N-CSRS 1 f3174d1.htm BLACKROCK FUNDS

UNITEDSTATES

SECURITIESANDEXCHANGECOMMISSION

Washington,D.C.20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT

COMPANIES

Investment Company Act file number: 811-05742

Name of Fund: BlackRock Funds

BlackRock Short Obligations Fund

BlackRock Total Factor Fund

BlackRock Liquid Environmentally Aware Fund

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Funds, 55 East 52nd Street, New York, NY 10055

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

Date of fiscal year end: 07/31/2020

Date of reporting period: 01/31/2020

Item 1 – Report to Stockholders

 

LOGO   JANUARY 31, 2020

 

  

2020 Semi-Annual Report

(Unaudited)

 

BlackRock FundsSM

 

·  

BlackRock Liquid Environmentally Aware Fund

 

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from BlackRock or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

You may elect to receive all future reports in paper free of charge. If you hold accounts directly with BlackRock, you can call (800) 441-7762 to inform BlackRock that you wish to continue receiving paper copies of your shareholder reports. If you hold accounts through a financial intermediary, you can follow the instructions included with this disclosure, if applicable, or contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Please note that not all financial intermediaries may offer this service. Your election to receive reports in paper will apply to all funds advised by BlackRock Advisors, LLC, BlackRock Fund Advisors or their affiliates, or all funds held with your financial intermediary, as applicable.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive electronic delivery of shareholder reports and other communications by: (i) accessing the BlackRock website at blackrock.com/edelivery and logging into your accounts, if you hold accounts directly with BlackRock, or (ii) contacting your financial intermediary, if you hold accounts through a financial intermediary. Please note that not all financial intermediaries may offer this service.

 

Not FDIC Insured • May Lose Value • No Bank Guarantee


The Markets in Review

Dear Shareholder,

U.S. equities and bonds both delivered impressive returns over the last 12 months, despite fears and doubts about the economy that were ultimately laid to rest with unprecedented monetary stimulus and a sluggish yet resolute performance from the U.S. economy. Investors were further encouraged by the apparent cessation of trade hostilities between the United States and China late in 2019, although some of these gains were reversed in January 2020, as the spread of the coronavirus injected uncertainty into markets.

Returns for most securities were particularly strong in the second half of the reporting period, as investors began to realize that the U.S. economy was maintaining the modest yet steady growth that has characterized this economic cycle. In the United States, large-cap stocks led the broader market, while small-cap equities still posted healthy returns. Emerging market stocks, however, were constrained by coronavirus fears, losing most of their gains near the end of the reporting period.

Fixed-income securities played an important role in diversified portfolios by delivering strong returns amid economic uncertainty, as interest rates declined (and bond prices rose). Long-term bonds, particularly long-term Treasuries, generally posted the strongest returns, as inflation remained low despite an uptick late in the reporting period. Investment-grade and high-yield corporate bonds also posted solid returns, as the credit fundamentals in corporate markets remained relatively solid.

Continuing the shift toward looser monetary policy that began in early 2019, the U.S. Federal Reserve (the “Fed”) increased efforts to stimulate economic activity. The Fed reduced interest rates three times during the reporting period, from July 2019 to October 2019. In December 2019, the Fed further reassured markets by indicating that it is unlikely to reverse course and tighten monetary policy in the near future. Following in the Fed’s footsteps, the European Central Bank announced aggressive economic stimulus measures, including lower interest rates and the return of its bond purchasing program. The Bank of Japan continued its accommodative monetary policy, while China committed to looser credit conditions and an increase in fiscal spending.

The outpouring of global economic stimulus led to a sharp rally in risk assets throughout the world despite the headwind of rising geopolitical and trade tensions. Hopes continued to remain high as the current economic expansion became the longest in U.S. history.

Looking ahead, we believe there are reasons to remain cautious about the U.S. economy, most notably the uncertainty around the duration of the impact of the coronavirus-driven economic contraction, the U.S. presidential election and future earnings growth. At this time we are watching the developments around the world very closely to assess the full extent of the risks of economic disruption that could result from the global pandemic. Corporate earnings underperformed in 2019, but action by the Fed led to outstanding equity returns. With the future of monetary policy and consumer behaviors uncertain, earnings deterioration could act as a drag on equities.

Overall, we favor moderately increasing investment risk to benefit from expected growth. We are neutral on U.S. equities, but we favor emerging market and Japanese equities, which could benefit from an uptick in global trade and investment. Increasing cyclical exposure through value-style investing and maintaining a meaningful emphasis on high-quality companies through quality factors also makes sense for diversified investors. In fixed income, extremely low yields and inflation risk limit the effectiveness of many bond classes as a counterweight in portfolios. We favor higher-yielding bonds from emerging markets, where central banks have more room for further accommodation, while strategically using U.S. Treasuries as stabilizers.

In this environment, investors need to think globally, extend their scope across a broad array of asset classes, and be nimble as market conditions change. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in today’s markets.

Sincerely,

 

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

 

Total Returns as of January 31, 2020
     6-Month   12-Month

U.S. large cap equities
(S&P 500® Index)

  9.31%   21.68%

U.S. small cap equities
(Russell 2000® Index)

  3.26   9.21

International equities
(MSCI Europe, Australasia, Far East Index)

  6.12   12.10

Emerging market equities
(MSCI Emerging Markets Index)

  3.36   3.81

3-month Treasury bills
(ICE BofAML 3-Month U.S. Treasury Bill Index)

  0.98   2.22

U.S. Treasury securities
(ICE BofAML 10-Year U.S. Treasury Index)

  5.13   12.15

U.S. investment grade bonds
(Bloomberg Barclays U.S. Aggregate Bond Index)

  4.20   9.64

Tax-exempt municipal bonds
(S&P Municipal Bond Index)

  3.08   8.21

U.S. high yield bonds
(Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)

  3.43   9.40
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.
 

 

 

2    THIS PAGE IS NOT PART OF YOUR FUND REPORT


Table of Contents

 

      Page  

The Markets in Review

     2  

Semi-Annual Report:

  

Money Market Overview

     4  

Fund Information

     5  

Disclosure of Expenses

     5  

Financial Statements:

  

Schedule of Investments

     6  

Statement of Assets and Liabilities

     9  

Statement of Operations

     10  

Statements of Changes in Net Assets

     11  

Financial Highlights

     12  

Notes to Financial Statements

     15  

Trustee and Officer Information

     20  

Additional Information

     21  

Glossary of Terms Used in This Report

     22  

 

 

 

LOGO

 

 

            3


Money Market Overview  For the Six-Month Period Ended January 31, 2020

 

January 2020 is officially in the books — as the second half of 2019 progressed, investors witnessed a pivot from the Fed’s first half “patient” approach to a more active Fed delivering 0.25% cuts in each of July, September and October to the Federal Funds target rate, which ended 2019 in a range of 1.50%-1.75%. Prompting these cuts, in our view, were concerns about slowing global growth amid uncertainties associated with geopolitical events including U.S.-China trade tensions, and muted inflation. We believe such concerns were also reflected in the slope of the U.S. Treasury yield curve between three months and 10 years, which was periodically inverted during 2019. However, even as the U.S. economy began to exhibit signs of softness, a strong labor market and rising consumer spending helped keep the economic expansion intact — with the support of the Fed’s more accommodative policy. We believe the future path for the Federal Funds rate looks to be stable for the foreseeable future as the Fed has acknowledged, in our opinion, a relatively high bar for further policy action.

Another notable event this year was the bout of temporary excessive volatility in the repurchase agreement (“repo”) market in mid-September, due in part to a prior contraction in excess reserves in the banking system, and outsized deposit flow activity related to corporate tax payments and the settlement of U.S. Treasury obligations. This prompted the Fed to inject a substantial amount of liquidity into the financial system during the balance of the year. Specifically, the Fed conducted regular overnight and term repo operations (known as temporary open market operations), and also began purchasing U.S. Treasury bills beginning at a rate of $60 billion per month in order to support the flow of funds and help maintain control over short-term interest rates. The dislocations in the repo market highlighted, in our opinion, the need for the Fed to determine the appropriate level of excess reserves in the post financial crisis regulatory environment.

The U.S. debt ceiling was again suspended in July, and net new U.S. Treasury bill issuance exceeded $250 billion in 2019. That said, the expanded footprint by the Fed in the U.S. Treasury bill market, in our view, contributed to a reduction in investable supply available to the public and in part caused a contraction in the relative value of such instruments during the latter part of 2019.

Another important development in 2019 included the government-sponsored agencies, having been guided by regulatory agencies, to issue floating rate notes indexed to the Secured Overnight Financing Rate (“SOFR”), a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities, and the reference rate generally expected to replace the London Interbank Offered Rate (“LIBOR”). In addition to the agency notes referenced to SOFR, some large financial institutions also issued certificates of deposit and commercial paper linked to this index, and demand for such obligations was generally strong. Investors also witnessed a pick-up in 2019 in investment grade green bond issuance where $29.0 billion in supply entered the market.

Sticking on the topic of demand, asset flows into money market mutual funds and short duration bond funds were strong while primary market investment grade issuance was reportedly down rather markedly. This technical backdrop supported spreads in credit instruments during 2019, and we believe this dynamic should continue to play out in 2020. Similar to 2018, we witnessed seasonal spread widening of the three-month LIBOR overnight-indexed swap spread, a general proxy for bank funding stress. In our opinion, issuers appeared willing to pay up in terms of additional yield spread to secure their funding needs over stress periods such as corporate tax payment days and balance sheet reporting dates, including most importantly year end, as investors paid close attention to the funding markets for clues to monetary system pressures. Throughout January, demand remained strong for commercial paper and other credit instruments, causing spreads to tighten. The three-month LIBOR overnight-indexed swap spread tightened to around 0.18% in January 2020 from around 0.39% in late December. This measure is expected to grind incrementally tighter in the weeks ahead.

With the market pricing in little action for further interest rate cuts, the Fed providing liquidity to the market during stress periods, assets continuing to flow into money market funds, and tentative optimism over the near-term outlook for global trade, we will consider 2019 historic in many ways and 2020 off to a historic start.

Looking ahead, based on recent communications, we believe the FOMC is likely to keep interest rate policy on hold for the foreseeable future, but we are cognizant that geopolitical events could bias risks to the downside. The net new supply of U.S. Treasury bills is expected to increase approximately $200 billion between January and mid- March; however, both the Fed’s footprint in the market and expected ongoing strong demand at the front end of the curve from other investors should contain the level of any related upward rate moves on U.S. Treasury bills, in our view. Publicly available U.S. Treasury bill supply is expected to contract materially beginning in the middle of March.

We believe green bond and commercial paper issuance will continue to increase throughout 2020. In our view, the Fed will continue to monitor conditions in the overnight repo market and provide liquidity to the banking system as needed to ensure adequate control of short-term interest rates.

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

 

 

4    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Fund Information  as of January 31, 2020    BlackRock Liquid Environmentally Aware Fund

 

Investment Objective

BlackRock Liquid Environmentally Aware Fund’s (the “Fund”) investment objective is to seek as high a level of current income as is consistent with liquidity and preservation of capital while giving consideration to select environmental criteria.

 

CURRENT SEVEN-DAY YIELDS

 

    

7-Day

SEC Yields

   

7-Day

Yields

 

Institutional

    1.61     1.61

Direct

    1.71       1.71  

Investor A

    1.36       1.36  

The 7-Day SEC Yields may differ from the 7-Day Yields shown above due to the fact that the 7-Day SEC Yields exclude distributed capital gains.

Past performance is not indicative of future results.

PORTFOLIO COMPOSITION

 

Asset Type  

Percent of

Net Assets

 

Commercial Paper

    33

Repurchase Agreements

    30  

Certificates of Deposit

    23  

Corporate Bonds

    6  

Time Deposits

    4  

Foreign Agency Obligations

    2  

Other Assets Less Liabilities

    2  
 

 

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses and (b) operating expenses, including investment advisory fees, administration fees, service and distribution fees and other fund expenses. The expense example shown below (which is based on a hypothetical investment of $1,000 invested on August 1, 2019 and held through January 31, 2020) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their Fund and share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Expense Example

 

    Actual           Hypothetical (a)           
     

Beginning

Account Value

(08/01/19)

 

 

 

    

Ending

Account Value

(01/31/20)

 

 

 

    

Expenses

Paid During

the Period (b)

 

 

 

           

Beginning

Account Value

(08/01/19)

 

 

 

    

Ending

Account Value

(01/31/20)

 

 

 

    

Expenses

Paid During

the Period (b)

 

 

 

      

Annualized
Expense
Ratio
 
 
 

Institutional

  $ 1,000.00      $ 1,009.50      $ 1.01       $ 1,000.00      $ 1,024.13      $ 1.02          0.20

Direct

    1,000.00        1,010.00        0.51         1,000.00        1,024.63        0.51          0.10  

Investor A

    1,000.00        1,008.20        2.27               1,000.00        1,022.87        2.29          0.45  

 

(a) 

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

(b) 

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 184/366.

 

 

FUND INFORMATION      5  


Schedule of Investments  (unaudited) 

January 31, 2020

  

BlackRock Liquid Environmentally Aware Fund

(Percentages shown are based on Net Assets)

 

Security         

Par

(000)

    Value  

Corporate Bonds — 6.4%

 

 
Banks — 2.5%                  

Australia & New Zealand Banking Group Ltd., 2.13%, 08/19/20

    USD       7,500     $ 7,516,181  

Bank of Nova Scotia (The), 2.15%, 07/14/20

      5,700       5,710,737  

Citibank NA, 2.10%, 06/12/20

      5,000       5,005,203  

Commonwealth Bank of Australia(a):

     

2.25%, 03/10/20

      1,250       1,250,687  

2.05%, 09/18/20

      3,500       3,506,668  

Nordea Bank Abp, (LIBOR USD 3 Month + 0.47%), 2.38%, 05/29/20(a)(b)

      1,686       1,688,662  
     

 

 

 
          24,678,138  
Capital Markets — 1.0%                  

UBS AG:

     

2.35%, 03/26/20

      5,500       5,504,950  

(LIBOR USD 3 Month + 0.85%), 2.76%, 06/01/20(b)

      1,600       1,604,421  

(LIBOR USD 3 Month + 0.58%), 2.46%, 06/08/20(a)(b)

      2,300       2,303,453  
     

 

 

 
        9,412,824  
Consumer Finance — 0.9%        

Toyota Motor Credit Corp.(b):

     

(LIBOR USD 3 Month + 0.26%), 2.10%, 04/17/20

      4,300       4,302,946  

(SOFR + 0.40%), 1.98%, 10/23/20

      5,000       5,003,919  
     

 

 

 
        9,306,865  
Entertainment — 2.0%                  

TWDC Enterprises 18 Corp., (LIBOR USD 3 Month + 0.13%), 2.03%, 03/04/20(b)

      20,000       20,006,097  
     

 

 

 

Total Corporate Bonds — 6.4%
(Cost: $63,359,838)

 

    63,403,924  
     

 

 

 

Foreign Agency Obligations — 2.3%

 

Canada — 2.3%                  

CPPIB Capital, Inc., (SOFR + 0.32%), 1.90%, 12/10/20(a)(b)

      23,250       23,254,130  
     

 

 

 

Total Foreign Agency Obligations — 2.3%
(Cost: $23,250,000)

 

    23,254,130  
     

 

 

 

Certificates of Deposit — 22.8%

 

Domestic — 0.1%                  

Goldman Sachs Bank USA, (SOFR + 0.25%), 1.83%, 06/29/20(b)

      1,000       999,995  
     

 

 

 
Euro — 2.4%                  

ABN AMRO Equity Plus Fund, 2.09%, 02/13/20

      2,000       2,000,305  

Banque Federative du Credit Mutuel SA, 1.93%, 01/08/21(c)

      17,500       17,206,870  

Credit Industriel et Commercial SA, 1.93%, 01/08/21(c)

      5,000       4,916,248  
     

 

 

 
        24,123,423  
Yankee — 20.3%(d)              

Banco Santander SA, New York, 1.91%, 02/14/20

      7,500       7,501,130  

Bank of Montreal, Chicago(b):

     

(LIBOR USD 1 Month + 0.18%), 1.96%, 05/01/20

      4,000       4,000,826  

(LIBOR USD 1 Month + 0.16%), 1.94%, 06/01/20

      2,000       2,000,541  

(LIBOR USD 1 Month + 0.18%), 1.87%, 06/08/20

      3,000       3,001,056  
Security         

Par

(000)

    Value  
Yankee (continued)                  

(US Federal Funds Effective Rate (continuous series) + 0.31%), 1.91%, 07/13/20

    USD       1,000     $ 1,000,613  

(SOFR + 0.32%), 1.90%, 09/22/20

      10,000         10,005,970  

(SOFR + 0.40%), 1.98%, 10/02/20

      7,500       7,507,140  

Bank of Nova Scotia, Houston, (LIBOR USD 1 Month + 0.23%), 1.90%, 08/17/20(b)

      12,000       12,005,853  

Canadian Imperial Bank of Commerce, New York(b):

     

(LIBOR USD 3 Month + 0.17%), 2.07%, 03/18/20

      1,300       1,300,401  

(US Federal Funds Effective Rate (continuous series) + 0.26%), 1.86%, 04/16/20

      10,000       10,002,221  

Credit Industriel et Commercial SA, New York, (LIBOR USD 3 Month + 0.07%), 1.85%, 02/01/21(b)

      5,000       4,999,997  

Credit Suisse AG, New York(b):

     

(SOFR + 0.23%), 1.81%, 02/14/20

      2,390       2,390,203  

(SOFR + 0.38%), 1.96%, 03/06/20

      10,000       10,002,699  

(SOFR + 0.37%), 1.95%, 05/22/20

      4,000       4,002,101  

(SOFR + 0.26%), 1.84%, 06/11/20 - 06/12/20

      6,000       6,001,126  

(LIBOR USD 3 Month + 0.10%), 2.04%, 07/01/20

      5,000       5,001,610  

Mizuho Bank Ltd., New York, (LIBOR USD 1 Month + 0.21%), 1.87%, 03/27/20(b)

      25,000       25,005,248  

MUFG Bank Ltd., New York, (LIBOR USD 1 Month + 0.25%), 1.98%, 05/05/20(b)

      2,000       2,000,834  

Natixis SA, New York, (LIBOR USD 1 Month + 0.26%), 1.94%, 05/15/20(b)

      1,000       1,000,665  

Nordea Bank Abp, New York(b):

     

(LIBOR USD 3 Month + 0.15%), 2.06%, 02/14/20

      900       900,064  

(LIBOR USD 1 Month + 0.23%), 1.93%, 07/09/20

      7,500       7,504,541  

Skandinaviska Enskilda Banken AB, New York(b):

     

(LIBOR USD 3 Month + 0.15%), 2.06%, 10/02/20

      5,000       5,002,938  

(LIBOR USD 3 Month + 0.12%), 2.03%, 11/13/20

      10,000       10,006,949  

Standard Chartered Bank, New York:

     

1.97%, 02/27/20

      20,000       20,004,111  

1.98%, 03/23/20

      7,500       7,502,958  

Svenska Handelsbanken, New York, (LIBOR USD 3 Month + 0.15%), 2.06%, 10/02/20(b)

      15,000       15,011,766  

Toronto-Dominion Bank, New York:

     

2.00%, 03/17/20 - 09/30/20

      14,500       14,502,972  

2.17%, 07/24/20

      1,500       1,503,712  

(US Federal Funds Effective Rate (continuous series) + 0.37%), 1.97%, 09/08/20(b)

      1,250       1,251,256  
     

 

 

 
        201,921,501  
     

 

 

 

Total Certificates of Deposit — 22.8%
(Cost: $226,933,014)

 

    227,044,919  
     

 

 

 

Commercial Paper — 32.6%

 

 

ABN AMRO Funding USA LLC(c):

     

1.68%, 03/05/20

      5,000       4,992,171  

1.71%, 03/27/20

      5,000       4,986,933  

1.72%, 04/03/20

      6,300       6,281,368  

Alpine Securitization Ltd., (LIBOR USD 1 Month + 0.17%), 1.83%, 03/06/20(b)

      9,500       9,500,000  
 

 

 

6    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Schedule of Investments  (unaudited) (continued)

January 31, 2020

  

BlackRock Liquid Environmentally Aware Fund

(Percentages shown are based on Net Assets)

 

Security         

Par

(000)

    Value  
Commercial Paper (continued)        

American Honda Finance Corp., 1.60%, 02/12/20(c)

    USD       10,000     $ 9,994,730  

Antalis SA, 1.68%, 02/20/20(c)

      10,000       9,990,833  

Australia & New Zealand Banking Group Ltd.(c):

     

1.62%, 02/20/20

      5,000       4,995,575  

1.66%, 03/13/20

      5,000       4,990,457  

Banco Santander SA, 1.64%, 04/03/20(c)

      12,500       12,464,781  

Bank of Nova Scotia (The):

     

1.66%, 03/30/20(c)

      15,000       14,959,978  

(LIBOR USD 1 Month + 0.18%), 1.96%, 05/01/20(b)

      4,000       4,000,815  

(LIBOR USD 1 Month + 0.16%), 1.82%, 05/27/20(b)

      2,000       2,000,399  

(LIBOR USD 1 Month + 0.18%), 1.86%, 06/11/20(b)

      2,000       2,000,625  

Barton Capital SA, 1.65%, 02/03/20(c)

      2,084       2,083,717  

BPCE SA, 1.74%, 07/31/20(c)

      5,000       4,957,028  

Canadian Imperial Bank of Commerce, (LIBOR USD 1 Month + 0.25%), 1.90%, 12/31/20(b)

      10,000       10,008,615  

Chariot Funding LLC, 1.61%, 02/03/20(c)

      20,000       19,997,358  

Commonwealth Bank of Australia(b):

     

(LIBOR USD 1 Month + 0.18%), 1.84%, 04/24/20

      2,500       2,499,668  

(LIBOR USD 3 Month + 0.05%), 1.93%, 10/09/20

      5,000       5,000,664  

Cooperatieve Rabobank UA, 1.55%, 02/07/20(c)

      10,000       9,997,025  

Credit Agricole Corporate and Investment Bank SA, 1.60%, 02/18/20(c)

      7,100       7,094,416  

European Investment Bank(c):

     

1.64%, 05/04/20

      5,000       4,978,968  

1.64%, 05/08/20

      5,000       4,978,045  

HSBC Bank plc(b):

     

(LIBOR USD 3 Month + 0.70%), 1.98%, 02/28/20

      3,000       3,000,354  

(LIBOR USD 3 Month + 0.23%), 2.08%, 10/13/20

      6,750       6,757,391  

Hydro-Quebec(c):

     

1.58%, 04/13/20

      25,000         24,921,221  

1.59%, 04/24/20

      2,969       2,958,206  

ING (US) Funding LLC(b):

     

(LIBOR USD 1 Month + 0.23%), 2.01%, 04/01/20

      10,000       10,002,526  

(LIBOR USD 3 Month + 0.15%), 2.06%, 09/14/20

      20,000       20,009,698  

Lloyds Bank plc, (LIBOR USD 3 Month + 0.06%), 1.96%, 07/06/20(b)

      7,500       7,500,612  
Security         

Par

(000)

    Value  
Commercial Paper (continued)        

Macquarie Bank Ltd., (LIBOR USD 1 Month + 0.25%), 1.94%, 07/08/20(b)

    USD       2,000     $ 2,001,234  

MetLife Short Term Funding LLC, 1.70%, 06/08/20(c)

      5,000       4,970,097  

MUFG Bank Ltd., 1.67%, 03/31/20(c)

      2,500       2,493,167  

National Australia Bank Ltd.(b):

     

(LIBOR USD 1 Month + 0.17%), 1.95%, 04/01/20

      5,000       4,999,285  

(LIBOR USD 1 Month + 0.23%), 1.89%, 08/20/20

      5,000       5,003,246  

Nordea Bank Abp, 1.71%, 04/29/20(c)

      2,000       1,991,698  

Pricoa Short Term Funding LLC, 1.65%, 02/14/20(c)

      4,000       3,997,471  

Province of Ontario Canada, 1.58%, 02/07/20(c)

      1,100       1,099,666  

Royal Bank of Canada(b):

     

(LIBOR USD 1 Month + 0.18%), 1.96%, 05/01/20

      4,000       4,000,826  

(SOFR + 0.31%), 1.89%, 08/17/20

      2,500       2,499,811  

(SOFR + 0.40%), 1.98%, 09/29/20

      13,000       13,002,421  

Santander UK plc, 1.66%, 03/02/20(c)

      17,500       17,475,392  

Societe Generale SA, 1.64%, 03/11/20(c)

      4,075       4,067,697  

Starbird Funding Corp., 1.60%, 02/03/20(c)

      2,030       2,029,734  

Toyota Motor Corp., (LIBOR USD 1 Month + 0.17%), 1.90%, 02/27/20(b)

      4,000       4,000,455  

UBS AG, 1.77%, 01/25/21(c)

      2,400       2,358,720  

Walt Disney Co. (The), 1.63%, 04/20/20(c)

      10,000       9,964,511  
     

 

 

 

Total Commercial Paper — 32.6%
(Cost: $323,769,006)

 

    323,859,608  
     

 

 

 

Time Deposits — 4.3%

 

 

Credit Agricole Corporate and Investment Bank SA, 1.57%, 02/03/20

      20,034       20,034,000  

Mizuho Bank Ltd., 1.60%, 02/03/20

      13,000       13,000,000  

Royal Bank of Canada, 1.57%, 02/03/20

      10,000       10,000,000  
   

 

 

 

Total Time Deposits — 4.3%
(Cost: $43,034,000)

 

    43,034,000  
   

 

 

 

Total Repurchase Agreements — 30.2%
(Cost: $301,000,000)

 

    301,000,000  
   

 

 

 

Total Investments — 98.6%
(Cost: $981,345,858)(e)

 

    981,596,581  

Other Assets Less Liabilities — 1.4%

 

    13,464,553  
   

 

 

 

Net Assets — 100.0%

      $   995,061,134  
   

 

 

 
 

 

(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 the rate in effect as of period end.

(c) 

Rates are the current rate or a range of current rates as of period end.

(d) 

Issuer is a U.S. branch of a foreign domiciled bank.

(e) 

Cost for U.S. federal income tax purposes.

 

 

SCHEDULE OF INVESTMENTS      7  


Schedule of Investments  (unaudited) (continued)

January 31, 2020

  

BlackRock Liquid Environmentally Aware Fund

 

Repurchase Agreements

 

     Repurchase Agreements       

Collateral

Counterparty   Coupon
Rate
    Purchase
Date
     Maturity
Date
    

Par

(000)

    

At Value

(000)

    

Proceeds

Including

Interest

      

Position

  

Original Par

  

Position

Received,

At Value

Bank of America Securities, Inc.

    1.59     01/31/20        02/03/20      $   130,000      $   130,000      $  130,017,225     U.S. Government Sponsored Agency Obligations, 3.50% to 4.00%, due 02/20/49 to 08/20/49    $  138,790,059    $  132,600,000
            

 

 

              

 

BMO Capital Markets Corp.

    1.59       01/31/20        02/03/20        20,000        20,000      20,002,650     U.S. Government Sponsored Agency Obligations, 1.91% to 5.00%, due 01/16/30 to 07/20/67    454,806,204    21,051,926
            

 

 

              

 

Citigroup Global Markets, Inc.

    1.59       01/31/20        02/03/20        50,000        50,000      50,006,625     U.S. Government Sponsored Agency Obligations, 3.00% to 7.00%, due 09/15/27 to 10/01/69    76,011,714    51,000,000
            

 

 

              

 

JP Morgan Securities LLC

    1.57       01/31/20        02/03/20        38,000        38,000      38,004,972     U.S. Treasury Obligations, 0.00% to 5.00%, due 03/26/20 to 11/15/49    36,218,200    38,760,002
    1.59       01/31/20        02/03/20        63,000        63,000      63,008,347     U.S. Government Sponsored Agency Obligations, 3.00% to 6.50%, due 09/20/33 to 12/20/49    247,661,035    64,260,000
            

 

 

              

 

Total JP Morgan Securities LLC

 

         $ 101,000                $  103,020,002
            

 

 

              

 

             $ 301,000                $  307,671,928
            

 

 

              

 

Fair Value Hierarchy as of Period End

Various inputs are used in determining the fair value of investments. For information about the Fund’s policy regarding valuation of investments, refer to the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy:

 

                                                                                                                                   
      Level 1        Level 2        Level 3        Total  

Assets:

                 

Investments:

                 

Short-Term Securities (a)

   $        $ 981,596,581        $        $ 981,596,581  
  

 

 

      

 

 

      

 

 

      

 

 

 

 

(a) 

See above Schedule of Investments for values in each security type.

See notes to financial statements.

 

 

8    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Statement of Assets and Liabilities  (unaudited)

January 31, 2020

 

    

BlackRock  

Liquid  
Environmentally  

Aware Fund  

ASSETS

 

Investments at value — unaffiliated (cost — $680,345,858)

  $ 680,596,581  

Cash

    13,019,205  

Repurchase agreements at value (cost — $301,000,000)

    301,000,000  

Receivables:

 

Interest — unaffiliated

    967,271  

From the Manager

    49,809  

Deferred offering costs

    86,161  

Prepaid expenses

    24,412  
 

 

 

 

Total assets

    995,743,439  
 

 

 

 

LIABILITIES

 

Payables:

 

Administration fees

    47,638  

Income dividend distributions

    488,973  

Investment advisory fees

    50,352  

Trustees’ and Officer’s fees

    1,422  

Professional fees

    51,637  

Service fees

    53  

Other accrued expenses

    42,230  
 

 

 

 

Total liabilities

    682,305  
 

 

 

 

NET ASSETS

  $ 995,061,134  
 

 

 

 

NET ASSETS CONSIST OF

 

Paid-in capital

  $ 994,768,832  

Accumulated earnings

    292,302  
 

 

 

 

NET ASSETS

  $ 995,061,134  
 

 

 

 

NET ASSET VALUE

 

Institutional — Based on net assets of $166,081,161 and 166,017,862 shares outstanding, unlimited number of shares authorized, $0.001 par value

  $ 1.0004  
 

 

 

 

Direct — Based on net assets of $828,726,826 and 828,403,710 shares outstanding, unlimited number of shares authorized, $0.001 par value

  $ 1.0004  
 

 

 

 

Investor A — Based on net assets of $253,147 and 253,048 shares outstanding, unlimited number of shares authorized, $0.001 par value

  $ 1.0004  
 

 

 

 

See notes to financial statements.

 

 

FINANCIAL STATEMENTS      9  


 

Statement of Operations  (unaudited)

Six Months Ended January 31, 2020

 

    

BlackRock    

Liquid    
Environmentally    
Aware Fund    

INVESTMENT INCOME

 

Interest — unaffiliated

  $ 7,076,580  
 

 

 

 

Total investment income

    7,076,580  
 

 

 

 

EXPENSES

 

Investment advisory

    363,037  

Administration — class specific

    207,444  

Offering

    120,518  

Professional

    33,671  

Registration

    28,031  

Accounting services

    22,375  

Custodian

    8,771  

Printing

    8,238  

Trustees and Officer

    5,481  

Service — class specific

    318  

Transfer agent — class specific

    50  

Miscellaneous

    9,252  
 

 

 

 

Total expenses

    807,186  

Less:

 

Fees waived and/or reimbursed by the Manager

    (381,554

Transfer agent fees waived and/or reimbursed — class specific

    (50
 

 

 

 

Total expenses after fees waived and/or reimbursed

    425,582  
 

 

 

 

Net investment income

    6,650,998  
 

 

 

 

REALIZED AND UNREALIZED GAIN

 

Net realized gain from investments

    8,910  

Net change in unrealized appreciation on investments

    217,987  
 

 

 

 

Net realized and unrealized gain

    226,897  
 

 

 

 

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

  $         6,877,895  
 

 

 

 

See notes to financial statements.

 

 

10    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Statements of Changes in Net Assets

 

    BlackRock Liquid Environmentally Aware
Fund
 
   

Six Months Ended

01/31/20

(unaudited)

   

Period from

04/08/19(a)

to 07/31/19

 

 

 

INCREASE (DECREASE) IN NET ASSETS

   

OPERATIONS

   

Net investment income

          $ 6,650,998         $ 2,676,698  

Net realized gain

    8,910       15,347  

Net change in unrealized appreciation (depreciation)

    217,987       32,736  
 

 

 

 

Net increase in net assets resulting from operations

    6,877,895       2,724,781  
 

 

 

 

DISTRIBUTIONS TO SHAREHOLDERS (b)

   

Institutional

    (1,095,311     (423,244

Direct

    (5,554,594     (2,251,811

Investor A

    (1,991     (1,643
 

 

 

 

Decrease in net assets resulting from distributions to shareholders

    (6,651,896     (2,676,698
 

 

 

 

CAPITAL SHARE TRANSACTIONS

   

Net increase in net assets derived from capital share transactions

    594,905,059       399,881,993  
 

 

 

 

NET ASSETS

   

Total increase in net assets

    595,131,058       399,930,076  

Beginning of period

    399,930,076        
 

 

 

 

End of period

          $       995,061,134     $       399,930,076  
 

 

 

 

 

(a) 

Commencement of operations.

(b) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

 

 

FINANCIAL STATEMENTS      11  


Financial Highlights

(For a share outstanding throughout each period)

 

    BlackRock Liquid Environmentally Aware
Fund
 
    Institutional  
   

Six Months Ended

01/31/20

(unaudited)

   

Period from

04/08/19  (a)

to 07/31/19

 

 

 

Net asset value, beginning of period

        $ 1.0001     $ 1.0000  
 

 

 

 

Net investment income (b)

    0.0089       0.0072  

Net realized and unrealized gain

    0.0005       0.0002  
 

 

 

 

Net increase from investment operations

    0.0094       0.0074  
 

 

 

 

Distributions from net investment income (c)

    (0.0091     (0.0073
 

 

 

 

Net asset value, end of period

        $ 1.0004     $ 1.0001  
 

 

 

 

Total Return (d)

   

Based on net asset value

    0.95%(e)       0.75%(e)  
 

 

 

 

Ratios to Average Net Assets

   

Total expenses

    0.29%(f)(g)       0.30%(g)(h)  
 

 

 

 

Total expenses after fees waived and/or reimbursed

    0.20%(g)       0.19%(g)  
 

 

 

 

Net investment income

    1.77%(g)       2.30%(g)  
 

 

 

 

Supplemental Data

   

Net assets, end of period (000)

        $         166,081     $         65,788  
 

 

 

 

 

(a) 

Commencement of operations.

(b) 

Based on average shares outstanding.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Where applicable, assumes the reinvestment of distributions.

(e) 

Aggregate total return.

(f) 

Audit and offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 0.31%.

(g) 

Annualized.

(h) 

Audit and offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 0.37%.

See notes to financial statements.

 

 

12    2026 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BlackRock Liquid Environmentally Aware
Fund
 
    Direct  
   

Six Months Ended

01/31/20

(unaudited)

   

Period from

04/08/19  (a)

to 07/31/19

 

 

 

Net asset value, beginning of period

        $ 1.0001     $ 1.0000  
 

 

 

 

Net investment income (b)

    0.0093       0.0076  

Net realized and unrealized gain

    0.0007       0.0001  
 

 

 

 

Net increase from investment operations

    0.0100       0.0077  
 

 

 

 

Distributions from net investment income (c)

    (0.0097     (0.0076
 

 

 

 

Net asset value, end of period

        $ 1.0004     $ 1.0001  
 

 

 

 

Total Return (d)

   

Based on net asset value

    1.00%(e)       0.78%(e)  
 

 

 

 

Ratios to Average Net Assets

   

Total expenses

    0.19%(f)(g)       0.22%(g)(h)  
 

 

 

 

Total expenses after fees waived and/or reimbursed

    0.10%(g)       0.09%(g)  
 

 

 

 

Net investment income

    1.85%(g)       2.45%(g)  
 

 

 

 

Supplemental Data

   

Net assets, end of period (000)

        $         828,727     $         333,890  
 

 

 

 

 

(a) 

Commencement of operations.

(b) 

Based on average shares outstanding.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d)

Where applicable, assumes the reinvestment of distributions.

(e) 

Aggregate total return.

(f) 

Audit and offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 0.21%.

(g) 

Annualized.

(h) 

Audit and offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 0.29%.

See notes to financial statements.

 

 

FINANCIAL HIGHLIGHTS      13  


Financial Highlights  (continued)

(For a share outstanding throughout each period)

 

    BlackRock Liquid Environmentally Aware
Fund
 
    Investor A  
   

Six Months Ended

01/31/20

(unaudited)

   

Period from

04/08/19 (a)

to 07/31/19

 

 

 

Net asset value, beginning of period

        $ 1.0001     $ 1.0000  
 

 

 

 

Net investment income (b)

    0.0079       0.0066  

Net realized and unrealized gain

    0.0003       0.0001  
 

 

 

 

Net increase from investment operations

    0.0082       0.0067  
 

 

 

 

Distributions from net investment income (c)

    (0.0079     (0.0066
 

 

 

 

Net asset value, end of period

        $ 1.0004     $ 1.0001  
 

 

 

 

Total Return (d)

   

Based on net asset value

    0.82%(e)       0.67%(e)  
 

 

 

 

Ratios to Average Net Assets

   

Total expenses

    0.55%(f)(g)       0.58%(g)(h)  
 

 

 

 

Total expenses after fees waived and/or reimbursed

    0.45%(g)       0.44%(g)  
 

 

 

 

Net investment income

    1.57%(g)       2.10%(g)  
 

 

 

 

Supplemental Data

   

Net assets, end of period (000)

        $         253     $         252  
 

 

 

 

 

(a) 

Commencement of operations.

(b) 

Based on average shares outstanding.

(c) 

Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

(d) 

Where applicable, assumes the reinvestment of distributions.

(e) 

Aggregate total return.

(f)

Audit and offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 0.58%.

(g) 

Annualized.

(h) 

Audit and offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses would have been 0.65%.

See notes to financial statements.

 

 

14    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (unaudited)

 

1.

ORGANIZATION

BlackRock FundsSM (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 Liquid Environmentally Aware Fund (the “Fund”) is a series of the Trust. The Fund is classified as diversified.

The Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that certain classes bear expenses related to the shareholder servicing and distribution of such shares. Institutional Shares are sold only to certain eligible investors. Direct Shares are generally only available to investors on eligible electronic platforms. Investor A Shares bear certain expenses related to shareholder servicing of such shares. Investor A Shares are generally available through financial intermediaries. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.

 

Share Class   Initial Sales Charge                  CDSC                 Conversion Privilege  

Institutional Shares

    No        No       None      

Direct Shares

    No        No       None  

Investor A Shares

    No        No (a)      None  

 

(a) 

Investor A Shares may be subject to a contingent deferred sales charge (“CDSC”) upon redemption of shares received in an exchange transaction for Investor A Shares of a fund advised by the Manager (defined below) or its affiliates where no initial sales charge was paid at the time of purchase of such fund.

The Fund prices and transacts its shares at a NAV per share calculated to four decimal places, reflecting market-based values of its portfolio holdings (i.e., at a “floating” NAV).

With respect to the Fund, the Board is permitted to impose a liquidity fee of up to 2% of the value of shares redeemed or temporarily restrict redemptions from the Fund for up to 10 business days during a 90 day period, in the event that the Fund’s weekly liquid assets fall below certain thresholds.

The Fund, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of equity, multi-asset, index and money market funds referred to as the BlackRock Multi-Asset Complex.

 

2.

SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of 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 Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are executed (the “trade dates”). Realized gains and losses on investment transactions are determined on the identified cost basis. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Distributions: Distributions from net investment income are declared daily and paid monthly. Distributions of capital gains are distributed at least annually and are recorded on the ex-dividend dates. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

Liquidity Fees: Any liquidity fees imposed on the value of shares redeemed in the event that the Fund’s weekly liquid assets fall below certain thresholds are recorded as paid-in-capital. The liquidity fees are collected and retained by the Fund for the benefit of the Fund’s remaining shareholders.

Offering Costs: Offering costs are amortized over a 12-month period beginning with the commencement of operations of a class of shares.

Indemnifications: In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnification. The Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against the Fund, which cannot be predicted with any certainty.

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.

 

3.

INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) as of the close of trading on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m., Eastern time). U.S. GAAP defines fair value as the price the Fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Trustees of the Trust (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 oversee the pricing function for all financial instruments.

 

 

NOTES TO FINANCIAL STATEMENTS      15  


Notes to Financial Statements  (unaudited) (continued)

 

Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Fund’s assets and liabilities:

 

   

Investments 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.

 

   

Fixed-income securities for which market quotations are readily available are generally valued using the last available bid prices or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value.

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

 

   

Level 1 — Unadjusted price quotations in active markets/exchanges for identical assets or 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 Global Valuation Committee’s 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 fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The categorization of a value determined for investments is based on the pricing transparency of the investments and is not necessarily an indication of the risks associated with investing in those securities.

 

4.

SECURITIES AND OTHER INVESTMENTS

Repurchase Agreements: Repurchase agreements are commitments to purchase a security from a counterparty who agrees to repurchase the same security at a mutually agreed upon date and price. On a daily basis, the counterparty is required to maintain collateral subject to the agreement and in value no less than the agreed upon repurchase amount. Repurchase agreements may be traded bilaterally, in a tri-party arrangement or may be centrally cleared through a sponsoring agent. Subject to the custodial undertaking associated with a tri-party repurchase arrangement and for centrally cleared repurchase agreements, a third party custodian maintains accounts to hold collateral for the fund and its counterparties. Typically, the fund and counterparty are not permitted to sell, re-pledge or use the collateral absent a default by the counterparty or the fund, respectively.

In the event the counterparty defaults and the fair value of the collateral declines, the fund could experience losses, delays and costs in liquidating the collateral.

Repurchase agreements are entered into by the fund under Master Repurchase Agreements (each, an “MRA”). The MRA permits the fund, under certain circumstances including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables with collateral held by and/or posted to the counterparty. As a result, one single net payment is created. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Based on the terms of the MRA, the fund receives securities as collateral with a market value in excess of the repurchase price at maturity. Upon a bankruptcy or insolvency of the MRA counterparty, the fund would recognize a liability with respect to such excess collateral. The liability reflects the fund’s obligation under bankruptcy law to return the excess to the counterparty.

 

5.

INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Advisory: The Trust, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment adviser and an indirect, wholly-owned subsidiary of BlackRock, Inc. (“BlackRock”), to provide investment advisory services. The Manager is responsible for the management of the Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Fund.

For such services, the Fund pays the Manager a monthly fee at an annual rate equal to 0.10% of the average daily value of the Fund’s net assets.

Service Fees: The Trust, on behalf of the Fund, entered into a Distribution Agreement and a 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 Fund pays BRIL ongoing service fees. The fees are accrued daily and paid monthly at an annual rate of 0.25% based upon the average daily net assets attributable to Investor A Shares.

BRIL and broker-dealers, pursuant to sub-agreements with BRIL, provide shareholder servicing to the Fund. The ongoing service fee compensates BRIL and each broker-dealer for providing shareholder servicing related services to shareholders.

 

 

16    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (unaudited) (continued)

 

For the six months ended January 31, 2020, the class specific service fees borne directly by Investor A Shares were $318.

Administration: The Trust, on behalf of the Fund, entered into an Administration Agreement with the Manager, an indirect, wholly-owned subsidiary of BlackRock, to provide administrative services. For these services, the Manager charges each of the share classes an administration fee, which is shown as administration - class specific in the Statement of Operations, at an annual rate of 0.14% of the average daily net assets for the Institutional Shares and Investor A Shares of the Fund and 0.04% of average daily net assets for the Direct Shares of the Fund.

For the six months ended January 31, 2020, the following table shows the class specific administration fees borne directly by each share class of the Fund:

 

Institutional

    $     86,940  

Direct

    120,326  

Investor A

    178  
      $   207,444  

Transfer Agent: Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Fund with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to servicing of underlying investor accounts. For these services, these entities receive an asset-based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the six months ended January 31, 2020, the Fund did not pay any amounts to affiliates in return for these services.

For the six months ended January 31, 2020, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

 

Institutional

  $             26  

Direct

    11  

Investor A

    13  
    $ 50  

Expense Limitations, Waivers, and Reimbursements: The Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit 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 Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are 0.00% for the Institutional, Investor A and Direct Shares.

The Manager has agreed not to reduce or discontinue these contractual expense limitations through November 30, 2030, unless approved by the Board, including a majority of the trustees who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Trustees”), or by a vote of a majority of the outstanding voting securities of the Fund. For the six months ended January 31, 2020, the Manager waived and/or reimbursed $236,337, which is included in fees waived and/or reimbursed by the Manager in the Statement of Operations.

These amounts waived and/or reimbursed are included in transfer agent fees waived and/or reimbursed - class specific, in the Statement of Operations. For the six months ended January 31, 2020, class specific expense waivers and/or reimbursements are as follows:

 

           

Transfer Agent Fees

Waived and/or Reimbursed

 

Institutional

      $            26  

Direct

      11  

Investor A

      13  
              $            50  

The Manager and BRIL have also voluntarily agreed to waive a portion of their respective investment advisory and service and distribution fees and/or reimburse operating expenses to enable the Fund to maintain minimum levels of daily net investment income if applicable. These amounts, if any, are reported in the Statement of Operations as fees waived and/or reimbursed by the Manager and transfer agent fees waived and/or reimbursed — class specific. The Manager and BRIL may discontinue the waiver and/ or reimbursement at any time. For the six months ended January 31, 2020, there were no fees waived and/or reimbursed by the Manager under this agreement.

Effective January 1, 2020, the Manager voluntarily agreed to waive a portion of the investment advisory fees. This voluntary waiver may be reduced or discontinued at any time. Pursuant to this voluntary waiver, the Fund waived $145,217, which is included in fees waived and/or reimbursed by the Manager in the Statement of Operations.

Interfund Lending: In accordance with an exemptive order (the “Order”) from the U.S. Securities and Exchange Commission (“SEC”), the Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Fund’s investment policies and restrictions. The Fund is currently permitted to borrow and lend under the Interfund Lending Program.

A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.

During the period ended January 31, 2020, the Fund did not participate in the Interfund Lending Program.

 

 

NOTES TO FINANCIAL STATEMENTS      17  


Notes to Financial Statements  (unaudited) (continued)

 

Trustees and Officers: Certain trustees and/or officers of the Trust are directors and/or officers of BlackRock or its affiliates. The Fund reimburses the Manager for a portion of the compensation paid to the Fund’s Chief Compliance Officer, which is included in Trustees and Officer in the Statement of Operations.

 

6.

INCOME TAX INFORMATION

It is the Fund’s 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 U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns remains open for the year ended July 31, 2019.

Management has analyzed tax laws and regulations and their application to the Fund as of January 31, 2020, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

 

7.

PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the Fund and its investments. The Fund’s prospectus provides details of the risks to which the Fund is subject.

The Fund may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force the Fund to reinvest in lower yielding securities. The Fund may also be exposed to reinvestment risk, which is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below the Fund portfolio’s current earnings rate.

A recent outbreak of respiratory disease caused by a novel coronavirus was first detected in China in December 2019 and has now been detected internationally. This coronavirus has resulted in closing borders, quarantines, disruptions to supply chains and customer activity, as well as general concern and uncertainty. The impact of epidemics and pandemics such as the coronavirus, could affect the economies of many nations, individual companies and the market in general in ways that cannot necessarily be foreseen at the present time. The impact of the outbreak may be short term or may last for an extended period of time.

Counterparty Credit Risk: The Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

 

 

18    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Notes to Financial Statements  (unaudited) (continued)

 

8.

CAPITAL SHARE TRANSACTIONS

The number of shares sold, reinvested and redeemed for the Fund were transacted at each class’ floating NAV per share calculated to four decimal places.

Transactions in capital shares for each class were as follows:

 

    

Six Months Ended

01/31/20

    Period from 04/08/19(a) to 07/31/19  
     Shares    

Amount

    Shares    

Amount

 

Institutional

       

Shares sold

    121,031,317     $ 121,050,025       165,742,682     $ 165,750,997  

Shares issued in reinvestment of distributions

    865,679       865,909       40,126       40,130  

Shares redeemed

    (21,660,648     (21,664,988     (100,001,294     (100,023,517

Net increase

    100,236,348     $ 100,250,946       65,781,514     $ 65,767,610  

Direct

       

Shares sold

    530,900,004     $ 531,009,085       339,652,733     $ 339,662,021  

Shares issued in reinvestment of distributions

    2,831,969       2,832,737       281,716       281,751  

Shares redeemed

    (39,180,675     (39,189,114     (6,082,037     (6,081,031

Net increase

    494,551,298     $ 494,652,708       333,852,412     $ 333,862,741  

Investor A

       

Shares sold

        $       250,000     $ 249,999  

Shares issued in reinvestment of distributions

    1,405       1,405       1,643       1,643  

Net increase

    1,405     $ 1,405       251,643     $ 251,642  

Total Net Increase

    594,789,051     $ 594,905,059       399,885,569     $ 399,881,993  

 

(a)

Commencement of operations.

As of January 31, 2020, shares owned by BlackRock Financial Management, Inc., an affiliate of the Fund, were as follows:

 

Institutional

    253,456  

Direct

    249,500,000  

Investor A

    253,048  

 

9.

SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events on the Fund 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.

 

 

NOTES TO FINANCIAL STATEMENTS      19  


Trustee and Officer Information

 

Mark Stalnecker, Chair of the Board and Trustee

Bruce R. Bond, Trustee

Susan J. Carter, Trustee

Collette Chilton, Trustee

Neil A. Cotty, Trustee

Lena G. Goldberg, Trustee

Henry R. Keizer, Trustee

Cynthia A. Montgomery, Trustee

Donald C. Opatrny, Trustee

Joseph P. Platt, Trustee

Kenneth L. Urish, Trustee

Claire A. Walton, Trustee

Robert Fairbairn, Trustee

John M. Perlowski, Trustee, President and Chief Executive Officer

Thomas Callahan, Vice President

Jennifer McGovern, Vice President

Neal J. Andrews, Chief Financial Officer

Jay M. Fife, Treasurer

Charles Park, Chief Compliance Officer

Lisa Belle, Anti-Money Laundering Compliance Officer

Janey Ahn, Secretary

 

Effective September 19, 2019, Lisa Belle replaced John MacKessy as the Anti-Money Laundering Compliance Officer of the Trust.

Effective September 19, 2019, Janey Ahn replaced Benjamin Archibald as the Secretary of the Trust.

Effective December 31, 2019, Robert M. Hernandez retired as Trustee of the Trust.

 

Investment Adviser and Administrator

BlackRock Advisors, LLC

Wilmington, DE 19809

Accounting Agent

JPMorgan Chase Bank, N.A.

New York, NY 10179

Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

Wilmington, DE 19809

Custodian

JPMorgan Chase Bank, N.A.

New York, NY 10179

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

Distributor

BlackRock Investments, LLC

New York, NY 10022

Legal Counsel

Sidley Austin LLP

New York, NY 10019

Address of the Trust

100 Bellevue Parkway

Wilmington, DE 19809

 

 

 

20    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Additional Information

 

General Information

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 Transfer Agent at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund files its complete schedule of portfolio holdings with the SEC each month on Form N-MFP. The Fund’s reports on Form N-MFP are available on the SEC’s website at sec.gov. The Fund makes portfolio holdings available to shareholders on its website at blackrock.com

Availability of Proxy Voting Policies and Procedures

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

Availability of Proxy Voting Record

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

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.

 

 

ADDITIONAL INFORMATION      21  


Glossary of Terms Used in This Report

 

Currency     
USD    United States Dollar

 

Portfolio Abbreviations
LIBOR    London Interbank Offered Rate
SOFR    Secured Overnight Financing Rate

 

 

22    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


 

Want to know more?

blackrock.com    |    877-275-1255 (1-877-ASK-1BLK)

This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless preceded or accompanied by the Fund’s current prospectus. You could lose money by investing in the Fund. Because the share price of the Fund will fluctuate, when you sell your shares they may be worth more or less than what you originally paid for them. The Fund may impose a fee upon sale of your shares or may temporarily suspend your ability to sell shares if the Fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund at any time. Performance data quoted represents past performance and does not guarantee future results. Total return information assumes reinvestment of all distributions. Current performance may be higher or lower than the performance data quoted. For current month-end performance information, call (800) 626-1960. The Fund’s current 7-day yield more closely reflects the current earnings of the Fund than the total returns quoted. Statements and other information herein are as dated and are subject to change.

LEAF-1/20-SAR

 

 

LOGO    LOGO


 

LOGO   JANUARY 31, 2020

 

  

2020 Semi-Annual Report

(unaudited)

 

BlackRock FundsSM

 

·  

BlackRock Total Factor Fund

 

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports from BlackRock or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

You may elect to receive all future reports in paper free of charge. If you hold accounts directly with BlackRock, you can call (800) 441-7762 to inform BlackRock that you wish to continue receiving paper copies of your shareholder reports. If you hold accounts through a financial intermediary, you can follow the instructions included with this disclosure, if applicable, or contact your financial intermediary to request that you continue to receive paper copies of your shareholder reports. Please note that not all financial intermediaries may offer this service. Your election to receive reports in paper will apply to all funds advised by BlackRock Advisors, LLC, BlackRock Fund Advisors or their affiliates, or all funds held with your financial intermediary, as applicable.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive electronic delivery of shareholder reports and other communications by: (i) accessing the BlackRock website at blackrock.com/edelivery and logging into your accounts, if you hold accounts directly with BlackRock, or (ii) contacting your financial intermediary, if you hold accounts through a financial intermediary. Please note that not all financial intermediaries may offer this service.

 

Not FDIC Insured • May Lose Value • No Bank Guarantee


The Markets in Review

Dear Shareholder,

U.S. equities and bonds both delivered impressive returns over the last 12 months, despite fears and doubts about the economy that were ultimately laid to rest with unprecedented monetary stimulus and a sluggish yet resolute performance from the U.S. economy. Investors were further encouraged by the apparent cessation of trade hostilities between the United States and China late in 2019, although some of these gains were reversed in January 2020, as the spread of the coronavirus injected uncertainty into markets.

Returns for most securities were particularly strong in the second half of the reporting period, as investors began to realize that the U.S. economy was maintaining the modest yet steady growth that has characterized this economic cycle. In the United States, large-cap stocks led the broader market, while small-cap equities still posted healthy returns. Emerging market stocks, however, were constrained by coronavirus fears, losing most of their gains near the end of the reporting period.

Fixed-income securities played an important role in diversified portfolios by delivering strong returns amid economic uncertainty, as interest rates declined (and bond prices rose). Long-term bonds, particularly long-term Treasuries, generally posted the strongest returns, as inflation remained low despite an uptick late in the reporting period. Investment-grade and high-yield corporate bonds also posted solid returns, as the credit fundamentals in corporate markets remained relatively solid.

Continuing the shift toward looser monetary policy that began in early 2019, the U.S. Federal Reserve (the “Fed”) increased efforts to stimulate economic activity. The Fed reduced interest rates three times during the reporting period, from July 2019 to October 2019. In December 2019, the Fed further reassured markets by indicating that it is unlikely to reverse course and tighten monetary policy in the near future. Following in the Fed’s footsteps, the European Central Bank announced aggressive economic stimulus measures, including lower interest rates and the return of its bond purchasing program. The Bank of Japan continued its accommodative monetary policy, while China committed to looser credit conditions and an increase in fiscal spending.

The outpouring of global economic stimulus led to a sharp rally in risk assets throughout the world despite the headwind of rising geopolitical and trade tensions. Hopes continued to remain high as the current economic expansion became the longest in U.S. history.

Looking ahead, we believe there are reasons to remain cautious about the U.S. economy, most notably the uncertainty around the duration of the impact of the coronavirus-driven economic contraction, the U.S. presidential election and future earnings growth. At this time we are watching the developments around the world very closely to assess the full extent of the risks of economic disruption that could result from the global pandemic. Corporate earnings underperformed in 2019, but action by the Fed led to outstanding equity returns. With the future of monetary policy and consumer behaviors uncertain, earnings deterioration could act as a drag on equities.

Overall, we favor moderately increasing investment risk to benefit from expected growth. We are neutral on U.S. equities, but we favor emerging market and Japanese equities, which could benefit from an uptick in global trade and investment. Increasing cyclical exposure through value-style investing and maintaining a meaningful emphasis on high-quality companies through quality factors also makes sense for diversified investors. In fixed income, extremely low yields and inflation risk limit the effectiveness of many bond classes as a counterweight in portfolios. We favor higher-yielding bonds from emerging markets, where central banks have more room for further accommodation, while strategically using U.S. Treasuries as stabilizers.

In this environment, investors need to think globally, extend their scope across a broad array of asset classes, and be nimble as market conditions change. We encourage you to talk with your financial advisor and visit blackrock.com for further insight about investing in today’s markets.

Sincerely,

 

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

 

Total Returns as of January 31, 2020
     6-Month   12-Month

U.S. large cap equities

(S&P 500® Index)

  9.31%   21.68%

U.S. small cap equities

(Russell 2000® Index)

  3.26   9.21

International equities
(MSCI Europe, Australasia, Far East Index)

  6.12   12.10

Emerging market equities

(MSCI Emerging Markets Index)

  3.36   3.81

3-month Treasury bills

(ICE BofAML 3-Month U.S. Treasury Bill Index)

  0.98   2.22

U.S. Treasury securities

(ICE BofAML 10-Year U.S. Treasury Index)

  5.13   12.15

U.S. investment grade bonds

(Bloomberg Barclays U.S. Aggregate Bond Index)

  4.20   9.64

Tax-exempt municipal bonds

(S&P Municipal Bond Index)

  3.08   8.21

U.S. high yield bonds

(Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)

  3.43   9.40
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.
 

 

 

2    THIS PAGE IS NOT PART OF YOUR FUND REPORT


Table of Contents

 

      Page  

The Markets in Review

     2  

Semi-Annual Report:

  

Fund Summary

     4  

About Fund Performance

     6  

Disclosure of Expenses

     6  

Derivative Financial Instruments

     6  

Consolidated Financial Statements:

  

Consolidated Schedule of Investments

     7  

Consolidated Statement of Assets and Liabilities

     44  

Consolidated Statement of Operations

     45  

Consolidated Statements of Changes in Net Assets

     46  

Consolidated Financial Highlights

     47  

Notes to Consolidated Financial Statements

     51  

Statement Regarding Liquidity Risk Management Program

     61  

Trustee and Officer Information

     62  

Additional Information

     63  

Glossary of Terms Used in this Report

     65  

 

 

LOGO

 

 

 

          3  


Fund Summary  as of January 31, 2020    BlackRock Total Factor Fund

 

Investment Objective

BlackRock Total Factor Fund’s (the “Fund”) investment objective is to seek total return.

Portfolio Management Commentary

How did the Fund perform?

For the six-month period ended January 31, 2020, the Fund underperformed its reference benchmark, a blend of 60% MSCI World Index Hedged USD Net/40% Bloomberg Barclays U.S. Aggregate Bond Index. For the same period, the Fund also underperformed its secondary benchmark, the ICE BofAML 3-Month U.S. Treasury Bill Index.

What factors influenced performance?

The Fund utilizes a factor investing approach in order to provide a diversified engine for growth. The Fund targets multiple return drivers, or factors, across many asset classes and geographies. By leveraging a long/short implementation framework, the strategy seeks to isolate broad and persistent sources of returns, while maintaining a low correlation to equity and fixed-income markets and being designed to be resilient to market shocks and drawdowns.

The long/short single-name equity component was the primary detractor from the Fund’s relative performance, as the momentum and quality factors weighed on results. In the third quarter of 2019, momentum strategies pared their gains from the first half of the year in conjunction with an unwind in the broader bond market. Quality strategies have been susceptible to geopolitical tensions due to the factor’s preference for companies with globally diversified supply chains. The combination of those tensions and a “junk firm” rally tied to the Phase 1 trade deal between the United States and China moved against the factor.

Within the long/short style factor component, the Fund’s positioning within currencies and commodities were substantial contributors to performance. Within currencies, continued geopolitical flare-ups resulted in a widening set of investment opportunities, particularly in emerging market foreign exchange. The value, momentum, and carry strategies were all able to take advantage of these favorable conditions. In commodities, value strategies were the primary drivers of returns, as the model was able to find price dislocations within the energy sector. From a factor perspective, value strategies were the top performers across the majority of asset classes in the long/short space, while low volatility equity strategies provided strong returns for a second straight year. Finally, the Fund’s risk parity component added significantly to performance, as the three targeted factors — real rates, inflation and economic growth — all delivered positive returns. Oscillating geopolitical tensions created a conducive environment for pro-cyclical and defensive exposures.

The Fund routinely holds derivatives including futures, swaps, and currency forwards to gain exposure to single name stocks, global bonds, currencies, commodities, and equity market indices in a cost-efficient and capital-efficient manner. Additionally, some of the Fund’s currency forwards are held as a means to protect against unintended exposure to foreign currency risk. Over the period, the Fund’s use of derivatives had a negative impact on Fund performance.

The Fund holds large unencumbered cash positions to meet collateral calls on derivative positions. The cash balance did not have a material impact on performance during the period.

Describe recent portfolio activity.

The majority of the portfolio’s risk budget remained unchanged from the start of the period. The Fund is currently positioned slightly more defensively within single name equities as quality and low volatility have received a marginally higher allocation than value and momentum. Outside of single name equities, the portfolio remains slightly tilted toward momentum strategies and has a strategic exposure to economic growth surprises.

Describe portfolio positioning at period end.

The Fund continued to seek to deliver positive absolute returns by balancing risks among equities, bonds, commodities, currencies and diversifying strategies. At the end of the period, the Fund favored developed market equities to those of emerging markets but favored emerging market currencies over those of developed markets. Within the long/short rates component, the Fund favored U.S. and U.K. duration (and corresponding sensitivity to interest rates), funded by short positions to Australia and Canada. The long/short commodities component was effectively neutral within energy and maintained a slight net long position in precious metals.

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    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Fund Summary  as of January 31, 2020 (continued)    BlackRock Total Factor Fund

 

Portfolio Information

 

PORTFOLIO COMPOSITION

 

Asset Type

   
Percent of
Total Investments
 
 (a) 

Foreign Government Obligations

    87

U.S. Treasury Obligations

    13  

 

(a) 

Total Investments exclude short-term securities.

PORTFOLIO HOLDINGS

 

Security

   
Percent of
Total Investments
 
 (a) 

Republic of France

    33

Commonwealth of Australia

    17  

U.K. Treasury Inflation Linked Bonds

    14  

Canadian Government Bond

    14  

Federal Republic of Germany

    9  

U.S. Treasury Inflation Linked Notes

    9  

U.S. Treasury Inflation Linked Bonds

    4  

 

(a) 

Total Investments exclude short-term securities.

 

 

Performance Summary for the Period Ended January 31, 2020

 

                Average Annual Total Returns (a)(b)  
                1 Year           5 Years           Since Inception (c)  
     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

    0.19       7.24     N/A         3.73     N/A         3.78     N/A  

Investor A

    0.09         6.94       1.32       3.47       2.36       3.53       2.74

Investor C

    (0.30       6.24       5.24         2.71       2.71         2.75       2.75  

Class K

    0.21         7.36       N/A         3.77       N/A         3.81       N/A  

60% MSCI World Index Hedged USD Net/40% Bloomberg Barclays U.S. Aggregate Bond Index(d)

    6.51         15.60       N/A         7.26       N/A         8.52       N/A  

MSCI World Index Hedged USD Net(e)

    7.97         19.38       N/A         9.87       N/A         12.12       N/A  

Bloomberg Barclays U.S. Aggregate Bond Index(f)

    4.20         9.64       N/A         3.01       N/A         2.94       N/A  

ICE BofAML 3-Month U.S. Treasury Bill Index(g)

    0.98               2.22       N/A               1.10       N/A               0.79       N/A  

 

(a) 

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 6 for a detailed description of share classes, including any related sales charges and fees, and how performance was calculated for certain share classes.

(b) 

The Fund seeks to achieve its investment objective by investing in a broad range of global asset classes, such as equity securities (which may include derivative instruments that are tied economically to equity securities), fixed and floating rate debt instruments, derivatives, other investment companies, including exchange-traded funds (“ETFs”), real estate investment trusts (“REITs”) and commodity-related instruments. The Fund’s total returns prior to February 3, 2017 are the returns of the Fund when it followed different investment strategies under the name “BlackRock Strategic Risk Allocation Fund”.

(c) 

The Fund commenced operations on December 27, 2012.

(d) 

This customized weighted index is comprised of the returns of the MSCI World Index Hedged USD Net (60%) and the Bloomberg Barclays U.S. Aggregate Bond Index (40%).

(e) 

Represents a close estimation of the performance that can be achieved by hedging the currency exposures of its parent index, the MSCI World Index, to the U.S. Dollar (“USD”), the “home” currency for the hedged index. The index is 100% hedged to the USD by selling each foreign currency forward at the one-month forward weight. The parent index is composed of large and midcap stocks across 23 developed market countries and its local performance is calculated in 13 different currencies, including the Euro.

(f) 

A broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes U.S. Treasuries, government-related and corporate securities, mortgage-backed securities (agency fixed-rate pass-throughs), asset-backed securities and commercial mortgage-backed securities (agency and non-agency).

(g) 

An unmanaged index that tracks 3-month U.S. Treasury securities.

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

Past performance is not indicative of future results.

Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.

Expense Example    

 

    Actual           Hypothetical (a)           
     Beginning
Account Value
(08/01/19)
     Ending
Account Value
(01/31/20)
     Expenses
Paid During
the Period (b)
           Beginning
Account Value
(08/01/19)
     Ending
Account Value
(01/31/20)
     Expenses
Paid During
the Period (b)
       Annualized
Expense
Ratio
 

Institutional

  $ 1,000.00      $ 1,001.90      $ 2.77       $ 1,000.00      $ 1,022.37      $ 2.80          0.55

Investor A

    1,000.00        1,000.90        4.02         1,000.00        1,021.11        4.06          0.80  

Investor C

    1,000.00        997.00        7.78         1,000.00        1,017.34        7.86          1.55  

Class K

    1,000.00        1,002.10        2.52               1,000.00        1,022.62        2.54          0.50  

 

(a) 

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

(b) 

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 184/366 (to reflect the one-half year period shown)

See “Disclosure of Expenses” on page 6 for further information on how expenses were calculated.

 

 

FUND SUMMARY      5  


About Fund Performance

 

Institutional and Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors. Class K Shares performance shown prior to the Class K Shares inception date of February 3, 2017 is that of Institutional Shares. The performance of the Fund’s Class K Shares would be substantially similar to Institutional Shares because Class K Shares and Institutional Shares invest in the same portfolio of securities and performance would only differ to the extent that Class K Shares and Institutional Shares have different expenses. The actual returns of Class K Shares would have been higher than those of the Institutional Shares because Class K Shares have lower expenses than the Institutional Shares.

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). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase. These shares are generally available through financial intermediaries.

Investor C 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% per year and a service fee of 0.25% per year. These shares are generally available through financial intermediaries. These Shares automatically convert to Investor A Shares after approximately ten years.

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 blackrock.com to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of Fund shares. Figures shown in the performance tables on the previous page assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend date or payable date, as applicable. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions 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.

BlackRock Advisors, LLC (the “Manager”), the Fund’s investment adviser, has contractually agreed to waive and/or reimburse a portion of the Fund’s expenses. Without such waiver and/or reimbursement, the Fund’s performance would have been lower. With respect to the Fund’s contractual waivers, the Manager is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 6 of the Notes to Consolidated Financial Statements for additional information on waivers and/or reimbursements.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; 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 example on the previous page (which is based on a hypothetical investment of $1,000 invested on August 1, 2019 and held through January 31, 2020) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

The expense example provides information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their share class under the heading entitled “Expenses Paid During the Period.”

The expense example also provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in the Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical example that appear in shareholder reports of other funds.

The expenses shown in the expense example are intended to highlight shareholders’ ongoing costs only and do not reflect transactional expenses, such as sales charges, if any. Therefore, the hypothetical example is useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and 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 instrument. The Fund’s successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation the Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Fund’s investments in these instruments, if any, are discussed in detail in the Notes to Consolidated Financial Statements.

 

 

6    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Consolidated Schedule of Investments  (unaudited)

January 31, 2020

  

BlackRock Total Factor Fund

(Percentages shown are based on Net Assets)

 

Security         

Par

(000)

    Value  

Foreign Government Obligations — 15.4%

 

Australia — 3.1%                  

Commonwealth of Australia:

     

1.25%, 02/21/22

    AUD               3,001     $         2,096,797  

3.00%, 09/20/25

      3,589       2,907,384  

0.75%, 11/21/27

      1,981       1,461,171  

2.50%, 09/20/30

      2,256       1,993,081  

2.00%, 08/21/35

      1,688       1,531,502  

1.25%, 08/21/40

      1,456       1,249,633  

1.00%, 02/21/50

      1,497       1,315,767  
     

 

 

 
        12,555,335  
Canada — 2.4%                  

Canadian Government Bond:

     

6.97%, 12/01/21

    CAD       1,310       1,063,611  

6.59%, 12/01/26

      1,258       1,228,251  

4.00%, 12/01/31

      1,336       1,486,352  

3.97%, 12/01/36

      1,195       1,336,644  

2.45%, 12/01/41

      1,239       1,308,217  

1.77%, 12/01/44

      1,402       1,408,282  

1.38%, 12/01/47

      1,314       1,304,101  

0.52%, 12/01/50

      1,003       858,760  
     

 

 

 
        9,994,218  
France — 5.8%                  

Republic of France:

     

0.10%, 03/01/21

    EUR       598       673,737  

0.10%, 07/25/21

      802       908,628  

1.10%, 07/25/22

      1,978       2,343,443  

2.10%, 07/25/23

      1,810       2,252,784  

0.25%, 07/25/24

      1,672       2,005,580  

0.10%, 03/01/25

      960       1,140,616  

1.85%, 07/25/27

      2,078       2,891,594  

0.10%, 03/01/28

      990       1,215,942  

0.10%, 03/01/29

      523       655,071  

4.42%, 07/25/29

      1,049       1,705,815  

0.70%, 07/25/30(a)

      1,249       1,683,756  

4.08%, 07/25/32

      1,202       2,113,944  

0.10%, 07/25/36(a)

      514       683,001  

2.16%, 07/25/40(a)

      1,256       2,262,435  

0.10%, 07/25/47(a)

      868       1,237,206  
     

 

 

 
        23,773,552  
Germany — 1.7%                  

Federal Republic of Germany:

     

0.10%, 04/15/23

      1,569       1,821,683  

0.10%, 04/15/26

      1,509       1,842,614  

0.50%, 04/15/30

      1,397       1,877,797  

0.10%, 04/15/46

      826       1,308,636  
     

 

 

 
        6,850,730  
United Kingdom — 2.4%                  

U.K. Treasury Inflation Linked Bonds:

     

1.88%, 11/22/22

    GBP       205       305,393  

0.13%, 03/22/24

      220       323,274  

2.50%, 07/17/24

      215       345,606  

0.13%, 03/22/26

      140       217,603  

1.25%, 11/22/27

      213       375,957  

0.13%, 08/10/28

      110       183,170  

0.13%, 03/22/29

      213       360,333  

4.13%, 07/22/30

      97       228,312  

1.25%, 11/22/32

      166       343,693  

0.75%, 03/22/34

      168       339,427  
Security         

Par

(000)

    Value  
United Kingdom (continued)                  

2.00%, 01/26/35

    GBP       193     $ 447,718  

0.13%, 11/22/36

      118       232,067  

1.13%, 11/22/37

      195       450,904  

0.63%, 03/22/40

      209       471,541  

0.13%, 08/10/41

      101       215,294  

0.63%, 11/22/42

      177       421,959  

0.13%, 03/22/44

      217       483,127  

0.13%, 03/22/46

      141       322,428  

0.75%, 11/22/47

      170       456,366  

0.13%, 08/10/48

      110       261,594  

0.50%, 03/22/50

      177       471,877  

0.25%, 03/22/52

      154       404,861  

1.25%, 11/22/55

      160       560,699  

0.13%, 11/22/56

      68       187,356  

0.13%, 03/22/58

      129       361,497  

0.38%, 03/22/62

      159       508,184  

0.13%, 11/22/65

      84       267,858  

0.13%, 03/22/68

      152       514,376  
     

 

 

 
        10,062,474  
     

 

 

 

Total Foreign Government Obligations — 15.4%
(Cost: $61,562,220)

 

            63,236,309  
     

 

 

 

U.S. Treasury Obligations — 2.3%

 

U.S. Treasury Inflation Linked Bonds:

     

2.38%, 01/15/25 - 01/15/27

    USD       351       402,299  

2.00%, 01/15/26

      150       169,356  

1.75%, 01/15/28

      110       126,963  

3.63%, 04/15/28

      154       201,269  

2.50%, 01/15/29

      216       266,176  

3.88%, 04/15/29

      177       241,259  

3.38%, 04/15/32

      42       59,667  

2.13%, 02/15/40 - 02/15/41

      316       437,054  

0.75%, 02/15/42 - 02/15/45

      343       380,447  

0.63%, 02/15/43

      149       160,409  

1.38%, 02/15/44

      147       184,135  

1.00%, 02/15/46 - 02/15/49

      386       459,529  

0.88%, 02/15/47

      115       132,712  

U.S. Treasury Inflation Linked Notes:

     

1.13%, 01/15/21

      249       251,108  

0.13%, 04/15/21 - 07/15/26

              2,597       2,623,068  

0.63%, 07/15/21 - 01/15/26

      1,083       1,113,229  

0.38%, 07/15/23 - 07/15/27

      979       1,012,360  

0.50%, 04/15/24 - 01/15/28

      425       442,476  

0.25%, 01/15/25 - 07/15/29

      502       517,043  

0.75%, 07/15/28

      229       246,433  

0.88%, 01/15/29

      213       232,058  
 

 

 

 

Total U.S. Treasury Obligations — 2.3%
(Cost: $9,296,003)

 

    9,659,050  
 

 

 

 

Total Long-Term Investments — 17.7%
(Cost: $70,858,223)

 

    72,895,359  
     

 

 

 
           Shares        
Short-Term Securities — 69.8%  
Money Market Funds — 3.1%                  

BlackRock Liquidity Funds, T-Fund,
Institutional Class, 1.48%(b)*

      12,710,094       12,710,094  
     

 

 

 

Total Money Market Funds — 3.1%
(Cost: $12,710,094)

 

    12,710,094  
     

 

 

 
 

 

 

CONSOLIDATED SCHEDULE OF INVESTMENTS      7  


Consolidated Schedule of Investments  (unaudited) (continued)

January 31, 2020

  

BlackRock Total Factor Fund

(Percentages shown are based on Net Assets)

 

Security         

Par

(000)

    Value  
U.S. Treasury Obligations — 66.7%        

U.S. Treasury Bills(c):

     

1.73%, 07/16/20

    USD               66,000     $         65,550,879  

1.84%, 06/18/20

      55,000       54,687,987  

1.90%, 02/27/20

      51,000       50,950,105  

1.98%, 03/26/20

      55,500       55,378,648  
Security         

Par

(000)

    Value  
U.S. Treasury Obligations (continued)  

2.10%, 05/21/20

    USD               48,000     $ 47,780,136  
     

 

 

 

Total U.S. Treasury Obligations — 66.7%
(Cost: $274,065,847)

 

    274,347,755  
     

 

 

 

Total Short-Term Securities — 69.8%
(Cost: $286,775,941)

 

    287,057,849  
     

 

 

 

Total Investments — 87.5%
(Cost: $357,634,164)

 

    359,953,208  

Other Assets Less Liabilities — 12.5%

 

      51,365,200  
     

 

 

 

Net Assets — 100.0%

 

    $         411,318,408  
     

 

 

 
 
(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) 

Annualized 7-day yield as of period end.

(c) 

Rates are discount rates or a range of discount rates as of period end.

*

During the six months ended January 31, 2020, investments in issuers considered to be an affiliate/affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

 

 

Affiliate    Shares
Held at
07/31/19
     Net
Activity
     Shares
Held at
01/31/20
    

Value at

01/31/20

     Income     

Net

Realized
Gain (Loss) 
(a)

     Change in
Unrealized
Appreciation
(Depreciation)
 

BlackRock Liquidity Funds, T-Fund, Institutional Class

     13,562,162        (852,068      12,710,094      $         12,710,094      $         132,559      $ 31      $  
           

 

 

    

 

 

    

 

 

    

 

 

 

 

(a)

Includes net capital gain distributions, if applicable.

 

 

8    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Consolidated Schedule of Investments  (unaudited) (continued)

January 31, 2020

  

BlackRock Total Factor Fund

 

Derivative Financial Instruments Outstanding as of Period End

Futures Contracts

 

Description    Number of
Contracts
       Expiration
Date
       Notional
Amount (000)
       Value/
Unrealized
Appreciation
(Depreciation)
 

Long Contracts

                 

AEX Index

     292          02/21/20        $ 38,074        $ (1,193,013

CAC 40 10 Euro Index

     611          02/21/20          39,330          (1,522,894

IBEX 35 Index

     190          02/21/20          19,760          (297,181

Hang Seng China Enterprises Index

     176          02/27/20          11,614          (423,720

Hang Seng Index

     11          02/27/20          1,858          (31,459

Brent Crude Oil(a)

     218          02/28/20          12,343          (1,467,288

RBOB Gasoline(a)

     371          02/28/20          23,437          (769,590

Euro-Bund

     590          03/06/20          114,536          1,978,797  

TOPIX Index

     32          03/12/20          4,959          (80,661

SPI 200 Index

     236          03/19/20          27,465          686,181  

DAX Index

     7          03/20/20          2,522          (38,525

FTSE/MIB Index

     42          03/20/20          5,408          (84,659

U.S. Treasury 10 Year Note

     1,527          03/20/20          201,039          3,787,524  

100 oz Gold(a)

     57          03/27/20          9,034          101,552  

Long Gilt

     1,103          03/27/20          196,542          3,021,017  

Silver(a)

  

 

72

 

       03/27/20          6,484          346,918  
                 

 

 

 
                    4,012,999  
                 

 

 

 

Short Contracts

                 

WTI Crude Oil(a)

     177          02/20/20          9,126          982,300  

OMXS30 Index

     14          02/21/20          260          1,904  

Natural Gas(a)

     80          02/26/20          1,473          25,450  

SGX NIFTY 50 Index

     1,380          02/27/20          33,084          493,223  

Low Sulphur Gasoil(a)

     174          03/12/20          8,744          12,603  

Australia 10 Year Bond

     1,463          03/16/20          144,830          (2,110,621

S&P/TSX 60 Index

     158          03/19/20          24,630          161,411  

Canada 10 Year Bond

     1,352          03/20/20          145,242          (2,988,317

FTSE 100 Index

     202          03/20/20          19,252          645,188  

S&P 500 E-Mini Index

     117          03/20/20          18,860          (285,436
                 

 

 

 
                    (3,062,295
                 

 

 

 
                  $ 950,704  
                 

 

 

 

 

(a) 

All or a portion of the security is held by a wholly-owned subsidiary. See Note 1 of the Notes to Consolidated Financial Statements for details on the wholly-owned subsidiary.

Forward Foreign Currency Exchange Contracts

 

Currency

Purchased

    

Currency

Sold

     Counterparty    Settlement
Date
     Unrealized
Appreciation
(Depreciation)
 
CHF        942,000 (a)      USD        965,932      Morgan Stanley & Co. International plc      03/18/20      $ 15,014  
EUR        863,000 (a)      USD        954,033      Morgan Stanley & Co. International plc      03/18/20        5,622  
GBP        6,477,994 (a)      USD        8,495,429      Morgan Stanley & Co. International plc      03/18/20        68,654  
INR        141,877,000 (a)     USD        1,957,950      Barclays Bank plc      03/18/20        13,450  
JPY        1,008,506,000 (a)     USD        9,248,905      Morgan Stanley & Co. International plc      03/18/20        80,222  
MXN        747,220,000 (a)     USD        38,305,190      Morgan Stanley & Co. International plc      03/18/20        989,541  
RUB        1,777,190,000 (a)     USD        27,556,922      Bank of America NA      03/18/20        113,352  
SEK        5,740,000      USD        595,732      JPMorgan Chase Bank NA      03/18/20        1,735  
USD        62,370,190 (a)      AUD        90,440,062      Morgan Stanley & Co. International plc      03/18/20        1,781,890  
USD        25,490,117 (a)      BRL        107,163,000      Bank of America NA      03/18/20        524,463  
USD        3,018,863 (a)      BRL        12,403,000      Barclays Bank plc      03/18/20        129,349  
USD        4,161,549 (a)      BRL        16,967,000      Deutsche Bank AG      03/18/20        208,764  
USD        5,148,646 (a)      BRL        20,706,000      JPMorgan Chase Bank NA      03/18/20        324,790  
USD        9,017,050 (a)      BRL        38,080,000      Morgan Stanley & Co. International plc      03/18/20        145,591  
USD        8,975,889 (a)      CAD        11,755,000      Morgan Stanley & Co. International plc      03/18/20        93,809  
USD        36,285,253 (a)      EUR        32,465,335      Morgan Stanley & Co. International plc      03/18/20        183,820  
USD        2,117,866 (a)      GBP        1,601,000      Morgan Stanley & Co. International plc      03/18/20        1,302  
USD        2,547,074 (a)      JPY        275,104,000      Morgan Stanley & Co. International plc      03/18/20        2,241  

 

 

CONSOLIDATED SCHEDULE OF INVESTMENTS      9  


Consolidated Schedule of Investments  (unaudited) (continued)

January 31, 2020

  

BlackRock Total Factor Fund

 

Forward Foreign Currency Exchange Contracts (continued)

 

Currency

Purchased

    

Currency

Sold

     Counterparty    Settlement
Date
     Unrealized
Appreciation
(Depreciation)
 
USD        659,646 (a)      KRW        766,172,000      Bank of America NA      03/18/20      $ 18,713  
USD        46,028,815 (a)      KRW        54,642,187,000      Barclays Bank plc      03/18/20        318,494  
USD        7,726,097 (a)      KRW        9,034,013,000      BNP Paribas SA      03/18/20        168,792  
USD        4,106,948 (a)      KRW        4,888,665,000      Deutsche Bank AG      03/18/20        17,390  
USD        1,225,583 (a)      KRW        1,418,392,000      HSBC Bank plc      03/18/20        39,043  
USD        697,609 (a)      KRW        815,582,000      JPMorgan Chase Bank NA      03/18/20        15,343  
USD        5,155,996 (a)      KRW        5,945,859,000      Morgan Stanley & Co. International plc      03/18/20        182,054  
USD        1,939,921 (a)      MXN        36,487,000      Morgan Stanley & Co. International plc      03/18/20        21,146  
USD        246,562 (a)      NOK        2,251,000      Morgan Stanley & Co. International plc      03/18/20        1,792  
USD        12,974,303 (a)      NZD        19,579,000      Morgan Stanley & Co. International plc      03/18/20        311,473  
USD        535,798      SEK        5,038,000      Citibank NA      03/18/20        11,401  
USD        1,178,169      SEK        11,150,000      JPMorgan Chase Bank NA      03/18/20        17,584  
USD        288,722 (a)      SEK        2,723,468      Morgan Stanley & Co. International plc      03/18/20        5,241  
USD        231,109 (a)      SGD        314,000      Morgan Stanley & Co. International plc      03/18/20        981  
USD        1,644,695 (a)      TWD        49,180,000      Bank of America NA      03/18/20        22,391  
USD        27,495,536 (a)      TWD        831,769,000      HSBC Bank plc      03/18/20        57,912  
USD        526,411 (a)      TWD        15,673,000      Morgan Stanley & Co. International plc      03/18/20        9,405  
                     

 

 

 
                        5,902,764  
                     

 

 

 
AUD        12,796,000 (a)      USD        8,710,763      Morgan Stanley & Co. International plc      03/18/20        (138,368
BRL        17,265,000 (a)      USD        4,209,436      Deutsche Bank AG      03/18/20        (187,226
CAD        92,383,276 (a)      USD        70,427,282      Morgan Stanley & Co. International plc      03/18/20        (622,467
EUR        5,736,000 (a)      USD        6,426,880      Morgan Stanley & Co. International plc      03/18/20        (48,452
GBP        10,389,000 (a)      USD        13,901,845      Morgan Stanley & Co. International plc      03/18/20        (167,307
INR        3,030,933,000 (a)     USD        42,116,765      Barclays Bank plc      03/18/20        (1,539
INR        439,775,000 (a)     USD        6,147,551      HSBC Bank plc      03/18/20        (36,817
INR        185,269,000 (a)     USD        2,583,587      JPMorgan Chase Bank NA      03/18/20        (9,249
INR        579,727,000 (a)     USD        8,075,886      Morgan Stanley & Co. International plc      03/18/20        (20,500
JPY        397,854,367 (a)     USD        3,686,298      Morgan Stanley & Co. International plc      03/18/20        (5,969
NZD        12,984,000 (a)      USD        8,550,518      Morgan Stanley & Co. International plc      03/18/20        (153,042
RUB        33,549,900 (a)      USD        533,717      Bank of America NA      03/18/20        (11,355
RUB        30,156,000 (a)      USD        477,039      Barclays Bank plc      03/18/20        (7,520
RUB        200,486,699 (a)     USD        3,214,267      Deutsche Bank AG      03/18/20        (92,754
RUB        588,861,402 (a)     USD        9,350,170      HSBC Bank plc      03/18/20        (181,788
RUB        253,849,000 (a)     USD        4,059,648      Morgan Stanley & Co. International plc      03/18/20        (107,301
TWD        155,244,000 (a)     USD        5,157,050      BNP Paribas SA      03/18/20        (36,005
TWD        206,890,000 (a)     USD        6,940,715      Deutsche Bank AG      03/18/20        (116,020
USD        767,533 (a)      CHF        752,000      Morgan Stanley & Co. International plc      03/18/20        (15,558
USD        18,904,715 (a)      GBP        14,424,000      Morgan Stanley & Co. International plc      03/18/20        (164,203
USD        1,100,647 (a)      HKD        8,589,000      Morgan Stanley & Co. International plc      03/18/20        (4,468
USD        3,485,730 (a)      JPY        379,371,000      Morgan Stanley & Co. International plc      03/18/20        (23,619
USD        4,568,100 (a)      MXN        87,630,000      Morgan Stanley & Co. International plc      03/18/20        (40,178
                     

 

 

 
                        (2,191,705
                     

 

 

 
Net Unrealized Appreciation       $ 3,711,059  
                     

 

 

 

 

(a) 

All or a portion of the security is held by a wholly-owned subsidiary. See Note 1 of the Notes to Consolidated Financial Statements for details on the wholly-owned subsidiary.

Centrally Cleared Credit Default Swaps — Sell Protection

 

Reference Obligation/Index    Financing
Rate Received
by the Fund
     Payment
Frequency
   Termination
Date
     Credit
Rating 
(a)
    

Notional

Amount

(000) (b)

     Value      Upfront
Premium
Paid
(Received)
     Unrealized
Appreciation
(Depreciation)
 

CDX.NA.HY.33.V2

     5.00    Quarterly      12/20/24        B        USD        22,007      $ 1,978,364      $ 1,714,297      $ 264,067  

ITRAXX.EUR. CROSSOVER.32.V1

     5.00    Quarterly      12/20/24        CCC+        EUR        20,023        2,847,368        2,889,054        (41,686
                    

 

 

    

 

 

    

 

 

 
                     $ 4,825,732      $ 4,603,351      $ 222,381  
                    

 

 

    

 

 

    

 

 

 

 

 

10    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Consolidated Schedule of Investments  (unaudited) (continued)

January 31, 2020

  

BlackRock Total Factor Fund

 

(a) 

Using the rating of the issuer or the underlying securities of the index, as applicable, provided by S&P Global Ratings.

 

(b) 

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

OTC Total Return Swaps

 

Reference Entity  

Fixed Amount Paid

/ (Received) by the

Fund (a)

    Counterparty   Termination
Date
   

Notional
Amount 

(000)

    Value     Upfront
Premium
Paid
(Received)
    Unrealized
Appreciation
(Depreciation)
 

BOVESPA Index Futures February 2020

  BRL     (4,372,508   Merrill Lynch International & Co.     02/12/20       BRL       4,373     $ 36,674     $     $ 36,674  

BOVESPA Index Futures February 2020

  BRL     (1,965,428   Merrill Lynch International & Co.     02/12/20       BRL       1,965       6,678             6,678  

BOVESPA Index Futures February 2020

  BRL     (7,611,852   Merrill Lynch International & Co.     02/12/20       BRL       7,612       48,180             48,180  

TAIEX Futures February 2020

  TWD     1,292,430,101     Merrill Lynch International & Co.     02/19/20       TWD       1,292,430       (1,856,132           (1,856,132

TAIEX Futures February 2020

  TWD     130,923,137     Merrill Lynch International & Co.     02/19/20       TWD       130,923       (233,636           (233,636

KOSPI 200 Index Futures March 2020

  KRW     (9,626,174,250   Merrill Lynch International & Co.     03/12/20       KRW       9,626,174                    

KOSPI 200 Index Futures March 2020

  KRW     (9,914,518,250   Merrill Lynch International & Co.     03/12/20       KRW       9,914,518       542,974             542,974  

Swiss Market Index Futures March 2020

  CHF     3,012,292     JPMorgan Chase Bank NA     03/20/20       CHF       3,012       (60,520           (60,520

Swiss Market Index Futures March 2020

  CHF     19,575,616     JPMorgan Chase Bank NA     03/20/20       CHF       19,576       268,256             268,256  

Swiss Market Index Futures March 2020

  CHF     7,187,918     JPMorgan Chase Bank NA     03/20/20       CHF       7,188                    
             

 

 

   

 

 

   

 

 

 
              $ (1,247,526   $     $ (1,247,526
             

 

 

   

 

 

   

 

 

 

 

(a)

At termination, the fixed amount paid (received) will be exchanged for the total return of the reference entity.

OTC Total Return Swaps (a)

 

Reference Entity    Counterparty   

Termination

Date

    

Net

Notional

     Unrealized
Appreciation
(Depreciation)
     Net Value of
Reference
Entity
     Gross
Notional
Amount
Net Asset
Percentage
 

Equity Securities Long/Short

   Bank of America NA      02/15/23      $ 21,496,535      $ (2,006,743 )(b)     $ 19,414,405        108.4
   Citibank NA      02/24/23 - 02/27/23        20,651,215        (2,793,272 )(c)       17,751,839        115.0
   Credit Suisse International      02/13/20 - 02/08/23        19,191,010        (670,934 )(d)        18,438,394        114.6
   Deutsche Bank AG      02/17/23        157,746        19,966 (e)        177,659        0.3
   JPMorgan Chase Bank NA      02/08/23        109,662        44,109 (f)        132,490        0.4
           

 

 

    

 

 

    
            $ (5,406,874    $ 55,914,787     
           

 

 

    

 

 

    

 

(a) 

The Fund receives or pays the total return on a portfolio of long and short positions underlying the total return swap. In addition, the Fund pays or receives a variable rate of interest, based on a specified benchmark, plus or minus a spread in a range of 0-300 basis points. The benchmark and spread are determined based upon the country and/or currency of the individual underlying positions. The following are the specified benchmarks used in determining the variable rate of interest:

Association of Banks in Singapore SGD 1 Month

Association of Banks in Singapore Swap Offer Rate Fixing 1 Month

Association of Banks in Singapore Interbank Offer Rate Overnight

ASX Australian Bank Bill Short Term Rates 1 Month

Canada Bankers Acceptances 1 Month

Copenhagen Interbank Offered Rate:

    DKK 1 Day

    DKK 1 Week

    DKK 1 Month

EMMI EURO Overnight Index Average Rate

Euro Denominated LIBOR Rate 1 Month

Hong Kong Dollar HIBOR Fixings:

    HKD 1 Week

    HKD 1 Month

Intercontinental Exchange LIBOR:

    CHF 1 Week

 

 

CONSOLIDATED SCHEDULE OF INVESTMENTS      11  


Consolidated Schedule of Investments  (unaudited) (continued)

January 31, 2020

  

BlackRock Total Factor Fund

 

    CHF 1 Month

    EUR 1 Week

    EUR 1 Month

    GBP 1 Week

    GBP 1 Month

    JPY 1 Week

    JPY 1 Month

    USD 1 Week

    USD 1 Month

Norwegian Interbank Offered Rate:

    NOK 1 Week

    NOK 1 Month

    SGD 1 Month Deposit

Stockholm Interbank Offered Rate:

    SEK 1 Week

    SEK 1 Month

USD Overnight Bank Funding Rate

 

(b) 

Amount includes $75,387 of net dividends and financing fees.

(c) 

Amount includes $106,104 of net dividends and financing fees.

(d) 

Amount includes $81,682 of net dividends and financing fees.

(e) 

Amount includes $53 of net dividends and financing fees.

(f) 

Amount includes $21,281 of net dividends and financing fees.

 

The following table represents the individual long and short positions and related values of equity securities underlying the total return swap with Bank of America NA, as of January 31, 2020, expiration date 02/15/23:

 

     Shares     Value     % of Basket
Value
 

Reference Entity — Long

 

Australia                  

AGL Energy Ltd.

    23,442     $ 311,104       1.6

Aristocrat Leisure Ltd.

    6,490       154,781       0.8  

ASX Ltd.

    13,252       749,741       3.9  

Aurizon Holdings Ltd.

    519,195               1,861,057       9.6  

BHP Group Ltd.

    18,445       473,002       2.4  

BHP Group plc

    22,150       482,131       2.5  

Cochlear Ltd.

    750       119,450       0.6  

Macquarie Group Ltd.

    5,310       507,372       2.6  

Newcrest Mining Ltd.

    42,650       853,855       4.4  

QBE Insurance Group Ltd.

    3,790       34,501       0.2  

Rio Tinto Ltd.

    9,199       596,908       3.1  

Rio Tinto plc

    20,275       1,084,191       5.6  

Santos Ltd.

    6,930       39,774       0.2  

South32 Ltd.

    62,340       106,969       0.6  

Suncorp Group Ltd.

    53,090       453,530       2.3  

Sydney Airport

    19,130       106,403       0.5  

Telstra Corp. Ltd.

    133,900       341,438       1.8  

Treasury Wine Estates Ltd.

    27,560       236,728       1.2  

Wesfarmers Ltd.

    13,168       395,066       2.0  

Woolworths Group Ltd.

    20,480       568,808       2.9  
   

 

 

   
      9,476,809    
Austria                  

Erste Group Bank AG

    26,680       979,620       5.1  
   

 

 

   
Belgium                  

Ageas

    11,518       635,121       3.3  

Colruyt SA

    750       37,555       0.2  

Groupe Bruxelles Lambert SA

    4,952       497,645       2.6  

KBC Group NV

    5,620       412,370       2.1  

UCB SA

    7,930       729,736       3.7  
   

 

 

   
      2,312,427    
     Shares     Value     % of Basket
Value
 
Canada                  

Bank of Nova Scotia (The)

    460     $ 25,124       0.1

BCE, Inc.

    4,050       190,840       1.0  

Canadian Natural Resources Ltd.

    7,206       202,665       1.0  

Canadian Pacific Railway Ltd.

    570       151,416       0.8  

Canadian Tire Corp. Ltd., Class A

    2,830       303,508       1.6  

CGI, Inc.

    4,520       346,087       1.8  

Constellation Software, Inc.

    790       830,384       4.3  

Hydro One Ltd.

    43,810       890,501       4.6  

Imperial Oil Ltd.

    35,189       834,389       4.3  

Magna International, Inc.

    8,570       434,413       2.2  

Manulife Financial Corp.

    23,770       463,043       2.4  

National Bank of Canada

    20,648       1,145,672       5.9  

Nutrien Ltd.

    17,990       767,993       4.0  

Restaurant Brands International, Inc.

    5,820       355,078       1.8  

Rogers Communications, Inc., Class B

    5,290       264,860       1.4  

Royal Bank of Canada

    200       15,805       0.1  

Suncor Energy, Inc.

    30,191       922,794       4.8  

TC Energy Corp.

    2,200       120,639       0.6  

Thomson Reuters Corp.

    2,789       224,068       1.2  

Toronto-Dominion Bank (The)

    260       14,369       0.1  
   

 

 

   
              8,503,648    
Denmark                  

Carlsberg A/S, Class B

    10,020       1,463,259       7.5  

Demant A/S

    5,430       176,083       0.9  

GN Store Nord A/S

    3,710       184,016       1.0  

H Lundbeck A/S

    10,686       454,073       2.3  

Novo Nordisk A/S, Class B

    16,650       1,013,514       5.2  
   

 

 

   
      3,290,945    
Finland                  

Kone OYJ, Class B

    5,810       375,403       1.9  

UPM-Kymmene OYJ

    16,705       526,349       2.7  
   

 

 

   
      901,752    
 

 

 

12    2020 BLACKROCK SEMI-ANNUAL REPORT TO SHAREHOLDERS


Consolidated Schedule of Investments   (unaudited) (continued)

January 31, 2020

  

BlackRock Total Factor Fund

 

     Shares     Value     % of Basket
Value
 
France                  

Arkema SA

    2,762     $ 253,080       1.3

Bouygues SA

    700       27,657       0.1  

Bureau Veritas SA

    24,406       672,503       3.5  

Capgemini SE

    3,640       452,055       2.3  

Carrefour SA

    21,073       356,591       1.8  

Cie de Saint-Gobain

    34,160       1,288,801       6.6  

Danone SA

    3,923       313,936       1.6  

Eiffage SA

    5,380       623,616       3.2  

Hermes International

    810       604,849       3.1  

Legrand SA

    12,439       995,266       5.1  

L’Oreal SA

    410       114,040       0.6  

Orange SA

    14,749       208,492       1.1  

Peugeot SA

    4,830       99,451       0.5  

Publicis Groupe SA

    5,270       233,615       1.2  

Safran SA

    1,990       320,862       1.7  

Schneider Electric SE

    4,416       440,393       2.3  

Sodexo SA

    6,230       652,311       3.4  

Suez

    19,360       317,714       1.6  

TOTAL SA

    11,693       569,341       2.9  

Veolia Environnement SA

    19,989       589,684       3.0  

Vinci SA

    1,467       162,528       0.8  

Vivendi SA

    31,690       866,699       4.5  
   

 

 

   
              10,163,484    
Germany                  

adidas AG

    1,135       358,790       1.8  

Allianz SE (Registered)

    5,610       1,339,352       6.9  

BASF SE

    2,780       187,641       1.0  

Brenntag AG

    7,700       398,476       2.1  

Continental AG

    680       77,600       0.4  

Covestro AG

    6,144       258,925       1.3  

Deutsche Post AG (Registered)

    41,663       1,453,618       7.5  

Deutsche Telekom AG (Registered)

    29,009       469,824       2.4  

Evonik Industries AG

    28,683       786,023       4.0  

Hannover Rueck SE

    1,085       210,671       1.1  

HeidelbergCement AG

    15,221       1,026,523       5.3  

Henkel AG & Co. KGaA (Preference)

    7,980       811,586       4.2  

Knorr-Bremse AG

    3,410       372,551       1.9  

LEG Immobilien AG

    2,998       369,775       1.9  

Merck KGaA

    2,030       260,306       1.3  

Muenchener Rueckversicherungs-Gesellschaft AG (Registered)

    610       179,853       0.9  

RWE AG

    1,672       57,964       0.3  

Telefonica Deutschland Holding AG

    280,440       850,023       4.4  

Volkswagen AG (Preference)

    2,590       464,680       2.4  
   

 

 

   
      9,934,181    
Ireland                  

AerCap Holdings NV

    3,140       177,755       0.9  
   

 

 

   
Italy                  

Assicurazioni Generali SpA

    26,307       512,610       2.6  

Eni SpA

    52,857       740,400       3.8  

Ferrari NV

    2,040       344,254       1.8  

Intesa Sanpaolo SpA

    123,030       305,547       1.6  

Moncler SpA

    5,960       256,532       1.3  

Snam SpA

    14,940       80,073       0.4  
   

 

 

   
      2,239,416    
Japan                  

Aeon Co. Ltd.

    9,400       192,263       1.0  

AGC, Inc.

    11,000       370,792       1.9  

Ajinomoto Co., Inc.

    24,600       405,158       2.1  

Asahi Group Holdings Ltd.

    10,500       486,759       2.5  

Asahi Kasei Corp.

    5,400       55,233       0.3  
     Shares     Value     % of Basket
Value
 
Japan (continued)                  

Astellas Pharma, Inc.

    73,900     $ 1,305,822       6.7

Bridgestone Corp.

    12,400       439,196       2.3  

Canon, Inc.

    12,000       314,692       1.6  

Dai Nippon Printing Co. Ltd.

    43,600       1,202,251       6.2  

Denso Corp.

    5,100       209,213       1.1  

East Japan Railway Co.

    7,400       651,582       3.4  

FUJIFILM Holdings Corp.

    15,000       744,967       3.8  

Fujitsu Ltd.

    4,700       496,944       2.6  

Hitachi Ltd.

    9,000       342,788       1.8  

Honda Motor Co. Ltd.

    4,900       125,319       0.6  

Hoya Corp.

    400       38,282       0.2  

ITOCHU Corp.

    7,600       177,543       0.9  

Japan Post Holdings Co. Ltd.

    27,100       246,520       1.3  

Japan Post Insurance Co. Ltd.

    15,300       258,165       1.3  

Kao Corp.

    1,900       151,539       0.8  

Kikkoman Corp.

    2,000       96,915       0.5  

Kirin Holdings Co. Ltd.

    13,600       298,690       1.5  

Konami Holdings Corp.

    4,400       170,401       0.9  

Kyocera Corp.

    4,300       282,537       1.5  

Kyowa Kirin Co. Ltd.

    4,900       115,195       0.6  

Marubeni Corp.

    50,000       359,281       1.8  

MEIJI Holdings Co. Ltd.

    7,300       513,729       2.6  

Mitsubishi Chemical Holdings Corp.

    55,400       400,374       2.1  

Mitsubishi Electric Corp.

    46,100       639,184       3.3  

Mitsubishi Heavy Industries Ltd.

    18,000       656,593       3.4  

Mitsui & Co. Ltd.

    20,400       362,827       1.9  

MS&AD Insurance Group Holdings, Inc.

    18,400       611,114       3.1  

NEC Corp.

    4,700       209,213       1.1  

Nintendo Co. Ltd.

    800       294,285       1.5  

Nippon Steel Corp.

    18,000       249,759       1.3  

Nitori Holdings Co. Ltd.

    1,000       155,401       0.8  

Nitto Denko Corp.

    9,200       511,411       2.6  

Nomura Research Institute Ltd.

    18,400       404,905       2.1  

NTT Data Corp.

    34,000       477,606       2.5  

Obayashi Corp.

    29,300       321,332       1.7  

Olympus Corp.

    4,600       74,323       0.4  

Omron Corp.

    13,400       767,350       3.9  

Ono Pharmaceutical Co. Ltd.

    20,200       465,142       2.4  

ORIX Corp.

    24,000       405,419       2.1  

Otsuka Holdings Co. Ltd.

    8,200       364,288       1.9  

Panasonic Corp.

    65,800       653,922       3.4  

Recruit Holdings Co. Ltd.

    9,700       378,070       1.9  

Ricoh Co. Ltd.

    10,000       113,464       0.6  

Rohm Co. Ltd.

    1,700       122,290       0.6  

Secom Co. Ltd.

    2,900       254,483       1.3  

Sekisui House Ltd.

    59,500       1,279,379       6.6  

Seven & i Holdings Co. Ltd.

    35,300       1,353,520       7.0  

Shionogi & Co. Ltd.

    12,300       731,532       3.8  

Sompo Holdings, Inc.

    6,200       231,656       1.2  

Sony Corp.

    2,900       202,788       1.0  

Sumitomo Chemical Co. Ltd.

    139,400       592,338       3.0  

Sumitomo Corp.

    23,000       342,118       1.8  

Sumitomo Electric Industries Ltd.

    45,400       605,256       3.1  

Sumitomo Mitsui Financial Group, Inc.

    43,500       1,529,435       7.9  

Tokio Marine Holdings, Inc.

    100       5,428       0.0  

Tokyo Electron Ltd.

    1,500       329,919       1.7  

Tokyu Corp.

    2,400       42,294       0.2  

Toray Industries, Inc.

    49,300       322,585       1.7  

Toshiba Corp.

    10,200       325,996       1.7  

Trend Micro, Inc.

    10,700       559,079       2.9  

West Japan Railway Co.

    5,700       482,276       2.5  
   

 

 

   
              27,880,130    
 

 

 

CONSOLIDATED SCHEDULE OF INVESTMENTS      13  


Consolidated Schedule of Investments  (unaudited) (continued)

January 31, 2020

  

BlackRock Total Factor Fund

 

     Shares     Value     % of Basket
Value
 
Luxembourg                  

Tenaris SA

    82,159     $ 849,079       4.4
   

 

 

   
Netherlands                  

Adyen NV

    230       211,349       1.1  

Akzo Nobel NV

    15,376       1,450,996       7.5  

ING Groep NV

    4,940       53,635       0.3  

Koninklijke Ahold Delhaize NV

    10,130       248,605       1.3  

Koninklijke KPN NV

    78,860       220,953       1.1  

Koninklijke Philips NV

    9,177       420,283       2.2  

NN Group NV

    5,420       188,120       1.0  

Randstad NV

    6,206       356,448       1.8  

Royal Dutch Shell plc, Class A

    30,578       802,990       4.1  

Wolters Kluwer NV

    10,295       773,583       4.0  
   

 

 

   
              4,726,962    
Norway                  

Equinor ASA

    4,370       78,868       0.4  

Orkla ASA

    24,730       238,738       1.2  

Telenor ASA

    15,916       287,619       1.5  

Yara International ASA

    1,540       55,926       0.3  
   

 

 

   
      661,151    
Portugal                  

Galp Energia SGPS SA

    17,650       266,701       1.4  

Jeronimo Martins SGPS SA

    5,580       96,020       0.5  
   

 

 

   
      362,721    
Singapore                  

Mapletree Industrial Trust

    17,100       34,757       0.2  
   

 

 

   
Spain                  

Aena SME SA

    630       116,601       0.6