BlackRock ETF Trust II

· BlackRock AAA CLO ETF | CLOA | NASDAQ

· BlackRock Flexible Income ETF | BINC | NYSE Arca

· BlackRock Floating Rate Loan ETF | BRLN | Cboe BZX

· BlackRock High Yield Muni Income Bond ETF | HYMU | Cboe BZX

· BlackRock Intermediate Muni Income Bond ETF | INMU | NYSE Arca

· BlackRock Short-Term California Muni Bond ETF | CALY | NASDAQ

· BlackRock Total Return ETF | BRTR | NASDAQ

Table of Contents

Investment Objective

The BlackRock AAA CLO ETF (the “Fund”) seeks to provide capital preservation and current income by investing principally in a portfolio composed of U.S. dollar-denominated AAA-rated collateralized loan obligations (“CLOs”).

Performance

The inception date of the Fund was January 10, 2023. The first day of secondary market trading was January 12, 2023.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

For much of the period, the expectation that the U.S. Federal Reserve would keep short-term interest rates “higher-for-longer” benefited floating rate assets such as collateralized loan obligations (“CLOs”). While loan downgrades continued to outpace loan upgrades, underlying default rates for CLOs were relatively subdued and demand remained strong for high quality, investment grade issues. Given their floating rate feature and the rise seen in reference rates entering the period, CLO performance benefited from higher all-in yields. Price appreciation due to spread compression also supported returns for the asset class, especially in November and December when risk assets broadly rallied.

The Fund outperformed its benchmark, the JP Morgan CLOIE AAA Index. The Fund was active in purchasing CLOs with managers that have a demonstrated track record in managing credit through multiple economic cycles. This approach supported the Fund’s performance as issues with top-tier managers are generally more liquid due to their higher quality. In this vein, the Fund purchased AAA-rated CLOs at a discount which experienced significant price strength as investor demand for high quality profiles at the top of the capital stack remained strong. Additionally, the Fund began to buy bonds in the AA and A ratings categories which became undervalued as they initially lagged the rally. This also proved additive to performance as these issues subsequently joined the price rally.

Portfolio Information

Investment Objective

The BlackRock Flexible Income ETF (the “Fund”) seeks to maximize long-term income by primarily investing in debt and income-producing securities with a secondary objective of capital appreciation.

Performance

The inception date of the Fund was May 19, 2023. The first day of secondary market trading was May 23, 2023.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

Credit-based fixed-income assets delivered positive returns in the six-month period, reflecting anticipation of a soft landing for the economy and a moving forward of expectations for when the U.S. Federal Reserve (“Fed”) would begin to cut short term interest rates.

Positive contributors to the Fund’s performance included positioning in securitized assets, non-U.S. corporate bonds, and U.S. high yield corporate bonds. The Fund’s stance with respect to overall portfolio duration and positioning along the yield curve also contributed to performance.

The Fund was opportunistic within the U.S. high yield market while remaining cautious with respect to credits farther down the capital stack. Yields for higher quality bonds within the segment have remained attractive despite tighter spreads while valuations appeared stretched within the lower quality CCC ratings category. The Fund also favored non-U.S. corporate bonds to gain diversification and incremental yield when hedged back to the U.S. dollar. Within securitized assets, the Fund favored collateralized loan obligations while positioning tactically within commercial mortgage-backed securities and asset-backed securities. Within these sectors, the Fund was focused on high-quality segments with favorable risk/reward profiles. The Fund trimmed its allocation to emerging markets based on less compelling valuations, heightened macro uncertainty, and adverse technical factors which impacted the supply and demand backdrop. With the Fed taking a March rate cut off the table at its late January meeting, the Fund had a cautious stance with respect to duration and corresponding interest rate sensitivity entering the second half of its fiscal year, while favoring the belly of the curve which appeared to have the most potential to rally.

Portfolio Information

Investment Objective

The BlackRock Floating Rate Loan ETF (the “Fund”) primarily seeks to provide high current income and secondarily seeks to provide long-term capital appreciation.

Performance

The inception date of the Fund was October 4, 2022. The first day of secondary market trading was October 6, 2022.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

The U.S. Federal Reserve (“Fed”) held short-term interest rates steady during the period, leaving the target range for the benchmark fed funds rate at 5.25%-5.50%. The loan market posted a strong positive return for the six months, with much of the gain experienced in November and December when a “soft landing” narrative took hold and risk assets broadly rallied on hopes the economy would avoid recession.

The Fund modestly underperformed its benchmark for the six months. Positive contributors to relative performance included strong issuer selection within and a slight overweight to loans in the CCC ratings category. In sector terms, contributions were highlighted by allocations to food & beverage, aerospace & defense, and leisure. Out of benchmark exposure to liquid, indexed high yield corporate bond vehicles also proved additive as credit sentiment strengthened and investors began to anticipate Fed rate cuts in 2024. On the downside, underweight exposure to lower quality loans in the B2 and B3 ratings categories detracted from relative return.

Portfolio Information

Investment Objective

The BlackRock High Yield Muni Income Bond ETF (the “Fund”) primarily seeks to maximize tax-free current income and secondarily seeks to maximize capital appreciation with a portfolio composed principally of high yield and other income-generating U.S. municipal bonds.

Performance

The inception date of the Fund was March 16, 2021. The first day of secondary market trading was March 18, 2021.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

Municipal bonds delivered positive total returns in the semiannual period. The market initially experienced weakness in the span from August through October, as a resurgence in growth expectations and increased U.S. Treasury issuance contributed to a sharp increase in yields. The Fund’s investment adviser sought to take advantage of the weak market conditions to capture higher yields while maintaining a long duration stance in the portfolio. (Duration is a measure of interest rate sensitivity.) In the second half of the period, investors began to anticipate the potential for a dovish shift in interest rate policy. The resulting rally helped the municipal market recover its earlier losses and close with a solid gain.

The Fund produced a robust total return and outperformed its benchmark. An overweight in non investment-grade bonds contributed to performance, as did the portfolio’s long duration and positions in longer-dated securities. At the sector level, the largest contributions came from holdings in corporate-backed bonds (primarily pre-paid gas and airline issues) and the other industries category, which includes development districts. Positions in the state tax-backed sector also contributed, led by Puerto Rico. At a time of positive performance for both the broader market and the Fund, there were no meaningful detractors. In terms of portfolio activity, the investment adviser remained focused on tax-loss selling and maintaining an attractive yield for the Fund.

Portfolio Information

Investment Objective

The BlackRock Intermediate Muni Income Bond ETF (the “Fund”) seeks to maximize tax-free current income.

Performance

The inception date of the Fund was March 16, 2021. The first day of secondary market trading was March 18, 2021.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

The fixed-income markets experienced elevated volatility in the semiannual period. Bonds initially sold off due to better-than-expected economic growth and increased inflation expectations. However, the U.S. Federal Reserve’s (Fed’s) apparent shift to a more dovish policy stance fueled a rally in the latter half of the period that helped the market recover its earlier losses and close in positive territory.

The Fund’s investment adviser responded to these developments by maintain a somewhat defensive posture with respect to duration (interest rate sensitivity) in the first part of the period. The adviser subsequently shifted to a long duration stance based on its anticipation of the Fed’s policy change and its belief that the market sell-off had created compelling valuations. These moves made a positive contribution to performance.

The Fund also benefited from its position in floating-rate notes, which outperformed in the first half of the period. Although the category experienced weaker relative price performance once the broader market began to rally, it continued to provide attractive income. Floating-rate securities also allowed the adviser to balance the Fund’s overweight in 15- to 20-year maturities without needing to allocate capital to the more richly priced short end of the yield curve. The overweight in bonds with maturities of 15 years and above contributed to returns due to their above-average yields and strong price performance in the latter half of the period.

Credit positioning had a slightly negative impact overall. The Fund held a modest overweight in high yield bonds, which aided performance. However, a tilt in favor of A and BBB rated securities within the investment-grade category detracted. Sector positioning was mixed. While underweights in the tax-backed and utility sectors contributed, overweights in healthcare, higher education, and housing detracted.

Portfolio Information

Investment Objective

The BlackRock Short-Term California Muni Bond ETF (the “Fund”) seeks to maximize tax-free current income by investing in short-term municipal bonds issued in the State of California.

Performance

The inception date of the Fund was July 11, 2023. The first day of secondary market trading was July 13, 2023.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Management Commentary

The fixed-income markets experienced elevated volatility in the semiannual period. Bonds initially sold off due to better-than-expected economic growth and increased inflation expectations. However, the U.S. Federal Reserve’s (Fed’s) apparent shift to a more dovish policy stance fueled a rally in the latter half of the period that helped the market recover its earlier losses and close in positive territory. Municipal bonds were further supported by favorable supply-and-demand trends. Municipal note supply remained subdued compared to pre-pandemic levels due to healthy issuer balance sheets, elevated rainy-day funds, the continued effects of COVID-era fiscal stimulus, and prior years of low interest rates that allowed issuers to sell longer-dated debt.

The Fund’s steady allocation to Variable Rate Demand Notes (“VRDNs”) and Tender Option Bond Floaters (“TOBs”) contributed to performance. Holdings in these categories offered price stability and attractive yields. Positions in the airports and prepaid gas sectors contributed, as did overweights in the local tax-backed, corporate-backed, and transportation sectors. On the other hand, the lack of a position in pre-refunded/escrow bonds detracted. Underweights in the state tax-backed and utilities sectors also hurt relative performance.

At the close of the period, the Fund maintained a longer duration stance amid market expectations that the Fed will reduce rates later in 2024 if inflation continues to decline. The Fund maintained selective holdings in commercial paper given the category’s attractive yield and ability to provide stable returns in the context of a volatile interest-rate environment.

Portfolio Information

Investment Objective

The BlackRock Total Return ETF (the “Fund”) seeks to realize a total return that exceeds that of the Bloomberg U.S. Aggregate Bond Index.

Performance

The inception date of the Fund was December 12, 2023. The first day of secondary market trading was December 14, 2023.

Past performance is not an indication of future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. See “About Fund Performance” for more information.

Expense Example

Portfolio Information

About Fund Performance

Past performance is not an indication of future results. Financial markets have experienced extreme volatility and trading in many instruments has been disrupted. These circumstances may continue for an extended period of time and may continue to affect adversely the value and liquidity of each Fund’s investments. As a result, current performance may be lower or higher than the performance data quoted. Performance data current to the most recent month-end is available at blackrock.com. Performance results assume reinvestment of all dividends and capital gain distributions and do not reflect the deduction of taxes that a shareholder would pay on fund distributions or on the redemption or sale of fund shares. The investment return and principal value of shares will vary with changes in market conditions. Shares may be worth more or less than their original cost when they are redeemed or sold in the market. Performance for certain funds may reflect a waiver of a portion of investment advisory fees. Without such a waiver, performance would have been lower.

Net asset value or “NAV” is the value of one share of a fund as calculated in accordance with the standard formula for valuing mutual fund shares. Since shares of a fund may not trade in the secondary market until after the fund’s inception, for the period from inception to the first day of secondary market trading in shares of the fund, the NAV of the fund is used as a proxy for the Market Price to calculate market returns. Market and NAV returns assume that dividends and capital gain distributions have been reinvested at Market Price and NAV, respectively.

An index is a statistical composite that tracks a specified financial market or sector. Unlike a fund, an index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by a fund. These expenses negatively impact fund performance. Also, index returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, index returns would be lower.

Disclosure of Expenses

Shareholders of each Fund may incur the following charges: (1) transactional expenses, including brokerage commissions on purchases and sales of fund shares and (2) ongoing expenses, including management fees and other fund expenses. The expense examples shown (which are based on a hypothetical investment of $1,000 invested at the beginning of the period and held through the end of the period) 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 funds.

The expense examples provide information about actual account values and actual expenses. Annualized expense ratios reflect contractual and voluntary fee waivers, if any. 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 under the heading 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 the Fund and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

The expenses shown in the expense examples are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as brokerage commissions and other fees paid on purchases and sales of fund shares. 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.

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the six months ended January 31, 2024 for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of financial instruments. For a description of the input levels and information about the Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s financial instruments categorized in the fair value hierarchy. The breakdown of the Fund’s financial instruments into major categories is disclosed in the Schedule of Investments above.

See notes to financial statements.