3,972,775
The Ryland Group, Inc., 6.63%, 5/01/20		4,025		4,367,125
Spie BondCo 3 SCA, 11.00%, 8/15/19	EUR	7,679		10,361,292
USG Corp., 9.75%, 1/15/18	USD	18,755		20,255,400
Xefin Lux SCA:
8.00%, 6/01/18	EUR	5,472		6,961,474
8.00%, 6/01/18 (a)		5,037		6,408,068
				77,776,408
Capital Markets – 0.6%
E*Trade Financial Corp.:
12.50%, 11/30/17	USD	33,508		38,073,465
1.83%, 8/31/19 (a)(b)(f)		1,420		1,252,263
Series A, 1.83%, 8/31/19 (b)(f)		328		289,255
Lehman Brothers Holdings, Inc.:
5.38%, 10/17/12 (c)(d)	EUR	4,550		1,609,673
4.75%, 1/16/14 (c)(d)		14,545		5,145,646
0.00%, 2/05/14 (c)(d)		22,800		7,925,416
				54,295,718
Chemicals – 3.7%
Ashland, Inc., 4.75%, 8/15/22 (a)	USD	8,650		8,844,625
Basell Finance Co. BV, 8.10%, 3/15/27 (a)		14,053		18,971,550
Celanese U.S. Holdings LLC:
6.63%, 10/15/18		7,760		8,497,200
5.88%, 6/15/21		24,150		27,048,000
Chemtura Corp., 7.88%, 9/01/18		3,080		3,349,500
Hexion U.S. Finance Corp., 6.63%, 4/15/20		5,324		5,417,170
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance ULC, 9.00%, 11/15/20		11,517		10,278,923
Huntsman International LLC:
8.63%, 3/15/20		4,340		4,904,200
8.63%, 3/15/21		11,915		13,642,675
INEOS Finance Plc:
8.38%, 2/15/19 (a)		12,015		12,645,787
7.50%, 5/01/20 (a)		10,805		10,967,075
INEOS Group Holdings SA, 8.50%, 2/15/16 (a)		4,120		3,893,400
Kinove German Bondco GmbH, 10.00%, 6/15/18	EUR	6,802		9,549,723
Kraton Polymers LLC/Kraton Polymers Capital Corp., 6.75%, 3/01/19	USD	1,590		1,637,700

Corporate Bonds	Par (000)		Value
Chemicals (concluded)
LyondellBasell Industries NV:
6.00%, 11/15/21	USD	7,890	$	8,994,600
5.75%, 4/15/24		66,435		75,569,813
Momentive Performance Materials, Inc.,
11.50%, 12/01/16		2,920		1,642,500
Nexeo Solutions LLC/Nexeo Solutions Finance Corp., 8.38%, 3/01/18		5,400		5,346,000
NOVA Chemicals Corp., 8.63%, 11/01/19		11,215		12,729,025
Nufarm Australia Ltd., 6.38%, 10/15/19 (a)		7,315		7,315,000
PolyOne Corp., 7.38%, 9/15/20		2,100		2,273,250
Rockwood Specialties Group, Inc., 4.63%, 10/15/20		24,505		24,872,575
TPC Group LLC, 8.25%, 10/01/17		3,485		3,763,800
Tronox Finance LLC, 6.38%, 8/15/20 (a)		58,605		59,191,050
				341,345,141
Commercial Banks – 0.7%
CIT Group, Inc.:
5.25%, 3/15/18		7,460		8,000,850
5.50%, 2/15/19 (a)		19,520		21,130,400
5.00%, 8/15/22		12,560		13,067,487
6.00%, 4/01/36		21,122		19,820,040
Glitnir Banki HF, 6.38%, 9/25/12 (a)(c)(d)		3,385		–
				62,018,777
Commercial Services & Supplies – 3.0%
ADS Waste Holdings, Inc., 8.25%, 10/01/20 (a)		5,555		5,666,100
ARAMARK Corp.:
3.94%, 2/01/15 (e)		1,340		1,333,300
8.50%, 2/01/15		3,319		3,397,859
ARAMARK Holdings Corp., 8.63%, 5/01/16 (a)(g)		8,300		8,507,583
Aviation Capital Group Corp., 6.75%, 4/06/21 (a)		7,360		7,502,784
Brickman Group Holdings, Inc., 9.13%, 11/01/18 (a)		301		308,525
Casella Waste Systems, Inc., 7.75%, 2/15/19		6,408		6,279,840
Ceridian Corp., 8.88%, 7/15/19 (a)		42,405		45,797,400
Clean Harbors, Inc., 5.25%, 8/01/20 (a)		13,000		13,390,000
Covanta Holding Corp., 6.38%, 10/01/22		11,605		12,616,689
Darling International, Inc., 8.50%, 12/15/18		1,225		1,394,969
GCL Holdings SCA:
9.38%, 4/15/18	EUR	3,288		4,288,622
9.38%, 4/15/18 (a)		5,145		6,710,755
HD Supply, Inc.:
8.13%, 4/15/19 (a)	USD	30,683		33,291,055
11.00%, 4/15/20 (a)		43,361		48,130,710
Hertz Holdings Netherlands BV:
8.50%, 7/31/15	EUR	2,404		3,320,954
8.50%, 7/31/15 (a)		12,100		16,715,284
Laureate Education, Inc., 9.25%, 9/01/19 (a)	USD	16,065		16,145,325
Leucadia National Corp., 8.13%, 9/15/15		9,390		10,587,225
Little Traverse Bay Bands of Odawa Indians, 9.00%, 8/31/20 (a)		1,504		1,383,680
Mobile Mini, Inc., 7.88%, 12/01/20		9,205		9,987,425
Verisure Holding AB:
8.75%, 9/01/18	EUR	8,429		11,210,793
Series B, 8.75%, 12/01/18		2,471		2,921,329
WaveDivision Escrow LLC/WaveDivision Escrow
Corp., 8.13%, 9/01/20 (a)	USD	8,930		9,175,575
				280,063,781
Communications Equipment – 0.1%
Hughes Satellite Systems Corp., 6.50%, 6/15/19		8,310		8,891,700
Computers & Peripherals – 0.1%
NCR Corp., 5.00%, 7/15/22 (a)		7,930		8,009,300
SanDisk Corp., 1.50%, 8/15/17 (f)		3,430		3,882,331
				11,891,631

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	27

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Construction & Engineering – 0.1%
Aguila 3 SA, 7.88%, 1/31/18 (a)		USD  7,377	$	7,745,850
Consumer Finance – 0.1%
Credit Acceptance Corp., 9.13%, 2/01/17		7,555		8,329,387
Containers & Packaging – 1.5%
Ardagh Packaging Finance Plc:
7.38%, 10/15/17		EUR  2,603		3,554,046
7.38%, 10/15/17 (a)		4,339		5,924,320
9.25%, 10/15/20 (a)		2,457		3,244,195
7.38%, 10/15/17 (a)		USD  2,935		3,147,787
9.13%, 10/15/20 (a)		985		1,044,100
Ardagh Packaging Finance Plc/Ardagh MP
Holdings USA, Inc.:
7.38%, 10/15/17		EUR  4,000		5,461,461
7.38%, 10/15/17 (a)		USD  3,931		4,211,084
9.13%, 10/15/20 (a)		15,192		16,027,560
9.13%, 10/15/20 (a)		4,839		5,117,243
Ball Corp., 6.75%, 9/15/20		3,280		3,608,000
Berry Plastics Corp.:
4.26%, 9/15/14 (e)		6,890		6,838,325
8.25%, 11/15/15		10,320		10,797,300
9.75%, 1/15/21		13,401		15,277,140
Beverage Packaging Holdings Luxembourg II SA, 8.00%, 12/15/16 EUR  15,108				19,196,118
Crown European Holdings SA:
7.13%, 8/15/18		4,344		6,098,615
7.13%, 8/15/18 (a)		3,772		5,295,574
Graphic Packaging International, Inc., 7.88%, 10/01/18		USD  3,730		4,130,975
Greif Luxembourg Finance SCA, 7.38%, 7/15/21 (a)		EUR  2,085		2,913,770
Greif, Inc., 7.75%, 8/01/19		USD  2,515		2,904,825
OI European Group BV, 6.88%, 3/31/17		EUR  2,030		2,686,910
Sealed Air Corp.:
8.13%, 9/15/19 (a)		USD  4,485		4,989,563
8.38%, 9/15/21 (a)		625		700,000
Tekni-Plex, Inc., 9.75%, 6/01/19 (a)		3,480		3,723,600
				136,892,511
Distributors – 0.0%
VWR Funding, Inc., 7.25%, 9/15/17 (a)		3,135		3,182,025
Diversified Consumer Services – 0.1%
ServiceMaster Co., 8.00%, 2/15/20		4,820		5,109,200
Diversified Financial Services – 2.2%
Ally Financial, Inc.:
8.00%, 11/01/31		34,767		40,538,322
8.00%, 11/01/31		7,892		9,088,940
CNG Holdings, Inc., 9.38%, 5/15/20 (a)		7,135		7,331,213
Doric Nimrod Air Finance Alpha Ltd.
Pass-Through Trust:
Series 2012-1, Class A, 5.13%, 11/30/24 (a)		25,915		26,951,600
Series 2012-1, Class B, 6.50% , 5/30/21 (a)		13,330		13,611,263
EC Finance Plc, 9.75%, 8/01/17		EUR  12,748		17,241,859
Ford Motor Credit Co. LLC:
12.00%, 5/15/15		USD  1,130		1,401,200
5.88%, 8/02/21		2,540		2,873,654
General Motors Financial Co., Inc., 6.75%, 6/01/18		5,540		6,165,300

Corporate Bonds	Par (000)		Value
Diversified Financial Services (concluded)
Icahn Enterprises LP/Icahn Enterprises Finance Corp., 8.00%, 1/15/18		USD  50,020	$	53,646,450
KKR Group Finance Co. LLC, 6.38%, 9/29/20 (a)		6,920		7,838,665
Nuveen Investments, Inc., 9.13%, 10/15/17 (a)		8,916		8,849,130
Serta Simmons Holdings LLC, 8.13%, 10/01/20 (a)		10,500		10,421,250
Springleaf Finance Corp., 6.90%, 12/15/17		3,020		2,567,000
				208,525,846
Diversified Telecommunication Services – 3.4%
Avaya, Inc., 9.75%, 11/01/15		8,000		7,100,000
Broadview Networks Holdings, Inc., 11.38%, 9/01/12 (c)(d)		12,360		8,837,400
Consolidated Communications Finance Co., 10.88%, 6/01/20 (a)		10,310		10,877,050
Intelsat Jackson Holdings SA:
11.25%, 6/15/16		9,026		9,420,887
7.25%, 10/15/20 (a)		14,075		15,130,625
6.63%, 12/15/22 (a)		5,645		5,616,775
Intelsat Luxembourg SA:
11.25%, 2/04/17		5,480		5,795,100
11.50%, 2/04/17 (g)		23,880		25,312,800
Level 3 Communications, Inc., 8.88%, 6/01/19 (a)		10,255		10,767,750
Level 3 Financing, Inc.:
8.13%, 7/01/19		46,913		49,845,063
7.00%, 6/01/20 (a)		11,799		11,916,990
8.63%, 7/15/20		19,210		20,746,800
OTE Plc:
5.00%, 8/05/13		EUR  5,810		6,794,933
7.25%, 2/12/15 (h)		2,515		2,488,563
ProtoStar I Ltd., 18.00%, 10/15/12 (a)(c)(d)(f)		USD  14,623		7,311
Sprint Capital Corp., 6.88%, 11/15/28		49,528		45,565,760
Sunrise Communications Holdings SA:
8.50%, 12/31/18		EUR    100		139,107
8.50%, 12/31/18 (a)		658		915,322
Sunrise Communications International SA:
7.00%, 12/31/17 (a)		2,040		2,801,074
7.00%, 12/31/17		1,318		1,809,714
Telefonica Emisiones SAU:
4.80%, 2/21/18		800		1,026,827
4.69%, 11/11/19		800		1,002,727
Telenet Finance III Luxembourg SCA, 6.63%, 2/15/21		380		502,358
Telenet Finance V Luxembourg SCA:
6.25%, 8/15/22		6,694		8,688,144
6.75%, 8/15/24		11,101		14,407,990
TW Telecom Holdings, Inc., 5.38%, 10/01/22 (a)		USD  9,640		9,832,800
UPC Holding BV, 9.88%, 4/15/18 (a)		4,580		5,038,000
UPCB Finance II Ltd.:
6.38%, 7/01/20		EUR  4,800		6,368,706
6.38%, 7/01/20 (a)		12,406		16,460,453
Windstream Corp., 7.88%, 11/01/17		USD  7,075		7,906,313
				313,123,342
Electric Utilities – 3.1%
The AES Corp.:
7.75%, 10/15/15		4,586		5,182,180
9.75%, 4/15/16		6,210		7,420,950
7.38%, 7/01/21		4,165		4,748,100
Energy Future Holdings Corp., 10.00%, 1/15/20		27,535		30,357,337

See Notes to Financial Statements.

 28   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Electric Utilities (concluded)
Energy Future Intermediate Holding Co. LLC/EFIH Finance, Inc.:
6.88%, 8/15/17 (a)	USD	9,680	$	10,018,800
10.00%, 12/01/20		158,208		177,984,000
11.75%, 3/01/22 (a)		13,584		14,433,000
FPL Energy National Wind Portfolio LLC, 6.13%, 3/25/19 (a)		250		196,817
The Tokyo Electric Power Co., Inc., 4.50%, 3/24/14	EUR	29,800		38,392,822
				288,734,006
Electrical Equipment – 0.2%
General Cable Corp., 5.75%, 10/01/22 (a)	USD	17,460		17,721,900
Electronic Equipment, Instruments & Components – 0.2%
Belden, Inc., 5.50%, 9/01/22 (a)		6,660		6,809,850
Jabil Circuit, Inc., 8.25%, 3/15/18		2,660		3,158,750
Techem GmbH:
6.13%, 10/01/19	EUR	6,318		8,342,215
6.13%, 10/01/19 (a)		891		1,176,466
				19,487,281
Energy Equipment & Services – 1.9%
CCS, Inc., 11.00%, 11/15/15 (a)	USD	14,665		15,141,613
Cie Generale de Geophysique - Veritas:
7.75%, 5/15/17		5,840		6,073,600
6.50%, 6/01/21		20,140		20,744,200
Forbes Energy Services Ltd., 9.00%, 6/15/19		6,840		6,634,800
Gulfmark Offshore, Inc., 6.38%, 3/15/22 (a)		3,815		3,958,063
Hornbeck Offshore Services, Inc., 5.88%, 4/01/20		7,680		7,814,400
Key Energy Services, Inc., 6.75%, 3/01/21		10,680		10,840,200
Oil States International, Inc., 6.50%, 6/01/19		13,205		14,030,313
Petroleum Geo-Services ASA, 7.38%, 12/15/18 (a)		5,865		6,260,887
Seadrill Ltd., 5.63%, 9/15/17 (a)		65,433		65,923,747
SESI LLC, 7.13%, 12/15/21		15,590		17,226,950
				174,648,773
Food & Staples Retailing – 0.1%
Rite Aid Corp.:
9.25%, 3/15/20		7,035		7,210,875
6.88%, 12/15/28 (a)		7,860		6,405,900
				13,616,775
Food Products – 0.4%
Bakkavor Finance 2 Plc, 8.25%, 2/15/18	GBP	9,150		13,297,919
Del Monte Corp., 7.63%, 2/15/19	USD	1,637		1,684,064
DGS International Finance Co., 10.00%, 6/01/49 (a)(c)(d)		20,000		2
JBS USA LLC/JBS USA Finance, Inc., 11.63%, 5/01/14		1,890		2,121,525
Post Holdings, Inc., 7.38%, 2/15/22 (a)		9,105		9,674,063
Smithfield Foods, Inc., 6.63%, 8/15/22		8,740		9,067,750
				35,845,323
Health Care Equipment & Supplies – 2.1%
Alere, Inc., 7.88%, 2/01/16		7,315		7,644,175
Biomet, Inc.:
10.00%, 10/15/17		6,347		6,696,085
6.50%, 8/01/20 (a)		39,693		41,131,871
6.50%, 10/01/20 (a)		50,071		49,069,580
DJO Finance LLC/DJO Finance Corp.:
10.88%, 11/15/14		4,443		4,598,505
8.75%, 3/15/18 (a)		13,755		14,631,881
7.75%, 4/15/18		4,190		3,823,375
9.88%, 4/15/18 (a)		8,790		8,680,125
Hanger, Inc., 7.13%, 11/15/18		3,000		3,135,000

Corporate Bonds	Par (000)		Value
Health Care Equipment & Supplies (concluded)
Hologic, Inc., 6.25%, 8/01/20 (a)	USD	25,915	$	27,469,900
Kinetic Concepts, Inc./KCI USA, Inc., 12.50%, 11/01/19 (a)		10,090		9,484,600
Ontex IV SA:
7.50%, 4/15/18	EUR	2,131		2,779,518
7.50%, 4/15/18 (a)		2,870		3,743,414
9.00%, 4/15/19		6,246		7,725,430
PSS World Medical, Inc., 6.38%, 3/01/22	USD	4,458		4,742,197
				195,355,656
Health Care Providers & Services – 4.8%
Aviv Healthcare Properties LP/Aviv Healthcare Capital Corp., 7.75%, 2/15/19		9,615		10,191,900
CHS/Community Health Systems, Inc.:
5.13%, 8/15/18		20,300		21,061,250
7.13%, 7/15/20		14,688		15,670,260
DaVita, Inc., 5.75%, 8/15/22		19,644		20,429,760
Fresenius Medical Care US Finance II, Inc., 5.88%, 1/31/22 (a)		5,519		5,905,330
Fresenius Medical Care US Finance, Inc.:
6.88%, 7/15/17		695		799,250
6.50%, 9/15/18 (a)		5,818		6,559,795
5.75%, 2/15/21 (a)		180		192,600
Fresenius US Finance II, Inc., 9.00%, 7/15/15 (a)		260		299,650
HCA, Inc.:
6.75%, 7/15/13		500		517,500
8.50%, 4/15/19		2,235		2,519,963
6.50%, 2/15/20		58,405		64,975,563
7.88%, 2/15/20		20,500		23,036,875
7.25%, 9/15/20		24,375		27,300,000
5.88%, 3/15/22		32,893		35,647,789
IASIS Healthcare LLC/IASIS Capital Corp., 8.38%, 5/15/19		43,455		41,499,525
INC Research LLC, 11.50%, 7/15/19 (a)		10,315		10,366,575
Omnicare, Inc., 7.75%, 6/01/20		26,839		29,522,900
Priory Group No. 3 Plc:
7.00%, 2/15/18	GBP	2,585		4,341,242
7.00%, 2/15/18 (a)		6,799		11,418,222
Symbion, Inc., 8.00%, 6/15/16	USD	6,870		7,041,750
Teleflex, Inc., 6.88%, 6/01/19		6,560		7,052,000
Tenet Healthcare Corp.:
10.00%, 5/01/18		13,290		15,349,950
6.25%, 11/01/18		16,200		17,860,500
8.88%, 7/01/19		38,807		43,851,910
United Surgical Partners International, Inc., 9.00%, 4/01/20 (a)		7,940		8,614,900
Vanguard Health Holding Co. II LLC/Vanguard Holding Co. II, Inc., 7.75%, 2/01/19 (a)		8,745		9,302,494
				441,329,453
Hotels, Restaurants & Leisure – 3.4%
Affinity Gaming LLC/Affinity Gaming Finance Corp., 9.00%, 5/15/18 (a)		8,665		8,989,937
Caesars Entertainment Operating Co., Inc.:
10.00%, 12/15/15		8,540		7,451,150
11.25%, 6/01/17		36,525		39,264,375
10.00%, 12/15/18		58,185		38,111,175
8.50%, 2/15/20 (a)		10,540		10,540,000
Caesars Operating Escrow
LLC/Caesars Escrow Corp., 9.00%, 2/15/20 (a)		44,137		44,468,027
Carlson Wagonlit BV, 6.88%, 6/15/19 (a)		3,905		4,100,250
Choice Hotels International, Inc., 5.75%, 7/01/22		4,000		4,360,000
Cirsa Funding Luxembourg SA, 8.75%, 5/15/18	EUR	6,671		8,090,360
Diamond Resorts Corp., 12.00%, 8/15/18	USD	19,535		21,048,963

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	29

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Hotels, Restaurants & Leisure (concluded)
Eldorado Resorts LLC/Eldorado Capital Corp., 8.63%, 6/15/19 (a)		USD      2,635	$	2,595,475
Enterprise Inns Plc, 6.50%, 12/06/18		GBP      4,347		6,159,662
Fontainebleau Las Vegas Holdings LLC, 10.25%, 6/15/15 (a)(c)(d)		USD      2,470		1,544
Gala Group Finance Plc, 8.88%, 9/01/18		GBP    12,105		18,667,590
MGM Resorts International:
4.25%, 4/15/15 (f)		USD    27,760		28,853,050
11.13%, 11/15/17		17,507		19,367,119
8.63%, 2/01/19 (a)		3,979		4,337,110
MTR Gaming Group, Inc., 11.50%, 8/01/19		11,794		12,412,843
NAI Entertainment Holdings LLC, 8.25%, 12/15/17 (a)		11,684		13,027,660
Scientific Games Corp., 8.13%, 9/15/18		1,800		1,966,500
Scientific Games International, Inc., 9.25%, 6/15/19		185		205,350
Travelport LLC:
5.04%, 9/01/14 (e)		3,255		2,408,700
9.88%, 9/01/14		720		576,000
11.88%, 9/01/16		1,100		415,250
6.36%, 12/01/16 (a)(g)		6,130		4,659,126
Travelport LLC/Travelport, Inc., 9.00%, 3/01/16		1,720		1,229,800
Waterford Gaming LLC, 8.63%, 9/15/14 (a)		4,444		1,422,111
Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., 5.38%, 3/15/22 (a)		12,062		12,242,930
				316,972,057
Household Durables – 2.2%
Beazer Homes USA, Inc.:
6.63%, 4/15/18 (a)		12,635		13,503,656
9.13%, 5/15/19		1,440		1,447,200
DR Horton, Inc., 4.38%, 9/15/22		11,490		11,418,187
K Hovnanian Enterprises, Inc.:
6.00%, 12/01/17 (f)		5,570		5,370,037
7.25%, 10/15/20 (a)		30,390		31,149,750
PH Holdings LLC, 9.75%, 12/31/17		11,150		10,927,000
Pulte Group, Inc., 6.38%, 5/15/33		6,170		5,738,100
Shea Homes LP/Shea Homes Funding Corp., 8.63%, 5/15/19		35,788		39,903,620
Standard Pacific Corp.:
10.75%, 9/15/16		27,912		34,122,420
8.38%, 1/15/21		43,780		49,963,925
Toll Brothers Finance Corp., 5.88%, 2/15/22		460		510,976
				204,054,871
Household Products – 1.7%
Libbey Glass, Inc., 6.88%, 5/15/20 (a)		9,351		10,052,325
Mead Products LLC/ACCO Brands Corp., 6.75%, 4/30/20 (a)		3,761		3,920,843
Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA:
7.75%, 10/15/16		EUR      2,464		3,285,101
7.13%, 4/15/19		USD    11,115		11,726,325
9.00%, 4/15/19		7,220		7,364,400
7.88%, 8/15/19		11,620		12,549,600
9.88%, 8/15/19		34,790		37,007,863
5.75%, 10/15/20 (a)		63,530		63,530,000
Spectrum Brands, Inc.:
9.50%, 6/15/18		2,535		2,858,213
6.75%, 3/15/20 (a)		1,735		1,791,387
				154,086,057
Independent Power Producers & Energy Traders – 1.7%
Calpine Corp.:
7.25%, 10/15/17 (a)		10,935		11,673,113

Corporate Bonds	Par (000)		Value
Independent Power Producers & Energy Traders (concluded)
7.50%, 2/15/21 (a)		USD      12,025	$	12,987,000
7.88%, 1/15/23 (a)		18,130		20,033,650
DPL, Inc., 7.25%, 10/15/21 (a)		26,420		30,118,800
GenOn REMA LLC:
Series B, 9.24%, 7/02/17		6,839		7,248,961
9.68%, 7/02/26		9,495		10,254,600
Ipalco Enterprises, Inc., 7.25%, 4/01/16 (a)		2,585		2,875,813
Mirant Mid Atlantic Pass-Through Trust B, 9.13%, 6/30/17		8,754		9,586,077
NRG Energy, Inc.:
7.63%, 1/15/18		8,440		9,136,300
7.63%, 5/15/19		11,935		12,651,100
7.88%, 5/15/21		5,860		6,372,750
6.63%, 3/15/23 (a)		27,135		27,745,537
				160,683,701
Insurance – 0.2%
Americo Life, Inc., 7.88%, 5/01/13 (a)		6,000		6,197,088
CNO Financial Group, Inc., 6.38%, 10/01/20 (a)		5,785		5,900,700
Genworth Financial, Inc., 7.63%, 9/24/21		7,455		7,608,826
International Lease Finance Corp., 6.50%, 9/01/14 (a)		180		193,500
				19,900,114
Internet Software & Services – 0.9%
ITC Deltacom, Inc., 10.50%, 4/01/16		4,780		5,114,600
Zayo Group LLC/Zayo Capital, Inc.:
8.13%, 1/01/20		31,340		34,238,950
10.13%, 7/01/20		41,530		45,890,650
				85,244,200
Life Sciences Tools & Services – 0.1%
Pharmaceutical Product Development, Inc., 9.50%, 12/01/19 (a)		8,705		9,771,363
Machinery – 0.1%
Boart Longyear Management Pty Ltd., 7.00%, 4/01/21 (a)		3,390		3,478,986
SPX Corp., 6.88%, 9/01/17		3,634		4,060,995
				7,539,981
Media – 5.5%
AMC Networks, Inc., 7.75%, 7/15/21		7,319		8,270,470
Cablevision Systems Corp., 5.88%, 9/15/22		14,565		14,492,175
CCO Holdings LLC/CCO Holdings Capital Corp.:
6.50%, 4/30/21		2,446		2,617,220
5.25%, 9/30/22		32,750		32,913,750
Cengage Learning Acquisitions, Inc., 11.50%, 4/15/20 (a)		29,015		31,046,050
CET 21 Spol SRO:
9.00%, 11/01/17		EUR      3,470		4,815,852
9.00%, 11/01/17 (a)		2,330		3,233,699
Cinemark USA, Inc., 8.63%, 6/15/19		USD      4,435		4,922,850
Clear Channel Communications, Inc., 9.00%, 3/01/21		9,186		8,175,540
Clear Channel Worldwide Holdings, Inc.:
9.25%, 12/15/17		23,929		25,663,853
Series B, 9.25%, 12/15/17		91,014		98,067,585
7.63%, 3/15/20		26,057		25,405,575
Series A, 7.63%, 3/15/20		5,000		4,800,000
DISH DBS Corp., 5.88%, 7/15/22 (a)		33,905		34,752,625
Harron Communications LP/Harron Finance Corp., 9.13%, 4/01/20 (a)		6,880		7,430,400
The Interpublic Group of Cos., Inc., 10.00%, 7/15/17		7,095		7,884,319

See Notes to Financial Statements.

 30   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Media (concluded)
Kabel Deutschland Vertrieb und Service GmbH & Co. KG, 6.50%, 6/29/18		EUR         6,780	$	9,272,250
Live Nation Entertainment, Inc., 8.13%, 5/15/18 (a)		USD      10,965		11,787,375
MPL 2 Acquisition Canco, Inc., 9.88%, 8/15/18 (a)		5,410		4,841,950
Nara Cable Funding Ltd., 8.88%, 12/01/18		EUR        6,380		7,501,735
Nielsen Finance LLC/Nielsen Finance Co.:
11.63%, 2/01/14		USD        1,258		1,418,395
11.50%, 5/01/16		62		69,285
7.75%, 10/15/18		23,487		26,481,593
Odeon & UCI Finco Plc:
9.00%, 8/01/18		GBP          662		1,079,691
9.00%, 8/01/18 (a)		4,179		6,815,753
ProQuest LLC/ProQuest Notes Co., 9.00%, 10/15/18 (a)		USD      7,925		7,370,250
Sinclair Television Group, Inc., 9.25%, 11/01/17 (a)		3,100		3,433,250
Unitymedia GmbH:
9.63%, 12/01/19		EUR      2,244		3,179,226
9.63%, 12/01/19 (a)		7,619		10,794,350
9.50%, 3/15/21		7,525		10,830,399
Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH:
8.13%, 12/01/17		5,371		7,402,397
8.13%, 12/01/17 (a)		1,244		1,714,501
8.13%, 12/01/17 (a)		USD      8,856		9,520,200
7.50%, 3/15/19		EUR    19,280		27,005,577
Univision Communications, Inc., 6.75%, 9/15/22 (a)		USD      4,190		4,190,000
WMG Acquisition Corp.:
9.50%, 6/15/16		2,430		2,645,663
11.50%, 10/01/18		11,629		13,082,625
Wolverine Healthcare Analytics, Inc., 10.63%, 6/01/20 (a)		12,685		13,572,950
Ziggo Bond Co. BV, 8.00%, 5/15/18 (a)		EUR      5,342		7,534,047
Ziggo Finance BV, 6.13%, 11/15/17 (a)		959		1,315,547
				507,350,972
Metals & Mining – 2.5%
Alpha Natural Resources, Inc., 6.00%,
6/01/19		USD      8,095		6,759,325
ArcelorMittal:
9.25%, 2/15/15		9,675		10,642,500
4.00%, 8/05/15		10,525		10,458,482
4.00%, 3/01/16		3,950		3,900,309
Eco-Bat Finance Plc, 7.75%, 2/15/17		EUR      9,305		12,076,962
FMG Resources August 2006 Pty Ltd.:
7.00%, 11/01/15 (a)		USD      5,665		5,636,675
6.88%, 2/01/18 (a)		11,350		10,555,500
6.88%, 4/01/22 (a)		6,215		5,686,725
Global Brass and Copper, Inc., 9.50%, 6/01/19 (a)		8,225		8,924,125
Goldcorp, Inc., 2.00%, 8/01/14 (f)		10,875		13,111,172
Kaiser Aluminum Corp., 8.25%, 6/01/20		6,075		6,561,000
New Gold, Inc., 7.00%, 4/15/20 (a)		4,155		4,404,300
Newmont Mining Corp., Series A, 1.25%, 7/15/14 (f)		19,350		26,062,031
Novelis, Inc.:
8.38%, 12/15/17		16,828		18,384,590
8.75%, 12/15/20		58,495		64,783,213
RathGibson, Inc., 11.25%, 2/15/14 (c)(d)		7,631		1
Schmolz + Bickenbach Luxembourg SA, 9.88%, 5/15/19		EUR      7,357		7,917,818
Steel Dynamics, Inc., 6.38%, 8/15/22 (a)		USD      7,250		7,485,625
Taseko Mines Ltd., 7.75%, 4/15/19		9,005		8,622,287

Corporate Bonds	Par (000)		Value
Metals & Mining (concluded)
Vedanta Resources Plc, 8.25%, 6/07/21 (a)		USD      2,940	$	2,851,800
				234,824,440
Multiline Retail – 0.1%
Dollar General Corp., 4.13%, 7/15/17		8,107		8,471,815
Oil, Gas & Consumable Fuels – 13.4%
Access Midstream Partners LP/ACMP Finance Corp., 6.13%, 7/15/22		11,810		12,489,075
Aurora USA Oil & Gas, Inc., 9.88%, 2/15/17 (a)		16,510		17,583,150
Berry Petroleum Co., 6.38%, 9/15/22		10,060		10,613,300
BreitBurn Energy Partners LP/BreitBurn Finance
Corp., 7.88%, 4/15/22 (a)		3,195		3,306,825
Calfrac Holdings LP, 7.50%, 12/01/20 (a)		14,765		14,617,350
Carrizo Oil & Gas, Inc., 7.50%, 9/15/20		8,715		8,889,300
Chaparral Energy, Inc., 7.63%, 11/15/22 (a)		7,205		7,565,250
Chesapeake Energy Corp.:
9.50%, 2/15/15		3,355		3,694,694
7.25%, 12/15/18		1,005		1,080,375
6.63%, 8/15/20		11,265		11,617,031
6.88%, 11/15/20		4,855		5,122,025
6.13%, 2/15/21		11,110		11,193,325
Chesapeake Midstream Partners LP /CHKM Finance Corp.,
5.88%, 4/15/21		23,093		24,189,917
Coffeyville Resources LLC/Coffeyville Finance, Inc., 9.00%, 4/01/15 (a)		6,075		6,485,063
Concho Resources, Inc.:
7.00%, 1/15/21		1,566		1,753,920
6.50%, 1/15/22		8,314		9,166,185
5.50%, 10/01/22		11,565		12,056,513
CONSOL Energy, Inc., 8.25%, 4/01/20		19,185		20,096,287
Continental Resources, Inc.:
8.25%, 10/01/19		4,305		4,843,125
7.13%, 4/01/21		3,965		4,460,625
5.00%, 9/15/22		6,600		6,880,500
Copano Energy LLC/Copano Energy Finance Corp.,
7.13%, 4/01/21		7,925		8,281,625
Crosstex Energy LP/Crosstex Energy Finance Corp.:
8.88%, 2/15/18		1,400		1,498,000
7.13%, 6/01/22 (a)		4,035		4,014,825
Crown Oil Partners IV LP, 11.00%, 11/22/14		9,827		9,827,189
Denbury Resources, Inc., 8.25%, 2/15/20		35,940		40,522,350
Drill Rigs Holdings, Inc., 6.50%, 10/01/17 (a)		9,960		9,897,750
El Paso LLC, 7.75%, 1/15/32		1,725		2,008,968
Encore Acquisition Co., 9.50%, 5/01/16		275		298,375
Energy XXI Gulf Coast, Inc.:
9.25%, 12/15/17		16,550		18,577,375
7.75%, 6/15/19		12,660		13,419,600
EP Energy LLC/EP Energy Finance, Inc., 6.88%, 5/01/19 (a)		23,515		25,161,050
EP Energy LLC/Everest Acquisition Finance, Inc.,
7.75%, 9/01/22 (a)		6,415		6,543,300
FTS International Services LLC/FTS International
Bonds, Inc., 8.13%, 11/15/18 (a)		38,447		40,946,055
Hilcorp Energy I LP/Hilcorp Finance Co.:
8.00%, 2/15/20 (a)		3,875		4,310,937
7.63%, 4/15/21 (a)		19,455		21,400,500
Holly Energy Partners LP/Holly Energy Finance Corp.,
6.50%, 3/01/20 (a)		3,830		4,021,500
Kodiak Oil & Gas Corp.,
8.13%, 12/01/19 (a)		8,705		9,227,300
Laredo Petroleum, Inc.:
9.50%, 2/15/19		21,825		24,716,813
7.38%, 5/01/22		9,650		10,422,000

See Notes to Financial Statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 31 

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Oil, Gas & Consumable Fuels (continued)
Linn Energy LLC/Linn Energy Finance Corp.:
6.50%, 5/15/19 (a)	USD	1,510	$	1,510,000
6.25%, 11/01/19 (a)		62,015		61,704,925
8.63%, 4/15/20		5,480		6,000,600
7.75%, 2/01/21		12,260		12,964,950
MarkWest Energy Partners LP/MarkWest Energy Finance Corp.:
6.25%, 6/15/22		12,840		13,803,000
5.50%, 2/15/23		6,500		6,808,750
Massey Energy Co., 3.25%, 8/01/15 (f)		19,946		18,400,185
MEG Energy Corp.:
6.50%, 3/15/21 (a)		43,850		46,919,500
6.38%, 1/30/23 (a)		13,075		13,957,563
New World Resources NV, 7.88%, 5/01/18	EUR	7,901		10,000,880
Newfield Exploration Co.:
6.88%, 2/01/20	USD	6,350		6,969,125
5.75%, 1/30/22		2,985		3,335,737
5.63%, 7/01/24		31,550		35,020,500
Northern Oil and Gas, Inc., 8.00%, 6/01/20		8,180		8,425,400
Oasis Petroleum, Inc.:
7.25%, 2/01/19		6,870		7,368,075
6.50%, 11/01/21		6,115		6,451,325
6.88%, 1/15/23		7,215		7,665,937
Offshore Group Investment Ltd., 11.50%, 8/01/15		48,170		53,227,850
OGX Austria GmbH:
8.50%, 6/01/18 (a)		56,919		51,227,100
8.38%, 4/01/22 (a)		19,745		17,178,150
PBF Holding Co. LLC/PBF Finance Corp., 8.25%,
2/15/20 (a)		4,190		4,399,500
PDC Energy, Inc., 7.75%, 10/15/22 (a)		6,500		6,500,000
Peabody Energy Corp.:
6.00%, 11/15/18 (a)		3,295		3,295,000
6.25%, 11/15/21 (a)		41,920		41,710,400
7.88%, 11/01/26		14,150		15,069,750
PetroBakken Energy Ltd., 8.63%, 2/01/20 (a)		34,930		36,327,200
Pioneer Natural Resources Co.:
6.65%, 3/15/17		2,365		2,807,451
6.88%, 5/01/18		10,755		13,057,871
7.50%, 1/15/20		4,425		5,509,784
7.20%, 1/15/28		12,440		15,559,230
Plains Exploration & Production Co., 7.63%, 4/01/20		1,235		1,318,363
Precision Drilling Corp.:
6.63%, 11/15/20		2,008		2,138,520
6.50%, 12/15/21		9,020		9,628,850
QEP Resources, Inc.:
6.88%, 3/01/21		4,470		5,051,100
5.38%, 10/01/22		9,263		9,587,205
5.25%, 5/01/23		5,095		5,209,637
Range Resources Corp.:
8.00%, 5/15/19		5,555		6,166,050
5.75%, 6/01/21		24,055		25,859,125
5.00%, 8/15/22		11,650		12,290,750
Regency Energy Partners LP/Regency Energy Finance Corp., 5.50%, 4/15/23		12,150		12,286,687
Sabine Pass LNG LP, 7.50%, 11/30/16		25,580		27,626,400
SandRidge Energy, Inc.:
8.75%, 1/15/20		3,605		3,902,413
7.50%, 3/15/21 (a)		20,820		21,444,600
7.50%, 3/15/21		5,690		5,860,700
8.13%, 10/15/22 (a)		6,010		6,400,650
7.50%, 2/15/23 (a)		33,680		34,690,400
SM Energy Co.:
6.63%, 2/15/19		5,260		5,549,300

Corporate Bonds	Par (000)		Value
Oil, Gas & Consumable Fuels (concluded)
6.50%, 11/15/21	USD	15,005	$	15,905,300
6.50%, 1/01/23 (a)		3,060		3,213,000
Targa Resources Partners LP/Targa Resources Partners Finance Corp.:
6.88%, 2/01/21		3,410		3,699,850
6.38%, 8/01/22 (a)		6,040		6,402,400
Tesoro Corp., 5.38%, 10/01/22		11,370		11,711,100
Tesoro Logistics LP/Tesoro Logistics Finance Corp., 5.88%, 10/01/20 (a)		6,164		6,318,100
Trafigura Beheer BV, 6.38%, 4/08/15	EUR	2,175		2,850,883
Vanguard Natural Resources LLC/VNR Finance Corp., 7.88%, 4/01/20	USD	5,750		5,793,125
Whiting Petroleum Corp., 6.50%, 10/01/18		4,425		4,745,813
				1,241,625,406
Paper & Forest Products – 0.8%
Ainsworth Lumber Co. Ltd., 11.00%, 7/29/15 (a)(g)		9,476		9,096,531
APP Finance II Mauritius Ltd., 12.00%, 12/29/49 (c)(d)		21,000		2,100
Boise Cascade LLC, 7.13%, 10/15/14		2,769		2,769,000
Boise Paper Holdings LLC/Boise Co-Issuer Co.,
8.00%, 4/01/20		5,850		6,420,375
Boise Paper Holdings LLC/Boise Finance Co.,
9.00%, 11/01/17		1,410		1,551,000
Cascades, Inc., 7.75%, 12/15/17		6,080		6,368,800
Clearwater Paper Corp.:
10.63%, 6/15/16		4,730		5,214,825
7.13%, 11/01/18		3,935		4,279,313
Longview Fibre Paper & Packaging, Inc., 8.00%,
6/01/16 (a)		6,515		6,791,887
NewPage Corp., 11.38%, 12/31/14 (c)(d)		30,570		19,259,100
PH Glatfelter Co., 5.38%, 10/15/20 (a)		3,500		3,535,000
Sappi Papier Holding GmbH:
7.75%, 7/15/17 (a)		2,365		2,530,550
8.38%, 6/15/19 (a)		4,855		5,194,850
6.63%, 4/15/21 (a)		935		897,600
				73,910,931
Pharmaceuticals – 0.8%
Capsugel FinanceCo SCA:
9.88%, 8/01/19	EUR	1,435		2,065,332
9.88%, 8/01/19 (a)		4,600		6,620,576
Catalent Pharma Solutions, Inc., 7.88%, 10/15/18 (a)	USD	6,644		6,743,660
ConvaTec Healthcare E SA, 7.38%,
12/15/17 (a)	EUR	4,903		6,773,144
inVentiv Health, Inc.:
10.00%, 8/15/18 (a)	USD	880		774,400
10.25%, 8/15/18 (a)		2,530		2,226,400
Sky Growth Acquisition Corp., 7.38%, 10/15/20 (a)		11,835		11,894,175
Valeant Pharmaceuticals International:
6.50%, 7/15/16 (a)		13,314		13,963,057
6.38%, 10/15/20 (a)		16,420		16,748,400
6.75%, 8/15/21 (a)		3,710		3,849,125
7.25%, 7/15/22 (a)		4,405		4,641,769
				76,300,038
Professional Services – 0.2%
FTI Consulting, Inc.:
7.75%, 10/01/16		5,215		5,358,413
6.75%, 10/01/20		9,895		10,562,913
				15,921,326
Real Estate Investment Trusts (REITs) – 0.3%
Felcor Lodging LP, 6.75%, 6/01/19		18,630		19,980,675
The Rouse Co. LLC, 6.75%, 11/09/15		2,372		2,502,460
Rouse Co. LP/TRC Co-Issuer, Inc., 6.75%, 5/01/13 (a)		4,992		5,091,840
				27,574,975

See Notes to Financial Statements.
32	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds		Par (000)		Value
Real Estate Management & Development – 1.5%
Crescent Resources LLC/Crescent Ventures, Inc.,
10.25%, 8/15/17 (a)	USD		21,220	$	22,068,800
IVG Immobilien AG, 8.00%, 5/29/49 (e)	EUR		7,100		4,470,688
Realogy Corp.:
11.50%, 4/15/17	USD		9,730		10,435,425
12.00%, 4/15/17			1,940		2,046,700
7.88%, 2/15/19 (a)			31,070		32,623,500
7.63%, 1/15/20 (a)			44,960		49,568,400
9.00%, 1/15/20 (a)			7,745		8,538,863
Tropicana Entertainment LLC/Tropicana Finance
Corp., 9.63%, 12/15/14 (c)(d)			1,115		–
The Unique Pub Finance Co. Plc, Series A4,
5.66%, 6/30/27	GBP		5,250		7,290,845
					137,043,221
Road & Rail – 0.3%
Florida East Coast Railway Corp., 8.13%,
2/01/17	USD		5,030		5,294,075
The Hertz Corp.:
7.50%, 10/15/18			5,615		6,064,200
6.75%, 4/15/19 (a)			7,060		7,448,300
7.38%, 1/15/21			11,745		12,625,875
					31,432,450
Semiconductors & Semiconductor Equipment – 0.2%
Micron Technology, Inc., 2.38%, 5/01/32 (a)(f)			9,070		8,480,450
Spansion LLC, 7.88%, 11/15/17			8,389		8,263,165
					16,743,615
Software – 3.8%
Epicor Software Corp., 8.63%, 5/01/19			10,830		11,425,650
Equinix, Inc., 7.00%, 7/15/21			6,020		6,742,400
First Data Corp.:
7.38%, 6/15/19 (a)			41,475		42,771,094
8.88%, 8/15/20 (a)			1,625		1,771,250
6.75%, 11/01/20 (a)			54,015		53,677,406
8.25%, 1/15/21 (a)			35,014		34,926,465
12.63%, 1/15/21			30,326		31,425,317
IMS Health, Inc., 12.50%, 3/01/18 (a)			35,125		41,798,750
Infor US, Inc.:
10.00%, 4/01/19 (a)	EUR		2,080		2,873,371
9.38%, 4/01/19 (a)	USD		50,480		56,032,800
Interactive Data Corp., 10.25%, 8/01/18			21,800		24,416,000
Nuance Communications, Inc., 5.38%, 8/15/20 (a)			13,770		14,217,525
Sophia LP/Sophia Finance, Inc., 9.75%, 1/15/19 (a)			14,840		15,953,000
SunGard Data Systems, Inc.:
7.38%, 11/15/18			8,810		9,448,725
7.63%, 11/15/20			8,790		9,537,150
					357,016,903
Specialty Retail – 1.9%
Asbury Automotive Group, Inc., 8.38%, 11/15/20			6,955		7,667,887
Claire’s Stores, Inc., 9.00%, 3/15/19 (a)			25,115		26,056,813
House of Fraser Funding Plc:
8.88%, 8/15/18	GBP		8,814		13,414,500
8.88%, 8/15/18 (a)			5,639		8,582,297
Limited Brands, Inc., 5.63%, 2/15/22	USD		8,775		9,455,063
Michaels Stores, Inc., 7.75%, 11/01/18 (a)			6,036		6,458,520

Corporate Bonds		Par (000)		Value
Specialty Retail (concluded)
Party City Holdings, Inc., 8.88%, 8/01/20 (a)	USD		16,988	$	18,092,220
Penske Automotive Group, Inc., 5.75%, 10/01/22 (a)			13,665		14,006,625
Punch Taverns Finance Plc, 7.27%, 4/15/22	GBP		820		1,251,312
QVC, Inc.:
7.13%, 4/15/17 (a)	USD		4,525		4,774,816
7.50%, 10/01/19 (a)			12,930		14,307,123
7.38%, 10/15/20 (a)			7,931		8,817,273
5.13%, 7/02/22 (a)			7,357		7,791,173
RSC Equipment Rental, Inc./RSC Holdings III LLC, 8.25%, 2/01/21			19,564		21,471,490
Sally Holdings LLC/Sally Capital, Inc.:
6.88%, 11/15/19			4,755		5,289,937
5.75%, 6/01/22			5,964		6,351,660
Sonic Automotive, Inc., 9.00%, 3/15/18			5,100		5,571,750
					179,360,459
Textiles, Apparel & Luxury Goods – 0.2%
Levi Strauss & Co.:
7.75%, 5/15/18	EUR		2,189		2,995,817
6.88%, 5/01/22	USD		8,205		8,553,713
PVH Corp., 7.38%, 5/15/20			2,575		2,909,750
					14,459,280
Trading Companies & Distributors – 1.2%
Aircastle Ltd., 6.75%, 4/15/17			9,020		9,719,050
Ashtead Capital, Inc., 6.50%, 7/15/22 (a)			14,125		14,831,250
H&E Equipment Services, Inc., 7.00%, 9/01/22 (a)			9,760		10,150,400
UR Merger Sub Corp.:
5.75%, 7/15/18 (a)			8,917		9,418,581
7.38%, 5/15/20 (a)			7,895		8,487,125
7.63%, 4/15/22 (a)			52,451		57,433,845
					110,040,251
Transportation Infrastructure – 0.1%
Gategroup Finance Luxembourg SA, 6.75%, 3/01/19	EUR		6,560		8,640,674
Wireless Telecommunication Services – 2.5%
Cricket Communications, Inc.:
7.75%, 5/15/16	USD		9,550		10,075,250
7.75%, 10/15/20			6,255		6,098,625
Digicel Group Ltd.:
10.50%, 4/15/18 (a)			10,659		11,591,663
8.25%, 9/30/20 (a)			28,075		29,478,750
Digicel Ltd., 8.25%, 9/01/17 (a)			14,891		16,082,280
MetroPCS Wireless, Inc., 6.63%, 11/15/20			15,940		16,697,150
NII Capital Corp., 7.63%, 4/01/21			6,022		4,787,490
Phones4u Finance Plc:
9.50%, 4/01/18	GBP		4,997		8,119,613
9.50%, 4/01/18 (a)			6,510		10,578,083
SBA Telecommunications, Inc., 5.75%, 7/15/20 (a)	USD		8,121		8,527,050
Sprint Nextel Corp.:
9.00%, 11/15/18 (a)			53,673		64,407,600
7.00%, 3/01/20 (a)			42,150		47,208,000
					233,651,554
Total Corporate Bonds – 77.7%					7,218,192,835

See Notes to Financial Statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 33 

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio (Percentages shown are based on Net Assets)

Floating Rate Loan Interests (e)	Par (000)		Value
Advertising – 0.0%
Affinion Group, Inc., Tranche B Term Loan, 5.00%, 7/16/15	USD	1,061	$	969,461
Aerospace & Defense – 0.0%
Sequa Corp., Tranche 1 2011 New Term Loan, 6.25%, 12/03/14		3,388		3,404,797
Airlines – 0.1%
AWAS Finance Luxembourg S.à r.l., Loan, 5.25%, 6/10/16		6,117		6,201,543
Delta Air Lines, Inc., Term Loan, 3.63%, 9/16/15		2,147		2,007,353
Northwest Airlines Corp.:
Trade Claim Participation, 0.00%, 12/31/49		4,500		–
Trade Claim Participation, 0.00%, 12/31/49		3,600		–
				8,208,896
Auto Components – 0.2%
Federal-Mogul Corp., Tranche B Term Loan,
2.16% - 2.17%, 12/29/14		14,203		13,810,021
The Goodyear Tire & Rubber Co., Loan (Second Lien), 4.75%, 4/30/19		2,805		2,829,544
Navistar, Inc., Tranche B Term Loan,
7.00%, 8/17/17		4,084		4,124,734
				20,764,299
Building Products – 0.2%
Hupah Finance, Inc., Initial Term Loan, 6.25%, 1/21/19		16,895		17,127,408
Capital Markets – 0.3%
American Capital Ltd. (FKA American Capital Strategies Ltd.), Loans, 5.50%, 8/22/16		28,408		28,408,000
Chemicals – 0.7%
Ascend Performance Materials Operations LLC, Term B Loan, 6.75%, 4/10/18		28,124		28,018,211
Ineos U.S. Finance LLC, Cash Dollar Term Loan, 6.50%, 5/04/18		30,233		30,520,289
PQ Corp. (FKA Niagara Acquisition, Inc.), Original Term Loan (First Lien), 3.97%, 7/30/14		89		88,471
Trinseo Materials Operating S.C.A. (FKA Styron S.à r.l.), Term Loan, 8.00%, 8/02/17		3,699		3,538,411
				62,165,382
Commercial Services & Supplies – 0.3%
ADS Waste Holdings, Inc., Term Loan B, 5.25%, 9/11/19		14,555		14,618,751
Ceridian Corp., Extended US Term Loan, 5.98%, 5/09/17		1,799		1,805,579
Laureate Education, Inc., Extended Term Loan, 5.25%, 6/15/18		3,568		3,519,882
Tervita Corp. (FKA CCS Corp.), Series A Term Loan, 6.50%, 11/14/14		4,441		4,455,327
				24,399,539
Diversified Consumer Services – 0.1%
The ServiceMaster Co.:
Delayed Draw Term Loan, 2.72%, 7/24/14		456		454,281
Tranche A Term Loan, 2.50% - 2.73%, 7/24/14		4,578		4,561,911
				5,016,192
Diversified Financial Services – 1.0%
GMACM Borrower LLC (RFC Borrower LLC):
Term A-2 Loan, 6.75%, 11/18/13		5,010		5,078,887
Term Loan (DIP), 5.00%, 11/18/13		43,645		43,754,113

Floating Rate Loan Interests (e)	Par (000)		Value
Diversified Financial Services (concluded)
Nuveen Investments, Inc.:
Additional Extended First Lien Term Loan, 5.86%, 5/13/17	USD	9,720	$	9,651,182
Extended First-Lien Term Loan, 5.86% - 5.94%, 5/13/17		3,000		2,975,640
First-Lien Incremental Term Loan, 7.25%, 5/13/17		8,655		8,709,094
New Second-Lien Term Loan, 8.25%, 2/28/19		10,695		10,768,582
Springleaf Financial Funding Co. (FKA American General Finance Corp.), Initial Loan, 5.50%, 5/10/17		15,770		15,427,003
				96,364,501
Diversified Telecommunication Services – 1.2%
Avaya, Inc., Term B-1 Loan, 3.18%, 10/24/14		8,112		7,867,455
Hawaiian Telcom Communications, Inc., Term B Loan, 7.00%, 2/28/17		5,135		5,196,004
Intelsat Jackson Holdings SA (FKA Intelsat Jackson Holdings Ltd.), Tranche B Term Loan, 5.25%, 4/02/18		41,185		41,211,025
Level 3 Financing, Inc.:
Term Loan B II, 4.75%, 8/01/19		38,470		38,470,000
Tranche B III Term Loan, 5.75%, 9/01/18		21,725		21,715,875
				114,460,359
Food & Staples Retailing – 0.6%
AB Acquisitions UK Topco 2 Ltd. (FKA Alliance Boots), Facility B1, 3.51%, 7/09/15	GBP	28,560		43,974,305
U.S. Foods, Inc. (AKA U.S. Foodservice, Inc.), Extended Term Loan, 5.75%, 3/31/17	USD	2,102		2,067,775
Volume Services America, Inc. (Centerplate), Term Loan B, 10.50% - 10.75%, 9/16/16		13,424		13,424,378
				59,466,458
Food Products – 0.1%
Pierre Foods, Inc., Loan (Second Lien), 11.25%, 9/29/17		12,230		12,303,380
Health Care Equipment & Supplies – 0.1%
Bausch & Lomb, Inc., Parent Term Loan, 5.25%, 5/17/19		12,499		12,626,286
Health Care Providers & Services – 0.3%
Harden Healthcare LLC:
Tranche A Additional Term Loan, 7.00% - 7.75%, 3/02/15		6,287		6,092,648
Tranche A Term Loan, 8.50%, 3/02/15		3,126		3,063,112
LHP Operations Co. LLC, Term Loan B, 9.00%, 7/03/18		7,601		7,657,957
Thomson Reuters (Healthcare), Inc. (FKA VCPH Holdings Corp./Wolverine Healthcare Analytics), Tranche B Term Loan, 6.75%, 6/06/19		10,229		10,302,912
				27,116,629
Hotels, Restaurants & Leisure – 1.3%
Caesars Entertainment Operating Co., Inc. (FKA Harrah’s Operating Co., Inc.):
Term B-1 Loan, 3.22%, 1/28/15		14,716		14,253,904
Term B-3 Loan, 3.22%, 1/28/15		20,389		19,748,344
Term B-4 Loan, 9.50%, 10/31/16		14,220		14,583,539
Term B-6 Loan, 5.47%, 1/28/18		5,605		5,083,062
Term Loan, 3.22%, 1/28/15		24,618		23,844,111
NP Opco LLC, Term Loan B, 5.50%, 9/15/19		33,125		33,176,675
Stockbridge/SBE Holdings, Term Loan B, 13.00%, 5/02/17		4,810		4,785,950

See Notes to Financial Statements.

 34   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio (Percentages shown are based on Net Assets)

Floating Rate Loan Interests (e)	Par (000)		Value
Hotels, Restaurants & Leisure (concluded)
Travelport Holdings Ltd.:
Extended Tranche A Loan, 6.00%, 12/01/16 (g)	USD	2,821	$	846,440
Extended Tranche B Loan, 13.86%, 12/01/16 (g)		9,096		716,338
				117,038,363
Independent Power Producers & Energy Traders – 0.5%
Calpine Corp., Term Loan, 4.50%, 4/01/18		5,735		5,740,834
Dynegy Midwest Generation LLC, Term Loan, 9.25%, 8/05/16		39,277		41,020,332
				46,761,166
Internet Software & Services – 0.7%
Zayo Group LLC/Zayo Capital, Inc., Term Loan, 7.12%, 7/02/19		63,885		64,404,272
Life Sciences Tools & Services – 0.1%
Pharmaceutical Product Development, Inc. (Jaguar Holdings LLC), Term Loan, 6.25%, 12/05/18		6,932		6,990,737
Machinery – 0.4%
Rexnord LLC/RBS Global, Inc., Term B Loan, 5.00%, 4/01/18		11,551		11,597,706
Schaeffler AG:
Facility C2 (USD), 6.00%, 1/27/17		13,485		13,611,489
Term Loan B, 1.00%, 1/27/15	EUR	12,075		15,071,173
				40,280,368
Media – 1.2%
Cengage Learning Acquisitions, Inc. (Thomson Learning), Term Loan, 2.47%, 7/03/14	USD	7,843		7,465,500
Cequel Communications LLC, Term Loan, 4.00%, 2/14/19		9,507		9,538,884
Clear Channel Communications, Inc.:
Tranche B Term Loan, 3.87%, 1/29/16		51,285		41,897,016
Tranche C Term Loan, 3.87%, 1/29/16		9,211		7,387,614
Eastman Kodak Co., Term Loan (DIP), 8.50%, 7/20/13		15,515		15,263,338
MTL Publishing LLC (EMI Music Publishing Group North America Holdings, Inc.), Term B Loan, 5.50%, 6/29/18		8,803		8,897,569
Newsday LLC, Fixed Rate Term Loan, 10.50%, 8/01/13		18,455		18,485,820
Univision Communications, Inc., Extended First-Lien Term Loan, 4.47%, 3/31/17		6,420		6,336,160
				115,271,901
Metals & Mining – 0.2%
Constellium Holdco BV, Initial Term Loan, 9.25%, 5/25/18		13,095		12,866,181
Walter Energy, Inc. (FKA Walter Industries, Inc.), B Term Loan, 4.00%, 4/02/18		9,500		9,446,610
				22,312,791
Multiline Retail – 0.2%
Hema Holding BV, Facility (Mezzanine), 3.62% - 5.00%, 7/05/17 (g)	EUR	9,065		10,095,393
Savers, Inc., Term Loan, 6.25%, 7/09/19	USD	4,579		4,617,168
				14,712,561
Oil, Gas & Consumable Fuels – 1.3%
Chesapeake Energy Corp., Loan, 8.50%, 12/02/17		35,180		35,269,709
Dynegy Power LLC, Term Loan, 9.25%, 8/05/16		56,466		59,127,430
Obsidian Natural Gas Trust, Loan, 7.00%, 11/02/15		8,455		8,454,791
Samson Resources Corp., Term Loan B, 6.00%, 9/25/18		7,350		7,389,837

Floating Rate Loan Interests (e)	Par (000)		Value
Oil, Gas & Consumable Fuels (concluded)
Tervita Corp. (FKA CCS Corp.), Term Loan, 3.22%, 11/14/14	USD	5,735	$	5,663,261
				115,905,028
Paper & Forest Products – 0.4%
Ainsworth Lumber Co. Ltd., Term Loan, 5.25%, 6/26/14		13,250		13,051,250
NewPage Corp., Term Loan (DIP), 8.00%, 3/08/13		9,950		10,043,331
Verso Paper Finance Holdings LLC, Loan, 6.49% - 7.24%, 2/01/13		19,709		9,854,447
				32,949,028
Pharmaceuticals – 0.2%
Aptalis Pharma, Inc. (FKA Axcan Intermediate Holdings, Inc.), Term B-1 Loan, 5.50%, 2/10/17		8,155		8,147,085
inVentiv Health, Inc. (FKA Ventive Health, Inc.):
Consolidated Term Loan, 6.50%, 8/04/16		5,197		5,015,175
Term B-3 Loan, 6.75%, 5/15/18		2,154		2,084,085
				15,246,345
Real Estate Investment Trusts (REITs) – 0.3%
iStar Financial, Inc.:
Tranche A-1 Loan, 5.00%, 6/28/13		23,879		23,913,755
Tranche A-2 Loan, 7.00%, 6/30/14		3,015		3,009,965
				26,923,720
Real Estate Management & Development – 0.4%
Realogy Corp.:
Extended FL Term Loan, 4.48%, 10/10/16		33,810		33,345,563
Extended Synthetic Commitment, 0.07% - 4.40%, 10/10/16		3,018		2,976,165
				36,321,728
Software – 0.7%
First Data Corp.:
2018 Dollar Term Loan, 4.22%, 3/26/18		15,635		14,846,683
Initial Tranche B-3 Term Loan, 2.97%, 9/24/14		67		66,342
Non Extending B-1 Term Loan, 2.97%, 9/24/14		155		154,798
Term Loan B-3, 3.22%, 9/30/18		4,725		4,634,422
Infor US, Inc. (FKA Lawson Software, Inc.), Term Loan B2, 5.25%, 4/05/18		30,898		30,974,806
Interactive Data Corp., Term B Loan, 4.50%, 2/11/18		11,024		11,074,483
Sabre, Inc., Non-Extended Initial Term Loan, 2.22%, 9/30/14		655		652,699
				62,404,233
Specialty Retail – 0.5%
HD Supply, Inc., Term Loan, 7.25%, 10/12/17		29,885		30,796,493
Party City Holdings, Inc., Term Loan, 5.75%, 7/27/19		18,940		19,162,545
				49,959,038
Textiles, Apparel & Luxury Goods – 0.1%
EB Sports Corp., Term Loan, 6.42%, 12/31/15 (g)		7,615		7,462,862
Wireless Telecommunication Services – 0.6%
Crown Castle Operating Co., Tranche B Term Loan, 4.00%, 1/31/19		710		711,176
Vodafone Americas Finance 2, Inc.:
Initial Loan, 6.88%, 8/11/15 (g)		39,317		40,496,741

See Notes to Financial Statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 35 

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio (Percentages shown are based on Net Assets)

Floating Rate Loan Interests (e)	Par (000)		Value
Wireless Telecommunication Services (concluded)
New Series A Loan, 6.25%, 7/11/16 (g)		USD    15,263	$	15,720,375
				56,928,292
Total Floating Rate Loan Interests – 14.3%				1,324,674,020
Foreign Agency Obligations – 0.0%
Eksportfinans ASA, 0.66%, 4/05/13 (e)		2,042		2,009,924
Investment Companies	Shares
Eaton Vance Senior Income Trust		11,650		88,540
ING Prime Rate Trust		399,934		2,475,591
Uranium Participation Corp. (c)		654,420		3,481,453
Total Investment Companies – 0.1%				6,045,584
Other Interests (i)	Beneficial Interest (000)
Auto Components – 0.0%
Lear Corp., Escrow (c)(d)		7,955		84,522
Lear Corp., Escrow (c)(d)		7,495		79,634
				164,156
Capital Markets – 0.1%
Lehman Brothers Holdings Capital Trust VII
Escrow Bonds (c)(d)		9,030		2,302,650
Lehman Brothers Holdings Capital Trust VII
Escrow Bonds (c)(d)		5,675		1,447,125
Lehman Brothers Holdings Capital Trust VII
Escrow Bonds (c)(d)		5,500		1,388,750
Lehman Brothers Holdings Capital Trust VII
Escrow Bonds (c)(d)		2,520		642,600
Lehman Brothers Holdings Capital Trust VII
Escrow Bonds (c)(d)		1,000		252,500
				6,033,625
Electric Utilities – 0.0%
Mirant America Corp., Escrow (c)(d)		3,270		–
Mirant America, Inc., Escrow (c)(d)		1,880		–
Mirant Americas Generation LLC, Escrow (c)(d)		1,215		–
				–
Hotels, Restaurants & Leisure – 0.0%
Buffets Restaurants Holdings, Inc., Escrow (c)		3,925		–
Household Durables – 0.4%
Richland-Stryker Generation LLC (c)(j)		10,488		10,487,500
Stanley-Martin, Class B Membership Units (c)		20		25,707,116
				36,194,616
Media – 0.0%
Adelphia Communications Corp., Escrow (c)(d)		800		6,080
Adelphia Communications Corp., Escrow (c)(d)		325		2,470
Adelphia Communications Corp., Escrow (c)(d)		27,425		3
Century Communications, Escrow (c)(d)		625		6,250
				14,803

Other Interests	Beneficial Interest (000)		Value
Oil, Gas & Consumable Fuels – 0.0%
Post Oak Crown IV LLC (c)		USD      1,250	$	1,250,000
Total Other Interests – 0.5%				43,657,200
Preferred Securities
Capital Trusts	Par (000)
Insurance – 0.2%
American General Institutional Capital A, 7.57%, 12/01/45 (a)		10,310		11,547,200
Genworth Financial, Inc., 6.15%, 11/15/66 (e)		15,780		10,138,650
				21,685,850
Total Capital Trusts – 0.2%				21,685,850
Preferred Stocks	Shares
Auto Components – 0.4%
Dana Holding Corp., 4.00% (a)		326,201		34,985,057
Commercial Banks – 0.0%
Royal Bank of Scotland Group Plc, 7.25%		84,000		1,905,960
Diversified Financial Services – 1.3%
Ally Financial, Inc., 7.00% (a)		119,240		111,545,300
RBS Capital Funding Trust VII, 6.08%		278,482		4,987,613
				116,532,913
Real Estate Investment Trusts (REITs) – 0.0%
MPG Office Trust, Inc., Series A, 7.63%		140,888		3,175,616
Thrifts & Mortgage Finance – 0.0%
Fannie Mae, 7.00%		370,000		407,000
Freddie Mac, 8.38%		990,611		842,019
				1,249,019
Total Preferred Stocks – 1.7%				157,848,565
Trust Preferreds
Diversified Financial Services – 0.7%
GMAC Capital Trust I, 8.13%, 2/15/40		2,510,880		63,048,197
Total Preferred Securities – 2.6%				242,582,612
Warrants (k)
Diversified Financial Services – 0.0%
Bankruptcy Management Solutions, Inc. (Expires 9/28/17)		3,811		–
Health Care Providers & Services – 0.0%
HealthSouth Corp. (Expires 1/16/14)		253,521		–
Hotels, Restaurants & Leisure – 0.0%
BLB Worldwide Holdings, Inc. (Expires 11/08/17)		500		2,500

See Notes to Financial Statements.

 36   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio (Percentages shown are based on Net Assets)

Warrants	Shares		Value
Media – 0.0%
Charter Communications, Inc., Class A (Expires 11/30/14)		74,775	$	2,235,773
HMH Holdings (Education Media) (Expires 6/22/19)		11,931		–
				2,235,773
Total Warrants – 0.0%				2,238,273
Total Long-Term Investments
(Cost – $9,078,124,501) – 100.2%				9,310,315,422
Short-Term Securities
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (l)(m)		211,929,286		211,929,286
Total Short-Term Securities
(Cost – $211,929,286) – 2.3%				211,929,286
Options Purchased		Contracts
Over-the-Counter Call Options – 0.0%
Marsico Parent Superholdco LLC, Strike Price USD 942.86, Expires 12/14/19, Broker Goldman Sachs Group, Inc.		107		1
Total Options Purchased
(Cost – $104,182) – 0.0%				1
Total Investments
(Cost – $9,290,157,969) – 102.5%				9,522,244,709
Liabilities in Excess of Other Assets – (2.5)%				(234,320,763	)
Net Assets – 100.0%			$	9,287,923,946

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(b) Represents a zero-coupon bond. Rate shown reflects the current yield as of report date.

(c) Non-income producing security.

(d) Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.

(e) Variable rate security. Rate shown is as of report date.

(f) Convertible security.

(g) Represents a payment-in-kind security which may pay interest/dividends in additional par/shares.

(h) Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.

(i) Other interests represent beneficial interests in liquidation trusts and other reorganization or private entities.

(j) Investments in issuers (whereby the Fund held 5% or more of the companies’ outstanding securities) that were considered to be an affiliate during the year ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at Septe- mber 30, 2011	Shares Purchased		Shares Sold	Shares Held at Septe- mber 30, 2012		Value at Septe- mber 30, 2012
Richland-Stryker Generation LLC	–		10,487,500	–		10,487,500	$	10,487,500

(k) Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

(l) Investments in issuers considered to be an affiliate of the Fund during the year ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at Septe- mber 30, 2011		Net Activity		Shares Held at Septe- mber 30, 2012		Income		Realized Gain
BlackRock Liquidity Funds, Temp- Fund, Institu- tional Class		205,812,406		6,116,880		211,929,286	$	538,448	$	6,522

(m) Represents the current yield as of report date.

• 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. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

• Foreign currency exchange contracts as of September 30, 2012 were as follows:

Currency Purchased		Currency Sold		Counter- party	Settle- ment Date	Unre- alized Appre- ciation (Depre- ciation)
EUR	22,000	USD	28,322	Citigroup, Inc.	10/01/12	$	(51	)
USD	1,894,324	AUD	1,875,500	Citigroup, Inc.	10/17/12		(47,540	)
USD	3,756,457	AUD	3,693,000	UBS AG	10/17/12		(67,220	)
USD	38,313,195	CAD	38,910,000	UBS AG	10/17/12		(1,249,402	)
USD	7,418,632	GBP	4,735,000	Citigroup, Inc.	10/17/12		(226,999	)
USD	7,261,956	GBP	4,635,000	Citigroup, Inc.	10/17/12		(222,205	)
USD	14,369,618	GBP	8,860,000	Citigroup, Inc.	10/17/12		63,325
USD	2,500,394	GBP	1,580,000	Credit Suisse Group AG	10/17/12		(50,841	)
USD	2,748,435	GBP	1,773,000	Deutsche Bank AG	10/17/12		(114,438	)
USD	116,284,183	GBP	74,721,000	UBS AG	10/17/12		(4,368,242	)
USD	11,023,201	GBP	6,890,000	UBS AG	10/17/12		(102,121	)
USD	3,034,437	GBP	1,930,000	UBS AG	10/17/12		(81,945	)
USD	1,903,430	GBP	1,227,000	UBS AG	10/17/12		(77,813	)
USD	1,255,111	GBP	808,500	UBS AG	10/17/12		(50,379	)
USD	500,278	EUR	383,000	BNP Paribas SA	10/22/12		7,982
USD	5,000,540	EUR	3,874,000	BNP Paribas SA	10/22/12		21,029
USD	380,182,600	EUR	310,100,000	Citigroup, Inc.	10/22/12		(18,409,666	)
USD	4,470,876	EUR	3,500,000	JPMorgan Chase & Co.	10/22/12		(27,909	)
USD	8,544,934	EUR	7,040,000	Royal Bank of Scotland Group Plc	10/22/12		(504,049	)
USD	4,526,279	EUR	3,490,000	Royal Bank of Scotland Group Plc	10/22/12		40,348
USD	14,763,397	EUR	11,959,000	UBS AG	10/22/12		(608,305	)
USD	26,307,172	EUR	20,860,000	UBS AG	10/22/12		(505,581	)
USD	7,422,925	EUR	6,015,000	UBS AG	10/22/12		(308,557	)
USD	1,261,016	EUR	998,000	UBS AG	10/22/12		(21,780	)
USD	1,467,878	EUR	1,118,000	UBS AG	10/22/12		30,838
Total						$	(26,881,521	)

See Notes to Financial Statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 37 

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio

— Financial futures contracts sold as of September 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation
2,475	E-Mini S&P 500® Futures	Chicago Mercantile	December 2012	USD	$177,482,250		$2,022,322

— Credit default swaps on single-name issues – buy protection outstanding as of September 30, 2012 were as follows:

Issuer	Pay Fixed Rate	Counter- party	Expiration Date	Notional Amount (000)		Unrea- lized Apprec- iation (Deprec- iation)
MGM Resorts International	5.00%	Deutsche Bank AG	6/20/15	USD	3,850	$	(376,363	)
MGM Resorts International	5.00%	Deutsche Bank AG	6/20/15	USD	2,060		(161,054	)
MGM Resorts International	5.00%	Deutsche Bank AG	6/20/15	USD	2,030		(171,404	)
MGM Resorts International	5.00%	Deutsche Bank AG	6/20/15	USD	1,965		(213,179	)
MGM Resorts International	5.00%	Deutsche Bank AG	6/20/15	USD	980		(98,363	)
Republic of Hungary	1.00%	Deutsche Bank AG	12/20/15	USD	4,520		(158,287	)
Israel Government	1.00%	Deutsche Bank AG	3/20/17	USD	11,550		(355,831	)
State of Israel	1.00%	Deutsche Bank AG	3/20/17	USD	3,845		(116,108	)
K Hovnanian Enterprises, Inc.	5.00%	Credit Suisse Group AG	9/20/17	USD	1,822		97,782
K Hovnanian Enterprises, Inc.	5.00%	Deutsche Bank AG	9/20/17	USD	720		39,537
Staples, Inc.	1.00%	Goldman Sachs Group, Inc.	9/20/17	USD	2,000		103,933
K Hovnanian Enterprises, Inc.	5.00%	JPMorgan Chase & Co.	9/20/17	USD	800		42,934
Total						$	(1,366,403	)

— Credit default swaps on single-name issues – sold protection outstanding as of September 30, 2012 were as follows:

Issuer	Receive Fixed Rate	Counter- party	Expiration Date	Issuer Credit Rating1	Notional Amount (000)2		Unrea- lized Apprec- iation
Air Lease Corp.	5.00%	Goldman Sachs Group, Inc.	2/14/13	Not Rated	USD	12,300	$	180,619
CIT Group, Inc.	5.00%	Deutsche Bank AG	9/20/15	BB-	USD	55,700		7,346,679
Realogy Corp.	5.00%	JPMorgan Chase & Co.	9/20/15	CC	USD	5,000		173,407

Issuer	Receive Fixed Rate	Counter- party	Expir- ation Date	Issuer Credit Rating1	Notional Amount (000)2		Unrea- lized Apprec- iation
ARAMARK Corp.	5.00%	Goldman Sachs Group, Inc.	3/20/16	B	USD	2,000	$	142,599
ARAMARK Corp.	5.00%	Goldman Sachs Group, Inc.	3/20/16	B	USD	1,500		85,303
ARAMARK Corp.	5.00%	Goldman Sachs Group, Inc.	6/20/16	B	USD	5,275		358,028
ARAMARK Corp.	5.00%	Goldman Sachs Group, Inc.	6/20/16	B	USD	5,275		317,330
ARAMARK Corp.	5.00%	Goldman Sachs Group, Inc.	6/20/16	B	USD	1,000		77,005
ARAMARK Corp.	5.00%	Goldman Sachs Group, Inc.	6/20/16	B	USD	1,000		71,577
Community Health Systems, Inc.	5.00%	BNP Paribas SA	9/20/16	B	USD	2,000		291,551
ARAMARK Corp.	5.00%	Credit Suisse Group AG	9/20/16	B	USD	2,600		275,577
The Hertz Corp.	5.00%	Citigroup, Inc.	3/20/17	B	USD	5,000		414,929
Crown Castle International Corp.	7.25%	Deutsche Bank AG	3/20/17	B-	USD	11,410		320,413
Ford Motor Co.	5.00%	Deutsche Bank AG	3/20/17	BB+	USD	35,000		2,484,390
The Hertz Corp.	5.00%	Citigroup, Inc.	6/20/17	B	USD	4,705		85,599
CCO Holdings LLC/CCO Holdings Capital Corp.	8.00%	Deutsche Bank AG	9/20/17	BB-	USD	16,770		1,892,454
Level 3 Communi- cations, Inc.	5.00%	Goldman Sachs Group, Inc.	6/20/19	CCC	USD	14,000		564,830
Total							$	15,082,290

¹  Using S&P’s rating.

²  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

See Notes to Financial Statements.

 38   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio

• Credit default swaps on traded indexes - buy protection outstanding as of September 30, 2012 were as follows:

Index	Pay Fixed Rate			Counterparty	Expiration Date	Notional Amount (000)		Unrealized Depreciation
CDX.NA.HY Series 18 Version 2		5.00	%	Credit Suisse Group AG	6/20/17	USD	24,255	$	(690,113	)

• Total return swaps outstanding as of September 30, 2012 were as follows:

Reference Entity	Fixed Rate/ Floating Rate	Counterparty	Expiration Date	Notional Amount (000)		Unrealized Appreciation
iBoxx US Dollar Liquid High Yield Index	3-month LIBOR1	JPMorgan Chase & Co.	3/20/13	USD	100,000	$	1,656,616

¹  Fund pays the fixed rate and receives the total return of the reference entity.

• Fair Value Measurements – Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 – unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

• Level 2 – other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 – unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the year. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of September 30, 2012:

	Level 1	Level 2	Level 3	Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities	–	–	$    2,523,287	$     2,523,287
Collateralized Debt Obligations	–	–	4,232,857	4,232,857
Common Stocks	$310,812,481	$    97,981,444	55,364,905	464,158,830
Corporate Bonds	–	7,179,121,325	39,071,510	7,218,192,835
Floating Rate Loan Interests	–	1,117,522,746	207,151,274	1,324,674,020
Foreign Agency Obligations	–	2,009,924	–	2,009,924
Investment Companies	6,045,584	–	–	6,045,584
Other Interests	–	6,042,175	37,615,025	43,657,200
Preferred Securities	74,366,405	168,216,207	–	242,582,612
Warrants	2,238,273	–	–	2,238,273
Short-Term Securities	211,929,286	–	–	211,929,286
Total	$605,392,029	$8,570,893,821	$345,958,858	$9,522,244,708

	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments1
Assets:
Credit contracts		–		$	7,282,927		$	9,740,165	$	17,023,092
Equity contracts	$	2,022,322			–			1		2,022,323
Foreign currency exchange contracts		–			163,522			–		163,522
Liabilities:
Credit contracts		–			(2,340,702	)		–		(2,340,702	)
Foreign currency exchange contracts		(51	)		(27,044,992	)		–		(27,045,043	)
Total	$	2,022,271		$	(21,939,245	)	$	9,740,166	$	(10,176,808	)

¹  Derivative financial instruments are swaps, financial futures contracts, foreign currency exchange contracts and options. Swaps, financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/ depreciation on the instrument and options are shown at value.

See Notes to Financial Statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 39 

Consolidated Schedule of Investments (continued)   BlackRock High Yield Bond Portfolio

Certain of the Fund’s assets and liabilities are held at carrying amount, which approximates fair value for financial statement purposes. As of September 30, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3	Total
Assets:
Cash	$	9,948,907		–		–	$	9,948,907
Foreign currency at value		20,058,886		–		–		20,058,886
Cash pledged as collateral for financial futures contracts		9,774,000		–		–		9,774,000
Cash pledged as collateral for swap contracts		310,000		–		–		310,000
Liabilities:
Cash received as collateral for swap contracts		–	$	(14,900,000	)	–		(14,900,000	)
Total	$	40,091,793	$	(14,900,000	)	–	$	25,191,793

Prior to March 31, 2012, only significant transfers between Level 1 and Level 2 were required to be disclosed. There were no significant transfers from the beginning of the period to March 31, 2012. For the interim period April 1, 2012 to September 30, 2012, all transfers between Level 1 and Level 2 are required to be disclosed. As of March 31, 2012, there were securities with a value of $103,765,487 that were valued using unadjusted price quotations from an exchange, but were valued using other observable inputs as of September 30, 2012. Therefore, these securities were transferred from Level 1 to Level 2 during the period.

The following table summarizes the valuation techniques used and unobservable inputs developed by the BlackRock Global Valuation Methodologies Committee (“Global Valuation Committee”) to determine the fair value of certain of the Fund’s Level 3 investments as of September 30, 2012:

	Value			Valuation Techniques	Unobservable Inputs1	Range of Unobservable Inputs Utilized	Weighted Average of Unobservable  Inputs2
Assets:
Collateralized Debt Obligations		$	672,857	Cost	N/A3	–	–
Common Stocks			55,364,902	Market Comparable Companies	EBITDA Multiple	6.7x	6.7x
					Forward EBITDA Multiple	5.2x	5.2x
				Cost	N/A3	–	–
Corporate Bonds			26,753,516	Market Comparable Companies	Yield	7.00%	7.00%
				Cost	N/A3	–	–
Floating Rate Loan Interests			19,010,207	Market Comparable Companies	Illiquidity Discount	50.00%	50.00%
					Yield	9.65%	9.65%
				Cost	N/A3	–	–
Other Interests			37,444,616	Market Comparable Companies	Tangible Book Value Multiple	1.97x	1.97x
					Discount to Public Comparables	27.50%	27.50%
				Cost	N/A3	–	–
Total4		$	139,246,098

¹  A change to the unobservable input may result in a significant change to the value of the investment as follows:

Unobservable Input	Impact to Value if Input Increases	Impact to Value if Input Decreases
EBITDA Multiple	Increase	Decrease
Forward EBITDA Multiple	Increase	Decrease
Yield	Decrease	Increase
Illiquidity Discount	Decrease	Increase
Tangible Book Value Multiple	Increase	Decrease
Discount to Public Comparables	Decrease	Increase

²  Unobservable inputs are weighted based on the fair value of the investments included in the range.

³  The Fund fair values certain of its Level 3 investments using prior transaction prices (acquisition cost), although the transaction may not have occurred during the current reporting period. In such cases, these investments are generally privately held investments. There may not be a secondary market, and/or there are a limited number of investors. The determination to fair value such investments at cost is based upon factors consistent with the principles of fair value measurement that are reasonably available to the Global Valuation Committee, or its delegate. Valuations are reviewed utilizing available market information to determine if the carrying value should be adjusted. Such market data may include, but is not limited to, observations of the trading multiples of public companies considered comparable to the private companies being valued, financial or operational information released by the company, and/or news or corporate events that affect the investment. Valuations may be adjusted to account for company-specific issues, the lack of liquidity inherent in a nonpublic investment and the fact that comparable public companies are not identical to the investments being fair valued by the Fund.

⁴  Does not include Level 3 investments with values derived utilizing prices from recent prior transactions or third party pricing information without adjustment for which such inputs are unobservable. The value of Level 3 investments derived using prices from prior transactions and/or third party pricing information is $206,712,760. A significant change in third party pricing information could result in a significantly lower or higher value in such Level 3 investments.

See Notes to Financial Statements.

 40   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Consolidated Schedule of Investments (concluded)   BlackRock High Yield Bond Portfolio

A reconciliation of Level 3 investments and derivative financial instruments is presented when the Fund had a significant amount of Level 3 investments and derivative financial instruments at the beginning and/or end of the year in relation to net assets. The following tables are a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Asset- Backed Securities			Collateralized Debt Obligations			Common Stocks			Corporate Bonds			Floating Rate Loan Interests			Other Interests			Preferred Securities			Warrants			Total
Assets:
Opening Balance, as of September 30, 2011	$	11,003,750		$	642,992		$	117,942,892		$	20,964,237		$	137,663,674		$	27,004,068		$	2,555,731		$	2,071		$	317,779,415
Transfers into Level 31		–			6,955,0002			15,265,8992			–			15,528,324			–			–			–			37,749,223
Transfers out of Level 31		(6,955,000	)2		–			–			–			(18,406,540	)		(15,265,899	)2		–			(2,000	)		(40,629,439	)
Accrued discounts/premiums		63,866			91,489			–			17,436			2,271,194			–			–			–			2,443,985
Net realized gain (loss)		(296,783	)		331,441			(14,907,789	)		–			(9,853,505	)		109,472			(971,084	)		(589,672	)		(26,177,920	)
Net change in unrealized appreciation/ depreciation3		167,454			1,571,388			(26,879,423	)		(324,652	)		3,256,275			16,139,174			801,419			589,481			(4,678,884	)
Purchases		–			81,822			21,161,097			20,754,189			115,436,745			24,991,758			–			120			182,425,731
Sales		(1,460,000	)		(5,441,275	)		(57,217,771	)		(2,339,700	)		(38,744,893	)		(15,363,548	)		(2,386,066	)		–			(122,953,253	)
Closing Balance, as of September 30, 2012	$	2,523,287		$	4,232,857		$	55,364,905		$	39,071,510		$	207,151,274		$	37,615,025			–			–		$	345,958,858

¹  Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period.

²  Transfers into and out of Level 3 are the result of a reclassification of certain Level 3 investments between Asset-Backed Securities, Collateralized Debt Obligations, Common Stocks and Other Interests and not the result of the investments transferring into or out of Level 3.

³  Included in the related net change in unrealized appreciation/depreciation in the Consolidated Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of September 30, 2012 was $2,064,271.

The following table is a reconciliation of Level 3 derivative financial instruments for which significant unobservable inputs were used in determining fair value:

	Equity Contracts		Credit Contracts
	Assets	Liabilities	Assets	Liabilities			Total
Opening Balance, as of September 30, 2011	$1	–	–	$	(106,124	)	$	(106,123	)
Transfers into Level 34	–	–	–		–			–
Transfers out of Level 34	–	–	–		–			–
Accrued discounts/ premiums	–	–	–		–			–
Net realized gain (loss)	–	–	–		–			–
Net change in unrealized appreciation/ depreciation5	–	–	–		5,088,528			5,088,528
Purchases	–	–	–		–			–
Issues6	–	–	–		4,757,761			4,757,761
Sales	–	–	–		–			–
Settlements7	–	–	–		–			–
Closing Balance, as of September 30, 2012	$1	–	–	$	9,740,165		$	9,740,166

⁴  Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period.

⁵  Included in the related net change in unrealized appreciation/depreciation in the Consolidated Statements of Operations. The change in unrealized appreciation/depreciation on swaps still held as of September 30, 2012 was $5,088,528.

⁶  Issues represent upfront cash received on certain derivative financial instruments.

⁷  Settlements represent periodic contractual cash flows and/or cash flows to terminate certain derivative financial instruments.

See Notes to Financial Statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 41 

Schedule of Investments September 30, 2012   BlackRock Low Duration Bond Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities	Par (000)		Value
AH Mortgage Advance Co. Ltd., Series SART-3, Class 1A1, 2.98%, 3/13/43 (a)		USD       8,180	$	8,233,554
AmeriCredit Automobile Receivables Trust:
Series 2011-1, Class A3, 1.39%, 9/08/15		1,160		1,166,811
Series 2011-3, Class D, 4.04%, 7/10/17		10,769		11,442,676
Series 2012-2, Class D, 3.38%, 4/09/18		6,960		7,142,895
Series 2012-4, Class B, 1.31%, 11/08/17		3,270		3,274,578
Ameriquest Mortgage Securities, Inc., Series 2004-FR1, Class A5, 4.46%, 5/25/34 (b)		1,248		1,262,216
Asset-Backed Securities Corp. Home Equity, Series 2005-HE3, Class M2, 0.66%, 4/25/35 (b)		959		942,093
Bear Stearns Asset-Backed Securities Trust:
Series 2006-HE10, Class 21A1, 0.29%, 12/25/36 (b)		574		547,249
Series 2007-HE3, Class 1A1, 0.34%, 4/25/37 (b)		688		680,783
BNC Mortgage Loan Trust, Series 2006-2, Class A3, 0.34%, 11/25/36 (b)		1,917		1,865,472
Carrington Mortgage Loan Trust, Series 2007-FRE1, Class A1, 0.34%, 2/25/37 (b)		13		13,178
Chesapeake Funding LLC, Series 2012-1A, Class A, 0.98%, 11/07/23 (a)(b)		6,050		6,064,968
Citibank Omni Master Trust:
Series 2009-A14A, Class A14, 2.97%, 8/15/18 (a)(b)		24,947		26,115,617
Series 2009-A14X, Class A14, 2.97%, 8/15/18 (a)(b)		5,000		5,238,780
Conseco Financial Corp.:
Series 1993-4, Class A5, 7.05%, 1/15/19		180		181,981
Series 1995-5, Class M1, 7.65%, 9/15/26 (b)		1,404		1,426,826
Series 1996-8, Class A6, 7.60%, 11/15/26 (b)		306		311,805
Countrywide Asset-Backed Certificates:
Series 2005-17, Class 1AF2, 5.36%, 5/25/36 (b)		4,039		3,501,266
Series 2006-13, Class 1AF2, 5.88%, 1/25/37		840		798,126
Series 2007-1, Class 2A1, 0.27%, 7/25/37 (b)		216		215,308
Series 2007-3, Class 2A1, 0.32%, 5/25/47 (b)		1,641		1,604,217
Series 2007-4, Class A1A, 0.34%, 4/25/47 (b)		818		812,461
Series 2007-7, Class 2A2, 0.38%, 10/25/47 (b)		11,644		11,138,753
Series 2007-10, Class 2A1, 0.27%, 6/25/47 (b)		725		721,475
Series 2007-12, Class 2A1, 0.57%, 8/25/47 (b)		3,967		3,921,864
Credit Acceptance Auto Loan Trust, Series 2011-1, Class A, 2.61%, 3/15/19 (a)		9,190		9,322,428
Discover Card Master Trust, Series 2012-A1, Class A1, 0.81%, 8/15/17		12,165		12,269,157
Ford Credit Auto Lease Trust, Series 2010-B, Class A4, 1.04%, 12/15/13 (a)		5,078		5,083,468
Ford Credit Auto Owner Trust, Series 2009-D, Class A4, 2.98%, 8/15/14		8,151		8,228,633
Ford Credit Floorplan Master Owner Trust:
Series 2010-1, Class A, 1.87%, 12/15/14 (a)(b)		4,410		4,425,237

Asset-Backed Securities	Par (000)		Value
Series 2010-5, Class C, 2.07%, 9/15/15 (a)		USD       3,130	$	3,156,765
Series 2011-2, Class C, 2.37%, 9/15/15		3,775		3,785,751
Series 2011-2, Class D, 2.86%, 9/15/15		3,830		3,840,690
Series 2012-4, Class C, 1.39%, 9/15/16		7,005		7,005,000
Series 2012-5, Class C, 2.14%, 9/15/19		2,330		2,340,459
GCO Slims Trust, Series 2006-1A, Class NOTE, 5.72%, 3/01/22 (a)		928		905,127
Golden Credit Card Trust, Series 2012-5A, Class A, 0.79%, 9/15/17 (a)		24,500		24,497,361
Gracechurch Card Funding Plc, Series 2012-4A, Class A, 0.92%, 6/15/17 (a)(b)		9,000		9,063,684
Heller Financial, Series 1998-1, Class A, 0.87%, 7/15/24 (a)(b)		785		412,354
Home Equity Asset Trust:
Series 2007-1, Class 2A1, 0.28%, 5/25/37 (b)		429		424,134
Series 2007-2, Class 2A1, 0.33%, 7/25/37 (b)		269		265,731
Hyundai Auto Receivables Trust, Series 2012-B, Class B, 1.39%, 3/15/18		3,970		3,991,613
IFC SBA Loan-Backed Adjustable Rate Certificate, Series 1997-1, Class A, 1.25%, 1/15/24 (a)(b)		200		200,240
MASTR Asset-Backed Securities Trust, Series 2005-FRE1, Class A4, 0.47%, 10/25/35 (b)		181		173,943
Motor Plc, Series 12A, Class A1C, 1.29%, 2/25/20 (a)		1,991		1,991,000
Red & Black Auto France, Series 2012-1, Class A, 0.97%, 12/28/21 (b)		EUR       9,443		12,190,393
Residential Asset Mortgage Products, Inc., Series 2003-RZ3, Class A6, 3.90%, 3/25/33 (c)		USD       3,545		3,497,817
Residential Asset Securities Corp., Series 2005-KS12, Class A2, 0.47%, 1/25/36 (b)		867		833,961
Santander Consumer Acquired Receivables Trust:
Series 2011-S1A, Class B, 1.66%, 8/15/16 (a)		6,232		6,251,003
Series 2011-S1A, Class C, 2.01%, 8/15/16 (a)		5,176		5,194,356
Series 2011-WO, Class A3, 1.40%, 10/15/14 (a)		12,590		12,615,299
Santander Drive Auto Receivables Trust:
Series 2010-2, Class C, 3.89%, 7/17/17		12,300		12,773,144
Series 2010-B, Class A3, 1.31%, 2/17/14 (a)		4,136		4,140,202
Series 2011-4, Class A2, 1.37%, 3/16/15		5,571		5,596,548
Series 2011-S1A, Class D, 3.10%, 5/15/17 (a)		3,721		3,736,158
Series 2011-S2A, Class B, 2.06%, 6/15/17 (a)		1,950		1,959,169
Series 2011-S2A, Class C, 2.86%, 6/15/17 (a)		507		509,771
Series 2011-S2A, Class D, 3.35%, 6/15/17 (a)		730		733,824
Series 2012-3, Class D, 3.64%, 5/15/18		9,930		10,126,703
Series 2012-5, Class C, 2.70%, 8/15/18		2,670		2,710,608
SLC Student Loan Trust, Series 2006-A, Class A4, 0.58%, 1/15/19 (b)		3,736		3,724,686
SLM Student Loan Trust:
Series 2002-1, Class A2, 0.56%, 4/25/17 (b)		276		275,599

See Notes to Financial Statements.

 42   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Schedule of Investments (continued)   BlackRock Low Duration Bond Portfolio (Percentages shown are based on Net Assets)

Asset-Backed Securities		Par (000)		Value
Series 2003-B, Class A2, 0.79%, 3/15/22 (b)	USD		6,677	$	6,503,617
Series 2004-10, Class A4A, 0.87%, 7/27/20 (a)(b)			2,000		1,999,553
Series 2004-B, Class A2, 0.59%, 6/15/21 (b)			9,714		9,475,072
Series 2005-8, Class A2, 0.54%, 7/25/22 (b)			2,427		2,426,467
Series 2008-5, Class A2, 1.55%, 10/25/16 (b)			7,029		7,078,422
Series 2008-5, Class A3, 1.75%, 1/25/18 (b)			25,650		26,258,521
Series 2010-C, Class A1, 1.87%, 12/15/17 (a)(b)			3,754		3,761,432
Series 2012-B, Class A1, 1.34%, 12/15/21 (a)(b)			3,544		3,568,255
Series 2012-C, Class A1, 1.32%, 8/15/23 (a)(b)			13,796		13,893,221
Soundview Home Loan Trust:
Series 2003-1, Class M1, 1.07%, 8/25/31 (b)			598		592,649
Series 2003-2, Class A2, 0.87%, 11/25/33 (b)			2,249		2,090,659
Series 2006-EQ1, Class A2, 0.33%, 10/25/36 (b)			62		62,296
Wells Fargo Home Equity Trust, Series 2007-2, Class A1, 0.31%, 4/25/37 (b)			1,739		1,699,572
Total Asset-Backed Securities – 16.4%					366,286,704
Capital Trusts
Consumer Finance – 0.2%
Capital One Capital VI, 8.88%, 5/15/40			3,430		3,487,494
Corporate Bonds
Air Freight & Logistics – 0.3%
Federal Express Corp. 2012 Pass-Through Trust, 2.63%, 1/15/18 (a)			4,856		4,904,086
United Parcel Service, Inc., 1.13%, 10/01/17			1,430		1,436,456
					6,340,542
Airlines – 0.8%
Continental Airlines Pass-Through Trust, Series 2000-1, Class B, 8.39%, 5/01/22			1,859		1,970,415
Continental Airlines, Inc., 6.75%, 9/15/15 (a)			5,130		5,380,087
Delta Air Lines Pass-Through Trust, Series 2010-1, Class B, 6.38%, 7/02/17			4,600		4,600,000
U.S. Airways Pass-Through Trust, Series 2012-1, Class C, 9.13%, 10/01/15			6,062		6,152,930
					18,103,432
Auto Components – 0.2%
Icahn Enterprises LP, 4.00%, 8/15/13 (b)(d)			5,310		5,317,965
Beverages – 1.7%
Anheuser-Busch InBev Worldwide, Inc.:
3.00%, 10/15/12			10,145		10,153,674
2.50%, 3/26/13			15,880		16,036,863
0.80%, 7/15/15			12,780		12,833,471
					39,024,008
Biotechnology – 0.4%
Amgen, Inc., 1.88%, 11/15/14			8,080		8,294,613

Corporate Bonds		Par (000)		Value
Capital Markets – 3.2%
Credit Suisse New York:
5.00%, 5/15/13	USD		15,000	$	15,400,830
5.50%, 5/01/14			2,225		2,376,242
3.50%, 3/23/15			1,850		1,955,291
Deutsche Bank AG, 5.38%, 10/12/12			10,305		10,318,098
The Goldman Sachs Group, Inc.:
3.30%, 5/03/15			12,830		13,350,526
6.25%, 9/01/17			22,336		26,181,589
Murray Street Investment Trust I, 4.65%, 3/09/17 (c)			2,315		2,486,014
					72,068,590
Chemicals – 1.0%
Airgas, Inc.:
2.85%, 10/01/13			3,365		3,430,153
4.50%, 9/15/14			2,880		3,066,074
Ecolab, Inc., 1.00%, 8/09/15			9,629		9,672,822
Nova Chemicals Corp., 8.38%, 11/01/16			6,000		6,630,000
					22,799,049
Commercial Banks – 5.3%
ANZ National International Ltd., 1.85%, 10/15/15 (a)(e)			6,280		6,350,750
Barclays Bank Plc, 2.50%, 1/23/13			9,919		9,980,528
BNP Paribas SA, 2.38%, 9/14/17			11,115		11,163,028
CIT Group, Inc.:
5.25%, 4/01/14 (a)			7,294		7,603,995
4.75%, 2/15/15 (a)			7,992		8,331,660
City National Corp., 5.13%, 2/15/13			4,700		4,759,596
Cooperatieve Centrale Raiffeisen- Boerenleenbank BA, 7.00%, 10/29/49			3,548		3,548,000
Credit Agricole SA, 3.00%, 10/01/17 (a)			12,370		12,329,031
HSBC Bank Plc, 1.26%, 1/17/14 (a)(b)			10,600		10,654,770
ING Bank NV:
1.44%, 3/15/13 (a)(b)			7,910		7,935,834
2.00%, 9/25/15 (a)			11,290		11,306,879
Regions Financial Corp., 4.88%, 4/26/13			5,776		5,891,520
Royal Bank of Scotland Group Plc, 2.55%, 9/18/15			11,240		11,375,240
Santander Holdings USA, Inc., 3.00%, 9/24/15			7,575		7,663,779
					118,894,610
Commercial Services & Supplies – 0.2%
The ADT Corp., 2.25%, 7/15/17 (a)			4,900		5,043,296
Communications Equipment – 0.3%
Brocade Communications Systems, Inc., 6.63%, 1/15/18			5,275		5,472,813
Computers & Peripherals – 0.2%
Hewlett-Packard Co., 2.63%, 12/09/14			4,780		4,906,469
Construction & Engineering – 0.1%
Tyco Flow Control International Finance SA, 1.88%, 9/15/17 (a)			1,277		1,277,756
Consumer Finance – 2.6%
American Express Bank FSB, 5.50%, 4/16/13			11,713		12,032,144
American Express Co., 7.25%, 5/20/14			5,000		5,518,740
American Express Credit Corp.:
1.75%, 6/12/15			5,860		5,994,030
Series C, 7.30%, 8/20/13			4,425		4,688,341
Capital One Financial Corp., 6.25%, 11/15/13			8,465		8,959,119
SLM Corp., 5.00%, 10/01/13			21,100		21,864,875
					59,057,249

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	43

Schedule of Investments (continued)   BlackRock Low Duration Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Containers & Packaging – 0.1%
Ball Corp., 7.13%, 9/01/16	USD	2,500	$	2,706,250
Diversified Financial Services – 5.4%
ABB Treasury Center USA, Inc., 2.50%, 6/15/16 (a)		5,415		5,660,310
Bank of America Corp.:
3.88%, 3/22/17		14,565		15,673,950
6.00%, 9/01/17		8,115		9,386,458
5.65%, 5/01/18		4,595		5,239,109
Citigroup, Inc., 4.45%, 1/10/17		9,190		10,094,094
FIA Card Services N.A., 7.13%, 11/15/12		3,455		3,480,885
Ford Motor Credit Co. LLC:
3.88%, 1/15/15		18,676		19,518,194
8.00%, 12/15/16		7,860		9,395,097
JPMorgan Chase & Co., 2.00%, 8/15/17		12,193		12,299,238
Merrill Lynch & Co., Inc., 6.75%, 5/21/13	EUR	5,650		7,520,153
National Rural Utilities Cooperative Finance Corp., 0.54%, 8/09/13 (b)	USD	9,442		9,440,272
Tiers Trust, Series 2012-01, 2.19%, 5/12/14 (a)(b)		12,215		12,215,000
				119,922,760
Diversified Telecommunication Services – 1.3%
British Telecommunications Plc, 2.00%, 6/22/15		9,216		9,475,624
CenturyLink, Inc., 5.50%, 4/01/13		1,870		1,908,339
Qwest Communications International, Inc.:
8.00%, 10/01/15		8,942		9,341,591
7.13%, 4/01/18		4,079		4,329,043
Qwest Corp., 3.64%, 6/15/13 (b)		250		251,347
Windstream Corp., 8.13%, 8/01/13		3,620		3,801,000
				29,106,944
Electric Utilities – 1.8%
AEP Texas Central Transition Funding LLC, Series A-2, 4.98%, 7/01/15		1,476		1,496,579
CMS Energy Corp., 4.25%, 9/30/15		2,395		2,535,828
Duke Energy Corp., 1.63%, 8/15/17		1,500		1,504,403
Exelon Generation Co. LLC, 6.20%, 10/01/17		8,193		9,751,268
Great Plains Energy, Inc., 2.75%, 8/15/13		5,400		5,475,146
Kentucky Power Co., 6.00%, 9/15/17 (a)		1,000		1,174,104
Northeast Utilities, 1.13%, 9/20/13 (b)		11,265		11,331,678
Pepco Holdings, Inc., 2.70%, 10/01/15		3,765		3,913,898
Southern Power Co., 4.88%, 7/15/15		2,432		2,677,440
				39,860,344
Electronic Equipment, Instruments & Components – 0.3%
Jabil Circuit, Inc., 7.75%, 7/15/16		6,642		7,688,115
Energy Equipment & Services – 1.8%
Diamond Offshore Drilling, Inc., 4.88%, 7/01/15		7,175		7,942,617
SESI LLC, 6.88%, 6/01/14		5,980		5,980,000
Transocean, Inc.:
4.95%, 11/15/15		5,659		6,195,371
2.50%, 10/15/17		2,495		2,508,830
1.50%, 12/15/37 (d)		17,475		17,322,094
				39,948,912
Food & Staples Retailing – 0.5%
Walgreen Co., 1.80%, 9/15/17		10,617		10,736,877
Food Products – 0.6%
Campbell Soup Co., 0.74%, 8/01/14 (b)		6,330		6,359,226
Nabisco, Inc., 7.55%, 6/15/15		6,425		7,534,109
				13,893,335
Health Care Equipment & Supplies – 0.3%
Boston Scientific Corp., 6.25%, 11/15/15		5,605		6,356,076

Corporate Bonds	Par (000)		Value
Health Care Providers & Services – 1.6%
Aristotle Holding, Inc.:
3.50%, 11/15/16 (a)	USD	4,668	$	5,046,687
2.65%, 2/15/17 (a)		8,890		9,315,858
Coventry Health Care, Inc.:
6.13%, 1/15/15		3,750		4,125,480
5.95%, 3/15/17		5,340		6,235,726
Tenet Healthcare Corp., 10.00%, 5/01/18		4,745		5,480,475
WellPoint, Inc., 1.25%, 9/10/15		4,918		4,952,337
				35,156,563
Hotels, Restaurants & Leisure – 1.4%
MGM Resorts International, 13.00%, 11/15/13		9,520		10,733,800
Starwood Hotels & Resorts Worldwide, Inc., 7.88%, 10/15/14		10,734		12,143,310
Universal City Development Partners Ltd./UCDP Finance, Inc., 8.88%, 11/15/15		8,478		8,929,581
				31,806,691
Household Durables – 0.5%
Newell Rubbermaid, Inc., 5.50%, 4/15/13		10,911		11,172,067
Independent Power Producers & Energy Traders – 0.3%
Constellation Energy Group, Inc., 4.55%, 6/15/15		3,363		3,665,317
TransAlta Corp., 5.75%, 12/15/13		2,860		2,992,029
				6,657,346
Insurance – 3.9%
American International Group, Inc.:
3.00%, 3/20/15		22,940		23,753,797
4.88%, 9/15/16		892		995,689
AXA SA, 6.00%, 6/18/13	EUR	7,820		10,429,608
Lincoln National Corp., 4.30%, 6/15/15	USD	10,880		11,623,789
MetLife Institutional Funding II, 1.63%, 4/02/15 (a)		8,450		8,576,150
Metropolitan Life Global Funding I, 5.13%, 6/10/14 (a)		742		795,761
New York Life Global Funding, 2.25%, 12/14/12 (a)		95		95,371
Pacific Life Global Funding, 5.15%, 4/15/13 (a)		3,786		3,880,366
Principal Financial Group, Inc., 7.88%, 5/15/14		5,100		5,670,450
Principal Life Global Funding II, 1.13%, 9/18/15 (a)		9,610		9,628,691
Prudential Financial, Inc., 2.75%, 1/14/13		5,935		5,973,423
XL Group Plc, 5.25%, 9/15/14		5,300		5,660,379
				87,083,474
IT Services – 0.3%
Computer Sciences Corp., 2.50%, 9/15/15		5,631		5,714,806
Life Sciences Tools & Services – 0.1%
Agilent Technologies, Inc., 5.50%, 9/14/15		2,315		2,598,231
Machinery – 0.3%
Ingersoll-Rand Global Holding Co. Ltd., 9.50%, 4/15/14		6,530		7,352,029
Media – 3.7%
CBS Corp., 8.88%, 5/15/19		8,200		10,991,231
CCH II LLC/CCH II Capital Corp., 13.50%, 11/30/16		11,868		12,876,780
Clear Channel Worldwide Holdings, Inc.:
9.25%, 12/15/17		1,005		1,077,863
Series B, 9.25%, 12/15/17		4,022		4,333,705
Comcast Cable Communications Holdings, Inc., 8.38%, 3/15/13		5,555		5,752,397

See Notes to Financial Statements.

 44   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Schedule of Investments (continued)   BlackRock Low Duration Bond Portfolio (Percentages shown are based on Net Assets)

Corporate Bonds	Par (000)		Value
Media (concluded)
DIRECTV Holdings LLC/DIRECTV Financing Co., Inc.:
3.13%, 2/15/16	USD	9,460	$	9,958,920
2.40%, 3/15/17		185		189,949
DISH DBS Corp., 7.75%, 5/31/15		5,500		6,187,500
The Interpublic Group of Cos., Inc., 6.25%, 11/15/14		14,470		15,627,600
Time Warner Cable, Inc., 7.50%, 4/01/14		8,326		9,141,215
Virgin Media Secured Finance Plc, 7.00%, 1/15/18	GBP	4,020		7,043,295
				83,180,455
Metals & Mining – 0.9%
Anglo American Capital Plc, 9.38%, 4/08/14 (a)	USD	8,482		9,465,912
Freeport-McMoRan Copper & Gold, Inc., 1.40%, 2/13/15		4,845		4,879,898
Xstrata Finance Canada Ltd., 2.85%, 11/10/14 (a)		5,005		5,145,345
				19,491,155
Multiline Retail – 0.3%
Dollar General Corp., 4.13%, 7/15/17		5,745		6,003,525
Multi-Utilities – 0.7%
CenterPoint Energy, Inc., Series B, 6.85%, 6/01/15		4,865		5,472,259
CMS Energy Corp., 6.88%, 12/15/15		1,727		1,960,285
Nisource Finance Corp., 5.25%, 9/15/17		1,000		1,156,928
Sempra Energy, 8.90%, 11/15/13		7,411		8,060,255
				16,649,727
Office Electronics – 0.6%
Xerox Corp., 1.80%, 9/13/13 (b)		12,460		12,542,286
Oil, Gas & Consumable Fuels – 4.4%
Enterprise Products Operating LLC, 6.13%, 2/01/13		4,295		4,366,044
Nexen, Inc., 5.20%, 3/10/15		6,580		7,016,386
ONEOK Partners LP, 2.00%, 10/01/17		2,690		2,739,870
Petrohawk Energy Corp.:
10.50%, 8/01/14		7,769		8,448,787
7.88%, 6/01/15		5,136		5,350,284
7.25%, 8/15/18		10,280		11,678,933
Pioneer Natural Resources Co., 5.88%, 7/15/16		21,465		24,453,550
Rockies Express Pipeline LLC, 6.25%, 7/15/13 (a)		10,635		10,847,700
Ruby Pipeline LLC, 4.50%, 4/01/17 (a)		3,985		4,132,796
Southeast Supply Header LLC, 4.85%, 8/15/14 (a)		6,120		6,419,452
Tennessee Gas Pipeline Co., 8.00%, 2/01/16		11,260		13,399,231
				98,853,033
Paper & Forest Products – 1.0%
Celulosa Arauco y Constitucion SA:
5.13%, 7/09/13		4,485		4,587,846
5.63%, 4/20/15		4,015		4,342,359
Georgia-Pacific LLC, 8.25%, 5/01/16 (a)		12,615		13,574,951
				22,505,156
Pharmaceuticals – 1.4%
Takeda Pharmaceutical Co. Ltd., 1.63%, 3/17/17 (a)		22,170		22,421,186
Valeant Pharmaceuticals International:
6.50%, 7/15/16 (a)		3,617		3,793,329
6.75%, 10/01/17 (a)		1,518		1,616,670

Corporate Bonds	Par (000)		Value
Pharmaceuticals (concluded)
Watson Pharmaceuticals, Inc., 1.88%, 10/01/17	USD	4,390	$	4,438,856
				32,270,041
Real Estate Investment Trusts (REITs) – 0.5%
AvalonBay Communities, Inc., 6.13%, 11/01/12		1,602		1,608,893
Health Care REIT, Inc., 5.88%, 5/15/15		2,000		2,218,864
Nationwide Health Properties, Inc., 6.59%, 7/07/38		1,400		1,533,857
Rouse Co. LP/TRC Co-Issuer, Inc., 6.75%, 5/01/13 (a)		5,420		5,528,400
Ventas Realty LP/Ventas Capital Corp., 3.13%, 11/30/15		1,100		1,146,261
				12,036,275
Real Estate Management & Development – 0.1%
Trafford Centre Finance Ltd., 0.95%, 7/28/15 (b)	GBP	1,131		1,794,268
Road & Rail – 1.7%
Asciano Finance Ltd., 3.13%, 9/23/15 (a)	USD	12,620		12,805,375
CSX Corp.:
5.75%, 3/15/13		1,500		1,535,418
5.50%, 8/01/13		1,258		1,309,026
Penske Truck Leasing Co. LP/PTL Finance Corp.:
3.13%, 5/11/15 (a)		13,042		13,343,022
3.38%, 3/15/18 (a)		9,215		9,220,962
				38,213,803
Semiconductors & Semiconductor Equipment – 0.7%
Maxim Integrated Products, Inc., 3.45%, 6/14/13		7,950		8,105,335
Texas Instruments, Inc., 1.65%, 8/03/19		7,719		7,755,318
				15,860,653
Specialty Retail – 0.8%
AutoZone, Inc., 5.50%, 11/15/15		4,355		4,932,133
Best Buy Co., Inc., 7.00%, 7/15/13		3,180		3,274,138
Kingfisher Plc, 4.13%, 11/23/12	EUR	3,094		3,995,013
Staples, Inc., 9.75%, 1/15/14	USD	5,200		5,752,963
				17,954,247
Tobacco – 0.8%
B.A.T. International Finance Plc:
8.13%, 11/15/13 (a)		1,474		1,585,841
1.40%, 6/05/15 (a)		10,685		10,766,879
2.13%, 6/07/17 (a)		5,500		5,626,588
				17,979,308
Wireless Telecommunication Services – 2.2%
ADC Telecommunications, Inc., 3.50%, 7/15/15 (d)		23,513		23,984,671
America Movil SAB de CV, 2.38%, 9/08/16		3,170		3,298,667
Rogers Communications, Inc., 6.25%, 6/15/13		1,000		1,038,573
SBA Tower Trust, 4.25%, 4/15/15 (a)		3,540		3,728,919
Vodafone Group Plc, 1.25%, 9/26/17		16,438		16,460,158
				48,510,988
Total Corporate Bonds – 56.6%				1,268,206,132

See Notes to Financial Statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 45 

Schedule of Investments (continued)   BlackRock Low Duration Bond Portfolio (Percentages shown are based on Net Assets)

Foreign Agency Obligations – 0.2%	Par (000)		Value
Petrobras International Finance Co., 3.88%, 1/27/16	USD	4,865	$	5,146,246
Non-Agency Mortgage-Backed Securities
Collateralized Mortgage Obligations – 8.3%
Arkle Master Issuer Plc, Series 2011-1X, Class 2A, 1.68%, 5/17/60 (b)		2,250		2,270,880
Arran Residential Mortgages Funding Plc:
Series 2011-1A, Class A1C, 1.63%, 11/19/47 (a)(b)		2,595		2,605,561
Series 2011-1A, Class A2C, 1.88%, 11/19/47 (a)(b)		15,930		16,259,416
Banc of America Mortgage Securities, Inc., Series 2003-J, Class 2A1, 2.85%, 11/25/33 (b)		1,856		1,880,141
BCAP LLC Trust, Series 2010-RR6, Class 9A6, 0.57%, 7/26/37 (a)(b)		4,050		3,818,299
Bear Stearns Adjustable Rate Mortgage Trust:
Series 2004-5, Class 2A, 3.35%, 7/25/34 (b)		2,536		2,517,530
Series 2004-7, Class 4A, 3.08%, 10/25/34 (b)		1,821		1,742,481
BlackRock Capital Finance LP, Series 1997-R2, Class AP, 1.24%, 12/25/35 (a)(b)(f)		47		46,989
Countrywide Home Loan Mortgage Pass-Through Trust:
Series 2004-29, Class 1A1, 0.76%, 2/25/35 (b)		1,102		993,683
Series 2005-17, Class 1A6, 5.50%, 9/25/35		5,497		5,497,280
Series 2005-HYB8, Class 2A1, 3.02%, 12/20/35 (b)		2,463		1,942,320
First Horizon Mortgage Pass- Through Trust, Series 2004-AR7, Class 1A1, 2.63%, 2/25/35 (b)		468		460,235
Fosse Master Issuer Plc, Series 2012-1X, Class 2A3, 2.26%, 10/18/54 (b)	GBP	12,730		21,022,483
Gosforth Funding Plc:
Series 2011-1, Class A1A, 2.07%, 4/24/47 (b)		1,717		2,784,018
Series 2012-1, Class A, 2.19%, 12/19/47 (b)		3,860		6,391,788
GS Mortgage Securities Corp. II, Series 2000-1A, Class A, 0.92%, 3/20/23 (a)(b)	USD	246		207,719
Holmes Master Issuer Plc:
Series 2010-1A, Class A2, 1.86%, 10/15/54 (a)(b)		2,880		2,911,164
Series 2010-1X, Class A2, 1.86%, 10/15/54 (b)		9,030		9,127,714
Series 2010-1X, Class A3, 1.90%, 10/15/54 (b)	EUR	5,040		6,547,434
Series 2011-1A, Class A2, 1.81%, 10/15/54 (a)(b)	USD	13,465		13,635,184
Series 2011-1X, Class A3, 1.85%, 10/15/54 (b)	EUR	6,275		8,172,482
Series 2011-3A, Class A2, 2.01%, 10/21/54 (a)(b)	USD	5,359		5,465,623
Series 2011-3X, Class A2, 2.01%, 10/15/54 (b)		6,950		7,088,277
Series 2012-1X, Class A2, 2.11%, 10/15/54 (b)		5,740		5,880,980
HomeBanc Mortgage Trust, Series 2005-3, Class A1, 0.46%, 7/25/35 (b)		4,268		3,560,400
JPMorgan Mortgage Trust, Series 2004-A1, Class 2A1, 2.49%, 2/25/34 (b)		71		72,976

Non-Agency Mortgage-Backed Securities	Par (000)		Value
Collateralized Mortgage Obligations (concluded)
Lanark Master Issuer Plc, Series 2012-2A, Class 1A, 1.83%, 12/22/54 (a)(b)	USD	7,790	$	7,963,273
MortgageIT Trust, Series 2004-1, Class A1, 1.00%, 11/25/34 (b)		4,162		3,955,807
Opteum Mortgage Acceptance Corp., Series 2005-4, Class 1A1B, 0.50%, 11/25/35 (b)		2,840		2,813,518
Permanent Master Issuer Plc:
Series 2006-1, Class 6A1, 0.95%, 4/15/20 (b)	GBP	11,625		18,768,804
Series 2010-1A, Class 1A, 1.61%, 7/15/42 (a)(b)	USD	8,220		8,245,030
Residential Asset Securitization Trust, Series 2005-A5, Class A12, 0.52%, 5/25/35 (b)		2,204		2,027,213
Structured Adjustable Rate Mortgage Loan Trust, Series 2004-13, Class A2, 0.52%, 9/25/34 (b)		2,201		1,761,900
Structured Mortgage Asset Residential Trust, Series 1991-1, Class H, 8.25%, 6/25/22		2		2,171
Superannuation Members Home Loans Global Fund, Series 2007-1, Class A2, 0.34%, 6/12/40 (b)	EUR	5,205		6,608,540
Walsh Acceptance, Series 1997-2, Class A, 2.22%, 3/01/27 (a)(b)	USD	22		4,391
				185,053,704
Commercial Mortgage-Backed Securities – 10.8%
Banc of America Merrill Lynch Commercial Mortgage, Inc., Series 2004-1, Class A4, 4.76%, 11/10/39		4,985		5,195,507
Bear Stearns Commercial Mortgage Securities, Series 2007-PW17, Class A3, 5.74%, 6/11/50		6,862		7,170,971
Citigroup/Deutsche Bank Commercial Mortgage Trust, Series 2007-CD4, Class A2B, 5.21%, 12/11/49		302		307,532
Commercial Mortgage Pass-Through Certificates:
Series 2001-J2A, Class A2, 6.10%, 7/16/34 (a)		46		46,407
Series 2007-C4, Class A3, 5.96%, 9/15/39 (b)		9,375		9,794,831
Series 2007-C5, Class AAB, 5.62%, 9/15/40 (b)		6,887		7,383,413
Series 2008-C1, Class A2, 6.41%, 2/15/41 (b)		5,592		5,913,935
Series 2010-C1, Class A1, 3.16%, 7/10/46 (a)		11,638		12,340,626
DBUBS Mortgage Trust, Series 2011-LC1A, Class A1, 3.74%, 11/10/46 (a)		8,160		8,870,736
Deutsche Bank ReREMIC Trust:
Series 2011-C32, Class A3A, 5.94%, 6/17/49 (a)(b)		14,940		17,317,402
Series 2012-EZ1, Class A, 0.95%, 9/24/45 (a)		11,305		11,325,314
Extended Stay America Trust, Series 2010-ESHA, Class A, 2.95%, 11/05/27 (a)		20,015		20,081,208
GMAC Commercial Mortgage Securities, Inc., Series 2004-C2, Class A4, 5.30%, 8/10/38 (b)		12,505		13,444,713
GS Mortgage Securities Corp. II:
Series 2006-GG6, Class A2, 5.51%, 4/10/38 (b)		2,672		2,742,212
Series 2006-GG8, Class A2, 5.48%, 11/10/39		943		958,583

See Notes to Financial Statements.

 46   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Schedule of Investments (continued)   BlackRock Low Duration Bond Portfolio (Percentages shown are based on Net Assets)

Non-Agency Mortgage-Backed Securities	Par (000)		Value
Commercial Mortgage-Backed Securities (concluded)
JPMorgan Chase Commercial Mortgage Securities Corp.:
Series 2004-LN2, Class A2, 5.12%, 7/15/41	USD	10,925	$	11,618,410
Series 2007-LD11, Class A2, 5.99%, 6/15/49 (b)		5,469		5,648,564
Series 2007-LD11, Class ASB, 6.00%, 6/15/49 (b)		6,364		6,959,261
Series 2007-LD12, Class A2, 5.83%, 2/15/51		6,022		6,170,398
LB-UBS Commercial Mortgage Trust, Series 2007-C6, Class A4, 5.86%, 7/15/40 (b)		12,540		14,821,941
LCP Proudreed Plc, Series 1, Class A, 0.95%, 8/25/16 (b)	GBP	3,337		4,822,742
Merrill Lynch Mortgage Trust:
Series 2003-KEY1, Class A4, 5.24%, 11/12/35 (b)	USD	9,190		9,562,103
Series 2004-KEY2, Class A4, 4.86%, 8/12/39 (b)		10,135		10,828,457
Morgan Stanley Capital I, Inc.:
Series 2012-C4, Class C, 5.71%, 3/15/45 (a)(b)		1,500		1,656,264
Series 2012-C4, Class D, 5.71%, 3/15/45 (a)(b)		2,000		1,994,606
Morgan Stanley ReREMIC Trust:
Series 2009-GG10, Class A4A, 5.98%, 8/12/45 (a)(b)		7,260		8,528,068
Series 2010-GG10, Class A4A, 5.98%, 8/15/45 (a)(b)		7,260		8,528,068
Series 2010-R5, Class 5A, 0.49%, 1/26/37 (a)(b)		2,057		2,012,789
Series 2011-IO, Class A, 2.50%, 3/23/51 (a)		1,836		1,851,221
ORES NPL LLC, Series 2012-LV1, Class A, 4.00%, 9/25/44 (a)		5,130		5,172,579
WFRBS Commercial Mortgage Trust, Series 2011-C2, Class A2, 3.79%, 2/15/44 (a)		8,865		9,662,229
Windermere CMBS Plc, Series XI-X, Class A, 0.87%, 4/24/17 (b)	GBP	6,968		10,548,427
				243,279,517
Interest Only Commercial Mortgage-Backed Securities – 1.4%
Commercial Mortgage Pass- Through Certificates, Series 2012-CR2, Class XA, 2.14%, 8/15/45 (b)	USD	18,618		2,354,412
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2012-C5, Class XA, 2.10%, 8/15/45 (a)(b)		86,430		9,843,279
UBS-Barclays Commercial Mortgage Trust, Series 2012-C2, Class XA, 2.00%, 5/10/63 (a)(b)		58,719		6,292,395
WaMu Commercial Mortgage Securities Trust, Series 2005-C1A, Class X, 1.35%, 5/25/36 (a)(b)		10,773		190,890
Wells Fargo Reremic Trust, Series 2012-IO, Class A, 1.75%, 8/20/21 (a)		8,439		8,407,539
WFRBS Commercial Mortgage Trust, Series 2012-C8, Class XA, 2.42%, 8/15/45 (a)(b)		33,085		4,474,509
				31,563,024
Total Non-Agency Mortgage-Backed Securities – 20.5%				459,896,245

Project Loans – 0.0%	Par (000)		Value
Federal Housing Authority, Merrill Lynch Project, Pool 42, 7.43%, 9/25/22	USD	4	$	3,573
Taxable Municipal Bonds
Citizens Property Insurance Corp. RB, Series A3, 1.93%, 6/01/13 (b)		10,640		10,705,436
New York City Industrial Development Agency RB, 8.00%, 8/01/12 (g)(h)		9,800		9,800,000
State of California GO:
5.10%, 8/01/14		2,240		2,341,629
3.95%, 11/01/15		2,375		2,575,925
State of California Various Purposes GO, 5.65%, 4/01/39 (b)		8,870		9,101,596
State of Illinois GO, 4.07%, 1/01/14		3,360		3,483,077
Total Taxable Municipal Bonds – 1.7%				38,007,663
U.S. Government Sponsored Agency Securities
Agency Obligations – 1.2%
Fannie Mae, 1.09%, 4/04/16 (e)		19,545		19,624,998
Federal Home Loan Bank:
5.25%, 9/12/14 (e)		3,500		3,832,710
5.38%, 6/13/14 (e)		3,500		3,802,057
				27,259,765
Collateralized Mortgage Obligations – 2.7%
Fannie Mae:
Series 1997-20, Class FB, 0.62%, 3/25/27 (b)		725		715,751
Series 2002-T6, Class A1, 3.31%, 2/25/32		586		607,883
Series 2011-48, Class MG, 2.00%, 6/25/26 (c)		11,550		12,196,413
Series 2011-84, Class MG, 2.00%, 9/25/26 (c)		12,176		12,841,431
Freddie Mac:
Series 1165, Class LD, 7.00%, 11/15/21		392		442,041
Series 2577, Class UC, 5.00%, 2/15/18		613		656,224
Series 2724, Class PD, 5.00%, 4/15/21		30		30,098
Series 3710, Class MG, 2.00%, 8/15/25 (c)		5,369		5,658,803
Series 3959, Class MA, 4.50%, 11/15/41		11,213		12,363,416
Series 3986, Class M, 4.50%, 9/15/41		10,437		11,259,681
Ginnie Mae, Series 2006-6, Class C, 5.01%, 2/16/44 (b)		3,611		3,841,883
				60,613,624
Commercial Mortgage-Backed Securities – 0.0%
Freddie Mac Multi-Family Structured Pass-Through Certificates:
Series K003, Class A1, 2.23%, 7/25/13		69		69,537
Series K003, Class A2, 3.61%, 6/25/14		210		216,478
				286,015
Interest Only Collateralized Mortgage Obligations – 1.1%
Fannie Mae:
Series 2010-126, Class UI, 5.50%, 10/25/40		46,752		7,436,267
Series 2012-M9, Class X1, 4.25%, 12/25/17 (b)		74,163		13,154,552
Freddie Mac, Series K710, Class X1, 1.92%, 5/25/19 (b)		46,928		4,587,058
				25,177,877

See Notes to Financial Statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 47 

Schedule of Investments (continued)   BlackRock Low Duration Bond Portfolio (Percentages shown are based on Net Assets)

U.S. Government Sponsored Agency Securities	Par (000)		Value
Mortgage-Backed Securities – 24.8%
Fannie Mae Mortgage-Backed Securities:
2.50%, 10/01/27 (i)	USD	168,860	$	177,303,069
3.00%, 10/01/27-10/01/42 (i)		94,210		99,732,972
4.50%, 10/01/42 (i)		122,340		132,394,819
4.54%, 4/01/14 (e)		5,336		5,626,652
5.00%, 4/01/21		13		13,839
5.50%, 6/01/20-10/01/21 (e)		3,409		3,726,883
6.00%, 2/01/17-10/01/42 (i)		121,824		134,474,720
6.50%, 4/01/21		936		1,022,973
7.00%, 3/01/15-11/01/17		547		584,109
7.50%, 4/01/15-8/01/16		346		370,818
				555,250,854
Total U.S. Government Sponsored Agency Securities – 29.8%				668,588,135
U.S. Treasury Obligations
U.S. Treasury Notes:
0.25%, 1/31/14-4/30/14 (e)		72,340		72,371,989
0.13%, 7/31/14 (e)		67,800		67,659,654
1.25%, 8/31/15 (e)		108,500		111,449,898
1.00%, 3/31/17 (e)		11,760		11,995,200
0.88%, 4/30/17 (e)		47,720		48,394,808
0.50%, 7/31/17 (e)		52,775		52,515,241
0.63%, 8/31/17 (e)		65,100		65,140,687
3.63%, 8/15/19 (e)		21,750		25,546,049
Total U.S. Treasury Obligations – 20.3%				455,073,526
Total Long-Term Investments (Cost – $3,224,117,348) – 145.7%				3,264,695,718
Short-Term Securities
Commercial Paper – 0.1%
BP Capital Markets Plc, 0.81%, 2/11/13		675		674,513
Total Short-Term Securities (Cost – $673,005) – 0.1%				674,513
Options Purchased	Notional Amount (000)
Over-the-Counter Interest Rate Call Swaptions – 0.0%
Receive a fixed rate of 1.35% and pay a floating rate based on 3-month LIBOR, Expires 10/15/12, Broker Citigroup, Inc.		75,000		413

Options Purchased	Notional Amount (000)		Value
Over-the-Counter Interest Rate Put Swaptions – 0.0%
Pay a fixed rate of 1.85% and receive floating rate based on 3-month LIBOR, Expires 4/17/13, Broker Goldman Sachs Group, Inc.	USD	150,000	$	87,105
Total Options Purchased (Cost – $1,759,000) – 0.0%				87,518
Total Investments Before TBA Sale Commitments and Options Written (Cost – $3,226,549,353) – 145.8%				3,265,457,749
TBA Sale Commitments (i)	Par (000)
Fannie Mae Mortgage-Backed Securities:
2.50%, 10/01/27		64,980		(68,310,225	)
3.00%, 10/01/27-10/01/42		73,810		(78,204,597	)
4.50%, 10/01/42		122,340		(132,394,819	)
6.00%, 10/01/42		81,200		(89,649,875	)
Total TBA Sale Commitments (Proceeds – $367,800,990) – (16.5)%				(368,559,516	)
Options Written	Notional Amount (000)
Over-the-Counter Interest Rate Call Swaptions – (0.0)%
Pay a fixed rate of 1.00% and receive a floating rate based on 3-month LIBOR, Expires 7/11/14, Broker Deutsche Bank AG		110,000		(644,798	)
Over-the-Counter Interest Rate Put Swaptions – (0.1)%
Receive a fixed rate of 2.00% and pay a floating rate based on 3-month LIBOR, Expires 7/11/14, Broker Deutsche Bank AG		110,000		(944,229	)
Total Options Written (Premiums Received – $2,167,000) – (0.1)%				(1,589,027	)
Total Investments Net of TBA Sale Commitments and Options Written – 129.2%				2,895,309,206
Liabilities in Excess of Other Assets – (29.2)%				(655,073,424	)
Net Assets – 100.0%			$	2,240,235,782

(a) Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration to qualified institutional investors.

(b) Variable rate security. Rate shown is as of report date.

(c) Represents a step-up bond that pays an initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown is as of report date.

(d) Convertible security.

(e) All or a portion of security has been pledged as collateral in connection with open reverse repurchase agreements.

See Notes to Financial Statements.
48	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

Schedule of Investments (continued)   BlackRock Low Duration Bond Portfolio

(f) Investments in issuers considered to be an affiliate of the Fund during the year ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/Par Held at September 30, 2011		Shares/Par Purchased		Shares/Par Sold			Shares/Par Held at September 30, 2012		Value at September 30, 2012			Income			Realized Gain
BlackRock Liquidity Funds, TempFund, Institutional Class		21,497,909		–		(21,497,909	)1		–			–		$	32,891			–
BlackRock Capital Finance LP, Series 1997-R2, Class AP		50,037		–		(3,048	)		46,989		$	46,989		$	831		$	272

¹ Represents net shares sold.

(g) Non-income producing security.

(h) Issuer filed for bankruptcy and/or is in default of principal and/or interest payments.

(i) Represents or includes a TBA transaction. Unsettled TBA transactions as of September 30, 2012 were as follows:

Counterparty	Value				Unrealized Appreciation (Depreciation)
Barclays Plc		$	1,899,563			$	(2,531	)
Credit Suisse Group AG		$	(2,638,281	)		$	(12,895	)
Deutsche Bank AG		$	44,799,562			$	(142,164	)
Goldman Sachs Group, Inc.		$	(22,181,375	)		$	(331,336	)
JPMorgan Chase & Co.		$	48,385,625			$	662,309
Morgan Stanley		$	105,055,687			$	1,207,298
Royal Bank of Scotland Group Plc			–			$	(10,278	)

— 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. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

— Reverse repurchase agreements outstanding as of September 30, 2012 were as follows:

Counterparty	Interest Rate			Trade Date		Maturity Date	Face Value			Face Value Including Accrued Interest
Bank of America Corp.		0.21	%		6/05/12	Open		$	19,524,375		$	19,537,814
Bank of America Corp.		0.19	%		6/19/12	Open			9,890,000			9,895,429
Deutsche Bank AG		0.11	%		7/19/12	Open			48,435,800			48,446,752
Citigroup, Inc.		0.12	%		7/19/12	Open			43,003,688			43,014,296
Credit Suisse Group AG		0.20	%		8/21/12	Open			5,486,782			5,488,032
Credit Suisse Group AG		0.20	%		8/21/12	Open			3,635,226			3,636,054
Deutsche Bank AG		0.20	%		8/22/12	Open			19,691,587			19,695,963
BNP Paribas SA		0.24	%		8/23/12	Open			3,832,500			3,833,496
BNP Paribas SA		0.24	%		8/23/12	Open			3,924,375			3,925,395
UBS AG		0.34	%		8/23/12	Open			5,966,000			5,968,197
Bank of America Corp.		0.26	%		9/13/12	Open			67,630,500			67,639,292
Bank of America Corp.		0.25	%		9/18/12	Open			52,379,188			52,383,917
Bank of America Corp.		0.11	%		9/28/12	10/01/12			65,181,375			65,181,972

Counterparty	Interest Rate			Trade Date		Maturity Date	Face Value			Face Value Including Accrued Interest
BNP Paribas SA		0.26	%		9/28/12	Open		$	25,692,187		$	25,692,744
Bank of America Corp.		0.27	%		9/28/12	Open			59,595,000			59,596,341
Deutsche Bank AG		0.28	%		9/28/12	Open			12,054,000			12,054,281
Total								$	445,922,583		$	445,989,975

— Foreign currency exchange contracts as of September 30, 2012 were as follows:

Currency Purchased		Currency Sold		Counterparty	Settlement Date	Unrealized Appreciation (Depreciation)
GBP	7,869,000	USD	12,336,837	Citigroup, Inc.	10/17/12	$	369,282
GBP	18,000	USD	29,180	UBS AG	10/17/12		(116	)
NOK	89,550,000	USD	14,789,122	Credit Suisse Group AG	10/17/12		830,909
USD	12,995,611	EUR	10,600,000	BNP Paribas SA	10/17/12		(628,578	)
USD	5,462,951	GBP	3,393,000	Citigroup, Inc.	10/17/12		(15,746	)
USD	4,373,868	GBP	2,801,000	Credit Suisse Group AG	10/17/12		(148,923	)
USD	19,829,266	GBP	12,775,000	Deutsche Bank AG	10/17/12		(798,600	)
USD	44,756,295	GBP	28,830,500	UBS AG	10/17/12		(1,796,477	)
USD	4,902,835	GBP	3,025,000	UBS AG	10/17/12		18,351
USD	14,917,926	NOK	89,550,000	UBS AG	10/17/12		(702,105	)
EUR	10,677,000	USD	13,931,360	Citigroup, Inc.	10/22/12		(207,498	)
EUR	1,866,000	USD	2,334,971	Citigroup, Inc.	10/22/12		63,524
EUR	285,000	USD	368,993	Deutsche Bank AG	10/22/12		(2,664	)
USD	56,259,301	EUR	45,888,500	Citigroup, Inc.	10/22/12		(2,724,257	)
Total						$	(5,742,898	)

— Financial futures contracts purchased as of September 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
1	Euro-Bund	Eurex	December 2012	USD	182,181		$ 772
38	U.S. Treasury Notes (2 Year)	Chicago Board Options	December 2012	USD	8,380,188		(181	)

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	49

Schedule of Investments (continued)   BlackRock Low Duration Bond Portfolio

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Appreciation (Depreciation)
7	Euro Dollar Futures	Chicago Mercantile	December 2012	USD	1,744,400		$    3,693
16	Euro Dollar Futures	Chicago Mercantile	March 2013	USD	3,987,000		8,840
30	Euro Dollar Futures	Chicago Mercantile	June 2013	USD	7,474,500		67,905
22	Euro Dollar Futures	Chicago Mercantile	September 2013	USD	5,480,750		35,884
28	Euro Dollar Futures	Chicago Mercantile	December 2013	USD	6,973,750		73,325
21	Euro Dollar Futures	Chicago Mercantile	March 2014	USD	5,229,263		37,757
12	Euro Dollar Futures	Chicago Mercantile	December 2014	USD	2,983,650		15,930
12	Euro Dollar Futures	Chicago Mercantile	March 2015	USD	2,982,000		19,080
Total							$263,005

— Financial futures contracts sold as of September 30, 2012 were as follows:

Contracts	Issue	Exchange	Expiration	Notional Value		Unrealized Depreciation
2,297	U.S. Treasury Notes (5 Year)	Chicago Board Options	December 2012	USD	286,281,571		$(780,081	)
1	U.S. Treasury Notes (10 Year)	Chicago Board Options	December 2012	USD	133,484		(764	)
Total							$(780,845	)

— Interest rate swaps outstanding as of September 30, 2012 were as follows:

Fixed Rate	Floating Rate	Counterparty	Expiration Date	Notional Amount (000)		Unrealized Appreciation (Depreciation)
0.56%1	3-month LIBOR	Morgan Stanley	5/10/14	USD	185,000	$	869,290
1.33%1	3-month CBA	Deutsche Bank AG	6/06/14	CAD	117,100		2,844
1.37%1	3-month CBA	Goldman Sachs Group, Inc.	6/07/14	CAD	117,000		49,011

Fixed Rate	Floating Rate	Counterparty	Expiration Date	Notional Amount (000)		Unrealized Appreciation (Depreciation)
1.32%1	3-month CBA	Deutsche Bank AG	7/05/14	CAD	232,800	$	(47,178	)
0.43%2	3-month LIBOR	Credit Suisse Group AG	8/03/14	USD	64,950		(65,147	)
0.43%2	3-month LIBOR	Deutsche Bank AG	8/03/14	USD	67,800		(74,773	)
1.61%2	3-month CBA	Deutsche Bank AG	6/06/16	CAD	59,800		15,753
1.70%2	3-month CBA	Goldman Sachs Group, Inc.	6/07/16	CAD	60,000		(94,022	)
1.67%2	3-month CBA	Deutsche Bank AG	7/05/16	CAD	120,000		(82,712	)
1.08%2	3-month LIBOR	Morgan Stanley	5/10/17	USD	74,900		(1,584,930	)
1.15%2	6-month EURIBOR	Citigroup, Inc.	7/11/17	EUR	20,500		(279,332	)
1.85%1	3-month STIBOR	Citigroup, Inc.	7/11/17	SEK	176,000		256,413
Total							$(1,034,783	)

¹  Fund pays the floating rate and receives the fixed rate.

²  Fund pays the fixed rate and receives the floating rate.

— Credit default swaps on single-name issues – buy protection outstanding as of September 30, 2012 were as follows:

Issuer	Pay Fixed Rate			Counterparty	Expiration Date	Notional Amount (000)		Unrealized Appreciation (Depreciation)
Hershey Foods Co.		1.00	%	Credit Suisse Group AG	12/20/14	USD	2,900	$	(45,971	)
CBS Corp.		1.00	%	Citigroup, Inc.	6/20/17	USD	3,885		(55,164	)
The Allstate Corp.		1.00	%	Deutsche Bank AG	6/20/17	USD	4,744		(40,518	)
CBS Corp.		1.00	%	Goldman Sachs Group, Inc.	6/20/17	USD	1,328		(32,985	)
CBS Corp.		1.00	%	JPMorgan Chase & Co.	6/20/17	USD	2,987		(68,928	)
Viacom, Inc.		1.00	%	JPMorgan Chase & Co.	6/20/17	USD	10,650		(71,457	)
The Allstate Corp.		1.00	%	Morgan Stanley	6/20/17	USD	5,906		(42,117	)
General Electric Capital Corp.		1.00	%	Bank of America Corp.	9/20/17	USD	11,200		(146,115	)
Nabors Industries Ltd.		1.00	%	Bank of America Corp.	9/20/17	USD	11,200		(220,576	)

See Notes to Financial Statements.
50	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Schedule of Investments (continued)   BlackRock Low Duration Bond Portfolio

Issuer	Pay Fixed Rate	Counterparty	Expiration Date	Notional Amount (000)		Unre- alized Appre- ciation (Depre- ciation)
General Dynamics Corp.	1.00%	Credit Suisse Group AG	9/20/17	USD	5,410	$	(18,210	)
Lockheed Martin Corp.	1.00%	Credit Suisse Group AG	9/20/17	USD	5,410		(38,151	)
Morgan Stanley	1.00%	Credit Suisse Group AG	9/20/17	USD	11,200		(585,979	)
Northrop Grumman Corp.	1.00%	Credit Suisse Group AG	9/20/17	USD	5,410		(18,393	)
Raytheon Co.	1.00%	Credit Suisse Group AG	9/20/17	USD	5,410		(15,613	)
Australia & New Zealand Banking Group Ltd.	1.00%	Deutsche Bank AG	9/20/17	USD	5,628		(71,904	)
Commonwealth Bank of Australia	1.00%	Deutsche Bank AG	9/20/17	USD	11,400		(144,746	)
ConAgra Foods, Inc.	1.00%	Deutsche Bank AG	9/20/17	USD	11,000		44,959
National Australia Bank Ltd.	1.00%	Deutsche Bank AG	9/20/17	USD	11,400		(128,614	)
Westpac Banking Corp.	1.00%	Deutsche Bank AG	9/20/17	USD	5,628		(70,294	)
Safeway, Inc.	1.00%	JPMorgan Chase & Co.	9/20/17	USD	2,170		(42,095	)
Total						$	(1,812,871	)

— Credit default swaps on single-name issues – sold protection outstanding as of September 30, 2012 were as follows:

Issuer	Receive Fixed Rate	Counte- rparty	Expir- ation Date	Issuer Credit Rating1	Notional Amount (000)2		Unre- alized Appre- ciation
Republic of Turkey	0.25%	Citigroup, Inc.	12/20/12	BB	USD	13,720	$	5,606
Travelers Co., Inc.	1.00%	Deutsche Bank AG	6/20/17	A	USD	4,744		32,034
Comcast Corp.	1.00%	JPMorgan Chase & Co.	6/20/17	BBB+	USD	10,650		22,799
Travelers Co., Inc.	1.00%	Morgan Stanley	6/20/17	A	USD	5,906		34,222
United Technologies Corp.	1.00%	Credit Suisse Group AG	9/20/17	A	USD	22,340		83,404
Verizon Communi- cations, Inc.	1.00%	Credit Suisse Group AG	9/20/17	A-	USD	22,340		174,992

Issuer	Receive Fixed Rate	Counterparty	Expiration Date		Issuer Credit Rating1	Notional Amount (000)2		Unre- alized Appre- ciation
Aetna, Inc.	1.00%	JPMorgan Chase & Co.		9/20/17	A-	USD	22,320	$	68,337
Pfizer, Inc.	1.00%	JPMorgan Chase & Co.		9/20/17	AA	USD	22,460		46,718
Total								$	468,112

¹  Using S&P’s rating.

² The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

— Credit default swaps on traded indexes - buy protection outstanding as of September 30, 2012 were as follows:

Index	Pay Fixed Rate	Counterparty	Expiration Date		Notional Amount (000)		Unrealized Appreciation (Depreciation)
CDX.NA.IG Series 16 Version 1	1.00%	Morgan Stanley		6/20/16	USD	27,900	$	(176,297	)
MCDX.NA Series 16 Version 1	1.00%	Morgan Stanley		6/20/21	USD	16,000		298,261
Total							$	121,964

— Credit default swaps on traded indexes – sold protection outstanding as of September 30, 2012 were as follows:

Index	Receive Fixed Rate	Counte- rparty	Expir- ation Date	Average Credit Rating1	Notional Amount (000)2		Unre- alized Appre- ciation
CDX.NA.IG Series 16 Version 1	1.00%	Morgan Stanley	6/20/16	BBB+	USD	20,800	$	434,970
CDX.NA.IG Series 16 Version 1	1.00%	Morgan Stanley	6/20/16	BBB+	USD	7,100		125,504
MCDX.NA Series 14	0.00%	Goldman Sachs Group, Inc.	6/20/20	AA	USD	8,000		734,828
Total							$	1,295,302

¹  Using S&P’s rating of the underlying securities.

²  The maximum potential amount the Fund may pay should a negative credit event take place as defined under the terms of the agreement.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	51

Schedule of Investments (continued)   BlackRock Low Duration Bond Portfolio

• Total return swaps outstanding as of September 30, 2012 were as follows:

Reference Entity	Floating Rate	Counterparty	Expiration Date	Notional Amount (000)		Unrealized Appreciation (Depreciation)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR1	Barclays Plc	1/12/40	USD	9,504	$	(17,820	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR2	JPMorgan Chase & Co.	1/12/40	USD	21,055		(14,608	)
Return on Markit IOS 4.50%, 30-year, fixed rate Fannie Mae	1-month LIBOR2	Barclays Plc	1/12/41	USD	9,483		17,781
Total						$	(14,647	)

¹  Fund pays the total return of the reference entity and receives the floating rate.

²  Fund pays the floating rate and receives the total return of the reference entity.

• Fair Value Measurements – Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

• Level 1 – unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

• Level 2 – other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

• Level 3 – unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the year. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of September 30, 2012:

	Level 1	Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities	–	$	350,534,203	$	15,752,501	$	366,286,704
Capital Trusts	–		3,487,494		–		3,487,494
Corporate Bonds	–		1,255,991,132		12,215,000		1,268,206,132
Foreign Agency Obligations	–		5,146,246		–		5,146,246

	Level 1	Level 2			Level 3		Total
Non-Agency Mortgage-Backed Securities	–	$	434,990,813		$	24,905,432	$	459,896,245
Project Loans	–		–			3,573		3,573
Taxable Municipal Bonds	–		38,007,663			–		38,007,663
U.S. Government Sponsored Agency Securities	–		668,588,135			–		668,588,135
U.S. Treasury Obligations	–		455,073,526			–		455,073,526
Short-Term Securities	–		674,513			–		674,513
Liabilities:
Investments in Securities:
TBA Sale Commitments	–		(368,559,516	)		–		(368,559,516	)
Total	–	$	2,843,934,209		$	52,876,506	$	2,896,810,715

	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments1
Assets:
Credit contracts		–		$	1,371,806		$	734,828	$	2,106,634
Foreign currency exchange contracts		–			1,282,066			–		1,282,066
Interest rate contracts	$	263,186			1,298,610			–		1,561,796
Liabilities:
Credit contracts		–			(2,034,127	)		–		(2,034,127	)
Foreign currency exchange contracts		–			(7,024,964	)		–		(7,024,964	)
Interest rate contracts		(781,026	)		(3,849,549	)		–		(4,630,575	)
Total	$	(517,840	)	$	(8,956,158	)	$	734,828	$	(8,739,170	)

¹  Derivative financial instruments are swaps, financial futures contracts, foreign currency exchange contracts and options. Swaps, financial futures contracts and foreign currency exchange contracts are valued at the unrealized appreciation/ depreciation on the instrument and options are shown at value.

See Notes to Financial Statements.
52	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

Schedule of Investments (concluded)   BlackRock Low Duration Bond Portfolio

Certain of the Fund’s assets and liabilities are held at carrying amount or face value, which approximates fair value for financial statement purposes. As of September 30, 2012, such assets and liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2	Level 3	Total
Assets:
Cash	$	7,592,400	–	–	$	7,592,400
Foreign currency at value		1,821,311	–	–		1,821,311
Cash pledged as collateral for financial futures contracts		1,566,000	–	–		1,566,000
Cash pledged as collateral for swap contracts		4,600,000	–	–		4,600,000

	Level 1		Level 2			Level 3	Total
Liabilities:
Reverse repurchase agreements		–	$	(445,922,583	)	–	$	(445,922,583	)
Cash received as collateral for swap contracts		–		(900,000	)	–		(900,000	)
Total	$	15,579,711	$	(446,822,583	)	–	$	(431,242,872	)

There were no transfers between Level 1 and Level 2 during the year ended September 30, 2012.

Certain of the Fund’s investments and derivative financial instruments are categorized as Level 3 and were valued utilizing transaction prices or third party pricing information without adjustment. Such valuations are based on unobservable inputs. A significant change in the unobservable inputs could result in a significantly lower or higher value in such Level 3 investments and derivative financial instruments.

A reconciliation of Level 3 investments and derivative financial instruments is presented when the Fund had a significant amount of Level 3 investments and derivative financial instruments at the beginning and/or end of the year in relation to net assets. The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used in determining fair value:

	Asset-Backed Securities				Corporate Bonds				Non-Agency Mortgage-Backed Securities				Project Loans				Total
Assets:
Opening Balance, as of September 30, 2011		$	34,799,782				–			$	3,533,037			$	3,929			$	38,336,748
Transfers into Level 32			–				–				–				–				–
Transfers out of Level 32			(32,021,920	)			–				(3,533,037	)			–				(35,554,957	)
Accrued discounts/premiums			(6,185	)		$	(1,458	)			1,320				(27	)			(6,350	)
Net realized gain (loss)			(318	)			–				925				13				620
Net change in unrealized appreciation/depreciation3			485,654				(2,207	)			30,236				(33	)			513,650
Purchases			14,243,496				12,218,665				25,128,066				–				51,590,227
Sales			(1,748,008	)			–				(255,115	)			(309	)			(2,003,432	)
Closing Balance, as of September 30, 2012		$	15,752,501			$	12,215,000			$	24,905,432			$	3,573			$	52,876,506

²  Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period. As of September 30, 2011, the Fund used significant unobservable inputs in determining the value of certain investments. As of September 30, 2012, the Fund used observable inputs in determining the value on the same investments. As a result, investments with a beginning of period value of $35,554,957 transferred from Level 3 to Level 2 in the disclosure hierarchy.

³  Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on investments still held as of September 30, 2012 was $303,288.

The following table is a reconciliation of Level 3 derivative financial instruments for which significant unobservable inputs were used in determining fair value:

	Credit Contracts
	Assets			Liabilities	Total
Opening Balance, as of September 30, 2011	$	133,104		–	$	133,104
Transfers into Level 34		–		–		–
Transfers out of Level 34		–		–		–
Accrued discounts/premiums		–		–		–
Net realized gain (loss)		110,785		–		110,785
Net change in unrealized appreciation/ depreciation5		601,724		–		601,724
Purchases.		–		–		–
Issues6		–		–		–
Sales		(110,785	)	–		(110,785	)
Settlements7		–		–		–
Closing Balance, as of September 30, 2012	$	734,828		–	$	734,828

⁴  Transfers into and transfers out of Level 3 represent the values as of the beginning of the reporting period.

⁵  Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations. The change in unrealized appreciation/depreciation on swaps still held as of September 30, 2012 was $616,878.

⁶  Issues represent upfront cash received on certain derivative financial instruments.

⁷  Settlements represent periodic contractual cash flows and/or cash flows to terminate certain derivative financial instruments.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	53

Statements of Assets and Liabilities

September 30, 2012	BlackRock Core Bond Portfolio			BlackRock High Yield Bond Portfolio1			BlackRock Low Duration Bond Portfolio
Assets
Investments at value – unaffiliated2	$	6,215,516,695		$	9,310,315,423		$	3,265,410,760
Investments at value – affiliated3		–			211,929,286			46,989
Cash		4,947,289			9,948,907			7,592,400
Cash pledged as collateral for financial futures contracts		5,280,000			9,774,000			1,566,000
Cash pledged as collateral for swap contracts		26,030,000			310,000			4,600,000
Foreign currency at value4		8,508,824			20,058,886			1,821,311
Variation margin receivable		242,720			864,270			8,791
Investments sold receivable		167,628,243			54,846,388			81,180,806
TBA sale commitments receivable		2,344,767,996			–			367,800,990
Swap premiums paid		333,615			5,133,053			6,226,361
Unrealized appreciation on foreign currency exchange contracts		1,472,767			163,522			1,282,066
Unrealized appreciation on swaps		3,937,819			17,023,092			3,317,726
Capital shares sold receivable		6,061,684			38,124,535			11,939,833
Interest receivable		20,546,964			146,196,139			19,282,077
Receivable from Manager		6,650			423,802			58,226
Principal paydown receivable		14,598			–			–
Dividends receivable – affiliated		–			44,118			1,797
Prepaid expenses		103,536			278,462			100,250
Other assets		–			5,269,465			–
Total assets		8,805,399,400			9,830,703,348			3,772,236,383
Liabilities
Options written at value5		29,391,868			–			1,589,027
TBA sale commitments at value6		2,350,840,078			–			368,559,516
Reverse repurchase agreements		481,293,756			–			445,922,583
Cash received as collateral for swap contracts		300,000			14,900,000			900,000
Variation margin payable		2,008,156			–			82,865
Investments purchased payable		2,728,629,617			429,694,370			671,409,996
Swap premiums received		3,789,727			5,272,088			5,295,646
Unrealized depreciation on foreign currency exchange contracts		4,130,002			27,045,043			7,024,964
Unrealized depreciation on swaps		2,317,715			2,340,702			4,294,649
Interest expense payable		7,021			–			67,392
Income dividends payable		3,139,209			14,262,709			1,580,723
Capital shares redeemed payable		4,618,373			40,072,983			22,924,227
Service and distribution fees payable		353,123			1,235,568			426,890
Investment advisory fees payable		957,592			3,147,399			596,289
Other affiliates payable		307,253			594,901			149,355
Officer’s and Trustees’ fees payable		16,796			35,611			12,966
Foreign taxes payable		–			470,269			–
Other accrued expenses payable		1,559,621			3,707,759			1,163,513
Total liabilities		5,613,659,907			542,779,402			1,532,000,601
Net Assets	$	3,191,739,493		$	9,287,923,946		$	2,240,235,782
Net Assets Consist of
Paid-in capital	$	3,214,748,572		$	9,359,259,614		$	2,314,345,877
Undistributed (distribution in excess of) net investment income		(1,633,767	)		49,877,584			8,099,944
Accumulated net realized loss		(138,307,555	)		(346,397,823	)		(113,714,947	)
Net unrealized appreciation/depreciation		116,932,243			225,184,571			31,504,908
Net Assets	$	3,191,739,493		$	9,287,923,946		$	2,240,235,782
1 Consolidated Statement of Assets and Liabilities.
2 Investments at cost – unaffiliated	$	6,078,675,719		$	9,078,228,683		$	3,226,502,636
3 Investments at cost – affiliated	$	–		$	211,929,286		$	46,717
4 Foreign currency at cost	$	8,573,632		$	20,149,056		$	1,822,116
5 Premiums received	$	16,190,279		$	–		$	2,167,000
6 Proceeds from TBA sale commitments	$	2,344,767,996			–		$	367,800,990

See Notes to Financial Statements.
54	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

Statements of Assets and Liabilities (continued)

September 30, 2012	BlackRock Core Bond Portfolio		BlackRock High Yield Bond Portfolio1		BlackRock Low Duration Bond Portfolio
Net Asset Value
BlackRock
Net assets	$	643,884,969	$	897,434,640	$	310,878,589
Shares outstanding7		65,627,862		112,967,410		31,668,388
Net asset value	$	9.81	$	7.94	$	9.82
Institutional
Net assets	$	1,457,782,998	$	3,989,753,152	$	762,769,149
Shares outstanding7		148,982,138		502,432,150		77,632,923
Net asset value	$	9.78	$	7.94	$	9.83
Service
Net assets	$	238,247,037	$	304,707,200	$	263,552,449
Shares outstanding7		24,336,297		38,359,453		26,833,874
Net asset value	$	9.79	$	7.94	$	9.82
Investor A
Net assets	$	638,402,248	$	3,437,216,878	$	546,318,058
Shares outstanding7		65,156,573		432,831,670		55,633,985
Net asset value	$	9.80	$	7.94	$	9.82
Investor A1
Net assets		–		–	$	22,845,701
Shares outstanding7		–		–		2,323,995
Net asset value		–		–	$	9.83
Investor B
Net assets	$	5,894,406	$	7,471,978	$	3,670,112
Shares outstanding7		601,951		940,568		373,546
Net asset value	$	9.79	$	7.94	$	9.83
Investor B1
Net assets		–	$	20,236,328		–
Shares outstanding7		–		2,547,574		–
Net asset value		–	$	7.94		–

⁷Unlimited number of shares authorized, $ 0.001 par value.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	55

Statements of Assets and Liabilities (concluded)

September 30, 2012	BlackRock Core Bond Portfolio		BlackRock High Yield Bond Portfolio1		BlackRock Low Duration Bond Portfolio
Net asset value
Investor B3
Net assets				–	$	6,146,497
Shares outstanding7		–		–		625,440
Net asset value		–		–	$	9.83
Investor C
Net assets	$	206,568,036	$	498,541,445	$	268,260,905
Shares outstanding7		21,173,727		62,716,963		27,323,422
Net asset value	$	9.76	$	7.95	$	9.82
Investor C1
Net assets		–	$	100,403,805		–
Shares outstanding7		–		12,623,395		–
Net asset value		–	$	7.95		–
Investor C2
Net assets		–		–	$	13,838,284
Shares outstanding7		–		–		1,409,121
Net asset value		–		–	$	9.82
Investor C3
Net assets		–		–	$	35,383,138
Shares outstanding7		–		–		3,603,791
Net asset value		–		–	$	9.82
Class R
Net assets	$	959,799	$	32,158,520	$	6,572,900
Shares outstanding7		97,886		4,050,316		669,321
Net asset value	$	9.81	$	7.94	$	9.82

⁷Unlimited number of shares authorized, $ 0.001 par value.

See Notes to Financial Statements.
56	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

Statements of Operations

Year Ended September 30, 2012	BlackRock Core Bond Portfolio			BlackRock High Yield Bond Portfolio1			BlackRock Low Duration Bond Portfolio
Investment Income
Interest – unaffiliated	$	118,138,563		$	478,820,625		$	65,587,829
Interest – affiliated		–			–			831
Dividends – unaffiliated		249,020			13,630,138			125
Dividends – affiliated		16,583			538,448			32,891
Total income		118,404,166			492,989,211			65,621,676
Expenses
Investment advisory		14,871,676			29,739,905			10,051,936
Service and distribution – class specific		4,183,630			12,486,178			5,146,132
Transfer agent – class specific		3,970,590			10,510,233			2,593,726
Administration		1,954,231			3,998,612			1,321,427
Custodian		646,529			352,586			153,902
Administration – class specific		640,020			939,152			514,847
Registration		228,575			758,386			193,123
Printing		126,128			485,844			120,995
Professional		107,499			361,835			76,534
Officer and Trustees		85,784			153,524			60,142
Miscellaneous		255,409			309,458			126,911
Recoupment of past waived fees – class specific		34,996			282,364			6,718
Total expenses excluding interest expense		27,105,067			60,378,077			20,366,393
Interest expense2		602,720			–			358,943
Total expenses		27,707,787			60,378,077			20,725,336
Less fees waived by Manager		(3,521,365	)		(279,590	)		(3,371,059	)
Less administration fees waived – class specific		(445,552	)		(360,230	)		(409,979	)
Less transfer agent fees waived – class specific		(51,492	)		(92,216	)		(18,431	)
Less transfer agent fees reimbursed – class specific		(573,557	)		(1,755,605	)		(618,671	)
Less fees paid indirectly		(424	)		(1,219	)		(110	)
Total expenses after fees waived, reimbursed and paid indirectly		23,115,397			57,889,217			16,307,086
Net investment income		95,288,769			435,099,994			49,314,590
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments – unaffiliated		46,411,047			34,802,149			18,334,409
Investments – affiliated		–			–			272
Capital gain distributions received from affiliated investment companies		–			6,522			–
Securities sold short		(690	)		–			–
Options written		1,813,742			13,313,373			1,164,439
Financial futures contracts		(21,378,085	)		(50,025,696	)		(462,338	)
Swaps		8,472,199			23,776,431			401,323
Foreign currency transactions		6,172,409			47,251,602			5,054,644
		41,490,622			69,124,381			24,492,749
Net change in unrealized appreciation/depreciation on:
Investments – unaffiliated		89,352,474			682,369,167	3		41,282,953
Investments – affiliated		–			–			(30	)
Options written		22,694,769			1,947,894			858,993
Financial futures contracts		205,272			(8,657,711	)		(742,646	)
Swaps		(18,034,679	)		17,052,913			(2,529,031	)
Foreign currency translations		(2,415,038	)		(55,203,568	)		(7,571,387	)
		91,802,798			637,508,695			31,298,852
Total realized and unrealized gain		133,293,420			706,633,076			55,791,601
Net Increase in Net Assets Resulting from Operations	$	228,582,189		$	1,141,733,070		$	105,106,191

¹  Consolidated Statement of Operations.

²  See Note 5 of the Notes to Financial Statements for details of borrowings.

³  Net of income tax and deferred Capital Gains Tax of $1,175,691 and $470,269, respectively.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	57

Statements of Changes in Net Assets

	BlackRock Core Bond Portfolio
	Year Ended September 30,
Increase (Decrease) in Net Assets:	2012			2011
Operations
Net investment income	$	95,288,769		$	92,725,265
Net realized gain		41,490,622			481,252
Net change in unrealized appreciation/depreciation		91,802,798			(21,877,874	)
Net increase in net assets resulting from operations		228,582,189			71,328,643
Dividends to Shareholders From
Net investment income:
BlackRock		(25,731,062	)		(42,458,753	)
Institutional		(50,058,047	)		(37,043,802	)
Service		(7,852,544	)		(3,250,877	)
Investor A		(18,103,575	)		(12,401,411	)
Investor B		(165,140	)		(254,080	)
Investor C		(4,566,029	)		(4,334,810	)
Class R		(16,942	)		(14,238	)
Decrease in net assets resulting from dividends to shareholders		(106,493,339	)		(99,757,971	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(274,186,643	)		1,040,822,456
Net Assets
Total increase (decrease) in net assets		(152,097,793	)		1,012,393,128
Beginning of year		3,343,837,286			2,331,444,158
End of year	$	3,191,739,493		$	3,343,837,286
Distributions in excess of net investment income	$	(1,633,767	)	$	(17,303,037	)

See Notes to Financial Statements.
58	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

Statements of Changes in Net Assets (concluded)

	BlackRock High Yield Bond Portfolio						BlackRock Low Duration Bond Portfolio
	Year Ended September 30,						Year Ended September 30,
Increase (Decrease) in Net Assets:	20121			2011			2012			2011
Operations
Net investment income	$	435,099,994		$	247,178,825		$	49,314,590		$	49,901,580
Net realized gain		69,124,381			63,396,984			24,492,749			3,065,078
Net change in unrealized appreciation/depreciation		637,508,695			(359,623,104	)		31,298,852			(32,873,261	)
Net increase (decrease) in net assets resulting from operations		1,141,733,070			(49,047,295	)		105,106,191			20,093,397
Dividends to Shareholders From
Net investment income:
BlackRock		(50,885,909	)		(56,509,828	)		(8,115,701	)		(9,783,495	)
Institutional		(184,573,987	)		(83,550,246	)		(17,069,144	)		(13,510,221	)
Service		(16,417,315	)		(14,147,966	)		(6,697,436	)		(14,685,523	)
Investor A		(167,919,678	)		(85,566,232	)		(11,725,736	)		(5,950,915	)
Investor A1		–			–			(560,872	)		(651,592	)
Investor B		(480,548	)		(743,712	)		(60,671	)		(68,221	)
Investor B1		(1,498,756	)		(867,045	)		–			(8,533	)
Investor B2		–			–			–			(57,165	)
Investor B3		–			–			(135,428	)		(46,341	)
Investor C		(22,559,036	)		(11,491,258	)		(3,859,971	)		(2,346,401	)
Investor C1		(5,978,625	)		(1,866,459	)		–			(80,951	)
Investor C2		–			–			(317,048	)		(421,686	)
Investor C3		–			–			(554,796	)		(137,378	)
Class R		(1,517,614	)		(1,348,861	)		(114,004	)		(22,740	)
Decrease in net assets resulting from dividends to shareholders		(451,831,468	)		(256,091,607	)		(49,210,807	)		(47,771,162	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		3,325,364,606			2,869,443,472			129,708,320			434,658,866
Redemption Fees
Redemption fees		–			149,202			–			–
Net Assets
Total increase (decrease) in net assets		4,015,266,208			2,564,453,772			185,603,704			406,981,101
Beginning of year		5,272,657,738			2,708,203,966			2,054,632,078			1,647,650,977
End of year	$	9,287,923,946		$	5,272,657,738		$	2,240,235,782		$	2,054,632,078
Undistributed (distributions in excess of) net investment income	$	49,877,584		$	(5,951,569	)	$	8,099,944		$	3,379,074

¹  Consolidated Statement of Changes in Net Assets.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	59

  Financial Highlights   BlackRock Core Bond Portfolio

	BlackRock
	Year Ended September 30,
	2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.45		$	9.61		$	9.08		$	8.63		$	9.47
Net investment income1		0.30			0.38			0.42			0.46			0.49
Net realized and unrealized gain (loss)		0.39			(0.13	)		0.57			0.48			(0.86	)
Net increase (decrease) from investment operations		0.69			0.25			0.99			0.94			(0.37	)
Dividends from net investment income		(0.33	)		(0.41	)		(0.46	)		(0.49	)		(0.47	)
Net asset value, end of year	$	9.81		$	9.45		$	9.61		$	9.08		$	8.63
Total Investment Return2
Based on net asset value		7.47%			2.69%			11.25%			11.97%			(4.18	)%
Ratios to Average Net Assets
Total expenses		0.60%			0.63%			0.81%			0.70%			1.05%
Total expenses after fees waived, reimbursed and paid indirectly		0.47%			0.47%			0.64%			0.51%			0.86%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.45%			0.45%			0.46%			0.42%			0.40%
Net investment income		3.15%			4.04%			4.55%			5.47%			5.18%
Supplemental Data
Net assets, end of year (000)	$	643,885		$	830,056		$	1,077,976		$	1,256,814		$	1,418,867
Portfolio turnover		739%	3		726%	4		724%	5		610%	6		1,007%	7
	Institutional
	Year Ended September 30,
	2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.42		$	9.58		$	9.06		$	8.62		$	9.45
Net investment income1		0.29			0.36			0.41			0.46			0.48
Net realized and unrealized gain (loss)		0.39			(0.12	)		0.56			0.46			(0.85	)
Net increase (decrease) from investment operations		0.68			0.24			0.97			0.92			(0.37	)
Dividends from net investment income		(0.32	)		(0.40	)		(0.45	)		(0.48	)		(0.46	)
Net asset value, end of year	$	9.78		$	9.42		$	9.58		$	9.06		$	8.62
Total Investment Return2
Based on net asset value		7.36%			2.55%			11.03%			11.75%			(4.17	)%
Ratios to Average Net Assets
Total expenses		0.73%			0.78%			0.97%			0.80%			1.12%
Total expenses excluding recoupment of past waived fees		0.73%			0.78%			0.96%			0.80%			1.12%
Total expenses after fees waived, reimbursed and paid indirectly		0.58%			0.60%			0.77%			0.62%			0.95%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.56%			0.58%			0.58%			0.53%			0.49%
Net investment income		3.03%			3.87%			4.44%			5.40%			5.10%
Supplemental Data
Net assets, end of year (000)	$	1,457,783		$	1,488,219		$	790,768		$	810,795		$	995,813
Portfolio turnover		739%	3		726%	4		724%	5		610%	6		1,007%	7

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 370%.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 412%.

⁵  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 497%.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 339%.

⁷  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 218%.

See Notes to Financial Statements.
60	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Financial Highlights (continued)   BlackRock Core Bond Portfolio

	Service															Investor A
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.43		$	9.59		$	9.06		$	8.62		$	9.46		$	9.44		$	9.60		$	9.07		$	8.62		$	9.46
Net investment income1		0.26			0.32			0.38			0.43			0.46			0.26			0.34			0.38			0.43			0.45
Net realized and unrealized gain (loss)		0.39			(0.11	)		0.57			0.47			(0.86	)		0.39			(0.13	)		0.57			0.48			(0.86	)
Net increase (decrease) from investment operations		0.65			0.21			0.95			0.90			(0.40	)		0.65			0.21			0.95			0.91			(0.41	)
Dividends from net investment income		(0.29	)		(0.37	)		(0.42	)		(0.46	)		(0.44	)		(0.29	)		(0.37	)		(0.42	)		(0.46	)		(0.43	)
Net asset value, end of year	$	9.79		$	9.43		$	9.59		$	9.06		$	8.62		$	9.80		$	9.44		$	9.60		$	9.07		$	8.62
Total Investment Return2
Based on net asset value		7.01%			2.25%			10.81%			11.46%			(4.48)%			7.01%			2.27%			10.81%			11.54%			(4.58)%
Ratios to Average Net Assets
Total expenses		1.05%			1.03%			1.20%			1.10%			1.34%			1.02%			1.01%			1.19%			1.10%			1.45%
Total expenses excluding recoupment of past waived fees		1.05%			1.02%			1.20%			1.08%			1.34%			1.02%			1.01%			1.19%			1.10%			1.45%
Total expenses after fees waived, reimbursed and paid indirectly		0.91%			0.90%			1.07%			0.90%			1.14%			0.90%			0.88%			1.06%			0.91%			1.27%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.89%			0.88%			0.88%			0.81%			0.69%			0.89%			0.86%			0.87%			0.82%			0.81%
Net investment income		2.71%			3.50%			4.13%			5.14%			4.90%			2.69%			3.58%			4.13%			5.04%			4.78%
Supplemental Data
Net assets, end of year (000)	$	238,247		$	278,072		$	37,639		$	39,291		$	59,642		$	638,402		$	551,875		$	280,857		$	226,782		$	220,122
Portfolio turnover		739%	3		726%	4		724%	5		610%	6		1,007%	7		739%	3		726%	4		724%	5		610%	6		1,007%	7

	Investor B
	Year Ended September 30,
	2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.43		$	9.59		$	9.06		$	8.62		$	9.46
Net investment income1		0.19			0.26			0.31			0.36			0.37
Net realized and unrealized gain (loss)		0.39			(0.13	)		0.57			0.47			(0.85	)
Net increase (decrease) from investment operations		0.58			0.13			0.88			0.83			(0.48	)
Dividends from net investment income		(0.22	)		(0.29	)		(0.35	)		(0.39	)		(0.36	)
Net asset value, end of year	$	9.79		$	9.43		$	9.59		$	9.06		$	8.62
Total Investment Return2
Based on net asset value		6.20%			1.40%			9.94%			10.53%			(5.34)%
Ratios to Average Net Assets
Total expenses		1.81%			1.86%			2.04%			1.93%			2.26%
Total expenses excluding recoupment of past waived fees		1.81%			1.84%			2.02%			1.92%			2.26%
Total expenses after fees waived, reimbursed and paid indirectly		1.68%			1.73%			1.89%			1.74%			2.09%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.66%			1.71%			1.71%			1.65%			1.61%
Net investment income		1.95%			2.79%			3.32%			4.31%			3.98%
Supplemental Data
Net assets, end of year (000)	$	5,894		$	8,680		$	10,118		$	14,537		$	22,500
Portfolio turnover		739%	3		726%	4		724%	5		610%	6		1,007%	7

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 370%.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 412%.

⁵  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 497%.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 339%.

⁷  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 218%.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	61

  Financial Highlights (concluded)   BlackRock Core Bond Portfolio

	Investor C															Class R
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.40		$	9.56		$	9.03		$	8.59		$	9.42		$	9.44		$	9.60		$	9.07		$	8.63		$	9.47
Net investment income1		0.19			0.27			0.31			0.36			0.38			0.23			0.31			0.35			0.40			0.43
Net realized and unrealized gain (loss)		0.39			(0.13	)		0.58			0.47			(0.85	)		0.40			(0.13	)		0.58			0.47			(0.86	)
Net increase (decrease) from investment operations		0.58			0.14			0.89			0.83			(0.47	)		0.63			0.18			0.93			0.87			(0.43	)
Dividends from net investment income		(0.22	)		(0.30	)		(0.36	)		(0.39	)		(0.36	)		(0.26	)		(0.34	)		(0.40	)		(0.43	)		(0.41	)
Net asset value, end of year	$	9.76		$	9.40		$	9.56		$	9.03		$	8.59		$	9.81		$	9.44		$	9.60		$	9.07		$	8.63
Total Investment Return2
Based on net asset value		6.26%			1.50%			10.04%			10.61%			(5.22	)%		6.82%			1.95%			10.48%			11.10%			(4.82	)%
Ratios to Average Net Assets
Total expenses		1.74%			1.77%			1.95%			1.86%			2.19%			1.34%			1.38%			1.54%			1.38%			1.74%
Total expenses excluding recoupment of past waived fees		1.74%			1.77%			1.95%			1.86%			2.19%			1.34%			1.38%			1.51%			1.38%			1.74%
Total expenses after fees waived, reimbursed and paid indirectly		1.63%			1.64%			1.81%			1.69%			2.02%			1.19%			1.19%			1.36%			1.20%			1.48%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.61%			1.62%			1.62%			1.60%			1.57%			1.17%			1.17%			1.18%			1.11%			1.02%
Net investment income		1.97%			2.85%			3.40%			4.27%			4.04%			2.40%			3.29%			3.81%			4.69%			4.60%
Supplemental Data
Net assets, end of year (000)	$	206,568		$	186,495		$	133,691		$	107,567		$	88,763		$	960		$	441		$	395		$	283		$	169
Portfolio turnover		739%	3		726%	4		724%	5		610%	6		1,007%	7		739%	3		726%	4		724%	5		610%	6		1,007%	7

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 370%.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 412%.

⁵  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 497%.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 339%.

⁷  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 218%.

See Notes to Financial Statements.
62	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Financial Highlights   BlackRock High Yield Bond Portfolio

	BlackRock														Institutional
	Year Ended September 30,														Year Ended September 30,
	20121		2011			2010			2009			2008			20121		2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	7.14	$	7.48		$	6.68		$	6.61		$	7.98		$	7.14	$	7.47		$	6.68		$	6.61		$	7.98
Net investment income2		0.50		0.52			0.61			0.62			0.62			0.49		0.50			0.60			0.62			0.62
Net realized and unrealized gain (loss)		0.80		(0.3 2	)3		0.79	3		0.07	3		(1.34)	3		0.80		(0.30)	3		0.78	3		0.06	3		(1.35)	3
Net increase (decrease) from investment operations		1.30		0.20			1.40			0.69			(0.72)			1.29		0.20			1.38			0.68			(0.73)
Dividends from net investment income		(0.50)		(0.54)			(0.60)			(0.62)			(0.65)			(0.49)		(0.53)			(0.59)			(0.61)			(0.64)
Net asset value, end of year	$	7.94	$	7.14		$	7.48		$	6.68		$	6.61		$	7.94	$	7.14		$	7.47		$	6.68		$	6.61
Total Investment Return4
Based on net asset value		18.99%		2.29%5			21.72%5			12.82%5			(9.61)%5			18.92%		2.35%5			21.43%5			12.75%5			(9.66)%5
Ratios to Average Net Assets
Total expenses		0.57%		0.59%			0.61%			0.63%			0.68%			0.63%		0.66%			0.71%			0.69%			0.71%
Total expenses excluding recoupment of past waived fees		0.55%		0.58%			0.61%			0.63%			0.68%			0.63%		0.66%			0.71%			0.69%			0.71%
Total expenses after fees waived,reimbursed and paid indirectly		0.56%		0.58%			0.58%			0.56%			0.58%			0.63%		0.65%			0.67%			0.63%			0.64%
Total expenses after fees waived,reimbursed and paid indirectlyand excluding interest expense		0.56%		0.58%			0.58%			0.56%			0.55%			0.63%		0.65%			0.67%			0.63%			0.61%
Net investment income		6.50%		6.69%			8.53%			10.95%			8.38%			6.42%		6.53%			8.38%			10.98%			8.31%
Supplemental Data
Net assets, end of year (000)	$	897,435	$	694,075		$	725,724		$	615,626		$	369,888		$	3,989,753	$	2,017,038		$	738,474		$	502,356		$	341,461
Portfolio turnover		69%		91%			113%			99%			65%			69%		91%			113%			99%			65%

	Service
	Year Ended September 30,
	20121		2011		2010		2009		2008
Per Share Operating Performance
Net asset value, beginning of year	$	7.14	$	7.48	$	6.68	$	6.61	$	7.98
Net investment income2		0.47		0.48		0.58		0.60		0.59
Net realized and unrealized gain (loss)		0.80		(0.32)3		0.793		0.073		(1.34)3
Net increase (decrease) from investment operations		1.27		0.16		1.37		0.67		(0.75)
Dividends from net investment income		(0.47)		(0.50)		(0.57)		(0.60)		(0.62)
Net asset value, end of year	$	7.94	$	7.14	$	7.48	$	6.68	$	6.61
Total Investment Return4
Based on net asset value		18.52%		1.85%5		21.21%5		12.37%5		(10.00)%5
Ratios to Average Net Assets
Total expenses		0.96%		1.06%		1.02%		1.04%		1.10%
Total expenses excluding recoupment of past waived fees		0.93%		1.03%		1.02%		1.02%		1.10%
Total expenses after fees waived, reimbursed and paid indirectly		0.96%		1.01%		1.00%		0.96%		1.02%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.96%		1.01%		1.00%		0.96%		0.99%
Net investment income		6.09%		6.22%		8.10%		10.69%		7.91%
Supplemental Data
Net assets, end of year (000)	$	304,707	$	195,688	$	173,027	$	163,915	$	147,534
Portfolio turnover		69%		91%		113%		99%		65%

¹  Consolidated Financial Highlights.

²  Based on average shares outstanding.

³  Includes redemption fees, which are less than $0.01 per share.

⁴  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵  Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	63

  Financial Highlights (continued)   BlackRock High Yield Bond Portfolio

	Investor A															Investor B
	Year Ended September 30,															Year Ended September 30,
	20121			2011			2010			2009			2008			20121			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	7.14		$	7.47		$	6.68		$	6.61		$	7.98		$	7.14		$	7.47		$	6.68		$	6.61		$	7.98
Net investment income2		0.47			0.48			0.58			0.60			0.59			0.40			0.43			0.53			0.56			0.54
Net realized and unrealized gain (loss)		0.80			(0.30	)3		0.78	3		0.06	3		(1.34	)3		0.81			(0.31	)3		0.77	3		0.06	3		(1.35	)3
Net increase (decrease) from investment operations		1.27			0.18			1.36			0.66			(0.75	)		1.21			0.12			1.30			0.62			(0.81	)
Total dividends and distributions		(0.47	)		(0.51	)		(0.57	)		(0.59	)		(0.62	)		(0.41	)		(0.45	)		(0.51	)		(0.55	)		(0.56	)
Net asset value, end of year	$	7.94		$	7.14		$	7.47		$	6.68		$	6.61		$	7.94		$	7.14		$	7.47		$	6.68		$	6.61
Total Investment Return4
Based on net asset value		18.56%			2.02%5			20.99%5			12.36%5			(9.98)%5			17.58%			1.26%5			20.11%5			11.55%5			(10.66)%5
Ratios to Average Net Assets
Total expenses		1.00%			1.06%			1.05%			1.16%			1.25%			1.77%			1.75%			1.79%			1.85%			1.85%
Total expenses excluding recoupment of past waived fees		1.00%			1.04%			1.05%			1.16%			1.25%			1.77%			1.73%			1.79%			1.84%			1.85%
Total expenses after fees waived, reimbursed and paid indirectly		0.92%			0.98%			1.04%			0.98%			0.99%			1.76%			1.75%			1.78%			1.72%			1.74%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.92%			0.98%			1.04%			0.98%			0.96%			1.76%			1.75%			1.78%			1.72%			1.70%
Net investment income		6.12%			6.20%			8.05%			10.67%			7.95%			5.33%			5.56%			7.47%			10.11%			7.23%
Supplemental Data
Net assets, end of year (000)	$	3,437,217		$	1,886,322		$	848,953		$	731,290		$	592,845		$	7,472		$	9,577		$	15,540		$	27,218		$	38,234
Portfolio turnover		69%			91%			113%			99%			65%			69%			91%			113%			99%			65%

	Investor B1
	Year Ended September 30,
	20121			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	7.14		$	7.47		$	6.68		$	6.61		$	7.98
Net investment income2		0.43			0.45			0.55			0.58			0.56
Net realized and unrealized gain (loss)		0.80			(0.31	)3		0.78	3		0.06	3		(1.35	)3
Net increase (decrease) from investment operations		1.23			0.14			1.33			0.64			(0.79	)
Dividends from net investment income		(0.43	)		(0.47	)		(0.54	)		(0.57	)		(0.58	)
Net asset value, end of year	$	7.94		$	7.14		$	7.47		$	6.68		$	6.61
Total Investment Return4
Based on net asset value		17.94%			1.55%	5		20.50%	5		11.86%	5		(10.39)%5
Ratios to Average Net Assets
Total expenses		1.56%			1.48%			1.46%			1.55%			1.52%
Total expenses excluding recoupment of past waived fees		1.56%			1.48%			1.46%			1.55%			1.52%
Total expenses after fees waived, reimbursed and paid indirectly		1.46%			1.44%			1.46%			1.43%			1.45%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.46%			1.44%			1.46%			1.43%			1.42%
Net investment income		5.63%			5.88%			7.73%			10.47%			7.52%
Supplemental Data
Net assets, end of year (000)	$	20,236		$	32,194		$	15,694		$	21,173		$	40,215
Portfolio turnover		69%			91%			113%			99%			65%

¹  Consolidated Financial Highlights.

²  Based on average shares outstanding.

³  Includes redemption fees, which are less than $0.01 per share.

⁴  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵  Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

See Notes to Financial Statements.
64	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Financial Highlights (concluded)   BlackRock High Yield Bond Portfolio

	Investor C															Investor C1
	Year Ended September 30,															Year Ended September 30,
	20121			2011			2010			2009			2008			20121			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	7.14		$	7.48		$	6.68		$	6.62		$	7.98		$	7.15		$	7.48		$	6.69		$	6.62		$	7.99
Net investment income2		0.41			0.43			0.52			0.56			0.54			0.42			0.44			0.54			0.57			0.56
Net realized and unrealized gain (loss)		0.81			(0.32	)3		0.80	3		0.05	3		(1.34	)3		0.80			(0.31	)3		0.78	3		0.06	3		(1.35	)3
Net increase (decrease) from investment operations		1.22			0.11			1.32			0.61			(0.80	)		1.22			0.13			1.32			0.63			(0.79	)
Dividends from net investment income		(0.41	)		(0.45	)		(0.52	)		(0.55	)		(0.56	)		(0.42	)		(0.46	)		(0.53	)		(0.56	)		(0.58	)
Net asset value, end of year	$	7.95		$	7.14		$	7.48		$	6.68		$	6.62		$	7.95		$	7.15		$	7.48		$	6.69		$	6.62
Total Investment Return4
Based on net asset value		17.77%			1.17%5			20.32%5			11.35%5			(10.53)%5			17.83%			1.49%5			20.34%5			11.75%5			(10.45)%5
Ratios to Average Net Assets
Total expenses		1.74%			1.71%			1.72%			1.80%			1.85%			1.57%			1.60%			1.56%			1.64%			1.62%
Total expenses excluding recoupment of past waived fees		1.73%			1.70%			1.72%			1.80%			1.85%			1.55%			1.60%			1.56%			1.64%			1.62%
Total expenses after fees waived, reimbursed and paid indirectly		1.72%			1.69%			1.72%			1.72%			1.74%			1.54%			1.52%			1.56%			1.51%			1.52%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.72%			1.69%			1.72%			1.72%			1.71%			1.54%			1.52%			1.55%			1.51%			1.49%
Net investment income		5.33%			5.54%			7.31%			9.78%			7.19%			5.54%			5.77%			7.55%			10.22%			7.43%
Supplemental Data
Net assets, end of year (000)	$	498,541		$	313,266		$	144,224		$	99,250		$	60,524		$	100,404		$	104,579		$	26,266		$	25,781		$	29,269
Portfolio turnover		69%			91%			113%			99%			65%			69%			91%			113%			99%			65%

	Class R
	Year Ended September 30,
	20121			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	7.13		$	7.47		$	6.67		$	6.61		$	7.98
Net investment income2		0.44			0.46			0.56			0.59			0.58
Net realized and unrealized gain (loss)		0.81			(0.32	)3		0.79	3		0.05	3		(1.35	)3
Net increase (decrease) from investment operations		1.25			0.14			1.35			0.64			(0.77	)
Dividends from net investment income		(0.44	)		(0.48	)		(0.55	)		(0.58	)		(0.60	)
Net asset value, end of year	$	7.94		$	7.13		$	7.47		$	6.67		$	6.61
Total Investment Return4
Based on net asset value		18.31%			1.57%	5		20.89%	5		11.95%	5		(10.17)%5
Ratios to Average Net Assets
Total expenses		1.34%			1.42%			1.51%			1.71%			1.69%
Total expenses excluding recoupment of past waived fees		1.34%			1.42%			1.51%			1.71%			1.69%
Total expenses after fees waived, reimbursed and paid indirectly		1.28%			1.28%			1.28%			1.20%			1.20%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.28%			1.28%			1.28%			1.20%			1.17%
Net investment income		5.79%			5.98%			7.74%			10.43%			7.75%
Supplemental Data
Net assets, end of year (000)	$	32,159		$	19,920		$	20,303		$	12,190		$	9,159
Portfolio turnover		69%			91%			113%			99%			65%

¹  Consolidated Financial Highlights.

²  Based on average shares outstanding.

³  Includes redemption fees, which are less than $0.01 per share.

⁴  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁵  Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	65

  Financial Highlights   BlackRock Low Duration Bond Portfolio

	BlackRock															Institutional
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.56		$	9.69		$	9.38		$	9.33		$	9.95		$	9.57		$	9.70		$	9.39		$	9.34		$	9.96
Net investment income1		0.26			0.29			0.31			0.39			0.47			0.25			0.29			0.31			0.38			0.47
Net realized and unrealized gain (loss)		0.25			(0.13	)		0.34			0.05			(0.63	)		0.26			(0.14	)		0.33			0.06			(0.63	)
Net increase (decrease) from investment operations		0.51			0.16			0.65			0.44			(0.16	)		0.51			0.15			0.64			0.44			(0.16	)
Dividends from net investment income		(0.25	)		(0.29	)		(0.34	)		(0.39	)		(0.46	)		(0.25	)		(0.28	)		(0.33	)		(0.39	)		(0.46	)
Net asset value, end of year	$	9.82		$	9.56		$	9.69		$	9.38		$	9.33		$	9.83		$	9.57		$	9.70		$	9.39		$	9.34
Total Investment Return2
Based on net asset value		5.48%			1.59%			7.03%			5.02%			(1.68)%			5.43%			1.55%			6.98%			4.98%			(1.73)%
Ratios to Average Net Assets
Total expenses		0.61%			0.64%			0.79%			0.69%			0.69%			0.72%			0.75%			0.90%			0.76%			0.78%
Total expenses after fees waived, reimbursed and paid indirectly		0.43%			0.44%			0.56%			0.43%			0.42%			0.47%			0.48%			0.61%			0.46%			0.47%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.41%			0.41%			0.42%			0.41%			0.40%			0.45%			0.45%			0.46%			0.44%			0.45%
Net investment income		2.65%			3.04%			3.27%			4.37%			4.79%			2.61%			2.99%			3.22%			4.30%			4.74%
Supplemental Data
Net assets, end of year (000)	$	310,879		$	281,572		$	289,968		$	224,546		$	302,436		$	762,769		$	609,308		$	306,895		$	262,138		$	345,204
Portfolio turnover		203%	3		280%	4		140%	5		154%	6		149%	7		203%	3		280%	4		140%	5		154%	6		149%	7

	Service
	Year Ended September 30,
	2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.57		$	9.70		$	9.38		$	9.34		$	9.96
Net investment income1		0.22			0.26			0.27			0.35			0.43
Net realized and unrealized gain (loss)		0.24			(0.14	)		0.35			0.04			(0.62	)
Net increase (decrease) from investment operations		0.46			0.12			0.62			0.39			(0.19	)
Dividends from net investment income		(0.21	)		(0.25	)		(0.30	)		(0.35	)		(0.43	)
Net asset value, end of year	$	9.82		$	9.57		$	9.70		$	9.38		$	9.34
Total Investment Return2
Based on net asset value		4.93%			1.23%			6.74%			4.49%			(2.06)%
Ratios to Average Net Assets
Total expenses		1.01%			0.96%			1.12%			1.06%			1.04%
Total expenses excluding recoupment of past waived fees		1.01%			0.96%			1.12%			1.06%			1.04%
Total expenses after fees waived, reimbursed and paid indirectly		0.85%			0.79%			0.93%			0.82%			0.81%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.83%			0.75%			0.78%			0.80%			0.79%
Net investment income		2.24%			2.73%			2.82%			3.90%			4.41%
Supplemental Data
Net assets, end of year (000)	$	263,552		$	330,091		$	694,407		$	373,497		$	250,955
Portfolio turnover		203%	3		280%	4		140%	5		154%	6		149%	7

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 172%.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 184%.

⁵  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 126%.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 128%.

⁷  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 63%.

See Notes to Financial Statements.
66	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

  Financial Highlights (continued)   BlackRock Low Duration Bond Portfolio

	Investor A															Investor A1
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.57		$	9.70		$	9.38		$	9.34		$	9.96		$	9.58		$	9.71		$	9.39		$	9.34		$	9.96
Net investment income1		0.22			0.26			0.27			0.34			0.43			0.23			0.27			0.29			0.37			0.45
Net realized and unrealized gain (loss)		0.24			(0.14	)		0.35			0.05			(0.63	)		0.25			(0.14	)		0.35			0.05			(0.63	)
Net increase (decrease) from investment operations		0.46			0.12			0.62			0.39			(0.20	)		0.48			0.13			0.64			0.42			(0.18	)
Dividends from net investment income		(0.21	)		(0.25	)		(0.30	)		(0.35	)		(0.42	)		(0.23	)		(0.26	)		(0.32	)		(0.37	)		(0.44	)
Net asset value, end of year	$	9.82		$	9.57		$	9.70		$	9.38		$	9.34		$	9.83		$	9.58		$	9.71		$	9.39		$	9.34
Total Investment Return2
Based on net asset value		4.94%			1.21%			6.71%			4.50%			(2.08)%			5.12%			1.36%			6.89%			4.77%			(1.90)%
Ratios to Average Net Assets
Total expenses		1.02%			0.98%			1.16%			1.08%			1.10%			0.86%			0.87%			1.02%			0.96%			0.92%
Total expenses excluding recoupment of past waived fees		1.02%			0.98%			1.14%			1.05%			1.10%			0.86%			0.87%			1.02%			0.96%			0.92%
Total expenses after fees waived, reimbursed and paid indirectly		0.83%			0.80%			0.97%			0.83%			0.83%			0.66%			0.66%			0.79%			0.65%			0.64%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.81%			0.78%			0.82%			0.81%			0.81%			0.64%			0.63%			0.65%			0.63%			0.62%
Net investment income		2.25%			2.64%			2.84%			3.82%			4.38%			2.43%			2.82%			3.06%			4.15%			4.58%
Supplemental Data
Net assets, end of year (000)	$	546,318		$	490,744		$	191,079		$	130,435		$	78,813		$	22,846		$	24,295		$	24,987		$	25,919		$	34,801
Portfolio turnover		203%	3		280%	4		140%	5		154%	6		149%	7		203%	3		280%	4		140%	5		154%	6		149%	7

	Investor B
	Year Ended September 30,
	2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.57		$	9.70		$	9.38		$	9.34		$	9.96
Net investment income1		0.14			0.18			0.21			0.29			0.36
Net realized and unrealized gain (loss)		0.26			(0.14	)		0.34			0.04			(0.63	)
Net increase (decrease) from investment operations		0.40			0.04			0.55			0.33			(0.27	)
Dividends from net investment income		(0.14	)		(0.17	)		(0.23	)		(0.29	)		(0.35	)
Net asset value, end of year	$	9.83		$	9.57		$	9.70		$	9.38		$	9.34
Total Investment Return2
Based on net asset value		4.24%			0.39%			5.89%			3.71%			(2.81)%
Ratios to Average Net Assets
Total expenses		1.87%			1.82%			1.97%			1.88%			1.84%
Total expenses excluding recoupment of past waived fees		1.87%			1.78%			1.96%			1.87%			1.84%
Total expenses after fees waived, reimbursed and paid indirectly		1.61%			1.64%			1.76%			1.59%			1.58%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.59%			1.62%			1.62%			1.57%			1.56%
Net investment income		1.48%			1.85%			2.16%			3.25%			3.65%
Supplemental Data
Net assets, end of year (000)	$	3,670		$	4,305		$	4,867		$	9,866		$	15,451
Portfolio turnover		203%	3		280%	4		140%	5		154%	6		149%	7

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 172%.

⁴  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 184%.

⁵  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 126%.

⁶ Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 128%.

⁷  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 63%.

See Notes to Financial Statements.
	BLACKROCK FUNDS II	SEPTEMBER 30, 2012	67

  Financial Highlights (concluded)   BlackRock Low Duration Bond Portfolio

	Investor B3						Investor C
	Year Ended			Period July 18,  20111			Year Ended September 30,
	September 30, 2012			to September 30, 2011			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of period	$	9.57		$	9.71		$	9.56		$	9.69		$	9.38		$	9.34		$	9.95
Net investment income2		0.14			0.03			0.15			0.18			0.20			0.28			0.36
Net realized and unrealized gain (loss)		0.25			(0.14	)		0.25			(0.13	)		0.34			0.05			(0.62	)
Net increase (decrease) from investment operations		0.39			(0.11	)		0.40			0.05			0.54			0.33			(0.26	)
Dividends from net investment income		(0.13	)		(0.03	)		(0.14	)		(0.18	)		(0.23	)		(0.29	)		(0.35	)
Net asset value, end of period	$	9.83		$	9.57		$	9.82		$	9.56		$	9.69		$	9.38		$	9.34
Total Investment Return3
Based on net asset value		4.23%			(1.13)%	4		4.31%			0.45%			5.83%			3.71%			(2.71)%
Ratios to Average Net Assets
Total expenses		1.77%			1.81%	5		1.76%			1.74%			1.88%			1.81%			1.81%
Total expenses excluding recoupment of past waived fees		1.77%			1.81%	5		1.76%			1.74%			1.88%			1.81%			1.81%
Total expenses after fees waived, reimbursed and paid indirectly		1.62%			1.63%	5		1.55%			1.56%			1.69%			1.58%			1.57%
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		1.60%			1.62%	5		1.53%			1.54%			1.54%			1.56%			1.55%
Net investment income		1.42%			1.71%	5		1.53%			1.90%			2.11%			3.16%			3.65%
Supplemental Data
Net assets, end of period (000)	$	6,146		$	12,837		$	268,261		$	239,979		$	108,010		$	59,823		$	45,461
Portfolio turnover		203%	6		280%	7		203%	6		280%	7		140%	8		154%	9		149%	10

	Investor C2															Investor C3						Class R
	Year Ended September 30,															Year Ended			Period July 18, 20111 to			Year Ended			Period July 18, 20111 to
	2012			2011			2010			2009			2008			September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
Per Share Operating Performance
Net asset value, beginning of period	$	9.57		$	9.70		$	9.38		$	9.34		$	9.95		$	9.56		$	9.71		$	9.57		$	9.71
Net investment income2		0.21			0.25			0.27			0.34			0.42			0.14			0.04			0.18			0.04
Net realized and unrealized gain (loss)		0.24			(0.14	)		0.34			0.04			(0.62	)		0.25			(0.16	)		0.24			(0.14	)
Net increase (decrease) from investment operations		0.45			0.11			0.61			0.38			(0.20	)		0.39			(0.12	)		0.42			(0.10	)
Dividends from net investment income		(0.20	)		(0.24	)		(0.29	)		(0.34	)		(0.41	)		(0.13	)		(0.03	)		(0.17	)		(0.04	)
Net asset value, end of period	$	9.82		$	9.57		$	9.70		$	9.38		$	9.34		$	9.82		$	9.56		$	9.82		$	9.57
Total Investment Return3
Based on net asset value		4.81%			1.07%			6.60%			4.35%			(2.07	)%		4.23%			(1.12	)%4		4.48%			(1.06	)%4
Ratios to Average Net Assets
Total expenses		1.12%			1.13%			1.27%			1.20%			1.16%			1.77%			1.73%	5		1.43%			1.46%	5
Total expenses after fees waived, reimbursed and paid indirectly		0.96%			0.96%			1.08%			0.96%			0.93%			1.61%			1.55%	5		1.27%			1.29%	5
Total expenses after fees waived, reimbursed and paid indirectly and excluding interest expense		0.94%			0.93%			0.93%			0.94%			0.91%			1.60%			1.54%	5		1.26%			1.27%	5
Net investment income		2.13%			2.54%			2.78%			3.83%			4.30%			1.46%			1.78%	5		1.81%			2.04%	5
Supplemental Data
Net assets, end of period (000)	$	13,838		$	15,448		$	18,151		$	19,543		$	22,452		$	35,383		$	40,361		$	6,573		$	5,693
Portfolio turnover		203%	6		280%	7		140%	8		154%	9		149%	10		203%	6		280%	7		203%	6		280%	7

¹  Commencement of operations.

² Based on average shares outstanding.

³  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴  Aggregate total investment return.

⁵  Annualized.

⁶  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 172%.

⁷  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 184%.

⁸  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 126%.

⁹  Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 128%.

¹⁰  Includes TBA transactions; excluding these transactions the portfolio turnover would have been 63%.

See Notes to Financial Statements.
68	BLACKROCK FUNDS II	SEPTEMBER 30, 2012

Notes to Financial Statements

1. Organization and Significant Accounting Policies:

BlackRock Funds II (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Massachusetts business trust. BlackRock Core Bond Portfolio (“Core Bond”) (formerly known as BlackRock Total Return Portfolio II), BlackRock High Yield Bond Portfolio (“High Yield Bond”) and BlackRock Low Duration Bond Portfolio (“Low Duration Bond”) (collectively, the “Funds” or individually, a “Fund”) are each a series of the Trust. Each of the Funds is diversified. The Funds’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund offers multiple classes of shares. BlackRock and Institutional Shares are sold without a sales charge and only to certain eligible investors. Service Shares are sold without a sales charge. Investor A and Investor A1 Shares are generally sold with a front-end sales charge. Investor B, Investor B1, Investor B3, Investor C, Investor C1, Investor C2 and Investor C3 Shares may be subject to a CDSC. Class R Shares are sold without a sales charge and only to certain retirement and other similar plans. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Service, Investor A, Investor A1, Investor B, Investor B1, Investor B3, Investor C, Investor C1, Investor C2, Investor C3 and Class R Shares bear certain expenses related to the shareholder servicing of such shares, and Investor B, Investor B1, Investor B3, Investor C, Investor C1, Investor C2, Investor C3 and Class R Shares also bear certain expenses related to the distribution of such shares. Investor B Shares automatically convert to Investor A Shares after approximately seven years. Investor B1 and Investor B3 Shares automatically convert to Investor A Shares after approximately ten years. Investor A1, B, B1, B3, C1, C2 and C3 Shares are only available through exchanges, dividend reinvestment by existing shareholders or for purchase by certain qualified employee benefit plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures (except that Investor B, Investor B1 and Investor B3 shareholders may vote on material changes to the Investor A distribution and service plan).

Reorganizations:

The Board of Trustees of the Trust (the “Board”) on behalf of BlackRock Total Return Portfolio II (“Total Return II”) and the Board and shareholders of each of BlackRock Bond Portfolio (“Bond”) and BlackRock Managed Income Portfolio (“Managed Income”), each a series of the Trust, approved the reorganizations of Bond and Managed Income into Total Return II pursuant to which Total Return II acquired substantially all of the assets and assumed certain stated liabilities of Bond and Managed Income in exchange for an equal aggregate value of Total Return II shares.

In connection with the reorganizations, effective July 18, 2011, Total Return II changed its name to BlackRock Core Bond Portfolio, hereafter referred to as Core Bond.

Each shareholder of Bond and Managed Income received shares of Core Bond with the same class designation and an amount equal to the aggregate NAV of such shareholder’s Bond and Managed Income shares, as determined at the close of business on July 15, 2011.

The reorganizations were accomplished by a tax-free exchange of shares of Core Bond in the following amounts and at the following conversion ratios:

Fund	Fund’s Share Class	Shares Prior to Reorga- nization	Conve- rsion Ratio	Core Bond’s Share Class	Shares of Core Bond
Bond	BlackRock	12,511,725	0.99804946	BlackRock	12,487,320
Bond	Institutional	50,909,845	1.00026716	Institutional	50,923,447
Bond	Service	12,514,261	1.00030974	Service	12,518,137
Bond	Investor A	9,067,932	0.99913554	Investor A	9,060,093
Bond	Investor B	226,819	0.99954079	Investor B	226,715
Bond	Investor C	5,669,719	1.00416957	Investor C	5,693,359
Managed
Income	Institutional	26,193,511	1.07272086	Institutional	28,098,325
Managed
Income	Service	16,384,076	1.07218994	Service	17,566,842
Managed
Income	Investor A	2,017,350	1.07175027	Investor A	2,162,096
Managed
Income	Investor B	38,836	1.07222418	Investor B	41,641
Managed
Income	Investor C	722,722	1.07355164	Investor C	775,880

Bond and Managed Income’s net assets and composition of net assets on July 15, 2011, the date of the reorganization, were as follows:

Fund	Net Assets		Paid-in Capital		Accum- ulated Net Inves- tment Income
Bond	$	851,019,392	$	858,980,677	$	(3,531,532	)
Managed Income	$	455,297,849	$	480,029,903	$	(1,041,733	)

Fund	Accum- ulated Net Realized Loss			Net Unrea- lized Apprec- iation
Bond	$	(18,862,271	)	$	14,432,518
Managed Income	$	(28,677,463	)	$	4,987,142

For financial reporting purposes, assets received and shares issued by Core Bond were recorded at fair value; however, the cost basis of the investments received from Bond and Managed Income were carried forward to align ongoing reporting of Core Bond’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

The aggregate net assets of Core Bond immediately after the acquisition amounted to $3,653,565,211. Bond and Managed Income’s fair value and cost of investments prior to the reorganizations were as follows:

	Fair Value of Investments		Cost of Investments
Bond	$	1,294,432,788	$	1,275,697,885
Managed Income	$	687,890,340	$	680,015,356

The purpose of these transactions was to combine three funds managed by the Manager, the investment advisor to Core Bond, Bond and Managed Income, with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was effective on July 18, 2011.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 69 

Notes to Financial Statements (continued)

Assuming the acquisitions had been completed on October 1, 2010, the beginning of the annual reporting period of Core Bond, the pro forma results of operations for the year ended September 30, 2011, are as follows:

• Net investment income: $132,948,085

• Net realized and change in unrealized gain/loss on investments: $(60,650,002)

• Net increase in the net assets resulting from operations: $72,298,083

Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of Bond and Managed Income that have been included in Core Bond’s Statement of Changes in Net Assets since July 18, 2011.

Reorganization costs incurred by Core Bond in connection with the reorganization were expensed by Core Bond.

The Board of High Yield Bond and the Board of Directors and shareholders of each of BlackRock High Income Fund (“High Income”), a series of BlackRock Bond Fund, Inc. and High Income Portfolio (“MAS: High Income”), a series of Managed Account Series, approved the reorganizations of High Income and MAS: High Income into High Yield Bond pursuant to which High Yield Bond acquired substantially all of the assets and assumed certain stated liabilities of High Income and MAS: High Income in exchange for an equal aggregate value of High Yield Bond shares.

Each shareholder of High Income and MAS: High Income received shares of High Yield Bond with the same class designation and an amount equal to the aggregate NAV of such shareholder’s High Income and MAS: High Income shares, as determined at the close of business on September 9, 2011, except High Income’s Investor B Shares were exchanged for High Yield Bond’s Investor B1 Shares.

The reorganizations were accomplished by a tax-free exchange of shares of High Yield Bond in the following amounts and at the following conversion ratios:

Fund	Fund’s Share Class		Shares Prior to Reorgani- zation		Conve- rsion Ratio		High Yield Bond’s Share Class		Shares of High Yield Bond
High
Income		Institutional		42,867,526		0.59094908		Institutional		25,332,525
High
Income		Investor A		89,679,602		0.59156054		Investor A		53,050,914
High
Income		Investor B		5,753,155		0.59172214		Investor B1		3,404,591
High
Income		Investor C		17,908,597		0.59144437		Investor C		10,591,938
High
Income		Investor C1		19,536,859		0.59091708		Investor C1		11,544,664
MAS:
High
Income				15,367,911		1.26564086		Institutional		19,450,256

High Income and MAS: High Income’s net assets and composition of net assets on September 9, 2011, the date of the reorganization, were as follows:

Fund	Net Assets		Paid-in Capital		Accumulated Net Investment Income (Loss)
High
Income	$	768,128,151	$	1,701,121,751	$	(5,099,500	)
MAS:
High
Income	$	143,723,779	$	159,456,423	$	(743,177	)

Fund	Accumulated Net Realized Loss			Net Unrealized Appreciation (Depreciation)
High
Income	$	(794,124,862	)	$	(133,769,238	)
MAS:
High
Income	$	(10,636,016	)	$	(4,353,451	)

For financial reporting purposes, assets received and shares issued by High Yield Bond were recorded at fair value; however, the cost basis of the investments received from High Income and MAS: High Income were carried forward to align ongoing reporting of High Yield Bond’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

The aggregate net assets of High Yield Bond immediately after the acquisition amounted to $5,410,935,648. High Income and MAS: High Income’s fair value and cost of investments prior to the reorganizations were as follows:

	Fair Value of Investments		Cost of Investments
High Income	$	786,409,739	$	923,131,423
MAS: High Income	$	140,991,203	$	145,795,472

The purpose of these transactions was to combine three funds managed by the Manager, the investment advisor to High Yield Bond, High Income and MAS: High Income, with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was effective on September 12, 2011.

Assuming the acquisitions had been completed on October 1, 2010, the beginning of the annual reporting period of High Yield Bond, the pro forma results of operations for the year ended September 30, 2011, are as follows:

• Net investment income: $322,971,239

• Net realized and change in unrealized gain/loss on investments: $(310,880,559)

• Net increase in the net assets resulting from operations: $12,090,680

Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of High Income and MAS: High Income that have been included in High Yield Bond’s Statement of Changes in Net Assets since September 12, 2011.

Reorganization costs incurred by High Yield Bond in connection with the reorganization were paid by the Manager.

The Board of Low Duration Bond and the Board of Directors and shareholders of BlackRock Short-Term Bond Fund (“Short-Term Bond”), a series of BlackRock Short-Term Bond Series, Inc., approved the reorganization of Short-Term Bond into Low Duration Bond pursuant to which Low Duration Bond acquired substantially all of the assets and assumed certain stated the liabilities of Short-Term Bond in exchange for an equal aggregate value of Low Duration Bond shares.

 70   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

In connection with but prior to the Reorganization, Short-Term Bond Master Portfolio (the “Master”) distributed its assets to Short-Term Bond and liquidated and dissolved immediately following such distribution. Prior to July 18, 2011, Short-Term Bond seeked to achieve its investment objectives by investing all of its assets in the Master, which has the same investment objective and strategies as Short-Term Bond.

Each shareholder of Short-Term Bond received shares of Low Duration Bond with the same class designation and an aggregate NAV of such shareholder’s Short-Term Bond shares, as determined at the close of business on July 15, 2011, except Short-Term Bond’s Investor B, Investor C1 and Class R Shares were exchanged for Low Duration Bond’s newly established Investor B3, Investor C3 and Class R Shares, respectively.

The reorganization was accomplished by a tax-free exchange of shares of Low Duration Bond in the following amounts and at the following conversion ratios:

	Short-Term Bond Shares Prior to Reorganization		Conversion Ratio		Shares of Low Duration Bond
Institutional		14,412,681		1.01411772		14,616,155
Investor A		12,030,518		1.01409408		12,200,077
Investor B/Investor B3		1,668,295		1.01120148		1,686,983
Investor C		9,910,902		1.01055202		10,015,482
Investor C1/Investor C3		4,356,853		1.01185042		4,408,484
Class R		611,128		1.01236323		618,684

In connection with the reorganization, effective July 18, 2011, Low Duration Bond’s Investor B1 and Investor C1 Shares were converted into Low Duration Bond Investor A Shares and Low Duration Bond’s Investor B2 Shares were converted into Investor A1 Shares as follows:

Share Class	Shares Prior to Share Conversion		Conversion Ratio		Share Class		Shares After Share Conversion
Investor B1		50,298		0.99998970		Investor A		50,297
Investor C1		500,855		1.00005151		Investor A		500,881
Investor B2		247,376		0.99897080		Investor A1		247,122

Short-Term Bond’s net assets and composition of net assets on July 15, 2011, the date of the reorganization, were as follows:

Net Assets	Paid-in Capital		Accumulated Net Investment Income	Accumulated Net Realized Loss			Net Unrealized Appreciation
$422,722,017	$	458,588,956	—	$	(41,912,072	)	$	6,045,133

For financial reporting purposes, assets received and shares issued by Low Duration Bond were recorded at fair value; however, the cost basis of the investments received from Short-Term Bond was carried forward to align ongoing reporting of Low Duration Bond’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes.

The aggregate net assets of Low Duration Bond immediately after the acquisition amounted to $2,140,608,018. Short-Term Bond’s fair value and cost of investments prior to the reorganization were $690,059,952 and $682,935,901, respectively.

The purpose of the transaction was to combine two funds managed by the Manager, the investment advisor to both Low Duration Bond and Short-Term Bond, with the same or substantially similar (but not identical) investment objectives, investment policies, strategies, risks and restrictions. The reorganization was a tax-free event and was effective on July 18, 2011.

Assuming the acquisition had been completed on October 1, 2010, the beginning of the annual reporting period of Low Duration Bond, the pro forma results of operations for the year ended September 30, 2011, are as follows:

• Net investment income: $62,543,025

• Net realized and change in unrealized gain/loss on investments: $(37,178,715)

• Net increase in the net assets resulting from operations: $25,364,310

Because the combined investment portfolios have been managed as a single integrated portfolio since the acquisition was completed, it is not practicable to separate the amounts of revenue and earnings of Short-Term Bond that have been included in the Low Duration Bond’s Statement of Changes in Net Assets since July 18, 2011.

Reorganization costs incurred by Low Duration Bond in connection with the reorganization were paid by the Manager.

The following is a summary of significant accounting policies followed by the Funds:

Basis of Consolidation: The accompanying consolidated financial statements include the accounts of BLK BR HY (Luxembourg) Investments, S.a.r.l. (the “Luxembourg Subsidiary”) and BR-HIYLD (S-Martin) SPV, LLC, BR-HIYLD Rich-Stryker LLC, BR-HIYLD Crown Ltd. and BR-HIYLD (R-Gibson) SPV, LLC (the “US Subsidiaries”), all of which are wholly owned taxable subsidiaries of High Yield Bond. The US Subsidiaries enable High Yield Bond to hold investments that are organized as an operating partnership and still satisfy Regulated Investment Company (“RIC”) tax requirements. Income earned and gains realized on the investments held by the US Subsidiaries are taxable to such subsidiaries. The Luxembourg Subsidiary holds shares of private Canadian companies. These shares are held in the Luxembourg Subsidiary in order to realize benefits under the Double Tax Avoidance Convention between Canada and Luxembourg, the result of which is gains on the sale of such shares will not be subject to capital gains taxes in Canada. Income earned on the investments held by the Luxembourg Subsidiary may be taxable to such subsidiary in Luxembourg. An income tax provision for all income, including realized and unrealized gains, if any, is reflected as a component of realized and unrealized gain (loss) on the Consolidated Statement of Operations. High Yield Bond may invest up to 25% of its total assets in the US Subsidiaries. Intercompany accounts and transactions have been eliminated. Both the US and Luxembourg Subsidiaries are subject to the same investment policies and restrictions that apply to High Yield Bond.

Valuation: US GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds fair value their financial instruments at market value using independent

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 71 

Notes to Financial Statements (continued)

dealers or pricing services under policies approved by the Board. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Funds for all financial instruments.

The Funds value their bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more brokers or dealers as obtained from a pricing service. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. Financial futures contracts traded on exchanges are valued at their last sale price. To-be-announced (“TBA”) commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services. Swap agreements are valued utilizing quotes received daily by the Funds’ pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. Investments in open-end registered investment companies are valued at NAV each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.

Municipal investments (including commitments to purchase such investments on a “when-issued” basis) are valued on the basis of prices provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments and information with respect to various relationships between investments.

Equity investments traded on a recognized securities exchange or the NASDAQ Global Market System (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid price. If no bid price is available, the prior day’s price will be used, unless it is determined that such prior day’s price no longer reflects the fair value of the security.

Securities and other assets and liabilities denominated in foreign currencies are translated into US dollars using exchange rates determined as of the close of business on the New York Stock Exchange (“NYSE”). Foreign currency exchange contracts are valued at the mean between the bid and ask prices and are determined as of the close of business on

the NYSE. Interpolated values are derived when the settlement date of the contract is an interim date for which quotations are not available.

Exchange-traded options are valued at the mean between the last bid and ask prices at the close of the options market in which the options trade. An exchange-traded option for which there is no mean price is valued at the last bid (long positions) or ask (short positions) price. If no bid or ask price is available, the prior day’s price will be used, unless it is determined that the prior day’s price no longer reflects the fair value of the option. Over-the-counter (“OTC”) options and swaptions are valued by an independent pricing service using a mathematical model, which incorporates a number of market data factors, such as the trades and prices of the underlying instruments.

In the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor deems relevant consistent with the principles of fair value measurement which include the market approach, income approach and/or cost approach, as appropriate. A market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and adjusted for liquidity as appropriate. These factors include but are not limited to (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Trust’s pricing vendors, a regular review of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of each Fund’s net assets. If events (for example, a company announcement, market volatility or a natural

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Notes to Financial Statements (continued)

disaster) occur during such periods that are expected to affect the value of such instruments materially, those instruments may be Fair Value Assets and valued at their fair value, as determined in good faith by the Global Valuation Committee using a pricing service and/or policies approved by the Board. Each business day, the Funds use a pricing service to assist with the valuation of certain foreign exchange-traded and OTC options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of business on the NYSE, which follows the close of the local markets.

Foreign Currency: The Funds’ books and records are maintained in US dollars. Purchases and sales of investment securities are recorded at the rates of exchange prevailing on the respective date of such transactions. Generally, when the US dollar rises in value against a foreign currency, the Funds’ investments denominated in that currency will lose value because that currency is worth fewer US dollars; the opposite effect occurs if the US dollar falls in relative value.

The Funds do not isolate the portion of the results of operations arising as a result of changes in the foreign exchange rates from the changes in the market prices of investments held or sold for financial reporting purposes. Accordingly, the effects of changes in foreign currency exchange rates on investments are not segregated on the Statements of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. The Funds report realized currency gains (losses) on foreign currency related transactions as components of net realized gains (loss) for financial reporting purposes, whereas such components are treated as ordinary income for federal income tax purposes.

Asset-Backed and Mortgage-Backed Securities: The Funds may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security subject to such a prepayment feature will have the effect of shortening the maturity of the security. If a Fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

The Funds may purchase certain mortgage pass-through securities. There are a number of important differences among the agencies and instrumentalities of the US government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely

payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed Mortgage Pass-Through Certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States but are supported by the right of the issuer to borrow from the Treasury.

Collateralized Debt Obligations: The Funds may invest in collateralized debt obligations (“CDOs”), which include collateralized bond obligations (“CBOs”) and collateralized loan obligations (“CLOs”). CBOs and CLOs are types of asset-backed securities. A CDO is an entity which is backed by a diversified pool of debt securities, (CBOs) or syndicated bank loans (CLOs). The cash flows of the CDO can be split into multiple segments, called “tranches”, which will vary in risk profile and yield. The riskiest segment is the subordinated or “equity” tranche. This tranche bears the greatest risk of defaults from the underlying assets in the CDO and serves to protect the other, more senior, tranches from default in all but the most severe circumstances. Since it is shielded from defaults by the more junior tranches, a “senior” tranche will typically have higher credit ratings and lower yields than their underlying securities, and often receive investment grade ratings from one or more of the nationally recognized rating agencies. Despite the protection from the more junior tranches, senior tranches can experience substantial losses due to actual defaults, increased sensitivity to future defaults and the disappearance of one or more protecting tranches as a result of changes in the credit profile of the underlying pool of assets.

Inflation-Indexed Bonds: The Funds may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income on the Statements of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of US Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.

Multiple Class Pass-Through Securities: The Funds may invest in multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities. These multiple class securities may be issued by Ginnie Mae, US government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations of a legal entity that are collateralized by, and multiple class pass-through securities represent direct ownership interests in, a pool of residential or commercial mortgage loans or mortgage pass-through securities (the “Mortgage Assets”), the payments on which are used to make payments on the CMOs or multiple pass-through securities. Classes of CMOs include interest only (“IOs”), principal only (“POs”), planned

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Notes to Financial Statements (continued)

amortization classes and targeted amortization classes. IOs and POs are stripped mortgage-backed securities representing interests in a pool of mortgages, the cash flow from which has been separated into interest and principal components. IOs receive the interest portion of the cash flow while POs receive the principal portion. IOs and POs can be extremely volatile in response to changes in interest rates. As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. POs perform best when prepayments on the underlying mortgages rise since this increases the rate at which the principal is returned and the yield to maturity on the PO. When payments on mortgages underlying a PO are slower than anticipated, the life of the PO is lengthened and the yield to maturity is reduced. If the underlying Mortgage Assets experience greater than anticipated pre-payments of principal, the Funds may not fully recoup their initial investments in IOs.

Stripped Mortgage-Backed Securities: The Funds may invest in stripped mortgage-backed securities issued by the US government, its agencies and instrumentalities. Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest (IOs) and principal (POs) distributions on a pool of Mortgage Assets. The Funds also may invest in stripped mortgage-backed securities that are privately issued.

Zero-Coupon Bonds: The Funds may invest in zero-coupon bonds, which are normally issued at a significant discount from face value and do not provide for periodic interest payments. Zero-coupon bonds may experience greater volatility in market value than similar maturity debt obligations which provide for regular interest payments.

Capital Trusts: The Funds may invest in capital trusts. These securities are typically issued by corporations, generally in the form of interest-bearing notes with preferred securities characteristics, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures or similarly structured securities. The securities can be structured as either fixed or adjustable coupon securities that can have either a perpetual or stated maturity date. Dividends can be deferred without creating an event of default or acceleration, although maturity cannot take place unless all cumulative payment obligations have been met. The deferral of payments does not affect the purchase or sale of these securities in the open market. Payments on these securities are treated as interest rather than dividends for federal income tax purposes. These securities generally are rated below that of the issuing company’s senior debt securities.

Preferred Stock: The Funds may invest in preferred stock. Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors.

Preferred stock also may be subject to optional or mandatory redemption provisions.

Floating Rate Loan Interests: The Funds may invest in floating rate loan interests. The floating rate loan interests the Funds hold are typically issued to companies (the “borrower”) by banks, other financial institutions, and privately and publicly offered corporations (the “lender”). Floating rate loan interests are generally non-investment grade, often involve borrowers whose financial condition is troubled or uncertain and companies that are highly leveraged. The Funds may invest in obligations of borrowers who are in bankruptcy proceedings. Floating rate loan interests may include fully funded term loans or revolving lines of credit. Floating rate loan interests are typically senior in the corporate capital structure of the borrower. Floating rate loan interests generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally the lending rate offered by one or more European banks, such as the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more US banks or the certificate of deposit rate. Floating rate loan interests may involve foreign borrowers, and investments may be denominated in foreign currencies. The Funds consider these investments to be investments in debt securities for purposes of their investment policies.

When a Fund purchases a floating rate loan interest it may receive a facility fee and when it sells a floating rate loan interest it may pay a facility fee. On an ongoing basis, the Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit amount of a floating rate loan interest. Facility and commitment fees are typically amortized to income over the term of the loan or term of the commitment, respectively. Consent and amendment fees are recorded to income as earned. Prepayment penalty fees, which may be received by the Fund upon the prepayment of a floating rate loan interest by a borrower, are recorded as realized gains. The Fund may invest in multiple series or tranches of a loan. A different series or tranche may have varying terms and carry different associated risks.

Floating rate loan interests are usually freely callable at the borrower’s option. The Funds may invest in such loans in the form of participations in loans (“Participations”) or assignments (“Assignments”) of all or a portion of loans from third parties. Participations typically will result in the Funds having a contractual relationship only with the lender, not with the borrower. The Funds will have the right to receive payments of principal, interest and any fees to which they are entitled only from the lender selling the Participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing Participations, the Funds generally will have no right to enforce compliance by the borrower with the terms of the loan agreement, nor any rights of offset against the borrower, and the Funds may not benefit directly from any collateral supporting the loan in which they have purchased the Participation. As a result, the Funds will assume the credit risk of both the borrower and the lender that is selling the Participation. The Funds’ investment in loan participation interests involves the risk of insolvency of the financial intermediaries who are parties to the transactions. In the event of the insolvency of the lender selling the Participation, the Funds may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower. Assignments typically result in the Funds having a direct contractual relationship with the borrower, and the Funds may enforce compliance by the borrower with the terms of the loan agreement.

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Borrowed Bond Agreements: The Funds may enter into borrowed bond agreements. In a borrowed bond agreement, the Funds borrow a bond from a counterparty in exchange for cash collateral with the commitment that the security and the cash will be returned to the counterparty and the Funds, respectively, at a mutually agreed upon rate and date. Certain agreements have no stated maturity and can be terminated by either party at any time. Borrowed bond agreements are entered into primarily in connection with short sales of bonds. Earnings on cash collateral and compensation to the lender of the bond are based on agreed upon rates between the Funds and the counterparty. The value of the underlying cash collateral approximates the market value and accrued interest of the borrowed bond. To the extent that a borrowed bond transaction exceeds one business day, the value of the cash collateral in the possession of the counterparty is monitored on a daily basis to ensure the adequacy of the collateral. As the market value of the borrowed bond changes, the cash collateral is periodically increased or decreased with a frequency and in amounts prescribed in the borrowed bond agreement. Full realization of the collateral by the Funds may be limited if the value of an investment purchased with the cash collateral by the lender decreases. The Funds may also experience delays in gaining access to the collateral.

Short Sales: The Funds may enter into short sale transactions in which a Fund sells a security it does not hold in anticipation of a decline in the market price of that security. When the Fund makes a short sale, it will borrow the security sold short (borrowed bond) and deliver it to the counterparty to which it sold the security short. An amount equal to the proceeds 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 market value of the short sale. The Fund is required to repay the counterparty any interest received on the security sold short, which is shown as interest expense in the Statements of Operations. The Fund maintains a segregated account of securities or deposits cash with the broker-dealer as collateral for the short sales. The Fund may receive interest on its cash collateral deposited with the broker-dealer. The Fund is exposed to market risk based on the amount, if any, that the market value of the security increases beyond the market value at which the position was sold. Thus, a short sale of a security involves the risk that instead of declining, the price of the security sold short will rise. The short sale of securities involves the possibility of a theoretically unlimited loss since there is a theoretically unlimited potential for the market price of the security sold short to increase. A gain, limited to the price at which the Fund sold the security short, or a loss, unlimited as to the dollar amount, will be recognized upon the termination of a short sale if the market price is greater or less than the proceeds originally received. There is no assurance the Fund will be able to close out a short position at a particular time or at an acceptable price.

Forward Commitments and When-Issued Delayed Delivery Securities: The Funds may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. The Funds may purchase securities under such conditions with the intention of actually acquiring them,

but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, the Funds may be required to pay more at settlement than the security is worth. In addition, the Funds are not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, the Funds assume the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, the Funds’ maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions, which is shown in the Schedules of Investments.

TBA Commitments: The Funds may enter into TBA commitments. TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. The Funds generally enter into TBA commitments with the intent to take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. TBA commitments involve a risk of loss if the value of the security to be purchased or sold declines or increases, respectively, prior to settlement date.

Mortgage Dollar Roll Transactions: The Funds may sell TBA mortgage-backed securities and simultaneously contract to repurchase substantially similar (same type, coupon and maturity) securities on a specific future date at an agreed upon price. During the period between the sale and repurchase, the Funds will not be entitled to receive interest and principal payments on the securities sold. The Funds account for mortgage dollar roll transactions as purchases and sales and realize gains and losses on these transactions. These transactions increase the Funds’ portfolio turnover rate. Mortgage dollar rolls involve the risk that the market value of the securities that the Funds are required to purchase may decline below the agreed upon repurchase price of those securities.

Treasury Roll Transactions: The Funds may enter into treasury roll transactions. In a treasury roll transaction, the Funds sell a Treasury security to a counterparty with a simultaneous agreement to repurchase the same security at an agreed upon price and future settlement date. The Funds receive cash from the sale of the Treasury security to use for other investment purposes. The difference between the sale price and repurchase price represents net interest income or net interest expense reflective of an agreed upon rate between the Funds and the counterparty over the term of the borrowing. For US GAAP purposes, a treasury roll transaction is accounted for as a secured borrowing and not as a purchase or sale. During the term of the borrowing, interest income from the Treasury security and the related interest expense on the secured borrowing is recorded by the Funds on an accrual basis. The Funds will benefit from the transaction if the income earned on the investment purchased with the cash received in the treasury roll transaction exceeds the interest expense incurred by the Funds. If the interest expense exceeds the income earned, the Funds’ net investment income and dividends to shareholders may be adversely impacted. Treasury roll transactions involve the risk that the market value of the securities that the Funds are required to repurchase may decline below the agreed upon repurchase price of those securities.

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Notes to Financial Statements (continued)

Reverse Repurchase Agreements: The Funds may enter into reverse repurchase agreements with qualified third party broker-dealers. In a reverse repurchase agreement, the Funds sell securities to a bank or broker-dealer and agree to repurchase the same securities at a mutually agreed upon date and price. Securities sold under reverse repurchase agreements are recorded as a liability in the Statements of Assets and Liabilities at face value including accrued interest. Due to the short term nature of the reverse repurchase agreements, face value approximates fair value. During the term of the reverse repurchase agreement, the Funds continue to receive the principal and interest payments on these securities. Certain agreements have no stated maturity and can be terminated by either party at any time. Interest on the value of the reverse repurchase agreements issued and outstanding is based upon competitive market rates determined at the time of issuance. The Funds may utilize reverse repurchase agreements when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. Reverse repurchase agreements involve leverage risk and also the risk that the market value of the securities that the Funds are obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Funds’ use of the proceeds of the agreement may be restricted while the other party, or its trustee or receiver, determines whether or not to enforce the Funds’ obligation to repurchase the securities.

Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the Securities and Exchange Commission (“SEC”) require that each Fund either deliver collateral or segregate assets in connection with certain investments (e.g., dollar rolls, TBA sale commitments, financial futures contracts, foreign currency exchange contracts, swaps and options written), or certain borrowings (e.g., reverse repurchase agreements and treasury roll transactions), each Fund will, consistent with SEC rules and/or certain interpretive letters issued by the SEC, segregate collateral or designate on its books and records cash or liquid securities having a market value at least equal to the amount that would otherwise be required to be physically segregated. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, a Fund engaging in such transactions may have requirements to deliver/deposit securities to/with an exchange or broker-dealer as collateral for certain investments.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment 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 Funds are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis. Income and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets. Consent fees are compensation

for agreeing to changes in the terms of debt instruments and are included in interest income in the Statements of Operations.

Dividends and Distributions: Dividends from net investment income are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend dates. The portion of distributions that exceeds a Fund’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of a Fund’s taxable income and net capital gains, but not in excess of a Fund’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a nontaxable return of capital. Capital losses carried forward from years beginning before 2011 do not reduce earnings and profits, even if such carried forward losses offset current year realized gains. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

Income Taxes: It is the Funds’ policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. Therefore, no federal income tax provision is required.

Each Fund files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Funds’ US federal tax returns remains open for each of the four years ended September 30, 2012. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

Recent Accounting Standard: In December 2011, the Financial Accounting Standards Board issued guidance that will enhance current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Funds’ financial statement disclosures.

Other: Expenses directly related to a Fund or its classes are charged to that Fund or class. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Funds and other shared expenses pro rated to the Funds are allocated daily to each class based on its relative net assets or other appropriate methods.

The Funds have an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

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2. Derivative Financial Instruments:

The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and to economically hedge, or protect, their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk or other risk (inflation risk). These contracts may be transacted on an exchange or OTC.

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. The Funds’ maximum risk of loss from counterparty credit risk on OTC derivatives is generally the aggregate unrealized gain netted against any collateral pledged by/posted to the counterparty. For OTC options purchased, the Funds bear the risk of loss in the amount of the premiums paid plus the positive change in market value net of any collateral received on the options should the counterparty fail to perform under the contracts. Options written by the Funds do not give rise to counterparty credit risk, as options written obligate the Funds to perform and not the counterparty. Counterparty risk related to exchange-traded financial futures contracts, options and centrally cleared swaps is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

The Funds may mitigate counterparty risk by procuring collateral and through netting provisions included within an International Swaps and Derivatives Association, Inc. master agreement (“ISDA Master Agreement”) implemented between a Fund and each of its respective counterparties. An ISDA Master Agreement allows each Fund to offset with each separate counterparty certain derivative financial instrument’s payables and/or receivables with collateral held. The amount of collateral moved to/from applicable counterparties is generally based upon minimum transfer amounts of up to $500,000. To the extent amounts due to the Funds from their counterparties are not fully collateralized contractually or otherwise, the Funds bear the risk of loss from counterparty non-performance. See Note 1 “Segregation and Collateralization” for information with respect to collateral practices. In addition, the Funds manage counterparty risk by entering into agreements only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Funds’ net assets decline by a stated percentage or the Funds fail to meet the terms of their ISDA Master Agreements, which would cause the Funds to accelerate payment of any net liability owed to the counterparty.

Financial Futures Contracts: The Funds purchase or sell financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk), interest rates (interest rate risk) or foreign currencies (foreign currency exchange rate risk). Financial futures contracts are agreements between the Fund and counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial

futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Funds as unrealized appreciation or depreciation. When the contract is closed, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

Foreign Currency Exchange Contracts: The Funds enter into foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to foreign currencies (foreign currency exchange rate risk). A foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Foreign currency exchange contracts, when used by the Funds, help to manage the overall exposure to the currencies in which some of the investments held by the Funds are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Funds as an unrealized gain or loss. When the contract is closed, the Funds record a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies and the risk that a counterparty to the contract does not perform its obligations under the agreement.

Options: The Funds purchase and write call and put options to increase or decrease their exposure to underlying instruments (including interest rate risk) and/or, in the case of options written, to generate gains from options premiums. A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised), the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. When the Funds purchase (write) an option, an amount equal to the premium paid (received) by the Funds is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked-to-market to reflect the current market value of the option purchased (written). When an instrument 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 instrument acquired or deducted from (or added to) the proceeds of the instrument sold. When an option expires (or the Funds enter into a closing transaction), the Funds realize 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 premiums received or paid). When the Funds write a call option, such option is “covered,” meaning that the Funds hold the underlying instrument subject to being called by the option counterparty. When the Funds write a put option, such option is covered by cash in an amount sufficient to cover the obligation.

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Notes to Financial Statements (continued)

Options on swaps (swaptions) are similar to options on securities except that instead of selling or purchasing the right to buy or sell a security, the writer or purchaser of the swap option is granting or buying the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

The Funds also purchase or sell listed or OTC foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedge against possible variations in foreign exchange rates or to gain exposure to foreign currencies (foreign currency exchange rate risk). When foreign currency is purchased or sold through an exercise of a foreign currency option, the related premium paid (or received) is added to (or deducted from) the basis of the foreign currency acquired or deducted from (or added to) the proceeds of the foreign currency sold. Such transactions may be effected with respect to hedges on non-US dollar denominated instruments owned by the Funds but not yet delivered, or committed or anticipated to be purchased by the Funds.

Core Bond may also purchase and write a variety of options with nonstandard payout structures or other features (“barrier options”). Barrier options are generally traded OTC. The types of barrier options the Funds may invest in include down-and-out options, double no-touch options and one-touch options. Down-and-out options are similar to standard options, except that the option expires worthless to the purchaser of the option if the price of the underlying security reaches a specific barrier price level prior to the option’s expiration date. Double no-touch options provide the purchaser of the option an agreed-upon payout if the price of the underlying asset does not reach or surpass predetermined barrier price levels prior to the option’s expiration date. One-touch options provide the purchaser of the option an agreed-upon payout if the price of the underlying asset reaches or surpasses predetermined barrier price levels prior to the option’s expiration date.

In purchasing and writing options, the Funds bear the risk of an unfavorable change in the value of the underlying instrument or the risk that the Funds may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Funds purchasing or selling a security at a price different from the current market value.

Swaps: The Funds enter into swap agreements, in which the Funds and a counterparty agree to either make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be executed on a registered financial and commodities exchange (“centrally cleared swaps”). In a centrally cleared swap, the Funds typically enter into an agreement with a counterparty; however, performance is guaranteed by the central clearinghouse reducing or eliminating the Fund’s exposure to the credit risk of the counterparty. These payments received or made by the Funds are recorded in the Statements of Operations as realized gains or losses, respectively. Any upfront fees paid are recorded as

assets and any upfront fees received are recorded as liabilities and are shown as swap premiums paid and swap premiums received, respectively on the Statements of Assets and Liabilities and amortized over the term of the swap. Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). The daily change in valuation of centrally cleared swaps, if any, is recorded as a receivable or payable for variation margin in the Statements of Assets and Liabilities. When the swap is terminated, the Funds will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Funds’ basis in the contract, if any. Generally, the basis of the contracts is the premium received or paid. Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

• Credit default swaps – The Funds enter into credit default swaps to manage their exposure to the market or certain sectors of the market, to reduce their risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which they are not otherwise exposed (credit risk). The Funds enter into credit default swap agreements to provide a measure of protection against the default of an issuer (as buyer of protection) and/or gain credit exposure to an issuer to which it is not otherwise exposed (as seller of protection). The Funds may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps on single-name issuers are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation accelerators, repudiation, moratorium or restructuring). Credit default swaps on traded indexes are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a write-down, principal or interest shortfall or default of all or individual underlying securities included in the index occurs. As a buyer, if an underlying credit event occurs, the Funds will either receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index or receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Funds will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

 78   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

• Total return swaps – Core Bond enters into total return swaps to obtain exposure to a security or market without owning such security or investing directly in that market or to transfer the risk/return of one market (e.g., fixed income) to another market (e.g., equity) (equity risk and/or interest rate risk). Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (coupons plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. To the extent the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Funds will receive a payment from or make a payment to the counterparty.

• Interest rate swaps – Certain Funds enter into interest rate swaps to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate risk by economically hedging the value of the fixed rate bonds which may decrease when interest rates rise (interest rate risk). Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. In more complex swaps, the notional principal amount may decline (or amortize) over time.

Derivative Financial Instruments Categorized by Risk Exposure:

Fair Values of Derivative Financial Instruments as of September 30, 2012
Asset Derivatives
	Statements of Assets and Liabilities Location	Core Bond		High Yield Bond		Low Duration Bond
Interest rate contracts	Net unrealized appreciation/ depreciation1 ; Unrealized appreciation on swaps1 ;Swap premiums paid; Investments at value – unaffiliated2	$	9,057,601		–	$	1,750,827
Foreign currency exchange contracts	Net unrealized appreciation/ depreciation1 ; Unrealized appreciation on foreign currency exchange contracts		1,506,403	$	163,522		1,282,066
Credit contracts	Unrealized appreciation on swaps1 ; Swap premiums paid; Investments at value – unaffiliated2		1,419,343		22,156,145		8,143,964
Equity contracts	Net unrealized appreciation/ depreciation1 ; Investments at value – unaffiliated2		—		2,022,323		—
Total		$	11,983,347	$	24,341,990	$	11,176,857

	Liability Derivatives
	Statements of Assets and Liabilities Location	Core Bond		High Yield Bond		Low Duration Bond
Interest rate contracts	Net unrealized appreciation/ depreciation1 ; Unrealized depreciation on swaps1 ; Swap premiums received; Options written at value	$	33,414,314		–	$	5,234,286
Foreign currency exchange contracts	Net unrealized appreciation/ depreciation1 ; Unrealized depreciation on foreign currency exchange contracts; Options written at value		4,130,002	$	27,045,043		7,024,964
Credit contracts	Unrealized depreciation on swaps1 ; Swap premiums received; Options written at value		3,089,481		7,612,790		6,726,062
Other contracts	Unrealized depreciation on swaps1		571,509		–		–
Total		$	41,205,306	$	34,657,833	$	18,985,312

¹  Includes cumulative appreciation/depreciation on financial futures contracts and centrally cleared swaps as reported in the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Assets and Liabilities.

²  Includes options purchased at value as reported in the Schedules of Investments.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 79 

Notes to Financial Statements (continued)

The Effect of Derivative Financial Instruments in the Statements of Operations Year Ended September 30, 2012
Net Realized Gain (Loss) From
	Core Bond			High Yield Bond			Low Duration Bond
Interest rate contracts:
Financial futures contracts	$	(20,915,579	)		–		$	(462,338	)
Options3		(12,857,230	)		–			1,336,592
Swaps		8,685,957			–			762,240
Foreign currency exchange contracts:
Foreign currency transactions		8,992,046		$	63,311,381			7,848,250
Financial futures contracts		(462,506	)		–			–
Options3		(1,909,545	)		–			293,764
Credit contracts:
Swaps		(639,864	)		23,776,431			(360,917	)
Options3		(671,106	)		6,583,925			27,690
Equity contracts:
Financial futures contracts		–			(50,025,696	)		–
Options3		–			(4,175,458	)		–
Other contracts:
Swaps		426,106			–			–
Total	$	(19,351,721	)	$	39,470,583		$	9,445,281
Net Change in Unrealized Appreciation/Depreciation on
	Core Bond			High Yield Bond			Low Duration Bond
Interest rate contracts:
Financial futures contracts	$	255,202			–		$	(742,646	)
Options3		12,273,814			–			(1,093,509	)
Swaps		(17,057,838	)		–			(1,049,430	)
Foreign currency exchange contracts:
Foreign currency translations		(2,370,011	)	$	(55,269,544	)		(7,628,830	)
Financial futures contracts		(49,930	)		(8,657,711	)		–
Options3		(3,699,543	)		–			–
Credit contracts:
Swaps		1,746,800			17,052,913			(1,479,601	)
Options3		–			(538,313	)		281,020
Equity contracts:
Financial futures contracts		–			–			–
Options3		–			(34,206	)		–
Other contracts:
Swaps		(2,723,641	)		–			–
Total	$	(11,625,147	)	$	(47,446,861	)	$	(11,712,996	)

³  Options purchased are included in the net realized gain (loss) from investments – unaffiliated and net change in unrealized appreciation/depreciation on investments – unaffiliated.

 80   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

For the year ended September 30, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:

	Core Bond		High Yield Bond		Low Duration Bond
Financial futures contracts:
Average number of contracts purchased		2,289		–		1,764
Average number of contracts sold		5,559		1,937		1,226
Average notional value of contracts purchased	$	640,230,760		–	$	408,211,405
Average notional value of contracts sold	$	1,012,516,726	$	132,139,693	$	161,712,352
Foreign currency exchange contracts:
Average number of contracts - US dollars purchased		19		17		10
Average number of contracts - US dollars sold		11		2		3
Average US dollar amounts purchased	$	202,979,391	$	594,885,250	$	184,800,206
Average US dollar amounts sold	$	97,774,864	$	16,384,138	$	41,048,290
Options:
Average number of option contracts purchased		7		2		1
Average number of option contracts written		4		1		–
Average notional value of option contracts purchased	$	859,478,755	$	164,338,386	$	16,625,000
Average notional value of option contracts written	$	475,909,680	$	114,297,500		–
Average number of swaption contracts purchased		9		–		1
Average number of swaption contracts written		15		1		1
Average notional value of swaption contracts purchased	$	323,383,456		–	$	131,250,000
Average notional value of swaption contracts written	$	532,325,000	$	50,500,000	$	121,250,000
Credit default swaps:
Average number of contracts - buy protection		4		10		11
Average number of contracts - sell protection		12		25		6
Average notional value - buy protection	$	41,483,000	$	41,333,000	$	97,505,500
Average notional value - sell protection	$	54,732,250	$	278,326,250	$	80,850,000
Interest rate swaps:
Average number of contracts - pays fixed rate		15		–		3
Average number of contracts - receives fixed rate		12		–		2
Average notional value - pays fixed rate	$	367,822,305		–	$	180,046,494
Average notional value - receives fixed rate	$	375,526,111		–	$	279,075,796
Total return swaps:
Average number of contracts		6		1		1
Average notional value	$	56,363,500	$	25,000,000	$	10,010,500

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”) is the largest stockholder and an affiliate, for 1940 Act purposes, of BlackRock.

The Trust, on behalf of the Funds, entered into an Investment Advisory Agreement with the Manager, the Funds’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of each Fund’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Fund. For such services, each Fund pays the Manager a monthly fee based on a percentage of each Fund’s average daily net assets at the following annual rates:

Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.500	%
$1 Billion – $2 Billion		0.450	%
$2 Billion – $3 Billion		0.425	%
Greater than $3 Billion		0.400	%

The Manager contractually or voluntarily agreed to waive and/or reimburse fees or expenses, excluding interest expense, dividend expense, acquired fund fees and expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Funds’ business, in order to limit expenses. The expense limitations as a percentage of average daily net assets are as follows:

	Core Bond	High Yield Bond		Low Duration Bond
	Contractual	Contractual	Voluntary3	Contractual	Voluntary3
BlackRock	0.45%1	0.58%1	–	0.41%1	–
Institutional	0.56%2	0.70%1	0.67%	0.55%1	0.45%
Service	0.93%1	1.02%1	–	0.85%1	–
Investor A	0.89%1	0.92%2	–	0.81%2	–
Investor A1	N/A	N/A	N/A	–	0.64%
Investor B	1.73%1	– 4	–	1.62%1	–
Investor B1	N/A	1.46%2	–	N/A	N/A
Investor B2	N/A	N/A	N/A	N/A	N/A
Investor B3	N/A	N/A	N/A	–	–
Investor C	1.66%1	1.72%2	–	1.53%2	–
Investor C1	N/A	1.56%2	–	N/A	N/A
Investor C2	N/A	N/A	N/A	–	0.97%
Investor C3	N/A	N/A	N/A	–	–
Class R	1.17%1	–	1.28%	1.65%1	–

¹  The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to February 1, 2013 unless approved by the Board, including a majority of the independent Trustees.

²  The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to February 1, 2014 unless approved by the Board, including a majority of the independent Trustees.

³  The voluntary waiver or reimbursement may be reduced or discontinued at any time.

⁴ Prior to January 31, 2012, Investor B Shares had a contractual expense limitation of 1.87%.

These amounts are included in fees waived by Manager and shown as administration fees waived – class specific, transfer agent fees waived – class specific and transfer agent fees reimbursed – class specific, respectively, in the Statements of Operations.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 81 

Notes to Financial Statements (continued)

For the year ended September 30, 2012, the amounts included in fees waived by Manager were as follows:

Core Bond	$	3,511,904
High Yield Bond	$	5,099
Low Duration Bond	$	3,352,926

Class specific expense waivers or reimbursements are as follows:

	Administration Fees Waived
Share Classes	Core Bond		High Yield Bond		Low Duration Bond
BlackRock	$	160,386	$	10,224	$	76,851
Institutional		206,029		12,965		148,424
Service		29,327		1,715		7,330
Investor A		49,067		281,184		111,755
Investor A1		–		–		5,560
Investor B		640		–		659
Investor B1		–		6,003		–
Investor C		–		34,254		59,374
Investor C1		–		8,421		–
Investor C2		–		–		26
Class R		103		5,464		–
Total	$	445,552	$	360,230	$	409,979
	Transfer Agent Fees Waived
Share Classes	Core Bond		High Yield Bond		Low Duration Bond
BlackRock	$	2,301	$	97	$	1,626
Institutional		26,668		1,712		4,345
Service		18,947		7		–
Investor A		3,412		85,347		8,382
Investor A1		–		–		419
Investor B		144		–		326
Investor B1		–		1,253		–
Investor C		–		2,208		3,333
Investor C1		–		950		–
Class R		20		642		–
Total	$	51,492	$	92,216	$	18,431
	Transfer Agent Fees Reimbursed
Share Classes	Core Bond		High Yield Bond		Low Duration Bond
BlackRock	$	53,211	$	1,016	$	12,832
Institutional		480,670		12,020		458,911
Service		27,873		3,193		43
Investor A		10,805		1,679,078		56,235
Investor A1		–		–		3,509
Investor B		843		–		3,304
Investor B1		–		17,607		–
Investor C		–		11,848		83,837
Investor C1		–		21,914		–
Class R		155		8,929		–
Total	$	573,557	$	1,755,605	$	618,671

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each Fund’s investment in other affiliated investment companies, if any. These

amounts are included in fees waived by Manager in the Statements of Operations. For the year ended September 30, 2012, the amounts waived/reimbursed were as follows:

Core Bond	$	9,461
High Yield Bond	$	274,491
Low Duration Bond	$	18,133

BlackRock provides investment management and other services to the US and Luxembourg Subsidiaries. BlackRock does not receive separate compensation from the US and Luxembourg Subsidiaries for providing investment management or administrative services. However, the High Yield Bond pays BlackRock based on the Fund’s net assets which includes the assets of US and Luxembourg Subsidiaries.

The Manager entered into separate sub-advisory agreements with BlackRock Financial Management, Inc. (“BFM”), an affiliate of the Manager. The Manager pays BFM for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by the Funds to the Manager.

If during a Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver or reimbursement from the Manager, are less than the expense limit for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of (a) the amount of fees waived or expenses reimbursed during those prior two fiscal years under the agreement and (b) the amount by which the expense limit for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that: (1) the Fund of which the share class is a part has more than $50 million in assets for the fiscal year and (2) the Manager or an affiliate continues to serve as the Fund’s investment advisor or administrator. In the event the expense limit for a share class is changed subsequent to a fiscal year in which the Manager becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse the Manager shall be calculated by reference to the expense limit for that share class in effect at the time the Manager became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.

For the year ended September 30, 2012, the Manager recouped the following waivers previously recorded by the Funds:

Share Classes	Core Bond		High Yield Bond		Low Duration Bond
BlackRock		–	$	93,484		–
Institutional	$	12,560		48,311		–
Service		–		85,094	$	1,700
Investor A		22,404		–		4,799
Investor B		17		–		219
Investor B1		–		505		–
Investor C		4		32,054		–
Investor C1		–		22,916		–
Class R		11		–		–
Total	$	34,996	$	282,364	$	6,718

 82   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

On September 30, 2012, the amounts subject to possible future recoupment under the expense limitation agreement are as follows:

	Expiring September 30,
	2013		2014
Core Bond	$	3,897,145	$	4,582,505
High Yield Bond	$	1,029,388	$	2,171,419
Low Duration Bond	$	3,195,617	$	3,800,994

The following waivers previously recorded by the Funds, which were subject to recoupment by the Manager, expired on September 30, 2012:

Core Bond	$	3,687,043
High Yield Bond	$	49,846
Low Duration Bond	$	2,813,504

The Trust, on behalf of the Funds, entered into a Distribution Agreement and Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the Funds pay BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the shares of each Fund as follows:

	Service Fee	Distribution Fee
Service	0.25%	–
Investor A	0.25%	–
Investor A1	0.10%	–
Investor B	0.25%	0.75%
Investor B1	0.25%	0.50%
Investor B3	0.25%	0.65%
Investor C	0.25%	0.75%
Investor C1	0.25%	0.55%
Investor C2	0.10%	0.30%
Investor C3	0.25%	0.65%
Class R	0.25%	0.25%

Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing and distribution services to each Fund. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to Service, Investor A, Investor A1, Investor B, Investor B1, Investor B3, Investor C, Investor C1, Investor C2, Investor C3 and Class R shareholders.

For the year ended September 30, 2012, the following table shows the class specific service and distribution fees borne directly by each class of each Fund:

Share Classes	Core Bond		High Yield Bond		Low Duration Bond
Service	$	644,070	$	646,285	$	746,494
Investor A		1,489,992		6,575,445		1,302,352
Investor A1		–		–		23,117
Investor B		72,233		85,841		40,840
Investor B1		–		190,308		–
Investor B3		–		–		83,323
Investor C		1,974,244		4,038,797		2,519,156
Investor C1		–		823,536		–
Investor C2		–		–		59,544
Investor C3		–		–		339,773
Class R		3,091		125,966		31,533
Total	$	4,183,630	$	12,486,178	$	5,146,132

For the year ended September 30, 2012, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each Fund’s Investor A Shares as follows:

Core Bond	$	144,903
High Yield Bond	$	287,427
Low Duration Bond	$	98,388

For the year ended September 30, 2012, affiliates received CDSCs as follows:

Share Classes	Core Bond		High Yield Bond		Low Duration Bond
Investor A	$	29,443	$	88,750	$	23,834
Investor B	$	9,364	$	5,985	$	3,461
Investor B1		N/A	$	2,877		N/A
Investor B3		N/A		N/A	$	2,086
Investor C	$	51,132	$	75,525	$	63,789
Investor C1		N/A	$	1,233		N/A
Investor C2		N/A		N/A	$	1
Investor C3		N/A		N/A	$	126

Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Funds with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the year ended September 30, 2012, the Funds paid the following to the affiliates in return for these services, which are included in transfer agent – class specific in the Statements of Operations:

Core Bond	$	1,041,076
High Yield Bond	$	680,400
Low Duration Bond	$	348,040

The Manager maintains a call center, which is responsible for providing certain shareholder services to the Funds, such as responding to shareholder inquiries and processing transactions based upon instructions from shareholders with respect to the subscription and redemption of Fund shares. For the year ended September 30, 2012, each Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent – class specific in the Statements of Operations:

Share Classes	Core Bond		High Yield Bond		Low Duration Bond
BlackRock	$	2,349	$	2,849	$	1,633
Institutional		28,010		102,129		4,345
Service		22,708		3,574		2,048
Investor A		13,013		85,556		9,053
Investor A1		–		–		446
Investor B		272		581		393
Investor B1		–		1,316		–
Investor B3		–		–		403
Investor C		2,347		13,988		3,906
Investor C1		–		4,614		–
Investor C2		–		–		183
Investor C3		–		–		666
Class R		47		979		141
Total	$	68,746	$	215,586	$	23,217

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 83 

Notes to Financial Statements (continued)

For the year ended September 30, 2012, the following table shows the class specific transfer agent fees borne directly by each class of each Fund:

Share Classes	Core Bond		High Yield Bond		Low Duration Bond
BlackRock	$	55,570	$	122,494	$	14,886
Institutional		2,113,970		2,891,683		725,820
Service		499,484		364,304		434,820
Investor A		1,013,265		5,984,039		827,019
Investor A1		–		–		33,570
Investor B		14,766		19,058		10,400
Investor B1		–		67,756		–
Investor B3		–		–		26,416
Investor C		272,082		772,342		385,179
Investor C1		–		212,523		–
Investor C2		–		–		15,616
Investor C3		–		–		99,817
Class R		1,453		76,034		20,183
Total	$	3,970,590	$	10,510,233	$	2,593,726

BNY Mellon Investment Servicing (US) Inc. (“BNYMIS”) and the Manager act as co-administrators for the Funds. For these services, the co-administrators receive a combined administration fee computed daily and payable monthly, based on a percentage of the average daily net assets of each Fund. The combined administration fee is paid at the following annual rates: 0.075% of the first $500 million, 0.065% of the next $500 million and 0.055% of the average daily net assets in excess of $1 billion. In addition, each of the share classes is charged an administration fee based on the following percentages of average daily net assets of each respective class: 0.025% of the first $500 million, 0.015% of the next $500 million and 0.005% of the average daily net assets in excess of $1 billion. In addition, BNYMIS and the Manager may have, at their discretion, voluntarily waived all or any portion of their administration fees for a Fund or a share class which are included in administration fees waived and administration fees waived – class specific in the Statements of Operations. For the year ended September 30, 2012, the Funds paid the following to the Manager in return for these services, which are included in administration, administration – class specific and administration fees waived – class specific in the Statements of Operations:

Core Bond	$	1,643,756
High Yield Bond	$	3,649,305
Low Duration Bond	$	1,070,921

For the year ended September 30, 2012, the following table shows the administration fees – class specific borne directly by each class of each Fund:

Share Classes	Core Bond		High Yield Bond		Low Duration Bond
BlackRock	$	160,640	$	163,001	$	76,851
Institutional		224,258		288,518		148,424
Service		64,407		64,629		74,649
Investor A		139,399		281,509		128,092
Investor A1		–		–		5,779
Investor B		1,806		2,148		1,022
Investor B1		–		6,344		–
Investor B2		–		–		–

Share Classes	Core Bond		High Yield Bond		Low Duration Bond
Investor B3		–		–		2,315
Investor C		49,356		100,970		62,979
Investor C1		–		25,735		–
Investor C2		–		–		3,722
Investor C3		–		–		9,438
Class R		154		6,298		1,576
Total	$	640,020	$	939,152	$	514,847

The Funds received an exemptive order from the SEC permitting them, among other things, to pay an affiliated securities lending agent a fee based on a share of the income derived from the securities lending activities and has retained BlackRock Investment Management, LLC (“BIM”) as the securities lending agent. BIM may, on behalf of the Funds, invest cash collateral received by the Funds 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. As securities lending agent, BIM is responsible for all transaction fees and all other operational costs relating to securities lending activities, other than extraordinary expenses. BIM does not receive any fees for managing the cash collateral. The market value of securities on loan and the value of the related collateral, if applicable, are shown in the Statements of Assets and Liabilities as securities loaned at value and collateral on securities loaned at value, respectively. The cash collateral invested by BIM is disclosed in the Schedules of Investments, if any. Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of rebates paid to, or fees paid by, borrowers of securities. The Fund retains 65% of securities lending income and pays a fee to BIM equal to 35% of such income. The share of income earned by the Funds is shown as securities lending – affiliated in the Statements of Operations. For the year ended September 30, 2012, BIM did not earn any securities lending agent fees.

During the year ended September 30, 2012, Core Bond received $305 from an affiliate, which is included in capital share transactions on the Statements of Changes in Net Assets, relating to processing errors.

Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Trust’s Chief Compliance Officer.

4. Investments:

Purchases and sales of investments including paydowns, mortgage dollar roll and TBA transactions and excluding short-term securities and US government securities for the year ended September 30, 2012, were as follows:

	Purchases		Sales
Core Bond	$	27,557,600,510	$	27,413,178,075
High Yield Bond	$	8,145,484,817	$	4,566,070,734
Low Duration Bond	$	4,675,219,673	$	3,925,404,637

 84   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

Purchases and sales of US government securities for the year ended September 30, 2012, were as follows:

	Purchases		Sales
Core Bond	$	17,514,611,445	$	17,679,454,567
Low Duration Bond	$	1,588,469,355	$	1,432,885,098

Purchases and sales of mortgage dollar rolls for the year ended September 30, 2012, were as follows:

	Purchases		Sales
Core Bond	$	22,512,723,587	$	22,516,297,828
Low Duration Bond	$	835,627,830	$	837,596,772

Transactions in options written for the year ended September 30, 2012, were as follows:

	Core Bond
	Calls									Puts
	Contracts			Notional (000)			Premiums Received			Contracts			Notional (000)			Premiums Received
Outstanding options, beginning of year		1,142			551,550		$	18,112,901			–			746,210		$	19,401,307
Options written		7,049			857,135			18,347,828			8,312			1,703,832			34,927,124
Options expired		(3,719	)		(402,085	)		(5,165,824	)		(3,948	)		(755,110	)		(9,604,390	)
Options closed		(2,333	)		(751,700	)		(23,997,146	)		(4,364	)		(1,372,832	)		(35,831,521	)
Outstanding options, end of year		2,139			254,900		$	7,297,759			–			322,100		$	8,892,520

	High Yield Bond
	Calls						Puts
	Notional (000)			Premiums Received			Contracts			Notional (000)			Premiums Received
Outstanding options, beginning of year		101,000		$	3,276,100			21,526			101,000		$	6,977,713
Options written		101,000			3,888,500			131,215			130,205			13,328,807
Options expired		–			–			(34,450	)		(29,205	)		(3,088,054	)
Options closed		(202,000	)		(7,164,600	)		(118,291	)		(202,000	)		(17,218,466	)
Outstanding options, end of year		–			–			–			–			–

	Low Duration Bond
	Calls				Puts
	Notional (000)		Premiums Received		Notional (000)			Premiums Received
Outstanding options, beginning of year		–		–		27,900		$	108,810
Options written		110,000	$	770,000		375,000			2,651,250
Options expired		–		–		(7,100	)		(27,690	)
Options closed		–		–		(285,800	)		(1,335,370	)
Outstanding options, end of year		110,000	$	770,000		110,000		$	1,397,000

5. Income Tax Information:

US GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The following permanent differences as of September 30, 2012 attributable to the accounting for swap agreements, distributions paid in excess of taxable income, amortization methods on fixed income securities, the classification of settlement proceeds, the expiration of capital loss carryforwards and foreign currency transactions were reclassified to the following accounts:

	Core Bond			High Yield Bond			Low Duration Bond
Paid-in Capital	$	(26,212,578	)	$	(7,480,996	)		–
Undistributed (distribution in excess of) net investment income	$	26,873,840		$	73,516,359		$	4,617,087
Accumulated net realized loss	$	(661,262	)	$	(66,035,363	)	$	(4,617,087	)

The tax character of distributions paid during the fiscal years ended September 30, 2012 and September 30, 2011 were as follows:

	Core Bond		High Yield Bond		Low Duration Bond
Ordinary Income
9/30/2012	$	106,493,339	$	451,831,468	$	49,210,807
9/30/2011	$	99,757,971	$	256,091,607	$	47,771,162

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 85 

Notes to Financial Statements (continued)

As of September 30, 2012, the tax components of accumulated net losses were as follows:

	Core Bond			High Yield Bond			Low Duration Bond
Undistributed ordinary income		–		$	38,140,697		$	2,752,539
Capital loss carryforwards	$	(120,034,245	)		(331,503,256	)		(114,035,370	)
Net unrealized gains1		111,826,737			224,140,682			37,172,736
Qualified late-year losses2		(14,801,572	)		(2,113,791	)		–
Total	$	(23,009,080	)	$	(71,335,668	)	$	(74,110,095	)

¹  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and straddles, amortization methods for premiums and discounts on fixed income securities, the realization for tax purposes of unrealized gains/losses on certain futures, options, and foreign currency contracts, the classification of investments, investments in wholly owned subsidiaries and the accounting for swap agreements.

² The Funds have elected to defer certain qualified late-year losses and recognize such losses in the year ending September 30, 2013.

As of September 30, 2012, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

Expires September 30,	Core Bond		High Yield Bond		Low Duration Bond
2013		–	$	10,436,405	$	8,434,425
2014		–		11,471,371		23,592,216
2015		–		21,774,534		14,223,477
2016		–		13,268,341		1,475,016
2017	$	36,234,943		177,130,967		41,571,660
2018		79,322,289		92,528,020		24,738,576
2019		4,477,013		–		–
No expiration date3		–		4,893,618		–
Total	$	120,034,245	$	331,503,256	$	114,035,370

³  Must be utilized prior to losses subject to expiration.

During the year ended September 30, 2012, Core Bond and Low Duration Bond utilized $46,807,766 and $16,622,710, respectively, of their capital loss carryforward.

As of September 30, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

	Core Bond			High Yield Bond			Low Duration Bond
Tax cost	$	6,081,136,831		$	9,304,618,513		$	3,226,566,398
Gross unrealized appreciation	$	149,570,347		$	445,666,283		$	48,789,960
Gross unrealized depreciation		(15,190,483	)		(228,040,087	)		(9,898,609	)
Net unrealized appreciation	$	134,379,864		$	217,626,196		$	38,891,351

6. Borrowings:

For the year ended September 30, 2012, the average amount of transactions considered as borrowings and the daily weighted average interest rates from treasury rolls and reverse repurchase agreements were as follows:

	Average Borrowings		Daily Weighted Average Interest Rate
Core Bond	$	548,998,052	0.11%
Low Duration Bond	$	211,438,294	0.17%

The Trust, on behalf of the Funds, along with certain other funds managed by the Manager and its affiliates, is a party to a $500 million credit agreement with a group of lenders, which expires in November 2012 and was subsequently renewed until November 2013. The Funds may borrow under the credit agreement to fund shareholder redemptions. Effective November 2010 to November 2011, the credit agreement had the following terms: a commitment fee of 0.08% per annum based on the Funds’ pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 1.00% per annum or (b) the Fed Funds rate plus 1.00% per annum on amounts borrowed. In addition, the Funds paid administration and arrangement fees which were allocated to the Funds based on their net assets as of October 31, 2010. The credit agreement, which expired in November 2011, was renewed until November 2012. Effective November 2011 to November 2012, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the Funds’ pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Funds paid administration and arrangement fees which were allocated to the Funds based on their net assets as of October 31, 2011. The Funds did not borrow under the credit agreement during the year ended September 30, 2012.

7. Concentration, Market and Credit Risk:

In the normal course of business, the Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Funds; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity with which the Funds have unsettled or open transactions may fail to or be unable to perform on its commitments. The Funds manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.

 86   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

8. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended September 30, 2012						Year Ended September 30, 2011
Core Bond	Shares			Amount			Shares			Amount
BlackRock
Shares issued in the reorganization1		–			–			12,487,320		$	117,156,039
Shares sold		4,274,356		$	40,618,000			20,070,260			188,475,785
Shares issued in reinvestment of dividends		2,379,356			22,774,981			4,059,988			38,129,043
Shares redeemed		(28,872,739	)		(276,158,533	)		(60,950,365	)		(574,482,615	)
Net decrease		(22,219,027	)	$	(212,765,552	)		(24,332,797	)	$	(230,721,748	)
Institutional
Shares issued in the reorganization1		–			–			79,021,772		$	739,462,031
Shares sold		43,615,077		$	415,568,720			30,835,761			288,919,448
Shares issued in reinvestment of dividends		3,264,218			31,200,992			2,814,192			26,372,122
Shares redeemed		(55,812,564	)		(532,532,132	)		(37,262,530	)		(349,714,562	)
Net increase (decrease)		(8,933,269	)	$	(85,762,420	)		75,409,195		$	705,039,039
Service
Shares issued in the reorganization1		–			–			30,084,979		$	281,679,646
Shares sold		2,327,111		$	22,130,267			1,229,008			11,527,814
Shares issued in reinvestment of dividends		812,546			7,762,354			341,567			3,210,928
Shares redeemed		(8,295,597	)		(78,984,283	)		(6,088,376	)		(57,309,603	)
Net increase (decrease)		(5,155,940	)	$	(49,091,662	)		25,567,178		$	239,108,785
Investor A
Shares issued in the reorganization1		–			–			11,222,189		$	105,151,907
Shares sold and automatic conversion of shares		18,707,070		$	178,297,490			28,895,302			271,066,351
Shares issued in reinvestment of dividends		1,785,293			17,096,835			1,207,552			11,335,748
Shares redeemed		(13,817,611	)		(131,908,759	)		(12,106,254	)		(113,809,684	)
Net increase		6,674,752		$	63,485,566			29,218,789		$	273,744,322
Investor B
Shares issued in the reorganization1		–			–			268,356		$	2,512,856
Shares sold		196,292		$	1,866,508			152,169			1,429,386
Shares issued in reinvestment of dividends		14,844			141,814			23,400			219,378
Shares redeemed and automatic conversion of shares		(529,515	)		(5,045,403	)		(578,641	)		(5,432,388	)
Net decrease		(318,379	)	$	(3,037,081	)		(134,716	)	$	(1,270,768	)
Investor C
Shares issued in the reorganization1		–			–			6,469,239		$	60,354,762
Shares sold		6,581,493		$	62,464,443			4,233,248			39,706,997
Shares issued in reinvestment of dividends		416,048			3,965,426			390,864			3,651,034
Shares redeemed		(5,672,401	)		(53,941,192	)		(5,235,767	)		(48,841,816	)
Net increase		1,325,140		$	12,488,677			5,857,584		$	54,870,977

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 87 

Notes to Financial Statements (continued)

–	Year Ended September 30, 2012						Year Ended September 30, 2011
Core Bond (concluded)	Shares			Amount			Shares			Amount
Class R
Shares sold		101,950		$	983,642			12,168		$	113,649
Shares issued in reinvestment of dividends		1,578			15,152			1,512			14,187
Shares redeemed		(52,307	)		(502,965	)		(8,144	)		(75,987	)
Net increase		51,221		$	495,829			5,536		$	51,849
Total Net Increase (Decrease)		(28,575,502	)	$	(274,186,643	)		111,590,769		$	1,040,822,456
High Yield Bond
BlackRock
Shares sold		54,278,897		$	411,556,403			47,227,837		$	363,870,096
Shares issued in reinvestment of dividends		6,142,041			47,079,081			6,882,445			52,912,956
Shares redeemed		(44,690,004	)		(335,830,785	)		(53,957,676	)		(419,863,611	)
Net increase (decrease)		15,730,934		$	122,804,699			152,606		$	(3,080,559	)
Institutional
Shares issued in the reorganization1					–			44,782,781		$	330,913,404
Shares sold		345,596,448		$	2,652,659,264			184,864,192			1,426,194,189
Shares issued in reinvestment of dividends		12,865,701			98,901,839			6,340,571			48,502,823
Shares redeemed		(138,692,529	)		(1,050,432,629	)		(52,140,991	)		(399,039,210	)
Net increase		219,769,620		$	1,701,128,474			183,846,553		$	1,406,571,206
Service
Shares sold		24,753,403		$	189,038,291			21,488,398		$	166,275,219
Shares issued in reinvestment of dividends		1,966,071			15,088,166			1,688,187			12,972,966
Shares redeemed		(15,772,931	)		(121,004,327	)		(18,908,513	)		(143,546,523	)
Net increase		10,946,543		$	83,122,130			4,268,072		$	35,701,662
Investor A
Shares issued in the reorganization1		–			–			53,050,914		$	391,998,506
Shares sold and automatic conversion of shares		271,859,305		$	2,080,110,872			145,894,134			1,126,195,495
Shares issued in reinvestment of dividends		18,893,586			145,072,880			9,263,673			70,949,620
Shares redeemed		(122,259,337	)		(928,434,604	)		(57,469,893	)		(439,939,074	)
Net increase		168,493,554		$	1,296,749,148			150,738,828		$	1,149,204,547
Investor B
Shares sold		303,843		$	2,324,744			280,620		$	2,159,896
Shares issued in reinvestment of dividends		49,032			374,347			72,352			555,918
Shares redeemed and automatic conversion of shares		(753,973	)		(5,736,918	)		(1,090,299	)		(8,396,584	)
Net decrease		(401,098	)	$	(3,037,827	)		(737,327	)	$	(5,680,770	)
Investor B1
Shares issued in the reorganization1		–			–			3,404,591		$	25,160,272
Shares sold		34,470		$	261,015			12,100			95,007
Shares issued in reinvestment of dividends		93,659			713,745			49,015			373,922
Shares redeemed		(2,090,342	)		(15,824,605	)		(1,055,763	)		(8,118,835	)
Net increase (decrease)		(1,962,213	)	$	(14,849,845	)		2,409,943		$	17,510,366

 88   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

	Year Ended September 30, 2012						Year Ended September 30, 2011
High Yield Bond (concluded)	Shares			Amount			Shares			Amount
Investor C
Shares issued in the reorganization1		–			–			10,591,938		$	78,341,156
Shares sold		29,704,979		$	227,482,867			21,487,286			165,522,004
Shares issued in reinvestment of dividends		2,364,823			18,162,350			1,124,317			8,605,443
Shares redeemed		(13,207,188	)		(100,674,598	)		(8,630,100	)		(66,006,548	)
Net increase		18,862,614		$	144,970,619			24,573,441		$	186,462,055
Investor C1
Shares issued in the reorganization1		–			–			11,544,664		$	85,438,592
Shares sold		101,281		$	777,174			108,685			843,092
Shares issued in reinvestment of dividends		479,718			3,671,005			142,351			1,082,575
Shares redeemed		(2,587,847	)		(19,666,056	)		(674,930	)		(5,108,703	)
Net increase (decrease)		(2,006,848	)	$	(15,217,877	)		11,120,770		$	82,255,556
Class R
Shares sold		2,626,141		$	20,133,459			1,636,973		$	12,615,783
Shares issued in reinvestment of dividends		198,057			1,517,614			172,904			1,327,384
Shares redeemed		(1,566,131	)		(11,955,988	)		(1,735,005	)		(13,443,758	)
Net increase		1,258,067		$	9,695,085			74,872		$	499,409
Total Net Increase		430,691,173		$	3,325,364,606			376,447,758		$	2,869,443,472
Low Duration Bond
BlackRock
Shares sold		18,752,243		$	181,815,974			18,308,922		$	176,970,891
Shares issued in reinvestment of dividends		819,049			7,936,388			987,222			9,550,827
Shares redeemed		(17,347,702	)		(168,495,281	)		(19,774,276	)		(191,677,136	)
Net increase (decrease)		2,223,590		$	21,257,081			(478,132	)	$	(5,155,418	)
Institutional
Shares issued in the reorganization1		–			–			14,616,155		$	141,940,405
Shares sold		40,799,888		$	395,593,491			41,442,345			401,853,669
Shares issued in reinvestment of dividends		1,330,519			12,885,393			867,981			8,398,526
Shares redeemed		(28,157,215	)		(272,355,683	)		(24,904,504	)		(241,185,219	)
Net increase		13,973,192		$	136,123,201			32,021,977		$	311,007,381
Service
Shares sold		1,711,963		$	16,534,758			16,097,408		$	155,765,725
Shares issued in reinvestment of dividends		686,010			6,643,585			1,508,652			14,608,821
Shares redeemed		(10,064,504	)		(97,394,582	)		(54,718,200	)		(530,906,049	)
Net decrease		(7,666,531	)	$	(74,216,239	)		(37,112,140	)	$	(360,531,503	)
Investor A
Shares issued in the reorganization1		–			–			12,200,077		$	118,416,386
Share converted in the reorganization1		–			–			551,178			5,349,841
Shares sold and automatic conversion of shares		20,356,735		$	196,756,237			32,399,235			314,012,971
Shares issued in reinvestment of dividends		1,095,213			10,610,926			561,897			5,430,198
Shares redeemed		(17,115,466	)		(165,505,007	)		(14,121,139	)		(136,331,219	)
Net increase		4,336,482		$	41,862,156			31,591,248		$	306,878,177

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 89 

Notes to Financial Statements (continued)

	Year Ended September 30, 2012						Year Ended September 30, 2011
Low Duration Bond (continued)	Shares			Amount			Shares			Amount
Investor A1
Share converted in the reorganization1		–			–			247,122		$	2,401,110
Shares sold and automatic conversion of shares		124,796		$	1,212,072			214,305			2,078,456
Shares issued in reinvestment of dividends		39,963			387,482			45,938			445,046
Shares redeemed		(377,750	)		(3,649,772	)		(544,784	)		(5,280,085	)
Net decrease		(212,991	)	$	(2,050,218	)		(37,419	)	$	(355,473	)
Investor B
Shares sold		181,437		$	1,751,086			263,913		$	2,557,993
Shares issued in reinvestment of dividends		5,612			54,358			5,948			57,601
Shares redeemed and automatic conversion of shares		(263,280	)		(2,546,580	)		(321,744	)		(3,115,097	)
Net decrease		(76,231	)	$	(741,136	)		(51,883	)	$	(499,503	)
Investor B1
Shares sold and automatic conversion of shares								185		$	1,800
Shares issued in reinvestment of dividends								783			7,589
Share converted in the reorganization1								(50,298	)		(488,194	)
Shares redeemed								(7,040	)		(68,327	)
Net decrease								(56,370	)	$	(547,132	)
Investor B2
Shares sold and automatic conversion of shares								5,162		$	49,171
Shares issued in reinvestment of dividends								4,760			46,131
Share converted in the reorganization1								(247,376	)		(2,401,110	)
Shares redeemed								(128,592	)		(1,245,856	)
Net decrease								(366,046	)	$	(3,551,664	)
							Period July 18, 20112 to September 30, 2011
							Shares			Amount
Investor B3
Shares issued in the reorganization1		–			–			1,686,983		$	16,385,661
Shares sold and automatic conversion of shares		15,540		$	150,895			3,750			36,357
Shares issued in reinvestment of dividends		8,152			78,960			2,778			26,737
Shares redeemed		(739,195	)		(7,152,558	)		(352,568	)		(3,399,845	)
Net increase (decrease)		(715,503	)	$	(6,922,703	)		1,340,943		$	13,048,910
							Year Ended September 30, 2011
							Shares			Amount
Investor C
Shares issued in the reorganization1		–			–			10,015,482		$	97,193,245
Shares sold		10,940,079		$	105,828,860			10,794,874			104,435,270
Shares issued in reinvestment of dividends		331,698			3,212,449			204,510			1,976,824
Shares redeemed		(9,038,761	)		(87,408,422	)		(7,066,301	)		(68,301,408	)
Net increase		2,233,016		$	21,632,887			13,948,565		$	135,303,931

 90   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Notes to Financial Statements (concluded)

	Year Ended September 30, 2012						Year Ended September 30, 2011
Low Duration Bond (concluded)	Shares			Amount			Shares			Amount
Investor C1
Shares sold and automatic conversion of shares								5,484		$	51,675
Shares issued in reinvestment of dividends								6,434			62,372
Share converted in the reorganization1								(500,855	)		(4,861,647	)
Shares redeemed								(46,380	)		(449,048	)
Net decrease								(535,317	)	$	(5,196,648	)
Investor C2
Shares sold		75		$	723			100		$	1,788
Shares issued in reinvestment of dividends		17,962			173,995			22,523			218,006
Shares redeemed		(223,668	)		(2,169,684	)		(279,747	)		(2,698,317	)
Net decrease		(205,631	)	$	(1,994,966	)		(257,124	)	$	(2,478,523	)
							Period July 18, 20112 to September 30, 2011
							Shares			Amount
Investor C3
Shares issued in the reorganization1		–			–			4,408,484		$	42,781,251
Shares sold and automatic conversion of shares		67,551		$	654,751			8,112			78,288
Shares issued in reinvestment of dividends		32,548			315,013			7,786			74,897
Shares redeemed		(716,087	)		(6,926,706	)		(204,603	)		(1,975,974	)
Net increase (decrease)		(615,988	)	$	(5,956,942	)		4,219,779		$	40,958,462
Class R
Shares issued in the reorganization1		–			–			618,684		$	6,005,069
Shares sold and automatic conversion of shares		245,475		$	2,374,357			28,660			276,711
Shares issued in reinvestment of dividends		11,758			113,921			2,364			22,741
Shares redeemed		(182,967	)		(1,773,079	)		(54,653	)		(526,652	)
Net increase		74,266		$	715,199			595,055		$	5,777,869
Total Net Increase		13,347,671		$	129,708,320			44,823,136		$	434,658,866

¹ See Note 1 regarding the reorganization.

² Commencement of operations.

9. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 91 

Report of Independent Registered Public  Accounting Firm

To the Board of Trustees BlackRock Funds II and Shareholders of BlackRock Core Bond Portfolio, BlackRock Low Duration Bond Portfolio and BlackRock High Yield Bond Portfolio:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the BlackRock Core Bond Portfolio and BlackRock Low Duration Bond Portfolio as of September 30, 2012, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. We have also audited the consolidated statement of assets and liabilities, including the consolidated schedule of investments, of the BlackRock High Yield Bond Portfolio (collectively with BlackRock Core Bond Portfolio and BlackRock Low Duration Bond Portfolio, the “Funds”), each a series of BlackRock Funds II, as of September 30, 2012, the related consolidated statements of operations and changes in net assets for the year then ended, the statement of changes in net assets for year ended September 30, 2011, the consolidated financial highlights for the year ended September 30, 2012, and the financial highlights for each of the other periods presented. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are

free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2012, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds as of September 30, 2012, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Philadelphia, Pennsylvania

November 21, 2012

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid monthly by the Funds for the fiscal year ended September 30, 2012:

Interest Related Dividends for Non-U.S. Residents1
	Month Paid:
	October 2011 – January 2012			February 2012 – September 2012
Core Bond		100.00	%		100.00	%
High Yield Bond		100.00	%		81.78	%
Low Duration Bond		88.08	%		100.00	%

¹  Represents the portion of the taxable ordinary income dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations.

Federal Obligation Interest2
Core Bond	9.74	%
Low Duration Bond	4.95	%

²  The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.

 92   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Disclosure of Investment Advisory Agreement  and Sub-Advisory Agreement

The Board of Trustees (the “Board,” and the members of which are referred to as “Board Members”) of BlackRock Core Bond Portfolio (the “Core Bond Portfolio”), BlackRock High Yield Bond Portfolio (the “High Yield Portfolio”) and BlackRock Low Duration Bond Portfolio (the “Low Duration Portfolio”) and (each, a “Fund,” and collectively, the “Funds”), each a series of BlackRock Funds II (the “Trust”), met on April 10, 2012 and May 8-9, 2012 to consider the approval of the Trust’s investment advisory agreement (the “Advisory Agreement”), on behalf of each Fund, with BlackRock Advisors, LLC (the “Manager”), each Fund’s investment advisor. The Board also considered the approval of the sub-advisory agreement (the “Sub-Advisory Agreement”) between the Manager and BlackRock Financial Management, Inc. (the “Sub-Advisor”), with respect to each Fund. The Manager and the Sub-Advisor are referred to herein as “BlackRock.” The Advisory Agreement and the Sub-Advisory Agreement are referred to herein as the “Agreements.”

Activities and Composition of the Board

The Board consists of thirteen individuals, ten of whom are not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Funds and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chairman of the Board is an Independent Board Member. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Performance Oversight Committee and the Executive Committee, each of which also has one interested Board Member).

The Agreements

Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreements on an annual basis. The Board has four quarterly meetings per year, each extending over two days, and a fifth meeting to consider specific information surrounding the consideration of renewing the Agreements. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services provided to each Fund by BlackRock, its personnel and its affiliates, including investment management, administrative and shareholder services, oversight of fund accounting and custody, marketing services, risk oversight, compliance and assistance in meeting applicable legal and regulatory requirements.

The Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to each Fund and its shareholders. Among the matters the Board considered were: (a) investment performance for one-, three- and five-year periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio managers’ analysis of the reasons for any over performance or underperformance against its peers and/or

benchmark, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by each Fund for services, such as marketing and distribution, call center and fund accounting; (c) Fund operating expenses and how BlackRock allocates expenses to each Fund; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of each Fund’s investment objective, policies and restrictions; (e) each Fund’s compliance with its Code of Ethics and other compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) execution quality of portfolio transactions; (j) BlackRock’s implementation of each Fund’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment objectives across the open-end fund, exchange traded fund (“ETF”), closed-end fund and institutional account product channels, as applicable; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.

The Board has engaged in an ongoing strategic review with BlackRock of opportunities to consolidate funds and of BlackRock’s commitment to investment performance. In addition, the Board requested, to the extent reasonably possible, an analysis of the risk and return relative to selected funds in peer groups. BlackRock provides information to the Board in response to specific questions. These questions covered issues such as profitability, investment performance and management fee levels. The Board considered the importance of: (i) managing fixed income assets with a view toward preservation of capital; (ii) portfolio managers’ investments in each funds they manage; (iii) BlackRock’s controls surrounding the coding of quantitative investment models; and (iv) BlackRock’s oversight of relationships with third party service providers.

Board Considerations in Approving the Agreements

The Approval Process: Prior to the April 10, 2012 meeting, the Board requested and received materials specifically relating to the Agreements. The Board is engaged in a process with its independent legal counsel and BlackRock to review periodically the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on Fund fees and expenses and the investment performance of each Fund as compared with a peer group of funds as determined by Lipper (collectively, “Peers”); (b) information on the profitability of the Agreements to BlackRock and a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees (a combination of the advisory fee and the administration fee, if any) charged to other clients, such as institutional clients, ETFs and closed-end funds, under similar investment mandates, as well as the performance of such other clients, as applicable; (d) the existence, impact and sharing of potential economies of scale; (e) a summary of aggregate amounts paid by each Fund to BlackRock; (f) sales and redemption data regarding each Fund’s shares; and (g) if applicable, a comparison of management fees to similar BlackRock open-end funds, as classified by Lipper.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 93 

Disclosure of Investment Advisory Agreement and Sub-Advisory  Agreement (continued)

At an in-person meeting held on April 10, 2012, the Board reviewed materials relating to its consideration of the Agreements. As a result of the discussions that occurred during the April 10, 2012 meeting, and as a culmination of the Board’s year-long deliberative process, the Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the May 8-9, 2012 Board meeting.

At an in-person meeting held on May 8-9, 2012, the Board, including all the Independent Board Members, approved the continuation of the Advisory Agreement between the Manager and the Trust, on behalf of each Fund, and the Sub-Advisory Agreement between the Manager and the Sub-Advisor with respect to each Fund, each for a one-year term ending June 30, 2013. In approving the continuation of the Agreements, the Board considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of each Fund and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with each Fund; (d) economies of scale; (e) fall-out benefits to BlackRock as a result of its relationship with each Fund; and (f) other factors deemed relevant by the Board Members.

The Board also considered other matters it deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to the distribution of Fund shares and securities lending, services related to the valuation and pricing of Fund portfolio holdings, direct and indirect benefits to BlackRock and its affiliates from their relationship with each Fund and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of each Fund. Throughout the year, the Board compared Fund performance to the performance of a comparable group of mutual funds and/or the performance of a relevant benchmark, if any. The Board met with BlackRock’s senior management personnel responsible for investment operations, including the senior investment officers. The Board also reviewed the materials provided by each Fund’s portfolio management team discussing Fund performance and the Fund’s investment objective, strategies and outlook.

The Board considered, among other factors, the number, education and experience of BlackRock’s investment personnel generally and each Fund’s portfolio management team, investments by portfolio managers in the funds they manage, BlackRock’s portfolio trading capabilities, BlackRock’s use of technology, BlackRock’s commitment to compliance,

BlackRock’s credit analysis capabilities, BlackRock’s risk analysis and oversight capabilities and BlackRock’s approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board engaged in a review of BlackRock’s compensation structure with respect to each Fund’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to each Fund. BlackRock and its affiliates provide each Fund with certain administrative, shareholder and other services (in addition to any such services provided to a Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. In particular, BlackRock and its affiliates provide each Fund with the following administrative services including, among others: (i) preparing disclosure documents, such as the prospectus, the statement of additional information and periodic shareholder reports; (ii) assisting with daily accounting and pricing; (iii) overseeing and coordinating the activities of other service providers; (iv) organizing Board meetings and preparing the materials for such Board meetings; (v) providing legal and compliance support; and (vi) performing other administrative functions necessary for the operation of the Fund, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Board reviewed the structure and duties of BlackRock’s fund administration, accounting, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of each Fund and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of each Fund. In preparation for the April 10, 2012 meeting, the Board worked with its independent legal counsel, BlackRock and Lipper to develop a template for, and was provided with, reports independently prepared by Lipper, which included a comprehensive analysis of each Fund’s performance. The Board also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with its review, the Board received and reviewed information regarding the investment performance of each Fund as compared to funds in the Fund’s applicable Lipper category. The Board was provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper representatives to review their methodology. The Board and the Board’s Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of each Fund throughout the year.

The Board noted that the Core Bond Portfolio ranked in the fourth, second and fourth quartiles against its Lipper Performance Universe for the one-, three- and five-year periods reported, respectively. The Board and BlackRock reviewed and discussed the reasons for the Core Bond Portfolio’s underperformance during the one- and five-year periods compared with its Peers. The Board was informed that, among other things, the Core Bond Portfolio maintained a shorter duration bias and underweight Treasuries relative to its peer universe throughout most of the one-year period. While this duration stance was beneficial in the earlier half of the period, the overall impact on performance for the one-year

 94   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Disclosure of Investment Advisory Agreement and Sub-Advisory  Agreement (continued)

period was negative as interest rates declined to historically low levels in the latter half due to fears of a global economic slowdown and persistent sovereign debt problems in Europe. For the five-year period the Core Bond Portfolio’s underperformance was primarily due to the significant exposure to non-government debt during the financial crisis in 2008. Most notably the Core Bond Portfolio’s allocation to non-agency mortgages, commercial mortgage-backed securities and asset-backed securities which all dramatically underperformed Treasuries that year.

The Board and BlackRock discussed BlackRock’s strategy for improving the Core Bond Portfolio’s performance and BlackRock’s commitment to providing the resources necessary to assist the Core Bond Portfolio’s portfolio managers and to improve Core Bond Portfolio’s performance.

The Board noted that the High Yield Portfolio ranked in the third, first, and second quartiles against its Lipper Performance Universe for the one-, three- and five-year periods reported, respectively. The Board and BlackRock reviewed and discussed the reasons for the High Yield Portfolio’s underperformance during the one-year period and will monitor closely the High Yield Portfolio’s performance in the coming year.

The Board noted that the Low Duration Portfolio ranked in the first, first, and third quartiles against its Lipper Performance Universe for the one-, three- and five-year periods reported, respectively.

C. Consideration of the Advisory Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with each Fund: The Board, including the Independent Board Members, reviewed each Fund’s contractual management fee rate compared with the other funds in its Lipper category. It also compared each Fund’s total expense ratio, as well as actual management fee rate, to those of other funds in its Lipper category. The Board considered the services provided and the fees charged by BlackRock to other types of clients with similar investment mandates, including separately managed institutional accounts.

The Board received and reviewed statements relating to BlackRock’s financial condition and profitability with respect to the services it provided each Fund. The Board was also provided with a profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to each Fund. The Board reviewed BlackRock’s profitability with respect to each Fund and other funds the Board currently oversees for the year ended December 31, 2011 compared to available aggregate profitability data provided for the years ended December 31, 2010 and December 31, 2009. The Board reviewed BlackRock’s profitability with respect to other fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, expense allocations and business mix, and the difficulty of comparing profitability as a result of those factors.

The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board considered

BlackRock’s operating margin, in general, compared to the operating margin for leading investment management firms whose operations include advising open-end funds, among other product types. In addition, the Board considered, among other things, certain third party data comparing BlackRock’s operating margin with that of other publicly-traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, the Board considered the cost of the services provided to each Fund by BlackRock, and BlackRock’s and its affiliates’ profits relating to the management and distribution of each Fund and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock’s methodology in allocating its costs to the management of each Fund. The Board also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreements and to continue to provide the high quality of services that is expected by the Board.

The Board noted that the Core Bond Portfolio’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was above the median contractual management fee ratio paid by the Core Bond Portfolio’s Peers, in each case before taking into account any expense reimbursements or fee waivers. The Board also noted, however, that the Core Bond Portfolio’s actual total expense ratio, after giving effect to any expense reimbursements or fee waivers by BlackRock, was reasonable relative to the median actual total expense ratio paid by the Core Bond Portfolio’s Peers, after giving effect to any expense reimbursements or fee waivers. The Board further noted that the Core Bond Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee ratio downward as the size of the Core Bond Portfolio increases above certain contractually specified levels. In addition, the Board noted that BlackRock has contractually agreed to waive fees or reimburse expenses in order to limit, to a specified amount, the Core Bond Portfolio’s total net expenses on a class-by-class basis, as applicable.

The Board noted that the High Yield Portfolio’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was lower than or equal to the median contractual management fee ratio paid by the High Yield Portfolio’s Peers, in each case before taking into account any expense reimbursements or fee waivers. The Board also noted that the High Yield Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee ratio downward as the size of the High Yield Portfolio increases above certain contractually specified levels. The Board further noted that BlackRock has contractually and/or voluntarily agreed to waive fees or reimburse expenses in order to limit, to a specified amount, the High Yield Portfolio’s total net expenses on a class-by-class basis, as applicable.

The Board noted that the Low Duration Portfolio’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was above the median contractual management fee ratio paid by the Low Duration Portfolio’s Peers, in each case before taking

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 95 

Disclosure of Investment Advisory Agreement and Sub-Advisory  Agreement (concluded)

into account any expense reimbursements or fee waivers. The Board also noted, however, that the Low Duration Portfolio’s actual management fee ratio, after giving effect to any expense reimbursements or fee waivers by BlackRock, was lower than or equal to the median actual management fee ratio paid by the Low Duration Portfolio’s Peers, after giving effect to any expense reimbursements or fee waivers. The Board further noted that the Low Duration Portfolio has an advisory fee arrangement that includes breakpoints that adjust the fee ratio downward as the size of the Low Duration Portfolio increases above certain contractually specified levels. In addition, the Board noted that BlackRock has contractually and/or voluntarily agreed to waive fees or reimburse expenses in order to limit, to a specified amount, the Low Duration Portfolio’s total net expenses on a class-by-class basis, as applicable.

D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of each Fund increase, as well as the existence of expense caps. The Board also considered the extent to which each Fund benefits from such economies and whether there should be changes in the advisory fee rate or structure in order to enable the Fund to participate in these economies of scale, for example through the use of revised breakpoints in the advisory fee based upon the asset level of the Fund. In its consideration, the Board Members took into account the existence of expense caps and further considered the continuation and/or implementation, as applicable, of such caps.

E. Other Factors Deemed Relevant by the Board Members: The Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates and significant shareholders may derive from their respective relationships with each Fund, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Fund, including for administrative, distribution, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund

transactions to assist in managing all or a number of its other client accounts. The Board further noted that it had considered the investment by BlackRock’s funds in ETFs without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Agreements, the Board also received information regarding BlackRock’s brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

The Board noted the competitive nature of the open-end fund marketplace, and that shareholders are able to redeem their Fund shares if they believe that a Fund’s fees and expenses are too high or if they are dissatisfied with the performance of the Fund.

Conclusion

The Board, including all the Independent Board Members, approved the continuation of the Advisory Agreement between the Manager and the Trust, on behalf of each Fund, for a one-year term ending June 30, 2013, and the Sub-Advisory Agreement between the Manager and the Sub-Advisor with respect to each Fund for a one-year term ending June 30, 2013. Based upon its evaluation of all of the aforementioned factors in their totality, the Board, including the Independent Board Members, was satisfied that the terms of the Agreements were fair and reasonable and in the best interest of each Fund and its shareholders. In arriving at its decision to approve the Agreements, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for each Fund reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

 96   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Officers and Trustees

Name, Address, and Year of Birth	Position(s) Held with Trust	Length of Time Served as a Trustee2	Principal Occupation(s) During Past 5 Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment  Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Robert M. Hernandez 55 East 52nd Street New York, NY 10055 1944	Chairman of the Board and Trustee	Since 2007	Director, Vice Chairman and Chief Financial Officer of USX Corporation (energy and steel business) from 1991 to 2001; Director, TE Connectivity (electronics) from 2006 to 2012.	29 RICs consisting of 82 Portfolios	ACE Limited (insurance company); Eastman Chemical Company (chemicals); RTI International Metals, Inc. (metals)
Fred G. Weiss 55 East 52nd Street New York, NY 10055 1941	Vice Chairman of the Board and Trustee	Since 2007	Managing Director, FGW Associates (consulting and investment company) since 1997; Director and Treasurer, Michael J. Fox Foundation for Parkinson’s Research since 2000; Director, BTG International Plc (medical technology commercialization company) from 2001 to 2007.	29 RICs consisting of 82 Portfolios	Watson Pharmaceuticals Inc.
James H. Bodurtha 55 East 52nd Street New York, NY 10055 1944	Trustee	Since 2007	Director, The China Business Group, Inc. (consulting firm) since 1996 and Executive Vice President thereof from 1996 to 2003; Chairman of the Board, Berkshire Holding Corporation since 1980.	29 RICs consisting of 82 Portfolios	None
Bruce R. Bond 55 East 52nd Street New York, NY 10055 1946	Trustee	Since 2007	Trustee and Member of the Governance Committee, State Street Research Mutual Funds from 1997 to 2005; Board Member of Governance, Audit and Finance Committee, Avaya Inc. (computer equipment) from 2003 to 2007.	29 RICs consisting of 82 Portfolios	None
Donald W. Burton 55 East 52nd Street New York, NY 10055 1944	Trustee	Since 2007	Managing General Partner, The Burton Partnership, LP (an investment partnership) since 1979; Managing General Partner, The South Atlantic Venture Funds since 1983; Director, Lifestyle Family Fitness (fitness industry) since 2006; Director, IDology, Inc. (technology solutions) since 2006; Member of the Investment Advisory Council of the Florida State Board of Administration from 2001 to 2007.	29 RICs consisting of 82 Portfolios	Knology, Inc. (telecommu- nications); Capital Southwest (financial)
Honorable Stuart E. Eizenstat 55 East 52nd Street New York, NY 10055 1943	Trustee	Since 2007	Partner and Head of International Practice, Covington and Burling LLP (law firm) since 2001; International Advisory Board Member, The Coca Cola Company from 2002 to 2011; Advisory Board Member, Veracity Worldwide LLC (risk management) since 2007; Member of the International Advisory Board GML (energy) since 2003; Advisory Board Member, BT Americas (telecommunications) since 2004 to 2010.	29 RICs consisting of 82 Portfolios	Alcatel-Lucent (telecom- munications); Global Specialty Metallurgical (metallurgical industry); UPS Corporation (delivery service)
Kenneth A. Froot 55 East 52nd Street New York, NY 10055 1957	Trustee	Since 2007	Professor, Harvard University since 1992.	29 RICs consisting of 82 Portfolios	None
John F. O’Brien 55 East 52nd Street New York, NY 10055 1943	Trustee	Since 2007	Chairman and Director, Woods Hole Oceanographic Institute since 2009 and Trustee thereof from 2003 to 2009; Director, Ameresco, Inc. (energy solutions company) from 2006 to 2007.	29 RICs consisting of 82 Portfolios	Cabot Corporation (chemicals); LKQ Corporation (auto parts manufacturing); TJX Companies, Inc. (retailer)
Roberta Cooper Ramo 55 East 52nd Street New York, NY 10055 1942	Trustee	Since 2007	Shareholder, Modrall, Sperling, Roehl, Harris & Sisk, P.A. (law firm) since 1993; Chairman of the Board, Cooper’s Inc., (retail) since 2000; Director ECMC Group (service provider to students, schools and lenders) since 2001; President, The American Law Institute (non-profit) since 2008; President, American Bar Association from 1995 to 1996.	29 RICs consisting of 82 Portfolios	None

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 97 

Officers and Trustees (continued)

Name, Address, and Year of Birth	Position(s) Held with Trust	Length of Time Served as a Trustee2	Principal Occupation(s) During Past 5 Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment  Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
David H. Walsh 55 East 52nd Street New York, NY 10055 1941	Trustee	Since 2007	Director, National Museum of Wildlife Art since 2007; Trustee, University of Wyoming Foundation since 2008; Director, Ruckleshaus Institute and Haub School of Natural Resources at the University of Wyoming from 2006 to 2008; Director, The American Museum of Fly Fishing since 1997; Director, The National Audubon Society from 1998 to 2005.	29 RICs consisting of 82 Portfolios	None
	1   Each Independent Trustee holds office until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal as provided by the Trust’s by-laws or charter or statute. In no event may an Independent Trustee hold office beyond December 31 of the year in which he or she turns 74.
	2   Date shown is the earliest date a person has served for the Trust covered by this annual report. Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock Fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Trustees as joining the Trust’s Board in 2007, each Trustee first became a member of the board of other legacy MLIM or legacy BlackRock Funds as follows: James H. Bodurtha, 1995; Bruce R. Bond, 2005; Donald W. Burton, 2002; Stuart E. Eizenstat, 2001; Kenneth A. Froot, 2005; Robert M. Hernandez, 1996; John F. O’Brien, 2004; Roberta Cooper Ramo, 2000; David H. Walsh, 2003; and Fred G. Weiss, 1998.
Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	159 RICs consisting of 286 Portfolios	None
Laurence D. Fink 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2007	Chairman and Chief Executive Officer of BlackRock since its formation in 1998 and of BlackRock’s predecessor entities since 1988 and Chairman of the Executive and Management Committees; Formerly Managing Director, The First Boston Corporation, Member of its Management Committee, Co-head of its Taxable Fixed Income Division and Head of its Mortgage and Real Estate Products Group; Chairman of the Board of several of BlackRock’s alternative investment vehicles; Director of several of BlackRock’s offshore funds; Member of the Board of Trustees of New York University, Chair of the Financial Affairs Committee and a member of the Executive Committee, the Ad Hoc Committee on Board Governance, and the Committee on Trustees; Co-Chairman of the NYU Hospitals Center Board of Trustees, Chairman of the Development/Trustee Stewardship Committee and Chairman of the Finance Committee; Trustee, The Boys’ Club of New York.	29 RICs consisting of 82 Portfolios	BlackRock
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	159 RICs consisting of 286 Portfolios	None
	3    Messrs. Audet and Fink are both “interested persons,” as defined in the 1940 Act, of the Trust based on their positions with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-ended funds. Interested Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

 98   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Officers and Trustees (concluded)

Name, Address, and Year of Birth	Position(s) Held with Trust	Length of Time Served	Principal Occupation(s) During Past 5 Years
Trust Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resources Network (charitable foundation) since 2009.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009 and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2007	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2007	Chief Compliance Officer of the BlackRock-advised Funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Director of BlackRock since 2010; Assistant Secretary to the Funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1 Officers of the Trust serve at the pleasure of the Board of Trustees.
	Further information about the Trust’s Officers and Trustees is available in the Trust’s Statement of Additional Information, which can be obtained without charge by calling 1-800-441-7762.

Investment Advisor and Co-Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Sub-Advisor BlackRock Financial Management, Inc. New York, NY 10055	Accounting Agent, Co-Administrator and Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm Deloitte & Touche LLP Philadelphia, PA 19103
Address of the Trust 100 Bellevue Parkway Wilmington, DE 19809	Custodian The Bank of New York Mellon New York, NY 10286	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Willkie Farr & Gallagher LLP New York, NY 10019

Effective May 8, 2012, Ira P. Shapiro resigned as Secretary of the Trust and Benjamin Archibald became Secretary of the Trust.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 99 

Additional Information

    General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the Funds’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Funds’ electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly With BlackRock:

1) Access the BlackRock website at http://www.blackrock.com/edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

Householding

The Funds 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 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 call the Funds at (800) 441-7762.

Availability of Quarterly Schedule of Investment

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http:// www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Fund voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http:// www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

    Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http://www.blackrock.com/funds.

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 funds.

Systematic Withdrawal Plan

Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance 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.

 100   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

Additional Information (concluded)

    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 websites.

BlackRock does not sell or disclose to non-affiliated third parties any nonpublic personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated 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 non-public 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 non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

  BLACKROCK FUNDS II   SEPTEMBER 30, 2012 101 

A World-Class Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.

Equity Funds
BlackRock ACWI ex-US Index Fund BlackRock All-Cap Energy & Resources Portfolio BlackRock Balanced Capital Fund† BlackRock Basic Value Fund BlackRock Capital Appreciation Fund BlackRock China Fund BlackRock Commodity Strategies Fund BlackRock Emerging Markets Fund BlackRock Emerging Markets Long/Short Equity Fund BlackRock Energy & Resources Portfolio BlackRock Equity Dividend Fund BlackRock EuroFund BlackRock Flexible Equity Fund BlackRock Focus Growth Fund BlackRock Global Allocation Fund†	BlackRock Global Dividend Income Portfolio BlackRock Global Opportunities Portfolio BlackRock Global SmallCap Fund BlackRock Health Sciences Opportunities Portfolio BlackRock Index Equity Portfolio BlackRock India Fund BlackRock International Fund BlackRock International Index Fund BlackRock International Opportunities Portfolio BlackRock Large Cap Core Fund BlackRock Large Cap Core Plus Fund BlackRock Large Cap Growth Fund BlackRock Large Cap Value Fund BlackRock Latin America Fund BlackRock Long-Horizon Equity Fund BlackRock Managed Volatility Portfolio†	BlackRock Mid-Cap Growth Equity Portfolio BlackRock Mid-Cap Value Opportunities Fund BlackRock Natural Resources Trust BlackRock Pacific Fund BlackRock Real Estate Securities Fund BlackRock Russell 1000 Index Fund BlackRock Science & Technology Opportunities Portfolio BlackRock Small Cap Growth Equity Portfolio BlackRock Small Cap Growth Fund II BlackRock Small Cap Index Fund BlackRock S&P 500 Index Fund BlackRock S&P 500 Stock Fund BlackRock U.S. Opportunities Portfolio BlackRock Value Opportunities Fund BlackRock World Gold Fund
Taxable Fixed Income Funds
BlackRock Bond Index Fund BlackRock Core Bond Portfolio BlackRock CoreAlpha Bond Fund BlackRock Emerging Market Local Debt Portfolio BlackRock Floating Rate Income Portfolio BlackRock Global Long/Short Credit Fund BlackRock GNMA Portfolio	BlackRock High Yield Bond Portfolio BlackRock Inflation Protected Bond Portfolio BlackRock International Bond Portfolio BlackRock Long Duration Bond Portfolio BlackRock Low Duration Bond Portfolio BlackRock Multi-Asset Income Portfolio† BlackRock Secured Credit Portfolio	BlackRock Strategic Income Opportunities Portfolio BlackRock Total Return Fund BlackRock US Government Bond Portfolio BlackRock US Mortgage Portfolio BlackRock World Income Fund
Municipal Fixed Income Funds
BlackRock California Municipal Bond Fund BlackRock High Yield Municipal Fund BlackRock Intermediate Municipal Fund	BlackRock National Municipal Fund BlackRock New Jersey Municipal Bond Fund BlackRock New York Municipal Bond Fund	BlackRock Pennsylvania Municipal Bond Fund BlackRock Short-Term Municipal Fund

Target Risk & Target Date Funds†
BlackRock Prepared Portfolios	LifePath Active Portfolios		LifePath Portfolios		LifePath Index Portfolios
Conservative Prepared Portfolio	2015	2035	Retirement	2040	Retirement	2040
Moderate Prepared Portfolio	2020	2040	2020	2045	2020	2045
Growth Prepared Portfolio	2025	2045	2025	2050	2025	2050
Aggressive Growth Prepared Portfolio	2030	2050	2030	2055	2030	2055
			2035		2035

† Mixed asset fund.

BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. 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) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.

 102   BLACKROCK FUNDS II   SEPTEMBER 30, 2012

[THIS PAGE INTENTIONALLY LEFT BLANK.]

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 Funds unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

Investment in foreign securities involves special risks including fluctuating foreign exchange rates, foreign government regulations, differing degrees of liquidity and the possibility of substantial volatility due to adverse political, economic or other developments.

TAXABLE3-9/12-AR

September 30, 2012

     Annual Report

BlackRock Funds II

u BlackRock Conservative Prepared Portfolio

u BlackRock Moderate Prepared Portfolio

u BlackRock Growth Prepared Portfolio

u BlackRock Aggressive Growth Prepared Portfolio

         Not FDIC Insured § No Bank Guarantee § May Lose Value        

Table of Contents

	Page
Dear Shareholder		3
Annual Report:
Fund Summaries		4
About Fund Performance		11
Disclosure of Expenses		11
Derivative Financial Instruments		12
Financial Statements:
Schedules of Investments		13
Statements of Assets and Liabilities		21
Statements of Operations		23
Statements of Changes in Net Assets		24
Financial Highlights		26
Notes to Financial Statements		34
Report of Independent Registered Public Accounting Firm		42
Important Tax Information		42
Disclosure of Investment Advisory Agreement		43
Officers and Trustees		47
Additional Information		50
A World-Class Mutual Fund Family		52

2     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Dear Shareholder

Late in the summer of 2011, financial markets were upended by sovereign debt turmoil in the United States and Europe as well as growing concerns about the future of the global economy. Investor confidence had crumbled. However, the fourth quarter of 2011 brought improving economic data and more concerted efforts among European leaders toward stemming the region’s debt crisis, gradually drawing investors back to the markets. Improving sentiment carried over into early 2012 as investors felt some relief from the world’s financial woes. Volatility abated and risk assets (including stocks, commodities and high yield bonds) moved boldly higher through the first two months of 2012, while climbing Treasury yields pressured higher-quality fixed income assets.

Markets reversed course in the spring when Europe’s debt problems boiled over once again. High levels of volatility returned as political instability in Greece threatened the country’s membership in the eurozone. Spain faced severe deficit issues while the nation’s banks clamored for liquidity. Yields on Spanish and Italian government debt rose to levels deemed unsustainable. European leaders conferred and debated vehemently over the need for fiscal integration among the 17 nations comprising the euro currency bloc as a means to resolve the crisis for the long term.

Alongside the drama in Europe, investors were discouraged by gloomy economic reports from various parts of the world. A slowdown in China, a key powerhouse for global growth, became particularly worrisome. In the United States, disappointing jobs reports dealt a crushing blow to investor sentiment. Risk assets sold off in the second quarter as investors again retreated to safe haven assets.

Despite ongoing concerns about the health of the global economy and the debt crisis in Europe, most asset classes enjoyed a robust summer rally powered mainly by expectations for policy stimulus from central banks in Europe and the United States. Although global economic data continued to be mixed, the spate of downside surprises seen in the second quarter had receded and, outside of Europe, the risk of recession largely subsided. Additionally, in response to growing debt pressures, the European Central Bank allayed investors’ fears by stating its conviction to hold the eurozone together. Early in September, the European Central Bank announced a plan to purchase sovereign debt in the eurozone’s most troubled nations. Later that month, the US Federal Reserve announced its long-awaited - and surprisingly aggressive – stimulus program, committing to purchase $40 billion of agency mortgage-backed securities per month until the US economy exhibits enough strength to sustain real growth and improving labor market conditions. These central bank actions boosted risk assets globally as investors increased their risk appetites in their search for higher returns.

All asset classes performed well for the 12-month period ended September 30, 2012, with particularly strong returns from US stocks and high yield bonds. For the six-month period ended September 30, 2012, fixed income investments outperformed equities. US Treasury bonds posted exceptional gains by historical standards and outperformed investment-grade corporate bonds and tax-exempt municipals. High yield bonds also generated solid returns. US stocks finished the six-month period with modest gains, while international and emerging market stocks lagged other asset classes amid ongoing uncertainty. Near-zero short term interest rates continued to keep yields on money market securities near their all-time lows.

The financial world is more uncertain than ever, but there are new avenues of opportunity – new ways to invest and new markets in which to invest. We believe it’s our responsibility to help investors adapt to today’s new world of investing and build the portfolios these times require. We encourage you to visit www.blackrock.com/newworld for more information.

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

“The financial world is more uncertain than ever, but there are new avenues of opportunity.”

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of September 30, 2012

	6-month	12-month
US large cap equities (S&P 500® Index)	3.43%	30.20%
US small cap equities (Russell 2000® Index)	1.60	31.91
International equities (MSCI Europe, Australasia, Far East Index)	(0.70)	13.75
Emerging market equities (MSCI Emerging Markets Index)	(1.84)	16.93
3-month Treasury bill (BofA Merrill Lynch 3-Month US Treasury Bill Index)	0.06	0.07
US Treasury securities (BofA Merrill Lynch 10- Year US Treasury Index)	6.78	5.66
US investment grade bonds (Barclays US Aggregate Bond Index)	3.68	5.16
Tax-exempt municipal bonds (S&P Municipal Bond Index)	4.50	8.84
US high yield bonds (Barclays US Corporate High Yield 2% Issuer Capped Index)	6.40	19.35

Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

    THIS PAGE NOT PART OF YOUR FUND REPORT 3

Funds’ Summary as of September 30, 2012   BlackRock Prepared Portfolios

Portfolio Management Commentary

How did the Funds perform?

Conservative Prepared

— For the 12-month period ended September 30, 2012, the Fund outperformed both its reference benchmark (Barclays US Aggregate Bond Index (60%)/Russell 3000^® Index (32%)/MSCI EAFE Index (8%)) and the fixed income benchmark, the Barclays US Aggregate Bond Index.

Moderate Prepared

— For the 12-month period ended September 30, 2012, the Fund’s Institutional, Investor A and Class R Shares outperformed its reference benchmark (Barclays US Aggregate Bond Index (40%)/Russell 3000^® Index (48%)/MSCI EAFE Index (12%)), while Investor C Shares underperformed the reference benchmark. All of the Fund’s share classes underperformed the broad-market S&P 500^® Index.

Growth Prepared

— For the 12-month period ended September 30, 2012, the Fund underperformed both its reference benchmark (Barclays US Aggregate Bond Index (20%)/Russell 3000^® Index (64%)/MSCI EAFE Index (16%)) and the broad-market S&P 500^® Index.

Aggressive Growth Prepared

— For the 12-month period ended September 30, 2012, the Fund underperformed both its reference benchmark (Russell 3000^® Index (80%)/MSCI EAFE Index (20%)) and the broad-market S&P 500^® Index. The following discussion of each Fund’s relative performance pertains to its respective reference benchmark.

What factors influenced performance?

— At a broad asset allocation level, the Funds with larger allocations to equity outperformed those Funds with smaller allocations, as equity markets outperformed fixed income over the 12-month period. However, the Funds’ fixed income allocation outperformed the Barclays US Aggregate Bond Index, while the equity allocation broadly underperformed the equity components of each Fund’s reference benchmark.

— With the exception of Aggressive Growth Prepared, which does not have a fixed income component, the Funds benefited from their investment in Master Total Return Portfolio (“Total Return”). Exposure to securitized assets, including commercial mortgage-backed securities (“CMBS”) and non-agency residential mortgage-backed securities (“MBS”), was the most significant driver of outperformance in Total Return. Allocations to high yield and investment grade credit also contributed to Total Return’s performance, as did security selection within industrials, active trading in the agency MBS space and tactical exposures to sovereign debt and credit names in Europe. Also having a positive impact within the Funds’ fixed income allocation was an out-of-benchmark allocation to BlackRock High Yield Bond Portfolio. High yield as an asset class outperformed broader fixed income markets during the period due to strong demand from investors seeking yield in a low interest rate environment.

— In equities, the Funds’ investments in BlackRock Equity Dividend Fund (“Equity Dividend”) and BlackRock Capital Appreciation Fund, Inc. (“Capital Appreciation”) both generated positive double-digit returns for the 12-month period, but underperformed their respective benchmarks. Equity Dividend’s portfolio of higher-quality, dividend-paying stocks lagged the broader equity market rally as risk-seeking investors favored

lower-quality stocks during the period. However, from a long-term perspective, Equity Dividend continues to exhibit strong performance relative to its benchmark, the Russell 1000^® Value Index. Capital Appreciation underperformed its benchmark, the Russell 1000^® Growth Index, primarily due to poor stock selection in key sectors including information technology (“IT”) and consumer discretionary. Conversely, the Funds’ investment in Master Large Cap Growth Portfolio (“Large Cap Growth”) had a positive impact on performance as stock selection in materials, IT and consumer discretionary drove Large Cap Growth’s outperformance versus its benchmark, the Russell 1000^® Growth Index.

Describe recent portfolio activity.

— From an asset allocation perspective, with the exception of Aggressive Growth Prepared, the Funds reduced exposure to fixed income in favor of equity in the earlier part of the 12-month period. In the latter half of the period, the Funds moved from an overweight to a neutral weighting in equities relative to their respective reference benchmarks, while maintaining underweight exposure to fixed income and a small allocation to cash and cash equivalents.

— Also during the 12-month period, the Funds added Master S&P 500 Index Series (“S&P Index”) to their equity holdings. This new position was offset by reduced exposure to actively managed US large cap equity investments. Exposure to S&P Index enhances the ability of each Fund to manage overall risk within its equity allocation. Additionally, the Funds’ equity allocation took a variety of sector and regional overweights/ underweights during the period. Within US equities, the Funds favored technology stocks on the basis of their strong fundamentals, including strong cash flows and reasonably priced valuations. In International equities, the Funds maintained an overweight to German stocks versus the broader MSCI EAFE Index. The Funds added to positions in emerging market equities, which, after a period of underperformance, once again offered attractive opportunities.

— The Conservative, Moderate and Growth Prepared Portfolios continued to maintain exposure to core fixed income through their investment in Total Return. During the period, Total Return tactically managed its corporate credit exposure, cautiously seeking to take advantage of relative value opportunities in industrials and financials. However, following good performance in corporate credit early in 2012, Total Return began reducing exposure to the sector while adding to its securitized credit allocation. Total Return added exposure to CMBS and auto loan ABS and reduced its allocation to agency MBS. Total Return also added a small position in Italian sovereign debt during the period.

Describe Funds positioning at period end.

— At period end, the Funds that invest in both equity and fixed income held a neutral weighting in equities relative to their respective reference benchmarks and a moderate underweight in fixed income due to an out-of-benchmark allocation to cash and cash equivalents. The fixed income allocation was underweight in core fixed income due to an out-of-benchmark allocation to high yield debt. With respect to equities, all of the Funds were overweight in US stocks and underweight in international developed markets.

The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.

4     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Fund Summary as of September 30, 2012   BlackRock Conservative Prepared Portfolio

Investment Objective

BlackRock Conservative Prepared Portfolio’s (the “Fund”) investment objective is to seek a balance between long term capital appreciation and high current income, with a greater emphasis on income.

Total Return Based on a $10,000 Investment

¹    Assuming maximum sales charges, if any, transaction costs and other operating expenses, including administration fees. Institutional Shares do not have a sales charge. ²    The Fund, which is a fund of funds, normally invests 40% of its assets in underlying funds that invest primarily in equity securities and 60% of its assets in underlying funds that invest primarily in fixed income securities. ³     The Fund compares its performance to that of a customized weighted index comprised of the returns of the Barclays US Aggregate Bond Index (60%), Russell 3000^® Index (32%) and MSCI EAFE Index (8%), recognized unmanaged indices of bond, US stock and non-US stock market performance, respectively.

⁴  This unmanaged market-weighted index is comprised of investment grade corporate bonds (rated BBB or better), mortgages and US Treasury and government agency issues with at least one year to maturity.

⁵  Commencement of operations.

Performance Summary for the Period Ended September 30, 2012

		Average Annual Total Returns6
		1 Year		5 Years		Since Inception7
	6-Month Total Returns	w/o sales charge	w/sales charge	w/o sales charge	w/sales charge	w/o sales charge	w/sales charge
Institutional	3.67%	15.66%	N/A	4.40%	N/A	5.08%	N/A
Investor A	3.41	15.19	9.12%	3.96	2.86%	4.66	3.69%
Investor C	3.15	14.40	13.40	3.23	3.23	3.91	3.91
Class R	3.43	14.94	N/A	3.74	N/A	4.43	N/A
Barclays US Aggregate Bond Index (60%)/Russell 3000® Index (32%)/MSCI EAFE Index (8%)	3.22	13.70	N/A	4.40	N/A	4.85	N/A
Barclays US Aggregate Bond Index	3.68	5.16	N/A	6.53	N/A	6.23	N/A

⁶  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 11 for a detailed description of share classes, including any related sales charges and fees.

⁷  The Fund commenced operations on December 21, 2006.

N/A - Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

Expense Example

	Actual			Hypothetical9
	Beginning Account Value April 1, 2012	Ending Account Value September 30, 2012	Expenses Paid During the Period8	Beginning Account Value April 1, 2012	Ending Account Value September 30, 2012	Expenses Paid During the Period8	Annualized Expense Ratio
Institutional	$1,000.00	$1,036.70	$2.09	$1,000.00	$1,022.95	$2.07	0.41%
Investor A	$1,000.00	$1,034.10	$4.12	$1,000.00	$1,020.95	$4.09	0.81%
Investor C	$1,000.00	$1,031.50	$7.77	$1,000.00	$1,017.35	$7.72	1.53%
Class R	$1,000.00	$1,034.30	$5.19	$1,000.00	$1,019.90	$5.15	1.02%

⁸  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown). Because the Fund invests in Master Portfolios, the expense example reflects the expenses of both the Fund and the Master Portfolios in which it invests. The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

⁹  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 5

Fund Summary as of September 30, 2012   BlackRock Moderate Prepared Portfolio

  Investment Objective

BlackRock Moderate Prepared Portfolio’s (the “Fund”) investment objective is to seek a balance between long term capital appreciation and high current income, with a greater emphasis on capital appreciation.

  Total Return Based on a $10,000 Investment

¹    Assuming maximum sales charges, if any, transaction costs and other operating expenses, including administration fees. Institutional Shares do not have a sales charge. ²    The Fund, which is a fund of funds, normally invests 60% of its assets in underlying funds that invest primarily in equity securities and 40% of its assets in underlying funds that invest primarily in fixed income securities. ³     The Fund compares its performance to that of a customized weighted index comprised of the returns of the Barclays US Aggregate Bond Index (40%), Russell 3000^® Index (48%) and MSCI EAFE Index (12%), recognized unmanaged indices of bond, US stock and non-US stock market performance, respectively.

⁴  This unmanaged index covers 500 industrial, utility, transportation and financial companies of the US markets (mostly New York Stock Exchange (“NYSE”) issues) representing about 75% of NYSE market capitalization and 30% of NYSE issues.

⁵  Commencement of operations.

  Performance Summary for the Period Ended September 30, 2012

					Average Annual Total Returns6
				1 Year						5 Years						Since Inception7
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		2.91	%		18.90	%		N/A			3.02	%		N/A			4.33	%		N/A
Investor A		2.73			18.45			12.26	%		2.64			1.54	%		3.97			3.01	%
Investor C		2.28			17.51			16.51			1.87			1.87			3.18			3.18
Class R		2.55			18.16			N/A			2.52			N/A			3.81			N/A
Barclays US Aggregate Bond Index (40%)/Russell 3000® Index (48%)/MSCI EAFE Index (12%)		2.92			18.04			N/A			3.10			N/A			3.94			N/A
S&P 500® Index		3.43			30.20			N/A			1.05			N/A			2.46			N/A

⁶  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 11 for a detailed description of share classes, including any related sales charges and fees.

⁷  The Fund commenced operations on December 21, 2006.

N/A - Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

  Expense Example

	Actual									Hypothetical9
	Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012			Expenses Paid During the Period8			Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012			Expenses Paid During the Period8			Annualized Expense Ratio
Institutional		$	1,000.00		$	1,029.10		$	2.08		$	1,000.00		$	1,022.95		$	2.07		0.41%
Investor A		$	1,000.00		$	1,027.30		$	3.90		$	1,000.00		$	1,021.15		$	3.89		0.77%
Investor C		$	1,000.00		$	1,022.80		$	7.89		$	1,000.00		$	1,017.20		$	7.87		1.56%
Class R		$	1,000.00		$	1,025.50		$	4.61		$	1,000.00		$	1,020.45		$	4.60		0.91%

⁸  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown). Because the Fund invests in Master Portfolios, the expense example reflects the expenses of both the Fund and the Master Portfolios in which it invests. The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

⁹  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.

6     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Fund Summary as of September 30, 2012   BlackRock Growth Prepared Portfolio

  Investment Objective

BlackRock Growth Prepared Portfolio’s (the “Fund”) investment objective is to seek long term capital appreciation. Current income is also a consideration.

  Total Return Based on a $10,000 Investment

¹    Assuming maximum sales charges, if any, transaction costs and other operating expenses, including administration fees. Institutional Shares do not have a sales charge. ²    The Fund, which is a fund of funds, normally invests 80% of its assets in underlying funds that invest primarily in equity securities and 20% of its assets in underlying funds that invest primarily in fixed income securities. ³     The Fund compares its performance to that of a customized weighted index comprised of the returns of the Barclays US Aggregate Bond Index (20%), Russell 3000^® Index (64%) and MSCI EAFE Index (16%), recognized unmanaged indices of bond, US stock and non-US stock market performance, respectively.

⁴  This unmanaged index covers 500 industrial, utility, transportation and financial companies of the US markets (mostly NYSE issues) representing about 75% of NYSE market capitalization and 30% of NYSE issues.

⁵  Commencement of operations.

  Performance Summary for the Period Ended September 30, 2012

					Average Annual Total Returns6
				1 Year						5 Years						Since Inception7
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		1.60	%		21.49	%		N/A			1.56	%		N/A			3.54	%		N/A
Investor A		1.33			20.94			14.54	%		1.18			0.09	%		3.17			2.21	%
Investor C		1.06			20.12			19.12			0.45			0.45			2.43			2.43
Class R		1.24			20.73			N/A			1.00			N/A			2.97			N/A
Barclays US Aggregate Bond Index (20%)/Russell 3000® Index (64%)/MSCI EAFE Index (16%)		2.58			22.41			N/A			1.64			N/A			2.88			N/A
S&P 500® Index		3.43			30.20			N/A			1.05			N/A			2.46			N/A

⁶  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 11 for a detailed description of share classes, including any related sales charges and fees.

⁷  The Fund commenced operations on December 21, 2006.

N/A - Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

  Expense Example

	Actual									Hypothetical9
	Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012			Expenses Paid During the Period8			Beginning Account Value April 1, 2012			Ending Account Value September 30, 2012			Expenses Paid During the Period8			Annualized Expense Ratio
Institutional		$	1,000.00		$	1,016.00		$	1.36		$	1,000.00		$	1,023.65		$	1.37		0.27%
Investor A		$	1,000.00		$	1,013.30		$	3.27		$	1,000.00		$	1,021.75		$	3.29		0.65%
Investor C		$	1,000.00		$	1,010.60		$	6.89		$	1,000.00		$	1,018.15		$	6.91		1.37%
Class R		$	1,000.00		$	1,012.40		$	4.13		$	1,000.00		$	1,020.90		$	4.14		0.82%

⁸  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown). Because the Fund invests in Master Portfolios, the expense example reflects the expenses of both the Fund and the Master Portfolios in which it invests. The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

⁹  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 7

Fund Summary as of September 30, 2012   BlackRock Aggressive Growth Prepared Portfolio

  Investment Objective

BlackRock Aggressive Growth Prepared Portfolio’s (the “Fund”) investment objective is to seek long term capital appreciation. Current income is not a consideration.

  Total Return Based on a $10,000 Investment

¹    Assuming maximum sales charges, if any, transaction costs and other operating expenses, including administration fees. Institutional Shares do not have a sales charge. ²    The Fund, which is a fund of funds, normally invests 100% of its assets in underlying funds that invest primarily in equity securities. ³    The Fund compares its performance to that of a customized weighted index comprised of the returns of the Russell 3000^® Index (80%) and MSCI EAFE Index (20%), recognized unmanaged indices of US stock and non-US stock market performance, respectively.

⁴  This unmanaged index covers 500 industrial, utility, transportation and financial companies of the US markets (mostly NYSE issues) representing about 75% of NYSE market capitalization and 30% of NYSE issues.

⁵  Commencement of operations.

  Performance Summary for the Period Ended September 30, 2012

		Average Annual Total Returns6
		1 Year		5 Years		Since Inception7
	6-Month Total Returns	w/o sales charge	w/sales charge	w/o sales charge	w/sales charge	w/o sales charge	w/sales charge
Institutional	0.77%	25.05%	N/A	(0.02)%	N/A	2.51%	N/A
Investor A	0.68	24.72	18.21%	(0.34)	(1.42)%	2.17	1.23%
Investor C	0.30	23.77	22.77	(1.09)	(1.09)	1.41	1.41
Class R	0.59	24.26	N/A	(0.51)	N/A	1.98	N/A
Russell 3000® Index (80%)/MSCI EAFE Index (20%)	2.19	26.82	N/A	0.03	N/A	1.68	N/A
S&P 500® Index	3.43	30.20	N/A	1.05	N/A	2.46	N/A

⁶  Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 11 for a detailed description of share classes, including any related sales charges and fees.

⁷  The Fund commenced operations on December 21, 2006.

N/A - Not applicable as share class and index do not have a sales charge.

Past performance is not indicative of future results.

  Expense Example

	Actual			Hypothetical9
	Beginning Account Value April 1, 2012	Ending Account Value September 30, 2012	Expenses Paid During the  Period8	Beginning Account Value April 1, 2012	Ending Account Value September 30, 2012	Expenses Paid During the  Period8	Annualized Expense Ratio
Institutional	$1,000.00	$1,007.70	$1.36	$1,000.00	$1,023.65	$1.37	0.27%
Investor A	$1,000.00	$1,006.80	$3.06	$1,000.00	$1,021.95	$3.08	0.61%
Investor C	$1,000.00	$1,003.00	$6.81	$1,000.00	$1,018.20	$6.86	1.36%
Class R	$1,000.00	$1,005.90	$3.86	$1,000.00	$1,021.15	$3.89	0.77%

⁸  For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period shown). Because the Fund invests in Master Portfolios, the expense example reflects the expenses of both the Fund and the Master Portfolios in which it invests. The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

⁹  Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 366.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.

8     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Fund Summaries as of September 30, 2012

  BlackRock Conservative Prepared Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Fixed Income Funds		58	%
Equity Funds		40
Short-Term Securities		2

Portfolio Holdings	Percent of Affiliated Investment Companies
Master Total Return Portfolio		56	%
Master S&P 500 Index Series		8
BlackRock Equity Dividend Fund, Institutional Class		5
Master Large Cap Growth Portfolio		4
BlackRock Global Dynamic Equity Fund, Institutional Class		4
BlackRock Capital Appreciation Fund, Inc., BlackRock Class		4
iShares MSCI Emerging Markets Index Fund		3
BlackRock High Yield Bond Portfolio, BlackRock Class		2
iShares MSCI Germany Index Fund		2
BlackRock Liquidity Funds, TempFund, Institutional Class		2
Master Basic Value LLC		2
iShares Dow Jones U.S. Technology Sector Index Fund		2
BlackRock Small Cap Growth Equity Portfolio, Institutional Class		2
BlackRock International Fund, Institutional Class		1
BlackRock International Opportunities Portfolio, Institutional Class		1
Master Value Opportunities LLC		1
BlackRock U.S. Opportunities Portfolio, Institutional Class		1

  BlackRock Moderate Prepared Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds		59	%
Fixed Income Funds		38
Short-Term Securities		3

Portfolio Holdings	Percent of Affiliated Investment Companies
Master Total Return Portfolio		36	%
Master S&P 500 Index Series		13
BlackRock Equity Dividend Fund, Institutional Class		11
BlackRock Capital Appreciation Fund, Inc., BlackRock Class		7
BlackRock Global Dynamic Equity Fund, Institutional Class		6
Master Large Cap Growth Portfolio		5
iShares MSCI Emerging Markets Index Fund		3
BlackRock Small Cap Growth Equity Portfolio, Institutional Class		3
BlackRock Liquidity Funds, TempFund, Institutional Class		3
iShares MSCI Germany Index Fund		2
BlackRock High Yield Bond Portfolio, BlackRock Class		2
iShares Dow Jones U.S. Technology Sector Index Fund		2
BlackRock International Opportunities Portfolio, Institutional Class		2
BlackRock International Fund, Institutional Class		2
Master Basic Value LLC		1
Master Value Opportunities LLC		1
BlackRock U.S. Opportunities Portfolio, Institutional Class		1

The Funds’ allocation and holdings listed above are current as of the report date. However, the Funds are regularly monitored and their composition may vary throughout various periods.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 9

Fund Summaries as of September 30, 2012

  BlackRock Growth Prepared Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds		80	%
Fixed Income Funds		18
Short-Term Securities		2

Portfolio Holdings	Percent of Affiliated Investment Companies
Master Total Return Portfolio		17	%
BlackRock Equity Dividend Fund, Institutional Class		15
Master S&P 500 Index Series		14
BlackRock Capital Appreciation Fund, Inc., BlackRock Class		11
BlackRock Global Dynamic Equity Fund, Institutional Class		10
Master Large Cap Growth Portfolio		6
BlackRock International Opportunities Portfolio, Institutional Class		4
BlackRock Small Cap Growth Equity Portfolio, Institutional Class		4
iShares MSCI Emerging Markets Index Fund		3
Master Basic Value LLC		3
iShares MSCI Germany Index Fund		2
BlackRock International Fund, Institutional Class		2
BlackRock U.S. Opportunities Portfolio, Institutional Class		2
iShares Dow Jones U.S. Technology Sector Index Fund		2
Master Value Opportunities LLC		2
BlackRock Liquidity Funds, TempFund, Institutional Class		2
BlackRock High Yield Bond Portfolio, BlackRock Class		1

  BlackRock Aggressive Growth Prepared Portfolio

Portfolio Composition	Percent of Affiliated Investment Companies
Equity Funds		99	%
Short-Term Securities		1

Portfolio Holdings	Percent of Affiliated Investment Companies
BlackRock Capital Appreciation Fund, Inc., BlackRock Class		18	%
BlackRock Equity Dividend Fund, Institutional Class		16
Master S&P 500 Index Series		16
Master Basic Value LLC		10
BlackRock Global Dynamic Equity Fund, Institutional Class		9
Master Large Cap Growth Portfolio		8
BlackRock Small Cap Growth Equity Portfolio, Institutional Class		5
BlackRock International Opportunities Portfolio, Institutional Class		4
iShares MSCI Emerging Markets Index Fund		3
BlackRock U.S. Opportunities Portfolio, Institutional Class		2
Master Value Opportunities LLC		2
iShares MSCI Germany Index Fund		2
iShares Dow Jones U.S. Technology Sector Index Fund		2
BlackRock International Fund, Institutional Class		2
BlackRock Liquidity Funds, TempFund, Institutional Class		1

The Funds’ allocation and holdings listed above are current as of the report date. However, the Funds are regularly monitored and their composition may vary throughout various periods.

10     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

About Fund Performance

— Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to eligible investors.

— Investor A Shares are subject to a maximum initial sales charge (front-end load) of 5.25% and a service fee of 0.25% per year (but no distribution fee).

— Investor C Shares are subject to a 1.00% contingent deferred sales charge (“CDSC”) if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year.

— Class R Shares are not subject to any sales charge. These shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. These shares are available only to certain retirement and other similar plans.

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/funds 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 performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) 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.

BlackRock Advisors, LLC (the “Manager”), the Funds’ investment advisor, waived and/or reimbursed a portion of each Fund’s expenses. Without such waiver and/or reimbursement, a Fund’s performance would have been lower. The Manager is under no obligation to waive or reimburse or to continue waiving or reimbursing its fees after the applicable termination date. See Note 3 of the Notes to Financial Statements for additional information on waivers and reimbursements. 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.

Disclosure of Expenses

Shareholders of these Funds may incur the following charges: (a) expenses related to transactions, including sales charges and exchange fees; and (b) operating expenses, including administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other Fund expenses. The expense examples on the previous pages (which are based on a hypothetical investment of $1,000 invested on April 1, 2012 and held through September 30, 2012) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense examples provide 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 corresponding to their Fund and share class under the headings entitled “Expenses Paid During the Period.”

The expense examples also provide information about hypothetical account values and hypothetical expenses based on a 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 these Funds and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in other funds’ shareholder reports.

The expenses shown in the expense examples are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges or exchange fees, if any. Therefore, the hypothetical examples are 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.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 11

Derivative Financial Instruments

The Funds may invest in various derivative financial instruments, including financial futures contracts as specified in Note 2 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market and/or equity risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. The Funds’ ability to use a derivative

financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require a Fund to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation a Fund can realize on an investment, may result in lower dividends paid to shareholders or may cause a Fund to hold an investment that it might otherwise sell. The Funds’ investments in these instruments are discussed in detail in the Notes to Financial Statements.

12     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments September 30, 2012   BlackRock Conservative Prepared Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds – 40.2%
BlackRock Capital Appreciation Fund, Inc., BlackRock Class (b)		93,630	$	2,351,041
BlackRock Equity Dividend Fund, Institutional Class		161,774		3,258,129
BlackRock Global Dynamic Equity Fund, Institutional Class		204,405		2,579,591
BlackRock International Fund, Institutional Class		61,984		762,406
BlackRock International Opportunities Portfolio, Institutional Class		21,126		693,358
BlackRock Small Cap Growth Equity Portfolio, Institutional Class (b)		41,211		1,099,085
BlackRock U.S. Opportunities Portfolio, Institutional Class (b)		14,248		518,922
iShares Dow Jones U.S. Technology Sector Index Fund		16,484		1,250,641
iShares MSCI Emerging Markets Index Fund		46,156		1,907,166
iShares MSCI Germany Index Fund		60,470		1,365,413
Master Basic Value LLC	$	1,282,871		1,282,871
Master Large Cap Growth Portfolio	$	2,700,991		2,700,991
Master S&P 500 Index Series	$	5,377,410		5,377,410
Master Value Opportunities LLC	$	519,892		519,892
				25,666,916

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Fixed Income Funds – 57.9%
BlackRock High Yield Bond Portfolio, BlackRock Class		190,390	$	1,511,697
Master Total Return Portfolio	$	35,465,989		35,465,989
				36,977,686
Short-Term Securities – 2.1%
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (c)		1,314,561		1,314,561
Total Affiliated Investment Companies
(Cost – $60,060,602) – 100.2%				63,959,163
Liabilities in Excess of Other Assets – (0.2)%				(129,148	)
Net Assets – 100.0%			$	63,830,015

(a) Investments in issuers considered to be an affiliate of the Fund during the year ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at September 30, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at September 30, 2012		Value at September 30, 2012		Income		Realized Gain (Loss)
BlackRock Capital Appreciation Fund, Inc., BlackRock Class		105,161		30,637			42,168			93,630	$	2,351,041		–	$	202,543
BlackRock Equity Dividend Fund, Institutional Class		224,423		57,779			120,428			161,774	$	3,258,129	$	91,379	$	106,397
BlackRock Floating Rate Income Portfolio, Institutional Class		306,775		13,524			320,299			–		–	$	19,872	$	(92,200	)
BlackRock Global Dynamic Equity Fund, Institutional Class		184,102		31,688			11,385			204,405	$	2,579,591	$	62,665	$	(8,226	)
BlackRock Global Emerging Markets Fund, Inc., Institutional Class		40,794		36,571			77,365			–		–	$	3,976	$	166,978
BlackRock High Yield Bond Portfolio, BlackRock Class		483,546		52,251			345,407			190,390	$	1,511,697	$	116,523	$	11,811
BlackRock International Fund, Institutional Class		–		152,970			90,986			61,984	$	762,406		–	$	(112,334	)
BlackRock International Opportunities Portfolio, Institutional Class		30,270		28,309			37,453			21,126	$	693,358	$	31,311	$	(61,051	)
BlackRock Latin America Fund, Inc., Institutional Class		3,785		551			4,336			–		–	$	2,109	$	24,577
BlackRock Liquidity Funds, TempFund, Institutional Class		185,709		1,128,852	1		–			1,314,561	$	1,314,561	$	2,365		–
BlackRock Pacific Fund, Inc., Institutional Class		39,570		7,273			46,843			–		–	$	5,117	$	7,958
BlackRock Small Cap Growth Equity Portfolio, Institutional Class		37,293		6,218			2,300			41,211	$	1,099,085		–	$	22,833
BlackRock U.S. Opportunities Portfolio, Institutional Class		11,815		3,204			771			14,248	$	518,922		–	$	46,101
iShares Dow Jones U.S. Technology Sector Index Fund		–		16,484			–			16,484	$	1,250,641	$	2,781		–
iShares MSCI Emerging Markets Index Fund		–		46,156			–			46,156	$	1,907,166		–		–
iShares MSCI Germany Index Fund		–		60,470			–			60,470	$	1,365,413		–		–
Master Basic Value LLC	$	1,332,002		–		$	49,131	2	$	1,282,871	$	1,282,871	$	53,446	$	122,760
Master Large Cap Growth Portfolio	$	2,689,455	$	11,536	1		–		$	2,700,991	$	2,700,991	$	91,626	$	259,576
Master S&P 500 Index Series		–	$	5,377,410	1		–		$	5,377,410	$	5,377,410	$	2,953	$	22,153
Master Total Return Portfolio	$	24,149,833	$	11,316,156	1		–		$	35,465,989	$	35,465,989	$	1,405,187	$	546,385
Master Value Opportunities LLC	$	369,269	$	150,623	1		–		$	519,892	$	519,892	$	5,677	$	59,678

    ¹   Represents net shares/beneficial interest purchased.

    ²   Represents net beneficial interest sold.

(b) Non-income producing security.

(c) Represents the current yield as of report date.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 13

  Schedule of Investments (concluded)   BlackRock Conservative Prepared Portfolio

— Fair Value Measurements – Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

— Level 1 - unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

— Level 2 - other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

— Level 3 - unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of September 30, 2012:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Affiliated Investment
Companies	$	18,612,010	$	45,347,153		–	$	63,959,163

Certain of the Fund’s assets are held at carrying amount, which approximates fair value for financial statement purposes. As of September 30, 2012, cash of $1,869 is categorized as Level 1 within the disclosure hierarchy.

There were no transfers between levels during the year ended September 30, 2012.

See Notes to Financial Statements.

14     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments September 30, 2012   BlackRock Moderate Prepared Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds – 60.0%
BlackRock Capital Appreciation Fund, Inc., BlackRock Class (b)		266,263	$	6,685,866
BlackRock Equity Dividend Fund, Institutional Class		522,382		10,520,769
BlackRock Global Dynamic Equity Fund, Institutional Class		489,549		6,178,106
BlackRock International Fund, Institutional Class		133,475		1,641,746
BlackRock International Opportunities Portfolio, Institutional Class		56,899		1,867,437
BlackRock Small Cap Growth Equity Portfolio, Institutional Class (b)		98,709		2,632,578
BlackRock U.S. Opportunities Portfolio, Institutional Class (b)		32,538		1,185,031
iShares Dow Jones U.S. Technology Sector Index Fund		25,593		1,941,741
iShares MSCI Emerging Markets Index Fund		71,663		2,961,115
iShares MSCI Germany Index Fund		93,886		2,119,946
Master Basic Value LLC	$	1,280,337		1,280,337
Master Large Cap Growth Portfolio	$	5,198,600		5,198,600
Master S&P 500 Index Series	$	12,253,717		12,253,717

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds (concluded)
Master Value Opportunities LLC	$	1,249,118	$	1,249,118
				57,716,107
Fixed Income Funds – 37.8%
BlackRock High Yield Bond Portfolio, BlackRock Class		254,455		2,020,374
Master Total Return Portfolio	$	34,392,720		34,392,720
				36,413,094
Short-Term Securities – 2.6%
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (c)		2,473,250		2,473,250
Total Affiliated Investment Companies
(Cost – $88,817,131) – 100.4%				96,602,451
Liabilities in Excess of Other Assets – (0.4)%				(365,416	)
Net Assets – 100.0%			$	96,237,035

(a) Investments in issuers considered to be an affiliate of the Fund during the year ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at September 30, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at September 30, 2012		Value at September 30, 2012		Income		Realized Gain (Loss)
BlackRock Capital Appreciation Fund, Inc., BlackRock Class		316,881		55,299			105,917			266,263	$	6,685,866		–	$	322,204
BlackRock Equity Dividend Fund, Institutional Class		567,011		174,196			218,825			522,382	$	10,520,769	$	226,821	$	142,275
BlackRock Floating Rate Income Portfolio, Institutional Class		356,047		6,059			362,106			–		–	$	22,407	$	(111,571	)
BlackRock Global Dynamic Equity Fund, Institutional Class		482,733		41,501			34,685			489,549	$	6,178,106	$	155,597	$	(32,246	)
BlackRock Global Emerging Markets Fund, Inc., Institutional Class		68,071		53,524			121,595			–		–	$	6,282	$	267,626
BlackRock High Yield Bond Portfolio, BlackRock Class		815,583		43,476			604,604			254,455	$	2,020,374	$	168,729	$	(25,311	)
BlackRock International Fund, Institutional Class		–		242,358			108,883			133,475	$	1,641,746		–	$	(156,805	)
BlackRock International Opportunities Portfolio, Institutional Class		79,278		54,316			76,695			56,899	$	1,867,437	$	73,556	$	(77,133	)
BlackRock Latin America Fund, Inc., Institutional Class		6,239		402			6,641			–		–	$	3,292	$	36,741
BlackRock Liquidity Funds, TempFund, Institutional Class		–		2,473,250	1		–			2,473,250	$	2,473,250	$	2,093		–
BlackRock Pacific Fund, Inc., Institutional Class		90,243		8,689			98,932			–		–	$	11,061	$	2,913
BlackRock Small Cap Growth Equity Portfolio, Institutional Class		97,833		7,918			7,042			98,709	$	2,632,578		–	$	53,042
BlackRock U.S. Opportunities Portfolio, Institutional Class		29,543		5,197			2,202			32,538	$	1,185,031		–	$	109,104
iShares Dow Jones US Technology Sector Index Fund		–		25,593			–			25,593	$	1,941,741	$	4,317		–
iShares MSCI Emerging Markets Index Fund		–		71,663			–			71,663	$	2,961,115		–		–
iShares MSCI Germany Index Fund		–		93,886			–			93,886	$	2,119,946		–		–
Master Basic Value LLC	$	4,323,485		–		$	3,043,148	2	$	1,280,337	$	1,280,337	$	141,536	$	298,805
Master Large Cap Growth Portfolio	$	6,701,650		–		$	1,503,050	2	$	5,198,600	$	5,198,600	$	207,436	$	561,607
Master S&P 500 Index Series		–	$	12,253,717	1		–		$	12,253,717	$	12,253,717	$	6,730	$	50,480
Master Total Return Portfolio	$	26,153,552	$	8,239,168	1		–		$	34,392,720	$	34,392,720	$	1,432,245	$	546,027
Master Value Opportunities LLC	$	971,562	$	277,556	1		–		$	1,249,118	$	1,249,118	$	13,897	$	145,336

    ¹   Represents net shares/beneficial interest purchased.

    ²   Represents net beneficial interest sold.

(b) Non-income producing security.

(c) Represents the current yield as of report date.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 15

  Schedule of Investments (concluded)   BlackRock Moderate Prepared Portfolio

— Fair Value Measurements – Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

— Level 1 - unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

— Level 2 - other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs)

— Level 3 - unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value

determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of September 30, 2012:

	Level 1		Level 2		Level 3	Total
Assets:
Investments:
Affiliated Investment
Companies	$	42,227,959	$	54,374,492	–	$	96,602,451

Certain of the Fund’s assets are held at carrying amount, which approximates fair value for financial statement purposes. As of September 30, 2012, cash of $1,647 is categorized as Level 1 within the disclosure hierarchy.

There were no transfers between levels during the year ended September 30, 2012.

See Notes to Financial Statements.

16     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments September 30, 2012   BlackRock Growth Prepared Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds – 80.8%
BlackRock Capital Appreciation Fund, Inc., BlackRock Class (b)		268,300	$	6,737,019
BlackRock Equity Dividend Fund, Institutional Class		449,918		9,061,339
BlackRock Global Dynamic Equity Fund, Institutional Class		497,227		6,275,008
BlackRock International Fund, Institutional Class		110,422		1,358,191
BlackRock International Opportunities Portfolio, Institutional Class		82,292		2,700,809
BlackRock Small Cap Growth Equity Portfolio, Institutional Class (b)		100,255		2,673,812
BlackRock U.S. Opportunities Portfolio, Institutional Class (b)		35,259		1,284,137
iShares Dow Jones U.S. Technology Sector Index Fund		16,756		1,271,278
iShares MSCI Emerging Markets Index Fund		46,917		1,938,610
iShares MSCI Germany Index Fund		61,466		1,387,902
Master Basic Value LLC	$	1,667,521		1,667,521
Master Large Cap Growth Portfolio	$	4,043,727		4,043,727
Master S&P 500 Index Series	$	8,857,289		8,857,289

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds (concluded)
Master Value Opportunities LLC	$	1,268,607	$	1,268,607
				50,525,249
Fixed Income Funds – 17.8%
BlackRock High Yield Bond Portfolio, BlackRock Class		99,932		793,458
Master Total Return Portfolio	$	10,348,489		10,348,489
				11,141,947
Short-Term Securities – 1.6%
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (c)		987,862		987,862
Total Affiliated Investment Companies
(Cost – $56,728,596) – 100.2%				62,655,058
Liabilities in Excess of Other Assets – (0.2)%				(108,397	)
Net Assets – 100.0%			$	62,546,661

(a) Investments in issuers considered to be an affiliate of the Fund during the year ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at September 30, 2011		Shares/ Beneficial Interest Purchased			Shares/ Beneficial Interest Sold			Shares/ Beneficial Interest Held at September 30, 2012		Value at September 30, 2012		Income		Realized Gain (Loss)
BlackRock Capital Appreciation Fund, Inc., BlackRock Class		359,858		11,313			102,871			268,300	$	6,737,019		–	$	280,123
BlackRock Equity Dividend Fund, Institutional Class		595,444		32,930			178,456			449,918	$	9,061,339	$	225,162	$	113,402
BlackRock Floating Rate Income Portfolio, Institutional Class		151,619		2,154			153,773			–		–	$	9,618	$	(44,805	)
BlackRock Global Dynamic Equity Fund, Institutional Class		515,890		33,119			51,782			497,227	$	6,275,008	$	164,976	$	(40,807	)
BlackRock Global Emerging Markets Fund, Inc., Institutional Class		53,369		33,548			86,917			–		–	$	4,887	$	186,866
BlackRock High Yield Bond Portfolio, BlackRock Class		385,575		16,493			302,136			99,932	$	793,458	$	74,569	$	(35,251	)
BlackRock International Fund, Institutional Class		–		188,643			78,221			110,422	$	1,358,191		–	$	(110,271	)
BlackRock International Opportunities Portfolio, Institutional Class		84,807		52,969			55,484			82,292	$	2,700,809	$	76,442	$	(139,464	)
BlackRock Latin America Fund, Inc., Institutional Class		4,867		184			5,051			–		–	$	2,547	$	26,780
BlackRock Liquidity Funds, TempFund, Institutional Class		–		987,862	1		–			987,862	$	987,862	$	1,440		–
BlackRock Pacific Fund, Inc., Institutional Class		89,794		6,664			96,458			–		–	$	10,916	$	(7,516	)
BlackRock Small Cap Growth Equity Portfolio, Institutional Class		104,552		6,205			10,502			100,255	$	2,673,812		–	$	64,137
BlackRock U.S. Opportunities Portfolio, Institutional Class		33,687		5,113			3,541			35,259	$	1,284,137		–	$	122,831
iShares Dow Jones U.S. Technology Sector Index Fund		–		16,756			–			16,756	$	1,271,278	$	2,827		–
iShares MSCI Emerging Markets Index Fund		–		46,917			–			46,917	$	1,938,610		–		–
iShares MSCI Germany Index Fund		–		61,466			–			61,466	$	1,387,902		–		–
Master Basic Value LLC	$	5,052,582		–		$	3,385,061	2	$	1,667,521	$	1,667,521	$	138,282	$	293,883
Master Large Cap Growth Portfolio	$	6,992,972		–		$	2,949,245	2	$	4,043,727	$	4,043,727	$	183,232	$	487,030
Master S&P 500 Index Series		–	$	8,857,289	1		–		$	8,857,289	$	8,857,289	$	4,865	$	36,488
Master Total Return Portfolio	$	10,869,496		–		$	521,007	2	$	10,348,489	$	10,348,489	$	498,127	$	166,053
Master Value Opportunities LLC	$	1,038,581	$	230,026	1		–		$	1,268,607	$	1,268,607	$	14,328	$	148,527

        ¹ Represents net shares/beneficial interest purchased.

         ² Represents net beneficial interest sold.

(b) Non-income producing security.

(c) Represents the current yield as of report date.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 17

  Schedule of Investments (concluded)   BlackRock Growth Prepared Portfolio

• Fair Value Measurements – Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

— Level 1 - unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

— Level 2 - other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs)

— Level 3 - unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of September 30, 2012:

		Level 1		Level 2	Level 3		Total
Assets:
Investments: Affiliated Investment Companies	$	36,469,425	$	26,185,633	–	$	62,655,058

Certain of the Fund’s assets are held at carrying amount, which approximates fair value for financial statement purposes. As of September 30, 2012, cash of $2,033 is categorized as Level 1 within the disclosure hierarchy.

There were no transfers between levels during the year ended September 30, 2012.

See Notes to Financial Statements.

18     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Schedule of Investments September 30, 2012   BlackRock Aggressive Growth Prepared Portfolio (Percentages shown are based on Net Assets)

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds – 99.5%
BlackRock Capital Appreciation Fund, Inc., BlackRock Class (b)		278,946	$	7,004,325
BlackRock Equity Dividend Fund, Institutional Class		307,605		6,195,172
BlackRock Global Dynamic Equity Fund, Institutional Class		282,610		3,566,532
BlackRock International Fund, Institutional Class		63,177		777,075
BlackRock International Opportunities Portfolio, Institutional Class		54,257		1,780,731
BlackRock Small Cap Growth Equity Portfolio, Institutional Class (b)		70,985		1,893,157
BlackRock U.S. Opportunities Portfolio, Institutional Class (b)		26,192		953,899
iShares Dow Jones U.S. Technology Sector Index Fund		10,391		788,365
iShares MSCI Emerging Markets Index Fund		29,096		1,202,247
iShares MSCI Germany Index Fund		38,119		860,727
Master Basic Value LLC	$	3,867,559		3,867,559

Affiliated Investment Companies (a)	Shares/ Beneficial Interest		Value
Equity Funds (concluded)
Master Large Cap Growth Portfolio	$	3,103,121	$	3,103,121
Master S&P 500 Index Series	$	6,172,704		6,172,704
Master Value Opportunities LLC	$	901,984		901,984
				39,067,598
Short-Term Securities – 0.6%
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (c)		238,452		238,452
Total Affiliated Investment Companies
(Cost – $34,308,656) – 100.1%				39,306,050
Liabilities in Excess of Other Assets – (0.1)%				(47,522	)
Net Assets – 100.0%			$	39,258,528

(a) Investments in issuers considered to be an affiliate of the Fund during the year ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares/ Beneficial Interest Held at September 30, 2011		Shares/ Beneficial Interest Purchased		Shares/ Beneficial Interest Sold		Shares/ Beneficial Interest Held at September 30, 2012		Value at September 30, 2012		Income		Realized Gain (Loss)
BlackRock Capital Appreciation Fund, Inc., BlackRock Class		284,860		105,102		111,016		278,946	$	7,004,325		–	$	(6,381	)
BlackRock Equity Dividend Fund, Institutional Class		408,780		143,290		244,465		307,605	$	6,195,172	$	145,413	$	103,714
BlackRock Global Dynamic Equity Fund, Institutional Class		299,372		19,458		36,220		282,610	$	3,566,532	$	95,466	$	26,179
BlackRock Global Emerging Markets Fund, Inc., Institutional Class		29,091		19,373		48,464		–		–	$	2,656	$	104,772
BlackRock International Fund, Institutional Class		–		94,957		31,780		63,177	$	777,075		–	$	(40,963	)
BlackRock International Opportunities Portfolio, Institutional Class		61,284		37,326		44,353		54,257	$	1,780,731	$	54,624	$	(107,860	)
BlackRock Latin America Fund, Inc., Institutional Class		2,634		112		2,746		–		–	$	1,375	$	14,805
BlackRock Liquidity Funds, TempFund, Institutional Class		–		238,4521		–		238,452	$	238,452	$	734		–
BlackRock Money Market Portfolio, Institutional Class		657,425		11,806		669,231		–		–		–	$	3
BlackRock Pacific Fund, Inc., Institutional Class		61,516		4,623		66,139		–		–	$	7,469	$	(4,335)
BlackRock Small Cap Growth Equity Portfolio, Institutional Class		75,562		4,551		9,128		70,985	$	1,893,157		–	$	53,487
BlackRock U.S. Opportunities Portfolio, Institutional Class		25,548		3,900		3,256		26,192	$	953,899		–	$	91,822
iShares Dow Jones U.S. Technology Sector Index Fund		–		10,391		–		10,391	$	788,365	$	1,753		–
iShares MSCI Emerging Markets Index Fund		–		29,096		–		29,096	$	1,202,247		–		–
iShares MSCI Germany Index Fund		–		38,119		–		38,119	$	860,727		–		–
Master Basic Value LLC	$	4,157,252		–	$	289,6932	$	3,867,559	$	3,867,559	$	124,074	$	255,948
Master Large Cap Growth Portfolio	$	4,713,663		–	$	1,610,5422	$	3,103,121	$	3,103,121	$	119,508	$	297,589
Master S&P 500 Index Series		–	$	6,172,7041		–	$	6,172,704	$	6,172,704	$	3,390	$	25,429
Master Value Opportunities LLC	$	753,615	$	148,3691		–	$	901,984	$	901,984	$	10,317	$	106,844

¹ Represents net shares/beneficial interest purchased.

² Represents net beneficial interest sold.

(b) Non-income producing security.

(c) Represents the current yield as of report date.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 19

  Schedule of Investments (concluded)   BlackRock Aggressive Growth Prepared Portfolio

— Fair Value Measurements – Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows:

— Level 1 - unadjusted price quotations in active markets/exchanges for identical assets and liabilities that the Fund has the ability to access

— Level 2 - other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market – corroborated inputs)

— Level 3 - unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of September 30, 2012:

		Level 1		Level 2	Level 3		Total
Assets:
Investments: Affiliated Investment Companies	$	25,260,682	$	14,045,368	–	$	39,306,050

Certain of the Fund’s assets are held at carrying amount, which approximates fair value for financial statement purposes. As of September 30, 2012, cash of $3,181 is categorized as Level 1 within the disclosure hierarchy.

There were no transfers between levels during the year ended September 30, 2012.

See Notes to Financial Statements.

20     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Statements of Assets and Liabilities

September 30, 2012	BlackRock Conservative Prepared Portfolio		BlackRock Moderate Prepared Portfolio			BlackRock Growth Prepared Portfolio			BlackRock Aggressive Growth Prepared Portfolio
Assets
Investments at value – affiliated1	$	63,959,163	$	96,602,451		$	62,655,058		$	39,306,050
Cash		1,869		1,647			2,033			3,181
Capital shares sold receivable		240,477		140,992			184,225			33,161
Receivable from Manager		13,674		14,605			17,945			16,491
Dividends receivable – affiliated		3,067		4,422			2,915			1,819
Prepaid expenses		11,863		11,464			12,490			11,553
Total assets		64,230,113		96,775,581			62,874,666			39,372,255
Liabilities
Capital shares redeemed payable		278,523		396,255			207,214			15,175
Professional fees payable		38,042		37,880			37,627			37,789
Service and distribution fees payable		31,108		46,361			30,942			17,771
Transfer agent fees payable		19,273		21,192			20,009			15,407
Custodian fees payable		11,779		11,775			11,889			11,802
Accounting fees payable		10,672		10,595			10,672			7,947
Officer’s and Trustees’ fees payable		4,013		4,166			4,021			3,937
Other affiliates payable		406		626			274			16
Payable to Manager		–		441			–			–
Other accrued expenses payable		6,282		9,255			5,357			3,883
Total liabilities		400,098		538,546			328,005			113,727
Net Assets	$	63,830,015	$	96,237,035		$	62,546,661		$	39,258,528
Net Assets Consist of
Paid-in capital	$	57,497,462	$	88,920,612		$	64,521,895		$	39,555,576
Undistributed net investment income		1,331,810		1,566,815			941,255			278,657
Accumulated net realized gain (loss)		1,102,182		(2,035,712	)		(8,842,951	)		(5,573,099	)
Net unrealized appreciation/depreciation		3,898,561		7,785,320			5,926,462			4,997,394
Net Assets	$	63,830,015	$	96,237,035		$	62,546,661		$	39,258,528
1 Investments at cost – affiliated.	$	60,060,602	$	88,817,131		$	56,728,596		$	34,308,656

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 21

Statements of Assets and Liabilities (concluded)

September 30, 2012	BlackRock Conservative Prepared Portfolio		BlackRock Moderate Prepared Portfolio		BlackRock Growth Prepared Portfolio		BlackRock Aggressive Growth Prepared Portfolio
Net Asset Value
Institutional
Net assets	$	1,691,561	$	2,140,962	$	2,414,746	$	1,753,859
Shares outstanding1		149,578		195,319		224,197		167,937
Net asset value	$	11.31	$	10.96	$	10.77	$	10.44
Investor A
Net assets	$	26,058,452	$	39,410,501	$	24,239,445	$	17,299,382
Shares outstanding1		2,323,696		3,616,193		2,275,647		1,676,867
Net asset value	$	11.21	$	10.90	$	10.65	$	10.32
Investor C
Net assets	$	28,169,447	$	39,804,945	$	27,761,088	$	14,704,466
Shares outstanding1		2,533,450		3,692,303		2,654,499		1,463,075
Net asset value	$	11.12	$	10.78	$	10.46	$	10.05
Class R
Net assets	$	7,910,555	$	14,880,627	$	8,131,382	$	5,500,821
Shares outstanding1		709,641		1,372,516		768,305		537,150
Net asset value	$	11.15	$	10.84	$	10.58	$	10.24

¹ Unlimited number of shares authorized, $0.001 par value.

See Notes to Financial Statements.

22     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Statements of Operations

Year Ended September 30, 2012	BlackRock Conservative Prepared Portfolio			BlackRock Moderate Prepared Portfolio			BlackRock Growth Prepared Portfolio			BlackRock Aggressive Growth Prepared Portfolio
Investment Income
Dividends – affiliated	$	338,098		$	674,155		$	573,384		$	309,490
Net investment income allocated from affiliated Master Portfolios:
Income		1,558,889			1,801,844			838,834			257,289
Expenses		(184,707	)		(239,620	)		(136,688	)		(61,029	)
Total income		1,712,280			2,236,379			1,275,530			505,750
Expenses
Service and distribution – class specific		346,625			534,998			376,891			209,733
Transfer agent – class specific		97,908			115,478			97,600			79,258
Professional		49,336			50,717			48,715			51,978
Registration		46,395			47,228			45,857			46,286
Administration		41,141			63,995			46,460			26,406
Printing		22,443			33,679			26,587			16,403
Officer and Trustees		19,957			20,539			20,043			19,596
Accounting		18,173			18,096			18,173			13,572
Administration – class specific		13,712			21,337			15,497			8,808
Custodian		12,756			12,756			12,774			12,740
Miscellaneous		11,788			12,378			12,209			11,633
Recoupment of past waived fees – class specific		45			441			–			–
Total expenses		680,279			931,642			720,806			496,413
Less administration fees waived		(41,141	)		(63,995	)		(46,460	)		(26,406	)
Less administration fees waived – class specific		(11,112	)		(12,696	)		(14,213	)		(8,808	)
Less transfer agent fees waived – class specific		(749	)		(487	)		(806	)		(1,062	)
Less transfer agent fees reimbursed – class specific		(30,328	)		(27,280	)		(35,493	)		(52,738	)
Less expenses reimbursed by Manager		(109,485	)		(118,619	)		(140,956	)		(140,539	)
Total expenses after fees waived and reimbursed		487,464			708,565			482,878			266,860
Net investment income		1,224,816			1,527,814			792,652			238,890
Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments – affiliated		223,374			313,934			181,132			62,970
Financial futures contracts		–			–			–			(119,792	)
Capital gain distributions received from affiliated investment companies		92,013			216,905			234,893			172,273
Allocation from affiliated Master Portfolios		1,010,552			1,602,255			1,131,981			685,810
		1,325,939			2,133,094			1,548,006			801,261
Net change in unrealized appreciation/depreciation on:
Investments – affiliated		2,825,447			6,665,299			6,425,447			4,531,188
Allocation from affiliated Master Portfolios		2,045,237			3,671,963			2,744,347			2,020,783
		4,870,684			10,337,262			9,169,794			6,551,971
Total realized and unrealized gain		6,196,623			12,470,356			10,717,800			7,353,232
Net Increase in Net Assets Resulting from Operations	$	7,421,439		$	13,998,170		$	11,510,452		$	7,592,122

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 23

Statements of Changes in Net Assets

	BlackRock Conservative Prepared Portfolio						BlackRock Moderate Prepared Portfolio
	Year Ended September 30,						Year Ended September 30,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011
Operations
Net investment income	$	1,224,816		$	1,102,997		$	1,527,814		$	1,377,749
Net realized gain		1,325,939			6,887,932			2,133,094			13,045,136
Net change in unrealized appreciation/depreciation		4,870,684			(7,454,615	)		10,337,262			(13,535,143	)
Net increase in net assets resulting from operations		7,421,439			536,314			13,998,170			887,742
Dividends and Distributions to Shareholders From
Net investment income:
Institutional		(48,233	)		(39,099	)		(46,588	)		(33,290	)
Investor A		(459,611	)		(316,068	)		(663,428	)		(501,960	)
Investor C		(451,246	)		(387,529	)		(607,964	)		(577,147	)
Class R		(170,917	)		(157,306	)		(282,030	)		(287,612	)
Net realized gain:
Institutional		(10,802	)		–			–			–
Investor A		(115,859	)		–			–			–
Investor C		(162,717	)		–			–			–
Class R		(48,482	)		–			–			–
Decrease in net assets resulting from dividends and distributions to shareholders		(1,467,867	)		(900,002	)		(1,600,010	)		(1,400,009	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		11,935,613			2,065,092			8,818,499			(8,348,368	)
Net Assets
Total increase (decrease) in net assets		17,889,185			1,701,404			21,216,659			(8,860,635	)
Beginning of year		45,940,830			44,239,426			75,020,376			83,881,011
End of year	$	63,830,015		$	45,940,830		$	96,237,035		$	75,020,376
Undistributed net investment income	$	1,331,810		$	1,096,017		$	1,566,815		$	1,485,694

See Notes to Financial Statements.

24     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Statements of Changes in Net Assets (concluded)

	BlackRock Growth Prepared Portfolio						BlackRock Aggressive Growth Prepared Portfolio
	Year Ended September 30,						Year Ended September 30,
Increase (Decrease) in Net Assets:	2012			2011			2012			2011
Operations
Net investment income	$	792,652		$	587,468		$	238,890		$	79,663
Net realized gain		1,548,006			8,762,957			801,261			4,515,807
Net change in unrealized appreciation/depreciation		9,169,794			(9,585,916	)		6,551,971			(5,543,925	)
Net increase (decrease) in net assets resulting from operations		11,510,452			(235,491	)		7,592,122			(948,455	)
Dividends to Shareholders From
Net investment income:
Institutional		(65,506	)		(50,080	)		(23,990	)		(18,061	)
Investor A		(368,380	)		(232,886	)		(103,123	)		(46,813	)
Investor C		(192,461	)		(151,402	)		–			–
Class R		(104,595	)		(93,122	)		(30,936	)		(30,558	)
Decrease in net assets resulting from dividends to shareholders		(730,942	)		(527,490	)		(158,049	)		(95,432	)
Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(6,610,001	)		(2,646,898	)		436,608			(1,766,075	)
Net Assets
Total increase (decrease) in net assets		4,169,509			(3,409,879	)		7,870,681			(2,809,962	)
Beginning of year		58,377,152			61,787,031			31,387,847			34,197,809
End of year	$	62,546,661		$	58,377,152		$	39,258,528		$	31,387,847
Undistributed net investment income	$	941,255		$	816,979		$	278,657		$	184,394

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 25

  Financial Highlights   BlackRock Conservative Prepared Portfolio

	Institutional															Investor A
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	10.14		$	10.19		$	9.50		$	9.24		$	10.74		$	10.06		$	10.12		$	9.45		$	9.20		$	10.72
Net investment income1		0.32			0.33			0.31			0.33			0.35			0.27			0.28			0.25			0.29			0.32
Net realized and unrealized gain (loss)		1.23			(0.10	)		0.70			0.24			(1.54	)		1.22			(0.10	)		0.71			0.24			(1.54	)
Net increase (decrease) from investment operations		1.55			0.23			1.01			0.57			(1.19	)		1.49			0.18			0.96			0.53			(1.22	)
Dividends and distributions from:
Net investment income		(0.31	)		(0.28	)		(0.32	)		(0.21	)		(0.23	)		(0.27	)		(0.24	)		(0.29	)		(0.18	)		(0.22	)
Net realized gain		(0.07	)		–			–			(0.10	)		(0.08	)		(0.07	)		–			–			(0.10	)		(0.08	)
Total dividends and distributions		(0.38	)		(0.28	)		(0.32	)		(0.31	)		(0.31	)		(0.34	)		(0.24	)		(0.29	)		(0.28	)		(0.30	)
Net asset value, end of year	$	11.31		$	10.14		$	10.19		$	9.50		$	9.24		$	11.21		$	10.06		$	10.12		$	9.45		$	9.20
Total Investment Return2
Based on net asset value		15.66%			2.15%	3		10.85%			6.85%			(11.43)%			15.19%			1.71%	3		10.31%			6.41%			(11.76)%
Ratios to Average Net Assets
Total expenses		0.84%	4		0.77%	5		0.53%	6		0.64%	7		0.68%	8		1.15%	4		1.10%	5		0.91%	6		1.01%	7		1.10%	8
Total expenses excluding recoupment of past waived fees		0.84%	4		0.77%	5		0.53%	6		0.64%	7		0.68%	8		1.15%	4		1.10%	5		0.91%	6		1.01%	7		1.10%	8
Total expenses after fees waived, reimbursed and paid indirectly		0.47%	4		0.40%	5		0.13%	6		0.13%	7		0.13%	8		0.87%	4		0.78%	5		0.53%	6		0.52%	7		0.51%	8
Net investment income		3.00%	4		3.11%	5		3.14%	6		3.94%	7		3.38%	8		2.56%	4		2.67%	5		2.62%	6		3.45%	7		3.08%	8
Supplemental Data
Net assets, end of year (000)	$	1,692		$	1,399		$	1,423		$	1,352		$	835		$	26,058		$	14,922		$	12,279		$	9,657		$	7,416
Portfolio turnover		48%			144%			49%			80%			46%			48%			144%			49%			80%			46%

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes payment received from affiliate, which impacted the Fund’s total return. Not including the payment from affiliate, the Fund’s total return would have been 1.65% and 1.41% for the Institutional and Investor A Shares, respectively.

⁴  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.26%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁵  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.42%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁶  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.81%

⁷  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.65%.

⁸  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds.

See Notes to Financial Statements.

26     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Financial Highlights (concluded)   BlackRock Conservative Prepared Portfolio

	Investor C															Class R
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.97		$	10.03		$	9.37		$	9.11		$	10.66		$	10.00		$	10.05		$	9.40		$	9.16		$	10.70
Net investment income1		0.20			0.21			0.19			0.22			0.23			0.25			0.26			0.23			0.27			0.27
Net realized and unrealized gain (loss)		1.21			(0.10	)		0.70			0.25			(1.52	)		1.21			(0.09	)		0.69			0.24			(1.52	)
Net increase (decrease) from investment operations		1.41			0.11			0.89			0.47			(1.29	)		1.46			0.17			0.92			0.51			(1.25	)
Dividends and distributions from:
Net investment income		(0.19	)		(0.17	)		(0.23	)		(0.11	)		(0.18	)		(0.24	)		(0.22	)		(0.27	)		(0.17	)		(0.21	)
Net realized gain		(0.07	)		–			–			(0.10	)		(0.08	)		(0.07	)		–			–			(0.10	)		(0.08	)
Total dividends and distributions		(0.26	)		(0.17	)		(0.23	)		(0.21	)		(0.26	)		(0.31	)		(0.22	)		(0.27	)		(0.27	)		(0.29	)
Net asset value, end of year	$	11.12		$	9.97		$	10.03		$	9.37		$	9.11		$	11.15		$	10.00		$	10.05		$	9.40		$	9.16
Total Investment Return2
Based on net asset value		14.40%			0.99%	3		9.61%			5.64%			(12.48)%			14.94%			1.62%	3		10.02%			6.17%			(12.04)%
Ratios to Average Net Assets
Total expenses		1.95%	4		1.90%	5		1.69%	6		1.80%	7		1.70%	8		1.56%	4		1.51%	5		1.33%	6		1.50%	7		1.33%	8
Total expenses after fees waived, reimbursed and paid indirectly		1.59%	4		1.52%	5		1.25%	6		1.25%	7		1.23%	8		1.08%	4		1.01%	5		0.74%	6		0.74%	7		0.73%	8
Net investment income		1.89%	4		1.97%	5		1.93%	6		2.69%	7		2.26%	8		2.40%	4		2.47%	5		2.36%	6		3.30%	7		2.66%	8
Supplemental Data
Net assets, end of year (000)	$	28,169		$	22,824		$	23,786		$	20,403		$	17,299		$	7,911		$	6,796		$	6,751		$	4,432		$	3,265
Portfolio turnover		48%			144%			49%			80%			46%			48%			144%			49%			80%			46%

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes payment received from affiliate, which impacted the Fund’s total return. Not including the payment from affiliate, the Fund’s total return would have been 0.59% and 1.21% for the Investor C and Class R Shares, respectively.

⁴  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.26%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁵  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.42%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁶  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.81%

⁷  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.65%.

⁸  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 27

  Financial Highlights   BlackRock Moderate Prepared Portfolio

		Institutional															Investor A
		Year Ended September 30,															Year Ended September 30,
		2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.48		$	9.62		$	8.94		$	9.00		$	11.02		$	9.43		$	9.56		$	8.90		$	8.96		$	11.00
Net investment income1		0.26			0.24			0.18			0.22			0.24			0.22			0.20			0.18			0.18			0.22
Net realized and unrealized gain (loss)		1.50			(0.14	)		0.71			0.06			(1.90	)		1.49			(0.13	)		0.65			0.08			(1.91	)
Net increase (decrease) from investment operations		1.76			0.10			0.89			0.28			(1.66	)		1.71			0.07			0.83			0.26			(1.69	)
Dividends and distributions from:
Net investment income		(0.28	)		(0.24	)		(0.21	)		(0.15	)		(0.22	)		(0.24	)		(0.20	)		(0.17	)		(0.13	)		(0.21	)
Net realized gain		–			–			–			(0.19	)		(0.14	)		–			–			–			(0.19	)		(0.14	)
Total dividends and distributions		(0.28	)		(0.24	)		(0.21	)		(0.34	)		(0.36	)		(0.24	)		(0.20	)		(0.17	)		(0.32	)		(0.35	)
Net asset value, end of year	$	10.96		$	9.48		$	9.62		$	8.94		$	9.00		$	10.90		$	9.43		$	9.56		$	8.90		$	8.96
Total Investment Return2
Based on net asset value		18.90%			0.85%	3		10.02%			4.04%			(15.53)%			18.45%			0.59%	3		9.47%			3.71%			(15.86)%
Ratios to Average Net Assets
Total expenses		0.70%	4		0.64%	5		0.47%	6		0.49%	7		0.50%	8		0.96%	4		0.89%	5		0.68%	6		0.76%	7		0.78%	8
Total expenses excluding recoupment of past waived fees		0.70%	4		0.64%	5		0.47%	6		0.49%	7		0.50%	8		0.96%	4		0.89%	5		0.68%	6		0.75%	7		0.78%	8
Total expenses after fees waived, reimbursed and paid indirectly		0.37%	4		0.31%	5		0.09%	6		0.09%	7		0.09%	8		0.74%	4		0.69%	5		0.48%	6		0.48%	7		0.48%	8
Net investment income		2.49%	4		2.34%	5		1.92%	6		2.85%	7		2.36%	8		2.12%	4		1.95%	5		1.91%	6		2.36%	7		2.16%	8
Supplemental Data
Net assets, end of year (000)	$	2,141		$	1,336		$	1,445		$	1,327		$	1,501		$	39,411		$	24,336		$	24,668		$	22,657		$	17,506
Portfolio turnover		57%			147%			50%			62%			34%			57%			147%			50%			62%			34%

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes payment received from affiliate, which impacted the Fund’s total return. Not including the payment from affiliate, the Fund’s total return would have been 0.53% and 0.27% for the Institutional and Investor A Shares, respectively.

⁴  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.37%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁵  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.50%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁶  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.84%

⁷  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.75%.

⁸  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds.

See Notes to Financial Statements.

28     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Financial Highlights (concluded)   BlackRock Moderate Prepared Portfolio

		Investor C															Class R
		Year Ended September 30,															Year Ended September 30,
		2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.32		$	9.46		$	8.81		$	8.88		$	10.93		$	9.38		$	9.51		$	8.86		$	8.93		$	10.97
Net investment income1		0.14			0.12			0.11			0.13			0.14			0.21			0.18			0.17			0.17			0.20
Net realized and unrealized gain (loss)		1.48			(0.13	)		0.66			0.06			(1.89	)		1.47			(0.12	)		0.65			0.08			(1.89	)
Net increase (decrease) from investment operations		1.62			(0.01	)		0.77			0.19			(1.75	)		1.68			0.06			0.82			0.25			(1.69	)
Dividends and distributions from:
Net investment income		(0.16	)		(0.13	)		(0.12	)		(0.07	)		(0.16	)		(0.22	)		(0.19	)		(0.17	)		(0.13	)		(0.21	)
Net realized gain		–			–			–			(0.19	)		(0.14	)		–			–			–			(0.19	)		(0.14	)
Total dividends and distributions		(0.16	)		(0.13	)		(0.12	)		(0.26	)		(0.30	)		(0.22	)		(0.19	)		(0.17	)		(0.32	)		(0.35	)
Net asset value, end of year	$	10.78		$	9.32		$	9.46		$	8.81		$	8.88		$	10.84		$	9.38		$	9.51		$	8.86		$	8.93
Total Investment Return2
Based on net asset value		17.51%			(0.23)%	3		8.76%			2.83%			(16.42)%			18.16%			0.54%	3		9.34%			3.63%			(15.93)%
Ratios to Average Net Assets
Total expenses		1.77%	4		1.68%	5		1.48%	6		1.57%	7		1.49%	8		1.26%	4		1.19%	5		1.01%	6		1.10%	7		1.05%	8
Total expenses excluding recoupment of past waived fees		1.77%	4		1.68%	5		1.48%	6		1.57%	7		1.49%	8		1.26%	4		1.19%	5		1.01%	6		1.10%	7		1.05%	8
Total expenses after fees waived, reimbursed and paid indirectly		1.52%	4		1.46%	5		1.24%	6		1.24%	7		1.20%	8		0.87%	4		0.81%	5		0.59%	6		0.59%	7		0.59%	8
Net investment income		1.41%	4		1.22%	5		1.17%	6		1.68%	7		1.41%	8		2.04%	4		1.81%	5		1.84%	6		2.20%	7		1.95%	8
Supplemental Data
Net assets, end of year (000)	$	39,805		$	36,963		$	44,195		$	37,646		$	37,472		$	14,881		$	12,385		$	13,573		$	10,028		$	6,439
Portfolio turnover		57%			147%			50%			62%			34%			57%			147%			50%			62%			34%

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes payment received from affiliate, which impacted the Fund’s total return. Not including the payment from affiliate, the Fund’s total return would have been (0.55)% and 0.21% for the Investor C and Class R Shares, respectively.

⁴  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.37%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁵  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.50%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁶  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.84%

⁷  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.75%.

⁸  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 29

  Financial Highlights   BlackRock Growth Prepared Portfolio

	Institutional															Investor A
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	9.04		$	9.19		$	8.53		$	8.74		$	11.32		$	8.95		$	9.10		$	8.45		$	8.70		$	11.29
Net investment income1		0.22			0.16			0.15			0.13			0.16			0.16			0.12			0.11			0.09			0.11
Net realized and unrealized gain (loss)		1.70			(0.17	)		0.62			(0.10	)		(2.23	)		1.70			(0.16	)		0.62			(0.10	)		(2.20	)
Net increase (decrease) from investment operations		1.92			(0.01	)		0.77			0.03			(2.07	)		1.86			(0.04	)		0.73			(0.01	)		(2.09	)
Dividends and distributions from:
Net investment income		(0.19	)		(0.14	)		(0.11	)		–			(0.27	)		(0.16	)		(0.11	)		(0.08	)		–			(0.25	)
Net realized gain		–			–			–			(0.24	)		(0.24	)		–			–			–			(0.24	)		(0.25	)
Total dividends and distributions		(0.19	)		(0.14	)		(0.11	)		(0.24	)		(0.51	)		(0.16	)		(0.11	)		(0.08	)		(0.24	)		(0.50	)
Net asset value, end of year	$	10.77		$	9.04		$	9.19		$	8.53		$	8.74		$	10.65		$	8.95		$	9.10		$	8.45		$	8.70
Total Investment Return2
Based on net asset value		21.49%			(0.21)%	3		9.00%			1.01%			(19.08)%			20.94%			(0.54)%	3		8.72%			0.55%			(19.36)%
Ratios to Average Net Assets
Total expenses		0.75%	4		0.61%	5		0.47%	6		0.50%	7		0.41%	8		1.00%	4		0.92%	5		0.75%	6		0.80%	7		0.72%	8
Total expenses excluding recoupment of past waived fees		0.75%	4		0.61%	5		0.47%	6		0.50%	7		0.41%	8		1.00%	4		0.90%	5		0.74%	6		0.79%	7		0.72%	8
Total expenses after fees waived, reimbursed and paid indirectly		0.29%	4		0.24%	5		0.07%	6		0.07%	7		0.07%	8		0.67%	4		0.61%	5		0.45%	6		0.45%	7		0.43%	8
Net investment income		2.20%	4		1.56%	5		1.74%	6		1.77%	7		1.52%	8		1.59%	4		1.21%	5		1.25%	6		1.25%	7		1.12%	8
Supplemental Data
Net assets, end of year (000)	$	2,415		$	3,178		$	3,321		$	4,148		$	7,703		$	24,239		$	20,879		$	18,737		$	17,136		$	16,927
Portfolio turnover		46%			150%			46%			55%			36%			46%			150%			46%			55%			36%

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes payment received from affiliate, which impacted the Fund’s total return. Not including the payment from affiliate, the Fund’s total return would have been (0.43)% and (0.76)% for the Institutional and Investor A Shares, respectively.

⁴  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.49%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁵  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.59%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁶  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.87%

⁷  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.85%.

⁸  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds.

See Notes to Financial Statements.

30     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Financial Highlights (concluded)   BlackRock Growth Prepared Portfolio

	Investor C															Class R
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	8.77		$	8.92		$	8.31		$	8.62		$	11.23		$	8.88		$	9.03		$	8.41		$	8.67		$	11.27
Net investment income1		0.09			0.05			0.05			0.04			0.05			0.14			0.10			0.08			0.06			0.08
Net realized and unrealized gain (loss)		1.67			(0.16	)		0.62			(0.11	)		(2.21	)		1.69			(0.15	)		0.62			(0.08	)		(2.19	)
Net increase (decrease) from investment operations		1.76			(0.11	)		0.67			(0.07	)		(2.16	)		1.83			(0.05	)		0.70			(0.02	)		(2.11	)
Dividends and distributions from:
Net investment income		(0.07	)		(0.04	)		(0.06	)		–			(0.20	)		(0.13	)		(0.10	)		(0.08	)		–			(0.25	)
Net realized gain		–			–			–			(0.24	)		(0.25	)		–			–			–			(0.24	)		(0.24	)
Total dividends and distributions		(0.07	)		(0.04	)		(0.06	)		(0.24	)		(0.45	)		(0.13	)		(0.10	)		(0.08	)		(0.24	)		(0.49	)
Net asset value, end of year	$	10.46		$	8.77		$	8.92		$	8.31		$	8.62		$	10.58		$	8.88		$	9.03		$	8.41		$	8.67
Total Investment Return2
Based on net asset value		20.12%			(1.24)%	3		7.92%			(0.16)%			(19.99)%			20.73%			(0.64)%	3		8.36%			0.43%			(19.59)%
Ratios to Average Net Assets
Total expenses		1.80%	4		1.70%	5		1.57%	6		1.65%	7		1.48%	8		1.29%	4		1.18%	5		1.06%	6		1.19%	7		1.02%	8
Total expenses after fees waived, reimbursed and paid indirectly		1.39%	4		1.34%	5		1.17%	6		1.17%	7		1.17%	8		0.84%	4		0.79%	5		0.62%	6		0.62%	7		0.62%	8
Net investment income		0.89%	4		0.52%	5		0.55%	6		0.57%	7		0.49%	8		1.44%	4		1.03%	5		0.92%	6		0.87%	7		0.79%	8
Supplemental Data
Net assets, end of year (000)	$	27,761		$	26,464		$	31,253		$	29,994		$	32,689		$	8,131		$	7,856		$	8,476		$	5,297		$	3,277
Portfolio turnover		46%			150%			46%			55%			36%			46%			150%			46%			55%			36%

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes payment received from affiliate, which impacted the Fund’s total return. Not including the payment from affiliate, the Fund’s total return would have been (1.57)% and (0.86)% for the Investor C and Class R Shares, respectively.

⁴  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.49%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁵  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.59%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁶  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.87%

⁷  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.85%.

⁸  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 31

  Financial Highlights   BlackRock Aggressive Growth Prepared Portfolio

	Institutional															Investor A
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	8.45		$	8.74		$	8.06		$	8.57		$	11.55		$	8.35		$	8.65		$	8.00		$	8.53		$	11.52
Net investment income1		0.14			0.09			0.07			0.05			0.07			0.09			0.05			0.07			0.01			0.03
Net realized and unrealized gain (loss)		1.96			(0.30	)		0.61			(0.31	)		(2.59	)		1.96			(0.30	)		0.58			(0.29	)		(2.58	)
Net increase (decrease) from investment operations		2.10			(0.21	)		0.68			(0.26	)		(2.52	)		2.05			(0.25	)		0.65			(0.28	)		(2.55	)
Dividends and distributions from:
Net investment income		(0.11	)		(0.08	)		–			–			(0.15	)		(0.08	)		(0.05	)		–			–			(0.14	)
Net realized gain		–			–			–			(0.25	)		(0.31	)		–			–			–			(0.25	)		(0.30	)
Total dividends and distributions		(0.11	)		(0.08	)		–			(0.25	)		(0.46	)		(0.08	)		(0.05	)		–			(0.25	)		(0.44	)
Net asset value, end of year	$	10.44		$	8.45		$	8.74		$	8.06		$	8.57		$	10.32		$	8.35		$	8.65		$	8.00		$	8.53
Total Investment Return2
Based on net asset value		25.05%			(2.55)%	3		8.44%			(2.22)%			(22.69)%			24.72%			(3.00)%	3		8.13%			(2.48)%			(22.96)%
Ratios to Average Net Assets
Total expenses		0.92%	4		0.77%	5		0.72%	6		0.79%	7		0.65%	8		1.18%	4		1.07%	5		1.00%	6		1.15%	7		0.99%	8
Total expenses after fees waived, reimbursed and paid indirectly		0.26%	4		0.21%	5		0.09%	6		0.09%	7		0.09%	8		0.60%	4		0.55%	5		0.43%	6		0.42%	7		0.43%	8
Net investment income		1.41%	4		0.91%	5		0.79%	6		0.69%	7		0.71%	8		0.96%	4		0.54%	5		0.79%	6		0.20%	7		0.26%	8
Supplemental Data
Net assets, end of year (000)	$	1,754		$	2,082		$	2,112		$	2,566		$	3,484		$	17,299		$	10,287		$	8,512		$	9,328		$	6,894
Portfolio turnover		61%			117%			46%			55%			20%			61%			117%			46%			55%			20%

¹  Based on average shares outstanding.

²  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

³  Includes payment received from affiliate, which impacted the Fund’s total return. Not including the payment from affiliate, the Fund’s total return would have been (2.67)% and (3.11)% for the Institutional and Investor A Shares, respectively.

⁴  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.57%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁵  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.67%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁶  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.89%

⁷  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.94%.

⁸  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds.

See Notes to Financial Statements.

32     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

  Financial Highlights (concluded)   BlackRock Aggressive Growth Prepared Portfolio

	Investor C															Class R
	Year Ended September 30,															Year Ended September 30,
	2012			2011			2010			2009			2008			2012			2011			2010			2009			2008
Per Share Operating Performance
Net asset value, beginning of year	$	8.12		$	8.43		$	7.86		$	8.45		$	11.45		$	8.29		$	8.58		$	7.95		$	8.50		$	11.49
Net investment income (loss)1		0.03			(0.01	)		(0.01	)		(0.03	)		(0.05	)		0.08			0.04			0.03			0.00	2		(0.01	)
Net realized and unrealized gain (loss)		1.90			(0.30	)		0.58			(0.31	)		(2.55	)		1.92			(0.29	)		0.60			(0.30	)		(2.54	)
Net increase (decrease) from investment operations		1.93			(0.31	)		0.57			(0.34	)		(2.60	)		2.00			(0.25	)		0.63			(0.30	)		(2.55	)
Dividends and distributions from:
Net investment income		–			–			–			–			(0.10	)		(0.05	)		(0.04	)		–			–			(0.13	)
Net realized gain		–			–			–			(0.25	)		(0.30	)		–			–			–			(0.25	)		(0.31	)
Total dividends and distributions		–			–			–			(0.25	)		(0.40	)		(0.05	)		(0.04	)		–			(0.25	)		(0.44	)
Net asset value, end of year	$	10.05		$	8.12		$	8.43		$	7.86		$	8.45		$	10.24		$	8.29		$	8.58		$	7.95		$	8.50
Total Investment Return3
Based on net asset value		23.77%			(3.68)%	4		7.25%			(3.24)%			(23.48)%			24.26%			(2.93)%	4		7.92%			(2.73)%			(23.13)%
Ratios to Average Net Assets
Total expenses		2.04%	5		1.91%	6		1.86%	7		1.99%	8		1.72%	9		1.50%	5		1.39%	6		1.35%	7		1.51%	8		1.31%	9
Total expenses after fees waived, reimbursed and paid indirectly		1.35%	5		1.30%	6		1.18%	7		1.18%	8		1.18%	9		0.76%	5		0.71%	6		0.59%	7		0.59%	8		0.59%	9
Net investment income (loss)		0.28%	5		(0.14%)	6		(0.10)%	7		(0.46)%	8		(0.47)%	9		0.87%	5		0.41%	6		0.41%	7		0.02%	8		(0.13)%	9
Supplemental Data
Net assets, end of year (000)	$	14,704		$	14,245		$	18,051		$	16,047		$	16,762		$	5,501		$	4,774		$	5,523		$	3,073		$	1,990
Portfolio turnover		61%			117%			46%			55%			20%			61%			117%			46%			55%			20%

¹  Based on average shares outstanding.

²  Less than $0.01 per share.

³  Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions.

⁴  Includes payment received from affiliate, which impacted the Fund’s total return. Not including the payment from affiliate, the Fund’s total return would have been (3.80)% and (3.16)% for the Investor C and Class R Shares, respectively.

⁵  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.57%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁶  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.67%, although the ratio does include the Fund’s share of the Master Portfolios’ allocated expenses and/or net investment income.

⁷  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.89%

⁸  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.94%.

⁹  Ratios do not include expenses incurred indirectly as a result of investments in underlying funds.

See Notes to Financial Statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 33

Notes to Financial Statements

1. Organization and Significant Accounting Policies:

BlackRock Funds II (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Massachusetts business trust. BlackRock Conservative Prepared Portfolio (“Conservative Prepared”), BlackRock Moderate Prepared Portfolio (“Moderate Prepared”), BlackRock Growth Prepared Portfolio (“Growth Prepared”) and BlackRock Aggressive Growth Prepared Portfolio (“Aggressive Growth Prepared”) (collectively, the “Funds” or individually, a “Fund”) are each a series of the Trust. The Funds are classified as non-diversified. The Funds generally will invest in other registered investment companies (each an “Underlying Fund” and collectively the “Underlying Funds”) that are managed by subsidiaries of BlackRock, Inc. (“BlackRock”) and its affiliates and affiliates of the Funds. The Funds may also invest in Master Portfolios that are managed by subsidiaries of BlackRock (the “Master Portfolios”). As of September 30, 2012, Conservative Prepared’s and Moderate Prepared’s investment in the Master Total Return Portfolio of Master Bond LLC (the “Master Total Return Portfolio”) was 55.6% of the Conservative Prepared’s net assets and 35.7% of the Moderate Prepared’s net assets. The financial statements of the Master Total Return Portfolio, including the Schedule of Investments, should be read in conjunction with Conservative Prepared’s and Moderate Prepared’s financial statements. The Master Total Return Portfolio’s financial statements, included in filings under Master Bond LLC, are available, without charge, on the SEC’s website at http://www.sec.gov. By owning shares of the Underlying Funds and investing in the Master Portfolios, each of the Funds indirectly invest, to varying degrees, in securities of US and non-US companies, including small and medium sized companies, and in fixed income securities. Equity funds may also include funds that invest in real estate related and other similar securities. Fixed income funds may include funds that invest in domestic and non-US bonds, US Government securities, high yield (or junk) bonds, and cash or money market instruments. In addition, the Underlying Funds and Master Portfolios may invest in derivatives. The Funds’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund offers multiple classes of shares. Institutional Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with a front-end sales charge. Investor C Shares may be subject to a CDSC. Class R Shares are sold without a sales charge and only to certain retirement and other similar plans. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A, Investor C and Class R Shares bear certain expenses related to the shareholder servicing of such shares, and 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.

The following is a summary of significant accounting policies followed by the Funds:

Valuation: US GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds fair value their financial instruments at market value. The BlackRock Global Valuation Methodologies Committee is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Funds for all financial instruments. The market value of the Funds’ investments in the Underlying Funds is based on the published NAV of each Underlying Fund computed as of the close of regular trading on the New York Stock Exchange (“NYSE”) on days when the NYSE is open. The Funds record their proportionate investment in the Master Portfolios at fair value which is ordinarily based upon their pro rata ownership in the net assets of the Master Portfolios. Financial futures contracts traded on exchanges are valued at their last sale price.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend dates. Interest income is recognized on the accrual basis. The Funds record their proportionate share of the Master Portfolios’ income, expenses and realized and unrealized gains and losses. Income and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets. In addition to the direct expenses borne by the shareholders of the Funds, the shareholders also bear indirectly a proportionate share of the expenses of the Underlying Funds in which the Funds invest. Capital gain distributions from the Underlying Funds are recorded as realized gains.

Dividends and Distributions: Dividends and distributions paid by the Funds are recorded on the ex-dividend dates. The portion of distributions that exceeds a Fund’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a nontaxable return of capital. Distributions in excess of a Fund’s taxable income and net capital gains, but not in excess of a Fund’s earnings and profits, will be taxable to shareholders as ordinary income and will not constitute a non-taxable return of capital. Capital losses carried forward from years beginning before 2011 do not reduce earnings and profits, even if such carried forward losses offset current year realized gains. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.

Income Taxes: It is the Funds’ policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. Therefore, no federal income tax provision is required.

34     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

Each Fund files US federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Funds’ US federal tax returns remains open for each of the four years ended September 30, 2012. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.

Recent Accounting Standard: In December 2011, the Financial Accounting Standards Board issued guidance that will expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Funds’ financial statement disclosures.

Other: Expenses directly related to a Fund or its classes are charged to that Fund or class. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Funds and other shared expenses pro rated to the Funds are allocated daily to each class based on its relative net assets or other appropriate methods.

The Funds have an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statements of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.

2. Derivative Financial Instruments:

Aggressive Growth Prepared engages in various portfolio investment strategies using derivative contracts both to increase the returns of Aggressive Growth Prepared and/or to economically hedge, or protect, its exposure to certain risks such as equity risk. These contracts may be transacted on an exchange or OTC.

Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. Counterparty risk related to exchange-traded financial futures contracts is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.

Financial Futures Contracts: Aggressive Growth Prepared purchases or sells financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk). Financial futures contracts are agreements between the Fund and counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized appreciation or depreciation. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

Derivative Financial Instruments Categorized by Risk Exposure:

The Effect of Derivative Financial Instruments in the Statements of Operations Year Ended September 30, 2012
Net Realized Gain (Loss) From
	Aggressive Growth Prepared
Equity contracts: Financial futures contracts		$(119,792)
For the year ended September 30, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:
	Aggressive Growth Prepared
Financial futures contracts: Average number of contracts purchased		6
Average notional value of contracts purchased		$438,500

3. Investment Advisory Agreement and Other Transactions with Affiliates:

The PNC Financial Services Group, Inc. (“PNC”) is the largest stockholder and an affiliate, for 1940 Act purposes, of BlackRock, Inc. (“BlackRock”).

The Trust, on behalf of the Funds, entered into an Investment Advisory Agreement with the Manager, the Funds’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager does not receive any management fees from the Funds for its investment advisory services.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 35

Notes to Financial Statements (continued)

The Trust, on behalf of the Funds, entered into a Distribution Agreement and Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the Funds pay BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the shares of each Fund as follows:

	Service Fee	Distribution Fee
Investor A	0.25%	–
Investor C	0.25%	0.75%
Class R	0.25%	0.25%

Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing and distribution services to each Fund. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to Investor A, Investor C and Class R shareholders.

For the year ended September 30, 2012, the following table shows the class specific service and distribution fees borne directly by each class of each Fund:

	Investor A	Investor C	Class R	Total
Conservative Prepared	$49,823	$259,256	$37,546	$346,625
Moderate Prepared	$77,324	$390,050	$67,624	$534,998
Growth Prepared	$58,702	$277,661	$40,528	$376,891
Aggressive Growth Prepared	$32,220	$151,289	$26,224	$209,733

Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Funds with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the year ended September 30, 2012, Aggressive Growth Prepared paid $17 to affiliates in return for these services, which are included in transfer agent – class specific in the Statements of Operations.

The Manager maintains a call center, which is responsible for providing certain shareholder services to the Funds, such as responding to shareholder inquiries and processing transactions based upon instructions from shareholders with respect to the subscription and redemption of Fund shares. For the year ended September 30, 2012, each Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent – class specific in the Statements of Operations:

	Institutional	Investor A	Investor C	Class R	Total
Conservative Prepared	$23	$626	$493	$  82	$1,224
Moderate Prepared	$26	$518	$391	$117	$1,052
Growth Prepared	$53	$582	$436	$  68	$1,139
Aggressive Growth Prepared	$59	$602	$350	$  51	$1,062

For the year ended September 30, 2012, the following table shows the class specific transfer agent fees borne directly by each class of each Fund:

	Institutional	Investor A	Investor C	Class R	Total
Conservative Prepared	$1,021	$27,984	$47,283	$21,620	$  97,908
Moderate Prepared	$1,562	$30,127	$63,222	$20,567	$115,478
Growth Prepared	$3,279	$30,460	$49,913	$13,948	$  97,600
Aggressive Growth Prepared	$2,988	$22,091	$41,685	$12,494	$  79,258

BNY Mellon Investment Servicing (US) Inc. (“BNYMIS”) and the Manager act as co-administrators for the Funds. For these services, the co-administrators receive a combined administration fee computed daily and payable monthly, based on a percentage of the average daily net assets of each Fund. The combined administration fee is paid at the following annual rates: 0.075% of the first $500 million, 0.065% of the next $500 million and 0.055% of the average daily net assets in excess of $1 billion. In addition, each of the share classes is charged an administration fee based on the following percentages of average daily net assets of each respective class: 0.025% of the first $500 million, 0.015% of the next $500 million and 0.005% of the average daily net assets in excess of $1 billion. In addition, BNYMIS and the Manager may have, at their discretion, voluntarily waived all or any portion of their administration fees for a Fund or a share class which are included in administration fees waived and administration fees waived – class specific in the Statements of Operations. For the year ended September 30, 2012, the following table shows the administration fees – class specific borne directly by each class of each Fund:

	Institutional	Investor A	Investor C	Class R	Total
Conservative Prepared	$363	$4,984	$6,487	$1,878	$13,712
Moderate Prepared	$449	$7,737	$9,767	$3,384	$21,337
Growth Prepared	$639	$5,877	$6,953	$2,028	$15,497
Aggressive Growth Prepared	$480	$3,225	$3,789	$1,314	$  8,808

The Manager contractually agreed to waive and/or reimburse fees or expenses, excluding interest expense, dividend expense, acquired fund fees and expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Funds’ business, in order to limit expenses. The expense limitations as a percentage of average daily net assets are as follows:

	Institutional	Investor A	Investor C	Class R
Conservative Prepared	1.13%	1.53%	2.25%	1.74%
Moderate Prepared	1.09%	1.51%	2.24%	1.59%
Growth Prepared	1.07%	1.45%	2.17%	1.62%
Aggressive Growth Prepared	1.09%	1.43%	2.18%	1.59%

This agreement is perpetual and has no effective termination date unless approved by the Board, including a majority of the Independent Trustees.

36     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

In addition, the Manager has also contractually agreed to waive and/or reimburse fees or expenses, excluding interest expense, dividend expense, acquired fund fees and expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Funds’ business, in order to limit expenses. The expense limitations as a percentage of average daily net assets are as follows:

	Institutional		Investor A		Investor C		Class R
Conservative Prepared		0.13%		0.53%		1.25%		0.74%
Moderate Prepared		0.09%		0.51%		1.24%		0.59%
Growth Prepared		0.07%		0.45%		1.17%		0.62%
Aggressive Growth Prepared		0.09%		0.43%		1.18%		0.59%

The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to February 1, 2013 unless approved by the Board, including a majority of the Independent Trustees.

These amounts are included in administration fees waived and shown as administration fees waived – class specific, transfer agent fees waived – class specific, transfer agent fees reimbursed – class specific and expenses reimbursed by Manager, respectively, in the Statements of Operations. For the year ended September 30, 2012, the amounts included in administration fees waived were as follows:

Conservative Prepared	$	41,141
Moderate Prepared	$	63,995
Growth Prepared	$	46,460
Aggressive Growth Prepared	$	26,406

Class specific expense waivers or reimbursements are as follows:
Administration Fees Waived
	Institutional	Investor A	Investor C	Class R	Total
Conservative Prepared	$363	$2,384	$6,487	$1,878	$11,112
Moderate Prepared	$449	–	$8,863	$3,384	$12,696
Growth Prepared	$639	$4,593	$6,953	$2,028	$14,213
Aggressive Growth Prepared	$480	$3,225	$3,789	$1,314	$  8,808
Transfer Agent Fees Waived
	Institutional	Investor A	Investor C	Class R	Total
Conservative Prepared	$24	$150	$493	$  82	$   749
Moderate Prepared	$27	–	$343	$117	$   487
Growth Prepared	$53	$249	$436	$  68	$   806
Aggressive Growth Prepared	$59	$602	$350	$  51	$1,062
Transfer Agent Fees Reimbursed
	Institutional	Investor A	Investor C	Class R	Total
Conservative Prepared	$   996	$   519	$15,552	$13,261	$30,328
Moderate Prepared	$1,532	–	$  5,363	$20,385	$27,280
Growth Prepared	$3,224	$   884	$21,575	$  9,810	$35,493
Aggressive Growth Prepared	$2,925	$9,874	$27,549	$12,390	$52,738

If during a Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver or reimbursement from the Manager, are less than the expense limit for that share class, the Manager is entitled to be reimbursed by such share

class up to the lesser of (a) the amount of fees waived or expenses reimbursed during those prior two fiscal years under the agreement and (b) the amount by which the expense limit for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that: (1) the Fund of which the share class is a part has more than $50 million in assets for the fiscal year and (2) the Manager or an affiliate continues to serve as the Fund’s investment advisor or administrator. In the event the expense limit for a share class is changed subsequent to a fiscal year in which the Manager becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse the Manager shall be calculated by reference to the expense limit for that share class in effect at the time the Manager became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.

For the year ended September 30, 2012, the Manager recouped the following waivers previously recorded by the Funds:

	Conservative Prepared	Moderate Prepared
Investor A	$45	–
Investor C	–	$441

On September 30, 2012, the amounts subject to possible future recoupment under the expense limitation agreement are as follows:

	Expiring September 30,
	2013		2014
Conservative Prepared		$186,261		$192,815
Moderate Prepared		$215,823		$223,077
Growth Prepared		$235,190		$237,928
Aggressive Growth Prepared		$223,035		$229,553

The following waivers previously recorded by the Funds, which were subject to recoupment by the Manager, expired on September 30, 2012:

Conservative Prepared	$	180,956
Moderate Prepared	$	213,733
Growth Prepared	$	221,728
Aggressive Growth Prepared	$	220,349

For the year ended September 30, 2012, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each Fund’s Investor A Shares as follows:

Conservative Prepared	$	8,690
Moderate Prepared	$	4,005
Growth Prepared	$	2,369
Aggressive Growth Prepared	$	1,572

For the year ended September 30, 2012, affiliates received CDSCs as follows:

	Investor A	Investor C
Conservative Prepared	$213	$2,094
Moderate Prepared	–	$   951
Growth Prepared	–	$1,110
Aggressive Growth Prepared	–	$1,774

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 37

Notes to Financial Statements (continued)

Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Trust’s Chief Compliance Officer.

4. Investments:

Purchases and sales of investments, excluding short-term securities, for the year ended September 30, 2012, were as follows:

	Purchases	Sales
Conservative Prepared	$34,767,551	$25,900,521
Moderate Prepared	$52,400,980	$48,562,239
Growth Prepared	$28,019,160	$36,546,926
Aggressive Growth Prepared	$21,278,667	$21,396,766

5. Income Tax Information:

US GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. The following permanent differences as of September 30, 2012 attributable to foreign currency transactions and distributions received from a regulated investment company were reclassified to the following accounts:

	Conservative Prepared	Moderate Prepared	Growth Prepared	Aggressive Growth Prepared
Paid-in capital	–	–	$        12	$          3
Undistributed net investment income	$ 140,984	$ 153,317	$ 62,566	$ 13,422
Accumulated net realized gain (loss)	$(140,984)	$(153,317)	$(62,578)	$(13,425)

The tax character of distributions paid during the fiscal years ended September 30, 2012 and September 30, 2011 was as follows:

	Conservative Prepared	Moderate Prepared	Growth Prepared	Aggressive Growth Prepared
Ordinary income
9/30/12	$1,130,007	$1,600,010	$730,942	$158,049
9/30/11	$   900,002	$1,400,009	$527,490	$  95,432
Long-term capital gains
9/30/12	337,860	–	–	–
Total distributions
9/30/12	$1,467,867	$1,600,010	$730,942	$158,049
9/30/11	$   900,002	$1,400,009	$527,490	$  95,432

As of September 30, 2012, the tax components of accumulated net earnings (losses) were as follows:

	Conservative Prepared Portfolio	Moderate Prepared Portfolio			Growth Prepared Portfolio			Aggressive Growth Prepared Portfolio
Undistributed ordinary income	$1,289,522	$	1,098,757		$	757,281		$	241,804
Undistributed long-term capital gains	298,420		–			–			–
Capital loss carryforwards	–		(3,502,754	)		(10,646,652	)		(6,037,735	)
Net unrealized gains1	4,744,611		9,720,420			7,914,137			5,593,175
Qualified late-year losses2	–		–			–			(94,292	)
Total	$6,332,553	$	7,316,423		$	(1,975,234	)	$	(297,048	)

¹  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales and the timing and recognition of partnership income.

²  The Fund has elected to defer certain qualified late-year losses and recognize such losses in the year ending September 30, 2013.

As of September 30, 2012, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:

Expires September 30,	Moderate Prepared	Growth Prepared	Aggressive Growth Prepared
2017	$  337,352	$  3,908,447	$1,419,054
2018	3,165,402	3,985,452	1,745,566
2019	–	2,752,753	2,324,746
No expiration date3	–	–	548,369
Total	$3,502,754	$10,646,652	$6,037,735

³  Must be utilized prior to losses subject to expiration.

During the year ended September 30 2012, Moderate Prepared and Growth Prepared utilized capital loss carryforwards of $749,500 and $294,587, respectively.

As of September 30, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

	Conservative Prepared	Moderate Prepared	Growth Prepared	Aggressive Growth Prepared
Tax cost	$59,214,552	$86,882,032	$54,740,920	$33,712,875
Gross unrealized appreciation	$  8,040,552	$13,784,731	$10,591,282	$  7,106,399
Gross unrealized depreciation	(3,295,941)	(4,064,312)	(2,677,144)	(1,513,224)
Net unrealized appreciation	$  4,744,611	$  9,720,419	$  7,914,138	$  5,593,175

6. Borrowings:

The Trust, on behalf of the Funds, along with certain other funds managed by the Manager and its affiliates, is a party to a $500 million credit agreement with a group of lenders, which expires in November 2012 and was subsequently renewed until November 2013. The Funds may borrow under the credit agreement to fund shareholder redemptions. Effective November 2010 to November 2011, the credit agreement had the following terms: a commitment fee of 0.08% per annum based on the Funds’ pro rata share of the unused portion of the credit agreement

38     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Notes to Financial Statements (continued)

and interest at a rate equal to the higher of (a) the one-month London Interbank Offered Rate (“LIBOR”) plus 1.00% per annum or (b) the Fed Funds rate plus 1.00% per annum on amounts borrowed. In addition, the Funds paid administration and arrangement fees which were allocated to the Funds based on their net assets as of October 31, 2010. The credit agreement, which expired in November 2011, was renewed until November 2012. Effective November 2011 to November 2012, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the Fund’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Funds paid administration and arrangement fees which were allocated to the Funds’ based on their net assets as of October 31, 2011. The Funds did not borrow under the credit agreement during the year ended September 30, 2012.

7. Market and Credit Risk:

In the normal course of business, through their investments in the Underlying Funds and Master Portfolios, the Funds enter into transactions

where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Funds; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity with which the Funds have unsettled or open transactions may fail to or be unable to perform on its commitments. The Funds manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.

8. Capital Share Transactions:

Transactions in capital shares for each class were as follows:

	Year Ended September 30, 2012						Year Ended September 30, 2011
Conservative Prepared	Shares			Amount			Shares			Amount
Institutional
Shares sold		93,775		$	1,004,843			36,524		$	386,609
Shares issued in reinvestment of dividends and distributions		5,313			54,248			2,983			31,023
Shares redeemed		(87,486	)		(924,269	)		(41,264	)		(440,487	)
Net increase (decrease)		11,602		$	134,822			(1,757	)	$	(22,855	)
Investor A
Shares sold		1,296,584		$	13,846,300			649,235		$	6,858,052
Shares issued in reinvestment of dividends and distributions		53,789			545,953			28,783			298,194
Shares redeemed		(509,620	)		(5,437,240	)		(408,596	)		(4,306,125	)
Net increase		840,753		$	8,955,013			269,422		$	2,850,121
Investor C
Shares sold		814,514		$	8,614,946			654,271		$	6,873,160
Shares issued in reinvestment of dividends and distributions		56,409			570,856			34,386			354,862
Shares redeemed		(626,643	)		(6,636,771	)		(771,047	)		(8,106,875	)
Net increase (decrease)		244,280		$	2,549,031			(82,390	)	$	(878,853	)
Class R
Shares sold		249,954		$	2,646,524			453,662		$	4,795,628
Shares issued in reinvestment of dividends and distributions		21,701			219,399			15,273			157,305
Shares redeemed		(241,729	)		(2,569,176	)		(460,640	)		(4,836,254	)
Net increase		29,926		$	296,747			8,295		$	116,679
Total Net Increase		1,126,561		$	11,935,613			193,570		$	2,065,092

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 39

Notes to Financial Statements (continued)

	Year Ended September 30, 2012						Year Ended September 30, 2011
Moderate Prepared		Shares			Amount			Shares			Amount
Institutional
Shares sold		87,463		$	888,606			27,223		$	282,004
Shares issued in reinvestment of dividends		4,587			45,001			3,016			30,379
Shares redeemed		(37,629	)		(381,027	)		(39,595	)		(402,677	)
Net increase (decrease)		54,421		$	552,580			(9,356	)	$	(90,294	)
Investor A
Shares sold		1,985,397		$	20,349,267			787,105		$	8,040,586
Shares issued in reinvestment of dividends		65,649			642,053			48,254			484,472
Shares redeemed		(1,015,779	)		(10,452,052	)		(833,928	)		(8,568,661	)
Net increase (decrease)		1,035,267		$	10,539,268			1,431		$	(43,603	)
Investor C
Shares sold		650,139		$	6,595,694			759,959		$	7,648,921
Shares issued in reinvestment of dividends		57,096			555,541			51,831			517,270
Shares redeemed		(981,506	)		(9,973,754	)		(1,518,580	)		(15,455,542	)
Net decrease		(274,271	)	$	(2,822,519	)		(706,790	)	$	(7,289,351	)
Class R
Shares sold		429,888		$	4,404,238			847,150		$	8,689,507
Shares issued in reinvestment of dividends		28,956			282,030			28,790			287,612
Shares redeemed		(406,365	)		(4,137,098	)		(983,133	)		(9,902,239	)
Net increase (decrease)		52,479		$	549,170			(107,193	)	$	(925,120	)
Total Net Increase (Decrease)		867,896		$	8,818,499			(821,908	)	$	(8,348,368	)
Growth Prepared
Institutional
Shares sold		56,417		$	574,119			95,486		$	969,871
Shares issued in reinvestment of dividends		6,464			62,120			4,640			46,066
Shares redeemed		(190,045	)		(1,867,612	)		(110,286	)		(1,087,599	)
Net decrease		(127,164	)	$	(1,231,373	)		(10,160	)	$	(71,662	)
Investor A
Shares sold		663,384		$	6,583,436			732,272		$	7,348,817
Shares issued in reinvestment of dividends		36,377			346,682			21,807			214,793
Shares redeemed		(757,564	)		(7,590,065	)		(480,603	)		(4,792,396	)
Net increase (decrease)		(57,803	)	$	(659,947	)		273,476		$	2,771,214

40     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Notes to Financial Statements (concluded)

	Year Ended September 30, 2012						Year Ended September 30, 2011
Growth Prepared (concluded)		Shares			Amount			Shares			Amount
Investor C
Shares sold		360,315		$	3,545,721			477,915		$	4,668,582
Shares issued in reinvestment of dividends		18,356			172,728			13,842			134,272
Shares redeemed		(742,220	)		(7,263,994	)		(977,846	)		(9,622,980	)
Net decrease		(363,549	)	$	(3,545,545	)		(486,089	)	$	(4,820,126	)
Class R
Shares sold		201,556		$	2,004,229			479,984		$	4,795,145
Shares issued in reinvestment of dividends		11,033			104,595			9,512			93,122
Shares redeemed		(328,621	)		(3,281,960	)		(543,481	)		(5,414,591	)
Net decrease		(116,032	)	$	(1,173,136	)		(53,985	)	$	(526,324	)
Total Net Decrease		(664,548	)	$	(6,610,001	)		(276,758	)	$	(2,646,898	)
Aggressive Growth Prepared
Institutional
Shares sold		18,362		$	180,991			118,067		$	1,215,961
Shares issued in reinvestment of dividends		1,355			12,505			1,150			11,129
Shares redeemed		(98,092	)		(925,249	)		(114,450	)		(1,061,515	)
Net increase (decrease)		(78,375	)	$	(731,753	)		4,767		$	165,575
Investor A
Shares sold		1,090,229		$	10,457,417			496,994		$	4,823,199
Shares issued in reinvestment of dividends		11,131			101,736			4,733			45,344
Shares redeemed		(655,946	)		(6,293,216	)		(254,754	)		(2,474,793	)
Net increase		445,414		$	4,265,937			246,973		$	2,393,750
Investor C
Shares sold		328,562		$	3,097,153			447,836		$	4,198,289
Shares redeemed		(618,719	)		(5,788,877	)		(835,504	)		(7,921,464	)
Net decrease		(290,157	)	$	(2,691,724	)		(387,668	)	$	(3,723,175	)
Class R
Shares sold		203,535		$	1,941,548			409,297		$	3,949,380
Shares issued in reinvestment of dividends		3,407			30,936			3,213			30,558
Shares redeemed		(245,680	)		(2,378,336	)		(480,201	)		(4,582,163	)
Net decrease		(38,738	)	$	(405,852	)		(67,691	)	$	(602,225	)
Total Net Increase (Decrease)		38,144		$	436,608			(203,619	)	$	(1,766,075	)

9. Subsequent Events:

Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 41

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of BlackRock Funds II and Shareholders of BlackRock Conservative Prepared Portfolio, BlackRock Moderate Prepared Portfolio, BlackRock Growth Prepared Portfolio and BlackRock Aggressive Growth Prepared Portfolio:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the BlackRock Conservative Prepared Portfolio, BlackRock Moderate Prepared Portfolio, BlackRock Growth Prepared Portfolio and BlackRock Aggressive Growth Prepared Portfolio (collectively, the “Funds”), each a series of BlackRock Funds II, as of September 30, 2012, and the related statements of operations for the period then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2012, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the Funds as of September 30, 2012, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Deloitte & Touche LLP

Philadelphia, Pennsylvania

November 28, 2012

Important Tax Information (Unaudited)

The following information is provided with respect to the ordinary income distributions paid by the Funds during the fiscal year ended September 30, 2012:

	Payable Date		Qualified Dividend Income for Individuals1			Dividends Qualifying for the Dividends Received Deduction for Corporations1			Federal Obligation Interest2
BlackRock Conservative Prepared Portfolio		12/28/11		21.58	%		18.05	%		3.21	%
BlackRock Moderate Prepared Portfolio		12/28/11		39.23	%		33.36	%		2.03	%
BlackRock Growth Prepared Portfolio		12/28/11		100.00	%		100.00	%		–
BlackRock Aggressive Growth Prepared Portfolio		12/28/11		100.00	%		100.00	%		–

¹  The Funds hereby designate the percentage indicated above or the maximum amount allowable by law.

²  The law varies in each state as to whether and what percentage of dividend income attributable to federal obligations is exempt from state income tax. We recommend that you consult your tax advisor to determine if any portion of the dividends you received is exempt from state income taxes.

Additionally, BlackRock Conservative Prepared Portfolio distributed long-term capital gains of $0.068945 per share to shareholders of record on December 23, 2011.

42     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Disclosure of Investment Advisory Agreement

The Board of Trustees (the “Board,” and the members of which are referred to as “Board Members”) of BlackRock Aggressive Growth Prepared Portfolio (the “Aggressive Growth Portfolio”), BlackRock Conservative Prepared Portfolio (the “Conservative Portfolio”), BlackRock Growth Prepared Portfolio (the “Growth Portfolio”) and BlackRock Moderate Prepared Portfolio (the “Moderate Portfolio”) (each, a “Fund,” and collectively, the “Funds”), each a series of BlackRock Funds II (the “Trust”), met on April 10, 2012 and May 8-9, 2012 to consider the approval of the Trust’s investment advisory agreement (the “Agreement”), on behalf of each Fund, with BlackRock Advisors, LLC (the “Manager,” or “BlackRock”), each Fund’s investment advisor.

Activities and Composition of the Board

The Board consists of thirteen individuals, ten of whom are not “interested persons” of the Trust as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Funds and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Chairman of the Board is an Independent Board Member. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight Committee and an Executive Committee, each of which is chaired by an Independent Board Member and composed of Independent Board Members (except for the Performance Oversight Committee and the Executive Committee, each of which also has one interested Board Member).

The Agreement

Pursuant to the 1940 Act, the Board is required to consider the continuation of the Agreement on an annual basis. The Board has four quarterly meetings per year, each extending over two days, and a fifth meeting to consider specific information surrounding the consideration of renewing the Agreements. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services provided to each Fund by BlackRock, its personnel and its affiliates, including investment management, administrative and shareholder services, oversight of fund accounting and custody, marketing services, risk oversight, compliance and assistance in meeting applicable legal and regulatory requirements.

The Board, acting directly and through its committees, considers at each of its meetings, and from time to time as appropriate, factors that are relevant to its annual consideration of the renewal of the Agreement, including the services and support provided by BlackRock to each Fund and its shareholders. Among the matters the Board considered were: (a) investment performance for one-, three- and five-year periods, as applicable, against peer funds, and applicable benchmarks, if any, as well as senior management’s and portfolio managers’ analysis of the reasons for any over performance or underperformance against its peers and/or benchmark, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by

each Fund for services, such as marketing and distribution, call center and fund accounting; (c) Fund operating expenses and how BlackRock allocates expenses to each Fund; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of each Fund’s investment objective, policies and restrictions; (e) each Fund’s compliance with its Code of Ethics and other compliance policies and procedures; (f) the nature, cost and character of non-investment management services provided by BlackRock and its affiliates; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) the use of brokerage commissions and execution quality of portfolio transactions; (j) BlackRock’s implementation of each Fund’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment objectives across the open-end fund, exchange traded fund (“ETF”), closed-end fund and institutional account product channels, as applicable; (l) BlackRock’s compensation methodology for its investment professionals and the incentives it creates; and (m) periodic updates on BlackRock’s business.

The Board has engaged in an ongoing strategic review with BlackRock of opportunities to consolidate funds and of BlackRock’s commitment to investment performance. In addition, the Board requested, to the extent reasonably possible, an analysis of the risk and return relative to selected funds in peer groups. BlackRock provides information to the Board in response to specific questions. These questions covered issues such as profitability, investment performance and management fee levels. The Board considered the importance of: (i) managing fixed income assets with a view toward preservation of capital; (ii) portfolio managers’ investments in the funds they manage; (iii) BlackRock’s controls surrounding the coding of quantitative investment models; and (iv) BlackRock’s oversight of relationships with third party service providers.

Board Considerations in Approving the Agreement

The Approval Process: Prior to the April 10, 2012 meeting, the Board requested and received materials specifically relating to the Agreement. The Board is engaged in a process with its independent legal counsel and BlackRock to review periodically the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April meeting included (a) information independently compiled and prepared by Lipper, Inc. (“Lipper”) on Fund fees and expenses and the investment performance of each Fund as compared with a peer group of funds as determined by Lipper (collectively, “Peers”); (b) a discussion of fall-out benefits to BlackRock and its affiliates; (c) a general analysis provided by BlackRock concerning investment management fees (a combination of the advisory fee and the administration fee, if any) charged to other clients, such as institutional clients, ETFs and closed-end funds, under similar investment mandates, as well as the performance of such other clients, as applicable; (d) the existence, impact and sharing of potential economies of scale; (e) a summary of aggregate amounts paid by each Fund to BlackRock; (f) sales and redemption data regarding each Fund’s shares; and (g) if

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 43

Disclosure of Investment Advisory Agreement (continued)

applicable, a comparison of management fees to similar BlackRock open-end funds, as classified by Lipper.

At an in-person meeting held on April 10, 2012, the Board reviewed materials relating to its consideration of the Agreement. As a result of the discussions that occurred during the April 10, 2012 meeting, and as a culmination of the Board’s year-long deliberative process, the Board presented BlackRock with questions and requests for additional information. BlackRock responded to these requests with additional written information in advance of the May 8-9, 2012 Board meeting.

At an in-person meeting held on May 8-9, 2012, the Board, including all the Independent Board Members, approved the continuation of the Agreement between the Manager and the Trust, on behalf of each Fund, for a one-year term ending June 30, 2013. In approving the continuation of the Agreement, the Board considered: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of each Fund and BlackRock; (c) the advisory fee and the cost of the services and profits to be realized by BlackRock and its affiliates from their relationship with each Fund; (d) economies of scale; (e) fallout benefits to BlackRock as a result of its relationship with each Fund; and (f) other factors deemed relevant by the Board Members.

The Board also considered other matters it deemed important to the approval process, such as payments made to BlackRock or its affiliates relating to the distribution of Fund shares and securities lending, services related to the valuation and pricing of Fund portfolio holdings, direct and indirect benefits to BlackRock and its affiliates from their relationship with each Fund and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered.

A. Nature, Extent and Quality of the Services Provided by BlackRock: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services provided by BlackRock, including the investment advisory services and the resulting performance of each Fund. Throughout the year, the Board compared Fund performance to the performance of a comparable group of mutual funds and/or the performance of a relevant benchmark, if any. The Board met with BlackRock’s senior management personnel responsible for investment operations, including the senior investment officers. The Board also reviewed the materials provided by each Fund’s portfolio management team discussing Fund performance and the Fund’s investment objective, strategies and outlook.

The Board considered, among other factors, the number, education and experience of BlackRock’s investment personnel generally and each Fund’s portfolio management team, investments by portfolio managers in the funds they manage, BlackRock’s portfolio trading capabilities, BlackRock’s use of technology, BlackRock’s commitment to compliance, BlackRock’s credit analysis capabilities, BlackRock’s risk analysis and

oversight capabilities and BlackRock’s approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board engaged in a review of BlackRock’s compensation structure with respect to each Fund’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to advisory services, the Board considered the quality of the administrative and non-investment advisory services provided to each Fund. BlackRock and its affiliates provide each Fund with certain administrative, shareholder and other services (in addition to any such services provided to a Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. In particular, BlackRock and its affiliates provide each Fund with the following administrative services including, among others: (i) preparing disclosure documents, such as the prospectus, the statement of additional information and periodic shareholder reports; (ii) assisting with daily accounting and pricing; (iii) overseeing and coordinating the activities of other service providers; (iv) organizing Board meetings and preparing the materials for such Board meetings; (v) providing legal and compliance support; and (vi) performing other administrative functions necessary for the operation of the Fund, such as tax reporting, fulfilling regulatory filing requirements and call center services. The Board reviewed the structure and duties of BlackRock’s fund administration, accounting, legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of each Fund and BlackRock: The Board, including the Independent Board Members, also reviewed and considered the performance history of each Fund. In preparation for the April 10, 2012 meeting, the Board worked with its independent legal counsel, BlackRock and Lipper to develop a template for, and was provided with, reports independently prepared by Lipper, which included a comprehensive analysis of each Fund’s performance. The Board also reviewed a narrative and statistical analysis of the Lipper data that was prepared by BlackRock, which analyzed various factors that affect Lipper’s rankings. In connection with its review, the Board received and reviewed information regarding the investment performance of each Fund as compared to funds in the Fund’s applicable Lipper category. The Board was provided with a description of the methodology used by Lipper to select peer funds and periodically meets with Lipper representatives to review their methodology. The Board and the Board’s Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of each Fund throughout the year.

The Board noted that the Aggressive Growth Portfolio ranked in the third, fourth and second quartiles against its Lipper Performance Universe for the one-, three- and five-year periods reported, respectively. The Board and BlackRock reviewed and discussed the reasons for the Aggressive Growth Portfolio’s underperformance during the one- and three-year periods compared with its Peers. The Board was informed that, among other things, the Aggressive Growth Portfolio’s performance is directly impacted by the performance of the underlying funds. The major detractor over the one- and three-year periods was the performance of the

44     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Disclosure of Investment Advisory Agreement (continued)

BlackRock Capital Appreciation Fund. Also detracting over the three-year period was the performance of the Master Large Cap Core Portfolio.

The Board and BlackRock discussed BlackRock’s strategy for improving the Aggressive Growth Portfolio’s performance and BlackRock’s commitment to providing the resources necessary to assist the Aggressive Growth Portfolio’s portfolio managers and to improve the Aggressive Growth Portfolio’s performance.

The Board noted that the Conservative Portfolio, Growth Portfolio and Moderate Portfolio each ranked in the third, second and second quartiles against its Lipper Performance Universe for the one-, three- and five-year periods reported, respectively. The Board and BlackRock reviewed and discussed the reasons for each Portfolio’s underperformance during the one-year period and will monitor closely each Portfolio’s performance in the coming year.

C. Consideration of the Advisory/Management Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with each Fund: The Board, including the Independent Board Members, reviewed each Fund’s contractual management fee rate compared with the other funds in its Lipper category. It also compared each Fund’s total expense ratio, as well as actual management fee rate, to those of other funds in its Lipper category. The Board considered the services provided and the fees charged by BlackRock to other types of clients with similar investment mandates, including separately managed institutional accounts.

The Board reviewed BlackRock’s profitability with respect to other funds the Board currently oversees for the year ended December 31, 2011 compared to available aggregate profitability data provided for the years ended December 31, 2010 and December 31, 2009. The Board reviewed BlackRock’s profitability with respect to other fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, expense allocations and business mix, and the difficulty of comparing profitability as a result of those factors.

The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board considered BlackRock’s operating margin, in general, compared to the operating margin for leading investment management firms whose operations include advising open-end funds, among other product types. In addition, the Board considered, among other things, certain third party data comparing BlackRock’s operating margin with that of other publicly-traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, the Board considered the cost of the services provided to each Fund by BlackRock, and BlackRock’s and its affiliates’ profits relating

to the management and distribution of each Fund and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock’s methodology in allocating its costs to the management of each Fund. The Board also considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreement and to continue to provide the high quality of services that is expected by the Board.

The Board noted that BlackRock will not receive any advisory fees from the Funds for its investment advisory service. The Board noted that each Fund’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was lower than or equal to the median contractual management fee ratio paid by the Fund’s Peers, in each case before taking into account any expense reimbursements or fee waivers. The Board also noted that BlackRock has contractually agreed to waive fees or reimburse expenses in order to limit, to a specified amount, each Fund’s total net expenses on a class-by-class basis, as applicable.

D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of each Fund increase, as well as the existence of expense caps. The Board also considered the extent to which each Fund benefits from such economies and whether there should be changes in the advisory fee rate or structure in order to enable the Fund to participate in these economies of scale, for example through the use of breakpoints in the advisory fee based upon the asset level of the Fund. In its consideration, the Board Members took into account the existence of expense caps and further considered the continuation and/or implementation, as applicable, of such caps.

E. Other Factors Deemed Relevant by the Board Members: The Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates may derive from their respective relationships with each Fund, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Fund, including for administrative, distribution, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Board further noted that it had considered the investment by BlackRock’s funds in ETFs without any offset against the management fees payable by the funds to BlackRock.

In connection with its consideration of the Agreement, the Board also received information regarding BlackRock’s brokerage and soft dollar practices. The Board received reports from BlackRock which included information on brokerage commissions and trade execution practices throughout the year.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 45

Disclosure of Investment Advisory Agreement (concluded)

The Board noted the competitive nature of the open-end fund marketplace, and that shareholders are able to redeem their Fund shares if they believe that a Fund’s fees and expenses are too high or if they are dissatisfied with the performance of the Fund.

Conclusion

The Board, including all the Independent Board Members, approved the continuation of the Agreement between the Manager and the Trust, on behalf of each Fund, for a one-year term ending June 30, 2013. Based upon its evaluation of all of the aforementioned factors in their totality, the Board, including the Independent Board Members, was satisfied that the terms of the Agreement were fair and reasonable and in the best interest of each Fund and its shareholders. In arriving at its decision to approve the Agreement, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination. The contractual fee arrangements for each Fund reflect the results of several years of review by the Board Members and predecessor Board Members, and discussions between such Board Members (and predecessor Board Members) and BlackRock. As a result, the Board Members’ conclusions may be based in part on their consideration of these arrangements in prior years.

46     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Officers and Trustees

Name, Address, and Year of Birth	Position(s) Held with Trust	Length of Time Served as a Trustee2	Principal Occupation(s) During Past 5 Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1
Robert M. Hernandez 55 East 52nd Street New York, NY 10055 1944	Chairman of the Board and Trustee	Since 2007	Director, Vice Chairman and Chief Financial Officer of USX Corporation (energy and steel business) from 1991 to 2001; Director, TE Connectivity (electronics) from 2006 to 2012.	29 RICs consisting of 82 Portfolios	ACE Limited (insurance company); Eastman Chemical Company (chemicals); RTI International Metals, Inc. (metals)
Fred G. Weiss 55 East 52nd Street New York, NY 10055 1941	Vice Chairman of the Board and Trustee	Since 2007	Managing Director, FGW Associates (consulting and investment company) since 1997; Director and Treasurer, Michael J. Fox Foundation for Parkinson’s Research since 2000; Director, BTG International Plc (medical technology commercialization company) from 2001 to 2007.	29 RICs consisting of 82 Portfolios	Watson Pharmaceuticals, Inc.
James H. Bodurtha 55 East 52nd Street New York, NY 10055 1944	Trustee	Since 2007	Director, The China Business Group, Inc. (consulting firm) since 1996 and Executive Vice President thereof from 1996 to 2003; Chairman of the Board, Berkshire Holding Corporation since 1980.	29 RICs consisting of 82 Portfolios	None
Bruce R. Bond 55 East 52nd Street New York, NY 10055 1946	Trustee	Since 2007	Trustee and Member of the Governance Committee, State Street Research Mutual Funds from 1997 to 2005; Board Member of Governance, Audit and Finance Committee, Avaya Inc. (computer equipment) from 2003 to 2007.	29 RICs consisting of 82 Portfolios	None
Donald W. Burton 55 East 52nd Street New York, NY 10055 1944	Trustee	Since 2007	Managing General Partner, The Burton Partnership, LP (an investment partnership) since 1979; Managing General Partner, The South Atlantic Venture Funds since 1983; Director, Lifestyle Family Fitness (fitness industry) since 2006; Director, IDology, Inc. (technology solutions) since 2006; Member of the Investment Advisory Council of the Florida State Board of Administration from 2001 to 2007.	29 RICs consisting of 82 Portfolios	Knology, Inc. (telecommunications); Capital Southwest (financial)
Honorable Stuart E. Eizenstat 55 East 52nd Street New York, NY 10055 1943	Trustee	Since 2007	Partner and Head of International Practice, Covington and Burling LLP (law firm) since 2001; International Advisory Board Member, The Coca Cola Company from 2002 to 2011; Advisory Board Member, Veracity Worldwide LLC (risk management) since 2007; Member of the International Advisory Board GML (energy) since 2003; Advisory Board Member, BT Americas (telecommunications) since 2004 to 2010.	29 RICs consisting of 82 Portfolios	Alcatel-Lucent (telecommunications); Global Specialty Metallurgical (metallurgical industry); UPS Corporation (delivery service)
Kenneth A. Froot 55 East 52nd Street New York, NY 10055 1957	Trustee	Since 2007	Professor, Harvard University since 1992.	29 RICs consisting of 82 Portfolios	None
John F. O’Brien 55 East 52nd Street New York, NY 10055 1943	Trustee	Since 2007	Chairman and Director, Woods Hole Oceanographic Institute since 2009 and Trustee thereof from 2003 to 2009; Director, Ameresco, Inc. (energy solutions company) from 2006 to 2007.	29 RICs consisting of 82 Portfolios	Cabot Corporation (chemicals); LKQ Corporation (auto parts manufacturing); TJX Companies, Inc. (retailer)
Roberta Cooper Ramo 55 East 52nd Street New York, NY 10055 1942	Trustee	Since 2007	Shareholder, Modrall, Sperling, Roehl, Harris & Sisk, P.A. (law firm) since 1993; Chairman of the Board, Cooper’s, Inc. (retail) since 2000; Director ECMC Group (service provider to students, schools and lenders) since 2001; President, The American Law Institute (non-profit) since 2008; President, American Bar Association from 1995 to 1996.	29 RICs consisting of 82 Portfolios	None

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 47

Officers and Trustees (continued)

Name, Address, and Year of Birth	Position(s) Held with Trust	Length of Time Served as a Trustee2	Principal Occupation(s) During Past 5 Years	Number of BlackRock- Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen	Public Directorships
Independent Trustees1 (concluded)
David H. Walsh 55 East 52nd Street New York, NY 10055 1941	Trustee	Since 2007	Director, National Museum of Wildlife Art since 2007; Trustee, University of Wyoming Foundation since 2008; Director, Ruckleshaus Institute and Haub School of Natural Resources at the University of Wyoming from 2006 to 2008; Director, The American Museum of Fly Fishing since 1997; Director, The National Audubon Society from 1998 to 2005.	29 RICs consisting of 82 Portfolios	None
	1  Each Independent Trustee holds office until his or her successor is duly elected and qualifies or until his or her earlier death, resignation or removal as provided by the Trust’s by-laws or charter or statute. In no event may an Independent Trustee hold office beyond December 31 of the year in which he or she turns 74.
	2  Date shown is the earliest date a person has served for the Trust covered by this annual report. Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. (“BlackRock”) in September 2006, the various legacy MLIM and legacy BlackRock Fund boards were realigned and consolidated into three new fund boards in 2007. As a result, although the chart shows certain Trustees as joining the Trust’s board in 2007, each Trustee first became a member of the board of other legacy MLIM or legacy BlackRock Funds as follows: James H. Bodurtha, 1995; Bruce R. Bond, 2005; Donald W. Burton, 2002; Stuart E. Eizenstat, 2001; Kenneth A. Froot, 2005; Robert M. Hernandez, 1996; John F. O’Brien, 2004; Roberta Cooper Ramo, 2000; David H. Walsh, 2003; and Fred G. Weiss, 1998.

Interested Trustees3
Paul L. Audet 55 East 52nd Street New York, NY 10055 1953	Trustee	Since 2011	Senior Managing Director of BlackRock and Head of U.S. Mutual Funds since 2011; Chair of the U.S. Mutual Funds Committee reporting to the Global Executive Committee since 2011; Head of BlackRock’s Real Estate business from 2008 to 2011; Member of BlackRock’s Global Operating and Corporate Risk Management Committees and of the BlackRock Alternative Investors Executive Committee and Investment Committee for the Private Equity Fund of Funds business since 2008; Head of BlackRock’s Global Cash Management business from 2005 to 2010; Acting Chief Financial Officer of BlackRock from 2007 to 2008; Chief Financial Officer of BlackRock from 1998 to 2005.	160 RICs consisting of 278 Portfolios	None
Laurence D. Fink 55 East 52nd Street New York, NY 10055 1952	Trustee	Since 2007	Chairman and Chief Executive Officer of BlackRock since its formation in 1998 and of BlackRock’s predecessor entities since 1988 and Chairman of the Executive and Management Committees; Formerly Managing Director, The First Boston Corporation, Member of its Management Committee, Co-head of its Taxable Fixed Income Division and Head of its Mortgage and Real Estate Products Group; Chairman of the Board of several of BlackRock’s alternative investment vehicles; Director of several of BlackRock’s offshore funds; Member of the Board of Trustees of New York University, Chair of the Financial Affairs Committee and a member of the Executive Committee, the Ad Hoc Committee on Board Governance, and the Committee on Trustees; Co-Chairman of the NYU Hospitals Center Board of Trustees, Chairman of the Development/Trustee Stewardship Committee and Chairman of the Finance Committee; Trustee, The Boys’ Club of New York.	29 RICs consisting of 82 Portfolios	BlackRock
Henry Gabbay 55 East 52nd Street New York, NY 10055 1947	Trustee	Since 2007	Consultant, BlackRock from 2007 to 2008; Managing Director, BlackRock from 1989 to 2007; Chief Administrative Officer, BlackRock Advisors, LLC from 1998 to 2007; President of BlackRock Funds and BlackRock Bond Allocation Target Shares from 2005 to 2007 and Treasurer of certain closed-end funds in the BlackRock fund complex from 1989 to 2006.	160 RICs consisting of 278 Portfolios	None
	3  Messrs. Audet and Fink are both “interested persons,” as defined in the 1940 Act, of the Trust based on their positions with BlackRock and its affiliates. Mr. Gabbay is an “interested person” of the Trust based on his former positions with BlackRock and its affiliates as well as his ownership of BlackRock and The PNC Financial Services Group, Inc. securities. Mr. Audet and Mr. Gabbay are also Directors of the BlackRock registered closed-end funds and Directors of other BlackRock registered open-ended funds. Interested Trustees serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.

48     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Officers and Trustees (concluded)

Name, Address, and Year of Birth	Position(s) Held with Trust	Length of Time Served	Principal Occupation(s) During Past 5 Years
Trust Officers1
John M. Perlowski 55 East 52nd Street New York, NY 10055 1964	President and Chief Executive Officer	Since 2010	Managing Director of BlackRock since 2009; Global Head of BlackRock Fund Administration since 2009; Managing Director and Chief Operating Officer of the Global Product Group at Goldman Sachs Asset Management, L.P. from 2003 to 2009; Treasurer of Goldman Sachs Mutual Funds from 2003 to 2009 and Senior Vice President thereof from 2007 to 2009; Director of Goldman Sachs Offshore Funds from 2002 to 2009; Director of Family Resources Network (charitable foundation) since 2009.
Brendan Kyne 55 East 52nd Street New York, NY 10055 1977	Vice President	Since 2009	Managing Director of BlackRock since 2010; Director of BlackRock from 2008 to 2009; Head of Product Development and Management for BlackRock’s U.S. Retail Group since 2009 and Co-head thereof from 2007 to 2009; Vice President of BlackRock from 2005 to 2008.
Neal Andrews 55 East 52nd Street New York, NY 10055 1966	Chief Financial Officer	Since 2007	Managing Director of BlackRock since 2006; Senior Vice President and Line of Business Head of Fund Accounting and Administration at PNC Global Investment Servicing (U.S.) Inc. from 1992 to 2006.
Jay Fife 55 East 52nd Street New York, NY 10055 1970	Treasurer	Since 2007	Managing Director of BlackRock since 2007; Director of BlackRock in 2006; Assistant Treasurer of the MLIM and Fund Asset Management, L.P. advised funds from 2005 to 2006; Director of MLIM Fund Services Group from 2001 to 2006.
Brian Kindelan 55 East 52nd Street New York, NY 10055 1959	Chief Compliance Officer and Anti-Money Laundering Officer	Since 2007	Chief Compliance Officer of the BlackRock-advised Funds since 2007; Managing Director and Senior Counsel of BlackRock since 2005.
Benjamin Archibald 55 East 52nd Street New York, NY 10055 1975	Secretary	Since 2012	Director of BlackRock since 2010; Assistant Secretary to the Funds from 2010 to 2012; General Counsel and Chief Operating Officer of Uhuru Capital Management from 2009 to 2010; Executive Director and Counsel of Goldman Sachs Asset Management from 2005 to 2009.
	1   Officers of the Trust serve at the pleasure of the Board of Trustees.
	Further information about the Trust’s Officers and Trustees is available in the Trust’s Statement of Additional Information, which can be obtained without charge by calling 1-800-441-7762.

Investment Advisor and Co-Administrator BlackRock Advisors, LLC Wilmington, DE 19809	Accounting Agent, Co-Administrator and Transfer Agent BNY Mellon Investment Servicing (US) Inc. Wilmington, DE 19809	Independent Registered Public Accounting Firm Deloitte & Touche LLP Philadelphia, PA 19103	Address of the Trust 100 Bellevue Parkway Wilmington, DE 19809
Custodian The Bank of New York Mellon New York, NY 10286	Distributor BlackRock Investments, LLC New York, NY 10022	Legal Counsel Willkie Farr & Gallagher LLP New York, NY 10019

Effective May 8, 2012, Ira P. Shapiro resigned as Secretary of the Trust and Benjamin Archibald became Secretary of the Trust.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 49

Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the Funds’ website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Funds’ electronic delivery program.

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.

Shareholders Who Hold Accounts Directly With BlackRock:

1) Access the BlackRock website at http://www.blackrock.com/edelivery

2) Select “eDelivery” under the “More Information” section

3) Log into your account

Householding

The Funds 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 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 call the Funds at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the SEC’s website at http:// www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Funds’ Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.

Availability of Proxy Voting Policies and Procedures

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling (800) 441-7762; (2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http://www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http:// www.blackrock.com/funds.

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 funds.

Systematic Withdrawal Plan

Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance 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.

50     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

Additional Information (concluded)

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 non-public 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 non-public 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 websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated 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 non-public 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 non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

    BLACKROCK FUNDS II     SEPTEMBER 30, 2012 51

A World-Class Mutual Fund Family

BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.

Equity Funds
BlackRock ACWI ex-US Index Fund BlackRock All-Cap Energy & Resources Portfolio BlackRock Balanced Capital Fund† BlackRock Basic Value Fund BlackRock Capital Appreciation Fund BlackRock China Fund BlackRock Commodity Strategies Fund BlackRock Emerging Markets Fund BlackRock Emerging Markets Long/Short     Equity Fund BlackRock Energy & Resources Portfolio BlackRock Equity Dividend Fund BlackRock EuroFund BlackRock Flexible Equity Fund BlackRock Focus Growth Fund BlackRock Global Allocation Fund†	BlackRock Global Dividend Income Portfolio BlackRock Global Opportunities Portfolio BlackRock Global SmallCap Fund BlackRock Health Sciences Opportunities Portfolio BlackRock Index Equity Portfolio BlackRock India Fund BlackRock International Fund BlackRock International Index Fund BlackRock International Opportunities Portfolio BlackRock Large Cap Core Fund BlackRock Large Cap Core Plus Fund BlackRock Large Cap Growth Fund BlackRock Large Cap Value Fund BlackRock Latin America Fund BlackRock Long-Horizon Equity Fund BlackRock Managed Volatility Portfolio†	BlackRock Mid-Cap Growth Equity Portfolio BlackRock Mid Cap Value Opportunities Fund BlackRock Natural Resources Trust BlackRock Pacific Fund BlackRock Real Estate Securities Fund BlackRock Russell 1000 Index Fund BlackRock Science & Technology     Opportunities Portfolio BlackRock Small Cap Growth Equity Portfolio BlackRock Small Cap Growth Fund II BlackRock Small Cap Index Fund BlackRock S&P 500 Index Fund BlackRock S&P 500 Stock Fund BlackRock U.S. Opportunities Portfolio BlackRock Value Opportunities Fund BlackRock World Gold Fund
Taxable Fixed Income Funds
BlackRock Bond Index Fund BlackRock Core Bond Portfolio BlackRock CoreAlpha Bond Fund BlackRock Emerging Market Local Debt Portfolio BlackRock Floating Rate Income Portfolio BlackRock Global Long/Short Credit Fund BlackRock GNMA Portfolio	BlackRock High Yield Bond Portfolio BlackRock Inflation Protected Bond Portfolio BlackRock International Bond Portfolio BlackRock Long Duration Bond Portfolio BlackRock Low Duration Bond Portfolio BlackRock Multi-Asset Income Portfolio† BlackRock Secured Credit Portfolio	BlackRock Strategic Income Opportunities     Portfolio BlackRock Total Return Fund BlackRock US Government Bond Portfolio BlackRock US Mortgage Portfolio BlackRock World Income Fund
Municipal Fixed Income Funds
BlackRock California Municipal Bond Fund BlackRock High Yield Municipal Fund BlackRock Intermediate Municipal Fund	BlackRock National Municipal Fund BlackRock New Jersey Municipal Bond Fund BlackRock New York Municipal Bond Fund	BlackRock Pennsylvania Municipal Bond Fund BlackRock Short-Term Municipal Fund

Target Risk & Target Date Funds†
BlackRock Prepared Portfolios	LifePath Active Portfolios		LifePath Portfolios		LifePath Index Portfolios
Conservative Prepared Portfolio	2015	2035	Retirement	2040	Retirement	2040
Moderate Prepared Portfolio	2020	2040	2020	2045	2020	2045
Growth Prepared Portfolio	2025	2045	2025	2050	2025	2050
Aggressive Growth Prepared Portfolio	2030	2050	2030	2055	2030	2055
			2035		2035

    †  Mixed  asset fund.

BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. 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) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.

52     BLACKROCK FUNDS II     SEPTEMBER 30, 2012

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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 a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns 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.

PREPARE-9/12-AR

Item 2	–	Code of Ethics – The registrant (or “Fund”) has adopted a code of ethics, as of the end of the period covered by this report, applicable to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, there have been no amendments to or waivers granted under the code of ethics. A copy of the code of ethics is available without charge at www.blackrock.com.
Item 3	–	Audit Committee Financial Expert – The registrant’s board of trustees (the “board of trustees”), has determined that (i) the registrant has the following audit committee financial experts serving on its audit committee and (ii) each audit committee financial expert is independent:
		Robert M. Hernandez
		Fred G. Weiss
		Stuart E. Eizenstat
		Under applicable securities laws, a person determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and board of trustees in the absence of such designation or identification.
Item 4	–	Principal Accountant Fees and Services

The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:

	(a) Audit Fees		(b) Audit-Related Fees1		(c) Tax Fees2		(d) All Other Fees3
Entity Name	Current     Fiscal Year     End	Previous     Fiscal  Year     End	Current     Fiscal Year     End	Previous     Fiscal  Year     End	Current     Fiscal Year     End	Previous     Fiscal  Year     End	Current     Fiscal Year     End	Previous     Fiscal Year     End
BlackRock Aggressive Growth Prepared Portfolio	$24,100	$23,900	$0	$0	$12,350	$12,350	$0	$0
BlackRock Conservative Prepared Portfolio	$24,100	$23,900	$0	$0	$12,350	$12,350	$0	$0
BlackRock Core Bond Portfolio	$50,000	$39,400	$0	$0	$14,600	$14,100	$0	$0
BlackRock GNMA Portfolio	$38,300	$34,400	$0	$0	$14,600	$14,100	$0	$0
BlackRock Growth Prepared Portfolio	$24,100	$23,900	$0	$0	$12,350	$12,350	$0	$0
BlackRock High Yield Bond Portfolio	$49,900	$46,100	$0	$13,300	$52,050	$62,000	$0	$0
BlackRock Inflation Protected Bond Portfolio	$32,000	$29,600	$0	$0	$14,600	$14,100	$0	$0
BlackRock Long Duration Bond Portfolio	$43,300	$39,400	$0	$0	$14,600	$14,100	$0	$0
BlackRock Low Duration Bond Portfolio	$43,000	$39,100	$0	$12,000	$14,600	$24,300	$0	$0
BlackRock Moderate Prepared Portfolio	$24,100	$23,900	$0	$0	$12,350	$12,350	$0	$0
BlackRock Secured Credit Portfolio	$52,400	$48,500	$0	$0	$14,600	$14,100	$0	$0
BlackRock U.S. Government Bond Portfolio	$40,000	$34,300	$0	$12,000	$14,600	$24,300	$0	$0

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The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (“Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Fund Service Providers”):

	Current Fiscal Year End	Previous Fiscal Year End
(b) Audit-Related Fees1	$0	$0
(c) Tax Fees2	$0	$0
(d) All Other Fees3	$2,970,000	$3,030,000

¹ The nature of the services includes assurance and related services reasonably related to the performance of the audit of financial statements not included in Audit Fees.

² The nature of the services includes tax compliance, tax advice and tax planning.

³ Aggregate fees borne by BlackRock in connection with the review of compliance procedures and attestation thereto performed by D&T with respect to all of the   registered closed-end funds and some of the registered open-end funds advised by BlackRock.

(e)(1) Audit Committee Pre-Approval Policies and Procedures:

The Committee has adopted policies and procedures with regard to the pre-approval of services. Audit, audit-related and tax compliance services provided to the registrant on an annual basis require specific pre-approval by the Committee. The Committee also must approve other non-audit services provided to the registrant and those non-audit services provided to the Investment Adviser and Fund Service Providers that relate directly to the operations and the financial reporting of the registrant. Certain of these non-audit services that the Committee believes are (a) consistent with the SEC’s auditor independence rules and (b) routine and recurring services that will not impair the independence of the independent accountants may be approved by the Committee without consideration on a specific case-by-case basis (“general pre-approval”). The term of any general pre-approval is 12 months from the date of the pre-approval, unless the Committee provides for a different period. Tax or other non-audit services provided to the registrant which have a direct impact on the operations or financial reporting of the registrant will only be deemed pre-approved provided that any individual project does not exceed $10,000 attributable to the registrant or $50,000 per project. For this purpose, multiple projects will be aggregated to determine if they exceed the previously mentioned cost levels.

Any proposed services exceeding the pre-approved cost levels will require specific pre-approval by the Committee, as will any other services not subject to general pre-approval (e.g., unanticipated but permissible services). The Committee is informed of each service approved subject to general pre-approval at the next regularly scheduled in-person board meeting. At this meeting, an analysis of such services is presented to the Committee for ratification. The Committee may delegate to the Committee Chairman the authority to approve the provision of and fees for any specific engagement of permitted non-audit services, including services exceeding pre-approved cost levels.

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(e)(2) None of the services described in each of Items 4(b) through (d) were approved by the Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

(f) Not Applicable

(g) The aggregate non-audit fees paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Fund Service Providers were:

Entity Name	Current Fiscal Year   End	Previous Fiscal Year End
BlackRock Aggressive Growth Prepared Portfolio	$12,350	$12,350
BlackRock Conservative Prepared Portfolio	$12,350	$12,350
BlackRock Core Bond Portfolio	$14,600	$14,100
BlackRock GNMA Portfolio	$14,600	$14,100
BlackRock Growth Prepared Portfolio	$12,350	$12,350
BlackRock High Yield Bond Portfolio	$52,050	$75,300
BlackRock Inflation Protected Bond Portfolio	$14,600	$14,100
BlackRock Long Duration Bond Portfolio	$14,600	$14,100
BlackRock Low Duration Bond Portfolio	$14,600	$36,300
BlackRock Moderate Prepared Portfolio	$12,350	$12,350
BlackRock Secured Credit Portfolio	$14,600	$14,100
BlackRock U.S. Government Bond Portfolio	$14,600	$36,300

Additionally, SSAE 16 Review (Formerly, SAS No. 70) fees for the current and previous fiscal years of $2,970,000 and $3,030,000, respectively, were billed by D&T to the Investment Adviser.

(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser and the Fund Service Providers that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

Item 5	–	Audit Committee of Listed Registrants – Not Applicable
Item 6	–	Investments
		(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.
		(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.

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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 – There have been no material changes to these procedures.
Item 11	–	Controls and Procedures

(a) –

The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended.

(b) –

There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12 – Exhibits attached hereto

(a)(1) –	Code of Ethics – See Item 2
(a)(2) –	Certifications – Attached hereto
(a)(3) –	Not Applicable
(b) –	Certifications – Attached hereto

5

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 Funds II
By:	/s/ John M. Perlowski
	John M. Perlowski
	Chief Executive Officer (principal executive officer) of
	BlackRock Funds II
Date: December 4, 2012

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/ John M. Perlowski
	John M. Perlowski
	Chief Executive Officer (principal executive officer) of
	BlackRock Funds II
Date: December 4, 2012

By:	/s/ Neal J. Andrews
	Neal J. Andrews
	Chief Financial Officer (principal financial officer) of
	BlackRock Funds II

Date: December 4, 2012

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