BLACKROCK FUND INVESTORS III
(IN LIQUIDATION)
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SEMI-ANNUAL REPORT
JUNE 30, 1999 (UNAUDITED)
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BLACKROCK FUND INVESTORS III (IN LIQUIDATION)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
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ASSETS
Investment in BlackRock Asset Investors, at estimated
fair value (cost $61,758,652) (Notes 1 and 3) $ 53,046,317
Repurchase agreement dated 06/30/99
with State Street Bank and Trust, Co. 4.60% due 07/01/99,
collateralized by $210,000 United States Treasury Note
6.50% due 05/31/01 (market value $215,228)
(repurchase proceeds $208,027) (cost $208,000) 208,000
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Total investments (cost $61,966,652) 53,254,317
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Cash 735
Notes receivable (Note 4) 107,500
Interest receivable from BAI preferred shares 27,524
Other assets 5,402
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Total assets 53,395,478
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LIABILITIES
Notes payable (Note 4) 107,500
Other accrued expenses 171,774
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Total liabilities 279,274
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NET ASSETS $ 53,116,204
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Net assets were comprised of:
Shares of beneficial interest, at par (Note 5) $ 3,354
Paid-in capital in excess of par 61,825,185
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61,828,539
Net unrealized depreciation on investments (8,712,335)
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Total net assets $ 53,116,204
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Net asset value per share $ 158.37
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Total shares outstanding at end of period 335,401.95
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See Notes to Financial Statements.
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BLACKROCK FUND INVESTORS III (IN LIQUIDATION)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
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NET INVESTMENT LOSS
Interest income (net of interest expense of $3,517) $ 4,871
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Expenses
Directors 31,000
Professional services 22,000
Transfer Agent 3,000
Miscellaneous 14,679
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Total expenses 70,679
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Net investment loss (65,808)
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REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (NOTE 3)
Net realized gain on investments 15,585,949
Net change in unrealized depreciation on investments (2,375,410)
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Net realized and unrealized gain 13,210,539
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NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 13,144,731
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See Notes to Financial Statements.
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BLACKROCK FUND INVESTORS III (IN LIQUIDATION)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
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INCREASE (DECREASE) IN CASH
Cash flows used for operating activities:
Dividends and interest received $ 5,257
Expenses paid (53,985)
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Net cash flows used for operating activities (48,728)
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Cash flows used for financing activities:
Distributions received 38,811,201
Distributions to shareholders (38,919,197)
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Net cash flows used for financing activities (107,996)
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Net decrease in cash (156,724)
Cash beginning of period 157,459
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Cash end of period $ 735
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RECONCILIATION OF NET INCREASE IN NET
ASSETS RESULTING FROM OPERATIONS
TO NET CASH FLOWS USED FOR
OPERATING ACTIVITIES
Net increase in net assets resulting from operations $ 13,144,731
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Increase in unrealized depreciation 2,375,410
Net realized gain on investments (15,585,949)
Decrease in deferred organization expenses and other assets 386
Increase in other accrued expenses 16,694
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Total adjustments (13,193,459)
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Net cash flows used for operating activities $ (48,728)
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See Notes to Financial Statements.
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BLACKROCK FUND INVESTORS III (IN LIQUIDATION)
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
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<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, 1999 DECEMBER 31, 1998
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Increase (Decrease) in Net Assets
Operations:
<S> <C> <C>
Net investment income (loss) $ (65,808) $ 6,449,943
Net realized gain 15,585,949 --
Net change in unrealized depreciation
on investments (2,375,410) (782,223)
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Net increase in net assets resulting
from operations 13,144,731 5,667,720
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Dividends and distributions to shareholders from:
Net investment income -- (6,449,943)
Net realized gain (15,520,141) --
Return of capital (23,399,056) (31,245,620)
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Total dividends and distributions to shareholders (38,919,197) (37,695,563)
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Net decrease (25,774,466) (32,027,843)
NET ASSETS
Beginning of period 78,890,670 110,918,513
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End of period $ 53,116,204 $ 78,890,670
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</TABLE>
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See Notes to Financial Statements.
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BLACKROCK FUND INVESTORS III (IN LIQUIDATION)
STATEMENTS OF FINANCIAL HIGHLIGHTS (UNAUDITED)
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<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR FOR THE YEAR FOR THE YEAR MARCH 29, 1995*
MONTHS ENDED ENDED ENDED ENDED THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period $235.21 $330.70 $733.89 $755.60 $1,000.00
------- ------- ------- ------- ---------
Net investment income (loss) (a) (0.20) 19.23 222.80 236.65 (10.91)
Net realized and unrealized
gain (loss) (a) 39.40 (2.33) (19.07) 34.75 (233.49)
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Net increase (decrease) from
investment operations 39.20 16.90 203.73 271.40 (244.40)
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Less dividends and distributions:
Net investment income -- (19.23) (210.53) (164.34) --
In excess of net investment income -- -- -- (0.75) --
Net realized gain (46.27) -- -- (19.63) --
Return of capital (69.77) (93.16) (396.39) (108.39) --
------- ------- ------- ------- ---------
(116.04) (112.39) (606.92) (293.11) --
------- ------- ------- ------- ---------
Net asset value, end of period $158.37 $235.21 $330.70 $733.89 $ 755.60
======= ======= ======= ======= =========
TOTAL INVESTMENT RETURN (B) 16.67% 5.11% 27.76% 53.84% (24.44)%
RATIOS TO AVERAGE NET ASSETS:
Expenses (d) 0.19%(c) 0.23% 0.08% 0.16% 0.85%(c)
Net investment income (loss) (d) (0.18)%(c) 6.38% 31.07% 30.37% (0.85)%(c)
SUPPLEMENTAL DATA:
Average net assets (in thousands) $75,628 $101,109 $227,550 $93,437 $21,529
Portfolio turnover -- -- -- -- --
Net assets, end of period
(in thousands) $53,116 $78,891 $110,919 $163,178 $45,427
</TABLE>
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* Commencement of investment operations.
(a) Calculated based on average shares.
(b)The Fund is not a publicly traded entity, therefore, total investment return
is calculated assuming a purchase of a common share at net asset value per
share on the first day and a sale at net asset value per share on tha last
day of the period reported. Total investment return for periods of less than
one full year are not annualized.
(c) Annualized.
(d)The ratio of expenses and net investment income to total investor capital
commitments of $253,239,514 on an annualized basis is 0.06% and (0.05)%,
respectively, for the six months ended June 30, 1999. The ratio of expenses
and net investment income to total investor capital commitments of
$253,239,514 on an annualized basis is 0.09% and 2.55%, respectively, for the
year ended December 31, 1998. The ratio of expenses and net investment income
to total investor capital commitments of $253,239,514 on an annualized basis
is 0.08% and 27.92%, respectively, for the year ended December 31, 1997. The
ratio of expenses and net investment income to total investor capital
commitments of $253,239,514 on an annualized basis is 0.06% and 11.21%,
respectively, for the year ended December 31, 1996. The ratio of expenses and
net investment loss to total investor capital commitments of $253,239,514 on
an annualized basis is 0.07% and (0.07)%, respectively, for the year ended
December 31, 1995.
Contained above is the unaudited 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 (IN LIQUIDATION)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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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 Board of Trustees of Fund III ("Trustees") approved a plan of
liquidation ("Plan") on September 18, 1997 which was adopted by the stockholders
on October 3, 1997 ("Adoption Date"). The plan term runs two years from the
Adoption Date. The plan requires the Trustees to oversee the complete and
orderly liquidation of Fund III and wind-up the Trust. Any remaining assets and
liabilities may be deposited in a voting trust at any time before the end of the
Plan Term. The liquidation of Fund III in accordance with the Plan, will result
in distributions paid subsequent to the Adoption Date being characterized for
tax purposes first as a return of capital until a shareholder's basis is reduced
to zero, and then as capital gain. The character of distributions paid
subsequent to the Adoption Date are determined in accordance with income tax
regulations which may differ from Generally Accepted Accounting Principals
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% at June 30, 1999). 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 Consolidated Financial Statements which are included elsewhere
in this report.
Short-term securities which mature in 60 days or less are valued at
amortized cost, if their term to maturity from date of purchase was 60 days or
less. Short-term securities with a term to maturity greater than 60 days from
the date of purchase are valued at current market quotations until maturity.
In connection with transactions in repurchase agreements, the custodian for
Fund III takes possession of the underlying collateral securities, the value of
which at least equals the principal amount of the repurchase transaction,
including accrued interest. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked to market on a
daily basis to ensure the adequacy of the collateral. If the seller defaults and
the value of the collateral declines or if bankruptcy proceedings are commenced
with respect to the seller of the security, realization of the collateral by
Fund III may be delayed or limited.
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.
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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.
MASTER ADMINISTRATION, ADMINISTRATION AND OTHER EXPENSES: Master administration
and other expenses are recorded on the accrual basis.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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
For the six months June 30, 1999, there were no purchases or sales of
investment securities, other than short-term investments. The federal income tax
basis of the investments at June 30, 1999 was substantially the same as the
basis for financial reporting.
NOTE 4. NOTES
Fund III holds a note with a principal amount of $107,500 from BAI. The
note pays interest at a per annum rate of 2.50% over the yield of the one-year
constant maturity Treasury, redeemable annually by Fund III and due on
dissolution of BAI.
Fund III has issued and sold notes in the aggregate principal amount of
$107,500 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.
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TRUSTEES
Laurence D. Fink, CHAIRMAN
John C. Deterding
Donald G. Drapkin
Wesley R. Edens
Charles Froland
James Grosfeld
Laurence E. Hirsch
Thomas Ruggels
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 AND ASSISTANT SECRETARY
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, 1999 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
