March 31, 1999
Taxable
Bond
Portfolios
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
Not FDIC Insured
May Lose Value
No Bank Guarantee
BLACKROCK
FUNDS (LOGO)
PURE INVESTMENT STYLE(REGISTRATION MARK)
[GRAPHIC OMITTED]
<PAGE>
BLACKROCK FUNDS
TAXABLE BOND PORTFOLIOS
* Low Duration Bond * GNMA
* Intermediate Government Bond * Managed Income
* Intermediate Bond * International Bond
* Core Bond * High Yield Bond
* Government Income
TABLE OF CONTENTS
SHAREHOLDER LETTER........................................................... 1
PORTFOLIO SUMMARIES
Low Duration Bond...................................................... 3
Intermediate Government Bond........................................... 4
Intermediate Bond...................................................... 5
Core Bond.............................................................. 6
Government Income...................................................... 7
GNMA................................................................... 8
Managed Income......................................................... 9
International Bond..................................................... 10
High Yield Bond........................................................ 11
Note on Performance Information........................................ 12
STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS............................13-46
Core Bond Statement of Assets & Liabilities............................ 31
Government Income Statement of Assets & Liabilities.................... 34
International Bond Statement of Assets & Liabilities................... 44
PORTFOLIO FINANCIAL STATEMENTS
Statement of Operations..............................................48-49
Statement of Cash Flows..............................................50-53
Statement of Changes in Net Assets...................................54-57
Financial Highlights.................................................58-65
NOTES TO FINANCIAL STATEMENTS..............................................66-78
<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>
BLACKROCK FUNDS
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.
/S/ KAREN SABATH
Karen H. Sabath
MANAGING DIRECTOR
BLACKROCK ADVISORS, INC.
2
<PAGE>
BLACKROCK FUNDS
LOW DURATION BOND PORTFOLIO
TOTAL NET ASSETS (3/31/99):
$291.1 MILLION
PERFORMANCE BENCHMARK:
MERRILL LYNCH 1-3 YEAR TREASURY INDEX
INVESTMENT APPROACH:
SEEKS A TOTAL RATE OF RETURN THAT EXCEEDS THE TOTAL RETURN OF ITS BENCHMARK
BY INVESTING PRIMARILY IN INVESTMENT GRADE SECURITIES WITH MATURITIES FROM 3 TO
5 YEARS. THE PORTFOLIO MAY ALSO INVEST UP TO 20% OF ITS ASSETS IN DEBT
SECURITIES OF FOREIGN ISSUERS AND UP TO 20% IN BELOW INVESTMENT GRADE SECURITIES
RATED B OR HIGHER BY A MAJOR RATING AGENCY OR DEEMED BY THE MANAGER TO BE OF
COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) IN SHARP CONTRAST TO THE FIRST NINE MONTHS OF 1998, TREASURY
YIELDS ROSE SHARPLY DURING THE PAST SIX MONTHS. FOR THE PERIOD, THE YIELD OF THE
2-YEAR TREASURY ROSE 0.71% FROM 4.27% ON SEPTEMBER 30, 1998 TO 4.98% ON MARCH
31, 1999.
(BULLET) ASSET-BACKED SECURITIES (ABS) CONTINUED TO BE THE PORTFOLIO'S
LARGEST SECTOR WEIGHTING DURING THE PERIOD, AS THE MANAGER BELIEVED THIS SECTOR
OFFERED ATTRACTIVE TOTAL RETURNS OPPORTUNITIES WITHIN THE SHORT DURATION SECTOR.
(BULLET) THE MANAGER INCREASED THE PORTFOLIO'S WEIGHTING TO MORTGAGE
PASS-THROUGH SECURITIES AND CORPORATE BONDS DURING THE PERIOD. IN THE MORTGAGE
SECTOR, EMPHASIS WAS PLACED ON ISSUES THAT OFFER RELATIVE PREPAYMENT STABILITY.
WITHIN THE PORTFOLIO'S CORPORATE WEIGHTING, THE MANAGER HAS EMPHASIZED
LOWER-RATED INVESTMENT GRADE SECURITIES IN AN ATTEMPT TO CAPITALIZE UPON
NARROWING CREDIT SPREADS.
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
LOW DURATION BOND PORTFOLIO AND THE MERRILL 1-3 YEAR TREASURY
INDEX FROM INCEPTION AND AT EACH SEMI-ANNUAL PERIOD END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Institutional Service Investor A Investor B Investor C BlackRock Merrill 1-3 Year
Class Class Class Class Class Class Treasury Index
<S> <C> <C> <C> <C> <C> <C> <C>
Jul-17-92 $10,000 $10,000 $ 9,700 $10,000 $10,000 $10,000 $10,000
Sep-92 10,079 10,079 9,777 10,079 10,079 10,079 10,288
Dec-92 10,137 10,137 9,833 10,137 10,137 10,137 10,595
Mar-93 10,295 10,295 9,986 10,295 10,295 10,295 10,614
Jun-93 10,468 10,468 10,154 10,468 10,468 10,468 10,848
Sep-93 10,620 10,620 10,302 10,620 10,620 10,620 10,965
Dec-93 10,711 10,711 10,390 10,711 10,711 10,711 11,122
Mar-94 10,691 10,691 10,370 10,691 10,691 10,691 11,188
Jun-94 10,713 10,713 10,391 10,713 10,713 10,713 11,132
Sep-94 10,837 10,837 10,512 10,837 10,837 10,837 11,141
Dec-94 10,860 10,860 10,534 10,860 10,860 10,860 11,251
Mar-95 11,214 11,214 10,878 11,214 11,214 11,214 11,251
Jun-95 11,521 11,521 11,175 11,521 11,521 11,521 11,629
Sep-95 11,767 11,767 11,414 11,767 11,767 11,767 12,002
Dec-95 12,001 12,001 11,641 12,001 12,001 12,001 12,182
Mar-96 12,023 12,009 11,644 12,004 12,004 12,023 12,489
Jun-96 12,149 12,125 11,752 12,115 12,115 12,149 12,531
Sep-96 12,347 12,313 11,929 1,229 12,298 12,347 12,657
Dec-96 12,610 12,565 12,168 12,537 12,537 12,610 12,866
Mar-97 12,668 12,614 12,210 12,789 12,789 12,938 13,197
Sep-97 13,196 13,122 12,692 13,003 13,003 13,199 13,487
Dec-97 13,370 13,286 12,845 13,135 13,135 13,379 13,752
Mar-98 13,588 13,492 13,039 13,309 13,309 13,602 13,983
Jun-98 13,808 13,699 13,235 13,483 13,483 13,828 14,197
Sep-98 14,156 14,035 13,552 13,781 13,781 14,182 14,634
Dec-98 14,256 14,125 13,634 13,838 13,838 14,288 14,745
Mar-99 14,425 14,280 13,778 13,958 13,958 14,461 14,834
</TABLE>
For period ending March 31, 1999
AVERAGE ANNUAL TOTAL RETURN
From
1 Year 3 Year 5 Year Inception
BlackRock Class 6.32% 6.36% 6.23% 5.66%
Institutional Class 6.16% 6.27% 6.17% 5.62%
Service Class 5.84% 5.95% 5.96% 5.46%
Investor A Class (Load Adjusted) 2.46% 4.70% 5.20% 4.89%
Investor A Class (NAV) 5.66% 5.77% 5.85% 5.37%
Investor B Class (Load Adjusted) 0.12% 3.92% 5.05% 5.10%
Investor B Class (NAV) 4.88% 5.16% 5.48% 5.10%
Investor C Class (Load Adjusted) 3.83% 5.16% 5.48% 5.10%
Investor C Class (NAV) 4.88% 5.16% 5.48% 5.10%
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The inception dates of the Portfolio's share
classes were as follows: Institutional Shares, 7/17/92; Service, 1/12/96;
Investor A Shares, 1/12/96; Investor B Shares, 11/18/96; Investor C Shares,
2/24/97; and BlackRock Shares, 6/3/97. See "Note on Performance Information" on
page 12 for further information on how performance data was calculated.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
3
<PAGE>
BLACKROCK FUNDS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
TOTAL NET ASSETS (3/31/99):
$454.0 MILLION
PERFORMANCE BENCHMARK:
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT INDEX
INVESTMENT APPROACH:
SEEKS CURRENT INCOME CONSISTENT WITH THE PRESERVATION OF CAPITAL BY
INVESTING IN SECURITIES ISSUED BY THE U.S. GOVERNMENT OR ITS AGENCIES OR RATED
AAA BY A MAJOR RATING AGENCY. THE PORTFOLIO EMPHASIZES SECURITIES WITH
MATURITIES FROM 5 TO 10 YEARS.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) IN SHARP CONTRAST TO THE FIRST NINE MONTHS OF 1998, TREASURY
YIELDS ROSE SHARPLY DURING THE PAST SIX MONTHS. FOR THE PERIOD, THE YIELD OF THE
5-YEAR TREASURY ROSE 0.88% FROM 4.22% ON SEPTEMBER 30, 1998 TO 5.10% ON MARCH
31, 1999.
(BULLET) THE PORTFOLIO'S MORTGAGE ALLOCATION WAS SUBSTANTIALLY INCREASED
DUE TO WIDENING YIELD SPREADS DURING THE BEGINNING OF THE PERIOD. HOWEVER, THE
MANAGER PARED THE PORTFOLIO'S MORTGAGE EXPOSURE DURING THE FIRST QUARTER OF 1999
AND EMPHASIZED SECURITIES THAT HAVE RELATIVELY LITTLE PREPAYMENT SENSITIVITY.
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 INTERMEDIATE
GOVERNMENT BOND PORTFOLIO AND THE LEHMAN BROTHERS INTERMEDIATE GOVERNMENT INDEX
FROM INCEPTION AND AT EACH SEMI-ANNUAL PERIOD END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Institutional Service Investor A Investor B Investor C Lehman Brothers Intermediate
Class Class Class Class Class Government Index
<S> <C> <C> <C> <C> <C> <C>
Apr-20-92 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
Jun-92 10,276 10,276 9,865 10,276 10,276 10,000
Sep-92 10,714 10,714 10,286 10,714 10,714 10,746
Dec-92 10,626 10,626 10,201 10,626 10,626 10,746
Mar-93 10,986 10,986 10,547 10,986 10,986 10,746
Jun-93 11,218 11,218 10,769 11,218 11,218 10,746
Sep-93 11,452 11,448 10,990 11,448 11,448 11,567
Dec-93 11,454 11,447 10,984 11,442 11,442 11,567
Mar-94 11,181 11,166 10,715 11,161 11,161 11,567
Jun-94 11,043 11,022 10,576 11,016 11,016 11,567
Sep-94 11,097 11,070 10,621 11,063 11,063 11,393
Dec-94 11,070 11,036 10,589 11,030 11,030 11,383
Mar-95 11,567 11,524 11,057 11,517 11,517 11,857
Jun-95 12,056 12,002 11,515 11,995 11,995 12,411
Sep-95 12,239 12,173 11,680 12,166 12,166 12,605
Dec-95 12,597 12,520 12,022 12,523 12,523 13,026
Mar-96 12,531 12,445 11,933 12,430 12,430 12,919
Jun-96 12,607 12,511 11,991 12,491 12,491 13,006
Sep-96 12,831 12,723 12,190 12,698 12,698 13,229
Dec-96 13,153 13,033 12,482 12,981 12,981 13,535
Mar-97 13,150 13,021 12,464 12,938 12,938 13,531
Jun-97 13,517 13,375 12,797 13,260 13,260 13,910
Sep-97 13,867 13,711 13,112 13,561 13,561 14,266
Dec-97 14,170 14,000 13,383 13,816 13,816 14,581
Mar-98 14,381 14,197 13,567 13,979 13,979 14,800
Jun-98 14,657 14,460 13,811 14,204 14,204 15,075
Sep-98 15,230 15,014 14,334 14,714 14,714 15,779
Dec-98 15,250 15,021 14,336 14,688 14,688 15,819
Mar-99 15,276 15,035 14,343 14,667 14,667 15,776
</TABLE>
FOR PERIOD ENDING MARCH 31, 1999
AVERAGE ANNUAL TOTAL RETURN
From
1 Year 3 Year 5 Year Inception
Institutional Class 6.22% 6.82% 6.44% 6.29%
Service Class 5.90% 6.50% 6.13% 6.04%
Investor A Class (Load Adjusted) 1.53% 4.87% 5.14% 5.33%
Investor A Class (NAV) 5.72% 6.32% 6.01% 5.95%
Investor B Class (Load Adjusted) 0.18% 4.43% 5.19% 5.67%
Investor B Class (NAV) 4.94% 5.68% 5.62% 5.67%
Investor C Class (Load Adjusted) 3.89% 5.68% 5.62% 5.67%
Investor C Class (NAV) 4.94% 5.68% 5.62% 5.67%
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The inception dates of the Portfolio's share
classes were as follows: Institutional Shares, 4/20/92; Investor A Shares,
5/11/92; Service Shares, 7/29/93; Investor C Shares, 10/8/96; and Investor B
Shares, 10/11/96. See "Note on Performance Information" on page 12 for further
information on how performance data was calculated.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
4
<PAGE>
BLACKROCK FUNDS
INTERMEDIATE BOND PORTFOLIO
TOTAL NET ASSETS (3/31/99):
$559.3 MILLION
PERFORMANCE BENCHMARK:
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE INDEX
INVESTMENT APPROACH:
SEEKS CURRENT INCOME CONSISTENT WITH THE PRESERVATION OF CAPITAL BY
INVESTING IN SECURITIES RATED BBB OR HIGHER BY A MAJOR RATING AGENCY OR DEEMED
BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY. THE PORTFOLIO EMPHASIZES
SECURITIES WITH MATURITIES FROM 5 TO 10 YEARS.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) IN SHARP CONTRAST TO THE FIRST NINE MONTHS OF 1998, TREASURY
YIELDS ROSE SHARPLY DURING THE PAST SIX MONTHS. FOR THE PERIOD, THE YIELD OF THE
5-YEAR TREASURY ROSE 0.88% FROM 4.22% ON SEPTEMBER 30, 1998 TO 5.10% ON MARCH
31, 1999.
(BULLET) THE PORTFOLIO'S MORTGAGE ALLOCATION WAS INCREASED DUE TO WIDENING
YIELD SPREADS DURING THE BEGINNING OF THE PERIOD. HOWEVER, THE MANAGER PARED THE
PORTFOLIO'S MORTGAGE EXPOSURE DURING THE FIRST QUARTER OF 1999 AND EMPHASIZED
SECURITIES THAT HAVE RELATIVELY LITTLE PREPAYMENT SENSITIVITY.
(BULLET) THE PORTFOLIO'S CORPORATE BOND EXPOSURE WAS MODESTLY INCREASED
DURING THE PERIOD BUT REMAINS UNDERWEIGHT TO THE INDEX, AS THE MANAGER BELIEVES
THAT OTHER SPREAD PRODUCTS, SUCH AS MORTGAGES, OFFER BETTER RELATIVE VALUE.
WITHIN THE PORTFOLIO'S CORPORATE WEIGHTING, THE MANAGER HAS EMPHASIZED
LOWER-RATED INVESTMENT GRADE SECURITIES IN AN ATTEMPT TO CAPITALIZE UPON
NARROWING CREDIT SPREADS.
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
INTERMEDIATE BOND PORTFOLIO AND THE LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE INDEX FROM INCEPTION AND AT EACH SEMI-ANNUAL PERIOD END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Institutional Service Investor A Investor B Investor C BlackRock Lehman Brothers Intermediate
Class Class Class Class Class Class Government/Corporate Index
<S> <C> <C> <C> <C> <C> <C> <C>
Sep-17-93 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000 $10,000
Dec-93 9,954 9,945 9,610 9,945 9,945 9,954 10,037
Mar-94 9,675 9,660 9,547 9,660 9,660 9,675 9,833
Jun-94 9,592 9,572 9,274 9,572 9,572 9,592 9,774
Sep-94 9,655 9,628 9,188 9,626 9,626 9,655 9,854
Dec-94 9,644 9,611 9,241 9,610 9,610 9,644 9,843
Mar-95 10,044 10,003 9,225 10,002 10,002 10,044 10,274
Jun-95 10,498 10,447 9,601 10,441 10,441 10,498 10,788
Sep-95 10,696 10,636 10,023 10,620 10,620 10,696 10,965
Dec-95 11,051 10,983 10,194 10,965 10,965 11,051 11,349
Mar-96 10,966 10,890 10,526 10,878 10,878 10,966 11,255
Jun-96 11,046 10,962 10,442 10,945 10,945 11,046 11,325
Sep-96 11,241 11,147 10,506 11,125 11,125 11,241 11,526
Dec-96 11,527 11,422 10,679 11,394 11,394 11,527 11,809
Mar-97 11,522 11,408 10,938 11,375 11,375 11,522 11,247
Jun-97 11,863 11,737 10,920 11,712 11,712 11,863 11,579
Sep-97 12,184 12,047 11,243 12,016 12,016 12,184 11,891
Dec-97 12,403 12,255 11,534 12,217 12,217 12,403 12,145
Mar-98 12,601 12,440 11,728 12,391 12,391 12,601 12,334
Jun-98 12,825 12,652 11,923 12,573 12,573 12,825 12,566
Sep-98 13,257 13,070 12,310 12,958 12,958 13,262 13,130
Dec-98 13,282 13,084 12,319 12,942 12,942 13,293 13,168
Mar-99 13,354 13,146 12,372 12,844 12,973 13,370 13,143
</TABLE>
For period ending March 31, 1999
AVERAGE ANNUAL TOTAL RETURN
From
1 Year 3 Year 5 Year Inception
BlackRock Class 6.12% 6.84% 6.69% 5.39%
Institutional Class 5.99% 6.79% 6.66% 5.37%
Service Class 5.67% 6.48% 6.35% 5.06%
Investor A Class (Load Adjusted) 1.32% 4.86% 5.36% 4.17%
Investor A Class (NAV) 5.49% 6.29% 6.22% 4.95%
Investor B Class (Load Adjusted) 0.01% 4.76% 5.62% 4.60%
Investor B Class (NAV) 4.71% 6.01% 6.05% 4.79%
Investor C Class (Load Adjusted) 3.66% 6.01% 6.05% 4.79%
Investor C Class (NAV) 4.71% 6.01% 6.05% 4.79%
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The inception dates of the Portfolio's share
classes were as follows: Institutional Shares, 9/17/93; Service Shares, 9/23/93;
Investor A Shares, 5/20/94; Investor B Shares, 2/5/98; BlackRock Shares, 5/1/98
and Investor C Shares, 10/16/98. See "Note on Performance Information" on page
12 for further information on how performance data was calculated.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
5
<PAGE>
BLACKROCK FUND
CORE BOND PORTFOLIO
TOTAL NET ASSETS (3/31/99):
$931.8 MILLION
PERFORMANCE BENCHMARK:
LEHMAN BROTHERS AGGREGATE INDEX
INVESTMENT APPROACH:
SEEKS A TOTAL RATE OF RETURN THAT EXCEEDS THE TOTAL RETURN OF ITS BENCHMARK
BY INVESTING IN SECURITIES RATED BBB OR HIGHER BY A MAJOR RATING AGENCY OR
DEEMED BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY. THE PORTFOLIO
EMPHASIZES SECURITIES WITH MATURITIES FROM 5 TO 15 YEARS.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) IN SHARP CONTRAST TO THE FIRST NINE MONTHS OF 1998, TREASURY
YIELDS ROSE SHARPLY DURING THE PAST SIX MONTHS. FOR THE PERIOD, THE YIELD OF THE
10-YEAR TREASURY ROSE 0.82% FROM 4.41% ON SEPTEMBER 30, 1998 TO 5.23% ON MARCH
31, 1999.
(BULLET) THE PORTFOLIO MAINTAINED AN OVERWEIGHT POSITION VERSUS THE INDEX
IN THE MORTGAGE PASS-THROUGH AND ASSET-BACKED SECURITY SECTORS, AS THE MANAGER
BELIEVED THESE SECTORS TO OFFER ATTRACTIVE YIELDS AND TOTAL RETURN OPPORTUNITIES
RELATIVE TO TREASURIES. THE PORTFOLIO'S MORTGAGE ALLOCATION WAS INCREASED DUE TO
WIDENING YIELD SPREADS DURING THE BEGINNING OF THE PERIOD.
(BULLET) THE PORTFOLIO'S CORPORATE BOND EXPOSURE WAS INCREASED DURING THE
PERIOD BUT REMAINS UNDERWEIGHT TO THE INDEX, AS THE MANAGER BELIEVES THAT OTHER
SPREAD PRODUCTS, SUCH AS MORTGAGES, OFFER BETTER RELATIVE VALUE. WITHIN THE
PORTFOLIO'S CORPORATE WEIGHTING, THE MANAGER HAS EMPHASIZED LOWER-RATED
INVESTMENT GRADE SECURITIES IN AN ATTEMPT TO CAPITALIZE UPON NARROWING CREDIT
SPREADS.
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 COREBOND PORTFOLIO
AND THE LEHMAN BROTHERS AGGREGATE INDEX FROM INCEPTION AND AT EACH SEMI-ANNUAL
PERIOD END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Institutional Service Investor A Investor B Investor C BlackRock Lehman Aggregate
Class Class Class Class Class Class Index
<S> <C> <C> <C> <C> <C> <C> <C>
Dec-9-92 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000 $10,000
Dec-92 10,033 10,033 9,631 10,033 10,033 10,033 10,192
Mar-93 10,416 10,416 9,999 10,416 10,416 10,416 10,487
Jun-93 10,688 10,688 10,261 10,688 10,688 10,688 10,751
Sep-93 11,021 11,021 10,581 11,021 11,021 11,021 11,010
Dec-93 11,005 11,005 10,565 11,005 11,005 11,005 11,123
Mar-94 10,715 10,715 10,286 10,715 10,715 10,715 10,574
Jun-94 10,612 10,612 10,188 10,612 10,612 10,612 10,760
Sep-94 10,695 10,695 10,267 10,695 10,695 10,695 10,605
Dec-94 10,749 10,749 10,319 10,749 10,749 10,749 10,866
Mar-95 11,269 11,269 10,818 11,269 11,269 11,269 11,349
Jun-95 11,931 11,931 11,453 11,931 11,931 11,931 11,848
Sep-95 12,166 12,166 11,680 12,166 12,166 12,166 12,265
Dec-95 12,703 12,703 12,195 12,703 12,703 12,703 12,707
Mar-96 12,405 12,399 11,900 12,396 12,396 12,405 12,329
Jun-96 12,473 12,466 11,957 12,432 12,432 12,473 12,503
Sep-96 12,722 12,706 12,182 12,642 12,642 12,722 12,980
Dec-96 13,157 13,134 12,584 13,035 13,035 13,157 13,120
Mar-97 13,121 13,088 12,534 12,940 12,940 13,121 13,007
Jun-97 13,563 13,523 13,026 13,604 13,604 13,564 13,484
Sep-97 14,002 13,950 13,432 14,003 14,003 14,009 13,932
Dec-97 14,348 14,283 13,748 14,305 14,305 14,360 14,342
Mar-98 14,580 14,503 13,954 14,493 14,493 14,599 14,562
Jun-98 14,926 14,836 14,268 14,791 14,791 14,950 14,903
Sep-98 15,483 15,377 14,783 15,297 15,297 15,514 15,534
Dec-98 15,520 15,403 14,801 15,287 15,287 15,557 15,586
Mar-99 15,498 15,371 14,762 15,219 15,219 15,542 15,507
</TABLE>
For period ending March 31, 1999
AVERAGE ANNUAL TOTAL RETURN
From
1 Year 3 Year 5 Year Inception
BlackRock Class 6.45% 7.79% 7.72% 7.24%
Institutional Class 6.29% 7.69% 7.66% 7.19%
Service Class 5.97% 7.37% 7.47% 7.04%
Investor A Class (Load Adjusted) 1.54% 5.75% 6.48% 6.26%
Investor A Class (NAV) 5.78% 7.20% 7.35% 6.95%
Investor B Class (Load Adjusted) 0.28% 5.14% 6.43% 6.56%
Investor B Class (NAV) 4.97% 6.40% 6.86% 6.56%
Investor C Class (Load Adjusted) 3.92% 6.40% 6.86% 6.56%
Investor C Class (NAV) 4.97% 6.40% 6.86% 6.56%
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The inception dates of the Portfolio's share
classes were as follows: Institutional Shares, 12/9/92; Service Shares, 1/12/96;
Investor A Shares, 1/31/96; Investor B Shares, 3/18/96; Investor C Shares,
2/28/97; and BlackRock Shares, 5/1/97. See "Note on Performance Information" on
page 12 for further information on how performance data was calculated.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
6
<PAGE>
BLACKROCK FUNDS
GOVERNMENT INCOME PORTFOLIO
TOTAL NET ASSETS (3/31/99):
$46.2 MILLION
PERFORMANCE BENCHMARK:
LEHMAN BROTHERS MORTGAGE/MERRILL LYNCH 10-YEAR TREASURY INDEX
INVESTMENT APPROACH:
SEEKS CURRENT INCOME CONSISTENT WITH THE PRESERVATION OF CAPITAL BY
INVESTING IN SECURITIES ISSUED BY THE U.S. GOVERNMENT OR GOVERNMENT AGENCY OR
RATED AAA BY A MAJOR RATING AGENCY. THE PORTFOLIO EMPHASIZES SECURITIES WITH
MATURITIES FROM 10 TO 15 YEARS.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) IN SHARP CONTRAST TO THE FIRST NINE MONTHS OF 1998, TREASURY
YIELDS ROSE SHARPLY DURING THE PAST SIX MONTHS. FOR THE PERIOD, THE YIELD OF THE
10-YEAR TREASURY ROSE 0.82% FROM 4.41% ON SEPTEMBER 30, 1998 TO 5.23% ON MARCH
31, 1999.
(BULLET) THE PORTFOLIO'S MORTGAGE WEIGHTING DECREASED OVER THE PERIOD, AS
HIGH LEVELS OF PREPAYMENT RESULTED IN CASH COMING INTO THE PORTFOLIO. THE
MANAGER REDEPLOYED THESE PROCEEDS INTO LESS PREPAYMENT SENSITIVE SECURITIES SUCH
AS TREASURIES AND COMMERCIAL MORTGAGE-BACKED SECURITIES.
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 GOVERNMENT
INCOME PORTFOLIO AND THE LEHMAN BROTHERS MORTGAGE INDEX/MERRILL LYNCH 10-YEAR
TREASURY INDEX FROM INCEPTION AND AT EACH SEMI-ANNUAL PERIOD END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Investor A Investor B Investor C Lehman Brothers Mortgage Index/
Class Class Class Merrill Lynch 10 Year Treasury Index
<S> <C> <C> <C> <C>
Oct-3-94 $ 9,550 $10,000 $10,000 $10,000
Dec-94 9,541 9,975 9,975 10,037
Mar-95 10,024 10,462 10,462 10,588
Jun-95 10,718 11,168 11,168 11,335
Sep-95 10,912 11,350 11,350 11,537
Dec-95 11,353 11,793 11,793 12,059
Mar-96 11,132 11,536 11,536 11,779
Jun-96 11,156 11,540 11,540 11,887
Sep-96 11,393 11,766 11,766 12,108
Dec-96 11,740 12,101 12,101 12,497
Mar-97 11,713 12,052 12,052 12,368
Jun-97 12,171 12,499 12,499 12,502
Sep-97 12,588 12,904 12,904 12,906
Dec-97 12,975 13,277 13,277 13,212
Mar-98 13,182 13,464 13,464 13,410
Jun-98 13,510 13,774 13,774 13,641
Sep-98 13,988 14,235 14,235 14,002
Dec-98 14,012 14,233 14,233 13,281
Mar-99 13,894 13,804 14,086 13,132
</TABLE>
For period ending March 31, 1999
AVERAGE ANNUAL TOTAL RETURN
From
1 Year 3 Year Inception
Investor A Class (Load Adjusted) 0.62% 6.01% 7.59%
Investor A Class (NAV) 5.40% 7.67% 8.70%
Investor B Class (Load Adjusted) (0.05)% 5.61% 6.83%
Investor B Class (NAV) 4.62% 6.88% 7.93%
Investor C Class (Load Adjusted) 3.57% 6.88% 7.93%
Investor C Class (NAV) 4.62% 6.88% 7.93%
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, 10/3/94; Investor B Shares, 10/3/94;
and Investor C Shares, 2/28/97. See "Note on Performance Information" on page 12
for further information on how performance data was calculated.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
7
<PAGE>
BLACKROCK FUNDS
GNMA PORTFOLIO
TOTAL NET ASSETS (3/31/99):
$115.2 MILLION
PERFORMANCE BENCHMARK:
LEHMAN GNMA INDEX
INVESTMENT APPROACH:
SEEKS CURRENT INCOME CONSISTENT WITH THE PRESERVATION OF CAPITAL BY
INVESTING IN SECURITIES ISSUED BY THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
("GNMAS"), AS WELL AS OTHER U.S. GOVERNMENT SECURITIES.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) IN SHARP CONTRAST TO THE FIRST NINE MONTHS OF 1998, TREASURY
YIELDS ROSE SHARPLY DURING THE PAST SIX MONTHS. FOR THE PERIOD, THE YIELD OF THE
10-YEAR TREASURY ROSE 0.82% FROM 4.41% ON SEPTEMBER 30, 1998 TO 5.23% ON MARCH
31, 1999.
(BULLET) THE PORTFOLIO REMAINED PRIMARILY INVESTED IN GNMA MORTGAGE
PASS-THROUGHS OVER THE PERIOD. AFTER PARING THE PORTFOLIO'S PASS-THROUGH
HOLDINGS DURING LATE 1998, THE MANAGER INCREASED MORTGAGE HOLDINGS DURING THE
FIRST QUARTER OF 1999 DUE TO THEIR WIDE YIELD SPREADS AND ATTRACTIVE VALUATIONS.
(BULLET) THE MANAGER INITIATED MINOR POSITIONS IN AAA-RATED NON-PREPAYMENT
SENSITIVE COMMERCIAL MORTGAGE-BACKED SECURITIES AND ASSET-BACKED SECURITIES,
WHICH THE MANAGER BELIEVED TO REPRESENT EXTRAORDINARY VALUE DUE TO THEIR HIGH
CREDIT QUALITY, DOMESTIC PROFILE AND WIDE YIELD SPREADS.
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 GNMA INCOME
PORTFOLIO AND THE LEHMAN GNMA INDEX FROM INCEPTION AND AT EACH SEMI-ANNUAL
PERIOD END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Institutional Service Investor A Investor B Investor C Lehman GNMA
Class Class Class Class Class Index
<S> <C> <C> <C> <C> <C> <C>
Sep-1-86 $10,000 $10,000 $ 9,550 $10,000 $10,000 $10,000
Dec-86 10,296 10,289 9,822 10,265 10,265 10,357
Mar-87 10,411 10,396 9,919 10,348 10,348 10,588
Jun-87 10,251 10,228 9,756 10,158 10,158 10,450
Sep-87 10,265 10,234 9,757 10,141 10,141 10,191
Dec-87 10,407 10,368 9,880 10,250 10,250 10,801
Mar-88 10,684 10,636 10,132 10,491 10,491 11,256
Jun-88 10,883 10,826 10,308 10,654 10,654 11,461
Sep-88 11,009 10,943 10,415 10,744 10,744 11,719
Dec-88 11,149 11,074 10,536 10,848 10,848 11,754
Mar-89 11,192 11,109 10,564 10,857 10,857 11,888
Jun-89 11,633 11,537 10,967 11,250 11,250 12,865
Sep-89 11,673 11,569 10,992 11,255 11,255 13,052
Dec-89 12,063 11,947 11,347 11,596 11,596 13,597
Mar-90 12,170 12,044 11,434 11,664 11,664 13,593
Jun-90 12,350 12,213 11,590 11,800 11,800 14,109
Sep-90 12,473 12,325 11,691 11,881 11,881 14,285
Dec-90 13,090 12,925 12,255 12,431 12,431 15,036
Mar-91 13,442 13,262 12,570 12,727 12,727 15,498
Jun-91 13,652 13,460 12,751 12,887 12,887 15,801
Sep-91 14,417 14,204 13,451 13,569 13,569 16,659
Dec-91 15,188 14,952 14,153 14,251 14,251 17,448
Mar-92 14,951 14,708 13,916 13,986 13,986 17,314
Jun-92 15,594 15,329 14,498 14,544 14,544 17,998
Sep-92 16,125 15,839 14,974 14,994 14,994 18,562
Dec-92 16,208 15,908 15,033 15,024 15,024 18,741
Mar-93 16,824 16,501 15,586 15,549 15,549 19,275
Jun-93 17,214 16,871 15,929 15,861 15,861 19,636
Sep-93 17,430 17,070 16,111 16,042 16,012 19,785
Dec-93 17,481 17,108 16,140 16,071 16,010 19,974
Mar-94 16,843 16,470 15,531 15,465 15,378 19,491
Jun-94 16,658 16,278 15,343 15,278 15,163 19,384
Sep-94 16,743 16,348 15,403 15,337 15,193 19,544
Dec-94 16,863 16,453 15,495 15,429 15,256 19,674
Mar-95 17,811 17,365 16,348 16,278 16,065 20,712
Jun-95 18,849 18,364 17,281 17,207 16,950 21,807
Sep-95 19,228 18,718 17,608 17,533 17,239 22,294
Dec-95 19,853 19,313 18,159 18,081 17,745 23,029
Mar-96 19,692 19,142 17,990 17,913 17,548 22,957
Jun-96 19,829 19,261 18,094 18,017 17,617 23,120
Sep-96 20,211 19,617 18,420 18,341 17,901 23,606
Dec-96 20,790 20,164 18,927 18,846 18,359 24,303
Mar-97 20,814 20,172 18,927 18,846 18,324 24,335
Jun-97 21,606 20,924 19,625 19,541 18,964 25,284
Sep-97 22,280 21,561 20,214 20,127 19,497 26,029
Dec-97 22,672 21,924 20,545 20,457 19,779 26,620
Mar-98 22,888 22,116 20,716 20,627 19,907 27,051
Jun-98 23,384 22,574 21,136 21,046 20,277 27,509
Sep-98 23,922 23,077 21,599 21,507 20,682 28,212
Dec-98 24,192 23,322 21,817 21,683 20,852 28,463
Mar-99 24,379 23,485 21,959 21,783 20,948 28,747
</TABLE>
For period ending March 31, 1999
AVERAGE ANNUAL TOTAL RETURN
1 Year 3 Year 5 Year From Inception
Institutional Class 6.52% 7.89% 7.98% 8.27%
Service Class 6.18% 7.56% 7.66% 7.94%
Investor A Class (Load Adjusted) 1.71% 5.93% 6.61% 7.26%
Investor A Class (NAV) 6.00% 7.38% 7.47% 7.76%
Investor B Class (Load Adjusted) 0.49% 5.33% 6.25% 6.96%
Investor B Class (NAV) 5.23% 6.59% 6.68% 6.96%
Investor C Class (Load Adjusted) 4.18% 6.59% 6.68% 6.96%
Investor C Class (NAV) 5.23% 6.59% 6.68% 6.96%
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 GNMA Portfolio
was established to receive the assets of the GNMA 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 GNMA Fund for periods prior to
the CTF Conversion.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
8
<PAGE>
BLACKROCK FUNDS
MANAGED INCOME PORTFOLIO
TOTAL NET ASSETS (3/31/99):
$1.6 BILLION
PERFORMANCE BENCHMARK:
LEHMAN BROTHERS AGGREGATE INDEX
INVESTMENT APPROACH:
SEEKS CURRENT INCOME CONSISTENT WITH THE PRESERVATION OF CAPITAL BY
INVESTING IN SECURITIES RATED BBB OR HIGHER BY A MAJOR RATING AGENCY OR DEEMED
BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY. THE PORTFOLIO EMPHASIZES
SECURITIES WITH MATURITIES FROM 5 TO 10 YEARS.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) IN SHARP CONTRAST TO THE FIRST NINE MONTHS OF 1998, TREASURY
YIELDS ROSE SHARPLY DURING THE PAST SIX MONTHS. FOR THE PERIOD, THE YIELD OF THE
10-YEAR TREASURY ROSE 0.82% FROM 4.41% ON SEPTEMBER 30, 1998 TO 5.23% ON MARCH
31, 1999.
(BULLET) DUE TO THE PORTFOLIO'S INCOME BIAS, THE MANAGER MAINTAINED
OVERWEIGHT POSITIONS VERSUS THE INDEX IN SPREAD SECTORS. THE PORTFOLIO INCREASED
ITS OVERALL MORTGAGE SECURITY EXPOSURE, FOCUSING ON MORTGAGE PASS-THROUGHS, DUE
TO WIDENING YIELD SPREADS DURING THE BEGINNING OF THE PERIOD.
(BULLET) THE PORTFOLIO'S AGGREGATE CORPORATE BOND AND ASSET-BACKED SECURITY
EXPOSURE WAS MODESTLY REDUCED DURING THE PERIOD BUT REMAINS OVERWEIGHT TO THE
INDEX. WITHIN THE PORTFOLIO'S CORPORATE WEIGHTING, THE MANAGER HAS EMPHASIZED
LOWER-RATED INVESTMENT GRADE SECURITIES IN AN ATTEMPT TO CAPITALIZE UPON
NARROWING CREDIT SPREADS.
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 MANAGED INCOME
PORTFOLIO AND THE LEHMAN BROTHERS AGGREGATE INDEX FROM INCEPTION AND AT
EACH SEMI-ANNUAL PERIOD END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Institutional Service Investor A Investor B Investor C Lehman Brothers Aggregate
Class Class Class Class Class Index
<S> <C> <C> <C> <C> <C> <C>
Nov-1-89 $10,000 $10,000 $ 9,550 $10,000 $10,000 $10,000
Dec-89 10,105 10,105 9,650 10,000 10,000 10,027
Mar-90 10,004 10,004 9,554 9,900 9,900 9,946
Jun-90 10,306 10,306 9,843 10,199 10,199 10,309
Sep-90 10,380 10,380 9,913 10,272 10,272 10,397
Dec-90 10,943 10,943 10,451 10,830 10,830 10,923
Mar-91 11,161 11,161 10,659 11,045 11,045 11,227
Jun-91 11,259 11,259 10,752 11,142 11,142 11,411
Sep-91 11,910 11,910 11,374 11,786 11,786 12,059
Dec-91 12,580 12,580 12,014 12,449 12,449 12,671
Mar-92 12,290 12,290 11,737 12,162 12,162 12,509
Jun-92 12,749 12,749 12,175 12,617 12,617 13,014
Sep-92 13,316 13,316 12,717 13,177 13,177 13,574
Dec-92 13,323 13,323 12,724 13,185 13,185 13,609
Mar-93 14,022 14,022 13,391 13,876 13,876 14,172
Jun-93 14,457 14,457 13,806 14,306 14,306 14,549
Sep-93 14,935 14,940 14,263 14,780 14,780 14,928
Dec-93 14,881 14,862 14,186 14,701 14,701 14,936
Mar-94 14,370 14,343 13,690 14,186 14,186 14,507
Jun-94 14,110 14,079 13,422 13,909 13,909 14,357
Sep-94 14,145 14,104 13,440 13,927 13,927 14,445
Dec-94 14,215 14,166 13,492 13,981 13,981 14,500
Mar-95 14,894 14,835 14,122 14,634 14,634 15,231
Jun-95 15,744 15,671 14,909 15,449 15,449 16,159
Sep-95 16,022 15,935 15,153 15,702 15,702 16,477
Dec-95 16,701 16,602 15,778 16,350 16,350 17,179
Mar-96 16,369 16,260 15,443 16,003 16,003 16,872
Jun-96 16,437 16,315 15,490 16,051 16,051 16,969
Sep-96 16,716 16,580 15,734 16,304 16,304 17,281
Dec-96 17,277 17,123 16,243 16,831 16,831 17,800
Mar-97 17,227 17,060 16,177 16,762 16,763 17,701
Jun-97 17,848 17,663 16,740 17,346 17,346 18,351
Sep-97 18,432 18,228 17,267 17,892 17,893 18,960
Dec-97 18,913 18,689 17,697 18,338 18,338 19,517
Mar-98 19,189 18,949 17,936 18,585 18,586 19,818
Jun-98 19,692 19,432 18,384 19,050 19,015 20,282
Sep-98 20,137 19,856 18,778 19,457 19,386 21,140
Dec-98 20,292 19,993 18,900 19,582 19,475 21,212
Mar-99 20,304 19,989 18,888 19,570 19,426 21,103
</TABLE>
For period ending March 31, 1999
AVERAGE ANNUAL TOTAL RETURN
1 Year 3 Year 5 Year From Inception
Institutional Class 5.80% 7.44% 7.15% 7.81%
Service Class 5.49% 7.12% 6.86% 7.63%
Investor A Class (Load Adjusted) 0.59% 5.31% 5.68% 6.98%
Investor A Class (NAV) 5.31% 6.94% 6.66% 7.51%
Investor B Class (Load Adjusted) (0.16)% 5.27% 5.97% 7.37%
Investor B Class (NAV) 4.52% 6.52% 6.40% 7.37%
The performance information above includes information relating to each class of
the Portfolio since the commencement of operations of the Portfolio, rather than
the date such class was introduced. The inception dates of the Portfolio's share
classes were as follows: Institutional Shares, 11/1/89; Investor A Shares,
2/5/92; Service Shares, 7/29/93; and Investor B Shares, 7/15/97. See "Note on
Performance Information" on page 12 for further information on how performance
data was calculated. The comparative index from previous years has changed from
the Salomon Broad Investment Grade Index to the Lehman Aggregate to more
accurately reflect the type of holdings of Managed Income.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
9
<PAGE>
BLACKROCK FUNDS
INTERNATIONAL BOND PORTFOLIO
TOTAL NET ASSETS (3/31/99):
$54.0 MILLION
PERFORMANCE BENCHMARK:
SALOMON NON-U.S. HEDGED WORLD GOVERNMENT BOND INDEX
INVESTMENT APPROACH:
PURSUES CURRENT INCOME CONSISTENT WITH THE PRESERVATION OF CAPITAL BY
INVESTING IN INVESTMENT GRADE INTERNATIONAL FIXED INCOME SECURITIES.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) OVER THE PAST SIX MONTHS, BOND YIELDS GENERALLY FELL IN JAPAN,
EUROPE AND THE DOLLAR BLOC (CANADA AND AUSTRALIA), WHILE U.S. BOND YIELDS ROSE.
(BULLET) THE PORTFOLIO REMAINED GENERALLY CURRENCY HEDGED DURING THE
PERIOD, WHICH RESULTED IN MIXED RETURNS AS THE DOLLAR ROSE VERSUS THE DM AND THE
EURO, BUT FELL VERSUS THE YEN.
(BULLET) OVER THE PERIOD THE PORTFOLIO WAS REWARDED FOR ITS OVERWEIGHT
POSITIONS IN CONTINENTAL EUROPE AND THE UNITED KINGDOM, WHICH PERFORMED WELL DUE
TO LACK OF INFLATIONARY PRESSURE AND THE CONTINUED EASING OF MONETARY POLICY.
THE PORTFOLIO BENEFITED FROM ITS SIGNIFICANT UNDERWEIGHT POSITION TO JAPANESE
BONDS, WHICH EXPERIENCED A SUBSTANTIAL SELL-OFF FROM NOVEMBER TO FEBRUARY.
(BULLET) THE MANAGER BELIEVES THAT THE OVERALL OUTLOOK FOR THE GLOBAL FIXED
INCOME MARKET REMAINS POSITIVE. GLOBAL ECONOMIES ARE SLUGGISH WITH RELATIVELY NO
INFLATION AND THE MANAGER BELIEVES IT IS UNLIKELY THAT THE CENTRAL BANKS WOULD
FOLLOW THE FEDERAL RESERVE INTO A MONETARY TIGHTENING BIAS.
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 INTERNATIONAL BOND
PORTFOLIO AND THE SALOMON NON-U.S. HEDGED WORLD GOVERNMENT BOND INDEX FROM
INCEPTION AND AT EACH SEMI-ANNUAL PERIOD END.
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Institutional Service Investor A Investor B Investor C Salomon Non-U.S. Hedged World
Class Class Class Class Class Government Bond Index
<S> <C> <C> <C> <C> <C> <C>
Jul-1-91 $10,000 $10,000 $ 9,500 $10,000 $10,000 $10,000
Sep-91 10,360 10,360 9,894 10,360 10,360 10,482
Dec-91 10,600 10,600 10,123 10,600 10,600 10,909
Mar-92 10,470 10,470 9,999 10,470 10,470 10,846
Jun-92 11,008 11,008 10,513 11,008 11,008 11,157
Sep-92 11,298 11,298 10,789 11,298 11,298 11,581
Dec-92 11,254 11,254 10,747 11,254 11,254 11,766
Mar-93 11,717 11,717 11,190 11,717 11,717 12,169
Jun-93 12,116 12,116 11,571 12,116 12,116 12,483
Sep-93 12,689 12,689 12,118 12,689 12,689 12,932
Dec-93 12,977 12,977 12,393 12,977 12,977 13,225
Mar-94 12,715 12,715 12,143 12,715 12,715 12,803
Jun-94 12,453 12,453 11,892 12,453 12,453 12,561
Sep-94 12,369 12,369 11,812 12,369 12,369 12,580
Dec-94 12,496 12,496 11,933 12,496 12,496 12,732
Mar-95 13,545 13,545 12,936 13,545 13,545 13,323
Jun-95 14,054 14,054 13,421 14,054 14,054 14,016
Sep-95 14,302 14,302 13,658 14,302 14,302 14,427
Dec-95 14,998 14,998 14,323 14,998 14,998 15,032
Mar-96 15,051 15,051 14,374 15,051 15,051 15,011
Jun-96 15,395 15,394 14,697 15,370 15,370 15,291
Sep-96 16,002 15,989 15,259 15,928 15,928 15,797
Dec-96 16,590 16,558 15,793 16,442 16,442 16,340
Mar-97 16,762 16,717 15,938 16,562 16,562 16,458
Jun-97 17,335 17,276 16,378 17,078 17,078 16,988
Sep-97 17,859 17,783 16,853 17,539 17,539 17,565
Dec-97 18,294 18,203 17,244 17,911 17,911 18,069
Mar-98 18,777 18,671 17,679 18,328 18,328 18,527
Jun-98 19,112 18,988 17,972 18,597 18,597 18,955
Sep-98 20,092 19,947 18,872 19,529 19,492 19,942
Dec-98 20,395 20,232 19,135 19,800 19,726 20,052
Mar-99 20,697 20,518 19,397 20,071 19,958 20,395
</TABLE>
For period ending March 31, 1999
AVERAGE ANNUAL TOTAL RETURN
1 Year 3 Year 5 Year From Inception
Institutional Class 10.22% 11.20% 10.24% 9.83%
Service Class 9.90% 10.88% 10.04% 9.71%
Investor A Class (Load Adjusted) 4.20% 8.82% 8.81% 8.91%
Investor A Class (NAV) 9.71% 10.69% 9.93% 9.64%
Investor B Class (Load Adjusted) 4.04% 8.57% 9.00% 9.32%
Investor B Class (NAV) 8.90% 9.87% 9.44% 9.32%
Investor C Class (Load Adjusted) 7.81% 9.87% 9.44% 9.32%
Investor C Class (NAV) 8.90% 9.87% 9.44% 9.32%
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 B Shares, 4/19/96;
Investor A Shares, 4/22/96; Institutional Shares, 6/10/96; and Investor C
Shares, 9/11/96. See "Note on Performance Information" on page 12 for further
information on how performance data was calculated.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
10
<PAGE>
BLACKROCK FUNDS
HIGH YIELD BOND PORTFOLIO TOTAL
NET ASSETS (3/31/99):
$56.7 MILLION
PERFORMANCE BENCHMARK:
LEHMAN HIGH YIELD INDEX
INVESTMENT APPROACH:
SEEKS CURRENT INCOME BY INVESTING PRIMARILY IN NON-INVESTMENT GRADE
SECURITIES (RATED C OR HIGHER OR DEEMED TO BE OF COMPARABLE QUALITY) WHICH YIELD
A HIGH LEVEL OF CURRENT INCOME.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET) SINCE THE PORTFOLIO'S INCEPTION IN NOVEMBER 1998 THE HIGH YIELD
MARKET HAS PERFORMED WELL AS YIELD SPREADS HAVE NARROWED COMPARED TO TREASURIES.
INVESTORS CONTINUE TO EMPHAZISE HIGHER QUALITY CREDITS INSTEAD OF LOWER TIER
CREDITS. THE MANAGER HAS TAKEN ADVANTAGE OF THIS BY FOCUSING ON THE B-RATED
CREDITS, WHOSE SPREADS CONTINUE TO TIGHTEN, WHILE UNDERWEIGHTING CCC-RATED
SECURITIES.
(BULLET) THE PORTFOLIO HAS BENEFITED FROM BEING OVERWEIGHT RELATIVE TO THE
INDEX IN THE TELECOM, MEDIA AND RENTAL SERVICES SECTORS. PARTICULAR EMPHASIS HAS
BEEN PLACED ON THESE SECTORS AS IMPROVING FUNDAMENTALS AND THE POTENTIAL FOR
CONSOLIDATION CONTINUE TO BE A MAJOR CONTRIBUTOR TO THEIR STRONG PERFORMANCE.
THE PORTFOLIO HAS BEEN UNDERWEIGHT TO THE HEALTHCARE SECTOR, WHICH HAS BEEN A
WEAK PERFORMER.
(BULLET) THE MANAGER BELIEVES THAT THE SUPPLY AND DEMAND TECHNICALS OF THE
HIGH YIELD MARKET APPEAR TO BE FAVORABLE, AS STRONG MONEY INFLOWS AND LOWER
SUPPLY RELATIVE TO LAST YEAR MAY BODE WELL FOR HIGH YIELD INVESTORS.
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.
TOTAL RETURN PERFORMANCE INFORMATION NOT REFLECTED.
FUND INCEPTION DATE WAS 11/19/98.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
11
<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
Performance information is restated to reflect the current maximum
front-end sales charge (in the case of Investor A Shares) or the maximum
contingent deferred sales charge (in the case of Investor B and Investor C
Shares), and assumes the reinvestment of dividends and distributions. The
maximum front-end sales charges for Investor A Shares are as follows:
Intermediate Government Bond, Intermediate Bond, Core Bond and GNMA Portfolios
- -- 4.00%; Government Income and Managed Income Portfolios -- 4.50%; Low Duration
Bond Portfolio -- 3.00%; and High Yield Bond Portfolio and International Bond
Portfolio -- 5.00%. 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.
12
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
-------- -------- -----------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 6.9%
Small Business Administration
Participation Certificates,
Series 97, Class A
6.35%** 08/15/22 $ 1,763 $ 1,752,703
U.S. Treasury Bonds
8.75% 11/15/08 5,940 6,717,816
U.S. Treasury Notes
4.50%(DAGGER) 09/30/00 11,830 11,749,020
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $20,300,241) 20,219,539
------------
MORTGAGE PASS-THROUGHS -- 24.9%
Federal Home Loan Mortgage
Corporation
7.25% 07/06-06/08 76 78,425
7.50%(DAGGER) 07/01/07 2,705 2,806,814
8.25% 06/01/09 87 90,921
8.75% 01/01/13 128 134,684
8.00%(DAGGER) 10/01/17 294 306,177
8.50% 04/01/19 795 835,745
8.85%** 11/01/26 3,437 3,516,069
6.09%** 06/01/28 2,521 2,521,174
Federal Home Loan Mortgage
Corporation 5 Year Balloon
7.00%(DAGGER) 05/00-11/00 1,074 1,095,000
Federal Home Loan Mortgage
Corporation 7 Year Balloon
8.00%(DAGGER) 01/01/04 557 570,942
Federal Home Loan Mortgage
Corporation 30 Year Balloon
8.25% 09/01/09 85 89,331
7.50% 04/01/22 852 876,142
Federal Home Loan Mortgage
Corporation Multi-Family
5.63%** 10/01/00 8,290 8,271,839
Federal National Mortgage Association
6.29%(DAGGER) 10/04/00 2,000 2,032,962
6.20%(DAGGER) 02/26/01 6,355 6,359,004
6.73%(DAGGER) 02/26/01 767 773,682
6.00%(DAGGER) 11/03-01/04 7,109 7,134,053
7.00% 06/01/04 2,427 2,460,900
6.50% 10/05-10/08 6,363 6,449,115
11.50% 05/01/09 273 304,561
5.50% 07/01/09 3,181 3,097,661
8.50% 08/01/22 700 734,874
Federal National Mortgage Association
10 Year Balloon
6.00%(DAGGER) 12/03-02/04 4,647 4,673,110
Federal National Mortgage Association
30 Year Balloon
8.50%(DAGGER) 12/01/10 3,526 3,703,785
Government National Mortgage
Association
7.25%(DAGGER) 04/15/06 510 522,150
8.25%(DAGGER) 08/15/08 4,762 4,998,661
8.00% 05/16/24 5,650 5,743,107
Government National Mortgage
Association 30 Year Balloon
6.50%(DAGGER) 03/24-04/24 1,244 1,241,459
Salomon Brothers Mortgage
Securities VII, Series 96-6B, Class A1
5.41%** 06/30/26 914 913,579
Par
Maturity (000) Value
-------- -------- -----------
MORTGAGE PASS-THROUGHS (CONTINUED)
Salomon Brothers Mortgage
Securities VII, Series 96-6G, Class A1
5.31%** 09/30/27 $ 191 $ 190,876
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $72,202,568) 72,526,802
------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 3.1%
Bear Stearns Mortgage Securities, Inc.,
Series 96-6, Class A2
7.00% 11/25/27 3,232 3,225,201
Residential Accredit Loans, Inc.,
Series 97-QS7, Class A1
7.50% 07/25/27 863 866,033
Residential Asset Securitization Trust,
Series 98-A1, Class A1
7.00%(DAGGER) 03/25/28 2,189 2,194,244
Residential Asset Securitization Trust,
Series 98-A2, Class A1
6.75%(DAGGER) 08/25/28 2,732 2,738,038
------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $9,021,373) 9,023,516
------------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 34.0%
American Business Financial Services,
Series 98-A, Class A
6.10% 10/15/05 4,499 4,516,115
Asset Securitization Corp.,
Series 97-D5, Class A1A
6.50% 02/14/41 3,240 3,276,789
Bayview Financial Acquisition Trust,
Series 98-1, Class AI
7.01% 05/25/29 3,213 3,216,757
Bayview Financial Acquisition Trust,
Series 98-1, Class AII
5.24%** 05/25/29 2,763 2,734,869
Bosque Asset Corp.,
Series 97-1, Class A1
7.66%** 06/05/02 1,293 1,294,854
Copelco Capital Funding Corp.,
Series 99-A, Class A3
5.67% 03/15/02 2,700 2,697,300
Credit Suisse First Boston Mortgage
Securities Corp., Series 97-C1,
Class A1A
6.96% 01/20/04 3,030 3,098,065
Donaldson, Lufkin & Jenrette, Inc.
Mortgage Acceptance Corp.,
Series 96-CF2, Class A1A
6.86% 11/12/21 2,171 2,212,495
FMAC Receivables Trust,
Series 98-CA, Class A1
5.99% 11/15/04 2,289 2,261,125
Franchise Loan Trust,
Series 98-I, Class A1
6.24% 07/15/04 2,204 2,186,546
IFC Small Business Administration
Loan-Backed Adjustable Rate
Certificates, Series 97-1, Class A
5.75%** 01/15/24 2,699 2,677,461
Impac Secured Assets Owner Trust,
Series 98-1, Class A3
6.52% 08/25/10 4,000 4,024,375
See accompanying notes to financial statements.
13
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
-------- -------- -----------
COMMERCIAL MORTGAGE BACKED
SECURITIES (CONTINUED)
J.P. Morgan Commercial Mortgage
Finance Corp., Series 97, Class D
5.92%** 07/25/29 $ 2,000 $ 1,932,500
Merit Securities Corp., Series 98-11,
Class 1A1
6.58% 07/28/22 2,222 2,222,609
Merit Securities Corp., Series 98-11,
Class 2A2
5.24%** 11/28/22 5,000 4,995,313
Morgan Stanley Capital Investments,
Series 98-CF1, Class A1
6.33% 10/15/07 2,570 2,579,415
Morgan Stanley Capital Investments,
Series 98-HF2, Class A1
6.01% 11/15/30 4,762 4,739,208
Mortgage Capital Funding, Inc.,
Series 98-MC3, Class A1
6.00% 11/18/31 2,759 2,737,153
Newcourt Equipment Trust Securities,
Series 98-1, Class A3
5.24% 12/01/02 4,250 4,223,560
NPF VI, Inc., Health Care Receivables
Securitization Program,
Series 98-1, Class A
6.22% 06/01/02 3,300 3,309,750
PNC Mortgage Securities Corp.,
Series 97-6, Class A1
6.49% 10/25/26 4,146 4,169,595
Prudential Home Mortgage Securities,
Inc., Series 94-19, Class A2
7.05% 05/25/24 4,830 4,869,674
Republic Bank Home Loan Owner Trust,
Series 98-1, Class A1
6.61% 04/25/07 2,806 2,805,240
Residential Funding Mortgage Securities
Series 98-NS1, Class A2
6.38% 01/25/09 2,733 2,740,890
Salomon Brothers Mortgage
Securities VII, Series 92-5, Class A1
7.75%** 11/25/22 560 559,670
Sequoia Mortgage Trust,
Series 97-1, Class A1
5.70%** 05/04/29 2,216 2,213,570
SMS Student Loan Trust,
Series 97, Class A
5.10%** 10/27/25 3,000 2,836,875
Structured Asset Securities Corp.,
Series 98-C2A, Class B
5.26%** 01/25/13 3,360 3,344,542
SWB Loan Backed Certificates,
Series 98-1, Class AV
5.50%** 09/15/24 3,494 3,468,124
Union Planters Mortgage Finance Corp.,
Series 98-1, Class A1
6.35% 01/25/28 2,522 2,516,791
Wilshire Funding Corp.,
Series 97, Class A
7.25% 08/25/27 2,300 2,285,332
Wilshire Funding Corp.,
Series 98-2, Class A3
7.00% 12/28/37 6,248 6,202,978
------------
TOTAL COMMERCIAL MORTGAGE
BACKED SECURITIES
(Cost $99,403,668) $ 98,949,540
------------
Par
Maturity (000) Value
-------- -------- -----------
PROJECT LOANS -- 4.2%
Federal Housing Authority, General
Motors Acceptance Corp. Grantor
Trust, Series 97-A, Class A
7.01% 01/01/21 $12,576 $ 12,178,390
------------
(Cost $12,692,409)
ASSET BACKED SECURITIES -- 43.7%
Arcadia Automobile Receivables Trust,
Series 98-B, Class A3
5.95%(DAGGER) 11/15/02 6,650 6,666,625
Arcadia Automobile Receivables Trust,
Series 98-C, Class A3
5.67% 08/15/06 4,100 4,068,609
Banc One Auto Grantor Trust,
Series 97-A, Class A
6.27% 11/20/03 426 431,093
Banc One Auto Grantor Trust,
Series 97-B, Class A
6.29% 07/20/04 2,484 2,501,021
Barnett Auto Trust, Series 97-A,
Class A3
6.03%(DAGGER) 11/15/01 7,795 7,954,113
Capital Auto Receivables Trust,
Series 99-1, Class A2
5.58% 06/15/02 4,400 4,407,562
Chase Credit Card Master Trust,
Series 97-5, Class A
6.19%(DAGGER) 08/15/05 6,075 6,146,978
Chase Manhattan Auto Owner Trust,
Series 98-C, Class A3
5.80%(DOUBLE DAGGER) 01/15/02 3,400 3,428,706
Chevy Chase Auto Receivables Trust,
Series 96-2, Class A
5.90% 07/15/03 2,450 2,457,865
Chevy Chase Auto Receivables Trust,
Series 97-3, Class A
6.20% 03/20/04 3,111 3,145,822
Dayton Hudson Credit Card Master Trust,
Series 97-1, Class A
6.25% 08/25/05 2,300 2,300,972
Fifth Third Auto Grantor Trust,
Series 96-B, Class A
6.45% 03/15/02 456 459,786
First Security Auto Grantor Trust,
Series 97-A, Class A
6.30% 08/15/03 3,148 3,178,113
Green Tree Financial Corp.,
Series 95-7, Class B1
7.35% 11/15/26 2,000 1,937,880
Green Tree Financial Corp.,
Series 95-A, Class A
7.25% 07/15/05 2,026 1,938,268
Green Tree Financial Corp.,
Series 96-10, Class A4
6.42% 11/15/28 3,300 3,324,750
Green Tree Home Improvement Loan
Trust, Series 98-D, Class HIA4
6.20% 06/15/29 3,275 3,288,421
Green Tree Recreational Equipment &
Consumer Trust, Series 97-C,
Class A1
6.49% 02/15/18 2,407 2,433,326
Honda Auto Receivables Grantor Trust,
Series 97-B, Class A
5.95% 05/15/03 1,141 1,139,676
See accompanying notes to financial statements.
14
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
-------- -------- -----------
ASSET BACKED SECURITIES (CONTINUED)
Missouri Higher Education Loan
Authority, Series 97, Class P
5.11%** 07/25/08 $ 3,684 $ 3,646,112
Mitsubishi Motors Credit of America
Automobile Trust, Series 95-1,
Class A
5.70% 11/15/00 2 1,723
Nissan Auto Receivables Grantor Trust,
Series 95-A, Class A
6.10% 08/15/01 212 212,789
NPC IX, Inc., Health Care Receivables,
Inc., Series 97-1, Class A
6.34% 07/01/00 2,500 2,504,688
Paragon Auto Receivables Owner Trust,
Series 99-A, Class A
5.95% 11/15/05 1,550 1,549,031
PBG Equipment Trust, Series 1A,
Class A
6.27% 01/20/12 1,505 1,503,107
PMC Capital Limited Partnership,
Series 98-1, Class A
6.75%** 04/01/21 4,177 4,177,241
PMC Capital Small Business
Administration Loan-Backed
Adjustable Rate Certificates,
Series 97-1, Class A
6.10%** 09/15/23 1,932 1,932,196
PMC Capital Small Business
Administration Loan-Backed
Adjustable Rate Certificates,
Series 97-1, Class B
6.45%** 09/15/23 1,028 1,022,827
Premier Auto Trust, Series 98-4,
Class A3
5.69%(DAGGER) 06/08/02 7,000 7,027,344
Ryder Vehicle Lease Trust,
Series 98-A, Class A
6.10% 09/15/08 5,178 5,158,109
Sears Credit Account Master Trust,
Series 95-5, Class A
6.05% 01/15/08 3,000 3,028,502
Sears Credit Account Master Trust,
Series 97-1, Class A
6.20% 07/15/07 4,030 4,011,079
Standard Credit Card Master Trust,
Series 95-3, Class A
7.85% 02/07/02 3,125 3,187,804
The Money Store Auto Grantor Trust,
Series 97-4, Class A2
6.35% 03/20/04 2,300 2,323,482
The Money Store Business Loan
Backed Securities, Series 97-1,
Class A
6.00%** 01/15/25 427 420,744
5.65% 04/15/28 3,511 3,476,304
The Money Store Business Loan
Backed Securities, Series 97-1,
Class B
6.52%** 01/15/25 2,136 2,103,720
The Money Store Home Equity Trust,
Series 98-A, Class AH3
6.18% 08/15/12 1,000 1,002,085
The Money Store Home Equity Trust,
Series 98-A, Class MH2
7.23% 05/15/24 2,000 1,973,119
Par
Maturity (000) Value
-------- -------- -----------
ASSET BACKED SECURITIES (CONTINUED)
The Money Store Residential Trust,
Series 97-1, Class A3
6.68% 08/15/12 $ 2,800 $ 2,827,125
The Money Store Residential Trust,
Series 97-II, Class A1
6.65% 11/15/07 1,403 1,409,817
The Money Store Residential Trust,
Series 97-II, Class A2
6.68% 07/15/10 800 816,220
World Omni Automobile Lease
Securitization Trust, Series 96-B,
Class A3
6.25%(DAGGER) 11/15/02 6,511 6,548,526
World Omni Automobile Lease
Securitization Trust, Series 97-A,
Class A4
6.90%** 06/25/03 4,072 4,122,938
------------
TOTAL ASSET BACKED SECURITIES
(Cost $127,090,894) 127,196,218
------------
CORPORATE BONDS -- 6.4%
FINANCE -- 3.3%
Donaldson, Lufkin & Jenrette, Inc.
5.88% 04/01/02 2,900 2,892,750
Goldman Sachs Escrow Corp.,
Series 144A
6.75% 08/01/01 3,000 2,994,599
Lehman Brothers Holdings, Inc.
6.75% 09/24/01 1,600 1,611,217
Salomon, Inc.
6.70% 07/05/00 2,100 2,127,720
------------
9,626,286
------------
INDUSTRIAL -- 0.9%
Time Warner, Inc.
4.90% 07/29/99 2,600 2,593,500
------------
REAL ESTATE -- 0.8%
Simon Property Group
6.75% 02/09/04 2,270 2,250,138
------------
TELECOMMUNICATIONS -- 1.0%
AT&T Capital Corp.
7.50% 11/15/00 2,700 2,770,113
------------
YANKEE -- 0.4%
Banco Internacional S.A.
6.03%** 07/16/01 1,094 1,091,805
Nordbanken
5.57%** 10/25/01 150 144,469
------------
1,236,274
------------
TOTAL CORPORATE BONDS
(Cost $18,370,998) 18,476,311
------------
TAXABLE MUNICIPAL BONDS -- 1.8%
New York City G.O., Series 96E
6.55% 08/01/00 200 203,250
New York St. Pwr. Auth. Rev.,
Series 98B
6.05%** 02/15/15 4,500 4,561,875
Philadelphia Auth. for Ind. Dev. Tax
Claim Coll. Rev., Series 97A
6.49% 06/15/04 542 538,529
------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $5,241,700) $ 5,303,654
------------
See accompanying notes to financial statements.
15
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
---------- ------ ------------
SHORT TERM INVESTMENTS -- 0.2%
Galileo Money Market Fund
(Cost $481,602) 482 481,602
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $364,805,453*) 125.2% 364,355,572
REVERSE REPURCHASE AGREEMENTS -- (28.5%)
Aubrey Lanston
(Agreement dated 03/30/99 to be
repurchased at $1,218,995. Collateralized by
$1,200,000 U.S. Treasury Notes 4.50% due
09/30/00. The value of the collateral is
$1,191,933.)
4.90% 04/05/99 1,218 (1,218,332)
Aubrey Lanston
(Agreement dated 03/29/99 to be
repurchased at $7,111,797. Collateralized by
$7,000,000 U.S. Treasury Notes 4.50% due
09/30/00. The value of the collateral is
$6,953,804.)
4.92% 04/05/99 7,105 (7,107,913)
Goldman Sachs & Co.
(Agreement dated 01/04/99 to be repurchased at
$2,534,190. Collateralized by $2,621,641
Residential Asset Securitization Trust 6.75%
due 06/25/28 The value of the collateral is
$2,678,117.)
5.25% 04/05/99 2,501 (2,532,732)
Goldman Sachs & Co.
(Agreement dated 01/04/99 to be repurchased at
$3,176,604. Collateralized by $3,289,680
Residential Asset Securitization Trust 6.75%
due 04/25/28 The value of the collateral is
$3,348,212.)
5.25% 04/05/99 3,135 (3,174,776)
Goldman Sachs & Co.
(Agreement dated 01/04/99 to be repurchased at
$1,992,597. Collateralized by $2,000,000 Federal
National Mortgage Association 6.29% due 10/04/00.
The value of the collateral is $2,062,684.)
5.25% 04/05/99 1,967 (1,991,450)
Goldman Sachs & Co.
(Agreement dated 01/04/99 to be
repurchased at $6,577,141
Collateralized by $6,796,449 PNC
Mortgage Securities Corp. 6.60% due
07/25/27. The value of the collateral
is $6,954,299.)
5.25% 04/05/99 6,491 (6,573,354)
Par
Maturity (000) Value
-------- -------- -----------
Lehman Brothers
(Agreement dated 03/22/99 to be repurchased at
$23,517,138. Collateralized by $6,650,000
Arcadia Automobile Receivables Trust 5.95% due
11/15/02, $7,000,000 Premier Auto Trust 5.69% due
06/08/02, $6,511,051 World Omni Automobile Lease
Securitization Trust 6.25% due 11/15/02 and
$7,794,590 Barnett Auto Trust 6.03% due 11/15/01.
The value of the collateral is $28,236,627.)
5.15% 05/21/99 $23,317 $(23,350,357)
Morgan Stanley & Co.
(Agreement dated 01/15/99 to be repurchased at
$3,217,148. Collateralized by $3,333,255
Residential Asset Securitization Trust 7.00% due
03/25/28. The value of the collateral is
$3,388,630.)
5.31% 04/15/99 3,175 (3,210,592)
Morgan Stanley & Co.
(Agreement dated 03/18/99 to be repurchased at
$4,800,820. Collateralized by $4,762,046
Government National Mortgage Association 8.25%
due 08/15/08 to 09/15/08. The value of the
collateral is $5,012,390.)
4.90% 04/19/99 4,780 (4,789,109)
Morgan Stanley & Co.
(Agreement dated 02/17/99 to be repurchased at
$3,372,829. Collateralized by $3,494,649 Federal
National Mortgage Association 6.00% due 01/01/04.
The value of the collateral is $3,535,795.)
4.91% 04/19/99 3,345 (3,364,617)
Morgan Stanley & Co.
(Agreement dated 02/17/99 to be repurchased at
$332,746. Collateralized by $553,318 Federal
Home Loan Mortgage Corporation 7.50% due 07/01/07.
The value of the collateral is $578,926.)
4.91% 04/19/99 330 (331,935)
Morgan Stanley & Co.
(Agreement dated 02/17/99 to be repurchased at
$759,271. Collateralized by $785,574 Federal
National Mortgage Association 6.725% due 02/26/01.
The value of the collateral is $798,333.)
5.00% 05/17/99 750 (754,479)
Morgan Stanley & Co.
(Agreement dated 02/17/99 to be repurchased at
$6,408,246. Collateralized by $6,650,814 Federal
National Mortgage Association 6.20% due 02/26/01.
The value of the collateral is $6,701,466.)
5.00% 05/17/99 6,330 (6,367,804)
See accompanying notes to financial statements.
16
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
LOW DURATION BOND PORTFOLIO (CONCLUDED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
-------- -------- -----------
REVERSE REPURCHASE AGREEMENTS (CONTINUED)
Salomon Brothers
(Agreement dated 03/04/99 to be
repurchased at $4,893,601. Collateralized by
$6,075,000 Chase Credit Card Master Trust 6.194%
due 08/15/05. The value of the collateral is
$6,174,289.)
5.22% 04/05/99 $4,871 $ (4,890,776)
Salomon Brothers
(Agreement dated 01/14/99 to be
repurchased at $387,740. Collateralized by
$391,056 Government National Mortgage
Association 6.50% due 04/15/24. The value of
the collateral is $395,516.)
4.95% 04/14/99 383 (387,055)
Salomon Brothers
(Agreement dated 01/14/99 to be
repurchased at $9,993,154. Collateralized by
$10,126,280 Federal National Mortgage Association
6.00 - 8.50% due 12/01/03 to 12/01/10. The value
of the collateral is $10,519,230.)
4.95% 04/14/99 9,871 (9,975,509)
Salomon Brothers
(Agreement dated 03/16/99 to be
repurchased at $2,863,202. Collateralized by
$1,925,348 Federal Home Loan Mortgage Corporation
7.00 - 8.00% due 05/01/00 to 10/01/17 and $942,037
Government National Mortgage Association 6.50 -
7.25% due 04/15/06 to 04/15/24. The value of the
collateral is $2,933,706.)
4.95% 05/17/99 2,839 (2,845,246)
------------
TOTAL REVERSE REPURCHASE
AGREEMENTS
(Cost $82,407,500) (82,866,036)
OTHER ASSETS IN EXCESS
OF LIABILITIES 3.3% 9,630,315
------ -----------
NET ASSETS (Applicable to 9,491,812 BlackRock shares,
17,472,710 Institutional shares, 1,728,837 Service
shares, 210,575 Investor A shares, 389,388 Investor
B shares and 53,185 Investor C shares outstanding)
100.0% $291,119,851
====== ============
Value
------------
NET ASSET VALUE AND REDEMPTION
PRICE PER BLACKROCK,
INSTITUTIONAL, SERVICE AND
INVESTOR A SHARE
($286,729,492 (DIVIDE) 28,903,934) $ 9.92
======
OFFERING PRICE PER BLACKROCK,
INSTITUTIONAL AND SERVICE SHARE $ 9.92
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($9.92 (DIVIDE) 0.970) $10.23
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($3,862,755 (DIVIDE) 389,388) $ 9.92
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($527,604 (DIVIDE) 53,185) $ 9.92
======
- -----------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 1,245,249
Gross unrealized depreciation (1,695,130)
-----------
$ (449,881)
===========
**Rates shown are the rates as of March 31, 1999.
(DAGGER) Partial principal in the amount of $89,902,788 has been pledged as
collateral for reverse repurchase agreements.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of of
$3,400,000 on 242 long U.S. Treasury Notes futures contracts and 281 281
short U.S. Treasury Notes futures contracts expiring June 1999. The value
of such contracts on March 31, 1999 was $82,084,781, thereby resulting in
an unrealized loss of $112,071.
See accompanying notes to financial statements.
17
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
--------- --------- ------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 32.1%
Federal Home Loan Bank
5.00% 09/20/00 $ 3,000 $ 2,994,073
Small Business Administration
Participation Certificates,
Series 96-20H, Class 1
7.25% 08/01/16 5,027 5,218,353
Small Business Administration
Participation Certificates,
Series 96-20J, Class 1
7.20% 10/01/16 4,321 4,478,707
Small Business Administration
Participation Certificates,
Series 98-20J, Class 1
5.50% 10/01/18 4,935 4,711,903
Small Business Investment Cos.
Pass-Through, Series 96-P10A,
Class 1
6.67% 02/10/06 4,992 5,066,045
U.S. Treasury Bonds
5.63%(DAGGER) 04/30/00 31,630 31,863,651
5.50% 05/31/00 29,575 29,768,048
8.75% 11/15/08 14,000 15,833,237
12.75% 11/15/10 20,525 28,645,679
14.00% 11/15/11 11,400 17,291,376
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $146,355,207) 145,871,072
------------
MORTGAGE PASS-THROUGHS -- 37.5%
Federal Home Loan Mortgage
Corporation
6.00% 06/30/99 900 902,328
9.00% 06/01/01 1 672
7.00% 05/01/02 109 111,102
8.00% 11/08-06/17 1,828 1,919,576
6.50% 07/18-09/28 2,827 1,820,459
Federal Home Loan Mortgage
Corporation 15 Year Balloon
6.50% 05/13/26 5,500 5,475,937
Federal National Mortgage Association
6.20% 02/26/01 1,166 1,166,790
6.73% 02/26/01 7,732 7,798,712
8.50% 06/01/03 65 67,898
6.50% 08/03-07/08 35,153 35,392,645
6.00% 11/03-02/29 19,182 18,828,070
6.13% 11/25/03 2,971 2,946,248
6.09%** 10/01/08 7,338 7,308,227
6.04% 02/25/09 4,500 4,443,720
8.50% 12/01/10 6,144 6,453,565
7.27% 01/25/11 6,205 6,455,001
5.50% 12/13-02/14 17,439 16,981,069
7.58%** 11/01/18 4,915 5,153,153
Federal National Mortgage Association
Multi-Family
6.50% 10/25/03 1,765 1,778,033
7.71%** 12/01/18 3,111 3,260,499
6.32%** 10/01/23 9,726 9,731,967
Government National Mortgage
Association
7.25% 04/15/06 7,840 8,023,294
8.25% 11/08-02/09 4,334 4,548,995
6.50% 10/23-12/23 5,653 5,630,017
9.75%** 06/15/24 11,093 11,400,800
7.00% 12/27-07/28 786 798,131
Par
Maturity (000) Value
--------- --------- ------------
MORTGAGE PASS-THROUGHS (CONTINUED)
MLCC Mortgage Investors, Inc.,
Series 95-C3, Class A1
6.76%** 12/26/25 $ 1,878 $ 1,891,959
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $170,061,681) 170,288,867
------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 2.1%
Federal National Mortgage Association
Grantor Trust, Series 96-T6, Class A
6.33% 10/25/00 5,815 5,857,643
Residential Asset Securitization Trust,
Series 98-A1, Class A1
7.00% 03/25/28 3,648 3,657,074
------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $9,470,344) 9,514,717
------------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 4.0%
Atherton Franchisee Loan Funding,
Series 98-A, Class A2
6.72% 08/15/19 5,150 5,088,844
General Motors Acceptance Corp.
Commercial Mortgage Securities, Inc.,
Series 97-C1, Class X (IO)
1.64%** 07/15/27 11,868 1,040,600
General Motors Acceptance Corp.
Commercial Mortgage Securities, Inc.,
Series 98-C2, Class A2
6.42% 05/15/31 1,400 1,404,465
Merit Securities Corp., Series 98-11,
Class 1A1
6.58% 07/28/22 3,062 3,062,863
Morgan Stanley Capital Investments,
Series 97-HF1, Class A1
6.86% 07/15/29 4,074 4,194,763
Residential Funding Mortgage
Securities, Series 96-HS2, Class A4
7.55% 09/25/12 2,022 2,024,606
Structured Asset Securities Corp.,
Series 98-C2, Class A
5.11%** 01/25/13 518 517,026
Union Planters Mortgage Finance Corp.,
Series 98-1, Class A1
6.35% 01/25/28 1,009 1,006,716
------------
TOTAL COMMERCIAL MORTGAGE
BACKED SECURITIES
(Cost $18,422,048) 18,339,883
------------
PROJECT LOANS -- 4.9%
Federal Housing Authority, General
Motors Acceptance Corp. Grantor
Trust, Series 97-A, Class A
7.01% 01/01/21 960 929,648
Federal Housing Authority, General
Motors Acceptance Corp. Grantor
Trust, Series 93-1
5.94% 04/14/12 2,151 2,089,074
Federal Housing Authority, Merrill Lynch,
Series 29, Class 1A1
7.43% 06/01/22 8,123 8,254,542
Federal Housing Authority, Merrill Lynch,
Series 97-23
7.43% 12/01/21 5,473 5,567,408
See accompanying notes to financial statements.
18
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
--------- --------- ------------
PROJECT LOANS (CONTINUED)
Federal Housing Authority, USGI,
Series 56
7.46% 01/01/23 $ 5,359 $ 5,459,088
------------
TOTAL PROJECT LOANS
(Cost $22,432,488) 22,299,760
------------
ASSET BACKED SECURITIES -- 23.2%
ACLC Business Loan Receivables Trust,
Series 98-1, Class A1
6.44% 07/15/13 9,114 9,051,767
Chevy Chase Auto Receivables Trust,
Series 96-1, Class A
6.60%(DOUBLE DAGGER) 12/15/02 580 586,579
Chevy Chase Auto Receivables Trust,
Series 96-2, Class A
5.90% 07/15/03 1,286 1,290,175
Chevy Chase Auto Receivables Trust,
Series 97-3, Class A
6.20% 03/20/04 2,700 2,730,237
Contimortgage Home Equity Loan Trust,
Series 95-1, Class A4
8.60% 04/15/10 2,721 2,744,315
Dayton Hudson Credit Card Master Trust,
Series 98-1, Class A
5.90% 05/25/06 2,200 2,207,562
DVI Receivables Corp., Series 98-I,
Class A2
6.04% 09/10/06 2,760 2,770,400
FMAC Loan Receivables Trust,
Series 97-C, Class A
6.75% 12/15/19 4,145 4,117,494
Green Tree Financial Corp.,
Series 97-4, Class A
7.36% 02/15/29 3,600 3,678,750
Green Tree Financial Corp., Series 97-5,
Class A7
7.13% 05/15/29 3,501 3,431,311
Green Tree Home Improvement Loan
Trust, Series 97-C, Class HEA2
6.38% 08/15/28 1,438 1,441,078
Health Care Receivables Securitization
Program, Series 98-1, Class A
6.22% 06/01/02 4,500 4,513,296
Honda Auto Receivables Grantor Trust,
Series 97-B, Class A
5.95% 05/15/03 2,190 2,188,179
Mitsubishi Motors Credit of America
Automobile Trust, Series 95-1, Class A
5.70% 11/15/00 17 17,227
National Premier Financial,
Series 97-1, Class A
6.82%** 07/01/01 2,300 2,304,312
New Century Home Equity Loan Trust,
Series 98-NC3, Class A1
6.00% 08/25/28 4,363 4,361,944
PMC Capital Small Business
Administration Loan-Backed
Certificates, Series 97-1, Class A
6.10%** 09/15/23 3,220 3,220,327
Par
Maturity (000) Value
--------- --------- ------------
ASSET BACKED SECURITIES (CONTINUED)
Sears Credit Account Master Trust,
Series 97-1, Class A
6.20% 07/15/07 $ 6,560 $ 6,529,200
Sears Credit Account Master Trust,
Series 98-1, Class A
5.80% 08/15/01 10,700 10,648,995
Sears Credit Account Master Trust,
Series 99-1, Class A
5.65% 03/15/09 1,850 1,829,187
Standard Credit Card Master Trust,
Series 94-4, Class A
8.25% 11/07/03 9,000 9,571,527
The Money Store Home Equity Trust,
Series 94-A, Class A2
5.25% 02/15/16 280 279,837
The Money Store Home Equity Trust,
Series 95-A, Class A8
8.13% 06/15/15 3,788 3,868,499
The Money Store Home Equity Trust,
Series 96-B, Class A13
6.90% 04/15/10 2,218 2,218,396
The Money Store Residential Trust,
Series 98-I, Class A4
6.52% 08/15/15 9,000 8,939,627
The Money Store Residential Trust,
Series 99-1, Class A
5.58% 07/15/25 3,300 3,299,485
Travelers Bank Credit Card Master Trust,
Series 98-1, Class A
6.00% 01/18/05 4,900 4,963,547
Union Acceptance Corp., Series 96-A,
Class A
5.40% 04/07/03 2,468 2,463,270
------------
TOTAL ASSET BACKED SECURITIES
(Cost $105,339,662) 105,266,523
------------
TAXABLE MUNICIPAL BONDS -- 1.4%
New Jersey Econ. Dev. Auth.
Pension Obligation Bond,
Series 97B
6.62% 02/15/02 1,527 1,292,224
Stanislaus Cnty., California Taxable
Pension Obligation Bond, Series 95
7.15% 08/15/13 4,830 5,035,275
------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $6,096,527) 6,327,499
------------
SHORT TERM INVESTMENTS -- 2.4%
Federal Home Loan Bank
Discount Notes
4.80% 04/01/99 3,685 3,685,000
Galileo Money Market Fund 7,078 7,077,805
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $10,762,805) 10,762,805
------------
See accompanying notes to financial statements.
19
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE GOVERNMENT BOND PORTFOLIO (CONCLUDED)
AS OF MARCH 31, 1999 (UNAUDITED) Value
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $488,940,762*) 107.6% $488,671,126
LIABILITIES IN EXCESS OF
OTHER ASSETS (7.6%) (34,647,216)
------ ------------
NET ASSETS (Applicable to 40,550,937
Institutional shares, 2,841,680 Service
shares, 1,293,958 Investor A shares,
47,917 Investor B shares and 32,929
Investor C shares outstanding) 100.0% $454,023,910
====== ============
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($453,203,965 (DIVIDE) 44,686,575) $10.14
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $10.14
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.14 (DIVIDE) 0.960) $10.56
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($485,977 (DIVIDE) 47,917) $10.14
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($333,968 (DIVIDE) 32,929) $10.14
======
- ------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 2,405,962
Gross unrealized depreciation (2,675,598)
-----------
$ (269,636)
===========
**Rates shown are the rates as of March 31, 1999.
(DAGGER) Partial principal in the amount of $31,630,000 has been pledged as
collateral for reverse repurchase agreements.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$2,570,124 on 54 long U.S. Treasury Bonds futures contracts, 78 long U.S.
Treasury Notes futures contracts and 45 short U.S. Treasury Notes futures
contracts expiring June 1999. The value of such contracts on March 31, 1999
was $20,363,438, thereby resulting in an unrealized loss of $19,672.
See accompanying notes to financial statements.
20
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
--------- --------- ------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS -- 16.2%
Small Business Administration
Participation Certificates,
Series 92-20H, Class 1
7.40% 08/01/12 $ 3,404 $ 3,508,888
Small Business Administration
Participation Certificates,
Series 96-20H, Class 1
7.25% 08/01/16 5,733 5,950,753
Small Business Investment Cos.
Pass-Through, Series 96-P10A,
Class 1
6.67% 02/10/06 3,349 3,398,341
Small Business Investment Cos.
Pass-Through, Series 97-P10D,
Class 1
6.51% 11/01/07 1,000 1,009,561
U.S. Treasury Bonds
5.50% 03/31/03 15,645 15,823,655
6.13% 08/15/07 4,265 4,467,892
8.75%(DAGGER) 11/15/08 19,150 21,657,606
12.75%(DAGGER) 11/15/10 18,200 25,400,797
14.00% 11/15/11 5,990 9,085,557
5.25% 11/15/28 465 434,576
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $90,970,045) 90,737,626
------------
MORTGAGE PASS-THROUGHS -- 18.8%
Federal Home Loan Mortgage
Corporation
6.23%** 07/01/01 6,607 6,592,748
9.00% 12/01-12/16 100 103,902
9.50% 01/01/05 190 201,364
8.50% 07/01/06 33 34,839
7.25% 12/01/06 489 499,269
8.00%(DAGGER) 07/08-09/18 5,787 1,126,065
5.13% 10/15/08 11,600 15,870,171
6.50%(DAGGER) 12/23-04/29 10,251 10,207,123
Federal National Mortgage Association
6.00%(DAGGER) 01/04-02/29 21,965 21,553,303
9.50% 03/01/05 10 10,356
8.00%(DAGGER) 03/01/08 2,677 2,763,831
6.04% 02/25/09 5,600 5,529,963
7.50%(DAGGER) 05/01/09 2,090 2,147,814
8.50% 12/01/10 5,877 6,172,975
7.27% 01/25/11 3,250 3,381,016
5.50%(DAGGER) 04/13-02/14 7,403 7,208,280
6.50% 02/01/25 3,970 3,955,088
Government National Mortgage
Association
7.25%(DAGGER) 04/15/06 1,399 1,431,989
8.25%(DAGGER) 08/08-11/08 6,793 7,130,780
9.50% 05/16-02/17 332 357,437
8.50% 02/17-03/17 1,886 1,992,650
6.50% 10/23-12/23 4,867 4,845,349
MLCC Mortgage Investors, Inc.,
Series 95-C1, Class C
7.52%** 05/25/15 2,022 2,022,842
Salomon Brothers Mortgage Securities
VII, Series 96-6B, Class A1
5.41%** 06/30/26 177 177,289
Salomon Brothers Mortgage Securities
VII, Series 96-6G, Class A1
5.31%** 09/30/27 61 60,842
------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $105,106,327) 105,377,285
------------
Par
Maturity (000) Value
--------- --------- ------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 5.4%
Amresco Securitized Net Interest
Margin Trust, Series 96-1, Class A
8.10% 04/26/26 $ 1,345 $ 1,283,117
Federal Home Loan Mortgage Corp.,
Series 96T-2, Class A
7.00% 01/25/21 3,997 4,009,627
Federal National Mortgage Association
Grantor Trust, Series 96-T6, Class A
6.33%(DAGGER) 10/25/00 3,610 3,636,436
Federal National Mortgage Association
Grantor Trust, Series 96-T6, Class C
6.20%(DAGGER) 02/26/01 4,723 4,725,498
Federal National Mortgage Association
Strip Notes, Series 279, Class 1 (PO)
6.92% 07/01/26 514 433,444
Federal National Mortgage Association,
Series 89-16, Class B (PO)
8.79% 03/25/19 1,367 1,134,715
General Motors Acceptance Corp.
Commercial Mortgage Securities, Inc.,
Series 97-C1, Class X (IO)
7.84%** 07/15/27 27,698 2,428,605
Residential Accredit Loans, Inc.,
Series 97-QS12, Class A7
7.25% 11/25/27 4,540 4,595,760
Residential Accredit Loans, Inc.,
Series 98-QS5, Class A1
6.75% 04/25/28 1,191 1,196,476
Residential Asset Securitization Trust,
Series 98-A1, Class A1
7.00% 03/25/28 3,648 3,657,074
Residential Asset Securitization Trust,
Series 98-A2, Class A1
6.75% 04/25/28 1,821 1,825,359
Residential Asset Securitization Trust,
Series 98-A5, Class A1
6.75% 02/25/28 266 267,348
Residential Asset Securitization Trust,
Series 98-A8, Class A2
6.75% 08/25/28 1,090 1,096,130
------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $30,337,331) 30,289,589
------------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 18.3%
Arcadia Automobile Receivables Trust,
Series 98-A, Class A3
5.90% 11/15/02 4,800 4,808,443
Asset Securitization Corp.,
Series 97-D5, Class A1A
6.50% 02/14/41 6,689 6,765,386
Atherton Franchisee Loan Funding,
Series 98-A, Class A2
6.72% 08/15/19 6,000 5,928,750
Bayview Financial Acquisition Trust,
Series 98-1, Class AI
7.01% 05/25/29 3,784 3,788,349
Bayview Financial Acquisition Trust,
Series 98-1, Class AII
5.24%** 05/25/29 2,844 2,814,571
Bosque Asset Corp., Series 97-1,
Class A1
7.66%** 06/05/02 1,293 1,294,854
See accompanying notes to financial statements.
21
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
--------- --------- ------------
COMMERCIAL MORTGAGE BACKED
SECURITIES (CONTINUED)
FMAC Loan Receivables Trust,
Series 98-CA, Class A1
5.99% 11/15/04 $ 3,823 $ 3,776,311
Franchise Loan Trust, Series 98-1,
Class A1
6.24% 07/15/04 3,559 3,530,361
General Motors Acceptance Corp.,
Series 97
7.43% 02/21/21 1,296 1,317,389
General Motors Acceptance Corp.
Commercial Mortgage Securities, Inc.,
Series 98-C2, Class A1
6.15% 11/15/07 1,123 1,126,261
ICI Funding Corp. Secured Assets Corp.,
Series 97-1, Class A10
7.75% 03/25/28 3,400 3,510,039
IFC Small Business Administration
Loan-Backed Adjustable Rate
Certificates, Series 97-1, Class A
5.75%** 01/15/24 3,014 2,989,816
J.P. Morgan Commercial Mortgage
Finance Corp., Series 97, Class D
5.92%** 07/25/29 4,000 3,865,000
Lehman Brothers Commercial Conduit
Mortgage Trust, Series 96-C2, Class A
7.43%** 10/25/26 8,316 8,676,953
Master Financial Asset Securitization
Trust, Series 98-2, Class A3
6.60% 11/20/18 6,000 5,988,750
Merit Securities Corp., Series 98-11,
Class 1A1
6.58% 07/28/22 2,908 2,908,939
Merit Securities Corp., Series 98-11,
Class 2A2
5.24%** 11/28/22 5,900 5,894,469
Morgan Stanley Capital Investments,
Series 97-HF1, Class A1
6.86% 07/15/29 4,606 4,741,906
Morgan Stanley Capital Investments,
Series 98-CF1, Class A1
6.33% 10/15/07 4,419 4,435,629
Norwest Integrated Structured Assets,
Inc., Series 98-1, Class 2A1
7.00% 05/25/28 3,829 3,848,349
NYC Mortgage Loan Trust, Series 96,
Class A1
6.75% 06/25/06 4,147 4,214,264
Republic Bank Home Loan Owner Trust,
Series 98-1, Class A1
6.61% 04/25/07 2,806 2,805,240
Resolution Trust Corp., Series 93-C3,
Class D
7.10% 12/25/24 607 606,379
Structured Asset Securities Corp.,
Series 98-C2A, Class B
5.26%** 01/25/13 3,619 3,601,814
The Money Store Small Business
Administration Loan Trust,
Series 99-1, Class A
5.55% 07/15/25 4,100 4,099,359
Par
Maturity (000) Value
--------- --------- ------------
COMMERCIAL MORTGAGE BACKED
SECURITIES (CONTINUED)
Union Planters Mortgage Finance Corp.,
Series 98-1, Class A1
6.35% 01/25/28 $ 4,801 $ 4,790,581
------------
TOTAL COMMERCIAL MORTGAGE
BACKED SECURITIES
(Cost $102,319,660) 102,128,162
------------
PROJECT LOANS -- 4.0%
Federal Housing Authority, Merrill Lynch,
Series 97-23
7.43% 12/01/21 17,291 17,588,315
Federal Housing Authority, USGI,
Series 56
7.46% 01/01/23 4,832 4,922,131
------------
TOTAL PROJECT LOANS
(Cost $22,495,149) 22,510,446
------------
ASSET BACKED SECURITIES -- 26.7%
ACLC Business Loan Receivables Trust,
Series 98-1, Class A1
6.44% 07/15/13 3,262 3,239,580
Associates Manufactured Housing
Pass-Through, Series 96-1, Class B1
8.00% 03/15/27 4,200 4,126,500
Barnett Auto Trust, Series 97-A, Class A3
6.03% 11/15/01 1,999 2,039,516
Brazo Student Loan Finance Corp.,
Series 95-B, Class A4
5.23%** 12/01/25 7,870 7,870,000
Chase Credit Card Master Trust,
Series 97-5, Class A
6.19%(DAGGER) 08/15/05 12,155 12,299,014
Chevy Chase Auto Receivables Trust,
Series 96-2, Class A
5.90% 07/15/03 1,693 1,698,458
Chevy Chase Auto Receivables Trust,
Series 97-1, Class A
6.50% 10/15/03 5,378 5,373,246
Chevy Chase Auto Receivables Trust,
Series 97-3, Class A
6.20% 03/20/04 1,748 1,767,553
Dayton Hudson Credit Card Master
Trust, Series 97-1, Class A
6.25% 08/25/05 4,000 4,001,691
DVI Receivables Corp., Series 98-1,
Class A2
6.04% 09/10/06 5,519 5,540,800
FMAC Loan Receivables Trust,
Series 97-C, Class A
6.75% 12/15/19 7,046 6,999,740
Green Tree Financial Corp., Series 94-B,
Class A
7.85% 07/15/04 2,799 2,772,381
Green Tree Financial Corp., Series 96-7,
Class A6
7.65% 10/15/27 3,300 3,456,938
Green Tree Financial Corp., Series 96-9,
Class B1
7.65% 01/15/28 4,000 3,811,802
Green Tree Financial Corp., Series 97-8,
Class B1
7.14%(DOUBLE DAGGER) 10/15/29 2,000 1,841,250
Green Tree Financial Corp., Series 98-1,
Class D
6.35% 06/15/29 5,800 5,851,435
See accompanying notes to financial statements.
22
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
--------- --------- ------------
ASSET BACKED SECURITIES (CONTINUED)
Green Tree Recreational Equipment &
Consumer Trust, Series 97-C,
Class A1
6.49% 02/15/18 $ 7,221 $ 7,299,979
Health Care Receivables Securitization
Program, Series 98-1, Class A
6.22% 06/01/02 4,400 4,413,000
Honda Auto Receivables Grantor Trust,
Series 97-B, Class A
5.95% 05/15/03 1,141 1,139,683
Mellon Bank Home Equity Loan Trust,
Series 96-1, Class B2
5.36%** 04/15/26 1,621 1,606,733
Mitsubishi Motors Credit of America
Automobile Trust, Series 95-1, Class A
5.70% 11/15/00 11 11,347
National Premier Financial, Series 97-1,
Class A
6.82%** 07/01/01 3,000 3,005,625
Nissan Auto Receivables Grantor Trust,
Series 95-A, Class A
6.10% 08/15/01 635 638,367
Nissan Auto Receivables Grantor Trust,
Series 98-A, Class A
5.45% 04/15/04 3,959 3,961,653
PBG Equipment Trust, Series 1A, Class A
6.27% 01/20/12 7,970 7,962,406
PMC Capital Limited Partnership,
Series 98-1, Class A
6.75%** 04/01/21 2,456 2,455,817
PMC Capital Small Business
Administration Loan-Backed
Adjustable Rate Certificates,
Series 97-1, Class A
6.10%** 09/15/23 5,284 5,284,397
Puget Power Conservation Grantor Trust,
Series 97-1, Class A
6.23% 07/11/02 3,248 3,260,609
Sears Credit Account Master Trust,
Series 95-5, Class A
6.05% 01/15/08 5,000 5,047,503
Sears Credit Account Master Trust,
Series 97-1, Class A
6.20% 07/15/07 6,055 6,026,571
Sears Credit Account Master Trust,
Series 99-1, Class A
5.65% 03/15/09 2,250 2,224,688
Standard Credit Card Master Trust,
Series 94-4, Class A
8.25% 11/07/03 1,650 1,754,780
The Money Store Home Equity Trust,
Series 94-A, Class A2
5.25% 02/15/16 671 671,609
The Money Store Home Equity Trust,
Series 95-A, Class A8
8.13% 06/15/15 3,179 3,246,428
The Money Store Home Equity Trust,
Series 95-B, Class A13
7.40% 01/15/16 5,574 5,778,630
Travelers Bank Credit Card Master Trust,
Series 98-1, Class A
6.00% 01/18/05 5,800 5,875,219
Union Acceptance Corp., Series 96-A,
Class A
5.40% 04/07/03 2,461 2,455,515
Par
Maturity (000) Value
--------- --------- ------------
ASSET BACKED SECURITIES (CONTINUED)
World Omni Automobile Lease
Securitization Trust, Series 96-A,
Class A2
6.55% 06/25/02 $ 2,707 $ 2,710,879
------------
TOTAL ASSET BACKED SECURITIES
(Cost $149,726,486) 149,521,342
------------
CORPORATE BONDS -- 29.3%
FINANCE -- 13.6%
Associates Corp.
5.75% 11/01/03 8,430 8,326,521
Bear Stearns Capital Trust Investments
7.00% 01/15/27 5,100 5,117,034
Capital One Bank
6.65% 03/15/04 2,360 2,368,850
Chrysler Financial Co.
5.25% 10/22/01 4,130 4,088,874
Crestar Financial Corp.
8.25% 07/15/02 3,200 3,408,000
Crown Cork & Seal, S.A.
6.75% 12/15/03 2,000 1,993,871
Den Danske Bank
6.38%** 06/15/08 5,600 5,390,000
Equitable Life Surplus
6.95% 12/01/05 1,750 1,793,893
ERAC USA Finance Co.
6.95% 03/01/04 1,375 1,395,489
Ford Motor Credit Corp.
6.50% 02/28/02 5,850 5,974,313
5.75% 02/23/04 2,810 2,788,925
Ikon Capital Resources
6.93% 06/07/99 4,000 3,998,313
J.P. Morgan & Co., Inc.
5.33% 02/15/12 3,700 3,277,090
KeyBank N.A.
5.80% 04/01/04 2,200 2,189,812
Lehman Brothers Holdings, Inc.
8.75% 05/15/02 3,940 4,174,919
Newcourt Credit Group
7.13% 12/17/03 5,035 5,217,238
Provident Companies, Inc.
7.41% 03/15/38 4,600 4,562,241
Raytheon Co.
6.30% 03/15/05 4,300 4,332,250
Salomon, Inc.
8.90% 02/15/00 1,100 1,133,143
Simon Property Group, L.P.
6.75% 02/09/04 4,380 4,341,675
-----------
75,872,451
-----------
INDUSTRIAL -- 9.4%
Anixter, Inc.
8.00%(DOUBLE DAGGER) 09/15/03 4,350 4,310,621
Coca-Cola Enterprises
5.71% 03/18/37 5,000 5,037,500
Federated Department Stores
6.13% 09/01/01 3,230 3,234,038
Litton Industries, Inc.
6.05% 04/15/03 4,100 4,064,125
Monsanto Co.
5.75% 12/01/05 5,110 5,014,188
RJR Nabisco, Inc.
6.70% 06/15/02 4,200 4,228,672
6.85% 06/15/05 300 302,353
See accompanying notes to financial statements.
23
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
---------- --------- -------------
CORPORATE BONDS (CONTINUED)
INDUSTRIAL (CONTINUED)
Safeway, Inc.
6.05% 11/15/03 $ 2,775 $ 2,755,670
Southdown, Inc.
10.00% 03/01/06 2,850 3,181,237
Texaco Capital, Inc.
9.00% 12/15/99 500 513,125
Time Warner, Inc.
4.90% 07/29/99 8,700 8,678,250
Tyco Intl. Group Corp.
5.88% 11/01/04 5,865 5,821,013
Williams Holdings of Delaware
6.13% 12/01/03 5,650 5,593,565
-----------
52,734,357
-----------
UTILITY -- 3.3%
Mobile Energy Services, L.L.C.
8.67% 01/01/17 856 214,067
National Rural Utilities Corp.
5.00% 10/01/02 4,620 4,519,677
Pennsylvania Power & Light Co.
9.25% 10/01/19 4,050 4,115,813
Sprint Capital Corp.
6.13% 11/15/08 3,010 2,961,088
US West Capital Funding, Inc.
6.25% 07/15/05 6,440 6,486,999
-----------
18,297,644
-----------
YANKEE -- 3.0%
Household Netherlands B.V.
6.20% 12/01/03 4,900 4,924,419
Nordbanken
5.57%** 10/25/01 4,950 4,767,469
Swedbank
7.50%** 09/29/49 2,200 2,165,878
Yorkshire Power Finance
6.15% 02/25/03 5,100 5,066,113
-----------
16,923,879
-----------
TOTAL CORPORATE BONDS
(Cost $165,523,527) 163,828,331
-----------
TAXABLE MUNICIPAL BONDS -- 3.5%
New Jersey Econ. Dev. Auth.
St. Pension Fdg. Rev., Series 97B
6.94% 02/15/05 2,900 2,040,875
New York City G.O., Series 96E
6.55% 08/01/00 4,600 4,674,750
New York St. Pwr. Auth. Rev. &
Gen. Purp. Rev., Series 98B
6.11%** 05/17/99 5,600 5,670,000
Philadelphia Auth. Ind. Dev. Tax Claim
Coll. Rev., Series 97A
6.49% 06/15/04 6,908 6,866,217
-----------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $19,052,671) 19,251,842
-----------
SHORT TERM INVESTMENTS -- 0.2%
Federal Home Loan Bank
Discount Notes
4.80% 04/01/99 445 445,000
Galileo Money Market Fund 386 386,078
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $831,078) 831,078
-----------
Par
Maturity (000) Value
---------- --------- ------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $686,362,274*) 122.4% $684,475,701
REVERSE REPURCHASE AGREEMENTS -- (18.8%)
Aubrey Lanston
(Agreement dated 03/30/99 to be
repurchased at $7,687,087. Collateralized by
$6,600,000 U.S. Treasury Bonds 8.75% due
11/15/08. The value of the collateral is
$7,682,797.)
4.95% 04/05/99 7,681 (7,682,862)
Aubrey Lanston
(Agreement dated 03/23/99 to be
repurchased at $10,037,819. Collateralized b
$8,600,000 U.S. Treasury Bonds 8.75% due
11/15/08. The value of the collateral is
$10,010,917.)
4.83% 04/06/99 10,019 (10,031,098)
Aubrey Lanston
(Agreement dated 03/31/99 to be
repurchased at $3,141,339. Collateralized by
$2,700,000 U.S. Treasury Bonds 8.75% due
11/15/08. The value of the collateral is
$3,142,962.)
4.95% 04/06/99 3,139 (3,139,182)
Aubrey Lanston
(Agreement dated 03/29/99 to be
repurchased at $15,887,136. Collateralized by
$11,000,000 U.S. Treasury Notes 12.75% due
11/15/10. The value of the collateral is
$15,882,911.)
4.95% 04/07/99 15,868 (15,874,045)
Lehman Brothers
(Agreement dated 03/18/99 to be
repurchased at $6,535,999. Collateralized
by $6,866,136 Federal National Mortgage
Association 5.50% due 12/01/13.
The value of the collateral is $6,717,369.)
4.84% 04/19/99 6,508 (6,520,249)
Morgan Stanley & Co.
(Agreement dated 01/04/99 to be repurchased
at $8,661,396. Collateralized by $8,644,140
Government National Mortgage Association 7.25-
8.25% due 04/15/06 to 11/15/08. The value of
the collateral is $9,097,398.)
4.92% 04/05/99 8,555 (8,663,734)
Morgan Stanley & Co.
(Agreement dated 03/25/99 to be repurchased
at $8,013,041. Collateralized by $8,332,802
Federal National Mortgage Association Grantor
Trust 6.20-6.325% due 10/25/00 to 02/26/01.
The value of the collateral is $8,405,363.)
4.91% 05/24/99 7,948 (7,955,588)
Paine Webber
(Agreement dated 03/15/99 to be
repurchased at $8,963,824. Collateralized
by $2,241,097 Federal Home Loan
Mortgage Corp. 8.00% due 09/01/09
and $6,803,797 Federal National
Mortgage Association 6.00-7.50% due
01/01/04 to 05/01/09. The value of
the collateral is $9,225,262.)
4.95% 04/14/99 8,927 (8,947,867)
See accompanying notes to financial statements.
24
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
INTERMEDIATE BOND PORTFOLIO (CONCLUDED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
---------- --------- ------------
REVERSE REPURCHASE AGREEMENTS (CONTINUED)
Salomon Brothers
(Agreement dated 03/04/99 to
be repurchased at $9,791,221. Collateralized
by $12,155,000 Chase Credit Card Master Trust
6.194% due 08/15/05. The value of the
collateral is $12,333,420.)
5.22% 04/05/99 $ 9,746 $ (9,785,569)
Salomon Brothers
(Agreement dated 01/14/99 to be
repurchased at $2,347,698.
Collateralized by $2,321,443 Federal
Home Loan Mortgage Corp. 8.00% due
07/01/08 to 09/01/18. The value of the
collateral is $2,453,718.)
4.95% 04/14/99 2,319 (2,345,465)
Salomon Brothers
(Agreement dated 03/15/99 to
be repurchased at $9,104,401. Collateralized
by $9,575,062 Federal National Mortgage
Association 6.00% due 01/01/29 to 2/01/29.
The value of the collateral is $9,361,672.)
4.95% 04/14/99 9,067 (9,088,194)
Salomon Brothers
(Agreement dated 03/18/99 to
be repurchased at $12,743,602. Collateralized
by $12,524,698 Federal National Mortgage
Association 6.50-8.50% due 03/01/08 to 02/01/25.
The value of the collateral is $12,972,878.)
4.93% 04/19/99 12,688 (12,712,326)
Salomon Brothers
(Agreement dated 03/04/99 to be
repurchasd at $2,408,321.
Collateralized by $1,091,450 Federal
Home Loan Mortgage Corp. 6.50%
due 09/01/28 and $1,390,208 Federal
National Mortgage Association 6.00%
due 02/01/04. The value of the
collateral is $2,497,379.)
4.93% 06/02/99 2,379 (2,388,122)
-----------
TOTAL REVERSE REPURCHASE
AGREEMENTS
(Cost $104,843,000) (105,134,301)
LIABILITIES IN EXCESS OF
OTHER ASSETS (3.6%) (20,063,388)
------ ------------
NET ASSETS (Applicable to 4,554,973 BlackRock
shares, 51,983,878 Institutional shares,
2,904,435 Service shares, 256,927 Investor A
shares, 76,288 Investor B shares and 10,475
Investor C shares outstanding) 100.0% $559,278,012
====== ============
Value
------------
NET ASSET VALUE AND REDEMPTION
PRICE PER BLACKROCK,
INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($558,466,483 (DIVIDE) 59,700,213) $ 9.35
======
OFFERING PRICE PER BLACKROCK,
INSTITUTIONAL AND SERVICE
SHARE $ 9.35
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($9.35 (DIVIDE) 0.960) $ 9.74
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($713,543 (DIVIDE) 76,288) $ 9.35
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($97,986 (DIVIDE) 10,475) $ 9.35
======
- -----------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 3,302,264
Gross unrealized depreciation (5,188,837)
-----------
$(1,886,573)
===========
** Rates shown are the rates as of March 31, 1999.
(DAGGER) Partial principal in the amount of $100,845,833 has been pledged as
collateral for reverse repurchase agreements.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$2,700,000 on 11 long U.S.Treasury Bonds futures contracts and 48 short
U.S. Treasury Notes futures contracts expiring June 1999. The value of such
contracts on March 31, 1999 was $6,831,188, thereby resulting in an
unrealized gain of $3,474.
See accompanying notes to financial statements.
25
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND PORTFOLIO
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
---------- --------- -----------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 14.6%
Overseas Private Investment Co.
5.46%** 02/15/06 $ 296 $ 285,888
5.79%** 02/15/06 265 258,395
6.46%** 12/06/06 187 185,928
5.92%** 12/16/06 1,932 1,895,165
6.27%** 12/16/06 2,279 2,283,067
6.38%** 12/16/06 1,772 1,777,915
6.53%** 12/16/06 461 460,237
5.88%** 05/29/12 351 343,924
6.27%** 05/29/12 235 234,626
6.84%** 05/29/12 482 489,488
Small Business Administration
Participation Certificates,
Series 92-20H, Class 1
7.40% 08/01/12 204 210,533
Small Business Administration
Participation Certificates,
Series 96-20J, Class 1
7.20% 10/01/16 55 57,175
Small Business Administration
Participation Certificates,
Series 97-20B, Class 1
7.10% 02/01/17 2,398 2,476,411
Small Business Investment Cos.
Pass-Through, Series 97-P10C,
Class 1
6.85% 08/01/07 5,500 5,623,027
Small Business Investment Cos.
Pass-Through, Series 97-P10D,
Class 1
6.51% 11/10/07 400 403,824
Small Business Investment Cos.
Pass-Through, Series 98-10A,
Class 1
6.12% 02/01/08 250 247,680
Student Loan Marketing Association,
Series 97-3, Class A2
5.39%** 10/25/10 3,500 3,448,730
U.S. Treasury Bonds
8.75% 11/15/08 8,415 9,516,906
12.75% 11/15/10 6,400 8,932,148
14.00% 11/15/11 750 1,137,591
8.50% 02/15/20 19,465 25,464,278
6.38% 08/15/27 9,695 10,380,747
5.25% 11/15/28 14,545 13,692,215
U.S. Treasury Bonds (CPI)
3.63%(DAGGER) 04/15/28 21,010 20,387,236
U.S. Treasury Notes
4.50% 09/30/00 2,115 2,100,522
5.50% 05/31/03 17,900 18,104,062
5.75% 08/15/03 2,950 3,012,571
7.25% 05/15/04 2,015 2,196,594
U.S. Treasury Notes (CPI)
3.63% 01/15/08 17,000 16,876,893
3.88% 01/15/09 6,725 6,711,506
-----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $161,131,209) 159,195,282
-----------
Par
Maturity (000) Value
---------- --------- ------------
MORTGAGE PASS-THROUGHS -- 27.8%
Federal Home Loan Mortgage
Corporation
7.50% 09/05-10/26 $ 3,302 $ 3,402,273
5.13% 10/15/08 7,350 6,959,297
6.00% 02/12-03/14 1,424 1,414,786
5.50% 12/12-01/14 26,762 26,093,096
8.00% 11/01/15 85 88,579
7.00% 03/01/25 616 625,814
6.50% 02/13/26 11,500 11,449,687
Federal National Mortgage Association
6.10% 02/04/09 8,400 8,217,048
8.00% 10/09-05/22 117 121,863
6.50%(DAGGER) 09/12-09/28 52,977 53,085,618
6.00% 03/13-01/29 82,472 80,311,606
5.50%(DAGGER) 12/13-01/14 79,841 77,744,809
7.00%** 02/24-10/25 4,635 4,699,918
Government National Mortgage
Association
8.50% 01/10-04/17 217 229,229
7.00% 12/22-09/28 6,943 7,051,111
6.50% 12/23-08/24 12,994 12,936,828
9.00% 10/15/24 471 489,634
7.50% 06/15/27 211 217,835
9.17% 03/15/37 3,036 3,400,789
MLCC Mortgage Investors, Inc.,
Series 92-D, Class A
7.75% 07/15/17 47 47,366
MLCC Mortgage Investors, Inc.,
Series 95-C3, Class A1
6.76%** 12/26/25 218 219,272
MLCC Mortgage Investors, Inc.,
Series 96-C1, Class A3
7.42% 04/25/28 3,000 3,132,903
MLCC Mortgage Investors, Inc.,
Series 96-C2, Class E
6.96% 11/21/28 1,915 1,682,708
-----------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $306,131,239) 303,622,069
-----------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 2.8%
Chase Commercial Mortgage Securities
Corp., Series 97-1, Class X (IO)
8.51%** 04/19/15 33,189 2,429,069
Credit Suisse First Boston Mortgage
Corp., Series 97-C1, Class AX (IO)
8.60%** 04/20/22 54,523 5,301,309
Federal Home Loan Mortgage Corp.,
Series 65, Class A (PO)
4.09%** 03/15/24 955 520,062
Federal National Mortgage Association,
Series 96-54, Class A (PO)
7.57%** 04/25/21 1,270 1,154,048
Federal National Mortgage Association
Strip Notes, Series 279, Class 1 (PO)
6.99% 07/01/26 323 271,791
Residential Accredit Loans, Inc.,
Series 97-QS7, Class A1
7.50% 07/25/27 2,046 2,052,123
Residential Accredit Loans, Inc.,
Series 97-QS10, Class A1
7.25% 10/25/27 5,043 5,055,437
Residential Asset Securitization Trust,
Series 97-A7, Class A1
7.50% 09/25/27 2,204 2,227,339
See accompanying notes to financial statements.
26
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
---------- --------- ------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS (CONTINUED)
Residential Asset Securitization Trust,
Series 98-A12, Class A5
6.75% 11/25/28 $ 7,866 $ 7,833,403
Salomon Brothers Mortgage Securities
VI, Series 87-1 (IO)
7.00% 02/17/17 2,082 563,961
Salomon Brothers Mortgage Securities
VI, Series 87-1 (PO)
7.00% 02/17/17 2,173 1,733,702
Salomon Brothers Mortgage Securities
VI, Series 87-2 (IO)
6.00% 03/06/17 1,356 370,797
Salomon Brothers Mortgage Securities
VI, Series 87-2 (PO)
6.00% 03/06/17 1,299 1,033,914
Salomon Brothers Mortgage Securities,
Series 87-3, Class A (PO)
5.00% 10/23/17 569 470,029
Salomon Brothers Mortgage Securities,
Series 87-3, Class B (IO)
5.00% 10/23/17 420 114,488
-----------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $31,443,243) 31,131,472
-----------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 7.0%
Amresco Residential Securitized Net
Interest Margin Trust, Series 96-1,
Class A
8.10% 04/26/26 841 801,940
Commercial Mortgage Asset Trust.,
Series 99-C1, Class A3
6.25% 09/17/10 3,230 3,250,187
Credit Suisse First Boston Mortgage
Securities Corp., Series 97-C2,
Class AX (IO)
8.32% 11/17/22 34,871 2,440,256
Donaldson, Lufkin & Jenrette, Inc.,
Mortgage Acceptance Corp.,
Series 97-CF1, Class A
7.60% 04/15/07 2,000 2,109,360
Empire Funding Home Loan Owner
Trust, Series 98-2, Class A4
6.53% 03/25/19 7,000 6,973,750
Federal National Mortgage Association,
Series 97-44, Class L (PO)
4.35%** 02/25/24 990 634,837
First Boston Mortgage Securities Corp.,
Series 93-M1, Class A
6.75% 09/25/06 115 115,735
First Union-Lehman Brothers
Commercial Mortgage 1,
Series 97-C1, Class A3
7.38% 04/18/29 4,700 4,981,991
Federal National Mortgage Association,
Series 99-17, Class JH (PO)
4.00%** 12/25/23 695 370,522
5.00% 04/25/24 865 474,398
General Electric Capital Mortgage
Services, Series 97-HE1, Class A4
7.78% 03/25/27 1,666 1,699,320
Par
Maturity (000) Value
---------- --------- ------------
COMMERCIAL MORTGAGE BACKED
SECURITIES (CONTINUED)
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 97-C1, Class X (IO)
8.29%** 07/15/27 $46,689 $ 4,093,814
General Motors Acceptance Corp.
Commercial Mortgage Securities,
Inc., Series 98-C2, Class A2
6.42% 08/15/08 3,775 3,787,041
Goldman Sachs Mortgage Securities
Corp. II, Series 96-PL, Class A2
7.41% 02/15/27 2,891 3,012,983
Impac Secured Assets Common Owner
Trust, Series 98-1, Class A1
6.71% 01/25/07 1,067 1,066,718
J.P. Morgan Commercial Mortgage
Finance Corp., Series 96-C3,
Class A1
7.33% 04/25/28 1,776 1,814,784
Merit Securities Corp., Series 98-11,
Class 1A1
6.58% 07/28/22 1,144 1,144,183
Mid-State Trust, Series 1, Class A1
7.34% 07/01/35 2,525 2,571,279
Mid-State Trust, Series 6, Class A4
7.79% 07/01/35 968 919,790
Midland Royalty Acceptance Corp.,
Series 96-C, Class A
7.23% 01/25/29 4,050 4,222,125
Morgan Stanley Capital Investments,
Series 98-HF2, Class A2
6.48% 11/15/30 6,300 6,342,911
Mortgage Capital Funding, Inc.,
Series 98-MC2, Class A1
6.33% 10/18/07 5,031 5,077,538
NPF VI, Inc., Health Care Receivables
Securitization Program, Series 98-1,
Class A
6.22% 06/01/02 6,800 6,820,091
PNC Mortgage Securities Corp.,
Series 97-6, Class A1
6.49% 10/25/26 8,293 8,339,190
Structured Asset Securitization Corp.,
Series 96-CFL, Class X1 (IO)
5.05%** 02/25/28 19,749 1,018,293
Structured Asset Securitization Corp.,
Series 98-C2, Class A
5.11%** 12/25/00 2,666 2,658,993
-----------
TOTAL COMMERCIAL MORTGAGE
BACKED SECURITIES
(Cost $76,620,828) 76,742,029
-----------
PROJECT LOANS -- 2.3%
Federal Housing Authority, East Point
Chelsea, Construction Loan Collateral
10.25% 05/01/33 98 111,056
Federal Housing Authority, Huntoon
Paige, Construction Loan Collateral
7.32% 10/01/24 5,487 5,546,940
Federal Housing Authority, Merrill Lynch,
Series 97-23
7.43% 12/01/21 408 414,819
See accompanying notes to financial statements.
27
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
---------- --------- ------------
PROJECT LOANS (CONTINUED)
Federal Housing Authority, University
Park Apartments FHA/FH
7.88% 10/01/37 $ 7,669 $ 8,218,606
Federal Housing Authority, Village Green,
Construction Loan Collateral
8.25% 09/01/34 5,217 5,567,252
Reilly Mortgage Securities, Series 97-A
6.90% 11/18/11 5,407 5,379,519
-----------
TOTAL PROJECT LOANS
(Cost $24,753,565) 25,238,192
-----------
ASSET BACKED SECURITIES -- 13.3%
Arcadia Automobile Receivables Trust,
Series 98-B, Class A3
5.95% 11/15/02 17,500 17,543,750
Associates Manufactured Housing
Pass-Through, Series 96-1, Class B1
8.00% 03/15/27 2,815 2,765,737
Banc One Auto Grantor Trust,
Series 97-B, Class A
6.29% 07/20/04 6,506 6,550,293
Brazos Student Loan Finance Corp.,
Series 98-A, Class A2
5.47%** 06/01/23 8,600 8,390,375
Chase Credit Card Master Trust,
Series 97-5, Class A
6.19% 08/15/05 17,220 17,424,025
Chevy Chase Auto Receivables Trust,
Series 97-2, Class A
6.35% 01/15/04 3,779 3,846,023
Chevy Chase Auto Receivables Trust,
Series 97-3, Class A
6.20% 03/20/04 1,311 1,325,664
Citibank Credit Card Master Trust I,
Series 97-6, Class A
6.14% 08/15/06 3,000 2,173,398
CIT Group Securitization Corp.,
Series 95-2, Class B
7.65% 05/15/26 300 260,250
Copelco Capital Funding Corp.,
Series 97-A, Class A3
6.27% 04/20/05 1,851 1,852,005
FMAC Loan Receivables Trust,
Series 97-B, Class A
6.85% 09/15/19 5,601 5,591,536
Ford Credit Auto Owner Trust,
Series 98-C, Class A5
5.86% 10/15/02 4,700 4,733,047
Green Tree Financial Corp.,
Series 93-3, Class B
6.85% 10/15/18 3,622 3,378,029
Green Tree Financial Corp.,
Series 94-B, Class A
7.85% 07/15/04 130 128,948
Green Tree Financial Corp.,
Series 95-7, Class B1
7.35% 11/15/26 600 581,364
Green Tree Financial Corp.,
Series 95-A, Class A
7.25% 07/15/05 5,679 5,432,250
Green Tree Financial Corp.,
Series 96-2, Class B2
7.90% 04/15/27 3,650 3,038,691
Par
Maturity (000) Value
---------- --------- ------------
ASSET BACKED SECURITIES (CONTINUED)
Green Tree Financial Corp.,
Series 97-2, Class B
7.56% 06/15/28 $ 5,000 $ 4,803,536
Green Tree Financial Corp.,
Series 97-3, Class A7
7.64% 07/15/28 4,200 4,325,462
Green Tree Financial Corp.,
Series 97-3, Class B2
8.03%(DOUBLE DAGGER) 07/15/28 2,400 1,980,855
Green Tree Financial Corp.,
Series 97-4, Class A
7.36% 02/15/29 5,000 5,109,375
Green Tree Home Improvement Loan
Trust, Series 94-D, Class M
9.05% 01/15/15 700 724,891
Honda Auto Receivables Grantor Trust,
Series 97-B, Class A
5.95% 05/15/03 2,555 2,552,879
Mellon Bank Home Equity Loan Trust,
Series 96-1, Class B2
5.36%** 04/15/26 2,408 2,387,145
Nissan Auto Receivables Grantor Trust,
Series 95-A, Class A
6.10% 08/15/01 549 551,863
Pegasus Aviation Lease, Series 99-1
6.00% 03/25/29 2,090 2,066,487
Puget Power Conservation Grantor
Trust, Series 97-1, Class A
6.23% 07/11/02 3,054 3,064,972
Sears Credit Account Master Trust,
Series 95-5, Class A
6.05% 01/15/08 10,600 10,700,705
Sears Credit Account Master Trust,
Series 97-1, Class A
6.20% 07/15/07 10,500 10,450,701
Sears Credit Account Master Trust,
Series 98-1, Class A
5.80% 08/15/05 5,400 5,374,259
Sears Credit Account Master Trust,
Series 99-1, Class A
5.65% 03/15/09 3,750 3,707,812
The Money Store Home Equity Trust,
Series 94-A, Class A2
5.25% 02/15/16 783 783,544
The Money Store Home Equity Trust,
Series 95-A, Class A8
8.13% 06/15/15 1,180 1,205,261
World Omni Automobile Lease
Securitization Trust, Series 96-B,
Class A3
6.25% 11/15/02 580 583,607
-----------
TOTAL ASSET BACKED SECURITIES
(Cost $147,062,089) 145,388,739
-----------
CORPORATE BONDS -- 20.2%
FINANCE -- 11.2%
American General Institutional Capital
8.13% 03/15/46 700 774,355
Amvescap PLC
6.38% 05/15/03 4,000 3,973,814
Associates Corp.
5.50% 02/15/04 9,000 8,865,000
AT&T Corp.
6.50% 03/15/29 6,300 6,170,487
See accompanying notes to financial statements.
28
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
---------- --------- ------------
CORPORATE BONDS (CONTINUED)
FINANCE (CONTINUED)
AT&T Capital Corp.
6.25% 05/15/01 $ 4,000 $ 4,035,000
BGB Finance
6.63% 12/30/99 5,500 5,540,797
Capital One Bank
6.65% 03/15/04 5,000 5,018,750
Crestar Financial Corp.
8.25% 07/15/02 400 426,000
Equitable Cos., Inc.
7.00% 04/01/28 2,565 2,565,126
Fairfax Financial Hldgs. Ltd.
7.38% 03/15/06 7,440 7,430,515
Florida Windstorm Underwritng Association
7.13% 02/25/19 3,255 3,274,970
Ford Motor Credit Corp.
7.75% 10/01/99 1,000 1,012,881
8.00% 06/15/02 1,000 1,063,750
5.75% 02/23/04 12,385 12,292,113
Fremont General Corp.
7.70% 03/17/04 3,885 3,907,106
General Electric Capital Corp.
6.90% 09/15/15 2,370 2,473,688
Goldman Sachs Escrow Corp.
7.00% 08/01/03 860 857,535
HSBC America Capital II
8.38% 05/15/27 1,800 1,831,095
J.P. Morgan & Co., Inc.
5.75% 02/25/04 4,000 3,959,828
5.54%** 02/15/12 100 88,570
Lehman Brothers Holdings, Inc.
6.75% 09/24/01 5,200 5,236,455
6.20% 01/15/02 6,000 5,957,470
6.63% 04/01/04 2,250 2,242,640
MidAmerican Funding L.L.C.
5.85% 03/01/01 4,845 4,851,510
Merrill Lynch & Co.
5.75% 11/04/02 2,445 2,430,447
Newcourt Credit Group
6.88% 02/16/05 2,500 2,553,998
Safeco Capital Trust I
8.07% 07/15/37 6,289 6,438,927
Simon Property Group L.P.
6.63% 06/15/03 4,200 4,176,985
TPSA Finance B.V.
7.75% 12/10/08 3,000 2,958,750
Wachovia Corp.
5.63% 12/15/08 4,910 4,659,854
Yorkshire Power Finance
6.50% 02/25/08 5,435 5,380,650
-----------
122,449,066
-----------
INDUSTRIAL -- 4.4%
Coca-Cola Enterprises, Inc.
5.71% 03/18/37 7,485 7,541,138
Corning, Inc.
6.30% 03/01/09 3,000 3,016,435
Hyder PLC
7.38% 12/15/28 4,125 4,058,530
Jones Apparel Group
6.25% 10/01/01 7,050 6,970,688
Pioneer Hi-Bred Int'l., Inc.
5.75% 01/15/09 920 896,807
RJR Nabisco, Inc.
7.55% 06/15/15 1,660 1,711,542
Par
Maturity (000) Value
---------- --------- ------------
CORPORATE BONDS (CONTINUED)
INDUSTRIAL (CONTINUED)
Saks, Inc.
7.25% 12/01/04 $ 1,645 $ 1,668,601
Time Warner, Inc.
4.90% 07/29/9 6,500 6,483,750
Tyco Intl. Group Corp.
6.25% 06/15/03 6,340 6,413,856
USA Waste Management, Inc.
6.13% 07/15/11 5,350 5,383,438
Williams Holdings of Delaware
6.13% 12/01/03 3,450 3,415,540
-----------
47,560,325
-----------
TELECOMMUNICATIONS -- 1.1%
Chesapeake & Potomac Telephone
of Maryland
8.30% 08/01/31 3,375 3,981,617
Comcast Cable Communications
8.38% 05/01/07 1,455 1,644,150
Frontier Corp.
6.00% 10/15/13 2,235 2,187,506
Worldcom, Inc.
7.75% 04/01/27 3,696 4,204,200
-----------
12,017,473
-----------
TRANSPORTATION -- 0.4%
CSX Corp.
5.85% 12/01/03 1,460 1,436,046
Federal Express
7.11% 01/02/14 3,262 3,245,867
-----------
4,681,913
-----------
UTILITY -- 1.7%
Avon Energy Partners Holding
7.05% 12/11/07 2,215 2,288,004
6.46% 03/04/08 5,000 4,954,771
National Rural Utilities Corp.
6.20% 02/01/08 4,700 4,758,750
Pennsylvania Power & Light Co.
9.25% 10/01/19 200 203,250
Reliant Energy, Inc.
6.50% 02/01/08 4,910 4,903,863
Trans-Canada Pipelines
6.49% 01/21/09 2,029 2,057,784
-----------
19,166,422
-----------
YANKEE -- 1.4%
Asian Development Bank
5.82% 06/16/28 4,485 4,398,762
Den Norske Stats Oljesel
7.38% 05/01/16 950 1,002,647
Empresa Electrica Pehuenche
7.30% 05/01/03 4,985 4,792,753
Poland Global
3.00% 10/27/24 2,880 1,859,400
Swedbank
7.50%** 09/29/49 2,800 2,756,572
-----------
14,810,134
-----------
TOTAL CORPORATE BONDS
(Cost $221,604,993) 220,685,333
-----------
See accompanying notes to financial statements.
29
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
CORE BOND PORTFOLIO (CONCLUDED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
---------- --------- --------------
TAXABLE MUNICIPAL BONDS -- 1.7%
New Jersey Econ. Dev. Auth. St.
Pension Fdg., Series B
6.80% 02/15/05 $ 200 $ 140,750
7.09% 02/15/11 4,185 1,951,256
7.56% 02/15/16 10,100 3,320,375
7.59% 02/15/17 3,575 1,099,313
7.21% 02/15/18 5,500 1,581,250
7.62% 02/15/20 6,265 1,581,913
7.63% 02/21-02/23 7,810 1,753,076
New York St. Pwr. Auth. Rev. and
Gen. Purp. Taxable, Series 98D
6.26% 02/15/03 7,100 7,197,625
--------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $17,078,108) 18,625,558
--------------
PREFERRED STOCKS -- 0.4%
Centaur Funding Corp. Cumulative
9.08% 04/21/20 4,150 4,607,289
--------------
(Cost $4,150,000)
SHORT TERM INVESTMENTS -- 9.9%
Student Loan Marketing Association
Discount Notes
4.80% 04/01/99 75,835 75,835,000
U.S. Treasury Bills
4.83% 04/15/99 25,000 24,953,090
Galileo Money Market Fund 7,059 7,058,662
--------------
TOTAL SHORT TERM INVESTMENTS
(Cost $107,846,752) 107,846,752
--------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $1,097,822,026*) $1,093,082,715
==============
- ------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 6,340,688
Gross unrealized depreciation (11,079,999)
------------
$ (4,739,311)
============
** Rates shown are the rates as of March 31, 1999.
(DAGGER) Partial principal in the amount of $81,392,886 has been pledged as
collateral for reverse repurchase agreements.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$2,400,000 on 323 long U.S. Treasury Bonds futures contracts and 331 short
U.S. Treasury Notes futures contracts expiring June 1999. The value of such
contracts on March 31, 1999 was $76,903,250, thereby resulting in an
unrealized gain of $227,388. Outstanding at March 31, 1999 are 2,500
10-year U.S. Treasury Bond future call options written expiring in June
1999 with a value of $213,000 and an exercise price of $97.
See accompanying notes to financial statements.
30
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
CORE BOND PORTFOLIO
MARCH 31, 1999 (UNAUDITED)
ASSETS
Investments at value (Cost $1,097,822,026) ................$1,093,082,715
Collateral received for securities loaned ................. 43,457,569
Interest receivable ....................................... 8,844,942
Principal sold receivable ................................. 185,973
Investments sold receivable ............................... 33,192,050
Capital shares sold receivable ............................ 248,678
Futures commissions ....................................... 5,271
Prepaid expenses .......................................... 27,483
--------------
TOTAL ASSETS ....................................... 1,179,044,681
--------------
LIABILITIES
Payable upon return of securities loaned .................. 43,457,569
Investments purchased payable ............................. 119,174,928
Capital shares redeemed payable ........................... 51,952
Distributions payable ..................................... 4,607,629
Advisor fees payable ...................................... 209,936
Administrative fees payable ............................... 157,311
Transfer agent fees payable ............................... 70,003
Other accrued expenses payable ............................ 263,606
Reverse repurchase agreements payable ..................... 78,938,825
Futures margin payable .................................... 78,500
Call options written (Premiums received $304,688) ......... 213,000
--------------
TOTAL LIABILITIES .................................. 247,223,259
--------------
NET ASSETS (Applicable to 12,618,121 BlackRock shares,
73,466,534 Institutional shares, 7,969,387 Service
shares, 667,113 Investor A shares, 1,451,330 Investor
B shares and 544,090 Investor C shares outstanding) .......$ 931,821,422
==============
NET ASSET VALUE AND REDEMPTION PRICE
PER BLACKROCK, INSTITUTIONAL, SERVICE AND
INVESTOR A SHARE ($912,596,291 (DIVIDE) 94,721,155) ....... $ 9.63
======
OFFERING PRICE PER BLACKROCK, INSTITUTIONAL AND
SERVICE SHARE ............................................. $ 9.63
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($9.63 (DIVIDE) 0.960) .................................... $10.03
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales
charge of 4.5%) PER INVESTOR B SHARE
($13,982,957 (DIVIDE) 1,451,330) .......................... $ 9.63
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($5,242,174 (DIVIDE) 544,090) ........ $ 9.63
======
See accompanying notes to financial statements.
31
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GOVERNMENT INCOME PORTFOLIO
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
---------- --------- ------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 34.9%
Small Business Administration
Participation Certificates,
Series 96-20J, Class 1
7.20% 10/01/16 $ 414 $ 428,813
Small Business Administration
Participation Certificates,
Series 98-20J, Class 1
5.50% 10/01/18 240 229,150
U.S. Treasury Bonds
8.50% 02/15/20 3,075 4,022,741
6.38% 08/15/27 5,050 5,407,197
U.S. Treasury Bonds (CPI)
3.63% 04/15/28 275 266,849
U.S. Treasury Notes
6.50% 08/31/01 200 206,545
6.25% 02/28/02 650 670,140
5.50% 05/31/03 3,100 3,135,340
6.13%(DAGGER) 08/15/07 2,050 2,147,522
----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $17,065,569) 16,514,297
----------
MORTGAGE PASS-THROUGHS -- 52.3%
Federal Home Loan Mortgage
Corporation
7.00%(DOUBLE DAGGER) 08/10-03/11 1,192 1,219,268
6.00% 10/11-12/12 851 845,998
8.00% 05/12-11/26 4,161 4,314,648
5.50% 10/13-11/13 2,000 1,950,042
7.50% 11/25-06/27 93 95,436
Federal National Mortgage Association
7.00% 08/09-02/29 596 607,426
6.50% 01/13-02/29 1,370 1,373,489
8.50% 01/01/13 936 977,246
8.00% 11/01/13 219 227,549
5.50% 12/13-03/14 2,958 2,879,874
6.00% 03/14-01/29 3,990 3,899,148
7.50% 06/24-04/26 894 918,924
Government National Mortgage
Association
8.00% 04/20/13 280 289,398
6.50% 11/23-03/28 1,622 1,615,329
7.00% 05/26-12/27 2,724 2,767,544
7.50% 04/27-12/27 673 693,445
MLCC Mortgage Investors, Inc.,
Series 96-C2, Class E
6.96% 11/21/28 70 61,509
----------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $24,727,448) 24,736,273
----------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 4.3%
Federal National Mortgage Association,
Series 96-54, Class A (PO)
5.85%** 04/25/21 315 286,681
Residential Accredit Loans, Inc.,
Series 97-QS12, Class A7
7.25% 11/25/27 296 299,723
Par
Maturity (000) Value
---------- --------- ------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS (CONTINUED)
Residential Accredit Loans, Inc.,
Series 98-QS4, Class A1
6.50% 03/25/28 $ 199 $ 199,756
Residential Accredit Loans, Inc.,
Series 98-QS5, Class A1
6.75% 04/25/28 280 281,524
Residential Asset Securitization Trust,
Series 98-A6, Class A1
6.75% 07/25/28 299 299,398
Residential Asset Securitization Trust,
Series 98-A8, Class A2
6.75% 08/25/28 272 274,032
Salomon Brothers Mortgage Securities
VI, Series 87-1 (IO)
5.50% 04/20/07 366 99,100
Salomon Brothers Mortgage Securities
VI, Series 87-1 (PO)
6.00% 02/17/17 366 291,813
-----------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $2,013,283) 2,032,027
-----------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 5.5%
AFC Home Equity Loan Trust,
Series 98-2, Class 2A
5.09%** 06/25/28 426 423,642
Credit Suisse First Boston Mortgage
Securities Corp., Series 98-C2, Class A1
5.96% 12/15/07 196 193,919
Federal Housing Authority, INSD Project,
Series 82
7.43% 09/01/22 285 290,599
Goldman Sachs Mortgage Securities
Corp., Series 98-1, Class A
8.00% 08/19/19 221 229,291
Goldman Sachs Mortgage Securities
Corp., Series 98-2, Class A
7.75% 05/19/27 223 230,745
Merit Securities Corp., Series 98-11,
Class 1A1
6.58% 07/28/22 39 38,786
Morgan Stanley Capital Investments,
Series 98-CF1, Class A1
6.33% 10/15/07 240 241,067
Mortgage Capital Funding, Inc.,
Series 98-MC3, Class A1
6.00% 11/18/31 386 383,201
Structured Asset Securities Corp.,
Series 98-C2, Class A
5.11%** 01/25/13 74 73,861
The Money Store Small Business
Administration Loan Trust, Series 99-1,
Class A
5.55%** 07/15/25 300 299,953
Union Planters Mortgage Finance
Corp., Series 98-1, Class A1
6.35% 01/25/28 191 190,929
-----------
TOTAL COMMERCIAL MORTGAGE
BACKED SECURITIES
(Cost $2,605,922) 2,595,993
-----------
See accompanying notes to financial statements.
32
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
GOVERNMENT INCOME PORTFOLIO (CONCLUDED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
---------- --------- ------------
PROJECT LOANS -- 1.6%
Excelsior II Apartments, Construction
Loan Collateral
7.88% 02/01/39 $ 631 $ 696,448
Excelsior II Apartments, Construction
Loan Committment
7.88% 02/01/39 69 76,681
----------
TOTAL PROJECT LOANS
(Cost $738,194) 773,129
----------
ASSET BACKED SECURITIES -- 0.2%
Chase Manhattan Grantor Trust,
Series 96-B, Class A
6.61% 09/15/02 57 57,025
Chevy Chase Auto Receivables Trust,
Series 96-2, Class A
5.90% 07/15/03 65 65,325
----------
TOTAL ASSET BACKED SECURITIES
(Cost $121,140) 122,350
----------
SHORT TERM INVESTMENTS -- 1.2%
Galileo Money Market Fund
(Cost $546,994) 547 546,994
----------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $47,818,550*) $47,321,063
===========
- --------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 247,655
Gross unrealized depreciation (745,142)
---------
$(497,487)
=========
** Rates shown are the rates as of March 31, 1999.
(DAGGER) Partial principal in the amount of $1,400,000 has been pledged as
collateral for reverse repurchase agreements.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$112,957 on 8 long U.S. Treasury Bonds futures contracts and 16 short U.S.
Treasury Notes futures contracts expiring June 1999. The value of such
contracts on March 31, 1999 was $2,747,500, thereby resulting in an
unrealized loss of $10,206.
See accompanying notes to financial statements.
33
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
GOVERNMENT INCOME PORTFOLIO
MARCH 31, 1999 (UNAUDITED)
ASSETS
Investments at value (Cost $47,818,550) ............. $47,321,063
Collateral received for securities loaned ........... 3,247,250
Interest receivable ................................. 341,892
Principal sold receivable ........................... 2,960
Capital shares sold receivable ...................... 442,251
Futures commissions ................................. 216
Prepaid expenses .................................... 7,142
-----------
TOTAL ASSETS ................................. 51,362,774
-----------
LIABILITIES
Payable upon return of securities loaned ............ 3,247,250
Investments purchased payable ....................... 81,243
Capital shares redeemed payable ..................... 40,072
Distributions payable ............................... 190,667
Advisor fees payable ................................ 8,533
Administrative fees payable ......................... 14,431
Transfer agent fees payable ......................... 18,377
Other accrued expenses payable ...................... 65,500
Reverse repurchase agreements payable ............... 1,481,022
Futures margin payable .............................. 1,250
-----------
TOTAL LIABILITIES ............................ 5,148,345
-----------
NET ASSETS (Applicable to 681,852 Investor A shares,
3,539,697 Investor B shares and 263,303 Investor C
shares outstanding) ................................. $46,214,429
===========
NET ASSET VALUE AND REDEMPTION PRICE
PER INVESTOR A SHARE ($7,026,226 (DIVIDE) 681,852) .. $10.30
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($10.30 (DIVIDE) 0.955) ............................. $10.79
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred
sales charge of 4.5%) PER INVESTOR B SHARE
($36,474,988 (DIVIDE) 3,539,697) .................... $10.30
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent deferred
sales charge of 1.0%) PER INVESTOR C SHARE
($2,713,215 (DIVIDE) 263,303) ....................... $10.30
======
See accompanying notes to financial statements.
34
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
GNMA PORTFOLIO
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
---------- --------- ------------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 11.7%
U.S. Treasury Bonds
8.50% 02/15/20 $ 4,220 $ 5,520,640
6.38% 08/15/27 1,750 1,873,781
U.S. Treasury Bonds (CPI)
3.63%(DAGGER) 04/15/28 1,300 1,261,466
U.S. Treasury Notes
5.75% 09/30/99 750 753,970
6.00% 08/15/00 4,020 4,074,665
-----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(Cost $13,852,037) 13,484,522
-----------
MORTGAGE PASS-THROUGHS -- 72.1%
Federal Home Loan Mortgage
Corporation
5.50% 04/13-10/13 1,943 1,894,647
7.50% 02/27-05/27 752 772,688
Federal National Mortgage
Association
6.00% 04/11-04/29 8,899 8,726,682
6.50% 02/13-06/28 1,449 1,456,715
8.00% 11/01/13 875 910,197
5.50% 12/13-03/14 3,267 3,180,859
Government National Mortgage
Association
8.00% 12/07-02/28 10,709 11,130,757
8.50% 01/17-09/21 2,339 2,471,348
7.00%(DOUBLE DAGGER) 09/17-05/28 13,588 13,768,375
9.00% 05/18-07/21 1,994 2,129,612
7.50% 01/22-11/27 13,668 14,077,781
6.50% 06/23-03/29 22,690 22,585,909
-----------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $81,700,944) 83,105,570
-----------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 0.7%
Residential Asset Securitization Trust,
Series 98-A8, Class A2
6.75% 08/25/28 783 787,843
(Cost $782,356) -----------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 6.8%
AFC Home Equity Loan Trust,
Series 98-2, Class 2A
5.09%** 06/25/28 1,365 1,355,653
Chase Commercial Mortgage Securities
Corp., Series 97-2, Class A1
6.45% 12/19/04 1,079 1,092,169
Commercial Mortgage Asset Trust,
Series 99-C1, Class A1
6.25% 08/17/06 1,200 1,206,000
Credit Suisse First Boston Mortgage
Securities Corp., Series 98-C2,
Class A1
5.96% 12/15/07 784 775,674
Merit Securities Corp., Series 98-11,
Class 1A1
6.58% 07/28/22 174 174,536
Morgan Stanley Capital Investments,
Series 97-HF1, Class A1
6.86% 07/15/29 1,151 1,185,476
Par
Maturity (000) Value
---------- --------- ------------
COMMERCIAL MORTGAGE BACKED
SECURITIES (CONTINUED)
Mortgage Capital Funding, Inc.,
Series 98-MC3, Class A1
6.00% 11/18/31 $ 1,150 $ 1,140,480
The Money Store Small Business
Administration Loan Trust,
Series 99-1, Class A
5.55% 07/15/25 900 899,859
-----------
TOTAL COMMERCIAL MORTGAGE
BACKED SECURITIES
(Cost $7,829,231) 7,829,847
-----------
PROJECT LOANS -- 15.6%
Castle Terrace, Construction Loan
Collateral
8.00% 10/01/38 89 97,092
Castle Terrace, Construction Loan
Committment
8.00% 10/01/38 1,414 1,547,883
Excelsior II Apartments, Construction
Loan Collateral
7.88% 02/01/39 901 995,557
Excelsior II Apartments, Construction
Loan Committment
7.88% 02/01/39 99 108,913
Federal Housing Administration,
Arrowhead Springs Apartments,
Construction Loan Collateral
7.55% 02/01/39 996 1,065,726
Federal Housing Administration,
Arrowhead Springs Apartments,
Construction Loan Committment
7.55% 02/01/39 119 126,804
Federal Housing Administration,
Creekwood Apartments, Construction
Loan Collateral
7.30% 11/15/38 1,998 2,123,745
Federal Housing Administration,
Greens at Viera East Apartments,
Construction Loan Collateral
7.88% 12/01/38 1,266 1,374,260
Federal Housing Administration,
Greens at Viera East Apartments,
Construction Loan Committment
7.88% 12/01/38 77 83,099
Federal Housing Administration,
Prairie District Lofts, Construction
Loan Collateral
7.41% 12/01/38 887 938,499
Federal Housing Administration,
Prairie District Lofts, Construction
Loan Committment
7.41% 12/01/38 598 632,636
Federal Housing Administration,
Renaissance Place Apartments,
Construction Loan Collateral
7.38% 02/01/39 1,882 1,993,866
Federal Housing Administration,
Triangle Point Apartments,
Construction Loan Collateral
7.75% 09/30/38 107 115,735
Federal Housing Administration,
Triangle Point Apartments,
Construction Loan Committment
7.75% 09/30/38 1,860 2,013,176
See accompanying notes to financial statements.
35
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
GNMA PORTFOLIO (CONCLUDED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
---------- --------- ------------
PROJECT LOANS (CONTINUED)
Federal Housing Administration,
Village At Stone Falls, Construction
Loan Collateral
7.38% 01/01/39 $ 1,483 $ 1,570,370
Federal Housing Administration,
Village At Stone Falls, Construction
Loan Committment
7.38% 01/01/39 69 72,743
Federal Housing Authority,
INSD Project, Series 82
7.43% 09/01/22 1,496 1,523,347
Timber Ridge Apartments,
Construction Loan Collateral
7.50% 06/01/37 1,439 1,549,537
Timber Ridge Apartments,
Construction Loan Committment
7.50% 06/01/37 61 65,467
-----------
TOTAL PROJECT LOANS
(Cost $16,796,730) 17,998,455
-----------
SHORT TERM INVESTMENTS -- 4.9%
Federal Home Loan Bank
Discount Notes
4.80% 04/01/99 5,560 5,560,000
Galileo Money Market Fund 102 101,747
-----------
TOTAL SHORT TERM INVESTMENTS
(Cost $5,661,747) 5,661,747
-----------
TOTAL INVESTMENTS IN SECURITIES
(Cost $126,623,045*) 111.8% 128,867,984
LIABILITIES IN EXCESS OF
OTHER ASSETS (Including $12,572,111
of investment purchases payable) (11.8%) (13,644,492)
------ -----------
NET ASSETS (Applicable to 11,377,334 Institutional
shares, 10 Service shares, 145,363 Investor A shares,
21,258 Investor B shares and 71 Investor C shares
outstanding) 100.0% $115,223,492
====== ============
Value
------------
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($115,010,604 (DIVIDE) 11,522,707) $ 9.98
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $ 9.98
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($9.98 (DIVIDE) 0.960) $10.40
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($212,179 (DIVIDE) 21,258) $ 9.98
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($709 (DIVIDE) 71) $ 9.98
======
- -----------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $2,824,650
Gross unrealized depreciation (579,711)
----------
$2,244,939
==========
** Rates shown are the rates as of March 31, 1999.
(DAGGER) Partial principal in the amount of $1,318,083 has been pledged as
collateral for reverse repurchase agreements.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of $500,000
on 12 short U.S. Treasury Bonds futures contracts and 171 short U.S. Treasury
Notes futures contracts expiring June 1999. The value of such contracts on
March 31, 1999 was $20,986,813, thereby resulting in an unrealized gain of
$74,267.
See accompanying notes to financial statements.
36
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MANAGED INCOME PORTFOLIO
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
-------- ------- -----------
U.S. GOVERNMENT & AGENCY
OBLIGATIONS -- 21.3%
Overseas Private Investment Co.
6.84%** 02/15/05 $ 620 $ 630,261
6.46%** 12/06/06 156 154,940
5.92%** 12/16/06 1,610 1,579,305
6.27%** 12/16/06 2,735 2,739,680
6.38%** 12/16/06 1,476 1,481,596
6.53%** 12/16/06 384 383,531
5.46%** 05/29/12 409 395,338
5.79%** 05/29/12 372 362,237
5.88%** 05/29/12 481 471,243
6.27%** 05/29/12 331 330,609
Small Business Administration
Participation Certificates,
Series 96-20B, Class 1
6.38% 02/01/16 6,546 6,551,443
Small Business Administration
Participation Certificates,
Series 96-20K, Class 1
6.95% 11/10/16 9,112 9,345,691
Small Business Administration
Participation Certificates,
Series 97, Class A
5.60%** 08/15/22 4,113 4,089,636
Small Business Administration
Participation Certificates,
Series 97-20B, Class 1
7.10% 02/01/17 6,531 6,745,272
Small Business Administration
Participation Certificates,
Series 97-20F, Class 1
7.20% 06/01/17 2,117 2,197,694
Small Business Administration
Participation Certificates,
Series 97-20G, Class 1
6.85% 07/01/17 12,743 13,125,519
Student Loan Marketing Association,
Series 97-3, Class A2
5.13%** 10/25/10 6,300 6,207,715
U.S. Treasury Bonds
8.75% 11/15/08 23,380 26,441,506
12.75% 11/15/10 8,725 12,177,031
8.50%(DAGGER) 02/15/20 48,300 63,186,471
6.50% 11/15/26 16,010 17,379,297
6.38% 08/15/27 11,535 12,350,894
5.25%(DAGGER) 11/15/28 7,515 7,023,306
5.25% 02/15/29 13,400 12,685,323
U.S. Treasury Bonds (CPI)
3.63%(DAGGER) 04/15/28 38,565 37,421,882
U.S. Treasury Notes
4.50%(DAGGER) 09/30/00 10,575 10,502,611
5.50% 03/03-05/03 37,395 37,821,408
5.75% 08/15/03 2,200 2,246,663
7.25% 05/15/04 4,810 5,243,482
6.13% 08/15/07 3,780 3,959,820
U.S. Treasury Notes (CPI)
3.63% 01/15/08 28,975 28,765,174
3.88% 01/15/09 13,545 13,517,821
------------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $352,641,696) 347,514,399
------------
Par
Maturity (000) Value
-------- -------- --------------
MORTGAGE PASS-THROUGHS -- 39.1%
Federal Home Loan Mortgage
Corporation
9.00% 07/01/01 $ 43 $ 44,890
9.50% 03/01/05 20 20,711
7.00%** 06/06-02/29 12,493 12,690,052
6.80% 07/23/07 12,025 12,366,340
5.89%** 10/15/07 4,868 4,772,359
6.04% 02/25/09 26,800 26,464,823
6.50% 03/09-09/25 33,913 33,913,422
7.50% 12/06/10 16,145 16,649,590
6.00% 11/01/12 1,800 1,789,220
Federal National Mortgage Association
6.50%(DAGGER) 02/11-02/29 97,102 96,715,888
6.00%(DAGGER) 04/13-01/29 92,532 90,206,185
5.50%(DAGGER) 09/13-01/14 259,812 252,992,227
Government National Mortgage
Association
7.25% 04/15/15 1,230 1,295,588
9.50% 09/16-10/17 278 299,417
8.50% 01/15/17 487 514,828
9.00% 03/18-11/20 1,228 1,310,967
8.00% 02/22-05/37 4,602 4,925,220
7.50% 04/23-09/27 1,065 1,097,054
6.50% 11/23-12/27 35,885 35,728,264
7.00% 02/26-09/28 23,617 23,984,734
Government National Mortgage
Association II
9.50% 05/17-12/24 881 938,818
MLCC Mortgage Investors, Inc.,
Series 95-C, Class D
8.08%** 05/25/15 3,506 3,476,079
MLCC Mortgage Investors, Inc.,
Series 96-C1, Class A2
7.24% 04/25/28 7,113 7,316,318
MLCC Mortgage Investors, Inc.,
Series 96-C1, Class A3
7.42% 04/25/28 5,500 5,743,656
MLCC Mortgage Investors, Inc.,
Series 96-C2, Class E
6.96% 11/21/28 2,725 2,394,454
--------------
TOTAL MORTGAGE PASS-THROUGHS
(Cost $640,641,780) 637,651,104
--------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS -- 1.9%
Federal Home Loan Mortgage
Corporation, Series 65,
Class A (PO)
4.09%** 03/15/24 1,700 925,764
Federal National Mortgage Association,
Series 97-44, Class L (PO)
4.35%** 02/25/24 1,774 1,137,372
Federal National Mortgage Association
Strip Notes, Series 279, Class 1 (PO)
6.00% 07/01/26 554 466,363
Residential Accredit Loans, Inc.,
Series 97-QS7, Class A1
7.50% 08/15/27 2,402 2,409,832
Residential Accredit Loans, Inc.,
Series 97-QS10, Class A1
7.25% 10/25/27 6,805 6,822,144
See accompanying notes to financial statements.
37
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MANAGED INCOME PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
-------- -------- --------------
MULTIPLE CLASS MORTGAGE
PASS-THROUGHS (CONTINUED)
Residential Asset Securitization Trust,
Series 97-A7, Class A1
7.50% 09/25/27 $ 4,998 $ 5,052,421
Residential Asset Securitization Trust,
Series 98-A12, Class A5
6.75% 11/25/28 14,159 14,100,130
--------------
TOTAL MULTIPLE CLASS MORTGAGE
PASS-THROUGHS
(Cost $30,746,066) 30,914,026
--------------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 11.1%
Advanta Mortgage Loan Trust,
Series 96-1, Class A7
7.07% 03/25/27 1,600 1,634,500
COMM, Series 99-1, Class A2
6.46% 09/15/08 8,773 8,810,328
Commercial Capital Access One,
Series 98-3, Class A1
6.30% 11/15/28 6,866 6,806,379
Credit Suisse First Boston Mortgage
Securities Corp., Series 95-AEW1,
Class C
7.46% 11/25/27 4,050 4,066,587
Empire Funding Home Loan Owner
Trust, Series 98-2, Class A4
6.53% 02/25/19 15,000 14,943,750
Federal National Mortgage Association,
Series 99-17, Class HJ (PO)
4.26% 12/25/23 1,225 653,078
Federal National Mortgage Association,
Series 99-17, Class JH (PO)
4.55% 04/25/24 1,545 847,336
FFCA Secured Lending Corp.,
Series 98-1, Class A1B
6.73% 07/18/13 8,246 8,224,058
First Union-Lehman Brothers
Commercial Mortgage, Series 98-C2,
Class A2
6.56% 11/18/08 15,250 15,460,827
Ford Credit Auto Owner Trust,
Series 98-C, Class A5
5.86% 10/15/02 8,600 8,660,469
FPlus, Series 98-3, Class A8
7.17%** 05/10/24 7,300 6,982,906
General Motors Acceptance Corp.
Commercial Mortgage Securities, Inc.,
Series 98-C2, Class A2
6.42% 05/15/31 7,550 7,574,081
Impac Secured Assets Common
Owner Trust, Series 98-1, Class A1
6.70% 01/25/07 747 746,702
J.P. Morgan Commercial Mortgage
Finance Corp., Series 96-C3,
Class A1
7.33% 04/25/28 2,220 2,268,479
Lehman Brothers Commercial Conduit
Mortgage Trust, Series 96-C2, Class A
7.43%** 10/25/26 6,977 7,280,411
Par
Maturity (000) Value
-------- -------- --------------
COMMERCIAL MORTGAGE BACKED
SECURITIES (CONTINUED)
Merit Securities Corp., Series 98-11,
Class 1A1
6.58% 07/28/22 $ 3,306 $ 3,306,808
Midland Royalty Acceptance Corp.,
Series 96-C, Class A
7.23% 01/25/29 6,200 6,463,500
Morgan Stanley Capital Investments,
Series 95, Class D
8.25% 08/15/27 2,000 2,065,504
Morgan Stanley Capital Investments,
Series 98-HF2, Class A2
6.48% 11/15/30 8,300 8,356,534
Mortgage Capital Funding, Inc.,
Series 98-MC2, Class A1
6.33% 06/18/30 11,373 11,478,605
Newcourt Equipment Trust Securities,
Series 98-2, Class A3
5.45% 10/15/02 15,400 15,341,396
NPF VI, Inc., Health Care Receivables
Securitization Program, Series 98-1,
Class A
6.22% 06/01/02 13,800 13,840,774
Prudential Securities Secured
Financing Corp., Series 95-MCF2,
Class F
6.51% 07/15/08 5,725 5,740,858
Reilly Mortgage Securities, Series 97,
Class A
6.90% 11/11/18 6,469 6,436,210
Ryland Acceptance Corp., Series 78,
Class B
9.55% 03/01/16 19 19,165
Structured Asset Securities Corp.,
Series 98-C2, Class A
5.11%** 01/25/13 3,259 3,249,881
Union Planters Mortgage Finance
Corp., Series 98-1, Class A3
6.60% 01/25/28 9,094 9,067,925
USGI, Series 87
7.43% 12/01/22 908 923,978
--------------
TOTAL COMMERCIAL MORTGAGE
BACKED SECURITIES
(Cost $181,717,069) 181,251,029
--------------
PROJECT LOANS -- 3.4%
Federal Housing Authority, Huntoon
Paige, Construction Loan Collateral
7.32% 10/01/24 15,905 16,078,086
Federal Housing Authority, Lakeland
Nursing, Construction Loan Collateral
7.88% 12/01/34 11,799 12,506,096
Federal Housing Authority,
Meadowbrook of Topeka,
Construction Loan Collateral
8.50% 08/01/22 1,658 1,810,939
Federal Housing Authority, Riverwalk,
Construction Loan Collateral
8.22% 06/01/36 1,562 1,696,723
Federal Housing Authority, University
Park Apartments FHA/FH
7.88% 10/01/37 4,508 4,831,258
See accompanying notes to financial statements.
38
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MANAGED INCOME PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
-------- -------- --------------
PROJECT LOANS (CONTINUED)
Federal Housing Authority, Village
Green, Construction Loan Collateral
8.25% 09/01/34 $ 4,947 $ 5,279,963
Federal Housing Authority, Washington
PC94, Non-Public, Construction
Loan Collateral
6.90% 02/01/14 831 836,304
Meadows II Apartments, Construction
Loan Collateral
7.00% 12/01/00 3,317 3,413,678
7.00% 12/01/39 546 562,014
Ponds at Punaluu, Construction
Loan Collateral
7.63% 04/01/37 1,038 1,113,394
Whittier Rehab At Westborough
Project Loan
8.13% 02/28/37 7,125 7,727,533
--------------
TOTAL PROJECT LOANS
(Cost $54,248,706) 55,855,988
--------------
ASSET BACKED SECURITIES -- 19.1%
ACLC Business Loan Receivables
Trust, Series 98-1, Class A1
6.44% 07/15/13 10,170 10,099,866
Arcadia Automobile Receivables
Trust, Series 97-B, Class A3
6.30% 07/16/01 4,760 4,764,835
Arcadia Automobile Receivables
Trust, Series 97-C, Class A2
6.05% 11/15/00 1,892 1,892,496
Arcadia Automobile Receivables
Trust, Series 98-B, Class A3
5.95% 11/15/02 17,500 17,543,750
Arcadia Automobile Receivables
Trust, Series 98-C, Class A2
5.38%** 02/15/02 2,750 2,745,703
Arcadia Automobile Receivables Trust,
Series 98-C, Class A3
5.67% 02/15/08 10,450 10,369,992
Associates Manufactured Housing
Pass-Through, Series 96-1, Class B1
8.00% 03/15/27 3,200 3,144,000
Banc One Auto Grantor Trust,
Series 97-B, Class A
6.29% 07/20/04 7,629 7,681,708
Brazos Student Loan Finance Corp.,
Series 98-A, Class A2
5.47%** 06/01/23 1,800 1,756,125
Chase Credit Card Master Trust,
Series 97-5, Class A
6.19%(DAGGER) 08/15/05 49,515 50,101,661
CIT Group Securitization Corp.,
Series 95-2, Class B
7.65% 05/15/26 7,650 6,636,375
Copelco Capital Funding Corp.,
Series 97-A, Class A3
6.27% 04/20/05 8,088 8,090,707
Daimler-Benz Auto Grantor Trust,
Series 97-A, Class A
6.05% 03/31/05 2,684 2,697,865
Equicon Home Equity Loan Trust,
Series 93-1, Class I (IO)
10.74% 02/18/13 7,446 55,849
Fifth Third Auto Grantor Trust,
Series 96-B, Class A
6.45% 03/15/02 694 698,875
Par
Maturity (000) Value
-------- -------- --------------
ASSET BACKED SECURITIES (CONTINUED)
FMAC Loan Receivables Trust,
Series 97-B, Class A
6.85% 09/15/19 $ 6,471 $ 6,460,522
FMAC Loan Receivables Trust,
Series 97-C, Class A
6.75% 12/15/19 1,243 1,235,248
Green Tree Financial Corp.,
Series 93-3, Class B
6.85% 10/15/18 3,622 3,378,029
Green Tree Financial Corp.,
Series 94-B, Class A
7.85% 07/15/04 847 839,451
Green Tree Financial Corp.,
Series 95-7, Class B1
7.35% 11/15/26 7,525 7,291,275
Green Tree Financial Corp.,
Series 95-A, Class A
7.25% 07/15/05 5,332 5,100,705
Green Tree Financial Corp.,
Series 96-2, Class B2
7.90%(DOUBLE DAGGER) 04/15/27 2,500 2,081,295
Green Tree Financial Corp.,
Series 96-5, Class A7
8.25% 07/15/27 5,534 5,928,987
Green Tree Financial Corp.,
Series 96-7, Class A6
7.65% 10/15/27 9,025 9,454,201
Green Tree Financial Corp.,
Series 96-8, Class B1
7.95% 01/01/05 3,000 2,902,464
Green Tree Financial Corp.,
Series 97-1, Class B1
7.23% 03/02/28 9,000 8,601,296
Green Tree Financial Corp.,
Series 97-2, Class A7
7.62% 04/15/27 2,717 2,722,135
Green Tree Financial Corp.,
Series 97-3, Class A7
7.64% 07/15/28 6,050 6,230,726
Green Tree Financial Corp.,
Series 97-3, Class B1
7.51% 07/15/28 2,500 2,353,510
Green Tree Financial Corp.,
Series 97-3, Class B2
8.03% 07/15/28 7,050 5,818,762
Green Tree Home Improvement Loan
Trust, Series 94-D, Class M
9.05% 01/15/15 500 517,779
Green Tree Home Improvement Loan
Trust, Series 96-C, Class HIB1
7.75% 06/15/21 6,850 6,834,337
Green Tree Home Improvement Loan
Trust, Series 97-A, Class Hem2
7.90% 03/15/28 5,150 5,372,968
Keycorp Student Loan Trust,
Series 95-B, Class A
5.45%** 09/27/24 8,976 8,923,171
Mellon Bank Home Equity Loan Trust,
Series 96-1, Class B2
5.36%** 04/15/26 2,316 2,295,332
Nissan Auto Receivables Grantor
Trust, Series 95-A, Class A
6.10% 08/15/01 1,376 1,383,129
Nissan Auto Receivables Grantor
Trust, Series 98-A, Class A
5.45% 04/15/04 6,769 6,773,149
See accompanying notes to financial statements.
39
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MANAGED INCOME PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
-------- -------- --------------
ASSET BACKED SECURITIES (CONTINUED)
Puget Power Conservation Grantor
Trust, Series 97-1, Class A
6.23% 07/11/02 $ 8,654 $ 8,686,261
Railcar Leasing L.L.C., Series 97-1,
Class A1
6.75% 07/15/06 10,618 10,883,131
Sears Credit Account Master Trust,
Series 95-5, Class A
6.05% 01/15/08 3,812 3,848,216
Sears Credit Account Master Trust,
Series 96-3, Class A
7.00% 07/15/08 11,600 12,141,300
Sears Credit Account Master Trust,
Series 96-4, Class A
6.45% 10/16/06 4,200 4,240,243
Sears Credit Account Master Trust,
Series 97-1, Class A
6.20% 07/15/07 8,000 7,962,439
Sears Credit Account Master Trust,
Series 98-1, Class A
5.80% 08/15/05 7,900 7,862,342
Sears Credit Account Master Trust,
Series 99-1, Class A
5.65% 03/15/09 6,450 6,377,438
The Money Store Business Loan
Backed Securities, Series 97-1,
Class A
5.65%** 04/15/28 7,229 7,157,097
The Money Store Home Equity Trust,
Series 97-C, Class MH2
7.36% 02/15/24 2,775 2,805,446
World Omni Automobile Lease
Securitization Trust, Series 97-B,
Class A1
6.07% 11/25/03 8,812 8,854,992
--------------
TOTAL ASSET BACKED SECURITIES
(Cost $315,085,041) 311,597,183
--------------
CORPORATE BONDS -- 20.9%
FINANCE -- 11.4%
AFC Capital Trust I
8.21% 02/03/27 2,690 2,887,436
AMB Property L.P.
6.90% 06/30/05 2,600 2,543,445
American General Capital Securities
7.57% 12/01/45 7,250 7,549,063
Amvescap PLC
6.60% 05/15/05 1,850 1,837,834
AT&T Capital Corp.
6.25% 05/15/01 4,500 4,539,375
Bank of New York
7.78% 12/01/26 2,150 2,217,188
BGB Finance
6.63% 12/30/99 8,000 8,059,341
Capital One Bank
6.65% 03/15/04 5,000 5,018,750
Crown Cork & Seal, S.A.
6.75% 12/15/03 3,000 2,990,806
CSW Investments
6.95% 08/01/01 7,705 7,809,003
Equitable Cos., Inc.
7.00% 04/01/28 4,670 4,670,229
Fairfax Financial Hldgs. Ltd.
8.30% 04/15/26 2,820 2,841,057
Par
Maturity (000) Value
-------- -------- --------------
CORPORATE BONDS (CONTINUED)
FINANCE (CONTINUED)
Farmers Insurance Exchange
8.63% 05/01/24 $ 2,000 $ 2,237,500
Federal Express
7.60% 07/01/47 1,150 1,131,978
Florida Windstorm Underwriting
Association
7.13% 02/25/19 5,715 5,750,062
Ford Motor Credit Corp.
5.75% 02/23/04 9,995 9,920,038
Frank Russel Co.
5.63% 01/15/09 9,385 9,029,565
General Motors
8.80% 03/01/21 3,000 3,648,750
Goldman Sachs Group L.P.
6.25% 02/01/03 6,030 6,058,039
Golden Sachs Escrow Corp.
7.00% 08/01/03 10,300 10,270,472
HSBC America Capital II
8.38% 05/15/27 9,900 10,071,020
Ikon Capital Resources
6.93%(DOUBLE DAGGER) 06/07/99 11,700 11,695,065
KeyBank, NA
5.80% 04/01/04 6,400 6,370,363
Larwin Group - Participation in
Asset Exchange
8.00% 12/01/99 13 12,515
Lehman Brothers Holdings, Inc.
6.75% 09/24/01 8,000 8,056,085
6.20% 01/15/02 4,700 4,666,685
7.38% 05/15/07 1,500 1,539,337
Liberty Mutual Insurance Co.
7.70% 10/15/47 3,225 3,068,278
Merrill Lynch & Co.
5.75% 11/04/02 5,165 5,134,258
MidAmerican Funding, L.L.C.
6.93% 03/01/29 7,000 6,919,233
Newcourt Credit Group
6.88% 02/16/05 4,780 4,883,243
Paine Webber, Inc.
6.31% 07/22/99 5,000 5,016,800
Prologis Trust
7.63% 07/01/17 4,400 3,965,500
Riggs Capital Trust II Preferred
Securities, Series C
8.88% 03/15/27 2,400 2,459,508
Salomon, Inc.
8.90% 02/15/00 3,600 3,708,469
Yorkshire Power Finance
6.50% 02/25/08 2,350 2,326,500
Zurich Capital Trust I
8.38% 06/01/27 5,000 5,343,750
--------------
186,246,540
--------------
INDUSTRIAL -- 4.8%
Albertson's, Inc.
6.63% 06/01/28 3,825 3,730,862
Coca-Cola Enterprises
5.71% 03/18/37 12,520 12,613,900
Dayton Hudson Corp.
5.95% 06/15/00 3,400 3,408,500
Litton Industries, Inc.
6.75% 04/15/18 1,630 1,554,613
See accompanying notes to financial statements.
40
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MANAGED INCOME PORTFOLIO (CONTINUED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
-------- -------- --------------
CORPORATE BONDS (CONTINUED)
INDUSTRIAL (CONTINUED)
Panamerican Beverages
7.25% 07/01/09 $ 8,735 $ 7,339,531
RJR Nabisco, Inc.
6.85% 06/15/05 8,300 8,365,113
7.05% 07/15/07 3,380 3,454,918
7.55% 06/15/15 3,080 3,175,632
Time Warner, Inc.
4.90% 07/29/99 9,600 9,576,000
9.13% 01/15/13 2,440 2,980,670
Tyco Intl. Group Corp.
5.88% 11/01/04 2,910 2,888,175
USA Waste Management, Inc.
6.13% 07/15/01 5,455 5,489,094
Williams Companies, Inc.
6.50% 08/01/06 9,360 9,255,950
Xerox Corp.
5.91% 04/01/37 3,600 3,654,000
--------------
77,486,958
--------------
TELECOMMUNICATIONS -- 0.9%
BellSouth Telecommunications, Inc.
7.88% 08/01/32 3,000 3,131,250
Worldcom, Inc.
7.75% 04/01/27 9,710 11,045,125
--------------
14,176,375
--------------
TRANSPORTATION -- 0.1%
ERAC USA Finance Co.
6.95% 03/01/04 1,017 1,032,154
--------------
UTILITY -- 2.5%
AT&T Corp.
6.50% 03/15/29 11,300 11,067,699
Avon Energy Partnership
6.73% 12/11/02 1,100 1,122,000
Isreal Electric Corp. Ltd.
7.25% 12/15/06 1,655 1,664,867
7.88% 12/15/26 6,000 5,649,875
8.10% 12/15/46 11,860 10,827,892
Mobile Energy Services, L.L.C.
8.67% 01/01/17 3,515 878,803
National Rural Utilities Corp.
6.55% 11/01/18 3,695 3,686,789
Pennsylvania Power & Light Co.
9.38% 07/01/21 2,500 2,752,150
Philadelphia Electric
9.08% 12/20/99 3,000 3,082,500
--------------
40,732,575
--------------
YANKEE -- 1.2%
Asian Development Bank
5.82% 06/16/28 8,580 8,415,024
Den Norske Stats Oljesel
7.38% 05/01/16 300 316,625
Empresa Electrica Pehuenche
7.30% 05/01/03 11,000 10,575,784
--------------
19,307,433
--------------
TOTAL CORPORATE BONDS
(Cost $344,052,345) 338,982,035
--------------
Par
Maturity (000) Value
-------- -------- --------------
TAXABLE MUNICIPAL BONDS -- 1.3%
Los Angeles Cnty. Pension Obligation
Rev., Series D
8.62% 06/30/06 $ 7,800 $ 8,931,000
6.97% 06/30/08 7,355 7,768,719
New Jersey Econ. Dev. Auth. St.
Pension Fdg. Rev., Series B
16.03% 02/15/18 14,500 4,168,750
--------------
TOTAL TAXABLE MUNICIPAL BONDS
(Cost $20,044,639) 20,868,469
--------------
PREFERRED STOCKS -- 0.5%
Centaur Funding Corp. Cumulative
9.08% 04/21/20 8,000 8,881,520
--------------
(Cost $8,000,000)
SHORT TERM INVESTMENTS -- 0.6%
Student Loan Marketing Association
Discount Notes
4.80% 04/01/99 2,475 2,475,000
Galileo Money Market Fund 7,026 7,025,589
--------------
TOTAL SHORT TERM INVESTMENTS
(Cost $9,500,589) 9,500,589
--------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $1,956,677,931*) 119.2% 1,943,016,342
REVERSE REPURCHASE AGREEMENTS -- (15.3%)
Aubrey Lanston
(Agreement dated 03/29/99 to be
repurchased at $10,743,894.
Collateralized by $10,575,000 U.S.
Treasury Notes 4.50% due 09/30/00.
The value of the collateral
is $10,505,218.)
4.92% 04/05/99 10,734 (10,738,026)
Aubrey Lanston
(Agreement dated 03/08/99 to be
repurchased at $38,574,063.
Collateralized by $39,101,439 U.S.
Treasury Bonds (CPI) 3.625% due
04/15/28. The value of the collateral
is $37,445,067.)
4.80% 04/07/99 38,420 (38,543,327)
Lehman Brothers
(Agreement dated 03/30/99 to be
repurchased at $7,142,859.
Collateralized by $7,515,000 U.S.
Treasury Bonds 5.25% due 11/15/28. The
value of the collateral is $7,024,365.)
2.60% 04/06/99 7,139 (7,140,281)
Lehman Brothers
(Agreement dated 03/29/99 to be
repurchased at $40,776,445.
Collateralized by $31,000,000 U.S.
Treasury Bonds 8.50% due 02/15/20. The
value of the collateral is $40,569,022.)
4.93% 04/07/99 40,726 (40,742,982)
See accompanying notes to financial statements.
41
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
MANAGED INCOME PORTFOLIO (CONCLUDED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
-------- -------- --------------
REVERSE REPURCHASE AGREEMENTS (CONTINUED)
Lehman Brothers
(Agreement dated 03/25/99 to be
repurchased at $8,165,277.
Collateralized by $8,000,000 U.S.
Treasury Notes 5.375% due 06/30/03.
The value of the collateral
is $8,059,627.)
4.82% 04/08/99 $ 8,150 $ (8,157,638)
Lehman Brothers
(Agreement dated 03/18/99 to be
repurchased at $89,816,756.
Collateralized by $94,355,434
Federal National Mortgage
Association 5.50% due 12/01/13 to
01/01/14. The value of the collateral
is $92,059,961.)
4.84% 04/19/99 89,432 (89,600,331)
Morgan Stanley & Co.
(Agreement dated 02/11/99 to be
repurchased at $36,141,215.
Collateralized by $38,020,680
Federal National Mortgage
Association 5.50 - 6.00% due
01/01/14 to 01/01/29. The value of
the collateral is $37,271,058.)
4.88% 04/14/99 35,840 (36,078,057)
Salomon Brothers
(Agreement dated 03/04/99 to be
repurchased at $19,146,429.
Collateralized by $23,770,000
Chase Credit Card Master Trust
6.194% due 08/15/05. The value of
the collateral is $24,158,492.)
5.22% 04/05/99 19,058 (19,135,375)
--------------
TOTAL REVERSE REPURCHASE AGREEMENTS
(Cost $249,499,506) (250,136,017)
LIABILITIES IN EXCESS OF
OTHER ASSETS (3.9%) (62,439,032)
------ --------------
NET ASSETS (Applicable to 128,734,384
Institutional shares, 27,856,638 Service
shares, 1,694,959 Investor A shares and
566,542 Investor B shares outstanding) 100.0% $1,630,441,293
====== ==============
Value
--------------
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($1,624,626,481 (DIVIDE) 158,285,981) $10.26
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $10.26
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.26 (DIVIDE) 0.955) $10.74
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($5,814,812 (DIVIDE) 566,542 ) $10.26
======
- ----------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 12,468,783
Gross unrealized depreciation (26,130,372)
------------
$(13,661,589)
============
** Rates shown are the rates as of March 31, 1999.
(DAGGER) Partial principal in the amount of $252,337,553 has been pledged as
collateral for reverse repurchase agreements.
(DOUBLE DAGGER) Principal amount of securities pledged as collateral of
$8,500,000 on 375 long U.S. Treasury Bonds futures contracts and 1,669
short U.S. Treasury Notes futures contracts expiring June 1999. The value
of such contracts on March 31, 1999 was $236,624,375, thereby resulting in
an unrealized gain of $579,896. Outstanding at March 31, 1999 are 4,000
10-year U.S. Treasury Bond future call options written expiring in June
1999 with a value of $340,800 and an exercise price of $97.
See accompanying notes to financial statements.
42
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
INTERNATIONAL BOND PORTFOLIO
Par**
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
-------- -------- -----------
FOREIGN BONDS -- 72.8%
CANADA -- 5.1%
Canada Trust Company Mortgage
5.63% 01/01/02 $ 2,126 $ 1,408,350
Government of Canada
4.25% 12/01/26 1,750 1,226,773
-----------
2,635,123
-----------
DENMARK -- 3.3%
Kingdom of Denmark
8.00% 05/15/03 10,000 1,691,474
-----------
FRANCE -- 7.8%
European Investment Bank
5.26% 04/15/08 1,955 2,235,909
Government of France
5.50% 10/25/07 1,524 1,824,391
-----------
4,060,300
-----------
GERMANY -- 15.7%
Deutsche Telekom International
Financial
5.25% 05/20/08 1,023 1,168,826
Deutschland Republic
6.50% 07/04/27 3,068 4,041,186
Treuhandanstalt
7.75% 10/01/02 2,352 2,911,744
-----------
8,121,756
-----------
ITALY -- 3.8%
Buoni Poliennali del Tes
6.75% 07/01/07 1,549 1,979,447
-----------
JAPAN -- 6.0%
Japan - 207
0.90% 12/22/08 290,000 2,247,910
Japan - 42
2.60% 03/20/19 100,000 853,922
-----------
3,101,832
-----------
NETHERLANDS -- 3.9%
Government of Netherlands
9.00% 01/15/01 1,679 1,999,131
-----------
SPAIN -- 4.3%
Government of Spain
11.30% 01/15/02 1,683 2,205,917
-----------
SWEDEN -- 3.1%
Kingdom of Sweden
10.25% 05/05/00 12,400 1,622,674
-----------
UNITED KINGDOM -- 19.8%
Abbey National Treasury Services
8.00% 04/02/03 600 1,056,364
Bayerische Landesbank Girozentrale
7.88% 12/07/06 1,100 2,043,212
Federal National Mortgage Assoc.
Global Bond
6.88% 06/07/02 2,500 4,235,041
Halifax Building Society PLC
6.50% 02/16/04 450 762,761
United Kingdom Treasury
9.00% 10/13/08 1,000 2,161,077
-----------
10,258,455
-----------
TOTAL FOREIGN BONDS
(Cost $37,766,771) 37,676,109
-----------
Par**
Maturity (000) Value
-------- -------- -----------
U.S. GOVERNMENT &
AGENCY OBLIGATIONS -- 9.1%
U.S. Treasury Bonds
8.50% 02/15/20 $ 1,500 $ 1,962,313
U.S. Treasury Notes
6.13% 08/15/07 2,600 2,723,686
-----------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(Cost $4,724,607) 4,685,999
-----------
YANKEE BONDS -- 1.9%
TPSA Finance B.V.
7.75% 12/10/08 1,000 986,250
-----------
(Cost $992,969)
SHORT-TERM INVESTMENTS -- 16.2%
Federal Home Loan Motgage Corp.
Discount Notes
4.80% 04/01/99 8,385 8,385,000
-----------
(Cost $8,385,000)
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $51,869,347*) $51,733,358
===========
- -------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 1,595,178
Gross unrealized depreciation (1,731,167)
===========
$ (135,989)
===========
** In local currency.
See accompanying notes to financial statements.
43
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
INTERNATIONAL BOND PORTFOLIO
<TABLE>
<CAPTION>
MARCH 31, 1999 (UNAUDITED)
<S> <C>
ASSETS
Investments at value (Cost $51,869,347) ......................................................................... $51,733,358
Cash denominated in foreign currencies ($21,662) ................................................................ 22,064
Cash ............................................................................................................ 1,630
Interest receivable ............................................................................................. 1,187,138
Capital shares sold receivable .................................................................................. 12,230
Cash segregated for futures collateral .......................................................................... 200,000
Net unrealized appreciation on forward foreign currency contracts ............................................... 1,342,437
Prepaid expenses ................................................................................................ 11,729
-----------
TOTAL ASSETS ............................................................................................. 54,510,586
-----------
LIABILITIES
Capital shares redeemed payable ................................................................................. 51,649
Distributions payable ........................................................................................... 226,858
Advisor fees payable ............................................................................................ 20,783
Administrative fees payable ..................................................................................... 9,037
Transfer agent fees payable ..................................................................................... 9,006
Other accrued expenses payable .................................................................................. 85,769
Futures margin payable .......................................................................................... 5,146
Net unrealized depreciation on forward foreign currency contracts ............................................... 79,698
-----------
TOTAL LIABILITIES ........................................................................................ 487,946
-----------
NET ASSETS (Applicable to 4,028,849 Institutional shares, 253,139 Service shares, 173,521
Investor A shares, 179,529 Investor B shares and 178,326 Investor C shares outstanding) ......................... $54,022,640
===========
NET ASSET VALUE AND REDEMPTION PRICE PER INSTITUTIONAL,
SERVICE AND INVESTOR A SHARE ($50,006,310 (DIVIDE) 4,455,509) ................................................... $11.22
======
OFFERING PRICE PER INSTITUTIONAL AND SERVICE SHARE ................................................................. $11.22
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($11.22 (DIVIDE) 0.950) ......................................................................................... $11.81
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($2,014,911 (DIVIDE) 179,529) .............................................................. $11.22
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE (subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($2,001,419 (DIVIDE) 178,326) .............................................................. $11.22
======
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
HIGH YIELD BOND PORTFOLIO
Number
AS OF MARCH 31, 1999 (UNAUDITED) of Shares Value
--------- -----------
PREFERRED STOCKS -- 12.7%
Global Crossing Hldgs. Ltd.
(PIK) 10.50% 20,000 $ 2,300,000
Hyperion Telecommunications, Inc.,
Series B (PIK) 12.875% 2,064 1,847,280
Nextel Communications, Inc.,
Series E (PIK) 11.125% 1,027 1,047,540
Nextlink Communications (PIK) 14.00% 39,033 1,990,683
-----------
TOTAL PREFERRED STOCKS
(Cost $6,865,512) 7,185,503
-----------
Par
Maturity (000)
-------- ---------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 3.4%
Donaldson, Lufkin & Jenrette, Inc.,
Commercial Mortgage Corp.,
Series 98-CG1, Class B4
7.15%** 01/10/13 $ 2,531 1,913,230
-----------
(Cost $1,982,136)
CORPORATE BONDS -- 88.0%
FINANCIAL -- 5.9%
Charter Communications Hldgs., L.L.C.,
Series 144A
8.63% 04/01/09 600 612,750
Charter Communications Hldgs., L.L.C.,
Series 144A (STEP)
9.51% 04/01/11 1,000 643,750
RBF Finance Co., Series 144A
11.00% 03/15/06 1,000 1,050,000
Willis Corroon Corp., Series 144A
9.00% 02/01/09 1,000 1,020,000
-----------
3,326,500
-----------
INDUSTRIAL -- 66.3%
AK Steel Corp., Series 144A
7.88% 02/15/09 500 501,250
Allied Waste North America, Series B
7.88%(DAGGER) 01/01/09 2,503 2,427,425
Ameriserve Food Distributor
10.13% 07/15/07 1,000 715,000
Carmike Cinemas, Inc., Series 144A
9.38% 02/01/09 1,000 1,012,500
Dual Drilling Co.
9.88% 01/15/04 100 104,750
Echostar, Series 144A
9.38% 02/01/09 1,570 1,636,725
Fairchild Semiconductor, Inc.,
Series 144A
10.38% 10/01/07 1,000 1,017,500
Formica Corp., Series 144A
10.88% 03/01/09 1,200 1,194,000
Fountain View, Inc., Series B
11.25% 04/15/08 1,000 755,000
Golden Northwest Aluminum,
Series 144A
12.00% 12/15/06 250 251,250
Group One Automotive, Inc.
10.88% 03/01/09 2,000 1,995,000
High Voltage Engineering
10.50% 08/15/04 500 470,000
Hollywood Entertainment, Series B
10.63% 08/15/04 1,000 997,500
Hudson Respiratory Care, Inc.
9.13% 04/15/08 1,500 1,305,000
Par
Maturity (000) Value
-------- -------- -----------
CORPORATE BONDS (CONTINUED)
INDUSTRIAL (CONTINUED)
Intermedia Communications, Inc.,
Series 144A (STEP)
12.70% 03/01/09 $ 2,000 $ 1,270,000
IPC Info. Systems (STEP)
14.13% 05/01/08 2,000 1,310,000
James Cable Partners L.P., Series B
10.75% 08/15/04 2,000 2,150,000
JH Heafner Co., Series 144A
10.00% 05/15/08 1,000 1,025,000
K-III Communications Corp., Series B
8.50% 02/01/06 1,000 1,032,500
Kasper A.S.L. Ltd.
12.75% 03/31/04 1,500 1,440,000
Knology Hldgs., Inc. (STEP)
15.37% 10/15/07 1,000 547,500
Muzak L.L.C., Series 144A
9.88% 03/15/09 500 507,500
National Equipment Services, Series D
10.00% 11/30/04 2,000 2,050,000
Northeast Optic Network
12.75% 08/15/08 1,000 1,045,000
Pogo Producing Co., Series 144A
10.38% 02/15/09 1,000 1,010,000
Polaroid Corp.
11.50% 02/15/06 1,000 1,037,500
Precision Partners, Inc., Series 144A
12.00% 03/15/09 500 510,000
R&B Falcon Corp., Series 144A
9.50% 12/15/08 1,095 952,650
Revlon Consumer Products
8.63% 02/01/08 500 460,000
Sinclair Broadcast Group
9.00% 07/15/07 2,000 2,050,000
Sonic Automotive, Inc., Series B
11.00% 08/01/08 2,000 1,990,000
Tropical Sportswear Intl., Series A
11.00% 06/15/08 1,750 1,841,875
U.S. Home
8.88% 02/15/09 1,000 985,000
-----------
37,597,425
-----------
SPECIAL PURPOSE -- 9.9%
Nextel Partners, Inc., Series E (STEP)
13.94% 02/01/09 4,100 2,429,250
Penhall Acquisition Corp.
12.00% 08/01/06 2,000 2,010,000
Pinnacle Hldgs., Inc. (STEP)
11.30% 03/15/08 2,000 1,195,000
-----------
5,634,250
-----------
TELECOMMUNICATIONS -- 5.9%
Iridium L.L.C. Capital Corp., Series A
13.00% 07/15/05 2,000 870,000
Teligent, Inc.
11.50% 12/01/07 1,500 1,428,750
Viatel, Inc., Series 144A
11.50% 03/15/09 1,000 1,040,000
-----------
3,338,750
-----------
TOTAL CORPORATE BONDS
(Cost $49,694,268) 49,896,925
-----------
See accompanying notes to financial statements.
45
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
HIGH YIELD BOND PORTFOLIO (CONCLUDED)
Par
AS OF MARCH 31, 1999 (UNAUDITED) Maturity (000) Value
-------- -------- -----------
SHORT TERM INVESTMENTS -- 0.1%
Galileo Money Market Fund
(Cost $56,564) $ 57 $ 56,564
-----------
TOTAL INVESTMENTS IN
SECURITIES
(Cost $58,598,480*) 104.2% 59,052,222
LIABILITIES IN EXCESS OF
OTHER ASSETS (4.2%) (2,352,525)
------ -----------
NET ASSETS (Applicable to 10 BlackRock
shares, 4,519,835 Institutional shares,
10 Service shares, 291,534 Investor A
shares, 646,110 Investor B shares and
150,589 Investor C shares outstanding) 100.0% $56,699,697
====== ===========
NET ASSET VALUE AND REDEMPTION
PRICE PER BLACKROCK,
INSTITUTIONAL, SERVICE AND
INVESTOR A SHARE
($48,644,932 (DIVIDE) 4,811,389) $10.11
======
OFFERING PRICE PER BLACKROCK,
INSTITUTIONAL AND SERVICE SHARE $10.11
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.11 (DIVIDE) 0.950) $10.64
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($6,532,256 (DIVIDE) 646,110) $10.11
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($1,522,509 (DIVIDE) 150,589) $10.11
======
- -------------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 1,687,314
Gross unrealized depreciation (1,233,572)
-----------
$ 453,742
===========
**Rates shown are the rates as of March 31, 1999.
(DAGGER) Partial principal in the amount of $2,502,000 has been pledged as
collateral for reverse repurchase agreements.
--------------------------
INVESTMENT ABBREVIATIONS
CPI Consumer Price Index
GO General Obligation
IO Interest Only
PIK Payment In Kind
PO Principal Only
STEP Step Bonds
--------------------------
See accompanying notes to financial statements.
46
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
BLACKROCK FUNDS
STATEMENT OF OPERATION
<TABLE>
<CAPTION>
Intermediate
Low Duration Government Intermediate Core Government
Bond Bond Bond Bond Income
FOR THE PERIOD ENDED MARCH 31, 1999 (UNAUDITED) Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment income:
Interest ................................... $ 13,220,141 $ 15,380,206 $ 22,264,157 $ 28,927,907 $ 1,392,322
------------ ------------ ------------ ------------ ------------
Expenses:
Investment advisory fee .................... 771,984 1,161,662 1,399,575 2,187,667 101,811
Administration fee ......................... 338,316 512,676 630,314 937,251 46,769
Custodian fee .............................. 38,380 46,969 60,772 84,943 9,240
Transfer agent fee ......................... 43,845 76,893 85,213 143,278 28,419
Shareholders servicing fees ................ 18,543 35,543 23,439 82,941 50,525
Shareholders processing fees ............... 16,473 30,068 22,208 71,720 30,315
Distribution fees .......................... 6,092 2,804 1,213 62,591 125,791
Legal and audit ............................ 14,049 16,724 26,047 23,715 1,069
Printing ................................... 37,997 30,432 57,646 100,108 3,038
Registration fees and
expenses ................................. 27,310 31,289 27,049 45,709 13,476
Trustees' fees and officer's
salary ................................... 2,708 3,718 4,553 7,004 778
Other ...................................... 6,991 7,068 9,001 15,957 4,617
------------ ------------ ------------ ------------ ------------
1,322,688 1,955,846 2,347,030 3,762,884 415,848
Less fees waived ........................... (502,201) (453,751) (638,004) (1,196,190) (64,243)
------------ ------------ ------------ ------------ ------------
Total operating expenses ................... 820,487 1,502,095 1,709,026 2,566,694 351,605
------------ ------------ ------------ ------------ ------------
Interest expense .............................. 3,265,610 821,207 3,687,729 1,573,307 135,012
------------ ------------ ------------ ------------ ------------
Total expenses ............................. 4,086,097 2,323,302 5,396,755 4,140,001 486,617
------------ ------------ ------------ ------------ ------------
Net investment income ......................... 9,134,044 13,056,904 16,867,402 24,787,906 905,705
------------ ------------ ------------ ------------ ------------
Realized and unrealized gain
(loss) on investments and
foreign currency transactions:
Net realized gain (loss) from:
Investment transactions .................. 39,856 380,552 1,101,706 700,577 84,311
Future contracts ......................... 663,674 27,213 100,603 1,111,522 2,696
Foreign currency and forward
foreign currency transactions ......... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
703,530 407,765 1,202,309 1,812,099 87,007
------------ ------------ ------------ ------------ ------------
Change in unrealized appreciation
(depreciation) from:
Investments ............................. (4,174,358) (10,797,824) (12,771,851) (26,039,215) (1,587,210)
Futures ................................. 79,394 (1,241,810) (1,162,233) 780,929 195,297
Foreign currency and
forward foreign currency
transactions .......................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
(4,094,964) (12,039,634) (13,934,084) (25,258,286) (1,391,913)
------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments and
foreign currency transactions .............. (3,391,434) (11,631,869) (12,731,775) (23,446,187) (1,304,906)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations .................. $ 5,742,610 $ 1,425,035 $ 4,135,627 $ 1,341,719 $ (399,201)
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Managed International High Yeild
GNMA Income Bond Bond
Portfolio Portfolio Portfolio Portfolio 1
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment income:
Interest ................................... $ 3,900,144 $ 59,023,045 $ 1,224,059 $ 1,640,766
------------ ------------ ------------ ------------
Expenses:
Investment advisory fee .................... 322,166 3,888,896 142,054 79,604
Administration fee ......................... 134,724 1,695,973 59,395 36,527
Custodian fee .............................. 14,325 155,737 44,997 4,420
Transfer agent fee ......................... 19,461 259,686 12,134 7,233
Shareholders servicing fees ................ 1,293 234,326 8,221 4,182
Shareholders processing fees ............... 776 223,336 5,669 2,509
Distribution fees .......................... 798 19,484 12,180 9,611
Legal and audit ............................ 48,951 66,853 1,380 6,633
Printing ................................... 4,410 116,887 3,759 4,744
Registration fees and
expenses ................................. 27,907 51,579 18,615 53,818
Trustees' fees and officer's
salary ................................... 1,381 12,928 629 212
Other ...................................... 2,195 24,749 828 396
------------ ------------ ------------ ------------
578,387 6,750,434 309,861 209,889
Less fees waived ........................... (212,678) (1,000,849) (15,141) (81,225)
------------ ------------ ------------ ------------
Total operating expenses ................... 365,709 5,749,585 294,720 128,664
------------ ------------ ------------ ------------
Interest expense .............................. 70,384 5,582,069 -- 7,076
------------ ------------ ------------ ------------
Total expenses ............................. 436,093 11,331,654 294,720 135,740
------------ ------------ ------------ ------------
Net investment income ......................... 3,464,051 47,691,391 929,339 1,505,026
------------ ------------ ------------ ------------
Realized and unrealized gain
(loss) on investments and
foreign currency transactions:
Net realized gain (loss) from:
Investment transactions .................. 122,714 4,446,454 1,084,832 (100,958)
Future contracts ......................... 237,075 3,197,486 130,261 --
Foreign currency and forward
foreign currency transactions ......... -- -- (750,726) --
------------ ------------ ------------ ------------
359,789 7,643,940 464,367 (100,958)
------------ ------------ ------------ ------------
Change in unrealized appreciation
(depreciation) from:
Investments ............................. (2,296,238) (50,483,998) (3,322,618) 453,742
Futures ................................. 717,483 8,601,817 97,129 --
Foreign currency and
forward foreign currency
transactions .......................... -- -- 3,354,138 --
------------ ------------ ------------ ------------
(1,578,755) (41,882,181) 128,649 453,742
------------ ------------ ------------ ------------
Net gain (loss) on investments and
foreign currency transactions .............. (1,218,966) (34,238,241) 593,016 352,784
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations .................. $ 2,245,085 $ 13,453,150 $ 1,522,355 $ 1,857,810
============ ============ ============ ============
<FN>
- ------------------
1 For the period November 19, 1998 (commencement of operations) through March 31, 1999.
</FN>
</TABLE>
See accompanying notes to financial statements.
48-49
<PAGE>
BLACKROCK FUNDS
STATEMENT OF CASH FLOWS
LOW DURATION BOND PORTFOLIO
FOR THE PERIOD ENDED MARCH 31, 1999
<TABLE>
<S> <C>
Cash provided by (used in) Operating Activities
Investment income received ................................... $ 13,551,427
Operating expenses paid ...................................... (826,957)
Interest expense paid ........................................ (3,265,610)
-------------
Net increase in cash from operating activities .................. 9,458,860
Cash provided by (used in) Investing Activities
Purchases of long-term investments ........................... (303,558,919)
Proceeds from disposition of long-term portfolio investment .. 373,539,736
Net purchases of short-term investments ...................... (7,870,040)
-------------
Net increase in cash from investing activities .................. 62,110,777
Cash provided by (used in) Financing Activities
Cash dividends paid .......................................... (6,126,896)
Net borrowing relative to reverse repurchase agreements ...... (27,411,758)
Net proceeds related to capital stock transactions ........... (38,030,983)
-------------
Net decrease in cash from financing activities .................. (71,569,637)
-------------
Net increase (decrease) in cash ................................. --
Cash at beginning of year ....................................... --
-------------
Cash at end of period ........................................... $ --
=============
Net increase in net assets resulting from operations ............ $ 5,742,610
Adjustments:
Decrease in interest receivable .............................. 207,102
Amortization of premium and accretion of discount ............ 124,184
Increase in accrued expenses ................................. 16,139
Increase in prepaid expenses ................................. (22,609)
Net realized and changes in unrealized gain (loss) on investments 3,391,434
-------------
Total adjustments ............................................... 3,716,250
-------------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES .................. $ 9,458,860
=============
</TABLE>
See accompanying notes to financial statements.
50
<PAGE>
BLACKROCK FUNDS
STATEMENT OF CASH FLOWS
INTERMEDIATE BOND PORTFOLIO
FOR THE PERIOD ENDED MARCH 31, 1999
<TABLE>
<S> <C>
Cash provided by (used in) Operating Activities
Investment income received ................................... $ 20,717,576
Operating expenses paid ...................................... (1,661,697)
Interest expense paid ........................................ (3,687,729)
-------------
Net increase in cash from operating activities .................. 15,368,150
Cash provided by (used in) Investing Activities
Purchases of long-term investments ........................... (773,714,714)
Proceeds from disposition of long-term portfolio investment .. 785,217,451
Net proceeds from disposition of short-term investments ...... 4,305,791
-------------
Net increase in cash from investing activities .................. 15,808,528
Cash provided by (used in) Financing Activities
Cash dividends paid .......................................... (16,791,409)
Net borrowing relative to reverse repurchase agreements ...... (18,513,951)
Net proceeds related to capital stock transactions ........... 4,128,682
-------------
Net decrease in cash from financing activities .................. (31,176,678)
-------------
Net increase (decrease) in cash ................................. --
Cash at beginning of year ....................................... --
-------------
Cash at end of period ........................................... $ --
=============
Net increase in net assets resulting from operations ............ $ 4,135,627
Adjustments:
Increase in interest receivable .............................. (1,630,734)
Amoritization of premium and accretion of discount ........... 84,153
Increase in accrued expenses ................................. 72,613
Increase in prepaid expenses ................................. (25,284)
Net realized and changes in unrealized gain (loss) on investments 12,731,775
-------------
Total adjustments ............................................... 11,232,523
-------------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES .................. $ 15,368,150
=============
</TABLE>
See accompanying notes to financial statements.
51
<PAGE>
BLACKROCK FUNDS
STATEMENT OF CASH FLOWS
GOVERNMENT INCOME PORTFOLIO
FOR THE PERIOD ENDED MARCH 31, 1999
<TABLE>
<S> <C>
Cash provided by (used in) Operating Activities
Investment income received ................................... $ 1,433,297
Operating expenses paid ...................................... (303,969)
Interest expense paid ........................................ (135,012)
------------
Net increase in cash from operating activities .................. 994,316
Cash provided by (used in) Investing Activities
Purchases of long-term investments ........................... (69,503,330)
Proceeds from disposition of long-term portfolio investment .. 57,982,380
Net purchases of short-term investments ...................... (372,480)
------------
Net decrease in cash from investing activities .................. (11,893,430)
Cash provided by (used in) Financing Activities
Cash dividends paid .......................................... (584,775)
Net borrowing relative to reverse repurchase agreements ...... (2,939,021)
Net proceeds related to capital stock transactions ........... 14,422,910
------------
Net increase in cash from financing activities .................. 10,899,114
------------
Net increase (decrease) in cash ................................. --
Cash at beginning of year ....................................... --
------------
Cash at end of period ........................................... $ --
============
Net decrease in net assets resulting from operations ............ $ (399,201)
Adjustments:
Increase in interest receivable .............................. (22,421)
Amortization of premium and accretion of discount ............ 63,396
Increase in accrued expenses ................................. 53,565
Increase in prepaid expenses ................................. (5,929)
Net realized and changes in unrealized gain (loss) on investments 1,304,906
------------
Total adjustments ............................................... 1,393,517
------------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES .................. $ 994,316
============
</TABLE>
See accompanying notes to financial statements.
52
<PAGE>
BLACKROCK FUNDS
STATEMENT OF CASH FLOWS
MANAGED INCOME PORTFOLIO
FOR THE PERIOD ENDED MARCH 31, 1999
<TABLE>
<S> <C>
Cash provided by (used in) Operating Activities
Investment income received ................................... $ 59,712,792
Operating expenses paid ...................................... (5,619,440)
Interest expense paid ........................................ (5,582,069)
---------------
Net increase in cash from operating activities .................. 48,511,283
Cash provided by (used in) Investing Activities
Purchases of long-term investments ........................... (2,794,025,704)
Proceeds from disposition of long-term portfolio investment .. 2,620,368,788
Net proceeds from disposition of short-term investments ...... 31,098,671
---------------
Net decrease in cash from investing activities .................. (142,558,245)
Cash provided by (used in) Financing Activities
Cash dividends paid .......................................... (46,579,038)
Net borrowing relative to reverse repurchase agreements ...... 89,500,311
Net proceeds related to capital stock transactions ........... 51,125,689
---------------
Net increase in cash from financing activities .................. 94,046,962
---------------
Net increase (decrease) in cash ................................. --
Cash at beginning of year ....................................... --
---------------
Cash at end of period ........................................... $ --
===============
Net increase in net assets resulting from operations ............ $ 13,453,150
Adjustments:
Decrease in interest receivable .............................. 536,894
Amoritization of premium and accretion of discount ........... 152,853
Increase in accrued expenses ................................. 138,886
Increase in prepaid expenses ................................. (8,741)
Net realized and changes in unrealized gain (loss) on investments 34,238,241
---------------
Total adjustments ............................................... 35,058,133
---------------
NET INCREASE IN CASH FROM OPERATING ACTIVITIES .................. $ 48,511,283
===============
</TABLE>
See accompanying notes to financial statements.
53
<PAGE>
BLACKROCK FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Low Duration
Bond Portfolio
----------------------------------
For the
Six Months For the
Ended Year Ended
3/31/99 9/30/98
------------ ------------
(Unaudited)
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................ $ 9,134,044 $ 17,152,014
Net realized gain on investment, futures and foreign currency
related transactions ............................................... 703,530 1,489,712
Net unrealized gain (loss) on investment, futures and foreign currency
related transactions ............................................... (4,094,964) 2,743,208
------------ ------------
Net increase in net assets resulting from operations ................. 5,742,610 21,384,934
------------ ------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ...................................................... (3,440,750) (6,991,384)
Institutional Class .................................................. (5,210,276) (5,569,323)
Service Class ........................................................ (506,955) (4,082,739)
Investor A Class ..................................................... (69,031) (80,989)
Investor B Class ..................................................... (31,968) (8,711)
Investor C Class ..................................................... (6,916) (8,683)
------------ ------------
Total distribution from net investment income ........................ (9,265,896) (16,741,829)
------------ ------------
Net realized gains:
BlackRock Class ...................................................... -- --
Institutional Class .................................................. -- --
Service Class ........................................................ -- --
Investor A Class ..................................................... -- --
Investor B Class ..................................................... -- --
Investor C Class ..................................................... -- --
------------ ------------
Total distributions from net realized gains .......................... -- --
------------ ------------
Total distributions to shareholders .................................. (9,265,896) (16,741,829)
------------ ------------
Capital share transactions ............................................... (34,719,850) 69,892,569
------------ ------------
Total increase (decrease) in net assets .............................. (38,243,136) 74,535,674
------------ ------------
Net assets:
Beginning of period .................................................. 329,362,987 254,827,313
------------ ------------
End of period ........................................................ $291,119,851 $329,362,987
============ ============
</TABLE>
<TABLE>
<CAPTION>
Intermediate Government
Bond Portfolio
----------------------------------
For the
Six Months For the
Ended Year Ended
3/31/99 9/30/98
------------ ------------
(Unaudited)
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................ $ 13,056,904 $ 15,170,724
Net realized gain on investment, futures and foreign currency
related transactions ............................................... 407,765 5,199,304
Net unrealized gain (loss) on investment, futures and foreign currency
related transactions ............................................... (12,039,634) 9,657,287
------------ ------------
Net increase in net assets resulting from operations ................. 1,425,035 30,027,315
------------ ------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ...................................................... -- --
Institutional Class .................................................. (12,181,708) (11,983,641)
Service Class ........................................................ (801,887) (2,952,271)
Investor A Class ..................................................... (260,461) (313,796)
Investor B Class ..................................................... (9,963) (5,639)
Investor C Class ..................................................... (6,937) (7,054)
------------ ------------
Total distribution from net investment income ........................ (13,260,956) (15,262,401)
------------ ------------
Net realized gains:
BlackRock Class ...................................................... -- --
Institutional Class .................................................. (3,157,047) --
Service Class ........................................................ (217,126) --
Investor A Class ..................................................... (61,441) --
Investor B Class ..................................................... (3,213) --
Investor C Class ..................................................... (2,184) --
------------ ------------
Total distributions from net realized gains .......................... (3,441,011) --
------------ ------------
Total distributions to shareholders .................................. (16,701,967) (15,262,401)
------------ ------------
Capital share transactions ............................................... (10,717,457) 312,660,657
------------ ------------
Total increase (decrease) in net assets .............................. (25,994,389) 327,425,571
------------ ------------
Net assets:
Beginning of period .................................................. 480,018,299 152,592,728
------------ ------------
End of period ........................................................ $454,023,910 $480,018,299
============ ============
</TABLE>
<TABLE>
<CAPTION>
Intermediate
Bond Portfolio
---------------------------------
For the
Six Months For the
Ended Year Ended
3/31/99 9/30/98
------------ ------------
(Unaudited)
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................ $ 16,867,402 $ 25,472,505
Net realized gain on investment, futures and foreign currency
related transactions ............................................... 1,202,309 5,387,354
Net unrealized gain (loss) on investment, futures and foreign currency
related transactions ............................................... (13,934,084) 8,072,392
------------ ------------
Net increase in net assets resulting from operations ................. 4,135,627 38,932,251
------------ ------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ...................................................... (1,494,594) --
Institutional Class .................................................. (14,594,895) (20,947,487)
Service Class ........................................................ (781,258) (3,490,893)
Investor A Class ..................................................... (59,958) (68,932)
Investor B Class ..................................................... (6,816) (1,147)
Investor C Class ..................................................... (1,071) (817,619)
------------ ------------
Total distribution from net investment income ........................ (16,938,592) (25,326,078)
------------ ------------
Net realized gains:
BlackRock Class ...................................................... (5,190,232) --
Institutional Class .................................................. (510,365) (1,533,689)
Service Class ........................................................ (290,823) (278,199)
Investor A Class ..................................................... (21,977) (5,904)
Investor B Class ..................................................... (1,947) --
Investor C Class ..................................................... (132) --
------------ ------------
Total distributions from net realized gains .......................... (6,015,476) (1,817,792)
------------ ------------
Total distributions to shareholders .................................. (22,954,068) (27,143,870)
------------ ------------
Capital share transactions ............................................... 11,351,960 205,815,141
------------ ------------
Total increase (decrease) in net assets .............................. (7,466,481) 217,603,522
------------ ------------
Net assets:
Beginning of period .................................................. 566,744,493 349,140,971
------------ ------------
End of period ........................................................ $559,278,012 $566,744,493
============ ============
</TABLE>
<TABLE>
<CAPTION>
Core
Bond Portfolio
----------------------------------
For the
Six Months For the
Ended Year Ended
3/31/99 9/30/98
------------ ------------
(Unaudited)
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................................................ $ 24,787,906 $ 42,612,702
Net realized gain on investment, futures and foreign currency
related transactions ............................................... 1,812,099 17,428,853
Net unrealized gain (loss) on investment, futures and foreign currency
related transactions ............................................... (25,258,286) 13,393,733
------------ ------------
Net increase in net assets resulting from operations ................. 1,341,719 73,435,288
------------ ------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ...................................................... (3,150,254) (5,050,600)
Institutional Class .................................................. (20,292,903) (28,236,789)
Service Class ........................................................ (2,084,342) (194,059)
Investor A Class ..................................................... (159,226) (9,446,081)
Investor B Class ..................................................... (309,566) (398,527)
Investor C Class ..................................................... (89,082) (27,851)
------------ ------------
Total distribution from net investment income ........................ (26,085,373) (43,353,907)
------------ ------------
Net realized gains:
BlackRock Class ...................................................... (13,661,822) (3,729,958)
Institutional Class .................................................. (1,870,281) (450,932)
Service Class ........................................................ (1,451,220) (1,587,760)
Investor A Class ..................................................... (110,191) (23,612)
Investor B Class ..................................................... (256,534) (55,299)
Investor C Class ..................................................... (67,797) (1,658)
------------ ------------
Total distributions from net realized gains .......................... (17,417,845) (5,849,219)
------------ ------------
Total distributions to shareholders .................................. (43,503,218) (49,203,126)
------------ ------------
Capital share transactions ............................................... 118,448,566 259,333,943
------------ ------------
Total increase (decrease) in net assets .............................. 76,287,067 283,566,105
------------ ------------
Net assets:
Beginning of period .................................................. 855,534,355 571,968,250
------------ ------------
End of period ........................................................ $931,821,422 $855,534,355
============ ============
</TABLE>
See accompanying notes to financial statements.
54-55
<PAGE>
BLACKROCK FUNDS
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
Government GNMA
Income Portfolio Portfolio
--------------------------- --------------------------------
For the For the For the
Six Months For the Six Months Period 5/18/98 1
Ended Year Ended Ended through
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 ......................................... $ 905,705 $ 1,235,776 $ 3,464,051 $ 2,681,619
Net realized gain (loss)on investment, futures and foreign
currency related transactions ............................... 87,007 754,990 359,789 687,615
Net unrealized gain (loss) on investment, futures and foreign
currency related transactions ............................... (1,391,913) 607,625 (1,578,755) 482,471
------------ ------------ ------------- -------------
Net increase (decrease) in net assets resulting from operations (399,201) 2,598,391 2,245,085 3,851,705
------------ ------------ ------------- -------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ............................................... -- -- -- --
Institutional Class ........................................... -- -- (3,504,987) (2,564,992)
Service Class ................................................. -- -- (3) (2)
Investor A Class .............................................. (199,308) (331,498) (22,811) (2,179)
Investor B Class .............................................. (780,669) (965,806) (5,126) (923)
Investor C Class .............................................. (65,999) (69,148) (13) (2)
------------ ------------ ------------- -------------
Total distribution from net investment income ................. (1,045,976) (1,366,452) (3,532,940) (2,568,098)
------------ ------------ ------------- -------------
Net realized gains:
BlackRock Class ............................................... -- -- -- --
Institutional Class ........................................... -- -- (216,280) --
Service Class ................................................. -- -- -- --
Investor A Class .............................................. (101,189) (51,565) (1,241) --
Investor B Class .............................................. (445,394) (226,059) (413) --
Investor C Class .............................................. (37,364) (9,696) (1) --
------------ ------------ ------------- -------------
Total distributions from net realized gains ................... (583,947) (287,320) (217,935) --
------------ ------------ ------------- -------------
Total distributions to shareholders ........................... (1,629,923) (1,653,772) (3,750,875) (2,568,098)
------------ ------------ ------------- -------------
Capital share transactions ........................................ 15,482,365 11,295,834 (2,010,711) 117,456,386
------------ ------------ ------------- -------------
Total increase (decrease) in net assets ....................... 13,453,241 12,240,453 (3,516,501) 118,739,993
------------ ------------ ------------- -------------
Net assets:
Beginning of period ........................................... 32,761,188 20,520,735 118,739,993 --
------------ ------------ ------------- -------------
End of period ................................................. $ 46,214,429 $ 32,761,188 $ 115,223,492 $ 118,739,993
============ ============ ============= =============
</TABLE>
<TABLE>
<CAPTION>
Managed International
Income Portfolio Bond 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 ......................................... $ 47,691,391 $ 67,146,905 $ 929,339 $ 1,952,167
Net realized gain (loss)on investment, futures and foreign
currency related transactions ............................... 7,643,940 25,885,211 464,367 3,224,013
Net unrealized gain (loss) on investment, futures and foreign
currency related transactions ............................... (41,882,181) 12,918,888 128,649 576,217
--------------- --------------- ------------ ------------
Net increase (decrease) in net assets resulting from operations 13,453,150 105,951,004 1,522,355 5,752,397
--------------- --------------- ------------ ------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ............................................... -- -- -- --
Institutional Class ........................................... (39,729,447) (47,894,845) (1,148,038) (2,043,103)
Service Class ................................................. (7,891,609) (19,460,184) (60,372) (320,780)
Investor A Class .............................................. (466,370) (829,070) (43,971) (64,752)
Investor B Class .............................................. (124,710) (111,579) (33,770) (51,701)
Investor C Class .............................................. -- -- (31,066) (37,046)
--------------- --------------- ------------ ------------
Total distribution from net investment income ................. (48,212,136) (68,295,678) (1,317,217) (2,517,382)
--------------- --------------- ------------ ------------
Net realized gains:
BlackRock Class ............................................... -- -- -- --
Institutional Class ........................................... (19,011,738) (2,168,258) (237,345) (1,522,323)
Service Class ................................................. (3,866,356) (1,199,800) (12,747) (266,359)
Investor A Class .............................................. (252,718) (70,278) (9,900) (41,747)
Investor B Class .............................................. (71,999) (4,924) (8,562) (38,402)
Investor C Class .............................................. -- -- (7,123) (21,891)
--------------- --------------- ------------ ------------
Total distributions from net realized gains ................... (23,202,811) (3,443,260) (275,677) (1,890,722)
--------------- --------------- ------------ ------------
Total distributions to shareholders ........................... (71,414,947) (71,738,938) (1,592,894) (4,408,104)
--------------- --------------- ------------ ------------
Capital share transactions ........................................ 76,171,824 758,310,929 3,595,989 (3,333,959)
--------------- --------------- ------------ ------------
Total increase (decrease) in net assets ....................... 18,210,027 792,522,995 3,525,450 (1,989,666)
--------------- --------------- ------------ ------------
Net assets:
Beginning of period ........................................... 1,612,231,266 819,708,271 50,497,190 52,486,856
--------------- --------------- ------------ ------------
End of period ................................................. $ 1,630,441,293 $ 1,612,231,266 $ 54,022,640 $ 50,497,190
=============== =============== ============ ============
</TABLE>
<TABLE>
<CAPTION>
High Yield
Bond Portfolio
----------------
For the
Period 11/19/99 1
through 03/31/99
----------------
(Unaudited)
<S> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ......................................... $ 1,505,026
Net realized gain (loss)on investment, futures and foreign
currency related transactions ............................... (100,958)
Net unrealized gain (loss) on investment, futures and foreign
currency related transactions ............................... 453,742
------------
Net increase (decrease) in net assets resulting from operations 1,857,810
------------
Distributions to shareholders from:
Net investment income:
BlackRock Class ............................................... (3)
Institutional Class ........................................... (1,361,481)
Service Class ................................................. (3)
Investor A Class .............................................. (37,685)
Investor B Class .............................................. (90,532)
Investor C Class .............................................. (22,837)
------------
Total distribution from net investment income ................. (1,512,541)
------------
Net realized gains:
BlackRock Class ............................................... --
Institutional Class ........................................... --
Service Class ................................................. --
Investor A Class .............................................. --
Investor B Class .............................................. --
Investor C Class .............................................. --
------------
Total distributions from net realized gains ................... --
------------
Total distributions to shareholders ........................... (1,512,541)
------------
Capital share transactions ........................................ 56,354,428
------------
Total increase (decrease) in net assets ....................... 56,699,697
------------
Net assets:
Beginning of period ........................................... --
------------
End of period ................................................. $ 56,699,697
============
<FN>
- ------------------------
1 Commencement of operations.
</FN>
</TABLE>
See accompanying notes to financial statements.
56-57
<PAGE>
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
ASSET (LOSS) ON DISTRIBUTIONS IN EXCESS FROM NET IN EXCESS
VALUE NET INVESTMENTS FROM NET OF NET REALIZED OF NET
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT CAPITAL REALIZED
OF PERIOD INCOME AND UNREALIZED) INCOME INCOME GAINS GAINS
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------
LOW DURATION BOND PORTFOLIO
- ---------------------------
BLACKROCK CLASS
10/1/98 through 3/31/99 14 $10.03 $0.30 $(0.11) $(0.30) $ -- $ -- $ --
9/30/98 9.89 0.59 0.12 (0.57) -- -- --
6/3/97 1 through 9/30/97 9.82 0.19 0.07 (0.19) -- -- --
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $10.03 $0.29 $(0.10) $(0.30) $ -- $ -- $ --
9/30/98 9.89 0.56 0.14 (0.56) -- -- --
9/30/97 9.79 0.58 0.08 (0.56) -- -- --
4/1/96 through 9/30/96 9.79 0.28 (0.01) (0.27) -- -- --
7/1/95 through 3/31/96 9.83 0.42 -- (0.41) (0.04) (0.01) --
6/30/95 9.71 0.58 0.13 (0.58) -- (0.01) --
6/30/94 9.96 0.48 (0.25) (0.48) -- -- --
SERVICE CLASS
10/1/98 through 3/31/99 14 $10.03 $0.28 $(0.11) $(0.28) $ -- $ -- $ --
9/30/98 9.89 0.66 0.01 (0.53) -- -- --
9/30/97 9.79 0.54 0.09 (0.53) -- -- --
4/1/96 through 9/30/96 9.79 0.26 (0.01) (0.25) -- -- --
1/12/96 1 through 3/31/96 9.91 0.11 (0.12) (0.11) -- -- --
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $10.03 $0.26 $(0.11) $(0.26) $ -- $ -- $ --
9/30/98 9.89 0.51 0.14 (0.51) -- -- --
9/30/97 9.79 0.52 0.09 (0.51) -- -- --
4/1/96 through 9/30/96 9.79 0.25 (0.01) (0.24) -- -- --
1/12/96 1 through 3/31/96 9.91 0.10 (0.12) (0.10) -- -- --
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $10.03 $0.23 $(0.10) $(0.24) $ -- $ -- $ --
9/30/98 9.89 0.41 0.17 (0.44) -- -- --
11/18/96 1 through 9/30/97 9.86 0.41 -- (0.38) -- -- --
INVESTOR C CLASS
10/1/98 through 3/31/99 14 $10.03 $0.24 $(0.11) $(0.24) $ -- $ -- $ --
9/30/98 9.89 0.44 0.14 (0.44) -- -- --
2/24/97 1 through 9/30/97 9.87 0.26 0.02 (0.26) -- -- --
- --------------------------------------
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $10.48 $0.29 $(0.26) $(0.29) $ -- $(0.08) $ --
9/30/98 10.11 0.57 0.39 (0.59) -- -- --
9/30/97 9.92 0.59 0.19 (0.59) -- -- --
9/30/96 10.02 0.58 (0.11) (0.57) -- -- --
9/30/95 9.64 0.58 0.38 (0.58) -- -- --
9/30/94 10.60 0.55 (0.86) (0.55) -- (0.10) --
SERVICE CLASS
10/1/98 through 3/31/99 14 $10.48 $0.28 $(0.26) $(0.28) $ -- $(0.08) $ --
9/30/98 10.11 0.58 0.35 (0.56) -- -- --
9/30/97 9.92 0.56 0.19 (0.56) -- -- --
9/30/96 10.02 0.56 (0.12) (0.54) -- -- --
9/30/95 9.64 0.56 0.37 (0.55) -- -- --
9/30/94 10.60 0.53 (0.86) (0.53) -- (0.10) --
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $10.48 $0.26 $(0.25) $(0.27) $ -- $(0.08) $ --
9/30/98 10.11 0.53 0.38 (0.54) -- -- --
9/30/97 9.92 0.54 0.19 (0.54) -- -- --
9/30/96 10.03 0.55 (0.13) (0.53) -- -- --
9/30/95 9.64 0.55 0.39 (0.55) -- -- --
9/30/94 10.60 0.53 (0.87) (0.52) -- (0.10) --
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $10.48 $0.23 $(0.26) $(0.23) $ -- $(0.08) $ --
9/30/98 10.11 0.47 0.37 (0.47) -- -- --
10/11/96 1 through 9/30/97 9.98 0.45 0.13 (0.45) -- -- --
INVESTOR C CLASS
10/1/98 through 3/31/99 14 $10.48 $0.23 $(0.26) $(0.23) $ -- $(0.08) $ --
9/30/98 10.11 0.47 0.37 (0.47) -- -- --
10/8/96 1 through 9/30/97 9.98 0.45 0.13 (0.45) -- -- --
- ---------------------------
INTERMEDIATE BOND PORTFOLIO
- ---------------------------
BLACKROCK CLASS
10/1/98 through 3/31/99 14 $ 9.67 $0.29 $(0.22) $(0.29) $ -- $(0.10) $ --
5/1/98 1 through 9/30/98 9.46 0.24 0.26 (0.24) -- (0.05) --
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
NET NET RATIO OF EXPENSES INVESTMENT INCOME
ASSET ASSETS RATIO OF TO AVERAGE RATIO OF NET TO AVERAGE
VALUE END OF EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
END OF TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
PERIOD RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------
LOW DURATION BOND PORTFOLIO
- ---------------------------
BLACKROCK CLASS
10/1/98 through 3/31/99 14 $ 9.92 1.97% $ 94,159 0.40%2,5 0.73%2 8.12%2 7.79%2 71%
9/30/98 10.03 7.44 140,493 0.40 5 0.80 7.12 6.72 227
6/3/97 1 through 9/30/97 9.89 2.68 68,300 0.40 2,5 0.73 2 6.58 2 6.25 2 371
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $ 9.92 1.90% $ 173,330 0.55%2,5 0.88%2 8.03%2 7.70%2 71%
9/30/98 10.03 7.28 166,887 0.55 5 0.95 7.02 6.62 227
9/30/97 9.89 6.89 102,490 0.55 5 0.88 6.14 5.81 371
4/1/96 through 9/30/96 9.79 2.70 135,686 0.55 2,5 0.83 2 5.72 2 5.45 2 228
7/1/95 through 3/31/96 9.79 4.25 52,843 0.63 2,5 0.83 2 5.25 2 5.05 2 185
6/30/95 9.83 6.99 44,486 0.57 1.05 6.08 5.60 586
6/30/94 9.71 2.33 31,265 0.57 1.02 4.70 4.25 455
SERVICE CLASS
10/1/98 through 3/31/99 14 $ 9.92 1.75% $ 17,150 0.85%2,5 1.18%2 7.73%2 7.40%2 71%
9/30/98 10.03 6.96 18,393 0.85 5 1.25 6.62 6.22 227
9/30/97 9.89 6.57 82,873 0.85 5 1.18 5.86 5.53 371
4/1/96 through 9/30/96 9.79 2.54 91,870 0.85 2,5 1.13 2 5.40 2 5.13 2 228
1/12/96 1 through 3/31/96 9.79 (0.11) 181,670 0.85 2,5 1.05 2 5.25 2 5.05 2 185
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $ 9.92 1.66%3 $ 2,090 1.01%2,5 1.34%2 7.53%2 7.20%2 71%
9/30/98 10.03 6.78 3 2,850 1.02 5 1.42 6.59 6.19 227
9/30/97 9.89 6.39 3 1,079 1.02 5 1.35 5.72 5.39 371
4/1/96 through 9/30/96 9.79 2.46 3 938 1.02 2,5 1.30 2 5.20 2 4.92 2 228
1/12/96 1 through 3/31/96 9.79 (0.15)3 719 1.01 2,5 1.21 2 4.94 2 4.74 2 185
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $ 9.92 1.28%4 $ 3,863 1.68%2,5 2.01%2 6.43%2 6.10%2 71%
9/30/98 10.03 5.99 4 398 1.76 5 2.16 5.82 5.42 227
11/18/96 1 through 9/30/97 9.89 4.31 4 13 1.73 2,5 2.06 2 4.96 2 4.63 2 371
INVESTOR C CLASS
10/1/98 through 3/31/99 14 $ 9.92 1.28%4 $ 528 1.70%2,5 2.03%2 6.55%2 6.22%2 71%
9/30/98 10.03 5.99 4 342 1.75 5 2.15 5.70 5.30 227
2/24/97 1 through 9/30/97 9.89 2.91 4 72 1.72 2,5 2.05 2 5.00 2 4.67 2 371
- --------------------------------------
INTERMEDIATE GOVERNMENT BOND PORTFOLIO
- --------------------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $10.14 0.29% $ 411,267 0.60%2,6 0.80%2 6.01%2 5.81%2 81%
9/30/98 10.48 9.83 441,691 0.59 6 0.85 5.76 5.50 272
9/30/97 10.11 8.08 96,605 0.55 6 0.86 6.00 5.69 291
9/30/96 9.92 4.82 126,312 0.53 6 0.83 6.03 5.73 580
9/30/95 10.02 10.28 134,835 0.42 6 0.79 5.94 5.57 247
9/30/94 9.64 (3.08) 128,974 0.40 0.80 5.48 5.08 9
SERVICE CLASS
10/1/98 through 3/31/99 14 $10.14 0.14% $ 28,820 0.90%2,6 1.10%2 5.71%2 5.51%2 81%
9/30/98 10.48 9.50 29,697 0.88 6 1.14 5.54 5.28 272
9/30/97 10.11 7.75 50,535 0.85 6 1.16 5.70 5.39 291
9/30/96 9.92 4.51 47,494 0.83 6 1.13 5.73 5.43 580
9/30/95 10.02 9.99 49,762 0.69 6 1.06 5.67 5.30 247
9/30/94 9.64 (3.31) 60,812 0.65 1.05 5.30 4.90 9
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $10.14 0.06%3 $ 13,117 1.07%2,6 1.27%2 5.48%2 5.28%2 81%
9/30/98 10.48 9.32 3 7,972 1.05 6 1.31 5.37 5.11 272
9/30/97 10.11 7.57 3 5,374 1.02 6 1.33 5.54 5.23 291
9/30/96 9.92 4.36 3 5,903 0.95 6 1.25 5.64 5.35 580
9/30/95 10.03 9.98 3 9,802 0.70 6 1.07 5.67 5.30 247
9/30/94 9.64 (3.36)3 8,508 0.65 1.05 5.24 4.84 9
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $10.14 (0.31)%4 $ 486 1.82%2,6 2.02%2 4.78%2 4.58%2 81%
9/30/98 10.48 8.51 4 361 1.79 6 2.05 4.66 4.40 272
10/11/96 1 through 9/30/97 10.11 5.94 4 28 1.77 2,6 2.08 2 4.75 2 4.44 2 291
INVESTOR C CLASS
10/1/98 through 3/31/99 14 $10.14 (0.31)%4 $ 334 1.82%2,6 2.02%2 4.79%2 4.59%2 81%
9/30/98 10.48 8.51 4 299 1.78 6 2.04 4.51 4.25 272
10/8/96 1 through 9/30/97 10.11 5.94 4 51 1.71 2,6 2.02 2 4.57 2 4.26 2 291
- ---------------------------
INTERMEDIATE BOND PORTFOLIO
- ---------------------------
BLACKROCK CLASS
10/1/98 through 3/31/99 14 $ 9.35 0.81% $ 42,609 0.45%2,7 0.68%2 7.49%2 7.26%2 101%
5/1/98 1 through 9/30/98 9.67 8.86 48,365 0.45 2,7 0.72 2 6.96 2 6.69 2 221
</TABLE>
See accompanying notes to financial statements.
58-59
<PAGE>
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
ASSET (LOSS) ON DISTRIBUTIONS IN EXCESS FROM NET IN EXCESS
VALUE NET INVESTMENTS FROM NET OF NET REALIZED OF NET
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT CAPITAL REALIZED
OF PERIOD INCOME AND UNREALIZED) INCOME INCOME GAINS GAINS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $ 9.67 $0.29 $(0.22) $(0.29) $ -- $(0.10) $ --
9/30/98 9.49 0.57 0.23 (0.57) -- (0.05) --
9/30/97 9.32 0.58 0.17 (0.58) -- -- --
9/30/96 9.43 0.56 (0.09) (0.55) -- (0.03) --
9/30/95 9.05 0.56 0.38 (0.56) -- -- --
9/30/94 10.01 0.54 (0.88) (0.56) -- (0.06) --
SERVICE CLASS
10/1/98 through 3/31/99 14 $ 9.67 $0.26 $(0.21) $(0.27) $ -- $(0.10) $ --
9/30/98 9.49 0.58 0.20 (0.55) -- (0.05) --
9/30/97 9.32 0.55 0.17 (0.55) -- -- --
9/30/96 9.43 0.53 (0.09) (0.52) -- (0.03) --
9/30/95 9.05 0.54 0.38 (0.54) -- -- --
9/30/94 10.01 0.54 (0.91) (0.53) -- (0.06) --
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $ 9.67 $0.25 $(0.21) $(0.26) $ -- $(0.10) $ --
9/30/98 9.49 0.53 0.23 (0.53) -- (0.05) --
9/30/97 9.32 0.53 0.17 (0.53) -- -- --
9/30/96 9.43 0.52 (0.09) (0.51) -- (0.03) --
9/30/95 9.05 0.54 0.38 (0.54) -- -- --
5/20/94 1 through 9/30/94 9.23 0.20 (0.17) (0.21) -- -- --
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $ 9.67 $0.23 $(0.22) $(0.23) $ -- $(0.10) $ --
2/5/98 1 through 9/30/98 9.51 0.29 0.21 (0.29) -- (0.05) --
INVESTOR C CLASS
10/16/98 1 through 3/31/99 14 $ 9.65 $0.20 $(0.20) $(0.20) $ -- $(0.10) $ --
- -------------------
CORE BOND PORTFOLIO
- -------------------
BLACKROCK CLASS
10/1/98 through 3/31/99 14 $10.12 $0.29 $(0.28) $(0.30) $ -- $(0.20) $ --
9/30/98 9.82 0.61 0.40 (0.62) -- (0.09) --
5/1/97 1 through 9/30/97 9.57 0.26 0.24 (0.25) -- -- --
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $10.12 $0.28 $(0.28) $(0.29) $ -- $(0.20) $ --
9/30/98 9.82 0.59 0.40 (0.60) -- (0.09) --
9/30/97 9.55 0.62 0.26 (0.61) -- -- --
4/1/96 through 9/30/96 9.61 0.30 (0.06) (0.30) -- -- --
7/1/95 though 3/31/96 9.85 0.47 (0.07) (0.47) -- (0.17) --
6/30/95 9.36 0.62 0.50 (0.62) -- (0.01) --
6/30/94 10.37 0.55 (0.60) (0.55) -- (0.41) --
SERVICE CLASS
10/1/98 through 3/31/99 14 $10.12 $0.27 $(0.28) $(0.28) $ -- $(0.20) $ --
9/30/98 9.82 0.56 0.40 (0.57) -- (0.09) --
9/30/97 9.55 0.59 0.26 (0.58) -- -- --
4/1/96 through 9/30/96 9.61 0.30 (0.07) (0.29) -- -- --
1/12/96 1 through 3/31/96 9.91 0.11 (0.30) (0.11) -- -- --
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $10.12 $0.26 $(0.28) $(0.27) $ -- $(0.20) $ --
9/30/98 9.82 0.55 0.40 (0.56) -- (0.09) --
9/30/97 9.55 0.58 0.26 (0.57) -- -- --
4/1/96 through 9/30/96 9.61 0.28 (0.06) (0.28) -- -- --
1/31/96 1 through 3/31/96 9.99 0.08 (0.38) (0.08) -- -- --
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $10.12 $0.22 $(0.28) $(0.23) $ -- $(0.20) $ --
9/30/98 9.82 0.47 0.40 (0.48) -- (0.09) --
9/30/97 9.55 0.51 0.26 (0.50) -- -- --
4/1/96 through 9/30/96 9.61 0.26 (0.07) (0.25) -- -- --
3/18/96 1 through 3/31/96 9.58 0.01 0.03 (0.01) -- -- --
INVESTOR C CLASS
10/1/98 through 3/31/99 14 $10.12 $0.22 $(0.28) $(0.23) $ -- $(0.20) $ --
9/30/98 9.82 0.47 0.40 (0.48) -- (0.09) --
2/28/97 1 through 9/30/97 9.64 0.29 0.17 (0.28) -- -- --
- ---------------------------
GOVERNMENT INCOME PORTFOLIO
- ---------------------------
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $10.84 $0.28 $(0.36) $(0.30) $ -- $(0.16) $ --
9/30/98 10.49 0.53 0.54 (0.61) -- (0.11) --
9/30/97 10.20 0.73 0.30 (0.74) -- -- --
9/30/96 10.68 0.68 (0.22) (0.66) -- (0.28) --
10/3/94 1 though 9/30/95 10.00 0.55 0.68 (0.55) -- -- --
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
NET NET RATIO OF EXPENSES INVESTMENT INCOME
ASSET ASSETS RATIO OF TO AVERAGE RATIO OF NET TO AVERAGE
VALUE END OF EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
END OF TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
PERIOD RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $ 9.35 0.73% $ 486,284 0.60%2,7 0.83%2 7.35%2 7.12%2 101%
9/30/98 9.67 8.81 490,674 0.59 7 0.86 7.18 6.91 221
9/30/97 9.49 8.40 295,709 0.53 7 0.82 6.63 6.34 321
9/30/96 9.32 5.10 207,909 0.53 7 0.83 6.27 5.97 670
9/30/95 9.43 10.76 124,979 0.47 7 0.81 6.18 5.84 262
9/30/94 9.05 (3.52) 71,896 0.45 0.88 5.54 5.11 92
SERVICE CLASS
10/1/98 through 3/31/99 14 $ 9.35 0.58% $ 27,170 0.90%2,7 1.13%2 7.05%2 6.82%2 101%
9/30/98 9.67 8.48 25,946 0.89 7 1.16 6.95 6.68 221
9/30/97 9.49 8.07 52,316 0.83 7 1.12 6.32 6.03 321
9/30/96 9.32 4.79 45,362 0.83 7 1.13 5.98 5.67 670
9/30/95 9.43 10.46 36,718 0.74 7 1.09 5.90 5.55 262
9/30/94 9.05 (3.80) 35,764 0.70 1.13 5.33 4.90 92
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $ 9.35 0.50%3 $ 2,403 1.07%2,7 1.30%2 6.97%2 6.74%2 101%
9/30/98 9.67 8.30 3 1,648 1.06 7 1.33 6.80 6.53 221
9/30/97 9.49 7.89 3 1,116 1.00 7 1.29 6.14 5.85 321
9/30/96 9.32 4.74 3 935 0.97 7 1.27 5.83 5.53 670
9/30/95 9.43 10.35 3 647 0.76 7 1.11 5.89 5.55 262
5/20/94 1 through 9/30/94 9.05 0.31 3 87 0.85 2 1.28 2 5.35 2 4.92 2 92
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $ 9.35 0.12%4 $ 714 1.75%2,7 1.98%2 5.97%2 5.74%2 101%
2/5/98 1 through 9/30/98 9.67 7.83 4 111 1.75 2 2.02 2 5.54 2 5.27 2 221
INVESTOR C CLASS
10/16/98 1 through 3/31/99 14 $ 9.35 0.12%4 $ 98 1.77%2,7 2.00%2 6.14%2 5.91%2 101%
- -------------------
CORE BOND PORTFOLIO
- -------------------
BLACKROCK CLASS
10/1/98 through 3/31/99 14 $ 9.63 0.18% $ 121,570 0.40%2,8 0.67%2 6.23%2 5.96%2 144%
9/30/98 10.12 10.74 92,723 0.40 8 0.74 6.42 6.08 405
5/1/97 1 through 9/30/97 9.82 5.30 48,139 0.40 2,8 0.69 2 6.70 2 6.41 2 441
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $ 9.63 0.10% $ 707,818 0.55%2,8 0.82%2 6.05%2 5.78%2 144%
9/30/98 10.12 10.57 673,823 0.55 8 0.89 6.28 5.94 405
9/30/97 9.82 10.03 393,657 0.55 8 0.85 6.81 6.52 441
4/1/96 through 9/30/96 9.55 2.55 162,626 0.55 2,8 0.84 2 6.75 2 6.45 2 308
7/1/95 though 3/31/96 9.61 3.93 64,707 0.66 2,8 0.91 2 5.89 2 5.64 2 723
6/30/95 9.85 11.79 32,191 0.55 1.75 6.62 5.43 435
6/30/94 9.36 (0.69) 12,507 0.55 2.65 5.61 3.51 722
SERVICE CLASS
10/1/98 through 3/31/99 14 $ 9.63 (0.05)% $ 76,781 0.85%2,8 1.12%2 5.76%2 5.49% 144%
9/30/98 10.12 10.24 70,111 0.85 8 1.19 6.05 5.71 405
9/30/97 9.82 9.71 122,308 0.85 8 1.14 6.59 6.31 441
4/1/96 through 9/30/96 9.55 2.40 117,207 0.85 2,8 1.14 2 6.33 2 6.04 2 308
1/12/96 1 through 3/31/96 9.61 (1.90) 232,040 0.85 2,8 1.10 2 5.46 2 5.21 2 723
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $ 9.63 (0.14)%3 $ 6,427 1.02%2,8 1.29%2 5.60%2 5.33%2 144%
9/30/98 10.12 10.04 3 5,108 0.98 8 1.32 5.78 5.44 405
9/30/97 9.82 9.52 3 2,441 1.01 8 1.30 6.31 6.02 441
4/1/96 through 9/30/96 9.55 2.36 3 320 1.02 2,8 1.31 2 6.29 2 6.00 2 308
1/31/96 1 through 3/31/96 9.61 (2.96)3 80 1.02 2,8 1.27 2 5.43 2 5.19 2 723
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $ 9.63 (0.51)%4 $ 13,983 1.77%2,8 2.04%2 4.85%2 4.58%2 144%
9/30/98 10.12 9.20 4 11,734 1.76 8 2.10 5.03 4.69 405
9/30/97 9.82 8.71 4 5,295 1.75 8 2.04 5.61 5.32 441
4/1/96 through 9/30/96 9.55 1.98 4 1,497 1.72 2,8 2.01 2 5.68 2 5.39 2 308
3/18/96 1 through 3/31/96 9.61 (0.33)4 77 1.77 2,8 2.02 2 4.71 2 4.46 2 723
INVESTOR C CLASS
10/1/98 through 3/31/99 14 $ 9.63 (0.51)%4 $ 5,242 1.75%2,8 2.02%2 4.93%2 4.66%2 144%
9/30/98 10.12 9.20 4 2,035 1.73 8 2.07 4.92 4.58 405
2/28/97 1 through 9/30/97 9.82 4.82 4 128 1.74 2,8 2.03 2 5.41 2 5.12 2 441
- ---------------------------
GOVERNMENT INCOME PORTFOLIO
- ---------------------------
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $10.30 (0.67)%3 $ 7,026 1.07%2,9 1.39%2 5.77%2 5.45%2 111%
9/30/98 10.84 11.13 3 6,045 1.05 9 1.63 5.86 5.28 477
9/30/97 10.49 10.48 3 4,876 1.02 9 1.74 8.02 7.30 393
9/30/96 10.20 4.43 3 3,651 0.91 9 1.67 8.59 7.83 434
10/3/94 1 though 9/30/95 10.68 14.27 3 2,990 0.37 2,9 1.81 2 6.89 2 5.44 2 258
</TABLE>
See accompanying notes to financial statements.
60-61
<PAGE>
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
ASSET (LOSS) ON DISTRIBUTIONS IN EXCESS FROM NET IN EXCESS
VALUE NET INVESTMENTS FROM NET OF NET REALIZED OF NET
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT CAPITAL REALIZED
OF PERIOD INCOME AND UNREALIZED) INCOME INCOME GAINS GAINS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $10.84 $0.24 $(0.36) $(0.26) $ -- $(0.16) $ --
9/30/98 10.49 0.54 0.50 (0.58) -- (0.11) --
9/30/97 10.20 0.66 0.30 (0.67) -- -- --
9/30/96 10.68 0.60 (0.21) (0.59) -- (0.28) --
10/3/94 1 through 9/30/95 10.00 0.50 0.68 (0.50) -- -- --
INVESTOR C CLASS
10/1/98 through 3/31/99 14 $10.84 $0.26 $(0.38) $(0.26) $ -- $(0.16) $ --
9/30/98 10.49 0.51 0.53 (0.58) -- (0.11) --
2/28/97 1 through 9/30/97 10.30 0.37 0.20 (0.38) -- -- --
- --------------
GNMA PORTFOLIO
- --------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $10.11 $0.29 $(0.10) $(0.30) $ -- $(0.02) $ --
5/18/98 1 through 9/30/98 10.00 0.23 0.10 (0.22) -- -- --
SERVICE CLASS
10/1/98 through 3/31/99 14 $10.11 $0.28 $(0.10) $(0.29) $ -- $(0.02) $ --
5/18/98 1 through 9/30/98 10.00 0.27 0.04 (0.20) -- -- --
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $10.11 $0.28 $(0.11) $(0.28) $ -- $(0.02) $ --
5/18/98 1 through 9/30/98 10.00 0.20 0.11 (0.20) -- -- --
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $10.11 $0.23 $(0.10) $(0.24) $ -- $(0.02) $ --
5/18/98 1 through 9/30/98 10.00 0.17 0.11 (0.17) -- -- --
INVESTOR C CLASS
10/1/98 through 3/31/99 14 $10.11 $0.22 $(0.09) $(0.24) $ -- $(0.02) $ --
5/18/98 1 through 9/30/98 10.00 0.23 0.05 (0.17) -- -- --
- ------------------------
MANAGED INCOME PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $10.64 $0.31 $(0.23) $(0.31) $ -- $(0.15) $ --
9/30/98 10.41 0.67 0.26 (0.65) -- (0.05) --
9/30/97 10.09 0.68 0.32 (0.68) -- -- --
9/30/96 10.38 0.64 (0.21) (0.62) -- (0.10) --
9/30/95 9.79 0.65 0.60 (0.65) (0.01) -- --
9/30/94 11.17 0.64 (1.21) (0.64) (0.02) (0.14) (0.01)
SERVICE CLASS
10/1/98 through 3/31/99 14 $10.64 $0.30 $(0.23) $(0.30) $ -- $(0.15) $ --
9/30/98 10.41 0.60 0.30 (0.62) -- (0.05) --
9/30/97 10.09 0.66 0.31 (0.65) -- -- --
9/30/96 10.38 0.61 (0.20) (0.60) -- (0.10) --
9/30/95 9.79 0.63 0.60 (0.63) (0.01) -- --
9/30/94 11.17 0.59 (1.18) (0.62) (0.02) (0.14) (0.01)
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $10.64 $0.29 $(0.23) $(0.29) $ -- $(0.15) $ --
9/30/98 10.41 0.59 0.29 (0.60) -- (0.05) --
9/30/97 10.09 0.65 0.31 (0.64) -- -- --
9/30/96 10.38 0.59 (0.20) (0.58) -- (0.10) --
9/30/95 9.79 0.60 0.60 (0.60) (0.01) -- --
9/30/94 11.18 0.57 (1.19) (0.60) (0.02) (0.14) (0.01)
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $10.64 $0.25 $(0.23) $(0.25) $ -- $(0.15) $ --
9/30/98 10.41 0.52 0.29 (0.53) -- (0.05) --
7/15/97 1 through 9/30/97 10.39 0.09 0.02 (0.09) -- -- --
- ----------------------------
INTERNATIONAL BOND PORTFOLIO
- ----------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $11.24 $0.20 $0.13 $(0.29) $ -- $(0.06) $ --
9/30/98 10.95 0.45 0.83 (0.57) -- (0.42) --
9/30/97 11.71 0.78 0.42 (1.47) -- (0.49) --
6/10/96 1 through 9/30/96 11.37 0.21 0.30 (0.17) -- -- --
SERVICE CLASS
10/1/98 through 3/31/99 14 $11.24 $0.18 $0.13 $(0.27) $ -- $(0.06) $ --
9/30/98 10.95 0.18 1.06 (0.53) -- (0.42) --
9/30/97 11.71 1.36 (0.19) (1.44) -- (0.49) --
2/1/96 through 9/30/96 11.39 0.89 (0.29) (0.28) -- -- --
3/1/95 through 1/31/96 10.52 0.62 1.13 (0.88) -- -- --
2/28/95 10.75 0.62 (0.48) (0.13) -- (0.24) --
2/28/94 10.76 0.65 0.46 (0.90) -- (0.22) --
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
NET NET RATIO OF EXPENSES INVESTMENT INCOME
ASSET ASSETS RATIO OF TO AVERAGE RATIO OF NET TO AVERAGE
VALUE END OF EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
END OF TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
PERIOD RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $10.30 (1.05)%4 $ 36,475 1.82%2,9 2.14%2 4.98%2 4.66%2 111%
9/30/98 10.84 10.31 4 25,165 1.80 9 2.38 5.03 4.45 477
9/30/97 10.49 9.66 4 14,796 1.77 9 2.49 7.26 6.54 393
9/30/96 10.20 3.68 4 11,119 1.64 9 2.40 7.81 7.05 434
10/3/94 1 through 9/30/95 10.68 13.52 4 10,188 1.05 2,9 2.50 2 6.17 2 4.72 2 258
INVESTOR C CLASS
10/1/98 through 3/31/99 14 $10.30 (1.05)%4 $ 2,713 1.82%2,9 2.14%2 4.98%2 4.66%2 111%
9/30/98 10.84 10.31 4 1,551 1.80 9 2.38 4.98 4.40 477
2/28/97 1 through 9/30/97 10.49 5.64 4 849 1.70 2,9 2.42 2 7.11 2 6.39 2 393
- --------------
GNMA PORTFOLIO
- --------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $ 9.98 1.91% $ 113,560 0.60%2,11 0.96%2 6.04%2 5.68%2 59%
5/18/98 1 through 9/30/98 10.11 3.31 118,039 0.60 2,11 0.97 2 6.12 2 5.75 2 56
SERVICE CLASS
10/1/98 through 3/31/99 14 $ 9.98 1.76% $ -- 0.90%2,11 1.26%2 5.74%2 5.38%2 59%
5/18/98 1 through 9/30/98 10.11 3.18 -- 0.57 2,11 0.94 2 8.95 2 8.58 2 56
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $ 9.98 1.67%3 $ 1,451 1.07%2,11 1.43%2 5.61%2 5.25%2 59%
5/18/98 1 through 9/30/98 10.11 3.12 3 535 1.06 2,11 1.43 2 5.69 2 5.32 2 56
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $ 9.98 1.29%4 $ 212 1.82%2,11 2.18%2 4.80%2 4.44%2 59%
5/18/98 1 through 9/30/98 10.11 2.85 4 166 1.70 2,11 2.07 2 4.53 2 4.16 2 56
INVESTOR C CLASS
10/1/98 through 3/31/99 14 $ 9.98 1.29%4 $ -- 1.82%2,11 2.18%2 4.80%2 4.44%2 59%
5/18/98 1 through 9/30/98 10.11 2.85 4 -- 0.57 2,11 0.94 2 5.26 2 4.90 2 56
- ------------------------
MANAGED INCOME PORTFOLIO
- ------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $10.26 0.82% $1,321,315 0.65%2,10 0.78%2 6.66%2 6.53%2 127%
9/30/98 10.64 9.25 1,335,054 0.63 10 0.81 6.71 6.53 376
9/30/97 10.41 10.25 537,260 0.58 10 0.83 6.99 6.74 428
9/30/96 10.09 4.33 564,744 0.58 0.81 6.17 5.95 638
9/30/95 10.38 13.27 443,148 0.57 0.77 6.44 6.24 203
9/30/94 9.79 (5.27) 395,060 0.55 0.77 6.11 5.89 61
SERVICE CLASS
10/1/98 through 3/31/99 14 $10.26 0.67% $ 285,915 0.95%2,10 1.08%2 6.35%2 6.22%2 127%
9/30/98 10.64 8.93 257,641 0.93 10 1.11 6.52 6.34 376
9/30/97 10.41 9.93 266,750 0.88 10 1.13 6.76 6.51 428
9/30/96 10.09 4.05 165,073 0.88 1.11 5.87 5.65 638
9/30/95 10.38 12.97 116,846 0.85 1.05 6.14 5.94 203
9/30/94 9.79 (5.49) 67,655 0.80 1.02 5.95 5.73 61
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $10.26 0.59%3 $ 17,396 1.11%2,10 1.24%2 6.13%2 6.00%2 127%
9/30/98 10.64 8.74 3 14,897 1.10 10 1.28 6.44 6.26 376
9/30/97 10.41 9.74 3 15,230 1.05 10 1.30 6.54 6.29 428
9/30/96 10.09 3.83 3 11,193 1.05 1.29 5.67 5.44 638
9/30/95 10.38 12.74 3 11,977 1.05 1.25 5.96 5.76 203
9/30/94 9.79 (5.76)3 10,921 1.00 1.22 5.66 5.44 61
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $10.26 0.21%4 $ 5,815 1.86%2,10 1.99%2 5.41%2 5.28%2 127%
9/30/98 10.64 7.94 4 4,639 1.82 10 2.00 5.32 5.14 376
7/15/97 1 through 9/30/97 10.41 1.35 4 468 1.31 2,10 1.56 2 4.68 2 4.43 2 428
- ----------------------------
INTERNATIONAL BOND PORTFOLIO
- ----------------------------
INSTITUTIONAL CLASS
10/1/98 through 3/31/99 14 $11.22 3.01% $ 45,218 1.03%2,12 1.09%2 3.71%2 3.65%2 132%
9/30/98 11.24 12.51 43,672 1.01 12 1.16 4.08 3.93 225
9/30/97 10.95 11.59 43,310 0.98 12 1.08 5.28 5.18 272
6/10/96 1 through 9/30/96 11.71 4.48 30,882 0.92 2 1.32 2 6.28 2 5.88 2 108
SERVICE CLASS
10/1/98 through 3/31/99 14 $11.22 2.86% $ 2,841 1.33%2,12 1.39%2 3.41%2 3.35%2 132%
9/30/98 11.24 12.17 2,359 1.31 12 1.46 3.79 3.64 225
9/30/97 10.95 11.23 6,708 1.29 12 1.39 5.02 4.92 272
2/1/96 through 9/30/96 11.71 5.39 7,836 1.09 2 1.20 2 3.82 2 3.72 2 108
3/1/95 through 1/31/96 11.39 16.79 37,627 1.23 2 1.23 2 5.62 2 5.62 2 159
2/28/95 10.52 1.50 45,657 1.24 1.24 5.96 5.96 131
2/28/94 10.75 10.24 46,888 1.38 1.38 6.00 6.00 128
</TABLE>
See accompanying notes to financial statements.
62-63
<PAGE>
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
NET NET GAIN DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
ASSET (LOSS) ON DISTRIBUTIONS IN EXCESS FROM NET IN EXCESS
VALUE NET INVESTMENTS FROM NET OF NET REALIZED OF NET
BEGINNING INVESTMENT (BOTH REALIZED INVESTMENT INVESTMENT CAPITAL REALIZED
OF PERIOD INCOME AND UNREALIZED) INCOME INCOME GAINS GAINS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $11.24 $0.16 $0.14 $(0.26) $ -- $(0.06) $ --
9/30/98 10.95 0.47 0.76 (0.52) -- (0.42) --
9/30/97 11.71 1.10 0.05 (1.42) -- (0.49) --
4/22/96 1 through 9/30/96 11.37 0.26 0.32 (0.24) -- -- --
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $11.24 $0.12 $0.14 $(0.22) $ -- $(0.06) $ --
9/30/98 10.95 0.40 0.74 (0.43) -- (0.42) --
9/30/97 11.71 1.06 -- (1.33) -- (0.49) --
4/19/96 1 through 9/30/96 11.36 0.22 0.33 (0.20) -- -- --
INVESTOR C CLASS
10/1/98 through 3/31/99 14 $11.24 $0.11 $0.15 $(0.22) $ -- $(0.06) $ --
9/30/98 10.95 0.54 0.60 (0.43) -- (0.42) --
9/30/97 11.71 1.15 (0.09) (1.33) -- (0.49) --
9/11/96 1 through 9/30/96 11.58 0.02 0.12 (0.01) -- -- --
- -------------------------
HIGH YIELD BOND PORTFOLIO
- -------------------------
BLACKROCK CLASS
11/19/98 1 through 3/31/99 14 $10.00 $0.35 $0.11 $(0.35) $ -- $ -- $ --
INSTITUTIONAL CLASS
11/19/98 1 through 3/31/99 14 $10.00 $0.35 $0.11 $(0.35) $ -- $ -- $ --
SERVICE CLASS
11/19/98 1 through 3/31/99 14 $10.00 $0.33 $0.11 $(0.33) $ -- $ -- $ --
INVESTOR A CLASS
11/19/98 1 through 3/31/99 14 $10.00 $0.33 $0.11 $(0.33) $ -- $ -- $ --
INVESTOR B CLASS
11/19/98 1 through 3/31/99 14 $10.00 $0.30 $0.11 $(0.30) $ -- $ -- $ --
INVESTOR C CLASS
11/19/98 1 through 3/31/99 14 $10.00 $0.29 $0.11 $(0.29) $ -- $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
RATIO OF NET
NET NET RATIO OF EXPENSES INVESTMENT INCOME
ASSET ASSETS RATIO OF TO AVERAGE RATIO OF NET TO AVERAGE
VALUE END OF EXPENSES TO NET ASSETS INVESTMENT INCOME NET ASSETS PORTFOLIO
END OF TOTAL PERIOD AVERAGE NET (EXCLUDING TO AVERAGE NET (EXCLUDING TURNOVER
PERIOD RETURN (000) ASSETS WAIVERS) ASSETS WAIVERS) RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTOR A CLASS
10/1/98 through 3/31/99 14 $11.22 2.77%3 $ 1,948 1.50%2,12 1.56%2 3.22%2 3.16%2 132%
9/30/98 11.24 11.98 3 1,705 1.48 12 1.63 3.59 3.44 225
9/30/97 10.95 11.02 3 1,015 1.42 12 1.52 4.49 4.39 272
4/22/96 1 through 9/30/96 11.71 5.13 3 176 1.45 2 1.86 2 5.29 2 4.88 2 108
INVESTOR B CLASS
10/1/98 through 3/31/99 14 $11.22 2.39%4 $ 2,015 2.24%2,12 2.30%2 2.47%2 2.41%2 132%
9/30/98 11.24 11.15 4 1,512 2.22 12 2.37 2.83 2.68 225
9/30/97 10.95 10.11 4 979 2.12 2,12 2.22 3.65 3.55 272
4/19/96 1 through 9/30/96 11.71 4.90 4 136 2.09 2 2.49 2 4.61 2 4.21 2 108
INVESTOR C CLASS
10/1/98 through 3/31/99 14 $11.22 2.39%4 $ 2,001 2.24%2,12 2.30%2 2.46%2 2.40%2 132%
9/30/98 11.24 11.15 4 1,249 2.22 12 2.37 2.83 2.68 225
9/30/97 10.95 10.13 4 474 2.11 12 2.21 3.57 3.47 272
9/11/96 1 through 9/30/96 11.71 1.24 4 19 1.53 2 1.93 2 2.79 2 2.38 2 108
- -------------------------
HIGH YIELD BOND PORTFOLIO
- -------------------------
BLACKROCK CLASS
11/19/98 1 through 3/31/99 14 $10.11 4.51% $ -- 0.55%2,13 1.06%2 8.11%2 7.60%2 119%
INSTITUTIONAL CLASS
11/19/98 1 through 3/31/99 14 $10.11 4.65% $ 45,697 0.70%2,13 1.21%2 9.62%2 9.11%2 119%
SERVICE CLASS
11/19/98 1 through 3/31/99 14 $10.11 4.35% $ -- 1.00%2,13 1.51%2 8.11%2 7.60%2 119%
INVESTOR A CLASS
11/19/98 1 through 3/31/99 14 $10.11 4.48%3 $ 2,948 1.17%2,13 1.68%2 9.11%2 8.60%2 119%
INVESTOR B CLASS
11/19/98 1 through 3/31/99 14 $10.11 4.14%4 $ 6,532 1.92%2,13 2.43%2 8.36%2 7.85%2 119%
INVESTOR C CLASS
11/19/98 1 through 3/31/99 14 $10.11 4.06%4 $ 1,523 1.92%2,13 2.43%2 8.38%2 7.87%2 119%
<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 Including interest expense, ratios for the BlackRock, Investor B and Investor
C classes would have been 2.53%, 3.81% and 3.83%, respectively, for the
period ended March 31, 1999, 1.59%, 3.08% and 2.98%, respectively, for the
period ended September 30, 1998, 1.01%, 2.19% and 2.23%, respectively, for
the period ended September 30, 1997, the Institutional, Service and Investor
A would have been 2.68%, 2.98% and 3.14%, respectively, for the period ended
March 31, 1999, 1.80%, 1.98% and 2.32%, respectively, for the period ended
September 30, 1998, 1.54%, 1.85% and 2.02%, respectively, for the period
ended September 30, 1997, 0.64%, 0.97% and 1.12%, respectively, for the
period ended September 30, 1996, and 0.96%, 1.18% and 1.34%, respectively,
for the period ended March 31, 1996.
6 Including interest expense, ratios for the Investor B and Investor C classes
would have been 2.18% and 2.18%, respectively, for the period ended March 31,
1999, 1.84% and 1.81% respectively, for the period ended September 30, 1998,
1.90% and 1.78%, respectively, for the period ended September 30, 1997, the
Institutional, Service and Investor A would have been 0.96%, 1.26% and 1.43%,
respectively, for the period ended March 31, 1999, 0.63%, 0.91% and 1.09%,
respectively, for the period ended September 30 1998, 0.67%, 0.97% and 1.14%,
respectively, for the period ended September 30, 1997, 0.70%, 1.00% and
1.14%, respectively, for the period ended September 30, 1996, 0.42%, 0.69%
and 0.70%, respectively, for the period ended September 30, 1995.
7 Including interest expense, ratios for the Investor C would have been 3.09%
for the period ended March 31, 1999, the BlackRock class would have been
1.77% for the period ended March 31, 1999 and 1.43% for the period ended
September 30, 1998, the Institutional, Service, Investor A and Investor B
classes would have been 1.92%, 2.22%, 2.40 and 3.07%, respectively, for the
period ended March 31, 1999, 1.72%, 2.06%, 2.22% and 2.79%, respectively, for
the period ended September 30, 1998, 0.98%, 1.27% and 1.44%, respectively,
for the period ended September 30, 1997, 0.83%, 1.14% and 1.27%,
respectively, for the period ended September 30, 1996, 0.55%, 0.82% and
0.84%, respectively, for the period ended September 30, 1995.
8 Including interest expense, ratios for the BlackRock and Investor C classes
would have been 0.76% and 2.11%, respectively, for the period ended March 31,
1999, 0.68% and 1.90%, respectively, for the period ended September 30, 1998,
0.56% and 1.93%, respectively, for the period ended September 30, 1997, the
Institutional, Service, Investor A, and Investor B would have been 0.91%,
1.21%, 1.38% and 2.13%, respectively, for the period ended March 31, 1999,
0.83%, 1.18%, 1.27% and 2.01%, respectively, for the period ended September
30, 1998, 0.84%, 1.35%, 1.36% and 2.17%, respectively, for the period ended
September 30, 1997, 0.80%, 1.08%, 1.27% and 2.00%, respectively, for the
period ended September 30, 1996 and 0.75%, 0.94%, 1.11% and 1.86%,
respectively, for the period ended March 31, 1996. For the periods prior to
March 31, 1996, interest income was presented net of interest expense.
9 Including interest expense, ratios for the Investor C class would have been
2.50% for the period ended March 31, 1999, 2.14% for the period ended
September 30, 1998, 3.24% for the period ended September 30, 1997, the
Investor A and Investor B classes would have been 1.75% and 2.49%,
respectively, for the period ended March 31, 1999, 1.46% and 2.01%,
respectively, for the period ended September 30, 1998, 1.41% and 2.14%,
respectively, for the period ended September 30, 1997, 2.96% and 3.69%,
respectively, for the period ended September 30, 1996, and 0.92% and 1.60%,
respectively, for the period ended September 30, 1995.
10 Including interest expense, ratios for the Institutional, Service, Investor A
and Investor B classes would have been 1.34%, 1.64%, 1.80% and 2.55%,
respectively, for the period ended March 31, 1999, and 1.30%, 1.69%, 1.90%
and 2.43% respectively, for the period ended September 30, 1998, 0.92%,
1.27%, 1.41% and 2.14%, respectively, for the period ended September 30,
1997, For periods prior to October 1, 1996, interest income was presented net
of interest expense.
11 Including interest expense, ratios for the Institutional, Service, Investor
A, Investor B, and Investor C classes would have been 0.72%, 1.02%, 1.19%,
1.94% and 1.94%, respectively, for the period ended March 31, 1999, 0.63%,
0.74%, 1.10%, 1.73% and 0.08%, respectively, for the period ended September
30,1998.
12 Including interest expense, ratios for the Institutional, Service, Investor
A, Investor B and Investor C classes would have been 1.03%, 1.33%, 1.50%,
2.24% and 2.24%, respectively, for the period ended March 31, 1999, 1.01%,
1.31%, 1.48%, 2.22% and 2.22%, respectively, for the period ended September
30, 1998, and 0.98%, 1.30%, 1.42%, 2.12% and 2.11%, respectively, for the
period ended September 30, 1997.
13 Including interest expense, ratios for the BlackRock, Institutional, Service,
Investor A, Investor B and Investor C classes would have been 0.60%, 0.75%,
1.05%, 1.22%, 1.97% and 1.97%, respectively, for the period ended March 31,
1999.
14 Unaudited.
</FN>
</TABLE>
64-65
<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, 9 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
- ------------------------------------------------------------------------------------------------------------------------------------
BlackRock Institutional Service Investor A Investor B Investor C
- ------------------------------------------------------------------------------------------------------------------------------------
Contractual Actual Contractual Actual Contractual Actual Contractual Actual Contractual Actual Contractual Actual
Fees Fees(4) 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> <C> <C>
Low Duration
Bond None None None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ----------------------------------------------------------------------------------------------------------------------------------
Intermediate
Government Bond N/A N/A None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ----------------------------------------------------------------------------------------------------------------------------------
Intermediate Bond None None None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ----------------------------------------------------------------------------------------------------------------------------------
Core Bond None None None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ----------------------------------------------------------------------------------------------------------------------------------
Government Income N/A N/A N/A N/A N/A N/A 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ----------------------------------------------------------------------------------------------------------------------------------
GNMA N/A N/A None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ----------------------------------------------------------------------------------------------------------------------------------
Managed Income N/A N/A None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% None
- ----------------------------------------------------------------------------------------------------------------------------------
International Bond N/A N/A None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
- ----------------------------------------------------------------------------------------------------------------------------------
High Yield Bond None None 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 Portfolios
totaled $77,344 for Class B shares and $1,622 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 valued 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 procedure.
66
<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.
FOREIGN CURRENCY TRANSLATION -- The books and records of the International
Bond Portfolio are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars on the following basis:
(I) market value of investment securities, assets and liabilities at the
current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The International Bond Portfolio isolates that portion of gains and losses
on investment securities which is due to changes in the foreign exchange rates
from that which is due to changes in market prices of such securities.
The International Bond Portfolio reports certain foreign currency related
transactions as components of realized and unrealized gains for financial
reporting purposes, whereas such components are treated as ordinary income for
federal income tax purposes.
FORWARD FOREIGN CURRENCY CONTRACTS -- The International Bond Portfolio
enters into forward foreign currency contracts as a hedge against either
specific transactions or portfolio positions. These contracts are adjusted by
the daily exchange rate of the underlying currency and any gains or losses are
recorded as unrealized until the contract settlement date. Such contracts, which
protect the value of the International Bond Portfolio's investment securities
against a decline in the value of currency, do not eliminate fluctuations in the
underlying prices of the securities. They simply establish an exchange rate at a
future date. Also, although such contracts tend to minimize the risk of loss due
to a decline in the value of a hedged currency, at the same time they tend to
limit any potential gain that might be realized should the value of such foreign
currency increase. Risks may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts and
from unanticipated movements in the value of a foreign currency relative to the
U.S. dollar.
The aggregate principal amounts of the contracts are not recorded as the
International Bond Portfolio intends to settle the contracts prior to delivery.
Under the terms of foreign currency contracts open at March 31, 1999, the
International Bond Portfolio is obligated to deliver or receive currency in
exchange for U.S. dollars as indicated below:
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE SOLD AMOUNT 1999 GAIN/(LOSS)
- ---------- ---------------------- ----------- ----------- ----------
04/16/99 Australian Dollar ...... $ 2,330,894 $ 2,346,588 $ (15,694)
04/16/99 Canadian Dollar ........ 4,002,680 3,960,225 42,455
04/16/99 Canadian Dollar ........ 2,279,144 2,304,073 (24,929)
04/16/99 Canadian Dollar ........ 398,023 397,746 277
04/16/99 Danish Krone ........... 1,858,745 1,784,241 74,504
04/16/99 European Currency Unit . 19,942,092 19,063,048 879,044
04/16/99 Great British Pound .... 6,344,000 6,301,856 42,144
04/16/99 Great British Pound .... 4,338,419 4,321,566 16,853
04/16/99 Japanese Yen ........... 3,131,005 2,990,917 140,088
04/16/99 Japanese Yen ........... 2,970,255 2,949,107 21,148
04/16/99 Swedish Krone .......... 1,829,625 1,759,772 69,853
----------- ----------- ----------
$49,424,882 $48,179,139 $1,245,743
=========== =========== ==========
67
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
UNREALIZED
VALUE AT FOREIGN
SETTLEMENT CURRENCY CONTRACT MARCH 31, EXCHANGE
DATE BOUGHT AMOUNT 1999 GAIN/(LOSS)
- ---------- ---------------------- ----------- ----------- ----------
04/16/99 Australian Dollar ...... $2,318,427 $2,346,588 $ 28,161
04/16/99 Canadian Dollar ........ 3,949,551 3,977,461 27,910
04/16/99 European Currency Unit . 3,272,475 3,233,400 (39,075)
---------- ---------- --------
$9,540,453 $9,557,449 $ 16,996
========== ========== ========
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.
REVERSE REPURCHASE AGREEMENTS -- The Fund enters into reverse repurchase
agreements with qualified, third party brokers-dealers as determined by and
under the direction of the Fund's Board of Trustees. Interest on the value of
the reverse repurchase agreements issued and outstanding is based upon
competitive market rates at the time of issuance. At the time the Fund enters
into a reverse repurchase agreement, it identifies for segregation certain
liquid securities having a value not less than the repurchase price, including
accrued interest, of the reverse repurchase agreement.
<TABLE>
<CAPTION>
LOW DURATION INTERMEDIATE GOVERNMENT MANAGED
BOND BOND INCOME INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Average daily balance of reverse repurchase
agreements outstanding during the period
ended March 31, 1999 ............................... $123,022,324 $141,485,788 $5,425,502 $225,732,099
Weighted Average Interest Rate ........................ 4.98% 5.00% 4.96% 4.23%
Maximum Amount of reverse repurchase
agreements outstanding at any month-end
during the period ended March 31, 19991 ............ $151,662,727 $185,041,187 $8,444,412 $391,893,759
Percentage of total assets ............................ 40.38% 26.42% 17.55% 19.85%
Amount of reverse repurchase agreements
outstanding at March 31, 1999 ...................... $ 82,867,014 $105,104,027 $1,481,022 $250,077,145
Percentage of total assets ............................ 22.06% 15.01% 3.08% 12.67%
<FN>
- ---------------
1 The maximum amount of reverse repurchase agreements outstanding at any month
end occurred on December 31, 1998, February 28, 1999, January 31, 1999 and
February 28, 1999, respectively.
</FN>
</TABLE>
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.
68
<PAGE>
BLACKROCK FUNDS
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.
Written Option transactions entered into during the six months ended March
31, 1999 are summarized as follows:
Managed
Core Bond Income
----------------------- ----------------------
Number of Number of
Contracts Premium Contracts Premium
--------- --------- --------- ---------
Balance at 9/30/98 ....... -- $ -- -- $ --
Written .................. 2,500 304,688 4,000 487,500
--------- --------- --------- ---------
Balance at 3/31/99 ....... 2,500 $304,688 4,000 $487,500
========= ========= ========= =========
TBA PURCHASE COMMITMENTS -- The Portfolios may enter into "TBA" (to be
announced) purchase commitments to purchase securities for a fixed price at a
future date, typically not exceeding 45 days. TBA purchase commitments may be
considered securities in themselves, and involve a risk of loss if the value of
the security to be purchased declines prior to settlement date, which risk is in
addition to the risk of decline in the value of a Portfolio's other assets.
Unsettled TBA purchase commitments are valued at the current market value of the
underlying securities, according to the procedures described under "Security
Valuation" above.
MORTGAGE DOLLAR ROLLS -- Each Portfolio may enter into mortgage dollar
rolls (principally using TBA's) in which the Portfolio sells mortgage securities
for delivery in the current month and simultaneously contracts to repurchase
similar, but not identical, securities at an agreed-upon price on a fixed date.
The Portfolio accounts for such dollar rolls as purchases and sales and receives
compensation as consideration for entering into the commitment to repurchase. A
Portfolio must maintain liquid securities having a value not less than the
repurchase price (including accrued interest) for such dollar rolls. The market
value of the securities a Portfolio is required to purchase may decline below
the agreed upon repurchase price of those securities.
In a "fee" roll, the compensation is recorded as deferred income and
amortized to income over the roll period. In a "drop" roll, the compensation is
paid via a lower price for the security upon its repurchase. The counterparty
receives all principal and interest payments, including prepayments, made in
respect of a security subject to such a contract while it is the holder.
Mortgage dollar rolls may be renewed with a new purchase and repurchase price
fixed and a cash settlement made on settlement date without physical delivery of
the securities subject to the contract. A Portfolio engages in dollar rolls for
the purpose of enhancing its yield, principally by earning a negotiated fee.
SECURITIES LENDING -- Loans of securities are required at all times to be
secured by collateral at least equal to 102% of the market value of the
securities on loan. However, in the event of default or bankruptcy by the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings. The market value of securities on loan to brokers
and the value of collateral held by the Fund with respect to such loans
(including rights to draw on letters of credit) at March 31, 1999 is as follows:
Value of Income
Market Value of Collateral Earned on
Portfolio Securities Loaned Received Securities Loaned*
--------- ----------------- ----------- ------------------
Intermediate Bond Portfolio . $ 434,576 $ 455,119 $ 2,317
Core Bond Portfolio ......... 42,111,603 43,457,569 12,562
Government Income Portfolio . 3,135,340 3,247,250 182
Managed Income Portfolio .... 54,812,952 56,337,231 12,836
*Income is included in Interest Income on the Statement of Operations.
69
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
OTHER -- Securities denominated in currencies other than U.S. dollars are
subject to changes in value due to fluctuations in exchange rates.
Some countries in which the Portfolios invest require governmental approval
for the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. Consequently, acquisition and disposition of securities by the
Portfolios may be inhibited.
(B) TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Pursuant to an Investment Advisory Agreement, BlackRock Advisors, Inc.
("BlackRock"), a wholly-owned subsidiary of BlackRock, Inc., serves as
investment adviser to the Portfolios. BlackRock Financial Management, Inc.,
("BFM") a wholly-owned subsidiary of BlackRock, serves as sub-adviser for all of
the Portfolios. BlackRock, Inc. is an indirect majority-owned subsidiary of PNC
Bank Corp.
For its advisory services, BlackRock is entitled to receive fees, computed
daily and paid monthly, at the following annual rates, based on each Portfolio's
average daily net assets:
Each Portfolio
Except the International International
Bond Portfolio Bond Portfolio
& GNMA Portfolio & GNMA Portfolio
------------------------ ----------------
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
------------ --------- ------------
Low Duration Bond Portfolio ........ $ 771,984 $ 438,973 $ 333,011
Intermediate Government
Bond Portfolio ................... 1,161,662 373,638 788,024
Intermediate Bond Portfolio ........ 1,399,575 596,168 803,407
Core Bond Portfolio ................ 2,187,667 1,153,921 1,033,746
Government Income Portfolio ........ 101,811 40,609 61,202
GNMA Portfolio ..................... 322,166 159,810 162,356
Managed Income Portfolio ........... 3,888,896 1,000,849 2,888,047
International Bond Portfolio ....... 142,054 12,559 129,495
High Yield Bond Portfolio .......... 79,604 74,001 5,603
BlackRock pays BFM, Inc. 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.
70
<PAGE>
BLACKROCK FUNDS
For the period ended March 31, 1999, administration fees and waivers for
each Portfolio were as follows:
Gross Net
Administration Administration
Fee Waiver Fee
-------------- ---------- --------------
Low Duration Bond Portfolio ..... $ 338,316 $63,228 $ 275,088
Intermediate Government
Bond Portfolio ................ 512,676 80,113 432,563
Intermediate Bond Portfolio ..... 630,314 41,836 588,478
Core Bond Portfolio ............. 937,251 42,269 894,982
Government Income Portfolio ..... 46,769 23,634 23,135
GNMA Portfolio .................. 134,724 52,868 81,856
Managed Income Portfolio ........ 1,695,973 -- 1,695,973
International Bond Portfolio .... 59,395 2,582 56,813
High Yield Bond Portfolio ....... 36,527 7,224 29,303
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 classes of a Portfolio) as a
percentage of average daily net assets are:
Low Duration Bond Portfolio ................................ .385%
Intermediate Government Bond Portfolio ..................... .475%
Intermediate Bond Portfolio ................................ .435%
Core Bond Portfolio ........................................ .380%
Government Income Portfolio ................................ .550%
GNMA Portfolio ............................................. .485%
Managed Income Portfolio ................................... .485%
International Bond Portfolio ............................... .865%
High Yield Bond Portfolio .................................. .525%
If in the following two years the operating expenses of a Portfolio that
previously received a waiver or reimbursement from BlackRock are less than the
expense limit for that Portfolio, the Portfolio is required to repay BlackRock
up to the amount of fees waived or expenses reimbursed under the agreement if:
(1) the Portfolio has more than $50 million in assets, (2) BlackRock continues
to be the Portfolio's investment adviser and (3) the Board of Trustees of the
Fund has approved the payments to BlackRock on a quarterly basis.
At March 31, 1999, the amount of advisory fee waiver and reimbursement of
expenses by BlackRock subject to possible reimbursement under the expense
limitation agreement were as follows:
Low Duration Bond Portfolio ........................... $ 142,698
Intermediate Government Bond Portfolio ................ 133,170
Intermediate Bond Portfolio ........................... 185,556
Core Bond Portfolio ................................... 361,326
Government Income Portfolio ........................... 24,743
GNMA Portfolio ........................................ 46,003
Managed Income Portfolio .............................. 292,109
International Bond Portfolio .......................... 4,463
High Yield Bond Portfolio ............................. 60,517
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.
71
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
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
-------------- --------------
Low Duration Bond Portfolio ............... $ 101,372,259 $ 101,156,497
Intermediate Government Bond Portfolio .... 78,662,367 148,813,733
Intermediate Bond Portfolio ............... 305,839,298 289,377,505
Core Bond Portfolio ....................... 1,082,614,411 558,539,532
Government Income Portfolio ............... 33,181,825 30,164,858
GNMA Portfolio ............................ 47,547,647 26,662,244
Managed Income Portfolio .................. 1,367,671,299 1,172,452,469
International Bond Portfolio .............. 37,992,084 42,640,592
High Yield Bond Portfolio ................. 105,908,525 48,410,474
For the period ended March 31, 1999, purchases and sales of government
securities were as follows:
Purchases Sales
-------------- --------------
Low Duration Bond Portfolio ............... $ 200,470,572 $ 193,190,018
Intermediate Government Bond Portfolio .... 337,813,546 265,304,322
Intermediate Bond Portfolio ............... 483,337,019 417,937,329
Core Bond Portfolio ....................... 690,050,011 673,396,051
Government Income Portfolio ............... 28,832,325 23,209,669
GNMA Portfolio ............................ 42,016,632 45,604,775
Managed Income Portfolio .................. 1,306,867,703 1,241,574,446
International Bond Portfolio .............. 18,521,398 15,932,188
High Yield Bond Portfolio ................. 2,004,063 2,000,781
72
<PAGE>
BLACKROCK FUNDS
(D) CAPITAL SHARES
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
Low Duration Bond 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:
BlackRock Class .................... 353,873 $ 3,519,380 10,953,938 $108,478,776
Institutional Class ................ 2,961,873 29,562,420 7,756,306 77,356,855
Service Class ...................... 207,611 2,066,761 804,858 7,979,540
Investor A Class ................... 4,658,527 46,333,004 3,255,674 32,355,524
Investor B Class ................... 404,740 4,020,641 44,066 437,617
Investor C Class ................... 81,412 806,822 31,759 314,906
Shares issued in conversion:
Institutional Class ................ -- -- 6,225,309 61,630,555
Shares issued in reinvestment
of dividends:
BlackRock Class .................... 263,262 2,624,582 506,324 5,019,138
Institutional Class ................ 40,719 405,679 111,942 1,108,874
Service Class ...................... 16,861 167,977 34,827 345,071
Investor A Class ................... 3,646 36,320 6,222 61,676
Investor B Class ................... 138 1,370 48 472
Investor C Class ................... 24 244 48 476
Shares redeemed:
BlackRock Class .................... (5,131,087) (51,146,560) (4,357,893) (43,261,535)
Institutional Class ................ (2,166,896) (21,564,352) (7,815,690) (77,483,136)
Service Class ...................... (329,266) (3,274,697) (7,382,461) (73,660,500)
Investor A Class .................. (4,735,804) (47,112,875) (3,086,710) (30,685,324)
Investor B Class .................. (55,207) (548,281) (5,711) (56,529)
Investor C Class .................. (62,335) (618,285) (5,037) (49,887)
--------- ------------ --------- ------------
Net increase (decrease) ................. (3,487,909) $(34,719,850) 7,077,819 $ 69,892,569
========= ============ ========= ============
</TABLE>
<TABLE>
<CAPTION>
Intermediate Government Bond 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 ................ 1,377,310 $14,136,673 5,388,703 $ 55,601,975
Service Class ...................... 554,784 5,712,351 2,085,488 21,357,363
Investor A Class ................... 6,852,304 69,806,770 420,548 4,312,104
Investor B Class ................... 26,248 269,966 37,733 387,253
Investor C Class ................... 7,050 72,535 34,215 351,716
Shares issued in conversion:
Institutional Class ................ -- -- 33,310,235 339,098,189
Shares issued in reinvestment
of dividends:
Institutional Class ................ 286,536 2,939,970 5,852 59,670
Service Class ...................... 20,453 209,851 -- --
Investor A Class ................... 19,417 199,710 25,882 264,001
Investor B Class ................... 283 2,909 36 368
Investor C Class ................... 1 11 -- 7
Shares redeemed:
Institutional Class ................ (3,269,805) (33,538,103) (6,104,045) (62,424,167)
Service Class ...................... (568,195) (5,823,190) (4,249,778) (43,949,478)
Investor A Class ................... (6,338,638) (64,546,393) (217,155) (2,225,240)
Investor B Class ................... (13,065) (133,220) (6,083) (62,159)
Investor C Class ................... (2,629) (27,297) (10,751) (110,945)
---------- ------------ ---------- ------------
Net increase (decrease) ................. (1,047,946) $(10,717,457) 30,720,880 $312,660,657
========== ============ ========== ============
</TABLE>
73
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Intermediate Bond 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:
BlackRock Class .................... 403,346 $ 3,798,491 4,981,102 $ 47,321,273
Institutional Class ................ 5,741,767 54,132,734 11,557,172 110,245,081
Service Class ...................... 703,878 6,656,834 3,123,968 29,665,129
Investor A Class ................... 235,151 2,218,806 149,506 1,420,708
Investor B Class ................... 66,315 623,421 17,767 169,383
Investor C Class ................... 12,919 121,712 -- --
Shares issued in conversion:
Institutional Class ................ -- -- 25,659,119 242,478,670
Shares issued in reinvestment
of dividends:
BlackRock Class .................... 76,578 723,883 18,335 174,351
Institutional Class ................ 513,057 4,827,971 151,911 1,435,680
Service Class ...................... 43,834 413,407 33,520 317,235
Investor A Class ................... 5,367 50,730 6,876 65,200
Investor B Class ................... 663 6,260 73 697
Investor C Class ................... 20 183 -- --
Shares redeemed:
BlackRock Class .................... (924,126) (8,650,000) (262) (2,485)
Institutional Class ................ (4,987,936) (47,138,990) (17,805,567) (169,025,115)
Service Class ...................... (525,101) (4,942,298) (5,989,510) (57,406,495)
Investor A Class ................... (153,940) (1,447,117) (103,601) (983,789)
Investor B Class ................... (2,198) (21,162) (6,332) (60,382)
Investor C Class ................... (2,464) (22,905) -- --
--------- ------------ ---------- -------------
Net increase ............................ 1,207,130 $ 11,351,960 21,794,077 $ 205,815,141
========= ============ ========== =============
</TABLE>
<TABLE>
<CAPTION>
Core Bond 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:
BlackRock Class .................... 5,049,741 $ 49,082,868 4,306,598 $ 42,116,116
Institutional Class ................ 11,465,861 111,988,440 34,726,690 344,428,847
Service Class ...................... 1,733,799 16,969,608 8,725,323 86,107,989
Investor A Class ................... 284,838 2,785,347 361,195 3,567,308
Investor B Class ................... 389,802 3,827,215 763,581 7,536,362
Investor C Class ................... 394,873 3,872,816 212,705 2,114,971
Shares issued in reinvestment
of dividends:
BlackRock Class .................... 398,899 3,902,691 330,228 3,250,694
Institutional Class ................ 1,407,904 13,724,000 555,928 5,446,836
Service Class ...................... 161,943 1,579,152 168,746 1,651,673
Investor A Class ................... 23,382 229,037 19,882 195,729
Investor B Class ................... 38,353 375,366 31,539 310,362
Investor C Class ................... 1,618 15,826 768 7,570
Shares redeemed:
BlackRock Class .................... (1,993,777) (19,400,989) (376,161) (3,709,600)
Institutional Class ................ (5,997,258) (58,873,626) (8,783,259) (86,598,628)
Service Class ...................... (854,997) (8,346,169) (14,421,591) (143,884,759)
Investor A Class ................... (145,953) (1,425,453) (124,790) (1,229,336)
Investor B Class ................... (136,427) (1,334,680) (174,749) (1,726,105)
Investor C Class ................... (53,501) (522,883) (25,456) (252,086)
---------- ------------ ----------- -------------
Net increase ............................ 12,169,100 $118,448,566 26,297,177 $ 259,333,943
========== ============ =========== =============
</TABLE>
74
<PAGE>
BLACKROCK FUNDS
<TABLE>
<CAPTION>
Government 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:
Investor A Class ................... 177,464 $ 1,879,554 325,203 $ 3,439,854
Investor B Class ................... 1,481,058 15,600,869 1,133,444 12,022,192
Investor C Class ................... 241,502 2,578,000 111,159 1,177,933
Shares issued in reinvestment
of dividends:
Investor A Class ................... 19,078 201,098 31,395 330,860
Investor B Class ................... 71,275 750,966 67,664 713,719
Investor C Class ................... 3,019 31,807 2,312 24,407
Shares redeemed:
Investor A Class ................... (72,135) (753,785) (263,954) (2,785,911)
Investor B Class ................... (333,262) (3,493,212) (290,930) (3,081,821)
Investor C Class ................... (124,191) (1,312,932) (51,448) (545,399)
--------- ----------- --------- -----------
Net increase ............................ 1,463,808 $15,482,365 1,064,845 $11,295,834
========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
GNMA 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 ................ 488,500 $ 4,899,325 647,172 $ 6,506,570
Service Class ...................... -- -- 10 100
Investor A Class ................... 118,320 1,184,893 57,226 576,633
Investor B Class ................... 10,568 106,606 16,426 165,246
Investor C Class ................... 61 612 10 100
Shares issued in conversion:
Institutional Class ................ -- -- 12,043,846 120,438,460
Shares issued in reinvestment
of dividends:
Institutional Class ................ 20,941 210,038 -- 2
Service Class ...................... -- 4 -- 2
Investor A Class ................... 452 4,537 29 291
Investor B Class ................... 452 4,547 37 370
Investor C Class ................... -- 3 -- 1
Shares redeemed:
Institutional Class ................ (808,663) (8,093,651) (1,014,462) (10,187,732)
Service Class ...................... -- -- -- --
Investor A Class ................... (26,327) (264,996) (4,337) (43,657)
Investor B Class ................... (6,225) (62,628) -- --
Investor C Class ................... -- (1) -- --
-------- ----------- ---------- ------------
Net increase (decrease) ................. (201,921) $(2,010,711) 11,745,957 $117,456,386
======== =========== ========== ============
<FN>
- -----------
1 Commencement of operations.
</FN>
</TABLE>
75
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Managed 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 ................ 10,961,003 $113,785,001 28,686,745 $ 301,709,745
Service Class ...................... 10,011,119 103,990,228 22,149,435 232,274,400
Investor A Class ................... 1,367,274 14,195,318 9,725,828 101,726,116
Investor B Class ................... 152,688 1,587,413 422,716 4,431,406
Investor C Class ................... 13,539 139,989 -- --
Shares issued in conversion:
Institutional Class ................ -- -- 70,076,349 730,896,316
Shares issued in reinvestment
of dividends:
Institutional Class ................ 1,726,676 17,820,865 284,166 2,960,491
Service Class ...................... 569,123 5,895,880 335,029 3,503,288
Investor A Class ................... 52,954 550,107 65,247 682,731
Investor B Class ................... 15,869 164,799 7,746 81,187
Investor C Class ................... -- -- -- --
Shares redeemed:
Institutional Class ................ (9,375,908) (97,650,765) (25,254,987) (264,941,084)
Service Class ...................... (6,927,948) (72,089,374) (23,914,429) (251,581,067)
Investor A Class ................... (1,124,770) (11,685,184) (9,855,158) (103,016,193)
Investor B Class ................... (37,813) (392,056) (39,630) (416,407)
Investor C Class ................... (13,539) (140,397) -- --
---------- ------------ ----------- -------------
Net increase ............................ 7,390,267 $ 76,171,824 72,689,057 $ 758,310,929
========== ============ =========== =============
</TABLE>
<TABLE>
<CAPTION>
International Bond 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 ................ 475,792 $ 5,336,790 807,871 $ 8,882,021
Service Class ...................... 145,615 1,628,418 100,604 1,092,321
Investor A Class ................... 32,543 364,120 90,092 969,639
Investor B Class ................... 50,810 571,441 63,765 687,221
Investor C Class ................... 75,896 850,049 95,780 1,035,900
Shares issued in reinvestment
of dividends:
Institutional Class ................ 21,525 238,817 149,376 1,571,786
Service Class ...................... 2,960 33,045 24,714 260,973
Investor A Class ................... 4,175 46,673 8,842 94,462
Investor B Class ................... 2,026 22,625 5,400 57,581
Investor C Class ................... 1,630 18,221 2,650 28,325
Shares redeemed:
Institutional Class ................ (353,743) (3,967,941) (1,026,741) (11,137,837)
Service Class ...................... (105,325) (1,175,605) (527,989) (5,850,929)
Investor A Class ................... (14,932) (167,628) (39,912) (429,622)
Investor B Class ................... (7,806) (87,436) (24,092) (263,096)
Investor C Class ................... (10,309) (115,600) (30,616) (332,704)
-------- ----------- ---------- ------------
Net increase (decrease) ................. 320,857 $ 3,595,989 (300,256) $ (3,333,959)
======== =========== ========== ============
</TABLE>
76
<PAGE>
BLACKROCK FUNDS
High Yield Bond Portfolio
-----------------------------------
FOR THE PERIOD
11/19/98 1 thru 3/31/99 (UNAUDITED)
----------------------------------
Shares Value
--------- ------------
Shares sold:
BlackRock Class .................... 10 $ 100
Institutional Class ................ 4,595,533 46,112,359
Service Class ...................... 10 100
Investor A Class ................... 301,360 3,044,938
Investor B Class ................... 655,641 6,629,843
Investor C Class ................... 150,952 1,528,061
Shares issued in reinvestment
of dividends:
BlackRock Class .................... -- 2
Institutional Class ................ -- 2
Service Class ...................... -- 2
Investor A Class .................. 383 3,882
Investor B Class ................... 1,675 16,977
Investor C Class ................... 257 2,600
Shares redeemed:
BlackRock Class .................... -- --
Institutional Class ................ (75,698) (761,909)
Service Class ...................... -- --
Investor A Class .................. (10,209) (103,097)
Investor B Class .................. (11,206) (113,183)
Investor C Class .................. (620) (6,249)
--------- -----------
Net increase ............................ 5,608,088 $56,354,428
========= ===========
(E) AT MARCH 31, 1999, NET ASSETS CONSISTED OF:
<TABLE>
<CAPTION>
Low Intermediate
Duration Government Intermediate Core
Bond Bond Bond Bond
Portfolio Portfolio Portfolio Portfolio
---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Capital paid-in .................................... $292,288,159 $456,132,223 $560,877,553 $938,250,831
Undistributed net investment income ................ 364,357 -- 273,518 --
Distributions in excess of net
investment income ................................ -- (204,052) -- (1,297,467)
Accumulated net realized gain (loss) on
investment transactions
and futures contracts ............................ (972,791) (1,614,410) 10,736 (660,571)
Net unrealized depreciation on
investment transactions
and futures contracts ............................ (559,874) (289,851) (1,883,795) (4,471,371)
------------ ------------ ------------ ------------
$291,119,851 $454,023,910 $559,278,012 $931,821,422
============ ============ ============ ============
</TABLE>
- -------------------------
1 Commencement of operations.
77
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED)
<TABLE>
<CAPTION>
Government Managed International High Yield
Income GNMA Income Bond Bond
Portfolio Portfolio Portfolio Portfolio Portfolio
------------ ------------ -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Capital paid-in ........................... $46,833,778 $112,012,927 $1,633,713,096 $49,693,530 $56,354,428
Undistributed net investment
income .................................. -- 44,632 -- 1,776,865 --
Distributions in excess of net
investment income ....................... (140,271) -- (520,745) -- (7,515)
Accumulated net realized gain (loss) on
investment transactions, future
contracts and foreign exchange
contracts ............................... 28,508 829,469 10,175,390 1,324,981 (100,958)
Net unrealized appreciation
(depreciation) on investment
transactions, future contracts and
foreign exchange contracts .............. (507,586) 2,336,464 (12,926,448) 1,227,264 453,742
----------- ------------ -------------- ----------- -----------
$46,214,429 $115,223,492 $1,630,441,293 $54,022,640 $56,699,697
=========== ============ ============== =========== ===========
</TABLE>
(F) CAPITAL LOSS CARRYOVERS
At September 30, 1998, capital loss carryovers were available to offset
possible future realized capital gains as follows:
Low Duration Bond Portfolio
Capital Loss Carryforward Year of Expiration
------------------------- ------------------
$470,894 9/30/04
767,646 9/30/03
525,941 9/30/02
(G) CONVERSION OF COMMON TRUST FUNDS
On January 13, 1998, January 22, 1998 and February 9, 1998, the Board of
Trustees of the Fund, the Board of Directors of PNC Bank and the Board of
directors of PNC Bank, Delaware, respectively, approved an asset purchase
agreement among the Fund, PNC Bank, Delaware regarding 25 common trust funds for
which either PNC Bank or PNC Bank Delaware serve as trustee (each a "PNC Common
Trust Fund"). The agreement provided for the acquisition by the Fund of all of
the assets and liabilities of each PNC Common Trust Fund managed by the Advisor
in a tax-free exchange for Institutional shares of the corresponding
portfolio(s) of the Fund and the distribution of such Institutional shares to
the participating trusts of the PNC Common Trust Funds in liquidation of the PNC
Common Trust Funds.
The following is a summary of shares issued, net assets converted, net
assets value per share issued and unrealized appreciation of assets acquired as
of the conversion date.
FUNDS CONVERTED ON MAY 18, 1998:
<TABLE>
<CAPTION>
Unrealized
PNC BlackRock Shares Net Assets Net Assets Value Appreciation
Common Trust Fund Fund Issued Converted Per Share Issued (Depreciation)
- --------------------------- ----------------------- ----------- ------------ ---------------- ------------
<S> <C> <C> <C> <C>
PNC Short Term Bond Low Duration Bond 3,805,870 $ 37,678,109 $ 9.90 $ 48,131
PNC Short Term Government Low Duration Bond
Bond 2,419,439 23,952,446 9.90 (4,521)
PNC Intermediate Government Intermediate Government
Bond Bond 33,310,235 339,098,189 10.18 1,048,107
PNC Intermediate Bond Intermediate Bond 25,659,119 242,478,670 9.45 938,554
PNC Managed Income Managed Income 53,447,855 557,461,128 10.43 4,696,910
PNC Income Managed Income 16,628,494 173,435,188 10.43 1,754,561
PNC GNMA GNMA 120,043,846 120,438,460 10.00 3,432,748
</TABLE>
78
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<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 Micro-Cap Equity
Large Cap Growth Equity International Equity
Mid-Cap Value Equity International Small Cap Equity
Mid-Cap Growth Equity International Emerging Markets
Small Cap Value Equity Select Equity
Small Cap Growth Equity Index Equity
STOCK & BOND PORTFOLIOS
Balanced
BOND PORTFOLIOS
Low Duration Bond GNMA
Intermediate Government Bond Managed Income
Intermediate Bond International Bond
Core Bond High Yield Bond
Government Income
TAX-FREE BOND PORTFOLIOS
Tax-Free Income Ohio Tax-Free Income
Pennsylvania Tax-Free Income Delaware Tax-Free Income
New Jersey Tax-Free Income Kentucky Tax-Free Income
MONEY MARKET PORTFOLIOS
Money Market North Carolina Municipal Money Market
U.S. Treasury Money Market Ohio Municipal Money Market
Municipal Money Market Pennsylvania Municipal Money Market
New Jersey Municipal Money Market Virginia Municipal Money Market
SHAREHOLDER PRIVILEGES
24 HOUR ACCOUNT INFORMATION
Call us at 1-800-441-7762, 24 hours a day, 7 days a week to get information
about your account balances, recent transactions and share prices. Note:
Institutional and Service Share Class investors should call 1-800-441-7764. You
can also reach us on the Internet through the World Wide Web by accessing
http://www.blackrock.com.
EXCHANGE PRIVILEGES
Should your investment goals change, shareholders in our Investor Class shares
may exchange all or part of their investments into the same share class of any
other portfolio of BlackRock Funds. (1)
AUTOMATIC INVESTMENT PLANS
Investor Class shareholders who want to invest regularly can arrange to have $50
or more automatically deducted from their checking or savings account and
invested in any of the BlackRock portfolios.
SYSTEMATIC WITHDRAWAL PLANS
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $100 or more from their BlackRock portfolios, as
long as their account is at least $1,000.
RETIREMENT PLANS
Shareholders may make investments in conjunction with individual IRAaccounts or
rollover IRAs.
GENERAL INFORMATION ABOUT THE BLACKROCK FUNDS
If you would like additional reports or have questions regarding any of the 36
BlackRock Funds, please call 1-800-FUTURE4 (1-800-388-8734)
(1) BLACKROCK FUNDS RESERVES THE RIGHT TO MODIFY OR TERMINATE THE EXCHANGE
PRIVILEGES AT ANY TIME.
<PAGE>
[GRAPHIC OMITTED]
BLACKROCK
FUNDS
P.O. Box 8907
Wilmington, DE 19899
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by PNC Bank, National Association or any other bank and shares are not federally
insured by, guaranteed by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, The Federal Reserve
Board, or any other governmental agency. Investments in shares of the fund
involve investment risks, including the possible loss of the principal amount
invested.
SR 3/31/99 TP
