<PAGE>
Rule 497(e)
File No. 33-26305
BLACKROCK FUNDS(SM)
THE BOND PORTFOLIOS/SERVICE CLASS
SUPPLEMENT TO PROSPECTUS DATED
JANUARY 28, 1998
The Prospectus is amended to reflect the fact that BlackRock, Inc. has changed
its name to BlackRock Advisors, Inc.
The section "What Are The Differences Among The Portfolios?" has been amended
to reflect that the minimum credit quality for investments of the Intermediate
Bond, Core Bond and Managed Income Portfolios is "BBB".
The section "What Types Of Securities Are In The Portfolios?" has been amended
to reflect that the Intermediate Bond, Core Bond and Managed Income Portfolios
may not invest in high yield securities and the Intermediate Bond Portfolio
may not invest in foreign securities/currency risk.
The section "What Additional Investment Policies And Risks Apply?" has been
amended as follows:
The following replaces the first paragraph under "Foreign Investments":
FOREIGN AND EMERGING MARKETS INVESTMENTS. The International Bond Portfolio
will invest primarily in foreign securities and currencies. Each of the
Managed Income and Core Bond Portfolios may invest up to 10% of its total
assets and the Low Duration Bond Portfolio may invest up to 20% of its to-
tal assets in debt securities of foreign and emerging markets issuers on
either a currency hedged or unhedged basis and may hold from time to time
various foreign and emerging markets currencies pending investment or con-
version into U.S. dollars. Some of these instruments may have the charac-
teristics of futures contracts. In addition, each Portfolio may engage in
foreign currency exchange transactions to seek to protect against changes
in the level of future exchange rates which would adversely affect the
Portfolio's performance. These investments and transactions involving for-
eign securities, currencies, options (including options that relate to for-
eign currencies), futures, hedging and cross-hedging are described below
and under "Interest Rate and Currency Transactions" and "Options and
Futures Contracts." Investing in securities of foreign and emerging markets
issuers involves considerations not typically associated with investing in
securities of companies organized and operated in the United States. Be-
cause foreign securities generally are denominated and pay dividends or in-
terest in foreign currencies, the value of a Portfolio that invests in for-
eign securities will be affected favorably or unfavorably by changes in
currency exchange rates.
The following is added after the second paragraph under "Foreign Investments":
Political and economic structures in many countries with emerging economies
or securities markets may be undergoing significant evolution and rapid de-
velopment, and these countries may lack the social, political and economic
stability characteristic of more developed countries. Some of these coun-
tries may have in the past failed to recognize private property rights and
have at times nationalized or expropriated the assets of private companies.
As a result, the risks described above, including the risks of nationaliza-
tion or expropriation of assets, may be heightened. In addition, unantici-
pated political or social developments may affect the value of investments
in these countries and the availability to a Portfolio of additional in-
vestments in emerging market countries. The small size and inexperience of
the securities markets in certain emerging market countries and the limited
volume of trading in securities in these countries may make investments in
emerging market countries illiquid and more volatile than investments in
more developed countries. There may be little financial or accounting in-
formation available with respect to issuers located in certain emerging
market countries, and it may be difficult to assess the value or prospects
of an investment in such issuers.
<PAGE>
The following replaces the first paragraph under "High Yield Securities":
The Low Duration Bond Portfolio may invest in non-investment grade or "high
yield" fixed income or convertible securities commonly known to investors
as "junk bonds" when the Portfolio's sub-adviser believes that the invest-
ment characteristics of such securities make them desirable in light of the
Portfolio's investment objective and current portfolio mix, so long as un-
der normal market conditions, no more than 20% of the Low Duration Bond
Portfolio's total assets are invested in non-investment grade debt securi-
ties, and such securities are rated "B" or higher at the time of purchase
by at least one major rating agency.
The following replaces the first sentence of the last paragraph under "High
Yield Securities":
The Low Duration Bond Portfolio may invest in securities rated "B" and
above or determined by the sub-adviser to be of comparable quality.
Investors in the Low Duration Bond, Core Bond, Managed Income and International
Bond Portfolios should refer to the section in the Prospectus entitled "What
Additional Investment Policies And Risks Apply?--Foreign and Emerging Markets
Investments" and to the section in the Statement of Additional Information
entitled "Investment Policies--Additional Information on Portfolio
Investments--Forward Currency Transactions" for a discussion of the risks
involved in investing in foreign securities. Investors in the Low Duration Bond
Portfolio should refer to the section in the Prospectus entitled "What
Additional Investment Policies And Risks Apply?--High Yield Securities" and to
the section in the Statement of Additional Information entitled "Investment
Policies--Additional Information on Portfolio Investments--Non-Investment Grade
Securities" for a discussion of the risks involved in investing in non-
investment grade securities.
The section "Who Manages The Fund?" has been amended as follows:
The Portfolios and their portfolio managers are as follows:
<TABLE>
<CAPTION>
BLACKROCK FUNDS PORTFOLIO PORTFOLIO MANAGER
------------------------- -----------------
<C> <S>
Low Duration Bond Robert S. Kapito; Vice Chairman of BlackRock
since 1988; Portfolio co-manager since its
inception.
Scott Amero; Managing Director of BlackRock since
1990; Portfolio co-manager since its inception.
Intermediate Government Bond Robert S. Kapito and Scott Amero (see above) and
Michael P. Lustig; Mr. Lustig has been Vice
President of BlackRock since 1989; Messrs.
Kapito, Lustig and Amero have been Portfolio co-
managers since 1995.
Intermediate Bond Robert S. Kapito, Michael P. Lustig and Scott
Amero (see above); Messrs. Kapito, Lustig and
Amero have been Portfolio co-managers since 1995.
Core Bond Keith Anderson; Managing Director of BlackRock
since 1988; Portfolio manager since June 1997.
Managed Income Keith Anderson (see above); Portfolio manager
since June 1997.
International Bond Andrew Gordon; Portfolio manager at BlackRock
since 1996; responsible for non-dollar research
at Barclay Investments from 1994 to 1996 and at
CS First Boston from 1986 to 1994; Portfolio
manager since January 1997.
Tax-Free Income Kevin Klingert; Portfolio manager at BlackRock
since 1991; prior to joining BlackRock, Assistant
Vice President, Merrill Lynch, Pierce, Fenner &
Smith; Portfolio manager since 1995.
Pennsylvania Tax-Free Income Kevin Klingert (see above); Portfolio manager
since 1995.
New Jersey Tax-Free Income Kevin Klingert (see above); Portfolio manager
since 1995.
Ohio Tax-Free Income Kevin Klingert (see above); Portfolio manager
since 1995.
</TABLE>
2
<PAGE>
The section "How Are Shares Purchased And Redeemed?" has been amended as fol-
lows:
The following replaces the first sentence under "Purchase of Shares":
Service Shares are offered without a sales load to Institutions acting on
behalf of their customers, certain persons who were shareholders of The
Compass Capital Group at the time of its combination with The PNC(R) Fund
during the first quarter of 1996, and investors that participate in the
Capital Directions SM asset allocation program.
The following has been added after the last paragraph under "Purchase of
Shares":
In the event that a shareholder acquiring Service Shares on or after May 1,
1998 (other than a former shareholder of The Compass Capital Group as de-
scribed above) ceases to meet the eligibility standards for purchasing
Service Shares, then the shareholder's Service Shares will, upon the direc-
tion of the Fund's distributor, automatically be converted to Investor A
Shares of the Portfolio having the same aggregate net asset value as the
shares converted. Investor A Shares are currently authorized to bear addi-
tional service and distribution fees at the aggregate annual rate of .20%
of average daily net assets. In the event that a shareholder acquiring
Service Shares on or after May 1, 1998 subsequently satisfies the eligibil-
ity standards for purchasing Institutional Shares (other than due to fluc-
tuations in market value), then the shareholder's Service Shares will, upon
the direction of the Fund's distributor, automatically be converted to In-
stitutional Shares of the Portfolio having the same aggregate net asset
value as the shares converted.
This Supplement is dated October 6, 1998.
3
<PAGE>
Rule 497(e)
File No. 33-26305
BLACKROCK FUNDS(SM)
THE BOND PORTFOLIOS/INSTITUTIONAL CLASS
SUPPLEMENT TO PROSPECTUS DATED
JANUARY 28, 1998
The Prospectus is amended to reflect the fact that BlackRock, Inc. has changed
its name to BlackRock Advisors, Inc.
The section "What Are The Differences Among The Portfolios?" has been amended
to reflect that the minimum credit quality for investments of the Intermediate
Bond, Core Bond and Managed Income Portfolios is "BBB".
The section "What Types Of Securities Are In The Portfolios?" has been amended
to reflect that the Intermediate Bond, Core Bond and Managed Income Portfolios
may not invest in high yield securities and the Intermediate Bond Portfolio
may not invest in foreign securities/currency risk.
The section "What Additional Investment Policies And Risks Apply?" has been
amended as follows:
The following replaces the first paragraph under "Foreign Investments":
FOREIGN AND EMERGING MARKETS INVESTMENTS. The International Bond Portfolio
will invest primarily in foreign securities and currencies. Each of the
Managed Income and Core Bond Portfolios may invest up to 10% of its total
assets and the Low Duration Bond Portfolio may invest up to 20% of its to-
tal assets in debt securities of foreign and emerging markets issuers on
either a currency hedged or unhedged basis and may hold from time to time
various foreign and emerging markets currencies pending investment or con-
version into U.S. dollars. Some of these instruments may have the charac-
teristics of futures contracts. In addition, each Portfolio may engage in
foreign currency exchange transactions to seek to protect against changes
in the level of future exchange rates which would adversely affect the
Portfolio's performance. These investments and transactions involving for-
eign securities, currencies, options (including options that relate to for-
eign currencies), futures, hedging and cross-hedging are described below
and under "Interest Rate and Currency Transactions" and "Options and
Futures Contracts." Investing in securities of foreign and emerging markets
issuers involves considerations not typically associated with investing in
securities of companies organized and operated in the United States. Be-
cause foreign securities generally are denominated and pay dividends or in-
terest in foreign currencies, the value of a Portfolio that invests in for-
eign securities will be affected favorably or unfavorably by changes in
currency exchange rates.
The following is added after the second paragraph under "Foreign Investments":
Political and economic structures in many countries with emerging economies
or securities markets may be undergoing significant evolution and rapid
development, and these countries may lack the social, political and
economic stability characteristic of more developed countries. Some of
these countries may have in the past failed to recognize private property
rights and have at times nationalized or expropriated the assets of private
companies. As a result, the risks described above, including the risks of
nationalization or expropriation of assets, may be heightened. In addition,
unanticipated political or social developments may affect the value of
investments in these countries and the availability to a Portfolio of
additional investments in emerging market countries. The small size and
inexperience of the securities markets in certain emerging market countries
and the limited volume of trading in securities in these countries may make
investments in emerging market countries illiquid and more volatile than
investments in more developed countries. There may be little financial or
accounting information available with respect to issuers located in certain
emerging market countries, and it may be difficult to assess the value or
prospects of an investment in such issuers.
<PAGE>
The following replaces the first paragraph under "High Yield Securities":
The Low Duration Bond Portfolio may invest in non-investment grade or "high
yield" fixed income or convertible securities commonly known to investors
as "junk bonds" when the Portfolio's sub-adviser believes that the invest-
ment characteristics of such securities make them desirable in light of the
Portfolio's investment objective and current portfolio mix, so long as un-
der normal market conditions, no more than 20% of the Low Duration Bond
Portfolio's total assets are invested in non-investment grade debt securi-
ties, and such securities are rated "B" or higher at the time of purchase
by at least one major rating agency.
The following replaces the first sentence of the last paragraph under "High
Yield Securities":
The Low Duration Bond Portfolio may invest in securities rated "B" and
above or determined by the sub-adviser to be of comparable quality.
Investors in the Low Duration Bond, Core Bond, Managed Income and International
Bond Portfolios should refer to the section in the Prospectus entitled "What
Additional Investment Policies And Risks Apply?--Foreign and Emerging Markets
Investments" and to the section in the Statement of Additional Information
entitled "Investment Policies--Additional Information on Portfolio
Investments--Forward Currency Transactions" for a discussion of the risks
involved in investing in foreign securities. Investors in the Low Duration Bond
Portfolio should refer to the section in the Prospectus entitled "What
Additional Investment Policies And Risks Apply?--High Yield Securities" and to
the section in the Statement of Additional Information entitled "Investment
Policies--Additional Information on Portfolio Investments--Non-Investment Grade
Securities" for a discussion of the risks involved in investing in non-
investment grade securities.
The section "Who Manages The Fund?" has been amended as follows:
The Portfolios and their portfolio managers are as follows:
<TABLE>
<CAPTION>
BLACKROCK FUNDS PORTFOLIO PORTFOLIO MANAGER
------------------------- -----------------
<C> <S>
Low Duration Bond Robert S. Kapito; Vice Chairman of BlackRock
since 1988; Portfolio co-manager since its
inception.
Scott Amero; Managing Director of BlackRock since
1990; Portfolio co-manager since its inception.
Intermediate Government Bond Robert S. Kapito and Scott Amero (see above) and
Michael P. Lustig; Mr. Lustig has been Vice
President of BlackRock since 1989; Messrs.
Kapito, Lustig and Amero have been Portfolio co-
managers since 1995.
Intermediate Bond Robert S. Kapito, Michael P. Lustig and Scott
Amero (see above); Messrs. Kapito, Lustig and
Amero have been Portfolio co-managers since 1995.
Core Bond Keith Anderson; Managing Director of BlackRock
since 1988; Portfolio manager since June 1997.
Managed Income Keith Anderson (see above); Portfolio manager
since June 1997.
International Bond Andrew Gordon; Portfolio manager at BlackRock
since 1996; responsible for non-dollar research
at Barclay Investments from 1994 to 1996 and at
CS First Boston from 1986 to 1994; Portfolio
manager since January 1997.
Tax-Free Income Kevin Klingert; Portfolio manager at BlackRock
since 1991; prior to joining BlackRock, Assistant
Vice President, Merrill Lynch, Pierce, Fenner &
Smith; Portfolio manager since 1995.
Pennsylvania Tax-Free Income Kevin Klingert (see above); Portfolio manager
since 1995.
New Jersey Tax-Free Income Kevin Klingert (see above); Portfolio manager
since 1995.
Ohio Tax-Free Income Kevin Klingert (see above); Portfolio manager
since 1995.
</TABLE>
2
<PAGE>
The section "How Are Shares Purchased And Redeemed?" has been amended as fol-
lows:
The following replaces the first paragraph under "Purchase of Shares":
Institutional Shares are offered to institutional investors, including (a)
registered investment advisers with a minimum investment of $500,000 and
(b) the trust departments of PNC Bank and its affiliates (collectively,
"PNC") on behalf of clients for whom PNC (i) acts in a fiduciary capacity
(excluding participant-directed employee benefit plans) or otherwise has
investment discretion or (ii) acts as custodian with respect to at least
$2,000,000 in assets, and individuals with a minimum investment of
$2,000,000.
The following has been added after the last paragraph under "Purchase of
Shares":
In the event that a shareholder acquiring Institutional Shares on or after
May 1, 1998 ceases to meet the eligibility standards for purchasing Insti-
tutional Shares (other than due to fluctuations in market value), then the
shareholder's Institutional Shares will, upon the direction of the Fund's
distributor, automatically be converted to shares of another class of the
Portfolio having the same aggregate net asset value as the shares convert-
ed. If, at the time of conversion, an institution offering Service Shares
of the Portfolio is acting on the shareholder's behalf, then the sharehold-
er's Institutional Shares will be converted to Service Shares of the Port-
folio. If not, then the shareholder's Institutional Shares will be con-
verted to Investor A Shares of the Portfolio. Service Shares are currently
authorized to bear additional service and processing fees at the aggregate
annual rate of .30% of average daily net assets, while Investor A Shares
are currently authorized to bear additional service, processing and distri-
bution fees at the aggregate annual rate of .50% of average daily net as-
sets.
This Supplement is dated October 6, 1998.
3
<PAGE>
Rule 497(e)
File No. 33-26305
BLACKROCK FUNDS(SM)
THE BOND PORTFOLIOS/INVESTOR CLASSES
SUPPLEMENT TO PROSPECTUS DATED
JANUARY 28, 1998
The Prospectus is amended to reflect the fact that BlackRock, Inc. has changed
its name to BlackRock Advisors, Inc.
The section "What Are The Differences Among The Portfolios?" has been amended
to reflect that the minimum credit quality for investments of the Intermediate
Bond, Core Bond and Managed Income Portfolios is "BBB".
The section "What Types Of Securities Are In The Portfolios?" has been amended
to reflect that the Intermediate Bond, Core Bond and Managed Income Portfolios
may not invest in high yield securities and the Intermediate Bond Portfolio
may not invest in foreign securities/currency risk.
The section "What Additional Investment Policies And Risks Apply?" has been
amended as follows:
The following replaces the first paragraph under "Foreign Investments":
FOREIGN AND EMERGING MARKETS INVESTMENTS. The International Bond Portfolio
will invest primarily in foreign securities and currencies. Each of the
Managed Income and Core Bond Portfolios may invest up to 10% of its total
assets and the Low Duration Bond Portfolio may invest up to 20% of its to-
tal assets in debt securities of foreign and emerging markets issuers on
either a currency hedged or unhedged basis and may hold from time to time
various foreign and emerging markets currencies pending investment or con-
version into U.S. dollars. Some of these instruments may have the charac-
teristics of futures contracts. In addition, each Portfolio may engage in
foreign currency exchange transactions to seek to protect against changes
in the level of future exchange rates which would adversely affect the
Portfolio's performance. These investments and transactions involving for-
eign securities, currencies, options (including options that relate to for-
eign currencies), futures, hedging and cross-hedging are described below
and under "Interest Rate and Currency Transactions" and "Options and
Futures Contracts." Investing in securities of foreign and emerging markets
issuers involves considerations not typically associated with investing in
securities of companies organized and operated in the United States. Be-
cause foreign securities generally are denominated and pay dividends or in-
terest in foreign currencies, the value of a Portfolio that invests in for-
eign securities will be affected favorably or unfavorably by changes in
currency exchange rates.
The following is added after the second paragraph under "Foreign Investments":
Political and economic structures in many countries with emerging economies
or securities markets may be undergoing significant evolution and rapid de-
velopment, and these countries may lack the social, political and economic
stability characteristic of more developed countries. Some of these coun-
tries may have in the past failed to recognize private property rights and
have at times nationalized or expropriated the assets of private companies.
As a result, the risks described above, including the risks of nationaliza-
tion or expropriation of assets, may be heightened. In addition, unantici-
pated political or social developments may affect the value of investments
in these countries and the availability to a Portfolio of additional in-
vestments in emerging market countries. The small size and inexperience of
the securities markets in certain emerging market countries and the limited
volume of trading in securities in these countries may make investments in
emerging market countries illiquid and more volatile than investments in
more developed countries. There may be little financial or accounting in-
formation available with respect to issuers located in certain emerging
market countries, and it may be difficult to assess the value or prospects
of an investment in such issuers.
<PAGE>
The following replaces the first paragraph under "High Yield Securities":
The Low Duration Bond Portfolio may invest in non-investment grade or "high
yield" fixed income or convertible securities commonly known to investors
as "junk bonds" when the Portfolio's sub-adviser believes that the invest-
ment characteristics of such securities make them desirable in light of the
Portfolio's investment objective and current portfolio mix, so long as un-
der normal market conditions, no more than 20% of the Low Duration Bond
Portfolio's total assets are invested in non-investment grade debt securi-
ties, and such securities are rated "B" or higher at the time of purchase
by at least one major rating agency.
The following replaces the first sentence of the last paragraph under "High
Yield Securities":
The Low Duration Bond Portfolio may invest in securities rated "B" and
above or determined by the sub-adviser to be of comparable quality.
Investors in the Low Duration Bond, Core Bond, Managed Income and International
Bond Portfolios should refer to the section in the Prospectus entitled "What
Additional Investment Policies And Risks Apply?--Foreign and Emerging Markets
Investments" and to the section in the Statement of Additional Information en-
titled "Investment Policies--Additional Information on Portfolio Investments--
Forward Currency Transactions" for a discussion of the risks involved in in-
vesting in foreign securities. Investors in the Low Duration Bond Portfolio
should refer to the section in the Prospectus entitled "What Additional Invest-
ment Policies And Risks Apply?--High Yield Securities" and to the section in
the Statement of Additional Information entitled "Investment Policies--Addi-
tional Information on Portfolio Investments--Non-Investment Grade Securities"
for a discussion of the risks involved in investing in non-investment grade se-
curities.
The section "Who Manages The Fund?" has been amended as follows:
The Portfolios and their portfolio managers are as follows:
<TABLE>
<CAPTION>
BLACKROCK FUNDS PORTFOLIO PORTFOLIO MANAGER
------------------------- -----------------
<C> <S>
Low Duration Bond Robert S. Kapito; Vice Chairman of BlackRock
since 1988; Portfolio co-manager since its
inception.
Scott Amero; Managing Director of BlackRock since
1990; Portfolio co-manager since its inception.
Intermediate Government Bond Robert S. Kapito and Scott Amero (see above) and
Michael P. Lustig; Mr. Lustig has been Vice
President of BlackRock since 1989; Messrs.
Kapito, Lustig and Amero have been Portfolio co-
managers since 1995.
Intermediate Bond Robert S. Kapito, Michael P. Lustig and Scott
Amero (see above); Messrs. Kapito, Lustig and
Amero have been Portfolio co-managers since 1995.
Core Bond Keith Anderson; Managing Director of BlackRock
since 1988; Portfolio manager since June 1997.
Government Income Robert S. Kapito, Michael P. Lustig and Scott
Amero (see above); Messrs. Kapito, Lustig and
Amero have been Portfolio co-managers since 1995.
Managed Income Keith Anderson (see above); Portfolio manager
since June 1997.
International Bond Andrew Gordon; Portfolio manager at BlackRock
since 1996; responsible for non-dollar research
at Barclay Investments from 1994 to 1996 and at
CS First Boston from 1986 to 1994; Portfolio
manager since January 1997.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
BLACKROCK FUNDS PORTFOLIO PORTFOLIO MANAGER
------------------------- -----------------
<C> <S>
Tax-Free Income Kevin Klingert; Portfolio manager at BlackRock
since 1991; prior to joining BlackRock, Assistant
Vice President, Merrill Lynch, Pierce, Fenner &
Smith; Portfolio manager since 1995.
Pennsylvania Tax-Free Income Kevin Klingert (see above); Portfolio manager
since 1995.
New Jersey Tax-Free Income Kevin Klingert (see above); Portfolio manager
since 1995.
Ohio Tax-Free Income Kevin Klingert (see above); Portfolio manager
since 1995.
</TABLE>
The section "How Are Shares Purchased?" has been amended as follows:
The following has been added after the last paragraph under "Other Purchase In-
formation":
In the event that a shareholder acquiring Investor A Shares on or after May
1, 1998 at a future date meets the eligibility standards for purchasing In-
stitutional Shares (other than due to fluctuations in market value), then
the shareholder's Investor A Shares will, upon the direction of the Fund's
distributor, automatically be converted to Institutional Shares of the
Portfolio having the same aggregate net asset value as the shares convert-
ed.
This Supplement is dated October 6, 1998.
3
<PAGE>
RULE NO. 497(e)
FILE NO. 33-26305
BLACKROCK FUNDS(SM)
LOW DURATION BOND, CORE BOND AND INTERMEDIATE BOND PORTFOLIOS/BLACKROCK CLASS
SUPPLEMENT TO PROSPECTUS DATED
JANUARY 28, 1998
The Prospectus is amended to reflect the fact that BlackRock, Inc. has changed
its name to BlackRock Advisors, Inc.
The section "What Are The Differences Among The Portfolios?" has been amended
to reflect that the minimum credit quality for investments of the Intermediate
Bond and Core Bond Portfolios is "BBB".
The section "What Types Of Securities Are In The Portfolios?" has been amended
to reflect that the Intermediate Bond and Core Bond Portfolios may not invest
in high yield securities and the Intermediate Bond Portfolio may not invest in
foreign securities/currency risk.
The section "What Additional Investment Policies And Risks Apply?" has been
amended as follows:
The following replaces the first paragraph under "Non-Investment Grade Securi-
ties":
The Low Duration Bond Portfolio may invest in non-investment grade or "high
yield" fixed income or convertible securities commonly known to investors
as "junk bonds" when the Portfolio's sub-adviser believes that the invest-
ment characteristics of such securities make them desirable in light of the
Portfolio's investment objective and current portfolio mix, so long as un-
der normal market conditions, no more than 20% of the Low Duration Bond
Portfolio's total assets are invested in non-investment grade debt securi-
ties, and such securities are rated "B" or higher at the time of purchase
by at least one major rating agency.
The following replaces the first sentence of the last paragraph under "Non-In-
vestment Grade Securities":
The Low Duration Bond Portfolio may invest in securities rated "B" and
above or determined by the sub-adviser to be of comparable quality.
The following replaces the first paragraph under "Foreign Investments":
FOREIGN AND EMERGING MARKETS INVESTMENTS. The Core Bond Portfolio may in-
vest up to 10% of its total assets and the Low Duration Bond Portfolio may
invest up to 20% of its total assets in debt securities of foreign and
emerging markets issuers on either a currency hedged or unhedged basis and
may hold from time to time various foreign and emerging markets currencies
pending investment or conversion into U.S. dollars. Some of these instru-
ments may have the characteristics of futures contracts. In addition, each
Portfolio may engage in foreign currency exchange transactions to seek to
protect against changes in the level of future exchange rates which would
adversely affect the Portfolio's performance. These investments and trans-
actions involving foreign securities, currencies, options (including op-
tions that relate to foreign currencies), futures, hedging and cross-hedg-
ing are described below and under "Interest Rate and Currency Transactions"
and "Options and Futures Contracts." Investing in securities of foreign and
emerging markets issuers involves considerations not typically associated
with investing in securities of companies organized and operated in the
United States. Because foreign securities generally are denominated and pay
dividends or interest in foreign currencies, the value of a Portfolio that
invests in foreign securities will be affected favorably or unfavorably by
changes in currency exchange rates.
<PAGE>
The following is added after the second paragraph under "Foreign Investments":
Political and economic structures in many countries with emerging economies
or securities markets may be undergoing significant evolution and rapid de-
velopment, and these countries may lack the social, political and economic
stability characteristic of more developed countries. Some of these coun-
tries may have in the past failed to recognize private property rights and
have at times nationalized or expropriated the assets of private companies.
As a result, the risks described above, including the risks of nationaliza-
tion or expropriation of assets, may be heightened. In addition, unantici-
pated political or social developments may affect the value of investments
in these countries and the availability to a Portfolio of additional in-
vestments in emerging market countries. The small size and inexperience of
the securities markets in certain emerging market countries and the limited
volume of trading in securities in these countries may make investments in
emerging market countries illiquid and more volatile than investments in
more developed countries. There may be little financial or accounting in-
formation available with respect to issuers located in certain emerging
market countries, and it may be difficult to assess the value or prospects
of an investment in such issuers.
Investors in the Low Duration Bond and Core Bond Portfolios should refer to the
section in the Prospectus entitled "What Additional Investment Policies And
Risks Apply?--Foreign and Emerging Markets Investments" and to the section in
the Statement of Additional Information entitled "Investment Policies--
Additional Information on Portfolio Investments--Forward Currency Transactions"
for a discussion of the risks involved in investing in foreign securities.
Investors in the Low Duration Bond Portfolio should refer to the section in the
Prospectus entitled "What Additional Investment Policies And Risks Apply?--Non-
Investment Grade Securities" and to the section in the Statement of Additional
Information entitled "Investment Policies--Additional Information on Portfolio
Investments--Non-Investment Grade Securities" for a discussion of the risks
involved in investing in non-investment grade securities.
The section "Who Manages The Fund?" has been amended as follows:
The Portfolios and their portfolio managers are as follows:
<TABLE>
<CAPTION>
BLACKROCK PORTFOLIO PORTFOLIO MANAGER
------------------- -----------------
<C> <S>
Low Duration Bond Robert S. Kapito; Vice Chairman of BlackRock since 1988;
Portfolio co-manager since its inception.
Scott Amero; Managing Director of BlackRock since 1990;
Portfolio co-manager since its inception.
Core Bond Keith Anderson; Managing Director of BlackRock since 1988;
Portfolio manager since June 1997.
Intermediate Bond Robert S. Kapito (see above); Portfolio co-manager since
1995.
Michael P. Lustig; Vice President of BlackRock since 1989;
Portfolio co-manager since 1995.
Scott Amero (see above); Portfolio co-manager since 1995.
</TABLE>
This Supplement is dated October 6, 1998.
2
<PAGE>
RULE 497 (e)
FILE NO. 33-26305
BLACKROCK FUNDS(SM)
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 29, 1998
The section "Investment Policies -- Additional Information on Portfolio
Investments" is amended as follows:
The following replaces the first paragraph under "Non-Investment Grade Secu-
rities":
The Low Duration Bond Portfolio may invest in non-investment grade or
"high yield" fixed income or convertible securities commonly known to
investors as "junk bonds" when the Portfolio's sub- adviser believes
that the investment characteristics of such securities make them
desirable in light of the Portfolio's investment objective and current
portfolio mix, so long as under normal market conditions, no more than
20% of the Low Duration Bond Portfolio's total assets are invested in
non- investment grade debt securities, and such securities are rated "B"
or higher at the time of purchase by at least one major rating agency.
This Supplement is dated October 6, 1998.
