The Fund has an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Consolidated Statement of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.
The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and to economically hedge, or protect, its exposure to certain risks such as equity risk. These contracts may be transacted on an exchange.
Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. Counterparty risk related to exchange-traded financial futures contracts is deemed to be minimal due to the protection against defaults provided by the exchange on which these contracts trade.
For the six months ended January 31, 2012, the average quarterly balances of outstanding derivative financial instruments were as follows:
The PNC Financial Services Group, Inc. (“PNC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate for 1940 Act purposes, but Barclays is not.
The Trust, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of the Fund’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the
|
|
Notes to Consolidated Financial Statements(continued) |
Fund. For such services, the Fund pays the Manager a monthly fee at an annual rate of 1.00% of based upon the Fund’s average daily net assets.
The Trust, on behalf of the Fund, entered into an Administration Agreement with the Manager and State Street Bank and Trust Company (collectively, the “Administrator”) to provide administrative services (other than investment advice and related portfolio activities).
The Fund pays the Administrator a monthly fee based upon the average daily value of the Fund’s net assets at the following annual rates: 0.075% of the Fund’s average daily net assets not exceeding $500 million; 0.065% of average daily net assets in excess of $500 million but not exceeding $1 billion; and 0.055% of average daily net assets in excess of $1 billion. In addition, each of the share classes is charged an administration fee based upon the average daily net assets of each respective class at the following rates: 0.025% of the first $500 million, 0.015% of the next $500 million and 0.005% of the average daily net assets in excess of $1 billion. These amounts are shown as administration — Institutional, Investor A and Investor C, respectively, in the Consolidated Statement of Operations.
The Manager contractually agreed to waive and/or reimburse fees or expenses, excluding interest expense, dividend expense, acquired fund fees and expenses and certain other fund expenses, in order to limit expenses. The current expense limitations as a percentage of average daily net assets are as follows: 1.75% for Institutional; 2.00% for Investor A and 2.75% for Investor C. The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to December 1, 2012 unless approved by the Board, including a majority of the Independent Trustees or by a vote of the majority of the outstanding voting securities of the Fund. These amounts are included in fees waived and/or reimbursed by advisor, shown as administration fees waived, administration fees waived — class specific and transfer agent fees waived and/or reimbursed — class specific, respectively, in the Consolidated Statement of Operations as follows:
| | | | | | | |
| | Transfer
Agent Fees | | Administration
Fees | |
Institutional | | $ | 2,500 | | $ | 350 | |
Investor A | | $ | 216 | | $ | 79 | |
Investor C | | $ | 55 | | $ | 14 | |
For the six months ended January 31, 2012, the Fund waived and/or reimbursed $262,116, which is included in fees waived and/or reimbursed by advisor in the Consolidated Statement of Operations. In addition, the Fund waived $1,329 in administration fees.
The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with the Fund’s investment in other affiliated investment companies, if any. For the six months ended January 31, 2012, the Manager waived $47, which is included in fees waived and/or reimbursed by advisor in the Consolidated Statement of Operations.
BlackRock provides investment management and other services to the Subsidiary. BlackRock does not receive separate compensation from the Subsidiary for providing investment management or administrative services. However, the Fund pays BlackRock based on the Fund’s net assets, which includes the assets of the Subsidiary.
If during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver or reimbursement from the Manager, are less than the expense limit for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of (a) the amount of fees waived or expenses reimbursed during those prior two fiscal years under the agreement and (b) the amount by which the expense limit for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that: (1) the Fund of which the share class is a part has more than $50 million in assets for the fiscal year and (2) the Manager or an affiliate continues to serve as the Fund’s investment advisor or administrator. In the event the expense limit for a share class is changed subsequent to a fiscal year in which the Manager becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse the Manager shall be calculated by reference to the expense limit for that share class in effect at the time the Manager became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.
On January 31, 2012, the amounts subject to possible future recoupment under the expense limitation agreement are as follows:
| | | | | | | |
| | 2013 | | 2014 | |
Expiring July 31, | | $ | 104,253 | | $ | 263,445 | |
The Trust, on behalf of the Fund, entered into a Distribution Agreement and Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the shares of the Fund as follows:
| | | | | | | |
| | Service
Fees | | Distribution
Fees | |
Investor A | | | 0.25 | % | | — | |
Investor C | | | 0.25 | % | | 0.75 | % |
| | | |
| | | |
| BLACKROCK INDIA FUND | JANUARY 31, 2012 | 17 |
|
|
Notes to Consolidated Financial Statements (continued) |
Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing and distribution services to the Fund. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to Investor A and Investor C shareholders.
For the six months ended January 31, 2012, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of the Fund’s Investor A Shares, which totaled $80.
Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates. The Fund reimburses the Manager for compensation paid to the Trust’s Chief Compliance Officer.
4. Investments:
Purchases and sales of investments, excluding short-term securities, for the six months ended January 31, 2012, were $5,445,151 and $4,319,580, respectively.
5. Income Tax Information:
As of July 31, 2011, the Fund had a capital loss carryforward available to offset future realized capital gains in the amount of $57,317. The capital loss carryforward is not subject to expiration and must first be utilized to offset future realized gains of the same character.
As of January 31, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:
| | | | |
Tax cost | | $ | 4,033,758 | |
Gross unrealized appreciation | | $ | 322,457 | |
Gross unrealized depreciation | | | (125,588 | ) |
Net unrealized appreciation | | $ | 196,869 | |
6. Borrowings:
The Trust, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates, is a party to a $500 million credit agreement with a group of lenders, which expired in November 2011. The Fund may borrow under the credit agreement to fund shareholder redemptions. Effective November 2010 to November 2011, the credit agreement had the following terms: a commitment fee of 0.08% per annum based on the Fund’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 1.00% per annum or (b) the Fed Funds rate plus 1.00% per annum on amounts borrowed. In addition, the Fund paid administration and arrangement fees which were allocated to the Fund based on its net assets as of October 31, 2010. Effective November 2011 to November 2012, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the Fund’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Fund paid administration and arrangement fees which were allocated to the Fund based on its net assets as of October 31, 2011. The Fund did not borrow under the credit agreement during the six months ended January 31, 2012.
7. Concentration, Market and Credit Risk:
In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Fund may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Fund; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Fund may be exposed to counterparty credit risk, or the risk that an entity with which the Fund has unsettled or open transactions may fail to or be unable to perform on its commitments. The Fund manages counterparty credit risk by entering into transactions only with counterparties that it 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 generally approximated by their value recorded in the Fund’s Consolidated Statement of Assets and Liabilities, less any collateral held by the Fund.
As of January 31, 2012, the Fund invested a significant portion of its assets in securities in the financials sector. Changes in economic conditions affecting the financials sector would have a greater impact on the Fund and could affect the value, income and/or liquidity of positions in such securities.
The Fund invests a substantial amount of its assets in issuers located in a single country or a limited number of countries. At January 31, 2012, the Fund invested 95.2% of its assets in India. When the Fund concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in those countries may have a significant impact on their investment performance. Foreign issuers may not be subject to the same uniform accounting, auditing and financial reporting standards and practices as used in the U.S. Foreign securities markets may also be less liquid, more volatile, and less subject to governmental supervision not typically associated with investing in U.S. securities.
| | |
| | |
18 | BLACKROCK INDIA FUND | JANUARY 31, 2012 |
|
|
Notes to Consolidated Financial Statements (concluded) |
8. Capital Share Transactions:
Transactions in capital shares for each class were as follows:
| | | | | | | | | | | | | | |
| | Six Months Ended
January 31, 2012 | | | Period May 5, 20111
to July 31, 2011 | |
| | Shares | | Amount | | | Shares | | Amount | |
Institutional | | | | | | | | | | | | | | |
Shares sold | | | 141,835 | | $ | 1,046,514 | | | | 298,971 | | $ | 2,989,450 | |
Shares issued to shareholders in reinvestment of dividends | | | 1 | | | 6 | | | | — | | | — | |
Shares redeemed | | | (1,881 | ) | | (14,621 | ) | | | — | | | — | |
Net increase | | | 139,955 | | $ | 1,031,899 | | | | 298,971 | | $ | 2,989,450 | |
| | | | | | | | | | | | | | |
Investor A | | | | | | | | | | | | | | |
Shares sold | | | 32,037 | | $ | 249,598 | | | | 78,438 | | $ | 797,033 | |
Shares redeemed | | | (44,073 | ) | | (337,191 | ) | | | (979 | ) | | (10,000 | ) |
Net increase (decrease) | | | (12,036 | ) | $ | (87,593 | ) | | | 77,459 | | $ | 787,033 | |
| | | | | | | | | | | | | | |
Investor C | | | | | | | | | | | | | | |
Shares sold | | | 2,815 | | $ | 25,245 | | | $ | 11,323 | | | 114,157 | |
Shares redeemed | | | — | | | — | | | | (1 | ) | | (10 | ) |
Net increase | | | 2,815 | | $ | 25,245 | | | | 11,322 | | $ | 114,147 | |
| | |
| 1 | Commencement of operations. |
At January 31, 2012, shares owned by affiliates were as follows:
| | | | |
| | Shares | |
Institutional | | | 296,000 | |
Investor A | | | 2,000 | |
Investor C | | | 2,000 | |
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.
| | | |
| | | |
| BLACKROCK INDIA FUND | JANUARY 31, 2012 | 19 |
|
Ronald W. Forbes, Co-Chairman of the Board and Trustee |
Rodney D. Johnson, Co-Chairman of the Board and Trustee |
Paul L. Audet, Trustee |
David O. Beim, Trustee |
Henry Gabbay, Trustee |
Dr. Matina S. Horner, Trustee |
Herbert I. London, Trustee |
Cynthia A. Montgomery, Trustee |
Joseph P. Platt, Trustee |
Robert C. Robb, Jr., Trustee |
Toby Rosenblatt, Trustee |
Kenneth L. Urish, Trustee |
Frederick W. Winter, Trustee |
John M. Perlowski, President and Chief Executive Officer |
Richard Hoerner, CFA, Vice President |
Brendan Kyne, Vice President |
Simon Mendelson, Vice President |
Christopher Stavrakos, CFA, Vice President |
Neal Andrews, Chief Financial Officer |
Jay Fife, Treasurer |
Brian Kindelan, Chief Compliance Officer and Anti-Money Laundering Officer |
Ira P. Shapiro, Secretary |
|
Investment Advisor |
BlackRock Advisors, LLC
|
Wilmington, DE 19809 |
|
Custodian and Accounting Agent |
State Street Bank and Trust Company
|
Boston, MA 02110 |
|
Transfer Agent |
BNY Mellon Investment Servicing (US) Inc.
|
Wilmington, DE 19809 |
|
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 Fund |
100 Bellevue Parkway
|
Wilmington, DE 19809 |
| | |
| | |
20 | BLACKROCK INDIA FUND | JANUARY 31, 2012 |
Electronic Delivery
Electronic copies of most financial reports and prospectuses are available on the Fund’s website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund’s electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.
Shareholders Who Hold Accounts Directly with BlackRock:
| |
1) | Access the BlackRock website at http://www.blackrock.com/edelivery |
| |
2) | Select “eDelivery” under the “More Information” section |
| |
3) | Log into your account |
Householding
The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Fund at (800) 441-7762.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Fund’s Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available
(1) without charge, upon request, by calling (800) 441-7762;
(2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.
Availability of Proxy Voting Record
Information about how the Fund voted proxies relating to securities held in the Fund’s portfolio during the most recent 12-month period ended June 30 is available upon request and without charge
(1) at http://www.blackrock.com or by calling (800) 441-7762 and
(2) on the SEC’s website at http://www.sec.gov.
| | | |
| | | |
| BLACKROCK INDIA FUND | JANUARY 31, 2012 | 21 |
|
|
Additional Information (concluded) |
Account Information
Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http://www.blackrock.com/funds.
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
|
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.
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22 | BLACKROCK INDIA FUND | JANUARY 31, 2012 |
|
|
A World-Class Mutual Fund Family |
BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.
|
Equity Funds |
|
BlackRock ACWI ex-US Index Fund |
BlackRock All-Cap Energy & Resources Portfolio |
BlackRock Asset Allocation Portfolio† |
BlackRock Balanced Capital Fund† |
BlackRock Basic Value Fund |
BlackRock Capital Appreciation Fund |
BlackRock China Fund |
BlackRock Commodity Strategies Fund |
BlackRock Emerging Markets Fund |
BlackRock Emerging Markets Long/Short Equity Fund |
BlackRock Energy & Resources Portfolio |
BlackRock Equity Dividend Fund |
BlackRock EuroFund |
BlackRock Focus Growth Fund |
BlackRock Global Allocation Fund† |
BlackRock Global Dividend Income Portfolio |
BlackRock Global Dynamic Equity Fund |
BlackRock Global Opportunities Portfolio |
BlackRock Global SmallCap Fund |
BlackRock Health Sciences Opportunities Portfolio |
BlackRock Index Equity Portfolio |
BlackRock India Fund |
BlackRock International Fund |
BlackRock International Index Fund |
BlackRock International Opportunities Portfolio |
BlackRock Large Cap Core Fund |
BlackRock Large Cap Core Plus Fund |
BlackRock Large Cap Growth Fund |
BlackRock Large Cap Value Fund |
BlackRock Latin America Fund |
BlackRock Mid-Cap Growth Equity Portfolio |
BlackRock Mid-Cap Value Equity Portfolio |
BlackRock Mid Cap Value Opportunities Fund |
BlackRock Natural Resources Trust |
BlackRock Pacific Fund |
BlackRock Russell 1000 Index Fund |
BlackRock Science & Technology Opportunities Portfolio |
BlackRock Small Cap Growth Equity Portfolio |
BlackRock Small Cap Growth Fund II |
BlackRock Small Cap Index Fund |
BlackRock S&P 500 Index Fund |
BlackRock S&P 500 Stock Fund |
BlackRock U.S. Opportunities Portfolio |
BlackRock Value Opportunities Fund |
BlackRock World Gold Fund |
|
Fixed Income Funds |
|
BlackRock Bond Index Fund |
BlackRock Core Bond Portfolio |
BlackRock Emerging Market Debt Portfolio |
BlackRock Floating Rate Income Portfolio |
BlackRock Global Long/Short Credit Fund |
BlackRock GNMA Portfolio |
BlackRock High Yield Bond Portfolio |
BlackRock Inflation Protected Bond Portfolio |
BlackRock International Bond Portfolio |
BlackRock Long Duration Bond Portfolio |
BlackRock Low Duration Bond Portfolio |
BlackRock Multi-Asset Income Portfolio† |
BlackRock Multi-Sector Bond Portfolio |
BlackRock Strategic Income Opportunities Portfolio |
BlackRock Total Return Fund |
BlackRock US Government Bond Portfolio |
BlackRock US Mortgage Portfolio |
BlackRock World Income Fund |
|
Municipal Bond Funds |
|
BlackRock California Municipal Bond Fund |
BlackRock High Yield Municipal Fund |
BlackRock Intermediate Municipal Fund |
BlackRock National Municipal Fund |
BlackRock New Jersey Municipal Bond Fund |
BlackRock New York Municipal Bond Fund |
BlackRock Pennsylvania Municipal Bond Fund |
BlackRock Short-Term Municipal Fund |
|
Target Risk & Target Date Funds† |
|
BlackRock Prepared Portfolios
Conservative Prepared Portfolio
Moderate Prepared Portfolio
Growth Prepared Portfolio
Aggressive Growth Prepared Portfolio |
|
BlackRock Lifecycle Prepared Portfolios |
2015 |
2020 |
2025 |
2030 |
2035 |
2040 |
2045 |
2050 |
|
LifePath Portfolios
Retirement |
2020 |
2025 |
2030 |
2035 |
2040 |
2045 |
2050 |
2055 |
|
LifePath Index Portfolios
Retirement |
2020 |
2025 |
2030 |
2035 |
2040 |
2045 |
2050 |
2055 |
|
† Mixed asset fund. |
BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund’s prospectus contains this and other information and is available at www.blackrock.com or by calling (800) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.
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| | | |
| BLACKROCK INDIA FUND | JANUARY 31, 2012 | 23 |
This report is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change. Please see the Fund’s prospectus for a description of risks associated with global investments.
| |
#INDIA-1/12-SAR | 
|
| |
| January 31, 2012 |
| | |
| Semi-Annual Report (Unaudited) |
|
| BlackRock FundsSM |
|
| 4 | BlackRock Emerging Markets Long/Short Equity Fund |
|
Not FDIC Insured § No Bank Guarantee § May Lose Value |
| | |
| | |
2 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
Early in 2011, global financial market action was dominated by political revolutions in the Middle East and North Africa, soaring prices of oil and other commodities, and natural disasters in Japan resulting in global supply chain disruptions. But corporate earnings were strong and the global economic recovery appeared to be on track. Investors demonstrated steadfast confidence as risk assets, including equities, commodities and high yield bonds, charged forward. Markets reversed sharply in May, however, when escalating political strife in Greece rekindled fears about sovereign debt problems spreading across Europe. Concurrently, global economic indicators signaled that the recovery had slowed. Confidence was further shaken by the prolonged debt ceiling debate in Washington, DC. On August 5th, Standard & Poor’s downgraded the US government’s credit rating and turmoil erupted in financial markets around the world. Extraordinary levels of volatility persisted in the months that followed as Greece teetered on the brink of default, debt problems escalated in Italy and Spain, and exposure to European sovereign bonds stressed banks globally. Financial markets whipsawed on hopes and fears. Macro news flow became a greater influence on trading decisions than the fundamentals of the securities traded, resulting in highly correlated asset prices. By the end of the third quarter, equity markets had fallen nearly 20% from their April peak while safe-haven assets such as US Treasuries and gold had rallied to historic highs.
October brought enough positive economic data to assuage fears of a global double-dip recession. Additionally, European leaders began to show progress toward stemming the region’s debt crisis. Investors came back from the sidelines and risk assets rallied through the month. Eventually, a lack of definitive details about Europe’s rescue plan raised doubts among investors and thwarted the rally at the end of October. The last two months of 2011 saw political instability in Greece, unsustainable yields on Italian bonds, and US policymakers in gridlock over budget issues. Global central bank actions and improving economic data invigorated investors, but confidence was easily tempered by sobering news flow. Sentiment improved in the New Year as investors saw bright spots in global economic data, particularly from the United States, China and Germany. International and emerging markets rebounded strongly through January. US stocks rallied on solid improvement in the domestic labor market and indications from the Federal Reserve that interest rates would remain low through 2014. Nonetheless, investors maintained caution as US corporate earnings began to weaken and a European recession appeared inevitable.
US equities and high yield bonds recovered their late-summer losses and posted positive returns for both the 6- and 12-month periods ended January 31, 2012. International markets, however, experienced some significant downturns in 2011 and remained in negative territory despite a strong rebound at the end of the period. Fixed income securities benefited from declining yields and delivered positive returns for the 6- and 12-month periods. US Treasury bonds outperformed other fixed income classes despite their quality rating downgrade, while municipal bonds also delivered superior results. Continued low short-term interest rates kept yields on money market securities near their all-time lows.
Many of the themes that caused uncertainty in 2011 remain unresolved. For investors, the risks are daunting. BlackRock remains committed to helping you keep your financial goals on track in this challenging environment.
|
Sincerely, |
|
|
Rob Kapito |
President, BlackRock Advisors, LLC |
|
|
|
“BlackRock remains committed to helping you keep your financial goals on track in this challenging environment.” |
|
Rob Kapito |
President, BlackRock Advisors, LLC |
|
|
Total Returns as of January 31, 2012 |
| | | | | | | |
| | 6-month | | 12-month | |
US large cap equities
(S&P 500® Index) | | | 2.71 | % | | 4.22 | % |
US small cap equities
(Russell 2000® Index) | | | 0.22 | | | 2.86 | |
International equities
(MSCI Europe, Australasia,
Far East Index) | | | (10.42 | ) | | (9.59 | ) |
Emerging market
equities (MSCI Emerging
Markets Index) | | | (9.56 | ) | | (6.64 | ) |
3-month Treasury
bill (BofA Merrill Lynch
3-Month Treasury
Bill Index) | | | 0.02 | | | 0.09 | |
US Treasury securities
(BofA Merrill Lynch 10-
Year US Treasury Index) | | | 10.81 | | | 18.49 | |
US investment grade
bonds (Barclays
Capital US Aggregate
Bond Index) | | | 4.25 | | | 8.66 | |
Tax-exempt municipal
bonds (S&P Municipal
Bond Index) | | | 7.25 | | | 14.40 | |
US high yield bonds
(Barclays Capital US
Corporate High Yield 2%
Issuer Capped Index) | | | 1.84 | | | 5.81 | |
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.
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| THIS PAGE NOT PART OF YOUR FUND REPORT | 3 |
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Fund Summary as of January 31, 2012 |
BlackRock Emerging Markets Long/Short Equity Fund’s (the “Fund”), a series of BlackRock FundsSM (the “Trust”), investment objective is to seek total return over the long term by investing at least 80% of its total assets in global equity instruments and related derivative instruments issued by, or tied economically to, companies in emerging markets.
| | | | | | | | | | |
| | Percent of Total Investments1 | |
Geographic Allocations | | Long | | Short | | Total | |
Brazil | | | 10 | % | | 10 | % | | 20 | % |
South Korea | | | 8 | | | 8 | | | 16 | |
Taiwan | | | 7 | | | 6 | | | 13 | |
China | | | 5 | | | 5 | | | 10 | |
Russia | | | 4 | | | 3 | | | 7 | |
South Africa | | | 4 | | | 3 | | | 7 | |
Thailand | | | 3 | | | 2 | | | 5 | |
Hong Kong | | | 2 | | | 3 | | | 5 | |
Malaysia | | | 2 | | | 1 | | | 3 | |
Mexico | | | 2 | | | 1 | | | 3 | |
Turkey | | | 1 | | | 1 | | | 2 | |
Chile | | | 1 | | | 1 | | | 2 | |
Israel | | | 1 | | | — | | | 1 | |
Canada | | | 1 | | | — | | | 1 | |
Poland | | | 1 | | | — | | | 1 | |
Argentina | | | 1 | | | — | | | 1 | |
Panama | | | 1 | | | — | | | 1 | |
United Kingdom | | | — | | | 1 | | | 1 | |
India | | | — | | | 1 | | | 1 | |
Total | | | 54 | % | | 46 | % | | 100 | % |
| | |
| 1 | Total investments include the gross notional values of long and short positions of the underlying derivative contracts utilized by the Fund and exclude short-term securities. |
|
Derivative Financial Instruments |
The Fund may invest in various derivative financial instruments, including swaps as specified in Note 2 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a market without owning or taking physical custody of securities or to hedge market and/or equity risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. The Fund’s ability to use a derivative financial instrument successfully depends on the investment advisor’s ability to predict pertinent market movements accurately, which cannot be assured. The use of derivative financial instruments may result in losses greater than if they had not been used, may require the Fund to sell or purchase portfolio investments at inopportune times or for distressed values, may limit the amount of appreciation the Fund can realize on an investment, may result in lower dividends paid to shareholders or may cause the Fund to hold an investment that it might otherwise sell. The Fund’s investments in these instruments are discussed in detail in the Notes to Financial Statements.
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4 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
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• | Institutional Shares are not subject to any sales charge. Institutional Shares bear no ongoing distribution or service fees and are available only to eligible investors. |
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• | Investor A Shares incur a maximum initial sales charge (front-end load)of 5.25% and a service fee of 0.25% per year. |
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• | Investor C Shares are subject to a 1.00% contingent deferred sales charge (“CDSC”) if redeemed within one year of purchase. In addition, Investor C Shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. |
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| Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Figures shown in the performance table on the previous page assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. |
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| The Fund’s investment advisor waived and/or reimbursed a portion of the Fund’s expenses. Without such waiver and/or reimbursement, the Fund’s performance would have been lower. BlackRock Advisors, LLC (the “Manager”) is under no obligation to waive or reimburse or to continue waiving or reimbursing its fees after the applicable termination date. See Note 3 of the Notes to Financial Statements for additional information on waivers and reimbursements. Dividends paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. |
Shareholders of the Fund may incur the following charges: (a) expenses related to transactions, including sales charges and exchange fees; and (b) operating expenses, including advisory fees, service and distribution fees, including 12b-1 fees, and other Fund expenses. The expense example shown below (which is based on a hypothetical investment of $1,000 invested on October 6, 2011 and held through January 31, 2012) 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 table 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 table 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 this Fund and other funds, compare the 5% hypothetical example with the 5% hypothetical examples that appear in other funds’ shareholder reports.
The expenses shown in the table are intended to highlight shareholders’ ongoing costs only and do not reflect any transactional expenses, such as sales charges or exchange fees, 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.
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| | Actual | | Hypothetical2 | | | |
| | Beginning
Account Value
October 6, 2011 | | Ending
Account Value
January 31, 2012 | | Expenses Paid
During the Period1 | | Beginning
Account Value
October 6, 2011 | | Ending
Account Value
January 31, 2012 | | Expenses Paid
During the Period1 | | Annualized
Expense Ratio | |
Institutional | | $ | 1,000.00 | | $ | 1,016.60 | | $ | 5.64 | | $ | 1,000.00 | | $ | 1,010.38 | | $ | 5.62 | | | 1.75 | % |
Investor A | | $ | 1,000.00 | | $ | 1,016.30 | | $ | 6.45 | | $ | 1,000.00 | | $ | 1,009.58 | | $ | 6.42 | | | 2.00 | % |
Investor C | | $ | 1,000.00 | | $ | 1,013.30 | | $ | 8.85 | | $ | 1,000.00 | | $ | 1,007.18 | | $ | 8.82 | | | 2.75 | % |
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| 1 | 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 118/366 (to reflect the period from October 6, 2011, the commencement of operations, to January 31, 2012). |
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| 2 | Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal period divided by 366. |
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| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 5 |
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|
Schedule of Investments January 31, 2012 (Unaudited) |
| | | | | | | |
Short-Term Securities | | Shares | | Value | |
BlackRock Liquidity Funds, TempFund,
Institutional Class, 0.12% (a)(b) | | | 34,827,432 | | $ | 34,827,432 | |
Total Short-Term Securities
(Cost — $34,827,432*) — 95.8% | | | | | | 34,827,432 | |
Other Assets Less Liabilities — 4.2% | | | | | | 1,536,956 | |
Net Assets — 100.0% | | | | | $ | 36,364,388 | |
| | | | | | | |
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* | Cost for federal income tax purposes. |
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(a) | Investments in companies considered to be an affiliate of the Fund during the period, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows: |
| | | | | | | | | | |
| | | | | | | | | | |
Affiliate | | Net
Activity | | Shares Held
at January 31,
2012 | | Income | |
BlackRock Liquidity Funds,
TempFund, Institutional Class | | | 34,827,432 | | | 34,827,432 | | $ | 9,384 | |
| |
(b) | Represents the current yield as of report date. |
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• | Total return swaps as of January 31, 2012 were as follows1: |
| | | | | | | | | | | | | | | | |
Reference
Entity | | Counterparty | | Expiration
Date | | Notional
Amount | | Unrealized
Appreciation | | Net Value of
Reference
Entities | |
Basket of
Equity | | | Goldman
Sachs & Co. | | | 6/17/13 | | $ | 777,469 | | $ | 348,1312 | | $ | 1,158,906 | |
Securities
Long/Short: | | | Morgan
Stanley &
Co., Inc. | | | 12/19/14 | | $ | 714,635 | | | 326,2323 | | | 1,074,628 | |
| | | UBS AG | | | 1/29/13 | | $ | 802,227 | | | 230,3284 | | | 1,041,713 | |
Total | | | | | | | | | | | $ | 904,691 | | $ | 3,275,247 | |
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| 1 | The Fund receives or pays the total return on a portfolio of long and short positions and pays or receives a specified LIBOR or Federal Funds floating rate. |
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| 2 | Amount is net of $33,306 of dividends and financing income payable from the Fund to the counterparty. |
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| 3 | Amount is net of $33,761 of dividends and financing income payable from the Fund to the counterparty. |
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| 4 | Amount is net of $9,158 of dividends and financing income payable from the Fund to the counterparty. |
The following table represents the individual long and short positions and related values of the basket of equity securities underlying the total return swap with Goldman Sachs & Co. as of January 31, 2012:
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Long | | | | | | | |
Argentina | | | | | | | |
Ternium SA — ADR | | | 12,494 | | $ | 283,239 | |
Brazil | | | | | | | |
AES Tiete SA, Preference Shares | | | 4,900 | | | 70,140 | |
Banco do Brasil SA | | | 7,900 | | | 122,940 | |
BM&F Bovespa SA | | | 5,000 | | | 31,450 | |
Bradespar SA, Preference Shares | | | 100 | | | 2,013 | |
Centrais Eletricas Brasileiras SA,
Preference B Shares | | | 12,700 | | | 186,081 | |
Cia de Bebidas das Americas, Preference Shares | | | 1,300 | | | 47,619 | |
Cia de Bebidas das Americas,
Preference Shares — ADR | | | 359 | | | 13,064 | |
Cia de Concessoes Rodoviarias | | | 6,600 | | | 45,934 | |
Cia de Saneamento Basico do Estado de
Sao Paulo | | | 1,900 | | | 63,442 | |
Cia de Saneamento Basico do Estado de
Sao Paulo — ADR | | | 1,693 | | | 111,552 | |
Cia Hering | | | 300 | | | 7,211 | |
Cia Paranaense de Energia — ADR | | | 660 | | | 15,107 | |
Cia Siderurgica Nacional SA — ADR | | | 707 | | | 7,261 | |
Cielo SA | | | 1,100 | | | 32,770 | |
EcoRodovias Infraestrutura e Logistica SA | | | 300 | | | 2,112 | |
Eletropaulo Metropolitana Eletricidade de
Sao Paulo SA, Preference Shares | | | 8,700 | | | 180,304 | |
Gafisa SA — ADR | | | 1,120 | | | 6,070 | |
Itausa — Investimentos Itau SA, Preference Shares | | | 7,700 | | | 50,417 | |
Localiza Rent a Car SA | | | 1,100 | | | 18,063 | |
Metalurgica Gerdau SA, Preference Shares | | | 4,400 | | | 52,885 | |
Natura Cosmeticos SA | | | 4,800 | | | 102,802 | |
Odontoprev SA | | | 500 | | | 8,356 | |
Souza Cruz SA | | | 24,000 | | | 312,363 | |
Tele Norte Leste Participacoes SA — ADR | | | 1,169 | | | 10,977 | |
Tele Norte Leste Participacoes SA,
Preference Shares | | | 100 | | | 962 | |
Vale SA, Preference A Shares | | | 100 | | | 2,443 | |
| | | | | | 1,504,338 | |
Canada | | | | | | | |
Methanex Corp. | | | 3,089 | | | 84,102 | |
Pan American Silver Corp. | | | 313 | | | 7,183 | |
| | | | | | 91,285 | |
Chile | | | | | | | |
Enersis SA — ADR | | | 5,173 | | | 94,718 | |
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Portfolio Abbreviations |
To simplify the listings of portfolio holdings in the Schedule of Investments, the names and descriptions of many of the securities have been abbreviated according to the following list: |
| |
ADR | American Depositary Receipts |
GDR | Global Depositary Receipts |
LIBOR | London Interbank Offered Rate |
See Notes to Financial Statements.
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6 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
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|
Schedule of Investments (continued) |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Long | | | | | | | |
China | | | | | | | |
Bank of China Ltd., Class H | | | 326,000 | | $ | 139,979 | |
China CITIC Bank Corp., Ltd., Class H | | | 67,000 | | | 42,764 | |
China Communications Construction Corp., Ltd.,
Class H | | | 24,000 | | | 22,313 | |
China Construction Bank, Class H | | | 27,000 | | | 21,620 | |
China Minsheng Banking Corp., Ltd., Class H | | | 92,500 | | | 85,519 | |
China Mobile Ltd. | | | 5,000 | | | 51,126 | |
China Petroleum & Chemical Corp., Class H | | | 116,000 | | | 140,900 | |
China Railway Construction Corp., Class H | | | 27,500 | | | 17,872 | |
China Shanshui Cement Group Ltd. | | | 92,000 | | | 67,618 | |
CNOOC Ltd. | | | 78,000 | | | 160,319 | |
Dongfeng Motor Group Co., Ltd., Class H | | | 76,000 | | | 142,096 | |
Golden Eagle Retail Group Ltd. | | | 15,000 | | | 34,389 | |
Lenovo Group Ltd. | | | 104,000 | | | 83,277 | |
Shanghai Industrial Holdings Ltd. | | | 61,000 | | | 194,673 | |
Zijin Mining Group Co., Ltd., Class H | | | 28,000 | | | 12,312 | |
| | | | | | 1,216,777 | |
Colombia | | | | | | | |
Petrominerales Ltd. | | | 2,571 | | | 53,666 | |
Hong Kong | | | | | | | |
Anta Sports Products Ltd. | | | 67,000 | | | 67,473 | |
China Lumena New Materials Corp. | | | 32,000 | | | 26,041 | |
Citic Pacific Ltd. | | | 39,000 | | | 74,728 | |
Dongyue Group | | | 87,000 | | | 72,694 | |
Guangdong Investment Ltd. | | | 188,000 | | | 108,844 | |
Haier Electronics Group Co., Ltd. | | | 29,000 | | | 29,840 | |
Lonking Holdings Ltd. | | | 22,000 | | | 9,049 | |
MIE Holdings Corp. | | | 70,000 | | | 21,031 | |
Renhe Commercial Holdings Co., Ltd. | | | 332,000 | | | 39,385 | |
| | | | | | 449,085 | |
Indonesia | | | | | | | |
Indocement Tunggal Prakarsa Tbk PT | | | 6,500 | | | 12,255 | |
United Tractors Tbk PT | | | 2,000 | | | 6,307 | |
| | | | | | 18,562 | |
Israel | | | | | | | |
Teva Pharmaceutical Industries Ltd. | | | 350 | | | 15,771 | |
Teva Pharmaceutical Industries Ltd. — ADR | | | 1,847 | | | 83,355 | |
| | | | | | 99,126 | |
Luxembourg | | | | | | | |
Reinet Investments SCA | | | 53,359 | | | 91,898 | |
Malaysia | | | | | | | |
DiGi.Com Bhd | | | 60,200 | | | 78,367 | |
JCY International Bhd | | | 100,000 | | | 42,735 | |
Telekom Malaysia Bhd | | | 54,600 | | | 86,154 | |
| | | | | | 207,256 | |
Mexico | | | | | | | |
Grupo Aeroportuario del Pacifico SAB de
CV — ADR | | | 5,985 | | | 224,258 | |
Grupo Aeroportuario del Pacifico SAB de
CV, B Shares | | | 27,200 | | | 101,837 | |
Grupo Modelo SAB de CV, Series C | | | 8,900 | | | 55,159 | |
Wal-Mart de Mexico SAB de CV, Series V | | | 6,700 | | | 20,690 | |
| | | | | | 401,944 | |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Long | | | | | | | |
Peru | | | | | | | |
Cia de Minas Buenaventura SA — ADR | | | 51 | | $ | 2,188 | |
Poland | | | | | | | |
KGHM Polska Miedz SA | | | 4,823 | | | 208,656 | |
Russia | | | | | | | |
AK Transneft OAO, Preference Shares | | | 5 | | | 9,494 | |
Gazprom OAO | | | 6,100 | | | 37,021 | |
Lukoil OAO | | | 561 | | | 32,719 | |
Lukoil OAO — ADR | | | 3,000 | | | 175,650 | |
Tatneft | | | 41,720 | | | 244,589 | |
| | | | | | 499,473 | |
South Africa | | | | | | | |
Barloworld Ltd. | | | 13,695 | | | 153,303 | |
Imperial Holdings Ltd. | | | 4,987 | | | 88,389 | |
Kumba Iron Ore Ltd. | | | 787 | | | 53,960 | |
Life Healthcare Group Holdings Ltd. | | | 56,210 | | | 152,364 | |
Vodacom Group Ltd. | | | 92 | | | 1,133 | |
Woolworths Holdings Ltd. | | | 45,368 | | | 243,630 | |
| | | | | | 692,779 | |
South Korea | | | | | | | |
Asiana Airlines, Inc. | | | 2,450 | | | 16,096 | |
Capro Corp. | | | 790 | | | 17,863 | |
CJ O Shopping Co., Ltd. | | | 58 | | | 14,323 | |
Daelim Industrial Co., Ltd. | | | 148 | | | 14,229 | |
Daesang Corp. | | | 2,090 | | | 27,442 | |
Doosan Engine Co., Ltd. | | | 2,230 | | | 26,204 | |
GameHi Co., Ltd. | | | 529 | | | 4,191 | |
Grand Korea Leisure Co., Ltd. | | | 3,310 | | | 58,636 | |
Halla Climate Control Corp. | | | 1,280 | | | 24,384 | |
Himart Co., Ltd. | | | 51 | | | 3,450 | |
Hyosung Corp. | | | 159 | | | 8,860 | |
Hyundai Engineering & Construction Co., Ltd. | | | 98 | | | 6,246 | |
Hyundai Marine & Fire Insurance Co., Ltd. | | | 300 | | | 8,813 | |
Kangwon Land, Inc. | | | 970 | | | 22,753 | |
KCC Corp. | | | 37 | | | 9,980 | |
Korea Exchange Bank | | | 8,850 | | | 62,317 | |
Korean Air Lines Co., Ltd. | | | 980 | | | 44,405 | |
KT Corp. — ADR | | | 1,241 | | | 18,478 | |
Kumho Petrochemical Co., Ltd. | | | 269 | | | 40,230 | |
Osstem Implant Co., Ltd. | | | 245 | | | 2,792 | |
Samsung Card Co. | | | 190 | | | 7,341 | |
Samsung Electronics Co., Ltd. | | | 173 | | | 170,482 | |
Samyoung Chemical Co., Ltd. | | | 2,220 | | | 10,849 | |
Shinsegae Co., Ltd. | | | 159 | | | 39,065 | |
Simm Tech Co., Ltd. | | | 853 | | | 9,302 | |
SK C&C Co., Ltd. | | | 171 | | | 19,865 | |
SK Chemicals Co., Ltd. | | | 296 | | | 17,022 | |
SK Holdings Co., Ltd. | | | 111 | | | 13,883 | |
SK Telecom Co., Ltd. — ADR | | | 3,736 | | | 52,341 | |
SM Entertainment Co. | | | 2,395 | | | 112,997 | |
Soosan Heavy Industries Co., Ltd. | | | 31,530 | | | 45,049 | |
Toptec Co., Ltd. | | | 304 | | | 4,276 | |
Woori Finance Holdings Co., Ltd. | | | 1,040 | | | 10,276 | |
Youngone Corp. | | | 2,370 | | | 56,014 | |
Youngone Holdings Co., Ltd. | | | 400 | | | 18,516 | |
| | | | | | 1,018,970 | |
| | | | | | | |
| | | |
See Notes to Financial Statements. |
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| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 7 |
|
|
Schedule of Investments (continued) |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Long | | | | | | | |
Taiwan | | | | | | | |
Ardentec Corp. | | | 6,000 | | $ | 4,522 | |
ASUSTek Computer, Inc. | | | 2,000 | | | 15,817 | |
China Petrochemical Development Corp. | | | 25,000 | | | 27,883 | |
Chong Hong Construction Co. | | | 56,000 | | | 111,669 | |
Dynapack International Technology Corp. | | | 22,000 | | | 109,303 | |
Elite Advanced Laser Corp. | | | 5,000 | | | 8,196 | |
Gintech Energy Corp. | | | 7,000 | | | 9,854 | |
HTC Corp. | | | 10,000 | | | 164,090 | |
Lite-On Technology Corp. | | | 43,000 | | | 54,499 | |
MediaTek, Inc. | | | 1,000 | | | 9,548 | |
MStar Semiconductor, Inc. | | | 31,000 | | | 196,975 | |
Phihong Technology Co., Ltd. | | | 21,000 | | | 28,036 | |
Phison Electronics Corp. | | | 4,000 | | | 29,337 | |
Powertech Technology, Inc. | | | 43,000 | | | 107,545 | |
President Chain Store Corp. | | | 13,000 | | | 69,861 | |
Radiant Opto-Electronics Corp. | | | 21,000 | | | 79,848 | |
Siliconware Precision Industries Co. — ADR | | | 7,868 | | | 44,454 | |
Teco Electric and Machinery Co., Ltd. | | | 93,000 | | | 61,450 | |
United Microelectronics Corp. | | | 72,000 | | | 37,719 | |
Wistron NeWeb Corp. | | | 8,000 | | | 16,493 | |
| | | | | | 1,187,099 | |
Thailand | | | | | | | |
Advanced Info Service PCL | | | 78,000 | | | 380,857 | |
Airports of Thailand PCL | | | 7,800 | | | 13,305 | |
Thai Airways International PCL | | | 10,400 | | | 7,970 | |
| | | | | | 402,132 | |
Turkey | | | | | | | |
Arcelik AS | | | 9,525 | | | 41,277 | |
BIM Birlesik Magazalar AS | | | 1,148 | | | 35,373 | |
Ford Otomotiv Sanayi AS | | | 2,149 | | | 19,230 | |
Haci Omer Sabanci Holding AS | | | 9,561 | | | 36,590 | |
Koza Altin Isletmeleri AS | | | 656 | | | 11,630 | |
| | | | | | 144,100 | |
Total Reference Entity — Long | | | | | | 8,667,291 | |
| | | | | | | |
Reference Entity — Short | | | | | | | |
Brazil | | | | | | | |
Anhanguera Educacional Participacoes SA | | | (5,200 | ) | | (69,940 | ) |
BR Malls Participacoes SA | | | (15,400 | ) | | (168,085 | ) |
BR Properties SA | | | (8,400 | ) | | (91,587 | ) |
BRF — Brasil Foods SA — ADR | | | (5,828 | ) | | (116,735 | ) |
CETIP SA — Balcao Organizado de
Ativos e Derivativos | | | (5,500 | ) | | (84,836 | ) |
Cia Brasileira de Distribuicao Grupo Pao de
Acucar, Preference Shares | | | (1,300 | ) | | (54,315 | ) |
Cia Energetica de Sao Paulo, Preference B Shares | | | (3,400 | ) | | (63,828 | ) |
CPFL Energia SA | | | (2,200 | ) | | (32,486 | ) |
Fibria Celulose SA — ADR | | | (16,538 | ) | | (132,139 | ) |
Gol Linhas Aereas Inteligentes SA — ADR | | | (2,834 | ) | | (19,555 | ) |
Gol Linhas Aereas Inteligentes SA,
Preference Shares | | | (1,100 | ) | | (7,568 | ) |
HRT Participacoes em Petroleo SA | | | (300 | ) | | (78,640 | ) |
Hypermarcas SA | | | (28,600 | ) | | (173,839 | ) |
LLX Logistica SA | | | (57,300 | ) | | (117,079 | ) |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Short | | | | | | | |
Brazil (concluded) | | | | | | | |
MPX Energia SA | | | (18,000 | ) | $ | (483,173 | ) |
OGX Petroleo e Gas Participacoes SA | | | (22,700 | ) | | (215,021 | ) |
Usinas Siderurgicas de Minas Gerais SA,
Preference A Shares | | | (8,900 | ) | | (59,700 | ) |
| | | | | | (1,968,526 | ) |
China | | | | | | | |
Aluminum Corp. of China Ltd. — ADR | | | (19,229 | ) | | (234,017 | ) |
BBMG Corp., Class H | | | (6,000 | ) | | (4,572 | ) |
China Coal Energy Co., Ltd., Class H | | | (10,000 | ) | | (12,559 | ) |
China COSCO Holdings Co., Ltd., Class H | | | (132,500 | ) | | (75,345 | ) |
China Life Insurance Co., Ltd., Class H | | | (2,000 | ) | | (5,893 | ) |
China Longyuan Power Group Corp., Class H | | | (363,000 | ) | | (275,692 | ) |
China Oilfield Services Ltd., Class H | | | (58,000 | ) | | (94,681 | ) |
China Shipping Container Lines Co., Ltd., Class H | | | (1,250,000 | ) | | (277,230 | ) |
CSR Corp., Ltd., Class H | | | (71,000 | ) | | (46,782 | ) |
Dongfang Electric Corp., Ltd., Class H | | | (16,000 | ) | | (47,245 | ) |
Hengan International Group Co., Ltd. | | | (21,500 | ) | | (192,259 | ) |
Huaneng Power International, Inc., Class H | | | (52,000 | ) | | (31,581 | ) |
Jiangxi Copper Co., Ltd., Class H | | | (11,000 | ) | | (27,999 | ) |
Ping An Insurance Group Co., Class H | | | (3,000 | ) | | (23,752 | ) |
Shandong Weigao Group Medical
Polymer Co., Ltd., Class H | | | (52,000 | ) | | (47,874 | ) |
Sinopharm Group Co., Ltd., Class H | | | (13,600 | ) | | (32,232 | ) |
Yanzhou Coal Mining Co., Ltd., Class H | | | (4,000 | ) | | (9,593 | ) |
Zhuzhou CSR Times Electric Co., Ltd., Class H | | | (31,000 | ) | | (68,353 | ) |
| | | | | | (1,507,659 | ) |
Colombia | | | | | | | |
BanColombia SA — ADR | | | (125 | ) | | (7,750 | ) |
Hong Kong | | | | | | | |
Brilliance China Automotive Holdings Ltd. | | | (2,000 | ) | | (2,138 | ) |
China Gas Holdings Ltd. | | | (52,000 | ) | | (24,205 | ) |
China Resources Cement Holdings Ltd. | | | (210,000 | ) | | (151,638 | ) |
China Resources Power Holdings Co., Ltd. | | | (96,000 | ) | | (187,413 | ) |
China Unicom Hong Kong Ltd. | | | (50,000 | ) | | (92,066 | ) |
China Unicom Hong Kong Ltd. — ADR | | | (3,800 | ) | | (70,186 | ) |
Kunlun Energy Co., Ltd. | | | (38,000 | ) | | (59,975 | ) |
Sany Heavy Equipment International
Holdings Co., Ltd. | | | (131,000 | ) | | (115,032 | ) |
Want Want China Holdings Ltd. | | | (3,000 | ) | | (2,781 | ) |
Zhongsheng Group Holdings Ltd. | | | (88,000 | ) | | (175,426 | ) |
| | | | | | (880,860 | ) |
Mexico | | | | | | | |
Grupo Financiero Banorte SAB de CV | | | (3,300 | ) | | (13,166 | ) |
Mexichem SAB de CV | | | (1,200 | ) | | (4,143 | ) |
| | | | | | (17,309 | ) |
Poland | | | | | | | |
Bank Pekao SA | | | (1,389 | ) | | (67,840 | ) |
Polski Koncern Naftowy Orlen SA | | | (3,508 | ) | | (39,920 | ) |
Powszechna Kasa Oszczednosci Bank Polski SA | | | (5,778 | ) | | (62,404 | ) |
| | | | | | (170,164 | ) |
Russia | | | | | | | |
Federal Grid Co. Unified Energy System JSC | | | (22,690,000 | ) | | (236,752 | ) |
Federal Hydrogenerating Co. JSC | | | (1,054,000 | ) | | (40,034 | ) |
Rostelecom OJSC | | | (62,200 | ) | | (306,019 | ) |
Surgutneftegas OJSC — ADR | | | (7,500 | ) | | (70,200 | ) |
| | | | | | (653,005 | ) |
| | |
See Notes to Financial Statements. |
| | |
8 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
|
|
Schedule of Investments (continued) |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Short | | | | | | | |
South Korea | | | | | | | |
Ahnlab, Inc. | | | (254 | ) | $ | (22,792 | ) |
Cheil Industries, Inc. | | | (318 | ) | | (28,450 | ) |
CJ CheilJedang Corp. | | | (83 | ) | | (22,757 | ) |
Hyundai Heavy Industries Co., Ltd. | | | (196 | ) | | (54,350 | ) |
Hyundai Hysco Co., Ltd. | | | (630 | ) | | (22,097 | ) |
Hyundai Mobis | | | (62 | ) | | (15,288 | ) |
Hyundai Steel Co. | | | (125 | ) | | (12,073 | ) |
Hyundai Wia Corp. | | | (368 | ) | | (42,259 | ) |
Korea Aerospace Industries Ltd. | | | (2,160 | ) | | (61,530 | ) |
Korea Zinc Co., Ltd. | | | (21 | ) | | (7,169 | ) |
Lotte Shopping Co., Ltd. | | | (53 | ) | | (18,094 | ) |
LS Corp. | | | (230 | ) | | (17,403 | ) |
S-Oil Corp. | | | (332 | ) | | (36,057 | ) |
Samsung C&T Corp. | | | (1,027 | ) | | (63,356 | ) |
Samsung Fine Chemicals Co., Ltd. | | | (379 | ) | | (20,783 | ) |
Samsung Heavy Industries Co., Ltd. | | | (1,280 | ) | | (40,678 | ) |
Samsung Techwin Co., Ltd. | | | (5,660 | ) | | (285,179 | ) |
| | | | | | (770,315 | ) |
Taiwan | | | | | | | |
AU Optronics Corp. — ADR | | | (609 | ) | | (3,209 | ) |
Cheng Shin Rubber Industry Co., Ltd. | | | (7,000 | ) | | (16,608 | ) |
Chimei Innolux Corp. | | | (85,000 | ) | | (39,358 | ) |
China Steel Corp. | | | (118,000 | ) | | (116,853 | ) |
Compal Communications, Inc. | | | (13,000 | ) | | (24,210 | ) |
Formosa Petrochemical Corp. | | | (78,000 | ) | | (243,326 | ) |
Formosa Plastics Corp. | | | (37,000 | ) | | (107,795 | ) |
Genius Electronic Optical Co., Ltd. | | | (8,000 | ) | | (62,594 | ) |
Gloria Material Technology Corp. | | | (30,000 | ) | | (25,095 | ) |
Hon Hai Precision Industry Co., Ltd. | | | (6,000 | ) | | (19,326 | ) |
Kinsus Interconnect Technology Corp. | | | (6,000 | ) | | (19,468 | ) |
LCY Chemical Corp. | | | (1 | ) | | (2 | ) |
Lung Yen Life Service Corp. | | | (39,000 | ) | | (126,935 | ) |
Nan Kang Rubber Tire Co., Ltd. | | | (38,000 | ) | | (61,391 | ) |
Nan Ya Plastics Corp. | | | (25,000 | ) | | (52,809 | ) |
Neo Solar Power Corp. | | | (55,000 | ) | | (45,915 | ) |
Ruentex Development Co., Ltd. | | | (15,000 | ) | | (18,530 | ) |
Ruentex Industries Ltd. | | | (23,000 | ) | | (43,843 | ) |
Walsin Lihwa Corp. | | | (126,000 | ) | | (44,502 | ) |
Yulon Motor Co., Ltd. | | | (121,000 | ) | | (236,786 | ) |
| | | | | | (1,308,555 | ) |
Turkey | | | | | | | |
Emlak Konut Gayrimenkul Yatirim Ortakligi AS | | | (40,900 | ) | | (48,799 | ) |
KOC Holding AS | | | (4,121 | ) | | (16,049 | ) |
Petkim Petrokimya Holding AS | | | (110,040 | ) | | (126,337 | ) |
Turk Hava Yollari | | | (24,995 | ) | | (33,057 | ) |
| | | | | | (224,242 | ) |
Total Reference Entity — Short | | | | | | (7,508,385 | ) |
Net Value of Reference Entity — Goldman Sachs & Co. | | | | | $ | 1,158,906 | |
|
The following table represents the individual long and short positions and related values of the basket of equity securities underlying the total return swap with Morgan Stanley & Co., Inc. as of January 31, 2012:
|
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Long | | | | | | | |
Argentina | | | | | | | |
MercadoLibre, Inc. | | | 374 | | $ | 32,688 | |
Ternium SA — ADR | | | 2,356 | | | 53,411 | |
| | | | | | 86,099 | |
Brazil | | | | | | | |
AES Tiete SA, Preference Shares | | | 16,100 | | | 230,461 | |
Banco do Brasil SA | | | 700 | | | 10,893 | |
Centrais Eletricas Brasileiras SA,
Preference B Shares | | | 7,200 | | | 105,495 | |
Cia de Bebidas das Americas,
Preference Shares — ADR | | | 422 | | | 15,357 | |
Cia de Bebidas das Americas, Preference Shares | | | 100 | | | 3,663 | |
Cia de Saneamento Basico do Estado de
Sao Paulo — ADR | | | 34 | | | 2,240 | |
Cia Hering | | | 1,400 | | | 33,654 | |
Cia Paranaense de Energia — ADR | | | 1,378 | | | 31,542 | |
Cia Siderurgica Nacional SA — ADR | | | 478 | | | 4,909 | |
Cielo SA | | | 3,200 | | | 95,330 | |
EcoRodovias Infraestrutura e Logistica SA | | | 700 | | | 4,928 | |
EDP — Energias do Brasil SA | | | 200 | | | 4,659 | |
Eletropaulo Metropolitana Eletricidade de
Sao Paulo SA, Preference Shares | | | 8,900 | | | 184,449 | |
Embraer SA — ADR | | | 863 | | | 23,663 | |
Gafisa SA — ADR | | | 8,538 | | | 46,276 | |
Itausa — Investimentos Itau SA,
Preference Shares | | | 18,700 | | | 122,440 | |
Metalurgica Gerdau SA, Preference Shares | | | 9,100 | | | 109,375 | |
Natura Cosmeticos SA | | | 1,300 | | | 27,842 | |
Rossi Residencial SA | | | 3,000 | | | 16,209 | |
Souza Cruz SA | | | 1,400 | | | 18,221 | |
Tele Norte Leste Participacoes SA — ADR | | | 975 | | | 9,155 | |
Tele Norte Leste Participacoes SA,
Preference Shares | | | 500 | | | 4,808 | |
Vale SA, Preference A Shares | | | 500 | | | 12,217 | |
| | | | | | 1,117,786 | |
Canada | | | | | | | |
Methanex Corp. | | | 8,577 | | | 233,521 | |
Pan American Silver Corp. | | | 1,772 | | | 40,664 | |
| | | | | | 274,185 | |
Chile | | | | | | | |
Empresa Nacional de Telecomunicaciones SA | | | 6,928 | | | 126,835 | |
Enersis SA | | | 188,609 | | | 68,292 | |
Enersis SA — ADR | | | 476 | | | 8,715 | |
| | | | | | 203,842 | |
China | | | | | | | |
China Communications Construction
Corp., Ltd., Class H | | | 50,000 | | | 46,484 | |
China Mobile Ltd. | | | 18,000 | | | 184,055 | |
China Petroleum & Chemical Corp., Class H | | | 30,000 | | | 36,439 | |
China Railway Construction Corp., Class H | | | 58,500 | | | 38,018 | |
China Shanshui Cement Group Ltd. | | | 59,000 | | | 43,364 | |
| | | |
See Notes to Financial Statements. |
| | | |
| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 9 |
|
|
Schedule of Investments (continued) |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Long | | | | | | | |
China (concluded) | | | | | | | |
China Southern Airlines Co., Ltd., Class H | | | 88,000 | | $ | 45,388 | |
CNOOC Ltd. | | | 37,000 | | | 76,049 | |
Guangzhou R&F Properties Co., Ltd., Class H | | | 200 | | | 196 | |
Shanghai Industrial Holdings Ltd. | | | 2,000 | | | 6,383 | |
| | | | | | 476,376 | |
Colombia | | | | | | | |
Petrominerales Ltd. | | | 1,214 | | | 25,342 | |
Hong Kong | | | | | | | |
Agile Property Holdings Ltd. | | | 16,000 | | | 17,846 | |
Anta Sports Products Ltd. | | | 28,000 | | | 28,198 | |
China Lumena New Materials Corp. | | | 298,000 | | | 58,791 | |
COSCO Pacific Ltd. | | | 12,000 | | | 16,680 | |
Dongyue Group | | | 6,000 | | | 5,013 | |
Evergrande Real Estate Group Ltd. | | | 213,000 | | | 101,071 | |
Guangdong Investment Ltd. | | | 22,000 | | | 12,737 | |
MIE Holdings Corp. | | | 144,000 | | | 43,263 | |
Renhe Commercial Holdings Co., Ltd. | | | 70,000 | | | 8,304 | |
| | | | | | 291,903 | |
Israel | | | | | | | |
Israel Chemicals Ltd. | | | 12,546 | | | 131,437 | |
Teva Pharmaceutical Industries Ltd. — ADR | | | 3,139 | | | 141,663 | |
| | | | | | 273,100 | |
Luxembourg | | | | | | | |
Reinet Investments SCA | | | 2,777 | | | 4,783 | |
Malaysia | | | | | | | |
DiGi.Com Bhd | | | 281,200 | | | 366,059 | |
Malayan Banking Bhd | | | 12,500 | | | 33,695 | |
Petronas Chemicals Group Bhd | | | 57,100 | | | 125,200 | |
| | | | | | 524,954 | |
Mexico | | | | | | | |
Grupo Aeroportuario del Pacifico SAB de
CV — ADR | | | 1,900 | | | 71,193 | |
Grupo Aeroportuario del Pacifico SAB de
CV, B Shares | | | 8,400 | | | 31,450 | |
Grupo Modelo SAB de CV, Series C | | | 10,200 | | | 63,215 | |
Urbi Desarrollos Urbanos SAB de CV | | | 2,200 | | | 3,138 | |
Wal-Mart de Mexico SAB de CV, Series V | | | 13,600 | | | 41,997 | |
| | | | | | 210,993 | |
Panama | | | | | | | |
Copa Holdings SA, Class A | | | 913 | | | 62,212 | |
Peru | | | | | | | |
Cia de Minas Buenaventura SA — ADR | | | 653 | | | 28,014 | |
Philippines | | | | | | | |
Philippine Long Distance Telephone Co. | | | 520 | | | 33,175 | |
Poland | | | | | | | |
KGHM Polska Miedz SA | | | 454 | | | 19,641 | |
Russia | | | | | | | |
AK Transneft OAO, Preference Shares | | | 24 | | | 45,569 | |
Gazprom OAO | | | 25,570 | | | 155,185 | |
IDGC Holding JSC | | | 2,623,600 | | | 239,966 | |
Lukoil OAO | | | 3,648 | | | 212,761 | |
Lukoil OAO — ADR | | | 150 | | | 8,782 | |
Tatneft | | | 430 | | | 2,521 | |
| | | | | | 664,784 | |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Long | | | | | | | |
South Africa | | | | | | | |
Barloworld Ltd. | | | 2,035 | | $ | 22,780 | |
Gold Fields Ltd. — ADR | | | 4,366 | | | 71,734 | |
Life Healthcare Group Holdings Ltd. | | | 2,556 | | | 6,928 | |
MR Price Group Ltd. | | | 2,661 | | | 29,345 | |
Vodacom Group Ltd. | | | 14,545 | | | 179,183 | |
Woolworths Holdings Ltd. | | | 19,957 | | | 107,171 | |
| | | | | | 417,141 | |
South Korea | | | | | | | |
Asiana Airlines, Inc. | | | 50 | | | 329 | |
Capro Corp. | | | 1,190 | | | 26,907 | |
CJ O Shopping Co., Ltd. | | | 131 | | | 32,349 | |
Daelim Industrial Co., Ltd. | | | 655 | | | 62,972 | |
Doosan Corp. | | | 166 | | | 22,609 | |
Grand Korea Leisure Co., Ltd. | | | 5,100 | | | 90,346 | |
Halla Climate Control Corp. | | | 180 | | | 3,429 | |
Hansol Paper Co. | | | 11,860 | | | 93,541 | |
Himart Co., Ltd. | | | 299 | | | 20,229 | |
Hynix Semiconductor, Inc. | | | 600 | | | 14,341 | |
Hyosung Corp. | | | 141 | | | 7,857 | |
Hyundai Department Store Co., Ltd. | | | 119 | | | 19,386 | |
Hyundai Engineering & Construction Co., Ltd. | | | 233 | | | 14,851 | |
Hyundai Motor Co. | | | 299 | | | 58,823 | |
Kangwon Land, Inc. | | | 1,560 | | | 36,592 | |
Kia Motors Corp. | | | 820 | | | 49,272 | |
Korea Exchange Bank | | | 10,150 | | | 71,471 | |
Korean Air Lines Co., Ltd. | | | 130 | | | 5,890 | |
KP Chemical Corp. | | | 3,170 | | | 46,562 | |
KT Corp. — ADR | | | 5,038 | | | 75,016 | |
KT&G Corp. | | | 725 | | | 50,728 | |
LG Corp. | | | 3,506 | | | 219,720 | |
S&T Dynamics Co., Ltd. | | | 440 | | | 6,776 | |
Samyoung Chemical Co., Ltd. | | | 760 | | | 3,714 | |
Shinsegae Co., Ltd. | | | 20 | | | 4,914 | |
SK Holdings Co., Ltd. | | | 728 | | | 91,053 | |
SK Telecom Co., Ltd. — ADR | | | 12,173 | | | 170,544 | |
SM Entertainment Co. | | | 554 | | | 26,138 | |
Soosan Heavy Industries Co., Inc. | | | 13,920 | | | 19,888 | |
Woori Finance Holdings Co., Ltd. | | | 5,020 | | | 49,603 | |
Youngone Corp. | | | 1,460 | | | 34,507 | |
Youngone Holdings Co., Ltd. | | | 67 | | | 3,101 | |
| | | | | | 1,433,458 | |
Taiwan | | | | | | | |
Ardentec Corp. | | | 2,000 | | | 1,507 | |
ASUSTek Computer, Inc. | | | 5,000 | | | 39,544 | |
Capella Microsystems Taiwan, Inc. | | | 6,000 | | | 21,496 | |
Dynapack International Technology Corp. | | | 18,000 | | | 89,430 | |
FLEXium Interconnect, Inc. | | | 11,000 | | | 36,100 | |
HTC Corp. | | | 6,000 | | | 98,454 | |
Lite-On Technology Corp. | | | 69,000 | | | 87,452 | |
MediaTek, Inc. | | | 7,000 | | | 66,836 | |
MStar Semiconductor, Inc. | | | 7,000 | | | 44,478 | |
Nan Ya Printed Circuit Board Corp. | | | 1,000 | | | 2,359 | |
Phison Electronics Corp. | | | 1,000 | | | 7,334 | |
Realtek Semiconductor Corp. | | | 3,000 | | | 5,556 | |
Sanyang Industry Co., Ltd. | | | 14,000 | | | 8,281 | |
Siliconware Precision Industries Co. — ADR | | | 994 | | | 5,616 | |
Silitech Technology Corp. | | | 58,000 | | | 160,351 | |
Taiwan Prosperity Chemical Corp. | | | 7,000 | | | 18,548 | |
| | |
See Notes to Financial Statements. |
| | |
10 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
|
|
Schedule of Investments (continued) |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Long | | | | | | | |
Taiwan (concluded) | | | | | | | |
Teco Electric and Machinery Co., Ltd. | | | 205,000 | | $ | 135,454 | |
Unimicron Technology Corp. | | | 7,000 | | | 9,215 | |
United Microelectronics Corp. | | | 106,000 | | | 55,530 | |
Wistron NeWeb Corp. | | | 4,000 | | | 8,247 | |
| | | | | | 901,788 | |
Thailand | | | | | | | |
Advanced Info Service PCL | | | 15,700 | | | 76,660 | |
Airports of Thailand PCL | | | 66,300 | | | 113,090 | |
CP ALL PCL | | | 57,200 | | | 108,204 | |
Thai Airways International PCL | | | 98,700 | | | 75,641 | |
| | | | | | 373,595 | |
Turkey | | | | | | | |
Arcelik AS | | | 21,855 | | | 94,709 | |
Dogan Sirketler Grubu Holdings AS | | | 12,984 | | | 4,457 | |
Ford Otomotiv Sanayi AS | | | 4,021 | | | 35,982 | |
Koza Altin Isletmeleri AS | | | 3,945 | | | 69,937 | |
| | | | | | 205,085 | |
Total Reference Entity — Long | | | | | | 7,628,256 | |
| | | | | | | |
Reference Entity — Short | | | | | | | |
Brazil | | | | | | | |
CETIP SA — Balcao Organizado de
Ativos e Derivativos | | | (3,700 | ) | | (57,071 | ) |
Fibria Celulose SA — ADR | | | (9,358 | ) | | (74,771 | ) |
Gol Linhas Aereas Inteligentes SA — ADR | | | (2,470 | ) | | (17,043 | ) |
HRT Participacoes em Petroleo SA | | | (100 | ) | | (26,214 | ) |
LLX Logistica SA | | | (23,650 | ) | | (48,323 | ) |
OGX Petroleo e Gas Participacoes SA | | | (12,200 | ) | | (115,562 | ) |
TAM SA — ADR | | | (3,851 | ) | | (83,413 | ) |
Telefonica Brasil SA — ADR | | | (5,248 | ) | | (146,104 | ) |
Usinas Siderurgicas de Minas Gerais SA,
Preference A Shares | | | (6,500 | ) | | (43,601 | ) |
| | | | | | (612,102 | ) |
Canada | | | | | | | |
Alamos Gold, Inc. | | | (261 | ) | | (5,346 | ) |
Goldcorp, Inc. | | | (2,852 | ) | | (137,950 | ) |
Silver Wheaton Corp. | | | (1,705 | ) | | (60,824 | ) |
| | | | | | (204,120 | ) |
China | | | | | | | |
China Longyuan Power Group Corp., Class H | | | (94,000 | ) | | (71,391 | ) |
China Oilfield Services Ltd., Class H | | | (24,000 | ) | | (39,178 | ) |
China Shipping Container Lines Co., Ltd., Class H | | | (67,000 | ) | | (14,860 | ) |
Dongfang Electric Corp., Ltd., Class H | | | (4,600 | ) | | (13,583 | ) |
Hengan International Group Co., Ltd. | | | (6,500 | ) | | (58,125 | ) |
Huaneng Power International, Inc., Class H | | | (48,000 | ) | | (29,152 | ) |
Jiangxi Copper Co., Ltd., Class H | | | (4,000 | ) | | (10,181 | ) |
Ping An Insurance Group Co., Class H | | | (500 | ) | | (3,959 | ) |
Shandong Weigao Group Medical
Polymer Co., Ltd., Class H | | | (20,000 | ) | | (18,413 | ) |
Sinopharm Group Co., Ltd., Class H | | | (800 | ) | | (1,896 | ) |
Tingyi Cayman Islands Holding Corp. | | | (14,000 | ) | | (40,888 | ) |
Yanzhou Coal Mining Co., Ltd. — ADR | | | (223 | ) | | (5,305 | ) |
| | | | | | (306,931 | ) |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Short | | | | | | | |
Colombia | | | | | | | |
BanColombia SA — ADR | | | (26 | ) | $ | (1,612 | ) |
Hong Kong | | | | | | | |
China Gas Holdings Ltd. | | | (96,000 | ) | | (44,687 | ) |
China Resources Power Holdings Co., Ltd. | | | (12,000 | ) | | (23,427 | ) |
China State Construction International
Holdings Ltd. | | | (28,000 | ) | | (22,204 | ) |
China Unicom Hong Kong Ltd. | | | (14,000 | ) | | (25,778 | ) |
Kunlun Energy Co., Ltd. | | | (4,000 | ) | | (6,313 | ) |
| | | | | | (122,409 | ) |
Hungary | | | | | | | |
MOL Hungarian Oil and Gas Plc | | | (287 | ) | | (23,983 | ) |
India | | | | | | | |
HDFC Bank Ltd. — ADR | | | (1,711 | ) | | (53,092 | ) |
Larsen & Toubro Ltd. — GDR | | | (370 | ) | | (9,835 | ) |
| | | | | | (62,927 | ) |
Malaysia | | | | | | | |
Axiata Group Bhd | | | (51,000 | ) | | (78,294 | ) |
Kuala Lumpur Kepong Bhd | | | (800 | ) | | (6,759 | ) |
Maxis Bhd | | | (179,500 | ) | | (336,931 | ) |
UEM Land Holdings Bhd | | | (18,700 | ) | | (14,262 | ) |
| | | | | | (436,246 | ) |
Mexico | | | | | | | |
America Movil SAB de CV, Series L — ADR | | | (9,053 | ) | | (210,120 | ) |
Netherlands | | | | | | | |
X5 Retail Group NV — GDR | | | (4,084 | ) | | (89,930 | ) |
Russia | | | | | | | |
Magnit OJSC — GDR | | | (7,202 | ) | | (185,019 | ) |
MMC Norilsk Nickel OJSC — ADR | | | (650 | ) | | (12,487 | ) |
NovaTek OAO — GDR | | | (242 | ) | | (32,597 | ) |
Novolipetsk Steel OJSC — GDR | | | (527 | ) | | (12,985 | ) |
Uralkali OJSC | | | (11,240 | ) | | (79,985 | ) |
Uralkali OJSC — GDR | | | (8,292 | ) | | (294,698 | ) |
| | | | | | (617,771 | ) |
South Africa | | | | | | | |
Aspen Pharmacare Holdings Ltd. | | | (31,118 | ) | | (396,718 | ) |
Clicks Group Ltd. | | | (26,268 | ) | | (133,337 | ) |
Exxaro Resources Ltd. | | | (1,769 | ) | | (43,651 | ) |
Foschini Group Ltd. | | | (11,519 | ) | | (160,006 | ) |
Naspers Ltd., N Shares | | | (1,147 | ) | | (57,456 | ) |
Steinhoff International Holdings Ltd. | | | (7,292 | ) | | (23,309 | ) |
Tiger Brands Ltd. | | | (144 | ) | | (4,640 | ) |
| | | | | | (819,117 | ) |
South Korea | | | | | | | |
Ahnlab, Inc. | | | (239 | ) | | (21,446 | ) |
Chabio & Diostech Co., Ltd. | | | (4,576 | ) | | (49,697 | ) |
Cheil Industries, Inc. | | | (261 | ) | | (23,350 | ) |
CrucialTec Co., Ltd. | | | (9,989 | ) | | (141,830 | ) |
Daewoo International Corp. | | | (3,140 | ) | | (84,276 | ) |
Daewoo Shipbuilding & Marine
Engineering Co., Ltd. | | | (1,660 | ) | | (41,155 | ) |
ELK Corp. | | | (504 | ) | | (6,259 | ) |
Foosung Co., Ltd. | | | (6,300 | ) | | (43,296 | ) |
Hyundai Heavy Industries Co., Ltd. | | | (306 | ) | | (84,852 | ) |
Hyundai Mobis | | | (254 | ) | | (62,632 | ) |
Hyundai Steel Co. | | | (231 | ) | | (22,311 | ) |
| | |
See Notes to Financial Statements. |
| | |
BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 11 |
|
|
Schedule of Investments (continued) |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Short | | | | | | | |
South Korea (concluded) | | | | | | | |
Hyundai Wia Corp. | | | (122 | ) | $ | (14,010 | ) |
INFINITT Co., Ltd. | | | (2,521 | ) | | (35,346 | ) |
JCEntertainment Corp. | | | (100 | ) | | (3,093 | ) |
Kolon Industries, Inc. | | | (176 | ) | | (11,265 | ) |
Korea Aerospace Industries Ltd. | | | (2,800 | ) | | (79,761 | ) |
Korea Electric Power Corp. | | | (420 | ) | | (10,431 | ) |
Korea Electric Power Corp. — ADR | | | (3,647 | ) | | (44,968 | ) |
Korea Gas Corp. | | | (110 | ) | | (4,348 | ) |
Korea Zinc Co., Ltd. | | | (75 | ) | | (25,604 | ) |
LG Innotek Co., Ltd. | | | (2,173 | ) | | (174,095 | ) |
Lock & Lock Co., Ltd. | | | (4,450 | ) | | (130,131 | ) |
LS Corp. | | | (243 | ) | | (18,387 | ) |
LS Industrial Systems Co., Ltd. | | | (711 | ) | | (41,520 | ) |
Lumens Co., Ltd. | | | (14,372 | ) | | (98,897 | ) |
Melfas, Inc. | | | (2,832 | ) | | (57,606 | ) |
POSCO — ADR | | | (372 | ) | | (34,135 | ) |
S-Oil Corp. | | | (95 | ) | | (10,317 | ) |
Samsung C&T Corp. | | | (891 | ) | | (54,966 | ) |
Samsung Electro-Mechanics Co., Ltd. | | | (541 | ) | | (44,355 | ) |
Samsung Engineering Co., Ltd. | | | (19 | ) | | (3,628 | ) |
Samsung Heavy Industries Co., Ltd. | | | (1,280 | ) | | (40,678 | ) |
Samsung Techwin Co., Ltd. | | | (539 | ) | | (27,158 | ) |
Seoul Semiconductor Co., Ltd. | | | (273 | ) | | (6,112 | ) |
SNU Precision Co., Ltd. | | | (11,274 | ) | | (106,382 | ) |
Wonik IPS Co., Ltd. | | | (2,808 | ) | | (22,797 | ) |
Woongjin Energy Co., Ltd. | | | (420 | ) | | (2,041 | ) |
| | | | | | (1,683,135 | ) |
Taiwan | | | | | | | |
AU Optronics Corp. — ADR | | | (19,087 | ) | | (100,589 | ) |
Chimei Innolux Corp. | | | (521,000 | ) | | (241,240 | ) |
Chunghwa Telecom Co., Ltd. — ADR | | | (4,161 | ) | | (134,858 | ) |
Formosa Petrochemical Corp. | | | (12,000 | ) | | (37,435 | ) |
Hon Hai Precision Industry Co., Ltd. — GDR | | | (2,435 | ) | | (15,828 | ) |
Nan Kang Rubber Tire Co., Ltd. | | | (3,000 | ) | | (4,847 | ) |
Ruentex Industries Ltd. | | | (40,000 | ) | | (76,248 | ) |
Yulon Motor Co., Ltd. | | | (28,000 | ) | | (54,793 | ) |
| | | | | | (665,838 | ) |
Thailand | | | | | | | |
Siam Commercial Bank PCL | | | (32,500 | ) | | (127,162 | ) |
Turkey | | | | | | | |
KOC Holding AS | | | (2,083 | ) | | (8,112 | ) |
Tupras Turkiye Petrol Rafinerileri AS | | | (357 | ) | | (8,137 | ) |
Turk Hava Yollari | | | (4,490 | ) | | (5,938 | ) |
Turkcell Iletisim Hizmetleri AS — ADR | | | (9,669 | ) | | (124,634 | ) |
| | | | | | (146,821 | ) |
United Kingdom | | | | | | | |
Anglo American Plc | | | (5,413 | ) | | (224,933 | ) |
Antofagasta Plc | | | (8,713 | ) | | (177,529 | ) |
Lonmin Plc | | | (1,261 | ) | | (20,942 | ) |
| | | | | | (423,404 | ) |
Total Reference Entity — Short | | | | | | (6,553,628 | ) |
Net Value of Reference Entity — Morgan Stanley & Co., Inc. | | | | | $ | 1,074,628 | |
|
The following table represents the individual long and short positions and related values of the basket of equity securities underlying the total return swap with UBS AG as of January 31, 2012: |
| | | | | |
| | Shares | | Value | |
Reference Entity — Long | | | | | | | |
Argentina | | | | | | | |
Ternium SA — ADR | | | 3,616 | | $ | 81,975 | |
Brazil | | | | | | | |
AES Tiete SA, Preference Shares | | | 13,100 | | | 187,518 | |
Banco do Brasil SA | | | 2,000 | | | 31,124 | |
BM&F Bovespa SA | | | 15,000 | | | 94,351 | |
Bradespar SA, Preference Shares | | | 3,500 | | | 70,453 | |
Cia de Bebidas das Americas,
Preference Shares — ADR | | | 354 | | | 12,882 | |
Cia de Saneamento Basico do Estado de
Sao Paulo | | | 4,900 | | | 163,614 | |
Cia de Saneamento Basico do Estado de
Sao Paulo — ADR | | | 1,400 | | | 92,246 | |
Cia Paranaense de Energia — ADR | | | 771 | | | 17,648 | |
Cia Siderurgica Nacional SA | | | 700 | | | 7,312 | |
Cia Siderurgica Nacional SA — ADR | | | 381 | | | 3,913 | |
Cielo SA | | | 1,600 | | | 47,665 | |
EcoRodovias Infraestrutura e Logistica SA | | | 2,300 | | | 16,192 | |
EDP — Energias do Brasil SA | | | 3,000 | | | 69,883 | |
Eletropaulo Metropolitana Eletricidade de
Sao Paulo SA, Preference Shares | | | 11,200 | | | 232,115 | |
Embraer SA | | | 600 | | | 4,141 | |
Embraer SA — ADR | | | 1,660 | | | 45,517 | |
Gafisa SA | | | 6,400 | | | 17,472 | |
Gafisa SA — ADR | | | 2,380 | | | 12,900 | |
Itausa — Investimentos Itau SA,
Preference Shares | | | 5,300 | | | 34,702 | |
Metalurgica Gerdau SA, Preference Shares | | | 3,600 | | | 43,269 | |
Natura Cosmeticos SA | | | 1,800 | | | 38,551 | |
Souza Cruz SA | | | 15,700 | | | 204,337 | |
Tele Norte Leste Participacoes SA — ADR | | | 2,604 | | | 24,452 | |
| | | | | | 1,472,257 | |
Canada | | | | | | | |
Coeur d’Alene Mines Corp. | | | 2,298 | | | 63,563 | |
Methanex Corp. | | | 1,313 | | | 35,748 | |
Pan American Silver Corp. | | | 346 | | | 7,940 | |
| | | | | | 107,251 | |
Chile | | | | | | | |
Empresa Nacional de Telecomunicaciones SA | | | 1,127 | | | 20,633 | |
Enersis SA | | | 31,407 | | | 11,372 | |
Enersis SA — ADR | | | 6,991 | | | 128,005 | |
| | | | | | 160,010 | |
China | | | | | | | |
Bank of Communications Co., Ltd., Class H | | | 36,000 | | | 28,873 | |
China Communications Construction
Corp., Ltd., Class H | | | 103,000 | | | 95,758 | |
China Construction Bank, Class H | | | 67,000 | | | 53,650 | |
China Lumena New Materials Corp. | | | 272,000 | | | 53,661 | |
China Mobile Ltd. | | | 6,500 | | | 66,464 | |
China Shanshui Cement Group Ltd. | | | 58,000 | | | 42,629 | |
China Southern Airlines Co., Ltd., Class H | | | 30,000 | | | 15,473 | |
CNOOC Ltd. | | | 12,000 | | | 24,664 | |
| | |
See Notes to Financial Statements. | |
| | |
12 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
|
|
Schedule of Investments (continued) |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Long | | | | | | | |
China (concluded) | | | | | | | |
Dongfeng Motor Group Co., Ltd., Class H | | | 52,000 | | $ | 97,224 | |
Golden Eagle Retail Group Ltd. | | | 5,000 | | | 11,463 | |
Guangzhou Automobile Group Co., Ltd., Class H | | | 14,000 | | | 15,182 | |
Lenovo Group Ltd. | | | 36,000 | | | 28,827 | |
Shanghai Industrial Holdings Ltd. | | | 21,000 | | | 67,019 | |
| | | | | | 600,887 | |
Colombia | | | | | | | |
Petrominerales Ltd. | | | 1,415 | | | 29,536 | |
Hong Kong | | | | | | | |
Anta Sports Products Ltd. | | | 53,000 | | | 53,374 | |
China Resources Enterprise Ltd. | | | 8,000 | | | 27,594 | |
Citic Pacific Ltd. | | | 4,000 | | | 7,664 | |
COSCO Pacific Ltd. | | | 16,000 | | | 22,240 | |
Country Garden Holdings Co., Ltd. | | | 77,000 | | | 33,062 | |
Dongyue Group | | | 28,000 | | | 23,396 | |
GOME Electrical Appliances Holdings Ltd. | | | 40,000 | | | 9,542 | |
Lonking Holdings Ltd. | | | 59,000 | | | 24,269 | |
MIE Holdings Corp. | | | 24,000 | | | 7,211 | |
Renhe Commercial Holdings Co., Ltd. | | | 60,000 | | | 7,118 | |
Shimao Property Holdings Ltd. | | | 13,500 | | | 13,908 | |
| | | | | | 229,378 | |
Indonesia | | | | | | | |
Indocement Tunggal Prakarsa Tbk PT | | | 36,000 | | | 67,876 | |
Telekomunikasi Indonesia Tbk PT — ADR | | | 1,348 | | | 41,316 | |
| | | | | | 109,192 | |
Israel | | | | | | | |
Israel Chemicals Ltd. | | | 11,112 | | | 116,414 | |
Teva Pharmaceutical Industries Ltd. — ADR | | | 1,340 | | | 60,474 | |
| | | | | | 176,888 | |
Luxembourg | | | | | | | |
Reinet Investments SCA | | | 13 | | | 22 | |
Malaysia | | | | | | | |
DiGi.Com Bhd | | | 112,800 | | | 146,840 | |
Mexico | | | | | | | |
Grupo Aeroportuario del Pacifico SAB de
CV, B Shares | | | 18,700 | | | 70,013 | |
Grupo Modelo SAB de CV, Series C | | | 2,900 | | | 17,973 | |
Urbi Desarrollos Urbanos SAB de CV | | | 3,700 | | | 5,277 | |
Wal-Mart de Mexico SAB de CV, Series V | | | 5,100 | | | 15,749 | |
| | | | | | 109,012 | |
Panama | | | | | | | |
Copa Holdings SA, Class A | | | 1,519 | | | 103,505 | |
Peru | | | | | | | |
Cia de Minas Buenaventura SA — ADR | | | 290 | | | 12,441 | |
Poland | | | | | | | |
KGHM Polska Miedz SA | | | 1,462 | | | 63,250 | |
Russia | | | | | | | |
AK Transneft OAO, Preference Shares | | | 19 | | | 36,075 | |
Gazprom OAO | | | 16,650 | | | 101,049 | |
IDGC Holding JSC | | | 1,279,100 | | | 116,992 | |
Lukoil OAO | | | 823 | | | 48,000 | |
Lukoil OAO — ADR | | | 1,900 | | | 111,245 | |
Tatneft | | | 6,170 | | | 36,172 | |
| | | | | | 449,533 | |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Long | | | | | | | |
South Africa | | | | | | | |
Barloworld Ltd. | | | 2,847 | | $ | 31,869 | |
Gold Fields Ltd. — ADR | | | 1,987 | | | 32,646 | |
Imperial Holdings Ltd. | | | 10,874 | | | 192,729 | |
Life Healthcare Group Holdings Ltd. | | | 87,394 | | | 236,892 | |
MR Price Group Ltd. | | | 2,106 | | | 23,225 | |
Vodacom Group Ltd. | | | 739 | | | 9,104 | |
| | | | | | 526,465 | |
South Korea | | | | | | | |
Asiana Airlines, Inc. | | | 6,250 | | | 41,060 | |
Capro Corp. | | | 380 | | | 8,592 | |
CJ O Shopping Co., Ltd. | | | 43 | | | 10,618 | |
Daelim Industrial Co., Ltd. | | | 260 | | | 24,997 | |
Daesang Corp. | | | 4,760 | | | 62,501 | |
Doosan Corp. | | | 35 | | | 4,767 | |
GameHi Co., Ltd. | | | 2,102 | | | 16,654 | |
Hansol Paper Co. | | | 7,290 | | | 57,497 | |
Himart Co., Ltd. | | | 384 | | | 25,979 | |
Hynix Semiconductor, Inc. | | | 680 | | | 16,253 | |
Hyosung Corp. | | | 239 | | | 13,319 | |
Hyundai Engineering & Construction Co., Ltd. | | | 1,385 | | | 88,277 | |
Hyundai Motor Co. | | | 193 | | | 37,969 | |
KCC Corp. | | | 5 | | | 1,349 | |
Kia Motors Corp. | | | 201 | | | 12,078 | |
Korea Exchange Bank | | | 4,020 | | | 28,307 | |
Korean Air Lines Co., Ltd. | | | 1,030 | | | 46,670 | |
KT Corp. — ADR | | | 2,715 | | | 40,426 | |
KT&G Corp. | | | 553 | | | 38,693 | |
Kumho Petrochemical Co., Ltd. | | | 77 | | | 11,516 | |
LG Corp. | | | 522 | | | 32,714 | |
LG Display Co., Ltd. | | | 250 | | | 6,554 | |
Orion Corp. | | | 85 | | | 51,756 | |
Osstem Implant Co., Ltd. | | | 131 | | | 1,493 | |
Samsung Electronics Co., Ltd. | | | 28 | | | 27,592 | |
Shinsegae Co., Ltd. | | | 56 | | | 13,759 | |
Silicon Works Co., Ltd. | | | 671 | | | 18,726 | |
SK Chemicals Co., Ltd. | | | 1,079 | | | 62,050 | |
SK Holdings Co., Ltd. | | | 851 | | | 106,436 | |
SK Telecom Co., Ltd. — ADR | | | 975 | | | 13,660 | |
SM Entertainment Co. | | | 401 | | | 18,919 | |
Soosan Heavy Industries Co., Ltd. | | | 21,540 | | | 30,775 | |
Woori Finance Holdings Co., Ltd. | | | 4,310 | | | 42,588 | |
Youngone Corp. | | | 170 | | | 4,018 | |
Youngone Holdings Co., Ltd. | | | 700 | | | 32,403 | |
| | | | | | 1,050,965 | |
Taiwan | | | | | | | |
Ardentec Corp. | | | 31,000 | | | 23,365 | |
Asia Cement Corp. | | | 20,000 | | | 23,997 | |
ASUSTek Computer, Inc. | | | 15,000 | | | 118,631 | |
Capella Microsystems Taiwan, Inc. | | | 7,000 | | | 25,078 | |
Chong Hong Construction Co. | | | 43,000 | | | 85,746 | |
Dynapack International Technology Corp. | | | 12,000 | | | 59,620 | |
Egalax EMPIA Technology, Inc. | | | 3,000 | | | 6,996 | |
Far EasTone Telecommunications Co. Ltd. | | | 29,000 | | | 55,868 | |
Gintech Energy Corp. | | | 16,000 | | | 22,523 | |
Grand Pacific Petrochemical | | | 19,000 | | | 9,664 | |
HTC Corp. | | | 1,000 | | | 16,409 | |
Huang Hsiang Construction Co. | | | 1,000 | | | 1,737 | |
Lite-On Technology Corp. | | | 49,000 | | | 62,104 | |
MStar Semiconductor, Inc. | | | 8,000 | | | 50,832 | |
| | | |
See Notes to Financial Statements. | | |
| | | |
| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 13 |
|
|
Schedule of Investments (continued) |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Long | | | | | | | |
Taiwan (concluded) | | | | | | | |
Phison Electronics Corp. | | | 4,000 | | $ | 29,337 | |
Powertech Technology, Inc. | | | 1,000 | | | 2,501 | |
Siliconware Precision Industries Co. — ADR | | | 5,460 | | | 30,849 | |
Taiflex Scientific Co., Ltd. | | | 3,000 | | | 3,838 | |
Taiwan Mobile Co., Ltd. | | | 18,000 | | | 54,449 | |
Teco Electric and Machinery Co., Ltd. | | | 34,000 | | | 22,465 | |
Wistron NeWeb Corp. | | | 3,000 | | | 6,185 | |
| | | | | | 712,194 | |
Thailand | | | | | | | |
Advanced Info Service PCL | | | 23,800 | | | 116,210 | |
Airports of Thailand PCL | | | 45,300 | | | 77,270 | |
Bangchak Petroleum PCL | | | 7,100 | | | 4,684 | |
CP ALL PCL | | | 60,800 | | | 115,014 | |
Thai Airways International PCL | | | 64,100 | | | 49,124 | |
| | | | | | 362,302 | |
Turkey | | | | | | | |
BIM Birlesik Magazalar AS | | | 2,071 | | | 63,814 | |
Haci Omer Sabanci Holding AS | | | 9,146 | | | 35,002 | |
Koza Altin Isletmeleri AS | | | 2,262 | | | 40,101 | |
Migros Ticaret AS | | | 6,082 | | | 46,551 | |
| | | | | | 185,468 | |
Total Reference Entity — Long | | | | | | 6,689,371 | |
| | | | | | | |
| | | | | | | |
Reference Entity — Short | | | | | | | |
Brazil | | | | | | | |
Anhanguera Educacional Participacoes SA | | | (7,100 | ) | | (95,496 | ) |
B2W Cia Global Do Varejo | | | (7,600 | ) | | (45,325 | ) |
BR Malls Participacoes SA | | | (10,200 | ) | | (111,329 | ) |
BRF — Brasil Foods SA — ADR | | | (6,843 | ) | | (137,065 | ) |
CETIP SA — Balcao Organizado de
Ativos e Derivativos | | | (10,300 | ) | | (158,874 | ) |
Cia Brasileira de Distribuicao Grupo Pao de
Acucar — ADR | | | (658 | ) | | (28,037 | ) |
Cia Energetica de Sao Paulo,
Preference B Shares | | | (900 | ) | | (16,896 | ) |
CPFL Energia SA — ADR | | | (9,860 | ) | | (292,349 | ) |
Diagnosticos da America SA | | | (25,800 | ) | | (248,077 | ) |
Duratex SA | | | (8,000 | ) | | (44,826 | ) |
Gol Linhas Aereas Inteligentes SA — ADR | | | (1,575 | ) | | (10,868 | ) |
Hypermarcas SA | | | (8,800 | ) | | (53,489 | ) |
OGX Petroleo e Gas Participacoes SA | | | (5,600 | ) | | (53,045 | ) |
TAM SA — ADR | | | (5,073 | ) | | (109,881 | ) |
TAM SA, Preference Shares | | | (2,000 | ) | | (42,788 | ) |
Usinas Siderurgicas de Minas Gerais SA,
Preference A Shares | | | (1,600 | ) | | (10,733 | ) |
| | | | | | (1,459,078 | ) |
Chile | | | | | | | |
Empresas COPEC SA | | | (4,494 | ) | | (67,602 | ) |
SACI Falabella | | | (26,539 | ) | | (228,194 | ) |
Sociedad Quimica y Minera de Chile SA — ADR | | | (1,479 | ) | | (86,877 | ) |
| | | | | | (382,673 | ) |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Short | | | | | | | |
China | | | | | | | |
Anhui Conch Cement Co., Ltd., Class H | | | (4,000 | ) | $ | (13,513 | ) |
China Longyuan Power Group Corp., Class H | | | (59,000 | ) | | (44,810 | ) |
Hengan International Group Co., Ltd. | | | (4,500 | ) | | (40,240 | ) |
Ping An Insurance Group Co., Class H | | | (1,500 | ) | | (11,876 | ) |
| | | | | | (110,439 | ) |
Hong Kong | | | | | | | |
China Resources Power Holdings Co., Ltd. | | | (28,000 | ) | | (54,662 | ) |
China State Construction International
Holdings Ltd. | | | (2,000 | ) | | (1,586 | ) |
China Unicom Hong Kong Ltd. | | | (12,000 | ) | | (22,096 | ) |
China Unicom Hong Kong Ltd. — ADR | | | (9,200 | ) | | (169,924 | ) |
Kunlun Energy Co., Ltd. | | | (10,000 | ) | | (15,783 | ) |
Sany Heavy Equipment International
Holdings Co., Ltd. | | | (94,000 | ) | | (82,542 | ) |
| | | | | | (346,593 | ) |
Hungary | | | | | | | |
MOL Hungarian Oil and Gas Plc | | | (77 | ) | | (6,434 | ) |
India | | | | | | | |
HDFC Bank Ltd. — ADR | | | (52 | ) | | (1,613 | ) |
Larsen & Toubro Ltd. — GDR | | | (7,424 | ) | | (197,330 | ) |
| | | | | | (198,943 | ) |
Israel | | | | | | | |
Avner Oil Exploration LLP | | | (98,236 | ) | | (70,308 | ) |
Delek Drilling LP | | | (20,157 | ) | | (82,476 | ) |
| | | | | | (152,784 | ) |
Malaysia | | | | | | | |
Genting Bhd | | | (3,600 | ) | | (13,160 | ) |
IOI Corp. Bhd | | | (17,600 | ) | | (31,242 | ) |
| | | | | | (44,402 | ) |
Mexico | | | | | | | |
America Movil SAB de CV, Series L — ADR | | | (3,308 | ) | | (76,779 | ) |
Mexichem SAB de CV | | | (88,400 | ) | | (305,199 | ) |
| | | | | | (381,978 | ) |
Poland | | | | | | | |
Bank Pekao SA | | | (78 | ) | | (3,810 | ) |
Russia | | | | | | | |
Federal Grid Co. Unified Energy System JSC | | | (4,980,000 | ) | | (51,962 | ) |
Rosneft Oil Co. — GDR | | | (6,581 | ) | | (48,502 | ) |
Sberbank of Russia | | | (8,020 | ) | | (23,879 | ) |
VTB Bank OJSC — GDR | | | (10,730 | ) | | (50,195 | ) |
| | | | | | (174,538 | ) |
South Africa | | | | | | | |
Anglo American Platinum Ltd. | | | (1,836 | ) | | (130,051 | ) |
Aspen Pharmacare Holdings Ltd. | | | (168 | ) | | (2,142 | ) |
Foschini Group Ltd. | | | (3,218 | ) | | (44,700 | ) |
Steinhoff International Holdings Ltd. | | | (23,764 | ) | | (75,961 | ) |
| | | | | | (252,854 | ) |
| | |
See Notes to Financial Statements. | |
| | |
14 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
|
|
Schedule of Investments (concluded) |
| | | | | | | |
| | Shares | | Value | |
Reference Entity — Short | | | | | | | |
South Korea | | | | | | | |
Chabio & Diostech Co., Ltd. | | | (3,901 | ) | $ | (42,366 | ) |
Daewoo Engineering & Construction Co., Ltd. | | | (11,970 | ) | | (126,269 | ) |
Daewoo International Corp. | | | (1,040 | ) | | (27,913 | ) |
Foosung Co., Ltd. | | | (14,900 | ) | | (102,397 | ) |
Hyundai Heavy Industries Co., Ltd. | | | (182 | ) | | (50,468 | ) |
Jusung Engineering Co., Ltd. | | | (445 | ) | | (4,813 | ) |
Kolon Industries, Inc. | | | (106 | ) | | (6,785 | ) |
Korea Aerospace Industries Ltd. | | | (3,520 | ) | | (100,271 | ) |
Korea Electric Power Corp. — ADR | | | (170 | ) | | (2,096 | ) |
LG Innotek Co., Ltd. | | | (332 | ) | | (26,599 | ) |
Lock & Lock Co., Ltd. | | | (2,120 | ) | | (61,995 | ) |
LS Industrial Systems Co., Ltd. | | | (597 | ) | | (34,863 | ) |
Posco ICT Co., Ltd. | | | (9,535 | ) | | (75,289 | ) |
Samsung Electro-Mechanics Co., Ltd. | | | (718 | ) | | (58,867 | ) |
Samsung Fine Chemicals Co., Ltd. | | | (30 | ) | | (1,645 | ) |
Seoul Semiconductor Co., Ltd. | | | (8,942 | ) | | (200,197 | ) |
| | | | | | (922,833 | ) |
Taiwan | | | | | | | |
AU Optronics Corp. — ADR | | | (8,051 | ) | | (42,429 | ) |
Cheng Shin Rubber Industry Co., Ltd. | | | (8,000 | ) | | (18,981 | ) |
China Steel Corp. | | | (133,000 | ) | | (131,708 | ) |
Epistar Corp. | | | (79,000 | ) | | (193,578 | ) |
Green Energy Technology, Inc. | | | (74,000 | ) | | (99,167 | ) |
TTY Biopharm Co., Ltd. | | | (6,000 | ) | | (20,887 | ) |
Yulon Motor Co., Ltd. | | | (16,000 | ) | | (31,310 | ) |
| | | | | | (538,060 | ) |
Thailand | | | | | | | |
Banpu PCL | | | (5,300 | ) | | (101,116 | ) |
Charoen Pokphand Foods PCL | | | (8,200 | ) | | (9,281 | ) |
Indorama Ventures PCL | | | (34,300 | ) | | (35,492 | ) |
IRPC PCL | | | (208,900 | ) | | (30,938 | ) |
Italian-Thai Development PCL | | | (49,200 | ) | | (5,568 | ) |
Krung Thai Bank PCL | | | (110,900 | ) | | (54,867 | ) |
PTT Exploration & Production PCL | | | (9,700 | ) | | (55,518 | ) |
PTT PCL | | | (5,000 | ) | | (54,972 | ) |
Ratchaburi Electricity Generating Holding PCL | | | (3,300 | ) | | (4,695 | ) |
Thai Oil PCL | | | (11,800 | ) | | (24,516 | ) |
True Corp. PCL | | | (2,031,000 | ) | | (212,787 | ) |
| | | | | | (589,750 | ) |
Turkey | | | | | | | |
KOC Holding AS | | | (12,593 | ) | | (49,044 | ) |
Tupras Turkiye Petrol Rafinerileri AS | | | (858 | ) | | (19,557 | ) |
Turk Hava Yollari | | | (10,501 | ) | | (13,888 | ) |
| | | | | | (82,489 | ) |
Total Reference Entity — Short | | | | | | (5,647,658 | ) |
Net Value of Reference Entity — UBS AG | | | | | $ | 1,041,713 | |
| | |
• | Fair Value Measurements — Various inputs are used in determining the fair value of investments and derivative financial instruments. These inputs are categorized into a disclosure hierarchy consisting of three broad levels for financial statement purposes as follows: |
| | |
| • | Level 1 — unadjusted price quotations in active markets/exchanges for identical assets and liabilities |
| | |
| • | Level 2 — other observable inputs (including, but not limited to: quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market-corroborated inputs) |
| | |
| • | Level 3 — unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments and derivative financial instruments) |
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and does not necessarily correspond to the Fund’s perceived risk of investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments and other significant accounting policies, please refer to Note 1 of the Notes to Financial Statements.
The following tables summarize the inputs used as of January 31, 2012 in determining the fair valuation of the Fund’s investments and derivative financial instruments:
| | | | | | | | | | | | | |
Valuation Inputs | | Level 1 | | Level 2 | | Level 3 | | Total | |
Assets: | | | | | | | | | | | | | |
Investments: | | | | | | | | | | | | | |
Short-Term Securities | | $ | 34,827,432 | | | — | | | — | | $ | 34,827,432 | |
| | | | | | | | | | | | | |
Valuation Inputs | | Level 1 | | Level 2 | | Level 3 | | Total | |
Derivative Financial
Instruments1 | | | | | | | | | | | | | |
Assets: | | | | | | | | | | | | | |
Equity Contracts | | | — | | $ | 904,691 | | | — | | $ | 904,691 | |
| | |
| 1 | Derivative financial instruments consist of total return swaps, which are shown at the unrealized appreciation/depreciation on the instrument. |
| | | |
See Notes to Financial Statements. | | |
| | | |
| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 15 |
|
|
Statement of Assets and Liabilities |
| | | | |
January 31, 2012 (Unaudited) | | | | |
Assets | | | | |
Investments at value — affiliated (cost — $34,827,432) | | $ | 34,827,432 | |
Unrealized appreciation on swaps | | | 904,691 | |
Capital shares sold receivable | | | 699,635 | |
Deferred offering costs | | | 130,322 | |
Swaps receivable | | | 17,256 | |
Prepaid expenses | | | 108 | |
Total assets | | | 36,579,444 | |
| | | | |
| | | | |
Liabilities | | | | |
Investment advisory fees payable | | | 71,941 | |
Service and distribution fees payable | | | 2,215 | |
Offering costs payable | | | 99,990 | |
Swaps payable | | | 14,934 | |
Capital shares redeemed payable | | | 8,156 | |
Administration fees payable | | | 5,101 | |
Officer’s and Trustees’ fees payable | | | 1,773 | |
Other accrued expenses payable | | | 10,946 | |
Total liabilities | | | 215,056 | |
Net Assets | | $ | 36,364,388 | |
| | | | |
| | | | |
Net Assets Consist of | | | | �� |
Paid-in capital | | $ | 35,756,029 | |
Net investment loss | | | (164,404 | ) |
Accumulated net realized loss | | | (131,928 | ) |
Net unrealized appreciation/depreciation | | | 904,691 | |
Net Assets | | $ | 36,364,388 | |
| | | | |
| | | | |
Net Asset Value | | | | |
Institutional — Based on net assets of $29,239,644 and 2,880,270 shares outstanding, unlimited shares authorized, $0.001 par value | | $ | 10.15 | |
Investor A — Based on net assets of $5,279,024 and 520,181 shares outstanding, unlimited shares authorized, $0.001 par value | | $ | 10.15 | |
Investor C — Based on net assets of $1,845,720 and 182,243 shares outstanding, unlimited shares authorized, $0.001 par value | | $ | 10.13 | |
See Notes to Financial Statements.
| | |
| | |
16 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
| | | | |
Period October 6, 20111 to January 31, 2012 (Unaudited) | | | | |
Investment Income | | | | |
Dividends — affiliated | | $ | 9,384 | |
| | | | |
| | | | |
Expenses | | | | |
Investment advisory | | | 110,963 | |
Administration | | | 5,548 | |
Service — Investor A | | | 1,482 | |
Service and distribution — Investor C | | | 2,848 | |
Administration — Institutional | | | 1,630 | |
Administration — Investor A | | | 148 | |
Administration — Investor C | | | 71 | |
Transfer agent — Institutional | | | 91 | |
Transfer agent — Investor A | | | 91 | |
Transfer agent — Investor C | | | 91 | |
Organization and offering | | | 113,928 | |
Professional | | | 24,874 | |
Printing | | | 3,141 | |
Officer and Trustees | | | 1,983 | |
Custodian | | | 628 | |
Miscellaneous | | | 1,963 | |
Total expenses | | | 269,480 | |
Less transfer agent fees waived and/or reimbursed — class specific | | | (273 | ) |
Less administration fees waived — class specific | | | (1,849 | ) |
Less administration fees waived | | | (5,548 | ) |
Less fees waived and/or reimbursed by advisor | | | (128,024 | ) |
Total expenses after fees waived and/or reimbursed | | | 133,786 | |
Net investment loss | | | (124,402 | ) |
| | | | |
| | | | |
Realized and Unrealized Gain (Loss) | | | | |
Net realized loss from swaps | | | (131,928 | ) |
Net change in unrealized appreciation/depreciation on swaps | | | 904,691 | |
Total realized and unrealized gain | | | 772,763 | |
Net Increase in Net Assets Resulting from Operations | | $ | 648,361 | |
| | |
| 1 | Commencement of operations. |
See Notes to Financial Statements.
| | | |
| | | |
| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 17 |
|
|
Statement of Changes in Net Assets |
| | | | |
Increase in Net Assets: | | Period
October 6,
20111 to
January 31,
2012
(Unaudited) | |
Operations | | | | |
Net investment loss | | $ | (124,402 | ) |
Net realized loss | | | (131,928 | ) |
Net change in unrealized appreciation/depreciation | | | 904,691 | |
Net increase in net assets resulting from operations | | | 648,361 | |
| | | | |
| | | | |
Dividends to Shareholders From | | | | |
Net investment income: | | | | |
Institutional | | | (36,800 | ) |
Investor A | | | (2,914 | ) |
Investor C | | | (288 | ) |
Decrease in net assets resulting from dividends to shareholders | | | (40,002 | ) |
| | | | |
| | | | |
Capital Share Transactions | | | | |
Net increase in net assets derived from capital share transactions | | | 35,756,029 | |
| | | | |
| | | | |
Net Assets | | | | |
Total increase in net assets | | | 36,364,388 | |
Beginning of period | | | — | |
End of period | | $ | 36,364,388 | |
Net investment loss | | $ | (164,404 | ) |
| | |
| 1 | Commencement of operations. |
See Notes to Financial Statements.
| | |
| | |
18 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
| | | | | | | | | | |
| | Period October 6, 20111 to
January 31, 2012 (Unaudited) | |
| | Institutional | | Investor A | | Investor C | |
Per Share Operating Performance | | | | | | | |
Net asset value, beginning of period | | $ | 10.00 | | $ | 10.00 | | $ | 10.00 | |
Net investment loss2 | | | (0.05 | ) | | (0.06 | ) | | (0.08 | ) |
Net realized and unrealized gain2 | | | 0.22 | | | 0.22 | | | 0.21 | |
Net increase (decrease) from investment operations | | | 0.17 | | | 0.16 | | | 0.13 | |
Dividends from net investment income | | | (0.02 | ) | | (0.01 | ) | | (0.00 | ) |
Net asset value, end of period | | $ | 10.15 | | $ | 10.15 | | $ | 10.13 | |
| | | | | | | | | | |
Total Investment Return3 | | | | | | | | | | |
Based on net asset value4 | | | 1.66 | % | | 1.63 | % | | 1.33 | % |
| | | | | | | | | | |
Ratios to Average Net Assets | | | | | | | | | | |
Total expenses5,6 | | | 2.93 | % | | 2.92 | % | | 3.66 | % |
Total expenses after fees waived and/or reimbursed5 | | | 1.75 | % | | 2.00 | % | | 2.75 | % |
Net investment loss5 | | | (1.62 | )% | | (1.87 | )% | | (2.62 | )% |
| | | | | | | | | | |
Supplemental Data | | | | | | | | | | |
Net assets, end of period (000) | | $ | 29,240 | | $ | 5,279 | | $ | 1,846 | |
| | |
| 1 | Commencement of operations. |
| 2 | Based on average shares outstanding. |
| 3 | Where applicable, total investment returns exclude the effects of any sales charges and include the reinvestment of dividends and distributions. |
| 4 | Aggregate total investment return. |
| 5 | Annualized. |
| 6 | Organization costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses for Institutional, Investor A and Investor C would have been 3.66%, 3.33% and 3.97%, respectively. |
| | | |
See Notes to Financial Statements. | | |
| | | |
| | | |
| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 19 |
|
|
Notes to Financial Statements(Unaudited) |
1. Organization and Significant Accounting Policies:
BlackRock Emerging Markets Long/Short Equity Fund (the “Fund”) is a series of BlackRock FundsSM (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust is organized as a Massachusetts business trust. The Fund’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”), which may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The Fund offers multiple classes of shares. Institutional Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with a front-end sales charge. Investor C Shares may be subject to a contingent deferred sales charge. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Investor A and Investor C Shares bear certain expenses related to the shareholder servicing of such shares, and Investor C Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.
The following is a summary of significant accounting policies followed by the Fund:
Valuation: US 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 fair values its financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of the Trust (the “Board”). Swap agreements are valued utilizing quotes received daily by the Fund’s pricing service or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. Investments in open-end registered investment companies are valued at NAV each business day. Short-term securities with remaining maturities of 60 days or less may be valued at amortized cost, which approximates fair value.
In the event that application of these methods of valuation results in a price for an investment which is deemed not to be representative of the market value of such investment or if a price is not available, the investment will be valued in accordance with a policy approved by the Board as reflecting fair value (“Fair Value Assets”). When determining the price for Fair Value Assets, the investment advisor and/or the sub-advisor seeks to determine the price that the Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the investment advisor and/or sub-advisor deems relevant. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof.
Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of the Fund’s net assets. If events (for example, a company announcement, market volatility or a natural disaster) occur during such periods that are expected to materially affect the value of such instruments, those instruments may be Fair Value Assets and be valued at their fair value, as determined in good faith by the investment advisor using a pricing service and/or policies approved by the Board.
Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Interest income, including amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis. Income and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
Dividends and Distributions: Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. The amount and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from US GAAP.
Income Taxes: It is the 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 federal income tax provision is required.
The Fund files US federal and various state and local tax returns. Management does not believe there are any uncertain tax positions that require recognition of a tax liability.
Recent Accounting Standards: In May 2011, the Financial Accounting Standards Board (the “FASB”) issued amended guidance to improve disclosure about fair value measurements which will require the following disclosures for fair value measurements categorized as Level 3: quantitative information about the unobservable inputs and assumptions used in the fair value measurement, a description of the valuation policies and procedures and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, the amounts and reasons for all transfers in and out of Level 1 and Level 2 will be required to be disclosed. The amended guidance is effective for financial statements for fiscal years beginning after December 15, 2011, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Fund’s financial statement disclosures.
| | |
|
20 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
|
|
Notes to Financial Statements (continued) |
In December 2011, the FASB issued guidance that will expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the Statement of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Fund’s financial statement disclosures.
Organization and Offering Costs: Upon commencement of operations, organization costs associated with the establishment of the Fund were expensed by the Fund and reimbursed by the Manager. Offering costs are amortized over a 12-month period beginning with the commencement of operations. The Manager reimbursed the Fund $74,301, which is included in fees waived and reimbursed by advisor in the Statement of Operations.
Other: Expenses directly related to the Fund or its classes are charged to the Fund or the class. Other operating expenses shared by several funds are pro rated among those funds on the basis of relative net assets or other appropriate methods. Expenses directly related to the Fund and other shared expenses pro rated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods.
The Fund has an arrangement with the custodian whereby fees may be reduced by credits earned on uninvested cash balances, which, if applicable, are shown as fees paid indirectly in the Statement of Operations. The custodian imposes fees on overdrawn cash balances, which can be offset by accumulated credits earned or may result in additional custody charges.
2. Derivative Financial Instruments:
The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and to economically hedge, or protect, its exposure to certain risks such as equity risk. These contracts may be transacted on an exchange or OTC.
Losses may arise if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument or if the counterparty does not perform under the contract. The Fund’s maximum risk of loss from counterparty credit risk on OTC derivatives is generally the aggregate unrealized gain netted against any collateral pledged by/posted to the counterparty.
The Fund may mitigate counterparty risk by procuring collateral and through netting provisions included within an International Swaps and Derivatives Association, Inc. master agreement (“ISDA Master Agreement”) implemented between a Fund and each of its respective counterparties. An ISDA Master Agreement allows the Fund to offset with each separate counterparty certain derivative financial instrument’s payables and/or receivables with collateral held. The amount of collateral moved to/from applicable counterparties is generally based upon minimum transfer amounts of up to $500,000. To the extent amounts due to the Fund from their counterparties are not fully collateralized contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance. See Note 1 “Segregation and Collateralization” for information with respect to collateral practices. In addition, the Fund manages counterparty risk by entering into agreements only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.
Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event a Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA Master Agreements, which would cause the Funds to accelerate payment of any net liability owed to the counterparty.
Swaps: The Fund enters into swap agreements, in which the Fund and a counterparty agree to either make periodic net payments on a specified notional amount or net payment upon termination. These payments received or made by the Fund are recorded in the Statement of Operations as realized gains or losses, respectively. Any upfront fees paid are recorded as assets and any upfront fees received are recorded as liabilities and amortized over the term of the swap. Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation). When the swap is terminated, the Fund will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract, if any. Generally, the basis of the contracts is the premium received or paid. Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counter-party to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.
| |
• | Total return swaps — The Fund enters into total return swaps to obtain exposure to securities (both long and short) or markets without owning such securities or investing directly in that market or to transfer the risk/return of one market (e.g., fixed income) to another market (e.g., equity) (equity risk and/or interest rate risk). Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (coupons plus capital gains/losses) of an underlying instrument in exchange for fixed or floating rate interest payments. The agreement allows the Manager to change the composition of the basket of securities by trading in and out of the underlying equity positions at its discretion and the resulting gains or losses are recorded in the Statement of |
| | | |
|
| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 21 |
|
|
Notes to Financial Statements (continued) |
Operations. The unrealized appreciation (depreciation) on total return swaps includes dividends on the underlying basket of equity securities and financing income payable from the Fund to the counterparty. To the extent the total return of the instrument or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty.
| | | | | | | |
Derivative Financial Instruments Categorized by Risk Exposure: | |
Fair Value of Derivative Financial Instruments as of January 31, 2012 | |
| | Asset Derivatives | |
| | Statement
of Assets and
Liabilities Location | | Value | |
| | | | | | | |
Equity contracts | | | Unrealized appreciation on swaps | | $ | 904,691 | |
| | | | |
The Effect of Derivative Financial Instruments in the Statement of Operations
Period Ended January 31, 2012 | |
| | Net Realized (Loss) From | |
| | Swaps | |
Equity contracts | | | $ (131,928) | |
| | | | |
| | Net Change in Unrealized
Appreciation/Depreciation on | |
| | Swaps | |
Equity contracts | | | $ 904,691 | |
3. Investment Advisory Agreement and Other Transactions with Affiliates:
The PNC Financial Services Group, Inc. (“PNC”) and Barclays Bank PLC (“Barclays”) are the largest stockholders of BlackRock, Inc. (“BlackRock”). Due to the ownership structure, PNC is an affiliate for 1940 Act purposes, but Barclays is not.
The Trust, on behalf of the Fund, entered into an Investment Advisory Agreement with the Manager, the Fund’s investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of the Fund’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of the Fund. For such services, the Fund pays the Manager a monthly based on a percentage of the Fund’s average daily net assets at the following annual rates:
| | |
Average Daily Net Assets | | Investment
Advisory Fee |
First $1 billion | | 1.50% |
$1 billion – $3 billion | | 1.41% |
$3 billion – $5 billion | | 1.35% |
$5 billion – $10 billion | | 1.31% |
Greater than $10 billion | | 1.28% |
The Trust, on behalf of the Fund, entered into an Administration Agreement with the Manager and State Street Bank and Trust Company (collectively, the “Administrator”) to provide administrative services (other than investment advice and related portfolio activities).
The Fund pays the Administrator a monthly fee based upon the average daily value of the Fund’s net assets at the following annual rates: 0.075% of the Fund’s average daily net assets not exceeding $500 million; 0.065% of average daily net assets in excess of $500 million but not exceeding $1 billion; and 0.055% of average daily net assets in excess of $1 billion. In addition, each of the share classes is charged an administration fee based upon the average daily net assets of each respective class at the following rates: 0.025% of the first $500 million, 0.015% of the next $500 million and 0.005% of the average daily net assets in excess of $1 billion. These amounts are shown as administration —Institutional, Investor A and Investor C, respectively, in the Statement of Operations.
The Manager contractually agreed to waive and/or reimburse fees or expenses, excluding interest expense, dividend expense, acquired fund fees and expenses and certain other fund expenses, in order to limit expenses. The expense limitations as a percentage of average daily net assets are as follows: 1.75% for Institutional, 2.00% for Investor A and 2.75% for Investor C. The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to December 1, 2012 unless approved by the Board, including a majority of the Independent Trustees or by a vote of the majority of the outstanding voting securities of the Fund. These amounts are included in fees waived and/or reimbursed by advisor, shown as administration fees waived and/or reimbursed, administration fees waived — class specific and transfer agent fees waived and/or reimbursed — class specific, respectively, in the Statement of Operations as follows:
| | | | | | | | | | | |
| | Transfer
Agent Fees | | Administration
Fees | |
| | | | | | | | | | | |
Institutional | | | $ | 91 | | | | $ | 1,630 | | |
Investor A | | | $ | 91 | | | | $ | 148 | | |
Investor C | | | $ | 91 | | | | $ | 71 | | |
In addition, for the period ended January 31, 2012, the Manager waived and/or reimbursed $50,383, which is included in fees waived and/or reimbursed by advisor in the Statement of Operations, and waived $5,548 in administration fees, which is shown as administration fees waived in the Statement of Operations.
The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with its investment in other affiliated investment companies, if any. For the period ended January 31, 2012, the Fund waived $3,340, which is included in fees waived by advisor in the Statement of Operations.
| | |
| | |
22 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
|
|
Notes to Financial Statements (continued) |
The Manager entered into a sub-advisory agreement with BlackRock Fund Advisors, an affiliate of the Manager. The Manager pays BlackRock Fund Advisors for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by the Fund to the Manager.
If during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver or reimbursement from the Manager, are less than the expense limit for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of (a) the amount of fees waived or expenses reimbursed during those prior two fiscal years under the agreement and (b) the amount by which the expense limit for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that: (1) the Fund has more than $50 million in assets for the fiscal year and (2) the Manager or an affiliate continues to serve as the Fund’s investment advisor or administrator. In the event the expense limit for a share class is changed subsequent to a fiscal year in which the Manager becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse the Manager shall be calculated by reference to the expense limit for that share class in effect at the time the Manager became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.
On January 31, 2012, the amounts subject to possible future recoupment under the expense limitation agreement are $58,053. These amounts expire on July 31, 2014.
The Trust, on behalf of the Fund, entered into a Distribution Agreement and Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the shares of the Fund, as follows:
| | | | | | | | | | | |
| | | Service
Fees | | | Distribution
Fees | |
Investor A | | | | 0.25 | % | | | | — | | |
Investor C | | | | 0.25 | % | | | | 0.75 | % | |
Pursuant to sub-agreements with BRIL, broker-dealers and BRIL provide shareholder servicing and distribution services to the Fund. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to Investor A and Investor C shareholders.
For the period ended January 31, 2012, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of the Fund’s Investor A Shares, which totaled $2,378.
Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates. The Fund reimburses the Manager for compensation paid to the Trust’s Chief Compliance Officer.
4. Borrowings:
The Trust, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates, is a party to a $500 million credit agreement with a group of lenders. The Fund may borrow under the credit agreement to fund shareholder redemptions. Effective November 2010 to November 2011, the credit agreement had the following terms: a commitment fee of 0.08% per annum based on the Fund’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 1.00% per annum or (b) the Fed Funds rate plus 1.00% per annum on amounts borrowed. In addition, the Fund paid administration and arrangement fees which were allocated to the Fund based on its net assets as of October 31, 2010. The credit agreement, which expired in November 2011, was renewed until Novem-ber 2012. Effective November 2011 to November 2012, the credit agreement has the following terms: a commitment fee of 0.065% per annum based on the Fund’s pro rata share of the unused portion of the credit agreement and interest at a rate equal to the higher of (a) the one-month LIBOR plus 0.80% per annum or (b) the Fed Funds rate plus 0.80% per annum on amounts borrowed. In addition, the Fund paid administration and arrangement fees which were allocated to the Fund based on its net assets as of October 31, 2011. The Fund did not borrow under the credit agreement during the period ended January 31, 2012.
5. Concentration, Market and Credit Risk:
In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Fund may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Fund; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Fund may be exposed to counter-party credit risk, or the risk that an entity with which the Fund has unsettled or open transactions may fail to or be unable to perform on its commitments. The Fund manages counterparty credit risk by entering into transactions only with counterparties that it 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 generally approximated by their value recorded in the Fund’s Statement of Assets and Liabilities, less any collateral held by the Fund.
| | | |
| | | |
| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 23 |
|
|
Notes to Financial Statements (concluded) |
The Fund has exposure to a substantial amount of its assets in issuers located in foreign countries, including emerging market countries. When the Fund concentrates its investments in this manner, it assumes the risk that economic, political and social conditions in those countries may have a significant impact on investment performance. Foreign issuers may not be subject to the same uniform accounting, auditing and financial reporting standards and practices as used in the US. Foreign securities markets may also be less liquid, more volatile, and less subject to governmental supervision not typically associated with investing in US securities. Please see the Schedule of Investments for concentrations in specific countries.
As of January 31, 2012, the Fund had the following industry classifications:
| | | | | | | | | | | | | | | | |
| | Percent of Total Investments | |
Industry | | Long | | Short | | Total | |
Wireless Telecommunication Services | | | | 5 | % | | | | 2 | % | | | | 7 | % | |
Oil, Gas & Consumable Fuels | | | | 4 | | | | | 4 | | | | | 8 | | |
Electric Utilities | | | | 4 | | | | | 2 | | | | | 6 | | |
Metals & Mining | | | | 3 | | | | | 4 | | | | | 7 | | |
Chemicals | | | | 3 | | | | | 3 | | | | | 6 | | |
Semiconductors & Semiconductor Equipment | | | | 3 | | | | | 2 | | | | | 5 | | |
Commercial Banks | | | | 2 | | | | | — | | | | | 2 | | |
Industrial Conglomerates | | | | 2 | | | | | — | | | | | 2 | | |
Transportation Infrastructure | | | | 2 | | | | | — | | | | | 2 | | |
Electrical Equipment | | | | 2 | | | | | — | | | | | 2 | | |
Tobacco | | | | 2 | | | | | — | | | | | 2 | | |
Independent Power Producers & Energy Traders | | | | — | | | | | 3 | | | | | 3 | | |
Diversified Telecommunication Services | | | | — | | | | | 3 | | | | | 3 | | |
Electronic Equipment, Instruments & Components | | | | — | | | | | 2 | | | | | 2 | | |
Other1 | | | | 22 | | | | | 21 | | | | | 43 | | |
Total | | | | 54 | % | | | | 46 | % | | | | 100 | % | |
| | |
| 1 | All other industries held were each less than 1% of investments. |
6. Capital Share Transactions:
Transactions in capital shares for each class were as follows:
| | | | | | | |
| | Period October 6, 20112
to January 31, 2012 | |
| | Shares | | Amount | |
Institutional | | | | | | | |
Shares sold | | | 2,958,515 | | $ | 29,532,754 | |
Shares issued to shareholders
in reinvestment of dividends | | | 777 | | | 7,719 | |
Shares redeemed | | | (79,022 | ) | | (789,236 | ) |
Net increase | | | 2,880,270 | | $ | 28,751,237 | |
| | | | | | | |
| | | | | | | |
Investor A | | | | | | | |
Shares sold | | | 536,951 | | $ | 5,357,773 | |
Shares issued to shareholders
in reinvestment of dividends | | | 271 | | | 2,689 | |
Shares redeemed | | | (17,041 | ) | | (168,803 | ) |
Net increase | | | 520,181 | | $ | 5,191,659 | |
| | | | | | | |
| | | | | | | |
Investor C | | | | | | | |
Shares sold | | | 182,242 | | $ | 1,813,122 | |
Shares issued to shareholders
in reinvestment of dividends | | | 24 | | | 237 | |
Shares redeemed | | | (23 | ) | | (226 | ) |
Net increase | | | 182,243 | | $ | 1,813,133 | |
| | |
| 2 | Commencement of operations. |
At January 31, 2012, shares owned by affiliates were as follows:
| | | | |
| | Shares | |
Institutional | | | | 1,496,000 | | |
Investor A | | | | 2,000 | | |
Investor C | | | | 2,000 | | |
7. 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.
| | | |
| | | |
24 | | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
|
|
Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement |
The Board of Trustees (the “Board,” and the members of which are referred to as “Board Members”) of BlackRock FundsSM (the “Trust”) met on September 22–23, 2011 to consider the approval of the Trust’s proposed investment advisory agreement (the “Advisory Agreement”) with BlackRock Advisors, LLC (the “Manager”) on behalf of BlackRock Emerging Markets Long/Short Equity Fund (the “Fund”), a portfolio of the Trust. The Advisory Agreement was the same agreement that had previously been approved by the Board with respect to other portfolios of the Trust. The Board also considered the approval of the sub-advisory agreement between the Manager and BlackRock Fund Advisors (the “Sub-Advisor”) with respect to the Fund (the “Sub-Advisory Agreement”). The Sub-Advisory Agreement was substantially the same as the sub-advisory agreements previously approved with respect to certain other portfolios of the Trust. The Manager and the Sub-Advisor are referred to herein as “BlackRock.” The Advisory Agreement and the Sub-Advisory Agreement are referred to herein as the “Agreements.” The Fund commenced operations in October 2011.
Activities and Composition of the Board
The Board consists of thirteen individuals, eleven of whom are not “interested persons” of the Trust or the Fund as defined in the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Board Members”). The Board Members are responsible for the oversight of the operations of the Fund and perform the various duties imposed on the directors of investment companies by the 1940 Act. The Independent Board Members have retained independent legal counsel to assist them in connection with their duties. The Co-Chairs of the Board are each Independent Board Members. The Board has established five standing committees: an Audit Committee, a Governance and Nominating Committee, a Compliance Committee, a Performance Oversight and Contract Committee and an Executive Committee, each of which is composed of Independent Board Members (except for the Executive Committee, which also has one interested Board Member) and is chaired by Independent Board Members.
The Agreements
Pursuant to the 1940 Act, the Board is required to consider the initial approval of the Agreements. In connection with this process, the Board assessed, among other things, the nature, scope and quality of the services to be provided to the Fund by the personnel of BlackRock and its affiliates, including investment management, administrative and shareholder services, oversight of fund accounting and custody, marketing services and assistance in meeting applicable legal and regulatory requirements.
Board Considerations in Approving the Agreements
The Approval Process: At an in-person meeting held on September 22–23, 2011, the Board reviewed materials relating to its consideration of the Agreements. The Board considered all factors it believed relevant with respect to the Trust and the Fund, including, among other factors: (a) the nature, extent and quality of the services to be provided by BlackRock; (b) the investment performance of BlackRock portfolio management; (c) the advisory fee and the cost of the services to be provided and profits to be realized by BlackRock and its affiliates from their relationship with the Fund; (d) economies of scale; (e) fall out benefits to BlackRock as a result of its relationship with the Fund; (f) possible alternatives to the proposed Agreements; (g) the policies and practices of BlackRock with respect to portfolio transactions for the Fund; and (h) other factors deemed relevant by the Board Members.
In determining to approve the Agreements, the Board met with the relevant investment advisory personnel from BlackRock and considered all information it deemed reasonably necessary to evaluate the terms of the Agreements. The Board received materials in advance of the September 2011 meeting relating to its consideration of the Agreements, including (a) fees and estimated expense ratios of each class of the Fund, and for a representative class of the Fund, in comparison to the fees and expense ratios of a peer group of funds; (b) information regarding BlackRock’s economic outlook for the Fund and its general investment outlook for the markets; (c) information regarding fees paid to service providers that are affiliates of BlackRock; and (d) information outlining the legal duties of the Board under the 1940 Act with respect to the consideration and approval of the Agreements. The Board also noted information received at prior Board meetings concerning compliance records and regulatory matters relating to BlackRock.
The Board also considered other matters it deemed important to the approval process, such as services related to the valuation and pricing of Fund portfolio holdings, direct and indirect benefits to BlackRock and its affiliates and significant shareholder from their relationship with the Fund and advice from independent legal counsel with respect to the review process and materials submitted for the Board’s review. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as controlling, and each Board Member may have attributed different weights to the various items considered.
| | | |
| | | |
| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 25 |
|
|
Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (continued) |
A. Nature, Extent and Quality of the Services: The Board, including the Independent Board Members, reviewed the nature, extent and quality of services to be provided by BlackRock, including the investment advisory services to be provided to the Fund. The Board received information concerning the investment philosophy and investment process to be used by BlackRock in managing the Fund, as well as a description of the capabilities, personnel and services of BlackRock. In connection with this review, the Board considered BlackRock’s in-house research capabilities as well as other resources available to its personnel. The Board considered the scope of the services provided by BlackRock to the Fund under the Agreements relative to services typically provided by third parties to other funds. The Board noted that the standard of care applicable under the Agreements was comparable to that found generally in investment company advisory agreements. The Board concluded that the scope of BlackRock’s services to be provided to the Fund was consistent with the Fund’s operational requirements, including, in addition to seeking to meet its investment objective, compliance with investment restrictions, tax and reporting requirements and related shareholder services.
The Board, including the Independent Board Members, also considered the quality of the administrative and non-investment advisory services to be provided by BlackRock and its affiliates to the Fund. The Board evaluated the procedures of BlackRock designed to fulfill its fiduciary duty to the Fund with respect to possible conflicts of interest, including BlackRock’s code of ethics (regulating the personal trading of BlackRock’s officers and employees), the procedures by which BlackRock allocates trades among its various investment advisory clients, the integrity of the systems in place to ensure compliance with the foregoing and the record of BlackRock in these matters. The Board also noted information received at prior Board meetings concerning standards of BlackRock with respect to the execution of portfolio transactions.
The Board, including the Independent Board Members, considered, among other factors, the number, education and experience of BlackRock’s investment personnel generally and the portfolio management team for the Fund. The Board also took into account the time and attention to be devoted by senior management of BlackRock to the Fund. The Board also considered the business reputation of BlackRock and its financial resources and concluded that BlackRock would be able to meet any reasonably foreseeable obligation under the Agreements.
B. The Investment Performance of the Fund and BlackRock: The Board, including the Independent Board Members, previously received and considered information about BlackRock’s investment performance for other funds. The Board, however, did not consider the performance history of the Fund because the Fund was newly organized and had not yet commenced operations as of the September 2011 meeting.
C. Consideration of the Advisory Fees and the Cost of the Services and Profits to be Realized by BlackRock and its Affiliates from their Relationship with the Fund: In connection with the initial approval of the Agreements, the Board, including the Independent Board Members, reviewed the Fund’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) compared with the other funds in a peer group of funds. Both the peer group and the funds within the peer group (collectively, “Peers”) were selected by Lipper, Inc. (“Lipper”), which is not affiliated with BlackRock. It also compared the Fund’s estimated total expense ratio, as well as the Fund’s estimated actual management fee ratio, to those of its Peers. The Board noted that the Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Fund increases above certain contractually specified levels. The Board considered the fee waivers and expense reimbursement arrangements in place, including the contractual agreement by BlackRock to waive fees and/or reimburse expenses in order to limit, to a specified amount, the Fund’s total operating expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis, as applicable. Additionally, the Board noted information received at prior Board meetings concerning the services rendered, and the fee rates offered, to other clients advised by BlackRock.
The Board noted that the Fund’s contractual management fee ratio (a combination of the advisory fee and the administration fee, if any) was above the median contractual management fee ratio paid by the Fund’s Peers, in each case before taking into account any expense reimbursements or fee waivers. The Board also noted, however, that although the Fund’s contractual management fee ratio was above the median contractual management fee ratio paid by the Fund’s Peers, the contractual management fee ratio was in the third quartile.
Following consideration of this information, the Board, including the independent Board Members, concluded that the fees to be paid pursuant to the Agreements were fair and reasonable in light of the services provided.
| | |
|
26 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
|
|
Disclosure of Investment Advisory Agreement and Sub-Advisory Agreement (concluded) |
As the Fund had not commenced operations as of the date of the September 2011 meeting, BlackRock was not able to provide the Board with specific information concerning the expected profits to be realized by BlackRock and its affiliates from their relationships with the Fund. BlackRock, however, will provide the Board with such information at future meetings.
D. Economies of Scale: The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized in respect of the management of the Fund in tandem with other portfolios of the Trust. Since the Fund is newly formed, BlackRock was not able to provide the Board with specific information concerning the extent to which economies of scale would be realized as the Fund grows and whether fee levels would reflect such economies of scale, if any.
E. Other Factors Deemed Relevant by the Board Members: The Board, including the Independent Board Members, also took into account other ancillary or “fall-out” benefits that BlackRock or its affiliates and significant shareholder may derive from their respective relationships with the Fund, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Fund, including for administrative, transfer agency, distribution and securities lending services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts. The Board further noted that BlackRock’s funds may invest in affiliated ETFs without any offset against the management fees payable by the funds to BlackRock.
The Board, including all of the Independent Board Members, concluded that these ancillary benefits that BlackRock and its affiliates could receive with regard to providing investment advisory and other services to the Fund were consistent with those generally available to other mutual fund sponsors.
Conclusion
The Board, including the Independent Board Members, unanimously approved the Advisory Agreement and the Sub-Advisory Agreement, each for a two-year term ending September 26, 2013. Based upon its evaluation of all of the aforementioned factors in their totality, the Board, including the Independent Board Members, was satisfied that the terms of the Agreements were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at a decision to approve the Agreements, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination.
| | | |
|
| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 27 |
|
Ronald W. Forbes, Co-Chairman of the Board and Trustee |
Rodney D. Johnson, Co-Chairman of the Board and Trustee |
Paul L. Audet, Trustee |
David O. Beim, Trustee |
Henry Gabbay, Trustee |
Dr. Matina S. Horner, Trustee |
Herbert I. London, Trustee |
Cynthia A. Montgomery, Trustee |
Joseph P. Platt, Trustee |
Robert C. Robb, Jr., Trustee |
Toby Rosenblatt, Trustee |
Kenneth L. Urish, Trustee |
Frederick W. Winter, Trustee |
John M. Perlowski, President and Chief Executive Officer |
Richard Hoerner, CFA, Vice President |
Brendan Kyne, Vice President |
Simon Mendelson, Vice President |
Christopher Stavrakos, CFA, Vice President |
Neal Andrews, Chief Financial Officer |
Jay Fife, Treasurer |
Brian Kindelan, Chief Compliance Officer and
Anti-Money Laundering Officer |
Ira P. Shapiro, Secretary |
|
Investment Advisor |
|
BlackRock Advisors, LLC |
Wilmington, DE 19809 |
|
Sub-Advisor |
|
BlackRock Fund Advisors |
San Francisco, CA 94105 |
|
Custodian and Accounting Agent |
|
State Street Bank and Trust Company |
Boston, MA 02110 |
|
Transfer Agent |
|
BNY Mellon Investment Servicing (US) Inc. |
Wilmington, DE 19809 |
|
Independent Registered Public Accounting Firm |
|
PricewaterhouseCoopers LLP |
Philadelphia, PA 19103 |
|
Distributor |
|
BlackRock Investments, LLC |
New York, NY 10022 |
|
Legal Counsel |
|
Sidley Austin LLP |
New York, NY 10019 |
|
Address of the Fund |
|
100 Bellevue Parkway |
Wilmington, DE 19809 |
| | |
|
28 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
Electronic Delivery
Electronic copies of most financial reports and prospectuses are available on the Fund’s website or shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund’s electronic delivery program.
To enroll:
Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:
Please contact your financial advisor. Please note that not all investment advisors, banks or brokerages may offer this service.
Shareholders Who Hold Accounts Directly with BlackRock:
| |
1) | Access the BlackRock website at |
| http://www.blackrock.com/edelivery |
2) | Select “eDelivery” under the “More Information” section |
3) | Log into your account |
Householding
The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Fund at (800) 441-7762.
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on how to access documents on the SEC’s website without charge may be obtained by calling (800) SEC-0330. The Fund’s Forms N-Q may also be obtained upon request and without charge by calling (800) 441-7762.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available
(1) without charge, upon request by calling (800) 441-7762;
(2) at http://www.blackrock.com; and (3) on the SEC’s website at http://www.sec.gov.
Availability of Proxy Voting Record
Information about how the Fund voted proxies relating to securities held in the Fund’s portfolio during the most recent 12-month period ended June 30 will be available upon request and without charge
(1) at http://www.blackrock.com or by calling (800) 441-7762 and
(2) on the SEC’s website at http://www.sec.gov.
| | | |
|
| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 29 |
|
|
Additional Information (concluded) |
|
Shareholder Privileges |
Account Information
Call us at (800) 441-7762 from 8:00 AM to 6:00 PM EST on any business day to get information about your account balances, recent transactions and share prices. You can also reach us on the Web at http://www.blackrock.com/funds.
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
|
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.
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30 | BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 |
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A World-Class Mutual Fund Family |
BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed income and tax-exempt investing.
|
|
Equity Funds |
|
BlackRock ACWI ex-US Index Fund |
BlackRock All-Cap Energy & Resources Portfolio |
BlackRock Asset Allocation Portfolio† |
BlackRock Balanced Capital Fund† |
BlackRock Basic Value Fund |
BlackRock Capital Appreciation Fund |
BlackRock China Fund |
BlackRock Commodity Strategies Fund |
BlackRock Emerging Markets Fund |
BlackRock Emerging Markets Long/Short Equity Fund |
BlackRock Energy & Resources Portfolio |
BlackRock Equity Dividend Fund |
BlackRock EuroFund |
BlackRock Focus Growth Fund |
BlackRock Global Allocation Fund† |
BlackRock Global Dividend Income Portfolio |
BlackRock Global Dynamic Equity Fund |
BlackRock Global Opportunities Portfolio |
BlackRock Global SmallCap Fund |
BlackRock Health Sciences Opportunities Portfolio |
BlackRock Index Equity Portfolio |
BlackRock India Fund |
BlackRock International Fund |
BlackRock International Index Fund |
BlackRock International Opportunities Portfolio |
BlackRock Large Cap Core Fund |
BlackRock Large Cap Core Plus Fund |
BlackRock Large Cap Growth Fund |
BlackRock Large Cap Value Fund |
BlackRock Latin America Fund |
BlackRock Mid-Cap Growth Equity Portfolio |
BlackRock Mid-Cap Value Equity Portfolio |
BlackRock Mid Cap Value Opportunities Fund |
BlackRock Natural Resources Trust |
BlackRock Pacific Fund |
BlackRock Russell 1000 Index Fund |
BlackRock Science & Technology Opportunities Portfolio |
BlackRock Small Cap Growth Equity Portfolio |
BlackRock Small Cap Growth Fund II |
BlackRock Small Cap Index Fund |
BlackRock S&P 500 Index Fund |
BlackRock S&P 500 Stock Fund |
BlackRock U.S. Opportunities Portfolio |
BlackRock Value Opportunities Fund |
BlackRock World Gold Fund |
|
|
Fixed Income Funds |
|
BlackRock Bond Index Fund |
BlackRock Core Bond Portfolio |
BlackRock Emerging Market Debt Portfolio |
BlackRock Floating Rate Income Portfolio |
BlackRock Global Long/Short Credit Fund |
BlackRock GNMA Portfolio |
BlackRock High Yield Bond Portfolio |
BlackRock Inflation Protected Bond Portfolio |
BlackRock International Bond Portfolio |
BlackRock Long Duration Bond Portfolio |
BlackRock Low Duration Bond Portfolio |
BlackRock Multi-Asset Income Portfolio† |
BlackRock Multi-Sector Bond Portfolio |
BlackRock Strategic Income Opportunities Portfolio |
BlackRock Total Return Fund |
BlackRock US Government Bond Portfolio |
BlackRock US Mortgage Portfolio |
BlackRock World Income Fund |
|
|
Municipal Bond Funds |
|
BlackRock California Municipal Bond Fund |
BlackRock High Yield Municipal Fund |
BlackRock Intermediate Municipal Fund |
BlackRock National Municipal Fund |
BlackRock New Jersey Municipal Bond Fund |
BlackRock New York Municipal Bond Fund |
BlackRock Pennsylvania Municipal Bond Fund |
BlackRock Short-Term Municipal Fund |
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Target Risk & Target Date Funds† |
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BlackRock Prepared Portfolios |
Conservative Prepared Portfolio |
Moderate Prepared Portfolio |
Growth Prepared Portfolio |
Aggressive Growth Prepared Portfolio |
BlackRock Lifecycle Prepared Portfolios |
2015 |
2020 |
2025 |
2030 |
2035 |
2040 |
2045 |
2050 |
LifePath Portfolios
Retirement |
2020 |
2025 |
2030 |
2035 |
2040 |
2045 |
2050 |
2055 |
LifePath Index Portfolios
Retirement |
2020 |
2025 |
2030 |
2035 |
2040 |
2045 |
2050 |
2055 |
BlackRock mutual funds are currently distributed by BlackRock Investments, LLC. You should consider the investment objectives, risks, charges and expenses of the funds under consideration carefully before investing. Each fund’s prospectus contains this and other information and is available at www.blackrock.com or by calling (800) 441-7762 or from your financial advisor. The prospectus should be read carefully before investing.
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| BLACKROCK EMERGING MARKETS LONG/SHORT EQUITY FUND | JANUARY 31, 2012 | 31 |
This report is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change. Please see the Fund’s prospectus for a description of risks associated with global investments.
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#EMLS-1/12-SAR | 
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Item 2 – | Code of Ethics – Not Applicable to this semi-annual report |
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Item 3 – | Audit Committee Financial Expert – Not Applicable to this semi-annual report |
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Item 4 – | Principal Accountant Fees and Services – Not Applicable to this semi-annual report |
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Item 5 – | Audit Committee of Listed Registrants – Not Applicable |
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Item 6 – | Investments |
| (a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form. |
| (b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing. |
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Item 7 – | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable |
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Item 8 – | Portfolio Managers of Closed-End Management Investment Companies – Not Applicable |
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Item 9 – | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable |
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Item 10 – | Submission of Matters to a Vote of Security Holders –There have been no material changes to these procedures. |
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Item 11 – | Controls and Procedures |
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(a) – | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended. |
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(b) – | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
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Item 12 – | Exhibits attached hereto |
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(a)(1) – | Code of Ethics – Not Applicable to this semi-annual report |
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(a)(2) – | Certifications – Attached hereto |
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(a)(3) – | Not Applicable |
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(b) – | Certifications – Attached hereto |
| Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. |
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| BlackRock Funds |
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| | By: | /s/ John M. Perlowski | |
| | | John M. Perlowski |
| | | Chief Executive Officer (principal executive officer) of |
| | | BlackRock Funds |
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| | Date: April 2, 2012 |
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| | Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. |
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| | By: | /s/ John M. Perlowski | |
| | | John M. Perlowski |
| | | Chief Executive Officer (principal executive officer) of |
| | | BlackRock Funds |
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| | Date: April 2, 2012 |
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| | By: | /s/ Neal J. Andrews | |
| | | Neal J. Andrews |
| | | Chief Financial Officer (principal financial officer) of |
| | | BlackRock Funds |
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| | Date: April 2, 2012 |
