UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-05742
| Name of Fund: | BlackRock Funds |
| iShares Municipal Bond Index Fund |
| Fund Address: | 100 Bellevue Parkway, Wilmington, DE 19809 |
Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Funds, 55 East 52nd Street, New York, NY 10055
Registrant’s telephone number, including area code: (800) 441-7762
Date of fiscal year end: 12/31/2020
Date of reporting period: 12/31/2020
Item 1 – Report to Stockholders
(a) The Report to Shareholders is attached herewith.
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DECEMBER 31, 2020 |
| 2020 Annual Report | ||
BlackRock FundsSM
| · | iShares Municipal Bond Index Fund |
| · | iShares Short-Term TIPS Bond Index Fund |
BlackRock Index Funds, Inc.
| · | iShares MSCI EAFE International Index Fund |
| · | iShares Russell 2000 Small-Cap Index Fund |
| Not FDIC Insured • May Lose Value • No Bank Guarantee |
| 2 | THIS PAGE IS NOT PART OF YOUR FUND REPORT |
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| Fund Summary as of December 31, 2020 | iShares Municipal Bond Index Fund |
Investment Objective
iShares Municipal Bond Index Fund’s (the “Fund”) investment objective is to seek to provide investment results that correspond to the total return performance of fixed-income securities in the aggregate, as represented by the ICE BofA US Municipal Securities Index (the “Underlying Index”).
Portfolio Management Commentary
How did the Fund perform?
For the 12-month period ended December 31, 2020, the Fund’s Institutional Shares returned 4.97%, Investor A Shares returned 4.70%, Class K Shares returned 5.00%, and Investor P Shares returned 4.69%. The Fund’s benchmark, the ICE BofA US Municipal Securities Index, returned 5.26% for the same period.
Returns for the Fund’s respective share classes differ from the benchmark indexes based on individual share-class expenses.
Describe the market environment.
During the period, the yield of the 10-year U.S. Treasury bond decreased to 0.93% at year end. In 2020, global markets endured severe shocks from the COVID-19 pandemic, along with increased geopolitical uncertainty. The year started with a positive tone for risk assets, but early in the first quarter of 2020 the emergence of the coronavirus, which quickly spread across the globe, sparked massive “risk-off” moves by investors. Ensuing flight-to-safety trades resulted in unprecedented rate rises over the quarter. In response, the Fed lowered interest rates via two emergency cuts, effectively bringing the fed funds target rate to 0.00%-0.25%.
These rate moves were accompanied by historic and coordinated fiscal and monetary stimulus programs that helped to gradually reduce market volatility during the second quarter of 2020. However, strict lockdown measures to stem the spread of the virus across the United States contributed to significant increases in unemployment, which increased threefold to 14.7% before halving to 6.7% late in the fourth quarter of 2020. The Fed and other global central banks maintained a dovish tone throughout, while governments around the globe coordinated fiscal stimulus programs alongside monetary policy to assist their battered economies. The combination of fiscal and monetary stimulus helped risk assets to stage a strong comeback, with U.S. equity indices eventually touching record highs and 10-year inflation expectations ending the year at a 12-month peak of 1.98%, a material recovery from March’s low of 0.55%.
Eventual clarity regarding the outcome of the U.S. election and encouraging COVID-19 vaccine developments further supported the market’s “risk-on” tone in late 2020. In Europe, the European Central Bank and The Bank of England announced record quantitative easing and monetary stimulus programs, paired with an unprecedented 750 billion euro fiscal stimulus plan within the European Union (“EU”). Lastly, the EU and the United Kingdom finally reached a trade deal late in the fourth quarter of 2020, bringing the four-year “Brexit” saga to a close.
Describe recent portfolio activity.
During the period, the Fund maintained its objective of seeking to provide investment results that correspond to the total return performance of the Underlying Index by selecting securities in accordance with their relative proportion within the Underlying Index. Other factors considered in security selection included transaction costs and maturity.
Describe portfolio positioning at period end.
The Fund remained positioned to attempt to match the risk characteristics of the Underlying Index, irrespective of the market’s future direction.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
| 4 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of December 31, 2020 (continued) | iShares Municipal Bond Index Fund |
TOTAL RETURN BASED ON A $10,000 INVESTMENT
| (a) | Assuming transaction costs and other operating expenses, including administration fees, if any. On November 19, 2018, the Fund acquired all of the assets and assumed certain stated liabilities of the State Farm Tax Advantaged Bond Fund (the “Predecessor Fund”), a series of State Farm Mutual Fund Trust, through a tax-free reorganization (the “Reorganization”). The Predecessor Fund is the performance and accounting survivor of the Reorganization; accordingly the Fund assumed the performance and financial history of the Predecessor Fund upon completion of the Reorganization. |
| (b) | The Fund generally invests at least 80% of its assets, plus the amount of any borrowings for investment purposes, in securities or other financial instruments that are components of or have economic characteristics similar to the securities in the Underlying Index. |
| (c) | ICE BofA US Municipal Securities Index is an index that tracks the performance of U.S. dollar denominated investment grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. domestic market. |
Performance Summary for the Period Ended December 31, 2020
| Average Annual Total Returns(a) |
||||||||||||||||||||||||||||||||||||||||||
| 1 Year |
5 Years |
10 Years | ||||||||||||||||||||||||||||||||||||||||
| Standardized 30-Day Yields |
Unsubsidized 30-Day Yields |
6-Month Total Returns |
Without |
With Sales Charge |
Without |
With Sales Charge |
Without Sales Charge |
With Sales Charge |
||||||||||||||||||||||||||||||||||
| Institutional |
0.89 | % | 0.85 | % | 2.99 | % | 4.97 | % | N/A | 3.57 | % | N/A | 4.10 | % | N/A | |||||||||||||||||||||||||||
| Investor A |
0.64 | 0.60 | 2.87 | 4.70 | N/A | 3.46 | N/A | 4.05 | N/A | |||||||||||||||||||||||||||||||||
| Investor P |
0.59 | 0.55 | 2.85 | 4.69 | 0.50 | % | 3.46 | 2.62 | % | 4.05 | 3.62 | % | ||||||||||||||||||||||||||||||
| Class K |
0.91 | 0.84 | 3.01 | 5.00 | N/A | 3.59 | N/A | 4.11 | N/A | |||||||||||||||||||||||||||||||||
| ICE BofA US Municipal Securities Index |
— | — | 3.23 | 5.26 | N/A | 3.94 | N/A | 4.79 | N/A | |||||||||||||||||||||||||||||||||
| (a) | Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” for a detailed description of share classes, including any related sales charges and fees, and how performance was calculated for certain share classes. On November 19, 2018, the Fund acquired all of the assets and assumed certain stated liabilities of the State Farm Tax Advantaged Bond Fund (the “Predecessor Fund”), a series of State Farm Mutual Fund Trust, through a tax-free reorganization (the “Reorganization”). The Predecessor Fund is the performance and accounting survivor of the Reorganization; accordingly the Fund assumed the performance and financial history of the Predecessor Fund upon completion of the Reorganization. |
N/A — Not applicable as the share class and index do not have a sales charge.
Past performance is not an indication of future results.
Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.
| FUND SUMMARY |
5 |
| Fund Summary as of December 31, 2020 (continued) | iShares Municipal Bond Index Fund |
Expense Example
| Actual | Hypothetical(a) | |||||||||||||||||||||||||||||
| Beginning Account Value (07/01/20) |
Ending Account Value (12/31/20) |
Expenses Paid During the Period(b) |
Beginning Account Value (07/01/20) |
Ending Account Value (12/31/20) |
Expenses Paid During the Period(b) |
Annualized Expense Ratio |
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| Institutional |
$ | 1,000.00 | $ | 1,029.90 | $ | 1.12 | $ | 1,000.00 | $ | 1,024.03 | $ | 1.12 | 0.22 | % | ||||||||||||||||
| Investor A |
1,000.00 | 1,028.70 | 2.40 | 1,000.00 | 1,022.77 | 2.39 | 0.47 | |||||||||||||||||||||||
| Investor P |
1,000.00 | 1,028.50 | 2.55 | 1,000.00 | 1,022.62 | 2.54 | 0.50 | |||||||||||||||||||||||
| Class K |
1,000.00 | 1,030.10 | 1.02 | 1,000.00 | 1,024.13 | 1.02 | 0.20 | |||||||||||||||||||||||
| (a) | Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366. |
| (b) | For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the six-month period shown). |
See “Disclosure of Expenses” for further information on how expenses were calculated.
Portfolio Information
| (a) | Excludes short-term securities. |
| (b) | For Fund compliance purposes, the Fund’s sector classifications refer to one or more of the sector sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease. |
| (c) | Scheduled maturity dates and/or bonds that are subject to potential calls by issuers over the next five years. |
| (d) | For financial reporting purposes, credit quality ratings shown above reflect the highest rating assigned by either S&P Global Ratings or Moody’s Investors Service, Inc. if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated N/R are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. |
| (e) | The investment adviser evaluates the credit quality of unrated investments based upon certain factors including, but not limited to, credit ratings for similar investments and financial analysis of sectors and individual investments. Using this approach, the investment adviser has deemed certain of these unrated securities as investment grade quality. As of December 31, 2020, the market value of unrated securities deemed by the investment adviser to be investment grade represents less than 1% of the Fund’s total investments. |
| (f) | Rounds to less than 1% of total investments. |
| 6 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of December 31, 2020 | iShares Short-Term TIPS Bond Index Fund |
Investment Objective
iShares Short-Term TIPS Bond Index Fund’s (the “Fund”) investment objective is to seek to track the investment results of an index composed of U.S. 0-5 Year Treasury Inflation-Protected Securities.
Portfolio Management Commentary
How did the Fund perform?
For the 12-month period ended December 31, 2020, the Fund’s Institutional Shares returned 4.89%, Investor A Shares returned 4.64%, and Class K Shares returned 4.87%.
For the same period, the Fund’s benchmark, the Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Years Index (Series-L) (the “Underlying Index”), returned 5.07%.
Returns for the Fund’s respective share classes differ from the Underlying Index based on individual share-class expenses.
What factors influenced performance?
Prices for Treasury inflation-protected securities (“TIPS”) are influenced by changes in inflation expectations as well as the direction of nominal Treasury yields. For the 12-month period, the Bloomberg Barclays US TIPS Index posted a return of 10.99% compared to the Fund’s benchmark, the Bloomberg Barclays US TIPS 0-5 year Index, returned 5.07%, with gains supported by declining nominal Treasury yields.
The U.S. market experienced one of the most tumultuous months in history in March as investors began to digest the COVID-19 outbreak. U.S. interest rates moved to unprecedented lows, with 10-year real (after inflation) rates touching a historic low of -0.56% after liquidity became increasingly challenged. 30-year real yields breached negative territory for the first time. The emergence of an oil “price war” between OPEC leadership and Russia further fueled the flight-to-quality rally in Treasuries. The Fed lowered interest rates through two emergency rate cuts, effectively bringing the range for the Fed funds target rate to 0%-0.25%. The measure was accompanied by a $700 billion purchase program of which $500 billion was in Treasuries. The Fed announced on March 23rd that it will buy an unlimited amount of government debt, as well as corporate and municipal bonds, leading break-evens (the inflation rate required for a TIPS investor to receive a return equivalent to the yield on a comparable maturity nominal Treasury bond) increased notably. U.S. lawmakers reached an $8 billion deal for coronavirus relief before unanimously passing the highly anticipated $2 trillion fiscal aid package on March 25th. The combined historic efforts between the Trump administration, Congress and the Fed gradually stabilized the rates market and led to a rebound in risk assets beginning in the second quarter of 2020.
In late 2020, clarity on the U.S. election outcome and positive headlines around COVID-19 vaccine development further supported the risk-on tone and inflation expectations. European policymakers announced record quantitative easing and monetary stimulus programs, providing a lifeline to many of the region’s hardest-hit economies. In addition, the European Union and the United Kingdom finally reached a trade deal after turbulent negotiations that had weighed on risk sentiment. At year end, 10-year inflation expectations as reflected in TIPS valuations approached 2%, versus the low of 0.55% reached in March as the COVID-19 crisis crested.
Describe recent portfolio activity.
During the period, the Fund maintained its objective of seeking to provide investment results that correspond to the total return performance of the Underlying Index by selecting securities in accordance with their relative proportion within the Underlying Index. Other factors considered in security selection included transaction costs and maturity.
Describe portfolio positioning at period end.
The Fund remains positioned to attempt to match the risk and return characteristics of the Underlying Index, irrespective of the future direction of inflation expectations.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
| FUND SUMMARY |
7 |
| Fund Summary as of December 31, 2020 (continued) | iShares Short-Term TIPS Bond Index Fund |
TOTAL RETURN BASED ON A $10,000 INVESTMENT
The Fund commenced operations on February 16, 2016.
| (a) | Assuming transaction costs and other operating expenses, including investment advisory fees, if any. |
| (b) | The Fund generally invests at least 90% of its assets, plus the amount of any borrowing for investment purposes, in securities of the Underlying Index. From time to time when conditions warrant, however, the Fund may invest at least 80% of its assets in securities of the Underlying Index. The Fund may invest a portion of the remainder of its assets in securities not included in the Underlying Index, but which BlackRock Advisors, LLC believes will help the Fund track the Underlying Index. |
| (c) | Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Years Index (Series-L) measures the performance of the inflation-protected public obligations of the U.S. Treasury that have a remaining maturity of less than five years. |
Performance Summary for the Period Ended December 31, 2020
| Average Annual Total Returns(a) | ||||||||||||
| 6-Month Total Returns |
1 Year | Since Inception(b) |
||||||||||
| Institutional |
2.96 | % | 4.89 | % | 2.75 | % | ||||||
| Investor A |
2.89 | 4.64 | 2.48 | |||||||||
| Class K |
3.01 | 4.87 | 2.77 | |||||||||
| Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Years Index (Series-L) |
3.09 | 5.07 | 2.86 | |||||||||
| (a) | Average annual total returns reflect reductions for distribution and service fees. See “About Fund Performance” for a detailed description of share classes, including any related fees. |
| (b) | The Fund commenced operations on February 16, 2016. |
Past performance is not an indication of future results.
Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.
Expense Example
| Actual | Hypothetical(a) | |||||||||||||||||||||||||||||
| Beginning Account Value (07/01/20) |
Ending Account Value (12/31/20) |
Expenses Paid During the Period(b) |
Beginning Account Value (07/01/20) |
Ending Account Value (12/31/20) |
Expenses Paid During the Period(b) |
Annualized Expense Ratio |
||||||||||||||||||||||||
| Institutional |
$ | 1,000.00 | $ | 1,029.60 | $ | 0.31 | $ | 1,000.00 | $ | 1,024.83 | $ | 0.31 | 0.06 | % | ||||||||||||||||
| Investor A |
1,000.00 | 1,028.90 | 1.84 | 1,000.00 | 1,023.33 | 1.83 | 0.36 | |||||||||||||||||||||||
| Class K |
1,000.00 | 1,030.10 | 0.31 | 1,000.00 | 1,024.83 | 0.31 | 0.06 | |||||||||||||||||||||||
| (a) | Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366. |
| (b) | For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the six-month period shown). |
See “Disclosure of Expenses” for further information on how expenses were calculated.
| 8 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of December 31, 2020 (continued) | iShares Short-Term TIPS Bond Index Fund |
Portfolio Information
| (a) | Exclude short-term securities. |
| FUND SUMMARY |
9 |
| Fund Summary as of December 31, 2020 | iShares MSCI EAFE International Index Fund |
Investment Objective
iShares MSCI EAFE International Index Fund’s (the “Fund”) investment objective is to match the performance of the MSCI EAFE Index (Europe, Australasia, Far East) (the “MSCI EAFE Index”) in U.S. dollars with net dividends as closely as possible before the deduction of Fund expenses.
Portfolio Management Commentary
How did the Fund perform?
For the 12-month period ended December 31, 2020, the Fund’s Institutional Shares returned 8.03%, Investor A Shares returned 7.68%, Class K Shares returned 8.07%, and Investor P Shares returned 7.68%. The benchmark MSCI EAFE Index returned 7.82% for the same period.
Returns for the Fund’s respective share classes differ from the benchmark index based on individual share-class expenses.
Describe the market environment.
In the Asia Pacific region, Japan outperformed relatively in the first quarter of 2020 while the country saw a technical recession after a contraction in its fourth quarter of 2019 gross domestic product growth due to a sales tax hike and as the coronavirus pandemic hit Japan’s tourism and trade in the first quarter of 2020. Both Singapore and Australia suffered from record drawdowns on coronavirus fears during the quarter. On continental Europe, Italy and Spain were among the worst performers as the COVID-19 outbreak in Italy intensified in late February and virus-related measures started to disrupt economic activities in the broader region with both France and Germany dragging the index down. The globally integrated European economy was particularly vulnerable to global supply chain disruptions, posing downside risks to growth. Macro data across the region showed a significant negative impact, as export orders sharply declined and the Eurozone March final manufacturing Purchasing Managers’ Index came in at 44.5 versus s. 44.6 estimated, its lowest since July 2012. In the United Kingdom, business sentiment improved in the first two months, before the spread of COVID-19 started to rattle its economy.
Developed markets, as represented by the MSCI EAFE Index, advanced 15.2% (in U.S. dollar terms) in the second quarter of 2020, amid strong fiscal and monetary stimulus, combined with the reopening of economies. The European Central Bank (“ECB”) continued its quantitative easing with a novel and flexible Pandemic Emergency Purchase Programme that allowed the ECB to buy government debt out of proportion to euro area country shareholdings in the bank. Meanwhile, the targeted long-term refinancing operation provided a record boost to the ECB balance. On continental Europe, Germany outperformed with stronger government support while Italy, Switzerland and Spain lagged. Shares in the United Kingdom underperformed the region. In the Asia-Pacific region, Australia led strong gains after suffering from record drawdowns on coronavirus fears in the previous quarter. Hong Kong and Singapore underperformed in the region.
Developed markets, as represented by the MSCI EAFE Index, continued their recovery over the third quarter of 2020 but at a slower pace than the second quarter. The ease of restrictions and supportive fiscal and monetary policies helped the market recovery over the quarter despite the market drop toward the end of the quarter as concerns about a third coronavirus wave in the developed countries started to arise. The ECB kept its quantitative easing policies unchanged even with rising concerns around inflation and debt level in the Eurozone. The low inflation rate, euro appreciation, and slower recovery sign shown in economic data started to surface toward the second half of the third quarter and pushed the ECB to consider adjusting its policies in the fourth quarter of 2020 to tackle the low inflation rate
In the fourth quarter of 2020, developed markets, as represented by the MSCI EAFE Index, rallied despite negative performance over October. Despite the rising numbers of COVID-19 cases in Europe and reports of the newly discovered strain of the virus in the United Kingdom, the MSCI EAFE Index still posted strong performance. Additionally, the Biden-Harris ticket was declared the winner of the U.S. presidential election. This caused market participants to forecast decreased trade tensions between the United States and its counterparties, along with more stable global policies. In addition, the announcement of the COVID-19 vaccine and the subsequent debut of vaccine distribution across developed countries reinforced the performance of the developed equity markets.
Most Global Industry Classification Standard sectors within the MSCI EAFE Index posted positive returns over the quarter. Information technology (+28.73 %), materials (+21.08 %) and consumer discretionary (+16.08 %) were the best performing sectors, while energy (-26.97 %), real estate (-6.43 %) and financials (-3.35%) lagged.
Describe recent portfolio activity.
During the 12-month period, as changes were made to the composition of the MSCI EAFE Index, the Fund purchased and sold securities to maintain its objective of replicating the risks and return of the benchmark index
Describe portfolio positioning at period end.
The Fund remains positioned to match the risk characteristics of its benchmark index, irrespective of the market’s future direction.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
| 10 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of December 31, 2020 (continued) | iShares MSCI EAFE International Index Fund |
TOTAL RETURN BASED ON A $10,000 INVESTMENT
| (a) | Assuming transaction costs and other operating expenses, including administration fees, if any. |
| (b) | Prior to August 1, 2016, the Fund invested all of its assets in Master International Index Series, a series of Quantitative Master Series LLC. Master International Index Series invested in a statistically selected sample of equity securities included in the MSCI EAFE Index and in derivative instruments linked to the MSCI EAFE Index. On August 1, 2016, the Fund ceased to invest in the Master International Index Series as part of a “master/feeder” structure and instead began to operate as a stand-alone fund. |
| (c) | An equity index which captures large and mid cap representation across 21 Developed Markets countries around the world, excluding the United States and Canada. With 918 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. |
Performance Summary for the Period Ended December 31, 2020
| Average Annual Total Returns(a) | ||||||||||||||||||||||||||||||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||||||||||||||||||||||||||||||
| 6-Month Total Returns |
Without Sales Charge |
With Sales Charge |
Without Sales Charge |
With Sales Charge |
Without Sales Charge |
With Sales Charge |
||||||||||||||||||||||||||||||||||
| Institutional |
21.24 | % | 8.03 | % | N/A | 7.59 | % | N/A | 5.39 | % | N/A | |||||||||||||||||||||||||||||
| Investor A |
21.03 | 7.68 | N/A | 7.31 | N/A | 5.10 | N/A | |||||||||||||||||||||||||||||||||
| Investor P |
20.99 | 7.68 | 2.03 | % | 7.31 | 6.16 | % | 5.12 | 4.55 | % | ||||||||||||||||||||||||||||||
| Class K |
21.17 | 8.07 | N/A | 7.63 | N/A | 5.43 | N/A | |||||||||||||||||||||||||||||||||
| MSCI EAFE Index |
21.61 | 7.82 | N/A | 7.45 | N/A | 5.51 | N/A | |||||||||||||||||||||||||||||||||
| (a) | Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” for a detailed description of share classes, including any related sales charges and fees, and how performance was calculated for certain share classes. |
N/A — Not applicable as the share class and index do not have a sales charge.
Past performance is not an indication of future results.
Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.
Expense Example
| Actual | Hypothetical(a) | |||||||||||||||||||||||||||||||
| Beginning Account Value (07/01/20) |
Ending Account Value (12/31/20) |
Expenses Paid During the Period(b) |
Beginning Account Value (07/01/20) |
Ending Account Value (12/31/20) |
Expenses Paid During the Period(b) |
Annualized Expense Ratio |
||||||||||||||||||||||||||
| Institutional |
$ | 1,000.00 | $ | 1,212.40 | $ | 0.50 | $ | 1,000.00 | $ | 1,024.68 | $ | 0.46 | 0.09 | % | ||||||||||||||||||
| Investor A |
1,000.00 | 1,210.30 | 1.94 | 1,000.00 | 1,023.38 | 1.78 | 0.35 | |||||||||||||||||||||||||
| Investor P |
1,000.00 | 1,209.90 | 2.06 | 1,000.00 | 1,023.28 | 1.88 | 0.37 | |||||||||||||||||||||||||
| Class K |
1,000.00 | 1,211.70 | 0.22 | 1,000.00 | 1,024.94 | 0.20 | 0.04 | |||||||||||||||||||||||||
| (a) | Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366. |
| (b) | For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the six-month period shown). |
See “Disclosure of Expenses” for further information on how expenses were calculated.
| FUND SUMMARY |
11 |
| Fund Summary as of December 31, 2020 (continued) | iShares MSCI EAFE International Index Fund |
| Portfolio Information |
| # | Includes holdings within countries that are 1% or less of net assets. Please refer to the Schedule of Investments for such countries. |
| 12 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Fund Summary as of December 31, 2020 | iShares Russell 2000 Small-Cap Index Fund |
Investment Objective
iShares Russell 2000 Small-Cap Index Fund’s (the “Fund”) investment objective is to match the performance of the Russell 2000® Index as closely as possible before the deduction of Fund expenses.
Portfolio Management Commentary
How did the Fund perform?
For the 12-month period ended December 31, 2020, the Fund’s Institutional Shares returned 19.97%, Investor A Shares returned 19.66%, Class K Shares returned 20.00%, and Investor P Shares returned 19.65%. The benchmark Russell 2000® Index returned 19.96% for the same period.
Returns for the Fund’s respective share classes differ from the benchmark index based on individual share-class expenses. The Fund invests all of its assets in Master Small Cap Index Series (the “Series”), a series of Quantitative Master Series LLC.
Describe the market environment.
Fears of the coronavirus outbreak in the first quarter of 2020 and its economic toll continued to drive unprecedented levels of financial market volatility. The Chicago Board Options Exchange Volatility Index, which measures near-term stock market volatility, surged to its highest level since the financial crisis, and the S&P 500® experienced its quickest bear market contraction on record. Economic activity fell to a standstill with the Purchasing Managers Index (an index of the prevailing direction of economic trends in the manufacturing and service sectors) across the globe registering its lowest levels on record and jobless claims surged. In late March, the United States saw a record number of initial unemployment claims as 3.3 million people filed for unemployment benefits while the consensus estimate was 1.4 million.
On the policy front, global governments in the second quarter of 2020 unleashed large stimulus packages to combat the shock on the economy. The United States passed several fiscal stimulus measures, including a $2 trillion relief bill to send money directly to Americans. Separately, monetary policy moved toward accommodation as the Fed cut the policy rate to 0% and pledged to buy as much government-backed debt as needed to bolster the markets for housing and Treasury bonds. Furthermore, the Fed announced it would buy corporate bonds, including the riskiest investment-grade debt, for the first time in its history. U.S. stocks outperformed other regions in the second quarter, with a sharper recovery from the troughs of late March. This was largely supported by the historic policy response. The United States was able to deliver coordinated fiscal and monetary support sufficient to offset the estimated initial shock from the coronavirus pandemic and spillovers to the full economy. Toward the end of the second quarter, U.S. government measures to contain the coronavirus was gradually lifted in many states, boosting activity and employment.
In the third quarter of 2020, U.S. stocks continued their recovery over July and August and maintained recording all-time highs until early September when valuation concerns created market volatility and led to a market sell off. COVID-19 continued to be center stage over the third quarter but the ease of some restrictions, coupled with a drop in the number of new cases in the United States and the Fed’s accommodative policies, supported the U.S. market recovery over the third quarter despite the spikes in volatility and the market sell off that dampened the recovery momentum.
U.S. markets reacted positively to the U.S. presidential election results following a poor start to the fourth quarter of 2020. The victory of Joe Biden came as an indicator of more stable internal and external policies. The fear of rising COVID-19 cases in the United States was offset by positive vaccine news and an announcement of a $900 billion stimulus in late December, which supported the market’s positive performance. Sectors that were severely impacted by the coronavirus pandemic, such as energy and financials, recovered following the positive vaccine news in November, prompting these two sectors to recoup some of the losses incurred earlier in 2020.
Describe recent portfolio activity.
During the 12-month period, as changes were made to the composition of the Russell 2000® Index, the Series purchased and sold securities to maintain its objective of replicating the risks and return of the benchmark index.
Describe portfolio positioning at period end.
The Series remains positioned to match the risk characteristics of its benchmark index, irrespective of the market’s future direction.
The views expressed reflect the opinions of BlackRock as of the date of this report and are subject to change based on changes in market, economic or other conditions. These views are not intended to be a forecast of future events and are no guarantee of future results.
| FUND SUMMARY |
13 |
| Fund Summary as of December 31, 2020 (continued) | iShares Russell 2000 Small-Cap Index Fund |
TOTAL RETURN BASED ON A $10,000 INVESTMENT
| (a) | Assuming transaction costs and other operating expenses, including administration fees, if any. |
| (b) | The Fund invests all of its assets in the Series. The Series may invest in a statistically selected sample of the stocks included in the Russell 2000® Index and in derivative instruments linked to the Russell 2000® Index. |
| (c) | An unmanaged index that is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. |
Performance Summary for the Period Ended December 31, 2020
| Average Annual Total Returns(a) | ||||||||||||||||||||||||||||||||||||||||
| 1 Year | 5 Years | 10 Years | ||||||||||||||||||||||||||||||||||||||
| 6-Month Total Returns |
Without Sales Charge |
With Sales Charge |
Without Sales Charge |
With Sales Charge |
Without Sales Charge |
With Sales Charge |
||||||||||||||||||||||||||||||||||
| Institutional |
37.82 | % | 19.97 | % | N/A | 13.26 | % | N/A | 11.16 | % | N/A | |||||||||||||||||||||||||||||
| Investor A |
37.67 | 19.66 | N/A | 12.99 | N/A | 10.89 | N/A | |||||||||||||||||||||||||||||||||
| Investor P |
37.64 | 19.65 | 13.37 | % | 12.98 | 11.77 | % | 10.88 | 10.28 | % | ||||||||||||||||||||||||||||||
| Class K |
37.80 | 20.00 | N/A | 13.33 | N/A | 11.22 | N/A | |||||||||||||||||||||||||||||||||
| Russell 2000® Index |
37.85 | 19.96 | N/A | 13.26 | N/A | 11.20 | N/A | |||||||||||||||||||||||||||||||||
| (a) | Assuming maximum sales charges, if any. Average annual total returns with and without sales charges reflect reductions for distribution and service fees. See “About Fund Performance” for a detailed description of share classes, including any related sales charges and fees, and how performance was calculated for certain share classes. |
N/A — Not applicable as the share class and index do not have a sales charge.
Past performance is not an indication of future results.
Performance results may include adjustments made for financial reporting purposes in accordance with U.S. generally accepted accounting principles.
Expense Example
| Actual | Hypothetical(a) | |||||||||||||||||||||||||||||||
| |
Beginning Account Value (07/01/20) |
|
|
Ending Account Value (12/31/20) |
|
Expenses Paid During the Period(b) |
|
|
Beginning Account Value (07/01/20) |
|
Ending Account Value (12/31/20) |
|
Expenses Paid During the Period(b) |
|
|
Annualized Expense Ratio |
||||||||||||||||
| Institutional |
$ | 1,000.00 | $ | 1,378.20 | $ | 0.72 | $ | 1,000.00 | $ | 1,024.53 | $ | 0.61 | 0.12 | % | ||||||||||||||||||
| Investor A |
1,000.00 | 1,376.70 | 2.21 | 1,000.00 | 1,023.28 | 1.88 | 0.37 | |||||||||||||||||||||||||
| Investor P |
1,000.00 | 1,376.40 | 2.21 | 1,000.00 | 1,023.28 | 1.88 | 0.37 | |||||||||||||||||||||||||
| Class K |
1,000.00 | 1,378.00 | 0.42 | 1,000.00 | 1,024.78 | 0.36 | 0.07 | |||||||||||||||||||||||||
| (a) | Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 366. |
| (b) | For each class of the Fund, expenses are equal to the annualized expense ratio for the class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the six-month period shown). Because the Fund invests all of its assets in the Master Portfolio, the expense example reflects the net expenses of both the Fund and the Master Portfolio in which it invests. |
See “Disclosure of Expenses” for further information on how expenses were calculated.
| 14 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Institutional and Class K Shares are not subject to any sales charge. These shares bear no ongoing distribution or service fees and are available only to certain eligible investors. Class K Shares performance of iShares MSCI EAFE International Index Fund and iShares Russell 2000 Small-Cap Index Fund shown prior to the Class K Shares inception date of March 31, 2011 is that of Institutional Shares. The performance of iShares MSCI EAFE International Index Fund’s and iShares Russell 2000 Small-Cap Index Fund’s Class K Shares would be substantially similar to Institutional Shares because Class K Shares and Institutional Shares invest in the same portfolio of securities and performance would only differ to the extent that Class K Shares and Institutional Shares have different expenses. The actual returns of Class K Shares would have been higher than those of the Institutional Shares because Class K Shares have lower expenses than the Institutional Shares.
On November 19, 2018, the iShares Municipal Bond Index Fund acquired all of the assets and assumed certain stated liabilities, of the State Farm Tax Advantaged Bond Fund (the “Predecessor Fund”), a series of State Farm Mutual Fund Trust, in a tax-free reorganization (the “Reorganization”). The Predecessor Fund is the performance and accounting survivor of the Reorganization. Accordingly, information provided herein for periods prior to the Reorganization is that of the Predecessor Fund. See Note 1 of the Notes to Financial Statements for additional information regarding the Reorganization.
Institutional and Class K Shares performance of iShares Municipal Bond Index Fund shown prior to the Institutional and Class K Shares inception date of November 19, 2018 is that of Investor A Shares, which reflect the performance of Premier Shares of the Predecessor Fund. The performance of iShares Municipal Bond Index Fund’s Institutional and Class K Shares would be substantially similar to Investor A Shares because Institutional Shares, Class K Shares and Investor A Shares invest in the same portfolio of securities and performance would only differ to the extent that Institutional Shares, Class K Shares and Investor A Shares have different expenses. The actual returns of Institutional and Class K Shares would have been higher than those of the Investor A Shares because Institutional and Class K Shares have lower expenses than the Investor A Shares.
Investor A Shares are not subject to any sales charge and bear no ongoing distribution fee. These shares are subject to an ongoing service fee of 0.25% per year. These shares are generally available through financial intermediaries. Investor A Shares performance of iShares Municipal Bond Index Fund shown prior to the Reorganization is that of the Premier Shares of the Predecessor Fund.
Investor PShares (available in iShares MSCI EAFE International Index Fund and iShares Russell 2000 Small-Cap Index Fund) are subject to a maximum initial sales charge (front-end load) of 5.25% and a service fee of 0.25% per year (but no distribution fee). These shares are only available to investors purchasing shares through registered representatives of an insurance company’s broker-dealer that has entered into an agreement with iShares MSCI EAFE International Index Fund and iShares Russell 2000 Small-Cap Index Fund’s distributor to offer such shares. Investor P Share performance of iShares MSCI EAFE International Index Fund and iShares Russell 2000 Small-Cap Index Fund shown prior to the Investor P Shares inception date of August 6, 2018 is that of Institutional Shares (which have no distribution or service fees) and was restated to reflect Investor P Shares fees.
Investor P Shares (available in iShares Municipal Bond Index Fund) are subject to a maximum initial sales charge (front-end load) of 4.00% and a service fee of 0.25% per year (but no distribution fee). Certain redemptions of these shares may be subject to a contingent deferred sales charge (“CDSC”) where no initial sales charge was paid at the time of purchase. These shares are only available to investors purchasing shares through registered representatives of an insurance company’s broker-dealer that has entered into an agreement with the Fund’s distributor to offer such shares. Investor P Shares performance shown prior to the Reorganization is that of the Premier Shares of the Predecessor Fund.
Past performance is not an indication of future results. Financial markets have experienced extreme volatility and trading in many instruments has been disrupted. These circumstances may continue for an extended period of time, and may continue to affect adversely the value and liquidity of the fund’s investments. As a result, current performance may be lower or higher than the performance data quoted. Refer to blackrock.com to obtain performance data current to the most recent month-end. Performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Figures shown in the performance tables on the previous pages assume reinvestment of all distributions, if any, at net asset value (“NAV”) on the ex-dividend date or payable date, as applicable. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Distributions paid to each class of shares will vary because of the different levels of service, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders.
BlackRock Advisors, LLC (the “Manager”), each Fund’s investment adviser, has contractually and/or voluntarily agreed to waive and/or reimburse a portion of each Fund’s expenses. Without such waivers and/or reimbursements, each Fund’s performance would have been lower. With respect to each Fund’s voluntary waiver(s), if any, the Manager is under no obligation to waive and/or reimburse or to continue waiving and/or reimbursing its fees and such voluntary waiver(s) may be reduced or discontinued at any time. With respect to each Fund’s contractual waiver(s), if any, the Manager is under no obligation to continue waiving and/or reimbursing its fees after the applicable termination date of such agreement. See the Notes to Financial Statements for additional information on waivers and/or reimbursements.
The standardized 30-day yield includes the effects of any waivers and/or reimbursements. The unsubsidized 30-day yield excludes the effects of any waivers and/or reimbursements.
| ABOUT FUND PERFORMANCE |
15 |
| Disclosure of Expenses |
Shareholders of each Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense examples shown (which are based on a hypothetical investment of $1,000 invested on July 1, 2020 and held through December 31, 2020) are intended to assist shareholders both in calculating expenses based on an investment in each Fund and in comparing these expenses with similar costs of investing in other mutual funds.
The expense examples provide information about actual account values and actual expenses. In order to estimate the expenses a shareholder paid during the period covered by this report, shareholders can divide their account value by $1,000 and then multiply the result by the number corresponding to their Fund and share class under the heading entitled “Expenses Paid During the Period.”
The expense examples also provide information about hypothetical account values and hypothetical expenses based on a Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses. In order to assist shareholders in comparing the ongoing expenses of investing in these Funds and other funds, compare the 5% hypothetical examples with the 5% hypothetical examples that appear in shareholder reports of other funds.
The expenses shown in the expense examples are intended to highlight shareholders’ ongoing costs only and do not reflect transactional expenses, such as sales charges, if any. Therefore, the hypothetical examples are useful in comparing ongoing expenses only, and will not help shareholders determine the relative total expenses of owning different funds. If these transactional expenses were included, shareholder expenses would have been higher.
Derivative Financial Instruments
The Funds may invest in various derivative financial instruments. These instruments are used to obtain exposure to a security, commodity, index, market, and/or other assets without owning or taking physical custody of securities, commodities and/or other referenced assets or to manage market, equity, credit, interest rate, foreign currency exchange rate, commodity and/or other risks. Derivative financial instruments may give rise to a form of economic leverage and involve risks, including the imperfect correlation between the value of a derivative financial instrument and the underlying asset, possible default of the counterparty to the transaction or illiquidity of the instrument. The Funds’ successful use of a derivative financial instrument depends on the investment adviser’s ability to predict pertinent market movements accurately, which cannot be assured. The use of these instruments may result in losses greater than if they had not been used, may limit the amount of appreciation a Fund can realize on an investment and/or may result in lower distributions paid to shareholders. The Funds’ investments in these instruments, if any, are discussed in detail in the Notes to Financial Statements.
| 16 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| December 31, 2020 |
iShares Municipal Bond Index Fund (Percentages shown are based on Net Assets) |
| FUND SCHEDULES OF INVESTMENTS |
17 |
| Schedule of Investments (continued) December 31, 2020 |
iShares Municipal Bond Index Fund (Percentages shown are based on Net Assets) |
| 18 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
iShares Municipal Bond Index Fund (Percentages shown are based on Net Assets) |
| FUND SCHEDULES OF INVESTMENTS |
19 |
| Schedule of Investments (continued) December 31, 2020 |
iShares Municipal Bond Index Fund (Percentages shown are based on Net Assets) |
| 20 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
iShares Municipal Bond Index Fund (Percentages shown are based on Net Assets) |
| FUND SCHEDULES OF INVESTMENTS |
21 |
| Schedule of Investments (continued) December 31, 2020 |
iShares Municipal Bond Index Fund (Percentages shown are based on Net Assets) |
| 22 | 2020 BLACK ROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
iShares Municipal Bond Index Fund (Percentages shown are based on Net Assets) |
| FUND SCHEDULES OF INVESTMENTS |
23 |
| Schedule of Investments (continued) December 31, 2020 |
iShares Municipal Bond Index Fund |
Affiliates
Investments in issuers considered to be affiliate(s) of the Fund during the year ended December 31, 2020 for purposes of Section 2(a)(3) of the 1940 Act, as amended, were as follows:
| Affiliated Issuer | Value at 12/31/19 |
Purchases at Cost |
Proceeds from Sales |
Net Realized Gain (Loss) |
Change in Unrealized Appreciation (Depreciation) |
Value at 12/31/20 |
Shares Held at 12/31/20 |
Income | Capital Gain Distributions from Underlying Funds |
|||||||||||||||||||||||||||
| BlackRock Liquidity Funds, MuniCash, Institutional Class |
$ | 5,109,953 | $ | — | $ | (964,146 | )(a) | $ | (1,088 | ) | $ | 1,540 | $ | 4,146,259 | 4,145,430 | $ | 24,053 | $ | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
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| (a) | Represents net amount purchased (sold). |
Fair Value Hierarchy as of Period End
Various inputs are used in determining the fair value of financial instruments. For a description of the input levels and information about the Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.
The following table summarizes the Fund’s investments categorized in the disclosure hierarchy. The breakdown of the Fund’s investments into major categories is disclosed in the Schedule of Investments above.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets |
||||||||||||||||
| Investments |
||||||||||||||||
| Long-Term Investments |
||||||||||||||||
| Municipal Bonds |
$ | — | $ | 338,985,064 | $ | — | $ | 338,985,064 | ||||||||
| Short-Term Securities |
||||||||||||||||
| Money Market Funds |
4,146,259 | — | — | 4,146,259 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 4,146,259 | $ | 338,985,064 | $ | — | $ | 343,131,323 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 24 | 2020 BLACK ROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments December 31, 2020 |
iShares Short-Term TIPS Bond Index Fund (Percentages shown are based on Net Assets) |
Affiliates
Investments in issuers considered to be affiliate(s) of the Fund during the year ended December 31, 2020 for purposes of Section 2(a)(3) of the 1940 Act, as amended, were as follows:
| Affiliated Issuer | Value at 12/31/19 |
Purchases at Cost |
Proceeds from Sales |
Net Realized Gain (Loss) |
Change in Unrealized Appreciation (Depreciation) |
Value at 12/31/20 |
Shares Held at 12/31/20 |
Income |
Capital Gain Distributions from Underlying Funds |
|||||||||||||||||||||||||||
| BlackRock Cash Funds: Treasury, SL Agency Shares |
$ | 918,350 | $ | 1,166,115 | (a) | $ | — | $ | — | $ | — | $ | 2,084,465 | 2,084,421 | $ | 2,014 | (b) | $ | — | |||||||||||||||||
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| (a) | Represents net amount purchased (sold). |
| (b) | All or a portion represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities. |
Fair Value Hierarchy as of Period End
Various inputs are used in determining the fair value of financial instruments. For a description of the input levels and information about the Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.
The following table summarizes the Fund’s investments categorized in the disclosure hierarchy. The breakdown of the Fund’s investments into major categories is disclosed in the Schedule of Investments above.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets |
||||||||||||||||
| Investments |
||||||||||||||||
| Long-Term Investments |
||||||||||||||||
| U.S. Treasury Obligations |
$ | — | $ | 58,060,810 | $ | — | $ | 58,060,810 | ||||||||
| Short-Term Securities |
||||||||||||||||
| Money Market Funds |
2,084,465 | — | — | 2,084,465 | ||||||||||||
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| $ | 2,084,465 | $ | 58,060,810 | $ | — | $ | 60,145,275 | |||||||||
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See notes to financial statements.
| FUND SCHEDULES OF INVESTMENTS |
25 |
| Schedule of Investments December 31, 2020 |
iShares MSCI EAFE International Index Fund (Percentages shown are based on Net Assets) |
| 26 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
iShares MSCI EAFE International Index Fund (Percentages shown are based on Net Assets) |
| FUND SCHEDULES OF INVESTMENTS |
27 |
| Schedule of Investments (continued) December 31, 2020 |
iShares MSCI EAFE International Index Fund (Percentages shown are based on Net Assets) |
| 28 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
iShares MSCI EAFE International Index Fund (Percentages shown are based on Net Assets) |
| FUND SCHEDULES OF INVESTMENTS |
29 |
| Schedule of Investments (continued) December 31, 2020 |
iShares MSCI EAFE International Index Fund (Percentages shown are based on Net Assets) |
| 30 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
iShares MSCI EAFE International Index Fund (Percentages shown are based on Net Assets) |
| FUND SCHEDULES OF INVESTMENTS |
31 |
| Schedule of Investments (continued) December 31, 2020 |
iShares MSCI EAFE International Index Fund (Percentages shown are based on Net Assets) |
| 32 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
iShares MSCI EAFE International Index Fund (Percentages shown are based on Net Assets) |
| FUND SCHEDULES OF INVESTMENTS |
33 |
| Schedule of Investments (continued) December 31, 2020 |
iShares MSCI EAFE International Index Fund |
Affiliates
Investments in issuers considered to be affiliate(s) of the Fund during the year ended December 31, 2020 for purposes of Section 2(a)(3) of the 1940 Act, as amended, were as follows:
| Affiliated Issuer | Value at 12/31/19 |
Purchases at Cost |
Proceeds from Sales |
Net Realized Gain (Loss) |
Change in Unrealized Appreciation (Depreciation) |
Value at 12/31/20 |
Shares Held at 12/31/20 |
Income | Capital Gain Distributions from Underlying Funds |
|||||||||||||||||||||||||||
| BlackRock Cash Funds: Institutional, SL Agency Shares |
$ | 43,046,155 | $ | — | $ | (12,566,726 | )(a) | $ | (34,736 | ) | $ | 10,948 | $ | 30,455,641 | 30,437,379 | $ | 582,380 | (b) | $ | — | ||||||||||||||||
| BlackRock Cash Funds: Treasury, SL Agency Shares |
— | 28,526,482 | (a) | — | — | — | 28,526,482 | 28,526,482 | 36,644 | — | ||||||||||||||||||||||||||
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| $ | (34,736 | ) | $ | 10,948 | $ | 58,982,123 | $ | 619,024 | $ | — | ||||||||||||||||||||||||||
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| (a) | Represents net amount purchased (sold). |
| (b) | All or a portion represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities. |
Derivative Financial Instruments Outstanding as of Period End
Futures Contracts
| Description | Number of Contracts |
Expiration Date |
Notional Amount (000) |
Value/ Unrealized Appreciation (Depreciation) |
||||||||||||
| Long Contracts |
||||||||||||||||
| Nikkei 225 Index |
191 | 03/11/21 | $ | 25,425 | $ | 759,571 | ||||||||||
| SPI 200 Index |
83 | 03/18/21 | 10,457 | (101,575 | ) | |||||||||||
| Euro Stoxx 50 Index |
769 | 03/19/21 | 33,350 | 393,405 | ||||||||||||
| FTSE 100 Index |
231 | 03/19/21 | 20,280 | (149,415 | ) | |||||||||||
|
|
|
|||||||||||||||
| $ | 901,986 | |||||||||||||||
|
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|
|||||||||||||||
Derivative Financial Instruments Categorized by Risk Exposure
As of period end, the fair values of derivative financial instruments located in the Statements of Assets and Liabilities were as follows:
| Commodity Contracts |
Credit Contracts |
Equity Contracts |
Foreign Currency Exchange Contracts |
Interest Rate Contracts |
Other Contracts |
Total | ||||||||||||||||||||||
| Assets — Derivative Financial Instruments |
||||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | 1,152,976 | $ | — | $ | — | $ | — | $ | 1,152,976 | ||||||||||||||
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|||||||||||||||
| Liabilities — Derivative Financial Instruments |
||||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | 250,990 | $ | — | $ | — | $ | — | $ | 250,990 | ||||||||||||||
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| (a) | Net cumulative unrealized appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, are reported in the Schedule of Investments. In the Statements of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in accumulated earnings (loss). |
| 34 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
iShares MSCI EAFE International Index Fund |
For the year ended December 31, 2020, the effect of derivative financial instruments in the Statements of Operations was as follows:
| Commodity Contracts |
Credit Contracts |
Equity Contracts |
Foreign Currency Exchange Contracts |
Interest Rate Contracts |
Other Contracts |
Total | ||||||||||||||||||||||
| Net Realized Gain (Loss) from |
||||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | (39,641,158 | ) | $ | — | $ | — | $ | — | $ | (39,641,158 | ) | ||||||||||||
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|||||||||||||||
| Net Change in Unrealized Appreciation (Depreciation) on |
||||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | 1,207,833 | $ | — | $ | — | $ | — | $ | 1,207,833 | ||||||||||||||
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|
|
|
|
|||||||||||||||
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| Futures contracts |
||||||||
| Average notional value of contracts — long |
$118,058,207 | |||||||
For more information about the Fund’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
Fair Value Hierarchy as of Period End
Various inputs are used in determining the fair value of financial instruments. For a description of the input levels and information about the Fund’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.
The following table summarizes the Fund’s investments and derivative financial instruments categorized in the disclosure hierarchy. The breakdown of the Fund’s investments into major categories is disclosed in the Schedule of Investments above.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets |
||||||||||||||||
| Investments |
||||||||||||||||
| Long-Term Investments |
||||||||||||||||
| Common Stocks |
||||||||||||||||
| Australia |
$ | — | $ | 489,538,486 | $ | — | $ | 489,538,486 | ||||||||
| Austria |
— | 11,613,117 | — | 11,613,117 | ||||||||||||
| Belgium |
1,327,682 | 57,715,043 | — | 59,042,725 | ||||||||||||
| Brazil |
— | 2,943,233 | — | 2,943,233 | ||||||||||||
| Chile |
— | 3,216,052 | — | 3,216,052 | ||||||||||||
| China |
— | 5,207,858 | — | 5,207,858 | ||||||||||||
| Denmark |
— | 165,687,431 | — | 165,687,431 | ||||||||||||
| Finland |
— | 80,102,703 | — | 80,102,703 | ||||||||||||
| France |
4,088,572 | 704,229,310 | — | 708,317,882 | ||||||||||||
| Germany |
14,618,174 | 567,393,476 | — | 582,011,650 | ||||||||||||
| Hong Kong |
3,915,934 | 185,739,325 | — | 189,655,259 | ||||||||||||
| Ireland |
9,195,731 | 51,630,629 | — | 60,826,360 | ||||||||||||
| Israel |
18,817,566 | 21,778,709 | — | 40,596,275 | ||||||||||||
| Italy |
— | 138,003,574 | — | 138,003,574 | ||||||||||||
| Japan |
— | 1,669,533,518 | — | 1,669,533,518 | ||||||||||||
| Jordan |
— | 2,469,598 | — | 2,469,598 | ||||||||||||
| Luxembourg |
4,570,219 | 8,363,838 | — | 12,934,057 | ||||||||||||
| Macau |
— | 13,445,074 | — | 13,445,074 | ||||||||||||
| Malta |
— | — | 12 | 12 | ||||||||||||
| Mexico |
— | 1,173,742 | — | 1,173,742 | ||||||||||||
| Netherlands |
32,569,142 | 280,267,529 | — | 312,836,671 | ||||||||||||
| New Zealand |
— | 25,729,287 | — | 25,729,287 | ||||||||||||
| Norway |
4,116,516 | 30,075,386 | — | 34,191,902 | ||||||||||||
| Portugal |
— | 11,325,770 | 1 | 11,325,771 | ||||||||||||
| Russia |
— | 1,354,633 | — | 1,354,633 | ||||||||||||
| Singapore |
— | 65,901,007 | — | 65,901,007 | ||||||||||||
| South Africa |
— | 16,839,756 | — | 16,839,756 | ||||||||||||
| Spain |
— | 161,085,747 | — | 161,085,747 | ||||||||||||
| Sweden |
— | 209,470,175 | — | 209,470,175 | ||||||||||||
| Switzerland |
— | 646,368,506 | — | 646,368,506 | ||||||||||||
| United Arab Emirates |
— | — | 1 | 1 | ||||||||||||
| United Kingdom |
4,320,161 | 809,175,052 | — | 813,495,213 | ||||||||||||
| United States |
— | 6,969,630 | — | 6,969,630 | ||||||||||||
| FUND SCHEDULES OF INVESTMENTS |
35 |
| Schedule of Investments (continued) December 31, 2020 |
iShares MSCI EAFE International Index Fund |
Fair Value Hierarchy as of Period End (continued)
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Preferred Securities |
||||||||||||||||
| Preferred Stocks |
$ | — | $ | 36,629,141 | $ | — | $ | 36,629,141 | ||||||||
| Rights |
213,467 | — | — | 213,467 | ||||||||||||
| Short-Term Securities |
||||||||||||||||
| Money Market Funds |
58,982,123 | — | — | 58,982,123 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 156,735,287 | $ | 6,480,976,335 | $ | 14 | $ | 6,637,711,636 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments(a) |
||||||||||||||||
| Assets |
||||||||||||||||
| Equity Contracts |
$ | 1,152,976 | $ | — | $ | — | $ | 1,152,976 | ||||||||
| Liabilities |
||||||||||||||||
| Equity Contracts |
(250,990 | ) | — | — | (250,990 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 901,986 | $ | — | $ | — | $ | 901,986 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | Derivative financial instruments are futures contracts. Futures contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
See notes to financial statements.
| 36 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Statements of Assets and Liabilities
December 31, 2020
| iShares Municipal Bond |
iShares Short-Term TIPS Bond Index Fund |
iShares MSCI EAFE International |
iShares Russell 2000 Small-Cap Index Fund |
|||||||||||||
| ASSETS |
||||||||||||||||
| Investments at value — unaffiliated(a)(b) |
$ | 338,985,064 | $ | 58,060,810 | $ | 6,578,729,513 | $ | — | ||||||||
| Investments at value — Master Small Cap Index Series |
— | — | — | 2,754,540,762 | ||||||||||||
| Investments at value — affiliated(c) |
4,146,259 | 2,084,465 | 58,982,123 | — | ||||||||||||
| Cash pledged for futures contracts |
— | — | 8,302,424 | — | ||||||||||||
| Foreign currency at value(d) |
— | — | 60,928,912 | — | ||||||||||||
| Receivables: |
||||||||||||||||
| Investments sold |
— | — | 782,289 | — | ||||||||||||
| Securities lending income — affiliated |
— | 85 | 17,355 | — | ||||||||||||
| Capital shares sold |
28,679 | 288,520 | 8,383,641 | 7,125,504 | ||||||||||||
| Dividends — unaffiliated |
— | — | 19,956,133 | — | ||||||||||||
| Dividends — affiliated |
— | — | 541 | — | ||||||||||||
| Interest — unaffiliated |
3,840,377 | 84,257 | — | — | ||||||||||||
| From the Manager |
— | 35,819 | — | — | ||||||||||||
| Variation margin on futures contracts |
— | — | 602,173 | — | ||||||||||||
| Prepaid expenses |
56,383 | 37,014 | 151 | 63,738 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total assets |
347,056,762 | 60,590,970 | 6,736,685,255 | 2,761,730,004 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| LIABILITIES |
||||||||||||||||
| Collateral on securities loaned at value |
— | — | 30,476,730 | — | ||||||||||||
| Payables: |
||||||||||||||||
| Investments purchased |
— | 982,903 | 408,820 | — | ||||||||||||
| Administration fees |
— | — | — | 70,210 | ||||||||||||
| Capital shares redeemed |
451,340 | 4,523 | 57,438,683 | 6,473,531 | ||||||||||||
| Contributions to the Master Portfolio |
— | — | — | 651,973 | ||||||||||||
| Income dividend distributions |
66,096 | 31 | — | — | ||||||||||||
| Investment advisory fees |
17,460 | — | 54,668 | — | ||||||||||||
| Directors’ and Officer’s fees |
4,386 | 3,940 | 33,965 | 506 | ||||||||||||
| Other accrued expenses |
88,080 | 39,405 | 645,140 | 116,931 | ||||||||||||
| Other affiliates |
— | — | 62,241 | — | ||||||||||||
| Professional fees |
48,490 | — | 42,374 | — | ||||||||||||
| Service fees |
72,232 | 279 | 104,201 | 121,075 | ||||||||||||
| Variation margin on futures contracts |
— | — | 401,421 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total liabilities |
748,084 | 1,031,081 | 89,668,243 | 7,434,226 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| NET ASSETS |
$ | 346,308,678 | $ | 59,559,889 | $ | 6,647,017,012 | $ | 2,754,295,778 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| NET ASSETS CONSIST OF |
||||||||||||||||
| Paid-in capital |
$ | 318,351,820 | $ | 58,315,619 | $ | 5,936,357,859 | $ | 2,044,555,040 | ||||||||
| Accumulated earnings |
27,956,858 | 1,244,270 | 710,659,153 | 709,740,738 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| NET ASSETS |
$ | 346,308,678 | $ | 59,559,889 | $ | 6,647,017,012 | $ | 2,754,295,778 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) Investments at cost — unaffiliated |
$ | 311,476,453 | $ | 56,701,966 | $ | 4,679,396,193 | $ | — | ||||||||
| (b) Securities loaned at value |
$ | — | $ | — | $ | 29,938,995 | $ | — | ||||||||
| (c) Investments at cost — affiliated |
$ | 4,144,662 | $ | 2,084,465 | $ | 58,968,576 | $ | — | ||||||||
| (d) Foreign currency at cost |
$ | — | $ | — | $ | 60,359,457 | $ | — | ||||||||
| FUND FINANCIAL STATEMENTS |
37 |
Statements of Assets and Liabilities (continued)
December 31, 2020
| iShares Municipal Bond |
iShares Short-Term TIPS Bond Index Fund |
iShares MSCI EAFE International |
iShares Russell 2000 Small-Cap Index Fund |
|||||||||||||
| NET ASSET VALUE |
||||||||||||||||
| Institutional | ||||||||||||||||
| Net assets |
$ | 6,115,131 | $ | 16,548,812 | $ | 1,004,854,608 | $ | 331,429,296 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares outstanding |
497,626 | 1,606,923 | 68,463,446 | 13,700,086 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net asset value |
$ | 12.29 | $ | 10.30 | $ | 14.68 | $ | 24.19 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares authorized |
Unlimited | Unlimited | 1.208 billion | 208 million | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Par value |
$ | 0.001 | $ | 0.001 | $ | 0.0001 | $ | 0.0001 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investor A | ||||||||||||||||
| Net assets |
$ | 23,314,710 | $ | 1,475,276 | $ | 351,999,105 | $ | 257,905,250 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares outstanding |
1,897,004 | 142,738 | 24,140,727 | 10,649,730 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net asset value |
$ | 12.29 | $ | 10.34 | $ | 14.58 | $ | 24.22 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares authorized |
Unlimited | Unlimited | 208 million | 208 million | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Par value |
$ | 0.001 | $ | 0.001 | $ | 0.0001 | $ | 0.0001 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investor P | ||||||||||||||||
| Net assets |
$ | 316,771,824 | N/A | $ | 146,759,185 | $ | 329,486,292 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares outstanding |
25,774,419 | N/A | 10,100,095 | 13,649,300 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net asset value |
$ | 12.29 | N/A | $ | 14.53 | $ | 24.14 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares authorized |
Unlimited | N/A | 2 billion | 2 billion | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Par value |
$ | 0.001 | N/A | $ | 0.0001 | $ | 0.0001 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Class K | ||||||||||||||||
| Net assets |
$ | 107,013 | $ | 41,535,801 | $ | 5,143,404,114 | $ | 1,835,474,940 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares outstanding |
8,707 | 4,018,251 | 350,116,180 | 75,647,590 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net asset value |
$ | 12.29 | $ | 10.34 | $ | 14.69 | $ | 24.26 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares authorized |
Unlimited | Unlimited | 1.208 billion | 1.208 billion | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Par value |
$ | 0.001 | $ | 0.001 | $ | 0.0001 | $ | 0.0001 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 38 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Year Ended December 31, 2020
| iShares Municipal Bond Index Fund |
iShares Short-Term |
iShares MSCI EAFE International |
iShares Russell 2000 Small-Cap Index Fund |
|||||||||||||
| INVESTMENT INCOME |
||||||||||||||||
| Dividends — unaffiliated |
$ | — | $ | — | $ | 151,562,625 | $ | — | ||||||||
| Dividends — affiliated |
24,053 | 1,997 | 36,644 | — | ||||||||||||
| Interest — unaffiliated |
9,432,115 | 511,712 | — | — | ||||||||||||
| Securities lending income — affiliated — net |
— | 17 | 582,380 | — | ||||||||||||
| Non-cash dividends — unaffiliated |
— | — | 10,435,815 | — | ||||||||||||
| Foreign taxes withheld |
— | — | (12,910,847 | ) | — | |||||||||||
| Net investment income allocated from the Master Small Cap Index Series: |
||||||||||||||||
| Dividends — unaffiliated |
— | — | — | 25,000,294 | ||||||||||||
| Dividends — affiliated |
— | — | — | 247,309 | ||||||||||||
| Interest - unaffliated |
— | — | — | 3,397 | ||||||||||||
| Securities lending income — affiliated — net |
— | — | — | 3,381,279 | ||||||||||||
| Foreign taxes withheld |
— | — | — | (48,319 | ) | |||||||||||
| Expenses |
— | — | — | (546,444 | ) | |||||||||||
| Fees waived |
— | — | — | 14,491 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total investment income | 9,456,168 | 513,726 | 149,706,617 | 28,052,007 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| EXPENSES |
||||||||||||||||
| Service — class specific |
867,969 | 2,238 | 1,115,721 | 1,225,653 | ||||||||||||
| Investment advisory |
350,086 | 3,433 | 615,945 | — | ||||||||||||
| Transfer agent — class specific |
184,492 | 11,228 | 1,079,293 | 665,134 | ||||||||||||
| Professional |
94,150 | 90,407 | 122,588 | 90,499 | ||||||||||||
| Registration |
70,867 | 54,351 | 217,809 | 108,536 | ||||||||||||
| Printing and postage |
59,459 | 36,638 | 6,483 | 31,844 | ||||||||||||
| Directors and Officer |
12,689 | 11,904 | 118,233 | 652 | ||||||||||||
| Accounting services |
9,273 | 9,272 | 88,632 | 5,069 | ||||||||||||
| Custodian |
3,500 | 1,656 | 521,145 | — | ||||||||||||
| Administration |
— | — | — | 862,255 | ||||||||||||
| Miscellaneous |
99,378 | 15,951 | 166,452 | 20,665 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses | 1,751,863 | 237,078 | 4,052,301 | 3,010,307 | ||||||||||||
| Less: |
||||||||||||||||
| Fees waived and/or reimbursed by the Administrator |
— | — | — | (142,773 | ) | |||||||||||
| Fees waived and/or reimbursed by the Manager |
(21,293 | ) | (202,957 | ) | (4,735 | ) | — | |||||||||
| Transfer agent fees waived and/or reimbursed — class specific |
(5,784 | ) | (10,328 | ) | (4,222 | ) | (303,662 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses after fees waived and/or reimbursed | 1,724,786 | 23,793 | 4,043,344 | 2,563,872 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net investment income | 7,731,382 | 489,933 | 145,663,273 | 25,488,135 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| REALIZED AND UNREALIZED GAIN (LOSS) |
||||||||||||||||
| Net realized gain (loss) from: |
||||||||||||||||
| Investments — unaffiliated |
768,181 | (17,788 | ) | (274,734,207 | ) | — | ||||||||||
| Investments — affiliated |
(1,088 | ) | — | (34,736 | ) | — | ||||||||||
| Foreign currency transactions |
— | — | (5,584,494 | ) | — | |||||||||||
| Futures contracts |
— | — | (39,641,158 | ) | — | |||||||||||
| Net realized gain (loss) allocated from the Master Small Cap Index Series from: |
||||||||||||||||
| Investments |
— | — | — | (5,372,654 | ) | |||||||||||
| Investments — affiliated |
— | — | — | 2,616,687 | ||||||||||||
| Futures contracts |
— | — | — | (872,183 | ) | |||||||||||
| Swaps |
— | — | — | (193,422 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 767,093 | (17,788 | ) | (319,994,595 | ) | (3,821,572 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| FUND FINANCIAL STATEMENTS |
39 |
Statements of Operations (continued)
Year Ended December 31, 2020
| iShares Municipal Bond Index Fund |
iShares Short-Term TIPS Bond Index Fund |
iShares MSCI Index Fund |
iShares Russell 2000 Small-Cap Index Fund |
|||||||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||||||
| Investments — unaffiliated |
$ | 7,264,357 | $ | 1,249,446 | $ | 248,185,687 | $ | — | ||||||||
| Investments — affiliated |
1,540 | — | 10,948 | — | ||||||||||||
| Foreign currency translations |
— | — | 1,376,337 | — | ||||||||||||
| Futures contracts |
— | — | 1,207,833 | — | ||||||||||||
| Net change in unrealized appreciation (depreciation) allocated from Master Small Cap Index Series on: |
||||||||||||||||
| Investments |
— | — | — | 450,228,713 | ||||||||||||
| Investments — affiliated |
— | — | — | (916,996 | ) | |||||||||||
| Futures contracts |
— | — | — | 1,464 | ||||||||||||
| Swaps |
— | — | — | 90,694 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 7,265,897 | 1,249,446 | 250,780,805 | 449,403,875 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net realized and unrealized gain (loss) |
8,032,990 | 1,231,658 | (69,213,790 | ) | 445,582,303 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 15,764,372 | $ | 1,721,591 | $ | 76,449,483 | $ | 471,070,438 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See notes to financial statements.
| 40 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Statements of Changes in Net Assets
| iShares Municipal Bond Index Fund | iShares Short-Term TIPS Bond Index Fund |
|||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||
| Net investment income |
$ | 7,731,382 | $ | 8,274,293 | $ | 489,933 | $ | 195,482 | ||||||||||||
| Net realized gain (loss) |
767,093 | 2,094,709 | (17,788 | ) | (7,264 | ) | ||||||||||||||
| Net change in unrealized appreciation |
7,265,897 | 15,580,089 | 1,249,446 | 152,930 | ||||||||||||||||
| Net increase in net assets resulting from operations |
15,764,372 | 25,949,091 | 1,721,591 | 341,148 | ||||||||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS(a) |
||||||||||||||||||||
| Institutional |
(79,249 | ) | (9,529 | ) | (161,714 | ) | (17,864 | ) | ||||||||||||
| Investor A |
(555,959 | ) | (802,085 | ) | (7,803 | ) | (12,599 | ) | ||||||||||||
| Investor P |
(7,699,970 | ) | (11,453,647 | ) | — | — | ||||||||||||||
| Class K |
(2,823 | ) | (3,816 | ) | (322,417 | ) | (165,345 | ) | ||||||||||||
| Decrease in net assets resulting from distributions to shareholders |
(8,338,001 | ) | (12,269,077 | ) | (491,934 | ) | (195,808 | ) | ||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||
| Net increase (decrease) in net assets derived from capital share transactions |
(19,069,783 | ) | (33,484,855 | ) | 40,760,633 | 14,134,110 | ||||||||||||||
| NET ASSETS |
||||||||||||||||||||
| Total increase (decrease) in net assets |
(11,643,412 | ) | (19,804,841 | ) | 41,990,290 | 14,279,450 | ||||||||||||||
| Beginning of year |
357,952,090 | 377,756,931 | 17,569,599 | 3,290,149 | ||||||||||||||||
| End of year |
$ | 346,308,678 | $ | 357,952,090 | $ | 59,559,889 | $ | 17,569,599 | ||||||||||||
(a) Distributions for annual periods determined in accordance with U.S. federal income tax regulations.
See notes to financial statements.
| FUND FINANCIAL STATEMENTS |
41 |
Statements of Changes in Net Assets (continued)
| iShares MSCI EAFE International Index Fund | iShares Russell 2000 Small-Cap Index Fund | |||||||||||||||||||
| Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||||||||||||||
| OPERATIONS |
||||||||||||||||||||
| Net investment income |
$ | 145,663,273 | $ | 258,818,758 | $ | 25,488,135 | $ | 27,526,475 | ||||||||||||
| Net realized gain (loss) |
(319,994,595 | ) | (31,601,972 | ) | (3,821,572 | ) | 35,652,447 | |||||||||||||
| Net change in unrealized appreciation |
250,780,805 | 1,356,515,995 | 449,403,875 | 380,171,158 | ||||||||||||||||
| Net increase in net assets resulting from operations |
76,449,483 | 1,583,732,781 | 471,070,438 | 443,350,080 | ||||||||||||||||
| DISTRIBUTIONS TO SHAREHOLDERS(a) |
||||||||||||||||||||
| Institutional |
(18,981,824 | ) | (28,671,489 | ) | (4,630,689 | ) | (7,506,356 | ) | ||||||||||||
| Investor A |
(6,032,650 | ) | (10,102,636 | ) | (3,073,130 | ) | (8,329,821 | ) | ||||||||||||
| Investor P |
(2,476,048 | ) | (4,447,915 | ) | (3,977,992 | ) | (9,373,153 | ) | ||||||||||||
| Class K |
(100,271,486 | ) | (224,970,295 | ) | (26,461,320 | ) | (50,010,333 | ) | ||||||||||||
| Decrease in net assets resulting from distributions to shareholders |
(127,762,008 | ) | (268,192,335 | ) | (38,143,131 | ) | (75,219,663 | ) | ||||||||||||
| CAPITAL SHARE TRANSACTIONS |
||||||||||||||||||||
| Net increase (decrease) in net assets derived from capital share transactions |
(1,539,505,451 | ) | (694,405,126 | ) | 17,181,682 | 269,152,880 | ||||||||||||||
| NET ASSETS |
||||||||||||||||||||
| Total increase (decrease) in net assets |
(1,590,817,976 | ) | 621,135,320 | 450,108,989 | 637,283,297 | |||||||||||||||
| Beginning of year |
8,237,834,988 | 7,616,699,668 | 2,304,186,789 | 1,666,903,492 | ||||||||||||||||
| End of year |
$ | 6,647,017,012 | $ | 8,237,834,988 | $ 2,754,295,778 | $ | 2,304,186,789 | |||||||||||||
(a) Distributions for annual periods determined in accordance with U.S. federal income tax regulations.
See notes to financial statements.
| 42 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
(For a share outstanding throughout each period)
| iShares Municipal Bond Index Fund | ||||||||||||||||
| Institutional | ||||||||||||||||
| Year Ended December 31, | Period from 11/19/18(a) to 12/31/18 |
|||||||||||||||
| 2020 | 2019 | |||||||||||||||
| Net asset value, beginning of period |
$ | 12.02 | $ | 11.59 | $ | 11.48 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net investment income(b) |
0.30 | 0.30 | 0.04 | |||||||||||||
| Net realized and unrealized gain |
0.29 | 0.56 | 0.14 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net increase from investment operations |
0.59 | 0.86 | 0.18 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Distributions(c) |
||||||||||||||||
| From net investment income |
(0.30 | ) | (0.30 | ) | (0.04 | ) | ||||||||||
| From net realized gain |
(0.02 | ) | (0.13 | ) | (0.03 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.32 | ) | (0.43 | ) | (0.07 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 12.29 | $ | 12.02 | $ | 11.59 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total Return(d) |
||||||||||||||||
| Based on net asset value |
4.97 | % | 7.52 | % | 1.56 | %(e) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Ratios to Average Net Assets(f) |
||||||||||||||||
| Total expenses |
0.23 | % | 0.30 | %(g) | 0.32 | %(h)(i)(j) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total expenses after fees waived and/or reimbursed |
0.22 | % | 0.23 | %(g) | 0.17 | %(h)(i)(j) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net investment income |
2.46 | % | 2.49 | % | 2.74 | %(h) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Supplemental Data |
||||||||||||||||
| Net assets, end of period (000) |
$ | 6,115 | $ | 477 | $ | 101 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Portfolio turnover rate |
8 | % | 24 | % | 3 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||
(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Distributions for annual periods determined in accordance with U.S. federal income tax regulations.
(d) Where applicable, assumes the reinvestment of distributions.
(e) Aggregate total return.
(f) Excludes expenses incurred indirectly as a result of investments in underlying funds as follows:
| Year Ended December 31, | Period from 11/19/18(a) to 12/31/18 |
|||||||||||||||
| 2020 | 2019 | |||||||||||||||
| Investments in underlying funds |
— | % | 0.01 | % | 0.01 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| (g) | Includes non-recurring expenses of offering costs. Without these costs, total expenses and total expenses after fees waived and/or reimbursed and paid indirectly would have been 0.24% and 0.23%, respectively. |
| (h) | Annualized. |
| (i) | Reorganization and offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses and total expenses after fees waived and/or reimbursed and paid indirectly would have been 0.69% and 0.21%, respectively. |
| (j) | Includes reorganization and offering costs associated with the Fund’s reorganization. Without these costs, total expenses and total expenses after fees waived and/or reimbursed and paid indirectly would have been 0.26% and 0.16%, respectively. |
See notes to financial statements.
| FUND FINANCIAL HIGHLIGHTS |
43 |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| iShares Municipal Bond Index Fund (continued) |
||||||||||||||||||||
| Investor A | ||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018(a) | 2017 | 2016(b) | ||||||||||||||||
| Net asset value, beginning of year |
$ | 12.02 | $ | 11.59 | $ | 11.81 | $ | 11.68 | $ | 11.90 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net investment income(c) |
0.27 | 0.27 | 0.39 | 0.31 | 0.28 | |||||||||||||||
| Net realized and unrealized gain (loss) |
0.29 | 0.56 | (0.25 | ) | 0.13 | (0.22 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net increase from investment operations |
0.56 | 0.83 | 0.14 | 0.44 | 0.06 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Distributions(d) |
||||||||||||||||||||
| From net investment income |
(0.27 | ) | (0.27 | ) | (0.31 | ) | (0.31 | ) | (0.28 | ) | ||||||||||
| From net realized gain |
(0.02 | ) | (0.13 | ) | (0.05 | ) | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.29 | ) | (0.40 | ) | (0.36 | ) | (0.31 | ) | (0.28 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of year |
$ | 12.29 | $ | 12.02 | $ | 11.59 | $ | 11.81 | $ | 11.68 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return(e) |
||||||||||||||||||||
| Based on net asset value |
4.70 | % | 7.24 | % | 1.24 | % | 3.83 | % | 0.48 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios to Average Net Assets(f) |
||||||||||||||||||||
| Total expenses |
0.50 | % | 0.62 | %(g) | 0.77 | %(h) | 0.56 | % | 0.56 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses after fees waived and/or reimbursed |
0.48 | % | 0.50 | %(g) | 0.41 | %(h) | 0.37 | % | 0.56 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net investment income |
2.22 | % | 2.25 | % | 3.36 | % | 2.61 | % | 2.35 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Supplemental Data |
||||||||||||||||||||
| Net assets, end of year (000) |
$ | 23,315 | $ | 23,805 | $ | 25,418 | $ | 396,544 | $ | 435,948 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Portfolio turnover rate |
8 | % | 24 | % | 3 | % | 1 | % | 8 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (a) | On November 19, 2018, State Farm Tax Advantaged Bond Fund was reorganized into the Fund. The activity in the table above is for the accounting survivor, State Farm Tax Advantaged Bond Fund Premier Class, for the periods prior to the date of the reorganization, and for the post-reorganization combined fund thereafter. |
| (b) | Effective May 23, 2016, Legacy Class A shares were renamed Premier shares. |
| (c) | Based on average shares outstanding. |
| (d) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (e) | Where applicable, assumes the reinvestment of distributions. |
| (f) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Investments in underlying funds |
— | % | 0.01 | % | 0.01 | % | — | % | — | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (g) | Includes non-recurring expenses of offering costs. Without these costs, total expenses and total expenses after fees waived and/or reimbursed and paid indirectly would have been 0.56% and 0.50%, respectively. |
| (h) | Includes reorganization and offering costs associated with the Fund’s reorganization. Without these costs, total expenses and total expenses after fees waived and/or reimbursed and paid indirectly would have been 0.70% and 0.41%, respectively. |
See notes to financial statements.
| 44 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| iShares Municipal Bond Index Fund (continued) | ||||||||||||||||||||
| Investor P | ||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||
| 2020 | 2019 | 2018(a) | 2017 | 2016(b) | ||||||||||||||||
| Net asset value, beginning of year |
$ | 12.02 | $ | 11.59 | $ | 11.81 | $ | 11.68 | $ | 11.90 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net investment income(c) |
0.27 | 0.27 | 0.39 | 0.31 | 0.28 | |||||||||||||||
| Net realized and unrealized gain (loss) |
0.29 | 0.56 | (0.25 | ) | 0.13 | (0.22 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net increase from investment operations |
0.56 | 0.83 | 0.14 | 0.44 | 0.06 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Distributions(d) |
||||||||||||||||||||
| From net investment income |
(0.27 | ) | (0.27 | ) | (0.31 | ) | (0.31 | ) | (0.28 | ) | ||||||||||
| From net realized gain |
(0.02 | ) | (0.13 | ) | (0.05 | ) | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.29 | ) | (0.40 | ) | (0.36 | ) | (0.31 | ) | (0.28 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of year |
$ | 12.29 | $ | 12.02 | $ | 11.59 | $ | 11.81 | $ | 11.68 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return(e) |
||||||||||||||||||||
| Based on net asset value |
4.69 | % | 7.25 | % | 1.24 | % | 3.83 | % | 0.48 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios to Average Net Assets(f) |
||||||||||||||||||||
| Total expenses |
0.50 | % | 0.53 | %(g) | 0.77 | %(h) | 0.56 | % | 0.56 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses after fees waived and/or reimbursed |
0.49 | % | 0.50 | %(g) | 0.41 | %(h) | 0.37 | % | 0.56 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net investment income |
2.21 | % | 2.26 | % | 3.35 | % | 2.61 | % | 2.35 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Supplemental Data |
||||||||||||||||||||
| Net assets, end of year (000) |
$ | 316,772 | $ | 333,565 | $ | 352,137 | $ | 396,544 | $ | 435,948 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Portfolio turnover rate |
8 | % | 24 | % | 3 | % | 1 | % | 8 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (a) | On November 19, 2018, State Farm Tax Advantaged Bond Fund was reorganized into the Fund. The activity in the table above is for the accounting survivor, State Farm Tax Advantaged Bond Fund Premier Class, for the periods prior to the date of the reorganization, and for the post-reorganization combined fund thereafter. |
| (b) | Effective May 23, 2016, Legacy Class A shares were renamed Premier shares. |
| (c) | Based on average shares outstanding. |
| (d) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (e) | Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions. |
| (f) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| Year Ended December 31, |
||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Investments in underlying funds |
— | % | 0.01 | % | 0.01 | % | — | % | — | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (g) | Includes non-recurring expenses of offering costs. Without these costs, total expenses and total expenses after fees waived and/or reimbursed and paid indirectly would have been 0.47% and 0.50%, respectively. |
| (h) | Includes reorganization and offering costs associated with the Fund’s reorganization. Without these costs, total expenses and total expenses after fees waived and/or reimbursed and paid indirectly would have been 0.70% and 0.41%, respectively. |
See notes to financial statements.
| FUND FINANCIAL HIGHLIGHTS |
45 |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| iShares Municipal Bond Index Fund (continued) | ||||||||||||||||
| Class K | ||||||||||||||||
| Year Ended December 31, | Period from 11/19/18(a) to 12/31/18 |
|||||||||||||||
| 2020 | 2019 | |||||||||||||||
| Net asset value, beginning of period |
$ | 12.02 | $ | 11.59 | $ | 11.48 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net investment income(b) |
0.30 | 0.30 | 0.04 | |||||||||||||
| Net realized and unrealized gain |
0.29 | 0.56 | 0.14 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net increase from investment operations |
0.59 | 0.86 | 0.18 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Distributions(c) |
||||||||||||||||
| From net investment income |
(0.30 | ) | (0.30 | ) | (0.04 | ) | ||||||||||
| From net realized gain |
(0.02 | ) | (0.13 | ) | (0.03 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.32 | ) | (0.43 | ) | (0.07 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 12.29 | $ | 12.02 | $ | 11.59 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total Return(d) |
||||||||||||||||
| Based on net asset value |
5.00 | % | 7.57 | % | 1.57 | %(e) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Ratios to Average Net Assets(f) |
||||||||||||||||
| Total expenses |
0.24 | % | 0.27 | %(g) | 0.33 | %(h)(i)(j) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total expenses after fees waived and/or reimbursed |
0.20 | % | 0.20 | %(g) | 0.16 | %(h)(i)(j) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net investment income |
2.50 | % | 2.55 | % | 2.74 | %(h) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Supplemental Data |
||||||||||||||||
| Net assets, end of period (000) |
$ | 107 | $ | 105 | $ | 101 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Portfolio turnover rate |
8 | % | 24 | % | 3 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| (a) | Commencement of operations. |
| (b) | Based on average shares outstanding. |
| (c) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (d) | Where applicable, assumes the reinvestment of distributions. |
| (e) | Aggregate total return. |
| (f) | Excludes expenses incurred indirectly as a result of investments in underlying funds as follows: |
| Year Ended December 31, |
Period from 11/19/18(a) to 12/31/18 |
|||||||||||
| 2020 | 2019 | |||||||||||
| Investments in underlying funds |
— | % | 0.01 | % | 0.01 | % | ||||||
|
|
|
|
|
|
|
|||||||
| (g) | Includes non-recurring expenses of offering costs. Without these costs, total expenses and total expenses after fees waived and/or reimbursed and paid indirectly would have been 0.21% and 0.20%, respectively. |
| (h) | Annualized. |
| (i) | Reorganization and offering costs were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses and total expenses after fees waived and/or reimbursed and paid indirectly would have been 0.70% and 0.20%, respectively. |
| (j) | Includes reorganization and offering costs associated with the Fund’s reorganization. Without these costs, total expenses and total expenses after fees waived and/or reimbursed and paid indirectly would have been 0.27% and 0.15%, respectively. |
See notes to financial statements.
| 46 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Financial Highlights (continued) (For a share outstanding throughout each period) |
| iShares Short-Term TIPS Bond Index Fund | ||||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||||
| Period from | ||||||||||||||||||||||||
| Year Ended December 31, | 02/16/16(a) | |||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | to 12/31/16 | ||||||||||||||||||||
| Net asset value, beginning of period |
$ | 9.98 | $ | 9.74 | $ | 9.95 | $ | 10.05 | $ | 10.00 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income(b) |
0.25 | 0.15 | 0.22 | 0.16 | 0.17 | |||||||||||||||||||
| Net realized and unrealized gain (loss) |
0.23 | 0.30 | (0.16 | ) | (0.08 | ) | 0.08 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net increase from investment operations |
0.48 | 0.45 | 0.06 | 0.08 | 0.25 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Distributions(c) |
||||||||||||||||||||||||
| From net investment income |
(0.16 | ) | (0.21 | ) | (0.26 | ) | (0.18 | ) | (0.19 | ) | ||||||||||||||
| From net realized gain |
(0.00 | )(d) | — | (0.01 | ) | — | (0.01 | ) | ||||||||||||||||
| Return of capital |
— | — | — | (0.00 | )(d) | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total distributions |
(0.16 | ) | (0.21 | ) | (0.27 | ) | (0.18 | ) | (0.20 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net asset value, end of period |
$ | 10.30 | $ | 9.98 | $ | 9.74 | $ | 9.95 | $ | 10.05 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total Return(e) |
||||||||||||||||||||||||
| Based on net asset value |
4.89 | % | 4.66 | % | 0.56 | % | 0.88 | % | 2.49 | %(f) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Ratios to Average Net Assets |
||||||||||||||||||||||||
| Total expenses |
0.55 | % | 3.24 | % | 4.96 | % | 5.07 | % | 18.22 | %(g)(h) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total expenses after fees waived and/or reimbursed |
0.07 | % | 0.11 | % | 0.09 | % | 0.08 | % | 0.09 | %(g) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income |
2.51 | % | 1.47 | % | 2.19 | % | 1.64 | % | 1.91 | %(g) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of period (000) |
$ | 16,549 | $ | 721 | $ | 976 | $ | 3,348 | $ | 476 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Portfolio turnover rate |
22 | % | 45 | % | 80 | % | 200 | % | 10 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Commencement of operations. |
| (b) | Based on average shares outstanding. |
| (c) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (d) | Amount is greater than $(0.005) per share. |
| (e) | Where applicable, assumes the reinvestment of distributions. |
| (f) | Aggregate total return. |
| (g) | Annualized. |
| (h) | Audit, offering and organization costs were not annualized in the calculation of expense ratios. If these expenses were annualized, the total expenses would have been 19.98%. |
See notes to financial statements.
| FUND FINANCIAL HIGHLIGHTS |
47 |
| Financial Highlights (continued) (For a share outstanding throughout each period) |
|
| iShares Short-Term TIPS Bond Index Fund (continued) | ||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||
| Period from | ||||||||||||||||||||||
| Year Ended December 31, | 02/16/16(a) | |||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | to 12/31/16 | ||||||||||||||||||
| Net asset value, beginning of period |
$ | 9.97 | $ | 9.74 | $ | 9.95 | $ | 10.04 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net investment income(b) |
0.07 | 0.19 | 0.20 | 0.14 | 0.16 | |||||||||||||||||
| Net realized and unrealized gain (loss) |
0.39 | 0.23 | (0.18 | ) | (0.07 | ) | 0.06 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net increase from investment operations |
0.46 | 0.42 | 0.02 | 0.07 | 0.22 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Distributions(c) |
||||||||||||||||||||||
| From net investment income |
(0.09 | ) | (0.19 | ) | (0.22 | ) | (0.16 | ) | (0.17 | ) | ||||||||||||
| From net realized gain |
(0.00 | )(d) | — | (0.01 | ) | — | (0.01 | ) | ||||||||||||||
| Return of capital |
— | — | — | |
(0.00 |
)(d) |
— | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.09 | ) | (0.19 | ) | (0.23 | ) | (0.16 | ) | (0.18 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 10.34 | $ | 9.97 | $ | 9.74 | $ | 9.95 | $ | 10.04 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Return(e) |
||||||||||||||||||||||
| Based on net asset value |
4.64 | % | 4.39 | % | 0.22 | % | 0.76 | % | 2.18 | %(f) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios to Average Net Assets |
||||||||||||||||||||||
| Total expenses |
1.18 | % | 3.36 | % | 6.40 | % | 6.24 | % | 20.84 | %(g)(h) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total expenses after fees waived and/or reimbursed |
0.36 | % | 0.36 | % | 0.36 | % | 0.36 | % | 0.36 | %(g) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net investment income |
0.71 | % | 1.94 | % | 2.00 | % | 1.35 | % | 1.81 | %(g) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Supplemental Data |
||||||||||||||||||||||
| Net assets, end of period (000) |
$ | 1,475 | $ | 737 | $ | 526 | $ | 256 | $ | 62 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Portfolio turnover rate |
22 | % | 45 | % | 80 | % | 200 | % | 10 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (a) | Commencement of operations. |
| (b) | Based on average shares outstanding. |
| (c) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (d) | Amount is greater than $(0.005) per share. |
| (e) | Where applicable, assumes the reinvestment of distributions. |
| (f) | Aggregate total return. |
| (g) | Annualized. |
| (h) | Audit, offering and organization costs were not annualized in the calculation of expense ratios. If these expenses were annualized, the total expenses would have been 22.90%. |
See notes to financial statements.
| 48 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Financial Highlights (continued) (For a share outstanding throughout each period) |
|
| iShares Short-Term TIPS Bond Index Fund (continued) | ||||||||||||||||||||||
| Class K | ||||||||||||||||||||||
| Period from | ||||||||||||||||||||||
| Year Ended December 31, | 02/16/16(a) | |||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | to 12/31/16 | ||||||||||||||||||
| Net asset value, beginning of period |
$ | 9.98 | $ | 9.76 | $ | 9.95 | $ | 10.05 | $ | 10.00 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net investment income(b) |
0.12 | 0.25 | 0.31 | 0.25 | 0.19 | |||||||||||||||||
| Net realized and unrealized gain (loss) |
0.36 | 0.21 | (0.25 | ) | (0.16 | ) | 0.06 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net increase from investment operations |
0.48 | 0.46 | 0.06 | 0.09 | 0.25 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Distributions(c) |
||||||||||||||||||||||
| From net investment income |
(0.12 | ) | (0.24 | ) | (0.24 | ) | (0.19 | ) | (0.19 | ) | ||||||||||||
| From net realized gain |
|
(0.00 |
)(d) |
— | (0.01 | ) | — | (0.01 | ) | |||||||||||||
| Return of capital |
— | — | — | |
(0.00 |
)(d) |
— | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total distributions |
(0.12 | ) | (0.24 | ) | (0.25 | ) | (0.19 | ) | (0.20 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net asset value, end of period |
$ | 10.34 | $ | 9.98 | $ | 9.76 | $ | 9.95 | $ | 10.05 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total Return(e) |
||||||||||||||||||||||
| Based on net asset value |
4.87 | % | 4.72 | % | 0.60 | % | 0.89 | % | 2.52 | %(f) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Ratios to Average Net Assets |
||||||||||||||||||||||
| Total expenses |
0.71 | % | 2.14 | % | 5.80 | % | 2.82 | % | 20.61 | %(g)(h) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total expenses after fees waived and/or reimbursed |
0.06 | % | 0.06 | % | 0.06 | % | 0.06 | % | 0.06 | %(g) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net investment income |
1.17 | % | 2.55 | % | 3.13 | % | 2.45 | % | 2.17 | %(g) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Supplemental Data |
||||||||||||||||||||||
| Net assets, end of period (000) |
$ | 41,536 | $ | 16,112 | $ | 1,788 | $ | 1,138 | $ | 904 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Portfolio turnover rate |
22 | % | 45 | % | 80 | % | 200 | % | 10 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (a) | Commencement of operations. |
| (b) | Based on average shares outstanding. |
| (c) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (d) | Amount is greater than $(0.005) per share. |
| (e) | Where applicable, assumes the reinvestment of distributions. |
| (f) | Aggregate total return. |
| (g) | Annualized. |
| (h) | Audit, offering and organization costs were not annualized in the calculation of expense ratios. If these expenses were annualized, the total expenses would have been 22.68%. |
See notes to financial statements.
| FUND FINANCIAL HIGHLIGHTS |
49 |
| Financial Highlights (continued) (For a share outstanding throughout each period) |
|
| iShares MSCI EAFE International Index Fund | ||||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
| Net asset value, beginning of year |
$ | 13.86 | $ | 11.76 | $ | 14.18 | $ | 11.60 | $ | 11.81 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income(a) |
0.30 | 0.42 | 0.42 | 0.39 | 0.28 | |||||||||||||||||||
| Net realized and unrealized gain (loss)(b) |
0.81 | 2.14 | (2.31 | ) | 2.53 | (0.16 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net increase (decrease) from investment operations |
1.11 | 2.56 | (1.89 | ) | 2.92 | 0.12 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Distributions(c) |
||||||||||||||||||||||||
| From net investment income |
(0.29 | ) | (0.46 | ) | (0.53 | ) | (0.34 | ) | (0.33 | ) | ||||||||||||||
| Return of capital |
— | — | (0.00 | )(d) | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total distributions |
(0.29 | ) | (0.46 | ) | (0.53 | ) | (0.34 | ) | (0.33 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net asset value, end of year |
$ | 14.68 | $ | 13.86 | $ | 11.76 | $ | 14.18 | $ | 11.60 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total Return(e) |
||||||||||||||||||||||||
| Based on net asset value |
8.03 | % | 21.80 | % | (13.37 | )% | 25.24 | % | 0.99 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Ratios to Average Net Assets |
||||||||||||||||||||||||
| Total expenses |
0.09 | % | 0.08 | % | 0.11 | %(f)(g) | 0.09 | % | 0.15 | %(h)(i) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total expenses after fees waived and/or reimbursed |
0.09 | % | 0.08 | % | 0.10 | %(f)(g) | 0.09 | % | 0.11 | %(h)(i) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income |
2.35 | % | 3.23 | % | 3.02 | %(f) | 2.92 | % | 2.44 | %(h)(i) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of year (000) |
$ | 1,004,855 | $ | 876,551 | $ | 753,659 | $ | 705,986 | $ | 649,763 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Portfolio turnover rate |
8 | % | 4 | % | 43 | % | 23 | % | 42 | %(j) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Based on average shares outstanding. |
| (b) | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| (c) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (d) | Amount is greater than $(0.005) per share. |
| (e) | Where applicable, assumes the reinvestment of distributions. |
| (f) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
| (g) | Includes reorganization costs, offering and board reorganization and consolidation expenses associated with the Fund’s reorganization. Without these expenses, total expenses and total expenses after fees waived and/or reimbursed would have been 0.10% and 0.09% respectively. |
| (h) | Includes the Fund’s share of the Master International Index’s allocated expenses and/or net investment income. |
| (i) | Includes the Fund’s share of the Master International Index’s allocated fees waived of 0.16%. |
| (j) | Portfolio turnover rate includes transactions from Master International Index prior to August 1, 2016. |
See notes to financial statements.
| 50 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| iShares MSCI EAFE International Index Fund (continued) | ||||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
| Net asset value, beginning of year |
$ | 13.78 | $ | 11.69 | $ | 14.09 | $ | 11.54 | $ | 11.75 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income(a) |
0.27 | 0.39 | 0.38 | 0.34 | 0.32 | |||||||||||||||||||
| Net realized and unrealized gain (loss)(b) |
0.78 | 2.12 | (2.28 | ) | 2.52 | (0.23 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net increase (decrease) from investment operations |
1.05 | 2.51 | (1.90 | ) | 2.86 | 0.09 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Distributions(c) |
||||||||||||||||||||||||
| From net investment income |
(0.25 | ) | (0.42 | ) | (0.50 | ) | (0.31 | ) | (0.30 | ) | ||||||||||||||
| Return of capital |
— | — | (0.00 | )(d) | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total distributions |
(0.25 | ) | (0.42 | ) | (0.50 | ) | (0.31 | ) | (0.30 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net asset value, end of year |
$ | 14.58 | $ | 13.78 | $ | 11.69 | $ | 14.09 | $ | 11.54 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total Return(e) |
||||||||||||||||||||||||
| Based on net asset value |
7.68 | % | 21.53 | % | (13.57 | )% | 24.84 | % | 0.78 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Ratios to Average Net Assets |
||||||||||||||||||||||||
| Total expenses |
0.35 | % | 0.35 | % | 0.36 | %(f)(g) | 0.36 | % | 0.38 | %(h)(i) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total expenses after fees waived and/or reimbursed |
0.35 | % | 0.35 | % | 0.36 | %(f)(g) | 0.35 | % | 0.37 | %(h)(i) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income |
2.11 | % | 3.00 | % | 2.74 | %(f) | 2.60 | % | 2.78 | %(h)(i) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of year (000) |
$ | 351,999 | $ | 340,750 | $ | 305,043 | $ | 373,846 | $ | 238,053 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Portfolio turnover rate |
8 | % | 4 | % | 43 | % | 23 | % | 42 | %(j) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Based on average shares outstanding. |
| (b) | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| (c) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (d) | Amount is greater than $(0.005) per share. |
| (e) | Where applicable, assumes the reinvestment of distributions. |
| (f) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
| (g) | Includes reorganization costs, offering and board reorganization and consolidation expenses associated with the Fund’s reorganization. Without these expenses, total expenses and total expenses after fees waived and/or reimbursed would have been 0.36% and 0.35% respectively. |
| (h) | Includes the Fund’s share of the Master International Index’s allocated expenses and/or net investment income. |
| (i) | Includes the Fund’s share of the Master International Index’s allocated fees waived of 0.39%. |
| (j) | Portfolio turnover rate includes transactions from Master International Index prior to August 1, 2016. |
See notes to financial statements.
| FUND FINANCIAL HIGHLIGHTS |
51 |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| iShares MSCI EAFE International Index Fund (continued) | ||||||||||||||||
| Investor P | ||||||||||||||||
| Year Ended December 31, | Period from 08/06/18(a) to 12/31/18 |
|||||||||||||||
| 2020 | 2019 | |||||||||||||||
| Net asset value, beginning of period |
$ | 13.73 | $ | 11.65 | $ | 13.87 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net investment income(b) |
0.26 | 0.39 | 0.01 | |||||||||||||
| Net realized and unrealized gain (loss)(c) |
0.79 | 2.11 | (1.70 | ) | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net increase (decrease) from investment operations |
1.05 | 2.50 | (1.69 | ) | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Distributions(d) |
||||||||||||||||
| From net investment income |
(0.25 | ) | (0.42 | ) | (0.53 | ) | ||||||||||
| Return of capital |
— | — | (0.00 | )(e) | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.25 | ) | (0.42 | ) | (0.53 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 14.53 | $ | 13.73 | $ | 11.65 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total Return(f) |
||||||||||||||||
| Based on net asset value |
7.68 | % | 21.51 | % | (12.25 | )%(g) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Ratios to Average Net Assets |
||||||||||||||||
| Total expenses |
0.37 | % | 0.39 | % | 0.33 | %(h)(i)(j) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total expenses after fees waived and/or reimbursed |
0.37 | % | 0.36 | % | 0.32 | %(i)(j) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net investment income |
2.08 | % | 2.97 | % | 0.23 | %(i) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Supplemental Data |
||||||||||||||||
| Net assets, end of period (000) |
$ | 146,759 | $ | 149,612 | $ | 137,266 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Portfolio turnover rate |
8 | % | 4 | % | 43 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| (a) | Commencement of operations. |
| (b) | Based on average shares outstanding. |
| (c) | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| (d) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (e) | Amount is greater than $(0.005) per share. |
| (f) | Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions. |
| (g) | Aggregate total return. |
| (h) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
| (i) | Annualized. |
| (j) | Reorganization costs, offering and board realignment and consolidation expenses were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses and total expenses after fees waived and/or reimbursed would have been 0.34% and 0.33% respectively. |
See notes to financial statements.
| 52 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| iShares MSCI EAFE International Index Fund (continued) | ||||||||||||||||||||||||
| Class K | ||||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
| Net asset value, beginning of year |
$ | 13.87 | $ | 11.76 | $ | 14.18 | $ | 11.61 | $ | 11.82 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income(a) |
0.31 | 0.43 | 0.43 | 0.38 | 0.38 | |||||||||||||||||||
| Net realized and unrealized gain (loss)(b) |
0.80 | 2.14 | (2.31 | ) | 2.54 | (0.26 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net increase (decrease) from investment operations |
1.11 | 2.57 | (1.88 | ) | 2.92 | 0.12 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Distributions(c) |
||||||||||||||||||||||||
| From net investment income |
(0.29 | ) | (0.46 | ) | (0.54 | ) | (0.35 | ) | (0.33 | ) | ||||||||||||||
| Return of capital |
— | — | (0.00 | )(d) | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total distributions |
(0.29 | ) | (0.46 | ) | (0.54 | ) | (0.35 | ) | (0.33 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net asset value, end of year |
$ | 14.69 | $ | 13.87 | $ | 11.76 | $ | 14.18 | $ | 11.61 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total Return(e) |
||||||||||||||||||||||||
| Based on net asset value |
8.07 | % | 21.94 | % | (13.33 | )% | 25.17 | % | 1.03 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Ratios to Average Net Assets |
||||||||||||||||||||||||
| Total expenses |
0.04 | % | 0.03 | % | 0.06 | %(f)(g) | 0.06 | % | 0.07 | %(h)(i) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total expenses after fees waived and/or reimbursed |
0.04 | % | 0.03 | % | 0.05 | %(f)(g) | 0.06 | % | 0.07 | %(h)(i) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income |
2.39 | % | 3.28 | % | 3.12 | %(f) | 2.80 | % | 3.25 | %(h)(i) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of year (000) |
$ | 5,143,404 | $ | 6,870,922 | $ | 6,420,732 | $ | 9,509,257 | $ | 4,042,470 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Portfolio turnover rate |
8 | % | 4 | % | 43 | % | 23 | % | 42 | %(j) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Based on average shares outstanding. |
| (b) | The amounts reported for a share outstanding may not accord with the change in aggregate gains and losses in securities for the fiscal period due to the timing of capital share transactions in relation to the fluctuating market values of the Fund’s underlying securities. |
| (c) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (d) | Amount is greater than $(0.005) per share. |
| (e) | Where applicable, assumes the reinvestment of distributions. |
| (f) | Excludes expenses incurred indirectly as a result of investments in underlying funds of 0.01%. |
| (g) | Includes reorganization costs, offering and board reorganization and consolidation expenses associated with the Fund’s reorganization. Without these expenses, total expenses and total expenses after fees waived and/or reimbursed would have been 0.05% and 0.04% respectively. |
| (h) | Includes the Fund’s share of the Master International Index’s allocated expenses and/or net investment income. |
| (i) | Includes the Fund’s share of the Master International Index’s allocated fees waived of 0.08%. |
| (j) | Portfolio turnover rate includes transactions from Master International Index prior to August 1, 2016. |
See notes to financial statements.
| FUND FINANCIAL HIGHLIGHTS |
53 |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| iShares Russell 2000 Small-Cap Index Fund | ||||||||||||||||||||||||
| Institutional | ||||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
| Net asset value, beginning of year |
$ | 20.46 | $ | 16.87 | $ | 19.72 | $ | 17.76 | $ | 15.32 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income(a) |
0.23 | 0.27 | 0.28 | 0.25 | 0.23 | |||||||||||||||||||
| Net realized and unrealized gain (loss) |
3.84 | 4.02 | (2.40 | ) | 2.34 | 3.03 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net increase (decrease) from investment operations |
4.07 | 4.29 | (2.12 | ) | 2.59 | 3.26 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Distributions(b) |
||||||||||||||||||||||||
| From net investment income |
(0.25 | ) | (0.28 | ) | (0.20 | ) | (0.21 | ) | (0.22 | ) | ||||||||||||||
| From net realized gain |
(0.09 | ) | (0.42 | ) | (0.53 | ) | (0.42 | ) | (0.60 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total distributions |
(0.34 | ) | (0.70 | ) | (0.73 | ) | (0.63 | ) | (0.82 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net asset value, end of year |
$ | 24.19 | $ | 20.46 | $ | 16.87 | $ | 19.72 | $ | 17.76 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total Return(c) |
||||||||||||||||||||||||
| Based on net asset value |
19.97 | % | 25.50 | % | (10.94 | )% | 14.55 | % | 21.33 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Ratios to Average Net Assets(d)(e) |
||||||||||||||||||||||||
| Total expenses |
0.16 | % | 0.16 | % | 0.18 | %(f) | 0.18 | % | 0.19 | %(g) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total expenses after fees waived and/or reimbursed |
0.12 | % | 0.12 | % | 0.12 | %(f) | 0.11 | % | 0.14 | %(g) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income |
1.22 | % | 1.38 | % | 1.38 | % | 1.36 | % | 1.44 | %(g) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of year (000) |
$ | 331,429 | $ | 227,381 | $ | 200,990 | $ | 167,351 | $ | 229,491 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Portfolio turnover rate of the Series |
27 | % | 20 | % | 28 | % | 30 | % | 39 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Based on average Common Shares outstanding. |
| (b) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (c) | Where applicable, assumes the reinvestment of distributions. |
| (d) | Includes the Fund’s share of the Series’ allocated expenses and/or net investment income. |
| (e) | Includes the Fund’s share of the Series’ allocated fees waived of less than 0.01%. |
| (f) | Includes reorganization costs, offering and board reorganization and consolidation expenses associated with the Fund’s reorganization. Without these expenses, total expenses and total expenses after fees waived and/or reimbursed would have been 0.16% and 0.10% respectively. |
| (g) | Excludes expenses incurred indirectly of 0.01% as a result of the Series’ investments in underlying funds. |
See notes to financial statements.
| 54 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| iShares Russell 2000 Small-Cap Index Fund (continued) | ||||||||||||||||||||||||
| Investor A | ||||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
| Net asset value, beginning of year |
$ | 20.49 | $ | 16.89 | $ | 19.74 | $ | 17.78 | $ | 15.34 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income(a) |
0.17 | 0.22 | 0.22 | 0.21 | 0.18 | |||||||||||||||||||
| Net realized and unrealized gain (loss) |
3.85 | 4.03 | (2.40 | ) | 2.34 | 3.03 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net increase (decrease) from investment operations |
4.02 | 4.25 | (2.18 | ) | 2.55 | 3.21 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Distributions(b) |
||||||||||||||||||||||||
| From net investment income |
(0.20 | ) | (0.23 | ) | (0.14 | ) | (0.17 | ) | (0.17 | ) | ||||||||||||||
| From net realized gain |
(0.09 | ) | (0.42 | ) | (0.53 | ) | (0.42 | ) | (0.60 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total distributions |
(0.29 | ) | (0.65 | ) | (0.67 | ) | (0.59 | ) | (0.77 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net asset value, end of year |
$ | 24.22 | $ | 20.49 | $ | 16.89 | $ | 19.74 | $ | 17.78 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total Return(c) |
||||||||||||||||||||||||
| Based on net asset value |
19.66 | % | 25.20 | % | (11.19 | )% | 14.35 | % | 21.04 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Ratios to Average Net Assets(d)(e) |
||||||||||||||||||||||||
| Total expenses |
0.41 | % | 0.42 | % | 0.43 | %(f) | 0.45 | % | 0.49 | %(g) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total expenses after fees waived and/or reimbursed |
0.37 | % | 0.37 | % | 0.37 | %(f) | 0.37 | % | 0.41 | %(g) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income |
0.93 | % | 1.14 | % | 1.08 | % | 1.13 | % | 1.14 | %(g) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Supplemental Data |
||||||||||||||||||||||||
| Net assets, end of year (000) |
$ | 257,905 | $ | 273,413 | $ | 254,591 | $ | 249,980 | $ | 116,722 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Portfolio turnover rate of the Series |
27 | % | 20 | % | 28 | % | 30 | % | 39 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Based on average Common Shares outstanding. |
| (b) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (c) | Where applicable, assumes the reinvestment of distributions. |
| (d) | Includes the Fund’s share of the Series’ allocated expenses and/or net investment income. |
| (e) | Includes the Fund’s share of the Series’ allocated fees waived of less than 0.01%. |
| (f) | Includes reorganization costs, offering and board reorganization and consolidation expenses associated with the Fund’s reorganization. Without these expenses, total expenses and total expenses after fees waived and/or reimbursed would have been 0.41% and 0.35% respectively. |
| (g) | Excludes expenses incurred indirectly of 0.01% as a result of the Series’ investments in underlying funds. |
See notes to financial statements.
| FUND FINANCIAL HIGHLIGHTS |
55 |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| iShares Russell 2000 Small-Cap Index Fund (continued) | ||||||||||||||||
| Investor P | ||||||||||||||||
| Year Ended December 31, | Period from 08/06/18(a) to 12/31/18 |
|||||||||||||||
| 2020 | 2019 | |||||||||||||||
| Net asset value, beginning of period |
$ | 20.43 | $ | 16.84 | $ | 21.76 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net investment income(b) |
0.18 | 0.22 | 0.17 | |||||||||||||
| Net realized and unrealized gain (loss) |
3.82 | 4.02 | (4.38 | ) | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net increase (decrease) from investment operations |
4.00 | 4.24 | (4.21 | ) | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Distributions(c) |
||||||||||||||||
| From net investment income |
(0.20 | ) | (0.23 | ) | (0.19 | ) | ||||||||||
| From net realized gain |
(0.09 | ) | (0.42 | ) | (0.52 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.29 | ) | (0.65 | ) | (0.71 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net asset value, end of period |
$ | 24.14 | $ | 20.43 | $ | 16.84 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total Return(d) |
||||||||||||||||
| Based on net asset value |
19.65 | % | 25.25 | % | (19.49 | )%(e) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Ratios to Average Net Assets(f)(g) |
||||||||||||||||
| Total expenses |
0.41 | % | 0.40 | % | 0.39 | %(h)(i)(j) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Total expenses after fees waived and/or reimbursed |
0.37 | % | 0.36 | % | 0.35 | %(h)(i)(j) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net investment income |
0.95 | % | 1.14 | % | 2.12 | %(h) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Supplemental Data |
||||||||||||||||
| Net assets, end of period (000) |
$ | 329,486 | $ | 301,163 | $ | 265,393 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Portfolio turnover rate of the Series |
27 | % | 20 | % | 28 | % | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| (a) | Commencement of operations. |
| (b) | Based on average Common Shares outstanding. |
| (c) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (d) | Where applicable, excludes the effects of any sales charges and assumes the reinvestment of distributions. |
| (e) | Aggregate total return. |
| (f) | Includes the Fund’s share of the Series’ allocated expenses and/or net investment income. |
| (g) | Includes the Fund’s share of the Series’ allocated fees waived of less than 0.01%. |
| (h) | Annualized. |
| (i) | Includes reorganization costs, offering and board reorganization and consolidation expenses associated with the Fund’s reorganization. Without these expenses, total expenses and total expenses after fees waived and/or reimbursed would have been 0.38% and 0.35% respectively. |
| (j) | Reorganization costs, offering and board realignment and consolidation expenses were not annualized in the calculation of the expense ratios. If these expenses were annualized, the total expenses and total expenses after fees waived and/or reimbursed would have been 0.40% and 0.37% respectively. |
See notes to financial statements.
| 56 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Financial Highlights (continued)
(For a share outstanding throughout each period)
| iShares Russell 2000 Small-Cap Index Fund (continued) | ||||||||||||||||||||||||
| Class K | ||||||||||||||||||||||||
| Year Ended December 31, | ||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||
| Net asset value, beginning of year |
$ | 20.52 | $ | 16.91 | $ | 19.77 | $ | 17.79 | $ | 15.35 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net investment income(a) |
0.24 | 0.28 | 0.30 | 0.27 | 0.24 | |||||||||||||||||||
| Net realized and unrealized gain (loss) |
3.85 | 4.04 | (2.43 | ) | 2.34 | 3.02 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net increase (decrease) from investment operations |
4.09 | 4.32 | (2.13 | ) | 2.61 | 3.26 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Distributions(b) |
||||||||||||||||||||||||
| From net investment income |
(0.26 | ) | (0.29 | ) | (0.20 | ) | (0.21 | ) | (0.22 | ) | ||||||||||||||
| From net realized gain |
(0.09 | ) | (0.42 | ) | (0.53 | ) | (0.42 | ) | (0.60 | ) | ||||||||||||||
|
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|
|
|
|
|
|
|
|
|||||||||||||||
| Total distributions |
(0.35 | ) | (0.71 | ) | (0.73 | ) | (0.63 | ) | (0.82 | ) | ||||||||||||||
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| Net asset value, end of year |
$ | 24.26 | $ | 20.52 | $ | 16.91 | $ | 19.77 | $ | 17.79 | ||||||||||||||
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|||||||||||||||
| Total Return(c) |
||||||||||||||||||||||||
| Based on net asset value |
20.00 | % | 25.62 | % | (10.93 | )% | 14.69 | % | 21.32 | % | ||||||||||||||
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|||||||||||||||
| Ratios to Average Net Assets(d)(e) |
||||||||||||||||||||||||
| Total expenses |
0.08 | % | 0.08 | % | 0.11 | %(f) | 0.14 | % | 0.17 | % | ||||||||||||||
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|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total expenses after fees waived and/or reimbursed |
0.07 | % | 0.07 | % | 0.07 | %(f) | 0.07 | % | 0.10 | %(g) | ||||||||||||||
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|
|
|||||||||||||||
| Net investment income |
1.26 | % | 1.44 | % | 1.44 | % | 1.40 | % | 1.48 | %(g) | ||||||||||||||
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| Supplemental Data |
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| Net assets, end of year (000) |
$ | 1,835,475 | $ | 1,502,229 | $ | 945,929 | $ | 474,830 | $ | 60,086 | ||||||||||||||
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| Portfolio turnover rate of the Series |
27 | % | 20 | % | 28 | % | 30 | % | 39 | % | ||||||||||||||
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| (a) | Based on average Common Shares outstanding. |
| (b) | Distributions for annual periods determined in accordance with U.S. federal income tax regulations. |
| (c) | Where applicable, assumes the reinvestment of distributions. |
| (d) | Includes the Fund’s share of the Series’ allocated expenses and/or net investment income. |
| (e) | Includes the Fund’s share of the Series’ allocated fees waived of less than 0.01%. |
| (f) | Includes reorganization costs, offering and board reorganization and consolidation expenses associated with the Fund’s reorganization. Without these expenses, total expenses and total expenses after fees waived and/or reimbursed would have been 0.10% and 0.05% respectively. |
| (g) | Excludes expenses incurred indirectly of 0.01% as a result of the Series’ investments in underlying funds. |
See notes to financial statements.
| FUND FINANCIAL HIGHLIGHTS |
57 |
1. ORGANIZATION
BlackRock FundsSM (the “Trust”) and BlackRock Index Funds, Inc. (the “Corporation”), are each registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as open-end management investment companies. BlackRock FundsSM is organized as a Massachusetts business trust. BlackRock Index Funds, Inc. is organized as a Maryland corporation. The following, each of which is a series of one of BlackRock FundsSM or BlackRock Index Funds, Inc., are referred to herein collectively as the “Funds” or individually as a “Fund”:
| Registrant Name | Fund Name | Herein Referred To As | Diversification Classification | |||||||
| BlackRock FundsSM |
iShares Municipal Bond Index Fund | Municipal Bond Index | Diversified | |||||||
| iShares Short-Term TIPS Bond Index Fund | Short-Term TIPS Bond Index | Diversified | ||||||||
| BlackRock Index Funds, Inc. |
iShares MSCI EAFE International Index Fund | International Index | Diversified | |||||||
| iShares Russell 2000 Small-Cap Index Fund | Small Cap Index | Diversified |
Small Cap Index seeks to achieve its investment objective by investing all of its assets in Master Small Cap Index Series (the “Series”), a series of Quantitative Master Series LLC (the “Master LLC”), and an affiliate of Small Cap Index, which has the same investment objective and strategies as Small Cap Index. The value of Small Cap Index’s investment in the Series reflects Small Cap Index’s proportionate interest in the net assets of the Series. The performance of Small Cap Index is directly affected by the performance of the Series. At December 31, 2020, the percentage of the Series owned by Small Cap Index was 70.72%. The financial statements of the Series, including the Schedule of Investments, are included elsewhere in this report and should be read in conjunction with Small Cap Index’s financial statements.
Each Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that certain classes bear expenses related to the shareholder servicing and distribution of such shares. Institutional and Class K Shares are sold only to certain eligible investors. Investor A and Investor P Shares bear certain expenses related to shareholder servicing of such shares. Investor A Shares are generally available through financial intermediaries. Investor P Shares are only available through registered representatives of an insurance company’s broker-dealer that has entered into an agreement with the Fund’s distributor to offer such shares. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures.
| Share Class | Initial Sales Charge | CDSC | Conversion Privilege | |||||||||
| Institutional, Investor A and Class K Shares |
No | No | None | |||||||||
| Investor P Shares |
Yes | No | (a) | None | ||||||||
| (a) | Investor P Shares may be subject to a contingent deferred sales charge (“CDSC”) for certain redemptions where no initial sales charge was paid at the time of purchase. |
The Board of Trustees of the Trust and the Board of Directors of the Corporation are collectively referred to throughout this report as the “Board”, and the directors/trustees thereof are collectively referred to throughout this report as “Directors”.
The Funds, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, are included in a complex of equity, multi-asset, index and money market funds referred to as the BlackRock Multi-Asset Complex.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:
Investment Transactions and Income Recognition: For Municipal Bond Index, Short-Term TIPS Bond Index and International Index, for financial reporting purposes, investment transactions are recorded on the dates the transactions are executed (the “trade dates”). Realized gains and losses on investment transactions are determined using the specific identification method. Dividend income and capital gain distributions, if any, are recorded on the ex-dividend date. Non-cash dividends, if any, are recorded on the ex-dividend date at fair value. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when International Index is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, a portion of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain. Interest income, including amortization and accretion of premiums and discounts on debt securities. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
For Small Cap Index, for financial reporting purposes, contributions to and withdrawals from the Series are accounted for on a trade date basis. Small Cap Index records its proportionate share of the Series’ income, expenses and realized and unrealized gains and losses on a daily basis. In addition, Small Cap Index accrues its own expenses. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.
Foreign Currency Translation: Each Fund’s books and records are maintained in U.S. dollars. Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates determined as of the close of trading on the New York Stock Exchange (“NYSE”). Purchases and sales of investments are recorded at the rates of exchange prevailing on the respective dates of such transactions. Generally, when the U.S. dollar rises in value against a foreign currency, the investments denominated in that currency will lose value; the opposite effect occurs if the U.S. dollar falls in relative value.
| 58 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Notes to Financial Statements (continued) |
Each Fund does not isolate the effect of fluctuations in foreign exchange rates from the effect of fluctuations in the market prices of investments for financial reporting purposes. Accordingly, the effects of changes in exchange rates on investments are not segregated in the Statements of Operations from the effects of changes in market prices of those investments, but are included as a component of net realized and unrealized gain (loss) from investments. Each Fund reports realized currency gains (losses) on foreign currency related transactions as components of net realized gain (loss) for financial reporting purposes, whereas such components are generally treated as ordinary income for U.S. federal income tax purposes.
Foreign Taxes: The International Index may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Fund invests. These foreign taxes, if any, are paid by the Fund and are reflected in its Statements of Operations as follows: foreign taxes withheld at source are presented as a reduction of income, foreign taxes on securities lending income are presented as a reduction of securities lending income, foreign taxes on stock dividends are presented as “Foreign taxes withheld”, and foreign taxes on capital gains from sales of investments and foreign taxes on foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable or deferred as of December 31, 2020, if any, are disclosed in the Statements of Assets and Liabilities.
Segregation and Collateralization: In cases where a Fund enters into certain investments (e.g., futures contracts) that would be treated as “senior securities” for 1940 Act purposes, a Fund may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Funds may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.
Distributions: Distributions paid by International Index and Small Cap Index are recorded on the ex-dividend date. Distributions from net investment income for Municipal Bond Index and Short-Term TIPS Bond Index are declared daily and paid monthly. Distributions of capital gains are recorded on the ex-dividend date and made at least annually. The character and timing of distributions are determined in accordance with U.S. federal income tax regulations, which may differ from U.S. GAAP.
Indemnifications: In the normal course of business, a Fund enters into contracts that contain a variety of representations that provide general indemnification. A Fund’s maximum exposure under these arrangements is unknown because it involves future potential claims against a Fund, which cannot be predicted with any certainty.
Other: Expenses directly related to a Fund or its classes are charged to that Fund or the applicable class. Expenses directly related to the Funds and other shared expenses prorated to the Funds are allocated daily to each class based on their relative net assets or other appropriate methods. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.
| 3. | INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS |
Investment Valuation Policies: Each Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) each day that the Fund is open for business and, for financial reporting purposes, as of the report date. U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. Each Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board. If a security’s market price is not readily available or does not otherwise accurately represent the fair value of the security, the security will be valued in accordance with a policy approved by the Board as reflecting fair value. Small Cap Index’s policy is to value its financial instruments at fair value. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments. Small Cap Index records its investment in the Series at fair value based on the Small Cap Index’s proportionate interest in the net assets of the Series. Valuation of securities held by the Series is discussed in Note 3 of the Series’ Notes to Financial Statements, which are included elsewhere in this report.
Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of each Fund’s assets and liabilities:
| • | Equity investments traded on a recognized securities exchange are valued at that day’s official closing price, as applicable, on the exchange where the stock is primarily traded. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price. |
Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the NYSE. Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be reflected in the computation of the Funds’ net assets. Each business day, the Funds use a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.
| • | Fixed-income investments for which market quotations are readily available are generally valued using the last available bid price or current market quotations provided by independent dealers or third party pricing services. Floating rate loan interests are valued at the mean of the bid prices from one or more independent brokers or dealers as obtained from a third party pricing service. Pricing services generally value fixed-income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. The pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values, including transaction data (e.g., recent representative bids and offers), market data, credit quality information, perceived market movements, news, and other relevant information. Certain fixed-income securities, including asset-backed and mortgage related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines such method does not represent fair value. |
| FUND NOTES TO FINANCIAL STATEMENTS |
59 |
Notes to Financial Statements (continued)
| • | Investments in open-end U.S. mutual funds (including money market funds) are valued at that day’s published net asset value (“NAV”). |
| • | Futures contracts are valued based on that day’s last reported settlement price on the exchange where the contract is traded. |
If events (e.g., a market closure, market volatility, company announcement or a natural disaster) occur that are expected to materially affect the value of such investment, or in the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that each Fund might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.
For investments in equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by the Global Valuation Committee and third party pricing services utilize one or a combination of, but not limited to, the following inputs.
| Standard Inputs Generally Considered By Third Party Pricing Services | ||||
| Market approach |
(i) | recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers; | ||
| (ii) | recapitalizations and other transactions across the capital structure; and | |||
| (iii) | market multiples of comparable issuers. | |||
| Income approach |
(i) | future cash flows discounted to present and adjusted as appropriate for liquidity, credit, and/or market risks; | ||
| (ii) | quoted prices for similar investments or assets in active markets; and | |||
| (iii) | other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. | |||
| Cost approach |
(i) | audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company; | ||
| (ii) | changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company; | |||
| (iii) | relevant news and other public sources; and | |||
| (iv) | known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company. | |||
Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”), a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.
The Private Companies are not subject to the public company disclosure, timing, and reporting standards applicable to other investments held by a Fund. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date a Fund is calculating its NAV. This factor may result in a difference between the value of the investment and the price a Fund could receive upon the sale of the investment.
Fair Value Hierarchy: Various inputs are used in determining the fair value of financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial reporting purposes as follows:
| • | Level 1 – Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that each Fund has the ability to access; |
| • | Level 2 – Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs); and |
| • | Level 3 – Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Global Valuation Committee’s assumptions used in determining the fair value of financial instruments). |
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by Private Companies that may not have a secondary market and/or may have a limited number of investors. The categorization of a value determined for financial instruments is based on the pricing transparency of the financial instruments and is not necessarily an indication of the risks associated with investing in those securities.
| 60 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
| 4. | SECURITIES AND OTHER INVESTMENTS |
Inflation-Indexed Bonds: Inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) are fixed-income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds (other than municipal inflation-indexed and certain corporate inflation-indexed bonds) will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statements of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal. With regard to municipal inflation-indexed bonds and certain corporate inflation-indexed bonds, the inflation adjustment is typically reflected in the semi-annual coupon payment. As a result, the principal value of municipal inflation-indexed bonds and such corporate inflation-indexed bonds does not adjust according to the rate of inflation.
Zero-Coupon Bonds: Zero-coupon bonds are normally issued at a significant discount from face value and do not provide for periodic interest payments. These bonds may experience greater volatility in market value than other debt obligations of similar maturity which provide for regular interest payments.
Preferred Stocks: Preferred stock has a preference over common stock in liquidation (and generally in receiving dividends as well), but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.
Forward Commitments, When-Issued and Delayed Delivery Securities: Certain Funds may purchase securities on a when-issued basis and may purchase or sell securities on a forward commitment basis. Settlement of such transactions normally occurs within a month or more after the purchase or sale commitment is made. A Fund may purchase securities under such conditions with the intention of actually acquiring them, but may enter into a separate agreement to sell the securities before the settlement date. Since the value of securities purchased may fluctuate prior to settlement, a Fund may be required to pay more at settlement than the security is worth. In addition, a Fund is not entitled to any of the interest earned prior to settlement. When purchasing a security on a delayed delivery basis, a Fund assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations. In the event of default by the counterparty, a Fund’s maximum amount of loss is the unrealized appreciation of unsettled when-issued transactions.
Securities Lending: Certain Funds may lend their securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Funds collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by each Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Funds are entitled to all distributions made on or in respect of the loaned securities, but do not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The market value of any securities on loan, all of which were classified as common stocks in the Funds’ Schedules of Investments, and the value of any related collateral are shown separately in the Statements of Assets and Liabilities as a component of investments at value - unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedules of Investments.
Securities lending transactions are entered into by the Funds under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Funds, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and a Fund can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.
As of period end, the following table is a summary of the International Index securities on loan by counterparty which are subject to offset under an MSLA:
| Counterparty |
|
Securities Loaned at Value |
|
|
Cash Collateral Received |
(a) |
|
Net Amount |
(b) | |||
| BofA Securities, Inc. |
$ | 687,744 | $ | (687,744 | ) | $ | — | |||||
| Credit Suisse Securities (USA) LLC |
36,670 | (36,670 | ) | — | ||||||||
| Goldman Sachs & Co. |
5,780,754 | (5,780,754 | ) | — | ||||||||
| HSBC Bank PLC |
5,075,073 | (5,075,073 | ) | — |
| FUND NOTES TO FINANCIAL STATEMENTS |
61 |
Notes to Financial Statements (continued)
| Counterparty |
|
Securities Loaned at Value |
|
|
Cash Collateral Received |
(a) |
|
Net Amount |
(b) | |||
| Morgan Stanley & Co. LLC |
$ | 16,109,114 | $ | (15,905,547 | ) | $ | 203,567 | |||||
| National Financial Services LLC |
2,249,640 | (2,249,640 | ) | — | ||||||||
|
|
|
|
|
|
|
|||||||
| $ | 29,938,995 | $ | (29,735,428 | ) | $ | 203,567 | ||||||
|
|
|
|
|
|
|
| (a) | Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received by each Fund is disclosed in the Fund’s Statement of Assets and Liabilities. |
| (b) | The market value of the loaned securities is determined as of December 31, 2020. Additional collateral is delivered to each Fund on the next business day in accordance with the MSLA. The net amount would be subject to the borrower default indemnity in the event of default by the counterparty. |
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities loaned to the extent the collateral received does not cover the value on the securities loaned in the event of borrower default. Each Fund could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received. Such losses are borne entirely by the Funds.
| 5. | DERIVATIVE FINANCIAL INSTRUMENTS |
The Funds engage in various portfolio investment strategies using derivative contracts both to increase the returns of the Funds and/or to manage their exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedules of Investments. These contracts may be transacted on an exchange or OTC.
Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk) and changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).
Futures contracts are exchange-traded agreements between the Funds and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Funds are required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts in the Statements of Assets and Liabilities.
Securities deposited as initial margin are designated in the Schedules of Investments and cash deposited, if any, are shown as cash pledged for futures contracts in the Statements of Assets and Liabilities. Pursuant to the contract, the Funds agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statements of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statements of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest rates, foreign currency exchange rates or underlying assets.
| 6. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Investment Advisory: Each of the Trust and the Corporation, on behalf of the Funds, entered into an Investment Advisory Agreement with the Manager, the Funds’ investment adviser and an indirect, wholly-owned subsidiary of BlackRock, Inc. (“BlackRock”), to provide investment advisory and administrative services. The Manager is responsible for the management of each Fund’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of each Fund.
For such services, each Fund pays the Manager a monthly fee at an annual rate equal to the following percentages of the average daily value of each Fund’s net assets.
| Municipal Bond Index | Short-Term TIPS Bond Index | International Index | ||||||||||
| Investment advisory fees |
0.10 | % | 0.01 | % | 0.01 | % | ||||||
Service Fees: The Funds entered into a Distribution Agreement and a Distribution and Service Plan with BlackRock Investments, LLC (“BRIL”), an affiliate of the Manager. Pursuant to the Distribution and Service Plan and in accordance with Rule 12b-1 under the 1940 Act, each Fund pays BRIL ongoing service and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the relevant share class of each Fund as follows:
| Municipal Bond Index |
Short-Term TIPS Bond Index |
International Index |
Small Cap Index | |||||||||||||
| Share Class | Service Fees | Distribution Fees | Service Fees | Distribution Fees | Service Fees | Distribution Fees | Service Fees | Distribution Fees | ||||||||
| Investor A |
0.25% | N/A | 0.25% | N/A | 0.25% | N/A | 0.25% | N/A | ||||||||
| Investor P |
0.25 | N/A | N/A | N/A | 0.25 | N/A | 0.25 | N/A | ||||||||
BRIL and broker-dealers, pursuant to sub-agreements with BRIL, provide shareholder servicing and distribution services to the Funds. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to shareholders.
| 62 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
For the year ended December 31, 2020, the following table shows the class specific service and distribution fees borne directly by each share class of each Fund:
| Fund Name | Investor A | Investor P | Total | |||||||||
| Municipal Bond Index |
$ | 58,090 | $ | 809,879 | $ | 867,969 | ||||||
| Short-Term TIPS Bond Index |
2,238 | — | 2,238 | |||||||||
| International Index |
786,290 | 329,431 | 1,115,721 | |||||||||
| Small Cap Index |
563,930 | 661,723 | 1,225,653 | |||||||||
Administration: The Corporation, on behalf of Small Cap Index, entered into an Administration Agreement with BlackRock Advisors, LLC (the “Administrator”), an indirect, wholly-owned subsidiary of Blackrock, to provide administrative services (other than investment advice and related portfolio activities). For such services, Small Cap Index pays the Administrator a monthly fee at an annual rate of 0.04% of the average daily net assets of Small Cap Index. Small Cap Index does not pay an investment advisory fee or investment management fee.
Transfer Agent: Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Funds with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to servicing of underlying investor accounts. For these services, these entities receive an asset-based fee or an annual fee per shareholder account, which will vary depending on share class and/or net assets. For the year ended December 31, 2020, the Funds did not pay any amounts to affiliates in return for these services.
The Manager maintains a call center that is responsible for providing certain shareholder services to the Funds. Shareholder services include responding to inquiries and processing purchases and sales based upon instructions from shareholders. For the year ended December 31, 2020, each Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statements of Operations:
| Fund Name | Institutional | Investor A | Investor P | Class K | Total | |||||||||||||||
| Municipal Bond Index |
$ | 17 | $ | 4,888 | $ | 999 | $ | 12 | $ | 5,916 | ||||||||||
| Short-Term TIPS Bond Index |
9 | 418 | — | 301 | 728 | |||||||||||||||
| International Index |
4,551 | 16,144 | 2,256 | 14,785 | 37,736 | |||||||||||||||
| Small Cap Index |
4,516 | 22,864 | 3,048 | 3,815 | 34,243 | |||||||||||||||
For the year ended December 31, 2020, the following table shows the class specific transfer agent fees borne directly by each share class of each Fund:
| Fund Name | Institutional | Investor A | Investor P | Class K | Total | |||||||||||||||
| Municipal Bond Index |
$ | 919 | $ | 12,754 | $ | 170,777 | $ | 42 | $ | 184,492 | ||||||||||
| Short-Term TIPS Bond Index |
624 | 2,028 | — | 8,576 | 11,228 | |||||||||||||||
| International Index |
488,874 | 207,960 | 118,321 | 264,138 | 1,079,293 | |||||||||||||||
| Small Cap Index |
180,794 | 199,188 | 207,735 | 77,417 | 665,134 | |||||||||||||||
Other Fees: For the year ended December 31, 2020, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of each Fund’s Investor P Shares as follows:
| Fund Name | Investor P | |||
| Municipal Bond Index |
$ | 14,698 | ||
| International Index |
9,079 | |||
| Small Cap Index |
16,746 | |||
Expense Limitations, Waivers, Reimbursements, and Recoupments: The Manager contractually agreed to waive its investment advisory fees by the amount of investment advisory fees each Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”) through April 30, 2021 with respect to International Index and Short-Term TIPS Bond Index Fund and through April 30, 2022 with respect to iShares Municipal Bond Index. The contractual agreement may be terminated upon 90 days’ notice by a majority of the directors who are not “interested persons” of the Trust or the Corporation, as defined in the 1940 Act (“Independent Directors”), or by a vote of a majority of the outstanding voting securities of a Fund. The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitations described below will be reduced by the amount of the affiliated money market fund waiver. These amounts are included in fees waived and/or reimbursed by the Manager in the Statements of Operations. For the year ended December 31, 2020, the amounts waived were as follows:
| Fund Name | Amounts Waived | |||
| Municipal Bond Index |
$ | 4,628 | ||
| Short-Term TIPS Bond Index |
449 | |||
| International Index |
4,735 | |||
The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of each Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2021 with respect to International Index and Short-Term TIPS Bond Index Fund and through April 30, 2022 with respect to iShares Municipal Bond Index. The contractual agreement may be terminated upon 90 days’ notice by a majority of the Independent Trustees, or by a vote of a majority of the outstanding voting securities of a Fund. For the year ended December 31, 2020, there were no fees waived and/or reimbursed by the Manager pursuant to this arrangement.
| FUND NOTES TO FINANCIAL STATEMENTS |
63 |
Notes to Financial Statements (continued)
The Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of each Fund’s business (“expense limitation”). The expense limitations as a percentage of average daily net assets are as follows:
| Fund Name | Institutional | Investor A | Investor P | Class K | ||||||||||||
| Municipal Bond Index |
0.25 | % | 0.50 | % | 0.50 | % | 0.20 | % | ||||||||
| Short-Term TIPS Bond Index |
0.11 | 0.36 | — | 0.06 | ||||||||||||
| International Index |
0.12 | 0.37 | 0.37 | 0.07 | ||||||||||||
| Small Cap Index |
0.12 | 0.37 | 0.37 | 0.07 | ||||||||||||
The Manager has agreed not to reduce or discontinue these contractual expense limitations through April 30, 2021 with respect to International Index, Small-Cap Index Fund and Short-Term TIPS Bond Index Fund and through April 30, 2022 with respect to iShares Municipal Bond Index, unless approved by the Board, including a majority of the Independent Directors, or by a vote of a majority of the outstanding voting securities of a Fund. For the year ended December 31, 2020, amounts included in the Statements of Operations were as follows:
| Fund Name | Amounts Waived | |||
| Municipal Bond Index |
$ | 16,665 | ||
| Short-Term TIPS Bond Index |
202,508 | |||
| Small Cap Index |
142,773 | |||
In addition, these amounts waived and/or reimbursed by the Manager are included in in the Statements of Operations. For the year ended December 31, 2020, class specific expense waivers and/or reimbursements are as follows:
| Transfer Agent Fees Waived and/or Reimbursed - Class Specific | ||||||||||||||||||||
| Fund Name | Institutional | Investor A | Investor P | Class K | Total | |||||||||||||||
| Municipal Bond Index |
$ | 37 | $ | 3,359 | $ | 2,353 | $ | 35 | $ | 5,784 | ||||||||||
| Short-Term TIPS Bond Index |
173 | 1,581 | — | 8,574 | 10,328 | |||||||||||||||
| International Index |
— | — | 4,222 | — | 4,222 | |||||||||||||||
| Small Cap Index |
65,832 | 86,225 | 75,194 | 76,411 | 303,662 | |||||||||||||||
With respect to the contractual expense limitation, if during a Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Manager, are less than the current expense limitation for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of: (a) the amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement and (b) an amount not to exceed either the current expense limitation of that share class or the expense limitation of the share class in effect at the time that the share class received the applicable waiver and/or reimbursement, provided that:
(1) each Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year, and
(2) the Manager or an affiliate continues to serve as a Fund’s investment adviser or administrator.
This repayment applies only to the contractual expense limitation on net expenses and does not apply to the contractual investment advisory fee waiver described above or any voluntary waivers that may be in effect from time to time. Effective February 16, 2023 for Short-Term TIPS Bond Index and November 16, 2025 for Municipal Bond Index, the repayment arrangement between each Fund and the Manager pursuant to which such Fund may be required to repay amounts waived and/or reimbursed under each Fund’s contractual caps on net expenses will be terminated.
As of December 31, 2020, the fund level and class specific waivers and/or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:
| Expiring | ||||||||
| Fund Name/Fund Level/Share Class | December 31, 2021 | December 31, 2022 | ||||||
| Municipal Bond Index |
||||||||
| Fund Level |
$ | 117,994 | $ | 16,665 | ||||
| Institutional |
15 | 37 | ||||||
| Investor A |
20,437 | 3,359 | ||||||
| Investor P |
7,174 | 2,353 | ||||||
| Class K |
38 | 35 | ||||||
| Short-Term TIPS Bond Index |
||||||||
| Fund Level |
178,375 | 202,508 | ||||||
| Institutional |
713 | 173 | ||||||
| Investor A |
1,410 | 1,581 | ||||||
| Class K |
3,831 | 8,574 | ||||||
| 64 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
The following fund level and class specific waivers and/or reimbursements previously recorded by the Funds, which were subject to recoupment by the Manager, expired on December 31, 2020:
| Fund Name/Fund Level/Share Class | Expired December 31, 2020 |
|||
| Municipal Bond Index |
||||
| Fund Level |
$ | 42,710 | ||
| Institutional |
— | |||
| Investor A |
— | |||
| Class K |
— | |||
| Investor P |
— | |||
| Short-Term TIPS Bond Index |
||||
| Fund Level |
176,815 | |||
| Institutional |
851 | |||
| Investor A |
993 | |||
| Class K |
824 | |||
Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the Funds, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The Funds are responsible for fees in connection with the investment of cash collateral received for securities on loan (the “collateral investment fees”). The cash collateral is invested in a money market fund, BlackRock Cash Funds: Institutional or BlackRock Cash Funds: Treasury, managed by the Manager or its affiliates. However, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees the Funds bear to an annual rate of 0.04%. The SL Agency Shares of such money market fund will not be subject to a sales load, distribution fee or service fee. The money market fund in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value redeemed or temporarily restrict redemptions for up to 10 business days during a 90 day period, in the event that the money market fund’s weekly liquid assets fall below certain thresholds.
Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. Each Fund retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent.
Pursuant to the current securities lending agreement, each Fund retains 75% of securities lending income (which excludes collateral investment fees), and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
In addition, commencing the business day following the date that the aggregate securities lending income earned across the BlackRock Multi-Asset Complex in a calendar year exceeds a specified threshold, each Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income in an amount equal to 80% of securities lending income (which excludes collateral investment fees), and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
The share of securities lending income earned by each Fund is shown as securities lending income — affiliated – net in the Statements of Operations. For the year ended December 31, 2020, each Fund paid BTC the following amounts for securities lending agent services:
| Fund Name | Amounts | |||
| Short-Term TIPS Bond Index |
$ | 7 | ||
| International Index |
130,951 | |||
Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, each Fund may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by each Fund’s investment policies and restrictions. Each Fund is currently permitted to borrow and lend under the Interfund Lending Program.
A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.
| FUND NOTES TO FINANCIAL STATEMENTS |
65 |
Notes to Financial Statements (continued)
During the year ended December 31, 2020, the Funds did not participate in the Interfund Lending Program.
Directors and Officers: Certain directors and/or officers of the Trust and the Corporation are directors and/or officers of BlackRock or its affiliates. The Funds reimburse the Manager for a portion of the compensation paid to the Trust’s and the Corporation’s Chief Compliance Officer, which is included in Directors and Officer in the Statements of Operations.
Other Transactions: International Index may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common directors. For the year ended December 31, 2020, the purchase and sale transactions and any net realized gains (losses) with affiliated funds in compliance with Rule 17a-7 under the 1940 Act were as follows:
| Fund Name | Purchases | Sales | Net Realized Gain (Loss) |
|||||||||
| International Index |
$ | 49,704,282 | $ | 161,286,509 | $ | (21,512,362) | ||||||
| 7. | PURCHASES AND SALES |
For the year ended December 31, 2020, purchases and sales of investments, excluding short-term investments, were as follows:
| Fund Name | Purchases | Sales | ||||||
| Municipal Bond Index |
$ | 28,223,586 | $ | 42,157,976 | ||||
| Short-Term TIPS Bond Index |
44,161,514 | 6,889,919 | ||||||
| International Index |
518,182,699 | 2,128,982,733 | ||||||
| 8. | INCOME TAX INFORMATION |
It is each Fund’s policy to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies, and to distribute substantially all of its taxable income to its shareholders. Therefore, no U.S. federal income tax provision is required.
Each Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on each Fund’s U.S. federal tax returns generally remains open for a period of three fiscal years after they are filed. The statutes of limitations on each Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.
Management has analyzed tax laws and regulations and their application to the Funds as of December 31, 2020, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Funds’ financial statements.
The tax character of distributions paid was as follows:
| Periods | Municipal Bond Index | Short-Term TIPS Bond Index |
International Index | Small Cap Index | ||||||||||||||||
| Tax-exempt income(a) |
12/31/20 | $ | 7,767,473 | $ | — | $ | — | $ | — | |||||||||||
| 12/31/19 | 8,272,140 | — | — | — | ||||||||||||||||
| Ordinary income |
12/31/20 | 11,616 | 491,934 | 127,762,008 | 33,976,890 | |||||||||||||||
| 12/31/19 | 414,246 | 195,808 | 268,192,335 | 41,020,154 | ||||||||||||||||
| Long-term capital gains |
12/31/20 | 558,912 | — | — | 4,166,241 | |||||||||||||||
| 12/31/19 | 3,582,691 | — | — | 34,199,509 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
12/31/20 | $ | 8,338,001 | $ | 491,934 | $ | 127,762,008 | $ | 38,143,131 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| 12/31/19 | $ | 12,269,077 | $ | 195,808 | $ | 268,192,335 | $ | 75,219,663 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| (a) | The Funds designate these amounts paid during the fiscal year ended December 31, 2020, as exempt-interest dividends. |
As of period end, the tax components of accumulated earnings (loss) were as follows:
| Municipal Bond Index | Short-Term TIPS Bond Index | International Index | Small Cap Index | |||||||||||||
| Undistributed tax-exempt income |
$ | 234,496 | $ | — | $ | — | $ | — | ||||||||
| Undistributed ordinary income |
— | 4,796 | 14,088,526 | 12,166,426 | ||||||||||||
| Undistributed long-term capital gains |
214,216 | — | — | — | ||||||||||||
| Non-expiring capital loss carryforwards(a) |
— | (80,825 | ) | (938,565,731 | ) | — | ||||||||||
| Net unrealized gains(b) |
27,508,146 | 1,320,299 | 1,635,136,358 | 706,843,305 | ||||||||||||
| Qualified late-year losses(c) |
— | — | — | (9,268,993 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 27,956,858 | $ | 1,244,270 | $ | 710,659,153 | $ | 709,740,738 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | Amounts available to offset future realized capital gains. |
| (b) | The difference between book-basis and tax-basis net unrealized gains (losses) was attributable primarily to the timing of income recognition on partnership interests, amortization methods on fixed income securities, the tax deferral of losses on wash sales, the realization for tax purposes of unrealized gains / (losses) on certain futures and foreign currency contracts, and the realization for tax purposes of unrealized gains on investments in passive foreign investment companies. |
| 66 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Notes to Financial Statements (continued) |
| (c) | The Fund has elected to defer certain qualified late-year losses and recognize such losses in the next taxable period. |
As of December 31, 2020, gross unrealized appreciation and depreciation based on cost of investments (including short positions and derivatives, if any) for U.S. federal income tax purposes were as follows:
| Municipal Bond Index | Short-Term TIPS Bond Index | International Index | ||||||||||
| Tax cost |
$ | 315,623,177 | $ | 58,824,976 | $ | 5,005,267,031 | ||||||
|
|
|
|
|
|
|
|||||||
| Gross unrealized appreciation |
$ | 27,543,448 | $ | 1,324,535 | $ | 2,163,881,774 | ||||||
| Gross unrealized depreciation |
(35,302 | ) | (4,236 | ) | (530,776,332 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net unrealized appreciation (depreciation) |
$ | 27,508,146 | $ | 1,320,299 | $ | 1,633,105,442 | ||||||
|
|
|
|
|
|
|
|||||||
| 9. | BANK BORROWINGS |
The Trust and the Corporation, on behalf of the Funds, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.25 billion credit agreement with a group of lenders. Under this agreement, the Funds may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Funds, can borrow up to an aggregate commitment amount of $1.75 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.10% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2021 unless extended or renewed. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2020, the Funds did not borrow under the credit agreement.
| 10. | PRINCIPAL RISKS |
In the normal course of business, certain Funds invest in securities or other instruments and may enter into certain transactions, and such activities subject each Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the Funds and their investments. Each Fund’s prospectus provides details of the risks to which each Fund is subject.
Short-Term TIPS Bond Index and International Index may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00, which may be subject to redemption gates or liquidity fees under certain circumstances.
Market Risk: Municipal Bond Index and Short-Term TIPS Bond Index may be exposed to prepayment risk, which is the risk that borrowers may exercise their option to prepay principal earlier than scheduled during periods of declining interest rates, which would force each Fund to reinvest in lower yielding securities. Municipal Bond Index and Short-Term TIPS Bond Indexmay also be exposed to reinvestment risk, which is the risk that income from each Fund’s portfolio will decline if each Fund invests the proceeds from matured, traded or called fixed-income securities at market interest rates that are below each Fund portfolio’s current earnings rate.
Municipal securities are subject to the risk that litigation, legislation or other political events, local business or economic conditions, credit rating downgrades, or the bankruptcy of the issuer could have a significant effect on an issuer’s ability to make payments of principal and/or interest or otherwise affect the value of such securities. Municipal securities can be significantly affected by political or economic changes, including changes made in the law after issuance of the securities, as well as uncertainties in the municipal market related to, taxation, legislative changes or the rights of municipal security holders, including in connection with an issuer insolvency. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the discontinuance of the tax benefits supporting the project or assets or the inability to collect revenues for the project or from the assets. Municipal securities may be less liquid than taxable bonds, and there may be less publicly available information on the financial condition of municipal security issuers than for issuers of other securities.
An outbreak of respiratory disease caused by a novel coronavirus has developed into a global pandemic and has resulted in closing borders, quarantines, disruptions to supply chains and customer activity, as well as general concern and uncertainty. The impact of this pandemic, and other global health crises that may arise in the future, could affect the economies of many nations, individual companies and the market in general in ways that cannot necessarily be foreseen at the present time. This pandemic may result in substantial market volatility and may adversely impact the prices and liquidity of a fund’s investments. The duration of this pandemic and its effects cannot be determined with certainty.
Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. A Fund may invest in illiquid investments. An illiquid investment is any investment that a Fund reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. A Fund may experience difficulty in selling illiquid investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause each Fund’s NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of a Fund may lose value, regardless of the individual results of the securities and other instruments in which a Fund invests.
| FUND NOTES TO FINANCIAL STATEMENTS |
67 |
Notes to Financial Statements (continued)
The price a Fund could receive upon the sale of any particular portfolio investment may differ from a Fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation technique or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore a Fund’s results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by a Fund, and a Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. A Fund’s ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.
Counterparty Credit Risk: The Funds may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions, including making timely interest and/or principal payments or otherwise honoring its obligations. The Funds manage counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Funds to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Funds’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statements of Assets and Liabilities, less any collateral held by the Funds.
A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
With exchange-traded futures and centrally cleared swaps, there is less counterparty credit risk to the Funds since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, a Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures and centrally cleared swaps with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Funds.
Concentration Risk: A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within certain Fund’s portfolio are disclosed in its Schedule of Investments.
Certain Funds invest a significant portion of their assets in securities within a single or limited number of market sectors. When a Fund concentrates its investments in this manner, it assumes the risk that economic, regulatory, political and social conditions affecting such sectors may have a significant impact on the Fund and could affect the income from, or the value or liquidity of, the Fund’s portfolio. Investment percentages in specific sectors are presented in the Schedules of Investments.
Certain Funds invest a significant portion of their assets in fixed-income securities and/or use derivatives tied to the fixed-income markets. Changes in market interest rates or economic conditions may affect the value and/or liquidity of such investments. Interest rate risk is the risk that prices of bonds and other fixed-income securities will increase as interest rates fall and decrease as interest rates rise. The Funds may be subject to a greater risk of rising interest rates due to the current period of historically low rates.
Certain Funds invest a substantial amount of their assets in issuers located in a single country or a limited number of countries. When a Fund concentrates its investments in this manner, it assumes the risk that economic, regulatory, political and social conditions in those countries may have a significant impact on their investment performance and could affect the income from, or the value or liquidity of, the Fund’s portfolio. Foreign issuers may not be subject to the same uniform accounting, auditing and financial reporting standards and practices as used in the United States. Foreign securities markets may also be more volatile and less liquid than U.S. securities and may be less subject to governmental supervision not typically associated with investing in U.S. securities. Investment percentages in specific countries are presented in the Schedules of Investments.
Certain Funds invest a significant portion of their assets in securities of issuers located in Europe or with significant exposure to European issuers or countries. The European financial markets have recently experienced volatility and adverse trends due to concerns about economic downturns in, or rising government debt levels of, several European countries. These events may spread to other countries in Europe and may affect the value and liquidity of certain of the Funds’ investments.
Responses to the financial problems by European governments, central banks and others, including austerity measures and reforms, may not work, may result in social unrest and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructurings by governments and others of their debt could have additional adverse effects on economies, financial markets and asset valuations around the world. In addition, the United Kingdom has withdrawn from the European Union, and one or more other countries may withdraw from the European Union and/or abandon the Euro, the common currency of the European Union. The impact of these actions, especially if they occur in a disorderly fashion, is not clear but could be significant and far reaching.
Certain Funds invest a significant portion of their assets in securities of issuers located in Asia or with significant exposure to Asian issuers or countries. The Asian financial markets have recently experienced volatility and adverse trends due to concerns in several Asian countries regarding monetary policy, government intervention in the markets, rising government debt levels or economic downturns. These events may spread to other countries in Asia and may affect the value and liquidity of certain of the Funds’ investments.
LIBOR Transition Risk: The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (“LIBOR”) by the end of 2021, and it is expected that LIBOR will cease to be published after that time. The Funds may be exposed to financial instruments tied to LIBOR to determine payment obligations, financing terms, hedging strategies or investment value. The transition process away from LIBOR might lead to increased volatility and illiquidity in markets for, and reduce the effectiveness of new hedges placed against, instruments whose terms currently include LIBOR. The ultimate effect of the LIBOR transition process on the Funds is uncertain.
| 68 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
| 11. | CAPITAL SHARE TRANSACTIONS |
Transactions in capital shares for each class were as follows:
| Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||
| Fund Name / Share Class | Shares | Amounts | Shares | Amounts | ||||||||||||
| Municipal Bond Index |
||||||||||||||||
| Institutional |
||||||||||||||||
| Shares sold |
527,852 | $ | 6,373,345 | 56,252 | $ | 675,622 | ||||||||||
| Shares issued in reinvestment of distributions |
6,176 | 75,290 | 471 | 5,666 | ||||||||||||
| Shares redeemed |
(76,103 | ) | (912,767 | ) | (25,729 | ) | (307,228 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 457,925 | $ | 5,535,868 | 30,994 | $ | 374,060 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investor A |
||||||||||||||||
| Shares sold |
249,370 | $ | 3,026,784 | 457,962 | $ | 5,459,767 | ||||||||||
| Shares issued in reinvestment of distributions |
39,734 | 482,349 | 59,619 | 714,672 | ||||||||||||
| Shares redeemed |
(372,148 | ) | (4,458,279 | ) | (730,665 | ) | (8,702,488 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (83,044 | ) | $ | (949,146 | ) | (213,084 | ) | $ | (2,528,049 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investor P |
||||||||||||||||
| Shares sold |
1,241,638 | $ | 14,991,034 | 974,925 | $ | 11,635,316 | ||||||||||
| Shares issued in reinvestment of distributions |
631,465 | 7,663,856 | 955,630 | 11,455,907 | ||||||||||||
| Shares redeemed |
(3,844,076 | ) | (46,311,395 | ) | (4,568,302 | ) | (54,422,089 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1,970,973 | ) | $ | (23,656,505 | ) | (2,637,747 | ) | $ | (31,330,866 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Class K |
||||||||||||||||
| Shares sold |
— | $ | — | — | $ | — | ||||||||||
| Shares issued in reinvestment of distributions |
— | — | — | — | ||||||||||||
| Shares redeemed |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| — | $ | — | — | $ | — | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1,596,092 | ) | $ | (19,069,783 | ) | (2,819,837 | ) | $ | (33,484,855 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||
| Fund Name / Share Class | Shares | Amounts | Shares | Amounts | ||||||||||||
| Short-Term TIPS Bond Index |
||||||||||||||||
| Institutional |
||||||||||||||||
| Shares sold |
1,538,927 | $ | 15,651,855 | 73,179 | $ | 726,771 | ||||||||||
| Shares issued in reinvestment of distributions |
15,764 | 160,899 | 1,693 | 16,821 | ||||||||||||
| Shares redeemed |
(20,028 | ) | (197,981 | ) | (102,826 | ) | (1,020,515 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 1,534,663 | $ | 15,614,773 | (27,954 | ) | $ | (276,923 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investor A |
||||||||||||||||
| Shares sold |
105,697 | $ | 1,079,056 | 31,689 | $ | 314,229 | ||||||||||
| Shares issued in reinvestment of distributions |
708 | 7,134 | 1,156 | 11,470 | ||||||||||||
| Shares redeemed |
(37,518 | ) | (378,343 | ) | (12,993 | ) | (128,981 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 68,887 | $ | 707,847 | 19,852 | $ | 196,718 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Class K |
||||||||||||||||
| Shares sold |
3,597,381 | $ | 36,446,814 | 1,911,631 | $ | 18,982,928 | ||||||||||
| Shares issued in reinvestment of distributions |
30,909 | 312,634 | 14,352 | 142,600 | ||||||||||||
| Shares redeemed |
(1,224,848 | ) | (12,321,435 | ) | (494,430 | ) | (4,911,213 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 2,403,442 | $ | 24,438,013 | 1,431,553 | $ | 14,214,315 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 4,006,992 | $ | 40,760,633 | 1,423,451 | $ | 14,134,110 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||||||||||
| Fund Name / Share Class | Shares | Amounts | Shares | Amounts | ||||||||||||||||||||
| International Index |
||||||||||||||||||||||||
| Institutional |
||||||||||||||||||||||||
| Shares sold |
36,055,673 | $ | 432,943,808 | 20,331,613 | $ | 265,429,037 | ||||||||||||||||||
| Shares issued in reinvestment of distributions |
1,213,193 | 17,385,549 | 1,921,999 | 26,216,064 | ||||||||||||||||||||
| Shares redeemed |
(32,041,822 | ) | (387,367,687 | ) | (23,125,321 | ) | (302,728,751 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| 5,227,044 | $ | 62,961,670 | (871,709 | ) | $ | (11,083,650 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| FUND NOTES TO FINANCIAL STATEMENTS |
69 |
Notes to Financial Statements (continued)
| Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||
| Fund Name / Share Class (continued) | Shares | Amounts | Shares | Amounts | ||||||||||||
| International Index (continued) |
||||||||||||||||
| Investor A |
||||||||||||||||
| Shares sold |
10,068,833 | $ | 124,413,156 | 10,905,246 | $ | 141,651,440 | ||||||||||
| Shares issued in reinvestment of distributions |
421,138 | 5,991,136 | 740,537 | 10,041,682 | ||||||||||||
| Shares redeemed |
(11,084,750 | ) | (139,444,486 | ) | (13,013,797 | ) | (169,434,000 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (594,779 | ) | $ | (9,040,194 | ) | (1,368,014 | ) | $ | (17,740,878 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investor P |
||||||||||||||||
| Shares sold |
539,569 | $ | 6,667,907 | 674,405 | $ | 8,730,993 | ||||||||||
| Shares issued in reinvestment of distributions |
174,418 | 2,472,469 | 328,784 | 4,441,874 | ||||||||||||
| Shares redeemed |
(1,511,779 | ) | (18,866,767 | ) | (1,890,213 | ) | (24,460,763 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (797,792 | ) | $ | (9,726,391 | ) | (887,024 | ) | $ | (11,287,896 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Class K |
||||||||||||||||
| Shares sold |
86,478,810 | $ | 1,086,784,228 | 87,821,428 | $ | 1,145,861,059 | ||||||||||
| Shares issued in reinvestment of distributions |
6,757,548 | 96,913,800 | 15,942,879 | 217,620,304 | ||||||||||||
| Shares redeemed |
(238,407,702 | ) | (2,767,398,564 | ) | (154,236,643 | ) | (2,017,774,065 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (145,171,344 | ) | $ | (1,583,700,536 | ) | (50,472,336 | ) | $ | (654,292,702 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (141,336,871 | ) | $ | (1,539,505,451 | ) | (53,599,083 | ) | $ | (694,405,126 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Year Ended 12/31/20 |
Year Ended 12/31/19 |
|||||||||||||||
| Fund Name / Share Class | Shares | Amounts | Shares | Amounts | ||||||||||||
| Small Cap Index |
||||||||||||||||
| Institutional |
||||||||||||||||
| Shares sold |
7,274,334 | $ | 131,368,583 | 3,592,601 | $ | 69,580,751 | ||||||||||
| Shares issued in reinvestment of distributions |
196,130 | 4,588,006 | 368,502 | 7,425,324 | ||||||||||||
| Shares redeemed |
(4,882,192 | ) | (88,356,989 | ) | (4,766,212 | ) | (91,979,972 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 2,588,272 | $ | 47,599,600 | (805,109 | ) | $ | (14,973,897 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investor A |
||||||||||||||||
| Shares sold |
3,519,232 | $ | 64,827,304 | 4,247,146 | $ | 82,378,182 | ||||||||||
| Shares issued in reinvestment of distributions |
129,265 | 3,018,237 | 404,884 | 8,170,561 | ||||||||||||
| Shares redeemed |
(6,342,853 | ) | (117,082,253 | ) | (6,385,884 | ) | (123,589,696 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (2,694,356 | ) | $ | (49,236,712 | ) | (1,733,854 | ) | $ | (33,040,953 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Investor P |
||||||||||||||||
| Shares sold |
922,473 | $ | 16,362,434 | 764,226 | $ | 14,806,788 | ||||||||||
| Shares issued in reinvestment of distributions |
170,625 | 3,975,291 | 465,565 | 9,367,159 | ||||||||||||
| Shares redeemed |
(2,186,516 | ) | (40,047,212 | ) | (2,247,336 | ) | (43,579,725 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (1,093,418 | ) | $ | (19,709,487 | ) | (1,017,545 | ) | $ | (19,405,778 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Class K |
||||||||||||||||
| Shares sold |
28,669,918 | $ | 514,018,462 | 28,513,761 | $ | 554,627,760 | ||||||||||
| Shares issued in reinvestment of distributions |
1,126,186 | 26,411,311 | 2,471,848 | 49,956,052 | ||||||||||||
| Shares redeemed |
(27,354,595 | ) | (501,901,492 | ) | (13,712,219 | ) | (268,010,304 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 2,441,509 | $ | 38,528,281 | 17,273,390 | $ | 336,573,508 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 1,242,007 | $ | 17,181,682 | 13,716,882 | $ | 269,152,880 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
As of December 31, 2020, shares owned by BlackRock Financial Management, Inc., an affiliate of the Funds, were as follows:
| Fund Name | Institutional | Investor A | Investor P | Class K | Total | |||||||||||||||
| Municipal Bond Index |
8,707 | 871 | 871 | 8,707 | 19,156 | |||||||||||||||
| International Index |
— | — | 14,420 | — | 14,420 | |||||||||||||||
| Small Cap Index |
— | — | 9,191 | — | 9,191 | |||||||||||||||
As of December 31, 2020, shares owned by BlackRock HoldCo 2, Inc., an affiliate of the Funds, were as follows:
| Fund Name | Institutional | Investor A | Class K | Total | ||||||||||||
| Short-Term TIPS Bond Index |
5,000 | 5,000 | 90,000 | 100,000 | ||||||||||||
| 70 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
| 12. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.
| FUND NOTES TO FINANCIAL STATEMENTS |
71 |
Report of Independent Registered Public Accounting Firm
To the Shareholders of iShares Municipal Bond Index Fund, iShares Short-Term TIPS Bond Index Fund, iShares MSCI EAFE International Index Fund, and iShares Russell 2000 Small-Cap Index Fund and the Board of Directors/Trustees of BlackRock FundsSM and BlackRock Index Funds, Inc.:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statements of assets and liabilities of iShares Municipal Bond Index Fund and iShares Short-Term TIPS Bond Index Fund of BlackRock FundsSM and iShares MSCI EAFE International Index Fund and iShares Russell 2000 Small-Cap Index Fund of BlackRock Index Funds, Inc. (collectively, the “Funds”), including the schedules of investments of iShares Municipal Bond Index Fund, iShares Short-Term TIPS Bond Index Fund, and iShares MSCI EAFE International Index Fund, as of December 31, 2020, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for the periods indicated in the table below, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Funds as of December 31, 2020, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for the periods indicated in the table below, in conformity with accounting principles generally accepted in the United States of America.
| Fund | Financial Highlights | |
| iShares Municipal Bond Index Fund |
For each of the three years in the period ended December 31, 2020 | |
| iShares Short-Term TIPS Bond Index Fund |
For each of the four years in the period ended December 31, 2020 | |
| iShares MSCI EAFE International Index Fund |
For each of the five years in the period ended December 31, 2020 | |
| iShares Russell 2000 Small-Cap Index Fund |
For each of the five years in the period ended December 31, 2020 |
The financial highlights of iShares Municipal Bond Index Fund for each of the two years in the period ended December 31, 2017 were audited by other auditors whose report dated February 27, 2018, expressed an unqualified opinion on those financial highlights. The financial highlights of iShares Short-Term TIPS Bond Index Fund for the period from February 16, 2016 (commencement of operations) through December 31, 2016 were audited by other auditors whose report dated February 24, 2017, expressed an unqualified opinion on those financial highlights.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Deloitte & Touche LLP
Boston, Massachusetts
February 23, 2021
We have served as the auditor of one or more BlackRock investment companies since 1992.
| 72 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Important Tax Information (unaudited)
For corporate shareholders, the percentage of ordinary income distributions paid during the fiscal year ended December 31, 2020 that qualified for the dividends-received deduction were as follows:
| Fund Name | Dividends-Received Deduction |
|||
| Small Cap Index |
57.50 | % | ||
The following maximum amounts are hereby designated as qualified dividend income for individuals for the fiscal year ended December 31, 2020:
| Fund Name | Qualified Dividend Income |
|||
| International Index |
$ |
146,152,673 |
| |
| Small Cap Index |
20,849,845 | |||
The following maximum amounts are hereby designated as qualified business income for individuals for the fiscal year ended December 31, 2020:
| Fund Name | Qualified Income |
|||
| Small Cap Index |
$ | 4,989,684 | ||
For the fiscal year ended December 31, 2020, the Funds intend to pass through to their shareholders foreign source income earned and foreign taxes paid by the underlying funds:
| Fund Name | Foreign Source Income Earned |
Foreign Taxes Paid |
||||||
| International Index |
$ | 136,020,930 | $ | 13,137,301 | ||||
For the fiscal year ended December 31, 2020, the Funds hereby designate the following maximum amounts allowable as interest-related dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations:
| Fund Name | Interest-Related Dividends |
|||
| Short-Term TIPS Bond Index |
$ | 494,639 | ||
The Funds hereby designate the following amount of distributions from direct federal obligation interest for the fiscal year ended December 31, 2020:
| Fund Name | Federal Obligation Interest |
|||
| Short-Term TIPS Bond Index |
$ | 494,639 | ||
The law varies in each state as to whether and what percent of ordinary income dividends attributable to federal obligations is exempt from state income tax. Shareholders are advised to check with their tax advisers to determine if any portion of the dividends received is exempt from state income tax.
The following distribution amounts are hereby designated for the fiscal year ended December 31, 2020:
| Fund Name | Short-Term Capital Gain Dividends |
20% Rate Long-Term Capital Gain Dividends |
||||||
| Municipal Bond Index |
$ | 11,616 | $ | 558,912 | ||||
| Small Cap Index |
6,205,025 | 4,166,241 | ||||||
| IMPORTANT TAX INFORMATION (UNAUDITED) |
73 |
| Series Portfolio Information as of December 31, 2020 | Master Small Cap Index Series |
| (a) | Rounds to less than 1% of net assets. |
| (b) | For Master Small Cap Index Series (the “Series ”) compliance purposes, the Series ’s sector classifications refer to one or more of the sector subclassifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such sector sub-classifications for reporting ease. |
| 74 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| SERIES SCHEDULE OF INVESTMENTS |
75 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| 76 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| SERIES SCHEDULE OF INVESTMENTS |
77 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| 78 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| SERIES SCHEDULE OF INVESTMENTS |
79 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| 80 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| SERIES SCHEDULE OF INVESTMENTS |
81 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| 82 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| SERIES SCHEDULE OF INVESTMENTS |
83 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| 84 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| SERIES SCHEDULE OF INVESTMENTS |
85 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| 86 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| SERIES SCHEDULE OF INVESTMENTS |
87 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| 88 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| SERIES SCHEDULE OF INVESTMENTS |
89 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| 90 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| SERIES SCHEDULE OF INVESTMENTS |
91 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| 92 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| SERIES SCHEDULE OF INVESTMENTS |
93 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series (Percentages shown are based on Net Assets) |
| 94 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series |
Affiliates
Investments in issuers considered to be affiliate(s) of the Series during the year ended December 31, 2020 for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:
| Affiliated Issuer | Value at 12/31/19 |
Purchases at Cost |
Proceeds from Sales |
Net Realized Gain (Loss) |
Change in Unrealized Appreciation (Depreciation) |
Value at 12/31/20 |
Shares Held at 12/31/20 |
Income | Capital Gain Distributions from Underlying Funds |
|||||||||||||||||||||||||||
| BlackRock Cash Funds: Institutional, SL Agency Shares |
$ | 391,585,616 | $ | — | $ | (97,439,927 | )(a) | $ | (23,954 | ) | $ | 114,461 | $ | 294,236,196 | 294,059,761 | $ | 4,951,387 | (b) | $ | — | ||||||||||||||||
| BlackRock Cash Funds: Treasury, SL Agency Shares |
28,859,257 | — |
|
(14,258,123 |
)(a) |
— | — | 14,601,134 | 14,601,134 | 157,331 | — | |||||||||||||||||||||||||
| iShares Russell 2000 ETF |
16,140,400 | 118,537,057 | (129,295,983 | ) | 3,724,232 | (508,671 | ) | 8,597,035 | 43,849 | 192,391 | — | |||||||||||||||||||||||||
| PennyMac Financial Services, Inc.(c) |
107,634 | 3,160,148 | (623,956 | ) | 160,703 | (40,446 | ) | N/A | N/A | 22,927 | — | |||||||||||||||||||||||||
| PennyMac Mortgage Investment Trust(c) |
2,987,774 | 444,327 | (266,510 | ) | (65,600 | ) | (389,013 | ) | N/A | N/A | 244,676 | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| $ | 3,795,381 | $ | (823,669 | ) | $ | 317,434,365 | $ | 5,568,712 | $ | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
| (a) | Represents net amount purchased (sold). |
| (b) | All or a portion represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities. |
| (c) | As of period end, the entity is no longer an affiliate. |
For Series compliance purposes, the Series’s industry classifications refer to one or more of the industry sub-classifications used by one or more widely recognized market indexes or rating group indexes, and/or as defined by the investment adviser. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.
Derivative Financial Instruments Outstanding as of Period End Futures Contracts
| Description | Number of Contracts |
Expiration Date |
Notional Amount (000) |
Value/ Unrealized Appreciation (Depreciation) |
||||||||||||
| Long Contracts |
||||||||||||||||
| Russell 2000 E-Mini Index |
207 | 03/19/21 | $ | 20,439 | $ | 192,730 | ||||||||||
|
|
|
|||||||||||||||
OTC Total Return Swaps
| Reference Entity | Payment Frequency |
Counterparty(a) | Termination Date |
Net Notional | Accrued Unrealized Appreciation (Depreciation) |
Net Value of Reference Entity |
Gross Notional Amount Net Asset Percentage |
|||||||||||||||
| Equity Securities Long |
Monthly | Goldman Sachs Bank USA(b) | 02/27/23 | $ | 968,442 | $28,048 | (c) | $ | 993,128 | 0.0 | %(d) | |||||||||||
| Monthly | JPMorgan Chase Bank N.A.(e) | 02/08/23 | 726,153 | 122,708 | (f) | 845,561 | 0.0 | (d) | ||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||
| $ | 1,694,595 | $ | 150,756 | $ | 1,838,689 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||
| (a) | The Series receives the total return on a portfolio of long positions underlying the total return swap. In addition, the Series pays or receives a variable rate of interest, based on a specified benchmark. The benchmark and spread are determined based upon the country and/or currency of the individual underlying positions. |
| (c) | Amount includes $3,362 of net dividends and financing fees. |
| (d) | Rounds to less than 0.1%. |
| (f) | Amount includes $3,300 of net dividends and financing fees. |
The following are the specified benchmarks (plus or minus a range) used in determining the variable rate of interest:
| (b) | (e) | |||
| Range: | 65 basis points | 65 basis points | ||
| Benchmarks: | USD - 1D Overnight Fed Funds Effective Rate (FEDL01) | USD - 1D Overnight Bank Funding Rate (OBFR01) | ||
| SERIES SCHEDULE OF INVESTMENTS |
95 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series |
Balances Reported in the Statement of Assets and Liabilities for OTC Swaps
| Description | Swap Premiums Paid |
Swap Premiums Received |
Unrealized Appreciation |
Unrealized Depreciation |
||||||||||||
| OTC Swaps |
$ | — | $ | — | $ | 150,756 | $ | — | ||||||||
Derivative Financial Instruments Categorized by Risk Exposure
As of period end, the fair values of derivative financial instruments located in the Statement of Assets and Liabilities were as follows:
| Commodity Contracts |
Credit Contracts |
Equity Contracts |
Foreign Currency Exchange Contracts |
Interest Rate Contracts |
Other Contracts |
Total | ||||||||||||||||||||||
| Assets — Derivative Financial Instruments |
|
|||||||||||||||||||||||||||
| Futures contracts |
||||||||||||||||||||||||||||
| Unrealized appreciation on futures contracts(a) |
$ | — | $ | — | $ | 192,730 | $ | — | $ | — | $ | — | $ | 192,730 | ||||||||||||||
| Swaps — OTC |
||||||||||||||||||||||||||||
| Unrealized appreciation on OTC swaps; Swap premiums paid |
— | — | 150,756 | — | — | — | 150,756 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | — | $ | 343,486 | $ | — | $ | — | $ | — | $ | 343,486 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (a) | Net cumulative unrealized appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, are reported in the Series Schedule of Investments. In the Statement of Assets and Liabilities, only current day’s variation margin is reported in receivables or payables and the net cumulative unrealized appreciation (depreciation) is included in net unrealized appreciation (depreciation). |
| 96 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series |
For the year ended December 31, 2020, the effect of derivative financial instruments in the Statement of Operations was as follows:
| Commodity Contracts |
Credit Contracts |
Equity Contracts |
Foreign Currency Exchange Contracts |
Interest Rate Contracts |
Other Contracts |
Total | ||||||||||||||||||||||
| Net Realized Gain (Loss) from |
||||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | (1,383,705 | ) | $— | $ | — | $ | — | $ | (1,383,705 | ) | |||||||||||||
| Swaps |
— | — | (289,104 | ) | — | — | — | (289,104 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | — | $ | (1,672,809 | ) | $ | — | $ | — | $ | — | $ | (1,672,809 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Net Change in Unrealized Appreciation (Depreciation) on | ||||||||||||||||||||||||||||
| Futures contracts |
$ | — | $ | — | $ | 109,329 | $ | — | $ | — | $ | — | $ | 109,329 | ||||||||||||||
| Swaps |
— | — | 128,446 | — | — | — | 128,446 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| $ | — | $ | — | $ | 237,775 | $ | — | $ | — | $ | — | $ | 237,775 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Average Quarterly Balances of Outstanding Derivative Financial Instruments
| Futures contracts |
| |||
| Average notional value of contracts — long |
$ | 26,952,390 | ||
| Total return swaps |
||||
| Average notional value |
$ | 4,383,472 | ||
For more information about the Series’s investment risks regarding derivative financial instruments, refer to the Notes to Financial Statements.
Derivative Financial Instruments — Offsetting as of Period End
The Series’s derivative assets and liabilities (by type) were as follows:
| Assets | Liabilities | |||||||
| Derivative Financial Instruments |
||||||||
| Futures contracts |
$ | — | $ | 16,723 | ||||
| Swaps — OTC(a) |
150,756 | — | ||||||
|
|
|
|
|
|||||
| Total derivative assets and liabilities in the Statement of Assets and Liabilities |
150,756 | 16,723 | ||||||
|
|
|
|
|
|||||
| Derivatives not subject to a Master Netting Agreement or similar agreement (“MNA”) |
— | (16,723 | ) | |||||
|
|
|
|
|
|||||
| Total derivative assets and liabilities subject to an MNA |
$ | 150,756 | $ | — | ||||
|
|
|
|
|
|||||
| (a) | Includes unrealized appreciation (depreciation) on OTC swaps and swap premiums (paid/received) in the Statement of Assets and Liabilities. |
The following table presents the Series’s derivative assets by counterparty net of amounts available for offset under an MNA and net of the related collateral received by the Series:
| Counterparty | Derivative Assets Subject to an MNA by Counterparty |
Derivatives Available for Offset |
Non-Cash Collateral Received |
Cash Collateral Received |
Net Amount of Derivative Assets(a) |
|||||||||||||||
| Goldman Sachs Bank USA |
$ | 28,048 | $ | — | $ | — | $ | — | $ | 28,048 | ||||||||||
| JPMorgan Chase Bank N.A. |
122,708 | — | — | — | 122,708 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| $ | 150,756 | $ | — | $ | — | $ | — | $ | 150,756 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (a) | Net amount represents the net amount receivable from the counterparty in the event of default. |
| SERIES SCHEDULE OF INVESTMENTS |
97 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series |
Fair Value Hierarchy as of Period End
Various inputs are used in determining the fair value of financial instruments. For a description of the input levels and information about the Series’s policy regarding valuation of financial instruments, refer to the Notes to Financial Statements.
The following table summarizes the Series’s investments and derivative financial instruments categorized in the disclosure hierarchy. The breakdown of the Series’s investments into major categories is disclosed in the Schedule of Investments above.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets |
| |||||||||||||||
| Investments |
| |||||||||||||||
| Long-Term Investments |
| |||||||||||||||
| Common Stocks |
||||||||||||||||
| Advertising Agencies |
$ | 13,160,048 | $ | — | $ | — | $ | 13,160,048 | ||||||||
| Aerospace |
36,331,358 | — | — | 36,331,358 | ||||||||||||
| Agriculture, Fishing & Ranching |
13,771,838 | — | — | 13,771,838 | ||||||||||||
| Air Transport |
17,323,056 | — | — | 17,323,056 | ||||||||||||
| Alternative Energy |
8,012,835 | — | — | 8,012,835 | ||||||||||||
| Aluminum |
14,663,189 | — | — | 14,663,189 | ||||||||||||
| Asset Management & Custodian |
35,077,795 | — | — | 35,077,795 | ||||||||||||
| Auto Parts |
41,247,050 | — | — | 41,247,050 | ||||||||||||
| Auto Services |
7,174,932 | — | — | 7,174,932 | ||||||||||||
| Back Office Support, HR & Consulting |
55,242,194 | — | — | 55,242,194 | ||||||||||||
| Banks: Diversified |
290,489,154 | — | — | 290,489,154 | ||||||||||||
| Banks: Savings, Thrift & Mortgage Lending |
42,013,736 | — | — | 42,013,736 | ||||||||||||
| Beverage: Soft Drinks |
10,740,121 | — | — | 10,740,121 | ||||||||||||
| Biotechnology |
416,033,947 | — | 67,794 | 416,101,741 | ||||||||||||
| Building Materials |
40,039,208 | — | — | 40,039,208 | ||||||||||||
| Building: Climate Control |
7,310,220 | — | — | 7,310,220 | ||||||||||||
| Building: Roofing, Wallboard & Plumbing |
7,418,291 | — | — | 7,418,291 | ||||||||||||
| Cable Television Services |
5,890,158 | — | — | 5,890,158 | ||||||||||||
| Casinos & Gambling |
55,934,259 | — | — | 55,934,259 | ||||||||||||
| Cement |
1,107,361 | — | — | 1,107,361 | ||||||||||||
| Chemicals: Diversified |
23,291,954 | — | — | 23,291,954 | ||||||||||||
| Chemicals: Specialty |
30,864,577 | — | — | 30,864,577 | ||||||||||||
| Coal |
3,327,061 | — | — | 3,327,061 | ||||||||||||
| Commercial Banks |
511,097 | — | — | 511,097 | ||||||||||||
| Commercial Finance & Mortgage Companies |
12,687,503 | — | — | 12,687,503 | ||||||||||||
| Commercial Services & Supplies |
2,203,799 | — | — | 2,203,799 | ||||||||||||
| Commercial Services: Rental & Leasing |
31,584,805 | — | — | 31,584,805 | ||||||||||||
| Commercial Vehicles & Parts |
13,092,474 | — | — | 13,092,474 | ||||||||||||
| Communications Technology |
34,944,382 | — | — | 34,944,382 | ||||||||||||
| Computer Services Software & Systems |
288,088,802 | — | — | 288,088,802 | ||||||||||||
| Computer Technology |
18,434,351 | — | — | 18,434,351 | ||||||||||||
| Construction |
16,725,146 | — | — | 16,725,146 | ||||||||||||
| Consumer Electronics |
7,150,252 | — | — | 7,150,252 | ||||||||||||
| Consumer Lending |
25,427,300 | — | — | 25,427,300 | ||||||||||||
| Consumer Services: Miscellaneous |
11,123,359 | — | — | 11,123,359 | ||||||||||||
| Containers & Packaging |
9,064,616 | — | — | 9,064,616 | ||||||||||||
| Cosmetics |
3,630,834 | — | — | 3,630,834 | ||||||||||||
| Diversified Financial Services |
35,984,101 | — | — | 35,984,101 | ||||||||||||
| Diversified Manufacturing Operations |
20,214,043 | — | — | 20,214,043 | ||||||||||||
| Diversified Materials & Processing |
7,579,777 | — | — | 7,579,777 | ||||||||||||
| Diversified Media |
1,547,823 | — | — | 1,547,823 | ||||||||||||
| Diversified Retail |
30,003,064 | — | — | 30,003,064 | ||||||||||||
| Drug & Grocery Store Chains |
4,236,824 | — | — | 4,236,824 | ||||||||||||
| Education Services |
14,639,987 | — | — | 14,639,987 | ||||||||||||
| Electronic Components |
20,836,465 | — | — | 20,836,465 | ||||||||||||
| Electronic Entertainment |
2,842,054 | — | — | 2,842,054 | ||||||||||||
| Electronics |
23,548,121 | — | — | 23,548,121 | ||||||||||||
| Energy Equipment |
41,302,359 | — | — | 41,302,359 | ||||||||||||
| Engineering & Contracting Services |
42,256,707 | — | — | 42,256,707 | ||||||||||||
| Entertainment |
5,191,895 | — | — | 5,191,895 | ||||||||||||
| Environmental, Maintenance, & Security Service |
22,912,259 | — | — | 22,912,259 | ||||||||||||
| Financial Data & Systems |
21,730,138 | — | — | 21,730,138 | ||||||||||||
| Food & Staples Retailing |
203,654 | — | — | 203,654 | ||||||||||||
| 98 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series |
Fair Value Hierarchy as of Period End (continued)
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Common Stocks (continued) |
||||||||||||||||
| Foods |
$ | 49,411,002 | $ | — | $ | — | $ | 49,411,002 | ||||||||
| Forest Products |
8,036,312 | — | — | 8,036,312 | ||||||||||||
| Forms & Bulk Printing Services |
2,866,145 | — | — | 2,866,145 | ||||||||||||
| Fruit & Grain Processing |
914,752 | — | — | 914,752 | ||||||||||||
| Funeral Parlors & Cemeteries |
6,878,297 | — | — | 6,878,297 | ||||||||||||
| Gas Pipeline |
90,719 | — | — | 90,719 | ||||||||||||
| Glass |
1,233,651 | — | — | 1,233,651 | ||||||||||||
| Gold |
8,141,012 | — | — | 8,141,012 | ||||||||||||
| Health Care Equipment & Supplies |
1,247,019 | — | — | 1,247,019 | ||||||||||||
| Health Care Facilities |
25,858,055 | — | — | 25,858,055 | ||||||||||||
| Health Care Management Services |
12,467,810 | — | — | 12,467,810 | ||||||||||||
| Health Care Services |
84,372,836 | — | — | 84,372,836 | ||||||||||||
| Health Care: Miscellaneous |
8,661,182 | — | — | 8,661,182 | ||||||||||||
| Home Building |
43,677,186 | — | — | 43,677,186 | ||||||||||||
| Hotel/Motel |
4,463,690 | — | — | 4,463,690 | ||||||||||||
| Household Appliances |
952,156 | — | — | 952,156 | ||||||||||||
| Household Equipment & Products |
14,171,521 | — | — | 14,171,521 | ||||||||||||
| Household Furnishings |
22,780,486 | — | — | 22,780,486 | ||||||||||||
| Insurance: Life |
19,161,024 | — | — | 19,161,024 | ||||||||||||
| Insurance: Multi-Line |
17,600,272 | — | — | 17,600,272 | ||||||||||||
| Insurance: Property-Casualty |
67,193,699 | — | — | 67,193,699 | ||||||||||||
| International Trade & Diversified Logistic |
3,731,363 | — | — | 3,731,363 | ||||||||||||
| Internet Software & Services |
4,487,149 | — | — | 4,487,149 | ||||||||||||
| Leisure Time |
52,100,330 | — | — | 52,100,330 | ||||||||||||
| Life Sciences Tools & Services |
412,404 | — | — | 412,404 | ||||||||||||
| Luxury Items |
2,679,035 | — | — | 2,679,035 | ||||||||||||
| Machinery: Agricultural |
4,865,056 | — | — | 4,865,056 | ||||||||||||
| Machinery: Construction & Handling |
8,037,946 | — | — | 8,037,946 | ||||||||||||
| Machinery: Industrial |
57,307,409 | — | — | 57,307,409 | ||||||||||||
| Machinery: Specialty |
3,860,355 | — | — | 3,860,355 | ||||||||||||
| Manufactured Housing |
5,074,196 | — | — | 5,074,196 | ||||||||||||
| Medical & Dental Instruments & Supplies |
88,772,025 | — | — | 88,772,025 | ||||||||||||
| Medical Equipment |
62,178,377 | — | — | 62,178,377 | ||||||||||||
| Medical Services |
2,645,077 | — | — | 2,645,077 | ||||||||||||
| Metal Fabricating |
34,304,030 | — | — | 34,304,030 | ||||||||||||
| Metals & Minerals: Diversified |
30,625,747 | 28,105 | — | 30,653,852 | ||||||||||||
| Office Supplies & Equipment |
14,293,788 | — | — | 14,293,788 | ||||||||||||
| Oil & Gas Producers |
1,463,002 | — | — | 1,463,002 | ||||||||||||
| Oil Well Equipment & Services |
19,949,689 | — | — | 19,949,689 | ||||||||||||
| Oil, Gas & Consumable Fuels |
24,652,963 | — | — | 24,652,963 | ||||||||||||
| Oil: Crude Producers |
33,966,299 | — | — | 33,966,299 | ||||||||||||
| Oil: Refining & Marketing |
12,759,942 | — | — | 12,759,942 | ||||||||||||
| Paints & Coatings |
7,756,662 | — | — | 7,756,662 | ||||||||||||
| Paper |
8,662,353 | — | — | 8,662,353 | ||||||||||||
| Personal Care |
10,945,796 | — | — | 10,945,796 | ||||||||||||
| Pharmaceuticals |
92,899,606 | — | — | 92,899,606 | ||||||||||||
| Photography |
1,550,356 | — | — | 1,550,356 | ||||||||||||
| Plastics |
3,067,172 | — | — | 3,067,172 | ||||||||||||
| Power Transmission Equipment |
8,941,114 | — | — | 8,941,114 | ||||||||||||
| Printing & Copying Services |
7,037,892 | — | — | 7,037,892 | ||||||||||||
| Producer Durables: Miscellaneous |
458,093 | — | — | 458,093 | ||||||||||||
| Production Technology Equipment |
24,740,278 | — | — | 24,740,278 | ||||||||||||
| Publishing |
4,513,695 | — | — | 4,513,695 | ||||||||||||
| Radio & TV Broadcasters |
14,129,884 | — | — | 14,129,884 | ||||||||||||
| Railroad Equipment |
1,898,418 | — | — | 1,898,418 | ||||||||||||
| Real Estate |
27,615,446 | — | — | 27,615,446 | ||||||||||||
| Real Estate Investment Trusts (REITs) |
224,707,288 | — | — | 224,707,288 | ||||||||||||
| Real Estate Management & Development |
2,086,154 | — | — | 2,086,154 | ||||||||||||
| Recreational Vehicles & Boats |
12,188,399 | — | — | 12,188,399 | ||||||||||||
| Rental & Leasing Services: Consumer |
11,775,494 | — | — | 11,775,494 | ||||||||||||
| Restaurants |
50,670,583 | — | — | 50,670,583 | ||||||||||||
| Scientific Instruments: Control & Filter |
25,833,923 | — | — | 25,833,923 | ||||||||||||
| Scientific Instruments: Electrical |
22,985,167 | — | — | 22,985,167 | ||||||||||||
| SERIES SCHEDULE OF INVESTMENTS |
99 |
| Schedule of Investments (continued) December 31, 2020 |
Master Small Cap Index Series |
Fair Value Hierarchy as of Period End (continued)
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Common Stocks (continued) |
||||||||||||||||
| Scientific Instruments: Gauges & Meters |
$ | 15,980,911 | $ | — | $ | — | $ | 15,980,911 | ||||||||
| Scientific Instruments: Pollution Control |
24,330,524 | — | — | 24,330,524 | ||||||||||||
| Securities Brokerage & Services |
3,438,597 | — | — | 3,438,597 | ||||||||||||
| Semiconductors & Components |
78,793,604 | — | — | 78,793,604 | ||||||||||||
| Semiconductors & Semiconductor Equipment |
4,789,423 | — | — | 4,789,423 | ||||||||||||
| Shipping |
15,079,237 | — | — | 15,079,237 | ||||||||||||
| Software |
8,502,620 | — | — | 8,502,620 | ||||||||||||
| Specialty Retail |
93,942,619 | — | — | 93,942,619 | ||||||||||||
| Steel |
13,357,200 | — | — | 13,357,200 | ||||||||||||
| Technology: Miscellaneous |
11,871,415 | — | — | 11,871,415 | ||||||||||||
| Telecommunications Equipment |
12,213,189 | — | — | 12,213,189 | ||||||||||||
| Textile Products |
1,334,726 | — | — | 1,334,726 | ||||||||||||
| Textiles Apparel & Shoes |
36,339,585 | — | — | 36,339,585 | ||||||||||||
| Thrifts & Mortgage Finance |
5,387,798 | — | — | 5,387,798 | ||||||||||||
| Toys |
383,925 | — | — | 383,925 | ||||||||||||
| Transportation Miscellaneous |
6,247,729 | — | — | 6,247,729 | ||||||||||||
| Truckers |
21,071,958 | — | — | 21,071,958 | ||||||||||||
| Utilities: Electrical |
55,579,135 | — | — | 55,579,135 | ||||||||||||
| Utilities: Gas Distributors |
24,234,822 | — | — | 24,234,822 | ||||||||||||
| Utilities: Miscellaneous |
9,303,687 | — | — | 9,303,687 | ||||||||||||
| Utilities: Telecommunications |
36,915,072 | — | — | 36,915,072 | ||||||||||||
| Utilities: Water |
15,995,604 | — | — | 15,995,604 | ||||||||||||
| Investment Companies |
8,597,035 | — | — | 8,597,035 | ||||||||||||
| Short-Term Securities |
||||||||||||||||
| Money Market Funds |
308,837,330 | — | — | 308,837,330 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| $ | 4,191,498,859 | $ | 28,105 | $ | 67,794 | $ | 4,191,594,758 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Derivative Financial Instruments(a) |
| |||||||||||||||
| Assets |
| |||||||||||||||
| Equity Contracts |
$ | 192,730 | $ | 150,756 | $ | — | $ | 343,486 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (a) | Derivative financial instruments are swaps and futures contracts. Swaps and futures contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
See notes to financial statements.
| 100 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Statement of Assets and Liabilities
December 31, 2020
| Master Small Cap Index Series |
||||
| ASSETS |
||||
| Investments at value — unaffiliated(a)(b) |
$ | 3,874,160,393 | ||
| Investments at value — affiliated(c) |
317,434,365 | |||
| Cash |
38,183 | |||
| Cash pledged for futures contracts |
976,000 | |||
| Receivables: |
||||
| Investments sold |
483,147 | |||
| Securities lending income — affiliated |
285,991 | |||
| Swaps |
13,931 | |||
| Dividends — unaffiliated |
3,387,878 | |||
| Dividends — affiliated |
889 | |||
| Unrealized appreciation on OTC swaps |
150,756 | |||
| Prepaid expenses |
20,830 | |||
|
|
|
|||
| Total assets |
4,196,952,363 | |||
|
|
|
|||
| LIABILITIES |
||||
| Collateral on securities loaned at value |
294,132,190 | |||
| Payables: |
||||
| Swaps |
21,385 | |||
| Withdrawal to investor |
7,367,848 | |||
| Investment advisory fees |
31,076 | |||
| Directors’ fees |
6,706 | |||
| Other accrued expenses |
131,656 | |||
| Other affiliates |
26,618 | |||
| Variation margin on futures contracts |
16,723 | |||
|
|
|
|||
| Total liabilities |
301,734,202 | |||
|
|
|
|||
| NET ASSETS |
$ | 3,895,218,161 | ||
|
|
|
|||
| NET ASSETS CONSIST OF |
||||
| Investors’ capital |
$ | 2,804,224,231 | ||
| Net unrealized appreciation (depreciation) |
1,090,993,930 | |||
|
|
|
|||
| NET ASSETS |
$ | 3,895,218,161 | ||
|
|
|
|||
| (a) Investments at cost — unaffiliated |
$ | 2,785,277,721 | ||
| (b) Securities loaned at value |
$ | 282,942,566 | ||
| (c) Investments at cost — affiliated |
$ | 315,666,593 | ||
See notes to financial statements.
| SERIES FINANCIAL STATEMENTS |
101 |
Year Ended December 31, 2020
| Master Small Cap Index Series |
||||
| INVESTMENT INCOME |
||||
| Dividends — unaffiliated |
$ | 36,034,621 | ||
| Dividends — affiliated |
617,325 | |||
| Interest — unaffiliated |
4,964 | |||
| Securities lending income — affiliated — net |
4,951,387 | |||
| Foreign taxes withheld |
(70,792 | ) | ||
|
|
|
|||
| Total investment income |
41,537,505 | |||
|
|
|
|||
| EXPENSES |
| |||
| Investment advisory |
314,926 | |||
| Custodian |
287,683 | |||
| Professional |
74,306 | |||
| Accounting services |
45,563 | |||
| Printing and postage |
29,381 | |||
| Directors |
19,038 | |||
| Miscellaneous |
26,938 | |||
|
|
|
|||
| Total expenses |
797,835 | |||
| Less: |
||||
| Fees waived and/or reimbursed by the Manager |
(21,188 | ) | ||
|
|
|
|||
| Total expenses after fees waived and/or reimbursed |
776,647 | |||
|
|
|
|||
| Net investment income |
40,760,858 | |||
|
|
|
|||
| REALIZED AND UNREALIZED GAIN (LOSS) |
| |||
| Net realized gain (loss) from: |
| |||
| Investments — unaffiliated |
14,408,052 | |||
| Investments — affiliated |
3,795,381 | |||
| Futures contracts |
(1,383,705 | ) | ||
| Swaps |
(289,104 | ) | ||
|
|
|
|||
| 16,530,624 | ||||
|
|
|
|||
| Net change in unrealized appreciation (depreciation) on: |
||||
| Investments — unaffiliated |
634,399,676 | |||
| Investments — affiliated |
(823,669 | ) | ||
| Futures contracts |
109,329 | |||
| Swaps |
128,446 | |||
|
|
|
|||
| 633,813,782 | ||||
|
|
|
|||
| Net realized and unrealized gain |
650,344,406 | |||
|
|
|
|||
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS |
$ | 691,105,264 | ||
|
|
|
|||
See notes to financial statements.
| 102 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Statements of Changes in Net Assets
| Master Small Cap Index Series | ||||||||
| Year Ended December 31, | ||||||||
| 2020 | 2019 | |||||||
| INCREASE (DECREASE) IN NET ASSETS |
||||||||
| OPERATIONS |
||||||||
| Net investment income |
$ | 40,760,858 | $ | 43,172,245 | ||||
| Net realized gain |
16,530,624 | 74,722,675 | ||||||
| Net change in unrealized appreciation |
633,813,782 | 518,108,964 | ||||||
|
|
|
|
|
|||||
| Net increase in net assets resulting from operations |
691,105,264 | 636,003,884 | ||||||
|
|
|
|
|
|||||
| CAPITAL TRANSACTIONS |
||||||||
| Proceeds from contributions |
935,046,677 | 1,078,306,760 | ||||||
| Value of withdrawals |
(1,056,617,358 | ) | (698,357,321 | ) | ||||
|
|
|
|
|
|||||
| Net increase (decrease) in net assets derived from capital transactions |
(121,570,681 | ) | 379,949,439 | |||||
|
|
|
|
|
|||||
| NET ASSETS |
||||||||
| Total increase in net assets |
569,534,583 | 1,015,953,323 | ||||||
| Beginning of year |
3,325,683,578 | 2,309,730,255 | ||||||
|
|
|
|
|
|||||
| End of year |
$ | 3,895,218,161 | $ | 3,325,683,578 | ||||
|
|
|
|
|
|||||
See notes to financial statements.
| SERIES FINANCIAL STATEMENTS |
103 |
| Master Small Cap Index Series |
||||||||||||||||||||
| Year Ended December 31, |
||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||
| Total Return |
||||||||||||||||||||
| Total return |
20.08 | % | 25.70 | % | (10.96 | )% | 14.69 | % | 21.49 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Ratios to Average Net Assets |
||||||||||||||||||||
| Total expenses |
0.03 | % | 0.02 | % | 0.03 | % | 0.06 | % | 0.07 | %(a) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total expenses after fees waived and/or reimbursed |
0.02 | % | 0.02 | % | 0.03 | % | 0.05 | % | 0.06 | %(a) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net investment income |
1.29 | % | 1.49 | % | 1.49 | % | 1.41 | % | 1.49 | %(a) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Supplemental Data |
||||||||||||||||||||
| Net assets, end of year (000) |
$ | 3,895,218 | $ | 3,325,684 | $ | 2,309,730 | $ | 1,278,155 | $ | 666,690 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Portfolio turnover rate |
27 | % | 20 | % | 28 | % | 30 | % | 39 | % | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (a) | Excludes expenses incurred indirectly of 0.01% as a result of the Series’ investments in underlying funds. |
See notes to financial statements.
| 104 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
| 1. | ORGANIZATION |
Quantitative Master Series LLC (the “Master LLC”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Master LLC is organized as a Delaware statutory trust. Master Small Cap Index Series (“the “Series”) is a series of the Master LLC. The Series is classified as diversified. The Series’ Limited Liability Company Agreement permits the Board of Directors of the Master LLC (the “Board”) to issue non-transferable interests, subject to certain limitations.
The Series, together with certain other registered investment companies advised by BlackRock Advisors, LLC (the “Manager”) or its affiliates, is included in a complex of equity, multi-asset, index and money market funds referred to as the BlackRock Multi-Asset Complex.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Series is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies. Below is a summary of significant accounting policies:
Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are executed. Realized gains and losses on investment transactions are determined using the specific identification method. Dividend income and capital gain distributions, if any, are recorded on the ex-dividend date. Non-cash dividends, if any, are recorded on the ex-dividend date at fair value. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Series is informed of the ex-dividend date. Under the applicable foreign tax laws, a withholding tax at various rates may be imposed on capital gains, dividends and interest. Upon notification from issuers, a portion of the dividend income received from a real estate investment trust may be redesignated as a reduction of cost of the related investment and/or realized gain.
ForeignTaxes: The Series may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, capital gains on investments, or certain foreign currency transactions. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Series invests. These foreign taxes, if any, are paid by the Series and are reflected in its Statement of Operations as follows: foreign taxes withheld at source are presented as a reduction of income, foreign taxes on securities lending income are presented as a reduction of securities lending income, foreign taxes on stock dividends are presented as “Foreign taxes withheld”, and foreign taxes on capital gains from sales of investments and foreign taxes on foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable or deferred as of December 31, 2020, if any, are disclosed in the Statement of Assets and Liabilities.
Segregation and Collateralization: In cases where the Series enters into certain investments (e.g., futures contracts and swaps) that would be treated as “senior securities” for 1940 Act purposes, the Series may segregate or designate on its books and records cash or liquid assets having a market value at least equal to the amount of its future obligations under such investments. Doing so allows the investment to be excluded from treatment as a “senior security.” Furthermore, if required by an exchange or counterparty agreement, the Series may be required to deliver/deposit cash and/or securities to/with an exchange, or broker-dealer or custodian as collateral for certain investments or obligations.
Indemnifications: In the normal course of business, the Series enters into contracts that contain a variety of representations that provide general indemnification. The Series’ maximum exposure under these arrangements is unknown because it involves future potential claims against the Series, which cannot be predicted with any certainty.
Other: Expenses directly related to the Series are charged to the Series. Other operating expenses shared by several funds, including other funds managed by the Manager, are prorated among those funds on the basis of relative net assets or other appropriate methods.
| 3. | INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS |
Investment Valuation Policies: The Series’ investments are valued at fair value (also referred to as “market value” within the financial statements) each day that the Series is open for business and, for financial reporting purposes, as of the report date. U.S. GAAP defines fair value as the price a fund would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. The Series determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board. If a security’s market price is not readily available or does not otherwise accurately represent the fair value of the security, the security will be valued in accordance with a policy approved by the Board as reflecting fair value. The BlackRock Global Valuation Methodologies Committee (the “Global Valuation Committee”) is the committee formed by management to develop global pricing policies and procedures and to oversee the pricing function for all financial instruments.
Fair Value Inputs and Methodologies: The following methods and inputs are used to establish the fair value of the Series’ assets and liabilities:
| • | Equity investments traded on a recognized securities exchange are valued at that day’s official closing price, as applicable, on the exchange where the stock is primarily traded. Equity investments traded on a recognized exchange for which there were no sales on that day may be valued at the last available bid (long positions) or ask (short positions) price. |
Generally, trading in foreign instruments is substantially completed each day at various times prior to the close of trading on the New York Stock Exchange (“NYSE”).
Occasionally, events affecting the values of such instruments may occur between the foreign market close and the close of trading on the NYSE that may not be
| SERIES NOTES TO FINANCIAL STATEMENTS |
105 |
Notes to Financial Statements (continued)
reflected in the computation of the Series’ net assets. Each business day, the Series uses a pricing service to assist with the valuation of certain foreign exchange-traded equity securities and foreign exchange-traded and over-the-counter (“OTC”) options (the “Systematic Fair Value Price”). Using current market factors, the Systematic Fair Value Price is designed to value such foreign securities and foreign options at fair value as of the close of trading on the NYSE, which follows the close of the local markets.
| • | Investments in open-end U.S. mutual funds (including money market funds) are valued at that day’s published net asset value (“NAV”). |
| • | Futures contracts are valued based on that day’s last reported settlement price on the exchange where the contract is traded. |
| • | Swap agreements are valued utilizing quotes received daily by independent pricing services or through brokers, which are derived using daily swap curves and models that incorporate a number of market data factors, such as discounted cash flows, trades and values of the underlying reference instruments. |
If events (e.g., a market closure, market volatility, company announcement or a natural disaster) occur that are expected to materially affect the value of such investment, or in the event that application of these methods of valuation results in a price for an investment that is deemed not to be representative of the market value of such investment, or if a price is not available, the investment will be valued by the Global Valuation Committee, or its delegate, in accordance with a policy approved by the Board as reflecting fair value (“Fair Valued Investments”). The fair valuation approaches that may be used by the Global Valuation Committee include market approach, income approach and cost approach. Valuation techniques such as discounted cash flow, use of market comparables and matrix pricing are types of valuation approaches and are typically used in determining fair value. When determining the price for Fair Valued Investments, the Global Valuation Committee, or its delegate, seeks to determine the price that the Series might reasonably expect to receive or pay from the current sale or purchase of that asset or liability in an arm’s-length transaction. Fair value determinations shall be based upon all available factors that the Global Valuation Committee, or its delegate, deems relevant and consistent with the principles of fair value measurement. The pricing of all Fair Valued Investments is subsequently reported to the Board or a committee thereof on a quarterly basis.
For investments in equity or debt issued by privately held companies or funds (“Private Company” or collectively, the “Private Companies”) and other Fair Valued Investments, the fair valuation approaches that are used by the Global Valuation Committee and third party pricing services utilize one or a combination of, but not limited to, the following inputs.
| Standard Inputs Generally Considered By Third Party Pricing Services | ||
| Market approach |
(i) recent market transactions, including subsequent rounds of financing, in the underlying investment or comparable issuers; (ii) recapitalizations and other transactions across the capital structure; and (iii) market multiples of comparable issuers. | |
| Income approach |
(i) future cash flows discounted to present and adjusted as appropriate for liquidity, credit, and/or market risks; (ii) quoted prices for similar investments or assets in active markets; and (iii) other risk factors, such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks, recovery rates, liquidation amounts and/or default rates. | |
| Cost approach |
(i) audited or unaudited financial statements, investor communications and financial or operational metrics issued by the Private Company; (ii) changes in the valuation of relevant indices or publicly traded companies comparable to the Private Company; (iii) relevant news and other public sources; and (iv) known secondary market transactions in the Private Company’s interests and merger or acquisition activity in companies comparable to the Private Company. |
Investments in series of preferred stock issued by Private Companies are typically valued utilizing market approach in determining the enterprise value of the company. Such investments often contain rights and preferences that differ from other series of preferred and common stock of the same issuer. Valuation techniques such as an option pricing model (“OPM”), a probability weighted expected return model (“PWERM”) or a hybrid of those techniques are used in allocating enterprise value of the company, as deemed appropriate under the circumstances. The use of OPM and PWERM techniques involve a determination of the exit scenarios of the investment in order to appropriately allocate the enterprise value of the company among the various parts of its capital structure.
The Private Companies are not subject to the public company disclosure, timing, and reporting standards applicable to other investments held by the Series. Typically, the most recently available information by a Private Company is as of a date that is earlier than the date the Series is calculating its NAV. This factor may result in a difference between the value of the investment and the price the Series could receive upon the sale of the investment.
Fair Value Hierarchy: Various inputs are used in determining the fair value of financial instruments. These inputs to valuation techniques are categorized into a fair value hierarchy consisting of three broad levels for financial reporting purposes as follows:
| • | Level 1 – Unadjusted price quotations in active markets/exchanges for identical assets or liabilities that the Series has the ability to access; |
| • | Level 2 – Other observable inputs (including, but not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market–corroborated inputs); and |
| • | Level 3 – Unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Global Valuation Committee’s assumptions used in determining the fair value of financial instruments). |
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The
| 106 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the fair value hierarchy classification is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Investments classified within Level 3 have significant unobservable inputs used by the Global Valuation Committee in determining the price for Fair Valued Investments. Level 3 investments include equity or debt issued by privately held companies or funds. There may not be a secondary market, and/or there are a limited number of investors. The categorization of a value determined for investments and derivative financial instruments is based on the pricing transparency of the investments and derivative financial instruments and is not necessarily an indication of the risks associated with investing in those securities.
| 4. | SECURITIES AND OTHER INVESTMENTS |
Securities Lending: The Series may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Series collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Series is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Series and any additional required collateral is delivered to the Series, or excess collateral returned by the Series, on the next business day. During the term of the loan, the Series is entitled to all distributions made on or in respect of the loaned securities, but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The market value of any securities on loan, all of which were classified as common stocks in the Series’ Schedule of Investments, and the value of any related collateral are shown separately in the Statement of Assets and Liabilities as a component of investments at value - unaffiliated, and collateral on securities loaned at value, respectively. As of period end, any securities on loan were collateralized by cash and/or U.S. Government obligations. Cash collateral invested by the securities lending agent, BlackRock Institutional Trust Company, N.A. (“BTC”), if any, is disclosed in the Schedule of Investments.
Securities lending transactions are entered into by the Series under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Series, as lender, would offset the market value of the collateral received against the market value of the securities loaned. When the value of the collateral is greater than that of the market value of the securities loaned, the lender is left with a net amount payable to the defaulting party. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of an MSLA counterparty’s bankruptcy or insolvency. Under the MSLA, absent an event of default, the borrower can resell or re-pledge the loaned securities, and the Series can reinvest cash collateral received in connection with loaned securities. Upon an event of default, the parties’ obligations to return the securities or collateral to the other party are extinguished, and the parties can resell or re-pledge the loaned securities or the collateral received in connection with the loaned securities in order to satisfy the defaulting party’s net payment obligation for all transactions under the MSLA. The defaulting party remains liable for any deficiency.
As of period end, the following table is a summary of the Series’ securities on loan by counterparty which are subject to offset under an MSLA:
| Counterparty | Securities Loaned at Value |
Cash Collateral Received(a) |
Net Amount(b) |
|||||||||
| Barclays Capital, Inc. |
$ | 5,845,477 | $ | (5,845,477 | ) | $ | — | |||||
| BNP Paribas Securities Corp. |
1,104,876 | (1,104,876 | ) | — | ||||||||
| BofA Securities, Inc. |
25,536,634 | (25,536,634 | ) | — | ||||||||
| Citadel Clearing LLC |
416,323 | (416,018 | ) | 305 | ||||||||
| Citigroup Global Markets, Inc. |
66,822,671 | (66,822,671 | ) | — | ||||||||
| Credit Suisse Securities (USA) LLC |
6,838,570 | (6,838,570 | ) | — | ||||||||
| J.P. Morgan Securities LLC |
126,755,401 | (126,755,401 | ) | — | ||||||||
| Jefferies LLC |
2,160,364 | (2,160,364 | ) | — | ||||||||
| Nomura Securities International, Inc. |
77,896 | (77,896 | ) | — | ||||||||
| Scotia Capital (USA), Inc. |
2,125,437 | (2,125,437 | ) | — | ||||||||
| State Street Bank & Trust Company |
2,586,985 | (2,586,985 | ) | — | ||||||||
| TD Prime Services LLC |
11,380,788 | (11,380,788 | ) | — | ||||||||
| Wells Fargo Bank, National Association |
22,696,996 | (22,696,996 | ) | — | ||||||||
| Wells Fargo Securities LLC |
8,594,148 | (8,594,148 | ) | — | ||||||||
|
|
|
|
|
|
|
|||||||
| $ | 282,942,566 | $ | (282,942,261 | ) | $ | 305 | ||||||
|
|
|
|
|
|
|
|||||||
| (a) | Collateral received in excess of the market value of securities on loan is not presented in this table. The total cash collateral received by the Series is disclosed in the Series’s Statement of Assets and Liabilities. |
| (b) | The market value of the loaned securities is determined as of December 31, 2020. Additional collateral is delivered to the Series on the next business day in accordance with the MSLA. The net amount would be subject to the borrower default indemnity in the event of default by the counterparty. |
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Series benefits from a borrower default indemnity provided by BlackRock, Inc. (“BlackRock”). BlackRock’s indemnity allows for full replacement of the securities loaned to the extent the collateral received does not cover the value on the securities loaned in the event of borrower default. The Series could incur a loss if the value of an investment purchased with cash collateral falls below the market value of loaned securities or if the value of an investment purchased with cash collateral falls below the value of the original cash collateral received. Such losses are borne entirely by the Series.
| SERIES NOTES TO FINANCIAL STATEMENTS |
107 |
Notes to Financial Statements (continued)
| 5. | DERIVATIVE FINANCIAL INSTRUMENTS |
The Series engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Series and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or OTC.
Futures Contracts: Futures contracts are purchased or sold to gain exposure to, or manage exposure to, changes in interest rates (interest rate risk) and changes in the value of equity securities (equity risk) or foreign currencies (foreign currency exchange rate risk).
Futures contracts are exchange-traded agreements between the Series and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and on a specified date. Depending on the terms of a contract, it is settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash amount on the settlement date. Upon entering into a futures contract, the Series is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. Amounts pledged, which are considered restricted, are included in cash pledged for futures contracts in the Statement of Assets and Liabilities.
Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited, if any, are shown as cash pledged for futures contracts in the Statement of Assets and Liabilities. Pursuant to the contract, the Series agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and, if any, shown as variation margin receivable (or payable) on futures contracts in the Statement of Assets and Liabilities. When the contract is closed, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the notional amount of the contract at the time it was opened and the notional amount at the time it was closed. The use of futures contracts involves the risk of an imperfect correlation in the movements in the price of futures contracts and interest rates, foreign currency exchange rates or underlying assets.
Swaps: Swap contracts are entered into to manage exposure to issuers, markets and securities. Such contracts are agreements between the Series and a counterparty to make periodic net payments on a specified notional amount or a net payment upon termination. Swap agreements are privately negotiated in the OTC market and may be entered into as a bilateral contract (“OTC swaps”) or centrally cleared (“centrally cleared swaps”).
For OTC swaps, any upfront premiums paid and any upfront fees received are shown as swap premiums paid and swap premiums received, respectively, in the Statement of Assets and Liabilities and amortized over the term of the contract. The daily fluctuation in market value is recorded as unrealized appreciation (depreciation) on OTC Swaps in the Statement of Assets and Liabilities. Payments received or paid are recorded in the Statement of Operations as realized gains or losses, respectively. When an OTC swap is terminated, a realized gain or loss is recorded in the Statement of Operations equal to the difference between the proceeds from (or cost of) the closing transaction and the Series’ basis in the contract, if any. Generally, the basis of the contract is the premium received or paid.
In a centrally cleared swap, immediately following execution of the swap contract, the swap contract is novated to a central counterparty (the “CCP”) and the CCP becomes the Series’ counterparty on the swap. The Series is required to interface with the CCP through the broker. Upon entering into a centrally cleared swap, the Series is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on the size and risk profile of the particular swap. Securities deposited as initial margin are designated in the Schedule of Investments and cash deposited is shown as cash pledged for centrally cleared swaps in the Statement of Assets and Liabilities. Amounts pledged, which are considered restricted cash, are included in cash pledged for centrally cleared swaps in the Statement of Assets and Liabilities. Pursuant to the contract, the Series agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in market value of the contract (“variation margin”). Variation margin is recorded as unrealized appreciation (depreciation) and shown as variation margin receivable (or payable) on centrally cleared swaps in the Statement of Assets and Liabilities. Payments received from (paid to) the counterparty are amortized over the term of the contract and recorded as realized gains (losses) in the Statement of Operations, including those at termination.
| • | Total return swaps — Total return swaps are entered into to obtain exposure to a security or market without owning such security or investing directly in such market or to exchange the risk/return of one security or market (e.g., fixed-income) with another security or market (e.g., equity or commodity prices) (equity risk, commodity price risk and/or interest rate risk). |
Total return swaps are agreements in which there is an exchange of cash flows whereby one party commits to make payments based on the total return (distributions plus capital gains/losses) of an underlying instrument, or basket of underlying instruments, in exchange for fixed or floating rate interest payments. If the total return of the instrument(s) or index underlying the transaction exceeds or falls short of the offsetting fixed or floating interest rate obligation, the Series receives payment from or makes a payment to the counterparty.
Certain total return swaps are designed to function as a portfolio of direct investments in long and short equity positions. This means that the Series has the ability to trade in and out of these long and short positions within the swap and will receive the economic benefits and risks equivalent to direct investment in these positions, subject to certain adjustments due to events related to the counterparty. Benefits and risks include capital appreciation (depreciation), corporate actions and dividends received and paid, all of which are reflected in the swap’s market value. The market value also includes interest charges and credits (“financing fees”) related to the notional values of the long and short positions and cash balances within the swap. These interest charges and credits are based on a specified benchmark rate plus or minus a specified spread determined based upon the country and/or currency of the positions in the portfolio.
Positions within the swap and financing fees are reset periodically. During a reset, any unrealized appreciation (depreciation) on positions and accrued financing fees become available for cash settlement between the Series and the counterparty. The amounts that are available for cash settlement are recorded as realized gains or losses in the Statement of Operations. Cash settlement in and out of the swap may occur at a reset date or any other date, at the discretion of the Series and the counterparty, over the life of the agreement. Certain swaps have no stated expiration and can be terminated by either party at any time.
| 108 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
Swap transactions involve, to varying degrees, elements of interest rate, credit and market risk in excess of the amounts recognized in the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavorable changes in interest rates and/or market values associated with these transactions.
Master Netting Arrangements: In order to define its contractual rights and to secure rights that will help it mitigate its counterparty risk, a Series may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between a Series and a counterparty that governs certain OTC derivatives and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, a Series may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.
Collateral Requirements: For derivatives traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Series and the counterparty.
Cash collateral that has been pledged to cover obligations of the Series and cash collateral received from the counterparty, if any, is reported separately in the Statement of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Series, if any, is noted in the Schedule of Investments. Generally, the amount of collateral due from or to a counterparty is subject to a certain minimum transfer amount threshold before a transfer is required, which is determined at the close of business of the Series. Any additional required collateral is delivered to/pledged by the Series on the next business day. Typically, the counterparty is not permitted to sell, re-pledge or use cash and non-cash collateral it receives. The Series generally agrees not to use non-cash collateral that it receives but may, absent default or certain other circumstances defined in the underlying ISDA Master Agreement, be permitted to use cash collateral received. In such cases, interest may be paid pursuant to the collateral arrangement with the counterparty. To the extent amounts due to the Series from the counterparties are not fully collateralized, the Series bears the risk of loss from counterparty non-performance. Likewise, to the extent the Series has delivered collateral to a counterparty and stands ready to perform under the terms of its agreement with such counterparty, the Series bears the risk of loss from a counterparty in the amount of the value of the collateral in the event the counterparty fails to return such collateral. Based on the terms of agreements, collateral may not be required for all derivative contracts.
For financial reporting purposes, the Series does not offset derivative assets and derivative liabilities that are subject to netting arrangements, if any, in the Statement of Assets and Liabilities.
| 6. | INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES |
Investment Advisory: The Master LLC, on behalf of the Series, entered into an Investment Advisory Agreement with the Manager, the Series’ investment adviser and an indirect, wholly-owned subsidiary of BlackRock, to provide investment advisory and administrative services. The Manager is responsible for the management of the Series’s portfolio and provides the personnel, facilities, equipment and certain other services necessary to the operations of the Series.
For such services, the Series pays the Manager a monthly fee at an annual rate equal to 0.01% of the average daily value of the Series’ net assets.
For the year ended December 31, 2020, the Series reimbursed the Manager for certain accounting services, which is included in accounting services in the Statement of Operations. The reimbursements were $36,648.
With respect to the Series, the Manager entered into a sub-advisory agreement with BlackRock Fund Advisors (“BFA”), an affiliate of the Manager. The Manager pays BFA for services it provides for that portion of the Series for which BFA acts as sub-adviser a monthly fee that is equal to a percentage of the investment advisory fees paid by the Series to the Manager.
Expense Limitations, Waivers and Reimbursements: The Manager contractually agreed to waive its investment advisory fees by the amount of investment advisory fees the Series pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”) through April 30, 2021. The contractual agreement may be terminated upon 90 days’ notice by a majority of the directors who are not “interested persons” of the Series, as defined in the 1940 Act (“Independent Directors”), or by a vote of a majority of the outstanding voting securities of the Series. The amount of waivers and/or reimbursements of fees and expenses made pursuant to the expense limitation described below will be reduced by the amount of the affiliated money market fund waiver. Prior to April 29, 2020, this waiver was voluntary. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2020, the amount waived was $19,456.
The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Series’ assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through April 30, 2021. The contractual agreement may be terminated upon 90 days’ notice by a majority of the Independent Directors, or by a vote of a majority of the outstanding voting securities of the Series. This amount is included in fees waived and/or reimbursed by the Manager in the Statement of Operations. For the year ended December 31, 2020, the Manager waived $1,732 in investment advisory fees pursuant to this arrangement.
The Manager contractually agreed to waive and/or reimburse fees or expenses in order to limit expenses, excluding interest expense, dividend expense, tax expense, acquired fund fees and expenses, and certain other fund expenses, which constitute extraordinary expenses not incurred in the ordinary course of the Series’ business (“expense limitation”). The expense limitation as a percentage of average daily net assets is 0.07%.
| SERIES NOTES TO FINANCIAL STATEMENTS |
109 |
Notes to Financial Statements (continued)
The Manager has agreed not to reduce or discontinue these contractual expense limitations through April 30, 2021, unless approved by the Board, including a majority of the Independent Directors, or by a vote of a majority of the outstanding voting securities of the Series. For the year ended December 31, 2020, there were no investment advisory fees waived and/or reimbursed by the Manager pursuant to this agreement.
Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BTC, an affiliate of the Manager, to serve as securities lending agent for the Series, subject to applicable conditions. As securities lending agent, BTC bears all operational costs directly related to securities lending. The Series is responsible for fees in connection with the investment of cash collateral received for securities on loan (the “collateral investment fees”). The cash collateral is invested in a money market fund, BlackRock Cash Funds: Institutional or BlackRock Cash Funds: Treasury, managed by the Manager or its affiliates. However, BTC has agreed to reduce the amount of securities lending income it receives in order to effectively limit the collateral investment fees the Series bears to an annual rate of 0.04%. The SL Agency Shares of such money market fund will not be subject to a sales load, distribution fee or service fee. The money market fund in which the cash collateral has been invested may, under certain circumstances, impose a liquidity fee of up to 2% of the value redeemed or temporarily restrict redemptions for up to 10 business days during a 90 day period, in the event that the money market fund’s weekly liquid assets fall below certain thresholds.
Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment fees. The Series retains a portion of securities lending income and remits a remaining portion to BTC as compensation for its services as securities lending agent.
Pursuant to the current securities lending agreement, the Series retains 75% of securities lending income (which excludes collateral investment fees), and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
In addition, commencing the business day following the date that the aggregate securities lending income earned across the BlackRock Multi-Asset Complex in a calendar year exceeds a specified threshold, the Series, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income in an amount equal to 80% of securities lending income (which excludes collateral investment fees), and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment fees.
The share of securities lending income earned by the Series is shown as securities lending income — affiliated – net in the Statement of Operations. For the year ended December 31, 2020, the Series paid BTC $1,540,434 for securities lending agent services.
Interfund Lending: In accordance with an exemptive order (the “Order”) from the SEC, the Series may participate in a joint lending and borrowing facility for temporary purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the Series’ investment policies and restrictions. The Series is currently permitted to borrow and lend under the Interfund Lending Program.
A lending BlackRock fund may lend in aggregate up to 15% of its net assets, but may not lend more than 5% of its net assets to any one borrowing fund through the Interfund Lending Program. A borrowing BlackRock fund may not borrow through the Interfund Lending Program or from any other source more than 33 1/3% of its total assets (or any lower threshold provided for by the fund’s investment restrictions). If a borrowing BlackRock fund’s total outstanding borrowings exceed 10% of its total assets, each of its outstanding interfund loans will be subject to collateralization of at least 102% of the outstanding principal value of the loan. All interfund loans are for temporary or emergency purposes and the interest rate to be charged will be the average of the highest current overnight repurchase agreement rate available to a lending fund and the bank loan rate, as calculated according to a formula established by the Board.
During the year ended December 31, 2020, the Series did not participate in the Interfund Lending Program.
Directors and Officers: Certain directors and/or officers of Master LLC are directors and/or officers of BlackRock or its affiliates.
Other Transactions: The Series may purchase securities from, or sell securities to, an affiliated fund provided the affiliation is due solely to having a common investment adviser, common officers, or common directors. For the year ended December 31, 2020, the purchase and sale transactions and any net realized gains (losses) with affiliated funds in compliance with Rule 17a-7 under the 1940 Act were as follows:
| Series Name | Purchases | Sales | Net Realized Gain (Loss) |
|||||||||
| Master Small Cap Index Series |
$ | 87,118,814 | $ | 232,302,729 | $ | 81,289,824 | ||||||
| 7. | PURCHASES AND SALES |
For the year ended December 31, 2020, purchases and sales of investments, excluding short-term investments, were $858,831,888 and $911,299,234, respectively.
| 8. | INCOME TAX INFORMATION |
The Series is classified as a partnership for U.S. federal income tax purposes. As such, each investor in the Series is treated as the owner of its proportionate share of net assets, income, expenses and realized and unrealized gains and losses of the Series. Therefore, no U.S. federal income tax provision is required. It is intended that the Series’ assets will be managed so an investor in the Series can satisfy the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended.
The Series files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Series’s U.S. federal tax returns generally remains open for a period of three fiscal years after they are filed. The statutes of limitations on the Series’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.
| 110 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Notes to Financial Statements (continued)
Management has analyzed tax laws and regulations and their application to the Series as of December 31, 2020, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Series’ financial statements.
As of December 31, 2020, gross unrealized appreciation and depreciation based on cost of investments (including short positions and derivatives, if any) for U.S. federal income tax purposes were as follows:
| Master Small Cap Index Series | ||||
| Tax cost |
$ | 3,173,619,985 | ||
|
|
|
|||
| Gross unrealized appreciation |
$ | 1,298,175,344 | ||
| Gross unrealized depreciation |
(279,899,059 | ) | ||
|
|
|
|||
| Net unrealized appreciation (depreciation) |
$ | 1,018,276,285 | ||
|
|
|
|||
| 9. | BANK BORROWINGS |
The Master LLC, on behalf of the Series, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.25 billion credit agreement with a group of lenders. Under this agreement, the Series may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Series, can borrow up to an aggregate commitment amount of $1.75 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.10% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2021 unless extended or renewed. These fees were allocated among such funds based upon portions of the aggregate commitment available to them and relative net assets of Participating Funds. During the year ended December 31, 2020, the Series did not borrow under the credit agreement.
| 10. | PRINCIPAL RISKS |
In the normal course of business, the Series invests in securities or other instruments and may enter into certain transactions, and such activities subject the Series to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability; (iii) regulation, taxation or international tax treaties between various countries; or (iv) currency, interest rate and price fluctuations. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, recessions, or other events could have a significant impact on the Series and its investments. The Series’ prospectus provides details of the risks to which the Series is subject.
The Series may be exposed to additional risks when reinvesting cash collateral in money market funds that do not seek to maintain a stable NAV per share of $1.00, which may be subject to redemption gates or liquidity fees under certain circumstances.
Market Risk: An outbreak of respiratory disease caused by a novel coronavirus has developed into a global pandemic and has resulted in closing borders, quarantines, disruptions to supply chains and customer activity, as well as general concern and uncertainty. The impact of this pandemic, and other global health crises that may arise in the future, could affect the economies of many nations, individual companies and the market in general in ways that cannot necessarily be foreseen at the present time. This pandemic may result in substantial market volatility and may adversely impact the prices and liquidity of a fund’s investments. The duration of this pandemic and its effects cannot be determined with certainty.
Valuation Risk: The market values of equities, such as common stocks and preferred securities or equity related investments, such as futures and options, may decline due to general market conditions which are not specifically related to a particular company. They may also decline due to factors which affect a particular industry or industries. The Series may invest in illiquid investments. An illiquid investment is any investment that the Series reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. The Series may experience difficulty in selling illiquid investments in a timely manner at the price that it believes the investments are worth. Prices may fluctuate widely over short or extended periods in response to company, market or economic news. Markets also tend to move in cycles, with periods of rising and falling prices. This volatility may cause the Series’ NAV to experience significant increases or decreases over short periods of time. If there is a general decline in the securities and other markets, the NAV of the Series may lose value, regardless of the individual results of the securities and other instruments in which the Series invests.
The price the Series could receive upon the sale of any particular portfolio investment may differ from the Series’ valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair valuation technique or a price provided by an independent pricing service. Changes to significant unobservable inputs and assumptions (i.e., publicly traded company multiples, growth rate, time to exit) due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Series’ results of operations. As a result, the price received upon the sale of an investment may be less than the value ascribed by the Series, and the Series could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. The Series’ ability to value its investments may also be impacted by technological issues and/or errors by pricing services or other third party service providers.
Counterparty Credit Risk: The Series may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions, including making timely interest and/or principal payments or otherwise honoring its obligations. The Series manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Series to market, issuer and counterparty credit risks, consist principally of financial instruments and
| SERIES NOTES TO FINANCIAL STATEMENTS |
111 |
Notes to Financial Statements (continued)
receivables due from counterparties. The extent of the Series’ exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Series.
A derivative contract may suffer a mark-to-market loss if the value of the contract decreases due to an unfavorable change in the market rates or values of the underlying instrument. Losses can also occur if the counterparty does not perform under the contract.
With exchange-traded futures, there is less counterparty credit risk to the Series since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Series does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default (including the bankruptcy or insolvency). Additionally, credit risk exists in exchange-traded futures with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Series.
Concentration Risk: A diversified portfolio, where this is appropriate and consistent with a fund’s objectives, minimizes the risk that a price change of a particular investment will have a material impact on the NAV of a fund. The investment concentrations within the Series’ portfolio are disclosed in its Schedule of Investments.
LIBOR Transition Risk: The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (“LIBOR”) by the end of 2021, and it is expected that LIBOR will cease to be published after that time. The Series may be exposed to financial instruments tied to LIBOR to determine payment obligations, financing terms, hedging strategies or investment value. The transition process away from LIBOR might lead to increased volatility and illiquidity in markets for, and reduce the effectiveness of new hedges placed against, instruments whose terms currently include LIBOR. The ultimate effect of the LIBOR transition process on the Series is uncertain.
| 11. | SUBSEQUENT EVENTS |
Management has evaluated the impact of all subsequent events on the Series through the date the financial statements were issued and has determined that there were no subsequent events requiring adjustment or additional disclosure in the financial statements.
| 112 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Report of Independent Registered Public Accounting Firm
To the Investors of Master Small Cap Index Series and the Board of Directors of Quantitative Master Series LLC:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities of Master Small Cap Index Series of Quantitative Master Series LLC (the “Fund”), including the schedule of investments, as of December 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. 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, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Deloitte & Touche LLP
Boston, Massachusetts
February 23, 2021
We have served as the auditor of one or more BlackRock investment companies since 1992.
| SERIES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
113 |
Statement Regarding Liquidity Risk Management Program
In compliance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), BlackRock FundsSM (the “Trust”), BlackRock Index Funds, Inc. and Quantitative Master Series LLC (the “Corporations”) have adopted and implemented a liquidity risk management program (the “Program”) for iShares Municipal Bond Index Fund, iShares Short-Term TIPS Bond Index Fund, iShares MSCI EAFE International Index Fund, iShares Russell 2000 Small-Cap Index Fund and Master Small Cap Index Series (the “Funds”), each a series of the Trust or the respective Corporation, which is reasonably designed to assess and manage each Fund’s liquidity risk.
The Board of Directors of the Corporations and the Board of Trustees of the Trust (collectively referred to herein as the “Board”), on behalf of the respective Funds, met on November 10-11 / 18-19, 2020 (the “Meeting”) to review the Program. The Board previously appointed BlackRock Advisors, LLC or BlackRock Fund Advisors (“BlackRock”), each an investment adviser to certain Funds, as the program administrator for each Fund’s Program, as applicable. BlackRock also previously delegated oversight of the Program to the 40 Act Liquidity Risk Management Committee (the “Committee”). At the Meeting, the Committee, on behalf of BlackRock, provided the Board with a report that addressed the operation of the Program and assessed its adequacy and effectiveness of implementation, including the operation of each Fund’s Highly Liquid Investment Minimum (“HLIM”) where applicable, and any material changes to the Program (the “Report”). The Report covered the period from October 1, 2019 through September 30, 2020 (the “Program Reporting Period”).
The Report described the Program’s liquidity classification methodology for categorizing a Fund’s investments (including derivative transactions) into one of four liquidity buckets. It also referenced the methodology used by BlackRock to establish a Fund’s HLIM and noted that the Committee reviews and ratifies the HLIM assigned to each Fund no less frequently than annually. The Report also discussed notable events affecting liquidity over the Program Reporting Period, including the impact of the coronavirus outbreak on the Funds and the overall market.
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, as follows:
| a) | The Fund’s investment strategy and liquidity of portfolio investments during both normal and reasonably foreseeable stressed conditions. During the Program Reporting Period, the Committee reviewed whether each Fund’s strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets. The Committee also factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account. Where a Fund participated in borrowings for investment purposes (such as tender option bonds and reverse repurchase agreements), such borrowings were factored into the Program’s calculation of a Fund’s liquidity bucketing. Derivative exposure was also considered in such calculation. |
| b) | Short-term and long-term cash flow projections during both normal and reasonably foreseeable stressed conditions. During the Program Reporting Period, the Committee reviewed historical net redemption activity and used this information as a component to establish each Fund’s reasonably anticipated trading size (“RATS”). Each Fund has adopted an in-kind redemption policy which may be utilized to meet larger redemption requests. The Committee may also take into consideration a Fund’s shareholder ownership concentration (which, depending on product type and distribution channel, may or may not be available), a Fund’s distribution channels, and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections. |
| c) | Holdings of cash and cash equivalents, as well as borrowing arrangements. The Committee considered the terms of the credit facility committed to the Funds, the financial health of the institution providing the facility and the fact that the credit facility is shared among multiple Funds (including that a portion of the aggregate commitment amount is specifically designated for BlackRock Floating Rate Income Portfolio, a series of BlackRock Funds V). The Committee also considered other types of borrowing available to the Funds, such as the ability to use reverse repurchase agreements and interfund lending, as applicable. |
There were no material changes to the Program during the Program Reporting Period. The Report provided to the Board stated that the Committee concluded that based on the operation of the functions, as described in the Report, the Program is operating as intended and is effective in implementing the requirements of the Liquidity Rule.
| 114 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Director and Officer Information
| Independent Directors(a) | ||||||||
| Name Year of Birth(b) |
Position(s) Held (Length of Service)(c) |
Principal Occupation(s) During Past Five Years | Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen |
Public Company and Other During | ||||
| Mark Stalnecker 1951 |
Chair of the Board (Since 2019) and Director (Since 2015) |
Chief Investment Officer, University of Delaware from 1999 to 2013; Trustee and Chair of the Finance and Investment Committees, Winterthur Museum and Country Estate from 2005 to 2016; Member of the Investment Committee, Delaware Public Employees’ Retirement System since 2002; Member of the Investment Committee, Christiana Care Health System from 2009 to 2017; Member of the Investment Committee, Delaware Community Foundation from 2013 to 2014; Director and Chair of the Audit Committee, SEI Private Trust Co. from 2001 to 2014. | 33 RICs consisting of 159 Portfolios | None | ||||
| Bruce R. Bond 1946 |
Director (Since 2019) |
Board Member, Amsphere Limited (software) since 2018; Trustee and Member of the Governance Committee, State Street Research Mutual Funds from 1997 to 2005; Board Member of Governance, Audit and Finance Committee, Avaya Inc. (computer equipment) from 2003 to 2007. | 33 RICs consisting of 159 Portfolios | None | ||||
| Susan J. Carter 1956 |
Director (Since 2016) |
Director, Pacific Pension Institute from 2014 to 2018; Advisory Board Member, Center for Private Equity and Entrepreneurship at Tuck School of Business since 1997; Senior Advisor, Commonfund Capital, Inc. (“CCI”) (investment adviser) in 2015; Chief Executive Officer, CCI from 2013 to 2014; President & Chief Executive Officer, CCI from 1997 to 2013; Advisory Board Member, Girls Who Invest from 2015 to 2018 and Board Member thereof since 2018; Advisory Board Member, Bridges Fund Management since 2016; Trustee, Financial Accounting Foundation since 2017; Practitioner Advisory Board Member, Private Capital Research Institute (“PCRI”) since 2017; Lecturer in the Practice of Management, Yale School of Management since 2019. | 33 RICs consisting of 159 Portfolios | None | ||||
| Collette Chilton 1958 |
Director (Since 2015) |
Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006. | 33 RICs consisting of 159 Portfolios | None | ||||
| Neil A. Cotty 1954 |
Director (Since 2016) |
Bank of America Corporation from 1996 to 2015, serving in various senior finance leadership roles, including Chief Accounting Officer from 2009 to 2015, Chief Financial Officer of Global Banking, Markets and Wealth Management from 2008 to 2009, Chief Accounting Officer from 2004 to 2008, Chief Financial Officer of Consumer Bank from 2003 to 2004, Chief Financial Officer of Global Corporate Investment Bank from 1999 to 2002. | 33 RICs consisting of 159 Portfolios | None | ||||
| Lena G. Goldberg 1949 |
Director (Since 2019) |
Senior Lecturer, Harvard Business School, since 2008; Director, Charles Stark Draper Laboratory, Inc. since 2013; FMR LLC/Fidelity Investments (financial services) from 1996 to 2008, serving in various senior roles including Executive Vice President - Strategic Corporate Initiatives and Executive Vice President and General Counsel; Partner, Sullivan & Worcester LLP from 1985 to 1996 and Associate thereof from 1979 to 1985. | 33 RICs consisting of 159 Portfolios | None | ||||
| DIRECTOR AND OFFICER INFORMATION |
115 |
Director and Officer Information (continued)
| Independent Directors(a) (continued) | ||||||||
| Name Year of Birth(b) |
Position(s) Held (Length of Service)(c) |
Principal Occupation(s) During Past Five Years | Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen |
Public Company and Other Investment Company Directorships Held During Past Five Years | ||||
| Henry R. Keizer 1956 |
Director (Since 2019) |
Director, Park Indemnity Ltd. (captive insurer) since 2010; Director, MUFG Americas Holdings Corporation and MUFG Union Bank, N.A. (financial and bank holding company) from 2014 to 2016; Director, American Institute of Certified Public Accountants from 2009 to 2011; Director, KPMG LLP (audit, tax and advisory services) from 2004 to 2005 and 2010 to 2012; Director, KPMG International in 2012, Deputy Chairman and Chief Operating Officer thereof from 2010 to 2012 and U.S. Vice Chairman of Audit thereof from 2005 to 2010; Global Head of Audit, KPMGI (consortium of KPMG firms) from 2006 to 2010; Director, YMCA of Greater New York from 2006 to 2010. |
33 RICs consisting of 159 Portfolios | Hertz Global Holdings (car rental); Montpelier Re Holdings, Ltd. (publicly held property and casualty reinsurance) from 2013 until 2015; WABCO (commercial vehicle safety systems); Sealed Air Corp. (packaging) | ||||
| Cynthia A. Montgomery 1952 | Director (Since 2007) |
Professor, Harvard Business School since 1989. |
33 RICs consisting of 159 Portfolios | Newell Rubbermaid, Inc. (manufacturing) | ||||
| Donald C. Opatrny 1952 | Director (Since 2019) |
Trustee, Vice Chair, Member of the Executive Committee and Chair of the Investment Committee, Cornell University since 2004; President, Trustee and Member of the Investment Committee, The Aldrich Contemporary Art Museum from 2007 to 2014; Member of the Board and Investment Committee, University School from 2007 to 2018; Member of the Investment Committee, Mellon Foundation from 2009 to 2015; Trustee, Artstor (a Mellon Foundation affiliate) from 2010 to 2015; President and Trustee, the Center for the Arts, Jackson Hole from 2011 to 2018; Director, Athena Capital Advisors LLC (investment management firm) since 2013; Trustee and Chair of the Investment Committee, Community Foundation of Jackson Hole since 2014; Member of Affordable Housing Supply Board of Jackson, Wyoming since 2018; Member, Investment Funds Committee, State of Wyoming since 2017; Trustee, Phoenix Art Museum since 2018; Trustee, Arizona Community Foundation and Member of Investment Committee since 2020. |
33 RICs consisting of 159 Portfolios | None | ||||
| Joseph P. Platt 1947 |
Director (Since 2007) |
General Partner, Thorn Partners, LP (private investments) since 1998; Director, WQED Multi-Media (public broadcasting not-for-profit) since 2001; Chair, Basic Health International (non-profit) since 2015. |
33 RICs consisting of 159 Portfolios | Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc. | ||||
| Kenneth L. Urish 1951 |
Director (Since 2007) |
Managing Partner, Urish Popeck & Co., LLC (certified public accountants and consultants) since 1976; Past- Chairman of the Professional Ethics Committee of the Pennsylvania Institute of Certified Public Accountants and Committee Member thereof since 2007; Member of External Advisory Board, The Pennsylvania State University Accounting Department since founding in 2001; Principal, UP Strategic Wealth Investment Advisors, LLC since 2013; Trustee, The Holy Family Institute from 2001 to 2010; President and Trustee, Pittsburgh Catholic Publishing Associates from 2003 to 2008; Director, Inter- Tel from 2006 to 2007. |
33 RICs consisting of 159 Portfolios | None | ||||
| 116 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Director and Officer Information (continued)
| Independent Directors(a) (continued) | ||||||||
| Name Year of Birth(b) |
Position(s) Held (Length of Service)(c) |
Principal Occupation(s) During Past Five Years | Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen |
Public Company and Other Investment Company Directorships Held During Past Five Years | ||||
| Claire A. Walton 1957 |
Director (Since 2016) |
Chief Operating Officer and Chief Financial Officer of Liberty Square Asset Management, LP from 1998 to 2015; General Partner of Neon Liberty Capital Management, LLC since 2003; Director, Boston Hedge Fund Group from 2009 to 2018; Director, Woodstock Ski Runners since 2013; Director, Massachusetts Council on Economic Education from 2013 to 2015. |
33 RICs consisting of 159 Portfolios | None | ||||
| Interested Directors(a)(d) | ||||||||
| Name Year of Birth(b) |
Position(s) Held (Length of Service)(c) |
Principal Occupation(s) During Past Five Years | Number of BlackRock-Advised Registered Investment Companies (“RICs”) Consisting of Investment Portfolios (“Portfolios”) Overseen |
Public Company and Other Investment Company Directorships Held During Past Five Years | ||||
| Robert Fairbairn 1965 |
Director (Since 2018) |
Vice Chairman of BlackRock, Inc. since 2019; Member of BlackRock’s Global Executive and Global Operating Committees; Co-Chair of BlackRock’s Human Capital Committee; Senior Managing Director of BlackRock, Inc. from 2010 to 2019; oversaw BlackRock’s Strategic Partner Program and Strategic Product Management Group from 2012 to 2019; Member of the Board of Managers of BlackRock Investments, LLC from 2011 to 2018; Global Head of BlackRock’s Retail and iShares® businesses from 2012 to 2016. |
117 RICs consisting of 267 Portfolios | None | ||||
| John M. Perlowski(e) 1964 | Director (Since 2015); President and Chief Executive Officer (Since 2010) |
Managing Director of BlackRock, Inc. since 2009; Head of BlackRock Global Accounting and Product Services since 2009; Advisory Director of Family Resource Network (charitable foundation) since 2009. |
118 RICs consisting of 268 Portfolios | None | ||||
| (a) The address of each Director is c/o BlackRock, Inc., 55 East 52nd Street, New York, New York 10055. | ||||||||
| (b) Independent Directors serve until their resignation, retirement, removal or death, or until December 31 of the year in which they turn 75. The Board may determine to extend the terms of Independent Directors on a case-by-case basis, as appropriate. | ||||||||
| (c) Following the combination of Merrill Lynch Investment Managers, L.P. (“MLIM”) and BlackRock, Inc. in September 2006, the various legacy MLIM and legacy BlackRock fund boards were realigned and consolidated into three new fund boards in 2007. Furthermore, effective January 1, 2019, three BlackRock Fund Complexes were realigned and consolidated into two BlackRock Fund Complexes. As a result, although the chart shows the year that each Independent Director joined the Board, certain Independent Directors first became members of the boards of other BlackRock-advised Funds, legacy MLIM funds or legacy BlackRock funds as follows: Bruce R. Bond, 2005; Cynthia A. Montgomery, 1994; Joseph P. Platt, 1999; Kenneth L. Urish, 1999; Lena G. Goldberg, 2016; Henry R. Keizer, 2016; Donald C. Opatrny, 2015. | ||||||||
| (d) Mr. Fairbairn and Mr. Perlowski are both “interested persons,” as defined in the 1940 Act, of the Trust/Corporations based on their positions with BlackRock, Inc. and its affiliates. Mr. Fairbairn and Mr. Perlowski are also board members of the BlackRock Fixed-Income Complex. | ||||||||
| (e) Mr. Perlowski is also a trustee of the BlackRock Credit Strategies Fund. | ||||||||
| DIRECTOR AND OFFICER INFORMATION |
117 |
Director and Officer Information (continued)
| Officers Who Are Not Directors(a) | ||||
| Name Year of Birth(b) |
Position(s) Held (Length of Service) |
Principal Occupation(s) During Past Five Years | ||
| Thomas Callahan 1968 |
Vice President (Since 2016) |
Managing Director of BlackRock, Inc. since 2013; Member of the Board of Managers of BlackRock Investments, LLC (principal underwriter) since 2019 and Managing Director thereof since 2017; Head of BlackRock’s Global Cash Management Business since 2016; Co-Head of the Global Cash Management Business from 2014 to 2016; Deputy Head of the Global Cash Management Business from 2013 to 2014; Member of the Cash Management Group Executive Committee since 2013; Chief Executive Officer of NYSE Liffe U.S. from 2008 to 2013. | ||
| Jennifer McGovern 1977 |
Vice President (Since 2014) |
Managing Director of BlackRock, Inc. since 2016; Director of BlackRock, Inc. from 2011 to 2015; Head of Americas Product Development and Governance for BlackRock’s Global Product Group since 2019; Head of Product Structure and Oversight for BlackRock’s U.S. Wealth Advisory Group from 2013 to 2019. | ||
| Neal J. Andrews 1966 |
Chief Financial Officer (Since 2007) |
Chief Financial Officer of the iShares® exchange traded funds from 2019 to 2020; Managing Director of BlackRock, Inc. since 2006. | ||
| Jay M. Fife 1970 |
Treasurer (Since 2007) |
Managing Director of BlackRock, Inc. since 2007. | ||
| Charles Park 1967 |
Chief Compliance Officer (Since 2014) |
Anti-Money Laundering Compliance Officer for certain BlackRock-advised Funds from 2014 to 2015; Chief Compliance Officer of BlackRock Advisors, LLC and the BlackRock-advised Funds in the BlackRock Multi-Asset Complex and the BlackRock Fixed-Income Complex since 2014; Principal of and Chief Compliance Officer for iShares® Delaware Trust Sponsor LLC since 2012 and BlackRock Fund Advisors (“BFA”) since 2006; Chief Compliance Officer for the BFA-advised iShares® exchange traded funds since 2006; Chief Compliance Officer for BlackRock Asset Management International Inc. since 2012. | ||
| Lisa Belle 1968 |
Anti-Money Laundering Compliance Officer (Since 2019) |
Managing Director of BlackRock, Inc. since 2019; Global Financial Crime Head for Asset and Wealth Management of JP Morgan from 2013 to 2019; Managing Director of RBS Securities from 2012 to 2013; Head of Financial Crimes for Barclays Wealth Americas from 2010 to 2012. | ||
| Janey Ahn 1975 |
Secretary (Since 2019) |
Managing Director of BlackRock, Inc. since 2018; Director of BlackRock, Inc. from 2009 to 2017. | ||
| (a) The address of each Officer is c/o BlackRock, Inc., 55 East 52nd Street, New York, New York 10055. | ||||
| (b) Officers of the Trust/Corporation serve at the pleasure of the Board. | ||||
Further information about the Trust’s/Corporations’ Directors and Officers is available in the Trust’s/Corporations’ Statement of Additional Information, which can be obtained without charge by calling (800) 441-7762.
|
Neal J. Andrews retired as the Chief Financial Officer effective December 31, 2020, and Trent Walker was elected as the Chief Financial Officer effective January 1, 2021.
| ||||
| 118 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Regulation Regarding Derivatives
On October 28, 2020, the Securities and Exchange Commission (the “SEC”) adopted new regulations governing the use of derivatives by registered investment companies (“Rule 18f-4”). The Funds will be required to implement and comply with Rule 18f-4 by the third quarter of 2022. Once implemented, Rule 18f-4 will impose limits on the amount of derivatives a fund can enter into, eliminate the asset segregation framework currently used by funds to comply with Section 18 of the 1940 Act, treat derivatives as senior securities so that a failure to comply with the limits would result in a statutory violation and require funds whose use of derivatives is more than a limited specified exposure amount to establish and maintain a comprehensive derivatives risk management program and appoint a derivatives risk manager.
Dividend Policy
iShares Municipal Bond Index Fund’s dividend policy is to distribute all or a portion of its net investment income to its shareholders on a monthly basis. In order to provide shareholders with a more stable level of distributions, the Fund may at times pay out less than the entire amount of net investment income earned in any particular month/quarter and may at times in any particular month/quarter pay out such accumulated but undistributed income in addition to net investment income earned in that month/quarter. As a result, the distributions paid by the Fund for any particular month/quarter may be more or less than the amount of net investment income earned by the Fund during such month/quarter. The Fund’s current accumulated but undistributed net investment income, if any, is disclosed as accumulated earnings (loss) in the Statements of Assets and Liabilities, which comprises part of the financial information included in this report.
General Information
Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Funds may be found on BlackRock’s website, which can be accessed at blackrock.com. Any reference to BlackRock’s website in this report is intended to allow investors public access to information regarding the Funds and does not, and is not intended to, incorporate BlackRock’s website in this report.
Householding
The Funds will mail only one copy of shareholder documents, including prospectuses, annual and semi-annual reports, Rule 30e-3 notices and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Funds at (800) 441-7762.
Availability of Quarterly Schedule of Investments
The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to their reports on Form N-PORT. The Funds’ Forms N-PORT are available on the SEC’s website at sec.gov. Additionally, each Fund makes its portfolio holdings for the first and third quarters of each fiscal year available at blackrock.com/fundreports.
Availability of Proxy Voting Policies and Procedures
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available upon request and without charge (1) by calling (800) 441-7762; (2) at blackrock.com; and (3) on the SEC’s website at sec.gov.
Availability of Proxy Voting Record
Information about how the Funds voted proxies relating to securities held in the Funds’ portfolios during the most recent 12-month period ended June 30 is available upon request and without charge (1) at blackrock.com; or by calling (800) 441-7762 and (2) on the SEC’s website at sec.gov.
BlackRock’s Mutual Fund Family
BlackRock offers a diverse lineup of open-end mutual funds crossing all investment styles and managed by experts in equity, fixed-income and tax-exempt investing. Visit blackrock.com for more information.
Shareholder Privileges
Account Information
Call us at (800) 441-7762 from 8:00 AM to 6:00 PM ET on any business day to get information about your account balances, recent transactions and share prices. You can also visit blackrock.com for more information.
Automatic Investment Plans
Investor class shareholders who want to invest regularly can arrange to have $50 or more automatically deducted from their checking or savings account and invested in any of the BlackRock funds.
| ADDITIONAL INFORMATION |
119 |
Additional Information (continued)
Systematic Withdrawal Plans
Investor class shareholders can establish a systematic withdrawal plan and receive periodic payments of $50 or more from their BlackRock funds, as long as their account balance is at least $10,000.
Retirement Plans
Shareholders may make investments in conjunction with Traditional, Rollover, Roth, Coverdell, Simple IRAs, SEP IRAs and 403(b) Plans.
BlackRock Privacy Principles
BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information BlackRock collects, how we protect that information and why in certain cases we share such information with select parties.
If you are located in a jurisdiction where specific laws, rules or regulations require BlackRock to provide you with additional or different privacy-related rights beyond what is set forth below, then BlackRock will comply with those specific laws, rules or regulations.
BlackRock obtains or verifies personal non-public information from and about you from different sources, including the following: (i) information we receive from you or, if applicable, your financial intermediary, on applications, forms or other documents; (ii) information about your transactions with us, our affiliates, or others; (iii) information we receive from a consumer reporting agency; and (iv) from visits to our websites.
BlackRock does not sell or disclose to non-affiliated third parties any non-public personal information about its Clients, except as permitted by law or as is necessary to respond to regulatory requests or to service Client accounts. These non-affiliated third parties are required to protect the confidentiality and security of this information and to use it only for its intended purpose.
We may share information with our affiliates to service your account or to provide you with information about other BlackRock products or services that may be of interest to you. In addition, BlackRock restricts access to non-public personal information about its Clients to those BlackRock employees with a legitimate business need for the information. BlackRock maintains physical, electronic and procedural safeguards that are designed to protect the non-public personal information of its Clients, including procedures relating to the proper storage and disposal of such information.
Fund and Service Providers
| (a) | Administrator to iShares Russell 2000 Small-Cap Index Fund. |
| (b) | For iShares Municipal Bond Index Fund. |
| 120 | 2020 BLACKROCK ANNUAL REPORT TO SHAREHOLDERS |
Glossary of Terms Used in this Report
Portfolio Abbreviation
| ADR | American Depositary Receipt | |
| AGC | Assured Guaranty Corp. | |
| AGM | Assured Guaranty Municipal Corp. | |
| AMBAC | AMBAC Assurance Corp. | |
| AMT | Alternative Minimum Tax | |
| ARB | Airport Revenue Bonds | |
| CAB | Capital Appreciation Bonds | |
| COP | Certificates of Participation | |
| ETF | Exchange-Traded Fund | |
| FTSE | Financial Times Stock Exchange | |
| GO | General Obligation Bonds | |
| PSF | Permanent School Fund | |
| RB | Revenue Bond | |
| REIT | Real Estate Investment Trust | |
| SAP | Subject to Appropriations | |
| SAW | State Aid Withholding | |
| SCA | Svenska Celluosa Aktiebolaget | |
| GLOSSARY OF TERMS USED IN THIS REPORT |
121 |
Want to know more?
blackrock.com | 800-441-7762
This report is intended for current holders. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of the Funds unless preceded or accompanied by the Funds’ current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.
iSIndex-12/20-AR
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(b) Not Applicable
| 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, principal accounting officer or controller, or persons performing similar functions. During the period covered by this report, the code of ethics was amended to update certain information and to make other non-material changes. During the period covered by this report, there have been no waivers granted under the code of ethics. The registrant undertakes to provide a copy of the code of ethics to any person upon request, without charge, who calls 1-800-441-7762. |
| Item 3 – | Audit Committee Financial Expert – The registrant’s board of directors (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: |
Neil A. Cotty
Henry R. Keizer
Kenneth L. Urish
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 of a person 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. The designation or identification of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or board of directors.
| Item 4 – | Principal Accountant Fees and Services |
The following table presents fees billed by Deloitte & Touche LLP (“D&T”) in each of the last two fiscal years for the services rendered to the Fund:
| Entity Name |
(a) Audit Fees | (b) Audit-Related Fees1 | (c) Tax Fees2 | (d) All Other Fees | ||||||||||||
| Current Fiscal Year End |
Previous Fiscal Year End |
Current Fiscal Year End |
Previous Fiscal Year End |
Current Fiscal Year End |
Previous Fiscal Year End |
Current Fiscal Year End |
Previous Fiscal Year End | |||||||||
| iShares Municipal Bond Index Fund | $32,640 | $32,640 | $0 | $0 | $15,400 | $13,400 | $0 | $0 | ||||||||
The following table presents fees billed by D&T that were required to be approved by the registrant’s audit committee (the “Committee”) for services that relate directly to the operations or financial reporting of the Fund and that are rendered on behalf of BlackRock Advisors, LLC (the “Investment Adviser” or “BlackRock”) and entities controlling, controlled by, or under common control with BlackRock (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the Fund (“Affiliated Service Providers”):
| Current Fiscal Year End | Previous Fiscal Year End | |||
| (b) Audit-Related Fees1 |
$0 | $0 | ||
| (c) Tax Fees2 |
$0 | $0 | ||
| (d) All Other Fees3 |
$1,984,000 | $2,050,500 |
| 1 | The nature of the services includes assurance and related services reasonably related to the performance of the audit or review of financial statements not included in Audit Fees, including accounting consultations, agreed-upon procedure reports, attestation reports, comfort letters, out-of-pocket expenses and internal control reviews not required by regulators. |
| 2 | The nature of the services includes tax compliance and/or tax preparation, including services relating to the filing or amendment of federal, state or local income tax returns, regulated investment company qualification reviews, taxable income and tax distribution calculations. |
| 3 | Non-audit fees of $1,984,000 and $2,050,500 for the current fiscal year and previous fiscal year, respectively, were paid to the Fund’s principal accountant in their entirety by BlackRock, in connection with services provided to the Affiliated Service Providers of the Fund and of certain other funds sponsored and advised by BlackRock or its affiliates for a service organization review and an accounting research tool subscription. These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis. |
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
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 Investment Adviser and 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 operations 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 per project. 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 the Committee Chairman 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 Committee pursuant to the de minimis exception in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) The aggregate non-audit fees, defined as the sum of the fees shown under “Audit-Related Fees,” “Tax Fees” and “All Other Fees,” paid to the accountant for services rendered by the accountant to the registrant, the Investment Adviser and the Affiliated Service Providers were:
| Entity Name | Current Fiscal Year End | Previous Fiscal Year End | ||||
| iShares Municipal Bond Index Fund | $15,400 | $13,400 |
3
Additionally, the amounts billed by D&T in connection with services provided to the Affiliated Service Providers of the Fund and of other funds sponsored and advised by BlackRock or its affiliates during the current and previous fiscal years for a service organization review and an accounting research tool subscription were:
| Current Fiscal Year End |
Previous Fiscal Year End | |
|
$1,984,000 |
$2,050,500 |
These amounts represent aggregate fees paid by BlackRock and were not allocated on a per fund basis.
(h) The Committee has considered and determined that the provision of non-audit services that were rendered to the Investment Adviser and the Affiliated Service Providers 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.
| Item 5 – | Audit Committee of Listed Registrant – Not Applicable |
| Item 6 – | Investments |
(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form.
(b) Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing.
| Item 7 – | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies – Not Applicable |
| Item 8 – | Portfolio Managers of Closed-End Management Investment Companies – Not Applicable |
| Item 9 – | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers – Not Applicable |
| Item 10 – | Submission of Matters to a Vote of Security Holders – There have been no material changes to these procedures. |
| Item 11 – | Controls and Procedures |
(a) The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing of this report based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
| Item 12 – | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies – Not Applicable |
| Item 13 – | Exhibits attached hereto |
(a)(1) Code of Ethics – See Item 2
(a)(2) Section 302 Certifications are attached
(a)(3) Not Applicable
(a)(4) Not Applicable
(b) Section 906 Certifications are attached
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BlackRock Funds
| By: | /s/ John M. Perlowski | |||
| John M. Perlowski | ||||
| Chief Executive Officer (principal executive officer) of | ||||
| BlackRock Funds |
Date: March 5, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ John M. Perlowski | |||
| John M. Perlowski | ||||
| Chief Executive Officer (principal executive officer) of | ||||
| BlackRock Funds |
Date: March 5, 2021
| By: | /s/ Trent Walker | |||
| Trent Walker | ||||
| Chief Financial Officer (principal financial officer) of | ||||
| BlackRock Funds |
Date: March 5, 2021