THE BLACKROCK FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
--------------------------------------------------
SEMI-ANNUAL REPORT TO SHAREHOLDERS
MARCH 31, 2000
(UNAUDITED)
<PAGE>
BLACKROCK MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
TOTAL ASSETS (3/31/00): $54.5 million
PERFORMANCE BENCHMARK: Salomon Broad Investment Grade Index
INVESTMENT APPROACH: Seeks to provide a total rate of return before fees and
expenses over rolling twelve-month periods that exceeds
the total return of the Salomon Broad Investment Grade
Index over the same periods by at least 1.60% on an
annualized basis.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
o Treasury yields on the short end of the curve continue to be pressured by
three quarter-point increases to the discount rate by the Federal Reserve and
uncertainty of future Fed action, while long-term yields decreased in reaction
to the Treasury's announcement to repurchase up to $30 billion in securities.
The Federal Reserve remains biased toward tighter monetary policy due to
concerns about robust demand and higher inflation in the economy. For the
period, the yield of the 10-year Treasury rose 0.14% from 5.88% on September
30, 1999 to 6.02% on March 31, 2000.
o The Portfolio maintained an overweight position versus the Index in the
commercial mortgage-backed security (CMBS) sector, as the Manager believed
this sector offers attractive yields and total return opportunities relative
to Treasuries. Strong performance within the sector continues to be driven by
a diminished supply and growing demand as ERISA eligible CMBS entered the
Lehman Aggregate Index. We anticipate light supply in the sector during the
second half of 2000.
o Within the commercial mortgage-backed sector the Manager emphasized high
quality liquid names as lower rated commercial mortgage-backed securities
offered little incremental return given the relatively flat credit curve.
Although the portfolio holdings and sectors listed above were current as of the
end of the semi-annual period ended March 31, 2000, the Portfolio is actively
managed and the composition will vary.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III AND THE SALOMON BROAD
INVESTMENT GRADE INDEX FROM INCEPTION AT EACH QUARTER END.
[GRAPHIC OMITTED]
Salomon Broad Investment
Multi Sector III Grade Index
10/6/94 $10,000 $10,000
Dec-94 10,078 10,101
Mar-95 10,608 10,612
Jun-95 11,278 11,263
Sep-95 11,328 11,477
Dec-95 11,806 11,975
Mar-96 11,853 11,766
Jun-96 11,737 11,823
Sep-96 11,991 12,043
Dec-96 12,777 12,407
Mar-97 12,821 12,342
Jun-97 13,082 12,787
Sep-97 13,538 13,212
Dec-97 13,933 13,601
Mar-98 14,186 13,821
Jun-98 14,452 14,141
Sep-98 14,762 14,727
Dec-98 15,041 14,787
Mar-99 14,911 14,719
Jun-99 15,065 14,582
Sep-99 14,851 14,688
Dec-99 14,863 14,663
Mar-00 15,324 14,985
Performance as of 3/31/00
--------------------------------------------------------------------------------
MULTI SECTOR III - AVERAGE ANNUAL RETURN
1 Yr 3 Yr From Inception
3.219% 6.810% 8.029%
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
<PAGE>
THE BLACKROCK FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
STATEMENT OF NET ASSETS (UNAUDITED)
MARCH 31, 2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
PAR
RATINGS** (000) DESCRIPTION MATURITY VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S GOVERNMENT OBLIGATIONS 23.2%
U.S. TREASURY BONDS,
$1,300 7.50% Series 1986 11/15/16 $1,472,465
950 8.50% # Series 1990 2/15/20 1,198,105
U.S. TREASURY NOTES,
8,560 5.88% Series 1999 11/15/04 8,408,193
1,600 6.50% Series 2000 2/28/02 1,599,553
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(COST $12,557,112) 12,678,316
-----------
COMMERCIAL MORTGAGE - BACKED SECURITIES 51.7%
CHASE COMMERCIAL MORTGAGE SECURITIES CORP.,
BBB- 1,000 6.60% Series 1997-2, Class E 12/19/29 876,510
AAA 784 7.03% Series 1999-2, Class A1 10/15/08 769,713
COMM,
AAA 65 6.46% Series 1999-1, Class A2 9/15/08 60,408
COMMERCIAL MORTGAGE ACCEPTANCE CORP.,
BB+ 2,000 5.44% ***Series 1998-C2, Class F 5/15/13 1,283,204
COMMERCIAL MORTGAGE ASSET TRUST,
AAA 1,000 6.59% Series 1999-C1, Class A2 7/17/08 942,410
AAA 976 7.29% Series 1999-C2, Class A1 12/17/07 966,466
DONALDSON, LUFKIN & JENRETTE COMMERCIAL MORTGAGE CORP.,
BBB- 1,500 7.06% ***Series 1998-CF2, Class B2 11/12/31 1,356,690
FDIC REAL ESTATE MORTGAGE INSURANCE CORP. TRUST,
AAA 989 8.45% Series 1994-C1, Class 2C 9/25/25 986,291
BBB 500 7.25% Series 1996-C1, Class 1D 5/25/26 476,702
FIRST BOSTON MORTGAGE SECURITIES CORP.,
AAA 2,846 6.75% Series 1993-M1, Class 1A 9/25/06 2,817,690
GENERAL MOTORS ACCEPTANCE CORP. COMMERCIAL MORTGAGE SECURITIES, INC.,
BBB- 2,000 7.22% Series 1997-C1, Class F 11/15/11 1,779,240
JP MORGAN COMMERCIAL MORTGAGE FINANCE CORP.,
AAA 750 6.61% Series 1998-C6, Class A3 1/15/30 708,848
AAA 1,000 7.45% Series 1999-C8, Class B 7/15/31 986,210
LEHMAN BROTHERS COMMERCIAL CONDUIT MORTGAGE TRUST,
BBB 2,000 7.13% ***Series 1995-C2, Class D 5/25/05 1,913,234
AAA 1,841 7.47% ***Series 1996-C2, Class A 10/25/26 1,831,853
AAA 1,350 6.40% Series 1998-C1, Class A2 8/18/07 1,288,670
MORGAN STANLEY CAPITAL INVESTMENTS, INC.,
AAA 2,320 7.27% Series 1997-HF1, Class A2 1/15/07 2,282,718
AAA 2,000 6.52% Series 1998-HF1, Class A2 1/15/08 1,880,760
AAA 2,000 6.48% Series 1998-HF2, Class A2 11/15/30 1,865,600
PRUDENTIAL SECURITIES SECURED FINANCING CORP.,
BBB- 1,232 7.29% ***Series 1998-C1, Class E 1/15/13 1,096,591
SOUTHERN PACIFIC THRIFT AND LOAN ASSOCIATION,
A+ 1,000 7.63% ***Series 1996-C1, Class D 4/25/28 1,004,687
STRUCTURED ASSET SECURITIES CORP.,
A+ 1,000 7.38% Series 1995-C1, Class D 9/25/24 993,795
-----------
TOTAL COMMERCIAL MORTGAGE - BACKED SECURITIES
(COST $28,988,900) $28,168,290
-----------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
THE BLACKROCK FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
STATEMENT OF NET ASSETS (UNAUDITED) (CONTINUED)
MARCH 31, 2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
PAR
RATINGS** (000) DESCRIPTION MATURITY VALUE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT - TERM INVESTMENTS 24.7%
FEDERAL HOME LOAN BANK DISCOUNT NOTES
$13,500 6.05% 4/3/00 $13,495,463
-----------
(COST $13,495,463)
TOTAL INVESTMENTS IN SECURITIES
(COST $55,041,475*) 99.6% 54,342,069
OTHER ASSETS IN EXCESS OF LIABILITIES 0.4% 200,959
--------------------
NET ASSETS (APPLICABLE TO 60,449.41
INSTITUTIONAL SHARES OUTSTANDING 100.0% ,543,028
====================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($54,543,028 / 60,449.41) $902.29
===========
------------------------------------------------------------------------------------------------------
<FN>
* Also cost for Federal income tax purposes. The gross unrealized appreciation (depreciation)
on a tax basis is as follows:
Gross unrealized appreciation $270,451
Gross unrealized depreciation (969,857)
-----------
($699,406)
===========
** Using the higher of Standard & Poor's, Moody's or Fitch's rating.
*** Rates shown are the rates as of March 31, 2000.
# Principal amount of securities pledged as collateral of
$300,000 on 70 long U.S. Treasury Bonds futures contracts
and 32 long U.S. Treasury Notes futures contracts expiring
June 2000. The value of such contracts on March 31, 2000
was $13,173,125, thereby resulting in an unrealized gain of
$212,783.
</FN>
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
THE BLACKROCK FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
For the Six
Months Ended
03/31/00
-----------
Investment Income: (Unaudited)
Interest $1,973,839
----------
Expenses:
Investment advisory fee 66,463
Administration fee 61,146
Custodian fee 9,066
Transfer agent fee 8,017
Legal and audit 1,965
Printing 2,490
Trustees fees and officer's salary 442
Other 825
----------
Total expenses 150,414
Less fees waived (52,050)
----------
Total expenses 98,364
----------
Net investment income 1,875,475
----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) from:
Investment transactions (1,357,651)
Futures contracts 48,796
----------
(1,308,855)
----------
Change in unrealized appreciation from:
Investments 924,690
Futures contracts 199,901
----------
1,124,591
----------
Net loss on investments (184,264)
----------
Net increase in net assets resulting from operations $1,691,211
==========
--------------------------------------------------------------------------------
See accompanying notes to finacial statements.
4
<PAGE>
THE BLACKROCK FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (decrease) in net assets: 03/31/00 09/30/99
------------ ------------
(Unaudited)
<S> <C> <C>
Operations:
Net investment income $1,875,475 $3,647,108
Net realized loss on investments and futures transactions (1,308,855) (258,705)
Net unrealized appreciation (depreciation) on investments and
futures transactions 1,124,591 (3,061,699)
----------- -----------
Net increase in net assets resulting from operations 1,691,211 326,704
----------- -----------
Distributions to shareholders from:
Net investment income (1,875,475) (3,647,108)
Net realized gains -- (4,419,435)
----------- -----------
(1,875,475) (8,066,543)
----------- -----------
Capital share transactions:
Proceeds from shares sold -- 6,000,000
Net asset value of shares issued in reinvestment
of dividends 1,871,979 7,994,700
Net asset value of shares redeemed -- --
----------- -----------
1,871,979 13,994,700
----------- -----------
Total increase in net assets 1,687,715 6,254,861
----------- -----------
Net Assets:
Beginning of period 52,855,313 46,600,452
----------- -----------
End of period $54,543,028 $52,855,313
=========== ===========
</TABLE>
--------------------------------------------------------------------------------
See accompanying notes to finacial statements.
5
<PAGE>
THE BLACKROCK FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: For the Six For the Year For the Year For the Year
Months Ended Ended Ended Ended
3/31/00 9/30/99 9/30/98 9/30/97
------------ ---------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period $905.73 $1,056.37 $1,056.37 $1,016.08
------- --------- --------- ---------
Net investment income 31.49 66.88 74.41 73.74
Net realized and unrealized gain (loss) on investments (3.44) (63.20) 15.26 49.82
------- --------- --------- ---------
Net increase from investment operations 28.05 3.68 89.67 123.56
------- --------- --------- ---------
Distributions from net investment income (31.49) (66.88) (74.41) (73.74)
Distributions from net realized capital gains -- (87.44) (15.26) (9.53)
----------- -----------
Total dividends and distributions (31.49) (154.32) (89.67) (83.27)
------- --------- --------- ---------
Net asset value, end of period $902.29 $905.73 $1,056.37 $1,056.37
======= ========= ========= =========
TOTAL RETURN 3.59% 0.51% 9.06% 12.67%
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $54,543 $52,855 $46,600 $121,251
Ratio of expenses to average net assets 0.37%(b) 0.37% 0.37% 0.37%
Ratio of expenses to average net assets (excluding waivers) 0.57%(b) 0.57%(b) 0.61% 0.62%
Ratio of net investment income to average net assets 7.13%(b) 7.00% 7.28% 7.13%
Ratio of net investment income to average net assets (excluding waivers) 6.93% 6.80% 7.04% 6.88%
Portfolio turnover rate 54% 76% 11% 52%
For the Period
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: the Period For the Period 10/6/94(a)
4/1/96 through 7/1/95 through through
9/30/96 3/31/96 6/30/95
---------- -------------- -------------
<S> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period $1,019.41 $1,068.11 $1,000.00
--------- --------- ---------
Net investment income 38.33 61.37 55.81
Net realized and unrealized gain (loss) on investments (3.33) (9.06) 68.11
--------- --------- ---------
Net increase from investment operations 35.00 52.31 123.92
--------- --------- ---------
Distributions from net investment income (38.33) (61.37) (55.81)
Distributions from net realized capital gains -- (39.64) --
--------- ----------- -----------
Total dividends and distributions (38.33) (101.01) (55.81)
--------- --------- ---------
Net asset value, end of period $1,016.08 $1,019.41 $1,068.11
========= ========= =========
TOTAL RETURN 3.53% 5.02% 12.78%
RATIOS / SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $121,738 $117,569 $112,810
Ratio of expenses to average net assets 0.37%(b) 0.37%(b) 0.37%(b)
Ratio of expenses to average net assets (excluding waivers) 0.51%(b) 0.37%(b) 0.45%(b)
Ratio of net investment income to average net assets 7.60%(b) 7.77%(b) 7.54%(b)
Ratio of net investment income to average net assets (excluding waivers) 7.45%(b) 7.76%(b) 7.46%(b)
Portfolio turnover rate 24% 119% 215%
-------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Commencement of investment operations.
(b) Annualized.
</FN>
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
BLACKROCK FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
-------------------------------------------------------------------------------
(A) ORGANIZATION AND ACCOUNTING POLICIES
BlackRock Funds SM (the "Fund") was organized on December 22, 1988 as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company. The Fund
currently has 38 investment portfolios. These financial statements relate to the
Fund's Multi-Sector Mortgage Securities Portfolio III (the "Portfolio"). The
Portfolio is authorized to issue an unlimited number of shares with a par value
of $0.001.
As of March 31, 2000, 99.93% of the shares of capital stock of the
Portfolio are owned by Ameritech Pension/VEBA Fund.
The following is a summary of significant accounting policies followed by
the Fund in preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires the use of management estimates. Actual results could differ from these
estimates.
SECURITIES VALUATION: The Fund values mortgage-backed, asset-backed and other
debt securities on the basis of current market quotations provided by dealers or
pricing services approved by the Fund's Board of Trustees. In determining the
value of a particular security, pricing services may use certain information
with respect to transactions in such securities, quotations from dealers, market
transactions in comparable securities, various relationships observed in the
market between securities and calculated yield measures based on valuation
technology commonly employed in the market for such securities. Exchange-traded
options are valued at their last sales price as of the close of options trading
on the applicable exchanges. In the absence of a last sale, options are valued
at the average of the quoted bid and asked prices as of the close of business. A
futures contract is valued at the last sale price as of the close of the
commodities exchange on which it trades. Any securities or other assets for
which such current market quotations are not readily available are valued at
fair value as determined in good faith under procedures established by and under
the general supervision and responsibility of the Fund's Board of Trustees.
Short-term securities which mature in more than 60 days are valued at current
market quotations. Short-term securities which mature in 60 days or less are
valued at amortized cost, if their term to maturity from date of purchase was 60
days or less, or by amortizing their value on the 61st day prior to maturity, if
their original term to maturity from date of purchase exceeded 60 days.
REPURCHASE AGREEMENTS: In connection with transactions in repurchase agreements,
the Fund's custodian takes possession of the underlying collateral securities,
the value of which at least equals the principal amount of the repurchase
transaction, including accrued interest. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to ensure the adequacy of the collateral. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
FUTURES TRANSACTIONS: The Portfolio invests in financial futures contracts
solely for the purpose of hedging its existing portfolio securities, or
securities the Portfolio intends to purchase, against fluctuations in fair value
caused by changes in prevailing market interest rates. The Portfolio may enter
into futures contracts subject to certain limitations. Upon entering into a
futures contract, the Portfolio is required to deposit cash or pledge U.S.
Government securities of an initial margin. Subsequent payments, which are
dependent on the daily fluctuations in the value of the underlying security or
securities, are made or received by the Portfolio each day (daily variation
margin) and are recorded as unrealized gains or losses until the contracts are
closed. When the contracts are closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transaction and the Portfolio's basis in the contracts. Risks of entering into
futures contracts include the possibility that there will not be a perfect price
correlation between the futures contracts and the underlying securities. Second,
it is possible that a lack of liquidity for futures contracts could exist in the
secondary market, resulting in an inability to close a futures position prior to
its maturity date. Third, the purchase of a futures contract involves the risk
that the Portfolio could lose more than the original margin deposit required to
initiate a futures transaction.
7
<PAGE>
BLACKROCK FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
SECURITY TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on the trade date. Realized and unrealized gains or losses are
calculated on the identified cost basis. Interest income is recorded on the
accrual basis and the Fund accretes premium or amortizes discount on securities
purchased using the interest method.
TAXES: No provision is made for federal taxes as it is the Fund's intention to
have the Portfolio continue to qualify for and elect the tax treatment
applicable the regulated investment companies under subchapter M of the Internal
Revenue Code of 1986, as amended, and to make the requisite distributions to its
shareholders which will be sufficient to relieve it from federal income and
excise taxes.
DIVIDENDS TO SHAREHOLDERS: Dividends from net investment income are declared
daily and paid monthly. Net realized gains, if any, will be distributed at least
annually.
(B) TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Pursuant to an Investment Advisory Agreement, BlackRock Advisors, Inc., a
wholly-owned subsidiary of BlackRock, Inc., serves as investment advisor for the
Portfolio. BlackRock Financial Management, Inc., a wholly-owned subsidiary of
BlackRock Advisors, Inc., serves as sub-advisor to the Portfolio. BlackRock,
Inc. is an indirect wholly-owned subsidiary of The PNC Financial Services Group,
Inc.
For its advisory services, BlackRock Advisors, Inc. is entitled to receive
fees, computed daily and paid quarterly, at the annual rate of .25% of the
Portfolio's average daily net assets.
BlackRock Advisors, Inc. may, at its discretion, waive all or any portion
of its advisory fee for the Portfolio and may reimburse the Portfolio for
certain operating expenses. For the period ended March 31, 2000, advisory fees
and waiver for the Portfolio were as follows:
GROSS NET
ADVISORY ADVISORY
FEE WAIVER FEE
-------- ------ --------
Multi-Sector Mortgage
Securities Portfolio III $66,463 $44,645 $21,818
PFPC Inc. ("PFPC"), an indirect wholly-owned subsidiary of The PNC
Financial Services Group, Inc. and BlackRock Advisors, Inc. act as
co-administrators for the Fund. For these services, the co-administrators
receive a combined administration fee computed daily and payable monthly, based
on a percentage of the average daily net assets of the Portfolio, at the
following annual rates: .085% of the first $500 million, .075% of the next $500
million and .065% of assets in excess of $1 billion. In addition, the Portfolio
is charged an administration fee based on the following percentage of average
daily net assets of the Portfolio: .145% of the first $500 million, .135% of the
next $500 million and .125% of assets in excess of $1 billion.
PFPC and BlackRock may, at their discretion, voluntarily waive all or any
portion of their administration fees for the Portfolio. For the period ended
March 31, 2000, administration fees and waivers for the Portfolio were as
follows:
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
-------------- ------ --------------
Multi-Sector Mortgage
Securities Portfolio III $61,146 $7,405 $53,741
In addition, PFPC Trust Co. serves as custodian for the Portfolio. PFPC
serves as transfer and dividend disbursing agent.
8
<PAGE>
BLACKROCK FUNDS
THE MULTI-SECTOR MORTGAGE SECURITIES PORTFOLIO III
NOTES TO FINANCIAL STATEMENTS (UNADUITED) (CONTINUED)
--------------------------------------------------------------------------
BlackRock Advisors, Inc. voluntarily agreed to waive fees and reimburse
expenses to the extent necessary to cap the Portfolio's expenses (exclusive of
advisory fees) at no more than .12% of its average daily net assets for the
period ended March 31, 2000.
(C) PORTFOLIO SECURITIES
Purchases and sales of investment securities, other than short-term
investments and government securities, for the period ended March 31, 2000 were
$10,874,274 and $28,215,234, respectively. Purchases and sales of government
securities for the period ended March 31, 2000 were $15,483,240 and $5,204,240,
respectively.
(D) CAPITAL SHARES
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
03/31/00 09/30/99
------------ ------------
<S> <C> <C>
Shares sold ................................... -- 5,819
Shares issued in reinvestment of dividends .... 2,093 8,424
Shares redeemed ............................... -- --
----------- ------
Net increase .................................. 2,093 14,243
=========== ======
(E) AT MARCH 31, 2000, NET ASSETS CONSISTED OF:
Capital paid-in ............................... $57,064,343
Accumulated net realized loss on investment
transactions and futures contracts ........ (2,034,867)
Net unrealized depreciation on investment
transactions and futures contracts ........ (486,448)
-----------
$54,543,028
===========
</TABLE>
(F) CAPITAL LOSS CARRYOVERS
At September 30, 1999, a capital loss carryover of $46,008, which expires
September 30, 2007, was available to offset possible future realized capital
gains. At September 30, 1999, the deferred post-October loss for the Portfolio
was $720,233.
9
<PAGE>
INVESTMENT ADVISER CO-ADMINISTRATOR AND TRANSFER AGENT
BlackRock Advisor, Inc. PFPC Inc.
New York, New York 10154 Wilmington, Delaware 19809
SUB-ADVISER DISTRIBUTOR
BlackRock Financial Management, Inc. BlackRock Distributors, Inc.
New York, New York 10154 King of Prussia, Pennsylvania 19428
CUSTODIAN CO-ADMINISTRATOR
PFPC Trust Co. BlackRock Advisor, Inc.
Philadelphia, Pennsylvania 19101 New York, New York 10154
COUNSEL
Simpson, Thatcher & Bartlett New
York, New York 10017
(A partnership which includes professional
corporations)
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania 19103
This report is for shareholder information. This is not a prospectus intended
for use in the purchase or sale of Fund shares.
BlackRock Funds
103 Bellevue Parkway
Wilmington, Delaware 19809
--------------------------------------------------------------------------------
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY PNC BANK, NATIONAL ASSOCIATION OR ANY OTHER BANK AND SHARES ARE NOT FEDERALLY
INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENTS IN SHARES OF THE FUND
INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
--------------------------------------------------------------------------------
10
