September 30, 1999
Tax-Free
Bond
Portfolios
ANNUAL REPORT
TO SHAREHOLDERS
Not FDICInsured [GRAPHIC OMITTED]
May Lose Value BLACKROCK
No Bank Guarantee FUNDS
Pure Investment Style(REGISTRATION MARK)
<PAGE>
BLACKROCK FUNDS
TAX-FREE BOND PORTFOLIOS
* Tax-Free Income * Ohio Tax-Free Income
* Pennsylvania Tax-Free Income * Delaware Tax-Free Income
* New Jersey Tax-Free Income * Kentucky Tax-Free Income
TABLE of CONTENTS
SHAREHOLDER LETTER........................................................... 1
PORTFOLIO SUMMARIES
Tax-Free Income........................................................ 3
Pennsylvania Tax-Free Income........................................... 4
New Jersey Tax-Free Income............................................. 5
Ohio Tax-Free Income................................................... 6
Delaware Tax-Free Income............................................... 7
Kentucky Tax-Free Income............................................... 8
Note on Performance Information........................................ 9
STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS............................10-38
Tax-Free Income Statement of Assets & Liabilities...................... 15
Pennsylvania Tax-Free Income Statement of Assets & Liabilities......... 25
New Jersey Tax-Free Income Statement of Assets & Liabilities........... 29
Ohio Tax-Free Income Statement of Assets & Liabilities................. 32
Delaware Tax-Free Income Statement of Assets & Liabilities............. 35
Kentucky Tax-Free Income Statement of Assets & Liabilities............. 39
PORTFOLIO FINANCIAL STATEMENTS
Statements of Operations............................................... 40
Statements of Changes in Net Assets..................................42-43
Financial Highlights.................................................44-49
NOTES TO FINANCIAL STATEMENTS..............................................50-57
REPORT OF INDEPENDENT ACCOUNTANTS............................................ 58
<PAGE>
BLACKROCK FUNDS
October 14, 1999
Dear Shareholder:
We are pleased to present the Annual Report for the BlackRock Funds for
the fiscal year ended September 30, 1999, our last annual report of the
millenium.
As we look ahead to the new millenium the future looks promising. While
the Fed has indicated a bias to tightening, interest rates remain low and
stable. Inflation still seems to be in check, despite a general consensus that
world economies are strengthening. Over the past twelve months the S&P 500 moved
ahead by 27.8%, and the Dow did even better, returning 34.0%. Broadly, stocks
performed better than bonds over the same period, as the total return of the
Lehman Aggregate Index was -0.38%.
However, these numbers tell only part of the story. A closer look reveals
that much of the equity market's performance was generated in the last quarter
of 1998. As an example, the performance of the S&P 500 for the first nine months
of 1999 is only 5.87%. Additionally, performance has been narrow, with the
largest growth stocks (and, to some degree, the Internet sector) leading the
way. In other words, it looks like the great bull market of recent years may
have slowed its charge. It is still moving forward, but with less energy.
What should investors do?
We believe that the symbolism of the new millenium is appropriate for
investors. The idea that we are marking the passing of 1,000 years of human
history is a wonderful reminder of the virtue of patience.
While we will be hearing much exaggeration and cosmic rhetoric about the
"new age" of investing, we believe that this is a good time to call to mind a
concept that has proven its worth over many years of investment history. This is
the idea of "regression to the mean," which basically means that, over time,
markets tend to perform as they have always performed.
According to Ibbotson, from 1926 to 1998, the market for large company
stocks as measured by the S&P 500 Index has returned 11.22% annually. This is a
respectable return but significantly less generous than the S&P has been
returning in recent years. Therefore, if you believe that markets will revert to
their historical performance, this figure is a more realistic long-term planning
tool. On the other hand, if you are mesmerized by the recent dazzling
performance of internet stocks, 11.22% may look paltry.
Will the concept of "regression to the mean" impact markets in the new
millenium as it has in the past? Or have we really entered a new age in which
valuations are based on new and non-traditional measures and that markets can
continue to climb higher indefinitely. This is what some observers think. For
example, consider that the total market capitalization of AOL is approximately
$136 billion, which is nearly equal to the COMBINED market capitalizations of
Dow Industrial components J.P. Morgan, Alcoa, General Motors and Philip Morris.
There is even a best-selling book titled "Dow 36,000" whose authors believe that
the DJIA should be three times as high because they believe that "old" methods
of valuation are out of date and do not reflect the realities of the new
information economy. Of course we cannot predict the future, but we believe that
while certain factors may change, markets will continue to fluctuate in the
future as they have in the past.
1
<PAGE>
BLACKROCK FUNDS
BlackRock was founded on the belief that adhering to a disciplined
investment approach that seeks to manage risk rather than attempt to time the
markets will add value to client portfolios. That's why we continue to believe
that the best course of action in the new millenium is the same as it was in the
old: 1) work with your financial adviser to set your goals; 2) plan and
implement a sensible asset allocation that meets your goals and fits with your
personal ability to tolerate risk; and 3) consult with your financial advisor to
make ongoing adjustments.
We also believe that mutual funds, which provide a diversified investment
portfolio and professional management, may be the most appropriate investment
vehicle for individual investors.
BlackRock Funds takes pride in the completeness of its mutual fund
offerings. We currently offer 36 different portfolios which can meet the needs
of virtually any investor regardless of investment goal and risk tolerance. In
addition to the traditional asset classes, we also offer funds such as
International Small Cap Equity, Micro-Cap Equity and High Yield Bond for
investors that are interested in more specialized markets.
Continued thanks 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
TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (9/30/99):
$321.0 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX AS
IS CONSISTENT WITH THE PRESERVATION OF CAPITAL BY INVESTING IN A PORTFOLIO OF
MUNICIPAL FIXED INCOME SECURITIES RATED BBB OR HIGHER BY A MAJOR RATING AGENCY
OR DEEMED BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)ALTHOUGH MUNICIPAL YIELDS APPROACHED THEIR LOWEST LEVELS OF THE
DECADE DURING LATE 1998 AND EARLY 1999, MUNICIPAL SECURITIES UNDERPERFORMED
TREASURIES ON A PRE-TAX BASIS DURING THE ANNUAL PERIOD. THE MANAGER'S DECISION
TO MAINTAIN A SHORTER THAN BENCHMARK DURATION AIDED THE PORTFOLIO'S TOTAL
RETURN, AS INTEREST RATES ROSE FROM THEIR LOWS THROUGHOUT THE SECOND HALF OF THE
PERIOD.
(BULLET)FOR MUCH OF THE PERIOD, THE MANAGER OVERWEIGHTED THE INTERMEDIATE
SECTOR OF THE MUNICIPAL YIELD CURVE, WHICH OFFERED GOOD RELATIVE VALUE. THOSE
MATURITIES OUTPERFORMED LONGER MATURITY MUNICIPAL SECURITIES, WHICH HAS LED THE
MANAGER TO BEGIN TO EXTEND THE AVERAGE MATURITY OF THE PORTFOLIO.
(BULLET)FURTHER BOOSTING THE PORTFOLIO'S RETURNS WAS THE MANAGER'S BIAS
TOWARDS A DEFENSIVE COUPON STRUCTURE, WHICH WAS ACHIEVED BY ADDING PREMIUM
COUPONS. THE PORTFOLIO BENEFITED FROM THIS BIAS AS INTEREST RATES ROSE DURING
THE PAST SIX MONTHS.
(BULLET)THE END OF THE PERIOD FINDS MUNICIPAL YIELDS AT ATTRACTIVE LEVELS,
WHICH HAS PROMPTED INCREASED RETAIL PURCHASING OF INDIVIDUAL MUNICIPAL
SECURITIES.
Although the portfolio holdings and sectors listed above were current as of the
end of the annual period ended September 30, 1999, the Portfolio is actively
managed and the composition will vary.
[GRAPHIC OMITTED]
EDGAR REPPRESENTATION OF DATA POINTS USED INPRINTED GRAPHIC
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE TAX-FREE INCOME
PORTFOLIO AND THE LEHMAN MUNICIPAL BOND INDEX FROM INCEPTION AND AT EACH
FISCAL YEAR END.
INSTITUTIONAL SERVICE INVESTOR INVESTOR INVESTOR LEHMAN MUNICIPAL
CLASS CLASS A CLASS B CLASS C CLASS BOND INDEX
5/14/90 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
JUN-90 10,118 10,118 9,662 10,118 10,118 10,234
SEP-90 10,139 10,139 9,683 10,139 10,139 10,240
DEC-90 10,513 10,513 10,040 10,513 10,513 10,681
MAR-91 10,720 10,720 10,238 10,720 10,720 10,923
JUN-91 10,919 10,919 10,428 10,919 10,919 11,156
SEP-91 11,296 11,296 10,787 11,296 11,296 11,590
DEC-91 11,708 11,708 11,181 11,708 11,708 11,979
MAR-92 11,776 11,776 11,247 11,776 11,776 12,015
JUN-92 12,215 12,215 11,665 12,215 12,215 12,471
SEP-92 12,504 12,504 11,942 12,504 12,504 12,802
DEC-92 12,744 12,744 12,170 12,744 12,744 13,035
MAR-93 13,246 13,246 12,650 13,246 13,246 13,518
JUN-93 13,708 13,708 13,091 13,708 13,708 13,961
SEP-93 14,200 14,194 13,551 14,189 14,189 14,432
DEC-93 14,412 14,400 13,738 14,385 14,385 14,635
MAR-94 13,430 13,410 12,786 13,389 13,389 13,832
JUN-94 13,615 13,587 12,948 13,558 13,558 13,985
SEP-94 13,661 13,625 12,978 13,590 13,590 14,080
DEC-94 13,455 13,395 12,764 13,365 13,365 13,878
MAR-95 14,555 14,496 13,793 14,443 14,443 14,859
JUN-95 14,810 14,737 14,014 14,674 14,674 15,218
SEP-95 15,242 15,156 14,404 15,083 15,083 15,656
DEC-95 15,941 15,825 15,031 15,739 15,739 16,302
MAR-96 15,806 15,694 14,900 15,602 15,602 16,105
JUN-96 15,953 15,828 15,026 15,734 15,734 16,228
SEP-96 16,378 16,237 15,408 16,104 16,104 16,602
DEC-96 16,853 16,696 15,837 16,522 16,522 17,025
MAR-97 16,838 16,669 15,805 16,458 16,458 16,985
JUN-97 17,446 17,258 16,439 16,999 16,999 17,571
SEP-97 18,032 17,824 16,971 17,550 17,516 18,101
DEC-97 18,560 18,332 17,448 18,043 17,975 18,592
MAR-98 18,805 18,559 17,656 18,258 18,155 18,806
JUN-98 19,080 18,815 17,892 18,502 18,363 19,092
SEP-98 19,629 19,344 18,386 19,013 18,835 19,678
DEC-98 19,753 19,450 18,480 19,110 18,896 19,797
MAR-99 19,856 19,536 18,554 19,187 18,935 19,972
JUN-99 19,510 19,180 18,209 18,796 18,549 19,619
SEP-99 19,301 18,960 17,992 17,980 18,293 19,540
FOR PERIOD ENDING SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
Taxable Taxable Taxable From Taxable
1 Year Equivalent* 3 Year Equivalent* 5 Year Equivalent* Inception Equivalent*
------- ----------- ------ ----------- ------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional Class (1.68)% (2.43)% 5.62% 8.14% 7.15% 10.36% 7.25% 10.51%
Service Class (1.97)% (2.86)% 5.30% 7.68% 6.84% 9.91% 7.05% 10.22%
Investor A Class (Load Adjusted) (6.06)% (8.78)% 3.71% 5.38% 5.77% 8.36% 6.46% 9.36%
Investor A Class (NAV) (2.14)% (3.10)% 5.13% 7.43% 6.64% 9.62% 6.92% 10.03%
Investor B Class (Load Adjusted) (7.21)% (10.45)% 3.11% 4.51% 5.70% 8.26% 6.64% 9.62%
InvestorBClass (NAV) (2.87)% (4.16)% 4.35% 6.30% 6.13% 8.88% 6.64% 9.62%
Investor C Class (Load Adjusted) (3.84)% (5.58)% 4.35% 6.30% 6.13% 8.88% 6.64% 9.62%
Investor C Class (NAV) (2.87)% (4.16)% 4.35% 6.30% 6.13% 8.88% 6.64% 9.62%
</TABLE>
*Taxable equivalent total return is based on the annualized total return and a
federal tax rate of 39.6%. It represents the return on a taxable investment
necessary to equal the after-tax return of the BlackRock Tax-Free
Income Portfolio.
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,
1/21/93; Service Shares, 7/29/93; Investor B Shares, 7/18/96 and Investor C
Shares, 2/28/97. See "Note on Performance Information" on page 9 for further
information on how performance data was calculated.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
3
<PAGE>
BLACKROCK FUNDS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (9/30/99):
$1.1 BILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND
PENNSYLVANIA STATE INCOME TAX AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL
BY INVESTING IN A PORTFOLIO OF MUNICIPAL FIXED INCOME SECURITIES RATED BBB OR
HIGHER BY A MAJOR RATING AGENCY OR DEEMED BY THE MANAGER TO BE OF COMPARABLE
CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)ALTHOUGH MUNICIPAL YIELDS APPROACHED THEIR LOWEST LEVELS OF THE
DECADE DURING LATE 1998 AND EARLY 1999, MUNICIPAL SECURITIES UNDERPERFORMED
TREASURIES ON A PRE-TAX BASIS DURING THE ANNUAL PERIOD. THE MANAGER'S DECISION
TO MAINTAIN A SHORTER THAN BENCHMARK DURATION AIDED THE PORTFOLIO'S TOTAL
RETURN, AS INTEREST RATES ROSE FROM THEIR LOWS THROUGHOUT THE SECOND HALF OF THE
PERIOD.
(BULLET)FOR MUCH OF THE PERIOD, THE MANAGER OVERWEIGHTED THE INTERMEDIATE
SECTOR OF THE MUNICIPAL YIELD CURVE, WHICH OFFERED GOOD RELATIVE VALUE. THOSE
MATURITIES OUTPERFORMED LONGER MATURITY MUNICIPAL SECURITIES, WHICH HAS LED THE
MANAGER TO BEGIN TO EXTEND THE AVERAGE MATURITY OF THE PORTFOLIO.
(BULLET)FURTHER BOOSTING THE PORTFOLIO'S RETURNS WAS THE MANAGER'S BIAS
TOWARDS A DEFENSIVE COUPON STRUCTURE, WHICH WAS ACHIEVED BY ADDING PREMIUM
COUPONS. THE PORTFOLIO BENEFITED FROM THIS BIAS AS INTEREST RATES ROSE DURING
THE PAST SIX MONTHS.
(BULLET)THE END OF THE PERIOD FINDS MUNICIPAL YIELDS AT ATTRACTIVE LEVELS,
WHICH HAS PROMPTED INCREASED RETAIL PURCHASING OF INDIVIDUAL MUNICIPAL
SECURITIES.
Although the portfolio holdings and sectors listed above were current as of the
end of the annual period ended September 30, 1999, the Portfolio is actively
managed and the composition will vary.
[GRAPHIC OMITTED]
EDGAR REPPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE PA TAX-FREE INCOME
PORTFOLIO AND LEHMAN MUNICIPAL BOND INDEX FROM INCEPTION AND AT EACH FISCAL
YEAR END.
INSTITUTIONAL SERVICE INVESTOR INVESTOR INVESTOR LEHMAN MUNICIPAL
CLASS CLASS A CLASS B CLASS C CLASS BOND INDEX
12/1/92 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
DEC-92 10,080 10,080 9,626 10,080 10,080 10,182
MAR-93 10,492 10,492 10,020 10,492 10,492 10,560
JUN-93 10,809 10,809 10,322 10,809 10,809 10,905
SEP-93 11,142 11,165 10,667 11,170 11,170 11,274
DEC-93 11,324 11,341 10,841 11,352 11,352 11,432
MAR-94 10,614 10,621 10,159 10,638 10,638 10,805
JUN-94 10,746 10,746 10,284 10,769 10,769 10,924
SEP-94 10,813 10,808 10,337 10,824 10,824 10,999
DEC-94 10,545 10,533 10,069 10,518 10,518 10,841
MAR-95 11,353 11,332 10,828 11,296 11,296 11,607
JUN-95 11,614 11,585 11,064 11,526 11,526 11,888
SEP-95 11,981 11,944 11,400 11,859 11,859 12,230
DEC-95 12,483 12,439 11,867 12,326 12,326 12,734
MAR-96 12,343 12,283 11,716 12,145 12,145 12,580
JUN-96 12,448 12,379 11,802 12,212 12,212 12,677
SEP-96 12,734 12,653 12,059 12,455 12,455 12,969
DEC-96 13,058 12,966 12,353 12,733 12,733 13,299
MAR-97 13,010 12,909 12,294 12,648 12,648 13,268
JUN-97 13,413 13,294 12,713 12,997 12,997 13,726
SEP-97 13,810 13,679 13,076 13,341 13,341 14,140
DEC-97 14,198 14,052 13,429 13,675 13,675 14,523
MAR-98 14,371 14,212 13,578 13,806 13,806 14,690
JUN-98 14,600 14,428 13,779 14,004 14,004 14,914
SEP-98 14,985 14,799 14,127 14,351 14,351 15,372
DEC-98 15,065 14,867 14,187 14,404 14,404 15,464
MAR-99 15,185 14,976 14,285 14,496 14,496 15,601
JUN-99 14,933 14,717 14,032 14,232 14,232 15,325
SEP-99 14,861 14,634 13,949 13,858 14,141 15,264
<TABLE>
<CAPTION>
FOR PERIOD ENDING SEPTEMBER 30, 1999
AVERAGE ANNUAL TOTAL RETURN
Taxable Taxable Taxable From Taxable
1 Year Equivalent* 3 Year Equivalent* 5 Year Equivalent* Inception Equivalent*
------- ----------- ------ ----------- ------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional Class (0.82)% (1.42)% 5.28% 9.17% 6.57% 11.41% 5.97% 10.36%
Service Class (1.11)% (1.93)% 4.97% 8.63% 6.26% 10.87% 5.73% 9.95%
Investor A Class (Load Adjusted) (5.17)% (8.98)% 3.39% 5.89% 5.23% 9.08% 4.99% 8.66%
Investor A Class (NAV) (1.25)% (2.17)% 4.82% 8.37% 6.10% 10.59% 5.62% 9.76%
Investor B Class (Load Adjusted) (6.61)% (11.48)% 2.81% 4.88% 4.93% 8.56% 5.07% 8.80%
InvestorBClass (NAV) (2.21)% (3.84)% 4.06% 7.05% 5.36% 9.31% 5.07% 8.80%
Investor C Class (Load Adjusted) (2.86)% (4.97)% 4.16% 7.22% 5.42% 9.41% 5.12% 8.89%
Investor C CLass (NAV) (1.93)% (3.35)% 4.16% 7.22% 5.42% 9.41% 5.12% 8.89%
</TABLE>
*Taxable equivalent total return is based on the annualized total return and a
combined federal and statae tax rate of 42.4%. It represents the return on a
taxable investment necessary to equal the after-tax return of the BlackRock
Pennsylvania Tax-Free Income Portfolio.
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 and Investor A Shares, 12/1/92; Service
Shares, 7/29/93; Investor B Shares, 10/3/94 and Investor C Shares, 8/14/98. See
"Note on Performance Information" on page 9 for further information on how
performance data was calculated.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
4
<PAGE>
BLACKROCK FUNDS
NEW JERSEY TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (9/30/99):
$161.5 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND NEW JERSEY
STATE INCOME TAX AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL BY INVESTING
IN A PORTFOLIO OF MUNICIPAL FIXED INCOME SECURITIES RATED BBB OR HIGHER BY A
MAJOR RATING AGENCY OR DEEMED BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)ALTHOUGH MUNICIPAL YIELDS APPROACHED THEIR LOWEST LEVELS OF THE
DECADE DURING LATE 1998 AND EARLY 1999, MUNICIPAL SECURITIES UNDERPERFORMED
TREASURIES ON A PRE-TAX BASIS DURING THE ANNUAL PERIOD. THE MANAGER'S DECISION
TO MAINTAIN A SHORTER THAN BENCHMARK DURATION AIDED THE PORTFOLIO'S TOTAL
RETURN, AS INTEREST RATES ROSE FROM THEIR LOWS THROUGHOUT THE SECOND HALF OF THE
PERIOD.
(BULLET)FOR MUCH OF THE PERIOD, THE MANAGER OVERWEIGHTED THE INTERMEDIATE
SECTOR OF THE MUNICIPAL YIELD CURVE, WHICH OFFERED GOOD RELATIVE VALUE. THOSE
MATURITIES OUTPERFORMED LONGER MATURITY MUNICIPAL SECURITIES, WHICH HAS LED THE
MANAGER TO BEGIN TO EXTEND THE AVERAGE MATURITY OF THE PORTFOLIO.
(BULLET)FURTHER BOOSTING THE PORTFOLIO'S RETURNS WAS THE MANAGER'S BIAS
TOWARDS A DEFENSIVE COUPON STRUCTURE, WHICH WAS ACHIEVED BY ADDING PREMIUM
COUPONS. THE PORTFOLIO BENEFITED FROM THIS BIAS AS INTEREST RATES ROSE DURING
THE PAST SIX MONTHS.
(BULLET)THE END OF THE PERIOD FINDS MUNICIPAL YIELDS AT ATTRACTIVE LEVELS,
WHICH HAS PROMPTED INCREASED RETAIL PURCHASING OF INDIVIDUAL MUNICIPAL
SECURITIES.
Although the portfolio holdings and sectors listed above were current as of the
end of the annual period ended September 30, 1999, the Portfolio is actively
managed and the composition will vary.
[GRAPHIC OMITTED]
EDGAR REPPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE NJ TAX-FREE
INCOME PORTFOLIO AND THE LEHMAN MUNICIPAL BOND INDEX FROM INCEPTION AND
AT EACH FISCAL YEAR END.
INSTITUTIONAL SERVICE INVESTOR INVESTOR INVESTOR LEHMAN MUNICIPAL
CLASS CLASS A CLASS B CLASS C CLASS BOND INDEX
7/1/91 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
SEP-91 10,357 10,357 9,891 10,357 10,357 10,389
DEC-91 10,736 10,736 1,0253 10,736 10,736 10,738
MAR-92 10,775 10,775 1,0290 10,775 10,775 10,770
JUN-92 11,205 11,205 1,0701 11,205 11,205 11,179
SEP-92 11,462 11,462 1,0946 11,462 11,462 11,475
DEC-92 11,691 11,691 1,1165 11,691 11,691 11,684
MAR-93 12,098 12,098 1,1553 12,098 12,098 12,118
JUN-93 12,514 12,514 1,1951 12,514 12,514 12,514
SEP-93 12,867 12,867 1,2288 12,867 12,867 12,937
DEC-93 13,045 13,045 1,2458 13,045 13,045 13,119
MAR-94 12,370 12,370 1,1813 12,370 12,370 12,399
JUN-94 12,504 12,504 1,1942 12,504 12,504 12,536
SEP-94 12,583 12,583 1,2017 12,583 12,583 12,622
DEC-94 12,432 12,432 1,1873 12,432 12,432 12,440
MAR-95 13,195 13,195 1,2601 13,195 13,195 13,320
JUN-95 13,454 13,454 1,2848 13,454 13,454 13,642
SEP-95 13,802 13,802 1,3181 13,802 13,802 14,034
DEC-95 14,289 14,289 1,3646 14,289 14,289 14,613
MAR-96 14,158 14,158 1,3519 14,156 14,156 14,437
JUN-96 14,198 14,198 1,3546 14,184 14,184 14,547
SEP-96 14,445 14,445 1,3776 14,398 14,398 14,882
DEC-96 14,808 14,808 1,4115 14,725 14,725 15,261
MAR-97 14,768 14,768 1,4072 14,653 14,653 15,226
JUN-97 15,185 15,185 1,4534 15,028 15,028 15,751
SEP-97 15,623 15,623 1,4946 15,429 15,429 16,226
DEC-97 16,035 16,035 1,5334 15,800 15,800 16,666
MAR-98 16,167 16,167 1,5453 15,893 15,893 16,858
JUN-98 16,406 16,403 1,5673 16,088 16,088 17,114
SEP-98 16,932 16,916 1,6157 16,585 16,555 17,640
DEC-98 17,021 16,990 1,6221 16,652 16,590 17,746
MAR-99 17,089 17,045 1,6267 16,700 16,605 17,903
JUN-99 16,752 16,695 1,5927 16,319 16,226 17,586
SEP-99 16,705 16,635 1,5863 15,736 16,130 17,516
<TABLE>
<CAPTION>
FOR PERIOD ENDING SEPTEMBER 30, 1999
AVERAGE ANNUAL TOTAL RETURN
Taxable Taxable Taxable From Taxable
1 Year Equivalent* 3 Year Equivalent* 5 Year Equivalent* Inception Equivalent*
------- ----------- ------ ----------- ------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional Class (1.35)% (2.50)% 4.96% 9.19% 5.83% 10.80% 6.41% 11.87%
Service Class (1.65)% (3.06)% 4.81% 8.91% 5.74% 10.63% 6.36% 11.78%
Investor A Class (Load Adjusted) (5.75)% (10.65)% 3.22% 5.96% 4.75% 8.80% 5.76% 10.67%
Investor A Class (NAV) (1.82)% (3.37)% 4.64% 8.59% 5.61% 10.39% 6.28% 11.63%
Investor B Class (Load Adjusted) (6.95)% (12.87)% 2.63% 4.87% 4.67% 8.65% 5.96% 11.04%
InvestorBClass (NAV) (2.55)% (4.72)% 3.86% 7.15% 5.09% 9.43% 5.96% 11.04%
InvestorCClass (Load Adjusted) (3.52)% 6.52% 3.86% 7.15% 5.09% 9.43% 5.96% 11.04%
InvestorCClass (NAV) (2.55)% (4.72)% 3.86% 7.15% 5.09% 9.43% 5.96% 11.04%
</TABLE>
*Taxable equivalent total return is based on the annualized total return and a
combined federal and statae tax rate of 46%. It represents the return on a
taxable investment necessary to equal the after-tax return of the BlackRock New
Jersey Tax-Free Income Portfolio.
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: Service Shares, 7/1/91; Investor A Shares, 1/26/96;
Investor B Shares, 7/2/96; Institutional Shares, 5/4/98 and Investor C shares,
12/9/98. See "Note on Performance Information" on page 9 for further information
on how performance data was calculated.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
5
<PAGE>
BLACKROCK FUNDS
OHIO TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (9/30/99):
$97.4 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND OHIO STATE
INCOME TAX AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL BY INVESTING IN A
PORTFOLIO OF MUNICIPAL FIXED INCOME SECURITIES RATED BBB OR HIGHER BY A MAJOR
RATING AGENCY OR DEEMED BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)ALTHOUGH MUNICIPAL YIELDS APPROACHED THEIR LOWEST LEVELS OF THE
DECADE DURING LATE 1998 AND EARLY 1999, MUNICIPAL SECURITIES UNDERPERFORMED
TREASURIES ON A PRE-TAX BASIS DURING THE ANNUAL PERIOD. THE MANAGER'S DECISION
TO MAINTAIN A SHORTER THAN BENCHMARK DURATION AIDED THE PORTFOLIO'S TOTAL
RETURN, AS INTEREST RATES ROSE FROM THEIR LOWS THROUGHOUT THE SECOND HALF OF THE
PERIOD.
(BULLET)FOR MUCH OF THE PERIOD, THE MANAGER OVERWEIGHTED THE INTERMEDIATE
SECTOR OF THE MUNICIPAL YIELD CURVE, WHICH OFFERED GOOD RELATIVE VALUE. THOSE
MATURITIES OUTPERFORMED LONGER MATURITY MUNICIPAL SECURITIES, WHICH HAS LED THE
MANAGER TO BEGIN TO EXTEND THE AVERAGE MATURITY OF THE PORTFOLIO.
(BULLET)FURTHER BOOSTING THE PORTFOLIO'S RETURNS WAS THE MANAGER'S BIAS
TOWARDS A DEFENSIVE COUPON STRUCTURE, WHICH WAS ACHIEVED BY ADDING PREMIUM
COUPONS. THE PORTFOLIO BENEFITED FROM THIS BIAS AS INTEREST RATES ROSE DURING
THE PAST SIX MONTHS.
(BULLET)THE END OF THE PERIOD FINDS MUNICIPAL YIELDS AT ATTRACTIVE LEVELS,
WHICH HAS PROMPTED INCREASED RETAIL PURCHASING OF INDIVIDUAL MUNICIPAL
SECURITIES.
Although the portfolio holdings and sectors listed above were current as of the
end of the annual period ended September 30, 1999, the Portfolio is actively
managed and the composition will vary.
[GRAPHIC OMITTED]
EDGAR REPPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE OH TAX-FREE
INCOME PORTFOLIO AND THE LEHMAN MUNICIPAL BOND INDEX FROM INCEPTION
AND AT EACH FISCAL YEAR END.
INSTITUTIONAL SERVICE INVESTOR INVESTOR INVESTOR LEHMAN MUNICIPAL
CLASS CLASS A CLASS B CLASS C CLASS BOND INDEX
12/1/92 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
DEC-92 10,010 10,010 9,560 10,010 10,010 10,182
MAR-93 10,270 10,270 9,808 10,270 10,270 10,560
JUN-93 10,561 10,561 10,086 10,561 10,561 10,905
SEP-93 10,910 10,907 10,420 10,911 10,911 11,274
DEC-93 11,024 11,014 10,529 11,025 11,025 11,432
MAR-94 10,346 10,330 9,881 10,347 10,347 10,805
JUN-94 10,442 10,420 9,973 10,443 10,443 10,924
SEP-94 10,498 10,469 10,026 10,499 10,499 10,999
DEC-94 10,310 10,276 9,843 10,281 10,281 10,841
MAR-95 11,076 11,033 10,568 11,018 11,018 11,607
JUN-95 11,300 11,249 10,774 11,211 11,211 11,888
SEP-95 11,625 11,565 11,075 11,503 11,503 12,230
DEC-95 12,145 12,073 11,560 11,985 11,985 12,734
MAR-96 11,950 11,870 11,361 11,756 11,756 12,580
JUN-96 12,046 11,957 11,440 11,815 11,815 12,677
SEP-96 12,335 12,234 11,700 12,061 12,061 12,969
DEC-96 12,646 12,533 11,981 12,330 12,330 13,299
MAR-97 12,612 12,490 11,936 12,260 12,260 13,268
JUN-97 13,001 12,867 12,355 12,600 12,600 13,726
SEP-97 13,385 13,238 12,706 12,934 12,934 14,140
DEC-97 13,739 13,577 13,026 13,236 13,236 14,523
MAR-98 13,864 13,691 13,130 13,316 13,316 14,690
JUN-98 14,084 13,899 13,323 13,488 13,488 14,914
SEP-98 14,531 14,328 13,730 13,874 13,874 15,372
DEC-98 14,612 14,397 13,790 13,909 13,909 15,464
MAR-99 14,714 14,488 13,871 13,964 13,964 15,601
JUN-99 14,364 14,131 13,525 13,589 13,589 15,325
<TABLE>
<CAPTION>
FOR PERIOD ENDING SEPTEMBER 30, 1999
AVERAGE ANNUAL TOTAL RETURN
Taxable Taxable Taxable From Taxable
1 Year Equivalent* 3 Year Equivalent* 5 Year Equivalent* Inception Equivalent*
------- ---------- ------ ----------- ------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional Class (1.38)% (2.59)% 5.13% 9.64% 6.43% 12.09% 5.41% 10.17%
Service Class (1.68)% (3.16)% 4.82% 9.06% 6.12% 11.50% 5.14% 9.66%
Investor A Class (Load Adjusted) (5.75)% (10.81)% 3.23% 6.07% 5.12% 9.62% 4.46% 8.38%
Investor A Class (NAV) (1.85)% (3.48)% 4.64% 8.72% 5.99% 11.26% 5.09% 9.57%
Investor B Class (Load Adjusted) (6.98)% (13.12)% 2.63% 4.94% 4.76% 8.95% 4.51% 8.48%
Investor B Class (NAV) (2.58)% (4.85)% 3.86% 7.26% 5.19% 9.76% 4.51% 8.48%
Investor C Class (Load Adjusted) (3.55)% (6.67)% 3.86% 7.26% 5.19% 9.76% 4.51% 8.48%
Investor C Class (NAV) (2.58)% (4.85)% 3.86% 7.26% 5.19% 9.76% 4.51% 8.48%
</TABLE>
*Taxable equivalent total return is based on the annualized total return and a
combined federal and state tax rate of 46.8%. It represents the return on a
taxable investment necessary to equal the after-tax return of the BlackRock
Ohio Tax-Free Income Portfolio.
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 and Investor A Shares, 12/1/92; Service
Shares, 7/29/93; Investor B Shares, 10/13/94 and Investor C Shares, 8/26/98. See
"Note on Performance Information" on page 9 for further information on how
performance data was calculated.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
6
<PAGE>
BLACKROCK FUNDS
DELAWARE TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (9/30/99):
$113.2 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND DELAWARE
STATE INCOME TAX AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL BY INVESTING
IN A PORTFOLIO OF MUNICIPAL FIXED INCOME SECURITIES RATED BBB OR HIGHER BY A
MAJOR RATING AGENCY OR DEEMED BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)ALTHOUGH MUNICIPAL YIELDS APPROACHED THEIR LOWEST LEVELS OF THE
DECADE DURING LATE 1998 AND EARLY 1999, MUNICIPAL SECURITIES UNDERPERFORMED
TREASURIES ON A PRE-TAX BASIS DURING THE ANNUAL PERIOD. THE MANAGER'S DECISION
TO MAINTAIN A SHORTER THAN BENCHMARK DURATION AIDED THE PORTFOLIO'S TOTAL
RETURN, AS INTEREST RATES ROSE FROM THEIR LOWS THROUGHOUT THE SECOND HALF OF THE
PERIOD.
(BULLET)FOR MUCH OF THE PERIOD, THE MANAGER OVERWEIGHTED THE INTERMEDIATE
SECTOR OF THE MUNICIPAL YIELD CURVE, WHICH OFFERED GOOD RELATIVE VALUE. THOSE
MATURITIES OUTPERFORMED LONGER MATURITY MUNICIPAL SECURITIES, WHICH HAS LED THE
MANAGER TO BEGIN TO EXTEND THE AVERAGE MATURITY OF THE PORTFOLIO.
(BULLET)FURTHER BOOSTING THE PORTFOLIO'S RETURNS WAS THE MANAGER'S BIAS
TOWARDS A DEFENSIVE COUPON STRUCTURE, WHICH WAS ACHIEVED BY ADDING PREMIUM
COUPONS. THE PORTFOLIO BENEFITED FROM THIS BIAS AS INTEREST RATES ROSE DURING
THE PAST SIX MONTHS.
(BULLET)THE END OF THE PERIOD FINDS MUNICIPAL YIELDS AT ATTRACTIVE LEVELS,
WHICH HAS PROMPTED INCREASED RETAIL PURCHASING OF INDIVIDUAL MUNICIPAL
SECURITIES.
Although the portfolio holdings and sectors listed above were current as of the
end of the annual period ended September 30, 1999, the Portfolio is actively
managed and the composition will vary.
[GRAPHIC OMITTED]
EDGAR REPPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE DE TAX-FREE
INCOME PORTFOLIO AND LEHMAN MUNICIPAL BOND INDEX FROM INCEPTION AND
AT EACH FISCAL YEAR END.
INSTITUTIONAL SERVICE INVESTOR INVESTOR INVESTOR LEHMAN MUNICIPAL
CLASS CLASS A CLASS B CLASS C CLASS BOND INDEX
12/31/89 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
MAR-90 10,058 10,050 9,644 10,027 10,027 10,045
JUN-90 10,249 10,233 9,816 10,186 10,186 10,279
SEP-90 10,349 10,325 9,899 10,255 10,255 10,285
DEC-90 10,661 10,629 10,186 10,532 10,532 10,729
MAR-91 10,867 10,825 10,371 10,702 10,702 10,972
JUN-91 11,021 10,971 10,506 10,821 10,821 11,205
SEP-91 11,327 11,268 10,785 11,088 11,088 11,641
DEC-91 11,634 11,564 11,064 11,354 11,354 12,032
MAR-92 11,604 11,525 11,022 11,290 11,290 12,068
JUN-92 11,952 11,861 11,340 11,593 11,593 12,526
SEP-92 12,188 12,086 11,549 11,786 11,786 12,859
DEC-92 12,302 12,190 11,644 11,860 11,860 13,093
MAR-93 12,601 12,478 11,913 12,134 12,134 13,579
JUN-93 12,860 12,724 12,143 12,345 12,345 14,023
SEP-93 13,217 13,069 12,466 12,650 12,650 14,497
DEC-93 13,322 13,162 12,550 12,711 12,711 14,700
MAR-94 12,709 12,547 11,971 12,089 12,089 13,893
JUN-94 12,907 12,733 12,143 12,241 12,241 14,047
SEP-94 12,990 12,805 12,207 12,282 12,282 14,143
DEC-94 12,881 12,689 12,089 12,142 12,142 13,940
MAR-95 13,496 13,285 12,653 12,685 12,685 14,926
JUN-95 13,813 13,587 12,935 12,944 12,944 15,286
SEP-95 14,170 13,928 13,253 13,238 13,238 15,726
DEC-95 14,564 14,305 13,606 13,564 13,564 16,374
MAR-96 14,501 14,232 13,531 13,464 13,464 16,177
JUN-96 14,561 14,279 13,570 13,478 13,478 16,301
SEP-96 14,789 14,492 13,767 13,647 13,647 16,676
DEC-96 15,086 14,771 14,027 13,879 13,879 17,101
MAR-97 15,068 14,743 13,993 13,821 13,821 17,061
JUN-97 15,430 15,087 14,312 14,110 14,110 17,649
SEP-97 15,788 15,426 14,627 14,394 14,394 18,182
DEC-97 16,061 15,682 14,863 14,599 14,599 18,675
MAR-98 16,209 15,816 14,983 14,690 14,690 18,890
JUN-98 16,466 16,055 15,205 14,881 14,881 19,177
SEP-98 17,035 16,597 15,711 15,374 15,374 19,766
DEC-98 17,142 16,689 15,791 15,422 15,422 19,885
MAR-99 17,289 16,820 15,908 15,507 15,507 20,061
JUN-99 16,905 16,433 15,538 15,116 15,116 19,706
SEP-99 16,848 16,363 15,466 15,019 15,019 19,627
<TABLE>
<CAPTION>
FOR PERIOD ENDING SEPTEMBER 30, 1999
AVERAGE ANNUAL TOTAL RETURN
Taxable Taxable Taxable From Taxable
1 Year Equivalent* 3 Year Equivalent* 5 Year Equivalent* Inception Equivalent*
------- ----------- ------ ----------- ------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional Class (1.10)% (1.96)% 4.42% 7.86% 5.33% 9.48% 5.57% 9.91%
Service Class (1.40)% (2.49)% 4.12% 7.33% 5.01% 8.91% 5.26% 9.36%
Investor A Class (Load Adjusted) (5.50)% (9.79)% 2.54% 4.52% 3.98% 7.08% 4.75% 8.45%
Investor A Class (NAV) (1.57)% (2.79)% 3.94% 7.01% 4.83% 8.59% 5.08% 9.04%
Investor B Class (Load Adjusted) (6.71)% (11.94)% 1.95% 3.47% 3.64% 6.48% 4.30% 7.65%
InvestorBClass (NAV) (2.31)% (4.11)% 3.17% 5.64% 4.06% 7.22% 4.30% 7.65%
Investor C Class (Load Adjusted) (3.29)% (5.85)% 3.17% 5.64% 4.06% 7.22% 4.30% 7.65%
Investor C Class (NAV) (2.31)% (4.11)% 3.17% 5.64% 4.06% 7.22% 4.30% 7.65%
</TABLE>
*Taxable equivalent total return is based on the annualized total return and a
combined federal and statae tax rate of 43.8%. It represents the return on a
taxable investment necessary to equal the after-tax return of the BlackRock
Delaware Tax-Free Income Portfolio.
In connection with the conversion of various common trust funds maintained by
PNC Bank and PNC Bank, Delaware ("PNC-DE"), an affiliate of PNC Bank, into the
Fund between May 1 and May 15, 1998 (the "CTF Conversion"), the Delaware
Tax-Free Income Portfolio was established to receive the assets of the DE
Tax-Free Income Fund of PNC-DE. Performance information presented for this
Portfolio includes performance for the predecessor common trust fund which
transferred its assets and liabilities to the related Portfolio pursuant to the
CTF Conversion. Performance information presented is based upon the performance
of the DE Tax-Free Income Fund for periods prior to the CTF Conversion.
The inception date of the Lehman Local G.O. was January 1, 1990. Based on the
performance of the DE Tax-Free Income Fund, the Portfolio's predecessor common
trust fund, the annual total return of the Delaware Tax-Free Income Portfolio
for the calendar years 1987, 1988 and 1989 was 0.27%, 0.74% and 0.63%,
respectively.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
7
<PAGE>
BLACKROCK FUNDS
KENTUCKY TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (9/30/99):
$170.4 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND KENTUCKY
STATE INCOME TAX AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL BY INVESTING
IN A PORTFOLIO OF MUNICIPAL FIXED INCOME SECURITIES RATED BBB OR HIGHER BY A
MAJOR RATING AGENCY OR DEEMED BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)ALTHOUGH MUNICIPAL YIELDS APPROACHED THEIR LOWEST LEVELS OF THE
DECADE DURING LATE 1998 AND EARLY 1999, MUNICIPAL SECURITIES UNDERPERFORMED
TREASURIES ON A PRE-TAX BASIS DURING THE ANNUAL PERIOD. THE MANAGER'S DECISION
TO MAINTAIN A SHORTER THAN BENCHMARK DURATION AIDED THE PORTFOLIO'S TOTAL
RETURN, AS INTEREST RATES ROSE FROM THEIR LOWS THROUGHOUT THE SECOND HALF OF THE
PERIOD.
(BULLET)FOR MUCH OF THE PERIOD, THE MANAGER OVERWEIGHTED THE INTERMEDIATE
SECTOR OF THE MUNICIPAL YIELD CURVE, WHICH OFFERED GOOD RELATIVE VALUE. THOSE
MATURITIES OUTPERFORMED LONGER MATURITY MUNICIPAL SECURITIES, WHICH HAS LED THE
MANAGER TO BEGIN TO EXTEND THE AVERAGE MATURITY OF THE PORTFOLIO.
(BULLET)FURTHER BOOSTING THE PORTFOLIO'S RETURNS WAS THE MANAGER'S BIAS
TOWARDS A DEFENSIVE COUPON STRUCTURE, WHICH WAS ACHIEVED BY ADDING PREMIUM
COUPONS. THE PORTFOLIO BENEFITED FROM THIS BIAS AS INTEREST RATES ROSE DURING
THE PAST SIX MONTHS.
(BULLET)THE END OF THE PERIOD FINDS MUNICIPAL YIELDS AT ATTRACTIVE LEVELS,
WHICH HAS PROMPTED INCREASED RETAIL PURCHASING OF INDIVIDUAL MUNICIPAL
SECURITIES.
Although the portfolio holdings and sectors listed above were current as of the
end of the annual period ended September 30, 1999, the Portfolio is actively
managed and the composition will vary.
[GRAPHIC OMITTED]
EDGAR REPPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE KY TAX-FREE INCOME
PORTFOLIO AND LEHMAN MUNICIPAL BOND INDEX FROM INCEPTION
AND AT EACH FISCAL YEAR END.
INSTITUTIONAL SERVICE INVESTOR INVESTOR INVESTOR LEHMAN MUNICIPAL
CLASS CLASS A CLASS B CLASS C CLASS BOND INDEX
12/31/89 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
MAR-90 10,086 10,079 9,671 10,055 10,055 10,045
JUN-90 10,198 10,183 9,767 10,135 10,135 10,279
SEP-90 10,254 10,232 9,810 10,161 10,161 10,285
DEC-90 10,751 10,720 10,274 10,621 10,621 10,729
MAR-91 10,940 10,900 10,442 10,775 10,775 10,972
JUN-91 11,142 11,094 10,624 10,942 10,942 11,205
SEP-91 11,414 11,356 10,870 11,175 11,175 11,641
DEC-91 11,736 11,667 11,164 11,456 11,456 12,032
MAR-92 11,772 11,694 11,185 11,456 11,456 12,068
JUN-92 12,092 12,002 11,476 11,732 11,732 12,526
SEP-92 12,367 12,266 11,723 11,962 11,962 12,859
DEC-92 12,613 12,501 11,942 12,163 12,163 13,093
MAR-93 12,960 12,834 12,256 12,459 12,459 13,579
JUN-93 13,268 13,131 12,533 12,717 12,717 14,023
SEP-93 13,683 13,531 12,910 13,075 13,075 14,497
DEC-93 13,816 13,653 13,021 13,162 13,162 14,700
MAR-94 13,212 13,046 12,437 12,548 12,548 13,893
JUN-94 13,392 13,214 12,591 12,681 12,681 14,047
SEP-94 13,502 13,313 12,679 12,745 12,745 14,143
DEC-94 13,368 13,172 12,539 12,581 12,581 13,940
MAR-95 14,085 13,869 13,197 13,216 13,216 14,926
JUN-95 14,410 14,178 13,486 13,480 13,480 15,286
SEP-95 14,801 14,551 13,835 13,804 13,804 15,726
DEC-95 15,163 14,896 14,157 14,099 14,099 16,374
MAR-96 15,116 14,838 14,096 14,012 14,012 16,177
JUN-96 15,168 14,876 14,127 14,016 14,016 16,301
SEP-96 15,416 15,110 14,343 14,204 14,204 16,676
DEC-96 15,718 15,395 14,607 14,438 14,438 17,101
MAR-97 15,745 15,409 14,615 14,418 14,418 17,061
JUN-97 16,131 15,774 14,955 14,727 14,727 17,649
SEP-97 16,520 16,144 15,298 15,036 15,036 18,182
DEC-97 16,806 16,412 15,544 15,251 15,251 18,675
MAR-98 16,960 16,551 15,670 15,346 15,346 18,890
JUN-98 17,245 16,817 15,916 15,556 15,556 19,177
SEP-98 17,787 17,332 16,397 15,998 15,998 19,766
DEC-98 17,883 17,414 16,465 16,036 16,036 19,885
MAR-99 17,979 17,495 16,535 16,074 16,074 20,061
JUN-99 17,648 17,161 16,210 15,730 15,730 19,706
SEP-99 17,567 17,072 16,116 15,611 15,611 19,627
FOR PERIOD ENDING SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
Taxable Taxable Taxable From Taxable
1 Year Equivalent* 3 Year Equivalent* 5 Year Equivalent* Inception Equivalent*
------- ----------- ------ ----------- ------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Institutional Class (1.23)% (2.27)% 4.56% 8.40% 5.46% 10.06% 6.28% 11.57%
Service Class (1.52)% (2.80)% 4.25% 7.83% 5.15% 9.48% 5.97% 10.99%
Investor A Class (Load Adjusted) (5.63)% (10.37)% 2.66% 4.90% 4.11% 7.57% 5.42% 9.98%
Investor A Class (NAV) (1.69)% (3.11)% 4.07% 7.50% 4.97% 9.15% 5.79% 10.66%
Investor B Class (Load Adjusted) (6.82)% (12.56)% 2.08% 3.83% 3.77% 6.94% 5.00% 9.21%
Investor B Class (NAV) (2.43)% (4.48)% 3.30% 6.08% 4.19% 7.72% 5.00% 9.21%
Investor C Class (Load Adjusted) (3.41)% (6.28)% 3.30% 6.08% 4.19% 7.72% 5.00% 9.21%
Investor C Class (NAV) (2.43)% (4.48)% 3.30% 6.08% 4.19% 7.72% 5.00% 9.21%
</TABLE>
*Taxable equivalent total return is based on the annualized total return and a
combined federal and state tax rate of 45.7%. It represents the return on a
taxable investment necessary to equal the after-tax return of the BlackRock
Kentucky Tax-Free IncomePortfolio.
In connection with the conversion of various common trust funds maintained by
PNC Bank and PNC Bank, Delaware ("PNC-DE"), an affiliate of PNC Bank, into the
Fund between May 1 and May 15, 1998 (the "CTF Conversion"), the Kentucky
Tax-Free Income Portfolio was established to receive the assets of the KY
Tax-Free Income Fund of PNC Bank. Performance information presented for this
Portfolio includes performance for the predecessor common trust fund which
transferred its assets and liabilities to the related Portfolio pursuant to the
CTF Conversion. Performance information presented is based upon the performance
of the KY Tax-Free Income Fund for periods prior to the CTF Conversion.
The inception date of the Lehman Local G.O. was January 1, 1990. Based on the
performance of the KY Tax-Free Income Fund, the Portfolio's predecessor common
trust fund, the annual total return of the KY Tax-Free Income Portfolio for the
calendar years 1987, 1988 and 1989 was 0.79%, 2.70% and 1.66%, respectively.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
8
<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 of all the portfolios is
4.00%. 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. BlackRock Advisors, Inc.
and the Portfolios' 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 TAX-FREE BOND
PORTFOLIOS (UNAUDITED)
During the fiscal year ended September 30, 1999, the following Portfolios
of the BlackRock Funds declared the following dividends from net realized
capital gains:
SHORT-TERM LONG-TERM
CAPITAL GAIN CAPITAL GAIN
PER SHARE PER SHARE
------------ ------------
Tax-Free Income Portfolio ................... $0.0333 $0.0288
Pennsylvania Tax-Free Income Portfolio ...... 0.0075 0.0222
New Jersey Tax-Free Income Portfolio ........ -- 0.0637
Ohio Tax-Free Income Portfolio .............. -- 0.0438
Delaware Tax-Free Income Portfolio .......... 0.0526 0.0833
Kentucky Tax-Free Income Portfolio .......... 0.0295 0.0694
Because each Portfolio's fiscal year is not the calendar year, another
notification will be sent with respect to calendar year 1999. The second
notification, which reflects the amounts to be used by calendar year taxpayers
on their U.S. federal income tax returns, has been made in conjunction with Form
1099-DIV and will be mailed in January 2000.
During the fiscal year ended September 30, 1999, 100% of the income
dividends paid by the Tax-Free Income, Pennsylvania Tax-Free Income, New Jersey
Tax-Free Income, Ohio Tax-Free Income, Delaware Tax-Free Income and Kentucky
Tax-Free Income Portfolios were exempt-interest dividends for purposes of
federal income taxes and accordingly, were exempt from such taxes. However, the
percentage of these dividends which must be included in federal alternative
minimum taxable income for purposes of determining any liability for the
alternative minimum tax is as follows: Tax-Free Income Portfolio 14%,
Pennsylvania Tax-Free Income Portfolio 2%, New Jersey Tax-Free Income Portfolio
10%, Ohio Tax-Free Income Portfolio 2%, Delaware Tax-Free Income Portfolio 2%
and Kentucky Tax-Free Income Portfolio 7%.
In January 2000, you will be furnished with a schedule showing the annual
percentage breakdown by state or U.S. possession of the source of interest
earned by each Portfolio in 1999.
9
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ---------- ------------
MUNICIPAL BONDS -- 93.0%
ALABAMA -- 1.3%
Alabama Hsg. Fin. Auth. Sgl. Fam.
Mtg. Rev., Collateral Home Mtg. Bd.
Prj., Ser. 94B-1
6.65% 10/01/25 $ 1,160 $ 1,207,850
Alabama Rev., Priv. Coll. & Tuskegee
Univ. Prj., Ser. 96A
5.90% 09/01/16 1,000 1,033,750
Alabama St. G.O., Ser. 90
7.00% 08/01/05 340 355,521
Courtland Ind. Dev. Rev., Champion
Intl. Corp. Prj., Ser. 92
7.20% 12/01/13 1,000 1,072,500
Shelby Cnty. Bd. of Ed. Rev., Ser. 95
5.70% 02/01/09 680 708,050
------------
4,377,671
------------
ALASKA -- 0.8%
Alaska Ind. Dev. & Expt. Auth. Revolving
Fund Rev., Ser. 97A
6.00% 04/01/07 2,500 2,640,625
------------
ARIZONA -- 0.5%
Maricopa Cnty. Cmnty. Coll. Dist. Rev.,
Ser. 95A
6.00% 07/01/06 325 346,125
Maricopa Cnty. Cmnty. Coll. Dist. Rev.,
Unrefunded Ser. 95A
6.00% 07/01/06 15 15,806
Phoenix G.O., Ser. 92
6.13% 07/01/03 1,030 1,091,800
6.38% 07/01/13 200 210,750
------------
1,664,481
------------
CALIFORNIA -- 3.8%
California Hsg. Fin. Agcy. Rev.,
Home Mtg. Prj., Ser. 93C
5.65% 08/01/14 2,000 2,017,500
California St. G.O., Ser. 90
6.50% 11/01/06 340 380,800
California St. G.O., Ser. 94
6.20% 11/01/02 1,000 1,063,750
Foothill Eastern Corridor Agcy.
Toll Rd. Rev., Ref. Ser. 99
5.00% 01/15/16 7,490 7,078,050
Los Angeles G.O., Ser. 94A
5.80% 09/01/07 340 369,325
Sacramento Mun. Elec. Util. Rev.,
Ser. 92C
5.75% 11/15/09 510 535,500
Tri City Hosp. Dist. Rev., Ser. 96A
5.38% 02/15/07 1,000 1,047,500
------------
12,492,425
------------
COLORADO -- 2.8%
Arapahoe Cnty. Cap. Imp. Trust Fund
Hwy. Rev., Ser. 86
7.16% 08/31/04 900 713,250
Arapahoe Cnty. Cap. Imp. Trust Fund
Hwy. Rev., Ser. 86E-470
6.90%** 08/31/05 750 854,062
Denver City & Cnty. Arpt. Rev.,
Prerefunded Ser. 91D
7.00% 11/15/25 210 221,287
Par
Maturity (000) Value
---------- ---------- ------------
MUNICIPAL BONDS (CONTINUED)
COLORADO (CONTINUED)
Denver City & Cnty. Arpt. Rev.,
Prerefunded Ser. 92C
6.75% 11/15/13 $ 60 $ 65,025
Denver City & Cnty. Arpt. Rev.,
Ser. 90A
8.00% 11/15/25 2,745 2,892,544
Denver City & Cnty. Arpt. Rev.,
Ser. 96D
5.50% 11/15/25 3,000 2,880,000
Denver City & Cnty. Arpt. Rev.,
Unrefunded Ser. 91D
7.00% 11/15/25 790 817,650
Denver City & Cnty. Arpt. Rev.,
Unrefunded Ser. 92C
6.75% 11/15/13 440 466,950
Jefferson Cnty. Sch. Dist. G.O., Ser. 92
6.00% 12/15/12 300 318,000
------------
9,228,768
------------
DELAWARE -- 0.1%
Delaware Trans. Auth. Trans.
Sys. Rev., Ser. 92
5.63% 07/01/05 440 457,050
------------
DISTRICT OF COLUMBIA -- 0.6%
District of Columbia G.O., Ser. 93
6.00% 06/01/11 1,900 2,006,875
District of Columbia G.O., Ser. 93A-1
6.00% 06/01/11 50 53,187
------------
2,060,062
------------
FLORIDA -- 3.0%
Florida Dept. of Trans. G.O., Ser. 91
6.25% 07/01/07 400 418,500
Florida Hsg. Fin. Corp. Rev., Sunset Place
Prj., Ser. 99K-1
6.10% 10/01/29 1,500 1,496,250
Santa Rosa Bay Bldg. Auth. Rev.,
Ser. 96
6.25% 07/01/28 3,000 3,075,000
Tampa Hosp. Cap. Imp. Rev., H. Lee
Moffitt Prj., Ser. 99A
5.75% 07/01/19 5,000 4,943,750
------------
9,933,500
------------
GEORGIA -- 2.6%
Atlanta Arpt. Fac. Rev., Ser. 94A
6.50% 01/01/10 1,000 1,111,250
Burke Cnty. Dev. Auth. Poll. Ctrl.
Rev., Pwr. Plant Vogtle Prj., Ser. 99-1
5.40% 05/01/34 4,500 4,106,250
Forsyth Cnty. Sch. Dist. G.O., Ser. 92
6.70% 07/01/12 1,000 1,128,750
Georgia G.O., Ser. 92A
6.00% 03/01/04 340 360,825
Georgia Mun. Elec. Auth. Pwr. Rev.,
Ser. 92B
6.13% 01/01/14 400 417,500
Georgia Mun. Elec. Auth. Pwr. Rev.,
Ser. 93B
5.70% 01/01/19 1,000 1,002,500
Gwinnett Cnty. G.O., Ser. 92
6.00% 01/01/10 400 421,500
------------
8,548,575
------------
See accompanying notes to financial statements.
10
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ---------- ------------
MUNICIPAL BONDS (CONTINUED)
HAWAII -- 1.3%
Hawaii Dept. of Budget & Fin. Rev.,
Ser. 90C
7.38% 12/01/20 $ 4,000 $ 4,200,000
------------
ILLINOIS -- 8.2%
Chicago Wtr. Rev., Ref. Ser. 97
5.50% 11/01/22 9,905 9,508,800
Chicago Motor Fuel Tax Rev., Ser. 90
7.00% 01/01/05 2,500 2,612,500
Chicago Pk. Dist. G.O., Ser. 96
5.50% 01/01/16 2,250 2,216,250
Chicago Res. Mtg. Rev., Ref. Ser. 92B
7.00%(DAGGER) 10/01/09 365 182,500
Cook Cnty. G.O., Ser. 96
5.88% 11/15/22 2,000 2,150,000
Cook Cnty. G.O., Ser. 97A
5.63% 11/15/22 2,000 1,937,500
Illinois G.O., Ser. 94
5.50% 08/01/06 680 708,050
Illinois Hlth. Fac. Auth. Rev., Hosp.
Sisters Svcs., Inc. Prj., Ser 98A
5.25% 06/01/11 4,000 3,975,000
Illinois Hsg. Dev. Auth. Rev.,
Multi-Family Prj., Ser. 94-5
6.65% 09/01/14 3,000 3,168,750
Winnebago & Boone Cnty. G.O.,
Sch. Dist. No. 205 Prj., Ser. 92C
5.90% 02/01/05 500 529,375
------------
26,988,725
------------
INDIANA -- 1.0%
Indianapolis Ind. Pub. Imp. Rev.,
Prerefunded Ser. 91C
6.70% 01/01/02 2,000 2,137,500
Indianapolis Intl. Arpt. Auth. Rev.,
Federal Express Corp. Prj., Ser. 94
7.10% 01/15/17 1,000 1,082,500
------------
3,220,000
------------
KANSAS -- 0.3%
Johnson Cnty. Intl. Imp. Rev.,
Prerefunded Ser. 92A
6.00% 09/01/02 165 173,869
Johnson Cnty. Intl. Imp. Rev.,
Unrefunded Ser. 92A
6.00% 09/01/07 235 246,162
Kansas Dept. of Trans. Rev., Ser. 94A
6.00% 09/01/12 400 425,500
------------
845,531
------------
LOUISIANA -- 0.9%
Orleans Rev., Levee Dist. Pub.
Imp. Prj., Ser. 86
5.95% 11/01/15 2,820 2,946,900
------------
MARYLAND -- 0.0%
Baltimore Port Fac. Rev., E.I. du Pont
Co. Prj., Ser. 84A
6.50% 10/01/11 100 107,000
------------
MASSACHUSETTS 5.2%
Massachusetts Port.
Auth. Rev., AMT Ser. 99B
5.50% 07/01/14 5,980 5,875,350
Par
Maturity (000) Value
---------- ---------- ------------
MUNICIPAL BONDS (CONTINUED)
MASSACHUSETTS (CONTINUED)
Massachusetts Bay Trans.
Auth. Rev., Ser. 95B
5.38% 03/01/20 $ 1,000 $ 955,000
Massachusetts St. Hlth. & Ed. Fac.
Auth. Rev., Newton-Wellesley
Hosp. Prj., Ser. 97G
6.13% 07/01/15 1,000 1,040,000
Massachusetts St. Wtr. Poll.
Abatement Trust Pool Prog. Rev., Ser. 99
5.75% 08/01/18 6,865 6,899,325
Massachusetts St. Wtr. Res. Auth. Rev.,
Ser. 94A
5.70% 08/01/08 680 724,200
New England Ed. Ln. Mktg. Corp. Rev.,
Stud. Ln. Redemption Prj.,
Ser. 93F
5.63% 07/01/04 1,350 1,388,812
------------
16,882,687
------------
MICHIGAN -- 3.1%
Grand Rapids Charter Twp. Rev.,
Porter Hills Oblig. Grp. Prj., Ser. 99
5.45% 07/01/29 3,500 3,189,375
Huron Valley Sch. Dist. G.O., Ser. 96
5.88% 05/01/16 2,000 2,130,000
Wayne Charter Cnty. Arpt. Rev.,
Detroit Met. Wayne Cnty. Prj., Ser. 98A
5.00% 12/01/28 5,610 4,824,600
------------
10,143,975
------------
MINNESOTA -- 0.2%
Metropolitan Council Minneapolis Rev.,
St. Paul Metro. Area Prj., Ser. 91D
6.60% 09/01/04 510 521,883
------------
MISSOURI -- 2.5%
Lake of The Ozarks Cmnty. Bldg.
Corp. Sys. Rev., Ser. 98
5.25% 12/01/14 4,915 4,644,675
Missouri St. Env. Imp. & Energy Res.
Auth. Poll. Ctrl. Rev. Ref., Assoc. Elec.
Coop. Thomas Hill Prj., Ser. 96
5.50% 12/01/11 3,415 3,491,837
------------
8,136,512
------------
NEBRASKA -- 0.4%
Omaha Pub. Pwr. Dist. Elec. Rev.,
Prerefunded Ser. 92A
6.30% 02/01/02 340 359,550
Omaha Pub. Pwr. Dist. Elec. Rev.,
Ser. 92B
6.15% 02/01/12 1,000 1,077,500
------------
1,437,050
------------
NEVADA -- 2.5%
Clark Cnty. Passenger Fac. Charge
Rev., Las Vegas McCarran
Intl. Prj., Ref. Ser. 98
5.50% 07/01/15 6,320 6,280,500
Clark Cnty. Trans. G.O., Ser. 98B
4.50% 12/01/19 2,260 1,856,025
------------
8,136,525
------------
See accompanying notes to financial statements.
11
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ---------- ------------
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY -- 1.1%
New Jersey Econ. Dev. Auth. Mkt.
Transition Fac. Rev., Ser. 94A
5.80% 07/01/08 $ 495 $ 523,462
Port Auth. New York & New Jersey
Spec. Oblig. Rev., JFK Intl. Air
Term. Prj., Ser. 97-6
6.25% 12/01/09 2,680 2,921,200
------------
3,444,662
------------
NEW MEXICO -- 0.5%
Los Alamos Cnty. Util., Inc. Sys. Rev.,
Ser. 94A
5.80% 07/01/06 1,500 1,588,125
------------
NEW YORK -- 6.9%
New York City G.O., Prerefunded
Ser. 95B
6.38% 08/15/09 805 882,481
New York City G.O., Ser. 95A
6.00% 08/01/05 1,000 1,061,250
New York City G.O., Ser. 95E
6.50% 08/01/02 285 302,100
New York City G.O., Ser. 96A
6.00% 08/01/05 2,000 2,117,500
New York City G.O., Unrefunded
Ser. 95B
6.38% 08/15/09 3,035 3,247,450
New York City G.O., Unrefunded
Ser. 95E
6.50% 08/01/02 715 753,431
New York City Ind. Dev. Agcy. Rev.,
Terminal One Group Assoc. Prj., Ser. 94
6.00% 01/01/08 360 373,950
6.00% 01/01/19 500 505,000
New York City Mun. Wtr. Fin. Auth.
Wtr. & Swr. Sys. Rev., Ser. 99
5.75% 06/15/31 3,000 2,960,940
New York St. Dorm. Auth. Rev.,
St. Joseph's Hosp. Prj., Ser. 97
5.25% 07/01/18 3,000 2,853,750
New York St. Hsg. Fin. Agcy. Rev.,
Ser. 96A
6.38% 11/01/04 4,000 4,235,000
New York St. Loc. Govt. Assistance
Corp. Rev., Ser. 95A
5.70% 04/01/08 340 362,950
New York St. Urban Dev. Corr. Fac.
Rev., Ser. 93
5.63% 01/01/07 2,750 2,877,187
------------
22,532,989
------------
NORTH CAROLINA -- 0.8%
Eastern Mun. Pwr. Agcy. Sys.
Rev., Ser. 93C
5.25% 01/01/04 1,000 1,025,000
5.38% 01/01/05 1,250 1,285,938
North Carolina Mun. Pwr. Agcy. Rev.,
Catawba Elec. Prj., Ser. 92A
6.00% 01/01/10 300 320,625
------------
2,631,563
------------
Par
Maturity (000) Value
---------- ---------- ------------
MUNICIPAL BONDS (CONTINUED)
OHIO -- 1.8%
Cleveland Pkg. Facs. Rev.,
Ser. 96
5.38% 09/15/12 $ 2,370 $ 2,393,700
Cleveland-Cuyahoga Cnty. Port Auth.
Rev., Ser. 97
6.00% 03/01/07 750 755,625
Columbus Refuse Coal Fired Plant
5-E-L G.O., Ser. 91
6.63% 09/15/01 70 73,325
Ohio St. Hgr. Ed. Fac. Cmnty. Rev.,
Univ. of Dayton Prj., Ser. 97
5.35% 12/01/17 2,000 1,970,000
Ohio Wtr. Dev. Auth. Rev., Clean
Wtr. Prj., Ser. 92
5.65% 12/01/05 300 314,250
Olentangy Loc. Sch. Dist. G.O.,
Ser. 95A
5.85% 12/01/07 340 365,925
------------
5,872,825
------------
OKLAHOMA -- 0.3%
Grand River Dam Auth. Rev.,
Ser. 93
8.00% 06/01/02 1,000 1,090,000
------------
OREGON -- 2.3%
Klamath Falls Elec. Sr. Lien Rev.,
Klamath Cogen Prj., Ref. Ser. 99
6.00% 01/01/25 7,500 7,096,875
Portland Swr. Sys. Rev., Ser. 92A
6.00% 10/01/12 300 319,500
------------
7,416,375
------------
PENNSYLVANIA -- 13.9%
Beaver Cnty. G.O., Ser. 96A
5.75% 10/01/15 1,000 1,060,000
Beaver Cnty. Ind. Dev. Auth. Poll. Ctrl.
Rev., St. Joe Minerals Corp. Prj., Ser. 77
6.00% 05/01/07 2,425 2,428,031
Dauphin Cnty. Gen. Auth. Rev.,
Hotel & Conference Ctr. Hyatt
Regency Prj., Ser. 98
6.20% 01/01/19 5,000 4,781,250
Delaware Cnty. Auth. Rev., Mercy
Hlth. Corp. Prj., Ser. 96
5.75% 12/15/20 2,400 2,415,000
Delaware Valley Regl. Fin. Auth.
Loc. Govt. Rev., Ser. 98A
5.50% 08/01/28 3,000 2,910,000
Indiana Cnty. Ind. Dev. Auth. Poll.
Ctrl. Rev., New York St. Elec. & Gas
Corp. Prj., Ser. 95A
6.00% 06/01/06 2,500 2,671,875
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Kidspeace Oblig. Prj., Ser. 98
6.00% 11/01/23 4,000 4,005,000
Pennsylvania Con. Ctr. Auth. Rev.,
Ser. 94A
6.60% 09/01/09 4,250 4,600,625
Pennsylvania G.O., Ser. 94
5.50% 06/15/08 1,000 1,038,750
Pennsylvania G.O., Ser. 96
5.38% 05/15/09 3,000 3,082,500
See accompanying notes to financial statements
12
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ---------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Pennsylvania Intergovernmental
Coop. Auth. Spec. Tax Rev., City of
Philadelphia Fdg. Prj., Ser. 96
5.50% 06/15/20 $ 4,000 $ 3,865,000
Pennsylvania St. Hgr. Ed. Fac. Auth.
Hlth. Svcs. Rev., Univ. of Pennsylvania
Hlth. Svcs. Prj., Ser. 96A
5.88% 01/01/15 2,750 2,705,313
5.75% 01/01/17 3,535 3,420,113
Philadelphia Ind. Dev. Auth. Arpt. Fac. Rev.,
Aero Philadelphia LLC Prj., Ser. 99
5.25% 01/01/09 1,190 1,129,013
Philadelphia Ind. Dev. Auth. Rev.,
PGH Dev. Corp. Prj., Ser. 93
5.25% 07/01/17 1,935 1,872,113
Philadelphia Mun. Auth. Rev., Ref.
Ser. 93D
6.13% 07/15/08 1,000 1,058,750
Pottstown Borough Auth. Swr. Rev.,
Ser. 96
5.50% 11/01/16 2,650 2,606,938
------------
45,650,271
------------
PUERTO RICO -- 0.3%
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 94S
7.00% 07/01/06 1,000 1,125,000
------------
RHODE ISLAND -- 0.9%
Rhode Island Depositors Econ.
Protection Corp. Spec. Oblig. Rev.,
Ser. 93A
5.63% 08/01/09 1,000 1,013,750
Rhode Island St. Hlth. & Ed. Bldg.
Corp. Rev., Hosp. Fin. Lifespan
Oblig. Grp. Prj., Ser. 96
5.50% 05/15/16 2,000 1,977,500
------------
2,991,250
------------
SOUTH CAROLINA -- 0.3%
Piedmont Mun. Pwr. Agcy. Elec.
Rev., Ser. 85B
6.25% 01/01/18 500 513,125
South Carolina Pub. Svcs. Auth. Rev.,
Santee Cooper Prj., Ser. 91D
6.50% 07/01/14 100 107,500
Spartanburg Wtr. Rev., Prerefunded
Ser. 93
6.20% 06/01/09 15 15,844
Spartanburg Wtr. Rev., Unrefunded
Ser. 92
6.20% 06/01/09 285 296,756
------------
933,225
------------
SOUTH DAKOTA -- 0.2%
South Dakota St. Lease Rev., Tran.
Cert. Prj., Ser. 93A
6.38% 09/01/05 500 542,500
------------
TENNESSEE -- 0.6%
Maury Cnty. Ind. Dev. Poll. Ctrl. Rev.,
Saturn Corp. Prj., Ser. 94
6.50% 09/01/24 1,800 1,921,500
------------
Par
Maturity (000) Value
---------- ---------- ------------
MUNICIPAL BONDS (CONTINUED)
TEXAS -- 15.4%
Dallas Cnty. Util. & Cap. Apprec.
Rev., Ref. Ser. 99A
6.19%(DAGGER) 02/15/21 $17,225 $ 4,650,750
6.21%(DAGGER) 02/15/22 18,405 4,739,288
Dallas Ind. Dev. Corp. Rev., CR/PL,
Inc. Prj., Ser. 87
7.50% 08/01/17 2,300 2,443,750
Guadalupe-Blanco River Auth.
Swr. & Solid Waste Disp. Fac. Rev.,
E.I. du Pont de Nemours & Co. Prj.,
Ser. 99
5.50% 05/01/29 6,000 5,572,500
Houston Arpt. Sys. Spec. Fac. Rev.,
Ser. 97A
6.00% 07/15/07 2,660 2,826,250
5.38% 07/15/08 1,000 1,017,500
Matagorda Cnty. Nav. Dist. No. 1 Rev.,
Reliant Energy Prj., Ser. 99B
5.95% 05/01/30 15,000 14,156,250
Sabine River Auth. Poll. Ctrl. Rev.,
Texas Util. Elec. Prj., Ser. 90B
8.25% 10/01/20 2,500 2,622,300
San Antonio Arpt. Rev., Ser. 91
7.13% 07/01/07 2,000 2,205,000
7.13% 07/01/08 2,645 2,912,806
San Antonio Elec. & Gas Rev.,
Ser. 98A
5.25% 02/01/14 4,000 3,880,000
Spring Branch Sch. Dist. G.O.,
Ser. 95
5.95% 02/01/12 2,245 2,317,963
Texas Wtr. Dev. Rev., St. Revolving
Fund Prj., Ser. 92
6.20% 07/15/05 680 720,800
University of Texas Rev., Prerefunded
Ser. 91A
7.00% 08/15/07 160 171,000
University of Texas Rev., Unrefunded
Ser. 91A
7.00% 08/15/07 340 359,975
------------
50,596,132
------------
UTAH -- 0.1%
Jordan Sch. Dist. G.O., Ser. 93
6.05% 06/15/03 340 354,875
Salt Lake City Hosp. Rev., Ser. 88A
8.13% 05/15/15 100 121,000
------------
475,875
------------
VERMONT -- 0.8%
Burlington Elec. Rev., Ser. 96A
6.00% 07/01/06 1,545 1,649,288
Vermont St. G.O., Ser. 94A
6.00% 01/15/03 1,000 1,050,000
------------
2,699,288
------------
VIRGINIA -- 1.5%
Hampton G.O., Ser. 95
6.00% 01/15/08 400 428,000
Pocahontas Pkwy. Toll Rd. Rev., Ser. 98B
5.85%(DAGGER) 08/15/23 15,300 3,423,375
See accompanying notes to financial statements.
13
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONCLUDED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ---------- ------------
MUNICIPAL BONDS (CONTINUED)
VIRGINIA (CONTINUED)
Virginia Hsg. Dev. Auth. Rev., Multi-
Family Prj., Ser. 95C
6.70% 11/01/15 $ 1,000 $ 1,061,250
------------
4,912,625
------------
WASHINGTON -- 3.5%
Central Puget Sound Regl. Tran. Auth.
Sales Tax & Motor Rev., Ser. 98
4.75% 02/01/28 10,000 8,225,000
Washington St. Pub. Pwr. Sply. Sys. Rev.,
Nuclear Prj. No. 3, Ser. 96A
6.00% 07/01/06 3,000 3,210,000
------------
11,435,000
------------
WISCONSIN -- 0.7%
Milwaukee Met. Swr. Dist. G.O.,
Ser. 92A
6.13% 10/01/03 250 265,313
Wisconsin St. Trans. Rev., Prerefunded
Ser. 92A
5.50% 07/01/02 495 505,519
Wisconsin St. Trans. Rev., Unrefunded
Ser. 92A
5.50% 07/01/05 1,505 1,536,981
------------
2,307,813
------------
TOTAL MUNICIPAL BONDS
(Cost $306,273,028) 305,136,963
------------
Shares Value
---------- ------------
CUMULATIVE PREFERRED STOCK -- 4.9%
Charter Mac Equity Issue Trust 144A
6.625% 80,000 $ 7,990,560
MuniMae TE Bonds Subs., LLC 144A
6.875% 80,000 8,082,480
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $16,000,000) 16,073,040
------------
SHORT TERM INVESTMENTS -- 2.1%
Smith Barney Tax-Free Money
Market Fund
(Cost $6,732,734) 6,732,734 6,732,734
------------
TOTAL INVESTMENTS
IN SECURITIES -- 100.0%
(Cost $329,005,762*) $327,942,737
============
- ---------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 5,727,493
Gross unrealized depreciation (6,790,518)
-----------
$(1,063,025)
===========
** Rates shown are the rates as of September 30, 1999.
(DAGGER)The rate shown is the effective yield on the zero coupon bonds.
See accompanying notes to financial statements.
14
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
TAX-FREE INCOME PORTFOLIO
<TABLE>
<S> <C>
SEPTEMBER 30, 1999
ASSETS
Investments at value (Cost $329,005,762) .................................................................... $327,942,737
Interest receivable ......................................................................................... 4,741,873
Investments sold receivable ................................................................................. 19,518,159
Capital shares sold receivable .............................................................................. 899
Prepaid expenses ............................................................................................ 7,968
------------
TOTAL ASSETS ......................................................................................... 352,211,636
------------
LIABILITIES
Investments purchased payable ............................................................................... 29,046,712
Capital shares redeemed payable ............................................................................. 790,198
Distributions payable ....................................................................................... 1,273,546
Advisory fees payable ....................................................................................... 57,865
Administrative fees payable ................................................................................. 39,170
Transfer agent fees payable ................................................................................. 22,001
Other accrued expenses payable .............................................................................. 16,107
------------
TOTAL LIABILITIES .................................................................................... 31,245,599
------------
NET ASSETS (Applicable to 27,578,467 Institutional shares, 524,801 Service shares, 601,281
Investor A shares, 313,282 Investor B shares and 261,629 Investor C shares outstanding) ..................... $320,966,037
============
NET ASSET VALUE AND REDEMPTION PRICE PER INSTITUTIONAL,
SERVICE AND INVESTOR A SHARE ($314,663,660 (DIVIDE) 28,704,549) ............................................. $10.96
======
OFFERING PRICE PER INSTITUTIONAL AND SERVICE SHARE ............................................................. $10.96
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($10.96 (DIVIDE) 0.960) ..................................................................................... $11.42
======
NETASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent
deferred sales charge of 4.5%) PER INVESTOR B SHARE ($3,434,286 (DIVIDE) 313,282) ........................... $10.96
======
NETASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent
deferred sales charge of 1.0%) PER INVESTOR C SHARE ($2,868,091 (DIVIDE) 261,629) ........................... $10.96
======
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ------- -------------
MUNICIPAL BONDS -- 98.2%
PENNSYLVANIA -- 97.0%
Allegheny Cnty. G.O., Ser. 00
5.00% 04/01/07 $ 3,000 $ 3,003,750
5.00% 04/01/08 2,000 1,990,000
Allegheny Cnty. G.O., Ser. 90C
7.00% 12/01/00 1,000 1,036,250
Allegheny Cnty. Hosp. Dev. Auth. Rev.,
Mercy Hosp. of Pittsburgh Prj.,
Ser. 91
6.75% 04/01/01 1,000 1,056,250
Allegheny Cnty. Hosp. Dev. Auth. Rev.,
Ser. 95A
6.00% 09/01/10 5,000 5,006,250
6.20% 09/15/15 1,000 1,000,000
Allegheny Cnty. Hosp. Dev. Auth. Rev.,
Univ. of Pittsburgh Med. Ctr. Prj.,
Ser. 95
5.35% 12/01/17 10,000 9,562,500
Allegheny Cnty. Inst. Dist. Rev., Ser. 90
7.30% 04/01/09 2,000 2,024,720
Allegheny Cnty. Res. Fin. Auth. Mtg. Rev.,
Sgl. Fam. Mtg. Prj., Ser. 94Y
6.25% 05/01/17 265 273,944
Allegheny Cnty. Sanit. Auth. Rev., Ser. 97
5.38% 12/01/24 18,500 17,436,250
Allegheny Cnty. Unltd. Tax G.O., Ser. 93C
5.00% 10/01/08 1,185 1,187,962
Allentown Pkg. Auth. Pkg. Rev., Gtd.,
Ser. 91
6.63% 11/15/01 750 787,500
Armstrong Cnty. Hosp. Auth. Hlth. Ctr.
Rev., Canterbury Pl. Prj., Ser. 91
6.50% 12/01/01 650 681,687
Armstrong Cnty. Hosp. Auth. Rev.,
St. Francis Med. Ctr. Prj., Ser. 92A
6.10% 06/01/02 1,000 1,043,750
Baldwin & Whitehall Sch. Dist. Rev.,
Ser. 92A
6.60% 08/15/02 1,000 1,061,250
Bangor Area Sch. Dist. G.O., Ser. 94
6.30% 03/01/04 1,655 1,708,787
Beaver Cnty. Hosp. Auth. Rev., Med.
Ctr. Beaver Pennsylvania, Inc. Prj.,
Ser. 92A
6.60% 07/01/04 2,000 2,155,000
6.25% 07/01/11 1,000 1,068,750
Beaver Cnty. Hosp. Auth. Rev., Ser. 96A
5.80% 10/01/06 5,830 6,194,375
Bensalem Twp. Wtr. & Swr. Auth. Rev.,
Ser. 93A
6.50% 06/01/02 1,000 1,041,250
Berks Cnty. G.O., Ser. 92
6.30% 11/10/20 2,000 2,105,000
Berks Cnty. Mun. Auth. Coll. Rev., Ser. 90
7.30% 12/01/00 1,000 1,040,000
Berks Cnty. Unltd. Tax G.O., Ser. 98
5.38% 11/15/28 6,685 6,258,831
Bethel Park Sch. Dist. G.O., Ser. 92B
7.00% 02/01/00 250 252,575
Bethlehem Wtr. Auth. Rev., Ser. 92
6.25%(BULLET) 11/15/01 750 781,875
6.35% 11/15/01 1,000 1,045,000
Par
Maturity (000) Value
---------- ------- --------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Bethlehem Wtr. Auth. Rev., Ser. 92A
6.10% 11/15/02 $ 500 $ 526,250
Bradford Area Sch. Dist. G.O., Ser. 95
5.80% 10/01/05 1,465 1,552,900
Bristol Twp. Swr. Auth. Rev., Ser. 84
10.00% 04/01/02 645 690,150
Bucks Cnty. Cmnty. Coll. Bldg. Auth.
Coll. Rev., Ser. 92
6.20% 06/15/02 1,000 1,047,500
Bucks Cnty. Unltd. Tax G.O., Ser. 95
5.88% 05/01/05 1,575 1,665,562
Butler Area Sch. Dist. G.O., Ser. 98B
5.38% 10/01/18 2,000 1,922,500
Cambria & Blair Cntys. Rev., Bldg.
Auth. Prj., Ser. 77
6.38% 02/01/07 1,545 1,657,012
Cambria Cnty. Unltd. Tax G.O., Ser. 91
8.25% 06/01/00 130 131,719
Cambria Twp. Wtr. Auth. Ind. Rev.,
Ser. 93A
6.00% 12/01/02 1,000 1,012,390
Central Bucks Sch. Dist. G.O., Ser. 91
6.75% 02/01/05 1,000 1,030,000
6.90% 02/01/08 750 773,437
Central Bucks Sch. Dist. G.O., Ser. 94A
6.45% 11/15/04 1,000 1,085,000
Central Bucks Sch. Dist. Unltd.
Tax G.O., Ser. 94A
6.70% 11/15/09 500 548,125
Central Dauphin Sch. Dist. G.O.,
Ser. 91
6.00% 06/01/01 1,500 1,545,000
Chester Cnty. Unltd. Tax G.O., Ser. 91
6.60% 08/01/01 1,000 1,040,000
7.00% 08/01/01 750 787,500
6.70% 12/15/04 385 399,919
Coatesville Sch. Dist. G.O., Ser. 91
7.13% 11/01/00 150 155,314
7.25% 11/01/00 750 777,547
6.70% 03/01/01 1,000 1,036,250
Coatesville Sch. Dist. G.O., Ser. 97
5.13% 04/01/17 10,050 10,238,437
Conestoga Valley Sch. Dist. G.O.,
Ser. 91B
7.00% 05/01/01 750 782,812
7.10% 05/01/01 750 783,750
Council Rock Sch. Dist. G.O., Ser. 91
6.60% 03/01/02 1,000 1,030,000
Council Rock Sch. Dist. Rev., Ser. 78
6.63% 09/01/01 1,325 1,382,969
Crawford Central Sch. Dist. G.O.,
Ser. 95
7.00% 02/15/05 1,765 1,956,944
Crawford Central Sch. Dist. Unltd.
Tax G.O., Ser. 95
5.75% 02/15/11 1,585 1,668,212
Cumberland Cnty. Mun. Auth. Coll.
Rev., Messiah Coll. Prj., Ser 95
5.13% 10/01/15 2,000 1,900,000
Dauphin Cnty. Gen. Auth. Hosp. Rev.,
Hapsco Western Pennsylvania Hosp.
Prj., Ser. 92
6.25% 07/01/16 1,000 1,036,250
See accompanying notes to financial statements.
16
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ------- -------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Dauphin Cnty. Gen. Auth. Rev.,
Harrisburg Intl. Arpt. Prj., Ser. 91
7.13% 06/01/01 $ 750 $ 778,125
Dauphin Cnty. Gen. Auth. Rev.,
Hotel & Conference Ctr. Hyatt
Regency Prj., Ser. 98
6.20% 01/01/19 11,975 11,451,094
Dauphin Cnty. Gen. Auth. Rev.,
Sch. Dist. Pooled Fin. Prj., Ser. 86
5.50% 06/01/07 550 563,062
6.85% 06/01/09 2,300 2,426,500
Dauphin Cnty. Gen. Auth. Rev., Ser. 86
6.80%** 06/01/26 2,305 2,477,644
6.71%** 06/01/26 1,325 1,394,562
5.60%** 06/01/26 525 537,469
5.70%** 06/01/26 660 676,500
Dauphin Cnty. Gen. Auth. Rev.,
Ser. 86 A-F
6.20% 01/01/29 5,000 4,712,500
Dauphin Cnty. Pinnacle Gen. Auth.
Hlth. Sys. Rev., Ser. 97
5.50% 05/15/17 3,500 3,408,125
Deer Lakes Sch. Dist. Unltd.
Tax G.O., Ser. 95
6.35% 01/15/14 1,000 1,080,000
6.45% 01/15/19 1,300 1,402,375
Delaware Cnty. Auth. Coll. Rev.,
Haverford Coll. Prj., Ser. 90
7.25% 11/15/00 1,000 1,056,250
7.00% 11/15/02 600 632,250
Delaware Cnty. Auth. Hosp. Rev.,
Ser. 95
5.50% 08/15/15 6,480 6,390,900
Delaware Cnty. Auth. Rev., Mercy
Hlth. Corp. Prj., Ser. 96
5.75% 12/15/20 3,735 3,758,344
Delaware Cnty. G.O., Ser. 99
5.13% 10/01/14 4,500 4,342,500
5.13% 10/01/15 6,915 6,612,469
5.13% 10/01/16 1,000 946,250
5.13% 10/01/17 2,805 2,629,687
Delaware Cnty. Ind. Dev. Auth. Rev.,
Ser. 99
6.00% 06/01/29 6,250 6,259,812
Delaware Cnty. Ind. Dev. Auth. Rev.,
Wtr. Fac. Philadelphia Suburban
Wtr. Prj., Ser. 92
6.50% 06/01/10 1,000 1,058,750
Delaware Cnty. Mem. Hosp. Auth. Rev.,
Ser. 95
5.50% 08/15/19 3,000 2,898,750
Delaware Cnty. Rev., Prerefunded Ser. 95
5.50% 10/01/15 1,075 1,120,687
Delaware Cnty. Rev., Unrefunded Ser. 95
5.50% 10/01/15 425 425,000
Delaware River Port Auth.
Pennsylvania & New Jersey Rev.,
Ser. 95
5.40% 01/01/11 3,000 3,052,500
5.40% 01/01/14 3,200 3,204,000
Delaware Valley Regl. Fin. Auth.
Loc. Govt. Rev., Ser. 96A
5.90% 04/15/16 2,540 2,574,925
Par
Maturity (000) Value
---------- ------- --------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Delaware Valley Regl. Fin. Auth. Loc.
Govt. Rev., Ser. 98A
5.50% 08/01/28 $14,750 $ 14,307,500
Derry Area Sch. Dist. G.O., Ser. 92A
6.60% 09/01/10 750 785,625
Dover Area Sch. Dist. G.O., Ser. 96
5.75% 04/01/12 2,445 2,503,069
Downingtown G.O., Ser. 91
6.70% 01/15/02 750 789,375
East Whiteland-Tredyffrin Joint Trans.
Auth. Rev., Hwy. Imp. Prj., Ser. 94
6.30% 01/01/16 775 793,406
Elizabeth Forward Sch. Dist. G.O.,
Ser. 90
7.05% 01/15/00 500 504,500
7.25% 01/15/00 750 757,155
Ephrata Sch. Dist. G.O., Ser. 91A
6.80% 04/15/01 750 779,062
Erie Cnty. Prison Auth. Lease Rev.,
Ser. 91
6.35% 11/01/00 2,500 2,568,400
6.45% 11/01/01 1,000 1,045,000
6.25% 11/01/11 3,225 3,358,031
Erie Swr. Auth. Rev., Ser. 97
5.63% 06/01/17 2,800 2,940,000
Fairview Sch. Dist. G.O., Ser. 95
6.00% 02/15/05 1,000 1,063,750
Falls Twp. G.O., Ser. 90
6.90% 12/15/00 1,000 1,027,500
Forest Hills G.O., Ser. 92
6.45% 05/01/09 750 782,812
Fox Chapel Area Sch. Dist. G.O.,
Ser. 92A
6.30% 02/15/02 2,000 2,087,500
Governor Mifflin Sch. Dist. G.O.,
Ser. 92
6.30% 02/01/02 1,000 1,043,750
Great Valley Sch. Dist. Chester
Cnty. G.O., Ser. 92
6.10% 03/01/00 1,000 1,009,220
Greater Johnstown Wtr. Auth.
Rev., Ser. 92
6.10% 01/01/04 685 713,256
Greene Cnty. Gen. Fac. Auth.
Rev., Ser. 91A
7.00% 07/01/01 3,325 3,541,125
Greensburg Salem Sch. Dist.
G.O., Ser. 92
6.45%(DOUBLE DAGGER) 09/15/18 1,000 1,031,250
Hampton Twp. Sch. Dist. G.O., Ser. 91A
6.95% 02/15/01 1,000 1,037,500
Harrisburg Auth. Wtr. Rev., Ser. 91
7.00% 07/15/01 1,000 1,048,750
Harrisburg Auth. Wtr. Rev., Ser. 92
6.55% 08/15/02 1,600 1,696,000
Harrisburg Pkg. Auth. Rev., Ser. 86B
7.40% 11/15/00 500 519,375
Hatboro Sch. Dist. G.O., Ser. 91A
6.65% 04/01/07 1,000 1,031,250
6.70% 04/01/08 1,000 1,031,250
Hempfield Sch. Dist. Rev., Ser. 91
6.00% 09/15/01 650 661,674
See accompanying notes to financial statements.
17
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ------- -------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Hempfield Twp. Mun. Auth. Gtd. Swr. Rev.,
Westmoreland Cnty. Prj., Ser. 91
6.50% 09/01/02 $ 1,000 $ 1,060,000
Indiana Cnty. Ind. Dev. Auth. Poll. Ctrl.
Rev., New York St. Elec. & Gas Corp.
Prj., Ser. 95A
6.00% 06/01/06 1,000 1,068,750
Jeannette Sch. Dist. G.O., Ser. 91
6.65% 06/15/01 750 780,937
Jefferson Cnty. Mun. Auth. Rev., Ser. 92
6.50% 06/01/06 1,515 1,594,537
Lancaster Cnty. Hosp. Auth. Rev., Hlth.
Ctr. Masonic Homes Prj., Ser. 94
5.30% 11/15/08 500 493,125
Lancaster Cnty. Hosp. Auth. Rev., Hlth.
United Church Homes Prj., Ser. 89
9.13% 10/01/99 3,500 3,570,000
Lancaster Swr. Auth. Sply. Spec.
Oblig. Rev., Ser. 98
5.25% 04/01/21 8,480 7,918,200
Langhorne Hgr. Ed. & Hlth. Auth.
Rev., Ser. 92
6.30% 11/15/03 740 781,625
Langhorne Manor Boro Hgr. Ed. &
Hlth. Auth. Rev., Ser. 92
6.15% 11/15/02 510 537,412
6.50% 11/15/14 1,500 1,561,875
Langhorne Manor Boro Hgr. Ed. &
Hlth. Auth. Rev., Ser. 94
6.90% 11/15/14 1,000 1,107,500
Lebanon Cnty. Hosp. Auth. Rev.,
Good Samaritan Hosp. Prj., Ser. 93
5.55% 11/15/04 355 358,994
5.65% 11/15/05 760 767,600
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Ser. 90A
7.00% 07/01/08 1,500 1,554,270
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Ser. 90B
7.00% 07/01/00 1,200 1,251,684
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Kidspeace Oblig. Prj., Ser. 98
5.70% 11/01/09 3,000 3,015,000
6.00% 11/01/18 2,000 2,022,500
6.00% 11/01/23 3,000 3,003,750
Lehigh Cnty. Gen. Purp. Auth. Rev.,
St. Lukes Hosp. Bethlehem Prj.,
Ser. 93
6.00% 11/15/02 1,750 1,835,312
Lehigh Cnty. Unltd. Tax G.O., Ser. 91
6.90% 08/01/00 500 522,425
Ligonier Valley Sch. Dist. Unltd. Tax
G.O., Ser. 94
5.65% 03/01/14 2,000 2,090,000
Lower Providence Twp. Swr. Auth. Rev.,
Ser. 92
6.63% 05/01/02 1,000 1,055,000
Luzerne Cnty. Flood Prot. Auth. Gtd. Rev.,
Ser. 96
5.60% 07/15/21 4,720 4,956,000
Lycoming Cnty. Auth. Coll. Rev.,
Pennsylvania Coll. Tech. Prj.,
Ser. 90
6.80% 11/01/00 1,000 1,030,660
Par
Maturity (000) Value
---------- ------- --------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Lycoming Cnty. Auth. Hosp. Rev.,
Divine Providence Hosp. Prj., Ser. 95
5.38% 11/15/10 $ 6,480 $ 6,561,000
Lycoming Cnty. G.O., Ser. 91A
6.85% 08/15/01 1,000 1,048,750
Manheim Central Sch. Dist. G.O.,
Ser. 91
6.70% 03/01/04 1,000 1,030,000
McKeesport Area Sch. Dist. G.O.,
Ser. 96A
5.75% 10/01/06 1,750 1,855,000
Media Boro Gtd. Wtr. Rev., Ser. 92
6.55% 01/01/17 500 526,875
Methacton Sch. Dist. Auth. Rev.,
Ser. 78
6.50% 10/01/06 475 523,094
Middletown Twp. Swr. Auth. Rev.,
Ser. 68
5.63% 05/01/01 10 10,087
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Coll. Rev., Cnty. Cmnty.
Coll. Prj., Ser. 90
7.00% 11/01/00 500 516,795
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Hosp. Rev., Abington
Mem. Hosp. Prj., Ser. 91A
6.66%** 07/05/11 2,400 2,511,000
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Hosp. Rev., BMH Rlty.
Corp. Prj., Ser. 91
6.75% 12/01/99 750 768,412
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Hosp. Rev., Sacred Heart
Hosp. Norristown Prj., Ser. 87A
6.80% 02/01/13 750 752,812
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Rev., Beaver Coll. Prj., Ser. 96
5.75% 04/01/12 1,690 1,734,362
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Rev., Holy Redeemer Hosp.
Prj., Ser. 97A
5.25% 10/01/27 9,000 8,223,750
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Rev., Pottstown Hlth. Care
Corp. Prj., Ser. 98
5.00% 01/01/16 6,235 5,736,200
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Rev., St. Josephs Univ. Prj.,
Ser. 92
6.50% 12/15/12 750 799,687
Montgomery Cnty. Hosp. Auth. Rev.,
Suburban Gen. Hosp. Prj., Ser. 76
7.75% 05/01/02 40 41,700
Montgomery Cnty. Ind. Dev. Auth.
Rev., Poll. Ctrl. Prj., Ser. 91B
6.70% 12/01/21 1,000 1,071,250
Moon Twp. Wtr. & Swr. Auth. Rev.,
Ser. 94
6.70% 12/01/19 1,000 1,004,590
New Garden Twp. Swr. Auth.
Rev., Ser. 91
7.00% 03/01/15 420 432,600
Norristown G.O., Ser. 90
6.90% 11/15/00 1,000 1,033,750
7.05% 11/15/00 1,250 1,293,750
See accompanying notes to financial statements.
18
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ------- -------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
North Allegheny Sch. Dist. G.O., Ser. 90
7.20% 05/01/00 $ 750 $ 764,610
7.60% 05/01/00 750 766,290
North Huntingdon Twp. G.O., Ser. 91
6.65% 04/01/04 1,635 1,686,094
Northampton Cnty. Hgr. Ed. Auth. Rev.,
Lehigh Univ. Prj., Ser. 89
7.00% 11/15/04 2,700 2,763,504
Northampton Cnty. Hgr. Ed. Auth. Rev.,
Lehigh Univ. Prj., Ser. 91
7.00% 10/15/11 4,000 4,295,000
Northampton Cnty. Hgr. Ed. Auth. Rev.,
Moravian Coll. Prj., Ser. 94
6.10% 07/01/12 1,950 2,003,625
Northampton Cnty. Hosp. Auth. Rev.,
Easton Hosp. Prj., Ser. 88
7.70% 01/01/04 1,000 1,022,700
Northampton Cnty. Ind. Dev. Auth. Poll.
Ctrl. Rev., Met. Ed. Co. Prj., Ser. 95A
6.10% 07/15/21 1,000 1,023,750
Northampton Cnty. Rev., Unrefunded
Ser 98
7.10% 11/15/09 1,800 1,842,534
Northeast Sch. Dist. G.O., Ser. 91
7.00% 01/15/10 890 921,150
Northeast Sch. Dist. G.O., Ser. 98
5.20% 09/01/23 2,000 1,845,000
Northeastern Hosp. & Ed. Auth. Rev.,
Luzerne Cnty. Coll. Prj., Ser. 97
5.15% 08/15/16 3,245 3,054,356
Northeastern Hosp. & Ed. Auth. Rev.,
Wilkes Univ. Prj., Ser. 93
5.40% 10/01/03 845 853,450
Northeastern Hosp. & Ed. Auth. Rev.,
Wyoming Vy. Hlth. Care Prj., Ser. 94A
6.50% 01/01/07 1,000 1,087,500
Northeastern Hosp. Auth. Rev., Nesbitt
Mem. Hosp. Prj., Ser. 90A
7.50% 07/01/00 1,250 1,307,875
Northgate Sch. Auth. Bldg. Rev., Ser. 78
6.38% 02/15/07 825 903,375
Northumberland Cnty. Auth. Gtd. Lease
Rev., Ser. 91
6.25% 10/15/01 4,000 4,165,000
6.60% 10/15/01 1,250 1,309,375
7.75% 10/15/01 2,110 2,257,700
Northumberland Cnty. Auth. Gtd. Lease
Rev., Ser. 92
6.70% 08/15/02 1,000 1,065,000
Parkland Sch. Dist. Rev., Ser. 96
5.75% 09/01/14 2,910 2,942,737
Penn Hills G.O., Ser. 93
5.88% 12/01/02 2,000 2,092,500
Pennsbury Sch. Dist. Unltd. Tax G.O.,
Ser. 94
6.65% 08/15/09 685 748,362
Pennsylvania Con. Ctr. Auth. Rev.,
Ser. 94A
6.60% 09/01/09 12,465 13,543,362
Pennsylvania Econ. Dev. Fin. Auth. Sch.
Rev., Baldwin Sch. Prj., Ser. 94A
6.35% 04/01/04 475 494,594
Pennsylvania Econ. Fin. Solid Waste
Disposal Rev., Ser. 99
6.00% 06/01/31 23,000 22,137,500
Par
Maturity (000) Value
---------- ------- --------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Pennsylvania Fin. Auth. Rev., Mun.
Cap. Imp. Prj., Ser. 93
6.60% 11/01/09 $22,805 $ 24,572,387
Pennsylvania G.O., Ser. 94
5.50% 06/15/08 1,000 1,038,750
Pennsylvania Hgr. Ed. Assistance Agcy.
Stud. Ln. Rev., Ser. 84A
7.44% 03/01/20 8,250 9,044,062
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Ser. 90
5.38% 01/01/15 5,200 5,089,500
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Assistance Agcy. for Stud. Lns. Prj.,
Ser. 84A
8.62%** 03/01/22 5,000 5,325,000
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Duquesne Univ. Prj., Ser. 91C
6.75%(DOUBLE DAGGER) 04/01/20 1,000 1,037,500
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Lehigh Univ. Northampton Prj.,
Unrefunded Ser. 89
7.10% 11/15/09 300 307,089
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Philadelphia Coll. of Textiles & Science
Prj., Ser. 93
5.15% 02/01/04 1,230 1,260,750
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Philadelphia Coll. Osteopathic Prj.,
Ser. 93
5.35% 12/01/10 3,735 3,767,681
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Thomas Jefferson Univ. Prj., Ser. 90
7.30% 11/01/00 1,500 1,583,895
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Univ. of Pennsylvania Prj., Ser. 98
5.75% 01/01/22 32,415 30,632,175
Pennsylvania Hsg. Fin. Agcy. AMT Sgl.
Fam. Mtg. Rev., Ser. 96A
6.05% 10/01/16 2,500 2,540,625
Pennsylvania Hsg. Fin. Agcy.
Multi-Family FHA Ins. Rev., Ref. Ser. 92
8.10% 07/01/13 2,000 2,125,000
Pennsylvania Hsg. Fin. Agcy. Res. Rev.,
Section 8 Prj., Ref. Ser. 91A
7.60% 07/01/13 1,000 1,045,000
Pennsylvania Hsg. Fin. Agcy. Rev.,
Ser. 92
6.40% 07/01/12 1,500 1,569,375
Pennsylvania Hsg. Fin. Agcy. Rev.,
Ser. 98
5.50%(DAGGER) 04/01/30 9,000 1,417,500
Pennsylvania Hsg. Fin. Agcy. Rev.,
Ser. 99
5.85% 10/01/18 1,000 995,460
Pennsylvania Hsg. Fin. Agcy. Rev.,
Sgl. Fam. Mtg. Prj., Ser. 91
6.95% 10/01/05 250 259,375
Pennsylvania Hsg. Fin. Agcy. Rev.,
Sgl. Fam. Mtg. Prj., Ser. 94A
6.60% 10/01/99 1,000 1,037,500
Pennsylvania Hsg. Fin. Agcy. Rev.,
Sgl. Fam. Mtg. Prj., Ser. 94B
6.88% 10/01/24 1,500 1,565,625
See accompanying notes to financial statements.
19
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ------- -------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Pennsylvania Ind. Dev. Auth. Rev.,
Pennvest Prj., Ser. 90
6.00% 03/01/00 $ 775 $ 790,423
Pennsylvania Infra. Investment Auth.
Rev., Pennvest Ln. Pool, Ser. 90
5.25% 07/01/02 6,620 6,777,225
Pennsylvania Infra. Investment Auth.
Rev., Pennvest Ln. Pool, Ser. 90B
6.80% 09/01/10 3,985 4,318,744
Pennsylvania Infra. Investment Auth.
Rev., Pennvest Ln. Pool, Ser. 93
6.00% 09/01/03 1,990 2,104,425
Pennsylvania Infra. Investment Auth.
Rev., Pennvest Ln. Pool, Ser. 94
6.00% 09/01/06 1,930 2,067,513
Pennsylvania Intergovernmental Coop.
Auth. Spec. Tax Rev., City of
Philadelphia Fdg. Prj., Ser. 92
6.80% 06/15/02 5,505 5,855,944
Pennsylvania Intergovernmental Coop.
Auth. Spec. Tax Rev., City of
Philadelphia Fdg. Prj., Ser. 93
5.15% 06/15/05 10,000 10,250,000
5.88% 06/15/23 15,000 15,750,000
Pennsylvania Intergovernmental Coop.
Auth. Spec. Tax Rev., City of
Philadelphia Fdg. Prj., Ser. 94
7.00% 06/15/04 500 551,875
Pennsylvania Intergovernmental Coop.
Auth. Spec. Tax Rev., City of
Philadelphia Fdg. Prj., Ser. 96
5.60% 06/15/12 1,000 1,013,750
5.50% 06/15/16 5,000 4,918,750
5.50% 06/15/20 8,000 7,730,000
Pennsylvania St. Fin. Auth. Cmnty.
Coll. Rev., Beaver Cnty Coll. Prj.,
Ser. 94A
5.88% 12/01/07 825 876,563
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Ser. 91
7.00% 10/01/01 1,385 1,459,444
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Bryn
Mawr Coll. Prj., Ser. 95
6.00% 12/01/15 1,200 1,245,000
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Drexel Univ.
Prj., Ser. 90
7.00% 05/01/00 50 50,918
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Philadelphia
Coll. of Textiles & Science Prj.,
Ser. 93
5.35% 02/01/06 1,050 1,082,813
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Ser. 91E
6.90% 06/15/01 1,000 1,045,000
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Ser. 93
5.25% 02/01/05 1,000 1,028,750
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Trustees Univ. Prj.,
Ser. 98
5.50% 07/15/38 19,000 18,097,500
Par
Maturity (000) Value
---------- ------- --------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Pennsylvania St. Hgr. Ed. Fac. Auth. Coll.
& Univ. Rev., Thomas Jefferson
Univ. Prj., Ser. 90
7.55% 11/01/00 $ 750 $ 793,898
Pennsylvania St. Ind. Dev. Auth. Rev.,
Econ. Dev. Prj., Ser. 94
7.00% 01/01/06 1,000 1,113,750
6.00% 01/01/12 4,000 4,210,000
Pennsylvania St. Infra. Investment
Auth. Rev., Ser. 90
6.45% 09/01/04 1,600 1,716,000
Pennsylvania St. Pub. Sch. Bldg.
Auth. Rev., Mid Valley Sch. Dist.
Prj., Ser. 92D
6.25% 01/01/07 500 527,500
Pennsylvania St. Third G.O., Ser. 91A
6.10% 11/15/01 7,000 7,376,250
6.50% 11/15/01 3,250 3,449,063
6.50% 11/15/11 1,500 1,591,875
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 86G
7.00% 12/01/00 500 527,500
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 86J
7.20% 12/01/99 2,275 2,459,844
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 86K
7.63% 12/01/99 2,000 2,051,780
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 91L
6.50% 06/01/04 1,445 1,517,250
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 92O
5.50% 12/01/17 2,895 2,833,481
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 92P
5.80% 12/01/06 1,500 1,563,750
6.00% 12/01/09 500 521,250
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 94A
5.88% 12/01/08 500 538,750
Pennsylvania St. Univ. Rev., Ser. 91
6.75% 07/01/01 1,000 1,061,250
7.00% 07/01/01 1,950 2,076,750
Pennsylvania St. Univ. Rev., Ser. 94
5.00% 05/01/03 1,000 1,020,000
Pennsylvania Trafford Dist. G.O.,
Ser. 94
5.85% 05/01/04 1,000 1,055,000
Pennsylvania Unltd. Tax G.O.,
Ser. 94A
6.50% 11/01/05 250 265,000
Philadelphia Arpt. Rev., Ser. 97A
6.00% 06/15/05 10,405 11,107,338
6.00% 06/15/06 6,030 6,452,100
5.13% 06/15/12 2,815 2,755,181
5.25% 06/15/15 5,770 5,575,263
Philadelphia Arpt. Rev., Ser. 98
6.00% 06/15/06 5,125 5,438,906
Philadelphia Gas Works Rev.,
Ser. 93
5.50% 07/01/04 5,000 5,206,250
Philadelphia Gas Works Rev.,
Ser. 94
5.25% 08/01/24 2,900 2,686,125
See accompanying notes to financial statements.
20
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ------- -------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Philadelphia Gas Works Rev., Ser. 98A
5.38% 07/01/13 $ 4,155 $ 4,123,838
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Children's Hosp.
of Philadelphia Prj., Ser. 93
5.00% 02/15/21 2,250 2,002,500
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Children's
Seashore House Prj., Ser. 92A
7.00% 08/15/03 1,000 1,065,000
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Children's
Seashore House Prj., Ser. 92B
7.00% 08/15/12 1,575 1,659,656
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Frankford Hosp.
Prj., Ser. 93A
6.00% 06/01/14 500 525,625
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Frankford Hosp.
Prj., Ser. 95
5.50% 01/01/07 1,235 1,281,313
5.60% 01/01/08 1,245 1,293,244
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Magee Rehab.
Hosp. Prj., Ser. 91
7.00% 12/01/05 1,000 1,048,750
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Nazareth Hosp.
Franciscan Prj., Ser. 96B
5.00% 07/01/10 4,590 4,503,938
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Presbyterian
Med. Ctr. Prj., Ser. 93
5.60% 12/01/00 595 606,900
6.10% 12/01/03 1,000 1,063,750
Philadelphia Ind. Dev. Auth. Rev.,
City of Philadelphia Prj., Ser. 96A
5.40% 02/15/17 2,500 2,421,875
Philadelphia Ind. Dev. Auth. Rev.,
Girard Estate Coal Mining Prj.,
Ser. 96
5.38% 11/15/12 3,945 3,935,138
5.50% 11/15/16 1,650 1,641,750
Philadelphia Ind. Dev. Auth. Rev.,
Inst. Cancer Rsrch. Prj., Ser. 90B
7.25% 07/01/03 2,515 2,606,948
Philadelphia Ind. Dev. Auth. Rev., Nat.
Bd. of Med. Examiners Prj., Ser. 92
6.75% 05/01/12 500 538,125
Philadelphia Ind. Dev. Auth. Rev.,
PGH Dev. Corp. Prj., Ser. 93
5.50% 07/01/10 1,035 1,056,994
Philadelphia Mun. Auth. Rev., Ref.
Ser. 93D
6.13% 07/15/08 2,650 2,805,688
Philadelphia Mun. Auth. Rev.,
Criminal Justice Prj., Ser. 88
7.80% 04/01/18 3,765 3,838,681
Philadelphia Mun. Auth. Rev.,
Justice Lease Prj., Ser. 91B
7.13% 11/15/01 1,055 1,138,081
7.10% 11/15/11 1,200 1,293,000
Par
Maturity (000) Value
---------- ------- --------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Philadelphia Mun. Auth. Rev., Ser. 93A
5.05% 11/15/03 $ 2,000 $ 2,050,000
5.20% 11/15/04 4,000 4,120,000
5.63% 11/15/14 2,600 2,613,000
Philadelphia Pk. Auth. Rev.,
Arpt. Pk. Prj., Ser. 97
5.75% 09/01/06 3,000 3,172,500
Philadelphia Pk. Auth. Rev.,
Arpt. Pk. Prj., Ser. 99
5.63% 09/01/18 4,430 4,380,163
Philadelphia Pk. Auth. Rev., Ser. 97
5.40% 09/01/15 5,900 5,789,375
Philadelphia Pk. Auth. Rev., Ser. 99
5.63% 09/01/13 3,390 3,440,850
5.63% 09/01/14 4,645 4,685,644
5.63% 09/01/17 5,495 5,453,788
Philadelphia Regl. Port Auth. Lease
Rev., Ser. 90
6.85% 08/01/00 500 512,520
Philadelphia Regl. Port Auth. Lease
Rev., Ser. 93
6.20%** 09/01/20 2,000 2,080,000
Philadelphia Sch. Dist. G.O., Ser. 94A
5.80% 07/01/08 1,910 2,029,375
5.85% 07/01/09 1,710 1,823,288
Philadelphia Sch. Dist. G.O., Ser. 95A
6.25% 09/01/04 5,985 6,441,356
6.25% 09/01/07 5,990 6,529,100
Philadelphia Sch. Dist. G.O., Ser. 95B
5.50% 09/01/10 2,500 2,650,000
5.50% 09/01/18 4,890 4,773,863
Philadelphia Sch. Dist. G.O., Ser. 97A
5.00% 04/01/05 5,000 5,087,500
Philadelphia Sch. Dist. Untld. Tax
G.O., Ser. 91B
7.00% 07/01/01 2,000 2,115,000
Philadelphia Sch. Dist. Untld. Tax
G.O., Ser. 92A
6.40% 05/15/02 2,000 2,112,500
Philadelphia Sch. Dist. Untld. Tax
G.O., Ser. 95A
6.25% 09/01/06 2,255 2,449,494
Philadelphia Sch. Dist. Untld. Tax
G.O., Ser. 95B
5.50% 09/01/11 2,000 2,120,000
Philadelphia Unltd. Tax G.O.,
Prerefunded Ser. 94B
5.90% 11/15/09 1,620 1,747,575
Philadelphia Unltd. Tax G.O., Ser. 93A
5.25% 05/15/04 300 309,375
Philadelphia Unltd. Tax G.O., Ser. 95
6.00% 05/15/04 2,345 2,488,631
6.00% 05/15/05 2,485 2,649,631
5.00% 05/15/20 4,000 3,595,000
Philadelphia Unltd. Tax G.O., Unrefunded
Ser. 94
5.90% 11/15/09 980 1,031,450
Philadelphia Wtr. & Swr. Rev., Ser. 89
6.85% 10/01/99 2,000 2,000,000
Philadelphia Wtr. & Swr. Rev., Ser. 92
7.35% 09/01/04 7,775 8,484,469
See accompanying notes to financial statements.
21
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ------- -------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Philadelphia Wtr. & Waste Wtr. Rev.,
Ser. 93
5.50% 06/15/06 $ 3,000 $ 3,123,750
5.50% 06/15/07 6,780 7,051,200
5.75% 06/15/13 5,260 5,343,900
5.00% 06/15/16 3,700 3,417,875
Philadelphia Wtr. & Waste Wtr. Rev.,
Ser. 95
6.75% 08/01/0 3500 541,250
Philadelphia Wtr. & Waste Wtr. Rev.,
Ser. 97A
5.00% 08/01/22 25,510 22,767,675
5.13% 08/01/27 20,645 18,657,919
Pittsburgh & Allegheny Cnty.
Auditorium Auth. Rev., Ser. 78
6.40% 12/01/01 340 340,680
Pittsburgh & Allegheny Cnty. Rev.,
Ser. 91B
6.00% 07/15/01 500 515,625
Pittsburgh Pub. Pk. Auth. Rev., Ser. 92A
5.88% 12/01/12 1,500 1,541,250
Pittsburgh Sch. Dist. G.O., Ser. 97
5.50% 09/01/09 4,500 4,601,250
Pittsburgh Unltd. Tax G.O., Ser. 95A
5.20% 03/01/10 10,000 10,287,500
5.25% 03/01/11 10,450 10,423,875
Pittsburgh Unltd. Tax G.O., Ser. 95B
5.13% 03/01/09 5,000 5,018,750
Pittsburgh Unltd. Tax G.O., Ser. 96A
6.00% 03/01/05 8,225 8,749,344
Pittsburgh Wtr. & Swr. Rev., Ser. 91A
6.60% 09/01/01 1,100 1,170,125
Pittsburgh Wtr. & Swr. Rev., Ser. 98A
5.00% 09/01/21 3,000 2,685,000
Pleasant Valley Sch. Dist. G.O., Ser. 95
5.60% 11/15/14 1,385 1,390,194
Pottstown Borough Auth. Swr. Rev., Ser. 96
5.50% 11/01/16 1,560 1,534,650
Punxsutawney Area Sch. Dist. G.O.,
Ser. 95
5.80% 04/15/05 1,000 1,056,250
Purchase Line Sch. Dist. G.O., Ser. 91
6.95% 01/15/01 1,000 1,035,000
Reading G.O., Ser. 92
6.50% 11/15/02 1,000 1,063,750
Ridley Park Hosp. Auth. Rev., Taylor
Hosp. Prj., Ser. 90A
8.63% 12/01/00 3,185 3,415,913
Ringgold Sch. Dist. Rev., Ser. 95
6.20% 02/01/19 500 536,875
Riverside Beaver Cnty. Sch. Dist.
Rev., Ser. 96
5.50% 02/15/17 3,725 3,878,656
Rose Tree Media Sch. Dist. G.O.,
Ser. 92A
6.55% 09/15/01 945 987,525
Saint Mary Hosp. Auth. Rev., Langhorne
Hosp. Franciscan Hlth. Prj., Ser. 89C
7.00% 07/01/03 750 770,183
Sayre Hlth. Care Fac. Auth. Rev.,
Guthrie Prj., Ser. 91A
7.10% 03/01/17 3,000 3,150,000
Sayre Hlth. Care Fac. Auth. Rev.,
Tioga Nursing Fac. Prj., Ser. 89A
7.25% 10/01/10 1,500 1,533,750
Par
Maturity (000) Value
---------- ------- --------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Sayre Hlth. Care Fac. Auth. Rev.,
VHA Cap. Fin. Prj., Ser. 85
7.15% 12/01/10 $ 1,400 $ 1,489,250
Sayre Hlth. Care Fac. Auth. Var.
Hosp. Rev., Ser. 85H
7.63% 12/01/99 750 775,988
Schuylkill Redev. Auth. Comm.
Rev., Ser. 91A
7.13% 06/01/13 2,000 2,110,000
Scranton Lackawanna Hlth. & Welfare
Auth. Rev., Hosp. Cmnty. Med.
Ctr. Prj., Ref. Ser. 98A
5.25% 07/01/04 2,215 2,278,681
Scranton Lackawanna Hlth. & Welfare
Auth. Rev., Univ. of Scranton Prj.,
Ser. 90B
7.25% 06/15/00 1,310 1,366,382
7.40% 06/15/10 1,665 1,738,943
Scranton Lackawanna Hlth. & Welfare
Auth. Rev., Univ. of Scranton Prj.,
Ser. 90C
7.50% 06/15/00 3,860 4,034,047
Seneca Valley Sch. Dist. G.O., Ser. 98A
5.00% 07/01/14 10,645 10,006,300
Solanco Sch. Dist. G.O., Ser. 94
6.30% 02/15/04 500 535,000
Somerset Cnty. Gen. Auth.
Comm. Rev., Ser. 91
6.45% 10/15/00 1,000 1,027,260
6.25% 10/15/01 1,750 1,822,188
6.70% 10/15/01 1,500 1,575,000
South Fork Mun. Auth. Hosp. Rev.,
Good Samaritan Med. Ctr. Prj.,
Ser. 96B
5.38% 07/01/16 4,000 3,860,000
Southeastern Pennsylvania Trans.
Auth. Rev., Prerefunded Ser. 95
5.75% 03/01/08 75 79,594
Southeastern Pennsylvania Trans.
Auth. Rev., Ref. Ser. 95
5.75% 03/01/08 1,210 1,284,113
Southeastern Pennsylvania Trans.
Auth. Rev., Ser. 94
6.00% 06/01/01 2,000 2,045,000
6.10% 06/01/02 1,000 1,035,000
Southeastern Pennsylvania Trans.
Auth. Rev., Ser. 95
5.88% 03/01/09 1,230 1,311,488
Southeastern Pennsylvania Trans.
Auth. Rev., Ser. 97
5.75% 03/01/06 2,900 3,055,875
5.75% 03/01/07 1,700 1,791,375
5.50% 03/01/12 2,525 2,550,250
5.55% 03/01/13 3,500 3,526,250
5.38% 03/01/17 4,770 4,603,050
Springford Sch. Dist. G.O., Ser. 97
5.15% 02/01/18 10,010 9,371,863
State Hgr. Ed. Fac. Auth. Rev., Ser 93
7.50% 06/15/01 1,670 1,761,850
State of Pennsylvania Pub. Sch. Bldg.
Auth. Coll. Rev., Butler Cnty. Cmnty.
Coll. Prj., Ser. 89E
7.20% 10/15/99 750 758,205
See accompanying notes to financial statements.
22
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ------- -------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
State of Pennsylvania Pub. Sch. Bldg.
Auth. Coll. Rev., Harrisburg Area Cmnty.
Coll. Prj., Ser. 90
7.15% 10/01/99 $ 385 $ 388,850
State of Pennsylvania Pub. Sch. Bldg.
Auth. Coll. Rev., Harrisburg Area Cmnty.
Coll. Prj., Ser. 91D
6.80% 04/01/02 1,335 1,413,431
Stroudsburg Area Sch. Dist. G.O., Ser. 98
5.25% 10/01/1 22,985 2,955,150
Swarthmore Borough Auth. Coll. Rev.,
Ser. 90
6.95% 09/15/00 500 519,430
7.38% 09/15/00 1,500 1,564,140
Tarentum Gtd. Elec. Rev., Ser. 93
5.88% 09/01/18 750 789,375
Unionville Chadds Ford Sch. Dist.
G.O., Ser. 91
6.75% 06/01/06 1,000 1,036,250
Unionville Chadds Ford Sch. Dist.
G.O., Ser. 93
5.60% 06/01/03 1,000 1,038,750
Upper St. Clair Twp. Sch. Bldg. Auth.
Rev., Ser. 78
6.50% 02/15/04 390 402,188
Warren Cnty. G.O., Ser. 91
7.15% 07/01/01 1,200 1,260,000
Washington Cnty. Auth. Lease Rev.,
Ser. 85C
7.30% 12/15/99 3,000 3,160,440
7.30% 06/15/00 3,840 4,045,363
Washington Cnty. Ind. Dev. Auth. Poll.
Ctrl. Rev., West Penn Pwr.
Co. Prj., Ser. 93
4.95% 03/01/03 5,190 5,274,338
Washington Cnty. Ind. Dev. Auth. Poll.
Ctrl. Rev., West Penn Pwr. Co.
Prj., Ser. 95G
6.05% 04/01/14 2,500 2,618,750
West Chester Area Sch. Dist. G.O.,
Ser. 91A
6.70% 01/15/01 1,000 1,031,250
West Chester Area Sch. Dist.
Unltd. Tax G.O., Ser. 91A
6.70% 01/01/01 1,000 1,031,250
West Goshen Swr. Auth. Rev., Ser. 91
7.00% 09/01/01 1,500 1,576,875
West Jefferson Hills Sch. Dist.
Unltd. Tax G.O. , Ser. 91A
6.70% 08/01/01 1,250 1,306,250
West Mifflin Sanit. Swr. Mun. Auth.
Swr. Rev., Ser. 96
5.70% 08/01/15 1,445 1,526,281
West Whiteland Twp. Unltd. Tax
G.O., Ser. 92
6.75% 12/01/02 1,100 1,177,000
West York Area Sch. Dist. G.O.,
Ser. 91
6.80% 03/01/01 900 932,625
Westmoreland Cnty. G.O., Ser. 91
6.35% 12/01/99 1,000 1,004,100
Westmoreland Cnty. G.O., Ser. 92
6.55% 08/01/01 750 781,875
Par
Maturity (000) Value
---------- ------- --------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Westmoreland Cnty. Ind. Dev. Auth.
Rev., Westmoreland Hlth. Sys. Prj.,
Ser 93A
6.00% 07/01/11 $ 200 $ 208,750
Westmoreland Cnty. Mun. Auth.
Rev., Ser. 87K
2.00% 07/01/03 1,000 910,000
Westmoreland Cnty. Unltd. Tax
G.O., Ser. 97
5.50% 12/01/16 1,160 1,141,150
Westview Mun. Auth. Spec. Oblig.
Rev., Ser. 85
9.25% 11/15/05 750 886,875
Williamsport Area Sch. Dist. Auth.
Rev., Ser. 78
6.00% 03/01/07 140 143,150
Wilson Sch. Dist. G.O., Ser. 97
5.50% 05/15/14 580 604,650
5.50% 05/15/17 7,435 7,750,988
Wilson Sch. Dist. G.O., Unrefunded
Ser. 97
5.50% 05/15/14 860 857,850
York Cnty. Hosp. Auth. Rev.,
York Hosp. Prj., Ser. 91
7.00% 01/01/01 285 300,319
7.10% 01/01/01 355 374,525
--------------
1,039,905,748
--------------
PUERTO RICO -- 1.2%
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 89N
6.80% 07/01/00 1,000 1,018,000
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 91P
6.75% 07/01/03 250 264,063
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 95X
6.00% 07/01/12 5,000 5,212,500
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 97A
5.38% 07/01/14 3,000 3,011,250
Puerto Rico Pub. Bldg. Auth. Pub. Ed.
& Hlth. Fac. Rev., Ser. 93M
4.90% 07/01/00 3,000 3,027,360
--------------
12,533,173
--------------
TOTAL MUNICIPAL BONDS
(Cost $1,047,098,831) 1,052,438,921
--------------
See accompanying notes to financial statements.
23
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF SEPTEMBER 30, 1999 Shares Value
------- -------------
CUMULATIVE PREFERRED STOCK -- 1.1%
Charter Mac Equity Issue Trust 144A
6.625% 80,000 $ 7,990,560
MuniMae TE Bond Subs.,LLC 144A
6.875% 40,000 4,041,240
--------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $12,000,000) 12,031,800
--------------
SHORT TERM INVESTMENTS -- 0.7%
Smith Barney Tax-Free Money
Market Fund 7,880,247 7,880,247
Vanguard Tax-Exempt Money
Market Fund 100,000 100,000
--------------
TOTAL SHORT TERM INVESTMENTS
(Cost $7,980,247) 7,980,247
--------------
TOTAL INVESTMENTS
IN SECURITIES -- 100.0%
(Cost $1,067,079,078*) $1,072,450,968
==============
- ---------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $23,101,341
Gross unrealized depreciation (17,729,451)
-----------
$ 5,371,890
===========
** Rates shown are the rates as of September 30, 1999.
(DAGGER) The rate shown is the effective yield on the zero coupon bonds.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$2,500,000 on 190 long U.S. Treasury Bond future contracts expiring December
1999. The value of such contracts on September 30, 1999 was $21,333,438,
thereby resulting in an unrealized loss of $118,750
See accompanying notes to financial statements.
24
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investments at value (Cost $1,067,079,078) .................................................................. $1,072,450,968
Interest receivable ......................................................................................... 16,316,963
Investments sold receivable ................................................................................. 47,137,446
Capital shares sold receivable .............................................................................. 96,057
Futures margin receivable ................................................................................... 102,648
Prepaid expenses ............................................................................................ 3,132
Other assets ................................................................................................ 8,278
---------------
TOTAL ASSETS ......................................................................................... 1,136,115,492
---------------
LIABILITIES
Investments purchased payable ............................................................................... 61,524,875
Capital shares redeemed payable ............................................................................. 223,068
Distributions payable ....................................................................................... 4,330,947
Advisory fees payable ....................................................................................... 72,329
Administrative fees payable ................................................................................. 123,132
Transfer agent fees payable ................................................................................. 76,597
Other accrued expenses payable .............................................................................. 108,451
---------------
TOTAL LIABILITIES .................................................................................... 66,459,399
---------------
NET ASSETS (Applicable to 94,519,536 Institutional shares, 1,344,151 Service shares, 3,482,327
Investor A shares, 2,260,041 Investor B shares and 86,596 Investor C shares outstanding) .................... $1,069,656,093
==============
NET ASSET VALUE AND REDEMPTION PRICE PER INSTITUTIONAL,
SERVICE AND INVESTOR A SHARE ($1,045,146,649 (DIVIDE) 99,346,014) ........................................... $10.52
======
OFFERING PRICE PER INSTITUTIONAL AND SERVICE SHARE ............................................................. $10.52
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($10.52 (DIVIDE) 0.960) ..................................................................................... $10.96
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($23,602,291 (DIVIDE) 2,260,041) ....................................................... $10.44
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($907,153 (DIVIDE) 86,596) ............................................................. $10.48
======
</TABLE>
See accompanying notes to financial statements.
25
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY TAX-FREE INCOME PORTFOLIO
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ------ -----------
MUNICIPAL BONDS -- 94.3%
NEW JERSEY -- 84.4%
Atlantic City, COP's, Pub. Fac.
Lease Agreement Prj., Ser. 91
7.30% 03/01/04 $1,535 $ 1,701,931
Bergen Cnty. G.O., Ser. 90
6.25% 11/15/00 645 661,931
Bergen Cnty. Util. Auth. Rev., Ser. 92A
6.00% 06/15/01 1,590 1,637,700
Brigantine G.O., Ser. 92
6.25% 08/01/03 730 773,800
Camden Cnty. Imp. Auth. Lease Rev.,
Ser. 92
6.00% 12/01/02 1,000 1,057,500
Cherry Hill Twp. G.O., Ser. 92
6.00% 06/01/06 500 526,250
Dover Twp. G.O., Ser. 92
6.00% 10/15/03 1,000 1,062,500
6.10% 10/15/04 540 575,100
Edison Twp. G.O., Ser. 91
6.50% 06/01/04 930 1,005,562
Essex Cnty. Imp. Auth. Lease Rev.,
Jail & Yth. Hsg. Prj., Ser. 94
6.90% 12/01/14 500 562,500
Essex Cnty. Util. Auth. Solid Waste
Rev., Ser. 96
5.75% 04/01/05 2,000 2,107,500
Gloucester Cnty. Srs. Hsg. Dev. Corp.
Rev., Sect. 8 Colonial Park Prj.,
Ser. 94A
6.20% 09/15/11 1,250 1,275,000
Hamilton Twp. Atlantic City Sch. Dist.
G.O., Ser. 92
5.88% 12/15/07 860 906,225
Hudson Cnty. Imp. Auth. Fac. Lease
Rev., Hudson Cnty. Lease Prj.,
Ser. 98
4.75% 10/01/19 2,250 1,960,312
Hudson Cnty. Imp. Auth. Rev., Union
Lease Prj., Ser. 99
5.20% 07/15/24 3,000 2,782,500
Jersey City G.O., Ser. 96A
6.00% 10/01/05 1,655 1,770,850
6.00% 10/01/06 3,000 3,221,250
Knowlton Twp. Bd. of Ed. G.O., Ser. 91
6.60% 08/15/11 169 190,547
Lacey Twp. Wtr. Auth. Rev., Ser. 93
6.00% 12/01/12 1,000 1,076,250
Mercer Cnty. Imp. Auth. Rev., Hamilton
Bd. of Ed. Prj., Ser. 92
5.90% 06/01/03 500 521,250
Middlesex Cnty. Imp. Auth. Rev., Ser. 96
5.80% 09/15/13 1,725 1,781,062
Monmouth Cnty. G.O., Ser. 90
6.90% 08/01/04 430 449,285
Monmouth Cnty. Imp. Auth. Corr. Fac. Rev.,
Ser. 91
6.30% 08/01/01 1,000 1,056,250
Morristown Cnty. G.O., Ser. 95
6.40% 08/01/14 500 540,000
New Jersey Econ. Dev. Auth. Mkt.
Transition Fac. Rev., Ser. 94A
5.80% 07/01/08 1,290 1,364,175
5.88% 07/01/11 4,000 4,205,000
Par
Maturity (000) Value
---------- ------ ------------
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY (CONTINUED)
New Jersey Econ. Dev. Auth. Rev.,
Performing Arts Ctr. Prj., Ser. 96C
5.75% 06/15/08 $4,440 $ 4,728,600
New Jersey Econ. Dev. Auth. Rev.,
Ser. 94
5.80% 07/01/07 1,500 1,590,000
New Jersey Econ. Dev. Auth. Rev.,
St. Barnabas Med. Ctr. Prj., Ser. 97A
5.63%(DAGGER) 07/01/23 4,000 1,000,000
New Jersey Econ. Dev. Auth. Rev.,
Trenton OFC Complex Prj., Ser. 89
6.63% 06/15/01 1,050 1,090,740
New Jersey Econ. Dev. Auth. Rev.,
W.Y. Hldg. Co. Prj., Ser. 95
5.95% 06/01/05 865 881,219
New Jersey Ed. Auth. Rev., Rowan
Coll. Prj., Ser. 96
5.88(DOUBLE DAGGER) 07/01/16 2,185 2,231,431
New Jersey Hlth. Care Fac. FHA Ins. Mtg.
Rev., Cathedral Hlth. Ctr. Prj., Ser. 90A
6.95% 02/15/01 640 663,200
New Jersey Hlth. Care Fac. Fin. Auth.
Rev., Ser. 99
5.25% 07/01/19 5,000 4,762,500
New Jersey Hlth. Care Fac. Fin. Auth.
Rev., Cathedral Hlth. Ctr. Prj., Ser. 90
7.25% 02/15/21 1,000 1,058,750
New Jersey Hlth. Care Fac. Fin. Auth.
Rev., Kennedy Hlth. Sys. Prj., Ser. 98
5.25% 07/01/15 700 676,375
New Jersey Hlth. Care Fac. Fin. Auth.
Rev., Robert Wood Johnson Univ. Prj.,
Ser. 96C
5.75%(DOUBLE DAGGER) 07/01/07 2,595 2,744,212
New Jersey Hlth. Care Fac. Fin. Auth.
Rev., Society of The Vy. Hosp. Prj.,
Ser. 89C
6.60% 07/01/00 430 438,910
New Jersey Sports & Expo. Auth. Rev.,
Ser. 92
6.50% 03/01/07 600 637,375
New Jersey St. Ed. Fac. Auth. Rev., Hgr.
Ed. Fac. Trust Fund Prj., Ser. 95A
5.13% 09/01/07 1,800 1,838,250
New Jersey St. Ed. Fac. Auth. Rev.,
St. Peters Coll. Prj., Ser. 98B
5.50% 07/01/27 3,220 2,934,225
New Jersey St. G.O., Ser. 86B
6.25% 01/15/04 860 919,125
New Jersey St. G.O., Ser. 91
6.25% 08/01/02 1,160 1,228,150
6.00% 08/01/03 4,075 4,263,469
New Jersey St. G.O., Ser. 98
7.65%** 02/01/13 3,400 3,140,750
New Jersey St. Hsg. & Mtg. Fin.
Agcy. Rev., Ser. 92A
6.70% 05/01/05 500 525,000
6.70% 11/01/05 1,000 1,050,000
6.95% 11/01/13 750 789,375
New Jersey St. Hwy. Auth. Rev.,
Garden St. Pkwy. Prj., Ser. 92
6.20% 01/01/10 750 810,000
6.25% 01/01/14 500 524,375
See accompanying notes to financial statements.
26
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ------ -----------
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY (CONTINUED)
New Jersey St. Tpke. Auth. Rev.,
Ser. 91A
6.40% 01/01/02 $ 860 $ 893,325
6.90% 01/01/14 970 972,134
New Jersey St. Tpke. Auth. Rev.,
Ser. 91C
6.25% 01/01/10 2,210 2,284,587
6.50% 01/01/16 500 539,375
New Jersey St. Tpke. Auth. Rev.,
Ser. 92A
5.80% 01/01/02 1,260 1,293,075
New Jersey St. Waste Wtr. Trtmnt.
Trust Rev., Ser. 90
6.88% 06/15/00 395 409,074
6.88% 06/15/06 35 36,065
New Jersey St. Waste Wtr. Trtmnt.
Trust Rev., Ser. 96C
6.25% 05/15/03 2,500 2,656,250
6.25% 05/15/06 5,955 6,476,063
New Jersey Trans. Auth. Rev., Ser. 96A
6.00% 12/15/05 1,000 1,075,000
New Jersey Trans. Auth. Rev., Ser. 94A
6.25% 12/15/03 1,000 1,070,000
New Jersey Trans. Trust Fund Auth.
Rev., Ser. 96B
5.25% 06/15/15 3,000 2,898,750
New Jersey Trans. Trust Fund Auth.
Rev., Ser. 99A
5.75% 06/15/18 4,000 4,055,000
5.75% 06/15/20 2,000 2,022,500
Newark Bd. of Ed. G.O., Ser. 94
5.88% 12/15/13 1,000 1,057,500
North Bergen Twp. G.O., Ser. 92
5.90% 08/15/01 500 517,500
North Jersey Dist. Wtr. Sply. Rev.,
Ser. 93
5.50% 07/01/03 860 893,325
Northwest Bergen Cnty. Rev., Ser. 92
5.90% 07/15/06 755 798,413
Northwest Bergen Cnty. Util. Auth.
Sys. Rev., Ser. 92
6.00% 07/15/07 860 912,675
Ocean Cnty. G.O., Ser. 89
6.75% 07/13/03 1,030 1,114,975
Ocean Cnty. G.O., Ser. 90
6.80% 06/15/00 430 438,669
Ocean Cnty. G.O., Ser. 91
6.38% 04/15/03 430 457,950
Ocean Cnty. G.O., Ser. 91A
6.25% 10/01/04 430 454,188
Ocean Cnty. Util. Auth. Rev., Ser. 95A
6.30% 01/01/12 1,005 1,087,913
Ocean Cnty. Util. Auth. Waste Wtr. Rev.,
Ser. 00
5.00% 01/01/13 500 456,875
5.00% 01/01/18 1,350 1,184,625
Ocean Twp. Swr. Auth. Rev., Ser. 92
6.00% 12/01/08 1,705 1,798,775
Passaic Valley Wtr. Sply. Comm. Rev.,
Ser. 92A
5.95% 12/15/02 500 525,000
Point Pleasant G.O., Ser. 95
5.70% 12/01/03 500 527,500
Par
Maturity (000) Value
---------- ------ ------------
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY (CONTINUED)
Port Auth. New York & New Jersey
Rev., Ser. 92
6.10% 10/15/02 $ 645 $ 678,863
Port Auth. New York & New Jersey
Rev., Ser. 95
5.75% 11/01/09 3,275 3,393,719
Port Auth. New York & New Jersey Spec.
Oblig. Rev., JFK Intl. Air Term. Prj.,
Ser. 97
5.75% 12/01/22 2,105 2,083,950
Port Auth. New York & New Jersey Spec.
Oblig. Rev., JFK Intl. Air Term. Prj.,
Ser. 97-6
6.25% 12/01/09 7,000 7,630,000
Rutgers Univ. Rev., Ser. 92A
6.10% 05/01/03 1,000 1,052,500
Salem Cnty. Ind. Poll. Ctrl. Fin.
Auth. Rev., Ser. 94
6.20% 08/01/30 1,000 1,035,000
South Jersey Port. Corp. Rev.,
Marine Term. Prj., Ser. 93G
5.60% 01/01/23 3,000 2,943,750
Warren Cnty. Poll. Ctrl. Fin. Auth.
Rev., Ser. 92B
5.70% 12/01/03 500 520,625
Weehawken Twp. G.O., Ser. 92
6.15% 07/01/04 350 366,625
West Windsor Plainsboro Twp.
Bd. of Ed. G.O., Ser. 93
5.80% 03/15/06 1,000 1,050,000
Winslow Twp. Unltd. Tax G.O., Ser. 92
6.40% 10/01/05 870 930,900
Woodbridge Twp. G.O., Ser. 90
6.65% 08/01/00 475 490,547
Woodbridge Twp. G.O., Ser. 92
6.05% 08/15/05 500 531,250
6.25% 08/15/08 1,000 1,068,750
------------
137,981,821
------------
NEW YORK -- 0.1%
New York Energy Research & Dev.
Auth. Rev., Niagara Mohawk Power
Prj., Ser. 85A
4.20%** 07/01/15 250 250,000
------------
PENNSYLVANIA -- 0.9%
Delaware River Joint Toll Bdg.
Rev., Ser. 92
6.25% 07/01/12 1,400 1,442,000
------------
PUERTO RICO -- 8.3%
Puerto Rico Cmwlth. Hwy. & Trans.
Auth. Rev., Ser. 93X
5.50% 07/01/13 2,000 2,055,000
Puerto Rico Cmwlth. Infra.
Auth. Rev., Ser. 99
5.20%** 07/01/12 2,000 1,894,700
Puerto Rico Cmwlth. Infra.
Auth. Rev., Ser. 99A
5.00% 07/01/15 2,000 1,911,640
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 94S
6.13% 07/01/08 1,000 1,096,250
See accompanying notes to financial statements.
27
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY TAX-FREE INCOME PORTFOLIO (CONCLUDED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
---------- ------ ------------
MUNICIPAL BONDS (CONTINUED)
PUERTO RICO (CONTINUED)
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 94T
5.50% 07/01/20 $2,250 $ 2,190,938
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 97AA
5.25% 07/01/16 1,000 981,250
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 97BB
5.50% 07/01/09 1,500 1,575,000
Puerto Rico Infra. Fin. Auth. Rev.,
Ser. 97A
5.00% 07/01/28 2,000 1,787,500
------------
13,492,278
------------
VIRGIN ISLANDS -- 0.6%
Virgin Islands Wtr. & Pwr. Auth.
Elec. Sys. Rev., Ser. 98
5.30% 07/01/21 1,100 1,006,500
------------
TOTAL MUNICIPAL BONDS
(Cost $152,047,869) 154,172,599
------------
Shares
---------
CUMULATIVE PREFERRED STOCK -- 4.9%
Charter Mac Equity Issue Trust 144A
6.625% 40,000 3,995,280
MuniMae TE Bond Subs., LLC 144A
6.875% 40,000 4,041,240
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $8,000,000) 8,036,520
------------
SHORT TERM INVESTMENTS -- 0.8%
Smith Barney Tax-Free Money
Market Fund
(Cost $1,243,807) 1,243,807 1,243,807
------------
Value
------------
TOTAL INVESTMENTS
IN SECURITIES -- 100.0%
(Cost $161,291,676*) $163,452,926
============
- ---------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $4,190,069
Gross unrealized depreciation (2,028,819)
==========
$2,161,250
==========
** Rates shown are the rates as of September 30, 1999.
(DAGGER) The rate shown is the effective yield on the zero coupon bonds.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of $685,000
on 145 long U.S. Treasury Bond future contracts and 110 short U.S. Treasury
Bond future contracts expiring December 1999. The value of such contracts on
September 30, 1999 was $28,813,906, thereby resulting in an unrealized loss
of $12,969.
See accompanying notes to financial statements.
28
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
NEW JERSEY TAX-FREE INCOME PORTFOLIO
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investments at value (Cost $161,291,676) .................................................................... $163,452,926
Interest receivable ......................................................................................... 2,338,463
Investments sold receivable ................................................................................. 14,274,387
Capital shares sold receivable .............................................................................. 517
------------
TOTAL ASSETS ......................................................................................... 180,066,293
------------
LIABILITIES
Investments purchased payable ............................................................................... 17,276,665
Capital shares redeemed payable ............................................................................. 597,480
Distributions payable ....................................................................................... 658,912
Advisory fees payable ....................................................................................... 13,816
Administrative fees payable ................................................................................. 19,626
Transfer agent fees payable ................................................................................. 16,114
Other accrued expenses payable .............................................................................. 14,862
Futures margin payable ...................................................................................... 10,148
------------
TOTAL LIABILITIES .................................................................................... 18,607,623
------------
NET ASSETS (Applicable to 11,862,666 Institutional shares, 2,179,368 Service shares, 117,449
Investor A shares, 127,466 Investor B shares and 1,670 Investor C shares outstanding) ....................... $161,458,670
============
NET ASSET VALUE AND REDEMPTION PRICE PER INSTITUTIONAL,
SERVICE AND INVESTOR A SHARE ($159,999,454 (DIVIDE) 14,159,483) ............................................. $11.30
======
OFFERING PRICE PER INSTITUTIONAL AND SERVICE SHARE ............................................................. $11.30
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($11.30 (DIVIDE) 0.960) ..................................................................................... $11.77
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($1,440,345 (DIVIDE) 127,466) .......................................................... $11.30
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($18,871 (DIVIDE) 1,670) ............................................................... $11.30
======
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
OHIO TAX-FREE INCOME PORTFOLIO
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
-------- ------- ------------
MUNICIPAL BONDS -- 96.2%
OHIO -- 82.2%
Akron Swr. Sys. Rev., Ser. 96
5.88% 12/01/16 $ 500 $ 516,250
Brunswick G.O., Ser. 94
6.30% 12/01/05 210 223,125
Butler Cnty. Hosp. Fac. Rev.,
Middletown Reg. Hosp. Prj., Ser. 91
6.75% 11/15/03 50 53,250
Butler Cnty. Trans. Imp. Dist. Rev.,
Ser. 97A
6.00% 04/01/11 600 640,500
Cincinnati Wtrwks. Imp. Rev., Ser. 89
6.75% 12/01/01 1,000 1,055,000
Clermont Cnty. Swr. Sys. Rev., Ser. 90
7.25% 12/01/00 1,415 1,496,362
Cleveland Apt. Sys. Rev., Ser. 94B
5.70% 01/01/04 150 159,375
Cleveland COP's, Cleveland
Stadium Prj., Ser. 97
5.25% 11/15/10 2,500 2,525,000
Cleveland COP's, Cleveland
Stadium Prj., Ser. 97B
6.00% 11/15/09 1,000 1,081,250
Cleveland Ltd. Tax G.O., Ser. 94
6.25% 11/15/06 1,915 2,096,925
Cleveland Pkg. Fac. Rev., Ser. 96
6.00% 09/15/06 1,275 1,373,812
Cleveland Pub. Pwr. Sys. Rev.,
First Mtg. Prj., Ser. 94B
6.10% 11/15/03 1,000 1,066,250
Cleveland Pub. Pwr. Sys. Rev., Ser. 94A
6.30% 11/15/05 4,000 4,385,000
Cleveland Wtrwks. Rev., First
Mtg. Prj., Ser. F-92A
6.50% 01/01/02 500 532,500
Cleveland Wtrwks. Rev., Imp. First
Mtg. Prj., Ser. 96H
6.00% 01/01/06 2,000 2,140,000
Cleveland-Cuyahoga Cnty. Port
Auth. Rev., Ser. 97
6.00% 03/01/07 500 503,750
Columbus G.O., Mun. Arpt.
No. 30-E-U Prj., Ser. 91
6.15% 04/15/02 1,475 1,517,406
Columbus Mun. Arpt. Auth. Rev.,
Columbus Intl. Arpt. Prj., Ser. 94A
6.00% 01/01/04 150 157,687
Columbus Pub. Imp. Rev., Ser. 93
5.35% 09/15/06 1,075 1,112,625
Columbus Unltd. Tax G.O., Ser. 86
7.38% 07/01/06 1,000 1,151,250
Columbus Unltd. Tax G.O., Ser 91-2
6.50% 09/15/01 1,105 1,151,962
Columbus Unltd. Tax G.O., Ser. 92B
6.10% 01/01/03 1,000 1,052,500
Columbus Unltd. Tax G.O., Ser 94-2
5.60% 05/15/05 1,000 1,050,000
Columbus Wtrwks. Enlargement No. 44
G.O., Ser. 92
6.00% 05/01/03 500 535,000
Cuyahoga Cnty. G.O., Ser. 91
6.70% 10/01/0 11,000 1,066,250
Cuyahoga Cnty. Hosp. Rev.,
Meridia Hlth. Sys. Prj., Ser. 95
6.10% 08/15/04 500 534,375
Par
Maturity (000) Value
-------- ------- ------------
MUNICIPAL BONDS (CONTINUED)
OHIO (CONTINUED)
Cuyahoga Cnty. Hosp. Rev., Univ.
Hlth. Sys. Prj., Ser. 96B
6.00% 01/15/04 $ 3,125 $ 3,261,719
6.00% 01/15/05 500 523,125
Cuyahoga Cnty. Jail Fac. Unltd.
Tax G.O., Ser. 91
7.00% 10/01/01 1,000 1,071,250
Dublin Unltd. Tax G.O., Ser. 98A
5.25% 12/01/14 1,660 1,618,500
Fairfield City Sch. Dist. G.O., Ser. 94
7.45% 12/01/14 1,000 1,195,000
Franklin Cnty. G.O., Ser. 91
6.38% 12/01/01 1,635 1,737,187
Greater Cleveland Regl. Tran.
Auth. G.O., Ser. 96
6.25% 12/01/06 2,935 3,206,488
Hamilton Cnty. Elec. Sys. Mtg. Rev.,
Ser. 92A
6.00% 10/15/12 500 527,500
Hamilton Cnty. Swr. Sys. Rev., Ser. 91A
6.40% 06/01/01 325 342,875
6.40% 12/01/04 675 708,750
Kings Sch. Dist. G.O., Ser. 94
7.60% 12/01/05 200 226,500
Loveland City Sch. Dist. G.O., Ser. 92
6.65% 12/01/02 145 157,325
Lucas Cnty. G.O., Ser. 96
6.00% 12/01/03 2,310 2,451,488
6.00% 12/01/05 500 537,500
Medina Cnty. Unltd. Tax G.O., Ser. 86
7.25% 12/01/03 50 55,250
Montgomery Cnty. G.O., Ser. 91A
6.75%(DOUBLE DAGGER) 09/01/01 1,500 1,569,375
North Royalton City Sch. Dist. G.O.,
Ser. 94
6.63% 12/01/06 100 111,500
Northwestern Sch. Dist. Rev., Wayne &
Ashland Cntys. Prj., Ser. 94
7.20% 12/01/10 300 354,000
Ohio Unltd. Tax G.O., Ser. 95
6.00% 08/01/08 225 241,031
Ohio Hsg. Fin. Agcy. Res. Mtg. Rev.,
Ser. 94B-2
6.35% 09/01/04 20 20,425
Ohio Hsg. Fin. Agcy. Rev., Wind River Prj.,
Ser. 94A
5.55% 11/01/18 1,050 1,019,813
Ohio St. Bldg. Auth. Adult Corr. Fac. Rev.,
Ser. 94
5.90% 10/01/09 2,000 2,127,500
Ohio St. Bldg. Auth. Disalle Govt. Ctr. Rev.,
Ser. 96A
6.00% 10/01/05 1,000 1,068,750
Ohio St. Bldg. Auth. Rev., Ser. 87
7.05% 04/01/00 1,000 1,035,620
Ohio St. Bldg. Auth. St. Corr. Fac. Rev.,
Ser. 91A
6.50% 10/01/02 4,000 4,235,000
Ohio St. Bldg. Auth. St. Corr. Fac. Rev.,
Admin. Bldg. Fd. Prj., Ser. 92A
6.00% 10/01/04 1,020 1,085,025
Ohio St. Bldg. Data Ctr. Rev., Ser. 93A
5.90% 10/01/07 450 479,250
See accompanying notes to financial statements.
30
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
OHIO TAX-FREE INCOME PORTFOLIO (CONCLUDED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
-------- ------- ------------
MUNICIPAL BONDS (CONTINUED)
OHIO (CONTINUED)
Ohio St. Env. Impt. Rev., USX Corp. Prj.,
Ref. Ser. 99
5.63% 05/01/29 $ 1,000 $ 918,750
Ohio St. Hghr. Ed. Fac. Comm. Rev.,
Ohio Dominican Coll. Prj., Ser. 94
6.63% 12/01/04 250 258,438
Ohio St. Nat. Res. Cap. Fac. G.O., Ser. 94A
5.40% 10/01/05 1,000 1,035,000
Ohio St. Pub. Fac. Comm. Hghr. Ed. Fac.
Rev., Ser. 89B
6.50% 12/01/99 1,000 1,024,170
Ohio St. Pub. Fac. Comm. Hghr. Ed. Fac.
Rev., Ser. 92A
5.50% 12/01/03 2,000 2,085,000
Ohio St. Tpke. Rev., Ser. 96
6.00% 02/15/05 4,400 4,686,000
Ohio St. Wtr. Dev. Auth. Poll. Ctrl. Fac. Rev.,
Republic Steel Prj., Ser. 95
6.38% 06/01/07 3,310 3,421,713
Ohio St. Wtr. Dev. Auth. Rev., Pure Wtr.
Prj., Ser. 92
5.75% 06/01/04 1,500 1,580,625
Ohio St. Wtr. Dev. Auth. Rev., Steel-Cargill
North Star Broken Hill Prj., Ser. 95
6.30% 09/01/20 500 516,250
Ohio St. Wtr. Dev. Poll. Ctrl. Fac. Rev., Wtr.
Ctrl. State Match Prj., Ser. 95
5.70% 06/01/11 1,300 1,356,875
Olentangy Sch. Dist. G.O., Ser. 95A
6.00% 12/01/08 225 243,844
Scioto Cnty. Rev., Marine Term. Norfolk
Southern Corp. Prj., Ser. 98
5.30%** 08/01/13 3,000 2,835,000
Summit Cnty. Hosp. Rev., Cuyahoga Falls
Gen. Hosp. Prj., Ser. 94
6.65% 07/01/14 200 205,500
Toledo G.O., Ser. 96
6.00% 12/01/06 500 538,750
Univ. of Cincinnati Gen. Rec. Rev., Ser. 91L
6.90% 06/01/07 1,500 1,578,750
Univ. of Toledo Gen. Rec. Rev., Ser. 92A
5.90%(DOUBLE DAGGER) 06/01/20 425 430,844
Westerville City Sch. Dist. G.O., Ser. 87
6.25% 12/01/05 1,000 1,081,250
Westlake G.O., Ser. 96
6.40% 12/01/08 1,560 1,719,900
Worthington City Sch. Dist. Unltd. Tax G.O.,
Ser. 89
7.10% 12/01/99 1,000 1,005,250
------------
86,667,059
------------
Par
Maturity (000) Value
-------- ------- ------------
MUNICIPAL BONDS (CONTINUED)
PUERTO RICO -- 14.0%
Puerto Rico Cmwlth. Hwy. & Trans. Auth.
Rites, Ser. 98
6.90%** 07/01/18 $ 5,000 $ 3,981,250
Puerto Rico Pub. Bldgs. Auth. Gtd. Govt.
Fac. Rev., Ser. 97B
5.00% 07/01/27 12,000 10,728,120
------------
14,709,370
------------
TOTAL MUNICIPAL BONDS
(Cost $99,669,118) 101,376,429
------------
Shares
-------
CUMULATIVE PREFERRED STOCK -- 3.8%
Charter Mac Equity Issue Trust 144A
6.625% 20,000 1,997,640
MuniMae TE Bond Subs., LLC 144A
6.875% 20,000 2,020,620
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $4,000,000) 4,018,260
------------
TOTAL INVESTMENTS
IN SECURITIES -- 100.0%
(Cost $103,669,118*) $105,394,689
============
- ---------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $3,113,167
Gross unrealized depreciation (1,387,596)
----------
$1,725,571
==========
** Rates shown are the rates as of September 30, 1999.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of $600,000
on 264 long U.S. Treasury Note future contracts and 174 short U.S. Treasury
Bond future contracts expiring December 1999. The value of such contracts on
September 30, 1999 was $49,467,375, thereby resulting in an unrealized loss
of $66,813.
See accompanying notes to financial statements.
31
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
OHIO TAX-FREE INCOME PORTFOLIO
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investments at value (Cost $103,669,118) .................................................................... $105,394,689
Cash ........................................................................................................ 7,581
Interest receivable ......................................................................................... 1,904,370
Investments sold receivable ................................................................................. 6,660,927
Capital shares sold receivable .............................................................................. 27
Prepaid expenses ............................................................................................ 12,283
Futures margin receivable ................................................................................... 2,771
------------
TOTAL ASSETS ......................................................................................... 113,982,648
------------
LIABILITIES
Investments purchased payable ............................................................................... 16,108,827
Capital shares redeemed payable ............................................................................. 52,090
Distributions payable ....................................................................................... 397,515
Advisory fees payable ....................................................................................... 37,080
Administrative fees payable ................................................................................. 9,986
Transfer agent fees payable ................................................................................. 10,438
Other accrued expenses payable .............................................................................. 3,616
------------
TOTAL LIABILITIES .................................................................................... 16,619,552
------------
NET ASSETS (Applicable to 9,075,695 Institutional shares, 24,905 Service shares, 297,990
Investor A shares, 139,979 Investor B shares and 18,847 Investor C shares outstanding) ...................... $ 97,363,096
============
NET ASSET VALUE AND REDEMPTION PRICE PER INSTITUTIONAL,
SERVICE AND INVESTOR A SHARE ($95,745,097 (DIVIDE) 9,398,590) ............................................... $10.19
======
OFFERING PRICE PER INSTITUTIONAL AND SERVICE SHARE ............................................................. $10.19
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($10.19 (DIVIDE) 0.960) ..................................................................................... $10.61
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($1,426,007 (DIVIDE) 139,979) .......................................................... $10.19
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingentb deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($191,992 (DIVIDE) 18,847) ............................................................. $10.19
======
</TABLE>
See accompanying notes to financial statements.
32
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
DELAWARE TAX-FREE INCOME PORTFOLIO
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
-------- ------ ------------
MUNICIPAL BONDS -- 95.7%
DELAWARE -- 77.5%
Delaware River & Bay Auth. Rev.,
Ser. 93
4.60% 01/01/05 $2,000 $ 1,982,500
Delaware River & Bay Auth. Rev.,
Ser. 96
6.00% 01/01/05 1,460 1,554,900
6.00% 01/01/06 1,160 1,238,300
Delaware St. Econ. Dev. Auth. Poll. Ctrl.
Rev., Delmarva Pwr. Prj., Ser. 91B
7.15% 07/01/18 500 527,500
Delaware St. Econ. Dev. Auth. Rev.,
First Mtg. Gilpin ACA CBI Prj.,
Ser. 98
5.63% 07/01/19 2,000 1,895,000
5.63% 07/01/25 1,500 1,408,125
Delaware St. Econ. Dev. Auth. Rev.,
United Wtr. Delaware, Inc. Prj.,
Ser. 95
6.20% 06/01/25 2,000 2,112,500
Delaware St. Econ. Dev. Auth. Rev.,
Wtr. Dev. Prj., Ser. 92B
6.45% 12/01/07 1,165 1,266,937
Delaware St. G.O., Ser. 90
6.85% 05/01/00 500 508,560
Delaware St. G.O., Ser. 91A
6.30% 08/15/05 1,730 1,822,987
Delaware St. G.O., Ser. 92A
6.25% 03/01/02 1,400 1,485,750
Delaware St. G.O., Ser. 97B
5.00% 05/01/15 1,000 948,750
Delaware St. Hlth. Fac. Auth. Rev.,
Christiana Care Hlth. Svcs. Prj.,
Ser. 98
5.00% 10/01/15 5,000 4,687,500
Delaware St. Hlth. Fac. Auth. Rev.,
Med. Ctr. of Delaware Prj., Ser. 92
6.25% 10/01/04 2,185 2,354,337
6.25% 10/01/05 2,175 2,357,156
6.25% 10/01/06 4,000 4,360,000
Delaware St. Hsg. Auth. Rev.,
Multi-Family Mtg. Prj., Ser. 91
7.15% 07/01/14 3,000 3,150,000
Delaware St. Hsg. Auth. Rev.,
Multi-Family Mtg. Prj., Ser. 92C
7.38% 01/01/15 2,000 2,115,000
Delaware St. Realty Transfer Tax Rev.,
Land & Wtr. Consv. Trust Fund Prj.,
Ser. 93
5.50% 04/01/02 1,500 1,543,125
5.75% 04/01/03 1,500 1,565,625
Delaware St. Solid Waste Auth.
Solid Waste Sys. Rev., Ser. 90A
6.75% 07/01/00 500 510,165
Delaware St. Solid Waste Auth.
Solid Waste Sys. Rev., Ser. 92
5.80% 07/01/01 1,500 1,539,375
6.00% 07/01/02 2,000 2,070,000
Delaware Trans. Auth. Trans. Sys.
Rev., Ser. 90
7.10% 07/01/01 2,335 2,428,307
Delaware Trans. Auth. Trans. Sys.
Rev., Ser. 91
6.00% 07/01/01 3,000 3,093,750
6.35% 07/01/01 500 527,500
Par
Maturity (000) Value
-------- ------ ------------
MUNICIPAL BONDS (CONTINUED)
DELAWARE (CONTINUED)
Delaware Trans. Auth. Trans. Sys.
Rev., Ser. 92
5.40% 07/01/03 $1,000 $ 1,030,000
5.63% 07/01/05 2,400 2,493,000
Delaware Trans. Auth. Trans. Sys.
Rev., Ser. 93
5.10%(DOUBLE DAGGER) 07/01/04 1,500 1,528,125
5.50% 07/01/08 1,000 1,022,500
Delaware Trans. Auth. Trans. Sys.
Rev., Ser. 94
6.10% 07/01/07 1,000 1,068,750
Dover Elec. Rev., Ser. 90
7.00% 07/01/00 500 511,250
7.00% 07/01/01 500 519,810
Dover Elec. Rev., Ser. 93
6.00% 07/01/07 500 525,625
New Castle Cnty. G.O., Ser. 91
6.20% 10/15/00 500 511,975
6.25% 10/15/01 3,000 3,123,750
6.30% 10/15/02 1,000 1,057,500
6.50% 10/15/04 1,000 1,058,750
6.50% 10/15/05 1,000 1,058,750
New Castle Cnty. G.O., Ser. 98
5.00% 10/01/18 3,150 2,886,188
Sussex Cnty. G.O., Ser. 93
5.60% 10/15/08 3,000 3,097,500
5.70% 10/15/12 2,000 2,052,500
Univ. of Delaware Hsg. & Dining
Sys. Rev., Ser. 89
7.00% 11/01/00 2,000 2,044,260
Wilmington G.O., Ser. 92A
6.20% 01/01/02 1,000 1,030,000
6.00% 07/01/03 500 517,500
Wilmington G.O., Ser. 92B
6.25% 04/01/02 3,050 3,244,438
Wilmington G.O., Ser. 96A
6.00% 10/01/03 3,525 3,736,500
5.50% 10/01/16 1,500 1,481,250
Wilmington Pk. Auth. Gtd. Pk. Rev.,
Ser. 92A
5.60% 09/15/02 500 518,750
5.80% 09/15/04 1,000 1,055,000
6.00% 09/15/06 500 527,500
------------
86,754,820
------------
PUERTO RICO -- 14.3%
Puerto Rico Cmwlth. G.O., Ser. 97
5.38% 07/01/21 2,500 2,443,750
Puerto Rico Cmwlth. Hwy. & Trans.
Auth. Hwy. Rev., Ser. 93W
5.50% 07/01/15 1,000 1,016,250
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 98EE
5.25% 07/01/16 1,800 1,766,250
Puerto Rico Pub. Bldg. Auth. Gtd.
Govt. Fac. Rev., Ser. 95A
6.25% 07/01/10 1,000 1,111,250
Puerto Rico Pub. Fin. Corp. Cmwlth.
Approp. Rev., Ser. 98A
5.38% 06/01/14 50 50,625
Puerto Rico Pub. Fin. Corp. Rites, Ser. 98
7.68%** 06/01/12 5,000 5,400,000
Puerto Rico Pub. Fin. Corp. Rites, Ser. 99
5.08%** 06/01/14 4,025 4,155,813
------------
15,943,938
------------
33
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
DELAWARE TAX-FREE INCOME PORTFOLIO (CONCLUDED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
-------- ------ ------------
MUNICIPAL BONDS (CONTINUED)
VIRGIN ISLANDS -- 3.9%
Virgin Islands Pub. Fin. Auth. Rev.,
Ser. 98
5.50% 10/01/18 $4,500 $ 4,325,625
------------
TOTAL MUNICIPAL BONDS
(Cost $106,305,165) 107,024,383
------------
Shares
-------
CUMULATIVE PREFERRED STOCK -- 3.6%
Charter Mac Equity Issue Trust 144A
6.625% 20,000 1,997,640
MuniMae TE Bond Subs., LLC 144A
6.875% 20,000 2,020,620
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $4,000,000) 4,018,260
------------
SHORT TERM INVESTMENTS -- 0.7%
Smith Barney Tax-Free Money
Market Fund
(Cost $761,360) 761,360 761,360
------------
TOTAL INVESTMENTS
IN SECURITIES -- 100.0%
(Cost $111,066,526*) $111,804,003
============
- ---------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $2,294,944
Gross unrealized depreciation ( 1,557,467)
----------
$ 737,477
==========
** Rates shown are the rates as of September 30, 1999.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of $500,000
on 229 long U.S. Treasury Bond future contracts and 180 short U.S. Treasury
Bond future contracts expiring December 1999. The value of such contracts on
September 30, 1999 was $46,221,156, thereby resulting in an unrealized loss
of $53,188.
See accompanying notes to financial statements.
34
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
DELAWARE TAX-FREE INCOME PORTFOLIO
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investments at value (Cost $111,066,526) .................................................................... $111,804,003
Interest receivable ......................................................................................... 2,198,407
Investments sold receivable ................................................................................. 4,925,350
Capital shares sold receivable .............................................................................. 11,535
Other assets ................................................................................................ 14,317
------------
TOTAL ASSETS ......................................................................................... 118,953,612
------------
LIABILITIES
Investments purchased payable ............................................................................... 5,226,400
Capital shares redeemed payable ............................................................................. 31,824
Distributions payable ....................................................................................... 450,865
Advisory fees payable ....................................................................................... 17,411
Administrative fees payable ................................................................................. 9,188
Transfer agent fees payable ................................................................................. 8,522
Futures margin payable ...................................................................................... 20,694
------------
TOTAL LIABILITIES .................................................................................... 5,764,904
------------
NET ASSETS (Applicable to 10,877,723 Institutional shares, 10 Service shares, 464,223
Investor A shares, 327,226 Investor B shares and 92,349 Investor C shares outstanding) ...................... $113,188,708
============
NET ASSET VALUE AND REDEMPTION PRICE PER INSTITUTIONAL,
SERVICE AND INVESTOR A SHARE ($109,150,730 (DIVIDE) 11,341,956) ............................................. $ 9.62
======
OFFERING PRICE PER INSTITUTIONAL AND SERVICE SHARE ............................................................. $ 9.62
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($9.62 (DIVIDE) 0.960) ...................................................................................... $10.02
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($3,149,211 (DIVIDE) 327,226) .......................................................... $ 9.62
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($888,767 (DIVIDE) 92,349) ............................................................. $ 9.62
======
</TABLE>
See accompanying notes to financial statements.
35
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
KENTUCKY TAX-FREE INCOME PORTFOLIO
Par
AS OS SEPTEMBER 30, 1999 Maturity (000) Value
-------- ------ ------------
MUNICIPAL BONDS -- 95.2%
KENTUCKY -- 88.8%
Ashland Env. Imp. Rev., Allied Chemical
Corp. Prj., Ser. 78
5.80% 03/01/03 $ 295 $ 300,900
Boone Cnty. Sch. Dist. Fin. Corp. Sch.
Bldg. Rev., Ser. 91C
6.40% 09/01/01 440 457,600
6.50% 09/01/01 490 524,300
6.60% 09/01/01 550 589,187
Campbell & Kenton Cnty. Rev., Sanit.
Dist. #1 Prj., Ser. 98A
5.00% 08/01/18 4,210 3,789,000
Christian Cnty. Hosp. Rev., Jennie
Stuart Med. Ctr. Prj., Ser. 96A
6.00% 07/01/17 1,000 1,008,750
Christian Cnty. Hosp. Rev., Jennie
Stuart Med. Ctr. Prj., Ser. 97A
5.25% 07/01/03 1,000 1,008,750
Danville Multi-City Lease Rev.,
Owensboro Riverpark Prj., Ser. 93B
5.45% 01/03/00 1,800 1,833,750
5.55% 01/03/00 1,000 1,006,250
Grayson Cnty. Sch. Dist. Fin. Corp. Sch.
Bldg. Rev., Ser. 95B
5.95% 01/01/08 1,290 1,360,950
Harlan Cnty. Sch. Dist. Fin. Corp. Sch.
Bldg. Rev., Ser. 90
7.25% 12/01/02 160 167,738
Henderson Elec. Light. & Pwr. Rev.,
Ser. 73
5.70% 03/01/03 1,885 1,889,712
Jefferson Cnty. Corp. Rev., Cap. Imp. Prj.,
Ser. 93A
5.75% 08/15/04 1,275 1,340,344
5.90% 08/15/05 1,000 1,053,750
6.10% 08/15/07 2,500 2,643,750
Jefferson Cnty. Corp. Rev., Cap. Imp. Prj.,
Ser. 97
5.25% 06/01/15 2,145 2,083,331
5.38% 06/01/22 3,000 2,883,750
Jefferson Cnty. Hlth. Fac. Rev., Alliant Hlth.
Sys., Inc. Prj., Ser. 97
5.13% 10/01/17 3,000 2,793,750
Jefferson Cnty. Hlth. Fac. Rev., Jewish
Hosp. Hlth. Svcs., Inc. Prj., Ser. 96
5.65% 01/01/17 3,000 2,996,250
Jefferson Cnty. Multi-Family Hsg. Rev.,
Taylorsville Rd. Prj., Ser. 93A
5.75% 06/01/23 3,860 3,961,325
Jefferson Cnty. Multi-Family Hsg. Rev.,
Whipps Mill Prj., Ser. 93A
5.88%** 06/01/23 2,250 2,297,812
Jefferson Cnty. Sch. Dist. Fin. Corp. Sch.
Bldg. Rev., Ser. 92B
6.00% 01/01/03 2,005 2,097,731
6.20% 01/01/06 2,000 2,112,500
6.20% 01/01/07 2,750 2,897,812
Jefferson Cnty. Sch. Dist. Fin. Corp. Sch.
Bldg. Rev., Ser. 99A
5.25% 01/01/1 92,500 2,362,500
Kenton Cnty. Arpt. Rev., Cincinnati
Northern Kentucky Prj., Ser. 97A
5.75% 03/01/05 1,490 1,557,050
5.85% 03/01/06 1,655 1,739,819
5.95% 03/01/07 1,730 1,831,637
6.30% 03/01/15 1,000 1,053,750
Par
Maturity (000) Value
-------- ------ ------------
MUNICIPAL BONDS (CONTINUED)
KENTUCKY (CONTINUED)
Kenton Cnty. Sch. Dist. Fin. Corp. Sch.
Bldg. Rev., Ser. 97
5.30% 03/01/13 $1,500 $ 1,473,750
5.38% 03/01/17 2,800 2,688,000
Kenton Cnty. Wtr. Dist. Wtrwks. Rev.,
Ser. 92
6.38% 02/01/17 1,000 1,056,250
Kentucky Dev. Fin. Auth. Hosp. Rev.,
St. Lukes Hosp. Prj., Ser. 89A
7.20% 10/01/99 900 900,000
7.25% 10/01/99 540 555,628
Kentucky Hgr. Ed. Stud. Ln. Ins. Rev.,
Ser. 85A
9.25% 06/01/01 1,785 1,860,862
Kentucky Hgr. Ed. Stud. Ln. Ins. Rev.,
Ser. 91C
6.25% 06/01/00 1,075 1,090,286
Kentucky Hgr. Ed. Stud. Ln. Ins. Rev.,
Ser. 94C
5.15% 06/01/02 1,130 1,138,475
Kentucky Hgr. Ed. Stud. Ln. Ins. Rev.,
Ser. 95B
6.60% 06/01/02 3,435 3,538,050
Kentucky Hsg. Corp. Hsg. Rev., Ser. 89A
6.85% 01/01/00 90 90,517
Kentucky Hsg. Corp. Hsg. Rev., Ser. 90A
7.40% 01/01/10 735 755,007
Kentucky Hsg. Corp. Hsg. Rev., Ser. 96D
5.80% 07/01/13 3,350 3,366,750
Kentucky Hsg. Corp. Hsg. Rev., Ser. 97F
5.70% 01/01/28 2,100 2,026,500
Kentucky Infra. Auth. Rev., Ser. 97L
5.50% 06/01/08 2,500 2,571,875
Kentucky St. Property & Bldg. Comm.
Econ. Dev. Rev., Prj. 30-Fifth, Ser. 88
7.40% 06/01/00 270 275,400
Kentucky St. Property & Bldg. Comm.
Rev., Prj. 53, Prerefunded Ser. 91
5.75% 10/01/11 4,090 4,280,387
Kentucky St. Property & Bldg. Comm.
Rev., Prj. 31-Fourth, Ref. Ser. 88
7.40% 06/01/00 375 381,750
Kentucky St. Property & Bldg. Comm.
Rev., Prj. 50, Ref. Ser. 91
6.60% 02/01/00 500 504,355
Kentucky St. Property & Bldg. Comm.
Rev., Prj. 51, Ref. Ser. 91
6.50% 08/01/01 740 784,400
Kentucky St. Property & Bldg. Comm.
Rev., Prj. 54, Ref. Ser. 92
5.90% 09/01/07 2,750 2,877,188
Kentucky St. Property & Bldg. Comm.
Rev., Prj. 55, Ref. Ser. 93
4.60%(DOUBLE DAGGER) 09/01/03 3,000 3,011,250
4.90% 09/01/06 2,000 2,002,500
Kentucky St. Property & Bldg. Comm.
Rev., Prj. 59, Ref. Ser. 95
6.00% 11/01/05 2,110 2,247,150
Kentucky St. Property & Bldg. Comm.
Rev., Prj. 53, Unrefunded Ser. 91
5.75% 10/01/11 410 425,888
See accompanying notes to financial statements.
36
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
KENTUCKY TAX-FREE INCOME PORTFOLIO (CONTINUED)
Par
AS OF SEPTEMBER 30, 1999 Maturity (000) Value
-------- ------ ------------
MUNICIPAL BONDS (CONTINUED)
KENTUCKY (CONTINUED)
Kentucky St. Tpke. Auth. Econ. Dev. Rev.,
Revitalization Prj., Ref. Ser. 90
7.13% 05/15/00 $1,400 $ 1,449,000
Kentucky St. Tpke. Auth. Econ. Dev. Rev.,
Revitalization Prj., Ref. Ser. 92
5.50% 01/01/01 2,040 2,068,050
5.70% 01/01/03 3,000 3,105,000
Kentucky St. Tpke. Auth. Econ. Dev. Rev.,
Revitalization Prj., Ref. Ser. 95
6.50% 07/01/08 3,000 3,337,500
Kentucky St. Tpke. Auth. Res. Rec. Rev.,
Ser. 79
7.10% 07/01/02 485 503,188
Lexington Ctr. Corp. Mtg. Rev., Ser. 93A
5.20% 10/01/04 1,790 1,830,275
Lexington-Fayette Urban Cnty. Govt.
Kentucky Sch. Bldg. Rev., Ser. 89
7.00% 12/01/99 500 517,440
Lexington-Fayette Urban Cnty. Govt. Pub.
Fac. Corp. Mtg. Rev., Ref. Ser. 93
4.50% 02/01/06 2,100 2,071,125
Lexington-Fayette Urban Cnty. Govt. Rev.,
Univ. of Kentucky Alumni Assoc., Inc. Prj.,
Ser. 94
6.50% 11/01/06 660 729,300
Louisville & Jefferson Cnty. Auth. Rev.,
Ser. 98A
5.00% 07/01/18 1,000 890,000
Louisville & Jefferson Cnty. Regl. Arpt.
Auth. Spec. Fac. Rev., Ser. 99
5.50% 03/01/19 4,285 3,995,763
Louisville & Jefferson Cnty. Met. Swr. &
Drain Sys. Rev., Ser. 98
4.75% 05/15/28 1,000 838,750
Louisville & Jefferson Cnty. Met. Swr.
Dist. Rev., Ser. 93
5.30% 05/15/10 2,000 2,022,500
Louisville & Jefferson Cnty. Regl. Arpt.
Auth. Arpt. Sys. Rev., Ser. 97A
5.75% 07/01/01 1,000 1,023,750
5.75% 07/01/03 1,070 1,111,463
Louisville & Jefferson Cnty. Swr. and
Drain Sys. Rev., Ser. 98A
5.00% 05/15/22 7,000 6,247,500
Louisville Ind. Bldg. Rev., Enterprise
Zone Dist. Prj., Ser. 88
5.75% 04/01/00 1,405 1,419,022
Louisville Pk. Auth. Rev., River City
First Mtg. Prj., Ser. 91
6.50% 06/01/01 265 282,225
Louisville Pub. Properties Corp. Rev.,
Ser. 98
5.00% 12/01/22 3,210 2,856,900
McCracken Cnty. Hosp. Rev., Mercy
Hlth. Sys. Prj., Ser. 94A
6.10% 11/01/04 400 422,000
Muhlenberg Cnty. Ind. Dev. Rev., Harsco
Corp. Prj., Ser. 87
7.00% 03/01/00 1,000 1,040,000
Par
Maturity (000) Value
-------- ------ ------------
MUNICIPAL BONDS (CONTINUED)
KENTUCKY (CONTINUED)
Owensboro Elec. Light & Pwr. Rev.,
Ser. 93B
5.05% 01/01/07 $3,000 $ 3,026,250
Somerset Ind. Bldg. Rev., CR/PL, Inc. Prj.,
Ser. 84
7.50% 10/01/10 2,800 2,957,500
Univ. of Kentucky Rev., Cons. Edl.
Bldg. Prj., Ser. 92N
6.00% 05/01/08 1,680 1,761,900
6.00% 05/01/10 1,000 1,047,500
Univ. of Kentucky Rev., Cons. Edl.
Bldg. Prj., Ser. 94
4.60% 05/01/07 2,540 2,498,725
Univ. of Kentucky Rev., Ref. Ser. 93A
5.30% 08/01/03 1,765 1,815,744
5.40% 08/01/04 750 776,250
Univ. of Louisville Rev., Cons. Edl. Bldg.
Prj., Ser. 92H
5.88% 05/01/11 1,150 1,190,250
Univ. of Louisville Rev., Cons. Edl. Bldg.
Prj., Ser. 93I
5.10% 05/01/02 1,545 1,570,106
Univ. of Louisville Rev., Cons. Edl. Bldg.
Prj., Ser. 93J
5.00% 05/01/06 2,370 2,381,850
Western Kentucky Univ. Rev., Hsg. &
Dining Sys. Prj., Ser. 90L
7.10% 12/01/00 350 360,063
Winchester Util. Rev., Ser. 93
5.45% 07/01/10 1,500 1,518,750
------------
150,211,605
------------
PUERTO RICO -- 5.5%
Puerto Rico Cmwlth. Infra Fin. Auth.
Spec. Rites-PA 569, Ser. 99
5.20%** 07/01/12 1,335 1,264,712
Puerto Rico Cmwlth. G.O., Ser. 97
5.38% 07/01/21 4,250 4,154,375
Puerto Rico Cmwlth. Infra. Fin. Auth.
Rev., Ser. 97A
5.00% 07/01/21 2,000 1,830,000
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 92R
5.90% 07/01/01 1,000 1,026,250
Puerto Rico Infra. Fin. Auth. Rev.,
Ser. 97A
5.00% 07/01/11 1,000 1,003,750
------------
9,279,087
------------
VIRGIN ISLANDS -- 0.9%
Virgin Islands Wtr. & Pwr. Auth. Elec.
Sys. Rev., Ref. Ser. 98
5.30% 07/01/18 1,685 1,560,731
------------
TOTAL MUNICIPAL BONDS
(Cost $159,007,519) 161,051,423
------------
See accompanying notes to financial statements.
37
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
KENTUCKY TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF SEPTEMBER 30, 1999 Shares Value
------- ------------
CUMULATIVE PREFERRED STOCK -- 4.8%
Charter Mac Equity Issue Trust 144A
6.625% 40,000 $ 3,995,280
Munimae TE Bond Subs., LLC 144A
6.875% 40,000 4,041,240
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $8,000,000) 8,036,520
------------
TOTAL INVESTMENTS
IN SECURITIES -- 100.0%
(Cost $167,007,519*) $169,087,943
============
- ---------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $4,274,408
Gross unrealized depreciation (2,193,984)
-----------
$2,080,424
===========
** Rates shown are the rates as of September 30, 1999.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$1,000,000 on 291 long U.S. Treasury Bond future contracts and 230 short
U.S. Treasury Bond future contracts expiring December 1999. The value of
such contracts on September 30, 1999 was $58,879,469, thereby resulting in
an unrealized loss of $90,531.
INVESTMENT ABBREVIATIONS
AMT Alternative Minimum Tax
COP Certificates of Participation
G.O. General Obligations
See accompanying notes to financial statements.
38
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
KENTUCKY TAX-FREE INCOME PORTFOLIO
SEPTEMBER 30, 1999
<TABLE>
<S> <C>
ASSETS
Investments at value (Cost $167,007,519) .................................................................... $169,087,943
Interest receivable ......................................................................................... 2,441,829
Investments sold receivable ................................................................................. 6,982,915
Futures commissions ......................................................................................... 4,689
------------
TOTAL ASSETS ......................................................................................... 178,517,376
------------
LIABILITIES
Investments purchased payable ............................................................................... 7,254,792
Capital shares redeemed payable ............................................................................. 33,000
Distributions payable ....................................................................................... 684,424
Advisory fees payable ....................................................................................... 45,776
Administrative fees payable ................................................................................. 19,892
Transfer agent fees payable ................................................................................. 9,757
Other accrued expenses payable .............................................................................. 8,245
Futures margin payable ...................................................................................... 32,281
------------
TOTAL LIABILITIES .................................................................................... 8,088,167
------------
NET ASSETS (Applicable to 17,431,864 Institutional shares, 10 Service shares, 192,848
Investor A shares, 21,081 Investor B shares and 59,271 Investor C shares outstanding) ....................... $170,429,209
============
NET ASSET VALUE AND REDEMPTION PRICE PER INSTITUTIONAL,
SERVICE AND INVESTOR A SHARE ($169,655,743 (DIVIDE) 17,624,722) ............................................. $ 9.63
======
OFFERING PRICE PER INSTITUTIONAL AND SERVICE SHARE ............................................................. $ 9.63
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($9.63 (DIVIDE) 0.960) ...................................................................................... $10.03
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($202,924 (DIVIDE) 21,081) ............................................................. $ 9.63
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($570,542 (DIVIDE) 59,271) ............................................................. $ 9.63
======
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
BLACKROCK FUNDS
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Pennsylvania New Jersey Ohio Delaware Kentucky
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Income Income Income Income Income
FOR THE YEAR ENDED SEPTEMBER 30, 1999 Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest ....................... $ 16,733,515 $59,188,287 $ 9,088,989 $ 5,547,367 $ 5,962,775 $ 9,709,773
Dividends ......................... 51,944 25,972 25,972 12,986 12,986 25,972
------------ ------------ ------------ ----------- ----------- ------------
Total investment income ... 16,785,459 59,214,259 9,114,961 5,560,353 5,975,761 9,735,745
------------ ------------ ------------ ----------- ----------- ------------
Expenses:
Investment advisory fee ........ 1,621,768 5,563,430 878,750 518,985 646,709 1,018,462
Administration fee ............. 746,013 2,437,898 404,225 238,366 270,436 425,759
Custodian fee .................. 61,345 152,976 32,926 25,396 22,575 33,946
Transfer agent fee ............. 106,416 382,034 63,602 37,333 42,223 57,436
Shareholders servicing
fees ......................... 41,892 180,570 54,411 12,460 19,321 4,731
Shareholders processing
fees ......................... 28,933 119,610 51,181 7,722 11,593 2,842
Distribution fees .............. 41,985 171,470 9,552 13,066 27,987 2,580
Legal and audit ................ 19,168 62,743 11,848 6,367 15,534 15,752
Printing ....................... 27,330 121,040 20,555 7,219 8,702 41,925
Registration fees and
expenses ..................... 41,304 14,721 7,276 9,748 7,175 11,041
Trustees' fees and officers'
salary ....................... 5,078 17,782 7,119 2,144 1,962 4,229
Other .......................... 33,588 110,650 5,729 3,541 3,757 24,602
------------ ------------ ------------ ----------- ----------- ------------
2,774,820 9,334,924 1,547,174 882,347 1,077,974 1,643,305
Less fees waived (706,830) (2,081,887) (375,262) (222,905) (190,588) (334,842)
------------ ------------ ------------ ----------- ----------- ------------
Total operating
expenses ................ 2,067,990 7,253,037 1,171,912 659,442 887,386 1,308,463
------------ ------------ ------------ ----------- ----------- ------------
Net investment income ............. 14,717,469 51,961,222 7,943,049 4,900,911 5,088,375 8,427,282
------------ ------------ ------------ ----------- ----------- ------------
Realized and unrealized gain (loss)
on investments:
Net realized gain (loss) from:
Investment transactions ...... (2,944,753) (5,710,076) (168,998) (192,625) (669,451) (444,011)
Futures and options
contracts ................. 724,250 1,661,191 (148,773) (335,112) (91,961) (224,424)
------------ ------------ ------------ ----------- ----------- ------------
(2,220,503) (4,048,885) (317,771) (527,737) (761,412) (668,435)
------------ ------------ ------------ ----------- ----------- ------------
Change in unrealized appreciation
(depreciation) from:
Investments .................. (18,435,091) (57,612,646) (10,009,966) (5,738,797) (5,636,529) (9,867,661)
Futures ...................... 15,364 146,408 9,200 (38,096) (32) (82,068)
------------ ------------ ------------ ----------- ----------- ------------
(18,419,727) (57,466,238) (10,000,766) (5,776,893) (5,636,561) (9,949,729)
------------ ------------ ------------ ----------- ----------- ------------
Net loss on investments ........... (20,640,230) (61,515,123) (10,318,537) (6,304,630) (6,397,973) (10,618,164)
------------ ------------ ------------ ----------- ----------- ------------
Net decrease in net assets
resulting from operations ...... $ (5,922,761) $ (9,553,901) $ (2,375,488) $(1,403,719) $(1,309,598) $ (2,190,882)
============ ============ ============ =========== =========== ============
</TABLE>
See accompanying notes to financial statements.
40
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
BLACKROCK FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Tax-Free Pennsylvania Tax-Free
Income Portfolio Income Portfolio
---------------------------- --------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
9/30/99 9/30/98 9/30/99 9/30/98
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................... $ 14,717,469 $ 7,337,197 $ 51,961,222 $ 22,883,610
Net realized gain (loss) on investment,
futures and options transactions .............. (2,220,503) 1,371,530 (4,048,885) 3,711,376
Net unrealized gain (loss) on investment
and futures transactions ...................... (18,419,727) 7,321,442 (57,466,238) 25,404,943
------------ ------------ -------------- --------------
Net increase (decrease) in net assets
resulting from operations ..................... (5,922,761) 16,030,169 (9,553,901) 51,999,929
------------ ------------ -------------- -------------
Distributions to shareholders from:
Net investment income:
Institutional Class ............................. (13,919,295) (4,403,844) (49,406,294) (18,470,332)
Service Class ................................... (269,328) (2,561,816) (828,260) (2,557,439)
Investor A Class ................................ (301,111) (253,639) (1,635,310) (1,412,477)
Investor B Class ................................ (102,808) (53,271) (904,150) (550,801)
Investor C Class ................................ (84,518) (5,054) (28,216) (440)
------------ ------------ -------------- --------------
Total distributions from net investment income .. (14,677,060) (7,277,624) (52,802,230) (22,991,489)
------------ ------------ -------------- --------------
Net realized gains:
Institutional Class ............................. (1,513,860) (42,951) (2,813,786) --
Service Class ................................... (29,710) (264,642) (53,925) --
Investor A Class ................................ (41,111) (24,838) (94,884) --
Investor B Class ................................ (12,418) (4,938) (51,775) --
Investor C Class ................................ (8,813) (1) (1,119) --
------------ ------------ -------------- --------------
Total distributions from net realized gains ..... (1,605,912) (337,370) (3,015,489) --
------------ ------------ -------------- -------------
Total distributions to shareholders ............. (16,282,972) (7,614,994) (55,817,719) (22,991,489)
------------ ------------ -------------- -------------
Capital share transactions .......................... 42,322,574 217,780,281 7,792,148 997,436,145
------------ ------------ -------------- -------------
Total increase (decrease) in net assets ......... 20,116,841 226,195,456 (57,579,472) 1,026,444,585
------------ ------------ -------------- -------------
Net assets:
Beginning of period ............................. 300,849,196 74,653,740 1,127,235,565 100,790,980
------------ ------------ -------------- -------------
End of period ................................... $320,966,037 $300,849,196 $1,069,656,093 $1,127,235,565
============ ============ ============== ==============
</TABLE>
<TABLE>
<CAPTION>
New Jersey Tax-Free Ohio Tax-Free
Income Portfolio Income Portfolio
---------------------------- ----------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
9/30/99 9/30/98 9/30/99 9/30/98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................... $ 7,943,049 $ 5,479,322 $ 4,900,911 $ 2,221,550
Net realized gain (loss) on investment,
futures and options transactions .............. (317,771) 1,458,455 (527,737) 700,041
Net unrealized gain (loss) on investment
and futures transactions ...................... (10,000,766) 4,429,882 (5,776,893) 2,694,414
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ..................... (2,375,488) 11,367,659 (1,403,719) 5,616,005
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income:
Institutional Class ............................. (6,647,926) (1,777,115) (4,683,783) (1,752,198)
Service Class ................................... (1,353,188) (3,661,512) (18,094) (338,008)
Investor A Class ................................ (82,916) (55,807) (128,385) (110,681)
Investor B Class ................................ (43,732) (30,377) (48,033) (28,760)
Investor C Class ................................ (543) -- (13,163) (1,554)
------------ ------------ ------------ ------------
Total distributions from net investment income .. (8,128,305) (5,524,811) (4,891,458) (2,231,201)
------------ ------------ ------------ ------------
Net realized gains:
Institutional Class ............................. (765,260) -- (405,483) --
Service Class ................................... (183,068) -- (2,601) --
Investor A Class ................................ (7,806) -- (11,809) --
Investor B Class ................................ (5,556) -- (4,713) --
Investor C Class ................................ -- -- (2,127) --
------------ ------------ ------------ ------------
Total distributions from net realized gains ..... (961,690) -- (426,733) --
------------ ------------ ------------ ------------
Total distributions to shareholders ............. (9,089,995) (5,524,811) (5,318,191) (2,231,201)
------------ ------------ ------------ ------------
Capital share transactions .......................... (10,069,641) 90,239,477 (2,110,008) 91,225,062
------------ ------------ ------------ ------------
Total increase (decrease) in net assets ......... (21,535,124) 96,082,325 (8,831,918) 94,609,866
------------ ------------ ------------ ------------
Net assets:
Beginning of period ............................. 182,993,794 86,911,469 106,195,014 11,585,148
------------ ------------ ------------ ------------
End of period ................................... $161,458,670 $182,993,794 $ 97,363,096 $106,195,014
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Delaware Tax-Free Kentucky Tax-Free
Income Portfolio Income Portfolio
---------------------------- ----------------------------
For the For the
Period Period
For the 5/11/98 1 For the 5/11/98 1
Year Ended through Year Ended through
9/30/99 9/30/98 9/30/99 9/30/98
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................... $ 5,088,375 $ 1,927,114 $ 8,427,282 $ 3,767,002
Net realized gain (loss) on investment,
futures and options transactions .............. (761,412) 1,532,218 (668,435) 1,778,278
Net unrealized gain (loss) on investment
and futures transactions ...................... (5,636,561) 2,541,557 (9,949,729) 4,590,015
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ..................... (1,309,598) 6,000,889 (2,190,882) 10,135,295
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income:
Institutional Class ............................. (5,129,768) (2,056,266) (8,452,511) (3,778,443)
Service Class ................................... (4) (2) (223) (2)
Investor A Class ................................ (168,639) (34,547) (64,408) (3,692)
Investor B Class ................................ (95,255) (16,992) (6,134) (1)
Investor C Class ................................ (33,664) (5,877) (5,713) (1)
------------ ------------ ------------ ------------
Total distributions from net investment income .. (5,427,330) (2,113,684) (8,528,989) (3,782,139)
------------ ------------ ------------ ------------
Net realized gains:
Institutional Class ............................. (1,497,785) -- (1,852,753) --
Service Class ................................... (1) -- (1) --
Investor A Class ................................ (40,396) -- (9,588) --
Investor B Class ................................ (26,907) -- (1) --
Investor C Class ................................ (12,008) -- (1) --
------------ ------------ ------------ ------------
Total distributions from net realized gains ..... (1,577,097) -- (1,862,344) --
------------ ------------ ------------ ------------
Total distributions to shareholders ............. (7,004,427) (2,113,684) (10,391,333) (3,782,139)
------------ ------------ ------------ ------------
Capital share transactions .......................... 1,976,902 115,638,626 (14,456,505) 191,114,773
------------ ------------ ------------ ------------
Total increase (decrease) in net assets ......... (6,337,123) 119,525,831 (27,038,720) 197,467,929
------------ ------------ ------------ ------------
Net assets:
Beginning of period ............................. 119,525,831 -- 197,467,929 --
------------ ------------ ------------ ------------
End of period ................................... $113,188,708 $119,525,831 $170,429,209 $197,467,929
============ ============ ============ ============
</TABLE>
- --------------
1 Commencement of operations.
See accompanying notes to financial statements.
43
<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 realized value
beginning nvestment (both realized investment capital end of
of period income and unrealized) income gains period
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------
TAX-FREE INCOME PORTFOLIO
- -------------------------
INSTITUTIONAL CLASS
9/30/99 $11.73 $0.52 $(0.71) $(0.52) $(0.06) $10.96
9/30/98 11.34 0.54 0.44 (0.54) (0.05) 11.73
9/30/97 10.84 0.56 0.51 (0.57) -- 11.34
9/30/96 10.61 0.49 0.28 (0.54) -- 10.84
9/30/95 10.04 0.53 0.59 (0.53) (0.02) 10.61
SERVICE CLASS
9/30/99 $11.73 $0.49 $(0.71) $(0.49) $(0.06) $10.96
9/30/98 11.34 0.38 0.56 (0.50) (0.05) 11.73
9/30/97 10.84 0.53 0.50 (0.53) -- 11.34
9/30/96 10.61 0.51 0.23 (0.51) -- 10.84
9/30/95 10.04 0.50 0.59 (0.50) (0.02) 10.61
INVESTOR A CLASS
9/30/99 $11.73 $0.47 $(0.71) $(0.47) $(0.06) $10.96
9/30/98 11.34 0.47 0.45 (0.48) (0.05) 11.73
9/30/97 10.84 0.50 0.51 (0.51) -- 11.34
9/30/96 10.61 0.45 0.21 (0.43) -- 10.84
9/30/95 10.04 0.48 0.59 (0.48) (0.02) 10.61
INVESTOR B CLASS
9/30/99 $11.73 $0.38 $(0.71) $(0.38) $(0.06) $10.96
9/30/98 11.34 0.40 0.44 (0.40) (0.05) 11.73
9/30/97 10.84 0.44 0.49 (0.43) -- 11.34
7/18/96 1 through 9/30/96 10.74 0.08 0.10 (0.08) -- 10.84
INVESTOR C CLASS
9/30/99 $11.73 $0.38 $(0.71) $(0.38) $(0.06) $10.96
9/30/98 11.34 0.36 0.48 (0.40) (0.05) 11.73
2/28/97 1 through 9/30/97 11.04 0.28 0.27 (0.25) -- 11.34
- --------------------------------------
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
9/30/99 $11.15 $0.51 $(0.59) $(0.52) $(0.03) $10.52
9/30/98 10.77 0.52 0.38 (0.52) -- 11.15
9/30/97 10.44 0.53 0.33 (0.53) -- 10.77
9/30/96 10.33 0.52 0.12 (0.53) -- 10.44
9/30/95 9.82 0.52 0.51 (0.52) -- 10.33
SERVICE CLASS
9/30/99 $11.15 $0.47 $(0.59) $(0.48) $(0.03) $10.52
9/30/98 10.77 0.47 0.39 (0.48) -- 11.15
9/30/97 10.44 0.50 0.33 (0.50) -- 10.77
9/30/96 10.33 0.50 0.11 (0.50) -- 10.44
9/30/95 9.82 0.50 0.51 (0.50) -- 10.33
INVESTOR A CLASS
9/30/99 $11.15 $0.46 $(0.59) $(0.47) $(0.03) $10.52
9/30/98 10.77 0.45 0.40 (0.47) -- 11.15
9/30/97 10.44 0.48 0.33 (0.48) -- 10.77
9/30/96 10.33 0.48 0.11 (0.48) -- 10.44
9/30/95 9.82 0.48 0.51 (0.48) -- 10.33
INVESTOR B CLASS
9/30/99 $11.15 $0.38 $(0.62) $(0.44) $(0.03) $10.44
9/30/98 10.77 0.39 0.41 (0.42) -- 11.15
9/30/97 10.44 0.40 0.33 (0.40) -- 10.77
9/30/96 10.33 0.40 0.11 (0.40) -- 10.44
10/3/94 1 through 9/30/95 9.82 0.42 0.51 (0.42) -- 10.33
INVESTOR C CLASS
9/30/99 $11.15 $0.39 $(0.59) $(0.44) $(0.03) $10.48
8/14/98 1 through 9/30/98 11.00 0.42 0.15 (0.42) -- 11.15
- ------------------------------------
NEW JERSEY TAX-FREE INCOME PORTFOLIO
- ------------------------------------
INSTITUTIONAL CLASS
9/30/99 $12.07 $0.54 $(0.70) $(0.55) $(0.06) $11.30
5/4/98 1 through 9/30/98 11.71 0.23 0.36 (0.23) -- 12.07
</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
Total period average net (excluding to average net (excluding turnover
return (000) assets waivers) assets waivers) rate
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------
TAX-FREE INCOME PORTFOLIO
- -------------------------
INSTITUTIONAL CLASS
9/30/99 (1.68)% $ 302,319 0.60% 0.82% 4.57% 4.35% 104%
9/30/98 8.85 285,921 0.60 0.88 4.61 4.33 100
9/30/97 10.09 9,419 0.55 0.90 5.07 4.72 262
9/30/96 7.45 8,350 0.55 0.89 5.10 4.78 268
9/30/95 11.54 271 0.52 1.30 5.19 4.41 92
SERVICE CLASS
9/30/99 (1.97)% $ 5,754 0.90% 1.12% 4.27% 4.05% 104%
9/30/98 8.52 5,430 0.88 1.16 4.34 4.06 100
9/30/97 9.77 58,779 0.85 1.20 4.76 4.41 262
9/30/96 7.14 36,161 0.85 1.18 4.88 4.56 268
9/30/95 11.24 4,713 0.80 1.57 4.92 4.15 92
INVESTOR A CLASS
9/30/99 (2.14)%3 $ 6,591 1.07% 1.29% 4.10% 3.88% 104%
9/30/98 8.34 3 6,440 1.05 1.33 4.17 3.89 100
9/30/97 9.58 3 5,530 1.02 1.37 4.60 4.25 262
9/30/96 6.94 3 4,873 1.04 1.37 4.67 4.35 268
9/30/95 10.99 3 6,591 1.00 1.78 4.74 3.96 92
INVESTOR B CLASS
9/30/99 (2.87)%4 $ 3,434 1.82% 2.04% 3.35% 3.13% 104%
9/30/98 7.53 4 2,034 1.79 2.07 3.39 3.11 100
9/30/97 8.77 4 926 1.75 2.10 3.65 3.30 262
7/18/96 1 through 9/30/96 1.72 4 10 1.65 2 1.98 2 3.84 2 3.51 2 268
INVESTOR C CLASS
9/30/99 (2.87)%4 $ 2,868 1.82% 2.04% 3.35% 3.13% 104%
9/30/98 7.53 4 1,024 1.70 1.98 3.19 2.91 100
2/28/97 1 through 9/30/97 5.02 4 -- 1.70 2 2.05 2 3.95 2 3.60 2 262
- --------------------------------------
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
9/30/99 (0.82)% $ 994,381 0.60% 0.79% 4.67% 4.48% 28%
9/30/98 8.51 1,054,070 0.58 0.82 4.66 4.42 43
9/30/97 8.43 5,108 0.55 0.86 4.97 4.66 97
9/30/96 6.29 3,609 0.55 0.85 5.01 4.72 119
9/30/95 10.81 2,092 0.52 0.84 5.23 4.91 66
SERVICE CLASS
9/30/99 (1.11)% $ 14,132 0.90% 1.09% 4.37% 4.18% 28%
9/30/98 8.19 20,669 0.86 1.10 4.39 4.15 43
9/30/97 8.10 50,395 0.85 1.16 4.67 4.36 97
9/30/96 5.97 34,297 0.85 1.15 4.74 4.44 119
9/30/95 10.51 13,815 0.79 1.11 5.04 4.72 66
INVESTOR A CLASS
9/30/99 (1.25)%3 $ 36,634 1.04% 1.23% 4.23% 4.04% 28%
9/30/98 8.04 3 34,712 1.01 1.25 4.25 4.01 43
9/30/97 7.95 3 32,900 0.97 1.30 4.54 4.23 97
9/30/96 5.81 3 38,031 1.00 1.30 4.58 4.29 119
9/30/95 10.30 3 42,775 0.98 1.30 4.88 4.56 66
INVESTOR B CLASS
9/30/99 (2.21)%4 $ 23,602 1.82% 2.00% 3.45% 3.26% 28%
9/30/98 7.56 4 17,601 1.78 2.02 3.46 3.22 43
9/30/97 7.12 4 12,388 1.76 2.07 3.73 3.42 97
9/30/96 5.04 4 7,974 1.74 2.03 3.81 3.51 119
10/3/94 1 through 9/30/95 9.69 4 4,008 1.57 2 1.89 2 4.07 2 3.75 2 66
INVESTOR C CLASS
9/30/99 (1.93)%4 $ 907 1.82% 1.97% 3.45% 3.26% 28%
8/14/98 1 through 9/30/98 7.56 4 184 1.58 2 1.82 2 2.98 2 2.74 2 43
- ------------------------------------
New Jersey Tax-Free Income Portfolio
- ------------------------------------
INSTITUTIONAL CLASS
9/30/99 (1.35)% $ 134,046 0.60% 0.81% 4.59% 4.37% 43%
5/4/981 through 9/30/98 8.38 145,708 0.60 2 0.90 2 4.67 2 4.37 2 24
</TABLE>
See accompanying notes to financial statements.
44-45
<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 realized value
beginning investment (both realized investment capital end of
of period income and unrealized) income gains period
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SERVICE CLASS
9/30/99 $12.07 $0.51 $(0.70) $(0.52) $(0.06) $11.30
9/30/98 11.65 0.52 0.42 (0.52) -- 12.07
9/30/97 11.27 0.52 0.37 (0.51) -- 11.65
2/1/96 through 9/30/96 11.61 0.73 (0.32) (0.75) -- 11.27
3/1/95 through 1/31/96 10.94 0.46 0.65 (0.44) -- 11.61
2/28/95 11.31 0.51 (0.36) (0.51) (0.01) 10.94
INVESTOR A CLASS
9/30/99 $12.07 $0.48 $(0.69) $(0.50) $(0.06) $11.30
9/30/98 11.65 0.50 0.42 (0.50) -- 12.07
9/30/97 11.27 0.51 0.37 (0.50) -- 11.65
2/1/96 through 9/30/96 11.61 0.34 (0.34) (0.34) -- 11.27
1/26/96 1 through 1/31/96 11.54 -- 0.07 -- -- 11.61
INVESTOR B CLASS
9/30/99 $12.07 $0.40 $(0.70) $(0.41) $(0.06) $11.30
9/30/98 11.65 0.41 0.42 (0.41) -- 12.07
9/30/97 11.27 0.41 0.38 (0.41) -- 11.65
7/2/96 1 through 9/30/96 11.15 0.09 0.12 (0.09) -- 11.27
INVESTOR C CLASS
12/9/98 1 through 9/30/99 $11.98 $0.32 $(0.67) $(0.33) -- $11.30
- ------------------------------
OHIO TAX-FREE INCOME PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
9/30/99 $10.88 $0.47 $(0.65) $(0.47) $(0.04) $10.19
9/30/98 10.50 0.48 0.37 (0.47) -- 10.88
9/30/97 10.15 0.51 0.34 (0.50) -- 10.50
9/30/96 10.05 0.50 0.10 (0.50) -- 10.15
9/30/95 9.60 0.55 0.45 (0.55) -- 10.05
SERVICE CLASS
9/30/99 $10.88 $0.47 $(0.65) $(0.47) $(0.04) $10.19
9/30/98 10.50 0.48 0.37 (0.47) -- 10.88
9/30/97 10.15 0.47 0.35 (0.47) -- 10.50
9/30/96 10.05 0.48 0.10 (0.48) -- 10.15
9/30/95 9.60 0.52 0.45 (0.52) -- 10.05
INVESTOR A CLASS
9/30/99 $10.88 $0.45 $(0.65) $(0.45) $(0.04) $10.19
9/30/98 10.50 0.45 0.38 (0.45) -- 10.88
9/30/97 10.15 0.45 0.35 (0.45) -- 10.50
9/30/96 10.05 0.46 0.10 (0.46) -- 10.15
9/30/95 9.60 0.52 0.45 (0.52) -- 10.05
INVESTOR B CLASS
9/30/99 $10.88 $0.37 $(0.65) $(0.37) $(0.04) $10.19
9/30/98 10.50 0.37 0.38 (0.37) -- 10.88
9/30/97 10.15 0.37 0.35 (0.37) -- 10.50
9/30/96 10.05 0.38 0.10 (0.38) -- 10.15
10/13/94 1 through 9/30/95 9.58 0.42 0.47 (0.42) -- 10.05
INVESTOR C CLASS
9/30/99 $10.88 $0.37 $(0.65) $(0.37) $(0.04) $10.19
8/26/98 1 through 9/30/98 10.74 0.03 0.14 (0.03) -- 10.88
- ----------------------------------
DELAWARE TAX-FREE INCOME PORTFOLIO
- ----------------------------------
INSTITUTIONAL CLASS
9/30/99 $10.33 $0.44 $(0.54) $(0.47) $(0.14) $9.62
5/11/98 1 through 9/30/98 10.00 0.17 0.34 (0.18) -- 10.33
SERVICE CLASS
9/30/99 $10.33 $0.44 $(0.57) $(0.44) $(0.14) $9.62
5/11/98 1 through 9/30/98 10.00 0.16 0.34 (0.17) -- 10.33
INVESTOR A CLASS
9/30/99 $10.33 $0.39 $(0.54) $(0.42) $(0.14) $9.62
5/11/98 1 through 9/30/98 10.00 0.15 0.34 (0.16) -- 10.33
INVESTOR B CLASS
9/30/99 $10.33 $0.32 $(0.54) $(0.35) $(0.14) $9.62
5/11/98 1 through 9/30/98 10.00 0.12 0.34 (0.13) -- 10.33
</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
Total period average net (excluding to average net (excluding turnover
return (000) assets waivers) assets waivers) rate
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SERVICE CLASS
9/30/99 (1.65)% $ 24,626 0.90% 1.11% 4.28% 4.07% 43%
9/30/98 8.28 34,803 0.88 1.18 4.37 4.07 24
9/30/97 8.11 84,596 0.85 1.17 4.59 4.27 77
2/1/96 through 9/30/96 0.15 88,077 0.85 2 1.17 2 4.44 2 4.13 2 109
3/1/95 through 1/31/96 10.35 97,976 0.88 2 0.90 2 4.43 2 4.41 2 26
2/28/95 1.49 96,857 0.79 0.87 4.71 4.63 28
INVESTOR A CLASS
9/30/99 (1.82)%3 $ 1,328 1.07% 1.28% 4.11% 3.90% 43%
9/30/98 8.10 3 1,432 1.06 1.36 4.26 3.96 24
9/30/97 7.94 3 1,548 1.02 1.34 4.41 4.09 77
2/1/96 through 9/30/96 (0.01)3 894 1.01 2 1.33 2 4.29 2 3.98 2 109
1/26/96 1 through 1/31/96 0.63 3 14 1.02 2 1.36 2 2.79 2 2.45 2 26
INVESTOR B CLASS
9/30/99 (2.55)%4 $ 1,440 1.82% 2.03% 3.36% 3.15% 43%
9/30/98 7.30 4 1,051 1.80 2.10 3.43 3.13 24
9/30/97 7.14 4 767 1.74 2.06 3.60 3.28 2 77
7/2/96 1 through 9/30/96 2.04 4 30 1.74 2 2.06 2 3.48 2 3.16 2 109
INVESTOR C CLASS
12/9/98 1 through 9/30/99 (3.02)%4 $ 19 1.82%2 2.03%2 3.36%2 3.15%2 43%
- ------------------------------
OHIO TAX-FREE INCOME PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
9/30/99 (1.38)% $ 92,455 0.60% 0.81% 4.75% 4.54% 23%
9/30/98 8.56 101,066 0.60 0.93 4.64 4.31 77
9/30/97 8.53 928 0.55 1.06 4.80 4.29 87
9/30/96 6.12 409 0.51 1.10 4.96 4.37 136
9/30/95 10.75 200 0.12 1.19 5.61 4.54 63
SERVICE CLASS
9/30/99 (1.68)% $ 254 0.90% 1.11% 4.45% 4.24% 23%
9/30/98 8.23 712 0.88 1.21 4.37 4.04 77
9/30/97 8.21 7,421 0.85 1.36 4.51 4.00 87
9/30/96 5.80 6,377 0.79 1.38 4.69 4.10 136
9/30/95 10.45 5,150 0.39 1.46 5.39 4.31 63
INVESTOR A CLASS
9/30/99 (1.85)%3 $ 3,036 1.07% 1.28% 4.28% 4.07% 23%
9/30/98 8.05 3 2,774 1.06 1.39 4.22 3.89 77
9/30/97 8.03 3 2,614 1.02 1.53 4.35 3.84 87
9/30/96 5.66 3 2,833 0.91 1.50 4.57 3.98 136
9/30/95 10.46 3 3,303 0.38 1.45 5.42 4.35 63
INVESTOR B CLASS
9/30/99 (2.58)%4 $ 1,426 1.82% 2.03% 3.53% 3.32% 23%
9/30/98 7.25 4 1,116 1.79 2.12 3.41 3.08 77
9/30/97 7.23 4 622 1.75 2.26 3.52 3.01 87
9/30/96 4.87 4 161 1.66 2.26 3.80 3.21 136
10/13/94 1 through 9/30/95 9.33 4 106 1.17 2 2.25 2 4.48 2 3.41 2 63
INVESTOR C CLASS
9/30/99 (2.58)%4 $ 192 1.82% 2.03% 3.53% 3.32% 23%
8/26/98 1 through 9/30/98 1.60 4 527 1.71 2 2.04 2 2.82 2 2.49 2 77
- ----------------------------------
DELAWARE TAX-FREE INCOME PORTFOLIO
- ----------------------------------
INSTITUTIONAL CLASS
9/30/99 (1.10)% $104,683 0.70% 0.86% 4.38% 4.22% 31%
5/11/98 1 through 9/30/98 5.16 114,524 0.70 2 0.88 2 4.18 2 4.00 2 54
SERVICE CLASS
9/30/99 (1.40)% $ -- 1.00% 1.16% 4.08% 3.92% 31%
5/11/98 1 through 9/30/98 5.04 -- 0.67 2 0.85 2 5.00 2 4.82 2 54
INVESTOR A CLASS
9/30/99 (1.57)%3 $ 4,468 1.17% 1.33% 3.91% 3.75% 31%
5/11/98 1 through 9/30/98 4.97 3 2,546 1.15 2 1.33 2 3.68 2 3.50 2 54
INVESTOR B CLASS
9/30/99 (2.31)%4 $ 3,149 1.92% 2.08% 3.16% 3.00% 31%
5/11/98 1 through 9/30/98 4.67 4 1,740 1.83 2 2.01 2 2.89 2 2.71 2 54
</TABLE>
See accompanying notes to financial statements.
46-47
<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 realized value
beginning investment (both realized investment capital end of
of period income and unrealized) income gains period
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTOR C CLASS
9/30/99 $10.33 $0.32 $(0.54) $(0.35) $(0.14) $9.62
5/11/98 1 through 9/30/98 10.00 0.12 0.34 (0.13) -- 10.33
- ----------------------------------
KENTUCKY TAX-FREE INCOME PORTFOLIO
- ----------------------------------
INSTITUTIONAL CLASS
9/30/99 $10.31 $0.45 $(0.57) $(0.46) $(0.10) $9.63
5/11/98 1 through 9/30/98 10.00 0.18 0.31 (0.18) -- 10.31
SERVICE CLASS
9/30/99 $10.31 $0.44 $(0.59) $(0.43) $(0.10) $9.63
5/11/98 1 through 9/30/98 10.00 0.19 0.29 (0.17) -- 10.31
INVESTOR A CLASS
9/30/99 $10.31 $0.40 $(0.57) $(0.41) $(0.10) $9.63
5/11/98 1 through 9/30/98 10.00 0.16 0.31 (0.16) -- 10.31
INVESTOR B CLASS
9/30/99 $10.31 $0.34 $(0.58) $(0.34) $(0.10) $9.63
5/11/98 1 through 9/30/98 10.00 0.15 0.29 (0.13) -- 10.31
INVESTOR C CLASS
9/30/99 $10.31 $0.33 $(0.57) $(0.34) $(0.10) $9.63
5/11/98 1 through 9/30/98 10.00 0.15 0.29 (0.13) -- 10.31
</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
Total period average net (excluding to average net (excluding turnover
return (000) assets waivers) assets waivers) rate
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTOR C CLASs
9/30/99 (2.31)%4 $ 889 1.92% 2.08% 3.16% 3.00% 31%
5/11/98 1 through 9/30/98 4.67 4 716 1.89 2 2.07 2 2.81 2 2.63 2 54
- ----------------------------------
KENTUCKY TAX-FREE INCOME PORTFOLIO
- ----------------------------------
INSTITUTIONAL CLASS
9/30/99 (1.23)% $167,799 0.70% 0.88% 4.56% 4.38% 25%
5/11/98 1 through 9/30/98 4.95 196,493 0.70 2 0.95 2 4.54 2 4.29 2 7
SERVICE CLASS
9/30/99 (1.52)% $ -- 1.00% 1.18% 4.26% 4.08% 25%
5/11/98 1 through 9/30/98 4.82 -- 0.67 2 0.92 2 5.00 2 4.75 2 7
INVESTOR A CLASS
9/30/99 (1.69)%3 $ 1,856 1.17% 1.35% 4.09% 3.91% 25%
5/11/98 1 through 9/30/98 4.76 3 975 1.17 2 1.42 2 4.07 2 3.82 2 7
INVESTOR B CLASS
9/30/99 (2.43)%4 $ 203 1.92% 2.10% 3.34% 3.16% 25%
5/11/98 1 through 9/30/98 4.45 4 -- 0.67 2 0.92 2 0.64 2 0.39 2 7
INVESTOR C CLASS
9/30/99 (2.43)%4 $ 571 1.92% 2.10% 3.34% 3.16% 25%
5/11/98 1 through 9/30/98 4.45 4 -- 0.67 2 0.92 2 5.00 2 4.75 2 7
</TABLE>
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.
See accompanying notes to financial statements.
48-49
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS
BlackRock Funds SM ("the Fund") 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 36 publicly-offered portfolios, 6 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. Each portfolio 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>
Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
New Jersey Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio Municipal
Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Kentucky Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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, 1999.
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 assets of such respective classes.
(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. If no sales are reported, as in the case of
some securities traded over-the-counter, portfolio securities are valued at the
mean between the last reported bid and asked prices or on the basis of
quotations provided by a pricing service or dealer which uses information with
respect to transactions on bonds, 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. Securities for which market quotations are not readily available are
valued at fair value as determined in accordance with procedures adopted by the
Board of Directors. As of September 30, 1999, there were no securities valued in
accordance with such procedures.
DIVIDENDS TO SHAREHOLDERS -- Dividends from net investment income are
declared by each Portfolio each day on "settled" shares (i.e. shares for which
the particular Portfolio has received payment in federal funds) and are paid
monthly. Over the course of a year, substantially all of each Portfolio's net
investment income will be declared as dividends. The amount of the daily
dividend for each Portfolio will be based on periodic projections of its net
investment income. Net
50
<PAGE>
BLACKROCK FUNDS
realized capital gains, if any, are 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 for and elect the tax
treatment applicable to regulated investment companies under Subchapter M of the
Internal Revenue Code of 1986, as amended, and to make the requisite
distributions to its shareholders which will be sufficient to relieve it from
federal income and excise taxes.
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.
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.
FUTURES TRANSACTIONS -- The Fund invests in financial futures contracts
solely for the purpose of hedging its existing portfolio securities, or
securities that the Fund intends to purchase, against fluctuations in fair value
caused by changes in prevailing market interest rates. Certain Portfolios may
enter into futures contracts subject to certain limitations. Upon entering into
a futures contract, the Portfolio is required to deposit cash or pledge
municipal 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 Fund invests in financial options
contracts solely for the purpose of hedging its existing portfolio securities,
or securities that the Fund intends to purchase, against fluctuations in fair
value caused by changes in prevailing market interest rates. When the Fund sells
or purchases an option, an amount equal to the premium received or paid by the
Fund is recorded as a liability or an asset and is subsequently adjusted 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 Fund 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. There were no options held by the Portfolios at
September 30, 1999.
51
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Written Option transactions entered into during the year ended September
30, 1999 are summarized as follows:
Ohio Tax-Free Income DE Tax-Free Income
----------------------- -------------------------
Number of Number of
Contracts Premium Contracts Premium
----------- --------- ----------- ---------
Balance at 9/30/98 -- $ -- -- $ --
Written 10 2,768 12 3,321
Expired (10) (2,768) (12) (3,321)
---- ------- ---- -------
Balance at 9/30/99 -- -- -- --
==== ======= ==== =======
(B) TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Pursuant to an Investment Advisory Agreement, BlackRock Advisors, Inc.
("BlackRock"), a wholly-owned subsidiary of BlackRock, Inc., serves as
investment adviser to the Portfolios. BlackRock Financial Management,
Inc.("BFM"),a wholly-owned subsidiary of BlackRock, serves as sub-adviser for
all of the Portfolios. BlackRock, Inc. is an indirect majority-owned subsidiary
of PNC Bank Corp.
For its advisory services, BlackRock is entitled to receive fees, computed
daily and paid monthly, at the following annual rates, based on each Portfolio's
average daily net assets:
<TABLE>
<CAPTION>
Tax-Free Income, Pennsylvania Delaware Tax-Free
Tax-Free Income, New Jersey Tax-Free Income and Income and Kentucky
Ohio Tax-Free Income Portfolios Tax-Free Income Portfolios
--------------------------------- -----------------------------
Investment Investment
Average Daily Net Assets Advisory Fee Advisory Fee
------------------------- --------------------------------- -----------------------------
<S> <C> <C>
first $1 billion .500% .550%
$1 billion-- $2 billion .450 .500
$2 billion-- $3 billion .425 .475
greater than $3 billion .400 .450
</TABLE>
For the year ended September 30, 1999, advisory fees and waivers for each
Portfolio were as follows:
<TABLE>
<CAPTION>
Gross Net Advisory
Advisory Fee Waiver Fee
-------------- ------------ --------------
<S> <C> <C> <C>
Tax-Free Income Portfolio ............................. $1,621,768 $ 491,480 $1,130,288
Pennsylvania Tax-Free Income Portfolio ................ 5,563,430 1,555,991 4,007,439
New Jersey Tax-Free Income Portfolio .................. 878,750 272,652 606,098
Ohio Tax-Free Income Portfolio ........................ 518,985 130,733 388,252
Delaware Tax-Free Income Portfolio .................... 646,709 112,869 533,840
Kentucky Tax-Free Income Portfolio .................... 1,018,462 213,243 805,219
</TABLE>
BlackRock pays BFM fees for its sub-advisory services.
PFPC Inc. ("PFPC"), an indirect wholly-owned subsidiary of PNC Bank Corp.,
BlackRock and BlackRock Distributors, Inc. ("BDI") act as co-administrators for
the Fund. For these services, the co-administrators receive a combined
administration fee computed daily and payable monthly, based on a percentage of
the average daily net assets of each Portfolio, at the following annual rates:
.085% of the first $500 million, .075% of the next $500 million and .065% of
assets in excess of $1 billion. In addition, each of the classes are charged an
administration fee based on the following percentage of average daily net assets
of each respective class: .145% of the first $500 million, .135% of the next
$500 million and .125% of assets in excess of $1 billion.
For the year ended September 30, 1999, administration fees and waivers for
each Portfolio were as follows:
<TABLE>
<CAPTION>
Gross Net
Administration Fee Waiver Administration Fee
-------------------- ----------- --------------------
<S> <C> <C> <C>
Tax-Free Income Portfolio ............................. $ 746,013 $ 215,350 $ 530,663
Pennsylvania Tax-Free Income Portfolio ................ 2,437,898 525,896 1,912,002
New Jersey Tax-Free Income Portfolio .................. 404,225 102,610 301,615
Ohio Tax-Free Income Portfolio ........................ 238,366 92,172 146,194
Delaware Tax-Free Income Portfolio .................... 270,436 77,719 192,717
Kentucky Tax-Free Income Portfolio .................... 425,759 121,599 304,160
</TABLE>
Prior to February 1, 1999, BlackRock may have, at its discretion, waived
all or any portion of its advisory fees for any
52
<PAGE>
BLACKROCK FUNDS
Portfolio. In addition, PFPC, BlackRock and BDI may have, at their discretion,
voluntarily waived all or any portion of their administration fees for any
Portfolio.
In the interest of limiting the expenses of the Portfolios, BlackRock and
the Fund have entered into an expense limitation agreement effective February 1,
1999. The agreement sets a limit on certain of the operating expenses of each
Portfolio for the next year and requires BlackRock to waive or reimburse fees or
expenses if these operating expenses exceed that limit. These expense limits
apply to expenses charged on Portfolio assets as a whole, but not expenses
separately charged to the different share classes of a Portfolio.
If in the following two years the operating expenses of a Portfolio that
previously received a waiver or reimbursement from BlackRock are less than the
expense limit for that Portfolio, the Portfolio is required to repay BlackRock
up to the amount of fees waived or expenses reimbursed under the agreement if:
(1) the Portfolio has more than $50 million in assets, (2) BlackRock continues
to be the Portfolio's investment adviser and (3) the Board of Trustees of the
Fund has approved the payments to BlackRock on a quarterly basis.
The expense limits as a percentage of average daily net assets and amounts
subject to possible reimbursement under the expense limitation agreement were as
follows:
Tax-Free Income Portfolio ........................ .485% $ 426,463
Pennsylvania Tax-Free Income Portfolio ........... .470% 1,097,746
New Jersey Tax-Free Income Portfolio ............. .475% 199,114
Ohio Tax-Free Income Portfolio ................... .515% 152,204
Delaware Tax-Free Income Portfolio ............... .585% 130,050
Kentucky Tax-Free Income Portfolio ............... .585% 248,078
PFPC Trust Co. (formerly PNC Bank, National Association) 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 arrangements 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.
(C) PURCHASES AND SALES OF SECURITIES
For the year ended September 30, 1999, purchases and sales of securities,
other than short-term and government securities, were as follows:
Purchases Sales
------------- -------------
Tax-Free Income Portfolio ............... $374,234,384 $335,568,255
Pennsylvania Tax-Free Income Portfolio .. 345,774,896 324,425,043
New Jersey Tax-Free Income Portfolio .... 76,482,330 81,744,732
Ohio Tax-Free Income Portfolio .......... 23,032,829 23,694,819
Delaware Tax-Free Income Portfolio ...... 43,401,012 40,530,152
Kentucky Tax-Free Income Portfolio ...... 46,814,621 65,095,219
53
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) CAPITAL SHARES
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
Tax-Free Income Portfolio
------------------------------------------------------------
For the Year Ended For the Year Ended
9/30/99 9/30/98
-------------------------- --------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ............................. 6,853,081 $ 78,835,003 6,919,177 $ 80,423,674
Service Class ................................... 592,049 6,816,763 1,975,361 22,644,691
Investor A Class ................................ 297,198 3,434,092 210,734 2,415,265
Investor B Class ................................ 181,706 2,101,564 113,149 1,299,966
Investor C Class ................................ 220,502 2,549,447 87,176 1,010,999
Shares issued in conversion:
Institutional Class ............................. -- -- 18,151,463 207,289,708
Shares issued in reinvestment of dividends:
Institutional Class ............................. 122,167 1,410,417 4,724 53,637
Service Class ................................... 14,682 168,519 24,014 273,213
Investor A Class ................................ 17,690 203,137 18,627 213,361
Investor B Class ................................ 6,589 75,421 3,724 42,714
Investor C Class ................................ 1,241 14,108 110 1,270
Shares redeemed:
Institutional Class ............................. (3,771,833) (42,951,830) (1,530,999) (17,675,320)
Service Class ................................... (544,873) (6,243,891) (6,720,377) (77,990,670)
Investor A Class ................................ (262,638) (3,002,374) (168,026) (1,932,633)
Investor B Class ................................ (48,379) (551,451) (25,128) (289,594)
Investor C Class ................................ (47,428) (536,351) -- --
--------- ------------ ---------- ------------
Net increase ......................................... 3,631,754 $ 42,322,574 19,063,729 $217,780,281
========= ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
Pennsylvania Tax-Free Income Portfolio
------------------------------------------------------------
For the Year Ended For the Year Ended
9/30/99 9/30/98
--------------------------- --------------------------
Shares Value Shares Value
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ............................. 11,936,803 $ 130,738,719 9,572,099 $105,653,542
Service Class ................................... 1,946,331 21,480,866 2,812,012 30,669,634
Investor A Class ................................ 1,933,552 21,220,399 895,649 9,825,497
Investor B Class ................................ 893,028 9,815,318 578,240 6,336,016
Investor C Class ................................ 79,677 875,012 16,522 182,840
Shares issued in conversion:
Institutional Class ............................. -- -- 88,644,492 963,565,622
Shares issued in reinvestment of dividends:
Institutional Class ............................. 235,781 2,600,638 777 8,537
Service Class ................................... 62,177 682,388 40,268 441,197
Investor A Class ................................ 95,111 1,041,492 108,476 1,184,635
Investor B Class ................................ 52,982 579,108 29,789 325,778
Investor C Class ................................ -- -- 1 10
Shares redeemed:
Institutional Class ............................. (12,182,730) (132,469,686) (4,161,868) (45,745,931)
Service Class ................................... (2,518,041) (27,664,097) (5,676,998) (62,689,684)
Investor A Class ................................ (1,659,281) (18,131,789) (945,403) (10,360,756)
Investor B Class ................................ (264,644) (2,874,022) (179,478) (1,960,782)
Investor C Class ................................ (9,603) (102,198) (1) (10)
---------- ------------- ---------- ------------
Net increase ......................................... 601,143 $ 7,792,148 91,734,577 $997,436,145
========== ============= ========== ============
</TABLE>
54
<PAGE>
BLACKROCK FUNDS
<TABLE>
<CAPTION>
New Jersey Tax-Free Income Portfolio
------------------------------------------------------------
For the Year Ended For the Year Ended
9/30/99 9/30/98
--------------------------- --------------------------
Shares Value Shares Value
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ............................. 1,703,003 $ 20,079,320 4,688,925 $ 56,230,912
Service Class ................................... 950,377 11,254,931 1,095,326 12,919,769
Investor A Class ................................ 157,686 1,867,021 46,487 552,690
Investor B Class ................................ 66,909 786,813 23,690 280,849
Investor C Class ................................ 1,670 20,007 -- --
Shares issued in conversion:
Institutional Class -- -- 7,941,083 93,069,494
Shares issued in reinvestment of dividends:
Institutional Class ............................. 53,037 631,145 -- --
Service Class ................................... 103,507 1,224,840 102,249 1,205,295
Investor A Class ................................ 3,615 42,510 3,225 37,984
Investor B Class ................................ 3,374 39,760 2,459 28,992
Investor C Class -- -- -- --
Shares redeemed:
Institutional Class ............................. (1,962,315) (23,087,074) (561,067) (6,654,369)
Service Class ................................... (1,757,218) (20,710,957) (5,573,838) (66,623,417)
Investor A Class ................................ (162,460) (1,871,831) (63,928) (749,845)
Investor B Class ................................ (29,876) (346,126) (4,914) (58,877)
Investor C Class ................................ -- -- -- --
---------- ------------- ---------- ------------
Net increase (decrease) .............................. (868,691) $(10,069,641) 7,699,697 $ 90,239,477
========== ============= ========== ============
</TABLE>
<TABLE>
<CAPTION>
Ohio Tax-Free Income Portfolio
------------------------------------------------------------
For the Year Ended For the Year Ended
9/30/99 9/30/98
--------------------------- --------------------------
Shares Value Shares Value
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ............................. 800,308 $ 8,533,006 769,961 $ 8,300,574
Service Class ................................... 650 7,042 202,902 2,150,390
Investor A Class ................................ 113,310 1,204,578 117,734 1,256,315
Investor B Class ................................ 40,768 440,491 43,310 462,005
Investor C Class ................................ 18,577 201,834 48,417 520,000
Shares issued in conversion:
Institutional Class ............................. -- -- 8,832,820 93,097,927
Shares issued in reinvestment of dividends:
Institutional Class ............................. 36,794 395,170 -- --
Service Class ................................... 81 867 -- --
Investor A Class ................................ 8,778 93,451 8,404 89,206
Investor B Class ................................ 3,410 36,270 1,842 19,597
Investor C Class ................................ 605 6,427 2 24
Shares redeemed:
Institutional Class ............................. (1,052,010) (11,152,663) (400,563) (4,278,793)
Service Class ................................... (41,330) (444,458) (843,984) (9,094,525)
Investor A Class ................................ (79,124) (838,187) (120,005) (1,278,452)
Investor B Class ................................ (6,775) (70,482) (1,803) (19,206)
Investor C Class ................................ (48,754) (523,354) -- --
---------- ------------- ---------- ------------
Net increase (decrease) .............................. (204,712) $ (2,110,008) 8,659,037 $91,225,062
========== ============= ========== ============
</TABLE>
55
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Delaware Tax-Free Income Portfolio
------------------------------------------------------------
For the Year Ended For the Period
9/30/99 5/11/98 1 through 9/30/98
--------------------------- --------------------------
Shares Value Shares Value
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ............................. 1,576,276 $ 15,667,167 521,512 $ 5,306,999
Service Class ................................... -- -- 10 100
Investor A Class ................................ 336,725 3,400,904 368,575 3,720,920
Investor B Class ................................ 155,502 1,583,445 173,512 1,749,948
Investor C Class ................................ 46,775 478,010 69,280 700,205
Shares issued in conversion:
Institutional Class ............................. -- -- 11,804,724 118,047,237
Shares issued in reinvestment of dividends:
Institutional Class ............................. 144,431 1,460,200 -- 1
Service Class ................................... -- 5 -- 1
Investor A Class ................................ 7,070 71,006 478 4,857
Investor B Class ................................ 5,851 58,794 809 8,208
Investor C Class ................................ 464 4,610 -- 1
Shares redeemed:
Institutional Class ............................. (1,925,198) (19,240,639) (1,244,022) (12,590,407)
Service Class ................................... -- -- -- --
Investor A Class ................................ (125,943) (1,245,406) (122,682) (1,249,255)
Investor B Class ................................ (2,496) (25,055) (5,952) (60,179)
Investor C Class ................................ (24,169) (236,139) (1) (10)
---------- ------------ ---------- ------------
Net increase ......................................... 195,288 $ 1,976,902 11,566,243 $115,638,626
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
Kentucky Tax-Free Income Portfolio
------------------------------------------------------------
For the Year Ended For the Period
9/30/99 5/11/98 1 through 9/30/98
--------------------------- --------------------------
Shares Value Shares Value
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ............................. 2,121,093 $ 21,304,021 679,481 $ 6,873,676
Service Class ................................... 11,768 119,792 10 100
Investor A Class ................................ 217,238 2,164,448 94,545 964,702
Investor B Class ................................ 32,197 325,615 10 100
Investor C Class ................................ 67,325 663,776 10 100
Shares issued in conversion:
Institutional Class ............................. -- -- 21,994,285 219,942,850
Shares issued in reinvestment of dividends:
Institutional Class ............................. 176,567 1,786,848 -- 1
Service Class ................................... -- 5 -- 1
Investor A Class ................................ 1,509 14,899 32 321
Investor B Class ................................ 324 3,229 -- 1
Investor C Class ................................ 379 3,691 -- 1
Shares redeemed:
Institutional Class ............................. (3,926,262) (39,348,302) (3,613,300) (36,667,080)
Service Class ................................... (11,768) (119,086) -- --
Investor A Class ................................ (120,476) (1,181,728) -- --
Investor B Class ................................ (11,450) (112,367) -- --
Investor C Class ................................ (8,443) (81,346) -- --
---------- ------------- ---------- -----------
Net increase (decrease) .............................. (1,449,999) $(14,456,505) 19,155,073 191,114,773
========== ============= ========== ===========
</TABLE>
- -------------------
1 Commencement of operations.
56
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
(E) AT SEPTEMBER 30, 1999, NET ASSETS CONSISTED OF:
<TABLE>
<CAPTION>
Pennsylvania New Jersey Ohio Delaware Kentucky
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Income Income Income Income Income
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------ -------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Capital paid-in ............. $324,664,814 $1,070,217,341 $160,003,804 $96,278,651 $113,759,227 $169,306,317
Undistributed net
investment income ......... 77,846 -- -- 9,453 -- --
Distributions in excess
of net investment
income .................... -- (841,008) (156,056) -- (264,296) (101,707)
Accumulated net
realized loss
on investment
transactions,
futures and
options contracts ......... (2,713,594) (4,974,237) (538,450) (585,713) (992,391) (767,640)
Net unrealized
appreciation
(depreciation) on
investment
transactions and
futures contracts ......... (1,063,029) 5,253,997 2,149,372 1,660,705 686,168 1,992,239
------------ -------------- ------------ ----------- ------------ ------------
$320,966,037 $1,069,656,093 $161,458,670 $97,363,096 $113,188,708 $170,429,209
============ ============== ============ =========== ============ ============
</TABLE>
(F) DEFERRED POST-OCTOBER LOSSES
At September 30, 1999, deferred post-October losses for Tax-Free Income
Portfolio were $2,460,848, for Pennsylvania Tax-Free Income Portfolio were
$4,696,019, for New Jersey Tax-Free Income Portfolio were $464,677, for Ohio
Tax-Free Income Portfolio were $644,908, for Delaware Tax-Free Income Portfolio
were $859,010, and for Kentucky Tax-Free Income Portfolio were $843,559.
(G) CONVERSION OF COMMON TRUST FUNDS
On January 13, 1998, January 22, 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.
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.
<TABLE>
<CAPTION>
FUNDS CONVERTED ON MAY 11, 1998:
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 Tax-Free Income Tax-Free Income 18,151,463 $207,289,708 $11.42 $ 7,404,139
PNC Pennsylvania Tax-Free Pennsylvania Tax-Free
Income Income 62,664,588 681,164,104 10.87 19,651,255
PNC Long-Term Pennsylvania Pennsylvania Tax-Free
Tax-Free Income Income 25,979,904 282,401,518 10.87 13,777,176
PNC New Jersey Tax-Free New Jersey Tax-Free
Income Income 7,941,083 93,069,494 11.72 3,307,561
PNC Ohio Tax-Free Income Ohio Tax-Free Income 8,832,820 93,097,927 10.54 4,176,201
PNC Delaware Tax-Free Delaware Tax-Free
Income Income 11,804,724 118,047,237 10.00 3,781,171
PNC Kentucky Tax-Free Kentucky Tax-Free
Income Income 21,994,285 219,942,850 10.00 7,351,951
</TABLE>
57
<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, 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 Tax-Free Income, Pennsylvania
Tax-Free Income, New Jersey Tax-Free Income, Ohio Tax-Free Income, Delaware
Tax-Free Income and Kentucky Tax-Free Income Portfolios of the BlackRock Funds
(the "Fund") at September 30, 1999, 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, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 15, 1999
58
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<PAGE>
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<PAGE>
BLACKROCK FUNDS
Investment Adviser Co-Administrator and Transfer Agent
BlackRock Advisors, Inc. PFPC Inc.
New York, New York 10154 Wilmington, Delaware 19809
Sub-Adviser Co-Administrator and Distributor
BlackRock Financial Management, Inc. BlackRock Distributors, Inc.
New York, New York 10154 West Conshohocken, Pennsylvania 19428
Custodian Co-Administrator
PFPC Trust Co. BlackRock Advisors, Inc.
Philadelphia, Pennsylvania 19103 New York, New York 10154
Counsel
Simpson, Thatcher & 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
$25 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 Micro-Cap Equity
Large Cap Growth Equity International Equity
Mid-Cap Value Equity International Small Cap Equity
Mid-Cap Growth Equity International Emerging Markets
Small Cap Value Equity Select Equity
Small Cap Growth Equity Index Equity
STOCK & BOND PORTFOLIOS
- -----------------------
Balanced
BOND PORTFOLIOS
- ---------------
Low Duration Bond GNMA
Intermediate Government Bond Managed Income
Intermediate Bond International Bond
Core Bond High Yield Bond
Government Income
TAX-FREE BOND PORTFOLIOS
- ------------------------
Tax-Free Income Ohio Tax-Free Income
Pennsylvania Tax-Free Income Delaware Tax-Free Income
New Jersey Tax-Free Income Kentucky Tax-Free Income
MONEY MARKET PORTFOLIOS
- -----------------------
Money Market North Carolina Municipal Money Market
U.S. Treasury Money Market Ohio Municipal Money Market
Municipal Money Market Pennsylvania Municipal Money Market
New Jersey 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 IRAaccounts 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>
[GRAPHIC OMITTED]
BLACKROCK FUNDS
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 9/30/99 TFP
