March 31, 1999
TAX-FREE
BOND
PORTFOLIOS
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
Not FDIC Insured
May Lose Value
No Bank Guarantee
BLACKROCK
FUNDS
PURE INVESTMENT STYLE
[GRAPHIC OMITTED]
<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........................... 10-37
Tax-Free Income Statement of Assets & Liabilities...................... 15
New Jersey Tax-Free Income Statement of Assets & Liabilities........... 29
PORTFOLIO FINANCIAL STATEMENTS
Statements of Operations............................................... 39
Statements of Changes in Net Assets................................. 40-41
Financial Highlights................................................ 42-47
NOTES TO FINANCIAL STATEMENTS............................................. 48-55
<PAGE>
BLACKROCK FUNDS
March 31, 1999
Dear Shareholder:
We are pleased to present the Semi-Annual Report for the BlackRock Funds
for March 31, 1999.
These are certainly exciting times for the U.S. stock market. On March 29,
1999, the Dow Jones Industrial Average (DJIA) eclipsed the mythic 10,000 level
for the first time in history, only to fall slightly below this mark at the end
of the period. This milestone is a media event that has created considerable
excitement and propelled the stock market into the forefront of public
attention. We believe that times like these present a good opportunity for
investors to look past the heat of the moment and focus on the true meaning of
events.
A quick look at recent history confirms that 10,000 on the Dow is indeed a
lofty height. It was only 27 years ago in 1972 that the Dow reached the 1,000
level for the first time. But that success did not last. Battered by recession
in the U.S. economy and worldwide oil shortages, the Dow plummeted below 600 in
1974, the lowest point in a generation, and it didn't get back to 1,000 again
until 1982. From 1982 to 1994 the Dow climbed to the 3,500 level. From there it
moved to 5,000 in 1996, 7,500 in 1998 and 10,000 in 1999. By anyone's measure
this has been a fast and impressive, yet often volatile, climb.
On the other hand, it is worth remembering that the Dow is not a broad
based index -- in fact it is only 30 stocks! While the Dow has been flying high,
many stocks, particularly smaller stocks, have not. Furthermore, the stocks that
make up the Dow are some of the largest of the large cap stocks, the very group
that has done so well over recent years. At the same time returns on small cap
stocks, measured by the Russell 2000, have lagged by returning -16.25% for the
twelve months ended March 31, 1999 and the large caps, measured by the S&P 500,
have been humming along at a rate of 18.58% in the same time period.
Is the market overdue for a significant correction, or can it continue to
move still higher? Of course, none of us can predict the future but there are
several important positive indications. We believe the economy is strong,
interest rates are favorable and inflation appears under control. While
BlackRock believes that the market will remain in positive territory for the
remainder of 1999, we also believe that growth will be tempered and that
investors would do well to roll back their expectations to more modest levels.
If you look at stock market performance from 1926 to 1998, as presented in the
Ibbotson 1999 Yearbook, Large Company Stocks (S&P Composite Index) returned an
average annual rate of 11.2%, Small Company Stocks (9th and 10th Deciles NYSE
plus corresponding AMEX and OTC) at 12.4%, and Long Term Bonds (Salomon Brothers
Long Term High-Grade Corporate Bond Index) at 5.8%. While past performance does
not predict future returns, common sense suggests that the market cannot be
expected to keep growing at current rates.
These historical returns, while not approaching the returns of recent
years, are still significant and confirm the appropriateness of our core
investment philosophy for long-term investors: start investing early and stay
invested through all market cycles. Of course, the asset allocation that you use
for your portfolio can change to reflect changes in the market and in your own
personal financial situation.
1
<PAGE>
We also believe that with the Federal Reserve currently holding steady on
interest rates, investors should not overlook the investment opportunity in the
bond market, both taxable and tax free. We are pleased to report that during the
period of this report we successfully launched a new fund, the BlackRock High
Yield Bond Portfolio, designed for investors who want high current income from
investing in securities that are rated less than investment grade.
We are pleased with the growth of BlackRock Funds during the past six
months. The addition of the BlackRock High Yield Bond Portfolio in November 1998
increased the number of BlackRock Funds to 36 investment portfolios.
Additionally, we received record inflows into the fund family, which helped
bring our total assets under management to approximately $25 billion as of March
31, 1999.
Thank you for your continued confidence in BlackRock Funds. We value your
business and appreciate the opportunity to help you achieve your long-term
investment goals.
Sincerely,
/S/ KAREN SABATH
Karen H. Sabath
MANAGING DIRECTOR
BLACKROCK ADVISORS, INC.
2
<PAGE>
BLACKROCK FUNDS
TAX-FREE INCOME PORTFOLIO
TOTAL ASSETS (3/31/99):
$336.6 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) MUNICIPAL SECURITIES OUTPERFORMED THEIR TREASURY COUNTERPARTS OVER
THE PAST SIX MONTHS, AS THE FLIGHT TO QUALITY BID THAT SPURRED THE DRAMATIC
TREASURY MARKET RALLY IN THE THIRD QUARTER OF 1998 EVAPORATED AS WORLD MARKETS
CALMED. THE MOST DRAMATIC MUNICIPAL OUTPERFORMANCE OCCURRED IN THE FIRST THREE
MONTHS OF 1999, AS MUNICIPAL NEW ISSUANCE WAS DOWN APPROXIMATELY 30% COMPARED TO
THE FIRST QUARTER OF 1998.
(BULLET) IN AN EFFORT TO INCREASE THE PORTFOLIO'S INCOME EARNING POWER, THE
MANAGER HAS EMPHASIZED HIGHER YIELDING INVESTMENT GRADE NEW ISSUES. WITHIN THE
PORTFOLIO, THE MANAGER BELIEVES THAT THE 10-20 YEAR MATURITY SECTOR OFFERS THE
MOST ATTRACTIVE TOTAL RETURN OPPORTUNITIES IN LIGHT OF BLACKROCK'S LONG-TERM
MUNICIPAL INTEREST RATE OUTLOOK.
Although the portfolio holdings and sectors listed above were current as of the
end of the semi-annual period ended March 31, 1999, the Portfolio is actively
managed and the composition will vary.
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
SEMI-ANNUAL PERIOD END.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Lehman
Institutional Service Investor A Investor B Investor C Municipal
Class Class Class Class Class Bond Index
------------- -------- -------- -------- -------- ----------
May/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
FOR PERIOD ENDING MARCH 31, 1999
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
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 5.58% 8.09% 7.90% 11.45% 8.12% 11.77% 8.02% 11.62%
Service Class 5.27% 7.64% 7.57% 10.97% 7.82% 11.33% 7.83% 11.35%
Investor A Class (Load Adjusted) 0.87% 1.26% 5.93% 8.59% 6.74% 9.77% 7.20% 10.43%
Investor A Class (NAV) 5.09% 7.38% 7.39% 10.71% 7.61% 11.03% 7.70% 11.16%
Investor B Class (Load Adjusted) (0.39%) (0.57%) 5.41% 7.84% 6.75% 9.78% 7.45% 10.80%
Investor B Class (NAV) 4.31% 6.25% 6.67% 9.67% 7.18% 10.41% 7.45% 10.80%
Investor C Class (Load Adjusted) 3.27% 4.74% 6.67% 9.67% 7.18% 10.41% 7.45% 10.80%
Investor C Class (NAV) 4.31% 6.25% 6.67% 9.67% 7.18% 10.41% 7.45% 10.80%
<FN>
* 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.
</FN>
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
3
<PAGE>
BLACKROCK FUNDS
PENNSYLVANIA TAX-FREE PORTFOLIO TOTAL
NET ASSETS (3/31/99):
$1.1 BILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL, PENNSYLVANIA
STATE AND LOCAL 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) MUNICIPAL SECURITIES OUTPERFORMED THEIR TREASURY COUNTERPARTS OVER
THE PAST SIX MONTHS, AS THE FLIGHT TO QUALITY BID THAT SPURRED THE DRAMATIC
TREASURY MARKET RALLY IN THE THIRD QUARTER OF 1998 EVAPORATED AS WORLD MARKETS
CALMED. THE MOST DRAMATIC MUNICIPAL OUTPERFORMANCE OCCURRED IN THE FIRST THREE
MONTHS OF 1999, AS MUNICIPAL NEW ISSUANCE WAS DOWN APPROXIMATELY 30% COMPARED TO
THE FIRST QUARTER OF 1998.
(BULLET) IN AN EFFORT TO INCREASE THE PORTFOLIO'S INCOME EARNING POWER, THE
MANAGER HAS EMPHASIZED HIGHER YIELDING INVESTMENT GRADE NEW ISSUES. WITHIN THE
PORTFOLIO, THE MANAGER BELIEVES THAT THE 10-20 YEAR MATURITY SECTOR OFFERS THE
MOST ATTRACTIVE TOTAL RETURN OPPORTUNITIES IN LIGHT OF BLACKROCK'S LONG-TERM
MUNICIPAL INTEREST RATE OUTLOOK.
Although the portfolio holdings and sectors listed above were current as of the
end of the semi-annual period ended March 31, 1999, the Portfolio is actively
managed and the composition will vary.
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 SEMI-ANNUAL
PERIOD END.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Lehman
Institutional Service Investor A Investor B Investor C Municipal
Class Class Class Class Class Bond Index
------------- -------- -------- -------- -------- ----------
Dec/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
FOR PERIOD ENDING MARCH 31, 1999
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
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 5.68% 9.86% 7.15% 12.41% 7.43% 12.90% 6.82% 11.84%
Service Class 5.36% 9.31% 6.83% 11.86% 7.12% 12.36% 6.58% 11.42%
Investor A Class (Load Adjusted) 0.97% 1.68% 5.24% 9.10% 6.11% 10.61% 5.79% 10.05%
Investor A Class (NAV) 5.22% 9.06% 6.68% 11.60% 6.98% 12.12% 6.48% 11.25%
Investor B Class (Load Adjusted) 0.23% 0.40% 4.82% 8.37% 5.95% 10.33% 6.03% 10.47%
Investor B Class (NAV) 5.00% 8.68% 6.07% 10.54% 6.38% 11.08% 6.03% 10.47%
Investor C Class (Load Adjusted) 3.95% 6.86% 6.07% 10.54% 6.38% 11.08% 6.03% 10.47%
Investor C Class (NAV) 5.00% 8.68% 6.07% 10.54% 6.38% 11.08% 6.03% 10.47%
<FN>
* 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.
</FN>
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
4
<PAGE>
BLACKROCK FUNDS
NEW JERSEY TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (3/31/99):
$179.3 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL, NEW JERSEY
STATE AND LOCAL 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) MUNICIPAL SECURITIES OUTPERFORMED THEIR TREASURY COUNTERPARTS OVER
THE PAST SIX MONTHS, AS THE FLIGHT TO QUALITY BID THAT SPURRED THE DRAMATIC
TREASURY MARKET RALLY IN THE THIRD QUARTER OF 1998 EVAPORATED AS WORLD MARKETS
CALMED. THE MOST DRAMATIC MUNICIPAL OUTPERFORMANCE OCCURRED IN THE FIRST THREE
MONTHS OF 1999, AS MUNICIPAL NEW ISSUANCE WAS DOWN APPROXIMATELY 30% COMPARED TO
THE FIRST QUARTER OF 1998.
(BULLET) IN AN EFFORT TO INCREASE THE PORTFOLIO'S INCOME EARNING POWER, THE
MANAGER HAS EMPHASIZED HIGHER YIELDING INVESTMENT GRADE NEW ISSUES. WITHIN THE
PORTFOLIO, THE MANAGER BELIEVES THAT THE 10-20 YEAR MATURITY SECTOR OFFERS THE
MOST ATTRACTIVE TOTAL RETURN OPPORTUNITIES IN LIGHT OF BLACKROCK'S LONG-TERM
MUNICIPAL INTEREST RATE OUTLOOK.
Although the portfolio holdings and sectors listed above were current as of the
end of the semi-annual period ended March 31, 1999, the Portfolio is actively
managed and the composition will vary.
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
SEMI-ANNUAL PERIOD END.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Lehman
Institutional Service Investor A Investor B Investor C Municipal
Class Class Class Class Class Bond Index
------------- -------- -------- -------- -------- ----------
Jul/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 10,253 10,736 10,736 10,738
Mar-92 10,775 10,775 10,290 10,775 10,775 10,770
Jun-92 11,205 11,205 10,701 11,205 11,205 11,179
Sep-92 11,462 11,462 10,946 11,462 11,462 11,475
Dec-92 11,691 11,691 11,165 11,691 11,691 11,684
Mar-93 12,098 12,098 11,553 12,098 12,098 12,118
Jun-93 12,514 12,514 11,951 12,514 12,514 12,514
Sep-93 12,867 12,867 12,288 12,867 12,867 12,937
Dec-93 13,045 13,045 12,458 13,045 13,045 13,119
Mar-94 12,370 12,370 11,813 12,370 12,370 12,399
Jun-94 12,504 12,504 11,942 12,504 12,504 12,536
Sep-94 12,583 12,583 12,017 12,583 12,583 12,622
Dec-94 12,432 12,432 11,873 12,432 12,432 12,440
Mar-95 13,195 13,195 12,601 13,195 13,195 13,320
Jun-95 13,454 13,454 12,848 13,454 13,454 13,642
Sep-95 13,802 13,802 13,181 13,802 13,802 14,034
Dec-95 14,289 14,289 13,646 14,289 14,289 14,613
Mar-96 14,158 14,158 13,519 14,156 14,156 14,437
Jun-96 14,198 14,198 13,546 14,184 14,184 14,547
Sep-96 14,445 14,445 13,776 14,398 14,398 14,882
Dec-96 14,808 14,808 14,115 14,725 14,725 15,261
Mar-97 14,768 14,768 14,072 14,653 14,653 15,226
Jun-97 15,185 15,185 14,534 15,028 15,028 15,751
Sep-97 15,623 15,623 14,946 15,429 15,429 16,226
Dec-97 16,035 16,035 15,334 15,800 15,800 16,666
Mar-98 16,167 16,167 15,453 15,893 15,893 16,858
Jun-98 16,406 16,403 15,673 16,088 16,088 17,114
Sep-98 16,932 16,916 16,157 16,585 16,555 17,640
Dec-98 17,021 16,990 16,221 16,652 16,590 17,746
Mar-99 17,089 17,045 16,267 16,700 16,605 17,903
FOR PERIOD ENDING MARCH 31, 1999
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
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 5.72% 10.59% 6.46% 11.96% 6.67% 12.35% 7.16% 13.26%
Service Class 5.45% 10.09% 6.36% 11.78% 6.62% 12.26% 7.12% 13.19%
Investor A Class (Load Adjusted) 1.06% 1.96% 4.75% 8.80% 5.64% 10.44% 6.48% 12.00%
Investor A Class (NAV) 5.27% 9.76% 6.18% 11.44% 6.50% 12.04% 7.05% 13.06%
Investor B Class (Load Adjusted) (0.19)% (0.35)% 4.21% 7.80% 5.64% 10.44% 6.76% 12.52%
Investor B Class (NAV) 4.48% 8.30% 5.46% 10.11% 6.06% 11.22% 6.76% 12.52%
Investor C Class (Load Adjusted) 3.44% 6.37% 5.46% 10.11% 6.06% 11.22% 6.76% 12.52%
Investor C Class (NAV) 4.48% 8.30% 5.46% 10.11% 6.06% 11.22% 6.76% 12.52%
<FN>
* 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.
</FN>
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
5
<PAGE>
OHIO TAX-FREE INCOME PORTFOLIO TOTAL
NET ASSETS (3/31/99):
$105.9 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL, OHIO STATE AND
LOCAL 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) MUNICIPAL SECURITIES OUTPERFORMED THEIR TREASURY COUNTERPARTS OVER
THE PAST SIX MONTHS, AS THE FLIGHT TO QUALITY BID THAT SPURRED THE DRAMATIC
TREASURY MARKET RALLY IN THE THIRD QUARTER OF 1998 EVAPORATED AS WORLD MARKETS
CALMED. THE MOST DRAMATIC MUNICIPAL OUTPERFORMANCE OCCURRED IN THE FIRST THREE
MONTHS OF 1999, AS MUNICIPAL NEW ISSUANCE WAS DOWN APPROXIMATELY 30% COMPARED TO
THE FIRST QUARTER OF 1998.
(BULLET) IN AN EFFORT TO INCREASE THE PORTFOLIO'S INCOME EARNING POWER, THE
MANAGER HAS EMPHASIZED HIGHER YIELDING INVESTMENT GRADE NEW ISSUES. WITHIN THE
PORTFOLIO, THE MANAGER BELIEVES THAT THE 10-20 YEAR MATURITY SECTOR OFFERS THE
MOST ATTRACTIVE TOTAL RETURN OPPORTUNITIES IN LIGHT OF BLACKROCK'S LONG-TERM
MUNICIPAL INTEREST RATE OUTLOOK.
Although the portfolio holdings and sectors listed above were current as of the
end of the semi-annual period ended March 31, 1999, the Portfolio is actively
managed and the composition will vary.
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
SEMI-ANNUAL PERIOD END.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Lehman
Institutional Service Investor A Investor B Investor C Municipal
Class Class Class Class Class Bond Index
------------- -------- -------- -------- -------- ----------
Dec/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
FOR PERIOD ENDING MARCH 31, 1999
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
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 6.13% 11.52% 7.19% 13.52% 7.31% 13.74% 6.29% 11.82%
Service Class 5.82% 10.94% 6.87% 12.91% 7.00% 13.16% 6.03% 11.33%
Investor A Class (Load Adjusted) 1.44% 2.71% 5.25% 9.87% 6.03% 11.33% 5.30% 9.96%
Investor A Class (NAV) 5.64% 10.60% 6.69% 12.58% 6.91% 12.99% 5.99% 11.26%
Investor B Class (Load Adjusted) 0.16% 0.30% 4.66% 8.76% 5.75% 10.81% 5.42% 10.19%
Investor B Class (NAV) 4.85% 9.12% 5.91% 11.11% 6.18% 11.62% 5.42% 10.19%
Investor C Class (Load Adjusted) 3.80% 7.14% 5.91% 11.11% 6.18% 11.62% 5.42% 10.19%
Investor C Class (NAV) 4.85% 9.12% 5.91% 11.11% 6.18% 11.62% 5.42% 10.19%
<FN>
* 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 ASHARES, 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.
</FN>
</TABLE>
PAST PERFORMANCEIS NOT PREDICTIVE OF FUTURE RESULTS.
6
<PAGE>
BLACKROCK FUNDS
DELAWARE TAX-FREE INCOME PORTFOLIO TOTAL
NET ASSETS (3/31/99):
$118.7 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL, DELAWARE STATE
AND LOCAL 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) MUNICIPAL SECURITIES OUTPERFORMED THEIR TREASURY COUNTERPARTS OVER
THE PAST SIX MONTHS, AS THE FLIGHT TO QUALITY BID THAT SPURRED THE DRAMATIC
TREASURY MARKET RALLY IN THE THIRD QUARTER OF 1998 EVAPORATED AS WORLD MARKETS
CALMED. THE MOST DRAMATIC MUNICIPAL OUTPERFORMANCE OCCURRED IN THE FIRST THREE
MONTHS OF 1999, AS MUNICIPAL NEW ISSUANCE WAS DOWN APPROXIMATELY 30% COMPARED TO
THE FIRST QUARTER OF 1998.
(BULLET) IN AN EFFORT TO INCREASE THE PORTFOLIO'S INCOME EARNING POWER, THE
MANAGER HAS EMPHASIZED HIGHER YIELDING INVESTMENT GRADE NEW ISSUES. WITHIN THE
PORTFOLIO, THE MANAGER BELIEVES THAT THE 10-20 YEAR MATURITY SECTOR OFFERS THE
MOST ATTRACTIVE TOTAL RETURN OPPORTUNITIES IN LIGHT OF BLACKROCK'S LONG-TERM
MUNICIPAL INTEREST RATE OUTLOOK.
Although the portfolio holdings and sectors listed above were current as of the
end of the semi-annual period ended March 31, 1999, the Portfolio is actively
managed and the composition will vary.
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 SEMI-ANNUAL
PERIOD END.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Lehman
Institutional Service Investor A Investor B Investor C Municipal
Class Class Class Class Class Bond Index
------------- -------- -------- -------- -------- ----------
Dec/31/89 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
Mar-90 9,989 9,987 9,586 9,979 9,979 10,045
Jun-90 10,073 10,068 9,662 10,052 10,052 10,279
Sep-90 10,110 10,103 9,695 10,080 10,080 10,285
Dec-90 10,149 10,139 9,728 10,108 10,108 10,729
Mar-91 10,064 10,052 9,643 10,013 10,013 10,972
Jun-91 10,055 10,040 9,630 9,994 9,994 11,205
Sep-91 10,163 10,145 9,730 10,091 10,091 11,641
Dec-91 10,335 10,315 9,891 10,252 10,252 12,032
Mar-92 10,281 10,258 9,835 10,188 10,188 12,068
Jun-92 10,419 10,393 9,963 10,314 10,314 12,526
Sep-92 10,445 10,417 9,984 10,329 10,329 12,859
Dec-92 10,533 10,502 10,064 10,406 10,406 13,093
Mar-93 10,416 10,382 9,949 10,279 10,279 13,579
Jun-93 10,524 10,487 10,048 10,375 10,375 14,023
Sep-93 10,648 10,609 10,163 10,488 10,488 14,497
Dec-93 10,812 10,769 10,315 10,638 10,638 14,700
Mar-94 10,407 10,363 9,924 10,229 10,229 13,893
Jun-94 10,386 10,340 9,901 10,198 10,198 14,047
Sep-94 10,293 10,244 9,808 10,096 10,096 14,143
Dec-94 10,436 10,384 9,941 10,227 10,227 13,940
Mar-95 10,528 10,473 10,024 10,306 10,306 14,926
Jun-95 10,487 10,430 9,982 10,256 10,256 15,286
Sep-95 10,536 10,476 10,024 10,293 10,293 15,726
Dec-95 10,605 10,541 10,085 10,349 10,349 16,374
Mar-96 10,501 10,436 9,983 10,238 10,238 16,177
Jun-96 10,583 10,515 10,057 10,307 10,307 16,301
Sep-96 10,666 10,595 10,132 10,378 10,378 16,676
Dec-96 10,624 10,550 10,088 10,327 10,327 17,101
Mar-97 10,497 10,422 9,963 10,199 10,193 17,061
Jun-97 10,585 10,506 10,043 10,280 10,268 17,649
Sep-97 10,699 10,617 10,147 10,387 10,368 18,182
Dec-97 10,812 10,726 10,250 10,492 10,466 18,675
Mar-98 10,816 10,728 10,251 10,493 10,460 18,890
Jun-98 10,988 10,891 10,403 10,648 10,596 19,177
Sep-98 11,367 11,258 10,749 11,003 10,929 19,766
Dec-98 11,439 11,320 10,804 11,059 10,964 19,885
Mar-99 11,537 11,408 10,884 11,141 11,024 20,061
FOR PERIOD ENDING MARCH 31, 1999
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
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 6.66% 11.85% 6.02% 10.71% 6.34% 11.28% 6.02% 10.71%
Service Class 6.34% 11.28% 5.71% 10.16% 6.03% 10.73% 5.71% 10.16%
Investor A Class (Load Adjusted) 1.91% 3.40% 4.11% 7.31% 4.99% 8.88% 5.18% 9.22%
Investor A Class (NAV) 6.17% 10.98% 5.53% 9.84% 5.85% 10.41% 5.53% 9.84%
Investor B Class (Load Adjusted) 0.65% 1.16% 3.51% 6.25% 4.64% 8.26% 4.74% 8.43%
Investor B Class (NAV) 5.39% 9.59% 4.75% 8.45% 5.06% 9.00% 4.74% 8.43%
Investor C Class (Load Adjusted) 4.34% 7.72% 4.75% 8.45% 5.06% 9.00% 4.74% 8.43%
Investor C Class (NAV) 5.39% 9.59% 4.75% 8.45% 5.06% 9.00% 4.74% 8.43%
<FN>
* 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.
</FN>
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
7
<PAGE>
BLACKROCK FUNDS
KENTUCKY TAX-FREE INCOME PORTFOLIO TOTAL
NET ASSETS (3/31/99):
$187.4 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL, KENTUCKY STATE
AND LOCAL 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) MUNICIPAL SECURITIES OUTPERFORMED THEIR TREASURY COUNTERPARTS OVER
THE PAST SIX MONTHS, AS THE FLIGHT TO QUALITY BID THAT SPURRED THE DRAMATIC
TREASURY MARKET RALLY IN THE THIRD QUARTER OF 1998 EVAPORATED AS WORLD MARKETS
CALMED. THE MOST DRAMATIC MUNICIPAL OUTPERFORMANCE OCCURRED IN THE FIRST THREE
MONTHS OF 1999, AS MUNICIPAL NEW ISSUANCE WAS DOWN APPROXIMATELY 30% COMPARED TO
THE FIRST QUARTER OF 1998.
(BULLET) IN AN EFFORT TO INCREASE THE PORTFOLIO'S INCOME EARNING POWER, THE
MANAGER HAS EMPHASIZED HIGHER YIELDING INVESTMENT GRADE NEW ISSUES. WITHIN THE
PORTFOLIO, THE MANAGER BELIEVES THAT THE 10-20 YEAR MATURITY SECTOR OFFERS THE
MOST ATTRACTIVE TOTAL RETURN OPPORTUNITIES IN LIGHT OF BLACKROCK'S LONG-TERM
MUNICIPAL INTEREST RATE OUTLOOK.
Although the portfolio holdings and sectors listed above were current as of the
end of the semi-annual period ended March 31, 1999, the Portfolio is actively
managed and the composition will vary.
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 SEMI-ANNUAL
PERIOD YEAR END.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Lehman
Institutional Service Investor A Investor B Investor C Municipal
Class Class Class Class Class Bond Index
------------- -------- -------- -------- -------- ----------
Dec/31/89 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
Mar-90 10,012 10,010 9,608 10,002 10,002 10,045
Jun-90 10,055 10,050 9,646 10,035 10,035 10,279
Sep-90 10,016 10,009 9,604 9,986 9,986 10,285
Dec-90 10,136 10,126 9,716 10,095 10,095 10,729
Mar-91 10,124 10,111 9,700 10,073 10,073 10,972
Jun-91 10,132 10,117 9,704 10,071 10,071 11,205
Sep-91 10,249 10,231 9,812 10,177 10,177 11,641
Dec-91 10,428 10,407 9,979 10,343 10,343 12,032
Mar-92 10,385 10,362 9,935 10,291 10,291 12,068
Jun-92 10,500 10,474 10,041 10,394 10,394 12,526
Sep-92 10,540 10,512 10,075 10,424 10,424 12,859
Dec-92 10,696 10,664 10,220 10,567 10,567 13,093
Mar-93 10,580 10,546 10,105 10,442 10,442 13,579
Jun-93 10,729 10,692 10,244 10,578 10,578 14,023
Sep-93 10,878 10,837 10,382 10,714 10,714 14,497
Dec-93 11,036 10,992 10,529 10,859 10,859 14,700
Mar-94 10,659 10,614 10,165 10,477 10,477 13,893
Jun-94 10,660 10,612 10,162 10,467 10,467 14,047
Sep-94 10,577 10,527 10,079 10,375 10,375 14,143
Dec-94 10,745 10,691 10,235 10,529 10,529 13,940
Mar-95 10,862 10,805 10,342 10,633 10,633 14,926
Jun-95 10,837 10,778 10,314 10,598 10,598 15,286
Sep-95 10,916 10,854 10,386 10,665 10,665 15,726
Dec-95 10,965 10,899 10,428 10,701 10,701 16,374
Mar-96 10,882 10,814 10,345 10,609 10,609 16,177
Jun-96 10,955 10,885 10,411 10,671 10,671 16,301
Sep-96 11,042 10,968 10,489 10,744 10,744 16,676
Dec-96 10,999 10,923 10,444 10,691 10,691 17,101
Mar-97 10,885 10,806 10,331 10,576 10,569 17,061
Jun-97 10,976 10,894 10,414 10,660 10,647 17,649
Sep-97 11,092 11,006 10,520 10,769 10,749 18,182
Dec-97 11,208 11,119 10,627 10,878 10,851 18,675
Mar-98 11,213 11,121 10,628 10,879 10,844 18,890
Jun-98 11,402 11,299 10,793 11,049 10,993 19,177
Sep-98 11,760 11,645 11,119 11,382 11,304 19,766
Dec-98 11,823 11,700 11,166 11,430 11,331 19,885
Mar-99 11,888 11,755 11,214 11,479 11,358 20,061
FOR PERIOD ENDING MARCH 31, 1999
AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
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 6.01% 11.07% 6.06% 11.16% 6.42% 11.82% 6.79% 12.50%
Service Class 5.70% 10.50% 5.74% 10.57% 6.10% 11.23% 6.47% 11.92%
Investor A Class (Load Adjusted) 1.29% 2.38% 4.14% 7.62% 5.05% 9.30% 5.91% 10.88%
Investor A Class (NAV) 5.52% 10.17% 5.56% 10.24% 5.92% 10.90% 6.29% 11.58%
Investor B Class (Load Adjusted) 0.03% 0.06% 3.54% 6.52% 4.71% 8.67% 5.50% 10.13%
Investor B Class (NAV) 4.74% 8.73% 4.78% 8.80% 5.13% 9.45% 5.50% 10.13%
Investor C Class (Load Adjusted) 3.69% 6.80% 4.78% 8.80% 5.13% 9.45% 5.50% 10.13%
Investor C Class (NAV) 4.74% 8.73% 4.78% 8.80% 5.13% 9.45% 5.50% 10.13%
<FN>
* 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 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 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.
</FN>
</TABLE>
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.
9
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS -- 94.6%
ALABAMA -- 6.9%
Alabama Hsg. Fin. Auth. Sgl. Fam.
Mtg. Rev., Cltrl. Home Mtg. Bd.
Prj., Ser. 94B-1
6.65% 10/01/25 $ 1,195 $ 1,277,156
Alabama Rev., Priv. Coll. & Tuskegee
Univ. Prj., Ser. 96A
5.90% 09/01/16 1,000 1,096,250
Alabama St. G.O., Ser. 90
7.00% 08/01/05 340 361,675
Birmingham Wtr. & Swr. Rev., Ser. 98A
4.75% 01/01/21 2,550 2,416,125
Courtland Ind. Dev. Rev., Champion Intl.
Corp. Prj., Ser. 92
7.20% 12/01/13 1,000 1,091,250
Jefferson Cnty. Swr. Rev., Ser. 99A
5.00% 02/01/33 13,535 13,145,869
5.38% 02/01/36 2,500 2,546,875
Mobile G.O., Ser. 96
5.00% 02/15/16 1,000 1,006,250
Shelby Cnty. Bd. of Ed. Rev., Ser. 95
5.70% 02/01/09 680 736,950
------------
23,678,400
------------
ALASKA -- 0.8%
Alaska Ind. Dev. & Expt. Auth. Revolving
Fund Rev., Ser. 97A
6.00% 04/01/07 2,500 2,759,375
------------
ARIZONA -- 0.5%
Maricopa Cnty. Cmnty. Coll. Dist. Rev.,
Ser. 95A
6.00% 07/01/06 325 356,281
Maricopa Cnty. Cmnty. Coll. Dist. Rev.,
Unrefunded Ser. 95A
6.00% 07/01/06 15 16,237
Phoenix G.O., Ser. 92
6.13% 07/01/03 1,030 1,122,700
6.38% 07/01/13 200 217,000
------------
1,712,218
------------
CALIFORNIA -- 3.4%
California Hsg. Fin. Agcy. Rev., Home
Mtg. Prj., Ser. 93C
5.65% 08/01/14 2,000 2,062,500
California St. AMT Veterans G.O.,
Ser. 97BH
5.40% 12/01/16 2,000 2,047,500
California St. G.O., Ser. 90
6.50% 11/01/06 340 395,250
California St. G.O., Ser. 91
6.20% 09/01/03 1,000 1,103,750
California St. G.O., Ser. 94
6.20% 11/01/02 1,000 1,088,750
Los Angeles G.O., Ser. 94A
5.80% 09/01/07 340 377,825
M-S-R Pub. Pwr. Agcy. Rev., San Juan
Prj., Ser. 97G
5.38% 07/01/14 2,850 3,010,312
Sacramento Mun. Elec. Util. Rev.,
Ser. 92C
5.75% 11/15/09 510 550,800
Tri City Hosp. Dist. Rev., Ser. 96A
5.38% 02/15/07 1,000 1,088,750
------------
11,725,437
------------
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
COLORADO -- 3.2%
Arapahoe Cnty. Cap. Imp. Trust Fund
Hwy. Rev., Ser. 86
7.16% 08/31/04 $ 900 $ 723,375
Arapahoe Cnty. Cap. Imp. Trust Fund
Hwy. Rev., Ser. 86E-470
6.90%** 08/31/05 750 887,813
Denver City & Cnty. Arpt. Rev.,
Prerefunded Ser. 91D
7.00% 11/15/25 210 226,800
Denver City & Cnty. Arpt. Rev.,
Prerefunded Ser. 92C
6.75% 11/15/13 60 66,750
Denver City & Cnty. Arpt. Rev.,
Ser. 90A
8.00% 11/15/25 2,745 2,940,581
Denver City & Cnty. Arpt. Rev.,
Ser. 96D
5.50% 11/15/25 3,000 3,108,750
Denver City & Cnty. Arpt. Rev.,
Unrefunded Ser. 91D
7.00% 11/15/25 790 832,462
Denver City & Cnty. Arpt. Rev.,
Unrefunded Ser. 92C
6.75% 11/15/13 440 476,300
Highlands Ranch Met. Dist. No. 2 G.O.,
Ser. 96
6.25% 06/15/07 1,000 1,141,250
Jefferson Cnty. Sch. Dist. G.O., Ser. 92
6.00% 12/15/12 300 326,250
------------
10,730,331
------------
DELAWARE -- 1.1%
Delaware Trans. Auth. Trans. Sys. Rev.,
Ser. 92
5.63% 07/01/05 440 468,050
New Castle Cnty. G.O., Ser. 98
5.00% 10/01/09 3,175 3,365,500
------------
3,833,550
------------
DISTRICT OF COLUMBIA -- 0.7%
District of Columbia G.O., Ser. 93
6.00% 06/01/11 1,900 2,135,125
District of Columbia G.O., Ser. 93A-1
6.00% 06/01/11 50 56,687
------------
2,191,812
------------
FLORIDA -- 2.8%
Florida Dept. of Trans. G.O., Ser. 91
6.25% 07/01/07 400 427,000
Florida Dept. of Trans. G.O., Right of
Way Prj., Ser. 91A
4.75% 07/01/24 5,000 4,731,250
Orlando Util. Comm. Wtr. & Elec.
Rev., Ser. 92
6.00% 10/01/10 1,000 1,147,500
Santa Rosa Bay Bldg. Auth. Rev.,
Ser. 96
6.25% 07/01/28 3,000 3,281,250
------------
9,587,000
------------
GEORGIA -- 1.9%
Atlanta Arpt. Fac. Rev., Ser. 94A
6.50% 01/01/10 1,000 1,177,500
See accompanying notes to financial statements.
10
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
GEORGIA (CONTINUED)
Columbus Wtr. & Swr. Rev., Ser. 92
6.25% 05/01/05 $ 1,620 $ 1,765,800
Forsyth Cnty. Sch. Dist. G.O., Ser. 92
6.70% 07/01/12 1,000 1,202,500
Georgia G.O., Ser. 92A
6.00% 03/01/04 340 371,875
Georgia Mun. Elec. Auth. Pwr. Rev.,
Ser. 92B
6.13% 01/01/14 400 432,500
Georgia Mun. Elec. Auth. Pwr. Rev.,
Ser. 93B
5.70% 01/01/19 1,000 1,087,500
Gwinnett Cnty. G.O., Ser. 92
6.00% 01/01/10 400 431,500
------------
6,469,175
------------
HAWAII -- 3.9%
Hawaii Dept. of Budget and Fin. Rev.,
Ser. 90C
7.38% 12/01/20 4,000 4,285,000
Honolulu City & Cnty. Waste Wtr. Sys.
Rev., Ser. 98
4.50% 07/01/28 10,000 9,062,500
------------
13,347,500
------------
ILLINOIS -- 8.3%
Chicago Wtr. Rev., Ser. 97
5.50% 11/01/22 9,905 10,226,912
Chicago Motor Fuel Tax Rev., Ser. 90
7.00% 01/01/05 2,500 2,662,500
Chicago Pk. Dist. G.O., Ser. 96
5.50% 01/01/16 2,250 2,356,875
Chicago Res. Mtg. Rev., Ref. Ser. 92B
7.00% 10/01/09 460 222,525
Cook Cnty. G.O., Ser. 96
5.88% 11/15/22 2,000 2,247,500
Cook Cnty. G.O., Ser. 97A
5.63% 11/15/22 2,000 2,115,000
Illinois G.O., Ser. 94
5.50% 08/01/06 680 737,800
Illinois Hlth. Fac. Auth. Rev., Hosp.
Sisters Svcs., Inc. Prj., Ser. 98A
5.25% 06/01/11 4,000 4,195,000
Illinois Hsg. Dev. Auth. Rev.,
Multi-Family Prj., Ser. 94-5
6.65% 09/01/1 3,000 3,262,500
Winnebago & Boone Cnty. G.O.,
Sch. Dist. No. 205 Prj., Ser. 92C
5.90% 02/01/05 500 546,250
------------
28,572,862
------------
INDIANA -- 1.6%
Hamilton Cnty. Ind. Redev. Auth. Rev.,
Cnty. Opt. Inc. Tax Lease Rev. Prj.,
Ser. 99
5.25% 08/01/12 2,120 2,194,200
Indianapolis Ind. Pub. Imp. Rev.,
Prerefunded Ser. 91C
6.70% 01/01/02 2,000 2,190,000
Indianapolis Intl. Arpt. Auth. Rev.,
Federal Express Corp. Prj., Ser. 94
7.10% 01/15/17 1,000 1,113,750
------------
5,497,950
------------
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
KANSAS -- 0.3%
Johnson Cnty. Intl. Imp. Rev.,
Prerefunded Ser. 92A
6.00% 09/01/02 $ 165 $ 177,994
Johnson Cnty. Intl. Imp. Rev.,
Unrefunded Ser. 92A
6.00% 09/01/07 235 251,156
Kansas Dept. of Trans. Rev., Ser. 94A
6.00% 09/01/12 400 435,000
------------
864,150
------------
LOUISIANA -- 0.9%
Orleans Rev., Levee Dist. Pub. Imp.
Prj., Ser. 86
5.95% 11/01/15 2,820 3,116,100
------------
MARYLAND -- 0.0%
Baltimore Port Fac. Rev., E.I. du Pont
Co. Prj., Ser. 84A
6.50% 10/01/11 100 109,625
------------
MASSACHUSETTS -- 2.7%
Massachusetts Bay Trans. Auth. Rev.,
Ser. 95B
5.38% 03/01/20 1,000 1,017,500
Massachusetts St. Hlth. & Ed. Fac.
Auth. Rev., Newton-Wellesley Hosp.
Prj., Ser. 97G
6.13% 07/01/15 1,000 1,110,000
Massachusetts St. Ind. Agcy. Pkg. Fac. Rev.,
Avon Assoc. L.L.C. Prj.,
Ser. 98A
5.38% 04/01/20 5,000 5,062,500
Massachusetts St. Wtr. Res. Auth.
Rev., Ser. 94A
5.70% 08/01/08 680 747,150
New England Ed. Ln. Massachusetts
Mktg. Corp. Rev., Student Ln.
Redemption Prj., Ser. 93F
5.63% 07/01/04 1,350 1,424,250
------------
9,361,400
------------
MICHIGAN -- 1.0%
Greater Detroit Res. Recovery Auth.
Rev., Ser. 93A
6.25% 12/13/08 1,000 1,151,250
Huron Valley Sch. Dist. G.O., Ser. 96
5.88% 05/01/16 2,000 2,230,000
------------
3,381,250
------------
MINNESOTA -- 0.8%
Metropolitan Council Minneapolis
Rev., St. Paul Metro. Area Prj.,
Ser. 91D
6.60% 09/01/04 510 532,312
Southern Minnesota Mun. Pwr. Agcy.
Sply. Sys. Rev., Ser. 86C
5.00% 01/01/17 2,310 2,307,112
------------
2,839,424
------------
MISSOURI -- 2.5%
Lake of The Ozarks Cmnty. Bdg.
Corp. Sys. Rev., Ser. 98
5.25% 12/01/14 4,915 4,902,712
See accompanying notes to financial statements.
11
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
MISSOURI -- (CONTINUED)
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 $ 3,641,244
------------
8,543,956
------------
NEBRASKA -- 0.4%
Omaha Pub. Pwr. Dist. Elec. Rev.,
Prerefunded Ser. 92A
6.30% 02/01/02 340 368,475
Omaha Pub. Pwr. Dist. Elec. Rev.,
Ser. 92B
6.15% 02/01/12 1,000 1,138,750
------------
1,507,225
------------
NEVADA -- 4.0%
Clark Cnty. Passenger Fac. Charge
Rev., Ref. Las Vegas McCarran
Intl. Prj., Ser. 98
5.50% 07/01/15 6,320 6,707,100
Clark Cnty. Sch. Dist. G.O., Ser. 99
5.25% 06/15/15 6,970 7,152,963
------------
13,860,063
------------
NEW JERSEY -- 2.5%
New Jersey Econ. Dev. Auth. Mkt.
Transition Fac. Rev., Ser. 94A
5.80% 07/01/08 495 540,169
New Jersey Trans. Trust Fund Auth.
Rev., Ser. 96B
5.25% 06/15/15 2,000 2,062,500
Port Auth. New York & New Jersey
Spec. Oblig. Rev., JFK Intl. Air
Term. Prj., Ser. 97-6
6.25% 12/01/09 2,680 3,071,950
South Jersey Port. Corp. Rev.,
Marine Term. Prj., Ser. 93G
5.60% 01/01/23 2,980 3,047,050
------------
8,721,669
------------
NEW MEXICO -- 0.5%
Los Alamos Cnty. Util. Inc. Sys. Rev.,
Ser. 94A
5.80%(DOUBLE DAGGER) 07/01/06 1,500 1,635,000
------------
NEW YORK -- 9.5%
Long Island Pwr. Auth. Elec. Sys. Rev.,
Sub. Ser. 98-5
3.15%** 05/01/33 2,500 2,500,000
New York City G.O., Prerefunded
Ser. 95B
6.38% 08/15/09 805 915,688
New York City G.O., Ser. 95A
6.00%(DOUBLE DAGGER) 08/01/05 1,000 1,100,000
New York City G.O., Ser. 95E
6.50% 08/01/02 285 309,225
New York City G.O., Ser. 96A
6.00% 08/01/05 2,000 2,187,500
New York City G.O., Ser. 96D
5.60% 11/01/05 1,000 1,085,000
New York City G.O., Ser. 98J
5.13% 08/01/14 7,500 7,650,000
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
NEW YORK (CONTINUED)
New York City G.O., Unrefunded
Ser. 95B
6.38% 08/15/09 $ 3,035 $ 3,384,025
New York City G.O., Unrefunded
Ser. 95E
6.50% 08/01/02 715 772,200
New York City Ind. Dev. Agcy. Rev.,
Terminal One Group Assoc. Prj., Ser. 94
6.00% 01/01/08 360 387,450
6.00% 01/01/19 500 532,500
New York St. Dorm. Auth. Rev.,
Albany Cnty. Prj., Ser. 97
5.50% 04/01/06 1,000 1,071,250
New York St. Dorm. Auth. Rev.,
St. Josephs Hosp. Prj., Ser. 97
5.25% 07/01/18 3,000 3,048,750
New York St. Hsg. Fin. Agcy. Rev.,
Ser. 96A
6.38% 11/01/04 4,000 4,420,000
New York St. Loc. Govt.
Assistance Corp. Rev., Ser. 95A
5.70% 04/01/08 340 375,275
New York St. Urban Dev. Corr. Fac.
Rev., Ser. 93
5.63% 01/01/07 2,750 2,939,063
------------
32,677,926
------------
NORTH CAROLINA -- 0.8%
Eastern Mun. Pwr. Agcy. Sys. Rev.,
Ser. 93C
5.25% 01/01/04 1,000 1,053,750
5.38% 01/01/05 1,250 1,328,125
North Carolina Mun. Pwr. Agcy. Rev.,
Catawba Elec. Prj., Ser. 92A
6.00% 01/01/10 300 337,500
------------
2,719,375
------------
OHIO -- 1.8%
Cleveland Pkg. Facs. Rev., Ser. 96
5.38% 09/15/12 2,370 2,521,088
Cleveland-Cuyahoga Cnty. Port Auth.
Rev., Ser. 97
6.00% 03/01/07 750 780,000
Columbus Refuse Coal, Fired Plant
5-E-L, G.O., Ser. 91
6.63% 09/15/01 110 117,975
Ohio St. Hgr. Ed. Fac. Cmnty. Rev.,
Univ. of Dayton Prj., Ser. 97
5.35% 12/01/17 2,000 2,082,500
Ohio Wtr. Dev. Auth. Rev., Clean
Wtr. Prj., Ser. 92
5.65% 12/01/05 300 321,375
Olentangy Loc. Sch. Dist. G.O.,
Ser. 95A
5.85% 12/01/07 340 372,300
------------
6,195,238
------------
OKLAHOMA -- 0.3%
Grand River Dam Auth. Rev.,
Ser. 93
8.00% 06/01/02 1,000 1,123,750
------------
OREGON -- 0.1%
Portland Swr. Sys. Rev., Ser. 92A
6.00% 10/01/12 300 327,000
------------
See accompanying notes to financial statements.
12
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA -- 13.9%
Allegheny Cnty. Hosp. Dev. Auth.
Rev., Univ. of Pittsburgh Med.
Ctr. Prj., Ser. 95
5.35% 12/01/17 $ 1,595 $ 1,640,856
Beaver Cnty. G.O., Ser. 96A
5.75% 10/01/15 1,000 1,106,250
Beaver Cnty. Ind. Dev. Auth. Poll.
Ctrl. Rev., St. Joe Minerals Corp.
Prj., Ser. 77
6.00% 05/01/07 2,425 2,429,195
Dauphin Cnty. Gen. Auth. Rev.,
Hotel & Conference Ctr. Hyatt
Regency Prj., Ser. 98
6.20% 01/01/19 5,000 5,006,250
Delaware Cnty. Auth. Rev., Mercy
Hlth. Corp. Prj., Ser. 96
5.75% 12/15/20 2,400 2,586,000
Delaware Valley Regl. Fin. Auth. Loc.
Govt. Rev., Ser. 98A
5.50% 08/01/28 3,000 3,221,250
Indiana Cnty. Ind. Dev. Auth. Poll. Ctrl.
Rev., New York St. Elec. & Gas
Corp. Prj., Ser. 95A
6.00% 06/01/06 2,500 2,784,375
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Kidspeace Oblig. Prj., Ser. 98
6.00% 11/01/23 4,000 4,320,000
Pennsylvania Con. Ctr. Auth.
Rev., Ser. 94A
6.60% 09/01/09 4,250 4,770,625
Pennsylvania G.O., Ser. 94
5.50% 06/15/08 1,000 1,071,250
Pennsylvania G.O., Ser. 96
5.38% 05/15/09 3,000 3,210,000
Pennsylvania Intergovernmental Coop.
Auth. Spec. Tax Rev., City of
Philadelphia Fdg. Prj., Ser. 96
5.50% 06/15/20 4,000 4,150,000
Pennsylvania St. Hgr. Ed. Fac. Auth.
Hlth. Svcs. Rev., Univ. of
Pennsylvania Hlth. Svcs. Prj.,
Ser. 96A
5.88% 01/01/15 2,750 2,901,250
Philadelphia Ind. Dev. Auth. Rev.,
PGH Dev. Corp. Prj., Ser. 93
5.25% 07/01/17 1,935 1,966,444
Philadelphia Mun. Auth. Rev., Ref.
Ser. 93D
6.13% 07/15/08 1,000 1,090,000
Pottstown Borough Auth. Swr. Rev.,
Ser. 96
5.50% 11/01/16 3,150 3,287,813
Tredyffrin Twp. G.O., Ser. 96
5.25% 11/15/21 2,000 2,032,500
------------
47,574,058
------------
PUERTO RICO -- 0.3%
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 94S
7.00% 07/01/06 1,000 1,171,250
------------
RHODE ISLAND -- 0.9%
Rhode Island Depositors Econ.
Protection Corp. Spec. Oblig. Rev.,
Ser. 93A
5.63% 08/01/09 1,000 1,070,000
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
RHODE ISLAND -- (CONTINUED)
Rhode Island St. Hlth. & Ed. Bldg.
Corp. Rev., Hosp. Fin. Lifespan
Oblig. Grp. Prj., Ser. 96
5.50% 05/15/16 $ 2,000 $ 2,100,000
------------
3,170,000
------------
SOUTH CAROLINA -- 0.3%
Piedmont Mun. Pwr. Agcy. Elec. Rev.,
Ser. 85B
6.25% 01/01/18 500 523,750
South Carolina Pub. Svcs. Auth. Rev.,
Santee Cooper Prj., Ser. 91D
6.50% 07/01/14 100 110,125
Spartanburg Wtr. Rev., Prerefunded
Ser. 93
6.20% 06/01/09 15 16,256
Spartanburg Wtr. Rev., Unrefunded
Ser. 92
6.20% 06/01/09 285 304,238
------------
954,369
------------
SOUTH DAKOTA -- 0.2%
South Dakota St. Lease Rev., Tran.
Cert. Prj., Ser. 93A
6.38% 09/01/05 500 561,875
------------
TENNESSEE -- 0.8%
Maury Cnty. Ind. Dev. Poll. Ctrl. Rev.,
Saturn Corp. Prj., Ser. 94
6.50% 09/01/24 1,800 1,989,000
Shelby Cnty. G.O., Ser. 99B
5.25% 09/01/24 575 614,531
------------
2,603,531
------------
TEXAS -- 7.8%
Austin Util. Sys. Rev., Ser. 97
5.13% 11/15/15 2,000 2,022,500
Austin Util. Sys. Rev., Ser. 98
6.50% 11/15/05 2,000 2,275,000
Dallas Ind. Dev. Corp. Rev.,
CR/PL, Inc. Prj., Ser. 87
7.50% 08/01/17 2,400 2,610,000
Houston Arpt. Sys. Spec. Fac. Rev.,
Ser. 97A
6.00% 07/15/07 2,660 2,942,625
5.38% 07/15/08 1,000 1,060,000
Sabine River Auth. Poll. Ctrl. Rev.,
Texas Util. Elec. Prj., Ser. 90B
8.25% 10/01/20 2,500 2,681,250
San Antonio Arpt. Rev., Ser. 91
7.13% 07/01/07 2,000 2,255,000
7.13% 07/01/08 2,645 2,992,156
San Antonio Elec. & Gas Rev.,
Ser. 98A
5.25% 02/01/14 4,000 4,160,000
Spring Branch Sch. Dist. G.O.,
Ser. 95
5.95% 02/01/12 2,245 2,424,600
Texas Wtr. Dev. Rev., St. Revolving
Fund Prj., Ser. 92
6.20% 07/15/05 680 739,500
University of Texas Rev., Prerefunded
Ser. 91A
7.00% 08/15/07 160 175,400
See accompanying notes to financial statements.
13
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
TEXAS -- (CONTINUED)
University of Texas Rev., Unrefunded
Ser. 91A
7.00% 08/15/07 $ 340 $ 368,900
------------
26,706,931
------------
UTAH -- 0.1%
Jordan Sch. Dist. G.O., Ser. 93
6.05% 06/15/03 340 365,075
Salt Lake City Hosp. Rev., Ser. 88A
8.13% 05/15/15 100 129,375
------------
494,450
------------
VERMONT -- 1.1%
Burlington Elec. Rev., Ser. 96A
6.00% 07/01/06 1,545 1,718,813
Vermont St. G.O., Prerefunded
Ser. 90A
6.75% 02/01/08 1,000 1,048,330
Vermont St. G.O., Ser. 94A
6.00% 01/15/03 1,000 1,077,500
------------
3,844,643
------------
VIRGINIA -- 3.1%
Fairfax Cnty. Pub. Imp. G.O.,
Ser. 97A
5.25% 06/01/15 5,285 5,456,763
Hampton G.O., Ser. 95
6.00% 01/15/08 400 444,000
Pocahontas Pkwy. Toll Rd. Rev.,
Ser. 98B
5.85% 08/15/23 15,300 3,767,625
Virginia Hsg. Dev. Auth. Rev.,
Multi-Family Prj., Ser. 95C
6.70% 11/01/15 1,000 1,092,500
------------
10,760,888
------------
WASHINGTON -- 2.2%
Seattle Met. Mun. G.O., Ser. 93
5.40% 01/01/08 1,000 1,056,250
Washington G.O., Ser. 96A
5.38% 07/01/21 2,000 2,050,000
Washington St. Pub. Pwr. Sply. Sys.
Rev., Nuclear Prj. No. 1, Ser. 97B
5.13% 07/01/17 1,000 1,001,250
Washington St. Pub. Pwr. Sply. Sys.
Rev., Nuclear Prj. No. 3, Ser. 96A
6.00% 07/01/06 3,000 3,333,750
------------
7,441,250
------------
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
WISCONSIN -- 0.7%
Milwaukee Met. Swr. Dist. G.O.,
Ser. 92A
6.13% 10/01/03 $ 250 $ 273,750
Wisconsin Trans. Rev., Ser. 92A
5.50% 07/01/05 2,000 2,085,000
------------
2,358,750
------------
TOTAL MUNICIPAL BONDS
(Cost $311,045,370) 324,730,756
------------
SHORT TERM INVESTMENTS -- 5.4%
Smith Barney Tax-Free Money
Market Fund
(Cost $18,704,251) 18,704 18,704,251
------------
TOTAL INVESTMENTS
IN SECURITIES -- 100.0%
(Cost $329,749,621*) $343,435,007
============
- ------------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $14,120,109
Gross unrealized depreciation (434,723)
-----------
$13,685,386
===========
** Rates shown are the rates as of March 31, 1999, and the maturities shown are
the longer of the next interest readjustment date or the date the principal
amount can be recovered through demand.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$1,500,000 on 120 long U.S. Treasury Bond future contracts expiring June
1999. The value of such contracts on March 31, 1999 was $14,467,500, thereby
resulting in an unrealized loss of $69,727.
See accompanying notes to financial statements.
14
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
TAX-FREE INCOME PORTFOLIO
MARCH 31, 1999 (UNAUDITED)
ASSETS
Investments at value (Cost $329,749,621) ..................... $343,435,007
Cash ......................................................... 1,960,593
Interest receivable .......................................... 4,682,282
Investments sold receivable .................................. 23,985,439
Capital shares sold receivable ............................... 5,000
Futures commissions .......................................... 1,080
Prepaid expenses ............................................. 15,608
------------
TOTAL ASSETS .......................................... 374,085,009
------------
LIABILITIES
Investments purchased payable ................................ 35,887,107
Distributions payable ........................................ 1,246,363
Advisory fees payable ........................................ 117,010
Administrative fees payable .................................. 48,805
Transfer agent fees payable .................................. 25,523
Other accrued expenses payable ............................... 47,943
Futures margin payable ....................................... 63,750
------------
TOTAL LIABILITIES ..................................... 37,436,501
------------
NET ASSETS (Applicable to 27,338,557 Institutional shares,
588,223 Service shares, 674,117 Investor A shares,
288,872 Investor B shares and 270,020 Investor C
shares outstanding) .......................................... $336,648,508
============
NET ASSET VALUE AND REDEMPTION PRICE PER INSTITUTIONAL,
SERVICE AND INVESTOR A SHARE
($330,196,128 (DIVIDE) 28,600,897) ........................... $11.54
======
OFFERING PRICE PER INSTITUTIONAL AND SERVICE SHARE .............. $11.54
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($11.54 (DIVIDE) 0.960) ...................................... $12.02
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject
to a maximum contingent deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($3,335,008 (DIVIDE) 288,872) ........... $11.54
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject
to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($3,117,372 (DIVIDE) 270,020) ........... $11.54
======
See accompanying notes to financial statements.
15
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS -- 103.8%
PENNSYLVANIA -- 98.1%
Allegheny Cnty. Apt. Rev., Ser. 97A
5.75% 01/01/06 $ 4,000 $ 4,335,000
Allegheny Cnty. Auth. Swr. Rev., Ser. 86B
6.95% 06/01/99 1,000 1,005,820
Allegheny Cnty. G.O., Ser. 90C
7.00% 12/01/00 1,000 1,058,750
Allegheny Cnty. G.O., Ser. 96C
5.10% 10/01/09 6,000 6,262,500
Allegheny Cnty. Hosp. Dev. Auth.
Rev., Mercy Hosp. of Pittsburgh Prj.,
Ser. 91
6.75% 04/01/01 1,000 1,080,000
Allegheny Cnty. Hosp. Dev. Auth. Rev.,
Ser. 95A
6.00% 09/01/10 5,000 5,087,500
6.20% 09/15/15 1,000 1,015,000
Allegheny Cnty. Hosp. Dev. Auth. Rev.,
Univ. of Pittsburgh Med. Ctr. Prj.,
Ser. 95
5.35% 12/01/17 10,000 10,287,500
Allegheny Cnty. Inst. Dist. Rev.,
Ser. 90
7.30% 04/01/09 2,000 2,062,200
Allegheny Cnty. Res. Fin. Auth. Mtg.
Rev., Sgl. Fam. Mtg. Prj., Ser. 94Y
6.25% 05/01/17 290 309,937
Allegheny Cnty. Sanit. Auth. Swr. Rev.,
Ser. 86A
7.25% 06/01/99 300 301,881
7.30% 06/01/99 250 251,587
Allegheny Cnty. Sanit. Auth. Swr. Rev.,
Ser. 86B
7.25% 06/01/99 100 100,627
7.30% 06/01/99 500 503,175
7.45% 06/01/99 500 503,285
Allegheny Cnty. Unltd. Tax G.O.,
Ser. 93C
5.00% 10/01/08 2,500 2,596,875
Allentown Pkg. Auth. Pkg. Rev., Gtd.,
Ser. 91
6.63% 11/15/01 750 807,187
Armstrong Cnty. Hosp. Auth. Hlth. Ctr.
Rev., Canterbury Pl. Prj., Ser. 91
6.50% 12/01/01 650 697,937
Armstrong Cnty. Hosp. Auth. Rev.,
St. Francis Med. Ctr. Prj., Ser. 92A
6.10% 06/01/02 1,000 1,068,750
Baldwin & Whitehall Sch. Dist. Rev.,
Ser. 92A
6.60% 08/15/02 1,000 1,088,750
Bangor Area Sch. Dist. G.O., Ser. 94
6.30% 03/01/04 1,655 1,743,956
Beaver Cnty. Hosp. Auth. Rev., Med
Ctr. Beaver Pennsylvania Inc. Prj.,
Ser. 92A
6.60% 07/01/04 2,000 2,207,500
6.25% 07/01/11 1,000 1,095,000
Beaver Cnty. Hosp. Auth. Rev., Ser. 96A
5.80% 10/01/06 5,830 6,471,300
Bensalem Twp. Wtr. & Swr. Auth.
Rev., Ser. 93A
6.50% 06/01/02 1,000 1,071,250
Berks Cnty. Hlth. Care G.O., Ser. 98
5.00% 03/01/28 2,000 1,910,000
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Berks Cnty. G.O., Ser. 92
6.30%** 11/10/20 $ 2,000 $ 2,180,000
Berks Cnty. Mun. Auth. Cltrl. Rev.,
Ser. 90
7.30% 12/01/00 1,000 1,062,500
Berks Cnty. Unltd. Tax G.O.,
Ser. 98
5.38% 11/15/28 6,685 6,810,344
Bethel Park Sch. Dist. G.O., Ser. 92B
7.00% 02/01/00 250 257,710
Bethel Park Sch. Dist. G.O., Ser. 99
6.00% 08/01/99 80 80,726
Bethlehem Wtr. Auth. Rev., Ser. 92
6.25% 11/15/01 750 800,625
6.35%(DOUBLE DAGGER) 11/15/01 1,000 1,070,000
Bethlehem Wtr. Auth. Rev., Ser. 92A
6.10% 11/15/02 500 540,000
Bradford Area Sch. Dist. G.O., Ser. 95
5.80% 10/01/05 1,465 1,616,994
Bristol Twp. Swr. Auth. Rev., Ser. 84
10.00% 04/01/02 835 919,544
Bucks Cnty. Cmnty. Coll. Bldg. Auth.
Coll. Rev., Ser. 92
6.20% 06/15/02 1,000 1,075,000
Bucks Cnty. Unltd. Tax G.O., Ser. 95
5.88% 05/01/05 1,575 1,730,531
Butler Area Sch. Dist. G.O., Ser. 98B
5.38% 10/01/18 2,000 2,057,500
Cambria Cnty. Unltd. Tax G.O., Ser. 91
8.25% 06/01/00 260 268,450
Cambria & Blair Cntys. Rev., Bldg.
Auth. Prj., Ser. 77
6.38% 02/01/07 1,545 1,713,019
Cambria Twp. Wtr. Auth. Ind. Rev.,
Ser. 93A
6.00% 12/01/02 1,000 1,024,010
Central Bucks Sch. Dist. G.O., Ser. 91
6.75% 02/01/05 1,000 1,048,750
6.90% 02/01/08 750 788,437
Central Bucks Sch. Dist. G.O., Ser. 94A
6.45% 11/15/04 1,000 1,126,250
Central Bucks Sch. Dist. Unltd.
Tax G.O., Ser. 94A
6.70% 11/15/09 500 567,500
Central Dauphin Sch. Dist. G.O.,
Ser. 91
6.00% 06/01/01 1,500 1,575,000
Chester Cnty. Unltd. Tax G.O., Ser. 91
6.60% 08/01/01 1,000 1,065,000
7.00% 08/01/01 750 807,187
6.70% 12/15/04 385 410,025
Coatesville Sch. Dist. G.O., Ser. 91
7.13% 11/01/00 150 158,625
7.25% 11/01/00 750 794,062
6.70% 03/01/01 1,000 1,058,750
Coatesville Sch. Dist. G.O., Ser. 97
5.13% 04/01/17 10,050 10,150,500
Conestoga Valley Sch. Dist. G.O.,
Ser. 91B
7.00% 05/01/01 750 801,562
7.10% 05/01/01 750 802,500
Council Rock Sch. Dist. G.O., Ser. 91
6.60% 03/01/02 1,000 1,051,250
Council Rock Sch. Dist. Rev., Ser. 78
6.63% 09/01/01 1,325 1,416,094
See accompanying notes to financial statements.
16
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Crawford Central Sch. Dist. Unltd. Tax
G.O., Ser. 95
5.75% 02/15/11 $ 1,585 $ 1,729,631
Crawford Central Sch. Dist. G.O.,
Ser. 95
7.00% 02/15/05 1,765 2,023,131
Cumberland Cnty. Mun. Auth. Coll.
Rev., Messiah Coll. Prj., Ser. 95
5.13% 10/01/15 2,000 2,037,500
Dauphin Cnty. Gen. Auth. Hosp.
Rev., Hapsco Western
Pennsylvania Hosp. Prj., Ser. 92
6.25% 07/01/16 1,000 1,066,250
Dauphin Cnty. Gen. Auth. Rev.,
Harrisburg Intl. Arpt. Prj., Ser. 91
7.13% 06/01/01 750 796,875
Dauphin Cnty. Gen. Auth. Rev.,
Hotel & Conference Ctr. Hyatt
Regency Prj., Ser. 98
6.20% 01/01/19 13,225 13,241,531
Dauphin Cnty. Gen. Auth. Rev., Sch.
Dist. Pooled Fin. Prog. Prj., Ser. 86
5.50% 06/01/07 550 601,562
6.85% 06/01/09 2,300 2,492,625
Dauphin Cnty. Gen. Auth. Rev.,
Ser. 86 A-F
6.20% 01/01/29 5,000 4,993,750
Dauphin Cnty. Gen. Auth. Rev., Ser. 86
5.60%** 06/01/26 525 564,375
5.70%** 06/01/26 660 713,625
6.71%** 06/01/26 1,325 1,432,656
6.80%** 06/01/26 2,305 2,565,162
Dauphin Cnty. Pinnacle Gen. Auth.
Hlth. Sys. Rev., Ser. 97
5.50% 05/15/17 3,500 3,644,375
Deer Lakes Sch. Dist. Unltd. Tax G.O.,
Ser. 95
6.35% 01/15/14 1,000 1,170,000
6.45% 01/15/19 1,300 1,508,000
Delaware Cnty. Auth. Coll. Rev.,
Haverford Coll. Prj., Ser. 90
7.25% 11/15/00 1,000 1,080,000
7.00% 11/15/02 600 645,000
Delaware Cnty. Auth. Hosp. Rev.,
Delaware Cnty. Mem. Hosp. Prj.,
Ser. 89A
7.20% 08/15/99 1,450 1,499,851
Delaware Cnty. Auth. Hosp. Rev.,
Ser. 95
5.50% 08/15/15 6,480 6,747,300
Delaware Cnty. Auth. Rev., Mercy
Hlth. Corp. Prj., Ser. 96
5.75% 12/15/20 3,735 4,024,462
Delaware Cnty. G.O., Ser. 95
5.50% 10/01/15 1,500 1,560,000
Delaware Cnty. Ind. Dev. Auth. Rev.,
Wtr. Fac. Philadelphia Suburban
Wtr. Prj., Ser. 92
6.50% 06/01/10 1,000 1,087,500
Delaware Cnty. Mem. Hosp. Auth.
Rev., Ser. 95
5.50% 08/15/19 3,000 3,086,250
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Delaware Cnty. G.O., Ser. 99
5.13% 10/01/13 $ 3,545 $ 3,677,937
5.13% 10/01/14 4,500 4,651,875
5.13% 10/01/15 6,915 7,113,806
5.13% 10/01/16 2,710 2,774,362
5.13% 10/01/17 2,805 2,857,594
Delaware River Port Auth.
Pennsylvania & New Jersey Rev.,
Ser. 95
5.40% 01/01/11 3,000 3,187,500
5.40% 01/01/14 3,200 3,344,000
Delaware Valley Regl. Fin. Auth. Loc.
Govt. Rev., Ser. 96A
5.90% 04/15/16 2,540 2,705,100
Delaware Valley Regl. Fin. Auth. Loc.
Govt. Rev., Ser. 98A
5.50% 08/01/28 11,000 11,811,250
Derry Area Sch. Dist. G.O., Ser. 92A
6.60% 09/01/10 750 807,187
Dover Area Sch. Dist. G.O., Ser. 96
5.75% 04/01/12 2,445 2,622,262
Downingtown G.O., Ser. 91
6.70% 01/15/02 750 809,062
East Whiteland-Tredyffrin Joint Trans.
Auth. Rev., Hwy. Imp. Prj., Ser. 94
6.30% 01/01/16 775 819,562
Elizabeth Forward Sch. Dist. G.O.,
Ser. 90
7.05% 01/15/00 500 514,780
7.25% 01/15/00 750 773,310
Ephrata Sch. Dist. G.O., Ser. 91A
6.80% 04/15/01 750 796,875
Ephrata Sch. Dist. G.O., Ser. 98A
5.25% 04/15/11 3,535 3,702,912
Erie Cnty. Prison Auth. Lease Rev.,
Ser. 91
6.35% 11/01/00 2,500 2,615,625
6.45% 11/01/01 1,000 1,071,250
6.25% 11/01/11 3,225 3,442,687
Erie Swr. Auth. Rev., Ser. 97
5.63% 06/01/17 2,800 2,950,500
Fairview Sch. Dist. G.O., Ser. 95
6.00% 02/15/05 1,000 1,105,000
Falls Twp. G.O., Ser. 90
6.90% 12/15/00 1,000 1,047,500
Falls Twp. Hosp. Auth. Rev.,
Delaware Valley Med. Ctr. Prj.,
Ser. 92
7.00% 08/01/22 2,000 2,020,000
Forest Hills G.O., Ser. 92
6.45% 05/01/09 750 797,812
Fox Chapel Area Sch. Dist. G.O.,
Ser. 92A
6.30% 02/15/02 2,000 2,140,000
Franklin Cnty. Ind. Dev. Auth. Hosp.
Rev., Chambersburg Hosp. Prj.,
Ser. 91
6.50% 07/01/04 1,000 1,027,820
Governor Mifflin Sch. Dist. G.O., Ser. 92
6.30% 02/01/02 1,000 1,070,000
Great Valley Sch. Dist. Chester Cnty.
G.O., Ser. 92
6.10% 03/01/00 1,000 1,026,020
See accompanying notes to financial statements.
17
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Greater Johnstown Wtr. Auth. Rev.,
Ser. 92
6.10% 01/01/04 $ 685 $ 730,381
Greene Cnty. Gen. Fac. Auth. Rev.,
Ser. 91A
7.00% 07/01/01 3,325 3,628,406
Greensburg Salem Sch. Dist. G.O.,
Ser. 92
6.45%(DOUBLE DAGGER) 09/15/18 1,000 1,076,250
Hampton Twp. Sch. Dist. G.O., Ser. 91A
6.95% 02/15/01 1,000 1,060,000
Harrisburg Auth. Wtr. Rev., Ser. 91
7.00% 07/15/01 1,000 1,075,000
Harrisburg Auth. Wtr. Rev., Ser. 92
6.55% 08/15/02 1,600 1,740,000
Harrisburg Pkg. Auth. Rev., Ser. 86B
7.40% 11/15/00 500 531,250
Hatboro Sch. Dist. G.O., Ser. 91A
6.65% 04/01/07 1,000 1,050,000
6.70% 04/01/08 1,000 1,051,250
Hempfield Sch. Dist. Rev., Ser. 91
6.00% 09/15/01 650 671,937
Hempfield Twp. Mun. Auth. Gtd. Swr.
Rev., Westmoreland Cnty. Prj.,
Ser. 91
6.50% 09/01/02 1,000 1,087,500
Indiana Cnty. Ind. Dev. Auth. Poll.
Ctrl. Rev., New York St. Elec. &
Gas Corp. Prj., Ser. 95A
6.00% 06/01/06 1,000 1,113,750
Jeannette Sch. Dist. G.O., Ser. 91
6.65% 06/15/01 750 798,750
Jefferson Cnty. Mun. Auth. Rev.,
Ser. 92
6.50% 06/01/06 1,515 1,638,094
Lancaster Cnty. Hosp. Auth. Rev.,
Hlth. Ctr. Masonic Homes Prj.,
Ser. 94
5.30% 11/15/08 500 518,750
Lancaster Cnty. Hosp. Auth. Rev.,
Hlth. United Church Homes Prj.,
Ser. 89
9.13% 10/01/99 3,500 3,669,015
Lancaster Swr. Auth. Sply. Spec.
Oblig. Rev., Ser. 98
5.25% 04/01/21 11,480 11,594,800
Langhorne Hgr. Ed. & Hlth. Auth.
Rev., Ser. 92
6.30% 11/15/03 740 801,975
Langhorne Manor Boro Hgr. Ed. &
Hlth. Auth. Rev., Ser. 92
6.15% 11/15/02 510 552,075
6.50% 11/15/14 1,500 1,606,875
Langhorne Manor Boro Hgr. Ed. &
Hlth. Auth. Rev., Ser. 94
6.90% 11/15/14 1,000 1,148,750
Lebanon Cnty. Hosp. Auth. Rev.,
Good Samaritan Hosp. Prj., Ser. 93
5.55% 11/15/04 355 373,637
5.65% 11/15/05 760 802,750
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Kidspeace Oblig. Prj., Ser. 98
5.70% 11/01/09 $ 4,000 $ 4,305,000
6.00% 11/01/18 2,000 2,170,000
6.00% 11/01/23 3,000 3,240,000
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Lehigh Valley Hosp., Inc. Prj.,
Ser. 92A
5.75% 07/01/99 1,000 1,006,100
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Saint Lukes Hosp., Bethlehem
Prj., Ser. 93
6.00% 11/15/02 1,750 1,881,250
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Ser. 90A
7.00% 07/01/08 1,500 1,582,500
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Ser. 90B
7.00% 07/01/00 1,200 1,275,000
Lehigh Cnty. Unltd. Tax G.O., Ser. 91
6.90% 08/01/00 500 532,500
Ligonier Valley Sch. Dist. Unltd. Tax
G.O., Ser. 94
5.65% 03/01/14 2,000 2,157,500
Lower Merion Twp. Sch. Dist. G.O.,
Ser. 98D
5.00% 05/15/07 2,110 2,233,962
Lower Providence Twp. Swr. Auth.
Rev., Ser. 92
6.63% 05/01/02 1,000 1,082,500
Luzerne Cnty. Flood Prot. Auth. Gtd.
Rev., Ser. 96
5.50% 07/15/16 1,360 1,480,700
5.60% 07/15/21 4,720 5,168,400
Lycoming Cnty. Auth. Coll. Rev.,
Pennsylvania Coll. Tech. Prj.,
Ser. 90
6.80% 11/01/00 1,000 1,053,750
Lycoming Cnty. Auth. Hosp. Rev.,
Divine Providence Hosp. Prj., Ser. 95
5.38% 11/15/10 6,480 6,844,500
Lycoming Cnty. G.O., Ser. 91A
6.85% 08/15/01 1,000 1,073,750
Manheim Central Sch. Dist. G.O.,
Ser. 91
6.70% 03/01/04 1,000 1,050,000
McKeesport Area Sch. Dist. G.O.,
Ser. 96A
5.75% 10/01/06 1,750 1,935,937
Media Boro Gtd. Wtr. Rev., Ser. 92
6.55% 01/01/17 500 540,625
Methacton Sch. Dist. Auth. Rev.,
Ser. 78
6.50% 10/01/06 475 545,062
Middletown Twp. Swr. Auth. Rev.,
Ser. 68
5.63% 05/01/01 15 15,394
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Coll. Rev., Cnty. Cmnty.
Coll. Prj., Ser. 90
7.00% 11/01/00 500 527,500
See accompanying notes to financial statements.
18
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Hosp. Rev., Abington Mem.
Hosp. Prj., Ser. 91
6.66%** 07/05/11 $ 2,400 $ 2,571,000
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Hosp. Rev., BMH Realty
Corp. Prj., Ser. 91
6.75% 12/01/99 750 782,467
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Hosp. Rev., Sacred Heart
Hosp. Norristown Prj., Ser. 87A
6.80% 02/01/13 750 754,072
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Rev., Abington Mem.
Hosp. Prj., Ser. 91A
6.10% 06/01/99 1,000 1,004,540
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Rev., Beaver Coll. Prj., Ser. 96
5.75% 04/01/12 1,690 1,833,650
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Rev., Holy Redeemer
Hosp. Prj., Ser. 97A
5.25% 10/01/27 9,000 9,090,000
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Rev., Pottstown Hlth. Care
Corp. Prj., Ser. 98
5.00% 01/01/16 6,235 6,219,412
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Rev., St. Josephs Univ. Prj.,
Ser. 92
6.50% 12/15/12 750 825,937
Montgomery Cnty. Hosp. Auth. Rev.,
Suburban Gen. Hosp. Prj., Ser. 76
7.75% 05/01/02 50 53,375
Montgomery Cnty. Ind. Dev. Auth.
Rev., Poll. Ctrl. Prj., Ser. 91B
6.70% 12/01/21 1,000 1,083,750
Moon Area Sch. Dist. Unltd. Tax
G.O., Ser. 83
10.00% 05/15/99 80 80,586
Moon Twp. Wtr. & Swr. Auth. Rev.,
Ser. 94
6.70% 12/01/19 1,000 1,023,360
New Garden Twp. Swr. Auth. Rev.,
Ser. 91
7.00% 03/01/15 420 442,575
Norristown G.O., Ser. 90
6.90% 11/15/00 1,000 1,055,000
7.05% 11/15/00 1,250 1,321,875
North Allegheny Sch. Dist. G.O.,
Ser. 90
7.20% 05/01/00 750 781,672
7.60% 05/01/00 750 784,800
North Huntingdon Twp. G.O., Ser. 91
6.65% 04/01/04 1,635 1,718,794
Northampton Area Sch. Dist. Rev.,
Ser. 94
6.88% 09/01/99 1,000 1,015,140
Northampton Cnty. Hgr. Ed. Auth.
Rev., Lehigh Univ. Prj., Ser. 89
7.00% 11/15/04 2,700 2,816,694
Northampton Cnty. Hgr. Ed. Auth.
Rev., Lehigh Univ. Prj., Ser. 91
7.00% 10/15/11 4,000 4,405,000
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Northampton Cnty. Hgr. Ed. Auth.
Rev., Moravian Coll. Prj., Ser. 94
6.10% 07/01/12 $ 1,950 $ 2,088,937
Northampton Cnty. Hosp. Auth.
Rev., Easton Hosp. Prj., Ser. 88
7.70% 01/01/04 1,000 1,029,230
Northampton Cnty. Ind. Dev. Auth.
Poll. Ctrl. Rev., Met. Ed. Co. Prj.,
Ser. 95A
6.10% 07/15/21 1,000 1,098,750
Northampton Cnty. Rev.,
Unrefunded Ser. 98
7.10% 11/15/09 1,800 1,878,876
Northeast Sch. Dist. G.O., Ser. 91
7.00% 01/15/10 890 942,287
Northeast Sch. Dist. G.O., Ser. 98
5.20% 09/01/23 4,000 4,010,000
Northeastern Hosp. & Ed. Auth.
Rev., Luzerne Cnty. Coll. Prj.,
Ser. 97
5.15% 08/15/16 3,245 3,289,619
Northeastern Hosp. & Ed. Auth.
Rev., Wilkes Univ. Prj., Ser. 93
5.40% 10/01/03 845 876,687
Northeastern Hosp. & Ed. Auth.
Rev., Wyoming Vy. Hlth. Care Prj.,
Ser. 94A
6.50% 01/01/07 1,000 1,125,000
Northeastern Hosp. Auth. Rev.,
Nesbitt Mem. Hosp. Prj., Ser. 90A
7.50% 07/01/00 1,250 1,335,938
Northeastern Hosp. Auth. Rev.,
Wilkes-Barre Hosp. Prj., Ser. 87A
7.65% 07/01/99 805 829,448
Northgate Sch. Auth. Bldg. Rev.,
Ser. 78
6.38% 02/15/07 825 945,656
Northumberland Cnty. Auth. Gtd.
Lease Rev., Ser. 91
6.25% 10/15/01 4,000 4,265,000
6.60% 10/15/01 1,250 1,340,625
7.75% 10/15/01 2,110 2,321,000
Northumberland Cnty. Auth. Gtd.
Lease Rev., Ser. 92
6.70% 08/15/02 1,000 1,092,500
Parkland Sch. Dist. Rev., Ser. 96
5.75% 09/01/14 2,910 3,128,250
Penn Hills G.O., Ser. 93
5.88% 12/01/02 2,000 2,147,500
Pennsbury Sch. Dist. Unltd. Tax G.O.,
Ser. 94
6.65% 08/15/09 685 774,050
Pennsylvania Con. Ctr. Auth. Rev.,
Ser. 94A
6.60% 09/01/09 12,465 13,991,963
Pennsylvania Econ. Dev. Fin. Auth.
Sch. Rev., Baldwin Sch. Prj.,
Ser. 94A
6.35% 04/01/04 555 594,544
Pennsylvania Fin. Auth. Rev., Mun.
Cap. Imp. Prj., Ser. 93
6.60% 11/01/09 22,805 25,114,006
Pennsylvania G.O., Ser. 94
5.50% 06/15/08 1,000 1,071,250
See accompanying notes to financial statements.
19
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Pennsylvania Hgr. Ed. Fac. Auth.
Rev., Duquesne Univ. Prj., Ser. 91C
6.75%(DOUBLE DAGGER) 04/01/20 $ 1,000 $ 1,061,250
Pennsylvania Hgr. Ed. Fac. Auth.
Rev., Lehigh Univ., Northampton
Prj., Unrefunded Ser. 89
7.10% 11/15/09 300 313,146
Pennsylvania Hgr. Ed. Fac. Auth.
Rev., Philadelphia Coll. of Textiles
& Science Prj., Ser. 93
5.15% 02/01/04 1,230 1,294,575
Pennsylvania Hgr. Ed. Fac. Auth.
Rev., Philadelphia Coll. Osteopathic
Prj., Ser. 93
5.35% 12/01/10 3,735 3,907,744
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Ser. 90
5.38% 01/01/15 5,200 5,395,000
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Thomas Jefferson Univ. Prj., Ser. 89A
7.00% 07/01/03 2,315 2,378,639
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Thomas Jefferson Univ. Prj., Ser. 89B
7.30% 07/01/99 2,500 2,573,900
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Thomas Jefferson Univ. Prj.,
Ser. 90
7.30% 11/01/00 1,500 1,616,250
Pennsylvania Hgr. Ed. Fac. Auth. Rev.,
Univ. of Pennsylvania Prj., Ser. 98
5.75% 01/01/22 32,415 33,671,081
Pennsylvania Hsg. Fin. Agcy. AMT Sgl.
Fam. Mtg. Rev., Ser. 96A
6.05% 10/01/16 2,500 2,631,250
Pennsylvania Hsg. Fin. Agcy.
Multi-Family FHA Ins. Rev., Ref. Ser. 92
8.10% 07/01/13 2,000 2,172,500
Pennsylvania Hsg. Fin. Agcy. Res.
Rev., Section 8 Prj., Ref. Ser. 91A
7.60% 07/01/13 1,000 1,063,750
Pennsylvania Hsg. Fin. Agcy. Rev.,
Ser. 92
6.40% 07/01/12 1,500 1,601,250
Pennsylvania Hsg. Fin. Agcy. Rev.,
Sgl. Fam. Mtg. Prj., Ser. 91
6.95% 10/01/05 250 262,813
Pennsylvania Hsg. Fin. Agcy. Rev.,
Sgl. Fam. Mtg. Prj., Ser. 94A
6.60% 04/01/17 1,000 1,062,500
Pennsylvania Hsg. Fin. Agcy. Rev.,
Sgl. Fam. Mtg. Prj., Ser. 94B
6.88% 10/01/24 1,500 1,603,125
Pennsylvania Hsg. Fin. Agcy. Rev.,
Ser. 98
5.50% 04/01/30 9,000 1,687,500
Pennsylvania Ind. Dev. Auth. Rev.,
Pennvest Prj., Ser. 90
6.00% 09/01/00 775 803,094
Pennsylvania Infra. Investment Auth.
Rev., Pennvest Ln. Pool, Ser. 90
5.25% 07/01/02 6,620 6,917,900
Pennsylvania Infra. Investment Auth.
Rev., Pennvest Ln. Pool, Ser. 90B
6.80% 09/01/10 3,985 4,433,313
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Pennsylvania Infra. Investment Auth.
Rev., Pennvest Ln. Pool, Ser. 93
6.00% 09/01/03 $ 1,990 $ 2,166,613
Pennsylvania Infra. Investment Auth.
Rev., Pennvest Ln. Pool, Ser. 94
6.00% 09/01/06 1,930 2,154,363
Pennsylvania Intergovernmental Coop.
Auth. Spec. Tax Rev., City of
Philadelphia Fdg. Prj., Ser. 92
6.80% 06/15/02 5,505 6,014,213
Pennsylvania Intergovernmental Coop.
Auth. Spec. Tax Rev., City of
Philadelphia Fdg. Prj., Ser. 93
5.15% 06/15/05 10,000 10,537,500
5.88% 06/15/23 15,000 16,224,900
Pennsylvania Intergovernmental Coop.
Auth. Spec. Tax Rev., City
of Philadelphia Fdg. Prj., Ser. 94
7.00% 06/15/04 500 571,250
Pennsylvania Intergovernmental Coop.
Auth. Spec. Tax Rev., City
of Philadelphia Fdg. Prj., Ser. 96
5.60% 06/15/12 1,000 1,056,250
5.50% 06/15/16 5,000 5,206,250
5.50% 06/15/20 8,000 8,300,000
Pennsylvania St. Fin. Auth. Cmnty.
Coll. Rev., Beaver Cnty. Coll. Prj.,
Ser. 94A
5.88% 12/01/07 825 907,500
Pennsylvania St. Hgr. Ed. Auth. Coll.
& Univ. Rev., Ser. 91
7.00% 10/01/01 1,385 1,497,531
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Bryn Mawr
Coll. Prj., Ser. 95
6.00% 12/01/15 1,200 1,317,000
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Drexel Univ.
Prj., Ser. 90
7.00% 05/01/00 50 52,007
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Hahnemann
Univ. Prj., Ser. 89
6.80% 07/01/99 1,000 1,008,660
7.00% 07/01/99 1,000 1,028,980
7.20% 07/01/99 750 772,088
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Philadelphia
Coll. of Textiles & Science Prj.,
Ser. 93
5.35% 02/01/06 1,050 1,123,500
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Ser. 91E
6.90% 06/15/01 1,000 1,070,000
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Ser. 93
5.25% 02/01/05 1,000 1,061,250
Pennsylvania St. Hgr. Ed. Fac. Auth.
Coll. & Univ. Rev., Trustees Univ.
Prj., Ser. 98
5.50% 07/15/38 30,000 30,750,000
Pennsylvania St. Hgr. Ed. Fac. Rev.,
Thomas Jefferson Univ. Prj., Ser. 90
7.55% 11/01/00 750 810,938
See accompanying notes to financial statements.
20
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Pennsylvania St. Ind. Dev. Auth. Rev.,
Econ. Dev. Prj., Ser. 94
7.00% 01/01/06 $ 1,000 $ 1,160,000
6.00% 01/01/12 4,000 4,330,000
Pennsylvania St. Ind. Dev. Auth. Rev.,
Ser. 94
5.80% 07/01/08 5,000 5,543,750
Pennsylvania St. Infra. Investment
Auth. Rev., Ser. 90
6.45% 09/01/04 1,600 1,760,000
Pennsylvania St. Pub. Sch. Bldg.
Auth. Rev., Mid Valley Sch. Dist.
Prj., Ser. 92D
6.25% 01/01/07 500 540,000
Pennsylvania St. Third G.O., Ser. 91A
6.10% 11/15/01 7,000 7,542,500
6.50% 11/15/01 3,250 3,530,313
6.50% 11/15/11 1,500 1,629,375
Pennsylvania St. Tpke. Comm. Oil
Franchise Tax Rev., Ser. 94A
5.88% 12/01/08 500 558,125
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 86G
7.00% 12/01/00 500 538,750
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 86J
7.20% 06/01/99 2,275 2,525,250
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 86K
7.63% 12/01/99 2,000 2,097,800
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 91L
6.50% 06/01/04 1,445 1,547,956
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 92O
5.50% 12/01/17 4,895 5,066,325
Pennsylvania St. Tpke. Comm. Rev.,
Ser. 92P
5.80% 12/01/06 1,500 1,606,875
6.00% 12/01/09 500 535,625
Pennsylvania St. Univ. Rev., Ser. 89
6.75% 07/01/99 1,000 1,018,355
Pennsylvania St. Univ. Rev., Ser. 91
6.75% 07/01/01 1,000 1,085,000
7.00% 07/01/01 1,950 2,127,938
Pennsylvania St. Univ. Rev., Ser. 94
5.00% 05/01/03 1,000 1,046,250
Pennsylvania Trafford Dist. G.O.,
Ser. 94
5.85% 05/01/04 1,000 1,090,000
Pennsylvania Unltd. Tax G.O., Ser. 94A
6.50% 11/01/05 250 271,250
Philadelphia Arpt. Rev., Ser. 97A
6.00% 06/15/05 10,405 11,510,531
6.00% 06/15/06 6,030 6,715,913
5.13% 06/15/12 4,815 4,965,469
5.25% 06/15/15 5,770 5,943,100
Philadelphia Arpt. Rev., Ser. 98
6.00% 06/15/06 5,125 5,656,719
Philadelphia Ind. Dev. Auth. Rev.,
Girard Estate Coal Mining Prj.,
Ser. 96
5.38% 11/15/12 3,945 4,073,213
5.50% 11/15/16 1,650 1,713,938
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Philadelphia Ind. Dev. Auth. Rev.,
City of Philadelphia Prj., Ser. 96A
5.40% 02/15/17 $ 2,500 $ 2,587,500
Philadelphia Ind. Dev. Auth. Rev.,
Inst. Cancer Research Prj., Ser. 90B
7.25% 07/01/03 2,515 2,656,469
Philadelphia Ind. Dev. Auth. Rev.,
Nat. Bd. of Med. Examiners Prj.,
Ser. 92
6.75% 05/01/12 500 539,375
Philadelphia Ind. Dev. Auth. Rev.,
PGH Dev. Corp. Prj., Ser. 89
7.00% 07/01/99 750 771,735
Philadelphia Ind. Dev. Auth. Rev.,
PGH Dev. Corp. Prj., Ser. 93
5.50% 07/01/10 1,035 1,090,631
Philadelphia Unltd. Tax G.O., Ser. 93A
5.25% 05/15/04 300 318,000
Philadelphia Unltd. Tax G.O., Ser. 94B
5.90% 11/15/09 2,600 2,834,000
Philadelphia Unltd. Tax G.O., Ser. 95
6.00% 05/15/04 2,345 2,567,775
6.00% 05/15/05 2,485 2,745,925
5.00% 05/15/20 5,000 4,918,750
Philadelphia Gas Works Rev., Ser. 93
5.50% 07/01/04 5,000 5,368,750
Philadelphia Gas Works Rev., Ser. 94
5.25% 08/01/24 2,900 2,936,250
Philadelphia Gas Works Rev., Ser. 98A
5.38% 07/01/13 4,155 4,362,750
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Albert Einstein
Med. Ctr. Prj., Ser. 89
7.63% 04/01/11 2,450 2,499,000
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Children's Hosp.
of Philadelphia Prj., Ser. 93
5.00% 02/15/21 2,250 2,227,500
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Children's
Seashore House Prj., Ser. 92A
7.00% 08/15/03 1,000 1,100,000
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Children's
Seashore House Prj., Ser. 92B
7.00% 08/15/12 1,575 1,708,875
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Frankford Hosp.
Prj., Ser. 93A
6.00% 06/01/14 500 521,875
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Frankford Hosp.
Prj., Ser. 95
5.50% 01/01/07 1,235 1,324,538
5.60% 01/01/08 1,245 1,339,931
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Magee Rehab.
Hosp. Prj., Ser. 91
7.00% 12/01/05 1,000 1,073,750
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Nazareth Hosp.
Franciscan Prj., Ser. 96B
5.00% 07/01/10 4,590 4,716,225
See accompanying notes to financial statements.
21
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Philadelphia Hosp. & Hgr. Ed. Fac.
Auth. Hosp. Rev., Presbyterian
Med. Ctr. Prj., Ser. 93
5.60% 12/01/00 $ 595 $ 616,569
6.10% 12/01/03 1,000 1,100,000
Philadelphia Mun. Auth. Gas Works
Lease Ref. Rev., Ser. 93D
6.13% 07/15/08 2,650 2,888,500
Philadelphia Mun. Auth. Rev., Justice
Lease Prj., Ser. 91B
7.13% 11/15/01 1,055 1,167,094
7.10% 11/15/11 1,200 1,327,500
Philadelphia Mun. Auth. Rev., Ser. 88
7.80% 04/01/18 3,765 3,933,634
Philadelphia Mun. Auth. Rev., Ser. 93A
5.05% 11/15/03 2,000 2,105,000
5.20% 11/15/04 4,000 4,245,000
5.63% 11/15/14 2,600 2,739,750
Philadelphia Pk. Auth. Rev.,
Arpt. Pk. Prj., Ser. 97
5.75% 09/01/06 3,000 3,303,750
Philadelphia Pk. Auth. Rev., Ser. 97
5.40% 09/01/15 5,900 6,165,500
Philadelphia Regl. Port Auth. Lease
Rev., Ser. 90
6.85% 08/01/00 500 522,500
Philadelphia Regl. Port Auth. Lease
Rev., Ser. 93
6.20%** 09/01/20 2,000 2,162,500
Philadelphia Sch. Dist. G.O., Ser. 94A
5.80% 07/01/08 1,910 2,058,025
5.85% 07/01/09 1,710 1,846,800
Philadelphia Sch. Dist. G.O., Ser. 95A
6.25% 09/01/04 5,985 6,658,313
6.25% 09/01/07 5,990 6,828,600
Philadelphia Sch. Dist. G.O., Ser. 95B
5.50% 09/01/10 2,500 2,668,750
5.50% 09/01/18 4,890 5,079,488
Philadelphia Sch. Dist. G.O., Ser. 97A
5.00% 04/01/05 5,000 5,250,000
Philadelphia Sch. Dist. Untld. Tax G.O.,
Ser. 91B
7.00% 07/01/01 2,000 2,165,000
Philadelphia Sch. Dist. Untld. Tax G.O.,
Ser. 92A
6.40% 05/15/02 2,000 2,170,000
Philadelphia Sch. Dist. Untld. Tax G.O.,
Ser. 95A
6.25% 09/01/06 2,255 2,553,788
Philadelphia Sch. Dist. Untld. Tax G.O.,
Ser. 95B
5.50% 09/01/11 2,000 2,120,000
Philadelphia Wtr. & Swr. Rev., Ser. 89
6.85% 10/01/99 2,000 2,036,380
Philadelphia Wtr. & Swr. Rev., Ser. 92
7.35% 09/01/04 7,820 8,817,050
Philadelphia Wtr. & Waste Wtr. Rev.,
Ser. 93
5.50% 06/15/06 3,000 3,251,250
5.50% 06/15/07 6,780 7,364,775
5.75% 06/15/13 5,260 5,634,775
5.00% 06/15/16 4,500 4,505,625
Philadelphia Wtr. & Waste Wtr. Rev.,
Ser. 95
6.75% 08/01/03 500 558,125
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Philadelphia Wtr. & Waste Wtr. Rev.,
Ser. 97A
5.25% 08/01/08 $ 160 $ 171,800
5.00% 08/01/12 2,765 2,820,300
5.00% 08/01/22 12,990 12,860,100
5.13% 08/01/27 20,645 20,696,613
Philadelphia Wtr. & Waste Wtr. Rev.,
Ser. 99 WIS
5.00% 12/15/05 14,155 14,774,281
5.00% 12/15/06 3,385 3,528,863
Pittsburgh & Allegheny Cnty.
Auditorium Auth. Rev., Ser. 78
6.40% 12/01/01 420 420,727
Pittsburgh & Allegheny Cnty. Rev.,
Ser. 91B
6.00% 07/15/01 500 526,250
Pittsburgh Unltd. Tax G.O., Ser. 95A
5.20% 03/01/10 10,000 10,687,500
5.25% 03/01/11 10,450 10,802,688
Pittsburgh Unltd. Tax G.O., Ser. 95B
5.13% 03/01/09 5,000 5,200,000
Pittsburgh Unltd. Tax G.O., Ser. 96A
6.00% 03/01/05 8,225 9,057,781
Pittsburgh Pub. Pk. Auth. Rev., Ser. 92A
5.88% 12/01/12 1,500 1,591,875
Pittsburgh Sch. Dist. G.O., Ser. 97
5.50% 09/01/09 4,500 4,775,625
Pittsburgh Wtr. & Swr. Auth. Wtr. &
Swr. Sys. Rev., Ser. 91A
6.60% 09/01/01 1,100 1,196,250
Pittsburgh Wtr. & Swr. Rev., Ser. 98A
5.00% 09/01/21 5,280 5,194,200
Pleasant Valley Sch. Dist. G.O., Ser. 95
5.60% 11/15/14 1,385 1,478,488
Pocono Mountain Sch. Dist. G.O.,
Ser. 98A
5.00% 11/15/08 1,935 2,031,750
5.00% 11/15/09 2,145 2,236,163
5.00% 11/15/10 2,260 2,336,275
5.00% 11/15/11 2,380 2,442,475
Pottsgrove Sch. Dist. G.O., Ser. 94A
6.85% 09/01/99 1,000 1,016,510
Pottstown Borough Auth. Swr. Rev.,
Ser. 96
5.50% 11/01/16 1,560 1,628,250
Punxsutawney Area Sch. Dist. G.O.,
Ser. 95
5.80% 04/15/05 1,000 1,096,250
Purchase Line Sch. Dist. G.O., Ser. 91
6.95% 01/15/01 1,000 1,057,500
Reading G.O., Ser. 92
6.50% 11/15/02 1,000 1,092,500
Ridley Park Hosp. Auth. Rev., Taylor
Hosp. Prj., Ser. 90A
8.63% 12/01/00 3,185 3,511,463
Ringgold Sch. Dist. Rev., Ser. 95
6.20% 02/01/19 500 556,875
Riverside Beaver Cnty. Sch. Dist. Rev.,
Ser. 96
5.50% 02/15/17 3,725 4,036,969
Rose Tree Media Sch. Dist. G.O.,
Ser. 92A
6.55% 09/15/01 945 1,011,150
See accompanying notes to financial statements.
22
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Saint Mary Hosp. Auth. Rev.,
Langhorne Hosp. Franciscan Hlth.
Prj., Ser. 89C
7.00% 07/01/03 $ 750 $ 770,858
Sayre Hlth. Care Fac. Auth. Rev.,
Guthrie Prj., Ser. 91A
7.10% 03/01/17 3,000 3,217,500
Sayre Hlth. Care Fac. Auth. Rev.,
Tioga Nursing Fac. Prj., Ser. 89A
7.25% 10/01/10 1,500 1,554,270
Sayre Hlth. Care Fac. Auth. Rev., VHA
Pennsylvania Cap. Fin. Prj., Ser. 85
7.15% 12/01/15 1,400 1,522,500
Sayre Hlth. Care Fac. Auth. Var. Hosp.
Rev., Ser. 85H
7.63% 12/01/15 750 790,830
Schuylkill Redev. Auth. Comm. Rev.,
Ser. 91A
7.13% 06/01/13 2,000 2,162,500
Scranton Lackawanna Hlth. & Welfare
Auth. Rev., Ref. Hosp. Cmnty. Med.
Ctr. Prj., Ser. 98A
5.25% 07/01/04 2,215 2,347,900
Scranton Lackawanna Hlth. & Welfare
Auth. Rev., Univ. of Scranton Prj.,
Ser. 90B
7.25% 06/15/00 1,310 1,393,513
7.40% 06/15/10 1,665 1,775,306
Scranton Lackawanna Hlth. & Welfare
Auth. Rev., Univ. of Scranton Prj.,
Ser. 90C
7.50% 06/15/00 3,860 4,120,550
Solanco Sch. Dist. G.O., Ser. 94
6.30% 02/15/04 500 553,125
Somerset Cnty. Gen. Auth. Comm.
Rev., Ser. 91
6.45% 10/15/00 1,000 1,046,250
6.25% 10/15/01 1,750 1,865,938
6.70% 10/15/01 1,500 1,612,500
South Fork Mun. Auth. Hosp. Rev.,
Good Samaritan Med. Ctr. Prj.,
Ser. 96B
5.38% 07/01/16 4,000 4,115,000
Southeastern Pennsylvania Trans.
Auth. Rev., Prerefunded Ser. 95
5.75% 03/01/08 75 82,500
Southeastern Pennsylvania Trans.
Auth. Spec. Rev., Ser. 99
5.25% 03/01/18 3,300 3,366,000
Southeastern Pennsylvania Trans.
Auth. Spec. Rev., Ser. 99B
5.25% 03/01/12 2,785 2,927,731
5.25% 03/01/15 4,220 4,362,425
Southeastern Pennsylvania Trans.
Auth. Rev., Unrefunded Ser. 95
5.75% 03/01/08 1,210 1,331,000
Southeastern Pennsylvania Trans.
Auth. Spec. Rev., Ser. 94
6.00% 06/01/01 2,000 2,082,500
6.10% 06/01/02 1,000 1,057,500
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Southeastern Pennsylvania Trans.
Auth. Spec. Rev., Ser. 95
5.88% 03/01/09 $ 1,230 $ 1,360,688
Southeastern Pennsylvania Trans.
Auth. Spec. Rev., Ser. 97
5.75% 03/01/06 2,900 3,175,500
5.75% 03/01/07 1,700 1,870,000
5.50% 03/01/12 2,525 2,692,281
5.55% 03/01/13 3,500 3,723,125
5.38% 03/01/17 4,770 4,942,913
Springford Sch. Dist. G.O., Ser. 97
5.15% 02/01/18 10,010 10,122,613
State Hgr. Ed. Fac. Auth. Rev., Ser.93I
7.50% 06/15/01 1,670 1,805,688
State of Pennsylvania G.O., Ser. 89A
6.60% 06/01/99 2,500 2,550,550
State of Pennsylvania Pub. Sch. Bldg.
Auth. Coll. Rev., Butler Cnty. Cmnty.
Coll. Prj., Ser. 89E
7.20% 10/15/99 750 773,460
State of Pennsylvania Pub. Sch. Bldg.
Auth. Coll. Rev., Harrisburg Area
Cmnty. Coll. Prj., Ser. 90
7.15% 10/01/99 385 396,350
State of Pennsylvania Pub. Sch. Bldg.
Auth. Coll. Rev., Harrisburg Area
Cmnty. Coll. Prj., Ser. 91D
6.80% 04/01/02 1,335 1,450,144
State of Pennsylvania Pub. Sch. Bldg.
Auth. Coll. Rev., Shenandoah Valley
Sch. Dist. Prj., Ser. 89
7.38% 09/15/10 1,000 1,035,670
Stroudsburg Area Sch. Dist. G.O.,
Ser. 98
5.25% 10/01/10 2,835 2,990,925
5.25% 10/01/12 2,985 3,100,669
Swarthmore Borough Auth. Coll. Rev.,
Ser. 90
6.95% 09/15/00 500 529,375
7.38% 09/15/00 1,500 1,597,500
Tarentum Gtd. Elec. Rev., Ser. 93
5.88% 09/01/18 750 813,750
Titusville Area Sch. Dist. Rev., Ser. 97
5.25% 07/01/17 5,000 5,112,500
Unionville Chadds Ford Sch. Dist. G.O.,
Ser. 91
6.75% 06/01/06 1,000 1,057,500
Unionville Chadds Ford Sch. Dist. G.O.,
Ser. 93
5.60% 06/01/03 1,000 1,068,750
Upper Saint Clair Twp. Sch. Bldg. Auth.
Rev., Ser. 78
6.50% 02/15/04 445 471,144
Warren Cnty. G.O., Ser. 91
7.15% 07/01/01 1,200 1,291,500
Washington Cnty. Auth. Lease Rev.,
Ser. 85C
7.30% 06/15/00 6,840 7,353,000
Washington Cnty. Ind. Dev. Auth. Poll.
Ctrl. Rev., West Penn Pwr. Co. Prj.,
Ser. 93
4.95% 03/01/03 5,190 5,397,600
See accompanying notes to financial statements.
23
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Washington Cnty. Ind. Dev. Auth. Poll.
Ctrl. Rev., West Penn Pwr. Co. Prj.,
Ser. 95G
6.05% 04/01/14 $ 2,500 $ 2,671,875
West Chester Area Sch. Dist. Unltd.
Tax G.O., Ser. 91A
6.70% 01/01/01 1,000 1,052,500
West Chester Area Sch. Dist. G.O.,
Ser. 91A
6.70% 01/15/01 1,000 1,052,500
West Goshen Swr. Auth. Rev., Ser. 91
7.00% 09/01/01 1,500 1,616,250
West Jefferson Hills Sch. Dist. Unltd.
Tax G.O., Ser. 91A
6.70% 08/01/01 1,250 1,337,500
West Mifflin Sanit. Swr. Mun. Auth.
Swr. Rev., Ser. 96
5.70% 08/01/15 1,445 1,591,306
West Shore Sch. Dist. G.O., Ser. 98
5.00% 11/15/08 5,215 5,449,675
5.00% 11/15/09 5,480 5,692,350
5.00% 11/15/10 5,760 5,932,800
West Whiteland Twp. Unltd. Tax G.O.,
Ser. 92
6.75% 12/01/02 1,100 1,210,000
West York Area Sch. Dist. G.O., Ser. 91
6.80% 03/01/01 900 952,875
Westmoreland Cnty. G.O., Ser. 91
6.35% 12/01/99 1,000 1,021,120
Westmoreland Cnty. G.O., Ser. 92
6.55% 08/01/01 750 799,688
Westmoreland Cnty. Unltd. Tax G.O.,,
Ser. 97
5.50% 12/01/16 1,160 1,212,200
Westmoreland Cnty. Ind. Dev. Auth.
Rev., Westmoreland Hlth. Sys. Prj.,
Ser. 93A
6.00% 07/01/11 200 215,250
Westmoreland Cnty. Mun. Auth. Rev.,
Ser. 87K
2.00% 07/01/03 1,000 925,000
Westview Mun. Auth. Spec. Oblig., Rev.
Ser. 85
9.25% 11/15/05 750 924,375
Williampsort Area Sch. Dist. Auth. Rev.,
Ser. 78
6.00% 03/01/07 140 148,750
Wilson Sch. Dist. G.O., Ser. 97
5.50% 05/15/14 1,440 1,521,000
5.50% 05/15/17 7,435 7,732,400
York Cnty. Hosp. Auth. Rev., York
Hosp. Prj., Ser. 91
7.00% 01/01/01 285 306,731
7.10% 01/01/01 355 382,513
--------------
1,126,517,509
--------------
ILLINOIS -- 4.4%
Chicago O'Hare Intl. Arpt. Spec. Fac.
Rev., Ser. 99 WIS
5.50% 01/01/14 18,540 19,443,825
5.50% 01/01/16 20,335 20,995,887
5.50% 01/01/17 9,385 9,643,087
--------------
50,082,799
--------------
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PUERTO RICO -- 1.3%
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 89N
6.80% 07/01/00 $ 1,000 $ 1,023,160
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 91P
6.75% 07/01/03 250 270,625
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 95X
6.00% 07/01/12 5,000 5,425,000
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 97A
5.38% 07/01/14 3,000 3,180,000
Puerto Rico Ind. Tourist Ed. Med. &
Env. Ctrl. Fac. Rev., Ser. 98A
5.50% 10/01/14 1,500 1,606,875
Puerto Rico Pub. Bldg. Auth. Pub. Ed.
and Hlth. Fac. Rev., Ser. 93M
4.90% 07/01/00 3,000 3,048,750
Puerto Rico Pub. Imp. Prj. Rev.,
Ser. 89A
7.38% 07/01/99 750 768,855
--------------
15,323,265
--------------
TOTAL MUNICIPAL BONDS
(Cost $1,141,483,551) 1,191,923,573
--------------
SHORT TERM INVESTMENTS -- 1.1%
Smith Barney Tax-Free Money
Market Fund 12,573 12,573,471
Vanguard Tax-Exempt
Money Market Fund 100 100,000
--------------
TOTAL SHORT TERM INVESTMENTS
(Cost $12,673,471) 12,673,471
--------------
TOTAL INVESTMENTS IN
SECURITIES
(Cost $1,154,157,022*) 104.9% 1,204,597,044
LIABILITIES IN EXCESS OF
OTHER ASSETS (4.9%) (56,653,199)
------ --------------
NET ASSETS (Applicable to 96,568,824
Institutional shares, 1,925,433 Service
shares, 3,639,481 Investor A shares,
2,073,418 Investor B shares and 70,473
Investor C shares outstanding) 100.0% $1,147,943,845
====== ==============
See accompanying notes to financial statements.
24
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 1999 (UNAUDITED)
Value
------------
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($1,124,343,082 (DIVIDE) 102,133,738) $11.01
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $11.01
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($11.01 (DIVIDE) 0.960) $11.47
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($22,824,964 (DIVIDE) 2,073,418) $11.01
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($775,799 (DIVIDE) 70,473) $11.01
======
- ------------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $50,988,672
Gross unrealized depreciation (548,650)
-----------
$50,440,022
===========
** Rates shown are the rates as of March 31, 1999, and the maturities shown are
the longer of the next interest readjustment date or the date the principal
amount can be recovered through demand.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$2,500,000 on 430 long U.S. Treasury Bond future contracts expiring June
1999. The value of such contracts on March 31, 1999 was $51,841,875, thereby
resulting in an unrealized loss of $291,016.
See accompanying notes to financial statements.
25
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS -- 98.3%
NEW JERSEY -- 86.3%
Atlantic City, COP's, Pub. Fac.
Lease Agreement Prj., Ser. 91
7.30% 03/01/04 $1,535 $ 1,759,494
Bergen Cnty. G.O., Ser. 90
6.25% 11/15/00 645 674,831
Bergen Cnty. Util. Auth. Rev., Ser. 92A
6.00% 06/15/01 1,590 1,671,487
Brigantine G.O., Ser. 92
6.25% 08/01/03 730 792,962
Camden Cnty. G.O., Ser. 89
7.00% 06/01/99 430 432,533
Camden Cnty. Imp. Auth. Lease Rev.,
Ser. 92
6.00% 12/01/02 1,000 1,085,000
Cherry Hill Twp. G.O., Ser. 92
6.00% 06/01/06 500 538,125
Dover Twp. G.O., Ser. 92
6.00% 10/15/03 1,000 1,091,250
6.10% 10/15/04 540 588,600
Edison Twp. G.O., Ser. 91
6.50% 06/01/04 930 1,038,112
Essex Cnty. Imp. Auth. Lease Rev.,
Jail & Yth. Hsg. Prj., Ser. 94
6.90% 12/01/14 500 582,500
Essex Cnty. Util. Auth. Rev., Ser. 99A
4.88% 04/01/18 2,500 2,468,750
Essex Cnty. Util. Auth. Solid Waste Rev.,
Ser. 96
5.75% 04/01/05 2,000 2,175,000
Gloucester Cnty. Srs. Hsg. Dev. Corp.
Rev., Sect. 8 Colonial Park Prj.,
Ser. 94A
6.20% 09/15/11 1,250 1,318,750
Hamilton Twp. Atlantic City Sch. Dist.
G.O., Ser. 92
5.88% 12/15/07 860 926,650
Hudson Cnty. Imp. Auth. Fac. Lease
Rev., Hudson Cnty. Lease Prj.,
Ser. 98
4.75% 10/01/19 3,000 2,891,250
Jersey City G.O., Ser. 96A
6.00% 10/01/05 1,655 1,841,187
6.00% 10/01/06 3,000 3,363,750
Knowlton Twp. Bd. of Ed. G.O., Ser. 91
6.60% 08/15/11 169 202,377
Lacey Twp. Wtr. Auth. Rev., Ser. 93
6.00% 12/01/12 1,000 1,112,500
Mercer Cnty. Imp. Auth. Rev., Hamilton
Bd. of Ed. Prj., Ser. 92
5.90% 06/01/03 500 530,625
Middlesex Cnty. Imp. Auth. Rev., Ser. 96
5.80% 09/15/13 1,725 1,850,062
Monmouth Cnty. G.O., Ser. 90
6.90% 08/01/04 430 457,950
Monmouth Cnty. Imp. Auth. Corr. Fac.
Rev., Ser. 91
6.30% 08/01/01 1,000 1,080,000
Monmouth Cnty. Imp. Auth. Rec. Fac.
Rev., Ser. 90
6.63% 12/01/99 1,170 1,219,713
Morristown Cnty. G.O., Ser. 95
6.40% 08/01/14 500 562,500
New Jersey Bldg. Auth. Rev., Ser. 97
5.00% 06/15/11 1,000 1,030,000
5.00% 06/15/13 2,070 2,116,575
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY (CONTINUED)
New Jersey Econ. Dev. Auth. Mkt.
Transition Fac. Rev., Ser. 94A
5.80% 07/01/08 $1,290 $ 1,407,712
5.88% 07/01/11 4,000 4,350,000
New Jersey Econ. Dev. Auth. Rev.,
Performing Arts Ctr. Prj., Ser. 96C
5.75% 06/15/08 4,440 4,917,300
5.00% 06/15/16 1,985 1,997,406
New Jersey Econ. Dev. Auth. Rev.,
Ser. 94
5.80% 07/01/07 1,500 1,636,875
New Jersey Econ. Dev. Auth. Rev.,
St. Barnabas Med. Ctr. Prj., Ser. 97A
5.63% 07/01/23 4,000 1,155,000
New Jersey Econ. Dev. Auth. Rev.,
Trenton OFC Complex Prj., Ser. 89
6.63% 06/15/01 1,050 1,109,062
New Jersey Econ. Dev. Auth. Rev.,
W.Y. Hldg. Co. Prj., Ser. 95
5.95% 06/01/05 865 907,169
New Jersey Ed. Auth. Rev., Rowan
Coll. Prj., Ser. 96
5.88%(DOUBLE DAGGER) 07/01/16 2,185 2,384,381
New Jersey G.O., Ser. 86B
6.25% 01/15/04 860 948,150
New Jersey G.O., Ser. 91
6.00% 08/01/02 4,075 4,365,344
6.25% 08/01/02 1,160 1,260,050
New Jersey Hlth. Care Fac. FHA Ins.
Rev. Mtg., Cathedral Hlth. Prj., Ser. 90A
6.95% 02/15/01 640 678,400
New Jersey Hlth. Care Fac. Fin. Auth.
Rev., Cathederal Hlth. Ctr. Prj.,
Ser. 90
7.25% 02/15/21 1,000 1,083,750
New Jersey Hlth. Care Fac. Fin. Auth.
Rev., Kennedy Hlth. Sys. Prj., Ser. 98
5.25% 07/01/15 700 723,625
New Jersey Hlth. Care Fac. Fin. Auth.
Rev., Robert Wood Johnson Univ.
Prj., Ser. 96C
5.75%(DOUBLE DAGGER) 07/01/07 2,595 2,848,012
New Jersey Hlth. Care Fac. Fin. Auth.
Rev., Society of The Vy. Hosp. Prj.,
Ser. 89C
6.60% 07/01/00 430 441,748
New Jersey Sports & Expo. Rev.,
Ser. 92A
6.50% 03/01/07 600 652,500
New Jersey St. Ed. Fac. Auth. Rev.,
Hgr. Ed. Equip. Leasing Prj., Ser. 94A
5.00% 09/01/99 1,000 1,007,700
New Jersey St. Ed. Fac. Auth. Rev.,
Hgr. Ed. Fac. Trust Fund Prj., Ser. 95A
5.13% 09/01/07 1,800 1,912,500
New Jersey St. Ed. Fac. Auth. Rev.,
Princeton Univ. Prj., Ser. 90A
6.45% 07/01/99 430 434,201
New Jersey St. Ed. Fac. Auth. Rev.,
Ser. 99 WIS
5.25% 07/01/13 2,000 2,047,500
5.00% 07/01/18 1,000 971,250
New Jersey St. Ed. Fac. Auth. Rev.,
St. Peters Coll. Prj., Ser. 98B
5.50% 07/01/27 3,220 3,240,125
See accompanying notes to financial statements.
26
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY (CONTINUED)
New Jersey St. G.O., Ser. 92D
6.00% 02/15/11 $2,000 $ 2,275,000
New Jersey St. G.O., Ser. 96
6.00% 07/15/06 2,000 2,240,000
New Jersey St. G.O., Ser. 98
5.00% 03/01/12 2,750 2,832,500
7.56% 02/01/13 3,400 3,612,500
New Jersey St. Hsg. & Mtg. Fin. Agcy.
Rev., Ser. 92A
6.70% 05/01/05 500 535,625
6.70% 11/01/05 1,000 1,071,250
6.95% 11/01/13 750 805,312
New Jersey St. Hsg. & Mtg. Fin. AMT
Rev., Ser. 97A
5.55% 05/01/27 2,000 2,040,000
New Jersey St. Hwy. Auth. Rev.,
Garden St. Pkwy. Prj., Ser. 92
6.00% 01/01/05 3,250 3,473,438
6.20% 01/01/10 750 866,250
6.25% 01/01/14 500 536,250
New Jersey St. Tpke. Auth. Rev.,
Ser. 91A
6.40% 01/01/02 860 914,825
6.90% 01/01/14 970 971,639
New Jersey St. Tpke. Auth. Rev.,
Ser. 91C
6.25% 01/01/10 2,210 2,323,263
6.50% 01/01/16 500 573,125
New Jersey St. Tpke. Auth. Rev.,
Ser. 92A
5.80% 01/01/02 1,260 1,321,425
New Jersey St. Waste Wtr. Trtmnt.
Trust Rev., Ser. 89B
6.90% 05/15/99 430 432,795
New Jersey St. Waste Wtr. Trtmnt.
Trust Rev., Ser. 90
6.88% 06/15/00 395 416,725
6.88% 06/15/06 35 36,706
New Jersey St. Waste Wtr. Trtmnt.
Trust Rev., Ser. 96C
6.25% 05/15/03 2,500 2,734,375
6.25% 05/15/06 5,955 6,729,150
New Jersey Trans. Auth. Rev., Ser. 96A
6.00% 12/15/05 1,000 1,113,750
New Jersey Trans. Sys. Rev., Ser. 94A
6.25% 12/15/03 1,000 1,106,250
New Jersey Trans. Trust Fund Auth.
Rev., Ser. 96B
5.25% 06/15/15 3,000 3,093,750
Newark Bd. of Ed. G.O., Ser. 94
5.88% 12/15/13 1,000 1,092,500
North Bergen Twp. G.O., Ser. 92
5.90% 08/15/01 500 527,500
North Jersey Dist. Wtr. Sply. Rev.,
Ser. 93
5.50% 07/01/03 860 918,050
Northwest Bergen Cnty. Rev., Ser. 92
5.90% 07/15/06 755 819,175
Northwest Bergen Cnty. Util. Auth.
Sys. Rev., Ser. 92
6.00% 07/15/07 860 936,325
Ocean Cnty. G.O., Ser. 89
6.75% 07/13/03 1,030 1,149,738
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY (CONTINUED)
Ocean Cnty. G.O., Ser. 90
6.80% 06/15/00 $ 430 $ 447,738
Ocean Cnty. G.O., Ser. 91
6.38% 04/15/03 430 471,388
Ocean Cnty. G.O., Ser. 91A
6.25% 10/01/04 430 465,475
Ocean Cnty. Util. Auth. Rev., Ser. 95A
6.30% 01/01/12 1,005 1,128,113
Ocean Cnty. Util. Auth. Waste Wtr. Rev.,
Ser. 00 WIS
5.00% 01/01/13 500 483,750
5.00% 01/01/18 1,350 1,269,000
Ocean Twp. Swr. Auth. Rev., Ser. 92
6.00% 12/01/08 1,705 1,843,531
Passaic Valley Wtr. Sply. Comm. Rev.,
Ser. 92A
5.95% 12/15/02 500 538,750
Point Pleasant G.O., Ser. 95
5.70% 12/01/03 500 541,250
Port Auth. New York & New Jersey Rev.,
Ser. 92
6.10% 10/15/02 645 694,988
Port Auth. New York & New Jersey Rev.,
Ser. 95
5.75% 11/01/09 3,275 3,516,531
Port Auth. New York & New Jersey Spec.
Oblig. Rev., JFK Intl. Air Term. Prj.,
Ser. 97
5.75% 12/01/22 2,105 2,252,350
Port Auth. New York & New Jersey Spec.
Oblig. Rev., JFK Intl. Air Term. Prj.,
Ser. 97-6
6.25% 12/01/09 7,000 8,023,750
Rutgers Univ. Rev., Ser. 92A
6.10% 05/01/03 1,000 1,082,500
Salem Cnty. Ind. Poll. Ctrl. Fin. Auth.
Rev., Ser. 94
6.20% 08/01/30 1,000 1,105,000
South Jersey Port. Corp. Rev., Marine
Term. Prj., Ser. 93
5.60% 01/01/23 3,000 3,067,500
Warren Cnty. Poll. Ctrl. Fin. Auth. Rev.,
Ser. 92B
5.70% 12/01/03 500 533,750
Weehawken Twp. G.O., Ser. 92
6.15% 07/01/04 350 373,188
West Windsor Plainsboro Twp. Bd. of
Ed. G.O., Ser. 93
5.80% 03/15/06 1,000 1,075,000
Winslow Twp. Unltd. Tax G.O., Ser. 92
6.40% 10/01/05 870 952,650
Woodbridge Twp. G.O., Ser. 90
6.65% 08/01/00 475 499,344
Woodbridge Twp. G.O., Ser. 92
6.05% 08/15/05 500 545,000
6.25% 08/15/08 1,000 1,096,250
------------
157,388,280
------------
See accompanying notes to financial statements.
27
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
NEW JERSEY TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA -- 0.8%
Delaware River Joint Toll Bdg. Rev.,
Ser. 92
6.25% 07/01/12 $1,400 $ 1,478,750
------------
PUERTO RICO -- 10.6%
Puerto Rico Cmwlth. Hwy. & Trans.
Auth. Rev., Ser. 93X
5.50% 07/01/13 2,000 2,200,000
Puerto Rico Cmwlth. Hwy. & Trans.
Auth. Rev., Ser. 96Z
6.25% 07/01/06 1,760 1,999,800
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 94S
6.13% 07/01/08 1,000 1,145,000
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 94T
5.50% 07/01/20 2,250 2,314,688
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 97AA
5.25% 07/01/16 1,000 1,040,000
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 97BB
5.50% 07/01/09 1,500 1,646,250
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 98DD
5.25% 07/01/16 2,025 2,111,063
Puerto Rico Infra. Fin. Auth. Rev.,
Ser. 97A
5.00% 07/01/28 4,000 3,995,000
Puerto Rico Pub. Bldg. Auth. Rev.,
Ser. 97B
5.00% 07/01/15 1,000 1,016,250
Puerto Rico Elec. Pwr. Auth. Rites,
Ser. 98
8.30%** 07/01/13 1,660 1,850,900
------------
19,318,951
------------
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
VIRGIN ISLANDS -- 0.6%
Virgin Islands Wtr. & Pwr. Auth. Elec.
Sys. Rev., Ser. 98
5.30% 07/01/21 $1,100 $ 1,090,375
------------
TOTAL MUNICIPAL BONDS
(Cost $169,780,310) 179,276,356
------------
SHORT TERM INVESTMENTS -- 1.7%
Smith Barney Tax-Free Money
Market Fund
(Cost $3,115,074) 3,115 3,115,074
------------
TOTAL INVESTMENTS
IN SECURITIES-- 100.0%
(Cost $172,895,384*) $182,391,430
============
- ------------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $9,740,301
Gross unrealized depreciation (244,255)
----------
$9,496,046
==========
** Rates shown are the rates as of March 31, 1999, and the maturities shown are
the longer of the next interest readjustment date or the date the principal
amount can be recovered through demand.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$685,000 on 90 long U.S. Treasury Bond future contracts expiring June 1999.
The value of such contracts on March 31, 1999 was $10,850,625, thereby
resulting in an unrealized loss of $52,031.
See accompanying notes to financial statements.
28
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
NEW JERSEY TAX-FREE INCOME PORTFOLIO
MARCH 31, 1999 (UNAUDITED)
ASSETS
Investments at value (Cost $172,895,384) ..................... $182,391,430
Interest receivable .......................................... 2,634,009
Investments sold receivable .................................. 7,292,460
Futures commissions .......................................... 710
------------
TOTAL ASSETS .......................................... 192,318,609
------------
LIABILITIES
Investments purchased payable ................................ 12,150,102
Distributions payable ........................................ 684,250
Advisory fees payable ........................................ 66,503
Administrative fees payable .................................. 27,354
Transfer agent fees payable .................................. 13,712
Other accrued expenses payable ............................... 42,024
Futures margin payable ....................................... 47,813
------------
TOTAL LIABILITIES ..................................... 13,031,758
------------
NET ASSETS (Applicable to 12,146,718 Institutional
shares, 2,742,458 Service shares, 157,755
Investor A shares, 92,955 Investor B shares
and 1,670 Investor C shares outstanding) ..................... $179,286,851
============
NET ASSET VALUE AND REDEMPTION PRICE PER INSTITUTIONAL,
SERVICE AND INVESTOR A SHARE
($178,166,369 (DIVIDE) 15,046,931) ........................... $11.84
======
OFFERING PRICE PER INSTITUTIONAL AND SERVICE SHARE .............. $11.84
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($11.84 (DIVIDE) 0.960) ...................................... $12.33
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($1,100,708 (DIVIDE) 92,955) ............ $11.84
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($19,774 (DIVIDE) 1,670) ................ $11.84
======
See accompanying notes to financial statements.
29
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
OHIO TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS -- 108.4%
OHIO -- 89.2%
Akron Swr. Sys. Rev., Ser. 96
5.88% 12/01/16 $ 500 $ 546,875
Akron Swr. Sys. Rev., Ser. 98
5.50% 12/01/12 1,070 1,164,962
Brunswick G.O., Ser. 94
6.30% 12/01/05 210 233,887
Butler Cnty. Hosp. Fac. Rev., Middletown
Regl. Hosp. Prj., Ser. 91
6.75% 11/15/03 50 54,437
Butler Cnty. Sales Tax Rev., Ser. 97
5.00% 12/15/13 500 510,625
Butler Cnty. Trans. Imp. Dist. Rev.,
Ser. 97A
6.00% 04/01/11 600 672,000
Cincinnati Wtrwks. Imp. Rev., Ser. 89
6.75% 12/01/01 1,000 1,082,500
Clermont Cnty. Swr. Sys. Rev., Ser. 90
7.25% 12/01/00 1,415 1,529,969
Cleveland Arpt. Sys. Rev., Ser. 94B
5.70% 01/01/04 150 164,250
Cleveland COP's, Cleveland
Stadium Prj., Ser. 97
5.25% 11/15/10 2,500 2,653,125
Cleveland COP's, Cleveland
Stadium Prj., Ser. 97B
6.00% 11/15/09 1,000 1,133,750
Cleveland G.O. Ltd., Ser. 94
6.25% 11/15/06 1,915 2,173,525
Cleveland Pk. Fac. Rev., Ser. 96
6.00% 09/15/06 1,275 1,424,812
Cleveland Pub. Pwr. Sys. Rev., First
Mtg. Prj., Ser. 94B
6.10% 11/15/03 1,000 1,096,250
Cleveland Pub. Pwr. Sys. Rev., Ser. 94A
6.30% 11/15/05 4,000 4,550,000
Cleveland Wtrwks. Rev., First Mtg. Prj.,
Ser. F-92A
6.50% 01/01/02 500 545,000
Cleveland Wtrwks. Rev., First Mtg. Prj.,
Ser. 96H
6.00% 01/01/06 2,000 2,217,500
Cleveland-Cuyahoga Cnty. Port Auth.
Rev., Ser. 97
6.00% 03/01/07 500 520,000
Columbus Unltd. Tax G.O., Ser. 86
7.38% 07/01/06 1,000 1,203,750
Columbus Unltd. Tax G.O., Ser. 89
6.75% 07/01/08 1,000 1,008,550
Columbus Unltd. Tax G.O., Ser. 91-2
6.50% 09/15/01 1,105 1,179,587
Columbus Unltd. Tax G.O., Ser. 92B
6.10% 01/01/03 1,000 1,080,000
Columbus Unltd. Tax G.O., Ser. 94-2
5.60% 05/15/05 1,000 1,095,000
Columbus G.O., Mun. Arpt. No. 30-E-U Prj.
Ser. 91
6.15% 04/15/02 1,475 1,550,594
Columbus Mun. Arpt. Auth. Rev.,
Columbus Intl. Arpt. Prj., Ser. 94A
6.00% 01/01/04 150 162,750
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
OHIO (CONTINUED)
Columbus Pub. Imp. Rev., Ser. 93
5.35% 09/15/06 $1,075 $ 1,151,594
Columbus Wtrwks. Enlargement No. 44
G.O., Ser. 92
6.00% 05/01/03 500 550,625
Cuyahoga Cnty. G.O., Ser. 89
7.00% 10/01/99 1,000 1,038,370
Cuyahoga Cnty. G.O., Ser. 91
6.70% 10/01/01 1,000 1,091,250
Cuyahoga Cnty. Hosp. Rev., Meridia
Hlth. Sys. Prj., Ser. 95
6.10% 08/15/04 500 553,125
Cuyahoga Cnty. Hosp. Rev., Univ. Hlth.
Sys. Prj., Ser. 96B
6.00% 01/15/04 3,125 3,386,719
6.00% 01/15/05 500 545,625
Cuyahoga Cnty. Jail Fac. Unltd. Tax G.O.,
Ser. 91
7.00% 10/01/01 1,000 1,098,750
Dublin Unltd. Tax G.O., Ser. 98A
5.25% 12/01/14 1,910 2,000,725
Fairfield City Sch. Dist. G.O., Ser. 94
7.45% 12/01/14 1,000 1,276,250
Franklin Cnty. G.O., Ser. 91
6.38% 12/01/01 1,635 1,780,106
Greater Cleveland Regl. Trans. Auth.
G.O., Ser. 96
6.25% 12/01/06 2,935 3,323,888
Hamilton Cnty. Elec. Sys. Mtg. Rev.,
Ser. 92A
6.00% 10/15/12 500 541,250
Hamilton Cnty. Swr. Sys. Rev., Ser. 91A
6.40% 06/01/01 325 350,594
6.40% 12/01/04 675 722,250
Kings Sch. Dist. G.O., Ser. 94
7.60% 12/01/05 200 235,000
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 2,523,675
6.00% 12/01/05 500 556,250
Medina Cnty. Unltd. Tax G.O., Ser. 86
7.25% 12/01/03 50 57,313
Montgomery Cnty. G.O. Ltd., Ser. 91A
6.75%(DOUBLE DAGGER) 09/01/01 1,500 1,606,875
North Royalton City Sch. Dist. G.O.,
Ser. 94
6.63% 12/01/06 100 115,750
Northwest Sch. Dist. G.O., Ser. 98
6.00% 12/01/13 1,030 1,172,913
Northwestern Sch. Dist. Rev., Wayne
& Ashland Cntys. Prj., Ser. 94
7.20% 12/01/10 300 372,750
Ohio G.O., Ser. 95
6.00% 08/01/05 225 251,156
Ohio Hsg. Fin. Agcy. Res. Mort. Rev.,
Ser. 94B-2
6.35% 09/01/04 70 73,150
Ohio Hsg. Fin. Agcy. Rev., Wind River
Prj., Ser. 94A
5.55% 11/01/18 1,050 1,078,875
Ohio St. Bldg. Auth. Adult Corr. Fac.
Rev., Ser. 94
5.90% 10/01/09 2,000 2,192,500
See accompanying notes to financial statements.
30
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
OHIO TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
OHIO (CONTINUED)
Ohio St. Bldg. Auth. Disalle Govt. Ctr.
Rev., Ser. 96A
6.00% 10/01/05 $1,000 $ 1,107,500
Ohio St. Bldg. Auth. Rev., Ser. 87
7.05% 04/01/00 1,000 1,056,960
Ohio St. Bldg. Auth. St. Corr. Fac. Rev.,
Ser. 91A
6.50% 10/01/02 4,000 4,340,000
Ohio St. Bldg. Auth. St. Fac. Rev., Admin.
Bldg. Fdg. Prj., Ser. 92A
6.00% 10/01/04 1,020 1,105,425
Ohio St. Bldg. Data Ctr. Rev., Ser. 93A
5.90% 10/01/07 450 500,625
Ohio St. Hgr. Ed. Fac. Comm. Rev., Ohio
Dominican Coll. Prj., Ser. 94
6.63% 12/01/04 250 269,375
Ohio St. Nat. Res. Cap. Fac. G.O.,
Ser. 94A
5.40% 10/01/05 1,000 1,073,750
Ohio St. Pub. Fac. Comm. Hgr. Ed. Fac.
Rev., Ser. 89B
6.50% 12/01/99 1,000 1,041,690
Ohio St. Pub. Fac. Comm. Hgr. Ed. Fac.
Rev., Ser. 92A
5.50% 12/01/03 2,000 2,120,000
Ohio St. Tpke. Rev., Ser. 96
6.00% 02/15/05 4,400 4,845,500
Ohio St. Wtr. Dev. Poll. Ctrl. Fac. Rev.,
Wtr. Ctrl. St. Match Prj., Ser. 95
5.70% 06/01/11 1,300 1,407,250
Ohio St. Wtr. Dev. Poll. Ctrl. Fac.
Rev., Republic Steel Prj., Ser. 95
6.38% 06/01/07 3,710 3,988,250
Ohio St. Wtr. Dev. Auth. Rev., Pure Wtr.
Prj., Ser. 92
5.75% 06/01/04 1,500 1,620,000
Ohio St. Wtr. Dev. Auth. Rev.,
Steel-Cargill North Star Broken Hill
Prj., Ser. 95
6.30% 09/01/20 500 544,375
Olentangy Sch. Dist. G.O., Ser. 95A
6.00% 12/01/08 225 248,063
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
OHIO (CONTINUED)
Scioto Cnty. Rev., Marine Term. Norfolk
Southern. Corp. Prj., Ser. 98
5.30%** 08/01/13 $3,000 $ 3,026,250
Summit Cnty. Hosp. Rev., Cuyahoga
Falls Gen. Hosp. Prj., Ser. 94
6.65% 07/01/14 200 211,750
Toledo G.O., Ser. 96
6.00% 12/01/06 500 560,000
Univ. of Cincinnati Gen. Rec. Rev., Ser. 91L
6.90% 06/01/07 1,500 1,614,375
Univ. of Toledo Gen. Rec. Rev., Ser. 92A
5.90%(DOUBLE DAGGER) 06/01/20 425 448,375
Westerville City Sch. Dist. G.O., Ser. 87
6.25% 12/01/05 1,000 1,125,000
Westlake G.O., Ser. 96
6.40% 12/01/08 1,560 1,817,400
Worthington City Sch. Dist. Unltd. Tax G.O.,
Ser. 89
7.10% 12/01/99 1,000 1,025,920
------------
94,456,184
------------
ILLINOIS -- 4.9%
Chicago O'Hare Intl. Arpt. Spec. Fac.
Rev., Ser. 99 WIS
5.50% 01/01/17 5,000 5,137,500
------------
PUERTO RICO -- 14.3%
Puerto Rico Cmwlth. G.O., Ser. 96
5.40% 07/01/25 3,000 3,093,750
Puerto Rico Cmwlth. Hwy. & Trans.
Auth. Rites, Ser. 98
7.23%** 07/01/18 5,000 5,031,250
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 98EE
5.25% 07/01/16 1,600 1,668,000
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 99FF WIS
5.25% 07/01/10 5,000 5,406,250
------------
15,199,250
------------
TOTAL MUNICIPAL BONDS
(Cost $108,579,525) $114,792,934
------------
SHORT TERM INVESTMENTS -- 0.1%
Smith Barney Tax-Free Money
Market Fund (Cost $131,345) 131 131,345
------------
See accompanying notes to financial statements.
31
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
OHIO TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 1999 (UNAUDITED) Value
------------
TOTAL INVESTMENTS IN
SECURITIES
(Cost $108,710,870*) 108.5% $114,924,279
LIABILITIES IN EXCESS
OF OTHER ASSETS (8.5%) (9,024,718)
------ ------------
NET ASSETS (Applicable to 9,395,471
Institutional shares, 28,743 Service
shares, 279,415 Investor A shares,
134,965 Investor B shares and 44,247
Investor C shares outstanding) 100.0% $105,899,561
====== ============
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($103,979,231 (DIVIDE) 9,703,629) $10.72
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $10.72
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.72 (DIVIDE) 0.960) $11.17
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($1,446,205 (DIVIDE) 134,965) $10.72
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($474,125 (DIVIDE) 44,247) $10.72
======
- ------------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $6,242,938
Gross unrealized depreciation (29,529)
----------
$6,213,409
==========
** Rates shown are the rates as of March 31, 1999, and the maturities shown are
the longer of the next interest readjustment date or the date the principal
amount can be recovered through demand.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$600,000 on 42 long U.S. Treasury Notes future contracts expiring June 1999.
The value of such contracts of March 31, 1999 was $5,063,625 thereby
resulting in an unrealized loss of $20,773
See accompanying notes to financial statements.
32
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
DELAWARE TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS -- 101.5%
DELAWARE -- 78.9%
Delaware River & Bay Auth. Rev.,
Ser. 93
4.60% 01/01/05 $2,000 $ 2,052,500
Delaware River & Bay Auth. Rev.,
Ser. 96
6.00% 01/01/05 1,460 1,606,000
6.00% 01/01/06 1,160 1,281,800
Delaware St. Econ. Dev. Auth. Poll. Ctrl.
Rev., Delmarva Pwr. Prj., Ser. 91B
7.15% 07/01/18 500 541,875
Delaware St. Econ. Dev. Auth. Rev.,
First Mtg. Gilpin ACA CBI Prj.,
Ser. 98
5.63% 07/01/19 2,000 2,047,500
5.63% 07/01/25 1,500 1,535,625
Delaware St. Econ. Dev. Auth. Rev.,
United Wtr. Delaware, Inc. Prj.,
Ser. 95
6.20% 06/01/25 2,000 2,225,000
Delaware St. Econ. Dev. Auth. Rev.,
Wtr. Dev. Prj., Ser. 92B
6.45% 12/01/07 1,165 1,326,644
Delaware St. G.O., Ser. 90
6.85% 05/01/99 500 501,305
6.85% 05/01/00 500 518,485
Delaware St. G.O., Ser. 91A
6.30% 08/15/05 1,730 1,853,262
Delaware St. G.O., Ser. 92A
6.25% 03/01/02 1,400 1,522,500
Delaware St. G.O., Ser. 97B
5.00% 05/01/15 1,000 1,016,250
Delaware St. Hlth. Fac. Auth. Rev.,
Christiana Care Hlth. Svcs. Prj.,
Ser. 98
5.00% 10/01/15 5,000 5,050,000
Delaware St. Hlth. Fac. Auth. Rev.,
Med. Ctr. of Delaware Prj., Ser. 92
6.25% 10/01/04 2,185 2,439,006
6.25% 10/01/05 2,175 2,455,031
6.25% 10/01/06 4,000 4,555,000
Delaware St. Hsg. Auth. Rev.,
Multi-Family Mtg. Prj., Ser. 91
7.15% 07/01/14 3,000 3,210,000
Delaware St. Hsg. Auth. Rev.,
Multi-Family Mtg. Prj., Ser. 92C
7.38% 01/01/15 2,000 2,162,500
Delaware St. Realty Transfer Tax Rev.,
Land & Wtr. Consv. Trust Fund Prj.,
Ser. 93
5.50% 04/01/02 1,500 1,578,750
5.75% 04/01/03 1,500 1,610,625
Delaware St. Solid Waste Auth. Solid
Waste Sys. Rev., Ser. 90A
6.75% 07/01/99 500 504,095
6.75% 07/01/00 500 518,750
Delaware St. Solid Waste Auth. Solid
Waste Sys. Rev., Ser. 92
5.80% 07/01/01 1,500 1,565,625
6.00% 07/01/02 2,000 2,120,000
Delaware Trans. Auth. Trans. Sys. Rev.,
Ser. 90
7.10% 07/01/01 2,335 2,478,019
Delaware Trans. Auth. Trans. Sys. Rev.,
Ser. 91
6.00% 07/01/01 4,765 5,021,119
6.35% 07/01/01 500 538,750
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
DELAWARE (CONTINUED)
Delaware Trans. Auth. Trans. Sys. Rev.,
Ser. 92
5.40% 07/01/03 $1,000 $ 1,060,000
5.63% 07/01/05 2,400 2,553,000
Delaware Trans. Auth. Trans. Sys. Rev.,
Ser. 93
5.10%(DOUBLE DAGGER) 07/01/04 1,500 1,576,875
5.50% 07/01/08 1,000 1,057,500
Delaware Trans. Auth. Trans. Sys. Rev.,
Ser. 94
6.10% 07/01/07 1,000 1,100,000
Dover Elec. Rev., Ser. 90
6.95% 07/01/99 500 504,325
7.00% 07/01/00 500 520,625
7.00% 07/01/01 500 530,000
Dover Elec. Rev., Ser. 93
6.00% 07/01/07 500 537,500
New Castle Cnty. G.O., Ser. 91
6.20% 10/15/00 500 521,250
6.25% 10/15/01 3,000 3,198,750
6.30% 10/15/02 1,000 1,082,500
6.50% 10/15/04 1,000 1,082,500
6.50% 10/15/05 1,000 1,080,000
New Castle Cnty. G.O., Ser. 98
5.00% 10/01/18 3,500 3,517,500
Sussex Cnty. G.O., Ser. 93
5.60% 10/15/08 3,000 3,210,000
5.70% 10/15/12 2,000 2,140,000
Univ. of Delaware Hsg. & Dining Sys.
Rev., Ser. 89
7.00% 11/01/00 2,000 2,078,380
Wilmington G.O., Ser. 92A
6.20% 01/01/02 1,000 1,052,500
6.00% 07/01/03 500 528,750
Wilmington G.O., Ser. 92B
6.25% 04/01/02 3,050 3,328,312
Wilmington G.O., Ser. 96A
6.00% 10/01/03 3,525 3,851,063
5.50% 10/01/16 1,500 1,571,250
Wilmington Pk. Auth. Gtd. Pk. Rev.,
Ser. 92A
5.60% 09/15/02 500 530,625
5.80% 09/15/04 1,000 1,077,500
6.00% 09/15/06 500 538,750
------------
93,665,471
------------
ILLINOIS -- 4.4%
Chicago O'Hare Intl. Arpt. Spec. Fac.
Rev., Ser. 99 WIS
5.50% 01/01/14 5,000 5,243,750
------------
PUERTO RICO -- 14.3%
Puerto Rico Cmwlth. G.O., Ser. 97
5.38% 07/01/21 2,500 2,600,000
Puerto Rico Cmwlth. Infra. Fin. Auth.
Spec. Rites, Ser. 98
7.31%** 07/01/21 4,000 3,970,000
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 97BB
5.50% 07/01/09 1,150 1,262,125
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 98EE
5.25% 07/01/16 1,800 1,876,500
See accompanying notes to financial statements.
33
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
DELAWARE TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
PUERTO RICO (CONTINUED)
Puerto Rico Pub. Bldg. Auth. Gtd. Govt.
Fac. Rev., Ser. 95A
6.25% 07/01/10 $1,000 $ 1,165,000
Puerto Rico Pub. Fin. Corp. Rites.,
Ser. 98
7.99%** 06/01/12 5,000 6,087,500
------------
16,961,125
------------
VIRGIN ISLANDS -- 3.9%
Virgin Islands Pub. Fin. Auth. Rev.,
Ser. 98
5.50% 10/01/18 4,500 4,635,000
------------
TOTAL MUNICIPAL BONDS
(Cost $115,139,780) 120,505,346
------------
SHORT TERM INVESTMENTS -- 1.4%
Smith Barney Tax-Free Money
Market Fund (Cost $1,587,862) 1,588 1,587,862
------------
TOTAL INVESTMENTS IN
SECURITIES
(Cost $116,727,642*) 102.9% 122,093,208
LIABILITIES IN EXCESS
OF OTHER ASSETS (2.9%) (3,393,737)
------ ------------
NET ASSETS (Applicable to 10,902,826
Institutional shares, 10 Service shares,
443,510 Investor A shares, 285,787
Investor B shares and 109,609
Investor C shares outstanding) 100.0% $118,699,471
====== ============
Value
------------
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($114,702,330 (DIVIDE) 11,346,346) $10.11
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $10.11
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.11 (DIVIDE) 0.960) $10.53
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($2,889,071 (DIVIDE) 285,787) $10.11
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($1,108,070 (DIVIDE) 109,609) $10.11
======
- ------------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $5,408,270
Gross unrealized depreciation (42,704)
----------
$5,365,566
==========
** Rates shown are the rates as of March 31, 1999, and the maturities shown are
the longer of the next interest readjustment date or the date the principal
amount can be recovered through demand.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$500,000 on 31 long U.S. Treasury Bonds future contracts expiring June 1999.
The value of such contracts on March 31, 1999 was $3,737,438, thereby
resulting in an unrealized loss of $4,305.
See accompanying notes to financial statements.
34
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
KENTUCKY TAX-FREE INCOME PORTFOLIO
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS -- 101.7%
KENTUCKY -- 87.5%
Ashland Env. Imp. Rev., Allied Chemical
Corp. Prj., Ser. 78
5.80% 03/01/03 $ 295 $ 307,537
Boone Cnty. Sch. Dist. Fin. Corp. Sch.
Bldg. Rev., Ser. 91C
6.40% 09/01/01 440 468,600
6.50% 09/01/01 490 535,937
6.60% 09/01/01 550 602,937
Campbell & Kenton Cnty. Rev., Sanit.
Dist. #1 Prj., Ser. 98A
5.00% 08/01/18 4,210 4,131,062
Christian Cnty. Hosp. Rev., Jennie Stuart
Med. Ctr. Prj., Ser. 96A
6.00% 07/01/17 1,000 1,055,000
Christian Cnty. Hosp. Rev., Jennie Stuart
Med. Ctr. Prj., Ser. 97A
5.25% 07/01/03 1,000 1,041,250
Danville Multi-City Lease Rev.,
Owensboro Riverpark Prj., Ser. 93B
5.45% 07/01/08 1,800 1,901,250
5.55% 07/01/11 1,000 1,040,000
Grayson Cnty. Sch. Dist. Fin. Corp. Sch.
Bldg. Rev., Ser. 95B
5.95% 01/01/08 1,290 1,412,550
Harlan Cnty. Sch. Dist. Fin. Corp. Sch.
Bldg. Rev., Ser. 90
7.25% 12/01/02 160 171,200
Henderson Elec. Light. & Pwr. Rev.,
Ser. 73
5.70% 03/01/03 2,135 2,143,540
Jefferson Cnty. Cap. Imp. Prj. Corp. Rev.,
Ser. 93A
5.75% 08/15/04 1,275 1,377,000
5.90% 08/15/05 1,000 1,082,500
6.10% 08/15/07 2,500 2,712,500
Jefferson Cnty. Cap. Imp. Prj. Corp. Rev.,
Ser. 97
5.25% 06/01/15 2,145 2,209,350
5.38% 06/01/22 3,000 3,082,500
Jefferson Cnty. Hlth. Fac. Rev., Alliant
Hlth. Sys. Inc. Prj., Ser. 97
5.13% 10/01/17 5,000 5,031,250
Jefferson Cnty. Hlth. Fac. Rev., Jewish
Hosp. Hlth. Svcs. Inc. Prj., Ser. 96
5.65% 01/01/17 3,000 3,176,250
Jefferson Cnty. Multi-Family Hsg. Rev.,
Taylorsville Rd. Prj., Ser. 93A
5.75% 06/01/23 3,860 4,043,350
Jefferson Cnty. Multi-Family Hsg. Rev.,
Whipps Mill Prj., Ser. 93A
5.88%** 06/01/23 2,250 2,337,187
Jefferson Cnty. Sch. Dist. Fin. Corp. Sch.
Bldg. Rev., Ser. 92B
6.00% 01/01/03 2,005 2,157,881
6.20% 01/01/06 2,000 2,160,000
6.20% 01/01/07 2,750 2,966,562
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
KENTUCKY (CONTINUED)
Kenton Cnty. Arpt. Rev., Cincinnati
Northern Kentucky Prj., Ser. 97A
5.75% 03/01/05 $1,490 $ 1,609,200
5.85% 03/01/06 1,655 1,806,019
5.95% 03/01/07 1,730 1,905,162
6.30% 03/01/15 1,000 1,126,250
Kenton Cnty. Sch. Dist. Fin. Corp. Sch.
Bldg. Rev., Ser. 97
5.30% 03/01/13 1,500 1,563,750
5.38% 03/01/17 2,800 2,870,000
Kenton Cnty. Wtr. Dist. Wtrwks. Rev.,
Ser. 92
6.38% 02/01/17 1,000 1,086,250
Kentucky Dev. Fin. Auth. Hosp. Rev.,
St. Lukes Hosp. Prj., Ser. 89A
7.20% 10/01/99 900 917,217
7.25% 10/01/99 540 559,888
Kentucky Hgr. Ed. Student Ln. Ins. Rev.,
Ser. 85A
9.25% 06/01/01 1,785 1,903,256
Kentucky Hgr. Ed. Student Ln. Ins. Rev.,
Ser. 91C
6.25% 06/01/00 1,075 1,103,219
Kentucky Hgr. Ed. Student Ln. Ins. Rev.,
Ser. 94C
5.15% 06/01/02 1,130 1,158,250
Kentucky Hgr. Ed. Student Ln. Ins. Rev.,
Ser. 95B
6.60% 06/01/02 3,435 3,615,337
Kentucky Hsg. Corp. Hsg. Rev., Ser. 89A
6.85% 01/01/00 90 92,033
Kentucky Hsg. Corp. Hsg. Rev., Ser. 90A
7.40% 01/01/10 735 762,562
Kentucky Hsg. Corp. Hsg. Rev., Ser. 96D
5.80% 07/01/13 3,350 3,479,813
Kentucky Hsg. Corp. Hsg. Rev., Ser. 97F
5.70% 01/01/28 2,100 2,144,625
Kentucky Infra. Auth. Rev., Ser. 97L
5.50% 06/01/08 2,500 2,718,750
Kentucky St. Poll. Abatement & Wtr.
Res. Fin. Auth. Rev., Ser. 88A
7.10% 08/01/99 265 268,363
Kentucky St. Property & Bldg. Comm.
Econ. Dev. Rev., Prj. 30-Fifth,
Ser. 88
7.40% 06/01/00 270 277,166
Kentucky St. Property & Bldg. Comm.
Rev., Prerefunded Prj. 53, Ser. 91
5.75% 10/01/11 2,415 2,583,007
Kentucky St. Property & Bldg. Comm.
Rev., Ref. Prj. 31-Fourth, Ser. 88
7.30% 06/01/99 1,000 1,006,110
7.40% 06/01/00 375 383,569
Kentucky St. Property & Bldg. Comm.
Rev., Ref. Prj. 34-Second, Ser. 89
7.10% 06/01/99 800 804,776
Kentucky St. Property & Bldg. Comm.
Rev., Ref. Prj. 50, Ser. 91
6.60% 02/01/00 500 513,610
6.50% 08/01/01 740 801,975
See accompanying notes to financial statements.
35
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
KENTUCKY TAX-FREE INCOME PORTFOLIO (CONTINUED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
KENTUCKY (CONTINUED)
Kentucky St. Property & Bldg. Comm.
Rev., Ref. Prj. 54, Ser. 92
5.90% 09/01/07 $2,750 $ 2,949,375
Kentucky St. Property & Bldg. Comm.
Rev., Ref. Prj. 55, Ser. 93
4.60%(DOUBLE DAGGER) 09/01/03 3,000 3,086,250
4.90% 09/01/06 2,000 2,080,000
Kentucky St. Property & Bldg. Comm.
Rev., Ref. Prj. 59, Ser. 95
6.00% 11/01/05 2,110 2,342,100
Kentucky St. Property & Bldg. Comm.
Rev., Ref. Prj. 62, Ser. 99
5.00% 09/01/11 4,185 4,336,706
Kentucky St. Property & Bldg. Comm.
Rev., Unrefunded Prj. 53, Ser. 91
5.75% 10/01/11 2,085 2,226,338
Kentucky St. Tpke. Auth. Econ. Dev.
Rev., Ref. Revitalization Prj., Ser. 90
7.13% 05/15/00 1,400 1,478,750
Kentucky St. Tpke. Auth. Econ. Dev.
Rev., Ref. Revitalization Prj., Ser. 92
5.50% 01/01/01 2,040 2,108,850
5.70% 01/01/03 3,000 3,195,000
Kentucky St. Tpke. Auth. Econ. Dev.
Rev., Ref. Revitalization Prj., Ser. 95
6.50% 07/01/07 1,000 1,153,750
6.50% 07/01/08 3,000 3,495,000
Kentucky St. Tpke. Auth. Res. Rec.
Rev., Ser. 79
7.10% 07/01/02 625 660,156
Lexington Ctr. Corp. Mtg. Rev., Ser. 93A
5.20% 10/01/04 1,790 1,883,975
Lexington-Fayette Urban Cnty. Govt.
Kentucky Sch. Bldg. Rev., Ser. 89
7.00% 12/01/99 500 527,350
Lexington-Fayette Urban Cnty. Govt.
Rev., Univ. of Kentucky Alumni Assoc.,
Inc. Prj., Ser. 94
6.50% 11/01/06 660 754,875
Lexington-Fayette Urban Cnty. Govt.
Pub. Fac. Corp. Mtg. Rev., Ref. Ser. 93
4.50% 02/01/06 2,100 2,142,000
Louisville & Jefferson Cnty. Auth. Rev.,
Ser. 98A
5.00% 07/01/18 2,000 1,927,500
5.00% 07/01/25 1,380 1,336,875
Louisville & Jefferson Cnty. Met. Swr.
Dist. Rev., Ser. 93
5.30% 05/15/10 2,000 2,095,000
Louisville & Jefferson Cnty. Regl. Arpt.
Auth. Arpt. Sys. Rev., Ser. 97A
5.75% 07/01/01 1,000 1,043,750
5.75% 07/01/03 1,070 1,144,900
Louisville & Jefferson Cnty. Swr. and
Drain Sys. Rev., Ser. 98A
5.00% 05/15/22 7,000 6,877,500
Louisville & Jefferson Cnty. Swr. Dist.
Rev., Ser. 98A
5.00% 05/15/30 3,000 2,940,000
Louisville Ind. Bldg. Rev., Enterprise
Zone Dist. Prj., Ser. 88
5.75% 04/01/00 1,465 1,503,134
Louisville Pk. Auth. River City First Mtg.
Rev., Ser. 91
6.50% 06/01/01 265 288,188
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
KENTUCKY (CONTINUED)
Louisville Pub. Properties Corp. Rev.,
Ser. 98
5.00% 12/01/22 $3,210 $ 3,145,800
McCracken Cnty. Hosp. Rev., Mercy
Health Sys. Prj., Ser. 94A
6.10% 11/01/04 400 437,000
Muhlenberg Cnty. Ind. Dev. Rev., Harsco
Corp. Prj., Ser. 87
7.00% 09/01/99 1,000 1,063,750
Owensboro Elec. Light & Pwr. Rev.,
Ser. 93B
5.05% 01/01/07 3,000 3,120,000
Somerset Ind. Bldg. Rev., CR/PL, Inc.
Prj., Ser. 84
7.50% 10/01/10 2,900 3,142,875
Univ. of Kentucky Rev., Cons. Edl. Bldg.
Prj., Ser. 92N
6.00% 05/01/08 1,680 1,810,200
6.00% 05/01/10 1,000 1,075,000
Univ. of Kentucky Rev., Cons. Edl. Bldg.
Prj., Ser. 94
4.60% 05/01/07 2,540 2,597,150
Univ. of Kentucky Univ. Rev., Ref.
Ser. 93A
5.30% 08/01/03 1,765 1,862,075
5.40% 08/01/04 750 799,688
Univ. of Louisville Rev., Cons. Edl. Bldg.
Prj., Ser. 92H
5.88% 05/01/11 1,150 1,217,563
Univ. of Louisville Rev., Cons. Edl. Bldg.
Prj., Ser. 93I
5.10% 05/01/02 1,545 1,604,869
Univ. of Louisville Rev., Cons. Edl. Bldg.
Prj., Ser. 93J
5.00% 05/01/06 2,370 2,467,763
Western Kentucky Univ. Rev., Hsg. &
Dining Sys. Prj., Ser. 90L
7.10% 12/01/00 350 368,375
Winchester Util. Rev., Ser. 93
5.45% 07/01/10 1,500 1,569,375
------------
164,066,155
------------
ILLINOIS -- 3.9%
Chicago O'Hare Intl. Arpt. Spec. Fac. Rev.,
Ser. 99 WIS
5.50% 01/01/16 7,000 7,227,500
------------
PUERTO RICO -- 9.4%
Puerto Rico Cmwlth. G.O., Ser. 97
5.38% 07/01/21 4,250 4,420,000
Puerto Rico Cmwlth. Infra. Fin. Auth.
Rev., Ser. 97A
5.00% 07/01/21 3,500 3,495,625
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 92R
5.90% 07/01/01 1,000 1,048,750
Puerto Rico Elec. Pwr. Auth. Rites,
Ser. 98
8.30%** 04/01/99 2,000 2,230,000
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 99FF WIS
5.25% 07/01/10 4,915 5,314,344
Puerto Rico Infra. Fin. Auth. Rev.,
Ser. 97A
5.00% 07/01/11 1,000 1,048,750
------------
17,557,469
------------
See accompanying notes to financial statements.
36
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
KENTUCKY TAX-FREE INCOME PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 1999 (UNAUDITED)
Par
Maturity (000) Value
-------- -------- ------------
MUNICIPAL BONDS (CONTINUED)
VIRGIN ISLANDS -- 0.9%
Virgin Islands Wtr. & Pwr. Auth. Elec.
Sys. Rev., Ref. Ser. 98
5.30% 07/01/18 $1,685 $ 1,676,575
------------
TOTAL MUNICIPAL BONDS
(Cost $181,396,653) 190,527,699
------------
SHORT TERM INVESTMENTS -- 2.9%
Smith Barney Tax-Free Money
Market Fund
(Cost $5,536,342) 5,536 5,536,342
------------
TOTAL INVESTMENTS IN
SECURITIES
(Cost $186,932,995*) 104.6% 196,064,041
LIABILITIES IN EXCESS
OF OTHER ASSETS (4.6%) (8,648,865)
------ ------------
NET ASSETS (Applicable to 18,405,964
Institutional shares, 10 Service shares,
144,262 Investor A shares, 25,594
Investor B shares and 3,974
Investor C shares outstanding) 100.0% $187,415,176
====== ============
Value
------------
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($187,116,907 (DIVIDE) 18,550,236) $10.09
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $10.09
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.09 (DIVIDE) 0.960) $10.51
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($258,183 (DIVIDE) 25,594) $10.09
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($40,086 (DIVIDE) 3,974) $10.09
======
- ------------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $9,213,315
Gross unrealized depreciation (82,269)
----------
$9,131,046
==========
** Rates shown are the rates as of March 31, 1999, and the maturities shown are
the longer of the next interest readjustment date or the date the principal
amount can be recovered through demand.
(DAGGER) Principal amount of securities pledged as collateral of $1,000,000 on
100 long U.S. Treasury Bonds futures contracts expiring June 1999. The value
of such contracts on March 31, 1999 was $12,056,250, thereby resulting in an
unrealized loss of $60,586.
INVESTMENT ABBREVIATIONS
AMT Alternative Minimum Tax
COP Certificates of Participation
G.O. General Obligations
WIS When Issued Security
See accompanying notes to financial statements.
37
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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
FOR THE PERIOD ENDED MARCH 31, 1999 Income Income Income Income Income Income
(UNAUDITED) Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
----------- ------------ ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest .......................... $8,062,193 $29,137,759 $4,632,671 $2,807,341 $3,037,723 $4,984,615
----------- ------------ ----------- ----------- ---------- ----------
Expenses:
Investment advisory fee ........... 787,526 2,801,093 450,282 249,691 328,075 523,151
Administration fee ................ 362,234 1,229,550 207,126 122,081 137,193 218,768
Custodian fee ..................... 31,037 77,972 16,884 11,248 11,363 17,588
Transfer agent fee ................ 54,540 193,160 33,442 18,664 20,651 29,153
Shareholder servicing fees ........ 19,978 88,309 28,821 6,178 8,160 1,453
Shareholder processing fees ....... 13,874 59,119 27,450 3,870 4,896 875
Distribution fees ................. 17,716 78,457 4,046 6,505 12,221 377
Legal and audit ................... 11,344 40,160 7,515 3,822 7,224 11,210
Printing .......................... 18,897 51,548 10,261 2,934 3,852 6,539
Registration fees and
expenses ........................ 28,901 56,220 9,469 6,818 8,169 13,168
Trustees' fees and officer's
salary .......................... 2,448 8,510 1,570 1,289 995 1,702
Other ............................. 4,732 16,287 3,024 1,604 1,960 3,315
----------- ------------ ----------- ----------- ---------- ----------
1,353,227 4,700,385 799,890 434,704 544,759 827,299
Less fees waived .................. (320,683) (799,647) (172,522) (76,062) (109,135) (174,793)
----------- ------------ ----------- ----------- ---------- ----------
Total expenses ............... 1,032,544 3,900,738 627,368 358,642 435,624 652,506
----------- ------------ ----------- ----------- ---------- ----------
Net investment income ................ 7,029,649 25,237,021 4,005,303 2,448,699 2,602,099 4,332,109
----------- ------------ ----------- ----------- ---------- ----------
Realized and unrealized gain
(loss) on investments:
Net realized gain (loss)
from:
Investment transactions ......... (12,797) 1,128,819 216,890 63,940 -- 475,309
Futures contracts ............... 409,442 937,773 53,739 30,732 53,617 73,510
----------- ------------ ----------- ----------- ---------- ----------
396,645 2,066,592 270,629 94,672 53,617 548,819
----------- ------------ ----------- ----------- ---------- ----------
Change in unrealized appreciation
(depreciation) from:
Investments ..................... (3,686,680) (12,544,514) (2,675,170) (1,250,959) (1,008,440) (2,817,039)
Futures ......................... (53,823) (24,778) (30,605) 6,263 47,151 (54,017)
----------- ------------ ----------- ----------- ---------- ----------
(3,740,503) (12,569,292) (2,705,775) (1,244,696) (961,289) (2,871,056)
----------- ------------ ----------- ----------- ---------- ----------
Net loss on investments .............. (3,343,858) (10,502,700) (2,435,146) (1,150,024) (907,672) (2,322,237)
----------- ------------ ----------- ----------- ---------- ----------
Net increase in net assets
resulting from operations ......... $ 3,685,791 $ 14,734,321 $ 1,570,157 $ 1,298,675 $1,694,427 $2,009,872
=========== ============ =========== =========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
BLACKROCK FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Tax-Free Pennsylvania Tax-Free
Income Portfolio Income Portfolio
------------------------------ ----------------------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
3/31/99 9/30/98 3/31/99 9/30/98
------------ ------------ -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................. $ 7,029,649 $ 7,337,197 $ 25,237,021 $ 22,883,610
Net realized gain on investment and
futures transactions ................................ 396,645 1,371,530 2,066,592 3,711,376
Net unrealized gain (loss) on investment
and futures transactions ............................ (3,740,503) 7,321,442 (12,569,292) 25,404,943
------------ ------------ -------------- --------------
Net increase in net assets resulting
from operations ..................................... 3,685,791 16,030,169 14,734,321 51,999,929
------------ ------------ -------------- --------------
Distributions to shareholders from:
Net investment income:
Institutional Class ................................... (6,675,291) (4,403,844) (24,650,309) (18,470,332)
Service Class ......................................... (131,909) (2,561,816) (446,347) (2,557,439)
Investor A Class ...................................... (150,880) (253,639) (793,554) (1,412,477)
Investor B Class ...................................... (43,264) (53,271) (410,898) (550,801)
Investor C Class ...................................... (34,407) (5,054) (10,530) (440)
------------ ------------ -------------- --------------
Total distributions from net investment income ........ (7,035,751) (7,277,624) (26,311,638) (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 ................... (8,641,663) (7,614,994) (29,327,127) (22,991,489)
------------ ------------ -------------- --------------
Capital share transactions ................................ 40,755,184 217,780,281 35,301,086 997,436,145
------------ ------------ -------------- --------------
Total increase (decrease) in net assets ............... 35,799,312 226,195,456 20,708,280 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 ......................................... $336,648,508 $300,849,196 $1,147,943,845 $1,127,235,565
============ ============ ============== ==============
</TABLE>
<TABLE>
<CAPTION>
New Jersey Tax-Free Ohio Tax-Free
Income Portfolio Income Portfolio
----------------------------- --------------------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
3/31/99 9/30/98 3/31/99 9/30/98
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................. $ 4,005,303 $ 5,479,322 $ 2,448,699 $ 2,221,550
Net realized gain on investment and
futures transactions ................................ 270,629 1,458,455 94,672 700,041
Net unrealized gain (loss) on investment
and futures transactions ............................ (2,705,775) 4,429,882 (1,244,696) 2,694,414
------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations ..................................... 1,570,157 11,367,659 1,298,675 5,616,005
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income:
Institutional Class ................................... (3,320,539) (1,777,115) (2,363,273) (1,752,198)
Service Class ......................................... (732,342) (3,661,512) (11,850) (338,008)
Investor A Class ...................................... (34,663) (55,807) (60,607) (110,681)
Investor B Class ...................................... (18,167) (30,377) (21,524) (28,760)
Investor C Class ...................................... (201) -- (8,354) (1,554)
------------ ------------ ------------ ------------
Total distributions from net investment income ........ (4,105,912) (5,524,811) (2,465,608) (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 ................... (5,067,602) (5,524,811) (2,892,341) (2,231,201)
------------ ------------ ------------ ------------
Capital share transactions ................................ (209,498) 90,239,477 1,298,213 91,225,062
------------ ------------ ------------ ------------
Total increase (decrease) in net assets ............... (3,706,943) 96,082,325 (295,453) 94,609,866
------------ ------------ ------------ ------------
Net assets:
Beginning of period ................................... 182,993,794 86,911,469 106,195,014 11,585,148
------------ ------------ ------------ ------------
End of period ......................................... $179,286,851 $182,993,794 $105,899,561 $106,195,014
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Delaware Tax-Free Kentucky Tax-Free
Income Portfolio Income Portfolio
------------------------------ -----------------------------------
For the For the
Six Months For the Six Months For the
Ended Period 5/11/98 1 Ended Period 5/11/98 1
3/31/99 through 9/30/98 3/31/99 through 9/30/98
------------ --------------- ------------ ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................. $ 2,602,099 $ 1,927,114 $ 4,332,109 $ 3,767,002
Net realized gain on investment and
futures transactions ................................ 53,617 1,532,218 548,819 1,778,278
Net unrealized gain (loss) on investment
and futures transactions ............................ (961,289) 2,541,557 (2,871,056) 4,590,015
------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations ..................................... 1,694,427 6,000,889 2,009,872 10,135,295
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income:
Institutional Class ................................... (2,596,562) (2,056,266) (4,302,004) (3,778,443)
Service Class ......................................... (2) (2) (220) (2)
Investor A Class ...................................... (67,650) (34,547) (21,536) (3,692)
Investor B Class ...................................... (39,607) (16,992) (1,674) (1)
Investor C Class ...................................... (15,596) (5,877) (26) (1)
------------ ------------ ------------ ------------
Total distributions from net investment income ........ (2,719,417) (2,113,684) (4,325,460) (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 ................... (4,296,514) (2,113,684) (6,187,804) (3,782,139)
------------ ------------ ------------ ------------
Capital share transactions ................................ 1,775,727 115,638,626 (5,874,821) 191,114,773
------------ ------------ ------------ ------------
Total increase (decrease) in net assets ............... (826,360) 119,525,831 (10,052,753) 197,467,929
------------ ------------ ------------ ------------
Net assets:
Beginning of period ................................... 119,525,831 -- 197,467,929 --
------------ ------------ ------------ ------------
End of period ......................................... $118,699,471 $119,525,831 $187,415,176 $197,467,929
============ ============ ============ ============
<FN>
- --------------------
1 Commencement of operations.
</FN>
</TABLE>
See accompanying notes to financial statements.
40-41
<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 ASSSET
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>
- -------------------------
TAX-FREE INCOME PORTFOLIO
- -------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 5 $11.73 $0.26 $(0.13) $(0.26) $(0.06) $11.54
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
9/30/94 11.31 0.53 (0.93) (0.53) (0.34) 10.04
SERVICE CLASS
10/1/98 through 3/31/99 5 $11.73 $0.26 $(0.15) $(0.24) $(0.06) $11.54
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
9/30/94 11.31 0.51 (0.93) (0.51) (0.34) 10.04
INVESTOR A CLASS
10/1/98 through 3/31/99 5 $11.73 $0.23 $(0.13) $(0.23) $(0.06) $11.54
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
9/30/94 11.31 0.48 (0.93) (0.48) (0.34) 10.04
INVESTOR B CLASS
10/1/98 through 3/31/99 5 $11.73 $0.19 $(0.13) $(0.19) $(0.06) $11.54
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
10/1/98 through 3/31/99 5 $11.73 $0.19 $(0.13) $(0.19) $(0.06) $11.54
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
10/1/98 through 3/31/99 5 $11.15 $0.25 $(0.10) $(0.26) $(0.03) $11.01
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
9/30/94 10.70 0.53 (0.85) (0.53) (0.03) 9.82
SERVICE CLASS
10/1/98 through 3/31/99 5 $11.15 $0.23 $(0.10) $(0.24) $(0.03) $11.01
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
9/30/94 10.70 0.51 (0.85) (0.51) (0.03) 9.82
INVESTOR A CLASS
10/1/98 through 3/31/99 5 $11.15 $0.18 $(0.06) $(0.23) $(0.03) $11.01
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
9/30/94 10.70 0.52 (0.85) (0.52) (0.03) 9.82
INVESTOR B CLASS
10/1/98 through 3/31/99 5 $11.15 $0.21 $(0.10) $(0.22) $(0.03) $11.01
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
10/1/98 through 3/31/99 5 $11.15 $0.21 $(0.10) $(0.22) $(0.03) $11.01
8/14/98 1 through 9/30/98 11.00 0.42 0.15 (0.42) -- 11.15
</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
10/1/98 through 3/31/99 5 1.15% $ 315,623 0.60%2 0.80%2 4.52%2 4.32%2 52%
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
9/30/94 (3.77) 132 0.50 1.73 4.97 3.74 40
SERVICE CLASS
10/1/98 through 3/31/99 5 1.00% $ 6,791 0.90%2 1.10%2 4.21%2 4.01%2 52%
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
9/30/94 (4.02) 2,109 0.75 1.98 4.75 3.52 40
INVESTOR A CLASS
10/1/98 through 3/31/99 5 0.92%3 $ 7,783 1.09%2 1.29%2 4.02%2 3.82%2 52%
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
9/30/94 (4.19)3 6,972 0.95 2.18 4.53 3.30 40
INVESTOR B CLASS
10/1/98 through 3/31/99 5 0.54%4 $ 3,335 1.75%2 1.95%2 3.30%2 3.10%2 52%
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
10/1/98 through 3/31/99 5 0.54%4 $ 3,117 1.75%2 1.95%2 3.24%2 3.04%2 52%
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
10/1/98 through 3/31/99 5 1.34% $1,063,082 0.60%2 0.74%2 4.54%2 4.40%2 8%
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
9/30/94 (2.96) 639 0.39 0.99 5.27 4.67 30
SERVICE CLASS
10/1/98 through 3/31/99 5 1.19% $ 21,196 0.90%2 1.04%2 4.24%2 4.10%2 8%
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
9/30/94 (3.20) 11,518 0.55 1.15 4.97 4.37 30
INVESTOR A CLASS
10/1/98 through 3/31/99 5 1.12%3 $ 40,065 1.08%2 1.22%2 4.06%2 3.92%2 8%
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
9/30/94 (3.06)3 46,563 0.41 1.01 5.06 4.46 30
INVESTOR B CLASS
10/1/98 through 3/31/99 5 1.01%4 $ 22,825 1.75%2 1.89%2 3.34%2 3.20%2 8%
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
10/1/98 through 3/31/99 5 1.01%4 $ 776 1.75%2 1.89%2 3.25%2 3.11%2 8%
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
</TABLE>
See accompanying notes to financial statements.
42-43
<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 ASSSET
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>
- -------------------------------------
NEW JERSEY TAX-FREE INCOME PORTFOLIO
- -------------------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 5 $12.07 $0.27 $(0.16) $(0.28) $(0.06) $11.84
5/4/98 1 through 9/30/98 11.71 0.23 0.36 (0.23) -- 12.07
SERVICE CLASS
10/1/98 through 3/31/99 5 $12.07 $0.25 $(0.16) $(0.26) $(0.06) $11.84
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
2/28/94 11.30 0.54 0.04 (0.54) (0.03) 11.31
INVESTOR A CLASS
10/1/98 through 3/31/99 5 $12.07 $0.24 $(0.16) $(0.25) $(0.06) $11.84
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
10/1/98 through 3/31/99 5 $12.07 $0.19 $(0.16) $(0.20) $(0.06) $11.84
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 3/31/99 5 $11.98 $0.12 $(0.14) $(0.12) -- $11.84
- ------------------------------
OHIO TAX-FREE INCOME PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 5 $10.88 $0.25 $(0.12) $(0.25) $(0.04) $10.72
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
9/30/94 10.53 0.53 (0.91) (0.53) (0.02) 9.60
SERVICE CLASS
10/1/98 through 3/31/99 5 $10.88 $0.25 $(0.13) $(0.24) $(0.04) $10.72
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
9/30/94 10.53 0.49 (0.91) (0.49) (0.02) 9.60
INVESTOR A CLASS
10/1/98 through 3/31/99 5 $10.88 $0.23 $(0.12) $(0.23) $(0.04) $10.72
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
9/30/94 10.53 0.53 (0.91) (0.53) (0.02) 9.60
INVESTOR B CLASS
10/1/98 through 3/31/99 5 $10.88 $0.19 $(0.12) $(0.19) $(0.04) $10.72
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
10/1/98 through 3/31/99 5 $10.88 $0.19 $(0.12) $(0.19) $(0.04) $10.72
8/26/98 1 through 09/30/98 10.74 0.03 0.14 (0.03) -- 10.88
</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>
- -------------------------------------
NEW JERSEY TAX-FREE INCOME PORTFOLIO
- -------------------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 5 0.92% $ 143,827 0.60%2 0.80%2 4.55%2 4.35%2 14%
5/4/98 1 through 9/30/98 8.38 145,708 0.60 2 0.90 2 4.67 2 4.37 2 24
SERVICE CLASS
10/1/98 through 3/31/99 5 0.77% $ 32,471 0.90%2 1.10%2 4.25%2 4.05%2 14%
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
2/28/94 5.18 111,354 0.38 0.86 4.75 4.27 12
INVESTOR A CLASS
10/1/98 through 3/31/99 5 0.68%3 $ 1,868 1.10%2 1.30%2 4.02%2 3.82%2 14%
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
10/1/98 through 3/31/99 5 0.31%4 $ 1,101 1.75%2 1.95%2 3.39%2 3.19%2 14%
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 3/31/99 5 (0.17)%4 $ 20 1.75%2 1.95%2 3.24%2 3.04%2 14%
- ------------------------------
OHIO TAX-FREE INCOME PORTFOLIO
- ------------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 5 1.26% $ 100,678 0.60%2 0.74%2 4.69%2 4.55%2 2%
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
9/30/94 (3.75) 127 0.10 1.49 5.16 3.77 61
SERVICE CLASS
10/1/98 through 3/31/99 5 1.11% $ 308 0.90%2 1.04%2 4.38%2 4.24%2 2%
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
9/30/94 (4.00) 4,428 0.35 1.74 5.06 3.67 61
INVESTOR A CLASS
10/1/98 through 3/31/99 5 1.03%3 $ 2,994 1.10%2 1.24%2 4.19%2 4.05%2 2%
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
9/30/94 (3.75)3 3,825 0.10 1.49 5.18 3.79 61
INVESTOR B CLASS
10/1/98 through 3/31/99 5 0.65%4 $ 1,446 1.75%2 1.89%2 3.51%2 3.37%2 2%
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
10/1/98 through 3/31/99 5 0.65%4 $ 474 1.75%2 1.89%2 3.48%2 3.34%2 2%
8/26/98 1 through 09/30/98 1.60 4 527 1.71 2 2.04 2 2.82 2 2.49 2 77
</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 ASSSET
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>
- ----------------------------------
DELAWARE TAX-FREE INCOME PORTFOLIO
- ----------------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 5 $10.33 $0.22 $(0.07) $(0.23) $(0.14) $10.11
5/11/98 1 through 9/30/98 10.00 0.17 0.34 (0.18) -- 10.33
SERVICE CLASS
10/1/98 through 3/31/99 5 $10.33 $0.23 $(0.09) $(0.22) $(0.14) $10.11
5/11/98 1 through 9/30/98 10.00 0.16 0.34 (0.17) -- 10.33
INVESTOR A CLASS
10/1/98 through 3/31/99 5 $10.33 $0.21 $(0.08) $(0.21) $(0.14) $10.11
5/11/98 1 through 9/30/98 10.00 0.15 0.34 (0.16) -- 10.33
INVESTOR B CLASS
10/1/98 through 3/31/99 5 $10.33 $0.17 $(0.08) $(0.17) $(0.14) $10.11
5/11/98 1 through 9/30/98 10.00 0.12 0.34 (0.13) -- 10.33
INVESTOR C CLASS
10/1/98 through 3/31/99 5 $10.33 $0.17 $(0.08) $(0.17) $(0.14) $10.11
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
10/1/98 through 3/31/99 5 $10.31 $0.23 $(0.12) $(0.23) $(0.10) $10.09
5/11/98 1 through 9/30/98 10.00 0.18 0.31 (0.18) -- 10.31
SERVICE CLASS
10/1/98 through 3/31/99 5 $10.31 $0.22 $(0.12) $(0.22) $(0.10) $10.09
5/11/98 1 through 9/30/98 10.00 0.19 0.29 (0.17) -- 10.31
INVESTOR A CLASS
10/1/98 through 3/31/99 5 $10.31 $0.21 $(0.12) $(0.21) $(0.10) $10.09
5/11/98 1 through 9/30/98 10.00 0.16 0.31 (0.16) -- 10.31
INVESTOR B CLASS
10/1/98 through 3/31/99 5 $10.31 $0.15 $(0.10) $(0.17) $(0.10) $10.09
5/11/98 1 through 9/30/98 10.00 0.15 0.29 (0.13) -- 10.31
INVESTOR C CLASS
10/1/98 through 3/31/99 5 $10.31 $0.15 $(0.10) $(0.17) $(0.10) $10.09
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>
- ----------------------------------
DELAWARE TAX-FREE INCOME PORTFOLIO
- ----------------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 5 1.49% $ 110,218 0.68%2 0.87%2 4.42%2 4.23%2 0%
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
10/1/98 through 3/31/99 5 1.34% $ -- 1.00%2 1.19%2 4.77%2 4.58%2 0%
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
10/1/98 through 3/31/99 5 1.25%3 $ 4,484 1.15%2 1.34%2 3.95%2 3.76%2 0%
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
10/1/98 through 3/31/99 5 0.87%4 $ 2,889 1.85%2 2.04%2 3.18%2 2.99%2 0%
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
INVESTOR C CLASS
10/1/98 through 3/31/99 5 0.87%4 $ 1,108 1.85%2 2.04%2 3.20%2 3.01%2 0%
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
10/1/98 through 3/31/99 5 1.09% $ 185,662 0.68%2 0.87%2 4.56%2 4.37%2 8%
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
10/1/98 through 3/31/99 5 0.94% $ -- 1.00%2 1.19%2 4.22%2 4.03%2 8%
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
10/1/98 through 3/31/99 5 0.85%3 $ 1,455 1.14%2 1.33%2 4.08%2 3.89%2 8%
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
10/1/98 through 3/31/99 5 0.48%4 $ 258 1.78%2 1.97%2 3.28%2 3.09%2 8%
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
10/1/98 through 3/31/99 5 0.48%4 $ 40 1.57%2 1.76%2 1.49%2 1.30%2 8%
5/11/98 1 through 9/30/98 4.45 4 -- 0.67 2 0.92 2 5.00 2 4.75 2 7
<FN>
1 Commencement of operations of share class.
2 Annualized.
3 Sales load not reflected in total return.
4 Contingent deferred sales load not reflected in total return.
5 Unaudited.
</FN>
</TABLE>
See accompanying notes to financial statements.
46-47
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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. Portfolios of the Fund
offer as many as six classes of shares. Shares of all classes of a Portfolio
represent equal pro rata interests in such Portfolio, except that each class
bears different expenses which reflect the difference in the range of services
provided to them. The following table provides a list of the Portfolios included
in this report along with a summary of their respective class-specific fee
arrangements as provided under the Fund's Amended and Restated Distribution and
Service Plan (the "Plan"). Fees are expressed as a percentage of average daily
net asset values of the respective classes.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio Share Classes
- -----------------------------------------------------------------------------------------------------------------------------------
Institutional Service Investor A Investor B Investor C
- -----------------------------------------------------------------------------------------------------------------------------------
Contractual Actual Contractual Actual Contractual Actual Contractual Actual Contractual Actual
Fees Fees(4) Fees(1) Fees(4) Fees(2) Fees(4) Fees(3) Fees(4) Fees(3) Fees(4)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 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%
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
(1)-- the maximum annual contractual fees are comprised of a .15% service fee
and .15% shareholder processing fee.
(2)-- the maximum annual contractual fees are comprised of a .10% distribution
fee, .25% service fee and .15% shareholder processing fee.
(3)-- the maximum annual contractual fees are comprised of a .75% distribution
fee, .25% service fee and .15% shareholder processing fee.
(4)-- the actual fees are as of March 31, 1999.
</FN>
</TABLE>
In addition, Institutional and Service shares bear a Transfer Agent fee at
an annual rate not to exceed .03% and Investor A, Investor B and Investor C
shares bear a Transfer Agent fee at an annual rate not to exceed .10% of the
average daily net asset of such respective classes.
Purchases of Class B shares and Class C shares are subject to contingent
deferred sales charges ("CDSCs") if shares are redeemed, declining over 6 years
from a high of 4.5% for Class B shares and 1% if shares are redeemed within 12
months of their purchase for Class C shares. CDSCs collected by the Portfolio
totaled $24,850 for Class B shares and $223 for Class C shares for the six
months ended March 31, 1999.
(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 the
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. Corporate bonds and
tax-exempt bonds are valued on the basis of quotations provided by a pricing
service 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 March 31, 1999, there were
no securities valued in accordance with such procedures.
48
<PAGE>
BLACKROCK FUNDS
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 realized capital gains, if any, will be distributed at
least annually. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes due to differences between
generally accepted accounting principles and tax accounting principles related
to the character of income and expense recognition.
FEDERAL TAXES -- No provision is made for federal taxes as it is the Fund's
intention to have each Portfolio continue to qualify as a regulated investment
company and to make the requisite distributions to its shareholders which will
be sufficient to relieve it from federal income and excise taxes.
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.
REPURCHASE AGREEMENTS -- Money market instruments may be purchased from
banks and non-bank dealers subject to the seller's agreement to repurchase them
at an agreed upon date and price. Collateral for repurchase agreements may have
longer maturities than the maximum permissible remaining maturity of portfolio
investments. The seller will be required on a daily basis to maintain the value
of the securities subject to the agreement at not less than the repurchase
price. The agreements are conditioned upon the collateral being deposited under
the Federal Reserve book-entry system or held in a separate account by the
Fund's custodian or an authorized securities depository.
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 U.S.
Government securities of an initial margin. Subsequent payments, which are
dependent on the daily fluctuations in the value of the underlying security or
securities, are made or received by the Portfolio each day (daily variation
margin) and are recorded as unrealized gains or losses until the contracts are
closed. When the contracts are closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transaction and the Portfolio's basis in the contracts. Risks of entering into
futures contracts include the possibility that there will not be a perfect price
correlation between the futures contracts and the underlying securities. Second,
it is possible that a lack of liquidity for futures contracts could exist in the
secondary market, resulting in an inability to close a futures position prior to
its maturity date. Third, the purchase of a futures contract involves the risk
that a Portfolio could lose more than the original margin deposit required to
initiate a futures transaction.
OPTION SELLING/PURCHASING -- The 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
March 31, 1999.
(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.
49
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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:
Tax-Free Income,
Pennsylvania Tax-Free
Income, New Jersey Tax-Free Delaware Tax-Free
Income and Ohio Tax-Free Income and Kentucky
Income Portfolios Tax-Free Income Portfolios
-------------------------- --------------------------
Investment Investment
Average Daily Net Assets Advisory Fee Advisory Fee
------------------------ -------------------------- -------------------------
first $1 billion .500% .550%
$1 billion -- $2 billion .450 .500
$2 billion -- $3 billion .425 .475
greater than $3 billion .400 .450
For the period ended March 31, 1999, advisory fees and waivers for each
Portfolio were as follows:
Gross Net Advisory
Advisory Fee Waiver Fee
-------------- --------------- ------------
Tax-Free Income Portfolio .. $ 787,526 $ 226,180 $ 561,346
Pennsylvania Tax-Free
Income Portfolio ......... 2,801,093 598,958 2,202,135
New Jersey Tax-Free
Income Portfolio ......... 450,282 127,494 322,788
Ohio Tax-Free Income
Portfolio ................ 249,691 44,846 204,845
Delaware Tax-Free
Income Portfolio ......... 328,075 73,345 254,730
Kentucky Tax-Free
Income Portfolio ......... 523,151 117,722 405,429
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. The combined administration fee is computed daily and payable monthly,
based on a percentage of the average daily net assets of each Portfolio, at the
following annual rates: .23% of the first $500 million, .21% of the next $500
million and .19% of assets in excess of $1 billion.
For the period ended March 31, 1999, administration fees and waivers for
each Portfolio were as follows:
Gross Net
Administration Fee Waiver Administration Fee
------------------ ---------- ------------------
Tax-Free Income Portfolio . $ 362,234 $ 94,503 $ 267,731
Pennsylvania Tax-Free
Income Portfolio ........ 1,229,550 200,689 1,028,861
New Jersey Tax-Free
Income Portfolio ........ 207,126 45,028 162,098
Ohio Tax-Free Income
Portfolio ............... 122,081 31,216 90,865
Delaware Tax-Free
Income Portfolio ........ 137,193 35,790 101,403
Kentucky Tax-Free
Income Portfolio ........ 218,768 57,071 161,697
Prior to February 1, 1999, BlackRock may have, at its discretion, waived
all or any portion of its advisory fees for any 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
(which apply to expenses charged on Portfolio assets as a whole, but not
expenses separately charged to the different share calsses of a Portfolio) as a
percentage of average daily net assets are:
Tax-Free Income Portfolio .................. .485%
Pennsylvania Tax-Free Income Portfolio ..... .470%
New Jersey Tax-Free Income Portfolio ....... .475%
Ohio Tax-Free Income Portfolio ............. .515%
Delaware Tax-Free Income Portfolio ......... .585%
Kentucky Tax-Free Income Portfolio ......... .585%
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
50
<PAGE>
BLACKROCK FUNDS
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.
At March 31, 1999, the amount of advisory fee waived and reimbursement of
expenses by BlackRock subject to possible reimbursement under the expense
limitation agreement were as follows:
Tax-Free Income Portfolio ......................... $80,744
Pennsylvania Tax-Free Income Portfolio ............ 72,754
New Jersey Tax-Free Income Portfolio .............. 33,222
Ohio Tax-Free Income Portfolio .................... 36,291
Delaware Tax-Free Income Portfolio ................ 39,111
Kentucky Tax-Free Income Portfolio ................ 62,456
In addition, PFPCTrust 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 period ended March 31, 1999, purchases and sales of securities,
other than short-term and government securities, were as follows:
Purchases Sales
------------- -------------
Tax-Free Income Portfolio .................. $ 198,649,879 $ 166,257,651
Pennsylvania Tax-Free Income Portfolio ..... 193,067,330 93,579,783
New Jersey Tax-Free Income Portfolio ....... 27,328,512 25,718,904
Ohio Tax-Free Income Portfolio ............. 8,286,459 1,995,497
Delaware Tax-Free Income Portfolio ......... 5,226,400 --
Kentucky Tax-Free Income Portfolio ......... 15,997,759 18,958,552
51
<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 Six Months Ended For the Year Ended
3/31/99 (Unaudited) 9/30/98
------------------------------------ ----------------------------------
Shares Value Shares Value
------------ --------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ........................ 4,355,021 $ 50,568,982 6,919,177 $ 80,423,674
Service Class .............................. 238,143 2,767,475 1,975,361 22,644,691
Investor A Class ........................... 254,136 2,950,757 210,734 2,415,265
Investor B Class ........................... 135,260 1,572,092 113,149 1,299,966
Investor C Class ........................... 192,875 2,243,654 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 ........................ 119,047 1,375,190 4,724 53,637
Service Class .............................. 7,838 91,087 24,014 273,213
Investor A Class ........................... 9,886 114,936 18,627 213,361
Investor B Class ........................... 3,219 37,407 3,724 42,714
Investor C Class ........................... 231 2,686 110 1,270
Shares redeemed:
Institutional Class ........................ (1,510,563) (17,566,148) (1,530,999) (17,675,320)
Service Class .............................. (120,701) (1,401,684) (6,720,377) (77,990,670)
Investor A Class ........................... (138,936) (1,613,893) (168,026) (1,932,633)
Investor B Class ........................... (22,973) (266,325) (25,128) (289,594)
Investor C Class ........................... (10,400) (121,032) -- --
---------- ------------ ---------- ------------
Net increase .................................... 3,512,083 $ 40,755,184 19,063,729 $217,780,281
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
Pennsylvania Tax-Free Income Portfolio
----------------------------------------------------------------------------
For the Six Months Ended For the Year Ended
3/31/99 (Unaudited) 9/30/98
------------------------------------ ----------------------------------
Shares Value Shares Value
------------ --------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ............................. 7,114,657 $ 78,773,488 9,572,099 $105,653,542
Service Class ................................... 719,964 7,975,393 2,812,012 30,669,634
Investor A Class ................................ 1,353,564 14,980,200 895,649 9,825,497
Investor B Class ................................ 566,008 6,271,675 578,240 6,336,016
Investor C Class ................................ 53,953 597,913 16,522 182,840
Shares issued in conversion:
Institutional Class ............................. -- -- 88,644,492 963,565,622
Shares issued in reinvestment of dividends:
Institutional Class ............................. 235,630 2,599,010 777 8,537
Service Class ................................... 36,619 405,913 40,268 441,197
Investor A Class ................................ 52,576 582,667 108,476 1,184,635
Investor B Class ................................ 27,214 301,548 29,789 325,778
Investor C Class ................................ -- -- 1 10
Shares redeemed:
Institutional Class ............................. (5,311,145) (58,760,898) (4,161,868) (45,745,931)
Service Class ................................... (684,834) (7,580,346) (5,676,998) (62,689,684)
Investor A Class ................................ (879,604) (9,755,912) (945,403) (10,360,756)
Investor B Class ................................ (98,479) (1,089,548) (179,478) (1,960,782)
Investor C Class ................................ (2) (17) (1) (10)
---------- ------------ ---------- ------------
Net increase ......................................... 3,186,121 $ 35,301,086 91,734,577 $997,436,145
========== ============ ========== ============
</TABLE>
52
<PAGE>
BLACKROCK FUNDS
<TABLE>
<CAPTION>
NEW JERSEY TAX-FREE INCOME PORTFOLIO
----------------------------------------------------------------------------
For the Six Months Ended For the Year Ended
3/31/99 (Unaudited) 9/30/98
------------------------------------ ----------------------------------
Shares Value Shares Value
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ............................. 853,416 $10,199,397 4,688,925 $ 56,230,912
Service Class ................................... 130,833 1,561,675 1,095,326 12,919,769
Investor A Class ................................ 76,337 910,762 46,487 552,690
Investor B Class ................................ 14,504 172,878 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 ............................. 53,037 631,138 -- --
Service Class ................................... 62,531 748,229 102,249 1,205,295
Investor A Class ................................ 1,731 20,708 3,225 37,984
Investor B Class ................................ 1,872 22,398 2,459 28,992
Investor C Class ................................ -- -- -- --
Shares redeemed:
Institutional Class ............................. (828,676) (9,927,453) (561,067) (6,654,369)
Service Class ................................... (333,608) (3,980,869) (5,573,838) (66,623,417)
Investor A Class ................................ (38,921) (463,980) (63,928) (749,845)
Investor B Class ................................ (10,480) (124,388) (4,914) (58,877)
Investor C Class ................................ -- -- -- --
-------- ----------- ---------- ------------
Net increase (decrease) .............................. (15,754) $ (209,498) 7,699,697 $ 90,239,477
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
Ohio Tax-Free Income Portfolio
----------------------------------------------------------------------------
For the Six Months Ended For the Year Ended
3/31/99 (Unaudited) 9/30/98
------------------------------------ ----------------------------------
Shares Value Shares Value
------------ --------------- ------------ ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ............................. 497,079 $ 5,365,561 769,961 $ 8,300,574
Service Class ................................... 650 7,042 202,902 2,150,390
Investor A Class ................................ 56,554 609,485 117,734 1,256,315
Investor B Class ................................ 32,349 350,934 43,310 462,005
Investor C Class ................................ 18,501 200,000 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 ................................... 81 868 -- --
Investor A Class ................................ 4,963 53,605 8,404 89,206
Investor B Class ................................ 1,813 19,574 1,842 19,597
Investor C Class ................................ 320 3,450 2 24
Shares redeemed:
Institutional Class ............................. (429,005) (4,632,612) (400,563) (4,278,793)
Service Class ................................... (37,492) (404,456) (843,984) (9,094,525)
Investor A Class ................................ (37,128) (401,272) (120,005) (1,278,452)
Investor B Class ................................ (1,773) (19,108) (1,803) (19,206)
Investor C Class ................................ (22,993) (250,028) -- --
-------- ----------- --------- -----------
Net increase ......................................... 120,713 $ 1,298,213 8,659,037 $91,225,062
======== =========== ========= ===========
</TABLE>
53
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
<TABLE>
<CAPTION>
Delaware Tax-Free Income Portfolio
----------------------------------------------------------------------------
For the Six Months Ended For the Period
3/31/99 (Unaudited) 5/11/98 1 through 9/30/98
------------------------------------ ----------------------------------
Shares Value Shares Value
------------ --------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ............................. 584,139 $ 5,936,187 521,512 $ 5,306,999
Service Class ................................... -- -- 10 100
Investor A Class ................................ 231,887 2,356,582 368,575 3,720,920
Investor B Class ................................ 114,374 1,167,935 173,512 1,749,948
Investor C Class ................................ 40,249 413,133 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 1,460,198 -- 1
Service Class ................................... -- 3 -- 1
Investor A Class ................................ 4,516 45,853 478 4,857
Investor B Class ................................ 3,499 35,547 809 8,208
Investor C Class ................................ 98 994 -- 1
Shares redeemed:
Institutional Class ............................. (907,958) (9,236,869) (1,244,022) (12,590,407)
Service Class ................................... -- -- -- --
Investor A Class ................................ (39,264) (399,064) (122,682) (1,249,255)
Investor B Class ................................ (455) (4,600) (5,952) (60,179)
Investor C Class ................................ (17) (172) (1) (10)
-------- ----------- ---------- -------------
Net increase ......................................... 175,499 $ 1,775,727 11,566,243 $115,638,626
======== =========== ========== ============
</TABLE>
<TABLE>
<CAPTION>
Kentucky Tax-Free Income Portfolio
---------------------------------------------------------
For the Six Months Ended For the Period
3/31/99 (Unaudited) 5/11/98 1 through 9/30/98
------------------------------------ ----------------------------------
Shares Value Shares Value
------------ --------------- ------------ -------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ............................. 1,337,018 $ 13,587,885 679,481 $ 6,873,676
Service Class ................................... 11,767 119,792 10 100
Investor A Class ................................ 51,828 523,261 94,545 964,702
Investor B Class ................................ 25,481 258,747 10 100
Investor C Class ................................ 3,964 40,000 10 100
Shares issued in conversion:
Institutional Class ............................. -- -- 21,994,285 219,942,850
Shares issued in reinvestment of dividends:
Institutional Class ............................. 176,551 1,786,694 -- 1
Service Class ................................... -- 3 -- 1
Investor A Class ................................ 246 2,502 32 321
Investor B Class ................................ 103 1,051 -- 1
Investor C Class ................................ -- 3 -- 1
Shares redeemed:
Institutional Class ............................. (2,168,071) (22,051,589) (3,613,300) (36,667,080)
Service Class ................................... (11,767) (119,086) -- --
Investor A Class ................................ (2,389) (24,084) -- --
Investor B Class ................................ -- -- -- --
Investor C Class ................................ -- -- -- --
---------- ------------ ------------ ------------
Net increase (decrease) .............................. (575,269) $ (5,874,821) 19,155,073 $191,114,773
========== ============ ============ ============
<FN>
- -------------------
1 Commencement of operations.
</FN>
</TABLE>
54
<PAGE>
BLACKROCK FUNDS
(E) AT MARCH 31, 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 ............ $323,097,424 $1,097,726,279 $169,863,947 $99,686,872 $113,633,182 $177,888,001
Undistributed net
investment income ........ 31,335 -- -- -- -- 6,649
Distributions in excess
of net investment
income ................... -- (1,074,617) (71,409) (16,909) (117,318) --
Accumulated net
realized gain (loss)
on investment
transactions and
futures contracts ........ (96,446) 1,141,240 49,950 36,697 (177,831) 449,614
Net unrealized
appreciation on
investment
transactions and
futures contracts ........ 13,616,195 50,150,943 9,444,363 6,192,901 5,361,438 9,070,912
------------ -------------- ------------ ------------ ------------ ------------
$336,648,508 $1,147,943,845 $179,286,851 $105,899,561 $118,699,471 $187,415,176
============ ============== ============ ============ ============ ============
</TABLE>
(F) 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.
FUNDS CONVERTED ON MAY 11, 1998:
<TABLE>
<CAPTION>
PNC BlackRock Shares Net Assets Net Assets Value Unrealized
Common Trust Fund Fund Issued Converted Per Share Issued Appreciation
- ------------------------- ---------------------- ---------- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C>
PNC 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>
55
<PAGE>
BLACKROCK FUNDS
Investment Adviser
BlackRock Advisors, Inc.
New York, New York 10154
Sub-Adviser
BlackRock Financial Management, Inc.
New York, New York 10154
Custodian
PFPC Trust Co.
Philadelphia, Pennsylvania 19103
Co-Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware 19809
Co-Administrator and Distributor
BlackRock Distributors, Inc.
West Conshohocken, Pennsylvania 19428
Co-Administrator
BlackRock Advisors, Inc.
New York, New York 10154
Counsel
Simpson, Thacher & Bartlett
New York, New York 10017
(A partnership which includes professional corporations)
Independent Accountants
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania 19103
To reduce expenses, the Fund will mail only one copy of annual and semi-annual
reports and most prospectuses to your household, even if more than one person in
the household has a Fund account. Please call (800) 441-7762 if you would like
to receive additional reports or prospectuses.
<PAGE>
BLACKROCK FUNDS
FUND SPECTRUM
BLACKROCK FUNDS IS A LEADING MUTUAL FUND COMPANY CURRENTLY MANAGING IN EXCESS OF
$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.(R)
STOCK PORTFOLIOS
Large Cap Value Equity
Large Cap Growth Equity
Mid-Cap Value Equity
Mid-Cap Growth Equity
Small Cap Value Equity
Small Cap Growth Equity
Micro-Cap Equity
International Equity
International Small Cap Equity
International Emerging Markets
Select Equity
Index Equity
STOCK & BOND PORTFOLIOS
Balanced
BOND PORTFOLIOS
Low Duration Bond
Intermediate Government Bond
Intermediate Bond
Core Bond
Government Income
GNMA
Managed Income
International Bond
High Yield Bond
TAX-FREE BOND PORTFOLIOS
Tax-Free Income
Pennsylvania Tax-Free Income
New Jersey Tax-Free Income
Ohio Tax-Free Income
Delaware Tax-Free Income
Kentucky Tax-Free Income
MONEY MARKET PORTFOLIOS
Money Market
U.S. Treasury Money Market
Municipal Money Market
New Jersey Municipal Money Market
North Carolina Municipal Money Market
Ohio Municipal Money Market
Pennsylvania Municipal Money Market
Virginia Municipal Money Market
SHAREHOLDER PRIVILEGES
24 Hour Account Information
Call us at 1-800-441-7762, 24 hours a day, 7 days a week to get information
about your account balances, recent transactions and share prices. Note:
Institutional and Service Share Class investors should call 1-800-441-7764. You
can also reach us on the Internet through the World Wide Web by accessing
http://www.blackrock.com.
Exchange Privileges
Should your investment goals change, shareholders in our Investor Class shares
may exchange all or part of their investments into the same share class of any
other portfolio of BlackRock Funds. (1)
Automatic Investment Plans
Investor Class shareholders who want to invest regularly can arrange to have $50
or more automatically deducted from their checking or savings account and
invested in any of the BlackRock portfolios.
Systematic Withdrawal Plans
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $100 or more from their BlackRock portfolios, as
long as their account is at least $1,000.
Retirement Plans
Shareholders may make investments in conjunction with individual IRA accounts or
rollover IRAs.
General Information About The BlackRock Funds
If you would like additional reports or have questions regarding any of the 36
BlackRock Funds, please call 1-800-FUTURE4 (1-800-388-8734)
(1) BLACKROCK FUNDS RESERVES THE RIGHT TO MODIFY OR TERMINATE THE EXCHANGE
PRIVILEGES AT ANY TIME.
<PAGE>
[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.
SR 3/31/99 TFP
