UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21760
Name of Fund: BlackRock Multi-Strategy Hedge Advantage
Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809
Name and address of agent for service: Donald C. Burke, Chief Executive Officer,
BlackRock Multi-Strategy Hedge Advantage, 800 Scudders Mill Road,
Plainsboro, NJ 08536. Mailing address: P.O. Box 9011, Princeton, NJ
08543-9011
Registrant's telephone number, including area code: (877) GPC-ROCK
Date of fiscal year end: 03/31/2008
Date of reporting period: 04/01/2007 - 03/31/2008
Item 1 - Report to Stockholders
EQUITIES FIXED INCOME REAL ESTATE
LIQUIDITY ALTERNATIVES BLACKROCK SOLUTIONS
BlackRock Multi-Strategy Hedge Advantage BLACKROCK
ANNUAL REPORT | MARCH 31, 2008
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
Table of Contents
================================================================================
Page
- --------------------------------------------------------------------------------
A Letter to Shareholders ................................................. 3
Annual Report:
Fund Summary ............................................................. 4
Disclosure of Expenses ................................................... 5
Financial Statements:
Schedule of Investments ................................................ 6
Statement of Assets and Liabilities .................................... 7
Statement of Operations ................................................ 7
Statements of Changes in Net Assets .................................... 8
Statement of Cash Flows ................................................ 9
Financial Highlights ..................................................... 10
Notes to Financial Statements ............................................ 11
Report of Independent Registered Public Accounting Firm .................. 15
Officers and Trustees .................................................... 16
Additional Information ................................................... 19
2 BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008
A Letter to Shareholders
Dear Shareholder
Financial markets endured severe bouts of volatility during the reporting
period, particularly as the calendar turned to 2008. It was then that fears of
an economic recession swelled and credit market strains intensified, producing
calamity in the financial system and, ultimately, the demise of major Wall
Street firm Bear Stearns.
The Federal Reserve Board (the "Fed"), after cutting the target federal funds
rate 100 basis points (1%) between September 2007 and year-end, stepped up its
efforts to support the ailing financial sector in the first three months of
2008. The central bank cut interest rates 125 basis points in January alone, and
followed with another 75-basis-point cut on March 18, bringing the target rate
to 2.25%. In an unprecedented move, the Fed also extended its financing
operations directly to broker/dealers and assisted JPMorgan in its buyout of
ill-fated Bear Stearns.
Against this backdrop, investor anxiety has been acute and equity markets have
struggled. The S&P 500 Index of U.S. stocks was down in March, marking the fifth
consecutive month of negative returns. International markets outperformed the
U.S. for much of 2007, but that trend changed in more recent months as investors
grew increasingly reluctant to take on the risks of foreign investing.
In fixed income markets, an ongoing investor flight to quality continued to
drive Treasury yields lower and their prices higher. The yield on 10-year
Treasury issues, which touched 5.30% in June 2007 (its highest level in five
years), fell to 4.04% by year-end and to 3.45% by March 31. Investors largely
shunned bonds associated with the housing and credit markets, and the riskier
high yield sector landed in negative territory year-to-date. Meanwhile, the
municipal bond market has struggled with concerns around the creditworthiness of
monoline bond insurers and the failure of auctions for auction rate securities,
driving yields higher and prices lower across the curve. At period-end,
municipal bonds were trading at higher yields than their Treasury counterparts,
a very unusual occurrence by historical standards.
Overall, the major benchmark indexes posted mixed results for the current
reporting period, generally reflecting heightened investor risk aversion:
Total Returns as of March 31, 2008 6-month 12-month
===============================================================================================================
U.S. equities (S&P 500 Index) -12.46% - 5.08%
- ---------------------------------------------------------------------------------------------------------------
Small cap U.S. equities (Russell 2000 Index) -14.02 -13.00
- ---------------------------------------------------------------------------------------------------------------
International equities (MSCI Europe, Australasia, Far East Index) -10.50 - 2.70
- ---------------------------------------------------------------------------------------------------------------
Fixed income (Lehman Brothers U.S. Aggregate Index) + 5.23 + 7.67
- ---------------------------------------------------------------------------------------------------------------
Tax-exempt fixed income (Lehman Brothers Municipal Bond Index) + 0.75 + 1.90
- ---------------------------------------------------------------------------------------------------------------
High yield bonds (Lehman Brothers U.S. Corporate High Yield 2% Issuer Capped Index) - 4.01 - 3.47
- ---------------------------------------------------------------------------------------------------------------
Past performance is no guarantee of future results. Index performance shown for
illustrative purposes only. You cannot invest directly in an index.
As you navigate today's volatile markets, we encourage you to review your
investment goals with your financial professional and to make portfolio changes,
as needed. For more up-to-date commentary on the economy and financial markets,
we invite you to visit www.blackrock.com/funds. As always, we thank you for
entrusting BlackRock with your investment assets, and we look forward to
continuing to serve you in the months and years ahead.
Sincerely,
/s/ Rob Kapito
Rob Kapito
President, BlackRock Advisors, LLC
3
THIS PAGE NOT PART OF YOUR FUND REPORT
Fund Summary as of March 31, 2008
Investment Objective
BlackRock Multi-Strategy Hedge Advantage (the "Fund") seeks high total return
over a full market cycle through investments in hedge funds and other investment
vehicles pursuing alternative investment strategies.
Performance
For the 12-month period ended March 31, 2008, the Fund returned -3.87% based on
net asset value (NAV), with distributions reinvested. For the same period, the
Hedge Fund Research Inc. Fund of Funds Composite Index returned +2.78% on a NAV
basis. Ongoing issues in residential real estate and structured credit markets,
as well as fear of economic recession and inflation, led to aggressive investor
risk reduction, dissipating liquidity and steep declines in valuations across a
number of asset classes. Against this backdrop, managers in the credit, relative
value and equity-based strategies suffered most, while global macro and
commodities strategies generally fared well. Short positions in the U.S. dollar
and long exposures to the energy complex contributed the most to the profits of
the fund's underlying managers.
Fund Information
The following charts show the ten largest holdings and investments by strategy
of the Fund's long-term investments:
Ten Largest Holdings
Drawbridge Global Macro Fund Ltd. ........................................ 7%
Trivium Offshore Fund Ltd. ............................................... 7
Glenview Capital Partners Ltd. ........................................... 7
Crabel Fund Ltd .......................................................... 6
Hayground Cove Overseas Partners Ltd. .................................... 5
SR Phoenicia Inc. ........................................................ 5
Kinetics Fund Inc. ....................................................... 5
Aristeia International Ltd. .............................................. 5
Altairis Offshore Levered Ltd. ........................................... 5
Gruss Global Investors Ltd. .............................................. 5
- -------------------------------------------------------------------------------
Investments by Strategy
3/31/08 3/31/07
- --------------------------------------------------------------------------------
Equity Opportunistic ........................................ 41% 40%
Directional ................................................. 17 24
Multi Strategy .............................................. 15 13
Event Driven ................................................ 11 6
High Yield .................................................. 11 8
Convertible Arbitrage ....................................... 5 6
Equity Neutral .............................................. 0 3
- --------------------------------------------------------------------------------
The table below summarizes the change in the Fund's net asset value per share:
- --------------------------------------------------------------------------------
3/31/08 3/31/07 Change High Low
- --------------------------------------------------------------------------------
Net Asset Value ......... $0.8908 $1.0387 (14.24%) $1.0941 $0.8908
- --------------------------------------------------------------------------------
The table below provides the Fund's average annual total returns:
Average Annual Total Return
Return Without Return With
Sales Charge Sales Charge*
================================================================================
One Year Ended 3/31/08 -3.87% -6.75%
- --------------------------------------------------------------------------------
Inception (9/01/05)
through 3/31/08 +2.97 +1.77
- --------------------------------------------------------------------------------
* Maximum sales charge is 3%.
Past results shown should not be considered a representation of future
performance.
4 BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008
Disclosure of Expenses
Shareholders of this Fund may incur the following charges: (a) expenses related
to transactions, including sales charges, redemption fees and exchange fees; and
(b) operating expenses, including advisory fees, distribution fees including
12b-1 fees, and other Fund expenses. The expense example below (which is based
on a hypothetical investment of $1,000 invested on October 1, 2007 and held
through March 31, 2008) is intended to assist shareholders both in calculating
expenses based on an investment in the Fund and in comparing these expenses with
similar costs of investing in other mutual funds.
The table provides information about actual account values and actual expenses.
In order to estimate the expenses a shareholder paid during the period covered
by this report, shareholders can divide their account value by $1,000 and then
multiply the result by the number in the first line under the heading entitled
"Expenses Paid During the Period."
The table also provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses. In order to assist shareholders
in comparing the ongoing expenses of investing in this Fund and other funds,
compare the 5% hypothetical example with the 5% hypothetical examples that
appear in other funds' shareholder reports.
The expenses shown in the table are intended to highlight shareholders' ongoing
costs only and do not reflect any transactional expenses, such as sales charges.
Therefore, the second table is useful in comparing ongoing expenses only, and
will not help shareholders determine the relative total expenses of owning
different funds. If these transactional expenses were included, shareholder
expenses would have been higher.
Expense Example
Actual Hypothetical**
--------------------------------------------------- ---------------------------------------------------
Beginning Ending Beginning Ending
Account Value Account Value Expenses Paid Account Value Account Value Expenses Paid
October 1, 2007 March 31, 2008 During the Period* October 1, 2007 March 31, 2008 During the Period*
- ------------------------------------------------------------------------------------------------------------------------------------
BlackRock Multi-Strategy
Hedge Advantage $1,000 $942 $12.41 $1,000 $1,012 $12.87
- ------------------------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the annualized expense ratio of 2.56%, multiplied by
the average account value over the period, multiplied by 183/366 (to
reflect the one-half year period shown).
** Hypothetical 5% annual return before expenses is calculated by pro-rating
the number of days in the most recent fiscal half year divided by 366.
BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008 5
Schedule of Investments March 31, 2008
(Percentages shown are based on Net Assets)
Strategy Portfolio Funds Value
===================================================================================================================================
Convertible Arbitrage -- 4.9% Aristeia International Ltd. $ 2,339,834
===================================================================================================================================
Directional -- 16.8% Crabel Fund Ltd 2,623,725
Drawbridge Global Macro Fund Ltd. 3,450,400
Grinham Diversified Fund Ltd 1,949,573
-----------
8,023,698
===================================================================================================================================
Equity Opportunistic -- 40.5% Altairis Offshore Levered Ltd. 2,297,531
Cantillion Europe Ltd. 1,669,865
Glenview Capital Partners Ltd. 3,159,588
Hayground Cove Overseas Partners Ltd. 2,457,130
Kinetics Fund Inc. 2,372,039
Neon Liberty Emerging Markets Fund Ltd. 1,779,557
SR Phoenicia Inc. 2,433,869
Trivium Offshore Fund Ltd. 3,162,492
-----------
19,332,071
===================================================================================================================================
Event Driven --10.9% Amber Fund Cayman Ltd. 1,731,816
Gruss Global Investors Ltd. 2,287,667
European Opportunities Unit Trust 1,198,116
-----------
5,217,599
===================================================================================================================================
High Yield -- 10.6% Avenue Europe International Ltd. 1,564,065
GoldenTree European Select Opportunities Ltd. 1,702,868
LibertyView Credit Opportunities Fund Ltd. 838,559
Ore Hill International Fund Ltd. 978,169
-----------
5,083,661
===================================================================================================================================
Multi-Strategy -- 14.9% The Canyon Value Realization Fund (Cayman) Ltd. 1,368,328
HBK Offshore Fund Ltd. 976,772
OZ Europe Overseas Fund II Ltd. 2,173,888
Sandelman Partners Multi-Strategy Fund Ltd. 1,785,050
York Investments Ltd. 814,393
-----------
7,118,431
===================================================================================================================================
Total Investments** (Cost -- $41,479,905*) -- 98.6% 47,115,294
Other Assets Less Liabilities -- 1.4% 667,914
-----------
Net Assets -- 100.0% $47,783,208
===========
* The cost and unrealized appreciation (depreciation) of investments as of
March 31, 2008, as computed for federal income tax purposes, were as
follows:
Aggregate cost .......................................... $ 48,009,382
============
Gross unrealized appreciation ........................... $ --
Gross unrealized depreciation ........................... (894,088)
------------
Net unrealized depreciation ............................. $ (894,088)
============
** Non-income producing securities.
See Notes to Financial Statements.
6 BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008
Statement of Assets and Liabilities
March 31, 2008
===============================================================================
Assets
- -------------------------------------------------------------------------------
Investments in Portfolio Funds,* at value
(identified cost -- $41,479,905) .............................. $47,115,294
Cash ............................................................ 2,712,081
Investments sold receivable ..................................... 1,455,087
Interest receivable -- affiliated ............................... 6,512
Prepaid expenses ................................................ 2,264
-----------
Total assets .................................................... 51,291,238
-----------
===============================================================================
Liabilities
- -------------------------------------------------------------------------------
Payables:
Investment adviser ............................................ 420,091
Service agents ................................................ 69,461
Tendered shares payable ......................................... 2,694,637
Accrued expenses and other liabilities .......................... 323,841
-----------
Total liabilities ............................................... 3,508,030
-----------
===============================================================================
Net Assets
- -------------------------------------------------------------------------------
Net Assets ...................................................... $47,783,208
===========
===============================================================================
Net Assets Consist of
- -------------------------------------------------------------------------------
Shares, $0.01 par value, unlimited number of shares authorized .. $ 536,424
Paid-in capital in excess of par ................................ 53,936,329
Net unrealized appreciation on investments ...................... 5,635,389
Net accumulated realized loss on investments .................... (2,103,147)
Distributions in excess of net investment income ................ (10,221,787)
-----------
Net Assets ...................................................... $47,783,208
===========
Shares outstanding .............................................. 53,642,395
===========
Net asset value per share ....................................... $ 0.8908
===========
* Non-income producing securities.
Statement of Operations
Year Ended March 31, 2008
===============================================================================
Investment Income
- -------------------------------------------------------------------------------
Interest -- affiliated .......................................... $ 109,411
-----------
===============================================================================
Expenses
- -------------------------------------------------------------------------------
Investment advisory ............................................. 875,120
Accounting and administration services .......................... 183,593
Service agent ................................................... 145,678
Printing and shareholder reports ................................ 91,995
Professional .................................................... 45,281
Custodian ....................................................... 40,200
Offering costs .................................................. 36,789
Loan interest expense ........................................... 8,956
Other ........................................................... 2,682
-----------
Total expenses .................................................. 1,430,294
-----------
Net investment loss ............................................. (1,320,883)
-----------
===============================================================================
Realized and Unrealized Gain (Loss)
- -------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation
investments ..................................................... (1,032,850)
Net realized gain on investments ................................ 493,377
-----------
Net total unrealized and realized loss .......................... (539,473)
-----------
Net Decrease in Net Assets Resulting from Operations ............ $(1,860,356)
===========
See Notes to Financial Statements.
BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008 7
Statements of Changes in Net Assets
Year Ended March 31,
-----------------------------
Increase in Net Assets 2008 2007
===================================================================================================================================
Operations
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment loss .............................................................................. $ (1,320,883) $ (1,453,435)
Net change in unrealized appreciation/depreciation on investments ................................ (1,032,850) 4,518,850
Net realized gain on investments ................................................................. 493,377 734,826
-----------------------------
Net increase (decrease) in net assets resulting from operations .................................. (1,860,356) 3,800,241
-----------------------------
===================================================================================================================================
Distributions to Shareholders
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income ............................................................................ (6,415,109) (4,333,584)
-----------------------------
Decrease in net assets resulting from distributions to shareholders .............................. (6,415,109) (4,333,584)
-----------------------------
===================================================================================================================================
Capital Transactions
- -----------------------------------------------------------------------------------------------------------------------------------
Net proceeds from issuance of shares ............................................................. 6,115,605 17,307,915
Valuation of shares issued to shareholders in reinvestment of distributions ...................... 5,188,504 4,040,442
Fair value of shares tendered .................................................................... (13,249,371) (4,569,957)
-----------------------------
Net increase (decrease) in net assets derived from capital transactions .......................... (1,945,262) 16,778,400
-----------------------------
===================================================================================================================================
Net Assets
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets .......................................................... (10,220,727) 16,245,057
Beginning of year ................................................................................ 58,003,935 41,758,878
-----------------------------
End of year ...................................................................................... $ 47,783,208 $ 58,003,935
=============================
Distributions in excess of net investment income ................................................. $(10,221,787) $ (4,524,972)
=============================
See Notes to Financial Statements.
8 BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008
Statement of Cash Flows
Year Ended March 31, 2008
===================================================================================================================================
Cash Provided by Operating Activities
- -----------------------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from operations .............................................................. $ (1,860,356)
------------
Adjustments to reconcile net decrease in net assets resulting from operations to net cash
provided by operating activities:
Decrease in investments paid in advance ....................................................................... 4,900,000
Decrease in receivables and other assets ...................................................................... 3,149,624
Increase in liabilities ....................................................................................... 22,781
Net change in unrealized appreciation/depreciation on investments ............................................. 1,032,850
Net realized gain on investments .............................................................................. (493,377)
Purchases of long-term securities ................................................................................. (11,701,976)
Sales of long-term securities ..................................................................................... 19,105,985
------------
Net cash provided by investing activities ......................................................................... 14,155,531
------------
===================================================================================================================================
Cash Used for Financing Activities
- -----------------------------------------------------------------------------------------------------------------------------------
Receipts from issuance of Shares .................................................................................. 5,474,895
Payments for distributions ........................................................................................ (1,315,884)
Payments for tender of Shares ..................................................................................... (12,646,374)
Payments on borrowings ............................................................................................ (3,200,000)
------------
Net cash used for financing activities ............................................................................ (11,687,363)
------------
===================================================================================================================================
Cash
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash .............................................................................................. 2,468,168
Cash at beginning of year ......................................................................................... 243,913
------------
Cash at end of year ............................................................................................... $ 2,712,081
============
===================================================================================================================================
Cash Flow Information
- -----------------------------------------------------------------------------------------------------------------------------------
Cash paid for interest ............................................................................................ $ 30,106
============
===================================================================================================================================
Non-Cash Financing Activities
- -----------------------------------------------------------------------------------------------------------------------------------
Capital shares issued in reinvestment of distributions paid to shareholders ....................................... $ 5,188,504
============
See Notes to Financial Statements.
BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008 9
Financial Highlights
Period
September 1,
Year Ended March 31, 2005 4 to
---------------------------- March 31,
2008 2007 2006
=================================================================================================================================
Per Share Operating Performance
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .......................................... $ 1.0387 $ 1.0486 $ 1.0000
---------------------------------------------
Net investment loss 3 ......................................................... (0.0233) (0.0286) (0.0158)
Net unrealized and realized gain (loss) on investments ........................ (0.0104) 0.0999 0.0644
---------------------------------------------
Net increase (decrease) from investment operations ............................ (0.0337) 0.0713 0.0486
---------------------------------------------
Less distributions from:
investment income ........................................................... (0.1142) (0.0812) --
---------------------------------------------
Total distributions ........................................................... (0.1142) (0.0812) --
---------------------------------------------
Net asset value, end of period ................................................ $ 0.8908 $ 1.0387 $ 1.0486
=============================================
=================================================================================================================================
Total Investment Return 2
- ---------------------------------------------------------------------------------------------------------------------------------
Total investment return ....................................................... (3.87%) 6.99% 4.86% 5
=============================================
=================================================================================================================================
Ratios to Average Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Total expenses ................................................................ 2.45% 3.15% 5.68% 1
=============================================
Total expenses net of reimbursement ........................................... 2.45% 2.92% 3.00% 1
=============================================
Net investment loss ........................................................... (2.26%) (2.73%) (2.70%) 1
=============================================
=================================================================================================================================
Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000) ............................................... $ 47,783 $ 58,004 $ 41,759
=============================================
Portfolio turnover ............................................................ 34% 37% 0%
=============================================
1 Annualized.
2 Total investment returns exclude the effects of sales charges.
3 Based on average shares outstanding.
4 Commencement of operations.
5 Aggregate total investment return; not annualized.
See Notes to Financial Statements.
10 BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008
Notes to Financial Statements
1. Significant Accounting Policies:
BlackRock Multi-Strategy Hedge Advantage (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a closed-end, non-diversified
management investment company. The Fund's financial statements are prepared in
conformity with accounting principles generally accepted in the United States of
America, which may require the use of management accruals and estimates. Actual
results may differ from these estimates. The Fund offers one class of shares,
which may be sold with a front-end sales charge. The following is a summary of
significant accounting policies followed by the Fund.
Valuation of Investments in Portfolio Funds: The Fund values its investments in
Portfolio Funds at fair value in accordance with procedures established by the
Board of Trustees. The valuations reported by the Portfolio Fund Managers of the
Portfolio Funds, upon which the Fund calculates its month-end net asset value
and net asset value per Share, may be subject to later adjustment, based upon
information reasonably available at that time. The Fund will pay redemption
proceeds, as well as calculate management fees, on the basis of net asset
valuations determined using the best information available as of the valuation
date. In the event a Portfolio Fund subsequently corrects, revises, or adjusts a
valuation after the Fund has determined a net asset value, the Fund will
generally not make any retroactive adjustment to such net asset value, or to any
amounts paid based on such net asset value, to reflect a revised valuation.
Foreign Currency Transactions: Transactions denominated in foreign currencies
are recorded at the exchange rate prevailing when recognized. Assets and
liabilities denominated in foreign currencies are valued at the exchange rate at
the end of the period. Foreign currency transactions are the result of settling
(realized) or valuing (unrealized) assets or liabilities expressed in foreign
currencies into U.S. dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments. The
Fund invests in foreign securities, which may involve a number of risk factors
and special considerations not present with investments in securities of U.S.
corporations.
Income Taxes: It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends and
capital gains at various rates.
Security Transactions and Investment Income: Portfolio Fund transactions are
recorded on the effective dates of the transactions. Realized gains and losses
on Portfolio Fund transactions are determined on the average cost basis.
Interest income is recognized on the accrual basis.
Cash Balances: The Fund maintains cash in a PNC interest-bearing money market
account, which, at times, may exceed federally insured limits. The Fund has not
experienced any losses in such account and does not believe it is exposed to any
significant credit risk on such bank deposits. All interest income earned will
be paid to the Fund.
Reclassifications: U.S. generally accepted accounting principles require that
certain components of net assets be adjusted to reflect permanent differences
between financial and tax reporting. Accordingly, during the current year,
$2,039,177 has been reclassified between net accumulated realized loss and
distributions in excess of net investment income as a result of permanent
differences attributable to gains from the sale of stock of passive foreign
investment companies. This reclassification has no effect on net assets or net
asset values per share.
Recent Accounting Pronouncements: Effective September 28, 2007, the Fund
implemented Financial Accounting Standards Board ("FASB") Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement No. 109" ("FIN 48"). FIN 48 prescribes the minimum recognition
threshold a tax position must meet in connection with accounting for
uncertainties in income tax positions taken or expected to be taken by an
entity, including investment companies, before being measured and recognized in
the financial statements. Management has evaluated the application of FIN 48 to
the Fund, and has determined that the adoption of FIN 48 did not have a material
impact on the Fund's financial statements. The Fund files U.S. and various state
tax returns. No income tax returns are currently under examination. The statute
of limitations on the Fund's tax returns remains open for the years ended March
31, 2006 through March 31, 2007. The statute of limitations on the Fund's state
tax returns may remain open for an additional year depending upon the
jurisdiction.
In September 2006, Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. At this time, management is evaluating the implications of FAS 157
and its impact on the Fund's financial statements, if any, is currently being
assessed.
In addition, in February 2007, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. FAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value that are not currently
required to be measured at fair value. FAS 159 also establishes presentation and
disclosure requirements designed to facilitate comparisons between entities that
choose different measurement attributes for similar types of assets and
liabilities. At this time, management is evaluating the implications of FAS 159
and its impact of the Fund's financial statements, if any, is currently being
assessed.
BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008 11
Notes to Financial Statements (continued)
Offering Costs: Offering costs associated with the ongoing sale of the Fund's
Shares are expensed as incurred.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with BlackRock
Advisors, LLC ("BlackRock"). Merrill Lynch & Co., Inc. ("Merrill Lynch") and The
PNC Financial Services Group, Inc. are principal owners of BlackRock, Inc.
On October 1, 2007, BlackRock and BAA Holdings, LLC ("BAA"), a wholly owned
subsidiary of BlackRock, completed the acquisition of the fund of funds business
of Quellos Holdings, LLC ("Quellos"). The combined fund of funds platform of
BlackRock, including the portion acquired from Quellos, will operate under the
name of BlackRock Alternative Advisors. The Fund's Investment Advisory Agreement
with BlackRock did not change as a result of the acquisition. No changes have
occurred to the Fund's investment objective or to the Fund's structure as a
result of these changes.
BlackRock is responsible for the management of the Fund's portfolio and provides
the necessary personnel, facilities, equipment and certain other services
necessary to the operations of the Fund. For such services, the Fund pays
BlackRock a monthly fee at an annual rate of 1.50% of the average daily value of
the Fund's net assets.
The Fund has also entered into a Member Services Agreement with FAM
Distributors, Inc. ("FAMD" or the "Service Agent"), a subsidiary of Merrill
Lynch. FAMD provides or arranges for provision of ongoing investor and
shareholder servicing. The Fund pays a monthly fee computed at the annual rate
of 0.25% of the Fund's average month-end assets (the "Service Fee") to certain
affiliates of the Fund, who in turn, pay the Service Agent for payments it makes
to broker-dealers and financial advisors that have agreed to provide ongoing
investor and shareholder maintenance servicing to shareholders of the Fund and
for ongoing investor servicing activities performed by the Service Agent.
For the year ended March 31, 2008, FAMD received $158,328 in distribution fees
on sales of shares in the Fund.
Certain officers and/or trustees of the Fund are officers and/or directors of
BlackRock and/or BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments for the year ended March 31, 2008 were
$11,701,976 and $19,105,985, respectively.
4. Capital Share Transactions:
An investor purchases Shares in the Fund and the Shares are offered at their net
asset value. The minimum initial investment for each investor is $25,000 (net of
any distribution fees) and the minimum additional investment is $10,000. An
investor's subscription for Shares is irrevocable by the investor and will
generally require the investor to maintain its investment in the Fund until such
time as the Fund offers to repurchase the Shares in a tender offering. No
shareholder or other person holding Shares acquired from a shareholder will have
the right to require the Fund to redeem the Shares. The Fund may, from time to
time, repurchase Shares from shareholders in accordance with written tenders by
shareholders at those times, in those amounts and on terms and conditions as the
Board of Trustees may determine in its sole discretion. BlackRock expects that
it will recommend to the Board of Trustees that the Fund offer to repurchase
Shares from shareholders quarterly on the last business day of March, June,
September and December.
Transactions in capital shares were as follows:
- --------------------------------------------------------------------------------
Year Ended March 31, 2008 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 5,801,944 $ 6,115,605
Reinvestments ................................ 5,495,296 5,188,504
Shares tendered .............................. (13,495,973) (13,249,371)
----------------------------
Net decrease ................................. (2,198,733) $ (1,945,262)
============================
- --------------------------------------------------------------------------------
Year Ended March 31, 2007 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................. 16,435,537 $ 17,307,915
Reinvestments ................................ 3,987,831 4,040,442
Shares tendered .............................. (4,404,998) (4,569,957)
----------------------------
Net increase ................................. 16,018,370 $ 16,778,400
============================
The Fund is currently closed to new subscriptions.
12 BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008
Notes to Financial Statements (continued)
5. Investments in Portfolio Funds:
The following table lists the Fund's investments in Portfolio Funds for the year
ended March 31, 2008, none of which was a related party. The agreements related
to investments in Portfolio Funds provide for the compensation in the form of
management fees of 1% to 4% (per annum) of net assets and performance incentive
fees or allocations of 20% to 25% of net profits earned.
Complete information about the underlying investments held by the Portfolio
Funds is not readily available, so it is unknown whether the Portfolio Funds
hold any single investment whereby the Fund's proportionate share exceeds 5% of
the Fund's net assets at March 31, 2008.
- ------------------------------------------------------------------------------------------------------------------------------------
Fees
% of Fund's Net Income ---------------------- Redemptions
Investments Total Fair Value Fair Value (Loss) Management Incentive Permitted
- ------------------------------------------------------------------------------------------------------------------------------------
Altairis Offshore Levered Ltd. 4.9% $ 2,297,531 $ 207,547 2% 20% Monthly
Amber Fund Cayman Ltd. 3.7 1,731,816 (151,112) 1.5 20 Quarterly
Aristeia International Ltd. 5.0 2,339,834 102,596 1 20 Quarterly
Avenue Europe International Ltd. 3.3 1,564,065 (17,153) 2 20 Quarterly
Bayswater Global Quant Alpha Fund -- (g) -- (g) (485,103) 2 20 Monthly
Campbell Global Assets Fund -- (h) -- (h) (433,368) 2 20 Monthly
Cantillion Europe Ltd. 3.5 1,669,865 119,173 1.5 20 Monthly
The Canyon Value Realization Fund
(Cayman) Ltd. 2.9 1,368,328 (13,543) 2 20 Monthly
Cornerstone International -- (d) -- (d) 43,885 1 20 Monthly
Crabel Fund Ltd. 5.6 2,623,725 123,725 3.5 20 Monthly
Drawbridge Global Macro Fund Ltd. 7.3 3,450,400 264,405 2 20-25 Quarterly-Annual
GCM Little Arbor -- (d) -- (d) 1,914 2 20 Quarterly
Glenview Capital Partners Ltd. 6.7 3,159,588 103,311 2 20 Quarterly
GoldenTree European
Select Opportunities 3.6 1,702,868 95,567 2 20 Semi-Annual
Graham Global Investment Fund II
Dis Port 2XL -- (e) -- (e) (579,279) 3 20 Monthly
Grinham Diversified Fund Ltd. 4.1 1,949,573 249,573 1.5 20 Monthly
Grossman Currency -- (d) -- (d) 20,087 2 25 Monthly
Gruss Global Investors Ltd. 4.9 2,287,667 (1,042) 1.5 20 Quarterly
Hayground Cove Overseas Partners Ltd. 5.2 2,457,130 (281,560) 1.5 20 Monthly
HBK Offshore Fund Ltd. 2.1 976,772 (69,350) 2 20 Quarterly
Kinetics Fund Inc. 5.0 2,372,039 (105,003) 1.25 20 Monthly
LibertyView Credit Opportunities Fund Ltd. 1.8 838,559 (35,779) 1 20 Quarterly
Litespeed -- (a) -- (a) 859 1.5 20 Quarterly
Martin Currie -- (b) -- (b) 4,413 1.5 20 Monthly
Maverick Levered -- (e) -- (e) 158,588 2 20 Quarterly
Neon Liberty Emerging Markets Fund Ltd. 3.8 1,779,557 (5,926) 1.5 20 Quarterly
North Sound Legacy International -- (g) -- (g) 342,724 1.5 20 Quarterly
Ore Hill International Fund Ltd. 2.1 978,169 (99,906) 1.5 20 Semi-Annual
OZ Europe Overseas Fund II Ltd. 4.6 2,173,888 140,644 2.5 20 Quarterly
Salem Futures Fund -- (c) -- (c) (372) 1 20 Quarterly
Sandelman Partners Multi-Strategy
Ltd. 3.8 1,785,050 (245,188) 2 20 Quarterly
SR Phoenicia Inc. 5.2 2,433,869 255,299 1 20 Monthly
Trivium Offshore 6.7 3,162,492 (223,808) 1.5 20 Monthly
Ventus US$ -- (f) -- (f) (168,578) 4 20 Monthly
Waterstone Market Neutral -- (g) -- (g) 9,188 2 20 Quarterly
York European Opportunities Unit Trust 2.5 1,198,116 60,302 2 20 Quarterly
York Investments Ltd. 1.7 814,393 72,797 1.5 20 Quarterly
----------------------------------------------
Total 100.0% $47,115,294 $ (539,473)
==============================================
(a) The Fund fully redeemed from the Portfolio Fund as of December 31, 2006.
(b) The Fund fully redeemed from the Portfolio Fund as of February 28, 2007.
(c) The Fund fully redeemed from the Portfolio Fund as of March 31, 2007.
(d) The Fund fully redeemed from the Portfolio Fund as of April 30, 2007.
(e) The Fund fully redeemed from the Portfolio Fund as of September 30, 2007.
(f) The Fund fully redeemed from the Portfolio Fund as of October 31, 2007.
(g) The Fund fully redeemed from the Portfolio Fund as of December 31, 2007.
(h) The Fund fully redeemed from the Portfolio Fund as of January 31, 2008.
BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008 13
Notes to Financial Statements (concluded)
6. Short-Term Borrowings:
The Fund, along with another BlackRock registered investment company, BlackRock
Multi-Strategy Hedge Opportunities LLC, has jointly entered into a $20,000,000
revolving credit agreement with Citibank, N.A. Amounts borrowed under the credit
agreement bear interest at a rate equal to, at the Fund's election, the federal
funds rate plus 1.25% or a base rate, as defined in the credit agreement or the
Eurodollar rate plus 1.25%. Through March 31, 2008, the Fund had weighted
average borrowings of $115,574. The interest rate on borrowings for the year
ended March 31, 2008 was 6.59%. The Fund had no loans outstanding as of March
31, 2008.
7. Risk Factors:
An investment in the Fund involves a high degree of risk, including the risk
that the entire amount invested may be lost. The Fund allocates assets to
Portfolio Managers and invests in Portfolio Funds that invest in and actively
trade securities and other financial instruments using a variety of strategies
and investment techniques with significant risk characteristics, including the
risks arising from the volatility of the equity, fixed income, commodity and
currency markets, the risks of borrowings and short sales, the risks arising
from leverage associated with trading in the equities, currencies and
over-the-counter derivatives markets, the illiquidity of derivative instruments
and the risk of loss from counterparty defaults. No guarantee or representation
is made that the investment program will be successful.
8. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years ended March 31,
2008 and March 31, 2007 was as follows:
- --------------------------------------------------------------------------------
3/31/08 3/31/07
- --------------------------------------------------------------------------------
Distributions paid from:
Ordinary income .................................. $6,415,109 $4,333,584
------------------------
Total taxable distributions ........................ $6,415,109 $4,333,584
========================
As of March 31, 2008 the components of accumulated earnings on a tax basis were
as follows:
- -----------------------------------------------------------------------------
Undistributed ordinary income -- net .......................... $ 143,379
Undistributed long-term capital gains -- net .................. --
-----------
Total undistributed earnings -- net ........................... 143,379
Capital loss carryforward .................................... (1,077,249)*
Unrealized losses -- net ...................................... (5,755,675)**
-----------
Total accumulated losses -- net ............................... $(6,689,545)
===========
* On March 31, 2008, the Fund had a net capital loss carryforward of
$1,077,249, all of which expires in 2016. This amount will be available to
offset like amounts of any future taxable gains.
** The difference between book-basis and tax-basis net unrealized losses is
attributable primarily to the realization for tax purposes of unrealized
gains on investments in passive foreign investment companies and deferral
of post-October capital losses.
14 BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of BlackRock Multi-Strategy Hedge
Advantage:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of BlackRock Multi-Strategy Hedge Advantage (the
"Fund") as of March 31, 2008, the related statements of operations and cash
flows for the year then ended, the statements of changes in net assets for each
of the two years in the period then ended, and the financial highlights for each
of the respective periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of March 31, 2008, by correspondence with the financial
intermediaries. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
BlackRock Multi-Strategy Hedge Advantage as of March 31, 2008, the results of
its operations and its cash flows for the year then ended, the changes in net
assets for each of the years in the period then ended, and the financial
highlights for each of the respective periods presented, in conformity with
accounting principles generally accepted in the United States of America.
As explained in Note 1 to the financial statements, the financial statements
include investments valued at $47,115,294, whose fair values have been estimated
by management in the absence of readily determinable fair values. Management's
estimates are based on information provided by the portfolio fund managers.
Deloitte & Touche LLP
Princeton, New Jersey
May 28, 2008
BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008 15
Officers and Trustees
Number of
Length of BlackRock-
Position(s) Time Advised Funds
Name, Address Held with Served as a Principal Occupation(s) During and Portfolios Public
and Year of Birth Fund Trustee** Past Five Years Overseen Directorships
====================================================================================================================================
Non-Interested Trustees*
- ------------------------------------------------------------------------------------------------------------------------------------
G. Nicholas Beckwith, III Trustee Since 2007 Chairman and Chief Executive 112 Funds None
40 East 52nd Street Officer, Arch Street Management, LLC 109 Portfolios
New York, NY 10022 (Beckwith Family Foundation) and
1945 various Beckwith property companies
since 2005; Chairman of the Board of
Directors, University of Pittsburgh
Medical Center since 2002; Board of
Directors, Shady Side Hospital
Foundation since 1977; Board of
Directors, Beckwith Institute for
Innovation In Patient Care since
1991; Member, Advisory Council on
Biology and Medicine, Brown
University since 2002; Trustee,
Claude Worthington Benedum
Foundation (charitable foundation)
since 1989; Board of Trustees,
Chatham College since 1981; Board of
Trustees, University of Pittsburgh
since 2002; Emeritus Trustee, Shady
Side Academy since 1977; Formerly
Chairman and Manager, Penn West
Industrial Trucks LLC (sales, rental
and servicing of material handling
equipment) from 2005 to 2007;
Formerly Chairman, President and
Chief Executive Officer, Beckwith
Machinery Company (sales, rental and
servicing of construction and
equipment) from 1985 to 2005;
Formerly Board of Directors,
National Retail Properties (REIT)
from 2006 to 2007.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard E. Cavanagh Trustee and Since 2007 Trustee, Aircraft Finance Trust 113 Funds Arch Chemical
40 East 52nd Street Chair of since 1999; Director, The Guardian 110 Portfolios (chemical and allied
New York, NY 10022 the Board Life Insurance Company of America products)
1946 of Directors since 1998; Chairman and Trustee,
Educational Testing Service since
1997; Director, The Fremont Group
since 1996; Formerly President and
Chief Executive Officer of The
Conference Board, Inc. (global
business research organization) from
1995 to 2007.
- ------------------------------------------------------------------------------------------------------------------------------------
Kent Dixon Trustee and Since 2007 Consultant/Investor since 1988. 113 Funds None
40 East 52nd Street Member of 110 Portfolios
New York, NY 10022 the Audit
1937 Committee
- ------------------------------------------------------------------------------------------------------------------------------------
Frank J. Fabozzi Trustee and Since 2007 Consultant/Editor of The Journal of 113 Funds None
40 East 52nd Street Member of Portfolio Management since 2006; 110 Portfolios
New York, NY 10022 the Audit Professor in the Practice of Finance
1948 Committee and Becton Fellow, Yale University,
School of Management since 2006;
Formerly Adjunct Professor of
Finance and Becton Fellow, Yale
University from 1994 to 2006.
- ------------------------------------------------------------------------------------------------------------------------------------
Kathleen F. Feldstein Trustee Since 2007 President of Economics Studies, Inc. 113 Funds The McClatchy
40 East 52nd Street (private economic consulting firm) 110 Portfolios Company
New York, NY 10022 since 1987; Chair, Board of (publishing)
1941 Trustees, McLean Hospital since
2000; Member of the Board of
Partners Community Healthcare, Inc.
since 2005; Member of the Board of
Partners HealthCare since 1995;
Member of the Board of Sherrill
House (health care) since 1990;
Trustee, Museum of Fine Arts, Boston
since 1992; Member of the Visiting
Committee to the Harvard University
Art Museum since 2003; Trustee, The
Committee for Economic Development
(research organization) since 1990;
Member of the Advisory Board to the
International School of Business,
Brandeis University since 2002;
Formerly Director of Bell South
(communications) from 1998 to 2006;
Formerly Director of Ionics (water
purification) from 1992 to 2005;
Formerly Director of John Hancock
Financial Services from 1994 to
2003; Formerly Director of Knight
Ridder (media) from 1998 to 2006.
- ------------------------------------------------------------------------------------------------------------------------------------
James T. Flynn Trustee and Since 2004 Formerly Chief Financial Officer of 112 Funds None
40 East 52nd Street Member of JPMorgan & Co., Inc. from 1990 to 109 Portfolios
New York, NY 10022 the Audit 1995.
1939 Committee
- ------------------------------------------------------------------------------------------------------------------------------------
16 BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008
Officers and Trustees (continued)
Number of
Length of BlackRock-
Position(s) Time Advised Funds
Name, Address Held with Served as a Principal Occupation(s) During and Portfolios Public
and Year of Birth Fund Trustee** Past Five Years Overseen Directorships
====================================================================================================================================
Non-Interested Trustees* (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
Jerrold B. Harris Trustee Since 2007 Trustee, Ursinus College since 2000; 112 Funds BlackRock Kelso
40 East 52nd Street Director, Troemner LLC (scientific 109 Portfolios Capital Corp.
New York, NY 10022 equipment) since 2000.
1942
- ------------------------------------------------------------------------------------------------------------------------------------
R. Glenn Hubbard Trustee Since 2007 Dean of Columbia Business School 113 Funds ADP (data and
40 East 52nd Street since 2004; Columbia faculty member 110 Portfolios information services);
New York, NY 10022 since 1988; Formerly Co-Director of KKR Financial
1958 Columbia Business School's Corporation (finance);
Entrepreneurship Program from 1997 Duke Realty (real
to 2004; Visiting Professor at the estate); Metropolitan
John F. Kennedy School of Government Life Insurance
at Harvard University and the Company (insurance);
Harvard Business School since 1985 Information
and at the University of Chicago Services Group
since 1994; Formerly Chairman of the (media/technology)
U.S. Council of Economic Advisers
under the President of the United
States from 2001 to 2003.
- ------------------------------------------------------------------------------------------------------------------------------------
W. Carl Kester Trustee and Since 2004 Mizuho Financial Group Professor of 112 Funds None
40 East 52nd Street Member of Finance, Harvard Business School; 109 Portfolios
New York, NY 10022 the Audit Deputy Dean for Academic Affairs
1951 Committee since 2006; Unit Head, Finance,
Harvard Business School from 2005 to
2006; Senior Associate Dean and
Chairman of the MBA Program of
Harvard Business School from 1999 to
2005; Member of the faculty of
Harvard Business School since 1981;
Independent Consultant since 1978.
- ------------------------------------------------------------------------------------------------------------------------------------
Karen P. Robards Trustee and Since 2004 Partner of Robards & Company, LLC, 112 Funds AtriCure, Inc.
40 East 52nd Street Chair of (financial advisory firm) since 109 Portfolios (medical devices);
New York, NY 10022 the Audit 1987; Co-founder and Director of the Care Investment Trust,
1950 Committee Cooke Center for Learning and Inc. (health care
Development (a not-for-profit REIT)
organization) since 1987; Formerly
Director of Enable Medical Corp.
from 1996 to 2005; Formerly an
investment banker at Morgan Stanley
from 1976 to 1987.
- ------------------------------------------------------------------------------------------------------------------------------------
Robert S. Salomon, Jr. Trustee and Since 2007 Formerly Principal of STI Management 112 Funds None
40 East 52nd Street Member of LLC (investment adviser) from 1994 109 Portfolios
New York, NY 10022 the Audit to 2005.
1936 Committee
--------------------------------------------------------------------------------------------------------
* Trustees serve until their resignation, removal or death, or until December 31 of the year in
which they turn 72.
** Following the combination of Merrill Lynch Investment Managers, L.P. ("MLIM") and BlackRock,
Inc. ("BlackRock") in September 2006, the various legacy MLIM and legacy BlackRock Fund boards were
realigned and consolidated into three new Fund boards in 2007. As a result, although the chart
shows certain trustees as joining the Fund's board in 2007, those trustees first became a member of
the board of directors of other legacy MLIM or legacy BlackRock Funds as follows: G. Nicholas
Beckwith, III since 1999; Richard E. Cavanagh since 1994; Kent Dixon since 1988; Frank J. Fabozzi
since 1988; Kathleen F. Feldstein since 2005; James T. Flynn since 1996; Jerrold B. Harris since
1999; R. Glenn Hubbard since 2004; W. Carl Kester since 1998; Karen P. Robards since 1998 and
Robert S. Salomon, Jr. since 1996.
BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008 17
Officers and Trustees (concluded)
Number of
Length of BlackRock-
Position(s) Time Advised Funds
Name, Address Held with Served as a Principal Occupation(s) During and Portfolios Public
and Year of Birth Fund Trustee Past Five Years Overseen Directorships
====================================================================================================================================
Interested Trustees*
- ------------------------------------------------------------------------------------------------------------------------------------
Richard S. Davis Trustee Since 2007 Managing Director, BlackRock, Inc. 185 Funds None
40 East 52nd Street since 2005; Formerly Chief Executive 292 Portfolios
New York, NY 10022 Officer, State Street Research &
1945 Management Company from 2000 to
2005; Formerly Chairman of the Board
of Trustees, State Street Research
Mutual Funds from 2000 to 2005;
Formerly Chairman, SSR Realty from
2000 to 2004.
- ------------------------------------------------------------------------------------------------------------------------------------
Henry Gabbay Trustee Since 2007 Consultant, BlackRock, Inc. since 184 Funds None
40 East 52nd Street 2007; Formerly Managing Director, 291 Portfolios
New York, NY 10022 BlackRock, Inc. from 1989 to 2007;
1947 Formerly Chief Administrative
Officer, BlackRock Advisors, LLC
from 1998 to 2007; Formerly
President of BlackRock Funds and
BlackRock Bond Allocation Target
Shares from 2005 to 2007; Formerly
Treasurer of certain closed-end
funds in the BlackRock fund complex
from 1989 to 2006.
--------------------------------------------------------------------------------------------------------
* Messrs. Davis and Gabbay are both "interested persons," as defined in the Investment Company Act
of 1940, of the Fund based on their positions with BlackRock, Inc. and its affiliates. Trustees
serve until their resignation, removal or death, or until December 31 of the year in which they
turn 72.
- ------------------------------------------------------------------------------------------------------------------------------------
Position(s) Length of
Name, Address Held with Time
and Year of Birth Fund Served Principal Occupation(s) During Past Five Years
====================================================================================================================================
Fund Officers*
- ------------------------------------------------------------------------------------------------------------------------------------
Donald C. Burke Fund Since 2007 Managing Director of BlackRock, Inc. since 2006; Formerly Managing Director
40 East 52nd Street President of Merrill Lynch Investment Managers, L.P. ("MLIM") and Fund Asset
New York, NY 10022 and Chief Management, L.P. ("FAM") in 2006; First Vice President thereof from 1997 to
1960 Executive 2005; Treasurer thereof from 1999 to 2006 and Vice President thereof from
Officer 1990 to 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
Anne F. Ackerley Vice Since 2007 Managing Director of BlackRock, Inc. since 2000 and First Vice President and
40 East 52nd Street President Chief Operating Officer of Mergers and Acquisitions Group from 1997 to 2000;
New York, NY 10022 First Vice President and Chief Operating Officer of Public Finance Group
1962 thereof from 1995 to 1997; First Vice President of Emerging Markets Fixed
Income Research of Merrill Lynch & Co., Inc. from 1994 to 1995.
- ------------------------------------------------------------------------------------------------------------------------------------
Neal J. Andrews Chief Since 2007 Managing Director of BlackRock, Inc. since 2006; Formerly Senior Vice
40 East 52nd Street Financial President and Line of Business Head of Fund Accounting and Administration at
New York, NY 10022 Officer PFPC Inc. from 1992 to 2006.
1966
- ------------------------------------------------------------------------------------------------------------------------------------
Jay M. Fife Treasurer Since 2007 Managing Director of BlackRock, Inc. since 2007 and Director in 2006;
40 East 52nd Street Formerly Assistant Treasurer of the MLIM/FAM advised funds from 2005 to
New York, NY 10022 2006; Director of MLIM Fund Services Group from 2001 to 2006.
1970
- ------------------------------------------------------------------------------------------------------------------------------------
Brian P. Kindelan Chief Since 2007 Chief Compliance Officer of the Funds since 2007; Anti-Money Laundering
40 East 52nd Street Compliance Officer of the Funds since 2007; Managing Director and Senior Counsel
New York, NY 10022 Officer of thereof since 2005; Director and Senior Counsel of BlackRock Advisors, Inc.
1959 the Funds 2001 to 2004 and Vice President and Senior Counsel thereof from 1998 to
2000; Senior Counsel of The PNC Bank Corp. from 1995 to 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
Howard Surloff Secretary Since 2007 Managing Director of BlackRock, Inc. and General Counsel of U.S. Funds at
40 East 52nd Street BlackRock, Inc. since 2006; Formerly General Counsel (U.S.) of Goldman Sachs
New York, NY 10022 Asset Management, L.P. from 1993 to 2006.
1965
--------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Trustees.
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian
PFPC Trust Company
Philadelphia, PA 19153
Administrator &
Escrow Agent
PFPC Inc.
Wilmington, DE 19809
Independent Registered Public
Accounting Firm
Deloitte & Touche LLP
Princeton, NJ 08540
Legal Counsel
Sidley Austin LLP
New York, NY 10019
18 BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008
Additional Information
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's website at
http://www.sec.gov and may also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. Information on the operation of the Public
Reference Room may be obtained by calling (800) SEC-0330. The Fund's Forms N-Q
may also be obtained upon request and without charge by calling (800) 441-7762.
Electronic Delivery
Electronic copies of most financial reports are available on the Fund's website
or shareholders can sign up for e-mail notifications of quarterly statements,
annual and semi-annual reports by enrolling in the Fund's electronic delivery
program.
Shareholders Who Hold Accounts with Investment Advisors, Banks or Brokerages:
Please contact your financial advisor to enroll. Please note that not all
investment advisors, banks or brokerages may offer this service.
General Information
During the period, there were no material changes in the Fund's investment
objective or policies or to the Fund's charter or by-laws that were not approved
by the shareholders or in the principal risk factors associated with investment
in the Fund. There have been no changes in the persons who are primarily
responsible for the day-to-day management of the Fund's portfolio.
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund
investors and individual clients (collectively, "Clients") and to safeguarding
their non-public personal information. The following information is provided to
help you understand what personal information BlackRock collects, how we protect
that information and why in certain cases we share such information with select
parties.
If you are located in a jurisdiction where specific laws, rules or regulations
require BlackRock to provide you with additional or different privacy-related
rights beyond what is set forth below, then BlackRock will comply with those
specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you
from different sources, including the following: (i) information we receive from
you or, if applicable, your financial intermediary, on applications, forms or
other documents; (ii) information about your transactions with us, our
affiliates, or others; (iii) information we receive from a consumer reporting
agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any
non-public personal information about its Clients, except as permitted by law or
as is necessary to respond to regulatory requests or to service Client accounts.
These non-affiliated third parties are required to protect the confidentiality
and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to
provide you with information about other BlackRock products or services that may
be of interest to you. In addition, BlackRock restricts access to non-public
personal information about its Clients to those BlackRock employees with a
legitimate business need for the information. BlackRock maintains physical,
electronic and procedural safeguards that are designed to protect the non-public
personal information of its Clients, including procedures relating to the proper
storage and disposal of such information.
BLACKROCK MULTI-STRATEGY HEDGE ADVANTAGE MARCH 31, 2008 19
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Statements and other
information herein are as dated and are subject to change.
Information about how the Fund voted proxies relating to securities held in the
Fund's portfolio during the most recent 12-month period ended June 30 is
available upon request and without charge (1) by calling (800) 441-7762 and (2)
on the Securities and Exchange Commission's website at http://www.sec.gov.
BlackRock Multi-Strategy Hedge Advantage
100 Bellevue Parkway
Wilmington, DE 19809
BLACKROCK
#MHA-3/08
Item 2 - Code of Ethics - The registrant (or the "Fund") has adopted a code
of ethics, as of the end of the period covered by this report,
applicable to the registrant's principal executive officer,
principal financial officer and principal accounting officer, or
persons performing similar functions. During the period covered by
this report, there have been no amendments to or waivers granted
under the code of ethics. A copy of the code of ethics is available
without charge at www.blackrock.com.
Item 3 - Audit Committee Financial Expert - The registrant's board of
directors or trustees, as applicable (the "board of directors") has
determined that (i) the registrant has the following audit committee
financial experts serving on its audit committee and (ii) each audit
committee financial expert is independent:
David O. Beim (term ended effective November 1, 2007)
Kent Dixon (term began effective November 1, 2007)
Frank J. Fabozzi (term began effective November 1, 2007)
James T. Flynn
W. Carl Kester
Karen P. Robards
Robert S. Salomon, Jr. (term began effective November 1, 2007)
The registrant's board of directors has determined that W. Carl
Kester and Karen P. Robards qualify as financial experts pursuant to
Item 3(c)(4) of Form N-CSR.
Prof. Kester has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions. Prof.
Kester has been involved in providing valuation and other financial
consulting services to corporate clients since 1978. Prof. Kester's
financial consulting services present a breadth and level of
complexity of accounting issues that are generally comparable to the
breadth and complexity of issues that can reasonably be expected to
be raised by the registrant's financial statements.
Ms. Robards has a thorough understanding of generally accepted
accounting principles, financial statements and internal control
over financial reporting as well as audit committee functions. Ms.
Robards has been President of Robards & Company, a financial
advisory firm, since 1987. Ms. Robards was formerly an investment
banker for more than 10 years where she was responsible for
evaluating and assessing the performance of companies based on their
financial results. Ms. Robards has over 30 years of experience
analyzing financial statements. She also is a member of the audit
committee of one publicly held company and a non-profit
organization.
Under applicable securities laws, a person determined to be an audit
committee financial expert will not be deemed an "expert" for any
purpose, including without limitation for the purposes of Section 11
of the Securities Act of 1933, as a result of being designated or
identified as an audit committee financial expert. The designation
or identification as an audit committee financial expert does not
impose on such person any duties, obligations, or liabilities
greater than the duties, obligations, and liabilities imposed on
such person as a member of the audit committee and board of
directors in the absence of such designation or identification.
Item 4 - Principal Accountant Fees and Services
- ----------------------------------------------------------------------------------------------------------------------------------
(a) Audit Fees (b) Audit-Related Fees(1) (c) Tax Fees(2) (d) All Other Fees(3)
- ----------------------------------------------------------------------------------------------------------------------------------
Current Previous Current Previous Current Previous Current Previous
Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal
Entity Name End Year End End Year End End Year End End Year End
- ----------------------------------------------------------------------------------------------------------------------------------
BlackRock
Multi-Strategy
Hedge Advantage $35,000 $31,000 $0 $0 $6,100 $6,100 $1,049 $0
- ----------------------------------------------------------------------------------------------------------------------------------
1 The nature of the services include assurance and related services reasonably
related to the performance of the audit of financial statements not included in
Audit Fees.
2 The nature of the services include tax compliance, tax advice and tax
planning.
3 The nature of the services include a review of compliance procedures and
attestation thereto.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to
the registrant's affiliated service providers that relate directly
to the operations and the financial reporting of the registrant.
Certain of these non-audit services that the Committee believes are
a) consistent with the SEC's auditor independence rules and b)
routine and recurring services that will not impair the independence
of the independent accountants may be approved by the Committee
without consideration on a specific case-by-case basis ("general
pre-approval"). The term of any general pre-approval is 12 months
from the date of the pre-approval, unless the Committee provides for
a different period. Tax or other non-audit services provided to the
registrant which have a direct impact on the operation or financial
reporting of the registrant will only be deemed pre-approved
provided that any individual project does not exceed $10,000
attributable to the registrant or $50,000 for all of the registrants
the Committee oversees. For this purpose, multiple projects will be
aggregated to determine if they exceed the previously mentioned cost
levels.
Any proposed services exceeding the pre-approved cost levels
will require specific pre-approval by the Committee, as will any
other services not subject to general pre-approval (e.g.,
unanticipated but permissible services). The Committee is informed
of each service approved subject to general pre-approval at the next
regularly scheduled in-person board meeting. At this meeting, an
analysis of such services is presented to the Committee for
ratification. The Committee may delegate to one or more of its
members the authority to approve the provision of and fees for any
specific engagement of permitted non-audit services, including
services exceeding pre-approved cost levels.
(e)(2) None of the services described in each of Items 4(b) through
(d) were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) Affiliates' Aggregate Non-Audit Fees:
--------------------------------------------------------------------
Current Fiscal Previous Fiscal
Entity Name Year End Year End
--------------------------------------------------------------------
BlackRock Multi-Strategy Hedge
Advantage $288,549 $3,020,600
--------------------------------------------------------------------
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any non-affiliated
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by the registrant's investment
adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services
to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $287,500, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals
are members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(58)(A)):
David O. Beim (term ended effective November 1, 2007)
Kent Dixon (term began effective November 1, 2007)
Frank J. Fabozzi (term began effective November 1, 2007)
James T. Flynn
W. Carl Kester
Karen P. Robards
Robert S. Salomon, Jr. (term began effective November 1, 2007)
Item 6 - Investments
(a) The registrant's Schedule of Investments is included as part of
the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable due to no such divestments during the semi-annual
period covered since the previous Form N-CSR filing.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - The registrant has delegated the
voting of proxies relating to Fund portfolio securities to its
investment adviser, BlackRock Advisors, LLC and its sub-adviser, as
applicable. The Proxy Voting Policies of the Fund are attached
hereto as Exhibit 99.PROXYPOL.
Information about how the Fund voted proxies relating to securities
held in the Fund's portfolio during the most recent 12 month period
ended June 30 is available without charge (1) at www.blackrock.com
and (2) on the Commission's web site at http://www.sec.gov.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
as of March 31, 2008.
(a)(1) The BlackRock Fund of Funds Team is responsible for managing
the Fund's investments. Howard P. Berkowitz, Christine Jurinich
and Edward Rzeszowski are the portfolio managers responsible for
investing the Company's assets. Mr. Berkowitz is the head of the
team and is responsible for overseeing the management of the
Company's investments. Ms. Jurinich is responsible for evaluating
potential Portfolio Fund Managers and monitoring existing Portfolio
Fund Managers, and Mr. Rzeszowski is responsible for evaluating
potential Portfolio Fund Managers and monitoring existing Portfolio
Fund Managers with a focus on managed futures, macro funds and
statistical arbitrage.
Mr. Berkowitz is a Managing Director of BlackRock and a member of
BlackRock's Management Committee. Mr. Berkowitz has more than 35
years of experience running private investment funds and funds of
hedge funds. He joined BlackRock in April 2003 and has been the
Company's portfolio manager since 2006. Prior to joining BlackRock,
Mr. Berkowitz was the founder and managing partner of HPB Associates
which he initially formed in 1979 as a traditional equity hedge
fund. In 1967, Mr. Berkowitz co-founded and managed Steinhardt,
Fine, Berkowitz & Co., one of the earliest and most highly
successful entrants into the hedge fund industry.
Ms. Jurinich is a Managing Director of BlackRock and has been a
member of the portfolio management team since 2003. Before taking on
her current responsibilities in 2003, Ms. Jurinich was a member of
the Account Management Group where she was responsible for
developing and maintaining relationships with non-U.S. clients and
for developing alternative investment products. Prior to joining
BlackRock in 2002, Ms. Jurinich was responsible for investor
relations and hedge fund research at Victus Capital LLC. From 2000
to 2001, she was responsible for manager research and
recommendations relating to relative value managers at Alpha
Investment Management LLC. She spent the prior year with Arista
Group, where her duties included all aspects of due diligence and
performance reporting. Ms. Jurinich began her career in 1993 with
Allied Capital Asset Management.
Mr. Rzeszowski is a Managing Director of BlackRock and joined
BlackRock in 2006 as a member of the Fund of Fund's team and became
part of the Company's portfolio management team at that time. Prior
to joining BlackRock, Mr. Rzeszowski was a Director with the fund of
funds team of MLIM LP. In this role, he was responsible for the
selection and analysis of hedge funds with a focus on managed
futures, macro funds and statistical arbitrage, and served as senior
hedge fund analyst and portfolio manager for the Global Horizons I,
L.P. and ML Global Horizons Ltd. Previously, Mr. Rzeszowski was a
Senior Quantitative Analyst for the MLIM LP fund of funds team,
responsible for risk management of the managed futures product line.
He has held various positions in MLIM LP's finance department. His
additional previous work experience includes OMR Systems Corporation
(a financial investments service company), where he was responsible
for the consolidation of managed futures risks.
(a)(2) As of March 31, 2008:
-----------------------------------------------------------------------------------------------------------------------
(iii) Number of Other Accounts and
(ii) Number of Other Accounts Managed Assets for Which Advisory Fee is
and Assets by Account Type Performance-Based
-----------------------------------------------------------------------------------------------------------------------
Other Other Other Other
(i) Name of Registered Pooled Registered Pooled
Portfolio Investment Investment Other Investment Investment Other
Manager Companies Vehicles Accounts Companies Vehicles Accounts
-----------------------------------------------------------------------------------------------------------------------
Howard P.
Berkowitz 1 35 7 0 18 4
-----------------------------------------------------------------------------------------------------------------------
$47.8 Million $2.53 Billion $616.2 Million $0 $1.05 Billion $474.8 Million
-----------------------------------------------------------------------------------------------------------------------
Christine
Jurinich 1 35 7 0 18 4
-----------------------------------------------------------------------------------------------------------------------
$47.8 Million $2.53 Billion $616.2 Million $0 $1.05 Billion $474.8 Million
-----------------------------------------------------------------------------------------------------------------------
Edward
Rzeszowski 1 35 7 0 18 4
-----------------------------------------------------------------------------------------------------------------------
$47.8 Million $2.53 Billion $616.2 Million $0 $1.05 Billion $474.8 Million
-----------------------------------------------------------------------------------------------------------------------
(iv) Potential Material Conflicts of Interest
BlackRock, Inc. and its affiliates (collectively, herein
"BlackRock") has built a professional working environment, firm-wide
compliance culture and compliance procedures and systems designed to
protect against potential incentives that may favor one account over
another. BlackRock has adopted policies and procedures that address
the allocation of investment opportunities, execution of portfolio
transactions, personal trading by employees and other potential
conflicts of interest that are designed to ensure that all client
accounts are treated equitably over time. Nevertheless, BlackRock
furnishes investment management and advisory services to numerous
clients in addition to the Fund, and BlackRock may, consistent with
applicable law, make investment recommendations to other clients or
accounts (including accounts which are hedge funds or have
performance or higher fees paid to BlackRock, or in which portfolio
managers have a personal interest in the receipt of such fees),
which may be the same as or different from those made for the Fund.
In addition, BlackRock, its affiliates and any officer, director,
stockholder or employee may or may not have an interest in the
securities whose purchase and sale BlackRock recommends to the Fund.
BlackRock, or any of its affiliates, or any officer, director,
stockholder, employee or any member of their families may take
different actions than those recommended to the Fund by BlackRock
with respect to the same securities. Moreover, BlackRock may refrain
from rendering any advice or services concerning securities of
companies of which any of BlackRock's (or its affiliates') officers,
directors or employees are directors or officers, or companies as to
which BlackRock or any of its affiliates or the officers, directors
or employees of any of them has any substantial economic interest or
possesses material non-public information. Each portfolio manager
also may manage accounts whose investment strategies may at times be
opposed to the strategy utilized for a Fund. In this regard, it
should be noted that Mr. Berkowitz, Ms. Jurinich and Mr. Rzeszowksi
currently manage certain accounts that are subject to performance
fees. In addition, certain portfolio managers may assist in managing
certain hedge funds and may be entitled to receive a portion of any
incentive fees earned on such funds and a portion of such incentive
fees may be voluntarily or involuntarily deferred. Additional
portfolio managers may in the future manage other such accounts or
funds and may be entitled to receive incentive fees.
As a fiduciary, BlackRock owes a duty of loyalty to its clients and
must treat each client fairly. When BlackRock purchases or sells
securities for more than one account, the trades must be allocated
in a manner consistent with its fiduciary duties. BlackRock attempts
to allocate investments in a fair and equitable manner among client
accounts, with no account receiving preferential treatment. To this
end, BlackRock has adopted a policy that is intended to ensure that
investment opportunities are allocated fairly and equitably among
client accounts over time. This policy also seeks to achieve
reasonable efficiency in client transactions and provide BlackRock
with sufficient flexibility to allocate investments in a manner that
is consistent with the particular investment discipline and client
base.
(a)(3) As of March 31, 2008:
Portfolio Manager Compensation Overview
BlackRock's financial arrangements with its portfolio managers, its
competitive compensation and its career path emphasis at all levels
reflect the value senior management places on key resources.
Compensation may include a variety of components and may vary from
year to year based on a number of factors. The principal components
of compensation include a base salary, a performance-based
discretionary bonus, participation in various benefits programs and
one or more of the incentive compensation programs established by
BlackRock such as its Long-Term Retention and Incentive Plan and
Restricted Stock Program.
Base compensation. Generally, portfolio managers receive base
compensation based on their seniority and/or their position with the
firm. Senior portfolio managers who perform additional management
functions within the portfolio management group or within BlackRock
may receive additional compensation for serving in these other
capacities.
Discretionary Incentive Compensation
Discretionary incentive compensation is a function of several
components: the performance of BlackRock, Inc., the performance of
the portfolio manager's group within BlackRock, the investment
performance, including risk-adjusted returns, of the firm's assets
under management or supervision by that portfolio manager relative
to predetermined benchmarks, and the individual's seniority, role
within the portfolio management team, teamwork and contribution to
the overall performance of these portfolios and BlackRock. In most
cases, including for the portfolio managers of the Fund, these
benchmarks are the same as the benchmark or benchmarks against which
the performance of the Fund or other accounts managed by the
portfolio managers are measured. BlackRock's Chief Investment
Officers determine the benchmarks against which the performance of
funds and other accounts managed by each portfolio manager is
compared and the period of time over which performance is evaluated.
With respect to the portfolio managers, such benchmarks for the Fund
include a combination of market-based indices (e.g., HFRI Fund of
Funds Composite Index, HFRI Fund Weighted Composite Index), certain
customized indices and certain fund industry peer groups.
BlackRock's Chief Investment Officers make a subjective
determination with respect to the portfolio managers' compensation
based on the performance of the funds and other accounts managed by
each portfolio manager relative to the various benchmarks noted
above. Performance is measured on both a pre-tax basis over various
time periods including 1, 3 and 5-year periods, as applicable.
Distribution of Discretionary Incentive Compensation
Discretionary incentive compensation is distributed to portfolio
managers in a combination of cash and BlackRock, Inc. restricted
stock units which vest ratably over a number of years. The
BlackRock, Inc. restricted stock units, if properly vested, will be
settled in BlackRock, Inc. common stock. Typically, the cash bonus,
when combined with base salary, represents more than 60% of total
compensation for the portfolio managers. Paying a portion of annual
bonuses in stock puts compensation earned by a portfolio manager for
a given year "at risk" based on the Company's ability to sustain and
improve its performance over future periods.
Other compensation benefits. In addition to base compensation and
discretionary incentive compensation, portfolio managers may be
eligible to receive or participate in one or more of the following:
Long-Term Retention and Incentive Plan ("LTIP") --The LTIP is
a long-term incentive plan that seeks to reward certain key
employees. Prior to 2006, the plan provided for the grant of awards
that were expressed as an amount of cash that, if properly vested
and subject to the attainment of certain performance goals, will be
settled in cash and/or in BlackRock, Inc. common stock. Beginning in
2006, awards are granted under the LTIP in the form of BlackRock,
Inc. restricted stock units that, if properly vested and subject to
the attainment of certain performance goals, will be settled in
BlackRock, Inc. common stock. Each of Mr. Berkowitz, Ms. Jurinich
and Mr. Rzeszowski has received awards under the LTIP.
Deferred Compensation Program --A portion of the compensation
paid to eligible BlackRock employees may be voluntarily deferred
into an account that tracks the performance of certain of the firm's
investment products. Each participant in the deferred compensation
program is permitted to allocate his deferred amounts among various
options, including to certain of the firm's hedge funds and other
proprietary mutual funds. Each of Mr. Berkowitz, Ms. Jurinich and
Mr. Rzeszowski has participated in the deferred compensation
program.
Options and Restricted Stock Awards -- A portion of the annual
compensation of certain employees is mandatorily deferred into
BlackRock restricted stock units. Prior to the mandatory deferral
into restricted stock units, the Company granted stock options to
key employees, including certain portfolio managers who may still
hold unexercised or unvested options. BlackRock, Inc. also granted
restricted stock awards designed to reward certain key employees as
an incentive to contribute to the long-term success of BlackRock.
These awards vest over a period of years. Mr. Berkowitz has been
granted stock options and/or restricted stock in prior years.
Incentive Savings Plans -- BlackRock, Inc. has created a
variety of incentive savings plans in which BlackRock employees are
eligible to participate, including a 401(k) plan, the BlackRock
Retirement Savings Plan (RSP), and the BlackRock Employee Stock
Purchase Plan (ESPP). The employer contribution components of the
RSP include a company match equal to 50% of the first 6% of eligible
pay contributed to the plan capped at $4,000 per year, and a company
retirement contribution equal to 3% of eligible compensation, plus
an additional contribution of 2% for any year in which BlackRock has
positive net operating income. The RSP offers a range of investment
options, including registered investment companies managed by the
firm. Company contributions follow the investment direction set by
participants for their own contributions or, absent employee
investment direction, are invested into a balanced portfolio. The
ESPP allows for investment in BlackRock common stock at a 5%
discount on the fair market value of the stock on the purchase date.
Annual participation in the ESPP is limited to the purchase of 1,000
shares or a dollar value of $25,000. Each portfolio manager is
eligible to participate in these plans.
(a)(4) Beneficial Ownership of Securities. As of March 31, 2008,
none of Mr. Berkowitz, Ms. Jurinich or Mr. Rzeszowski
beneficially owned any stock issued by the Fund.
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable due to no such
purchases during the period covered by this report.
Item 10 - Submission of Matters to a Vote of Security Holders - The
registrant's Nominating and Governance Committee will consider
nominees to the Board recommended by shareholders when a vacancy
becomes available. Shareholders who wish to recommend a nominee
should send nominations which include biographical information and
set forth the qualifications of the proposed nominee to the
registrant's Secretary. There have been no material changes to these
procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial
officers or persons performing similar functions have concluded that
the registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act")) are effective as of a date within 90 days of the
filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
13a-15(b) under the Securities Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(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 Multi-Strategy Hedge Advantage
By: /s/ Donald C. Burke
-------------------
Donald C. Burke
Chief Executive Officer of
BlackRock Multi-Strategy Hedge Advantage
Date: May 22, 2008
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/ Donald C. Burke
-------------------
Donald C. Burke
Chief Executive Officer (principal executive officer) of
BlackRock Multi-Strategy Hedge Advantage
Date: May 22, 2008
By: /s/ Neal J. Andrews
-------------------
Neal J. Andrews
Chief Financial Officer (principal financial officer) of
BlackRock Multi-Strategy Hedge Advantage
Date: May 22, 2008