BlackRock 20/80 Target Allocation Fund, Investor A NCSRS Certified semi-annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number: 811-05742

Name of Fund: BlackRock Funds

BlackRock All-Cap Energy & Resources Portfolio

BlackRock Emerging Markets Dividend Fund

BlackRock Energy & Resources Portfolio

BlackRock Flexible Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Health Sciences Opportunities Portfolio

BlackRock International Opportunities Portfolio

BlackRock Managed Volatility Portfolio

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock U.S. Opportunities Portfolio

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

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

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

Date of fiscal year end: 09/30/2014

Date of reporting period: 03/31/2014

Item 1 – Report to Stockholders

MARCH 31, 2014

SEMI-ANNUAL REPORT (UNAUDITED)

BLACKROCK^®

BlackRock Funds^SM

„ BlackRock All-Cap Energy & Resources Portfolio

„ BlackRock Emerging Markets Dividend Fund

„ BlackRock Energy & Resources Portfolio


Not FDIC Insured ¡ May Lose Value ¡ No Bank Guarantee


Table of Contents


			Page
Shareholder Letter			3
Semi-Annual Report:
Fund Summaries			4
About Fund Performance			10
Disclosure of Expenses			11
Derivative Financial Instruments			11
Financial Statements:
Schedules of Investments			12
Statements of Assets and Liabilities			20
Statements of Operations			22
Statements of Changes in Net Assets			23
Financial Highlights			24
Notes to Financial Statements			30
Officers and Trustees			42
Additional Information			43
A World-Class Mutual Fund Family			45


2		BLACKROCK FUNDS		MARCH 31, 2014

Shareholder Letter

Dear Shareholder,

One year ago, U.S. financial markets were improving despite a sluggish global economy, as easy monetary policy provided investors with enough conviction to take on more risk in their portfolios. Slow but positive growth in the U.S. was sufficient to support corporate earnings, while uncomfortably high unemployment reinforced expectations that the Federal Reserve would continue to maintain its aggressive monetary stimulus programs.

Sentiment swiftly reversed in May when then-Fed Chairman Bernanke first mentioned the possibility of reducing (or “tapering”) the central bank’s asset purchase programs – comments that were widely misinterpreted as signaling an end to the Fed’s zero-interest-rate policy. U.S. Treasury yields rose sharply, triggering a steep sell-off across fixed income markets. (Bond prices move in the opposite direction of yields.) Global equities also suffered as investors feared the implications of a potential end to a program that had greatly supported the markets. Emerging markets, which are more sensitive to changes in global liquidity, were particularly hurt by the prospect of ebbing cash flows from the U.S. Markets rebounded in late June, however, when the Fed’s tone turned more dovish, and improving economic indicators and better corporate earnings helped extend gains through most of the summer.

Although the tone of economic and financial news was mixed during the autumn, it was a surprisingly positive period for most asset classes. Early on, the Fed defied market expectations with its decision to delay tapering, but higher volatility returned in late September when the U.S. Treasury Department warned that the national debt would soon breach its statutory maximum. The ensuing political brinksmanship led to a partial government shutdown, roiling global financial markets through the first half of October. Equities and other so-called “risk assets” managed to resume their rally when politicians engineered a compromise to reopen the government and extend the debt ceiling.

The remainder of 2013 was generally positive for stock markets in the developed world, although investors continued to grapple with uncertainty about when and how much the Fed would scale back on stimulus. When the Fed ultimately announced its tapering plans in mid-December, markets reacted positively, as this action signaled the Fed’s perception of real improvement in the economy, and investors were finally relieved from the anxiety that had gripped them for quite some time.

The start of the new year brought another turn in sentiment, as heightened risks in emerging markets and mixed U.S. economic data caused global equities to weaken in January while bond markets found renewed strength. Although these headwinds persisted, equities were back on the rise in February as investors were encouraged by a one-year extension of the U.S. debt ceiling and market-friendly comments from the Fed’s new Chairwoman, Janet Yellen. While U.S. economic data pointed to softer growth, investors viewed this trend as temporarily driven by poor winter weather and continued adding risk to their portfolios on the belief that growth would pick up in the coming months. In March, markets focused on decelerating growth in China and tensions between Russia and Ukraine over the disputed region of Crimea. Additionally, investors were caught off guard by a statement from Chairwoman Yellen indicating that the Fed may raise short-term interest rates earlier than the markets had previously forecasted. Bond markets came under pressure as the middle of the yield curve vaulted higher in response to the unexpected shift in forward guidance.

Against a backdrop of modest economic growth, investors over the past year remained highly attuned to potential changes in monetary policy. Despite the fact that markets were gearing up for a modest shift toward tighter conditions from the Fed, equity markets in the developed world generated strong returns for the six- and 12-month periods ended March 31, with stocks in the United States performing particularly well. In contrast, emerging markets were weighed down by concerns about reduced global liquidity, severe currency weakness, high levels of debt and uneven growth.

Interest rate uncertainty posed a headwind for fixed income assets, and higher-quality sectors of the market experienced heightened volatility and poor performance over the reporting period. High yield bonds, however, benefited from income-oriented investors’ search for yield in the overall low-rate environment. Short-term interest rates remained near zero, keeping yields on money market securities close to historic lows.

At BlackRock, we believe investors need to think globally, extend their scope across a broad array of asset classes and be prepared to move freely as market conditions change over time. We encourage you to talk with your financial advisor and visit www.blackrock.com for further insight about investing in today’s world.

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

In a modest global growth environment, expectations around monetary policy changes continued to be a key theme in financial market performance.

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of March 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500^® Index)		12.51	%		21.86	%
U.S. small cap equities (Russell 2000^® Index)		9.94			24.90
International equities (MSCI Europe, Australasia, Far East Index)		6.41			17.56
Emerging market equities (MSCI Emerging Markets Index)		1.39			(1.43	)
3-month Treasury bill (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.03			0.07
U.S. Treasury securities (BofA Merrill Lynch 10- Year U.S. Treasury Index)		0.85			(4.38	)
U.S. investment grade bonds (Barclays U.S. Aggregate Bond Index)		1.70			(0.10	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.91			0.31
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		6.66			7.53

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


		THIS PAGE NOT PART OF YOUR FUND REPORT				3


Fund Summary as of March 31, 2014			BlackRock All-Cap Energy & Resources Portfolio

Investment Objective

BlackRock All-Cap Energy & Resources Portfolio’s (the “Fund”) investment objective is to provide long-term growth of capital.

Effective March 17, 2014, the Fund’s performance benchmarks changed from the S&P 500^® Index and a customized weighted index, comprised of 70% Wilshire 5000 Modified Energy Cap Weighted Index and 30% MSCI All-Country World Energy Index, to solely the MSCI World Energy Index. The investment advisor believes that this change in the performance benchmark more accurately reflects the investment strategy of the Fund.

Portfolio Management Commentary

How did the Fund perform?

For the six-month period ended March 31, 2014, the Fund underperformed the MSCI World Energy Index and its former benchmarks, the S&P 500^® Index and the customized weighted index. The following discussion of relative performance pertains to the MSCI World Energy Index.

What factors influenced performance?

The Fund’s position in Cairn Energy PLC, a global oil & gas exploration & production company, detracted from performance as the company came under scrutiny from the Indian tax authority due to a matter relating to the initial public offering of their Indian subsidiary, Cairn India, in 2006. India’s tax authority cited retrospective legislation introduced in 2012 regarding the taxation of indirect transfers of Indian assets as the reason for the investigation. Also having a negative impact on results was the Fund’s overweight position in U.S. integrated energy company Chevron Corp. as the company posted disappointing earnings results for the fourth quarter of 2013.

Conversely, the Fund’s position in Phillips 66, a refiner engaged in producing natural gas liquids and petrochemicals, aided relative performance over the six-month period. The company has benefited from the discount between the price of their crude oil inputs (linked to domestic U.S. prices) and the price of the refined product outputs (linked to international

prices). Southwestern Energy Co. was also a notable contributor as a higher average natural gas price provided an improved earnings outlook for gas producers.

Describe recent portfolio activity.

Early in the six-month period, the Fund reduced exposure to oil services while increasing exposure to integrated and exploration & production companies based on attractive valuations. In the latter half of the period, the Fund rotated exposure within the integrated energy segment, exiting positions in Hess Corp. and Eni SpA on the back of their strong 2013 performance, and initiating a position in Statoil ASA. Additionally, the Fund added a new position in Cimarex Energy Co., a U.S. exploration & production company located in the Permian basin.

Describe portfolio positioning at period end.

As of period end, nearly half of the Fund’s net assets were invested in integrated oil & gas companies. The Fund also held a large exposure to the oil & gas exploration & production segment with a focus on companies that exhibit the ability to meet or exceed market expectations in terms of earnings and costs and have the potential to surprise on the upside through their development and exploration projects. The Fund maintained a meaningful allocation to oil services as well. The remainder of the Fund was invested in distribution companies, coal and uranium stocks, and names in the oil & gas refining & marketing space.

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

Portfolio Information


Ten Largest Holdings	Percent of Long-Term Investments
Chevron Corp.		11	%
Exxon Mobil Corp.		10
Royal Dutch Shell PLC - ADR		9
ConocoPhillips		7
Schlumberger Ltd.		5
BP PLC		5
Anadarko Petroleum Corp.		5
Noble Energy, Inc.		4
EOG Resources, Inc.		4
Statoil ASA		3


Industry Allocation	Percent of Long-Term Investments
Oil, Gas & Consumable Fuels		91	%
Energy Equipment & Services		9

For Fund compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.


4		BLACKROCK FUNDS		MARCH 31, 2014


			BlackRock All-Cap Energy & Resources Portfolio


Total Return Based on a $10,000 Investment

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

² Under normal market conditions, the Fund invests at least 80% of its total assets in equity securities of global energy and natural resources companies and companies in associated businesses, as well as utilities (such as gas, water, cable, electrical and tele-communications utilities).

This unmanaged total return index covers 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly New York Stock Exchange (“NYSE”) issues) representing about 75% of NYSE market capitalization and 30% of NYSE issues.

⁴

The Wilshire 5000 Modified Energy Cap Weighted Index is a customized index comprised of the energy sector constituents of the Wilshire 5000 (Full Cap) Index, which have been market capitalization weighted and the six largest securities and all securities that have a percentage market value below 0.01% have been removed.

⁵

The MSCI All-Country World Energy Index is comprised of the energy sector constituents of the MSCI All-Country World Index, a free float-adjusted market capitalization weighted index designed to measure the equity market performance of developed and emerging markets.

⁶

An index comprised of the energy sector constituents of the MSCI World Index, a free float-adjusted market capitalization weighted index designed to measure the equity market performance of developed markets. Effective March 17, 2014, the Fund now uses this index as its benchmark rather than the S&P 500^® Index and a customized weighted index, comprised of 70% Wilshire 5000 Modified Energy Cap Weighted Index and 30% MSCI All-Country World Energy Index because management believes that this benchmark better represents the sector exposures of the Fund and is a more appropriate basis for evaluating performance.

⁷

Commencement of operations.

Performance Summary for the Period Ended March 31, 2014


				Average Annual Total Returns⁸
				1 Year						5 Years						Since Inception⁹
	6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		4.92	%		15.25	%		N/A			14.46	%		N/A			8.26	%		N/A
Service		4.63			14.73			N/A			14.00			N/A			7.83			N/A
Investor A		4.69			14.73			8.71	%		13.97			12.75	%		7.82			7.18	%
Investor B		4.26			13.89			9.39			13.14			12.89			7.12			7.12
Investor C		4.33			13.94			12.94			13.15			13.15			7.05			7.05
S&P 500^® Index		12.51			21.86			N/A			21.16			N/A			7.13			N/A
70% Wilshire 5000 Modified Energy Cap Weighted Index / 30% MSCI All-Country World Energy Index		9.74			15.04			N/A			19.60			N/A			10.75			N/A
MSCI World Energy Index		8.72			14.07			N/A			13.52			N/A			7.40			N/A

⁸

Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” on page 10 for a detailed description of share classes, including any related sales charges and fees.

⁹

The Fund commenced operations on February 16, 2005.

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

Past performance is not indicative of future results.

Expense Example


	Actual			Hypothetical¹¹
	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period¹⁰	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period¹⁰	Annualized Expense Ratio
Institutional	$1,000.00	$1,049.20	$4.90	$1,000.00	$1,020.14	$4.84	0.96%
Service	$1,000.00	$1,046.30	$7.04	$1,000.00	$1,018.05	$6.94	1.38%
Investor A	$1,000.00	$1,046.90	$7.04	$1,000.00	$1,018.05	$6.94	1.38%
Investor B	$1,000.00	$1,042.60	$10.69	$1,000.00	$1,014.46	$10.55	2.10%
Investor C	$1,000.00	$1,043.30	$10.70	$1,000.00	$1,014.46	$10.55	2.10%

¹⁰

¹¹

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.


		BLACKROCK FUNDS		MARCH 31, 2014		5


Fund Summary as of March 31, 2014			BlackRock Emerging Markets Dividend Fund

Investment Objective

BlackRock Emerging Markets Dividend Fund’s (the “Fund”) investment objective is primarily to seek investment income and, as a secondary objective, to seek capital appreciation.

Portfolio Management Commentary

How did the Fund perform?

For the six-month period ended March 31, 2014, the Fund underperformed its benchmark, the MSCI Emerging Markets Index.

What factors influenced performance?

Relative to the benchmark index, the Fund’s underweight to India and stock selection in Russia hurt performance during the period. On a sector basis, stock selection in telecommunication services (“telecom”), consumer staples and materials detracted from returns. The largest individual detractor for the period was a position in Lukoil OAO, which suffered due to geopolitical tensions in Russia and Ukraine.

Conversely, stock selection in South Korea, China and Taiwan contributed positively to relative performance. Additionally, stock selection in the energy and consumer discretionary sectors had a positive impact. The largest individual contributor to returns was Macau casino operator Sands China Ltd., which continued to benefit from growth in gaming revenues and a positive outlook for growth in the mass market.

Describe recent portfolio activity.

During the six-month period, the Fund increased exposure to financials. Specifically, the Fund purchased Brazilian bank Itau Unibanco Holding SA given a positive outlook for improving asset quality and diminishing

non-performing loans in the sector. In addition, the Fund added to positions in Kasikornbank PCL in Thailand and Powszechny Zaklad Ubezpieczen SA in Poland. In other sectors, the Fund reduced its position in Tata Motors Ltd. due to concerns about increased capital expenditures. The Fund also exited a holding in Brazilian exchange BM&FBovespa SA as the company suffered from weaker trading volumes in both equities and derivatives. A position in Copa Holdings SA was eliminated given concerns about the company’s currency exposure given its cash balance in Venezuela.

Describe portfolio positioning at period end.

Relative to the MSCI Emerging Markets Index, the Fund ended the period with overweight exposures to Mexico and the Philippines. The Fund held a structural underweight in Korea given low dividend yields in that market. Other significant underweights included India and China. From a sector perspective, the Fund was overweight in industrials, telecom and consumer staples, and underweight in information technology and energy. The investment advisor continues to monitor a number of factors that may drive growth in emerging markets including corporate earnings growth, net exports and government reform in a number of developing countries.

Portfolio Information


Ten Largest Holdings	Percent of Long-Term Investments
Taiwan Semiconductor Manufacturing Co. Ltd. - ADR		4	%
Lukoil OAO - ADR		4
Powszechny Zaklad Ubezpieczen SA		3
CCR SA		3
Itau Unibanco Holding SA - ADR		3
China Petroleum & Chemical Corp., H Shares		3
Kimberly-Clark de Mexico SAB de CV, Class A		3
Philippine Long Distance Telephone Co. - ADR		2
China Merchants Holdings International Co. Ltd		2
BB Seguridade Participacoes SA		2


Geographic Allocation	Percent of Long-Term Investments
China		15	%
Brazil		14
Taiwan		12
Mexico		10
South Africa		7
Russia		5
Thailand		5
South Korea		5
Philippines		5
Poland		3
Indonesia		3
Other¹		16

¹	Includes holdings within countries that are 2% or less of long-term investments. Please refer to the Schedule of Investments for such countries.


6		BLACKROCK FUNDS		MARCH 31, 2014


			BlackRock Emerging Markets Dividend Fund

Total Return Based on a $10,000 Investment


		¹ Assuming maximum sales charges, if any, transaction costs and other operating expenses, including investment advisory fees and administration fees, if any. Institutional Shares do not have a sales charge. The Fund’s total returns prior to August 16, 2013, are the returns of the Fund when it followed different investment strategies under the name BlackRock China Fund.

Under normal circumstances, the Fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in dividend-paying equity securities of, or derivatives having economic characteristics similar to the dividend-paying equity securities of, companies domiciled in, or tied economically to, emerging market countries and at least 80% of its net assets (plus any borrowings for investment purposes) in dividend paying securities.

A free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI Emerging Markets Index consists of the following 21 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

⁴

Commencement of operations.


Performance Summary for the Period Ended March 31, 2014
				Average Annual Total Returns⁵
				1 Year						Since Inception⁶
	6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		(0.66	)%		3.16	%		N/A			(3.02	)%		N/A
Investor A		(0.84	)		2.87			(2.53	)%		(3.28	)		(5.05	)%
Investor C		(1.21	)		2.14			1.14			(3.95	)		(3.95	)
MSCI Emerging Markets Index		1.39			(1.43	)		N/A			(3.95	)		N/A

⁵

⁶

The Fund commenced operations on April 29, 2011.

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

Past performance is not indicative of future results.


Expense Example
	Actual			Hypothetical⁸
	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁷	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁷	Annualized Expense Ratio
Institutional	$1,000.00	$993.40	$7.55	$1,000.00	$1,017.35	$7.64	1.52%
Investor A	$1,000.00	$991.60	$8.74	$1,000.00	$1,016.16	$8.85	1.76%
Investor C	$1,000.00	$987.90	$12.49	$1,000.00	$1,012.37	$12.64	2.52%

⁷

⁸

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.


		BLACKROCK FUNDS		MARCH 31, 2014		7


Fund Summary as of March 31, 2014			BlackRock Energy & Resources Portfolio

Investment Objective

BlackRock Energy & Resources Portfolio’s (the “Fund”) investment objective is to provide long-term growth of capital.

Effective March 17, 2014, the Fund’s performance benchmarks changed from the S&P 500^® Index and the Wilshire 5000 Modified Energy Equal Weighted Index, to solely the MSCI World Small and Mid-Cap Energy Index. The investment advisor believes that this change in the performance benchmark more accurately reflects the investment strategy of the Fund.

Portfolio Management Commentary

How did the Fund perform?

For the six-month period ended March 31, 2014, all classes outperformed the MSCI World Small and Mid-Cap Energy Index but underperformed its former benchmarks, the S&P 500^® Index and the Wilshire 5000 Modified Energy Equal Weighted Index. The following discussion of relative performance pertains to the MSCI World Small and Mid-Cap Energy Index.

What factors influenced performance?

Relative to the benchmark index, the Fund’s overweight in Cairn Energy PLC, a global oil & gas exploration & production company, detracted from performance as the company came under scrutiny from the Indian tax authority due to a matter relating to the initial public offering of their Indian subsidiary, Cairn India, in 2006. India’s tax authority cited retrospective legislation introduced in 2012 regarding the taxation of indirect transfers of Indian assets as the reason for the investigation. The Fund’s performance was also hurt by exposure to U.S. onshore exploration & production stocks that declined as investors took profits on these names following a period of their strong performance. In particular, holdings in Rosetta Resources, Inc., Gulfport Energy Corp. and Trilogy Energy Corp. detracted from returns.

Conversely, a position in Helmerich & Payne, Inc. a U.S. oil services company, contributed positively to performance. The company has benefited from the development of unconventional resources driving increased demand for onshore drilling rigs in the U.S. The Fund’s position in Clayton Williams Energy, Inc., a U.S.-based exploration & production company, buoyed performance after the firm posted strong third-quarter results and a positive operational update.

Describe recent portfolio activity.

During the six-month period, the Fund continued reducing positions in companies with coal exposure. Within the exploration & production space, the Fund initiated positions in Cimarex Energy Co. and RSP Permian, Inc., two North American companies. In the integrated space, the Fund initiated a position in Murphy Oil Corp.

Describe portfolio positioning at period end.

As of period end, the Fund was invested mostly in oil & gas exploration & production companies while maintaining underweight exposures in the oil services and refining & marketing segments. The investment advisor maintains caution on oil services given ongoing rhetoric from integrated oil & gas companies regarding their capital expenditure discipline.

Portfolio Information


Ten Largest Holdings	Percent of Long-Term Investments
Cimarex Energy Co.		5	%
CONSOL Energy, Inc.		5
Helmerich & Payne, Inc.		4
Southwestern Energy Co.		4
EOG Resources, Inc.		4
Superior Energy Services, Inc.		4
AltaGas Ltd.		4
Cameron International Corp.		3
Pioneer Natural Resources Co.		3
Foster Wheeler AG		3


Industry Allocation	Percent of Long-Term Investments
Oil, Gas & Consumable Fuels		79	%
Energy Equipment & Services		15
Construction & Engineering		6


8		BLACKROCK FUNDS		MARCH 31, 2014


			BlackRock Energy & Resources Portfolio


Total Return Based on a $10,000 Investment

² Under normal conditions, the Fund invests at least 80% of its total assets in equity securities of global energy and natural resources companies and companies in associated businesses, as well as utilities (such as gas, water, cable, electrical and telecommunications utilities).

⁴

The Wilshire 5000 Modified Energy Equal Weighted Index is a customized index comprised of the energy sector constituents of the Wilshire 5000 (Full Cap) Index, which have been equally weighted and the six largest securities and all securities that have a percentage market value below 0.01% have been removed.

⁵

An index comprised of the energy sector constituents of the MSCI World SMID Index, a free float-adjusted market capitalization weighted index designed to measure the equity market performance of the mid and small cap developed market Effective March 17, 2014, the Fund now uses this index as its benchmark rather than the S&P 500 Index^® and the Wilshire 5000 Modified Energy Equal Weighted Index because management believes that this benchmark better represents the sector exposures of the Fund and is a more appropriate basis for evaluating performance.

Performance Summary for the Period Ended March 31, 2014


				Average Annual Total Returns⁶
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		6.00	%		14.98	%		N/A			16.57	%		N/A			11.02	%		N/A
Investor A		5.86			14.67			8.65	%		16.17			14.93	%		10.68			10.08	%
Investor B		5.45			13.81			9.31			15.29			15.06			10.03			10.03
Investor C		5.46			13.79			12.79			15.31			15.31			9.88			9.88
S&P 500^® Index		12.51			21.86			N/A			21.16			N/A			7.42			N/A
Wilshire 5000 Modified Energy Equal Weighted Index		17.59			25.57			N/A			28.11			N/A			15.83			N/A
MSCI World Small and Mid-Cap Energy Index		4.97			10.38			N/A			20.48			N/A			12.56			N/A

⁶

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

Past performance is not indicative of future results.

Expense Example


	Actual			Hypothetical⁸
	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁷	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁷	Annualized Expense Ratio
Institutional	$1,000.00	$1,060.00	$5.50	$1,000.00	$1,019.60	$5.39	1.07%
Investor A	$1,000.00	$1,058.60	$6.83	$1,000.00	$1,018.30	$6.69	1.33%
Investor B	$1,000.00	$1,054.50	$10.76	$1,000.00	$1,014.46	$10.55	2.10%
Investor C	$1,000.00	$1,054.60	$10.76	$1,000.00	$1,014.46	$10.55	2.10%

⁷

⁸

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 11 for further information on how expenses were calculated.


		BLACKROCK FUNDS		MARCH 31, 2014		9


About Fund Performance

Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

Investor A Shares are subject to a maximum initial sales charge (front-end load) of 5.25% and a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase.

Investor B Shares are subject to a maximum CDSC of 4.50% declining to 0% after six years. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares automatically convert to Investor A Shares after approximately eight years. (There is no initial sales charge for automatic share conversions.) All returns for periods greater than eight years reflect this conversion. These shares are only available through exchanges and dividend reinvestments by existing shareholders and for purchase by certain employer-sponsored retirement plans.

Investor C Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the

performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the ex-dividend/payable dates. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

Performance for the BlackRock Energy & Resources Portfolio for the periods prior to January 28, 2005 is based on performance of a certain former State Street Research mutual fund that reorganized with BlackRock Energy & Resources Portfolio on that date.

BlackRock Advisors, LLC (the “Manager”), the Funds’ investment advisor, waived and/or reimbursed a portion of each Fund’s expenses. Without such waiver and/or reimbursement, each Fund’s performance would have been lower. The Manager is under no obligation to waive or reimburse or to continue waiving or reimbursing its fees after the applicable termination date. See Note 5 of the Notes to Financial Statements for additional information on waivers and reimbursements.


10		BLACKROCK FUNDS		MARCH 31, 2014


Disclosure of Expenses

Shareholders of the Funds may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other Fund expenses. The expense examples on the previous pages (which are based on a hypothetical investment of $1,000 invested on October 1, 2013 and held through March 31, 2014) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

Derivative Financial Instruments

The Funds may invest in various derivative financial instruments, including forward foreign currency exchange contracts, as specified in Note 4 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market and/or foreign currency exchange rate risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. The Funds’ ability to use a derivative financial instrument

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


		BLACKROCK FUNDS		MARCH 31, 2014		11


Schedule of Investments March 31, 2014 (Unaudited)			BlackRock All-Cap Energy & Resources Portfolio
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Energy Equipment & Services — 9.0%
Cameron International Corp. (a)		57,688	$	3,563,388
Halliburton Co.		84,600		4,982,094
Schlumberger Ltd.		103,941		10,134,247

				18,679,729
Oil, Gas & Consumable Fuels — 89.0%
Anadarko Petroleum Corp.		112,500		9,535,500
BG Group PLC		338,900		6,326,988
BP PLC		1,251,235		10,053,675
Cairn Energy PLC (a)		509,200		1,417,997
Canadian Oil Sands Ltd.		81,704		1,713,899
Caracal Energy, Inc. (a)		282,000		1,631,362
Chevron Corp.		178,598		21,237,089
Cimarex Energy Co.		46,000		5,479,060
ConocoPhillips		189,700		13,345,395
CONSOL Energy, Inc.		62,530		2,498,073
Devon Energy Corp.		44,000		2,944,920
Enbridge, Inc.		62,500		2,838,648
EOG Resources, Inc.		40,770		7,997,851
Exxon Mobil Corp.		205,700		20,092,776
Imperial Oil Ltd.		54,000		2,514,627
Kosmos Energy Ltd. (a)		225,314		2,478,454
Murphy Oil Corp.		33,500		2,105,810
Noble Energy, Inc.		125,400		8,908,416
Oil Search Ltd.		616,287		4,837,476


Common Stocks	Shares		Value
Oil, Gas & Consumable Fuels (concluded)
Phillips 66		55,200	$	4,253,712
Pioneer Natural Resources Co.		11,100		2,077,254
Range Resources Corp.		59,700		4,953,309
Royal Dutch Shell PLC — ADR		258,300		18,871,398
Southwestern Energy Co. (a)		142,900		6,574,829
Statoil ASA		242,612		6,845,230
Total SA		95,000		6,253,369
TransCanada Corp.		138,900		6,313,636

				184,100,753
Total Long-Term Investments (Cost — $165,453,327) — 98.0%				202,780,482

Short-Term Securities
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (b)(c)		4,560,360		4,560,360
Total Short-Term Securities (Cost — $4,560,360) — 2.2%				4,560,360
Total Investments (Cost — $170,013,687) — 100.2%				207,340,842
Liabilities in Excess of Other Assets — (0.2)%				(385,245	)

Net Assets — 100.0%			$	206,955,597

Notes to Schedule of Investments

(a)	Non-income producing security.

(b)	Investments in issuers considered to be an affiliate of the Fund during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares/Beneficial Interest Held at September 30, 2013		Net Activity			Shares/Beneficial Interest Held at March 31, 2014		Income
BlackRock Liquidity Funds, TempFund, Institutional Class		6,884,032		(2,323,672	)		4,560,360	$	1,094
BlackRock Liquidity Series, LLC, Money Market Series	$	4,708,251	$	(4,708,251	)		—	$	945


Portfolio Abbreviations
ADR American Depositary Receipts	MXN Mexican Peso	PLN Polish Zloty
CLP Chilean Peso	NVDR Non-Voting Depository Receipts	USD U.S. Dollar
GDR Global Depositary Receipts

See Notes to Financial Statements.


12		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (concluded)			BlackRock All-Cap Energy & Resources Portfolio

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

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

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

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

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

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments, please refer to Note 2 of the Notes to Financial Statements.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of March 31, 2014:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Energy Equipment & Services	$	18,679,729		—		—	$	18,679,729
Oil, Gas & Consumable Fuels		148,366,018	$	35,734,735		—		184,100,753
Short-Term Securities		4,560,360		—		—		4,560,360
Total	$	171,606,107	$	35,734,735		—	$	207,340,842

The carrying amount for certain of the Fund’s assets approximates fair value for financial statement purposes. As of March 31, 2014, foreign currency at value of $223,722 is categorized as Level 1 within the disclosure hierarchy.

There were no transfers between levels during the six months ended March 31, 2014.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		13


Schedule of Investments March 31, 2014 (Unaudited)			BlackRock Emerging Markets Dividend Fund
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Brazil — 14.0%
Ambev SA — ADR (a)		9,441	$	69,958
BB Seguridade Participacoes SA		8,732		95,863
CCR SA		19,410		147,906
EDP — Energias do Brasil SA		4,894		21,979
Itau Unibanco Holding SA — ADR		9,579		142,344
Mahle-Metal Leve SA Industria e Comercio		3,841		40,374
Marcopolo SA, Preference		10,361		20,777
Vale SA — ADR		5,252		72,635
Vale SA, Preference — ADR		3,532		43,973

				655,809
Cambodia — 0.9%
NagaCorp Ltd.		42,000		43,847
Chile — 1.6%
Banco de Chile — ADR		669		50,362
Cia Cervecerias Unidas SA — ADR		1,173		26,252

				76,614
China — 14.8%
Bank of China Ltd., H Shares		55,000		24,435
Beijing Capital International Airport Co. Ltd., H Shares		66,000		45,429
China Hongqiao Group Ltd.		134,000		84,793
China Merchants Holdings International Co. Ltd.		30,000		103,436
China Petroleum & Chemical Corp., H Shares		149,000		133,275
Great Wall Motor Co. Ltd., H Shares		4,500		22,670
Hengan International Group Co. Ltd.		6,500		67,480
Jiangsu Expressway Co. Ltd., H Shares		66,000		75,242
Sands China Ltd.		8,400		62,999
Want Want China Holdings Ltd.		33,000		49,372
Yashili International Holdings Ltd.		51,000		23,057

				692,188
Cyprus — 0.7%
Globaltrans Investment PLC — GDR		2,905		33,524
Czech Republic — 1.0%
Komercni Banka AS		201		48,030
India — 2.1%
Infosys Ltd. — ADR		1,279		69,296
Tata Motors Ltd. — ADR		761		26,947

				96,243
Indonesia — 2.6%
Bank Central Asia Tbk PT		62,801		58,983
Media Nusantara Citra Tbk PT		159,500		37,281
Semen Indonesia Persero Tbk PT		16,728		23,515

				119,779
Ireland — 1.1%
Dragon Oil PLC		5,396		50,961
Kazakhstan — 0.4%
Kcell JSC — GDR		1,523		20,865
Malaysia — 1.6%
DiGi.Com Bhd		45,600		75,330
Mexico — 10.0%
Bolsa Mexicana de Valores SAB de CV		23,508		46,420
Fibra Uno Administracion SA de CV		13,858		44,836


Common Stocks	Shares		Value
Mexico (concluded)
Fomento Economico Mexicano SAB de CV — ADR		343	$	31,981
Grupo Aeroportuario del Pacifico SAB de CV, Class B		12,853		75,254
Grupo Aeroportuario del Sureste SAB de CV — ADR		397		48,688
Grupo Financiero Santander Mexico SAB de CV, Class B — ADR		3,534		43,433
Kimberly-Clark de Mexico SAB de CV, Class A		43,786		116,881
Mexico Real Estate Management SA de CV		31,780		59,931

				467,424
Peru — 1.6%
Credicorp Ltd.		558		76,959
Philippines — 4.9%
Alliance Global Group, Inc.		64,100		40,834
Philippine Long Distance Telephone Co.		375		22,828
Philippine Long Distance Telephone Co. — ADR		1,892		115,450
Robinsons Land Corp.		101,700		49,803

				228,915
Poland — 3.3%
Powszechny Zaklad Ubezpieczen SA		1,084		154,038
Portugal — 0.9%
Jeronimo Martins SGPS SA		2,519		42,271
Russia — 5.1%
Lukoil OAO — ADR		3,073		171,858
MMC Norilsk Nickel OJSC — ADR		2,644		44,287
Mobile Telesystems OJSC — ADR		1,336		23,367

				239,512
South Africa — 7.0%
FirstRand Ltd.		20,073		68,825
Life Healthcare Group Holdings Ltd.		13,360		48,815
Mr. Price Group Ltd.		4,313		64,463
Sanlam Ltd.		16,685		91,141
Sasol Ltd.		1,018		56,932

				330,176
South Korea — 4.0%
Grand Korea Leisure Co. Ltd.		1,520		62,657
Hyundai Motor Co., Preference		495		63,314
SK Telecom Co. Ltd.		184		37,341
SK Telecom Co. Ltd. — ADR		1,034		23,337

				186,649
Taiwan — 11.3%
Cleanaway Co. Ltd.		5,000		30,567
Delta Electronics, Inc.		11,000		68,126
Far EasTone Telecommunications Co. Ltd.		43,000		91,022
Mega Financial Holding Co. Ltd.		30,299		23,514
Quanta Computer, Inc.		12,000		32,354
Taiwan Cement Corp.		46,000		71,148
Taiwan Semiconductor Manufacturing Co. Ltd.		4,000		15,738
Taiwan Semiconductor Manufacturing Co. Ltd. — ADR		8,791		175,996
Tripod Technology Corp.		12,000		23,665

				532,130

See Notes to Financial Statements.


14		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (continued)			BlackRock Emerging Markets Dividend Fund
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Thailand — 5.1%
Advanced Info Service PCL — NVDR		6,600	$	46,094
Bangkok Expressway PCL — NVDR		20,500		20,885
BEC World PCL — NVDR		44,900		75,577
Kasikornbank PCL — NVDR		14,400		79,244
Siam City Cement PCL — NVDR		1,600		17,107

				238,907
Turkey — 2.2%
BIM Birlesik Magazalar AS		2,453		55,255
Turk Traktor ve Ziraat Makineleri AS		914		23,492
Turkiye Halk Bankasi AS		4,228		26,187

				104,934
Total Common Stocks — 96.2%				4,515,105

Participation Notes (a)
Qatar — 1.3%
Deutsche Bank AG (Qatar Electricity & Water Co.), due 4/14/17		1,277		60,321


Participation Notes (a)	Shares		Value
South Korea — 1.0%
Deutsche Bank AG (Hyundai Motor & Finance Co.), due 8/15/23		1,630	$	47,011
Total Participation Notes — 2.3%				107,332
Total Long-Term Investments (Cost — $4,504,594) — 98.5%				4,622,437

Short-Term Securities
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (b)(c)		68,894		68,894
Total Short-Term Securities (Cost — $68,894) — 1.4%				68,894
Total Investments (Cost — $4,573,488) — 99.9%				4,691,331
Other Assets Less Liabilities — 0.1%				2,890

Net Assets — 100.0%			$	4,694,221

Notes to Schedule of Investments

(a)	Non-income producing security.

(b)	Investments in issuers considered to be an affiliate of the Fund during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate

Shares Held at
September 30, 2013

Net

Activity

Shares Held at
March 31, 2014

Income

BlackRock Liquidity Funds, TempFund, Institutional Class

68,511

383

68,894

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

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows:


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
MXN	1,126,742		USD	84,649	JPMorgan Chase Bank N.A.		4/29/14	$	1,462
MXN	1,167,170		USD	87,738	JPMorgan Chase Bank N.A.		4/29/14		1,463
PLN	269,760		USD	87,246	Citibank N.A.		4/29/14		1,800
PLN	196,240		USD	64,455	Deutsche Bank AG		4/29/14		322
USD	170,548		MXN	2,293,912	Citibank N.A.		4/29/14		(4,765	)
USD	148,801		PLN	466,000	Morgan Stanley & Co. International PLC		4/29/14		(5,022	)
USD	43,250		CLP	24,267,577	Citibank N.A.		5/28/14		(734	)
USD	853		CLP	478,641	Citibank N.A.		5/28/14		(14	)
Total								$	(5,488	)

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

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

Level 2 — other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		15


Schedule of Investments (continued)			BlackRock Emerging Markets Dividend Fund

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)

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of March 31, 2014:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Brazil	$	655,809		—		—	$	655,809
Cambodia		—	$	43,847		—		43,847
Chile		76,614		—		—		76,614
China		—		692,188		—		692,188
Cyprus		33,524		—		—		33,524
Czech Republic		—		48,030		—		48,030
India		96,243		—		—		96,243
Indonesia		—		119,779		—		119,779
Ireland		—		50,961		—		50,961
Kazakhstan		20,865		—		—		20,865
Malaysia		—		75,330		—		75,330
Mexico		467,424		—		—		467,424
Peru		76,959		—		—		76,959
Philippines		115,450		113,465		—		228,915
Poland		—		154,038		—		154,038
Portugal		—		42,271		—		42,271
Russia		239,512		—		—		239,512
South Africa		—		330,176		—		330,176
South Korea		23,337		163,312		—		186,649
Taiwan		175,996		356,134		—		532,130
Thailand		—		238,907		—		238,907
Turkey		—		104,934	��	—		104,934
Participation Notes:
Qatar		—		60,321		—		60,321
South Korea		—		47,011		—		47,011
Short-Term Securities		68,894		—		—		68,894
Total	$	2,050,627	$	2,640,704		—	$	4,691,331

See Notes to Financial Statements.


16		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (concluded)			BlackRock Emerging Markets Dividend Fund


	Level 1		Level 2			Level 3		Total
Derivative Financial Instruments¹
Assets:
Foreign currency exchange contracts		—	$	5,047			—	$	5,047
Liabilities:
Foreign currency exchange contracts		—		(10,535	)		—		(10,535	)
Total		—	$	(5,488	)		—	$	(5,488	)

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

The carrying amount for certain of the Fund’s assets approximates fair value for financial statement purposes. As of March 31, 2014, such assets are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Cash	$	14,000		—			—	$	14,000
Foreign currency at value		3,860		—			—		3,860
Total	$	17,860		—			—	$	17,860

There were no transfers between levels during the six months ended March 31, 2014.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		17


Schedule of Investments March 31, 2014 (Unaudited)			BlackRock Energy & Resources Portfolio
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Commercial Services & Supplies — 0.0%
Republic Resources, Inc. (Acquired 7/18/97 to 2/24/99, cost $779,869) (a)(b)		28,750		—
Construction & Engineering — 5.8%
Foster Wheeler AG (b)		600,000	$	19,452,000
KBR, Inc.		544,000		14,513,920

				33,965,920
Energy Equipment & Services — 11.7%
Cameron International Corp. (b)		330,000		20,384,100
Helmerich & Payne, Inc.		240,000		25,814,400
Poseidon Concepts Corp. (b)		35,081		18
Superior Energy Services, Inc.		738,257		22,708,785

				68,907,303
Machinery — 0.0%
Railpower Technologies Corp. (Acquired 4/26/04 to 6/17/04, cost $1,010,377) (a)(b)		360,600		—
Oil, Gas & Consumable Fuels — 82.1%
AltaGas Ltd.		506,500		20,754,817
Arch Coal, Inc.		1,384,800		6,674,736
Bellatrix Exploration Ltd. (b)		862,632		7,295,892
Cabot Oil & Gas Corp.		429,400		14,548,072
Cairn Energy PLC (b)		3,247,000		9,042,096
Canadian Oil Sands Ltd.		900,000		18,879,240
Caracal Energy, Inc. (b)		1,173,200		6,786,930
Carrizo Oil & Gas, Inc. (b)		301,500		16,118,190
Cimarex Energy Co.		235,010		27,992,041
CONSOL Energy, Inc.		689,200		27,533,540
Crocotta Energy, Inc. (b)		2,268,300		6,955,710
Denbury Resources, Inc.		887,338		14,552,343
EnQuest PLC (b)		5,414,000		11,199,018
EOG Resources, Inc.		118,400		23,226,528
EQT Corp.		171,744		16,654,016
Gulfport Energy Corp. (b)		126,135		8,978,289
Ithaca Energy, Inc. (b)		5,071,000		12,614,428
Kosmos Energy Ltd. (b)		1,761,588		19,377,468
Longview Energy Co. (Acquired 8/13/04, cost $1,281,000) (a)(b)		85,400		727,608
Murphy Oil Corp.		190,000		11,943,400
Noble Energy, Inc.		272,000		19,322,880


Common Stocks	Shares		Value
Oil, Gas & Consumable Fuels (concluded)
Oil Search Ltd.		2,400,000	$	18,838,531
Painted Pony Petroleum Ltd. (b)		1,970,000		15,931,072
PDC Energy, Inc. (b)		203,800		12,688,588
Pioneer Natural Resources Co.		108,337		20,274,186
Range Resources Corp.		187,640		15,568,491
Rex Energy Corp. (b)		379,600		7,102,316
Rosetta Resources, Inc. (b)		373,400		17,392,972
RSP Permian, Inc. (b)		317,842		9,182,455
SM Energy Co.		210,000		14,970,900
Southwestern Energy Co. (b)		507,500		23,350,075
Stone Energy Corp. (b)		375,538		15,761,330
Tourmaline Oil Corp. (b)		154,420		7,299,855
TransGlobe Energy Corp. (b)		690,000		5,261,601

				484,799,614
Total Common Stocks — 99.6%				587,672,837

Warrants (c)
Oil, Gas & Consumable Fuels — 0.0%
Magnum Hunter Resources Corp. (Issued/Exercisable 10/15/13, 1 Share for 1 Warrant, Expires 4/15/16, Strike Price USD 8.50)		235,700		2
Total Warrants — 0.0%				2
Total Long-Term Investments (Cost — $451,474,985) — 99.6%				587,672,839

Short-Term Securities
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (d)(e)		4,401,608		4,401,608
Total Short-Term Securities (Cost — $4,401,608) — 0.7%				4,401,608
Total Investments (Cost — $455,876,593) — 100.3%				592,074,447
Liabilities in Excess of Other Assets — (0.3)%				(1,863,820	)

Net Assets — 100.0%			$	590,210,627

Notes to Schedule of Investments

(a)	Restricted security as to resale. As of report date, the Fund held restricted securities with a current value of $727,608 and an original cost of $3,071,246, which was 0.2% of its net assets.

(b)	Non-income producing security.

(c)	Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date of the warrants, if any.

(d)	Investments in issuers considered to be an affiliate of the Fund during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate

Shares Held at
September 30, 2013

Net

Activity

Shares Held at
March 31, 2014

Income

BlackRock Liquidity Funds, TempFund, Institutional Class

14,345,070

(9,943,462

)

4,401,608

5,428


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

See Notes to Financial Statements.


18		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (concluded)			BlackRock Energy & Resources Portfolio

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

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of March 31, 2014:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Construction & Engineering	$	33,965,920		—		—	$	33,965,920
Energy Equipment & Services		68,907,303		—		—		68,907,303
Oil, Gas & Consumable Fuels		444,992,361	$	39,079,645	$	727,608		484,799,614
Warrants		2		—		—		2
Short-Term Securities		4,401,608		—		—		4,401,608
Total	$	552,267,194	$	39,079,645	$	727,608	$	592,074,447

There were no transfers between levels during the six months ended March 31, 2014.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		19


Statements of Assets and Liabilities


March 31, 2014 (Unaudited)	BlackRock All-Cap Energy & Resources Portfolio			BlackRock Emerging Markets Dividend Fund			BlackRock Energy & Resources Portfolio

Assets
Investments at value — unaffiliated¹	$	202,780,482		$	4,622,437		$	587,672,839
Investments at value — affiliated²		4,560,360			68,894			4,401,608
Cash		—			14,000			—
Foreign currency at value³		223,722			3,860			—
Investments sold receivable		—			44,462			—
Unrealized appreciation on forward foreign currency exchange contracts		—			5,047			—
Capital shares sold receivable		132,426			31			367,640
Dividends receivable — unaffiliated		111,461			15,977			147,302
Dividends receivable — affiliated		96			4			262
Receivable from Manager		1,846			20,885			585
Prepaid expenses		45,110			31,516			39,244

Total assets		207,855,503			4,827,113			592,629,480


Liabilities
Investments purchased payable		—			92,822			—
Unrealized depreciation on forward foreign currency exchange contracts		—			10,535			—
Capital shares redeemed payable		431,914			—			1,268,033
Transfer agent fees payable		156,254			897			390,242
Investment advisory fees payable		130,731			—			382,398
Service and distribution fees payable		81,981			654			169,082
Professional fees payable		29,242			17,687			35,772
Other affiliates payable		22,285			—			73,888
Officer’s and Trustees’ fees payable		2,595			396			5,434
Other accrued expenses payable		44,904			9,901			94,004

Total liabilities		899,906			132,892			2,418,853

Net Assets	$	206,955,597		$	4,694,221		$	590,210,627


Net Assets Consist of
Paid-in capital	$	229,614,429		$	5,183,319		$	562,395,431
Undistributed (distributions in excess of) net investment income (loss)		(27,557	)		1,975			(10,605,199	)
Accumulated net realized loss		(59,958,781	)		(603,427	)		(97,779,143	)
Net unrealized appreciation/depreciation		37,327,506			112,354			136,199,538

Net Assets	$	206,955,597		$	4,694,221		$	590,210,627

¹ Investments at cost — unaffiliated	$	165,453,327		$	4,504,594		$	451,474,985
² Investments at cost — affiliated	$	4,560,360		$	68,894		$	4,401,608
³ Foreign currency at cost	$	223,674		$	3,853			—

See Notes to Financial Statements.


20		BLACKROCK FUNDS		MARCH 31, 2014


Statements of Assets and Liabilities (concluded)


March 31, 2014 (Unaudited)	BlackRock All-Cap Energy & Resources Portfolio		BlackRock Emerging Markets Dividend Fund		BlackRock Energy & Resources Portfolio

Net Asset Value
Institutional
Net assets	$	34,919,506	$	2,684,370	$	93,194,472

Shares outstanding¹		2,194,031		309,629		2,353,233

Net asset value	$	15.92	$	8.67	$	39.60

Service
Net assets	$	1,938,373		—		—

Shares outstanding¹		125,016		—		—

Net asset value	$	15.50		—		—

Investor A
Net assets	$	98,658,582	$	1,597,099	$	397,746,024

Shares outstanding¹		6,374,413		184,972		11,588,182

Net asset value	$	15.48	$	8.63	$	34.32

Investor B
Net assets	$	6,292,918		—	$	3,859,734

Shares outstanding¹		428,646		—		154,586

Net asset value	$	14.68		—	$	24.97

Investor C
Net assets	$	65,146,218	$	412,752	$	95,410,397

Shares outstanding¹		4,428,420		48,089		3,854,879

Net asset value	$	14.71	$	8.58	$	24.75

Unlimited shares authorized, $ 0.001 par value.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		21


Statements of Operations


Six Months Ended March 31, 2014 (Unaudited)	BlackRock All-Cap Energy & Resources Portfolio			BlackRock Emerging Markets Dividend Fund			BlackRock Energy & Resources Portfolio

Investment Income
Dividends — unaffiliated	$	2,181,959		$	56,411		$	1,216,475
Dividends — affiliated		1,094			34			5,428
Foreign taxes withheld		(134,759	)		(6,030	)		(55,564	)
Other income — affiliated		26,012			894			982
Securities lending — affiliated — net		945			—			—

Total income		2,075,251			51,309			1,167,321


Expenses
Investment advisory		798,388			22,491			2,258,842
Service and distribution — class specific		503,916			3,433			1,021,707
Transfer agent — class specific		197,605			1,825			584,730
Administration		79,839			1,687			220,698
Registration		34,344			20,258			30,806
Professional		32,796			56,203			36,610
Administration — class specific		26,659			562			75,383
Printing		10,728			13,206			24,643
Custodian		6,906			5,041			17,797
Officer and Trustees		4,756			1,449			10,680
Miscellaneous		14,171			15,825			17,969
Recoupment of past waived fees — class specific		45			—			10,446

Total expenses		1,710,153			141,980			4,310,311
Less fees waived by Manager		(1,776	)		(22,491	)		(8,840	)
Less administration fees waived		—			(1,687	)		—
Less administration fees waived — class specific		(22,266	)		(562	)		(8,073	)
Less transfer agent fees waived — class specific		(4,454	)		(148	)		(1,558	)
Less transfer agent fees reimbursed — class specific		(16,580	)		(1,624	)		(6,894	)
Less expenses reimbursed by Manager		—			(77,951	)		—

Total expenses after fees waived and/or reimbursed		1,665,077			37,517			4,284,946

Net investment income (loss)		410,174			13,792			(3,117,625	)


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		39,737,357			(56,240	)		101,674,592
Foreign currency transactions		(68,127	)		710			24,087

		39,669,230			(55,530	)		101,698,679

Net change in unrealized appreciation/depreciation on:
Investments		(30,657,031	)		6,630			(65,330,177	)
Foreign currency translations		273			(5,635	)		1,533

		(30,656,758	)		995			(65,328,644	)

Total realized and unrealized gain (loss)		9,012,472			(54,535	)		36,370,035

Net Increase (Decrease) in Net Assets Resulting from Operations	$	9,422,646		$	(40,743	)	$	33,252,410

See Notes to Financial Statements.


22		BLACKROCK FUNDS		MARCH 31, 2014


Statements of Changes in Net Assets


	BlackRock All-Cap Energy & Resources Portfolio						BlackRock Emerging Markets Dividend Fund						BlackRock Energy & Resources Portfolio
Increase (Decrease) in Net Assets:	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30, 2013			Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30, 2013			Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30, 2013

Operations
Net investment income (loss)	$	410,174		$	240,598		$	13,792		$	70,383		$	(3,117,625	)	$	(3,281,433	)
Net realized gain (loss)		39,669,230			43,388,887			(55,530	)		(367,588	)		101,698,679			(122,591,564	)
Net change in unrealized appreciation/depreciation		(30,656,758	)		(17,065,324	)		995			663,985			(65,328,644	)		208,114,198

Net increase (decrease) in net assets resulting from operations		9,422,646			26,564,161			(40,743	)		366,780			33,252,410			82,241,201


Dividends and Distributions to Shareholders From
Net investment income:
Institutional		(243,720	)		(50,085	)¹		(62,421	)		(35,294	)¹		—			—
Service		(7,889	)		—			—			—			—			—
Investor A		(428,293	)		—			(32,128	)		(5,061	)¹		—			—
Investor C		—			—			(5,451	)		(126	)¹		—			—
Return of capital:
Institutional		—			—			—			—			—			(195,831	)¹
Investor A		—			—			—			—			—			(591,849	)¹
Investor B		—			—			—			—			—			(10,822	)¹
Investor C		—			—			—			—			—			(201,151	)¹

Decrease in net assets resulting from dividends and distributions to shareholders		(679,902	)		(50,085	)		(100,000	)		(40,481	)		—			(999,653	)


Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(23,095,487	)		(320,389,090	)		576,674			1,188,900			(81,909,914	)		(343,987,639	)


Net Assets
Total increase (decrease) in net assets		(14,352,743	)		(293,875,014	)		435,931			1,515,199			(48,657,504	)		(262,746,091	)
Beginning of period		221,308,340			515,183,354			4,258,290			2,743,091			638,868,131			901,614,222

End of period	$	206,955,597		$	221,308,340		$	4,694,221		$	4,258,290		$	590,210,627		$	638,868,131

Undistributed (distributions in excess of) net investment income (loss), end of period	$	(27,557	)	$	242,171		$	1,975		$	88,183		$	(10,605,199	)	$	(7,487,574	)

Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		23


Financial Highlights			BlackRock All-Cap Energy & Resources Portfolio


	Institutional																		Service
	Six Months Ended March 31,			Year Ended September 30,															Six Months Ended March 31,			Year Ended September 30,
	2014																		2014
	(Unaudited)			2013			2012			2011			2010			2009			(Unaudited)			2013			2012			2011			2010			2009

Per Share Operating Performance
Net asset value, beginning of period	$	15.28		$	13.51		$	12.14		$	13.76		$	12.46		$	16.20		$	14.87		$	13.20		$	11.90		$	13.49		$	12.24		$	16.01

Net investment income (loss)¹		0.08			0.06			0.05			0.01			0.02			0.02			0.04			0.02			0.00	²		(0.05	)		(0.03	)		(0.03	)
Net realized and unrealized gain (loss)		0.67			1.71			1.32			(1.51	)³		1.38	³		(2.14	)³		0.65			1.65			1.30			(1.47	)³		1.35	³		(2.12	)³

Net increase (decrease) from investment operations		0.75			1.77			1.37			(1.50	)		1.40			(2.12	)		0.69			1.67			1.30			(1.52	)		1.32			(2.15	)

Dividends and distributions from:
Net investment income		(0.11	)		(0.00	)^4,5		—			(0.12	)⁴		(0.10	)⁴		—			(0.06	)		—			—			(0.07	)⁴		(0.07	)⁴		—
Net realized gain		—			—			—			—			—			(1.62	)⁴		—			—			—			—			—			(1.62	)⁴

Total dividends and distributions		(0.11	)		—			—			(0.12	)		(0.10	)		(1.62	)		(0.06	)		—			—			(0.07	)		(0.07	)		(1.62	)

Net asset value, end of period	$	15.92		$	15.28		$	13.51		$	12.14		$	13.76		$	12.46		$	15.50		$	14.87		$	13.20		$	11.90		$	13.49		$	12.24


Total Investment Return⁶
Based on net asset value		4.92	%⁷		13.13	%		11.29	%		(11.10	)%⁸		11.32	%⁸		(7.53	)%⁸		4.63	%⁷		12.65	%		10.93	%		(11.36	)%⁸		10.79	%⁸		(7.85	)%⁸


Ratios to Average Net Assets
Total expenses		1.02	%⁹		0.98	%		0.95	%		0.93	%		0.94	%		0.98	%		1.38	%⁹		1.34	%		1.29	%		1.27	%		1.34	%		1.54	%

Total expenses excluding recoupment of past waived fees		1.02	%⁹		0.98	%		0.95	%		0.91	%		0.93	%		0.97	%		1.38	%⁹		1.34	%		1.29	%		1.24	%		1.27	%		1.47	%

Total expenses after fees waived and/or reimbursed and paid indirectly		0.96	%⁹		0.96	%		0.94	%		0.93	%		0.93	%		0.93	%		1.38	%⁹		1.33	%		1.29	%		1.26	%		1.34	%		1.35	%

Net investment income (loss)		0.99	%⁹		0.49	%		0.34	%		0.03	%		0.16	%		0.17	%		0.57	%⁹		0.17	%		0.00	%		(0.30	)%		(0.25	)%		(0.26	)%


Supplemental Data
Net assets, end of period (000)	$	34,920		$	35,726		$	272,779		$	400,269		$	420,071		$	328,434		$	1,938		$	2,298		$	3,828		$	4,816		$	4,231		$	3,426

Portfolio turnover		54	%		28	%		19	%		22	%		38	%		22	%		54	%		28	%		19	%		22	%		38	%		22	%

Based on average shares outstanding.

Amount is less than $0.005 per share.

Includes redemption fees, which are less than $0.005 per share.

⁴

Determined in accordance with federal income tax regulations.

⁵

Amount is greater than $(0.005) per share.

⁶

Where applicable, assumes the reinvestment of dividends and distributions.

⁷

Aggregate total investment return.

⁸

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁹

Annualized.

See Notes to Financial Statements.


24		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights (continued)			BlackRock All-Cap Energy & Resources Portfolio


	Investor A																		Investor B
	Six Months Ended March 31,			Year Ended September 30,															Six Months Ended March 31,			Year Ended September 30,
	2014																		2014
	(Unaudited)			2013			2012			2011			2010			2009			(Unaudited)			2013			2012			2011			2010			2009

Per Share Operating Performance
Net asset value, beginning of period	$	14.85		$	13.19		$	11.90		$	13.50		$	12.24		$	16.01		$	14.08		$	12.59		$	11.45		$	13.03		$	11.84		$	15.68

Net investment income (loss)¹		0.04			0.02			(0.01	)		(0.06	)		(0.03	)		(0.02	)		(0.01	)		(0.08	)		(0.11	)		(0.18	)		(0.13	)		(0.09	)
Net realized and unrealized gain (loss)		0.65			1.64			1.30			(1.47	)²		1.35	²		(2.13	)²		0.61			1.57			1.25			(1.40	)²		1.32	²		(2.13	)²

Net increase (decrease) from investment operations		0.69			1.66			1.29			(1.53	)		1.32			(2.15	)		0.60			1.49			1.14			(1.58	)		1.19			(2.22	)

Dividends and distributions from:
Net investment income		(0.06	)		—			—			(0.07	)³		(0.06	)³		—			—			—			—			—			—			—
Net realized gain		—			—			—			—			—			(1.62	)³		—			—			—			—			—			(1.62	)³

Total dividends and distributions		(0.06	)		—			—			(0.07	)		(0.06	)		(1.62	)		—			—			—			—			—			(1.62	)

Net asset value, end of period	$	15.48		$	14.85		$	13.19		$	11.90		$	13.50		$	12.24		$	14.68		$	14.08		$	12.59		$	11.45		$	13.03		$	11.84


Total Investment Return⁴
Based on net asset value		4.69	%⁵		12.59	%		10.84	%		(11.46	)%⁶		10.84	%⁶		(7.85	)%⁶		4.26	%⁵		11.84	%		9.96	%		(12.13	)%⁶		10.05	%⁶		(8.56	)%⁶


Ratios to Average Net Assets
Total expenses		1.40	%⁷		1.39	%		1.35	%		1.35	%		1.34	%		1.48	%		2.39	%⁷		2.28	%		2.20	%		2.11	%		2.17	%		2.35	%

Total expenses excluding recoupment of past waived fees		1.40	%⁷		1.37	%		1.35	%		1.28	%		1.32	%		1.45	%		2.39	%⁷		2.28	%		2.19	%		2.09	%		2.16	%		2.33	%

Total expenses after fees waived and/or reimbursed and paid indirectly		1.38	%⁷		1.37	%		1.34	%		1.34	%		1.34	%		1.34	%		2.10	%⁷		2.10	%		2.10	%		2.10	%		2.10	%		2.06	%

Net investment income (loss)		0.57	%⁷		0.12	%		(0.09	)%		(0.38	)%		(0.25	)%		(0.25	)%		(0.16	)%⁷		(0.60	)%		(0.83	)%		(1.15	)%		(1.03	)%		(0.95	)%


Supplemental Data
Net assets, end of period (000)	$	98,659		$	103,388		$	137,765		$	187,017		$	207,523		$	178,364		$	6,293		$	9,802		$	15,162		$	18,872		$	27,113		$	30,873

Portfolio turnover		54	%		28	%		19	%		22	%		38	%		22	%		54	%		28	%		19	%		22	%		38	%		22	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

Aggregate total investment return.

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		25


Financial Highlights (concluded)			BlackRock All-Cap Energy & Resources Portfolio


	Investor C
	Six Months Ended March 31, 2014			Year Ended September 30,
	(Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	14.10		$	12.62		$	11.47		$	13.04		$	11.85		$	15.69

Net investment loss¹		(0.01	)		(0.07	)		(0.10	)		(0.17	)		(0.13	)		(0.09	)
Net realized and unrealized gain (loss)		0.62			1.55			1.25			(1.40	)²		1.32	²		(2.13	)²

Net increase (decrease) from investment operations		0.61			1.48			1.15			(1.57	)		1.19			(2.22	)

Distributions from net realized gain		—			—			—			—			—			(1.62	)³

Net asset value, end of period	$	14.71		$	14.10		$	12.62		$	11.47		$	13.04		$	11.85


Total Investment Return⁴
Based on net asset value		4.33	%⁵		11.73	%		10.03	%		(12.04	)%⁶		10.04	%⁶		(8.54	)%⁶


Ratios to Average Net Assets
Total expenses		2.13	%⁷		2.12	%		2.08	%		2.05	%		2.08	%		2.23	%

Total expenses excluding recoupment of past waived fees		2.13	%⁷		2.12	%		2.08	%		2.03	%		2.08	%		2.21	%

Total expenses after fees waived and/or reimbursed and paid indirectly		2.10	%⁷		2.09	%		2.07	%		2.04	%		2.08	%		2.05	%

Net investment loss		(0.15	)%⁷		(0.59	)%		(0.79	)%		(1.08	)%		(1.00	)%		(0.95	)%


Supplemental Data
Net assets, end of period (000)	$	65,146		$	70,094		$	85,649		$	99,433		$	116,401		$	113,347

Portfolio turnover		54	%		28	%		19	%		22	%		38	%		22	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁷

Annualized.

See Notes to Financial Statements.


26		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights			BlackRock Emerging Markets Dividend Fund


	Institutional												Investor A												Investor C
	Six Months Ended March 31,			Year Ended						Period April 29, 2011¹ to			Six Months Ended March 31,			Year Ended						Period April 29, 2011¹ to			Six Months Ended March 31,			Year Ended						Period April 1 29, 2011¹ to
	2014			September 30,						September			2014			September 30,						September			2014			September 30,						September
	(Unaudited)			2013			2012			30, 2011			(Unaudited)			2013			2012			30, 2011			(Unaudited)			2013			2012			30, 2011
Per Share Operating Performance
Net asset value, beginning of period.	$	8.93		$	7.79		$	6.90		$	10.00		$	8.89		$	7.77		$	6.89		$	10.00		$	8.84		$	7.72		$	6.87		$	10.00

Net investment income²		0.03			0.15			0.12			0.13			0.02			0.21			0.18			0.09			(0.01	)		0.20			0.05			0.09
Net realized and unrealized gain (loss)		(0.09	)		1.11			0.89			(3.23	)		(0.09	)		1.02			0.82			(3.20	)		(0.10	)		0.95			0.90			(3.22	)

Net increase (decrease) from investment operations		(0.06	)		1.26			1.01			(3.10	)		(0.07	)		1.23			1.00			(3.11	)		(0.11	)		1.15			0.95			(3.13	)

Dividends from net investment income		(0.20	)		(0.12	)³		(0.12	)³		—			(0.19	)		(0.11	)³		(0.12	)³		—			(0.15	)		(0.03	)³		(0.10	)³		—

Net asset value, end of period	$	8.67		$	8.93		$	7.79		$	6.90		$	8.63		$	8.89		$	7.77		$	6.89		$	8.58		$	8.84		$	7.72		$	6.87


Total Investment Return⁴
Based on net asset value		(0.66	)%⁵		16.15	%⁶		14.82	%		(31.00	)%⁵		(0.84	)%⁵		15.82	%⁶		14.64	%		(31.10	)%⁵		(1.21	)%⁵		14.95	%⁶		13.95	%		(31.30	)%⁵


Ratios to Average Net Assets
Total expenses		6.10	%⁷		7.54	%		13.05	%		9.67	%^7,8		6.48	%⁷		8.33	%		14.41	%		12.18	%^7,8		7.36	%⁷		9.53	%		14.94	%		11.73	%^7,8

Total expenses after fees waived and/or reimbursed		1.52	%⁷		1.63	%		1.65	%		1.65	%⁷		1.76	%⁷		1.87	%		1.90	%		1.90	%⁷		2.52	%⁷		2.61	%		2.65	%		2.65	%⁷

Net investment income		0.74	%⁷		1.71	%		1.55	%		3.39	%⁷		0.54	%⁷		2.44	%		2.24	%		2.47	%⁷		(0.14	)%⁷		2.33	%		0.60	%		2.30	%⁷


Supplemental Data
Net assets, end of period (000)	$	2,684		$	2,736		$	2,355		$	2,049		$	1,597		$	1,308		$	360		$	51		$	413		$	214		$	28		$	19

Portfolio turnover		38	%		150	%		40	%		14	%		38	%		150	%		40	%		14	%		38	%		150	%		40	%		14	%

Commencement of operations.

Based on average shares outstanding.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes a payment from an affiliate related to securities lending which impacted the Fund’s total return. Not including this payment the Fund’s total return would have been 15.76%, 15.43% and 14.56% for the Institutional, Investor A and Investor C Shares, respectively.

⁷

Annualized.

⁸

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 13.81%, 18.86% and 16.54%, respectively.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		27


Financial Highlights			BlackRock Energy & Resources Portfolio


	Institutional																		Investor A
	Six Months Ended March 31,			Year Ended September 30,															Six Months Ended March 31,			Year Ended September 30,
	2014																		2014
	(Unaudited)			2013			2012			2011			2010			2009			(Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	37.36		$	32.87		$	31.70		$	34.98		$	32.61		$	51.31		$	32.42		$	28.62		$	27.73		$	30.63		$	28.67		$	47.29

Net investment income (loss)¹		(0.13	)		(0.04	)		(0.16	)		(0.08	)		0.05			(0.07	)		(0.16	)		(0.11	)		(0.24	)		(0.20	)		(0.12	)		(0.13	)
Net realized and unrealized gain (loss)		2.37			4.56			2.79			(2.68	)		2.31			(9.60	)		2.06			3.94			2.46			(2.34	)		2.08			(9.46	)

Net increase (decrease) from investment operations		2.24			4.52			2.63			(2.76	)		2.36			(9.67	)		1.90			3.83			2.22			(2.54	)		1.96			(9.59	)

Dividends and distributions from:
Net investment income		—			—			(0.25	)²		(0.52	)²		—			—			—			—			(0.17	)²		(0.36	)²		—			—
Return of capital		—			(0.03	)²		(0.47	)²		—			—			—			—			(0.03	)²		(0.42	)²		—			—			—
Net realized gain		—			—			(0.74	)²		—			—			(9.04	)²		—			—			(0.74	)²		—			—			(9.04	)²

Total dividends and distributions		—			(0.03	)		(1.46	)		(0.52	)		—			(9.04	)		—			(0.03	)		(1.33	)		(0.36	)		—			(9.04	)

Redemption fees added to paid-in capital		—			—			—			0.003			0.01			0.01			—			—			—			0.00	³		0.00	³		0.01

Net asset value, end of period	$	39.60		$	37.36		$	32.87		$	31.70		$	34.98		$	32.61		$	34.32		$	32.42		$	28.62		$	27.73		$	30.63		$	28.67


Total Investment Return⁴
Based on net asset value		6.00	%⁵		13.78	%		7.76	%		(8.28	)%		7.27	%^6,7		(7.64	)%^8,9		5.86	%⁵		13.42	%		7.41	%		(8.61	)%		6.84	%^10,11		(8.20	)%^7,12


Ratios to Average Net Assets
Total expenses		1.09	%¹³		1.04	%		0.99	%		0.93	%		0.97	%		1.00	%		1.34	%¹³		1.34	%		1.34	%		1.28	%		1.35	%		1.40	%

Total expenses excluding recoupment of past waived fees.		1.09	%¹³		1.03	%		0.99	%		0.93	%		0.97	%		0.98	%		1.34	%¹³		1.33	%		1.33	%		1.26	%		1.31	%		1.38	%

Total expenses after fees waived and/or reimbursed and paid indirectly		1.07	%¹³		1.03	%		0.99	%		0.92	%		0.97	%		0.99	%		1.33	%¹³		1.34	%		1.34	%		1.27	%		1.35	%		1.31	%

Net investment income (loss)		(0.68	)%¹³		(0.11	)%		(0.44	)%		(0.18	)%		0.13	%		(0.25	)%		(0.95	)%¹³		(0.38	)%		(0.77	)%		(0.52	)%		(0.39	)%		(0.55	)%


Supplemental Data
Net assets, end of period (000)	$	93,195		$	105,317		$	222,034		$	306,403		$	274,009		$	134,187		$	397,746		$	425,568		$	539,085		$	632,030		$	644,786		$	636,437

Portfolio turnover		41	%		33	%		15	%		40	%		16	%		25	%		41	%		33	%		15	%		40	%		16	%		25	%

Based on average shares outstanding.

Determined in accordance with federal income tax regulations.

Amount is less than $0.005 per share.

⁴

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 7.20%.

⁷

Redemption fee of 2.00% is reflected in total return calculations. The impact to the return from redemption fees received during the period was an increase of 0.03%.

⁸

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (7.66)%.

⁹

Redemption fee of 2.00% is reflected in total return calculations. The impact to the return from redemption fees received during the period was an increase of 0.02%.

¹⁰

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 6.77%.

¹¹

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

¹²

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (8.23)%.

¹³

Annualized.

See Notes to Financial Statements.


28		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights (concluded)			BlackRock Energy & Resources Portfolio


	Investor B																		Investor C
	Six Months Ended March 31, 2014			Year Ended September 30,															Six Months Ended March 31, 2014			Year Ended September 30,
	(Unaudited)			2013			2012			2011			2010			2009			(Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	23.68		$	21.07		$	20.65		$	22.86		$	21.56		$	39.68		$	23.47		$	20.88		$	20.55		$	22.81		$	21.51		$	39.61

Net investment loss¹		(0.20	)		(0.25	)		(0.36	)		(0.38	)		(0.27	)		(0.22	)		(0.20	)		(0.24	)		(0.34	)		(0.37	)		(0.24	)		(0.22	)
Net realized and unrealized gain (loss)		1.49			2.89			1.87			(1.73	)		1.57			(8.87	)		1.48			2.86			1.84			(1.69	)		1.54			(8.85	)

Net increase (decrease) from investment operations		1.29			2.64			1.51			(2.11	)		1.30			(9.09	)		1.28			2.62			1.50			(2.06	)		1.30			(9.07	)

Dividends and distributions from:
Net investment income		—			—			(0.06	)²		(0.10	)²		—			—			—			—			(0.09	)²		(0.20	)²		—			—
Return of capital		—			(0.03	)²		(0.29	)²		—			—			—			—			(0.03	)²		(0.34	)²		—			—			—
Net realized gain		—			—			(0.74	)²		—			—			(9.04	)²		—			—			(0.74	)²		—			—			(9.04	)²

Total dividends and distributions		—			(0.03	)		(1.09	)		(0.10	)		—			(9.04	)		—			(0.03	)		(1.17	)		(0.20	)		—			(9.04	)

Redemption fees added to paid-in capital		—			—			—			0.00	³		0.00	³		0.01			—			—			—			0.00	³		0.00	³		0.01

Net asset value, end of period	$	24.97		$	23.68		$	21.07		$	20.65		$	22.86		$	21.56		$	24.75		$	23.47		$	20.88		$	20.55		$	22.81		$	21.51


Total Investment Return⁴
Based on net asset value		5.45	%⁵		12.57	%		6.63	%		(9.33	)%		6.03	%^6,7		(8.74	)%^8,9		5.46	%⁵		12.59	%		6.57	%		(9.25	)%		6.04	%^7,10		(8.68	)%^9,11


Ratios to Average Net Assets
Total expenses		2.41	%¹²		2.31	%		2.16	%		2.07	%		2.10	%		2.25	%		2.11	%¹²		2.10	%		2.07	%		2.04	%		2.06	%		2.16	%

Total expenses excluding recoupment of past waived fees		2.41	%¹²		2.30	%		2.16	%		2.03	%		2.10	%		2.23	%		2.09	%¹²		2.10	%		2.07	%		1.99	%		2.05	%		2.16	%

Total expenses after fees waived and/or reimbursed and paid indirectly		2.10	%¹²		2.10	%		2.10	%		2.07	%		2.09	%		2.05	%		2.10	%¹²		2.09	%		2.07	%		2.03	%		2.05	%		2.05	%

Net investment loss		(1.71	)%¹²		(1.15	)%		(1.56	)%		(1.31	)%		(1.17	)%		(1.28	)%		(1.71	)%¹²		(1.12	)%		(1.50	)%		(1.29	)%		(1.07	)%		(1.29	)%


Supplemental Data
Net assets, end of period (000)	$	3,860		$	4,576		$	7,687		$	16,450		$	25,633		$	34,218		$	95,410		$	103,407		$	132,808		$	146,186		$	142,490		$	129,556

Portfolio turnover		41	%		33	%		15	%		40	%		16	%		25	%		41	%		33	%		15	%		40	%		16	%		25	%

Based on average shares outstanding.

Determined in accordance with federal income tax regulations.

Amount is less than $0.005 per share.

⁴

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 5.94%.

⁷

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁸

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (8.77)%.

⁹

Redemption fee of 2.00% is reflected in total return calculations. The impact to the return from redemption fees received during the period was an increase of 0.04%.

¹⁰

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 5.95%.

¹¹

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (8.71)%.

¹²

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		29


Notes to Financial Statements (Unaudited)

1. Organization:

BlackRock Funds^SM (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Massachusetts business trust. BlackRock All-Cap Energy & Resources Portfolio (“All-Cap Energy & Resources”), BlackRock Emerging Markets Dividend Fund (“Emerging Markets Dividend”) and BlackRock Energy & Resources Portfolio (“Energy & Resources”) (collectively, the “Funds” or individually, a “Fund”) are each a series of the Trust. The Funds are classified as non-diversified; however, Emerging Markets Dividend intends to operate as a diversified fund.

Each Fund offers multiple classes of shares. Institutional and Service Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with an initial sales charge, but may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase. Investor B and Investor C Shares may be subject to a CDSC. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Service, Investor A, Investor B and Investor C Shares bear certain expenses related to the shareholder servicing of such shares, and Investor B and Investor C Shares also bear certain expenses related to the distribution of such shares. Investor B Shares automatically convert to Investor A Shares after approximately eight years. Investor B Shares are only available through exchanges and dividend reinvestments by existing shareholders and for purchase by certain employer-sponsored retirement plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures (except that Investor B shareholders may vote on material changes to the Investor A distribution and service plan).

The Funds, together with certain other registered investment companies advised by the Manager or its affiliates, are included in a complex of open-end funds referred to as the Equity-Liquidity Complex.

2. Significant Accounting Policies:

The Funds’ financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Funds:

Valuation: U.S. GAAP defines fair value as the price the Funds would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Funds determine the fair values of their financial instruments at market value using independent dealers or pricing services under policies approved by the Board of Trustees of the Trust (the “Board”). The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”)

is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Funds for all financial instruments.

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

The Funds value their investments in BlackRock Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon their pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments will follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act. Each Fund may withdraw up to 25% of its investment daily, although the manager of the Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.


30		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Funds’ pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

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

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

(loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for federal income tax purposes.

Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., forward foreign currency exchange contracts), that would be “senior securities” for 1940 Act purposes, such Fund may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of a Fund’s future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, each Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Funds are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Income, expenses 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 Funds are recorded on the ex-dividend date. Portions of return of capital distributions under U.S. GAAP may be taxed at ordinary income rates. The character of dividends and distributions is determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. The portion of distributions that exceeds a Fund’s current and accumulated earnings and profits, which are measured on a tax basis, will constitute a non-taxable return of capital. Realized net capital gains can be offset by capital losses carried forward from prior years. However, certain Funds have capital loss carry-forwards from pre-2012 tax years that offset realized net capital gains but do not offset current and accumulated earnings and profits. Consequently, if distributions in any tax year are less than the Fund’s current earnings and profits but greater than net investment income and net realized capital gains (taxable income), distributions in excess of taxable income are not treated as non-taxable return of capital, but rather may be taxable to shareholders at ordinary income rates. Under certain circumstances, taxable excess distributions could be significant.

Income Taxes: It is the Funds’ policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of their taxable income to their shareholders. Therefore, no federal income tax provision is required.


		BLACKROCK FUNDS		MARCH 31, 2014		31


Notes to Financial Statements (continued)

The Funds file U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on All-Cap Energy & Resources’ and Energy & Resources’ U.S. federal tax returns remains open for each of the four years ended Sep-tember 30, 2013. The statute of limitations on Emerging Markets Dividend’s U.S. federal tax returns remains open for the period ended Sep-tember 30, 2011 and the two years ended September 30, 2013. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Funds’ facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

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

3. Securities and Other Investments:

Participation Notes: Emerging Markets Dividend may invest in P-Notes. P-Notes are promissory notes issued by banks or broker-dealers that are designed to offer Emerging Markets Dividend a return measured by the change in the value of the underlying security or basket of securities (the “underlying security”) while not holding the actual shares of the underlying security. P-Notes are typically used to allow Emerging Markets Dividend to gain exposure to securities traded in foreign markets that may be restricted due to country-specific regulations. When the P-Note matures, the issuer will pay to, or receive from, Emerging Markets Dividend the difference between the value of the underlying security at the time of the purchase and the underlying security’s value at maturity of the P-Notes. Income received on P-Notes is recorded by Emerging Markets Dividend as dividend income in the Statements of Operations. An investment in a P-Note involves additional risks beyond the risks normally associated with a direct investment in the underlying security. While the holder of a P-Note is entitled to receive from the bank or broker-dealer any dividends paid by the underlying security, the holder is not entitled to the same rights (e.g., voting rights) as a direct owner of the underlying security. P-Notes are considered general unsecured contractual obligations of the bank or broker-dealer. Emerging Markets Dividend must rely on the creditworthiness of the issuer for its investment returns on the P-Notes and has no rights against the issuer of the underlying security. A P-Note may be more volatile and less liquid than other investments held by Emerging Markets Dividend since the P-Note

generally is dependent on the liquidity in the local trading market for the underlying security.

Securities Lending: Each Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by each Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund on the next business day. During the term of the loan, each Fund earns dividend or interest income on the securities loaned but does not receive interest income on the securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of securities on loan and the value of the related collateral are shown separately in the Statements of Assets and Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. As of March 31, 2014, any securities on loan were collateralized by cash. The cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedules of Investments.

Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (each, an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, each Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the Funds can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities lent. Each Fund could suffer a loss if the value of an investment purchased with cash collateral falls below the


32		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

4. Derivative Financial Instruments:

Emerging Markets Dividend engages in various portfolio investment strategies using derivative contracts both to increase the returns of Emerging Markets Dividend and/or to economically hedge its exposure to certain risks such as foreign currency exchange rate risk. These contracts may be transacted on an exchange or OTC.

Forward Foreign Currency Exchange Contracts: Emerging Markets Dividend enters into forward foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from, foreign currencies (foreign currency exchange rate risk). A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Forward foreign currency exchange contracts, when used by Emerging Markets Dividend, help to manage the overall exposure to the currencies in which some of the investments held by Emerging Markets Dividend are denominated. The contract is marked-to-market daily and the change in market value is recorded by Emerging Markets Dividend as an unrealized gain or loss. When the contract is closed, Emerging Markets Dividend records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of forward foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

The following is a summary of Emerging Markets Dividend’s derivative financial instruments categorized by risk exposure:


Fair Values of Derivative Financial Instruments as of March 31, 2014
	Derivative Assets
	Statements of Assets and Liabilities Location	Value
Forward foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	$	5,047


	Derivative Liabilities
	Statements of Assets and Liabilities Location	Value
Forward foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts	$	10,535


The Effect of Derivative Financial Instruments in the Statements of Operations Six Months Ended March 31, 2014
Net Realized Gain From
Foreign currency exchange contracts:
Foreign currency transactions	$	3,092


Net Change in Unrealized Appreciation/Depreciation on
Foreign currency exchange contracts:
Foreign currency translations	$	(5,488	)

For the six months ended March 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:


Forward foreign currency exchange contracts:
Average number of contracts - USD purchased		3
Average number of contracts - USD sold		2
Average USD amounts purchased	$	213,972
Average USD amounts sold	$	162,044

Counterparty Credit Risk: A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.

A Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by such Fund.

In order to better define its contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, a Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between Emerging Markets Dividend and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, Emerging Markets Dividend may, under certain circumstances, offset with the counter- party certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event Emerging Markets Dividend’s net assets decline by a stated percentage or Emerging Markets Dividend fails to meet the terms of its ISDA Master Agreements, which would cause Emerging Markets Dividend to accelerate payment of any net liability owed to the counterparty.


		BLACKROCK FUNDS		MARCH 31, 2014		33


Notes to Financial Statements (continued)

At March 31, 2014, Emerging Markets Dividend’s derivative assets and liabilities (by type) are as follows:


	Assets		Liabilities
Derivative Financial Instruments:
Forward foreign currency exchange contracts	$	5,047	$	10,535

Total derivative assets and liabilities subject to a Master Netting Agreement (“MNA”)	$	5,047	$	10,535

The following tables present Emerging Markets Dividend’s derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by Emerging Markets Dividend as of March 31, 2014:


Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset¹			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets²
Citibank N.A.	$	1,800	$	(1,800	)		—		—		—
Deutsche Bank AG		322		—			—		—	$	322
JPMorgan Chase Bank N.A.		2,925		—			—		—		2,925

Total	$	5,047	$	(1,800	)		—		—	$	3,247


Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset¹			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Liabilities³
Citibank N.A.	$	5,513	$	(1,800	)		—		—	$	3,713
Morgan Stanley & Co. International PLC		5,022		—			—		—		5,022

Total	$	10,535	$	(1,800	)		—		—	$	8,735

The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

Net amount represents the net amount receivable from the counterparty in the event of default.

Net amount represents the net amount payable due to the counterparty in the event of default.

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

The Trust, on behalf of the Funds, entered into an Investment Advisory Agreement with the Manager, the Funds’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of each Fund’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Fund. For such services, each Fund, except Emerging Markets Dividend pays the Manager a monthly fee based on a percentage of each Fund’s average daily net assets at the following annual rates:


Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.750	%
$1 Billion - $2 Billion		0.700	%
$2 Billion - $3 Billion		0.675	%
Greater than $3 Billion		0.650	%

Emerging Markets Dividend pays the Manager a monthly fee based on a percentage of its average daily net assets at the following annual rates:


Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		1.00	%
$1 Billion - $3 Billion		0.94	%
$3 Billion - $5 Billion		0.90	%
$5 Billion - $10 Billion		0.87	%
Greater than $10 Billion		0.85	%

The Manager voluntarily agreed to waive its investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds. However, the Manager does not waive its investment advisory fees by the amount of investment advisory fees paid in connection with each Fund’s investment in other affiliated investment companies, if any. These amounts are included in fees waived by Manager in the Statements of Operations. For the six months ended March 31, 2014, the amounts waived were as follows:


All-Cap Energy & Resources	$	1,776
Emerging Markets Dividend	$	58
Energy & Resources	$	8,840

The Manager, on behalf of each Fund, entered into sub-advisory agreements with BlackRock International Limited (“BIL”), an affiliate of the Manager. The Manager pays BIL, for services it provides, a monthly fee


34		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

that is a percentage of the investment advisory fees paid by each Fund to the Manager.

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


	Service Fee			Distribution Fee
Service		0.25	%		—
Investor A		0.25	%		—
Investor B		0.25	%		0.75	%
Investor C		0.25	%		0.75	%

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

For the six months ended March 31, 2014, the following table shows the class specific service and distribution fees borne directly by each class of each Fund:


	All-Cap Energy & Resources		Emerging Markets Dividend		Energy & Resources
Service	$	2,580		—		—
Investor A		126,390	$	1,867	$	508,287
Investor B		40,892		—		20,693
Investor C		334,054		1,566		492,727

Total	$	503,916	$	3,433	$	1,021,707

Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Funds with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an asset based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the six months ended March 31, 2014, the Funds paid the following to affiliates in return for these services, which are included in transfer agent — class specific in the Statements of Operations:


	All-Cap Energy & Resources		Energy & Resources
Investor A		—	$	114
Investor C	$	6		20

Total	$	6	$	134

Fund shares. For the six months ended March 31, 2014, each Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statements of Operations:


	All-Cap Energy & Resources		Emerging Markets Dividend		Energy & Resources
Institutional	$	486	$	62	$	946
Investor A		7,411		61		18,834
Investor B		1,425		—		1,063
Investor C		1,811		25		2,335

Total	$	11,133	$	148	$	23,178

For the six months ended March 31, 2014, the following table shows the class specific transfer agent fees borne directly by each class of each Fund:


	All-Cap Energy & Resources		Emerging Markets Dividend		Energy & Resources
Institutional	$	13,517	$	605	$	89,132
Service		1,918		—		—
Investor A		103,433		975		390,851
Investor B		17,934		—		10,562
Investor C		60,803		245		94,185

Total	$	197,605	$	1,825	$	584,730

BNY Mellon Investment Servicing (US) Inc. (“BNYMIS”) and the Manager act as co-administrators for the Funds. For these services, the co-administrators receive an administration fee computed daily and payable monthly to each administrator pursuant to separate fee arrangements, based on a percentage of the average daily net assets of each Fund. The combined administration fee, which is shown as administration in the Statements of Operations, is paid at the following annual rates:


Average Daily Net Assets	Administration Fee
First $500 Million		0.075	%
$500 Million - $1 Billion		0.065	%
Greater than $1 Billion		0.055	%

In addition, each of the share classes is charged an administration fee, which is shown as administration — class specific in the Statements of Operations, based on the following percentages of average daily net assets of each respective class:


Average Daily Net Assets	Administration Fee — Class Specific
First $500 Million		0.025	%
$500 Million - $1 Billion		0.015	%
Greater than $1 Billion		0.005	%

For the six months ended March 31, 2014, the Funds paid the following to the Manager in return for these services, which are included in administration and administration — class specific in the Statements of


		BLACKROCK FUNDS		MARCH 31, 2014		35


Notes to Financial Statements (continued)

Operations:


All-Cap Energy & Resources	$	73,093
Emerging Markets Dividend	$	562
Energy & Resources	$	212,710

For the six months ended March 31, 2014, the following table shows the class specific administration fees borne directly by each class of each Fund:


	All-Cap Energy & Resources			Emerging Markets Dividend		Energy & Resources
Institutional	$	4,388		$	336	$	11,719
Service		258			—		—
Investor A		12,640			187		50,829
Investor B		1,022	��		—		517
Investor C		8,351			39		12,318

Total	$	26,659		$	562	$	75,383

BNYMIS and the Manager may have, at their discretion, voluntarily waived all or any portion of their administration fees for a Fund or a share class which are included in administration fees waived and administration fees waived — class specific in the Statements of Operations.

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


	All-Cap Energy & Resources			Emerging Dividend Markets			Energy & Resources
BlackRock		0.92	%¹		N/A			N/A
Institutional		0.96	%		1.50	%		1.07	%
Service		1.38	%		N/A			1.38	%¹
Investor A		1.38	%		1.75	%		1.38	%
Investor B		2.10	%		N/A			2.10	%
Investor C		2.10	%		2.50	%		2.10	%
Class R		1.83	%¹		N/A			1.94	%¹

There were no shares outstanding as of March 31, 2014.

The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to February 1, 2015 unless approved by the Board, including a majority of the Independent Trustees.

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

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

the six months ended March 31, 2014, the Manager waived $22,433 of investment advisory fees for Emerging Markets Dividend, which is included in fees waived by Manager.

Class specific expense waivers or reimbursements are as follows:


Administration Fees Waived
	All-Cap Energy & Resources		Emerging Markets Dividend		Energy & Resources
Institutional	$	4,388	$	336	$	6,141
Service		55		—		—
Investor A		9,094		187		—
Investor B		1,022		—		517
Investor C		7,707		39		1,415

Total	$	22,266	$	562	$	8,073


Transfer Agent Fees Waived
	All-Cap Energy & Resources		Emerging Markets Dividend		Energy & Resources
Institutional	$	486	$	62	$	495
Investor A		1,489		61		—
Investor B		1,425		—		1,063
Investor C		1,054		25		—

Total	$	4,454	$	148	$	1,558


Transfer Agent Fees Reimbursed
	All-Cap Energy & Resources		Emerging Markets Dividend		Energy & Resources
Institutional	$	6,100	$	517	$	2,173
Service		10		—		—
Investor A		6		897		—
Investor B		9,239		—		4,721
Investor C		1,225		210		—

Total	$	16,580	$	1,624	$	6,894

If during a Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver or reimbursement from the Manager, are less than the expense limit for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of (a) the amount of fees waived or expenses reimbursed during those prior two fiscal years under the agreement and (b) the amount by which the expense limit for that share class exceeds the operating expenses of the share class for the current fiscal year, provided that: (1) the Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year and (2) the Manager or an affiliate continues to serve as the Fund’s investment advisor or administrator. In the event the expense limit for a share class is changed subsequent to a fiscal year in which the Manager becomes entitled to reimbursement for fees waived or reimbursed, the amount available to reimburse the Manager shall be calculated by reference to the expense limit for that share class in effect at the time the Manager became entitled to receive such reimbursement, rather than the subsequently changed expense limit for that share class.


36		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

For the six months ended March 31, 2014, the Manager recouped the following Fund level and class specific waivers and/or reimbursements previously recorded by the Funds:


	All-Cap Energy & Resources		Energy & Resources
Institutional		—	$	1,566
Service	$	12		—
Investor A		33		74
Investor B		—		—
Investor C		—		8,806

Total	$	45	$	10,446

On March 31, 2014, the Fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:


	Expiring September 30,
	2014		2015		2016
All-Cap Energy & Resources
Fund Level		—	$	406		—
Institutional	$	8,691	$	25,585	$	10,974
Service		—		—	$	65
Investor A		—	$	15,689	$	10,589
Investor B	$	17,006	$	22,079	$	11,686
Investor C		—	$	22,395	$	9,986
Emerging Markets Dividend
Fund Level	$	291,902	$	221,737	$	102,071
Institutional	$	741	$	1,750	$	915
Investor A	$	592	$	1,610	$	1,145
Investor C	$	235	$	461	$	274
Energy & Resources
Institutional		—		—	$	8,809
Investor B	$	8,328	$	11,644	$	6,301
Investor C		—	$	1,034	$	1,415

For the six months ended March 31, 2014, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each Fund’s Investor A Shares as follows:


All-Cap Energy & Resources	$	2,906
Emerging Markets Dividend	$	209
Energy & Resources	$	9,229

For the six months ended March 31, 2014, affiliates received CDSCs as follows:


	Investor A		Investor B		Investor C
All-Cap Energy & Resources		—	$	1,700	$	578
Emerging Markets Dividend		—		—	$	26
Energy & Resources	$	7,020	$	2,957	$	593

(the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment advisor to the private investment company will not charge any advisory fees with respect to shares purchased by the Funds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. Each Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent. Pursuant to the securities lending agreement effective February 1,2014, BIM may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to a securities lending agreement effective February 1, 2014, each Fund retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, each Fund, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, each Fund retained 65% of securities lending income and paid a fee to BIM equal to 35% of such income. The share of securities lending income earned by each Fund, if any, is shown as securities lending — affiliated — net in the Statements of Operations. For the six months ended March 31, 2014, All-Cap Energy & Resources paid BIM $509 for securities lending agent services.

The Funds recorded payments from an affiliate to compensate for foregone securities lending revenue, which is shown as other income — affiliated in the Statements of Operations.

Certain officers and/or trustees of the Trust are officers and/or directors of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Trust’s Chief Compliance Officer, which is included in officer and trustees in the Statements of Operations.

The Funds may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment advisor, common officers, or common trustees. For the six months ended March 31, 2014, the purchase and sale transaction with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:


	Purchases		Sales
All-Cap Energy & Resources	$	3,167,071	$	2,520,785
Energy & Resources	$	12,411,058		—


		BLACKROCK FUNDS		MARCH 31, 2014		37


Notes to Financial Statements (continued)

6. Purchases and Sales:

Purchases and sales of investments, excluding short-term securities, for the six months ended March 31, 2014 were as follows:


	Purchases		Sales
All-Cap Energy & Resources	$	113,320,427	$	134,701,283
Emerging Markets Dividend	$	2,193,878	$	1,627,164
Energy & Resources	$	241,980,938	$	318,173,885

7. Income Tax Information:

As of September 30, 2013, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:


Expires September 30,	All-Cap Energy & Resources		Emerging Markets Dividend		Energy & Resources
2018	$	98,676,572		—		—
2019		—	$	18,788		—
No expiration date¹		—		510,449	$	100,034,290

Total	$	98,676,572	$	529,237	$	100,034,290

Must be utilized prior to losses subject to expiration.

As of March 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:


	All-Cap Energy & Resources			Emerging Markets Dividend			Energy & Resources
Tax cost	$	171,402,546		$	4,592,148		$	457,154,570

Gross unrealized appreciation	$	36,917,014		$	284,284		$	160,083,819
Gross unrealized depreciation		(978,718	)		(185,101	)		(25,163,942	)

Net unrealized appreciation	$	35,938,296		$	99,183		$	134,919,877

8. Bank Borrowings:

The Trust, on behalf of the Funds, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $800 million credit agreement with a group of lenders, under which the Funds may borrow to fund shareholder redemptions. The agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the Funds, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts 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. Participating Funds paid administration and arrangement fees

which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The Funds did not borrow under the credit agreement during the six months ended March 31, 2014.

9. Concentration, Market and Credit Risk:

In the normal course of business, the Funds invest in securities and enter into transactions where risks exist due to fluctuations in the market (market risk) or failure of the issuer of a security to meet all its obligations (issuer credit risk). The value of securities held by the Funds may decline in response to certain events, including those directly involving the issuers whose securities are owned by the Funds; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency and interest rate and price fluctuations. Similar to issuer credit risk, the Funds may be exposed to counterparty credit risk, or the risk that an entity with which the Funds have unsettled or open transactions may fail to or be unable to perform on its commitments. The Funds manage counterparty credit risk by entering into transactions only with counterparties that they believe have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is generally approximated by their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.

As of March 31, 2014, All-Cap Energy & Resources and Energy & Resources invested a significant portion of their assets in securities in the energy sector. Changes in economic conditions affecting the energy sector would have a greater impact on All-Cap Energy & Resources and Energy & Resources and could affect the value, income and/or liquidity of positions in such securities.

As of March 31, 2014, Emerging Markets Dividend had the following industry classifications:


Industry
Banks	12	%
Transportation Infrastructure	11
Wireless Telecommunication Services	10
Oil, Gas & Consumable Fuels	9
Insurance	7
Metals & Mining	5
Other¹	46

All other industries held were each less than 5% of long-term investments.


38		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

10. Capital Share Transactions:

Transactions in capital shares for each class were as follows:


	Six Months Ended March 31, 2014						Year Ended September 30, 2013
All-Cap Energy & Resources	Shares			Amount			Shares			Amount
Institutional
Shares sold		222,750		$	3,449,999			609,736		$	8,327,536
Shares issued in reinvestment of dividends		15,019			229,181			3,624			48,053
Shares redeemed		(381,906	)		(5,913,974	)		(18,459,698	)		(251,072,170	)

Net decrease		(144,137	)	$	(2,234,794	)		(17,846,338	)	$	(242,696,581	)


Service
Shares sold		7,071		$	104,560			11,893		$	160,737
Shares issued in reinvestment of dividends		521			7,757			—			—
Shares redeemed		(37,100	)		(559,027	)		(147,367	)		(1,963,145	)

Net decrease		(29,508	)	$	(446,710	)		(135,474	)	$	(1,802,408	)


Investor A
Shares sold and automatic conversion of shares		521,601		$	7,872,618			857,797		$	11,617,915
Shares issued in reinvestment of dividends		28,029			416,519			—			—
Shares redeemed		(1,137,260	)		(17,146,066	)		(4,341,334	)		(57,971,504	)

Net decrease		(587,630	)	$	(8,856,929	)		(3,483,537	)	$	(46,353,589	)


Investor B
Shares sold		2,497		$	36,039			4,373		$	53,854
Shares redeemed and automatic conversion of shares		(270,212	)		(3,853,782	)		(512,064	)		(6,549,791	)

Net decrease		(267,715	)	$	(3,817,743	)		(507,691	)	$	(6,495,937	)


Investor C
Shares sold		106,515		$	1,528,906			247,719		$	3,143,188
Shares redeemed		(647,546	)		(9,268,217	)		(2,067,037	)		(26,183,763	)

Net decrease		(541,031	)	$	(7,739,311	)		(1,819,318	)	$	(23,040,575	)

Total Net Decrease		(1,570,021	)	$	(23,095,487	)		(23,792,358	)	$	(320,389,090	)


Emerging Markets Dividend Fund
Institutional
Shares sold		4,163		$	36,457			154,817		$	1,426,951
Shares issued in reinvestment of dividends		277			2,415			83			736
Shares redeemed		(1,060	)		(8,880	)		(150,829	)		(1,349,152	)

Net increase		3,380		$	29,992			4,071		$	78,535


Investor A
Shares sold		66,504		$	591,862			161,369		$	1,438,208
Shares issued in reinvestment of dividends		3,159			27,452			392			3,443
Shares redeemed		(31,741	)		(277,904	)		(61,010	)		(519,642	)

Net increase		37,922		$	341,410			100,751		$	922,009


		BLACKROCK FUNDS		MARCH 31, 2014		39


Notes to Financial Statements (continued)


	Six Months Ended March 31, 2014						Year Ended September 30, 2013
Emerging Market Dividend (concluded)	Shares			Amount			Shares			Amount
Investor C
Shares sold		24,164		$	207,938			26,270		$	236,210
Shares issued in reinvestment of dividends		594			5,142			7			58
Shares redeemed		(895	)		(7,808	)		(5,685	)		(47,912	)

Net increase		23,863		$	205,272			20,592		$	188,356

Total Net Increase		65,165		$	576,674			125,414		$	1,188,900


Energy & Resources
Institutional
Shares sold		252,371		$	9,646,944			742,386		$	25,044,510
Shares issued in reinvestment of distributions		—			—			4,497			146,688
Shares redeemed		(718,172	)		(27,203,430	)		(4,681,998	)		(157,551,585	)

Net decrease		(465,801	)	$	(17,556,486	)		(3,935,115	)	$	(132,360,387	)


Investor A
Shares sold and automatic conversion of shares		662,741		$	21,799,405			1,979,712		$	58,200,723
Shares issued in reinvestment of distributions		—			—			20,430			579,797
Shares redeemed		(2,200,316	)		(72,194,162	)		(7,709,607	)		(225,348,532	)

Net decrease		(1,537,575	)	$	(50,394,757	)		(5,709,465	)	$	(166,568,012	)


Investor B
Shares sold		1,211		$	28,544			2,873		$	60,212
Shares issued in reinvestment of distributions		—			—			501			10,444
Shares redeemed and automatic conversion of shares		(39,906	)		(955,664	)		(174,940	)		(3,737,657	)

Net decrease		(38,695	)	$	(927,120	)		(171,566	)	$	(3,667,001	)


Investor C
Shares sold		119,713		$	2,857,113			423,372		$	9,011,500
Shares issued in reinvestment of distributions		—			—			9,345			193,162
Shares redeemed		(670,821	)		(15,888,664	)		(2,385,985	)		(50,596,901	)

Net decrease		(551,108	)	$	(13,031,551	)		(1,953,268	)	$	(41,392,239	)

Total Net Decrease		(2,593,179	)	$	(81,909,914	)		(11,769,414	)	$	(343,987,639	)

At March 31, 2014, shares owned by affiliates of Emerging Markets Dividend were as follows:


	Shares
Institutional		296,000
Investor A		2,000
Investor C		2,000


40		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

11. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the Funds’ financial statements was completed through the date the financial statements were issued and the following item was noted:

Effective April 24, 2014, the credit agreement was terminated and a new agreement was entered into. The Funds became a party to a 364-day, $1.1 billion credit agreement, which expires in April 2015. Excluding commitments designated for a certain individual fund, the Funds can borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts 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.


		BLACKROCK FUNDS		MARCH 31, 2014		41


Officers and Trustees

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

Ian A. MacKinnon, 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

Neal Andrews, Chief Financial Officer

Jay Fife, Treasurer

Brian Kindelan, Chief Compliance Officer and Anti-Money Laundering Officer

Benjamin Archibald, Secretary

Investment Advisor and Co-Administrator

BlackRock Advisors, LLC

Wilmington, DE 19809

Sub-Advisor

BlackRock International Limited

Edinburgh, EH3 8BL, United Kingdom

Accounting Agent, Co-Administrator and Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

Wilmington, DE 19809

Custodian

The Bank of New York Mellon

New York, NY 10286

Distributor

BlackRock Investments, LLC

New York, NY 10022

Legal Counsel

Sidley Austin LLP

New York, NY 10019

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Philadelphia, PA 19103

Address of the Trust

100 Bellevue Parkway

Wilmington, DE 19809


42		BLACKROCK FUNDS		MARCH 31, 2014


Additional Information

General Information

Electronic Delivery

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

To enroll:

Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:

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

Shareholders Who Hold Accounts Directly With BlackRock:

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

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

3)	Log into your account

Householding

The Funds will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 441-7762.

Availability of Quarterly Schedule of investments

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

Availability of Proxy Voting Policies and Procedures

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

Availability of Proxy Voting Record

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

Shareholder Privileges

Account Information

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

Automatic Investment Plans

Investor Class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds.

Systematic Withdrawal 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 FUNDS		MARCH 31, 2014		43


Additional Information (concluded)

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.

If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.

BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.

BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.

We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.


44		BLACKROCK FUNDS		MARCH 31, 2014


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 Global Long/Short Equity Fund	BlackRock Natural Resources Trust
BlackRock All-Cap Energy & Resources Portfolio	BlackRock Global Opportunities Portfolio	BlackRock Pacific Fund
BlackRock Basic Value Fund	BlackRock Global SmallCap Fund	BlackRock Real Estate Securities Fund
BlackRock Capital Appreciation Fund	BlackRock Health Sciences Opportunities Portfolio	BlackRock Russell 1000^® Index Fund
BlackRock Commodity Strategies Fund	BlackRock International Fund	BlackRock Science & Technology Opportunities Portfolio
BlackRock Disciplined Small Cap Core Fund	BlackRock International Index Fund	BlackRock Small Cap Growth Equity Portfolio
BlackRock Emerging Markets Dividend Fund	BlackRock International Opportunities Portfolio	BlackRock Small Cap Growth Fund II
BlackRock Emerging Markets Fund	BlackRock Large Cap Core Fund	BlackRock Small Cap Index Fund
BlackRock Emerging Markets Long/Short Equity Fund	BlackRock Large Cap Core Plus Fund	BlackRock S&P 500 Stock Fund
BlackRock Energy & Resources Portfolio	BlackRock Large Cap Growth Fund	BlackRock U.S. Opportunities Portfolio
BlackRock Equity Dividend Fund	BlackRock Large Cap Value Fund	BlackRock Value Opportunities Fund
BlackRock EuroFund	BlackRock Latin America Fund
BlackRock Flexible Equity Fund	BlackRock Long-Horizon Equity Fund
BlackRock Focus Growth Fund	BlackRock Mid-Cap Growth Equity Portfolio
BlackRock Global Dividend Portfolio	BlackRock Mid-Cap Value Opportunities Fund

Taxable Fixed Income Funds


BlackRock Bond Index Fund	BlackRock Emerging Markets Flexible Dynamic Bond Portfolio	BlackRock Short Obligations Fund
BlackRock Core Bond Portfolio	BlackRock Floating Rate Income Portfolio	BlackRock Short-Term Treasury Fund
BlackRock CoreAlpha Bond Fund	BlackRock Global Long/Short Credit Fund	BlackRock Strategic Income Opportunities Portfolio
BlackRock CoRI Funds	BlackRock GNMA Portfolio	BlackRock Total Return Fund
2015	BlackRock High Yield Bond Portfolio	BlackRock U.S. Government Bond Portfolio
2017	BlackRock Inflation Protected Bond Portfolio	BlackRock U.S. Mortgage Portfolio
2019	BlackRock Investment Grade Bond Portfolio	BlackRock Ultra-Short Obligations Fund
2021	BlackRock Low Duration Bond Portfolio	BlackRock World Income Fund
2023	BlackRock Secured Credit Portfolio

Municipal Fixed Income Funds


BlackRock California Municipal Bond Fund	BlackRock New Jersey Municipal Bond Fund	BlackRock Short-Term Municipal Fund
BlackRock High Yield Municipal Fund	BlackRock New York Municipal Bond Fund	BlackRock Strategic Municipal Opportunities Fund
BlackRock National Municipal Fund	BlackRock Pennsylvania Municipal Bond Fund

Mixed Asset Funds


BlackRock Balanced Capital Fund	LifePath Active Portfolios		LifePath Index Portfolios
BlackRock Emerging Market Allocation Portfolio	2015	2040	Retirement	2040
BlackRock Global Allocation Fund	2020	2045	2020	2045
BlackRock Managed Volatility Portfolio	2025	2050	2025	2050
BlackRock Multi-Asset Income Portfolio	2030	2055	2030	2055
BlackRock Multi-Asset Real Return Fund	2035		2035
BlackRock Strategic Risk Allocation Fund

BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio	Retirement	2040
Moderate Prepared Portfolio	2020	2045
Growth Prepared Portfolio	2025	2050
Aggressive Growth Prepared Portfolio	2030	2055
	2035

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.


		BLACKROCK FUNDS		MARCH 31, 2014		45

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Funds unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

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


Eq-Allcap-3/14-SAR

MARCH 31, 2014

SEMI-ANNUAL REPORT (UNAUDITED)

BLACKROCK^®

BlackRock Funds^SM

„ BlackRock Flexible Equity Fund

„ BlackRock Mid-Cap Growth Equity Portfolio

„ BlackRock Small Cap Growth Equity Portfolio


Not FDIC Insured ¡ May Lose Value ¡ No Bank Guarantee


Table of Contents


			Page
Shareholder Letter			3
Semi-Annual Report:
Fund Summaries			4
About Fund Performance			10
Disclosure of Expenses			10
Derivative Financial Instruments			11
Financial Statements:
Schedules of Investments			12
Statements of Assets and Liabilities			27
Statements of Operations			29
Statements of Changes in Net Assets			30
Financial Highlights			31
Notes to Financial Statements			40
Officers and Trustees			54
Additional Information			55
A World-Class Mutual Fund Family			57


2		BLACKROCK FUNDS		MARCH 31, 2014

Shareholder Letter

Dear Shareholder,

Sentiment swiftly reversed in May when then-Fed Chairman Bernanke first mentioned the possibility of reducing (or “tapering”) the central bank’s asset purchase programs — comments that were widely misinterpreted as signaling an end to the Fed’s zero-interest-rate policy. U.S. Treasury yields rose sharply, triggering a steep sell-off across fixed income markets. (Bond prices move in the opposite direction of yields.) Global equities also suffered as investors feared the implications of a potential end to a program that had greatly supported the markets. Emerging markets, which are more sensitive to changes in global liquidity, were particularly hurt by the prospect of ebbing cash flows from the U.S. Markets rebounded in late June, however, when the Fed’s tone turned more dovish, and improving economic indicators and better corporate earnings helped extend gains through most of the summer.

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

In a modest global growth environment, expectations around monetary policy changes continued to be a key theme in financial market performance.

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of March 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500^® Index)		12.51	%		21.86	%
U.S. small cap equities (Russell 2000^® Index)		9.94			24.90
International equities (MSCI Europe, Australasia, Far East Index)		6.41			17.56
Emerging market equities (MSCI Emerging Markets Index)		1.39			(1.43	)
3-month Treasury bill (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.03			0.07
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		0.85			(4.38	)
U.S. investment grade bonds (Barclays U.S. Aggregate Bond Index)		1.70			(0.10	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.91			0.31
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		6.66			7.53

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


		THIS PAGE NOT PART OF YOUR FUND REPORT				3


Fund Summary as of March 31, 2014			BlackRock Flexible Equity Fund

Investment Objective

BlackRock Flexible Equity Fund’s (the “Fund”) investment objective is to seek to achieve long-term total return.

Portfolio Management Commentary

How did the Fund perform?

For the six-month period ended March 31, 2014, the Fund underperformed its benchmark, the S&P 500^® Index.

What factors influenced performance?

During the period, stock selection, particularly within the industrials sector, weighed heavily on relative returns. In particular, a significant position in Japan Airlines Co. Ltd. and a smaller position in WestJet Airlines Ltd. both posted double-digit declines after experiencing strong gains during the prior reporting period. Concerns surrounding runway access at one of Japan’s primary airports coupled with a weakening yen contributed to stock price weakness. Additionally, in a strong equity market, allocations to cash, precious metals and a short position in Russell 2000^® Index futures underperformed relative to the market, but also limited the Fund’s beta (sensitivity) to the broader equity market, detracting from relative returns. An underweight in health care, the top-performing sector in the benchmark index, also proved costly.

The Fund ended the period with an approximate 10% weighting in cash, which created a drag on relative performance. Despite creating a headwind for the Fund in a rapidly rising equity market, cash plays an important strategic role within the Fund on a structural and shorter-term strategic basis. On a structural basis, the Fund holds cash to preserve the ability to fund high-conviction ideas without having to sell other positions. On a strategic basis, cash accumulated in the Fund as a result of trimming several positions that neared their price targets while new opportunities were scarce given the level of market valuations.

Conversely, stock selection within the information technology sector, led by gains in one of the Fund’s top holdings, Google, Inc., made the largest positive impact

on performance during the period. The internet search provider rallied substantially in the fourth quarter on strong revenue growth driven by rising mobile advertising revenue. Additionally, select consumer discretionary holdings, such as Expedia Inc. and educational publisher Houghton Mifflin Harcourt, also made positive contributions to returns.

Describe recent portfolio activity.

During the six-month period, substantial changes were made in terms of holdings and overall structure. The investment advisor took advantage of market strength in the fourth quarter of 2013 and early first quarter of 2014 to take profits in many of the top-performing holdings across the Fund such as Google, Inc., Visa, Inc. and Vodafone Group PLC. Additionally, the Fund eliminated its exposure to silver and redeployed those proceeds into its existing gold position. Proceeds from sales were primarily directed toward several new, high-conviction positions that are classified as consumer discretionary stocks, but represent unique investment insights across a variety of non-related industries including publishing, automobile manufacturing and broadcasters. The Fund’s index short positions and cash position were also augmented.

Describe portfolio positioning at period end.

At period end, the Fund held substantial exposure to non-equity assets in the forms of cash and gold. Relative to the S&P 500 Index, the Fund was overweight in consumer discretionary, driven largely by exposures to broadcasters and automobile manufacturers. In contrast, the Fund was intentionally underweight in consumer staples, health care and utilities.

Portfolio Information


Ten Largest Holdings		Percent of Long-Term Investments


Japan Airlines Co. Ltd.	8	%
American International Group, Inc.	7
SPDR Gold Trust	6
UnitedHealth Group, Inc.	6
General Motors Co.	6
Sinclair Broadcast Group, Inc., Class A	6
Houghton Mifflin Harcourt Co.	5
Fidelity National Financial, Inc., Class A	4
Nexstar Broadcasting Group, Inc., Class A	4
Suncor Energy, Inc.	4


Sector Allocation		Percent of Long-Term Investments


Consumer Discretionary	25	%
Financials	16
Information Technology	15
Industrials	11
Energy	10
Investment Companies	9
Health Care	8
Telecommunication Services	4
Consumer Staples	2

For Fund compliance purposes, the Fund’s sector classifications refer to any one or more of the sector sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine sector sub-classifications for reporting ease.


4		BLACKROCK FUNDS		MARCH 31, 2014


			BlackRock Flexible Equity Fund

Total Return Based on a $10,000 Investment

LOGO

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

Under normal circumstances, the Fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities and equity-like securities and instruments with similar economic characteristics. The Fund seeks to invest in securities issued by North American companies. The Fund may invest in companies of any market capitalization size, style, or sector. The Fund’s total return prior to July 31, 2012 are the returns of the Fund when it followed a different investment strategy.

This total return unmanaged index covers 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly New York Stock Exchange (“NYSE”) issues) representing about 75% of NYSE market capitalization and 30% of NYSE issues.


Performance Summary for the Period Ended March 31, 2014
				Average Annual Total Returns⁴
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		6.12	%		13.22	%		N/A			18.77	%		N/A			7.55	%		N/A
Service		5.89			12.84			N/A			18.39			N/A			7.23			N/A
Investor A		5.99			12.88			6.96	%		18.37			17.10	%		7.23			6.65	%
Investor B		5.59			11.98			7.48			17.45			17.24			6.58			6.58
Investor C		5.58			12.01			11.01			17.46			17.46			6.42			6.42
Class R		5.70			12.39			N/A			18.07			N/A			7.19			N/A
S&P 500^® Index		12.51			21.86			N/A			21.16			N/A			7.42			N/A

⁴

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

Past performance is not indicative of future results.


Expense Example
	Actual			Hypothetical⁶
	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁵	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁵	Annualized Expense Ratio
Institutional	$1,000.00	$1,061.20	$4.98	$1,000.00	$1,020.09	$4.89	0.97%
Service	$1,000.00	$1,058.90	$6.62	$1,000.00	$1,018.50	$6.49	1.29%
Investor A	$1,000.00	$1,059.90	$6.62	$1,000.00	$1,018.50	$6.49	1.29%
Investor B	$1,000.00	$1,055.90	$10.56	$1,000.00	$1,014.66	$10.35	2.06%
Investor C	$1,000.00	$1,055.80	$10.56	$1,000.00	$1,014.66	$10.35	2.06%
Class R	$1,000.00	$1,057.00	$8.41	$1,000.00	$1,016.75	$8.25	1.64%

⁵

⁶

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 10 for further information on how expenses were calculated.


		BLACKROCK FUNDS		MARCH 31, 2014		5


Fund Summary as of March 31, 2014			BlackRock Mid-Cap Growth Equity Portfolio

Investment Objective

BlackRock Mid-Cap Growth Equity Portfolio’s (the “Fund”) investment objective is long-term capital appreciation.

Portfolio Management Commentary

How did the Fund perform?

For the six-month period ended March 31, 2014, the Fund outperformed its benchmark, the Russell Midcap^® Growth Index.

What factors influenced performance?

Relative performance was supported by favorable stock selection in the consumer discretionary and industrials sectors. Selection in financials also had a positive impact.

In consumer discretionary, the Fund’s outperformance was led by internet & catalog retail holdings Vipshop Holdings Ltd. and Liberty Ventures. Shares of Chinese off-price retailer Vipshop Holdings Ltd. surged as the company continued to capitalize on the massive opportunity in e-commerce in China. Liberty Ventures outperformed as its investments in TripAdvisor, Inc. and Expedia, Inc. (which are also held in the Fund) appreciated and the markets began to price in a greater return on the company’s private investment initiatives. Other notable contributors in the sector included casino operator Wynn Resorts Ltd., athletic apparel maker Under Armour, Inc. and consumer-products company Jarden Corp.

Within the industrials sector, Spirit Airlines, Inc. and SolarCity Corp. were the Fund’s strongest performers. Underlying Spirit’s strength was its industry-leading level of profitability, aggressive yet balanced capacity growth plans, and further opportunity to drive ancillary revenues through non-traditional fees. The company also benefited from consolidation in the U.S. airline industry. SolarCity Corp. shares advanced as the company’s disruptive solar power leasing business model continued to gain traction. Also adding to returns in the industrials sector was a position in Acuity Brands, Inc.

Contributing to results in financials was bank holding SVB Financial Group as well as the Fund’s underexposure to real estate investment trusts, which significantly trailed the broader market during the period.

Conversely, the Fund’s energy holdings detracted from performance for the period. A position in Laredo Petroleum, Inc. lagged on concerns that private equity owners may further reduce their ownership in the company. Shares of Oceaneering International, Inc. fell due to concerns about slowing deepwater spend. Gulfport Energy Corp. also weighed on the Fund’s performance in the energy sector.

Additionally, the Fund was not immune to the market volatility toward the end of the period as investors stampeded out of high-growth, more volatile companies in favor of previously underperforming sectors. The reversal exacted the greatest toll on the strongest performing stocks of 2013, especially internet and social media players, a number of which were held in the Fund.

Chinese online media company SINA Corp. was the largest individual detractor in the Fund. SINA shares lost ground amid a confluence of factors, including concerns about growth in China; the larger decline in high-growth technology names; worries about user growth for the company’s social media platform Weibo as well as 2014 margins; and, finally, the turmoil in emerging markets. Other detractors in the IT sector included Qlik Technologies, Inc. and Yandex NV.

Describe recent portfolio activity.

The Fund continued to actively manage risk throughout the six-month period and reduced the overall level of risk in the portfolio, particularly through moderating exposure to internet-related and non-U.S. stocks.

On a sector basis, the most notable decrease was within IT, where the Fund trimmed holdings in the internet software & services industry. The Fund also reduced exposure to energy stocks. The Fund increased exposure to commercial services & supplies and air freight & logistics holdings in industrials, as well as household and food products within consumer staples.

Describe portfolio positioning at period end.

As of period end, the Fund’s largest sector overweights relative to the Russell Midcap Growth^® Index were consumer discretionary, industrials and IT, while the most notable underweights were in materials and consumer staples. The Fund’s overweights in consumer discretionary and IT reflect the investment adviser’s favorable view on companies that continue to take share in the expanding growth of consumer wealth globally and, in particular, the rise of e-commerce.

Portfolio Information


Ten Largest Holdings		Percent of Long-Term Investments


Liberty Ventures, Series A	4	%
Jarden Corp.	3
Wynn Resorts Ltd.	3
The Madison Square Garden Co., Class A	3
Schibsted ASA	3
Yelp, Inc.	2
Alliance Data Systems Corp.	2
The Cooper Cos., Inc.	2
Moody’s Corp.	2
WEX, Inc.	2


Sector Allocation		Percent of Long-Term Investments


Consumer Discretionary	32	%
Information Technology	22
Industrials	21
Health Care	10
Financials	6
Consumer Staples	4
Energy	3
Telecommunication Services	2


6		BLACKROCK FUNDS		MARCH 31, 2014


			BlackRock Mid-Cap Growth Equity Portfolio

Total Return Based on a $10,000 Investment

LOGO

The Fund normally invests at least 80% of its net assets in equity securities issued by U.S. mid-capitalization companies, which Fund management believes have above-average earnings growth potential.

An index that consists of the bottom 800 securities of the Russell 1000^® Index with greater-than-average growth orientation as ranked by total market capitalization. Securities in this index generally have higher price-to-book and price-to-earnings ratios, lower dividend yields and higher forecasted growth values.


Performance Summary for the Period Ended March 31, 2014
				Average Annual Total Returns⁴
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		12.37	%		35.05	%		N/A			23.35	%		N/A			8.58	%		N/A
Service		12.09			34.39			N/A			22.78			N/A			8.19			N/A
Investor A		12.21			34.65			27.58	%		22.89			21.57	%		8.14			7.55	%
Investor B		11.76			33.56			29.06			21.96			21.78			7.48			7.48
Investor C		11.70			33.59			32.59			21.97			21.97			7.32			7.32
Class R		11.99			34.19			N/A			22.66			N/A			8.01			N/A
Russell Midcap^® Growth Index		10.44			24.22			N/A			24.73			N/A			9.47			N/A

⁴

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

Past performance is not indicative of future results.


Expense Example
	Actual			Hypothetical⁶
	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁵	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁵	Annualized Expense Ratio
Institutional	$1,000.00	$1,123.70	$5.88	$1,000.00	$1,019.40	$5.59	1.11%
Service	$1,000.00	$1,120.90	$8.35	$1,000.00	$1,017.05	$7.95	1.58%
Investor A	$1,000.00	$1,122.10	$7.35	$1,000.00	$1,018.00	$6.99	1.39%
Investor B	$1,000.00	$1,117.60	$11.40	$1,000.00	$1,014.16	$10.85	2.16%
Investor C	$1,000.00	$1,117.00	$11.40	$1,000.00	$1,014.16	$10.85	2.16%
Class R	$1,000.00	$1,119.90	$8.72	$1,000.00	$1,016.70	$8.30	1.65%

⁵

⁶

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 10 for further information on how expenses were calculated.


		BLACKROCK FUNDS		MARCH 31, 2014		7


Fund Summary as of March 31, 2014			BlackRock Small Cap Growth Equity Portfolio

Investment Objective

BlackRock Small Cap Growth Equity Portfolio’s (the “Fund”) investment objective is to seek long-term capital growth.

Portfolio Management Commentary

How did the Fund perform?

For the six-month period ended March 31, 2014, the Fund outperformed its benchmark, the Russell 2000^® Growth Index.

What factors influenced performance?

The Fund’s outperformance was attributable mostly to stock selection within the health care and information technology (“IT”) sectors. Within health care, a position in Biopharmaceutical Gentium Spa appreciated substantially throughout the period, driven by several factors including better-than-expected third-quarter earnings, the company’s main vascular drug Defibrotide (Defitelio) receiving the European Medicines Agency’s orphan drug designation, and the company’s acceptance of a take-over bid from Jazz Pharmaceuticals. The Fund’s position in specialty pharmaceutical Santarus also contributed positively to performance after the company accepted a takeover bid from Salix Pharmaceuticals. Within IT, a position in supply chain IT system provider Manhattan Associates rallied considerably after the company reported record fourth-quarter and full-year 2013 financial results. Touchscreen and touchpad provider Synaptics notably appreciated throughout the period on the back of strong smartphone touchscreen demand and better-than-expected third-quarter revenues.

Conversely, stock selection within the consumer discretionary sector detracted from performance. In particular, the Fund’s position in television

network company CTC Media, which streams local Russian news and media globally, hurt returns. CTC Media stock depreciated throughout the period as investors’ concerns about a weakening macroeconomic outlook for Russia overshadowed the company’s better-than-expected fourth-quarter earnings and 2014 outlook. The Fund’s holding of home appliance and equipment retailer Sears Hometown & Outlet Stores also detracted from performance. The company reported disappointing third-and fourth-quarter earnings, missed its earnings estimates for fiscal year 2014, and continued to struggle with sales due in part to no longer selling consumer electronics in their Hometown stores.

Describe recent portfolio activity.

During the six-month period, the Fund’s weightings in the IT and materials sectors increased while the weightings in consumer discretionary and industrials decreased.

Describe portfolio positioning at period end.

Relative to the Russell 2000 Growth^® Index, the Fund’s most significant sector overweight as of period end was IT and the most significant underweight was consumer discretionary.

Portfolio Information


Ten Largest Holdings	Percent of Long-Term Investments
Align Technology, Inc.		3	%
Aspen Technology, Inc.		3
Manhattan Associates, Inc.		2
Thoratec Corp.		2
Synaptics, Inc.		2
KapStone Paper and Packaging Corp.		2
Syntel, Inc.		2
Spirit Airlines, Inc.		2
PROS Holdings, Inc.		2
NIC, Inc.		2


Sector Allocation	Percent of Long-Term Investments
Information Technology		30	%
Health Care		21
Industrials		17
Consumer Discretionary		11
Financials		6
Energy		5
Materials		5
Telecommunication Services		2
Consumer Staples		2
Utilities		1


8		BLACKROCK FUNDS		MARCH 31, 2014


			BlackRock Small Cap Growth Equity Portfolio


Total Return Based on a $10,000 Investment

LOGO

Under normal circumstances, the Fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of small cap companies and at least 80% of its net assets (plus any borrowings for investment purposes) in securities or instruments of issuers located in the United States.

An index that contains those securities with greater-than-average growth orientations, generally having higher price-to-value ratios and higher fore- casted growth values.


Performance Summary for the Period Ended March 31, 2014
				Average Annual Total Returns⁴
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		12.76	%		26.82	%		N/A			24.38	%		N/A			9.22	%		N/A
Service		12.62			26.50			N/A			24.03			N/A			8.93			N/A
Investor A		12.62			26.48			19.83	%		23.93			22.60	%		8.84			8.26	%
Investor B		12.15			25.45			22.14			22.87			22.69			8.10			8.10
Investor C		12.20			25.53			24.79			22.88			22.88			7.91			7.91
Russell 2000^® Growth Index		8.70			27.19			N/A			25.24			N/A			8.87			N/A

⁴

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

Past performance is not indicative of future results.


Expense Example
	Actual			Hypothetical⁶
	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁵	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁵	Annualized Expense Ratio
Institutional	$1,000.00	$1,127.60	$4.77	$1,000.00	$1,020.44	$4.53	0.90%
Service	$1,000.00	$1,126.20	$5.88	$1,000.00	$1,019.40	$5.59	1.11%
Investor A	$1,000.00	$1,126.20	$6.10	$1,000.00	$1,019.20	$5.79	1.15%
Investor B	$1,000.00	$1,121.50	$10.53	$1,000.00	$1,015.01	$10.00	1.99%
Investor C	$1,000.00	$1,122.00	$10.05	$1,000.00	$1,015.46	$9.55	1.90%

⁵

⁶

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 10 for further information on how expenses were calculated.


		BLACKROCK FUNDS		MARCH 31, 2014		9


About Fund Performance

Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

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

Class R Shares are not subject to any sales charge. These shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. These shares are available only to certain employer- sponsored retirement plans. Prior to October 2, 2006, Class R performance results of BlackRock Mid-Cap Growth Equity Portfolio are those of Institutional Shares (which have no distribution or service fees) restated

to reflect Class R Share fees. Prior to July 30, 2010, Class R performance results of BlackRock Flexible Equity Fund are those of Institutional Shares (which have no distribution or service fees) restated to reflect Class R Share fees.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month end. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. 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.

Performance for BlackRock Flexible Equity Fund for the periods prior to January 31, 2005 is based on performance of a certain former State Street Research mutual fund that reorganized with BlackRock Flexible Equity Fund on that date.

Disclosure of Expenses

Shareholders of these Funds may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other Fund expenses. The expense examples on the previous pages (which are based on a hypothetical investment of $1,000 invested on October 1, 2013 and held through March 31, 2014) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other mutual funds.


10		BLACKROCK FUNDS		MARCH 31, 2014


Derivative Financial Instruments

The Funds may invest in various derivative financial instruments, including financial futures contracts, forward foreign currency exchange contracts, options and swaps, as specified in Note 4 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, equity, interest rate and/or foreign currency exchange rate risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial

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


		BLACKROCK FUNDS		MARCH 31, 2014		11


Consolidated Schedule of Investments March 31, 2014 (Unaudited)			BlackRock Flexible Equity Fund
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Airlines — 7.8%
Air Canada, Class B (a)		74,400	$	372,168
Japan Airlines Co. Ltd.		941,300		46,325,695
United Continental Holdings, Inc. (a)		94,400		4,213,072
Westjet Airlines Ltd.		10,000		222,976

				51,133,911
Automobiles — 6.3%
Bayerische Motoren Werke AG		66,000		8,340,206
General Motors Co.		952,600		32,788,492

				41,128,698
Building Products — 1.6%
Owens Corning		234,100		10,106,097
Capital Markets — 0.0%
Freedom Pay, Inc. (a)		43,051		—
Chemicals — 0.5%
CF Industries Holdings, Inc.		12,400		3,231,936
Consumer Finance — 1.1%
Discover Financial Services		123,500		7,186,465
Diversified Consumer Services — 4.1%
Houghton Mifflin Harcourt Co. (a)		1,332,767		27,095,153
Diversified Financial Services — 2.9%
Ally Financial, Inc. (a)		925		7,608,125
Berkshire Hathaway, Inc., Class B (a)		92,300		11,534,731

				19,142,856
Energy Equipment & Services — 0.9%
Noble Corp. PLC		176,900		5,791,706
Food & Staples Retailing — 2.1%
Metro AG (a)		331,804		13,534,803
Health Care Providers & Services — 5.9%
Community Health Systems, Inc. (a)		145,600		5,703,152
UnitedHealth Group, Inc.		404,500		33,164,955

				38,868,107
Insurance — 9.6%
American International Group, Inc.		754,300		37,722,543
Fidelity National Financial, Inc., Class A		808,500		25,419,240

				63,141,783
Internet Software & Services — 3.0%
eBay, Inc. (a)		242,320		13,385,757
Google, Inc., Class A (a)		5,800		6,464,158

				19,849,915
IT Services — 3.4%
Visa, Inc., Class A		104,200		22,492,612
Media — 11.7%
Comcast Corp., Class A		163,700		8,188,274
Liberty Global PLC, Series A (a)		144,700		6,019,520
Liberty Global PLC, Series C (a)		144,700		5,890,737
Nexstar Broadcasting Group, Inc., Class A		648,200		24,320,464
Sinclair Broadcast Group, Inc., Class A		1,183,800		32,069,142

				76,488,137
Oil, Gas & Consumable Fuels — 7.6%
EQT Corp.		118,370		11,478,339


Common Stocks	Shares		Value
Oil, Gas & Consumable Fuels (concluded)
Gazprom Neft OAO — ADR		6,130	$	126,462
Gazprom OAO — ADR		166,700		1,295,259
HollyFrontier Corp.		68,440		3,256,375
Marathon Petroleum Corp.		119,000		10,357,760
Suncor Energy, Inc.		671,100		23,461,656

				49,975,851
Pharmaceuticals — 1.5%
Pfizer, Inc.		310,300		9,966,836
Semiconductors & Semiconductor Equipment — 3.7%
Micron Technology, Inc. (a)		525,700		12,438,062
Samsung Electronics Co. Ltd., Preference Shares		8,400		8,367,888
SK Hynix, Inc. (a)		99,600		3,379,515

				24,185,465
Software — 3.0%
Activision Blizzard, Inc.		943,800		19,291,272
Wireless Telecommunication Services — 3.1%
SoftBank Corp.		109,600		8,282,281
Vodafone Group PLC — ADR		329,945		12,145,276

				20,427,557
Total Common Stocks — 79.8%				523,039,160

Investment Companies
iShares Gold Trust (a)		1,226,700		15,260,148
SPDR Gold Trust (a)		277,000		34,239,970
Total Investment Companies — 7.6%				49,500,118

Participation Notes (a)
Semiconductors & Semiconductor Equipment — 2.3%
Merrill Lynch International (Samsung Electronics Co. Ltd.), due 9/09/14		12,000		15,176,880
Total Long-Term Investments (Cost — $513,897,671) — 89.7%				587,716,158

Short-Term Securities
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (b)(c)		45,393,347		45,393,347
Total Short-Term Securities (Cost — $45,393,347) — 7.0%				45,393,347

Options Purchased
(Cost — $1,835,275) — 0.4%				2,775,910
Total Investments Before Options Written (Cost — $561,126,293) — 97.1%				635,885,415

Portfolio Abbreviations

ADR American Depositary Receipts

CAD Canadian Dollar

EUR Euro

JPY Japanese Yen

LIBOR London Interbank Offered Rate

USD US Dollar

See Notes to Financial Statements.


12		BLACKROCK FUNDS		MARCH 31, 2014


Consolidated Schedule of Investments (continued)			BlackRock Flexible Equity Fund
			(Percentages shown are based on Net Assets)


Options Written		Value
(Premiums Received — $438,165) — (0.1)%	$	(380,361	)
Total Investments Net of Options Written — 97.0%		635,505,054
Other Assets Less Liabilities — 3.0%		19,553,755

Net Assets — 100.0%	$	655,058,809

Notes to Consolidated Schedule of Investments

(a)	Non-income producing security.

(b)	Investments in issuers considered to be an affiliate of the Fund during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares Held at September 30, 2013		Shares Purchased			Shares Sold		Shares Held at March 31, 2014		Value at March 31, 2014		Income		Realized Loss
BlackRock Liquidity Funds, TempFund, Institutional Class		25,752,136		19,641,212	¹		—		45,393,347	$	45,393,347	$	6,548		—
BlackRock Liquidity Series, LLC, Money Market Series		—		—			—		—		—		814		—
iShares Gold Trust		—		1,226,700			—		1,226,700		15,260,148		—		—
iShares Silver Trust		783,500		—			783,500		—		—		—	$	(1,777,073	)

Represents net shares purchased.

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

For Fund compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes and/or as defined by the investment advisor. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

Financial futures contracts outstanding as of March 31, 2014 were as follows:

Contracts
Sold

Issue

Exchange

Expiration

Notional
Value

Unrealized
Appreciation

(425

)

E-Mini Russell 2000 Futures

Intercontinental Exchange

June 2014

USD

49,746,250

540,620

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows:


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
CAD	7,400,000		USD	6,678,399	Citibank N.A.		4/22/14	$	12,010
EUR	1,845,000		USD	2,534,292	Citibank N.A.		4/22/14		7,357
EUR	9,943,767		USD	13,518,362	Citibank N.A.		4/22/14		180,047
JPY	260,540,000		USD	2,544,063	Citibank N.A.		4/22/14		(19,513	)
USD	6,926,576		CAD	7,602,000	Barclays Bank PLC		4/22/14		53,537
USD	2,549,740		CAD	2,825,000	Citibank N.A.		4/22/14		(4,369	)
USD	39,249,579		EUR	28,906,000	Deutsche Bank AG		4/22/14		(570,966	)
USD	48,835,998		JPY	5,092,401,000	BNP Paribas S.A.		4/22/14		(507,745	)
USD	4,662,307		JPY	472,447,000	JPMorgan Chase Bank N.A.		4/22/14		84,447
USD	3,030,638		JPY	310,207,000	Toronto-Dominion Bank		4/22/14		24,831
Total								$	(740,364	)

Exchange-traded options purchased as of March 31, 2014 were as follows:

Description

Put

Strike

Price

Expiration
Date

Contracts

Market
Value

58.com, Inc. — ADR

Put

USD

40.00

4/19/14

500

111,250

Facebook, Inc.

Put

USD

62.50

4/19/14

1,000

352,500

Seattle Genetics, Inc.

Put

USD

50.00

4/19/14

300

195,000

ServiceNow, Inc.

Put

USD

60.00

4/19/14

400

102,000

Tableau Software, Inc.

Put

USD

80.00

4/19/14

600

360,000

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		13


Consolidated Schedule of Investments (continued)			BlackRock Flexible Equity Fund

Exchange-traded options purchased as of March 31, 2014 were as follows: (concluded)


Description	Put		Strike Price			Expiration Date	Contracts		Market Value
Yelp, Inc.		Put		USD	82.50	4/19/14		400	$	294,000
Yelp, Inc.		Put		USD	80.00	4/19/14		200		111,000
Demandware, Inc.		Put		USD	55.00	5/17/14		300		51,000
FireEye, Inc.		Put		USD	60.00	5/17/14		350		196,000
Workday, Inc.		Put		USD	90.00	5/17/14		166		69,720
Facebook, Inc.		Put		USD	57.50	6/21/14		438		178,485
FireEye, Inc.		Put		USD	55.00	6/21/14		504		241,920
DexCom, Inc.		Put		USD	40.00	9/20/14		266		210,140
Veeva Systems, Inc.		Put		USD	25.00	9/20/14		663		208,845
Tableau Software, Inc.		Put		USD	70.00	10/18/14		95		94,050
Total									$	2,775,910

Exchange-traded options written as of March 31, 2014 were as follows:


Description	Call		Strike Price			Expiration Date	Contracts		Market Value
American International Group, Inc.		Call		USD	51.00	4/11/14		1,734	$	(50,286	)
Discover Financial Services		Call		USD	55.00	4/19/14		404		(137,360	)
Marathon Petroleum Corp.		Call		USD	92.50	4/19/14		238		(17,255	)
CF Industries Holdings, Inc.		Call		USD	250.00	4/25/14		124		(175,460	)
Total									$	(380,361	)

OTC total return swaps outstanding as of March 31, 2014 were as follows:


Reference Entity	Fixed Rate/ Floating Rate	Counterparty		Expiration Date	Contracts			Market Value		Premiums Paid (Received)		Unrealized Appreciation
Samsung Electronics Co. Ltd.	1-month LIBOR plus 0.50%¹		Citibank N.A.	9/05/14		USD	6,000	$	451,678		—	$	451,678
Samsung Electronics Co. Ltd.	1-month LIBOR plus 0.50%¹		Citibank N.A.	9/11/14		USD	4,500		338,758		—		338,758
Samsung Electronics Co. Ltd.	1-month LIBOR plus 0.50%¹		Citibank N.A.	9/11/14		USD	4,200		316,174		—		316,174
Total								$	1,106,610		—	$	1,106,610

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

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

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

See Notes to Financial Statements.


14		BLACKROCK FUNDS		MARCH 31, 2014


Consolidated Schedule of Investments (concluded)		BlackRock Flexible Equity Fund

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of March 31, 2014:


	Level 1			Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Airlines	$	4,808,216		$	46,325,695			—	$	51,133,911
Automobiles		32,788,492			8,340,206			—		41,128,698
Building Products		10,106,097			—			—		10,106,097
Capital Markets		—			—			—		—
Chemicals		3,231,936			—			—		3,231,936
Consumer Finance		7,186,465			—			—		7,186,465
Diversified Consumer Services		27,095,153			—			—		27,095,153
Diversified Financial Services		11,534,731			7,608,125			—		19,142,856
Energy Equipment & Services		5,791,706			—			—		5,791,706
Food & Staples Retailing		—			13,534,803			—		13,534,803
Health Care Providers & Services		38,868,107			—			—		38,868,107
Insurance		63,141,783			—			—		63,141,783
Internet Software & Services		19,849,915			—			—		19,849,915
IT Services		22,492,612			—			—		22,492,612
Media		76,488,137			—			—		76,488,137
Oil, Gas & Consumable Fuels		49,975,851			—			—		49,975,851
Pharmaceuticals		9,966,836			—			—		9,966,836
Semiconductors & Semiconductor Equipment		12,438,062			11,747,403			—		24,185,465
Software		19,291,272			—			—		19,291,272
Wireless Telecommunication Services		12,145,276			8,282,281			—		20,427,557
Investment Companies		49,500,118			—			—		49,500,118
Participation Notes:
Semiconductors & Semiconductor Equipment		—			15,176,880			—		15,176,880
Short-Term Securities		45,393,347			—			—		45,393,347
Options Purchased:
Equity Contracts		2,775,910			—			—		2,775,910
Total	$	524,870,022		$	111,015,393			—	$	635,885,415


	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments¹
Assets:
Equity contracts	$	540,620		$	1,106,610			—	$	1,647,230
Foreign currency exchange contracts		—			362,229			—		362,229
Liabilities:
Equity contracts		(380,361	)		—			—		(380,361	)
Foreign currency exchange contracts		—			(1,102,593	)		—		(1,102,593	)
Total	$	160,259		$	366,246			—	$	526,505


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

The carrying amount for certain of the Fund’s assets and/or liabilities approximates fair value for financial statement purposes. As of March 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1			Level 2			Level 3		Total
Assets:
Cash pledged for financial futures contracts	$	2,105,000			—			—	$	2,105,000
Foreign currency at value		3,329,352			—			—		3,329,352
Liabilities:
Cash received as collateral for OTC derivatives		—		$	(900,000	)		—		(900,000	)
Total	$	5,434,353		$	(900,000	)		—	$	4,534,353

There were no transfers between levels during the six months ended March 31, 2014.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		15


Schedule of Investments March 31, 2014 (Unaudited)			BlackRock Mid-Cap Growth Equity Portfolio
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Air Freight & Logistics — 1.4%
XPO Logistics, Inc. (a)		184,716	$	5,432,498
Airlines — 2.1%
Spirit Airlines, Inc. (a)		144,016		8,554,550
Banks — 1.9%
First Republic Bank		81,029		4,374,756
SVB Financial Group (a)		26,100		3,361,158

				7,735,914
Biotechnology — 2.0%
United Therapeutics Corp. (a)		84,642		7,958,887
Capital Markets — 1.7%
Affiliated Managers Group, Inc. (a)		33,340		6,669,667
Commercial Services & Supplies — 4.2%
KAR Auction Services, Inc.		279,664		8,487,802
Waste Connections, Inc.		191,643		8,405,462

				16,893,264
Construction & Engineering — 0.5%
Louis XIII Holdings Ltd. (a)(b)		1,988,500		2,179,339
Diversified Financial Services — 2.4%
Moody’s Corp.		118,949		9,435,035
Electrical Equipment — 5.0%
Acuity Brands, Inc.		31,000		4,109,670
AMETEK, Inc.		168,597		8,681,059
SolarCity Corp. (a)(b)		114,560		7,173,747

				19,964,476
Energy Equipment & Services — 3.5%
Core Laboratories NV		33,631		6,673,736
FMC Technologies, Inc. (a)		66,333		3,468,553
Oceaneering International, Inc.		54,025		3,882,237

				14,024,526
Food Products — 1.8%
Mead Johnson Nutrition Co.		88,440		7,352,902
Health Care Equipment & Supplies — 3.5%
The Cooper Cos., Inc.		68,699		9,436,495
Intuitive Surgical, Inc. (a)		10,897		4,772,777

				14,209,272
Health Care Technology — 1.6%
Athenahealth, Inc. (a)(b)		40,187		6,439,565
Hotels, Restaurants & Leisure — 4.8%
Panera Bread Co. — Class A (a)		43,851		7,738,386
Wynn Resorts Ltd.		51,320		11,400,738

				19,139,124
Household Durables — 3.3%
Jarden Corp. (a)		218,903		13,096,966
Household Products — 2.0%
Spectrum Brands Holdings, Inc.		103,013		8,210,136
Internet & Catalog Retail — 8.0%
ASOS PLC (a)		37,399		3,232,760
Liberty Ventures, Series A (a)		119,433		15,565,703
Qunar Cayman Islands Ltd. — ADR (a)		180,545		5,522,872
Vipshop Holdings Ltd. — ADR (a)		51,824		7,737,323

				32,058,658
Internet Software & Services — 8.1%
AOL, Inc. (a)		80,838		3,538,279
CoStar Group, Inc. (a)		26,063		4,867,005
IAC/InterActiveCorp		111,378		7,951,275


Common Stocks	Shares		Value
Internet Software & Services (concluded)
SINA Corp. (a)		71,647	$	4,328,195
Yelp, Inc. (a)		131,006		10,078,292
Youku Tudou, Inc. — ADR (a)		68,506		1,920,908

				32,683,954
IT Services — 4.7%
Alliance Data Systems Corp. (a)		36,212		9,865,959
WEX, Inc. (a)		94,443		8,976,807

				18,842,766
Machinery — 3.7%
Colfax Corp. (a)		104,906		7,482,945
Pentair Ltd.		42,487		3,370,919
Timken Co.		69,489		4,084,563

				14,938,427
Marine — 0.8%
Kirby Corp. (a)		32,500		3,290,625
Media — 8.7%
Aimia, Inc.		406,100		6,520,375
Lions Gate Entertainment Corp.		245,267		6,555,987
The Madison Square Garden Co., Class A (a)		194,360		11,035,761
Schibsted ASA		172,414		10,689,084

				34,801,207
Pharmaceuticals — 2.7%
Alexza Pharmaceuticals, Inc. (a)		81,252		—
Jazz Pharmaceuticals PLC (a)		40,391		5,601,424
Zoetis, Inc.		176,460		5,106,752

				10,708,176
Professional Services — 1.2%
Towers Watson & Co., Class A		42,531		4,850,660
Road & Rail — 2.2%
Genesee & Wyoming, Inc., Class A (a)		73,418		7,145,040
JB Hunt Transport Services, Inc.		24,641		1,772,181

				8,917,221
Software — 7.2%
Autodesk, Inc. (a)		146,368		7,198,378
Guidewire Software, Inc. (a)		117,314		5,754,252
Qlik Technologies, Inc. (a)		137,098		3,645,436
ServiceNow, Inc. (a)		87,504		5,243,240
Splunk, Inc. (a)		97,099		6,941,607

				28,782,913
Specialty Retail — 5.4%
CarMax, Inc. (a)		143,960		6,737,328
Lumber Liquidators Holdings, Inc. (a)		75,637		7,094,751
Tractor Supply Co.		113,125		7,990,019

				21,822,098
Textiles, Apparel & Luxury Goods — 2.0%
Under Armour, Inc., Class A (a)		68,142		7,811,799
Wireless Telecommunication Services — 1.6%
SBA Communications Corp., Class A (a)		71,019		6,459,888
Total Common Stocks — 98.0%				393,264,513

See Notes to Financial Statements.


16		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (continued)			BlackRock Mid-Cap Growth Equity Portfolio
			(Percentages shown are based on Net Assets)


Preferred Stocks	Shares		Value
Internet Software & Services — 1.3%
Uber Technologies, Inc. (Acquired 3/20/14, cost $5,000,920) (c)(d)		5,000,920	$	5,000,920
Software — 0.7%
Palantir Technologies, Inc. (Acquired 2/07/14,cost $2,811,904) (d)		458,712		2,811,904
Total Preferred Stocks — 2.0%				7,812,824
Total Long-Term Investments (Cost — $320,335,364) — 100.0%				401,077,337

Short-Term Securities
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (e)(f)		2,093,119		2,093,119


Short-Term Securities	Beneficial Interest (000)		Value
BlackRock Liquidity Series, LLC, Money Market Series, 0.16% (e)(f)(g)	$	10,457		10,457,192
Total Short-Term Securities (Cost — $12,550,311) — 3.1%				12,550,311
Total Investments (Cost — $332,885,675) — 103.1%				413,627,648
Liabilities in Excess of Other Assets — (3.1)%				(12,338,715	)

Net Assets — 100.0%			$	401,288,933

Notes to Schedule of Investments

(a)	Non-income producing security.

(b)	Security, or a portion of security, is on loan.

(c)	Convertible security.

(d)	Restricted securities as to resale. As of report date, the Fund held restricted securities with a current value of $7,812,824 and an original cost of $7,812,824 which was 2.0% of its net assets.

(e)	Investments in issuers considered to be an affiliate of the Fund during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares/ Beneficial Interest Held at September 30, 2013		Net Activity			Shares/ Beneficial Interest Held at March 31, 2014		Value at March 31, 2014		Income
BlackRock Liquidity Funds, TempFund, Institutional Class		340,952		1,752,167			2,093,119	$	2,093,119	$	382
BlackRock Liquidity Series, LLC, Money Market Series	$	31,633,241	$	(21,176,049	)	$	10,457,192	$	10,457,192	$	47,212

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

(g)	Security was purchased with the cash collateral from loaned securities. The Fund may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

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

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		17


Schedule of Investments (continued)			BlackRock Mid-Cap Growth Equity Portfolio

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of March 31, 2014:


	Level 1		Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Air Freight & Logistics	$	5,432,498		—			—	$	5,432,498
Airlines		8,554,550		—			—		8,554,550
Banks		7,735,914		—			—		7,735,914
Biotechnology		7,958,887		—			—		7,958,887
Capital Markets		6,669,667		—			—		6,669,667
Commercial Services & Supplies		16,893,264		—			—		16,893,264
Construction & Engineering		—	$	2,179,339			—		2,179,339
Diversified Financial Services		9,435,035		—			—		9,435,035
Electrical Equipment		19,964,476		—			—		19,964,476
Energy Equipment & Services		14,024,526		—			—		14,024,526
Food Products		7,352,902		—			—		7,352,902
Health Care Equipment & Supplies		14,209,272		—			—		14,209,272
Health Care Technology		6,439,565		—			—		6,439,565
Hotels, Restaurants & Leisure		19,139,124		—			—		19,139,124
Household Durables		13,096,966		—			—		13,096,966
Household Products		8,210,136		—			—		8,210,136
Internet & Catalog Retail		28,825,898		3,232,760			—		32,058,658
Internet Software & Services		32,683,954		—			—		32,683,954
IT Services		18,842,766		—			—		18,842,766
Machinery		14,938,427		—			—		14,938,427
Marine		3,290,625		—			—		3,290,625
Media		24,112,123		10,689,084			—		34,801,207
Pharmaceuticals		10,708,176		—			—		10,708,176
Professional Services		4,850,660		—			—		4,850,660
Road & Rail		8,917,221		—			—		8,917,221
Software		28,782,913		—			—		28,782,913
Specialty Retail		21,822,098		—			—		21,822,098
Textiles, Apparel & Luxury Goods		7,811,799		—			—		7,811,799
Wireless Telecommunication Services		6,459,888		—			—		6,459,888
Preferred Stocks		—		—		$	7,812,824		7,812,824
Short-Term Securities		2,093,119		10,457,192			—		12,550,311
Total	$	379,256,449	$	26,558,375		$	7,812,824	$	413,627,648


The carrying amount for certain of the Fund’s assets and/or liabilities approximates fair value for financial statement purposes. As of March 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Foreign currency at value	$	53,815		—			—	$	53,815
Liabilities:
Collateral on securities loaned at value		—	$	(10,457,192	)		—		(10,457,192	)
Total	$	53,815	$	(10,457,192	)		—	$	(10,403,377	)

There were no transfers between Level 1 and Level 2 during the six months ended March 31, 2014.

See Notes to Financial Statements.


18		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (concluded)			BlackRock Mid-Cap Growth Equity Portfolio

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


	Preferred Stocks
Assets:
Opening balance, as of September 30, 2013		—
Transfers into Level 3		—
Transfers out of Level 3		—
Accrued discounts/premiums		—
Net realized gain (loss)		—
Net change in unrealized appreciation/depreciation¹		—
Purchases	$	7,812,824
Sales		—
Closing balance, as of March 31, 2014	$	7,812,824

Net change in unrealized appreciation/depreciation on investments still held at March 31, 2014^1,2		—

¹	Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations.

²	Any difference between Net change in unrealized appreciation/depreciation and Net change in unrealized appreciation/depreciation on investments still held at March 31, 2014 is generally due to investments no longer held or categorized as level 3 at period end.

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

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		19


Schedule of Investments March 31, 2014 (Unaudited)			BlackRock Small Cap Growth Equity Portfolio
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Aerospace & Defense — 1.5%
Ducommun, Inc. (a)		106,410	$	2,666,635
Esterline Technologies Corp. (a)		18,081		1,926,350
Spirit AeroSystems Holdings, Inc., Class A (a)		178,331		5,027,151
Taser International, Inc. (a)		169,276		3,096,058

				12,716,194
Airlines — 1.7%
Republic Airways Holdings, Inc. (a)		52,272		477,766
Spirit Airlines, Inc. (a)		239,316		14,215,370

				14,693,136
Auto Components — 2.1%
Gentherm, Inc. (a)		196,726		6,830,327
Stoneridge, Inc. (a)		95,264		1,069,815
Tower International, Inc. (a)		356,315		9,698,894

				17,599,036
Banks — 0.3%
Access National Corp.		9,636		156,200
CommunityOne Bancorp (a)		29,762		333,930
First Citizens BancShares, Inc., Class A		2,201		529,891
Independent Bank Group, Inc.		3,346		196,577
State Bank Financial Corp.		18		318
Texas Capital Bancshares, Inc. (a)		16,424		1,066,575

				2,283,491
Biotechnology — 7.4%
ACADIA Pharmaceuticals, Inc. (a)		29,005		705,692
Achillion Pharmaceuticals, Inc. (a)		256,337		843,349
Acorda Therapeutics, Inc. (a)		18,123		687,043
Aegerion Pharmaceuticals, Inc. (a)		9,370		432,144
Alnylam Pharmaceuticals, Inc. (a)		40,778		2,737,835
AMAG Pharmaceuticals, Inc. (a)		38,312		741,337
Ambit Biosciences Corp. (a)		39,677		361,854
Arena Pharmaceuticals, Inc. (a)		57,329		361,173
ArQule, Inc. (a)		65,615		134,511
AVEO Pharmaceuticals, Inc. (a)		56,002		83,723
BIND Therapeutics, Inc. (a)		98,981		1,183,813
BioSpecifics Technologies Corp. (a)(b)		78,153		2,025,726
BioTime, Inc. (a)(c)		90,590		298,041
Bluebird Bio, Inc. (a)		25,649		583,258
Celldex Therapeutics, Inc. (a)		37,305		659,179
Cepheid, Inc. (a)		49,511		2,553,777
Chimerix, Inc. (a)		27,174		620,654
Clovis Oncology, Inc. (a)		7,304		505,948
Cytokinetics, Inc. (a)		197,194		1,873,343
Dicerna Pharmaceuticals, Inc. (a)		23,896		675,062
Dyax Corp. (a)		46,581		418,297
Dynavax Technologies Corp. (a)		1,039,592		1,871,266
Emergent Biosolutions, Inc. (a)		71,187		1,798,895
Enzon Pharmaceuticals, Inc.		631,173		650,108
Exact Sciences Corp. (a)		9,267		131,313
Foundation Medicine, Inc. (a)(c)		28,298		916,006
GTx, Inc. (a)(c)		73,283		112,123
Halozyme Therapeutics, Inc. (a)		27,574		350,190
Harvard Apparatus Regenerative Technology, Inc. (a)		88,148		799,502
Immunogen, Inc. (a)		9,511		141,999
Intercept Pharmaceuticals, Inc. (a)		4,493		1,481,746
InterMune, Inc. (a)		55,736		1,865,484
Intrexon Corp. (a)		71,434		1,878,000
Ironwood Pharmaceuticals, Inc. (a)		36,795		453,314
Isis Pharmaceuticals, Inc. (a)		94,442		4,080,839
Karyopharm Therapeutics, Inc. (a)		23,861		737,066
Keryx Biopharmaceuticals, Inc. (a)		38,513		656,262
Kindred Biosciences, Inc. (a)		3,147		58,314
Ligand Pharmaceuticals, Inc., Class B (a)		14,605		982,332


Common Stocks	Shares		Value
Biotechnology (concluded)
Macrogenics, Inc. (a)		2,332	$	64,900
Momenta Pharmaceuticals, Inc. (a)		144,140		1,679,231
Myriad Genetics, Inc. (a)(c)		12,940		442,419
Neurocrine Biosciences, Inc. (a)		14,006		225,497
NPS Pharmaceuticals, Inc. (a)		41,083		1,229,614
OncoGenex Pharmaceutical, Inc. (a)		149,327		1,756,086
Ophthotech Corp. (a)		37,846		1,352,616
OPKO Health, Inc. (a)(c)		95,925		894,021
OvaScience, Inc. (a)		8,582		76,723
PDL BioPharma, Inc.		37,443		311,151
Peregrine Pharmaceuticals, Inc. (a)(c)		437,447		831,149
Portola Pharmaceuticals, Inc. (a)		73,828		1,912,145
Puma Biotechnology, Inc. (a)		14,492		1,509,197
Receptos, Inc. (a)		27,061		1,134,938
Regulus Therapeutics, Inc. (a)		167,699		1,512,645
Repligen Corp. (a)		146,225		1,880,453
Rigel Pharmaceuticals, Inc. (a)		267,702		1,038,684
Sangamo Biosciences, Inc. (a)		24,291		439,181
Stemline Therapeutics, Inc. (a)		11,671		237,622
Sunesis Pharmaceuticals, Inc. (a)		242,671		1,604,055
Synageva BioPharma Corp. (a)		8,393		696,367
Tetralogic Pharmaceuticals Corp. (a)		3,581		22,847
Tetraphase Pharmaceuticals, Inc. (a)		68,214		742,850
Threshold Pharmaceuticals, Inc. (a)		389,610		1,854,544
Ultragenyx Pharmaceutical, Inc. (a)		32,810		1,604,081
Vanda Pharmaceuticals, Inc. (a)		6,161		100,116
Verastem, Inc. (a)		36,447		393,263
Xencor, Inc. (a)		8,619		101,101

				63,098,014
Building Products — 1.9%
Griffon Corp.		497		5,934
Insteel Industries, Inc.		9,186		180,689
NCI Building Systems, Inc. (a)		21,832		381,187
PGT, Inc. (a)		1,104,701		12,715,108
Ply Gem Holdings, Inc. (a)(c)		202,488		2,557,423

				15,840,341
Capital Markets — 0.8%
GAMCO Investors, Inc., Class A		7,455		578,881
HFF, Inc., Class A		160,759		5,403,110
Marcus & Millichap, Inc. (a)		5,363		95,676
MCG Capital Corp.		1,253		4,749
Westwood Holdings Group, Inc.		13,094		820,863

				6,903,279
Chemicals — 1.1%
Codexis, Inc. (a)		220		449
Ferro Corp. (a)		70,323		960,612
FutureFuel Corp.		50,795		1,031,139
KMG Chemicals, Inc.		598		9,377
Landec Corp. (a)		23,879		266,490
OM Group, Inc.		109,566		3,639,783
OMNOVA Solutions, Inc. (a)		34,664		359,812
PolyOne Corp.		91,646		3,359,742

				9,627,404
Commercial Services & Supplies — 0.6%
Deluxe Corp.		30,788		1,615,446
G&K Services, Inc., Class A		13,130		803,162
Performant Financial Corp. (a)		184,195		1,666,965
Steelcase, Inc., Class A		10,323		171,465
Viad Corp.		35,892		862,844

				5,119,882
Communications Equipment — 3.2%
Aruba Networks, Inc. (a)(c)		449,515		8,428,406

See Notes to Financial Statements.


20		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (continued)			BlackRock Small Cap Growth Equity Portfolio
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Communications Equipment (concluded)
Aviat Networks, Inc. (a)		201,039	$	319,652
Calix, Inc. (a)		156,835		1,322,119
Extreme Networks, Inc. (a)		916,444		5,315,375
Ubiquiti Networks, Inc. (a)(c)		263,131		11,964,567

				27,350,119
Construction & Engineering — 0.1%
Comfort Systems USA, Inc.		48,357		736,961
Consumer Finance — 0.2%
JGWPT Holdings, Inc., Class A (a)		91,567		1,672,013
Containers & Packaging — 1.0%
Berry Plastics Group, Inc. (a)		26,996		624,957
Graphic Packaging Holding Co. (a)		771,733		7,840,807

				8,465,764
Distributors — 0.1%
Core-Mark Holding Co., Inc.		11,337		823,066
Diversified Consumer Services — 1.1%
2U, Inc. (a)		8,831		120,543
Capella Education Co.		6,330		399,739
Collectors Universe, Inc.		67,346		1,267,452
LifeLock, Inc. (a)		230,021		3,935,659
National American University Holdings, Inc.		9,696		37,717
Steiner Leisure Ltd. (a)		75,364		3,485,585

				9,246,695
Diversified Telecommunication Services — 2.5%
Cbeyond, Inc. (a)(b)		1,456,154		10,557,117
Inteliquent, Inc.		267,507		3,886,877
Leap Wireless International, Inc. (a)		11,529		29,053
Magicjack Vocaltec Ltd. (a)(c)		125,430		2,662,879
Premiere Global Services, Inc. (a)		166,054		2,002,611
Vonage Holdings Corp. (a)		412,686		1,762,169

				20,900,706
Electrical Equipment — 2.1%
EnerSys, Inc.		128,609		8,911,318
Franklin Electric Co., Inc.		1,393		59,230
Generac Holdings, Inc.		134,021		7,903,218
Lihua International, Inc. (a)		121,652		597,311

				17,471,077
Electronic Equipment, Instruments & Components — 3.0%
Aeroflex Holding Corp. (a)		268,374		2,230,188
Benchmark Electronics, Inc. (a)		3,251		73,635
Coherent, Inc. (a)		14,784		966,134
Electro Scientific Industries, Inc.		20,886		205,727
Fabrinet (a)		144,279		2,996,675
FARO Technologies, Inc. (a)		5,991		317,523
Knowles Corp. (a)		130,465		4,118,780
Methode Electronics, Inc.		6,111		187,363
Newport Corp. (a)		303,715		6,280,826
OSI Systems, Inc. (a)		13,643		816,670
RealD, Inc. (a)		659,267		7,364,012

				25,557,533
Energy Equipment & Services — 0.4%
Hercules Offshore, Inc. (a)		58,510		268,561
ION Geophysical Corp. (a)		426,921		1,797,337
Matrix Service Co. (a)		41,688		1,408,221
Parker Drilling Co. (a)		8,292		58,790

				3,532,909
Food & Staples Retailing — 0.3%
The Pantry, Inc. (a)		190,971		2,929,495


Common Stocks	Shares		Value
Food Products — 1.5%
Chiquita Brands International, Inc. (a)		12,378	$	154,106
Farmer Bros Co. (a)		19,316		380,525
Omega Protein Corp. (a)		111,816		1,349,619
Pilgrim’s Pride Corp. (a)		479,149		10,023,797
Seaboard Corp. (a)		402		1,053,823

				12,961,870
Gas Utilities — 0.0%
Southwest Gas Corp.		1,181		63,124
Health Care Equipment & Supplies — 5.9%
Align Technology, Inc. (a)		397,590		20,591,186
Anika Therapeutics, Inc. (a)(c)		1,688		69,377
Cardiovascular Systems, Inc. (a)		5,833		185,431
Cutera, Inc. (a)		59,233		662,817
Dexcom, Inc. (a)		11,818		488,792
Haemonetics Corp. (a)		33,081		1,078,110
ICU Medical, Inc. (a)		45,096		2,700,348
Medical Action Industries, Inc. (a)		163,443		1,139,198
Natus Medical, Inc. (a)		19,061		491,774
RTI Surgical, Inc. (a)		42,729		174,334
SurModics, Inc. (a)		195,813		4,425,374
Thoratec Corp. (a)		503,084		18,015,438

				50,022,179
Health Care Providers & Services — 3.2%
Alliance HealthCare Services, Inc. (a)		11,329		379,861
AMN Healthcare Services, Inc. (a)		273,535		3,758,371
BioTelemetry, Inc. (a)		71,456		720,991
Corvel Corp. (a)		96,096		4,781,737
Cross Country Healthcare, Inc. (a)		89,779		724,517
Five Star Quality Care, Inc. (a)		123,029		597,921
Hanger, Inc. (a)		25,535		860,019
Team Health Holdings, Inc. (a)		72,310		3,235,873
VCA Antech, Inc. (a)		370,093		11,928,097

				26,987,387
Health Care Technology — 1.0%
MedAssets, Inc. (a)		120,598		2,979,977
Merge Healthcare, Inc. (a)		32,102		78,329
Omnicell, Inc. (a)		196,429		5,621,798

				8,680,104
Hotels, Restaurants & Leisure — 1.8%
Bravo Brio Restaurant Group, Inc. (a)		14		198
Caesars Acquisition Co., Class A (a)		4,448		63,206
Del Frisco’s Restaurant Group, Inc. (a)		11,549		322,217
Einstein Noah Restaurant Group, Inc.		37,090		610,501
Jack in the Box, Inc. (a)		179,411		10,574,484
Monarch Casino & Resort, Inc. (a)		11,495		213,002
Popeyes Louisiana Kitchen, Inc. (a)		55,670		2,262,429
Red Lion Hotels Corp. (a)		48,638		283,560
Ruth’s Hospitality Group, Inc.		46,606		563,467
Six Flags Entertainment Corp.		19,163		769,394
Speedway Motorsports, Inc.		12		225

				15,662,683
Household Durables — 0.2%
Cavco Industries, Inc. (a)		9,015		707,227
Flexsteel Industries, Inc.		1,627		61,208
Zagg, Inc. (a)		157,061		725,622

				1,494,057
Insurance — 0.7%
Crawford & Co., Class B		7,308		79,730

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		21


Schedule of Investments (continued)			BlackRock Small Cap Growth Equity Portfolio
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Insurance (concluded)
Fidelity & Guaranty Life		2,538	$	59,897
Fortegra Financial Corp. (a)		39,559		278,100
Greenlight Capital Re Ltd., Class A (a)		51,883		1,701,762
Hallmark Financial Services, Inc. (a)		14,434		119,947
Third Point Reinsurance Ltd. (a)		214,865		3,405,610
Universal Insurance Holdings, Inc.		16,244		206,299

				5,851,345
Internet & Catalog Retail — 0.4%
1-800-Flowers.com, Inc., Class A (a)		141,769		798,159
HSN, Inc.		7,417		443,017
Orbitz Worldwide, Inc. (a)		290,258		2,275,623

				3,516,799
Internet Software & Services — 6.1%
Blucora, Inc. (a)		303,368		5,973,316
Borderfree, Inc. (a)		6,382		118,960
Care.com, Inc. (a)(c)		2,741		45,364
Chegg, Inc. (a)(c)		38,052		266,364
Constant Contact, Inc. (a)		29,294		716,531
CoStar Group, Inc. (a)		11,517		2,150,685
Demandware, Inc. (a)		13,649		874,355
Earthlink Holdings Corp.		14,356		51,825
Global Eagle Entertainment, Inc. (a)		26,525		418,565
Gogo, Inc. (a)(c)		256,211		5,262,574
j2 Global, Inc.		19,315		966,716
Limelight Networks, Inc. (a)		226,206		493,129
LogMeIn, Inc. (a)		20,765		932,141
Move, Inc. (a)		151,280		1,748,797
NIC, Inc.		673,599		13,007,197
Perficient, Inc. (a)		71,600		1,297,392
Q2 Holdings, Inc. (a)		6,382		99,112
Rocket Fuel, Inc. (a)		1,843		79,028
Spark Networks, Inc. (a)		148,655		777,466
Stamps.com, Inc. (a)		28,738		964,447
support.com, Inc. (a)		313,902		800,450
Travelzoo, Inc. (a)		102,270		2,341,983
Tremor Video, Inc. (a)		52,980		218,278
Web.com Group, Inc. (a)		341,734		11,629,208
YuMe, Inc. (a)(c)		41,731		305,054

				51,538,937
IT Services — 2.8%
Cardtronics, Inc. (a)		120,660		4,687,641
Global Cash Access Holdings, Inc. (a)		580,702		3,983,616
Planet Payment, Inc. (a)		16,204		44,399
Syntel, Inc. (a)		166,170		14,938,683

				23,654,339
Leisure Products — 0.5%
Brunswick Corp.		96,485		4,369,806
Life Sciences Tools & Services — 0.4%
Furiex Pharmaceuticals, Inc. (a)		17,062		1,484,394
Harvard Bioscience, Inc. (a)		214,254		1,015,564
PAREXEL International Corp. (a)		10,258		554,855

				3,054,813
Machinery — 4.3%
Douglas Dynamics, Inc.		1,737		30,259
Federal Signal Corp. (a)		121,847		1,815,520
Global Brass & Copper Holdings, Inc.		270,022		4,258,247
The Greenbrier Cos., Inc. (a)		223,893		10,209,521
Hyster-Yale Materials Handling, Inc.		45,348		4,421,430
John Bean Technologies Corp.		103,208		3,189,127
Luxfer Holdings PLC — ADR		628,668		12,309,319


Common Stocks	Shares		Value
Machinery (concluded)
Xerium Technologies, Inc. (a)		8,607	$	138,142

				36,371,565
Marine — 1.1%
Matson, Inc.		370,292		9,142,509
Media — 1.1%
Crown Media Holdings, Inc., Class A (a)		185,694		713,065
CTC Media, Inc.		777,684		7,162,470
ReachLocal, Inc. (a)		79,215		780,268
Salem Communications Corp., Class A		13,686		136,723
SFX Entertainment, Inc. (a)(c)		39,968		281,774

				9,074,300
Metals & Mining — 0.2%
Worthington Industries, Inc.		38,514		1,473,161
Multi-Utilities — 0.0%
Avista Corp.		8		245
Oil, Gas & Consumable Fuels — 4.4%
APCO Oil and Gas International, Inc. (a)		7,631		110,268
Bonanza Creek Energy, Inc. (a)		167,987		7,458,623
Callon Petroleum Co. (a)		50,851		425,623
Carrizo Oil & Gas, Inc. (a)		33,988		1,816,998
Clayton Williams Energy, Inc. (a)		4,693		530,356
Energy XXI Bermuda Ltd.		7,901		186,227
EPL Oil & Gas, Inc. (a)		9,411		363,265
Kodiak Oil & Gas Corp. (a)		216,772		2,631,612
L&L Energy, Inc. (a)(c)		130,233		196,912
LinnCo LLC		63,153		1,708,289
Penn Virginia Corp. (a)		100,301		1,754,264
Renewable Energy Group, Inc. (a)		134,938		1,616,557
REX American Resources Corp. (a)		2,550		145,477
Rosetta Resources, Inc. (a)		3,719		173,231
RSP Permian, Inc. (a)		68,318		1,973,707
Sanchez Energy Corp. (a)		4,855		143,854
SemGroup Corp., Class A		3,308		217,269
Targa Resources Corp.		3,251		322,694
Vaalco Energy, Inc. (a)		217,137		1,856,521
Warren Resources, Inc. (a)		798,963		3,835,022
Western Refining, Inc.		251,153		9,694,506

				37,161,275
Paper & Forest Products — 2.4%
Boise Cascade Co. (a)		151,515		4,339,390
Clearwater Paper Corp. (a)		1,959		122,771
KapStone Paper and Packaging Corp. (a)		563,977		16,265,097

				20,727,258
Personal Products — 0.3%
USANA Health Sciences, Inc. (a)		36,993		2,787,053
Pharmaceuticals — 2.3%
Aerie Pharmaceuticals, Inc. (a)		19,731		418,100
Alexza Pharmaceuticals, Inc. (a)		1,000,249		—
Lannett Co., Inc. (a)		194,560		6,949,683
The Medicines Co. (a)		167,804		4,768,990
Nektar Therapeutics (a)		91,029		1,103,271
Questcor Pharmaceuticals, Inc.		43,000		2,791,990
Relypsa, Inc. (a)		9,949		296,580
Revance Therapeutics, Inc. (a)		35,386		1,114,659
Sciclone Pharmaceuticals, Inc. (a)		502,809		2,287,781

				19,731,054
Professional Services — 2.4%
The Dolan Co. (a)		14,888		238

See Notes to Financial Statements.


22		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (continued)			BlackRock Small Cap Growth Equity Portfolio
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Professional Services (concluded)
Kforce, Inc.		518,536	$	11,055,188
Mistras Group, Inc. (a)		9,994		227,563
RPX Corp. (a)(c)		573,842		9,342,148

				20,625,137
Real Estate Investment Trusts (REITs) — 2.3%
Altisource Residential Corp.		3		95
Aviv REIT, Inc.		13,664		334,085
Cedar Realty Trust, Inc.		94		574
DuPont Fabros Technology, Inc. (c)		253,452		6,100,590
The GEO Group, Inc.		32,299		1,041,320
Investors Real Estate Trust		22,709		203,927
MFA Financial, Inc.		64,568		500,402
PS Business Parks, Inc.		100,317		8,388,508
Sabra Health Care REIT, Inc.		81,572		2,275,043
Sovran Self Storage, Inc.		13,972		1,026,243

				19,870,787
Real Estate Management & Development — 0.5%
AV Homes, Inc. (a)		7		127
Forestar Group, Inc. (a)		182,418		3,247,040
Tejon Ranch Co. (a)		22,543		762,630

				4,009,797
Road & Rail — 0.4%
Ryder System, Inc.		6,603		527,712
Swift Transportation Co. (a)		106,788		2,643,003
Universal Truckload Services, Inc.		1,394		40,287

				3,211,002
Semiconductors & Semiconductor Equipment — 5.5%
Advanced Energy Industries, Inc. (a)		286,420		7,017,290
Alpha & Omega Semiconductor Ltd. (a)		62,511		460,081
Entegris, Inc. (a)		22,415		271,446
Inphi Corp. (a)		170,282		2,739,837
Intermolecular, Inc. (a)		280,962		786,694
Lattice Semiconductor Corp. (a)		29,189		228,842
Microsemi Corp. (a)		513,969		12,864,644
Pericom Semiconductor Corp. (a)		44,136		345,585
Silicon Image, Inc. (a)		665,251		4,590,232
Synaptics, Inc. (a)(c)		291,356		17,487,187
Tessera Technologies, Inc.		150		3,545

				46,795,383
Software — 8.5%
Aspen Technology, Inc. (a)		459,015		19,443,875
AVG Technologies NV (a)		314,044		6,582,362
Ebix, Inc. (c)		22,182		378,647
Interactive Intelligence Group, Inc. (a)		1,753		127,093
Manhattan Associates, Inc. (a)		534,781		18,733,378
Progress Software Corp. (a)		439,121		9,572,838
PROS Holdings, Inc. (a)		426,297		13,432,618
PTC, Inc. (a)		46,133		1,634,492
QAD, Inc., Class A		28,477		581,785
Rosetta Stone, Inc. (a)		97,813		1,097,462
Viggle, Inc. (a)		16,470		173,347

				71,757,897
Specialty Retail — 2.2%
ANN, Inc. (a)		12,173		504,936
Big 5 Sporting Goods Corp.		290,116		4,656,362
Brown Shoe Co., Inc.		34,516		916,055
The Container Store Group, Inc. (a)(c)		81,687		2,773,274
Haverty Furniture Cos., Inc.		89,400		2,655,180
Kirkland’s, Inc. (a)		59,545		1,100,987
Murphy USA, Inc. (a)		18,650		757,003


Common Stocks	Shares		Value
Specialty Retail (concluded)
Sears Hometown and Outlet Stores, Inc. (a)		192,860	$	4,561,139
Systemax, Inc. (a)		16		239
The Wet Seal, Inc., Class A (a)		646,976		854,008

				18,779,183
Technology Hardware, Storage & Peripherals — 0.3%
Dot Hill Systems Corp. (a)		43,476		168,252
Immersion Corp. (a)		175,271		1,849,109
Quantum Corp. (a)		277,474		338,518

				2,355,879
Textiles, Apparel & Luxury Goods — 1.2%
Cherokee, Inc.		425		5,920
Deckers Outdoor Corp. (a)		1,628		129,800
Movado Group, Inc.		211,707		9,643,254
Vince Holding Corp. (a)		21,991		579,683

				10,358,657
Thrifts & Mortgage Finance — 1.0%
EverBank Financial Corp.		181,357		3,578,174
Heritage Financial Group, Inc.		11,636		228,647
HomeStreet, Inc.		193,847		3,789,709
MGIC Investment Corp. (a)		76,058		648,014
Provident Financial Holdings, Inc.		9,110		140,476

				8,385,020
Trading Companies & Distributors — 0.6%
Aceto Corp.		8,272		166,184
H&E Equipment Services, Inc. (a)		3,448		139,472
Stock Building Supply Holdings, Inc. (a)		10,569		214,762
Watsco, Inc.		48,012		4,796,879
Willis Lease Finance Corp. (a)		9,853		201,691

				5,518,988
Water Utilities — 0.6%
American States Water Co.		146,938		4,744,628
Total Common Stocks — 97.5%				827,305,336

Preferred Stocks
Software — 0.5%
MongoDB Series C (Acquired 12/19/13, cost $1,517,990) (a)(d)		60,511		1,518,221
MongoDB Series D (Acquired 12/19/13, cost $472,222) (a)(d)		18,824		472,294
MongoDB Series E (Acquired 12/19/13, cost $16,682) (a)(d)		665		16,685
Palantir Technologies, Inc. (Acquired 2/06/14, cost $1,999,998) (d)		326,264		1,999,998
Total Preferred Stocks — 0.5%				4,007,198

Warrants (e)
Real Estate Management & Development — 0.0%
Tejon Ranch Co. (Issued/Exercisable 8/08/13, 1 Share for 1 Warrant, Expires 8/31/16, Strike Price USD 40.00)(c)		3,330		12,155
Total Long-Term Investments (Cost — $711,417,825) — 98.0%				831,324,689

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		23


Schedule of Investments (continued)			BlackRock Small Cap Growth Equity Portfolio
			(Percentages shown are based on Net Assets)


Short-Term Securities	Shares		Value
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (f)(g)		15,937,807	$	15,937,807

Short-Term Securities	Beneficial Interest (000)
BlackRock Liquidity Series, LLC, Money Market Series, 0.16% (f)(g)(h)	$	52,750		52,750,304
Total Short-Term Securities (Cost — $68,688,111) — 8.1%				68,688,111


	Value
Total Investments (Cost — $780,105,936) — 106.1%	$	900,012,800
Liabilities in Excess of Other Assets — (6.1)%		(51,825,354	)

Net Assets — 100.0%	$	848,187,446

Notes to Schedule of Investments

(a)	Non-income producing security.

(b)	Investments in issuers (whereby the Fund held 5% or more of the companies’ outstanding securities) that were considered to be an affiliate during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares Held at September 30, 2013		Shares Sold			Shares Held at March 31, 2014		Value at March 31, 2014		Realized Gain (Loss)
BioSpecifics Technologies Corp.¹		339,291		(261,138	)		78,153	$	2,025,726	$	773,917
Cbeyond, Inc.¹		2,230,851		(774,697	)		1,456,154	$	10,557,117	$	(4,039,248	)
Gentium SpA — ADR¹		1,267,927		(1,267,927	)		—		—	$	47,756,522

No longer an affiliated company or held by the Fund as of report date.

(c)	Security, or a portion of security, is on loan.

(d)	Restricted securities as to resale. As of report date, the Fund held restricted securities with a current value of $4,007,198 and an original cost of $4,006,892 which was 0.5% of its net assets.

(e)	Warrants entitle the Fund to purchase a predetermined number of shares of common stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date of the warrants, if any.

(f)	Investments in issuers considered to be an affiliate of the Fund during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares/Beneficial Interest Held at September 30, 2013		Net Activity			Shares/Beneficial Interest Held at March 31, 2014		Income
BlackRock Liquidity Funds, TempFund, Institutional Class		23,218,232		(7,280,425	)		15,937,807	$	2,611
BlackRock Liquidity Series, LLC, Money Market Series	$	122,835,897	$	(70,085,593	)	$	52,750,304	$	489,479

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

(h)	Security was purchased with the cash collateral from loaned securities. The Fund may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

Financial futures contracts outstanding as of March 31, 2014 were as follows:

Contracts
Purchased

Issue

Exchange

Expiration

Notional
Value

Unrealized
Depreciation

159

E-Mini Russell 2000 Futures

Intercontinental Exchange

June 2014

USD

18,610,950

(158,560

)

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

See Notes to Financial Statements.


24		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (continued)			BlackRock Small Cap Growth Equity Portfolio

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of March 31, 2014:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Aerospace & Defense	$	12,716,194		—		—	$	12,716,194
Airlines		14,693,136		—		—		14,693,136
Auto Components		17,599,036		—		—		17,599,036
Banks		2,283,491		—		—		2,283,491
Biotechnology		63,098,014		—		—		63,098,014
Building Products		15,840,341		—		—		15,840,341
Capital Markets		6,903,279		—		—		6,903,279
Chemicals		9,627,404		—		—		9,627,404
Commercial Services & Supplies		5,119,882		—		—		5,119,882
Communications Equipment		27,350,119		—		—		27,350,119
Construction & Engineering		736,961		—		—		736,961
Consumer Finance		1,672,013		—		—		1,672,013
Containers & Packaging		8,465,764		—		—		8,465,764
Distributors		823,066		—		—		823,066
Diversified Consumer Services		9,246,695		—		—		9,246,695
Diversified Telecommunication Services		20,900,706		—		—		20,900,706
Electrical Equipment		17,471,077		—		—		17,471,077
Electronic Equipment, Instruments & Components		25,557,533		—		—		25,557,533
Energy Equipment & Services		3,532,909		—		—		3,532,909
Food & Staples Retailing		2,929,495		—		—		2,929,495
Food Products		12,961,870		—		—		12,961,870
Gas Utilities		63,124		—		—		63,124
Health Care Equipment & Supplies		50,022,179		—		—		50,022,179
Health Care Providers & Services		26,987,387		—		—		26,987,387
Health Care Technology		8,680,104		—		—		8,680,104
Hotels, Restaurants & Leisure		15,662,683		—		—		15,662,683
Household Durables		1,494,057		—		—		1,494,057
Insurance		5,851,345		—		—		5,851,345
Internet & Catalog Retail		3,516,799		—		—		3,516,799
Internet Software & Services		51,538,937		—		—		51,538,937
IT Services		23,654,339		—		—		23,654,339
Leisure Products		4,369,806		—		—		4,369,806
Life Sciences Tools & Services		3,054,813		—		—		3,054,813
Machinery		36,371,565		—		—		36,371,565
Marine		9,142,509		—		—		9,142,509
Media		9,074,300		—		—		9,074,300
Metals & Mining		1,473,161		—		—		1,473,161
Multi-Utilities		245		—		—		245
Oil, Gas & Consumable Fuels		36,964,363		—	$	196,912		37,161,275
Paper & Forest Products		20,727,258		—		—		20,727,258
Personal Products		2,787,053		—		—		2,787,053
Pharmaceuticals		19,731,054		—		—		19,731,054
Professional Services		20,625,137		—		—		20,625,137
Real Estate Investment Trusts (REITs)		19,870,787		—		—		19,870,787
Real Estate Management & Development		4,009,797		—		—		4,009,797
Road & Rail		3,211,002		—		—		3,211,002
Semiconductors & Semiconductor Equipment		46,795,383		—		—		46,795,383
Software		71,584,550		—		173,347		71,757,897
Specialty Retail		18,779,183		—		—		18,779,183
Technology Hardware, Storage & Peripherals		2,355,879		—		—		2,355,879

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		25


Schedule of Investments (concluded)			BlackRock Small Cap Growth Equity Portfolio


	Level 1			Level 2			Level 3		Total
Textiles, Apparel & Luxury Goods	$	10,358,657			—			—	$	10,358,657
Thrifts & Mortgage Finance		8,385,020			—			—		8,385,020
Trading Companies & Distributors		5,518,988			—			—		5,518,988
Water Utilities		4,744,628			—			—		4,744,628
Preferred Stocks		—			—		$	4,007,198		4,007,198
Warrants		12,155			—			—		12,155
Short-Term Securities		15,937,807		$	52,750,304			—		68,688,111
Total	$	842,885,039		$	52,750,304		$	4,377,457	$	900,012,800


	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments¹
Liabilities:
Equity contracts	$	(158,560	)		—			—	$	(158,560	)

¹Derivative financial instruments are financial futures contracts which are valued at the unrealized appreciation/depreciation on the instrument.

The carrying amount for certain of the Fund’s assets and/or liabilities approximates fair value for financial statement purposes. As of March 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1			Level 2			Level 3		Total
Assets:
Cash pledged for financial futures contracts	$	837,280			—			—	$	837,280
Liabilities:
Bank overdraft		—		$	(2,613	)		—		(2,613	)
Collateral on securities loaned at value		—			(52,750,304	)		—		(52,750,304	)
Total	$	837,280		$	(52,752,917	)		—	$	(51,915,637	)

There were no transfers between levels during the six months ended March 31, 2014.

See Notes to Financial Statements.


26		BLACKROCK FUNDS		MARCH 31, 2014


Statements of Assets and Liabilities


March 31, 2014 (Unaudited)	BlackRock Flexible Equity Fund¹		BlackRock Mid-Cap Growth Equity Portfolio			BlackRock Small Cap Growth Equity Portfolio

Assets
Investments at value — unaffiliated^2,3	$	575,231,920	$	401,077,337		$	831,324,689
Investments at value — affiliated⁴		60,653,495		12,550,311			68,688,111
Cash pledged for financial futures contracts		2,105,000		—			837,280
Foreign currency at value⁵		3,329,352		53,815			—
Variation margin receivable on financial futures contracts		1,819		—			374,510
Investments sold receivable		16,267,698		1,625,445			10,543,168
Unrealized appreciation on forward foreign currency exchange contracts		362,229		—			—
Unrealized appreciation on OTC swaps		1,106,610		—			—
Capital shares sold receivable		256,160		590,677			1,010,956
Dividends receivable — unaffiliated		1,706,057		119,459			56,866
Dividends receivable — affiliated		1,252		107			371
Receivable from Manager		39,611		24,298			—
Securities lending income receivable — affiliated		—		10,138			80,701
Prepaid expenses		50,060		47,563			56,973

Total assets		661,111,263		416,099,150			912,973,625


Liabilities
Bank overdraft		—		—			2,613
Options written at value⁶		380,361		—			—
Cash received as collateral for OTC derivatives		900,000		—			—
Collateral on securities loaned at value		—		10,457,192			52,750,304
Variation margin payable on financial futures contracts		981,250		—			—
Investments purchased payable		28		3,179,653			9,069,242
Unrealized depreciation on forward foreign currency exchange contracts		1,102,593		—			—
Capital shares redeemed payable		1,507,027		504,291			1,627,877
Investment advisory fees payable		444,477		286,428			408,706
Service and distribution fees payable		198,970		103,419			110,208
Officer’s and Trustees’ fees payable		5,658		2,335			11,457
Other affiliates payable		2,273		—			95,200
Other accrued expenses payable		529,817		276,899			710,572

Total Liabilities		6,052,454		14,810,217			64,786,179

Net Assets	$	655,058,809	$	401,288,933		$	848,187,446


Net Assets Consist of
Paid-in capital	$	563,600,586	$	296,952,600		$	588,580,367
Undistributed (accumulated) net investment income (loss)		12,044,632		(2,274,893	)		(4,851,087	)
Accumulated net realized gain		3,682,944		25,869,252			144,709,862
Net unrealized appreciation/depreciation		75,730,647		80,741,974			119,748,304

Net Assets	$	655,058,809	$	401,288,933		$	848,187,446

¹Consolidated Statement of Assets and Liabilities.
²Investments at cost — unaffiliated	$	500,724,137	$	320,335,364		$	711,417,825
³Securities loaned at value		—	$	10,261,642		$	52,611,050
⁴Investments at cost — affiliated	$	60,402,156	$	12,550,311		$	68,688,111
⁵Foreign currency at cost	$	3,315,012	$	53,814			—
⁶Premiums received	$	438,165		—			—

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		27


Statements of Assets and Liabilities (concluded)


March 31, 2014 (Unaudited)	BlackRock Flexible Equity Fund¹		BlackRock Mid-Cap Growth Equity Portfolio		BlackRock Small Cap Growth Equity Portfolio

Net Asset Value
Institutional
Net assets	$	55,716,700	$	34,035,790	$	451,264,502

Shares outstanding²		3,793,937		1,966,168		19,561,420

Net asset value	$	14.69	$	17.31	$	23.07

Service
Net assets	$	301,365	$	2,242,370	$	26,004,703

Shares outstanding²		20,806		139,703		1,250,597

Net asset value	$	14.48	$	16.05	$	20.79

Investor A
Net assets	$	488,085,929	$	322,288,440	$	333,802,207

Shares outstanding²		34,282,353		20,820,321		17,020,224

Net asset value	$	14.24	$	15.48	$	19.61

Investor B
Net assets	$	9,520,938	$	3,994,432	$	1,069,503

Shares outstanding²		738,115		306,837		72,589

Net asset value	$	12.90	$	13.02	$	14.73

Investor C
Net assets	$	100,269,175	$	31,005,469	$	36,046,531

Shares outstanding²		7,829,917		2,391,548		2,473,979

Net asset value	$	12.81	$	12.96	$	14.57

Class R
Net assets	$	1,164,702	$	7,722,432		—

Shares outstanding²		79,590		502,954		—

Net asset value	$	14.63	$	15.35		—

Consolidated Statement of Assets and Liabilities.

Unlimited number of shares authorized, $0.001 par value.

See Notes to Financial Statements.


28		BLACKROCK FUNDS		MARCH 31, 2014


Statements of Operations


Six Months Ended March 31, 2014 (Unaudited)	BlackRock Flexible Equity Fund¹			BlackRock Mid-Cap Growth Equity Portfolio			BlackRock Small Cap Growth Equity Portfolio

Investment Income
Dividends — unaffiliated	$	15,310,080		$	386,982		$	2,425,784
Dividends — affiliated		6,548			382			2,611
Securities lending — affiliated — net		814			47,212			489,479
Other income — affiliated		9,080			18,726			172,901
Foreign taxes withheld		(196,066	)		(23,890	)		—

Total income		15,130,456			429,412			3,090,775


Expenses
Investment advisory		2,748,472			1,498,086			2,870,062
Service and distribution — class specific		1,208,103			566,468			640,672
Transfer agent — class specific		741,253			464,559			1,138,268
Administration		248,245			140,446			362,088
Administration — class specific		85,383			46,762			123,761
Professional		37,933			32,289			44,105
Registration		42,071			38,503			37,131
Custodian		35,491			10,865			73,580
Printing		19,710			7,526			30,798
Officer and Trustees		11,672			6,380			19,488
Miscellaneous		19,614			13,264			24,259
Recoupment of past waived fees — class specific		—			10,242			15,195

Total expenses		5,197,947			2,835,390			5,379,407
Less fees waived by Manager		(11,961	)		(827	)		(4,608	)
Less administration fees waived — class specific		(85,308	)		(39,872	)		—
Less transfer agent fees waived — class specific		(50,276	)		(62,839	)		—
Less transfer agent fees reimbursed — class specific		(280,748	)		(27,544	)		—

Total expenses after fees waived and reimbursed		4,769,654			2,704,308			5,374,799

Net investment income (loss)		10,360,802			(2,274,896	)		(2,284,024	)


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		69,720,568			30,345,904			145,601,406
Investments — affiliated		(1,777,073	)		—			44,491,191
Options written		729,887			—			—
Financial futures contracts		(3,660,129	)		—			2,052,048
Swaps		(2,000,601	)		—			—
Foreign currency transactions		1,383,701			(9,025	)		—

		64,396,353			30,336,879			192,144,645

Net change in unrealized appreciation/depreciation on:
Investments — unaffiliated		(38,824,543	)		12,781,817			(24,346,944	)
Investments — affiliated		333,715			—			(22,014,193	)
Options written		149,769			—			—
Financial futures contracts		713,708			—			(321,252	)
Swaps		1,768,225			—			—
Foreign currency translations		1,376,792			4			—

		(34,482,334	)		12,781,821			(46,682,389	)

Total realized and unrealized gain		29,914,019			43,118,700			145,462,256

Net Increase in Net Assets Resulting from Operations	$	40,274,821		$	40,843,804		$	143,178,232

Consolidated Statement of Operations.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		29


Statements of Changes in Net Assets


	BlackRock Flexible Equity Fund¹						BlackRock Mid-Cap Growth Equity Portfolio						BlackRock Small Cap Growth Equity Portfolio
Increase (Decrease) in Net Assets:	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30, 2013			Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30, 2013			Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30, 2013

Operations
Net investment income (loss)	$	10,360,802		$	7,677,041		$	(2,274,896	)	$	(63,600	)	$	(2,284,024	)	$	(680,869	)
Net realized gain		64,396,353			30,339,554			30,336,879			61,948,809			192,144,645			337,408,833
Net change in unrealized appreciation/depreciation		(34,482,334	)		47,234,064			12,781,821			26,906,700			(46,682,389	)		(35,983,349	)

Net increase in net assets resulting from operations		40,274,821			85,250,659			40,843,804			88,791,909			143,178,232			300,744,615


Dividends and Distributions to Shareholders From
Net investment income:
Institutional		(973,756	)		(1,253,277	)²		—			—			—			(2,500,056	)²
Service		(2,950	)		(4,137	)²		—			—			—			—
Investor A		(5,945,499	)		(4,742,133	)²		—			—			—			—
Investor B		(39,265	)		(10,767	)²		—			—			—			—
Investor C		(580,645	)		(182,439	)²		—			—			—			—
Class R		(7,904	)		(7,295	)²		—			—			—			—
Net realized gain:
Institutional		—			—			(3,566,206	)		—			(224,335,020	)		(94,587,297	)²
Service		—			—			(359,600	)		—			(8,970,316	)		(3,052,314	)²
Investor A		—			—			(48,709,954	)		—			(114,556,719	)		(37,128,147	)²
Investor B		—			—			(773,466	)		—			(545,137	)		(164,432	)²
Investor C		—			—			(4,928,001	)		—			(14,869,102	)		(3,289,903	)²
Class R		—			—			(1,635,424	)		—			—			—

Decrease in net assets resulting from dividends and distributions to shareholders		(7,550,019	)		(6,200,048	)		(59,972,651	)		—			(363,276,294	)		(140,722,149	)


Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(70,267,394	)		(279,569,298	)		76,501,497			(33,574,893	)		(186,203,034	)		(296,762,969	)


Net Assets
Total increase (decrease) in net assets		(37,542,592	)		(200,518,687	)		57,372,650			55,217,016			(406,301,096	)		(136,740,503	)
Beginning of period		692,601,401			893,120,088			343,916,283			288,699,267			1,254,488,542			1,391,229,045

End of period	$	655,058,809		$	692,601,401		$	401,288,933		$	343,916,283		$	848,187,446		$	1,254,488,542

Undistributed (accumulated) net investment income (loss)	$	12,044,632		$	9,233,849		$	(2,274,893	)	$	3		$	(4,851,087	)	$	(2,567,063	)

Consolidated Statement of Changes in Net Assets.

Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.


30		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights			BlackRock Flexible Equity Fund


	Institutional																		Service
	Six Months Ended March 31, 2014 (Unaudited)¹			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)¹			Year Ended September 30,
				2013¹			2012¹			2011			2010			2009						2013¹			2012¹			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	14.04		$	12.53		$	9.81		$	10.53		$	9.34		$	9.94		$	13.81		$	12.30		$	9.63		$	10.33		$	9.17		$	9.78

Net investment income²		0.25			0.19			0.10			0.12			0.10			0.08			0.20			0.14			0.06			0.08			0.04			0.05
Net realized and unrealized gain (loss)		0.61			1.46			2.72			(0.74	)		1.16			(0.61	)		0.62			1.44			2.68			(0.73	)		1.17			(0.60	)

Net increase (decrease) from investment operations		0.86			1.65			2.82			(0.62	)		1.26			(0.53	)		0.82			1.58			2.74			(0.65	)		1.21			(0.55	)

Dividends from net investment income		(0.21	)		(0.14	)³		(0.10	)³		(0.10	)³		(0.07	)³		(0.07	)³		(0.15	)		(0.07	)³		(0.07	)³		(0.05	)³		(0.05	)³		(0.06	)³

Net asset value, end of period	$	14.69		$	14.04		$	12.53		$	9.81		$	10.53		$	9.34		$	14.48		$	13.81		$	12.30		$	9.63		$	10.33		$	9.17


Total Investment Return⁴
Based on net asset value		6.12	%⁵		13.36	%		28.90	%		(6.03	)%⁶		13.56	%		(5.09	)%		5.89	%⁵		13.00	%		28.58	%		(6.38	)%⁶		13.20	%		(5.36	)%


Ratios to Average Net Assets
Total expenses		1.11	%^7,8		1.15	%⁹		1.13	%		1.08	%		1.13	%		1.16	%		1.31	%^7,8		1.75	%⁹		1.95	%		1.49	%		1.31	%		1.32	%

Total expenses excluding recoupment of past waived fees		1.11	%^7,8		1.15	%⁹		1.13	%		1.08	%		1.13	%		1.16	%		1.31	%^7,8		1.73	%⁹		1.95	%		1.49	%		1.31	%		1.32	%

Total expenses after fees waived, reimbursed and paid indirectly		0.97	%^7,8		0.97	%⁹		0.97	%		0.97	%		0.97	%		0.95	%		1.29	%^7,8		1.29	%⁹		1.29	%		1.29	%		1.27	%		1.26	%

Net investment income		3.44	%^7,8		1.48	%⁹		0.89	%		0.98	%		0.99	%		1.00	%		2.80	%^7,8		1.15	%⁹		0.56	%		0.65	%		0.37	%		0.69	%


Supplemental Data
Net assets, end of period (000)	$	55,717		$	64,078		$	142,963		$	195,753		$	204,286		$	165,710		$	301		$	421		$	674		$	1,025		$	737		$	2,561

Portfolio turnover		51	%		119	%		156	%		137	%		123	%		181	%		51	%		119	%		156	%		137	%		123	%		181	%

Consolidated Financial Highlights.

Based on average shares outstanding.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes proceeds received from a settlement of litigation, which had no impact on the Fund’s total return.

⁷

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

⁸

Annualized.

⁹

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.03%.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		31


Financial Highlights (continued)			BlackRock Flexible Equity Fund


	Investor A																		Investor B
	Six Months Ended March 31,			Year Ended September 30,															Six Months Ended March 31,			Year Ended September 30,
	2014																		2014
	(Unaudited)¹			2013¹			2012¹			2011			2010			2009			(Unaudited)¹			2013¹			2012¹			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	13.59		$	12.14		$	9.50		$	10.21		$	9.06		$	9.66		$	12.26		$	10.95		$	8.58		$	9.25		$	8.23		$	8.84

Net investment income (loss)²		0.22			0.14			0.07			0.08			0.06			0.05			0.14			0.04			(0.02	)		(0.01	)		(0.02	)		(0.00	)³
Net realized and unrealized gain (loss)		0.60			1.41			2.63			(0.72	)		1.13			(0.59	)		0.55			1.28			2.39			(0.65	)		1.04			(0.56	)

Net increase (decrease) from investment operations		0.82			1.55			2.70			(0.64	)		1.19			(0.54	)		0.69			1.32			2.37			(0.66	)		1.02			(0.56	)

Dividends from net investment income		(0.17	)		(0.10	)⁴		(0.06	)⁴		(0.07	)⁴		(0.04	)⁴		(0.06	)⁴		(0.05	)		(0.01	)⁴		—			(0.01	)⁴		—			(0.05	)⁴

Net asset value, end of period	$	14.24		$	13.59		$	12.14		$	9.50		$	10.21		$	9.06		$	12.90		$	12.26		$	10.95		$	8.58		$	9.25		$	8.23


Total Investment Return⁵
Based on net asset value		5.99	%⁶		12.92	%		28.54	%		(6.33	)%⁷		13.21	%		(5.32	)%		5.59	%⁶		12.04	%		27.62	%		(7.17	)%⁷		12.39	%		(6.12	)%


Ratios to Average Net Assets
Total expenses		1.41	%^8,9		1.43	%¹⁰		1.40	%		1.37	%		1.40	%		1.51	%		2.47	%^8,9		2.42	%¹⁰		2.31	%		2.13	%		2.22	%		2.38	%

Total expenses excluding recoupment of past waived fees		1.41	%^8,9		1.43	%¹⁰		1.40	%		1.37	%		1.40	%		1.51	%		2.47	%^8,9		2.41	%¹⁰		2.30	%		2.12	%		2.20	%		2.38	%

Total expenses after fees waived, reimbursed and paid indirectly		1.29	%^8,9		1.29	%¹⁰		1.29	%		1.29	%		1.29	%		1.26	%		2.06	%^8,9		2.06	%¹⁰		2.06	%		2.06	%		2.04	%		2.02	%

Net investment income (loss)		3.11	%^8,9		1.11	%¹⁰		0.60	%		0.66	%		0.61	%		0.70	%		2.12	%^8,9		0.36	%¹⁰		(0.19	)%		(0.10	)%		(0.24	)%		(0.04	)%


Supplemental Data
Net assets, end of period (000)	$	488,086		$	512,059		$	615,464		$	587,989		$	726,666		$	395,763		$	9,521		$	11,918		$	17,465		$	26,233		$	42,239		$	41,196

Portfolio turnover		51	%		119	%		156	%		137	%		123	%		181	%		51	%		119	%		156	%		137	%		123	%		181	%

Consolidated Financial Highlights.

Based on average shares outstanding.

Amount is greater than $(0.005) per share.

⁴

Determined in accordance with federal income tax regulations.

⁵

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

Includes proceeds received from a settlement of litigation, which had no impact on the Fund’s total return.

⁸

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

⁹

Annualized.

¹⁰

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.03%.

See Notes to Financial Statements.


32		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights (concluded)			BlackRock Flexible Equity Fund


	Investor C																		Class R
	Six Months Ended March 31, 2014 (Unaudited)¹			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)¹			Year Ended September 30,									Period July 30, 2010² to September 30, 2010
				2013¹			2012¹			2011			2010			2009						2013¹			2012¹			2011			Period July 30, 2010² to September 30, 2010
Per Share Operating Performance
Net asset value, beginning of period	$	12.20		$	10.91		$	8.55		$	9.22		$	8.20		$	8.81		$	13.94		$	12.46		$	9.75		$	10.51		$	10.24

Net investment income (loss)³		0.15			0.04			(0.02	)		(0.01	)		(0.01	)		(0.00	)⁴		0.24			0.10			0.03			0.04			0.00	⁵
Net realized and unrealized gain (loss)		0.53			1.27			2.38			(0.64	)		1.03			(0.56	)		0.56			1.45			2.71			(0.73	)		0.27

Net increase (decrease) from investment operations		0.68			1.31			2.36			(0.65	)		1.02			(0.56	)		0.80			1.55			2.74			(0.69	)		0.27

Dividends from net investment income		(0.07	)		(0.02	)⁶		—			(0.02	)⁶		—			(0.05	)⁶		(0.11	)		(0.07	)⁶		(0.03	)⁶		(0.07	)⁶		—

Net asset value, end of period	$	12.81		$	12.20		$	10.91		$	8.55		$	9.22		$	8.20		$	14.63		$	13.94		$	12.46		$	9.75		$	10.51


Total Investment Return⁷
Based on net asset value		5.58	%⁸		12.01	%		27.60	%		(7.11	)%⁹		12.44	%		(6.14	)%		5.70	%⁸		12.51	%		28.13	%		(6.66	)%⁹		13.17	%⁸


Ratios to Average Net Assets
Total expenses		2.16	%^10,11		2.20	%¹²		2.18	%		2.16	%		2.22	%		2.39	%		1.71	%^10,11		1.78	%¹²		1.78	%		1.72	%		2.21	%¹¹

Total expenses excluding recoupment of past waived fees		2.16	%^10,11		2.20	%¹²		2.18	%		2.16	%		2.22	%		2.39	%		1.71	%^10,11		1.78	%¹²		1.78	%		1.70	%		2.21	%¹¹

Total expenses after fees waived, reimbursed and paid indirectly		2.06	%^10,11		2.06	%¹²		2.06	%		2.06	%		2.06	%		2.02	%		1.64	%^10,11		1.65	%¹²		1.65	%		1.65	%		1.65	%¹¹

Net investment income (loss)		2.37	%^10,11		0.34	%¹²		(0.18	)%		(0.11	)%		(0.17	)%		(0.06	)%		3.29	%^10,11		0.78	%¹²		0.25	%		0.31	%		0.08	%¹¹


Supplemental Data
Net assets, end of period (000)	$	100,269		$	103,097		$	115,242		$	112,520		$	148,923		$	92,141		$	1,165		$	1,028		$	1,312		$	920		$	838

Portfolio turnover		51	%		119	%		156	%		137	%		123	%		181	%		51	%		119	%		156	%		137	%		123	%

Consolidated Financial Highlights.

Commencement of operations.

Based on average shares outstanding.

⁴

Amount is greater than $(0.005) per share.

⁵

Amount is less than $0.005 per share.

⁶

Determined in accordance with federal income tax regulations.

⁷

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁸

Aggregate total investment return.

⁹

Includes proceeds received from a settlement of litigation, which had no impact on the Fund’s total return.

¹⁰

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.01%.

¹¹

Annualized.

¹²

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.03%.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		33


Financial Highlights			BlackRock Mid-Cap Growth Equity Portfolio


	Institutional																		Service
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
				2013			2012			2011			2010			2009						2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	18.22		$	13.58		$	11.10		$	11.18		$	10.27		$	10.33		$	17.05		$	12.77		$	10.49		$	10.60		$	9.78		$	9.87

Net investment income (loss)¹		(0.08	)		0.05			0.04			(0.05	)		(0.01	)		(0.04	)		(0.11	)		(0.02	)		(0.01	)		(0.10	)		(0.05	)		(0.06	)
Net realized and unrealized gain (loss)		2.09			4.59			2.44			(0.03	)		0.92			(0.02	)		1.94			4.30			2.29			(0.01	)		0.87			(0.03	)

Net increase (decrease) from investment operations		2.01			4.64			2.48			(0.08	)		0.91			(0.06	)		1.83			4.28			2.28			(0.11	)		0.82			(0.09	)

Distributions from net realized gain		(2.92	)		—			—			—			—			—			(2.83	)		—			—			—			—			—

Net asset value, end of period	$	17.31		$	18.22		$	13.58		$	11.10		$	11.18		$	10.27		$	16.05		$	17.05		$	12.77		$	10.49		$	10.60		$	9.78


Total Investment Return²
Based on net asset value		12.37	%³		34.17	%		22.34	%		(0.72	)%⁴		8.86	%⁵		(0.58	)%⁶		12.09	%³		33.52	%		21.74	%		(1.04	)%⁷		8.38	%⁸		(0.91	)%⁹


Ratios to Average Net Assets
Total expenses		1.11	%¹⁰		1.13	%		1.11	%		1.17	%		1.15	%		1.20	%		1.58	%¹⁰		1.67	%		2.29	%		1.87	%		1.63	%		1.65	%

Total expenses excluding recoupment of past waived fees		1.07	%¹⁰		1.11	%		1.11	%		1.17	%		1.14	%		1.20	%		1.35	%¹⁰		1.51	%		2.29	%		1.87	%		1.62	%		1.64	%

Total expenses after fees waived, reimbursed and paid indirectly		1.11	%¹⁰		1.11	%		1.07	%		1.17	%		1.15	%		1.18	%		1.58	%¹⁰		1.58	%		1.58	%		1.58	%		1.58	%		1.51	%

Net investment income (loss)		(0.86	)%¹⁰		0.30	%		0.27	%		(0.38	)%		(0.09	)%		(0.44	)%		(1.33	)%¹⁰		(0.15	)%		(0.06	)%		(0.83	)%		(0.52	)%		(0.76	)%


Supplemental Data
Net assets, end of period (000)	$	34,036		$	21,485		$	18,526		$	19,348		$	24,421		$	25,572		$	2,242		$	2,065		$	1,865		$	714		$	330		$	360

Portfolio turnover		55	%		160	%		88	%		131	%		76	%		53	%		55	%		160	%		88	%		131	%		76	%		53	%

Based on average shares outstanding.

Where applicable, assumes the reinvestment of dividends and distributions.

Aggregate total investment return.

⁴

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (0.90)%.

⁵

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 8.47%.

⁶

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (0.87)%.

⁷

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (1.23)%.

⁸

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 7.98%.

⁹

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (1.22)%.

¹⁰

Annualized.

See Notes to Financial Statements.


34		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights (continued)			BlackRock Mid-Cap Growth Equity Portfolio


	Investor A																		Investor B
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
				Year Ended September 30,																		Year Ended September 30,
				2013			2012			2011			2010			2009						2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	16.56		$	12.38		$	10.15		$	10.27		$	9.47		$	9.56		$	14.27		$	10.75		$	8.88		$	9.05		$	8.42		$	8.56

Net investment income (loss)¹		(0.09	)		0.00	²		(0.01	)		(0.09	)		(0.05	)		(0.06	)		(0.13	)		(0.08	)		(0.09	)		(0.16	)		(0.12	)		(0.10	)
Net realized and unrealized gain (loss)		1.87			4.18			2.24			(0.03	)		0.85			(0.03	)		1.59			3.60			1.96			(0.01	)		0.75			(0.04	)

Net increase (decrease) from investment operations		1.78			4.18			2.23			(0.12	)		0.80			(0.09	)		1.46			3.52			1.87			(0.17	)		0.63			(0.14	)

Distributions from net realized gain		(2.86	)		—			—			—			—			—			(2.71	)		—			—			—			—			—

Net asset value, end of period	$	15.48		$	16.56		$	12.38		$	10.15		$	10.27		$	9.47		$	13.02		$	14.27		$	10.75		$	8.88		$	9.05		$	8.42


Total Investment Return³
Based on net asset value		12.21	%⁴		33.76	%		21.97	%		(1.17	)%⁵		8.45	%⁶		(0.94	)%⁷		11.76	%⁴		32.74	%		21.06	%		(1.88	)%⁸		7.48	%⁹		(1.64	)%¹⁰


Ratios to Average Net Assets
Total expenses		1.47	%¹¹		1.55	%		1.55	%		1.59	%		1.58	%		1.76	%		2.66	%¹¹		2.70	%		2.59	%		2.43	%		2.48	%		2.73	%

Total expenses excluding recoupment of past waived fees		1.47	%¹¹		1.55	%		1.55	%		1.56	%		1.55	%		1.72	%		2.66	%¹¹		2.70	%		2.59	%		2.42	%		2.47	%		2.64	%

Total expenses after fees waived, reimbursed and paid indirectly		1.39	%¹¹		1.39	%		1.39	%		1.58	%		1.58	%		1.59	%		2.16	%¹¹		2.16	%		2.16	%		2.39	%		2.38	%		2.34	%

Net investment income (loss)		(1.16	)%¹¹		0.03	%		(0.06	)%		(0.79	)%		(0.51	)%		(0.85	)%		(1.93	)%¹¹		(0.66	)%		(0.88	)%		(1.58	)%		(1.36	)%		(1.57	)%


Supplemental Data
Net assets, end of period (000)	$	322,288		$	282,726		$	237,748		$	232,924		$	180,501		$	181,159		$	3,994		$	4,330		$	5,123		$	7,596		$	8,209		$	11,978

Portfolio turnover		55	%		160	%		88	%		131	%		76	%		53	%		55	%		160	%		88	%		131	%		76	%		53	%

Based on average shares outstanding.

Amount is less than $0.005 per share.

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (1.36)%.

⁶

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 8.03%.

⁷

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (1.26)%.

⁸

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (2.10)%.

⁹

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 7.01%.

¹⁰

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (1.99)%.

¹¹

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		35


Financial Highlights (concluded)			BlackRock Mid-Cap Growth Equity Portfolio


	Investor C																		Class R
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
				2013			2012			2011			2010			2009						2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	14.28		$	10.75		$	8.89		$	9.05		$	8.41		$	8.56		$	16.44		$	12.32		$	10.13		$	10.25		$	9.46		$	9.56

Net investment loss¹		(0.13	)		(0.09	)		(0.08	)		(0.16	)		(0.11	)		(0.11	)		(0.11	)		(0.04	)		(0.03	)		(0.10	)		(0.04	)		(0.07	)
Net realized and unrealized gain (loss)		1.58			3.62			1.94			(0.00	)²		0.75			(0.04	)		1.85			4.16			2.22			(0.02	)		0.83			(0.03	)

Net increase (decrease) from investment operations		1.45			3.53			1.86			(0.16	)		0.64			(0.15	)		1.74			4.12			2.19			(0.12	)		0.79			(0.10	)

Distributions from net realized gain		(2.77	)		—			—			—			—			—			(2.83	)		—			—			—			—			—

Net asset value, end of period	$	12.96		$	14.28		$	10.75		$	8.89		$	9.05		$	8.41		$	15.35		$	16.44		$	12.32		$	10.13		$	10.25		$	9.46


Total Investment Return³
Based on net asset value		11.70	%⁴		32.84	%		20.92	%		(1.77	)%⁵		7.61	%⁶		(1.75	)%⁷		11.99	%⁴		33.44	%		21.62	%		(1.17	)%⁸		8.35	%⁹		(1.05	)%¹⁰


Ratios to Average Net Assets
Total expenses		2.16	%¹¹		2.23	%		2.31	%		2.34	%		2.33	%		2.46	%		1.71	%¹¹		1.74	%		1.84	%		1.91	%		1.97	%		2.04	%

Total expenses excluding recoupment of past waived fees		2.14	%¹¹		2.23	%		2.31	%		2.31	%		2.30	%		2.44	%		1.71	%¹¹		1.74	%		1.84	%		1.91	%		1.97	%		2.04	%

Total expenses after fees waived, reimbursed and paid indirectly		2.16	%¹¹		2.16	%		2.16	%		2.33	%		2.33	%		2.34	%		1.65	%¹¹		1.65	%		1.65	%		1.65	%		1.65	%		1.63	%

Net investment loss		(1.94	)%¹¹		(0.75	)%		(0.81	)%		(1.54	)%		(1.26	)%		(1.59	)%		(1.38	)%¹¹		(0.26	)%		(0.28	)%		(0.84	)%		(0.44	)%		(0.89	)%


Supplemental Data
Net assets, end of period (000)	$	31,005		$	23,959		$	18,774		$	16,615		$	12,578		$	12,418		$	7,722		$	9,352		$	6,663		$	5,227		$	4,138		$	2,323

Portfolio turnover		55	%		160	%		88	%		131	%		76	%		53	%		55	%		160	%		88	%		131	%		76	%		53	%

Based on average shares outstanding.

Amount is greater than $(0.005) per share.

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (1.99)%.

⁶

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 7.13%.

⁷

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (2.10)%.

⁸

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (1.37)%.

⁹

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 7.93%.

¹⁰

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (1.36)%.

¹¹

Annualized.

See Notes to Financial Statements.


36		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights			BlackRock Small Cap Growth Equity Portfolio


	Institutional																		Service
	Six Months Ended March 31, 2014			Year Ended September 30,															Six Months Ended March 31, 2014			Year Ended September 30,
	(Unaudited)			2013			2012			2011			2010			2009			(Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	29.86		$	26.67		$	20.09		$	20.42		$	18.66		$	20.33		$	27.81		$	25.01		$	18.93		$	19.29		$	17.67		$	19.30

Net investment income (loss)¹		(0.04	)		0.01			0.04			(0.13	)		(0.12	)		(0.07	)		(0.07	)		(0.06	)		(0.04	)		(0.18	)		(0.16	)		(0.10	)
Net realized and unrealized gain (loss)		3.35			5.90			7.14			(0.20	)²		1.88	²		(1.60	)²		3.09			5.49			6.72			(0.18	)²		1.78	²		(1.53	)²

Net increase (decrease) from investment operations		3.31			5.91			7.18			(0.33	)		1.76			(1.67	)		3.02			5.43			6.68			(0.36	)		1.62			(1.63	)

Dividends and distributions from:
Net investment income		—			(0.07	)³		—			—			—			—			—			—			—			—			—			—
Net realized gain		(10.10	)		(2.65	)³		(0.60	)³		—			—			—			(10.04	)		(2.63	)³		(0.60	)³		—			—			—

Total dividends and distributions		(10.10	)		(2.72	)		(0.60	)		—			—			—			(10.04	)		(2.63	)		(0.60	)		—			—			—

Net asset value, end of period	$	23.07		$	29.86		$	26.67		$	20.09		$	20.42		$	18.66		$	20.79		$	27.81		$	25.01		$	18.93		$	19.29		$	17.67


Total Investment Return⁴
Based on net asset value		12.76	%⁵		25.36	%		36.16	%		(1.62	)%^6,7		9.43	%⁷		(8.22	)%^7,8		12.62	%⁵		24.96	%		35.72	%		(1.87	)%^6,7		9.17	%⁷		(8.45	)%^7,9


Ratios to Average Net Assets
Total expenses		0.90	%¹⁰		0.82	%		0.82	%		0.80	%		0.83	%		0.88	%		1.11	%¹⁰		1.12	%		1.20	%		1.07	%		1.10	%		1.15	%

Total expenses excluding recoupment of past waived fees		0.90	%¹⁰		0.82	%		0.82	%		0.80	%		0.83	%		0.88	%		1.11	%¹⁰		1.12	%		1.20	%		1.07	%		1.10	%		1.14	%

Total expenses after fees waived, reimbursed and paid indirectly		0.90	%¹⁰		0.82	%		0.82	%		0.80	%		0.83	%		0.88	%		1.11	%¹⁰		1.12	%		1.17	%		1.07	%		1.10	%		1.11	%

Net investment income (loss)		(0.28	)%¹⁰		0.06	%		0.15	%		(0.55	)%		(0.59	)%		(0.48	)%		(0.57	)%¹⁰		(0.25	)%		(0.15	)%		(0.81	)%		(0.86	)%		(0.70	)%


Supplemental Data
Net assets, end of period (000)	$	451,265		$	862,261		$	979,582		$	931,857		$	806,461		$	855,375		$	26,005		$	24,792		$	29,281		$	23,683		$	47,917		$	43,932

Portfolio turnover		52	%		175	%		147	%		141	%		128	%		82	%		52	%		175	%		147	%		141	%		128	%		82	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes proceeds received from a settlement of litigation, which had no impact on the Fund’s total return.

⁷

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁸

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (8.26)%.

⁹

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (8.50)%.

¹⁰

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		37


Financial Highlights (continued)			BlackRock Small Cap Growth Equity Portfolio


	Investor A																		Investor B
	Six Months Ended March 31,			Year Ended September 30,															Six Months Ended March 31,			Year Ended September 30,
	2014																		2014
	(Unaudited)			2013			2012			2011			2010			2009			(Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	26.75		$	24.17		$	18.31		$	18.69		$	17.14		$	18.76		$	22.34		$	20.50		$	15.75		$	16.20		$	15.00		$	16.56

Net investment loss¹		(0.07	)		(0.06	)		(0.04	)		(0.21	)		(0.18	)		(0.13	)		(0.13	)		(0.21	)		(0.21	)		(0.32	)		(0.30	)		(0.21	)
Net realized and unrealized gain (loss)		2.96			5.27			6.50			(0.17	)²		1.73	²		(1.49	)²		2.39			4.41			5.56			(0.13	)²		1.50	²		(1.35	)²

Net increase (decrease) from investment operations		2.89			5.21			6.46			(0.38	)		1.55			(1.62	)		2.26			4.20			5.35			(0.45	)		1.20			(1.56	)

Distributions from net realized gain		(10.03	)		(2.63	)³		(0.60	)³		—			—			—			(9.87	)		(2.36	)³		(0.60	)³		—			—			—

Net asset value, end of period	$	19.61		$	26.75		$	24.17		$	18.31		$	18.69		$	17.14		$	14.73		$	22.34		$	20.50		$	15.75		$	16.20		$	15.00


Total Investment Return⁴
Based on net asset value		12.62	%⁵		24.91	%		35.73	%		(2.03	)%^6,7		9.04	%⁷		(8.64	)%^7,8		12.15	%⁵		23.92	%		34.46	%		(2.78	)%^6,7		8.00	%⁷		(9.42	)%^7,9


Ratios to Average Net Assets
Total expenses		1.15	%¹⁰		1.14	%		1.17	%		1.18	%		1.22	%		1.33	%		1.99	%¹⁰		1.98	%		2.07	%		1.96	%		2.19	%		2.30	%

Total expenses excluding recoupment of past waived fees		1.15	%¹⁰		1.14	%		1.17	%		1.18	%		1.22	%		1.33	%		1.99	%¹⁰		1.98	%		2.07	%		1.96	%		2.07	%		2.20	%

Total expenses after fees waived, reimbursed and paid indirectly		1.15	%¹⁰		1.14	%		1.17	%		1.18	%		1.22	%		1.33	%		1.99	%¹⁰		1.98	%		2.07	%		1.96	%		2.19	%		2.20	%

Net investment loss		(0.61	)%¹⁰		(0.25	)%		(0.18	)%		(0.94	)%		(0.98	)%		(0.92	)%		(1.43	)%¹⁰		(1.08	)%		(1.12	)%		(1.72	)%		(1.94	)%		(1.72	)%


Supplemental Data
Net assets, end of period (000)	$	333,802		$	332,978		$	352,073		$	235,400		$	269,080		$	240,361		$	1,070		$	1,265		$	1,506		$	1,687		$	2,369		$	3,327

Portfolio turnover		52	%		175	%		147	%		141	%		128	%		82	%		52	%		175	%		147	%		141	%		128	%		82	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes proceeds received from a settlement of litigation, which had no impact on the Fund’s total return.

⁷

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁸

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (8.69)%.

⁹

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (9.48)%.

¹⁰

Annualized.

See Notes to Financial Statements.


38		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights (concluded)			BlackRock Small Cap Growth Equity Portfolio


	Investor C
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
				2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	22.23		$	20.50		$	15.73		$	16.19		$	14.99		$	16.56

Net investment loss¹		(0.12	)		(0.21	)		(0.19	)		(0.35	)		(0.30	)		(0.22	)
Net realized and unrealized gain (loss)		2.38			4.38			5.56			(0.11	)²		1.50	²		(1.35	)²

Net increase (decrease) from investment operations		2.26			4.17			5.37			(0.46	)		1.20			(1.57	)

Distributions from net realized gain		(9.92	)		(2.44	)³		(0.60	)³		—			—			—

Net asset value, end of period	$	14.57		$	22.23		$	20.50		$	15.73		$	16.19		$	14.99


Total Investment Return⁴
Based on net asset value		12.20	%⁵		23.91	%		34.63	%		(2.84	)%^6,7		8.01	%⁷		(9.48	)%^7,8


Ratios to Average Net Assets
Total expenses		1.90	%⁹		1.95	%		1.99	%		2.08	%		2.19	%		2.31	%

Total expenses excluding recoupment of past waived fees		1.90	%⁹		1.95	%		1.99	%		2.05	%		2.13	%		2.29	%

Total expenses after fees waived, reimbursed and paid indirectly		1.90	%⁹		1.95	%		1.99	%		2.07	%		2.16	%		2.22	%

Net investment loss		(1.37	)%⁹		(1.06	)%		(0.99	)%		(1.83	)%		(1.92	)%		(1.81	)%


Supplemental Data
Net assets, end of period (000)	$	36,047		$	33,193		$	28,787		$	23,947		$	33,219		$	25,915

Portfolio turnover		52	%		175	%		147	%		141	%		128	%		82	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Includes proceeds received from a settlement of litigation, which had no impact on the Fund’s total return.

⁷

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁸

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been (9.54)%.

⁹

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		39


Notes to Financial Statements (Unaudited)

1. Organization:

BlackRock Funds^SM (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Massa-chusetts business trust. BlackRock Flexible Equity Fund (“Flexible Equity”), BlackRock Mid-Cap Growth Equity Portfolio (“Mid-Cap Growth Equity”) and BlackRock Small Cap Growth Equity Portfolio (“Small Cap Growth Equity”) (collectively, the “Funds” or individually, a “Fund”) are each a series of the Trust. The Funds are classified as diversified. Each Fund offers multiple classes of shares. Institutional and Service Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with an initial sales charge, but may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase. Investor B and Investor C Shares may be subject to a CDSC. Class R Shares are sold without a sales charge and only to certain employer-sponsored retirement plans. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Service, Investor A, Investor B, Investor C and Class R Shares bear certain expenses related to the shareholder servicing of such shares, and Investor B, Investor C and Class R Shares also bear certain expenses related to the distribution of such shares. Investor B Shares automatically convert to Investor A Shares after approximately eight years. Investor B Shares are only available through exchanges and dividend reinvestments by existing shareholders and for purchase by certain employer-sponsored retirement plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures (except that Investor B shareholders may vote on material changes to the Investor A distribution and service plan).

Basis of Consolidation: The accompanying consolidated financial statements of Flexible Equity include the accounts of BlackRock Flexible Equity Fund Subsidiary, Ltd. (the “Subsidiary”), which is a wholly owned subsidiary of Flexible Equity, and primarily invests in commodity-related instruments. The Subsidiary enables Flexible Equity to hold these commodity-related instruments and satisfy regulated investment company tax requirements. Flexible Equity may invest up to 25% of its total assets in the Subsidiary. Intercompany accounts and transactions, if any, have been eliminated. The Subsidiary is subject to the same investment policies and restrictions that apply to Flexible Equity, except that the Subsidiary may invest without limitation in commodity-related instruments.

2. Significant Accounting Policies:

Equity investments traded on a recognized securities exchange or the NASDAQ Stock Market (“NASDAQ”) are valued at the last reported sale price that day or the NASDAQ official closing price, if applicable. For equity investments traded on more than one exchange, the last reported sale price on the exchange where the stock is primarily traded is used. Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last available bid (long positions) or ask (short positions) price. Financial futures contracts traded on exchanges are valued at their last sale price. 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.

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


40		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

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

Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of business on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of business on the NYSE that may not be reflected in the computation of each Fund’s net assets. If events (e.g., 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 valued at their fair value, as determined in good faith by the Global Valuation Committee, or its delegate, using a pricing service and/or policies approved by the Board. Each business day, the Funds use a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and OTC options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities

and foreign options at fair value as of the close of business on the NYSE, which follows the close of the local markets.

Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., financial futures contracts, forward foreign currency exchange contracts, options written, and swaps), that would be “senior securities” for 1940 Act purposes, such Fund may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of a Fund’s future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Funds are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Income, expenses 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 Funds are recorded on the ex-dividend date. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

Net income and realized gains from investments held by the Subsidiary are treated as ordinary income for tax purposes. Accordingly, the net


		BLACKROCK FUNDS		MARCH 31, 2014		41


Notes to Financial Statements (continued)

investment income (loss) and realized gains (losses) reported in the Fund’s financial statements presented under US GAAP for such investments held by the Subsidiary may differ significantly from income dividends and capital gain distributions. As such, any net gain will pass through to the Fund as ordinary income for federal income tax purposes. If a net loss is realized by the Subsidiary in any taxable year, the loss will generally not be available to offset the Fund’s ordinary income and/or capital gains for that year.

The Funds file U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Funds’ U.S. federal tax returns remains open for each of the four years ended September 30, 2013. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

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

3. Securities and Other Investments:

Participation Notes: Flexible Equity may invest in participation notes (“P-Notes”). P-Notes are promissory notes issued by banks or broker-dealers that are designed to offer Flexible Equity a return measured by the change in the value of the underlying security or basket of securities (the“underlying security”) while not holding the actual shares of the underlying security. P-Notes are typically used to allow Flexible Equity to gain exposure to securities traded in foreign markets that may be restricted due to country-specific regulations. When the P-Note matures, the issuer will pay to, or receive from, Flexible Equity the difference between the value of the underlying security at the time of the purchase and the underlying security’s value at maturity of the P-Notes. Income received on P-Notes is recorded by Flexible Equity as dividend income in the Statements of Operations. An investment in a P-Note involves additional risks beyond the risks normally associated with a direct investment

in the underlying security. While the holder of a P-Note is entitled to receive from the bank or broker-dealer any dividends paid by the underlying security, the holder is not entitled to the same rights (e.g., voting rights) as a direct owner of the underlying security. P-Notes are considered general unsecured contractual obligations of the bank or broker-dealer. Flexible Equity must rely on the creditworthiness of the issuer for its investment returns on the P-Notes and has no rights against the issuer of the underlying security. A P-Note may be more volatile and less liquid than other investments held by Flexible Equity since the P-Note generally is dependent on the liquidity in the local trading market for the underlying security.


42		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

The following table is a summary of the Funds’ securities lending agreements by counterparty which are subject to offset under an MSLA as of March 31, 2014:


Mid-Cap Growth Equity
Counterparty	Securities Loaned at Value		Cash Collateral Received¹			Net Amount
Credit Suisse Securities (USA) LLC	$	3,208,899	$	(3,208,899	)		—
Deutsche Bank Securities, Inc.		54,799		(54,799	)		—
Goldman Sachs & Co.		6,121,168		(6,121,168	)		—
JP Morgan Securities LLC		438,388		(438,388	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		438,388		(438,388	)		—

Total	$	10,261,642	$	(10,261,642	)		—

Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. Collateral with a value of $10,457,192 has been received in connection with securities lending agreements.


Small Cap Growth Equity
Counterparty	Securities Loaned at Value		Cash Collateral Received¹			Net Amount²
Barclays Capital Inc.	$	3,227,133	$	(3,227,133	)		—
Citigroup Global Markets, Inc.		12,934,056		(12,907,175	)	$	26,881
Deutsche Bank Securities, Inc.		90		(90	)		—
Goldman Sachs & Co.		6,722,197		(6,628,649	)		93,548
JP Morgan Securities LLC		2,107,784		(2,107,784	)		—
Morgan Stanley		10,680,682		(10,680,682	)		—
UBS Securities LLC		16,939,108		(16,792,333	)		146,775

Total	$	52,611,050	$	(52,343,846	)	$	120,429

Excess of collateral received from the individual counterparty is not shown for financial reporting purposes. Collateral with a value of $52,750,304 has been received in connection with securities lending agreements.

The market value of the loaned securities is determined as of March 31,2014. Additional collateral is delivered to the Fund on the next business day in accordance with the MSLA. The net amount would be subject to the borrower default indemnity in the event of default by the counterparty.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities lent. Each Fund could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

4. Derivative Financial Instruments:

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

Financial Futures Contracts: Flexible Equity and Small Cap Growth Equity purchase and/or sell financial futures contracts and options on financial future contracts to gain exposure to, or economically hedge against, changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk). Financial futures contracts are agreements between the Funds and a counterparty to buy or

sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.

Upon entering into a financial futures contract, Flexible Equity and Small Cap Growth Equity are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited, if any, is recorded on the Statements of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, Flexible Equity and Small Cap Growth Equity agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by Flexible Equity and Small Cap Growth Equity as unrealized appreciation or depreciation; and, if applicable, as a receivable or payable for variation margin in the Statements of Assets and Liabilities.

When the contract is closed, Flexible Equity and Small Cap Growth Equity record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

Forward Foreign Currency Exchange Contracts: Flexible Equity enters into forward foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from, foreign currencies (foreign currency exchange rate risk). A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Forward foreign currency exchange contracts, when used by Flexible Equity, help to manage the overall exposure to the currencies in which some of the investments held by Flexible Equity are denominated. The contract is marked-to-market daily and the change in market value is recorded by Flexible Equity as an unrealized gain or loss. When the contract is closed, Flexible Equity records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of foreign currency exchange contracts involves the risk that the value of a forward foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

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


		BLACKROCK FUNDS		MARCH 31, 2014		43


Notes to Financial Statements (continued)

the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. When a Fund purchases (writes) an option, an amount equal to the premium paid (received) by a Fund is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked-to-market to reflect the current market value of the option purchased (written). When an instrument is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the instrument acquired or deducted from (or added to) the proceeds of the instrument sold. When an option expires (or a Fund enters into a closing transaction), a Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premiums received or paid). When a Fund writes a call option, such option is “covered,” meaning that a Fund holds the underlying instrument subject to being called by the option counterparty. When a Fund writes a put option, such option is covered by cash in an amount sufficient to cover the obligation.

In purchasing and writing options, the Funds bear the risk of an unfavorable change in the value of the underlying instrument or the risk that the Funds may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Funds purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

Swaps: Flexible Equity enters into swap agreements, in which the Fund and a counterparty agree either to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”). Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation).

For OTC swaps, any upfront premiums paid are recorded as assets and any upfront fees received are recorded as liabilities and are shown as swap premiums paid and swap premiums received, respectively, in the Statements of Assets and Liabilities and amortized over the term of the OTC swap. Payments received or made by the Funds for OTC swaps are recorded in the Statements of Operations as realized gains or losses, respectively. When an OTC swap is terminated, the Funds will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Funds’ basis in the contract, if any. Generally, the basis of the contracts is the premium received or paid.

In a centrally cleared swap, immediately following execution of the swap agreement, the swap agreement is novated to a central counterparty (the “CCP”) and the Fund’s counterparty on the swap agreement becomes the CCP. The Fund is required to interface with the CCP through a broker. Upon entering into a centrally cleared swap, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited is recorded on the Statements of Assets and Liabilities as cash pledged for centrally

cleared swaps. The daily change in valuation of centrally cleared swaps is recorded as a receivable or payable for variation margin in the Statements of Assets and Liabilities. Payments received from (paid to) the counterparty, including at termination, are recorded as realized gain (loss) in the Statements of Operations.

Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statements of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

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

The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure:


Fair Values of Derivative Financial Instruments as of March 31, 2014
Derivative Assets
		Flexible Equity
	Statements of Assets and Liabilities Location	Value
Foreign currency exchange contracts	Unrealized appreciation on forward foreign currency exchange contracts	$	362,229
Equity contracts	Net unrealized appreciation/depreciation¹; Unrealized appreciation on OTC swaps¹; Investments at value — unaffiliated²;	$	4,423,140

Total		$	4,785,369


Derivative Liabilities
		Flexible Equity		Small Cap Growth Equity
	Statements of Assets and Liabilities Location			Value
Foreign currency exchange contracts	Unrealized depreciation on forward foreign currency exchange contracts	$	1,102,593		—
Equity contracts	Net unrealized appreciation/depreciation¹; Options written at value		380,361	$	158,560

Total		$	1,482,954	$	158,560

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

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


44		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)


The Effect of Derivative Financial Instruments in the Statements of Operations Six Months Ended March 31, 2014
Net Realized Gain (Loss) From
	Flexible Equity			Small Cap Growth Equity
Foreign currency exchange contracts:
Foreign currency transactions	$	1,668,890			—
Equity contracts:
Financial futures contracts		(3,660,129	)	$	2,052,048
Swaps		(2,000,601	)		—
Options³		(3,878,802	)		—

Total	$	(7,870,642	)	$	2,052,048


Net Change in Unrealized Appreciation/Depreciation on
	Flexible Equity		Small Cap Growth Equity
Foreign currency exchange contracts:
Foreign currency translations	$	1,579,769		—
Equity contracts:
Financial futures contracts		713,708	$	(321,252	)
Swaps		1,768,225		—
Options³		3,891,704

Total	$	7,953,406	$	(321,252	)

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

For the six months ended March 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:


	Flexible Equity		Small Cap Growth Equity
Financial futures contracts:
Average number of contracts purchased		—		159
Average notional value of contracts purchased		—	$	18,538,605
Average number of contracts sold		325		—
Average notional value of contracts sold	$	37,880,805		—
Forward foreign currency exchange contracts:
Average number of contracts - USD purchased		5		—
Average number of contracts - USD sold		4		—
Average USD amounts purchased	$	106,392,083		—
Average USD amounts sold	$	16,550,639		—
Options:
Average number of option contracts purchased		10,363
Average number of option contracts written		1,250		—
Average notional value of option contracts purchased	$	58,594,131		—
Average notional value of option contracts written	$	8,183,450		—
Total return swaps:
Average number of contracts		3		—
Average notional value	$	18,495,446		—

A Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by such Fund.

For OTC options purchased, each Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by such Fund should the counterparty fail to perform under the contracts. Options written by the Funds do not typically give rise to counterparty credit risk, as options written generally obligate the Funds, and not the counterparty, to perform.

With exchange-traded purchased options, futures and centrally cleared swaps, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.

In order to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between each Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the 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 Fund to accelerate payment of any net liability owed to the counterparty.


		BLACKROCK FUNDS		MARCH 31, 2014		45


Notes to Financial Statements (continued)

and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount threshold (typically either $250,000 or $500,000) before a transfer is required, which is determined at the close of business of the Fund and any additional required collateral is delivered to/pledged by the Fund on the next business day. Typically, the

Fund and counterparties are not permitted to sell, re-pledge or use the collateral they receive. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance. Each Fund attempts to mitigate 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.

For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.

At March 31, 2014, the Funds’ derivative assets and liabilities (by type) are as follows:


	Flexible Equity						Small Cap Growth Equity
	Assets			Liabilities			Assets			Liabilities
Derivative Financial Instruments:
Financial futures contracts		1,819		$	981,250		$	374,510			—
Forward foreign currency exchange contracts	$	362,229			1,102,593			—			—
Options		2,775,910	¹		380,361			—			—
Swaps - OTC²		1,106,610			—			—			—

Total derivative assets and liabilities in the Statements of Assets and Liabilities	$	4,246,568		$	2,464,204		$	374,510			—

Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		(2,777,729	)		(1,361,611	)		(374,510	)		—

Total derivative assets and liabilities subject to an MNA	$	1,468,839		$	1,102,593			—			—

Includes options purchased at value which are included in Investments at value — unaffiliated in the Statements of Assets and Liabilities and reported in the Schedule of Investments.

Includes unrealized appreciation/depreciation on OTC swaps and swap premiums paid/received in the Statements of Assets and Liabilities.

The following table presents the Funds’ derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund as of March 31, 2014:


Flexible Equity
Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset¹			Non-cash Collateral Received		Cash Collateral Received²			Net Amount of Derivative Assets³
Barclays Bank PLC	$	53,537		—			—		—		$	53,537
Citibank N.A.		1,306,024	$	(23,882	)		—	$	(900,000	)		382,142
JPMorgan Chase Bank N.A.		84,447		—			—		—			84,447
Toronto-Dominion Bank		24,831		—			—		—			24,831

Total	$	1,468,839	$	(23,882	)		—	$	(900,000	)	$	544,957


Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset¹			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities⁴
BNP Paribas S.A.	$	507,745		—			—		—	$	507,745
Citibank N.A.		23,882	$	(23,882	)		—		—		—
Deutsche Bank AG		570,966		—			—		—		570,966

Total	$	1,102,593	$	(23,882	)		—		—	$	1,078,711

The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

Excess of collateral received from the individual counterparty may not be shown for financial reporting purposes.

Net amount represents the net amount receivable from the counterparty in the event of default.

⁴

Net amount represents the net amount payable due to the counterparty in the event of default.


46		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

The Trust, on behalf of the Funds, entered into an Investment Advisory Agreement with the Manager, the Funds’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of each Fund’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Fund. For such services, each Fund pays the Manager a monthly fee based on a percentage of each Fund’s average daily net assets at the following annual rates:


	Flexible Equity and Mid-Cap Growth Equity			Small Cap Growth Equity
Average Daily Net Assets	Investment Advisory Fee			Investment Advisory Fee
First $1 Billion		0.800	%		0.550	%
$1 Billion - $2 Billion		0.700	%		0.500	%
$2 Billion - $3 Billion		0.650	%		0.475	%
Greater than $3 Billion		0.625	%		0.450	%

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

The Manager provides investment management and other services to the Subsidiary. The Manager does not receive separate compensation from the Subsidiary for providing investment management or administrative services. However, Flexible Equity pays the Manager based on Flexible Equity’s net assets which include the assets of the Subsidiary.


	Service Fee			Distribution Fee
Service		0.25	%		—
Investor A		0.25	%		—
Investor B		0.25	%		0.75	%
Investor C		0.25	%		0.75	%
Class R		0.25	%		0.25	%

dealer for providing shareholder servicing and/or distribution related services to Service, Investor A, Investor B, Investor C and Class R shareholders.

For the six months ended March 31, 2014, the following table shows the class specific service and distribution fees borne directly by each class of each Fund:


	Flexible Equity		Mid-Cap Growth Equity		Small Cap Growth Equity
Service	$	423	$	2,775	$	33,075
Investor A		634,320		382,289		422,557
Investor B		54,747		21,076		6,167
Investor C		515,757		138,446		178,873
Class R		2,856		21,882		—

Total	$	1,208,103	$	566,468	$	640,672

Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Funds with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an asset based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the six months ended March 31, 2014, the Funds paid the following to the affiliates in return for these services, which are included in transfer agent — class specific in the Statements of Operations:


Flexible Equity	$	2,864
Mid-Cap Growth Equity	$	4,164
Small Cap Growth Equity	$	38,302

The Manager maintains a call center, which is responsible for providing certain shareholder services to the Funds, such as responding to shareholder inquiries and processing transactions based upon instructions from shareholders with respect to the subscription and redemption of Fund shares. For the six months ended March 31, 2014, each Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statements of Operations:


	Flexible Equity		Mid-Cap Growth Equity		Small Cap Growth Equity
Institutional	$	1,293	$	832	$	1,753
Investor A		43,900		63,998		3,125
Investor B		3,931		2,701		74
Investor C		1,126		746		664
Class R		26		91		—

Total	$	50,276	$	68,368	$	5,616

For the six months ended March 31, 2014, the following table shows the class specific transfer agent fees borne directly by each class of each Fund:


	Flexible Equity		Mid-Cap Growth Equity		Small Cap Growth Equity
Institutional	$	53,195	$	14,274	$	714,143
Service		189		1,554		23,049
Investor A		548,522		396,332		360,010
Investor B		28,374		15,055		1,852
Investor C		109,486		26,302		39,214


		BLACKROCK FUNDS		MARCH 31, 2014		47


Notes to Financial Statements (continued)


	Flexible Equity		Mid-Cap Growth Equity		Small Cap Growth Equity
Class R	$	1,487	$	11,042		—

Total	$	741,253	$	464,559	$	1,138,268


Average Daily Net Assets	Administration Fee
First $500 Million		0.075	%
$500 Million - $1 Billion		0.065	%
Greater than $1 Billion		0.055	%

In addition, each of the share classes is charged an administration fee, which is shown as administration-class specific in the Statements of Operations, based on the following percentages of average daily net assets of each respective class:


Average Daily Net Assets	Administration Fee — Class Specific
First $500 Million		0.025	%
$500 Million - $1 Billion		0.015	%
Greater than $1 Billion		0.005	%


Flexible Equity	$	259,330
Mid-Cap Growth Equity	$	142,955
Small Cap Growth Equity	$	381,126

For the six months ended March 31, 2014, the following table shows the class specific administration fees borne directly by each class of each Fund:


	Flexible Equity		Mid-Cap Growth Equity		Small Cap Growth Equity
Institutional	$	8,079	$	3,167	$	73,571
Service		42		278		3,308
Investor A		62,856		38,228		42,256
Investor B		1,369		532		154
Investor C		12,894		3,463		4,472
Class R		143		1,094		—

Total	$	85,383	$	46,762	$	123,761

The Manager contractually or voluntarily agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, income tax expense, acquired fund fees and

expenses and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Funds’ business. The expense limitations as a percentage of average daily net assets are as follows:


	Flexible Equity			Mid-Cap Growth Equity			Small Cap Growth Equity
	Contractual¹			Contractual²			Contractual²			Voluntary³
Institutional		0.97	%		1.11	%		1.02	%		—
Service		1.29	%		1.58	%		1.29	%		1.18	%
Investor A		1.29	%		1.39	%		1.50	%		—
Investor B		2.06	%		2.16	%		2.28	%		—
Investor C		2.06	%		2.16	%		2.28	%		—
Class R		1.65	%⁴		1.65	%		1.72	%⁵		—

The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to February 1, 2015, except for Class R Shares which is prior to February 1, 2024, unless approved by the Board, including a majority of the independent Trustees.

The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to February 1, 2015 unless approved by the Board, including a majority of the independent Trustees.

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

⁴

On February 1 of each year, the waiver agreement will renew automatically for an additional one year so that the agreement will have a perpetual ten year term.

⁵

There were no shares outstanding as of March 31, 2014.

These amounts waived or reimbursed are included in fees waived by Manager, and shown as administration fees waived — class specific, transfer agent fees waived — class specific and transfer agent fees reimbursed — class specific, respectively, in the Statements of Operations. For the six months ended March 31, 2014, class specific expense waivers or reimbursements are as follows:


Administration Fees Waived
	Flexible Equity		Mid-Cap Growth Equity
Institutional	$	8,079		—
Service		23		—
Investor A		62,856	$	38,228
Investor B		1,369		532
Investor C		12,894		154
Class R		87		958

Total	$	85,308	$	39,872


Transfer Agent Fees Waived
	Flexible Equity		Mid-Cap Growth Equity
Institutional	$	1,293		—
Investor A		43,900	$	60,112
Investor B		3,931		2,701
Investor C		1,126		—
Class R		26		26

Total	$	50,276	$	62,839


Transfer Agent Fees Reimbursed
	Flexible Equity		Mid-Cap Growth Equity
Institutional	$	34,834		—
Service		9		—
Investor A		193,538	$	18,562


48		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)


Transfer Agent Fees Reimbursed
	Flexible Equity		Mid-Cap Growth Equity
Investor B	$	16,685	$	7,343
Investor C		35,443		—
Class R		239		1,639

Total	$	280,748	$	27,544

For the six months ended March 31, 2014, the Manager recouped the following Fund level and class specific waivers previously recorded by the Funds:


	Mid-Cap Growth Equity		Small Cap Growth Equity
Institutional	$	5,248	$	15,195
Service		2,582		—
Investor C		2,412		—

Total	$	10,242	$	15,195

On March 31, 2014, the Fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:


	Expiring September 30,
	2014		2015		2016
Flexible Equity
Fund Level	$	3,058	$	4,185		—
Institutional	$	286,798	$	161,208	$	44,206
Service	$	7,949	$	2,177	$	32
Investor A	$	668,091	$	726,434	$	300,294
Investor B	$	57,761	$	50,744	$	21,985
Investor C	$	140,462	$	141,245	$	49,463
R Shares	$	1,419	$	1,533	$	352
Mid-Cap Growth Equity
Institutional	$	868	$	2,628		—
Service	$	4,864	$	1,701		—
Investor A	$	397,817	$	387,828	$	116,902
Investor B	$	28,651	$	24,471	$	10,576
Investor C	$	26,056	$	14,126	$	154
R Shares	$	11,748	$	6,418	$	2,623

For the six months ended March 31, 2014, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each Fund’s Investor A Shares as follows:


Flexible Equity	$	4,440
Mid-Cap Growth Equity	$	14,289
Small Cap Growth Equity	$	10,151

For the six months ended March 31, 2014, affiliates received CDSCs as follows:


	Investor A		Investor B		Investor C
Flexible Equity	$	11	$	1,221	$	2,327
Mid-Cap Growth Equity	$	250	$	296	$	977
Small Cap Growth Equity	$	1,448	$	53	$	1,286

The U.S. Securities and Exchange Commission has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Funds are responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment advisor to the private investment company will not charge any advisory fees with respect to shares purchased by the Funds.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. Each Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent. Pursuant to the securities lending agreement effective February 1, 2014, BIM may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to a securities lending agreement effective February 1, 2014, each Fund retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, each Fund, pursuant to the securities lending agreement will retain for the remainder of the calendar year, securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, each Fund retained 65% of securities lending income and paid a fee to BIM equal to 35% of such income. The share of securities lending income earned by each Fund, if any, is shown as securities lending — affiliated — net in the Statements of Operations. For the six months ended March 31, 2014, the Funds paid BIM for securities lending agent services as follows:


Flexible Equity	$	438
Mid-Cap Growth Equity	$	18,966
Small Cap Growth Equity	$	218,457


		BLACKROCK FUNDS		MARCH 31, 2014		49


Notes to Financial Statements (continued)

6. Purchases and Sales:

Purchases and sales of investments, excluding short-term securities, for the six months ended March 31, 2014, were as follows:


	Purchases		Sales
Flexible Equity	$	328,949,415	$	428,225,882
Mid-Cap Growth Equity	$	219,066,817	$	204,756,228
Small Cap Growth Equity	$	538,381,038	$	1,079,825,452

Transactions in options written for the six months ended March 31, 2014, were as follows:


Flexible Equity
	Calls
	Contracts			Premiums Received

Outstanding options, beginning of period		1,149		$	79,236
Options written		14,097			2,799,647
Options exercised		(1,251	)		(430,957	)
Options expired		(3,756	)		(350,440	)
Options closed		(7,739	)		(1,659,321	)

Outstanding options, end of period		2,500		$	438,165

7. Income Tax Information:

As of September 30, 2013, the Fund had a capital loss carryforward available to offset future realized capital gains of $62,693,400, all of which is due to expire September 30, 2017.

As of March 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:


	Flexible Equity			Mid-Cap Growth Equity			Small Cap Growth Equity
Tax cost	$	563,514,128		$	333,429,685		$	785,356,202

Gross unrealized appreciation	$	85,903,329		$	82,281,050		$	146,395,832
Gross unrealized depreciation		(13,532,042	)		(2,083,087	)		(31,739,234	)

Net unrealized appreciation	$	72,371,287		$	80,197,963		$	114,656,598

8. Bank Borrowings:

agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the Funds, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts 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. Participating Funds paid administration and arrangement fees, which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The Funds did not borrow under the credit agreement during the six months ended March 31, 2014.

9. Concentration, Market and Credit Risk:

As of March 31, 2014, Flexible Equity invested a significant portion of its assets in securities in the consumer discretionary and financials sectors. Mid-Cap Growth Equity invested a significant portion of its assets in securities in the consumer discretionary, information technology and industrials sectors. Small Cap Growth Equity invested a significant portion of its assets in securities in the information technology and health care sectors. Changes in economic conditions affecting these sectors would have a greater impact on the respective Funds and could affect the value, income and/or liquidity of positions in such securities.


50		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

10. Capital Share Transactions:

Transactions in capital shares for each class were as follows:


	Six Months Ended March 31, 2014						Year Ended September 30, 2013
Flexible Equity	Shares			Amount			Shares			Amount
Institutional
Shares sold		559,559		$	8,152,413			1,480,403		$	19,061,403
Shares issued in reinvestment of dividends		61,089			904,109			78,980			961,390
Shares redeemed		(1,392,156	)		(20,315,394	)		(8,399,300	)		(107,020,444	)

Net decrease		(771,508	)	$	(11,258,872	)		(6,839,917	)	$	(86,997,651	)


Service
Shares sold		1,277		$	18,069			4,658		$	59,314
Shares issued in reinvestment of dividends		202			2,950			344			4,137
Shares redeemed		(11,152	)		(160,461	)		(29,279	)		(361,847	)

Net decrease		(9,673	)	$	(139,442	)		(24,277	)	$	(298,396	)


Investor A
Shares sold and automatic conversion of shares		964,410		$	13,598,485			2,981,374		$	37,203,485
Shares issued in reinvestment of dividends		404,269			5,805,298			392,256			4,639,298
Shares redeemed		(4,764,519	)		(67,486,838	)		(16,386,872	)		(202,891,873	)

Net decrease		(3,395,840	)	$	(48,083,055	)		(13,013,242	)	$	(161,049,090	)


Investor B
Shares sold		2,095		$	26,543			9,549		$	106,426
Shares issued in reinvestment of dividends		2,955			38,498			964			10,535
Shares redeemed and automatic conversion of shares		(238,928	)		(3,050,694	)		(633,285	)		(7,157,447	)

Net decrease		(233,878	)	$	(2,985,653	)		(622,772	)	$	(7,040,486	)


Investor C
Shares sold		159,987		$	2,030,858			441,994		$	5,001,546
Shares issued in reinvestment of dividends		43,155			558,433			16,337			175,633
Shares redeemed		(824,780	)		(10,474,039	)		(2,573,973	)		(28,939,114	)

Net decrease		(621,638	)	$	(7,884,748	)		(2,115,642	)	$	(23,761,935	)


Class R
Shares sold		27,724		$	401,513			14,316		$	204,012
Shares issued in reinvestment of dividends		536			7,904			19,595			238,521
Shares redeemed		(22,435	)		(325,041	)		(65,492	)		(864,273	)

Net increase (decrease)		5,825		$	84,376			(31,581	)	$	(421,740	)

Total Net Decrease		(5,026,712	)	$	(70,267,394	)		(22,647,431	)	$	(279,569,298	)


		BLACKROCK FUNDS		MARCH 31, 2014		51


Notes to Financial Statements (continued)


	Six Months Ended March 31, 2014						Year Ended September 30, 2013
Mid-Cap Growth Equity	Shares			Amount			Shares			Amount
Institutional
Shares sold		767,597		$	13,691,360			177,733		$	2,878,224
Shares issued in reinvestment of distributions		194,583			3,105,529			—			—
Shares redeemed		(174,960	)		(3,018,067	)		(362,839	)		(5,180,039	)

Net increase (decrease)		787,220		$	13,778,822			(185,106	)	$	(2,301,815	)


Service
Shares sold		28,498		$	485,687			13,860		$	183,892
Shares issued in reinvestment of distributions		24,218			359,153			—			—
Shares redeemed		(34,065	)		(553,346	)		(38,893	)		(564,426	)

Net increase (decrease)		18,651		$	291,494			(25,033	)	$	(380,534	)


Investor A
Shares sold and automatic conversion of shares		1,756,617		$	27,968,905			1,038,890		$	14,803,094
Shares issued in reinvestment of distributions		3,329,309			47,575,761			—			—
Shares redeemed		(1,333,503	)		(21,152,622	)		(3,177,171	)		(43,484,976	)

Net increase (decrease)		3,752,423		$	54,392,044			(2,138,281	)	$	(28,681,882	)


Investor B
Shares sold		9,200		$	126,727			8,359		$	106,415
Shares issued in reinvestment of distributions		63,066			759,319			—			—
Shares redeemed and automatic conversion of shares		(68,903	)		(931,755	)		(181,592	)		(2,167,718	)

Net increase (decrease)		3,363		$	(45,709	)		(173,233	)	$	(2,061,303	)


Investor C
Shares sold		501,067		$	6,776,552			279,854		$	3,492,185
Shares issued in reinvestment of distributions		396,072			4,748,893			—			—
Shares redeemed		(183,652	)		(2,421,775	)		(347,917	)		(4,134,057	)

Net increase (decrease)		713,487		$	9,103,670			(68,063	)	$	(641,872	)


Class R
Shares sold		136,352		$	2,174,055			200,992		$	2,814,955
Shares issued in reinvestment of distributions		115,333			1,635,424			—			—
Shares redeemed		(317,590	)		(4,828,303	)		(173,049	)		(2,322,442	)

Net increase (decrease)		(65,905	)	$	(1,018,824	)		27,943		$	492,513

Total Net Increase (Decrease)		5,209,239		$	76,501,497			(2,561,773	)	$	(33,574,893	)


Small Cap Growth Equity
Institutional
Shares sold		2,823,048		$	74,478,049			10,643,445		$	269,637,687
Shares issued in reinvestment of dividends and distributions		9,997,391			219,842,574			4,121,612			93,766,649
Shares redeemed		(22,135,762	)		(577,293,992	)		(22,615,252	)		(594,896,244	)

Net decrease		(9,315,323	)	$	(282,973,369	)		(7,850,195	)	$	(231,491,908	)


52		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (concluded)


	Six Months Ended March 31, 2014						Year Ended September 30, 2013
Small Cap Growth Equity (concluded)	Shares			Amount			Shares			Amount
Service
Shares sold		202,017		$	4,818,887			245,960		$	5,973,963
Shares issued in reinvestment of distributions		452,078			8,964,705			138,883			2,949,869
Shares redeemed		(294,961	)		(6,686,955	)		(664,355	)		(16,295,845	)

Net increase (decrease)		359,134		$	7,096,637			(279,512	)	$	(7,372,013	)


Investor A
Shares sold and automatic conversion of shares		2,207,426		$	47,329,272			3,182,798		$	74,853,134
Shares issued in reinvestment of distributions		6,048,548			113,168,173			1,800,128			36,794,609
Shares redeemed		(3,681,825	)		(84,730,421	)		(7,105,594	)		(170,531,397	)

Net increase (decrease)		4,574,149		$	75,767,024			(2,122,668	)	$	(58,883,654	)


Investor B
Shares sold		2,277		$	38,239			5,873		$	119,158
Shares issued in reinvestment of distributions		34,769			489,889			9,190			157,884
Shares redeemed and automatic conversion of shares		(21,071	)		(319,940	)		(31,902	)		(630,671	)

Net increase (decrease)		15,975		$	208,188			(16,839	)	$	(353,629	)


Investor C
Shares sold		252,080		$	4,313,859			426,789		$	8,393,879
Shares issued in reinvestment of distributions		1,031,671			14,371,093			185,401			3,168,491
Shares redeemed		(302,927	)		(4,986,466	)		(523,586	)		(10,224,135	)

Net increase		980,824		$	13,698,486			88,604		$	1,338,235

Total Net Decrease		(3,385,241	)	$	(186,203,034	)		(10,180,610	)	$	(296,762,969	)

11. Subsequent Events:

Effective April 24, 2014, the credit agreement was terminated and a new agreement was entered into. The Fund became a party to a 364-day, $1.1 billion credit agreement, which expires in April 2015. Excluding commitments designated for a certain individual fund, the Fund can borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts 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.


		BLACKROCK FUNDS		MARCH 31, 2014		53


Officers and Trustees

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

Ian A. MacKinnon, 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

Neal Andrews, Chief Financial Officer

Jay Fife, Treasurer

Brian Kindelan, Chief Compliance Officer and Anti-Money Laundering Officer

Benjamin Archibald, Secretary

Investment Advisor and Co-Administrator

BlackRock Advisors, LLC

Wilmington, DE 19809

Accounting Agent, Co-Administrator and Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

Wilmington, DE 19809

Custodian

The Bank of New York Mellon

New York, NY 10286

Distributor

BlackRock Investments, LLC

New York, NY 10022

Legal Counsel

Sidley Austin LLP

New York, NY 10019

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Philadelphia, PA 19103

Address of the Trust

100 Bellevue Parkway

Wilmington, DE 19809


54		BLACKROCK FUNDS		MARCH 31, 2014


Additional Information

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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:

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http://www.blackrock.com/edelivery

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

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Householding

Availability of Quarterly Schedule of Investments

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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 FUNDS		MARCH 31, 2014		55


Additional Information (concluded)

BlackRock Privacy Principles


56		BLACKROCK FUNDS		MARCH 31, 2014


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 Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock Commodity Strategies Fund

BlackRock Disciplined Small Cap Core Fund

BlackRock Emerging Markets Dividend Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Long/Short Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid-Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000^® Index Fund

BlackRock Science & Technology Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund

Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock CoRI Funds

2015

2017

2019

2021

2023

BlackRock Emerging Markets Flexible Dynamic Bond 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 Investment Grade Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Short Obligations Fund

BlackRock Short-Term Treasury Fund

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock Ultra-Short Obligations Fund

BlackRock World Income Fund

Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield 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

BlackRock Strategic Municipal Opportunities Fund

Mixed Asset Funds


BlackRock Balanced Capital Fund	LifePath Active Portfolios		LifePath Index Portfolios
BlackRock Emerging Market Allocation Portfolio	2015	2040	Retirement	2040
BlackRock Global Allocation Fund	2020	2045	2020	2045
BlackRock Managed Volatility Portfolio	2025	2050	2025	2050
BlackRock Multi-Asset Income Portfolio	2030	2055	2030	2055
BlackRock Multi-Asset Real Return Fund	2035		2035
BlackRock Strategic Risk Allocation Fund

	LifePath Portfolios
BlackRock Prepared Portfolios	Retirement	2040
Conservative Prepared Portfolio	2020	2045
Moderate Prepared Portfolio	2025	2050
Growth Prepared Portfolio	2030	2055
Aggressive Growth Prepared Portfolio	2035


		BLACKROCK FUNDS		MARCH 31, 2014		57

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

LOGO



Eq-Midcap-3/31-SAR

MARCH 31, 2014

SEMI-ANNUAL REPORT (UNAUDITED)

BLACKROCK^®

BlackRock Funds^SM

„ BlackRock Global Opportunities Portfolio

„ BlackRock Health Sciences Opportunities Portfolio

„ BlackRock International Opportunities Portfolio

„ BlackRock Science & Technology Opportunities Portfolio

„ BlackRock U.S. Opportunities Portfolio


Not FDIC Insured ¡ May Lose Value ¡ No Bank Guarantee


Table of Contents


			Page
Shareholder Letter			3
Semi-Annual Report:
Fund Summaries			4
About Fund Performance			14
Disclosure of Expenses			15
Derivative Financial Instruments			15
Financial Statements:
Schedules of Investments			16
Statements of Assets and Liabilities			42
Statements of Operations			44
Statements of Changes in Net Assets			45
Financial Highlights			47
Notes to Financial Statements			62
Officers and Trustees			82
Additional Information			83
A World-Class Mutual Fund Family			85


2		BLACKROCK FUNDS		MARCH 31, 2014

Shareholder Letter

Dear Shareholder,

The start of the new year brought another turn in sentiment, as heightened risks in emerging markets and mixed U.S. economic data caused global equities to weaken in January while bond markets found renewed strength. Although these headwinds persisted, equities were back on the rise in Feb-ruary as investors were encouraged by a one-year extension of the U.S. debt ceiling and market-friendly comments from the Fed’s new Chairwoman, Janet Yellen. While U.S. economic data pointed to softer growth, investors viewed this trend as temporarily driven by poor winter weather and continued adding risk to their portfolios on the belief that growth would pick up in the coming months. In March, markets focused on decelerating growth in China and tensions between Russia and Ukraine over the disputed region of Crimea. Additionally, investors were caught off guard by a statement from Chairwoman Yellen indicating that the Fed may raise short-term interest rates earlier than the markets had previously forecasted. Bond markets came under pressure as the middle of the yield curve vaulted higher in response to the unexpected shift in forward guidance.

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

In a modest global growth environment, expectations around monetary policy changes continued to be a key theme in financial market performance.

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of March 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500^® Index)		12.51	%		21.86	%
U.S. small cap equities (Russell 2000^® Index)		9.94			24.90
International equities (MSCI Europe, Australasia, Far East Index)		6.41			17.56
Emerging market equities (MSCI Emerging Markets Index)		1.39			(1.43	)
3-month Treasury bill (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.03			0.07
U.S. Treasury securities (BofA Merrill Lynch 10- Year U.S. Treasury Index)		0.85			(4.38	)
U.S. investment grade bonds (Barclays U.S. Aggregate Bond Index)		1.70			(0.10	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.91			0.31
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		6.66			7.53

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


		THIS PAGE NOT PART OF YOUR FUND REPORT				3


Fund Summary as of March 31, 2014			BlackRock Global Opportunities Portfolio

Investment Objective

BlackRock Global Opportunities Portfolio’s (the “Fund”) investment objective is to provide long-term capital appreciation.

Portfolio Management Commentary

How did the Fund perform?

For the six-month period ended March 31, 2014, the Fund’s Institutional and Investor A Shares outperformed the benchmark, the MSCI All Country World Index (“ACWI”), while Investor B, Investor C and Class R Shares of the Fund underperformed the benchmark.

What factors influenced performance?

Stock selection contributed positively to the Fund’s performance in the industrials, materials and information technology (“IT”) sectors. In industrials, standout performance came from select positions such as United Rentals, Inc., which continued to benefit from a broad-based construction recovery, and American Airlines Group, Inc., which benefited from increased pricing power due to industry consolidation. In the materials sector, strong performance came from selection in the specialty chemicals segment, where the Fund continued to favor well-capitalized businesses with the ability to consistently grow and generate cash flow in excess of their cost of capital. Within IT, the Fund’s internet software holdings added to returns attributable to a preference for emerging technology and businesses with high potential for monetizing their new products or subscribers.

Detracting from performance was stock selection in the energy sector. In particular, Eurasia Drilling Co. Ltd., a Russian provider of onshore drilling services, came under pressure on account of drilling contract disruptions coupled with the geopolitical turmoil in Ukraine, which ultimately led to the Fund exiting the position. In health care, the Fund’s exposure to biotechnology hurt returns as the industry experienced selling pressure during October 2013 and again in March 2014 due to investors taking profits on their recent strong performance.

Describe recent portfolio activity.

During the six-month period, the Fund pared back exposure to Japan, moving to a slight underweight versus the benchmark index, with most of the sales within consumer discretionary, financials and materials. The proceeds were rotated into stock-specific ideas within industrials and also financial stocks that are more sensitive to a recovering U.S. economy.

Describe portfolio positioning at period end.

Relative to the MSCI All Country World Index, the Fund ended the period overweight in European equities and underweight developed markets in the Americas and Asia ex-Japan. From a sector perspective, the Fund was most notably overweight in industrials and health care, while the most significant underweights were in energy and consumer staples.

Portfolio Information


Ten Largest Holdings		Percent of Long-Term Investments


Google, Inc., Class A	2	%
Apple, Inc.	2
JPMorgan Chase & Co.	2
NH Hoteles SA	2
Covidien PLC	2
Citigroup, Inc.	2
Kennedy-Wilson Holdings, Inc.	1
Anheuser-Busch InBev NV	1
BankUnited, Inc.	1
Vivendi SA	1


Geographic Allocation		Percent of Long-Term Investments


United States	48	%
United Kingdom	7
France	5
Germany	5
Ireland	5
Japan	5
China	3
Spain	3
Switzerland	3
Italy	2
Sweden	2
Other¹	12

¹	Includes holdings within countries that are 1% or less of long-term investments. Please refer to the Schedule of Investments for such countries.


4		BLACKROCK FUNDS		MARCH 31, 2014


		BlackRock Global Opportunities Portfolio

Total Return Based on a $10,000 Investment

LOGO

Under normal market conditions, the Fund will invests at least 75% of its total assets in global equity securities of any market capitalization, selected for their above-average return potential. The Fund may invest up to 25% of its total assets in stocks of issuers in emerging market countries. The Fund may also invest up to 25% of its total assets in global fixed-income securities, including corporate bonds, U.S. government debt securities, non-U.S. government and supranational debt securities, asset-backed securities, mortgage-backed securities, emerging market debt securities and non-investment grade debt securities (high yield or junk bonds).

This unmanaged index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The MSCI All Country World Index consists of 45 country indices comprising 24 developed and 21 emerging market country indices.

⁴

Commencement of operations.


Performance Summary for the Period Ended March 31, 2014
				Average Annual Total Returns⁵
				1 Year						5 Years						Since Inception⁶
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		8.87	%		18.49	%		N/A			16.69	%		N/A			6.00	%		N/A
Investor A		8.63			18.22			12.01	%		16.42			15.17	%		5.70			5.00	%
Investor B		8.24			17.17			12.67			15.62			15.39			4.93			4.93
Investor C		8.19			17.16			16.16			15.63			15.63			4.89			4.89
Class R		8.36			17.66			N/A			15.93			N/A			5.31			N/A
MSCI All Country World Index (ACWI)		8.48			16.55			N/A			17.80			N/A			5.15			N/A

⁵

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

⁶

The Fund commenced operations on January 31, 2006.

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

Past performance is not indicative of future results.


Expense Example
	Actual			Hypothetical⁸
	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁷	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁷	Annualized Expense Ratio
Institutional	$1,000.00	$1,088.70	$5.52	$1,000.00	$1,019.65	$5.34	1.06%
Investor A	$1,000.00	$1,086.30	$6.92	$1,000.00	$1,018.30	$6.69	1.33%
Investor B	$1,000.00	$1,082.40	$11.32	$1,000.00	$1,014.06	$10.95	2.18%
Investor C	$1,000.00	$1,081.90	$11.11	$1,000.00	$1,014.26	$10.75	2.14%
Class R	$1,000.00	$1,083.60	$8.93	$1,000.00	$1,016.36	$8.65	1.72%

⁷

⁸

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 15 for further information on how expenses were calculated.


		BLACKROCK FUNDS		MARCH 31, 2014		5


Fund Summary as of March 31, 2014			BlackRock Health Sciences Opportunities Portfolio

Investment Objective

BlackRock Health Sciences Opportunities Portfolio’s (the “Fund”) investment objective is to provide long-term growth of capital.

Portfolio Management Commentary

How did the Fund perform?

For the six-month period ended March 31, 2014, the Fund underperformed its benchmark, the Russell 3000^® Health Care Index, and outperformed the broad-market S&P 500^® Index. The following discussion of relative performance pertains to the Russell 3000^® Health Care Index.

What factors influenced performance?

The Fund’s underperformance relative to the benchmark index was attributable mostly to an overweight allocation and stock selection in the biotechnology industry. During October 2013 and again in March 2014, biotechnology stocks experienced selling pressure due to investors taking profits on their recent strong performance, with small and medium capitalization stocks declining the most. Also detracting from relative performance was the Fund’s underweight allocation to pharmaceuticals as investors preferred the stability of these large capitalization companies during periods of market turbulence.

Key contributors to relative performance were the Fund’s overweight allocation and stock selection in the life sciences tools & services industry and an underweight allocation and stock selection in health care services.

Describe recent portfolio activity.

During the fourth quarter of 2013, the Fund sold several of its biotechnology holdings given their recent strong price appreciation and consequently, less appealing risk-reward profiles. These proceeds were invested in both devices & supplies and pharmaceutical companies selected for their individual fundamental merits and attractive valuations. Amid market weakness in March, the Fund took profits on higher growth positions across the portfolio as recent strong performance in these names made them particularly vulnerable in the market downturn.

Describe portfolio positioning at period end.

As of period end, valuations in the health care remained reasonable, even after the strong performance of the sector over the previous two years. The Fund continued to maintain a focus on innovative companies and, as such, the two largest industry allocations were biotechnology and pharmaceuticals, where the innovation cycle is in an upward trend and is expected to drive a secular growth story. Additionally, given the potential for this theme expanding to medical devices in 2014, the Fund maintained holdings in several of these companies with new product launches on the horizon.

Portfolio Information


Ten Largest Holdings		Percent of Long-Term Investments


Johnson & Johnson	4	%
Biogen Idec, Inc.	4
Pfizer, Inc.	4
Merck & Co., Inc.	3
AbbVie, Inc.	3
Alexion Pharmaceuticals, Inc.	3
Bayer AG, Registered Shares	3
Celgene Corp.	3
UnitedHealth Group, Inc.	2
Covidien PLC	2


Industry Allocation		Percent of Long-Term Investments


Pharmaceuticals	36	%
Biotechnology	26
Health Care Equipment & Supplies	18
Health Care Providers & Services	12
Life Sciences Tools & Services	6
Health Care Technology	1
Chemicals	1


6		BLACKROCK FUNDS		MARCH 31, 2014


		BlackRock Health Sciences Opportunities Portfolio

Total Return Based on a $10,000 Investment

LOGO

Under normal market conditions, the Fund invests at least 80% of its total assets in equity securities, primarily common stock, of companies in health sciences and related industries.

An unmanaged total return index, which covers 500 industrial, utility, transportation and financial companies of the U.S. markets (mostly New York Stock Exchange (“NYSE”) issues) representing about 75% of NYSE market capitalization and 30% of NYSE issues.

⁴

An unmanaged index representative of companies involved in medical services or health care in the Russell 3000^® Index, which is comprised of the 3,000 largest US companies as determined by total market capitalization.


Performance Summary for the Period Ended March 31, 2014
				Average Annual Total Returns⁵
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		14.20	%		29.84	%		N/A			22.55	%		N/A			13.57	%		N/A
Service		14.02			29.46			N/A			22.18			N/A			13.25			N/A
Investor A		14.02			29.46			22.67	%		22.18			20.87	%		13.22			12.61	%
Investor B		13.57			28.42			23.92			21.21			21.03			12.52			12.52
Investor C		13.60			28.52			27.52			21.30			21.30			12.41			12.41
Class R		13.90			29.10			N/A			21.68			N/A			12.72			N/A
S&P 500^® Index		12.51			21.86			N/A			21.16			N/A			7.42			N/A
Russell 3000^® Health Care Index		16.22			30.56			N/A			22.67			N/A			9.27			N/A

⁵

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

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

Past performance is not indicative of future results.


Expense Example
	Actual			Hypothetical⁷
	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁶	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁶	Annualized Expense Ratio
Institutional	$1,000.00	$1,142.00	$4.75	$1,000.00	$1,020.49	$4.48	0.89%
Service	$1,000.00	$1,140.20	$6.30	$1,000.00	$1,019.05	$5.94	1.18%
Investor A	$1,000.00	$1,140.20	$6.24	$1,000.00	$1,019.10	$5.89	1.17%
Investor B	$1,000.00	$1,135.70	$10.60	$1,000.00	$1,015.01	$10.00	1.99%
Investor C	$1,000.00	$1,136.00	$10.12	$1,000.00	$1,015.46	$9.55	1.90%
Class R	$1,000.00	$1,139.00	$7.73	$1,000.00	$1,017.70	$7.29	1.45%

⁶

⁷

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 15 for further information on how expenses were calculated.


		BLACKROCK FUNDS		MARCH 31, 2014		7


Fund Summary as of March 31, 2014			BlackRock International Opportunities Portfolio

Investment Objective

BlackRock International Opportunities Portfolio’s (the “Fund”) investment objective is to seek long-term capital appreciation.

Portfolio Management Commentary

How did the Fund perform?

For the six-month period ended March 31, 2014, the Fund outperformed its benchmark, the MSCI All Country World Index (“ACWI”) Ex-U.S.

What factors influenced performance?

The Fund’s outperformance was driven by stock selection in the financials, industrials and health care sectors. Within financials, the Fund’s positions in Bank of Ireland and Bankinter SA boosted returns as financial conditions improved in the peripheral European countries during the period. In the industrials sector, Sacyr SA contributed positively as the company benefited from the beginning of an economic recovery in Spain and investor optimism for its debt restructuring plans. In health care, the Fund benefited from a position in Roche Holding AG as investors responded favorably to the company’s strong business results and future pipeline potential. From a regional perspective, an overweight allocation to Europe, stock selection in emerging Asia, and an underweight allocation to emerging Americas all contributed positively to performance.

Conversely, stock selection in the information technology (“IT”) sector detracted from relative performance, specifically within the internet software & services industry. Exposure to high-growth names across the portfolio had a negative impact on results as investors shifted away from these

stocks in favor of more value-oriented companies. Additionally, the Fund’s underweight allocation to utilities proved disadvantageous as the sector generated strong performance over the period. Regionally, stock selection in Japan negatively impacted performance in the latter part of the period as investors harvested profits following the strong performance of these stocks in 2013.

Describe recent portfolio activity.

During the six-month period, the Fund marginally reduced its overweight to developed Europe, with the more notable reductions focused in the United Kingdom and France. Offsetting this slight reduction was an increased allocation to emerging Asia, specifically within China and South Korea. From a sector perspective, the Fund decreased exposures to consumer discretionary and IT, and increased weightings in the health care and telecommunication services sectors.

Describe portfolio positioning at period end.

Relative to the MSCI All Country World Index Ex-U.S., the Fund ended the period overweight in Europe and underweight in both emerging markets and Asia ex-Japan. On a sector basis, the Fund was most notably overweight in industrials and health care, while the most significant underweights were in consumer staples and energy.

Portfolio Information


Ten Largest Holdings	Percent of Long-Term Investments
Novartis AG, Registered Shares		3	%
Roche Holding AG		3
SoftBank Corp.		2
Svenska Cellulosa AB SCA, B Shares		2
Vivendi SA		2
Daimler AG, Registered Shares		2
Sumitomo Mitsui Financial Group, Inc.		2
Anheuser-Busch InBev NV		2
AstraZeneca PLC		2
NH Hoteles SA		2


Geographic Allocation	Percent of Long-Term Investments
United Kingdom		15	%
Japan		12
Switzerland		10
Germany		9
France		8
Ireland		5
China		4
Sweden		4
Canada		3
Denmark		3
Italy		3
Netherlands		3
Spain		3
United States		3
Belgium		2
Other¹		13

Includes holdings within countries that are 1% or less of long-term investments. Please refer to the Schedule of Investments for such countries.


8		BLACKROCK FUNDS		MARCH 31, 2014


		BlackRock International Opportunities Portfolio

Total Return Based on a $10,000 Investment

LOGO

Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities issued by foreign companies of any market capitalization. The Fund may invest up to 40% of its net assets in stocks of issuers in emerging market countries.

A market capitalization weighted index maintained by MSCI Inc. and is designed to provide a broad measure of stock performance throughout the world, with the exception of US-based companies. The index includes both developed and emerging markets.


Performance Summary for the Period Ended March 31, 2014
				Average Annual Total Returns⁴
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		7.48	%		15.09	%		N/A			16.16	%		N/A			9.96	%		N/A
Service		7.34			14.72			N/A			15.69			N/A			9.57			N/A
Investor A		7.33			14.75			8.73	%		15.85			14.61	%		9.63			9.04	%
Investor B		6.89			13.83			9.33			14.92			14.69			8.95			8.95
Investor C		6.93			13.91			12.91			14.96			14.96			8.80			8.80
MSCI All Country World Index (ACWI) Ex-US		5.30			12.31			N/A			15.52			N/A			7.12			N/A

⁴

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

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

Past performance is not indicative of future results.


Expense Example
	Actual						Hypothetical⁶
	Beginning Account Value October 1, 2013		Ending Account Value March 31, 2014		Expenses Paid During the Period⁵		Beginning Account Value October 1, 2013		Ending Account Value March 31, 2014		Expenses Paid During the Period⁵		Annualized Expense Ratio
Institutional		$1,000.00		$1,074.80		$6.26		$1,000.00		$1,018.90		$6.09		1.21	%
Service		$1,000.00		$1,073.40		$7.75		$1,000.00		$1,017.45		$7.54		1.50	%
Investor A		$1,000.00		$1,073.30		$7.81		$1,000.00		$1,017.40		$7.59		1.51	%
Investor B		$1,000.00		$1,068.90		$12.17		$1,000.00		$1,013.16		$11.85		2.36	%
Investor C		$1,000.00		$1,069.30		$11.71		$1,000.00		$1,013.61		$11.40		2.27	%

⁵

⁶

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 15 for further information on how expenses were calculated.


		BLACKROCK FUNDS		MARCH 31, 2014		9


Fund Summary as of March 31, 2014			BlackRock Science & Technology Opportunities Portfolio

Investment Objective

BlackRock Science & Technology Opportunities Portfolio’s (the “Fund”) investment objective is to provide long-term capital appreciation.

Portfolio Management Commentary

Effective October 11, 2013, the benchmark against which the Fund measures its performance changed from the NYSE Arca Tech 100 Index^SM to the MSCI World Information Technology Index. The investment adviser believes that this change in the benchmark better represents the sector exposures of the Fund and is a more appropriate basis for evaluating performance.

How did the Fund perform?

For the six-month period ended March 31, 2014, the Fund outperformed the MSCI World Information Technology Index. The Fund’s Institutional Shares performed in line with its former benchmark, the NYSE Arca Tech 100 Index^SM, while all other share classes underperformed its former benchmark. The following discussion of relative performance pertains to the MSCI World Information Technology Index.

What factors influenced performance?

Stock selection within the application software segment, was the largest contributor to the Fund’s outperformance due to positions in big data provider Splunk, Inc. and computer-aided design provider Autodesk, Inc. as these companies benefited from being the “best-of-breed” (those offering industry-leading solutions) within their respective markets.

Additionally, the Fund’s holdings in data processing & outsourced services had a positive impact on returns. In particular, names such as

Alliance Data Systems Corp., GMO Payment Gateway, Inc. and QIWI PLC were notable contributors as they continued to benefit from a secular shift from cash-based to electronic-based payment transactions.

Detracting from relative performance was stock selection within semiconductor equipment where Aixtron SE suffered due to equipment order delays. Despite the short-term weakness, the Fund continued to hold the stock given a positive long-term outlook for the company.

Describe recent portfolio activity.

During the six-month period, the Fund reduced exposure to application software and internet software & services stocks as the Fund took profits in names that had strong performance in recent months. These proceeds helped fund purchases of internet retailers with the potential to benefit from a fast-growing e-commerce market.

Describe portfolio positioning at period end.

Relative to the MSCI World Information Technology Index, the Fund ended the period overweight in application software and internet software & services stocks and underweight in computer storage & peripherals names. From a regional perspective, the Fund was most notably overweight in emerging Asia and Asia ex-Japan, while the most significant underweights were in the developed Americas and Japan.

Portfolio Information

Ten Largest Holdings

Percent of

Long-Term

Investments


Apple, Inc.	5	%
Google, Inc., Class A	5
21Vianet Group, Inc. - ADR	3
Alliance Data Systems Corp.	3
Facebook, Inc., Class A	3
Amazon.com, Inc.	3
Salesforce.com, Inc.	3
priceline.com, Inc.	2
Tencent Holdings Ltd.	2
Vipshop Holdings Ltd. - ADR	2

Industry Allocation

Percent of

Long-Term

Investments


Internet Software & Services	31	%
Software	24
IT Services	14
Semiconductors & Semiconductor Equipment	10
Internet & Catalog Retail	10
Technology Hardware, Storage & Peripherals	6
Other¹	5

Includes holdings within industries that are 1% or less of long-term investments. Please refer to the Schedule of Investments for such industries.


10		BLACKROCK FUNDS		MARCH 31, 2014


			BlackRock Science & Technology Opportunities Portfolio

Total Return Based on a $10,000 Investment

LOGO

Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities issued by U.S. and non-U.S. science and technology companies in all market capitalization ranges, selected for their rapid and sustainable growth potential from the development, advancement and use of science and/or use of technology. The Fund may invest up to 25% of its net assets in emerging market countries.

A price-weighted index comprised of common stocks and ADRs of technology-related companies listed on U.S. exchanges. Modeled as a multi-industry technology index, the objective of the NYSE Arca Tech 100 Index^SM is to provide a benchmark for measuring the performance of companies using technology innovation across a broad spectrum of industries.

⁴

An index that measures the performance of the technology sector in developed equity markets. Effective October 11, 2013, the Fund now uses this index as its benchmark rather than the NYSE Arca Tech 100 Index ^SM because management believes that this benchmark better represents the sector exposures of the Fund and is a more appropriate basis for evaluating performance.


Performance Summary for the Period Ended March 31, 2014
				Average Annual Total Returns⁵
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		16.46	%		40.65	%		N/A			21.04	%		N/A			8.59	%		N/A
Service		16.26			40.25			N/A			20.74			N/A			8.27			N/A
Investor A		16.28			40.19			32.83	%		20.61			19.31	%		8.18			7.60	%
Investor B		15.74			38.94			34.44			19.59			19.40			7.45			7.45
Investor C		15.78			38.91			37.91			19.53			19.53			7.24			7.24
Class R		16.11			39.80			N/A			20.28			N/A			7.81			N/A
NYSE Arca Tech 100 Index^SM		16.50			29.42			N/A			25.71			N/A			10.71			N/A
MSCI World Information Technology Index		14.10			25.57			N/A			19.75			N/A			6.55			N/A

⁵

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

N/A—Not applicable as share class and index do not have a sales charge. Past performance is not indicative of future results.


Expense Example
	Actual						Hypothetical⁷
	Beginning Account Value October 1, 2013		Ending Account Value March 31, 2014		Expenses Paid During the Period⁶		Beginning Account Value October 1, 2013		Ending Account Value March 31, 2014		Expenses Paid During the Period⁶		Annualized Expense Ratio
Institutional		$1,000.00		$1,164.60		$6.96		$1,000.00		$1,018.50		$6.49		1.29	%
Service		$1,000.00		$1,162.60		$7.71		$1,000.00		$1,017.80		$7.19		1.43	%
Investor A		$1,000.00		$1,162.80		$8.68		$1,000.00		$1,016.90		$8.10		1.61	%
Investor B		$1,000.00		$1,157.40		$12.96		$1,000.00		$1,012.91		$12.09		2.41	%
Investor C		$1,000.00		$1,157.80		$13.18		$1,000.00		$1,012.72		$12.29		2.45	%
Class R		$1,000.00		$1,161.10		$10.18		$1,000.00		$1,015.51		$9.50		1.89	%

⁶

⁷

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 15 for further information on how expenses were calculated.


		BLACKROCK FUNDS		MARCH 31, 2014		11


Fund Summary as of March 31, 2014			BlackRock U.S. Opportunities Portfolio

Investment Objective

BlackRock U.S. Opportunities Portfolio’s (the “Fund”) investment objective is to provide long-term capital appreciation.

Portfolio Management Commentary

How did the Fund perform?

For the six-month period ended March 31, 2014, the Fund’s Institutional, Investor A and Service Shares outperformed the benchmark, the Russell Midcap^® Index, while the Fund’s Investor B Shares underperformed and Investor C Shares performed in line with the benchmark index.

What factors influenced performance?

Stock selection within the financials and information technology (“IT”) sectors were the largest contributors to relative performance for the period. Within financials, exposure to regional banks such as Western Alliance Bancorp and BankUnited, Inc. generated strong performance as these names benefited from the continued recovery in U.S. credit and a pickup in commercial loan demand. Within IT, the continued growth in demand for big-data analytics benefited the Fund’s application software holding, Splunk, Inc.

Conversely, stock selection in the consumer discretionary and energy sectors detracted from relative performance. In consumer discretionary,

selection in the cable & satellite segment hampered results after Sirius XM Holdings, Inc. gave back its earlier gains by the end of the reporting period. Within energy, selection decisions in the oil & gas exploration & production industry detracted from performance. In particular, Cabot Oil & Gas Corp. was negatively impacted by investors’ near-term concerns about the outlook for natural gas discounts.

Describe recent portfolio activity.

During the six-month period, the Fund reduced exposures to the financials, IT and utilities sectors and increased exposures to health care and consumer discretionary.

Describe portfolio positioning at period end.

Relative to the Russell Midcap^® Index, the Fund ended the period overweight in the consumer discretionary, health care and materials sectors, while maintaining underweight allocations to utilities, financials and IT.

Portfolio Information


Ten Largest Holdings		Percent of Long-Term Investments


Kennedy-Wilson Holdings, Inc.	2	%
BankUnited, Inc.	2
Acuity Brands, Inc.	2
SBA Communications Corp., Class A	1
Jarden Corp.	1
Alliance Data Systems Corp.	1
WisdomTree Investments, Inc.	1
Roper Industries, Inc.	1
Sequential Brands Group, Inc.	1
Thermo Fisher Scientific, Inc.	1


Sector Allocation		Percent of Long-Term Investments


Consumer Discretionary	21	%
Financials	17
Health Care	15
Industrials	14
Information Technology	14
Materials	7
Energy	6
Consumer Staples	4
Telecommunication Services	2


12		BLACKROCK FUNDS		MARCH 31, 2014


			BlackRock U.S. Opportunities Portfolio

Total Return Based on a $10,000 Investment

LOGO

Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities issued by U.S. emerging capitalization companies with relatively attractive earnings growth potential and valuation.

This market index measures the performance of the mid-cap segment of the U.S. equities universe. It is a subset of the Russell 1000^® Index including approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap^® Index represents approximately 31% of the total market capitalization of the Russell 1000^® companies.

Performance Summary for the Period Ended March 31, 2014


				Average Annual Total Returns⁴
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge
Institutional		12.84	%		27.53	%		N/A			21.80	%		N/A			11.60	%		N/A
Service		12.62			27.06			N/A			21.26			N/A			11.15			N/A
Investor A		12.64			27.04			20.37	%		21.23			19.93	%		11.10			10.50	%
Investor B		12.15			26.01			21.59			20.28			20.09			10.43			10.43
Investor C		12.20			26.07			25.09			20.33			20.33			10.28			10.28
Russell Midcap^® Index		12.21			23.51			N/A			25.55			N/A			10.05			N/A

⁴

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

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

Past performance is not indicative of future results.

Expense Example


	Actual						Hypothetical⁶
	Beginning Account Value October 1, 2013		Ending Account Value March 31, 2014		Expenses Paid During the Period⁵		Beginning Account Value October 1, 2013		Ending Account Value March 31, 2014		Expenses Paid During the Period⁵		Annualized Expense Ratio
Institutional		$1,000.00		$1,128.40		$5.09		$1,000.00		$1,020.14		$4.84		0.96	%
Service		$1,000.00		$1,126.20		$7.21		$1,000.00		$1,018.15		$6.84		1.36	%
Investor A		$1,000.00		$1,126.40		$7.21		$1,000.00		$1,018.15		$6.84		1.36	%
Investor B		$1,000.00		$1,121.50		$11.37		$1,000.00		$1,014.21		$10.80		2.15	%
Investor C		$1,000.00		$1,122.00		$11.22		$1,000.00		$1,014.36		$10.65		2.12	%

⁵

⁶

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

See “Disclosure of Expenses” on page 15 for further information on how expenses were calculated.


		BLACKROCK FUNDS		MARCH 31, 2014		13


About Fund Performance

Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

Service Shares are not subject to any sales charge (front-end load) or deferred sales charge. These shares are subject to a service fee of 0.25% per year (but no distribution fee) and are only available to eligible investors. Prior to January 28, 2005, the performance results of Service Shares of the BlackRock Health Sciences Opportunities Portfolio (“Health Sciences Opportunities”) are those of Investor A Shares restated to reflect Service Share fees.

Class R Shares are not subject to any sales charge (front-end load) or deferred sales charge. These shares are subject to a distribution fee of 0.25% per year and a service fee of 0.25% per year. These shares are available only to certain employer-sponsored retirement plans. Prior to September 8, 2008, the performance results of Class R Shares of BlackRock Science & Technology Opportunities Portfolio are those of

Institutional Shares (which have no distribution or service fees) restated to reflect Class R Share fees. Prior to September 12, 2011, the performance results of Class R Shares of BlackRock Global Opportunities Portfolio and Health Sciences Opportunities are those of the applicable Fund’s Institutional Shares (which have no distribution or service fees) restated to reflect Class R Share fees.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/funds to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Figures shown in each of the performance tables on the previous pages assume reinvestment of all dividends and distributions, if any, at net asset value (“NAV”) on the ex-dividend/payable dates. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

Performance for Health Sciences Opportunities for the periods prior to January 28, 2005 is based on performance of a certain former State Street Research mutual fund that reorganized with Health Sciences Opportunities on that date.


14		BLACKROCK FUNDS		MARCH 31, 2014


Disclosure of Expenses

Derivative Financial Instruments

The Funds may invest in various derivative financial instruments, including forward foreign currency exchange contracts and options, as specified in Note 4 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, equity and/or foreign currency exchange rate risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial

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


		BLACKROCK FUNDS		MARCH 31, 2014		15


Schedule of Investments March 31, 2014 (Unaudited)			BlackRock Global Opportunities Portfolio
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Belgium — 1.4%
Anheuser-Busch InBev NV		46,918	$	4,941,210
Canada — 1.0%
MEG Energy Corp. (a)		106,200		3,588,993
China — 2.6%
Anhui Conch Cement Co. Ltd., H Shares (b)		716,000		3,079,740
Baidu, Inc. — ADR (a)		10,500		1,599,990
China Cinda Asset Management Co. Ltd., H Shares (a)(b)		2,203,000		1,254,147
Ctrip.com International Ltd. — ADR (a)		35,700		1,799,994
Ping An Insurance Group Co. of China Ltd., H Shares		184,000		1,529,200

				9,263,071
Denmark — 1.2%
ISS A/S (a)		33,600		1,128,401
Novo Nordisk A/S, Class B		66,700		3,037,002

				4,165,403
France — 4.8%
BNP Paribas SA		33,870		2,611,362
Rexel SA		84,200		2,209,196
Schneider Electric SA		29,500		2,614,491
Société Générale SA		75,275		4,633,621
Vivendi SA		171,120		4,762,782

				16,831,452
Germany — 5.2%
Bayer AG, Registered Shares		19,000		2,573,065
Commerzbank AG (a)		105,390		1,938,566
Daimler AG, Registered Shares		44,400		4,200,214
Henkel AG & Co. KGaA		26,500		2,852,534
OSRAM Licht AG (a)		60,400		3,916,461
Telefonica Deutschland Holding AG		201,000		1,604,120
Wirecard AG		34,400		1,428,354

				18,513,314
Greece — 0.8%
Alpha Bank AE (a)		2,764,674		2,712,875
Hong Kong — 1.9%
AIA Group Ltd.		514,500		2,447,039
Melco Crown Entertainment Ltd. — ADR (a)		44,100		1,704,465
Samsonite International SA (b)		785,100		2,429,240

				6,580,744
Indonesia — 1.5%
Global Mediacom Tbk PT		10,106,400		2,103,878
Matahari Department Store Tbk PT (a)		2,462,200		3,026,913

				5,130,791
Ireland — 5.0%
Actavis PLC (a)		8,500		1,749,725
Alkermes PLC (a)		51,800		2,283,862


Common Stocks	Shares		Value
Ireland (concluded)
Covidien PLC		74,300	$	5,472,938
CRH PLC		127,400		3,567,222
Eaton Corp. PLC		23,970		1,800,626
Green REIT PLC (a)		1,724,032		2,850,150

				17,724,523
Italy — 2.3%
Assicurazioni Generali SpA		77,955		1,737,595
Banca Generali SpA		87,272		2,881,742
Intesa Sanpaolo SpA		699,015		2,371,907
Moncler SpA (a)		69,700		1,191,642

				8,182,886
Japan — 5.1%
Kenedix Realty Investment Corp.		345		1,710,859
Nabtesco Corp.		109,700		2,532,091
Shinsei Bank Ltd.		1,609,000		3,158,846
SMC Corp.		7,200		1,898,878
SoftBank Corp.		49,500		3,740,629
Sumitomo Mitsui Financial Group, Inc.		59,200		2,537,545
Tokyo Tatemono Co. Ltd.		281,000		2,407,708

				17,986,556
Mexico — 0.5%
Cemex SAB de CV — ADR (a)		134,600		1,699,998
Netherlands — 1.4%
ING Groep NV — CVA (a)		124,400		1,769,187
Randstad Holding NV		56,218		3,290,383

				5,059,570
New Zealand — 0.9%
Xero Ltd. (Acquired 10/15/13, cost $1,616,409) (a)(c)		106,300		3,267,128
Nigeria — 0.7%
Lekoil Ltd. (a)		2,787,800		2,451,635
Norway — 0.3%
Statoil ASA		38,300		1,080,624
Russia — 0.0%
Eurasia Drilling Co. Ltd. — GDR		6,654		170,542
South Africa — 0.9%
Naspers Ltd., N Shares		27,900		3,074,385
South Korea — 0.6%
NAVER Corp.		3,000		2,192,013
Spain — 2.6%
NH Hoteles SA (a)		818,927		5,827,362
Sacyr SA (a)		507,600		3,375,985

				9,203,347
Sweden — 2.3%
Nordea Bank AB		109,970		1,559,992

Portfolio Abbreviations


ADR	American Depositary Receipts	NZD	New Zealand Dollar
CHF	Swiss Franc	REIT	Real Estate Investment Trust
DKK	Danish Krone	SCA	Svenska Cellulosa Aktiebolaget
EUR	Euro	SEK	Swedish Krona
GBP	British Pound	SGD	Singapore Dollar
GDR	Global Depositary Receipts	TRY	Turkish Lira
HKD	Hong Kong Dollar	USD	US Dollar
JPY	Japanese Yen	ZAR	South African Rand
NOK	Norwegian Krone

See Notes to Financial Statements.


16		BLACKROCK FUNDS		MARCH 31, 2014


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


Common Stocks	Shares		Value
Sweden (concluded)
Skanska AB, B Shares		83,700	$	1,973,092
Svenska Cellulosa AB SCA, B Shares		151,018		4,447,653

				7,980,737
Switzerland — 3.0%
Adecco SA		39,200		3,262,468
Novartis AG, Registered Shares		42,700		3,625,568
Roche Holding AG		11,840		3,561,043

				10,449,079
Taiwan — 0.3%
Hermes Microvision, Inc. — GDR (a)(d)		23,717		930,062
United Kingdom — 6.6%
AO World PLC (a)		322,900		1,690,322
APR Energy PLC (b)		205,822		2,763,943
ASOS PLC (a)		10,500		907,617
AstraZeneca PLC		43,300		2,806,991
Crest Nicholson Holdings PLC		663,986		4,353,662
Foxtons Group PLC (a)		502,249		3,016,842
Kennedy Wilson Europe Real Estate PLC (a)		94,669		1,641,394
Metro Bank PLC (Acquired 1/15/14, cost $1,748,929) (a)(c)		82,275		1,783,130
Perform Group PLC (a)		407,157		1,663,029
Poundland Group PLC (a)		118,900		753,247
Vodafone Group PLC — ADR		52,035		1,915,408

				23,295,585
United States — 45.2%
AbbVie, Inc.		70,700		3,633,980
Acuity Brands, Inc.		25,429		3,371,123
Adobe Systems, Inc. (a)		30,750		2,021,505
American Airlines Group, Inc. (a)		59,100		2,163,060
Apple, Inc.		12,885		6,915,895
Aramark Holdings Corp.		88,300		2,553,636
Autodesk, Inc. (a)		51,500		2,532,770
BankUnited, Inc.		137,788		4,790,889
Biogen Idec, Inc. (a)		5,300		1,621,111
BioMarin Pharmaceutical, Inc. (a)		34,700		2,366,887
Bristol-Myers Squibb Co.		48,400		2,514,380
Cabot Oil & Gas Corp.		125,578		4,254,583
CBS Corp., Class B		42,400		2,620,320
Celgene Corp. (a)		11,500		1,605,400
Charles River Laboratories International, Inc. (a)		46,300		2,793,742
Citigroup, Inc.		113,568		5,405,837
Concho Resources, Inc. (a)		30,500		3,736,250
Continental Building Products, Inc. (a)		58,253		1,097,487
Crown Holdings, Inc. (a)		41,500		1,856,710
Eastman Chemical Co.		35,310		3,044,075
Facebook, Inc., Class A (a)		28,460		1,714,430
Flowserve Corp.		35,900		2,812,406
General Motors Co.		65,200		2,244,184
Genworth Financial, Inc., Class A (a)		180,400		3,198,492
Google, Inc., Class A (a)		7,179		8,001,067
The Hain Celestial Group, Inc. (a)		36,756		3,362,071
Hertz Global Holdings, Inc. (a)		117,140		3,120,610
JPMorgan Chase & Co.		97,285		5,906,172
Kennedy-Wilson Holdings, Inc.		222,300		5,003,973
Las Vegas Sands Corp.		23,490		1,897,522
Lowe’s Cos., Inc.		43,820		2,142,798
Merck & Co., Inc.		47,000		2,668,190
Mondelez International, Inc., Class A		96,100		3,320,255


Common Stocks	Shares		Value
United States (concluded)
National Oilwell Varco, Inc.		23,794	$	1,852,839
Oasis Petroleum, Inc. (a)		42,384		1,768,684
Pfizer, Inc.		111,200		3,571,744
Platform Specialty Products Corp. (a)		226,800		4,320,540
Ralph Lauren Corp.		16,100		2,590,973
Roper Industries, Inc.		34,040		4,544,680
Schlumberger Ltd.		19,000		1,852,500
ServiceNow, Inc. (a)		28,800		1,725,696
St. Jude Medical, Inc.		41,200		2,694,068
Strategic Growth Bancorp (Acquired 3/10/14, cost $1,691,208) (a)(c)		135,840		1,691,208
SunPower Corp. (a)		39,638		1,278,722
Textron, Inc.		46,200		1,815,198
United Parcel Service, Inc., Class B		36,100		3,515,418
United Rentals, Inc. (a)		40,355		3,831,304
US Silica Holdings, Inc.		39,700		1,515,349
Varian Medical Systems, Inc. (a)		31,000		2,603,690
Verizon Communications, Inc.		25,089		1,193,484
Visa, Inc., Class A		15,350		3,313,451
Whole Foods Market, Inc.		45,100		2,287,021
WisdomTree Investments, Inc. (a)		240,249		3,152,067
Yelp, Inc. (a)		22,520		1,732,464

				159,142,910
Total Common Stocks — 98.1%				345,619,433

Preferred Stocks
United States — 1.5%
Hortonworks, Inc., Series D (Acquired 3/21/14, cost $3,133,876) (a)(c)		257,147		3,133,876
Palantir Technologies, Inc. (Acquired 2/07/14, cost $942,242) (c)		153,710		942,242
Uber Technologies, Inc. (Acquired 3/20/14, cost $1,176,400) (c)(e)		1,176,400		1,176,400
Total Preferred Stocks — 1.5%				5,252,518

Total Long-Term Investments (Cost — $290,802,132) — 99.6%			350,871,951

Short-Term Securities
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (f)(g)		1,552,261		1,552,261



	Beneficial Interest (000)
BlackRock Liquidity Series, LLC, Money Market Series, 0.16% (f)(g)(h)	$	7,540		7,540,083
Total Short-Term Securities (Cost — $9,092,344) — 2.6%				9,092,344
Total Investments (Cost — $299,894,476) — 102.2%				359,964,295
Liabilities in Excess of Other Assets — (2.2)%				(7,691,926	)

Net Assets — 100.0%			$	352,272,369

Notes to Schedule of Investments

(a)	Non-income producing security.

(b)	Security, or a portion of security, is on loan.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		17


Schedule of Investments (continued)			BlackRock Global Opportunities Portfolio

(c)	Restricted security as to resale. As of report date, the Fund held restricted securities with a current value of $11,993,984 and an original cost of $10,309,067, which was 3.4% of its net assets.

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

(e)	Convertible security.

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

(g)	Investments in issuers considered to be an affiliate of the Fund during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares/Beneficial Interest Held at September 30, 2013		Net Activity		Shares/Beneficial Interest Held at March 31, 2014		Income
BlackRock Liquidity Funds, TempFund, Institutional Class		60,217		1,492,044		1,552,261	$	259
BlackRock Liquidity Series, LLC, Money Market Series	$	3,939,993	$	3,600,090	$	7,540,083	$	75,010

(h)	Security was purchased with the cash collateral from loaned securities. The Fund may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows:


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
CHF	2,335,000		USD	2,640,522	Citibank N.A.		4/22/14	$	1,203
CHF	2,590,918		USD	2,881,858	Credit Suisse International		4/22/14		49,401
CHF	186,267		USD	209,469	Deutsche Bank AG		4/22/14		1,266
CHF	154,158		USD	174,660	Goldman Sachs International		4/22/14		(252	)
CHF	4,240,830		USD	4,797,216	Royal Bank of Scotland PLC		4/22/14		688
CHF	138,229		USD	155,830	The Bank of New York Mellon		4/22/14		557
CHF	4,595,945		USD	5,192,671	UBS AG		4/22/14		6,995
DKK	8,120,583		USD	1,481,656	Bank of America N.A.		4/22/14		17,013
EUR	223,000		USD	305,642	Barclays Bank PLC		4/22/14		1,560
EUR	1,113,000		USD	1,522,228	BNP Paribas S.A.		4/22/14		11,027
EUR	2,540,000		USD	3,503,290	BNP Paribas S.A.		4/22/14		(4,218	)
EUR	191,000		USD	263,011	Citibank N.A.		4/22/14		109
EUR	191,307		USD	263,121	Citibank N.A.		4/22/14		421
EUR	619,167		USD	853,215	Citibank N.A.		4/22/14		(258	)
EUR	671,442		USD	912,813	Citibank N.A.		4/22/14		12,157
EUR	1,128,110		USD	1,556,144	Citibank N.A.		4/22/14		(2,074	)
EUR	3,293,000		USD	4,456,799	Citibank N.A.		4/22/14		79,597
EUR	153,000		USD	210,681	Deutsche Bank AG		4/22/14		90
EUR	1,201,000		USD	1,670,089	JPMorgan Chase Bank N.A.		4/22/14		(15,606	)
EUR	444,867		USD	604,570	Royal Bank of Scotland PLC		4/22/14		8,273
EUR	952,000		USD	1,314,663	State Street Bank and Trust Co.		4/22/14		(3,200	)
EUR	79,000		USD	108,425	The Bank of New York Mellon		4/22/14		404
GBP	157,000		USD	262,416	Bank of America N.A.		4/22/14		(717	)
GBP	37,569		USD	62,251	Barclays Bank PLC		4/22/14		372
GBP	285,000		USD	477,148	BNP Paribas S.A.		4/22/14		(2,089	)
GBP	336,000		USD	559,110	BNP Paribas S.A.		4/22/14		959
GBP	454,000		USD	747,999	Citibank N.A.		4/22/14		8,762
GBP	664,000		USD	1,103,790	Citibank N.A.		4/22/14		3,014
GBP	250,000		USD	407,910	Goldman Sachs International		4/22/14		8,808
HKD	4,750,000		USD	612,404	BNP Paribas S.A.		4/22/14		32

See Notes to Financial Statements.


18		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (continued)			BlackRock Global Opportunities Portfolio

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows: (continued)


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
HKD	1,160,000		USD	149,540	Citibank N.A.		4/22/14	$	24
HKD	13,166,000		USD	1,698,000	Deutsche Bank AG		4/22/14		(455	)
JPY	303,091,000		USD	2,994,423	Bank of America N.A.		4/22/14		(57,568	)
JPY	44,591,599		USD	435,207	Barclays Bank PLC		4/22/14		(3,128	)
JPY	209,719,955		USD	2,053,736	Barclays Bank PLC		4/22/14		(21,617	)
JPY	26,713,000		USD	261,366	Citibank N.A.		4/22/14		(2,525	)
JPY	273,704,459		USD	2,680,917	Deutsche Bank AG		4/22/14		(28,808	)
JPY	172,647,000		USD	1,702,885	Goldman Sachs International		4/22/14		(29,991	)
JPY	10,556,137		USD	103,006	JPMorgan Chase Bank N.A.		4/22/14		(721	)
JPY	234,645,000		USD	2,285,897	State Street Bank and Trust Co.		4/22/14		(12,261	)
JPY	9,288,000		USD	90,615	The Bank of New York Mellon		4/22/14		(617	)
JPY	9,507,477		USD	93,175	The Bank of New York Mellon		4/22/14		(1,051	)
JPY	183,573,000		USD	1,799,554	Westpac Banking Corp.		4/22/14		(20,790	)
NOK	6,844,000		USD	1,102,047	Morgan Stanley Capital Services LLC		4/22/14		39,973
SEK	682,000		USD	105,432	Citibank N.A.		4/22/14		(96	)
SGD	2,518,000		USD	1,979,474	Deutsche Bank AG		4/22/14		22,298
USD	3,273,235		CHF	2,853,835	Barclays Bank PLC		4/22/14		44,521
USD	3,583,914		CHF	3,135,000	Credit Suisse International		4/22/14		37,102
USD	5,581,869		CHF	5,044,000	Goldman Sachs International		4/22/14		(124,709	)
USD	1,914,060		CHF	1,737,995	UBS AG		4/22/14		(52,237	)
USD	2,625,564		DKK	14,504,681	Bank of America N.A.		4/22/14		(51,303	)
USD	998,602		DKK	5,376,000	Morgan Stanley Capital Services LLC		4/22/14		6,451
USD	828,398		EUR	612,000	Bank of America N.A.		4/22/14		(14,685	)
USD	1,458,424		EUR	1,073,000	Bank of America N.A.		4/22/14		(19,728	)
USD	1,550,964		EUR	1,134,000	BNP Paribas S.A.		4/22/14		(11,220	)
USD	2,787,451		EUR	2,025,000	BNP Paribas S.A.		4/22/14		(2,164	)
USD	27,386,174		EUR	20,169,000	Deutsche Bank AG		4/22/14		(398,388	)
USD	178,238		EUR	130,000	Goldman Sachs Bank USA		4/22/14		(848	)
USD	305,340		EUR	226,000	JPMorgan Chase Bank N.A.		4/22/14		(5,995	)
USD	2,595,334		EUR	1,900,000	Royal Bank of Scotland PLC		4/22/14		(22,083	)
USD	3,934,269		EUR	2,877,000	Royal Bank of Scotland PLC		4/22/14		(29,051	)
USD	1,197,152		GBP	720,000	Goldman Sachs Bank USA		4/22/14		(2,997	)
USD	7,569,301		GBP	4,607,000	Goldman Sachs International		4/22/14		(109,985	)
USD	131,720		GBP	79,000	The Bank of New York Mellon		4/22/14		37
USD	173,130		HKD	1,344,000	Citibank N.A.		4/22/14		(157	)
USD	403,837		HKD	3,133,000	Royal Bank of Scotland PLC		4/22/14		(113	)
USD	19,192,896		JPY	2,001,350,000	BNP Paribas S.A.		4/22/14		(199,547	)
USD	822,021		JPY	84,068,000	Royal Bank of Scotland PLC		4/22/14		7,429
USD	1,429,918		JPY	145,760,000	UBS AG		4/22/14		17,550
USD	1,071,538		NOK	6,464,000	Credit Suisse International		4/22/14		(7,074	)
USD	1,581,141		NZD	1,840,000	Bank of America N.A.		4/22/14		(12,821	)
USD	1,595,454		NZD	1,930,000	JPMorgan Chase Bank N.A.		4/22/14		(76,475	)
USD	356,861		SEK	2,304,000	BNP Paribas S.A.		4/22/14		1,005
USD	432,694		SEK	2,801,000	BNP Paribas S.A.		4/22/14		75
USD	371,402		SEK	2,425,000	JPMorgan Chase Bank N.A.		4/22/14		(3,143	)
USD	967,937		SEK	6,275,000	JPMorgan Chase Bank N.A.		4/22/14		(1,245	)

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		19


Schedule of Investments (continued)		BlackRock Global Opportunities Portfolio

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows: (concluded)


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	1,168,109		ZAR	12,699,000	BNP Paribas S.A.		4/22/14	$	(34,042	)
USD	946,933		ZAR	10,310,000	Citibank N.A.		4/22/14		(29,063	)
USD	1,214,538		ZAR	13,225,000	UBS AG		4/22/14		(37,407	)
ZAR	27,525,000		USD	2,510,460	Goldman Sachs Bank USA		4/22/14		95,194
Total								$	(970,155	)

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

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of March 31, 2014:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Belgium		—	$	4,941,210		—	$	4,941,210
Canada	$	3,588,993		—		—		3,588,993
China		3,399,984		5,863,087		—		9,263,071
Denmark		1,128,401		3,037,002		—		4,165,403
France		2,209,196		14,622,256		—		16,831,452
Germany		—		18,513,314		—		18,513,314
Greece		—		2,712,875		—		2,712,875
Hong Kong		1,704,465		4,876,279		—		6,580,744
Indonesia		—		5,130,791		—		5,130,791
Ireland		14,157,301		3,567,222		—		17,724,523
Italy		1,191,642		6,991,244		—		8,182,886
Japan		—		17,986,556		—		17,986,556
Mexico		1,699,998		—		—		1,699,998
Netherlands		—		5,059,570		—		5,059,570
New Zealand		—		3,267,128		—		3,267,128
Nigeria		2,451,635		—		—		2,451,635
Norway		—		1,080,624		—		1,080,624
Russia		170,542		—		—		170,542
South Africa		—		3,074,385		—		3,074,385
South Korea		—		2,192,013		—		2,192,013
Spain		—		9,203,347		—		9,203,347
Sweden		—		7,980,737		—		7,980,737
Switzerland		—		10,449,079		—		10,449,079
Taiwan		930,062		—		—		930,062
United Kingdom		14,781,005		6,731,450	$	1,783,130		23,295,585
United States		157,451,702		—		1,691,208		159,142,910

See Notes to Financial Statements.


20		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (concluded)			BlackRock Global Opportunities Portfolio


	Level 1		Level 2			Level 3		Total
Preferred Stocks		—		—		$	5,252,518	$	5,252,518
Short-Term Securities	$	1,552,261	$	7,540,083			—		9,092,344
Total	$	206,417,187	$	144,820,252		$	8,726,856	$	359,964,295


	Level 1		Level 2			Level 3		Total
Derivative Financial Instruments¹
Assets:
Foreign currency exchange contracts		—	$	484,367			—	$	484,367
Liabilities:
Foreign currency exchange contracts		—		(1,454,522	)		—		(1,454,522	)
Total		—	$	(970,155	)		—	$	(970,155	)

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

The carrying amount for certain of the Fund’s assets and/or liabilities approximates fair value for financial statement purposes. As of March 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:



	Level 1		Level 2			Level 3		Total
Assets:
Foreign currency at value	$	154,419		—			—	$	154,419
Liabilities:
Bank overdraft		—	$	(1,261	)		—		(1,261	)
Collateral on securities loaned at value		—		(7,540,083	)		—		(7,540,083	)
Total	$	154,419	$	(7,541,344	)		—	$	(7,386,925	)

Certain foreign securities are fair valued utilizing an external pricing service to reflect any significant market movements between the time the Fund values such foreign securities and the earlier closing of foreign markets. Such fair valuations are categorized as Level 2 in the disclosure hierarchy. As of March 31, 2014, securities with a value of $3,872,225 were systematically fair valued due to significant market movements, but were not valued using systematic fair values as of September 30, 2013. Therefore, these securities were transferred from Level 2 to Level 1 during the period September 30, 2013 to March 31, 2014.



	Common Stocks		Preferred Stocks		Total
Assets:
Balance, as of September 30, 2013		—		—		—
Accrued discounts/premiums		—		—		—
Realized gain (loss)		—		—		—
Net change in unrealized appreciation/depreciation^1,2	$	34,200		—	$	34,200
Net purchases		3,440,138	$	5,252,518		8,692,656
Transfers in/out of Level 3		—		—		—
Closing Balance, as of March 31, 2014	$	3,474,338	$	5,252,518	$	8,726,856

Net change in unrealized appreciation/depreciation on investments still held at March 31, 2014²	$	34,200		—	$	34,200

¹	Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations.

²	Any difference between Net change in unrealized appreciation/depreciation and Net change in unrealized appreciation/depreciation on investments still held at March 31, 2014 is generally due to investments no longer held or categorized as Level 3 at period end.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		21


Schedule of Investments March 31, 2014 (Unaudited)			BlackRock Health Sciences Opportunities Portfolio
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Biotechnology — 25.6%
ACADIA Pharmaceuticals, Inc. (a)		410,921	$	9,997,708
Acceleron Pharma, Inc. (a)(b)		159,600		5,506,200
Acorda Therapeutics, Inc. (a)		543,800		20,615,458
Actelion Ltd., Registered Shares		266,600		25,265,257
Aegerion Pharmaceuticals, Inc. (a)(b)		218,300		10,067,996
Agios Pharmaceuticals, Inc. (a)		60,100		2,352,915
Akebia Therapeutics, Inc. (a)		150,000		2,934,000
Alexion Pharmaceuticals, Inc. (a)		641,017		97,517,916
Alkermes PLC (a)		1,022,700		45,090,843
Amgen, Inc.		626,810		77,310,746
Aquinox Pharmaceuticals, Inc. (a)		90,900		1,157,157
Array BioPharma, Inc. (a)		1,057,100		4,968,370
Biogen Idec, Inc. (a)		471,000		144,064,770
BioMarin Pharmaceutical, Inc. (a)		680,500		46,416,905
Biota Pharmaceuticals, Inc. (a)		418,300		2,555,813
Bluebird Bio, Inc. (a)		109,200		2,483,208
Celgene Corp. (a)		674,519		94,162,852
Conatus Pharmaceuticals, Inc. (a)		110,200		896,477
Concert Pharmaceuticals, Inc. (a)		166,100		2,234,045
Dicerna Pharmaceuticals, Inc. (a)		43,100		1,217,575
Dyax Corp. (a)		765,337		6,872,726
Eleven Biotherapeutics, Inc. (a)		65,100		1,056,573
Epizyme, Inc. (a)		307,200		6,994,944
Exelixis, Inc. (a)(b)		446,800		1,581,672
Gilead Sciences, Inc. (a)		685,493		48,574,034
Incyte Corp. Ltd. (a)		221,700		11,865,384
Infinity Pharmaceuticals, Inc. (a)		339,500		4,036,655
InterMune, Inc. (a)		452,900		15,158,563
Isis Pharmaceuticals, Inc. (a)		589,167		25,457,906
Karyopharm Therapeutics, Inc. (a)		344,339		10,636,632
MacroGenics, Inc. (a)		63,500		1,767,205
Medivation, Inc. (a)		234,300		15,081,891
Neurocrine Biosciences, Inc. (a)		764,438		12,307,452
Prosensa Holding BV (a)		106,300		598,469
Protalix BioTherapeutics, Inc. (a)(b)		1,155,326		5,291,393
PTC Therapeutics, Inc. (a)		61,200		1,599,768
Puma Biotechnology, Inc. (a)		210,500		21,921,470
Regeneron Pharmaceuticals, Inc. (a)		164,822		49,492,750
Seattle Genetics, Inc. (a)(b)		1,008,118		45,929,856
Tekmira Pharmaceuticals Corp. (a)		337,500		7,252,875
Ultragenyx Pharmaceutical, Inc. (a)		37,000		1,808,930
Ultragenyx Pharmaceutical, Inc. (Acquired 12/18/12, cost $3,351,658) (a)(c)		386,105		17,932,840
UniQure B.V. (a)		91,800		1,427,490
Verastem, Inc. (a)		239,640		2,585,716
Vertex Pharmaceuticals, Inc. (a)		541,070		38,264,470

				952,313,875
Chemicals — 0.5%
Sigma-Aldrich Corp.		197,100		18,405,198
Diversified Consumer Services — 0.3%
Service Corp. International		522,100		10,379,348
Health Care Equipment & Supplies — 17.2%
Abbott Laboratories		1,546,300		59,548,012
Alere, Inc. (a)		482,500		16,573,875
AtriCure, Inc. (a)		335,881		6,317,922
Baxter International, Inc.		267,300		19,667,934
Becton Dickinson & Co.		333,922		39,095,588
Boston Scientific Corp. (a)		4,592,200		62,086,544
CareFusion Corp. (a)		652,200		26,231,484
Coloplast A/S, Class B		341,900		27,643,001
The Cooper Cos., Inc.		122,800		16,867,808
Covidien PLC		1,151,000		84,782,660
DENTSPLY International, Inc.		169,300		7,794,572


Common Stocks	Shares		Value
Health Care Equipment & Supplies (concluded)
Edwards Lifesciences Corp. (a)(b)		347,500	$	25,774,075
Medtronic, Inc.		780,700		48,044,278
PW Medtech Group Ltd. (a)		10,900,900		4,852,267
St. Jude Medical, Inc.		911,800		59,622,602
Stryker Corp.		940,100		76,589,947
Varian Medical Systems, Inc. (a)(b)		400,400		33,629,596
Zimmer Holdings, Inc.		251,900		23,824,702

				638,946,867
Health Care Providers & Services — 12.2%
Aetna, Inc.		453,723		34,015,613
AmerisourceBergen Corp.		139,200		9,130,128
Cardinal Health, Inc.		707,680		49,523,446
CIGNA Corp.		407,500		34,119,975
Envision Healthcare Holdings, Inc. (a)		453,600		15,345,288
Express Scripts Holding Co. (a)		272,847		20,488,081
HCA Holdings, Inc. (a)		1,029,200		54,033,000
McKesson Corp.		284,900		50,304,793
Phoenix Healthcare Group Co. Ltd (a)		599,500		873,112
Premier, Inc., Class A (a)		370,500		12,207,975
Team Health Holdings, Inc. (a)		391,100		17,501,725
UnitedHealth Group, Inc.		1,079,282		88,490,331
Universal Health Services, Inc., Class B		548,500		45,015,395
WellPoint, Inc.		226,300		22,528,165

				453,577,027
Health Care Technology — 0.7%
Cerner Corp. (a)		452,700		25,464,375
Life Sciences Tools & Services — 5.6%
Agilent Technologies, Inc.		794,800		44,445,216
Charles River Laboratories International, Inc. (a)		647,200		39,052,048
ICON PLC (a)		313,200		14,892,660
Illumina, Inc. (a)(b)		382,000		56,788,120
Thermo Fisher Scientific, Inc.		439,500		52,845,480

				208,023,524
Pharmaceuticals — 35.3%
AbbVie, Inc.		2,241,700		115,223,380
Achaogen, Inc. (a)		247,700		3,829,442
Actavis PLC (a)		215,900		44,443,015
Allergan, Inc.		375,200		46,562,320
AstraZeneca PLC		293,900		19,052,535
Bayer AG, Registered Shares		717,500		97,167,052
Bristol-Myers Squibb Co.		1,263,800		65,654,410
Chugai Pharmaceutical Co. Ltd.		715,000		18,262,756
Eli Lilly & Co.		1,109,000		65,275,740
Forest Laboratories, Inc. (a)		556,100		51,311,347
Intra-Cellular Therapies, Inc. (a)		791,254		14,384,998
Johnson & Johnson		1,543,000		151,568,890
Mallinckrodt PLC (a)		498,200		31,590,862
Merck & Co., Inc.		2,118,700		120,278,599
Mylan, Inc. (a)		1,044,200		50,988,286
Novartis AG, Registered Shares		926,400		78,658,701
Perrigo Co. PLC		413,600		63,967,376
Pfizer, Inc.		3,957,540		127,116,185
Roche Holding AG		187,500		56,393,208
Shire PLC — ADR		172,100		25,562,013
Valeant Pharmaceuticals International, Inc. (a)		418,300		55,144,489
Zoetis, Inc.		302,500		8,754,350

				1,311,189,954
Total Common Stocks — 97.4%				3,618,300,168

See Notes to Financial Statements.


22		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (continued)			BlackRock Health Sciences Opportunities Portfolio
			(Percentages shown are based on Net Assets)


Preferred Stocks	Shares		Value
Biotechnology — 0.2%
SAGE Therapeutics, Series C (Acquired 3/10/14, cost $8,368,520) (a)(c)	1,976,271	$	8,368,520
Total Preferred Stocks — 0.2%			8,368,520
Total Long-Term Investments (Cost — $2,633,127,764) — 97.6%			3,626,668,688

Short-Term Securities
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (d)(e)	108,321,040		108,321,040



	Beneficial Interest (000)
BlackRock Liquidity Series, LLC, Money Market Series, 0.16% (d)(e)(f)	$	57,300	57,299,570
Total Short-Term Securities (Cost — $165,620,610) — 4.5%			165,620,610


	Value
Total Investments (Cost — $2,798,748,374) — 102.1%		3,792,289,298
Liabilities in Excess of Other Assets — (2.1)%		(76,636,512	)

Net Assets — 100.0%	$	3,715,652,786

Notes to Schedule of Investments

(a)	Non-income producing security.

(b)	Security, or a portion of security, is on loan.

(c)	Restricted security as to resale. As of report date, the Fund held restricted securities with a current value of $26,301,360 and an original cost of $11,720,178, which was 0.7% of its net assets.

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

(e)	Investments in issuers considered to be an affiliate of the Fund during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares/Beneficial Interest Held at September 30, 2013		Net Activity			Shares/Beneficial Interest Held at March 31, 2014		Income
BlackRock Liquidity Funds, TempFund, Institutional Class		51,597,591		56,723,449			108,321,040	$	15,512
BlackRock Liquidity Series, LLC, Money Market Series	$	189,308,224	$	(132,008,654	)	$	57,299,570	$	158,697

(f)	Security was purchased with the cash collateral from loaned securities. The Fund may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows:


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
CHF	4,081,406		USD	4,616,876	Royal Bank of Scotland PLC		4/22/14	$	662
CHF	1,414,618		USD	1,594,744	The Bank of New York Mellon		4/22/14		5,697
CHF	28,530,404		USD	32,277,827	UBS AG		4/22/14		318
USD	35,419,113		CHF	32,090,000	Citibank N.A.		4/22/14		(886,215	)
USD	2,473,284		CHF	2,179,876	JPMorgan Chase Bank N.A.		4/22/14		7,061
USD	1,960,104		CHF	1,720,848	Royal Bank of Scotland PLC		4/22/14		13,206
USD	2,003,023		CHF	1,780,202	State Street Bank and Trust Co.		4/22/14		(11,026	)
USD	6,044,503		CHF	5,460,000	UBS AG		4/22/14		(132,720	)
USD	82,395,437		CHF	74,816,292	UBS AG		4/22/14		(2,248,691	)
USD	35,354,414		EUR	26,215,000	Citibank N.A.		4/22/14		(759,042	)

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		23


Schedule of Investments (continued)			BlackRock Health Sciences Opportunities Portfolio

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows: (concluded)


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	3,584,684		EUR	2,640,000	Deutsche Bank AG		4/22/14	$	(52,147	)
USD	2,465,447		EUR	1,808,000	UBS AG		4/22/14		(25,231	)
USD	11,451,558		EUR	8,399,000	UBS AG		4/22/14		(118,800	)
USD	16,656,734		GBP	10,138,000	Goldman Sachs Bank USA		4/22/14		(242,030	)
USD	5,086,513		HKD	39,440,000	Citibank N.A.		4/22/14		1,356
USD	5,231,197		JPY	545,486,000	BNP Paribas S.A.		4/22/14		(54,388	)
Total								$	(4,501,990	)

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

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of March 31, 2014:


	Level 1		Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Biotechnology	$	909,115,778	$	43,198,097			—	$	952,313,875
Chemicals		18,405,198		—			—		18,405,198
Diversified Consumer Services		10,379,348		—			—		10,379,348
Health Care Equipment & Supplies		606,451,599		32,495,268			—		638,946,867
Health Care Providers & Services		452,703,915		873,112			—		453,577,027
Health Care Technology		25,464,375		—			—		25,464,375
Life Sciences Tools & Services		208,023,524		—			—		208,023,524
Pharmaceuticals		1,041,655,702		269,534,252			—		1,311,189,954
Preferred Stocks		—		—		$	8,368,520		8,368,520
Short-Term Securities		108,321,040		57,299,570			—		165,620,610
Total	$	3,380,520,479	$	403,400,299		$	8,368,520	$	3,792,289,298


	Level 1		Level 2			Level 3		Total
Derivative Financial Instruments¹
Assets:
Foreign currency exchange contracts		—	$	28,300			—	$	28,300
Liabilities:
Foreign currency exchange contracts		—		(4,530,290	)		—		(4,530,290	)
Total		—	$	(4,501,990	)		—	$	(4,501,990	)

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

See Notes to Financial Statements.


24		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (concluded)		BlackRock Health Sciences Opportunities Portfolio



The carrying amount for certain of the Fund’s assets and/or liabilities approximates fair value for financial statement purposes. As of March 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Cash pledged as collateral for options written	$	22,627,237		—			—	$	22,627,237
Foreign currency at value		5,058,309		—			—		5,058,309
Liabilities:
Bank overdraft		—	$	(22,920	)		—		(22,920	)
Collateral on securities loaned at value		—		(57,299,570	)		—		(57,299,570	)
Total	$	27,685,546	$	(57,322,490	)		—	$	(29,636,944	)

There were no transfers between levels during the six months ended March 31, 2014.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		25


Schedule of Investments March 31, 2014 (Unaudited)			BlackRock International Opportunities Portfolio
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Austria — 1.1%
Erste Group Bank AG		597,823	$	20,451,338
Belgium — 1.7%
Anheuser-Busch InBev NV		298,879		31,476,702
Brazil — 0.3%
Banco Bradesco SA — ADR		346,400		4,735,288
Canada — 2.6%
Gildan Activewear, Inc.		208,300		10,496,963
MEG Energy Corp. (a)		563,900		19,056,810
Tourmaline Oil Corp. (a)		419,175		19,815,545

				49,369,318
China — 3.6%
Anhui Conch Cement Co. Ltd., H Shares (b)		5,069,000		21,803,357
Baidu, Inc. — ADR (a)		61,000		9,295,180
China Cinda Asset Management Co. Ltd., H Shares (a)(b)		19,100,000		10,873,447
Ctrip.com International Ltd. — ADR (a)		191,400		9,650,388
Ping An Insurance Group Co. of China Ltd., H Shares		1,845,000		15,333,555

				66,955,927
Denmark — 2.6%
Chr Hansen Holding A/S		419,068		16,631,878
ISS A/S (a)		276,200		9,275,725
Novo Nordisk A/S, Class B		517,300		23,553,843

				49,461,446
Finland — 1.2%
Nokia OYJ (a)		1,695,080		12,471,475
Sanitec Corp. (a)		834,044		9,616,901

				22,088,376
France — 8.3%
BNP Paribas SA		215,723		16,632,149
Criteo SA — ADR (a)		235,100		9,533,305
Publicis Groupe SA		237,800		21,468,958
Rexel SA		783,294		20,551,661
Safran SA		143,700		9,955,527
Schneider Electric SA		156,700		13,887,820
Société Générale SA		414,300		25,502,611
Vivendi SA		1,346,800		37,485,479

				155,017,510
Germany — 8.9%
Aixtron SE (a)		766,348		12,557,382
Bayer AG, Registered Shares		226,600		30,687,183
Commerzbank AG (a)		482,378		8,872,963
Daimler AG, Registered Shares		350,400		33,147,631
Dmg Mori Seiki AG		233,764		7,178,012
KUKA AG		194,756		9,543,081
OSRAM Licht AG (a)		431,143		27,956,203
ProSiebenSat.1 Media AG		415,200		19,044,997
Telefonica Deutschland Holding AG		1,092,100		8,715,720
Wirecard AG		185,800		7,714,775

				165,417,947
Greece — 0.8%
Alpha Bank AE (a)		14,402,330		14,132,486
Hong Kong — 2.2%
AIA Group Ltd.		4,062,500		19,321,859
ASM Pacific Technology Ltd.		105,000		1,020,007
Samsonite International SA		6,428,300		19,890,311

				40,232,177
India — 0.5%
Tata Motors Ltd. — ADR		264,000		9,348,240


Common Stocks	Shares		Value
Indonesia — 1.2%
Global Mediacom Tbk PT		31,933,500	$	6,647,688
Matahari Department Store Tbk PT (a)		12,907,200		15,867,503

				22,515,191
Ireland — 5.2%
Bank of Ireland (a)		29,178,500		12,425,755
CRH PLC		941,600		26,364,960
Dalata Hotel Group PLC (a)		2,131,126		8,338,129
Green REIT PLC (a)		9,077,594		15,006,975
Kingspan Group PLC		559,297		10,579,233
Ryanair Holdings Plc — ADR (a)		426,500		25,082,465

				97,797,517
Italy — 3.0%
Banca Generali SpA		438,300		14,472,768
Intesa Sanpaolo SpA		6,136,600		20,822,795
Moncler SpA (a)		530,500		9,069,813
UniCredit SpA		1,355,200		12,388,000

				56,753,376
Japan — 12.0%
Calbee, Inc.		11,900		280,047
Kenedix Realty Investment Corp.		2,612		12,952,940
Makita Corp.		166,100		9,144,406
Mitsui OSK Lines Ltd.		2,362,000		9,187,491
Nabtesco Corp.		1,078,700		24,898,512
Shinsei Bank Ltd.		9,586,000		18,819,573
SMC Corp.		102,400		27,006,260
SoftBank Corp.		591,600		44,706,181
Sumitomo Mitsui Financial Group, Inc.		754,600		32,345,121
Tokyo Tatemono Co. Ltd.		2,040,000		17,479,448
Yahoo! Japan Corp.		2,481,500		12,156,712
Yaskawa Electric Corp.		1,016,800		14,047,790

				223,024,481
Mexico — 1.0%
Cemex SAB de CV — ADR (a)		1,453,400		18,356,442
Netherlands — 3.4%
Aalberts Industries NV		594,005		20,689,772
ING Groep NV — CVA (a)		1,128,700		16,052,104
Randstad Holding NV		458,875		26,857,489

				63,599,365
New Zealand — 0.9%
Xero Ltd. (Acquired 10/15/13, cost $8,211,297) (a)(c)		540,000		16,596,888
Nigeria — 0.7%
Lekoil Ltd. (a)(d)		14,262,400		12,542,580
Norway — 1.3%
Statoil ASA		888,400		25,065,959
Russia — 0.0%
Eurasia Drilling Co. Ltd. — GDR		36,998		948,259
South Africa — 1.1%
Naspers Ltd., N Shares		145,900		16,077,158
Playtech PLC		324,920		3,668,144

				19,745,302
South Korea — 1.2%
Hyundai Development Co. — Engineering & Construction		173,900		4,918,351
NAVER Corp.		22,800		16,659,295

				21,577,646
Spain — 3.4%
Bankinter SA		1,754,200		14,124,238

See Notes to Financial Statements.


26		BLACKROCK FUNDS		MARCH 31, 2014


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


Common Stocks	Shares		Value
Spain (concluded)
NH Hoteles SA (a)		4,375,356	$	31,134,377
Sacyr SA (a)		2,747,937		18,276,191

				63,534,806
Sweden — 3.6%
Nordea Bank AB		673,900		9,559,682
Seamless Distribution AB (a)(b)		755,464		3,722,576
Skanska AB, B Shares		647,490		15,263,531
Svenska Cellulosa AB SCA, B Shares		1,290,522		38,007,354

				66,553,143
Switzerland — 10.0%
Actelion Ltd., Registered Shares		225,755		21,394,441
Adecco SA		280,100		23,311,669
Novartis AG, Registered Shares		728,200		61,829,950
Roche Holding AG		203,014		61,059,257
UBS AG, Registered Shares		904,902		18,725,460

				186,320,777
Taiwan — 1.1%
Epistar Corp.		6,579,000		15,846,838
Hermes Microvision, Inc. — GDR (a)(e)		121,933		4,781,603

				20,628,441
Thailand — 0.6%
PTT Global Chemical PCL (a)		5,138,600		11,444,632
Turkey — 0.5%
Turkiye Halk Bankasi AS		1,578,159		9,774,736
United Kingdom — 15.0%
AO World PLC (a)		2,035,000		10,652,851
APR Energy PLC (b)		1,520,844		20,423,117
AstraZeneca PLC		481,300		31,201,039
Babcock International Group PLC		995,100		22,346,296
Crest Nicholson Holdings PLC		3,923,492		25,725,779
DS Smith PLC		3,266,120		17,701,338
esure Group PLC		2,215,306		10,369,636
Foxtons Group PLC (a)		4,194,324		25,193,907
Halma PLC		1,563,576		15,029,168
Hargreaves Lansdown PLC		397,345		9,665,883
Kennedy Wilson Europe Real Estate PLC (a)		808,719		14,021,769
Monitise PLC (a)		7,242,500		8,582,815
Ocado Group PLC (a)		694,700		5,336,685
Perform Group PLC (a)		2,727,873		11,141,971
Poundland Group PLC (a)		626,032		3,965,993


Common Stocks	Shares		Value
United Kingdom (concluded)
Rio Tinto PLC		242,800	$	13,540,323
Travis Perkins PLC		572,600		18,029,780
Ultra Electronics Holdings PLC		196,181		5,857,599
Vodafone Group PLC		3,227,549		11,868,661

				280,654,610
United States — 1.5%
Euronet Worldwide, Inc. (a)		271,683		11,299,296
Platform Specialty Products Corp. (a)		147,683		2,813,361
Schlumberger Ltd.		68,700		6,698,250
Verizon Communications, Inc.		155,622		7,420,057

				28,230,964
Total Common Stocks — 100.5%				1,874,351,870

Preferred Stocks
United States — 0.5%
SAGE Therapeutics, Series C (Acquired 1/15/14, cost $9,137,436) (a)(c)		429,853		9,316,121
Total Preferred Stocks — 0.5%				9,316,121

Total Long-Term Investments (Cost — $1,592,965,858) — 101.0%			1,883,667,991

Short-Term Securities
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (f)(g)		5,443,397		5,443,397
	Beneficial Interest (000)
BlackRock Liquidity Series, LLC, Money Market Series, 0.16% (f)(g)(h)	$	56,773		56,773,283
Total Short-Term Securities (Cost — $62,216,680) — 3.3%				62,216,680
Total Investments (Cost — $1,655,182,538) — 104.3%				1,945,884,671
Liabilities in Excess of Other Assets — (4.3)%				(80,607,622	)

Net Assets — 100.0%			$	1,865,277,049

Notes to Schedule of Investments

(a)	Non-income producing security.

(b)	Security, or a portion of security, is on loan.

(c)	Restricted security as to resale. As of report date, the Fund held restricted securities with a current value of $25,913,009 and an original cost of $17,348,733, which was 1.4% of its net assets.

(d)	Investments in issuers (whereby the Fund held 5% or more of the companies’ outstanding securities) that were considered to be an affiliate during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares Held at September 30, 2013		Shares Purchased		Shares Held at March 31, 2014		Value at March 31, 2014
Lekoil Ltd.¹		11,466,200		2,796,200		14,262,400	$	12,542,580

No longer an affiliated company as of report date.

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

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		27


Schedule of Investments (continued)			BlackRock International Opportunities Portfolio

(f)	Investments in issuers considered to be an affiliate of the Fund during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares/Beneficial Interest Held at September 30, 2013		Net Activity		Shares/Beneficial Interest Held at March 31, 2014		Income
BlackRock Liquidity Funds, TempFund, Institutional Class		362,527		5,080,870		5,443,397	$	2,228
BlackRock Liquidity Series, LLC, Money Market Series	$	30,786,020	$	25,987,263	$	56,773,283	$	513,794

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

(h)	Security was purchased with the cash collateral from loaned securities. The Fund may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows:


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
CHF	1,906,973		USD	2,097,027	BNP Paribas S.A.		4/22/14	$	60,446
CHF	629,437		USD	691,176	Citibank N.A.		4/22/14		20,943
CHF	1,227,629		USD	1,351,315	State Street Bank and Trust Co.		4/22/14		37,575
CHF	3,185,439		USD	3,499,125	State Street Bank and Trust Co.		4/22/14		104,752
CHF	1,159,659		USD	1,307,320	The Bank of New York Mellon		4/22/14		4,670
CHF	1,196,084		USD	1,367,042	The Bank of New York Mellon		4/22/14		(13,841	)
DKK	50,994,542		USD	9,304,307	Bank of America N.A.		4/22/14		106,834
EUR	5,370,000		USD	7,406,562	BNP Paribas S.A.		4/22/14		(8,917	)
EUR	4,464,000		USD	6,205,603	Citibank N.A.		4/22/14		(56,052	)
EUR	4,504,000		USD	6,258,326	Citibank N.A.		4/22/14		(53,672	)
EUR	19,684,000		USD	27,152,562	Citibank N.A.		4/22/14		(36,130	)
EUR	34,055,241		USD	46,297,453	Citibank N.A.		4/22/14		616,621
EUR	5,929,000		USD	8,244,761	JPMorgan Chase Bank N.A.		4/22/14		(77,044	)
EUR	5,497,000		USD	7,567,995	The Bank of New York Mellon		4/22/14		4,604
GBP	10,080,000		USD	16,616,053	Deutsche Bank AG		4/22/14		186,031
GBP	18,219,000		USD	30,318,347	Goldman Sachs Bank USA		4/22/14		50,421
GBP	1,002,000		USD	1,665,299	State Street Bank and Trust Co.		4/22/14		4,908
HKD	49,251,000		USD	6,342,487	Citibank N.A.		4/22/14		7,641
HKD	298,710,000		USD	38,524,197	Deutsche Bank AG		4/22/14		(10,322	)
JPY	1,061,454,671		USD	10,352,948	Barclays Bank PLC		4/22/14		(67,791	)
JPY	173,400,532		USD	1,678,320	Deutsche Bank AG		4/22/14		1,876
JPY	817,426,000		USD	7,944,428	JPMorgan Chase Bank N.A.		4/22/14		(23,830	)
JPY	913,540,000		USD	9,018,716	JPMorgan Chase Bank N.A.		4/22/14		(166,805	)
JPY	941,720,000		USD	9,174,176	State Street Bank and Trust Co.		4/22/14		(49,210	)
JPY	1,518,073,459		USD	14,906,602	The Bank of New York Mellon		4/22/14		(196,954	)
JPY	1,803,901,000		USD	17,683,518	Westpac Banking Corp.		4/22/14		(204,293	)
NOK	21,473,000		USD	3,575,484	Bank of America N.A.		4/22/14		7,596
NOK	65,234,602		USD	10,849,738	Barclays Bank PLC		4/22/14		35,597
SGD	21,429,000		USD	16,845,970	Deutsche Bank AG		4/22/14		189,765
USD	7,464,736		CHF	6,508,279	Barclays Bank PLC		4/22/14		101,532
USD	27,754,415		CHF	25,080,000	Goldman Sachs International		4/22/14		(620,082	)
USD	5,859,913		CHF	5,200,263	JPMorgan Chase Bank N.A.		4/22/14		(23,454	)
USD	25,542,148		CHF	23,192,653	UBS AG		4/22/14		(697,082	)
USD	2,168,425		CHF	1,917,230	Westpac Banking Corp.		4/22/14		(652	)
USD	1,134,594		DKK	6,067,000	Bank of America N.A.		4/22/14		14,918
USD	1,901,490		DKK	10,218,039	Bank of America N.A.		4/22/14		15,731

See Notes to Financial Statements.


28		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (continued)			BlackRock International Opportunities Portfolio

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows: (continued)


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	2,091,354		DKK	11,339,817	Bank of America N.A.		4/22/14	$	(1,431	)
USD	4,972,598		DKK	27,028,216	Bank of America N.A.		4/22/14		(15,512	)
USD	13,830,929		DKK	76,407,667	Bank of America N.A.		4/22/14		(270,253	)
USD	933,647		DKK	5,103,532	BNP Paribas S.A.		4/22/14		(8,219	)
USD	3,200,288		DKK	17,372,039	Citibank N.A.		4/22/14		(5,755	)
USD	4,290,484		DKK	23,377,305	Citibank N.A.		4/22/14		(23,842	)
USD	2,076,812		DKK	11,255,260	Credit Suisse International		4/22/14		(368	)
USD	1,283,967		DKK	7,007,527	Morgan Stanley Capital Services LLC		4/22/14		(9,285	)
USD	2,955,027		DKK	16,163,492	Morgan Stanley Capital Services LLC		4/22/14		(27,977	)
USD	6,414,088		DKK	34,530,404	Morgan Stanley Capital Services LLC		4/22/14		41,436
USD	4,657,210		EUR	3,357,000	Barclays Bank PLC		4/22/14		32,648
USD	948,119		EUR	690,000	BNP Paribas S.A.		4/22/14		(2,416	)
USD	8,382,590		EUR	6,129,000	BNP Paribas S.A.		4/22/14		(60,643	)
USD	8,498,747		EUR	6,129,000	BNP Paribas S.A.		4/22/14		55,513
USD	9,174,290		EUR	6,750,000	Citibank N.A.		4/22/14		(124,426	)
USD	13,148,590		EUR	9,590,000	Citibank N.A.		4/22/14		(62,474	)
USD	252,858,749		EUR	186,222,000	Deutsche Bank AG		4/22/14		(3,678,351	)
USD	3,848,577		EUR	2,807,000	Goldman Sachs Bank USA		4/22/14		(18,311	)
USD	5,589,645		EUR	4,019,000	State Street Bank and Trust Co.		4/22/14		53,121
USD	297,231		EUR	218,000	UBS AG		4/22/14		(3,084	)
USD	10,767,559		EUR	7,818,000	Westpac Banking Corp.		4/22/14		(2,420	)
USD	1,606,010		GBP	962,000	Citibank N.A.		4/22/14		2,478
USD	8,662,724		GBP	5,210,000	Goldman Sachs Bank USA		4/22/14		(21,687	)
USD	14,005,918		GBP	8,385,000	Goldman Sachs Bank USA		4/22/14		29,184
USD	77,087,917		GBP	46,919,000	Goldman Sachs International		4/22/14		(1,120,121	)
USD	6,663,513		GBP	4,007,000	JPMorgan Chase Bank N.A.		4/22/14		(15,649	)
USD	1,603,387		GBP	960,000	UBS AG		4/22/14		3,189
USD	3,339,643		GBP	1,997,000	Westpac Banking Corp.		4/22/14		10,897
USD	4,775,089		GBP	2,861,000	Westpac Banking Corp.		4/22/14		6,164
USD	1,217,248		HKD	9,439,000	Citibank N.A.		4/22/14		240
USD	3,664,720		HKD	28,429,000	Citibank N.A.		4/22/14		(745	)
USD	13,402,111		HKD	103,936,000	Royal Bank of Scotland PLC		4/22/14		1,227
USD	106,641,902		JPY	11,120,144,000	BNP Paribas S.A.		4/22/14		(1,108,748	)
USD	1,440,758		JPY	146,781,000	Citibank N.A.		4/22/14		18,497
USD	2,546,983		JPY	260,685,000	Credit Suisse International		4/22/14		21,029
USD	7,658,086		JPY	790,280,000	JPMorgan Chase Bank N.A.		4/22/14		525
USD	34,625,887		JPY	3,567,564,000	JPMorgan Chase Bank N.A.		4/22/14		57,329
USD	9,497,152		JPY	972,005,000	Westpac Banking Corp.		4/22/14		78,733
USD	22,648,944		NOK	140,029,000	Bank of America N.A.		4/22/14		(716,916	)
USD	7,428,787		NZD	8,645,000	Bank of America N.A.		4/22/14		(60,240	)
USD	8,102,095		NZD	9,801,000	JPMorgan Chase Bank N.A.		4/22/14		(388,357	)
USD	1,338,779		SEK	8,646,000	Bank of America N.A.		4/22/14		3,392
USD	1,687,843		SEK	10,779,000	Bank of America N.A.		4/22/14		23,011

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		29


Schedule of Investments (continued)			BlackRock International Opportunities Portfolio

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows: (concluded)


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	2,943,865		SEK	18,919,000	Bank of America N.A.		4/22/14	$	21,799
USD	3,102,763		SEK	19,867,000	Bank of America N.A.		4/22/14		34,277
USD	1,877,238		SEK	12,120,000	BNP Paribas S.A.		4/22/14		5,287
USD	1,978,695		SEK	12,856,000	BNP Paribas S.A.		4/22/14		(6,932	)
USD	7,281,596		SEK	47,253,000	Citibank N.A.		4/22/14		(16,696	)
USD	2,516,747		SEK	16,449,000	Goldman Sachs Bank USA		4/22/14		(23,825	)
USD	1,953,482		SEK	12,755,000	JPMorgan Chase Bank N.A.		4/22/14		(16,546	)
USD	5,092,199		SEK	33,012,000	JPMorgan Chase Bank N.A.		4/22/14		(6,550	)
USD	2,568,815		SEK	16,546,000	Royal Bank of Scotland PLC		4/22/14		13,262
USD	9,375,352		TRY	20,300,000	Bank of America N.A.		4/22/14		(46,793	)
USD	3,304,997		ZAR	35,930,000	BNP Paribas S.A.		4/22/14		(96,316	)
USD	2,743,876		ZAR	30,509,000	Citibank N.A.		4/22/14		(144,258	)
USD	6,491,633		ZAR	73,095,782	Citibank N.A.		4/22/14		(427,979	)
USD	3,435,972		ZAR	37,414,000	UBS AG		4/22/14		(105,825	)
ZAR	275,695,000		USD	25,145,189	Goldman Sachs Bank USA		4/22/14		953,477
Total								$	(7,905,905	)

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

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of March 31, 2014:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Austria		—	$	20,451,338		—	$	20,451,338
Belgium		—		31,476,702		—		31,476,702
Brazil	$	4,735,288		—		—		4,735,288
Canada		49,369,318		—		—		49,369,318
China		18,945,568		48,010,359		—		66,955,927
Denmark		9,275,725		40,185,721		—		49,461,446
Finland		—		22,088,376		—		22,088,376
France		30,084,966		124,932,544		—		155,017,510
Germany		—		165,417,947		—		165,417,947
Greece		—		14,132,486		—		14,132,486
Hong Kong		—		40,232,177		—		40,232,177

See Notes to Financial Statements.


30		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (concluded)			BlackRock International Opportunities Portfolio


	Level 1		Level 2			Level 3		Total
India	$	9,348,240		—			—	$	9,348,240
Indonesia		—	$	22,515,191			—		22,515,191
Ireland		59,006,802		38,790,715			—		97,797,517
Italy		9,069,813		47,683,563			—		56,753,376
Japan		280,047		222,744,434			—		223,024,481
Mexico		18,356,442		—			—		18,356,442
Netherlands		—		63,599,365			—		63,599,365
New Zealand		—		16,596,888			—		16,596,888
Nigeria		12,542,580		—			—		12,542,580
Norway		—		25,065,959			—		25,065,959
Russia		948,259		—			—		948,259
South Africa		—		19,745,302			—		19,745,302
South Korea		—		21,577,646			—		21,577,646
Spain		—		63,534,806			—		63,534,806
Sweden		—		66,553,143			—		66,553,143
Switzerland		—		186,320,777			—		186,320,777
Taiwan		4,781,603		15,846,838			—		20,628,441
Thailand		11,444,632		—			—		11,444,632
Turkey		—		9,774,736			—		9,774,736
United Kingdom		85,931,480		194,723,130			—		280,654,610
United States		28,230,964		—			—		28,230,964
Preferred Stocks		—		—		$	9,316,121		9,316,121
Short-Term Securities		5,443,397		56,773,283			—		62,216,680
Total	$	357,795,124	$	1,578,773,426		$	9,316,121	$	1,945,884,671


	Level 1		Level 2			Level 3		Total
Derivative Financial Instruments¹
Assets:
Foreign currency exchange contracts		—	$	3,039,176			—	$	3,039,176
Liabilities:
Foreign currency exchange contracts		—		(10,945,081	)		—		(10,945,081	)
Total		—	$	(7,905,905	)		—	$	(7,905,905	)

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

The carrying amount for certain of the Fund’s assets and/or liabilities approximates fair value for financial statement purposes. As of March 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Foreign currency at value	$	40,967,721		—			—	$	40,967,721
Liabilities:
Bank overdraft		—	$	(2,378	)		—		(2,378	)
Collateral on securities loaned at value		—		(56,773,283	)		—		(56,773,283	)
Total	$	40,967,721	$	(56,775,661	)		—	$	(15,807,940	)

Certain foreign securities are fair valued utilizing an external pricing service to reflect any significant market movements between the time the Fund values such foreign securities and the earlier closing of foreign markets. Such fair valuations are categorized as Level 2 in the disclosure hierarchy. As of March 31, 2014, securities with a value of $42,272,865 were systematically fair valued due to significant market movements, but were not valued using systematic fair values as of September 30, 2013. Therefore, these securities were transferred from Level 2 to Level 1 during the period September 30, 2013 to March 31, 2014.

Certain foreign securities are fair valued utilizing an external pricing service to reflect any significant market movements between the time the Fund values such foreign securities and the earlier closing of foreign markets. Such fair valuations are categorized as Level 2 in the disclosure hierarchy. As of September 30, 2013, the Fund did not utilize the external pricing service model adjustments as significant market movements did not occur. As of March 31, 2014, securities with a value of $35,563,543 were systematically fair valued due to significant market movements. Therefore, these securities were transferred from Level 1 to Level 2 during the period September 30, 2013 to March 31, 2014.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		31


Schedule of Investments March 31, 2014 (Unaudited)			BlackRock Science & Technology Opportunities Portfolio
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Communications Equipment — 1.0%
QUALCOMM, Inc.		29,885	$	2,356,731
Diversified Telecommunication Services — 0.5%
8X8, Inc. (a)		107,500		1,162,075
Electronic Equipment, Instruments & Components — 1.0%
Fingerprint Cards AB, Class B (a)(b)		70,900		592,867
Tong Hsing Electronic Industries Ltd.		172,000		891,135
Yaskawa Electric Corp.		57,600		795,784

				2,279,786
Internet & Catalog Retail — 9.4%
Amazon.com, Inc. (a)		16,350		5,502,102
Expedia, Inc.		22,400		1,624,000
Makemytrip Ltd. (a)		65,600		1,776,448
Ocado Group PLC (a)		140,500		1,079,321
priceline.com, Inc. (a)		4,490		5,351,586
Qunar Cayman Islands Ltd. — ADR (a)		36,100		1,104,299
Vipshop Holdings Ltd. — ADR (a)		32,700		4,882,110

				21,319,866
Internet Software & Services — 28.6%
21Vianet Group, Inc. — ADR (a)		242,890		6,970,942
58.com, Inc. — ADR (a)		32,900		1,369,627
Baidu, Inc. — ADR (a)		20,400		3,108,552
Borderfree, Inc. (a)		8,600		160,304
ChannelAdvisor Corp. (a)		43,700		1,649,238
Criteo SA — ADR (a)		26,700		1,082,685
Cvent, Inc. (a)		34,165		1,235,065
DealerTrack Holdings, Inc. (a)		26,600		1,308,454
Demandware, Inc. (a)		20,600		1,319,636
E2open, Inc. (a)		46,968		1,107,036
eBay, Inc. (a)		57,100		3,154,204
econtext Asia Ltd. (a)		1,665,000		874,624
Facebook, Inc., Class A (a)		93,100		5,608,344
Google, Inc., Class A (a)		8,883		9,900,192
Kakaku.com, Inc.		137,900		2,243,221
LinkedIn Corp., Class A (a)		12,100		2,237,774
NAVER Corp.		3,600		2,630,415
Rocket Fuel, Inc. (a)(b)		22,600		969,088
SPS Commerce, Inc. (a)		26,800		1,646,860
Tencent Holdings Ltd.		74,200		5,179,174
TrustBuddy International AB		7,806,300		3,003,212
Twitter, Inc. (a)(b)		23,100		1,078,077
Xoom Corp. (a)		44,100		860,832
Yahoo!, Inc. (a)		43,300		1,554,470
Yelp, Inc. (a)		14,300		1,100,099
YY, Inc. — ADR (a)		48,400		3,695,824

				65,047,949
IT Services — 13.0%
Alliance Data Systems Corp. (a)		21,900		5,966,655
EPAM Systems, Inc. (a)		33,850		1,113,665
Euronet Worldwide, Inc. (a)		90,975		3,783,650
Fidelity National Information Services, Inc.		40,238		2,150,721
GMO Payment Gateway, Inc.		33,700		1,435,871
Jack Henry & Associates, Inc.		40,531		2,260,009
Luxoft Holding, Inc. (a)		54,300		1,904,301
MasterCard, Inc., Class A		48,100		3,593,070
QIWI PLC — ADR		45,000		1,559,250
TriNet Group, Inc. (a)		12,086		257,553
Visa, Inc., Class A		21,300		4,597,818
Wirecard AG		22,200		921,787

				29,544,350


Common Stocks	Shares		Value
Machinery — 0.3%
Arcam AB (a)		22,200	$	675,710
Media — 1.0%
Imax Corp. (a)		29,200		798,036
Rentrak Corp. (a)		24,500		1,476,860

				2,274,896
Oil, Gas & Consumable Fuels — 0.5%
Solazyme, Inc. (a)(b)		104,200		1,209,762
Semiconductors & Semiconductor Equipment — 9.7%
Aixtron SE (a)		87,900		1,440,330
Applied Materials, Inc.		71,700		1,464,114
ASM Pacific Technology Ltd.		201,600		1,958,413
Avago Technologies Ltd.		35,999		2,318,696
Cavium, Inc. (a)		33,600		1,469,328
Epistar Corp.		1,631,000		3,928,590
Hermes Microvision, Inc. — GDR (a)(c)		25,206		988,453
Intel Corp.		177,000		4,568,370
NXP Semiconductor NV (a)		45,765		2,691,440
SK Hynix, Inc. (a)		32,300		1,095,967

				21,923,701
Software — 19.9%
Adobe Systems, Inc. (a)		44,600		2,932,004
Autodesk, Inc. (a)		65,600		3,226,208
Concur Technologies, Inc. (a)		21,490		2,129,014
Guidewire Software, Inc. (a)		40,430		1,983,092
Microsoft Corp.		56,900		2,332,331
Monitise PLC (a)		1,208,600		1,432,266
NetSuite, Inc. (a)		14,000		1,327,620
Proofpoint, Inc. (a)		78,510		2,911,151
Red Hat, Inc. (a)		32,300		1,711,254
Salesforce.com, Inc. (a)		96,000		5,480,640
Seamless Distribution AB (a)(b)		90,244		444,681
ServiceNow, Inc. (a)		76,280		4,570,698
Tableau Software, Inc., Class A (a)		25,750		1,959,060
Totvs SA		124,900		1,936,528
UBISOFT Entertainment (a)		71,500		1,278,591
Ultimate Software Group, Inc. (a)		6,800		931,600
WANdisco PLC (a)		136,513		2,366,896
Workday, Inc., Class A (a)		14,800		1,353,164
Xero Ltd. (Acquired 10/15/13, cost $2,411,080) (a)(d)		158,560		4,873,338

				45,180,136
Technology Hardware, Storage & Peripherals — 5.8%
Apple, Inc.		20,937		11,237,725
Nimble Storage, Inc. (a)		19,100		723,699
Stratasys Ltd. (a)		10,800		1,145,772

				13,107,196
Wireless Telecommunication Services — 1.3%
Aerohive Networks, Inc. (a)		42,000		443,100
RingCentral, Inc., Class A (a)		59,400		1,075,140
SoftBank Corp.		18,200		1,375,342

				2,893,582
Total Common Stocks — 92.0%				208,975,740

See Notes to Financial Statements.


32		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (continued)			BlackRock Science & Technology Opportunities Portfolio
			(Percentages shown are based on Net Assets)


Preferred Stocks	Shares		Value
Internet Software & Services — 0.9%
Uber Technologies, Inc. (Acquired 3/20/14, cost $2,000,000) (d)(e)	2,000,000	$	2,000,000
Software — 2.9%
Hortonworks, Inc., Series D (Acquired 3/21/14, cost $3,100,459) (a)(d)	254,405		3,100,459
MongoDB Series C (Acquired 12/19/13, cost
$1,512,772) (a)(d)	60,303		1,513,002
MongoDB Series D (Acquired 12/19/13, cost
$470,592) (a)(d)	18,759		470,663
MongoDB Series E (Acquired 12/19/13, cost
$16,632) (a)(d)	663		16,635
Palantir Technologies, Inc. (Acquired 2/07/14, cost $1,500,011) (d)	244,700		1,500,011

			6,600,770
Total Preferred Stocks — 3.8%			8,600,770
Total Long-Term Investments (Cost — $157,099,711) — 95.8%			217,576,510


Short-Term Securities	Shares		Value
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (f)(g)		9,533,475	$	9,533,475
	Beneficial Interest (000)
BlackRock Liquidity Series, LLC, Money Market Series, 0.16% (f)(g)(h)	$	3,760		3,760,146
Total Short-Term Securities (Cost — $13,293,621) — 5.8%				13,293,621
Total Investments (Cost — $170,393,332) — 101.6%				230,870,131
Liabilities in Excess of Other Assets — (1.6)%				(3,662,535	)

Net Assets — 100.0%			$	227,207,596

Notes to Schedule of Investments

(a)	Non-income producing security.

(b)	Security, or a portion of security, is on loan.

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

(d)	Restricted security as to resale. As of report date, the Fund held restricted securities with a current value of $13,474,108 and an original cost of $12,511,557, which was 5.9% of its net assets.

(e)	Convertible security.

(f)	Investments in issuers considered to be an affiliate of the Fund during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares/Beneficial Interest Held at September 30, 2013		Net Activity			Shares/Beneficial Interest Held at March 31, 2014		Income
BlackRock Liquidity Funds, TempFund, Institutional Class		1,949,728		7,583,747			9,533,475	$	1,295
BlackRock Liquidity Series, LLC, Money Market Series	$	13,648,085	$	(9,887,939	)	$	3,760,146	$	101,582

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

(h)	Security was purchased with the cash collateral from loaned securities. The Fund may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		33


Schedule of Investments (continued)			BlackRock Science & Technology Opportunities Portfolio

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows:


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
SEK	1,267,834		USD	196,507	Royal Bank of Scotland PLC		4/22/14	$	(688	)
USD	234,953		EUR	172,000	Barclays Bank PLC		4/22/14		(1,992	)
USD	1,014,828		EUR	742,000	BNP Paribas S.A.		4/22/14		(7,342	)
USD	416,991		EUR	305,000	Citibank N.A.		4/22/14		(3,173	)
USD	555,355		EUR	409,000	Deutsche Bank AG		4/22/14		(8,079	)
USD	133,814		EUR	98,000	Goldman Sachs Bank USA		4/22/14		(1,189	)
USD	164,282		EUR	120,000	Goldman Sachs Bank USA		4/22/14		(1,029	)
USD	635,163		GBP	389,000	Citibank N.A.		4/22/14		(13,251	)
USD	218,422		GBP	131,000	Deutsche Bank AG		4/22/14		62
USD	659,753		GBP	396,000	Goldman Sachs Bank USA		4/22/14		(328	)
USD	972,686		GBP	585,000	Goldman Sachs Bank USA		4/22/14		(2,435	)
USD	3,146,345		GBP	1,915,000	Goldman Sachs Bank USA		4/22/14		(45,718	)
USD	383,231		HKD	2,974,000	BNP Paribas S.A.		4/22/14		(219	)
USD	488,199		HKD	3,791,000	BNP Paribas S.A.		4/22/14		(589	)
USD	492,581		HKD	3,823,000	BNP Paribas S.A.		4/22/14		(334	)
USD	1,170,303		HKD	9,078,000	Citibank N.A.		4/22/14		(160	)
USD	2,836,918		HKD	21,997,000	Citibank N.A.		4/22/14		757
USD	126,321		HKD	980,000	Royal Bank of Scotland PLC		4/22/14		(35	)
USD	465,192		HKD	3,609,000	Royal Bank of Scotland PLC		4/22/14		(131	)
USD	307,494		HKD	2,385,000	Toronto-Dominion Bank		4/22/14		(14	)
USD	455,978		HKD	3,541,000	Toronto-Dominion Bank		4/22/14		(577	)
USD	4,716,095		NZD	5,705,000	JPMorgan Chase Bank N.A.		4/22/14		(226,056	)
USD	178,868		SEK	1,144,000	Bank of America N.A.		4/22/14		2,175
USD	2,853,524		SEK	18,472,000	BNP Paribas S.A.		4/22/14		497
USD	69,809		SEK	454,000	Goldman Sachs Bank USA		4/22/14		(311	)
USD	96,821		SEK	631,000	Goldman Sachs Bank USA		4/22/14		(638	)
USD	147,347		SEK	956,000	Goldman Sachs Bank USA		4/22/14		(309	)
USD	159,210		SEK	1,017,000	Toronto-Dominion Bank		4/22/14		2,133
USD	789,758		ZAR	8,659,000	Goldman Sachs Bank USA		4/22/14		(29,947	)
Total								$	(338,920	)

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

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

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

See Notes to Financial Statements.


34		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (continued)			BlackRock Science & Technology Opportunities Portfolio

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of March 31, 2014:


	Level 1		Level 2			Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Communications Equipment	$	2,356,731		—			—	$	2,356,731
Diversified Telecommunication Services		1,162,075		—			—		1,162,075
Electronic Equipment, Instruments & Components		—	$	2,279,786			—		2,279,786
Internet & Catalog Retail		20,240,545		1,079,321			—		21,319,866
Internet Software & Services		56,363,736		8,684,213			—		65,047,949
IT Services		27,186,692		2,357,658			—		29,544,350
Machinery		675,710		—			—		675,710
Media		2,274,896		—			—		2,274,896
Oil, Gas & Consumable Fuels		1,209,762		—			—		1,209,762
Semiconductors & Semiconductor Equipment		13,500,401		8,423,300			—		21,923,701
Software		37,151,260		8,028,876			—		45,180,136
Technology Hardware, Storage & Peripherals		13,107,196		—			—		13,107,196
Wireless Telecommunication Services		1,518,240		1,375,342			—		2,893,582
Preferred Stocks		—		—		$	8,600,770		8,600,770
Short-Term Securities		9,533,475		3,760,146			—		13,293,621
Total	$	186,280,719	$	35,988,642		$	8,600,770	$	230,870,131


	Level 1		Level 2			Level 3		Total
Derivative Financial Instruments¹
Assets:
Foreign currency exchange contracts		—	$	5,624			—	$	5,624
Liabilities:
Foreign currency exchange contracts		—		(344,544	)		—		(344,544	)
Total		—	$	(338,920	)		—	$	(338,920	)

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

The carrying amount for certain of the Fund’s assets and/or liabilities approximates fair value for financial statement purposes. As of March 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Foreign currency at value	$	3,930,868		—			—	$	3,930,868
Liabilities:
Bank overdraft		—	$	(1,127	)		—		(1,127	)
Collateral on securities loaned at value		—		(3,760,146	)		—		(3,760,146	)
Total	$	3,930,868	$	(3,761,273	)		—	$	169,595

There were no transfers between Level 1 and Level 2 during the six months ended March 31, 2014.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		35


Schedule of Investments (concluded)			BlackRock Science & Technology Opportunities Portfolio


	Preferred Stocks
Assets:
Opening Balance, as of September 30, 2013		—
Transfers into Level 3		—
Transfers out of Level 3		—
Accrued discounts/premiums		—
Net realized gain (loss)		—
Net change in unrealized appreciation/depreciation^1,2	$	303
Purchases		8,600,467
Sales		—
Closing Balance, as of March 31, 2014	$	8,600,770

Net change in unrealized appreciation/depreciation on investments still held at March 31, 2014	$	303

¹	Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations.

²	Any difference between Net change in unrealized appreciation/depreciation and Net change in unrealized appreciation/depreciation on investments still held at March 31, 2014 is generally due to investments no longer held or categorized as Level 3 at period end.

See Notes to Financial Statements.


36		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments March 31, 2014 (Unaudited)			BlackRock U.S. Opportunities Portfolio
			(Percentages shown are based on Net Assets)


Common Stocks	Shares		Value
Aerospace & Defense — 1.8%
B/E Aerospace, Inc. (a)		116,800	$	10,137,072
Textron, Inc.		208,700		8,199,823
Triumph Group, Inc.		156,524		10,108,320

				28,445,215
Airlines — 1.1%
American Airlines Group, Inc. (a)		265,550		9,719,130
JetBlue Airways Corp. (a)		901,700		7,835,773

				17,554,903
Auto Components — 2.6%
Lear Corp.		133,160		11,148,155
TRW Automotive Holdings Corp. (a)		210,900		17,213,658
Visteon Corp. (a)		152,700		13,504,788

				41,866,601
Automobiles — 0.5%
Tesla Motors, Inc. (a)		41,160		8,579,802
Banks — 4.9%
BankUnited, Inc.		736,680		25,614,364
Regions Financial Corp.		1,527,880		16,974,747
SunTrust Banks, Inc.		349,230		13,895,862
Texas Capital Bancshares, Inc. (a)		125,300		8,136,982
Western Alliance Bancorp (a)		574,286		14,127,436

				78,749,391
Biotechnology — 3.8%
Alexion Pharmaceuticals, Inc. (a)		48,900		7,439,157
Alkermes PLC (a)		294,600		12,988,914
BioMarin Pharmaceutical, Inc. (a)		212,700		14,508,267
Karyopharm Therapeutics, Inc. (a)		105,359		3,254,540
Regeneron Pharmaceuticals, Inc. (a)		24,760		7,434,933
Seattle Genetics, Inc. (a)		168,168		7,661,734
UniQure B.V. (a)		800		12,440
Vertex Pharmaceuticals, Inc. (a)		98,000		6,930,560

				60,230,545
Building Products — 0.3%
Continental Building Products, Inc. (a)		262,426		4,944,106
Capital Markets — 2.3%
Invesco Ltd.		443,070		16,393,590
WisdomTree Investments, Inc. (a)		1,591,127		20,875,586

				37,269,176
Chemicals — 2.9%
Axiall Corp.		313,047		14,062,071
Cytec Industries, Inc.		108,090		10,550,665
Eastman Chemical Co.		138,000		11,896,980
The Valspar Corp.		128,340		9,255,881

				45,765,597
Consumer Finance — 0.3%
Regional Management Corp. (a)		210,900		5,200,794
Containers & Packaging — 2.2%
Crown Holdings, Inc. (a)		413,450		18,497,753
Owens-Illinois, Inc. (a)		483,470		16,355,790

				34,853,543
Electrical Equipment — 2.9%
Acuity Brands, Inc.		191,751		25,420,430
Roper Industries, Inc.		154,520		20,629,965

				46,050,395
Electronic Equipment, Instruments & Components — 0.5%
Amphenol Corp., Class A		88,680		8,127,522


Common Stocks	Shares		Value
Energy Equipment & Services — 0.8%
Bristow Group, Inc.		109,600	$	8,276,992
Geospace Technologies Corp. (a)		56,755		3,755,478

				12,032,470
Food & Staples Retailing — 0.5%
Whole Foods Market, Inc.		160,000		8,113,600
Food Products — 3.1%
Annie’s, Inc. (a)(b)		174,370		7,007,930
The Hain Celestial Group, Inc. (a)		153,701		14,059,030
The Hillshire Brands Co.		214,400		7,988,544
Hormel Foods Corp.		221,900		10,933,013
Keurig Green Mountain, Inc.		83,800		8,848,442

				48,836,959
Health Care Equipment & Supplies — 2.2%
CareFusion Corp. (a)		180,210		7,248,046
The Cooper Cos., Inc.		62,070		8,525,935
Edwards Lifesciences Corp. (a)		120,200		8,915,234
Varian Medical Systems, Inc. (a)		125,400		10,532,346

				35,221,561
Health Care Providers & Services — 1.7%
HCA Holdings, Inc. (a)		308,360		16,188,900
Universal Health Services, Inc., Class B		123,190		10,110,203

				26,299,103
Hotels, Restaurants & Leisure — 1.0%
ARAMARK Holdings Corp.		283,900		8,210,388
Diamond Resorts International, Inc. (a)		490,600		8,315,670

				16,526,058
Household Durables — 3.2%
Installed Building Products, Inc. (a)		349,300		4,872,735
Jarden Corp. (a)		359,580		21,513,671
The New Home Co., Inc. (a)		237,600		3,383,424
PulteGroup, Inc.		603,920		11,589,225
Toll Brothers, Inc. (a)		277,955		9,978,585

				51,337,640
Household Products — 0.6%
Energizer Holdings, Inc.		102,400		10,315,776
Insurance — 2.6%
AON PLC		138,340		11,659,295
Genworth Financial, Inc., Class A (a)		977,000		17,322,210
Reinsurance Group of America, Inc.		149,820		11,930,167

				40,911,672
Internet & Catalog Retail — 1.0%
Groupon, Inc. (a)		663,900		5,204,976
Liberty Interactive Corp., Class A (a)		389,400		11,241,978

				16,446,954
Internet Software & Services — 1.7%
Borderfree, Inc. (a)		58,800		1,096,032
ChannelAdvisor Corp. (a)		259,166		9,780,925
Cvent, Inc. (a)		244,700		8,845,905
Rocket Fuel, Inc. (a)(b)		154,000		6,603,520

				26,326,382
IT Services — 3.0%
Alliance Data Systems Corp. (a)		76,660		20,886,017
Euronet Worldwide, Inc. (a)		257,073		10,691,666
Fidelity National Information Services, Inc.		278,620		14,892,239

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		37


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


Common Stocks	Shares		Value
IT Services (concluded)
TriNet Group, Inc. (a)		83,917	$	1,788,271

				48,258,193
Life Sciences Tools & Services — 3.7%
Agilent Technologies, Inc.		200,700		11,223,144
Charles River Laboratories International, Inc. (a)		212,800		12,840,352
Illumina, Inc. (a)(b)		102,930		15,301,574
Thermo Fisher Scientific, Inc.		160,940		19,351,426

				58,716,496
Machinery — 4.1%
Actuant Corp., Class A		282,330		9,641,569
Crane Co.		182,400		12,977,760
Flowserve Corp.		148,200		11,609,988
Snap-On, Inc.		150,870		17,120,728
Stanley Black & Decker, Inc.		179,300		14,566,332

				65,916,377
Marine — 0.4%
Diana Shipping, Inc. (a)		589,300		7,065,707
Media — 4.8%
AMC Networks, Inc., Class A (a)		153,400		11,212,006
The E.W. Scripps Co., Class A (a)		194,200		3,441,224
The Interpublic Group of Cos., Inc.		872,390		14,952,765
Liberty Global PLC, Series A (a)		168,870		7,024,992
Liberty Global PLC, Series C (a)		168,870		6,874,698
LIN Media LLC, Class A (a)		147,100		3,898,150
The Madison Square Garden Co., Class A (a)		169,500		9,624,210
Nexstar Broadcasting Group, Inc., Class A		74,800		2,806,496
Sirius XM Holdings, Inc. (a)		3,946,600		12,629,120
Tribune Co. (a)		51,000		4,062,150

				76,525,811
Metals & Mining — 1.6%
Constellium NV (a)		432,900		12,705,615
US Silica Holdings, Inc.		340,100		12,981,617

				25,687,232
Multiline Retail — 0.6%
Nordstrom, Inc.		140,000		8,743,000
Oil, Gas & Consumable Fuels — 5.4%
Cabot Oil & Gas Corp.		522,284		17,694,982
Concho Resources, Inc. (a)		157,180		19,254,550
Diamondback Energy, Inc. (a)		122,400		8,238,744
Gaslog Ltd. (a)		428,700		9,984,423
Kosmos Energy Ltd. (a)		692,110		7,613,210
Navigator Holdings Ltd. (a)		274,500		7,137,000
Oasis Petroleum, Inc. (a)		273,560		11,415,659
Solazyme, Inc. (a)(b)		414,930		4,817,337

				86,155,905
Pharmaceuticals — 2.7%
Mallinckrodt PLC (a)		173,400		10,995,294
Mylan, Inc. (a)		345,800		16,885,414
Perrigo Co. PLC		95,100		14,708,166

				42,588,874
Professional Services — 1.0%
Equifax, Inc.		224,060		15,242,802
Real Estate Investment Trusts (REITs) — 4.1%
Hospitality Properties Trust		466,340		13,393,285
Host Hotels & Resorts, Inc.		780,400		15,795,296
Liberty Property Trust		200,849		7,423,379
RLJ Lodging Trust		568,450		15,200,353
Weyerhaeuser Co.		440,513		12,929,057

				64,741,370


Common Stocks	Shares		Value
Real Estate Management & Development — 1.8%
Kennedy-Wilson Holdings, Inc.		1,257,400	$	28,304,074
Road & Rail — 1.1%
Hertz Global Holdings, Inc. (a)		629,046		16,757,785
Semiconductors & Semiconductor Equipment — 4.2%
Advanced Energy Industries, Inc. (a)		280,244		6,865,978
Applied Materials, Inc.		436,000		8,903,120
Avago Technologies Ltd.		197,318		12,709,252
Canadian Solar, Inc. (a)		129,600		4,152,384
NXP Semiconductor NV (a)		220,190		12,949,374
SunPower Corp. (a)(b)		179,640		5,795,186
Veeco Instruments, Inc. (a)		359,900		15,090,607

				66,465,901
Software — 2.2%
Autodesk, Inc. (a)		227,200		11,173,696
ServiceNow, Inc. (a)		215,100		12,888,792
Tableau Software, Inc., Class A (a)		109,800		8,353,584
Varonis Systems, Inc. (a)		72,800		2,603,328

				35,019,400
Specialty Retail — 2.7%
Abercrombie & Fitch Co., Class A		200,850		7,732,725
Dick’s Sporting Goods, Inc.		137,600		7,514,336
Genesco, Inc. (a)		145,190		10,826,818
GNC Holdings, Inc., Class A		210,500		9,266,210
L Brands, Inc.		134,800		7,652,596

				42,992,685
Textiles, Apparel & Luxury Goods — 3.3%
Kate Spade & Co. (a)		276,000		10,236,840
PVH Corp.		107,130		13,366,610
Ralph Lauren Corp.		58,600		9,430,498
Sequential Brands Group, Inc. (a)(c)		2,500,000		20,000,000

				53,033,948
Thrifts & Mortgage Finance — 0.5%
Strategic Growth Bancorp (Acquired 3/10/14, cost $7,599,729) (a)(d)		610,420		7,599,729
Trading Companies & Distributors — 1.1%
United Rentals, Inc. (a)		191,567		18,187,371
Wireless Telecommunication Services — 2.0%
Aerohive Networks, Inc. (a)		291,400		3,074,270
SBA Communications Corp., Class A (a)		250,330		22,770,017
T-Mobile U.S., Inc.		164,900		5,446,647

				31,290,934
Total Common Stocks — 94.8%				1,509,299,359

See Notes to Financial Statements.


38		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (continued)			BlackRock U.S. Opportunities Portfolio


Preferred Stocks	Shares		Value
Internet Software & Services — 0.3%
Uber Technologies, Inc. (Acquired 3/20/14, cost $5,218,000) (d)(e)	5,218,000	$	5,218,000
Software — 1.8%
Hortonworks, Inc., Series D (Acquired 3/21/14,cost $14,233,594) (a)(d)	1,167,923		14,233,594
MongoDB Series C (Acquired 12/19/13, cost $7,974,602) (a)(d)	317,888		7,975,810
MongoDB Series D (Acquired 12/19/13, cost $2,480,799) (a)(d)	98,891		2,481,175
MongoDB Series E (Acquired 12/19/13, cost $87,676) (a)(d)	3,495		87,690
Palantir Technologies, Inc. (Acquired 2/07/14,cost $4,300,011) (d)	701,470		4,300,011

			29,078,280
Total Preferred Stocks — 2.1%			34,296,280
Total Long-Term Investments (Cost — $1,150,979,992) — 96.9%			1,543,595,639


Short-Term Securities	Shares		Value
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (f)(g)		51,289,172	$	51,289,172
Short-Term Securities	Beneficial Interest (000)
BlackRock Liquidity Series, LLC, Money Market Series, 0.16% (f)(g)(h)	$	27,405		27,404,520
Total Short-Term Securities (Cost — $78,693,692) — 5.0%				78,693,692
Total Investments (Cost — $1,229,673,684) — 101.9%				1,622,289,331
Liabilities in Excess of Other Assets — (1.9)%				(29,550,252	)

Net Assets — 100.0%			$	1,592,739,079

Notes to Schedule of Investments

(a)	Non-income producing security.

(b)	Security, or a portion of security, is on loan.

(c)	Investments in issuers (whereby the Fund held 5% or more of the companies’ outstanding securities) that were considered to be an affiliate during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares Held at September 30, 2013		Shares Purchased		Shares Held at March 31, 2014		Value at March 31, 2014
Sequential Brands Group, Inc.		2,500,000		—		2,500,000	$	20,000,000

(d)	Restricted security as to resale. As of report date, the Fund held restricted securities with a current value of $41,896,009 and an original cost of $41,894,411, which was 3.9% of its net assets.

(e)	Convertible security.

(f)	Investments in issuers considered to be an affiliate of the Fund during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares/ Beneficial Interest Held at September 30, 2013		Net Activity			Shares/Beneficial Interest Held at March 31, 2014		Income
BlackRock Liquidity Funds, TempFund, Institutional Class		47,610,474		3,678,698			51,289,172	$	3,450
BlackRock Liquidity Series, LLC, Money Market Series	$	185,313,336	$	(160,608,816	)	$	24,704,520	$	438,749

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

(h)	Security was purchased with the cash collateral from loaned securities. The Fund may withdraw up to 25% of its investment daily, although the manager of the BlackRock Liquidity Series, LLC, Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

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

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		39


Schedule of Investments (continued)		BlackRock U.S. Opportunities Portfolio

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of March 31, 2014:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Common Stocks:
Aerospace & Defense	$	28,445,215		—		—	$	28,445,215
Airlines		17,554,903		—		—		17,554,903
Auto Components		41,866,601		—		—		41,866,601
Automobiles		8,579,802		—		—		8,579,802
Banks		78,749,391		—		—		78,749,391
Biotechnology		60,230,545		—		—		60,230,545
Building Products		4,944,106		—		—		4,944,106
Capital Markets		37,269,176		—		—		37,269,176
Chemicals		45,765,597		—		—		45,765,597
Consumer Finance		5,200,794		—		—		5,200,794
Containers & Packaging		34,853,543		—		—		34,853,543
Electrical Equipment		46,050,395		—		—		46,050,395
Electronic Equipment, Instruments & Components		8,127,522		—		—		8,127,522
Energy Equipment & Services		12,032,470		—		—		12,032,470
Food & Staples Retailing		8,113,600		—		—		8,113,600
Food Products		48,836,959		—		—		48,836,959
Health Care Equipment & Supplies		35,221,561		—		—		35,221,561
Health Care Providers & Services		26,299,103		—		—		26,299,103
Hotels, Restaurants & Leisure		16,526,058		—		—		16,526,058
Household Durables		51,337,640		—		—		51,337,640
Household Products		10,315,776		—		—		10,315,776
Insurance		40,911,672		—		—		40,911,672
Internet & Catalog Retail		16,446,954		—		—		16,446,954
Internet Software & Services		26,326,382		—		—		26,326,382
IT Services		48,258,193		—		—		48,258,193
Life Sciences Tools & Services		58,716,496		—		—		58,716,496
Machinery		65,916,377		—		—		65,916,377
Marine		7,065,707		—		—		7,065,707
Media		76,525,811		—		—		76,525,811
Metals & Mining		25,687,232		—		—		25,687,232
Multiline Retail		8,743,000		—		—		8,743,000
Oil, Gas & Consumable Fuels		86,155,905		—		—		86,155,905
Pharmaceuticals		42,588,874		—		—		42,588,874
Professional Services		15,242,802		—		—		15,242,802
Real Estate Investment Trusts (REITs)		64,741,370		—		—		64,741,370
Real Estate Management & Development		28,304,074		—		—		28,304,074
Road & Rail		16,757,785		—		—		16,757,785
Semiconductors & Semiconductor Equipment		66,465,901		—		—		66,465,901

See Notes to Financial Statements.


40		BLACKROCK FUNDS		MARCH 31, 2014


Schedule of Investments (concluded)		BlackRock U.S. Opportunities Portfolio


	Level 1		Level 2			Level 3		Total
Software	$	35,019,400		—			—	$	35,019,400
Specialty Retail		42,992,685		—			—		42,992,685
Textiles, Apparel & Luxury Goods		53,033,948		—			—		53,033,948
Thrifts & Mortgage Finance		—		—		$	7,599,729		7,599,729
Trading Companies & Distributors		18,187,371		—			—		18,187,371
Wireless Telecommunication Services		31,290,934		—			—		31,290,934
Preferred Stocks		—		—			34,296,280		34,296,280
Short-Term Securities		51,289,172	$	27,404,520			—		78,693,692
Total	$	1,552,988,802	$	27,404,520		$	41,896,009	$	1,622,289,331

The carrying amount for certain of the Fund’s assets and/or liabilities approximates fair value for financial statement purposes. As of March 31, 2014, such assets and/or liabilities are categorized within the disclosure hierarchy as follows:

	Level 1		Level 2			Level 3		Total
Assets:
Cash	$	63,853		—			—	$	63,853
Liabilities:
Collateral on securities loaned at value		—	$	(27,404,520	)		—		(27,404,520	)
Total	$	63,853	$	(27,404,520	)		—	$	(27,340,667	)

There were no transfers between Level 1 and Level 2 during the six months ended March 31, 2014.


	Common Stocks			Preferred Stocks		Total
Assets:
Opening Balance, as of September 30, 2013	$	13,062,500			—	$	13,062,500
Transfers into Level 3		—			—		—
Transfers out of Level 3		(13,062,500	)		—		(13,062,500	)
Accrued discounts/premiums		—			—		—
Net realized gain (loss)		—			—		—
Net change in unrealized appreciation/depreciation^1,2		—		$	1,601		1,601
Purchases		7,599,729			34,294,679		41,894,408
Sales		—			—		—
Closing Balance, as of March 31, 2014	$	7,599,729		$	34,296,280	$	41,896,009

Net change in unrealized appreciation/depreciation on investments still held at March 31, 2014²		—		$	1,601	$	1,601

¹	Included in the related net change in unrealized appreciation/depreciation in the Statements of Operations.

²	Any difference between Net change in unrealized appreciation/depreciation and Net change in unrealized appreciation/depreciation on investments still held at March 31, 2014 is generally due to investments no longer held or categorized as Level 3 at period end.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		41


Statements of Assets and Liabilities


March 31, 2014 (Unaudited)	BlackRock Global Opportunities Portfolio			BlackRock Health Sciences Opportunities Portfolio		BlackRock International Opportunities Portfolio		BlackRock Science & Technology Opportunities Portfolio			BlackRock U.S. Opportunities Portfolio

Assets
Investments at value — unaffiliated^1,2	$	350,871,951		$	3,626,668,688	$	1,883,667,991	$	217,576,510		$	1,543,595,639
Investments at value — affiliated³		9,092,344			165,620,610		62,216,680		13,293,621			78,693,692
Cash		—			—		—		—			63,853
Cash pledged as collateral for options written		—			22,627,237		—		—			—
Foreign currency at value⁴		154,419			5,058,309		40,967,721		3,930,868			—
Investments sold receivable		5,070,489			30,371,551		69,152,831		9,451,817			15,273,472
Unrealized appreciation on forward foreign currency exchange contracts		484,367			28,300		3,039,176		5,624			—
Capital shares sold receivable		102,405			7,790,558		2,329,720		365,801			945,089
Dividends receivable — unaffiliated		632,556			4,179,949		5,720,559		33,643			839,108
Dividends receivable — affiliated		79			2,272		215		275			743
Receivable from Manager		26,058			—		150		—			81,876
Securities lending income receivable — affiliated		19,764			16,560		144,297		26,701			103,680
Prepaid expenses		44,902			129,878		81,954		56,414			72,890

Total assets		366,499,334			3,862,493,912		2,067,321,294		244,741,274			1,639,670,042


Liabilities
Bank overdraft		1,261			22,920		2,378		1,127			—
Collateral on securities loaned at value		7,540,083			57,299,570		56,773,283		3,760,146			27,404,520
Investments purchased payable		4,027,924			70,912,459		120,519,958		12,317,705			12,566,441
Unrealized depreciation on forward foreign currency exchange contracts		1,454,522			4,530,290		10,945,081		344,544			—
Capital shares redeemed payable		567,295			9,510,182		10,860,392		653,029			3,994,827
Investment advisory fees payable		272,630			2,237,657		1,559,122		198,022			1,203,947
Service and distribution fees payable		105,198			1,094,470		314,634		64,323			342,830
Other affiliates payable		21,957			238,385		196,651		18,367			181,292
Officer’s and Trustees’ fees payable		2,670			15,732		11,781		1,348			12,603
Other accrued expenses payable		233,425			979,461		860,965		175,067			1,224,503

Total liabilities		14,226,965			146,841,126		202,044,245		17,533,678			46,930,963

Net Assets	$	352,272,369		$	3,715,652,786	$	1,865,277,049	$	227,207,596		$	1,592,739,079


Net Assets Consist of
Paid-in capital	$	394,981,148		$	2,565,035,738	$	1,467,238,541	$	199,079,666		$	1,027,504,083
Undistributed (accumulated) net investment income (loss)		2,263,033			8,412,395		28,599,142		(2,393,919	)		(4,565,543	)
Accumulated net realized gain (loss)		(104,080,125	)		153,077,518		86,619,031		(29,648,215	)		177,184,892
Net unrealized appreciation/depreciation		59,108,313			989,127,135		282,820,335		60,170,064			392,615,647

Net Assets	$	352,272,369		$	3,715,652,786	$	1,865,277,049	$	227,207,596		$	1,592,739,079

¹Investments at cost — unaffiliated	$	290,802,132		$	2,633,127,764	$	1,592,965,858	$	157,099,711		$	1,150,979,992
²Securities loaned at value	$	7,125,179		$	57,419,168	$	53,293,449	$	3,668,024		$	27,482,834
³Investments at cost — affiliated	$	9,092,344		$	165,620,610	$	62,216,680	$	13,293,621		$	78,693,692
⁴Foreign currency at cost	$	153,416		$	5,046,592	$	40,808,317	$	3,909,921			—

See Notes to Financial Statements.


42		BLACKROCK FUNDS		MARCH 31, 2014


Statements of Assets and Liabilities (concluded)


March 31, 2014 (Unaudited)	BlackRock Global Opportunities Portfolio		BlackRock Health Sciences Opportunities Portfolio		BlackRock International Opportunities Portfolio		BlackRock Science & Technology Opportunities Portfolio		BlackRock U.S. Opportunities Portfolio

Net Asset Value
Institutional
Net assets	$	63,853,324	$	930,562,271	$	856,622,574	$	48,929,788	$	698,941,802

Shares outstanding¹		4,371,791		20,791,748		20,746,410		3,424,635		16,784,990

Net asset value	$	14.61	$	44.76	$	41.29	$	14.29	$	41.64


Service
Net assets		—	$	28,171,587	$	40,880,406	$	1,950,951	$	153,288,223

Shares outstanding¹		—		648,643		1,028,676		142,102		3,891,679

Net asset value		—	$	43.43	$	39.74	$	13.73	$	39.39


Investor A
Net assets	$	212,298,995	$	1,944,408,162	$	810,069,215	$	134,022,787	$	509,928,398

Shares outstanding¹		14,673,558		44,893,844		20,586,128		9,930,296		13,123,181

Net asset value	$	14.47	$	43.31	$	39.35	$	13.50	$	38.86


Investor B
Net assets	$	3,850,608	$	31,320,491	$	4,160,958	$	2,297,473	$	12,673,126

Shares outstanding¹		273,878		777,348		113,920		190,500		377,703

Net asset value	$	14.06	$	40.29	$	36.53	$	12.06	$	33.55


Investor C
Net assets	$	58,035,730	$	725,620,904	$	153,543,896	$	35,285,598	$	217,907,530

Shares outstanding¹		4,143,959		18,207,791		4,244,304		2,933,954		6,484,770

Net asset value	$	14.00	$	39.85	$	36.18	$	12.03	$	33.60


Class R
Net assets	$	14,233,712	$	55,569,371		—	$	4,720,999		—

Shares outstanding¹		988,907		1,293,062		—		342,810		—

Net asset value	$	14.39	$	42.98		—	$	13.77		—

Unlimited shares authorized, $0.001 par value.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		43


Statements of Operations


Six Months Ended March 31, 2014 (Unaudited)	BlackRock Global Opportunities Portfolio			BlackRock Health Sciences Opportunities Portfolio			BlackRock International Opportunities Portfolio			BlackRock Science & Technology Opportunities Portfolio			BlackRock U.S. Opportunities Portfolio

Investment Income
Dividends — unaffiliated	$	3,528,892		$	20,823,440		$	22,392,318		$	237,046		$	5,081,032
Dividends — affiliated		259			15,512			2,228			1,295			3,450
Foreign taxes withheld		(112,721	)		(700,723	)		(1,047,909	)		(3,433	)		—
Other Income — affiliated		9,738			54,891			25,744			9,566			245,073
Securities lending — affiliated — net		75,010			158,697			513,794			101,582			438,749

Total income		3,501,178			20,351,817			21,886,175			346,056			5,768,304


Expenses
Investment advisory		1,587,071			12,008,927			8,956,177			905,467			8,621,919
Service and distribution — class specific		611,298			5,903,237			1,831,347			334,373			1,991,071
Transfer agent — class specific		253,506			1,992,932			1,324,705			269,772			1,322,281
Administration		132,256			1,017,101			578,876			75,456			513,359
Administration — class specific		44,109			296,857			197,267			25,113			188,848
Professional		36,803			36,547			42,764			29,481			36,447
Registration		29,383			84,177			50,798			35,596			46,841
Custodian		25,007			95,443			102,625			8,908			39,796
Officer and Trustees		6,434			45,233			26,972			3,918			24,699
Printing		6,174			47,255			31,776			5,729			29,505
Miscellaneous		16,100			37,838			36,001			12,604			21,771
Recoupment of past waived fees — class specific		723			—			286			20,042			2,606
Total expenses		2,748,864			21,565,547			13,179,594			1,726,459			12,839,143
Less fees waived by Manager		(531	)		(25,724	)		(4,178	)		(2,530	)		(1,679,062	)
Less administration fees waived — class specific		(42,917	)		—			(1,778	)		(10,079	)		(174,976	)
Less transfer agent fees waived — class specific		(3,862	)		—			(275	)		(3,851	)		(7,000	)
Less transfer agent fees reimbursed — class specific		(160,706	)		—			(1,989	)		(6,952	)		(644,258	)

Total expenses after fees waived and/or reimbursed		2,540,848			21,539,823			13,171,374			1,703,047			10,333,847

Net investment income (loss)		960,330			(1,188,006	)		8,714,801			(1,356,991	)		(4,565,543	)


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments		24,137,007			238,121,859			115,932,555			13,930,706			205,189,830
Options written		—			1,609,622			—			—			—
Foreign currency transactions		(881,375	)		(12,447,789	)		(21,105,239	)		(338,766	)		—

		23,255,632			227,283,692			94,827,316			13,591,940			205,189,830

Net change in unrealized appreciation/depreciation on:
Investments		3,919,525			198,899,971			5,854,829			14,642,739			(11,208,570	)
Foreign currency translations		776,329			9,186,215			17,194,211			51,702			—

		4,695,854			208,086,186			23,049,040			14,694,441			(11,208,570	)

Total realized and unrealized gain		27,951,486			435,369,878			117,876,356			28,286,381			193,981,260

Net Increase in Net Assets Resulting from Operations	$	28,911,816		$	434,181,872		$	126,591,157		$	26,929,390		$	189,415,717

See Notes to Financial Statements.


44		BLACKROCK FUNDS		MARCH 31, 2014


Statements of Changes in Net Assets


	BlackRock Global Opportunities Portfolio						BlackRock Health Sciences Opportunities Portfolio
Increase in Net Assets:	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30, 2013			Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30, 2013

Operations
Net investment income (loss)	$	960,330		$	1,484,765		$	(1,188,006	)	$	4,016,643
Net realized gain		23,255,632			42,405,072			227,283,692			288,619,944
Net change in unrealized appreciation/depreciation		4,695,854			21,126,620			208,086,186			403,472,884

Net increase in net assets resulting from operations		28,911,816			65,016,457			434,181,872			696,109,471


Dividends and Distributions to Shareholders From
Net investment income:
Institutional		—			(718,206	)¹		(2,684,586	)		(2,499,090	)¹
Service		—			—			(15,999	)		(44,478	)¹
Investor A		—			(1,967,914	)¹		(1,334,162	)		(3,119,552	)¹
Investor B		—			(4,918	)¹		—			—
Investor C		—			(104,581	)¹		—			(1,211	)¹
Class R		—			(104,371	)¹		—			(11,171	)¹
Net realized gain:
Institutional		—			—			(73,784,321	)		(30,594,431	)¹
Service		—			—			(2,296,130	)		(1,018,612	)¹
Investor A		—			—			(159,449,440	)		(67,678,578	)¹
Investor B		—			—			(3,350,382	)		(2,559,474	)¹
Investor C		—			—			(60,490,412	)		(26,229,484	)¹
Class R		—			—			(3,720,372	)		(1,006,211	)¹

Decrease in net assets resulting from dividends and distributions to shareholders		—			(2,899,990	)		(307,125,804	)		(134,762,292	)


Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		(16,283,932	)		(47,329,070	)		509,897,577			570,833,474

Net Assets
Total increase in net assets		12,627,884			14,787,397			636,953,645			1,132,180,653
Beginning of period		339,644,485			324,857,088			3,078,699,141			1,946,518,488

End of period	$	352,272,369		$	339,644,485		$	3,715,652,786		$	3,078,699,141

Undistributed net investment income, end of period	$	2,263,033		$	1,302,703		$	8,412,395		$	13,635,148

Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		45


Statements of Changes in Net Assets (concluded)


	BlackRock International Opportunities Portfolio						BlackRock Science & Technology Opportunities Portfolio						BlackRock U.S. Opportunities Portfolio
Increase (Decrease) in Net Assets:	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30, 2013			Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30, 2013			Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30, 2013

Operations
Net investment income (loss)	$	8,714,801		$	18,796,396		$	(1,356,991	)	$	(1,193,075	)	$	(4,565,543	)	$	(1,165,708	)
Net realized gain		94,827,316			185,281,736			13,591,940			9,764,585			205,189,830			476,110,315
Net change in unrealized appreciation/depreciation		23,049,040			102,538,962			14,694,441			21,890,030			(11,208,570	)		(17,583,669	)

Net increase in net assets resulting from operations		126,591,157			306,617,094			26,929,390			30,461,540			189,415,717			457,360,938


Dividends and Distributions to Shareholders From
Net investment income:
Institutional		(1,532,662	)		(13,286,367	)¹		—			—			—			(10,774,061	)¹
Service		(48,294	)		(559,333	)¹		—			—			—			(397,297	)¹
Investor A		(919,073	)		(10,010,464	)¹		—			—			—			(828,656	)¹
Investor B		—			(51,463	)¹		—			—			—			—
Investor C		—			(1,092,382	)¹		—			—			—			—
Net realized gain:
Institutional		(2,005,514	)		—			—			—			(134,711,811	)		(25,442,679	)¹
Service		(101,390	)		—			—			—			(31,011,668	)		(3,450,902	)¹
Investor A		(1,953,372	)		—			—			—			(103,656,072	)		(12,518,844	)¹
Investor B		(14,262	)		—			—			—			(2,930,164	)		(304,395	)¹
Investor C		(410,265	)		—			—			—			(47,392,290	)		(5,116,563	)¹

Decrease in net assets resulting from dividends and distributions to shareholders		(6,984,832	)		(25,000,009	)		—			—			(319,702,005	)		(58,833,397	)


Capital Share Transactions
Net increase (decrease) in net assets derived from capital share transactions		21,409,466			(255,326,514	)		30,690,991			(35,823,712	)		153,578,400			(1,133,474,361	)


Net Assets
Total increase (decrease) in net assets		141,015,791			26,290,571			57,620,381			(5,362,172	)		23,292,112			(734,946,820	)
Beginning of period		1,724,261,258			1,697,970,687			169,587,215			174,949,387			1,569,446,967			2,304,393,787

End of period	$	1,865,277,049		$	1,724,261,258		$	227,207,596		$	169,587,215		$	1,592,739,079		$	1,569,446,967

Undistributed (accumulated) net investment income (loss), end of period	$	28,599,142		$	22,384,370		$	(2,393,919	)	$	(1,036,928	)	$	(4,565,543	)		—

Determined in accordance with federal income tax regulations.

See Notes to Financial Statements.


46		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights			BlackRock Global Opportunities Portfolio


	Institutional
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	13.42		$	11.11		$	9.32		$	10.52		$	10.13		$	9.96

Net investment income¹		0.07			0.10			0.14			0.08			0.06			0.06
Net realized and unrealized gain (loss)		1.12			2.36			1.67			(1.20	)²		0.48	²		0.12	²

Net increase (decrease) from investment operations		1.19			2.46			1.81			(1.12	)		0.54			0.18

Dividends from net investment income		—			(0.15	)³		(0.02	)³		(0.08	)³		(0.15	)³		(0.01	)³

Net asset value, end of period	$	14.61		$	13.42		$	11.11		$	9.32		$	10.52		$	10.13


Total Investment Return⁴
Based on net asset value		8.87	%⁵		22.40	%		19.45	%		(10.81	)%⁶		5.32	%⁶		1.78	%⁶


Ratios to Average Net Assets
Total expenses		1.20	%⁷		1.22	%		1.25	%		1.53	%		1.43	%		1.50	%

Total expenses excluding recoupment of past waived fees		1.20	%⁷		1.22	%		1.25	%		1.52	%		1.42	%		1.49	%

Total expenses after fees waived and/or reimbursed and paid indirectly		1.06	%⁷		1.06	%		1.06	%		1.34	%		1.37	%		1.36	%

Net investment income		0.92	%⁷		0.83	%		1.35	%		0.68	%		0.64	%		0.70	%


Supplemental Data
Net assets, end of period (000)	$	63,853		$	63,182		$	54,448		$	58,793		$	21,699		$	16,971

Portfolio turnover		63	%		149	%		122	%		137	%		146	%		190	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁷

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		47


Financial Highlights (continued)			BlackRock Global Opportunities Portfolio


	Investor A																		Investor B
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	13.32		$	11.02		$	9.26		$	10.45		$	10.08		$	9.92		$	12.99		$	10.75		$	9.10		$	10.31		$	9.93		$	9.83

Net investment income (loss)¹		0.05			0.07			0.11			0.05			0.03			0.04			(0.02	)		(0.03	)		0.02			(0.04	)		(0.04	)		(0.02	)
Net realized and unrealized gain (loss)		1.10			2.35			1.66			(1.20	)²		0.46	²		0.12	²		1.09			2.28			1.63			(1.17	)²		0.45	²		0.12	²

Net increase (decrease) from investment operations		1.15			2.42			1.77			(1.15	)		0.49			0.16			1.07			2.25			1.65			(1.21	)		0.41			0.10

Dividends from net investment income		—			(0.12	)³		(0.01	)³		(0.04	)³		(0.12	)³		—			—			(0.01	)³		—			—			(0.03	)³		—

Net asset value, end of period	$	14.47		$	13.32		$	11.02		$	9.26		$	10.45		$	10.08		$	14.06		$	12.99		$	10.75		$	9.10		$	10.31		$	9.93


Total Investment Return⁴
Based on net asset value		8.63	%⁵		22.14	%		19.16	%		(11.11	)%⁶		4.92	%⁶		1.61	%⁶		8.24	%⁵		20.95	%		18.13	%		(11.74	)%⁶		4.09	%⁶		1.02	%⁶


Ratios to Average Net Assets
Total expenses		1.46	%⁷		1.48	%		1.52	%		1.76	%		1.72	%		1.81	%		2.20	%⁷		2.19	%		2.21	%		2.56	%		2.45	%		2.65	%

Total expenses excluding recoupment of past waived fees		1.46	%⁷		1.48	%		1.52	%		1.74	%		1.70	%		1.80	%		2.20	%⁷		2.19	%		2.20	%		2.53	%		2.45	%		2.63	%

Total expenses after fees waived and/or reimbursed and paid indirectly		1.33	%⁷		1.33	%		1.33	%		1.61	%		1.67	%		1.66	%		2.18	%⁷		2.18	%		2.18	%		2.42	%		2.43	%		2.42	%

Net investment income (loss)		0.66	%⁷		0.56	%		1.06	%		0.42	%		0.32	%		0.49	%		(0.24	)%⁷		(0.29	)%		0.21	%		(0.39	)%		(0.44	)%		(0.25	)%


Supplemental Data
Net assets, end of period (000)	$	212,299		$	202,343		$	195,961		$	210,299		$	39,280		$	45,110		$	3,851		$	4,254		$	5,412		$	6,750		$	3,617		$	4,351

Portfolio turnover		63	%		149	%		122	%		137	%		146	%		190	%		63	%		149	%		122	%		137	%		146	%		190	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁷

Annualized.

See Notes to Financial Statements.


48		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights (concluded)		BlackRock Global Opportunities Portfolio


	Investor C																		Class R
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,						Period September 12, 2011¹to September 30, 2011
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			Period September 12, 2011¹to September 30, 2011
Per Share Operating Performance
Net asset value, beginning of period	$	12.94		$	10.71		$	9.06		$	10.27		$	9.91		$	9.82		$	13.28		$	10.99		$	9.26		$	9.76

Net investment income (loss)²		(0.01	)		(0.03	)		0.03			(0.04	)		(0.04	)		(0.02	)		0.02			0.02			0.08			0.00	³
Net realized and unrealized gain (loss)		1.07			2.28			1.62			(1.17	)⁴		0.45	⁴		0.11	⁴		1.09			2.35			1.65			(0.50	)⁴

Net increase (decrease) from investment operations		1.06			2.25			1.65			(1.21	)		0.41			0.09			1.11			2.37			1.73			(0.50	)

Dividends from net investment income		—			(0.02	)⁵		—			—			(0.05	)⁵		—			—			(0.08	)⁵		(0.00	)^5,6		—

Net asset value, end of period	$	14.00		$	12.94		$	10.71		$	9.06		$	10.27		$	9.91		$	14.39		$	13.28		$	10.99		$	9.26


Total Investment Return⁷
Based on net asset value		8.19	%⁸		21.07	%		18.21	%		(11.78	)%⁹		4.13	%⁹		0.92	%⁹		8.36	%⁸		21.71	%		18.72	%		(4.83	)%^8,9


Ratios to Average Net Assets
Total expenses		2.23	%¹⁰		2.28	%		2.32	%		2.59	%		2.49	%		2.62	%		1.77	%¹⁰		1.81	%		1.80	%		1.98	%¹⁰

Total expenses excluding recoupment of past waived fees		2.23	%¹⁰		2.28	%		2.32	%		2.57	%		2.49	%		2.62	%		1.76	%¹⁰		1.80	%		1.79	%		1.98	%¹⁰

Total expenses after fees waived and/or reimbursed and paid indirectly		2.14	%¹⁰		2.14	%		2.14	%		2.42	%		2.44	%		2.42	%		1.72	%¹⁰		1.72	%		1.65	%		1.72	%¹⁰

Net investment income (loss)		(0.16	)%¹⁰		(0.25	)%		0.26	%		(0.38	)%		(0.40	)%		(0.26	)%		0.25	%¹⁰		0.18	%		0.74	%		0.23	%¹⁰


Supplemental Data
Net assets, end of period (000)	$	58,036		$	55,494		$	54,332		$	58,687		$	19,554		$	16,348		$	14,234		$	14,371		$	14,704		$	14,891

Portfolio turnover		63	%		149	%		122	%		137	%		146	%		190	%		63	%		149	%		122	%		137	%

Commencement of operations.

Based on average shares outstanding.

Amount is less than $0.005 per share.

⁴

Includes redemption fees, which are less than $0.005 per share.

⁵

Determined in accordance with federal income tax regulations.

⁶

Amount is greater than $(0.005) per share.

⁷

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁸

Aggregate total investment return.

⁹

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

¹⁰

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		49


Financial Highlights			BlackRock Health Sciences Opportunities Portfolio


	Institutional																		Service
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	43.24		$	34.62		$	28.77		$	28.92		$	26.29		$	28.77		$	42.02		$	33.72		$	28.05		$	28.22		$	25.74		$	28.20

Net investment income (loss)¹		0.06			0.20			0.15			0.02			0.06			0.08			—			0.09			0.05			(0.07	)		(0.03	)		0.01
Net realized and unrealized gain (loss)		5.66			10.82			7.26			1.23	²		2.57	²		(0.14	)²		5.49			10.53			7.10			1.19	²		2.51	²		(0.14	)²

Net increase (decrease) from investment operations		5.72			11.02			7.41			1.25			2.63			(0.06	)		5.49			10.62			7.15			1.12			2.48			(0.13	)

Dividends and distributions from:
Net investment income		(0.15	)		(0.18	)³		—			(0.05	)³		—			—			(0.03	)		(0.10	)³		—			—			—			—
Net realized gain		(4.05	)		(2.22	)³		(1.56	)³		(1.35	)³		—			(2.42	)³		(4.05	)		(2.22	)³		(1.48	)³		(1.29	)³		—			(2.33	)³

Total dividends and distributions		(4.20	)		(2.40	)		(1.56	)		(1.40	)		—			(2.42	)		(4.08	)		(2.32	)		(1.48	)		(1.29	)		—			(2.33	)

Net asset value, end of period	$	44.76		$	43.24		$	34.62		$	28.77		$	28.92		$	26.29		$	43.43		$	42.02		$	33.72		$	28.05		$	28.22		$	25.74


Total Investment Return⁴
Based on net asset value		14.20	%⁵		34.07	%		27.06	%		4.41	%⁶		10.00	%^6,7		1.91	%⁶		14.02	%⁵		33.68	%		26.73	%		4.04	%⁶		9.64	%^6,7		1.59	%⁶


Ratios to Average Net Assets
Total expenses		0.90	%⁸		0.94	%		0.98	%		1.00	%		1.00	%		1.03	%		1.18	%⁸		1.23	%		1.28	%		1.32	%		1.33	%		1.37	%

Total expenses excluding recoupment of past waived fees		0.90	%⁸		0.94	%		0.98	%		1.00	%		1.00	%		1.03	%		1.18	%⁸		1.23	%		1.28	%		1.31	%		1.33	%		1.35	%

Total expenses after fees waived and/or reimbursed and paid indirectly		0.89	%⁸		0.94	%		0.98	%		1.00	%		1.00	%		1.03	%		1.18	%⁸		1.23	%		1.28	%		1.31	%		1.32	%		1.36	%

Net investment income (loss)		0.29	%⁸		0.54	%		0.47	%		0.07	%		0.21	%		0.36	%		0.01	%⁸		0.25	%		0.18	%		(0.24	)%		(0.12	)%		0.03	%


Supplemental Data
Net assets, end of period (000)	$	930,562		$	748,148		$	473,193		$	362,292		$	232,697		$	171,607		$	28,172		$	23,035		$	14,921		$	13,478		$	11,704		$	8,110

Portfolio turnover		39	%		94	%		135	%		135	%		184	%		153	%		39	%		94	%		135	%		135	%		184	%		153	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁷

Includes proceeds received from a settlement of litigation, which had no impact on the Fund’s total return.

⁸

Annualized.

See Notes to Financial Statements.


50		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights (continued)			BlackRock Health Sciences Opportunities Portfolio


	Investor A																		Investor B
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	41.92		$	33.64		$	28.00		$	28.18		$	25.69		$	28.14		$	38.99		$	31.46		$	26.26		$	26.39		$	24.25		$	26.73

Net investment income (loss)¹		—			0.09			0.05			(0.07	)		(0.03	)		0.01			(0.16	)		(0.17	)		(0.17	)		(0.28	)		(0.23	)		(0.17	)
Net realized and unrealized gain (loss)		5.47			10.51			7.07			1.19	²		2.52	²		(0.15	)²		5.10			9.79			6.63			1.14	²		2.37	²		(0.16	)²

Net increase (decrease) from investment operations		5.47			10.60			7.12			1.12			2.49			(0.14	)		4.94			9.62			6.46			0.86			2.14			(0.33	)

Dividends and distributions from:
Net investment income		(0.03	)		(0.10	)³		—			—			—			—			—			—			—			—			—			—
Net realized gain		(4.05	)		(2.22	)³		(1.48	)³		(1.30	)³		—			(2.31	)³		(3.64	)		(2.09	)³		(1.26	)³		(0.99	)³		—			(2.15	)³

Total dividends and distributions		(4.08	)		(2.32	)		(1.48	)		(1.30	)		—			(2.31	)		(3.64	)		(2.09	)		(1.26	)		(0.99	)		—			(2.15	)

Net asset value, end of period	$	43.31		$	41.92		$	33.64		$	28.00		$	28.18		$	25.69		$	40.29		$	38.99		$	31.46		$	26.26		$	26.39		$	24.25


Total Investment Return⁴
Based on net asset value		14.02	%⁵		33.73	%		26.68	%		4.03	%⁶		9.69	%^6,7		1.57	%⁶		13.57	%⁵		32.63	%		25.70	%		3.27	%⁶		8.82	%^6,7		0.73	%⁶


Ratios to Average Net Assets
Total expenses		1.17	%⁸		1.22	%		1.29	%		1.31	%		1.31	%		1.37	%		2.00	%⁸		2.02	%		2.07	%		2.06	%		2.10	%		2.20	%

Total expenses excluding recoupment of past waived fees		1.17	%⁸		1.22	%		1.29	%		1.31	%		1.31	%		1.37	%		2.00	%⁸		2.02	%		2.07	%		2.06	%		2.10	%		2.17	%

Total expenses after fees waived and/or reimbursed and paid indirectly		1.17	%⁸		1.21	%		1.28	%		1.31	%		1.31	%		1.37	%		1.99	%⁸		2.02	%		2.07	%		2.06	%		2.09	%		2.20	%

Net investment income (loss)		0.02	%⁸		0.26	%		0.17	%		(0.24	)%		(0.11	)%		0.02	%		(0.82	)%⁸		(0.51	)%		(0.59	)%		(0.99	)%		(0.88	)%		(0.80	)%


Supplemental Data
Net assets, end of period (000)	$	1,944,408		$	1,641,026		$	1,018,429		$	825,046		$	682,857		$	478,273		$	31,320		$	39,048		$	40,452		$	46,180		$	47,855		$	57,835

Portfolio turnover		39	%		94	%		135	%		135	%		184	%		153	%		39	%		94	%		135	%		135	%		184	%		153	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁷

Includes proceeds received from a settlement of litigation, which had no impact on the Fund’s total return.

⁸

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		51


Financial Highlights (concluded)			BlackRock Health Sciences Opportunities Portfolio


	Investor C																		Class R
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,						Period September 12, 2011¹to September 30, 2011
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			Period September 12, 2011¹to September 30, 2011
Per Share Operating Performance
Net asset value, beginning of period	$	38.77		$	31.34		$	26.18		$	26.37		$	24.22		$	26.70		$	41.62		$	33.46		$	28.00		$	28.19

Net investment loss²		(0.14	)		(0.16	)		(0.16	)		(0.27	)		(0.21	)		(0.15	)		(0.05	)		(0.03	)		(0.07	)		(0.01	)
Net realized and unrealized gain (loss)		5.05			9.74			6.62			1.14	³		2.36	³		(0.16	)³		5.44			10.43			7.05			(0.18	)³

Net increase (decrease) from investment operations		4.91			9.58			6.46			0.87			2.15			(0.31	)		5.39			10.40			6.98			(0.19	)

Dividends and distributions from:
Net investment income		—			(0.00	)^4,5		—			—			—			—			—			(0.02	)⁴		—			—
Net realized gain		(3.83	)		(2.15	)⁴		(1.30	)⁴		(1.06	)⁴		—			(2.17	)⁴		(4.03	)		(2.22	)⁴		(1.52	)⁴		—

Total dividends and distributions		(3.83	)		(2.15	)		(1.30	)		(1.06	)		—			(2.17	)		(4.03	)		(2.24	)		(1.52	)		—

Net asset value, end of period	$	39.85		$	38.77		$	31.34		$	26.18		$	26.37		$	24.22		$	42.98		$	41.62		$	33.46		$	28.00


Total Investment Return⁶
Based on net asset value		13.60	%⁷		32.71	%		25.80	%		3.32	%⁸		8.88	%^8,9		0.81	%⁸		13.90	%⁷		33.21	%		26.17	%		(0.64	)%^7,8


Ratios to Average Net Assets
Total expenses		1.90	%¹⁰		1.95	%		2.01	%		2.02	%		2.04	%		2.09	%		1.45	%¹⁰		1.55	%		1.70	%		1.75	%¹⁰

Total expenses excluding recoupment of past waived fees		1.90	%¹⁰		1.95	%		2.01	%		2.02	%		2.04	%		2.09	%		1.45	%¹⁰		1.54	%		1.70	%		1.75	%¹⁰

Total expenses after fees waived and/or reimbursed and paid indirectly		1.90	%¹⁰		1.95	%		2.01	%		2.02	%		2.04	%		2.09	%		1.45	%¹⁰		1.55	%		1.68	%		1.75	%¹⁰

Net investment loss		(0.71	)%¹⁰		(0.48	)%		(0.55	)%		(0.95	)%		(0.83	)%		(0.70	)%		(0.24	)%¹⁰		(0.09	)%		(0.24	)%		(0.82	)%¹⁰


Supplemental Data
Net assets, end of period (000)	$	725,621	��	$	596,123		$	384,910		$	327,855		$	285,428		$	255,340		$	55,569		$	31,319		$	14,613		$	9,580

Portfolio turnover		39	%		94	%		135	%		135	%		184	%		153	%		39	%		94	%		135	%		135	%

Commencement of operations.

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

⁴

Determined in accordance with federal income tax regulations.

⁵

Amount is greater than $(0.005) per share.

⁶

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁷

Aggregate total investment return.

⁸

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁹

Includes proceeds received from a settlement of litigation, which had no impact on the Fund’s total return.

¹⁰

Annualized.

See Notes to Financial Statements.


52		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights			BlackRock International Opportunities Portfolio


		Institutional																		Service
		Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
		Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period		$	38.58		$	32.82		$	28.37		$	32.76		$	31.36		$	29.44		$	37.16		$	31.62		$	27.34		$	31.58		$	30.26		$	28.36

Net investment income¹			0.24			0.48			0.56			0.49			0.28			0.34			0.16			0.26			0.39			0.34			0.16			0.27
Net realized and unrealized gain (loss)			2.64			5.84			4.49			(4.52	)²		1.58	²		1.68	²		2.57			5.67			4.33			(4.37	)²		1.53	²		1.63	²

Net increase (decrease) from investment operations			2.88			6.32			5.05			(4.03	)		1.86			2.02			2.73			5.93			4.72			(4.03	)		1.69			1.90

Dividends from:
Net investment income			(0.07	)		(0.56	)³		(0.60	)³		(0.36	)³		(0.46	)³		(0.10	)³		(0.05	)		(0.39	)³		(0.44	)³		(0.21	)³		(0.37	)³		—
Net realized gain			(0.10	)		—			—			—			—			—			(0.10	)		—			—			—			—			—

Total dividends and distributions			(0.17	)		(0.56	)		(0.60	)		(0.36	)		(0.46	)		(0.10	)		(0.15	)		(0.39	)		(0.44	)		(0.21	)		(0.37	)		—

Net asset value, end of period		$	41.29		$	38.58		$	32.82		$	28.37		$	32.76		$	31.36		$	39.74		$	37.16		$	31.62		$	27.34		$	31.58		$	30.26


Total Investment Return⁴
Based on net asset value			7.48	%⁵		19.50	%		18.08	%		(12.50	)%⁶		5.99	%⁶		6.99	%⁶		7.34	%⁵		18.93	%		17.48	%		(12.88	)%⁶		5.63	%⁶		6.70	%⁶


Ratios to Average Net Assets	��
Total expenses			1.21	%⁷		1.23	%		1.29	%		1.26	%		1.35	%		1.45	%		1.50	%⁷		1.71	%		1.90	%		1.66	%		1.72	%		1.75	%

Total expenses excluding recoupment of past waived fees			1.21	%⁷		1.23	%		1.29	%		1.26	%		1.34	%		1.45	%		1.50	%⁷		1.60	%		1.90	%		1.66	%		1.69	%		1.73	%

Total expenses after fees waived and/or reimbursed and paid indirectly			1.21	%⁷		1.23	%		1.29	%		1.26	%		1.35	%		1.43	%		1.50	%⁷		1.71	%		1.80	%		1.65	%		1.72	%		1.70	%

Net investment income			1.19	%⁷		1.34	%		1.83	%		1.41	%		0.91	%		1.36	%		0.83	%⁷		0.76	%		1.31	%		1.02	%		0.53	%		1.13	%


Supplemental Data
Net assets, end of period (000)		$	856,623		$	775,659		$	798,205		$	792,695		$	802,167		$	673,420		$	40,880		$	40,885		$	47,598		$	47,846		$	70,365		$	83,093

Portfolio turnover			68	%		157	%		99	%		116	%		116	%		143	%		68	%		157	%		99	%		116	%		116	%		143	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁷

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		53


Financial Highlights (continued)			BlackRock International Opportunities Portfolio


	Investor A																		Investor B
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	36.80		$	31.33		$	27.10		$	31.33		$	30.02		$	28.14		$	34.27		$	29.15		$	25.18		$	29.10		$	27.83		$	26.29

Net investment income (loss)¹		0.17			0.35			0.45			0.39			0.21			0.27			(0.06	)		0.02			0.16			0.10			(0.05	)		0.09
Net realized and unrealized gain (loss)		2.53			5.59			4.30			(4.34	)²		1.50	²		1.62	²		2.42			5.25			4.03			(4.01	)²		1.42	²		1.45	²

Net increase (decrease) from investment operations		2.70			5.94			4.75			(3.95	)		1.71			1.89			2.36			5.27			4.19			(3.91	)		1.37			1.54

Dividends and distributions from:
Net investment income		(0.05	)		(0.47	)³		(0.52	)³		(0.28	)³		(0.40	)³		(0.01	)³		—			(0.15	)³		(0.22	)³		(0.01	)³		(0.10	)³		—
Net realized gain		(0.10	)		—			—			—			—			—			(0.10	)		—			—			—			—			—

Total dividends and distributions		(0.15	)		(0.47	)		(0.52	)		(0.28	)		(0.40	)		(0.01	)		(0.10	)		(0.15	)		(0.22	)		(0.01	)		(0.10	)		—

Net asset value, end of period	$	39.35		$	36.80		$	31.33		$	27.10		$	31.33		$	30.02		$	36.53		$	34.27		$	29.15		$	25.18		$	29.10		$	27.83


Total Investment Return⁴
Based on net asset value		7.33	%⁵		19.16	%		17.74	%		(12.77	)%⁶		5.73	%⁶		6.73	%⁶		6.89	%⁵		18.15	%		16.72	%		(13.45	)%⁶		4.92	%⁶		5.86	%⁶


Ratios to Average Net Assets
Total expenses		1.51	%⁷		1.52	%		1.57	%		1.54	%		1.59	%		1.68	%		2.47	%⁷		2.40	%		2.41	%		2.32	%		2.38	%		2.49	%

Total expenses excluding recoupment of past waived fees		1.51	%⁷		1.52	%		1.57	%		1.54	%		1.59	%		1.68	%		2.47	%⁷		2.40	%		2.41	%		2.32	%		2.38	%		2.49	%

Total expenses after fees waived and/or reimbursed and paid indirectly		1.51	%⁷		1.52	%		1.57	%		1.53	%		1.59	%		1.68	%		2.36	%⁷		2.40	%		2.41	%		2.32	%		2.38	%		2.49	%

Net investment income (loss)		0.87	%⁷		1.02	%		1.52	%		1.16	%		0.72	%		1.15	%		(0.33	)%⁷		0.06	%		0.60	%		0.34	%		(0.18	)%		0.41	%


Supplemental Data
Net assets, end of period (000)	$	810,069		$	753,074		$	692,445		$	703,201		$	794,034		$	604,283		$	4,161		$	6,507		$	10,813		$	15,568		$	25,080		$	33,094

Portfolio turnover		68	%		157	%		99	%		116	%		116	%		143	%		68	%		157	%		99	%		116	%		116	%		143	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁷

Annualized.

See Notes to Financial Statements.


54		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights (concluded)			BlackRock International Opportunities Portfolio


	Investor C
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	33.93		$	28.91		$	24.98		$	28.92		$	27.74		$	26.21

Net investment income (loss)¹		0.02			0.07			0.20			0.11			(0.02	)		0.08
Net realized and unrealized gain (loss)		2.33			5.17			3.98			(3.98	)²		1.39	²		1.45	²

Net increase (decrease) from investment operations		2.35			5.24			4.18			(3.87	)		1.37			1.53

Dividends from:
Net investment income		—			(0.22	)³		(0.25	)³		(0.07	)³		(0.19	)³		—
Net realized gain		(0.10	)		—			—			—			—			—

Total dividends and distributions		(0.10	)		(0.22	)		(0.25	)		(0.07	)		(0.19	)		—

Net asset value, end of period	$	36.18		$	33.93		$	28.91		$	24.98		$	28.92		$	27.74


Total Investment Return⁴
Based on net asset value		6.93	%⁵		18.25	%		16.83	%		(13.44	)%⁶		4.95	%⁶		5.84	%⁶


Ratios to Average Net Assets
Total expenses		2.27	%⁷		2.30	%		2.34	%		2.31	%		2.36	%		2.49	%

Total expenses excluding recoupment of past waived fees		2.27	%⁷		2.30	%		2.34	%		2.31	%		2.36	%		2.49	%

Total expenses after fees waived and/or reimbursed and paid indirectly		2.27	%⁷		2.30	%		2.34	%		2.31	%		2.36	%		2.48	%

Net investment income (loss)		0.10	%⁷		0.24	%		0.73	%		0.37	%		(0.06	)%		0.38	%


Supplemental Data
Net assets, end of period (000)	$	153,544		$	148,136		$	148,910		$	169,481		$	224,958		$	187,246

Portfolio turnover		68	%		157	%		99	%		116	%		116	%		143	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁵

Aggregate total investment return.

⁶

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁷

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		55


Financial Highlights			BlackRock Science & Technology Opportunities Portfolio


	Institutional																		Service
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	12.27		$	10.01		$	8.61		$	9.02		$	7.79		$	6.98		$	11.81		$	9.66		$	8.32		$	8.72		$	7.56		$	6.80

Net investment loss¹		(0.07	)		(0.03	)		(0.06	)		(0.06	)		(0.05	)		(0.02	)		(0.07	)		(0.05	)		(0.08	)		(0.07	)		(0.08	)		(0.04	)
Net realized and unrealized gain (loss)		2.09			2.29			1.46			(0.35	)²		1.28	²		0.83	²		1.99			2.20			1.42			(0.33	)²		1.24	²		0.80	²

Net increase (decrease) from investment operations		2.02			2.26			1.40			(0.41	)		1.23			0.81			1.92			2.15			1.34			(0.40	)		1.16			0.76

Net asset value, end of period	$	14.29		$	12.27		$	10.01		$	8.61		$	9.02		$	7.79		$	13.73		$	11.81		$	9.66		$	8.32		$	8.72		$	7.56


Total Investment Return³
Based on net asset value		16.46	%⁴		22.58	%		16.26	%		(4.55	)%⁵		15.79	%^5,6		11.60	%^5,7		16.26	%⁴		22.26	%		16.11	%		(4.59	)%⁵		15.34	%^5,8		11.18	%^5,9


Ratios to Average Net Assets
Total expenses		1.35	%¹⁰		1.50	%		1.45	%		1.46	%		1.55	%		1.90	%		1.43	%¹⁰		1.56	%		1.57	%		1.55	%		1.76	%		1.96	%

Total expenses excluding recoupment of past waived fees		1.35	%¹⁰		1.49	%		1.44	%		1.46	%		1.55	%		1.90	%		1.43	%¹⁰		1.56	%		1.56	%		1.54	%		1.67	%		1.96	%

Total expenses after fees waived and/or reimbursed and paid indirectly		1.29	%¹⁰		1.36	%		1.39	%		1.39	%		1.39	%		1.36	%		1.43	%¹⁰		1.56	%		1.57	%		1.53	%		1.74	%		1.75	%

Net investment loss		(0.95	)%¹⁰		(0.34	)%		(0.63	)%		(0.60	)%		(0.59	)%		(0.27	)%		(1.09	)%¹⁰		(0.54	)%		(0.81	)%		(0.74	)%		(0.94	)%		(0.71	)%


Supplemental Data
Net assets, end of period (000)	$	48,930		$	36,218		$	34,022		$	33,982		$	33,135		$	27,013		$	1,951		$	869		$	944		$	851		$	659		$	193

Portfolio turnover		36	%		86	%		320	%		103	%		97	%		158	%		36	%		86	%		320	%		103	%		97	%		158	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Where applicable, assumes the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁶

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 15.53%.

⁷

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 9.03%.

⁸

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 15.08%.

⁹

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 8.53%.

¹⁰

Annualized.

See Notes to Financial Statements.


56		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights (continued)			BlackRock Science & Technology Opportunities Portfolio


	Investor A																		Investor B
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	11.61		$	9.51		$	8.21		$	8.62		$	7.48		$	6.73		$	10.42		$	8.60		$	7.48		$	7.93		$	6.94		$	6.30

Net investment loss¹		(0.08	)		(0.06	)		(0.09	)		(0.09	)		(0.08	)		(0.04	)		(0.12	)		(0.13	)		(0.15	)		(0.16	)		(0.14	)		(0.08	)
Net realized and unrealized gain (loss)		1.97			2.16			1.39			(0.32	)²		1.22	²		0.79	²		1.76			1.95			1.27			(0.29	)²		1.13	²		0.72	²

Net increase (decrease) from investment operations		1.89			2.10			1.30			(0.41	)		1.14			0.75			1.64			1.82			1.12			(0.45	)		0.99			0.64

Net asset value, end of period	$	13.50		$	11.61		$	9.51		$	8.21		$	8.62		$	7.48		$	12.06		$	10.42		$	8.60		$	7.48		$	7.93		$	6.94


Total Investment Return³
Based on net asset value		16.28	%⁴		22.08	%		15.84	%		(4.76	)%⁵		15.24	%^5,6		11.14	%^5,7		15.74	%⁴		21.16	%		14.97	%		(5.68	)%⁵		14.27	%^5,8		10.16	%^5,9


Ratios to Average Net Assets
Total expenses		1.63	%¹⁰		1.72	%		1.72	%		1.79	%		1.82	%		2.24	%		2.43	%¹⁰		2.50	%		2.52	%		2.67	%		2.70	%		3.13	%

Total expenses excluding recoupment of past waived fees		1.60	%¹⁰		1.72	%		1.70	%		1.71	%		1.81	%		2.24	%		2.43	%¹⁰		2.50	%		2.52	%		2.44	%		2.65	%		3.00	%

Total expenses after fees waived and/or reimbursed and paid indirectly		1.61	%¹⁰		1.70	%		1.71	%		1.78	%		1.79	%		1.77	%		2.41	%¹⁰		2.49	%		2.52	%		2.66	%		2.69	%		2.65	%

Net investment loss		(1.27	)%¹⁰		(0.67	)%		(0.95	)%		(0.98	)%		(0.99	)%		(0.68	)%		(2.06	)%¹⁰		(1.47	)%		(1.76	)%		(1.87	)%		(1.90	)%		(1.53	)%


Supplemental Data
Net assets, end of period (000)	$	134,023		$	97,437		$	106,466		$	106,632		$	105,577		$	83,734		$	2,297		$	2,275		$	2,645		$	3,130		$	4,390		$	6,538

Portfolio turnover		36	%		86	%		320	%		103	%		97	%		158	%		36	%		86	%		320	%		103	%		97	%		158	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁶

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 14.97%.

⁷

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 8.47%.

⁸

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 13.98%.

⁹

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 7.30%.

¹⁰

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		57


Financial Highlights (concluded)			BlackRock Science & Technology Opportunities Portfolio


	Investor C																		Class R
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
				2013			2012			2011			2010			2009						2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	10.39		$	8.58		$	7.47		$	7.92		$	6.94		$	6.29		$	11.86		$	9.74		$	8.43		$	8.88		$	7.72		$	6.97

Net investment loss¹		(0.12	)		(0.14	)		(0.15	)		(0.16	)		(0.14	)		(0.09	)		(0.10	)		(0.09	)		(0.12	)		(0.12	)		(0.11	)		(0.06	)
Net realized and unrealized gain (loss)		1.76			1.95			1.26			(0.29	)²		1.12	²		0.74	²		2.01			2.21			1.43			(0.33	)²		1.27	²		0.81	²

Net increase (decrease) from investment operations		1.64			1.81			1.11			(0.45	)		0.98			0.65			1.91			2.12			1.31			(0.45	)		1.16			0.75
Net asset value, end of period	$	12.03		$	10.39		$	8.58		$	7.47		$	7.92		$	6.94		$	13.77		$	11.86		$	9.74		$	8.43		$	8.88		$	7.72


Total Investment Return³
Based on net asset value		15.78	%⁴		21.10	%		14.86	%		(5.68	)%⁵		14.12	%^5,6		10.33	%^5,7		16.11	%⁴		21.77	%		15.54	%		(5.07	)%⁵		15.03	%^5,8		10.76	%^5,9


Ratios to Average Net Assets
Total expenses		2.45	%¹⁰		2.58	%		2.60	%		2.68	%		2.73	%		3.23	%		1.89	%¹⁰		1.97	%		2.00	%		2.00	%		2.10	%		2.42	%

Total expenses excluding recoupment of past waived fees		2.43	%¹⁰		2.58	%		2.59	%		2.59	%		2.73	%		3.23	%		1.86	%¹⁰		1.97	%		1.99	%		2.00	%		2.10	%		2.42	%

Total expenses after fees waived and/or reimbursed and paid indirectly		2.45	%¹⁰		2.57	%		2.60	%		2.67	%		2.71	%		2.68	%		1.89	%¹⁰		1.93	%		1.99	%		2.00	%		2.09	%		2.13	%

Net investment loss		(2.11	)%¹⁰		(1.56	)%		(1.84	)%		(1.88	)%		(1.92	)%		(1.59	)%		(1.55	)%¹⁰		(0.92	)%		(1.23	)%		(1.21	)%		(1.29	)%		(1.04	)%


Supplemental Data
Net assets, end of period (000)	$	35,286		$	28,234		$	26,543		$	27,651		$	27,053		$	22,575		$	4,721		$	4,555		$	4,329		$	3,518		$	2,961		$	1,904

Portfolio turnover		36	%		86	%		320	%		103	%		97	%		158	%		36	%		86	%		320	%		103	%		97	%		158	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁶

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 13.83%.

⁷

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 7.47%.

⁸

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 14.77%.

⁹

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 8.18%.

¹⁰

Annualized.

See Notes to Financial Statements.


58		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights			BlackRock U.S. Opportunities Portfolio


	Institutional																		Service
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	45.82		$	36.42		$	33.86		$	36.94		$	32.20		$	31.69		$	43.72		$	34.71		$	32.44		$	35.40		$	30.93		$	30.58

Net investment income (loss)¹		(0.05	)		0.11			0.19			0.05			0.04			0.09			(0.13	)		(0.09	)		0.02			(0.12	)		(0.11	)		(0.01	)
Net realized and unrealized gain (loss)		5.20			10.41			6.31			(2.44	)²		4.77	²		0.42	²		4.94			9.98			6.03			(2.34	)²		4.58	²		0.35	²

Net increase (decrease) from investment operations		5.15			10.52			6.50			(2.39	)		4.81			0.51			4.81			9.89			6.05			(2.46	)		4.47			0.34

Dividends and distributions from:
Net investment income		—			(0.33	)³		—			—			(0.07	)³		(0.01	)³		—			(0.09	)³		—			—			—			—
Net realized gains		(9.33	)		(0.79	)³		(3.94	)³		(0.69	)³		—			—			(9.14	)		(0.79	)³		(3.78	)³		(0.50	)³		—			—

Total dividends and distributions		(9.33	)		(1.12	)		(3.94	)		(0.69	)		(0.07	)		(0.01	)		(9.14	)		(0.88	)		(3.78	)		(0.50	)		—			—

Redemption fees added to paid-in capital		—			—			—			0.00	⁴		0.00	⁴		0.01			—			—			—			0.00	⁴		0.00	⁴		0.01

Net asset value, end of period	$	41.64		$	45.82		$	36.42		$	33.86		$	36.94		$	32.20		$	39.39		$	43.72		$	34.71		$	32.44		$	35.40		$	30.93


Total Investment Return⁵
Based on net asset value		12.84	%⁶		29.79	%		20.40	%		(6.75	)%⁷		14.96	%^7,8		1.63	%⁹		12.62	%⁶		29.26	%		19.80	%		(7.16	)%⁷		14.45	%^7,8		1.14	%⁹


Ratios to Average Net Assets
Total expenses		1.36	%¹⁰		1.37	%		1.30	%		1.36	%		1.30	%		1.40	%		1.61	%¹⁰		1.61	%		1.62	%		1.57	%		1.60	%		1.71	%

Total expenses excluding recoupment of past waived fees		1.36	%¹⁰		1.37	%		1.30	%		1.36	%		1.30	%		1.40	%		1.61	%¹⁰		1.61	%		1.62	%		1.57	%		1.60	%		1.70	%

Total expenses after fees waived and/or reimbursed and paid indirectly		0.96	%¹⁰		1.01	%		1.03	%		1.03	%		1.03	%		1.01	%		1.36	%¹⁰		1.45	%		1.51	%		1.46	%		1.48	%		1.49	%

Net investment income (loss)		(0.24	)%¹⁰		0.28	%		0.52	%		0.12	%		0.13	%		0.36	%		(0.64	)%¹⁰		(0.22	)%		0.05	%		(0.30	)%		(0.34	)%		(0.06	)%


Supplemental Data
Net assets, end of period (000)	$	698,942		$	676,540		$	1,294,928		$	1,905,254		$	1,588,509		$	890,264		$	153,288		$	155,414		$	159,939		$	183,604		$	235,926		$	191,318

Portfolio turnover		39	%		82	%		106	%		120	%		123	%		166	%		39	%		82	%		106	%		120	%		123	%		166	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Amount is less than $0.005 per share.

⁵

Where applicable, assumes the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁸

Includes proceeds received from a settlement of litigation, which had no impact on the Fund’s total return.

⁹

Redemption fee of 2.00% is reflected in total return calculations. The impact to the return from redemption fees received during the period was an increase of 0.03%.

¹⁰

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		59


Financial Highlights (continued)			BlackRock U.S. Opportunities Portfolio


	Investor A																		Investor B
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	43.23		$	34.30		$	32.08		$	35.02		$	30.61		$	30.29		$	38.39		$	30.72		$	29.11		$	31.96		$	28.16		$	28.06

Net investment income (loss)¹		(0.13	)		(0.09	)		0.01			(0.13	)		(0.12	)		(0.04	)		(0.25	)		(0.35	)		(0.23	)		(0.40	)		(0.35	)		(0.17	)
Net realized and unrealized gain (loss)		4.89			9.86			5.97			(2.31	)²		4.53	²		0.35	²		4.26			8.79			5.39			(2.06	)²		4.15	²		0.26	²

Net increase (decrease) from investment operations		4.76			9.77			5.98			(2.44	)		4.41			0.31			4.01			8.44			5.16			(2.46	)		3.80			0.09

Dividends and distributions from:
Net investment income		—			(0.05	)³		—			—			—			—			—			—			—			—			—			—
Net realized gains		(9.13	)		(0.79	)³		(3.76	)³		(0.50	)³		—			—			(8.85	)		(0.77	)³		(3.55	)³		(0.39	)³		—			—

Total dividends and distributions		(9.13	)		(0.84	)		(3.76	)		(0.50	)		—			—			(8.85	)		(0.77	)		(3.55	)		(0.39	)		—			—

Redemption fees added to paid-in capital		—			—			—			0.00	⁴		0.00	⁴		0.01			—			—			—			0.00	⁴		0.00	⁴		0.01

Net asset value, end of period	$	38.86		$	43.23		$	34.30		$	32.08		$	35.02		$	30.61		$	33.55		$	38.39		$	30.72		$	29.11		$	31.96		$	28.16


Total Investment Return⁵
Based on net asset value		12.64	%⁶		29.19	%		19.82	%		(7.19	)%⁷		14.41	%^7,8		1.06	%⁹		12.15	%⁶		28.19	%		18.87	%		(7.90	)%⁷		13.49	%^7,8		0.36	%⁹


Ratios to Average Net Assets
Total expenses		1.62	%¹⁰		1.63	%		1.62	%		1.59	%		1.64	%		1.76	%		2.39	%¹⁰		2.43	%		2.42	%		2.39	%		2.44	%		2.59	%

Total expenses excluding recoupment of past waived fees		1.62	%¹⁰		1.63	%		1.62	%		1.59	%		1.64	%		1.75	%		2.39	%¹⁰		2.42	%		2.42	%		2.37	%		2.44	%		2.59	%

Total expenses after fees waived and/or reimbursed and paid indirectly		1.36	%¹⁰		1.47	%		1.51	%		1.49	%		1.51	%		1.56	%		2.15	%¹⁰		2.26	%		2.30	%		2.28	%		2.30	%		2.27	%

Net investment income (loss)		(0.64	)%¹⁰		(0.23	)%		0.03	%		(0.34	)%		(0.37	)%		(0.15	)%		(1.43	)%¹⁰		(1.04	)%		(0.74	)%		(1.12	)%		(1.18	)%		(0.77	)%


Supplemental Data
Net assets, end of period (000)	$	509,928		$	512,224		$	610,343		$	888,293		$	1,158,626		$	855,127		$	12,673		$	13,107		$	12,833		$	15,047		$	20,255		$	21,849

Portfolio turnover		39	%		82	%		106	%		120	%		123	%		166	%		39	%		82	%		106	%		120	%		123	%		166	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Amount is less than $0.005 per share.

⁵

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁸

Includes proceeds received from a settlement of litigation, which had no impact on the Fund’s total return.

⁹

Redemption fee of 2.00% is reflected in total return calculations. The impact to the return from redemption fees received during the period was an increase of 0.04%.

¹⁰

Annualized.

See Notes to Financial Statements.


60		BLACKROCK FUNDS		MARCH 31, 2014


Financial Highlights (concluded)			BlackRock U.S. Opportunities Portfolio


	Investor C
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	38.44		$	30.75		$	29.11		$	31.95		$	28.14		$	28.04

Net investment loss¹		(0.25	)		(0.33	)		(0.21	)		(0.38	)		(0.33	)		(0.19	)
Net realized and unrealized gain (loss)		4.28			8.79			5.39			(2.07	)²		4.14	²		0.28	²

Net increase (decrease) from investment operations		4.03			8.46			5.18			(2.45	)		3.81			0.09

Distributions from net realized gains		(8.87	)		(0.77	)³		(3.54	)³		(0.39	)³		—			—

Redemption fees added to paid-in capital		—			—			—			0.00	⁴		0.00	⁴		0.01

Net asset value, end of period	$	33.60		$	38.44		$	30.75		$	29.11		$	31.95		$	28.14


Total Investment Return⁵
Based on net asset value		12.20	%⁶		28.22	%		18.94	%		(7.87	)%⁷		13.54	%^7,8		0.36	%⁹


Ratios to Average Net Assets
Total expenses		2.34	%¹⁰		2.38	%		2.35	%		2.34	%		2.39	%		2.52	%

Total expenses excluding recoupment of past waived fees		2.34	%¹⁰		2.38	%		2.35	%		2.33	%		2.38	%		2.52	%

Total expenses after fees waived and/or reimbursed and paid indirectly		2.12	%¹⁰		2.22	%		2.25	%		2.24	%		2.27	%		2.28	%

Net investment loss		(1.40	)%¹⁰		(0.98	)%		(0.69	)%		(1.08	)%		(1.12	)%		(0.85	)%


Supplemental Data
Net assets, end of period (000)	$	217,910		$	212,162		$	226,350		$	282,586		$	334,958		$	238,819

Portfolio turnover		39	%		82	%		106	%		120	%		123	%		166	%

Based on average shares outstanding.

Includes redemption fees, which are less than $0.005 per share.

Determined in accordance with federal income tax regulations.

⁴

Amount is less than $0.005 per share.

⁵

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁶

Aggregate total investment return.

⁷

Redemption fee of 2.00% is reflected in total return calculations. There was no impact to the return.

⁸

Includes proceeds received from a settlement of litigation, which had no impact on the Fund’s total return.

⁹

Redemption fee of 2.00% is reflected in total return calculations. The impact to the return from redemption fees received during the period was an increase of 0.04%.

¹⁰

Annualized.

See Notes to Financial Statements.


		BLACKROCK FUNDS		MARCH 31, 2014		61


Notes to Financial Statements (Unaudited)

1. Organization:

BlackRock Funds^SM (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Massa-chusetts business trust. BlackRock Global Opportunities Portfolio (“Global Opportunities”), BlackRock Health Sciences Opportunities Portfolio (“Health Sciences Opportunities”), BlackRock International Opportunities Portfolio (“International Opportunities”), BlackRock Science & Technology Opportunities Portfolio (“Science & Technology Opportunities”) and BlackRock U.S. Opportunities Portfolio (“U.S. Opportunities”) (collectively, the “Funds” or individually, a “Fund”) are each a series of the Trust. Each of the Funds, except Health Sciences Opportunities, is classified as diversified.

Each Fund offers multiple classes of shares. Institutional and Service Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with an initial sales charge, but may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase. Investor B and Investor C Shares may be subject to a CDSC. Class R Shares are sold without a sales charge and only to certain employer-sponsored retirement plans. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Service, Investor A, Investor B, Investor C and Class R Shares bear certain expenses related to the shareholder servicing of such shares, and Investor B, Investor C and Class R Shares also bear certain expenses related to the distribution of such shares. Investor B Shares automatically convert to Investor A Shares after approximately eight years. Investor B Shares are only available through exchanges and dividend reinvestments by existing shareholders and for purchase by certain employer-sponsored retirement plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures (except that Investor B shareholders may vote on material changes to the Investor A distribution and service plan).

2. Significant Accounting Policies:

is the committee formed by management to develop global pricing policies and procedures and to provide oversight of the pricing function for the Funds for all financial instruments.


62		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

principles of fair value measurement, which include the market approach, income approach and/or in the case of recent investments, the cost approach, as appropriate. The market approach generally consists of using comparable market transactions. The income approach generally is used to discount future cash flows to present value and is adjusted for liquidity as appropriate. These factors include but are not limited to: (i) attributes specific to the investment or asset; (ii) the principal market for the investment or asset; (iii) the customary participants in the principal market for the investment or asset; (iv) data assumptions by market participants for the investment or asset, if reasonably available; (v) quoted prices for similar investments or assets in active markets; and (vi) other factors, such as future cash flows, interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. Due to the inherent uncertainty of valuations of such investments, the fair values may differ from the values that would have been used had an active market existed. The Global Valuation Committee, or its delegate, employs various methods for calibrating valuation approaches for investments where an active market does not exist, including regular due diligence of the Funds’ pricing vendors, regular reviews of key inputs and assumptions, transactional back-testing or disposition analysis to compare unrealized gains and losses to realized gains and losses, reviews of missing or stale prices and large movements in market values and reviews of any market related activity. The pricing of all Fair Value Assets is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

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

Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., forward foreign currency exchange contracts and options written), that would be “senior securities” for 1940 Act purposes, such Fund may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of a Fund’s future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, each Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Funds are informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Income, expenses 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 Funds are recorded on the ex-dividend dates. The character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP.

The Funds file U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Funds’ U.S. federal tax returns remain open for each of the four years ended September 30, 2013. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.


		BLACKROCK FUNDS		MARCH 31, 2014		63


Notes to Financial Statements (continued)

3. Securities and Other Investments:

can resell or re-pledge the loaned securities, and the Funds can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.

The following tables are a summary of the Funds’ securities lending agreements by counterparty which are subject to offset under an MSLA as of March 31, 2014:


Global Opportunities
Counterparty	Securities Loaned at Value		Cash Collateral Received¹			Net Amount
Barclays Capital, Inc.	$	335,720	$	(335,720	)		—
Credit Suisse Securities (USA) LLC		2,924,893		(2,924,893	)		—
Deutsche Bank Securities, Inc.		1,736,801		(1,736,801	)		—
JP Morgan Clearing Corp.		227,716		(227,716	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		326,271		(326,271	)		—
Morgan Stanley & Co. LLC		910,865		(910,865	)		—
UBS Securities LLC		662,913		(662,913	)		—

Total	$	7,125,179	$	(7,125,179	)		—


Health Sciences Opportunities
Counterparty	Securities Loaned at Value		Cash Collateral Received¹			Net Amount²
Citigroup Global Markets, Inc.	$	283,502	$	(283,502	)		—
Credit Suisse Securities (USA) LLC		17,776,102		(17,776,102	)		—
Goldman Sachs & Co.		12,178,493		(12,043,550	)	$	134,943
JP Morgan Clearing Corp.		1,543,794		(1,526,350	)		17,444
Merrill Lynch, Pierce, Fenner & Smith, Inc.		430,978		(430,978	)		—
Morgan Stanley & Co. LLC		25,120,049		(24,977,051	)		142,998
UBS Securities LLC		86,250		(86,250	)		—

Total	$	57,419,168	$	(57,123,783	)	$	295,385


International Opportunities
Counterparty	Securities Loaned at Value		Cash Collateral Received¹			Net Amount
Credit Suisse Securities (USA) LLC	$	22,913,813	$	(22,913,813	)		—
Deutsche Bank Securities, Inc.		1,812,889		(1,812,889	)		—
JP Morgan Clearing Corp.		492,754		(492,754	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		3,017,644		(3,017,644	)		—
Morgan Stanley & Co. LLC		6,831,485		(6,831,485	)		—
UBS Securities LLC		18,224,864		(18,224,864	)		—

Total	$	53,293,449	$	(53,293,449	)		—


Science & Technology Opportunities
Counterparty	Securities Loaned at Value		Cash Collateral Received¹			Net Amount
Barclays Capital, Inc.	$	2,013,590	$	(2,013,590	)		—
Citigroup Global Markets, Inc.		246,377		(246,377	)		—
Deutsche Bank Securities, Inc.		605,251		(605,251	)		—
Goldman Sachs & Co.		795,714		(795,714	)		—
Merrill Lynch, Pierce, Fenner & Smith, Inc.		7,092		(7,092	)		—

Total	$	3,668,024	$	(3,668,024	)		—

Collateral with a value of $7,540,083, $57,299,570, $56,773,283 and $3,760,146 has been received in connection with securities lending agreements for Global Opportunities, Health Sciences Opportunities, International Opportunities and Science & Technology Opportunities, respectively. Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

The market value of the loaned securities is determined as of March 31, 2014. Additional collateral is delivered to Health Sciences Opportunities on the next business day in accordance with the MSLA. The net amount would be subject to the borrower default indemnity in the event of default by the counterparty.


64		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)


U.S. Opportunities
Counterparty	Securities Loaned at Value		Cash Collateral Received¹			Net Amount²
Barclays Capital, Inc.	$	2,838,746	$	(2,838,746	)		—
Credit Suisse Securities (USA) LLC		3,018,600		(2,990,000	)	$	28,600
Deutsche Bank Securities, Inc.		4,472,667		(4,472,667	)		—
Goldman Sachs & Co.		16,649,053		(16,250,760	)		398,293
Merrill Lynch, Pierce, Fenner & Smith, Inc.		289,368		(289,368	)		—
Morgan Stanley & Co. LLC		214,400		(214,400	)		—

Total	$	27,482,834	$	(27,055,941	)	$	426,893

¹	Collateral with a value of $27,404,520 has been received in connection with securities lending agreements. Excess of collateral received from the individual counterparty is not shown for financial reporting purposes.

²	The market value of the loaned securities is determined as of March 31, 2014. Additional collateral is delivered to U.S. Opportunities on the next business day in accordance with the MSLA. The net amount would be subject to the borrower default indemnity in the event of default by the counterparty.

4. Derivative Financial Instruments:

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

Forward Foreign Currency Exchange Contracts: Certain Funds enter into forward foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from, foreign currencies (foreign currency exchange rate risk). A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Forward foreign currency exchange contracts, when used by the Funds, help to manage the overall

exposure to the currencies in which some of the investments held by the Funds are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Funds as an unrealized gain or loss. When the contract is closed, the Funds record a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of forward foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: Certain Funds purchase and write call and put options to increase or decrease their exposure to underlying instruments (including equity risk) and/or, in the case of options written, to generate gains from options premiums. A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised), the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. When a Fund purchases (writes) an option, an amount equal to the premium paid (received) by a Fund is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked-to-market to reflect the current market value of the option purchased (written). When an instrument is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the instrument acquired or deducted from (or added to) the proceeds of the instrument sold. When an option expires (or a Fund enters into a closing transaction), a Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premiums received or paid). When a Fund writes a call option, such option is “covered,” meaning that a Fund holds the underlying instrument subject to being called by the option counterparty. When a Fund writes a put option, such option is covered by cash in an amount sufficient to cover the obligation.

In purchasing and writing options, a Fund bears the risk of an unfavorable change in the value of the underlying instrument or the risk that a Fund may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in a Fund purchasing or selling a security when it otherwise would not, or at a price different from the current market value.


		BLACKROCK FUNDS		MARCH 31, 2014		65


Notes to Financial Statements (continued)

The following is a summary of the Funds’ derivative financial instruments categorized by risk exposure:


Fair Values of Derivative Financial Instruments as of March 31, 2014
	Derivative Assets
		Global Opportunities		Health Sciences Opportunities		International Opportunities		Science & Technology Opportunities
	Statements of Assets and Liabilities Location	Value
Foreign currency exchange contracts	Unrealized appreciation on foreign currency exchange contracts	$	484,367	$	28,300	$	3,039,176	$	5,624

	Derivative Liabilities
		Global Opportunities		Health Sciences Opportunities		International Opportunities		Science & Technology Opportunities
	Statements of Assets and Liabilities Location	Value
Foreign currency exchange contracts	Unrealized depreciation on foreign currency exchange contracts	$	1,454,522	$	4,530,290	$	10,945,081	$	344,544


The Effect of Derivative Financial Instruments in the Statements of Operations Six Months Ended March 31, 2014


	Net Realized Gain (Loss) From
	Global Opportunities			Health Sciences Opportunities			International Opportunities			Science & Technology Opportunities
Foreign currency exchange contracts:
Foreign currency transactions	$	(780,633	)	$	(12,472,049	)	$	(22,106,257	)	$	(329,494	)
Equity contracts:
Options		—			1,609,622			—			—

Total	$	(780,633	)	$	(10,862,427	)	$	(22,106,257	)	$	(329,494	)



	Net Change in Unrealized Appreciation/Depreciation on
	Global Opportunities			Health Sciences Opportunities			International Opportunities			Science & Technology Opportunities
Foreign currency exchange contracts:
Foreign currency translations	$	779,320		$	9,222,553		$	17,366,394		$	24,708


For the six months ended March 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:
	Global Opportunities		Health Sciences Opportunities		International Opportunities		Science & Technology Opportunities
Foreign currency exchange contracts:
Average number of contracts - USD purchased		36		12		55		25
Average number of contracts - USD sold		45		3		37		2
Average USD amounts purchased	$	95,908,499	$	202,062,405	$	795,173,442	$	22,529,628
Average USD amounts sold	$	52,117,381	$	35,448,419	$	354,990,746	$	3,936,944
Options:
Average number of option contracts written		—		619		—		—
Average notional value of option contracts written		—	$	4,174,875		—		—

A Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by such Fund. For OTC options purchased, each Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by such Fund should the counterparty fail to perform under the contracts. Options written by the Funds do not typically give rise to counterparty credit risk, as options written generally obligate the Funds, and not the counterparty, to perform.

With exchange-traded purchased options, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Funds do not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes


66		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.

In order to better define its contractual rights and to secure rights that will help the Funds mitigate their counterparty risk, a Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between each Fund and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, each Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events. In addition, 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 a Fund fails to meet the terms of its ISDA Master Agreements, which would cause a Fund to accelerate payment of any net liability owed to the counterparty.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by a Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of a Fund and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by a Fund, if any, is noted in the Schedules of Investments. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount threshold (typically either $250,000 or $500,000) before a transfer is required, which is determined at the close of business of each Fund and any additional required collateral is delivered to/pledged by each Fund on the next business day. Typically, the Funds and counterparties are not permitted to sell, re-pledge or use the collateral they receive. To the extent amounts due to a Fund from its counterparties are not fully collateralized, contractually or otherwise, each Fund bears the risk of loss from counterparty non-performance. Each Fund attempts to mitigate 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.

For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statements of Assets and Liabilities.

At March 31, 2014, the Funds’ derivative assets and liabilities (by type) are as follows:


Global Opportunities	Assets		Liabilities
Derivative Financial Instruments:
Forward foreign currency exchange contracts	$	484,367	$	1,454,522

Total derivative assets and liabilities subject to a Master Netting Agreement (“MNA”)	$	484,367	$	1,454,522


Health Sciences Opportunities
Derivative Financial Instruments:
Forward foreign currency exchange contracts	$	28,300	$	4,530,290

Total derivative assets and liabilities subject to an MNA	$	28,300	$	4,530,290


International Opportunities
Derivative Financial Instruments:
Forward foreign currency exchange contracts	$	3,039,176	$	10,945,081

Total derivative assets and liabilities subject to an MNA	$	3,039,176	$	10,945,081


Science & Technology Opportunities
Derivative Financial Instruments:
Forward foreign currency exchange contracts	$	5,624	$	344,544

Total derivative assets and liabilities subject to an MNA	$	5,624	$	344,544


		BLACKROCK FUNDS		MARCH 31, 2014		67


Notes to Financial Statements (continued)

The following tables present the Funds’ derivative assets and liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Funds as of March 31, 2014:


Global Opportunities
Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset¹			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets²
Bank of America N.A.	$	17,013	$	(17,013)			—		—		—
The Bank of New York Mellon		998		(998	)		—		—		—
Barclays Bank PLC		46,453		(24,745	)		—		—	$	21,708
BNP Paribas S.A.		13,098		(13,098	)
Citibank N.A.		105,287		(34,173	)		—		—		71,114
Credit Suisse International		86,503		(7,074	)		—		—		79,429
Deutsche Bank AG		23,654		(23,654	)		—		—		—
Goldman Sachs Bank USA		95,194		(3,845	)		—		—		91,349
Goldman Sachs International		8,808		(8,808	)		—		—		—
Morgan Stanley Capital Services LLC		46,424		—			—		—		46,424
Royal Bank of Scotland PLC		16,390		(16,390	)		—		—		—
UBS AG		24,545		(24,545	)		—		—		—

Total	$	484,367	$	(174,343)			—		—	$	310,024


Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset¹			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities³
Bank of America N.A.	$	156,822	$	(17,013)			—		—	$	139,809
The Bank of New York Mellon	$	1,668		(998	)		—		—		670
Barclays Bank PLC		24,745		(24,745	)		—		—		—
BNP Paribas S.A.		253,280		(13,098	)		—		—		240,182
Citibank N.A.		34,173		(34,173	)		—		—		—
Credit Suisse International		7,074		(7,074	)		—		—		—
Deutsche Bank AG		427,651		(23,654	)		—		—		403,997
Goldman Sachs Bank USA		3,845		(3,845	)		—		—		—
Goldman Sachs International		264,937		(8,808	)		—		—		256,129
JPMorgan Chase Bank N.A.		103,185		—			—		—		103,185
Royal Bank of Scotland PLC		51,247		(16,390	)		—		—		34,857
State Street Bank and Trust Co.		15,461		—			—		—		15,461
UBS AG		89,644		(24,545	)		—		—		65,099
Westpac Banking Corp.		20,790		—			—		—		20,790

Total	$	1,454,522	$	(174,343)			—		—	$	1,280,179

The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

Net amount represents the net amount receivable from the counterparty in the event of default.

Net amount represents the net amount payable due to the counterparty in the event of default.


68		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)


Health Sciences Opportunities
Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivative Available for Offset¹			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets²
The Bank of New York Mellon	$	5,697		—			—		—	$	5,697
Citibank N.A.		1,356	$	(1,356	)		—		—		—
JPMorgan Chase Bank N.A.		7,061		—			—		—		7,061
Royal Bank of Scotland PLC		13,868		—			—		—		13,868
UBS AG		318		(318	)		—		—		—

Total	$	28,300	$	(1,674	)		—		—	$	26,626


Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivative Available for Offset¹			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities³
BNP Paribas S.A.	$	54,388		—			—		—	$	54,388
Citibank N.A.		1,645,257	$	(1,356	)		—		—		1,643,901
Deutsche Bank AG		52,147		—			—		—		52,147
Goldman Sachs Bank USA	$	242,030		—			—		—		242,030
State Street Bank and Trust Co.		11,026		—			—		—		11,026
UBS AG		2,525,442		(318	)		—		—		2,525,124

Total	$	4,530,290	$	(1,674	)		—		—	$	4,528,616


International Opportunities
Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivative Available for Offset¹			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets²
Bank of America N.A.	$	227,558	$	(227,558	)		—		—		—
The Bank of New York Mellon		9,274		(9,274	)		—		—		—
Barclays Bank PLC		169,777		(67,791	)		—		—	$	101,986
BNP Paribas S.A.		121,246		(121,246	)		—		—		—
Citibank N.A.		666,420		(666,420	)		—		—		—
Credit Suisse International		21,029		(368	)		—		—		20,661
Deutsche Bank AG		377,672		(377,672	)		—		—		—
Goldman Sachs Bank USA		1,033,082		(63,823	)		—		—		969,259
JPMorgan Chase Bank N.A.		57,854		(57,854	)		—		—		—
Morgan Stanley Capital Services LLC		41,436		(37,262	)		—		—		4,174
Royal Bank of Scotland PLC		14,489		—			—		—		14,489
State Street Bank and Trust Co.		200,356		(49,210	)		—		—		151,146
UBS AG		3,189		(3,189	)		—		—		—
Westpac Banking Corp.		95,794		(95,794	)		—		—		—

Total	$	3,039,176	$	(1,777,461	)		—		—	$	1,261,715


Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivative Available for Offset¹			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities³
Bank of America N.A.	$	1,111,145	$	(227,558	)		—		—	$	883,587
The Bank of New York Mellon		210,795		(9,274	)		—		—		201,521
Barclays Bank PLC		67,791		(67,791	)		—		—		—
BNP Paribas S.A.		1,292,191		(121,246	)		—		—		1,170,945
Citibank N.A.		952,029		(666,420	)		—		—		285,609
Credit Suisse International		368		(368	)		—		—		—
Deutsche Bank AG		3,688,673		(377,672	)		—		—		3,311,001
Goldman Sachs Bank USA		63,823		(63,823	)		—		—		—
Goldman Sachs International		1,740,203		—			—		—		1,740,203
JPMorgan Chase Bank N.A.		718,235		(57,854	)		—		—		660,381
Morgan Stanley Capital Services LLC		37,262		(37,262	)		—		—		—
State Street Bank and Trust Co.		49,210		(49,210	)		—		—		—
UBS AG		805,991		(3,189	)		—		—		802,802
Westpac Banking Corp.		207,365		(95,794	)		—		—		111,571

Total	$	10,945,081	$	(1,777,461	)		—		—	$	9,167,620

The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

Net amount represents the net amount receivable from the counterparty in the event of default.

Net amount represents the net amount payable due to the counterparty in the event of default.


		BLACKROCK FUNDS		MARCH 31, 2014		69


Notes to Financial Statements (continued)


Science & Technology Opportunities
Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivative Available for Offset¹			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets²
Bank of America N.A.	$	2,175		—			—		—	$	2,175
BNP Paribas S.A.		497	$	(497	)		—		—		—
Citibank N.A.		757		(757	)		—		—		—
Deutsche Bank AG		62		(62	)		—		—		—
Toronto-Dominion Bank		2,133		(591	)		—		—		1,542

Total	$	5,624	$	(1,907	)		—		—	$	3,717


Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivative Available for Offset¹			Non-cash Collateral Pledged		Cash Collateral Pledged		Net Amount of Derivative Liabilities³
Barclays Bank PLC	$	1,992		—			—		—	$	1,992
BNP Paribas S.A.		8,484	$	(497	)		—		—		7,987
Citibank N.A.		16,584		(757	)		—		—		15,827
Deutsche Bank AG		8,079		(62	)						8,017
Goldman Sachs Bank USA		81,904		—							81,904
JPMorgan Chase Bank N.A.		226,056		—			—		—		226,056
Royal Bank of Scotland PLC		854		—			—		—		854
Toronto-Dominion Bank		591		(591	)		—		—		—

Total	$	344,544	$	(1,907	)		—		—	$	342,637

The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

Net amount represents the net amount receivable from the counterparty in the event of default.

Net amount represents the net amount payable due to the counterparty in the event of default.

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

The Trust, on behalf of the Funds, entered into an Investment Advisory Agreement with the Manager, the Funds’ investment advisor, an indirect, wholly owned subsidiary of BlackRock, to provide investment advisory and administration services. The Manager is responsible for the management of each Fund’s portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the operations of each Fund. For such services, each Fund pays the Manager a monthly fee based on a percentage of each Fund’s average daily net assets at the following annual rates:


	First $1 Billion			$1 Billion - $2 Billion			$2 Billion - $3 Billion			Greater than $3 Billion
Global Opportunities and Science & Technology Opportunities		0.900	%		0.850	%		0.800	%		0.750	%
Health Sciences Opportunities		0.750	%		0.700	%		0.675	%		0.650	%
International Opportunities		1.000	%		0.950	%		0.900	%		0.850	%
U.S. Opportunities		1.100	%		1.050	%		1.025	%		1.000	%


Global Opportunities	$	531
Health Sciences Opportunities	$	25,724
International Opportunities	$	4,178
Science & Technology Opportunities	$	2,530
U.S. Opportunities	$	6,318

The Manager, on behalf of the Fund, entered into a sub-advisory agreement with BlackRock Financial Management, Inc. (“BFM”), an affiliate of the Manager, to serve as sub-advisor for a portion of the assets of Global Opportunities. The Manager pays BFM for services it provides, a monthly fee that is a percentage of the investment advisory fees paid by Global Opportunities to the Manager.


70		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the shares of each Fund as follows:


	Service Fee			Distribution Fee
Service		0.25	%		—
Investor A		0.25	%		—
Investor B		0.25	%		0.75	%
Investor C		0.25	%		0.75	%
Class R		0.25	%		0.25	%

For the six months ended March 31, 2014, the following table shows the class specific service and distribution fees borne directly by each class of each Fund:


	Service		Investor A		Investor B		Investor C		Class R		Total
Global Opportunities		—	$	264,980	$	20,909	$	288,741	$	36,668	$	611,298
Health Sciences Opportunities	$	32,711	$	2,247,662	$	182,544	$	3,332,232	$	108,088	$	5,903,237
International Opportunities	$	51,539	$	989,142	$	26,883	$	763,783		—	$	1,831,347
Science & Technology Opportunities	$	1,594	$	146,725	$	12,375	$	161,689	$	11,990	$	334,373
U.S. Opportunities	$	194,514	$	645,909	$	65,973	$	1,084,675		—	$	1,991,071

Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Funds with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an asset based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the six months ended March 31, 2014, the Funds paid the following to the affiliates in return for these services, which are included in transfer agent — class specific in the Statements of Operations:


	Institutional		Service		Investor A		Investor C		Total
Health Sciences Opportunities	$	24	$	87	$	389	$	16	$	516
International Opportunities	$	101,570	$	2,107	$	7,455		—	$	111,132
Science & Technology Opportunities	$	3		—	$	1,909		—	$	1,912
U.S. Opportunities	$	48,935	$	63	$	4,434	$	3	$	53,435


	Institutional		Service		Investor A		Investor B		Investor C		Class R		Total
Global Opportunities	$	1,652		—	$	2,078	$	298		—	$	70	$	4,098
Health Sciences Opportunities	$	6,504	$	62	$	23,891	$	2,216	$	3,424	$	381	$	36,478
International Opportunities	$	1,909		—	$	8,575	$	275	$	526		—	$	11,285
Science & Technology Opportunities	$	3,926	$	17	$	4,388	$	181	$	1,085	$	131	$	9,728
U.S. Opportunities		—	$	69	$	6,872	$	357	$	325		—	$	7,623

For the six months ended March 31, 2014, the following table shows the class specific transfer agent fees borne directly by each class of each Fund:


	Institutional		Service		Investor A		Investor B		Investor C		Class R		Total
Global Opportunities	$	41,318		—	$	145,474	$	2,976	$	49,607	$	14,131	$	253,506
Health Sciences Opportunities	$	404,248	$	16,682	$	1,172,609	$	34,442	$	334,084	$	30,867	$	1,992,932
International Opportunities	$	487,137	$	30,467	$	667,959	$	9,927	$	129,215		—	$	1,324,705
Science & Technology Opportunities	$	55,037	$	579	$	148,909	$	4,069	$	54,946	$	6,232	$	269,772
U.S. Opportunities	$	565,676	$	127,060	$	457,682	$	13,004	$	158,859		—	$	1,322,281


		BLACKROCK FUNDS		MARCH 31, 2014		71


Notes to Financial Statements (continued)


Average Daily Net Assets	Administration Fee
First $500 Million		0.075	%
$500 Million - $1 Billion		0.065	%
Greater than $1 Billion		0.055	%


Average Daily Net Assets	Administration Fee — Class Specific
First $500 Million		0.025	%
$500 Million - $1 Billion		0.015	%
Greater than $1 Billion		0.005	%


Global Opportunities	$	125,464
Health Sciences Opportunities	$	937,825
International Opportunities	$	559,577
Science & Technology Opportunities	$	68,639
U.S. Opportunities	$	559,159

For the six months ended March 31, 2014, the following table shows the class specific administration fees borne directly by each class of each Fund:


	Institutional		Service		Investor A		Investor B		Investor C		Class R		Total
Global Opportunities	$	7,993		—	$	26,498	$	527	$	7,258	$	1,833	$	44,109
Health Sciences Opportunities	$	88,955	$	3,271	$	119,748	$	4,564	$	74,915	$	5,404	$	296,857
International Opportunities	$	88,067	$	5,154	$	84,279	$	672	$	19,095		—	$	197,267
Science & Technology Opportunities	$	5,330	$	159	$	14,674	$	309	$	4,042	$	599	$	25,113
U.S. Opportunities	$	76,950	$	19,451	$	63,681	$	1,649	$	27,117		—	$	188,848

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


	Global Opportunities¹			Health Sciences Opportunities			International Opportunities						Science & Technology Opportunities¹			U.S. Opportunities¹
	Contractual			Contractual			Contractual¹			Voluntary²			Contractual			Contractual
Institutional		1.06	%		N/A			1.49	%		1.24	%		1.29	%		0.96	%
Service		1.70	%		N/A			1.80	%		1.52	%		1.61	%		1.36	%
Investor A		1.33	%		N/A			1.98	%		1.52	%		1.61	%		1.36	%
Investor B		2.18	%		N/A			2.75	%		2.36	%		2.42	%		2.15	%
Investor C		2.14	%		N/A			2.75	%		2.29	%		2.49	%		2.12	%
Class R		1.72	%		1.81	%¹		2.18	%³		2.13	%³		1.89	%		2.24	%³

¹	The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to February 1, 2015 unless approved by the Board, including a majority of the Independent Trustees.

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

³	There were no shares outstanding as of March 31, 2014.

These amounts waived are included in fees waived by Manager, and shown as administration fees waived — class specific, transfer agent fees waived — class specific and transfer agent fees reimbursed — class specific, respectively, in the Statements of Operations. For the six months ended March 31, 2014, the amounts included in fees waived by Manager were as follows:


U.S. Opportunities		$	1,672,744


72		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

Class specific expense waivers and reimbursements are as follows:


Administration Fees Waived
	Institutional		Service		Investor A		Investor B		Investor C		Class R		Total
Global Opportunities	$	7,993		—	$	26,498	$	344	$	7,258	$	824	$	42,917
International Opportunities		—		—	$	1,093	$	672	$	13		—	$	1,778
Science & Technology Opportunities	$	4,360		—	$	5,288	$	159	$	271	$	1	$	10,079
U.S. Opportunities	$	76,950	$	19,273	$	62,424	$	1,449	$	14,880		—	$	174,976


Transfer Agent Fees Waived
	Institutional		Service		Investor A		Investor B		Investor C		Total
Global Opportunities	$	1,652		—	$	2,078	$	132		—	$	3,862
International Opportunities		—		—		—	$	275		—	$	275
Science & Technology Opportunities	$	2,779		—	$	1,001	$	57	$	14	$	3,851
U.S. Opportunities		—	$	69	$	6,388	$	260	$	283	$	7,000


Transfer Agent Fees Reimbursed
	Institutional		Service		Investor A		Investor B		Investor C		Class R		Total
Global Opportunities	$	34,079		—	$	103,821	$	9	$	19,957	$	2,840	$	160,706
International Opportunities		—				—	$	1,989		—		—	$	1,989
Science & Technology Opportunities	$	5,788		—	$	1,102	$	49	$	13		—	$	6,952
U.S. Opportunities	$	565,662	$	11,037	$	65,867	$	510	$	1,182		—	$	644,258

For the six months ended March 31, 2014, the Manager recouped the following Fund level and class specific waivers and/or reimbursements previously recorded by the Funds:


	Service		Investor A		Investor B		Investor C		Class R		Total
Global Opportunities		—		—	$	12		—	$	711	$	723
International Opportunities	$	286		—		—		—		—	$	286
Science & Technology Opportunities		—	$	15,909	$	47	$	3,198	$	888	$	20,042
U.S. Opportunities		—		—		—	$	2,606		—	$	2,606


		BLACKROCK FUNDS		MARCH 31, 2014		73


Notes to Financial Statements (continued)

On March 31, 2014, the Fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:


	Expiring September 30,
	2014		2015		2016
Global Opportunities
Fund Level	$	31,642	$	14,155		—
Institutional	$	103,049	$	91,262	$	43,724
Investor A	$	371,480	$	293,364	$	132,397
Investor B	$	926	$	359	$	485
Investor C	$	98,285	$	73,264	$	27,215
Class R	$	19,644	$	12,010	$	3,664
Science & Technology Opportunities
Institutional	$	20,414	$	43,356	$	12,927
Investor A		—	$	1,675	$	7,391
Investor B		—		—	$	265
Investor C		—		—	$	298
Class R		—	$	449	$	1
U.S. Opportunities
Fund Level	$	3,190,512	$	2,794,164	$	1,672,744
Institutional	$	2,763,643	$	1,866,300	$	642,612
Service		—	$	3,018	$	30,379
Investor A		—	$	8,867	$	134,679
Investor B	$	668	$	1,502	$	2,219
Investor C		—	$	8,964	$	16,345

For the six months ended March 31, 2014, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each Fund’s Investor A Shares as follows:


Global Opportunities	$	6,101
Health Sciences Opportunities	$	175,352
International Opportunities	$	30,292
Science & Technology Opportunities	$	15,429
U.S. Opportunities	$	5,902

For the six months ended March 31, 2014, affiliates received CDSCs as follows:


	Investor A		Investor B		Investor C
Global Opportunities	$	3	$	531	$	817
Health Sciences Opportunities	$	5	$	1,836	$	40,096
International Opportunities	$	8,375	$	2,028	$	3,425
Science & Technology Opportunities		—	$	1,684	$	1,672
U.S. Opportunities		—	$	2,855	$	1,202

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. Each Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent. Pursuant to the securities lending agreement effective February 1, 2014, BIM may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).


74		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

paid a fee to BIM equal to 35% of such income. The share of securities lending income earned by each Fund is shown as securities lending — affiliated — net in the Statements of Operations. For the six months ended March 31, 2014, each Fund paid BIM the following amounts for securities lending agent services:


Global Opportunities	$	31,888
Health Sciences Opportunities	$	73,077
International Opportunities	$	209,385
Science & Technology Opportunities	$	41,293
U.S. Opportunities	$	183,853

The Funds recorded payments from an affiliate to compensate for foregone securities lending revenue, which is shown as other income — affiliated in the Statements of Operations.

The Funds may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common trustees. For the six months ended March 31, 2014, the purchase and sale transactions with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act were as follows:


	Purchases		Sales
Global Opportunities	$	114,720	$	35,897
Health Sciences Opportunities	$	9,538,369	$	18,767,544
International Opportunities	$	640,520	$	194,087
Science & Technology Opportunities	$	447,579		—
U.S. Opportunities		—	$	1,580,711

6. Purchases and Sales:

Purchases and sales of investments, excluding short-term securities, for the six months ended March 31, 2014 were as follows:


	Purchases		Sales
Global Opportunities	$	219,783,847	$	240,530,828
Health Sciences Opportunities	$	1,456,309,167	$	1,315,269,938
International Opportunities	$	1,250,178,889	$	1,232,096,602
Science & Technology Opportunities	$	91,090,814	$	71,592,682
U.S. Opportunities	$	618,014,699	$	788,979,800

Transactions in options written for the six months ended March 31, 2014, were as follows:


	Health Sciences Opportunities
	Puts
	Contracts			Premiums Received

Outstanding options, beginning of period		—			—
Options written		4,507		$	2,248,557
Options expired		(1,717	)		(671,018	)
Options closed		(2,790	)		(1,577,539	)

Outstanding options, end of period		—			—

7. Income Tax Information:

As of September 30, 2013, the Funds had capital loss carryforwards available to offset future realized capital gains through the indicated expiration dates as follows:


Expires September 30,	Global Opportunities		International Opportunities		Science & Technology Opportunities
2015		—		—	$	37,628,326
2017	$	116,767,555		—		4,448,928
2018		9,946,168	$	2,077,859		—
2019		—		—		783,208
Total	$	126,713,723	$	2,077,859	$	42,860,462


		BLACKROCK FUNDS		MARCH 31, 2014		75


Notes to Financial Statements (continued)

As of March 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:


	Global Opportunities			Health Sciences Opportunities			International Opportunities			Science & Technology Opportunities			U.S. Opportunities
Tax cost	$	300,516,511		$	2,808,859,903		$	1,660,314,130		$	170,773,025		$	1,233,213,889

Gross unrealized appreciation	$	64,345,967		$	1,010,345,960		$	318,380,102		$	62,410,590		$	413,760,681
Gross unrealized depreciation		(4,898,183	)		(26,916,565	)		(32,809,561	)		(2,313,484	)		(24,685,239	)

Net unrealized appreciation	$	59,447,784		$	983,429,395		$	285,570,541		$	60,097,106		$	389,075,442

8. Bank Borrowings:

9. Concentration, Market and Credit Risk:

Global Opportunities and International Opportunities invest a significant portion of their assets in securities of issuers located in Europe or with significant exposure to European issuers or countries. The European

financial markets have recently experienced volatility and adverse trends due to concerns about economic downturns in, or rising government debt levels of several European countries. These events may spread to other countries in Europe and may affect the value and liquidity of certain of Global Opportunities’ and International Opportunities’ investments.

As of March 31, 2014, Health Sciences Opportunities invested a significant portion of its assets in securities in the health care sector. Changes in economic conditions affecting the health care sector would have a greater impact on Health Sciences Opportunities and could affect the value, income and/or liquidity of positions in such securities.

As of March 31, 2014, Science & Technology Opportunities invested a significant portion of its assets in securities in the information technology sector. Changes in economic conditions affecting the information technology sector would have a greater impact on Science & Technology Opportunities and could affect the value, income and/or liquidity of positions in such securities.

As of March 31, 2014, Global Opportunities and International Opportunities invest a substantial amount of its assets in issuers located in a single country or a limited number of countries. When a 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 its investment performance. Foreign issuers may not be subject to the same uniform accounting, auditing and financial reporting standards and practices as used in the United States. 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. Please see the Schedule of Investments for concentrations in specific countries.

As of March 31, 2014, the Funds listed below had the following industry classifications:


Industry	Global Opportunities			International Opportunities
Banks		11	%		11	%
Pharmaceuticals		8			11
Oil, Gas & Consumable Fuels		5			—
Internet Software & Services		5			—
Electrical Equipment		5			—
Machinery		—			5
Other¹		66			73

All other industries held were each less than 5% of long-term investments.


76		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)

10. Capital Share Transactions:

Transactions in capital shares for each class were as follows:


	Six Months Ended March 31, 2014						Year Ended September 30, 2013
Global Opportunities	Shares			Amount			Shares			Amount
Institutional
Shares sold		219,075		$	3,135,250			900,536		$	10,824,975
Shares issued in reinvestment of dividends		—			—			25,716			287,006
Shares redeemed		(554,145	)		(7,873,890	)		(1,118,997	)		(13,606,954	)

Net decrease		(335,070	)	$	(4,738,640	)		(192,745	)	$	(2,494,973	)


Investor A
Shares sold and automatic conversion of shares		733,503		$	10,518,848			983,153		$	12,029,511
Shares issued in reinvestment of dividends		—			—			151,938			1,686,369
Shares redeemed		(1,256,194	)		(17,995,675	)		(3,717,956	)		(44,389,095	)

Net decrease		(522,691	)	$	(7,476,827	)		(2,582,865	)	$	(30,673,215	)


Investor B
Shares sold		3,676		$	49,533			6,005		$	69,439
Shares issued in reinvestment of dividends		—			—			393			4,291
Shares redeemed and automatic conversion of shares		(57,209	)		(794,904	)		(182,593	)		(2,163,633	)

Net decrease		(53,533	)	$	(745,371	)		(176,195	)	$	(2,089,903	)


Investor C
Shares sold		187,318		$	2,587,558			240,313		$	2,848,497
Shares issued in reinvestment of dividends		—			—			8,422			91,454
Shares redeemed		(331,547	)		(4,579,784	)		(1,034,608	)		(11,931,416	)

Net decrease		(144,229	)	$	(1,992,226	)		(785,873	)	$	(8,991,465	)


Class R
Shares sold		132,611		$	1,877,879			225,687		$	2,756,046
Shares issued in reinvestment of dividends		—			—			37,846			422,279
Shares redeemed		(226,123	)		(3,208,747	)		(518,590	)		(6,257,839	)

Net decrease		(93,512	)	$	(1,330,868	)		(255,057	)	$	(3,079,514	)

Total Net Decrease		(1,149,035	)	$	(16,283,932	)		(3,992,735	)	$	(47,329,070	)


		BLACKROCK FUNDS		MARCH 31, 2014		77


Notes to Financial Statements (continued)


	Six Months Ended March 31, 2014						Year Ended September 30, 2013
Health Sciences Opportunities	Shares			Amount			Shares			Amount
Institutional
Shares sold		3,885,673		$	172,723,306			7,271,943		$	270,912,421
Shares issued in reinvestment of dividends and distributions		1,752,835			71,375,071			947,294			31,014,483
Shares redeemed		(2,149,720	)		(94,632,773	)		(4,584,992	)		(164,966,314	)

Net increase		3,488,788		$	149,465,604			3,634,245		$	136,960,590


Service
Shares sold		159,308		$	6,803,946			240,670		$	8,877,458
Shares issued in reinvestment of dividends and distributions		58,067			2,296,543			32,877			1,048,425
Shares redeemed		(116,932	)		(4,981,918	)		(167,877	)		(6,074,731	)

Net increase		100,443		$	4,118,571			105,670		$	3,851,152


Investor A
Shares sold and automatic conversion of shares		8,467,155		$	364,241,999			15,513,462		$	573,984,707
Shares issued in reinvestment of dividends and distributions		4,007,405			158,051,325			2,174,190			69,160,977
Shares redeemed		(6,729,638	)		(286,901,278	)		(8,808,885	)		(320,516,414	)

Net increase		5,744,922		$	235,392,046			8,878,767		$	322,629,270


Investor B
Shares sold		16,462		$	648,455			40,757		$	1,394,319
Shares issued in reinvestment of distributions		87,259			3,209,380			81,716			2,433,479
Shares redeemed and automatic conversion of shares		(327,793	)		(13,086,694	)		(406,783	)		(13,925,331	)

Net decrease		(224,072	)	$	(9,228,859	)		(284,310	)	$	(10,097,533	)


Investor C
Shares sold		2,537,913		$	100,642,391			4,436,444		$	153,562,755
Shares issued in reinvestment of dividends and distributions		1,589,321			57,803,090			835,814			24,731,781
Shares redeemed		(1,296,936	)		(51,057,727	)		(2,178,383	)		(72,667,229	)

Net increase		2,830,298		$	107,387,754			3,093,875		$	105,627,307


Class R
Shares sold		607,457		$	25,867,238			527,329		$	19,843,444
Shares issued in reinvestment of dividends and distributions		94,950			3,718,232			32,122			1,017,311
Shares redeemed		(161,776	)		(6,823,009	)		(243,794	)		(8,998,067	)

Net increase		540,631		$	22,762,461			315,657		$	11,862,688

Total Net Increase		12,481,010		$	509,897,577			15,743,904		$	570,833,474


78		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (continued)


	Six Months Ended March 31, 2014						Year Ended September 30, 2013
International Opportunities	Shares			Amount			Shares			Amount
Institutional
Shares sold		2,771,634		$	113,406,005			5,587,155		$	198,989,870
Shares issued in reinvestment of dividends		77,908			3,096,053			348,371			11,715,714
Shares redeemed		(2,206,664	)		(90,579,448	)		(10,155,458	)		(366,236,469	)

Net increase (decrease)		642,878		$	25,922,610			(4,219,932	)	$	(155,530,885	)


Service
Shares sold		68,396		$	2,694,636			199,975		$	6,986,076
Shares issued in reinvestment of dividends		3,881			148,540			17,109			556,385
Shares redeemed		(143,710	)		(5,605,802	)		(622,329	)		(21,540,900	)

Net decrease		(71,433	)	$	(2,762,626	)		(405,245	)	$	(13,998,439	)


Investor A
Shares sold and automatic conversion of shares		2,526,804		$	98,890,456			4,730,422		$	163,123,349
Shares issued in reinvestment of dividends		74,728			2,832,191			305,190			9,814,892
Shares redeemed		(2,477,385	)		(96,399,240	)		(6,674,726	)		(228,622,684	)

Net increase (decrease)		124,147		$	5,323,407			(1,639,114	)	$	(55,684,443	)


Investor B
Shares sold		2,238		$	81,684			3,535		$	111,956
Shares issued in reinvestment of dividends		389			13,713			1,613			48,633
Shares redeemed and automatic conversion of shares		(78,564	)		(2,849,988	)		(186,183	)		(5,930,072	)

Net decrease		(75,937	)	$	(2,754,591	)		(181,035	)	$	(5,769,483	)


Investor C
Shares sold		338,431		$	12,168,516			437,479		$	13,891,319
Shares issued in reinvestment of dividends		11,153			389,466			34,281			1,022,570
Shares redeemed		(471,310	)		(16,877,316	)		(1,256,630	)		(39,257,153	)

Net decrease		(121,726	)	$	(4,319,334	)		(784,870	)	$	(24,343,264	)

Total Net Increase (Decrease)		497,929		$	21,409,466			(7,230,196	)	$	(255,326,514	)


		BLACKROCK FUNDS		MARCH 31, 2014		79


Notes to Financial Statements (continued)


	Six Months Ended March 31, 2104						Year Ended September 30, 2013
Science & Technology Opportunities	Shares			Amount			Shares			Amount
Institutional
Shares sold		705,824		$	10,146,033			646,035		$	6,597,183
Shares redeemed		(232,349	)		(3,193,962	)		(1,092,435	)		(10,953,075	)

Net increase (decrease)		473,475		$	6,952,071			(446,400	)	$	(4,355,892	)


Service
Shares sold		88,556		$	1,256,191			11,578		$	114,954
Shares redeemed		(20,077	)		(273,602	)		(35,757	)		(352,108	)

Net increase (decrease)		68,479		$	982,589			(24,179	)	$	(237,154	)


Investor A
Shares sold and automatic conversion of shares		2,337,367		$	31,335,884			1,022,457		$	10,053,977
Shares redeemed		(798,050	)		(10,381,779	)		(3,828,731	)		(36,397,727	)

Net increase (decrease)		1,539,317		$	20,954,105			(2,806,274	)	$	(26,343,750	)


Investor B
Shares sold		40,865		$	461,322			5,932		$	52,024
Shares redeemed and automatic conversion of shares		(68,746	)		(799,335	)		(95,224	)		(833,016	)

Net decrease		(27,881	)	$	(338,013	)		(89,292	)	$	(780,992	)


Investor C
Shares sold		443,273		$	5,311,282			580,185		$	4,978,794
Shares redeemed		(226,554	)		(2,611,850	)		(955,659	)		(8,454,877	)

Net increase (decrease)		216,719		$	2,699,432			(375,474	)	$	(3,476,083	)


Class R
Shares sold		100,491		$	1,356,870			210,207		$	2,108,715
Shares redeemed		(141,568	)		(1,916,063	)		(270,916	)		(2,738,556	)

Net decrease		(41,077	)	$	(559,193	)		(60,709	)	$	(629,841	)

Total Net Increase (Decrease)		2,229,032		$	30,690,991			(3,802,328	)	$	(35,823,712	)


80		BLACKROCK FUNDS		MARCH 31, 2014


Notes to Financial Statements (concluded)


	Six Months Ended March 31, 2014						Year Ended September 30, 2013
U.S. Opportunities	Shares			Amount			Shares			Amount
Institutional
Shares sold		1,209,294		$	51,933,708			4,007,426		$	156,939,783
Shares issued in reinvestment of dividends and distributions		3,132,585			120,980,318			938,471			33,306,300
Shares redeemed		(2,323,423	)		(99,011,634	)		(25,739,110	)		(998,504,847	)

Net increase (decrease)		2,018,456		$	73,902,392			(20,793,213	)	$	(808,258,764	)


Service
Shares sold		22,738		$	931,684			56,911		$	2,132,995
Shares issued in reinvestment of dividends and distributions		846,209			30,945,870			112,947			3,836,814
Shares redeemed		(532,369	)		(21,431,974	)		(1,223,272	)		(46,343,743	)

Net increase (decrease)		336,578		$	10,445,580			(1,053,414	)	$	(40,373,934	)


Investor A
Shares sold and automatic conversion of shares		893,332		$	35,223,685			1,400,610		$	52,695,526
Shares issued in reinvestment of dividends and distributions		2,833,685			102,239,143			391,969			13,174,024
Shares redeemed		(2,451,818	)		(97,520,441	)		(7,738,284	)		(287,998,683	)

Net increase (decrease)		1,275,199		$	39,942,387			(5,945,705	)	$	(222,129,133	)


Investor B
Shares sold		6,421		$	210,577			4,500		$	156,314
Shares issued in reinvestment of distributions		91,556			2,859,297			9,883			296,795
Shares redeemed and automatic conversion of shares		(61,726	)		(2,102,116	)		(90,701	)		(3,021,414	)

Net increase (decrease)		36,251		$	967,758			(76,318	)	$	(2,568,305	)


Investor C
Shares sold		178,769		$	6,209,869			251,773		$	8,443,541
Shares issued in reinvestment of distributions		1,461,947			45,714,858			164,304			4,938,957
Shares redeemed		(674,848	)		(23,604,444	)		(2,258,436	)		(73,526,723	)

Net increase (decrease)		965,868		$	28,320,283			(1,842,359	)	$	(60,144,225	)

Total Net Increase (Decrease)		4,632,352		$	153,578,400			(29,711,009	)	$	(1,133,474,361	)

11. Subsequent Events:


		BLACKROCK FUNDS		MARCH 31, 2014		81


Officers and Trustees

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

Ian A. MacKinnon, 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

Neal Andrews, Chief Financial Officer

Jay Fife, Treasurer

Brian Kindelan, Chief Compliance Officer and Anti-Money Laundering Officer

Benjamin Archibald, Secretary

Investment Advisor and Co-Administrator

BlackRock Advisors, LLC

Wilmington, DE 19809

Sub-Advisors

BlackRock Financial Management, Inc.¹

New York, NY 10055

Accounting Agent, Co-Administrator and Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

Wilmington, DE 19809

Custodian

The Bank of New York Mellon

New York, NY 10286

Distributor

BlackRock Investments, LLC

New York, NY 10022

Legal Counsel

Sidley Austin LLP

New York, NY 10019

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Philadelphia, PA 19103

Address of the Trust

100 Bellevue Parkway

Wilmington, DE 19809

For Global Opportunities.


82		BLACKROCK FUNDS		MARCH 31, 2014


Additional Information

General Information

Electronic Delivery

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

Availability of Quarterly Schedule of Investments

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

Availability of Proxy Voting Policies and Procedures

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

Availability of Proxy Voting Record

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

Shareholder Privileges

Account Information

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 FUNDS		MARCH 31, 2014		83


Additional Information (concluded)

BlackRock Privacy Principles


84		BLACKROCK FUNDS		MARCH 31, 2014


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 Basic Value Fund

BlackRock Capital Appreciation Fund

BlackRock Commodity Strategies Fund

BlackRock Disciplined Small Cap Core Fund

BlackRock Emerging Markets Dividend Fund

BlackRock Emerging Markets Fund

BlackRock Emerging Markets Long/Short

Equity Fund

BlackRock Energy & Resources Portfolio

BlackRock Equity Dividend Fund

BlackRock EuroFund

BlackRock Flexible Equity Fund

BlackRock Focus Growth Fund

BlackRock Global Dividend Portfolio

BlackRock Global Long/Short Equity Fund

BlackRock Global Opportunities Portfolio

BlackRock Global SmallCap Fund

BlackRock Health Sciences Opportunities Portfolio

BlackRock International Fund

BlackRock International Index Fund

BlackRock International Opportunities Portfolio

BlackRock Large Cap Core Fund

BlackRock Large Cap Core Plus Fund

BlackRock Large Cap Growth Fund

BlackRock Large Cap Value Fund

BlackRock Latin America Fund

BlackRock Long-Horizon Equity Fund

BlackRock Mid-Cap Growth Equity Portfolio

BlackRock Mid-Cap Value Opportunities Fund

BlackRock Natural Resources Trust

BlackRock Pacific Fund

BlackRock Real Estate Securities Fund

BlackRock Russell 1000^® Index Fund

BlackRock Science & Technology

Opportunities Portfolio

BlackRock Small Cap Growth Equity Portfolio

BlackRock Small Cap Growth Fund II

BlackRock Small Cap Index Fund

BlackRock S&P 500 Stock Fund

BlackRock U.S. Opportunities Portfolio

BlackRock Value Opportunities Fund


Taxable Fixed Income Funds

BlackRock Bond Index Fund

BlackRock Core Bond Portfolio

BlackRock CoreAlpha Bond Fund

BlackRock CoRI Funds

2015

2017

2019

2021

2023

BlackRock Emerging Markets Flexible Dynamic

Bond 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 Investment Grade Bond Portfolio

BlackRock Low Duration Bond Portfolio

BlackRock Secured Credit Portfolio

BlackRock Short Obligations Fund

BlackRock Short-Term Treasury Fund

BlackRock Strategic Income Opportunities Portfolio

BlackRock Total Return Fund

BlackRock U.S. Government Bond Portfolio

BlackRock U.S. Mortgage Portfolio

BlackRock Ultra-Short Obligations Fund

BlackRock World Income Fund


Municipal Fixed Income Funds

BlackRock California Municipal Bond Fund

BlackRock High Yield 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

BlackRock Strategic Municipal Opportunities Fund


Mixed Asset Funds


BlackRock Balanced Capital Fund	LifePath Active Portfolios		LifePath Index Portfolios
BlackRock Emerging Market Allocation Portfolio	2015	2040	Retirement	2040
BlackRock Global Allocation Fund	2020	2045	2020	2045
BlackRock Managed Volatility Portfolio	2025	2050	2025	2050
BlackRock Multi-Asset Income Portfolio	2030	2055	2030	2055
BlackRock Multi-Asset Real Return Fund	2035		2035
BlackRock Strategic Risk Allocation Fund

BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio	Retirement	2040
Moderate Prepared Portfolio	2020	2045
Growth Prepared Portfolio	2025	2050
Aggressive Growth Prepared Portfolio	2030	2055
	2035


		BLACKROCK FUNDS		MARCH 31, 2014		85

LOGO



Eq-Opps-3/14-SAR

MARCH 31, 2014

SEMI-ANNUAL REPORT (UNAUDITED)

BLACKROCK^®

BlackRock Managed Volatility Portfolio | of BlackRock Funds^SM


Not FDIC Insured ¡ May Lose Value ¡ No Bank Guarantee


Table of Contents


			Page
Shareholder Letter			3
Semi-Annual Report:
Fund Summary			4
About Fund Performance			6
Disclosure of Expenses			6
Derivative Financial Instruments			7
Financial Statements:
Schedule of Investments			8
Statement of Assets and Liabilities			23
Statement of Operations			24
Statements of Changes in Net Assets			25
Financial Highlights			26
Notes to Financial Statements			29
Officers and Trustees			43
Additional Information			44
A World-Class Mutual Fund Family			46


2		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014

Shareholder Letter

Dear Shareholder,

Sincerely,

LOGO

Rob Kapito

President, BlackRock Advisors, LLC

LOGO

In a modest global growth environment, expectations around monetary policy changes continued to be a key theme in financial market performance.

Rob Kapito

President, BlackRock Advisors, LLC


Total Returns as of March 31, 2014
	6-month			12-month
U.S. large cap equities (S&P 500^® Index)		12.51	%		21.86	%
U.S. small cap equities (Russell 2000^® Index)		9.94			24.90
International equities (MSCI Europe, Australasia, Far East Index)		6.41			17.56
Emerging market equities (MSCI Emerging Markets Index)		1.39			(1.43	)
3-month Treasury bill (BofA Merrill Lynch 3-Month U.S. Treasury Bill Index)		0.03			0.07
U.S. Treasury securities (BofA Merrill Lynch 10-Year U.S. Treasury Index)		0.85			(4.38	)
U.S. investment grade bonds (Barclays U.S. Aggregate Bond Index)		1.70			(0.10	)
Tax-exempt municipal bonds (S&P Municipal Bond Index)		3.91			0.31
U.S. high yield bonds (Barclays U.S. Corporate High Yield 2% Issuer Capped Index)		6.66			7.53

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


		THIS PAGE NOT PART OF YOUR FUND REPORT					3


Fund Summary as of March 31, 2014

Investment Objective

BlackRock Managed Volatility Portfolio’s (the “Fund”) investment objective is to seek total return.

Portfolio Management Commentary

How did the Fund perform?

For the six-month period ended March 31, 2014, the Fund underperformed its reference benchmark (50% MSCI All Country World Index (“MSCI ACWI”)/50% Citigroup World Government Bond Index (hedged into USD) (“Citigroup WGBI (hedged into USD)”).

What factors influenced performance?

The Fund’s modest overweight to Japanese equities weighed on returns as the country’s stock market underperformed other developed markets during the period. Within U.S. stocks, health care and consumer discretionary positions that were added to the Fund toward the end of the period detracted from performance as both sectors underperformed broad equities during March. Within fixed income, a significant underweight to duration (low sensitivity to interest rate movements) detracted from performance as yields generally fell across developed markets amid signs of softening economic data, most notably in the U.S. (Bond prices fall as yields rise.) Lastly, the Fund held a higher-than-normal allocation to cash given a generally cautious view on valuations in equity and fixed income markets during the period. The cash position hindered relative results as both equities and fixed income assets generated positive returns over the period.

Contributing positively to performance was the Fund’s bias toward developed market equities, which broadly outperformed their emerging market counterparts during the period amid heightened volatility in several emerging market economies. Specifically, overweights in Germany and France buoyed performance as both countries continued to demonstrate economic momentum relative to the rest of the eurozone. In the U.S., overweight positions in financials and information technology (“IT”) had a positive impact on returns as these sectors outperformed broad equities over the period. Additionally, the Fund’s underweight to the Japanese yen was a significant contributor to performance as the currency continued to weaken relative to the U.S. dollar during the period given massive economic stimulus from the Bank of Japan.

The Fund uses derivatives as part of its investment strategy. During the period, the use of foreign currency exchange contracts had a positive impact on performance, most notably due to a short position in the yen. Over the period, the Fund used derivatives to gain equity exposure in Germany, Japan and France. Exposures to French and German equity markets added to performance as both markets moved higher during the

period. Japanese equities, however, lagged broader international equities. The Fund also held two futures positions in 10-year Australian and Treasury bonds.

Describe recent portfolio activity.

From a broad asset allocation perspective, the Fund significantly reduced exposure to equities throughout the period, most notably in the U.S., given broader macro concerns in several emerging markets and softer-than-expected economic data in the U.S. Following the stock market correction earlier in 2014, U.S. and European equities rallied strongly in February, reaching all-time highs and prompting a decision to take profits and wait for more attractive re-entry points. Despite the general reduction in equity exposure, in February, the Fund added new positions in U.S. health care and French stocks, both overweight relative to the benchmark index, and increased the existing overweights to German and Japanese stocks.

Additionally, as credit markets continued to outpace core fixed income sectors with credit spreads tightening over recent months, the Fund decreased exposure to credit, capturing gains on those positions and rotating into cash. Finally, the Fund added an Australian 10-year bond position in late March, largely driven by attractive valuations relative to the U.S. and the likelihood of slower economic growth in the region resulting in declining yields.

Describe portfolio positioning at period end.

Relative to the reference benchmark, the Fund ended the period underweight in both equities and fixed income, while continuing to hold an allocation to cash and cash equivalents.

Within equities, the Fund continued to hold overweight positions in Germany, France and Japan given recent improvement in Europe’s economic landscape and the likelihood that massive economic stimulus will continue to support risk assets in Japan. In the U.S., the Fund was overweight in financials, health care, IT and consumer discretionary stocks.

In fixed income, the Fund remained underweight in core fixed income in the U.S. and held a long position in Australian bonds. The Fund’s fixed income allocation ended the period with a shorter duration relative to the fixed income portion of the reference benchmark. Additionally, the Fund was underweight in both the yen and euro relative to the benchmark index.

Portfolio Information


Ten Largest Holdings		Percent of Long-Term Investments


Financial Select Sector SPDR Fund	17	%
Health Care Select Sector SPDR Fund	9
Technology Select Sector SPDR Fund	8
Consumer Discretionary Select Sector SPDR Fund	6
Government of Japan	6
iShares 1-3 Year Credit Bond ETF	5
PowerShares QQQ Trust Series 1	3
United Kingdom Gilt	2
Fannie Mae Mortgage-Backed Securities	2
Federal Republic of Germany	2


Portfolio Composition		Percent of Long-Term Investments


Investment Companies	49	%
Foreign Government Obligations	18
Corporate Bonds	12
Common Stocks	12
U.S. Government Sponsored Agency Securities	5
Foreign Agency Obligations	3
U.S. Treasury Obligations	1


4		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014

Total Return Based on a $10,000 Investment

LOGO

The Fund uses an asset allocation strategy, investing varying percentages of its portfolio in three major categories: stocks, bonds and money market instruments.

A free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.

⁴

A market capitalization weighted bond index consisting of government bond markets of 23 countries, including the United States.

⁵

This customized weighted index is comprised of the returns of the MSCI All Country World Index (50%) and Citigroup WGBI (hedged into USD) (50%).


Performance Summary for the Period Ended March 31, 2014
				Average Annual Total Returns⁶
				1 Year						5 Years						10 Years
	6-Month Total Returns			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge			w/o sales charge			w/ sales charge
Institutional		5.27	%		9.03	%		N/A			13.24	%		N/A			5.98	%		N/A
Service		5.06			8.59			N/A			12.93			N/A			5.70			N/A
Investor A		5.07			8.65			2.94	%		12.90			11.69	%		5.63			5.06	%
Investor B		4.51			7.53			3.11			11.95			11.69			4.97			4.97
Investor C		4.72			7.90			6.91			12.11			12.11			4.87			4.87
50% MSCI ACWI/50% Citigroup WGBI (hedged into USD)		5.37			8.90			N/A			10.78			N/A			6.02			N/A
MSCI ACWI		8.48			16.55			N/A			17.80			N/A			6.97			N/A
Citigroup WGBI (hedged into USD)		2.19			1.45			N/A			3.37			N/A			4.24			N/A

⁶

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

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

Past performance is not indicative of future results.


Expense Example
	Actual			Hypothetical⁸
	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁷	Beginning Account Value October 1, 2013	Ending Account Value March 31, 2014	Expenses Paid During the Period⁷	Annualized Expense Ratio
Institutional	$1,000.00	$1,052.70	$3.99	$1,000.00	$1,021.04	$3.93	0.78%
Service	$1,000.00	$1,050.60	$5.98	$1,000.00	$1,019.10	$5.89	1.17%
Investor A	$1,000.00	$1,050.70	$5.78	$1,000.00	$1,019.30	$5.69	1.13%
Investor B	$1,000.00	$1,045.10	$10.91	$1,000.00	$1,014.26	$10.75	2.14%
Investor C	$1,000.00	$1,047.20	$9.29	$1,000.00	$1,015.86	$9.15	1.82%

⁷

For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 182/ 365 (to reflect the one-half year period shown). The fees and expenses of the underlying funds in which the Fund invests are not included in the Fund’s annualized expense ratio.

⁸

Hypothetical 5% annual return before expenses is calculated by pro rating the number of days in the most recent fiscal half year divided by 365.

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


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		5


About Fund Performance

Institutional Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors.

Service Shares are not subject to any sales charge (front-end load) or deferred sales charge. These shares are subject to a service fee of 0.25% per year (but no distribution fee) and are only available to eligible investors. Prior to January 28, 2005, Service Shares performance results are those of Institutional Shares (which have no distribution or service fees) restated to reflect Service Share fees.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer to www.blackrock.com/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/payable dates. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

Performance for the Fund for periods prior to January 28, 2005 is based on performance of a certain former State Street Research mutual fund that reorganized with the Fund on that date.

BlackRock Advisors, LLC (the “Manager”), 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. 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 5 of the Notes to Financial Statements for additional information on waivers and reimbursements.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, administration fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses and other Fund expenses. The expense example on the previous page (which is based on a hypothetical investment of $1,000 invested on October 1, 2013 and held through March 31, 2014) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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


6		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014

Derivative Financial Instruments

The Fund may invest in various derivative financial instruments, including financial futures contracts, foreign currency exchange contracts, options and swaps, as specified in Note 4 of the Notes to Financial Statements, which may constitute forms of economic leverage. Such derivative financial instruments are used to obtain exposure to a security, index and/or market without owning or taking physical custody of securities or to hedge market, equity, credit, interest rate, foreign currency exchange rate and/or other risks. Derivative financial instruments involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the derivative financial instrument. The

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 and/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.


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		7


Schedule of Investments March 31, 2014 (Unaudited)
			(Percentages shown are based on Net Assets)


Asset-Backed Securities	Par (000)		Value
Amortizing Residential Collateral Trust, Series 2002-BC5, Class M2, 1.95%, 7/25/32 (a)	USD	11	$	6,654
Knollwood CDO Ltd., Series 2004-1A, Class C, 3.44%, 1/10/39 (a)(b)		133		1
Santander Drive Auto Receivables Trust, Series 2011-S1A, Class B, 1.48%, 5/15/17 (b)		22		22,475
Total Asset-Backed Securities — 0.0%				29,130

Common Stocks	Shares
Automobiles — 0.3%
Tata Motors Ltd.		188,088		1,270,942
Yamaha Motor Co. Ltd.		56,700		904,586

				2,175,528
Banks — 1.3%
BNP Paribas SA		17,378		1,339,836
Danske Bank A/S		34,621		963,323
Erste Group Bank AG		25,936		887,262
HSBC Holdings PLC		159,179		1,611,743
Mitsubishi UFJ Financial Group, Inc.		293,900		1,618,444
Sberbank of Russia — ADR		108,379		1,058,863
Société Générale SA		23,404		1,440,654

				8,920,125
Beverages — 0.5%
Anheuser-Busch InBev NV		30,001		3,159,581
Biotechnology — 0.1%
Genmab A/S (c)		12,394		502,688
Capital Markets — 0.3%
Credit Suisse Group AG		55,286		1,789,515
Electric Utilities — 0.2%
Enel SpA		238,915		1,351,354
Electrical Equipment — 0.3%
Mitsubishi Electric Corp.		72,000		810,490
Schneider Electric SA		15,546		1,377,792

				2,188,282
Food Products — 0.1%
BRF SA		31,100		622,685


Common Stocks	Shares		Value
Hotels, Restaurants & Leisure — 0.2%
Carnival PLC		22,294	$	848,899
Sands China Ltd.		108,800		815,994

				1,664,893
Insurance — 0.2%
Tokio Marine Holdings, Inc.		43,400		1,301,583
Internet Software & Services — 0.2%
MercadoLibre, Inc.		5,371		510,836
Yandex NV (c)		26,462		798,888

				1,309,724
Machinery — 0.2%
Makita Corp.		27,600		1,519,480
Railpower Technologies Corp. (Acquired 4/26/04-6/17/04, cost $49,616) (c)(d)		17,600		—

				1,519,480
Media — 0.7%
Grupo Televisa SAB — ADR		53,327		1,775,256
ITV PLC		429,974		1,373,766
Liberty Global PLC, Series A (c)		21,017		874,307
Liberty Global PLC, Series C (c)		21,017		855,602

				4,878,931
Metals & Mining — 0.1%
ArcelorMittal		54,805		884,508
Oil, Gas & Consumable Fuels — 0.3%
Longview Energy Co. (Acquired 8/13/04, cost $48,000) (c)(d)		3,200		27,264
Matador Resources Co. (Acquired 4/13/06, cost $8,451) (c)(d)		939		22,996
Royal Dutch Shell PLC, Class A		47,402		1,731,953

				1,782,213
Paper & Forest Products — 0.0%
Ainsworth Lumber Co. Ltd. (c)		26,991		97,172
Ainsworth Lumber Co. Ltd. (b)(c)		19,432		69,959

				167,131
Pharmaceuticals — 1.2%
AstraZeneca PLC		30,296		1,963,986
Novo Nordisk A/S, Class B		36,102		1,643,806
Roche Holding AG		10,010		3,010,645
Shire PLC		16,634		823,466
Teva Pharmaceutical Industries Ltd. — ADR		18,575		981,503

				8,423,406


Portfolio Abbreviations
ADR	American Depositary Receipts	ILS	Israeli Shekel	S&P	Standard & Poor’s
AUD	Australian Dollar	JPY	Japanese Yen	SEK	Swedish Krona
CAD	Canadian Dollar	JSC	Joint Stock Company	SGD	Singapore Dollar
CDO	Collateralized Debt Obligation	KRW	South Korean Won	SPDR	Standard & Poor’s Depositary
CHF	Swiss Franc	LIBOR	London Interbank Offered Rate		Receipts
CZK	Czech Koruna	MXN	Mexican Peso	TBA	To-be-announced
DKK	Danish Krone	MYR	Malaysian Ringgit	THB	Thai Baht
ETF	Exchange Traded Fund	NOK	Norwegian Krone	TRY	Turkish Lira
EUR	Euro	NZD	New Zealand Dollar	TWD	Taiwan New Dollar
EURIBOR	Euro Interbank Offer Rate	OJSC	Open Joint Stock Company	USD	US Dollar
GBP	British Pound	REIT	Real Estate Investment Trust	ZAR	South African Rand

See Notes to Financial Statements.


8		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


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


Common Stocks	Shares		Value
Semiconductors & Semiconductor Equipment — 0.2%
MediaTek, Inc.		71,000	$	1,050,920
Veeco Instruments, Inc. (c)		13,181		552,679

				1,603,599
Technology Hardware, Storage & Peripherals — 0.1%
Nokia OYJ (c)		88,966		654,563
Textiles, Apparel & Luxury Goods — 0.4%
Cie Financiere Richemont SA		15,090		1,441,671
The Swatch Group AG		1,743		1,093,442

				2,535,113
Tobacco — 0.5%
Imperial Tobacco Group PLC		50,176		2,028,984
Japan Tobacco, Inc.		51,000		1,600,758

				3,629,742
Wireless Telecommunication Services — 0.2%
Rogers Communications, Inc., B Shares		34,665		1,436,458
Total Common Stocks — 7.6%				52,501,102

Corporate Bonds	Par (000)
Aerospace & Defense — 0.1%
EADS Finance BV, 2.70%, 4/17/23 (b)	USD	500		472,417
Auto Components — 0.1%
Continental AG:
3.00%, 7/16/18	EUR	100		147,047
3.13%, 9/09/20		200		293,579
Valeo SA, 3.25%, 1/22/24		100		143,331

				583,957
Automobiles — 0.2%
Ford Motor Co., 4.75%, 1/15/43	USD	250		241,756
Peugeot SA, 7.38%, 3/06/18	EUR	300		469,195
Renault SA, 3.13%, 3/05/21		75		104,449
Volkswagen International Finance NV, 2.00%, 1/14/20		400		561,445

				1,376,845
Banks — 2.9%
Abbey National Treasury Services PLC, 4.25%, 4/12/21		500		812,293
Asian Development Bank, 2.35%, 6/21/27	JPY	20,000		227,107
Banca Monte dei Paschi di Siena SpA, 3.63%, 4/01/19	EUR	200		275,637
Banco Bilbao Vizcaya Argentaria SA, 3.50%, 12/05/17		500		743,845
Banco de Sabadell SA, 3.38%, 1/23/18		200		293,641
Banco Espirito Santo SA, 4.00%, 1/21/19		500		695,104
Banco Popolare SC, 3.50%, 3/14/19		225		313,454
Bank of Ireland Mortgage Bank:
1.88%, 5/13/17		300		420,517
3.63%, 10/02/20		200		302,465
Bankia SA, 3.50%, 1/17/19		600		849,772
Bankinter SA, 3.88%, 10/30/15		300		431,441
BNP Paribas SA, 2.88%, 11/27/17		300		438,611
BPCE SFH SA, 2.38%, 11/29/23		200		283,641


Corporate Bonds	Par (000)		Value
Banks (concluded)
CaixaBank SA:
5.00%, 11/14/23 (a)	EUR	200	$	290,945
2.60%, 3/21/24		200		277,069
Canadian Imperial Bank of Commerce, 2.60%, 7/02/15 (b)	USD	290		298,103
Carrefour Banque SA, 2.88%, 9/25/15	EUR	200		283,973
Citigroup, Inc.:
5.00%, 9/15/14	USD	140		142,711
4.59%, 12/15/15		700		742,454
Credit Agricole SA, 3.13%, 2/05/26	EUR	400		568,205
Danske Bank A/S:
3.88%, 5/18/16		500		731,940
3.88%, 10/04/23 (a)		300		435,523
Dexia Credit Local SA, 1.25%, 10/18/16	USD	1,660		1,664,359
DNB Bank ASA, 3.00%, 9/26/23 (a)	EUR	600		857,029
European Investment Bank, 2.15%, 1/18/27	JPY	20,000		219,771
HSBC Bank Brasil SA — Banco Multiplo, 4.00%, 5/11/16 (b)	USD	680		705,500
HSBC Holdings PLC, 6.10%, 1/14/42		150		183,017
Hypo Alpe-Adria-Bank International AG, 2.38%, 12/13/22	EUR	1,300		1,797,010
ING Bank NV:
3.38%, 1/11/18		250		377,369
4.13%, 11/21/23 (a)	USD	330		331,237
Intesa Sanpaolo SpA:
3.00%, 1/28/19	EUR	250		360,103
3.38%, 1/24/25		200		292,527
3.25%, 2/10/26		100		143,455
Intesa Sanpaolo Vita SpA, 5.35%, 9/18/18		100		151,280
Lloyds Bank PLC:
6.50%, 3/24/20		300		495,635
4.00%, 9/29/20		250		399,660
Russian Agricultural Bank OJSC Via RSHB Capital SA, 5.10%, 7/25/18	USD	200		194,980
Société Générale SFH, 2.88%, 3/14/19	EUR	500		749,335
Swedbank AB:
1.50%, 3/18/19		200		275,975
3.00%, 12/05/22 (a)		384		549,858
UniCredit SpA:
3.00%, 1/31/24		280		398,125
5.75%, 10/28/25 (a)		150		224,759

				20,229,435
Capital Markets — 0.6%
Credit Suisse AG/Guernsey, 1.00%, 3/12/19		525		720,131
European Investment Bank, 1.50%, 4/15/21		1,150		1,588,171
The Goldman Sachs Group, Inc., 5.75%, 1/24/22	USD	700		793,743
Morgan Stanley, 3.75%, 2/25/23		650		645,880
UBS AG, 4.75%, 2/12/26 (a)	EUR	175		247,378

				3,995,303
Chemicals — 0.1%
Brenntag Finance BV, 5.50%, 7/19/18		400		623,362
GCS Holdco Finance I SA, 6.50%, 11/15/18		100		146,204

				769,566
Diversified Financial Services — 0.7%
Adecco International Financial Services BV, 2.75%, 11/15/19		200		287,060

See Notes to Financial Statements.


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		9


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


Corporate Bonds	Par (000)		Value
Diversified Financial Services (concluded)
American Honda Finance Corp., 1.88%, 9/04/19	EUR	500	$	701,047
Bank of America Corp., 5.70%, 1/24/22	USD	600		688,395
Ford Motor Credit Co. LLC, 4.38%, 8/06/23		300		309,525
Fresenius Finance BV, 4.00%, 2/01/24	EUR	99		141,869
Imperial Tobacco Finance PLC, 3.38%, 2/26/26		325		451,571
JPMorgan Chase Bank, NA, 6.00%, 10/01/17	USD	445		506,908
Macquarie Bank Ltd., 2.50%, 9/18/18	EUR	200		285,255
The NASDAQ OMX Group, Inc., 3.88%, 6/07/21		300		441,525
Nationwide Building Society:
3.13%, 4/03/17		100		146,002
4.13%, 3/20/23 (a)		150		217,955
Old Mutual PLC, 7.13%, 10/19/16	GBP	200		368,550

				4,545,662
Diversified Telecommunication Services — 0.3%
Iliad SA, 4.88%, 6/01/16		300		441,265
OTE PLC, 7.88%, 2/07/18		300		483,558
Verizon Communications, Inc.:
3.50%, 11/01/21	USD	240		241,676
2.38%, 2/17/22	EUR	125		174,172
3.25%, 2/17/26		100		142,298
6.40%, 2/15/38	USD	200		234,838
6.55%, 9/15/43		250		304,234

				2,022,041
Electric Utilities — 0.3%
Alabama Power Co., 3.95%, 6/01/21		220		229,412
Enel Finance International NV, 5.63%, 8/14/24	GBP	100		180,404
Energa Finance AB, 3.25%, 3/19/20	EUR	300		426,119
ESB Finance Ltd., 6.25%, 9/11/17		200		321,593
Georgia Power Co., 3.00%, 4/15/16	USD	390		407,189
MidAmerican Energy Holdings Co., 6.50%, 9/15/37		150		185,505
PacifiCorp, 6.25%, 10/15/37		100		126,328
Perusahaan Listrik Negara PT, 5.25%, 10/24/42		200		162,250

				2,038,800
Food & Staples Retailing — 0.1%
Wal-Mart Stores, Inc., 4.00%, 4/11/43		500		465,375
Food Products — 0.1%
Barry Callebaut Services NV, 5.63%, 6/15/21	EUR	250		392,047
Gas Utilities — 0.1%
Gas Natural Finance BV, 3.88%, 1/17/23		100		150,989
KeySpan Gas East Corp., 5.82%, 4/01/41 (b)	USD	185		217,868

				368,857
Health Care Equipment & Supplies — 0.1%
Covidien International Finance SA, 3.20%, 6/15/22		500		492,021
Health Care Providers & Services — 0.0%
McKesson Corp., 4.88%, 3/15/44		300		304,080


Corporate Bonds	Par (000)		Value
Hotels, Restaurants & Leisure — 0.2%
Accor SA, 2.63%, 2/05/21	EUR	500	$	691,894
Wyndham Worldwide Corp.:
4.25%, 3/01/22	USD	330		333,783
3.90%, 3/01/23		200		195,945

				1,221,622
Industrial Conglomerates — 0.1%
Smiths Group PLC, 4.13%, 5/05/17	EUR	500		740,615
Insurance — 0.2%
AIA Group Ltd., 3.13%, 3/13/23	USD	600		563,550
Allianz Finance II BV, 5.75%, 7/08/41 (a)	EUR	100		159,549
Aviva PLC, 6.13%, 11/14/36 (a)	GBP	100		178,017
Talanx AG, 3.13%, 2/13/23	EUR	100		145,515

				1,046,631
IT Services — 0.0%
Computer Sciences Corp., 4.45%, 9/15/22	USD	300		306,259
Leisure Products — 0.0%
Mattel, Inc., 5.45%, 11/01/41		200		210,024
Life Sciences Tools & Services — 0.0%
Life Technologies Corp., 6.00%, 3/01/20		230		264,673
Media — 0.1%
Altice Financing SA, 6.50%, 1/15/22	EUR	100		146,376
Cyfrowy Polsat Finance AB, 7.13%, 5/20/18		300		436,545
Time Warner Cable, Inc., 4.50%, 9/15/42	USD	6		5,508
Viacom, Inc., 5.85%, 9/01/43		200		219,767

				808,196
Metals & Mining — 0.1%
AngloGold Ashanti Holdings PLC, 5.13%, 8/01/22		200		186,476
MMC Norilsk Nickel OJSC via MMC Finance Ltd., 5.55%, 10/28/20		300		294,750

				481,226
Multi-Utilities — 0.1%
Centrica PLC, 6.38%, 3/10/22	GBP	100		196,197
Dominion Resources, Inc., 1.95%, 8/15/16	USD	305		310,750
Linea Group Holding SpA, 3.88%, 11/28/18	EUR	100		141,458

				648,405
Oil, Gas & Consumable Fuels — 0.2%
BP Capital Markets PLC, 3.81%, 2/10/24	USD	400		403,577
Enterprise Products Operating LLC:
6.13%, 10/15/39		125		145,832
Series L, 6.30%, 9/15/17		250		288,383
KazMunayGas National Co. JSC, 4.40%, 4/30/23		350		331,153
Rosneft Oil Co. via Rosneft International Finance Ltd., 4.20%, 3/06/22		300		268,170
Vier Gas Transport GmbH, 3.13%, 7/10/23	EUR	150		219,054

				1,656,169
Paper & Forest Products — 0.1%
Metsa Board OYJ, 4.00%, 3/13/19		100		137,835
Mondi Finance PLC, 3.38%, 9/28/20		330		479,132
Stora Enso OYJ, 5.50%, 3/07/19		200		305,032

				921,999

See Notes to Financial Statements.


10		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


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


Corporate Bonds	Par (000)		Value
Pharmaceuticals — 0.0%
Almirall SA, 4.63%, 4/01/21	EUR	100	$	140,130
Professional Services — 0.1%
Experian Finance PLC, 4.75%, 11/23/18	GBP	400		734,352
Real Estate Investment Trusts (REITs) — 0.1%
Goodman Funding Pty Ltd., 6.38%, 4/15/21 (b)	USD	400		452,126
Ventas Realty LP/Ventas Capital Corp., 4.75%, 6/01/21		135		145,499

				597,625
Road & Rail — 0.1%
National Express Group PLC, 6.63%, 6/17/20	GBP	400		778,478
Semiconductors & Semiconductor Equipment — 0.1%
ASML Holding NV, 3.38%, 9/19/23	EUR	200		287,418
TSMC Global Ltd., 1.63%, 4/03/18 (b)	USD	300		290,831

				578,249
Software — 0.0%
Microsoft Corp., 2.63%, 5/02/33	EUR	200		264,556
Specialty Retail — 0.1%
Dixons Retail PLC, 8.75%, 9/15/17	GBP	150		290,082
O’Reilly Automotive, Inc., 3.80%, 9/01/22	USD	500		492,047

				782,129
Technology Hardware, Storage & Peripherals — 0.1%
Apple Inc., 2.40%, 5/03/23		550		510,003
Oberthur Technologies Holding SAS, 9.25%, 4/30/20	EUR	100		152,920

				662,923
Textiles, Apparel & Luxury Goods — 0.1%
LVMH Moet Hennessy Louis Vuitton SA, 1.63%, 6/29/17 (b)	USD	800		805,704
Thrifts & Mortgage Finance — 0.0%
Achmea Hypotheekbank NV, 2.75%, 2/18/21	EUR	150		210,385
Transportation Infrastructure — 0.0%
Brisa Concessao Rodoviaria SA, 3.88%, 4/01/21		100		137,697
Manchester Airport Group Funding PLC, 4.75%, 3/31/34	GBP	100		167,069

				304,766
Wireless Telecommunication Services — 0.3%
Crown Castle Towers LLC, 6.11%, 1/15/40 (b)	USD	500		573,154
Play Finance 2 SA, 5.25%, 2/01/19	EUR	100		140,521
SK Telecom Co. Ltd., 2.13%, 5/01/18 (b)	USD	950		940,576
Telefonica Emisiones SAU, 4.71%, 1/20/20	EUR	100		156,724

				1,810,975
Total Corporate Bonds — 7.8%				54,032,497

Foreign Agency Obligations
Banco Nacional de Desenvolvimento Economicoe Social, 5.75%, 9/26/23 (b)	USD	200		209,000
CNOOC Curtis Funding No. 1 Pty Ltd., 4.50%, 10/03/23 (b)		200		203,493
European Financial Stability Facility, 1.50%, 1/22/20	EUR	250		349,366
Hydro-Quebec, 8.40%, 1/15/22	USD	405		531,777


Foreign Agency Obligations	Par (000)		Value
Kreditanstalt Für Wiederaufbau:
0.50%, 7/25/16	EUR	1,200	$	1,660,800
0.63%, 2/12/18		3,200		4,406,819
Propertize BV, 0.50%, 2/27/17		500		687,754
Province of British Columbia, 4.80%, 6/15/21	CAD	350		359,267
Province of Manitoba:
4.30%, 3/01/16		200		191,385
1.75%, 5/30/19	USD	490		482,089
Province of Ontario:
4.30%, 3/08/17	CAD	600		585,102
6.20%, 6/02/31		400		475,314
Province of Quebec:
4.50%, 12/01/19		600		602,100
5.00%, 12/01/41		150		156,924
Total Foreign Agency Obligations — 1.6%				10,901,190

Foreign Government Obligations
Australia — 0.4%
Commonwealth of Australia:
4.75%, 6/15/16	AUD	1,100		1,061,510
5.50%, 4/21/23		250		258,194
4.75%, 4/21/27		150		144,839
New South Wales Treasury Corp., 6.00%, 2/01/18		400		404,895
Queensland Treasury Corp., 6.25%, 2/21/20		400		414,700
Treasury Corp. of Victoria, 6.00%, 6/15/20		250		258,109

				2,542,247
Belgium — 0.1%
Kingdom of Belgium:
2.60%, 6/22/24	EUR	120		171,100
3.75%, 6/22/45		350		536,763

				707,863
Canada — 0.3%
Canada Housing Trust No. 1:
2.75%, 9/15/14	CAD	400		364,725
2.75%, 6/15/16		400		373,659
3.35%, 12/15/20		250		240,570
Government of Canada:
1.75%, 3/01/19		300		272,185
8.00%, 6/01/27		300		435,441
4.00%, 6/01/41		500		537,589

				2,224,169
Colombia — 0.1%
Republic of Colombia, 4.00%, 2/26/24	USD	500		495,000
Czech Republic — 0.0%
Czech Republic, 3.85%, 9/29/21	CZK	4,300		246,870
Denmark — 0.1%
Kingdom of Denmark, 4.00%, 11/15/19	DKK	3,500		757,010
Finland — 0.2%
Republic of Finland:
1.13%, 9/15/18	EUR	20		28,066
3.50%, 4/15/21		700		1,105,349
2.00%, 4/15/24		250		348,251

				1,481,666

See Notes to Financial Statements.


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		11


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


Foreign Government Obligations	Par (000)		Value
France — 1.1%
France Government Bond OAT, 2.25%, 10/25/22	EUR	3,810	$	5,457,254
UNEDIC, 2.38%, 5/25/24		1,300		1,820,476

				7,277,730
Germany — 1.0%
Federal Republic of Germany:
2.25%, 9/04/21		3,000		4,471,098
2.50%, 7/04/44		1,890		2,642,464

				7,113,562
Ireland — 0.1%
Republic of Ireland:
4.50%, 4/18/20		200		313,781
3.40%, 3/18/24		20		28,451

				342,232
Israel — 0.0%
State of Israel, 4.25%, 8/31/16	ILS	1,000		308,157
Italy — 0.7%
Buoni Poliennali Del Tesoro, 4.50%, 3/01/24	EUR	3,350		5,090,143
Ivory Coast — 0.0%
African Development Bank, 1.63%, 10/02/18	USD	100		99,681
Japan — 4.0%
Development Bank of Japan (20 Year), 1.05%, 6/20/23	JPY	50,000		502,984
Government of Japan (5 Year):
Series 89, 0.40%, 6/20/15		150,000		1,459,180
Series 102, 0.30%, 12/20/16		430,000		4,187,887
Series 105, 0.20%, 6/20/17		195,000		1,893,953
Government of Japan (10 Year):
Series 300, 1.50%, 3/20/19		485,000		4,999,304
Series 313, 1.30%, 3/20/21		145,000		1,495,382
Series 323, 0.90%, 6/20/22		290,000		2,900,947
Series 325, 0.80%, 9/20/22		55,000		545,330
Government of Japan (20 Year):
Series 94, 2.10%, 3/20/27		290,000		3,234,205
Series 137, 1.70%, 6/20/32		205,000		2,095,000
Series 146, 1.70%, 9/20/33		30,000		301,792
Government of Japan (30 Year):
Series 26, 2.40%, 3/20/37		100,000		1,110,839
Series 36, 2.00%, 3/20/42		117,000		1,210,910
Government of Japan (40 Year), Series 5, 2.00%, 3/20/52		24,000		246,588
Japan Finance Organization for Municipalities:
2.00%, 5/09/16		100,000		1,006,342
2.13%, 3/06/19 (b)	USD	396		393,834

				27,584,477
Luxembourg — 0.4%
Grand Duchy of Luxembourg, 2.13%, 7/10/23	EUR	2,160		3,063,524
Malaysia — 0.1%
Federation of Malaysia, 3.58%, 9/28/18	MYR	1,200		365,601
Mexico — 0.1%
United Mexican States:
6.50%, 6/09/22	MXN	7,500		592,015
8.30%, 8/15/31	USD	194		271,115

				863,130


Foreign Government Obligations	Par (000)		Value
Netherlands — 0.6%
Kingdom of the Netherlands:
1.25%, 1/15/19	EUR	1,550	$	2,178,798
1.75%, 7/15/23		1,480		2,039,924

				4,218,722
New Zealand — 0.0%
Government of New Zealand, 5.00%, 3/15/19	NZD	300		269,465
Norway — 0.0%
Kingdom of Norway, 2.00%, 5/24/23	NOK	800		124,787
Poland — 0.2%
Republic of Poland:
1.63%, 1/15/19	EUR	400		563,296
5.13%, 4/21/21	USD	200		220,850
5.00%, 3/23/22		250		272,813

				1,056,959
Russia — 0.0%
Russian Federation, 7.50%, 3/31/30 (e)		164		187,005
Singapore — 0.0%
Republic of Singapore, 2.25%, 6/01/21	SGD	350		279,953
Slovenia — 0.2%
Republic of Slovenia, 5.85%, 5/10/23	USD	1,000		1,095,650
South Africa — 0.1%
Republic of South Africa:
5.50%, 3/09/20		100		108,600
7.00%, 2/28/31	ZAR	3,000		240,761

				349,361
Spain — 0.2%
Kingdom of Spain, 5.15%, 10/31/44	EUR	735		1,164,758
Sweden — 0.2%
Kingdom of Sweden:
3.75%, 8/12/17	SEK	6,000		1,008,680
3.50%, 6/01/22		1,000		172,398

				1,181,078
Thailand — 0.1%
Kingdom of Thailand, 3.45%, 3/08/19	THB	13,500		420,979
Turkey — 0.0%
Republic of Turkey, 8.80%, 11/17/18	TRY	600		266,392
United Kingdom — 1.4%
United Kingdom Gilt:
2.75%, 1/22/15	GBP	900		1,528,558
1.75%, 1/22/17		1,500		2,545,221
3.75%, 9/07/19		750		1,365,449
5.00%, 3/07/25		400		801,394
4.25%, 6/07/32		800		1,505,987
4.50%, 12/07/42		930		1,838,743
4.25%, 12/07/55		100		195,626

				9,780,978
Total Foreign Government Obligations — 11.7%				80,959,149

See Notes to Financial Statements.


12		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


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


Investment Companies	Shares		Value
Consumer Discretionary Select Sector SPDR Fund		418,104	$	27,059,691
Financial Select Sector SPDR Fund		3,487,473		77,910,147
Health Care Select Sector SPDR Fund		710,391		41,550,770
iShares 1-3 Year Credit Bond ETF (f)		196,815		20,756,110
PowerShares QQQ Trust Series 1		174,361		15,287,972
Technology Select Sector SPDR Fund		1,011,752		36,777,185
Total Investment Companies — 31.6%				219,341,875

Non-Agency Mortgage-Backed Securities	Par (000)
Commercial Mortgage-Backed Securities — 0.1%
Banc of America Commercial Mortgage Trust, Series 2007-1, Class AMFX, 5.48%, 1/15/49 (a)	USD	30		31,524
COBALT CMBS Commercial Mortgage Trust, Series 2006-C1, Class A4, 5.22%, 8/15/48		327		351,141
Greenwich Capital Commercial Funding Corp., Series 2006-GG7, Class AJ, 5.82%, 7/10/38 (a)		170		175,919
JPMorgan Chase Commercial Mortgage Securities Trust, Series 2006-CB14, Class AM, 5.45%, 12/12/44 (a)		180		192,302
LB-UBS Commercial Mortgage Trust, Series 2007-C1, Class AM, 5.46%, 2/15/40		165		181,268
Total Non-Agency Mortgage-Backed Securities — 0.1%				932,154

U.S. Government Sponsored Agency Securities
Agency Obligations — 0.3%
Fannie Mae, 6.63%, 11/15/30		200		274,817
Federal Home Loan Bank, 5.63%, 6/13/16		890		984,958
Freddie Mac, 1.00%, 7/30/14		1,000		1,002,762
Small Business Administration Participation Certificates, Series 1997-20F, Class 1, 7.20%, 6/01/17		62		66,077
Tennessee Valley Authority, 5.25%, 9/15/39		145		164,196

				2,492,810
Mortgage-Backed Securities — 2.8%
Fannie Mae Mortgage-Backed Securities:
2.50%, 4/01/29 (g)		800		799,375
3.00%, 4/01/44 (g)		1,830		1,766,236
3.50%, 4/01/29-4/01/44 (g)		3,550		3,607,203
4.00%, 4/01/29 (g)		450		475,787
4.50%, 4/01/44 (g)		450		480,023
5.50%, 4/01/44 (g)		300		331,277
6.00%, 4/01/44 (g)		900		1,003,043
6.50%, 4/01/44 (g)		250		281,172
Freddie Mac Mortgage-Backed Securities:
2.50%, 4/01/29 (g)		500		499,766
3.00%, 4/01/29-4/01/44 (g)		1,450		1,444,340
3.50%, 4/01/44 (g)		300		301,453
4.00%, 4/01/44 (g)		1,150		1,192,990
4.50%, 4/01/29-4/01/44 (g)		700		744,086
5.00%, 4/01/44 (g)		950		1,032,160
5.50%, 4/01/44 (g)		300		329,906


U.S. Government Sponsored Agency Securities	Par (000)		Value
Mortgage-Backed Securities (concluded)
Ginnie Mae Mortgage-Backed Securities:
3.00%, 4/15/44 (g)	USD	500	$	491,641
4.00%, 4/15/44 (g)		1,400		1,470,438
4.50%, 4/15/44 (g)		1,600		1,724,500
5.00%, 4/15/44 (g)		1,000		1,092,188
5.50%, 4/15/44 (g)		350		387,242

				19,454,826
Total U.S. Government Sponsored Agency Securities — 3.1%				21,947,636

U.S. Treasury Obligations
U.S. Treasury Bonds:
5.25%, 11/15/28		500		625,625
5.38%, 2/15/31		700		895,453
5.00%, 5/15/37		570		715,885
4.38%, 5/15/41		350		404,578
3.00%, 5/15/42		1,068		962,868
U.S. Treasury Notes:
0.25%, 4/30/14		570		570,067
1.00%, 6/30/19		580		555,622
Total U.S. Treasury Obligations — 0.7%				4,730,098
Total Long-Term Investments (Cost — $418,460,864) — 64.2%				445,374,831

Short-Term Securities	Shares
BlackRock Liquidity Funds, TempFund, Institutional Class, 0.03% (f)(h)		252,758,818		252,758,818
Total Short-Term Securities (Cost — $252,758,818) — 36.4%				252,758,818

Options Purchased
(Cost — $20,479) — 0.0%				19,766
Total Investments Before Options Written (Cost — $671,240,161) — 100.6%				698,153,415

Options Written
(Premiums Received — $ 152,235) — (0.0)%				(135,969	)
Total Investments Net of Options Written — 100.6%				698,017,446
Liabilities in Excess of Other Assets — (0.6)%				(4,070,025	)

Net Assets — 100.0%			$	693,947,421

See Notes to Financial Statements.


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		13


Schedule of Investments (continued)

Notes to Schedule of Investments

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

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

(c)	Non-income producing security.

(d)	Restricted security as to resale. As of report date, the Fund held 0.01% of its net assets, with a current value of $50,260 and an original cost of $106,067, in these securities.

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

(f)	Investments in issuers considered to be an affiliate of the Fund during the six months ended March 31, 2014, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:


Affiliate	Shares/Beneficial Interest Held at September 30, 2013		Shares Purchased			Shares/Beneficial Interest Sold			Shares Held at March 31, 2014		Value at March 31, 2014		Income		Realized Gain (Loss)
BlackRock Liquidity Funds, TempFund, Institutional Class		153,052,516		99,706,302	¹		—			252,758,818	$	252,758,818	$	48,709		—
BlackRock Liquidity Series, LLC, Money Market Series	$	243,001		—		$	243,001	²		—		—	$	1,762		—
iShares 1-3 Year Credit Bond ETF		196,815		—			—			196,815	$	20,756,110	$	105,778		—
iShares iBoxx $ High Yield Corporate Bond ETF		127,830		—			127,830			—		—	$	56,855	$	256,111
iShares MSCI Mexico Capped ETF		161,084		—			161,084			—		—	$	18,298	$	(462,883	)

Represents net shares purchased.

Represents beneficial interest sold.

(g)	Represents or includes a TBA transaction. Unsettled TBA transactions as of March 31, 2014 were as follows:


Counterparty	Value		Unrealized Depreciation
Barclays Capital, Inc.	$	4,113,185	$	(880	)
Deutsche Bank Securities, Inc.	$	2,608,912	$	(5,494	)
Goldman Sachs & Co.	$	8,885,018	$	(8,326	)
J.P. Morgan Securities LLC	$	480,023	$	(844	)
Merrill Lynch, Pierce, Fenner & Smith, Inc.	$	264,414	$	(1,211	)
Morgan Stanley & Co. LLC	$	3,103,274	$	(824	)

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

Financial futures contracts outstanding as of March 31, 2014 were as follows:


Contracts Purchased/ (Sold)		Issue	Exchange	Expiration			Notional Value		Unrealized Appreciation (Depreciation)
	175	CAC 40 10 Euro Index	NYSE Liffe		April 2014	USD		10,586,262	$	371,074
	119	AUD Currency Futures	Chicago Mercantile		June 2014	USD		10,977,750		355,525
	274	Australian Government Bonds (10 Year)	Sydney		June 2014	USD		29,361,725		171,730
	34	CHF Currency Futures	Chicago Mercantile		June 2014	USD		4,810,150		(54,949	)
	79	DAX Index	Eurex		June 2014	USD		26,083,648		1,426,341
	437	Euro STOXX 50 Index	Eurex		June 2014	USD		18,663,121		1,008,326
	30	Euro-Schatz	Eurex		June 2014	USD		4,563,420		(4,510	)
	24	GBP Currency Futures	Chicago Mercantile		June 2014	USD		2,499,300		8,763
	192	Nikkei 225 Index	Osaka Securities		June 2014	USD		27,586,688		(488,533	)
	4	Ultra Treasury Bonds	Chicago Board of Trade		June 2014	USD		577,875		7,912
	12	U.S. Treasury Bonds (30 Year)	Chicago Board of Trade		June 2014	USD		1,598,625		(4,685	)
	45	U.S. Treasury Notes (2 Year)	Chicago Board of Trade		June 2014	USD		9,880,313		(10,852	)

See Notes to Financial Statements.


14		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Schedule of Investments (continued)

Financial futures contracts outstanding as of March 31, 2014 were as follows: (concluded)


Contracts Purchased/ (Sold)			Issue	Exchange		Expiration			Notional Value		Unrealized Appreciation (Depreciation)
	(16	)	Euro-Bund 8.5 to 10.5-Year Bond Futures Call Options, Strike Price EUR 142.50		Eurex		April 2014	USD		26,451	$	(10,520	)
	(16	)	Euro-Bund 8.5 to 10.5-Year Bond Futures Put Options, Strike Price EUR 142.50		Eurex		April 2014	USD		7,054		10,820
	(12	)	Euro-Bund 8.5 to 10.5-Year Bond Futures Call Options, Strike Price EUR 142.50		Eurex		May 2014	USD		25,459		731
	(12	)	Euro-Bund 8.5 to 10.5-Year Bond Futures Put Options, Strike Price EUR 142.50		Eurex		May 2014	USD		10,911		1,613
	(11	)	Canadian Government Bonds (10 Year)		Montreal		June 2014	USD		1,292,836		(4,459	)
	(687	)	E-Mini S&P 500 Futures		Chicago Mercantile		June 2014	USD		64,045,575		(848,683	)
	(11	)	Euro - OAT French Government Bonds		Eurex		June 2014	USD		2,065,067		(18,174	)
	(79	)	EUR Currency Futures		Chicago Mercantile		June 2014	USD		13,601,825		126,630
	(53	)	Euro-Bobl		Eurex		June 2014	USD		9,153,995		(5,387	)
	(51	)	Euro-Bund		Eurex		June 2014	USD		10,073,953		(17,296	)
	(67	)	FTSE 100 Index Futures		NYSE Liffe		June 2014	USD		7,308,979		(98,703	)
	(8	)	Gilt British		NYSE Liffe		June 2014	USD		1,460,814		(2,141	)
	(55	)	JPY Currency Futures		Chicago Mercantile		June 2014	USD		666,325,000		35,206
	(3	)	U.S. Treasury Notes (5 Year)		Chicago Board of Trade		June 2014	USD		356,859		286
	(326	)	U.S. Treasury Notes (10 Year)		Chicago Board of Trade		June 2014	USD		40,261,000		166,881
	Total										$	2,122,946

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows:


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	1,270,000		USD	1,175,258	Royal Bank of Canada		4/03/14	$	2,302
AUD	1,270,000		USD	1,174,318	UBS AG		4/03/14		3,242
CAD	5,033,436		USD	4,569,620	Royal Bank of Canada		4/03/14		(16,849	)
CZK	4,700,000		USD	235,437	BNP Paribas S.A.		4/03/14		436
DKK	4,400,000		USD	809,344	Deutsche Bank AG		4/03/14		2,578
EUR	49,910,000		USD	68,496,484	Deutsche Bank AG		4/03/14		261,930
GBP	7,545,000		USD	12,538,085	Barclays Bank PLC		4/03/14		40,207
ILS	1,200,000		USD	342,769	Deutsche Bank AG		4/03/14		1,305
JPY	2,884,500,000		USD	28,181,605	HSBC Bank PLC		4/03/14		(234,627	)
MXN	8,500,000		USD	650,019	Credit Suisse International		4/03/14		897
NOK	5,350,000		USD	891,183	BNP Paribas S.A.		4/03/14		2,197
NZD	350,000		USD	303,800	Westpac Banking Corp.		4/03/14		(127	)
SEK	11,400,000		USD	1,757,254	BNP Paribas S.A.		4/03/14		4,016
SGD	400,000		USD	317,133	Westpac Banking Corp.		4/03/14		858
THB	13,500,000		USD	415,538	Citibank N.A.		4/03/14		560
USD	564,999		AUD	635,000	Deutsche Bank AG		4/03/14		(23,781	)
USD	565,093		AUD	635,000	HSBC Bank PLC		4/03/14		(23,687	)
USD	565,131		AUD	635,000	Royal Bank of Canada		4/03/14		(23,649	)
USD	565,180		AUD	635,000	Westpac Banking Corp.		4/03/14		(23,599	)

See Notes to Financial Statements.


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		15


Schedule of Investments (continued)

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows: (continued)


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	68,884		CAD	76,308	JPMorgan Chase Bank N.A.		4/03/14	$	(137	)
USD	223,083		CAD	247,128	Royal Bank of Canada		4/03/14		(445	)
USD	4,227,798		CAD	4,710,000	Royal Bank of Canada		4/03/14		(32,422	)
USD	234,802		CZK	4,700,000	BNP Paribas S.A.		4/03/14		(1,071	)
USD	805,471		DKK	4,400,000	BNP Paribas S.A.		4/03/14		(6,451	)
USD	16,597,567		EUR	12,155,000	BNP Paribas S.A.		4/03/14		(147,745	)
USD	16,596,364		EUR	12,155,000	Deutsche Bank AG		4/03/14		(148,948	)
USD	538,640		EUR	390,000	Goldman Sachs International		4/03/14		1,357
USD	16,596,388		EUR	12,155,000	Goldman Sachs International		4/03/14		(148,924	)
USD	123,800		EUR	90,000	UBS AG		4/03/14		(188	)
USD	1,114,204		EUR	810,000	UBS AG		4/03/14		(1,691	)
USD	16,595,307		EUR	12,155,000	UBS AG		4/03/14		(150,005	)
USD	12,546,173		GBP	7,545,000	Royal Bank of Canada		4/03/14		(32,119	)
USD	341,054		ILS	1,200,000	Deutsche Bank AG		4/03/14		(3,020	)
USD	28,308,470		JPY	2,884,500,000	Credit Suisse International		4/03/14		361,491
USD	635,752		MXN	8,500,000	Credit Suisse International		4/03/14		(15,164	)
USD	882,252		NOK	5,350,000	BNP Paribas S.A.		4/03/14		(11,128	)
USD	291,489		NZD	350,000	Westpac Banking Corp.		4/03/14		(12,185	)
USD	1,742,720		SEK	11,400,000	BNP Paribas S.A.		4/03/14		(18,549	)
USD	315,588		SGD	400,000	HSBC Bank PLC		4/03/14		(2,403	)
USD	413,192		THB	13,500,000	Citibank N.A.		4/03/14		(2,906	)
USD	276,003		ZAR	3,000,000	Credit Suisse International		4/03/14		(8,820	)
ZAR	3,000,000		USD	283,119	Barclays Bank PLC		4/03/14		1,704
USD	1,172,540		AUD	1,270,000	Royal Bank of Canada		5/07/14		(2,263	)
USD	1,171,607		AUD	1,270,000	UBS AG		5/07/14		(3,196	)
USD	4,565,972		CAD	5,033,436	Royal Bank of Canada		5/07/14		16,841
USD	235,478		CZK	4,700,000	BNP Paribas S.A.		5/07/14		(439	)
USD	809,538		DKK	4,400,000	Deutsche Bank AG		5/07/14		(2,576	)
USD	68,493,090		EUR	49,910,000	Deutsche Bank AG		5/07/14		(260,380	)
USD	358,317		EUR	260,000	JPMorgan Chase Bank N.A.		5/07/14		154
USD	12,534,901		GBP	7,545,000	Barclays Bank PLC		5/07/14		(40,250	)
USD	342,632		ILS	1,200,000	Deutsche Bank AG		5/07/14		(1,324	)
USD	28,186,562		JPY	2,884,500,000	HSBC Bank PLC		5/07/14		234,410
USD	648,333		MXN	8,500,000	Credit Suisse International		5/07/14		(866	)
USD	890,025		NOK	5,350,000	BNP Paribas S.A.		5/07/14		(2,174	)
USD	302,995		NZD	350,000	Westpac Banking Corp.		5/07/14		168
USD	1,756,305		SEK	11,400,000	BNP Paribas S.A.		5/07/14		(4,017	)
USD	317,132		SGD	400,000	Westpac Banking Corp.		5/07/14		(864	)
USD	414,823		THB	13,500,000	Citibank N.A.		5/07/14		(645	)
USD	281,580		ZAR	3,000,000	Barclays Bank PLC		5/08/14		(1,705	)
USD	3,475,368		JPY	352,159,000	Deutsche Bank AG		6/05/14		62,260
AUD	144,000		USD	132,044	Barclays Bank PLC		6/11/14		837
AUD	283,000		USD	253,640	Citibank N.A.		6/11/14		7,510
AUD	207,617		USD	186,230	Credit Suisse International		6/11/14		5,357
AUD	266,936		USD	239,438	Credit Suisse International		6/11/14		6,888

See Notes to Financial Statements.


16		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Schedule of Investments (continued)

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows: (continued)


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
AUD	291,000		USD	259,846	Credit Suisse International		6/11/14	$	8,687
AUD	433,000		USD	390,360	Credit Suisse International		6/11/14		9,208
AUD	191,000		USD	172,668	HSBC Bank PLC		6/11/14		3,585
AUD	10,000		USD	9,193	JPMorgan Chase Bank N.A.		6/11/14		35
AUD	12,000		USD	10,862	JPMorgan Chase Bank N.A.		6/11/14		212
AUD	34,000		USD	30,775	JPMorgan Chase Bank N.A.		6/11/14		600
AUD	72,000		USD	66,077	UBS AG		6/11/14		364
AUD	187,000		USD	172,273	UBS AG		6/11/14		289
AUD	270,000		USD	240,979	UBS AG		6/11/14		8,174
AUD	145,000		USD	132,746	Westpac Banking Corp.		6/11/14		1,059
AUD	190,000		USD	171,470	Westpac Banking Corp.		6/11/14		3,860
CAD	143,000		USD	127,111	Citibank N.A.		6/11/14		2,018
CAD	66,000		USD	58,463	Deutsche Bank AG		6/11/14		1,135
CAD	52,000		USD	46,386	Goldman Sachs International		6/11/14		570
CAD	265,000		USD	238,595	Royal Bank of Canada		6/11/14		701
CAD	389,000		USD	350,239	Royal Bank of Canada		6/11/14		1,029
CAD	15,000		USD	13,438	State Street Bank and Trust Co.		6/11/14		107
EUR	134,000		USD	184,669	Deutsche Bank AG		6/11/14		(85	)
EUR	802,000		USD	1,101,096	Deutsche Bank AG		6/11/14		3,654
EUR	146,000		USD	201,753	Goldman Sachs International		6/11/14		(639	)
EUR	61,000		USD	84,028	HSBC Bank PLC		6/11/14		(1	)
EUR	29,000		USD	39,896	JPMorgan Chase Bank N.A.		6/11/14		52
EUR	148,000		USD	205,388	JPMorgan Chase Bank N.A.		6/11/14		(1,519	)
EUR	191,000		USD	263,677	UBS AG		6/11/14		(576	)
GBP	103,000		USD	171,217	Goldman Sachs International		6/11/14		406
GBP	8,000		USD	13,344	HSBC Bank PLC		6/11/14		(14	)
GBP	56,000		USD	93,410	HSBC Bank PLC		6/11/14		(101	)
GBP	136,000		USD	226,615	HSBC Bank PLC		6/11/14		(6	)
GBP	219,000		USD	365,552	HSBC Bank PLC		6/11/14		(645	)
GBP	447,000		USD	742,268	UBS AG		6/11/14		2,541
JPY	20,300,000		USD	197,696	Barclays Bank PLC		6/11/14		(943	)
JPY	40,000,000		USD	392,015	Barclays Bank PLC		6/11/14		(4,325	)
JPY	20,300,000		USD	197,696	BNP Paribas S.A.		6/11/14		(943	)
JPY	6,700,000		USD	65,083	Citibank N.A.		6/11/14		(145	)
JPY	16,400,000		USD	159,651	Credit Suisse International		6/11/14		(698	)
JPY	53,500,000		USD	520,218	Credit Suisse International		6/11/14		(1,682	)
JPY	20,400,000		USD	199,443	Deutsche Bank AG		6/11/14		(1,721	)
JPY	3,800,000		USD	36,922	Goldman Sachs International		6/11/14		(91	)
JPY	4,100,000		USD	40,432	Goldman Sachs International		6/11/14		(694	)
JPY	12,300,000		USD	121,297	Goldman Sachs International		6/11/14		(2,083	)
JPY	16,400,000		USD	159,514	Goldman Sachs International		6/11/14		(562	)
JPY	17,500,000		USD	172,901	Goldman Sachs International		6/11/14		(3,287	)
JPY	17,500,000		USD	172,919	HSBC Bank PLC		6/11/14		(3,305	)
JPY	5,100,000		USD	50,000	JPMorgan Chase Bank N.A.		6/11/14		(570	)
JPY	20,150,000		USD	198,986	JPMorgan Chase Bank N.A.		6/11/14		(3,687	)

See Notes to Financial Statements.


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		17


Schedule of Investments (continued)

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows: (continued)


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
JPY	20,400,000		USD	198,726	UBS AG		6/11/14	$	(1,004	)
NOK	82,000		USD	13,690	Barclays Bank PLC		6/11/14		(34	)
NOK	1,237,000		USD	206,728	Barclays Bank PLC		6/11/14		(724	)
NOK	84,000		USD	13,967	Deutsche Bank AG		6/11/14		22
NOK	159,000		USD	26,501	HSBC Bank PLC		6/11/14		(22	)
NOK	710,000		USD	119,087	JPMorgan Chase Bank N.A.		6/11/14		(846	)
NZD	135,000		USD	114,880	Barclays Bank PLC		6/11/14		1,587
NZD	110,000		USD	91,896	HSBC Bank PLC		6/11/14		3,003
NZD	531,000		USD	443,608	HSBC Bank PLC		6/11/14		14,498
NZD	108,000		USD	91,599	Westpac Banking Corp.		6/11/14		1,575
NZD	242,000		USD	205,653	Westpac Banking Corp.		6/11/14		3,126
SEK	92,000		USD	14,382	BNP Paribas S.A.		6/11/14		(184	)
SEK	294,000		USD	45,496	Deutsche Bank AG		6/11/14		(124	)
SEK	418,000		USD	65,765	Deutsche Bank AG		6/11/14		(1,256	)
SEK	526,000		USD	81,831	Deutsche Bank AG		6/11/14		(655	)
SEK	753,000		USD	118,561	Deutsche Bank AG		6/11/14		(2,352	)
SEK	588,000		USD	91,981	HSBC Bank PLC		6/11/14		(1,237	)
SEK	6,143,000		USD	950,910	HSBC Bank PLC		6/11/14		(2,876	)
SEK	1,786,000		USD	275,394	JPMorgan Chase Bank N.A.		6/11/14		235
SEK	360,000		USD	56,618	UBS AG		6/11/14		(1,060	)
USD	113,890		AUD	124,000	Bank of America N.A.		6/11/14		(536	)
USD	131,386		AUD	143,000	Barclays Bank PLC		6/11/14		(573	)
USD	131,988		AUD	147,000	Barclays Bank PLC		6/11/14		(3,662	)
USD	146,244		AUD	159,000	BNP Paribas S.A.		6/11/14		(480	)
USD	25,352		AUD	28,000	Deutsche Bank AG		6/11/14		(486	)
USD	95,009		AUD	105,000	Deutsche Bank AG		6/11/14		(1,884	)
USD	98,693		AUD	109,000	Deutsche Bank AG		6/11/14		(1,891	)
USD	113,039		AUD	126,000	Royal Bank of Canada		6/11/14		(3,233	)
USD	238,909		AUD	259,000	UBS AG		6/11/14		(93	)
USD	509,949		AUD	572,000	UBS AG		6/11/14		(17,887	)
USD	836,246		AUD	938,000	UBS AG		6/11/14		(29,332	)
USD	88,510		CAD	98,000	Royal Bank of Canada		6/11/14		15
USD	13,540		CAD	15,000	State Street Bank and Trust Co.		6/11/14		(5	)
USD	45,615		EUR	33,000	Bank of America N.A.		6/11/14		157
USD	22,067		EUR	16,000	Barclays Bank PLC		6/11/14		27
USD	264,705		EUR	191,000	Barclays Bank PLC		6/11/14		1,604
USD	69,046		EUR	50,000	Citibank N.A.		6/11/14		171
USD	12,355		EUR	9,000	Deutsche Bank AG		6/11/14		(43	)
USD	52,858		EUR	38,500	Deutsche Bank AG		6/11/14		(175	)
USD	130,877		EUR	94,000	Deutsche Bank AG		6/11/14		1,392
USD	263,089		EUR	190,000	Deutsche Bank AG		6/11/14		1,365
USD	119,843		EUR	87,000	HSBC Bank PLC		6/11/14		1
USD	193,920		EUR	141,000	JPMorgan Chase Bank N.A.		6/11/14		(307	)
USD	121,222		EUR	87,000	Royal Bank of Scotland PLC		6/11/14		1,380
USD	39,836		EUR	29,000	UBS AG		6/11/14		(111	)

See Notes to Financial Statements.


18		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Schedule of Investments (continued)

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows: (continued)


Currency Purchased		Currency Sold				Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	144,727		EUR	105,000		UBS AG		6/11/14	$	90
USD	512,829		EUR	370,000		UBS AG		6/11/14		3,156
USD	199,377		GBP	120,000		Deutsche Bank AG		6/11/14		(572	)
USD	232,981		GBP	140,000		Deutsche Bank AG		6/11/14		(292	)
USD	13,286		GBP	8,000		HSBC Bank PLC		6/11/14		(44	)
USD	144,479		GBP	87,000		HSBC Bank PLC		6/11/14		(484	)
USD	145,219		GBP	87,000		HSBC Bank PLC		6/11/14		256
USD	207,547		GBP	125,000		HSBC Bank PLC		6/11/14		(733	)
USD	92,708		GBP	56,000		State Street Bank and Trust Co.		6/11/14		(601	)
USD	132,831		GBP	80,000	��	State Street Bank and Trust Co.		6/11/14		(468	)
USD	26,569		GBP	16,000		UBS AG		6/11/14		(91	)
USD	574,924		JPY	58,850,000		BNP Paribas S.A.		6/11/14		4,535
USD	1,127,525		JPY	115,415,000		BNP Paribas S.A.		6/11/14		8,894
USD	25,461		JPY	2,600,000		Citibank N.A.		6/11/14		261
USD	210,539		JPY	21,500,000		Citibank N.A.		6/11/14		2,156
USD	129,833		JPY	13,300,000		Credit Suisse International		6/11/14		927
USD	130,399		JPY	13,350,000		Deutsche Bank AG		6/11/14		1,008
USD	130,539		JPY	13,350,000		Deutsche Bank AG		6/11/14		1,148
USD	392,847		JPY	40,650,000		Deutsche Bank AG		6/11/14		(1,143	)
USD	393,050		JPY	40,650,000		Deutsche Bank AG		6/11/14		(940	)
USD	53,130		JPY	5,400,000		HSBC Bank PLC		6/11/14		792
USD	171,980		JPY	17,500,000		JPMorgan Chase Bank N.A.		6/11/14		2,366
USD	65,625		JPY	6,700,000		State Street Bank and Trust Co.		6/11/14		687
USD	52,836		JPY	5,400,000		UBS AG		6/11/14		498
USD	236,816		JPY	24,100,000		UBS AG		6/11/14		3,233
USD	265,646		JPY	27,200,000		UBS AG		6/11/14		2,017
USD	365,798		MYR	1,200,000		Barclays Bank PLC		6/11/14		162
USD	119,240		NOK	718,000		BNP Paribas S.A.		6/11/14		(333	)
USD	685,544		NOK	4,128,000		BNP Paribas S.A.		6/11/14		(1,916	)
USD	26,425		NOK	160,000		Deutsche Bank AG		6/11/14		(220	)
USD	53,973		NOK	327,000		JPMorgan Chase Bank N.A.		6/11/14		(484	)
USD	13,330		NOK	80,000		UBS AG		6/11/14		7
USD	5,039		NZD	6,000		Barclays Bank PLC		6/11/14		(137	)
USD	65,894		NZD	77,000		Barclays Bank PLC		6/11/14		(536	)
USD	78,950		NZD	94,000		Barclays Bank PLC		6/11/14		(2,146	)
USD	27,226		NZD	32,000		Credit Suisse International		6/11/14		(381	)
USD	357,340		NZD	420,000		Credit Suisse International		6/11/14		(5,004	)
USD	412,694		NZD	491,000		Credit Suisse International		6/11/14		(10,904	)
USD	99,220		NZD	117,000		Royal Bank of Canada		6/11/14		(1,719	)
USD	8,408		NZD	10,000		UBS AG		6/11/14		(219	)
USD	79,876		NZD	95,000		UBS AG		6/11/14		(2,083	)
USD	101,721		NZD	120,000		Westpac Banking Corp.		6/11/14		(1,806	)
USD	325,349		SEK	2,085,000		Deutsche Bank AG		6/11/14		3,576
USD	53,250		SEK	344,000		HSBC Bank PLC		6/11/14		161
USD	126,865		SEK	811,000		HSBC Bank PLC		6/11/14		1,706

See Notes to Financial Statements.


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		19


Schedule of Investments (continued)

Forward foreign currency exchange contracts outstanding as of March 31, 2014 were as follows: (concluded)


Currency Purchased		Currency Sold			Counterparty	Settlement Date		Unrealized Appreciation (Depreciation)
USD	71,099		SEK	455,000	JPMorgan Chase Bank N.A.		6/11/14	$	880
USD	90,542		SEK	580,000	JPMorgan Chase Bank N.A.		6/11/14		1,032
USD	254,379		SEK	1,628,000	JPMorgan Chase Bank N.A.		6/11/14		3,134
USD	274,635		TRY	600,000	Deutsche Bank AG		6/11/14		201
Total								$	(405,157	)

Exchange-traded options purchased as of March 31, 2014 were as follows:

Description

Put/
Call

Strike

Price

Expiration

Date

Contracts

Market

Value

U.S. Treasury Notes (10 Year)

Put

USD

122.00

4/25/14

115

19,766

Exchange-traded options written as of March 31, 2014 were as follows:


Description	Put/ Call		Strike Price			Expiration Date		Contracts		Market Value
U.S. Treasury Notes (10 Year)		Call		USD	124.00		4/25/14		85	$	(35,859	)
U.S. Treasury Notes (10 Year)		Call		USD	123.50		5/23/14		12		(10,875	)
U.S. Treasury Notes (10 Year)		Put		USD	124.00		4/25/14		85		(78,360	)
U.S. Treasury Notes (10 Year)		Put		USD	123.50		5/23/14		12		(10,875	)
Total										$	(135,969	)

Centrally cleared interest rate swaps outstanding as of March 31, 2014 were as follows:

Fixed

Rate

Floating

Rate

Clearinghouse

Expiration

Date

Notional

Amount

(000)

Unrealized

Appreciation

(Depreciation)

2.38%¹

3-month LIBOR

Chicago Mercantile

2/15/21

USD

1,780

3,491

1.73%¹

6-month EURIBOR

Chicago Mercantile

2/15/23

EUR

760

(5,792

)

1.71%¹

6-month EURIBOR

Chicago Mercantile

2/15/23

EUR

360

(1,865

)

Total

(4,166

)

Fund pays the fixed rate and receives the floating rate.

Centrally cleared credit default swaps — buy protection outstanding as of March 31, 2014 were as follows:


Index	Pay Fixed Rate			Clearinghouse	Expiration Date		Notional Amount (000)			Unrealized Appreciation (Depreciation)
AXA SA		1.00	%	Bank of America N.A.		3/20/19		EUR	250	$	(18	)
AXA SA		1.00	%	Bank of America N.A.		3/20/19		EUR	130		(9	)
AXA SA		1.00	%	Bank of America N.A.		3/20/19		EUR	70		(5	)
AXA SA		1.00	%	Société Générale		3/20/19		EUR	50		13
Total										$	(19	)

See Notes to Financial Statements.


20		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Schedule of Investments (continued)

OTC total return swaps outstanding as of March 31, 2014 were as follows:


Reference Entity	Fixed Amount			Counterparty	Expiration Date		Contract Amount		Market Value		Premiums Paid (Received)		Unrealized Appreciation
TAIEX Future Contract April 2014	TWD	433,144,964	¹	Deutsche Bank AG		4/16/14		248	$	93,228		—	$	93,228
KOSPI 200 Future Contract June 2014	KRW	14,798,758,000	¹	Credit Suisse International		6/12/14		116		177,032		—		177,032
Total									$	270,260		—	$	270,260

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

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

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investment and derivative financial instrument and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and derivative financial instruments, please refer to Note 2 of the Notes to Financial Statements.

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy as of March 31, 2014:


	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments:
Asset-Backed Securities		—	$	29,130		—	$	29,130
Common Stocks	$	9,564,249		42,909,589	$	27,264		52,501,102
Corporate Bonds		—		54,032,497		—		54,032,497
Foreign Agency Obligations		—		10,901,190		—		10,901,190
Foreign Government Obligations		—		79,453,162		1,505,987		80,959,149
Investment Companies		219,341,875		—		—		219,341,875
Non-Agency Mortgage-Backed Securities		—		932,154		—		932,154
U.S. Government Sponsored Agency Securities		—		21,947,636		—		21,947,636
U.S. Treasury Obligations		—		4,730,098		—		4,730,098
Short-Term Securities		252,758,818		—		—		252,758,818
Options Purchased		19,766		—		—		19,766
Total	$	481,684,708	$	214,935,456	$	1,533,251	$	698,153,415

See Notes to Financial Statements.


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		21


Schedule of Investments (concluded)


	Level 1			Level 2			Level 3		Total
Derivative Financial Instruments¹
Assets:
Equity contracts	$	2,805,741		$	270,260			—	$	3,076,001
Foreign currency exchange contracts		526,124			1,140,832			—		1,666,956
Interest rate contracts		359,973			—			—		359,973
Liabilities:
Credit contracts		—			(19	)		—		(19	)
Equity contracts		(1,435,919	)		—			—		(1,435,919	)
Foreign currency exchange contracts		(54,949	)		(1,545,989	)		—		(1,600,938	)
Interest rate contracts		(213,993	)		(4,166	)		—		(218,159	)
Total	$	1,986,977		$	(139,082	)		—	$	1,847,895

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


	Level 1		Level 2			Level 3		Total
Assets:
Cash pledged for financial futures contracts	$	10,990,000		—			—	$	10,990,000
Cash pledged for centrally cleared swaps		60,000		—			—		60,000
Foreign currency at value		3,614,694		—			—		3,614,694
Liabilities:
Bank overdraft		—	$	(1,012,686	)		—		(1,012,686	)
Total	$	14,664,694	$	(1,012,686	)		—	$	13,652,008

There were no transfers between levels during the period ended March 31, 2014.

See Notes to Financial Statements.


22		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Statement of Assets and Liabilities


March 31, 2014 (Unaudited)

Assets
Investments at value — unaffiliated (cost — $397,732,945)	$	424,638,487
Investments at value — affiliated (cost — $273,507,216)		273,514,928
Cash pledged for financial futures contracts		10,990,000
Cash pledged for centrally cleared swaps		60,000
Foreign currency at value (cost — $3,563,937)		3,614,694
Variation margin receivable on financial futures contracts		397,007
Investments sold receivable		2,435,454
Unrealized appreciation on forward foreign currency exchange contracts		1,140,832
Unrealized appreciation on OTC swaps		270,260
Capital shares sold receivable		434,681
Interest receivable		1,414,548
Dividends receivable — unaffiliated		304,243
Dividends receivable — affiliated		6,470
Securities lending income receivable — affiliated		117
Prepaid expenses		63,213

Total assets		719,284,934


Liabilities
Bank overdraft		1,012,686
Options written at value (premiums received — $152,235)		135,969
Variation margin payable on centrally cleared swaps		9,119
Variation margin payable on financial futures contracts		665,779
Investments purchased payable		20,330,463
Unrealized depreciation on forward foreign currency exchange contracts		1,545,989
Capital shares redeemed payable		507,113
Investment advisory fees payable		351,522
Service and distribution fees payable		154,869
Other affiliates payable		153,973
Deferred tax payable		16,559
Officer’s and Trustees’ fees payable		3,667
Other accrued expenses payable		449,805

Total liabilities		25,337,513

Net Assets	$	693,947,421


Net Assets Consist of
Paid-in capital	$	642,547,732
Undistributed net investment income		5,156,863
Accumulated net realized gain		17,279,640
Net unrealized appreciation/depreciation		28,963,186

Net Assets	$	693,947,421


Net Asset Value
Institutional — Based on net assets of $237,091,248 and 15,529,356 shares outstanding, unlimited shares authorized, $0.001 par value	$	15.27

Service — Based on net assets of $1,723,982 and 113,295 shares outstanding, unlimited shares authorized, $0.001 par value	$	15.22

Investor A — Based on net assets of $365,536,165 and 24,037,862 shares outstanding, unlimited shares authorized, $0.001 par value	$	15.21

Investor B — Based on net assets of $9,861,336 and 658,608 shares outstanding, unlimited shares authorized, $0.001 par value	$	14.97

Investor C — Based on net assets of $79,734,690 and 5,355,828 shares outstanding, unlimited shares authorized, $0.001 par value	$	14.89

See Notes to Financial Statements.


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		23


Statement of Operations


Six Months Ended March 31, 2014 (Unaudited)

Investment Income
Interest	$	1,793,483
Dividends — unaffiliated		2,602,163
Dividends — affiliated		229,640
Foreign taxes withheld		(50,614	)
Other income — affiliated		15,791
Securities lending — affiliated — net		1,762

Total income		4,592,225


Expenses
Investment advisory		1,889,969
Service and distribution — class specific		930,348
Transfer agent — class specific		510,902
Administration		248,292
Professional		87,725
Administration — class specific		85,921
Printing		33,301
Registration		34,906
Custodian		15,740
Officer and Trustees		10,373
Miscellaneous		36,828
Recoupment of past waived fees		43,094
Recoupment of past waived fees — class specific		5,575

Total expenses		3,932,974
Less fees waived by Manager		(87,168	)
Less administration fees waived — class specific		(119	)

Total expenses after fees waived and/or reimbursed		3,845,687

Net investment income		746,538


Realized and Unrealized Gain (Loss)
Net realized gain (loss) from:
Investments — unaffiliated		26,527,536
Investments — affiliated		(206,772	)
Options written		101,941
Financial futures contracts		4,621,498
Swaps		(640,878	)
Foreign currency transactions		(1,407,815	)

		28,995,510

Net change in unrealized appreciation/depreciation on:
Investments — unaffiliated		(137,925	)
Investments — affiliated		1,093,200
Options written		20,010
Financial futures contracts		927,869
Swaps		572,315
Foreign currency translations		1,641,217

		4,116,686

Total realized and unrealized gain		33,112,196

Net Increase in Net Assets Resulting from Operations	$	33,858,734

See Notes to Financial Statements.


24		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Statements of Changes in Net Assets


Increase in Net Assets:	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30, 2013

Operations
Net investment income	$	746,538		$	4,868,858
Net realized gain		28,995,510			58,547,459
Net change in unrealized appreciation/depreciation		4,116,686			(16,080,632	)

Net increase in net assets resulting from operations		33,858,734			47,335,685


Dividends and Distributions to Shareholders From
Net investment income:
Institutional		(2,875,794	)		(854,926	)¹
Service		(17,512	)		(20,556	)¹
Investor A		(3,753,926	)		(4,326,576	)¹
Investor B		(78,744	)		(15,863	)¹
Investor C		(649,050	)		(271,036	)¹
Net realized gain:
Institutional		(19,653,564	)		(2,193,125	)¹
Service		(140,882	)		(70,315	)¹
Investor A		(30,046,152	)		(14,426,688	)¹
Investor B		(927,559	)		(670,450	)¹
Investor C		(6,652,735	)		(3,215,648	)¹

Decrease in net assets resulting from dividends and distributions to shareholders		(64,795,918	)		(26,065,183	)


Capital Share Transactions
Net increase in net assets derived from capital share transactions		121,810,106			24,614,595


Net Assets
Total increase in net assets		90,872,922			45,885,097
Beginning of period		603,074,499			557,189,402

End of period	$	693,947,421		$	603,074,499

Undistributed net investment income, end of period	$	5,156,863		$	11,785,351

Determined in accordance with federal tax regulations.

See Notes to Financial Statements.


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		25


Financial Highlights


	Institutional																		Service
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	15.95		$	15.37		$	14.03		$	14.31		$	13.28		$	12.96		$	15.90		$	15.31		$	13.99		$	14.27		$	13.24		$	12.93

Net investment income¹		0.04			0.19			0.23			0.29			0.29			0.27			0.01			0.15			0.19			0.25			0.25			0.24
Net realized and unrealized gain (loss)		0.79			1.19			1.68			(0.26	)		1.02			0.45			0.78			1.19			1.67			(0.26	)		1.03			0.44

Net increase (decrease) from investment operations		0.83			1.38			1.91			0.03			1.31			0.72			0.79			1.34			1.86			(0.01	)		1.28			0.68

Dividends and distributions from:
Net investment income		(0.20	)		(0.22	)²		(0.26	)²		(0.31	)²		(0.28	)²		(0.21	)²		(0.16	)		(0.17	)²		(0.23	)²		(0.27	)²		(0.25	)²		(0.18	)²
Net realized gain		(1.31	)		(0.58	)²		(0.31	)²		—			—			(0.19	)²		(1.31	)		(0.58	)²		(0.31	)²		—			—			(0.19	)²

Total dividends and distributions		(1.51	)		(0.80	)		(0.57	)		(0.31	)		(0.28	)		(0.40	)		(1.47	)		(0.75	)		(0.54	)		(0.27	)		(0.25	)		(0.37	)

Net asset value, end of period	$	15.27		$	15.95		$	15.37		$	14.03		$	14.31		$	13.28		$	15.22		$	15.90		$	15.31		$	13.99		$	14.27		$	13.24


Total Investment Return³
Based on net asset value		5.27	%⁴		9.35	%		13.89	%		0.06	%		9.99	%		6.15	%⁵		5.06	%⁴		9.06	%		13.53	%		(0.21	)%		9.74	%		5.83	%⁶


Ratios to Average Net Assets
Total expenses		0.81	%^7,8		0.91	%⁷		0.95	%⁹		0.94	%		0.95	%		0.95	%		1.20	%^7,8		1.24	%⁷		1.27	%⁹		1.24	%		1.27	%		1.18	%

Total expenses excluding recoupment of past waived fees		0.79	%^7,8		0.89	%⁷		0.91	%⁹		0.94	%		0.95	%		0.95	%		1.18	%^7,8		1.23	%⁷		1.27	%⁹		1.24	%		1.27	%		1.15	%

Total expenses after fees waived and/or reimbursed and paid indirectly		0.78	%^7,8		0.87	%⁷		0.90	%⁹		0.90	%		0.91	%		0.88	%		1.17	%^7,8		1.17	%⁷		1.18	%⁹		1.18	%		1.19	%		1.14	%

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense		0.78	%^7,8		0.87	%⁷		0.89	%⁹		0.89	%		0.89	%		0.88	%		1.17	%^7,8		1.17	%⁷		1.17	%⁹		1.17	%		1.17	%		1.14	%

Net investment income		0.57	%^7,8		1.22	%⁷		1.59	%⁹		1.91	%		2.09	%		2.43	%		0.16	%^7,8		0.95	%⁷		1.30	%⁹		1.63	%		1.80	%		2.17	%


Supplemental Data
Net assets, end of period (000)	$	237,091		$	132,007		$	59,041		$	40,259		$	39,083		$	29,127		$	1,724		$	1,774		$	1,915		$	1,676		$	1,652		$	1,472

Portfolio turnover		88	%		192	%		324	%¹⁰		401	%¹¹		400	%¹²		354	%¹³		88	%		192	%		324	%¹⁰		401	%¹¹		400	%¹²		354	%¹³

Based on average shares outstanding.

Determined in accordance with federal income tax regulations.

Where applicable, assumes the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 5.92%.

⁶

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 5.60%.

⁷

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10%.

⁸

Annualized.

⁹

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.05%.

¹⁰

Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 254%.

¹¹

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

¹²

Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 302%.

¹³

Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 227%.

See Notes to Financial Statements.


26		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Financial Highlights (continued)


	Investor A																		Investor B
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,															Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009			Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	15.89		$	15.30		$	13.98		$	14.26		$	13.23		$	12.92		$	15.69		$	15.10		$	13.83		$	14.10		$	13.08		$	12.75

Net investment income (loss)¹		0.02			0.15			0.19			0.25			0.24			0.23			(0.06	)		0.01			0.06			0.13			0.12			0.14
Net realized and unrealized gain (loss)		0.77			1.19			1.66			(0.26	)		1.03			0.43			0.76			1.16			1.65			(0.26	)		1.03			0.43

Net increase (decrease) from investment operations		0.79			1.34			1.85			(0.01	)		1.27			0.66			0.70			1.17			1.71			(0.13	)		1.15			0.57

Dividends and distributions from:
Net investment income		(0.16	)		(0.17	)²		(0.22	)²		(0.27	)²		(0.24	)²		(0.16	)²		(0.11	)		(0.01	)²		(0.13	)²		(0.14	)²		(0.13	)²		(0.05	)²
Net realized gain		(1.31	)		(0.58	)²		(0.31	)²		—			—			(0.19	)²		(1.31	)		(0.57	)²		(0.31	)²		—			—			(0.19	)²

Total dividends and distributions		(1.47	)		(0.75	)		(0.53	)		(0.27	)		(0.24	)		(0.35	)		(1.42	)		(0.58	)		(0.44	)		(0.14	)		(0.13	)		(0.24	)

Net asset value, end of period	$	15.21		$	15.89		$	15.30		$	13.98		$	14.26		$	13.23		$	14.97		$	15.69		$	15.10		$	13.83		$	14.10		$	13.08


Total Investment Return³
Based on net asset value		5.07	%⁴		9.09	%		13.51	%		(0.23	)%		9.70	%		5.66	%⁵		4.51	%⁴		8.04	%		12.60	%		(1.01	)%		8.78	%		4.93	%⁶


Ratios to Average Net Assets
Total expenses		1.16	%^7,8		1.18	%⁷		1.23	%⁹		1.20	%		1.23	%		1.27	%		2.17	%^7,8		2.10	%⁷		2.08	%⁹		2.00	%		2.04	%		2.07	%

Total expenses excluding recoupment of past waived fees		1.15	%^7,8		1.18	%⁷		1.23	%⁹		1.20	%		1.22	%		1.27	%		2.15	%^7,8		2.10	%⁷		2.08	%⁹		2.00	%		2.02	%		2.06	%

Total expenses after fees waived and/or reimbursed and paid indirectly		1.13	%^7,8		1.14	%⁷		1.20	%⁹		1.20	%		1.22	%		1.26	%		2.14	%^7,8		2.06	%⁷		2.06	%⁹		2.00	%		2.04	%		2.04	%

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense		1.13	%^7,8		1.14	%⁷		1.19	%⁹		1.19	%		1.20	%		1.26	%		2.14	%^7,8		2.06	%⁷		2.05	%⁹		1.98	%		2.02	%		2.04	%

Net investment income (loss)		0.19	%^7,8		0.98	%⁷		1.28	%⁹		1.61	%		1.75	%		2.04	%		(0.83	)%^7,8		0.08	%⁷		0.45	%⁹		0.84	%		0.91	%		1.27	%


Supplemental Data
Net assets, end of period (000)	$	365,536		$	374,715		$	390,209		$	370,916		$	385,511		$	361,751		$	9,861		$	12,730		$	19,077		$	31,595		$	49,315		$	69,934

Portfolio turnover		88	%		192	%		324	%¹⁰		401	%¹¹		400	%¹²		354	%¹³		88	%		192	%		324	%¹⁰		401	%¹¹		400	%¹²		354	%¹³

Based on average shares outstanding.

Determined in accordance with federal income tax regulations.

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 5.42%.

⁶

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 4.69%.

⁷

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10%.

⁸

Annualized.

⁹

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.05%.

¹⁰

Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 254%.

¹¹

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

¹²

Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 302%.

¹³

Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 227%.

See Notes to Financial Statements.


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		27


Financial Highlights (concluded)


	Investor C
	Six Months Ended March 31, 2014 (Unaudited)			Year Ended September 30,
	Six Months Ended March 31, 2014 (Unaudited)			2013			2012			2011			2010			2009
Per Share Operating Performance
Net asset value, beginning of period	$	15.60		$	15.02		$	13.76		$	14.04		$	13.04		$	12.73

Net investment income¹		(0.04	)		0.04			0.08			0.13			0.14			0.15
Net realized and unrealized gain (loss)		0.77			1.17			1.64			(0.25	)		1.02			0.43

Net increase (decrease) from investment operations		0.73			1.21			1.72			(0.12	)		1.16			0.58

Dividends and distributions from:
Net investment income		(0.13	)		(0.05	)²		(0.15	)²		(0.16	)²		(0.16	)²		(0.08	)²
Net realized gain		(1.31	)		(0.58	)²		(0.31	)²		—			—			(0.19	)²

Total dividends and distributions		(1.44	)		(0.63	)		(0.46	)		(0.16	)		(0.16	)		(0.27	)

Net asset value, end of period	$	14.89		$	15.60		$	15.02		$	13.76		$	14.04		$	13.04


Total Investment Return³
Based on net asset value		4.72	%⁴		8.29	%		12.75	%		(0.94	)%		8.86	%		4.99	%⁵


Ratios to Average Net Assets
Total expenses		1.85	%^6,7		1.88	%⁶		1.93	%⁸		1.93	%		1.94	%		1.98	%

Total expenses excluding recoupment of past waived fees		1.84	%^6,7		1.88	%⁶		1.93	%⁸		1.93	%		1.94	%		1.97	%

Total expenses after fees waived and/or reimbursed and paid indirectly		1.82	%^6,7		1.83	%⁶		1.90	%⁸		1.93	%		1.94	%		1.98	%

Total expenses after fees waived and/or reimbursed and paid indirectly and excluding interest expense		1.82	%^6,7		1.83	%⁶		1.90	%⁸		1.92	%		1.92	%		1.98	%

Net investment income (loss)		(0.49	)%^6,7		0.28	%⁶		0.58	%⁸		0.89	%		1.05	%		1.32	%


Supplemental Data
Net assets, end of period (000)	$	79,735		$	81,850		$	86,947		$	81,644		$	84,367		$	72,063

Portfolio turnover		88	%		192	%		324	%⁹		401	%¹⁰		400	%¹¹		354	%¹²

Based on average shares outstanding.

Determined in accordance with federal income tax regulations.

Where applicable, excludes the effects of any sales charges and assumes the reinvestment of dividends and distributions.

⁴

Aggregate total investment return.

⁵

Includes proceeds received from a settlement of litigation, which impacted the Fund’s total return. Excluding these proceeds, the Fund’s total return would have been 4.75%.

⁶

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.10%.

⁷

Annualized.

⁸

Ratios do not include expenses incurred indirectly as a result of investments in underlying funds of approximately 0.05%.

⁹

Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 254%.

¹⁰

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

¹¹

Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 302%.

¹²

Includes mortgage dollar roll transactions; excluding these transactions the portfolio turnover would have been 227%.

See Notes to Financial Statements.


28		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Notes to Financial Statements (Unaudited)

1. Organization:

BlackRock Funds^SM (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, open-end management investment company. The Trust is organized as a Massachusetts business trust. BlackRock Managed Volatility Portfolio (the “Fund”) is a series of the Trust.

The Fund offers multiple classes of shares. Institutional and Service Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with an initial sales charge, but may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase. Investor B and Investor C Shares may be subject to a CDSC. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that Service, Investor A, Investor B and Investor C Shares bear certain expenses related to the shareholder servicing of such shares, and Investor B and Investor C Shares also bear certain expenses related to the distribution of such shares. Investor B Shares automatically convert to Investor A Shares after approximately eight years. Investor B Shares are only available through exchanges and dividend reinvestments by existing shareholders and for purchase by certain employer-sponsored retirement plans. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures (except that Investor B shareholders may vote on material changes to the Investor A distribution and service plan).

The Fund, together with certain other registered investment companies advised by the Manager or its affiliates, is included in a complex of open-end funds referred to as the Equity-Liquidity Complex.

2. Significant Accounting Policies:

The Fund’s financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund:

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

The Fund values its bond investments on the basis of last available bid prices or current market quotations provided by dealers or pricing

services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. Financial futures contracts traded on exchanges are valued at their last sale price. TBA commitments are valued on the basis of last available bid prices or current market quotations provided by pricing services. Swap agreements are valued utilizing quotes received daily by the 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. Certain centrally cleared swaps are valued at the price determined by the relevant exchange or clearinghouse. Investments in open-end registered investment companies are valued at NAV each business day.

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

The Fund values its investments in BlackRock Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments will follow the parameters of investments by a money market fund that is subject to


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		29


Notes to Financial Statements (continued)

Rule 2a-7 under the 1940 Act. The Fund may withdraw up to 25% of its investment daily, although the manager of the Money Market Series, in its sole discretion, may permit an investor to withdraw more than 25% on any one day.

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

approved by the Board. Each business day, the Fund uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and OTC options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of business on the NYSE, which follows the close of the local markets.

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

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

Segregation and Collateralization: In cases where the Fund enters into certain investments (e.g., financial futures contracts, forward foreign currency exchange contracts, swaps and options written) that would be “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid securities having a market value at least equal to the amount of the Fund’s future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Fund may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.

Investment Transactions and Investment Income: For financial reporting purposes, investment transactions are recorded on the dates the transactions are entered into (the trade dates). Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on the ex-dividend date. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, some of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including


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Notes to Financial Statements (continued)

amortization and accretion of premiums and discounts on debt securities, is recognized on the accrual basis. Income, expenses 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 character and timing of dividends and distributions are determined in accordance with federal income tax regulations, which may differ from U.S. 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 U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns remains open for each of the four years ended September 30, 2013. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund’s facts and circumstances and does not believe there are any uncertain tax positions that require recognition of a tax liability.

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

3. Securities and Other Investments:

Asset-Backed and Mortgage-Backed Securities: The Fund may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates, which represent undivided fractional ownership interests in an underlying pool of assets, or as debt instruments, which are also known as collateralized obligations, and are generally issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may

be prepaid at any time because the underlying assets (i.e., loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security subject to such a prepayment feature will have the effect of shortening the maturity of the security. In addition, the Fund may subsequently have to reinvest the proceeds at lower interest rates. If the Fund has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.

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

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

Multiple Class Pass-Through Securities: The Fund may invest in multiple class pass-through securities, including collateralized mortgage obligations (“CMOs”) and commercial mortgage-backed securities. These multiple class securities may be issued by Ginnie Mae, U.S. government agencies or instrumentalities or by trusts formed by private originators of, or investors in, mortgage loans. In general, CMOs are debt obligations


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Notes to Financial Statements (continued)

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

Forward Commitments and When-Issued Delayed Delivery Securities:

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

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

In order to better define contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, TBA commitments may be entered into by the Fund under Master Securities Forward Transaction

Agreements (each, an “MSFTA”). An MSFTA typically contains, among other things, collateral posting terms and netting provisions in the event of default and/or termination event. The collateral requirements are typically calculated by netting the mark to market amount for each transaction under such agreement and comparing that amount to the value of the collateral currently pledged by the Fund and the counterparty. Cash collateral that has been pledged to cover the obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as cash pledged as collateral for TBA commitments or cash received as collateral for TBA commitments, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Typically, the Fund is permitted to sell, repledge or use the collateral it receives; however, the counterparty is not. To the extent amounts due to the Fund are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance.

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter, at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund on the next business day. During the term of the loan, the Fund earns dividend or interest income on the securities loaned but does not receive interest income on the securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.

The market value of securities on loan and the value of the related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value, and collateral on securities loaned at value, respectively. As of March 31, 2014, any securities on loan were collateralized by cash. The cash collateral invested by the securities lending agent, BlackRock Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”) which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. The value of the collateral is typically greater than that of the market value of the securities loaned, leaving the lender with a net


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Notes to Financial Statements (continued)

amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, the borrower can resell or re-pledge the loaned securities, and the Fund can reinvest cash collateral, or, upon an event of default, resell or re-pledge the collateral.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities lent. The Fund could suffer a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received.

4. Derivative Financial Instruments:

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to economically hedge its exposure to certain risks such as credit risk, equity risk, interest rate risk, forward foreign currency exchange rate risk or other risk (inflation risk). These contracts may be transacted on an exchange or OTC.

Financial Futures Contracts: The Fund purchases and/or sells financial futures contracts and options on financial futures contracts to gain exposure to, or economically hedge against, changes in interest rates (interest rate risk), changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk). Financial futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the particular contract, financial futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date.

Upon entering into a financial futures contract, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited, if any, is recorded on the Statement of Assets and Liabilities as cash pledged for financial futures contracts. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. Variation margin is recorded by the Fund as unrealized appreciation or depreciation and, if applicable, as a receivable or payable for variation margin in the Statement of Assets and Liabilities.

When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it

was opened and the value at the time it was closed. The use of financial futures contracts involves the risk of an imperfect correlation in the movements in the price of financial futures contracts, interest or foreign currency exchange rates and the underlying assets.

Forward Foreign Currency Exchange Contracts: The Fund enters into forward foreign currency exchange contracts as an economic hedge against either specific transactions or portfolio instruments or to obtain exposure to, or hedge exposure away from, foreign currencies (foreign currency exchange rate risk). A forward foreign currency exchange contract is an agreement between two parties to buy and sell a currency at a set exchange rate on a future date. Forward foreign currency exchange contracts, when used by the Fund, help to manage the overall exposure to the currencies in which some of the investments held by the Fund are denominated. The contract is marked-to-market daily and the change in market value is recorded by the Fund as an unrealized gain or loss. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. The use of forward foreign currency exchange contracts involves the risk that the value of a foreign currency exchange contract changes unfavorably due to movements in the value of the referenced foreign currencies.

Options: The Fund purchases and writes call and put options to increase or decrease its exposure to underlying instruments (including equity risk and interest rate risk) and/or, in the case of options written, to generate gains from options premiums. A call option gives the purchaser (holder) of the option the right (but not the obligation) to buy, and obligates the seller (writer) to sell (when the option is exercised) the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. A put option gives the holder the right to sell and obligates the writer to buy the underlying instrument at the exercise or strike price at any time or at a specified time during the option period. When the Fund purchases (writes) an option, an amount equal to the premium paid (received) by the Fund is reflected as an asset (liability). The amount of the asset (liability) is subsequently marked-to-market to reflect the current market value of the option purchased (written). When an instrument is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the instrument acquired or deducted from (or added to) the proceeds of the instrument sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premiums received or paid). When the Fund writes a call option, such option is “covered,” meaning that the Fund holds the underlying instrument subject to being called by the option counterparty. When the Fund writes a put option, such option is covered by cash in an amount sufficient to cover the obligation.

Options on swaps (swaptions) are similar to options on securities except that instead of selling or purchasing the right to buy or sell a security, the writer or purchaser of the swap option is granting or buying the right


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		33


Notes to Financial Statements (continued)

to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option.

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

In purchasing and writing options, the Fund bears the risk of an unfavorable change in the value of the underlying instrument or the risk that the Fund may not be able to enter into a closing transaction due to an illiquid market. Exercise of a written option could result in the Fund purchasing or selling a security when it otherwise would not, or at a price different from the current market value.

Swaps: The Fund enters into swap agreements, in which the Fund and a counterparty agree either to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”). Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation (depreciation).

For OTC swaps, any upfront premiums paid are recorded as assets and any upfront fees received are recorded as liabilities and are shown as swap premiums paid and swap premiums received, respectively, in the Statement of Assets and Liabilities and amortized over the term of the OTC swap. Payments received or made by the Fund for OTC swaps are recorded in the Statement of Operations as realized gains or losses, respectively. When an OTC 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.

In a centrally cleared swap, immediately following execution of the swap agreement, the swap agreement is novated to a central counterparty (the “CCP”) and the Fund’s counterparty on the swap agreement becomes the CCP. The Fund is required to interface with the CCP through a broker. Upon entering into a centrally cleared swap, the Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated on the Schedule of Investments and cash deposited is recorded on the Statement of Assets and Liabilities as cash pledged for centrally cleared swaps. The daily change in valuation of centrally cleared swaps is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities. Payments received from (paid to) the

counterparty, including at termination, are recorded as realized gain (loss) in the Statement of Operations.

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 counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.

Credit default swaps — The Fund enters into credit default swaps to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and/or sovereign issuers or to create exposure to corporate and/or sovereign issuers to which it is not otherwise exposed (credit risk). The Fund may either buy or sell (write) credit default swaps on single-name issuers (corporate or sovereign), a combination or basket of single-name issuers or traded indexes. Credit default swaps on single-name issuers are agreements in which the protection buyer pays fixed periodic payments to the seller in consideration for a guarantee from the protection seller to make a specific payment should a negative credit event take place with respect to the referenced entity (e.g., bankruptcy, failure to pay, obligation accelerators, repudiation, moratorium or restructuring). Credit default swaps on traded indexes are agreements in which the buyer pays fixed periodic payments to the seller in consideration for a guarantee from the seller to make a specific payment should a write-down, principal or interest shortfall or default of all or individual underlying securities included in the index occur. As a buyer, if an underlying credit event occurs, the Fund will either (i) receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising the index, or (ii) receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index. As a seller (writer), if an underlying credit event occurs, the Fund will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising the index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising the index.

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


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Notes to Financial Statements (continued)

short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty.

Interest rate swaps — The Fund enters into interest rate swaps to gain or reduce exposure to interest rates or to manage duration, the yield curve or interest rate risk by economically hedging the value of the fixed rate bonds which may decrease when interest rates rise (interest rate risk). Interest rate swaps are agreements in which one party pays a stream of interest payments, either fixed or floating, for another party’s stream of interest payments, either fixed or floating, on the same notional amount for a specified period of time. Interest rate floors, which are a type of interest rate swap, are agreements in which one party agrees to make payments to the other party to the extent that interest rates fall below a specified rate or floor in return for a premium. In more complex swaps, the notional principal amount may decline (or amortize) over time.

Forward swaps — The Fund may enter into forward interest rate swaps and forward total return swaps. In a forward swap, the Fund and the counterparty agree to make either periodic net payments beginning on a specified future effective date or a net payment at termination, unless terminated earlier.

The following is a summary of the Fund’s derivative financial instruments categorized by risk exposure:


Fair Values of Derivative Financial Instruments as of March 31, 2014
	Derivative Assets
	Statement of Assets and Liabilities Location	Value
Interest rate contracts	Net unrealized appreciation/depreciation¹ ; Investments at value²	$	383,230
Forward foreign currency exchange contracts	Net unrealized appreciation/depreciation¹ ; Unrealized appreciation on forward foreign currency exchange contracts		1,666,956
Credit contracts	Net unrealized appreciation/depreciation¹		13
	Net unrealized appreciation/depreciation¹ ;
Equity contracts	Unrealized appreciation on OTC swaps		3,076,001

Total		$	5,126,200


	Derivative Liabilities
	Statement of Assets and Liabilities Location	Value
Interest rate contracts	Net unrealized appreciation/depreciation¹ ; Options written at value	$	221,650
Forward foreign currency exchange contracts	Net unrealized appreciation/depreciation¹ ; Unrealized depreciation on forward foreign currency exchange contracts		1,600,938
Credit contracts	Net unrealized appreciation/depreciation¹		32
Equity contracts	Net unrealized appreciation/depreciation¹		1,435,919

Total		$	3,258,539

Includes cumulative appreciation/depreciation on financial futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

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


The Effect of Derivative Financial Instruments in the Statement of Operations Six Months Ended March 31, 2014
Net Realized Gain (Loss) From
Interest rate contracts:
Financial futures contracts	$	(887,048	)
Swaps		(577,211	)
Options		101,941
Foreign currency exchange contracts:
Financial futures contracts		819,769
Foreign currency transactions		(1,560,388	)
Credit contracts:
Swaps		(22,186	)
Equity contracts:
Financial futures contracts		4,688,777
Swaps		(41,481	)

Total	$	2,522,173


Net Change in Unrealized Appreciation/Depreciation on
Interest rate contracts:
Financial futures contracts	$	700,867
Swaps		302,283
Options¹		19,297
Foreign currency exchange contracts:
Financial futures contracts		266,887
Foreign currency translations		1,683,860
Credit contracts:
Swaps		(228	)
Equity contracts:
Financial futures contracts		(39,885	)
Swaps		270,260

Total	$	3,203,341

Options purchased are included in the net change in unrealized appreciation/ depreciation on investments.

For the six months ended March 31, 2014, the average quarterly balances of outstanding derivative financial instruments were as follows:


Financial futures contracts:
Average number of contracts purchased		1,748
Average number of contracts sold		834
Average notional value of contracts purchased	$	167,762,505
Average notional value of contracts sold	$	90,063,440
Forward foreign currency exchange contracts:
Average number of contracts - USD purchased		98
Average number of contracts - USD sold		74
Average USD amounts purchased	$	253,077,726
Average USD amounts sold	$	131,667,111
Options:
Average number of option contracts purchased		58
Average number of option contracts written		156
Average notional value of option contracts purchased	$	7,015,000
Average notional value of option contracts written	$	19,315,000
Credit default swaps:
Average number of contracts - buy protection		2
Average notional value - buy protection	$	344,414
Interest rate swaps:
Average number of contracts - pays fixed rate		3
Average notional value - pays fixed rate	$	5,323,684
Total return swaps:
Average number of contracts		1
Average notional value	$	2,692,816


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		35


Notes to Financial Statements (continued)

The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain netted against any collateral held by the Fund. For OTC options purchased, the Fund bears the risk of loss of the amount of the premiums paid plus the positive change in market values net of any collateral held by the Fund should the counterparty fail to perform under the contracts. Options written by the Fund do not typically give rise to counterparty credit risk, as options written generally obligate the Fund, and not the counterparty, to perform.

With exchange-traded purchased options and futures and centrally cleared swaps, there is less counterparty credit risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency) of the clearing broker or clearinghouse. Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. Bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events. In addition, certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the 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 Fund to accelerate payment of any net liability owed to the counterparty.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the counterparty.

Cash collateral that has been pledged to cover obligations of the Fund and cash collateral received from the counterparty, if any, is reported separately on the Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Fund, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount threshold (typically either $250,000 or $500,000) before a transfer is required, which is determined at the close of business of the Fund and any additional required collateral is delivered to/pledged by the Fund on the next business day. Typically, the Fund and counterparties are not permitted to sell, re-pledge or use the collateral they receive. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance. The Fund attempts to mitigate 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.

For financial reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.

At March 31, 2014, the Fund’s derivative assets and liabilities (by type) are as follows:


	Assets		Liabilities
Derivative Financial Instruments:
Financial futures contracts	$	397,007	$	665,779
Forward foreign currency exchange contracts		1,140,832		1,545,989
Options¹		19,766		135,969
Swaps-Centrally cleared		—		9,119
Swaps-OTC²		270,260		—

Total derivative assets and liabilities in the Statement of Assets and Liabilities	$	1,827,865	$	2,356,856


36		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Notes to Financial Statements (continued)


	Assets			Liabilities
Derivative Financial Instruments:
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)	$	(416,773	)	$	(810,867	)

Total derivative assets and liabilities subject to an MNA	$	1,411,092		$	1,545,989

¹	Includes options purchased at value which is included in Investments at value — unaffiliated in the Statement of Assets and Liabilities and reported in the Schedule of Investments.

²	Includes unrealized appreciation/depreciation on OTC swaps in the Statement of Assets and Liabilities.

The following tables present the Fund’s derivative assets and/or liabilities by counterparty net of amounts available for offset under an MNA and net of the related collateral received and pledged by the Fund as of March 31, 2014:


Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset¹			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets²
Bank of America N.A.	$	157	$	(157	)		—		—		—
Barclays Bank PLC		46,128		(46,128	)		—		—		—
BNP Paribas S.A.		20,078		(20,078	)		—		—		—
Citibank N.A.		12,676		(3,696	)		—		—	$	8,980
Credit Suisse International		570,487		(43,519	)		—		—		526,968
Deutsche Bank AG		434,802		(434,802	)		—		—		—
Goldman Sachs International		2,333		(2,333	)		—		—		—
HSBC Bank PLC		258,412		(258,412	)		—		—		—
JPMorgan Chase Bank N.A.		8,700		(7,550	)		—		—		1,150
Royal Bank of Canada		20,888		(20,888	)		—		—		—
Royal Bank of Scotland PLC		1,380		—			—		—		1,380
State Street Bank and Trust Co.		794		(794	)		—		—		—
UBS AG		23,611		(23,611	)		—		—		—
Westpac Banking Corp.		10,646		(10,646	)		—		—		—

	$	1,411,092	$	(872,614	)		—		—	$	538,478


Counterparty	Derivative Liabilities Subject to an MNA by Counterparty		Derivatives Available for Offset¹			Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Liabilities³
Bank of America N.A.	$	536	$	(157	)		—		—	$	379
Barclays Bank PLC		55,035		(46,128	)		—		—		8,907
BNP Paribas S.A.		195,430		(20,078	)		—		—		175,352
Citibank N.A.		3,696		(3,696	)		—		—		—
Credit Suisse International		43,519		(43,519	)		—		—		—
Deutsche Bank AG		453,868		(434,802	)		—		—		19,066
Goldman Sachs International		156,280		(2,333	)		—		—		153,947
HSBC Bank PLC		270,185		(258,412	)		—		—		11,773
JPMorgan Chase Bank N.A.		7,550		(7,550	)		—		—		—
Royal Bank of Canada		112,699		(20,888	)		—		—		91,811
State Street Bank and Trust Co.		1,074		(794	)		—		—		280
UBS AG		207,536		(23,611	)		—		—		183,925
Westpac Banking Corp.		38,581		(10,646	)		—		—		27,935

	$	1,545,989	$	(872,614	)		—		—	$	673,375

¹	The amount of derivatives available for offset is limited to the amount of derivative assets and/or liabilities that are subject to an MNA.

²	Net amount represents the net amount receivable from the counterparty in the event of default.

³	Net amount represents the net amount payable due to the counterparty in the event of default.


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		37


Notes to Financial Statements (continued)

5. Investment Advisory Agreement and Other Transactions with Affiliates:

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

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 fee 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		0.550	%
$1 Billion - $2 Billion		0.500	%
$2 Billion - $3 Billion		0.475	%
Greater than $3 Billion		0.450	%

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. In addition, the Manager has contractually agreed to waive the management fee on assets estimated to be attributed to the Fund’s investments in other equity and fixed-income mutual funds managed by the Manager or its affiliates, if any. This amount is shown as fees waived by Manager in the Statement of Operations. For the six months ended March 31, 2014, the amount waived was $87,168.

The Manager, on behalf of the Fund, entered into separate sub-advisory agreements with BlackRock International Limited (“BIL”), BlackRock (Hong Kong) Limited (“BHK”), BlackRock (Singapore) Limited (“BSL”) and BlackRock Financial Management, Inc. (“BFM”), each an affiliate of the Manager. The Manager pays BIL, BHK, BSL and BFM, for services they provide, a monthly fee that is a percentage of the investment advisory fees paid by the Fund to the Manager. Effective March 20, 2014, BlackRock Asset Management North Asia Limited, an affiliate of the Manager, replaced BHK as sub-advisor to the Fund.

The Trust, on behalf of the Fund, entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, the Fund pays BRIL ongoing service 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 Fee			Distribution Fee
Service		0.25	%		—
Investor A		0.25	%		—
Investor B		0.25	%		0.75	%
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 Service, Investor A, Investor B and Investor C shareholders.

For the six months ended March 31, 2014, the following table shows the class specific service and distribution fees borne directly by each class of the Fund:


Service	$	2,215
Investor A		465,367
Investor B		56,927
Investor C		405,839

Total	$	930,348

Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Fund with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to sub-accounts they service. For these services, these entities receive an asset based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the six months ended March 31, 2014, the Fund paid the following to affiliates in return for these services, which are included in transfer agent — class specific in the Statement of Operations:


Institutional	$	18,562
Service	$	1,395
Investor A	$	5,568

The Manager maintains a call center, which is responsible for providing certain shareholder services to the Fund, such as responding to shareholder inquiries and processing transactions based upon instructions from shareholders with respect to the subscription and redemption of Fund shares. For the six months ended March 31, 2014, the Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statement of Operations:


Institutional	$	626
Service		73
Investor A		49,258
Investor B		3,696
Investor C		2,191

Total	$	55,844

For the six months ended March 31, 2014, the following table shows the class specific transfer agent fees borne directly by each class of the Fund:


Institutional	$	86,864
Service		1,913
Investor A		346,823
Investor B		24,990
Investor C		50,312

Total	$	510,902


38		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Notes to Financial Statements (continued)

BNY Mellon Investment Servicing (US) Inc. (“BNYMIS”) and the Manager act as co-administrators for the Fund. For these services, the co-administrators receive an administration fee computed daily and payable monthly to each administrator pursuant to separate fee arrangements, based on a percentage of the average daily net assets of the Fund. The combined administration fee, which is shown as administration in the Statement of Operations, is paid at the following annual rates:


Average Daily Net Assets	Administration Fee
First $500 Million		0.075	%
$500 Million - $1 Billion		0.065	%
Greater than $1 Billion		0.055	%

In addition, each of the share classes is charged an administration fee, which is shown as administration — class specific in the Statement of Operations, based on the following percentages of average daily net assets of each respective class:


Average Daily Net Assets	Administration Fee — Class Specific
First $500 Million		0.025	%
$500 Million - $1 Billion		0.015	%
Greater than $1 Billion		0.005	%

For the six months ended March 31, 2014, the Fund paid $241,047 to the Manager in return for these services, which is included in administration and administration — class specific in the Statement of Operations.

For the six months ended March 31, 2014, the following table shows the class specific administration fees borne directly by each class of the Fund:


Institutional	$	27,594
Service		221
Investor A		46,537
Investor B		1,423
Investor C		10,146

Total	$	85,921

BNYMIS and the Manager may have, at their discretion, voluntarily waived all or any portion of their administration fees for the Fund or a share class which are included in administration fees waived – class specific in the Statement of Operations.

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


Institutional	0.89	%
Service	1.17	%
Investor A	1.37	%
Investor B	2.14	%
Investor C	2.14	%

The Manager has agreed not to reduce or discontinue this contractual waiver or reimbursement prior to February 1, 2015 unless approved by the Board, including a majority of the Independent Trustees.

Class specific expense waivers or reimbursements are as follows:


	Share Classes
	Service		Investor B		Total
Administration Fees Waived	$	18	$	101	$	119

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.

For the six months ended March 31, 2014, the Manager recouped waivers previously recorded of $43,094, $5,313, $70 and $192 for Fund Level, Institutional Shares, Service Shares and Investor B Shares, respectively.

On March 31, 2014, the Fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:


	Expires September 30,
	2014		2015		2016
Fund Level		—	$	3,009		—
Service	$	1,056	$	557	$	18
Investor B		—	$	158	$	101

For the six months ended March 31, 2014, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of the Fund’s Investor A Shares of $7,674.

For the six months ended March 31, 2014, affiliates received CDSCs as follows:


Investor A	$	361
Investor B	$	2,538
Investor C	$	1,147


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		39


Notes to Financial Statements (continued)

The U.S. Securities and Exchange Commission has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the private investment company to an annual rate of 0.04%. The investment advisor to the private investment company will not charge any advisory fees with respect to shares purchased by the Fund.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent. Pursuant to the securities lending agreement effective February 1, 2014, BIM may lend securities only when the difference between the borrower rebate rate and the risk free rate exceeds a certain level (such securities, the “specials only securities”).

Pursuant to a securities lending agreement effective February 1, 2014, the Fund retains 80% of securities lending income. In addition, commencing the business day following the date that the aggregate securities lending income earned across the Equity-Liquidity Complex in a calendar year exceeds the aggregate securities lending income earned across the Equity-Liquidity Complex through the lending of specials only securities in the calendar year 2013, the Fund, pursuant to the securities lending agreement, will retain for the remainder of the calendar year securities lending income in an amount equal to 85% of securities lending income. Prior to February 1, 2014, the Fund retained 65% of securities lending income and paid a fee to BIM equal to 35% of such income. The share of securities lending income earned by the Fund is shown as securities lending — affiliated – net in the Statement of Operations. For the six months ended March 31, 2014, the Fund paid BIM $1,051 for securities lending agent services.

The Fund recorded payments from an affiliate to compensate for foregone securities lending revenue, which is shown as other income — affiliated in the Statement of Operations.

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

The Fund may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely due to having a common investment adviser, common officers, or common trustees. Sales transactions for the Fund with an affiliated fund in compliance with Rule 17a-7 under the 1940 Act for the six months ended March 31, 2014, were $103,819.

6. Purchases and Sales:

Purchases and sales of investments, including paydowns, TBA transactions and excluding short-term securities, for the six months ended March 31, 2014, were $393,197,566 and $428,989,314, respectively.

Transactions in options written for the six months ended March 31, 2014, were as follows:


	Calls						Puts
	Contracts			Premiums Received			Contracts			Premiums Received

Outstanding options, beginning of period		29		$	29,347			29		$	37,143
Options written		479			421,324			479			384,727
Options closed		(411	)		(375,119	)		(411	)		(345,187	)

Outstanding options, end of period		97		$	75,552			97		$	76,683

7. Income Tax Information:

As of March 31, 2014, gross unrealized appreciation and depreciation based on cost for federal income tax purposes were as follows:


Tax cost	$	671,501,774

Gross unrealized appreciation	$	36,134,291
Gross unrealized depreciation		(9,482,650	)

Net unrealized appreciation	$	26,651,641

8. Borrowings:

The Trust, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $800 million credit agreement with a group of lenders, under which the Fund may borrow to fund shareholder redemptions. The agreement expires in April 2014. Excluding commitments designated for a certain individual fund, other Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.065% per annum on unused commitment amounts 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. Participating Funds paid administration and arrangement fees which, along with commitment fees, were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. The Fund did not borrow under the credit agreement during the six months ended March 31, 2014.

9. 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


40		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Notes to Financial Statements (continued)

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 Statement of Assets and Liabilities, less any collateral held by the Fund.

10. Capital Share Transactions:

Transactions in capital shares for each class were as follows:


	Six Months Ended March 31, 2014						Year Ended September 30, 2013
	Shares			Amount			Shares			Amount
Institutional
Shares sold		8,063,588		$	129,856,113			5,399,210		$	85,173,661
Shares issued in reinvestment of dividends		1,321,435			20,101,427			191,428			2,878,727
Shares redeemed		(2,132,426	)		(33,256,826	)		(1,155,843	)		(17,865,866	)

Net increase		7,252,597		$	116,700,714			4,434,795		$	70,186,522


Service
Shares sold		2,585		$	41,921			3,454		$	52,993
Shares issued in reinvestment of dividends		10,119			153,456			5,836			87,401
Shares redeemed		(10,976	)		(174,222	)		(22,814	)		(351,502	)

Net increase (decrease)		1,728		$	21,155			(13,524	)	$	(211,108	)


Investor A
Shares sold and automatic conversion of shares		492,180		$	7,692,720			1,134,995		$	17,477,082
Shares issued in reinvestment of dividends		2,177,839			33,005,202			1,224,911			18,341,023
Shares redeemed		(2,219,806	)		(34,631,542	)		(4,276,680	)		(65,889,375	)

Net increase (decrease)		450,213		$	6,066,380			(1,916,774	)	$	(30,071,270	)


Investor B
Shares sold		4,329		$	66,775			11,692		$	178,376
Shares issued in reinvestment of dividends		65,575			980,348			45,316			669,151
Shares redeemed and automatic conversion of shares		(222,681	)		(3,438,518	)		(509,365	)		(7,763,294	)

Net decrease		(152,777	)	$	(2,391,395	)		(452,357	)	$	(6,915,767	)


Investor C
Shares sold		145,021		$	2,196,849			357,660		$	5,416,805
Shares issued in reinvestment of dividends		468,294			6,958,846			227,187			3,333,431
Shares redeemed		(504,912	)		(7,742,443	)		(1,127,929	)		(17,124,018	)

Net increase (decrease)		108,403		$	1,413,252			(543,082	)	$	(8,373,782	)

Total Net Increase		7,660,164		$	121,810,106			1,509,058		$	24,614,595


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		41


Notes to Financial Statements (concluded)

11. Subsequent Events:

Management’s evaluation of the impact of all subsequent events on the Fund’s financial statements was completed through the date the financial statements were issued and the following item was noted:

Effective April 24, 2014, the credit agreement was terminated and a new agreement was entered into. The Fund became a party to a 364-day,
$1.1 billion credit agreement, which expires in April 2015. Excluding commitments designated for a certain individual fund, the Fund can borrow up to an aggregate commitment amount of $650 million, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.06% per annum on unused commitment amounts 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.


42		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Officers and Trustees

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

Ian A. MacKinnon, 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

Neal Andrews, Chief Financial Officer

Jay Fife, Treasurer

Brian Kindelan, Chief Compliance Officer and Anti-Money Laundering Officer

Benjamin Archibald, Secretary

Investment Advisor and Co-Administrator

BlackRock Advisors, LLC

Wilmington, DE 19809

Sub-Advisors

BlackRock Financial Management, Inc.

New York, NY 10055

BlackRock International Limited

Edinburgh, EH3 8BL, United Kingdom

BlackRock Asset Management North Asia Limited

Hong Kong

BlackRock (Singapore) Limited

079912 Singapore

Accounting Agent, Co-Administrator and Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

Wilmington, DE 19809

Custodian

The Bank of New York Mellon

New York, NY 10286

Distributor

BlackRock Investments, LLC

New York, NY 10022

Legal Counsel

Sidley Austin LLP

New York, NY 10019

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Philadelphia, PA 19103

Address of the Trust

100 Bellevue Parkway

Wilmington, DE 19809


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		43


Additional Information

General Information

Electronic Delivery

Electronic copies of most financial reports and prospectuses are available on the Fund’s websites 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 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 portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at http:// www.blackrock.com or by calling (800) 441-7762 and (2) on the SEC’s website at http://www.sec.gov.

Shareholder Privileges

Account Information

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.


44		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014


Additional Information (concluded)

BlackRock Privacy Principles


		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014		45


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 Global Dividend Portfolio	BlackRock Mid-Cap Value Opportunities Fund
BlackRock All-Cap Energy & Resources Portfolio	BlackRock Global Long/Short Equity Fund	BlackRock Natural Resources Trust
BlackRock Basic Value Fund	BlackRock Global Opportunities Portfolio	BlackRock Pacific Fund
BlackRock Capital Appreciation Fund	BlackRock Global SmallCap Fund	BlackRock Real Estate Securities Fund
BlackRock Commodity Strategies Fund	BlackRock Health Sciences Opportunities Portfolio	BlackRock Russell 1000^® Index Fund
BlackRock Disciplined Small Cap Core Fund	BlackRock International Fund	BlackRock Science & Technology
BlackRock Emerging Markets Dividend Fund	BlackRock International Index Fund	Opportunities Portfolio
BlackRock Emerging Markets Fund	BlackRock International Opportunities Portfolio	BlackRock Small Cap Growth Equity Portfolio
BlackRock Emerging Markets Long/Short	BlackRock Large Cap Core Fund	BlackRock Small Cap Growth Fund II
Equity Fund	BlackRock Large Cap Core Plus Fund	BlackRock Small Cap Index Fund
BlackRock Energy & Resources Portfolio	BlackRock Large Cap Growth Fund	BlackRock S&P 500 Stock Fund
BlackRock Equity Dividend Fund	BlackRock Large Cap Value Fund	BlackRock U.S. Opportunities Portfolio
BlackRock EuroFund	BlackRock Latin America Fund	BlackRock Value Opportunities Fund
BlackRock Flexible Equity Fund	BlackRock Long-Horizon Equity Fund
BlackRock Focus Growth Fund	BlackRock Mid-Cap Growth Equity Portfolio

Taxable Fixed Income Funds


BlackRock Bond Index Fund	BlackRock Emerging Markets Flexible Dynamic	BlackRock Secured Credit Portfolio
BlackRock Core Bond Portfolio	Bond Portfolio	BlackRock Short Obligations Fund
BlackRock CoreAlpha Bond Fund	BlackRock Floating Rate Income Portfolio	BlackRock Short-Term Treasury Fund
BlackRock CoRI Funds	BlackRock Global Long/Short Credit Fund	BlackRock Strategic Income
2015	BlackRock GNMA Portfolio	Opportunities Portfolio
2017	BlackRock High Yield Bond Portfolio	BlackRock Total Return Fund
2019	BlackRock Inflation Protected Bond Portfolio	BlackRock U.S. Government Bond Portfolio
2021	BlackRock Investment Grade Bond Portfolio	BlackRock U.S. Mortgage Portfolio
2023	BlackRock Low Duration Bond Portfolio	BlackRock Ultra-Short Obligations Fund
		BlackRock World Income Fund

Municipal Fixed Income Funds


BlackRock California Municipal Bond Fund	BlackRock New Jersey Municipal Bond Fund	BlackRock Short-Term Municipal Fund
BlackRock High Yield Municipal Fund	BlackRock New York Municipal Bond Fund	BlackRock Strategic Municipal
BlackRock National Municipal Fund	BlackRock Pennsylvania Municipal Bond Fund	Opportunities Fund

Mixed Asset Funds


BlackRock Balanced Capital Fund	LifePath Active Portfolios		LifePath Index Portfolios
BlackRock Emerging Market Allocation Portfolio	2015	2040	Retirement	2040
BlackRock Global Allocation Fund	2020	2045	2020	2045
BlackRock Managed Volatility Portfolio	2025	2050	2025	2050
BlackRock Multi-Asset Income Portfolio	2030	2055	2030	2055
BlackRock Multi-Asset Real Return Fund	2035		2035
BlackRock Strategic Risk Allocation Fund

BlackRock Prepared Portfolios	LifePath Portfolios
Conservative Prepared Portfolio	Retirement	2040
Moderate Prepared Portfolio	2020	2045
Growth Prepared Portfolio	2025	2050
Aggressive Growth Prepared Portfolio	2030	2055
	2035


46		BLACKROCK MANAGED VOLATILITY PORTFOLIO		MARCH 31, 2014

This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless accompanied or preceded by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment 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.


MV-3/14-SAR



Item 2 –		Code of Ethics – Not Applicable to this semi-annual report

Item 3 –		Audit Committee Financial Expert – Not Applicable to this semi-annual report

Item 4 –		Principal Accountant Fees and Services – Not Applicable to this semi-annual report

Item 5 –		Audit Committee of Listed Registrants – Not Applicable

Item 6 –		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.

Item 7 –		Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable

Item 8 –		Portfolio Managers of Closed-End Management Investment Companies – Not Applicable

Item 9 –		Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable

Item 10 –		Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures.

Item 11 –		Controls and Procedures

		(a) – The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended.

		(b) – There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12 –		Exhibits attached hereto

		(a)(1) – Code of Ethics – Not Applicable to this semi-annual report

		(a)(2) – Certifications – Attached hereto

		(a)(3) – Not Applicable

		(b) – Certifications – Attached hereto

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


BlackRock Funds

By:		/s/ John M. Perlowski
		John M. Perlowski
		Chief Executive Officer (principal executive officer) of
		BlackRock Funds

Date: June 2, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


By:		/s/ John M. Perlowski
		John M. Perlowski
		Chief Executive Officer (principal executive officer) of
		BlackRock Funds

Date: June 2, 2014

By:		/s/ Neal J. Andrews
		Neal J. Andrews
		Chief Financial Officer (principal financial officer) of
		BlackRock Funds

Date: June 2, 2014

BlackRock 20/80 Target Allocation Fund, Investor A (BACPX) N-CSRSCertified semi-annual shareholder report (management investment company)