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^SM

BlackRock Advantage ESG U.S. Equity Fund

Fund Address:    100 Bellevue Parkway, Wilmington, DE 19809

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

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

Date of fiscal year end: 05/31/2021

Date of reporting period: 05/31/2021

Item 1 – Report to Stockholders

(a) The Report to Shareholders is attached herewith.

MAY 31, 2021

2021 Annual Report

BlackRock Funds^SM

🌑 BlackRock Advantage ESG U.S. Equity Fund

Not FDIC Insured • May Lose Value • No Bank Guarantee

The Markets in Review

Dear Shareholder,

The 12-month reporting period as of May 31, 2021 was a remarkable period of adaptation and recovery, as the global economy dealt with the implications of the coronavirus (or “COVID-19”) pandemic. The United States, along with most of the world, began the reporting period in a severe recession, prompted by pandemic-related restrictions that disrupted many aspects of daily life. However, easing restrictions and robust government intervention led to a strong rebound, and the economy grew at a significant pace for most of the reporting period, recovering much of the output lost at the beginning of the pandemic.

Equity prices rose with the broader economy, as investors became increasingly optimistic about the economic outlook. Stocks rose through the summer of 2020, fed by strong fiscal and monetary support and positive economic indicators. The implementation of mass vaccination campaigns and passage of an additional $1.9 trillion of fiscal stimulus further boosted stocks, and many equity indices neared or surpassed all-time highs late in the reporting period. In the United States, both large- and small-capitalization stocks posted a significant advance. International equities also gained, as both developed countries and emerging markets rebounded substantially.

The 10-year U.S. Treasury yield (which is inversely related to bond prices) had fallen sharply prior to the beginning of the reporting period, which meant bonds were priced for extreme risk avoidance and economic disruption. Despite expectations of doom and gloom, the economy expanded rapidly, stoking inflation concerns late in the reporting period, which led to higher yields and a negative overall return for most U.S. Treasuries. In the corporate bond market, support from the U.S. Federal Reserve (the “Fed”) assuaged credit concerns and led to substantial returns for high-yield corporate bonds, although investment-grade corporates declined slightly.

The Fed remained committed to accommodative monetary policy by maintaining near zero interest rates and by announcing that inflation could exceed its 2% target for a sustained period without triggering a rate increase. To stabilize credit markets, the Fed also continued purchasing significant quantities of bonds, as did other influential central banks around the world, including the European Central Bank and the Bank of Japan.

Looking ahead, while coronavirus-related disruptions have clearly hindered worldwide economic growth, we believe that the global expansion will continue to accelerate as vaccination efforts ramp up and pent-up consumer demand leads to higher spending. While we expect inflation to increase somewhat as the expansion continues, we believe the recent uptick owes more to temporary supply disruptions than a lasting change in fundamentals. The change in Fed policy also means that moderate inflation is less likely to be followed by interest rate hikes that could threaten the economic expansion.

Overall, we favor a positive stance toward risk, with an overweight in equities. We see U.S. and Asian equities outside of Japan benefiting from structural growth trends in technology, while emerging markets should be particularly helped by a vaccine-led economic expansion and more stable U.S. trade policy. While we are underweight long-term on credit, global high-yield and Asian bonds present attractive opportunities, as do emerging market bonds denominated in local currencies. We believe that international diversification and a focus on sustainability can help provide portfolio resilience, and the disruption created by the coronavirus appears to be accelerating the shift toward sustainable investments.

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

Sincerely,

Rob Kapito

President, BlackRock Advisors, LLC

Rob Kapito

President, BlackRock Advisors, LLC

Total Returns as of May 31, 2021
	6-Month	12-Month
U.S. large cap equities (S&P 500® Index)	16.95%	40.32%
U.S. small cap equities (Russell 2000® Index)	25.28	64.56
International equities (MSCI Europe, Australasia, Far East Index)	15.19	38.41
Emerging market equities (MSCI Emerging Markets Index)	15.15	51.00
3-month Treasury bills (ICE BofA 3-Month U.S. Treasury Bill Index)	0.04	0.11
U.S. Treasury securities (ICE BofA 10-Year U.S. Treasury Index)	(6.07)	(7.30)
U.S. investment grade bonds (Bloomberg Barclays U.S. Aggregate Bond Index)	(2.16)	(0.40)
Tax-exempt municipal bonds (S&P Municipal Bond Index)	1.54	4.70
U.S. high yield bonds (Bloomberg Barclays U.S. Corporate High Yield 2% Issuer Capped Index)	4.18	14.90
Past performance is not an indication of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.

2 T H I S   P A G E   I S   N O T   P A R T   O F   Y O U R   F U N D   R E P O R T

Table of Contents

	Page
The Markets in Review	2
Annual Report:
Fund Summary	4
About Fund Performance	7
Disclosure of Expenses	7
Derivative Financial Instruments	7
Financial Statements:
Schedule of Investments	8
Statement of Assets and Liabilities	13
Statement of Operations	15
Statements of Changes in Net Assets	16
Financial Highlights	17
Notes to Financial Statements	21
Report of Independent Registered Public Accounting Firm	30
Important Tax Information	31
Disclosure of Investment Advisory Agreement	32
Trustee and Officer Information	35
Additional Information	39
Glossary of Terms Used in this Report	41

    3

Fund Summary   as of May 31, 2021 BlackRock Advantage ESG U.S. Equity Fund

Investment Objective

BlackRock Advantage ESG U.S. Equity Fund’s (the “Fund”) investment objective is to seek to provide total return.

On November 11, 2020, the Board of Trustees of BlackRock Funds^SM approved certain changes to the Fund’s investment strategies, and the Fund changed its benchmark index from the Russell 3000^® Index to the Russell 1000^® Index effective on December 14, 2020.

Portfolio Management Commentary

How did the Fund perform?

For the 12-month period ended May 31, 2021, the Fund outperformed both its former benchmark, the Russell 3000^® Index, and its new benchmark, the Russell 1000^® Index.

Investment Process

BlackRock Advisors, LLC (“BlackRock”) seeks to utilize exclusionary screens in determining the investment universe and to incorporate investment insights related to environmental, social and governance (“ESG”) characteristics in the portfolio construction process. To determine the Fund’s investable universe, BlackRock, the Fund’s investment manager, will first seek to screen out certain companies or industries based on certain ESG criteria determined by BlackRock. Such screening criteria includes companies with exposure to controversial weapons, civilian firearms, tobacco and fossil fuels beyond specified thresholds, as determined by BlackRock. The Fund then seeks to pursue its investment objective by investing in equity securities in a disciplined manner, by using proprietary return forecast models that incorporate quantitative analysis. These forecast models are designed to identify aspects of mispricing across stocks which the Fund can seek to capture by over- and under-weighting particular equities while seeking to control incremental risk. The investment process is driven with systematic and quantitative implementation based on an issuer’s expected returns, which include measurable ESG characteristics, risk and transaction costs, as determined by BlackRock’s proprietary research.

BlackRock then constructs and rebalances the portfolio’s weightings by integrating its investment insights with the model-based optimization process. Certain of the investment insights relate to ESG characteristics in BlackRock defined categories, including, but not limited to, (i) superior growth characteristics of issuers, (ii) risk mitigation characteristics of issuers, (iii) themes related to social matters and (iv) economic transition, which includes, but is not limited to, environmental considerations. Examples of such ESG characteristics include management quality, governance, controversies at issuers, public health analytics and an issuer’s innovation-oriented research and development. The ESG characteristics utilized in the portfolio construction process may change over time and one or more characteristics may not be relevant to all issuers that are eligible for investment.

BlackRock’s ESG research does not attempt to capture all possible ESG characteristics, rather those that in BlackRock’s opinion, can be measured and have an associated investment thesis. Fund management may consider both positive and negative ESG characteristics of an issuer when developing such investment theses. BlackRock determines which ESG characteristics to include in the model and what changes are made in the model over time. ESG-related characteristics are not the sole considerations in the portfolio construction process and BlackRock’s evaluation of ESG characteristics may change over time. In addition, the Fund may gain indirect exposure (through, including but not limited to, derivatives and investments in other investment companies) to issuers with exposures that are inconsistent with the ESG criteria used by BlackRock described above.

What factors influenced performance?

The Fund performed well against the backdrop of sharp market rotations. The period began with the early stages of economic reopening before heading into a more turbulent fall. Markets struggled in October 2020, as investor attention shifted away from earnings results and instead focused on macro headlines. The impending U.S. election, COVID-19 virus trends and expectations for future fiscal policy became the dominant themes. However, in November 2020 the market experienced a sharp rotation after the announcement of strong efficacy data from vaccine developers. This motivated a robust cyclical rally given stronger economic recovery expectations. The subsequent rotation out of momentum styles, which had led the market to that point in 2020, was one of the strongest on record as investors moved toward previous market laggards. This trend accelerated in 2021 as the reflation rally gathered steam. The prospect of additional fiscal policy support after the Georgia senate election results and aggressive vaccine distribution led to a strong investor preference for cyclicality and valuation-based exposures amid more robust economic reopening.

Interestingly, insights related to ESG factors were the top performers during the period, despite the sharp reflationary tone. This once again highlighted the diversifying nature of these insights against more traditional lenses of stock selection. The best performing insight captured investor flows into ESG-related positions, benefiting from the continued investor preference for this space. In particular, the insight provided strong gains across industrial and technology shares, successfully capturing the reflationary tone late in the period. Environmental measures related to both water and carbon intensity were additive early in the period, as these insights have proven to be proxies for operational efficiencies. Finally, employee-based dimensions performed well in capturing the reopening theme. This was highlighted by an insight that looks at employer-provided benefits, which provided gains in select retail and financial companies.

Elsewhere across the stock selection model, trend-based sentiment insights performed well having correctly captured market themes as they emerged. Signals that benefit from higher frequency alternative data across credit card transaction, mobile application utilization and online search activity all performed well within retail names. As economies continued to reopen, insights capturing trends across supply chains and hiring activity performed well across communications services stocks.

Despite the overall model strength, the portfolio struggled in the fourth quarter of 2020 amid the sizable momentum rotation, which prompted a reversal of dominant market trends. This adversely impacted insights that captured COVID-related themes such as working from home and vaccine development. Importantly, these insights had been some of the strongest performing until that time. Additionally, sentiment insights that look toward bond investors came under pressure given the sharp rise in interest rates that dominated fixed income markets in February 2021. Finally, measures focused on company management struggled during the period given broad-based business uncertainty. These measures also tend to have a growth-orientation, which struggled against the strong value environment in the back half of the period.

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Fund Summary   as of May 31, 2021 (continued) BlackRock Advantage ESG U.S. Equity Fund

Describe recent portfolio activity.

During the period, the Fund changed its benchmark from the Russell 3000^® Index to the Russell 1000^® Index, resulting in a shift to a higher primary market capitalization exposure.

Over the course of the period, the portfolio maintained a balanced allocation of risk across all major return drivers. There were, however, several new signals added within the stock selection group of insights. The Fund built upon its alternative data capabilities by adding an insight that captures brand sentiment around retail names. Additionally, given the dynamism of the current environment, the Fund has instituted enhanced signal constructs to best identify emerging trends, such as sentiment around vaccine distribution and the impact on economic reopening. Within ESG-related insights the Fund added further transition measures looking at the issuance by companies of “green” bonds.

Describe portfolio positioning at period end.

The Fund remained largely sector neutral relative to the Russell 1000^® Index. At period end, the Fund had slight overweight positions to information technology and consumer staples and slight underweights to health care and consumer discretionary.

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.

The Fund commenced operations on October 5, 2015.

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

^(b)  Under normal circumstances, the Fund seeks to invest at least 80% of its net assets plus any borrowings for investment purposes in U.S. equity securities, which include common stock, preferred stock and convertible securities.

^(c)  An index that measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000^® Index and includes approximately 1,000 of the largest securities based on a combination of their market capitalization and current index membership. The index represents approximately 92% of the total market capitalization of the Russell 3000^® Index. Effective December 14, 2020, the Fund changed its benchmark against which it measures its performance from the Russell 3000^® Index to the Russell 1000^® Index.

^(d)  An index that measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market.

F U N D   S U M M A R Y 5

Fund Summary  as of May 31, 2021 (continued) BlackRock Advantage ESG U.S. Equity Fund

Performance Summary for the Period Ended May 31, 2021

				Average Annual Total Returns(a)
				1 Year						5 Years						Since Inception(b)
	6-Month Total Returns			Without Sales Charge			With Sales Charge			Without Sales Charge			With Sales Charge			Without Sales Charge			With Sales Charge
Institutional		18.60	%		45.64	%		N/A			18.23	%		N/A			17.08	%		N/A
Investor A		18.43			45.25			37.62	%		17.92			16.65	%		16.78			15.67	%
Investor C		17.97			44.13			43.13			17.05			17.05			15.92			15.92
Class K		18.62			45.68			N/A			18.28			N/A			17.12			N/A
Russell 1000® Index		16.88			42.66			N/A			17.46			N/A			16.59			N/A
Russell 3000® Index		17.39			43.91			N/A			17.36			N/A			16.43			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.

^(b) The Fund commenced operations on October 5, 2015.

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 (12/01/20)		Ending Account Value (05/31/21)		Expenses Paid During the Period(b)		Beginning Account Value (12/01/20)		Ending Account Value (05/31/21)		Expenses Paid During the Period(b)		Annualized Expense Ratio
Institutional		$1,000.00		$1,186.00		$2.62		$1,000.00		$1,022.54		$2.42		0.48	%
Investor A		1,000.00		1,184.30		3.98		1,000.00		1,021.29		3.68		0.73
Investor C		1,000.00		1,179.70		8.04		1,000.00		1,017.55		7.44		1.48
Class K		1,000.00		1,186.20		2.34		1,000.00		1,022.79		2.17		0.43

^(a)  Hypothetical 5% annual return before expenses is calculated by prorating the number of days in the most recent fiscal half year divided by 365.

^(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 182/365 (to reflect the six-month period shown).

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

Portfolio Information

TEN LARGEST HOLDINGS
Security(a)	Percent of Net Assets
Apple, Inc.		4	%
Microsoft Corp.		4
Amazon.com, Inc.		2
Alphabet, Inc., Class A		2
Alphabet, Inc., Class C		2
Home Depot, Inc.		2
Walt Disney Co.		2
Tesla, Inc.		2
Mastercard, Inc., Class A		1
PayPal Holdings, Inc.		1

SECTOR ALLOCATION
Sector(b)	Percent of Net Assets
Information Technology		26	%
Financials		12
Health Care		12
Consumer Discretionary		11
Industrials		10
Communication Services		9
Consumer Staples		6
Real Estate		4
Energy		3
Materials		3
Utilities		2
Short-Term Securities		3
Liabilities in Excess of Other Assets		(1	)

^(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.

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About Fund Performance BlackRock Advantage ESG U.S. Equity Fund

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 shown prior to the Class K Shares inception date of March 28, 2016 is that of Institutional Shares. The performance of the 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.

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

Investor C Shares are subject to a 1.00% CDSC if redeemed within one year of purchase. In addition, these shares are subject to a distribution fee of 0.75% per year and a service fee of 0.25% per year. These shares are generally available through financial intermediaries. These shares automatically convert to Investor A Shares after approximately eight years.

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 table 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”), the Fund’s investment adviser, has contractually and/or voluntarily agreed to waive and/or reimburse a portion of the Fund’s expenses. Without such waiver(s) and/or reimbursement(s), the Fund’s performance would have been lower. With respect to the 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 the 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.

Disclosure of Expenses

Shareholders of the Fund may incur the following charges: (a) transactional expenses, such as sales charges; and (b) operating expenses, including investment advisory fees, service and distribution fees, including 12b-1 fees, acquired fund fees and expenses, and other fund expenses. The expense example shown (which is based on a hypothetical investment of $1,000 invested on December 1, 2020 and held through May 31, 2021) is intended to assist shareholders both in calculating expenses based on an investment in the Fund and in comparing these expenses with similar costs of investing in other mutual funds.

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

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

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

Derivative Financial Instruments

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

A B O U T   F U N D   P E R F O R M A N C E   /   D I S C L O S U R E   O F    E X P E N S E S   /   D E R I V A T I V E   F I N A N C I A L   I N S T R U M E N T S 7

Schedule of Investments May 31, 2021 BlackRock Advantage ESG U.S. Equity Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Common Stocks
Aerospace & Defense — 0.3%
Axon Enterprise, Inc.(a)		475	$	66,780
Curtiss-Wright Corp.		198		24,813
HEICO Corp.		267		37,503
HEICO Corp., Class A		593		78,549
Hexcel Corp.(a)		404		24,022
Howmet Aerospace, Inc.(a)		3,007		106,688
L3Harris Technologies, Inc.		1,744		380,297
Mercury Systems, Inc.(a)		261		17,082
Spirit AeroSystems Holdings, Inc., Class A		799		39,319
Teledyne Technologies, Inc.(a)		351		147,234
				922,287
Air Freight & Logistics — 1.4%
C.H. Robinson Worldwide, Inc.		17,295		1,677,961
Expeditors International of Washington, Inc.		25,421		3,195,165
				4,873,126
Airlines — 0.5%
Delta Air Lines, Inc.(a)		35,639		1,699,268
Auto Components — 0.2%
BorgWarner, Inc.		15,140		776,531
Automobiles — 1.6%
Tesla, Inc.(a)		8,546		5,343,130
Banks — 2.6%
Bank of America Corp.		11,707		496,260
Citigroup, Inc.		15,223		1,198,202
Comerica, Inc.		9,048		710,178
Credicorp Ltd.		3,153		433,443
JPMorgan Chase & Co.		7,008		1,150,994
Regions Financial Corp.		91,872		2,150,724
SVB Financial Group(a)		541		315,343
Truist Financial Corp.		28,112		1,736,759
Wells Fargo & Co.		14,904		696,315
				8,888,218
Beverages — 2.0%
Coca-Cola Co.		36,665		2,027,208
PepsiCo, Inc.		31,962		4,728,458
				6,755,666
Biotechnology — 2.9%
Amgen, Inc.		14,520		3,454,889
Biogen, Inc.(a)		1,028		274,969
Gilead Sciences, Inc.		55,855		3,692,574
Vertex Pharmaceuticals, Inc.(a)		11,205		2,337,699
				9,760,131
Building Products — 1.3%
Carrier Global Corp.		24,014		1,102,963
Trane Technologies PLC		18,373		3,424,727
				4,527,690
Capital Markets — 3.6%
Bank of New York Mellon Corp.		49,136		2,559,003
CME Group, Inc.		7,826		1,712,016
FactSet Research Systems, Inc.		217		72,556
Invesco Ltd.		35,766		1,020,404
Morgan Stanley		45,399		4,129,039

Security	Shares		Value
Capital Markets (continued)
Northern Trust Corp.		5,642	$	683,754
T. Rowe Price Group, Inc.		11,230		2,148,860
				12,325,632
Chemicals — 1.8%
Ecolab, Inc.		14,143		3,041,877
Linde PLC(a)		2,542		764,125
LyondellBasell Industries NV, Class A		262		29,506
PPG Industries, Inc.		13,129		2,359,544
				6,195,052
Commercial Services & Supplies(a) — 0.5%
Copart, Inc.		6,220		802,442
IAA, Inc.		15,793		899,727
				1,702,169
Communications Equipment — 1.3%
Cisco Systems, Inc.		82,345		4,356,051
Construction & Engineering — 0.3%
EMCOR Group, Inc.		8,719		1,099,553
Consumer Finance — 2.1%
Ally Financial, Inc.		59,328		3,245,835
American Express Co.		24,454		3,915,819
				7,161,654
Containers & Packaging — 0.2%
AptarGroup, Inc.		1,310		192,976
Ball Corp.		5,313		436,516
				629,492
Diversified Consumer Services — 0.7%
Terminix Global Holdings, Inc.(a)(b)		47,752		2,356,084
Diversified Financial Services — 0.9%
Berkshire Hathaway, Inc., Class B(a)		5,482		1,586,710
Voya Financial, Inc.		20,679		1,354,888
				2,941,598
Diversified Telecommunication Services — 0.5%
AT&T, Inc.		7,181		211,337
Bandwidth, Inc., Class A(a)		1,341		158,627
Verizon Communications, Inc.		25,586		1,445,353
				1,815,317
Electric Utilities — 1.0%
Avangrid, Inc.		36,421		1,918,658
Eversource Energy		8,619		699,777
NextEra Energy, Inc.		9,571		700,789
				3,319,224
Electrical Equipment — 0.5%
Acuity Brands, Inc.		4,766		885,284
Rockwell Automation, Inc.		3,191		841,531
				1,726,815
Electronic Equipment, Instruments & Components(a) — 0.8%
Flex Ltd.		106,465		1,945,116
Zebra Technologies Corp., Class A		1,386		688,911
				2,634,027
Energy Equipment & Services — 0.8%
ChampionX Corp.(a)		2,344		62,116
Schlumberger NV		79,728		2,497,878
TechnipFMC PLC(a)		29,422		252,735
				2,812,729

8 2 0 2 1   B L A C K R O C K   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S

Schedule of Investments   (continued) May 31, 2021 BlackRock Advantage ESG U.S. Equity Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Entertainment — 2.4%
Activision Blizzard, Inc.		474	$	46,097
Electronic Arts, Inc.		5,999		857,437
Lions Gate Entertainment Corp., Class B(a)		11,035		191,788
Live Nation Entertainment, Inc.(a)		10,520		947,957
Netflix, Inc.(a)		714		359,007
Walt Disney Co.(a)		31,888		5,696,791
				8,099,077
Equity Real Estate Investment Trusts (REITs) — 2.9%
Brixmor Property Group, Inc.		20,322		461,513
Equinix, Inc.		4,834		3,561,304
Equity Residential		1,296		100,375
Kilroy Realty Corp.		18,773		1,318,052
Macerich Co.		4,557		72,502
Prologis, Inc.		31,765		3,743,188
Regency Centers Corp.		12,259		791,931
				10,048,865
Food & Staples Retailing — 1.2%
Costco Wholesale Corp.		10,756		4,068,672
Food Products — 1.8%
Bunge Ltd.		4,699		407,967
Conagra Brands, Inc.		76,603		2,918,575
Kellogg Co.		42,898		2,809,390
				6,135,932
Health Care Equipment & Supplies — 2.9%
Align Technology, Inc.(a)		1,898		1,120,105
DexCom, Inc.(a)		2,647		977,775
Edwards Lifesciences Corp.(a)		516		49,484
IDEXX Laboratories, Inc.(a)		5,615		3,133,788
Insulet Corp.(a)		6,342		1,710,247
Tandem Diabetes Care, Inc.(a)		759		64,811
West Pharmaceutical Services, Inc.		7,895		2,743,592
				9,799,802
Health Care Providers & Services — 1.3%
1Life Healthcare, Inc.(a)		3,101		114,737
Anthem, Inc.		1,562		622,020
Cigna Corp.		11,075		2,866,764
Humana, Inc.		627		274,438
McKesson Corp.		663		127,554
UnitedHealth Group, Inc.		683		281,341
				4,286,854
Health Care Technology — 1.2%
Cerner Corp.		33,680		2,635,460
Teladoc Health, Inc.(a)		8,668		1,305,227
				3,940,687
Hotels, Restaurants & Leisure — 0.9%
Booking Holdings, Inc.(a)		83		196,009
Chipotle Mexican Grill, Inc.(a)		154		211,285
Dine Brands Global, Inc.(a)		972		92,291
McDonald’s Corp.		1,716		401,355
Planet Fitness, Inc., Class A(a)		3,309		260,650
Travel + Leisure Co.		5,185		337,803
Vail Resorts, Inc.(a)		2,946		962,989
Wendy’s Co.		4,979		115,612
Wyndham Hotels & Resorts, Inc.		5,657		424,614
				3,002,608

Security	Shares		Value
Household Products — 1.3%
Clorox Co.		5,286	$	934,195
Colgate-Palmolive Co.		40,627		3,403,730
				4,337,925
Independent Power and Renewable Electricity Producers — 0.2%
Sunnova Energy International, Inc.(a)		28,999		846,771
Industrial Conglomerates — 0.4%
Roper Technologies, Inc.		3,190		1,435,532
Insurance — 3.1%
American International Group, Inc.		7,268		384,041
Marsh & McLennan Cos., Inc.		25,587		3,539,962
MetLife, Inc.		50,580		3,305,909
Travelers Cos., Inc.		18,632		2,975,530
Willis Towers Watson PLC		1,084		283,314
				10,488,756
Interactive Media & Services(a) — 5.2%
Alphabet, Inc., Class A		3,113		7,336,874
Alphabet, Inc., Class C		2,454		5,917,968
Facebook, Inc., Class A		11,108		3,651,533
Twitter, Inc.		10,871		630,518
ZoomInfo Technologies, Inc., Class A		1,571		68,857
				17,605,750
Internet & Direct Marketing Retail — 2.8%
Amazon.com, Inc.(a)		2,661		8,576,589
eBay, Inc.		17,267		1,051,215
				9,627,804
IT Services — 5.6%
Accenture PLC, Class A		1,669		470,925
Automatic Data Processing, Inc.		19,075		3,739,082
Fidelity National Information Services, Inc.		1,329		197,994
Fiserv, Inc.(a)		1,217		140,198
Mastercard, Inc., Class A		14,738		5,314,228
Okta, Inc.(a)		800		177,952
Paychex, Inc.		2,971		300,487
PayPal Holdings, Inc.(a)		20,310		5,281,006
Visa, Inc., Class A		15,379		3,495,647
				19,117,519
Leisure Products — 0.0%
Hasbro, Inc.		1,225		117,563
Life Sciences Tools & Services(a) — 0.9%
Mettler-Toledo International, Inc.		348		452,731
Waters Corp.		7,734		2,492,281
				2,945,012
Machinery — 2.0%
Caterpillar, Inc.		5,700		1,374,156
Oshkosh Corp.		1,638		215,299
Woodward, Inc.		19,037		2,421,125
Xylem, Inc.		24,940		2,945,913
				6,956,493
Media — 1.3%
Cable One, Inc.		321		582,795
Cardlytics, Inc.(a)		1,178		125,516
Comcast Corp., Class A		5,197		297,996
Discovery, Inc., Class A(a)		7,955		255,435
Discovery, Inc., Class C(a)		2,614		78,550
John Wiley & Sons, Inc., Class A		6,389		404,935
New York Times Co., Class A		21,005		899,434

S C H E D U L E   O F   I N V E S T M E N T S 9

Schedule of Investments   (continued) May 31, 2021 BlackRock Advantage ESG U.S. Equity Fund (Percentages shown are based on Net Assets)

Security	Shares		Value
Media (continued)
Sirius XM Holdings, Inc.		162,475	$	1,015,469
TEGNA, Inc.		41,133		797,569
				4,457,699
Metals & Mining — 0.5%
Newmont Corp.		2,832		208,095
Reliance Steel & Aluminum Co.		5,622		944,890
Royal Gold, Inc.		4,410		545,826
				1,698,811
Multi-line Retail — 1.3%
Nordstrom, Inc.(a)		13,538		454,065
Target Corp.		17,110		3,882,601
				4,336,666
Multi-Utilities — 0.9%
Consolidated Edison, Inc.		41,390		3,196,964
Oil, Gas & Consumable Fuels — 2.1%
Chevron Corp.		9,402		975,834
EQT Corp.(a)		7,414		154,804
Hess Corp.		38,062		3,190,357
Kinder Morgan, Inc.		150,197		2,754,613
Phillips 66		1,687		142,079
				7,217,687
Pharmaceuticals — 3.1%
Bristol-Myers Squibb Co.		44,369		2,915,931
Johnson & Johnson		20,615		3,489,089
Perrigo Co. PLC		16,495		761,079
Pfizer, Inc.		21,597		836,452
Zoetis, Inc.		14,205		2,509,739
				10,512,290
Professional Services — 0.5%
IHS Markit Ltd.		8,115		854,591
Robert Half International, Inc.		11,018		978,288
				1,832,879
Real Estate Management & Development — 0.9%
CBRE Group, Inc., Class A(a)		36,612		3,213,801
Road & Rail — 0.7%
Landstar System, Inc.		9,250		1,577,125
Norfolk Southern Corp.		119		33,427
Ryder System, Inc.		8,177		668,797
				2,279,349
Semiconductors & Semiconductor Equipment — 4.7%
Advanced Micro Devices, Inc.(a)		11,591		928,207
Applied Materials, Inc.		25,731		3,554,223
Intel Corp.		81,517		4,656,251
NVIDIA Corp.		6,144		3,992,248
Qualcomm, Inc.		6,122		823,654
Texas Instruments, Inc.		8,120		1,541,339
Universal Display Corp.		642		138,582
Xilinx, Inc.		2,058		261,366
				15,895,870
Software — 9.6%
ACI Worldwide, Inc.(a)		1,806		69,098
Adobe, Inc.(a)		9,983		5,037,222
Autodesk, Inc.(a)		1,225		350,178
Cadence Design Systems, Inc.(a)		16,102		2,044,793
HubSpot, Inc.(a)		1,319		665,277
Intuit, Inc.		8,908		3,911,414
Microsoft Corp.		53,605		13,384,096

Security	Shares		Value
Software (continued)
PTC, Inc.(a)		11,114	$	1,490,832
RingCentral, Inc., Class A(a)		310		81,366
ServiceNow, Inc.(a)		4,828		2,287,893
Slack Technologies, Inc., Class A(a)		4,121		181,489
Teradata Corp.(a)		7,761		371,519
UiPath, Inc., Class A(a)(b)		3,520		280,966
VMware, Inc., Class A(a)		8,794		1,388,485
Workday, Inc., Class A(a)(b)		4,128		944,156
Zendesk, Inc.(a)		1,811		247,491
				32,736,275
Specialty Retail — 2.7%
Best Buy Co., Inc.		21,220		2,466,612
Home Depot, Inc.		18,002		5,741,018
Lowe’s Cos., Inc.		4,236		825,300
				9,032,930
Technology Hardware, Storage & Peripherals — 4.5%
Apple, Inc.		110,062		13,714,826
Dell Technologies, Inc., Class C(a)		581		57,310
Hewlett Packard Enterprise Co.		89,627		1,430,447
				15,202,583
Textiles, Apparel & Luxury Goods — 0.5%
Levi Strauss & Co., Class A		8,452		226,176
Lululemon Athletica, Inc.(a)		1,231		397,773
NIKE, Inc., Class B		7,011		956,721
				1,580,670
Thrifts & Mortgage Finance — 0.0%
MGIC Investment Corp.		2,110		31,059
New York Community Bancorp, Inc.		10,044		120,227
				151,286
Trading Companies & Distributors — 1.0%
SiteOne Landscape Supply, Inc.(a)		2,069		355,951
W.W. Grainger, Inc.		6,341		2,930,556
				3,286,507
Wireless Telecommunication Services(a) — 0.1%
T-Mobile US, Inc.		495		70,018
United States Cellular Corp.		5,435		205,171
				275,189
Total Long-Term Investments — 98.3% (Cost: $275,304,242)				334,390,522
Short-Term Securities
Money Market Funds — 2.5%
BlackRock Liquidity Funds, T-Fund, Institutional Class, 0.01%(c)(d)		6,572,797		6,572,797
SL Liquidity Series, LLC, Money Market Series, 0.12%(c)(d)(e)		2,030,823		2,031,432
Total Short-Term Securities — 2.5% (Cost: $8,604,229)				8,604,229
Total Investments — 100.8% (Cost: $283,908,471)				342,994,751
Liabilities in Excess of Other Assets — (0.8)%				(2,826,748	)
Net Assets — 100.0%			$	340,168,003

^(a)  Non-income producing security.

^(b)  All or a portion of this security is on loan.

^(c)  Affiliate of the Fund.

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Schedule of Investments   (continued) May 31, 2021 BlackRock Advantage ESG U.S. Equity Fund

^(d)  Annualized 7-day yield as of period end.

^(e)  All or a portion of this security was purchased with the cash collateral from loaned securities.

For Fund compliance purposes, the Fund’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.

Affiliates

Investments in issuers considered to be affiliate(s) of the Fund during the year ended May 31, 2021 for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:

Affiliated Issuer	Value at 05/31/20		Purchases at Cost			Proceeds from Sales			Net Realized Gain (Loss)			Change in Unrealized Appreciation (Depreciation)			Value at 05/31/21		Shares Held at 05/31/21		Income			Capital Gain Distributions from Underlying Funds
BlackRock Liquidity Funds, T-Fund, Institutional Class	$	—	$	6,572,797	(a)	$	—		$	—		$	—		$	6,572,797		6,572,797	$	2,483		$	—
SL Liquidity Series, LLC, Money Market Series		4,503,354		—			(2,471,464	)(a)		(250	)		(208	)		2,031,432		2,030,823		4,516	(b)		—
									$	(250	)	$	(208	)	$	8,604,229			$	6,999		$	—

^(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
S&P 500 E-Mini Index		13		06/18/21	$2,732	$	3,579

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)	$	—	$	—	$	3,579	$	—	$	—	$	—	$	3,579

^(a)  Net cumulative unrealized appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, are reported in the 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 accumulated earnings (loss).

S C H E D U L E   O F   I N V E S T M E N T S 11

Schedule of Investments (continued) May 31, 2021 BlackRock Advantage ESG U.S. Equity Fund

For the year ended May 31, 2021, 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	$	—	$	—	$	3,073,590		$	—	$	—	$	—	$	3,073,590
Net Change in Unrealized Appreciation (Depreciation) on
Futures contracts	$	—	$	—	$	(525,579	)	$	—	$	—	$	—	$	(525,579	)

Average Quarterly Balances of Outstanding Derivative Financial Instruments

Futures contracts
Average notional value of contracts — long	$	5,480,176

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 tables summarize the Fund’s financial instruments categorized in the fair value 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	$	334,390,522	$	—	$	—	$	334,390,522
Short-Term Securities
Money Market Funds		6,572,797		—		—		6,572,797
	$	340,963,319	$	—	$	—		340,963,319
Investments Valued at NAV(a)								2,031,432
							$	342,994,751
Derivative Financial Instruments(b)
Assets
Equity Contracts	$	3,579	$	—	$	—	$	3,579

^(a)  Certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

^(b)  Derivative financial instruments are futures contracts. Futures contracts are valued at the unrealized appreciation (depreciation) on the instrument.

See notes to financial statements.

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Statement of Assets and Liabilities

May 31, 2021

	BlackRock Advantage ESG U.S. Equity Fund
ASSETS
Investments, at value — unaffiliated(a)(b)	$	334,390,522
Investments, at value — affiliated(c)		8,604,229
Cash pledged for futures contracts		112,000
Receivables:
Investments sold		1,832,967
Securities lending income — affiliated		1,042
Capital shares sold		3,736,525
Dividends — unaffiliated		379,545
Dividends — affiliated		97
Variation margin on futures contracts		536
Prepaid expenses		35,852
Total assets		349,093,315
LIABILITIES
Collateral on securities loaned, at value		2,031,432
Payables:
Investments purchased		6,388,848
Administration fees		21,713
Capital shares redeemed		188,570
Investment advisory fees		139,717
Trustees’ and Officer’s fees		3,864
Other accrued expenses		125,048
Service and distribution fees		26,120
Total liabilities		8,925,312
NET ASSETS	$	340,168,003
NET ASSETS CONSIST OF
Paid-in capital	$	265,181,876
Accumulated earnings		74,986,127
NET ASSETS	$	340,168,003
(a)  Investments, at cost — unaffiliated	$	275,304,242
(b)  Securities loaned, at value	$	1,973,005
(c)  Investments, at cost — affiliated	$	8,604,229

F I N A N C I A L   S T A T E M E N T S 13

Statement of Assets and Liabilities   (continued)

May 31, 2021

	BlackRock Advantage ESG U.S. Equity Fund
NET ASSET VALUE
Institutional
Net assets	$	227,992,614
Shares outstanding		11,834,090
Net asset value	$	19.27
Shares authorized		Unlimited
Par value	$	0.001
Investor A
Net assets	$	62,538,956
Shares outstanding		3,260,726
Net asset value	$	19.18
Shares authorized		Unlimited
Par value	$	0.001
Investor C
Net assets	$	15,926,479
Shares outstanding		841,730
Net asset value	$	18.92
Shares authorized		Unlimited
Par value	$	0.001
Class K
Net assets	$	33,709,954
Shares outstanding		1,748,404
Net asset value	$	19.28
Shares authorized		Unlimited
Par value	$	0.001

See notes to financial statements.

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Statement of Operations

Year Ended May 31, 2021

	BlackRock Advantage ESG U.S. Equity Fund
INVESTMENT INCOME
Dividends — unaffiliated	$	2,674,748
Dividends — affiliated		2,483
Securities lending income — affiliated — net		4,516
Foreign taxes withheld		(458	)
Total investment income		2,681,289
EXPENSES
Investment advisory		754,193
Service and distribution — class specific		191,191
Transfer agent — class specific		141,926
Professional		107,811
Registration		87,226
Administration		80,133
Custodian		39,342
Accounting services		38,696
Administration — class specific		37,709
Trustees and Officer		12,079
Miscellaneous		67,036
Total expenses		1,557,342
Less:
Administration fees waived — class specific		(37,709	)
Fees waived and/or reimbursed by the Manager		(345,922	)
Transfer agent fees waived and/or reimbursed — class specific		(54,702	)
Total expenses after fees waived and/or reimbursed		1,119,009
Net investment income		1,562,280
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) from:
Investments — unaffiliated		24,211,393
Investments — affiliated		(250	)
Futures contracts		3,073,590
		27,284,733
Net change in unrealized appreciation (depreciation) on:
Investments — unaffiliated		40,618,814
Investments — affiliated		(208	)
Futures contracts		(525,579	)
		40,093,027
Net realized and unrealized gain		67,377,760
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS	$	68,940,040

See notes to financial statements.

F I N A N C I A L   S T A T E M E N T S 15

Statement of Changes in Net Assets

	BlackRock Advantage
	ESG U.S. Equity Fund
	Year Ended May 31,
	2021			2020
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income	$	1,562,280		$	1,279,083
Net realized gain (loss)		27,284,733			(4,716,525	)
Net change in unrealized appreciation		40,093,027			12,690,115
Net increase in net assets resulting from operations		68,940,040			9,252,673
DISTRIBUTIONS TO SHAREHOLDERS(a)
Institutional		(3,989,260	)		(2,266,825	)
Investor A		(1,259,676	)		(399,479	)
Investor C		(269,656	)		(89,955	)
Class K		(590,452	)		(18,812	)
Decrease in net assets resulting from distributions to shareholders		(6,109,044	)		(2,775,071	)
CAPITAL SHARE TRANSACTIONS
Net increase in net assets derived from capital share transactions		148,118,260			48,554,399
NET ASSETS
Total increase in net assets		210,949,256			55,032,001
Beginning of year		129,218,747			74,186,746
End of year	$	340,168,003		$	129,218,747

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

See notes to financial statements.

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Financial Highlights

(For a share outstanding throughout each period)

	BlackRock Advantage ESG U.S. Equity Fund
	Institutional
	Year Ended May 31,
	2021			2020			2019			2018			2017
Net asset value, beginning of year	$	13.75		$	12.64		$	13.33		$	12.07		$	10.49
Net investment income(a)		0.16			0.18			0.18			0.17			0.15
Net realized and unrealized gain		6.00			1.35			0.13			1.79			1.74
Net increase from investment operations		6.16			1.53			0.31			1.96			1.89
Distributions(b)
From net investment income		(0.16	)		(0.16	)		(0.17	)		(0.16	)		(0.17	)
From net realized gain		(0.48	)		(0.26	)		(0.83	)		(0.54	)		(0.14	)
Total distributions		(0.64	)		(0.42	)		(1.00	)		(0.70	)		(0.31	)
Net asset value, end of year	$	19.27		$	13.75		$	12.64		$	13.33		$	12.07
Total Return(c)
Based on net asset value		45.64	%		12.16	%		2.36	%		16.74	%		18.35	%
Ratios to Average Net Assets
Total expenses		0.73	%(d)		0.79	%		0.95	%		1.10	%		1.63	%
Total expenses after fees waived and/or reimbursed		0.50	%(d)		0.55	%		0.55	%		0.54	%		0.57	%
Net investment income		0.93	%(d)		1.31	%		1.41	%		1.32	%		1.37	%
Supplemental Data
Net assets, end of year (000)	$	227,993		$	102,475		$	59,344		$	49,872		$	30,844
Portfolio turnover rate		160	%		159	%		149	%		118	%		82	%

^(a)  Based on average shares outstanding.

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

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

^(d)  Excludes 0.01% of expenses incurred indirectly as a result of investments in underlying funds.

See notes to financial statements.

F I N A N C I A L   H I G H L I G H T S 17

Financial Highlights (continued)

(For a share outstanding throughout each period)

	BlackRock Advantage ESG U.S. Equity Fund (continued)
	Investor A
	Year Ended May 31,
	2021			2020			2019			2018			2017
Net asset value, beginning of year	$	13.70		$	12.60		$	13.29		$	12.05		$	10.48
Net investment income(a)		0.11			0.14			0.15			0.14			0.14
Net realized and unrealized gain		5.98			1.35			0.13			1.77			1.72
Net increase from investment operations		6.09			1.49			0.28			1.91			1.86
Distributions(b)
From net investment income		(0.13	)		(0.13	)		(0.14	)		(0.13	)		(0.15	)
From net realized gain		(0.48	)		(0.26	)		(0.83	)		(0.54	)		(0.14	)
Total distributions		(0.61	)		(0.39	)		(0.97	)		(0.67	)		(0.29	)
Net asset value, end of year	$	19.18		$	13.70		$	12.60		$	13.29		$	12.05
Total Return(c)
Based on net asset value		45.25	%		11.89	%		2.13	%		16.38	%		18.04	%
Ratios to Average Net Assets
Total expenses		0.98	%(d)		1.08	%		1.23	%		1.42	%		1.84	%
Total expenses after fees waived and/or reimbursed		0.74	%(d)		0.80	%		0.80	%		0.80	%		0.82	%
Net investment income		0.68	%(d)		1.06	%		1.17	%		1.06	%		1.22	%
Supplemental Data
Net assets, end of year (000)	$	62,539		$	19,030		$	11,052		$	5,881		$	3,194
Portfolio turnover rate		160	%		159	%		149	%		118	%		82	%

^(a)  Based on average shares outstanding.

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

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

^(d)  Excludes 0.01% of expenses incurred indirectly as a result of investments in underlying funds.

See notes to financial statements.

18 2 0 2 1   B L A C K R O C K   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S

Financial Highlights (continued)

(For a share outstanding throughout each period)

	BlackRock Advantage ESG U.S. Equity Fund (continued)
	Investor C
	Year Ended May 31,
	2021			2020			2019			2018			2017
Net asset value, beginning of year	$	13.54		$	12.46		$	13.17		$	11.98		$	10.45
Net investment income(a)		(0.01	)		0.04			0.05			0.04			0.06
Net realized and unrealized gain		5.90			1.34			0.13			1.76			1.71
Net increase from investment operations		5.89			1.38			0.18			1.80			1.77
Distributions(b)
From net investment income		(0.03	)		(0.04	)		(0.06	)		(0.07	)		(0.10	)
From net realized gain		(0.48	)		(0.26	)		(0.83	)		(0.54	)		(0.14	)
Total distributions		(0.51	)		(0.30	)		(0.89	)		(0.61	)		(0.24	)
Net asset value, end of year	$	18.92		$	13.54		$	12.46		$	13.17		$	11.98
Total Return(c)
Based on net asset value		44.13	%		11.11	%		1.38	%		15.45	%		17.24	%
Ratios to Average Net Assets
Total expenses		1.72	%(d)		1.83	%		2.01	%		2.25	%		2.46	%
Total expenses after fees waived and/or reimbursed		1.50	%(d)		1.55	%		1.55	%		1.55	%		1.54	%
Net investment income (loss)		(0.08	)%(d)		0.30	%		0.42	%		0.30	%		0.53	%
Supplemental Data
Net assets, end of year (000)	$	15,926		$	6,082		$	3,453		$	1,722		$	756
Portfolio turnover rate		160	%		159	%		149	%		118	%		82	%

^(a)  Based on average shares outstanding.

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

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

^(d)  Excludes 0.01% of expenses incurred indirectly as a result of investments in underlying funds.

See notes to financial statements.

F I N A N C I A L   H I G H L I G H T S 19

Financial Highlights (continued)

(For a share outstanding throughout each period)

	BlackRock Advantage ESG U.S. Equity Fund (continued)
	Class K
	Year Ended May 31,
	2021			2020			2019			2018			2017
Net asset value, beginning of year	$	13.76		$	12.65		$	13.33		$	12.08		$	10.49
Net investment income(a)		0.17			0.18			0.19			0.17			0.16
Net realized and unrealized gain		6.00			1.36			0.14			1.78			1.74
Net increase from investment operations		6.17			1.54			0.33			1.95			1.90
Distributions(b)
From net investment income		(0.17	)		(0.17	)		(0.18	)		(0.16	)		(0.17	)
From net realized gain		(0.48	)		(0.26	)		(0.83	)		(0.54	)		(0.14	)
Total distributions		(0.65	)		(0.43	)		(1.01	)		(0.70	)		(0.31	)
Net asset value, end of year	$	19.28		$	13.76		$	12.65		$	13.33		$	12.08
Total Return(c)
Based on net asset value		45.68	%		12.20	%		2.48	%		16.67	%		18.47	%
Ratios to Average Net Assets
Total expenses		0.64	%(d)		0.74	%		0.93	%		1.09	%		1.68	%
Total expenses after fees waived and/or reimbursed		0.43	%(d)		0.50	%		0.50	%		0.50	%		0.55	%
Net investment income		0.97	%(d)		1.38	%		1.46	%		1.36	%		1.39	%
Supplemental Data
Net assets, end of year (000)	$	33,710		$	1,632		$	338		$	264		$	239
Portfolio turnover rate		160	%		159	%		149	%		118	%		82	%

^(a)  Based on average shares outstanding.

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

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

^(d)  Excludes 0.01% of expenses incurred indirectly as a result of investments in underlying funds.

See notes to financial statements.

20 2 0 2 1   B L A C K R O C K   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S

Notes to Financial Statements

1. ORGANIZATION

BlackRock Funds^SM (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust is organized as a Massachusetts business trust. BlackRock Advantage ESG U.S. Equity Fund (the “Fund”) is a series of the Trust. The Fund is classified as diversified.

The Fund offers multiple classes of shares. All classes of shares have identical voting, dividend, liquidation and other rights and are subject to the same terms and conditions, except that certain classes bear expenses related to the shareholder servicing and distribution of such shares. Institutional and Class K Shares are sold only to certain eligible investors. Investor A and Investor C Shares bear certain expenses related to shareholder servicing of such shares, and Investor C Shares also bear certain expenses related to the distribution of such shares. Investor A and Investor C Shares are generally available through financial intermediaries. Each class has exclusive voting rights with respect to matters relating to its shareholder servicing and distribution expenditures (except that Investor C shareholders may vote on material changes to the Investor A Shares distribution and service plan).

Share Class	Initial Sales Charge	CDSC	Conversion Privilege
Institutional and Class K Shares	No	No	None
Investor A Shares	Yes	No(a)	None
Investor C Shares	No	Yes(b)	To Investor A Shares after approximately 8 years

^(a)  Investor A 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.

^(b)  A CDSC of 1.00% is assessed on certain redemptions of Investor C Shares made within one year after purchase.

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

2. SIGNIFICANT ACCOUNTING POLICIES

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

Investment Transactions and Income Recognition: For financial reporting purposes, investment transactions are recorded on the dates the transactions are executed. Realized gains and losses on investment transactions are determined using the specific identification method. Dividend income and capital gain distributions, if any, are recorded on the ex-dividend dates. Non-cash dividends, if any, are recorded on the ex-dividend dates at fair value. 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. Income, expenses and realized and unrealized gains and losses are allocated daily to each class based on its relative net assets.

Foreign Taxes: The Fund 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 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 May 31, 2021, if any, are disclosed in the Statement of Assets and Liabilities.

The Fund files withholding tax reclaims in certain jurisdictions to recover a portion of amounts previously withheld. The Fund may record a reclaim receivable based on collectability, which includes factors such as the jurisdiction’s applicable laws, payment history and market convention. The Statement of Operations includes tax reclaims recorded as well as professional and other fees, if any, associated with recovery of foreign withholding taxes.

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

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

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

Other: Expenses directly related to the Fund or its classes are charged to the Fund or the applicable class. Expenses directly related to the Fund and other shared expenses prorated to the Fund are allocated daily to each class based on its relative net assets or other appropriate methods. 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.

N O T E S   T O   F I N A N C I A L   S T A T E M E N T S 21

Notes to Financial Statements  (continued)

3. INVESTMENT VALUATION AND FAIR VALUE MEASUREMENTS

Investment Valuation Policies: The Fund’s investments are valued at fair value (also referred to as “market value” within the financial statements) 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. The Fund determines the fair values of its financial instruments using various independent dealers or pricing services under policies approved by the Board of Trustees of the Trust (the “Board”). 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 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.

• Investments in open-end U.S. mutual funds (including money market funds) are valued at that day’s published net asset value (“NAV”).

• The Fund values its investment in SL Liquidity Series, LLC, Money Market Series (the “Money Market Series”) at fair value, which is ordinarily based upon its pro rata ownership in the underlying fund’s net assets.

• Futures contracts are valued based on that day’s last reported settlement or trade 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 the 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.

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 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 privately held companies or funds 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.

As of May 31, 2021, certain investments of the Fund were fair valued using NAV per share as no quoted market value is available and therefore have been excluded from the fair value hierarchy.

4. SECURITIES AND OTHER INVESTMENTS

Securities Lending: The Fund may lend its securities to approved borrowers, such as brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by a bank, or securities issued or guaranteed by the U.S. Government. The initial collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities for securities traded on U.S. exchanges and a value of at least 105% for all other securities. The collateral is maintained thereafter at a value equal to at least 100% of the current market value of the securities on loan. The market value of the loaned securities is determined at the close of each business day of the Fund and any additional required collateral is delivered to the Fund, or excess collateral returned by the Fund, on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities, but does not receive

22 2 0 2 1   B L A C K R O C K   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S

Notes to Financial Statements  (continued)

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.

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 Investment Management, LLC (“BIM”), if any, is disclosed in the Schedule of Investments. Any non-cash collateral received cannot be sold, re-invested or pledged by the Fund, except in the event of borrower default. The securities on loan, if any, are disclosed in the Fund’s Schedule of Investments. The market value of any securities on loan 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.

Securities lending transactions are entered into by the Fund under Master Securities Lending Agreements (each, an “MSLA”), which provide the right, in the event of default (including bankruptcy or insolvency), for the non-defaulting party to liquidate the collateral and calculate a net exposure to the defaulting party or request additional collateral. In the event that a borrower defaults, the Fund, as lender, would offset the market value of the collateral received against the market value of the securities loaned. 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 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 Fund’s securities on loan by counterparty which are subject to offset under an MSLA:

Counterparty		Securities Loaned at Value		Cash Collateral Received	(a)		Net Amount
Credit Suisse Securities (USA) LLC	$	271,388	$	(271,388	)	$	—
Deutsche Bank Securities, Inc.		6,705		(6,705	)		—
J.P. Morgan Securities LLC		1,694,912		(1,694,912	)		—
	$	1,973,005	$	(1,973,005	)	$	—

^(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 Fund is disclosed in the Fund’s Statement of Assets and Liabilities.

The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by BIM. BIM’s indemnity allows for full replacement of the securities loaned to the extent the collateral received does not cover the value on the securities loaned in the event of borrower default. The 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 Fund.

5. DERIVATIVE FINANCIAL INSTRUMENTS

The Fund engages in various portfolio investment strategies using derivative contracts both to increase the returns of the Fund and/or to manage its exposure to certain risks such as credit risk, equity risk, interest rate risk, foreign currency exchange rate risk, commodity price risk or other risks (e.g., inflation risk). Derivative financial instruments categorized by risk exposure are included in the Schedule of Investments. These contracts may be transacted on an exchange or over-the-counter (“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), foreign currencies (foreign currency exchange rate risk).

Futures contracts are exchange-traded agreements between the Fund 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 Fund is required to deposit initial margin with the broker in the form of cash or securities in an amount that varies depending on a contract’s size and risk profile. The initial margin deposit must then be maintained at an established level over the life of the contract. 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 Fund 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.

6. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS WITH AFFILIATES

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

N O T E S   T O   F I N A N C I A L   S T A T E M E N T S 23

Notes to Financial Statements  (continued)

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

Average Daily Net Assets	Investment Advisory Fees
First $1 billion		0.40	%
$1 billion — $3 billion		0.38
$3 billion — $5 billion		0.36
$5 billion — $10 billion		0.35
Greater than $10 billion		0.34

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

Share Class	Service Fees			Distribution Fees
Investor A		0.25	%		N/A
Investor C		0.25			0.75	%

BRIL and broker-dealers, pursuant to sub-agreements with BRIL, provide shareholder servicing and distribution services to the Fund. The ongoing service and/or distribution fee compensates BRIL and each broker-dealer for providing shareholder servicing and/or distribution related services to shareholders.

For the year ended May 31, 2021, the following table shows the class specific service and distribution fees borne directly by each share class of the Fund:

	Investor A		Investor C		Total
Service and distribution fees — class specific	$	93,036	$	98,155	$	191,191

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

Average Daily Net Assets	Administration Fees
First $500 million		0.0425	%
$500 million — $1 billion		0.0400
$1 billion — $2 billion		0.0375
$2 billion — $4 billion		0.0350
$4 billion — $13 billion		0.0325
Greater than $13 billion		0.0300

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

For the year ended May 31, 2021, the following table shows the class specific administration fees borne directly by each share class of the Fund:

	Institutional		Investor A		Investor C		Class K		Total
Administration fees	$	25,487	$	7,443	$	1,963	$	2,816	$	37,709

Transfer Agent: Pursuant to written agreements, certain financial intermediaries, some of which may be affiliates, provide the Fund with sub-accounting, recordkeeping, sub-transfer agency and other administrative services with respect to 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 May 31, 2021, the Fund did not pay any amounts to affiliates in return for these services.

The Manager maintains a call center that is responsible for providing certain shareholder services to the Fund. Shareholder services include responding to inquiries and processing purchases and sales based upon instructions from shareholders. For the year ended May 31, 2021, the Fund reimbursed the Manager the following amounts for costs incurred in running the call center, which are included in transfer agent — class specific in the Statement of Operations:

	Institutional		Investor A		Investor C		Class K		Total
Reimbursed amounts	$	382	$	731	$	220	$	29	$	1,362

For the year ended May 31, 2021, the following table shows the class specific transfer agent fees borne directly by each share class of the Fund:

	Institutional		Investor A		Investor C		Class K		Total
Transfer agent fees — class specific	$	106,592	$	28,212	$	6,636	$	486	$	141,926

Other Fees: For the year ended May 31, 2021, affiliates earned underwriting discounts, direct commissions and dealer concessions on sales of the Fund’s Investor A Shares, which totaled $25,086.

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Notes to Financial Statements  (continued)

For the year ended May 31, 2021, affiliates received CDSCs as follows:

Fund Name	Investor A		Investor C
BlackRock Advantage ESG U.S. Equity Fund	$	1,333	$	1,887

Expense Limitations, Waivers, Reimbursements, and Recoupments: The Manager contractually agreed to waive its investment advisory fees by the amount of investment advisory fees the Fund pays to the Manager indirectly through its investment in affiliated money market funds (the “affiliated money market fund waiver”) through September 30, 2021. The contractual agreement may be terminated upon 90 days’ notice by a majority of the trustees who are not “interested persons” of the Fund, as defined in the 1940 Act (“Independent Trustees”), or by a vote of a majority of the outstanding voting securities of the Fund. 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 September 28, 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 May 31, 2021, the amount waived was $3,785.

The Manager has contractually agreed to waive its investment advisory fee with respect to any portion of the Fund’s assets invested in affiliated equity and fixed-income mutual funds and affiliated exchange-traded funds that have a contractual management fee through September 30, 2021. 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 the Fund. For the year ended May 31, 2021, there were no fees waived and/or reimbursed by the Manager pursuant to this arrangement.

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

Share Class	Expense Limitation
Institutional		0.48	%
Investor A		0.73
Investor C		1.48
Class K		0.43

Prior to September 28, 2020, the expense limitations as a percentage of average daily net assets for classes were as follows:    

Share Class	Expense Limitation
Institutional		0.55	%
Investor A		0.80
Investor C		1.55
Class K		0.50

The Manager has agreed not to reduce or discontinue these contractual expense limitations through September 30, 2021, unless approved by the Board, including a majority of the Independent Trustees, or by a vote of a majority of the outstanding voting securities of the Fund. For the year ended May 31, 2021, the Manager waived and/or reimbursed investment advisory fees of $342,137 which is included in fees waived and/or reimbursed by the Manager in the Statement of Operations.

In addition, these amounts waived and/or reimbursed by the Manager are included in administration fees waived — class specific and transfer agent fees waived and/or reimbursed — class specific, respectively, in the Statement of Operations. For the year ended May 31, 2021, class specific expense waivers and/or reimbursements are as follows:

	Institutional		Investor A		Investor C		Class K		Total
Administration fees waived — class specific	$	25,487	$	7,443	$	1,963	$	2,816	$	37,709

	Institutional		Investor A		Investor C		Class K		Total
Transfer agent fees waived and/or reimbursed — class specific	$	42,874	$	9,611	$	1,731	$	486	$	54,702

With respect to the contractual expense limitation, if during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver and/or reimbursement from the Manager, are less than the current expense limitation for that share class, the Manager is entitled to be reimbursed by such share class up to the lesser of: (a) the amount of fees waived and/or expenses reimbursed during those prior two fiscal years under the agreement and (b) an amount not to exceed either the current expense limitation of that share class or the expense limitation of the share class in effect at the time that the share class received the applicable waiver and/or reimbursement, provided that:

(1) the Fund, of which the share class is a part, has more than $50 million in assets for the fiscal year, and

(2) the Manager or an affiliate continues to serve as the Fund’s investment 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 October 5, 2022, the repayment arrangement between the Fund and the Manager pursuant to which such Fund may be required to repay amounts waived and/or reimbursed under the Fund’s contractual caps on net expenses will be terminated.

N O T E S   T O   F I N A N C I A L   S T A T E M E N T S 25

Notes to Financial Statements  (continued)

As of May 31, 2021, 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	May 31, 2022		October 05, 2022
BlackRock Advantage ESG U.S. Equity Fund
Fund Level	$	228,833	$	342,137
Institutional		16,607		68,361
Investor A		8,792		17,054
Investor C		2,337		3,694
Class K		343		3,302

The following fund level and class specific waivers and/or reimbursements previously recorded by the Fund, which were subject to recoupment by the Manager, expired on May 31, 2021:

Fund Name/Fund Level/Share Class	Expired May 31, 2021
BlackRock Advantage ESG U.S. Equity Fund
Fund Level	$	244,945
Institutional		6,797
Investor A		2,918
Investor C		1,837
Class K		101

Securities Lending: The U.S. Securities and Exchange Commission (“SEC”) has issued an exemptive order which permits BIM, an affiliate of the Manager, to serve as securities lending agent for the Fund, subject to applicable conditions. As securities lending agent, BIM bears all operational costs directly related to securities lending. The Fund is responsible for expenses in connection with the investment of cash collateral received for securities on loan (the “collateral investment expenses”). The cash collateral is invested in a private investment company, Money Market Series, managed by the Manager or its affiliates. However, BIM has agreed to cap the collateral investment expenses of the Money Market Series to an annual rate of 0.04%. The investment adviser to the Money Market Series will not charge any advisory fees with respect to shares purchased by the Fund. The Money Market Series may, under certain circumstances, impose a liquidity fee of up to 2% of the value withdrawn or temporarily restrict withdrawals for up to 10 business days during a 90 day period, in the event that the private investment company’s weekly liquid assets fall below certain thresholds. The Money Market Series seeks current income consistent with maintaining liquidity and preserving capital. Although the Money Market Series is not registered under the 1940 Act, its investments may follow the parameters of investments by a money market fund that is subject to Rule 2a-7 under the 1940 Act.

Securities lending income is equal to the total of income earned from the reinvestment of cash collateral, net of fees and other payments to and from borrowers of securities, and less the collateral investment expenses. The Fund retains a portion of securities lending income and remits a remaining portion to BIM as compensation for its services as securities lending agent.

Pursuant to the current securities lending agreement, the Fund retains 77% of securities lending income (which excludes collateral investment expenses), and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

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 Fund, pursuant to the securities lending agreement, will retain for the remainder of that calendar year securities lending income in an amount equal to 81% of securities lending income (which excludes collateral investment expenses), and this amount retained can never be less than 70% of the total of securities lending income plus the collateral investment expenses.

Prior to January 1, 2021, the Fund retained 75% of securities lending income (which excluded collateral investment expenses) and the amount retained could never be less than 70% of the total of securities lending income plus the collateral investment expenses. 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 exceeded a specified threshold, the Fund would retain for the remainder of that calendar year 80% of securities lending income (which excluded collateral investment expenses), and the amount retained could never be less than 70% of the total of securities lending income plus the collateral investment expenses.

The share of securities lending income earned by the Fund is shown as securities lending income — affiliated — net in the Statement of Operations. For the year ended May 31, 2021, the Fund paid BIM $1,309 for securities lending agent services.

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

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

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Notes to Financial Statements  (continued)

During the year ended May 31, 2021, the Fund did not participate in the Interfund Lending Program.

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

7. PURCHASES AND SALES

For the year ended May 31, 2021, purchases and sales of investments, excluding short-term investments, were $439,668,997 and $294,923,578, respectively.

8. INCOME TAX INFORMATION

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

The Fund files U.S. federal and various state and local tax returns. No income tax returns are currently under examination. The statute of limitations on the Fund’s U.S. federal tax returns generally remains open for a period of three fiscal years after they are filed. The statutes of limitations on the Fund’s state and local tax returns may remain open for an additional year depending upon the jurisdiction.

Management has analyzed tax laws and regulations and their application to the Fund as of May 31, 2021, inclusive of the open tax return years, and does not believe that there are any uncertain tax positions that require recognition of a tax liability in the Fund’s financial statements.

The tax character of distributions paid was as follows:

Fund Name	Year Ended 05/31/21		Year Ended 05/31/20
BlackRock Advantage ESG U.S. Equity Fund
Ordinary income	$	3,685,541	$	1,141,565
Long-term capital gains		2,423,503		1,633,506
	$	6,109,044	$	2,775,071

As of period end, the tax components of accumulated earnings (loss) were as follows:

Fund Name		Undistributed Ordinary Income		Undistributed Long-Term Capital Gains		Net Unrealized Gains (Losses)(a)		Total
BlackRock Advantage ESG U.S. Equity Fund	$	13,360,498	$	4,921,272	$	56,704,357	$	74,986,127

^(a)  The difference between book-basis and tax-basis net unrealized gains was attributable primarily to the tax deferral of losses on wash sales, the timing and recognition of partnership income and the realization for tax purposes of unrealized gains/losses on certain futures contracts.

As of May 31, 2021, 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:

Fund Name	Tax Cost		Gross Unrealized Appreciation		Gross Unrealized Depreciation			Net Unrealized Appreciation (Depreciation)
BlackRock Advantage ESG U.S. Equity Fund	$	286,291,197	$	57,727,228	$	(1,023,674	)	$	56,703,554

9. BANK BORROWINGS

The Trust, on behalf of the Fund, along with certain other funds managed by the Manager and its affiliates (“Participating Funds”), is a party to a 364-day, $2.25 billion credit agreement with a group of lenders. Under this agreement, the Fund may borrow to fund shareholder redemptions. Excluding commitments designated for certain individual funds, the Participating Funds, including the Fund, can borrow up to an aggregate commitment amount of $1.75 billion at any time outstanding, subject to asset coverage and other limitations as specified in the agreement. The credit agreement has the following terms: a fee of 0.10% per annum on unused commitment amounts and interest at a rate equal to the higher of (a) one-month LIBOR (but, in any event, not less than 0.00%) on the date the loan is made plus 0.80% per annum or (b) the Fed Funds rate (but, in any event, not less than 0.00%) in effect from time to time plus 0.80% per annum on amounts borrowed. The agreement expires in April 2022 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 May 31, 2021, the Fund did not borrow under the credit agreement.

10. PRINCIPAL RISKS

In the normal course of business, the Fund invests in securities or other instruments and may enter into certain transactions, and such activities subject the Fund to various risks, including among others, fluctuations in the market (market risk) or failure of an issuer to meet all of its obligations. The value of securities or other instruments may also be affected by various factors, including, without limitation: (i) the general economy; (ii) the overall market as well as local, regional or global political and/or social instability;

N O T E S   T O   F I N A N C I A L   S T A T E M E N T S 27

Notes to Financial Statements  (continued)

(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 Fund and its investments. The Fund’s prospectus provides details of the risks to which the Fund is subject.

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

The price the Fund could receive upon the sale of any particular portfolio investment may differ from the 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 the 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 the Fund, and the Fund could realize a greater than expected loss or lesser than expected gain upon the sale of the investment. The 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 Fund may be exposed to counterparty credit risk, or the risk that an entity may fail to or be unable to perform on its commitments related to unsettled or open transactions, including making timely interest and/or principal payments or otherwise honoring its obligations. The Fund manages counterparty credit risk by entering into transactions only with counterparties that the Manager believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties. Financial assets, which potentially expose the Fund to market, issuer and counterparty credit risks, consist principally of financial instruments and receivables due from counterparties. The extent of the Fund’s exposure to market, issuer and counterparty credit risks with respect to these financial assets is approximately their value recorded in the Statement of Assets and Liabilities, less any collateral held by the Fund.

A derivative contract may suffer 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 Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the 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 with respect to initial and variation margin that is held in a clearing broker’s customer accounts. While clearing brokers are required to segregate customer margin from their own assets, in the event that a clearing broker becomes insolvent or goes into bankruptcy and at that time there is a shortfall in the aggregate amount of margin held by the clearing broker for all its clients, typically the shortfall would be allocated on a pro rata basis across all the clearing broker’s customers, potentially resulting in losses to the Fund.

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 Fund’s portfolio are disclosed in its Schedule of Investments.

The Fund invests a significant portion of its 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 Schedule of Investments.

LIBOR Transition Risk: The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (“LIBOR”). Although many LIBOR rates will be phased out by the end of 2021, a selection of widely used USD LIBOR rates will continue to be published through June 2023 in order to assist with the transition. The Fund 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 Fund is uncertain.

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Notes to Financial Statements  (continued)

11. CAPITAL SHARE TRANSACTIONS

Transactions in capital shares for each class were as follows:

	Year Ended 05/31/21						Year Ended 05/31/20
Fund Name / Share Class	Shares			Amounts			Shares			Amounts
BlackRock Advantage ESG U.S. Equity Fund
Institutional
Shares sold		8,851,510		$	152,780,886			5,799,898		$	77,297,492
Shares issued in reinvestment of distributions		229,405			3,739,573			96,259			1,329,012
Shares redeemed		(4,697,463	)		(73,998,089	)		(3,140,786	)		(40,630,065	)
		4,383,452		$	82,522,370			2,755,371		$	37,996,439
Investor A
Shares sold and automatic conversion of shares		2,374,833		$	40,308,618			718,258		$	9,656,355
Shares issued in reinvestment of distributions		70,758			1,157,143			24,021			330,646
Shares redeemed		(573,740	)		(10,066,473	)		(230,664	)		(3,024,441	)
		1,871,851		$	31,399,288			511,615		$	6,962,560
Investor C
Shares sold		466,173		$	7,915,937			227,388		$	2,974,394
Shares issued in reinvestment of distributions		16,276			264,413			6,343			86,451
Shares redeemed and automatic conversion of shares		(90,037	)		(1,481,148	)		(61,545	)		(809,446	)
		392,412		$	6,699,202			172,186		$	2,251,399
Class K
Shares sold		1,707,494		$	28,785,454			162,361		$	2,247,953
Shares issued in reinvestment of distributions		35,714			590,452			741			10,285
Shares redeemed		(113,383	)		(1,878,506	)		(71,244	)		(914,237	)
		1,629,825		$	27,497,400			91,858		$	1,344,001
		8,277,540		$	148,118,260			3,531,030		$	48,554,399

12. SUBSEQUENT EVENTS

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

N O T E S   T O   F I N A N C I A L   S T A T E M E N T S 29

Report of Independent Registered Public Accounting Firm

To the Shareholders of BlackRock Advantage ESG U.S. Equity Fund and the Board of Trustees of BlackRock Funds^SM:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of BlackRock Advantage ESG U.S. Equity Fund of BlackRock Funds^SM (the “Fund”), including the schedule of investments, as of May 31, 2021, 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 May 31, 2021, 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 May 31, 2021, 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

July 21, 2021

We have served as the auditor of one or more BlackRock investment companies since 1992.

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Important Tax Information  (unaudited)

The following maximum amounts are hereby designated as qualified dividend income for individuals for the fiscal year ended May 31, 2021:

Fund Name	Qualified Dividend Income
BlackRock Advantage ESG U.S. Equity Fund	$	2,485,551

For corporate shareholders, the percentage of ordinary income distributions paid during the fiscal year ended May 31, 2021 that qualified for the dividends-received deduction were as follows:

Fund Name	Dividends-Received   Deduction
BlackRock Advantage ESG U.S. Equity Fund		46.13%

For the fiscal year ended May 31, 2021, the Fund hereby designates the following maximum amounts allowable as qualified short-term capital gain dividends eligible for exemption from U.S. withholding tax for nonresident aliens and foreign corporations:

Fund Name	Short-Term Capital Gain Dividends
BlackRock Advantage ESG U.S. Equity Fund	$	2,297,166

I M P O R T A N T   T A X   I N F O R M A T I O N 31

Disclosure of Investment Advisory Agreement

The Board of Trustees (the “Board,” the members of which are referred to as “Board Members”) of BlackRock Funds^SM (the “Trust”) met on April 7, 2021 (the “April Meeting”) and May 10-12, 2021 (the “May Meeting”) to consider the approval to continue the investment advisory agreement (the “Agreement”) between the Trust, on behalf of BlackRock Advantage ESG U.S. Equity Fund (the “Fund”), and BlackRock Advisors, LLC (the “Manager” or “BlackRock”), the Fund’s investment advisor.

The Approval Process

Consistent with the requirements of the Investment Company Act of 1940 (the “1940 Act”), the Board considers the approval of the continuation of the Agreement for the Fund on an annual basis. The Board members whom are not “interested persons” of the Trust, as defined in the 1940 Act, are considered independent Board members (the “Independent Board Members”). The Board’s consideration entailed a year-long deliberative process during which the Board and its committees assessed BlackRock’s various services to the Fund, including through the review of written materials and oral presentations, and the review of additional information provided in response to requests from the Independent Board Members. The Board had four quarterly meetings per year, each typically extending for two days, as well as additional ad hoc meetings and executive sessions throughout the year, as needed. The committees of the Board similarly met throughout the year. The Board also had a fifth one-day meeting to consider specific information surrounding the renewal of the Agreement. In particular, the Board assessed, among other things, the nature, extent and quality of the services provided to the Fund by BlackRock, BlackRock’s personnel and affiliates, including (as applicable): investment management services; accounting oversight; administrative and shareholder services; oversight of the Fund’s service providers; risk management and oversight; and legal, regulatory and compliance services. Throughout the year, including during the contract renewal process, the Independent Board Members were advised by independent legal counsel, and met with independent legal counsel in various executive sessions outside of the presence of BlackRock’s management.

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

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

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

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

The Board also considered other matters it deemed important to the approval process, such as other payments made to BlackRock or its affiliates relating to securities lending and cash management, and BlackRock’s services related to the valuation and pricing of Fund portfolio holdings. The Board noted the willingness of BlackRock’s personnel to engage in open, candid discussions with the Board. The members of the Board gave attention to all of the information that was furnished, and each Board Member placed varying degrees of importance on the various pieces of information that were provided to them. The Board evaluated the information available to it on a fund by fund basis. The following paragraphs provide more information about some of the primary factors that were relevant to the Board’s decision. The Board Members did not identify any particular information, or any single factor as determinative, and each Board Member may have attributed different weights to the various items and factors considered.

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Disclosure of Investment Advisory Agreement  (continued)

A. Nature, Extent and Quality of the Services Provided by BlackRock

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

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

In addition to investment advisory services, the Board considered the nature and quality of the administrative and other non-investment advisory services provided to the Fund. BlackRock and its affiliates provide the Fund with certain administrative, shareholder and other services (in addition to any such services provided to the Fund by third parties) and officers and other personnel as are necessary for the operations of the Fund. In particular, BlackRock and its affiliates provide the Fund with administrative services including, among others: (i) responsibility for disclosure documents, such as the prospectus, the summary prospectus (as applicable), the statement of additional information and periodic shareholder reports; (ii) oversight of daily accounting and pricing; (iii) responsibility for periodic filings with regulators; (iv) overseeing and coordinating the activities of third-party service providers including, among others, the Fund’s custodian, fund accountant, transfer agent, and auditor; (v) organizing Board meetings and preparing the materials for such Board meetings; (vi) providing legal and compliance support; (vii) furnishing analytical and other support to assist the Board in its consideration of strategic issues such as the merger, consolidation or repurposing of certain open-end funds; and (viii) performing or managing administrative functions necessary for the operation of the Fund, such as tax reporting, expense management, fulfilling regulatory filing requirements, overseeing the Fund’s distribution partners, and shareholder call center and other services. The Board reviewed the structure and duties of BlackRock’s fund administration, shareholder services, and legal and compliance departments and considered BlackRock’s policies and procedures for assuring compliance with applicable laws and regulations. The Board considered the operation of BlackRock’s business continuity plans, including in light of the ongoing COVID-19 pandemic.

B. The Investment Performance of the Fund and BlackRock

The Board, including the Independent Board Members, reviewed and considered the performance history of the Fund throughout the year and at the April Meeting. In preparation for the April Meeting, the Board was provided with reports independently prepared by Broadridge, which included an analysis of the Fund’s performance as of December 31, 2020, as compared to its Performance Peers. Broadridge ranks funds in quartiles, ranging from first to fourth, where first is the most desirable quartile position and fourth is the least desirable. In connection with its review, the Board received and reviewed information regarding the investment performance of the Fund as compared to its Performance Peers and, in light of the Fund’s outcome-oriented investment objective, certain performance metrics (“Outcome-Oriented Performance Metrics”). The Board and its Performance Oversight Committee regularly review and meet with Fund management to discuss the performance of the Fund throughout the year.

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

The Board reviewed and considered the Fund’s performance relative to the Fund’s Outcome-Oriented Performance Metrics including a total return benchmark. The Board noted that for each of the one-, three- and five-year periods reported, the Fund outperformed its total return benchmark. The Board noted that BlackRock believes that the Outcome-Oriented Performance Metrics are an appropriate performance metric for the Fund, and that BlackRock has explained its rationale for this belief to the Board.

C. Consideration of the Advisory/Management Fees and the Estimated Cost of the Services and Estimated Profits Realized by BlackRock and its Affiliates from their Relationship with the Fund

The Board, including the Independent Board Members, reviewed the Fund’s contractual management fee rate compared with those of its Expense Peers. The contractual management fee rate represents a combination of the advisory fee and any administrative fees, before taking into account any reimbursements or fee waivers. The Board also compared the Fund’s total expense ratio, as well as its actual management fee rate, to those of its Expense Peers. The total expense ratio represents a fund’s total net operating expenses, including any 12b-1 or non-12b-1 service fees. The total expense ratio gives effect to any expense reimbursements or fee waivers, and the actual management fee rate gives effect to any management fee reimbursements or waivers. The Board considered the services provided and the fees charged by BlackRock and its affiliates to other types of clients with similar investment mandates, as applicable, including institutional accounts and sub-advised mutual funds (including mutual funds sponsored by third parties).

The Board received and reviewed statements relating to BlackRock’s financial condition. The Board reviewed BlackRock’s profitability methodology and was also provided with an estimated profitability analysis that detailed the revenues earned and the expenses incurred by BlackRock for services provided to the Fund. The Board reviewed BlackRock’s estimated profitability with respect to the Fund and other funds the Board currently oversees for the year ended December 31, 2020 compared to available aggregate estimated profitability data provided for the prior two years. The Board reviewed BlackRock’s estimated profitability with respect to certain other U.S. fund complexes managed by the Manager and/or its affiliates. The Board reviewed BlackRock’s assumptions and methodology of allocating expenses in the estimated profitability analysis, noting the inherent limitations in allocating costs among various advisory products. The Board recognized that profitability may be affected by numerous factors including,

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Disclosure of Investment Advisory Agreement  (continued)

among other things, fee waivers and expense reimbursements by the Manager, the types of funds managed, precision of expense allocations and business mix. The Board thus recognized that calculating and comparing profitability at the individual fund level is difficult.

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

The Board considered whether BlackRock has the financial resources necessary to attract and retain high quality investment management personnel to perform its obligations under the Agreement and to continue to provide the high quality of services that is expected by the Board. The Board further considered factors including but not limited to BlackRock’s commitment of time, assumption of risk, and liability profile in servicing the Fund, including in contrast to what is required of BlackRock with respect to other products with similar investment mandates across the open-end fund, ETF, closed-end fund, sub-advised mutual fund, separately managed account, collective investment trust, and institutional separate account product channels, as applicable.

The Board noted that the Fund’s contractual management fee rate ranked in the first quartile, and that the actual management fee rate and total expense ratio each ranked in the first quartile relative to the Fund’s Expense Peers. The Board also noted that the Fund has an advisory fee arrangement that includes breakpoints that adjust the fee rate downward as the size of the Fund increases above certain contractually specified levels. The Board noted that if the size of the Fund were to decrease, the Fund could lose the benefit of one or more breakpoints. The Board further noted that BlackRock and the Board have contractually agreed to a cap on the Fund’s total expenses as a percentage of the Fund’s average daily net assets on a class-by-class basis. In addition, the Board noted that BlackRock proposed, and the Board agreed to, a lower contractual expense cap on a class by class basis. This expense cap reduction was implemented on September 24, 2020.

D. Economies of Scale

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

E. Other Factors Deemed Relevant by the Board Members

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

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

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

Conclusion

The Board, including the Independent Board Members, unanimously approved the continuation of the Agreement between the Manager and the Trust, on behalf of the Fund, for a one-year term ending June 30, 2022. Based upon its evaluation of all of the aforementioned factors in their totality, as well as other information, the Board, including the Independent Board Members, was satisfied that the terms of the Agreement were fair and reasonable and in the best interest of the Fund and its shareholders. In arriving at its decision to approve the Agreement, the Board did not identify any single factor or group of factors as all-important or controlling, but considered all factors together, and different Board Members may have attributed different weights to the various factors considered. The Independent Board Members were also assisted by the advice of independent legal counsel in making this determination.

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Trustee and Officer Information

		Independent Trustees(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 Investment Company Directorships Held During Past Five Years
Mark Stalnecker 1951	Chair of the Board (Since 2019) and Trustee (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.	30 RICs consisting of 152 Portfolios	None
Bruce R. Bond 1946	Trustee (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.	30 RICs consisting of 152 Portfolios	None
Susan J. Carter 1956	Trustee (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; Advisor to Finance Committee, Altman Foundation since 2020.	30 RICs consisting of 152 Portfolios	None
Collette Chilton 1958	Trustee (Since 2015)	Chief Investment Officer, Williams College since 2006; Chief Investment Officer, Lucent Asset Management Corporation from 1998 to 2006; Director, Boys and Girls Club of Boston since 2017; Director, B1 Capital since 2018; Director, David and Lucile Packard Foundation since 2020.	30 RICs consisting of 152 Portfolios	None
Neil A. Cotty 1954	Trustee (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.	30 RICs consisting of 152 Portfolios	None
Lena G. Goldberg 1949	Trustee (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.	30 RICs consisting of 152 Portfolios	None

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Trustee and Officer Information (continued)

		Independent Trustees(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	Trustee (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.	30 RICs consisting of 152 Portfolios	Hertz Global Holdings (car rental); Sealed Air Corp. (packaging); Montpelier Re Holdings, Ltd. (publicly held property and casualty reinsurance) from 2013 until 2015; WABCO (commercial vehicle safety systems) from 2015 to 2020.
Cynthia A. Montgomery 1952	Trustee (Since 2007)	Professor, Harvard Business School since 1989.	30 RICs consisting of 152 Portfolios	Newell Rubbermaid, Inc. (manufacturing) from 1995 to 2016.
Donald C. Opatrny 1952	Trustee (Since 2019)	Trustee, Vice Chair, Member of the Executive Committee and Chair of the Investment Committee, Cornell University from 2004 to 2019; 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 2017; 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.	30 RICs consisting of 152 Portfolios	None
Joseph P. Platt 1947	Trustee (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.	30 RICs consisting of 152 Portfolios	Greenlight Capital Re, Ltd. (reinsurance company); Consol Energy Inc.
Kenneth L. Urish 1951	Trustee (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; Member Advisory Board, ESG Competent Boards since 2020.	30 RICs consisting of 152 Portfolios	None

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Trustee and Officer Information (continued)

		Independent Trustees(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	Trustee (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.	30 RICs consisting of 152 Portfolios	None
		Interested Trustees(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	Trustee (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.	103 RICs consisting of 251 Portfolios	None
John M. Perlowski(e) 1964	Trustee (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.	105 RICs consisting of 253 Portfolios	None

^(a) The address of each Trustee is c/o BlackRock, Inc., 55 East 52nd Street, New York, New York 10055.

^(b)  Independent Trustees 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 Trustees 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 Trustee joined the Board, certain Independent Trustees 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 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 and BlackRock Private Investments Fund.

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Trustee and Officer Information (continued)

Officers Who Are Not Trustees(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.
Trent Walker 1974	Chief Financial Officer (Since 2021)	Managing Director of BlackRock, Inc. since September 2019; Executive Vice President of PIMCO from 2016 to 2019; Senior Vice President of PIMCO from 2008 to 2015; Treasurer from 2013 to 2019 and Assistant Treasurer from 2007 to 2017 of PIMCO Funds, PIMCO Variable Insurance Trust, PIMCO ETF Trust, PIMCO Equity Series, PIMCO Equity Series VIT, PIMCO Managed Accounts Trust, 2 PIMCO-sponsored interval funds and 21 PIMCO-sponsored closed-end funds.
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 serve at the pleasure of the Board.

Further information about the Trust’s Trustees and Officers is available in the Trust’s 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.

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Additional Information

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 Fund will be required to implement and comply with Rule 18f-4 by August 19, 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 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.

General Information

Quarterly performance, semi-annual and annual reports, current net asset value and other information regarding the Fund 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 Fund and does not, and is not intended to, incorporate BlackRock’s website in this report.

Householding

The Fund 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 Fund at (800) 441-7762.

Availability of Quarterly Schedule of Investments

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Form N-PORT is available on the SEC’s website at sec.gov. Additionally, the 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, Procedures and Voting Records

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information about how the Fund voted proxies relating to securities held in the Fund’s portfolio during the most recent 12-month period ended June 30 is available without charge, upon request (1) by calling (800) 441-7762; (2) on the BlackRock website at blackrock.com; and (3) 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.

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.

A D D I T I O N A L   I N F O R M A T I O N 39

Additional Information (continued)

BlackRock Privacy Principles

BlackRock is committed to maintaining the privacy of its current and former fund investors and individual clients (collectively, “Clients”) and to safeguarding 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

Investment Adviser and Administrator

BlackRock Advisors, LLC

Wilmington, DE 19809

Accounting Agent and Custodian

State Street Bank and Trust Company

Boston, MA 02111

Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

Wilmington, DE 19809

Distributor

BlackRock Investments, LLC

New York, NY 10022

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Boston, MA 02116

Legal Counsel

Sidley Austin LLP

New York, NY 10019

Address of the Fund

100 Bellevue Parkway

Wilmington, DE 19809

40 2 0 2 1   B L A C K R O C K   A N N U A L   R E P O R T   T O   S H A R E H O L D E R S

Glossary of Terms Used in this Report

Portfolio Abbreviation

S&P Standard & Poor’s

G L O S S A R Y   O F  T E R M S   U S E D   I N   T H I S   R E P O R T 41

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 Fund unless preceded or accompanied by the Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change.

IMP-05/21-AR

(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:

	(a) Audit Fees		(b) Audit-Related Fees1		(c) Tax Fees2		(d) All Other Fees
Entity Name	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
BlackRock Advantage ESG U.S. Equity Fund	$29,694	$30,600	$0	$0	$13,600	$13,900	$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”):

2

	Current Fiscal Year End	Previous Fiscal Year End
(b) Audit-Related Fees1	$0	$0
(c) Tax Fees2	$0	$0
(d) All Other Fees3	$2,032,000	$1,984,000

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 $2,032,000 and $1,984,000 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:

3

Entity Name	Current Fiscal Year End	Previous Fiscal Year End
BlackRock Advantage ESG U.S. Equity Fund	$13,600	$13,900

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
$2,032,000	$1,984,000

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(a) 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.

4

(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)(2) Section 302 Certifications are attached

(a)(3) Not Applicable

(a)(4) Not Applicable

(b) Section 906 Certifications are attached

5

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 FundsSM
By:	/s/ John M. Perlowski
	John M. Perlowski
	Chief Executive Officer (principal executive officer) of
	BlackRock FundsSM
Date: August 4, 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 FundsSM
Date: August 4, 2021
By:	/s/ Trent Walker
	Trent Walker
	Chief Financial Officer (principal financial officer) of
	BlackRock FundsSM
Date: August 4, 2021

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