BLACKROCK FUND INVESTORS III
SEMI-ANNUAL REPORT
JUNE 30, 1997 (UNAUDITED)
<PAGE>
BLACKROCK FUND INVESTORS III
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in BlackRock Asset Investors,
at estimated fair value
(cost $249,061,565) (Notes 1 and 3) $ 251,330,955
Repurchase agreement dated 6/30/97
with State Street Bank and Trust, Co.
5.60% due 7/1/97, collateralized by
$165,000 United States Treasury Note
4.75% due 10/31/98 (market value $163,798)
(repurchase proceeds $160,025) (cost $160,000) 160,000
-------------
Total investments (cost $249,221,565) 251,490,955
-------------
Cash 6,588
Notes receivable (Note 4) 107,500
Deferred organization expenses and other assets (Note 1) 97,971
-------------
Total assets 251,703,014
LIABILITIES
Notes payable (Note 4) 107,500
Other accrued expenses 39,888
Total liabilities 147,388
NET ASSETS $ 251,555,626
=============
Net assets were comprised of:
Shares of beneficial interest, at par (Note 5) $ 3,354
Paid-in capital in excess of par 249,419,429
-------------
249,422,783
Distributions in excess of net investment income (136,547)
Net unrealized appreciation on investment companies 2,269,390
Total net assets $ 251,555,626
=============
Net asset value per share $ 750.01
=============
Total shares outstanding at end of period 335,401.95
=============
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
BLACKROCK FUND INVESTORS III
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME
Income
Interest (net of interest expense of $4,296) $ 6,169
Dividend income 10,435,368
-----------
Total income 10,441,537
Expenses
Directors 31,241
Amortization of deferred organization expenses 16,811
Audit 11,207
Amortization of prepaid insurance 3,711
Legal 3,471
Transfer Agent 2,603
Custodian 2,479
Miscellaneous 8,575
-----------
Total expenses 80,098
Net investment income 10,361,439
UNREALIZED GAIN
ON INVESTMENTS (NOTE 3)
Net change in unrealized appreciation
on investment companies 4,957,097
-----------
Net unrealized gain 4,957,097
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $15,318,536
===========
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
BLACKROCK FUND INVESTORS III
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
Cash flows provided by operating activities:
Dividends and interest received $ 10,447,811
Expenses paid (144,722)
Paid to affiliates (28,966)
------------
Net cash flows provided by operating activities 10,274,123
------------
Net purchase of investments (83,618,952)
Cash flows provided by financing activities:
Proceeds from Fund shares issued 83,458,950
Dividend and distributions to shareholders (10,399,826)
Net cash flows provided by financing activities 73,059,124
------------
Net decrease in cash (285,705)
Cash beginning of period 292,293
Cash end of period 6,588
RECONCILIATION OF NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS
TO NET CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES
Net increase in net assets resulting from operations $ 15,318,536
------------
Increase in unrealized appreciation (4,957,097)
Decrease in deferred organization expenses and other assets 16,819
Decrease in accrued expenses and other liabilities (104,135)
Total adjustments (5,044,413)
Net cash flows provided by operating activities $ 10,274,123
============
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
<PAGE>
BLACKROCK FUND INVESTORS III
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 common shares is valued by Fund
III at its proportionate interest in the net asset value of BAI (approximately
45.20% at June 30, 1997). Fund III also holds 691.56 BAI preferred shares which
are valued at cost ($345,780). 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. Dividends and distributions received from
BAI are recorded based on the character of the dividend or distribution
received.
TAXES: It is Fund III's intention to continue 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.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to paid in capital.
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.
<PAGE>
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.
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, which is split ratably between BAI, Fund III, BlackRock Fund Investors I
and BlackRock Fund Investors II, 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 and proceeds from sale of investment securities other than
short-term investments for the period ended June 30, 1997 aggregated $83,458,950
and $0, respectively. The federal income tax basis of the investments of Fund
III at June 30, 1997 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, 1996, the total
capital commitments from the Funds was $253,239,514 of which $249,453,818 had
been called and received.
<PAGE>
TRUSTEES
Laurence D. Fink, CHAIRMAN
Terry Blaney
John C. Deterding
Donald G. Drapkin
Wesley R. Edens
Charles Froland
James Grosfeld
Laurence E. Hirsch
Kendrick R. Wilson, III
OFFICERS
Ralph L. Schlosstein, PRESIDENT
Wesley R. Edens, CHIEF OPERATING OFFICER
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
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 LLP
919 Third Avenue
New York, NY 10022
The accompanying financial statements as of June 30, 1997 were not audited and
accordingly, no opinion is expressed on them. 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
