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

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORMN-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number:811-05742

Name of Fund:    BlackRock Funds

BlackRock Real Estate Securities Fund

Fund Address:    100 Bellevue Parkway, Wilmington, DE 19809

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

            Street, New York, NY 10055

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

Date of fiscal year end: 01/31/2020

Date of reporting period: 07/31/2019

Item 1 – Report to Stockholders

JULY 31, 2019

SEMI-ANNUAL REPORT (UNAUDITED)

BlackRock Funds^SM

▶ BlackRock Real Estate Securities Fund

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

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

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

 Not FDIC Insured • May Lose Value •  No Bank Guarantee

The Markets in Review

Dear Shareholder,

Investment performance in the 12 months ended July 31, 2019 was a tale of two markets. The first half of the reporting period was characterized by restrictive monetary policy, deteriorating economic growth, equity market volatility, and rising fear of an imminent recession. During the second half of the reporting period, stocks and bonds rebounded sharply, as restrained inflation and weak economic growth led the U.S. Federal Reserve (the “Fed”) to stop raising interest rates, which led to broad-based optimism that stimulative monetary policy could help forestall a recession.

After the dust settled, the U.S. equity and bond markets posted mixed returns while weathering significant volatility. Less volatile U.S. large cap equities and U.S. bonds advanced, while equities at the high end of the risk spectrum — emerging markets, international developed, and U.S. small cap — posted relatively flat returns.

Fixed-income securities delivered modest positive returns with relatively low volatility, as interest rates declined (and bond prices rose). Longer-term U.S. Treasury yields declined further than short-term Treasury yields. This led to positive returns for U.S. Treasuries and a substantial flattening of the yield curve. Investment grade and high yield corporate bonds also posted positive returns, as the credit fundamentals in corporate markets remained relatively solid.

In the U.S. equity market, volatility spiked in late 2018, as a wide range of risks were brought to bear on markets, ranging from rising interest rates and slowing global growth to heightened trade tensions and political turmoil. These risks manifested in a broad-based sell-off in December, leading to the worst December performance on record since 1931.

Volatility also rose in emerging markets, as the rising U.S. dollar and higher interest rates in the U.S. disrupted economic growth abroad. U.S.-China trade relations and debt concerns adversely affected the Chinese stock market, particularly in mainland China, while Turkey and Argentina became embroiled in currency crises, largely due to hyperinflation in both countries. An economic slowdown in Europe and ongoing uncertainty about Brexit led to modest performance for European equities.

As equity performance faltered and global economic growth slowed, the Fed shifted to a more patient perspective on the economy in January 2019. The Fed left interest rates unchanged for six months, then lowered interest rates for the first time in 11 years in July 2019. Similarly, the European Central Bank signaled a continuation of accommodative monetary policy, while China committed to looser credit conditions and an increase in fiscal spending.

The outpouring of global economic stimulus led to a sharp rally in risk assets throughout the world. Hopes continued to remain high thereafter, as the current economic expansion became the longest in U.S. history. Looking ahead, markets are pricing in additional rate cuts by the Fed over the next year, as investors anticipate a steady shift toward more stimulative monetary policy.

We expect a slowing expansion with additional room to run, as opposed to an economic recession. However, escalating trade tensions and the resulting disruptions in global supply chains have become the greatest risk to the global expansion.

We believe U.S. and emerging market equities remain relatively attractive. Within U.S. equities, companies with high-quality earnings and strong balance sheets offer the most attractive risk/reward trade-off. For bonds, U.S. Treasuries are likely to help buffer against volatility in risk assets, while income from other types of bonds can continue to offer steady returns.

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

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of July 31, 2019
	6-month	12-month
U.S. large cap equities (S&P 500® Index)	11.32%	7.99%
U.S. small cap equities (Russell 2000® Index)	5.76	(4.42)
International equities (MSCI Europe, Australasia, Far East Index)	5.64	(2.60)
Emerging market equities (MSCI Emerging Markets Index)	0.44	(2.18)
3-month Treasury bills (ICE BofAML 3-Month U.S. Treasury Bill Index)	1.23	2.34
U.S. Treasury securities (ICE BofAML 10-Year U.S. Treasury Index)	6.68	11.16
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)	5.23	8.08
Tax-exempt municipal bonds (S&P Municipal Bond Index)	4.98	6.93
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)	5.78	6.91
Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

2 THIS  PAGE  IS  NOT  PART  OF  YOUR  FUND  REPORT

Table of Contents

	Page
The Markets in Review		2
Semi-Annual Report:
Fund Summary		4
About Fund Performance		6
Disclosure of Expenses		6
Derivative Financial Instruments		6
Financial Statements:
Schedule of Investments		7
Statement of Assets and Liabilities		10
Statement of Operations		11
Statements of Changes in Net Assets		12
Financial Highlights		13
Notes to Financial Statements		16
Disclosure of Investment Advisory Agreement andSub-Advisory Agreements		23
Trustee and Officer Information		26
Additional Information		27

3

Fund Summary  as of July 31, 2019 BlackRock Real Estate Securities Fund

Investment Objective

BlackRock Real Estate Securities Fund’s (the “Fund”)investment objective is to seek total return comprised of long-term growth of capital and dividend income.

Portfolio Management Commentary

How did the Fund perform?

For thesix-month period ended July 31, 2019, the Fund outperformed the benchmark, the FTSE EPRA Nareit United States Index.

What factors influenced performance?

During the period, the Fund’s holdings in the specialty, lodging and triple net lease real estate investment trust (“REIT”) sectors were strong positive contributors relative to the benchmark. Principal individual contributors to relative performance included Equinix, Inc. (specialty), Rexford Industrial Realty, Inc. (industrial), Sun Communities, Inc. (residential) and GDS Holdings Ltd. (specialty).

Conversely, positions in the self storage, diversified and residential REIT sectors detracted from relative performance. In particular, positions in Public Storage (self storage), W.P. Carey, Inc. (triple net lease) and Digital Realty Trust, Inc. (specialty) weighed on returns.

Describe recent portfolio activity.

Over the period, the Fund’s allocations within residential, specialty, retail, industrial and self storage REITs were increased, while holdings within triple net lease, health care and office REITs were reduced.

Describe portfolio positioning at period end.

As of period end, the Fund had overweight positions in the specialty, triple net lease, office and lodging REIT sectors, and was underweight in the self storage, diversified, retail, health care, industrial and residential REIT sectors.

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

Security	Percent of Net Assets
Prologis, Inc.	7%
Simon Property Group, Inc.	7
AvalonBay Communities, Inc.	6
Boston Properties, Inc.	6
Ventas, Inc.	6
Alexandria Real Estate Equities, Inc.	5
Equity Residential	4
Spirit Realty Capital, Inc.	4
Extra Space Storage, Inc.	4
UDR, Inc.	3

INDUSTRY ALLOCATION

Industry	Percent of Net Assets
Residential	19%
Office	14
Triple Net Lease	13
Health Care	13
Retail	12
Industrial	11
Specialty	6
Lodging	6
Self Storage	5
Short-Term Securities	1

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

4 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

Fund Summary as of July 31, 2019  (continued) BlackRock Real Estate Securities Fund

Performance Summary for the Period Ended July 31, 2019

				Average Annual Total Returns(a)(b)
				1 Year						5 Years						Since Inception(c)
	6-Month Total Returns			w/o sales charge			w/sales charge			w/o sales charge			w/sales charge			w/o sales charge			w/sales     charge
Institutional		8.69	%		14.95	%		N/A			9.28	%		N/A			10.04	%		N/A
Investor A		8.59			14.72			8.70	%		9.01			7.84	%		9.76			8.90	%
Investor C		8.12			13.82			12.82			8.20			8.20			8.94			8.94
FTSE EPRA Nareit United States Index(d)		6.16			11.40			N/A			7.74			N/A			8.96			N/A

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

^(b)  Under normal conditions, the Fund invests at least 80% of its net assets plus any borrowings for investment purposes (measured at the time of purchase) in a portfolio of equity investments in issuers that are primarily engaged in or related to the real estate industry inside the United States.

^(c)  The Fund commenced operations on September 28, 2012.

^(d)  A subset of the EPRA Nareit Global Index and the EPRA Nareit North America Index containing publicly quoted real estate companies that meet the EPRA Ground Rules.

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

Past performance is not indicative of future results.

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

Expense Example

	Actual									Hypothetical(b)
	Beginning     Account Value (02/01/19)			Ending     Account Value (07/31/19)			Expenses Paid     During the Period(a)			Beginning Account Value (02/01/19)			Ending Account Value (07/31/19)			Expenses Paid During the Period(a)			Annualized Expense Ratio
Institutional		$	1,000.00		$	1,086.90		$	5.43		$	1,000.00		$	1,019.59		$	5.26		1.05	%
Investor A			1,000.00			1,085.90			6.72			1,000.00			1,018.35			6.51		1.30
Investor C			1,000.00			1,081.20			10.58			1,000.00			1,014.63			10.24		2.05

^(a)  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 181/365 (to reflect theone-half year period shown).

^(b)  Hypothetical 5% annual return before expenses is calculated by prorating 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.

FUND  SUMMARY 5

About Fund Performance

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

Investor C Sharesare subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares are generally available through financial intermediaries. Effective November 8, 2018, the Fund adopted an automatic conversion feature whereby Investor C Shares held for approximately ten years will be automatically converted into Investor A Shares.

Performance information reflects past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Refer towww.blackrock.comto obtain performance data current to the most recentmonth-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 distributions, if any, at net asset value (“NAV”) on theex-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. Distributions paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.

BlackRock Advisors, LLC (the “Manager”), the Fund’s investment adviser, has contractually and/or voluntarily agreed to waive and/or reimburse a portion of the Fund’s expenses. Without such waiver and/or reimbursement, the Fund’s performance would have been lower. With respect to the Fund’s voluntary waiver, the Manager is under no obligation to waive and/or reimburse or to continue waiving and/or reimbursing its fees and such voluntary waivers may be reduced or discontinued at any time. With respect to the Fund’s contractual waiver, the Manager is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See Note 5 of the Notes to Financial Statements for additional information on waivers and/or reimbursements.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, administration fees, service and distribution fees, including12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example shown on the previous page (which is based on a hypothetical investment of $1,000 invested on February 1, 2019 and held through July 31, 2019) 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 shareholder reports of other funds.

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

Derivative Financial Instruments

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

6 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

Schedule of Investments  (unaudited) July 31, 2019 BlackRock Real Estate Securities Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks — 98.8%
Health Care — 12.5%
CareTrust REIT, Inc.		41,333	$	960,166
Healthcare Trust of America, Inc., Class A		16,856		453,932
Omega Healthcare Investors, Inc.		13,556		492,083
Ventas, Inc.		38,567		2,595,173
Welltower, Inc.		16,672		1,385,777
				5,887,131
Industrial — 10.5%
Prologis, Inc.		42,819		3,451,641
Rexford Industrial Realty, Inc.		36,041		1,492,097
				4,943,738
Lodging — 5.5%
Host Hotels & Resorts, Inc.		87,562		1,522,703
Sunstone Hotel Investors, Inc.		80,604		1,064,779
				2,587,482
Office — 14.3%
Alexandria Real Estate Equities, Inc.		14,797		2,165,689
Boston Properties, Inc.		19,843		2,638,127
Douglas Emmett, Inc.		10,221		417,221
Highwoods Properties, Inc.		19,699		892,956
Hudson Pacific Properties, Inc.		18,376		648,673
				6,762,666
Residential — 19.1%
American Homes 4 Rent, Class A		22,176		536,881
AvalonBay Communities, Inc.		13,002		2,714,687
Equity Residential		25,805		2,035,756
Invitation Homes, Inc.		20,278		557,037
Sun Communities, Inc.		11,499		1,527,182
UDR, Inc.		35,170		1,619,930
				8,991,473
Retail — 12.2%
Federal Realty Investment Trust		9,010		1,189,410
Regency Centers Corp.		22,994		1,533,700
Simon Property Group, Inc.		18,669		3,028,112
				5,751,222

Security	Shares		Value
Self Storage — 5.0%
Extra Space Storage, Inc.		14,977	$	1,683,265
Life Storage, Inc.		7,049		687,207
				2,370,472
Specialty — 6.4%
Digital Realty Trust, Inc.		11,442		1,308,507
Equinix, Inc.		2,873		1,442,533
InterXion Holding NV(a)		3,250		244,725
				2,995,765
Triple Net Lease — 13.3%
EPR Properties		13,761		1,024,231
Plymouth Industrial REIT, Inc.		26,651		495,176
Spirit Realty Capital, Inc.		40,333		1,779,492
STAG Industrial, Inc.		15,560		462,443
VEREIT, Inc.		119,641		1,091,126
VICI Properties, Inc.		66,724		1,423,890
				6,276,358
Total Long-Term Investments — 98.8% (Cost: $40,648,791)				46,566,307
Short-Term Securities — 1.3%
BlackRock Liquidity Funds,T-Fund, Institutional Class,     2.20%(b)(c)		637,988		637,988
Total Short-Term Securities — 1.3% (Cost: $637,988)				637,988
Total Investments — 100.1% (Cost: $41,286,779)				47,204,295
Liabilities in Excess of Other Assets — (0.1)%				(54,099	)
Net Assets — 100.0%			$	47,150,196

^(a)  Non-income producing security.

^(b)  Annualized7-day yield as of period end.

^(c)  During the six months ended July 31, 2019, investments in issuers considered to be an affiliate/affiliates of the Fund for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliate	Shares Held at 01/31/19		Net Activity	Shares         Held at               07/31/19	Value at 07/31/19		Income		Net Realized Gain (Loss)(a)		Change in Unrealized Appreciation (Depreciation)
BlackRock Liquidity Funds,T-Fund, Institutional Class		1,618,476	(980,488)	637,988	$	637,988	$	9,164		$—		$—

^(a)  Includes net capital gain distributions, if applicable.

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

Portfolio Abbreviations
OTC	Over-the-counter
REIT	Real Estate Investment Trust

SCHEDULE  OF  INVESTMENTS 7

Schedule of Investments  (unaudited) (continued) July 31, 2019 BlackRock Real Estate Securities Fund     

Derivative Financial Instruments Outstanding as of Period End

OTC Total Return Swaps^(a)

Reference Entity

Counterparty

Termination Date

Net Notional Amount

Unrealized Appreciation (Depreciation)

Net Value of Reference Entity

Gross Notional Amount Net Asset     Percentage

Equity Securities Long/Short

Morgan Stanley & Co. LLC

06/09/20

$

174,160

$1,475

(b)

$175,061

0.4

%

^(a)  The Fund receives the total return on a portfolio of long positions underlying the total return swap. In addition, the Fund pays a variable rate of interest, based on a specified benchmark, plus or minus a spread of 20 basis points. The benchmark and spread are determined based upon the country and/or currency of the individual underlying positions. The following is the specified benchmark used in determining the variable rate of interest:

U.S. Federal Funds Effective Rate

^(b)  Amount includes $574 of net dividends and financing fees.

The following table represents the individual long positions and related values of equity securities underlying the total return swap with Morgan Stanley & Co. LLC, as of period end, termination date 06/09/20:

Reference Entity — Long

Common Stocks	Shares		Value	% of Basket Value
Health Care
CareTrust REIT, Inc.		7,536	$175,061		100.0%
Net Value of Reference
Entity — Morgan Stanley & Co. LLC			$175,061

Balances Reported in the Statement of Assets and Liabilities for OTC Derivatives

	Swap Premiums Paid		Swap Premiums Received		Unrealized Appreciation		Unrealized Depreciation
OTC Swaps		$—		$—		$1,475		$—

Derivative Financial Instruments Categorized by Risk Exposure

As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:

Assets — Derivative Financial Instruments		Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Swaps — OTC	Unrealized appreciation on OTC swaps	$	—	$	—	$	1,475	$	—	$	—	$	—	$	1,475

For the six months ended July 31, 2019, the effect of derivative financial instruments in the Statement of Operations was as follows:

Net Realized Gain (Loss) from:	Commodity Contracts		Credit Contracts		Equity Contracts		Foreign Currency Exchange Contracts		Interest Rate Contracts		Other Contracts		Total
Swaps	$	—	$	—	$	11,743	$	—	$	—	$	—	$	11,743
Net Change in Unrealized Appreciation (Depreciation) on:
Swaps	$	—	$	—	$	1,269	$	—	$	—	$	—	$	1,269

8 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

Schedule of Investments  (unaudited) (continued) July 31, 2019 BlackRock Real Estate Securities Fund     

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Total return swaps:
Average notional value	$	87,080

For information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.

Derivative Financial Instruments — Offsetting as of Period End

The Fund’s derivative assets and liabilities (by type) were as follows:

	Assets		Liabilities
Derivative Financial Instruments:
Swaps — OTC(a)	$	1,475		$—
Total derivative assets and liabilities in the Statement of Assets and Liabilities	$	1,475		$—
Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”)		—		—
Total derivative assets and liabilities subject to an MNA	$	1,475		$—

^(a)  Includes unrealized appreciation (depreciation) on OTC swaps in the Statement of Assets and Liabilities.

The following table presents the Fund’s derivative assets by counterparty net of amounts available for offset under an MNA and net of the related collateral pledged by the Fund:

Counterparty	Derivative Assets Subject to an MNA by Counterparty		Derivatives Available for Offset		Non-cash Collateral Received		Cash Collateral Received		Net Amount of Derivative Assets(a)
Morgan Stanley & Co. LLC	$	1,475	$	—	$	—	$	—	$	1,475

^(a)  Net amount represents the net amount receivable from the counterparty in the event of default.

Fair Value Hierarchy as of Period End

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

The following tables summarize the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy:

	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Long-Term Investments(a)	$	46,566,307	$	—	$	—	$	46,566,307
Short-Term Securities		637,988		—		—		637,988
	$	47,204,295	$	—	$	—	$	47,204,295
Derivative Financial Instruments(b)
Assets:
Equity contracts	$	—	$	��                1,475	$	—	$	1,475

^(a)  See above Schedule of Investments for values in each industry.

^(b)  Derivative financial instruments are swaps, which are valued at the unrealized appreciation (depreciation) on the instrument.

See notes to financial statements.

SCHEDULE  OF  INVESTMENTS 9

Statement of Assets and Liabilities  (unaudited)

July 31, 2019

	BlackRock Real Estate Securities Fund
ASSETS
Investments at value — unaffiliated (cost — $40,648,791)	$	46,566,307
Investments at value — affiliated (cost — $637,988)		637,988
Receivables:
Capital shares sold		189,795
Dividends — affiliated.		1,506
Dividends — unaffiliated		15,962
From the Manager		5,892
Unrealized appreciation on OTC swaps		1,475
Prepaid expenses		20,561
Total assets		47,439,486
LIABILITIES
Payables:
Investments purchased		32,725
Swaps		5,606
Administration fees		1,730
Board realignment and consolidation		1,441
Capital shares redeemed		124,763
Investment advisory fees		19,189
Other accrued expenses		13,221
Other affiliates		303
Printing fees		28,700
Professional fees		38,152
Service and distribution fees		5,180
Transfer agent fees		17,700
Trustees’ and Officer’s fees		580
Total liabilities		289,290
NET ASSETS	$	47,150,196
NET ASSETS CONSIST OF
Paid-in capital	$	40,697,780
Accumulated earnings		6,452,416
NET ASSETS	$	47,150,196
NET ASSET VALUE
Institutional— Based on net assets of $26,230,418 and 1,911,817 shares outstanding, unlimited number of shares authorized, $0.001 par value	$	13.72
Investor A— Based on net assets of $17,857,427 and 1,304,636 shares outstanding, unlimited number of shares authorized, $0.001 par value	$	13.69
Investor C— Based on net assets of $3,062,351 and 225,309 shares outstanding, unlimited number of shares authorized, $0.001 par value	$	13.59

See notes to financial statements.

10 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

Statement of Operations  (unaudited)

Six Months Ended July 31, 2019

	BlackRock Real Estate Securities Fund
INVESTMENT INCOME
Dividends — unaffiliated	$	758,320
Dividends — affiliated		9,164
Interest — unaffiliated		28
Total investment income		767,512
EXPENSES
Investment advisory		156,078
Professional		41,188
Service and distribution — class specific		33,983
Transfer agent — class specific		31,119
Registration		24,652
Accounting services		19,186
Printing		18,656
Administration		8,845
Trustees and Officer		5,342
Administration — class specific		4,155
Custodian		2,188
Miscellaneous		5,024
Total expenses		350,416
Less:
Fees waived and/or reimbursed by the Manager		(63,377	)
Transfer agent fees waived and/or reimbursed — class specific		(30,178	)
Administration fees waived — class specific		(4,155	)
Total expenses after fees waived and/or reimbursed		252,706
Net investment income		514,806
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain from:
Investments — unaffiliated		529,952
Swaps		11,743
		541,695
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		2,206,732
Swaps		1,269
		2,208,001
Net realized and unrealized gain		2,749,696
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	3,264,502

See notes to financial statements.

FINANCIAL  STATEMENTS 11

Statements of Changes in Net Assets

	BlackRock Real Estate Securities Fund
	Six Months Ended 07/31/19 (unaudited)			Year Ended 01/31/19
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	514,806		$	405,494
Net realized gain		541,695			211,604
Net change in unrealized appreciation (depreciation)		2,208,001			2,348,692
Net increase in net assets resulting from operations		3,264,502			2,965,790
DISTRIBUTIONS TO SHAREHOLDERS(a)
Institutional		(211,229	)		(254,861	)
Investor A		(127,068	)		(300,386	)
Investor C		(11,709	)		(44,729	)
Decrease in net assets resulting from distributions to shareholders		(350,006	)		(599,976	)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital share transactions		13,928,648			5,487,776
NET ASSETS
Total increase in net assets		16,843,144			7,853,590
Beginning of period		30,307,052			22,453,462
End of period	$	47,150,196		$	30,307,052

^(a)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

See notes to financial statements.

12 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

Financial Highlights  

(For a share outstanding throughout each period)

	BlackRock Real Estate Securities Fund
	Institutional
		Six Months Ended 07/31/19			Year Ended January 31,
		(unaudited)			2019			2018			2017			2016			2015
Net asset value, beginning of period		$	12.73		$	11.61		$	12.43		$	11.81		$	13.71		$	10.47
Net investment income(a)			0.17			0.22			0.25			0.19			0.21			0.20
Net realized and unrealized gain (loss)			0.94			1.25			0.12			1.33			(1.27	)		3.32
Net increase (decrease) from investment operations			1.11			1.47			0.37			1.52			(1.06	)		3.52
Distributions(b)
From net investment income			(0.12	)		(0.35	)		(0.22	)		(0.20	)		(0.20	)		(0.17	)
From net realized gain			—			—			(0.97	)		(0.70	)		(0.64	)		(0.11	)
Total distributions			(0.12	)		(0.35	)		(1.19	)		(0.90	)		(0.84	)		(0.28	)
Net asset value, end of period		$	13.72		$	12.73		$	11.61		$	12.43		$	11.81		$	13.71
Total Return(c)
Based on net asset value			8.69	%(d)		12.95	%		2.71	%		12.84	%		(7.85	)%		33.92	%
Ratios to Average Net Assets
Total expenses			1.47	%(e)		1.95	%		1.49	%		1.36	%		1.39	%		1.67	%
Total expenses after fees waived and/or reimbursed			1.05	%(e)		1.07	%		1.05	%		1.05	%		1.04	%		1.05	%
Net investment income			2.60	%(e)		1.87	%		1.94	%		1.44	%		1.66	%		1.67	%
Supplemental Data
Net assets, end of period (000)		$	26,230		$	13,470		$	9,069		$	15,041		$	9,593		$	17,862
Portfolio turnover rate			26	%(f)		82	%(f)		103	%		118	%		86	%		74	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, assumes the reinvestment of distributions.

^(d)  Aggregate total return.

^(e)  Annualized.

^(f)  Excludes underlying investments in total return swaps.

See notes to financial statements.

FINANCIAL  HIGHLIGHTS 13

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Real Estate Securities Fund (continued)
	Investor A
		Six Months Ended 07/31/19			Year Ended January 31,
		(unaudited)			2019			2018			2017			2016			2015
Net asset value, beginning of period		$	12.70		$	11.58		$	12.41		$	11.79		$	13.69		$	10.46
Net investment income(a)			0.16			0.22			0.19			0.19			0.16			0.13
Net realized and unrealized gain (loss)			0.93			1.22			0.14			1.30			(1.25	)		3.36
Net increase (decrease) from investment operations			1.09			1.44			0.33			1.49			(1.09	)		3.49
Distributions(b)
From net investment income			(0.10	)		(0.32	)		(0.19	)		(0.17	)		(0.17	)		(0.15	)
From net realized gain			—			—			(0.97	)		(0.70	)		(0.64	)		(0.11	)
Total distributions			(0.10	)		(0.32	)		(1.16	)		(0.87	)		(0.81	)		(0.26	)
Net asset value, end of period		$	13.69		$	12.70		$	11.58		$	12.41		$	11.79		$	13.69
Total Return(c)
Based on net asset value			8.59	%(d)		12.70	%		2.34	%		12.57	%		(8.10	)%		33.61	%
Ratios to Average Net Assets
Total expenses			1.81	%(e)		2.23	%		1.89	%		1.76	%		1.76	%		1.88	%
Total expenses after fees waived and/or reimbursed			1.30	%(e)		1.32	%		1.30	%		1.30	%		1.30	%		1.30	%
Net investment income			2.44	%(e)		1.85	%		1.54	%		1.45	%		1.27	%		1.10	%
Supplemental Data
Net assets, end of period (000)		$	17,857		$	14,391		$	10,885		$	20,949		$	19,641		$	23,792
Portfolio turnover rate			26	%(f)		82	%(f)		103	%		118	%		86	%		74	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

^(d)  Aggregate total return.

^(e)  Annualized.

^(f)  Excludes underlying investments in total return swaps.

See notes to financial statements.

14 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

Financial Highlights  (continued)

(For a share outstanding throughout each period)

	BlackRock Real Estate Securities Fund (continued)
	Investor C
		Six Months Ended 07/31/19			Year Ended January 31,
		(unaudited)			2019			2018			2017			2016			2015
Net asset value, beginning of period		$	12.62		$	11.50		$	12.33		$	11.72		$	13.61		$	10.42
Net investment income(a)			0.11			0.15			0.10			0.09			0.05			0.02
Net realized and unrealized gain (loss)			0.91			1.20			0.13			1.30			(1.23	)		3.37
Net increase (decrease) from investment operations			1.02			1.35			0.23			1.39			(1.18	)		3.39
Distributions(b)
From net investment income			(0.05	)		(0.23	)		(0.09	)		(0.08	)		(0.07	)		(0.09	)
From net realized gain			—			—			(0.97	)		(0.70	)		(0.64	)		(0.11	)
Total distributions			(0.05	)		(0.23	)		(1.06	)		(0.78	)		(0.71	)		(0.20	)
Net asset value, end of period		$	13.59		$	12.62		$	11.50		$	12.33		$	11.72		$	13.61
Total Return(c)
Based on net asset value			8.12	%(d)		11.92	%		1.57	%		11.75	%		(8.76	)%		32.65	%
Ratios to Average Net Assets
Total expenses			2.67	%(e)		3.14	%		2.74	%		2.57	%		2.61	%		2.70	%
Total expenses after fees waived and/or reimbursed			2.05	%(e)		2.07	%		2.05	%		2.05	%		2.05	%		2.05	%
Net investment income			1.64	%(e)		1.31	%		0.78	%		0.71	%		0.43	%		0.15	%
Supplemental Data
Net assets, end of period (000)		$	3,062		$	2,446		$	2,500		$	3,539		$	3,175		$	3,546
Portfolio turnover rate			26	%(f)		82	%(f)		103	%		118	%		86	%		74	%

^(a)  Based on average shares outstanding.

^(b)  Distributions for annual periods determined in accordance with U.S. federal income tax regulations.

^(c)  Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions.

^(d)  Aggregate total return.

^(e)  Annualized.

^(f)  Excludes underlying investments in total return swaps.

See notes to financial statements.

FINANCIAL  HIGHLIGHTS 15

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 anopen-end management investment company. The Trust is organized as a Massachusetts business trust. BlackRock Real Estate Securities Fund (the “Fund”) is a series of the Trust and is classified asnon-diversified.

The Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that certain classes bear expenses related to the shareholder servicing and distribution of such shares. Institutional Shares are sold without a sales charge and only to certain eligible investors. Investor A Shares are generally sold with an initial sales charge, and may be subject to a contingent deferred sales charge (“CDSC”) for certain redemptions where no initial sales charge was paid at the time of purchase. Investor C Shares may be subject to a CDSC. However, the CDSC does not apply to redemptions by certain employer-sponsored retirement plans or to redemptions of shares acquired through the reinvestment of dividends and capital gains by existing shareholders. Investor A and Investor C Shares bear certain expenses related to shareholder servicing of such shares, and Investor C Shares also bear certain expenses related to the distribution of such shares. Investor A and Investor C Shares are generally available through financial intermediaries. Effective November 8, 2018, the Fund adopted an automatic conversion feature whereby Investor C Shares held for approximately ten years will be automatically converted into Investor A Shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures (except that Investor C shareholders may vote on material changes to the Investor A Shares distribution and service plan).

Share Class	Initial Sales Charge	CDSC			Conversion Privilege
Institutional Shares	No		No		None
Investor A Shares	Yes		No	(a)	None
Investor C Shares	No		Yes		To Investor A Shares after approximately 10 years

^(a)  Investor A Shares may be subject to a CDSC for certain redemptions where no initial sales charge was paid at the time of purchase.

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

2. SIGNIFICANT ACCOUNTING POLICIES

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

Investment Transactions and Income Recognition:For financial reporting purposes, investment transactions are recorded on the dates the transactions are executed. Realized gains and losses on investment transactions are determined on the identified cost basis. Dividend income is recorded on theex-dividend date. Upon notification from issuers, a portion 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 amortization and accretion of premiums and discounts on debt securities, is recognized on an accrual basis. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Segregation and Collateralization:In cases where the Fund enters into certain investments (e.g., swaps) that would be treated as “senior securities” for 1940 Act purposes, the Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its 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.

Distributions:Distributions paid by the Fund are recorded on theex-dividend date. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.

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

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

The Fund has an arrangement with its custodian whereby credits are earned on uninvested cash balances, which could be used to reduce custody fees and/or overdraft charges. The Fund may incur charges on certain uninvested cash balances and overdrafts, subject to certain conditions.

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

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

16 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

Notes to Financial Statements  (unaudited) (continued)

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

• Equity investments traded on a recognized securities exchange are valued at the official closing price each day, if available. For equity investments traded on more than one exchange, the official closing 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 may be valued at the last available bid (long positions) or ask (short positions) price.

• Investments inopen-end U.S. mutual funds are valued at net asset value (“NAV”) each business day.

• 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.

If events (e.g., a company announcement, market volatility or a natural disaster) occur that are expected to materially affect the value of such investments, or 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 Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee will include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in anarm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.

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

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

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

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

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.

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 manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange orover-the-counter (“OTC”).

Swaps: Swap contracts are entered into to manage exposure to issuers, markets and securities. Such contracts are agreements between the Fund and a counterparty 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”).

For OTC swaps, any upfront premiums paid and any upfront fees received 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 contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statement of Assets and Liabilities. Payments received or paid are recorded in the Statement of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statement of Operations 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 contract is the premium received or paid.

• Total return swaps — Total return swaps are entered into to obtain exposure to a security or market without owning such security or investing directly in such market or to exchange the risk/return of one market (e.g., fixed-income) with another market (e.g., equity or commodity prices) (equity risk, commodity price 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 (distributions plus capital gains/losses) of an underlying instrument, or basket of underlying instruments, in exchange for fixed or floating rate interest payments. If the total return of the instrument(s) or index underlying the transaction exceeds or falls short of the offsetting fixed or floating interest rate obligation, the Fund receives payment from or makes a payment to the counterparty.

NOTES  TO  FINANCIAL  STATEMENTS 17

Notes to Financial Statements  (unaudited) (continued)

Certain total return swaps are designed to function as a portfolio of direct investments in long and short equity positions. This means that the Fund has the ability to trade in and out of these long and short positions within the swap and will receive the economic benefits and risks equivalent to direct investment in these positions, subject to certain adjustments due to events related to the counterparty. Benefits and risks include capital appreciation (depreciation), corporate actions and dividends received and paid, all of which are reflected in the swap’s market value. The market value also includes interest charges and credits (“financing fees”) related to the notional values of the long and short positions and cash balances within the swap. These interest charges and credits are based on a specified benchmark rate plus or minus a specified spread determined based upon the country and/or currency of the positions in the portfolio.

Positions within the swap and financing fees are reset periodically. During a reset, any unrealized appreciation (depreciation) on positions and accrued financing fees become available for cash settlement between the Fund and the counterparty. The amounts that are available for cash settlement are recorded as realized gains or losses in the Statement of Operations. Cash settlement in and out of the swap may occur at a reset date or any other date, at the discretion of the Fund and the counterparty, over the life of the agreement. Certain swaps have no stated expiration and can be terminated by either party at any time.

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.

Master Netting Arrangements: In order to define its contractual rights and to secure rights that will help it 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 counterparties. An ISDA Master Agreement is a bilateral agreement between the 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, the 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 restrict or prohibit the right of offset in bankruptcy, insolvency or other events.

Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting themark-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 in 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 counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Fund. Any additional required collateral is delivered to/pledged by the Fund on the next business day. Typically, the counterparty is not permitted to sell,re-pledge or use cash andnon-cash collateral it receives. The Fund generally agrees not to usenon-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Fund from its counterparties are not fully collateralized, it bears the risk of loss from counterpartynon-performance. Likewise, to the extent the Fund has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, it bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.

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.

5. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

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

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

Average Daily Net Assets	Investment Advisory Fee
First $1 Billion		0.75	%
$1 Billion — $3 Billion		0.71
$3 Billion — $5 Billion		0.68
$5 Billion — $10 Billion		0.65
Greater than $10 Billion		0.64

The Manager entered into separatesub-advisory agreements with BlackRock International Limited (“BIL”) and BlackRock (Singapore) Limited (“BRS”) (collectively, the“Sub-Advisers”), each an affiliate of the Manager. The Manager pays BIL and BRS for services they provide for that portion of the Fund for which BIL and BRS, as applicable, acts assub-adviser, a monthly fee that is equal to a percentage of the investment advisory fees paid by the Fund to the Manager.

Service and Distribution Fees:The Trust, on behalf of the Fund, entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plan and in accordance with Rule12b-1 under the 1940 Act, the Fund pays BRIL ongoing

18 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

Notes to Financial Statements  (unaudited) (continued)

service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of the Fund as follows:

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

BRIL and broker-dealers, pursuant tosub-agreements with 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 shareholders.

For the six months ended July 31, 2019, the following table shows the class specific service and distribution fees borne directly by each share class of the Fund:

Investor A	Investor C	Total
$19,982	$14,001	$	33,983

Administration:The Trust, on behalf of the Fund, entered into an Administration Agreement with the Manager, an indirect, wholly-owned subsidiary of BlackRock, to provide administrative services. For these services, the Manager receives an administration fee computed daily and payable monthly, based on a percentage of the average daily net assets of the Fund. The administration fee, which is shown as administration in the Statement of Operations, is paid at the annual rates below.

Average Daily Net Assets	Administration Fee
First $500 Million		0.0425	%
$500 Million — $1 Billion		0.0400
$1 Billion — $2 Billion		0.0375
$2 Billion — $4 Billion		0.0350
$4 Billion — $13 Billion		0.0325
Greater than $13 Billion		0.0300

In addition, the Manager charges each of the share classes an administration fee, which is shown as administration — class specific in the Statement of Operations, at an annual rate of 0.02% of the average daily net assets of each respective class.

For the six months ended July 31, 2019, the Fund paid the following to the Manager in return for these services, which are included in administration and administration — class specific in the Statement of Operations:

Fund Level	Institutional		Investor A		Investor C		Total
$8,845		$2,259		$1,616		$280	$	13,000

Transfer Agent:Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Fund withsub-accounting, recordkeeping,sub-transfer agency and other administrative services with respect to servicing of underlying investor accounts. For these services, these entities receive an asset-based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the six months ended July 31, 2019, the Fund did not pay any amounts to affiliates in return for these services.

The Manager maintains a call center that is responsible for providing certain shareholder services to the Fund. Shareholder services include responding to inquiries and processing purchases and sales based upon instructions from shareholders. For the six months ended July 31, 2019, 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	Investor A		Investor C		Total
$103		$704		$435	$	1,242

For the six months ended July 31, 2019, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

Institutional	Investor A		Investor C		Total
$12,499		$14,572		$4,048	$	31,119

Other Fees:For the six months ended July 31, 2019, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of the Fund’s Investor A Shares of $4,197.

For the six months ended July 31, 2019, affiliates received CDSCs of $334 for Investor C Shares.

Expense Limitations, Waivers, Reimbursements and Recoupments: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 (the “affiliated money market fund waiver”). The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation described below will be reduced by the amount of the affiliated money market fund waiver. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the six months ended July 31, 2019, the amount waived was $277.

NOTES  TO  FINANCIAL  STATEMENTS 19

Notes to Financial Statements  (unaudited) (continued)

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through May 31, 2020. The contractual agreement may be terminated upon 90 days’ notice by a majority of the trustees who are not “interested persons” of the Trust, as defined in the 1940 Act (“Independent Trustees”), or by a vote of a majority of the outstanding voting securities of the Fund. For the six months ended July 31, 2019, there were no fees waived and/or reimbursed by the Manager pursuant to this arrangement.

The Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, 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 (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:

Institutional	Investor A			Investor C
1.05%		1.30	%		2.05	%

The Manager has agreed not to reduce or discontinue these contractual expense limitations through May 31, 2020, unless approved by the Board, including a majority of the Independent Trustees, or by a vote of a majority of the outstanding voting securities of the Fund. For the six months ended July 31, 2019, the Manager waived and/or reimbursed $63,100, which is included in fees waived and/or reimbursed by the Manager in the Statement of Operations.

These amounts waived and/or reimbursed are included in transfer agent fees waived and/or reimbursed — class specific and administration fees waived — class specific, respectively, in the Statement of Operations. For the six months ended July 31, 2019, class specific expense waivers and/or reimbursements are as follows:

	Institutional		Investor A		Investor C		Total
Administration Fees Waived		$  2,259		$  1,616		$  280		$  4,155
Transfer Agent Fees Waived and/or Reimbursed		12,093		14,067		4,018		30,178

With respect to the contractual expense limitation, 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 and/or reimbursement from the Manager, are less than the current expense limitation 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 and/or expenses reimbursed during those prior two fiscal years under the agreement and (b) an amount not to exceed either the current expense limitation of that share class or the expense limitation of the share class in effect at the time that the share class received the applicable waiver and/or reimbursement, 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 adviser or administrator.

This repayment applies only to the contractual expense limitation on net expenses and does not apply to the contractual investment advisory fee waiver described above or any voluntary waivers that may be in effect from time to time.

As of July 31, 2019, the fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:

			Expires January 31,
	2020		2021		2022
Fund Level		$116,245	$	168,251	$	63,100
Institutional		11,047		12,197		14,352
Investor A		29,637		18,657		15,683
Investor C		8,992		7,483		4,298

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

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

During the six months ended July 31, 2019, the Fund did not participate in the Interfund Lending Program.

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

6. PURCHASES AND SALES

For the six months ended July 31, 2019, purchases and sales of investments, excluding short-term securities, were $24,390,894 and $10,525,600, respectively.

20 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

Notes to Financial Statements  (unaudited) (continued)

7. INCOME TAX INFORMATION

It is the Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for each of the four years ended January 31, 2019. 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 as of July 31, 2019, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

As of July 31, 2019, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

Tax cost	$	41,470,898
Gross unrealized appreciation	$	5,872,788
Gross unrealized depreciation		(137,916	)
Net unrealized appreciation	$	5,734,872

8. BANK 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 a364-day, $2.25 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.75 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.10% per annum on unused commitment amounts and interest at a rate equal to the higher of(a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2020 unless extended or renewed. Prior to April 18, 2019, Participating Funds paid an upfront commitment fee of 0.02% on the total commitment amounts, in addition to administration, legal and arrangement fees, which are included in miscellaneous expenses in the Statement of Operations. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the six months ended July 31, 2019, the Fund did not borrow under the credit agreement.

9. PRINCIPAL RISKS

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

Valuation Risk:The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Fund may invest in illiquid investments. An illiquid investment is any investment that the Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The Fund may experience difficulty in selling illiquid investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Fund may lose value, regardless of the individual results of the securities and other instruments in which the Fund invests.

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

A derivative contract may suffer amark-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.

The Fund’s risk of loss from counterparty credit risk on OTC derivatives is generally limited to the aggregate unrealized gain less the value of any collateral held by the Fund.

Concentration Risk:As of period end, the Fund invested a significant portion of its assets in securities in the real estate investment trusts (“REITs”) sector. Changes in economic conditions affecting such sector would have a greater impact on the Fund and could affect the value, income and/or liquidity of positions in such securities.

NOTES  TO  FINANCIAL  STATEMENTS 21

Notes to Financial Statements  (unaudited) (continued)

10. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Six Months Ended 07/31/19							Year Ended 01/31/19
	Shares			Amount				Shares			Amount
Institutional
Shares sold		1,396,428			$	18,559,709			796,768			$	9,490,945
Shares issued in reinvestment of distributions		15,433				210,523			21,058				248,039
Shares redeemed		(558,005	)			(7,555,898	)		(541,154	)			(6,414,198	)
Net increase		853,856			$	11,214,334			276,672			$	3,324,786
Investor A
Shares sold and automatic conversion of shares		452,415			$	6,060,683			496,369			$	5,962,507
Shares issued in reinvestment of distributions		9,296				126,474			25,159				296,052
Shares redeemed		(289,851	)			(3,886,040	)		(328,607	)			(3,827,737	)
Net increase		171,860			$	2,301,117			192,921			$	2,430,822
Investor C
Shares sold		47,592			$	625,194			44,444			$	521,085
Shares issued in reinvestment of distributions		845				11,414			3,562				41,561
Shares redeemed and automatic conversion of shares		(16,972	)			(223,411	)		(71,515	)			(830,478	)
Net increase (decrease)		31,465			$	413,197			(23,509	)		$	(267,832	)
Total Net Increase		1,057,181			$	13,928,648			446,084			$	5,487,776

11. SUBSEQUENT EVENTS

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

22 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

Disclosure of Investment Advisory Agreement and Sub-Advisory Agreements

The Board of Trustees (the “Board,” the members of which are referred to as “Board Members”) of BlackRock Funds (the “Trust”) met in person on April 17, 2019 (the “April Meeting”) and May14-15, 2019 (the “May Meeting”) to consider the approval of the investment advisory agreement (the “Advisory Agreement”) between the Trust, on behalf of BlackRock Real Estate Securities Fund (the “Fund”), a series of the Trust, and BlackRock Advisors, LLC (the “Manager”), the Trust’s investment advisor. The Board also considered the approval of thesub-advisory agreement between the Manager and BlackRock International Limited (“BIL”) with respect to the Fund (the “BILSub-Advisory Agreement”) and thesub-advisory agreement between the Manager and BlackRock (Singapore) Limited (“BRS” and, together with BIL, the“Sub-Advisors”) with respect to the Fund (the “BRSSub-Advisory Agreement” and, together with the BILSub-Advisory Agreement, the“Sub-Advisory Agreements”). The Manager and theSub-Advisors are referred to herein as “BlackRock.” The Advisory Agreement and theSub-Advisory Agreements are referred to herein as the “Agreements.”

Activities and Composition of the Board

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

The Agreements

Consistent with the requirements of the 1940 Act, the Board considers the continuation of the Agreements on an annual basis. The Board has four quarterly meetings per year, each typically extending for two days, and additionalin-person and telephonic meetings throughout the year, as needed. While the Board also has a fifthone-day meeting to consider specific information surrounding the renewal of the Agreements, the Board’s consideration entails a year-long deliberative process whereby the Board and its committees assess BlackRock’s services to the Fund. In particular, the Board assessed, among other things, the nature, extent and quality of the services provided to the Fund by BlackRock, BlackRock’s personnel and affiliates, including (as applicable): investment management; accounting, administrative and shareholder services; oversight of the Fund’s service providers; risk management and oversight; legal and compliance services; and ability to meet applicable legal and regulatory requirements. Throughout the year, including during the contract renewal process, the Independent Board Members were advised by independent legal counsel, and met with independent legal counsel in various executive sessions outside of the presence of management.

During the year, the Board, acting directly and through its committees, considers information that is relevant to its annual consideration of the renewal of the Agreements, including the services and support provided by BlackRock to the Fund and its shareholders. BlackRock also furnished additional information to the Board in response to specific questions from the Board. This additional information is discussed further below in the section titled “Board Considerations in Approving the Agreements.” Among the matters the Board considered were: (a) investment performance forone-year, three-year, five-year,ten-year, and/or since inception periods, as applicable, against peer funds, applicable benchmark, and performance metrics, as applicable, as well as senior management’s and portfolio managers’ analyses of the reasons for any over-performance or under-performance relative to its peers, benchmarks, and other performance metrics, as applicable; (b) fees, including advisory, administration, if applicable, and other amounts paid to BlackRock and its affiliates by the Fund for services; (c) Fund operating expenses and how BlackRock allocates expenses to the Fund; (d) the resources devoted to, risk oversight of, and compliance reports relating to, implementation of the Fund’s investment objective, policies and restrictions, and meeting regulatory requirements; (e) BlackRock and the Trust’s adherence to applicable compliance policies and procedures; (f) the nature, character and scope ofnon-investment management services provided by BlackRock and its affiliates and the estimated cost of such services; (g) BlackRock’s and other service providers’ internal controls and risk and compliance oversight mechanisms; (h) BlackRock’s implementation of the proxy voting policies approved by the Board; (i) the use of brokerage commissions and execution quality of portfolio transactions; (j) BlackRock’s implementation of the Trust’s valuation and liquidity procedures; (k) an analysis of management fees for products with similar investment mandates across theopen-end fund, exchange-traded fund (“ETF”),closed-end fund,sub-advised mutual fund, separately managed account, collective investment trust, and institutional separate account product channels, as applicable, and the similarities and differences between these products and the services provided as compared to the Fund; (l) BlackRock’s compensation methodology for its investment professionals and the incentives and accountability it creates, along with investment professionals’ investments in the fund(s) they manage; and (m) periodic updates on BlackRock’s business.

Board Considerations in Approving the Agreements

The Approval Process:Prior to the April Meeting, the Board requested and received materials specifically relating to the Agreements. The Independent Board Members are continuously engaged in a process with their independent legal counsel and BlackRock to review the nature and scope of the information provided to better assist its deliberations. The materials provided in connection with the April Meeting included, among other things: (a) information independently compiled and prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), based on either a Lipper classification or Morningstar category, regarding the Fund’s fees and expenses as compared with a peer group of funds as determined by Broadridge (“Expense Peers”) and the investment performance of the Fund as compared with a peer group of funds (“Performance Peers”) and other metrics, as applicable; (b) information on the composition of the Expense Peers and Performance Peers, and a description of Broadridge’s methodology; (c) information on the estimated profits realized by BlackRock and its affiliates pursuant to the Agreements and a discussion offall-out benefits to BlackRock and its affiliates; (d) a general analysis provided by BlackRock concerning investment management fees received in connection with other types of investment products, such as institutional accounts,sub-advised mutual funds, ETFs,closed-end funds,open-end funds, and separately managed accounts under similar investment mandates, as well as the performance of such other products, as applicable; (e) review ofnon-management fees; (f) the existence, impact and sharing of potential economies of scale, if any, with the Fund; (g) a summary of aggregate amounts paid by the Fund to BlackRock; (h) sales and redemption data regarding the Fund’s shares; and (i) various additional information requested by the Board as appropriate regarding BlackRock’s and the Fund’s operations.

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

DISCLOSURE  OF  INVESTMENT  ADVISORY  AGREEMENT  AND  SUB - ADVISORY  AGREEMENTS 23

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

At the May Meeting, the Board concluded its assessment of, among other things: (a) the nature, extent and quality of the services provided by BlackRock; (b) the investment performance of the Fund as compared with Performance Peers and other metrics, as applicable; (c) the advisory fee and the estimated cost of the services and estimated profits realized by BlackRock and its affiliates from their relationship with the Fund; (d) the Fund’s fees and expenses compared to Expense Peers; (e) the sharing of potential economies of scale;(f) fall-out benefits to BlackRock and its affiliates as a result of BlackRock’s relationship with the Fund; and (g) other factors deemed relevant by the Board Members.

The Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock or its affiliates relating to securities lending and cash management, and BlackRock’s services related to the valuation and pricing of Fund portfolio holdings. The Board noted the willingness of BlackRock personnel to engage in open, candid discussions with the Board. The Board did not identify any particular information as determinative, and each Board Member may have attributed different weights to the various items considered.

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

The Board considered, among other factors, with respect to BlackRock: the number, education and experience of investment personnel generally and the Fund’s portfolio management team; BlackRock’s research capabilities; investments by portfolio managers in the funds they manage; portfolio trading capabilities; use of technology; commitment to compliance; credit analysis capabilities; risk analysis and oversight capabilities; and the approach to training and retaining portfolio managers and other research, advisory and management personnel. The Board also considered BlackRock’s overall risk management program, including the continued efforts of BlackRock and its affiliates to address cybersecurity risks and the role of BlackRock’s Risk & Quantitative Analysis Group. The Board engaged in a review of BlackRock’s compensation structure with respect to the Fund’s portfolio management team and BlackRock’s ability to attract and retain high-quality talent and create performance incentives.

In addition to investment advisory services, the Board considered the nature and quality of the administrative and othernon-investment advisory services provided to the Fund. BlackRock and its affiliates provide the Fund with certain administrative, shareholder and other services (in addition to any such services provided to the Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. In particular, BlackRock and its affiliates provide the Fund with administrative services including, among others: (i) responsibility for disclosure documents, such as the prospectus, the summary prospectus (as applicable), the statement of additional information and periodic shareholder reports; (ii) oversight of daily accounting and pricing; (iii) responsibility for periodic filings with regulators; (iv) overseeing and coordinating the activities of other service providers, including, among others, the Fund’s custodian, fund accountant, transfer agent, and auditor; (v) organizing Board meetings and preparing the materials for such Board meetings; (vi) providing legal and compliance support; (vii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger, consolidation or repurposing of certainopen-end funds; and (viii) performing or managing administrative functions necessary for the operation of the Fund, such as tax reporting, expense management, fulfilling regulatory filing requirements, overseeing the Fund’s distribution partners, and shareholder call center and other services. The Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, and legal & compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations.

B. The Investment Performance of the Fund and BlackRock:The Board, including the Independent Board Members, also reviewed and considered the performance history of the Fund. In preparation for the April Meeting, the Board was provided with reports independently prepared by Broadridge, which included a comprehensive analysis of the Fund’s performance as of December 31, 2018. Broadridge ranks funds in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable. In connection with its review, the Board received and reviewed information regarding the investment performance of the Fund as compared to its Performance Peers and a custom peer group of funds as defined by BlackRock (“Customized Peer Group”). The Board and its Performance Oversight Committee regularly review, and meet with Fund management to discuss, the performance of the Fund throughout the year.

In evaluating performance, the Board focused particular attention on funds with less favorable performance records. The Board also noted that while it found the data provided by Broadridge generally useful, it recognized the limitations of such data, including in particular, that notable differences may exist between a fund and the Performance Peer funds (for example, the investment objective(s) and investment strategies). Further, the Board recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results. The Board also acknowledged that long-term performance could be impacted by even one period of significant outperformance or underperformance, and that a single investment theme could have the ability to affect long-term performance disproportionately.

The Board noted that for each of theone-, three- and five-year periods reported, the Fund ranked in the first quartile against its Customized Peer Group. The Board noted that BlackRock believes that the Customized Peer Group is an appropriate performance metric for the Fund, and that BlackRock has explained its rationale for this belief to the Board.

C. Consideration of the Advisory/Management Fees and the Estimated Cost of the Services and Estimated Profits Realized by BlackRock and its Affiliates from their Relationship with the Fund:The Board, including the Independent Board Members, reviewed the Fund’s contractual management fee rate compared with those of its Expense Peers. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. The Board also compared the Fund’s total expense ratio, as well as its actual management fee rate, to those of its Expense Peers. The total expense ratio represents a fund’s total net operating expenses, including any12b-1 or non12b-1 service fees. The total expense ratio gives effect to any expense reimbursements or fee waivers that benefit a fund, and the actual management fee rate gives effect to any management fee reimbursements or waivers that benefit a fund. The Board considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts andsub-advised mutual funds (including mutual funds sponsored by third parties).

The Board received and reviewed statements relating to BlackRock’s financial condition. The Board reviewed BlackRock’s profitability methodology and was also provided with an estimated profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Fund. The Board reviewed

24 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

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

BlackRock’s estimated profitability with respect to the Fund and other funds the Board currently oversees for the year ended December 31, 2018 compared to available aggregate estimated profitability data provided for the prior two years. The Board reviewed BlackRock’s estimated profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the estimated profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including, among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. The Board thus recognized that calculating and comparing profitability at individual fund levels is difficult.

The Board noted that, in general, individual fund or product line profitability of other advisors is not publicly available. The Board reviewed BlackRock’s overall operating margin, in general, compared to that of certain other publicly-traded asset management firms. The Board considered the differences between BlackRock and these other firms, including the contribution of technology at BlackRock, BlackRock’s expense management, and the relative product mix.

In addition, the Board considered the estimated cost of the services provided to the Fund by BlackRock, and BlackRock’s and its affiliates’ estimated profits relating to the management of the Fund and the other funds advised by BlackRock and its affiliates. As part of its analysis, the Board reviewed BlackRock’s methodology in allocating its costs of managing the Fund, to the Fund. The Board considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreements and to continue to provide the high quality of services that is expected by the Board. The Board further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk, and liability profile in servicing the Fund, including in contrast to what is required of BlackRock with respect to other products with similar investment mandates across theopen-end fund, ETF,closed-end fund,sub-advised mutual fund, separately managed account, collective investment trust, and institutional separate account product channels, as applicable.

The Board noted that the Fund’s contractual management fee rate ranked in the second quartile, and that the actual management fee rate and total expense ratio each ranked in the second quartile relative to the Fund’s Expense Peers. The Board also noted that the Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Fund increases above certain contractually specified levels. The Board noted that if the size of the Fund were to decrease, the Fund could lose the benefit of one or more breakpoints. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Fund’s total expenses as a percentage of the Fund’s average daily net assets on aclass-by-class basis.

D. Economies of Scale:The Board, including the Independent Board Members, considered the extent to which economies of scale might be realized as the assets of the Fund increase, including the existence of fee waivers and/or expense caps, as applicable, noting that any contractual fee waivers and expense caps had been approved by the Board. The Board also considered the extent to which the Fund benefits from such economies in a variety of ways and whether there should be changes in the advisory fee rate or breakpoint structure in order to enable the Fund to more fully participate in these economies of scale. The Board considered the Fund’s asset levels and whether the current fee schedule was appropriate. In their consideration, the Board Members took into account the existence of any expense caps and further considered the continuation and/or implementation, as applicable, of such caps.

E. Other Factors Deemed Relevant by the Board Members:The Board, including the Independent Board Members, also took into account other ancillary or“fall-out” benefits that BlackRock or its affiliates may derive from BlackRock’s respective relationships with the Fund, both tangible and intangible, such as BlackRock’s ability to leverage its investment professionals who manage other portfolios and risk management personnel, an increase in BlackRock’s profile in the investment advisory community, and the engagement of BlackRock’s affiliates as service providers to the Fund, including for administrative, distribution, securities lending and cash management services. The Board also considered BlackRock’s overall operations and its efforts to expand the scale of, and improve the quality of, its operations. The Board also noted that, subject to applicable law, BlackRock may use and benefit from third party research obtained by soft dollars generated by certain registered fund transactions to assist in managing all or a number of its other client accounts.

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

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

Conclusion

The Board, including the Independent Board Members, unanimously approved the continuation of (i) the Advisory Agreement between the Manager and the Trust, on behalf of the Fund, (ii) the BILSub-Advisory Agreement between the Manager and BIL with respect to the Fund and (iii) the BRSSub-Advisory Agreement between the Manager and BRS with respect to the Fund, each for aone-year term ending June 30, 2020. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, the Board, including the Independent Board Members, was satisfied that the terms of the Agreements were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Agreements, the Board did not identify any single factor or group of factors asall-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination.

DISCLOSURE  OF  INVESTMENT  ADVISORY  AGREEMENT  AND  SUB - ADVISORY  AGREEMENTS 25

Trustee and Officer Information

Mark Stalnecker, Chair of the Board and Trustee

Bruce R. Bond, Trustee

Susan J. Carter, Trustee

Collette Chilton, Trustee

Neil A. Cotty, Trustee

Lena G. Goldberg, Trustee

Robert M. Hernandez, Trustee

Henry R. Keizer, Trustee

Cynthia A. Montgomery, Trustee

Donald C. Opatrny, Trustee

Joseph P. Platt, Trustee

Kenneth L. Urish, Trustee

Claire A. Walton, Trustee

Robert Fairbairn, Trustee

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

Thomas Callahan, Vice President

Jennifer McGovern, Vice President

Neal J. Andrews, Chief Financial Officer

Jay M. Fife, Treasurer

Charles Park, Chief Compliance Officer

John MacKessy, Anti-Money Laundering Compliance Officer

Benjamin Archibald, Secretary

Investment Adviser and Administrator

BlackRock Advisors, LLC

Wilmington, DE 19809

Sub-Advisers

BlackRock International Limited

Edinburgh, EH3 8BL

United Kingdom

BlackRock (Singapore) Limited

079912 Singapore

Accounting Agent and Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

Wilmington, DE 19809

Custodian

The Bank of New York Mellon

New York, NY 10286

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

Distributor

BlackRock Investments, LLC

New York, NY 10022

Legal Counsel

Sidley Austin LLP

New York, NY 10019

Address of the Trust

100 Bellevue Parkway

Wilmington, DE 19809

26 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

Additional Information

General Information

Householding

The Fund will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the 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 as an exhibit to its reports on FormN-PORT, and for reporting periods ended prior to March 31, 2019, filed such information on FormN-Q. The Fund’s FormsN-PORT andN-Q are available on the SEC’s website at http://www.sec.gov. The Fund’s FormsN-PORT andN-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 upon request and without charge (1) by calling (800)441-7762; (2) athttp://www.blackrock.com;and (3) on the SEC’s website at http://www.sec.gov.

Availability of Proxy Voting Record

Information about how the Fund voted proxies relating to securities held in the Fund’s portfolio during the most recent12-month period ended June 30 is available upon request and without charge (1) athttp://www.blackrock.comor by calling (800)441-7762 and (2) on the SEC’s website at http://www.sec.gov.

BlackRock’s Mutual Fund Family

BlackRock offers a diverse lineup ofopen-end mutual funds crossing all investment styles and managed by experts in equity, fixed-income andtax-exempt investing. Visithttp://www.blackrock.comfor more information.

Shareholder Privileges

Account Information

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

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.

ADDITIONAL   INFORMATION 27

Additional Information  (continued)

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 theirnon-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 personalnon-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 tonon-affiliated third parties anynon-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. Thesenon-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 tonon-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 thenon-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.

28 2 0 1 9   BLACK ROCK  SEMI - ANNUAL  REPORT  TO  SHAREHOLDERS

This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Fund unless preceded or accompanied by the Fund’s current prospectus. 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.

          REALES-7/19-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 previousForm N-CSR filing.
Item 7	–	Disclosure of Proxy Voting Policies and Procedures forClosed-End Management Investment Companies – Not Applicable
Item 8	–	Portfolio Managers ofClosed-End Management Investment Companies – Not Applicable
Item 9	–	Purchases of Equity Securities byClosed-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 Rule30a-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 Rule30a-3(b) under the 1940 Act and Rule15d-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 Rule30a-3(d) under the 1940 Act) that occurred during 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	–	Disclosure of Securities Lending Activities forClosed-End Management Investment Companies – Not Applicable
Item 13	–	Exhibits attached hereto
		(a)(1) – Code of Ethics – Not Applicable to this semi-annual report
		(a)(2) – Certifications – Attached hereto
		(a)(3) – Not Applicable
		(a)(4) – 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: October 4, 2019
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: October 4, 2019
By:	/s/ Neal J. Andrews
	Neal J. Andrews
	Chief Financial Officer (principal financial officer) of
	BlackRock Funds
Date: October 4, 2019