BlackRock Fund Investors III
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Annual Report
December 31, 1995
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BlackRock Fund Investors III
Statement of Assets and Liabilities
December 31, 1995
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Assets
Investment in BlackRock Asset Investors, at estimated
fair value (cost $49,043,383) (Note 1) $ 45,560,914
Notes receivable (Note 4) 117,500
Deferred organization expenses and other assets (Note 1) 147,023
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45,825,437
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Liabilities
Payable for organization expenses 146,899
Notes payable (Note 4) 117,500
Payable to BlackRock Asset Investors 58,337
Directors fee payable 27,154
Other accrued expenses 48,453
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398,343
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Net Assets $ 45,427,094
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Net assets were comprised of:
Shares of beneficial interest, at par (Note 4) $ 601
Paid-in capital in excess of par 54,698,154
Receivable for shares of beneficial interest (Note 4) (5,649,967)
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49,048,788
Net investment loss (139,225)
Net unrealized depreciation on investments (3,482,469)
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Net assets, December 31, 1995 $ 45,427,094
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Net asset value per share $ 755.60
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Total shares outstanding at end of period 60,120.49
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See Notes to Financial Statements.
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BlackRock Fund Investors III
Statement of Operations
For the Period March 29, 1995* through December 31,1995
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Net Investment Loss
Income
Interest (net of interest expense of $7,640) $ --
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Expenses
Directors
Amortization of deferred organization expenses 60,791
Audit 25,634
Legal 18,758
Custodian 13,188
Amortization of prepaid insurance 12,817
Miscellaneous 4,067
Total expenses 3,970
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139,225
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Net investment loss (139,225)
Realized and Unrealized Loss
on Investments (Note 3)
Net unrealized depreciation on investments (3,482,469)
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Net Decrease In Net Assets
Resulting from Operations $ (3,621,694)
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*Commencement of investment operations.
See Notes to Financial Statements.
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BlackRock Fund Investors III
Statement of Cash Flows
For the Period March 29, 1995* through December 31, 1995
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Increase (Decrease) in Cash
Cash flows used for operating activities:
Interest received $ 7,640
Expenses paid (13,045)
Purchase of long-term portfolio investments (49,043,383)
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Net cash flows used for operating activities (49,048,788)
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Cash flows provided by financing activities:
Proceeds from Fund shares issued 49,048,788
Proceeds from notes sold 117,500
Cost of notes purchased (117,500)
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Net cash flows provided by financing activities 49,048,788
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Net increase in cash --
Cash, beginning of period --
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Cash, end of period $ --
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Reconciliation of Net Decrease in Net
Assets Resulting from Operations
to Net Cash Flows Used for
Operating Activities
Net decrease in net assets resulting from operations $ (3,621,694)
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Increase in investments (49,043,383)
Increase in unrealized depreciation 3,482,469
Increase in deferred organization expenses and
other assets (147,023)
Increase in accrued expenses and other liabilities 280,843
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Total adjustments (45,427,094)
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Net cash flows used for operating activities $(49,048,788)
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* Commencement of investment operations.
See Notes to Financial Statements.
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BlackRock Fund Investors III
Statement of Changes in Net Assets
For the Period March 29, 1995* through December 31, 1995
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Increase (Decrease) in Net Assets
Operations:
Net investment loss $ (139,225)
Net unrealized depreciation
on investments (3,482,469)
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Net decrease in net assets resulting
from operations (3,621,694)
Proceeds from shares of beneficial interest issued 49,048,788
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Net increase 45,427,094
Net Assets
Beginning of period --
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End of period $ 45,427,094
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* Commencement of investment operations.
See Notes to Financial Statements.
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BlackRock Fund Investors III
Financial Highlights
For the Period March 29, 1995* through December 31, 1995
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PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period $ 1,000
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Net investment loss (10.91)
Net unrealized loss on
investments (233.49)
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Net decrease from investment operations (244.40)
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Net asset value, end of period $ 755.60
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TOTAL INVESTMENT RETURN (a) (24.44%)
RATIOS TO AVERAGE NET ASSETS:
Expenses (0.85%)(b)(c)
Net investment loss (0.85%)(b)(c)
SUPPLEMENTAL DATA:
Average net assets (in thousands) $21,529
Portfolio turnover --
Net assets, end of period (in thousands) $45,427
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* Commencement of investment operations.
(a) Total investment return is calculated assuming a purchase of a share of
beneficial interest at net asset value per share on the first day and a
sale at net asset value per share on the last day of the period reported.
Dividends are assumed, for purposes of this calculation, to be reinvested
at the net asset value per share on the payment date. Total investment
return for periods of less than one full year are not annualized.
(b) Annualized.
(c) The ratio of expenses and net investment loss to total investor capital
commitments of $253,239,514 on annualized basis is 0.07% and 0.07%,
respectively.
Contained above is audited operating performance based on an average share
of beneficial interest outstanding, total investment return, ratios to
average net assets and other supplemental data, for the period indicated.
This information has been determined based upon financial information
provided in the financial statements.
See Notes to Financial Statements.
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BlackRock Fund Investors III
Notes to Financial Statements
Note 1. Organization and Accounting Policies
BlackRock Fund Investors III ("Fund III") is a non-diversified closed-end
investment company organized as a Delaware business trust. Fund III invests all
of its investable assets in BlackRock Asset Investors ("BAI" or the "Trust")
which is a Delaware business trust registered under the Investment Company Act
of 1940 as a non-diversified closed-end investment company and has the same
investment objective as Fund III. The value of Fund III's investment in BAI
reflects Fund III's proportionate interest in the net assets of BAI. The
performance of Fund III is directly affected by the performance of BAI. The
financial statements of BAI are included in this report and should be read in
conjunction with Fund III's financial statements.
The following is a summary of significant accounting policies followed by
Fund III.
Securities Valuation: Fund III's interest in BAI is valued by Fund III at its
proportionate interest in the net asset value of BAI (45.11% at December 31,
1995). Valuation of securities by BAI is discussed in Note 1 of BAI's Notes to
Financial Statements which are included elsewhere in this report.
Securities Transactions and Investment Income: Securities transactions are
recorded on the trade date. Realized and unrealized gains and losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and Fund III amortizes premium or accretes discount on securities
purchased using the interest method.
Taxes: It is Fund III's intention to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income to shareholders. Therefore, no federal
income or excise tax provision is required.
Dividends and Distributions: Fund III declares and distributes dividends at
least annually first from net investment income, then from realized short-term
capital gains and other sources. Fund III also expects to pay distributions in
the form of return of paid-in capital. Net long-term capital gains, if any, in
excess of loss carryforwards are distributed at least annually. Dividends and
distributions are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for mortgage-backed
securities.
Master Administration, Administration and Other Expenses: Master administration
and other expenses are recorded on the accrual basis.
Deferred Organization Expenses: A total of $169,499 was incurred in connection
with the organization of Fund III. These costs have been deferred and are being
amortized ratably over a period of 60 months from the date Fund III commenced
investment operations.
Note 2. Agreements
Fund III has a Master Administration Agreement with BlackRock Financial
Management, Inc. (the "Master Administrator "). For its services under the
Master Administration Agreement, the Master Administrator receives no fees from
Fund III.
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Fund III has also entered into an Administration Agreement with State Street
Bank and Trust Company ("State Street"). For its services under the
Administration Agreement, State Street receives no fees from Fund III.
Pursuant to the agreements, the Master Administrator provides various
administrative services, provides office space and pays the compensation of
officers of Fund III, who are affiliated persons of the Master Administrator.
State Street pays occupancy and certain clerical and accounting costs of Fund
III. Fund III bear all other costs and expenses.
Certain trustees of Fund III who are not interested parties are paid a fee
for their services in the amount of $40,000 each on an annual basis plus
telephonic meeting fees not to exceed $500 annually and certain out-of-pocket
expenses.
Note 3. Portfolio Securities
Purchases of investment for the period ended December 31, 1995 aggregated
$49,043,383. The federal income tax basis of the investments of Fund III at
December 31, 1995 was substantially the same as the basis for financial
reporting.
Note 4. Notes
Fund III has issued and sold notes in the aggregate principal amount of
$117,500 paying interest at a per annum rate of 2.50% over the yield of the
one-year constant maturity Treasury, redeemable annually by the holder and due
on dissolution of the Fund III.
Note 5. Capital
Fund III has obtained capital commitments from investors in the form of
subscription agreements to engage in the real estate debt investment activities
described herein. When notified by Fund III, in accordance with the Declaration
of Trust, the investors shall make capital contributions as are required to
satisfy their outstanding capital commitments. Fund III must give fourteen days
advance notice before contributions are due. As of December 31, 1995, the total
outstanding capital commitments from investors was $253,239,514 of which
$49,048,788 had been called and received. On December 29, 1995, Fund III made a
capital call, received on January 12, 1996, totaling $5,649,967 which is
recorded net in the capital account of Fund III at December 31, 1995.
Note 6. Quarterly Data (Unaudited)
<TABLE>
<CAPTION>
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Net realized and
unrealized
Net investment loss on Dividends and Period end
Quarterly Total loss investments Distributions net asset
Period income Amount Per Share Amount Per Share Amount Per Share value
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
March 29, 1995*
to April 30, 1995 - ($53,738) ($5.75) ($826,202) ($88.37) - - $905.89
May 1, 1995
to June 30, 1995 - ($26,371) ($2.22) ($525,527) ($46.72) - - $861.12
July 1, 1995
to Sept. 30, 1995 - ($40,161) ($2.55) ($1,151,062) ($75.69) - - $786.34
October 1, 1995
to Dec. 31, 1995 - ($18,955) ($0.39) ($979,674) ($22.71) - - $755.60
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<FN>
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* Commencement of investment operations.
</FN>
</TABLE>
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BLACKROCK FUND INVESTORS III
REPORT OF INDEPENDENT AUDITORS
The Shareholders and Board of Trustees of
BlackRock Fund Investors III:
We have audited the accompanying statement of assets and liabilities of
BlackRock Fund Investors III as of December 31, 1995 and the related statements
of operations, cash flows, changes in net assets and financial highlights for
the period March 29, 1995 (commencement of investment operations) to December
31, 1995. These financial statements are the responsibility of the Trustis
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1995, by
correspondence with BlackRock Asset Investors. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of BlackRock Fund Investors III as of December
31, 1995, and the results of its operations, its cash flows, the changes in its
net assets and the financial highlights for the period March 29, 1995
(commencement of operations) to December 31, 1995 in conformity with generally
accepted accounting principles.
As explained in Note 1, the financial statements include investment in BlackRock
Asset Investors valued at $45,560,918 (100.3% of net assets), whose value of
underlying investments have been estimated by the Board of Trustees in the
absence of readily ascertainable market values. We have reviewed the procedures
used by the Board of Trustees in arriving at its estimate of value of such
investments and have inspected underlying documentation, and, in the
circumstances, we believe the procedures are reasonable and the documentation
appropriate. However, because of the inherent uncertainty of valuation, those
estimated values may differ significantly from the values that would have been
used had a ready market for the investments existed, and the differences could
be material.
Deloitte & Touche LLP
New York, New York
February 9, 1996
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Trustees
Laurence D. Fink, Chairman
John C. Deterding
Charles Froland
Donald G. Drapkin
Wesley R. Edens
James Grosfeld
Philip Halpern
Laurence E. Hirsch
Kendrick R. Wilson, III
Officers
Ralph L. Schlosstein, President
Wesley R. Edens, Chief Operating Officer
John R. Herbert, Managing Director
Robert I. Kauffman, Managing Director
Randal A. Nardone, Managing Director
Erik P. Nygaard, Managing Director
Henry Gabbay, Treasurer
Susan L. Wagner, Secretary
James Kong, Assistant Treasurer
J. Robert Small, Managing Director and Assistant Secretary
Master Administrator
BlackRock Financial Management, Inc.
345 Park Avenue
New York, NY 10154
Administrator, Custodian and Transfer Agent
State Street Bank and Trust Company
Two Heritage Drive
North Quincy, MA 02171
Independent Auditors
Deloitte & Touche LLP
Two World Financial Center
New York, NY 10281-1431
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Trust shares.
BlackRock Fund Investors III
Two Heritage Drive
North Quincy, MA 02171
