UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-05742

Name of Fund: BlackRock Funds

Exchange Portfolio

Fund Address: 100 Bellevue Parkway, Wilmington, DE 19809

Name and address of agent for service: John M. Perlowski, Chief Executive Officer, BlackRock Funds, 55

            East 52 nd Street, New York, NY 10055

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

Date of fiscal year end: 12/31/2012

Date of reporting period: 09/30/2012

Item 1 – Schedule of Investments

      

 

Schedule of Investments September 30, 2012 (Unaudited)

 

 

(Percentages shown are based on Net Assets)

 

Common Stocks    Shares      Value  

Aerospace & Defense – 6.5%

     

The Boeing Co.

     93,493       $ 6,508,983   

General Dynamics Corp.

     93,000         6,149,160   
     

 

 

 
        12,658,143   

 

 

Beverages – 3.4%

     

The Coca-Cola Co.

     175,470         6,655,577   

 

 

Capital Markets – 1.0%

     

Ameriprise Financial, Inc.

     33,066         1,874,511   

 

 

Consumer Finance – 6.7%

     

American Express Co.

     229,709         13,061,254   

 

 

Diversified Financial Services – 2.6%

  

  

JPMorgan Chase & Co.

     124,728         5,048,989   

 

 

Diversified Telecommunication Services – 1.5%

  

Verizon Communications, Inc.

     64,800         2,952,936   

 

 

Energy Equipment & Services – 6.3%

     

Schlumberger Ltd.

     168,194         12,165,472   

 

 

Food & Staples Retailing – 1.0%

     

Wal-Mart Stores, Inc.

     27,424         2,023,891   

 

 

Food Products – 1.1%

     

Mondelez International, Inc.

     53,285         2,203,335   

 

 

Health Care Equipment & Supplies – 0.5%

  

Medtronic, Inc.

     22,800         983,136   

 

 

Household Products – 3.9%

     

The Procter & Gamble Co.

     109,960         7,626,826   

 

 

Industrial Conglomerates – 3.7%

     

General Electric Co.

     317,848         7,218,328   

 

 

Insurance – 6.9%

     

Berkshire Hathaway, Inc., Class B (a)

     152,557         13,455,527   

 

 

IT Services – 11.2%

     

International Business Machines Corp.

     81,355         16,877,095   

The Western Union Co.

     266,480         4,855,266   
     

 

 

 
        21,732,361   

 

 

Life Sciences Tools & Services – 0.6%

     

Agilent Technologies, Inc.

     29,749         1,143,849   

 

 

Machinery – 3.5%

     

Caterpillar, Inc.

     78,108         6,720,412   

 

 

Metals & Mining – 1.1%

     

Freeport-McMoRan Copper & Gold, Inc.

     53,600         2,121,488   

 

 

Multiline Retail – 7.1%

     

Target Corp.

     216,661         13,751,474   

 

 
Common Stocks    Shares      Value  

Oil, Gas & Consumable Fuels – 7.5%

     

BP Plc - ADR

     31,546       $ 1,336,288   

Exxon Mobil Corp.

     144,677         13,230,712   
     

 

 

 
        14,567,000   

 

 

Pharmaceuticals – 12.7%

     

AstraZeneca Plc - ADR

     64,000         3,063,040   

Johnson & Johnson

     80,592         5,553,595   

Merck & Co., Inc.

     83,999         3,788,355   

Novartis AG - ADR

     116,044         7,108,855   

Pfizer, Inc.

     204,166         5,073,525   
     

 

 

 
        24,587,370   

 

 

Semiconductors & Semiconductor Equipment – 0.5%

  

Intel Corp.

     40,915         927,952   

 

 

Software – 5.6%

     

Microsoft Corp.

     367,277         10,937,509   

 

 

Tobacco – 3.6%

     

Altria Group, Inc.

     77,000         2,571,030   

Philip Morris International, Inc.

     50,136         4,509,232   
     

 

 

 
        7,080,262   

 

 

Wireless Telecommunication Services – 0.9%

  

Vodafone Group Plc - ADR

     64,452         1,836,560   

 

 

Total Long-Term Investments

(Cost – $38,494,608) – 99.4%

        193,334,162   

 

 
               
     
Short-Term Securities                  

BlackRock Liquidity Funds, TempFund, Institutional Class, 0.15% (b)(c)

     892,277         892,277   

 

 

Total Short-Term Securities
(Cost – $892,277) – 0.5%

   

     892,277   

 

 

Total Investments (Cost – $39,386,885*) – 99.9%

  

     194,226,439   

Other Assets Less Liabilities – 0.1%

        170,652   
     

 

 

 

Net Assets – 100.0%

      $ 194,397,091   
     

 

 

 

 

* As of September 30, 2012, gross unrealized appreciation and gross unrealized depreciation based on cost for federal income tax purposes were as follows:

 Tax cost

   $ 36,422,583   
  

 

 

 

 Gross unrealized appreciation.

   $ 158,044,650   

 Gross unrealized depreciation.

     (240,794 ) 
  

 

 

 

 Net unrealized appreciation

   $ 157,803,856   
  

 

 

 

 

(a)  Non-income producing security.
 

 

(b) Investments in issuers considered to be an affiliate of the Fund during the period ended September 30, 2012, for purposes of Section 2(a)(3) of the Investment Company Act of 1940, as amended, were as follows:
Affiliate   

Shares

Held at

December 31,
2011

   Net Activity   

Shares

Held at

September 30,
2012

   Income

BlackRock Liquidity Funds, TempFund, Institutional Class

   685,887    206,390    892,277    $779

 

 

Portfolio Abbreviation

ADR   American Depositary Receipts

 

                 
      BLACKROCK EXCHANGE PORTFOLIO       SEPTEMBER 30, 2012    1

      

 

Schedule of Investments (concluded)

 

 

(c) Represents the current yield as of report date.

 

—  

For Fund compliance purposes, the Fund’s industry classifications refer to any one or more of the industry sub-classifications used by one or more widely recognized market indexes or ratings group indexes, and/or as defined by Fund management. These definitions may not apply for purposes of this report, which may combine such industry sub-classifications for reporting ease.

 

—  

Fair Value Measurements — Various inputs are used in determining the fair value of investments. These inputs to valuation techniques are categorized into a disclosure hierarchy consisting of three broad levels for financial reporting purposes as follows:

 

  —  

Level 1 – unadjusted price quotations in active markets/exchanges for identical assets and 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)

 

  —  

Level 3 – unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available (including the Fund’s own assumptions used in determining the fair value of investments)

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 level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

Changes in valuation techniques may result in transfers into or out of an assigned level within the disclosure hierarchy. In accordance with the Fund’s policy, transfers between different levels of the fair value disclosure hierarchy are deemed to have occurred as of the beginning of the reporting period. The categorization of a value determined for investments is based on the pricing transparency of the investment and is not necessarily an indication of the risks associated with investing in those securities. For information about the Fund’s policy regarding valuation of investments and other significant accounting policies, please refer to the Fund’s most recent financial statements as contained in its semi-annual report.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of September 30, 2012:

 

      Level 1     Level 2     Level 3     Total  

Assets:

       

Investments:

       

Long-Term Investments 1

  $ 193,334,162        —          —        $ 193,334,162   

Short-Term Securities

    892,277        —          —          892,277   

 

 

Total

  $ 194,226,439        —          —        $ 194,226,439   
 

 

 

 

 

1

See above Schedule of Investments for values in each industry.

There were no transfers between levels during the period ended September 30, 2012.

 

 

                 
2       BLACKROCK EXCHANGE PORTFOLIO       SEPTEMBER 30, 2012   

Item 2 – Controls and Procedures

 

2(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.
2(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 registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3 – Exhibits

    Certifications – Attached hereto

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BlackRock Funds

 

By:  

/s/ John M. Perlowski

  John M. Perlowski
  Chief Executive Officer (principal executive officer) of
  BlackRock Funds
Date:   November 21, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  

/s/ John M. Perlowski

  John M. Perlowski
  Chief Executive Officer (principal executive officer) of
  BlackRock Funds
Date:   November 21, 2012
By:  

/s/ Neal J. Andrews

  Neal J. Andrews
  Chief Financial Officer (principal financial officer) of
  BlackRock Funds
Date:   November 21, 2012