September 30, 1998
Equity
Portfolios
ANNUAL REPORT
TO SHAREHOLDERS
(LOGO)
Not FDIC Insured BLACKROCK FUNDS
May Lose Value PURE INVESTMENT STYLE(REGISTRATION MARK)
No Bank Guarantee [GRAPHIC OMITTED]
<PAGE>
BLACKROCK FUNDS
EQUITY PORTFOLIOS
* Large Cap Value Equity * International Equity
* Large Cap Growth Equity * International Small Cap Equity
* Mid-Cap Value Equity * International Emerging Markets
* Mid-Cap Growth Equity * Select Equity
* Small Cap Value Equity * Index Equity
* Small Cap Growth Equity * Balanced
* Micro-Cap Equity
TABLE OF CONTENTS
PRESIDENT'S LETTER.............................................................1
PORTFOLIO SUMMARIES
Large Cap Value Equity...................................................3
Large Cap Growth Equity..................................................4
Mid-Cap Value Equity.....................................................5
Mid-Cap Growth Equity....................................................6
Small Cap Value Equity...................................................7
Small Cap Growth Equity..................................................8
Micro-Cap Equity.........................................................9
International Equity....................................................10
International Small Cap Equity..........................................11
International Emerging Markets..........................................12
Select Equity...........................................................13
Index Equity............................................................14
Balanced................................................................15
Note on Performance Information.........................................16
STATEMENTS OF NET ASSETS/SCHEDULES OF INVESTMENTS..........................17-55
Large Cap Value Equity Statement of Assets & Liabilities................19
Large Cap Growth Equity Statement of Assets & Liabilities...............22
Mid-Cap Value Equity Statement of Assets & Liabilities..................25
Mid-Cap Growth Equity Statement of Assets & Liabilities.................28
Small Cap Value Equity Statement of Assets & Liabilities................31
Small Cap Growth Equity Statement of Assets & Liabilities...............34
Micro-Cap Equity Statement of Assets & Liabilities......................36
International Equity Portfolio Statement of Assets & Liabilities........39
International Emerging Markets Statement of Assets & Liabilities........45
Select Equity Statement of Assets & Liabilities.........................48
Balanced Statement of Assets & Liabilities..............................55
PORTFOLIO FINANCIAL STATEMENTS
Statements of Operations.............................................56-57
Statements of Changes in Net Assets..................................58-61
Financial Highlights.................................................62-71
NOTES TO FINANCIAL STATEMENTS..............................................72-86
REPORT OF INDEPENDENT ACCOUNTANTS.............................................87
DFA INVESTMENT TRUST COMPANY ANNUAL REPORT................................89-106
<PAGE>
BLACKROCK FUNDS
PRESIDENT'S LETTER
November 1, 1998
Dear Shareholder:
We are pleased to present the Annual Report for the BlackRock Funds for
the fiscal year ended September 30, 1998, a period that stands in stark contrast
to recent years.
When we addressed you this time in 1997, our message celebrated the strong
performance of the capital markets, which were then enjoying one of the longest
sustained bull runs in modern times. At the same time, we cautioned against
expecting such growth to continue unabated.
As we look back over 1998, it is clear that while the US economy generally
remained strong, the financial markets delivered a reality check to investors
who may have forgotten that markets will fluctuate. Over the twelve month period
which ended on September 30, 1998, the domestic stock market as measured by the
S&P 500 Index returned 9.2%, in stark contrast to the 20% annual returns of the
previous three years. The bond market posted strong gains in light of the equity
market's turbulence, returning 11.5% over the same period as measured by the
Lehman Brothers Aggregate Index. As bond prices rose, the yield of the benchmark
30-year Treasury fell below 5.0% for the first time ever. These 12-month returns
mask the significant volatility of the markets on a quarter-to-quarter basis.
For example, the quarterly returns for the S&P 500 Index over this period ranged
from as high as 14.0% in the first quarter of 1998 to -9.9% in the most recent
quarter.
These figures serve as a reminder that investors may do well to adjust
expectations to be more in line with historical returns. According to Ibbotson,
from 1926 through 1997, the S&P 500 Index has returned 11.0% annually. Given
these long-term figures we can assume that the S&P 500 Index returns in excess
of 20% from 1995-1997 were exceptional and should not necessarily set the
benchmark for future expectations.
Importantly, we believe that the strategy for long-term investing has not
changed. Make a plan, allocate assets to reach a specific goal, keep investing
regularly and stick with your program unless, of course, your goals or financial
situation changes.
Of course everything looks clearer in hindsight. Now that the equity
markets have taken back much of what they have previously given, I wonder how
many investors question if it might have been wiser to switch some of their
equity shares into less volatile, income producing bond funds. Of course this is
much easier said than done. When equity markets are returning over 20% as they
had been, it takes real fortitude to take some money off the table and diversify
into an asset class that offers less growth potential along with lower
volatility. However, after so many strong years of equity performance, it is
possible that a portfolio's equity weighting may have increased past its target
level. Therefore, now may be an excellent opportunity to review a portfolio and
possibly reallocate assets from equities into a complementary asset class like
bonds. That's precisely why it is so important to set up an asset allocation
that is in line with your financial goals and time horizons -- and to stay the
course over different market environments while consistently monitoring your
target allocation.
1
<PAGE>
BLACKROCK FUNDS
PRESIDENT'S LETTER (CONCLUDED)
At times like these, when the markets are showing extreme volatility, we
are proud to be offering our shareholders investment styles which have been
formulated for long-term results. Our emphasis on Pure Investment
Style(REGISTRATION MARK) assures that the BlackRock funds you own will be true
to their stated asset class and investment styles. This can mean investment
results consistent with expectations. Another key BlackRock characteristic is
our dedication to risk-management as an investment approach. Our investment
philosophy is to seek to mitigate risk, rather than to attempt to time the
market. While this approach can never take all of the risk out of investing, our
focus is to try to make sure that the risks we assume are justified in
comparison to the potential rewards.
We believe and will continue to believe that this dedicated risk-oriented
approach is the most prudent long-term process to manage money.
In our ongoing attempt to develop quality investment products we are
pleased to announce that we will soon be launching BlackRock High Yield Bond
Portfolio. This portfolio will seek to provide current income by investing
primarily in bonds that are rated below investment grade.
Thank you for your confidence in BlackRock Funds. We appreciate the
opportunity to help you achieve your long-term investment goals.
Sincerely,
/S/ KAREN H. SABATH
Karen H. Sabath
MANAGING DIRECTOR
BLACKROCK ADVISORS, INC.
2
<PAGE>
BLACKROCK FUNDS
LARGE CAP VALUE EQUITY PORTFOLIO
TOTAL NET ASSETS (9/30/98):
$2.3 BILLION
PERFORMANCE BENCHMARK:
RUSSELL 1000 VALUE INDEX
INVESTMENT APPROACH:
PURSUES LONG-TERM CAPITAL APPRECIATION BY INVESTING IN EQUITY SECURITIES
BELIEVED BY THE MANAGER TO BE UNDERVALUED. TYPICALLY, THE MANAGER WILL FOCUS ON
STOCKS WITH LOWER THAN AVERAGE PRICE-TO-EARNINGS AND PRICE-TO-BOOK RATIOS AND
MARKET CAPITALIZATIONS IN EXCESS OF $5 BILLION. A COMPANY'S EARNINGS TREND AND
ITS STOCK'S DIVIDEND GROWTH RATE WILL ALSO BE FACTORS CONSIDERED IN SECURITY
SELECTION.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) THE PORTFOLIO ENDED THE PERIOD OVERWEIGHT IN THE ENERGY SECTOR
VERSUS THE RUSSELL 1000 VALUE INDEX DUE TO STRONG FUNDAMENTALS DESPITE ONGOING
DEREGULATION AND INCREASING COMPETITIVENESS OF THE INDUSTRY.
(BULLET) THE PORTFOLIO'S OVER-WEIGHTED EXPOSURE TO AUTOMOBILE MANUFACTURER
STOCKS IN THEIR TIME OF SPIN-OFFS AND MERGERS HAS BENEFITED THE PORTFOLIO.
PARTICULARLY STRONG PERFORMERS WERE FORD MOTOR AND CHRYSLER.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE LARGE CAP VALUE
EQUITY PORTFOLIO AND RUSSELL 1000 VALUE INDEX FROM INCEPTION AND AT EACH FISCAL
YEAR END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Russell 1000
Institutional Class Service Class Investor A Class Investor B Class Investor C Class Value Index
<S> <C> <C> <C> <C> <C> <C>
4/20/92 $10,000 $10,000 $9,550 $10,000 $10,000 $10,000
Jun-92 $9,831 $9,831 $9,388 $9,831 $9,831 $9,842
Sep-92 $9,882 $9,882 $9,437 $9,882 $9,882 $9,899
Dec-92 $10,457 $10,457 $9,986 $10,457 $10,457 $10,476
Mar-93 $11,342 $11,342 $10,832 $11,342 $11,342 $11,333
Jun-93 $11,414 $11,414 $10,901 $11,414 $11,414 $11,575
Sep-93 $12,048 $12,042 $11,508 $12,050 $12,050 $12,044
Dec-93 $12,338 $12,327 $11,768 $12,322 $12,322 $11,919
Mar-94 $11,871 $11,853 $11,313 $11,846 $11,846 $11,410
Jun-94 $12,045 $12,021 $11,459 $11,999 $11,999 $11,385
Sep-94 $12,501 $12,466 $11,891 $12,452 $12,452 $11,568
Dec-94 $12,474 $12,432 $11,854 $12,413 $12,413 $11,265
Mar-95 $13,546 $13,494 $12,862 $13,468 $13,468 $12,224
Jun-95 $14,616 $14,549 $13,863 $14,516 $14,516 $13,197
Sep-95 $15,716 $15,633 $14,890 $15,591 $15,591 $14,232
Dec-95 $16,823 $16,722 $15,921 $16,672 $16,672 $15,060
Mar-96 $17,778 $17,659 $16,807 $17,581 $17,581 $15,794
Jun-96 $18,388 $18,253 $17,372 $18,132 $18,132 $15,945
Sep-96 $19,018 $18,864 $17,947 $18,705 $18,705 $16,285
Dec-96 $20,894 $20,698 $19,712 $20,485 $20,485 $17,770
Mar-97 $21,243 $21,044 $20,007 $20,363 $20,363 $18,119
Jun-97 $24,155 $23,900 $22,716 $23,671 $23,671 $20,649
Sep-97 $26,177 $25,883 $24,592 $25,579 $25,579 $22,561
Dec-97 $26,876 $26,554 $25,236 $26,195 $26,195 $23,445
Mar-98 $30,252 $29,905 $28,361 $29,375 $29,375 $26,068
Jun-98 $29,798 $29,417 $27,907 $28,852 $28,852 $26,185
Sep-98 $25,581 $25,237 $23,947 $24,698 $24,698 $23,153
</TABLE>
<TABLE>
<CAPTION>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- -----------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 3 YEAR 5 YEAR FROM INCEPTION
------ ------ ------ --------------
<S> <C> <C> <C> <C>
Institutional Class (2.27)% 17.64% 16.26% 15.68%
Service Class (2.50)% 17.32% 15.95% 15.44%
Investor A Class (Load Adjusted) (7.03)% 15.36% 14.72% 14.50%
Investor A Class (NAV) (2.63)% 17.15% 15.78% 15.32%
Investor B Class (Load Adjusted) (7.79)% 14.98% 14.84% 14.95%
Investor B Class (NAV) (3.45)% 16.35% 15.31% 14.95%
Investor C Class (Load Adjusted) (4.42)% 16.35% 15.31% 14.95%
Investor C Class (NAV) (3.45)% 16.35% 15.31% 14.95%
- -----------------------------------------------------------------------------------------------------
<FN>
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS OF
THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER THAN
THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 4/20/92; INVESTOR A SHARES,
5/2/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 1/18/96; AND INVESTOR C
SHARES, 8/16/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
</FN>
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
3
<PAGE>
BLACKROCK FUNDS
LARGE CAP GROWTH EQUITY PORTFOLIO
TOTAL NET ASSETS (9/30/98):
$1.2 BILLION
PERFORMANCE BENCHMARK:
RUSSELL 1000 GROWTH INDEX
INVESTMENT APPROACH:
PURSUES LONG-TERM CAPITAL APPRECIATION BY INVESTING IN STOCKS OF COMPANIES
BELIEVED BY THE MANAGER TO HAVE FAVORABLE AND ABOVE-AVERAGE EARNINGS GROWTH
PROSPECTS AND MARKET CAPITALIZATIONS GREATER THAN $5 BILLION.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) THE PORTFOLIO ENDED THE PERIOD OVERWEIGHT VERSUS THE RUSSELL 1000
GROWTH INDEX IN THE HEALTHCARE AND CAPITAL GOODS INDUSTRIES. IN ADDITION, THE
PORTFOLIO CONTINUES TO HAVE A SIGNIFICANT TECHNOLOGY WEIGHTING DUE TO THE
MANAGER'S BELIEF THAT STRONG, STABLE GROWTH CAN BE FOUND IN THESE SECTORS.
(BULLET) LARGE CAP GROWTH STOCKS SHOWED CONSIDERABLE RESILIENCE DURING THE
MARKET'S RECENT DECLINE. THE MANAGER BELIEVES THAT SLOWING ECONOMIC DOMESTIC
GROWTH, MINIMAL INFLATIONARY PRESSURE AND CONTINUED VOLATILITY WITHIN THE MARKET
DUE TO THE WORLDWIDE CRISES WITH LOWER EXPECTATIONS FOR CORPORATE EARNINGS ALL
FAVOR LARGE CAP GROWTH STOCKS AS INVESTORS LOOK FOR SAFETY IN LARGE COMPANIES
WITH STABLE EARNINGS.
(BULLET) STRONG PERFORMERS IN THE PORTFOLIO DURING THE PERIOD INCLUDE
ORACLE, BMC SOFTWARE AND COMPUTER ASSOCIATES.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE LARGE CAP GROWTH
EQUITY PORTFOLIO AND RUSSELL 1000 GROWTH INDEX FROM INCEPTION AND AT EACH FISCAL
YEAR END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Russell 1000
Institutional Class Service Class Investor A Class Investor B Class Investor C Class Growth Index
<S> <C> <C> <C> <C> <C> <C>
11/1/89 $10,000 $10,000 $9,550 $10,000 $10,000 $10,000
Dec-89 $10,825 $10,825 $10,338 $10,825 $10,825 $10,396
Mar-90 $10,493 $10,493 $10,021 $10,493 $10,493 $10,053
Jun-90 $10,987 $10,987 $10,493 $10,987 $10,987 $10,651
Sep-90 $10,040 $10,040 $9,589 $10,040 $10,040 $9,096
Dec-90 $10,603 $10,603 $10,126 $10,603 $10,603 $9,963
Mar-91 $11,397 $11,397 $10,884 $11,397 $11,397 $11,510
Jun-91 $11,304 $11,304 $10,795 $11,304 $11,304 $11,459
Sep-91 $11,993 $11,993 $11,454 $11,993 $11,993 $12,167
Dec-91 $13,361 $13,361 $12,760 $13,361 $13,361 $13,254
Mar-92 $12,389 $12,389 $11,831 $12,389 $12,389 $12,967
Jun-92 $12,455 $12,455 $11,894 $12,455 $12,455 $13,148
Sep-92 $12,581 $12,581 $12,014 $12,581 $12,581 $13,579
Dec-92 $13,228 $13,228 $12,631 $13,228 $13,228 $14,451
Mar-93 $13,473 $13,473 $12,865 $13,473 $13,473 $15,053
Jun-93 $13,912 $13,912 $13,271 $13,912 $13,912 $15,157
Sep-93 $15,371 $15,371 $14,651 $15,371 $15,371 $15,646
Dec-93 $15,039 $15,039 $14,338 $15,039 $15,039 $15,919
Mar-94 $13,859 $13,859 $13,200 $13,859 $13,859 $15,290
Jun-94 $13,001 $13,001 $12,370 $13,001 $13,001 $15,260
Sep-94 $13,657 $13,657 $12,983 $13,657 $13,657 $16,041
Dec-94 $13,525 $13,525 $12,841 $13,525 $13,525 $15,979
Mar-95 $14,755 $14,755 $13,997 $14,755 $14,755 $17,499
Jun-95 $16,075 $16,075 $15,237 $16,075 $16,075 $19,147
Sep-95 $17,737 $17,737 $16,781 $17,737 $17,737 $20,853
Dec-95 $18,183 $18,183 $17,192 $18,183 $18,183 $22,012
Mar-96 $19,333 $19,333 $18,267 $19,333 $19,333 $23,226
Jun-96 $20,471 $20,471 $19,315 $20,471 $20,471 $24,171
Sep-96 $21,048 $21,048 $19,833 $21,048 $21,048 $24,958
Dec-96 $21,884 $21,884 $20,591 $21,884 $21,884 $26,948
Mar-97 $21,746 $21,746 $20,451 $21,197 $21,197 $27,365
Jun-97 $25,867 $25,858 $24,304 $25,150 $25,150 $32,540
Sep-97 $28,140 $28,115 $26,412 $27,280 $27,280 $34,987
Dec-97 $28,104 $28,051 $26,335 $27,152 $27,152 $36,040
Mar-98 $32,837 $32,752 $30,725 $31,613 $31,613 $40,859
Jun-98 $34,918 $34,793 $32,642 $33,520 $33,520 $42,710
Sep-98 $31,451 $31,303 $29,358 $30,097 $30,097 $38,827
</TABLE>
<TABLE>
<CAPTION>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- -----------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 3 YEAR 5 YEAR FROM INCEPTION
------ ------ ------ --------------
<S> <C> <C> <C> <C>
Institutional Class 11.76% 21.04% 15.40% 13.71%
Service Class 11.33% 20.67% 15.10% 13.53%
Investor A Class (Load Adjusted) 6.17% 18.67% 13.86% 12.83%
Investor A Class (NAV) 11.16% 20.50% 14.92% 13.42%
Investor B Class (Load Adjusted) 5.37% 18.24% 13.97% 13.15%
Investor B Class (NAV) 10.33% 19.65% 14.43% 13.15%
Investor C Class (Load Adjusted) 9.23% 19.65% 14.43% 13.15%
Investor C Class (NAV) 10.33% 19.65% 14.43% 13.15%
- -----------------------------------------------------------------------------------------------------
<FN>
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS OF
THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER THAN
THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 11/1/89; INVESTOR A SHARES,
3/14/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 1/24/96; AND INVESTOR C
SHARES, 1/24/97. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
</FN>
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
4
<PAGE>
BLACKROCK FUNDS
MID-CAP VALUE EQUITY PORTFOLIO
TOTAL NET ASSETS (9/30/98):
$245.1 MILLION
PERFORMANCE BENCHMARK:
RUSSELL MID CAP VALUE INDEX
INVESTMENT APPROACH:
PURSUES LONG-TERM CAPITAL APPRECIATION BY INVESTING IN EQUITY SECURITIES
BELIEVED BY THE MANAGER TO BE UNDERVALUED. TYPICALLY, THE MANAGER WILL FOCUS ON
STOCKS WITH LOWER THAN AVERAGE PRICE-TO-EARNINGS AND PRICE-TO-BOOK RATIOS AND
MARKET CAPITALIZATIONS GENERALLY BETWEEN $1 BILLION AND $10 BILLION. A COMPANY'S
EARNINGS TREND AND ITS STOCK'S DIVIDEND GROWTH RATE WILL ALSO BE FACTORS
CONSIDERED IN SECURITY SELECTION.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) THE PORTFOLIO ENDED THE PERIOD OVERWEIGHT VERSUS THE RUSSELL MID
CAP VALUE INDEX IN UTILITY COMPANIES, WHICH PERFORMED WELL DURING THE PERIOD.
ESPECIALLY STRONG WAS AMERICAN STORES, WHOSE STOCK PRICE INCREASED AFTER ITS
ACQUISITION BY ALBERTSON INC.
(BULLET) THE MANAGER'S DECISION TO OVERWEIGHT HEALTHCARE STOCKS VERSUS THE
INDEX ADDED TO THE PORTFOLIO'S POSITIVE RELATIVE PERFORMANCE.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MID-CAP VALUE
EQUITY PORTFOLIO AND THE RUSSELL MID CAP VALUE INDEX FROM INCEPTION AND AT EACH
PERIOD END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Russell Mid Cap
Institutional Class Service Class Investor A Class Investor B Class Investor C Class Value Index
<S> <C> <C> <C> <C> <C> <C>
12/27/96 $10,000 $10,000 $9,550 $10,000 $10,000 $10,000
3/31/97 $10,084 $10,071 $9,617 $10,065 $10,065 $10,170
6/30/97 $11,383 $11,363 $10,838 $11,328 $11,328 $11,450
9/30/97 $12,910 $12,881 $12,273 $12,823 $12,823 $12,910
12/31/97 $12,856 $12,819 $12,218 $12,741 $12,741 $13,436
3/31/98 $14,288 $14,240 $13,558 $14,126 $14,126 $14,778
6/30/98 $13,475 $13,418 $12,765 $13,269 $13,269 $14,398
9/30/98 $11,144 $11,086 $10,548 $10,506 $10,944 $12,433
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR FROM INCEPTION
------ ---------------
Institutional Class (13.68)% 6.35%
Service Class (13.94)% 6.03%
Investor A Class (Load Adjusted) (17.91)% 3.08%
Investor A Class (NAV) (14.06)% 5.81%
Investor B Class (Load Adjusted) (18.50)% 2.84%
Investor B Class (NAV) (14.66)% 5.25%
Investor C Class (Load Adjusted) (15.51)% 5.25%
Investor C Class (NAV) (14.66)% 5.25%
- --------------------------------------------------------------------------------
THE INCEPTION DATE OF THE PORTFOLIO'S INSTITUTIONAL, SERVICE, INVESTOR A,
INVESTOR B AND INVESTOR C SHARES WAS 12/27/96. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 16 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
5
<PAGE>
BLACKROCK FUNDS
MID-CAP GROWTH EQUITY PORTFOLIO
TOTAL NET ASSETS (9/30/98):
$257.9 MILLION
PERFORMANCE BENCHMARK:
RUSSELL MID CAP GROWTH INDEX
INVESTMENT APPROACH:
PURSUES LONG-TERM CAPITAL APPRECIATION BY INVESTING IN STOCKS OF COMPANIES
BELIEVED BY THE MANAGER TO HAVE FAVORABLE AND ABOVE-AVERAGE EARNINGS GROWTH
PROSPECTS AND MARKET CAPITALIZATIONS GENERALLY BETWEEN $1 BILLION AND $10
BILLION.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) THE PORTFOLIO'S PRIMARY PERFORMANCE FACTORS DURING THE PERIOD,
PARTICULARLY DURING THE MARKET'S RECENT DECLINE, WERE STOCK SELECTION AND STRICT
ADHERENCE TO BUY AND SELL DISCIPLINES.
(BULLET) THE PORTFOLIO'S LARGEST SECTOR WEIGHTINGS WERE TECHNOLOGY,
SERVICES AND HEALTHCARE DUE TO STRONG FUNDAMENTALS AND EARNINGS GROWTH
POTENTIAL. THE PORTFOLIO'S CASH POSITION HAS DECREASED DURING THE FINAL MONTHS
OF THE PERIOD AS OPPORTUNITIES FOR INVESTMENT AT ATTRACTIVE LEVELS INCREASED.
GOING FORWARD, THE MANAGER BELIEVES THAT STRONG UNIT VOLUME GROWTH, RELATIVELY
MINOR INTERNATIONAL EXPOSURE AND ATTRACTIVE RELATIVE VALUATIONS WILL PROPEL
MID-CAP COMPANIES.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MID-CAP GROWTH
EQUITY PORTFOLIO AND THE RUSSELL MID CAP GROWTH INDEX FROM INCEPTION AND AT EACH
PERIOD END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Russell Mid Cap
Institutional Class Service Class Investor A Class Investor B Class Investor C Class Growth Index
<S> <C> <C> <C> <C> <C> <C>
12/27/96 $10,000 $10,000 $9,550 $10,000 $10,000 $10,000
3/31/97 $8,894 $8,930 $8,519 $8,920 $8,920 $9,635
6/30/97 $10,528 $10,550 $10,066 $10,530 $10,530 $11,053
9/30/97 $12,151 $12,170 $11,594 $12,110 $12,110 $12,600
12/31/97 $11,474 $11,480 $10,944 $11,400 $11,400 $12,253
3/31/98 $12,911 $12,913 $12,293 $12,782 $12,782 $13,741
6/30/98 $13,081 $13,074 $12,446 $12,913 $12,913 $13,732
9/30/98 $11,173 $11,158 $10,615 $10,557 $10,997 $11,439
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR FROM INCEPTION
------ --------------
Institutional Class (8.05)% 6.75%
Service Class (8.32)% 6.42%
Investor A Class (Load Adjusted) (12.53)% 3.46%
Investor A Class (NAV) (8.42)% 6.20%
Investor B Class (Load Adjusted) (13.27)% 3.13%
Investor B Class (NAV) (9.19)% 5.55%
Investor C Class (Load Adjusted) (10.10)% 5.55%
Investor C Class (NAV) (9.19)% 5.55%
- --------------------------------------------------------------------------------
THE INCEPTION DATE OF THE PORTFOLIO'S INSTITUTIONAL, SERVICE, INVESTOR A,
INVESTOR B AND INVESTOR C SHARES WAS 12/27/96. SEE "NOTE ON PERFORMANCE
INFORMATION" ON PAGE 16 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS
CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
6
<PAGE>
BLACKROCK FUNDS
SMALL CAP VALUE EQUITY PORTFOLIO
TOTAL NET ASSETS (9/30/98):
$665.8 MILLION
PERFORMANCE BENCHMARK:
RUSSELL 2000 VALUE INDEX
INVESTMENT APPROACH:
PURSUES LONG-TERM CAPITAL APPRECIATION BY INVESTING IN SMALL CAP EQUITY
SECURITIES BELIEVED BY THE MANAGER TO BE UNDERVALUED. TYPICALLY, THE MANAGER
WILL FOCUS ON STOCKS WITH LOWER THAN AVERAGE PRICE-TO-EARNINGS AND PRICE-TO-BOOK
RATIOS AND MARKET CAPITALIZATIONS LESS THAN $1.5 BILLION. A COMPANY'S EARNINGS
TREND AND ITS STOCK'S DIVIDEND GROWTH RATE WILL ALSO BE FACTORS CONSIDERED IN
SECURITY SELECTION.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)THE PORTFOLIO ENDED THE PERIOD OVERWEIGHT VERSUS THE RUSSELL 2000
VALUE INDEX IN TECHNOLOGY AND HEALTHCARE STOCKS, WHILE UNDERWEIGHT IN FINANCIALS
AND UTILITY STOCKS.
(BULLET)WITH REGARD TO STOCK SELECTION, THE PORTFOLIO BENEFITED FROM THE
AGREED SALE OF MARQUETTE MEDICAL SYSTEMS TO GE AT A SIGNIFICANT PREMIUM OVER
PREVIOUS CLOSING VALUE. ALSO ADDING TO POSITIVE RELATIVE PERFORMANCE WAS THE
PORTFOLIO'S UNDERWEIGHT IN CYCLICALLY SENSITIVE TRUCKING COMPANIES AND SPECIALTY
FINANCE COMPANIES.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP VALUE
EQUITY PORTFOLIO AND THE RUSSELL 2000 VALUE INDEX FROM INCEPTION AND AT EACH
FISCAL YEAR END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Russell 2000
Institutional Class Service Class Investor A Class Investor B Class Investor C Class Value Index
<S> <C> <C> <C> <C> <C> <C>
4/13/92 $10,000 $10,000 $9,550 $10,000 $10,000 $10,000
Jun-92 $9,680 $9,680 $9,244 $9,680 $9,680 $9,657
Sep-92 $10,151 $10,151 $9,694 $10,151 $10,151 $9,933
Dec-92 $11,686 $11,686 $11,160 $11,686 $11,686 $11,416
Mar-93 $12,412 $12,412 $11,854 $12,412 $12,412 $11,903
Jun-93 $12,251 $12,251 $11,699 $12,251 $12,251 $12,162
Sep-93 $13,233 $13,232 $12,637 $13,232 $13,232 $13,225
Dec-93 $13,866 $13,856 $13,228 $13,851 $13,851 $13,596
Mar-94 $13,608 $13,599 $12,973 $13,584 $13,584 $13,236
Jun-94 $13,349 $13,322 $12,707 $13,306 $13,306 $12,720
Sep-94 $14,061 $14,022 $13,378 $14,009 $14,009 $13,603
Dec-94 $13,800 $13,768 $13,125 $13,733 $13,733 $13,350
Mar-95 $14,256 $14,212 $13,548 $14,154 $14,154 $13,965
Jun-95 $15,085 $15,028 $14,311 $14,933 $14,933 $15,274
Sep-95 $16,513 $16,428 $15,644 $16,297 $16,297 $16,783
Dec-95 $16,994 $16,898 $16,091 $16,732 $16,732 $17,147
Mar-96 $17,903 $17,797 $16,923 $17,583 $17,583 $18,023
Jun-96 $18,519 $18,383 $17,474 $18,123 $18,123 $18,925
Sep-96 $18,599 $18,449 $17,530 $18,146 $18,146 $18,991
Dec-96 $20,369 $20,203 $19,203 $19,829 $19,829 $19,979
Mar-97 $20,206 $20,015 $19,016 $19,210 $19,210 $18,946
Jun-97 $24,603 $24,362 $23,139 $23,325 $23,325 $21,805
Sep-97 $30,016 $29,686 $28,184 $28,370 $28,370 $24,616
Dec-97 $30,280 $29,911 $28,392 $28,534 $28,534 $25,030
Mar-98 $32,657 $32,241 $30,578 $30,677 $30,677 $27,120
Jun-98 $30,942 $30,507 $28,939 $28,966 $28,966 $26,141
Sep-98 $24,902 $24,540 $23,270 $23,239 $23,239 $21,467
</TABLE>
<TABLE>
<CAPTION>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- -----------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 3 YEAR 5 YEAR FROM INCEPTION
------ ------ ------ --------------
<S> <C> <C> <C> <C>
Institutional Class (17.03)% 11.26% 11.44% 13.54%
Service Class (17.33)% 10.91% 11.11% 13.28%
Investor A Class (Load Adjusted) (21.14)% 9.08% 9.96% 12.35%
Investor A Class (NAV) (17.43)% 10.76% 10.98% 13.16%
Investor B Class (Load Adjusted) (21.74)% 8.64% 9.91% 12.68%
Investor B Class (NAV) (18.08)% 9.94% 10.35% 12.68%
Investor C Class (Load Adjusted) (18.90)% 9.94% 10.35% 12.68%
Investor C Class (NAV) (18.08)% 9.94% 10.35% 12.68%
- -----------------------------------------------------------------------------------------------------
<FN>
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS OF
THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER THAN
THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 4/13/92; INVESTOR A SHARES,
6/2/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 10/3/94; AND INVESTOR C
SHARES, 10/1/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
</FN>
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
7
<PAGE>
BLACKROCK FUNDS
SMALL CAP GROWTH EQUITY PORTFOLIO
TOTAL NET ASSETS (9/30/98):
$1.3 BILLION
PERFORMANCE BENCHMARK:
RUSSELL 2000 GROWTH INDEX
INVESTMENT APPROACH:
PURSUES LONG-TERM CAPITAL APPRECIATION BY INVESTING IN STOCKS OF COMPANIES
BELIEVED BY THE MANAGER TO HAVE FAVORABLE AND ABOVE-AVERAGE EARNINGS GROWTH
PROSPECTS AND MARKET CAPITALIZATIONS LESS THAN $1.5 BILLION.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)THE PORTFOLIO'S LARGEST SECTOR ALLOCATIONS OVER THE PERIOD
CONTINUED TO BE TECHNOLOGY, CONSUMER SERVICES AND HEALTHCARE.
(BULLET)DESPITE POSTING A NEGATIVE RETURN, THE PORTFOLIO OUTPERFORMED THE
RUSSELL 2000 GROWTH INDEX DURING THE PERIOD. THE TWO KEY FACTORS DRIVING
PERFORMANCE WERE STOCK SELECTION AND STRICT ADHERENCE TO BUY AND SELL
DISCIPLINES. THE PORTFOLIO'S CASH POSITION HAS DECREASED DURING THE FINAL MONTHS
OF THE PERIOD AS OPPORTUNITIES FOR INVESTMENT IN SMALL CAP GROWTH COMPANIES AT
ATTRACTIVE LEVELS INCREASED.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SMALL CAP
GROWTH EQUITY PORTFOLIO AND THE RUSSELL 2000 GROWTH INDEX FROM INCEPTION AND AT
EACH FISCAL YEAR END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Russell 2000
Institutional Class Service Class Investor A Class Investor B Class Investor C Class Growth Index
<S> <C> <C> <C> <C> <C> <C>
9/14/93 $10,000 $10,000 $9,550 $10,000 $10,000 $10,000
Sep-93 $10,470 $10,470 $9,956 $10,470 $10,470 $10,141
Dec-93 $10,379 $10,374 $9,904 $10,371 $10,371 $10,407
Mar-94 $9,858 $9,854 $9,398 $9,841 $9,841 $9,984
Jun-94 $9,169 $9,143 $8,729 $9,141 $9,141 $9,357
Sep-94 $10,170 $10,144 $9,666 $10,121 $10,121 $10,231
Dec-94 $10,990 $10,955 $10,439 $10,931 $10,931 $10,155
Mar-95 $11,672 $11,635 $11,079 $11,601 $11,601 $10,711
Jun-95 $13,195 $13,146 $12,512 $13,101 $13,101 $11,773
Sep-95 $15,100 $15,026 $14,307 $14,981 $14,981 $13,111
Dec-95 $16,213 $16,066 $15,282 $16,002 $16,002 $13,304
Mar-96 $18,291 $18,107 $17,221 $17,993 $17,993 $14,069
Jun-96 $20,941 $20,719 $19,695 $20,534 $20,534 $14,891
Sep-96 $22,025 $21,809 $20,717 $21,535 $21,535 $14,763
Dec-96 $21,332 $21,110 $20,040 $20,784 $20,784 $14,803
Mar-97 $17,182 $16,989 $16,114 $16,190 $16,190 $13,240
Jun-97 $20,921 $20,678 $19,608 $20,267 $20,267 $15,564
Sep-97 $25,524 $25,197 $23,883 $24,650 $24,650 $18,197
Dec-97 $23,293 $22,964 $21,772 $22,449 $22,449 $16,705
Mar-98 $25,534 $25,153 $23,829 $24,528 $24,528 $18,689
Jun-98 $24,566 $24,177 $22,909 $23,517 $23,517 $17,615
Sep-98 $19,923 $19,552 $18,554 $18,816 $19,006 $13,676
</TABLE>
<TABLE>
<CAPTION>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- -----------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 3 YEAR 5 YEAR FROM INCEPTION
------ ------ ------ --------------
<S> <C> <C> <C> <C>
Institutional Class (21.93)% 9.69% 13.74% 14.64%
Service Class (22.40)% 9.18% 13.31% 14.21%
Investor A Class (Load Adjusted) (25.82)% 7.38% 12.12% 13.03%
Investor A Class (NAV) (22.31)% 9.05% 13.16% 14.07%
Investor B Class (Load Adjusted) (26.36)% 6.97% 12.21% 13.34%
Investor B Class (NAV) (22.89)% 8.25% 12.66% 13.57%
Investor C Class (Load Adjusted) (23.66)% 8.25% 12.66% 13.57%
Investor C Class (NAV) (22.89)% 8.25% 12.66% 13.57%
- -----------------------------------------------------------------------------------------------------
<FN>
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS OF
THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER THAN
THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 9/14/93; SERVICE AND INVESTOR A
SHARES, 9/15/93; INVESTOR B SHARES, 1/18/96; AND INVESTOR C SHARES, 9/6/96. SEE
"NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER INFORMATION ON HOW
PERFORMANCE DATA WAS CALCULATED.
</FN>
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
8
<PAGE>
BLACKROCK FUNDS
MICRO-CAP EQUITY PORTFOLIO
TOTAL NET ASSETS (9/30/98):
$17.8 MILLION
PERFORMANCE BENCHMARK:
WILSHIRE MICRO CAP INDEX
INVESTMENT APPROACH:
PURSUES LONG-TERM CAPITAL APPRECIATION BY INVESTING IN STOCKS OF COMPANIES
BELIEVED BY THE MANAGER TO HAVE FAVORABLE AND ABOVE-AVERAGE EARNINGS GROWTH
PROSPECTS AND MARKET CAPITALIZATIONS BETWEEN $25 MILLION AND $300 MILLION.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)SINCE FUNDING ON MAY 1, 1998, THE PORTFOLIO HAS BUILT SIGNIFICANT
POSITIONS IN THE TECHNOLOGY, CONSUMER SERVICES AND CONSUMER CYCLICALS SECTORS.
(BULLET)MICRO CAP STOCKS WERE OUT OF FAVOR RELATIVE TO LARGER CAP STOCKS
DURING THE THIRD QUARTER OF 1998. AS A RESULT OF THE TURMOIL IN THE EMERGING
MARKETS AS WELL AS RUSSIA'S DEVALUATION OF THE RUBLE, INVESTORS ARE WILLING TO
PAY HIGH PREMIUMS FOR STABLE GROWTH AND VISIBLE EARNINGS.
(BULLET)WHILE POSTING A NEGATIVE RETURN, THE PORTFOLIO OUTPERFORMED ITS
INDEX DURING THE PERIOD.THE TWO KEY FACTORS DRIVING PERFORMANCE WERE STOCK
SELECTION AND STRICT ADHERENCE TO BUY AND SELL DISCIPLINES. THE PORTFOLIO'S CASH
POSITION HAS DECREASED DURING THE FINAL MONTHS OF THE PERIOD AS OPPORTUNITIES
FOR INVESTMENT IN MICRO-CAP COMPANIES AT ATTRACTIVE LEVELS INCREASED.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE MICRO-CAP EQUITY
PORTFOLIO AND THE WILSHIRE MICRO CAP INDEX FROM INCEPTION AND AT EACH MONTH END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Institutional Class Service Class Investor A Class Investor B Class Investor C Class Wilshire Micro Cap
<S> <C> <C> <C> <C> <C> <C>
5/1/98 $10,000 $10,000 $9,550 $10,000 $10,000 $10,000
May-98 $10,570 $10,570 $10,042 $10,570 $10,570 $9,506
Jun-98 $10,951 $10,951 $10,403 $10,951 $10,951 $9,461
Jul-98 $10,861 $10,861 $10,318 $10,861 $10,861 $8,860
Aug-98 $8,710 $8,710 $8,275 $8,701 $8,701 $6,995
Sep-98 $9,391 $9,391 $8,911 $8,949 $9,277 $7,251
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR FROM INCEPTION
------ ---------------
Institutional Class N/A (13.95)
Service Class N/A (13.95)%
Investor A Class (Load Adjusted) N/A (24.12)%
Investor A Class (NAV) N/A (14.17)%
Investor B Class (Load Adjusted) N/A (23.17)%
Investor B Class (NAV) N/A (14.39)%
Investor C Class (Load Adjusted) N/A (16.42)%
Investor C Class (NAV) N/A (14.39)%
- --------------------------------------------------------------------------------
THE INCEPTION DATES OF THE PORTFOLIO'S SHARE CLASSES WERE AS FOLLOWS:
INSTITUTIONAL, SERVICE, INVESTOR A, INVESTOR B, AND INVESTOR C SHARES WAS
5/1/98. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER INFORMATION
ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
9
<PAGE>
BLACKROCK FUNDS
INTERNATIONAL EQUITY PORTFOLIO
TOTAL NET ASSETS (9/30/98):
$1.2 BILLION
PERFORMANCE BENCHMARK:
MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALIA AND THE FAR EAST
INDEX ("EAFE").
INVESTMENT APPROACH:
PURSUES LONG-TERM CAPITAL APPRECIATION BY INVESTING IN NON-DOLLAR
DENOMINATED STOCKS OF ISSUERS IN COUNTRIES INCLUDED IN THE EAFE INDEX. WITHIN
THIS UNIVERSE, A VALUE STYLE OF INVESTING IS EMPLOYED TO SELECT STOCKS WHICH THE
MANAGER BELIEVES ARE UNDERVALUED.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)RELATIVE TO THE MSCI EAFE INDEX, THE PORTFOLIO ENDED THE PERIOD
OVERWEIGHT IN THE UNITED KINGDOM, GERMANY AND FRANCE AND SIGNIFICANTLY
UNDERWEIGHT IN JAPAN.
(BULLET)FEARS OVER GLOBAL DEFLATION CAUSED ECONOMIC GROWTH AND CORPORATE
EARNINGS ESTIMATES TO BE DOWNGRADED ACROSS THE GLOBE. HIT PARTICULARLY HARD WERE
CONTINENTAL EUROPEAN STOCKS, WHERE GROWTH EXPECTATIONS WERE HIGH EARLY IN THE
PERIOD AND WERE SUBSEQUENTLY REVISED DOWNWARDS. BANK STOCKS WERE GENERALLY WEAK
GIVEN THEIR LOSSES IN RUSSIAN INVESTMENTS AND EXPOSURE TO HEDGE FUNDS.
(BULLET)JAPAN EXPERIENCED DIFFICULTY DURING THE PERIOD, AS THE LAST THREE
QUARTERS HAVE RESULTED IN NEGATIVE ECONOMIC GROWTH. WORRIES OVER BAD DEBTS IN
THE FINANCIAL SYSTEM CONTINUE DESPITE SIGNS OF PROGRESS. IN ADDITION, EARNINGS
DOWNGRADES HAVE BEGUN TO AFFECT BLUE CHIP STOCKS.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERNATIONAL
EQUITY PORTFOLIO AND THE EAFE INDEX FROM INCEPTION AND AT EACH FISCAL YEAR END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Institutional Class Service Class Investor A Class Investor B Class Investor C Class MSCI EAFE Index
<S> <C> <C> <C> <C> <C> <C>
4/27/92 $10,000 $10,000 $9,500 $10,000 $10,000 $10,000
Jun-92 $10,429 $10,429 $9,908 $10,430 $10,430 $9,529
Sep-92 $9,938 $9,938 $9,442 $9,939 $9,939 $9,682
Dec-92 $9,816 $9,816 $9,327 $9,817 $9,817 $9,317
Mar-93 $10,962 $10,962 $10,415 $10,963 $10,963 $10,443
Jun-93 $11,602 $11,602 $11,024 $11,604 $11,604 $11,502
Sep-93 $12,692 $12,692 $12,058 $12,693 $12,693 $12,273
Dec-93 $13,435 $13,423 $12,747 $13,418 $13,418 $12,386
Mar-94 $13,591 $13,569 $12,886 $13,564 $13,564 $12,827
Jun-94 $13,643 $13,621 $12,916 $13,596 $13,596 $13,492
Sep-94 $14,050 $14,007 $13,293 $13,992 $13,992 $13,513
Dec-94 $13,468 $13,428 $12,732 $13,392 $13,392 $13,385
Mar-95 $13,371 $13,332 $12,630 $13,263 $13,263 $13,644
Jun-95 $13,854 $13,796 $13,069 $13,692 $13,692 $13,753
Sep-95 $14,394 $14,318 $13,560 $14,185 $14,185 $14,337
Dec-95 $14,807 $14,730 $13,954 $14,580 $14,580 $14,929
Mar-96 $15,165 $15,076 $14,271 $14,877 $14,877 $15,371
Jun-96 $15,849 $15,733 $14,893 $15,496 $15,496 $15,625
Sep-96 $15,548 $15,422 $14,587 $15,152 $15,152 $15,616
Dec-96 $16,070 $15,929 $15,068 $15,626 $15,626 $15,876
Mar-97 $15,960 $15,795 $14,942 $15,470 $15,470 $15,638
Jun-97 $17,699 $17,501 $16,530 $17,095 $17,095 $17,679
Sep-97 $17,869 $17,658 $16,679 $17,215 $17,215 $17,566
Dec-97 $16,914 $16,698 $15,758 $16,245 $16,245 $16,201
Mar-98 $19,350 $19,085 $18,010 $18,530 $18,530 $18,596
Jun-98 $19,487 $19,198 $18,093 $18,591 $18,591 $18,806
Sep-98 $16,611 $16,363 $15,419 $15,806 $15,806 $16,145
</TABLE>
<TABLE>
<CAPTION>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- -----------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 3 YEAR 5 YEAR FROM INCEPTION
------ ------ ------ --------------
<S> <C> <C> <C> <C>
Institutional Class (7.03)% 4.88% 5.53% 8.21%
Service Class (7.34)% 4.56% 5.21% 7.96%
Investor A Class (Load Adjusted) (12.20)% 2.60% 3.97% 6.96%
Investor A Class (NAV) (7.56)% 4.38% 5.04% 7.82%
Investor B Class (Load Adjusted) (12.30)% 2.45% 4.07% 7.38%
Investor B Class (NAV) (8.19)% 3.68% 4.49% 7.38%
Investor C Class (Load Adjusted) (9.11)% 3.68% 4.49% 7.38%
Investor C Class (NAV) (8.19)% 3.68% 4.49% 7.38%
- -----------------------------------------------------------------------------------------------------
<FN>
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS OF
THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER THAN
THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 4/27/92; INVESTOR A SHARES,
6/2/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 10/3/94; AND INVESTOR C
SHARES, 12/5/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
</FN>
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
10
<PAGE>
BLACKROCK FUNDS
INTERNATIONAL SMALL CAP EQUITY PORTFOLIO
TOTAL NET ASSETS (9/30/98):
$19.2 MILLION
PERFORMANCE BENCHMARK:
SALOMON BROTHERS EXTENDED MARKETS WORLD EX-U.S. INDEX
INVESTMENT APPROACH:
PURSUES LONG-TERM CAPITAL APPRECIATION BY INVESTING IN NON-DOLLAR
DENOMINATED STOCKS OF SMALL CAP COMPANIES PRIMARILY FROM DEVELOPED COUNTRIES,
WHICH THE MANAGEMENT TEAM BELIEVES ARE UNDERVALUED AND WILL APPRECIATE. THE
PORTFOLIO MAY ALSO INVEST UP TO 20% OF ITS ASSETS IN STOCKS FROM EMERGING MARKET
COUNTRIES. THE STOCKS IN THE PORTFOLIO WILL GENERALLY HAVE A MARKET
CAPITALIZATION BELOW $1 BILLION.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)THE PORTFOLIO ENDED THE PERIOD OVERWEIGHT RELATIVE TO THE INDEX IN
THE UNITED KINGDOM AND GERMANY, WHILE SUBSTANTIALLY UNDERWEIGHT IN JAPAN AND
ASIA DUE TO THE UNCERTAINTY OF ECONOMIC PROGRESS IN THAT REGION.
(BULLET)GOING FORWARD, THE MANAGER BELIEVES THAT THE BEST OPPORTUNITIES
REMAIN IN CONTINENTAL EUROPE, GIVEN THE HIGH LEVELS OF LIQUIDITY, ONGOING
CORPORATE RESTRUCTURING AND SOLID EARNINGS MOMENTUM SEEN THROUGHOUT THE REGION.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INTERNATIONAL SMALL
CAP EQUITY PORTFOLIO AND THE SALOMON EMI EXUS FROM INCEPTION AND AT EACH PERIOD
END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Institutional Class Service Class Investor A Class Investor B Class Investor C Class Salomon EMI EXUS
<S> <C> <C> <C> <C> <C> <C>
9/26/97 $10,000 $10,000 $9,500 $10,000 $10,000 $10,000
Dec-97 $9,458 $9,447 $8,996 $9,458 $9,458 $8,943
Mar-98 $11,354 $11,343 $10,786 $11,324 $11,324 $10,431
Jun-98 $11,966 $11,954 $11,348 $11,896 $11,896 $10,393
Sep-98 $9,588 $9,587 $9,090 $9,128 $9,508 $8,821
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR FROM INCEPTION
------ --------------
Institutional Class (3.57)% (3.81)%
Service Class (3.62)% (3.85)%
Investor A Class (Load Adjusted) (8.74)% (8.97)%
Investor A Class (NAV) (3.98)% (4.21)%
Investor B Class (Load Adjusted) (9.02)% (8.70)%
Investor B Class (NAV) (4.73)% (4.95)%
Investor C Class (Load Adjusted) (5.68)% (4.95)%
Investor C Class (NAV) (4.73)% (4.95)%
- --------------------------------------------------------------------------------
THE INCEPTION DATES OF THE PORTFOLIO'S SHARE CLASSES WERE AS FOLLOWS:
INSTITUTIONAL, SERVICE, INVESTOR A, INVESTOR B, AND INVESTOR C SHARES WAS
9/26/97. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
11
<PAGE>
BLACKROCK FUNDS
INTERNATIONAL EMERGING MARKETS PORTFOLIO
TOTAL NET ASSETS (9/30/98):
$92.8 MILLION
PERFORMANCE BENCHMARK:
MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS FREE INDEX ("EMF")
INVESTMENT APPROACH:
PURSUES LONG-TERM CAPITAL APPRECIATION BY INVESTING IN NON-DOLLAR
DENOMINATED STOCKS OF ISSUERS IN EMERGING MARKETS (GENERALLY ANY COUNTRY
CONSIDERED TO BE EMERGING OR DEVELOPING BY THE WORLD BANK, THE INTERNATIONAL
FINANCE CORPORATION OR THE UNITED NATIONS). WITHIN THIS UNIVERSE, A VALUE STYLE
OF INVESTING IS EMPLOYED TO SELECT STOCKS WHICH THE MANAGER BELIEVES ARE
UNDERVALUED.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)THE PORTFOLIO ENDED THE PERIOD OVERWEIGHT RELATIVE TO THE INDEX IN
SOUTH AFRICA, MEXICO AND CHILE, AND UNDERWEIGHT IN TAIWAN.
(BULLET)ALL REGIONS WITHIN THE EMERGING MARKETS POSTED NEGATIVE RETURNS
DURING THE PERIOD, PRIMARILY DUE TO GLOBAL WORRIES SUCH AS THE RECENT IMPOSITION
OF CAPITAL CONTROLS IN MALAYSIA, DEBT DEFAULT IN RUSSIA AND POTENTIAL DEBT
DEFAULT IN BRAZIL.
(BULLET)GOING FORWARD, THE MANAGER BELIEVES THAT THE EMERGING MARKETS,
WHICH WERE THE FIRST INTO THE GLOBAL FISCAL CRISIS, MAY BE THE FIRST ONES TO
RECOVER. ASIA POSTED RELATIVELY STRONG RETURNS IN THE THIRD QUARTER OF 1998 AS
IMPROVED TRADE BALANCES STABILIZED CURRENCIES AND FALLING INTEREST RATES
IMPROVED MARKET SENTIMENT. ACCORDINGLY, THE MANAGER INCREASED THE PORTFOLIO'S
WEIGHTING IN ASIA TO REFLECT THIS RELATIVE STRENGTH, WITH THAILAND AND KOREA
BEING THE PRIMARY BENEFICIARIES.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE EMERGING MARKETS
PORTFOLIO AND THE MSCI EMERGING MARKETS FREE INDEX FROM INCEPTION AND AT EACH
FISCAL YEAR END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MSCI Emerging
Institutional Class Service Class Investor A Class Investor B Class Investor C Class Free Index
<S> <C> <C> <C> <C> <C> <C>
6/17/94 $10,000 $10,000 $9,500 $10,000 $10,000 $10,000
Jun-94 $9,960 $9,960 $9,462 $9,960 $9,960 $10,058
Sep-94 $10,560 $10,550 $10,013 $10,540 $10,540 $12,076
Dec-94 $9,142 $9,131 $8,665 $9,121 $9,121 $10,340
Mar-95 $8,071 $8,060 $7,637 $8,039 $8,039 $9,060
Jun-95 $8,758 $8,736 $8,272 $8,707 $8,707 $10,001
Sep-95 $8,478 $8,450 $7,997 $8,418 $8,418 $9,937
Dec-95 $7,992 $7,955 $7,529 $7,925 $7,925 $9,803
Mar-96 $8,810 $8,760 $8,291 $8,727 $8,727 $10,413
Jun-96 $9,327 $9,267 $8,770 $9,221 $9,221 $10,848
Sep-96 $9,069 $9,008 $8,515 $8,943 $8,943 $10,456
Dec-96 $8,973 $8,905 $8,418 $8,820 $8,820 $10,394
Mar-97 $10,197 $10,114 $9,552 $9,743 $9,743 $11,274
Jun-97 $10,954 $10,856 $10,244 $10,436 $10,436 $12,276
Sep-97 $10,080 $9,976 $9,411 $9,573 $9,573 $11,175
Dec-97 $8,160 $8,073 $7,611 $7,730 $7,730 $9,217
Mar-98 $8,117 $8,021 $7,561 $7,659 $7,659 $9,788
Jun-98 $6,286 $6,218 $5,845 $5,913 $5,913 $7,478
Sep-98 $4,677 $4,627 $4,349 $4,303 $4,391 $5,832
</TABLE>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 3 YEAR FROM INCEPTION
------ ------ --------------
Institutional Class (53.59)% (17.98)% (16.23)%
Service Class (53.62)% (18.19)% (16.44)%
Investor A Class (Load Adjusted) (56.12)% (19.76)% (17.65)%
Investor A Class (NAV) (53.79)% (18.37)% (16.65)%
Investor B Class (Load Adjusted) (56.19)% (19.92)% (17.35)%
Investor B Class (NAV) (54.13)% (18.82)% (16.96)%
Investor C Class (Load Adjusted) (54.59)% (18.82)% (16.96)%
Investor C Class (NAV) (54.13)% (18.82)% (16.96)%
- --------------------------------------------------------------------------------
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS OF
THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER THAN
THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, SERVICE SHARES AND INVESTOR A
SHARES, 6/17/94; INVESTOR B SHARES, 4/25/96; AND INVESTOR C SHARES, 3/21/97. SEE
"NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER INFORMATION ON HOW
PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
12
<PAGE>
BLACKROCK FUNDS
SELECT EQUITY PORTFOLIO
TOTAL NET ASSETS (9/30/98):
$1.6 BILLION
PERFORMANCE BENCHMARK:
S&P 500 INDEX
INVESTMENT APPROACH:
SEEKS LONG-TERM CAPITAL APPRECIATION BY MAINTAINING COMPARABLE SECTOR
WEIGHTINGS TO THE BENCHMARK WHILE OVERWEIGHTING OR UNDERWEIGHTING SPECIFIC
SECURITIES WITHIN THOSE SECTORS AS THE MANAGER IDENTIFIES MARKET OPPORTUNITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)OVER THE PERIOD, GROWTH STOCKS GENERALLY OUTPERFORMED VALUE STOCKS,
WHICH HINDERED THE PORTFOLIO'S PERFORMANCE DUE TO ITS VALUE ORIENTATION. THE
MANAGER BELIEVES THAT INVESTORS FOCUSED ON STABLE EARNINGS RATHER THAN
ATTRACTIVELY VALUED ISSUES, WHICH BEGAN TO REBOUND DURING THE LAST FEW MONTHS OF
THE PERIOD.
(BULLET)THE PORTFOLIO HELD STRONG PERFORMING STOCKS ACROSS NUMEROUS
INDUSTRIES DURING THE PERIOD, INCLUDING SYSCO, LUCENT AND MICROSOFT
(TECHNOLOGY), FORD (AUTOS), HOME DEPOT (RETAIL) AND PFIZER (DRUG).
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE SELECT EQUITY
PORTFOLIO AND THE S&P 500 INDEX FROM INCEPTION AND AT EACH FISCAL YEAR END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Institutional Class Service Class Investor A Class Investor B Class Investor C Class S&P 500 Index
<S> <C> <C> <C> <C> <C> <C>
9/13/93 $10,000 $10,000 $9,550 $10,000 $10,000 $10,000
Sep-93 $9,970 $9,970 $9,521 $9,970 $9,970 $10,058
Dec-93 $10,114 $10,108 $9,653 $10,108 $10,108 $10,232
Mar-94 $9,730 $9,718 $9,278 $9,715 $9,715 $9,844
Jun-94 $9,784 $9,766 $9,331 $9,770 $9,770 $9,886
Sep-94 $10,148 $10,124 $9,659 $10,114 $10,114 $10,369
Dec-94 $9,987 $9,958 $9,498 $9,945 $9,945 $10,367
Mar-95 $10,911 $10,872 $10,366 $10,855 $10,855 $11,377
Jun-95 $11,704 $11,643 $11,098 $11,621 $11,621 $12,463
Sep-95 $12,561 $12,497 $11,908 $12,470 $12,470 $13,454
Dec-95 $13,312 $13,223 $12,595 $13,189 $13,189 $14,264
Mar-96 $13,989 $13,898 $13,221 $13,844 $13,844 $15,030
Jun-96 $14,630 $14,513 $13,812 $14,443 $14,443 $15,705
Sep-96 $15,054 $14,924 $14,197 $14,821 $14,821 $16,190
Dec-96 $16,469 $16,316 $15,528 $16,160 $16,160 $17,539
Mar-97 $16,904 $16,735 $15,922 $16,084 $16,084 $18,009
Jun-97 $19,856 $19,649 $18,674 $19,367 $19,367 $21,152
Sep-97 $21,448 $21,210 $20,152 $20,852 $20,852 $22,761
Dec-97 $21,648 $21,392 $20,317 $20,986 $20,986 $23,407
Mar-98 $24,633 $24,329 $23,098 $23,812 $23,812 $26,675
Jun-98 $25,175 $24,847 $23,583 $24,272 $24,272 $27,561
Sep-98 $22,320 $22,010 $20,883 $21,242 $21,456 $24,843
</TABLE>
<TABLE>
<CAPTION>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- -----------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 3 YEAR 5 YEAR FROM INCEPTION
------ ------ ------ --------------
<S> <C> <C> <C> <C>
Institutional Class 4.07% 21.13% 17.49% 17.24%
Service Class 3.77% 20.77% 17.16 16.93%
Investor A Class (Load Adjusted) (1.02)% 18.76% 16.30% 15.70%
Investor A Class (NAV) 3.62% 20.59% 17.01% 16.76%
Investor B Class (Load Adjusted) (1.73)% 18.41% 16.10% 16.09%
Investor B Class (NAV) 2.90% 19.83% 16.57% 16.32%
Investor C Class (Load Adjusted) 1.87% 19.83% 16.57% 16.32%
Investor C Class (NAV) 2.90% 19.83% 16.57% 16.32%
- -----------------------------------------------------------------------------------------------------
<FN>
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS OF
THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER THAN
THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 9/13/93; SERVICE SHARES, 9/15/93;
INVESTOR A SHARES, 10/13/93; INVESTOR B SHARES, 3/27/96; AND INVESTOR C SHARES,
9/27/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
</FN>
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
13
<PAGE>
BLACKROCK FUNDS
INDEX EQUITY PORTFOLIO
ADVISOR TO THE INDEX MASTER PORTFOLIO:
DIMENSIONAL FUND ADVISORS INC.
TOTAL NET ASSETS (9/30/98):
$821.4 MILLION
PERFORMANCE BENCHMARK:
S&P 500 INDEX
INVESTMENT APPROACH:
UTILIZES A PASSIVE INVESTMENT STYLE THAT PURSUES THE REPLICATION OF THE S&P
500 INDEX TOTAL RETURN.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)THE PORTFOLIO HOLDS SUBSTANTIALLY ALL OF THE STOCKS CONTAINED IN
THE S&P 500 INDEX IN APPROXIMATELY THE SAME PROPORTION AS THEY ARE REPRESENTED
IN THE INDEX BY INVESTING ALL OF ITS ASSETS IN THE U.S. LARGE COMPANY SERIES OF
THE DFA INVESTMENT TRUST COMPANY.
(BULLET)ACCORDINGLY, THE PORTFOLIO POSTED A TOTAL RETURN SUBSTANTIALLY
SIMILAR TO THAT OF THE S&P 500.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE INDEX EQUITY
PORTFOLIO AND THE S&P 500 INDEX FROM INCEPTION AND AT EACH FISCAL YEAR END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Institutional Class Service Class Investor A Class Investor B Class Investor C Class S&P 500 Index
<S> <C> <C> <C> <C> <C> <C>
4/20/92 $10,000 $10,000 $9,700 $10,000 $10,000 $10,000
Jun-92 $9,870 $9,870 $9,574 $9,870 $9,870 $9,899
Sep-92 $10,161 $10,161 $9,857 $10,161 $10,161 $10,212
Dec-92 $10,659 $10,659 $10,339 $10,659 $10,659 $10,726
Mar-93 $11,118 $11,118 $10,784 $11,118 $11,118 $11,194
Jun-93 $11,139 $11,139 $10,805 $11,139 $11,139 $11,249
Sep-93 $11,423 $11,417 $11,073 $11,415 $11,415 $11,539
Dec-93 $11,676 $11,664 $11,308 $11,657 $11,657 $11,806
Mar-94 $11,197 $11,181 $10,824 $11,159 $11,159 $11,359
Jun-94 $11,254 $11,231 $10,878 $11,214 $11,214 $11,406
Sep-94 $11,771 $11,739 $11,366 $11,718 $11,718 $11,964
Dec-94 $11,770 $11,731 $11,357 $11,708 $11,708 $11,962
Mar-95 $12,900 $12,850 $12,415 $12,799 $12,799 $13,127
Jun-95 $14,134 $14,070 $13,613 $14,034 $14,034 $14,379
Sep-95 $15,221 $15,143 $14,636 $15,088 $15,088 $15,522
Dec-95 $16,130 $16,036 $15,505 $15,985 $15,985 $16,457
Mar-96 $16,959 $16,836 $16,276 $16,763 $16,763 $17,339
Jun-96 $17,702 $17,562 $16,974 $17,466 $17,466 $18,117
Sep-96 $18,237 $18,089 $17,462 $17,946 $17,946 $18,677
Dec-96 $19,737 $19,563 $18,891 $19,371 $19,371 $20,235
Mar-97 $20,250 $20,055 $19,359 $19,422 $19,422 $20,776
Jun-97 $23,757 $23,512 $22,689 $22,722 $22,722 $24,401
Sep-97 $25,529 $25,248 $24,359 $24,324 $24,324 $26,258
Dec-97 $26,234 $25,924 $24,987 $24,927 $24,927 $27,004
Mar-98 $29,880 $29,497 $28,421 $28,305 $28,305 $30,773
Jun-98 $30,848 $30,429 $29,336 $29,137 $29,137 $31,795
Sep-98 $27,804 $27,404 $26,396 $26,182 $26,182 $28,660
</TABLE>
<TABLE>
<CAPTION>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- -----------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 3 YEAR 5 YEAR FROM INCEPTION
------ ------ ------ --------------
<S> <C> <C> <C> <C>
Institutional Class 8.91% 22.24% 19.48% 17.18%
Service Class 8.54% 21.86% 19.14% 16.91%
Investor A Class (Load Adjusted) 5.12% 20.50% 18.26% 16.23%
Investor A Class (NAV) 8.37% 21.73% 18.98% 16.78%
Investor B Class (Load Adjusted) 2.79% 19.55% 18.06% 16.45%
Investor B Class (NAV) 7.63% 20.98% 18.54% 16.45%
Investor C Class (Load Adjusted) 6.55% 20.98% 18.54% 16.54%
Investor C Class (NAV) 7.63% 20.98% 18.54% 16.45%
- -----------------------------------------------------------------------------------------------------
<FN>
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS OF
THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER THAN
THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INSTITUTIONAL SHARES, 4/20/92; INVESTOR A SHARES,
6/2/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 2/7/96; AND INVESTOR C
SHARES, 8/14/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
</FN>
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
14
<PAGE>
BLACKROCK FUNDS
BALANCED PORTFOLIO
TOTAL NET ASSETS (9/30/98):
$695.3 MILLION
PERFORMANCE BENCHMARK:
Equity Portion: S&P 500 INDEX
Fixed Income Portion: SALOMON BROAD INVESTMENT
GRADE INDEX
INVESTMENT APPROACH:
PURSUES A BLEND OF EQUITY AND FIXED INCOME SECURITIES TO DELIVER TOTAL
RETURN THROUGH CAPITAL APPRECIATION AND CURRENT INCOME. THE PORTFOLIO WILL
MAINTAIN AT MINIMUM 25% ALLOCATION FIXED INCOME SECURITIES.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)THE PORTFOLIO'S TARGET EQUITY ALLOCATION WAS REDUCED FROM 65% TO
60% DURING THE THIRD QUARTER OF 1998 DUE TO THEN CURRENT AND PROJECTED MARKET
CONDITIONS.
(BULLET)WITHIN THE EQUITY PORTION OF THE PORTFOLIO, THE MANAGER ENDED THE
PERIOD WITH AN OVERWEIGHT RELATIVE TO THE S&P 500 IN THE TECHNOLOGY SECTOR, WITH
SIGNIFICANT POSITIONS IN INTEL AND COMPAQ. ADDITIONALLY, STOCK SELECTION AIDED
RELATIVE PERFORMANCE, WITH WAL-MART AND PHILIP MORRIS POSTING STRONG PERFORMANCE
DURING THE PERIOD.
(BULLET)WITHIN THE FIXED INCOME PORTION, THE MANAGER TOOK ADVANTAGE OF
WIDER YIELD SPREADS OVER THE PERIOD BY SELLING TREASURY SECURITIES AND
REINVESTING IN HIGH CREDIT QUALITY CORPORATE BONDS AND MORTGAGE SECURITIES WITH
LOW PREPAYMENT RISK.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE BALANCED PORTFOLIO
AND 65% S&P 500 /35% SALOMON BIG INDEX FROM INCEPTION AND AT EACH FISCAL YEAR
END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
65% S&P 500,
Institutional Class Service Class Investor A Class Investor B Class Investor C Class 35% Salomon BIG Index
<S> <C> <C> <C> <C> <C> <C>
5/14/90 $10,000 $10,000 $9,550 $10,000 $10,000 $10,000
Jun-90 $10,240 $10,240 $9,779 $10,240 $10,240 $9,726
Sep-90 $9,236 $9,236 $8,821 $9,236 $9,236 $10,185
Dec-90 $9,998 $9,998 $9,548 $9,998 $9,998 $9,258
Mar-91 $10,827 $10,827 $10,340 $10,827 $10,827 $9,898
Jun-91 $10,796 $10,796 $10,310 $10,796 $10,796 $10,866
Sep-91 $11,459 $11,459 $10,943 $11,459 $11,459 $10,858
Dec-91 $12,243 $12,243 $11,692 $12,243 $12,243 $11,392
Mar-92 $12,165 $12,165 $11,618 $12,165 $12,165 $12,151
Jun-92 $12,469 $12,469 $11,908 $12,469 $12,469 $11,848
Sep-92 $13,197 $13,197 $12,603 $13,197 $13,197 $12,102
Dec-92 $13,690 $13,690 $13,074 $13,690 $13,690 $12,471
Mar-93 $14,160 $14,160 $13,523 $14,160 $14,160 $12,830
Jun-93 $14,481 $14,481 $13,829 $14,481 $14,481 $13,322
Sep-93 $14,894 $14,888 $14,215 $14,885 $14,885 $13,430
Dec-93 $15,309 $15,294 $14,600 $15,288 $15,288 $13,716
Mar-94 $14,821 $14,797 $14,109 $14,774 $14,774 $13,864
Jun-94 $14,647 $14,615 $13,941 $14,598 $14,598 $13,328
Sep-94 $14,876 $14,833 $14,144 $14,810 $14,810 $13,254
Dec-94 $14,827 $14,776 $14,082 $14,725 $14,725 $13,636
Mar-95 $15,802 $15,741 $14,996 $15,666 $15,666 $13,590
Jun-95 $16,989 $16,910 $16,105 $16,788 $16,788 $14,627
Sep-95 $17,900 $17,789 $16,950 $17,640 $17,640 $15,778
Dec-95 $18,937 $18,805 $17,914 $18,613 $18,613 $16,629
Mar-96 $19,418 $19,285 $18,351 $19,033 $19,033 $17,464
Jun-96 $20,002 $19,837 $18,884 $19,547 $19,547 $17,902
Sep-96 $20,484 $20,301 $19,320 $19,956 $19,956 $18,385
Dec-96 $21,872 $21,661 $20,609 $21,245 $21,245 $18,803
Mar-97 $22,143 $21,913 $20,844 $21,452 $21,452 $19,951
Jun-97 $25,000 $24,728 $23,517 $24,272 $24,272 $20,202
Sep-97 $26,306 $25,999 $24,721 $25,462 $25,462 $22,677
Dec-97 $27,079 $26,743 $25,423 $26,126 $26,126 $23,976
Mar-98 $29,565 $29,163 $27,717 $28,433 $28,433 $26,287
Jun-98 $30,591 $30,169 $28,645 $29,326 $29,326 $27,076
Sep-98 $29,153 $28,712 $27,242 $27,854 $27,854 $25,771
</TABLE>
<TABLE>
<CAPTION>
FOR PERIOD ENDING SEPTEMBER 30, 1998
- -----------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 YEAR 3 YEAR 5 YEAR FROM INCEPTION
------ ------ ------ --------------
<S> <C> <C> <C> <C>
Institutional Class 10.82% 17.65% 14.38% 13.60%
Service Class 10.43% 17.30% 14.04% 13.40%
Investor A Class (Load Adjusted) 5.22% 15.33% 12.84% 12.69%
Investor A Class (NAV) 10.19% 17.12% 13.89% 13.31%
Investor B Class (Load Adjusted) 4.48% 14.88% 12.78% 12.92%
Investor B Class (NAV) 9.40% 16.26% 13.24% 12.92%
Investor C Class (Load Adjusted) 8.31% 16.26% 13.24% 12.92%
Investor C Class (NAV) 9.40% 16.26% 13.24% 12.92%
- -----------------------------------------------------------------------------------------------------
<FN>
THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS OF
THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER THAN
THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE PORTFOLIO'S SHARE
CLASSES WERE AS FOLLOWS: INVESTOR A SHARES, 5/14/90; INSTITUTIONAL SHARES,
5/1/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 10/3/94; AND INVESTOR C
SHARES, 12/20/96. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 16 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
</FN>
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
15
<PAGE>
BLACKROCK FUNDS
NOTE ON PERFORMANCE INFORMATION
The performance information above includes information for each class of
each Portfolio since the commencement of operations of the Portfolio, rather
than the date such class was introduced. Performance information for each class
introduced after the commencement of operations of a Portfolio is therefore
based on the performance history of a predecessor class or predecessor classes.
If a class of shares in a Portfolio (the "Subsequent Class") has more than one
predecessor class, the performance data predating the introduction of the
Subsequent Class is based initially on the performance of the Portfolio's first
operational predecessor class (the "Initial Class"); thereafter, the performance
of the Subsequent Class is based upon the performance of any other predecessor
class or classes which were introduced after the Initial Class and which had
total operating expenses more similar to those of the Subsequent Class. In the
case of Investor A, Investor B, Investor C and Service Shares, the performance
information for periods prior to their introduction dates has not been restated
to reflect the shareholder servicing and processing and/or distribution fees and
certain other expenses borne by these share classes which, if reflected, would
reduce the performance quoted. Accordingly, the performance information may be
used in assessing each Portfolio's performance history but does not reflect how
the distinct classes would have performed on a relative basis prior to the
introduction of these classes, which would require an adjustment to the ongoing
expenses.
Performance information is restated to reflect the current maximum
front-end sales charge (in the case of Investor A Shares) or the maximum
contingent deferred sales charge (in the case of Investor B and Investor C
Shares), and assumes the reinvestment of dividends and distributions. The
maximum front-end sales charges for Investor A Shares are as follows: Large Cap
Value Equity, Large Cap Growth Equity, Small Cap Value Equity, Small Cap Growth
Equity, Mid-Cap Value Equity, Mid-Cap Growth Equity, Micro-Cap Equity, Select
Equity and Balanced Portfolios -- 4.50%; International Equity, International
Emerging Markets and International Small Cap Equity Portfolios -- 5.00%; and
Index Equity Portfolio -- 3.00%. The maximum contingent deferred sales charge
for Investor B Shares and Investor C Shares of all of the Portfolios is 4.50%
and 1.00%, respectively.
The performance information also reflects fee waivers that subsidize and
reduce the total operating expenses of each Portfolio. The Portfolios' returns
would have been lower if there were not such waivers. PAMG and the Portfolio's
Administrators are under no obligation to waive or continue waiving their fees.
Investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
- --------------------------------------------------------------------------------
IMPORTANT TAX INFORMATION FOR SHAREHOLDERS OF THE BLACKROCK EQUITY PORTFOLIOS
(UNAUDITED)
During the fiscal year ended September 30, 1998, the following Portfolios
of BlackRock Funds declared the following dividends from realized capital gains:
SHORT-TERM LONG-TERM
CAPITAL GAIN, CAPITAL GAIN,
PER SHARE PER SHARE
------------ -------------
Large Cap Value Equity Portfolio ............ $0.5070 $1.7471
Large Cap Growth Equity Portfolio ........... 0.9571 1.6820
Mid-Cap Value Equity Portfolio .............. 0.3628 --
Mid-Cap Growth Equity Portfolio ............. 0.0381 0.0663
Small Cap Value Equity Portfolio ............ 0.8451 1.2788
Small Cap Growth Equity Portfolio ........... -- 1.1381
International Equity Portfolio .............. 0.0355 0.1617
International Emerging Markets Portfolio .... -- 0.1415
Select Equity Portfolio ..................... 0.1353 0.8662
Index Equity Portfolio ...................... 0.0165 0.0217
Balanced Portfolio .......................... 0.1352 1.1161
FOR CORPORATE SHAREHOLDERS ONLY:
The percentage of dividends from net investment income declared in the
fiscal year ended September 30, 1998 which qualify for the corporate dividends
received deduction is as follows:
Large Cap Value Equity Portfolio ............ 100.0%
Large Cap Growth Equity Portfolio ........... 100.0
Mid-Cap Value Equity Portfolio .............. 100.0
Small Cap Value Equity Portfolio ............ 100.0
Select Equity Portfolio ..................... 100.0
Balanced Portfolio .......................... 45.4
IMPORTANT TAX INFORMATION FOR SHAREHOLDERS OF THE INTERNATIONAL EQUITY AND
INTERNATIONAL SMALL CAP EQUITY PORTFOLIOS.
During the fiscal year ended September 30, 1998, the International Equity
Portfolio distributed $11,228,709 of foreign source income on which the
Portfolio paid foreign taxes of $2,846,865, and International Small Cap Equity
Portfolio distributed $134,495, of foreign source income on which the Portfolio
paid foreign taxes of $45,615. This information is being furnished to you
pursuant to notice requirements of Sections 853(a) and 855(d) of the Internal
Revenue Code, as amended, and the Treasury Regulations thereunder.
16
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LARGE CAP VALUE EQUITY PORTFOLIO
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
---------- --------------
COMMON STOCKS -- 98.7%
AEROSPACE -- 3.5%
AlliedSignal, Inc. 1,311,200 $ 46,383,700
Boeing Co. 511,900 17,564,569
Northrop Grumman Corp. 211,800 15,461,400
--------------
79,409,669
--------------
AIR TRANSPORTATION -- 0.9%
Delta Air Lines, Inc. 210,400 20,461,400
--------------
BANKS -- 9.9%
#Banc One Corp. 711,410 30,323,851
BankAmerica Corp. 533,500 32,076,687
BankBoston Corp. 653,440 21,563,520
Chase Manhattan Corp. 641,400 27,740,550
Citicorp 107,600 10,000,075
First Chicago NBD Corp. 468,027 32,059,849
National City Corp.** 353,000 23,275,937
#NationsBank, Inc. 418,500 22,389,750
Wells Fargo & Co. 83,000 29,465,000
--------------
228,895,219
--------------
BUSINESS SERVICES -- 0.5%
Varian Associates, Inc. 353,800 12,471,450
--------------
CHEMICALS -- 3.3%
Dow Chemical Co. 269,500 23,025,406
E.I. du Pont de Nemours & Co. 405,950 22,783,944
#IMC Global, Inc. 432,200 8,373,875
PPG Industries, Inc. 411,600 22,457,925
--------------
76,641,150
--------------
COMPUTER & OFFICE EQUIPMENT -- 5.6%
Compaq Computer Corp. 756,800 23,933,800
International Business Machines
Corp. 373,800 47,846,400
#Seagate Technology, Inc.** 624,400 15,649,025
#Xerox Corp. 500,600 42,425,850
--------------
129,855,075
--------------
CONSUMER DURABLES -- 0.4%
#Black & Decker Corp. 220,800 9,190,800
--------------
CONTAINERS -- 0.6%
Crown Cork & Seal Co., Inc. 536,600 14,354,050
--------------
ELECTRONICS -- 4.4%
#Applied Materials, Inc.** 421,000 10,630,250
Avnet, Inc. 167,500 6,166,094
General Electric Co. 488,140 38,837,639
Intel Corp. 343,300 29,437,975
Texas Instruments, Inc. 305,700 16,125,675
--------------
101,197,633
--------------
ENERGY & UTILITIES -- 8.6%
Cinergy Corp. 221,500 8,472,375
#Columbia Gas Systems, Inc. 526,450 30,863,131
#Entergy Corp. 485,000 14,913,750
#FPL Group, Inc. 477,300 33,261,844
#NIPSCO Industries, Inc. 420,200 13,814,075
PacifiCorp 1,051,600 20,177,575
PECO Energy Co. 404,900 14,804,156
Southern Co. 1,407,900 41,445,056
Unicom Corp. 527,830 19,727,646
--------------
197,479,608
--------------
NUMBER
OF SHARES VALUE
---------- --------------
FINANCE -- 5.7%
AMBAC Financial Group, Inc. 266,000 $ 12,768,000
CIT Group, Inc. Class A 865,200 22,170,750
Fleet Financial Group, Inc. 351,500 25,813,281
Household International, Inc. 269,640 10,111,500
Morgan Stanley,
Dean Witter & Co. 659,272 28,389,900
#Travelers Group, Inc. 396,600 14,872,500
#Washington Mutual, Inc. 548,850 18,523,687
--------------
132,649,618
--------------
FOOD & AGRICULTURE -- 0.6%
Archer Daniels Midland Co. 876,905 14,688,159
--------------
INSURANCE -- 6.1%
Aetna, Inc. 325,800 22,643,100
Allstate Corp. 166,966 6,960,395
American General Corp. 451,000 28,807,625
Chubb Corp. 337,300 21,249,900
Cigna Corp. 406,800 26,899,650
#Conseco, Inc. 561,500 17,160,844
MBIA, Inc. 146,400 7,859,850
St. Paul Cos., Inc. 286,870 9,323,275
--------------
140,904,639
--------------
MACHINERY & HEAVY EQUIPMENT -- 1.3%
#Deere & Co. 531,100 16,065,775
Dover Corp. 442,100 13,649,837
--------------
29,715,612
--------------
MEDICAL & MEDICAL SERVICES -- 0.8%
Columbia Healthcare Corp. 447,800 8,983,987
#Foundation Health Systems, Inc.** 905,810 8,491,969
--------------
17,475,956
--------------
METAL & MINING -- 1.7%
Aluminum Co. of America 236,700 16,805,700
#Phelps Dodge Corp. 202,100 10,547,094
Reynolds Metals Co. 247,400 12,571,012
--------------
39,923,806
--------------
MOTOR VEHICLES -- 4.4%
#Chrysler Corp. 436,600 20,902,225
Dana Corp. 486,900 18,167,456
Ford Motor Co. 498,100 23,379,569
General Motors Corp. 367,804 20,114,281
Goodyear Tire & Rubber Co. 360,400 18,515,550
Meritor Automotive, Inc. 12 181
--------------
101,079,262
--------------
OIL & GAS -- 12.8%
Atlantic Richfield Co. 365,900 25,956,031
#British Petroleum Co. PLC ADR 427,000 37,255,750
#Chevron Corp. 512,800 43,107,250
Exxon Corp. 838,900 58,880,294
Mobil Corp. 532,500 40,436,719
Phillips Petroleum Co. 526,000 23,735,750
#Royal Dutch Petroleum Co. 771,100 36,723,637
Tenneco, Inc. 310,300 10,201,113
Ultramar Diamond Shamrock Corp. 857,288 19,503,302
--------------
295,799,846
--------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LARGE CAP VALUE EQUITY PORTFOLIO (CONCLUDED)
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
---------- --------------
COMMON STOCKS (CONTINUED)
PAPER & FOREST PRODUCTS -- 2.2%
Champion International Corp. 388,200 $ 12,155,513
Fort James Corp. 396,100 12,997,031
Kimberly-Clark Corp. 630,100 25,519,050
--------------
50,671,594
--------------
PHARMACEUTICALS -- 3.8%
#American Home Products Corp. 371,300 19,446,838
Bristol-Myers Squibb Co. 273,400 28,399,425
#Merck & Co., Inc. 121,950 15,800,147
Pharmacia & Upjohn, Inc. 462,600 23,216,738
--------------
86,863,148
--------------
REAL ESTATE -- 1.0%
Boston Properties, Inc. 425,000 12,112,500
Starwood Hotels & Resorts 356,345 10,868,523
--------------
22,981,023
--------------
RETAIL MERCHANDISING -- 5.4%
#Albertson's, Inc. 648,700 35,110,888
#Federated Department Stores, Inc.** 461,200 16,776,150
J.C. Penney Co., Inc. 477,600 21,462,150
Kmart Corp.** 1,574,900 18,800,369
Sears, Roebuck & Co. 488,200 21,572,338
#Toys "R" Us, Inc.** 739,000 11,962,563
--------------
125,684,458
--------------
TELECOMMUNICATIONS -- 10.8%
#AT&T Corp. 983,300 57,461,594
Bell Atlantic Corp. 1,085,584 52,582,975
GTE Corp. 489,100 26,900,500
#SBC Communications, Inc. 925,068 41,107,709
Sprint Corp. 485,500 34,956,000
US West, Inc. 710,100 37,235,869
--------------
250,244,647
--------------
TEXTILES -- 0.4%
Fruit of the Loom, Inc., Class A** 608,400 9,164,025
--------------
TOBACCO -- 1.8%
#Philip Morris Cos., Inc. 891,350 41,057,809
--------------
TRANSPORTATION -- 2.2%
CSX Corp. 469,800 19,760,962
#FDX Corp.** 349,200 15,757,650
Norfolk Southern Corp. 530,600 15,420,563
--------------
50,939,175
--------------
TOTAL COMMON STOCKS
(Cost $2,008,588,330) 2,279,798,831
--------------
PAR
MATURITY (000) VALUE
-------- ------- -------------
SHORT TERM INVESTMENTS -- 1.3%
Federal Home Loan Mortgage Corp.
Discount Notes
5.38% 10/01/98 $20,660 $ 20,660,000
Galileo Money Market Fund 9,965 9,964,768
--------------
TOTAL SHORT TERM INVESTMENTS
(Cost $30,624,768) 30,624,768
--------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $2,039,213,098*) $2,310,423,599
==============
- ------------------
* Cost for Federal income tax purposes is $2,039,295,556. The
gross unrealized appreciation (depreciation) on a tax basis
is as follows:
Gross unrealized appreciation $ 469,138,026
Gross unrealized depreciation (198,009,983)
--------------
$ 271,128,043
==============
** Non-income producing security.
# Total or partial securities on loan.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
LARGE CAP VALUE EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
ASSETS
<S> <C>
Investments at value (Cost $2,039,213,098) ............................................................. $2,310,423,599
Collateral received for securities loaned .............................................................. 371,746,065
Dividends receivable ................................................................................... 4,058,878
Interest receivable .................................................................................... 38,631
Investments sold receivable ............................................................................ 20,674,707
Capital shares sold receivable ......................................................................... 6,295,551
Prepaid expenses ....................................................................................... 2,471
--------------
TOTAL ASSETS .................................................................................... 2,713,239,902
--------------
LIABILITIES
Payable upon return of securities loaned ............................................................... 371,746,065
Investments purchased payable .......................................................................... 21,817,579
Capital shares redeemed payable ........................................................................ 5,054,342
Accrued expenses payable ............................................................................... 2,380,516
--------------
TOTAL LIABILITIES ............................................................................... 400,998,502
--------------
NET ASSETS ................................................................................................ $2,312,241,400
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($1,841,170,974 (DIVIDE) 125,334,586) .......................................... $14.69
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($387,323,370 (DIVIDE) 26,364,662) ................................................... $14.69
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($51,150,997 (DIVIDE) 3,483,278) .................................................. $14.68
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($14.68 (DIVIDE) 0.955) ................................................................................ $15.37
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($29,449,813 (DIVIDE) 2,019,155) .................................................. $14.59
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($3,146,246 (DIVIDE) 215,712) ..................................................... $14.59
======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LARGE CAP GROWTH EQUITY PORTFOLIO
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- --------------
COMMON STOCKS -- 98.1%
ADVERTISING -- 1.0%
#Omnicom Group, Inc. 247,100 $ 1,119,500
-------------
AEROSPACE -- 1.0%
AlliedSignal, Inc. 137,300 4,856,987
Boeing Co. 96,570 3,313,558
United Technologies Corp. 48,000 3,669,000
-------------
11,839,545
-------------
BANKS -- 1.7%
Fifth Third Bancorp 49,000 2,817,500
#MBNA Corp. 404,900 11,590,262
U.S. Bancorp 153,800 5,469,512
-------------
19,877,274
-------------
BEVERAGES -- 3.8%
Coca-Cola Co. 539,600 31,094,450
PepsiCo, Inc. 406,500 11,966,344
-------------
43,060,794
-------------
BROADCASTING -- 1.7%
Chancellor Media Corp.** 172,800 5,767,200
Clear Channel Communications,
Inc.** 278,500 13,228,750
-------------
18,995,950
-------------
CHEMICALS -- 0.7%
Monsanto Co. 139,000 7,836,125
-------------
COMPUTER & OFFICE EQUIPMENT -- 9.5%
Cisco Systems, Inc.** 587,550 36,317,934
Compaq Computer Corp. 462,900 14,639,212
Computer Associates International,
Inc. 100,000 3,700,000
#Dell Computer Corp.** 370,000 24,327,500
#EMC Corp.** 162,300 9,281,531
HBO & Co. 431,500 12,459,562
#PeopleSoft, Inc.** 81,400 2,655,675
Xerox Corp. 70,600 5,983,350
-------------
109,364,764
-------------
COMPUTER SOFTWARE & SERVICES -- 6.9%
America Online, Inc.** 56,800 6,319,000
Automatic Data Processing, Inc. 109,800 8,207,550
#BMC Software, Inc.** 100,400 6,030,275
Microsoft Corp.** 526,100 57,903,881
-------------
78,460,706
-------------
CONSUMER NON-DURABLES -- 0.9%
Newell Co. 231,700 10,672,681
-------------
CONSUMER - STAPLES -- 0.5%
#Walgreen Co. 135,000 5,948,437
-------------
ELECTRONICS -- 11.6%
General Electric Co. 879,900 70,007,044
Hewlett Packard Co. 80,000 4,235,000
Intel Corp. 513,200 44,006,900
#Nokia Corp. ADR 90,400 7,090,750
Texas Instruments, Inc. 147,900 7,801,725
-------------
133,141,419
-------------
NUMBER
OF SHARES VALUE
--------- -------------
ENTERTAINMENT & LEISURE -- 2.7%
Carnival Corp. Class A 217,000 $ 6,903,313
Marriott International, Inc.
Class A 192,700 4,600,713
Time Warner, Inc. 70,000 6,129,375
Walt Disney Co. 525,600 13,304,250
-------------
30,937,651
-------------
FINANCE -- 3.9%
Associates First Capital Corp.
Class A 78,300 5,109,075
Capital One Financial Corp. 59,500 6,158,250
Charles Schwab Corp. 100,000 3,937,500
Federal Home Loan Mortgage Corp. 180,000 8,898,750
Federal National Mortgage
Association 176,600 11,346,550
Travelers Group, Inc. 84,000 3,150,000
#Washington Mutual, Inc. 180,900 6,105,375
-------------
44,705,500
-------------
FOOD & AGRICULTURE -- 0.8%
#Hershey Foods Corp. 47,500 3,250,781
Sara Lee Corp. 121,000 6,534,000
-------------
9,784,781
-------------
INSURANCE -- 1.7%
Ace Ltd. 289,500 8,685,000
American International Group, Inc. 148,500 11,434,500
-------------
20,119,500
-------------
MACHINERY & HEAVY EQUIPMENT -- 0.9%
Danaher Corp. 65,000 1,950,000
#Illinois Tool Works, Inc. 155,000 8,447,500
-------------
10,397,500
-------------
MANUFACTURING -- 0.9%
#Tyco International Ltd. 193,100 10,668,775
-------------
MEDICAL & MEDICAL SERVICES -- 0.6%
Medtronic, Inc. 121,800 7,049,175
-------------
MEDICAL INSTRUMENTS & SUPPLIES -- 2.2%
#Becton, Dickinson & Co. 206,000 8,471,750
Cardinal Health, Inc. 81,700 8,435,525
#Guidant Corp. 112,600 8,360,550
-------------
25,267,825
-------------
PAPER & FOREST PRODUCTS -- 0.4%
Kimberly-Clark Corp. 107,000 4,333,500
-------------
PHARMACEUTICALS -- 22.5%
Abbott Laboratories 367,600 15,967,625
#American Home Products Corp. 361,400 18,928,325
#Amgen, Inc.** 76,400 5,772,975
Bristol-Myers Squibb Co. 331,400 34,424,175
#Eli Lilly & Co. 248,600 19,468,488
#Johnson & Johnson 358,600 28,060,450
#Merck & Co., Inc. 333,400 43,196,144
Pfizer, Inc. 373,600 39,578,250
Schering-Plough Corp. 261,900 27,123,019
Warner-Lambert Co. 346,600 26,168,300
-------------
258,687,751
-------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
LARGE CAP GROWTH EQUITY PORTFOLIO (CONCLUDED)
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- --------------
COMMON STOCKS (CONTINUED)
RESTAURANTS -- 0.3%
McDonald's Corp. 60,000 $ 3,581,250
-------------
RETAIL MERCHANDISING -- 7.8%
Borders Group, Inc.** 186,000 4,138,500
#Dayton Hudson Corp. 307,600 10,996,700
#Gap, Inc. 89,900 4,742,225
#Home Depot, Inc. 311,800 12,316,100
Kroger Co.** 150,900 7,545,000
Lowe's Cos., Inc. 246,200 7,832,237
#Mattel, Inc. 232,300 6,504,400
#Staples, Inc.** 310,000 9,106,250
TJX Companies, Inc. 377,100 6,717,094
#Wal-Mart Stores, Inc. 368,800 20,145,700
-------------
90,044,206
-------------
SERVICES - COMPUTER INTEGRATED
SYSTEMS DESIGN -- 0.6%
Sun Microsystems, Inc.** 138,000 6,874,125
-------------
SOAPS & COSMETICS -- 4.5%
Colgate-Palmolive Co. 98,000 6,713,000
Estee Lauder Co., Inc. 76,800 3,936,000
#Gillette Co. 400,600 15,322,950
Procter & Gamble Co. 358,900 25,459,469
-------------
51,431,419
-------------
TELECOMMUNICATIONS -- 6.1%
Airtouch Communications, Inc.** 216,000 12,312,000
Century Telephone Enterprises, Inc. 113,900 5,381,775
Lucent Technologies, Inc. 382,800 26,437,126
MCI Worldcom, Inc.** 325,900 15,928,363
Oracle Corp.** 234,475 6,829,084
SBC Communications, Inc. 67,000 2,977,312
-------------
69,865,660
-------------
TOBACCO -- 2.6%
Philip Morris Cos., Inc. 660,200 30,410,463
-------------
TRANSIT & PASSENGER TRANSPORTATION -- 0.3%
Wm. Wrigley Jr. Co. 40,000 3,037,500
-------------
TOTAL COMMON STOCKS
(Cost $756,804,841) 1,127,513,776
-------------
PAR
MATURITY (000) VALUE
-------- ------ --------------
SHORT TERM INVESTMENTS -- 1.9%
Federal Home Loan Mortgage
Corp. Discount Market Notes
5.38% 10/01/98 $12,58 $ 12,580,000
5.44% 10/16/98 1,000*** 997,733
Galileo Money Market Fund 8,010 8,009,882
--------------
TOTAL SHORT TERM INVESTMENTS
(Cost $21,587,615) 21,587,615
--------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $778,392,456*) $1,149,101,391
==============
- --------------------
* Cost for Federal income tax purposes is $778,480,920. The
gross unrealized appreciation (depreciation) on a tax basis
is as follows:
Gross unrealized appreciation $ 394,070,406
Gross unrealized depreciation (23,449,935)
--------------
$370,620,471
==============
** Non-income producing security.
*** Principal amount of securities pledged as initial margin requirement of
$675,000 on 50 Standard & Poor's 500 Stock Index futures contracts expiring
December 1998. The value of such contracts on September 30, 1998 was
$12,825,000, thereby resulting in an unrealized loss of $49,375.
# Total or partial securities on loan.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
LARGE CAP GROWTH EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
ASSETS
<S> <C>
Investments at value (Cost $778,392,456) .................................................................. $1,149,101,391
Collateral received for securities loaned ................................................................. 150,864,074
Dividends receivable ...................................................................................... 1,252,301
Interest receivable ....................................................................................... 14,161
Investments sold receivable ............................................................................... 18,516,786
Capital shares sold receivable ............................................................................ 369,844
Prepaid expenses .......................................................................................... 1,591
--------------
TOTAL ASSETS ....................................................................................... 1,320,120,148
--------------
LIABILITIES
Payable upon return of securities loaned .................................................................. 150,864,074
Investments purchased payable ............................................................................. 4,229,970
Capital shares redeemed payable ........................................................................... 3,554,692
Accrued expenses payable .................................................................................. 1,353,204
Futures margin payable .................................................................................... 393,750
--------------
TOTAL LIABILITIES .................................................................................. 160,395,690
--------------
NET ASSETS ................................................................................................... $1,159,724,458
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($922,896,450 (DIVIDE) 50,886,525) ................................................ $18.14
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($187,738,050 (DIVIDE) 10,364,757) ...................................................... $18.11
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($33,339,983 (DIVIDE) 1,845,833) ..................................................... $18.06
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($18.06 (DIVIDE) 0.955) ................................................................................... $18.91
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($14,713,183 (DIVIDE) 832,313) ....................................................... $17.68
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($1,036,792 (DIVIDE) 58,650) ......................................................... $17.68
======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MID-CAP VALUE EQUITY PORTFOLIO
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
---------- ------------
COMMON STOCKS -- 97.0%
AIR TRANSPORTATION -- 1.4%
Delta Air Lines, Inc. 35,000 $ 3,403,750
------------
AUTOMOTIVE -- 2.2%
#Dana Corp. 63,600 2,373,075
Lear Corp.** 68,000 2,975,000
------------
5,348,075
------------
BANKS -- 10.0%
#Amsouth Bancorp. 89,550 3,055,894
Associated Bancorp. 64,338 2,022,626
#Charter One Financial, Inc. 147,913 3,679,348
Commercial Federal Corp. 69,400 1,635,237
Compass Bancshares, Inc. 72,050 2,377,650
Huntington Bancshares, Inc. 129,130 3,244,391
Sovereign Bancorp, Inc. 138,680 1,846,177
Summit Bancorp 79,500 2,981,250
Union Planters Corp. 69,600 3,497,400
------------
24,339,973
------------
CHEMICALS -- 2.5%
Air Products & Chemicals, Inc. 106,200 3,159,450
Ashland, Inc. 64,600 2,987,750
------------
6,147,200
------------
COMPUTER & OFFICE EQUIPMENT -- 3.7%
Adobe Systems, Inc. 65,100 2,258,156
#Gateway 2000, Inc.** 24,700 1,287,487
Seagate Technology, Inc.** 134,900 3,380,931
Steelcase, Inc. Class A 123,500 2,192,125
------------
9,118,699
------------
COMPUTER COMMUNICATIONS
EQUIPMENT -- 0.9%
3Com Corp.** 72,500 2,179,531
------------
CONSTRUCTION -- 3.1%
Centex Corp. 51,800 1,787,100
Harsco Corp. 34,400 1,036,300
Southdown, Inc. 58,100 2,614,500
USG Corp. 49,600 2,145,200
------------
7,583,100
------------
CONTAINERS -- 1.0%
#Owens-Illinois, Inc.** 99,300 2,482,500
------------
DURABLE GOODS -- 1.1%
Whirlpool Corp. 56,300 2,646,100
------------
ELECTRONICS -- 4.8%
#DPL, Inc. 171,650 3,368,631
Florida Progress Corp. 79,400 3,439,012
#SCI Systems, Inc.** 92,300 2,486,331
Vishay Intertechnology, Inc.** 208,445 2,514,368
------------
11,808,342
------------
ENERGY & UTILITIES -- 9.9%
Ameren Corp. 99,488 4,172,278
Cinergy Corp. 104,000 3,978,000
El Paso Energy Corp. 69,300 2,247,919
Houston Industries, Inc. 89,700 2,791,912
New Century Energies, Inc. 89,600 4,362,400
NUMBER
OF SHARES VALUE
---------- ------------
ENERGY & UTILITIES (CONTINUED)
Public Service Enterprise Group,
Inc. 44,700 $ 1,757,269
Scana Corp. 81,000 2,718,562
Sierra Pacific Resources 54,400 2,111,400
------------
24,139,740
------------
FINANCE -- 4.7%
CIT Group, Inc. Class A 129,200 3,310,750
Countrywide Credit Industries, Inc. 69,500 2,892,938
Finova Group, Inc. 65,600 3,275,900
Heller Financial, Inc.** 79,200 1,900,800
------------
11,380,388
------------
FOOD & AGRICULTURE -- 1.6%
Food Lion, Inc. Class B 251,100 2,448,225
International Home Foods, Inc.** 106,800 1,441,800
------------
3,890,025
------------
INSURANCE -- 6.6%
Allmerica Financial Corp. 55,000 3,279,375
#Conseco, Inc. 104,900 3,206,006
Everest Reinsurance Holdings, Inc. 49,300 1,839,506
Humana, Inc.** 95,600 1,565,450
Old Republic International Corp. 109,100 2,454,750
Partnerre Ltd. 50,200 2,011,138
Reliastar Financial Corp. 47,800 1,864,200
------------
16,220,425
------------
LEASING -- 0.8%
Hertz Corp. 45,200 1,870,150
------------
MACHINERY & HEAVY EQUIPMENT -- 2.1%
#Cooper Industries, Inc. 49,500 2,017,125
Howmet International, Inc.** 148,600 1,727,475
United Dominion Industries Ltd. 74,400 1,348,500
------------
5,093,100
------------
MANUFACTURING -- 2.6%
#ITT Industries, Inc. 114,100 3,865,138
#Magna International, Inc. 42,600 2,476,125
------------
6,341,263
------------
MEASURING & CONTROLLING
DEVICES -- 0.9%
KLA Instruments Corp. 85,700 2,131,788
------------
MEDICAL & MEDICAL SERVICES -- 4.6%
#Bergen Brunswig Corp. 66,150 3,344,709
#Integrated Health Services, Inc. 66,100 1,111,306
#Tenet Healthcare Corp.** 125,700 3,613,875
Wellpoint Health Networks, Inc.** 56,800 3,184,350
------------
11,254,240
------------
MEDICAL INSTRUMENTS & SUPPLIES -- 0.9%
Beckman Coulter, Inc. 44,400 2,292,150
------------
METAL & MINING -- 3.8%
Carpenter Technology Corp. 68,400 2,500,875
#Nucor Corp. 79,700 3,237,813
Reynolds Metals Co. 69,600 3,536,550
------------
9,275,238
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MID-CAP VALUE EQUITY PORTFOLIO (CONCLUDED)
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
---------- ------------
COMMON STOCKS (CONTINUED)
OIL & GAS -- 6.7%
#Burlington Resources, Inc. 69,100 $ 2,582,613
#Consolidated Natural Gas Co. 81,700 4,452,650
#Diamond Offshore Drilling, Inc. 83,300 2,165,800
Sonat, Inc. 99,200 2,963,600
USX-Marathon Group 119,100 4,220,606
------------
16,385,269
------------
PAPER & FOREST PRODUCTS -- 1.9%
Fort James Corp. 69,600 2,283,750
Union Camp Corp. 59,600 2,346,750
------------
4,630,500
------------
PUBLISHING & PRINTING -- 1.0%
New York Times Co. Class A 88,600 2,436,500
------------
REAL ESTATE -- 4.2%
Arden Realty, Inc. 92,475 2,063,348
Carramerica Realty Corp. 86,500 1,973,281
#Equity Residential Properties
Trust 45,100 1,902,656
Felcor Lodging Trust, Inc. 61,150 1,486,709
Simon Property Group, Inc. 96,000 2,856,000
------------
10,281,994
------------
RESTAURANTS -- 1.8%
Darden Restaurants, Inc. 140,100 2,241,600
Outback Steakhouse, Inc.** 79,300 2,091,538
------------
4,333,138
------------
RETAIL MERCHANDISING -- 7.8%
#American Greetings Corp.
Class A 68,000 2,690,250
American Stores Co. 95,000 3,057,813
#Dillards, Inc. Class A 89,400 2,531,138
#Fred Meyer, Inc.** 73,800 2,868,975
Ross Stores, Inc. 79,500 2,275,688
The Learning Co., Inc.** 148,900 2,950,081
Toys "R" Us, Inc.** 159,400 2,580,288
------------
18,954,233
------------
SEMI-CONDUCTORS & RELATED DEVICES -- 0.4%
#ST Microelectronics NV - New York
Registered Shares** 21,900 984,131
------------
TELECOMMUNICATIONS -- 2.0%
#Frontier Corp. 139,100 3,807,863
Glenayre Technologies, Inc.** 143,400 1,039,650
------------
4,847,513
------------
TEXTILES -- 0.5%
Fruit of the Loom, Inc. Class A** 79,400 1,195,963
------------
TOBACCO -- 0.6%
RJR Nabisco Holdings Corp. 62,200 1,566,663
------------
TRANSPORTATION -- 0.9%
Kansas City Southern Industries,
Inc. 65,900 2,306,500
------------
TOTAL COMMON STOCKS
(Cost $246,408,870) 236,868,181
------------
PAR
MATURITY (000) VALUE
-------- ------ ------------
SHORT TERM INVESTMENTS -- 3.0%
Federal Home Loan Mortage Corp.
Discount Notes
5.38% 10/01/98 $4,460 $ 4,460,000
Galileo Money Market Fund 3,009 3,009,477
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $7,469,477) 7,469,477
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $253,878,347*) $244,337,658
============
- ---------------
* Cost for Federal income tax purposes is $253,899,610. The
gross unrealized appreciation (depreciation) on a tax basis
is as follows:
Gross unrealized appreciation $ 18,859,387
Gross unrealized depreciation (28,421,339)
------------
$ (9,561,952)
============
** Non-income producing security.
# Total or partial securities on loan.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
MID-CAP VALUE EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
ASSETS
<S> <C>
Investments at value (Cost $253,878,347) ..................................................................... $244,337,658
Collateral received for securities loaned .................................................................... 50,790,100
Dividends receivable ......................................................................................... 429,127
Interest receivable .......................................................................................... 9,900
Investments sold receivable .................................................................................. 7,856,767
Capital shares sold receivable ............................................................................... 80,334
Prepaid expenses ............................................................................................. 414
------------
TOTAL ASSETS .......................................................................................... 303,504,300
------------
LIABILITIES
Payable upon return of securities loaned ..................................................................... 50,790,100
Investments purchased payable ................................................................................ 6,969,302
Capital shares redeemed payable .............................................................................. 295,739
Accrued expenses payable ..................................................................................... 319,284
------------
TOTAL LIABILITIES ..................................................................................... 58,374,425
------------
NET ASSETS ...................................................................................................... $245,129,875
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($205,634,048 (DIVIDE) 19,335,676) ................................................... $10.63
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($28,878,697 (DIVIDE) 2,718,499) ........................................................... $10.62
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($3,983,378 (DIVIDE) 375,407) ........................................................... $10.61
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($10.61 (DIVIDE) 0.955) ...................................................................................... $11.11
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($6,375,310 (DIVIDE) 602,492) ........................................................... $10.58
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($258,442 (DIVIDE) 24,425) .............................................................. $10.58
======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MID-CAP GROWTH EQUITY PORTFOLIO
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
---------- ------------
COMMON STOCKS -- 88.7%
ADVERTISING -- 1.8%
Lamar Advertising Co.** 40,000 $ 1,120,000
Omnicom Group, Inc. 26,000 1,170,000
Outdoor Systems, Inc.** 114,800 2,238,600
-----------
4,528,600
-----------
APPAREL -- 0.2%
Burlington Coat Factory Warehouse
Corp. 33,800 498,550
-----------
BROADCASTING -- 1.1%
#Chancellor Media Corp.** 82,500 2,753,437
-----------
BUSINESS SERVICES -- 3.7%
#Apollo Group, Inc. ** 46,800 1,304,550
#Quintiles Transnational Corp.** 102,700 4,493,125
Robert Half International, Inc.** 87,250 3,768,109
-----------
9,565,784
-----------
COMMUNICATIONS -- 4.0%
#At Home Corp., Series A** 90,000 4,308,750
#Yahoo!, Inc.** 46,000 5,957,000
-----------
10,265,750
-----------
COMPUTER & OFFICE EQUIPMENT -- 16.1%
#Fiserv, Inc.** 86,000 3,961,375
#Ingram Micro, Inc. Class A** 78,000 4,177,875
#J. D. Edwards & Co.** 150,000 7,200,000
Network Appliance, Inc.** 157,000 7,948,125
Policy Management Systems
Corp.** 126,000 5,103,000
#SunGard Data Systems, Inc.** 81,000 2,551,500
Symbol Technologies, Inc. 141,200 7,245,325
Tech Data Corp.** 63,000 3,153,937
-----------
41,341,137
-----------
COMPUTER SOFTWARE & SERVICES -- 16.0%
Acxiom Corp.** 100,000 2,481,250
#BMC Software, Inc.** 137,000 8,228,562
Citrix Systems, Inc.** 94,200 6,688,200
Compuware Corp.** 125,100 7,365,262
#DST Systems, Inc.** 80,000 4,220,000
#HNC Software, Inc.** 63,900 2,595,937
Sylvan Learning Systems, Inc.** 88,000 2,057,000
VERITAS Software Corp.** 129,850 7,174,212
-----------
40,810,423
-----------
CONSTRUCTION -- 1.0%
Martin Marietta Materials, Inc. 57,000 2,461,688
-----------
ELECTRONICS -- 10.3%
American Power Conversion Corp.** 74,000 2,788,875
#Broadcom Corp.** 81,700 5,800,700
#Concord EFS, Inc.** 282,000 7,279,125
Gemstar Resources Ltd.** 81,000 3,756,375
Rambus, Inc.** 61,000 3,904,000
Vitesse Semiconductor Corp.** 120,100 2,837,363
-----------
26,366,438
-----------
NUMBER
OF SHARES VALUE
--------- -----------
FINANCE -- 2.9%
Paychex, Inc. 145,000 $ 7,476,563
------------
FOOD & AGRICULTURE -- 2.8%
Earthgrains Co. 230,000 7,115,625
------------
INSURANCE -- 1.4%
#Mutual Risk Management Ltd. 104,400 3,693,150
------------
MEDICAL & MEDICAL SERVICES -- 5.0%
IMS Health, Inc. 53,000 3,282,688
#McKesson Corp. 61,700 5,653,263
#Medimmune, Inc.** 61,600 3,988,600
------------
12,924,551
------------
MEDICAL INSTRUMENTS & SUPPLIES -- 6.9%
Biogen, Inc.** 40,000 2,632,500
#Elan Corp.** 104,500 7,530,531
Forest Laboratories, Inc.** 64,000 2,200,000
#Sepracor, Inc.** 40,000 2,630,000
Sofamor Danek Group, Inc.** 30,000 2,670,000
------------
17,663,031
------------
OIL & GAS -- 1.8%
Anadarko Petroleum Corp. 60,000 2,358,750
Montana Power Co. 50,000 2,228,125
------------
4,586,875
------------
PHARMACEUTICALS -- 1.7%
Watson Pharmaceuticals, Inc.** 85,000 4,313,750
------------
RESTAURANTS -- 0.4%
Papa John's International, Inc.** 33,800 1,115,400
------------
RETAIL MERCHANDISING -- 6.5%
Abercrombie & Fitch Co.** 157,000 6,908,000
#Amazon.com, Inc. 17,000 1,897,625
#Best Buy, Inc.** 59,500 2,469,250
#Family Dollar Stores, Inc. 35,200 554,400
Lowe's Cos., Inc. 70,000 2,226,875
#Staples, Inc.** 90,000 2,643,750
------------
16,699,900
------------
TELECOMMUNICATIONS -- 5.1%
Ascend Communications, Inc.** 60,000 2,730,000
#Broadcast.Com, Inc.** 25,000 1,009,375
#Jacor Communications, Inc.** 23,000 1,164,375
Qwest Communications
International, Inc.** 85,013 2,661,970
#Teleglobe, Inc. 208,000 5,395,000
------------
12,960,720
------------
TOTAL COMMON STOCKS
(Cost $209,462,003) 227,141,372
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MID-CAP GROWTH EQUITY PORTFOLIO (CONCLUDED)
PAR
MATURITY (000) VALUE
---------- ---------- -----------
SHORT TERM INVESTMENTS -- 11.3%
Federal Home Loan Bank
Discount Notes
4.95% 10/01/98 $11,500 $ 11,500,000
5.12% 10/23/98 450*** 448,592
5.13% 10/23/98 500*** 498,433
Federal Home Loan Mortgage Corp.
Discount Notes
5.38% 10/01/98 5,390 5,390,000
5.38% 10/16/98 275*** 274,384
5.44% 10/16/98 500*** 498,867
Galileo Money Market Fund 10,231 10,231,206
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $28,841,482) 28,841,482
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $238,303,485*) $255,982,854
============
- -----------------
* Cost for Federal income tax purposes is $238,475,333. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $25,795,931
Gross unrealized depreciation (8,288,410)
-----------
$17,507,521
===========
** Non-income producing security.
*** Principal amount of securities pledged as initial margin requirement of
$1,174,500 on 87 Standard & Poor's 500 Stock Index futures contracts
expiring December 1998. The value of such contracts on September 30, 1998
was $22,315,500 thereby resulting in an unrealized loss of $809,598.
# Total or partial securities on loan.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
MID-CAP GROWTH EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
<S> <C>
ASSETS
Investments at value (Cost $238,303,485) ....................................................................... $255,982,854
Collateral received for securities loaned ...................................................................... 82,297,112
Dividends receivable ........................................................................................... 18,872
Interest receivable ............................................................................................ 34,928
Investments sold receivable .................................................................................... 7,661,693
Capital shares sold receivable ................................................................................. 317,555
Prepaid expenses ............................................................................................... 600
------------
TOTAL ASSETS ............................................................................................ 346,313,614
------------
LIABILITIES
Payable upon return of securities loaned ....................................................................... 82,297,112
Investments purchased payable .................................................................................. 4,795,479
Capital shares redeemed payable ................................................................................ 312,964
Accrued expenses payable ....................................................................................... 310,637
Futures margin payable ......................................................................................... 685,125
------------
TOTAL LIABILITIES ....................................................................................... 88,401,317
------------
NET ASSETS ........................................................................................................ $257,912,297
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($220,902,674 (DIVIDE) 19,862,137) ..................................................... $11.12
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($28,600,711 (DIVIDE) 2,585,685) ............................................................. $11.06
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($4,089,848 (DIVIDE) 371,177) ............................................................. $11.02
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($11.02 (DIVIDE) 0.955) ........................................................................................ $11.54
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($4,088,649 (DIVIDE) 375,023) ............................................................. $10.90
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($230,415 (DIVIDE) 21,135) ................................................................ $10.90
======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SMALL CAP VALUE EQUITY PORTFOLIO
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- -----------
COMMON STOCKS -- 97.8%
AIR TRANSPORTATION -- 0.7%
Airborne Freight Corp. 280,600 $ 4,857,887
------------
APPAREL -- 0.4%
Burlington Coat Factory
Warehouse Corp. 163,100 2,405,725
------------
BANKS -- 5.4%
#BankAtlantic Bancorp, Inc. Class A 425,460 3,057,994
BankAtlantic Bancorp, Inc. Class B 176,524 1,588,716
Banknorth Group, Inc. 322,000 9,418,500
Commerce Bancorp, Inc. 190,085 7,520,238
GBC Bancorp 244,600 5,870,400
Susquehanna Bancshares, Inc. 457,275 8,631,066
------------
36,086,914
------------
CHEMICALS -- 1.8%
Bush Boake Allen, Inc.** 220,700 5,903,725
Crompton & Knowles Corp. 435,400 6,340,512
------------
12,244,237
------------
COMPUTER & OFFICE EQUIPMENT -- 4.7%
Bell and Howell Co.** 366,600 9,508,687
Bell Micro Products, Inc.** 339,000 2,521,312
#HMT Technology Corp.** 483,100 3,774,219
#Hutchinson Technology, Inc.** 192,400 3,294,850
United Stationers, Inc.** 242,800 5,796,850
Vanstar Corp.** 618,400 6,106,700
------------
31,002,618
------------
CONTAINERS -- 1.0%
Silgan Holdings, Inc.** 290,900 6,908,875
------------
DRAWING & INSULATING NONFERROUS
WIRE -- 0.5%
Essex International, Inc.** 195,300 3,344,512
------------
DRILLING OIL & GAS WELLS -- 0.7%
Rowan Companies, Inc.** 442,300 4,948,231
------------
DURABLE GOODS -- 1.9%
Kellwood Co. 290,000 7,793,750
Wellman, Inc. 392,300 5,001,825
------------
12,795,575
------------
ELECTRONICS -- 7.0%
Allen Telecommunications, Inc.** 416,200 2,783,337
BEI Technologies, Inc. 177,800 1,322,387
Belden, Inc. 221,140 2,971,569
Berg Electronics Corp.** 162,800 5,636,950
C & D Technology, Inc. 321,200 7,668,650
Dallas Semiconductor Corp. 252,800 6,825,600
Electro Scientific Industries,
Inc.** 232,400 3,689,350
Holophane Corp.** 347,775 8,520,487
Marshall Industries** 133,100 2,936,519
Park Electrochemical Corp. 341,100 4,647,487
------------
47,002,336
------------
ENERGY & UTILITIES -- 9.2%
Cilcorp, Inc. 96,200 5,044,487
Cleco Corp. 177,300 5,972,794
Eastern Enterprises 100,200 4,220,925
#Interstate Energy Corp. 253,692 8,134,000
Mitchell Energy & Development
Corp. 260,900 3,652,600
NUMBER
OF SHARES VALUE
--------- -----------
ENERGY & UTILITIES (CONTINUED)
PacifiCorp 5,500 $ 105,531
Piedmont Natural Gas, Inc. 120,700 4,088,712
Santa Fe Energy Resources, Inc.** 1,012,500 9,555,469
Sierra Pacific Resources 160,460 6,227,854
Tesoro Petroleum Corp.** 393,300 5,137,481
TNP Enterprises, Inc. 165,300 5,775,169
UGI Corp. Holding Co. 134,810 3,117,481
-----------
61,032,503
-----------
FINANCE -- 6.4%
Aames Financial Corp. 529,000 3,207,062
ARM Financial Group, Inc.
Class A 456,600 8,104,650
Astoria Financial Corp. 151,100 6,365,087
#Metris Companies, Inc.** 71,724 3,344,154
#Peoples Heritage Financial
Group, Inc. 449,200 8,057,525
PFF Bancorp, Inc.** 381,700 5,820,925
Webster Financial Corp. 297,000 7,239,375
-----------
42,138,778
-----------
FOOD & AGRICULTURE -- 2.4%
Earthgrains Co. 290,000 8,971,875
#Suiza Foods Corp.** 214,700 6,709,375
-----------
15,681,250
-----------
FURNITURE -- 1.1%
Dal-Tile International, Inc. 786,500 7,127,656
-----------
GLASS -- 0.6%
#Libbey, Inc. 130,000 3,835,000
-----------
INSURANCE -- 6.3%
Commerce Group, Inc. 65,400 1,806,675
#Enhance Financial Services
Group, Inc. 307,200 9,081,600
ESG Re Ltd. 319,700 4,835,462
Executive Risk, Inc. 160,700 7,241,544
#Penn Treaty American Corp.** 241,600 5,828,600
PXRE Corp. 267,500 6,871,406
W.R. Berkley Corp. 218,105 6,515,887
-----------
42,181,174
-----------
JEWELRY -- 1.4%
Finlay Enterprises, Inc.** 288,200 2,413,675
Movado Group, Inc. 314,012 6,594,252
-----------
9,007,927
-----------
MACHINERY & HEAVY EQUIPMENT -- 3.7%
Alamo Group, Inc. 230,360 3,181,847
Brown & Sharpe Manufacturing Co.
Class A** 306,800 2,301,000
Pentair, Inc. 250,000 8,062,500
Plantronics, Inc.** 114,220 5,503,976
US Can Corp.** 391,600 5,727,150
-----------
24,776,473
-----------
MEDIA -- 1.0%
Valassis Communication, Inc.** 165,800 6,632,000
-----------
MEDICAL & MEDICAL SERVICES -- 2.5%
#Healthcare Realty Trust, Inc. 139,600 3,559,800
#Integrated Health Services, Inc. 286,900 4,823,506
Mariner Post-Acute Network, Inc.** 114,480 586,710
Sierra Health Services, Inc.** 393,900 7,754,906
-----------
16,724,922
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SMALL CAP VALUE EQUITY PORTFOLIO (CONCLUDED)
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- ------------
COMMON STOCKS (CONTINUED)
MEDICAL INSTRUMENTS & SUPPLIES -- 4.4%
ADAC Laboratories** 230,500 $ 5,532,000
Marquette Medical Systems, Inc.
Class A** 268,000 11,641,250
Maxxim Medical, Inc.** 259,500 6,665,906
Perrigo Co.** 628,100 5,731,413
------------
29,570,569
------------
METAL & MINING -- 3.5%
Gibraltar Steel Corp.** 387,300 6,753,544
Mueller Industries, Inc.** 254,000 6,461,125
Steel Dynamics, Inc.** 516,400 6,713,200
Wolverine Tube, Inc.** 176,100 3,709,106
------------
23,636,975
------------
MISCELLANEOUS SERVICES -- 3.0%
CDI Corp.** 258,600 5,883,150
Norrell Corp. 394,100 5,911,500
#RMI Titanium Co.** 417,800 8,408,225
------------
20,202,875
------------
MOTOR VEHICLES -- 2.0%
Borge-Warner Automotive, Inc. 207,900 7,705,294
Tower Automotive, Inc.** 284,800 5,624,800
------------
13,330,094
------------
OIL & GAS -- 1.5%
Belco Oil & Gas Corp. 226,200 1,526,850
Flowserve Corp. 226,929 4,595,312
Oneok, Inc. 119,100 4,049,400
#Pride International, Inc.** 42 336
------------
10,171,898
------------
PAPER & FOREST PRODUCTS -- 2.1%
Caraustar Industries, Inc. 289,100 6,577,025
Chesapeake Corp. 219,300 7,606,969
------------
14,183,994
------------
REAL ESTATE -- 8.9%
Alexandria Real Estate Equities,
Inc. 152,900 4,147,413
Bedford Property Investors, Inc. 189,400 3,409,200
Boykin Lodging Trust, Inc. 181,700 2,736,856
Brandywine Realty Trust 155,600 2,975,850
Burnham Pacific Properties, Inc. 291,000 4,055,813
Camden Property Trust 233,700 6,528,994
#Chelsea GCA Realty, Inc. 143,900 4,928,575
Felcor Lodging Trust, Inc. 147,650 3,589,741
Glenborough Realty Trust, Inc. 307,800 6,540,750
Highwoods Properties, Inc. 187,400 5,200,350
Lennar Corp. 320,665 7,154,838
Patriot American Hospitality, Inc. 251,099 3,201,513
Prentiss Properties Trust 216,700 5,173,713
------------
59,643,606
------------
RESTAURANTS -- 1.9%
#Buffets, Inc.** 557,900 6,032,294
Ruby Tuesday, Inc. 418,600 6,331,325
------------
12,363,619
------------
NUMBER
OF SHARES VALUE
--------- -----------
RETAIL MERCHANDISING -- 4.1%
Bon Ton Stores, Inc.** 368,000 $ 2,760,000
Brylane, Inc.** 243,600 3,897,600
Duane Reade, Inc.** 174,600 6,623,888
Enesco Group, Inc. 237,300 5,888,006
Fingerhut Co. 225,300 2,478,300
Zale Corp.** 223,200 5,719,500
------------
27,367,294
------------
SEMI-CONDUCTORS & RELATED DEVICES -- 0.8%
Novellus Systems, Inc. 191,600 5,029,500
------------
TEXTILES -- 2.2%
Dress Barn, Inc.** 289,100 3,505,338
Guilford Mills, Inc. 353,200 5,253,850
Tropical Sportswear International
Corp.** 309,900 5,771,888
------------
14,531,076
------------
TOBACCO -- 1.3%
UST, Inc. 420,800 8,889,400
------------
TRANSPORTATION -- 2.6%
Budget Group, Inc. Class A** 247,400 5,643,813
Midwest Express Holdings, Inc.** 129,615 4,342,103
#Teekay Shipping Corp. 390,500 7,102,219
------------
17,088,135
------------
WHOLESALE - GROCERIES & GENERAL LINE -- 0.8%
Richfood Holdings, Inc. 360,500 5,542,688
------------
TOTAL COMMON STOCKS
(Cost $657,782,008) 652,286,316
------------
PAR
MATURITY (000)
-------- -------
SHORT TERM INVESTMENTS -- 2.2%
Federal Home Loan Mortage Corp.
Discount Notes
5.38% 10/01/98 $8,800 8,800,000
Galileo Money Market Fund 5,994 5,993,560
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $14,793,560) 14,793,560
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $672,575,568*) $667,079,876
============
- -----------------
* Cost for Federal income tax purposes is $672,440,609. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 98,279,944
Gross unrealized depreciation (103,640,677)
-------------
$ (5,360,733)
=============
** Non-income producing security.
# Total or partial securities on loan.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
SMALL CAP VALUE EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
<S> <C>
ASSETS
Investments at value (Cost $672,575,568) ...................................................................... $667,079,876
Collateral received for securities loaned ..................................................................... 42,303,837
Dividends receivable .......................................................................................... 1,108,840
Investments sold receivable ................................................................................... 4,641,712
Capital shares sold receivable ................................................................................ 549,834
Prepaid expenses .............................................................................................. 2,105
------------
TOTAL ASSETS ........................................................................................... 715,686,204
------------
LIABILITIES
Payable upon return of securities loaned ...................................................................... 42,303,837
Investments purchased payable ................................................................................. 6,173,269
Capital shares redeemed payable ............................................................................... 741,528
Accrued expenses payable ...................................................................................... 706,129
------------
TOTAL LIABILITIES ...................................................................................... 49,924,763
------------
NET ASSETS ....................................................................................................... $665,761,441
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($527,373,868 (DIVIDE) 35,422,607) .................................................... $14.89
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($77,893,105 (DIVIDE) 5,236,173) ............................................................ $14.88
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($34,286,072 (DIVIDE) 2,304,673) ............................................................ $14.88
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($14.88 (DIVIDE) 0.955) ....................................................................................... $15.58
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($20,717,124 (DIVIDE) 1,425,537) ......................................................... $14.53
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($5,491,272 (DIVIDE) 377,855) ............................................................ $14.53
======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SMALL CAP GROWTH EQUITY PORTFOLIO
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- ------------
COMMON STOCKS -- 83.4%
ADVERTISING -- 0.3%
#TMP Worldwide, Inc.** 119,100 $ 3,907,969
------------
AEROSPACE -- 0.0%
Kellstrom Industries, Inc.** 43,600 604,950
------------
BANKS -- 0.6%
Investors Financial Service Co. 150,000 7,350,000
------------
BUSINESS SERVICES -- 14.1%
Abacus Direct Corp.** 290,100 14,795,100
#Apollo Group, Inc.** 107,448 2,995,113
#Engineering Animation, Inc.** 228,950 10,932,362
First Consulting Group, Inc.** 101,900 1,745,037
Great Plains Software, Inc.** 54,500 2,575,125
Inspire Insurance Solutions, Inc.** 520,200 12,289,725
International Network Services** 740,300 30,722,450
International Telecommunications
Data Systems, Inc.** 428,350 12,422,150
Kroll-O'Gara Co.** 124,000 2,898,500
Lason Holdings, Inc.** 398,100 20,402,625
Metzler Group, Inc.** 320,600 10,980,550
Nova Corp.** 281,200 8,629,325
Pre-Paid Legal Services, Inc.** 409,100 10,457,619
#Quintiles Transnational Corp.** 400,900 17,539,375
#Robert Half International, Inc.** 432,050 18,659,159
------------
178,044,215
------------
COMPUTER & OFFICE EQUIPMENT -- 19.6%
Affiliated Computer Services,
Inc.** 139,200 4,245,600
Concord Communications, Inc.** 418,200 16,623,450
#EarthLink Network, Inc.** 487,500 20,109,375
#Excite, Inc.** 258,700 10,558,194
IDX Systems Corp.** 345,800 18,327,400
#Infoseek Corp.** 286,300 7,050,137
#Inktomi Corp.** 65,200 4,906,300
#Legato Systems, Inc.** 747,100 38,382,262
#Lycos, Inc.** 236,000 7,979,750
Micros Systems, Inc.** 322,500 9,675,000
Microstrategy, Inc.** 241,700 9,063,750
#MindSpring Enterprises, Inc.** 149,500 6,204,250
National Computer Systems, Inc. 192,700 5,684,650
New Era of Networks, Inc.** 127,900 5,211,925
Progress Software Corp.** 401,700 10,393,987
#PSINet, Inc.** 844,800 11,774,400
#RealNetworks, Inc.** 169,800 5,889,937
#Sapient Corp.** 62,000 2,115,750
Touchstone Software Corp.** 2,249 2,249
VERITAS Software Corp.** 451,575 24,949,519
#Wind River Systems, Inc.** 397,600 18,786,600
Xircom, Inc.** 386,400 9,466,800
------------
247,401,285
------------
COMPUTER SOFTWARE & SERVICES -- 11.6%
#Aspect Development, Inc.** 966,000 38,036,250
Insight Enterprises, Inc.** 416,790 11,774,317
#Jack Henry & Associates, Inc. 386,600 18,460,150
Macromedia, Inc.** 210,000 3,412,500
Mastech Corp.** 202,200 4,865,437
Mercury Interactive Corp.** 531,600 21,097,875
Peregrine Systems, Inc.** 507,600 20,430,900
#Sylvan Learning Systems, Inc.** 469,900 10,983,912
Whittman-Hart, Inc.** 919,800 16,901,325
------------
145,962,666
------------
NUMBER
OF SHARES VALUE
--------- ------------
CONSTRUCTION -- 0.5%
Morrison Knudsen Corp.** 162 $ 607
Rental Service Corp.** 341,000 6,138,000
------------
6,138,607
------------
ELECTRONICS -- 3.0%
#Broadcom Corp.** 100 7,100
California Micro Devices Corp.** 776 2,134
Comptronix Corp.** 146 0
Dendrite International, Inc.** 555,000 13,250,625
QLogic Corp.** 193,000 12,593,250
Sound Advice, Inc.** 87 0
Vitesse Semiconductor Corp.** 518,900 12,259,012
------------
38,112,121
------------
ENERGY & UTILITIES -- 0.7%
Catalytica, Inc.** 665,900 9,405,837
------------
ENTERTAINMENT & LEISURE -- 2.3%
Championship Auto Racing Teams,
Inc.** 299,900 7,328,807
Cinar Films, Inc. Class B** 574,000 10,296,125
Dover Downs Entertainment, Inc. 271,200 3,423,900
#Speedway Motorsports, Inc.** 325,500 6,143,812
Steiner Leisure Ltd.** 108,700 1,698,438
------------
28,891,082
------------
FINANCE -- 0.6%
NCO Group, Inc.** 254,750 7,085,234
Valutron Distribution Trust** 10,000 0
------------
7,085,234
------------
FOOD & AGRICULTURE -- 1.3%
#American Italian Pasta Co.** 402,800 10,573,500
#Beringer Wine Estates Holdings,
Inc.** 88,584 3,393,875
#Gardenburger, Inc.** 204,900 2,330,738
------------
16,298,113
------------
INSURANCE -- 0.4%
Century Business Services, Inc.** 281,600 5,737,600
------------
MEDICAL & MEDICAL SERVICES -- 7.9%
MedQuist, Inc.** 562,600 17,792,225
#Orthodontic Centers of America,
Inc.** 681,500 11,372,531
Patterson Dental Co.** 624,700 23,113,900
Province Healthcare Co.** 377,100 12,844,969
#Renal Care Group, Inc.** 837,150 21,451,969
Serologicals Corp.** 513,750 12,907,969
------------
99,483,563
------------
MEDICAL INSTRUMENTS & SUPPLIES -- 2.3%
#Biomatrix, Inc.** 239,700 9,348,300
Hanger Orthopedic Group, Inc.** 383,200 7,137,100
Minimed, Inc.** 78,600 5,187,600
#Safeskin Corp.** 200,100 6,315,656
Ventana Medical Systems, Inc.** 60,000 1,080,000
------------
29,068,656
------------
OIL & GAS -- 0.0%
York Resh Corp.** 514 0
------------
0
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SMALL CAP GROWTH EQUITY PORTFOLIO (CONCLUDED)
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- ------------
COMMON STOCKS (CONTINUED)
PERSONAL SERVICES -- 1.4%
#Bright Horizons Family Solutions,
Inc.** 89,142 $ 1,888,696
DeVry, Inc.** 672,100 15,752,344
--------------
17,641,040
--------------
PHARMACEUTICALS -- 2.1%
Coulter Pharmaceutical, Inc.** 349,600 8,696,300
Roberts Pharmaceuticals Corp.** 390,300 7,464,488
#Shire Pharmaceuticals Group
PLC ADR** 462,600 10,119,375
--------------
26,280,163
--------------
RESTAURANTS -- 0.9%
#Buffets, Inc.** 314,400 3,399,450
Papa John's International, Inc.** 242,210 7,992,930
The Cheesecake Factory, Inc.** 23,600 365,800
--------------
11,758,180
--------------
RETAIL MERCHANDISING -- 6.3%
#Action Performance Co., Inc.** 305,900 8,259,300
#American Eagle Outfitters, Inc.** 166,800 5,775,450
#Ann Taylor Stores Corp.** 536,500 10,897,656
Duane Reade, Inc.** 292,500 11,096,719
Eagle Hardware & Garden, Inc.* 421,500 9,141,281
Ebay, Inc.** 14,400 648,900
Fossil, Inc.** 284,900 3,881,763
Linens 'N Things, Inc.** 742,900 20,429,750
Strayer Education, Inc. 272,700 7,124,288
Trans World Entertainment Corp.** 105,650 1,928,113
--------------
79,183,220
--------------
SANITARY SERVICES -- 1.9%
Eastern Environmental Services,
Inc.** 794,000 24,018,500
--------------
SOAPS & COSMETICS -- 0.5%
Helen of Troy Ltd.** 319,609 6,192,424
--------------
SOCIAL SERVICES -- 0.5%
#Ciber, Inc.** 300,700 6,070,381
--------------
TELECOMMUNICATIONS -- 4.6%
#Broadcast.com, Inc.** 124,300 5,018,613
#CNET, Inc.** 118,100 5,403,075
e.spire Communications, Inc.** 646,400 5,817,598
Geotel Communications Corp.** 712,300 19,143,063
#Metromedia Fiber Network, Inc.** 371,100 12,153,525
#Superior Telecom, Inc. 169,000 8,175,375
Tekelec** 175,000 2,668,750
--------------
58,379,999
--------------
TOTAL COMMON STOCKS
(Cost $934,264,158) 1,053,015,805
--------------
PAR
MATURITY (000) VALUE
-------- -------- --------------
CORPORATE BONDS -- 0.5%
Speedway Motorsports, Inc.
5.75% 09/30/03 $ 7,000 $ 6,405,000
(Cost $7,000,000) --------------
SHORT TERM INVESTMENTS -- 16.1%
Federal Home Loan Bank
Discount Notes
5.39% 10/21/98 4,500*** 4,486,525
Federal Home Loan Mortgage Corp.
Discount Notes
5.38% 10/01/98 181,540 181,540,000
5.42% 10/16/98 1,500*** 1,496,613
5.44% 10/16/98 3,500*** 3,492,067
Galileo Money Market Fund 12,037 12,037,055
--------------
TOTAL SHORT TERM INVESTMENTS
(Cost $203,052,260) 203,052,260
--------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $1,144,316,418*) $1,262,473,065
==============
- -------------
* Cost for federal income tax purposes is $1,146,206,952. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $171,958,841
Gross unrealized depreciation (55,692,728)
------------
$116,266,113
============
** Non-income producing security.
*** Principal amount of securities pledged as initial margin requirement of
$8,235,000 on 610 Standard & Poor's 500 Stock Index futures contracts
expiring December 1998. The value of such contracts on September 30, 1998
was $156,465,000, thereby resulting in an unrealized loss of $3,411,250.
# Total or partial securities on loan.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
SMALL CAP GROWTH EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
<S> <C>
ASSETS
Investments at value (Cost $1,144,316,418) ................................................................. $1,262,473,065
Collateral received for securities loaned .................................................................. 189,508,956
Interest receivable ........................................................................................ 71,489
Investments sold receivable ................................................................................ 32,732,742
Capital shares sold receivable ............................................................................. 1,144,883
Prepaid expenses ........................................................................................... 3,435
--------------
TOTAL ASSETS ........................................................................................ 1,485,934,570
--------------
LIABILITIES
Payable upon return of securities loaned ................................................................... 189,508,956
Investments purchased payable .............................................................................. 20,778,742
Capital shares redeemed payable ............................................................................ 6,981,953
Accrued expenses payable ................................................................................... 1,380,898
Futures margin payable ..................................................................................... 4,803,750
--------------
TOTAL LIABILITIES ................................................................................... 223,454,299
--------------
NET ASSETS .................................................................................................... $1,262,480,271
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($1,022,403,881 (DIVIDE) 58,409,202) ............................................... $17.50
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($141,470,230 (DIVIDE) 8,204,908) ........................................................ $17.24
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($48,190,163 (DIVIDE) 2,814,694) ...................................................... $17.12
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($17.12 (DIVIDE) 0.955) .................................................................................... $17.93
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($38,484,811 (DIVIDE) 2,300,330) ...................................................... $16.73
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($11,931,186 (DIVIDE) 713,129) ........................................................ $16.73
======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
MICRO-CAP EQUITY PORTFOLIO
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- ----------
COMMON STOCKS -- 75.9%
AEROSPACE -- 0.2%
Kellstrom Industries, Inc.** 3,000 $ 41,625
----------
BANKS -- 1.0%
#Net.B@nk, Inc.** 10,000 190,000
----------
BROADCASTING -- 1.6%
Medialink Worldwide Inc.** 17,800 298,150
----------
BUSINESS SERVICES -- 9.3%
Macrovision Corp.** 15,000 438,750
Market Facts, Inc.** 16,000 444,000
Meta Group, Inc.** 25,350 828,628
----------
1,711,378
----------
COMPUTER & OFFICE EQUIPMENT -- 3.6%
Miami Computer Supply Corp.** 30,000 478,125
Symix Systems, Inc.** 10,000 182,500
----------
660,625
----------
COMPUTER SOFTWARE & SERVICES -- 20.9%
Best Software, Inc.** 28,000 672,000
Cognizant Technology Solutions, Inc.
Class A** 25,000 387,500
H.T.E., Inc.** 9,600 117,600
#Intelligroup, Inc.** 16,000 272,000
International Integration, Inc.** 40,000 625,000
Segue Software, Inc.** 26,200 432,300
SPR, Inc.** 17,750 408,250
TSI International Software Ltd.** 27,000 934,875
----------
3,849,525
----------
ELECTRONICS -- 2.0%
TranSwitch Corp.** 25,000 373,438
----------
FINANCE -- 1.8%
Telebanc Financial Corp.** 20,000 322,500
----------
FOOD & AGRICULTURE -- 3.0%
Worthington Foods, Inc. 28,000 542,500
----------
FURNITURE -- 3.1%
School Specialty, Inc.** 37,000 568,875
----------
LEASING -- 1.2%
Leasing Solutions, Inc.** 8,000 219,000
----------
MACHINERY & HEAVY EQUIPMENT -- 1.8%
Neff Corp.** 33,000 330,000
----------
MEDICAL & MEDICAL SERVICES -- 4.3%
Stericycle, Inc.** 40,000 790,000
----------
NUMBER
OF SHARES VALUE
--------- ----------
PAPER & FOREST PRODUCTS -- 2.7%
ICON PLC - ADR 15,000 $ 489,375
-----------
PERSONAL SERVICES -- 1.7%
Bright Horizons Family
Solutions, Inc.** 15,000 318,750
-----------
PHARMACEUTICALS -- 2.3%
Medco Research, Inc.** 20,000 433,750
-----------
SANITARY SERVICES -- 3.2%
Waste Connections, Inc.** 30,000 592,500
-----------
SERVICES - PREPACKAGED SOFTWARE -- 2.9%
Bindview Development Corp.** 27,000 543,375
-----------
TELECOMMUNICATIONS -- 0.5%
Carrier Access Corp.** 4,800 85,800
-----------
TEXTILES -- 8.8%
Chico's Fas, Inc.** 30,000 483,750
Tarrant Apparel Group** 24,000 582,000
Tropical Sportswear International
Corp.** 30,000 558,750
-----------
1,624,500
-----------
TOTAL COMMON STOCKS
(Cost $13,634,780) 13,985,666
-----------
PAR
MATURITY (000)
-------- ---------
SHORT TERM INVESTMENTS -- 24.1%
Federal Home Loan Bank
Discount Notes
4.95% 10/01/98 $ 300 300,000
Federal Home Loan Mortgage
Corp. Discount Notes
5.38% 10/01/98 3,375 3,375,000
Galileo Money Market Fund 762 761,530
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $4,436,530) 4,436,530
-----------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $18,071,310*) $18,422,196
===========
- ----------------
* Cost for Federal income tax purposes is $18,221,930. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 1,296,683
Gross unrealized depreciation (1,096,417)
-----------
$ 200,266
===========
** Non-income producing security.
# Total or partial securities on loan.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
35
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
MICRO-CAP EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
<S> <C>
ASSETS
Investments at value (Cost $18,071,310) ........................................................................ $18,422,196
Collateral received for securities loaned ...................................................................... 1,119,800
Dividends receivable ........................................................................................... 473
Interest receivable ............................................................................................ 6,991
Investments sold receivable .................................................................................... 982,424
Capital shares sold receivable ................................................................................. 82,298
Other expenses ................................................................................................. 75,100
-----------
TOTAL ASSETS ............................................................................................ 20,689,282
-----------
LIABILITIES
Payable upon return of securities loaned ....................................................................... 1,119,800
Investments purchased payable .................................................................................. 1,637,751
Capital shares redeemed payable ................................................................................ 50,623
Accrued expenses payable ....................................................................................... 41,567
-----------
TOTAL LIABILITIES ....................................................................................... 2,849,741
-----------
NET ASSETS ........................................................................................................ $17,839,541
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($1,301,468 (DIVIDE) 138,677) .......................................................... $9.38
=====
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($69,337 (DIVIDE) 7,391) ..................................................................... $9.38
=====
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($6,100,311 (DIVIDE) 650,470) ............................................................. $9.38
=====
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($9.38 (DIVIDE) 0.950) ......................................................................................... $9.87
=====
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($8,559,462 (DIVIDE) 914,362) ............................................................. $9.36
=====
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($1,808,963 (DIVIDE) 193,214) ............................................................. $9.36
=====
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY PORTFOLIO
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- ------------
COMMON STOCKS -- 98.8%
DENMARK -- 1.2%
Den Danske Bank AB 41,250 $ 4,673,478
Teledanmark Series B 90,000 8,936,257
------------
13,609,735
------------
FINLAND -- 0.6%
Nokia AB Class A 90,000 7,145,356
------------
FRANCE -- 13.3%
Axa SA 218,500 19,999,019
Compagnie Generale des Eaux 70,000 13,938,053
Dexia France 77,200 9,738,153
Groupe Danone 72,000 18,922,352
Lafarge SA 230,000 20,353,982
Michelin (C.G.D.E.) Class B 300,000 11,775,621
SGS-Thomson Microelectronics** 103,400 4,796,603
Societe Generale 104,750 11,587,389
Suez Lyonnaise des Eaux 93,500 15,914,752
Total SA 189,500 23,870,076
------------
150,896,000
------------
GERMANY -- 10.5%
Allianz AG 54,750 16,935,860
Deutsche Telekom AG 225,000 6,986,867
MAN AG 52,400 17,149,490
Mannesmann AG 323,500 29,710,862
Siemens AG 134,000 7,319,951
Veba AG 295,125 15,291,725
Volkswagen AG 350,920 25,510,384
------------
118,905,139
------------
ITALY -- 7.6%
Burgo Cartiere SpA 975,000 5,463,705
Credito Italiano SpA** 3,300,000 13,739,598
ENI SpA** 1,984,000 12,150,491
Istituto Nazionale delle
Assicurazioni SpA** 2,000,000 5,083,361
Telecom Italia Mobile SpA 4,110,000 23,927,016
Telecom Italia SpA 3,785,000 26,054,871
------------
86,419,042
------------
JAPAN -- 16.5%
Bridgestone Corp. 456,000 9,212,457
Eisai Co. Ltd. 709,000 8,625,504
Fuji Photo Film Co. 272,000 9,391,710
Hitachi Ltd. 2,113,000 9,313,838
Ito-Yokado Co. Ltd. 203,000 9,693,650
Komori Corp. 513,000 9,139,176
Kuraray Co. Ltd. 925,000 8,358,431
Mabuchi Motors Co. Ltd. 150,000 9,421,831
Matsushita Electric Industrial Co. 640,000 8,721,714
Mitsui Fudosan Co. Ltd. 711,000 3,651,108
Nintendo Co. Ltd. 107,800 10,168,613
Nippon Telegraph & Telephone
Corp. 11,880 8,683,953
Nishimatsu Construction Co. Ltd. 900,000 4,013,370
Ricoh Co. 1,088,000 10,071,111
Ryohin Keikaku Co. 89,000 9,022,918
Sanwa Bank Ltd. 628,000 3,298,706
Sekisui Chemical Co. 1,300,000 4,947,104
Shin-Etsu Chemical Co. 586,000 9,320,376
Shiseido Co. Ltd. 530,000 4,691,815
Sony Corp. 121,000 8,435,863
Sumitomo Marine & Fire
Insurance Co. 2,066,000 9,941,446
NUMBER
OF SHARES VALUE
--------- ------------
JAPAN (CONTINUED)
Sumitomo Trust & Banking 708,000 $ 1,352,336
Suzuki Motor Co. Ltd. 1,077,000 10,871,272
Tsubaki Nakashima Co. Ltd. 530,000 3,033,132
Yamanashi Chuo Bank 802,000 3,470,305
------------
186,851,739
------------
NETHERLANDS -- 6.5%
Internationale Nederlanden
Groep NV 330,597 14,889,387
Philips Electronics NV 282,000 15,183,971
Vedior NV CVA 432,490 10,668,399
Vendex NV 235,600 8,748,700
Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit 580,000 23,937,446
------------
73,427,903
------------
NORWAY -- 0.3%
Petroleum Geo Services ASA** 192,100 3,140,284
------------
PORTUGAL -- 0.5%
Banco Portugues do Atlantico** 310,000 5,276,749
------------
SINGAPORE -- 2.0%
Development Bank of
Singapore Ltd. 1,703,000 6,873,824
Singapore Press Holdings 1,186,680 9,861,353
United Overseas Bank Ltd. 1,800,000 5,256,691
------------
21,991,868
------------
SPAIN -- 4.7%
Banco Santander SA 400,000 6,180,269
Banco Santander SA Rights** 800,000 5,631
Corporacion Bancaria de
Espana SA 693,000 13,780,486
Repsol SA 200,000 8,446,836
Telefonica de Espana ADR 120,000 12,952,500
Telefonica de Espana SA 330,000 12,032,519
------------
53,398,241
------------
SWEDEN -- 1.2%
Sparbanken Sverige AB 600,000 13,785,128
------------
SWITZERLAND -- 6.3%
Credit Suisse Group 51,400 5,680,953
Nestle SA 9,250 18,402,309
Novartis Ltd. 10,850 17,392,166
Roche Holding AG 845 9,095,145
UBS-AG Registered 47,500 9,264,543
Zurich Allied Versicherungs-
Gesellschaft 22,500 11,166,212
------------
71,001,328
------------
UNITED KINGDOM -- 27.6%
Abbey National PLC 565,000 9,736,090
Asda Group PLC 2,995,000 8,741,616
Bank of Ireland PLC 760,700 13,535,000
Barclays PLC 482,978 7,887,673
BBA Group PLC 595,000 3,053,670
BG PLC 2,330,000 16,194,867
Boots Co. PLC 450,000 7,746,760
British Aerospace PLC 1,500,000 9,100,341
British Petroleum Co. PLC 1,657,538 25,351,530
British Telecommunications PLC 1,690,000 22,774,983
Bryant Group PLC 2,395,000 3,378,172
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
37
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL EQUITY PORTFOLIO (CONCLUDED)
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- ------------
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
Cadbury Schweppes PLC 550,000 $ 7,122,227
Diageo PLC 1,118,320 10,642,711
General Electric Co. PLC 1,240,000 9,061,254
Glaxo Wellcome PLC 904,500 26,699,711
Granada Group PLC 654,000 8,224,465
HSBC Holdings PLC 225,000 4,213,687
Jarvis Hotels PLC 2,325,000 4,227,707
Kingfisher PLC 730,000 6,773,508
Land Securities PLC 340,000 5,269,531
Limelight Group PLC** 2,350,000 1,238,020
Lloyds TSB PLC 940,000 10,527,165
NFC PLC 1,771,875 3,116,532
Norwich Union PLC 1,310,000 10,140,464
Peninsular & Oriental
Steam PLC 445,800 4,242,543
Royal & Sun Alliance Insurance
Group PLC 1,140,000 9,880,370
Sainsbury PLC 900,000 8,618,558
Smithkline Beecham PLC 1,680,000 18,471,907
Soco International PLC** 376,000 396,166
Southern Electric PLC 540,000 6,033,755
Unilever PLC 484,000 4,141,360
Vodafone Group PLC 1,020,000 11,839,110
Whitbread PLC 541,380 6,909,400
Yorkshire Water PLC 783,161 7,320,014
--------------
312,610,867
--------------
TOTAL COMMON STOCKS
(Cost $1,102,618,045) 1,118,459,379
--------------
PREFERRED STOCKS -- 1.2%
GEA AG Non Voting 476,500 13,684,746
(Cost $14,475,327) --------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $1,117,093,372*) $1,132,144,125
==============
- -----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 170,138,597
Gross unrealized depreciation (155,087,844)
-------------
$ 15,050,753
=============
** Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
INTERNATIONAL EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
<S> <C>
ASSETS
Investments at value (Cost $1,117,093,372) .................................................................... $1,132,144,125
Cash .......................................................................................................... 87,008,028
Dividends receivable .......................................................................................... 4,099,705
Interest receivable ........................................................................................... 409,624
Investments sold receivable ................................................................................... 2,412,012
Capital shares sold receivable ................................................................................ 174,025
Gross unrealized appreciation on forward foreign currency contracts ........................................... 32,378,503
Prepaid expenses .............................................................................................. 2,644
--------------
TOTAL ASSETS ........................................................................................... 1,258,628,666
--------------
LIABILITIES
Investments purchased payable ................................................................................. 45,552,739
Capital shares redeemed payable ............................................................................... 2,796,874
Gross unrealized depreciation on forward foreign currency contracts ........................................... 19,398,177
Accrued expenses payable ...................................................................................... 1,783,317
--------------
TOTAL LIABILITIES ...................................................................................... 69,531,107
--------------
NET ASSETS ....................................................................................................... $1,189,097,559
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($1,012,131,387 (DIVIDE) 76,530,720) .................................................. $13.23
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($143,525,903 (DIVIDE) 10,912,461) .......................................................... $13.15
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($26,637,346 (DIVIDE) 2,027,205) ......................................................... $13.14
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($13.14 (DIVIDE) 0.950) ....................................................................................... $13.83
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($6,508,943 (DIVIDE) 503,202) ............................................................ $12.94
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($293,980 (DIVIDE) 22,721) ............................................................... $12.94
======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
39
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERNATIONAL SMALL CAP EQUITY PORTFOLIO
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- ----------
COMMON STOCKS -- 92.6%
EGYPT -- 1.4%
Paints & Chemical Industries
SA - GDR 30,000 $ 263,250
----------
FINLAND -- 1.2%
Asko Oyj, Class A 16,500 230,220
----------
FRANCE -- 6.9%
Bouygues Offshore SA 5,000 125,339
Cie des Signaux SA 2,515 134,841
Entrelec 4,000 176,991
GFI Informatique SA** 1,250 124,224
Labinal SA 750 200,721
Moulinex** 7,000 106,159
Scor SA 3,500 207,947
Vallourec SA 2,500 95,275
Zodiac SA 750 159,238
----------
1,330,735
----------
GERMANY -- 12.0%
Boewe Systec AG 5,000 182,487
Brokat Infosystems AG** 1,000 51,575
Douglas Holding AG 4,000 235,738
Kamps AG** 10,000 523,529
Koenig & Bauer-Albert AG 2,000 485,835
Sartorius AG 500 161,546
Schaltbau AG 2,000 209,411
Tarkett AG 7,500 163,790
Teldafax AG** 7,500 302,899
----------
2,316,810
----------
GREECE -- 0.5%
National Bank of Greece
SA - GDR (Reg. S)** 3,661 98,486
----------
HONG KONG -- 0.3%
First Tractor Co. Ltd. 110,000 28,393
Yanzhou Coal Mining Co. Ltd. 152,000 26,482
----------
54,875
----------
INDIA -- 0.1%
Industrial Credit & Investment Corp.
of India Ltd. - GDR (Reg. S) 3,000 24,975
----------
ITALY -- 6.2%
Autogrill SpA 30,000 197,888
Banca Popolare di Bergamo SpA 10,000 202,427
Beghelli SpA** 100,000 217,253
Ciga SpA** 200,000 120,669
Gruppo Ceramiche Ricchetti SpA 125,000 125,949
Gruppo Ceramiche Ricchetti SpA
Warrants** 25,000 3,949
Marzotto & Figli SpA 17,500 169,975
Unicem SpA 20,000 146,691
----------
1,184,801
----------
JAPAN -- 11.6%
Bank of Iwate Ltd. 3,000 136,644
Denny's Japan Co. Ltd. 6,000 119,233
Exedy Corp. 17,000 82,053
Fuji Machine Manufacturing Co. 4,000 105,201
Fujitsu Support & Service, Inc. 1,000 38,202
Horiba Ltd. 9,000 83,970
Kansai Sekiwa Real Estate 28,000 66,853
Mabuchi Motors Co. Ltd. 2,000 125,624
Matsumotokiyoshi 4,000 131,061
NUMBER
OF SHARES VALUE
--------- ---------
JAPAN (CONTINUED)
Meitec Corp. 4,000 $ 86,688
Mitsui High-Tec, Inc. 7,000 136,277
Nichicon Corp. 13,000 159,014
Nihon Unisys Ltd. 25,000 149,133
Nippon Cable System 19,000 104,827
Nippon Denwa Shisetsu Co. 27,000 67,440
Plenus Co. Ltd. 4,400 51,719
Rinnai Corp. 9,000 141,493
Sanyo Shinpan Finance Co. 3,000 108,654
Toppan Forms Co. Ltd 7,000 95,137
Trusco Nakayama Corp. 9,000 102,814
World Co. Ltd. 5,000 143,256
----------
2,235,293
----------
NETHERLANDS -- 7.2%
Aalberts Industries NV 10,000 251,979
Athlon Groep NV 7,500 195,350
Copaco NV** 12,500 129,968
GTI Holdings NV 10,000 307,679
Hunter Douglas NV 7,500 254,233
NBM-Amstelland NV 10,000 244,021
----------
1,383,230
----------
NORWAY -- 1.7%
NCL Holdings ASA** 60,000 133,749
Petroleum Geo Services ASA** 5,000 81,736
Tandberg Telelvision ASA** 15,000 103,352
----------
318,837
----------
POLAND -- 0.6%
Bank Handlowy W. Warszawie 10,400 107,114
----------
SINGAPORE -- 0.7%
Elec & Eltek International Co. Ltd. 18,000 89,280
GP Batteries International Ltd. 31,000 40,114
----------
129,394
----------
SPAIN -- 7.8%
Adolfo Dominguez SA** 8,000 221,307
Aldeasa SA 7,000 242,178
Campofrio Alimentacion SA 6,000 78,978
Federico Paternina SA** 8,000 118,256
Gas y Electricidad SA 3,000 225,108
Grupo Acciona SA 1,000 250,237
Prosegur Cia de Seguridad SA 10,000 123,887
Sol Melia SA 3,000 95,027
Superdiplo SA** 6,000 156,055
----------
1,511,033
----------
SWEDEN -- 1.3%
Europolitan Holdings AB 3,000 255,408
----------
SWITZERLAND -- 3.7%
Kuoni Reisen AG 75 227,550
Scauffner AG** 1,000 104,745
Schindler Holding AG 150 170,663
Sika Finanz AG 750 211,297
----------
714,255
----------
UNITED KINGDOM -- 29.4%
Aea Technology PLC 25,000 295,272
Anglo Irish Bank Corp. PLC 150,000 358,151
Avon Rubber PLC 25,000 174,189
Bovis Homes Group PLC 50,000 158,470
Britax International PLC 75,000 138,289
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERNATIONAL SMALL CAP EQUITY PORTFOLIO (CONCLUDED)
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- -----------
COMMON STOCKS (CONTINUED)
UNITED KINGDOM (CONTINUED)
British Regional Airways PLC** 49,100 $ 33,376
Cattles PLC 20,000 176,739
Delphi Group PLC 40,000 205,629
Filtronic Comtek PLC 30,000 228,656
Firstgroup PLC 25,000 179,713
GAME PLC** 75,000 172,065
Hicking Pentecost PLC 60,000 116,240
HW Group PLC** 95,000 147,721
Jarvis Hotels PLC 100,000 181,837
Jarvis PLC 25,000 208,603
JBA Holdings PLC 15,000 71,375
Marchpole Holdings PLC 64,000 16,314
Monsoon PLC 70,000 94,572
Morland PLC 25,000 151,885
Old English Pub Co. PLC 40,000 147,849
Peter Black Holdings PLC 40,000 183,196
Pressac Holdings PLC 83,333 265,532
Save Group PLC 100,000 128,305
SGB Group PLC 60,000 162,633
Skillgroup PLC 65,000 256,823
T & S Stores PLC 65,000 316,473
The Dialog Corp PLC** 100,000 312,691
The Mayflower Corp. PLC 60,000 141,221
TLG PLC 50,000 145,724
Transtec PLC 175,000 120,446
Vardon PLC 100,000 212,426
Wyko Group PLC 125,000 156,133
-----------
5,658,548
-----------
TOTAL COMMON STOCKS
(Cost $21,107,761) 17,817,264
-----------
PREFERRED STOCKS -- 2.5%
GEA AG Non Voting 7,500 215,395
Quante AG Non Voting 1,600 261,346
-----------
TOTAL PREFERRED STOCKS
(Cost $639,213) 476,741
-----------
PAR
MATURITY (000)
-------- ---------
SHORT TERM INVESTMENTS -- 6.1%
Federal Home Loan Mortgage
Corp. Discount Notes
5.38% 10/01/98 $1,150 1,150,000
Galileo Money Market Fund 21 21,204
----------
TOTAL SHORT TERM INVESTMENTS
(Cost $1,171,204) 1,171,204
----------
VALUE
---------
TOTAL INVESTMENTS IN
SECURITIES
(Cost $22,918,178*) 101.2% $19,465,209
LIABILITIES IN EXCESS OF
OTHER ASSETS (1.2%) (231,605)
----- -----------
NET ASSETS (Applicable to 1,697,300
Institutional shares, 508 Service
shares, 88,952 Investor A shares,
181,849 Investor B shares and 44,652
Investor C shares outstanding) 100.0% $19,233,604
===== ===========
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($16,231,958 (DIVIDE) 1,697,300) $ 9.56
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($4,855 (DIVIDE) 508) $ 9.56
======
NET ASSET VALUE AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($848,493 (DIVIDE) 88,952) $ 9.54
======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($9.54 (DIVIDE) 0.950) $10.04
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($1,724,803 (DIVIDE) 181,849) $ 9.48
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($423,495 (DIVIDE) 44,652) $ 9.48
======
- --------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 1,550,716
Gross unrealized depreciation (5,003,685)
-----------
$(3,452,969)
===========
** Non-income producing security.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
41
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL EMERGING MARKETS PORTFOLIO
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
---------- ----------
COMMON STOCKS -- 84.3%
ARGENTINA -- 2.5%
Banco Rio de la Plata SA - ADR 97,000 $ 824,500
Inversiones y Respresentacion SA 416,666 883,482
YPF Sociedad Anonima - ADR 22,500 585,000
-----------
2,292,982
-----------
BRAZIL -- 8.5%
Centrais Eletricas Brasileiras
SA 42,500,000 883,098
Centrais Eletricas de Santa
Catarina SA 2,700,000 1,231,523
Centrais Geradoras do Sul do
Brasil SA** 42,500,000 44,514
Companhia de Saneamento
Basico do Estado de Sao Paulo 16,200,000 1,008,480
#Globo Cabo SA - ADR** 140,000 306,250
Iochpe Maxion SA** 501,739 13,562
Iochpe Maxion SA - ADR** 130,000 95,940
Telecomunicacoes Brasileiras SA 74,300,000 3,200,693
Uniao de Bancos Brasileiros
SA - GDR 75,000 1,012,500
-----------
7,796,560
-----------
CHILE -- 5.1%
Banco Santiago SA - ADR 100,000 1,243,750
Cristalerias de Chile SA - ADR 50,000 581,250
Enersis SA - ADR 54,500 1,110,437
Gener SA - ADR 61,000 911,187
Masisa SA - ADR 125,000 679,688
Santa Isabel SA - ADR 23,928 136,091
-----------
4,662,403
-----------
CHINA -- 2.0%
First Tractor Co. Ltd. - H 2,390,000 616,894
Guangdong Kelon Electric
Holding - H 430,000 288,572
Heilongjiang Electric Power Co.
Ltd. - B** 2,000,000 740,000
Shenzhen Chiwan Wharf
Holdings Ltd. - B 1,210,000 217,061
-----------
1,862,527
-----------
COLOMBIA -- 0.3%
#Bancolumbia SA - ADR 45,000 225,000
-----------
EGYPT -- 5.6%
MISR International Bank - GDR
(Reg. S) 185,600 1,893,120
Olympic Group Financial
Investments Co. 374,182 1,728,245
Paints & Chemical Industries
SA - GDR 173,000 1,518,075
-----------
5,139,440
-----------
GREECE -- 3.2%
Alpha Credit Bank 21,444 1,593,380
Michaniki SA - (Reg. D) 72,000 419,993
National Bank of Greece
SA - GDR (Reg. S)** 34,170 919,173
-----------
2,932,546
-----------
NUMBER
OF SHARES VALUE
--------- -----------
HONG KONG -- 1.5%
Asia Satellite Telecommunications
Holdings Ltd. 447,000 $ 550,926
Yanzhou Coal Mining Co. Ltd. - H 3,000,000 522,682
YGM Trading Ltd. 900,000 290,379
-----------
1,363,987
-----------
HUNGARY -- 1.7%
Danubius Hotel & Spa** 26,950 429,030
Delmagyarorszagi Aramszol
Rt - GDR (Reg. S) 48,600 583,200
Pannonplast Muanyagipari 23,734 542,864
-----------
1,555,094
-----------
INDIA -- 6.3%
Gujarat Ambuja Cements Ltd. -
GDR 100,000 455,000
Hindalco Industries Ltd. -
GDR (Reg. S) 15,500 171,663
Industrial Credit & Investment
Corp. of India Ltd. - GDR
(Reg. S) 130,000 1,082,250
Mahanagar Telephone Nigam Ltd. 45,000 533,250
Reliance Industries Ltd. - GDR 144,000 777,600
State Bank of India Ltd. -
GDR (Reg. S) 88,000 981,200
Tata Engineering & Locomotive
Co. Ltd. - GDR (Reg. S) 228,000 701,100
Videsh Sanchar Nigam Co. Ltd. -
GDR (Reg. S) 103,000 1,133,000
-----------
5,835,063
-----------
ISRAEL -- 5.5%
Blue Square Chain Stores Properties
& Investments** 60,000 825,423
Blue Square Ltd. - ADR 100,000 1,293,750
#Magyar Tavkozlesi RT - ADR 110,000 2,385,625
Makhteshim-Agan Industries Ltd.** 268,004 581,966
-----------
5,086,764
-----------
MALAYSIA -- 0.7%
Genting Berhad*** 418,000 620,400
-----------
MEXICO -- 11.2%
Altos Hornos de Mexico SA** 575,000 481,969
Apasco SA - ADR 60,000 865,548
Cementos de Mexico SA - CPO 535,600 1,169,341
Cifra SA de CV - V** 1,040,000 1,165,692
Consorcio G Grupo Dina
SA de CV** 213,000 70,170
Corporacion Geo SA de CV - B** 199,400 371,203
Fomento Economico Mexicano
SA de CV 340,000 659,454
Grupo Cementos de Chihuahua
SA - B 2,000,000 974,659
Grupo Financiero Bancomer
SA de CV - B 5,600,000 993,372
Grupo Financiero Banorte
SA - B** 402,500 211,842
Grupo Industrial Bimbo
SA de CV - A 431,300 756,667
San Luis Corporacion
SA de CV - B - CPO 110,000 182,261
#Telefonos de Mexico SA - ADR 55,000 2,433,750
-----------
10,335,928
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
42
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL EMERGING MARKETS PORTFOLIO (CONTINUED)
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- ----------
COMMON STOCKS (CONTINUED)
PAKISTAN -- 0.0%
Engro Chemical Ltd. 30,000 $ 38,987
-----------
PERU -- 2.5%
Banco Wiese - ADR 60,000 165,000
#CPT Telefonica del Peru
SA - B - ADR 100,000 1,225,000
Luz del Sur SA - ADR (Reg. 144A) 86,000 903,000
-----------
2,293,000
-----------
PHILIPPINES -- 2.1%
Benpres Holdings Corp.** 5,200,000 332,799
Manila Electric Co. - B 369,000 704,261
Philippine Long Distance
Telephone Co. 41,000 862,170
-----------
1,899,230
-----------
POLAND -- 3.4%
Bank Handlowy W. Warszawie 92,000 947,543
Debica 30,000 520,567
Elektrim Spolka Akcyjna S.A. 84,600 857,121
Powsechney Bank Kredit 41,000 849,139
-----------
3,174,370
-----------
RUSSIA -- 0.8%
#A.O. Tatneft - ADR - (Reg. S) 71,000 101,175
Gazprom- ADR - (Reg. S) 75,000 489,375
Mosenergo-ADR 54,000 54,000
Trade House Gum- ADR 100,000 63,150
-----------
707,700
-----------
SOUTH AFRICA -- 12.3%
ABSA Group Ltd. 465,000 1,692,341
AECI Ltd. 281,300 495,144
Anglovaal Industries Ltd. 390,000 341,580
Anglovaal Ltd. - N 20,000 141,156
Illovo Sugar Ltd. 514,000 428,332
Impala Platinum Holdings Ltd. 110,000 1,356,288
Liberty Life Association of
Africa Ltd. 45,000 681,885
Meikles Africa Ltd. 1,664,000 956,800
Murray & Roberts Ltd. 1,180,000 1,177,989
Pretoria Portland Cement
Co. Ltd. 134,347 765,410
SA Iron & Steel Industrial Corp.
Ltd 2,674,842 600,473
Sasol Ltd. 210,000 962,497
South African Breweries Ltd. 52,082 784,770
Tongaat-Hulett Group Ltd. 181,807 958,503
-----------
11,343,168
-----------
TAIWAN -- 2.9%
Accton Technology Corp. -
GDR (Reg. S)** 274,345 919,056
Acer Inc. - GDR (Reg. 144A)** 109,375 516,797
Acer Inc. - GDR (Reg. S)** 100,000 472,500
Yageo Corp. - GDR (Reg. S)** 117,600 749,112
-----------
2,657,465
-----------
NUMBER
OF SHARES VALUE
--------- -----------
THAILAND -- 2.2%
Bangkok Bank Public Co. Ltd.
(Foreign shares)** 450,000 $ 426,891
Bangkok Expressway Public Co. Ltd.
(Foreign shares)** 1,610,000 1,221,857
Electricity Generating Public Co. Ltd.
(Foreign shares)** 18,500 44,226
Total Access Communication PLC** 439,000 291,935
-----------
1,984,909
-----------
TURKEY -- 2.6%
Eczacibasi Yapi Gerecleri Sanayi
ve Ticaret A.S.** 50,354,000 553,430
Haci Omer Sabanci Holding A.S. 66,367,500 1,016,421
Turkiye Garanti Bankasi A.S.** 15,200,000 262,914
Turkiye Is Bankasi (Isbank) - C 21,795,000 573,336
-----------
2,406,101
-----------
UNITED KINGDOM -- 1.4%
Saudi Arabian Investment Fund** 200,000 1,300,000
-----------
TOTAL COMMON STOCKS
(Cost $138,040,727) 77,513,624
-----------
PREFERRED STOCKS -- 8.5%
BRAZIL -- 8.4%
Brasmotor SA 4,500,000 389,602
Casa Anglo Brasileira SA 51,003,632 1,506,974
Casa Anglo Brasileira SA Rights 60,662 0
Cia Cimento Portland Itau 3,200,000 445,713
Cia Energetica de Minas Gerais 58,727,030 1,279,802
Cia Paranaense de Energia -
Copel - B 233,000,000 1,535,096
Empresa Bandeirantes de
Enegeria** 10,413,807 93,240
Empresa Metropitanna de
Agusa Energia SA** 10,413,807 13,722
Empresa Paulista de Transmisao
de Enegeria Electrica** 10,413,807 28,939
Iochpe Maxion SA** 9,413,750 278,222
Petroleo Brasileiro SA 9,717,000 1,001,247
Sadia Concordia SA Industria e
Comercio - B 2,400,000 1,013,599
Usiminas Siderurgicas de Minas
Gerais SA 60,000 177,380
-----------
7,763,536
-----------
GREECE -- 0.1%
Michaniki SA - (Reg. D) 12,000 54,999
-----------
TOTAL PREFERRED STOCKS
(Cost $15,195,706) 7,818,535
-----------
OPTIONS -- 0.7%
BRAZIL -- 0.7%
Petroleo Brasleiro SA Put Option
(Cost $104,441) 6,430,000 651,744
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
43
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL EMERGING MARKETS PORTFOLIO (CONCLUDED)
PAR
AS OF SEPTEMBER 30, 1998 MATURITY (000) VALUE
-------- ---------- -----------
CONVERTIBLE BONDS -- 1.7%
TAIWAN -- 1.7%
Far East Department Stores (Reg. S)
3.00% 07/06/01 $ 520 458,900
Siliconware Precision Industries
0.50% 07/21/04 450 400,500
Yang Ming Marine Transport, Inc.
2.00% 10/06/01 640 745,600
-----------
TOTAL CONVERTIBLE BONDS
(Cost $1,775,865) 1,605,000
-----------
SHORT TERM INVESTMENTS -- 4.8%
Federal Home Loan Mortgage Corp.
Discount Notes
5.38% 10/01/98 4,345 4,345,000
Galileo Money Market Fund 58 57,998
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $4,402,998) 4,402,998
-----------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $159,509,737*) $91,991,901
===========
- --------------
* Cost for federal income tax purposes is $159,881,006. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 3,589,861
Gross unrealized depreciation (71,478,966)
------------
$(67,889,105)
============
** Non-income producing security.
***Illiquid security representing 0.6% of portfolio assets. Security is being
valued using Board approved fair valuation procedures.
# Total or partial securities on loan.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
44
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
INTERNATIONAL EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
<S> <C>
ASSETS
Investments at value (Cost $159,509,737) ...................................................................... $ 91,991,901
Cash denominated in foreign currencies (Cost $416,458) ........................................................ 385,904
Collateral received for securities loaned ..................................................................... 5,325,000
Dividends receivable .......................................................................................... 829,859
Interest receivable ........................................................................................... 18,841
Investments sold receivable ................................................................................... 1,721,405
Capital shares sold receivable ................................................................................ 345,849
Prepaid expenses .............................................................................................. 4,467
------------
TOTAL ASSETS ........................................................................................... 100,623,226
------------
LIABILITIES
Payable upon return of securities loaned ...................................................................... 5,325,000
Investments purchased payable ................................................................................. 1,962,634
Capital shares redeemed payable ............................................................................... 167,455
Accrued expenses payable ...................................................................................... 359,776
------------
TOTAL LIABILITIES ...................................................................................... 7,814,865
------------
NET ASSETS ....................................................................................................... $ 92,808,361
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($63,649,007 (DIVIDE) 14,387,173) ..................................................... $4.42
=====
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($26,566,305 (DIVIDE) 6,053,239) ............................................................ $4.39
=====
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($1,835,321 (DIVIDE) 420,881) ............................................................ $4.36
=====
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($4.36 (DIVIDE) 0.950) ........................................................................................ $4.59
=====
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($733,038 (DIVIDE) 170,404) .............................................................. $4.30
=====
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($24,690 (DIVIDE) 5,739) ................................................................. $4.30
=====
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
45
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SELECT EQUITY PORTFOLIO
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- ------------
COMMON STOCKS -- 97.7%
AEROSPACE -- 1.6%
Boeing Co. 219,100 $ 7,517,869
Lockheed Martin Corp. 99,700 10,051,006
United Technologies Corp. 97,500 7,452,656
------------
25,021,531
------------
AIR TRANSPORTATION -- 0.5%
Delta Air Lines, Inc. 73,500 7,147,875
------------
BANKS -- 6.3%
Banc One Corp. 343,723 14,651,193
BankAmerica Corp. 162,000 9,740,250
BankBoston Corp. 237,000 7,821,000
Chase Manhattan Corp. 425,240 18,391,630
First Chicago NBD Corp. 219,895 15,062,807
NationsBank, Inc. 262,500 14,043,750
Wells Fargo & Co. 53,100 18,850,500
------------
98,561,130
------------
BEVERAGES -- 3.3%
Anheuser-Busch Cos., Inc. 203,800 11,005,200
Coca-Cola Co. 520,800 30,011,100
PepsiCo, Inc. 378,200 11,133,262
------------
52,149,562
------------
CHEMICALS -- 2.6%
Air Products & Chemicals, Inc. 218,600 6,503,350
#Dow Chemical Co. 94,200 8,048,212
#E.I. du Pont de Nemours & Co. 284,370 15,960,266
#IMC Global, Inc. 166,500 3,225,937
PPG Industries, Inc. 128,100 6,989,456
------------
40,727,221
------------
COMPUTER & OFFICE EQUIPMENT -- 5.5%
Cisco Systems, Inc.** 339,525 20,986,889
Compaq Computer Corp. 501,900 15,872,587
International Business Machines
Corp. 254,300 32,550,400
Seagate Technology, Inc.** 265,300 6,649,081
Xerox Corp. 113,200 9,593,700
------------
85,652,657
------------
COMPUTER SOFTWARE & SERVICES -- 3.4%
Microsoft Corp.** 488,500 53,765,531
------------
CONSTRUCTION -- 0.3%
#Fluor Corp. 116,400 4,779,675
------------
ELECTRONICS -- 8.5%
#Applied Materials, Inc.** 313,200 7,908,300
Emerson Electric Co. 217,300 13,526,925
General Electric Co. 623,300 49,591,306
Hewlett Packard Co. 208,100 11,016,294
Intel Corp. 382,900 32,833,675
Motorola, Inc. 200,800 8,571,650
#Texas Instruments, Inc. 181,300 9,563,575
------------
133,011,725
------------
NUMBER
OF SHARES VALUE
--------- ------------
ENERGY & UTILITIES -- 2.8%
Cinergy Corp. 247,200 $ 9,455,400
#Entergy Corp. 286,300 8,803,725
#FPL Group, Inc. 169,300 11,798,094
#NIPSCO Industries, Inc. 207,300 6,814,987
Southern Co. 257,400 7,577,212
------------
44,449,418
------------
ENTERTAINMENT & LEISURE -- 0.7%
Walt Disney Co. 466,650 11,812,078
------------
FINANCE -- 6.0%
Associates First Capital Corp.
Class A 79,726 5,202,184
CIT Group, Inc. Class A 256,900 6,583,062
#Equifax, Inc. 232,300 8,290,206
Federal National Mortgage
Association 249,400 16,023,950
Fleet Financial Group, Inc. 227,500 16,707,031
Household International, Inc. 185,529 6,957,337
Morgan Stanley, Dean Witter
& Co. 310,200 13,357,987
#Travelers Group, Inc. 294,900 11,058,750
#Washington Mutual, Inc. 302,250 10,200,938
------------
94,381,445
------------
FOOD & AGRICULTURE -- 2.4%
Archer Daniels Midland Co. 365,898 6,128,792
Bestfoods, Inc. 342,400 16,585,000
Burlington Northern Santa Fe
Corp. 251,700 8,054,400
Tyson Foods, Inc. 362,900 7,212,638
------------
37,980,830
------------
INSURANCE -- 3.7%
Aetna, Inc. 100,456 6,981,692
Allstate Corp. 351,700 14,661,494
American International Group, Inc. 273,750 21,078,750
Cigna Corp. 139,800 9,244,275
#Conseco, Inc. 190,000 5,806,875
------------
57,773,086
------------
MACHINERY & HEAVY EQUIPMENT -- 0.9%
#Illinois Tool Works, Inc. 251,000 13,679,500
------------
MEDICAL & MEDICAL SERVICES -- 1.1%
Columbia Healthcare Corp. 172,450 3,459,778
#United Healthcare Corp. 374,200 13,097,000
------------
16,556,778
------------
MEDICAL INSTRUMENTS & SUPPLIES -- 0.3%
Medtronic, Inc. 70,600 4,085,975
------------
METAL & MINING -- 1.3%
Aluminum Co. of America 59,400 4,217,400
Barrick Gold Corp. 223,000 4,460,000
#Minnesota Mining &
Manufacturing Co. 117,500 8,658,281
#Phelps Dodge Corp. 73,200 3,820,125
------------
21,155,806
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
46
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
SELECT EQUITY PORTFOLIO (CONCLUDED)
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- ------------
COMMON STOCKS (CONTINUED)
MOTOR VEHICLES -- 2.7%
#Eaton Corp. 119,400 $ 7,484,888
#Ford Motor Co. 376,700 17,681,356
General Motors Corp. 200,500 10,964,844
Goodyear Tire & Rubber Co. 117,300 6,026,288
------------
42,157,376
------------
OIL & GAS -- 8.8%
Atlantic Richfield Co. 155,400 11,023,688
#British Petroleum Co. PLC ADR 147,850 12,899,913
Enron Corp. 144,650 7,639,328
Exxon Corp. 757,400 53,160,013
Mobil Corp. 223,600 16,979,625
#Royal Dutch Petroleum Co. 563,300 26,827,163
Schlumberger Ltd. 187,000 9,408,438
------------
137,938,168
------------
PAPER & FOREST PRODUCTS -- 1.0%
Fort James Corp. 265,100 8,698,594
Westvaco Corp. 276,600 6,638,400
------------
15,336,994
------------
PHARMACEUTICALS -- 11.5%
#American Home Products Corp. 557,200 29,183,350
Bristol-Myers Squibb Co. 284,800 29,583,600
#Eli Lilly & Co. 342,600 26,829,863
Johnson & Johnson 254,400 19,906,800
Merck & Co., Inc. 273,050 35,377,041
Pfizer, Inc. 240,000 25,425,000
Pharmacia & Upjohn, Inc. 285,600 14,333,550
------------
180,639,204
------------
PUBLISHING & PRINTING -- 1.0%
McGraw-Hill Cos., Inc. 106,700 8,455,975
#Tribune Co. 140,000 7,043,750
------------
15,499,725
------------
REAL ESTATE -- 0.3%
#Starwood Hotels & Resorts 151,984 4,635,512
------------
RESTAURANTS -- 0.9%
McDonald's Corp. 229,400 13,692,313
------------
RETAIL MERCHANDISING -- 5.7%
#Albertson's, Inc. 223,800 12,113,175
Home Depot, Inc. 371,300 14,666,350
J.C. Penney Co., Inc. 215,700 9,693,019
Kmart Corp.** 702,200 8,382,513
#Mattel, Inc. 137,500 3,850,000
Pep Boys - Manny, Moe & Jack 338,500 4,527,438
Sears, Roebuck & Co. 169,600 7,494,200
Toys "R" Us, Inc.** 339,700 5,498,894
#Wal-Mart Stores, Inc. 424,600 23,193,775
------------
89,419,364
------------
NUMBER
OF SHARES VALUE
--------- -------------
SOAPS & COSMETICS -- 2.5%
Colgate-Palmolive Co. 169,500 $ 11,610,750
Gillette Co. 226,900 8,678,925
#Procter & Gamble Co. 269,800 19,138,938
--------------
39,428,613
--------------
TELECOMMUNICATIONS -- 9.8%
#Alltel Corp. 225,000 10,659,375
#AT&T Corp. 486,800 28,447,375
Bell Atlantic Corp. 331,100 16,037,656
GTE Corp. 321,700 17,693,500
Lucent Technologies, Inc. 252,494 17,437,867
MCI Worldcom, Inc.** 363,950 17,788,056
Oracle Corp.** 453,075 13,195,809
SBC Communications, Inc. 738,400 32,812,650
--------------
154,072,288
--------------
TOBACCO -- 1.9%
Philip Morris Cos., Inc. 656,100 30,221,606
--------------
TRANSPORTATION -- 0.4%
CSX Corp. 145,100 6,103,269
--------------
TOTAL COMMON STOCKS
(Cost $1,094,018,587) 1,531,836,255
--------------
PREFERRED STOCKS -- 0.4%
#News Corp. Ltd. - ADR 320,800 7,177,900
(Cost $6,528,216) --------------
PAR
MATURITY (000)
-------- -------
SHORT TERM INVESTMENTS -- 1.9%
Federal Home Loan Mortgage Corp.
Discount Notes
5.38% 10/01/98 $19,580 19,580,000
5.44% 10/16/98 2,800*** 2,793,653
Galileo Money Market Fund 7,004 7,004,239
--------------
TOTAL SHORT TERM INVESTMENTS
(Cost $29,377,892) 29,377,892
--------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $1,129,924,695*) $1,568,392,047
==============
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $501,669,107
Gross unrealized depreciation (63,201,755)
------------
$438,467,352
============
** Non-income producing security.
*** Principal amount of securities pledged as initial margin requirement of
$472,500 on 35 Standard & Poor's 500 Stock Index futures contracts expiring
December 1998. The value of such contracts on September 30, 1998 was
$8,977,500, thereby resulting in an unrealized loss of $34,559.
# Total or partial securities on loan.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
47
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
SELECT EQUITY PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
<S> <C>
ASSETS
Investments at value (Cost $1,129,924,695) ................................................................ $1,568,392,047
Collateral received for securities loaned ................................................................. 265,659,591
Dividends receivable ...................................................................................... 2,330,772
Interest receivable ....................................................................................... 21,731
Capital shares sold receivable ............................................................................ 739,855
Prepaid expenses .......................................................................................... 3,853
--------------
TOTAL ASSETS ....................................................................................... 1,837,147,849
--------------
LIABILITIES
Payable upon return of securities loaned .................................................................. 265,659,591
Capital shares redeemed payable ........................................................................... 1,947,747
Accrued expenses payable .................................................................................. 1,698,835
Futures margin payable .................................................................................... 275,625
--------------
TOTAL LIABILITIES .................................................................................. 269,581,798
--------------
NET ASSETS ................................................................................................... $1,567,566,051
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($1,286,031,992 (DIVIDE) 75,598,789) .............................................. $17.01
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($203,753,968 (DIVIDE) 11,984,322) ...................................................... $17.00
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($35,359,044 (DIVIDE) 2,079,728) ..................................................... $17.00
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($17.00 (DIVIDE) 0.955) ................................................................................... $17.80
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($39,970,796 (DIVIDE) 2,372,671) ..................................................... $16.85
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($2,450,251 (DIVIDE) 145,446) ........................................................ $16.85
======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
48
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INDEX EQUITY PORTFOLIO
AS OF SEPTEMBER 30, 1998 VALUE
------------
Investment in The U.S. Large Company
Series of The DFA Investment
Trust Company 100.0% $821,064,507
(Cost $676,763,115)
OTHER ASSETS IN EXCESS OF
LIABILITIES 0.0% 285,499
------ ------------
NET ASSETS (Applicable to 18,028,053
Institutional shares, 11,898,411 Service
shares, 2,183,440 Investor A shares,
5,585,263 Investor B shares and 4,176,734
Investor C shares outstanding) 100.0% $821,350,006
====== ============
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
INSTITUTIONAL SHARE
($354,215,604 (DIVIDE) 18,028,053) $19.65
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE PER
SERVICE SHARE
($233,695,794 (DIVIDE) 11,898,411) $19.64
======
NET ASSET VALUE AND
REDEMPTION PRICE PER
INVESTOR A SHARE
($42,891,252 (DIVIDE) 2,183,440) $19.64
======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($19.64 (DIVIDE) 0.970) $20.25
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($109,018,748 (DIVIDE) 5,585,263) $19.52
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($81,528,608 (DIVIDE) 4,176,734) $19.52
======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS AND
ACCOMPANYING FINANCIAL STATEMENTS AND RELATED
NOTES FOR THE DFA INVESTMENT TRUST COMPANY.
49
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BALANCED PORTFOLIO
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- -------------
COMMON STOCKS -- 59.5%
AEROSPACE -- 1.6%
AlliedSignal, Inc. 120,600 $ 4,266,225
Boeing Co. 33,300 1,142,606
United Technologies Corp. 83,200 6,359,600
-------------
11,768,431
-------------
BANKS -- 1.9%
Banc One Corp. 145,460 6,200,232
First Chicago NBD Corp. 103,900 7,117,150
-------------
13,317,382
-------------
BEVERAGES -- 1.1%
Coca-Cola Co. 93,500 5,387,937
PepsiCo, Inc. 78,900 2,322,619
-------------
7,710,556
-------------
CHEMICALS -- 1.5%
Dow Chemical Co. 41,400 3,537,112
E.I. du Pont de Nemours & Co. 99,800 5,601,275
#IMC Global, Inc. 81,100 1,571,312
-------------
10,709,699
-------------
COMPUTER & OFFICE EQUIPMENT -- 4.8%
Cisco Systems, Inc.** 187,050 11,562,028
Compaq Computer Corp. 291,000 9,202,875
International Business Machines
Corp. 52,100 6,668,800
Seagate Technology, Inc.** 72,800 1,824,550
Xerox Corp. 56,000 4,746,000
-------------
34,004,253
-------------
COMPUTER SOFTWARE & SERVICES -- 3.2%
#Automatic Data Processing, Inc. 67,700 5,060,575
Microsoft Corp.** 159,000 17,499,937
-------------
22,560,512
-------------
ELECTRONICS -- 3.8%
#Emerson Electric Co. 49,800 3,100,050
General Electric Co. 150,500 11,974,156
Intel Corp. 110,200 9,449,650
Motorola, Inc. 54,100 2,309,394
-------------
26,833,250
-------------
ENERGY & UTILITIES -- 2.0%
Entergy Corp. 156,000 4,797,000
#NIPSCO Industries, Inc. 133,200 4,378,950
PECO Energy Co. 137,200 5,016,375
-------------
14,192,325
-------------
ENTERTAINMENT & LEISURE -- 0.7%
Walt Disney Co. 193,500 4,897,969
-------------
FINANCE -- 4.6%
Associates First Capital Corp.
Class A 22,879 1,492,855
Federal National Mortgage
Association 149,700 9,618,225
Fleet Financial Group, Inc. 103,900 7,630,156
Morgan Stanley, Dean Witter
& Co. 145,600 6,269,900
Travelers Group, Inc. 101,600 3,810,000
#Washington Mutual, Inc. 124,500 4,201,875
-------------
33,023,011
-------------
NUMBER
OF SHARES VALUE
--------- -----------
FOOD & AGRICULTURE -- 0.6%
Bestfoods, Inc. 91,600 $ 4,436,875
-------------
INSURANCE -- 2.6%
Allstate Corp. 92,600 3,860,262
#American International Group, Inc. 140,250 10,799,250
Chubb Corp. 66,500 4,189,500
-------------
18,849,012
-------------
MACHINERY & HEAVY EQUIPMENT -- 1.0%
Illinois Tool Works, Inc. 133,100 7,253,950
-------------
MEDICAL & MEDICAL SERVICES -- 1.3%
Medtronic, Inc. 120,600 6,979,725
#United Healthcare Corp. 62,200 2,177,000
-------------
9,156,725
-------------
METAL & MINING -- 1.0%
Minnesota Mining & Manufacturing
Co. 47,800 3,522,262
#Phelps Dodge Corp. 74,900 3,908,844
-------------
7,431,106
-------------
MOTOR VEHICLES -- 1.7%
Chrysler Corp. 52,000 2,489,500
Ford Motor Co. 87,300 4,097,644
General Motors Corp. 41,900 2,291,406
Goodyear Tire & Rubber Co. 60,300 3,097,912
-------------
11,976,462
-------------
OIL & GAS -- 4.3%
Chevron Corp. 54,100 4,547,781
Exxon Corp. 116,300 8,162,806
Mobil Corp. 83,100 6,310,406
Royal Dutch Petroleum Co. 133,100 6,338,887
Schlumberger Ltd. 43,700 2,198,656
Tenneco, Inc. 103,900 3,415,712
-------------
30,974,248
-------------
PHARMACEUTICALS -- 7.1%
#American Home Products Corp. 232,600 12,182,425
Bristol-Myers Squibb Co. 110,200 11,447,025
Eli Lilly & Co. 129,000 10,102,313
Johnson & Johnson 77,500 6,064,375
Merck & Co., Inc. 83,200 10,779,600
-------------
50,575,738
-------------
PUBLISHING & PRINTING -- 0.8%
McGraw-Hill Cos., Inc. 70,500 5,587,125
-------------
RESTAURANTS -- 0.8%
McDonald's Corp. 93,500 5,580,781
-------------
RETAIL MERCHANDISING -- 4.1%
Kroger Co.** 178,800 8,940,000
Lowe's Cos., Inc. 210,200 6,686,988
#Staples, Inc.** 169,900 4,990,813
#Wal-Mart Stores, Inc. 157,000 8,576,125
-------------
29,193,926
-------------
SOAPS & COSMETICS -- 1.7%
Colgate-Palmolive Co. 103,900 7,117,150
Procter & Gamble Co. 70,700 5,015,281
-------------
12,132,431
-------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BALANCED PORTFOLIO (CONTINUED)
NUMBER
AS OF SEPTEMBER 30, 1998 OF SHARES VALUE
--------- -----------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS -- 4.9%
Airtouch Communications, Inc.** 33,100 $ 1,886,700
Alltel Corp. 97,800 4,633,275
#AT&T Corp. 83,200 4,862,000
Bell Atlantic Corp. 121,400 5,880,313
GTE Corp. 70,700 3,888,500
#Lucent Technologies, Inc. 81,000 5,594,063
SBC Communications, Inc. 191,200 8,496,450
-------------
35,241,301
-------------
TOBACCO -- 1.7%
Philip Morris Cos., Inc. 259,900 11,971,644
-------------
TRANSPORTATION -- 0.7%
Norfolk Southern Corp. 162,100 4,711,031
-------------
TOTAL COMMON STOCKS
(Cost $253,196,263) 424,089,743
-------------
PAR
MATURITY (000)
-------- -------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 3.8%
Small Business Administration
Participation Certificates,
Series 97-20F, Class 1
7.20% 06/01/17 $ 2,303 2,487,784
Small Business Investment Cos.
Pass-Through, Series 97-P10C,
Class 1
6.85% 08/01/07 1,250 1,324,216
U.S. Treasury Bonds
12.75% 11/15/10 1,335 1,988,228
14.00% 11/15/11 1,575 2,562,981
6.50% 11/15/26 1,565 1,866,395
U.S. Treasury Bonds (CPI)
3.62% 04/15/28 9,085 9,143,757
U.S. Treasury Notes
5.25% 08/15/03 4,240 4,430,291
5.62% 05/15/08 745 815,926
U.S. Treasury Notes (CPI)
3.37% 01/15/07 2,175 2,205,994
-------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $26,174,884) 26,825,572
-------------
MORTGAGE PASS-THROUGHS -- 8.7%
Federal Home Loan Mortgage
Corporation
7.50% 10/01/09 2,062 2,125,714
6.00% 06/01/13 960 971,462
7.80% 07/15/26 4,092 4,098,102
7.50% 09/27-10/27 109 112,469
7.00% 12/27-07/28 491 503,607
Federal National Mortgage
Association
6.94% 03/19/07 750 784,800
6.80% 07/23/07 2,400 2,509,680
7.00% 06/10-05/11 5,538 5,683,080
6.00% 04/13-10/17 13,500 13,463,750
5.50% 04/01/23 11,000 10,934,688
6.50% 08/10-09/28 13,398 13,636,223
PAR
MATURITY (000) VALUE
-------- ------- -----------
MORTGAGE PASS-THROUGHS (CONTINUED)
Government National Mortgage
Association
6.50% 01/24-07/24 $ 5,865 $ 5,995,635
7.50% 04/27-07/27 1,220 1,265,332
-----------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $61,054,959) 62,084,542
-----------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 0.7%
Federal Home Loan Mortgage Corp.,
Series 35, Class PE (IO)
7.00% 03/15/28 455 108,426
Federal Home Loan Mortgage Corp.,
Series 43, Class IB (IO)
7.00% 04/15/28 402 91,799
Federal National Mortgage Association,
Series 93-216, Class B (PO)
10.57% 08/25/23 67 63,885
Federal National Mortgage Association,
Series 96-54, Class A (PO)
7.58% 04/25/21 496 461,063
Federal National Mortgage Association,
Series 97-58, Class PG (IO)
10.83% 09/18/27 1,100 167,675
Residential Accredit Loans, Inc.,
Series 97-QS7, Class A1
7.50% 07/25/27 955 960,844
Residential Asset Securitization Trust,
Series 97-A7, Class A1
7.50% 09/25/27 1,471 1,479,349
Salomon Brothers Mortgage
Securities VI, Series 87-1 (IO)
1.75% 02/17/17 608 135,185
Salomon Brothers Mortgage
Securities VI, Series 87-1 (PO)
9.49% 02/17/17 679 575,922
Salomon Brothers Mortgage
Securities VI, Series 87-2 (IO)
1.31% 03/06/17 402 89,417
Salomon Brothers Mortgage
Securities VI, Series 87-2 (PO)
9.56% 03/06/17 402 340,838
Structured Asset Securities Corp.,
Series 96-CFL, Class X1 (IO)
11.44% 02/25/28 6,096 340,165
-----------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $4,956,229) 4,814,568
-----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES -- 6.3%
Asset Securitization Corp.,
Series 96-D2, Class A1
6.92% 02/14/29 1,193 1,262,233
Chase Credit Card Master Trust,
Series 97-5, Class A
6.19% 08/15/05 4,610 4,770,480
Chase Mortgage Finance Corp.,
Series 98-S4, Class A3
6.55% 08/25/28 1,950 1,981,532
CS First Boston Mortgage Securities
Corp., Series 95-AEW1, Class C
7.46% 11/25/27 650 660,563
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
51
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BALANCED PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 1998 MATURITY (000) VALUE
-------- ------- -----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES (CONTINUED)
Discover Card Master Trust I
Series 98-6, Class A
5.85% 01/17/06 $ 1,300 $ 1,331,028
DLJ Mortgage Acceptance Corp.,
Series 98-2, Class 1PA1
6.75% 06/19/28 2,967 3,007,652
Empire Funding Home Loan Owner
Trust, Series 98-2, Class A4
6.53% 03/25/19 2,500 2,512,500
Fingerhut Master Trust,
Series 98-2, Class A
6.23% 02/15/07 950 990,963
First Security Auto Grantor Trust,
Series 98-A, Class A
5.97% 04/15/04 2,267 2,288,048
First Union-Lehman Brothers
Commercial Mortgage, Series 98-C2,
Class A2
6.56% 11/18/08 2,125 2,231,447
GMAC Commercial Mortgage
Securities, Inc., Series 98-C2,
Class A2
6.42% 08/15/08 1,900 1,974,876
Health Care Receivables Securitization
Program, Series 98-1, Class A
6.22% 06/01/02 1,700 1,722,770
J.P. Morgan Commercial Mortgage
Finance Corp., Series 96-C3,
Class A1
7.33% 04/25/28 464 495,871
Merit Securities Corp., Series 10,
Class 2A1
5.85%**** 05/28/25 758 759,693
Merit Securities Corp., Series 98-11,
Class 1A1
6.58%**** 10/01/98 1,444 1,444,074
Merrill Lynch Mortgage Investors, Inc.,
Series 95-C1, Class C
7.65%**** 05/25/15 1,120 1,166,200
Merrill Lynch Mortgage Investors, Inc.,
Series 96-C1, Class A2
7.24% 04/25/28 1,000 1,062,656
Merrill Lynch Mortgage Investors, Inc.,
Series 96-C1, Class A3
7.42% 04/25/28 1,500 1,641,094
Midland Royalty Acceptance Corp.,
Series 96-C, Class A
7.23% 01/25/29 1,000 1,081,354
Mortgage Capital Funding, Inc.,
Series 98-MC2, Class A1
6.32% 10/18/07 1,799 1,868,527
Navistar Financial Corp. Owner Trust,
Series 98-A, Class A
5.94% 11/15/04 2,230 2,234,123
PNC Mortgage Securities Corp.,
Series 97-6, Class A2
6.60% 07/25/27 1,005 1,015,235
Premier Auto Trust, Series 95-4,
Class A4
6.00% 05/06/00 916 916,840
PAR
MATURITY (000) VALUE
-------- -------- -----------
COMMERCIAL MORTGAGE-BACKED
SECURITIES (CONTINUED)
Prudential Securities Secured Financing,
Series 98-C1, Class A1B
6.50% 07/15/08 $ 2,250 $ 2,350,547
Standard Credit Card Master Trust,
Series 95-1, Class A
8.25% 01/07/07 1,310 1,520,317
Structured Asset Securities Corp.,
Series 97-N1, Class D
6.12%**** 09/25/28 924 921,741
Structured Asset Securitization Corp.,
Series 98-C2, Class A
5.77%**** 01/25/13 638 636,830
The Money Store Residential Trust,
Series 98-I, Class A1
6.40% 03/15/06 1,037 1,038,541
-----------
TOTAL COMMERCIAL MORTGAGE-
BACKED SECURITIES
(Cost $43,803,853) 44,887,735
-----------
PROJECT LOANS -- 0.8%
Huntoon Paige, Series 97-B, FHA
7.32% 10/01/24 2,778 2,930,557
Reilly Mortgage Securities,
Series 97-A
6.90% 11/11/18 2,442 2,539,752
-----------
TOTAL PROJECT LOANS
(Cost $5,232,628) 5,470,309
-----------
ASSET BACKED SECURITIES -- 5.3%
Arcadia Automobile Receivables Trust,
Series 98-B, Class A3
5.95% 11/15/02 3,400 3,443,807
Brazos Student Loan Finance Corp.,
Series 98-A, Class A2
6.06% 12/14/98 2,700 2,664,563
CIT Group Securitization Corp.,
Series 95-2, Class B
7.65% 05/15/26 1,050 1,040,813
Copelco Capital Funding Corp.,
Series 97-A, Class A3
6.27% 04/20/05 2,000 2,008,438
Corporate Bond Backed Certificates,
Series 97-10
8.13% 09/15/17 1,272 1,432,135
Fifth Third Auto Grantor Trust,
Series 96-B, Class A
6.45% 03/15/02 285 287,305
First Security Auto Grantor Trust,
Series 97-B, Class A
6.10% 04/15/03 1,650 1,663,419
FMAC Loan Receivables Trust,
Series 97-B, Class A
6.85% 09/15/19 1,253 1,314,482
Green Tree Financial Corp.,
Series 93-3, Class B
6.85% 10/15/18 1,300 1,303,403
Green Tree Financial Corp.,
Series 95-7, Class B1
7.35% 11/15/26 1,000 992,500
Green Tree Financial Corp.,
Series 96-6, Class A6
7.95% 08/15/26 1,000 1,087,744
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
52
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BALANCED PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 1998 MATURITY (000) VALUE
-------- ------- -----------
ASSET BACKED SECURITIES (CONTINUED)
Green Tree Financial Corp.,
Series 96-7, Class A6
7.65% 10/15/27 $ 1,000 $ 1,066,088
Green Tree Financial Corp.,
Series 96-9, Class A6
7.69% 01/15/28 1,150 1,251,431
Green Tree Financial Corp.,
Series 97-1, Class B1
7.23% 03/15/28 1,000 989,867
Green Tree Financial Corp.,
Series 97-3, Class A7
7.64% 07/15/28 2,400 2,627,417
Green Tree Financial Corp.,
Series 97-3, Class B2
8.03% 07/15/28 1,150 1,106,326
Mellon Bank Home Equity Loan Trust,
Series 96-1, Class B2
6.06%**** 04/15/26 917 916,643
Newcourt Receivables Asset Trust,
Series 97-1, Class A3
6.11% 05/20/01 2,400 2,407,875
Nissan Auto Receivables Grantor Trust,
Series 95-A, Class A
6.10% 08/15/01 285 285,538
NPC Health Care Receivables, Inc.,
Series 97-1, Class A
6.33% 07/01/00 1,700 1,707,872
Puget Power Conservation Grantor Trust,
Series 97-1, Class A
6.23% 07/11/02 1,738 1,755,116
Sears Credit Account Master Trust,
Series 96, Class A
6.45% 10/16/06 700 724,627
Sears Credit Account Master Trust,
Series 98-1, Class A
5.80% 08/15/05 1,000 1,008,750
Sears Credit Card Master Trust,
Series 96-3, Class A
7.00% 07/15/08 2,000 2,145,135
The Money Store Home Equity Trust,
Series 95-A, Class A8
8.12% 06/15/15 520 536,424
The Money Store Home Equity Trust,
Series 96-B, Class A5
7.18% 12/15/14 965 968,602
The Money Store Home Equity Trust,
Series 97-C, Class MH2
7.35% 02/15/24 1,200 1,233,295
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $37,304,265) 37,969,615
-----------
CORPORATE BONDS -- 7.6%
FINANCE -- 3.7%
AFC Capital Trust I
8.20% 02/03/27 1,000 1,139,058
AMB Property L.P.
6.90% 06/30/05 1,200 1,232,556
American General Capital Securities
7.57% 12/01/45 1,050 1,122,212
Ameritech Capital Funding Corp.
6.55% 01/15/28 1,780*** 1,835,541
BankAmerica Institutional
7.70% 12/31/26 1,700 1,767,215
Bear Stearns Capital
7.00% 01/15/27 1,050 1,061,130
PAR
MATURITY (000) VALUE
-------- ------- -----------
CORPORATE BONDS (CONTINUED)
FINANCE (CONTINUED)
BGB Finance
6.62% 12/30/99 $ 300 $ 304,339
Equitable Life Assurance Society
7.70% 12/01/15 950 1,041,411
Fairfax Financial
8.30% 04/15/26 1,050 1,116,023
First of America
8.12% 01/31/27 2,550 2,745,592
Household International Corp.
6.00% 03/15/99 1,000 1,002,500
Jones Apparel
6.25% 10/01/01 2,055 2,060,639
Lehman Brothers Holdings, Inc.
6.75% 09/24/01 3,855 3,790,388
Merrill Lynch & Co.
6.47% 06/27/00 2,000 2,036,263
Salomon Smith Barney Hlds., Inc.
8.90% 02/15/00 300 314,022
Union Planters Capital Trust
8.20% 12/15/26 1,545 1,630,538
Yorkshire Power Finance
6.49% 02/25/08 2,100 2,163,680
-----------
26,363,107
-----------
INDUSTRIAL -- 1.8%
Dayton Hudson Corp.
6.75% 01/01/28 2,100 2,136,457
ERAC USA Finance Co.
6.95% 03/01/04 450 464,345
Mckesson Corp.
6.30% 03/01/05 1,000 1,028,902
Panamerican Beverages
7.25% 07/01/09 1,300 1,193,703
Raytheon Co.
5.95% 03/15/01 1,250 1,271,166
RJR Nabisco, Inc.
8.75% 04/15/04 1,025 1,064,266
6.85% 06/15/05 600 597,754
7.05% 07/15/07 555 552,482
Security Capital Group
6.95% 06/15/05 2,075 2,088,195
Time Warner, Inc.
4.90% 07/29/99 1,000 994,840
6.10% 12/30/01 1,000 1,023,750
Trans - Canada Pipelines
6.49% 01/21/09 592 619,270
-----------
13,035,130
-----------
TELECOMMUNICATIONS -- 1.2%
BellSouth Telecommunications, Inc.
7.00% 12/01/95 1,200 1,340,499
U.S. West Capital Funding, Inc.
6.87% 07/15/28 2,650 2,861,553
Worldcom, Inc.
7.75% 04/01/27 1,545 1,813,585
6.95% 08/15/28 2,345 2,462,584
-----------
8,478,221
-----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
53
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
BALANCED PORTFOLIO (CONCLUDED)
PAR
AS OF SEPTEMBER 30, 1998 MATURITY (000) VALUE
-------- ------- -----------
CORPORATE BONDS (CONTINUED)
UTILITY -- 0.4%
Israel Electric Corp. Ltd.
7.87% 12/15/26 $ 850 $ 836,704
Mobile Energy Services, L.L.C.
8.67% 01/01/17 688 171,976
Pennsylvania Power & Light Co.
9.37% 07/01/21 1,500 1,657,500
------------
2,666,180
------------
YANKEE -- 0.5%
Empresa Electrica Pehuenche
7.30% 05/01/03 1,670 1,498,200
Landeskreditbank Baden-Wuerttemberg
7.62% 02/01/23 1,500 1,756,216
------------
3,254,416
------------
TOTAL CORPORATE BONDS
(Cost $52,985,803) 53,797,054
------------
TAXABLE MUNICIPAL BONDS -- 0.9%
Los Angeles County Taxable
Pension Obligation
8.62% 06/30/06 2,950 3,554,750
6.97% 06/30/08 1,000 1,113,750
New Jersey Economic
Development Authority
7.56% 02/15/16 2,425 863,082
7.59% 02/15/17 850 284,538
7.65% 02/15/20 895 250,546
7.62% 02/15/21 630 166,887
7.62% 02/15/22 895 223,401
7.63% 02/15/23 340 79,971
------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $5,519,615) 6,536,925
------------
SHORT TERM INVESTMENTS -- 6.4%
Federal Home Loan Mortgage Corp.
Discount Notes
5.38% 10/01/98 38,005 38,005,000
Galileo Money Market Fund 7,689 7,689,052
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $45,694,052) 45,694,052
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $535,922,551*) $712,170,115
============
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $189,289,353
Gross unrealized depreciation (13,041,789)
------------
$176,247,564
============
** Non-income producing security.
*** Principal amount of securities pledged as collateral is $1,780,000 on 91
net long U.S. Treasury Bond futures contracts 101 net short U.S. Treasury
Note futures contracts expiring December 1998. The value of such contracts
on September 30, 1998 was $23,625,797, thereby resulting in an unrealized
gain on $383,648.
**** Rates shown are the rates as of September 30, 1998.
# Total or partial securities on loan.
--------------------------------
INVESTMENT ABBREVIATIONS
CPI Consumer Price Index
IO Interest Only
PO Principal Only
--------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
54
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
BALANCED PORTFOLIO
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
<S> <C>
ASSETS
Investments at value (Cost $535,922,551) ...................................................................... $712,170,115
Collateral received for securities loaned ..................................................................... 67,795,435
Dividends receivable .......................................................................................... 639,801
Interest receivable ........................................................................................... 2,262,995
Investments sold receivable ................................................................................... 36,834,216
Capital shares sold receivable ................................................................................ 852,555
Futures margin receivable ..................................................................................... 65,415
Prepaid expenses .............................................................................................. 1,600
------------
TOTAL ASSETS ........................................................................................... 820,622,132
------------
LIABILITIES
Payable upon return of securities loaned ...................................................................... 67,795,435
Investments purchased payable ................................................................................. 53,374,853
Capital shares redeemed payable ............................................................................... 3,317,296
Accrued expenses payable ...................................................................................... 880,905
Deferred dollar roll income ................................................................................... 308
------------
TOTAL LIABILITIES ...................................................................................... 125,368,797
------------
NET ASSETS ....................................................................................................... $695,253,335
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER INSTITUTIONAL SHARE ($374,899,685 (DIVIDE) 20,425,648) .................................................... $18.35
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SERVICE SHARE ($176,556,772 (DIVIDE) 9,627,158) ........................................................... $18.34
======
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($96,795,124 (DIVIDE) 5,280,298) ......................................................... $18.33
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($18.33 (DIVIDE) 0.955) ....................................................................................... $19.19
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($46,302,748 (DIVIDE) 2,540,726) ......................................................... $18.22
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($699,006 (DIVIDE) 38,355) ............................................................... $18.22
======
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
55
<PAGE>
BLACKROCK FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID-CAP MID-CAP
VALUE GROWTH VALUE GROWTH SMALL CAP SMALL CAP
EQUITY EQUITY EQUITY EQUITY VALUE EQUITY GROWTH EQUITY
FOR THE PERIOD ENDED SEPTEMBER 30, 1998 PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ----------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest ............................ $ 2,157,492 $ 1,481,067 $ 546,825 $ 1,375,304 $ 1,602,235 $ 7,883,879
Dividends ........................... 42,111,914 8,802,976 3,702,684 225,194 8,714,579 194,438
Net investment income from master ... -- -- -- -- -- --
Foreign taxes withheld .............. -- -- -- -- -- --
------------- ----------- ------------ ------------ ------------- -------------
Total investment income ........ 44,269,406 10,284,043 4,249,509 1,600,498 10,316,814 8,078,317
------------- ----------- ------------ ------------ ------------- -------------
Expenses:
Investment advisory fee ............. 10,153,561 5,402,585 1,672,977 1,671,089 3,445,768 5,972,883
Administration fee .................. 3,993,529 2,161,776 480,981 480,438 1,414,554 2,378,749
Custodian fee ....................... 287,263 162,921 52,688 62,354 116,250 223,253
Transfer agent fee .................. 733,619 369,887 78,139 79,432 246,139 457,634
Shareholder servicing fees .......... 1,166,026 552,857 82,334 75,503 353,344 620,443
Shareholder processing fees ......... 1,083,553 511,184 72,810 68,209 291,382 505,892
Distribution fees ................... 229,170 87,354 44,038 29,117 178,285 431,985
Legal and audit ..................... 113,576 68,750 18,954 11,686 41,064 63,866
Printing ............................ 210,949 104,467 25,838 28,643 56,662 103,697
Registration fees and expenses ...... 550,834 241,501 165,397 151,930 167,780 391,142
Organization ........................ -- -- -- -- -- 11,506
Trustees' fees and officer's
salary ............................ 25,105 13,761 8,834 8,227 9,085 13,019
Other ............................... 206,799 56,510 11,096 17,313 37,292 60,553
------------- ----------- ------------ ------------ ------------- -------------
18,753,984 9,733,553 2,714,086 2,683,941 6,357,605 11,234,622
------------- ----------- ------------ ------------ ------------- -------------
Less fees voluntarily waived ........ (121,850) (2,560) (124,270) (129,697) (32,828) (2,310)
------------- ----------- ------------ ------------ ------------- -------------
Total operating expenses ....... 18,632,134 9,730,993 2,589,816 2,554,244 6,324,777 11,232,312
------------- ----------- ------------ ------------ ------------- -------------
Interest expense .................... -- -- -- -- -- --
------------- ----------- ------------ ------------ ------------- -------------
Total expenses ................. 18,632,134 9,730,993 2,589,816 2,554,244 6,324,777 11,232,312
------------- ----------- ------------ ------------ ------------- -------------
Net investment income (loss) ........ 25,637,272 553,050 1,659,693 (953,746) 3,992,037 (3,153,995)
------------- ----------- ------------ ------------ ------------- -------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions ........... 192,099,260 72,920,143 (4,969,292) (1,730,835) 48,844,677 (4,740,987)
Futures contracts ................. -- 408,263 -- 152,921 -- (2,487,986)
Foreign currency related
transactions and forward
foreign currency contracts ..... -- -- -- -- -- --
------------- ----------- ------------ ------------ ------------- -------------
192,099,260 73,328,406 (4,969,292) (1,577,914) 48,844,677 (7,228,973)
------------- ----------- ------------ ------------ ------------- -------------
Change in unrealized appreciation
(depreciation) from:
Investments ....................... (446,969,393) (7,132,694) (47,088,039) (24,839,876) (220,300,060) (348,173,763)
Futures contracts ................. -- (362,953) -- (880,474) -- (3,805,000)
Foreign currency related
transactions and forward
foreign currency contracts ..... -- -- -- -- -- --
------------- ----------- ------------ ------------ ------------- -------------
(446,969,393) (7,495,647) (47,088,039) (25,720,350) (220,300,060) (351,978,763)
------------- ----------- ------------ ------------ ------------- -------------
Net gain (loss) on investments and
foreign currency transactions ..... (254,870,133) 65,832,759 (52,057,331) (27,298,264) (171,455,383) (359,207,736)
------------- ----------- ------------ ------------ ------------- -------------
Net increase (decrease) in assets
resulting from operations ......... $(229,232,861) $66,385,809 $(50,397,638) $(28,252,010) $(167,463,346) $(362,361,731)
============= =========== ============ ============ ============= =============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
MICRO-CAP INTERNATIONAL SMALL CAP EMERGING SELECT
EQUITY EQUITY EQUITY MARKETS EQUITY
FOR THE PERIOD ENDED SEPTEMBER 30, 1998 PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest ............................ $ 60,762 $ 1,134,040 $ 74,946 $ 306,706 $ 1,628,819
Dividends ........................... 633 19,461,235 338,970 3,575,830 19,135,788
Net investment income from master ... -- -- -- -- --
Foreign taxes withheld .............. -- (1,456,154) (23,707) (71,845) --
----------- ------------- ----------- ------------- -------------
Total investment income ........ 61,395 19,139,121 390,209 3,810,691 20,764,607
----------- ------------- ----------- ------------- -------------
Expenses:
Investment advisory fee ............. 60,566 7,090,811 198,000 1,743,466 6,234,740
Administration fee .................. 12,636 2,073,036 45,540 336,405 2,477,773
Custodian fee ....................... 7,823 581,070 26,780 356,726 173,152
Transfer agent fee .................. 5,338 340,577 13,091 58,362 414,989
Shareholder servicing fees .......... 12,321 407,667 7,886 87,256 530,936
Shareholder processing fees ......... 7,408 375,482 4,949 82,846 469,251
Distribution fees ................... 21,222 52,740 15,854 13,416 250,493
Legal and audit ..................... 65,707 192,767 69,495 10,601 54,439
Printing ............................ 131 76,997 7,139 19,994 99,641
Registration fees and expenses ...... 13,660 228,867 58,064 41,581 494,437
Organization ........................ -- -- -- 14,914 3,209
Trustees' fees and officer's
salary ............................ 24 11,879 3,330 5,865 11,821
Other ............................... 138 33,240 10,301 17,041 43,598
----------- ------------- ----------- ------------- -------------
206,974 11,465,133 460,429 2,788,473 11,258,479
----------- ------------- ----------- ------------- -------------
Less fees voluntarily waived ........ (86,406) (485,945) (168,736) (146,105) (7,036)
----------- ------------- ----------- ------------- -------------
Total operating expenses ....... 120,568 10,979,188 291,693 2,642,368 11,251,443
----------- ------------- ----------- ------------- -------------
Interest expense .................... -- -- -- -- --
----------- ------------- ----------- ------------- -------------
Total expenses ................. 120,568 10,979,188 291,693 2,642,368 11,251,443
----------- ------------- ----------- ------------- -------------
Net investment income (loss) ........ (59,173) 8,159,933 98,516 1,168,323 9,513,164
----------- ------------- ----------- ------------- -------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions ........... (2,808,502) 73,671,401 2,195,280 (22,657,543) 48,885,738
Futures contracts ................. -- -- -- -- 1,496,929
Foreign currency related
transactions and forward
foreign currency contracts ..... -- (2,001,457) (119,572) (583,279) --
----------- ------------- ----------- ------------- -------------
(2,808,502) 71,669,944 2,075,708 (23,240,822) 50,382,667
----------- ------------- ----------- ------------- -------------
Change in unrealized appreciation
(depreciation) from:
Investments ....................... 350,886 (247,367,470) (3,349,604) (80,520,082) (125,445,009)
Futures contracts ................. -- -- -- -- (56,309)
Foreign currency related
transactions and forward
foreign currency contracts ..... -- 13,837,898 97,649 65,860 --
----------- ------------- ----------- ------------- -------------
350,886 (233,529,572) (3,251,955) (80,454,222) (125,501,318)
----------- ------------- ----------- ------------- -------------
Net gain (loss) on investments and
foreign currency transactions ..... (2,457,616) (161,859,628) (1,176,247) (103,695,044) (75,118,651)
----------- ------------- ----------- ------------- -------------
Net increase (decrease) in assets
resulting from operations ......... $(2,516,789) $(153,699,695)$(1,077,731) $(102,526,721) $ (65,605,487)
=========== ============= =========== ============= =============
</TABLE>
<TABLE>
<CAPTION>
INDEX
EQUITY BALANCED
FOR THE PERIOD ENDED SEPTEMBER 30, 1998 PORTFOLIO PORTFOLIO
----------- -----------
<S> <C> <C>
Investment income:
Interest ............................ $ -- $11,580,436
Dividends ........................... -- 4,994,564
Net investment income from master ... 9,844,627 --
Foreign taxes withheld .............. -- --
----------- -----------
Total investment income ........ 9,844,627 16,575,000
----------- -----------
Expenses:
Investment advisory fee ............. -- 2,674,965
Administration fee .................. 1,466,563 1,102,215
Custodian fee ....................... -- 97,765
Transfer agent fee .................. 321,366 220,655
Shareholder servicing fees .......... 737,703 611,323
Shareholder processing fees ......... 587,206 482,199
Distribution fees ................... 853,764 268,649
Legal and audit ..................... 27,170 26,766
Printing ............................ 37,868 42,533
Registration fees and expenses ...... 55,368 191,734
Organization ........................ -- --
Trustees' fees and officer's
salary ............................ 7,172 7,841
Other ............................... 40,723 42,678
----------- -----------
4,134,903 5,769,323
----------- -----------
Less fees voluntarily waived ........ (1,098,153) (8,915)
----------- -----------
Total operating expenses ....... 3,036,750 5,760,408
----------- -----------
Interest expense .................... -- 2,847
----------- -----------
Total expenses ................. 3,036,750 5,763,255
----------- -----------
Net investment income (loss) ........ 6,807,877 10,811,745
----------- -----------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Net realized gain (loss) from:
Investment transactions ........... (922,089) 18,135,857
Futures contracts ................. -- 1,941,393
Foreign currency related
transactions and forward
foreign currency contracts ..... -- --
----------- -----------
(922,089) 20,077,250
----------- -----------
Change in unrealized appreciation
(depreciation) from:
Investments ....................... 15,954,093 (4,363,140)
Futures contracts ................. -- 178,633
Foreign currency related
transactions and forward
foreign currency contracts ..... -- --
----------- -----------
15,954,093 (4,184,507)
----------- -----------
Net gain (loss) on investments and
foreign currency transactions ..... 15,032,004 15,892,743
----------- -----------
Net increase (decrease) in assets
resulting from operations ......... $21,839,881 $26,704,488
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
56-57
<PAGE>
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID-CAP VALUE
VALUE EQUITY PORTFOLIO GROWTH EQUITY PORTFOLIO EQUITY PORTFOLIO
------------------------------- ----------------------------- ---------------------------
FOR THE PERIOD
FOR THE FOR THE FOR THE FOR THE FOR THE 12/27/96 1
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
9/30/98 9/30/97 9/30/98 9/30/97 9/30/98 9/30/97
-------------- -------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (deficit) .. $ 25,637,272 $ 23,066,335 $ 553,050 $ 3,014,249 $ 1,659,693 $ 797,116
Net gain (loss) on investments
and foreign currency related
transactions ................... (254,870,133) 388,585,459 65,832,759 205,451,812 (52,057,331) 23,019,242
-------------- -------------- -------------- ------------ ------------ ------------
Net increase (decrease) in net
assets resulting from
operations ..................... (229,232,861) 411,651,794 66,385,809 208,466,061 (50,397,638) 23,816,358
-------------- -------------- -------------- ------------ ------------ ------------
Distributions to shareholders from:
Net investment income:
Institutional Shares ............. (18,530,517) (13,758,751) (492,332) (3,233,374) (1,414,807) (671,220)
Service Shares ................... (6,348,629) (8,690,512) -- (551,885) (189,171) (102,519)
Investor A Shares ................ (510,254) (566,730) -- (28,989) (12,658) (7,342)
Investor B Shares ................ (72,123) (100,630) -- -- -- (2,026)
Investor C Shares ................ (6,367) (6,938) -- -- -- (36)
-------------- -------------- -------------- ------------ ------------ ------------
Total distribution from net
investment income .............. (25,467,890) (23,123,561) (492,332) (3,814,248) (1,616,636) (783,143)
-------------- -------------- -------------- ------------ ------------ ------------
Capital:
Institutional Shares ............. -- -- -- -- -- --
Service Shares ................... -- -- -- -- -- --
Investor A Shares ................ -- -- -- -- -- --
Investor B Shares ................ -- -- -- -- -- --
Investor C Shares ................ -- -- -- -- -- --
-------------- -------------- -------------- ------------ ------------ ------------
Total distributions from net
capital gains .................. -- -- -- -- -- --
-------------- -------------- -------------- ------------ ------------ ------------
Net realized gains:
Institutional Shares ............. (93,723,477) (118,697,319) (65,760,356) (23,813,741) (3,170,990) --
Service Shares ................... (76,020,941) (74,902,263) (36,048,878) (9,521,137) (873,004) --
Investor A Shares ................ (6,087,188) (4,450,693) (3,610,796) (845,179) (77,103) --
Investor B Shares ................ (2,790,824) (686,113) (1,161,883) (142,913) (106,596) --
Investor C Shares ................ (189,032) (37,282) (23,904) -- (687) --
-------------- -------------- -------------- ------------ ------------ ------------
Total distributions from net
realized gains ................. (178,811,462) (198,773,670) (106,605,817) (34,322,970) (4,228,380) --
-------------- -------------- -------------- ------------ ------------ ------------
Total distributions to
shareholders ................... (204,279,352) (221,897,231) (107,098,149) (38,137,218) (5,845,016) (783,143)
-------------- -------------- -------------- ------------ ------------ ------------
Capital share transactions ........... 1,338,827,954 (682,854) 421,476,131 (82,504,921) 166,482,367 111,856,947
-------------- -------------- -------------- ------------ ------------ ------------
Total increase in net assets ..... 905,315,741 189,071,709 380,763,791 87,823,922 110,239,713 134,890,162
Net assets:
Beginning of period .............. 1,406,925,659 1,217,853,950 778,960,667 691,136,745 134,890,162 --
-------------- -------------- -------------- ------------ ------------ ------------
End of period .................... $2,312,241,400 $1,406,925,659 $1,159,724,458 $778,960,667 $245,129,875 $134,890,162
============== ============== ============== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MID-CAP GROWTH SMALL CAP SMALL CAP
EQUITY PORTFOLIO VALUE EQUITY PORTFOLIO GROWTH EQUITY PORTFOLIO
--------------------------- -------------------------- -----------------------------
FOR THE PERIOD
FOR THE 12/27/96 1 FOR THE FOR THE FOR THE FOR THE
YEAR ENDED THROUGH YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/98 9/30/97 9/30/98 9/30/97 9/30/98 9/30/97
------------ ------------ ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (deficit) .. $ (953,746) $ (155,369) $ 3,992,037 $ 3,584,345 $ (3,153,995) $ (908,194)
Net gain (loss) on investments
and foreign currency related
transactions ................... (27,298,264) 23,174,837 (171,455,383) 144,987,366 (359,207,736) 131,995,135
------------ ------------ ------------ ------------ -------------- ------------
Net increase (decrease) in net
assets resulting from
operations ..................... (28,252,010) 23,019,468 (167,463,346) 148,571,711 (362,361,731) 131,086,941
------------ ------------ ------------ ------------ -------------- ------------
Distributions to shareholders from:
Net investment income:
Institutional Shares ............. -- -- (3,336,413) (2,644,746) -- (433,573)
Service Shares ................... -- -- (527,494) (734,773) -- --
Investor A Shares ................ -- -- (121,897) (176,487) -- --
Investor B Shares ................ -- -- -- (10,398) -- --
Investor C Shares ................ -- -- -- (762) -- --
------------ ------------ ------------ ------------ -------------- ------------
Total distribution from net
investment income .............. -- -- (3,985,804) (3,567,166) -- (433,573)
------------ ------------ ------------ ------------ -------------- ------------
Capital:
Institutional Shares ............. (140,856) -- -- -- (1,106,034) --
Service Shares ................... (18,337) -- -- -- (155,368) --
Investor A Shares ................ (2,632) -- -- -- (53,299) --
Investor B Shares ................ (2,660) -- -- -- (43,559) --
Investor C Shares ................ (150) -- -- -- (13,504) --
------------ ------------ ------------ ------------ -------------- ------------
Total distributions from net
capital gains .................. (164,635) -- -- -- (1,371,764) --
------------ ------------ ------------ ------------ -------------- ------------
Net realized gains:
Institutional Shares ............. (822,665) -- (33,889,486) (29,222,142) (23,804,910) (21,197,629)
Service Shares ................... (245,537) -- (12,976,187) (10,944,596) (11,303,533) (10,929,423)
Investor A Shares ................ (23,701) -- (3,650,541) (3,377,127) (2,931,890) (2,203,319)
Investor B Shares ................ (24,423) -- (1,336,440) (336,403) (2,132,407) (608,317)
Investor C Shares ................ (624) -- (318,538) (416) (731,934) (61,208)
------------ ------------ ------------ ------------ -------------- ------------
Total distributions from net
realized gains ................. (1,116,950) -- (52,171,192) (43,880,684) (40,904,674) (34,999,896)
------------ ------------ ------------ ------------ -------------- ------------
Total distributions to
shareholders ................... (1,281,585) -- (56,156,996) (47,447,850) (42,276,438) (35,433,469)
------------ ------------ ------------ ------------ -------------- ------------
Capital share transactions ........... 151,328,193 113,098,231 409,911,079 55,575,869 834,426,119 243,771,372
------------ ------------ ------------ ------------ -------------- ------------
Total increase in net assets ..... 121,794,598 136,117,699 186,290,737 156,699,730 429,787,950 339,424,844
Net assets:
Beginning of period .............. 136,117,699 -- 479,470,704 322,770,974 832,692,321 493,267,477
------------ ------------ ------------ ------------ -------------- ------------
End of period .................... $257,912,297 $136,117,699 $665,761,441 $479,470,704 $1,262,480,271 $832,692,321
============ ============ ============ ============ ============== ============
</TABLE>
<TABLE>
<CAPTION>
MICRO-CAP INTERNATIONAL
EQUITY PORTFOLIO EQUITY PORTFOLIO
---------------- ------------------------
FOR THE PERIOD
5/01/98 1 FOR THE FOR THE
THROUGH YEAR ENDED YEAR ENDED
9/30/98 9/30/98 9/30/97
--------------- ---------- ------------
<S> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income (deficit) .. $ (59,173) $ 8,159,933 $ 5,191,778
Net gain (loss) on investments
and foreign currency related
transactions ................... (2,457,616) (161,859,628) 83,115,155
----------- -------------- ------------
Net increase (decrease) in net
assets resulting from
operations ..................... (2,516,789) (153,699,695) 88,306,933
----------- -------------- ------------
Distributions to shareholders from:
Net investment income:
Institutional Shares ............. -- (5,917,557) (8,151,028)
Service Shares ................... -- (2,234,158) (2,965,174)
Investor A Shares ................ -- (196,004) (336,258)
Investor B Shares ................ -- (32,932) (41,787)
Investor C Shares ................ -- (1,193) (32)
----------- -------------- ------------
Total distribution from net
investment income .............. -- (8,381,844) (11,494,279)
----------- -------------- ------------
Capital:
Institutional Shares ............. -- -- --
Service Shares ................... -- -- --
Investor A Shares ................ -- -- --
Investor B Shares ................ -- -- --
Investor C Shares ................ -- -- --
----------- -------------- ------------
Total distributions from net
capital gains .................. -- -- --
----------- -------------- ------------
Net realized gains:
Institutional Shares ............. -- (5,880,920) (11,783,420)
Service Shares ................... -- (2,710,758) (4,941,534)
Investor A Shares ................ -- (359,503) (620,819)
Investor B Shares ................ -- (85,549) (90,494)
Investor C Shares ................ -- (2,122) --
----------- -------------- ------------
Total distributions from net
realized gains ................. -- (9,038,852) (17,436,267)
----------- -------------- ------------
Total distributions to
shareholders ................... -- (17,420,696) (28,930,546)
----------- -------------- ------------
Capital share transactions ........... 20,356,330 698,804,127 29,594,684
----------- -------------- ------------
Total increase in net assets ..... 17,839,541 527,683,736 88,971,071
Net assets:
Beginning of period .............. -- 661,413,823 572,442,752
----------- -------------- ------------
End of period .................... $17,839,541 $1,189,097,559 $661,413,823
=========== ============== ============
<FN>
- ------------
1 Commencement of operations.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
58 & 59
<PAGE>
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL
SMALL CAP EMERGING MARKETS SELECT
EQUITY PORTFOLIO PORTFOLIO EQUITY PORTFOLIO
--------------------------- ---------------------------- -----------------------------
FOR THE PERIOD
FOR THE 9/26/97 1 FOR THE FOR THE FOR THE FOR THE
YEAR ENDED THROUGH YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/98 9/30/97 9/30/98 9/30/97 9/30/98 9/30/97
----------- ----------- ------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................$ 98,516 $ 2,584 $ 1,168,323 $ 379,075 $ 9,513,164 $ 5,552,094
Net gain (loss) on investments and
foreign currency related
transactions ....................... (1,176,247) (94,412) (103,695,044) 12,712,170 (75,118,651) 165,812,482
----------- ----------- ------------- ------------ -------------- ------------
Net increase (decrease) in net assets
resulting from operations .......... (1,077,731) (91,828) (102,526,721) 13,091,245 (65,605,487) 171,364,576
----------- ----------- ------------- ------------ -------------- ------------
Distributions to shareholders from:
Net investment income:
Institutional Shares ................. (81,520) -- -- (474,769) (7,923,238) (4,137,153)
Service Shares ....................... (1,514) -- -- (179,460) (1,345,132) (1,370,431)
Investor A Shares .................... (2,465) -- -- (12,546) (126,292) (96,476)
Investor B Shares .................... (2,821) -- -- -- 120 (14,738)
Investor C Shares .................... (560) -- -- -- -- (111)
----------- ----------- ------------- ------------ -------------- ------------
Total distributions from net
investment income .................. (88,880) -- -- (666,775) (9,394,542) (5,618,909)
----------- ----------- ------------- ------------ -------------- ------------
Net realized gains:
Institutional Shares ................. -- -- (1,735,707) -- (26,245,020) (24,271,695)
Service Shares ....................... -- -- (980,791) -- (11,088,452) (10,159,155)
Investor A Shares .................... -- -- (62,362) -- (1,142,824) (598,242)
Investor B Shares .................... -- -- (27,732) -- (1,237,130) (140,029)
Investor C Shares .................... -- -- (1,309) -- (25,714) (383)
----------- ----------- ------------- ------------ -------------- ------------
Total distributions from net
realized gains ..................... -- -- (2,807,901) -- (39,739,140) (35,169,504)
----------- ----------- ------------- ------------ -------------- ------------
Total distributions to shareholders .. (88,880) -- (2,807,901) (666,775) (49,133,682) (40,788,413)
----------- ----------- ------------- ------------ -------------- ------------
Capital share transactions ............... 3,766,352 16,725,691 9,594,481 66,260,603 1,090,529,491 65,514,355
----------- ----------- ------------- ------------ -------------- ------------
Total increase (decrease) in
net assets ......................... 2,599,741 16,633,863 (95,740,141) 78,685,073 975,790,322 196,090,518
Net assets:
Beginning of period .................. 16,633,863 -- 188,548,502 109,863,429 591,775,729 395,685,211
----------- ----------- ------------- ------------ -------------- ------------
End of period ........................$19,233,604 $16,633,863 $ 92,808,361 $188,548,502 $1,567,566,051 $591,775,729
=========== =========== ============= ============ ============== ============
</TABLE>
<TABLE>
<CAPTION>
INDEX
EQUITY PORTFOLIO BALANCED PORTFOLIO
-------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
9/30/98 9/30/97 9/30/98 9/30/97
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................$ 6,807,877 $ 4,982,227 $ 10,811,745 $ 7,571,920
Net gain (loss) on investments and
foreign currency related
transactions ....................... 15,032,004 107,651,902 15,892,743 62,801,064
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations .......... 21,839,881 112,634,129 26,704,488 70,372,984
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income:
Institutional Shares ................. (3,530,357) (2,473,762) (4,562,657) (972,993)
Service Shares ....................... (2,427,368) (1,969,191) (3,867,304) (4,320,625)
Investor A Shares .................... (327,932) (256,444) (1,800,766) (2,073,865)
Investor B Shares .................... (159,040) (100,050) (455,298) (283,194)
Investor C Shares .................... (101,654) (53,663) (4,734) (622)
------------ ------------ ------------ ------------
Total distributions from net
investment income .................. (6,546,351) (4,853,110) (10,690,759) (7,651,299)
------------ ------------ ------------ ------------
Net realized gains:
Institutional Shares ................. (350,642) (6,172,085) (2,175,645) (1,274,430)
Service Shares ....................... (412,780) (5,024,090) (12,131,307) (4,988,172)
Investor A Shares .................... (61,777) (620,161) (5,953,904) (2,456,117)
Investor B Shares .................... (85,726) (141,880) (1,760,468) (283,940)
Investor C Shares .................... (45,394) (20,100) (7,177) --
------------ ------------ ------------ ------------
Total distributions from net
realized gains ..................... (956,319) (11,978,316) (22,028,501) (9,002,659)
------------ ------------ ------------ ------------
Total distributions to shareholders .. (7,502,670) (16,831,426) (32,719,260) (16,653,958)
------------ ------------ ------------ ------------
Capital share transactions ............... 355,034,744 109,931,345 382,617,238 14,011,868
------------ ------------ ------------ ------------
Total increase (decrease) in
net assets ......................... 369,371,955 205,734,048 376,602,466 67,730,894
Net assets:
Beginning of period .................. 451,978,051 246,244,003 318,650,869 250,919,975
------------ ------------ ------------ ------------
End of period ........................$821,350,006 $451,978,051 $695,253,335 $318,650,869
============ ============ ============ ============
<FN>
- ----------
1 Commencement of operations.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
60 & 61
<PAGE>
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS NET
ASSET (LOSS) ON DISTRIBUTIONS FROM NET ASSET
VALUE NET INVESTMENTS FROM NET DISTRIBUTIONS REALIZED VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT FROM CAPITAL END OF TOTAL
OF PERIOD INCOME AND UNREALIZED) INCOME CAPITAL GAINS PERIOD RETURN
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------
LARGE CAP VALUE EQUITY
- ----------------------
INSTITUTIONAL CLASS
9/30/98 $17.53 $ 0.22 $(0.58) $(0.23) $ -- $(2.25) $14.69 (2.27)%
9/30/97 15.35 0.31 4.69 (0.30) -- (2.52) 17.53 37.66
9/30/96 13.92 0.35 2.41 (0.36) -- (0.97) 15.35 21.01
9/30/95 11.62 0.34 2.54 (0.33) -- (0.25) 13.92 25.73
9/30/94 11.68 0.27 0.16 (0.27) -- (0.22) 11.62 3.76
SERVICE CLASS
9/30/98 $17.52 $ 0.21 $(0.61) $(0.18) $ -- $(2.25) $14.69 (2.50)%
9/30/97 15.35 0.24 4.70 (0.25) -- (2.52) 17.52 37.22
9/30/96 13.92 0.32 2.40 (0.32) -- (0.97) 15.35 20.68
9/30/95 11.62 0.30 2.55 (0.30) -- (0.25) 13.92 25.40
9/30/94 11.68 0.25 0.16 (0.25) -- (0.22) 11.62 3.51
INVESTOR A CLASS
9/30/98 $17.52 $ 0.17 $(0.60) $(0.16) $ -- $(2.25) $14.68 (2.63)%3
9/30/97 15.35 0.23 4.69 (0.23) -- (2.52) 17.52 37.01 3
9/30/96 13.92 0.28 2.41 (0.29) -- (0.97) 15.35 20.52 3
9/30/95 11.62 0.27 2.56 (0.28) -- (0.25) 13.92 25.22 3
9/30/94 11.69 0.23 0.15 (0.23) -- (0.22) 11.62 3.32 3
INVESTOR B CLASS
9/30/98 $17.44 $ 0.05 $(0.61) $(0.04) $ -- $(2.25) $14.59 (3.45)%4
9/30/97 15.32 0.14 4.64 (0.14) -- (2.52) 17.44 36.40 4
1/18/96 1 through 9/30/96 13.56 0.13 1.80 (0.17) -- -- 15.32 14.26 4
INVESTOR C CLASS
9/30/98 $17.44 $ 0.06 $(0.62) $(0.04) $ -- $(2.25) $14.59 (3.45)%4
9/30/97 15.32 0.15 4.63 (0.14) -- (2.52) 17.44 35.99 4
8/16/96 1 through 9/30/96 14.91 0.02 0.45 (0.06) -- -- 15.32 3.16 4
- ------------------------
LARGE CAP GROWTH EQUITY
- ------------------------
INSTITUTIONAL CLASS
9/30/98 $18.92 $ 0.03 $ 1.85 $(0.02) $ -- $(2.64) $18.14 11.76%
9/30/97 14.96 0.09 4.72 (0.11) -- (0.74) 18.92 33.69
9/30/96 13.03 0.08 2.29 (0.06) -- (0.38) 14.96 18.67
9/30/95 10.19 0.13 2.88 (0.17) -- -- 13.03 29.88
9/30/94 11.58 0.06 (1.34) (0.01) -- (0.10) 10.19 (11.14)
SERVICE CLASS
9/30/98 $18.93 $(0.03) $ 1.85 $ -- $ -- $(2.64) $18.11 11.33%
9/30/97 14.95 0.04 4.72 (0.04) -- (0.74) 18.93 33.38
9/30/96 13.02 0.05 2.28 (0.02) -- (0.38) 14.95 18.34
9/30/95 10.18 0.10 2.87 (0.13) -- -- 13.02 29.43
9/30/94 11.57 0.03 (1.32) -- -- (0.10) 10.18 (11.20)
INVESTOR A CLASS
9/30/98 $18.91 $(0.05) $ 1.84 $ -- $ -- $(2.64) $18.06 11.16%3
9/30/97 14.94 0.01 4.72 (0.02) -- (0.74) 18.91 33.18 3
9/30/96 13.01 0.02 2.29 -- -- (0.38) 14.94 18.18 3
9/30/95 10.16 0.08 2.87 (0.10) -- -- 13.01 29.26 3
9/30/94 11.57 0.02 (1.33) -- -- (0.10) 10.16 (11.38)3
INVESTOR B CLASS
9/30/98 $18.69 $(0.15) $ 1.78 $ -- $ -- $(2.64) $17.68 10.33%4
9/30/97 14.86 (0.07) 4.64 -- -- (0.74) 18.69 32.18 4
1/24/96 1 through 9/30/96 13.08 (0.02) 1.80 -- -- -- 14.86 13.61 4
INVESTOR C CLASS
9/30/98 $18.69 $(0.15) $ 1.78 $ -- $ -- $(2.64) $17.68 10.33%4
1/24/97 1 through 9/30/97 15.23 (0.03) 3.49 -- -- -- 18.69 22.78 4
- --------------------
MID-CAP VALUE EQUITY
- --------------------
INSTITUTIONAL CLASS
9/30/98 $12.80 $ 0.10 $(1.81) $(0.10) $ -- $(0.36) $10.63 (13.68)%
12/27/96 1 through 9/30/97 10.00 0.10 2.80 (0.10) -- -- 12.80 29.11
SERVICE CLASS
9/30/98 $12.79 $ 0.08 $(1.82) $(0.07) $ -- $(0.36) $10.62 (13.94)%
12/27/96 1 through 9/30/97 10.00 0.07 2.80 (0.08) -- -- 12.79 28.81
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
NET RATIO OF EXPENSES INVESTMENT INCOME
ASSETS RATIO OF TO AVERAGE RATIO OF NET TO AVERAGE
END OF EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
(000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- ----------------------
LARGE CAP VALUE EQUITY
- ----------------------
INSTITUTIONAL CLASS
9/30/98 $1,841,171 0.83% 0.84% 1.45% 1.44% 33%
9/30/97 743,405 0.78 0.85 1.94 1.87 37
9/30/96 731,024 0.75 0.84 2.40 2.32 60
9/30/95 508,273 0.67 0.81 2.68 2.53 12
9/30/94 577,996 0.65 0.81 2.44 2.28 11
SERVICE CLASS
9/30/98 $ 387,323 1.13% 1.14% 1.14% 1.13% 33%
9/30/97 595,189 1.09 1.16 1.62 1.55 37
9/30/96 457,283 1.05 1.14 2.13 2.04 60
9/30/95 170,832 0.95 1.09 2.40 2.26 12
9/30/94 105,035 0.90 1.06 2.24 2.08 11
INVESTOR A CLASS
9/30/98 $ 51,151 1.27% 1.28% 0.99% 0.98% 33%
9/30/97 47,131 1.26 1.33 1.44 1.37 37
9/30/96 26,190 1.22 1.31 1.93 1.84 60
9/30/95 16,910 1.11 1.25 2.24 2.10 12
9/30/94 10,412 1.05 1.21 2.08 1.92 11
INVESTOR B CLASS
9/30/98 $ 29,450 2.06% 2.07% 0.20% 0.19% 33%
9/30/97 19,773 2.00 2.07 0.64 0.57 37
1/18/96 1 through 9/30/96 3,152 1.92 2 2.00 2 1.34 2 1.25 2 60
INVESTOR C CLASS
9/30/98 $ 3,146 2.04% 2.05% 0.22% 0.21% 33%
9/30/97 1,428 2.01 2.08 0.61 0.54 37
8/16/96 1 through 9/30/96 205 1.80 2 1.88 2 1.29 2 1.20 2 60
- ------------------------
LARGE CAP GROWTH EQUITY
- ------------------------
INSTITUTIONAL CLASS
9/30/98 $ 922,896 0.86% 0.86% 0.18% 0.18% 54%
9/30/97 482,851 0.79 0.86 0.54 0.47 81
9/30/96 481,171 0.75 0.86 0.63 0.51 58
9/30/95 211,543 0.67 0.85 1.20 1.01 55
9/30/94 97,834 0.65 0.89 0.62 0.38 212
SERVICE CLASS
9/30/98 $ 187,738 1.16% 1.16% (0.13)% (0.13)% 54%
9/30/97 262,409 1.10 1.17 0.24 0.17 81
9/30/96 191,023 1.05 1.17 0.31 0.20 58
9/30/95 76,769 0.95 1.13 0.91 0.73 55
9/30/94 36,752 0.90 1.14 0.51 0.26 212
INVESTOR A CLASS
9/30/98 $ 33,340 1.33% 1.33% (0.30)% (0.30)% 54%
9/30/97 25,575 1.27 1.34 0.07 0.0 2 81
9/30/96 16,579 1.22 1.34 0.15 0.04 58
9/30/95 10,034 1.11 1.29 0.76 0.58 55
9/30/94 5,049 1.05 1.29 0.29 0.05 212
INVESTOR B CLASS
9/30/98 $ 14,713 2.07% 2.07% (1.03)% (1.03)% 54%
9/30/97 7,919 2.01 2.08 (0.66) (0.73) 81
1/24/96 1 through 9/30/96 2,364 1.93 2 2.05 2 (0.47)2 (0.58)2 58
INVESTOR C CLASS
9/30/98 $ 1,037 2.06% 2.06% (1.01)% (1.01)% 54%
1/24/97 1 through 9/30/97 207 2.02 2 2.09 2 (0.66)2 (0.73)2 81
- --------------------
MID-CAP VALUE EQUITY
- --------------------
INSTITUTIONAL CLASS
9/30/98 $ 205,634 1.14% 1.20% 0.89% 0.83% 71%
12/27/96 1 through 9/30/97 106,886 1.15 2 1.19 2 1.33 2 1.29 2 36
SERVICE CLASS
9/30/98 $ 28,879 1.44% 1.50% 0.60% 0.54% 71%
12/27/96 1 through 9/30/97 22,757 1.44 2 1.48 2 0.98 2 0.94 2 36
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
62 & 63
<PAGE>
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS NET
ASSET (LOSS) ON DISTRIBUTIONS FROM NET ASSET
VALUE NET INVESTMENTS FROM NET DISTRIBUTIONS REALIZED VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT FROM CAPITAL END OF TOTAL
OF PERIOD INCOME AND UNREALIZED) INCOME CAPITAL GAINS PERIOD RETURN
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTOR A CLASS
9/30/98 $12.77 $ 0.05 $(1.81) $(0.04) $ -- $(0.36) $10.61 (14.06)%3
12/27/96 1 through 9/30/97 10.00 0.07 2.78 (0.08) -- -- 12.77 28.51 3
INVESTOR B CLASS
9/30/98 $12.78 $(0.03) $(1.81) $ -- $ -- $(0.36) $10.58 (14.66)%4
12/27/96 1 through 9/30/97 10.00 0.03 2.79 (0.04) -- -- 12.78 28.23 4
INVESTOR C CLASS
9/30/98 $12.78 $(0.02) $(1.82) $ -- $ -- $(0.36) $10.58 (14.66)%4
12/27/96 1 through 9/30/97 10.00 0.02 2.80 (0.04) -- -- 12.78 28.23 4
- ---------------------
MID-CAP GROWTH EQUITY
- ---------------------
INSTITUTIONAL CLASS
9/30/98 $12.20 $(0.02) $(0.96) $ -- $(0.01) $(0.09) $11.12 (8.05)%
12/27/96 1 through 9/30/97 10.00 (0.01) 2.21 -- -- -- 12.20 22.00
SERVICE CLASS
9/30/98 $12.17 $(0.09) $(0.92) $ -- $(0.01) $(0.09) $11.06 (8.32)%
12/27/96 1 through 9/30/97 10.00 (0.03) 2.20 -- -- -- 12.17 21.70
INVESTOR A CLASS
9/30/98 $12.14 $(0.07) $(0.95) $ -- $(0.01) $(0.09) $11.02 (8.42)%3
12/27/96 1 through 9/30/97 10.00 (0.03) 2.17 -- -- -- 12.14 21.40 3
INVESTOR B CLASS
9/30/98 $12.11 $(0.14) $(0.97) $ -- $(0.01) $(0.09) 10.90 (9.19)%4
12/27/96 1 through 9/30/97 10.00 (0.05) 2.16 -- -- -- 12.11 21.10 4
INVESTOR C CLASS
9/30/98 $12.11 $(0.14) $(0.97) $ -- $(0.01) $(0.09) $10.90 (9.19)%4
12/27/96 1 through 9/30/97 10.00 (0.07) 2.18 -- -- -- 12.11 21.10 4
- ----------------------
SMALL CAP VALUE EQUITY
- ----------------------
INSTITUTIONAL CLASS
9/30/98 $20.20 $ 0.13 $(3.19) $(0.13) $ -- $(2.12) $14.89 (17.03)%
9/30/97 15.98 0.17 6.39 (0.17) -- (2.17) 20.20 47.36
9/30/96 15.16 0.10 1.70 (0.11) -- (0.87) 15.98 12.64
9/30/95 13.62 0.06 2.17 (0.08) -- (0.61) 15.16 17.43
9/30/94 13.08 0.04 0.77 (0.02) -- (0.25) 13.62 6.28
SERVICE CLASS
9/30/98 $20.20 $ 0.09 $(3.21) $(0.08) $ -- $(2.12) $14.88 (17.33)%
9/30/97 15.98 0.13 6.39 (0.13) -- (2.17) 20.20 46.95
9/30/96 15.15 0.06 1.70 (0.06) -- (0.87) 15.98 12.30
9/30/95 13.59 0.02 2.18 (0.03) -- (0.61) 15.15 17.17
9/30/94 13.08 -- 0.77 (0.01) -- (0.25) 13.59 5.96
INVESTOR A CLASS
9/30/98 $20.20 $ 0.06 $(3.20) $(0.06) $ -- $(2.12) $14.88 (17.43)%3
9/30/97 15.97 0.10 6.40 (0.10) -- (2.17) 20.20 46.85 3
9/30/96 15.14 0.03 1.69 (0.02) -- (0.87) 15.97 12.06 3
9/30/95 13.58 -- 2.17 -- -- (0.61) 15.14 16.96 3
9/30/94 13.07 (0.01) 0.77 -- -- (0.25) 13.58 5.93 3
INVESTOR B CLASS
09/30/98 $19.86 $(0.02) $(3.19) $ -- $ -- $(2.12) $14.53 (18.08)%4
9/30/97 15.80 0.08 6.19 (0.04) -- (2.17) 19.86 45.67 4
9/30/96 15.06 (0.04) 1.65 -- -- (0.87) 15.80 11.34 4
10/3/94 1 through 9/30/95 13.51 (0.05) 2.21 -- -- (0.61) 15.06 16.95 4
INVESTOR C CLASS
9/30/98 $19.86 $(0.04) $(3.17) $ -- $ -- $(2.12) $14.53 (18.08)%4
10/1/96 1 through 9/30/97 15.76 0.02 6.29 (0.04) -- (2.17) 19.86 46.04 4
- -----------------------
SMALL CAP GROWTH EQUITY
- -----------------------
INSTITUTIONAL CLASS
9/30/98 $23.62 $ -- $(4.98) $ -- $(0.02) $(1.12) $17.50 (21.93)%
9/30/97 21.94 0.02 3.18 (0.03) -- (1.49) 23.62 15.89
9/30/96 15.06 (0.01) 6.91 (0.02) -- -- 21.94 45.87
9/30/95 10.16 0.02 4.90 (0.02) -- -- 15.06 48.50
9/30/94 10.47 0.03 (0.33) (0.01) -- -- 10.16 (2.89)
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
NET RATIO OF EXPENSES INVESTMENT INCOME
ASSETS RATIO OF TO AVERAGE RATIO OF NET TO AVERAGE
END OF EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
(000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
INVESTOR A CLASS
9/30/98 $ 3,983 1.61% 1.67% 0.41% 0.35% 71%
12/27/96 1 through 9/30/97 2,315 1.61 2 1.64 2 0.77 2 0.73 2 36
INVESTOR B CLASS
9/30/98 $ 6,375 2.35% 2.41% (0.33)% (0.39)% 71%
12/27/96 1 through 9/30/97 2,911 2.32 2 2.36 2 0.04 2 0.0 2 36
INVESTOR C CLASS
9/30/98 $ 259 2.33% 2.39% (0.28)% (0.34)% 71%
12/27/96 1 through 9/30/97 21 2.33 2 2.37 2 0.13 2 0.09 2 36
- ---------------------
MID-CAP GROWTH EQUITY
- ---------------------
INSTITUTIONAL CLASS
9/30/98 $ 220,903 1.14% 1.20% (0.37)% (0.43)% 204%
12/27/96 1 through 9/30/97 107,709 1.13 2 1.17 2 (0.16)2 (0.20)2 64
SERVICE CLASS
9/30/98 $ 28,601 1.44% 1.50% (0.68)% (0.74)% 204%
12/27/96 1 through 9/30/97 22,984 1.44 2 1.48 2 (0.54)2 (0.58)2 64
INVESTOR A CLASS
9/30/98 $ 4,090 1.61% 1.67% (0.85)% (0.91)% 204%
12/27/96 1 through 9/30/97 2,650 1.59 2 1.63 2 (0.73)2 (0.77)2 64
INVESTOR B CLASS
9/30/98 $ 4,088 2.35% 2.41% (1.60)% (1.66)% 204%
12/27/96 1 through 9/30/97 2,691 2.32 2 2.36 2 (1.50)2 (1.54)2 64
INVESTOR C CLASS
9/30/98 $ 230 2.34% 2.40% (1.56)% (1.62)% 204%
12/27/96 1 through 9/30/97 85 2.35 2 2.39 2 (1.49)2 (1.53)2 64
- ----------------------
SMALL CAP VALUE EQUITY
- ----------------------
INSTITUTIONAL CLASS
9/30/98 $ 527,374 0.87% 0.88% 0.79% 0.78% 45%
9/30/97 309,899 0.87 0.88 1.09 1.08 66
9/30/96 214,828 0.85 0.86 0.68 0.67 50
9/30/95 168,334 0.75 0.84 0.44 0.35 31
9/30/94 168,360 0.73 0.85 0.28 0.16 18
SERVICE CLASS
9/30/98 $ 77,893 1.17% 1.18% 0.44% 0.43% 45%
9/30/97 122,431 1.17 1.18 0.79 0.78 66
9/30/96 80,981 1.15 1.16 0.38 0.37 50
9/30/95 61,313 1.02 1.12 0.16 0.07 31
9/30/94 45,372 0.98 1.10 0.03 (0.09) 18
INVESTOR A CLASS
9/30/98 $ 34,286 1.32% 1.33% 0.32% 0.31% 45%
9/30/97 34,031 1.34 1.35 0.63 0.62 66
9/30/96 24,605 1.32 1.33 0.20 0.19 50
9/30/95 21,563 1.18 1.28 0.0 (0.09) 31
9/30/94 16,884 1.13 1.25 (0.11) (0.23) 18
INVESTOR B CLASS
09/30/98 $ 20,717 2.08% 2.09% (0.43)% (0.44)% 45%
9/30/97 11,001 2.07 2.08 (0.15) (0.16) 66
9/30/96 2,357 2.04 2.05 (0.50) (0.51) 50
10/3/94 1 through 9/30/95 1,477 1.80 2 1.89 2 (0.61)2 (0.70)2 31
INVESTOR C CLASS
9/30/98 $ 5,491 2.08% 2.09% (0.42)% (0.43)% 45%
10/1/96 1 through 9/30/97 2,109 2.04 2 2.05 2 (0.18)2 (0.19)2 66
- -----------------------
SMALL CAP GROWTH EQUITY
- -----------------------
INSTITUTIONAL CLASS
9/30/98 $1,022,404 0.87% 0.87% (0.13)% (0.13)% 159%
9/30/97 495,904 0.87 0.87 0.01 0.01 82
9/30/96 299,563 0.86 0.88 (0.07) (0.09) 89
9/30/95 145,915 0.75 0.88 0.22 0.09 74
9/30/94 65,612 0.48 1.04 0.45 (0.10) 89
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
64 & 65
<PAGE>
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS NET
ASSET (LOSS) ON DISTRIBUTIONS FROM NET ASSET
VALUE NET INVESTMENTS FROM NET DISTRIBUTIONS REALIZED VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT FROM CAPITAL END OF TOTAL
OF PERIOD INCOME AND UNREALIZED) INCOME CAPITAL GAINS PERIOD RETURN
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERVICE CLASS
9/30/98 $23.43 $(0.14) $(4.91) $ -- $(0.02) $(1.12) $17.24 (22.40)%
9/30/97 21.80 (0.03) 3.15 -- -- (1.49) 23.43 15.54
9/30/96 15.02 (0.06) 6.84 -- -- -- 21.80 45.14
9/30/95 10.14 (0.01) 4.89 -- -- -- 15.02 48.13
9/30/94 10.47 0.01 (0.34) -- -- -- 10.14 (3.12)
INVESTOR A CLASS
9/30/98 $23.25 $(0.11) $(4.88) $ -- $(0.02) $(1.12) $17.12 (22.31)%3
9/30/97 21.69 (0.04) 3.09 -- -- (1.49) 23.25 15.28 3
9/30/96 14.98 (0.06) 6.77 -- -- -- 21.69 44.79 3
9/30/95 10.12 (0.02) 4.88 -- -- -- 14.98 48.02 3
9/30/94 10.47 -- (0.35) -- -- -- 10.12 (3.33)3
INVESTOR B CLASS
9/30/98 $22.89 $(0.22) $(4.80) $ -- $(0.02) $(1.12) $16.73 (22.89)%4
9/30/97 21.53 (0.07) 2.92 -- -- (1.49) 22.89 14.47 4
1/18/96 1 through 9/30/96 14.87 (0.07) 6.73 -- -- -- 21.53 38.27 4
INVESTOR C CLASS
9/30/98 $22.89 $(0.26) $(4.76) $ -- $(0.02) $(1.12) $16.73 (22.89)%4
9/30/97 21.53 (0.11) 2.96 -- -- (1.49) 22.89 14.47 4
9/6/96 1 through 9/30/96 19.66 (0.01) 1.88 -- -- -- 21.53 9.51 4
- --------------------------
MICRO-CAP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
5/01/98 1 through 9/30/98 $10.00 $(0.01) $(0.61) $ -- $ -- $ -- $ 9.38 (6.10)%
SERVICE CLASS
5/01/98 1 through 9/30/98 $10.00 $(0.02) $(0.60) -- -- -- $ 9.38 (6.10)%
INVESTOR A CLASS
5/01/98 1 through 9/30/98 $10.00 $(0.02) $(0.60) -- -- -- $ 9.38 (6.20)%3
INVESTOR B CLASS
5/01/98 1 through 9/30/98 $10.00 $(0.04) $(0.60) -- -- -- $ 9.36 (6.30)%4
INVESTOR C CLASS
5/01/98 1 through 9/30/98 $10.00 $(0.04) $(0.60) -- -- -- $ 9.36 (6.30)%4
- --------------------
INTERNATIONAL EQUITY
- --------------------
INSTITUTIONAL CLASS
9/30/98 $14.65 $ 0.27 $(1.29) $(0.20) $ -- $(0.20) $13.23 (7.03)%
9/30/97 13.43 0.14 1.77 (0.28) -- (0.41) 14.65 14.88
9/30/96 13.27 0.17 0.84 (0.18) -- (0.67) 13.43 8.01
9/30/95 13.44 0.17 0.13 (0.11) -- (0.36) 13.27 2.46
9/30/94 12.48 0.15 1.17 (0.11) -- (0.25) 13.44 10.71
SERVICE CLASS
9/30/98 $14.58 $ 0.02 $(1.09) $(0.16) $ -- $(0.20) $13.15 (7.34)%
9/30/97 13.37 0.10 1.76 (0.24) -- (0.41) 14.58 14.52
9/30/96 13.24 0.19 0.78 (0.17) -- (0.67) 13.37 7.71
9/30/95 13.41 0.11 0.16 (0.08) -- (0.36) 13.24 2.19
9/30/94 12.47 0.14 1.14 (0.09) -- (0.25) 13.41 10.36
INVESTOR A CLASS
9/30/98 $14.57 $ 0.10 $(1.20) $(0.13) $ -- $(0.20) $13.14 (7.56)%3
9/30/97 13.36 0.07 1.77 (0.22) -- (0.41) 14.57 14.36 3
9/30/96 13.24 0.14 0.81 (0.16) -- (0.67) 13.36 7.58 3
9/30/95 13.40 0.11 0.13 (0.04) -- (0.36) 13.24 2.00 3
9/30/94 12.47 0.12 1.15 (0.09) -- (0.25) 13.40 10.24 3
INVESTOR B CLASS
9/30/98 $14.38 $(0.01) $(1.16) $(0.07) $ -- $(0.20) $12.94 (8.19)%4
9/30/97 13.23 0.07 1.66 (0.17) -- (0.41) 14.38 13.63 4
9/30/96 13.20 0.08 0.77 (0.15) -- (0.67) 13.23 6.81 4
10/3/94 1 through 9/30/95 13.35 0.05 0.16 -- -- (0.36) 13.20 1.77 4
INVESTOR C CLASS
9/30/98 $14.38 $ 0.00 $(1.17) $(0.07) $ -- $(0.20) $12.94 (8.19)%4
12/5/96 1 through 9/30/97 13.21 0.15 1.19 (0.17) -- -- 14.38 10.33 4
- ------------------------------
INTERNATIONAL SMALL CAP EQUITY
- ------------------------------
INSTITUTIONAL CLASS
9/30/98 $ 9.94 $ 0.07 $(0.40) $(0.05) $ -- $ -- $ 9.56 (3.57)%
9/26/97 1 through 9/30/97 10.00 -- (0.06) -- -- -- 9.94 (0.30)
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
NET RATIO OF EXPENSES INVESTMENT INCOME
ASSETS RATIO OF TO AVERAGE RATIO OF NET TO AVERAGE
END OF EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
(000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
SERVICE CLASS
9/30/98 $ 141,470 1.17% 1.17% (0.46)% (0.46)% 159%
9/30/97 225,089 1.17 1.17 (0.29) (0.29) 82
9/30/96 158,901 1.16 1.18 (0.38) (0.40) 89
9/30/95 62,604 1.03 1.16 (0.07) (0.20) 74
9/30/94 22,648 0.71 1.27 0.21 (0.34) 89
INVESTOR A CLASS
9/30/98 $ 48,190 1.32% 1.32% (0.61)% (0.61)% 159%
9/30/97 57,323 1.34 1.34 (0.46) (0.46) 82
9/30/96 27,954 1.33 1.35 (0.55) (0.57) 89
9/30/95 7,348 1.20 1.33 (0.24) (0.36) 74
9/30/94 1,620 0.86 1.42 0.07 (0.49) 89
INVESTOR B CLASS
9/30/98 $ 38,485 2.07% 2.07% (1.36)% (1.36% 159%
9/30/97 40,270 2.07 2.07 (1.23) (1.23) 82
1/18/96 1 through 9/30/96 6,520 2.06 2 2.08 2 (1.34)2 (1.36)2 89
INVESTOR C CLASS
9/30/98 $ 11,931 2.09% 2.09% (1.38)% (1.38)% 159%
9/30/97 14,106 2.07 2.07 (1.25) (1.25) 82
9/6/96 1 through 9/30/96 329 1.74 2 1.76 2 (0.93)2 (0.95)2 89
- --------------------------
MICRO-CAP EQUITY PORTFOLIO
- --------------------------
INSTITUTIONAL CLASS
5/01/98 1 through 9/30/98 $ 1,302 1.40%2 2.73%2 (0.33)%2 (1.66)%2 119%
SERVICE CLASS
5/01/98 1 through 9/30/98 $ 69 1.68%2 3.01%2 (0.61)%2 (1.94)%2 119%
INVESTOR A CLASS
5/01/98 1 through 9/30/98 $ 6,100 1.84%2 3.17%2 (0.70)%2 (2.03)%2 119%
INVESTOR B CLASS
5/01/98 1 through 9/30/98 $ 8,560 2.55%2 3.88%2 (1.44)%2 (2.77)%2 119%
INVESTOR C CLASS
5/01/98 1 through 9/30/98 $ 1,809 2.53%2 3.86%2 (1.45)%2 (2.78)%2 119%
- --------------------
INTERNATIONAL EQUITY
- --------------------
INSTITUTIONAL CLASS
9/30/98 $1,012,132 1.06% 1.11% 1.00% 0.95% 57%
9/30/97 433,135 1.06 1.16 0.94 0.84 62
9/30/96 388,588 1.36 1.46 0.65 0.54 70
9/30/95 312,588 1.53 1.63 0.50 0.40 105
9/30/94 284,905 0.95 1.14 1.27 1.08 37
SERVICE CLASS
9/30/98 $ 143,526 1.36% 1.41% 0.49% 0.44% 57%
9/30/97 199,939 1.36 1.46 0.42 0.32 62
9/30/96 161,321 1.36 1.47 0.71 0.60 70
9/30/95 106,045 1.25 1.42 1.16 0.98 105
9/30/94 75,174 1.20 1.39 1.09 0.90 37
INVESTOR A CLASS
9/30/98 $ 26,637 1.52% 1.57% 0.31% 0.26% 57%
9/30/97 22,335 1.53 1.63 0.50 0.40 62
9/30/96 19,842 1.53 1.64 0.45 0.34 70
9/30/95 17,721 1.40 1.58 0.97 0.80 105
9/30/94 14,433 1.35 1.54 0.96 0.77 37
INVESTOR B CLASS
9/30/98 $ 6,509 2.28% 2.33% (0.38)% (0.43)% 57%
9/30/97 5,850 2.27 2.37 (0.22) (0.32) 62
9/30/96 2,692 2.23 2.34 (0.18) (0.29) 70
10/3/94 1 through 9/30/95 1,071 2.06 2 2.23 2 0.59 2 0.41 2 105
INVESTOR C CLASS
9/30/98 $ 294 2.27% 2.32% (0.31)% (0.36)% 57%
12/5/96 1 through 9/30/97 155 2.28 2 2.38 2 (0.48)2 (0.58)2 62
- ------------------------------
INTERNATIONAL SMALL CAP EQUITY
- ------------------------------
INSTITUTIONAL CLASS
9/30/98 $ 16,233 1.32% 2.17% 0.65% (0.20)% 76%
9/26/97 1 through 9/30/97 15,415 1.33 2 1.55 2 1.42 2 1.19 2 0
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
66 & 67
<PAGE>
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS NET
ASSET (LOSS) ON DISTRIBUTIONS FROM NET ASSET
VALUE NET INVESTMENTS FROM NET DISTRIBUTIONS REALIZED VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT FROM CAPITAL END OF TOTAL
OF PERIOD INCOME AND UNREALIZED) INCOME CAPITAL GAINS PERIOD RETURN
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERVICE CLASS
9/30/98 $ 9.94 $ 0.02 $(0.35) $(0.05) $ -- $ -- $ 9.56 (3.62)%
9/26/97 1 through 9/30/97 10.00 -- (0.06) -- -- -- 9.94 (0.30)
INVESTOR A CLASS
9/30/98 $ 9.94 $ 0.02 $(0.39) $(0.03) $ -- $ -- $ 9.54 (3.98)%3
9/26/97 1 through 9/30/97 10.00 -- (0.06) -- -- -- 9.94 (0.30)3
INVESTOR B CLASS
9/30/98 $ 9.94 $(0.05) $(0.39) $(0.02) $ -- $ -- $ 9.48 (4.73)%4
9/26/97 1 through 9/30/97 10.00 -- (0.06) -- -- -- 9.94 (0.30)4
INVESTOR C CLASS
9/30/98 $ 9.94 $(0.04) $(0.40) $(0.02) $ -- $ -- $ 9.48 (4.73)%4
9/26/97 1 through 9/30/97 10.00 -- (0.06) -- -- -- 9.94 (0.30)4
- ------------------------------
INTERNATIONAL EMERGING MARKETS
- ------------------------------
INSTITUTIONAL CLASS
9/30/98 $ 9.69 $ 0.06 $(5.19) $ -- $ -- $(0.14) $ 4.42 (53.59)%
9/30/97 8.76 0.03 0.95 (0.05) -- -- 9.69 11.16
9/30/96 8.19 0.08 0.50 -- -- (0.01) 8.76 6.97
9/30/95 10.56 0.08 (2.15) (0.10) (0.01) (0.19) 8.19 (19.72)
6/17/94 1 through 9/30/94 10.00 0.03 0.53 -- -- -- 10.56 5.60
SERVICE CLASS
9/30/98 $ 9.63 $ 0.06 $(5.16) $ -- $ -- $(0.14) $ 4.39 (53.62)%
9/30/97 8.72 0.01 0.93 (0.03) -- -- 9.63 10.74
9/30/96 8.18 0.04 0.51 -- -- (0.01) 8.72 6.61
9/30/95 10.55 0.06 (2.15) (0.08) (0.01) (0.19) 8.18 (19.91)
6/17/94 1 through 9/30/94 10.00 0.02 0.53 -- -- -- 10.55 5.50
INVESTOR A CLASS
9/30/98 $ 9.60 $ 0.03 $(5.13) $ -- $ -- $(0.14) $ 4.36 (53.79)%3
9/30/97 8.71 (0.06) 0.98 (0.03) -- -- 9.60 10.51 3
9/30/96 8.18 0.02 0.52 -- -- (0.01) 8.71 6.49 3
9/30/95 10.54 0.03 (2.14) (0.05) (0.01) (0.19) 8.18 (20.12)3
6/17/94 1 through 9/30/94 10.00 0.02 0.52 -- -- -- 10.54 5.40 3
INVESTOR B CLASS
9/30/98 $ 9.54 $(0.03) $(5.07) $ -- $ -- $(0.14) $ 4.30 (54.13)%4
9/30/97 8.69 (0.04) 0.89 -- -- -- 9.54 9.78 4
4/25/96 1 through 9/30/96 8.85 -- (0.16) -- -- -- 8.69 (1.81)4
INVESTOR C CLASS
9/30/98 $ 9.54 $(0.02) $(5.08) $ -- $ -- $(0.14) $ 4.30 (54.13)%4
3/21/97 1 through 9/30/97 9.70 (0.01) (0.15) -- -- -- 9.54 (3.08)4
- -------------
SELECT EQUITY
- -------------
INSTITUTIONAL CLASS
9/30/98 $17.51 $ 0.16 $ 0.49 $(0.15) $ -- $(1.00) $17.01 4.07%
9/30/97 13.57 0.19 5.15 (0.19) -- (1.21) 17.51 42.50
9/30/96 11.88 0.21 2.08 (0.21) -- (0.39) 13.57 19.84
9/30/95 9.92 0.22 2.08 (0.22) -- (0.12) 11.88 23.76
9/30/94 9.97 0.22 (0.04) (0.23) -- -- 9.92 1.79
SERVICE CLASS
9/30/98 $17.50 $ 0.12 $ 0.48 $(0.10) $ -- $(1.00) $17.00 3.77%
9/30/97 13.56 0.11 5.18 (0.14) -- (1.21) 17.50 42.12
9/30/96 11.88 0.17 2.07 (0.17) -- (0.39) 13.56 19.43
9/30/95 9.92 0.22 2.05 (0.19) -- (0.12) 11.88 23.43
9/30/94 9.97 0.19 (0.04) (0.20) -- -- 9.92 1.55
INVESTOR A CLASS
9/30/98 $17.50 $ 0.08 $ 0.50 $(0.08) $ -- $(1.00) $17.00 3.62%3
9/30/97 13.56 0.11 5.16 (0.12) -- (1.21) 17.50 41.95 3
9/30/96 11.88 0.15 2.07 (0.15) -- (0.39) 13.56 19.23 3
9/30/95 9.92 0.20 2.06 (0.18) -- (0.12) 11.88 23.29 3
10/13/93 1 through 9/30/94 9.96 0.18 (0.03) (0.19) -- -- 9.92 1.54 3
INVESTOR B CLASS
9/30/98 $17.40 $(0.03) $ 0.48 $ -- $ -- $(1.00) $16.85 2.90%4
9/30/97 13.54 0.05 5.07 (0.05) -- (1.21) 17.40 40.70 4
3/27/96 1 through 9/30/96 12.83 0.04 0.73 (0.06) -- -- 13.54 6.58 4
INVESTOR C CLASS
9/30/98 $17.40 $(0.02) $ 0.47 $ -- $ -- $(1.00) $16.85 2.90%4
9/30/97 13.54 0.04 5.08 (0.05) -- (1.21) 17.40 40.70 4
9/27/96 1 through 9/30/96 13.52 -- 0.02 -- -- -- 13.54 0.15 4
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
NET RATIO OF EXPENSES INVESTMENT INCOME
ASSETS RATIO OF TO AVERAGE RATIO OF NET TO AVERAGE
END OF EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
(000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
SERVICE CLASS
9/30/98 $ 5 1.62% 2.47% 0.28% (0.57)% 76%
9/26/97 1 through 9/30/97 10 1.63 2 1.86 2 1.42 2 1.19 2 0
INVESTOR A CLASS
9/30/98 $ 849 1.78% 2.63% 0.20% (0.65)% 76%
9/26/97 1 through 9/30/97 326 1.30 2 1.52 2 1.44 2 1.22 2 0
INVESTOR B CLASS
9/30/98 $ 1,725 2.53% 3.38% (0.54)% (1.39)% 76%
9/26/97 1 through 9/30/97 711 1.30 2 1.52 2 1.58 2 1.35 2 0
INVESTOR C CLASS
9/30/98 $ 423 2.53% 3.38% (0.54)% (1.39)% 76%
9/26/97 1 through 9/30/97 182 1.30 2 1.52 2 1.44 2 1.22 2 0
- ------------------------------
INTERNATIONAL EMERGING MARKETS
- ------------------------------
INSTITUTIONAL CLASS
9/30/98 $ 63,649 1.76% 1.86% 0.95% 0.85% 37%
9/30/97 116,107 1.78 1.87 0.37 0.27 33
9/30/96 68,664 1.78 1.88 0.96 0.87 44
9/30/95 29,319 1.78 2.02 1.90 1.66 75
6/17/94 1 through 9/30/94 2,511 1.75 2 2.73 2 1.19 2 0.21 2 4
SERVICE CLASS
9/30/98 $ 26,566 2.06% 2.16% 0.71% 0.61% 37%
9/30/97 66,064 2.08 2.17 0.09 (0.01) 33
9/30/96 37,987 2.08 2.18 0.70 0.60 44
9/30/95 15,020 2.06 2.30 1.72 1.48 75
6/17/94 1 through 9/30/94 3,505 2.00 2 2.98 2 1.10 2 0.12 2 4
INVESTOR A CLASS
9/30/98 $ 1,835 2.24% 2.34% 0.46% 0.36% 37%
9/30/97 4,454 2.25 2.34 (0.08) (0.18) 33
9/30/96 2,996 2.26 2.35 0.45 0.35 44
9/30/95 2,563 2.20 2.44 1.54 1.30 75
6/17/94 1 through 9/30/94 2,857 2.15 2 3.13 2 0.74 2 (0.24)2 4
INVESTOR B CLASS
9/30/98 $ 733 2.98% 3.08% (0.30)% (0.40)% 37%
9/30/97 1,836 2.98 3.07 (0.80) (0.90) 33
4/25/96 1 through 9/30/96 216 2.90 2 3.00 2 0.17 2 0.07 2 44
INVESTOR C CLASS
9/30/98 $ 25 2.98% 3.08% (0.29)% (0.39)% 37%
3/21/97 1 through 9/30/97 88 2.58 2 2.67 2 (0.27)2 (0.37)2 33
- -------------
SELECT EQUITY
- -------------
INSTITUTIONAL CLASS
9/30/98 $1,286,032 0.86% 0.86% 0.93% 0.93% 27%
9/30/97 379,687 0.79 0.86 1.24 1.17 29
9/30/96 274,434 0.74 0.87 1.70 1.58 55
9/30/95 238,813 0.67 0.85 2.35 2.17 51
9/30/94 48,123 0.65 0.93 2.11 1.82 88
SERVICE CLASS
9/30/98 $ 203,754 1.16% 1.16% 0.63% 0.63% 27%
9/30/97 174,418 1.09 1.16 0.93 0.86 29
9/30/96 113,777 1.04 1.17 1.41 1.28 55
9/30/95 83,705 0.95 1.13 2.10 1.91 51
9/30/94 49,293 0.90 1.18 1.96 1.68 88
INVESTOR A CLASS
9/30/98 $ 35,359 1.32% 1.32% 0.44% 0.44% 27%
9/30/97 18,949 1.27 1.34 0.75 0.68 29
9/30/96 6,228 1.21 1.34 1.24 1.11 55
9/30/95 3,808 1.12 1.30 1.91 1.73 51
10/13/93 1 through 9/30/94 601 1.05 2 1.34 2 1.89 2 1.60 2 88
INVESTOR B CLASS
9/30/98 $ 39,971 2.07% 2.07% (0.29)% (0.29)% 27%
9/30/97 18,345 2.01 2.08 (0.02) (0.09) 29
3/27/96 1 through 9/30/96 1,196 1.92 2 2.04 2 0.59 2 0.46 2 55
INVESTOR C CLASS
9/30/98 $ 2,450 2.06% 2.06% (0.30)% (0.30)% 27%
9/30/97 377 2.01 2.08 (0.12) (0.19) 29
9/27/96 1 through 9/30/96 50 0.02 0.02 0.02 0.02 55
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
68 & 69
<PAGE>
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS NET
ASSET (LOSS) ON DISTRIBUTIONS FROM NET ASSET
VALUE NET INVESTMENTS FROM NET DISTRIBUTIONS REALIZED VALUE
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT FROM CAPITAL END OF TOTAL
OF PERIOD INCOME AND UNREALIZED) INCOME CAPITAL GAINS PERIOD RETURN
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------
INDEX EQUITY
- ------------
INSTITUTIONAL CLASS
9/30/98 $18.32 $0.24 $ 1.39 $(0.26) $ -- $(0.04) $19.65 8.91%
9/30/97 13.97 0.04 5.02 (0.03) -- (0.68) 18.32 39.78
9/30/96 13.58 0.30 2.13 (0.34) -- (1.70) 13.97 19.82
9/30/95 10.93 0.38 2.73 (0.34) -- (0.12) 13.58 29.30
9/30/94 11.02 0.31 0.03 (0.32) -- (0.11) 10.93 3.07
SERVICE CLASS
9/30/98 $18.32 $0.22 $ 1.34 $(0.20) $ -- $(0.04) $19.64 8.54%
9/30/97 13.97 0.23 5.01 (0.21) -- (0.68) 18.32 39.58
9/30/96 13.58 0.29 2.10 (0.30) -- (1.70) 13.97 19.45
9/30/95 10.93 0.35 2.73 (0.31) -- (0.12) 13.58 28.99
9/30/94 11.02 0.29 0.02 (0.29) -- (0.11) 10.93 2.78
INVESTOR A CLASS
9/30/98 $18.32 $0.18 $ 1.35 $(0.17) $ -- $(0.04) $19.64 8.37%3
9/30/97 13.96 0.21 5.02 (0.19) -- (0.68) 18.32 39.49 3
9/30/96 13.58 0.27 2.09 (0.28) -- (1.70) 13.96 19.31 3
9/30/95 10.93 0.34 2.73 (0.30) -- (0.12) 13.58 28.77 3
9/30/94 11.02 0.25 0.04 (0.27) -- (0.11) 10.93 2.66 3
INVESTOR B CLASS
9/30/98 $18.22 $0.05 $ 1.34 $(0.05) $ -- $(0.04) $19.52 7.63%4
9/30/97 13.93 0.13 4.94 (0.10) -- (0.68) 18.22 38.31 4
2/7/96 1 through 9/30/96 13.20 0.08 0.77 (0.12) -- -- 13.93 6.50 4
INVESTOR C CLASS
9/30/98 $18.22 $0.05 $ 1.34 $(0.05) $ -- $(0.04) $19.52 7.63%4
9/30/97 13.93 0.13 4.94 (0.10) -- (0.68) 18.22 38.31 4
8/14/96 1 through 9/30/96 13.47 0.02 0.50 (0.06) -- -- 13.93 3.90 4
- --------
BALANCED
- --------
INSTITUTIONAL CLASS
9/30/98 $18.22 $0.38 $ 1.43 $(0.43) $ -- $(1.25) $18.35 10.82%
9/30/97 15.10 0.52 3.62 (0.50) -- (0.52) 18.22 28.43
9/30/96 13.73 0.46 1.49 (0.45) -- (0.13) 15.10 14.43
9/30/95 11.98 0.46 1.90 (0.47) -- (0.14) 13.73 20.32
9/30/94 12.42 0.38 (0.39) (0.37) -- (0.06) 11.98 (0.11)
SERVICE CLASS
9/30/98 $18.21 $0.42 $ 1.34 $(0.38) $ -- $(1.25) $18.34 10.43%
9/30/97 15.09 0.45 3.64 (0.45) -- (0.52) 18.21 28.07
9/30/96 13.72 0.42 1.49 (0.41) -- (0.13) 15.09 14.11
9/30/95 11.98 0.44 1.88 (0.44) -- (0.14) 13.72 19.94
9/30/94 12.42 0.34 (0.38) (0.34) -- (0.06) 11.98 (0.36)
INVESTOR A CLASS
9/30/98 $18.22 $0.39 $ 1.33 $(0.36) $ -- $(1.25) $18.33 10.19%3
9/30/97 15.10 0.39 3.68 (0.43) -- (0.52) 18.22 27.93 3
9/30/96 13.73 0.40 1.49 (0.39) -- (0.13) 15.10 13.98 3
9/30/95 11.98 0.43 1.88 (0.42) -- (0.14) 13.73 19.86 3
9/30/94 12.42 0.32 (0.38) (0.32) -- (0.06) 11.98 (0.50)3
INVESTOR B CLASS
9/30/98 $18.13 $0.25 $ 1.31 $(0.22) $ -- $(1.25) $18.22 9.40%4
9/30/97 15.04 0.31 3.61 (0.31) -- (0.52) 18.13 26.95 4
9/30/96 13.69 0.31 1.47 (0.30) -- (0.13) 15.04 13.14 4
10/3/94 1 through 9/30/95 11.95 0.33 1.93 (0.38) -- (0.14) 13.69 19.38 4
INVESTOR C CLASS
9/30/98 $18.13 $0.24 $ 1.32 $(0.22) $ -- $(1.25) $18.22 9.40%4
12/20/96 1 through 9/30/97 15.62 0.28 2.54 (0.31) -- -- 18.13 23.95 4
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
NET RATIO OF EXPENSES INVESTMENT INCOME
ASSETS RATIO OF TO AVERAGE RATIO OF NET TO AVERAGE
END OF EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
(000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- ------------
INDEX EQUITY
- ------------
INSTITUTIONAL CLASS
9/30/98 $354,215 0.18% 0.34%(DOUBLE DAGGER) 1.40% 1.24% --*
9/30/97 166,786 0.18 0.38(DOUBLE DAGGER) 1.71 1.51 --*
9/30/96 127,076 0.18 0.50(DOUBLE DAGGER) 2.29 1.98 18%5*
9/30/95 109,433 0.17 0.50 2.92 2.59 18
9/30/94 147,746 0.15 0.52 2.72 2.35 17
SERVICE CLASS
9/30/98 $233,696 0.48% 0.64%(DOUBLE DAGGER) 1.09% 0.93% --*
9/30/97 193,319 0.48 0.68(DOUBLE DAGGER) 1.41 1.21 --*
9/30/96 103,080 0.48 0.80(DOUBLE DAGGER) 1.98 1.67 18%5*
9/30/95 61,536 0.45 0.79 2.62 2.28 18
9/30/94 27,376 0.40 0.77 2.49 2.12 17
INVESTOR A CLASS
9/30/98 $ 42,891 0.65% 0.81%(DOUBLE DAGGER) 0.92% 0.76% --*
9/30/97 33,934 0.65 0.85(DOUBLE DAGGER) 1.23 1.03 --*
9/30/96 12,752 0.65 0.97(DOUBLE DAGGER) 1.81 1.49 18%5*
9/30/95 6,501 0.61 0.95 2.44 2.10 18
9/30/94 2,632 0.55 0.92 2.35 1.98 17
INVESTOR B CLASS
9/30/98 $109,019 1.38% 1.54%(DOUBLE DAGGER) 0.19% 0.03% --*
9/30/97 38,271 1.38 1.58(DOUBLE DAGGER) 0.45 0.25 --*
2/7/96 1 through 9/30/96 2,904 1.38 2 1.60 2(DOUBLE DAGGER) 0.93 2 0.71 2 18%5*
INVESTOR C CLASS
9/30/98 $ 81,529 1.38% 1.54%(DOUBLE DAGGER) 0.19% 0.03% --*
9/30/97 19,668 1.38 1.58(DOUBLE DAGGER) 0.45 0.25 --*
8/14/96 1 through 9/30/96 432 1.25 2 1.43 2(DOUBLE DAGGER) 0.71 2 0.53 2 18%5*
- --------
BALANCED
- --------
INSTITUTIONAL CLASS
9/30/98 $374,899 0.90% 0.90% 2.48% 2.48% 134%
9/30/97 31,674 0.84 0.89 2.98 2.92 173
9/30/96 37,567 0.79 0.90 3.16 3.06 275
9/30/95 24,525 0.67 0.88 3.78 3.56 154
9/30/94 17,610 0.65 0.91 3.16 2.89 54
SERVICE CLASS
9/30/98 $176,557 1.20% 1.20% 2.22% 2.22% 134%
9/30/97 176,232 1.14 1.20 2.68 2.62 173
9/30/96 134,121 1.09 1.20 2.87 2.76 275
9/30/95 85,668 0.94 1.16 3.49 3.28 154
9/30/94 66,024 0.90 1.16 2.96 2.70 54
INVESTOR A CLASS
9/30/98 $ 96,795 1.30% 1.30% 2.13% 2.13% 134%
9/30/97 87,202 1.24 1.30 2.58 2.52 173
9/30/96 71,899 1.19 1.30 2.75 2.65 275
9/30/95 67,892 1.07 1.28 3.38 3.16 154
9/30/94 62,307 1.05 1.31 2.77 2.51 54
INVESTOR B CLASS
9/30/98 $ 46,303 2.11% 2.11% 1.30% 1.30% 134%
9/30/97 23,455 2.05 2.11 1.78 1.72 173
9/30/96 7,333 1.98 2.09 1.99 1.88 275
10/3/94 1 through 9/30/95 3,124 1.72 2 1.94 2 2.71 2 2.49 2 154
INVESTOR C CLASS
9/30/98 $ 699 1.92% 1.92% 1.46% 1.46% 134%
12/20/96 1 through 9/30/97 87 2.03 2 2.09 2 1.90 2 1.84 2 173
<FN>
1 Commencement of operations of share class.
2 Annualized.
3 Sales load not reflected in total return.
4 Contingent deferred sales load not reflected in total return.
5 For the period 10/1/95 through 5/31/96.
* See accompanying footnotes to The DFA Investment Trust Company.
(DOUBLE DAGGER) Including expenses allocated from The U.S. Large Company Series
of The DFA Investment Trust Company of 0.06% for the year ended 9/30/98,
0.07% for the year ended 9/30/97 and 0.12% for the year ended 9/30/96.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
70 & 71
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS
BlackRock Funds(SERVICE MARK) ("the Fund") (formerly Compass Capital Funds)
was organized on December 22, 1988 as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund currently has 35 publicly-offered
portfolios, 13 of which are included in these financial statements (the
"Portfolios"). Each Portfolio is authorized to issue an unlimited number of
shares with a par value of $0.001. Portfolios of the Fund offer as many as six
classes of shares. Shares of all classes of a Portfolio represent equal pro rata
interests in such Portfolio, except that each class bears different expenses
which reflect the difference in the range of services provided to them. The
following table provides a list of the Portfolios included in this report along
with a summary of their respective class-specific fee arrangements as provided
under the Fund's Amended and Restated Distribution and Service Plan (the
"Plan"). Fees are expressed as a percentage of average daily net asset values of
the respective classes.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio Share Classes
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Service Investor A Investor B Investor C
- ------------------------------------------------------------------------------------------------------------------------------------
Contractual Actual Contractual Actual Contractual Actual Contractual Actual Contractual Actual
Fees Fees (4) Fees (1) Fees (4) Fees (2) Fees (4) Fees (3) Fees (4) Fees (3) Fees (4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Large Cap Value Equity None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Large Cap Growth Equity None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Value Equity None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Mid-Cap Growth Equity None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Value Equity None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Growth Equity None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Micro-Cap Equity None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
International Small
Cap Equity None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
International Emerging
Markets None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Select Equity None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Index Equity None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) -- the maximum annual contractual fees are comprised of a .15% service fee
and .15% shareholder processing fee.
(2) -- the maximum annual contractual fees are comprised of a .10% distribution
fee, .25% service fee and .15% shareholder processing fee.
(3) -- the maximum annual contractual fees are comprised of a .75% distribution
fee, .25% service fee and .15% shareholder processing fee.
(4) -- The actual fees are as of September 30, 1998.
</FN>
</TABLE>
In addition, Institutional and Service shares bear a Transfer Agent fee at
an annual rate not to exceed .03% and Investor A, Investor B and Investor C
shares bear a Transfer Agent fee at an annual rate not to exceed .10% of the
average daily net asset of such respective classes.
The Index Equity Portfolio invests solely in The U.S. Large Company Series
of The DFA Investment Trust Company. The financial statements of which are
included elsewhere in this report and should be read in conjunction with the
financial statements of Index Equity Portfolio.
(A) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires the use of management estimates. Actual results could differ from these
estimates.
SECURITY VALUATION -- Portfolio securities for which market quotations are
readily available are valued at market value, which is currently determined
using the last reported sales price. Portfolio securities which are primarily
traded on foreign securities exchanges are normally valued at the preceding
closing values of such securities on their respective exchanges. If no sales are
reported, as in the case of some securities traded over-the-counter, portfolio
securities are
72
<PAGE>
BLACKROCK FUNDS
valued at the mean between the last reported bid and asked prices. Corporate
bonds are valued on the basis of quotations from bond dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Short-term obligations with maturities of 60
days or less are valued at amortized cost which approximates market value.
Discounts and premiums on debt securities are amortized for book and tax
purposes using the effective yield-to-maturity method over the term of the
instrument.
The Index Equity Portfolio's investment reflects its proportionate interest
in the net assets of The U.S. Large Company Series of The DFA Investment Trust
Company.
DIVIDENDS TO SHAREHOLDERS -- Dividends from net investment income are
declared and paid quarterly for the Portfolios. Net realized capital gains, if
any, will be distributed at least annually. The character of distributions made
during the year from net investment income or net realized gains may differ from
their ultimate characterization for federal income tax purposes due to
differences between generally accepted accounting principles and tax accounting
principles related to the character of income and expense recognition.
FEDERAL TAXES -- No provision is made for federal taxes as it is the Fund's
intention to have each Portfolio continue to qualify as a regulated investment
company and to make the requisite distributions to its shareholders which will
be sufficient to relieve it from federal income and excise taxes.
FOREIGN CURRENCY TRANSLATION -- The books and records of the International
Equity Portfolio and International Emerging Markets Portfolio are maintained in
U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions. It is not practical to isolate that portion of both
realized and unrealized gains and losses on investments in the
statement of operations that result from fluctuations in foreign
currency exchange rates. The Portfolios report forward foreign
currency contracts and foreign currency related transactions as
components of realized gains for financial reporting purposes, whereas
such components are treated as ordinary income for federal income tax
purposes.
FORWARD FOREIGN CURRENCY CONTRACTS -- The International Equity Portfolio
and International Small Cap Equity Portfolio enter into forward foreign currency
contracts as a hedge against either specific transactions or portfolio
positions. These contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded as unrealized until the
contract settlement date. Such contracts, which protect the value of the
International Equity Portfolio's and International Small Cap Equity Portfolio's
investment securities against a decline in the value of currency, do not
eliminate fluctuations in the underlying prices of the securities. They simply
establish an exchange rate at a future date. Also, although such contracts tend
to minimize the risk of loss due to a decline in the value of a hedged currency,
at the same time they tend to limit any potential gain that might be realized
should the value of such foreign currency increase. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar.
The aggregate principal amounts of the contracts are not recorded as the
International Equity Portfolio intends to settle the contracts prior to
delivery. Under the terms of foreign currency contracts open at September 30,
1998, the International Equity Portfolio is obligated to deliver or receive
currency in exchange for U.S. dollars as indicated below:
<TABLE>
<CAPTION>
VALUE AT UNREALIZED FOREIGN
SETTLEMENT DATE CURRENCY BOUGHT CONTRACT AMOUNT SEPTEMBER 30, 1998 EXCHANGE GAIN/(LOSS)
------------------ ----------------------- --------------- ------------------ --------------------
<S> <C> <C> <C> <C>
October 14, 1998 Japanese Yen $ 74,225,432 $ 66,835,183 $ (7,390,249)
October 14, 1998 Japanese Yen 80,256,249 71,561,770 (8,694,479)
November 16, 1998 Japanese Yen 74,037,993 70,724,544 (3,313,449)
------------ ------------ ------------
$228,519,674 $209,121,497 $(19,398,177)
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
VALUE AT UNREALIZED FOREIGN
SETTLEMENT DATE CURRENCY SOLD CONTRACT AMOUNT SEPTEMBER 30, 1998 EXCHANGE GAIN/(LOSS)
------------------ ----------------------- --------------- ------------------ --------------------
<S> <C> <C> <C> <C>
October 14, 1998 Japanese Yen $ 80,000,000 $ 66,835,183 $13,164,817
October 14, 1998 Japanese Yen 86,500,000 71,561,770 14,938,230
November 16, 1998 Japanese Yen 75,000,000 70,724,544 4,275,456
------------ ------------ -----------
$241,500,000 $209,121,497 $32,378,503
============ ============ ===========
</TABLE>
73
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The aggregate principal amounts of the contracts are not recorded as the
International Small Cap Equity Portfolio intends to settle the contracts prior
to delivery. Under the terms of foreign currency contracts open at September 30,
1998, the International Small Cap Equity Portfolio is obligated to deliver or
receive currency in exchange for U.S. dollars as indicated below:
<TABLE>
<CAPTION>
VALUE AT UNREALIZED FOREIGN
SETTLEMENT DATE CURRENCY BOUGHT CONTRACT AMOUNT SEPTEMBER 30, 1998 EXCHANGE GAIN/(LOSS)
------------------ ----------------------- --------------- ------------------ --------------------
<S> <C> <C> <C> <C>
October 14, 1998 Japanese Yen $1,298,945 $1,171,459 $(127,486)
November 16, 1998 Japanese Yen 592,304 575,426 (16,878)
---------- ---------- ---------
$1,891,249 $1,746,885 $(144,364)
========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
VALUE AT UNREALIZED FOREIGN
SETTLEMENT DATE CURRENCY SOLD CONTRACT AMOUNT SEPTEMBER 30, 1998 EXCHANGE GAIN/(LOSS)
------------------ ----------------------- --------------- ------------------ --------------------
<S> <C> <C> <C> <C>
October 14, 1998 Japanese Yen $1,400,000 $1,171,459 $228,541
November 16, 1998 Japanese Yen 600,000 575,426 24,574
---------- ---------- ---------
$2,000,000 $1,746,885 $253,115
========== ========== =========
</TABLE>
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
federal income tax purposes. Interest income is recorded on the accrual basis.
Dividends are recorded on the ex-dividend date. Expenses not directly
attributable to a specific Portfolio or class are allocated among all of the
Portfolios or classes of the Fund based on their relative net assets.
REPURCHASE AGREEMENTS -- Money market instruments may be purchased from
banks and non-bank dealers subject to the seller's agreement to repurchase them
at an agreed upon date and price. Collateral for repurchase agreements may have
longer maturities than the maximum permissible remaining maturity of portfolio
investments. The seller will be required on a daily basis to maintain the value
of the securities subject to the agreement at not less than the repurchase
price. The agreements are conditioned upon the collateral being deposited under
the Federal Reserve book-entry system or held in a separate account by the
Fund's custodian or an authorized securities depository.
REVERSE REPURCHASE AGREEMENTS -- The Balanced Portfolio may enter into
reverse repurchase agreements with qualified, third party brokers-dealers as
determined by and under the direction of the Fund's Board of Trustees. Interest
on the value of the reverse repurchase agreements issued and outstanding is
based upon competitive market rates at the time of issuance. At the time the
Fund enters into a reverse repurchase agreement, it identifies for segregation
certain liquid securities having a value not less than the repurchase price,
including accrued interest, of the reverse repurchase agreement.
FUTURES TRANSACTIONS -- The Balanced Portfolio invests in financial futures
contracts solely for the purposes of hedging its existing portfolio securities,
or securities that the Balanced Portfolio intends to purchase, against
fluctuations in fair value caused by changes in prevailing market interest
rates. The Fund invests in futures contracts and options on futures contracts to
commit funds awaiting investments in stocks or to maintain cash liquidity or,
except with respect to the Index Equity Portfolio, for other hedging purposes.
These portfolios futures contracts obligate a portfolio, at maturity, to take or
make delivery of securities, the cash value of a securities index or a stated
quantity of a foreign currency. Upon entering into a futures contract, the
Portfolio is required to deposit cash or pledge U.S. Government securities of an
initial margin. Subsequent payments, which are dependent on the daily
fluctuations in the value of the underlying security or securities, are made or
received by the Portfolio each day (daily variation margin) and are recorded as
unrealized gains or losses until the contracts are closed. When the contracts
are closed, the Portfolio records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction and
the Portfolio's basis in the contracts. Risks of entering into futures contracts
include the possibility that there will not be a perfect price correlation
between the futures contracts and the underlying securities. Second, it is
possible that a lack of liquidity for futures contracts could exist in the
secondary market, resulting in an inability to close a futures position prior to
its maturity date. Third, the purchase of a futures contract involves the risk
that a Portfolio could lose more than the original margin deposit required to
initiate a futures transaction.
OPTION SELLING/PURCHASING -- The Balanced Portfolio may invest in financial
options contracts solely for the purpose of hedging its existing portfolio
securities, or securities that the Portfolio intends to purchase, against
fluctuations in fair value caused by changes in prevailing market interest
rates. When the Portfolio sells or purchases an option, an amount equal to the
premium received or paid by the Portfolio is recorded as a liability or an asset
and is subsequently adjusted
74
<PAGE>
BLACKROCK FUNDS
to the current market value of the option written or purchased. Premiums
received or paid from writing or purchasing options which expire unexercised are
treated by the Portfolio on the expiration date as realized gains or losses. The
difference between the premium and the amount paid or received on effecting a
closing purchase or sale transaction, including brokerage commissions, is also
treated as a realized gain or loss. If an option is exercised, the premium paid
or received is added to the cost of the purchase or proceeds from the sale in
determining whether the Fund has realized a gain or a loss on investment
transactions. The Fund as writer of an option, may have no control over whether
the underlying securities may be sold (call) or purchased (put) and as a result
bears the market risk of an unfavorable change in the price of the security
underlying the written option.
Written Option transactions entered into during the fiscal year are
summarized as follows:
BALANCED PORTFOLIO
---------------------------------------
NUMBER OF CONTRACTS PREMIUM
------------------- -------
Written ....................... 280 $ 11,813
Expired ....................... (280) (11,813)
---- --------
Balance at 9/30/98 ............ -- $ --
==== ========
TBA PURCHASE COMMITMENTS -- The Balanced Portfolio may enter into "TBA" (to
be announced) purchase commitments to purchase securities for a fixed price at a
future date, typically not exceeding 45 days. TBA purchase commitments may be
considered securities in themselves, and involve a risk of loss if the value of
the security to be purchased declines prior to settlement date, which risk is in
addition to the risk of decline in the value of a Portfolio's other assets.
Unsettled TBA purchase commitments are valued at the current market value of the
underlying securities, according to the procedures described under "Security
Valuation" above.
MORTGAGE DOLLAR ROLLS -- The Balanced Portfolio may enter into mortgage
dollar rolls (principally using TBA's) in which the Portfolio sells mortgage
securities for delivery in the current month and simultaneously contracts to
repurchase similar, but not identical, securities at an agreed-upon price on a
fixed date. The Portfolio accounts for such dollar rolls as purchases and sales
and receives compensation as consideration for entering into the commitment to
repurchase. The Portfolio must maintain liquid securities having a value not
less than the repurchase price (including accrued interest) for such dollar
rolls. The market value of the securities a Portfolio is required to purchase
may decline below the agreed upon repurchase price of those securities.
In a "fee" roll, the compensation is recorded as deferred income and
amortized to income over the roll period. In a "drop" roll, the compensation is
paid via a lower price for the security upon its repurchase. The counterparty
receives all principal and interest payments, including prepayments, made in
respect of a security subject to such a contract while it is the holder.
Mortgage dollar rolls may be renewed with a new fixed purchase and repurchase
price and on settlement date, cash is paid without physical delivery of the
securities subject to the contract. A Portfolio engages in dollar rolls for the
purpose of enhancing its yield, principally by earning a negotiated fee.
SECURITIES LENDING -- Loans of securities are required at all times to be
secured by collateral at least equal to 102% of the market value of the
securities on loan. However, in the event of default or bankruptcy by the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings. The market value of securities on loan to brokers
and the value of collateral held by the Fund with respect to such loans
(including rights to draw on letters of credit) at September 30, 1998, is as
follows:
<TABLE>
<CAPTION>
MARKET VALUE OF SECURITIES VALUE OF COLLATERAL INCOME EARNED
ON LOAN RECEIVED ON SECURITIES LOANED*
-------------------------- ------------------- ---------------------
<S> <C> <C> <C>
Large Cap Value Equity Portfolio .............. $356,638,337 $371,746,065 $223,223
Large Cap Growth Equity Portfolio ............. 139,950,356 150,864,074 169,677
Mid-Cap Value Equity Portfolio ................ 49,089,743 50,790,100 52,310
Mid-Cap Growth Equity Portfolio ............... 73,640,800 82,297,112 125,238
Small Cap Value Equity Portfolio .............. 39,138,926 42,303,837 163,130
Small Cap Growth Equity Portfolio ............. 179,123,770 189,508,956 794,793
Micro-Cap Equity Portfolio .................... 951,938 1,119,800 2,841
International Emerging Markets Portfolio ...... 4,954,644 5,325,000 31,383
Select Equity Portfolio ....................... 248,932,094 265,659,591 130,539
Balanced Portfolio ............................ 63,439,550 67,795,435 62,747
</TABLE>
*Income is included in interest income on the Statements of Operations.
75
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OTHER -- Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates.
Some countries in which the Portfolios invest require governmental approval
for the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. Consequently, acquisition and disposition of securities by the
Portfolios may be inhibited. In addition, a significant proportion of the
aggregate market value of equity securities listed on the major securities
exchanges in emerging markets are held by a smaller number of investors. This
may limit the number of shares available for acquisition or disposition by the
Fund.
The Index Equity Portfolio accrues its respective share of income net of
expenses daily on their investment in The U.S. Large Company Series of The DFA
Investment Trust Company, which is treated as a partnership for federal income
tax purposes. All of the net investment income and realized and unrealized gains
and losses from the security transactions of the Master Fund is allocated pro
rata at the time of such determination.
(B) TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Pursuant to an Investment Advisory Agreement, BlackRock Advisors, Inc.
(formerly PNC Asset Management Group, Inc.), a wholly-owned subsidiary of
BlackRock, Inc., serves as investment advisor for each of the Fund's Portfolios,
except for the Index Equity Portfolio. BlackRock Financial Management, Inc., a
wholly-owned subsidiary of BlackRock Advisors, Inc., serves as the sub-advisor
for the Large Cap Value Equity, Large Cap Growth Equity, Mid-Cap Value Equity,
Mid-Cap Growth Equity, Small Cap Value Equity, Small Cap Growth Equity,
Micro-Cap Equity, Select Equity, and Balanced Portfolios. These Portfolios were
previously sub-advised by PNC Equity Advisors Company and Provident Capital
Management, Inc. BlackRock International, Ltd., (formerly CastleInternational
Asset Management Limited), an indirect wholly-owned subsidiary of BlackRock
Advisors, Inc., serves as the sub-advisor for the International Equity,
International Small Cap Equity and International Emerging Markets Portfolios.
BlackRock, Inc. is an indirect majority-owned subsidiary of PNC Bank Corp.
For its advisory services, BlackRock Advisors, Inc. is entitled to receive
fees at the following annual rates, computed daily and payable monthly, based on
each Portfolio's average daily net assets:
Large Cap Value Equity, Large Cap Growth Equity, Small Cap Value Equity,
Small Cap Growth Equity, Select Equity, and Balanced Portfolios -- .55% of the
first $1 billion, .50% of the next $1 billion, .475% of the next $1 billion, and
.45% of net assets in excess of $3 billion.
Mid-Cap Value Equity and Mid-Cap Growth Equity Portfolios -- .80% of the
first $1 billion, .70% of the next $1 billion, .675% of the next $1 billion and
.625% of net assets in excess of $3 billion.
Micro-Cap Equity Portfolio -- 1.10% of the first $1 billion, 1.05% of the
next $1 billion, 1.025% of the next $1 billion, and 1.00% of the net assets in
excess of $3 billion.
International Equity Portfolio -- .75% of its first $1 billion, .70% of the
next $1 billion, .675% of the next $1 billion and .65% of net assets in excess
of $3 billion.
International Small Cap Equity Portfolio -- 1.00% of its first $1 billion,
.95% of the next $1 billion, .90% of the next $1 billion and .85% of net assets
in excess of $3 billion.
International Emerging Markets Portfolio -- 1.25% of its first $1 billion,
1.20% of the next $1 billion, 1.155% of the next $1 billion, and 1.10% of net
assets in excess of $3 billion.
76
<PAGE>
BLACKROCK FUNDS
BlackRock Advisors, Inc. may, at its discretion, waive all or any portion
of its advisory fees for any Portfolio. For the period ended September 30, 1998,
advisory fees and waivers for each Portfolio were as follows:
<TABLE>
<CAPTION>
GROSS NET
ADVISORY FEE WAIVER ADVISORY FEE
------------ ------ ------------
<S> <C> <C> <C>
Large Cap Value Equity Portfolio ............ $10,153,561 $116,103 $10,037,458
Large Cap Growth Equity Portfolio ........... 5,402,585 2,180 5,400,405
Mid-Cap Value Equity Portfolio .............. 1,672,977 78,704 1,594,273
Mid-Cap Growth Equity Portfolio ............. 1,671,089 78,954 1,592,135
Small Cap Value Equity Portfolio ............ 3,445,768 25,678 3,420,090
Small Cap Growth Equity Portfolio ........... 5,972,883 1,099 5,971,784
Micro-Cap Equity Portfolio .................. 60,566 60,482 84
International Equity Portfolio .............. 7,090,811 402,961 6,687,850
International Small Cap Equity .............. 198,000 146,655 51,345
International Emerging Markets Portfolio .... 1,743,466 129,584 1,613,882
Select Equity Portfolio ..................... 6,234,740 7,036 6,227,704
Balanced Portfolio .......................... 2,674,965 8,134 2,666,831
</TABLE>
BlackRock Advisors, Inc. pays BlackRock International, Ltd., and BlackRock
Financial Management fees for their sub-advisory services.
PFPC Inc. ("PFPC"), an indirect wholly-owned subsidiary of PNC Bank Corp.,
BlackRock Advisors, Inc., and BlackRock Distributors, Inc. ("BDI") (formerly
Compass Distributors, Inc.) act as co-administrators for the Fund. The combined
administration fee is computed daily and payable monthly, based on a percentage
of the average daily net assets of each Portfolio, at the following annual
rates: .20% of the first $500 million, .18% of the next $500 million, .16% of
average daily net assets in excess of $1 billion.
PFPC, BlackRock Advisors, Inc. and BDI may, at their discretion, waive all
or any portion of their administration fees for any Portfolio. For the period
ended September 30, 1998, administration fees and waivers for each Portfolio
were as follows:
<TABLE>
<CAPTION>
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
-------------- ------ --------------
<S> <C> <C> <C>
Large Cap Value Equity Portfolio ........... $3,993,529 $ 5,747 $3,987,782
Large Cap Growth Equity Portfolio .......... 2,161,776 380 2,161,396
Mid-Cap Value Equity Portfolio ............. 480,981 45,566 435,415
Mid-Cap Growth Equity Portfolio ............ 480,438 50,743 429,695
Small Cap Value Equity Portfolio ........... 1,414,554 7,150 1,407,404
Small Cap Growth Equity Portfolio .......... 2,378,749 1,211 2,377,538
Micro-Cap Equity Portfolio ................. 12,636 12,405 231
International Equity Portfolio ............. 2,073,036 82,984 1,990,052
International Small Cap Equity ............. 45,540 22,081 23,459
International Emerging Markets Portfolio ... 336,405 16,521 319,884
Select Equity Portfolio .................... 2,477,773 -- 2,477,773
Index Equity Portfolio ..................... 1,466,563 1,098,153 368,410
Balanced Portfolio ......................... 1,102,215 781 1,101,434
</TABLE>
In addition, PNC Bank serves as custodian for each of the Fund's
Portfolios. PFPC serves as transfer and dividend disbursing agent.
Under the Fund's Distribution and Service Plan (the "Plan"), Investor
Shares of the Portfolios bear the expense of payments ("distribution fees") made
to BDI, as the Fund's distributor (the "Distributor"), or affiliates of PNC
Bank, for distribution and sales support services. Under the Plan, the Fund has
entered into agreements with various service organizations (including PNC Bank
and its affiliates) that provide support services to their customers who are the
beneficial owners of Shares in each Investor Class and the Service Class.
Refer to the fee table in the Notes to Financial Statements for fee information.
PFPC and BDI have also voluntarily agreed to reimburse for expenses in the
amount of $13,519 with respect to the Micro-Cap Equity Portfolio for the period
ended September 30, 1998.
77
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) PURCHASES AND SALES OF SECURITIES
For the period ended September 30, 1998, purchases and sales of securities,
other than short-term and government securities, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
Large Cap Value Equity Portfolio .............. $1,489,437,996 $ 812,834,079
Large Cap Growth Equity Portfolio ............. 997,599,385 616,595,591
Mid-Cap Value Equity Portfolio ................ 277,767,514 133,407,032
Mid-Cap Growth Equity Portfolio ............... 477,912,699 370,243,493
Small Cap Value Equity Portfolio .............. 545,437,041 236,420,473
Small Cap Growth Equity Portfolio ............. 1,986,649,046 1,567,547,739
Micro-Cap Equity Portfolio .................... 34,419,045 13,849,256
International Equity Portfolio ................ 1,069,884,749 566,881,580
International Small Cap Equity ................ 20,649,855 13,961,899
International Emerging Markets Portfolio ...... 61,177,478 49,904,162
Select Equity Portfolio ....................... 939,698,130 289,014,098
Balanced Portfolio ............................ 511,513,666 259,621,109
</TABLE>
For the period ended September 30, 1998, purchases and sales of government
securities were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------- --------------
<S> <C> <C>
Large Cap Growth Equity Portfolio ............. $ 3,000,036 $ --
Mid-Cap Growth Equity Portfolio ............... 840,158 --
Small Cap Growth Equity Portfolio ............. 6,119,724 --
Select Equity Portfolio ....................... 4,454,142 --
Balanced Portfolio ............................ 398,512,750 388,945,299
</TABLE>
(D) CAPITAL SHARES
TRANSACTIONS IN CAPITAL SHARES FOR EACH PERIOD WERE AS FOLLOWS:
<TABLE>
<CAPTION>
LARGE CAP VALUE EQUITY PORTFOLIO
----------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/98 9/30/97
-------------------------------- -------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ................................. 18,761,222 $ 282,706,864 3,763,955 $ 58,797,910
Service Class ....................................... 10,619,568 175,915,532 6,182,931 94,977,627
Investor A Class .................................... 1,730,946 28,559,315 1,094,419 16,718,645
Investor B Class .................................... 938,138 15,377,558 996,134 15,393,514
Investor C Class .................................... 143,190 2,299,944 70,459 1,084,088
Shares issued in conversion:
Institutional Class ................................. 73,889,741 1,302,593,623 -- --
Shares issued in reinvestment of dividends:
Institutional Class ................................. 6,443,412 97,417,675 8,626,314 119,927,815
Service Class ....................................... 4,725,591 71,267,440 4,813,057 66,818,409
Investor A Class .................................... 406,403 6,131,693 352,293 4,926,795
Investor B Class .................................... 177,151 2,645,866 54,207 757,478
Investor C Class .................................... 3,170 47,356 120 1,899
Shares redeemed:
Institutional Class ................................. (16,151,725) (268,263,453) (17,592,420) (265,113,113)
Service Class ....................................... (23,401,743) (351,888,220) (6,814,366) (105,724,113)
Investor A Class .................................... (1,337,810) (22,071,101) (463,144) (7,246,351)
Investor B Class .................................... (228,008) (3,706,721) (122,233) (1,969,444)
Investor C Class .................................... (12,526) (205,417) (2,097) (34,013)
----------- -------------- ----------- -------------
Net increase (decrease) .................................. 76,706,720 $1,338,827,954 959,629 $ (682,854)
=========== ============== =========== =============
</TABLE>
78
<PAGE>
BLACKROCK FUNDS
<TABLE>
<CAPTION>
LARGE CAP GROWTH EQUITY PORTFOLIO
----------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/98 9/30/97
-------------------------------- -------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class .................................. 14,330,519 $ 260,139,380 4,100,138 $ 68,934,353
Service Class ........................................ 6,926,148 129,785,746 3,591,480 57,907,296
Investor A Class ..................................... 1,091,586 20,579,343 491,684 8,038,672
Investor B Class ..................................... 428,636 7,828,156 286,063 4,650,177
Investor C Class ..................................... 53,857 990,658 11,078 195,240
Shares issued in conversion:
Institutional Class .................................. 22,346,262 431,506,319 -- --
Shares issued in reinvestment of dividends:
Institutional Class .................................. 3,914,204 62,844,198 1,684,601 25,068,778
Service Class ........................................ 1,879,737 30,188,579 530,577 7,853,001
Investor A Class ..................................... 222,895 3,575,231 58,305 862,280
Investor B Class ..................................... 72,085 1,139,669 9,660 141,908
Investor C Class ..................................... 220 3,470 -- --
Shares redeemed:
Institutional Class .................................. (15,224,495) (285,067,207) (12,426,251) (200,944,440)
Service Class ........................................ (12,301,697) (224,687,776) (3,037,967) (49,500,077)
Investor A Class ..................................... (820,932) (15,572,024) (307,549) (5,200,889)
Investor B Class ..................................... (92,023) (1,661,601) (31,139) (511,220)
Investor C Class ..................................... (6,505) (116,010) -- --
----------- ------------- ------------ -------------
Net increase (decrease) ................................... 22,820,497 $ 421,476,131 (5,039,320) $ (82,504,921)
=========== ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
MID-CAP VALUE EQUITY PORTFOLIO
------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD 12/27/96 1 THROUGH
9/30/98 9/30/97
-------------------------------- ---------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ................................. 5,913,961 $ 70,036,846 8,896,850 $ 94,138,731
Service Class ....................................... 3,778,987 47,633,329 1,914,151 20,681,721
Investor A Class .................................... 291,579 3,669,153 189,936 2,103,982
Investor B Class .................................... 418,592 5,320,029 232,883 2,670,486
Investor C Class .................................... 22,846 291,546 2,260 25,652
Shares issued in conversion:
Institutional Class ................................. 8,024,645 109,937,637 -- --
Shares issued in reinvestment of dividends:
Institutional Class ................................. 297,036 3,612,845 15,331 195,462
Service Class ....................................... 66,916 810,801 2,705 34,453
Investor A Class .................................... 7,100 85,995 617 7,085
Investor B Class .................................... 8,483 103,070 186 2,005
Investor C Class .................................... 47 569 3 36
Shares redeemed:
Institutional Class ................................. (3,251,101) (40,262,805) (561,046) (6,293,710)
Service Class ....................................... (2,906,852) (32,862,442) (137,408) (1,534,976)
Investor A Class .................................... (104,472) (1,267,749) (9,353) (105,588)
Investor B Class .................................... (52,273) (625,317) (5,379) (60,403)
Investor C Class .................................... (100) (1,140) (631) (7,989)
----------- ------------ ----------- ------------
Net increase ............................................. 12,515,394 $166,482,367 10,541,105 $111,856,947
=========== ============ =========== ============
<FN>
- -------------
1 Commencement of operations.
</FN>
</TABLE>
79
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
MID-CAP GROWTH EQUITY PORTFOLIO
------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD 12/27/96 1 THROUGH
9/30/98 9/30/97
-------------------------------- ---------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class .................................. 5,758,680 $ 66,898,857 9,480,474 $ 96,275,352
Service Class ........................................ 3,422,677 41,702,771 2,116,730 21,700,683
Investor A Class ..................................... 232,165 2,825,180 226,905 2,349,724
Investor B Class ..................................... 196,974 2,356,782 225,130 2,348,912
Investor C Class ..................................... 14,232 175,298 6,978 67,081
Shares issued in conversion:
Institutional Class .................................. 8,432,259 108,860,464 -- --
Shares issued in reinvestment of dividends:
Institutional Class .................................. 71,476 847,707 -- --
Service Class ........................................ 2,672 31,614 -- --
Investor A Class ..................................... 2,210 26,073 -- --
Investor B Class ..................................... 2,255 26,524 -- --
Investor C Class ..................................... 66 774 -- --
Shares redeemed:
Institutional Class .................................. (3,227,866) (40,048,082) (652,886) (7,158,764)
Service Class ........................................ (2,727,898) (30,831,317) (228,496) (2,359,332)
Investor A Class ..................................... (81,383) (981,552) (8,720) (93,962)
Investor B Class ..................................... (46,370) (561,221) (2,966) (31,463)
Investor C Class ..................................... (141) (1,679) -- --
---------- ------------ ---------- ------------
Net increase .............................................. 12,052,008 $151,328,193 11,163,149 $113,098,231
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SMALL CAP VALUE EQUITY PORTFOLIO
----------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/98 9/30/97
-------------------------------- -------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class .................................. 15,346,259 $ 263,786,891 6,663,986 $ 114,030,745
Service Class ........................................ 3,688,055 67,196,922 1,903,335 31,016,901
Investor A Class ..................................... 1,404,053 25,334,594 430,036 7,152,490
Investor B Class ..................................... 967,161 17,456,713 406,141 7,016,554
Investor C Class ..................................... 326,946 5,908,135 109,385 1,912,858
Shares issued in conversion:
Institutional Class .................................. 15,644,346 308,037,173 -- --
Shares issued in reinvestment of dividends:
Institutional Class .................................. 1,694,367 30,605,954 1,841,845 26,273,991
Service Class ........................................ 620,746 11,221,107 635,002 9,026,515
Investor A Class ..................................... 202,621 3,663,168 249,425 3,549,482
Investor B Class ..................................... 58,156 1,031,697 24,354 340,893
Investor C Class ..................................... 3,448 61,164 36 513
Shares redeemed:
Institutional Class .................................. (12,603,673) (220,462,274) (6,608,331) (111,217,171)
Service Class ........................................ (5,135,032) (82,989,610) (1,542,961) (24,616,052)
Investor A Class ..................................... (986,916) (17,308,562) (534,852) (8,443,485)
Investor B Class ..................................... (153,655) (2,634,326) (25,807) (419,136)
Investor C Class ..................................... (58,706) (997,667) (3,254) (49,229)
----------- ------------- ---------- -------------
Net increase .............................................. 21,018,176 $ 409,911,079 3,548,340 $ 55,575,869
=========== ============= ========== =============
<FN>
- ---------------
1 Commencement of operations.
</FN>
</TABLE>
80
<PAGE>
BLACKROCK FUNDS
<TABLE>
<CAPTION>
SMALL CAP GROWTH EQUITY PORTFOLIO
----------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/98 9/30/97
-------------------------------- -------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ................................. 23,431,140 $ 462,711,400 24,570,369 $ 465,310,898
Service Class ....................................... 7,559,273 159,126,251 4,276,637 79,601,918
Investor A Class .................................... 11,346,492 223,786,382 6,094,862 114,486,135
Investor B Class .................................... 911,079 18,669,216 1,664,738 31,445,733
Investor C Class .................................... 282,220 5,734,205 639,762 11,859,117
Shares issued in conversion:
Institutional Class ................................. 30,529,187 687,822,581 -- --
Shares issued in reinvestment of dividends:
Institutional Class ................................. 990,910 21,245,106 821,752 16,346,714
Service Class ....................................... 448,838 9,537,811 430,248 8,510,309
Investor A Class .................................... 127,447 2,685,302 110,912 2,180,539
Investor B Class .................................... 72,198 1,495,221 29,715 578,839
Investor C Class .................................... 20,385 422,183 2,009 39,134
Shares redeemed:
Institutional Class ................................. (17,534,767) (342,715,796) (18,053,070) (341,609,017)
Service Class ....................................... (9,411,285) (183,123,119) (2,386,675) (45,263,011)
Investor A Class .................................... (11,125,265) (220,308,861) (5,028,464) (94,607,993)
Investor B Class .................................... (442,227) (8,604,608) (238,025) (4,304,650)
Investor C Class .................................... (205,739) (4,057,155) (40,812) (803,293)
----------- ------------- ----------- -------------
Net increase ............................................. 36,999,886 $ 834,426,119 12,893,958 $ 243,771,372
=========== ============= =========== =============
</TABLE>
MICRO-CAP EQUITY PORTFOLIO
---------------------------------
FOR THE PERIOD 5/01/98 1 THROUGH
9/30/98
---------------------------------
SHARES VALUE
----------- ------------
Shares sold:
Institutional Class .................. 155,797 $ 1,664,513
Service Class ........................ 15,795 164,998
Investor A Class ..................... 826,277 8,766,773
Investor B Class ..................... 951,420 10,046,401
Investor C Class ..................... 205,420 2,218,831
Shares redeemed:
Institutional Class .................. (17,120) (157,934)
Service Class ........................ (8,404) (76,393)
Investor A Class ..................... (175,807) (1,796,482)
Investor B Class ..................... (37,058) (363,926)
Investor C Class ..................... (12,206) (110,451)
--------- -----------
Net increase ......................... 1,904,114 $20,356,330
========= ===========
- --------------
1 Commencement of operations.
81
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
----------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/98 9/30/97
-------------------------------- -------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ................................ 22,171,814 $ 316,090,870 18,427,749 $ 249,827,119
Service Class ...................................... 9,558,403 141,964,104 4,798,267 65,276,413
Investor A Class ................................... 12,261,428 177,237,875 5,766,495 78,085,410
Investor B Class ................................... 154,249 2,235,897 227,413 3,097,248
Investor C Class ................................... 12,976 184,935 10,724 155,185
Shares issued in conversion:
Institutional Class ................................ 47,132,261 737,148,562 -- --
Shares issued in reinvestment of dividends:
Institutional Class ................................ 751,360 10,155,048 1,267,456 16,587,621
Service Class ...................................... 270,822 3,656,448 429,352 5,605,176
Investor A Class ................................... 36,099 487,412 72,891 951,131
Investor B Class ................................... 8,315 111,216 10,030 129,581
Investor C Class ................................... 12 156 3 32
Shares redeemed:
Institutional Class ................................ (23,080,604) (341,919,900) (19,077,120) (261,816,900)
Service Class ...................................... (12,632,530) (175,232,797) (3,574,224) (48,412,325)
Investor A Class ................................... (11,803,362) (172,361,971) (5,791,432) (79,432,520)
Investor B Class ................................... (66,174) (940,024) (34,057) (458,487)
Investor C Class ................................... (994) (13,704) -- --
----------- ------------- ----------- -------------
Net increase ............................................ 44,774,075 $ 698,804,127 2,533,547 $ 29,594,684
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL SMALL CAP EQUITY PORTFOLIO
------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD 9/26/97 1 THROUGH
9/30/98 9/30/97
-------------------------------- ---------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class .................................. 318,237 $ 3,614,894 1,550,001 $15,500,010
Service Class ........................................ 62,851 675,615 1 10
Investor A Class ..................................... 71,874 735,279 32,754 327,508
Investor B Class ..................................... 137,198 1,445,340 71,518 715,023
Investor C Class ..................................... 26,322 283,465 18,314 183,140
Shares issued in reinvestment of dividends:
Institutional Class .................................. 8,652 81,070 -- --
Service Class ........................................ 93 873 -- --
Investor A Class ..................................... 255 2,395 -- --
Investor B Class ..................................... 105 982 -- --
Investor C Class ..................................... 17 157 -- --
Shares redeemed:
Institutional Class .................................. (179,590) (1,968,631) -- --
Service Class ........................................ (62,437) (642,150) -- --
Investor A Class ..................................... (15,932) (162,543) -- --
Investor B Class ..................................... (26,972) (300,383) -- --
Investor C Class ..................................... (1) (11) -- --
-------- ----------- --------- -----------
Net increase .............................................. 340,672 $ 3,766,352 1,672,588 $16,725,691
======== =========== ========= ===========
<FN>
- -------------
1 Commencement of operations.
</FN>
</TABLE>
82
<PAGE>
BLACKROCK FUNDS
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING MARKETS PORTFOLIO
----------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/98 9/30/97
-------------------------------- -------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ................................. 9,856,526 $ 57,250,161 6,194,114 $ 58,681,787
Service Class ....................................... 7,561,366 46,093,024 3,396,941 32,721,399
Investor A Class .................................... 203,838 1,388,511 222,576 2,150,041
Investor B Class .................................... 37,292 260,404 192,786 1,883,783
Investor C Class .................................... 10,790 71,306 9,264 92,800
Shares issued in reinvestment of dividends:
Institutional Class ................................. 175,570 1,430,896 12,211 103,871
Service Class ....................................... 87,703 710,396 1 7
Investor A Class .................................... 7,181 57,948 1,111 11,578
Investor B Class .................................... 3,094 24,815 -- --
Investor C Class .................................... 148 1,190 -- --
Shares redeemed:
Institutional Class ................................. (7,630,691) (49,348,984) (2,055,585) (19,721,701)
Service Class ....................................... (8,454,628) (46,130,093) (893,611) (8,425,552)
Investor A Class .................................... (253,915) (1,705,480) (103,774) (989,388)
Investor B Class .................................... (62,510) (425,038) (25,136) (247,215)
Investor C Class .................................... (14,379) (84,575) (84) (807)
---------- ------------ ---------- ------------
Net increase ............................................. 1,527,385 $ 9,594,481 6,950,814 $ 66,260,603
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
SELECT EQUITY PORTFOLIO
----------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/98 9/30/97
-------------------------------- -------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class .................................. 15,000,173 $ 257,009,894 5,853,339 $ 85,232,930
Service Class ........................................ 10,577,940 190,991,132 3,109,666 46,747,048
Investor A Class ..................................... 1,512,205 27,556,895 754,034 11,663,168
Investor B Class ..................................... 1,471,039 26,052,426 996,963 15,826,909
Investor C Class ..................................... 138,720 2,501,325 21,826 354,432
Shares issued in conversion:
Institutional Class .................................. 47,552,529 912,057,506 -- --
Shares issued in reinvestment of dividends:
Institutional Class .................................. 1,747,306 28,534,736 1,825,871 24,532,069
Service Class ........................................ 633,683 10,310,927 607,614 8,141,550
Investor A Class ..................................... 75,398 1,226,233 51,092 692,892
Investor B Class ..................................... 71,122 1,138,659 11,367 152,295
Investor C Class ..................................... 354 5,660 14 188
Shares redeemed:
Institutional Class .................................. (10,389,208) (191,879,607) (6,216,108) (92,157,955)
Service Class ........................................ (9,195,332) (160,166,892) (2,138,625) (32,181,860)
Investor A Class ..................................... (590,526) (10,577,071) (181,922) (2,752,937)
Investor B Class ..................................... (223,552) (3,954,182) (42,645) (682,951)
Investor C Class ..................................... (15,306) (278,150) (3,860) (53,423)
----------- -------------- ---------- ------------
Net increase ......................................... 58,366,545 $1,090,529,491 4,648,626 $ 65,514,355
=========== ============== ========== ============
</TABLE>
83
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
INDEX EQUITY PORTFOLIO
----------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/98 9/30/97
-------------------------------- -------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class .................................. 7,625,271 $152,924,221 2,462,483 $ 38,257,001
Service Class ........................................ 5,200,839 104,994,634 4,417,051 70,407,935
Investor A Class ..................................... 1,047,368 21,369,817 1,150,737 18,875,513
Investor B Class ..................................... 3,920,396 79,973,652 1,935,614 31,084,295
Investor C Class ..................................... 3,423,349 69,588,194 1,131,696 18,023,818
Shares issued in conversion:
Institutional Class .................................. 5,052,170 109,328,955 -- --
Shares issued in reinvestment of dividends:
Institutional Class .................................. 119,292 2,346,304 556,932 7,642,144
Service Class ........................................ 136,903 2,682,747 439,467 6,053,435
Investor A Class ..................................... 18,251 356,608 60,839 861,293
Investor B Class ..................................... 8,883 165,166 13,467 192,015
Investor C Class ..................................... 3,340 62,606 2,605 38,351
Shares redeemed:
Institutional Class .................................. (3,872,586) (79,729,578) (3,014,892) (47,987,128)
Service Class ........................................ (3,992,780) (78,981,985) (1,684,244) (26,809,793)
Investor A Class ..................................... (734,369) (14,587,954) (272,772) (4,364,443)
Investor B Class ..................................... (443,992) (8,937,590) (57,642) (960,311)
Investor C Class ..................................... (329,146) (6,521,053) (86,128) (1,382,780)
---------- ------------ ---------- ------------
Net increase .............................................. 17,183,189 $355,034,744 7,055,213 $109,931,345
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
----------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
9/30/98 9/30/97
-------------------------------- -------------------------------
SHARES VALUE SHARES VALUE
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ................................. 2,422,553 $ 44,222,257 440,057 $ 7,176,252
Service Class ....................................... 2,127,472 39,389,262 2,917,801 47,278,637
Investor A Class .................................... 2,833,309 53,221,039 658,450 10,926,754
Investor B Class .................................... 1,346,155 24,700,962 867,487 14,542,010
Investor C Class .................................... 37,034 676,869 4,757 83,032
Shares issued in conversion:
Institutional Class ................................. 17,383,688 329,247,053 -- --
Shares issued in reinvestment of dividends:
Institutional Class ................................. 141,176 2,434,702 98,648 1,554,413
Service Class ....................................... 882,573 15,160,573 423,634 6,704,875
Investor A Class .................................... 447,858 7,687,100 280,237 4,501,717
Investor B Class .................................... 123,433 2,102,496 33,001 532,907
Investor C Class .................................... 252 4,293 23 392
Shares redeemed:
Institutional Class ................................. (1,259,763) (23,720,119) (1,288,465) (20,912,724)
Service Class ....................................... (3,060,250) (56,191,748) (2,551,141) (41,613,142)
Investor A Class .................................... (2,786,325) (52,168,584) (915,855) (15,203,656)
Investor B Class .................................... (222,825) (4,092,886) (94,088) (1,559,599)
Investor C Class .................................... (3,711) (56,031) -- --
---------- ------------ ---------- ------------
Net increase ............................................. 20,412,629 $382,617,238 874,546 $ 14,011,868
========== ============ ========== ============
</TABLE>
84
<PAGE>
BLACKROCK FUNDS
(E) AT SEPTEMBER 30, 1998, NET ASSETS CONSISTED OF:
<TABLE>
<CAPTION>
LARGE CAP LARGE CAP MID-CAP MID-CAP SMALL CAP SMALL CAP MICRO-CAP
VALUE EQUITY GROWTH EQUITY VALUE EQUITY GROWTH EQUITY VALUE EQUITY GROWTH EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------- ------------ ------------- ------------ ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Capital paid in .............. $1,882,151,879 $721,628,410 $260,100,140 $242,691,315 $633,608,695 $1,169,525,477 $20,297,157
Undistributed net investment
income .................... 169,434 367,688 57,030 -- 43,388 -- --
Accumulated net realized
gain (loss) on investment
transactions, futures
contracts and foreign
exchange contracts ........ 158,709,586 67,068,800 (5,486,606) (1,648,789) 37,605,050 (21,790,603) (2,808,502)
Net unrealized appreciation
(depreciation) on
investment transactions,
futures contracts and foreign
exchange contracts ........ 271,210,501 370,659,560 (9,540,689) 16,869,771 (5,495,692) 114,745,397 350,886
-------------- -------------- ------------ ------------ ------------ -------------- -----------
$2,312,241,400 $1,159,724,458 $245,129,875 $257,912,297 $665,761,441 $1,262,480,271 $17,839,541
============== ============== ============ ============ ============ ============== ===========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL INTERNATIONAL INTERNATIONAL SELECT INDEX
EQUITY SMALL CAP EQUITY EMERGING MARKETS EQUITY EQUITY BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ---------------- ---------------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Capital paid in ............. $1,092,125,571 $20,492,043 $184,212,812 $1,079,740,812 $607,630,101 $499,177,500
Undistributed net investment
income ................... 2,815,849 -- 604,210 140,691 520,550 123,254
Accumulated net realized
gain (loss) on investment
transactions, futures
contracts and foreign
exchange contracts ....... 65,280,848 2,087,928 (24,460,838) 49,251,755 (1,652,607) 19,320,442
Net unrealized appreciation
(depreciation) on
investment transactions,
futures contracts and foreign
exchange contracts ....... 28,875,291 (3,346,367) (67,547,823) 438,432,793 214,851,962 176,632,139
-------------- ----------- ------------ -------------- ------------ ------------
$1,189,097,559 $19,233,604 $ 92,808,361 $1,567,566,051 $821,350,006 $695,253,335
============== =========== ============ ============== ============ ============
</TABLE>
(F) CAPITAL LOSS CARRYOVERS
At September 30, 1998, a capital loss carryover of $563,816, which expires
September 30, 2006, was available to offset possible future realized gains in
the Mid-Cap Growth Equity Portfolio. At September 30, 1998, deferred
post-October losses for Mid-Cap Value Equity Portfolio were $5,482,102, for
Mid-Cap Growth Equity Portfolio were $1,722,725, for Small Cap Growth Equity
Portfolio were $23,311,634, and for Micro-Cap Equity Portfolio were $2,657,882.
(G) PNC COMMON TRUST CONVERSION
On January 22, 1998, January 13, 1998 and February 9, 1998, the Board of
Trustees of the Fund, the Board of Directors of PNC Bank and the Board of
Directors of PNC Bank, Delaware, respectively, approved an asset purchase
agreement among the Fund, PNC Bank, Delaware regarding 25 common trust funds for
which either PNC Bank or PNC Bank, Delaware serve as trustee (each a "PNC Common
Trust Fund"). The agreement provided for the acquisition by the Fund of all of
the assets and liabilities of each PNC Common Trust Fund managed by the Advisor
in a tax-free exchange for Institutional Shares of the corresponding
Portfolio(s) of the Fund and the distribution of such Institutional Shares to
the participating trusts of the PNC Common Trust Funds in liquidation of the PNC
Common Trust Funds.
85
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
The following is a summary of shares issued, net assets converted, net
assets value per share issued and unrealized appreciation of assets acquired as
of the conversion date.
FUNDS CONVERTED ON MAY 4, 1998:
<TABLE>
<CAPTION>
PNC BLACKROCK SHARES NET ASSETS NET ASSETS VALUE UNREALIZED
COMMON TRUST FUND FUND ISSUED CONVERTED PER SHARE ISSUED APPRECIATION
- --------------------------- ----------------------- ---------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
PNC Large Cap Value Equity Large Cap Value Equity 36,221,776 $639,314,346 $17.65 $186,859,990
PNC Equity Growth & Income Large Cap Value Equity 30,883,995 545,102,512 17.65 140,016,238
PNC Large Cap Growth Equity Large Cap Growth Equity 22,346,262 431,506,319 19.31 128,998,512
PNC Mid-Cap Value Equity Mid-Cap Value Equity 8,024,645 109,937,637 13.70 18,239,174
PNC Mid-Cap Growth Equity Mid-Cap Growth Equity 8,432,259 108,860,464 12.91 20,616,729
PNC Small Cap Value Equity Small Cap Value Equity 15,644,346 308,037,173 19.69 76,920,198
PNC Small Cap Growth Equity Small Cap Growth Equity 30,529,187 687,822,581 22.53 194,362,010
PNC International Equity International Equity 47,132,261 737,148,562 15.64 159,658,329
PNC Select Equity Select Equity 47,552,529 912,057,506 19.18 387,681,390
PNC Index Equity Index Equity 5,052,170 109,328,955 21.64 29,512,732
</TABLE>
<TABLE>
<CAPTION>
FUNDS CONVERTED ON MAY 18, 1998:
<S> <C> <C> <C> <C> <C>
PNC Income Large Cap Value Equity 6,783,970 118,176,765 17.42 33,602,127
PNC Balanced Balanced 17,383,688 329,247,053 18.94 103,701,340
</TABLE>
96
<PAGE>
BLACKROCK FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF THE BLACKROCK FUNDS:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, of the Large Cap Value Equity, Large Cap Growth
Equity, Mid-Cap Value Equity, Mid-Cap Growth Equity, Small Cap Value Equity,
Small Cap Growth Equity, Micro-Cap Equity, International Equity, International
Emerging Markets, and Select Equity Portfolios and the statements of net assets
of International Small Cap Equity and Index Equity Portfolios of the BlackRock
Funds (the "Fund"), and the related statements of operations and of changes in
net assets and the financial highlights present fairly, in all material
respects, the financial position of the Large Cap Value Equity, Large Cap Growth
Equity, Mid-Cap Value Equity, Mid-Cap Growth Equity, Small Cap Value Equity,
Small Cap Growth Equity, Micro-Cap Equity, International Equity, International
Small Cap Equity, International Emerging Markets, Select Equity, Index Equity
and Balanced Portfolios of the Fund at September 30, 1998, and the results of
each of their operations, the changes in each of their net assets, and the
financial highlights for the periods presented, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at September 30, 1998 by
correspondence with the custodians and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
November 13, 1998
87
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES
TEN MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<PAGE>
TABLE OF CONTENTS THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES
Page
Schedule of Investments ........................... 91
Statement of Net Assets ........................... 95
Statement of Assets and Liabilities ............... 100
Statements of Operations .......................... 101
Statements of Changes in Net Assets ............... 102
Financial Highlights .............................. 103
Notes to Financial Statements ..................... 104
Report of Independent Accountants ................. 106
THIS REPORT IS SUBMITTED FOR THE INFORMATION OF THE FUND'S SHAREHOLDERS. IT IS
NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS UNLESS PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998
-----------------------
(UNAUDITED)
SHARES VALUE(DAGGER)
------ -------------
COMMON STOCKS -- (100%)
3COM Corp. ........................ 57,100 $ 1,714,784*
AMP, Inc. ......................... 34,804 1,244,243#
AMR Corp. ......................... 28,800 1,596,600
AON Corp. ......................... 26,700 1,722,150#
AT & T Corp. ...................... 277,239 16,201,154
Abbott Laboratories ............... 244,800 10,633,500
Adobe Systems ..................... 10,700 371,491
Advanced Micro Devices, Inc. ...... 22,900 425,081*
Aeroquip Vickers, Inc. ............ 4,500 129,375
Aetna Inc. ........................ 22,937 1,594,122
Ahmanson (H.F.) & Co. ............. 19,500 1,082,250
Air Products & Chemicals, Inc. .... 36,700 1,091,825
Airtouch Communications, Inc. ..... 91,060 5,190,420*
Alberto-Culver Co. Class B ........ 8,900 208,038
Albertson's Inc. .................. 39,100 2,116,288#
Alcan Aluminum, Ltd. .............. 36,100 846,094
Allegheny Teledyne, Inc. .......... 31,335 558,155
Allergan, Inc. .................... 10,400 607,100
AlliedSignal, Inc. ................ 89,100 3,151,913
Allstate Corp. .................... 131,800 5,494,413
Alltel Corp. ...................... 43,600 2,065,550
Aluminum Co. of America ........... 29,500 2,094,500
Alza Corp. ........................ 13,700 594,238*#
Amerada Hess Corp. ................ 14,400 830,700
Ameren Corp. ...................... 21,900 918,431
American Electric Power Co., Inc .. 30,300 1,479,019#
American Express Co. .............. 72,600 5,635,575
American General Corp. ............ 40,100 2,561,388
American Greetings Corp. Class A .. 11,400 451,013
American Home Products Corp. ...... 209,200 10,956,850#
American International Group,
Inc. ............................ 166,789 12,842,753
American Stores Co. ............... 43,700 1,406,594
Ameritech Corp. ................... 175,200 8,300,100
Amgen, Inc. ....................... 40,300 3,050,206*
Amoco Corp. ....................... 151,700 8,172,838
Anadarko Petroleum Corp. .......... 19,000 746,938
Andrew Corp. ...................... 13,893 184,516*
Anheuser-Busch Companies, Inc. .... 76,600 4,136,400
Apache Corp. ...................... 15,600 418,275
Apple Computer, Inc. .............. 21,300 812,728*#
Applied Materials, Inc. ........... 58,300 1,473,897*
Archer-Daniels Midland Co. ........ 95,305 1,596,359
Armco, Inc. ....................... 17,100 85,500*
Armstrong World Industries, Inc. .. 6,400 342,400#
Asarco, Inc. ...................... 6,350 121,444
Ascend Communications ............. 31,600 1,438,788*#
Ashland, Inc. ..................... 12,100 559,625
Associates First Capital Corp.
Class A ......................... 54,755 3,572,764
Atlantic Richfield Co. ............ 50,800 3,603,625
Autodesk, Inc. .................... 7,500 197,109
Automatic Data Processing, Inc. ... 48,000 3,588,000
Autozone, Inc. .................... 24,300 598,388*
Avery Dennison Corp. .............. 18,500 808,219
Avon Products, Inc. ............... 41,900 1,175,819
BB&T Corp. ........................ 45,400 1,359,163
BMC Software, Inc. ................ 32,300 1,939,009*
Baker Hughes, Inc. ................ 50,610 1,059,647
Ball Corp. ........................ 4,800 169,200
Baltimore Gas & Electric Co. ...... 23,650 789,319
Banc One Corp. .................... 112,132 4,779,627
BankAmerica Corp. ................. 108,736 6,537,752
BankBoston Corp. .................. 46,800 1,544,400
Bank of New York Co., Inc. ........ 118,500 3,243,938
Bankers Trust Co. ................. 15,400 908,600#
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998
-----------------------
(UNAUDITED)
SHARES VALUE(DAGGER)
------ -------------
Bard (C.R.), Inc. ................. 8,900 $ 328,188
Barrick Gold Corp. ................ 59,200 1,184,000
Battle Mountain Gold Co. .......... 36,500 221,281
Bausch & Lomb, Inc. ............... 8,900 350,438
Baxter International, Inc. ........ 45,300 2,695,350
Bear Stearns Co. .................. 18,000 556,875
Becton Dickinson & Co. ............ 39,400 1,620,325
Bell Atlantic Corp. ............... 236,838 11,471,841
Bellsouth Corp. ................... 146,300 11,009,075
Bemis Co., Inc. ................... 8,500 298,031
Bestfoods, Inc. ................... 45,600 2,208,750
Bethlehem Steel Corp. ............. 20,600 169,950*
Biomet, Inc. ...................... 17,900 621,466
Black & Decker Corp. .............. 14,900 620,213#
Block (H.R.), Inc. ................ 16,900 699,238
Boeing Co. ........................ 160,606 5,510,793
Boise Cascade Corp. ............... 8,900 225,281
Boston Scientific Corp. ........... 31,200 1,602,900*
Briggs & Stratton Corp. ........... 3,800 156,275
Bristol Myers Squibb Co. .......... 158,300 16,443,413
Brown-Forman Corp. Class B ........ 11,000 660,000
Browning-Ferris Industries, Inc. .. 27,700 837,925
Brunswick Corp. ................... 15,700 203,119
Burlington Northern Santa Fe
Corp. ........................... 75,111 2,403,552
Burlington Resources, Inc. ........ 28,200 1,053,975
CBS Corp. ......................... 113,800 2,759,650
CIGNA Corp. ....................... 33,900 2,241,638
CSX Corp. ......................... 34,600 1,455,363
CVS Corp. ......................... 62,016 2,717,076
Cabletron Systems, Inc. ........... 26,100 293,625*
Campbell Soup Co. ................. 71,400 3,583,388
Capital One Financial ............. 10,400 1,076,400
Cardinal Health, Inc. ............. 21,200 2,188,900#
Carolina Power & Light Co. ........ 24,100 1,113,119#
Case Corp. ........................ 11,800 256,650#
Caterpillar, Inc. ................. 57,800 2,575,713#
Cendent Corp. ..................... 136,200 1,583,325*
Centex Corp. ...................... 9,500 327,750
Central & South West Corp. ........ 33,900 968,269
Ceridian Corp. .................... 11,453 657,116*
Champion International Corp. ...... 15,100 472,819
Chase Manhattan Corp. ............. 136,292 5,894,629
Chevron Corp. ..................... 104,000 8,742,500
Chrysler Corp. .................... 102,800 4,921,550
Chubb Corp. ....................... 26,600 1,675,800#
Cincinnati Financial .............. 26,700 821,025
Cincinnati Milacron, Inc. ......... 6,200 95,713
Cinergy Corp. ..................... 25,093 959,807
Circuit City Stores, Inc. ......... 15,800 526,338#
Cisco Systems, Inc. ............... 246,900 15,269,222*
Citicorp .......................... 71,800 6,672,913
Clear Channel Communications,
Inc. ............................ 39,566 1,879,385*
Clorox Co. ........................ 16,500 1,361,250
Coastal Corp. ..................... 33,700 1,137,375
Coca-Cola Co. ..................... 381,900 22,006,988
Colgate-Palmolive Co. ............. 47,200 3,233,200
Columbia Energy Group ............. 13,200 773,850#
Columbia/HCA Healthcare Corp. ..... 102,682 2,060,058#
Comcast Corp. Class A Special ..... 58,500 2,747,672
Comerica, Inc. .................... 24,850 1,362,091
Compaq Computer Corp. ............. 265,724 8,403,522
Computer Associates International,
Inc. ............................ 89,300 3,304,100
Computer Sciences Corp. ........... 24,900 1,357,050#
Conagra, Inc. ..................... 77,500 2,087,656#
Conseco, Inc. ..................... 49,688 1,518,590#
See accompanying notes to financial statements.
91
<PAGE>
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998
-----------------------
(UNAUDITED)
SHARES VALUE(DAGGER)
------ -------------
Consolidated Edison Co. of
New York, Inc. .................. 37,300 $ 1,944,263
Consolidated Natural Gas Co. ...... 15,200 828,400
Consolidated Stores ............... 17,400 341,475*
Cooper Industries, Inc. ........... 18,400 749,800
Cooper Tire & Rubber Co. .......... 12,400 223,200
Coors (Adolph) Co. Class B ........ 5,800 266,619
Corning, Inc. ..................... 36,800 1,083,300#
Costco Companies, Inc. ............ 34,303 1,625,105*
Countrywide Credit Industries,
Inc. ........................... 17,700 736,763
Crane Co. ......................... 10,900 256,150
Crown Cork & Seal Co., Inc. ....... 19,700 526,975
Cummins Engine Co., Inc. .......... 6,100 181,475#
Cyprus Amax Minerals Co., Inc. .... 14,850 196,763
DTE Energy Co. .................... 23,100 1,043,831
Dana Corp. ........................ 26,142 975,423
Darden Restaurants, Inc. .......... 22,400 358,400
Data General Corp. ................ 7,900 85,913*
Dayton-Hudson Corp. ............... 69,600 2,488,200
Deere & Co. ....................... 39,100 1,182,775#
Dell Computer Corp. ............... 201,400 13,248,344*
Delta Air Lines, Inc. ............. 12,000 1,167,000
Deluxe Corp. ...................... 12,800 364,000
Dillard Department Stores, Inc.
Class A ......................... 17,600 498,300
Disney (Walt) Co. ................. 325,300 8,234,156
Dollar General Corp. .............. 29,175 776,784#
Dominion Resources, Inc. VA ....... 31,100 1,387,838
Donnelley (R.R.) & Sons Co. ....... 22,300 784,681#
Dover Corp. ....................... 35,400 1,092,975
Dow Chemical Co. .................. 35,700 3,050,119#
Dow Jones & Co., Inc. ............. 14,900 692,850
DuPont (E.I.) de Nemours & Co. .... 179,600 10,080,050
Duke Energy Corp. ................. 57,241 3,788,639
Dun & Bradstreet Corp. ............ 27,100 731,700#
E G & G, Inc. ..................... 7,300 165,163
EMC Corp., MA ..................... 79,400 4,540,688*#
Eastern Enterprises ............... 3,200 134,800
Eastman Chemical Co. .............. 12,550 632,991#
Eastman Kodak Co. ................. 51,500 3,981,594
Eaton Corp. ....................... 11,400 714,638
Ecolab, Inc. ...................... 20,600 585,813
Edison International .............. 56,200 1,443,638
Electronic Data ................... 78,400 2,601,900
Emerson Electric Co. .............. 70,000 4,357,500#
Engelhard Corp. ................... 22,874 404,584
Enron Corp. ....................... 52,500 2,772,656
Entergy Corp. ..................... 39,100 1,202,325#
Equifax Corp. ..................... 23,400 835,088
Exxon Corp. ....................... 377,600 26,502,800
FDX Corp. ......................... 23,400 1,055,925*
FMC Corp. ......................... 5,500 283,594
FPL Group, Inc. ................... 28,800 2,007,000#
Fannie Mae ........................ 164,800 10,588,400
Federated Department Stores,
Inc. ........................... 33,400 1,214,925*#
Fifth Third Bancorp. .............. 42,500 2,437,109
First Chicago NBD Corp. ........... 45,493 3,116,271
First Data Corp. .................. 70,900 1,666,150
First Energy Corp. ................ 37,600 1,167,950
First Union Corp. ................. 154,164 7,891,270
Fleet Financial Group, Inc. ....... 45,064 3,309,388
Fleetwood Enterprises, Inc. ....... 5,500 166,031
Fluor Corp. ....................... 13,000 533,813#
Ford Motor Co. .................... 192,300 9,026,081
Fort James Corp. .................. 34,900 1,145,156
Fortune Brands .................... 27,400 811,725
Foster Wheeler Corp. .............. 6,450 88,688
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998
-----------------------
(UNAUDITED)
SHARES VALUE(DAGGER)
------ -------------
Franklin Resources Inc. ........... 40,300 $ 1,209,000#
Freddie Mac. ...................... 107,600 5,319,475
Freeport McMoran Cooper & Gold, Inc.
Class B .......................... 28,600 339,625
Frontier Corporation .............. 27,300 747,338
Fruit of the Loom, Inc. Class A ... 11,500 173,219*
GPU, Inc. ......................... 20,400 867,000
GTE Corp. ......................... 153,400 8,437,000
Gannett Co., Inc. ................. 45,400 2,431,738#
Gap, Inc. ......................... 62,300 3,286,325#
Gateway 2000 Inc. ................. 24,700 1,287,488*#
General Dynamics Corp. ............ 20,100 1,008,769#
General Electric Co. .............. 516,800 41,117,900
General Instrument Corp. .......... 23,880 516,405*
General Mills, Inc. ............... 24,800 1,736,000
General Motors Corp. .............. 103,800 5,676,563
General RE Corp. .................. 12,000 2,436,000
General Signal Corp. .............. 6,900 234,169
Genuine Parts Co. ................. 28,275 850,017
Georgia-Pacific Group ............. 14,900 679,813
Giant Food, Inc. Class A .......... 8,600 371,413
Gillette Co. ...................... 178,600 6,831,450
Golden West Financial Corp. ....... 9,200 752,675
Goodrich (B.F.) Co. ............... 11,800 385,713
Goodyear Tire & Rubber Co. ........ 24,800 1,274,100
Grainger (W.W.), Inc. ............. 15,600 657,150
Great Atlantic & Pacific Tea
Co., Inc. ....................... 6,100 147,925
Great Lakes Chemical Corp. ........ 9,400 365,425
Guidant Corp. ..................... 23,900 1,774,575#
HBO & Co. ......................... 68,600 1,982,969
HCR Manor Care .................... 10,100 296,056*
Halliburton Co. ................... 69,800 1,993,663#
Harcourt General, Inc. ............ 11,223 542,913
Harnischfeger Industries, Inc. .... 7,576 85,230
Harrahs Entertainment, Inc. ....... 16,100 214,331*
Harris Corp. ...................... 12,700 406,400
Hartford (The) Financial
Services Group .................. 37,200 1,764,675
Hasbro, Inc. ...................... 20,799 613,571#
Healthsouth Rehabilitation Corp. .. 67,100 708,744*#
Health Care & Rehab ............... 7,100 208,119
Heinz (H.J.) Co. .................. 57,600 2,944,800
Helmerich & Payne, Inc. ........... 8,000 168,000
Hercules, Inc. .................... 15,000 450,938
Hershey Foods Corp. ............... 22,600 1,546,688#
Hewlett-Packard Co. ............... 165,200 8,745,275#
Hilton Hotels Corp. ............... 39,200 668,850
Home Depot, Inc. .................. 233,344 9,217,088#
Homestake Mining Co. .............. 33,600 407,400#
Honeywell, Inc. ................... 20,000 1,281,250
Household International, Inc. ..... 78,212 2,932,950
Houston Industries, Inc. .......... 47,124 1,466,735
Humana, Inc. ...................... 26,600 435,575*
Huntington Bancshares, Inc. ....... 33,730 841,142
IMS Health, Inc. .................. 26,400 1,635,150
ITT Corp. ......................... 18,800 636,850
Ikon Office Solutions, Inc. ....... 21,500 154,531
Illinois Tool Works, Inc. ......... 39,800 2,169,100#
Inco, Ltd. ........................ 26,400 270,600
Ingersoll-Rand Co. ................ 26,200 993,963
Intel Corp. ....................... 267,200 22,920,750
International Business
Machines Corp. .................. 148,300 18,982,400
International Flavors &
Fragrances, Inc. ................ 17,100 564,300#
International Paper Co. ........... 48,900 2,279,963
Interpublic Group of Companies,
Inc. ............................ 21,750 1,173,141#
Jefferson-Pilot Corp. ............. 16,975 1,026,988
See accompanying notes to financial statements.
92
<PAGE>
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998
-----------------------
(UNAUDITED)
SHARES VALUE(DAGGER)
------ -------------
Johnson & Johnson ................. 203,800 $ 15,947,350#
Johnson Controls, Inc. ............ 13,400 623,100
Jostens, Inc. ..................... 5,900 122,425
KLA-Tencor Corp. .................. 13,800 343,706*
K Mart Corp. ...................... 78,300 934,706*
Kaufman & Broad Home Corp. ........ 6,300 147,656
Kellogg Co. ....................... 64,800 2,134,350
Kerr-McGee Corp. .................. 7,600 345,800
Keycorp ........................... 69,800 2,015,475
Kimberly Clark Corp. .............. 86,904 3,519,612
King World Productions, Inc. ...... 11,600 303,050*
Knight Ridder, Inc. ............... 12,452 554,114#
Kohls Corp. ....................... 25,100 978,900*#
Kroger Co. ........................ 40,600 2,030,000*
LSI Logic Corp. ................... 22,400 282,800*
Laidlaw, Inc. Class B Non-Voting .. 52,300 493,581
Lehman Bros. HL ................... 18,700 528,275
Lilly (Eli) & Co. ................. 174,900 13,696,856
Limited, Inc. ..................... 36,200 794,138#
Lincoln National Corp. ............ 15,800 1,299,550
Liz Claiborne, Inc. ............... 10,500 274,969
Lockheed Martin Corp. ............. 31,057 3,130,934
Loews Corp. ....................... 18,300 1,544,063
Longs Drug Stores Corp. ........... 6,200 249,163
Louisiana Pacific Corp. ........... 17,400 354,525
Lowe's Companies, Inc. ............ 56,000 1,781,500
Lucent Technologies, Inc. ......... 208,700 14,413,344
MBIA, Inc. ........................ 15,900 853,631
MBNA Corp. ........................ 79,830 2,285,134
MCI Worldcom, Inc. ................ 282,401 13,811,174*
MGIC Investment Corp. ............. 18,000 663,750
Mallinckrodt Group, Inc. .......... 11,600 235,625
Marriott International, Inc. ...... 40,000 955,000
Marsh & McLennan Companies, Inc. .. 40,800 2,029,800
Masco Corp. ....................... 54,000 1,329,750#
Mattel, Inc. ...................... 46,352 1,297,856#
May Department Stores Co. ......... 36,700 1,890,050
Maytag Corp. ...................... 14,700 701,925
McDermott International, Inc. ..... 9,500 255,906
McDonalds Corp. ................... 108,800 6,494,000
McGraw-Hill Companies, Inc. ....... 15,700 1,244,225
Mead Corp. ........................ 16,400 482,775
Mediaone Group, Inc. .............. 96,700 4,297,106*#
Medtronic, Inc. ................... 74,500 4,311,688
Mellon Bank Corp. ................. 41,400 2,279,588
Mercantile Bank ................... 24,200 1,170,675#
Merck & Co., Inc. ................. 189,000 24,487,313#
Meredith Corp. .................... 8,400 268,800
Merrill Lynch & Co., Inc. ......... 55,200 2,615,100
Meyer Fred Inc. ................... 24,500 952,437*#
Micron Technology, Inc. ........... 33,800 1,028,788*#
Microsoft Corp. ................... 381,600 42,011,775*
Millipore Corp. ................... 7,000 133,438
Minnesota Mining & Manufacturing
Co. ............................. 64,000 4,716,000#
Mirage Resorts, Inc. .............. 28,600 479,050*#
Mobil Corp. ....................... 124,400 9,446,625
Monsanto Co. ...................... 95,700 5,395,088
Moore Corp., Ltd. ................. 14,100 148,931
Morgan (J.P.) & Co., Inc. ......... 28,200 2,386,425
Morgan Stanley Group, Inc. ........ 93,009 4,005,200
Morton International, Inc. ........ 20,800 455,000
Motorola, Inc. .................... 94,800 4,046,775
Nacco Industries, Inc. Class A .... 1,300 130,000
Nalco Chemical Co. ................ 10,500 309,750
National City Corp. ............... 52,367 3,452,949
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998
-----------------------
(UNAUDITED)
SHARES VALUE(DAGGER)
------ -------------
National Semiconductor Corp. ...... 26,100 $ 252,844*
National Service Industries, Inc. . 6,700 213,563
NationsBank Corp. ................. 152,819 8,175,817
Navistar International Corp. ...... 10,800 244,350*
New York Times Class A ............ 30,200 830,500
Newell Co. ........................ 25,800 1,188,413
Newmont Mining Corp. .............. 24,958 605,232
Nextel Communications ............. 45,252 914,939*
Niagra Mohawk Power Corp. ......... 29,700 456,638*
Nicor, Inc. ....................... 7,600 314,925
Nike, Inc. Class B ................ 45,900 1,689,694#
Nordstrom, Inc. ................... 24,000 593,250
Norfolk Southern Corp. ............ 60,100 1,746,656
Northern States Power Co. MN ...... 24,000 673,500
Northern Telecom, Ltd. ............ 103,760 3,320,320
Northern Trust Co. ................ 17,700 1,206,366
Northrop Grumman Corp. ............ 10,900 795,700
Norwest Corp. ..................... 121,600 4,354,800
Novell, Inc. ...................... 56,100 685,472*
Nucor Corp. ....................... 14,000 568,750#
Occidental Petroleum Corp. ........ 56,000 1,204,000
Omnicom Group ..................... 27,000 1,215,000
Oneok, Inc. ....................... 5,000 170,000
Oracle Systems Corp. .............. 154,662 4,509,364*#
Oryx Energy Co. ................... 16,900 218,644*
Owens-Corning Fiberglass Corp. .... 8,600 280,038
Owens-Illinois, Inc. .............. 24,700 617,500*#
PECO Energy Co. ................... 35,500 1,297,969
PG&E Corp. ........................ 60,800 1,941,800
PNC Bank Corp. .................... 47,950 2,157,750
PPG Industries, Inc. .............. 28,000 1,527,750
Paccar, Inc. ...................... 12,320 507,815
PacifiCorp. ....................... 47,200 905,650
Pall Corp. ........................ 19,700 437,094
Parametric Technology Corp. ....... 43,300 437,059*
Parker-Hannifin Corp. ............. 17,525 520,273
Paychex Inc. ...................... 25,800 1,327,088
Penney (J.C.) Co., Inc. ........... 40,100 1,801,994#
Pennsylvania Power & Light ........ 24,000 621,000#
Pennzoil Co. ...................... 7,600 266,475
Peoples Energy Corp. .............. 5,600 201,600
Pep Boys -- Manny, Moe & Jack ..... 10,100 135,088
PepsiCo, Inc. ..................... 234,000 6,888,375
Perkin Elmer Corp. ................ 7,800 535,763#
Pfizer, Inc. ...................... 197,700 20,943,844
Pharmacia & Upjohn, Inc. .......... 80,580 4,044,109
Phelps Dodge Corp. ................ 9,300 485,344
Phillip Morris Companies, Inc. .... 376,500 17,342,531
Phillips Petroleum Co. ............ 41,200 1,859,150
Pioneer Hi-Bred International,
Inc. ............................ 38,401 1,008,026
Pitney Bowes, Inc. ................ 43,800 2,389,838
Placer Dome, Inc. ................. 39,800 549,738
Polaroid Corp. .................... 7,000 171,938
Potlatch Corp. .................... 4,600 156,688
Praxair, Inc. ..................... 25,100 820,456
Procter & Gamble Co. .............. 212,832 15,097,770
Progressive Corp. ................. 11,400 1,285,350#
Provident Companies ............... 21,400 722,250
Providian Financial Corp. ......... 15,200 1,289,150
Public Service Enterprise Group,
Inc. ............................ 37,000 1,454,563
Pulte Corp. ....................... 6,800 167,025
Quaker Oats Co. ................... 21,700 1,280,300
Ralston Purina Co. ................ 49,600 1,450,800
Raychem Corp. ..................... 13,300 324,188
Raytheon Co. Class B .............. 54,000 2,912,625
See accompanying notes to financial statements.
93
<PAGE>
SCHEDULE OF INVESTMENTS THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES (CONTINUED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998
-----------------------
(UNAUDITED)
SHARES VALUE(DAGGER)
------ -------------
Reebok International, Ltd. ........ 9,000 $ 122,063#
Regions Financial Co. ............. 34,100 1,235,059
Republic Bank of New York ......... 17,200 679,400
Reynolds Metals Co. ............... 11,400 579,263
Rite Aid Corp. .................... 41,000 1,455,500#
RJR Nabisco Holdings .............. 51,700 1,302,194
Rockwell International Corp. ...... 30,500 1,101,813#
Rohm & Haas Co. ................... 28,300 787,094#
Rowan Companies, Inc. ............. 13,700 153,269*
Royal Dutch Petroleum Co. ......... 340,900 16,235,363#
Rubbermaid, Inc. .................. 23,800 569,713#
Russell Corp. ..................... 5,800 152,250
Ryder System, Inc. ................ 11,700 291,038
SBC Communications, Inc. .......... 281,708 12,518,399
SLM Holding Corp. ................. 26,600 862,838
Safeco Corp. ...................... 22,500 937,266
Saint Jude Medical, Inc. .......... 13,350 308,719*
Saint Paul Companies, Inc. ........ 37,542 1,220,115
Sara Lee Corp. .................... 74,000 3,996,000
Schering-Plough Corp. ............. 116,500 12,065,031
Schlumberger, Ltd. ................ 86,400 4,347,000
Schwab (Charles) Corp. ............ 42,550 1,675,406
Scientific-Atlanta, Inc. .......... 12,500 264,063
Seagate Technology, Inc. .......... 38,600 967,413*
Seagram Co., Ltd. ................. 55,200 1,583,550
Sealed Air Corp. .................. 13,292 423,683*
Sears, Roebuck & Co. .............. 62,400 2,757,300
Sempra Energy ..................... 38,145 994,154#
Service Corp. International ....... 40,800 1,300,500
Shared Medical Systems Corp. ...... 4,200 223,388#
Sherwin-Williams Co. .............. 27,400 592,525
Sigma-Aldrich Corp. ............... 16,000 462,500
Silicon Graphics, Inc. ............ 30,000 281,250*
Snap-On, Inc. ..................... 9,400 289,638
Sonat, Inc. ....................... 17,500 522,813
Southern Co. ...................... 110,900 3,264,619
Southwest Airlines Co. ............ 53,400 1,068,000
Springs Industries, Inc. Class A .. 3,050 105,988
Sprint Corp. ...................... 68,400 4,924,800
Stanley Works ..................... 14,100 419,475
State Street Corp. ................ 25,800 1,407,713
Stone Container Corp. ............. 16,700 144,038*
Summit Bancorp .................... 27,800 1,042,500
Sun Company, Inc. ................. 14,800 473,600
Sun Microsystems .................. 60,240 3,002,588*
Sunamerica Inc. ................... 31,150 1,900,150
Suntrust Banks, Inc. .............. 33,300 2,064,600#
Supervalu, Inc. ................... 19,200 447,600
Synovus Financial Corp. ........... 41,850 826,538#
Sysco Corp. ....................... 53,700 1,265,306
TJX Companies, Inc. ............... 50,500 899,531#
TRW, Inc. ......................... 19,400 860,875
Tandy Corp. ....................... 15,930 852,255
Tektronix, Inc. ................... 7,950 123,225
Tele-Communications, Inc. Class A . 83,400 3,265,631*#
Tellabs, Inc. ..................... 30,800 1,227,188*#
Temple-Inland, Inc. ............... 8,800 421,300
Tenet Healthcare Corp. ............ 48,900 1,405,875*
Tenneco, Inc. ..................... 26,900 884,338
Texaco, Inc. ...................... 85,100 5,334,706
Texas Instruments, Inc. ........... 61,800 3,259,950
Texas Utilities Co. ............... 44,397 2,067,235
Textron, Inc. ..................... 26,200 1,588,375
Thermo-Electron Group ............. 26,300 396,144*
Thomas & Betts Corp. .............. 9,000 342,563
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1998
-----------------------
(UNAUDITED)
SHARES VALUE(DAGGER)
------ -------------
Time Warner, Inc. ................. 95,400 $ 8,353,463#
Times Mirror Co. Class A .......... 13,900 738,438#
Timken Co. ........................ 9,900 149,738
Torchmark Corp. ................... 22,300 801,406
Toys "R" Us, Inc. ................. 43,900 710,631*
Transamerica Corp. ................ 9,900 1,049,400
Travelers Group, Inc. ............. 183,868 6,895,050#
Tribune Co. ....................... 19,400 976,063#
Tricon Global Rest. ............... 24,060 938,340*
Tupperware Corp. .................. 9,200 108,100
Tyco International, Ltd. .......... 93,300 5,154,825#
UNUM Corp. ........................ 22,100 1,098,094#
US Airways Group, Inc. ............ 14,800 749,250*
US Bancorp ........................ 117,900 4,192,819
US West, Inc. Media Group ......... 79,481 4,167,785
UST, Inc. ......................... 29,500 872,093
USX-Marathon Group, Inc. .......... 46,100 1,633,669
USX-US Steel Group ................ 14,020 334,728
Unicom Corp., Inc. ................ 34,500 1,289,438
Unilever NV ....................... 101,800 6,235,250
Union Camp Corp. .................. 11,000 433,125
Union Carbide Corp. ............... 21,400 922,875
Union Pacific Corp. ............... 39,100 1,666,638#
Union Pacific Resources Group ..... 39,876 490,973
Union Planters Corp. .............. 20,000 1,005,000
Unisys Corp. ...................... 40,300 916,825*
United Healthcare Corp. ........... 30,900 1,081,500#
United States Surgical Corp. ...... 12,340 514,424
United Technologies Corp. ......... 36,400 2,782,325
Unocal Corp. ...................... 38,200 1,384,750
VF Corp. .......................... 19,300 716,513
Venator Group, Inc. ............... 21,500 186,781*
Viacom, Inc. Class B .............. 56,934 3,302,172*
Wachovia Corp. .................... 32,800 2,796,200
Wal-Mart Stores, Inc. ............. 355,100 19,397,338#
Walgreen Co. ...................... 79,100 3,485,344#
Warner-Lambert Co. ................ 130,300 9,837,650
Washington Mutual Inc. ............ 61,330 2,060,305#
Waste Management .................. 91,047 4,375,946
Wells Fargo & Co. ................. 13,500 4,792,500
Wendy's International, Inc. ....... 20,300 450,406
Westvaco Corp. .................... 16,050 385,200
Weyerhaeuser Co. .................. 31,600 1,333,125
Whirlpool Corp. ................... 12,100 568,700
Williamette Industries, Inc. ...... 17,700 507,769
Williams Companies, Inc. .......... 67,697 1,946,289
Winn-Dixie Stores, Inc. ........... 23,600 877,625#
Worthington Industries, Inc. ...... 15,375 194,109
W.R. Grace & Co. .................. 12,100 150,494*
Wrigley (Wm.) Jr. Co. ............. 18,400 1,397,250
Xerox Corp. ....................... 52,100 4,415,477
------- --------------
TOTAL INVESTMENTS--(100%) ............ $1,288,972,796
(Cost $915,392,655)(DAGGER)(DAGGER) ==============
- --------------------
(DAGGER) See Note B to Financial Statements.
* Non-Income Producing Securities
# Total or Partial Securities on Loan
(DAGGER)(DAGGER) Approximates cost for federal income tax purposes.
See accompanying notes to financial statements.
94
<PAGE>
STATEMENT OF NET ASSETS THE U.S. LARGE COMPANY SERIES
THE U.S. LARGE COMPANY SERIES
- --------------------------------------------------------------------------------
NOVEMBER 30, 1997
---------------------------
SHARES VALUE(DAGGER)
------- ---------------
COMMON STOCKS -- (99.8%)
3COM Corp. ........................ 38,200 $ 1,383,556*
AMP, Inc. ......................... 24,304 1,055,705
AMR Corp. ......................... 10,300 1,248,231*
AON Corp. ......................... 18,475 978,020
AT & T Corp. ...................... 179,539 10,031,742
Abbott Laboratories ............... 85,100 5,531,500
Adobe Systems, Inc. ............... 8,300 348,081
Advanced Micro Devices, Inc. ...... 15,600 340,275*
Aeroquip Vickers, Inc. ............ 3,000 153,187
Aetna, Inc. ....................... 16,537 1,246,476
Ahmanson (H.F.) & Co. ............. 10,800 642,600#
Air Products & Chemicals, Inc. .... 12,200 935,587
Airtouch Communications, Inc. ..... 55,600 2,182,300*
Alberto-Culver Co. Class B ........ 6,500 202,719
Albertson's Inc. .................. 27,200 1,207,000
Alcan Aluminum, Ltd. .............. 25,000 673,437
Allegheny Teledyne, Inc. .......... 19,400 499,550
Allergan, Inc. .................... 7,000 237,125
AlliedSignal, Inc. ................ 62,400 2,316,600
Allstate Corp. .................... 48,127 4,132,906
Alltel Corp. ...................... 20,700 822,825
Aluminium Co. of America .......... 19,200 1,291,200
Alza Corp. ........................ 9,200 245,525*
Amerada Hess Corp. ................ 10,000 560,000
American Electric Power Co., Inc. . 21,000 1,040,812
American Express Co. .............. 51,800 4,085,725
American General Corp. ............ 27,480 1,480,485
American Greetings Corp. Class A .. 8,100 297,169
American Home Products Corp. ...... 71,600 5,003,050
American International Group,
Inc. ............................ 77,493 7,812,263
American Stores Co. ............... 30,300 600,319
Ameritech Corp. ................... 60,900 4,693,106
Amgen, Inc. ....................... 29,300 1,499,794
Amoco Corp. ....................... 54,300 4,887,000
Anadarko Petroleum Corp. .......... 6,800 442,000
Andrew Corp. ...................... 10,193 269,796
Anheuser-Busch Companies, Inc. .... 54,300 2,345,081
Apache Corp. ...................... 9,800 360,150
Apple Computer, Inc. .............. 14,200 251,606*#
Applied Materials, Inc. ........... 40,200 1,325,344*
Archer-Daniels Midland Co. ........ 61,991 1,325,058
Armco, Inc. ....................... 11,600 61,625*
Armstrong World Industries, Inc. .. 4,500 310,219#
Asarco, Inc. ...................... 4,650 115,669
Ashland, Inc. ..................... 8,100 378,169
Atlantic Richfield Co. ............ 35,400 2,885,100#
Autodesk, Inc. .................... 5,600 215,075
Automatic Data Processing, Inc. ... 32,400 1,822,500
Autozone, Inc. .................... 16,700 501,000#
Avery Dennison Corp. .............. 11,500 481,562
Avon Products, Inc. ............... 14,700 849,844#
Baker Hughes, Inc. ................ 18,600 778,875
Ball Corp. ........................ 3,300 127,050
Baltimore Gas & Electric Co. ...... 16,350 501,741
Banc One Corp. .................... 64,411 3,309,115
Bank of New York Co., Inc. ........ 42,000 2,257,500#
BankAmerica Corp. ................. 77,236 5,638,228
BankBoston Corp. .................. 16,100 1,434,912
Bankers Trust New York Corp. ...... 11,000 1,304,187
Bard (C.R.), Inc. ................. 6,300 188,606
Barnett Banks, Inc. ............... 21,900 1,541,212
Barrick Gold Corp. ................ 41,300 684,031#
Battle Mountain Gold Co. .......... 25,200 127,575
Bausch & Lomb, Inc. ............... 6,100 241,712
- --------------------------------------------------------------------------------
NOVEMBER 30, 1997
---------------------------
SHARES VALUE(DAGGER)
------- ---------------
Baxter International, Inc. ........ 31,000 $ 1,569,375
Bay Networks, Inc. ................ 23,200 697,450*
Becton Dickinson & Co. ............ 13,600 701,250
Bell Atlantic Corp. ............... 85,806 7,658,185
Bellsouth Corp. ................... 109,400 5,989,650
Bemis Co., Inc. ................... 5,800 244,325
Beneficial Corp. .................. 5,700 442,462
Bethlehem Steel Corp. ............. 12,600 129,150*#
Beverly Enterprises. .............. 12,300 209,100*
Biomet, Inc. ...................... 12,500 298,047
Black & Decker Corp. .............. 10,200 374,850
Block (H.&R.), Inc. ............... 11,300 463,300
Boeing Co. ........................ 110,486 5,869,569
Boise Cascade Corp. ............... 6,000 202,125
Boston Scientific Corp. ........... 21,500 971,531*#
Briggs & Stratton Corp. ........... 2,800 143,150
Bristol Myers Squibb Co. .......... 110,100 10,308,112
Brown-Forman Corp. Class B ........ 7,900 405,862
Browning-Ferris Industries, Inc. .. 21,800 777,987
Brunswick Corp. ................... 10,800 361,125
Burlington Northern Santa Fe
Corp. ........................... 17,237 1,577,185
Burlington Resources, Inc. ........ 19,590 871,755#
CIGNA Corp. ....................... 8,300 1,388,175
CPC International, Inc. ........... 15,900 1,643,662
CSX Corp. ......................... 24,100 1,260,731
CUC International, Inc. ........... 45,350 1,303,812*
CVS Corp. ......................... 19,000 1,261,125
Cabletron Systems, Inc. ........... 17,400 400,200*#
Caliber Systems, Inc. ............. 4,300 229,781
Campbell Soup Co. ................. 50,900 2,850,400
Cardinal Health, Inc. ............. 12,100 916,575
Carolina Power & Light Co. ........ 16,700 624,162
Case Corp. ........................ 8,500 527,000#
Caterpillar, Inc. ................. 41,500 1,989,406
Centex Corp. ...................... 3,100 196,462
Central & South West Corp. ........ 23,400 585,000
Ceridian Corp. .................... 8,700 381,712*#
Champion International Corp. ...... 10,800 578,475
Charming Shoppes, Inc. ............ 11,900 58,198*
Chase Manhattan Corp. ............. 46,796 5,083,215
Chevron Corp. ..................... 72,300 5,797,556
Chrysler Corp. .................... 74,400 2,552,850
Chubb Corp. ....................... 19,000 1,347,812
Cincinnati Milacron, Inc. ......... 4,400 130,075
Cinergy Corp. ..................... 17,593 626,751
Circuit City Stores, Inc.
(Circuit City Group) ............. 10,700 351,094*
Cisco Sytems, Inc. ................ 73,800 6,362,944*
Citicorp .......................... 50,700 6,080,831
Clear Channel Communications,
Inc. ............................ 10,900 738,475*
Clorox Co. ........................ 11,600 900,450#
Coastal Corp. ..................... 11,750 688,109
Coca-Cola Co. ..................... 276,300 17,268,750
Cognizant Corp. ................... 18,100 776,037
Colgate-Palmolive Co. ............. 32,800 2,191,450
Columbia Gas System, Inc. ......... 6,100 443,775
Columbia/HCA Healthcare Corp. ..... 72,182 2,129,369
Comcast Corp. Class A Special ..... 38,550 1,080,605
Comerica, Inc. .................... 11,800 1,005,212
Compaq Computer Corp. ............. 83,395 5,206,975*
Computer Associates International,
Inc. ............................ 60,412 3,145,226
Computer Sciences Corp. ........... 8,400 665,175*
Conagra, Inc. ..................... 52,300 1,879,531
Conseco, Inc. ..................... 20,700 963,844
Consolidated Edison Co. of New
York, Inc. ...................... 25,900 977,725
Consolidated Natural Gas Co. ...... 10,700 646,012
See accompanying notes to financial statements.
95
<PAGE>
STATEMENT OF NET ASSETS THE U.S. LARGE COMPANY SERIES
THE U.S. LARGE COMPANY SERIES (CONTINUED)
- --------------------------------------------------------------------------------
NOVEMBER 30, 1997
---------------------------
SHARES VALUE(DAGGER)
------- ---------------
Cooper Industries, Inc. ........... 13,600 $ 702,100
Cooper Tire & Rubber Co. .......... 8,500 190,187
Coors (Adolph) Co. Class B ........ 4,000 143,500
Corestates Financial Corp. ........ 22,400 1,731,800
Corning, Inc. ..................... 25,600 1,086,400#
Costco Companies, Inc. ............ 23,403 1,038,508*
Countrywide Credit Industries,
Inc. ............................ 11,600 474,875
Crane Co. ......................... 5,000 210,625
Crown Cork & Seal Co., Inc. ....... 14,300 698,019
Cummins Engine Co., Inc. .......... 4,200 270,375
Cyprus Amax Minerals Co., Inc. .... 10,550 193,197
DSC Communications Corp. .......... 13,200 297,825*
DTE Energy Co. .................... 16,100 528,281#
Dana Corp. ........................ 11,700 546,975
Darden Restaurants, Inc. .......... 16,900 200,687
Data General Corp. ................ 5,600 100,450*
Dayton-Hudson Corp. ............... 24,000 1,594,500
Deere & Co. ....................... 27,900 1,529,269
Dell Computer Corp. ............... 36,500 3,071,703*#
Delta Air Lines, Inc. ............. 8,000 891,500
Deluxe Corp. ...................... 9,300 328,406#
Digital Equipment Corp. ........... 16,900 832,325*
Dillards, Inc. Class A ............ 12,100 442,406
Disney (Walt) Co. ................. 74,700 7,091,831
Dominion Resources, Inc. VA ....... 20,600 800,825
Donnelley (R.R.) & Sons Co. ....... 16,200 571,050
Dover Corp.. ...................... 12,400 831,575
Dow Chemical Co. .................. 25,100 2,478,625
Dow Jones & Co., Inc. ............. 10,800 546,075
Dresser Industries, Inc. .......... 19,300 721,337
DuPont (E.I.) de Nemours & Co. .... 124,800 7,558,200
Duke Power Co. .................... 39,866 2,073,032#
Dun & Bradstreet Corp. ............ 18,800 526,400
E G & G, Inc. ..................... 5,100 100,087
EMC Corp. MA. ..................... 54,400 1,649,000*
Eastern Enterprises. .............. 2,300 92,575
Eastman Chemical Co. .............. 8,550 516,206
Eastman Kodak Co. ................. 35,900 2,176,437
Eaton Corp. ....................... 8,600 812,162
Echlin, Inc. ...................... 6,900 218,644#
Echo Bay Mines, Ltd. .............. 15,500 35,844
Ecolab, Inc. ...................... 7,100 362,100
Edison International .............. 43,900 1,177,069
Emerson Electric Co. .............. 49,100 2,700,500
Engelhard Corp. ................... 16,174 288,099
Enron Corp. ....................... 33,900 1,313,625
Entergy Corp. ..................... 26,800 696,800#
Equifax, Inc. ..................... 16,700 569,887#
Exxon Corp. ....................... 275,700 16,817,700
FMC Corp. ......................... 4,100 299,556*
FPL Group, Inc. ................... 20,100 1,124,344#
Federal Express Corp. ............. 12,700 851,694*
Federal Home Loan Mortgage Corp. .. 76,900 3,172,125
Federal National Mortgage
Association ..................... 117,300 6,194,906#
Federated Department Stores, Inc. . 23,100 1,052,494*
Fifth Third Bancorp. .............. 17,000 1,193,187
First Chicago NBD Corp. ........... 32,793 2,566,052
First Data Corp. .................. 49,000 1,387,312#
First Union Corp. ................. 61,880 3,016,650
FirstEnergy Corp. ................. 25,400 685,800*
Fleet Financial Group, Inc. ....... 27,664 1,827,553
Fleetwood Enterprises, Inc. ....... 4,000 142,750
Fleming Companies, Inc. ........... 4,200 69,825
Fluor Corp. ....................... 9,500 341,406*
Ford Motor Co. .................... 132,100 5,680,300
- --------------------------------------------------------------------------------
NOVEMBER 30, 1997
---------------------------
SHARES VALUE(DAGGER)
------- ---------------
Fort James Corp. .................. 20,800 $ 813,800
Fortune Brands, Inc. .............. 19,000 687,562
Foster Wheeler Corp. .............. 4,450 137,116*#
Freeport McMoran Copper & Gold,
Inc. Class B .................... 21,900 458,531#
Frontier Corp. .................... 18,100 443,450
Fruit of The Loom, Inc. Class A ... 8,000 186,500*#
GPU, Inc. ......................... 13,500 533,250
GTE Corp. ......................... 105,500 5,334,344
Gannett Co., Inc. ................. 31,300 1,817,356
Gap, Inc. ......................... 29,700 1,594,519
General Dynamics Corp. ............ 6,800 589,050
General Electric Co. .............. 364,300 26,867,125
General Mills, Inc. ............... 17,700 1,309,800
General Motors Corp. .............. 80,600 4,916,600
General RE Corp. .................. 8,900 1,766,650
General Signal Corp. .............. 5,500 224,469
Genuine Parts Co. ................. 19,975 639,200
Georgia-Pacific Corp. ............. 10,200 870,825
Giant Food, Inc. Class A .......... 6,500 219,375
Gillette Co. ...................... 61,700 5,695,681
Golden West Financial Corp. ....... 6,200 555,675
Goodrich (B.F.) Co. ............... 5,900 262,550
Goodyear Tire & Rubber Co. ........ 17,200 1,043,825
Grace (W.R.) and Co. .............. 7,900 574,725
Grainger (W.W.), Inc. ............. 5,500 514,937
Great Atlantic & Pacific Tea Co.,
Inc. ............................ 4,200 129,675
Great Lakes Chemical Corp. ........ 6,500 291,687*
Green Tree Financial Corp. ........ 15,100 462,437
Guidant Corp. ..................... 16,400 1,053,700
HBO & Co. ......................... 21,900 981,394
HFS, Inc. ......................... 17,600 1,207,800*
Halliburton Co. ................... 28,100 1,515,644#
Harcourt General, Inc. ............ 8,023 439,259#
Harland (John H.) Co. ............. 3,350 69,303#
Harnischfeger Industries, Inc. .... 5,476 209,115
Harrahs Entertainment, Inc. ....... 11,400 228,712*
Harris Corp. ...................... 9,000 426,937
Hartford Financial Services Group,
Inc. ............................ 13,100 1,097,125
Hasbro, Inc. ...................... 14,225 413,414#
Healthsouth Corp. ................. 42,700 1,120,875*
Heinz (H.J.) Co. .................. 40,950 2,050,059
Helmerich & Payne, Inc. ........... 2,800 212,975
Hercules, Inc. .................... 11,100 539,044#
Hershey Foods Corp. ............... 15,800 969,725
Hewlett-Packard Co. ............... 114,800 7,009,975
Hilton Hotels Corp. ............... 27,600 859,050#
Home Depot, Inc. .................. 80,772 4,518,184
Homestake Mining Co. .............. 16,400 172,200
Honeywell, Inc. ................... 14,200 930,100
Household International, Inc. ..... 11,800 1,486,800
Houston Industries, Inc. .......... 31,500 746,156
Humana, Inc. ...................... 18,100 401,594*
Huntington Bancshares, Inc. ....... 21,000 711,375
ITT Corp. ......................... 13,000 986,375*
ITT Industries, Inc. .............. 13,300 422,275
Ikon Office Solutions, Inc. ....... 14,800 450,475
Illinois Tool Works, Inc. ......... 27,600 1,512,825
Inco, Ltd. ........................ 18,600 354,562
Ingersoll-Rand Co. ................ 18,300 748,012#
Inland Steel Industries, Inc. ..... 5,400 103,275
Intel Corp. ....................... 181,500 14,094,609
International Business Machines
Corp. ........................... 109,100 11,953,269
International Flavors & Fragrances,
Inc. ............................ 12,300 592,706
International Paper Co. ........... 33,500 1,589,156
Interpublic Group of Companies,
Inc. ............................ 13,850 663,934#
See accompanying notes to financial statements.
96
<PAGE>
STATEMENT OF NET ASSETS THE U.S. LARGE COMPANY SERIES
THE U.S. LARGE COMPANY SERIES (CONTINUED)
- --------------------------------------------------------------------------------
NOVEMBER 30, 1997
---------------------------
SHARES VALUE(DAGGER)
------- ---------------
Jefferson-Pilot Corp. ............. 7,650 $ 583,791
Johnson & Johnson ................. 146,900 9,245,519
Johnson Controls, Inc. ............ 9,100 416,894
Jostens, Inc. ..................... 4,300 103,200
K Mart Corp. ...................... 53,700 674,606*
KLA-Tencor Corp. .................. 9,500 367,531*
Kaufman & Broad Home Corp. ........ 4,300 93,256
Kellogg Co. ....................... 45,700 2,119,337
Kerr-McGee Corp. .................. 5,200 344,825#
Keycorp. .......................... 23,900 1,611,756
Kimberly Clark Corp. .............. 61,584 3,206,217
King World Productions, Inc. ...... 4,100 222,937
Knight Ridder, Inc. ............... 9,500 476,187
Kroger Co. ........................ 28,200 971,138*
LSI Logic Corp. ................... 15,700 365,025*
Laidlaw, Inc. ..................... 36,500 474,500
Lilly (Eli) & Co. ................. 122,800 7,744,075
Limited, Inc. ..................... 29,900 719,469
Lincoln National Corp. ............ 11,300 806,538
Liz Claiborne, Inc. ............... 7,500 376,875
Lockheed Martin Corp. ............. 21,357 2,083,642#
Loews Corp. ....................... 12,800 1,358,400
Longs Drug Stores Corp. ........... 4,300 125,775
Louisiana-Pacific Corp. ........... 12,300 248,306#
Lowe's Companies, Inc. ............ 19,300 886,594
Lucent Technologies, Inc. ......... 70,890 5,680,061
MBIA, Inc. ........................ 10,000 628,750
MBNA Corp. ........................ 55,430 1,472,359#
MCI Communications Corp. .......... 76,400 3,354,438
MGIC Investment Corp. ............. 12,600 736,313#
Mallinckrodt, Inc. ................ 7,900 292,300*
Manor Care, Inc. .................. 7,300 257,325
Marriott International, Inc. ...... 14,200 1,028,613
Marsh & McLennan Companies, Inc. .. 18,600 1,384,538#
Masco Corp. ....................... 18,200 857,675
Mattel, Inc. ...................... 32,152 1,288,090
May Department Stores Co. ......... 25,600 1,376,000
Maytag Corp. ...................... 10,700 345,744
McDermott International, Inc. ..... 6,100 192,150
McDonalds Corp. ................... 75,900 3,681,150#
McGraw-Hill Companies, Inc. ....... 11,100 759,656
Mead Corp. ........................ 6,000 387,375
Medtronic, Inc. ................... 51,700 2,468,675
Mellon Bank Corp. ................. 27,900 1,581,581#
Mercantile Stores Co., Inc. ....... 4,100 264,963
Merck & Co., Inc. ................. 134,500 12,718,656
Meredith Corp. .................... 5,900 205,763
Merrill Lynch & Co., Inc. ......... 36,600 2,568,863#
Micron Technology, Inc. ........... 23,300 579,588*#
Microsoft Corp. ................... 133,400 18,871,931*
Millipore Corp. ................... 4,800 186,000
Minnesota Mining & Manufacturing
Co. ............................. 45,800 4,462,638
Mirage Resorts, Inc. .............. 19,700 467,875*#
Mobil Corp. ....................... 86,900 6,251,369
Monsanto Co. ...................... 65,200 2,848,425
Moore Corp., Ltd. ................. 9,600 149,400#
Morgan (J.P.) & Co., Inc. ......... 19,700 2,249,494
Morgan Stanley Dean Witter
Discover & Co. .................. 64,909 3,525,370
Morton International, Inc. ........ 15,200 517,750
Motorola, Inc. .................... 65,800 4,137,175
Nacco Industries, Inc. Class A .... 800 87,100
Nalco Chemical Co. ................ 7,200 279,450
National City Corp. ............... 23,700 1,581,975
National Semiconductor Corp. ...... 17,700 586,313*#
National Service Industries, Inc. . 5,000 234,063
- --------------------------------------------------------------------------------
NOVEMBER 30, 1997
---------------------------
SHARES VALUE(DAGGER)
------- ---------------
NationsBank Corp. ................. 78,576 $ 4,719,471#
Navistar International Corp. ...... 7,970 175,340*
New York Times Class A ............ 10,400 617,500
Newell Co. ........................ 17,700 722,381
Newmont Mining Corp. .............. 17,313 520,472
Nextlevel Systems, Inc. ........... 16,280 215,710*
Niagara Mohawk Power Corp. ........ 16,000 153,000*
Nicor, Inc. ....................... 5,300 213,325
Nike, Inc. Class B. ............... 31,900 1,553,131#
Nordstrom, Inc. ................... 8,400 495,338
Norfolk Southern Corp. ............ 41,600 1,323,400
Northern States Power Co. MN ...... 8,400 460,950
Northern Telecom, Ltd. ............ 29,000 2,604,563#
Northrop Grumman Corp. ............ 7,300 823,075#
Norwest Corp. ..................... 82,900 3,103,569#
Novell, Inc. ...................... 38,600 354,034*
Nucor Corp. ....................... 9,600 480,000#
Occidental Petroleum Corp. ........ 36,500 1,083,594
Oneok, Inc. ....................... 3,100 115,863
Oracle Systems Corp. .............. 108,262 3,603,095*#
Oryx Energy Co. ................... 11,900 321,300*
Owens Corning. .................... 6,200 227,850
Owens-Illinois, Inc. .............. 15,600 528,450*#
PECO Energy Co. ................... 24,500 595,656
PG&E Corp. (Holding Co.) .......... 48,300 1,364,475#
PNC Bank Corp. .................... 33,850 1,821,553
PP&L Resources, Inc. .............. 18,400 432,400
PPG Industries, Inc. .............. 19,800 1,147,163#
Paccar, Inc. ...................... 8,420 459,943#
Pacific Enterprises ............... 9,000 318,375
PacifiCorp. ....................... 32,800 764,650
Pall Corp. ........................ 14,166 299,257
Parametric Technology Corp. ....... 14,200 717,544*
Parker-Hannifin Corp. ............. 12,425 552,913
Penney (J.C.) Co., Inc. ........... 27,600 1,773,300
Pennzoil Co. ...................... 5,200 346,450
Peoples Energy Corp. .............. 3,900 142,838
Pep Boys - Manny, Moe & Jack ...... 6,900 173,363*
Pepsico, Inc. ..................... 169,200 6,239,250
Perkin Elmer Corp. ................ 4,700 326,944
Pfizer, Inc. ...................... 142,800 10,388,700
Pharmacia & Upjohn, Inc. .......... 56,080 1,892,700
Phelps Dodge Corp. ................ 6,600 437,250
Philip Morris Companies, Inc. ..... 270,000 11,745,000
Phillips Petroleum Co. ............ 29,000 1,404,688
Pioneer Hi-Bred International,
Inc. ............................ 7,200 735,300
Pitney Bowes, Inc. ................ 15,900 1,336,594
Placer Dome, Inc. ................. 26,300 322,175
Polaroid Corp. .................... 5,000 212,500
Potlatch Corp. .................... 3,200 155,600
Praxair, Inc. ..................... 17,500 768,906
Procter & Gamble Co. .............. 150,232 11,464,580
Progressive Corp. ................. 7,900 805,800
Providian Financial Corp. ......... 10,600 467,063
Public Service Enterprise Group,
Inc. ............................ 25,500 744,281
Pulte Corp. ....................... 2,400 97,350
Quaker Oats Co. ................... 15,200 805,600
Ralston Purina Group. ............. 11,800 1,097,400
Raychem Corp. ..................... 4,700 444,444
Raytheon Co. ...................... 26,000 1,454,375
Reebok International, Ltd. ........ 6,100 239,806*
Republic New York Corp. ........... 6,000 652,500
Reynolds Metals Co. ............... 8,000 455,500
Rite Aid Corp. .................... 13,700 900,775#
Rockwell International Corp. ...... 23,100 1,126,125
See accompanying notes to financial statements.
97
<PAGE>
STATEMENT OF NET ASSETS THE U.S. LARGE COMPANY SERIES
THE U.S. LARGE COMPANY SERIES (CONTINUED)
- --------------------------------------------------------------------------------
NOVEMBER 30, 1997
---------------------------
SHARES VALUE(DAGGER)
------- ---------------
Rohm & Haas Co. ................... 6,800 $ 625,175#
Rowan Companies, Inc. ............. 9,400 319,600*
Royal Dutch Petroleum Co. Den Haag
(N.Y. Registry) ................. 239,000 12,592,313
Rubbermaid, Inc. .................. 16,600 402,550
Russell Corp. ..................... 4,100 125,306
Ryder System, Inc. ................ 8,500 308,656
SBC Communications, Inc. .......... 101,004 7,354,354
Safeco Corp. ...................... 15,500 760,469
Safety Kleen Corp. ................ 6,400 177,600
Saint Jude Medical, Inc. .......... 9,950 294,769*
Saint Paul Companies, Inc. ........ 9,400 752,000
Sara Lee Corp. .................... 53,100 2,807,663
Schering-Plough Corp. ............. 80,800 5,065,150
Schlumberger, Ltd. ................ 54,800 4,510,725#
Schwab (Charles) Corp. ............ 29,450 1,135,666#
Scientific-Atlanta, Inc. .......... 8,800 176,000
Seagate Technology, Inc. .......... 26,800 608,025*
Seagram Co., Ltd. ................. 41,000 1,324,813#
Sears, Roebuck & Co. .............. 43,300 1,983,681
Service Corp. International ....... 27,900 1,020,094
Shared Medical Systems Corp. ...... 2,700 172,800#
Sherwin-Williams Co. .............. 19,200 548,400
Siebel Systems, Inc. .............. -- 28*
Sigma-Aldrich Corp. ............... 10,900 391,038
Silicon Graphics, Inc. ............ 19,500 255,938*
Snap-On, Inc. ..................... 6,600 289,988
Sonat, Inc. ....................... 9,700 422,556#
Southern Co. ...................... 75,800 1,819,200
Southwest Airlines Co. ............ 24,300 593,831
Springs Industries, Inc. Class A .. 2,150 108,441
Sprint Corp. ...................... 47,700 2,793,431*
Stanley Works ..................... 9,600 423,000
State Street Corp. ................ 17,700 1,053,150#
Stone Container Corp. ............. 10,800 135,000
Sun Co., Inc. ..................... 8,200 331,588#
Sun Microsystems .................. 40,840 1,468,964*
Sunamerica, Inc. .................. 21,650 876,825
Suntrust Banks, Inc. .............. 23,600 1,675,600#
Supervalu, Inc. ................... 6,900 271,256
Synovus Financial Corp. ........... 19,300 616,394
Sysco Corp. ....................... 19,200 855,600
TJX Companies, Inc. ............... 18,000 621,000
TRW, Inc. ......................... 13,700 777,475#
Tandy Corp. ....................... 11,530 495,790
Tektronix, Inc. ................... 5,850 245,334
Tele-Communications, Inc. Class A
(TCI Group) ..................... 55,900 1,280,459*
Tellabs, Inc. ..................... 20,100 1,044,572*#
Temple-Inland, Inc. ............... 6,600 377,025
Tenet Healthcare Corp. ............ 33,400 1,058,363*
Tenneco, Inc. ..................... 18,800 814,275
Texaco, Inc. ...................... 58,500 3,305,250
Texas Instruments, Inc. ........... 42,500 2,093,125
Texas Utilities Co. ............... 26,697 1,067,880
Textron, Inc. ..................... 18,200 1,076,075
Thermo-Electron Corp. ............. 16,700 614,769*
Thomas & Betts Corp. .............. 6,000 272,250
Time Warner, Inc. ................. 61,960 3,609,170
Times Mirror Co. Class A .......... 10,700 635,313#
Timken Co. ........................ 6,800 240,975
Torchmark Corp. ................... 15,100 616,269
Toys R Us, Inc. ................... 31,500 1,074,938*
Transamerica Corp. ................ 6,900 749,081
Travelers Group, Inc. 126,535 6,390,018#
- --------------------------------------------------------------------------------
NOVEMBER 30, 1997
---------------------------
SHARES VALUE(DAGGER)
------- ---------------
Tribune Co. ....................... 13,600 $ 766,700
Tricon Global Restaurants, Inc. ... 17,040 576,165*
Tupperware Corp. .................. 6,700 159,963
Tyco International, Ltd. .......... 59,000 2,315,750
U.S. Bancorp. ..................... 26,998 2,903,972
UNUM Corp. ........................ 15,400 730,538
US West, Inc. Communications
Group Class ..................... 53,000 2,394,938
US West, Inc. Media Group Class ... 67,000 1,779,688*
USAir Group, Inc. ................. 10,200 562,275*
USF&G Corp. ....................... 12,400 250,325
UST, Inc. ......................... 20,400 629,850
USX-Marathon Group, Inc. .......... 31,900 1,092,575
USX-US Steel Group ................ 9,320 291,833
Unicom Corp., Inc. ................ 23,800 693,175
Unilever NV ....................... 70,700 4,105,019
Union Camp Corp. .................. 7,500 450,469
Union Carbide Corp. ............... 13,900 613,338
Union Electric Co. ................ 11,100 441,919
Union Pacific Corp. ............... 27,400 1,644,000
Union Pacific Resources Group,
Inc. ............................ 28,076 698,391
Unisys Corp. ...................... 19,300 276,231*
United Healthcare Corp. ........... 20,700 1,077,694
United States Surgical Corp. ...... 8,000 211,000
United Technologies Corp. ......... 25,900 1,940,881
Unocal Corp. ...................... 27,400 1,090,863
Unova, Inc. ....................... 5,700 96,544*
VF Corp. .......................... 14,400 665,100
Viacom, Inc. Class B .............. 39,134 1,369,690*
Wachovia Corp. .................... 18,700 1,439,900*
Wal-Mart Stores, Inc. ............. 250,600 10,008,338
Walgreen Co. ...................... 54,400 1,751,000
Warner-Lambert Co. ................ 30,100 4,210,238#
Washington Mutual, Inc. ........... 27,620 1,905,780#
Waste Management, Inc. ............ 50,200 1,236,175
Wells Fargo & Co. ................. 9,899 3,041,468#
Wendy's International, Inc. ....... 14,700 308,700
Western Atlas, Inc. ............... 5,900 410,419*
Westinghouse Electric Corp. ....... 77,900 2,337,000
Westvaco Corp. .................... 11,450 373,556
Weyerhaeuser Co. .................. 22,100 1,167,156
Whirlpool Corp. ................... 8,100 443,981
Whitman Corp. ..................... 11,000 289,438
Willamette Industries, Inc. ....... 12,400 435,550*
Williams Companies, Inc. .......... 17,535 937,027
Winn-Dixie Stores, Inc. ........... 16,500 667,219#
Woolworth Corp. ................... 15,000 324,375*
Worldcom, Inc. .................... 99,720 3,194,156*#
Worthington Industries, Inc. ...... 10,875 196,430
Wrigley (Wm.) Jr. Co. ............. 12,900 1,020,713
Xerox Corp. ....................... 335,900 2,788,981#
------- ------------
TOTAL COMMON STOCKS
(Cost $525,673,682) ............... $820,902,308
------------
See accompanying notes to financial statements.
98
<PAGE>
STATEMENT OF NET ASSETS THE U.S. LARGE COMPANY SERIES
THE U.S. LARGE COMPANY SERIES (CONTINUED)
- --------------------------------------------------------------------------------
NOVEMBER 30, 1997
-----------------------------
FACE AMOUNT
(000) VALUE(DAGGER)
------------ ---------------
TEMPORARY CASH INVESTMENTS -- (0.5%)
Repurchase Agreement, PNC Capital
Markets Inc. 5.45%, 12/01/97 (Collateralized
by U.S. Treasury Notes 6.25%, 07/31/98,
valued at $4,146,188) to be repurchased
at $4,085,855
(Cost $4,084,000) ................. $4,084 $ 4,084,000
------------
TOTAL INVESTMENTS -- (100.3%)
(Cost $529,757,682)(DAGGER)(DAGGER) .......... $824,986,308
------------
OTHER ASSETS AND LIABILITIES -- (-0.3%)
Other Assets ................................. 1,485,666
Payable for Investment Securities Purchased .. (3,724,306)
Payable for Fund Shares Redeemed ............. (175,855)
Other Liabilities ............................ (78,991)
------------
(2,493,486)
------------
NET ASSETS -- (100.0%) ....................... $822,492,822
============
- --------------------
(DAGGER) See Note B to Financial Statements.
* Non-Income Producing Securities
# Total or Partial Securities on Loan
(DAGGER)(DAGGER) Approximates cost for federal income tax purposes.
See accompanying notes to financial statements.
99
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES (AMOUNTS IN THOUSANDS)
SEPTEMBER 30, 1998
------------------
(UNAUDITED)
ASSETS
Investments at Value (Cost $915,393) ...................... $1,288,973
Collateral for Securities Loaned .......................... 154,585
Receivables:
Dividends and Interest .................................. 2,054
Investment Securities Sold .............................. 6,960
Prepaid Expenses and Other Assets ......................... 12
----------
Total Assets ......................................... 1,452,584
----------
LIABILITIES:
Payable for Securities Loaned ............................. 154,585
Payable for Investment Securities Purchased ............... 4,360
Loan Payable .............................................. 9,811
Accrued Expenses .......................................... 102
----------
Total Liabilities .................................... 168,858
----------
NET ASSETS ................................................... $1,283,726
==========
See accompanying notes to financial statements.
100
<PAGE>
STATEMENTS OF OPERATIONS THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES (AMOUNTS IN THOUSANDS)
TEN MONTHS YEAR
ENDED ENDED
SEPT. 30, NOV. 30,
1998 1997
----------- --------
(UNAUDITED)
INVESTMENT INCOME
Dividends ............................................ $ 14,310 $ 11,452
Interest ............................................. 232 141
Income From Securities Lending ....................... 82 41
-------- --------
Total Investment Income ............................ 14,624 11,634
-------- --------
EXPENSES
Investment Advisory Services ......................... 235 160
Accounting & Transfer Agent Fees ..................... 141 96
Custodian's Fee ...................................... 114 109
Legal Fees ........................................... 10 7
Audit Fees ........................................... 16 18
Shareholders' Reports ................................ 15 14
Trustees' Fees and Expenses .......................... 3 1
Other ................................................ 62 50
-------- --------
Total Expenses ..................................... 596 455
-------- --------
NET INVESTMENT INCOME .............................. 14,028 11,179
-------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net Realized Gain (Loss) on Investment Securities ....... (1,362) 975
Change in Unrealized Appreciation
of Investment Securities ............................. 30,926 147,979
-------- --------
NET GAIN ON INVESTMENT SECURITIES .................... 29,564 148,954
-------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .... $ 43,592 $160,133
======== ========
See accompanying notes to financial statements.
101
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES (AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
TEN MONTHS YEAR YEAR
ENDED ENDED ENDED
SEPT. 30, NOV. 30, NOV. 30,
1998 1997 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net Investment Income ................................ $ 14,028 $ 11,179 $ 5,282
Net Realized Gain (Loss) on Investment Securities .... (1,362) 975 (18)
Change in Unrealized Appreciation (Depreciation)
of Investment Securities ........................... 30,926 147,979 63,985
----------- ----------- -----------
Net Increase in Net Assets Resulting from Operations 43,592 160,133 69,249
----------- ----------- -----------
Distributions From:
Net Investment Income ................................ -- -- (1,215)
Net Realized Gains ................................... -- -- (686)
----------- ----------- -----------
Total Distributions ................................ -- -- (1,901)
----------- ----------- -----------
Capital Share Transactions(1):
Shares Issued ........................................ -- -- 32,324
Shares Issued in Lieu of Cash Distributions .......... -- -- 1,744
Shares Redeemed ...................................... -- -- (10,535)
----------- ----------- -----------
Net Increase from Capital Share Transactions ....... -- -- 23,533
----------- ----------- -----------
Transactions in Interest(1):
Contributions ........................................ 546,454 269,144 309,297
Withdrawals .......................................... (128,813) (73,225) (30,855)
----------- ----------- -----------
Net Increase from Transactions in Interest ......... 417,641 195,919 287,442
----------- ----------- -----------
Total Increase ..................................... 461,233 356,052 369,323
----------- ----------- -----------
NET ASSETS
Beginning of Period .................................. 822,493 466,441 97,118
----------- ----------- -----------
End of Period ........................................ $ 1,283,726 $ 822,493 $ 466,441
=========== =========== ===========
(1) SHARES ISSUED AND REDEEMED:
Shares Issued ........................................ N/A N/A 2,257
Shares Issued in Lieu of Cash Distributions .......... 121
Shares Redeemed ...................................... (754)
----------- ----------- -----------
1,624
=========== =========== ===========
<FN>
- ----------------
(1) Capital Share Transactions and Shares Issued and Redeemed are reported
through May 31, 1996. Transactions in Interest are reported for the period
June 1 through November 30, 1996 and subsequent periods. Effective June 1,
1996, the Series was reorganized as a partnership.
</FN>
</TABLE>
See accompanying notes to financial statements.
102
<PAGE>
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FINANCIAL HIGHLIGHTS THE DFA INVESTMENT TRUST COMPANY
THE U.S. LARGE COMPANY SERIES
<TABLE>
<CAPTION>
TEN MONTHS YEAR YEAR YEAR YEAR FEB. 8
ENDED ENDED ENDED ENDED ENDED TO
SEPT. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30, NOV. 30,
1998 1997 1996 1995 1994 1993
---------- -------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period (1) ................................ N/A N/A $ 13.48 $ 10.11 $ 10.27 $ 10.00
---------- -------- -------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS (1)
Net Investment Income . ................... -- -- 0.15 0.30 0.28 0.24
Net Gains (Losses) on Securities
(Realized and Unrealized) ............... -- -- 1.41 3.36 (0.14) 0.26
---------- -------- -------- ------- ------- -------
Total from Investment Operations .......... -- -- 1.56 3.66 0.14 0.50
---------- -------- -------- ------- ------- -------
LESS DISTRIBUTIONS (1)
Net Investment Income ..................... -- -- (0.16) (0.29) (0.29) (0.23)
Net Realized Gains ........................ -- -- (0.08) -- (0.01) --
---------- -------- -------- ------- ------- -------
Total Distributions .................. -- -- (0.24) (0.29) (0.30) (0.23)
---------- -------- -------- ------- ------- -------
Net Asset Value, End of Period (1) ........... N/A N/A $ 14.80 $ 13.48 $ 10.11 $ 10.27
========== ======== ======== ======= ======= =======
Total Return (1) ............................. N/A N/A 11.60%# 36.77% 1.30% 5.05%#
========== ======== ======== ======= ======= =======
Net Assets, End of Period (thousands) ........ $1,283,726 $822,493 $466,441 $97,118 $48,657 $37,853
Ratio of Expenses to Average Net Assets ...... 0.06%* 0.07% 0.12% 0.02%(a) 0.02%(a) 0.02%*(a)
Ratio of Net Investment Income to Average
Net Assets ................................ 1.50%* 1.75% 2.12% 2.61%(a) 2.83%(a) 2.87%*(a)
Portfolio Turnover Rate ...................... 9.07%* 4.28% 14.09% 2.38% 8.52% 34.36%*
<FN>
- ----------------
* Annualized
# Non-Annualized
(1) Items are calculated for the period December 1, 1995 through May 31, 1996.
Effective June 1, 1996, the Series was reorganized as a partnership, and
these items are no longer applicable.
(a) Had certain reimbursements not been in effect the ratios of expenses to
average net assets for the periods ended November 30, 1995, 1994 and 1993
would have been 0.18%, 0.33% and 0.48%, respectively, and the ratios of net
investment income to average net assets for the periods ended November 30,
1995, 1994 and 1993, would have been 2.45%, 2.52% and 2.41%, respectively.
</FN>
</TABLE>
See accompanying notes to financial statements.
103
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) THE DFA INVESTMENT TRUST COMPANY
A. ORGANIZATION:
The DFA Investment Trust Company (the "Trust") is an open-end management
investment company registered under the Investment Company Act of 1940. At
September 30, 1998, The Trust currently offers sixteen portfolios, of which The
U.S. Large Company Series (the "Series") is presented in this report.
On June 1, 1996, the Series was reorganized from an entity taxed as a
corporation to an entity taxed as a partnership for income tax purposes. This
reorganization was accomplished by an amendment to the organization document of
the Series which for income tax purposes was treated as a liquidation of the
Series, immediate distribution of its assets to its sole shareholder at May 31,
1996, which was The U.S. Large Company Portfolio (the "Portfolio") and
subsequent contribution of those assets from the Portfolio, along with a nominal
contribution from the Advisor to this Series to create the partnership. On June
2, 1996, an unrelated investment company contributed assets valued at
$225,957,696 to the Series in exchange for a 63.4% interest in the Series. The
total net assets of the Series increased to $356,632,854 immediately following
this transaction. These transactions are expected to be tax-free events to all
parties involved based on rulings obtained from the Internal Revenue Service.
For financial reporting purposes, the Series continues to exist and as such,
will maintain all of its previous operating history throughout the financial
statements.
Information included within these notes to financial statements as of and
for the period ended September 30, 1998 is unaudited.
B. SIGNIFICANT ACCOUNTING POLICIES:
The following significant accounting policies are in conformity with
generally accepted accounting principles for investment companies. Such policies
are consistently followed by the Trust in preparation of its financial
statements. The preparation of financial statements in accordance with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
1. SECURITY VALUATION: Securities held by the Series which are listed on a
securities exchange and for which market quotations are readily available are
valued at the last quoted sale price of the day, or if there is no such reported
sale, at the mean between the most recent bid and asked prices. Price
information on listed securities is taken from the exchange where the security
is primarily traded. Unlisted securities for which market quotations are readily
available are valued at the mean between the most recent bid and asked prices.
Securities for which quotations are not readily available are valued in good
faith at fair value using methods determined by the Board of Directors.
2. FEDERAL INCOME TAXES: Prior to June 1, 1996, the Series qualified as a
regulated investment company and distributed all of its taxable income.
Accordingly, no provision for federal taxes was required in the financial
statements prior to that time. Effective June 1, 1996, the Series is treated as
a partnership for federal income tax purposes. Any interest, dividends and gains
or losses of the Series will be deemed to have been "passed through" to its
Feeder Funds.
3. REPURCHASE AGREEMENTS: The Series may purchase money market instruments
subject to the seller's agreement to repurchase them at an agreed upon date and
price. The seller will be required on a daily basis to maintain the value of the
collateral subject to the agreement at not less than the repurchase price
(including accrued interest). The agreements are conditioned upon the collateral
being deposited under the Federal Reserve book-entry system or with the Series'
custodian or a third party sub-custodian. No repurchase agreements were
outstanding as of September 30, 1998.
4. OTHER: Security transactions are accounted for on the date the
securities are purchased or sold. Costs used in determining realized gains and
losses on the sale of investment securities are those of specific securities
sold. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on the accrual basis. Expenses
directly attributable to the Series are directly charged. Common expenses are
allocated using methods determined by the Board of Directors.
C. INVESTMENT ADVISOR:
Dimensional Fund Advisors Inc. (the "Advisor") provides investment advisory
services to the Series. For the ten months ended September 30, 1998 and the year
ended November 30, 1997, the Series' advisory fees were computed daily and paid
monthly to the Advisor based on an effective annual rate of 0.025 of 1%.
Certain officers of the Series are also officers, directors and
shareholders of the Advisor.
104
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED) THE DFA INVESTMENT TRUST COMPANY
D. PURCHASES AND SALES OF SECURITIES:
The Series made the following purchases and sales of investment securities,
other than short-term and government securities (amounts in thousands):
TEN MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1998 NOV. 30, 1997
------------------ -------------
(UNAUDITED)
Purchases ......................... $411,439 $233,484
Sales ............................. 83,044 27,162
E. INVESTMENT TRANSACTIONS:
The gross unrealized appreciation and depreciation for federal income tax
purposes of investment securities was as follows (amounts in thousands):
TEN MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1998 NOV. 30, 1997
------------------ -------------
(UNAUDITED)
Gross Unrealized Appreciation .......... $404,972 $302,219
Gross Unrealized Depreciation .......... (31,392) (6,991)
-------- --------
Net .................................... $373,580 $295,228
======== ========
F. LINE OF CREDIT:
The Trust, together with other DFA-advised portfolios, has entered into a
$50 million unsecured line of credit with its domestic custodian bank. Each
series is permitted to borrow, subject to its investment limitations, up to a
maximum of $50 million. Borrowings under the line are charged interest at the
current overnight federal funds rate plus a variable rate determined at the date
of borrowing. Each series is individually, and not jointly liable for its
particular advances under the line. There is no commitment fee on the unused
portion of the line of credit. For the ten months ended September 30, 1998 and
year ended November 30, 1997, the Series borrowed against the line of credit as
follows:
<TABLE>
<CAPTION>
MAXIMUM
AMOUNT
WEIGHTED WEIGHTED NUMBER OF INTEREST BORROWED
AVERAGE AVERAGE DAYS EXPENSE DURING
INTEREST RATE LOAN BALANCE OUTSTANDING INCURRED THE PERIOD
------------- ------------ ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Ten Months Ended September 30, 1998 (Unaudited) ........... 6.25% $5,573,087 19 $22,262 $33,400,000
Year Ended November 30, 1997 .............................. 6.07% 1,572,388 23 8,744 4,850,000
</TABLE>
There was no outstanding borrowing under the line of credit at November 30,
1997. At September 30, 1998, there was an outstanding borrowing of $9,811,000
plus accrued interest under the line of credit.
G. SECURITIES LENDING
Security loans are required at all times to be secured by collateral at
least equal to 102% of the market value of the securities on loan. However, in
the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral may be subject to legal
proceedings. In the event that the borrower fails to return loaned securities,
and cash collateral being maintained by the borrower is insufficient to cover
the value of loaned securities, and provided such collateral insufficiency is
not the result of investment losses, the lending agent has agreed to pay the
amount of the shortfall to the Series or, at the option of the lending agent,
replace the loaned securities. The market value of securities on loan to brokers
from the Series and the related collateral cash received was as follows:
SEPTEMBER 30, 1998 NOV. 30, 1997
------------------ -------------
(UNAUDITED)
Value of Securities on Loan ............... $144,182,147 $86,232,944
Value of Collateral and Indemnification ... 154,584,874 88,733,158
Such cash collateral for September 30, 1998 was reinvested into overnight
repurchase agreements with Warburg Dillon Reed, Inc. which was in turn
collateralized by US Government Treasury Securities with a value of
$157,962,493. The cash collateral for November 30, 1997 was reinvested into an
overnight repurchase agreement with Swiss Bank Corp., JP Morgan and UBS
Securities Inc., which in turn was collateralized by US Government Treasury
Securities with a value of $89,699,555.
105
<PAGE>
REPORT OF INDEPENDENT ACCOUTANTS THE DFA INVESTMENT TRUST COMPANY
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
THE DFA INVESTMENT TRUST COMPANY:
We have audited the accompanying statement of net assets of The U.S. Large
Company Series of The DFA Investment Trust Company as of November 30, 1997, and
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion of these financial
statements and financial highlights based on our audits.
We conducted our audits 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 misstatements. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosure in the financial
statements. Our procedures included confirmation of investments owned as of
November 30, 1997, by correspondence with the custodians and brokers. 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 audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all materials respects, the financial position of The
U.S. Large Company Series of The DFA Investment Trust Company as of November 30,
1997, and the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and its
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
PRICEWATERHOUSECOOPERS LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 16, 1998
106
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
BLACKROCK FUNDS
Investment Advisor
BlackRock Advisors, Inc.
New York, New York 10154
Sub-Advisor -- Large Cap Value Equity
Portfolio, Large Cap Growth Equity
Portfolio, Mid-Cap Value Equity Portfolio,
Mid-Cap Growth Equity Portfolio,
Small Cap Value Equity Portfolio, Small Cap
Growth Equity Portfolio, Micro-Cap
Equity Portfolio, Select Equity Portfolio
and Balanced Portfolio
BlackRock Financial Management, Inc.
New York, New York 10154
Sub-Advisor -- International Equity Portfolio,
International Small Cap Equity Portfolio
and International Emerging
Markets Portfolio
BlackRock International Limited
Edinburgh, Scotland EH2 3AH
Custodian
PNC Bank, National Association
Philadelphia, Pennsylvania 19103
Co-Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware 19809
Co-Administrator and Distributor
BlackRock Distributors, Inc.
West Conshohocken, Pennsylvania 19428
Co-Administrator
BlackRock Advisors, Inc.
New York, New York 10154
Counsel
Simpson, Thacher & Bartlett
New York, New York 10017
(A partnership which includes
professional corporations)
Independent Accountants
PricewaterhouseCoopers, LLP
Philadelphia, Pennsylvania 19103
To reduce expenses, the Fund will mail only one copy of annual and semi-annual
reports and most prospectuses to your household, even if more than one person in
the household has a Fund account. Please call (800) 441-7762 if you would like
to receive additional reports or prospectuses.
<PAGE>
BLACKROCK FUNDS
FUND SPECTRUM
BLACKROCK FUNDS IS A LEADING MUTUAL FUND COMPANY CURRENTLY MANAGING IN EXCESS OF
$22 BILLION IN 36 PORTFOLIOS DESIGNED TO FIT A BROAD RANGE OF INVESTMENT GOALS.
EACH PORTFOLIO IS MANAGED BY RECOGNIZED EXPERTS IN EQUITY, FIXED INCOME,
INTERNATIONAL, AND TAX-FREE INVESTING WHO ADHERE TO A PURE INVESTMENT
STYLE.(REGISTRATION MARK)
STOCK PORTFOLIOS
Large Cap Value Equity
Large Cap Growth Equity
Mid-Cap Value Equity
Mid-Cap Growth Equity
Small Cap Value Equity
Small Cap Growth Equity
Micro-Cap Equity
International Equity
International Small Cap Equity
International Emerging Markets
Select Equity
Index Equity
STOCK & BOND PORTFOLIOS
Balanced
BOND PORTFOLIOS
Low Duration Bond
Intermediate Government Bond
Intermediate Bond
Core Bond
Government Income
GNMA
Managed Income
International Bond
High Yield Bond
TAX-FREE BOND PORTFOLIOS
Tax-Free Income
Pennsylvania Tax-Free Income
New Jersey Tax-Free Income
Ohio Tax-Free Income
Delaware Tax-Free Income
Kentucky Tax-Free Income
MONEY MARKET PORTFOLIOS
Money Market
U.S. Treasury Money Market
Municipal Money Market
New Jersey Municipal Money Market
North Carolina Municipal Money Market
Ohio Municipal Money Market
Pennsylvania Municipal Money Market
Virginia Municipal Money Market
SHAREHOLDER PRIVILEGES
24 HOUR ACCOUNT INFORMATION
Call us at 1-800-441-7762, 24 hours a day, 7 days a week to get information
about your account balances, recent transactions and share prices. Note:
Institutional and Service Share Class investors should call 1-800-441-7764. You
can also reach us on the Internet through the World Wide Web by accessing
http://www.blackrock.com.
EXCHANGE PRIVILEGES
Should your investment goals change, shareholders in our Investor Class shares
may exchange all or part of their investments into the same share class of any
other portfolio of BlackRock Funds. (1)
AUTOMATIC INVESTMENT PLANS
Investor Class shareholders who want to invest regularly can arrange to have $50
or more automatically deducted from their checking or savings account and
invested in any of the BlackRock portfolios.
SYSTEMATIC WITHDRAWAL PLANS
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $100 or more from their BlackRock portfolios, as
long as their account is at least $1,000.
RETIREMENT PLANS
Shareholders may make investments in conjunction with individual IRA accounts or
rollover IRAs.
GENERAL INFORMATION ABOUT THE BLACKROCK FUNDS
If you would like additional reports or have questions regarding any of the 36
BlackRock Funds, please call 1-800-FUTURE4 (1-800-388-8734)
(1) BLACKROCK FUNDS RESERVES THE RIGHT TO MODIFY OR TERMINATE THE EXCHANGE
PRIVILEGES AT ANY TIME.
<PAGE>
BLACKROCK FUNDS (LOGO)
[GRAPHIC OMITTED]
P.O. Box 8907
Wilmington, DE 19899
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by PNC Bank, National Association or any other bank and shares are not federally
insured by, guaranteed by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, The Federal Reserve
Board, or any other governmental agency. Investments in shares of the fund
involve investment risks, including the possible loss of the principal amount
invested.
AR 9/30/98 EP
