BLACKROCK FUNDS, 485BPOS, 2000-01-28

BLACKROCK FUNDS
485BPOS, 2000-01-28

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<PAGE>

As filed with the Securities and Exchange Commission on January 28, 2000
Registration No. 33-26305
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

PRE-EFFECTIVE AMENDMENT NO. [_]
----

POST-EFFECTIVE AMENDMENT NO. 50 [X]

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]

AMENDMENT NO. 52 [X]

---------------------------------------------

BLACKROCK FUNDS/SM/

(Exact Name of Registrant as Specified in Charter)
<TABLE>

<S> <C> <C>
Bellevue Corporate Center Brian Kindelan, Esq. copy to:
400 Bellevue Parkway BlackRock Advisors, Inc. Sarah E. Cogan, Esq.
Suite 100 1600 Market Street, 28th Floor Simpson Thacher & Bartlett
Wilmington, Delaware 19809 Philadelphia, PA 19103 425 Lexington Avenue
(Address of Principal (Name and Address of New York, New York 10017
Executive Offices) Agent for Service)
Registrant's Telephone Number
(302) 792-2555
</TABLE>
---------------------------------------------

It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.

If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>

EXPLANATORY NOTE
----------------

The prospectuses for the shares of the BlackRock Strategic Portfolio I,
BlackRock Strategic Portfolio II and the Multi-Sector Mortgage Securities
Portfolio III, dated December 6, 1999, are incorporated by reference to the
Registrant's filing of Post-Effective Amendment No. 49 to its Registration
Statement on Form N-1A on December 6, 1999.

The prospectus for the Hilliard Lyons Shares of the Money Market Portfolio and
the Municipal Money Market Portfolio is incorporated by reference to the
Registrant's filing of Post-Effective Amendment No. 47 to its Registration
Statement on Form N-1A on October 5, 1999.

The statements of additional information for the shares of the BlackRock
Strategic Portfolio I, the BlackRock Strategic Portfolio II and the Multi-Sector
Mortgage Securities Portfolio III, dated December 6, 1999, are incorporated by
reference to the Registrant's filing of Post-Effective Amendment No. 49 to its
Registration Statement on Form N-1A on December 6, 1999.

The statement of additional information for Hilliard Lyons Shares of the Money
Market Portfolio and the Municipal Money Market Portfolio is incorporated by
reference to the Registrant's filing of Post-Effective Amendment No. 47 to its
Registration Statement on Form N-1A on October 5, 1999.
<PAGE>

BLACKROCK FUNDS/SM/
EQUITY BOND AND
MONEY MARKET PORTFOLIOS
CROSS REFERENCE SHEET

Item Number Form N-1A, Prospectus
Part A Caption
- ------ -------
1(a) Cover Page
1(b) Back Cover Page
2 The Portfolios - Investment Goal; - Primary Investment
Strategies; - Key Risks; - Risk Return Information
3 The Portfolios - Expenses and Fees
4 The Portfolios - Investment Goal; - Primary Investment
Strategies; - Key Risks
5 Not Applicable
6 The Portfolios - Fund Management; - Management
7 About Your Investment - What Price Per Share Will You
Pay?; - When Must You Pay?; - How Much is the Minimum
Investment?; - How to Sell Shares; - Expedited
Redemptions; -Accounts With Low Balances; - Dividends
and Distributions; -Taxation of Distributions
8 About Your Investment - Which Pricing Option Should You
Choose?; How Much is the Sales Charge?; - Can the Sales
Charge be Reduced or Eliminated?; - Distribution and
Service Plan

9 The Portfolios - Financial Highlights
<PAGE>

Item Number Form Statement of Additional
N-1A, Part B Information Caption
------ -------------------

10 Cover Page
11 Miscellaneous
12 Miscellaneous; Investment Policies; Additional Investment
Limitations
13 Trustees and Officers; Purchase and Redemption Information
14 Trustees and Officers; Miscellaneous
15 Investment Advisory, Administration, Distribution and
Servicing Arrangements; Purchase and Redemption Information
16 Portfolio Transactions
17 Shareholder and Trustee Liability of the Fund; Additional
Information Concerning Shares; Miscellaneous
18 Purchase and Redemption Information; Valuation of
Portfolio Securities
19 Taxes
20 Investment Advisory, Administration, Distribution and
Servicing Arrangements
21 Performance Information
22 Financial Statements

Part C
- ------

Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.

<PAGE>

[GRAPHIC]

NOT FDIC- || May lose value
INSURED || No bank guarantee

Equity Portfolios
============================
I N V E S T O R S H A R E S

BlackRock Funds/sm/ is a mutual fund family with 36 investment portfolios, 13 of
which are described in this prospectus. BlackRock Funds are sold principally
through licensed investment professionals.

P R O S P E C T U S

January 28, 2000

[LOGO] BLACKROCK
FUNDS

The securities described in this prospectus have been registered with the
Securities and Exchange Commission (SEC). The SEC, however, has not judged these
securities for their investment merit and has not determined the accuracy or
adequacy of this prospectus. Anyone who tells you otherwise is committing a
criminal offense.
<PAGE>

How to find
the information
you need

About Your
Investment

Table of
Contents

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
How to find the information you need........................................ 1
THE BLACKROCK EQUITY FUNDS
Large Cap Value............................................................. 2
Large Cap Growth............................................................ 9
Mid-Cap Value............................................................... 16
Mid-Cap Growth.............................................................. 23
Small Cap Value............................................................. 29
Small Cap Growth............................................................ 36
International Equity........................................................ 43
International Emerging Markets.............................................. 51
International Small Cap .................................................... 59
Select Equity............................................................... 68
Index Equity................................................................ 75
Balanced.................................................................... 82
Micro-Cap................................................................... 89
How to Buy/Sell Shares...................................................... 97
Dividends/Distributions/Taxes............................................... 112
Services for Shareholders................................................... 115
</TABLE>
<PAGE>

How to Find the
Information You Need
About BlackRock Funds

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

This is the BlackRock Equity Portfolios Prospectus. It has been written to pro-
vide you with the information you need to make an informed decision about
whether to invest in BlackRock Funds (the Company).

This prospectus contains information on all 13 of the BlackRock Equity funds.
To save you time, the prospectus has been organized so that each fund has its
own short section. All you have to do is turn to the section for any particular
fund. Once you read the important facts about the funds that interest you, read
the sections that tell you about buying and selling shares, certain fees and
expenses, shareholder features of the funds and your rights as a shareholder.
These sections apply to all the funds.

If you have questions after reading the prospectus, ask your registered repre-
sentative for help. Your investment professional has been trained to help you
decide which investments are right for you.
1
<PAGE>

BlackRock
[GRAPHIC] Large Cap Value Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Fundamental Analysis: A
method of stock market
analysis that concen-
trates on "fundamental"
information about the
company (such as its
income statement, bal-
ance sheet, earnings
and sales history,
products and manage-
ment) to attempt to
forecast future stock
value.

Investment Style:
Refers to the guiding
principles of a mutual
fund's investment
choices. The investment
style of this fund is
large cap value, refer-
ring to the type of
securities the manager
will choose for this
fund.

Large Capitalization
Companies: The fund
defines these companies
as those with capital-
ization of over $10
billion. Capitalization
refers to the market
value of the company
and is calculated by
multiplying the number
of shares outstanding
by the current price
per share. Larger com-
panies may be more
likely to have the
staying power to get
them through all eco-
nomic cycles; however,
their size may also
make them less flexible
and innovative than
smaller companies.

Value Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value," although there
are times when a growth
fund and value fund may
own the same stock.
Value stocks are compa-
nies that appear to the
manager to be underval-
ued by the market as
measured by certain
financial formulas.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general and
whose growth in revenue
is expected to continue
for an extended period.

Investment Goal
The fund seeks long-term capital appreciation--current income is the secondary
objective.

Primary Investment Strategies
In pursuit of this goal, the fund manager invests primarily in U.S. large capi-
talization value companies (market capitalization in excess of $10 billion).
The fund normally invests at least 65% of its total assets in the equity secu-
rities issued by these companies and normally invests at least 80% of its total
assets in equity securities. The fund primarily buys common stock but also can
invest in preferred stock and securities convertible into common and preferred
stock.

The fund manager is seeking large capitalization stocks which he believes are
worth more than is indicated by current market price. The manager initially
screens for "value" stocks from the universe of companies with market capital-
ization above $1 billion, emphasizing those companies with market capitaliza-
tion over $10 billion. The manager uses fundamental analysis to examine each
company for financial strength before deciding to purchase the stock.

The fund generally will sell a stock when it reaches a target price, which is
when the manager believes it is fully valued or when, in the manager's opinion,
conditions change such that the risk of continuing to hold the stock is unac-
ceptable when compared to its growth potential.

It is possible that in extreme market conditions the fund may invest some or
all of its assets in high quality money market securities. The reason for
acquiring money market securities would be to avoid market losses. However, if
market conditions improve, this strategy could result in reducing the potential
gain from the market upswing, thus reducing the fund's opportunity to achieve
its investment objective. The fund may also hold these securities pending
investments or when it expects to need cash to pay redeeming shareholders.

2
<PAGE>

Key Risks

The fund may lend some of its securities on a short-term basis in order to earn
extra income. The fund will receive collateral in cash or high quality securi-
ties equal to the current value of the loaned securities. These loans will be
limited to 33 1/3% of the value of the fund's total assets.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks
The main risk of any investment in stocks is that values fluctuate in price.
The value of your investment can go up or down depending upon market condi-
tions, which means you could lose money.

While the fund manager chooses stocks he believes to be undervalued, there is
no guarantee that prices won't move even lower.

Securities loans involve the risk of a delay in receiving additional collateral
if the value of the securities goes up while they are on loan. There is also
the risk of delay in recovering the loaned securities and of losing rights to
the collateral if a borrower goes bankrupt.

Higher than normal portfolio turnover may result in increased transaction costs
to the fund, including brokerage commissions, dealer mark-ups and other trans-
action costs on the sale of the securities and on reinvestment in other securi-
ties. The sale of fund securities may result in the recognition of capital gain
or loss. Given the frequency of sales, such gain or loss will likely be short-
term capital gain or loss. Unlike long-term capital gain, short-term capital
gain of individuals is taxable at the same rates as ordinary income.

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.
3
<PAGE>

These returns assume payment of applicable sales charges.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The information shows you how the fund's performance has varied
year by year and provides some indication of the risks of investing in the
fund. The table compares the fund's performance to that of the Russell 1000
Value Index, a recognized unmanaged index of stock market performance. As with
all such investments, past performance is not an indication of future results.
Sales charges are not reflected in the bar chart. If they were, returns would
be less than those shown.

The performance for the period before Investor A Shares were launched is based
upon performance for Institutional Shares of the fund, which were first issued
in April 1992. Investor A Shares were launched in May 1992, Investor B Shares
were launched in January 1996 and Investor C Shares were launched in August
1996. The performance for Investor B Shares for the period before they were
launched is based upon performance for Institutional and Investor A Shares, and
the performance for Investor C Shares for the period before they were launched
is based upon performance for Institutional, Investor A and Investor B Shares.
The actual return of Investor A Shares would have been lower than shown because
Investor A Shares have higher expenses than Institutional Shares. Also, the
actual returns of Investor B and C Shares would have been lower compared to
Investor A Shares because Investor B and C Shares have higher expenses than
Investor A Shares.

As of 12/31 Investor A Shares
- ------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- ------------------------------------------------------------------------------

Best Quarter Q4 '98: 15.89%

Worst Quarter Q3 '98: -14.19%

[BAR CHART]

93 94 95 96 97 98 99
- ----- ----- ----- ----- ----- ----- -----
17.84 0.73 34.31 23.81 28.02 9.97 3.28

Since Inception
1 Year 3 Years 5 Years Inception Date
------ ------- ------- --------- ---------
Large Cap Value; Inv A -1.35% 11.56% 18.22% 14.65% 04/20/92
Large Cap Value; Inv B -2.17% 11.08% 18.10% 14.88% 04/20/92
Large Cap Value; Inv C 1.42% 12.41% 18.58% 14.88% 04/20/92
Russell 1000 Value 7.35% 18.83% 23.07% 17.87% N/A*

* For comparative purposes, the value of the index on 05/01/92 is used as the
beginning value on 04/20/92.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

4
<PAGE>

Expenses
and Fees

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

This prospectus offers shareholders different ways to invest with three sepa-
rate pricing options. You need to understand your choices so that you can
choose the pricing option that is most suitable for you. With one option (In-
vestor A Shares) you pay a one-time front-end transaction fee each time you buy
shares. The other options (Investor B and Investor C Shares) have no front-end
charges but have higher on-going fees, which are paid over the life of the
investment, and have a contingent deferred sales charge (CDSC) that you may pay
when you redeem your shares. Which option should you choose? It depends on your
individual circumstances. You should know that the lowest sales charge won't
necessarily be the least expensive option over time. For example, if you intend
to hold your shares long term it may cost less to buy A Shares than B or C
Shares.

The tables below explain your pricing options and describe the fees and
expenses that you may pay if you buy and hold Investor A, B and C Shares of the
fund. The "Annual Fund Operating Expenses" table is based on expenses for the
most recent fiscal year.

Shareholder Fees (Fees paid directly from your investment)

<TABLE>
<CAPTION>
A Shares B Shares C Shares

<S> <C> <C> <C>
Maximum Front-End Sales
Charge* 4.5% 0.0% 0.0%
(as percentage of offering
price)
Maximum Deferred Sales Charge 0.0% 4.5%** 1.00%***
(as percentage of offering
price)
</TABLE>
* Reduced front-end sales charges may be available. A CDSC of up to 1.00% is
assessed on certain redemptions of Investor A Shares that are purchased
with no initial sales charge as part of an investment of $1,000,000 or
more.

** The CDSC is 4.5% if shares are redeemed in less than one year. The CDSC for
Investor B Shares decreases for redemptions made in subsequent years. After
six years there is no CDSC on B Shares. (See page 102 for complete schedule
of CDSCs.)
*** There is no CDSC on C Shares after one year.

5
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Distribution Fees: A
method of charging dis-
tribution-related
expenses against fund
assets.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and /or its affiliates
for shareholder account
service and mainte-
nance.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares

<S> <C> <C> <C>
Advisory fees .51% .51% .51%
Distribution and service
(12b-1) fees .50% 1.15% 1.15%
Other expenses/1/ .33% .33% .33%
Total annual fund operating
expenses 1.34% 1.99% 1.99%
Fee waivers and expense
reimbursements* .10% - - - -
Net expenses* 1.24% 1.99% 1.99%
</TABLE>

* BlackRock and BlackRock Distributors, Inc., the Fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in order to
limit fund expenses to 1.27% (for Investor A Shares) and 2.01% (for
Investor B and C Shares) of average daily net assets until February 1,
2001. The fund may have to repay some of these waivers and reimbursements
to BlackRock in the following two years. See the "Management" section on
page 108 for a discussion of these waivers and reimbursements.

/1/ "Other expenses" have been restated to reflect current expenses.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual cost may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years

<S> <C> <C> <C> <C>
A Shares* $571 $846 $1,142 $1,982
B Shares**
Redemption $652 $974 $1,273 $2,149***
B Shares
No Redemption $202 $624 $1,073 $2,149***
C Shares**
Redemption $302 $624 $1,073 $2,317
C Shares
No Redemption $202 $624 $1,073 $2,317
</TABLE>
* Reflects imposition of sales charge.
** Reflects deduction of CDSC.
*** Based on the conversion of the Investor B Shares to Investor A Shares
after eight years.

6
<PAGE>

Fund Management
The manager of the fund is Daniel B. Eagan, Managing Director with BlackRock
Financial Management, Inc. since 1995. Mr. Eagan was a director of investment
strategy at BlackRock Advisors, Inc. during 1994-1995. Prior to 1994 he served
as senior research consultant for Mercer Investment Consulting. He has served
as manager for the fund since January 1997.

Financial Highlights
The financial information in the table on the next page shows the fund's
financial performance for the periods indicated. Certain information reflects
results for a single fund share. The term "Total Return" indicates how much
your investment would have increased or decreased during this period of time
and assumes that you have reinvested all dividends and distributions. These
figures have been audited by PricewaterhouseCoopers LLP, the fund's independent
accountants. The auditor's report, along with the fund's financial statements,
are included in the Company's annual report, which is available upon request
(see back cover for ordering instructions).
7
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Investor A, B or C Share Outstanding Throughout Each Period)

Large Cap Value Equity Portfolio
(formerly the Value Equity Portfolio)

<TABLE>
<CAPTION>
INVESTOR A
SHARES
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value
at
beginning
of period $ 14.68 $ 17.52 $ 15.35 $ 13.92 $ 11.62
------- ------- ------- ------- -------
Income from
investment
operations
Net investment
income 0.16 0.17 0.23 0.28 0.27
Net gain (loss)
on investments
(both realized
and unrealized) 2.01 (0.60) 4.69 2.41 2.56
------- ------- ------- ------- -------
Total from
investment
operations 2.17 (0.43) 4.92 2.69 2.83
------- ------- ------- ------- -------
Less
distributions
Distributions
from net
investment
income (0.16) (0.16) (0.23) (0.29) (0.28)
Distributions
from net
realized
capital gains (0.95) (2.25) (2.52) (0.97) (0.25)
------- ------- ------- ------- -------
Total
distributions (1.11) (2.41) (2.75) (1.26) (0.53)
------- ------- ------- ------- -------
Net asset value
at end of period $ 15.74 $ 14.68 $ 17.52 $ 15.35 $ 13.92
======= ======= ======= ======= =======
Total return 14.85%/3/ (2.63)%/3/ 37.01%/3/ 20.52%/3/ 25.22%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $61,657 $51,151 $47,131 $26,190 $16,910
Ratios of
expenses to
average
net assets
After advisory/
administration
fee waivers 1.19% 1.27% 1.26% 1.22% 1.11%
Before
advisory/
administration
fee waivers 1.19% 1.28% 1.33% 1.31% 1.25%
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers 0.96% 0.99% 1.44% 1.93% 2.24%
Before
advisory/
administration
fee waivers 0.96% 0.98% 1.37% 1.84% 2.10%
Portfolio
turnover rate 42% 33% 37% 60% 12%
<CAPTION>
INVESTOR B INVESTOR C
SHARES SHARES
For the For the
Period Period
Year Year Year 1/18/96/1/ Year Year Year 8/16/96/1/
Ended Ended Ended through Ended Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/96 9/30/99 9/30/98 9/30/97 9/30/96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at
beginning
of period $ 14.59 $ 17.44 $ 15.32 $13.56 $14.59 $17.44 $15.32 $14.91
----------- ------------ ----------- ------------ ----------- ------------ ----------- ------------
Income from
investment
operations
Net investment
income 0.02 0.05 0.14 0.13 0.03 0.06 0.15 0.02
Net gain (loss)
on investments
(both realized
and unrealized) 1.99 (0.61) 4.64 1.80 1.98 (0.62) 4.63 0.45
----------- ------------ ----------- ------------ ----------- ------------ ----------- ------------
Total from
investment
operations 2.01 (0.56) 4.78 1.93 2.01 (0.56) 4.78 0.47
----------- ------------ ----------- ------------ ----------- ------------ ----------- ------------
Less
distributions
Distributions
from net
investment
income (0.04) (0.04) (0.14) (0.17) (0.04) (0.04) (0.14) (0.06)
Distributions
from net
realized
capital gains (0.95) (2.25) (2.52) - - (0.95) (2.25) (2.52) - -
----------- ------------ ----------- ------------ ----------- ------------ ----------- ------------
Total
distributions (0.99) (2.29) (2.66) (0.17) (0.99) (2.29) (2.66) (0.06)
----------- ------------ ----------- ------------ ----------- ------------ ----------- ------------
Net asset value
at end of period $ 15.61 $ 14.59 $ 17.44 $15.32 $15.61 $14.59 $17.44 $15.32
=========== ============ =========== ============ =========== ============ =========== ============
Total return 13.93%/3/ (3.45)%/3/ 36.40%/3/ 14.26%/3/ 13.93%/3/ (3.45)%/3/ 35.99%/3/ 3.16%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $33,206 $29,450 $19,773 $3,152 $4,172 $3,146 $1,428 $ 205
Ratios of
expenses to
average
net assets
After advisory/
administration
fee waivers 2.00% 2.06% 2.00% 1.92%/2/ 2.00% 2.04% 2.01% 1.80%/2/
Before
advisory/
administration
fee waivers 2.00% 2.07% 2.07% 2.00%/2/ 2.00% 2.05% 2.08% 1.88%/2/
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers 0.15% 0.20% 0.64% 1.34%/2/ 0.15% 0.22% 0.61% 1.29%/2/
Before
advisory/
administration
fee waivers 0.15% 0.19% 0.57% 1.25%/2/ 0.15% 0.21% 0.54% 1.20%/2/
Portfolio
turnover rate 42% 33% 37% 60% 42% 33% 37% 60%
</TABLE>
--------------------------------------------------------------------
/1/Commencement of operations of share class.

/2/Annualized.
/3/Neither front-end sales load nor contingent deferred sales load is reflected
in total return.

8
<PAGE>

BlackRock
[GRAPHIC] Large Cap Growth Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Earnings Growth: The
rate of growth in a
company's earnings per
share from period to
period. Security ana-
lysts attempt to iden-
tify companies with
earnings growth poten-
tial because a pattern
of earnings growth gen-
erally causes share
prices to increase.

Fundamental Analysis: A
method of stock market
analysis that concen-
trates on "fundamental"
information about the
company such (as its
income statement, bal-
ance sheet, earnings
and sales history,
products and manage-
ment) to attempt to
forecast future stock
value.

Growth Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value," although there
are times when a growth
fund and value fund may
own the same stock.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general and
whose revenue growth is
expected to continue
for an extended period.
These stocks typically
pay relatively low div-
idends and sell at rel-
atively high prices.
Value stocks are compa-
nies that appear to the
manager to be underval-
ued by the market as
measured by certain
financial formulas.

Large Capitalization
Companies: The fund
defines these companies
as those with capital-
ization over $10 bil-
lion. Capitalization
refers to the market
value of the company
and is calculated by
multiplying the number
of shares outstanding
by the current price
per share. Larger com-
panies may be more
likely to have the
staying power to get
them through all eco-
nomic cycles; however
their size may also
make them less flexible
and innovative than
smaller companies.

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies
In pursuit of this goal, the fund manager invests primarily in U.S. large capi-
talization growth companies (market capitalization in excess of $10 billion)
which he believes have above-average earnings growth potential. The fund nor-
mally invests at least 65% of its total assets in the equity securities issued
by these companies and normally invests at least 80% of its total assets in
equity securities. The fund primarily buys common stock but also can invest in
preferred stock and securities convertible into common and preferred stock.

The manager initially screens for "growth" stocks from the universe of compa-
nies with market capitalization above $1 billion, emphasizing those companies
with market capitalization over $10 billion. The manager uses fundamental anal-
ysis to examine each company for financial strength before deciding to purchase
the stock.

The fund generally will sell a stock when, in the fund manager's opinion, there
is a deterioration in the company's fundamentals, the company fails to meet
performance expectations or the stock's relative price momentum declines mean-
ingfully.

9
<PAGE>

The fund may lend some of its securities on a short-term basis in order to
earn extra income. The fund will receive collateral in cash or high quality
securities equal to the current value of the loaned securities. These loans
will be limited to 33 1/3% of the value of the fund's total assets.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

While the fund manager chooses stocks he believes have above-average earnings
growth potential, there is no guarantee that the shares will increase in val-
ue.

Securities loans involve the risk of a delay in receiving additional collat-
eral if the value of the securities goes up while they are on loan. There is
also the risk of delay in recovering the loaned securities and of losing
rights to the collateral if a borrower goes bankrupt.

Higher than normal portfolio turnover may result in increased transaction
costs to the fund, including brokerage commissions, dealer mark-ups and other
transaction costs on the sale of the securities and on reinvestment in other
securities. The sale of fund securities may result in the recognition of capi-
tal gain or loss. Given the frequency of sales, such gain or loss will likely
be short-term capital gain or loss. Unlike long-term capital gain, short-term
capital gain of individuals is taxable at the same rates as ordinary income.

Key Risks
10
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The information shows you how the fund's performance has varied
year by year and provides some indication of the risks of investing in the
fund. The table compares the fund's performance to that of the Russell 1000
Growth Index, a recognized unmanaged index of stock market performance. As with
all such investments, past performance is not an indication of future results.
Sales charges are not reflected in the bar chart. If they were, returns would
be less than those shown.

The performance for the period before Investor A Shares were launched is based
upon performance for Institutional Shares of the fund, which were first issued
in November 1989. Investor A Shares were launched in March 1992, Investor B
Shares were launched in January 1996 and Investor C Shares were launched in
January 1997. The performance for Investor B Shares for the period before they
were launched is based upon performance for Institutional and Investor A
Shares, and the performance for Investor C Shares for the period before they
were launched is based upon performance for Institutional, Investor A and
Investor B Shares. The actual return of Investor A Shares would have been lower
than shown because Investor A Shares have higher expenses than Institutional
Shares. Also, the actual returns of Investor B and C Shares would have been
lower compared to Investor A Shares because Investor B and C Shares have higher
expenses than Investor A Shares.
11
<PAGE>

As of 12/31 Investor A Shares
- ------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS*
- ------------------------------------------------------------------------------

Best Quarter Q4 '99: 27.17%

Worst Quarter Q3 '98: -10.06%

The bars for 1990-1992 are based upon performance for Institutional Shares of
the fund.

[BAR CHART]

90 91 92 93 94 95 96 97 98 99
- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- -2.05 26.01 -1.01 13.51 -10.44 33.89 19.77 27.9 40.65 35.99

These returns assume payment of applicable sales charges.

As of 12/31/99
- ------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- ------------------------------------------------------------------------------

10 Since Inception
1 Year 3 Years 5 Years Years Inception Date
------ ------- ------- ----- --------- ---------
Large Cap Growth; Inv A 29.85% 32.68% 30.23% 16.62% 17.22% 11/01/89
Large Cap Growth; Inv B 28.75% 32.08% 30.08% 16.79% 17.39% 11/01/89
Large Cap Growth; Inv C 33.47% 33.66% 30.61% 16.79% 17.39% 11/01/89
Russell 1000 Growth 33.16% 34.08% 32.42% 20.32% 20.48% N/A

* The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

12
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Distribution Fees: A
method of charging dis-
tribution-related
expenses against fund
assets.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and /or its affiliates
for shareholder account
service and mainte-
nance.

Shareholder Fees (Fees paid directly from your investment)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Maximum Front-End Sales
Charge* 4.5% 0.0% 0.0%
(as percentage of offering
price)
Maximum Deferred Sales
Charge 0.0% 4.5%** 1.00%***
(as percentage of offering
price)
</TABLE>
* Reduced front-end sales charges may be available. A CDSC of up to 1.00% is
assessed on certain redemptions of Investor A Shares that are purchased
with no initial sales charge as part of an investment of $1,000,000 or
more.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Advisory fees .53% .53% .53%
Distribution and service
(12b-1) fees .50% 1.15% 1.15%
Other expenses .35% .35% .35%
Total annual fund operating
expenses 1.38% 2.03% 2.03%
Fee waivers and expense
reimbursements* .10% -- --
Net expenses* 1.28% 2.03% 2.03%
</TABLE>

* BlackRock and BlackRock Distributors, Inc., the fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in order to
limit fund expenses to 1.29% (for Investor A Shares) and 2.04% (for Investor
B and C Shares) of average daily net assets until February 1, 2001. The fund
may have to repay some of these waivers and reimbursements to BlackRock in
the following two years. See the "Management" section on page 108 for a
discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
A Shares* $575 $858 $1,162 $2,025
B Shares**
Redemption $656 $987 $1,293 $2,192***
B Shares
No Redemption $206 $637 $1,093 $2,192***
C Shares**
Redemption $306 $637 $1,093 $2,358
C Shares
No Redemption $206 $637 $1,093 $2,358
</TABLE>
* Reflects imposition of sales charge.
** Reflects deduction of CDSC.
*** Based on the conversion of Investor B Shares to Investor A Shares after
eight years.

13
<PAGE>

Fund Management
The manager of the fund is R. Andrew Damm, who has served as Managing Director
with BlackRock Financial Management, Inc. since 1997 and senior investment
manager with BlackRock Advisors, Inc. since 1995. Mr. Damm was a portfolio
manager for PNC Bank from 1988 to 1995. He has participated in the management
of the portfolio since 1996 and has been designated as manager since September
1997.

14
<PAGE>

Financial Highlights
The financial information in the table below shows the fund's financial perfor-
mance for the periods indicated. Certain information reflects results for a
single fund share. The term "Total Return" indicates how much your investment
would have increased or decreased during this period of time and assumes that
you have reinvested all dividends and distributions. These figures have been
audited by PricewaterhouseCoopers LLP, the fund's independent accountants. The
auditor's report, along with the fund's financial statements, are included in
the Company's annual report, which is available upon request (see back cover
for ordering instructions).

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Investor A, B or C Share Outstanding Throughout Each Period)

Large Cap Growth Equity Portfolio

<TABLE>
<CAPTION>
INVESTOR A
SHARES
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value
at beginning of period $ 18.06 $18.91 $ 14.94 $ 13.01 $ 10.16
------- ------- ------- ------- -------
Income from
investment
operations
Net investment
income (0.09) (0.05) 0.01 0.02 0.08
Net gain on
investments
(both realized
and unrealized) 6.03 1.84 4.72 2.29 2.87
------- ------- ------- ------- -------
Total from
investment
operations 5.94 1.79 4.73 2.31 2.95
------- ------- ------- ------- -------
Less
distributions
Distributions
from net
investment
income - - - - (0.02) - - (0.10)
Distributions
from net
realized
capital gains (1.63) (2.64) (0.74) (0.38) - -
------- ------- ------- ------- -------
Total
distributions (1.63) (2.64) (0.76) (0.38) (0.10)
------- ------- ------- ------- -------
Net asset value
at end of period $ 22.37 $18.06 $ 18.91 $ 14.94 $ 13.01
======= ======= ======= ======= =======
Total return 34.91%/3/ 11.16%/3/ 33.18%/3/ 18.18%/3/ 29.26%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $61,211 $33,340 $25,575 $16,579 $10,034
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 1.22% 1.33% 1.27% 1.22% 1.11%
Before
advisory/
administration
fee waivers 1.22% 1.33% 1.34% 1.34% 1.29%
Ratios of net
investment
income to
average
net assets
After advisory/
administration
fee waivers (0.42)% (0.30)% 0.07% 0.15% 0.76%
Before
advisory/
administration
fee waivers (0.42)% (0.30)% 0.02% 0.04% 0.58%
Portfolio
turnover rate 60% 54% 81% 58% 55%
--------------------------------------------------------------------------------------------------
<CAPTION>
INVESTOR B INVESTOR C
SHARES SHARES
For the For the
Period Period
Year Year Year 1/24/96/1/ Year Year 1/24/97/1/
Ended Ended Ended through Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/96 9/30/99 9/30/98 9/30/97
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning of period $ 17.68 $18.69 $14.86 $13.08 $17.68 $18.69 $15.23
----------- ----------- ----------- ------------- ----------- ----------- -------------
Income from
investment
operations
Net investment
income (0.20) (0.15) (0.07) (0.02) (0.18) (0.15) (0.03)
Net gain on
investments
(both realized
and unrealized) 5.83 1.78 4.64 1.80 5.81 1.78 3.49
----------- ----------- ----------- ------------- ----------- ----------- -------------
Total from
investment
operations 5.63 1.63 4.57 1.78 5.63 1.63 3.46
----------- ----------- ----------- ------------- ----------- ----------- -------------
Less
distributions
Distributions
from net
investment
income - - - - - - - - - - - - - -
Distributions
from net
realized
capital gains (1.63) (2.64) (0.74) - - (1.63) (2.64) - -
----------- ----------- ----------- ------------- ----------- ----------- -------------
Total
distributions (1.63) (2.64) (0.74) - - (1.63) (2.64) - -
----------- ----------- ----------- ------------- ----------- ----------- -------------
Net asset value
at end of period $ 21.68 $17.68 $18.69 $14.86 $21.68 $17.68 $18.69
=========== =========== =========== ============= =========== =========== =============
Total return 33.83%/3/ 10.33%/3/ 32.18%/3/ 13.61%/3/ 33.83%/3/ 10.33%/3/ 22.78%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $37,032 $14,713 $7,919 $2,364 $4,181 $1,037 $ 207
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 2.03% 2.07% 2.01% 1.93%/2/ 2.03% 2.06% 2.02%/2/
Before
advisory/
administration
fee waivers 2.03% 2.07% 2.08% 2.05%/2/ 2.03% 2.06% 2.09%/2/
Ratios of net
investment
income to
average
net assets
After advisory/
administration
fee waivers (1.23)% (1.03)% (0.66)% (0.47)%/2/ (1.23)% (1.01)% (0.66)%/2/
Before
advisory/
administration
fee waivers (1.23)% (1.03)% (0.73)% (0.58)%/2/ (1.23)% (1.01)% (0.73)%/2/
Portfolio
turnover rate 60% 54% 81% 58% 60% 54% 81%
--------------------------------------------------------------------------------------------------
</TABLE>
/1/Commencement of operations of share class.

/2/Annualized.
/3/Neither front-end sales load nor contingent deferred sales load is reflected
in total return.

15
<PAGE>

BlackRock
[GRAPHIC] Mid-Cap Value Equity Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation--current income is the secondary
objective.

Primary Investment Strategies

In pursuit of this goal, the fund manager invests primarily in U.S. mid-capi-
talization value companies (market capitalization between $2 billion and $15
billion). The fund normally invests at least 65% of its total assets in the
equity securities issued by these companies and normally invests at least 80%
of its total assets in equity securities. The fund primarily buys common stock
but also can invest in preferred stock and securities convertible into common
and preferred stock.

The fund manager is seeking mid-capitalization stocks which he believes are
worth more than is indicated by current market price. The manager initially
screens for "value" stocks from the universe of companies with market capital-
ization above $2 billion, emphasizing those companies with market capitaliza-
tion between $2 billion and $15 billion. The manager uses fundamental analysis
to examine each company for financial strength before deciding to purchase the
stock.

IMPORTANT DEFINITIONS

Equity Security: A
security, such as
stock, representing
ownership of a company.
Bonds, in comparison,
are referred to as
fixed-income or debt
securities because they
represent indebtedness
to the bondholder, not
ownership.

Investment Style:
Refers to the guiding
principles of a mutual
fund's investment
choices. The investment
style of this fund is
mid-cap value, refer-
ring to the type of
securities the managers
will choose for this
fund.

Mid-Capitalization Com-
panies: The fund
defines these companies
as those with capital-
ization of from $2 bil-
lion to $15 billion,
which applies to about
25% of the public U.S.
equity market. Capital-
ization refers to the
market value of the
company and is calcu-
lated by multiplying
the number of shares
outstanding by the cur-
rent price per share.

16
<PAGE>

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

There is more business risk in investing in mid-capitalization companies than
in larger, better capitalized companies. These organizations will normally have
more limited product lines, markets and financial resources and will be depen-
dent upon a more limited management group than larger capitalized companies.

While the fund manager chooses stocks he believes to be undervalued, there is
no guarantee that prices won't move even lower.

Securities loans involve the risk of delay in receiving additional collateral
if the value of the securities goes up while they are on loan. There is also
the risk of delay in recovering the loaned securities and of losing rights to
the collateral if a borrower goes bankrupt.

Key Risks
17
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The information shows you how the fund's performance has varied
year by year and provides some indication of the risks of investing in the
fund. The table compares the fund's performance to that of the Russell Mid Cap
Value Index, a recognized unmanaged index of stock market performance. As with
all such investments, past performance is not an indication of future results.
Sales charges are not reflected in the bar chart. If they were, returns would
be less than those shown.

Best Quarter Q4 '98: 13.49%

Worst Quarter Q3 '98: -17.36%

[BAR CHART]

97 98 99
----- ----- -----
27.94 -2.01 0.71

These returns assume payment of applicable sales charges.

Since Inception
1 Year 3 Years Inception Date
------ ------- --------- ---------
Mid Cap Value; Inv A -3.84% 6.43% 6.41% 12/27/96
Mid Cap Value; Inv B -4.62% 6.13% 6.28% 12/27/96
Mid Cap Value; Inv C -1.11% 7.39% 7.36% 12/27/96
Russell Mid Cap Value -0.11% 12.15% 12.15% N/A*

* For comparative purposes, the value of the index on 01/01/97 is used as the
beginning value on 12/27/96.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

18
<PAGE>

Expenses
and Fees

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

This prospectus offers shareholders three different ways to invest with three
separate pricing options. You need to understand your choices so that you can
choose the pricing option that is most suitable for you. With one option (In-
vestor A Shares) you pay a one-time front-end transaction fee each time you buy
shares. The other options (Investor B and Investor C Shares) have no front-end
charges but have higher on-going fees, which are paid over the life of the
investment, and have a contingent deferred sales charge (CDSC) that you may pay
when you redeem your shares. Which option should you choose? It depends on your
individual circumstances. You should know that the lowest sales charge won't
necessarily be the least expensive option over time. For example, if you intend
to hold your shares long term it may cost less to buy A Shares than B or C
Shares.

Shareholder Fees (Fees paid directly from your investment)

<TABLE>
<CAPTION>
A Shares B Shares C Shares

<S> <C> <C> <C>
Maximum Front-End Sales
Charge* 4.5% 0.0% 0.0%
(as percentage of offering
price)
Maximum Deferred Sales
Charge 0.0% 4.5%** 1.00%***
(as percentage of offering
price)
</TABLE>
* Reduced front-end sales charges may be available. A CDSC of up to 1.00% is
assessed on certain redemptions of Investor A Shares that are purchased
with no initial sales charge as part of an investment of $1,000,000 or
more.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Advisory fees .80% .80% .80%
Distribution and service
(12b-1) fees .50% 1.15% 1.15%
Other expenses .39% .39% .39%
Total annual fund operating
expenses 1.69% 2.34% 2.34%
Fee waivers and expense
reimbursements* .10% - - - -
Net expenses* 1.59% 2.34% 2.34%
</TABLE>

* BlackRock and BlackRock Distributors, Inc., the fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in order to
limit fund expenses to 1.64% (for Investor A Shares) and 2.39% (for
Investor B and C Shares) of average daily net assets until February 1,
2001. The fund may have to repay some of these waivers and reimbursements
to BlackRock in the following two years. See the "Management" section on
page 108 for a discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years

<S> <C> <C> <C> <C>
A Shares* $604 $ 949 $1,318 $2,350
B Shares**
Redemption $687 $1,080 $1,450 $2,514***
B Shares
No Redemption $237 $ 730 $1,250 $2,514***
C Shares**
Redemption $337 $ 730 $1,250 $2,676
C Shares
No Redemption $237 $730 $1,250 $2,676
</TABLE>
* Reflects imposition of sales charge.
** Reflects deduction of CDSC.
*** Based on the conversion of Investor B Shares to Investor A Shares after
eight years.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Distribution Fees: A
method of charging dis-
tribution-related
expenses against fund
assets.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and/or its affiliates
for shareholder account
service and
maintenance.

20
<PAGE>

Fund Management
The fund is co-managed by Christian K. Stadlinger and Daniel B. Eagan.

Christian K. Stadlinger has been co-manager of the fund since inception. He has
been a Managing Director with BlackRock Financial Management, Inc. (BFM) since
July 1996. Prior to joining BFM he was Portfolio Manager and Research Analyst
with Morgan Stanley Asset Management.

Daniel B. Eagan, has been co-manager of the fund since inception. Mr. Eagan is
a Managing Director with Black Rock Financial Management, Inc. since 1995. He
was a director of investment strategy at BlackRock Advisors, Inc. during 1994-
1995. Previously, he served as senior research consultant for Mercer Investment
Consulting.
21
<PAGE>

Financial Highlights
The financial information in the table below shows
the fund's financial performance for the periods
indicated. Certain information reflects results
for a single fund share. The term "Total Return"
indicates how much your investment would have
increased or decreased during this period of time
and assumes that you have reinvested all dividends
and distributions. These figures have been audited
by PricewaterhouseCoopers LLP, the fund's indepen-
dent accountants. The auditor's report, along with
the fund's financial statements, are included in
the Company's annual report, which is available
upon request (see back cover for ordering instruc-
tions).

FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(For an Investor A, B or C Share Outstanding Throughout Each Period)

Mid-Cap Value Equity Portfolio

<TABLE>
<CAPTION>
INVESTOR A INVESTOR B
SHARES SHARES
For the For the
Period Period
Year Year 12/27/96/1/ Year Year 12/27/96/1/
Ended Ended through Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/99 9/30/98 9/30/97
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $10.61 $12.77 $10.00 $10.58 $12.78 $10.00
------ ------ ------ ------ ------ ------
Income from
investment
operations
Net investment
income 0.05 0.05 0.07 (0.04) (0.03) 0.03
Net gain (loss) on
investments
(both realized
and unrealized) 0.72 (1.81) 2.78 0.72 (1.81) 2.79
------ ------ ------ ------ ------ ------
Total from
investment
operations 0.77 (1.76) 2.85 0.68 (1.84) 2.82
------ ------ ------ ------ ------ ------
Less distributions
Distributions from
net investment
income (0.05) (0.04) (0.08) - - - - (0.04)
Distributions from
net realized
capital gains - - (0.36) - - - - (0.36) - -
------ ------ ------ ------ ------ ------
Total
distributions (0.05) (0.40) (0.08) - - (0.36) (0.04)
------ ------ ------ ------ ------ ------
Net asset value at
end of period $11.33 $10.61 $12.77 $11.26 $10.58 $12.78
====== ====== ====== ====== ====== ======
Total return 7.14%/3/ (14.06)%/3/ 28.51%/3/ 6.33%/3/ (14.66)%/3/ 28.23%/3/
Ratios/Supplemental
data
Net assets at end
of period (in
thousands) $4,328 $3,983 $2,315 $5,147 $6,375 $2,911
Ratios of expenses
to average net
assets
After
advisory/administration
fee waivers 1.59% 1.61% 1.61%/2/ 2.34% 2.35% 2.32%/2/
Before
advisory/administration
fee waivers 1.60% 1.67% 1.64%/2/ 2.34% 2.41% 2.36%/2/
Ratios of net
investment income
to average
net assets
After
advisory/administration
fee waivers 0.41% 0.41% 0.77%/2/ (0.34)% (0.33)% 0.04%/2/
Before advisory/
administration fee
waivers 0.41% 0.35% 0.73%/2/ (0.34)% (0.39)% 0.00%/2/
Portfolio turnover
rate 88% 71% 36% 88% 71% 36%
------------------------------------------------------------------------------------
<CAPTION>
INVESTOR C
SHARES
For the
Period
Year Year 12/27/96/1/
Ended Ended through
9/30/99 9/30/98 9/30/97
<S> <C> <C> <C>
Net asset value at
beginning of period $10.58 $12.78 $10.00
----------- ------------ -------------
Income from
investment
operations
Net investment
income (0.03) (0.02) 0.02
Net gain (loss) on
investments
(both realized
and unrealized) 0.71 (1.82) 2.80
----------- ------------ -------------
Total from
investment
operations 0.68 (1.84) 2.82
----------- ------------ -------------
Less distributions
Distributions from
net investment
income - - - - (0.04)
Distributions from
net realized
capital gains - - (0.36) - -
----------- ------------ -------------
Total
distributions - - (0.36) (0.04)
----------- ------------ -------------
Net asset value at
end of period $11.26 $10.58 $12.78
=========== ============ =============
Total return 6.33%/3/ (14.66)%/3/ 28.23%/3/
Ratios/Supplemental
data
Net assets at end
of period (in
thousands) $ 420 $ 259 $ 21
Ratios of expenses
to average net
assets
After
advisory/administration
fee waivers 2.34% 2.33% 2.33%/2/
Before
advisory/administration
fee waivers 2.34% 2.39% 2.37%/2/
Ratios of net
investment income
to average
net assets
After
advisory/administration
fee waivers (0.34)% (0.28)% 0.13%/2/
Before advisory/
administration fee
waivers (0.34)% (0.34)% 0.09%/2/
Portfolio turnover
rate 88% 71% 36%
------------------------------------------------------------------------------------
</TABLE>
/1/Commencement of operations of share class.

/2/Annualized.
/3/Neither front-end sales load nor contingent deferred sales load is
reflected in total return.

22
<PAGE>

BlackRock
[Graphic] Mid-Cap Growth Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Equity Security: A
security, such as
stock, representing
ownership of a company.
Bonds, in comparison,
are referred to as
fixed income or debt
securities because they
represent indebtedness
to the bondholder, not
ownership.
Fundamental Analysis: A
method of stock market
analysis that concen-
trates on "fundamental"
information about the
company (such as its
income statement, bal-
ance sheet, earnings
and sales history,
products and manage-
ment) to attempt to
forecast future stock
value.

Investment Style:
Refers to the guiding
principles of a mutual
fund's investment
choices. The investment
style of this fund is
mid-cap growth, refer-
ring to the type of
securities the managers
will choose for this
fund.

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies

In pursuit of this goal, the fund manager invests primarily in U.S. mid-capi-
talization growth companies (market capitalization between $2 billion and $15
billion) which he believes have above-average earnings growth potential. The
fund normally invests at least 65% of its total assets in the equity securities
issued by these companies and normally invests at least 80% of its total assets
in equity securities. The fund primarily buys common stock but also can invest
in preferred stock and securities convertible into common and preferred stock.

The manager initially screens for "growth" stocks from the universe of compa-
nies with market capitalization above $2 billion, emphasizing those companies
with market capitalization between $2 billion and $15 billion. The manager uses
fundamental analysis to examine each company for financial strength before
deciding to purchase the stock.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

There is more business risk in investing in mid-capitalization companies than
in larger, better capitalized companies. These organizations will normally
have more limited product lines, markets and financial resources and will be
dependent upon a more limited management group than larger capitalized compa-
nies.

While the fund manager chooses stocks he believes to have above-average earn-
ings growth potential, there is no guarantee that the shares will increase in
value.

Key Risks
24
<PAGE>

When you invest in this fund you are not making a bank deposit. Your invest-
ment is not insured or guaranteed by the Federal Deposit Insurance Corporation
or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The information shows you how the fund's performance has var-
ied year by year and provides some indication of the risks of investing in the
fund. The table compares the fund's performance to that of the Russell Mid Cap
Growth Index, a recognized unmanaged index of stock market performance. As
with all such investments, past performance is not an indication of future
results. Sales charges are not reflected in the bar chart. If they were,
returns would be less than those shown.

Best Quarter Q4 '99: 61.35%

Worst Quarter Q3 '98: -14.71%

[BAR CHART]

97 98 99
----- ----- ------
14.15 21.66 120.08

These returns assume payment of applicable sales charges.

Since Inception
1 Year 3 Years Inception Date
------- ------- --------- ---------
Mid Cap Growth; Inv A 110.19% 42.92% 42.90% 12/27/96
Mid Cap Growth; Inv B 108.66% 42.47% 42.71% 12/27/96
Mid Cap Growth; Inv C 116.30% 44.17% 44.16% 12/27/96
Russell Mid Cap Growth 51.30% 29.77% 29.77% N/A*

* For comparative purposes, the value of the index on 01/01/97 is used as the
beginning value on 12/27/96.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.
25
<PAGE>

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

This prospectus offers shareholders different ways to invest with three sepa-
rate pricing options. You need to understand your choices so that you can
choose the pricing option that is most suitable for you. With one option (In-
vestor A Shares) you pay a one-time front-end transaction fee each time you
buy shares. The other options (Investor B and Investor C Shares) have no
front-end charges but have higher on-going fees, which are paid over the life
of the investment, and have a contingent deferred sales charge (CDSC) that you
may pay when you redeem your shares. Which option should you choose? It
depends on your individual circumstances. You should know that the lowest
sales charge won't necessarily be the least expensive option over time. For
example, if you intend to hold your shares long term it may cost less to buy A
Shares than B or C Shares.

The tables below explain your pricing options and describe the fees and
expenses that you may pay if you buy and hold Investor A, B and C Shares of
the fund. The "Annual Fund Operating Expenses" table is based on expenses for
the most recent fiscal year.

Shareholder Fees (Fees paid directly from your investment)

<TABLE>
<CAPTION>
A Shares B Shares C Shares

<S> <C> <C> <C>
Maximum Front-End Sales
Charge* 4.5% 0.0% 0.0%
(as percentage of offering
price)
Maximum Deferred Sales
Charge 0.0% 4.5%** 1.00%***
(as percentage of offering
price)
</TABLE>
* Reduced front-end sales charges may be available. A CDSC of up to 1.00% is
assessed on certain redemptions of Investor A Shares that are purchased
with no initial sales charge as part of an investment of $1,000,000 or
more.

** The CDSC is 4.5% if shares are redeemed in less than one year. The CDSC
for Investor B Shares decreases for redemptions made in subsequent years.
After six years there is no CDSC on B Shares. (See page 102 for complete
schedule of CDSCs.)
*** There is no CDSC on C Shares after one year.

26
<PAGE>

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares

<S> <C> <C> <C>
Advisory fees .80% .80% .80%
Distribution and service (12b-
1) fees .50% 1.15% 1.15%
Other expenses/1/ .38% .38% .38%
Total annual fund operating
expenses 1.68% 2.33% 2.33%
Fee waivers and expense
reimbursements* .10% - - - -
Net expenses* 1.58% 2.33% 2.33%
</TABLE>

* BlackRock and BlackRock Distributors, Inc., the fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in order to
limit fund expenses to 1.64% (for Investor A Shares) and 2.39% (for Investor
B and C Shares) of average daily net assets until February 1, 2001. The fund
may have to repay some of these waivers and reimbursements to BlackRock in
the following two years. See the "Management" section on page 108 for a
discussion of these waivers and reimbursements.

/1/ "Other expenses" have been restated to reflect current expenses.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years

<S> <C> <C> <C> <C>
A Shares* $603 $ 946 $1,313 $2,340
B Shares**
Redemption $686 $1,077 $1,445 $2,504***
B Shares
No Redemption $236 $ 727 $1,245 $2,504***
C Shares**
Redemption $336 $ 727 $1,245 $2,666
C Shares
No Redemption $236 $ 727 $1,245 $2,666
</TABLE>
* Reflects imposition of sales charge.
** Reflects deduction of CDSC.
*** Based on the conversion of Investor B Shares to Investor A Shares after
eight years.

Fund Management

The fund is managed by a team of investment professionals at BlackRock Finan-
cial Management, Inc. (BFM), including the following individuals who have day-
to-day responsibility: William Wykle, Managing Director of BFM since 1995,
Thomas Callan, Managing Director of BFM since 1996, and Amy Hogan, Managing
Director of BFM since August 1999. Prior to joining BFM, William Wykle served
as an investment manager for PNC Bank from 1986 to 1995, Thomas Callan served
as an equity analyst for PNC Bank from 1993 to 1996, and Amy Hogan was a
IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Distribution Fees: A
method of charging dis-
tribution-related
expenses against fund
assets.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and/or its affiliates
for shareholder account
service and mainte-
nance.

27
<PAGE>

Managing Director with Columbus Circle Investors for 13 years. William Wykle
has been a portfolio co-manager since inception, Thomas Callan since May 1998
and Amy Hogan since October 1999.

Mid-Cap Growth Equity Portfolio

<TABLE>
<CAPTION>
INVESTOR A INVESTOR B
SHARES SHARES
<CAPTION>
INVESTOR C
SHARES
For the For the
Period Period
Year Year 12/27/96/1 Year Year 12/27/96/1/
Ended Ended / through Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/99 9/30/98 9/30/97
For the
Period
Year Year 12/27/96/1/
Ended Ended through
9/30/99 9/30/98 9/30/97
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 11.02 $12.14 $10.00 $ 10.90 $12.11 $10.00
------- ------ ------ ------- ------ ------
Income from
investment
operations
Net investment
income (0.11) (0.07) (0.03) (0.18) (0.14) (0.05)
Net gain (loss) on
investments
(both realized
and unrealized) 7.94 (0.95) 2.17 7.80 (0.97) 2.16
------- ------ ------ ------- ------ ------
Total from
investment
operations 7.83 (1.02) 2.14 7.62 (1.11) 2.11
------- ------ ------ ------- ------ ------
Less distributions
Distributions from
capital - - (0.01) - - - - (0.01) - -
Distributions from
net realized
capital gains - - (0.09) - - - - (0.09) - -
------- ------ ------ ------- ------ ------
Total distributions - - (0.10) - - - - (0.10) - -
------- ------ ------ ------- ------ ------
Net asset value at
end of period $ 18.85 $11.02 $12.14 $ 18.52 $10.90 $12.11
======= ====== ====== ======= ====== ======
Total return 71.05%/3/ (8.42)%/3/ 21.40%/3/ 69.91%/3/ (9.19)%/3/ 21.10%/3/
Ratios/Supplemental
data
Net assets at end of
period (in
thousands) $12,795 $4,090 $2,650 $12,698 $4,088 $2,691
Ratios of expenses
to average net
assets
After
advisory/administration
fee waivers 1.58% 1.61% 1.59%/2/ 2.33% 2.35% 2.32%/2/
Before
advisory/administration
fee waivers 1.59% 1.67% 1.63%/2/ 2.34% 2.41% 2.36%/2/
Ratios of net
investment income
to average
net assets
After
advisory/administration
fee waivers (0.95)% (0.85)% (0.73)%/2/ (1.70)% (1.60)% (1.50)%/2/
Before
advisory/administration
fee waivers (0.96)% (0.91)% (0.77)%/2/ (1.71)% (1.66)% (1.54)%/2/
Portfolio turnover
rate 318% 204% 64% 318% 204% 64%
<S> <C> <C> <C>
Net asset value at
beginning of period $10.90 $12.11 $10.00
----------- ------------ --------------
Income from
investment
operations
Net investment
income (0.10) (0.14) (0.07)
Net gain (loss) on
investments
(both realized
and unrealized) 7.72 (0.97) 2.18
----------- ------------ --------------
Total from
investment
operations 7.62 (1.11) 2.11
----------- ------------ --------------
Less distributions
Distributions from
capital - - (0.01) - -
Distributions from
net realized
capital gains - - (0.09) - -
----------- ------------ --------------
Total distributions - - (0.10) - -
----------- ------------ --------------
Net asset value at
end of period $18.52 $10.90 $12.11
=========== ============ ==============
Total return 69.91%/3/ (9.19)%/3/ 21.10%/3/
Ratios/Supplemental
data
Net assets at end of
period (in
thousands) $1,770 $230 $ 85
Ratios of expenses
to average net
assets
After
advisory/administration
fee waivers 2.33% 2.34% 2.35%/2/
Before
advisory/administration
fee waivers 2.34% 2.40% 2.39%/2/
Ratios of net
investment income
to average
net assets
After
advisory/administration
fee waivers (1.70)% (1.56)% (1.49)%/2/
Before
advisory/administration
fee waivers (1.71)% (1.62)% (1.53)%/2/
Portfolio turnover
rate 318% 204% 64%
</TABLE>
/1/Commencement of operations of share class.
/2/Annualized.
-------------------------------------------------------
/3/Neither front-end sales load nor contingent deferred sales load is reflected
in total return.

28
<PAGE>

BlackRock
[GRAPHIC] Small Cap Value Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies
In pursuit of this goal, the fund manager invests primarily in U.S. small capi-
talization value companies (market capitalization under $2 billion). The fund
normally invests at least 65% of its total assets in the equity securities
issued by these companies and normally invests at least 80% of its total assets
in equity securities. The fund primarily buys common stock but also can invest
in preferred stock and securities convertible into common and preferred stock.

The fund manager is seeking small capitalization stocks which he believes are
worth more than is indicated by current market price. The manager initially
screens for "value" stocks from the universe of companies with market capital-
ization under $2 billion. The manager uses fundamental analysis to examine each
company for financial strength before deciding to purchase the stock.

The fund generally will sell a stock when it reaches a target price which is
when the manager believes it is fully valued or when, in the manager's opinion,
conditions change such that the risk of continuing to hold the stock is unac-
ceptable when compared to its growth potential.

IMPORTANT DEFINITIONS

Investment Style:
Refers to the guiding
principles of a mutual
fund's investment
choices. The investment
style of this fund is
small cap value, refer-
ring to the type of
securities the managers
will choose for this
fund.

Small Capitalization
Companies: The fund
defines these companies
as those with capital-
ization of under $2
billion. Capitalization
refers to the market
value of the company
and is calculated by
multiplying the number
of shares outstanding
by the current price
per share.

29
<PAGE>

Key Risks

The fund may lend some of its securities on a short-term basis in order to
earn extra income. The fund will receive collateral in cash or high quality
securities equal to the current value of the loan securities. These loans will
be limited to 33 1/3% of the value of the fund's total assets.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

There is more business risk in investing in small capitalization companies
than in larger, better capitalized companies. These organizations will nor-
mally have more limited product lines, markets and financial resources and
will be dependent upon a more limited management group than larger capitalized
companies.

While the fund manager chooses stocks he believes to be undervalued, there is
no guarantee that prices won't move even lower.

Securities loans involve the risk of a delay in receiving additional
collateral if the value of the securities goes up while they are on loan.
There is also the risk of delay in recovering the loaned securities and of
losing rights to the collateral if a borrower goes bankrupt.

Higher than normal portfolio turnover may result in increased transaction
costs to the fund, including brokerage commissions, dealer mark-ups and other
transaction costs on the sale of the securities and on reinvestment in other
securities. The sale of fund securities may result in the recognition of
capital gain or loss. Given the frequency of sales, such gain or loss will
likely be short-term capital gain or loss. Unlike long-term capital gain,
short-term capital gain of individuals is taxable at the same rates as
ordinary income.

30
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The information shows you how the fund's performance has varied
year by year and provides some indication of the risks of investing in the
fund. The table compares the fund's performance to that of the Russell 2000
Value Index, a recognized unmanaged index of stock market performance. As with
all such investments, past performance is not an indication of future results.
Sales charges are not reflected in the bar chart. If they were, returns would
be less than those shown.

The performance for the period before Investor A Shares were launched is based
upon performance for Institutional Shares of the fund, which were first issued
in April 1992. Investor A Shares were launched in June 1992, Investor B Shares
were launched in October 1994, and Investor C Shares were launched in October
1996. The performance for Investor B Shares for the period before they were
launched is based upon performance for Institutional and Investor A Shares, and
the performance for Investor C Shares for the period before they were launched
is based upon performance for Institutional, Investor A and Investor B Shares.
The actual return of Investor A Shares would have been lower than shown because
Investor A Shares have higher expenses than Institutional Shares. Also, the
actual returns of Investor B and C Shares would have been lower compared to
Investor A Shares because Investor B and C Shares have higher expenses than
Investor A Shares.
31
<PAGE>

Best Quarter Q2 '98: 18.48%

Worst Quarter Q3 '98: -19.59%

[BAR CHART]

93 94 95 96 97 98 99
- ----- ----- ----- ----- ----- ----- -----
18.53 -0.78 22.6 19.34 35.04 -6.62 -5.34

These returns assume payment of applicable sales charges.

Since Inception
1 Year 3 Years 5 Years Inception Date
------- ------- ------- --------- ---------
Small Cap Value; Inv A -9.61% 4.47% 10.78% 11.33% 04/13/92
Small Cap Value; Inv B -10.26% 4.03% 10.55% 11.47% 04/13/92
Small Cap Value; Inv C -6.98% 5.27% 10.99% 11.47% 04/13/92
Russell 2000 Value -1.49% 6.69% 13.13% 13.11% N/A*

* For comparative purposes, the value of the index on 04/01/92 is used as the
beginning value on 04/13/92.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

32
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Distribution Fees: A
method of charging dis-
tribution-related
expenses against fund
assets.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and/or its affiliates
for shareholder account
service and
maintenance.

Shareholder Fees (Fees paid directly from your investment)

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Advisory fees .55% .55% .55%
Distribution and service
(12b-1) fees .50% 1.15% 1.15%
Other expenses .38% .38% .38%
Total annual fund operating
expenses 1.43% 2.08% 2.08%
Fee waivers and expense
reimbursements* .10% - - - -
Net expenses* 1.33% 2.08% 2.08%
</TABLE>

* BlackRock and BlackRock Distributors, Inc., the fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in order to
limit fund expenses to 1.35% (for Investor A Shares) and 2.10% (for Investor
B and C Shares) of average daily net assets until February 1, 2001. The fund
may have to repay some of these waivers and reimbursements to BlackRock in
the following two years. See the "Management" section on page 108 for a
discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
A Shares* $579 $ 873 $1,187 $2,078
B Shares**
Redemption $661 $1,002 $1,319 $2,244***
B Shares
No Redemption $211 $ 652 $1,119 $2,244***
C Shares**
Redemption $311 $ 652 $1,119 $2,410
C Shares
No Redemption $211 $ 652 $1,119 $2,410
</TABLE>
* Reflects imposition of sales charge.
** Reflects deduction of CDSC.
*** Based on the conversion of Investor B Shares to Investor A Shares after
eight years.
33
<PAGE>

Fund Management

The manager of the fund is Christian K. Stadlinger. He has been a Managing
Director with BlackRock Financial Management, Inc. (BFM) since July 1996.
Prior to joining BFM he was Portfolio Manager and Research Analyst with Morgan
Stanley Asset Management. He has headed the fund's portfolio management team
since 1996.

Financial Highlights
The financial information in the table on the opposite page shows the fund's
financial performance for the periods indicated. Certain information reflects
results for a single fund share. The term "Total Return" indicates how much
your investment would have increased or decreased during this period of time
and assumes that you have reinvested all dividends and distributions. These
figures have been audited by PricewaterhouseCoopers LLP, the fund's indepen-
dent accountants. The auditor's report, along with the fund's financial state-
ments, are included in the Company's annual report, which is available upon
request (see back cover for ordering instructions).

34
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Investor A, B or C Share Outstanding Throughout Each Period)

Small Cap Value Equity Portfolio

<TABLE>
<CAPTION>
INVESTOR A
SHARES
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period $ 14.88 $ 20.20 $ 15.97 $ 15.14 $ 13.58
------- ------- ------- ------- -------
Income from
investment
operations
Net investment
income 0.03 0.06 0.10 0.03 - -
Net gain (loss)
on investments
(both realized
and unrealized) 0.69 (3.20) 6.40 1.69 2.17
------- ------- ------- ------- -------
Total from
investment
operations 0.72 (3.14) 6.50 1.72 2.17
------- ------- ------- ------- -------
Less
distributions
Distributions
from net
investment
income (0.07) (0.06) (0.10) (0.02) - -
Distributions in
excess of net
investment
income (0.15) - - - - - - - -
Distributions
from net
realized
capital gains (0.67) (2.12) (2.17) (0.87) (0.61)
------- ------- ------- ------- -------
Total
distributions (0.89) (2.18) (2.27) (0.89) (0.61)
------- ------- ------- ------- -------
Net asset value
at
end of period $ 14.71 $ 14.88 $ 20.20 $ 15.97 15.14
======= ======= ======= ======= =======
Total return 4.71%/3/ (17.43)%/3/ 46.85%/3/ 12.06%/3/ 16.96%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $31,843 $34,286 $34,031 $24,605 $21,563
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 1.30% 1.32% 1.34% 1.32% 1.18%
Before advisory/
administration
fee waivers 1.30% 1.33% 1.35% 1.33% 1.28%
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers 0.44% 0.32% 0.63% 0.20% 0.00%
Before
advisory/
administration
fee waivers 0.44% 0.31% 0.62% 0.19% (0.09)%
Portfolio
turnover rate 48% 45% 66% 50% 31%
<CAPTION>
INVESTOR B INVESTOR C
SHARES SHARES
For the For the
Period Period
Year Year Year Year 10/03/94/1/ Year Year 10/01/96/1/
Ended Ended Ended Ended through Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95 9/30/99 9/30/98 9/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period $ 14.53 $ 19.86 $ 15.80 $15.06 $13.51 $14.53 $19.86 $15.76
----------- ------------ ----------- ----------- -------------- ----------- ------------ --------------
Income from
investment
operations
Net investment
income (0.06) (0.02) 0.08 (0.04) (0.05) (0.01) (0.04) 0.02
Net gain (loss)
on investments
(both realized
and unrealized) 0.66 (3.19) 6.19 1.65 2.21 0.61 (3.17) 6.29
----------- ------------ ----------- ----------- -------------- ----------- ------------ --------------
Total from
investment
operations 0.60 (3.21) 6.27 1.61 2.16 0.60 (3.21) 6.31
----------- ------------ ----------- ----------- -------------- ----------- ------------ --------------
Less
distributions
Distributions
from net
investment
income - - - - (0.04) - - - - - - - - (0.04)
Distributions in
excess of net
investment
income (0.15) - - - - - - - - (0.15) - - - -
Distributions
from net
realized
capital gains (0.67) (2.12) (2.17) (0.87) (0.61) (0.67) (2.12) (2.17)
----------- ------------ ----------- ----------- -------------- ----------- ------------ --------------
Total
distributions (0.82) (2.12) (2.21) (0.87) (0.61) (0.82) (2.12) (2.21)
----------- ------------ ----------- ----------- -------------- ----------- ------------ --------------
Net asset value
at
end of period $ 14.31 $ 14.53 $ 19.86 $15.80 15.06 $14.31 $14.53 $19.86
=========== ============ =========== =========== ============== =========== ============ ==============
Total return 3.93%/3/ (18.08)%/3/ 45.67%/3/ 11.34%/3/ 16.95%/3/ 3.93%/3/ (18.08)%/3/ 46.04%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $19,000 $20,717 $11,001 $2,357 $1,477 $9,162 $5,491 $2,109
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 2.08% 2.08% 2.07% 2.04% 1.80%/2/ 2.08% 2.08% 2.04%/2/
Before advisory/
administration
fee waivers 2.08% 2.09% 2.08% 2.05% 1.89%/2/ 2.08% 2.09% 2.05%/2/
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers (0.34)% (0.43)% (0.15)% (0.50)% (0.61)%/2/ (0.34)% (0.42)% (0.18)%/2/
Before
advisory/
administration
fee waivers (0.34)% (0.44)% (0.16)% (0.51)% (0.70)%/2/ (0.34)% (0.43)% (0.19)%/2/
Portfolio
turnover rate 48% 45% 66% 50% 31% 48% 45% 66%
</TABLE>

----------------------------------------------------------------------

/1/Commencement of operations of share class.
/2/Annualized.
/3/Neither front-end sales load nor contingent deferred sales load is reflected
in total return.

35
<PAGE>

BlackRock
[GRAPHIC] Small Cap Growth Equity
Portfolio

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Equity Security: A
security such as stock,
representing ownership
in a company. Bonds, in
comparison, are
referred to as fixed-
income or debt securi-
ties because they rep-
resent indebtedness to
the bondholder, not
ownership.

Investment Style:
Refers to the guiding
principles of a mutual
fund's investment
choices. The investment
style of this fund is
small cap growth,
referring to the type
of securities the man-
agers will choose for
this fund.

Small Capitalization
Companies: The fund
defines these companies
as those with a total
market capitalization
of under $2 billion.
Capitalization refers
to the market value of
the company and is cal-
culated by multiplying
the number of shares
outstanding by the cur-
rent price per share.

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies

In pursuit of this goal, the fund manager invests primarily in U.S. small cap-
italization growth companies (market capitalization under $2 billion) which he
believes have above-average earnings growth potential. The fund normally
invests at least 65% of its total assets in the equity securities issued by
these companies and normally invests at least 80% of its total assets in
equity securities. The fund primarily buys common stock but also can invest in
preferred stock and securities convertible into common and preferred stock.

The manager initially screens for "growth" stocks from the universe of compa-
nies with market capitalization under $2 billion. The manager uses fundamental
analysis to examine each company for financial strength before deciding to
purchase the stock.

The fund generally will sell a stock when, in the fund manager's opinion,
there is a deterioration in the company's fundamentals, the company fails to
meet performance expectations or the stock's relative price momentum declines
meaningfully.

It is possible that in extreme market conditions the fund may invest some or
all of its assets in high quality money market securities. The reason for
acquiring money market securities would be to avoid market losses. However, if
market conditions improve, this strategy could result in reducing the poten-
tial gain from the market upswing, thus reducing the fund's opportunity to
achieve its investment objective. The fund may also hold these securities
pending investments or when it expects to need cash to pay redeeming share-
holders.

36
<PAGE>

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

There is more business risk in investing in small capitalization companies than
in larger, better capitalized companies. These organizations will normally have
more limited product lines, markets and financial resources and will be depen-
dent upon a more limited management group than larger capitalized companies.

While the fund manager chooses stocks he believes to have above-average earn-
ings growth potential, there is no guarantee that the shares will increase in
value.

Key Risks
37
<PAGE>

When you invest in this fund you are not making a bank deposit. Your invest-
ment is not insured or guaranteed by the Federal Deposit Insurance Corporation
or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The information shows you how the fund's performance has var-
ied year by year and provides some indication of the risks of investing in the
fund. The table compares the fund's performance to that of the Russell 2000
Growth Index, a recognized unmanaged index of stock market performance. As
with all such investments, past performance is not an indication of future
results. Sales charges are not reflected in the bar chart. If they were,
returns would be less than those shown.

The performance for the period before Investor B and C Shares were launched is
based upon performance for Investor A Shares of the fund. Investor A Shares
were launched in September 1993, Investor B Shares were launched in January
1996 and Investor C Shares were launched in September 1996. The actual return
of Investor B and C Shares would have been lower than shown because Investor B
and C Shares have higher expenses than Investor A Shares.

38
<PAGE>

Best Quarter Q4 '99: 49.21%

Worst Quarter Q1 '98: -19.59%

[BAR CHART]

94 95 96 97 98 99
- ----- ----- ----- ----- ----- -----
5.4 46.39 31.14 8.65 6.82 71.89

These returns assume payment of applicable sales charges.

Since Inception
1 Year 3 Years 5 Years Inception Date
------- ------- ------- --------- ---------
Small Cap Growth; Inv A 64.16% 23.96% 29.60% 24.61% 09/14/93
Small Cap Growth; Inv B 62.78% 23.49% 29.46% 24.90% 09/14/93
Small Cap Growth; Inv C 68.78% 24.96% 29.98% 24.90% 09/14/93
Russell 2000 Growth 43.09% 17.83% 18.99% 15.33% N/A*

* For comparative purposes, the value of the index on 09/01/93 is used as the
beginning value on 09/15/93.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

Until January 31, 2000, the Small Cap Growth Equity Portfolio is closed to new
investors, with the exception of investors who purchase through certain PNC
Bank departments. The fund will continue to be open to wrap and retirement pro-
grams that are already invested in the fund and to certain payroll deduction
programs. Shareholders as of August 15, 1998 may make additional investments in
current accounts. The fund will re-open to new investors on January 31, 2000.

39
<PAGE>

The tables below explain your pricing options and describe the fees and
expenses that you may pay if you buy and hold Investor A, B and C Shares of
the fund. The "Annual Fund Operating Expenses" table is based on expenses for
the most recent fiscal year.

Shareholder Fees (Fees paid directly from your investment)

** The CDSC is 4.5% if shares are redeemed in less than one year. The CDSC
for Investor B Shares decreases for redemptions made in subsequent years.
After six years there is no CDSC on B Shares. (See page 102 for complete
schedule of CDSCs.)
*** There is no CDSC on C Shares after one year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Advisory fees .53% .53% .53%
Distribution and service (12b-
1) fees .50% 1.15% 1.15%
Other expenses/1/ .36% .36% .36%
Total annual fund operating
expenses 1.39% 2.04% 2.04%
Fee waivers and expense
reimbursements* .10% - - - -
Net expenses* 1.29% 2.04% 2.04%
</TABLE>

* BlackRock and BlackRock Distributors, Inc., the fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in order to
limit fund expenses to 1.33% (for Investor A Shares) and 2.07% (for
Investor B and C Shares) of average daily net assets until February 1,
2001. The fund may have to repay some of these waivers and reimbursements
to BlackRock in the following two years. See the "Management" section on
page 108 for a discussion of these waivers and reimbursements.

/1/ "Other expenses" have been restated to reflect current expenses.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Distribution Fees: A
method of charging dis-
tribution-related
expenses against fund
assets.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and/or its affiliates
for shareholder account
service and mainte-
nance.

40
<PAGE>

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
A Shares* $575 $ 861 $1,167 $2,035
B Shares**
Redemption $657 $ 990 $1,298 $2,202***
B Shares
No Redemption $207 $ 640 $1,098 $2,202***
C Shares**
Redemption $307 $ 640 $1,098 $2,369
C Shares
No Redemption $207 $ 640 $1,098 $2,369
</TABLE>
*Reflects imposition of sales charge.
**Reflects deduction of CDSC.
***Based on the conversion of Investor B Shares to Investor A Shares after
eight years.

Fund Management

41
<PAGE>

Financial Highlights
The financial information in the table below shows the fund's financial per-
formance for the periods indicated. Certain information reflects results for a
single fund share. The term "Total Return" indicates how much your investment
would have increased or decreased during this period of time and assumes that
you have reinvested all dividends and distributions. These figures have been
audited by PricewaterhouseCoopers LLP, the fund's independent accountants. The
auditor's report, along with the fund's financial statements, are included in
the Company's annual report, which is available upon request (see back cover
for ordering instructions).
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(For an Investor A, B or C Share Outstanding Throughout Each Period)

Small Cap Growth Equity Portfolio

<TABLE>
<CAPTION>
INVESTOR A
SHARES
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period $ 17.12 $ 23.25 $ 21.69 $ 14.98 $10.12
------- ------- ------- ------- ------
Income from
investment
operations
Net investment
income (0.13) (0.11) (0.04) (0.06) (0.02)
Net gain (loss)
on investments
(both
realized and
unrealized) 7.74 (4.88) 3.09 6.77 4.88
------- ------- ------- ------- ------
Total from
investment
operations 7.61 (4.99) 3.05 6.71 4.86
------- ------- ------- ------- ------
Less
distributions
Distributions
from
capital - - (0.02) - - - - - -
Distributions
from
net realized
capital
gains - - (1.12) (1.49) - - - -
------- ------- ------- ------- ------
Total
distributions - - (1.14) (1.49) - - - -
------- ------- ------- ------- ------
Net asset value
at end
of period $ 24.73 $ 17.12 $ 23.25 $ 21.69 $14.98
======= ======= ======= ======= ======
Total return 44.37%/3/ (22.31)%/3/ 15.28%/3/ 44.79%/3/ 48.02%/3/
Ratios/Supplemental
data
Net assets at
end of
period (in
thousands) $79,478 $48,190 $57,323 $27,954 $7,348
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 1.23% 1.32% 1.34% 1.33% 1.20%
Before
advisory/
administration
fee waivers 1.23% 1.32% 1.34% 1.35% 1.33%
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers (0.66)% (0.61)% (0.46)% (0.55)% (0.24)%
Before
advisory/
administration
fee waivers (0.66)% (0.61)% (0.46)% (0.57)% (0.36)%
Portfolio
turnover rate 176% 159% 82% 89% 74%
--------------------------------------------------------------------------------------------------------------
<CAPTION>
INVESTOR B INVESTOR C
SHARES SHARES
For the For the
Period Period
Year Year Year 1/18/96/1/ Year Year Year 9/6/96/1/
Ended Ended Ended through Ended Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/96 9/30/99 9/30/98 9/30/97 9/30/96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period $ 16.73 $ 22.89 $ 21.53 $14.87 $ 16.73 $ 22.89 $ 21.53 $19.66
----------- ------------ ----------- ------------- ----------- ------------ ----------- -------------
Income from
investment
operations
Net investment
income (0.33) (0.22) (0.07) (0.07) (0.35) (0.26) (0.11) (0.01)
Net gain (loss)
on investments
(both
realized and
unrealized) 7.57 (4.80) 2.92 6.73 7.59 (4.76) 2.96 1.88
----------- ------------ ----------- ------------- ----------- ------------ ----------- -------------
Total from
investment
operations 7.24 (5.02) 2.85 6.66 7.24 (5.02) 2.85 1.87
----------- ------------ ----------- ------------- ----------- ------------ ----------- -------------
Less
distributions
Distributions
from
capital - - (0.02) - - - - - - (0.02) - - - -
Distributions
from
net realized
capital
gains - - (1.12) (1.49) - - - - (1.12) (1.49) - -
----------- ------------ ----------- ------------- ----------- ------------ ----------- -------------
Total
distributions - - (1.14) (1.49) - - - - (1.14) (1.49) - -
----------- ------------ ----------- ------------- ----------- ------------ ----------- -------------
Net asset value
at end
of period $ 23.97 $ 16.73 $ 22.89 $21.53 $ 23.97 $ 16.73 $ 22.89 $21.53
=========== ============ =========== ============= =========== ============ =========== =============
Total return 43.28%/3/ (22.89)%/3/ 14.47%/3/ 38.27%/3/ 43.28%/3/ (22.89)%/3/ 14.47%/3/ 9.51%/3/
Ratios/Supplemental
data
Net assets at
end of
period (in
thousands) $44,019 $38,485 $40,270 $6,520 $13,541 $11,931 $14,106 $ 329
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 2.00% 2.07% 2.07% 2.06%/2/ 2.05% 2.09% 2.07% 1.74%/2/
Before
advisory/
administration
fee waivers 2.00% 2.07% 2.07% 2.08%/2/ 2.05% 2.09% 2.07% 1.76%/2/
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers (1.43)% (1.36)% (1.23)% (1.34)%/2/ (1.48)% (1.38)% (1.25)% (0.93)%/2/
Before
advisory/
administration
fee waivers (1.43)% (1.36)% (1.23)% (1.36)%/2/ (1.48)% (1.38)% (1.25)% (0.95)%/2/
Portfolio
turnover rate 176% 159 % 82% 89% 176% 159 % 82% 89%
--------------------------------------------------------------------------------------------------------------
</TABLE>
/1/Commencement of operations of share class.
/2/Annualized.
/3/Neither front-end sales load nor contingent deferred sales load is
reflected in total return.

42
<PAGE>

BlackRock
[GRAPHIC] International Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Investment Style:
Refers to the guiding
principles of a mutual
fund's investment
choices. The investment
style of this fund is
international value,
referring to the type
of securities the man-
agers will choose for
this fund.

Morgan Stanley Capital
International Europe,
Australia and Far East
Index (EAFE): An unman-
aged index comprised of
a sample of companies
representative of the
market structure of the
following European and
Pacific Basin coun-
tries: Australia, Aus-
tria, Belgium, Denmark,
Finland, France, Germa-
ny, Hong Kong, Italy,
Japan, Netherlands, New
Zealand, Norway, Singa-
pore, Malaysia, Spain,
Sweden, Switzerland and
the U.K.

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies
In pursuit of this goal, the fund manager invests primarily in stocks of for-
eign issuers located in countries included in the Morgan Stanley Capital Inter-
national Europe, Australia and Far East Index (EAFE). The fund normally invests
at least 65% of its total assets in the equity securities issued by these com-
panies and normally invests at least 80% of its total assets in equity securi-
ties. The fund primarily buys common stock but also can invest in preferred
stock and securities convertible into common and preferred stock.

The fund manager uses a "value" style to select stocks which he believes are
worth more than is indicated by current market price. The manager screens for
"value" stocks by using proprietary computer models to find stocks that meet
the value stock criteria. A security's earnings trend and its price momentum
will also be factors considered in security selection. The manager will also
consider factors such as prospects for relative economic growth among certain
foreign countries, expected levels of inflation, government policies influenc-
ing business conditions and outlook for currency relationships. The manager and
his team examine each company for financial soundness before deciding to pur-
chase its stock.

The manager, in an attempt to reduce portfolio risk, will diversify investments
across countries, industry groups and companies with investment at all times in
at least three foreign countries. In addition, the fund can invest more than
25% of its assets in Japanese stocks. From time to time the fund may invest in
the securities of issuers located in emerging market countries.

be to avoid market losses. However, if market conditions improve, this strat-
egy could result in reducing the potential gain from the market upswing, thus
reducing the fund's opportunity to achieve its investment objective. The fund
may also hold these securities pending investments or when it expects to need
cash to pay redeeming shareholders.

The fund's manager may, when consistent with the fund's investment objective,
use options or futures (commonly known as derivatives). The primary purpose of
using derivatives is to attempt to reduce risk to the fund as a whole (hedge)
but they may also be used to maintain liquidity, commit cash pending invest-
ment or for speculation to increase returns. The fund may also use forward
foreign currency exchange contracts (obligations to buy or sell a currency at
a set rate in the future) to hedge against movements in the value of foreign
currencies.

The fund may lend some of its securities on a short-term basis in order to
earn extra income. The fund will receive collateral in cash or high-quality
securities equal to the current value of the loaned securities. These loans
will be limited to 33 1/3% of the value of the fund's total assets.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Because different kinds of stocks go in and out of favor depending on market
conditions, this fund's performance may be better or worse than other funds
with different investment styles.

Foreign securities involve risks not typically associated with investing in
U.S. securities. These risks include but are not limited to: currency risks
(the risk that the value of dividends or interest paid by foreign securities,
or the value of the securities themselves, may fall if currency exchange rates
change), the risk that a security's value will be hurt by changes in foreign
political or social conditions, the possibility of heavy taxation or expropri-
ation and more difficulty obtaining information on foreign securities or com-
panies. In addition, a portfolio of foreign securities may be harder to sell
and may be subject to wider price movements than comparable investments in
U.S. companies. There is less government regulation of foreign securities mar-
kets.
Key Risks
44
<PAGE>

In addition, political and economic structures in emerging market countries may
be undergoing rapid change and these countries may lack the social, political
and economic stability of more developed countries. As a result some of the
risks described above, including the risks of nationalization or expropriation
of assets and the existence of smaller, more volatile and less regulated mar-
kets may be increased. The value of many investments in emerging market coun-
tries recently has dropped significantly due to economic and political turmoil
in many of these countries.

While the fund manager chooses stocks he believes to be undervalued, there is
no guarantee that prices won't move even lower.

On January 1, 1999, eleven European countries implemented a new currency unit
called the "Euro" which is expected to reshape financial markets, banking sys-
tems and monetary policies in Europe and other parts of the world. While it is
impossible to predict the impact of the "Euro," it is possible that it could
increase volatility in financial markets worldwide which could hurt the value
of shares of the fund.

The fund's use of derivatives may reduce returns and/or increase volatility.
Volatility is defined as the characteristic of a security or a market to fluc-
tuate significantly in price within a short time period. Forward foreign cur-
rency exchange contracts do not eliminate movements in the value of foreign
securities but rather allow the fund to establish a fixed rate of exchange for
a future point in time. This strategy can have the effect of reducing returns
and minimizing opportunities for gain.

The fund may, from time to time, invest more than 25% of its assets in securi-
ties whose issuers are located in Japan. These investments would make the fund
more dependent upon the political and economic circumstances of that country
than a mutual fund that owns stocks of companies in many countries. The Japa-
nese economy (especially Japanese banks, securities firms and insurance compa-
nies) have experienced considerable difficulty recently. In addition, the Japa-
nese Yen has gone up and down in value versus the U.S. Dollar. Japan may also
be affected by recent turmoil in other Asian countries.

The expenses of the fund can be expected to be higher than those of other funds
investing primarily in domestic securities because the costs attributable to
investing abroad is usually higher.

When you invest in this fund you are not making a bank deposit. Your invest-
ment is not insured or guaranteed by the Federal Deposit Insurance Corporation
or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The information shows you how the fund's performance has var-
ied year by year and provides some indication of the risks of investing in the
fund. The table compares the fund's performance to that of the EAFE Index, a
recognized unmanaged index of stock market performance. As with all such
investments, past performance is not an indication of future results. Sales
charges are not reflected in the bar chart. If they were, returns would be
less than those shown.

The performance for the period before Investor A Shares were launched is based
upon performance for Institutional Shares of the fund, which were first issued
in April 1992. Investor A Shares were launched in June 1992, Investor B Shares
were launched in October 1994, and Investor C Shares were launched in December
1996. The performance for Investor B Shares for the period before they were
launched is based upon performance for Institutional and Investor A Shares,
and the performance for Investor C Shares for the period before they were
launched is based upon performance for Institutional, Investor A and Investor
B Shares. The actual return of Investor A Shares would have been lower than
shown because Investor A Shares have higher expenses than Institutional
Shares. Also, the actual returns of Investor B and C Shares would have been
lower compared to Investor A Shares because Investor B and C Shares have
higher expenses than Investor A Shares.

46
<PAGE>

Best Quarter Q4 '99: 19.66%

Worst Quarter Q3 '98: -14.77%

[BAR CHART]

93 94 95 96 97 98 99
- ----- ----- ----- ----- ----- ----- -----
36.68 -0.12 9.6 7.98 4.61 15.01 30.13

These returns assume payment of applicable sales charges.

Since Inception
1 Year 3 Years 5 Years Inception Date
------- ------- ------- --------- ---------
International Equity; Inv A 23.66% 14.15% 11.97% 11.82% 04/27/92
International Equity; Inv B 23.66% 13.99% 11.91% 12.06% 04/27/92
International Equity; Inv C 28.19% 15.35% 12.36% 12.06% 04/27/92
MSCI EAFE 27.30% 16.06% 13.15% 13.55% N/A*

* For comparative purposes, the value of the index on 05/01/92 is used as the
beginning value on 04/27/92.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

This prospectus offers shareholders different ways to invest with three sepa-
rate pricing options. You need to understand your choices so that you can
choose the pricing option that is most suitable for you. With one option (In-
vestor A Shares) you pay a one-time front-end transaction fee each time you
buy shares. The other options (Investor B and Investor C Shares) have no
front-end charges but have higher on-going fees, which are paid over the life
of the investment, and have a contingent deferred sales charge (CDSC) that you
may pay when you redeem your shares. Which option should you choose? It
depends on your individual circumstances. You should know that the lowest
sales charge won't necessarily be the least expensive option over time. For
example, if you intend to hold your shares long term it may cost less to buy A
Shares than B or C Shares.

The tables below explain your pricing options and describe the fees and
expenses that you may pay if you buy and hold Investor A, B and C Shares of
the fund. The "Annual Fund Operating Expenses" table is based on expenses for
the most recent fiscal year.

47
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Distribution Fees: A
method of charging dis-
tribution-related
expenses against fund
assets.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and/or its affiliates
for shareholder account
service and mainte-
nance.

Shareholder Fees (Fees paid directly from your investment)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Maximum Front-End Sales
Charge* 5.0% 0.0% 0.0%
(as percentage of offering
price)
Maximum Deferred Sales Charge 0.0% 4.5%** 1.00%***
(as percentage of offering
price)
</TABLE>
* Reduced front-end sales charges may be available. A CDSC of up to 1.00% is
assessed on certain redemptions of Investor A Shares that are purchased
with no initial sales charge as part of an investment of $1,000,000 or
more.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Advisory Fees .74% .74% .74%
Distribution and service (12b-
1) fees .50% 1.15% 1.15%
Other expenses/1/ .36% .36% .36%
Total annual fund operating
expenses 1.60% 2.25% 2.25%
Fee waivers and expense
reimbursements* .17% -- % -- %
Net Expenses* 1.50% 2.25% 2.25%
</TABLE>

* BlackRock and BlackRock Distributors, Inc., the fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in order to
limit fund expenses to 1.53% (for Investor A Shares) and 2.28% (for Investor
B and C Shares) of average daily net assets until February 1, 2001. The fund
may have to repay some of these waivers and reimbursements to BlackRock in
the following two years. See the "Management" section on page 108 for a dis-
cussion of these waivers and reimbursements.

/1/"Other expenses" have been restated to reflect current expenses.

48
<PAGE>

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
A Shares* $645 $ 970 $1,318 $2,297
B Shares**
Redemption $678 $1,053 $1,405 $2,442***
B Shares
No Redemption $228 $ 703 $1,205 $2,442***
C Shares**
Redemption $328 $ 703 $1,205 $2,585
C Shares
No Redemption $228 $ 703 $1,205 $2,585
</TABLE>
* Reflects imposition of sales charge.
** Reflects deduction of CDSC.
*** Based on the conversion of Investor B Shares to Investor A Shares after
eight years.

Fund Management

The fund is managed by a team of professionals at BlackRock International, Ltd.
(BIL), including the following individuals who have day-to-day responsibility:
Peter Tait, Managing Director and Global Strategist since 1996, and Lorna Mac-
kay, Director and investment manager since 1996. Prior to joining BIL, Peter
Tait was the Director and Head of the Continental European Desk at Dunedin Fund
Managers Ltd from 1990-1996 and Lorna Mackay was an investment manager on the
Continental European desk at Dunedin Fund Managers from 1994 to 1996. Peter
Tait has served as portfolio manager since the fund's inception and Lorna Mac-
kay since January 2000.
49
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Investor A, B or C Share Outstanding Throughout Each Period)

International Equity Portfolio

<TABLE>
<CAPTION>
INVESTOR A
SHARES
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period $ 13.14 $ 14.57 $ 13.36 $ 13.24 $ 13.40
------- ------- ------- ------- -------
Income from
investment
operations
Net investment
income (0.05) 0.10 0.07 0.14 0.11
Net gain (loss)
on investments
(both realized
and unrealized) 3.58 (1.20) 1.77 0.81 0.13
------- ------- ------- ------- -------
Total from
investment
operations 3.53 (1.10) 1.84 0.95 0.24
------- ------- ------- ------- -------
Less
distributions
Distributions
from net
investment
income (0.08) (0.13) (0.22) (0.16) (0.04)
Distributions
from net
realized
capital gains (0.80) (0.20) (0.41) (0.67) (0.36)
------- ------- ------- ------- -------
Total
distributions (0.88) (0.33) (0.63) (0.83) (0.40)
------- ------- ------- ------- -------
Net asset value
at end of period $ 15.79 $ 13.14 $ 14.57 $ 13.36 $ 13.24
======= ======= ======= ======= =======
Total return 27.82%/3/ (7.56)%/3/ 14.36%/3/ 7.58%/3/ 2.00%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $33,106 $26,637 $22,335 $19,842 $17,721
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 1.48% 1.52% 1.53% 1.53% 1.40%
Before
advisory/
administration
fee waivers 1.48% 1.57% 1.63% 1.64% 1.58%
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers 0.23% 0.31% 0.50% 0.45% 0.97%
Before
advisory/
administration
fee waivers 0.23% 0.26% 0.40% 0.34% 0.80%
Portfolio
turnover rate 62% 57% 62% 70% 105%
-------------------------------------------------------------------------------------------------------------
<CAPTION>
INVESTOR B INVESTOR C
SHARES SHARES
For the For the
Period Period
Year Year Year Year 10/03/94/1/ Year Year 12/05/96/1/
Ended Ended Ended Ended through Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95 9/30/99 9/30/98 9/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period $12.94 $14.38 $13.23 $13.20 $13.35 $12.94 $14.38 $13.21
----------- ------------ ----------- ----------- ------------- ----------- ------------ --------------
Income from
investment
operations
Net investment
income (0.10) (0.01) 0.07 0.08 0.05 (0.02) - - 0.15
Net gain (loss)
on investments
(both realized
and unrealized) 3.51 (1.16) 1.66 0.77 0.16 3.43 (1.17) 1.19
----------- ------------ ----------- ----------- ------------- ----------- ------------ --------------
Total from
investment
operations 3.41 (1.17) 1.73 0.85 0.21 3.41 (1.17) 1.34
----------- ------------ ----------- ----------- ------------- ----------- ------------ --------------
Less
distributions
Distributions
from net
investment
income - - (0.07) (0.17) (0.15) - - - - (0.07) (0.17)
Distributions
from net
realized
capital gains (0.80) (0.20) (0.41) (0.67) (0.36) (0.80) (0.20) - -
----------- ------------ ----------- ----------- ------------- ----------- ------------ --------------
Total
distributions (0.80) (0.27) (0.58) (0.82) (0.36) (0.80) (0.27) (0.17)
----------- ------------ ----------- ----------- ------------- ----------- ------------ --------------
Net asset value
at end of period $15.55 $12.94 $14.38 $13.23 $13.20 $15.55 $12.94 $14.38
=========== ============ =========== =========== ============= =========== ============ ==============
Total return 26.98%/3/ (8.19)%/3/ 13.63%/3/ 6.81%/3/ 1.77%/3/ 26.98%/3/ (8.19)%/3/ 10.33%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $7,822 $6,509 $5,850 $2,692 $1,071 $1,018 $ 294 $ 155
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 2.26% 2.28% 2.27% 2.23% 2.06%/2/ 2.26% 2.27% 2.28%/2/
Before
advisory/
administration
fee waivers 2.26% 2.33% 2.37% 2.34% 2.23%/2/ 2.26% 2.32% 2.38%/2/
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers (0.66)% (0.38)% (0.22)% (0.18)% 0.59%/2/ (0.27)% (0.31)% (0.48)%/2/
Before
advisory/
administration
fee waivers (0.66)% (0.43)% (0.32)% (0.29)% 0.41%/2/ (0.27)% (0.36)% (0.58)%/2/
Portfolio
turnover rate 62% 57% 62% 70% 105% 62% 57% 62%
-------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Commencement of operations of share class.
/2/ Annualized.

/3/ Neither front-end sales load nor contingent deferred sales load is
reflected in total return.

50
<PAGE>

BlackRock
[GRAPHIC] International Emerging Markets
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Emerging Market Stocks:
Stocks issued by compa-
nies located in coun-
tries with emerging
economies or securities
markets. The list of
emerging market coun-
tries includes, among
others: Argentina, Bra-
zil, Bulgaria, China,
Colombia, The Czech
Republic, Ecuador,
Egypt, Greece, Hungary,
India, Indonesia, Isra-
el, Lebanon, Malaysia,
Mexico, Morocco, Peru,
The Philippines,
Poland, Romania, Rus-
sia, South Africa,
South Korea, Taiwan,
Thailand, Tunisia, Tur-
key, Venezuela, Vietnam
and Zimbabwe.

Investment Style:
Refers to the guiding
principles of a mutual
fund's investment
choices. The investment
style of this fund is
emerging markets,
referring to the type
of securities the man-
agers will choose for
this fund.

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies
In pursuit of this goal, the fund manager invests primarily in stocks of
issuers located in emerging market countries. These are countries considered to
be "emerging" or "developing" by the World Bank, the International Finance Cor-
poration or the United Nations. The fund normally invests at least 65% of its
total assets in the equity securities issued by these companies and normally
invests at least 80% of its total assets in equity securities. The fund primar-
ily buys in common stock but also can invest in preferred stock and securities
convertible into common and preferred stock.

The fund manager uses a "value" style to select stocks which he believes are
worth more than is indicated by current market price. The manager screens for
"value" stocks by using proprietary computer models to find stocks that meet
the value stock criteria. A security's earnings trend and its price momentum
will also be factors considered in security selection. The manager will also
consider factors such as prospects for relative economic growth among certain
foreign countries, expected levels of inflation, government policies influenc-
ing business conditions and outlook for currency relationships. The manager and
his team also examine each company for financial soundness before deciding to
purchase its stock.

The manager, in an attempt to reduce portfolio risks, will diversify invest-
ments across countries, industry groups and companies with investment ordinar-
ily in at least three emerging markets countries.

improve, this strategy could result in reducing the potential gain from the
market upswing, thus reducing the fund's opportunity to achieve its investment
objective. The fund may also hold these securities pending investments or when
it expects to need cash to pay redeeming shareholders.

The fund's manager may, when consistent with the fund's investment objective,
use options or futures (commonly known as derivatives). The primary purpose of
using derivatives is to attempt to reduce risk to the fund as a whole (hedge)
but they may also be used to maintain liquidity, commit cash pending investment
or for speculation to increase returns. The fund may also use forward foreign
currency exchange contracts (obligations to buy or sell a currency at a set
rate in the future) to hedge against movements in the value of foreign curren-
cies.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

Because different kinds of stocks go in and out of favor depending on market
conditions, this fund's performance may be better or worse than other funds
with different investment styles.

Foreign securities involve risks not typically associated with investing in
U.S. securities. These risks include but are not limited to: currency risks
(the risk that the value of dividends or interest paid by foreign securities,
or the value of the securities themselves, may fall if currency exchange rates
change), the risk that a security's value will be hurt by changes in foreign
political or social conditions, the possibility of heavy taxation or expropria-
tion and more difficulty obtaining information on foreign securities or compa-
nies. In addition, a portfolio of foreign securities may be harder to sell and
may be subject to wider price movements than comparable investments in U.S.
companies. There is less government regulation of foreign securities markets.
52
<PAGE>

In addition, political and economic structures in emerging market countries may
be undergoing rapid change and these coun-tries may lack the social, political
and economic stability of more developed countries. As a result some of the
risks described above, including the risks of nationalization or expropriation
of assets and the existence of smaller, more volatile and less regulated mar-
kets may be increased. The value of many investments in emerging market coun-
tries recently has dropped significantly due to economic and political turmoil
in many of these countries.

While the portfolio manager chooses stocks he believes to be undervalued there
is no guarantee that prices won't move even lower.

The expenses of the fund can be expected to be higher than those of other funds
investing primarily in domestic securities because the costs attributable to
investing abroad is usually higher.

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The information shows you how the fund's performance has varied
year by year and provides some indication of the risks of investing in the
fund. The table compares the fund's performance to that of the MSCI Emerging
Market Free Index, a recognized unmanaged index of stock market performance. As
with all such investments, past performance is not an indication of future
results. Sales charges are not reflected in the bar chart. If they were,
returns would be less than those shown.

The performance for the period before Investor B and C Shares were launched is
based upon performance for Investor A Shares of the fund. Investor A Shares
were launched in June 1994, Investor B Shares were launched in April 1996 and
Investor C Shares were launched in March 1997. The actual return of Investor B
and C Shares would have been lower than shown because Investor B and C Shares
have higher expenses than Investor A Shares.

Best Quarter Q4 '99: 33.87%

Worst Quarter Q3 '98: -25.60%

[BAR CHART]

95 96 97 98 99
- ------ ----- ----- ------ -----
- -13.11 11.81 -9.59 -36.96 68.09

These returns assume payment of applicable sales charges.

Since Inception
1 Year 3 Years 5 Years Inception Date
------- ------- ------- --------- ---------
International Emerging; Inv A 59.78% -3.08% -2.43% -3.81% 06/17/94
International Emerging; Inv B 59.07% -3.26% -2.33% -3.54% 06/17/94
International Emerging; Inv C 65.00% -2.11% -1.94% -3.36% 06/17/94
MSCI EMF 66.42% 3.29% 2.07% 2.50% N/A*

* For comparative purposes, the value of the index on 07/01/94 is used as the
beginning value on 06/17/94.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

54
<PAGE>

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

This prospectus offers shareholders different ways to invest with three sepa-
rate pricing options. You need to understand your choices so that you can
choose the pricing option that is most suitable for you. With one option (In-
vestor A Shares) you pay a one-time front-end transaction fee each time you buy
shares. The other options (Investor B and Investor C Shares) have no front-end
charges but have higher on-going fees, which are paid over the life of the
investment, and have a contingent deferred sales charge (CDSC) that you may pay
when you redeem your shares. Which option schedule should you choose? It
depends on your individual circumstances. You should know that the lowest sales
charge won't necessarily be the least expensive option over time. For example,
if you intend to hold your shares long term it may cost less to buy A Shares
than B or C Shares.

Shareholder Fees (Fees paid directly from your investment)

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Advisory Fees 1.25% 1.25% 1.25%
Distribution and service (12b-
1) fees .50% 1.15% 1.15%
Other expenses .55% .55% .55%
Total annual fund operating
expenses 2.30% 2.95% 2.95%
Fee waivers and expense
reimbursements* .10% -- --
Net Expenses* 2.20% 2.95% 2.95%
</TABLE>

* BlackRock and BlackRock Distributors, Inc., the fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in order to
limit fund expenses to 2.21% (for Investor A Shares) and 2.96% (for Investor
B and C Shares) of average daily net assets until February 1, 2001. The fund
may have to repay some of these waivers and reimbursements to BlackRock in
the following two years. See the "Management" section on page 108 for a dis-
cussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
A Shares* $712 $1,173 $1,660 $2,997
B Shares**
Redemption $748 $1,263 $1,752 $3,118***
B Shares
No Redemption $298 $ 913 $1,552 $3,118***
C Shares**
Redemption $398 $ 913 $1,552 $3,271
C Shares
No Redemption $298 $ 913 $1,552 $3,271
</TABLE>
* Reflects imposition of sales charge.
** Reflects deduction of CDSC.
*** Based on the conversion of Investor B Shares to Investor A Shares after
eight years.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the invest-
ment adviser for
portfolio management
services.

Distribution Fees: A
method of charging
distribution-related
expenses against fund
assets.

Other Expenses:
Include administra-
tion, transfer agen-
cy, custody, profes-
sional fees and
registration fees.

Service Fees: Fees
that are paid to
BlackRock and/or its
affiliates for
shareholder account
service and mainte-
nance.

56
<PAGE>

Fund Management

The fund is managed by a team of professionals at BlackRock International, Ltd.
(BIL), including the following individuals who have day-to-day responsibility:
Nigel Barry, Managing Director and portfolio manager of BlackRock International
(BIL) since 1996, and Robin Watson, Vice President and investment manager since
1999. Prior to joining BII, Nigel Barry was Director and head of the Pacific
Basin desk at Dunedin Fund Managers Ltd., and Robin Watson was a Latin American
specialist with AIB Govett in London from 1997 to 1999. Mr. Barry has served on
the fund's management team since 1996 and has been fund manager since April
1999, and Mr. Watson since January of 2000.
57
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Investor A, B or C Share Outstanding Throughout Each Period)

International Emerging Markets Portfolio

<TABLE>
<CAPTION>
INVESTOR A
SHARES
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period $ 4.36 $ 9.60 $ 8.71 $ 8.18 $10.54
------ ------ ------ ------ ------
Income from
investment
operations
Net investment
income 0.03 0.03 (0.06) 0.02 0.03
Net gain (loss)
on investments
(both realized
and unrealized) 1.65 (5.13) 0.98 0.52 (2.14)
------ ------ ------ ------ ------
Total from
investment
operations 1.68 (5.10) 0.92 0.54 (2.11)
------ ------ ------ ------ ------
Less
distributions
Distributions
from net
investment
income - - - - (0.03) - - (0.05)
Distribution
from capital - - - - - - - - (0.01)
Distributions
from net
realized
capital gains - - (0.14) - - (0.01) (0.19)
------ ------ ------ ------ ------
Total
distributions - - (0.14) (0.03) (0.01) (0.25)
------ ------ ------ ------ ------
Net asset value
at end of period $ 6.04 $ 4.36 $ 9.60 $ 8.71 $ 8.18
====== ====== ====== ====== ======
Total return 38.53%/3/ (53.79)%/3/ 10.51%/3/ 6.49%/3/ (20.12)%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $2,052 $1,835 $4,454 $2,996 $2,563
Ratios of
expenses to
average net
assets
After
advisory/administration
fee waivers 2.20% 2.24% 2.25% 2.25% 2.20%
Before
advisory/administration
fee waivers 2.20% 2.34% 2.34% 2.35% 2.44%
Ratios of net
investment
income to
average net
assets
After
advisory/administration
fee waivers 0.37% 0.46% (0.08)% 0.45% 1.54%
Before
advisory/administration
fee waivers 0.37% 0.36% (0.18)% 0.35% 1.30%
Portfolio
turnover rate 117% 37% 33% 44% 75%
<CAPTION>
INVESTOR B INVESTOR C
SHARES SHARES
For the For the
Period Period
Year Year Year 4/25/96/1/ Year Year 3/21/97/1/
Ended Ended Ended through Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/96 9/30/99 9/30/98 9/30/97
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period $4.30 $ 9.54 $ 8.69 $8.85 $4.30 $ 9.54 $9.70
---------- ------------ ----------- ------------- ---------- ------------ -------------
Income from
investment
operations
Net investment
income (0.01) (0.03) (0.04) - - (0.05) (0.02) (0.01)
Net gain (loss)
on investments
(both realized
and unrealized) 1.62 (5.07) 0.89 (0.16) 1.66 (5.08) (0.15)
---------- ------------ ----------- ------------- ---------- ------------ -------------
Total from
investment
operations 1.61 (5.10) 0.85 (0.16) 1.61 (5.10) (0.16)
---------- ------------ ----------- ------------- ---------- ------------ -------------
Less
distributions
Distributions
from net
investment
income - - - - - - - - - - - - - -
Distribution
from capital - - - - - - - - - - - - - -
Distributions
from net
realized
capital gains - - (0.14) - - - - - - (0.14) - -
---------- ------------ ----------- ------------- ---------- ------------ -------------
Total
distributions - - (0.14) - - - - - - (0.14) - -
---------- ------------ ----------- ------------- ---------- ------------ -------------
Net asset value
at end of period $5.91 $ 4.30 $ 9.54 $8.69 $5.91 $ 4.30 $9.54
========== ============ =========== ============= ========== ============ =============
Total return 37.67%/3/ (54.13)%/3/ 9.78%/3/ (1.81)%/3/ 37.67%/3/ (54.13)%/3/ (3.08)%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $ 807 $ 733 $1,836 $ 216 $ 43 $ 25 $ 88
Ratios of
expenses to
average net
assets
After
advisory/administration
fee waivers 2.95% 2.98% 2.98% 2.90%/2/ 2.95% 2.98% 2.58%/2/
Before
advisory/administration
fee waivers 2.95% 3.08% 3.07% 3.00%/2/ 2.95% 3.08% 2.67%/2/
Ratios of net
investment
income to
average net
assets
After
advisory/administration
fee waivers (0.37)% (0.30)% (0.80)% 0.17%/2/ (0.37)% (0.29)% (0.27)%/2/
Before
advisory/administration
fee waivers (0.37)% (0.40)% (0.90)% 0.07%/2/ (0.37)% (0.39)% (0.37)%/2/
Portfolio
turnover rate 117% 37% 33% 44% 117% 37% 33%
</TABLE>
/1/ Commencement of operations of share class.
---------------------------------------------------------------

/2/ Annualized.
/3/ Neither front-end sales load nor contingent deferred sales load is
reflected in total return.

58
<PAGE>

BlackRock
[GRAPHIC] International Small Cap Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Emerging Market Stocks:
Stocks issued by compa-
nies located in coun-
tries with emerging
economies or securities
markets. The list of
emerging market coun-
tries includes, among
others: Argentina, Bra-
zil, Bulgaria, Chile,
China, Colombia, The
Czech Republic, Ecua-
dor, Egypt, Greece,
Hungary, India, Indone-
sia, Israel, Lebanon,
Malaysia, Mexico,
Morocco, Peru, The
Philippines, Poland,
Romania, Russia, South
Africa, South Korea,
Taiwan, Thailand, Tuni-
sia, Turkey, Venezuela,
Vietnam and Zimbabwe.

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies

In pursuit of this goal, the fund manager invests primarily in small cap stocks
(capitalization of less than $5 billion) of foreign issuers in countries
included in the Salomon Brothers Extended Markets World Ex-U.S. Index. The fund
normally invests at least 65% of its total assets in the equity securities
issued by these companies and normally invests at least 80% of its total assets
in equity securities. The manager may invest up to 20% of the portfolio in
stocks of issuers in emerging market countries. The fund primarily buys common
stock but can also invest in preferred stock and securities convertible into
common and preferred securities. From time to time the fund may invest in
shares of companies through initial public offerings (IPOs).

The manager initially screens for "growth" stocks from the universe of compa-
nies described above. The manager uses fundamental analysis to examine each
company for financial strength before deciding to purchase the stock.

The fund can invest more than 25% of its assets in securities whose issuers are
located in Japan, the United Kingdom, France or Germany.

IMPORTANT DEFINITIONS

Investment Style:
Refers to the guiding
principles of a mutual
fund's investment
choices. The investment
style of this fund is
international small
cap, referring to the
type of securities the
managers will choose
for this fund.

Salomon Brothers
Extended Markets World
Ex-U.S. Index: An
unmanaged index com-
prised of equity secu-
rities whose issuers
are located in the fol-
lowing developed coun-
tries: Australia, Aus-
tria, Belgium, Canada,
Denmark, Finland,
France, Germany, Hong
Kong, Ireland, Italy,
Japan, Netherlands, New
Zealand, Norway, Singa-
pore, Malaysia, Spain,
Sweden, Switzerland and
the U.K.

Small Capitalization
Companies: The fund
defines these companies
as those with total
market capitalization
under $5 billion. Capi-
talization refers to
the market value of the
company and is calcu-
lated by multiplying
the number of shares
outstanding by the cur-
rent price per share.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

There is more business risk in investing in small capitalization companies
than in larger, better capitalized companies. These organizations will nor-
mally have more limited product lines, markets and financial resources and
will be more dependent upon a more limited management group than larger capi-
talized companies.

Because different kinds of stocks go in and out of favor depending on market
conditions, this fund's performance may be better or worse than other funds
with different investment styles.

In addition, political and economic structures in emerging market countries may
be undergoing rapid change and these countries may lack the social, political
and economic stability of more developed countries. As a result some of the
risks described above, including the risks of nationalization or expropriation
of assets and the existence of smaller, more volatile and less regulated mar-
kets, may be increased. The value of many investments in emerging market coun-
tries recently has dropped significantly due to economic and political turmoil
in many of these countries.

IPOs and companies that have recently gone public have the potential to pro-
duce, and have in fact produced, substantial gains for the fund. There is no
assurance that the fund will have continued access to profitable IPOs and
therefore investors should not rely on these past gains as an indication of
future performance.

While the fund manager chooses stocks he believes have above average earnings
growth potential, there is no guarantee that the shares will increase in value.

The fund may, from time to time, invest more than 25% of its assets in securi-
ties whose issuers are located in Japan, the United Kingdom, France or Germany.
These investments would make the fund more dependent upon the political and
economic circumstances of those countries than a mutual fund that owns stocks
of companies in many countries. For example, the Japanese economy (especially
Japanese banks, securities firms and insurance companies) has experienced con-
siderable difficulty recently. In addition, the Japanese Yen has gone up and
down in value versus the U.S. Dollar. Japan may also be affected by recent tur-
moil in other Asian countries. Similarly, the ability to concentrate in the
U.K., France and Germany may make the fund's performance more dependent on
developments affecting those countries, such as the introduction of the Euro.

61
<PAGE>

The expenses of the fund can be expected to be higher than those of other
funds investing primarily in domestic securities because the costs attribut-
able to investing abroad is usually higher.

Securities loans involve the risk of a delay in receiving additional collat-
eral if the value of the securities go up while they are on loan. There is
also the risk of delay in recovering the loaned securities and of losing
rights to the collateral if a borrower goes bankrupt.

When you invest in this fund you are not making a bank deposit. Your invest-
ment is not insured or guaranteed by the Federal Deposit Insurance Corporation
or by any bank or governmental agency.
62
<PAGE>

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The information shows you how the fund's performance has varied
year by year and provides some indication of the risks of investing in the
fund. The table compares the fund's performance to that of the Salomon Brothers
Extended Market World Ex-U.S. Index, a recognized unmanaged index of stock mar-
ket performance. As with all such investments, past performance is not an indi-
cation of future results. Sales charges are not reflected in the bar chart. If
they were, returns would be less than those shown.

Best Quarter Q4 '99: 81.64%

Worst Quarter Q3 '98: -19.90%

[BAR CHART]

98 99
----- ------
10.44 150.51

These returns assume payment of applicable sales charges.

Since Inception
1 Year Inception Date
------- --------- ---------
International Small Cap; Inv A 137.98% 49.59% 09/26/97
International Small Cap; Inv B 137.92% 49.62% 09/26/97
International Small Cap; Inv C 146.65% 51.99% 09/26/97
Salomon EMI Ex-U.S. 23.52% 10.16% N/A*

* For comparative purposes, the value of the index on 10/01/97 is used as the
beginning value on 09/26/97.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

One factor impacting the fund's total return to date was its investment in IPOs
and companies that had recently gone public. There is no assurance that the
fund's investments in IPOs or newly-public companies will have the same impact
on performance in the future as they did in the past.
63
<PAGE>

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

This prospectus offers shareholders different ways to invest with three sepa-
rate pricing options. You need to understand your choices so that you can
choose the pricing option that is most suitable for you. With one option (In-
vestor A Shares) you pay a one-time front-end transaction fee each time you
buy shares. The other options (Investor B and Investor C Shares) have no
front-end charges but have higher on-going fees, which are paid over the life
of the investment, and have a contingent deferred sales charge (CDSC) that you
may pay when you redeem your shares. Which option should you choose? It
depends on your individual circumstances. You should know that the lowest
sales charge won't necessarily be the least expensive option over time. For
example, if you intend to hold your shares long term it may cost less to buy A
Shares than B or C Shares.

The tables below explain your pricing options and describe the fees and
expenses that you may pay if you buy and hold Investor A, B and C Shares of
the fund. The "Annual Fund Operating Expenses" table is based on expenses for
the most recent fiscal year.

Shareholder Fees (Fees paid directly from your investment)

** The CDSC is 4.5% if shares are redeemed in less than one year. The CDSC
for Investor B Shares decreases for redemptions made in subsequent years.
After six years there is no CDSC on B Shares. (See page 102 for complete
schedule of CDSCs.)
*** There is no CDSC on C Shares after one year.

64
<PAGE>

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Advisory Fees 1.00% 1.00% 1.00%
Distribution and service
(12b-1) fees .50% 1.15% 1.15%
Other expenses/1/ .62% .62% .62%
Total annual fund operating
expenses 2.12% 2.77% 2.77%
Fee waivers and expense
reimbursements* .32% .22% .22%
Net Expenses* 1.80% 2.55% 2.55%
</TABLE>

* BlackRock and BlackRock Distributors, Inc., the fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in order to
limit fund expenses to 1.80% (for Investor A Shares) and 2.55% (for Investor
B and C Shares) of average daily net assets until February 1, 2001. The fund
may have to repay some of these waivers and reimbursements to BlackRock in
the following two years. See the "Management" section on page 108 for a
discussion of these waivers and reimbursements.

/1/"Other expenses" have been restated to reflect current expenses.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
A Shares* $674 $1,101 $1,554 $2,805
B Shares**
Redemption $708 $1,188 $1,645 $2,928***
B Shares
No Redemption $258 $ 838 $1,445 $2,928***
C Shares**
Redemption $358 $ 838 $1,445 $3,083
C Shares
No Redemption $258 $ 838 $1,445 $3,083
</TABLE>
* Reflects imposition of sales charge.
** Reflects deduction of CDSC.
*** Based on the conversion of Investor B Shares to Investor A Shares after
eight years.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Distribution Fees: A
method of charging dis-
tribution-related
expenses against fund
assets.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and/or its affiliates
for shareholder account
service and mainte-
nance.

65
<PAGE>

Fund Management

The fund is co-managed by William J. Wykle, Thomas Callan and Jean Rosenbaum.

William J. Wykle has been a Managing Director with BlackRock Advisors, Inc.
(BlackRock) since 1999, a Managing Director with BlackRock Financial Manage-
ment, Inc. (BFM) since 1995 and an investment manager for PNC Bank from 1986
to 1995. He has co-managed the fund since April 1999.

Thomas Callan has been a Managing Director with BlackRock since 1999, a Manag-
ing Director with BFM since 1996 and served as an equity analyst for PNC Bank
from 1993-1996. He has co-managed the fund since April 1999.

Jean Rosenbaum has been a Vice President with BlackRock since 2000, an equity
analyst with BFM since 1997, and served as an equity analyst with PNC Bank
from 1994 to 1997. She has co-managed the fund since January 2000.

66
<PAGE>

Financial Highlights
The financial information in the table below shows the fund's financial perfor-
mance for the period indicated. Certain information reflects results for a sin-
gle fund share. The term "Total Return" indicates how much your investment
would have increased or decreased during this period of time and assumes that
you have reinvested all dividends and distributions. These figures have been
audited by PricewaterhouseCoopers LLP, the fund's independent accountants. The
auditor's report, along with the fund's financial statements, are included in
the Company's annual report, which is available upon request (see back cover
for ordering instructions).

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Investor A, B or C Share Outstanding Throughout Each Period)

International Small Cap Equity Portfolio

<TABLE>
<CAPTION>
INVESTOR A INVESTOR B
SHARES SHARES
For the For the
Period Period
Year Year 9/26/97/1/ Year Year 9/26/97/1/
Ended Ended through Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/99 9/30/98 9/30/97
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 9.54 $9.94 $10.00 $ 9.48 $ 9.94 $10.00
------ ----- ------ ------ ------ ------
Income from investment
operations
Net investment income (0.01) 0.02 - - (0.10) (0.05) - -
Net gain (loss) on
investments (both
realized and
unrealized) 4.42 (0.39) (0.06) 4.51 (0.39) (0.06)
------ ----- ------ ------ ------ ------
Total from investment
operations 4.41 (0.37) (0.06) 4.41 (0.44) (0.06)
------ ----- ------ ------ ------ ------
Less distributions
Distributions from net
investment income - - (0.03) - - - - (0.02) - -
Distributions from net
realized capital
gains (1.11) - - - - (1.11) - - - -
------ ----- ------ ------ ------ ------
Total distributions (1.11) (0.03) - - (1.11) (0.02) - -
------ ----- ------ ------ ------ ------
Net asset value at end
of period $12.84 $9.54 $ 9.94 $12.78 $ 9.48 $ 9.94
====== ===== ====== ====== ====== ======
Total return 50.71%/3/ (3.98)%/3/ (0.30)%/3/ 49.83%/3/ (4.73)%/3/ (0.30)%/3/
Ratios/Supplemental
data
Net assets at end of
period (in thousands) $1,092 $ 849 $ 326 $2,208 $1,725 $ 711
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 1.80% 1.78% 1.30%/2/ 2.55% 2.53% 1.30%/2/
Before
advisory/administration
fee waivers 2.47% 2.63% 1.52%/2/ 3.22% 3.38% 1.52%/2/
Ratios of net
investment income to
average net assets
After
advisory/administration
fee waivers (0.23)% 0.20% 1.44%/2/ (0.99)% (0.54)% 1.58%/2/
Before
advisory/administration
fee waivers (0.90)% (0.65)% 1.22%/2/ (1.66)% (1.39)% 1.35%/2/
Portfolio turnover rate 224% 76% 0% 224% 76% 0%
<CAPTION>
INVESTOR C
SHARES
For the
Period
Year Year 9/26/97/1/
Ended Ended through
9/30/99 9/30/98 9/30/97
<S> <C> <C> <C>
Net asset value at
beginning of period $ 9.48 $9.94 $10.00
----------- ----------- -------------
Income from investment
operations
Net investment income (0.03) (0.04) - -
Net gain (loss) on
investments (both
realized and
unrealized) 4.44 (0.40) (0.06)
----------- ----------- -------------
Total from investment
operations 4.41 (0.44) (0.06)
----------- ----------- -------------
Less distributions
Distributions from net
investment income - - (0.02) - -
Distributions from net
realized capital
gains (1.11) - - - -
----------- ----------- -------------
Total distributions (1.11) (0.02) - -
----------- ----------- -------------
Net asset value at end
of period $12.78 $9.48 $ 9.94
=========== =========== =============
Total return 49.83%/3/ (4.73)%/3/ (0.30)%/3/
Ratios/Supplemental
data
Net assets at end of
period (in thousands) $1,019 $ 423 $ 182
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 2.55% 2.53% 1.30%/2/
Before
advisory/administration
fee waivers 3.22% 3.38% 1.52%/2/
Ratios of net
investment income to
average net assets
After
advisory/administration
fee waivers (0.99)% (0.54)% 1.44%/2/
Before
advisory/administration
fee waivers (1.66)% (1.39)% 1.22%/2/
Portfolio turnover rate 224% 76% 0%
</TABLE>
----------------------------------------------------------

/1/ Commencement of operations of share class.
/2/ Annualized.
/3/ Neither front-end sales load nor contingent deferred sales load is
reflected in total return.

67
<PAGE>

BlackRock
[GRAPHIC] Select Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Equity Security: A
security, such as
stock, representing
ownership of a Company.
Bonds, in comparison,
are referred to as
fixed income or debt
securities because they
represent indebtedness
to the bondholders, not
ownership.

Investment Style:
Refers to the guiding
principles of a mutual
fund's investment
choices. The investment
style of this fund is a
blend of growth stocks
and value stocks,
referring to the type
of securities the man-
agers will choose for
this fund.

Market Capitalization:
Refers to the market
value of the company
and is calculated by
multiplying the number
of shares outstanding
by the current price
per share.

Sector: All stocks are
classified into a cate-
gory or sector such as
utilities, consumer
services, basic materi-
als, capital equipment,
consumer cyclicals,
energy, consumer non-
cyclicals, healthcare,
technology, transporta-
tion, finance and cash.

S&P 500 Index: The
Standard & Poor's Com-
posite Stock Price
Index, an unmanaged
index of 500 stocks,
most of which are
listed on the New York
Stock Exchange. The
index is heavily
weighted toward stocks
with large market capi-
talization and repre-
sents approximately
two-thirds of the total
market value of all
domestic common stocks.

Investment Goal
The fund seeks long-term capital appreciation--current income is the secondary
objective.

Primary Investment Strategies
In pursuit of this goal, the fund manger uses the S&P 500 Index as a benchmark
and seeks to invest in stocks and market sectors in similar proportion to that
index. The manager seeks to own securities in all sectors, but can overweight
or underweight securities within sectors as he identifies market opportunities.
The fund normally invests at least 80% of its total assets in equity securi-
ties. The fund primarily buys common stock but can also invest in preferred
stock and securities convertible into common and preferred stock.

The manager initially screens for "value" and "growth" stocks from the universe
of companies with market capitalization above $1 billion. Whether screening
growth or value stocks, the manager is seeking companies that are currently
undervalued. The manager uses fundamental analysis to examine each company for
financial strength before deciding to purchase the stock.

68
<PAGE>

used to maintain liquidity, commit cash pending investment or for speculation
to increase returns.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

While the fund manager chooses stocks he believes to be undervalued, or which
have above average growth potential, there is no guarantee that prices will
increase in value.

Securities loans involve the risk of a delay in receiving additional collateral
if the value of the securities go up while they are on loan. There is also the
risk of delay in recovering the loaned securities and of losing rights to the
collateral if a borrower goes bankrupt.

IMPORTANT DEFINITIONS

Value and Growth Compa-
nies: All stocks are
generally divided into
the categories of
"growth" or "value,"
although there are
times when a growth
fund and value fund may
own the same stock.
Value stocks are compa-
nies that appear to the
manager to be underval-
ued by the market as
measured by certain
financial formulas.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general and
whose growth in revenue
is expected to continue
for an extended period.

69
<PAGE>

When you invest in this fund you are not making a bank deposit. Your invest-
ment is not insured or guaranteed by the Federal Deposit Insurance Corporation
or by any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The information shows you how the fund's performance has var-
ied year by year and provides some indication of the risks of investing in the
fund. The table compares the fund's performance to that of the S&P 500 Index,
a recognized unmanaged index of stock market performance. As with all such
investments, past performance is not an indication of future results. Sales
charges are not reflected in the bar chart. If they were, returns would be
less than those shown.

The performance for the period before Investor A Shares were launched is based
upon performance for Institutional Shares of the fund, which were first issued
in September 1993. Investor A Shares were launched in October 1993, Investor B
Shares were launched in March 1996 and Investor C Shares were launched in Sep-
tember 1996. The performance for Investor B Shares for the period before they
were launched is based upon performance for Institutional and Investor A
Shares, and the performance for Investor C Shares for the period before they
were launched is based upon performance for Institutional, Investor A and
Investor B Shares. The actual return of Investor A Shares would have been
lower than shown because Investor A Shares have higher expenses than Institu-
tional Shares. Also, the actual returns of Investor B and C Shares would have
been lower compared to Investor A Shares because Investor B and C Shares have
higher expenses than Investor A Shares.

70
<PAGE>

Best Quarter Q4 '98: 20.68%

Worst Quarter Q3 '98: -11.45%

[BAR CHART]

94 95 96 97 98 99
- ----- ----- ----- ----- ----- -----
- -1.61 32.62 23.29 30.84 24.05 20.29

These returns assume payment of applicable sales charges.

Since Inception
1 Year 3 Years 5 Years Inception Date
------- ------- ------- --------- ---------
Select; Inv A 14.90% 23.08% 24.98% 19.25% 09/13/93
Select; Inv B 13.86% 22.56% 24.88% 19.57% 09/13/93
Select; Inv C 18.07% 24.02% 25.39% 19.57% 09/13/93
S&P 500 21.14% 27.66% 28.66% 22.57% N/A*

*For comparative purposes, the value of the index on 09/01/93 is used as the
beginning value on 09/15/93.

**The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

and Fees
71
<PAGE>

The tables below explain your pricing options and describe the fees and
expenses that you may pay if you buy and hold Investor A, B and C Shares of
the fund. The "Annual Fund Operating Expenses" table is based on expenses for
the most recent fiscal year.

Shareholder Fees (Fees paid directly from your investment)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Maximum Front-End Sales
Charge* 4.5% 0.0% 0.0%
(as percentage of offering
price)
Maximum Deferred Sales Charge 0.0% 4.5%** 1.00%***
(as percentage of offering
price)
</TABLE>
* Reduced front-end sales charges may be available. A CDSC of up to 1.00% is
assessed on certain redemptions of Investor A Shares that are purchased
with no initial sales charge as part of an investment of $1,000,000 or
more.

** The CDSC is 4.5% if shares are redeemed in less than one year. The CDSC
for Investor B Shares decreases for redemptions made in subsequent years.
After six years there is no CDSC on B Shares. (See page 102 for complete
schedule of CDSCs.)
*** There is no CDSC on C Shares after one year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Advisory fees .53% .53% .53%
Distribution and service (12b-
1) fees .50% 1.15% 1.15%
Other expenses .34% .34% .34%
Total annual fund operating
expenses 1.37% 2.02% 2.02%
Fee waivers and expense
reimbursements* .10% --% --%
Net expenses* 1.27% 2.02% 2.02%
</TABLE>

* BlackRock and BlackRock Distributors, Inc., the fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in order to
limit fund expenses to 1.28% (for Investor A Shares) and 2.03% (for
Investor B and C Shares) of average daily net assets until February 1,
2001. The fund may have to repay some of these waivers and reimbursements
to Blackrock in the following two years. See the "Management" section on
page 108 for a discussion of these waivers and reimbursements.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Distribution Fees: A
method of charging dis-
tribution-related
expenses against fund
assets.

Other Expenses: Fees
paid by the fund for
other expenses such as
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and/or its affiliates
for shareholder account
service and mainte-
nance.

72
<PAGE>

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
A Shares* $574 $855 $1,157 $2,014
B Shares**
Redemption $655 $984 $1,288 $2,181***
B Shares
No Redemption $205 $634 $1,088 $2,181***
C Shares**
Redemption $305 $634 $1,088 $2,348
C Shares
No Redemption $205 $634 $1,088 $2,348
</TABLE>
* Reflects imposition of sales charge.
** Reflects deduction of CDSC.
*** Based on conversion of the Investor B Shares to Investor A Shares after
eight years.

73
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Investor A, B or C Share Outstanding Throughout Each Period)

Select Equity Portfolio

<TABLE>
<CAPTION>
INVESTOR A INVESTOR B
SHARES SHARES
For the
Period
Year Year Year Year Year Year Year Year 3/27/96/1/
Ended Ended Ended Ended Ended Ended Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95 9/30/99 9/30/98 9/30/97 9/30/96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period $ 17.00 $ 17.50 $ 13.56 $11.88 $ 9.92 $ 16.85 $ 17.40 $ 13.54 $12.83
------- ------- ------- ------ ------ ------- ------- ------- ------
Income from
investment
operations
Net investment
income 0.05 0.08 0.11 0.15 0.20 (0.10) (0.03) 0.05 0.04
Net gain on
investments
(both realized
and unrealized) 4.36 0.50 5.16 2.07 2.06 4.30 0.48 5.07 0.73
------- ------- ------- ------ ------ ------- ------- ------- ------
Total from
investment
operations 4.41 0.58 5.27 2.22 2.26 4.20 0.45 5.12 0.77
------- ------- ------- ------ ------ ------- ------- ------- ------
Less
distributions
Distributions
from net
investment
income (0.05) (0.08) (0.12) (0.15) (0.18) - - - - (0.05) (0.06)
Distributions
from net
realized
capital gains (0.61) (1.00) (1.21) (0.39) (0.12) (0.61) (1.00) (1.21) - -
------- ------- ------- ------ ------ ------- ------- ------- ------
Total
distributions (0.66) (1.08) (1.33) (0.54) (0.30) (0.61) (1.00) (1.26) (0.06)
------- ------- ------- ------ ------ ------- ------- ------- ------
Net asset value
at end of period $ 20.75 $ 17.00 $ 17.50 $13.56 $11.88 $ 20.44 $ 16.85 $ 17.40 $13.54
======= ======= ======= ====== ====== ======= ======= ======= ======
Total return 26.44%/3/ 3.62%/3/ 41.95%/3/ 19.23%/3/ 23.29%/3/ 25.38%/3/ 2.90%/3/ 40.70%/3/ 6.58%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $66,646 $35,359 $18,949 $6,228 $3,808 $66,854 $39,971 $18,345 $1,196
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 1.21% 1.32% 1.27% 1.21% 1.12% 2.02% 2.07% 2.01% 1.92%/2/
Before
advisory/
administration
fee waivers 1.21% 1.32% 1.34% 1.34% 1.30% 2.02% 2.07% 2.08% 2.04%/2/
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers 0.26% 0.44% 0.75% 1.24% 1.91% (0.55)% (0.29)% (0.02)% 0.59%/2/
Before
advisory/
administration
fee waivers 0.26% 0.44% 0.68% 1.11% 1.73% (0.55)% (0.29)% (0.09)% 0.46%/2/
Portfolio
turnover rate 22% 27% 29% 55% 51% 22% 27% 29% 55%
<CAPTION>
INVESTOR C
SHARES
For the
Period
Year Year Year 9/27/96/1/
Ended Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/96
<S> <C> <C> <C> <C>
Net asset value
at beginning of
period $16.85 $17.40 $13.54 $13.52
----------- ----------- ----------- ------------
Income from
investment
operations
Net investment
income (0.08) (0.02) 0.04 - -
Net gain on
investments
(both realized
and unrealized) 4.28 0.47 5.08 0.02
----------- ----------- ----------- ------------
Total from
investment
operations 4.20 0.45 5.12 0.02
----------- ----------- ----------- ------------
Less
distributions
Distributions
from net
investment
income - - - - (0.05) - -
Distributions
from net
realized
capital gains (0.61) (1.00) (1.21) - -
----------- ----------- ----------- ------------
Total
distributions (0.61) (1.00) (1.26) - -
----------- ----------- ----------- ------------
Net asset value
at end of period $20.44 $16.85 $17.40 $13.54
=========== =========== =========== ============
Total return 25.38%/3/ 2.90%/3/ 40.70%/3/ 0.15%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $6,543 $2,450 $ 377 $ 50
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 2.02% 2.06% 2.01% 0.00%/2/
Before
advisory/
administration
fee waivers 2.02% 2.06% 2.08% 0.00%/2/
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers (0.55)% (0.30)% (0.12)% 0.00%/2/
Before
advisory/
administration
fee waivers (0.55)% (0.30)% (0.19)% 0.00%/2/
Portfolio
turnover rate 22% 27% 29% 55%
</TABLE>
/1/ Commencement of operations of share class.

-------------------------------------------------------------------
/2/ Annualized.

/3/ Neither front-end sales load nor contingent deferred sales load is
reflected in total return.

74
<PAGE>

BlackRock
[GRAPHIC] Index Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies
In pursuit of this goal, the fund invests all of its assets indirectly, through
The U.S. Large Company Series (the Index Master Portfolio) of The DFA Invest-
ment Trust Company, in the stocks of the S&P 500 Index using a passive invest-
ment style that seeks to replicate the returns of the S&P 500 Index. The Index
Master Portfolio normally invests at least 95% of its total assets in substan-
tially all the stocks of the S&P 500 Index in approximately the same proportion
as they are represented in the Index.

The Index Master Portfolio may invest some of its assets (generally not more
than 5% of net assets) in certain short-term fixed income securities pending
investments or to pay redeeming shareholders.

Each of the Index Equity Portfolio and the Index Master Portfolio may lend some
of its securities on a short-term basis in order to earn extra income. The fund
and the Index Master Portfolio will receive collateral in cash or high-quality
securities equal to the current value of the loaned securities. These loans
will be limited to 33 1/3% of the value of total assets.

IMPORTANT DEFINITIONS

Index Investing: An
investment strategy
involving the creation
of a portfolio tailored
as closely as possible
to match the composi-
tion and investment
performance of a spe-
cific stock or bond
market index. Index
funds offer investors
diversification among
securities, low portfo-
lio turnover and rela-
tive predictability of
portfolio composition.
The Index Master Port-
folio engages in index
investing.

Large Capitalization
Companies: Capitaliza-
tion refers to the mar-
ket value of the com-
pany and is calculated
by multiplying the num-
ber of shares outstand-
ing by the current
price per share. Larger
companies may be more
likely to have the
staying power to get
them through all eco-
nomic cycles; however
their size may also
make them less flexible
and innovative than
smaller companies.

75
<PAGE>

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made. The investment objective of the Index
Master Portfolio may not be changed without shareholder approval.

Key Risks

Because different kinds of stocks go in and out of favor depending on market
conditions, this fund's performance may be better or worse than other funds
with different investment styles. The Index Master Portfolio is not actively
managed and poor performance of a stock will ordinarily not result in its
elimination from the Index Master Portfolio. The Index Master Portfolio will
remain fully invested in stocks even when stock prices are generally falling.
Ordinarily, portfolio securities will not be sold except to reflect additions
or deletions of the stocks that comprise the S&P 500 Index, including mergers,
reorganizations and similar transactions, and, to the extent necessary, to
provide cash to pay redeeming shareholders. The investment performance of the
Index Master Portfolio and the fund (not taking into account fund expenses) is
expected to approximate the investment performance of the S&P 500 Index, which
tends to be cyclical in nature, reflecting periods when stock prices generally
rise or fall.

The Index Master Portfolio's use of derivatives may reduce returns and/or
increase volatility. Volatility is defined as the characteristic of a security
or a market to fluctuate significantly in price within a short time period.

Securities loans involve the risk of a delay in receiving additional collat-
eral if the values of the securities go up while they are on loan. There is
also the risk of delay in recovering the loaned securities and of losing
rights to the collateral if a borrower goes bankrupt.

When you invest in this fund you are not making a bank deposit. Your invest-
ment is not insured or guaranteed by the Federal Deposit Insurance Corporation
or by any bank or governmental agency.

76
<PAGE>

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The information shows you how the fund's performance has var-
ied year by year and provides some indication of the risks of investing in the
fund. The table compares the fund's performance to that of the S&P 500 Index,
a recognized unmanaged index of stock market performance. As with all such
investments, past performance is not an indication of future results. Sales
charges are not reflected in the bar chart. If they were, returns would be
less than those shown.

The performance for the period before Investor A Shares were launched is based
upon performance for Service Shares of the fund, which were first issued in
April 1992. Investor A Shares were launched in June 1992, Investor B Shares
were launched in February 1996 and Investor C Shares were launched in August
1996. The performance for Investor B Shares for the period before they were
launched is based upon performance for Service and Investor A Shares, and the
performance for Investor C Shares for the period before they were launched is
based upon performance for Service, Investor A and Investor B Shares. The
actual return of Investor A Shares would have been lower than shown because
Investor A Shares have higher expenses than Service Shares. Also, the actual
returns of Investor B and C Shares would have been lower compared to Investor
A Shares because Investor B and C Shares have higher expenses than Investor A
Shares.

Best Quarter Q4 '98: 21.18%

Worst Quarter Q3 '98: -10.02%

[BAR CHART]

93 94 95 96 97 98 99
- ----- ----- ----- ----- ----- ----- -----
9.37 0.44 36.53 21.84 32.27 28.02 20

These returns assume payment of applicable sales charges.

Since Inception
1 Year 3 Years 5 Years Inception Date
------- ------- ------- --------- ---------
Index; Inv A 16.40% 25.38% 26.81% 19.08% 04/20/92
Index; Inv B 13.75% 24.22% 26.35% 19.11% 04/20/92
Index; Inv C 17.91% 25.70% 26.87% 19.11% 04/20/92
S&P 500 21.14% 27.66% 28.66% 20.66% N/A*

* For comparative purposes, the value of the index on 05/01/92 is used as the
beginning value on 04/20/92.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

77
<PAGE>

Expenses
and Fees

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

This prospectus offers shareholders different ways to invest with three sepa-
rate pricing options. You need to understand your choices so that you can
choose the pricing option that is most suitable for you. With one option (In-
vestor A Shares) you pay a one-time front-end transaction fee each time you
buy shares. The other options (Investor B and Investor C Shares) have no
front-end charges but have higher on-going fees, which are paid over the life
of the investment, and have a contingent deferred sales charge (CDSC) that you
may pay when you redeem your shares. Which option should you choose? It
depends on your individual circumstances. You should know that the lowest
sales charge won't necessarily be the least expensive option over time. For
example, if you intend to hold your shares long term it may cost less to buy A
Shares than B or C Shares.

The tables below explain your pricing options and describe the fees and
expenses that you may pay if you buy and hold Investor A, B and C Shares of
the fund. The "Annual Fund Operating Expenses" table is based on expenses for
the most recent fiscal year.

Shareholder Fees (Fees paid directly from your investment)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Maximum Front-End Sales
Charge* 3.0% 0.0% 0.0%
(as percentage of offering
price)
Maximum Deferred Sales Charge 0.0% 4.5%** 1.00%***
(as percentage of offering
price)
</TABLE>
* Reduced front-end sales charges may be available. A CDSC of up to 1.00% is
assessed on certain redemptions of Investor A Shares that are purchased
with no initial sales charge as part of an investment of $1,000,000 or
more.

** The CDSC is 4.5% if shares are redeemed in less than one year. The CDSC
for Investor B Shares decreases for redemptions made in subsequent years.
After six years there is no CDSC on B Shares. (See page 102 for complete
schedule of CDSCs.)
*** There is no CDSC on C Shares after one year.

78
<PAGE>

Annual Fund Operating Expenses*
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Advisory Fees .025% .025% .025%
Distribution and service
(12b-1) fees .50% 1.15% 1.15%
Other expenses/1/ .375% .375% .375%
Total annual fund operating
expenses .90% 1.55% 1.55%
Fee waivers and expense
reimbursements** .115% .015% .015%
Net Expenses** .785% 1.535% 1.535%
</TABLE>
* The Annual Fund Operating Expenses table and the Example reflect the
expenses of both the Index Equity and Index Master Portfolios.

** BlackRock and BlackRock Distributors, Inc., the fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in order to
limit fund expenses to .785% (for Investor A Shares) and 1.535% (for
Investor B and C Shares) of average daily net assets until February 1, 2001.
The fund may have to repay some of these waivers and reimbursements to
BlackRock in the following two years. See the "Management" section on page
108 for a discussion of these waivers and reimbursements.

/1/"Other expenses" have been restated to reflect current expenses.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
A Shares* $378 $567 $ 773 $1,364
B Shares**
Redemption $606 $838 $1,043 $1,669***
B Shares
No Redemption $156 $488 $ 843 $1,669***
C Shares**
Redemption $256 $488 $ 843 $1,844
C Shares
No Redemption $156 $488 $ 843 $1,844
</TABLE>
* Reflects imposition of sales charge.
** Reflects deduction of CDSC.
*** Based on the conversion of Investor B Shares to Investor A Shares after
eight years.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Distribution Fees: A
method of charging dis-
tribution-related
expenses against fund
assets.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and/or its affiliates
for shareholder account
service and mainte-
nance.

79
<PAGE>

Index Master Portfolio Management
Dimensional Fund Advisors Inc. (DFA) serves as investment adviser to the Index
Master Portfolio. Investment decisions for the Index Master Portfolio are made
by the Investment Committee of DFA, which meets on a regular basis and also as
needed to consider investment issues. The Investment Committee is composed of
certain officers and directors of DFA who are elected annually. DFA provides
the Index Master Portfolio with a trading department and selects brokers and
dealers to effect securities transactions.

80
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Investor A, B or C Share Outstanding Throughout Each Period)

Index Equity Portfolio

<TABLE>
<CAPTION>
INVESTOR A
SHARES
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period $ 19.64 $ 18.32 $ 13.96 $ 13.58 $10.93
------- ------- ------- ------- ------
Income from
investment
operations
Net investment
income 0.17 0.18 0.21 0.27 0.34
Net gain on
investments
(both realized
and unrealized) 5.10 1.35 5.02 2.09 2.73
------- ------- ------- ------- ------
Total from
investment
operations 5.27 1.53 5.23 2.36 3.07
------- ------- ------- ------- ------
Less
distributions
Distributions
from net
investment
income (0.19) (0.17) (0.19) (0.28) (0.30)
Distributions
from net
realized
capital gains (0.06) (0.04) (0.68) (1.70) (0.12)
------- ------- ------- ------- ------
Total
distributions (0.25) (0.21) (0.87) (1.98) (0.42)
------- ------- ------- ------- ------
Net asset value
at end of period $ 24.66 $ 19.64 $ 18.32 $ 13.96 $13.58
======= ======= ======= ======= ======
Total return 26.74%/3/ 8.37%/3/ 39.49%/3/ 19.31%/3/ 28.77%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $85,174 $42,891 $33,934 $12,752 $6,501
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 0.75%/4/ 0.65%/4/ 0.65%/4/ 0.65%/4/ 0.61%
Before
advisory/
administration
fee waivers 0.81%/4/ 0.81%/4/ 0.85%/4/ 0.97%/4/ 0.95%
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers 0.62% 0.92% 1.23% 1.81% 2.44%
Before
advisory/
administration
fee waivers 0.56% 0.76% 1.03% 1.49% 2.10%
Portfolio
turnover rate 5%/6/ 9%/7/ 4%/8/ 18%/5/,* 18%
<CAPTION>
INVESTOR B INVESTOR C
SHARES SHARES
For the For the
Period Period
Year Year Year 2/7/96/1/ Year Year Year 8/14/96/1/
Ended Ended Ended through Ended Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/96 9/30/99 9/30/98 9/30/97 9/30/96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at beginning of
period $ 19.52 $ 18.22 $ 13.93 $13.20 $ 19.52 $ 18.22 $ 13.93 $13.47
------------ ------------ ----------- ---------------- ------------ ----------- ----------- ----------------
Income from
investment
operations
Net investment
income (0.02) 0.05 0.13 0.08 - - 0.05 0.13 0.02
Net gain on
investments
(both realized
and unrealized) 5.05 1.34 4.94 0.77 5.03 1.34 4.94 0.50
------------ ------------ ----------- ---------------- ------------ ----------- ----------- ----------------
Total from
investment
operations 5.03 1.39 5.07 0.85 5.03 1.39 5.07 0.52
------------ ------------ ----------- ---------------- ------------ ----------- ----------- ----------------
Less
distributions
Distributions
from net
investment
income (0.05) (0.05) (0.10) (0.12) (0.05) (0.05) (0.10) (0.06)
Distributions
from net
realized
capital gains (0.06) (0.04) (0.68) - - (0.06) (0.04) (0.68) - -
------------ ------------ ----------- ---------------- ------------ ----------- ----------- ----------------
Total
distributions (0.11) (0.09) (0.78) (0.12) (0.11) (0.09) (0.78) (0.06)
------------ ------------ ----------- ---------------- ------------ ----------- ----------- ----------------
Net asset value
at end of period $ 24.44 $ 19.52 $ 18.22 $13.93 $ 24.44 $ 19.52 $ 18.22 $13.93
============ ============ =========== ================ ============ =========== =========== ================
Total return 25.78%/3/ 7.63%/3/ 38.31%/3/ 6.50%/3/ 25.78%/3/ 7.63%/3/ 38.31%/3/ 3.90%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $302,071 $109,019 $38,271 $2,904 $391,152 $81,529 $19,668 $ 432
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 1.49%/4/ 1.38%/4/ 1.38%/4/ 1.38%/2/,/4/ 1.51%/4/ 1.38%/4/ 1.38%/4/ 1.25%/2/,/4/
Before
advisory/
administration
fee waivers 1.55%/4/ 1.54%/4/ 1.58%/4/ 1.60%/2/,/4/ 1.55%/4/ 1.54%/4/ 1.58%/4/ 1.43%/2/,/4/
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers (0.13) 0.19% 0.45% 0.93%/2/ (0.15)% 0.19% 0.45% 0.71%/2/
Before
advisory/
administration
fee waivers (0.18)% 0.03% 0.25% 0.71%/2/ (0.19)% 0.03% 0.25% 0.53%/2/
Portfolio
turnover rate 5%/6/ 9%/7/ 4%/8/ 18%/5/,* 5%/6/ 9%/7/ 4%/8/ 18%/5/,*
</TABLE>

---------------------------------------------------------------------
/1/ Commencement of operations of share class.

/2/ Annualized.
/3/ Neither front-end sales load nor contingent deferred sales load is
reflected in total return.

/4/ Including expenses allocated from The U.S. Large Company Series of The DFA
Investment Trust Company of 0.06% for the year ended 9/30/99, 0.06% for the
year ended 9/30/98, 0.07% for the year ended 9/30/97 and 0.12% for the year
ended 9/30/96.

/5/ For period October 1, 1995 through May 31, 1996.
/6/ For period December 1, 1998 through September 30, 1999.
/7/ For period December 1, 1997 through November 30, 1998.
/8/ For period December 1, 1996 through November 30, 1997.

* See footnotes to the financial statements of The DFA Investment Trust
Company for the year ended November 30, 1996.

81
<PAGE>

BlackRock
[GRAPHIC] Balanced
Portfolio

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Asset-Backed Securi-
ties: Bonds that are
backed by a pool of
assets, usually loans
such as installment
sale contracts or
credit card receiv-
ables.

Bonds: Debt obligations
such as bonds and
debentures, U.S. Gov-
ernment securities,
debt obligations of
domestic and foreign
corporations, debt
obligations of foreign
governments and their
political subdivisions,
asset-backed securi-
ties, various mortgage-
backed securities (both
residential and commer-
cial), other floating
or variable rate obli-
gations, municipal
obligations and zero
coupon debt securities.

Investment Grade: Secu-
rities which are rated
in the four highest
categories by at least
one of the major rating
agencies or determined
by the fund manager to
be of similar quality.
Generally, the higher
the rating of a bond,
the higher the likeli-
hood that interest and
principal payments will
be made on time.

Investment Style:
Refers to the guiding
principle of a mutual
fund's investment
choices. The investment
style of this fund is
balanced, both equity
and fixed income secu-
rities meaning that the
managers will choose
both equity and fixed
income securities for
this fund.

Investment Goal
The fund seeks long-term capital appreciation--current income from fixed
income securities is the secondary objective.

Primary Investment Strategies
In pursuit of this goal, the fund managers invest primarily in a blend of
equity and fixed income securities selected to deliver returns through the
combination of capital appreciation and current income. The equity and fixed
income managers work together to determine an appropriate asset allocation
strategy.

Equity Portion

The manager initially screens for "value" and "growth" stocks from the uni-
verse of companies with market capitalization above $1 billion. In pursuit of
this goal, the fund manager uses the S&P 500 Index as a benchmark and seeks to
invest in stocks and market sectors in similar proportion to that index. The
manager seeks to own securities in all sectors, but can overweight or under-
weight securities within sectors as he identifies market opportunities. The
portfolio manager will adjust the blend of value/growth stocks based on eco-
nomic conditions. The fund will invest primarily in common stock, but can also
invest in preferred stock and securities convertible into common and preferred
stock.

The fund generally will sell a stock when it reaches a target price, which is
when the manager believes it is fully valued or when, in the manager's opin-
ion, conditions change such that the risk of continuing to hold the stock is
unacceptable when compared to its growth potential.

Fixed Income Portion

The fixed income portion of the fund consists of a broad range of U.S. invest-
ment grade bonds including U.S. Government bonds, mortgage-backed, asset-
backed and corporate debt securities. The fund normally will invest at least
25% of its total assets in bonds. The fund may invest up to 10% of its total
assets in bonds of foreign issuers. The fixed income team seeks bonds that
will add value while controlling risk.

If a security falls below investment grade, the manager will decide whether to
continue to hold the security. A security will be sold if, in the opinion of
the fund manager, the risk of continuing to hold the security is unacceptable
when compared to the total return potential.

It is possible that in extreme market conditions the fund may invest some or
all of its assets in high quality money market securities. The reason for
acquiring money market securities would

82
<PAGE>

be to avoid market losses. However, if market conditions improve, this strategy
could result in reducing the potential gain from the market upswing, thus
reducing the fund's opportunity to achieve its investment objective. The fund
may hold these securities pending investments or when it expects to need cash
to pay redeeming shareholders. The fund also may invest in money market securi-
ties in order to achieve its investment objective.

The fund may lend some of its securities on a short-term basis in order to earn
extra income. The fund will receive collateral in cash or high-quality securi-
ties equal to the current value of the loaned securities. These loans will be
limited to 33 1/3% of the value of the fund's total assets.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks
The value of your investment can go up or down depending upon market condi-
tions, which means you could lose money.

The main risk of any investment in stocks is that values fluctuate in price.

Two of the main risks of investing in the fund are interest rate risk and
credit risk. Typically, when interest rates rise, there is a corresponding
decline in the market value of bonds such as those held by the fund. Credit
risk refers to the possibility that the issuer of the bond will not be able to
make principal and interest payments.

Because market conditions can vary, this fund's performance may be better or
worse than other funds with different investment styles. For example, in some
markets a fund holding exclusively equity or fixed income securities may
outperform this fund.

IMPORTANT DEFINITIONS

Mortgage-Backed Securi-
ties: Asset-backed
securities based on a
particular type of
asset, a mortgage.
There is a wide variety
of mortgage backed
securities involving
commercial or residen-
tial, fixed rate or
adjustable rate mort-
gages and mortgages
issued by banks or gov-
ernment agencies.

S&P 500 Index: The
Standard & Poor's Com-
posite Stock Price
Index, an unmanaged
index of 500 common
stocks, most of which
are listed on the New
York Stock Exchange.
The Index is heavily
weighted toward stocks
with large market capi-
talization and repre-
sents approximately
two-thirds of the total
market value of all
domestic common stocks.

Total Return: A way of
measuring fund perfor-
mance. Total return is
based on a calculation
that takes into account
income dividends, capi-
tal gain distributions
and the increase or
decrease in share
price.

Value and Growth Compa-
nies: All stocks are
generally divided into
the categories of
"growth" or "value,"
although there are
times when a "growth
fund" and a "value
fund" may own the same
stock. Value stocks are
companies which appear
to the manager to be
undervalued by the mar-
ket as measured by cer-
tain financial formu-
las. Growth stocks are
companies whose earn-
ings growth potential
appears to the manager
to be greater than the
market in general and
whose growth in revenue
is expected to continue
for an extended period.

83
<PAGE>

While the fund manager chooses stocks with a focus on attempting to minimize
risk and chooses bonds of investment grade quality, there is no guarantee that
prices won't move lower.

The fund may invest up to 10% of its total assets in bonds of foreign issuers.
Foreign securities involve risks not typically associated with investing in
U.S. securities. These risks include but are not limited to: currency risks
(the risk that the value of interest paid on foreign securities, or the value
of the securities themselves, may fall if currency exchange rates change), the
risk that a security's value will be hurt by changes in foreign political or
social conditions, the possibility of heavy taxation or expropriation and more
difficulty obtaining information on foreign securities or companies. In addi-
tion, a portfolio of foreign securities may be harder to sell and may be sub-
jected to wider price movements than comparable investments in U.S. companies.
There is also less regulation of foreign securities markets.

On January 1, 1999, eleven European cuntries implemented a new currency unit
called the "Euro" which is expected to reshape financial markets, banking sys-
tems and monetary policies in Europe and other parts of the world. While it is
impossible to predict the impact of the "Euro," it is possible that it could
increase volatility in financial markets and world wide which could hurt the
value of shares of the fund.

Securities rated in the fourth highest category by the rating agencies are
considered investment grade but they are also considered speculative, meaning
that they carry more risk than higher rated securities and may have problems
making principal and interest payments in difficult economic climates. Invest-
ment grade ratings do not guarantee that bonds will not lose value.

84
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The chart shows you how the fund's performance has varied year
by year and provides some indication of the risks of investing in the fund. The
table compares the fund's performance to that of both the S&P 500 Index and a
customized weighted index comprised of the returns of the S&P 500 Index (65%)
and the Lehman Aggregate Index (35%), recognized unmanaged indices of stock and
bond market performance, respectively. As with all such investments, past per-
formance is not an indication of future results. Sales charges are not
reflected in the bar chart. If they were, returns would be less than those
shown.

The performance for the period before Investor B and C Shares were launched is
based upon performance for Investor A Shares of the fund. Investor A Shares
were launched in May 1990, Investor B Shares were launched in October 1994 and
Investor C Shares were launched in December 1996. The actual return of Investor
B and C Shares would have been lower compared to Investor A Shares because
Investor B and C Shares have higher expenses than Investor A Shares.

Best Quarter Q4 '98: 13.29%

Worst Quarter Q3 '98: -4.90%

[BAR CHART]

91 92 93 94 95 96 97 98 99
----- ----- ----- ----- ----- ----- ----- ----- -----
22.45 11.82 11.67 -3.55 27.22 15.04 23.34 21.38 10.56

These returns assume payment of applicable sales charges.

Since Inception
1 Year 3 Years 5 Years Inception Date
------- ------- ------- --------- ---------
Balanced; Inv A 5.61% 16.49% 18.27% 13.57% 05/14/90
Balanced; Inv B 4.74% 15.99% 17.98% 13.66% 05/14/90
Balanced; Inv C 8.58% 17.37% 18.46% 13.66% 05/14/90
S&P 500 21.14% 27.66% 28.66% 19.63% N/A*
65% S&P 500/35% Leh. Ag. 13.16% 19.92% 21.20% 15.70% N/A*

* For comparative purposes, the values of the indexes on 05/01/90 are used as
the beginning values on 05/14/90.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.
85
<PAGE>

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

This prospectus offers shareholders different ways to invest with three sepa-
rate pricing options. You need to understand your choices so that you can
choose the pricing option that is most suitable for you. With one option (In-
vestor A Shares) you pay a one-time front-end transaction fee each time you
buy shares. The other options (Investor B and Investor C Shares) have no
front-end charges but have higher on-going fees, which are paid over the life
of the investment, and have a contingent deferred sales charge (CDSC) that you
may pay when you redeem your shares. Which option should you choose? It
depends on your individual circumstances. You should know that the lowest
sales charge won't necessarily be the least expensive option over time. For
example, if you intend to hold your shares long term it may cost less to buy A
Shares than B or C Shares.

The tables below explain your pricing options and describe the fees and
expenses that you may pay if you buy and hold Investor A, B and C Shares of
the fund. The "Annual Fund Operating Expenses" table is based on expenses for
the most recent fiscal year.

Shareholder Fees (Fees paid directly from your investment)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Maximum Front-End Sales
Charge* 4.5% 0.0% 0.0%
(as percentage of offering
price)
Maximum Deferred Sales Charge 0.0% 4.5%** 1.00%***
(as percentage of offering
price)
</TABLE>
* Reduced front-end sales charges may be available. A CDSC of up to 1.00% is
assessed on certain redemptions of Investor A Shares that are purchased
with no initial sales charge as part of an investment of $1,000,000 or
more.

** The CDSC is 4.5% if shares are redeemed in less than one year. The CDSC
for Investor B Shares decreases for redemptions made in subsequent years.
After six years there is no CDSC on B Shares. (See page 102 for complete
schedule of CDSCs.)
*** There is no CDSC on C Shares after one year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Advisory fees .55% .55% .55%
Distribution and service
(12b-1) fees .50% 1.15% 1.15%
Other expenses/1/ .37% .37% .37%
Total annual fund operating
expenses 1.42% 2.07% 2.07%
Fee waivers and expense
reimbursements* .10% - - - -
Net expenses* 1.32% 2.07% 2.07%
</TABLE>

* BlackRock and BlackRock Distributors, Inc., the fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in order to
limit fund expenses to 1.34% (for Investor A Shares) and 2.08% (for
Investor B and C Shares) of average daily net assets until February 1,
2001. The fund may have to repay some of these waivers and reimbursements
to BlackRock in the following two years. See the "Management" section on
page 108 for a discussion of these waivers and reimbursements.

/1/"Other expenses" have been restated to reflect current expenses.
The table does not reflect charges or credits which investors might incur if
they invest through a financial institution.

Expenses and Fees

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Distribution Fees: A
method of charging dis-
tribution-related
expenses against fund
assets.

Other Expenses: Include
fees paid by the fund
for other expenses such
as administration,
transfer agency, custo-
dy, professional fees
and registration fees.

Service Fees: Fees that
are paid to BlackRock
and/or its affiliates
for shareholder account
service and mainte-
nance.

86
<PAGE>

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
A Shares* $578 $870 $1,182 $2,067
B Shares**
Redemption $660 $999 $1,314 $2,234***
B Shares
No Redemption $210 $649 $1,114 $2,234***
C Shares**
Redemption $310 $649 $1,114 $2,400
C Shares
No Redemption $210 $649 $1,114 $2,400
</TABLE>
* Reflects imposition of sales charge.
** Reflects deduction of CDSC.
*** Based on the conversion of Investor B Shares to Investor A shares after
eight years.

Fund Management
The portfolio manager for the equity portion of the fund is R. Andrew Damm, who
has served as a Managing Director with BlackRock Financial Management, Inc.
since 1997 and senior investment manager with BlackRock Advisors, Inc. since
1995. Mr. Damm was a Portfolio Manager for PNC Bank from 1988 to 1995. He has
been co-manager of the fund since 1996.

The co-managers for the fixed-income portion of the fund are Robert S. Kapito,
who has been Vice Chairman of BlackRock Financial Management, Inc. since 1988
and who has served as co-manager of the fund since 1995 and Keith T. Anderson,
who has been a Managing Director at BlackRock Financial Management, Inc. since
1988. He has served as co-manager of the fund since 1995.

87
<PAGE>

Financial Highlights
The financial information in the table on the next page shows the fund's finan-
cial performance for the periods indicated. Certain information reflects
results for a single fund share. The term "Total Return" indicates how much
your investment would have increased or decreased during this period of time
and assumes that you have reinvested all dividends and distributions. These
figures have been audited by PricewaterhouseCoopers LLP, the fund's independent
accountants. The auditor's report, along with the fund's financial statements,
are included in the Company's annual report, which is available upon request
(see back cover for ordering instructions).

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Investor A, B or C Share Outstanding Throughout Each Period)

Balanced Portfolio

<TABLE>
<CAPTION>
INVESTOR A
SHARES
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value
at
beginning of period $ 18.33 $ 18.22 $ 15.10 $ 13.73 $ 11.98
-------- ------- ------- ------- -------
Income from
investment
operations
Net investment
income 0.41 0.39 0.39 0.40 0.43
Net realized
gain on
investments 2.18 1.33 3.68 1.49 1.88
-------- ------- ------- ------- -------
Total from
investment
operations 2.59 1.72 4.07 1.89 2.31
-------- ------- ------- ------- -------
Less
distributions
Distributions
from net
investment
income (0.41) (0.36) (0.43) (0.39) (0.42)
Distributions
from net
realized
capital gains (0.79) (1.25) (0.52) (0.13) (0.14)
-------- ------- ------- ------- -------
Total
distributions (1.20) (1.61) (0.95) (0.52) (0.56)
-------- ------- ------- ------- -------
Net asset value
at end of
period $ 19.72 $ 18.33 $ 18.22 $ 15.10 $ 13.73
======== ======= ======= ======= =======
Total return 14.40%/3/ 10.19%/3/ 27.93%/3/ 13.98%/3/ 19.86%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $132,833 $96,795 $87,202 $71,899 $67,892
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 1.25% 1.30% 1.24% 1.19% 1.07%
Before
advisory/
administration
fee waivers 1.25% 1.30% 1.30% 1.30% 1.28%
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers 2.05% 2.13% 2.58% 2.75% 3.38%
Before
advisory/
administration
fee waivers 2.05% 2.13% 2.52% 2.65% 3.16%
Portfolio
turnover rate 122% 134% 173% 275% 154%
<CAPTION>
INVESTOR B INVESTOR C
SHARES SHARES
For the For the
Period Period
Year Year Year Year 10/03/94/1/ Year Year 12/20/96/1/
Ended Ended Ended Ended through Ended Ended through
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95 9/30/99 9/30/98 9/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value
at
beginning of period $ 18.22 $ 18.13 $ 15.04 $13.69 $11.95 $ 18.22 $18.13 $15.62
----------- ----------- ----------- ----------- ------------- ----------- ----------- -------------
Income from
investment
operations
Net investment
income 0.24 0.25 0.31 0.31 0.33 0.23 0.24 0.28
Net realized
gain on
investments 2.18 1.31 3.61 1.47 1.93 2.19 1.32 2.54
----------- ----------- ----------- ----------- ------------- ----------- ----------- -------------
Total from
investment
operations 2.42 1.56 3.92 1.78 2.26 2.42 1.56 2.82
----------- ----------- ----------- ----------- ------------- ----------- ----------- -------------
Less
distributions
Distributions
from net
investment
income (0.26) (0.22) (0.31) (0.30) (0.38) (0.26) (0.22) (0.31)
Distributions
from net
realized
capital gains (0.79) (1.25) (0.52) (0.13) (0.14) (0.79) (1.25) - -
----------- ----------- ----------- ----------- ------------- ----------- ----------- -------------
Total
distributions (1.05) (1.47) (0.83) (0.43) (0.52) (1.05) (1.47) (0.31)
----------- ----------- ----------- ----------- ------------- ----------- ----------- -------------
Net asset value
at end of
period $ 19.59 $ 18.22 $ 18.13 $15.04 $13.69 $ 19.59 $18.22 $18.13
=========== =========== =========== =========== ============= =========== =========== =============
Total return 13.46%/3/ 9.40%/3/ 26.95%/3/ 13.14%/3/ 19.38%/3/ 13.46%/3/ 9.40%/3/ 23.95%/3/
Ratios/Supplemental
data
Net assets at
end of period
(in thousands) $96,253 $46,303 $23,455 $7,333 $3,124 $10,095 $ 699 $ 87
Ratios of
expenses to
average net
assets
After advisory/
administration
fee waivers 2.07% 2.11% 2.05% 1.98% 1.72%/2/ 2.07% 1.92% 2.03%/2/
Before
advisory/
administration
fee waivers 2.07% 2.11% 2.11% 2.09% 1.94%/2/ 2.07% 1.92% 2.09%/2/
Ratios of net
investment
income to
average net
assets
After advisory/
administration
fee waivers 1.23% 1.30% 1.78% 1.99% 2.71%/2/ 1.23% 1.46% 1.90%/2/
Before
advisory/
administration
fee waivers 1.23% 1.30% 1.72% 1.88% 2.49%/2/ 1.23% 1.46% 1.84%/2/
Portfolio
turnover rate 122% 134% 173% 275% 154% 122% 134% 173%
- -----------------------------------------------------------------------------------------------------------------------------------

/1/ Commencement of operations of share class.

/2/ Annualized.
/3/ Neither front-end sales load nor contingent deferred sales load is
reflected in total return.
</TABLE>
88
<PAGE>

BlackRock
[LOGO] Micro-Cap Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies

In pursuit of this goal, the fund manager invests primarily in micro-capital-
ization companies (market capitalization between $25 million to $500 million)
with earnings visibility and earnings growth potential. The fund normally
invests at least 65% of its total assets in the equity securities issued by
these companies and normally invests at least 80% of its total assets in equity
securities. The fund primarily buys common stock but can also invest in pre-
ferred stock and securities convertible into common and preferred stock. From
time to time the fund may invest in shares of companies through initial public
offerings (IPOs).

The fund manager is seeking micro-capitalization stocks which he believes have
favorable and above-average earnings growth prospects. The manager screens for
"growth" stocks from the universe of companies with market capitalization
between $25 million and $500 million. Generally, only companies in the top 40%
of the micro-cap sector with earnings growth visibility of 20% or higher will
be considered appropriate investments. The manager uses fundamental analysis to
examine each company for financial strength before deciding to purchase the
stock.

IMPORTANT DEFINITIONS

Earnings Visibility:
Earnings visibility
means positive earnings
in the foreseeable
future (generally
defined as 2-3 years).
Earnings growth poten-
tial means the rate of
earnings growth of
which a company is
capable. Earnings
growth visibility of
20% or more means earn-
ings are forecasted to
grow at a rate of 20%
or higher in the fore-
seeable future.

Growth Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value," although there
are times when a growth
fund and value fund may
own the same stock.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general and
whose revenue growth is
expected to continue
for an extended period.
These stocks typically
pay relatively low div-
idend yields and sell
at relatively high
prices in relation to
their earnings and book
value. Value stocks are
companies that appear
to the manager to be
undervalued by the mar-
ket as measured by cer-
tain financial formu-
las.

89
<PAGE>

used to maintain liquidity, commit cash pending investment or for speculation
to increase returns.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

The Micro-Cap Equity Portfolio was closed to new investors as of 4 p.m.,
December 23, 1999. Shareholders as of 4 p.m., December 23, 1999 may make addi-
tional investments. The fund may re-open to new investors in the future.

Key Risks

There are certain risks with investing in micro-cap securities. Micro-cap com-
panies will normally have more limited product lines, markets and financial
resources and will be more dependent on a more limited management group than
companies with larger capitalizations. In addition, it is more difficult to
get information on micro-cap companies, which tend to be less well known, do
not have significant ownership by large investors and are followed by rela-
tively few securities analysts. The securities of micro-cap companies are
often traded in the over-the-counter markets and may have fewer market makers
and wider price spreads. This may result in greater price movements and less
ability to sell the fund's investment than if the fund held the securities of
larger, more established companies. There have been instances of fraud in the
micro-cap market. The fund may suffer losses due to fraudulent activity in the
market in which it invests.

An important consideration: In certain investment cycles and over certain
holding periods, an equity fund that invests in micro-cap stocks may perform
above or below the market. The fund should be considered an aggressive alloca-
tion within an overall investment strategy; it is not intended to be used as a
complete investment program.

IMPORTANT DEFINITIONS

Investment Style:
Refers to the guiding
principles of a mutual
fund's investment
choices. The investment
style of this fund is
micro-cap, referring to
the type of securities
the manager will choose
for this fund.

Micro-Cap Companies:
This asset class con-
tains the smallest cap-
italized companies. The
fund defines a "micro-
cap" company as one
with total capitaliza-
tion of $25 million to
$500 million.

90
<PAGE>

Because different kinds of stocks go in and out of favor depending on market
conditions, this fund's performance may be better or worse than other funds
with different investment styles.

While the fund manager chooses stocks he believes to have above average earn-
ings growth potential, there is no guarantee that the shares will increase in
value.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Investor A Shares (in the chart) and for Investor A, B and C Shares
(in the table). The information shows you how the fund's performance has varied
year by year and provides some indication of the risks of investing in the
fund. The table compares the fund's performance to that of the Wilshire
Microcap Index, a recognized unmanaged index of stock market performance. As
with all such investments, past performance is not an indication of future
results. Sales charges are not reflected in the bar chart. If they were,
returns would be less than those shown.

[BAR CHART]

* The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Shareholder transaction
fees are paid out of your investment and annual fund operating expenses are
paid out of fund assets.

This prospectus offers shareholders different ways to invest with three sepa-
rate pricing options. You need to understand your choices so that you can
choose the pricing option that is most suitable for you. With one option (In-
vestor A Shares) you pay a one-time front-end transaction fee each time you buy
shares. The other options (Investor B and Investor C Shares) have no front- end
charges but have higher on-going fees, which are paid over the life of the
investment, and have a contingent deferred sales charge (CDSC) that you may pay
when you redeem your shares. Which option schedule should you choose? It
depends on your individual circumstances. You should know that the lowest sales
charge won't necessarily be the least expensive option over time. For example,
if you intend to hold your shares long term it may cost less to buy A Shares
than B or C Shares.
93
<PAGE>

The tables below explain your pricing options and describe the fees and
expenses that you may pay if you buy and hold Investor A, B and C Shares of
the fund. The "Annual Fund Operating Expenses" table is based on expenses for
the most recent fiscal year.

Shareholder Fees (Fees paid directly from your investment)

** The CDSC is 4.5% if shares are redeemed in less than one year. The CDSC
for Investor B Shares decreases for redemptions made in subsequent years.
After six years there is no CDSC on B Shares. (See page 102 for complete
schedule of CDSCs.)
*** There is no CDSC on C shares after one year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<CAPTION>
A Shares B Shares C Shares
<S> <C> <C> <C>
Advisory fees 1.10% 1.10% 1.10%
Distribution and service
(12b-1) fees .50% 1.15% 1.15%
Other expenses/1/ .42% .42% .42%
Total annual fund operating
expenses 2.02% 2.67% 2.67%
Fee waivers and expense
reimbursements* .10% - - - -
Net expenses* 1.92% 2.67% 2.67%
</TABLE>

* BlackRock and BlackRock Distributors, Inc., the fund's distributor, have
contractually agreed to waive or reimburse fees or expenses in oder to
limit fund expenses to 1.95% (for Investor A Shares) and 2.70% (for
Investor B and C Shares) of average daily net assets until February 1,
2001. The fund may have to repay some of these waivers and reimbursements
to BlackRock in the following two years. See the "Management" section on
page 108 for a discussion of these waivers and reimbursements.

/1/"Other expenses" have been restated to reflect current expenses.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Distribution Fees: A
method of charging dis-
tribution-related
expenses against fund
assets.

Other Expenses: Include
fees paid by the fund
for other expenses such
as administration,
transfer agency, custo-
dy, professional fees
and registration fees.

Service Fees: Fees that
are paid to BlackRock
and/or its affiliates
for shareholder account
service and mainte-
nance.
94
<PAGE>

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses, redemption at the end of each time period and, with respect to B
Shares and C Shares only, no redemption at the end of each time period.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
A Shares* $685 $1,093 $1,525 $2,723
B Shares**
Redemption $720 $1,179 $1,615 $2,846***
B Shares
No Redemption $270 $ 829 $1,415 $2,846***
C Shares**
Redemption $370 $ 829 $1,415 $3,003
C Shares
No Redemption $270 $ 829 $1,415 $3,003
</TABLE>
* Reflects imposition of sales charge.
** Reflects deduction of contingent deferred sales charge.

*** Based on the conversion of Investor B Shares to Investor A Shares after
eight years.

Fund Management

The fund is managed by a team of investment professionals at BlackRock Finan-
cial Management, Inc. (BFM), including the following individuals who have day-
to-day responsibility: William Wykle, Managing Director of BFM since 1995,
Thomas Callan, Managing Director of BFM since 1996, and Michael Carey, a Vice
President since 2000 and an equity analyst at BFM since 1996. Prior to joining
BFM, William Wykle served as an investment manager for PNC Bank from 1986 to
1995, Thomas Callan served as an equity analyst for PNC Bank from 1993 to 1996,
and Michael Carey was a fixed income analyst for PNC Bank from 1993 to 1996.
William Wykle and Thomas Callan have been portfolio co-managers since incep-
tion, and Michael Carey since October 1999.
95
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Investor A, B or C Share Outstanding Throughout Each Period)

Micro-Cap Equity Portfolio

<TABLE>
<CAPTION>
INVESTOR A INVESTOR B INVESTOR C
SHARES SHARES SHARES
For the For the For the
Period Period Period
Year 5/01/98/1/ Year 5/01/98/1/ Year 5/01/98/1/
Ended through Ended through Ended through
9/30/99 9/30/98 9/30/99 9/30/98 9/30/99 9/30/98
<S> <C> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 9.38 $10.00 $ 9.36 $10.00 $ 9.36 $10.00
------- ------ ------- ------ ------- ------
Income from investment
operations
Net investment income (0.11) (0.02) (0.18) (0.04) (0.16) (0.04)
Net gain (loss) on
investments (both
realized and
unrealized) 15.33 (0.60) 15.20 (0.60) 15.18 (0.60)
------- ------ ------- ------ ------- ------
Total from investment
operations 15.22 (0.62) 15.02 (0.64) 15.02 (0.64)
------- ------ ------- ------ ------- ------
Net asset value at end of
period $ 24.60 $ 9.38 $ 24.38 $ 9.36 $ 24.38 $ 9.36
======= ====== ======= ====== ======= ======
Total return 162.26%/3/ (6.20)%/3/ 160.19%/3/ (6.30)%/3/ 160.19%/3/ (6.30)%/3/
Ratios/Supplemental data
Net assets at end of
period (in thousands) $45,429 $6,100 $53,476 $8,560 $19,993 $1,809
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 1.90% 1.84%/2/ 2.65% 2.55%/2/ 2.63% 2.53%/2/
Before
advisory/administration
fee waivers 2.23% 3.17%/2/ 3.01% 3.88%/2/ 2.93% 3.86%/2/
Ratios of net investment
income to average net
assets
After
advisory/administration
fee waivers (1.17)% (0.70)%/2/ (1.91)% (1.44)%/2/ (1.91)% (1.45)%/2/
Before
advisory/administration
fee waivers (1.50)% (2.03)%/2/ (2.27)% (2.77)%/2/ (2.21)% (2.78)%/2/
Portfolio turnover rate 346% 119% 346% 119% 346% 119%
</TABLE>
-------------------------------------------------

/1/ Commencement of operations of share class.
/2/ Annualized.
/3/ Neither front-end sales load nor contingent deferred sales load is
reflected in total return.

96
<PAGE>

[LOGO] About Your Investment

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- --------------------------------------------------------------------------------

Buying Shares from a Registered Investment Professional

BlackRock Funds believes that investors can benefit from the advice and ongoing
assistance of a registered investment professional. Accordingly, when you buy
or sell BlackRock Funds Investor Shares, you may pay a sales charge, which is
used to compensate your investment professional for services provided to you.

As a shareholder you pay certain fees and expenses. Shareholder fees are paid
directly from your investment and annual fund operating expenses are paid out
of fund assets and are reflected in the fund's price.

Your registered representative can help you to buy shares by telephone. Before
you place your order make sure that you have read the prospectus and have a
discussion with your registered representative about the details of your
investment

- --------------------------------------------------------------------------------

What Price Per Share Will You Pay?

The price of mutual fund shares generally changes every business day. A mutual
fund is a pool of investors' money that is used to purchase a portfolio of
securities, which in turn is owned in common by the investors. Investors put
money into a mutual fund by buying shares. If a mutual fund has a portfolio
worth $50 million and has 5 million shares outstanding, the net asset value
(NAV) per share is $10. When you buy Investor Shares you pay the NAV/share plus
the sales charge if you are purchasing Investor A Shares.

The funds' investments are valued based on market value, or where market quota-
tions are not readily available, based on fair value as determined in good
faith by or under the direction of the Company's Board of Trustees. Under some
circumstances certain short-term debt securities will be valued using the amor-
tized cost method.

Since the NAV changes daily, the price you pay for your shares depends on the
time that your order is received by the BlackRock Funds' transfer agent, whose
job it is to keep track of shareholder records.

PFPC, the Company's transfer agent, will probably receive your order from your
registered representative, who takes your order. However, you can also fill out
a purchase application and mail it
97
<PAGE>

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to the transfer agent with your check. Please call (800) 441-7762 for a pur-
chase application. Purchase orders received by the transfer agent before the
close of regular trading on the New York Stock Exchange (NYSE) (currently 4
p.m. (Eastern time)) on each day the NYSE is open will be priced based on the
NAV calculated at the close of trading on that day plus any applicable sales
charge. NAV is calculated separately for each class of shares of each fund at 4
p.m. (Eastern time) each day the NYSE is open. Shares will not be priced on
days the NYSE is closed. Purchase orders received after the close of trading
will be priced based on the next calculation of NAV. The foreign securities and
certain other securities held by a fund may trade on days when the NYSE is
closed. In these cases, net asset value of shares may change when fund shares
cannot be bought or sold.

When you place a purchase order, you need to specify whether you want Investor
A, B or C Shares. If you do not specify a class, you will receive Investor A
Shares.

When Must You Pay?

Payment for an order must be made by your registered representative in immedi-
ately available funds by 4 p.m. (Eastern time) on the third business day fol-
lowing PFPC's receipt of the order. If payment is not received by this time,
the order will be canceled and you and your registered representative will be
responsible for any loss to a fund. For shares purchased directly from the
transfer agent, a check payable to BlackRock Funds and bearing the name of the
fund you are purchasing must accompany a completed purchase application. The
Company does not accept third-party checks. You may also wire Federal funds to
the transfer agent to purchase shares, but you must call PFPC at (800) 441-7762
before doing so to confirm the wiring instructions.

How Much is the Minimum Investment?

98
<PAGE>

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- --------------------------------------------------------------------------------

you make regular, periodic investments through a savings or checking account.
Your investment professional can advise you on how to begin an Automatic
Investment Plan. The Company won't accept a purchase order of $1 million or
more for Investor B or Investor C Shares. The fund may reject any purchase
order, modify or waive the minimum investment requirements and suspend and
resume the sale of any share class of the Company at any time.

- --------------------------------------------------------------------------------

Which Pricing Option Should You Choose?

BlackRock Funds offers different pricing options to investors in the form of
different share classes. Your registered representative can help you decide
which option works best for you. Through this prospectus, you can choose from
Investor A, B, or C Shares.

A Shares (Front-End Load)
.One time sales charge paid at time of purchase

.Lower ongoing fees
.Free exchange with other A Shares in BlackRock Funds family
.Advantage: Makes sense for investors who have long-term investment horizon
because ongoing fees are less than for other Investor Share classes.
.Disadvantage: You pay sales charge up-front, and therefore you start off own-
ing fewer shares.

B Shares (Back-End Load)
.No front-end sales charge when you buy shares
.You pay sales charge when you redeem shares. It is called a contingent
deferred sales charge (CDSC) and it declines over 6 years from a high of 4.5%.
.Higher ongoing fees than A Shares
.Free exchange with other B Shares in BlackRock Funds family
.Automatically convert to A Shares eight years from purchase
.Advantage: No up-front sales charge so you start off owning more shares.
.Disadvantage: You pay higher ongoing fees than on A Shares each year you own
shares, which means that you can expect lower total performance per share.

99
<PAGE>

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C Shares (Level Load)
.No front-end sales charge when you buy shares
.Contingent deferred sales charge (CDSC) of 1.00% if shares are redeemed within
12 months of purchase
.Higher ongoing fees than A Shares
.Free exchange with other C Shares in BlackRock Funds family
.Advantage: No up-front sales charge so you start off owning more shares. These
shares may make sense for investors who have a shorter investment horizon rel-
ative to A or B Shares.
.Disadvantage: You pay higher ongoing fees than on A shares each year you own
shares, which means that you can expect lower total performance per share.
Shares do not convert to A Shares.

Investor B Shares received through the reinvestment of dividends and distribu-
tions convert to A Shares 8 years after the reinvestment or at the same time as
the conversion of the investor's most recently purchased B Shares that were not
received through reinvestment (whichever is earlier).

If a shareholder acquiring Investor A Shares on or after May 1, 1998 later
meets the requirements for purchasing Institutional Shares of a fund (other
than due to changes in market value), then the shareholder's Investor A Shares
will automatically be converted to Institutional Shares of the same fund having
the same total net asset value as the shares converted.

How Much is the Sales Charge?

The tables below show the schedule of front-end sales charges that you may pay
if you buy and sell Investor A, B and C Shares of a fund.

100
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The following tables show the front-end sales charges that you may pay if you
buy Investor A Shares. The offering price for Investor A Shares includes any
front-end sales charge.

The following schedule of front-end sales charges and quantity discounts
applies to the Large Cap Value Equity, Large Cap Growth Equity, Mid-Cap Value
Equity, Mid-Cap Growth Equity, Small Cap Value Equity, Small Cap Growth Equity,
Select Equity and Balanced Portfolios.

<TABLE>
<CAPTION>
AMOUNT OF SALES CHARGE AS SALES CHARGE AS
TRANSACTION AT % OF OFFERING % OF NET ASSET
OFFERING PRICE PRICE* VALUE*
<S> <C> <C>
Less than $50,000 4.50% 4.71%
$50,000 but less than
$100,000 4.25% 4.44%
$100,000 but less than
$250,000 4.00% 4.17%
$250,000 but less than
$500,000 3.00% 3.09%
$500,000 but less than
$1,000,000 2.00% 2.04%
$1 million or more 0.00% 0.00%
</TABLE>

The following schedule of front-end sales charges and quantity discounts
applies to the Micro-Cap Equity, International Equity, International Emerging
Markets and International Small Cap Equity Portfolios.

<TABLE>
<CAPTION>
AMOUNT OF SALES CHARGE AS SALES CHARGE AS
TRANSACTION AT % OF OFFERING % OF NET ASSET
OFFERING PRICE PRICE* VALUE*
<S> <C> <C>
Less than $50,000 5.00% 5.26%
$50,000 but less than
$100,000 4.75% 4.99%
$100,000 but less than
$250,000 4.50% 4.71%
$250,000 but less than
$500,000 3.50% 3.83%
$500,000 but less than
$1,000,000 2.50% 2.56%
$1 million or more 0.00% 0.00%
</TABLE>
* There is no initial sales charge on purchases of $1,000,000 or more of
Investor A Shares; however, you will pay a CDSC of 1.00% of the offering
price or the net asset value of the shares on the redemption date (whichever
is less) for shares redeemed within 18 months after purchase.
Purchase of Investor A Shares

101
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The following schedule of front-end sales charges and quantity discounts
applies to the Index Equity Portfolio.

<TABLE>
<CAPTION>
AMOUNT OF SALES CHARGE AS SALES CHARGE AS
TRANSACTION AT % OF OFFERING % OF NET ASSET
OFFERING PRICE PRICE* VALUE*
<S> <C> <C>
Less than $50,000 3.00% 3.09%
$50,000 but less than
$100,000 2.75% 2.83%
$100,000 but less than
$250,000 2.50% 2.56%
$250,000 but less than
$500,000 1.75% 1.78%
$500,000 but less than
$1,000,000 1.25% 1.26%
$1 million or more 0.00% 0.00%
</TABLE>

* There is no initial sales charge on purchases of $1,000,000 or more of
Investor A Shares; however, you will pay a CDSC of 1.00% of the offering
price or the net asset value of the shares on the redemption date (whichever
is less) for shares redeemed within 18 months after purchase.

Purchase of Investor B Shares

Investor B Shares are subject to a CDSC at the rates shown in the chart below if
they are redeemed within six years of purchase. The CDSC is based on the offer-
ing price or the net asset value of the B Shares on the redemption date (which-
ever is less). The amount of any CDSC an investor must pay depends on the num-
ber of years that elapse between the date of purchase and the date of
redemption.

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE (AS %
OF DOLLAR AMOUNT
NUMBER OF YEARS SUBJECT TO THE
ELAPSED SINCE PURCHASE CHARGE)
<S> <C>
Up to one year 4.50%
More than one but less than two years 4.00%
More than two but less than three
years 3.50%
More than three but less than four
years 3.00%
More than four but less than five
years 2.00%
More than five but less than six
years 1.00%
More than six years 0.00%
</TABLE>

Purchase of Investor C Shares

Investor C Shares are subject to a CDSC of 1.00% if they are redeemed within 12
months after purchase. The 1.00% is based on the offering price or the net
asset value of the C Shares on the redemption date (whichever is less). There
is no CDSC on C Shares redeemed after 12 months.

102
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When an investor redeems Investor B Shares or Investor C Shares, the redemption
order is processed so that the lowest CDSC is charged. Investor B Shares and
Investor C Shares that are not subject to the CDSC are redeemed first. After
that, the Company redeems the Shares that have been held the longest.

- --------------------------------------------------------------------------------

There are several ways in which the sales charge can be reduced or eliminated.
Purchases of Investor A Shares at certain fixed dollar levels, known as "break-
points," cause a reduction in the front-end sale charge. The CDSC on Investor B
Shares can be reduced depending on how long you own the shares. (Schedules of
these reductions are listed above in the "Purchase of Investor A Shares" and
"Purchase of Investor B Shares" sections.) Purchases by certain individuals and
groups may be combined in determining the sales charge on Investor A Shares.
The following are also ways the sales charge can be reduced or eliminated.

- --------------------------------------------------------------------------------

Investors have a "right of accumulation" under which the current value of an
investor's existing Investor A Shares in any fund that is subject to a front-
end sales charge, or the total amount of an initial investment in such shares
less redemptions (whichever is greater), may be combined with the amount of the
current purchase in the same fund in determining the amount of the sales
charge. In order to use this right, the investor must alert the Company's
transfer agent, PFPC, of the existence of previously purchased shares.

- --------------------------------------------------------------------------------

An investor may qualify for a reduced front-end sales charge immediately by
signing a "Letter of Intent" stating the investor's intention to buy a speci-
fied amount of Investor A Shares within the next 13 months that would, if
bought all at once, qualify the investor for a reduced sales charge. The Letter
of Intent may be signed anytime within 90 days after the first investment to be
covered by the letter. The initial investment must meet the minimum initial
purchase requirement and represent at least 5% of the total intended purchase.
The investor must tell PFPC that later purchases are subject to the Letter of
Intent. During the

Can the Sales Charge be Reduced or Eliminated?

Right of Accumulation (Investor A Shares)

Letter of Intent (Investor A Shares)
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term of the Letter of Intent, PFPC will hold Investor A Shares representing 5%
of the indicated amount in an escrow account for payment of a higher sales load
if the full amount indicated in the Letter of Intent is not purchased. Any
redemptions made during the term of the Letter of Intent will be subtracted
from the amount of the total purchase indicated in the letter. If the full
amount indicated is not purchased within the 13-month period, and the investor
does not pay the higher sales load within 20 days, PFPC will redeem enough of
the Investor A Shares held in escrow to pay the difference.

Reinvestment Privilege (Investor A Shares)

Upon redeeming Investor A Shares, an investor has a one-time right, for a period
of up to 60 days, to reinvest the proceeds in A Shares of another fund without
any sales charge. To exercise this right, PFPC must be notified of the rein-
vestment in writing at the time of purchase by the purchaser or his or her reg-
istered representative. Investors should consult a tax adviser concerning the
tax consequences of using this reinvestment privilege.

Quantity Discounts (Investor A Shares)

In addition to quantity discounts for individuals which we discussed above,
there are ways for you to reduce the front-end sales charge by combining your
order with the orders of certain members of your family and members of certain
groups you may belong to. For more information on these discounts, please con-
tact PFPC at (800) 441-7762 or see the SAI.

Waiving the Sales Charge (Investor A Shares)

Certain investors, including some people associated with the Company and its
service providers, may buy Investor A Shares without paying a sales charge. For
more information on the waivers, please contact PFPC at (800) 441-7762 or see
the SAI.

104
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- --------------------------------------------------------------------------------

The CDSC on Investor B and Investor C Shares is not charged in certain circum-
stances, including share exchanges (see page 113) and redemptions made in con-
nection with certain retirement plans and in connection with certain share-
holder services offered by the Company. For more information on these waivers,
please contact PFPC at (800)-441-7762 or see the SAI.

- --------------------------------------------------------------------------------

The Company has adopted a plan under Rule 12b-1 of the Investment Company Act of
1940 (the Plan) that allows the Company to pay distribution and other fees for
the sale of its shares and for certain services provided to its shareholders.
Under the Plan, Investor Shares pay a fee (distribution fees) to BlackRock Dis-
tributors, Inc. (the Distributor) or affiliates of PNC Bank for distribution
and sales support services. The distribution fees may be used to pay the Dis-
tributor for distribution services and to pay the Distributor and PNC Bank
affiliates for sales support services provided in connection with the sale of
Investor Shares. The distribution fees may also be used to pay brokers, deal-
ers, financial institutions and industry professionals (Service Organizations)
for sales support services and related expenses. Investor A Shares pay a maxi-
mum distribution fee of .10% per year of the average daily net asset value of
each fund. Investor B and C Shares pay a maximum of .75% per year. The Plan
also allows the Distributor, PNC Bank affiliates and other companies that
receive fees from the Company to make payments relating to distribution and
sales support activities out of their past profits or other sources.

Under the Plan, the Company may enter into arrangements with Service Organiza-
tions (including PNC Bank and its affiliates). Under these arrangements, Serv-
ice Organizations will provide certain support services to their customers who
own Investor Shares. The Company may pay a shareholder servicing fee of up to
.25% per year of the average daily net asset value of Investor Shares owned by
each Service Organization's customers.

Waiving the Contingent Deferred Sales Charge (Investor B and Investor C Shares)

Distribution and Service Plan
105
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In return for that fee, Service Organizations may provide one or more of the
following services:

(1) Responding to customer questions on the services performed by the Service
Organization and investments in Investor Shares;
(2) Assisting customers in choosing and changing dividend options, account
designations and addresses; and
(3) Providing other similar shareholder liaison services.

For a separate shareholder processing fee of up to .15% per year of the aver-
age daily net asset value of Investor Shares owned by each Service Organiza-
tion's customers, Service Organizations may provide one or more of these addi-
tional services:

(1) Processing purchase and redemption requests from customers and placing
orders with the Company's transfer agent or the Distributor;
(2) Processing dividend payments from the Company on behalf of customers;
(3) Providing sub-accounting for Investor Shares beneficially owned by cus-
tomers or the information necessary for sub-accounting; and
(4) Providing other similar services.

The shareholder servicing fees and shareholder processing fees payable pursu-
ant to the Plan are fees payable for the administration and servicing of
shareholder accounts and not costs which are primarily intended to result in
the sale of a fund's shares.

Because the fees paid by the Company under the Plan are paid out of Company
assets on an on-going basis, over time these fees will increase the cost of
your investment and may cost you more than paying other types of sales
charges.

Master-Feeder Structure

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Index Equity Portfolio to do so. Upon withdrawal, the Board of Trustees would
consider what action to take. It might, for example, invest all the assets of
the Index Equity Portfolio in another mutual fund having the same investment
objective as the Index Equity Portfolio or hire an investment adviser to manage
the Index Equity Portfolio's assets.

- --------------------------------------------------------------------------------

How to Sell Shares

You can redeem shares at any time (although certain verification may be required
for redemptions in excess of $25,000 or in certain other cases). The Company
will redeem your shares at the next net asset value (NAV) calculated after your
order is received by the fund's transfer agent minus any applicable CDSC.
Except when CDSCs are applied, BlackRock Funds will not charge for redemptions.
Shares may be redeemed by sending a written redemption request to BlackRock
Funds c/o PFPC, P.O. Box 8907, Wilmington, DE 19899-8907.

You can also make redemption requests through your registered investment
professional, who may charge for this service. Shareholders should indicate
whether they are redeeming Investor A, Investor B or Investor C Shares. If a
shareholder owns more than one class of a fund and does not indicate which
class he or she is redeeming, the fund will redeem shares so as to minimize the
CDSC charged.

Unless another option is requested, payment for redeemed shares is normally
made by check mailed within seven days after PFPC receives the redemption
request. If the shares to be redeemed have been recently purchased by check,
PFPC may delay the payment of redemption proceeds for up to 15 days after the
purchase date to make sure that the check has cleared.

- -------------------------------------------------------------------------------

Expedited Redemptions

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- --------------------------------------------------------------------------------
bank. The Company may refuse a telephone redemption request if it believes it
is advisable to do so and may use reasonable procedures to make sure telephone
instructions are genuine. The Company and its service providers will not be
liable for any loss that results from acting upon telephone instructions that
they reasonably believed to be genuine in accordance with those procedures. The
Company may alter the terms of or terminate this expedited redemption privilege
at any time. Any redemption request of $25,000 or more must be in writing.

The Company's Rights

The Company may:

.Suspend the right of redemption if trading is halted or restricted on the
NYSE or under other emergency conditions.

.Postpone date of payment upon redemption if trading is halted or
restricted on the NYSE or under other emergency conditions or as described
in the section "How to Sell Shares" above

.Redeem shares involuntarily in certain cases, such as when the value of a
shareholder account falls below a specified level, as described below

.Redeem shares for property other than cash if conditions exist which make
cash payments undesirable

in accordance with its rights under the Investment Company Act of 1940.

Accounts with Low Balances

The Company may redeem a shareholder's account in any fund at any time the net
asset value of the account in such fund falls below the required minimum ini-
tial investment as the result of a redemption or an exchange request. The
shareholder will be notified in writing that the value of the account is less
than the required amount and the shareholder will be allowed 30 days to make
additional investments before the redemption is processed.

Management

BlackRock Funds' Adviser is BlackRock Advisors, Inc. (BlackRock). BlackRock was
organized in 1994 to perform advisory services for investment companies and is
located at 345
108
<PAGE>

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Park Avenue, New York, NY 10154. BlackRock is a wholly-owned subsidiary of
BlackRock, Inc., one of the largest publicly traded investment management firms
in the United States with $164.5 billion of assets under management as of
December 31, 1999. BlackRock, Inc. is a majority-owned subsidiary of PNC Bank
Corp., one of the largest diversified financial services companies in the
United States. BlackRock Financial Management, Inc. (BFM), an affiliate of
BlackRock located at 345 Park Avenue, New York, New York 10154, acts as sub-
adviser to the Company, as does BlackRock International, Ltd. (BIL), an affili-
ate of BlackRock located at 7 Castle Street, Edinburgh, Scotland EH2 3AH. The
only fund not managed by BlackRock is the Index Equity Portfolio, which invests
all of its assets in the Index Master Portfolio. The Index Master Portfolio is
advised by Dimensional Fund Advisors Inc. (DFA), located at 1299 Ocean Avenue,
11th Floor, Santa Monica, CA 90401. DFA was organized in May 1981 and provides
investment management services to institutional investors. As of November 30,
1999, DFA had over $31 billion in assets under management.

For their investment advisory and sub-advisory services, BlackRock, BFM, BIL
and DFA, as applicable, are entitled to fees computed daily on a fund-by-fund
basis and payable monthly. For the fiscal year ended September 30, 1999, the
aggregate advisory fees paid by the funds to BlackRock as a percentage of aver-
age daily net assets were:

<TABLE>
<S> <C>
Large Cap Value Equity 0.51%
Large Cap Growth Equity 0.53%
Mid-Cap Value Equity 0.79%
Mid-Cap Growth Equity 0.79%
Small Cap Value Equity 0.55%
Small Cap Growth Equity 0.53%
International Equity 0.74%
International Small Cap Equity 0.33%
International Emerging Markets 1.25%
Select Equity 0.53%
Balanced 0.55%
Micro-Cap Equity 0.78%
</TABLE>

For the fiscal year ended November 30, 1999, the Index Master Portfolio paid
DFA an aggregate advisory fee of .025% of average daily net assets.

IMPORTANT DEFINITIONS

Adviser: The Adviser of
a mutual fund is
responsible for the
overall investment man-
agement of the Fund.
The Adviser for Black-
Rock Funds is BlackRock
Advisors, Inc.

Sub-Adviser: The sub-
adviser of a fund is
responsible for its
day-to-day management
and will generally make
all buy and sell deci-
sions. Sub-advisers
also provide research
and credit analysis.
The sub-adviser for all
the funds except the
Index Equity, Interna-
tional Equity, Interna-
tional Emerging Markets
and International Small
Cap Equity Portfolios
is BlackRock Financial
Management, Inc. The
sub-adviser for the
International Equity,
International Emerging
Markets and Interna-
tional Small Cap Equity
Portfolios is BlackRock
International, Ltd.
109
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The maximum annual advisory fees that can be paid to BlackRock (as a percentage
of average daily net assets) are as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET INVESTMENT
ASSETS ADVISORY FEE
<S> <C>
First $1 billion .550%
$1 billion-$2 billion .500%
$2 billion-$3 billion .475%
more than $3 billion .450%
</TABLE>

Maximum Annual Contractual Advisory Fee Rate for the Mid-Cap Value Equity and
Mid-Cap Growth Equity Portfolios (Before Waivers)

<TABLE>
<CAPTION>
AVERAGE DAILY NET INVESTMENT
ASSETS ADVISORY FEE
<S> <C>
First $1 billion .800%
$1 billion-$2 billion .700%
$2 billion-$3 billion .675%
more than $3 billion .625%
</TABLE>

Maximum Annual Contractual Advisory Fee Rate for the International Equity
Portfolio (Before Waivers)

<TABLE>
<CAPTION>
AVERAGE DAILY NET INVESTMENT
ASSETS ADVISORY FEE
<S> <C>
First $1 billion .750%
$1 billion-$2 billion .700%
$2 billion-$3 billion .675%
more than $3 billion .650%
</TABLE>

Maximum Annual Contractual Advisory Fee Rate for the International Emerging
Markets Portfolio (Before Waivers)

<TABLE>
<CAPTION>
AVERAGE DAILY NET INVESTMENT
ASSETS ADVISORY FEE
<S> <C>
First $1 billion 1.250%
$1 billion-$2 billion 1.200%
$2 billion-$3 billion 1.155%
more than $3 billion 1.100%
</TABLE>

110
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Maximum Annual Contractual Advisory Fee Rate for the International Small Cap
Equity Portfolio (Before Waivers)

<TABLE>
<CAPTION>
AVERAGE DAILY NET INVESTMENT
ASSETS ADVISORY FEE
<S> <C>
First $1 billion 1.00%
$1 billion-$2 billion .950%
$2 billion-$3 billion .900%
more than $3 billion .850%
</TABLE>

Maximum Annual Contractual Advisory Fee Rate for the Micro-Cap Equity Portfolio
(Before Waivers)

<TABLE>
<CAPTION>
AVERAGE DAILY NET INVESTMENT
ASSETS ADVISORY FEE
<S> <C>
First $1 billion 1.10%
$1 billion-$2 billion 1.05%
$2 billion-$3 billion 1.025%
more than $3 billion 1.00%
</TABLE>

The Index Master Portfolio pays DFA a maximum annual advisory fee of .025% of
its average daily net assets.

Information about the portfolio manager for each of the funds is presented in
the appropriate fund section.

As discussed above, BlackRock and the Distributor have agreed to cap each
fund's net expenses at the levels shown in that fund's expense table.
111
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

To achieve this cap, BlackRock and the Company have entered into an expense
limitation agreement. The agreement sets a limit on certain of the operating
expenses of each fund through February 1, 2001 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 fund assets as a
whole, but not expenses separately charged to the different share classes of a
fund) as a percentage of average daily net assets are:

<TABLE>
<S> <C>
Large Cap Value Equity .630%
Large Cap Growth Equity .650%
Mid-Cap Value Equity .995%
Mid-Cap Growth Equity .995%
Small Cap Value Equity .705%
Small Cap Growth Equity .690%
International Equity .900%
International Emerging Markets 1.565%
International Small Cap Equity 1.155%
Select Equity .645%
Index Equity .150%
Balanced .690%
Micro-Cap Equity 1.305%
</TABLE>

If in the following two years the operating expenses of a fund that previously
received a waiver or reimbursement from BlackRock are less than the expense
limit for that fund, the fund is required to repay BlackRock up to the amount
of fees waived or expenses reimbursed under the agreement if: (1) the fund has
more than $50 million in assets, (2) BlackRock continues to be the fund's
investment adviser and (3) the Board of Trustees of the Company has approved
the payments to BlackRock on a quarterly basis.

In addition, through February 1, 2001, BlackRock and the Distributor have con-
tractually agreed to waive distribution and service fees on Investor A Shares
in the amount of .095% of average daily net assets for each Fund.

Dividends and Distributions

BlackRock Funds makes two kinds of distributions to shareholders: dividends and
net capital gain.

Dividends are the net investment income derived by a fund and are paid within
10 days after the end of each quarter. The Company's Board of Trustees may
change the timing of dividend payments.

112
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Net capital gain occurs when the fund manager sells securities at a profit. Net
capital gain (if any) is distributed to shareholders at
least annually at a date determined by the Company's Board of Trustees.

Your distributions will be reinvested at net asset value in new shares of the
same class of the fund unless you instruct PFPC in writing to pay them in cash.
There are no sales charges on these reinvestments.

The Index Equity Portfolio seeks its investment objective by investing all of
its assets in the Index Master Portfolio (which is taxable as a partnership for
federal income tax purposes). The Index Equity Portfolio is allocated its dis-
tributive share of the income, gains (including capital gains), losses, deduc-
tions and credits of the Index Master Portfolio. The Index Equity Portfolio's
distributive share of such items, plus gain, if any, on the redemption of
shares of the Index Master Portfolio, less the Index Equity Portfolio's
expenses incurred in operations, will constitute the Index Equity Portfolio's
net income from which dividends are distributed as described above.

- --------------------------------------------------------------------------------

Distributions paid out of a fund's "net capital gain" will be taxed to share-
holders as long-term capital gains, regardless of how long a shareholder has
owned shares. All other distributions will be taxed to shareholders as ordinary
income.

Your annual tax statement from the Company will present in detail the tax sta-
tus of your distributions for each year.

If more than half of the total asset value of a fund is invested in foreign
stock or securities, the fund may elect to "pass through" to its shareholders
the amount of foreign taxes paid. In such case each shareholder would be
required to include his proportionate share of such taxes in his income and may
be entitled to deduct or credit such taxes in computing his taxable income.

Distributions paid by a fund with respect to certain qualifying dividends
received by the Fund from domestic corporations may be eligible for the Corpo-
rate dividends received deduction.

Use of the exchange privilege will be treated as a taxable event and may be
subject to federal, state and local income tax.

Taxation of Distributions
113
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Because every investor has an individual tax situation, and also because the
tax laws are subject to periodic changes, you should always consult your tax
professional about federal, state and local tax consequences of owning shares
of the Company.

114
<PAGE>

Services for Shareholders
[LOGO]

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

BlackRock Funds offers shareholders many special features which can enable
investors to have greater investment flexibility as well as more access to
information about the Company.

Additional information about these features is available by calling PFPC at
(800) 441-7762.

- --------------------------------------------------------------------------------

Exchange Privilege

BlackRock Funds offers 36 different funds, enough to meet virtually any invest-
ment need. Once you are a shareholder, you have the right to exchange Investor
A, B, or C Shares from one fund to another to meet your changing financial
needs. For example, if you are in a fund that has an investment objective of
long term capital growth and you are nearing retirement, you may want to switch
into another fund that has current income as an investment objective.

You can exchange $500 (or any other applicable minimum) or more from one Black-
Rock Fund into another. Investor A, Investor B and Investor C Shares of each
fund may be exchanged for shares of the same class of other funds which offer
that class of shares, based on their respective net asset values. (You can
exchange less than $500 if you already have an account in the fund into which
you are exchanging.) Because different funds have different sales charges, the
exchange of Investor A Shares may be subject to the difference between the
sales charge already paid and the higher sales charge (if any) payable on the
shares acquired as a result of the exchange. For Federal income tax a share
exchange is a taxable event and a capital gain or loss may be realized. Please
consult your tax or other financial adviser before making an exchange request.

The exchange of Investor B and Investor C Shares will not be subject to a CDSC.
The CDSC will continue to be measured from the date of the original purchase
and will not be affected by the exchange.

115
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------

To make an exchange, you must send a written request to PFPC at P.O. Box 8907,
Wilmington, DE 19899-8907. You can also make exchanges via telephone automati-
cally, unless you previously indicated that you did not want this option. If
so, you may not use telephone exchange privileges until completing a Telephone
Exchange Authorization Form. To receive a copy of the form contact PFPC. The
Company has the right to reject any telephone request.

In general, there are no limits on the number of exchanges you can make. How-
ever, the Company may suspend or terminate your exchange privilege at any time
and generally will do so if you make more than five exchanges out of any fund
in any twelve month period.

The Company reserves the right to modify, limit the use of, or terminate the
exchange privilege at any time.

Automatic Investment Plan (AIP)

If you would like to establish a regular, affordable investment program, Black-
Rock Funds makes it easy to set up. As an investor in any BlackRock Fund port-
folio, you can arrange for periodic investments in that fund through automatic
deductions from a checking or savings account by completing the AIP
Application Form. The minimum investment amount for an automatic investment
plan is $50. AIP Application Forms are available from PFPC.

Retirement Plans

Shares may be purchased in conjunction with individual retirement accounts
(IRAs) and rollover IRAs where PNC Bank or any of its affiliates acts as cus-
todian. For more information about applications or annual fees, please contact
the Distributor at Four Falls Corporate Center, 6th floor, West Conshohocken,
PA 19428-2961. To determine if you are eligible for an IRA and whether an IRA
will benefit you, you should consult with a tax adviser.

116
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Market Timing

The funds are not designed for market time organizations or other entities using
programmed or frequent exchanges. The Company reserves the right to reject any
specific purchase order, including an order made by a market timer.

Any redemption that is made as a result of this activity will be subject to any
and all redemption fees.

- --------------------------------------------------------------------------------

Statements

Every BlackRock shareholder automatically receives regular account statements.
In addition, for tax purposes, shareholders also receive a yearly statement
describing the characteristics of any dividends or other distributions
received.

- --------------------------------------------------------------------------------

Systematic Withdrawal Plan (SWP)

This feature can be used by investors who want to receive regular distributions
from their accounts. To start a SWP a shareholder must have a current invest-
ment of $10,000 or more in a fund. Shareholders can elect to receive cash pay-
ments of $50 or more monthly, every other month, quarterly, semi-annually or
annually. Shareholders may sign up by completing the SWP Application Form which
may be obtained from PFPC. Shareholders should realize that if withdrawals
exceed income the invested principal in their account will be depleted.

To participate in the SWP, shareholders must have their dividends automatically
reinvested and may not hold share certificates. Shareholders may change or can-
cel the SWP at any time, upon written notice to PFPC. If an investor purchases
additional Investor A Shares of a fund at the same time he or she redeems
shares through the SWP, that investor may lose money because of the sales
charge involved. No CDSC will be assessed on redemptions of Investor B or
Investor C Shares made through the SWP that do not exceed 12% of the account's
net asset value on an annualized basis. For example, monthly, quarterly and
semi-annual SWP redemptions of Investor B or Investor C Shares will not be sub-
ject to the CDSC if they do not exceed 1%, 3% and 6%, respectively, of an
account's net asset value on the redemption date. SWP redemptions of Investor B
or Investor C Shares in excess of this limit will still pay the applicable
CDSC.

117
<PAGE>

For more information:
This prospectus contains important information you should know before you
invest. Read it carefully and keep it for future reference.
More information about the BlackRock Funds is available free, upon request,
including:

Annual/Semi-Annual Reports
These reports contain additional information about each of the fund's
investments. The annual report describes the funds' performance, lists portfolio
holdings and discusses recent market conditions, economic trends and fund
investment strategies that significantly affected each of the fund's performance
during the last fiscal year.

Statement of Additional Information (SAI)
A Statement of Additional Information dated January 28, 2000 has been filed with
the Securities and Exchange Commission (SEC). The SAI, which includes additional
information about the BlackRock Funds, may be obtained free of charge, along
with the Company's annual and semi-annual reports, by calling (800) 441-7762.
The SAI, as supplemented from time to time, is incorporated by reference into
this Prospectus.

Shareholder Account Service Representatives
Representatives are available to discuss account balance information, mutual
fund prospectuses, literature, programs and services available. Hours: 9 a.m. to
6 p.m. (Eastern time), Monday-Friday. Call: (800) 441-7762

Purchases and Redemptions
Call your registered representative or (800) 441-7762.

World Wide Web
Access general fund information and specific fund performance. Request mutual
fund prospectuses and literature. Forward mutual fund inquiries. Available 24
hours a day, 7 days a week. http://www.blackrock.com

Email
Request prospectuses, SAI, Annual or Semi-Annual Reports and literature. Forward
mutual fund inquiries. Available 24 hours a day, 7 days a week. Mail to:
[email protected]

Written Correspondence
Post Office Address: BlackRock Funds c/o PFPC Inc., P.O. Box 8907,
Wilmington, DE 19899-8907
Street Address: BlackRock Funds, c/o PFPC Inc., 400 Bellevue Parkway,
Wilmington, DE 19809

Internal Wholesalers/Broker Dealer Support
Available to support investment professionals 9 a.m. to 6 p.m. (Eastern time),
Monday-Friday. Call (888) 8BLACKROCK

Securities and Exchange Commission (SEC)
You may also view and copy information about the BlackRock Funds, including the
SAI, by visiting the EDGAR Database on the SEC Web site (http://www.sec.gov) or
the SEC's Public Reference Room in Washington, D.C. Information about the
operation of the public reference room can be obtained by calling the SEC
directly at 1-202-942-8090. Copies of this information can be obtained, for a
duplicating fee, by electronic request at the following E-mail address:
[email protected], or by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.

INVESTMENT COMPANY ACT FILE NO. 811-05742

[GRAPHIC]

[LOGO] BLACKROCK
FUNDS

<PAGE>

[GRAPHIC]

NOT FDIC- | May lose value
INSURED | No bank guarantee

Equity Portfolios
======================================
I N S T I T U T I O N A L S H A R E S

BlackRock Funds/SM/ is a mutual fund family with 36 investment portfolios, 13 of
which are described in this prospectus.

P R O S P E C T U S

January 28, 2000

[LOGO] BLACKROCK
FUNDS

Table of
Contents

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

How to find the information you need

<TABLE>
<S> <C>
How to find the information you need........................................ 1
THE BLACKROCK EQUITY FUNDS
Large Cap Value............................................................. 2
Large Cap Growth............................................................ 7
Mid-Cap Value............................................................... 12
Mid-Cap Growth.............................................................. 17
Small Cap Value............................................................. 22
Small Cap Growth............................................................ 27
International Equity........................................................ 32
International Emerging Markets.............................................. 38
International Small Cap..................................................... 44
Select Equity............................................................... 51
Index Equity................................................................ 56
Balanced.................................................................... 61
Micro-Cap................................................................... 67
</TABLE>

About Your Investment

<TABLE>
<S> <C>
How to Buy/Sell Shares..................................................... 73
Dividends/Distributions/Taxes.............................................. 80
</TABLE>
<PAGE>

How to Find the
Information You Need
About BlackRock Funds

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

BlackRock
[LOGO] Large Cap Value Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Value Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value," although there
are times when a growth
fund and value fund may
own the same stock.
Value stocks are compa-
nies that appear to the
manager to be underval-
ued by the market as
measured by certain
financial formulas.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general, and
whose growth in revenue
is expected to continue
for an extended period.

Investment Goal
The fund seeks long-term capital appreciation--current income is the secondary
objective.

2
<PAGE>

used to maintain liquidity, commit cash pending investment or for speculation
to increase returns.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

While the fund manager chooses stocks he believes to be undervalued, there is
no guarantee that prices won't move even lower.

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

3
<PAGE>

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Institutional Shares. The information shows you how the fund's
performance has varied year by year and provides some indication of the risks
of investing in the fund. The table compares the fund's performance to that of
the Russell 1000 Value Index, a recognized unmanaged index of stock market per-
formance. As with all such investments, past performance is not an indication
of future results.

As of 12/31
- -----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- -----------------------------------------------------------------------------

Best Quarter Q4 '98: 16.07%

Worst Quarter Q3 '98: -14.15%

[BAR CHART]

93 94 95 96 97 98 99
----- ----- ----- ----- ----- ----- -----
18 1.1 34.86 24.2 28.65 10.48 3.64

As of 12/31/99
- -----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS**
- -----------------------------------------------------------------------------

Since Inception
1 Year 3 Years 5 Years Inception Date
------ ------- ------- --------- ---------
Large Cap Value 3.64% 13.78% 19.80% 15.72% 04/20/92
Russell 1000 Value 7.35% 18.83% 23.07% 17.87% N/A*

* For comparative purposes, the value of the index on 05/01/92 is used as the
beginning value on 04/20/92.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.
4
<PAGE>

The table below describes the fees and expenses that you may pay if you buy and
hold Institutional Shares of the fund. The table is based on expenses for the
most recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory fees .51%
Other expenses/1/ .26%
Total annual fund operating expenses .77%
Fee waivers and expense reimbursements --
Net expenses* .77%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses in
order to limit fund expenses to .79% of average daily net assets until Feb-
ruary 1, 2001. The fund may have to repay these waivers and reimbursements
to BlackRock in the following two years. See the "Management" section on
page 77 for a discussion of these waivers and reimbursements.

/1/"Other expenses" have been restated to reflect current expenses.

Example:
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
cost may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years

<S> <C> <C> <C> <C>
Institutional Shares $79 $246 $428 $954
</TABLE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

5
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Institutional Share Outstanding Throughout Each Period)

Large Cap Value Equity Portfolio

Year Year Year Year
Year Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 14.69 $ 17.53 $ 15.35 $ 13.92 $ 11.62
---------- ---------- -------- -------- --------
Income from investment
operations
Net investment income 0.22 0.22 0.31 0.35 0.34
Net gain (loss) on
investments (both
realized and
unrealized) 2.01 (0.58) 4.69 2.41 2.54
---------- ---------- -------- -------- --------
Total from investment
operations 2.23 (0.36) 5.00 2.76 2.88
---------- ---------- -------- -------- --------
Less distributions
Distributions from net
investment income (0.22) (0.23) (0.30) (0.36) (0.33)
Distributions from net
realized capital gains (0.95) (2.25) (2.52) (0.97) (0.25)
---------- ---------- -------- -------- --------
Total distributions (1.17) (2.48) (2.82) (1.33) (0.58)
---------- ---------- -------- -------- --------
Net asset value at end of
period $ 15.75 $ 14.69 $ 17.53 $ 15.35 $ 13.92
========== ========== ======== ======== ========
Total return 15.38% (2.27)% 37.66% 21.01% 25.73%
Ratios/Supplemental data
Net assets at end of
period (in thousands) $1,909,445 $1,841,171 $743,405 $731,024 $508,273
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 0.78% 0.83% 0.78% 0.75% 0.67%
Before
advisory/administration
fee waivers 0.78% 0.84% 0.85% 0.84% 0.81%
Ratios of net investment
income to average net
assets
After
advisory/administration
fee waivers 1.37% 1.45% 1.94% 2.40% 2.68%
Before
advisory/administration
fee waivers 1.37% 1.44% 1.87% 2.32% 2.53%
Portfolio turnover rate 42% 33% 37% 60% 12%
</TABLE>
-----------------------------------------------------

6
<PAGE>

BlackRock
[LOGO] Large Cap Growth Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation.

IMPORTANT DEFINITIONS

Equity Security: A
security, such as
stock, representing
ownership of a company.
Bonds, in comparison,
are referred to as
fixed income or debt
securities because they
represent indebtedness
to the bondholders, not
ownership.
Fundamental Analysis: A
method of stock market
analysis that concen-
trates on "fundamental"
information about the
company such (as its
income statement, bal-
ance sheet, earnings
and sales history,
products and manage-
ment) to attempt to
forecast future stock
value.

Investment Style:
Refers to the guiding
principles of a mutual
fund's investment
choices. The investment
style of this fund is
large cap growth,
referring to the type
of securities the man-
ager will choose for
this fund.
Large Capitalization
Companies: The fund
defines these companies
as those with capital-
ization over $10 bil-
lion. Capitalization
refers to the market
value of the company
and is calculated by
multiplying the number
of shares outstanding
by the current price
per share. Larger com-
panies may be more
likely to have the
staying power to get
them through all eco-
nomic cycles; however
their size may also
make them less flexible
and innovative than
smaller companies.

7
<PAGE>

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

While the fund manager chooses stocks he believes have above-average earnings
growth potential, there is no guarantee that the shares will increase in
value.

Higher than normal portfolio turnover may result in increased transaction
costs to the fund, including brokerage commissions, dealer mark-ups and other
transaction costs on the sale of the securities and on reinvestment in other
securities. The sale of fund securities may result in the recognition of capi-
tal gain or loss. Given the frequency of sales, such gain or loss will likely
be short-term gain or loss. Unlike long-term capital gain, short-term capital
gain of individuals is taxable at the same rates as ordinary income.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Insititutional Shares. The information shows you how the fund's per-
formance has varied year by year and provides some indication of the risks of
investing in the fund. The table compares the fund's performance to that of the
Russell 1000 Growth Index, a recognized unmanaged index of stock market perfor-
mance. As with all such investments, past performance is not an indication of
future results.

As of 12/31
- -----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS*
- -----------------------------------------------------------------------------

Best Quarter Q4 '99: 27.25%

Worst Quarter Q3 '98: -9.93%

[BAR CHART]

90 91 92 93 94 95 96 97 98 99
- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- -2.05 26.01 -1 13.69 -10.07 34.44 20.35 28.42 41.31 36.5

As of 12/31/99
- -----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- -----------------------------------------------------------------------------

Since Inception
1 Year 3 Years 5 Years 10 Years Inception Date
------ ------- ------- -------- --------- ---------
Large Cap Growth 36.50% 35.31% 32.00% 17.48% 18.08% 11/01/89
Russell 1000 Growth 33.16% 34.08% 32.42% 20.32% 20.48% N/A

* The chart and the table both assume reinvestment of dividends and distribu-
tions.
9
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table below describes the fees and expenses that you may pay if you buy
and hold Institutional Shares of the fund. The table is based on expenses for
the most recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory fees .53%
Other expenses .28%
Total annual fund operating expenses .81%
Fee waivers and expense reimbursements --
Net expenses* .81%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses
in order to limit fund expenses to .82% of average daily net assets until
February 1, 2001. The fund may have to repay some of these waivers and
reimbursements to BlackRock in the following two years. See the "Manage-
ment" section on page 77 for a discussion of these waivers and reimburse-
ments.

Example:
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Institutional Shares $83 $259 $450 $1,002
</TABLE>

10
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Institutional Share Outstanding Throughout Each Period)

Large Cap Growth Equity Portfolio

Year Year Year Year
Year Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 18.14 $ 18.92 $ 14.96 $ 13.03 $ 10.19
---------- -------- -------- -------- --------
Income from investment
operations
Net investment income - - 0.03 0.09 0.08 0.13
Net gain on investments
(both realized and
unrealized) 6.06 1.85 4.72 2.29 2.88
---------- -------- -------- -------- --------
Total from investment
operations 6.06 1.88 4.81 2.37 3.01
---------- -------- -------- -------- --------
Less distributions
Distributions from net
investment income - - (0.02) (0.11) (0.06) (0.17)
Distributions from net
realized capital gains (1.63) (2.64) (0.74) (0.38) - -
---------- -------- -------- -------- --------
Total distributions (1.63) (2.66) (0.85) (0.44) (0.17)
---------- -------- -------- -------- --------
Net asset value at end of
period $ 22.57 $ 18.14 $ 18.92 $ 14.96 $ 13.03
========== ======== ======== ======== ========
Total return 35.46% 11.76% 33.69% 18.67% 29.88%
Ratios/Supplemental data
Net assets at end of
period (in thousands) $1,115,368 $922,896 $482,851 $481,171 $211,543
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 0.81% 0.86% 0.79% 0.75% 0.67%
Before
advisory/administration
fee waivers 0.81% 0.86% 0.86% 0.86% 0.85%
Ratios of net investment
income to average net
assets
After
advisory/administration
fee waivers (0.01%) 0.18% 0.54% 0.63% 1.20%
Before
advisory/administration
fee waivers (0.01%) 0.18% 0.47% 0.51% 1.01%
Portfolio turnover rate 60% 54% 81% 58% 55%
-------------------------------------------------
</TABLE>
11
<PAGE>

BlackRock
[LOGO] Mid-Cap Value Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation--current income is the secondary
objective.

Primary Investment Strategies

IMPORTANT DEFINITIONS

Value Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value,"although there
are times when a growth
fund and value fund may
own the same stock.
Value stocks are compa-
nies that appear to the
manager to be underval-
ued by the market as
measured by certain
financial formulas.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general, and
whose growth in revenue
is expected to continue
for an extended period.

12
<PAGE>

used to maintain liquidity, commit cash pending investment or for speculation
to increase returns.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Key Risks

While the fund manager chooses stocks he believes to be undervalued, there is
no guarantee that prices won't move even lower.

The fund's uses of derivatives may reduce returns and/or increase volatility.
Volatility is defined as the characteristic of a security or a market to fluc-
tuate significantly in price within a short time period.

Higher than normal portfolio turnover may result in increased transaction costs
to the fund, including brokerage commissions, dealer mark-ups and other trans-
action costs on the sale of the securities and on reinvestment in other securi-
ties. The sale of fund securities may result in the recognition of capital gain
or loss. Given the frequency of sales, such gain or loss will likely be short-
term gain or loss. Unlike long-term capital gain, short-term capital gain of
individuals is taxable at the same rates as ordinary income.
13
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Institutional Shares. The information shows you how the fund's per-
formance has varied year by year and provides some indication of the risks of
investing in the fund. The table compares the fund's performance to that of the
Russell Mid Cap Value Index, a recognized unmanaged index of stock market per-
formance. As with all such investments, past performance is not an indication
of future results.

As of 12/31
- -------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- -------------------------------------------------------------------------------

Best Quarter Q4 '98: 13.69%

Worst Quarter Q3 '98: -17.30%

[BAR CHART]

97 98 99
----- ----- ----
28.57 -1.46 1.12

Since Inception
1 Year 3 Years Inception Date
------ -------- --------- ---------
Mid Cap Value 1.12% 8.61% 8.58% 12/27/96
Russell Mid Cap Value -0.11% 12.15% 12.15% N/A*

* For comparative purposes, the value of the index on 01/01/97 is used as the
beginning value on 12/27/96.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

14
<PAGE>

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table below describes the fees and expenses that you may pay if you buy and
hold Institutional Shares of the fund. The table is based on expenses for the
most recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C> <C> <C>
Advisory fees .80%
Other expenses .32%
Total annual
fund operating
expenses 1.12%
Fee waivers and
expense
reimbursements* --
Net expenses* 1.12%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses in
order to limit fund expenses to 1.17% of average daily net assets until
February 1, 2001. The fund may have to repay some of these waivers and
reimbursements to BlackRock in the following two years. See the "Management"
section on page 77 for a discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years

<S> <C> <C> <C> <C>
Institutional Shares $114 $356 $617 $1,363
</TABLE>

Fund Management
The fund is co-managed by Christian K. Stadlinger and Daniel B. Eagan.

Daniel B. Eagan, has been co-manager of the fund since inception. Mr. Eagan is
a Managing Director with BlackRock Financial Management, Inc. since 1995. He
was a director of investment strategy at BlackRock Advisors, Inc. during 1994-
1995. Previously, he served as senior research consultant for Mercer Investment
Consulting.

Expenses and Fees

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

15
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Institutional Share Outstanding Throughout Each Period)

Mid-Cap Value

For the
Period
Year Year 12/27/96/1/
Ended Ended through
9/30/99 9/30/98 9/30/97
<S> <C> <C> <C>
Net asset value at
beginning of period $ 10.63 $ 12.80 $ 10.00
-------- -------- --------
Income from investment
operations
Net investment income 0.11 0.10 0.10
Net gain (loss) on
investments
(both realized and
unrealized) 0.72 (1.81) 2.80
-------- -------- --------
Total from investment
operations 0.83 (1.71) 2.90
-------- -------- --------
Less distributions
Distributions from net
investment income (0.11) (0.10) (0.10)
Distributions from net
realized capital gains - - (0.36) - -
-------- -------- --------
Total distributions (0.11) (0.46) (0.10)
-------- -------- --------
Net asset value at end of
period $ 11.35 $ 10.63 $ 12.80
======== ======== ========
Total return 7.68% (13.68)% 29.11%
Ratios/Supplemental data
Net assets at end of
period (in thousands) $233,891 $205,634 $106,886
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 1.12% 1.14% 1.15%/2/
Before
advisory/administration
fee waivers 1.12% 1.20% 1.19%/2/
Ratios of net investment
income to average net
assets
After
advisory/administration
fee waivers 0.88% 0.89% 1.33%/2/
Before
advisory/administration
fee waivers 0.88% 0.83% 1.29%/2/
Portfolio turnover rate 88% 71% 36%
-------------------------------------
</TABLE>

/1/Commencement of operations of share class.
/2/Annualized.

16
<PAGE>

BlackRock
[LOGO] Mid-Cap Growth Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies

IMPORTANT DEFINITIONS

17
<PAGE>

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

There is more business risk in investing in mid-capitalization companies than
in larger, better capitalized companies. These organizations will normally
have more limited product lines, markets and financial resources and will be
dependent upon a more limited management group than larger capitalized compa-
nies.

While the fund manager chooses stocks he believes to have above-average earn-
ings growth potential, there is no guarantee that the shares will increase in
value.

The fund's use of derivatives may reduce returns and/or increase volatility.
Volatility is defined as the characteristic of a security or a market to
fluctuate significantly in price within a short time period.

18
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Institutional Shares. The information shows you how the fund's per-
formance has varied year by year and provides some indication of the risks of
investing in the fund. The table compares the fund's performance to that of the
Russell Mid Cap Growth Index, a recognized unmanaged index of stock market per-
formance. As with all such investments, past performance is not an indication
of future results.

As of 12/31
- -----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- -----------------------------------------------------------------------------

Best Quarter Q4 '99: 61.50%

Worst Quarter Q3 '98: -14.59%

[BAR CHART]

97 98 99
----- ----- ------
14.75 22.33 121.04

Since Inception
1 Year 3 Years Inception Date
------- ------- --------- ---------
Mid Cap Growth 121.04% 45.85% 45.83% 12/27/96
Russell Mid Cap Growth 51.30% 29.77% 29.77% N/A*

* For comparative purposes, the value of the index on 01/01/97 is used as the
beginning value on 12/27/96.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.
19
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the fund. The table is based on expenses for the most
recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory Fees .80%
Other expenses/1/ .31%
Total annual fund operating expenses 1.11%
Fee waivers and expense reimbursements* --
Net Expenses* 1.11%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses
in order to limit fund expenses to 1.17% of average daily net assets until
February 1, 2001. The fund may have to repay some of these waivers and
reimbursements to BlackRock in the following two years. See the "Manage-
ment" section on page 77 for a discussion of these waivers and reimburse-
ments.

/1/"Other expenses" have been restated to reflect current expenses.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years

<S> <C> <C> <C> <C>
Institutional Shares $113 $353 $612 $1,352
</TABLE>

Fund Management

20
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Institutional Share Outstanding Throughout Each Period)

Mid-Cap Growth Equity Portfolio

For the
Period
Year Year 12/27/96/1/
Ended Ended through
9/30/99 9/30/98 9/30/97
<S> <C> <C> <C>
Net asset value at
beginning of period $ 11.12 $ 12.20 $ 10.00
-------- -------- --------
Income from investment
operations
Net investment income (0.07) (0.02) (0.01)
Net gain (loss) on
investments
(both realized and
unrealized) 8.07 (0.96) 2.21
-------- -------- --------
Total from investment
operations 8.00 (0.98) 2.20
-------- -------- --------
Less distributions
Distributions from net
investment income - - - - - -
Distributions from capi- - - (0.01)
tal - -
Distributions from net
realized capital gains - - (0.09) - -
-------- -------- --------
Total distributions - - (.10) - -
-------- -------- --------
Net asset value at end of
period $ 19.12 $ 11.12 $ 12.20
======== ======== ========
Total return 71.94% (8.05)% 22.00%
Ratios/Supplemental data
Net assets at end of
period (in thousands) $361,901 $220,903 $107,709
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 1.11% 1.14% 1.13%/2/
Before
advisory/administration
fee waivers 1.12% 1.20% 1.17%/2/
Ratios of net investment
income to average net
assets
After
advisory/administration
fee waivers (0.48)% (0.37)% (0.16)%/2/
Before
advisory/administration
fee waivers (0.49)% (0.43)% (0.20)%/2/
Portfolio turnover rate 318% 204% 64%
</TABLE>

----------------------------------------------------

/1/Commencement of operations of share class.
/2/Annualized.
21
<PAGE>

BlackRock
[LOGO] Small Cap Value Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Investment Goal
The fund seeks long-term capital appreciation.

22
<PAGE>

The fund may lend some of its securities on a short-term basis in order to earn
extra income. The fund will receive collateral in cash or high quality securi-
ties equal to the current value of the loan securities. These loans will be
limited to 33 1/3% of the value of the fund's total assets.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

While the fund manager chooses stocks he believes to be undervalued, there is
no guarantee that prices won't move even lower.

Higher than normal portfolio turnover may result in increased transaction costs
to the fund, including brokerage commissions, dealer mark-ups and other
transaction costs on the sale of the securities and on reinvestment in other
securities. The sale of fund securities may result in the recognition of
capital gain or loss. Given the frequency of sales, such gain or loss will
likely be short-term capital gain or loss. Unlike long-term capital gain,
short-term capital gain of individuals in taxable at the same rates as ordinary
income.
23
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Institutional Shares. The information shows you how the fund's per-
formance has varied year by year and provides some indication of the risks of
investing in the fund. The table compares the fund's performance to that of the
Russell 2000 Value Index, a recognized unmanaged index of stock market perfor-
mance. As with all such investments, past performance is not an indication of
future results.

As of 12/31
- -----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- -----------------------------------------------------------------------------

Best Quarter Q2 '97: 18.59%

Worst Quarter Q3 '98: -19.53%

[BAR CHART]

93 94 95 96 97 98 99
----- ----- ----- ----- ----- ----- -----
18.66 -0.48 23.15 19.86 35.74 -6.22 -4.85

Since Inception
1 Year 3 Years 5 Years Inception Date
------ ------- ------- --------- ---------
Small Cap Value -4.85% 6.60% 12.32% 12.41% 04/13/92
Russell 2000 Value -1.49% 6.69% 13.13% 13.11% N/A*

* For comparative purposes, the value of the index on 04/01/92 is used as the
beginning value on 04/13/92.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

24
<PAGE>

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the fund. The table is based on expenses for the most
recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory fees .55%
Other expenses .31%
Total annual fund operating expenses .86%
Fee waivers and expense reimbursements --
Net expenses* .86%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses in
order to limit fund expenses to .88% of average daily net assets until Feb-
ruary 1, 2001. The fund may have to repay some of these waivers and reim-
bursements to BlackRock in the following two years. See the "Management"
section on page 77 for a discussion of these waivers and reimbursements.

Example:
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Institutional Shares $88 $274 $477 $1,061
</TABLE>

Fund Management
The manager of the fund is Christian K. Stadlinger. He has been a Managing
Director with BlackRock Financial Management, Inc. (BFM) since July 1996. Prior
to joining BFM he was Portfolio Manager and Research Analyst with Morgan Stan-
ley Asset Management. He has headed the fund's portfolio management team since
1996.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

25
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Institutional Share Outstanding Throughout Each Period)

Small Cap Value Equity Portfolio

Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value at beginning
of period $ 14.89 $ 20.20 $ 15.98 $ 15.16 $ 13.62
-------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.12 0.13 0.17 0.10 0.06
Net gain (loss) on
investments
(both realized and
unrealized) 0.67 (3.19) 6.39 1.70 2.17
-------- -------- -------- -------- --------
Total from investment
operations 0.79 (3.06) 6.56 1.80 2.23
-------- -------- -------- -------- --------
Less distributions
Distributions from net
investment income (0.13) (0.13) (0.17) (0.11) (0.08)
Distributions in excess of
net investment income (0.15) - - - - - - - -
Distributions from net
realized capital gains (0.67) (2.12) (2.17) (0.87) (0.61)
-------- -------- -------- -------- --------
Total distributions (0.95) (2.25) (2.34) (0.98) (0.69)
-------- -------- -------- -------- --------
Net asset value at end of
period $ 14.73 $ 14.89 $ 20.20 $ 15.98 $ 15.16
======== ======== ======== ======== ========
Total return 5.22% (17.03)% 47.36% 12.64% 17.43%
Ratios/Supplemental data
Net assets at end of period
(in thousands) $519,388 $527,374 $309,899 $214,828 $168,334
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 0.86% 0.87% 0.87% 0.85% 0.75%
Before
advisory/administration
fee
waivers 0.86% 0.88% 0.88% 0.86% 0.84%
Ratios of net investment
income to average net
assets
After
advisory/administration
fee waivers 0.88% 0.79% 1.09% 0.68% 0.44%
Before
advisory/administration
fee
waivers 0.88% 0.78% 1.08% 0.67% 0.35%
Portfolio turnover rate 48% 45% 66% 50% 31%
</TABLE>

-----------------------------------------------------

26
<PAGE>

BlackRock
[LOGO] Small Cap Growth Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies

In pursuit of this goal, the fund manager invests primarily in U.S. small capi-
talization growth companies (market capitalization under $2 billion) which he
believes have above-average earnings growth potential. The fund normally
invests at least 65% of its total assets in the equity securities issued by
these companies and normally invests at least 80% of its total assets in equity
securities. The fund primarily buys common stock but also can invest in pre-
ferred stock and securities convertible into common and preferred stock.

The fund may lend some of its securities on a short-term basis in order to earn
extra income. The fund will receive collateral in

IMPORTANT DEFINITIONS

27
<PAGE>

cash or high quality securities equal to the current value of the loaned secu-
rities. These loans will be limited to 33 1/3% of the value of the fund's
total assets.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

While the fund manager chooses stocks he believes to have above-average earn-
ings growth potential, there is no guarantee that the shares will increase in
value.

28
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Institutional Shares. The information shows you how the fund's per-
formance has varied year by year and provides some indication of the risks of
investing in the fund. The table compares the fund's performance to that of the
Russell 2000 Growth Index, a recognized unmanaged index of stock market perfor-
mance. As with all such investments, past performance is not an indication of
future results.

As of 12/31
- ----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- ----------------------------------------------------------------------------

Best Quarter Q4 '99: 49.35%

Worst Quarter Q1 '97: -19.45%

[BAR CHART]

94 95 96 97 98 99
----- ----- ----- ----- ----- -----
5.89 47.52 31.57 9.2 7.38 72.46

As of 12/31/99
- ----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS**
- ----------------------------------------------------------------------------

Since Inception
1 Year 3 Years 5 Years Inception Date
------ ------- ------- --------- ---------
Small Cap Growth 72.46% 26.46% 31.46% 26.13% 09/14/93
Russell 2000 Growth 43.09% 17.83% 18.99% 15.33% N/A*

* For comparative purposes, the value of the index on 09/01/93 is used as the
beginning value on 09/15/93.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

29
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

The table below describes the fees and expenses that you may pay if you buy
and hold Institutional Shares of the fund. The table is based on expenses for
the most recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory Fees .53%
Other expenses .29%
Total annual fund operating expenses .82%
Fee waivers and expense reimbursements --
Net Expenses* .82%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses
in order to limit fund expenses to .85% of average daily net assets until
February 1, 2001. The fund may have to repay some of these waivers and
reimbursements to BlackRock in the following two years. See the "Manage-
ment" section on page 77 for a discussion of these waivers and reimburse-
ments.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Institutional Shares $84 $262 $455 $1,014
</TABLE>

Fund Management

The fund is managed by a team of investment professionals at BlackRock
Financial Management, Inc. (BFM), including the following individuals who have
day-to-day responsibility: William Wykle, Managing Director of BFM since 1995,
Thomas Callan, Managing Director of BFM since 1996, and Amy Hogan, Managing
Director of BFM since August 1999. Prior to joining BFM, William Wykle served
as an investment manager for PNC Bank from 1986 to 1995, Thomas Callan served
as an equity analyst for PNC Bank from 1993 to 1996, and Amy Hogan was a
Managing Director with Columbus Circle Investors for 13 years. William Wykle
has been a portfolio co-manager since inception, Thomas Callan since May 1998
and Amy Hogan since October 1999.

30
<PAGE>

Small Cap Growth Equity Portfolio

Year Year Year Year
Year Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 17.50 $ 23.62 $ 21.94 $ 15.06 $ 10.16
---------- ---------- -------- -------- --------
Income from investment
operations
Net investment income (0.06) - - 0.02 (0.01) 0.02
Net gain (loss) on
investments (both
realized and
unrealized) 7.94 (4.98) 3.18 6.91 4.90
---------- ---------- -------- -------- --------
Total from investment
operations 7.88 (4.98) 3.20 6.90 4.92
---------- ---------- -------- -------- --------
Less distributions
Distributions from net
investment income - - - - (0.03) (0.02) (0.02)
Distributions from
capital - - (0.02) - - - - - -
Distributions from net
realized capital gains - - (1.12) (1.49) - - - -
---------- ---------- -------- -------- --------
Total distributions - - (1.14) (1.52) (0.02) (0.02)
---------- ---------- -------- -------- --------
Net asset value at end of
period $ 25.38 $ 17.50 $ 23.62 $ 21.94 $ 15.06
========== ========== ======== ======== ========
Total return 44.95% (21.93)% 15.89% 45.87% 48.50%
Ratios/Supplemental data
Net assets at end of
period (in thousands) $1,426,124 $1,022,404 $495,904 $299,563 $145,915
Ratios of expenses to
average net
assets
After
advisory/administration
fee waivers 0.82% 0.87% 0.87% 0.86% 0.75%
Before
advisory/administration
fee waivers 0.82% 0.87% 0.87% 0.88% 0.88%
Ratios of net investment
income to average net
assets
After
advisory/administration
fee waivers (0.25)% (0.13)% 0.01% (0.07)% 0.22%
Before
advisory/administration
fee waivers (0.25)% (0.13)% 0.01% (0.09)% 0.09%
Portfolio turnover rate 176% 159% 82% 89% 74%
</TABLE>

------------------------------------------------------

31
<PAGE>

BlackRock
[LOGO] International Equity
Portfolio

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Equity Security: A
security, such as
stock, representing
ownership of a compa-
ny. Bonds, in compari-
son, are referred to
as fixed income or
debt securities
because they represent
indebtedness to the
bondholders, not own-
ership.

Investment Style:
Refers to the guiding
principles of a mutual
fund's investment
choices. The invest-
ment style of this
fund is international
value, referring to
the type of securities
the managers will
choose for this fund.

Morgan Stanley Capital
International Europe,
Australia and Far East
Index (EAFE): An
unmanaged index com-
prised of a sample of
companies representa-
tive of the market
structure of the fol-
lowing European and
Pacific Basin coun-
tries: Australia, Aus-
tria, Belgium, Den-
mark, Finland, France,
Germany, Hong Kong,
Italy, Japan, Nether-
lands, New Zealand,
Norway, Singapore,
Malaysia, Spain, Swe-
den, Switzerland and
the U.K.

Value Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value," although
there are times when a
growth fund and value
fund may own the same
stock. Value stocks
are companies that
appear to the manager
to be undervalued by
the market as measured
by certain financial
formulas. Growth
stocks are companies
whose earnings growth
potential appears to
the manager to be
greater than the mar-
ket in general, and
whose growth in reve-
nue is expected to
continue for an
extended period.

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies
In pursuit of this goal, the fund manager invests primarily in stocks of for-
eign issuers located in countries included in the Morgan Stanley Capital
International Europe, Australia and Far East Index (EAFE). The fund normally
invests at least 65% of its total assets in the equity securities issued by
these companies and normally invests at least 80% of its total assets in
equity securities. The fund primarily buys common stock but also can invest in
preferred stock and securities convertible into common and preferred stock.

The fund manager uses a "value" style to select stocks which he believes are
worth more than is indicated by current market price. The manager screens for
"value" stocks by using proprietary computer models to find stocks that meet
the value stock criteria. A security's earnings trend and its price momentum
will also be factors considered in security selection. The manager will also
consider factors such as prospects for relative economic growth among certain
foreign countries, expected levels of inflation, government policies influenc-
ing business conditions and outlook for currency relationships. The manager
and his team also examine each company for financial soundness before deciding
to purchase its stock.

The manager, in an attempt to reduce portfolio risk, will diversify invest-
ments across countries, industry groups and companies with investment at all
times in at least three foreign countries. In addition, the fund can invest
more than 25% of its assets in Japanese stocks. From time to time the fund may
invest in the securities of issuers located in emerging market countries.

be to avoid market losses. However, if market conditions improve, this strategy
could result in reducing the potential gain from the market upswing, thus
reducing the fund's opportunity to achieve its investment objective. The fund
may also hold these securities pending investments or when it expects to need
cash to pay redeeming shareholders.

The fund's manager may, when consistent with the fund's investment objective,
use options or futures (commonly known as derivatives). The primary purpose of
using derivatives is to attempt to reduce risk to the fund as a whole (hedge)
but they may also be used to maintain liquidity, commit cash pending investment
or for speculation to increase returns. The fund may also use forward currency
exchange contracts (obligations to buy or sell a currency at a set rate in the
future) to hedge against movements in the value of foreign currencys.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

Because different kinds of stocks go in and out of favor depending on market
conditions, this fund's performance may be better or worse than other funds
with different investment styles.

Foreign securities involve risks not typically associated with investing in
U.S. securities. These risks include but are not limited to: currency risks
(the risk that the value of dividends or interest paid by foreign securities,
or the value of the securities themselves, may fall if currency exchange rates
change), the risk that a security's value will be hurt by changes in foreign
political or social conditions, the possibility of heavy taxation or expropria-
tion and more difficulty obtaining information on foreign securities or compa-
nies. In addition, a portfolio of foreign securities may be harder to sell and
may be subject to wider price movements than comparable investments in U.S.
companies. There is less government regulation of foreign securities markets.
33
<PAGE>

In addition, political and economic structures in emerging market countries
may be undergoing rapid change and these countries may lack the social, polit-
ical and economic stability of more developed countries. As a result some of
the risks described above, including the risks of nationalization or expropri-
ation of assets and the existence of smaller, more volatile and less regulated
markets may be increased. The value of many investments in emerging market
countries recently has dropped significantly due to economic and political
turmoil in many of these countries.

While the fund manager chooses stocks he believes to be undervalued, there is
no guarantee that prices won't move even lower.

The fund may, from time to time, invest more than 25% of its assets in securi-
ties whose issuers are located in Japan. These investments would make the fund
more dependent upon the political and economic circumstances of that country
than a mutual fund that owns stocks of companies in many countries. The Japa-
nese economy (especially Japanese banks, securities firms and insurance compa-
nies) have experienced considerable difficulty recently. In addition, the Jap-
anese Yen has gone up and down in value versus the U.S. Dollar. Japan may also
be affected by recent turmoil in other Asian countries.

The expenses of the fund can be expected to be higher than those of other
funds investing primarily in domestic securities because the costs attribut-
able to investing abroad is usually higher.

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Institutional Shares. The information shows you how the fund's per-
formance has varied year by year and provides some indication of the risks of
investing in the fund. The table compares the fund's performance to that of the
EAFE Index, a recognized unmanaged index of stock market performance. As with
all such investments, past performance is not an indication of future results.

As of 12/31
- ----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- ----------------------------------------------------------------------------

Best Quarter Q4 '99: 19.83%

Worst Quarter Q3 '98: -14.76%

[BAR CHART]

93 94 95 96 97 98 99
---- ----- ----- ----- ----- ----- -----
36.87 0.25 9.94 8.53 5.22 15.45 31.1

Since Inception
1 Year 3 Years 5 Years Inception Date
------ ------- ------- --------- ---------
International Equity 31.10% 16.78% 13.70% 13.01% 04/27/92
MSCI EAFE 27.30% 16.06% 13.15% 13.55% N/A*

* For comparative purposes, the value of the index on 05/01/92 is used as the
beginning value on 04/27/92.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.
35
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the fund. The table is based on expenses for the most
recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory fees .74%
Other expenses/1/ .29%
Total annual fund operating expenses 1.03%
Fee waivers and expense reimbursements* - -
Net expenses* 1.03%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses
in order to limit fund expenses to 1.07% of average daily net assets until
February 1, 2001. The fund may have to repay some of these waivers and
reimbursements to BlackRock in the following two years. See the "Manage-
ment" section on page 77 for a discussion of these waivers and reimburse-
ments.

/1/"Other expenses" have been restated to reflect current expenses.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Institutional Shares $105 $328 $569 $1,259
</TABLE>

Fund Management

The fund is managed by a team of professionals at BlackRock International,
Ltd. (BIL), including the following individuals who have day-to-day responsi-
bility: Peter Tait, Managing Director and Global Strategist since 1996, and
Lorna Mackay, Director and investment manager since 1996. Prior to joining
BIL, Peter Tait was the Director and Head of the Continental European Desk at
Dunedin Fund Managers Ltd from 1990-1996 and Lorna Mackay was an investment
manager on the Continental European desk at Dunedin Fund Managers from 1994 to
1996. Peter Tait has served as portfolio manager since the fund's inception
and Lorna Mackay since January 2000.
36
<PAGE>

Financial Highlights
The financial information in the table below shows
the fund's financial performance for the periods
indicated. Certain information reflects results for
a single fund share. The term "Total Return" indi-
cates how much your investment would have increased
or decreased during this period of time and assumes
that you have reinvested all dividends and distri-
butions. These figures have been audited by
PricewaterhouseCoopers LLP, the fund's independent
accountants. The auditor's report, along with the
fund's financial statements, are included in the
Company's annual report, which is available upon
request (see back cover for ordering instructions).

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Institutional Share Outstanding Throughout Each Period)

International Equity Portfolio

Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 13.23 $ 14.65 $ 13.43 $ 13.27 $ 13.44
---------- ---------- -------- -------- --------
Income from investment
operations
Net investment income 0.07 0.27 0.14 0.17 0.17
Net gain (loss) on
investments (both
realized and
unrealized) 3.57 (1.29) 1.77 0.84 0.13
---------- ---------- -------- -------- --------
Total from investment
operations 3.64 (1.02) 1.91 1.01 0.30
---------- ---------- -------- -------- --------
Less distributions
Distributions from net
investment income (0.13) (.20) (0.28) (0.18) (0.11)
Distributions from net
realized capital gains (0.80) (.20) (0.41) (0.67) (0.36)
---------- ---------- -------- -------- --------
Total distributions (0.93) (.40) (0.69) (0.85) (0.47)
---------- ---------- -------- -------- --------
Net asset value at end of
period $ 15.94 $ 13.23 $ 14.65 $ 13.43 $ 13.27
========== ========== ======== ======== ========
Total return 28.59% (7.03)% 14.88% 8.01% 2.46%
Ratios/Supplemental data
Net assets at end of
period (in thousands) $1,116,766 $1,012,132 $433,135 $388,588 $312,588
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 1.04% 1.06% 1.06% 1.06% 0.97%
Before
advisory/administration
fee waivers 1.04% 1.11% 1.16% 1.17% 1.14%
Ratios of net investment
income to average net
assets
After
advisory/administration
fee waivers 0.55% 1.00% 0.94% 0.90% 1.42%
Before
advisory/administration
fee waivers 0.55% 0.95% 0.84% 0.79% 1.24%
Portfolio turnover rate 62% 57% 62% 70% 105%
</TABLE>

-----------------------------------------------
37
<PAGE>

BlackRock
[LOGO] International Emerging Markets
Portfolio

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Emerging Market Stocks:
Stocks issued by compa-
nies located in coun-
tries with emerging
economies or securities
markets. The list of
emerging market coun-
tries includes, among
others: Argentina, Bra-
zil, Bulgaria, Chile,
China, Colombia, The
Czech Republic, Ecua-
dor, Egypt, Greece,
Hungary, India, Indone-
sia, Israel, Lebanon,
Malaysia, Mexico,
Morocco, Peru, The
Philippines, Poland,
Romania, Russia, South
Africa, South Korea,
Taiwan, Thailand, Tuni-
sia, Turkey, Venezuela,
Vietnam and Zimbabwe.

Value Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value," although there
are times when a growth
fund and value fund may
own the same stock.
Value stocks are compa-
nies that appear to the
manager to be underval-
ued by the market as
measured by certain
financial formulas.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general, and
whose growth in revenue
is expected to continue
for an extended period.

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies
In pursuit of this goal, the fund manager invests primarily in stocks of
issuers located in emerging market countries. These are countries considered
to be "emerging" or "developing" by the World Bank, the International Finance
Corporation or the United Nations. The fund normally invests at least 65% of
its total assets in the equity securities issued by these companies and nor-
mally invests at least 80% of its total assets in equity securities. The fund
primarily buys common stock but also can invest in preferred stock and securi-
ties convertible into common and preferred stock.

The fund manager uses a "value" style to select stocks which he believes are
worth more than is indicated by current market price. The manager screens for
"value" stocks by using proprietary computer models to find stocks that meet
the value stock criteria. A security's earnings trend and its price momentum
will also be factors considered in security selection. The manager will also
consider factors such as prospects for relative economic growth among certain
foreign countries, expected levels of inflation, government policies influenc-
ing business conditions and outlook for currency relationships. The manager
and his team also examine each company for financial soundness before deciding
to purchase its stock.

The fund generally will sell a stock when it reaches a target price which is
when the manager believes it is fully valued or when, in the manager's opin-
ion, conditions change such that the risk of continuing to hold the stock is
unacceptable when compared to its growth potential.

The fund's manager may, when consistent with the fund's investment objective,
use options or futures (commonly known as derivatives). The primary purpose of
using derivatives is to attempt to reduce risk to the fund as whole (hedge) but
they may also be used to maintain liquidity, commit cash pending investment or
for speculation to increase returns. The fund may also use forward foreign cur-
rency exchange contracts (obligations to buy or sell a currency at a set rate
in the future) to hedge against movements in the value of foreign currencies.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

Because different kinds of stocks go in and out of favor depending on market
conditions, this fund's performance may be better or worse than other funds
with different investment styles.

Foreign securities involve risks not typically associated with investing in
U.S. securities. These risks include but are not limited to: currency risks
(the risk that the value of dividends or interest paid by foreign securities,
or the value of the securities themselves, may fall if currency exchange rates
change), the risk that a security's value will be hurt by changes in foreign
political or social conditions, the possibility of heavy taxation or expropria-
tion and more difficulty obtaining information on foreign securities or compa-
nies. In addition, a portfolio of foreign securities may be harder to sell and
may be subject to wider price movements than comparable investments in U.S.
companies. There is less government regulation of foreign securities markets.
39
<PAGE>

While the fund manager chooses stocks he believes to be undervalued there is
no guarantee that prices won't move even lower.

The expenses of the fund can be expected to be higher than those of other
funds investing primarily in domestic securities because the costs attribut-
able to investing abroad is usually higher.

40
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Institutional Shares. The information shows you how the fund's per-
formance has varied year by year and provides some indication of the risks of
investing in the fund. The table compares the fund's performance to that of the
MSCI Emerging Market Free Index, a recognized unmanaged index of stock market
performance. As with all such investments, past performance is not an indica-
tion of future results.

As of 12/31
- -----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- -----------------------------------------------------------------------------

Best Quarter Q4 '99: 34.10%

Worst Quarter Q3 '98: -25.59%

[BAR CHART]

95 96 97 98 99
----- ----- ----- ----- -----
-12.58 12.27 -9.06 -36.63 68.74

Since Inception
1 Year 3 Years 5 Years Inception Date
------ ------- ------- --------- ---------
International Emerging 68.74% -0.93% -0.93% -2.43% 06/17/94
MSCI EMF 66.42% 3.29% 2.07% 2.50% N/A*

* For comparative purposes, the value of the index on 07/01/94 is used as the
beginning value on 06/17/94.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the fund. The table is based on expenses for the most
recent fiscal year.

41
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory Fees 1.25%
Other expenses .48%
Total annual fund operating expenses 1.73%
Fee waivers and expense reimbursements* --
Net Expenses* 1.73%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses
in order to limit fund expenses to 1.74% of average daily net assets until
February 1, 2001. The fund may have to repay some of these waivers and
reimbursements to BlackRock in the following two years. See the "Manage-
ment" section on page 77 for a discussion of these waivers and reimburse-
ments.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Institutional Shares $176 $545 $939 $2,041
</TABLE>

Fund Management

The fund is managed by a team of professionals at BlackRock International,
Ltd. (BIL), including the following individuals who have day-to-day responsi-
bility: Nigel Barry, Managing Director and portfolio manager of BlackRock
International (BIL) since 1996, and Robin Watson, Vice President and invest-
ment manager since 1999. Prior to joining BIL, Nigel Barry was Director and
head of the Pacific Basin desk at Dunedin Fund Managers Ltd., and Robin Watson
was a Latin American specialist with AIB Govett in London from 1997 to 1999.
Mr. Barry has served on the fund's management team since 1996 and has been
fund manager since April 1999, and Mr. Watson since January of 2000.
42
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Institutional Share Outstanding Throughout Each Period)

International Emerging Markets Portfolio

Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of
period $ 4.42 $ 9.69 $ 8.76 $ 8.19 $ 10.56
------- ------- -------- ------- -------
Income from investment opera-
tions
Net investment income 0.06 0.06 0.03 0.08 0.08
Net gain (loss) on investments
(both realized and
unrealized) 1.66 (5.19) 0.95 0.50 (2.15)
------- ------- -------- ------- -------
Total from investment opera-
tions 1.72 (5.13) 0.98 0.58 2.07
------- ------- -------- ------- -------
Less distributions
Distributions from net
investment income (0.05) - - (0.05) - - (0.10)
Distributions from capital - - - - - - - - (0.01)
Distributions from net
realized capital gains - - (0.14) - - (0.01) (0.19)
------- ------- -------- ------- -------
Total distributions (0.05) (0.14) (0.05) (0.01) (0.30)
------- ------- -------- ------- -------
Net asset value at end of
period $ 6.09 $ 4.42 $ 9.69 $ 8.76 $ 8.19
======= ======= ======== ======= =======
Total return 39.10% (53.59)% 11.16% 6.97% (19.72)%
Ratios/Supplemental data
Net assets at end of period
(in thousands) $65,701 $63,649 $116,107 $68,664 $29,319
Ratios of expenses to average
net assets
After advisory/administration
fee waivers 1.73% 1.76% 1.78% 1.78% 1.78%
Before advisory/administration
fee waivers 1.73% 1.86% 1.87% 1.88% 2.02%
Ratios of net investment
income to average
net assets
After advisory/administration
fee waivers 0.85% 0.95% 0.37% 0.96% 1.90%
Before advisory/administration
fee waivers 0.85% 0.85% 0.27% 0.87% 1.66%
Portfolio turnover rate 117% 37% 33% 44% 75%
</TABLE>

----------------------------------------------------

43
<PAGE>

BlackRock
[LOGO] International Small Cap Equity
Portfolio

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Emerging Market Stocks:
Stocks issued by compa-
nies located in coun-
tries with emerging
economies or securities
markets. The list of
emerging market coun-
tries includes, among
others: Argentina, Bra-
zil, Bulgaria, Chile,
China, Colombia, The
Czech Republic, Ecua-
dor, Egypt, Greece,
Hungary, India, Indone-
sia, Israel, Lebanon,
Malaysia, Mexico,
Morocco, Peru, The
Philippines, Poland,
Romania, Russia, South
Africa, South Korea,
Taiwan, Thailand, Tuni-
sia, Turkey, Venezuela,
Vietnam and Zimbabwe.

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies

In pursuit of this goal, the fund manager invests primarily in small cap
stocks (capitalization of less than $5 billion) of foreign issuers in coun-
tries included in the Salomon Brothers Extended Markets World Ex-U.S. Index.
The fund normally invests at least 65% of its total assets in the equity secu-
rities issued by these companies and normally invests at least 80% of its
total assets in equity securities. The manager may invest up to 20% of the
portfolio in stocks of issuers in emerging market countries. The fund primar-
ily buys common stock but can also invest in preferred stock and securities
convertible into common and preferred securities. From time to time the fund
may invest in shares of companies through initial public offerings (IPOs).

The fund can invest more than 25% of its assets in securities whose issuers
are located in Japan, the United Kingdom, France or Germany.

The fund generally will sell a stock when, in the fund manager's opinion,
there is a deterioration in the company's fundamentals, the company fails to
meet performance expectations or the stock's relative price momentum
declines meaningfully.

It is possible that in extreme market conditions the fund may invest some or
all of its assets in high quality money market securities. The reason for
acquiring money market securities would be to avoid market losses. However, if
market conditions improve, this strategy could result in reducing the poten-
tial gain from the market upswing, thus reducing the fund's opportunity to
achieve its investment objective. The fund may also hold these securities
pending investments or when it expects to need cash to pay redeeming share-
holders.

reduce risk to the fund as a whole (hedge) but they may also be used to main-
tain liquidity, commit cash pending investment or for speculation to increase
returns. The fund may also use forward foreign currency exchange contracts (ob-
ligations to buy or sell a currency at a set rate in the future) to hedge
against movements in the value of foreign currencies.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Because different kinds of stocks go in and out of favor depending on market
conditions, this fund's performance may be better or worse than other funds
with different investment styles.

Foreign securities involve risks not typically associated with investing in
U.S. securities. These risks include but are not limited to: currency risks
(the risk that the value of dividends or interest paid by foreign securities,
or the value of the securities themselves, may fall if currency exchange rates
change), the risk that a security's value will be hurt by changes in foreign
political or social conditions, the possibility of heavy taxation or expropria-
tion and more difficulty obtaining information on foreign securities or compa-
nies. In addition, a portfolio of foreign securities may be harder to sell and
may be subject to wider price movements than comparable investments in U.S.
companies. There is less government regulation of foreign securities markets.

In addition, political and economic structures in emerging markets countries
may be undergoing rapid change and these countries may lack the social, politi-
cal and economic stability of more

IMPORTANT DEFINITIONS

Small Capitalization
Companies: The funds
defines these companies
as those with total
market capitalization
under $5 billion. Capi-
talization refers to
the market value of the
company and is calcu-
lated by multiplying
the number of shares
outstanding by the cur-
rent price per share.

45
<PAGE>

developed countries. As a result some of the risks described above, including
the risks of nationalization or expropriation of assets and the existence of
smaller, more volatile and less regulated markets, may be increased. The value
of many investments in emerging market countries recently has dropped signifi-
cantly due to economic and political turmoil in many of these countries.

While the fund manager chooses stocks he believes have above-average earnings
growth potential, there is no guarantee that the shares will increase in value.

The fund may, from time to time, invest more than 25% of its assets in securi-
ties whose issuers are located in Japan, the United Kingdom, France or Germany.
These investments would make the fund more dependent upon the political and
economic circumstances of those countries than a mutual fund that owns stocks
of companies in many countries. For example, the Japanese economy (especially
Japanese banks, securities firms and insurance companies) have experienced con-
siderable difficulty recently. In addition, the Japanese Yen has gone up and
down in value versus the U.S. Dollar. Japan may also be affected by recent tur-
moil in other Asian countries. Similarly, the ability to concentrate in the
U.K., France and Germany may make the fund's performance more dependent on
developments affecting those countries, such as the introduction of the Euro.

46
<PAGE>

The expenses of the fund can be expected to be higher than those of other funds
investing primarily in domestic securities because the costs attributable to
investing abroad is usually higher.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Institutional Shares. The information shows you how the fund's per-
formance has varied year by year and provides some indication of the risks of
investing in the fund. The table compares the fund's performance to that of the
Salomon Brothers Extended Market World Ex-U.S. Index, a recognized unmanaged
index of stock market performance. As with all such investments, past perfor-
mance is not an indication of future results.

As of 12/31
- ----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- ----------------------------------------------------------------------------

Best Quarter Q4 '99: 81.63%

Worst Quarter Q3 '98: -19.87%

[BAR CHART]

98 99
----- ------
11.13 151.68

Since Inception
1 Year Inception Date
------ --------- ---------
International Small Cap 151.68% 53.85% 09/26/97
Salomon EMI Ex-U.S. 23.52% 10.16% N/A*

* For comparative purposes, the value of the index on 10/01/97 is used as the
beginning value on 09/26/97.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table below describes the fees and expenses that you may pay if you buy and
hold Institutional Shares of the fund. The table is based on expenses for the
most recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory Fees 1.00%
Other expenses/1/ .55%
Total annual fund operating expenses 1.55%
Fee waivers and expense reimbursements* .22%
Net Expenses* 1.33%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses in
order to limit fund expenses to 1.33% of average daily net assets until Feb-
ruary 1, 2001. The fund may have to repay some of these waivers and reim-
bursements to BlackRock in the following two years. See the "Management"
section on page 77 for a discussion of these waivers and reimbursements.

/1/"Other expenses" have been restated to reflect current expenses.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Institutional Shares $135 $468 $824 $1,827
</TABLE>

Fund Management

The fund is co-managed by William J. Wykle, Thomas Callan and Jean Rosenbaum.

William J. Wykle has been a Managing Director with BlackRock Advisors, Inc.
(BlackRock) since 1999, a Managing Director with BlackRock Financial Manage-
ment, Inc. (BFM) since 1995 and an investment manager for PNC Bank from 1986 to
1995. He has co-managed the fund since April 1999.

Jean Rosenbaum has been a Vice President with BlackRock since 2000, an equity
analyst with BFM since 1997, and served as an equity analyst with PNC Bank from
1994 to 1997. She has co-managed the fund since January 2000.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.
49
<PAGE>

Financial Highlights
The financial information in the table below shows the fund's financial perfor-
mance for the period indicated. Certain information reflects results for a sin-
gle fund share. The term "Total Return" indicates how much your investment
would have increased or decreased during this period of time and assumes that
you have reinvested all dividends and distributions. These figures have been
audited by PricewaterhouseCoopers LLP, the fund's independent accountants. The
auditor's report, along with the fund's financial statements, are included in
the Company's Fund's annual report, which is available upon request (see back
cover for ordering instructions).

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Institutional Share Outstanding Throughout Each Period)

International Small Cap Equity Portfolio

For the
Period
Year Year 9/26/97/1
Ended Ended / through
9/30/99 9/30/98 9/30/97
<S> <C> <C> <C>
Net asset value at beginning of period $ 9.56 $ 9.94 $ 10.00
------- ------- -------
Income from investment operations
Net investment income 0.03 0.07 - -
Net gain (loss) on investments (both realized
and unrealized) 4.44 (0.40) (0.06)
------- ------- -------
Total from investment operations 4.47 (0.33) (0.06)
------- ------- -------
Less distributions
Distributions from net investment income (0.02) (0.05) - -
Distributions from net realized capital gains (1.11) - - - -
------- ------- -------
Total distributions (1.13) (0.05) - -
------- ------- -------
Net asset value at end of period $ 12.90 $ 9.56 $ 9.94
======= ======= =======
Total return 51.88% (3.57)% (0.30)%
Ratios/Supplemental data
Net assets at end of period (in thousands) $23,814 $16,233 $15,415
Ratios of expenses to average net assets
After advisory/administration fee waivers 1.33% 1.32% 1.33%/2/
Before advisory/administration fee waivers 2.00% 2.17% 1.55%/2/
Ratios of net investment income to average
net assets
After advisory/administration fee waivers 0.19% 0.65% 1.42%/2/
Before advisory/administration fee waivers (0.48)% (0.20)% 1.19%/2/
Portfolio turnover rate 224% 76% 0%
</TABLE>

---------------------------------------------

/1/Commencement of operations of share class.
/2/Annualized.
50
<PAGE>

BlackRock
[LOGO] Select Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation--current income is the secondary
objective.

IMPORTANT DEFINITIONS

Market Capitalization:
Refers to the market
value of the company
and is calculated by
multiplying the number
of shares outstanding
by the current price
per share.

Value and Growth Compa-
nies: All stocks are
generally divided into
the categories of
"growth" or "value,"
although there are
times when a growth
fund and value fund may
own the same stock.
Value stocks are compa-
nies that appear to the
manager to be underval-
ued by the market as
measured by certain
financial formulas.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general, and
whose growth in revenue
is expected to continue
for an extended period.

51
<PAGE>

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

While the fund manager chooses stocks he believes to be undervalued, or which
have above average growth potential, there is no guarantee that prices will
increase in value.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Institutional Shares. The information shows you how the fund's per-
formance has varied year by year and provides some indication of the risks of
investing in the fund. The table compares the fund's performance to that of the
S&P 500 Index, a recognized unmanaged index of stock market performance. As
with all such investments, past performance is not an indication of future
results.

As of 12/31
- ----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- ----------------------------------------------------------------------------

Best Quarter Q4 '98: 20.85%

Worst Quarter Q3 '98: -11.35%

[BAR CHART]

94 95 96 97 98 99
---- ----- ----- ----- ----- -----
-1.26 33.3 23.72 31.46 24.61 20.77

Since Inception
1 Year 3 Years 5 Years Inception Date
------ ------- ------- --------- ---------
Select 20.77% 25.54% 26.68% 20.62% 09/13/93
S&P 500 21.14% 27.66% 28.66% 22.57% N/A*

* For comparative purposes, the value of the index on 09/01/93 is used as the
beginning value on 09/15/93.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.
53
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Fees
paid by the fund for
other expenses such as
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table below describes the fees and expenses that you may pay if you buy
and hold Institutional Shares of the fund. The table is based on expenses for
the most recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory fees .53%
Other expenses .27%
Total annual fund operating expenses .80%
Fee waivers and expense reimbursements --
Net expenses* .80%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses
in order to limit fund expenses to .81% of average daily net assets until
February 1, 2001. The fund may have to repay some of these waivers and
reimbursements to BlackRock in the following two years. See the "Manage-
ment" section on page 77 for a discussion of these waivers and reimburse-
ments.

Example:
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Institutional Shares $82 $255 $444 $990
</TABLE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Institutional Share Outstanding Throughout Each Period)

Select Equity Portfolio

<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95

<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 17.01 $ 17.51 $ 13.57 $ 11.88 $ 9.92
---------- ---------- -------- -------- --------
Income from investment
operations
Net investment income 0.14 0.16 0.19 0.21 0.22
Net gain on investments
(both realized and
unrealized) 4.36 0.49 5.15 2.08 2.08
---------- ---------- -------- -------- --------
Total from investment
operations 4.50 0.65 5.34 2.29 2.30
---------- ---------- -------- -------- --------
Less distributions
Distributions from net
investment income (0.13) (0.15) (0.19) (0.21) (0.22)
Distributions from net
realized capital gains (0.61) (1.00) (1.21) (0.39) (0.12)
---------- ---------- -------- -------- --------
Total distributions (0.74) (1.15) (1.40) (0.60) (0.34)
---------- ---------- -------- -------- --------
Net asset value at end of
period $ 20.77 $ 17.01 $ 17.51 $ 13.57 $ 11.88
---------- ========== ======== ======== ========
Total return 26.96% 4.07% 42.50% 19.84% 23.76%
Ratios/Supplemental data
Net assets at end of
period (in thousands) $1,443,128 $1,286,032 $379,687 $274,434 $238,813
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 0.80% 0.86% 0.79% 0.74% 0.67%
Before
advisory/administration
fee waivers 0.80% 0.86% 0.86% 0.87% 0.85%
Ratios of net investment
income to average
net assets
After
advisory/administration
fee waivers 0.67% 0.93% 1.24% 1.70% 2.35%
Before
advisory/administration
fee waivers 0.67% 0.93% 1.17% 1.58% 2.17%
Portfolio turnover rate 22% 27% 29% 55% 51%
</TABLE>
---------------------------------------------------
55
<PAGE>

BlackRock
[LOGO] Index Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies
In pursuit of this goal, the fund invests all of its assets indirectly, through
The U.S. Large Company Series (the Index Master Portfolio) of the DFA Invest-
ment Trust Company, in the stocks of the S&P 500 Index using a passive invest-
ment style that seeks to replicate the returns of the S&P 500 Index. The Index
Master Portfolio normally invests at least 95% of its total assets in substan-
tially all the stocks of the S&P 500 Index in approximately the same proportion
as they are represented in the Index.

The Index Master Portfolio may invest some of its assets (not more than 5% of
net assets) in certain short-term fixed income securities pending investments
or to pay redeeming shareholders.

The Index Master Portfolio may, to the extent consistent with its investment
objective, invest in index futures contracts and options or index futures con-
tracts, commonly known as derivatives, to commit funds pending investment or to
maintain liquidity.

Each of the Index Equity Portfolio and the Index Master Portfolio may lend some
of its securities on a short-term basis in order to earn extra income. The fund
will receive collateral in cash or high-quality securities equal to the current
value of the loaned securities. These loans will be limited to 33 1/3% of the
value of the fund's total assets.

Key Risks

Because different kinds of stocks go in and out of favor depending on market
conditions, this fund's performance may be better or worse than other funds
with different investment styles. The Index Master Portfolio is not actively
managed and poor performance of a stock will ordinarily not result in its elim-
ination from the Index Master Portfolio. The Index Master Portfolio will remain
fully invested in stocks even when stock prices are generally falling. Ordinar-
ily, portfolio securities will not be sold except to reflect additions or dele-
tions of the stocks that comprise the S&P 500 Index, including mergers, reorga-
nizations and similar transactions, and, to the extent necessary, to provide
cash to pay redeeming shareholders. The investment performance of the Index
Master Portfolio and the fund (not taking into account fund expenses) is
expected to approximate the investment performance of the S&P 500 Index, which
tends to be cyclical in nature, reflecting periods when stock prices generally
rise or fall.

The Index Master Portfolio may, to the extent consistent with its investment
objective, invest in index futures contracts and options on index futures con-
tracts, commonly known as derivatives, to commit funds pending investment or to
maintain liquidity. Such practices may reduce returns and/or increase volatili-
ty. The Index Master Portfolio can borrow money to buy additional securities.
This practice can have the effect of increasing the fund's losses or gains.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Institutional Shares. The information shows you how the fund's per-
formance has varied year by year and provides some indication of the risks of
investing in the fund. The table compares the fund's performance to that of the
S&P 500 Index, a recognized unmanaged index of stock market performance. As
with all such investments, past performance is not an indication of future
results.

As of 12/31
- ----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- ----------------------------------------------------------------------------

Best Quarter Q4 '98: 21.29%

Worst Quarter Q3 '98: -9.86%

[BAR CHART]

93 94 95 96 97 98 99
---- ---- ----- ----- ----- ----- -----
9.55 0.8 37.04 22.36 32.91 28.56 20.62

Since Inception
1 Year 3 Years 5 Years Inception Date
------ ------- ------- --------- ---------
Index 20.62% 27.26% 28.15% 19.98% 04/20/92
S&P 500 21.14% 27.66% 28.66% 20.66% N/A*

* For comparative purposes, the value of the index on 05/01/92 is used as the
beginning value on 04/20/97.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.
58
<PAGE>

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table below describes the fees and expenses that you may pay if you buy and
hold Institutional Shares of the fund. The table is based on expenses for the
most recent fiscal year.

Annual Fund Operating Expenses*
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory Fees .025%
Other expenses/1/ .305%
Total annual fund operating expenses .33%
Fee waivers and expense reimbursements** .15%
Net Expenses** .18%
</TABLE>

* The Annual Fund Operating Expenses table and the Example reflect the
expenses of both the Index Equity and Index Master Portfolios.

** BlackRock has contractually agreed to waive or reimburse fees or expenses
in order to limit fund expenses to .18% of average daily net assets until
February 1, 2001. The fund may have to repay some of these waivers and
reimbursements to BlackRock in the following two years. See the "Manage-
ment" section on page 77 for a discussion on these waivers and reimburse-
ments.

/1/"Other expenses" have been restated to reflect current expenses.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Institutional Shares $ 18 $ 91 $ 170 $403
</TABLE>

Index Master Portfolio
Dimensional Fund Advisors Inc. (DFA) serves as investment adviser to the Index
Master Portfolio. Investment decisions for the Index Master Portfolio are made
by the Investment Committee of DFA, which meets on a regular basis and also as
needed to consider investment issues. The Investment Committee is composed of
certain officers and directors of DFA who are elected annually. DFA provides
the Index Master Portfolio with a trading department and selects brokers and
dealers to effect securities transactions.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

59
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Institutional Share Outstanding Throughout Each Period)

Index Equity Portfolio

Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 19.65 $ 18.32 $ 13.97 $ 13.58 $ 10.93
-------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.27 0.24 0.04 0.30 0.38
Net realized gain on
investments (both
realized and
unrealized) 5.10 1.39 5.02 2.13 2.73
-------- -------- -------- -------- --------
Total from investment
operations 5.37 1.63 5.06 2.43 3.11
-------- -------- -------- -------- --------
Less distributions
Distributions from net
investment income (0.27) (0.26) (0.03) (0.34) (0.34)
Distributions from net
realized capital gains (0.06) (0.04) (0.68) (1.70) (0.12)
-------- -------- -------- -------- --------
Total distributions (0.33) (0.30) (0.71) (2.04) (0.46)
-------- -------- -------- -------- --------
Net asset value at end of
period $ 24.69 $ 19.65 $ 18.32 $ 13.97 $ 13.58
======== ======== ======== ======== ========
Total return 27.36% 8.91% 39.78% 19.82% 29.30%
Ratios/Supplemental data
Net assets at end of
period (in thousands) $507,841 $354,215 $166,786 $127,076 $109,433
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 0.22%/1/ 0.18%/1/ 0.18%/1/ 0.18%/1/ 0.17%
Before
advisory/administration
fee waivers 0.33%/1/ 0.34%/1/ 0.38%/1/ 0.50%/1/ 0.50%
Ratios of net investment
income to average net
assets
After
advisory/administration
fee waivers 1.14% 1.40% 1.71% 2.29% 2.92%
Before
advisory/administration
fee waivers 1.04% 1.24% 1.51% 1.98% 2.59%
Portfolio turnover rate 5%/3/ 9%/4/ 4%/5/ 18%/2/,* 18%
</TABLE>
--------------------------------------------------

/1/Including expenses allocated from the U.S. Large Company Series of The DFA
Investment Trust Company of 0.06% for the year ended 9/30/99, 0.06% for the
year ended 9/30/98, 0.07% for the year ended 9/30/97, and 0.12% for the year
ended 9/30/96.

/2/For period from October 1, 1995 through May 31, 1996.
/3/For period December 1, 1998 through September 30, 1999.

/4/For period December 1, 1997 through November 30, 1998.
/5/For period December 1, 1996 through November 30, 1997.

* See footnotes to the financial statements of The DFA Investment Trust Company
for the year ended November 30, 1996.
60
<PAGE>

BlackRock
[LOGO] Balanced
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation--current income from fixed income
securities is the secondary objective.

Primary Investment Strategies
In pursuit of this goal, the fund managers invest primarily in a blend of
equity and fixed income securities selected to deliver returns through the com-
bination of capital appreciation and current income. The equity and fixed
income managers work together to determine an appropriate asset allocation
strategy.

Equity Portion

The manager initially screens for "value" and "growth" stocks from the universe
of companies with market capitalization above $1 billion. In pursuit of this
goal, the fund manager uses the S&P 500 Index as a benchmark and seeks to
invest in stocks and market sectors in similar proportion to that index. The
manager seeks to own securities in all sectors, but can overweight or under-
weight securities within sectors as he identifies market opportunities. The
portfolio manager will adjust the blend of value/growth stocks based on eco-
nomic conditions. The fund will invest primarily in common stock but can also
invest in preferred stock and securities convertible into common and preferred
stock.

Fixed Income Portion

The fixed income portion of the fund consists of a broad range of U.S. invest-
ment grade bonds including U.S. Government bonds, mortgage-backed, asset-backed
and corporate debt securities. The fund normally will invest at least 25% of
its total assets in bonds. The fund may invest up to 10% of its total assets in
bonds of foreign issuers. The fixed income team seeks bonds that will add value
while controlling risk.

IMPORTANT DEFINITIONS

Asset-Backed Securi-
ties: Bonds that are
backed by a pool of
assets, usually loans
such as installment
sale contracts or
credit card receiv-
ables.

Investment Style:
Refers to the guiding
principle of a mutual
fund's investment
choices. The investment
style of this fund is
balanced, meaning that
the managers will
choose both equity and
fixed income securities
for this fund.

61
<PAGE>

IMPORTANT DEFINITIONS

Value and Growth Compa-
nies: All stocks are
generally divided into
the categories of
"growth" or "value,"
although there are
times when a "growth
fund" and a "value
fund" may own the same
stock. Value stocks are
companies which appear
to the manager to be
undervalued by the mar-
ket as measured by cer-
tain financial formu-
las. Growth stocks are
companies whose earn-
ings growth potential
appears to the manager
to be greater than the
market in general, and
whose growth in revenue
is expected to continue
for an extended period.

It is possible that in extreme market conditions the fund may invest some or
all of its assets in high quality money market securities. The reason for
acquiring money market securities would be to avoid market losses. However, if
market conditions improve, this strategy could result in reducing the poten-
tial gain from the market upswing, thus reducing the fund's opportunity to
achieve its investment objective. The fund may hold these securities pending
investments or when it expects to need cash to pay redeeming shareholders. The
fund also may invest in money market securities in order to achieve its
investment objective.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks
The value of your investment can go up or down depending upon market condi-
tions, which means you could lose money.

The main risk of any investment in stocks is that values fluctuate in price.

Because market conditions can vary, this fund's performance may be better or
worse than other funds with different investment styles. For example, in some
markets a fund holding exclu-
62
<PAGE>

sively equity or fixed income securities may outperform this fund.

While the fund manager chooses stocks with a focus on attempting to minimize
risk and chooses bonds of investment grade quality, there is no guarantee that
prices won't move lower.

The fund may invest up to 10% of its total assets in bonds of foreign issuers.
Foreign securities involve risks not typically associated with investing in
U.S. securities. These risks include but are not limited to: currency risks
(the risk that the value of interest paid on foreign securities, or the value
of the securities themselves, may fall if currency exchange rates change), the
risk that a security's value will be hurt by changes in foreign political or
social conditions, the possibility of heavy taxation or expropriation and more
difficulty obtaining information on foreign securities or companies. In addi-
tion, a portfolio of foreign securities may be harder to sell and may be sub-
ject to wider price movements than comparable investments in U.S. companies.
There is also less regulation of foreign securities markets.

On January 1, 1999, eleven European countries implemented a new currency unit
called the "Euro" which is expected to reshape financial markets, banking sys-
tems and monetary policies in Europe and other parts of the world. While it is
impossible to predict the impact of the "Euro," it is possible that it could
increase volatility in financial markets world wide which could hurt the value
of shares of the fund.

Securities rated in the fourth highest category by the rating agencies are con-
sidered investment grade but they are also considered speculative, meaning that
they carry more risk than higher rated securities and may have problems making
principal and interest payments in difficult economic climates. Investment
grade ratings do not guarantee that bonds will not lose value.

short-term capital gain or loss. Unlike long-term capital gain, short-term cap-
ital gain of individuals is taxable at the same rates as ordinary income.

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Institutional Shares. The chart shows you how the fund's performance
has varied year by year and provides some indication of the risks of investing
in the fund. The table compares the fund's performance to that of both the S&P
500 Index and a customized weighted index comprised of the returns of the S&P
500 Index (65%) and the Lehman Aggregate Index (35%), recognized unmanaged
indices of stock and bond market performance, respectively. As with all such
investments, past performance is not an indication of future results.

The performance for the period before Institutional Shares were launched in May
1992 is based upon performance for Investor A Shares of the fund, which were
first issued in May 1990.

As of 12/31
- ----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- ----------------------------------------------------------------------------

Best Quarter Q4 '98: 13.31%

Worst Quarter Q3 '98: -4.71%

The bars for 1991 and 1992 are based upon performance for Investor A Shares of
the Fund.

[BAR CHART]

91 92 93 94 95 96 97 98 99
----- ----- ----- ---- ----- ----- ----- ----- -----
22.45 11.82 11.83 -3.15 27.72 15.5 23.82 21.98 11.02

Since Inception
1 Year 3 Years 5 Years Inception Date
------ ------- ------- --------- ---------
Balanced 11.02% 18.80% 19.85% 14.43% 05/14/90
S&P 500 21.14% 27.66% 28.66% 19.63% N/A*
65% S&P 500/ 35% Leh. Ag. 13.16% 19.92% 21.20% 15.70% N/A*

* For comparative purposes, the values of the indexes on 05/01/90 are used as
the beginning values on 05/14/90.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.
64
<PAGE>

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table below describes the fees and expenses that you may pay if you buy and
hold Institutional Shares of the fund. The table is based on expenses for the
most recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory fees .55%
Other expenses/1/ .30%
Total annual fund operating expenses .85%
Fee waivers and expense reimbursements --
Net expenses* .85%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses in
order to limit fund expenses to .86% of average daily net assets until Feb-
ruary 1, 2001. The fund may have to repay some of these waivers and reim-
bursements to BlackRock in the following two years. See the "Management"
section on page 77 for a discussion of these waivers and reimbursements.

/1/"Other expenses" have been restated to reflect current expenses.

Example:
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Institutional Shares $87 $271 $471 $1,049
</TABLE>

Fund Management
The portfolio manager for the equity portion of the fund is R. Andrew Damm, who
has served as Managing Director with BlackRock Financial Management, Inc. since
1997 and senior investment manager with BlackRock Advisors, Inc. since 1995.
Mr. Damm was a Portfolio Manager for PNC Bank from 1988 to 1995. He has been
co-manager of the fund since 1996.

The co-managers for the fixed-income portion of the fund are Robert S. Kapito,
who is Vice Chairman of BlackRock Financial Management, Inc. since 1988 and who
has served as co-manager of the fund since 1995 and Keith T. Anderson, who has
been a Managing Director at BlackRock Financial Management, Inc. since 1988. He
has served as co-manager of the fund since 1995.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
fees paid by the fund
for other expenses such
as administration,
transfer agency, custo-
dy, professional fees
and registration fees.

65
<PAGE>

Balanced Portfolio

Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of
period $ 18.35 $ 18.22 $ 15.10 $ 13.73 $ 11.98
-------- -------- ------- ------- -------
Income from investment
operations
Net investment income 0.49 0.38 0.52 0.46 0.46
Net realized gain on
investments
(both realized and unrealized) 2.18 1.43 3.62 1.49 1.90
-------- -------- ------- ------- -------
Total from investment
operations 2.67 1.81 4.14 1.95 2.36
-------- -------- ------- ------- -------
Less distributions
Distributions from net
investment income (0.48) (0.43) (0.50) (0.45) (0.47)
Distributions from net realized
capital gains (0.79) (1.25) (0.52) (0.13) (0.14)
-------- -------- ------- ------- -------
Total distributions (1.27) (1.68) (1.02) (0.58) (0.61)
-------- -------- ------- ------- -------
Net asset value at end of period $ 19.75 $ 18.35 $ 18.22 $ 15.10 $ 13.73
======== ======== ======= ======= =======
Total return 14.81% 10.82% 28.43% 14.43% 20.32%
Ratios/Supplemental data
Net assets at end of period (in
thousands) $414,057 $374,899 $31,674 $37,567 $24,525
Ratios of expenses to average
net assets
After advisory/administration
fee waivers 0.86% 0.90% 0.84% 0.79% 0.67%
Before advisory/administration
fee waivers 0.86% 0.90% 0.89% 0.90% 0.88%
Ratios of net investment income
to average
net assets
After advisory/administration
fee waivers 2.44% 2.48% 2.98% 3.16% 3.78%
Before advisory/administration
fee waivers 2.44% 2.48% 2.92% 3.06% 3.56%
Portfolio turnover rate 122% 134% 173% 275% 154%
</TABLE>

---------------------------------------------------
66
<PAGE>

BlackRock
[LOGO] Micro-Cap Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies

The fund manager may, when consistent with the fund's investment objective, use
options or futures (commonly known as derivatives). The primary purpose of
using derivatives is to attempt to

IMPORTANT DEFINITIONS

Growth Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value,"although there
are times when a growth
fund and value fund may
own the same stock.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general and
whose revenue growth is
expected to continue
for an extended period.
These stocks typically
pay relatively low div-
idend yields and sell
at relatively high
prices in relation to
their earnings and book
value. Value stocks are
companies that appear
to the manager to be
undervalued by the mar-
ket as measured by cer-
tain financial formu-
las.

67
<PAGE>

IMPORTANT DEFINITIONS

Micro-Cap Companies:
This asset class con-
tains the smallest cap-
italized companies. The
fund defines a "micro-
cap" company as one
with total capitaliza-
tion of $25 million to
$500 million.

reduce risk to the fund as a whole (hedge) but they may also be used to main-
tain liquidity, commit cash pending investment or for speculation to increase
returns.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

Because different kinds of stocks go in and out of favor depending on market
conditions, this fund's performance may be better or worse than other funds
with different investment styles.

68
<PAGE>

While the fund manager chooses stocks he believes to have above average earn-
ings growth potential, there is no guarantee that the shares will increase in
value.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Institutional Shares. The information shows you how the fund's per-
formance has varied year by year and provides some indication of the risks of
investing in the fund. The table compares the fund's performance to that of the
Wilshire Microcap Index, a recognized unmanaged index of stock market perfor-
mance. As with all such investments, past performance is not an indication of
future results.

As of 12/31
- ----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS*
- ----------------------------------------------------------------------------

Best Quarter Q4 '99: 69.41%

Worst Quarter Q3 '99: 18.04%

[BAR CHART]

99
------
221.54

As of 12/31/99
- ----------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS*
- ----------------------------------------------------------------------------

Since Inception
1 Year Inception Date
------- --------- ---------
Micro-Cap 221.54% 135.80% 05/01/98
Wilshire Quantum Micro Cap 40.86% 9.05% N/A

* The chart and the table both assume reinvestment of dividends and distribu-
tions.

One factor impacting the fund's total return to date was its investments in
IPOs and companies that had recently gone public. There is no assurance that
the fund's investments in IPOs or newly-public companies will have the same
impact on performance in the future as they did in the past.
70
<PAGE>

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table below describes the fees and expenses that you may pay if you buy and
hold Institutional Shares of the fund. The table is based on expenses for the
most recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory fees 1.10%
Other expenses/1/ .35%
Total annual fund operating expenses 1.45%
Fee waivers and expense reimbursements* --
Net expenses* 1.45%

* BlackRock has contractually agreed to waive or reimburse fees or expenses in
order to limit fund expenses to 1.48% of average daily net assets until Feb-
ruary 1, 2001. The fund may have to repay some of these waivers and reim-
bursements to BlackRock in the following two years. See the "Management"
section on page 77 for a discussion of these waivers and reimbursements.

</TABLE>

/1/"Other expenses" have been restated to reflect current expenses.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Institutional Shares $148 $459 $792 $1,735
</TABLE>

Fund Management

The fund is managed by a team of investment professionals at BlackRock Finan-
cial Management, Inc. (BFM), including the following individuals who have day-
to-day responsibility: William Wykle, Managing Director of BFM since 1995,
Thomas Callan, Managing Director of BFM since 1996, and Michael Carey, a Vice
President since 2000 and an equity analyst at BFM since 1996. Prior to joining
BFM, William Wykle served as an investment manager for PNC Bank from 1986 to
1995, Thomas Callan served as an equity analyst for PNC Bank from 1993 to 1996,
and Michael Carey was a fixed income analyst for PNC Bank from 1993 to 1996.
William Wykle and Thomas Callan have been portfolio co-managers since incep-
tion, and Michael Carey since October 1999.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
fees paid by the fund
for other expenses such
as administration,
transfer agency, custo-
dy, professional fees
and registration fees.

71
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For an Institutional Share Outstanding Throughout Each Period)

Micro-Cap Equity Portfolio

For the
Period
Year 5/1/98/1/
Ended through
9/30/99 9/30/98
<S> <C> <C>
Net asset value at beginning of
period $ 9.38 $10.00
------- ------
Income from investment operations
Net investment income (0.06) (0.01)
Net gain (loss) on investments (both
realized and unrealized) 15.41 (0.61)
------- ------
Total from investment operations 15.35 (0.62)
------- ------
Less distributions
Distributions from net investment
income - - - -
Distributions from net realized
capital gains - - - -
------- ------
Total distributions - - - -
------- ------
Net asset value at end of period $ 24.73 $ 9.38
======= ======
Total return 163.37% (6.10)%
Ratios/Supplemental data
Net assets at end of period (in
thousands) $28,106 $1,302
Ratios of expenses to average net
assets
After advisory/administration fee
waivers 1.43% 1.40%/2/
Before advisory/administration fee
waivers 1.65% 2.73%/2/
Ratios of net investment income to
average net assets
After advisory/administration fee
waivers (0.72)% (0.33)%/2/
Before advisory/administration fee
waivers (0.94)% (1.66)%/2/
Portfolio turnover rate 346% 119%
</TABLE>

----------------------------------------------

/1/Commencement of operations of share class.
/2/Annualized.

72
<PAGE>

About Your Investment
[LOGO]

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Buying Shares

Institutional Shares are offered to:

.Institutional investors
.Trust departments of PNC Bank and its affiliates on behalf of clients for
whom the bank:
.acts in a fiduciary capacity (excluding participant-directed employee ben-
efit plans)
.otherwise has investment discretion or
.acts as custodian for at least $2 million in assets
.Individuals with a minimum investment of $2 million

Purchase orders may be placed through PFPC, the Company's transfer agent by
telephoning (800) 441-7450.

- --------------------------------------------------------------------------------

What Price Per Share Will You Pay?

73
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

time) each day the NYSE is open. Shares will not be priced on days the NYSE is
closed. Purchase orders received after the close of trading will be priced
based on the next calculation of NAV. Foreign securities and certain other
securities held by a fund may trade on days when the NYSE is closed. In these
cases, net asset value of shares may change when fund shares cannot be bought
or sold.

- --------------------------------------------------------------------------------
Paying for Shares

Payment for Institutional Shares must normally be made in Federal funds or other
funds immediately available by 4 p.m. (Eastern time) on the first business day
following PFPC's receipt of the order. Payment may also, at the discretion of
the Company, be made in the form of securities that are permissible investments
for the respective fund.

- --------------------------------------------------------------------------------
How Much is the Minimum Investment?

The minimum investment for the initial purchase of Institutional Shares is:

.$5,000 for institutions
.$500,000 for registered investment advisers
.$2 million for individuals

There is no minimum requirement for later investments. The fund does not accept
third party checks as payment for shares.

The fund may reject any purchase order, modify or waive the minimum initial or
subsequent investment requirements and suspend and resume the sale of any share
class of the fund at any time.

- --------------------------------------------------------------------------------
Master-Feeder Structure

The Index Equity Portfolio, unlike many other investment companies which
directly acquire and manage their own portfolio of securities, invests all of
its assets in the Index Master Portfolio. The Index Equity Portfolio may with-
draw its investment in the Index Master Portfolio at any time on 30 days notice
to the Index Master Portfolio if the Board of Trustees of the Company deter-
mines that it is in the best interest of the Index Equity Portfolio to do so.
Upon withdrawal, the Board of Trustees would consider what action to take. It
might, for exam-

74
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

ple, invest all the assets of the Index Equity Portfolio in another mutual fund
having the same investment objective as the Index Equity Portfolio or hire an
investment adviser to manage the Index Equity Portfolio's assets.

- --------------------------------------------------------------------------------

Selling Shares

Shareholders may place redemption orders by telephoning PFPC at (800) 441-7450.
Shares are redeemed at their net asset value per share next determined after
PFPC's receipt of the redemption order. The fund, the administrators and the
distributor will employ reasonable procedures to confirm that instructions com-
municated by telephone are genuine. The fund and its service providers will not
be liable for any loss; liability, cost or expense for acting upon telephone
instructions that are reasonably believed to be genuine in accordance with such
procedures.

Payment for redeemed shares for which a redemption order is received by PFPC
before 4 p.m. (Eastern time) on a business day is normally made in Federal
funds wired to the redeeming shareholder on the next business day, provided
that the funds' custodian is also open for business. Payment for redemption
orders received after 4 p.m. (Eastern time) or on a day when the funds' custo-
dian is closed is normally wired in Federal funds on the next business day fol-
lowing redemption on which the funds' custodian is open for business. The funds
reserve the right to wire redemption proceeds within seven days after receiving
a redemption order if, in the judgement of BlackRock Advisors, Inc., an earlier
payment could adversely affect a fund. No charge for wiring redemption payments
is imposed by the Company.

During periods of substantial economic market change telephone redemptions may
be difficult to complete. Redemption requests may also be mailed to PFPC at
P.O. Box 8950, Wilmington, DE 19899-8950.

The Company may refuse a telephone redemption request if it believes it is
advisable to do so.

75
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

net asset value as the shares converted. If, at the time of conversion, an
institution offering Service Shares of the fund is acting on the shareholder's
behalf, then the shareholder's Institutional Shares will be converted to Serv-
ice Shares. If not, then the shareholder's Institutional Shares will be con-
verted to Investor A Shares. Service Shares are currently authorized to bear
additional service and processing fees at the total annual rate of .30% of
average daily net assets, while Investor A Shares are currently authorized to
bear additional service, processing and distribution fees at the total annual
rate of .50% of average daily net assets.

- -------------------------------------------------------------------------------
The Company's Rights

The Company may:

.Suspend the right of redemption if trading is halted or restricted on the
NYSE or under other emergency conditions

.Postpone date of payment upon redemption if trading is halted or restricted
on the NYSE or under other emergency conditions or as described in the sec-
tion "Selling Shares" above

.Redeem shares involuntarily in certain cases, such as when the value of a
shareholder account falls below a specified level, as described below

.Redeem shares for property other than cash if conditions exist which make
cash payments undesirable

in accordance with its rights under the Investment Company Act of 1940.

- -------------------------------------------------------------------------------
Accounts with Low Balances

The Company may redeem a shareholder's account in any fund at any time the net
asset value of the account in such fund falls below $5,000 as the result of a
redemption. The shareholder will be notified in writing that the value of the
account is less than the required amount and the shareholder will be allowed
30 days to make additional investments before the redemption is processed.

- -------------------------------------------------------------------------------

Market Timing

The funds are not designed for market timing organizations or other entities
using programmed or frequent purchases or redemptions. The Company reserves
the right to reject any specific purchase order, including an order made by a
market timer.

76
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Management

BlackRock Funds' Adviser is BlackRock Advisors, Inc. (BlackRock). BlackRock was
organized in 1994 to perform advisory services for investment companies and is
located at 345 Park Avenue, New York, NY 10154. BlackRock is a wholly-owned
subsidiary of BlackRock, Inc., one of the largest publicly traded investment
management firms in the United States with $164.5 billion of assets under man-
agement as of December 31, 1999. BlackRock, Inc. is a majority-owned subsidiary
of PNC Bank Corp., one of the largest diversified financial services companies
in the United States. BlackRock Financial Management, Inc. (BFM), an affiliate
of BlackRock located at 345 Park Avenue, New York, New York 10154, acts as sub-
adviser to the Company, as does BlackRock International, Ltd. (BIL), an affili-
ate of BlackRock located at 7 Castle Street, Edinburgh, Scotland EH2 3AH. The
only fund not managed by BlackRock is the Index Equity Portfolio, which invests
all of its assets in the Index Master Portfolio. The Index Master Portfolio is
advised by Dimensional Fund Advisors Inc. (DFA), located at 1299 Ocean Avenue,
11th Floor, Santa Monica, CA 90401. DFA was organized in May 1981 and provides
investment management services to institutional investors. As of November 30,
1999, DFA had over $31 billion in assets under management.

For the fiscal year ended November 30, 1999, the Index Master Portfolio paid
DFA an aggregate advisory fee of .025% of average daily net assets.

77
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Adviser: The Adviser of
a mutual fund is
responsible for the
overall investment man-
agement of the Fund.
The Adviser for Black-
Rock Funds is BlackRock
Advisors, Inc.

The maximum annual advisory fees that can be paid to BlackRock (as a percentage
of average daily net assets) are as follows:

<TABLE>
<CAPTION>
AVERAGE DAILY NET INVESTMENT
ASSETS ADVISORY FEE
<S> <C>
First $1 billion .550%
$1 billion-$2 billion .500%
$2 billion-$3 billion .475%
more than $3 billion .450%
</TABLE>

Maximum Annual Contractual Advisory Fee Rate for the Mid-Cap Value Equity and
Mid-Cap Growth Equity Portfolios (Before Waivers)
<TABLE>
<CAPTION>
AVERAGE DAILY NET INVESTMENT
ASSETS ADVISORY FEE
<S> <C>
First $1 billion .800%
$1 billion-$2 billion .700%
$2 billion-$3 billion .675%
more than $3 billion .625%
</TABLE>

Maximum Annual Contractual Advisory Fee Rate for the International Equity
Portfolio (Before Waivers)

<TABLE>
<CAPTION>
AVERAGE DAILY NET INVESTMENT
ASSETS ADVISORY FEE
<S> <C>
First $1 billion .750%
$1 billion-$2 billion .700%
$2 billion-$3 billion .675%
more than $3 billion .650%
</TABLE>

Maximum Annual Contractual Advisory Fee Rate for the International Emerging
Markets Portfolio (Before Waivers)

<TABLE>
<CAPTION>
AVERAGE DAILY NET INVESTMENT
ASSETS ADVISORY FEE
<S> <C>
First $1 billion 1.250%
$1 billion-$2 billion 1.200%
$2 billion-$3 billion 1.155%
more than $3 billion 1.100%
</TABLE>

78
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Maximum Annual Contractual Advisory Fee Rate for the International Small Cap
Equity Portfolio (Before Waivers)

<TABLE>
<CAPTION>
AVERAGE DAILY NET INVESTMENT
ASSETS ADVISORY FEE
<S> <C>
First $1 billion 1.00%
$1 billion-$2 billion .950%
$2 billion-$3 billion .900%
more than $3 billion .850%

Maximum Annual Contractual Advisory Fee Rate for the Micro-Cap Equity Portfolio
(Before Waivers)

<CAPTION>
AVERAGE DAILY NET INVESTMENT
ASSETS ADVISORY FEE
<S> <C>
First $1 billion 1.10%
$1 billion-$2 billion 1.05%
$2 billion-$3 billion 1.025%
more than $3 billion 1.00%
</TABLE>

The Index Master Portfolio pays DFA a maximum annual advisory fee of .025% of
its average daily net assets.

Information about the portfolio manager for each of the funds is presented in
the appropriate fund section.

As discussed above, BlackRock has agreed to cap each fund's net expenses at the
levels shown in that fund's expense table.

79
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Dividends and Distributions

BlackRock Funds makes two kinds of distributions to shareholders: dividends and
net capital gain.

Dividends are the net investment income derived by a fund and are paid within
10 days after the end of each quarter. The Company's Board of Trustees may
change the timing of dividend payments.

Net capital gain occurs when the fund manager sells securities at a profit. Net
capital gain (if any) is distributed to shareholders at least annually at a
date determined by the Company's Board of Trustees.

80
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

lio's distributive share of such items, plus gain, if any, on the redemption of
shares of the Index Master Portfolio, less the Index Equity Portfolio's
expenses incurred in operations, will constitute the Index Equity Portfolio's
net income from which dividends are distributed as described above.

- --------------------------------------------------------------------------------

Taxation of Distributions

Distributions paid out of a fund's "net capital gain" will be taxed to share-
holders as long-term capital gain regardless of how long a shareholder has
owned shares. All other distributions will be taxed to shareholders as ordinary
income.

Your annual tax statement from the Company will present in detail the tax sta-
tus of your distributions for each year.
If more than half of the total asset value of a fund is invested in foreign
stock or securities, the fund may elect to "pass through" to its shareholders
the amount of foreign taxes paid. In such case each shareholder would be
required to include his proportionate share of such taxes in his income and may
be entitled to deduct or credit such taxes in computing his taxable income.

Distributions paid by a fund with respect to certain qualifying dividends
received by the Fund from domestic corporations may be eligible for the corpo-
rate dividends received deduction.

81
<PAGE>

For more information:
This prospectus contains important information you should know before you
invest. Read it carefully and keep it for future reference. More information
about the BlackRock Funds is available free, upon request, including:

Annual/Semi-Annual Reports
These reports contain additional information about each of the fund's
investments. The annual report describes the funds' performance, lists portfolio
holdings and discusses recent market conditions, economic trends and fund
investment that significantly affected each of the fund's performance strategies
during the last fiscal year.

Statement of Additional Information (SAI)
A Statement of Additional Information dated January 28, 2000 has been filed with
the Securities and Exchange Commission (SEC). The SAI, which includes additional
information about the BlackRock Funds, may be obtained free of charge, along
with the Company's annual and semi-annual reports, by calling (800) 441-7450.
The SAI, as supplemented from time to time, is incorporated by reference into
this Prospectus.

Shareholder Account Service Representatives
Representatives are available to discuss account balance information, mutual
fund prospectuses, literature, programs and services available. Hours: 8:30 a.m.
to 5:30 p.m. (Eastern time), Monday-Friday. Call: (800) 441-7450

Purchases and Redemptions
Call your registered representative or (800) 441-7450.

Email
Request prospectuses, SAI, Annual or Semi-Annual Reports and literature. Forward
mutual fund inquiries. Available 24 hours a day, 7 days a week.
Mail to: [email protected]

Written Correspondence
Post Office Address: BlackRock Funds c/o PFPC Inc., P.O. Box 8950, Wilmington,
DE 19899-8950 Street Address: BlackRock Funds, c/o PFPC Inc., 400 Bellevue
Parkway, Wilmington, DE 19809

Internal Wholesalers/Broker Dealer Support
Available to support investment professionals 9 a.m. to 6 p.m. (Eastern time),
Monday-Friday. Call (888) 8BLACKROCK

Securities and Exchange Commission (SEC)
You may also view and copy information about the BlackRock Funds, including the
SAI, by visiting the EDGAR database on the SEC Web site (http://www.sec.gov) or
the SEC's Public Reference Room in Washington, D.C. Information about the
operation of the public reference room can be obtained by calling the SEC
directly at 1-202-942-8090. Copies of this information can be obtained, for a
duplicating fee, by electronic request at the following E-mail address:
[email protected], or by writing to the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.

INVESTMENT COMPANY ACT FILE NO. 811-05742

[GRAPHIC]

[LOGO] BLACKROCK
FUNDS

<PAGE>

[GRAPHIC]

NOT FDIC- || May lose value
INSURED || No bank guarantee

Equity Portfolios
==========================
S E R V I C E S H A R E S

BlackRock Funds/SM/ is a mutual fund family with 36 investment portfolios, 13 of
which are described in this prospectus.

P R O S P E C T U S

January 28, 2000

[LOGO] BLACKROCK
FUNDS

Table of
Contents

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

How to find the information you need

About Your Investment

<TABLE>
<S> <C>
How to Buy/Sell Shares..................................................... 73
Dividends/Distributions/Taxes.............................................. 83
</TABLE>
<PAGE>

How to Find the
Information You Need
About BlackRock Funds

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

1
<PAGE>

BlackRock
[LOGO] Large Cap Value Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Large Capitalization
Companies: The fund
defines these companies
as these with capital-
ization of over $10
billion. Capitalization
refers to the market
value of the company
and is calculated by
multiplying the number
of shares outstanding
by the current price
per share. Larger com-
panies may be more
likely to have the
staying power to get
them through all eco-
nomic cycles; however,
their size may also
make them less flexible
and innovative than
smaller companies.

Value Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value," although there
are times when a growth
fund and value fund may
own the same stock.
Value stocks are compa-
nies that appear to the
manager to be underval-
ued by the market as
measured by certain
financial formulas.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general, and
whose growth in revenue
is expected to continue
for an extended period.

Investment Goal
The fund seeks long-term capital appreciation--current income is the secondary
objective.

2
<PAGE>

used to maintain liquidity, commit cash pending investment or for speculation
to increase returns.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

While the fund manager chooses stocks he believes to be undervalued, there is
no guarantee that prices won't move even lower.

3
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Service Shares. The information shows you how the fund's performance
has varied year by year and provides some indication of the risks of investing
in the fund. The table compares the fund's performance to that of the Russell
1000 Value Index, a recognized unmanaged index of stock market performance. As
with all such investments, past performance is not an indication of future
results.

The performance for the period before Service Shares were launched in July 1993
is based upon performance for Institutional Shares of the fund, which were
first issued in April 1992. The actual return of Service Shares would have been
lower than shown because Service Shares have higher expenses than Institutional
Shares.

As of 12/31
- ----------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- ----------------------------------------------------------------------------

Best Quarter Q4 '98: 16.00%

Worst Quarter Q3 '98: -14.21%

The bar for 1993 is based upon performance for Institutional Shares of the fund.

[BAR CHART]

93 94 95 96 97 98 99
----- ----- ----- ----- ----- ----- -----
17.89 0.85 34.5 23.77 28.31 10.23 3.39

Since Inception
1 Year 3 Years 5 Years Inception Date
------ ------- ------- --------- ---------
Large Cap Value 3.39% 13.50% 19.48% 15.47% 04/20/92
Russell 1000 Value 7.35% 18.83% 23.07% 17.87% N/A*

* For comparative purposes, the value of the index on 05/01/92 is used as the
beginning value on 04/20/92.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.
4
<PAGE>

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table below describes the fees and expenses that you may pay if you buy and
hold Service Shares of the fund. The table is based on expenses for the most
recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory fees .51%
Distribution and service (12b-1) fees .30%
Other expenses/1/ .26%
Total annual fund operating expenses 1.07%
Fee waivers and expense reimbursements --
Net expenses* 1.07%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses in
order to limit fund expenses to 1.09% of average daily net assets until
February 1, 2001. The fund may have to repay some of these waivers and
reimbursements to BlackRock in the following two years. See the "Management"
section on page 79 for a discussion of these waivers and reimbursements.

/1/"Other expenses" have been restated to reflect current expenses.

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years

<S> <C> <C> <C> <C>
Service Shares $109 $340 $590 $1,306
</TABLE>

Expenses and Fees

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and/or its affiliates
for shareholder account
service and mainte-
nance.

5
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For a Service Share Outstanding Throughout Each Period)

Large Cap Value Equity Portfolio

Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value at beginning
of period $ 14.69 $ 17.52 $ 15.35 $ 13.92 $ 11.62
-------- -------- -------- -------- --------
Income from investment
operations
Net investment income 0.16 0.21 0.24 0.32 0.30
Net gain (loss) on investments
(both realized and unrealized) 2.02 (0.61) 4.70 2.40 2.55
-------- -------- -------- -------- --------
Total from investment
operations 2.18 (0.40) 4.94 2.72 2.85
-------- -------- -------- -------- --------
Less distributions
Distributions from net
investment income (0.17) (0.18) (0.25) (0.32) (0.30)
Distributions from net
realized capital gains (0.95) (2.25) (2.52) (0.97) (0.25)
-------- -------- -------- -------- --------
Total distributions (1.12) (2.43) (2.77) (1.29) (0.55)
-------- -------- -------- -------- --------
Net asset value at end of
period $ 15.75 $ 14.69 $ 17.52 $ 15.35 $ 13.92
======== ======== ======== ======== ========
Total return 15.03% (2.50)% 37.22% 20.68% 25.40%
Ratios/Supplemental data
Net assets at end of period
(in thousands) $374,907 $387,323 $595,189 $457,283 $170,832
Ratios of expenses to average
net assets
After advisory/administration
fee waivers 1.08% 1.13% 1.09% 1.05% 0.95%
Before
advisory/administration fee
waivers 1.08% 1.14% 1.16% 1.14% 1.09%
Ratios of net investment
income to average net assets
After advisory/administration
fee waivers 1.07% 1.14% 1.62% 2.13% 2.40%
Before
advisory/administration fee
waivers 1.07% 1.13% 1.55% 2.04% 2.26%
Portfolio turnover rate 42% 33% 37% 60% 12%
</TABLE>
-----------------------------------------
6
<PAGE>

BlackRock
[LOGO] Large Cap Growth Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation.

IMPORTANT DEFINITIONS

7
<PAGE>

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

While the fund manager chooses stocks he believes have above-average earnings
growth potential, there is no guarantee that the shares will increase in
value.

8
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Service Shares. The information shows you how the fund's performance
has varied year by year and provides some indication of the risks of investing
in the fund. The table compares the fund's performance to that of the Russell
1000 Growth Index, a recognized unmanaged index of stock market performance. As
with all such investments, past performance is not an indication of future
results.

The performance for the period before Service Shares were launched in July 1993
is based upon performance for Institutional Shares of the fund, which were
first issued in November 1989. The actual return of Service Shares would have
been lower than shown because Service Shares have higher expenses than Institu-
tional Shares.

As of 12/31
- ------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS*
- ------------------------------------------------------------------------------

Best Quarter Q4 '99: 27.18%

Worst Quarter Q3 '98: -10.04%

The bars for 1990-1993 are based upon performance for Institutional Shares of
the fund.

[BAR CHART]

90 91 92 93 94 95 96 97 98 99
---- ----- ----- ----- ----- ----- ----- ----- ----- -----
-2.05 26.01 -1.00 13.65 -10.33 34.12 20.03 28.08 40.9 36.09

Since Inception
1 Year 3 Years 5 Years 10 Years Inception Date
------ ------- ------- -------- --------- --------
Large Cap Growth 36.09% 34.92% 31.64% 17.28% 17.88% 11/01/89
Russell 1000 Growth 33.16% 34.08% 32.42% 20.32% 20.48% 11/01/89

* The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.
9
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and /or its affiliates
for shareholder account
service and mainte-
nance.

The table below describes the fees and expenses that you may pay if you buy
and hold Service Shares of the fund. The table is based on expenses for the
most recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory fees .53%
Distribution and service (12b-1) fees .30%
Other expenses .28%
Total annual fund operating expenses 1.11%
Fee waivers and expense reimbursements --
Net expenses* 1.11%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses
in order to limit fund expenses to 1.12% of average daily net assets until
February 1, 2001. The fund may have to repay some of these waivers and
reimbursements to BlackRock in the following two years. See the "Manage-
ment" section on page 79 for a discussion of these waivers and reimburse-
ments.

Example:
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Service Shares $113 $353 $612 $1,352
</TABLE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For a Service Share Outstanding Throughout Each Period)

Large Cap Growth Equity Portfolio

<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value at beginning
of period $ 18.11 $ 18.93 $ 14.95 $ 13.02 $ 10.18
-------- -------- -------- -------- -------
Income from investment
operations
Net investment income (0.07) (0.03) 0.04 0.05 0.10
Net gain (loss) on
investments
(both realized and
unrealized) 6.06 1.85 4.72 2.28 2.87
-------- -------- -------- -------- -------
Total from investment
operations 5.99 1.82 4.76 2.33 2.97
-------- -------- -------- -------- -------
Less distributions
Distributions from net
investment income - - - - (0.04) (0.02) (0.13)
Distributions from net
realized capital gains (1.63) (2.64) (0.74) (0.38) - -
-------- -------- -------- -------- -------
Total distributions (1.63) (2.64) (0.78) (0.40) (0.13)
-------- -------- -------- -------- -------
Net asset value at end of
period $ 22.47 $ 18.11 $ 18.93 $ 14.95 $ 13.02
======== ======== ======== ======== =======
Total return 35.10% 11.33% 33.38% 18.34% 29.43%
Ratios/Supplemental data
Net assets at end of period
(in thousands) $248,901 $187,738 $262,409 $191,023 $76,769
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 1.11% 1.16% 1.10% 1.05% 0.95%
Before
advisory/administration
fee waivers 1.11% 1.16% 1.17% 1.17% 1.13%
Ratios of net investment
income to average net
assets
After
advisory/administration
fee waivers (0.31)% (0.13)% 0.24% 0.31% 0.91%
Before
advisory/administration
fee waivers (0.31)% (0.13)% 0.17% 0.20% 0.73%
Portfolio turnover rate 60% 54 % 81% 58% 55%
</TABLE>
-----------------------------------------------
11
<PAGE>

BlackRock
[LOGO] Mid-Cap Value Equity Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Value Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value," although there
are times when a growth
fund and value fund may
own the same stock.
Value stocks are compa-
nies that appear to the
manager to be underval-
ued by the market as
measured by certain
financial formulas.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general, and
whose growth in revenue
is expected to continue
for an extended period.

Investment Goal
The fund seeks long-term capital appreciation--current income is the secondary
objective.

Primary Investment Strategies

12
<PAGE>

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

While the fund manager chooses stocks he believes to be undervalued, there is
no guarantee that prices won't move even lower.

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Service Shares. The information shows you how the fund's performance
has varied year by year and provides some indication of the risks of investing
in the fund. The table compares the fund's performance to that of the Russell
Mid Cap Value Index, a recognized unmanaged index of stock market performance.
As with all such investments, past performance is not an indication of future
results.

As of 12/31
- ------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- ------------------------------------------------------------------------------

Best Quarter Q4 '98: 13.55%

Worst Quarter Q3 '98: -17.38%

[BAR CHART]

97 98 99
----- ----- -----
28.19 -1.81 0.88

Since Inception
1 Year 3 Years Inception Date
------ ------- --------- ---------
Mid Cap Value 0.88% 8.29% 8.25% 12/27/96
Russell Mid Cap Value -0.11% 12.15% 12.15% N/A*

* For comparative purposes, the value of the index on 01/01/97 is used as the
beginning value on 12/27/96.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

14
<PAGE>

The table below describes the fees and expenses that you may pay if you buy and
hold Service Shares of the fund. The table is based on expenses for the most
recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory Fees .80%
Distribution and service (12b-1) fees .30%
Other expenses .32%
Total annual fund operating expenses 1.42%
Fee waivers and expense reimbursements* - -
Net Expenses* 1.42%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses in
order to limit fund expenses to 1.47% of average daily net assets until Feb-
ruary 1, 2001. The fund may have to repay some of these waivers and reim-
bursements to BlackRock in the following two years. See the "Management"
section on page 79 for a discussion of these waivers and reimbursements.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years

<S> <C> <C> <C> <C>
Service Shares $145 $449 $776 $1,702
</TABLE>

Fund Management
The fund is co-managed by Christian K. Stadlinger and Daniel B. Eagan.

Daniel B. Eagan has been co-manager of the fund since inception. Mr. Eagan has
been a Managing Director with BFM since 1995. Mr. Eagan was a director of
investment strategy at BlackRock Advisors, Inc. during 1994-1995. Previously,
he served as senior research consultant for Mercer Investment Consulting.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and /or its affiliates
for shareholder account
service and
maintenance.

15
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For a Service Share Outstanding Throughout Each Period)

Mid-Cap Value Equity Portfolio

<TABLE>
<CAPTION>
For the
Period
Year Year 12/27/96/1/
Ended Ended through
9/30/99 9/30/98 9/30/97
<S> <C> <C> <C>
Net asset value at
beginning of period $ 10.62 $ 12.79 $ 10.00
------- ------- -------
Income from investment
operations
Net investment income 0.07 0.08 0.07
Net gain (loss) on
investments
(both realized and
unrealized) 0.73 (1.82) 2.80
------- ------- -------
Total from investment
operations 0.80 (1.74) 2.87
------- ------- -------
Less distributions
Distributions from net
investment income (0.08) (0.07) (0.08)
Distributions from net
realized capital gains - - (0.36) - -
------- ------- -------
Total distributions (0.08) (0.43) (0.08)
------- ------- -------
Net asset value at end of
period $ 11.34 $ 10.62 $ 12.79
======= ======= =======
Total return 7.29% (13.94)% 28.81%
Ratios/Supplemental data
Net assets at end of
period (in thousands) $40,852 $28,879 $22,757
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 1.42% 1.44% 1.44%/2/
Before
advisory/administration
fee waivers 1.42% 1.50% 1.48%/2/
Ratios of net investment
income to average net
assets
After
advisory/administration
fee waivers 0.58% 0.60% 0.98%/2/
Before
advisory/administration
fee waivers 0.58% 0.54% 0.94%/2/
Portfolio turnover rate 88% 71% 36%
</TABLE>
------------------------------------------------------
/1/Commencement of operations of share class.
/2/Annualized.

16
<PAGE>

BlackRock
[LOGO] Mid-Cap Growth Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies

IMPORTANT DEFINITIONS

Growth Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value," although there
are times when a growth
fund and value fund may
own the same stock.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general and
whose revenue growth is
expected to continue
for an extended period.
These stocks typically
pay relatively low div-
idends and sell at rel-
atively high
prices.Value stocks are
companies that appear
to the manager to be
undervalued by the mar-
ket as measured by cer-
tain financial
formulas.

17
<PAGE>

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

There is more business risk in investing in mid-capitalization companies than
in larger, better capitalized companies. These organizations will normally
have more limited product lines, markets and financial resources and will be
dependent upon a more limited management group than larger capitalized compa-
nies.

While the fund manager chooses stocks he believes to have above-average earn-
ings growth potential, there is no guarantee that the shares will increase in
value.

18
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Service Shares. The information shows you how the fund's performance
has varied year by year and provides some indication of the risks of investing
in the fund. The table compares the fund's performance to that of the Russell
Mid Cap Growth Index, a recognized unmanaged index of stock market performance.
As with all such investments, past performance is not an indication of future
results.

As of 12/31
- ------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- ------------------------------------------------------------------------------

Best Quarter Q4 '99: 61.38%

Worst Quarter Q3 '98: -14.66%

[BAR CHART]

97 98 99
----- ----- -----
14.35 21.97 120.42
As of 12/31/99
- ------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS**
- ------------------------------------------------------------------------------

Since Inception
1 Year 3 Years Inception Date
------- ------- --------- ---------
Mid Cap Growth 120.42% 45.40% 45.38% 12/27/96
Russell Mid Cap Growth 51.30% 29.77% 29.77% N/A*

* For comparative purposes, the value of the index on 01/01/97 is used as the
beginning value on 12/27/96.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.
19
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and /or its affiliates
for shareholder account
service and mainte-
nance.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table describes the fees and expenses that you may pay if you buy and hold
Service Shares of the fund. The table is based on expenses for the most recent
fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory fees .80%
Distribution and service (12b-1) fees .30%
Other expenses/1/ .31%
Total annual fund operating expenses 1.41%
Fee waivers and expense reimbursements* --
Net expenses* 1.41%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses
in order to limit fund expenses to 1.47% of average daily net assets until
February 1, 2001. The fund may have to repay some of these waivers and
reimbursements to BlackRock in the following two years. See the
"Management" section on page 79 for a discussion of these waivers and
reimbursements.

/1/"Other expenses" have been restated to reflect current expenses.

Example:

This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years

<S> <C> <C> <C> <C>
Service Shares $144 $446 $771 $1,691
</TABLE>

Fund Management

20
<PAGE>

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For a Service Share Outstanding Throughout Each Period)

Mid-Cap Growth Equity Portfolio

<TABLE>
<CAPTION>
For the
Period
Year Year 12/27/96/1/
Ended Ended through
9/30/99 9/30/98 9/30/97
<S> <C> <C> <C>
Net asset value at beginning
of period $ 11.06 $ 12.17 $ 10.00
------- ------- -------
Income from investment
operations
Net investment income (0.13) (0.09) (0.03)
Net gain (loss) on
investments
(both realized and
unrealized) 8.03 (0.92) 2.20
------- ------- -------
Total from investment
operations 7.90 (1.01) 2.17
------- ------- -------
Less distributions
Distributions from net
investment income - - - - - -
Distributions from capital - - (0.01) - -
Distributions from net
realized capital gains - - (0.09) - -
------- ------- -------
Total distributions - - (0.10) - -
------- ------- -------
Net asset value at end of
period $18.96 $ 11.06 $ 12.17
======= ======= =======
Total return 71.43% (8.32)% 21.70%
Ratios/Supplemental data
Net assets at end of period
(in thousands) $46,639 $28,601 $22,984
Ratios of expenses to average
net assets
After advisory/administration
fee waivers 1.41% 1.44% 1.44%/2/
Before
advisory/administration fee
waivers 1.42% 1.50% 1.48%/2/
Ratios of net investment
income to average net assets
After advisory/administration
fee waivers (0.78)% (0.68)% (0.54)%/2/
Before
advisory/administration fee
waivers (0.79)% (0.74)% (0.58)%/2/
Portfolio turnover rate 318% 204% 64%
</TABLE>
------------------------------------------------------
/1/Commencement of operations of share class.
/2/Annualized.
21
<PAGE>

BlackRock
[LOGO] Small Cap Value Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

IMPORTANT DEFINITIONS

Value Companies: All
stocks are generally
divided into the cate-
gories of "growth" or
"value," although there
are times when a growth
fund and value fund may
own the same stock.
Value stocks are compa-
nies that appear to the
manager to be underval-
ued by the market as
measured by certain
financial formulas.
Growth stocks are com-
panies whose earnings
growth potential
appears to the manager
to be greater than the
market in general, and
whose growth in revenue
is expected to continue
for an extended period.

Investment Goal
The fund seeks long-term capital appreciation.

22
<PAGE>

The fund may lend some of its securities on a short-term basis in order to earn
extra income. The fund will receive collateral in cash or high quality securi-
ties equal to the current value of the loan securities. These loans will be
limited to 33 1/3% of the value of the fund's total assets.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks
Key Risks
The main risk of any investment in stocks is that values fluctuate in price.
The value of your investment can go up or down depending upon market condi-
tions, which means you could lose money.

While the fund manager chooses stocks he believes to be undervalued, there is
no guarantee that prices won't move even lower.

Higher than normal portfolio turnover may result in increased transaction costs
to the fund, including brokerage commissions, dealer mark-ups and other
transaction costs on the sale of the securities and on reinvestment in other
securities. The sale of fund securities may result in the recognition of
capital gain or loss. Given the frequency of sales, such gain or loss will
likely be short-term capital gain or loss. Unlike long-term capital gain,
short-term capital gain of individuals is taxable at the same rates as ordinary
income.
23
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Service Shares. The information shows you how the fund's performance
has varied year by year and provides some indication of the risks of investing
in the fund. The table compares the fund's performance to that of the Russell
2000 Value Index, a recognized unmanaged index of stock market performance. As
with all such investments, past performance is not an indication of future
results.

As of 12/31
- ------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- ------------------------------------------------------------------------------

Best Quarter Q2 '97: 18.44%

Worst Quarter Q3 '98: -19.56%

The bar for 1993 is based upon performance for Institutional Shares of the fund.

[BAR CHART]

93 94 95 96 97 98 99
----- ----- ----- ----- ----- ----- -----
18.57 -0.64 22.74 19.56 35.21 -6.50 -5.15

Since Inception
1 Year 3 Years 5 Years Inception Date
------ ------- ------- --------- ---------
Small Cap Value -5.15% 6.24% 11.97% 12.14% 04/13/92
Russell 2000 Value -1.49% 6.69% 13.13% 13.11% N/A*

* For comparative purposes, the value of the index on 04/01/92 is used as the
beginning value on 04/13/92.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

24
<PAGE>

Expenses
and Fees

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

The table describes the fees and expenses that you may pay if you buy and hold
Service Shares of the fund. The table is based on expenses for the most recent
fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory fees .55%
Distribution and service (12b-1) fees .30%
Other expenses .31%
Total annual fund operating expenses 1.16%
Fee waivers and expense reimbursements --
Net expenses* 1.16%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses in
order to limit fund expenses to 1.18% of average daily net assets until Feb-
ruary 1, 2001. The fund may have to repay some of these waivers and reim-
bursements to BlackRock in the following two years. See the "Management"
section on page 79 for a discussion of these waivers and reimbursements.

Example:
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Service Shares $118 $368 $638 $1,409
</TABLE>

Fund Management
The manager of the fund is Christian K. Stadlinger. He has been a Managing
Director with BlackRock Financial Management, Inc. (BFM) since July 1996. Prior
to joining BFM, he was portfolio manager and Research Analyst with Morgan Stan-
ley Asset Management. He has headed the fund's portfolio management team since
1996.

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and/or its affiliates
for shareholder account
service and mainte-
nance.

25
<PAGE>

Financial Highlights
The financial information in the table below shows
the fund's financial performance for the periods
indicated. Certain information reflects results for
a single fund share. The term "Total Return" indi-
cates how much your investment would have increased
or decreased during this period of time and assumes
that you have reinvested all dividends and distri-
butions. These figures have been audited by
PricewaterhouseCoopers LLP, the fund's independent
accountants. The auditor's report, along with the
fund's financial statements, are included in the
Company's annual report, which is available upon
request (see back cover for ordering instructions).

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(For a Service Share Outstanding Throughout Each Period)

Small Cap Value Equity Portfolio

Year Year Year Year Year
Ended Ended ended ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of
period $ 14.88 $ 20.20 $ 15.98 $ 15.15 $ 13.59
------- ------- -------- ------- -------
Income from investment
operations
Net investment income 0.07 0.09 0.13 0.06 0.02
Net gain (loss) on investments
(both realized and unrealized) 0.68 (3.21) 6.39 1.70 2.18
------- ------- -------- ------- -------
Total from investment
operations 0.75 (3.12) 6.52 1.76 2.20
------- ------- -------- ------- -------
Less distributions
Distributions from net
investment income (0.10) (0.08) (0.13) (0.06) (0.03)
Distributions in excess of net
investment income (0.15) - - - - - - - -
Distributions from net realized
capital gains (0.67) (2.12) (2.17) (0.87) (0.61)
------- ------- -------- ------- -------
Total distributions (0.92) (2.20) (2.30) (0.93) (0.64)
------- ------- -------- ------- -------
Net asset value at end of period $ 14.71 $ 14.88 $ 20.20 $ 15.98 $ 15.15
======= ======= ======== ======= =======
Total return 4.88% (17.33)% 46.95% 12.30% 17.17%
Ratios/Supplemental data
Net assets at end of period (in
thousands) $66,728 $77,893 $122,431 $80,981 $61,313
Ratios of expenses to average
net assets
After advisory/administration
fee waivers 1.16% 1.17% 1.17% 1.15% 1.02%
Before advisory/administration
fee waivers 1.16% 1.18% 1.18% 1.16% 1.12%
Ratios of net investment income
to average net assets
After advisory/administration
fee waivers 0.58% 0.44% 0.79% 0.38% 0.16%
Before advisory/administration
fee waivers 0.58% 0.43% 0.78% 0.37% 0.07%
Portfolio turnover rate 48% 45% 66% 50% 31%
</TABLE>
-----------------------------------------------
26
<PAGE>

BlackRock
[LOGO] Small Cap Growth Equity
Portfolio

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

Investment Goal
The fund seeks long-term capital appreciation.

Primary Investment Strategies

The fund may lend some of its securities on a short-term basis in order to earn
extra income. The fund will receive collateral in cash or high quality securi-
ties equal to the current value of the

IMPORTANT DEFINITIONS

27
<PAGE>

loaned securities. These loans will be limited to 33 1/3% of the value of the
fund's total assets.

The fund may engage in active and frequent trading of portfolio securities to
achieve its principal investment strategies.

Should the Company's Board of Trustees determine that the investment objective
of the fund should be changed, shareholders will be given at least 30 days
notice before any such change is made.

Key Risks

While the fund manager chooses stocks he believes to have above-average earn-
ings growth potential, there is no guarantee that the shares will increase in
value.

28
<PAGE>

When you invest in this fund you are not making a bank deposit. Your investment
is not insured or guaranteed by the Federal Deposit Insurance Corporation or by
any bank or governmental agency.

Risk / Return Information

The chart and table below give you a picture of the fund's long-term perfor-
mance for Service Shares. The information shows you how the fund's performance
has varied year by year and provides some indication of the risks of investing
in the fund. The table compares the fund's performance to that of the Russell
2000 Growth Index, a recognized unmanaged index of stock market performance. As
with all such investments, past performance is not an indication of future
results.

As of 12/31
- ------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS**
- ------------------------------------------------------------------------------

Best Quarter Q4 '99: 49.25%

Worst Quarter Q3 '97: -19.52%

[BAR CHART]

94 95 96 97 98 99
----- ----- ----- ----- ----- -----
5.61 46.65 31.4 8.79 6.76 72.01

Since Inception
1 Year 3 Years 5 Years Inception Date
------ ------- ------- --------- ---------
Small Cap Growth 72.01% 25.95% 30.95% 25.68% 09/14/93
Russell 2000 Growth 43.09% 17.83% 18.99% 15.33% N/A*

* For comparative purposes, the value of the index on 09/01/93 is used as the
beginning value on 09/15/95.

** The chart and the table both assume reinvestment of dividends and distribu-
tions.

Expenses and Fees

As a shareholder you pay certain fees and expenses. Annual fund operating
expenses are paid out of fund assets.

29
<PAGE>

IMPORTANT DEFINITIONS

Advisory Fees: Fees
paid to the investment
adviser for portfolio
management services.

Other Expenses: Include
administration, trans-
fer agency, custody,
professional fees and
registration fees.

Service Fees: Fees that
are paid to BlackRock
and /or its affiliates
for shareholder account
service and mainte-
nance.

The table below describes the fees and expenses that you may pay if you buy
and hold Service Shares of the fund. The table is based on expenses for the
most recent fiscal year.

Annual Fund Operating Expenses
(Expenses that are deducted from fund assets)

<TABLE>
<S> <C>
Advisory fees .53%
Distribution and service (12b-1) fees .30%
Other expenses .29%
Total annual fund operating expenses 1.12%
Fee waivers and expense reimbursements --
Net expenses* 1.12%
</TABLE>

* BlackRock has contractually agreed to waive or reimburse fees or expenses
in order to limit fund expenses to 1.15% of average daily net assets until
February 1, 2001. The fund may have to repay some of these waivers and
reimbursements to BlackRock in the following two years. See the
"Management" section on page 79 for a discussion of these waivers and
reimbursements.

Example:
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. We are assuming an initial
investment of $10,000, 5% total return each year with no changes in operating
expenses and redemption at the end of each time period. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Service Shares $114 $356 $617 $1,363
</TABLE>

Fund Management

30
<PAGE>

Small Cap Growth Equity Portfolio

Year Year Year Year Year
Ended Ended Ended Ended Ended
9/30/99 9/30/98 9/30/97 9/30/96 9/30/95
<S> <C> <C> <C> <C> <C>
Net asset value at
beginning of period $ 17.24 $ 23.43 $ 21.80 $ 15.02 $ 10.14
-------- -------- -------- -------- -------
Income from investment
operations
Net investment income (0.13) (0.14) (0.03) (0.06) (0.01)
Net gain (loss) on
investments (both
realized and
unrealized) 7.82 (4.91) 3.15 6.84 4.89
-------- -------- -------- -------- -------
Total from investment
operations 7.69 (5.05) 3.12 6.78 4.88
-------- -------- -------- -------- -------
Less distributions
Distributions from
capital - - (0.02)
Distributions from net
realized capital gains - - (1.12) (1.49) - - - -
-------- -------- -------- -------- -------
Total distributions - - (1.14) (1.49) - - - -
-------- -------- -------- -------- -------
Net asset value at end of
period $ 24.93 $ 17.24 $ 23.43 $ 21.80 $ 15.02
======== ======== ======== ======== =======
Total return 44.52% (22.40)% 15.54% 45.14% 48.13%
Ratios/Supplemental data
Net assets at end of
period (in thousands) $170,900 $141,470 $225,089 $158,901 $62,604
Ratios of expenses to
average net assets
After
advisory/administration
fee waivers 1.12% 1.17% 1.17% 1.16% 1.03%
Before
advisory/administration
fee waivers 1.12% 1.17% 1.17% 1.18% 1.16%
Ratios of net investment
income to average net
assets
After
advisory/administration
fee waivers (0.55)% (0.46)% (0.29)% (0.38)% (0.07)%
Before
advisory/administration
fee waivers (0.55)% (0.46)% (0.29)% (0.40)% (0.20)%
Portfolio turnover rate 176% 159% 82% 89% 74%
</TABLE>
----------------------------------------------