<PAGE>
RULE 497 (E)
FILE NO. 33-26305
BLACKROCK FUNDS SM
THE EQUITY PORTFOLIOS/INVESTOR CLASSES
SUPPLEMENT TO PROSPECTUS DATED JANUARY 28, 1999
BLACKROCK INTERNATIONAL EMERGING MARKETS PORTFOLIO
Fund Management
The section "Fund Management" on page 57 has been amended to read in its
entirety as follows:
The fund is managed by Nigel Barry, Managing Director and portfolio manager
of BlackRock International, Ltd. (BIL) since 1996. Prior to joining BIL in
1996, Mr. Barry was a Director and head of the Pacific Basin desk at
Dunedin Fund Managers Ltd. Mr. Barry has been a member of the fund's man-
agement team since 1996 and has been fund manager since April 1999.
BLACKROCK INTERNATIONAL SMALL CAP EQUITY PORTFOLIO
Primary Investment Strategies
The first four paragraphs in the section "Primary Investment Strategies" on
page 59 have been amended to read in their entirety as follows:
In pursuit of this goal, the fund manager invests primarily in small cap
stocks (capitalization of less than $2 billion) of foreign issuers in coun-
tries included in the Salomon Brothers Extended Markets World Ex-U.S.
Index. The fund normally invests at least 65% of its total assets in the
equity securities issued by these companies and normally invests at least
80% of its total assets in equity securities. The manager may invest up to
20% of the portfolio in stocks of issuers in emerging market countries. The
fund primarily buys common stock but can also invest in preferred stock and
securities convertible into common and preferred securities.
The manager initially screens for "growth" stocks from the universe of com-
panies described above. The manager uses fundamental analysis to examine
each company for financial strength before deciding to purchase the stock.
The fund can invest more than 25% of its assets in securities whose issuers
are located in Japan, the United Kingdom, France or Germany.
The fund generally will sell a stock when, in the fund manager's opinion,
there is a deterioration in the company's fundamentals, the company fails
to meet performance expectations or the stock's relative price momentum
declines meaningfully.
ADDITIONAL IMPORTANT
DEFINITIONS
Earnings Growth: The
increased rate of
growth in a company's
earnings per share from
period to period. Secu-
rity analysts attempt
to identify companies
with earnings growth
potential because a
pattern of earnings
growth generally causes
share prices to
increase.
Fundamental Analysis: A
method of stock market
analysis that concen-
trates on "fundamental"
information about the
company (such as its
income statement, bal-
ance sheet, earnings
and sales history,
products and manage-
ment) to attempt to
forecast future stock
value.
Growth Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value," although there
are times when a growth
fund and value fund may
own the same stock.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general and
whose growth in revenue
is expected to continue
for an extended period.
These stocks typically
pay relatively low div-
idends and sell at rel-
atively high prices.
Value stocks are compa-
nies that appear to the
manager to be underval-
ued by the market as
measured by certain
financial formulas.
Small Capitalization
Companies: The fund
defines these companies
as those with total
market capitalization
under $2 billion. Capi-
talization refers to
the market value of the
company and is calcu-
lated by multiplying
the number of shares
outstanding by the cur-
rent price per share.
<PAGE>
Key Risks
The sixth and ninth paragraphs in the section "Key Risks" on page 61 have been
amended to read in their entirety as follows:
While the fund manager chooses stocks he believes have above-average earn-
ings growth potential, there is no guarantee that the shares will increase
in value.
The fund may, from time to time, invest more than 25% of its assets in
securities whose issuers are located in Japan, the United Kingdom, France
or Germany. These investments would make the fund more dependent upon the
political and economic circumstances of those countries than a mutual fund
that owns stocks of companies in many countries. For example, the Japanese
economy (especially Japanese banks, securities firms and insurance compa-
nies) have experienced considerable difficulty recently. In addition, the
Japanese Yen has gone up and down in value versus the U.S. Dollar. Japan
may also be affected by recent turmoil in other Asian countries. Similarly,
the ability to concentrate in the U.K., France and Germany may make the
fund's performance more dependent on developments affecting those coun-
tries, such as the introduction of the Euro.
Fund Management
The section "Fund Management" on page 65 has been amended to read in its
entirety as follows:
The fund is co-managed by William J. Wykle and Thomas Callan.
William J. Wykle has been a Managing Director with BlackRock Advisors, Inc.
since 1999, a Managing Director with BlackRock Financial Management, Inc.
since 1995 and an investment manager for PNC Bank from 1986 to 1995. He has
co-managed the fund since April 1999.
Thomas Callan has been a Managing Director with BlackRock Advisors, Inc.
since 1999, a Managing Director with BlackRock Financial Management, Inc.
since 1996 and served as an equity analyst for PNC Bank from 1993-1996. He
has co-managed the fund since April 1999.
<PAGE>
BLACKROCK INDEX EQUITY PORTFOLIO
Annual Fund Operating Expenses
The Annual Fund Operating Expenses Table on page 77 has been amended to read in
its entirety as follows:
Annual Fund Operating Expenses*
(Expenses that are deducted from fund assets)
<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Advisory Fees .025% .025% .025%
Distribution and service
(12b-1) fees .50% 1.15% 1.15%
Other expenses .385% .385% .385%
Total annual fund operating
expenses .91% 1.56% 1.56%
Fee waivers and expense
reimbursements** .125% .025% .025%
Net Expenses** .785% 1.535% 1.535%
</TABLE>
* The Annual Fund Operating Expenses table and the Example reflect the
expenses of both the Index Equity and Index Master Portfolios.
** BlackRock has contractually agreed to waive or reimburse fees or expenses
in order to limit certain (but not all) fund expenses for the next year.
The fund may have to repay these waivers and reimbursements to BlackRock in
the following two years if the repayment can be made within these expense
limits. In addition, BlackRock Distributors, Inc., the fund's distributor,
has contractually agreed to waive all 12b-1 distribution fees on Investor A
Shares (otherwise payable at the maximum annual rate of .10% of average
daily net assets) for the next year. "Net Expenses" in the table have been
restated to reflect these waivers and reimbursements. "Other expenses" are
expected to be .35%, .35% and .35%, and "Net Expenses" are expected not to
exceed .75%, 1.50% and 1.50% for A Shares, B Shares and C Shares,
respectively. This is because BlackRock and another of the Company's
service providers have volunteered not to collect a portion of their fees.
BlackRock and this service provider may end this arrangement at any time.
Example
The expense example on page 78 has been amended to read in its entirety as fol-
lows:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
A Shares* $378 $569 $ 777 $1,375
B Shares**
Redemption $606 $840 $1,048 $1,680***
B Shares
No Redemption $156 $490 $ 848 $1,680***
C Shares**
Redemption $256 $490 $ 848 $1,854
C Shares
No Redemption $156 $490 $ 848 $1,854
</TABLE>
*Reflects imposition of sales charge.
**Reflects deduction of CDSC.
***Based on the conversion of Investor B Shares to Investor A Shares after
eight years.
This Supplement is dated June 7, 1999.
<PAGE>
RULE 497 (E)
FILE NO. 33-26305
BLACKROCK FUNDS SM
THE EQUITY PORTFOLIOS/SERVICE CLASS
SUPPLEMENT TO PROSPECTUS DATED JANUARY 28, 1999
BLACKROCK INTERNATIONAL EMERGING MARKETS PORTFOLIO
Fund Management
The section "Fund Management" on page 42 has been amended to read in its
entirety as follows:
The fund is managed by Nigel Barry, Managing Director and portfolio manager
of BlackRock International, Ltd. (BIL) since 1996. Prior to joining BIL in
1996, Mr. Barry was a Director and head of the Pacific Basin desk at
Dunedin Fund Managers Ltd. Mr. Barry has been a member of the fund's man-
agement team since 1996 and has been fund manager since April 1999.
BLACKROCK INTERNATIONAL SMALL CAP EQUITY PORTFOLIO
Primary Investment Strategies
The first four paragraphs in the section "Primary Investment Strategies" on
page 44 have been amended to read in their entirety as follows:
In pursuit of this goal, the fund manager invests primarily in small cap
stocks (capitalization of less than $2 billion) of foreign issuers in coun-
tries included in the Salomon Brothers Extended Markets World Ex-U.S.
Index. The fund normally invests at least 65% of its total assets in the
equity securities issued by these companies and normally invests at least
80% of its total assets in equity securities. The manager may invest up to
20% of the portfolio in stocks of issuers in emerging market countries. The
fund primarily buys common stock but can also invest in preferred stock and
securities convertible into common and preferred securities.
The manager initially screens for "growth" stocks from the universe of com-
panies described above. The manager uses fundamental analysis to examine
each company for financial strength before deciding to purchase the stock.
The fund can invest more than 25% of its assets in securities whose issuers
are located in Japan, the United Kingdom, France or Germany.
The fund generally will sell a stock when, in the fund manager's opinion,
there is a deterioration in the company's fundamentals, the company fails
to meet performance expectations or the stock's relative price momentum
declines meaningfully.
ADDITIONAL IMPORTANT
DEFINITIONS
Earnings Growth: The
increased rate of
growth in a company's
earnings per share from
period to period. Secu-
rity analysts attempt
to identify companies
with earnings growth
potential because a
pattern of earnings
growth generally causes
share prices to
increase.
Fundamental Analysis: A
method of stock market
analysis that concen-
trates on "fundamental"
information about the
company (such as its
income statement, bal-
ance sheet, earnings
and sales history,
products and manage-
ment) to attempt to
forecast future stock
value.
Growth Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value," although there
are times when a growth
fund and value fund may
own the same stock.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general and
whose growth in revenue
is expected to continue
for an extended period.
These stocks typically
pay relatively low div-
idends and sell at rel-
atively high prices.
Value stocks are compa-
nies that appear to the
manager to be underval-
ued by the market as
measured by certain
financial formulas.
Small Capitalization
Companies: The fund
defines these companies
as those with total
market capitalization
under $2 billion. Capi-
talization refers to
the market value of the
company and is calcu-
lated by multiplying
the number of shares
outstanding by the cur-
rent price per share.
<PAGE>
Key Risks
The sixth and ninth paragraphs in the section "Key Risks" on page 46 have been
amended to read in their entirety as follows:
While the fund manager chooses stocks he believes have above-average earn-
ings growth potential, there is no guarantee that the shares will increase
in value.
The fund may, from time to time, invest more than 25% of its assets in
securities whose issuers are located in Japan, the United Kingdom, France
or Germany. These investments would make the fund more dependent upon the
political and economic circumstances of those countries than a mutual fund
that owns stocks of companies in many countries. For example, the Japanese
economy (especially Japanese banks, securities firms and insurance compa-
nies) have experienced considerable difficulty recently. In addition, the
Japanese Yen has gone up and down in value versus the U.S. Dollar. Japan
may also be affected by recent turmoil in other Asian countries. Similarly,
the ability to concentrate in the U.K., France and Germany may make the
fund's performance more dependent on developments affecting those coun-
tries, such as the introduction of the Euro.
Fund Management
The section "Fund Management" on page 49 has been amended to read in its
entirety as follows:
The fund is co-managed by William J. Wykle and Thomas Callan.
William J. Wykle has been a Managing Director with BlackRock Advisors, Inc.
since 1999, a Managing Director with BlackRock Financial Management, Inc.
since 1995 and an investment manager for PNC Bank from 1986 to 1995. He has
co-managed the fund since April 1999.
Thomas Callan has been a Managing Director with BlackRock Advisors, Inc.
since 1999, a Managing Director with BlackRock Financial Management, Inc.
since 1996 and served as an equity analyst for PNC Bank from 1993-1996. He
has co-managed the fund since April 1999.
<PAGE>
BLACKROCK INDEX EQUITY PORTFOLIO
Annual Fund Operating Expenses
The Annual Fund Operating Expenses Table on page 59 has been amended to read in
its entirety as follows:
Annual Fund Operating Expenses*
(Expenses that are deducted from fund assets)
<TABLE>
<S> <C>
Advisory Fees .025%
Distribution and service (12b-1) fees .30%
Other expenses .315%
Total annual fund operating expenses .64%
Fee waivers and expense reimbursements** .025%
Net Expenses** .615%
</TABLE>
* The Annual Fund Operating Expenses table and the Example reflect the
expenses of both the Index Equity and Index Master Portfolios.
** BlackRock has contractually agreed to waive or reimburse fees or expenses in
order to limit certain (but not all) fund expenses for the next year. The
fund may have to repay these waivers and reimbursements to BlackRock in the
following two years if the repayment can be made within these expense lim-
its. "Net Expenses" in the table have been restated to reflect these waivers
and reimbursements.
"Other expenses" are expected to be .28% and "Net Expenses" are expected
not to exceed .58%. This is because BlackRock and another of the Company's
service providers have volunteered not to collect a portion of their fees.
BlackRock and this service provider may end this arrangement at any time.
Example
The expense example on page 59 has been amended to read in its entirety as fol-
lows:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Service Shares $63 $202 $354 $796
</TABLE>
This Supplement is dated June 7, 1999.
