September 30, 2000
TAX-FREE
BOND
PORTFOLIOS
ANNUAL REPORT
TO SHAREHOLDERS
Not FDIC Insured
May Lose Value
No Bank Guarantee BLACKROCK
[BLACKROCK LOGO] FUNDS
PURE INVESTMENT STYLE [REGISTRATION MARK]
<PAGE>
BLACKROCK FUNDS
* TAX-FREE INCOME * OHIO TAX-FREE INCOME
* PENNSYLVANIA TAX-FREE INCOME * DELAWARE TAX-FREE INCOME
* NEW JERSEY TAX-FREE INCOME * KENTUCKY TAX-FREE INCOME
TABLE OF CONTENTS
SHAREHOLDER LETTER........................................................... 1
PORTFOLIO SUMMARIES
Tax-Free Income........................................................ 2
Pennsylvania Tax-Free Income........................................... 3
New Jersey Tax-Free Income............................................. 4
Ohio Tax-Free Income................................................... 5
Delaware Tax-Free Income............................................... 6
Kentucky Tax-Free Income............................................... 7
Note on Performance Information........................................ 8
STATEMENT OF NET ASSETS/SCHEDULE OF INVESTMENTS............................ 9-32
Delaware Tax-Free Income Statement of Assets & Liabilities............. 29
PORTFOLIO FINANCIAL STATEMENTS
Statements of Operations............................................... 33
Statements of Changes in Net Assets................................. 34-35
Financial Highlights................................................ 36-41
NOTES TO FINANCIAL STATEMENTS............................................. 42-49
REPORT OF INDEPENDENT ACCOUNTANTS............................................ 50
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PRIVACY PRINCIPLES OF BLACKROCK FUNDS
BLACKROCK FUNDS IS COMMITTED TO MAINTAINING THE PRIVACY OF ITS SHAREHOLDERS AND
TO SAFEGUARDING THEIR NONPUBLIC PERSONAL INFORMATION. THE FOLLOWING INFORMATION
IS PROVIDED TO HELP YOU UNDERSTAND WHAT PERSONAL INFORMATION BLACKROCK FUNDS
COLLECTS, HOW WE PROTECT THAT INFORMATION, AND WHY IN CERTAIN CASES WE MAY SHARE
SUCH INFORMATION WITH SELECT OTHER PARTIES.
BLACKROCK FUNDS DOES NOT RECEIVE ANY NONPUBLIC PERSONAL INFORMATION RELATING TO
ITS SHAREHOLDERS WHO PURCHASE SHARES THROUGH THEIR BROKER-DEALERS. IN THE CASE
OF SHAREHOLDERS WHO ARE RECORD OWNERS OF BLACKROCK FUNDS, BLACKROCK FUNDS
RECEIVES NONPUBLIC PERSONAL INFORMATION ON ACCOUNT APPLICATIONS OR OTHER FORMS.
WITH RESPECT TO THESE SHAREHOLDERS, BLACKROCK FUNDS ALSO HAS ACCESS TO SPECIFIC
INFORMATION REGARDING THEIR TRANSACTIONS IN BLACKROCK FUNDS.
BLACKROCK FUNDS DOES NOT DISCLOSE ANY NONPUBLIC PERSONAL INFORMATION ABOUT ITS
SHAREHOLDERS OR FORMER SHAREHOLDERS TO ANYONE, EXCEPT AS PERMITTED BY LAW OR AS
IS NECESSARY IN ORDER TO SERVICE OUR SHAREHOLDERS' ACCOUNTS (FOR EXAMPLE, TO A
TRANSFER AGENT).
BLACKROCK FUNDS RESTRICTS ACCESS TO NONPUBLIC PERSONAL INFORMATION ABOUT ITS
SHAREHOLDERS TO BLACKROCK EMPLOYEES WITH A LEGITIMATE BUSINESS NEED FOR THE
INFORMATION. BLACKROCK FUNDS MAINTAINS PHYSICAL, ELECTRONIC AND PROCEDURAL
SAFEGUARDS DESIGNED TO PROTECT THE NONPUBLIC PERSONAL INFORMATION OF OUR
SHAREHOLDERS.
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BLACKROCK FUNDS
September 30, 2000
DEAR SHAREHOLDER:
We are pleased to present the Annual Report for the BLACKROCK FUNDS for
the 12 months ending September 30, 2000.
Since our Semi-Annual report of March 31, 2000, the stock market as
measured by the S&P 500 returned -4.14%, the NASDAQ returned -18.81% and the
Lehman Aggregate Index returned 4.81%. So in this first year of the millennium,
at a time in history when there is more media attention about the stock market
than ever before, stocks actually under-performed bonds.
It has been a year of extremes. When we reported to you one year ago, it
was the dawn of a new millennium and there was plenty of concern about Y2K and
the devastation that it could wreak on capital markets and world economies. Yet
while the media bombarded us with concerns about Y2K, the investment world was
investing in technology and the Internet with an enthusiasm that could only be
described as fervent. There was much talk of a "new economy" and Internet shares
shot skyward. Share prices climbed so quickly that analysts continue to search
for new and improved ways to measure value.
Now, a year later, we can all be relieved that Y2K has come and gone with
small incident. And, while it is clear that the Internet will become an
important part of our economy, the boundless enthusiasm for Internet stocks has
moderated to the extent that the Goldman Sachs Technology Industry Internet
Index fell nearly 35% in the last six months. In fact, we were reminded of the
long-term lessons of investing.
The truth of the matter is that successful investing is a long-term
process and the best strategy for most investors is to work with your financial
advisor to set your goals, plan and implement an asset allocation that is
customized to your goals and your personal needs for certain levels of risk --
and then to stay the course despite short term volatility in the markets.
We continue to believe that mutual funds, which provide diversification,
professional management and ease and flexibility of use, are an appropriate
investment vehicle for individual investors.
We are proud to be able to offer our shareholders a full range of funds to
meet virtually any investment need. In the past year, we added three specialized
portfolios: Global Science & Technology, European Equity and Asia Pacific
Equity. You can now choose from 39 different BlackRock Funds.
Thank you for your confidence in BlackRock Funds. We appreciate the
opportunity to help you achieve your long-term investment goals.
Sincerely,
/S/ KAREN SABATH
Karen H. Sabath
MANAGING DIRECTOR
BLACKROCK ADVISORS, INC.
1
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BLACKROCK FUNDS
TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (9/30/00):
$336.2 million
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX AS
IS CONSISTENT WITH THE PRESERVATION OF CAPITAL BY INVESTING PRIMARILY IN
MUNICIPAL FIXED INCOME SECURITIES RATED BBB OR HIGHER BY A MAJOR RATING AGENCY
OR DEEMED BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)THE TWO MOST PERSUASIVE THEMES IN THE MUNICIPAL MARKET DURING THE
PAST YEAR WERE A CONTINUED SLOWDOWN IN NEW ISSUANCE AND THE EMERGENCE OF THE
RETAIL INVESTOR'S PREFERENCE FOR INDIVIDUAL MUNICIPAL BONDS. AFTER DECLINING BY
21% IN 1999, NEW ISSUANCE THROUGH THE FIRST NINE MONTHS OF 2000 DECLINED BY
19.1%. THIS LARGE DROP IN ISSUANCE WAS FUELED BY A 60% DROP IN REFUNDING
ACTIVITY. THE FACT THAT MUNICIPAL COFFERS WERE FULL AS A RESULT OF THE STRONG
ECONOMY ALSO CONTRIBUTED TO THE DECLINE IN ISSUANCE.
(BULLET)SIMULTANEOUSLY WITH THE DROP IN SUPPLY, RETAIL INVESTORS FLEXED
THEIR COLLECTIVE MUSCLES DURING 2000 AND BOUGHT INDIVIDUAL MUNICIPAL BONDS AT A
RECORD PACE. THIS STRONG DEMAND, COUPLED WITH HISTORICALLY LIGHT SUPPLY, HELPED
MUNICIPAL BONDS OUTPERFORM TAXABLE SECTORS SUCH AS CORPORATES AND MORTGAGE
BACKED SECURITIES. THE TREASURY SECTOR, WHICH BENEFITED FROM VERY STRONG
TECHNICALS (REDUCED NEW ISSUANCE AND BUYBACKS), WAS THE ONLY FIXED-INCOME SECTOR
THAT MUNICIPALS WERE UNABLE TO OUTPERFORM.
(BULLET)IN THE THIRD QUARTER OF 2000, MUNICIPALS MARGINALLY UNDERPERFORMED
THE TREASURY MARKET IN THE 5- AND 10-YEAR SECTORS AS THE TREASURY CURVE
EXPERIENCED A SIGNIFICANT AMOUNT OF STEEPENING. OVERALL, THOUGH, THE MUNICIPAL
YIELD CURVE HAS BEEN REMARKABLY STABLE IN SPITE OF THE VOLATILITY EXPERIENCED IN
THE TREASURY MARKET.
(BULLET)THROUGHOUT THE PAST YEAR, OUR MAJOR PORTFOLIO MANAGEMENT THEME HAS
BEEN TO ADD INCOME. THE NARROWING OF COUPON AND QUALITY SPREADS OVER THE PAST
YEAR HAS ENABLED US TO DO BOTH UP-IN-COUPON AND UP-IN-QUALITY TRADES SO THAT THE
END RESULT IS THAT THE PORTFOLIO HAS A HIGHER LEVEL OF INCOME AND THE GENERAL
QUALITY OF INVESTMENTS HAS BEEN IMPROVED.
Although the portfolio holdings and sectors listed above were current as of the
end of the annual period ended September 30, 2000, the Portfolio is actively
managed and the composition will vary.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
TAX-FREE INCOME PORTFOLIO AND THE LEHMAN MUNICIPAL BOND
INDEX FROM INCEPTION AND AT EACH FISCAL YEAR END.
[GRAPH OMITTED]
Plot points as follows:
Lehman
Municipal
Institutional Service Investor A Investor B Investor C Bond
Class Class Class Class Class Index
5/14/90 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
Sep-90 10,139 10,139 9,683 10,139 10,139 10,240
Dec-90 10,513 10,513 10,040 10,513 10,513 10,681
Mar-91 10,720 10,720 10,238 10,720 10,720 10,923
Jun-91 10,919 10,919 10,428 10,919 10,919 11,156
Sep-91 11,296 11,296 10,787 11,296 11,296 11,590
Dec-91 11,708 11,708 11,181 11,708 11,708 11,979
Mar-92 11,776 11,776 11,247 11,776 11,776 12,015
Jun-92 12,215 12,215 11,665 12,215 12,215 12,471
Sep-92 12,504 12,504 11,942 12,504 12,504 12,802
Dec-92 12,744 12,744 12,170 12,744 12,744 13,035
Mar-93 13,246 13,246 12,650 13,246 13,246 13,518
Jun-93 13,708 13,708 13,091 13,708 13,708 13,961
Sep-93 14,200 14,194 13,551 14,189 14,189 14,432
Dec-93 14,412 14,400 13,738 14,385 14,385 14,635
Mar-94 13,430 13,410 12,786 13,389 13,389 13,832
Jun-94 13,615 13,587 12,948 13,558 13,558 13,985
Sep-94 13,661 13,625 12,978 13,590 13,590 14,080
Dec-94 13,455 13,395 12,764 13,365 13,365 13,878
Mar-95 14,555 14,496 13,793 14,443 14,443 14,859
Jun-95 14,810 14,737 14,014 14,674 14,674 15,218
Sep-95 15,242 15,156 14,404 15,083 15,083 15,656
Dec-95 15,941 15,825 15,031 15,739 15,739 16,302
Mar-96 15,806 15,694 14,900 15,602 15,602 16,105
Jun-96 15,953 15,828 15,026 15,734 15,734 16,228
Sep-96 16,378 16,237 15,408 16,104 16,104 16,602
Dec-96 16,853 16,696 15,837 16,522 16,522 17,025
Mar-97 16,838 16,669 15,805 16,458 16,458 16,985
Jun-97 17,446 17,258 16,439 16,999 16,999 17,571
Sep-97 18,032 17,824 16,971 17,550 17,516 18,101
Dec-97 18,560 18,332 17,448 18,043 17,975 18,592
Mar-98 18,805 18,559 17,656 18,258 18,155 18,806
Jun-98 19,080 18,815 17,892 18,502 18,363 19,092
Sep-98 19,629 19,344 18,386 19,013 18,835 19,678
Dec-98 19,753 19,450 18,480 19,110 18,896 19,797
Mar-99 19,856 19,536 18,554 19,187 18,935 19,972
Jun-99 19,510 19,180 18,209 18,796 18,549 19,619
Sep-99 19,301 18,960 17,992 18,536 18,293 19,540
Dec-99 18,931 18,582 17,627 18,125 17,887 19,388
Mar-00 19,474 19,101 18,111 18,589 17,429 19,956
Jun-00 19,725 19,332 18,323 18,771 17,600 20,257
Sep-00 20,228 19,811 18,769 19,191 17,188 20,747
FOR PERIOD ENDING SEPTEMBER 30, 2000
AVERAGE ANNUAL TOTAL RETURN
From
1 Year 5 Year 10 Year Inception
------- ------- ------- ----------
Institutional Class 4.80% 5.82% 7.15% 7.01%
Service Class 4.49% 5.51% 6.93% 6.80%
Investor A Class (Load Adjusted) 0.11% 4.47% 6.35% 6.25%
Investor A Class (NAV) 4.31% 5.32% 6.79% 6.67%
Investor B Class (Load Adjusted) (0.96)% 4.33% 6.20% 6.34%
Investor B Class (NAV) 3.54% 4.67% 6.45% 6.34%
Investor C Class (Load Adjusted) 2.63% 4.69% 6.46% 6.35%
Investor C Class (NAV) 3.63% 4.69% 6.46% 6.35%
* THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE
PORTFOLIO'S SHARE CLASSES WERE AS FOLLOWS: INVESTOR A SHARES, 5/14/90;
INSTITUTIONAL SHARES, 1/21/93; SERVICE SHARES, 7/29/93; INVESTOR B SHARES,
7/18/96 AND INVESTOR C SHARES, 2/28/97. SEE "NOTE ON PERFORMANCE INFORMATION"
ON PAGE 8 FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
2
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BLACKROCK FUNDS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (9/30/00):
$950.1 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND
PENNSYLVANIA STATE INCOME TAX AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL
BY INVESTING PRIMARILY IN MUNICIPAL FIXED INCOME SECURITIES RATED BBB OR HIGHER
BY A MAJOR RATING AGENCY OR DEEMED BY THE MANAGER TO BE OF COMPARABLE CREDIT
QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)THE TWO MOST PERSUASIVE THEMES IN THE MUNICIPAL MARKET DURING THE
PAST YEAR WERE A CONTINUED SLOWDOWN IN NEW ISSUANCE AND THE EMERGENCE OF THE
RETAIL INVESTOR'S PREFERENCE FOR INDIVIDUAL MUNICIPAL BONDS. AFTER DECLINING BY
21% IN 1999, NEW ISSUANCE THROUGH THE FIRST NINE MONTHS OF 2000 DECLINED BY
19.1%. THIS LARGE DROP IN ISSUANCE WAS FUELED BY A 60% DROP IN REFUNDING
ACTIVITY. THE FACT THAT MUNICIPAL COFFERS WERE FULL AS A RESULT OF THE STRONG
ECONOMY ALSO CONTRIBUTED TO THE DECLINE IN ISSUANCE.
(BULLET)SIMULTANEOUSLY WITH THE DROP IN SUPPLY, RETAIL INVESTORS FLEXED
THEIR COLLECTIVE MUSCLES DURING 2000 AND BOUGHT INDIVIDUAL MUNICIPAL BONDS AT A
RECORD PACE. THIS STRONG DEMAND, COUPLED WITH HISTORICALLY LIGHT SUPPLY, HELPED
MUNICIPAL BONDS OUTPERFORM TAXABLE SECTORS SUCH AS CORPORATES AND MORTGAGE
BACKED SECURITIES. THE TREASURY SECTOR, WHICH BENEFITED FROM VERY STRONG
TECHNICALS (REDUCED NEW ISSUANCE AND BUYBACKS), WAS THE ONLY FIXED-INCOME SECTOR
THAT MUNICIPALS WERE UNABLE TO OUTPERFORM.
(BULLET)IN THE THIRD QUARTER OF 2000, MUNICIPALS MARGINALLY UNDERPERFORMED
THE TREASURY MARKET IN THE 5- AND 10-YEAR SECTORS AS THE TREASURY CURVE
EXPERIENCED A SIGNIFICANT AMOUNT OF STEEPENING. OVERALL, THOUGH, THE MUNICIPAL
YIELD CURVE HAS BEEN REMARKABLY STABLE IN SPITE OF THE VOLATILITY EXPERIENCED IN
THE TREASURY MARKET.
(BULLET)THROUGHOUT THE PAST YEAR, OUR MAJOR PORTFOLIO MANAGEMENT THEME HAS
BEEN TO ADD INCOME. THE NARROWING OF COUPON AND QUALITY SPREADS OVER THE PAST
YEAR HAS ENABLED US TO DO BOTH UP-IN-COUPON AND UP-IN-QUALITY TRADES SO THAT THE
END RESULT IS THAT THE PORTFOLIO HAS A HIGHER LEVEL OF INCOME AND THE GENERAL
QUALITY OF INVESTMENTS HAS BEEN IMPROVED.
Although the portfolio holdings and sectors listed above were current as of the
end of the annual period ended September 30, 2000, the Portfolio is actively
managed and the composition will vary.
COMPARISON OF CHANGE IN VALUE OF A $10,000
INVESTMENT IN THE PA TAX-FREE INCOME
PORTFOLIO AND LEHMAN MUNICIPAL BOND
INDEX FROM INCEPTION AND AT EACH FISCAL YEAR END.
[GRAPH OMITTED]
Plot points as follows:
Lehman
Municipal
Institutional Service Investor A Investor B Investor C Bond
Class Class Class Class Class Index
12/1/92 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
Dec-92 10,080 10,080 9,626 10,080 10,080 10,182
Mar-93 10,492 10,492 10,020 10,492 10,492 10,560
Jun-93 10,809 10,809 10,322 10,809 10,809 10,905
Sep-93 11,142 11,165 10,667 11,170 11,170 11,274
Dec-93 11,324 11,341 10,841 11,352 11,352 11,432
Mar-94 10,614 10,621 10,159 10,638 10,638 10,805
Jun-94 10,746 10,746 10,284 10,769 10,769 10,924
Sep-94 10,813 10,808 10,337 10,824 10,824 10,999
Dec-94 10,545 10,533 10,069 10,518 10,518 10,841
Mar-95 11,353 11,332 10,828 11,296 11,296 11,607
Jun-95 11,614 11,585 11,064 11,526 11,526 11,888
Sep-95 11,981 11,944 11,400 11,859 11,859 12,230
Dec-95 12,483 12,439 11,867 12,326 12,326 12,734
Mar-96 12,343 12,283 11,716 12,145 12,145 12,580
Jun-96 12,448 12,379 11,802 12,212 12,212 12,677
Sep-96 12,734 12,653 12,059 12,455 12,455 12,969
Dec-96 13,058 12,966 12,353 12,733 12,733 13,299
Mar-97 13,010 12,909 12,294 12,648 12,648 13,268
Jun-97 13,413 13,294 12,713 12,997 12,997 13,726
Sep-97 13,810 13,679 13,076 13,341 13,341 14,140
Dec-97 14,198 14,052 13,429 13,675 13,675 14,523
Mar-98 14,371 14,212 13,578 13,806 13,806 14,690
Jun-98 14,600 14,428 13,779 14,004 14,004 14,914
Sep-98 14,985 14,799 14,127 14,351 14,351 15,372
Dec-98 15,065 14,867 14,187 14,404 14,404 15,464
Mar-99 15,185 14,976 14,285 14,496 14,496 15,601
Jun-99 14,933 14,717 14,032 14,232 14,232 15,325
Sep-99 14,861 14,634 13,949 14,141 14,141 15,264
Dec-99 14,719 14,482 13,800 13,969 13,969 15,145
Mar-00 15,093 14,838 14,135 14,283 14,268 15,588
Jun-00 15,311 15,042 14,323 14,447 14,445 15,824
Sep-00 15,680 15,378 14,651 14,754 14,735 16,207
FOR PERIOD ENDING SEPTEMBER 30, 2000
AVERAGE ANNUAL TOTAL RETURN
From
1 Year 3 Year 5 Year Inception
------- ------- ------- ---------
Institutional Class 5.50% 4.33% 5.53% 5.91%
Service Class 5.09% 3.98% 5.19% 5.65%
Investor A Class (Load Adjusted) 0.81% 2.46% 4.21% 4.99%
Investor A Class (NAV) 5.03% 3.87% 5.06% 5.55%
Investor B Class (Load Adjusted) (0.17)% 2.04% 3.97% 4.98%
Investor B Class (NAV) 4.33% 3.15% 4.31% 4.98%
Investor C Class (Load Adjusted) 3.32% 3.24% 4.36% 5.02%
Investor C Class (NAV) 4.32% 3.24% 4.36% 5.02%
* THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE
PORTFOLIO'S SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL AND INVESTOR A
SHARES, 12/1/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 10/3/94 AND
INVESTOR C SHARES, 8/14/98. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 8
FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
3
<PAGE>
BLACKROCK FUNDS
NEW JERSEY TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (9/30/00):
$152.5 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND NEW JERSEY
STATE INCOME TAX AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL BY INVESTING
PRIMARILY IN MUNICIPAL FIXED INCOME SECURITIES RATED BBB OR HIGHER BY A MAJOR
RATING AGENCY OR DEEMED BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)THE TWO MOST PERSUASIVE THEMES IN THE MUNICIPAL MARKET DURING THE
PAST YEAR WERE A CONTINUED SLOWDOWN IN NEW ISSUANCE AND THE EMERGENCE OF THE
RETAIL INVESTOR'S PREFERENCE FOR INDIVIDUAL MUNICIPAL BONDS. AFTER DECLINING BY
21% IN 1999, NEW ISSUANCE THROUGH THE FIRST NINE MONTHS OF 2000 DECLINED BY
19.1%. THIS LARGE DROP IN ISSUANCE WAS FUELED BY A 60% DROP IN REFUNDING
ACTIVITY. THE FACT THAT MUNICIPAL COFFERS WERE FULL AS A RESULT OF THE STRONG
ECONOMY ALSO CONTRIBUTED TO THE DECLINE IN ISSUANCE.
(BULLET)SIMULTANEOUSLY WITH THE DROP IN SUPPLY, RETAIL INVESTORS FLEXED
THEIR COLLECTIVE MUSCLES DURING 2000 AND BOUGHT INDIVIDUAL MUNICIPAL BONDS AT A
RECORD PACE. THIS STRONG DEMAND, COUPLED WITH HISTORICALLY LIGHT SUPPLY, HELPED
MUNICIPAL BONDS OUTPERFORM TAXABLE SECTORS SUCH AS CORPORATES AND MORTGAGE
BACKED SECURITIES. THE TREASURY SECTOR, WHICH BENEFITED FROM VERY STRONG
TECHNICALS (REDUCED NEW ISSUANCE AND BUYBACKS), WAS THE ONLY FIXED-INCOME SECTOR
THAT MUNICIPALS WERE UNABLE TO OUTPERFORM.
(BULLET)IN THE THIRD QUARTER OF 2000, MUNICIPALS MARGINALLY UNDERPERFORMED
THE TREASURY MARKET IN THE 5- AND 10-YEAR SECTORS AS THE TREASURY CURVE
EXPERIENCED A SIGNIFICANT AMOUNT OF STEEPENING. OVERALL, THOUGH, THE MUNICIPAL
YIELD CURVE HAS BEEN REMARKABLY STABLE IN SPITE OF THE VOLATILITY EXPERIENCED IN
THE TREASURY MARKET.
(BULLET)THROUGHOUT THE PAST YEAR, OUR MAJOR PORTFOLIO MANAGEMENT THEME HAS
BEEN TO ADD INCOME. THE NARROWING OF COUPON AND QUALITY SPREADS OVER THE PAST
YEAR HAS ENABLED US TO DO BOTH UP-IN-COUPON AND UP-IN-QUALITY TRADES SO THAT THE
END RESULT IS THAT THE PORTFOLIO HAS A HIGHER LEVEL OF INCOME AND THE GENERAL
QUALITY OF INVESTMENTS HAS BEEN IMPROVED.
Although the portfolio holdings and sectors listed above were current as of the
end of the annual period ended September 30, 2000, the Portfolio is actively
managed and the composition will vary.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE NJ TAX-FREE INCOME PORTFOLIO AND THE
LEHMAN MUNICIPAL BOND INDEX FROM INCEPTION
AND AT EACH FISCAL YEAR END.NT
[GRAPH OMITTED]
Plot points as follows:
Lehman
Municipal
Institutional Service Investor A Investor B Investor C Bond
Class Class Class Class Class Index
7/1/91 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
Sep-91 10,357 10,357 9,891 10,357 10,357 10,389
Dec-91 10,736 10,736 10,253 10,736 10,736 10,738
Mar-92 10,775 10,775 10,290 10,775 10,775 10,770
Jun-92 11,205 11,205 10,701 11,205 11,205 11,179
Sep-92 11,462 11,462 10,946 11,462 11,462 11,475
Dec-92 11,691 11,691 11,165 11,691 11,691 11,684
Mar-93 12,098 12,098 11,553 12,098 12,098 12,118
Jun-93 12,514 12,514 11,951 12,514 12,514 12,514
Sep-93 12,867 12,867 12,288 12,867 12,867 12,937
Dec-93 13,045 13,045 12,458 13,045 13,045 13,119
Mar-94 12,370 12,370 11,813 12,370 12,370 12,399
Jun-94 12,504 12,504 11,942 12,504 12,504 12,536
Sep-94 12,583 12,583 12,017 12,583 12,583 12,622
Dec-94 12,432 12,432 11,873 12,432 12,432 12,440
Mar-95 13,195 13,195 12,601 13,195 13,195 13,320
Jun-95 13,454 13,454 12,848 13,454 13,454 13,642
Sep-95 13,802 13,802 13,181 13,802 13,802 14,034
Dec-95 14,289 14,289 13,646 14,289 14,289 14,613
Mar-96 14,158 14,158 13,519 14,156 14,156 14,437
Jun-96 14,198 14,198 13,546 14,184 14,184 14,547
Sep-96 14,445 14,445 13,776 14,398 14,398 14,882
Dec-96 14,808 14,808 14,115 14,725 14,725 15,261
Mar-97 14,768 14,768 14,072 14,653 14,653 15,226
Jun-97 15,185 15,185 14,534 15,028 15,028 15,751
Sep-97 15,623 15,623 14,946 15,429 15,429 16,226
Dec-97 16,035 16,035 15,334 15,800 15,800 16,666
Mar-98 16,167 16,167 15,453 15,893 15,893 16,858
Jun-98 16,406 16,403 15,673 16,088 16,088 17,114
Sep-98 16,932 16,916 16,157 16,585 16,555 17,640
Dec-98 17,021 16,990 16,221 16,652 16,590 17,746
Mar-99 17,089 17,045 16,267 16,700 16,605 17,903
Jun-99 16,752 16,695 15,927 16,319 16,226 17,586
Sep-99 16,705 16,635 15,863 16,223 16,130 17,516
Dec-99 16,598 16,517 15,744 16,070 15,979 17,379
Mar-00 16,942 16,846 16,051 16,353 16,260 17,888
Jun-00 17,198 17,088 16,274 16,551 16,457 18,159
Sep-00 17,566 17,440 16,603 16,854 16,758 18,598
FOR PERIOD ENDING SEPTEMBER 30, 2000
AVERAGE ANNUAL TOTAL RETURN
From
1 Year 3 Year 5 Year Inception
------- ------- ------- ---------
Institutional Class 5.15% 3.99% 4.94% 6.27%
Service Class 4.84% 3.74% 4.79% 6.19%
Investor A Class (Load Adjusted) 0.48% 2.17% 3.77% 5.64%
Investor A Class (NAV) 4.67% 3.57% 4.62% 6.10%
Investor B Class (Load Adjusted) (0.61)% 1.68% 3.61% 5.74%
Investor B Class (NAV) 3.89% 2.80% 3.95% 5.74%
Investor C Class (Load Adjusted) 2.89% 2.80% 3.95% 5.74%
Investor C Class (NAV) 3.89% 2.80% 3.95% 5.74%
* THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE
PORTFOLIO'S SHARE CLASSES WERE AS FOLLOWS: SERVICE SHARES, 7/1/91; INVESTOR A
SHARES, 1/26/96; INVESTOR B SHARES, 7/2/96; INSTITUTIONAL SHARES, 5/4/98 AND
INVESTOR C SHARES, 12/9/98. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 8
FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
4
<PAGE>
BLACKROCK FUNDS
OHIO TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (9/30/00):
$94.6 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND OHIO STATE
INCOME TAX AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL BY INVESTING
PRIMARILY IN MUNICIPAL FIXED INCOME SECURITIES RATED BBB OR HIGHER BY A MAJOR
RATING AGENCY OR DEEMED BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)THE TWO MOST PERSUASIVE THEMES IN THE MUNICIPAL MARKET DURING THE
PAST YEAR WERE A CONTINUED SLOWDOWN IN NEW ISSUANCE AND THE EMERGENCE OF THE
RETAIL INVESTOR'S PREFERENCE FOR INDIVIDUAL MUNICIPAL BONDS. AFTER DECLINING BY
21% IN 1999, NEW ISSUANCE THROUGH THE FIRST NINE MONTHS OF 2000 DECLINED BY
19.1%. THIS LARGE DROP IN ISSUANCE WAS FUELED BY A 60% DROP IN REFUNDING
ACTIVITY. THE FACT THAT MUNICIPAL COFFERS WERE FULL AS A RESULT OF THE STRONG
ECONOMY ALSO CONTRIBUTED TO THE DECLINE IN ISSUANCE.
(BULLET)SIMULTANEOUSLY WITH THE DROP IN SUPPLY, RETAIL INVESTORS FLEXED
THEIR COLLECTIVE MUSCLES DURING 2000 AND BOUGHT INDIVIDUAL MUNICIPAL BONDS AT A
RECORD PACE. THIS STRONG DEMAND, COUPLED WITH HISTORICALLY LIGHT SUPPLY, HELPED
MUNICIPAL BONDS OUTPERFORM TAXABLE SECTORS SUCH AS CORPORATES AND MORTGAGE
BACKED SECURITIES. THE TREASURY SECTOR, WHICH BENEFITED FROM VERY STRONG
TECHNICALS (REDUCED NEW ISSUANCE AND BUYBACKS), WAS THE ONLY FIXED-INCOME SECTOR
THAT MUNICIPALS WERE UNABLE TO OUTPERFORM.
(BULLET)IN THE THIRD QUARTER OF 2000, MUNICIPALS MARGINALLY UNDERPERFORMED
THE TREASURY MARKET IN THE 5- AND 10-YEAR SECTORS AS THE TREASURY CURVE
EXPERIENCED A SIGNIFICANT AMOUNT OF STEEPENING. OVERALL, THOUGH, THE MUNICIPAL
YIELD CURVE HAS BEEN REMARKABLY STABLE IN SPITE OF THE VOLATILITY EXPERIENCED IN
THE TREASURY MARKET.
(BULLET)THROUGHOUT THE PAST YEAR, OUR MAJOR PORTFOLIO MANAGEMENT THEME HAS
BEEN TO ADD INCOME. THE NARROWING OF COUPON AND QUALITY SPREADS OVER THE PAST
YEAR HAS ENABLED US TO DO BOTH UP-IN-COUPON AND UP-IN-QUALITY TRADES SO THAT THE
END RESULT IS THAT THE PORTFOLIO HAS A HIGHER LEVEL OF INCOME AND THE GENERAL
QUALITY OF INVESTMENTS HAS BEEN IMPROVED.
Although the portfolio holdings and sectors listed above were current as of the
end of the annual period ended September 30, 2000, the Portfolio is actively
managed and the composition will vary.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE OH TAX-FREE INCOME PORTFOLIO AND THE
LEHMAN MUNICIPAL BOND INDEX FROM INCEPTION
AND AT EACH FISCAL YEAR END.NT
[GRAPH OMITTED]
Plot points as follows:
Lehman
Municipal
Institutional Service Investor A Investor B Investor C Bond
Class Class Class Class Class Index
12/1/92 $10,000 $10,000 $ 9,600 $10,000 $10,000 $10,000
Dec-92 10,010 10,010 9,560 10,010 10,010 10,182
Mar-93 10,270 10,270 9,808 10,270 10,270 10,560
Jun-93 10,561 10,561 10,086 10,561 10,561 10,905
Sep-93 10,910 10,907 10,420 10,911 10,911 11,274
Dec-93 11,024 11,014 10,529 11,025 11,025 11,432
Mar-94 10,346 10,330 9,881 10,347 10,347 10,805
Jun-94 10,442 10,420 9,973 10,443 10,443 10,924
Sep-94 10,498 10,469 10,026 10,499 10,499 10,999
Dec-94 10,310 10,276 9,843 10,281 10,281 10,841
Mar-95 11,076 11,033 10,568 11,018 11,018 11,607
Jun-95 11,300 11,249 10,774 11,211 11,211 11,888
Sep-95 11,625 11,565 11,075 11,503 11,503 12,230
Dec-95 12,145 12,073 11,560 11,985 11,985 12,734
Mar-96 11,950 11,870 11,361 11,756 11,756 12,580
Jun-96 12,046 11,957 11,440 11,815 11,815 12,677
Sep-96 12,335 12,234 11,700 12,061 12,061 12,969
Dec-96 12,646 12,533 11,981 12,330 12,330 13,299
Mar-97 12,612 12,490 11,936 12,260 12,260 13,268
Jun-97 13,001 12,867 12,355 12,600 12,600 13,726
Sep-97 13,385 13,238 12,706 12,934 12,934 14,140
Dec-97 13,739 13,577 13,026 13,236 13,236 14,523
Mar-98 13,864 13,691 13,130 13,316 13,316 14,690
Jun-98 14,084 13,899 13,323 13,488 13,488 14,914
Sep-98 14,531 14,328 13,730 13,874 13,874 15,372
Dec-98 14,612 14,397 13,790 13,909 13,909 15,464
Mar-99 14,714 14,488 13,871 13,964 13,964 15,601
Jun-99 14,364 14,131 13,525 13,589 13,589 15,325
Sep-99 14,330 14,087 13,477 13,515 13,515 15,264
Dec-99 14,169 13,920 13,310 13,323 13,323 15,145
Mar-00 14,566 14,284 13,667 13,655 13,655 15,588
Jun-00 14,780 14,499 13,866 13,828 13,815 15,824
Sep-00 15,120 14,822 14,155 14,091 14,091 16,207
FOR PERIOD ENDING SEPTEMBER 30, 2000
AVERAGE ANNUAL TOTAL RETURN
From
1 Year 3 Year 5 Year Inception
------- ------- ------- ---------
Institutional Class 5.52% 4.15% 5.40% 5.42%
Service Class 5.20% 3.84% 5.09% 5.15%
Investor A Class (Load Adjusted) 0.87% 2.25% 4.06% 4.53%
Investor A Class (NAV) 5.03% 3.66% 4.92% 5.08%
Investor B Class (Load Adjusted) (0.25)% 1.77% 3.80% 4.48%
Investor B Class (NAV) 4.25% 2.89% 4.14% 4.48%
Investor C Class (Load Adjusted) 3.25% 2.90% 4.15% 4.48%
Investor C Class (NAV) 4.25% 2.90% 4.15% 4.48%
* THE PERFORMANCE INFORMATION ABOVE INCLUDES INFORMATION RELATING TO EACH CLASS
OF THE PORTFOLIO SINCE THE COMMENCEMENT OF OPERATIONS OF THE PORTFOLIO, RATHER
THAN THE DATE SUCH CLASS WAS INTRODUCED. THE INCEPTION DATES OF THE
PORTFOLIO'S SHARE CLASSES WERE AS FOLLOWS: INSTITUTIONAL AND INVESTOR A
SHARES, 12/1/92; SERVICE SHARES, 7/29/93; INVESTOR B SHARES, 10/13/94 AND
INVESTOR C SHARES, 8/26/98. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 8
FOR FURTHER INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
5
<PAGE>
BLACKROCK FUNDS
DELAWARE TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (9/30/00):
$100.7 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND DELAWARE
STATE INCOME TAX AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL BY INVESTING
PRIMARILY IN MUNICIPAL FIXED INCOME SECURITIES RATED BBB OR HIGHER BY A MAJOR
RATING AGENCY OR DEEMED BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)THE TWO MOST PERSUASIVE THEMES IN THE MUNICIPAL MARKET DURING THE
PAST YEAR WERE A CONTINUED SLOWDOWN IN NEW ISSUANCE AND THE EMERGENCE OF THE
RETAIL INVESTOR'S PREFERENCE FOR INDIVIDUAL MUNICIPAL BONDS. AFTER DECLINING BY
21% IN 1999, NEW ISSUANCE THROUGH THE FIRST NINE MONTHS OF 2000 DECLINED BY
19.1%. THIS LARGE DROP IN ISSUANCE WAS FUELED BY A 60% DROP IN REFUNDING
ACTIVITY. THE FACT THAT MUNICIPAL COFFERS WERE FULL AS A RESULT OF THE STRONG
ECONOMY ALSO CONTRIBUTED TO THE DECLINE IN ISSUANCE.
(BULLET)SIMULTANEOUSLY WITH THE DROP IN SUPPLY, RETAIL INVESTORS FLEXED
THEIR COLLECTIVE MUSCLES DURING 2000 AND BOUGHT INDIVIDUAL MUNICIPAL BONDS AT A
RECORD PACE. THIS STRONG DEMAND, COUPLED WITH HISTORICALLY LIGHT SUPPLY, HELPED
MUNICIPAL BONDS OUTPERFORM TAXABLE SECTORS SUCH AS CORPORATES AND MORTGAGE
BACKED SECURITIES. THE TREASURY SECTOR, WHICH BENEFITED FROM VERY STRONG
TECHNICALS (REDUCED NEW ISSUANCE AND BUYBACKS), WAS THE ONLY FIXED-INCOME SECTOR
THAT MUNICIPALS WERE UNABLE TO OUTPERFORM.
(BULLET)IN THE THIRD QUARTER OF 2000, MUNICIPALS MARGINALLY UNDERPERFORMED
THE TREASURY MARKET IN THE 5- AND 10-YEAR SECTORS AS THE TREASURY CURVE
EXPERIENCED A SIGNIFICANT AMOUNT OF STEEPENING. OVERALL, THOUGH, THE MUNICIPAL
YIELD CURVE HAS BEEN REMARKABLY STABLE IN SPITE OF THE VOLATILITY EXPERIENCED IN
THE TREASURY MARKET.
(BULLET)THROUGHOUT THE PAST YEAR, OUR MAJOR PORTFOLIO MANAGEMENT THEME HAS
BEEN TO ADD INCOME. THE NARROWING OF COUPON AND QUALITY SPREADS OVER THE PAST
YEAR HAS ENABLED US TO DO BOTH UP-IN-COUPON AND UP-IN-QUALITY TRADES SO THAT THE
END RESULT IS THAT THE PORTFOLIO HAS A HIGHER LEVEL OF INCOME AND THE GENERAL
QUALITY OF INVESTMENTS HAS BEEN IMPROVED.
Although the portfolio holdings and sectors listed above were current as of the
end of the annual period ended September 30, 2000, the Portfolio is actively
managed and the composition will vary.
COMPARISON OF CHANGE IN VALUE OF A $10,000
INVESTMENT IN THE DE TAX-FREE
INCOME PORTFOLIO AND LEHMAN
MUNICIPAL BOND INDEX AT EACH
FISCAL YEAR END.
[GRAPH OMITTED]
Plot points as follows:
Lehman
Municipal
Institutional Service Investor A Investor B Investor C Bond
Class Class Class Class Class Index
12/31/89 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
Sep-90 10,349 10,325 9,899 10,255 10,255 10,285
Dec-90 10,661 10,629 10,186 10,532 10,532 10,729
Mar-91 10,867 10,825 10,371 10,702 10,702 10,972
Jun-91 11,021 10,971 10,506 10,821 10,821 11,205
Sep-91 11,327 11,268 10,785 11,088 11,088 11,641
Dec-91 11,634 11,564 11,064 11,354 11,354 12,032
Mar-92 11,604 11,525 11,022 11,290 11,290 12,068
Jun-92 11,952 11,861 11,340 11,593 11,593 12,526
Sep-92 12,188 12,086 11,549 11,786 11,786 12,859
Dec-92 12,302 12,190 11,644 11,860 11,860 13,093
Mar-93 12,601 12,478 11,913 12,134 12,134 13,579
Jun-93 12,860 12,724 12,143 12,345 12,345 14,023
Sep-93 13,217 13,069 12,466 12,650 12,650 14,497
Dec-93 13,322 13,162 12,550 12,711 12,711 14,700
Mar-94 12,709 12,547 11,971 12,089 12,089 13,893
Jun-94 12,907 12,733 12,143 12,241 12,241 14,047
Sep-94 12,990 12,805 12,207 12,282 12,282 14,143
Dec-94 12,881 12,689 12,089 12,142 12,142 13,940
Mar-95 13,496 13,285 12,653 12,685 12,685 14,926
Jun-95 13,813 13,587 12,935 12,944 12,944 15,286
Sep-95 14,170 13,928 13,253 13,238 13,238 15,726
Dec-95 14,564 14,305 13,606 13,564 13,564 16,374
Mar-96 14,501 14,232 13,531 13,464 13,464 16,177
Jun-96 14,561 14,279 13,570 13,478 13,478 16,301
Sep-96 14,789 14,492 13,767 13,647 13,647 16,676
Dec-96 15,086 14,771 14,027 13,879 13,879 17,101
Mar-97 15,068 14,743 13,993 13,821 13,821 17,061
Jun-97 15,430 15,087 14,312 14,110 14,110 17,649
Sep-97 15,788 15,426 14,627 14,394 14,394 18,182
Dec-97 16,061 15,682 14,863 14,599 14,599 18,675
Mar-98 16,209 15,816 14,983 14,690 14,690 18,890
Jun-98 16,466 16,055 15,205 14,881 14,881 19,177
Sep-98 17,035 16,597 15,711 15,374 15,374 19,766
Dec-98 17,142 16,689 15,791 15,422 15,422 19,885
Mar-99 17,289 16,820 15,908 15,507 15,507 20,061
Jun-99 16,905 16,433 15,538 15,116 15,116 19,706
Sep-99 16,848 16,363 15,466 15,019 15,019 19,627
Dec-99 16,739 16,243 15,347 14,875 14,875 19,474
Mar-00 17,192 16,671 15,745 15,232 15,232 20,045
Jun-00 17,429 16,889 15,943 15,395 15,395 20,347
Sep-00 17,776 17,212 16,241 15,653 15,653 20,840
FOR PERIOD ENDING SEPTEMBER 30, 2000
AVERAGE ANNUAL TOTAL RETURN
From
1 Year 5 Year 10 Year Inception
------- ------- ------- ---------
Institutional Class 5.50% 4.62% 5.60% 5.57%
Service Class 5.19% 4.31% 5.29% 5.25%
Investor A Class (Load Adjusted) 0.82% 3.29% 4.68% 4.77%
Investor A Class (NAV) 5.01% 4.13% 5.11% 5.07%
Investor B Class (Load Adjusted) (0.27)% 3.00% 3.07% 4.29%
Investor B Class (NAV) 4.23% 3.36% 4.33% 4.29%
Investor C Class (Load Adjusted) 3.23% 3.36% 4.33% 4.29%
Investor C Class (NAV) 4.23% 3.36% 4.33% 4.29%
* IN CONNECTION WITH THE CONVERSION OF VARIOUS COMMON TRUST FUNDS MAINTAINED BY
PNC BANK AND PNC BANK, DELAWARE ("PNC-DE"), AN AFFILIATE OF PNC BANK, INTO THE
FUND BETWEEN MAY 1 AND MAY 15, 1998 (THE "CTF CONVERSION"), THE DELAWARE
TAX-FREE INCOME PORTFOLIO WAS ESTABLISHED TO RECEIVE THE ASSETS OF THE DE
TAX-FREE INCOME FUND OF PNC-DE. PERFORMANCE INFORMATION PRESENTED FOR THIS
PORTFOLIO INCLUDES PERFORMANCE FOR THE PREDECESSOR COMMON TRUST FUND WHICH
TRANSFERRED ITS ASSETS AND LIABILITIES TO THE RELATED PORTFOLIO PURSUANT TO
THE CTF CONVERSION. PERFORMANCE INFORMATION PRESENTED IS BASED UPON THE
PERFORMANCE OF THE DE TAX-FREE INCOME FUND FOR PERIODS PRIOR TO THE CTF
CONVERSION.
THE INCEPTION DATE OF THE LEHMAN LOCAL G.O. WAS JANUARY 1, 1990. BASED ON THE
PERFORMANCE OF THE DE TAX-FREE INCOME FUND, THE PORTFOLIO'S PREDECESSOR COMMON
TRUST FUND, THE ANNUAL TOTAL RETURN OF THE DELAWARE TAX-FREE INCOME PORTFOLIO
FOR THE CALENDAR YEARS 1987, 1988 AND 1989 WAS 0.27%, 0.74% AND 0.63%,
RESPECTIVELY. SEE "NOTE ON PERFORMANCE INFORMATION" ON PAGE 8 FOR FURTHER
INFORMATION ON HOW PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
6
<PAGE>
BLACKROCK FUNDS
KENTUCKY TAX-FREE INCOME PORTFOLIO
TOTAL NET ASSETS (9/30/00):
$154.8 MILLION
PERFORMANCE BENCHMARK:
LEHMAN MUNICIPAL BOND INDEX
INVESTMENT APPROACH:
SEEKS AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL AND KENTUCKY
STATE INCOME TAX AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL BY INVESTING
PRIMARILY IN MUNICIPAL FIXED INCOME SECURITIES RATED BBB OR HIGHER BY A MAJOR
RATING AGENCY OR DEEMED BY THE MANAGER TO BE OF COMPARABLE CREDIT QUALITY.
RECENT PORTFOLIO MANAGEMENT ACTIVITY:
(BULLET)THE TWO MOST PERSUASIVE THEMES IN THE MUNICIPAL MARKET DURING THE
PAST YEAR WERE A CONTINUED SLOWDOWN IN NEW ISSUANCE AND THE EMERGENCE OF THE
RETAIL INVESTOR'S PREFERENCE FOR INDIVIDUAL MUNICIPAL BONDS. AFTER DECLINING BY
21% IN 1999, NEW ISSUANCE THROUGH THE FIRST NINE MONTHS OF 2000 DECLINED BY
19.1%. THIS LARGE DROP IN ISSUANCE WAS FUELED BY A 60% DROP IN REFUNDING
ACTIVITY. THE FACT THAT MUNICIPAL COFFERS WERE FULL AS A RESULT OF THE STRONG
ECONOMY ALSO CONTRIBUTED TO THE DECLINE IN ISSUANCE.
(BULLET)SIMULTANEOUSLY WITH THE DROP IN SUPPLY, RETAIL INVESTORS FLEXED
THEIR COLLECTIVE MUSCLES DURING 2000 AND BOUGHT INDIVIDUAL MUNICIPAL BONDS AT A
RECORD PACE. THIS STRONG DEMAND, COUPLED WITH HISTORICALLY LIGHT SUPPLY, HELPED
MUNICIPAL BONDS OUTPERFORM TAXABLE SECTORS SUCH AS CORPORATES AND MORTGAGE
BACKED SECURITIES. THE TREASURY SECTOR, WHICH BENEFITED FROM VERY STRONG
TECHNICALS (REDUCED NEW ISSUANCE AND BUYBACKS), WAS THE ONLY FIXED-INCOME SECTOR
THAT MUNICIPALS WERE UNABLE TO OUTPERFORM.
(BULLET)IN THE THIRD QUARTER OF 2000, MUNICIPALS MARGINALLY UNDERPERFORMED
THE TREASURY MARKET IN THE 5- AND 10-YEAR SECTORS AS THE TREASURY CURVE
EXPERIENCED A SIGNIFICANT AMOUNT OF STEEPENING. OVERALL, THOUGH, THE MUNICIPAL
YIELD CURVE HAS BEEN REMARKABLY STABLE IN SPITE OF THE VOLATILITY EXPERIENCED IN
THE TREASURY MARKET.
(BULLET)THROUGHOUT THE PAST YEAR, OUR MAJOR PORTFOLIO MANAGEMENT THEME HAS
BEEN TO ADD INCOME. THE NARROWING OF COUPON AND QUALITY SPREADS OVER THE PAST
YEAR HAS ENABLED US TO DO BOTH UP-IN-COUPON AND UP-IN-QUALITY TRADES SO THAT THE
END RESULT IS THAT THE PORTFOLIO HAS A HIGHER LEVEL OF INCOME AND THE GENERAL
QUALITY OF INVESTMENTS HAS BEEN IMPROVED.
Although the portfolio holdings and sectors listed above were current as of the
end of the annual period ended September 30, 2000, the Portfolio is actively
managed and the composition will vary.
COMPARISON OF CHANGE IN VALUE OF A $10,000
INVESTMENT IN THE KY TAX-FREE
INCOME PORTFOLIO AND LEHMAN
MUNICIPAL BOND INDEX AT EACH
FISCAL YEAR END.
[GRAPH OMITTED]
Plot points as follows:
Lehman
Municipal
Institutional Service Investor A Investor B Investor C Bond
Class Class Class Class Class Index
12/31/89 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000
Sep-90 10,254 10,232 9,810 10,161 10,161 10,285
Dec-90 10,751 10,720 10,274 10,621 10,621 10,729
Mar-91 10,940 10,900 10,442 10,775 10,775 10,972
Jun-91 11,142 11,094 10,624 10,942 10,942 11,205
Sep-91 11,414 11,356 10,870 11,175 11,175 11,641
Dec-91 11,736 11,667 11,164 11,456 11,456 12,032
Mar-92 11,772 11,694 11,185 11,456 11,456 12,068
Jun-92 12,092 12,002 11,476 11,732 11,732 12,526
Sep-92 12,367 12,266 11,723 11,962 11,962 12,859
Dec-92 12,613 12,501 11,942 12,163 12,163 13,093
Mar-93 12,960 12,834 12,256 12,459 12,459 13,579
Jun-93 13,268 13,131 12,533 12,717 12,717 14,023
Sep-93 13,683 13,531 12,910 13,075 13,075 14,497
Dec-93 13,816 13,653 13,021 13,162 13,162 14,700
Mar-94 13,212 13,046 12,437 12,548 12,548 13,893
Jun-94 13,392 13,214 12,591 12,681 12,681 14,047
Sep-94 13,502 13,313 12,679 12,745 12,745 14,143
Dec-94 13,368 13,172 12,539 12,581 12,581 13,940
Mar-95 14,085 13,869 13,197 13,216 13,216 14,926
Jun-95 14,410 14,178 13,486 13,480 13,480 15,286
Sep-95 14,801 14,551 13,835 13,804 13,804 15,726
Dec-95 15,163 14,896 14,157 14,099 14,099 16,374
Mar-96 15,116 14,838 14,096 14,012 14,012 16,177
Jun-96 15,168 14,876 14,127 14,016 14,016 16,301
Sep-96 15,416 15,110 14,343 14,204 14,204 16,676
Dec-96 15,718 15,395 14,607 14,438 14,438 17,101
Mar-97 15,745 15,409 14,615 14,418 14,418 17,061
Jun-97 16,131 15,774 14,955 14,727 14,727 17,649
Sep-97 16,520 16,144 15,298 15,036 15,036 18,182
Dec-97 16,806 16,412 15,544 15,251 15,251 18,675
Mar-98 16,960 16,551 15,670 15,346 15,346 18,890
Jun-98 17,245 16,817 15,916 15,556 15,556 19,177
Sep-98 17,787 17,332 16,397 15,998 15,998 19,766
Dec-98 17,883 17,414 16,465 16,036 16,036 19,885
Mar-99 17,979 17,495 16,535 16,074 16,074 20,061
Jun-99 17,648 17,161 16,210 15,730 15,730 19,706
Sep-99 17,567 17,072 16,116 15,611 15,611 19,627
Dec-99 17,449 16,946 15,991 15,460 15,460 19,474
Mar-00 17,795 17,268 16,288 15,718 15,750 20,045
Jun-00 18,014 17,485 16,485 15,880 15,895 20,347
Sep-00 18,385 17,814 16,789 16,142 16,175 20,840
FOR PERIOD ENDING SEPTEMBER 30, 2000
AVERAGE ANNUAL TOTAL RETURN
From
1 Year 5 Year 10 Year Inception
------- ------- ------- ---------
Institutional Class 4.66% 4.49% 6.04% 6.16%
Service Class 4.35% 4.18% 5.73% 5.84%
Investor A Class (Load Adjusted) 0.01% 3.16% 5.12% 5.32%
Investor A Class (NAV) 4.17% 4.01% 5.55% 5.66%
Investor B Class (Load Adjusted) (1.10)% 2.88% 3.69% 4.87%
Investor B Class (NAV) 3.40% 3.23% 4.76% 4.87%
Investor C Class (Load Adjusted) 2.61% 3.27% 4.78% 4.89%
Investor C Class (NAV) 3.61% 3.27% 4.78% 4.89%
* IN CONNECTION WITH THE CONVERSION OF VARIOUS COMMON TRUST FUNDS MAINTAINED BY
PNC BANK AND PNC BANK, DELAWARE ("PNC-DE"), AN AFFILIATE OF PNC BANK, INTO THE
FUND BETWEEN MAY 1 AND MAY 15, 1998 (THE "CTF CONVERSION"), THE KENTUCKY
TAX-FREE INCOME PORTFOLIO WAS ESTABLISHED TO RECEIVE THE ASSETS OF THE KY
TAX-FREE INCOME FUND OF PNC BANK. PERFORMANCE INFORMATION PRESENTED FOR THIS
PORTFOLIO INCLUDES PERFORMANCE FOR THE PREDECESSOR COMMON TRUST FUND WHICH
TRANSFERRED ITS ASSETS AND LIABILITIES TO THE RELATED PORTFOLIO PURSUANT TO
THE CTF CONVERSION. PERFORMANCE INFORMATION PRESENTED IS BASED UPON THE
PERFORMANCE OF THE KY TAX-FREE INCOME FUND FOR PERIODS PRIOR TO THE CTF
CONVERSION.
THE INCEPTION DATE OF THE LEHMAN LOCAL G.O. WAS JANUARY 1, 1990. BASED ON THE
PERFORMANCE OF THE KY TAX-FREE INCOME FUND, THE PORTFOLIO'S PREDECESSOR COMMON
TRUST FUND, THE ANNUAL TOTAL RETURN OF THE KY TAX-FREE INCOME PORTFOLIO FOR THE
CALENDAR YEARS 1987, 1988 AND 1989 WAS 0.79%, 2.70% AND 1.66%, RESPECTIVELY. SEE
"NOTE ON PERFORMANCE INFORMATION" ON PAGE 8 FOR FURTHER INFORMATION ON HOW
PERFORMANCE DATA WAS CALCULATED.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS.
7
<PAGE>
BLACKROCK FUNDS
NOTE ON PERFORMANCE INFORMATION
The performance information above includes information for each class of
each Portfolio since the commencement of operations of the Portfolio, rather
than the date such class was introduced. Performance information for each class
introduced after the commencement of operations of a Portfolio is therefore
based on the performance history of a predecessor class or predecessor classes.
If a class of shares in a Portfolio (the "Subsequent Class") has more than one
predecessor class, the performance data predating the introduction of the
Subsequent Class is based initially on the performance of the Portfolio's first
operational predecessor class (the "Initial Class"); thereafter, the performance
of the Subsequent Class is based upon the performance of any other predecessor
class or classes which were introduced after the Initial Class and which had
total operating expenses more similar to those of the Subsequent Class. In the
case of Investor A, Investor B, Investor C and Service Shares, the performance
information for periods prior to their introduction dates has not been restated
to reflect the shareholder servicing and processing and/or distribution fees and
certain other expenses borne by these share classes which, if reflected, would
reduce the performance quoted. Accordingly, the performance information may be
used in assessing each Portfolio's performance history but does not reflect how
the distinct classes would have performed on a relative basis prior to the
introduction of these classes, which would require an adjustment to the ongoing
expenses.
Performance information is restated to reflect the current maximum
front-end sales charge (in the case of Investor A Shares) or the maximum
contingent deferred sales charge (in the case of Investor B and Investor C
Shares), and assumes the reinvestment of dividends and distributions. The
maximum front-end sales charges for Investor A Shares of all the portfolios is
4.00%. The maximum contingent deferred sales charge for Investor B Shares and
Investor C Shares of all of the Portfolios is 4.50% and 1.00%, respectively.
The performance information also reflects fee waivers that subsidize and
reduce the total operating expenses of each Portfolio. The Portfolios' returns
would have been lower if there were not such waivers. BlackRock Advisors, Inc.
and the Portfolios' Administrators are under no obligation to waive or continue
waiving their fees. Investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
--------------------------------------------------------------------------------
IMPORTANT TAX INFORMATION FOR SHAREHOLDERS OF THE BLACKROCK TAX-FREE BOND
PORTFOLIOS (UNAUDITED)
During the fiscal year ended September 30, 2000, 100% of the income
dividends paid by the Tax-Free Income, Pennsylvania Tax-Free Income, New Jersey
Tax-Free Income, Ohio Tax-Free Income, Delaware Tax-Free Income and Kentucky
Tax-Free Income Portfolios were exempt-interest dividends for purposes of
federal income taxes and accordingly, were exempt from such taxes. However, the
percentage of these dividends which must be included in federal alternative
minimum taxable income for purposes of determining any liability for the
alternative minimum tax is as follows: Tax-Free Income Portfolio 22%,
Pennsylvania Tax-Free Income Portfolio 6 %, New Jersey Tax-Free Income Portfolio
11%, Ohio Tax-Free Income Portfolio 2%, Delaware Tax-Free Income Portfolio 3%
and Kentucky Tax-Free Income Portfolio 11%.
In January 2001, you will be furnished with a schedule showing the annual
percentage breakdown by state or U.S. possession of the source of interest
earned by each Portfolio in 2000.
8
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
TAX-FREE INCOME PORTFOLIO
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS -- 94.9%
ALABAMA -- 2.5%
Alabama Hsg. Fin. Auth. Sgl. Fam. Mtg
Rev., Cltrl. Home Mtg. Bd. Prj.,
Ser. 94B-1
6.65% 10/01/25 $1,100 $ 1,143,373
Alabama Rev., Priv. Coll. & Tuskegee
Univ. Prj., Ser. 96A
5.90% 09/01/16 1,000 1,031,130
Alabama St. Pub. Sch. & Coll. Auth.
Cap. Imp. Rev., Ser. 99C
5.75% 07/01/18 3,000 3,065,970
Courtland Ind. Dev. Rev.,
Champion Intl. Corp. Prj., Ser. 92
7.20% 12/01/13 1,000 1,043,150
Courtland Ind. Dev. Solid Waste Disp.
Rev., Champion Intl. Corp. Prj.,
Ref. Ser. 99
6.00% 08/01/29 1,500 1,397,190
Shelby Cnty. Bd. of Ed. Rev., Ser. 95
5.70% 02/01/09 680 708,852
-------------
8,389,665
-------------
ALASKA -- 1.5%
Alaska Ind. Dev. & Expt. Auth.
Revolving Fd. Rev., Ser 97A
6.00% 04/01/07 2,500 2,644,225
Alaska St. Hsg. Fin. Agcy Rev., Ser. 95A
5.87% 12/01/24 2,500 2,500,500
-------------
5,144,725
-------------
ARIZONA -- 0.5%
Maricopa Cnty. Cmnty. Coll. Dist. Rev.,
Prerefunded Ser. 95A
6.00% 07/01/06 325 340,379
Maricopa Cnty. Cmnty. Coll. Dist. Rev.,
Unrefunded Ser. 95A
6.00% 07/01/06 15 15,658
Phoenix G.O., Ser. 92
6.12% 07/01/03 1,030 1,073,981
6.37% 07/01/13 200 208,150
-------------
1,638,168
-------------
CALIFORNIA -- 5.0%
California St. G.O., Ser. 90
6.50% 11/01/06 340 379,219
California St. G.O., Ser. 94
6.20% 11/01/02 1,000 1, 1,040,920
California St. G.O., Ser. 99
5.87% 10/01/20 13,815 14,414,157
Los Angeles G.O., Ser. 94A
5.80% 09/01/07 340 365,187
Sacramento Mun. Util. Dist. Elec. Rev.,
Prerefunded Ser. 92C
5.75% 11/15/09 430 447,110
Sacramento Mun. Util. Dist. Elec. Rev.,
Unrefunded Ser. 92C
5.75% 11/15/09 80 83,811
-------------
16,730,404
-------------
COLORADO -- 1.9%
Arapahoe Cnty. Cap. Imp. Tr. Fd.
Hwy. Rev., Ser. 86
7.16%+ 08/31/04 900 746,847
PAR
MATURITY (000) VALUE
-------- ----- -------
COLORADO (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
Arapahoe Cnty. Cap. Imp. Tr. Fd.
Hwy. Rev., Ser. 86E-470
6.90%** 08/31/05 $ 750 $ 842,272
Denver City & Cnty. Arpt. Rev.,
Prerefunded Ser. 91D
7.00% 11/15/25 210 215,443
Denver City & Cnty. Arpt. Rev.,
Prerefunded Ser. 92C
6.75% 11/15/13 60 63,631
Denver City & Cnty. Arpt. Rev.,
Unrefunded Ser. 90A
8.00% 11/15/25 2,745 2,809,755
Denver City & Cnty. Arpt. Rev.,
Unrefunded Ser. 91D
7.00% 11/15/25 790 797,134
Denver City & Cnty. Arpt. Rev.,
Unrefunded Ser. 92C
6.75% 11/15/13 440 458,735
Jefferson Cnty. Sch. Dist. G.O.,
Ser. 92
6.00% 12/15/12 300 312,204
-------------
6,246,021
-------------
DELAWARE -- 0.1%
Delaware Trans. Auth. Trans.
Sys. Rev., Ser. 92
5.62% 07/01/05 440 455,611
-------------
DISTRICT OF COLUMBIA -- 0.0%
District of Columbia G.O.,
Ser. 93A-1
6.00% 06/01/11 50 53,831
-------------
FLORIDA -- 7.1%
Florida Dept. of Trans. G.O.,
Ser. 91
6.25% 07/01/07 400 409,476
Florida Hsg. Fin. Corp. Rev.,
Sunset Place Prj., Ser. 99K-1
6.10% 10/01/29 3,000 2,975,790
Florida St. Bd. of Ed. Cap.
Outlay G.O., Ref. Ser. 00D
5.75% 06/01/22 7,800 7,898,514
Hillsborough Cnty. Ind. Dev. Auth.
Exempt Fac. Rev., Nat. Gypsum
Prj., Ser. 00A
7.12% 04/01/30 5,000 4,993,850
Santa Rosa Bay Bldg. Auth.
Rev., Ser. 96
6.25% 07/01/28 3,000 2,844,930
Tampa Hosp. Cap. Imp. Rev.,
H. Lee Moffitt Prj., Ser. 99A
5.75% 07/01/19 5,000 4,627,700
-------------
23,750,260
-------------
GEORGIA -- 1.6%
Atlanta Arpt. Fac. Rev., Ser. 94A
6.50% 01/01/10 1,000 1,117,680
Forsyth Cnty. Sch. Dist. G.O., Ser. 92
6.70% 07/01/12 1,000 1,126,990
Fulton Cnty. Fac. Corp. COP's,
Fulton Cnty. Pub. Purp. Prj., Ser. 99
5.50% 11/01/18 1,000 993,170
Georgia G.O., Ser. 92A
6.00% 03/01/04 340 355,606
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
GEORGIA (CONTINUED)
Georgia Mun. Elec. Auth. Pwr.
Rev., Ser. 92B
6.12% 01/01/14 $ 400 $ 413,268
Georgia Mun. Elec. Auth. Pwr.
Rev., Ser. 93B
5.70% 01/01/19 1,000 1,008,960
Gwinnett Cnty. G.O., Ser. 92
6.00% 01/01/10 400 416,896
-------------
5,432,570
-------------
HAWAII -- 2.3%
Hawaii Dept. of Budget & Fin.
Rev., Ser. 90C
7.37% 12/01/20 4,000 4,092,440
Hawaii St. Hbr. Cap. Imp. Rev., Ser. 97
5.50% 07/01/27 3,750 3,578,138
-------------
7,670,578
-------------
ILLINOIS -- 6.3%
Chicago Wtr. Rev., Ref. Ser. 97
5.50% 11/01/22 9,905 9,669,657
Chicago Motor Fuel Tax Rev., Ser. 90
7.00% 01/01/05 2,500 2,562,525
Chicago Pk. Dist. G.O., Ser. 96
5.50% 01/01/16 2,250 2,242,890
Chicago Res. Mtg. Rev., Ref. Ser. 92B
7.00%+ 10/01/09 230 123,142
Cook Cnty. G.O., Ser. 96
5.87% 11/15/22 2,000 2,138,560
Illinois G.O., Ser. 94
5.50% 08/01/06 680 706,690
Illinois Hsg. Dev. Auth. Rev.,
Multi-Family Prj., Ser. 94-5
6.65% 09/01/14 3,000 3,174,930
Winnebago & Boone Cnty. G.O.,
Sch. Dist. No. 205 Prj., Ser. 92C
5.90% 02/01/05 500 522,800
-------------
21,141,194
-------------
INDIANA -- 1.5%
Indianapolis Ind. Pub. Imp. Rev.,
Prerefunded Ser. 91C
6.70% 01/01/02 2,000 2,089,720
Indianapolis Intl. Arpt. Auth. Spec.
Fac. Rev., Federal Express Corp.
Prj., Ser. 94
7.10% 01/15/17 2,825 2,952,153
-------------
5,041,873
-------------
KANSAS -- 0.3%
Johnson Cnty. Intl. Imp. Rev.,
Prerefunded Ser. 92A
6.00% 09/01/02 165 171,077
Johnson Cnty. Intl. Imp. Rev.,
Unrefunded Ser. 92A
6.00% 09/01/07 235 243,218
Kansas Dept. of Trans. Rev., Ser. 94A
6.00% 09/01/12 400 418,408
-------------
832,703
-------------
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
LOUISIANA -- 0.8%
Orleans Rev., Levee Dist. Pub.
Imp. Prj., Ser. 86
5.96% 11/01/15 $2,730 $ 2,833,276
------------
MARYLAND -- 0.0%
Baltimore Port Fac. Rev.,
E.I. du Pont Co. Prj., Ser. 84A
6.50% 10/01/11 100 104,991
------------
MASSACHUSETTS -- 3.3%
Massachusetts Bay Trans. Auth.
Rev., Ser. 95B
5.37% 03/01/20 1,000 974,680
Massachusetts St. Hlth. & Ed. Fac.
Auth. Rev., Newton-Wellesley
Hosp. Prj., Ser. 97G
6.12% 07/01/15 1,000 1,053,450
Massachusetts St. Wtr. Poll.
Abatement Tr. Pool Prog.
Rev., Ser. 99
5.75% 08/01/18 6,865 6,972,506
Massachusetts St. Wtr. Res.
Auth. Rev., Ser. 94A
5.70% 08/01/08 680 716,203
New England Ed. Ln. Mktg. Corp. Rev.,
Stud. Ln. Redemption Prj., Ser. 93F
5.62% 07/01/04 1,350 1,378,809
------------
11,095,648
------------
MICHIGAN -- 0.6%
Huron Vy. Sch. Dist. G.O., Ser. 96
5.87% 05/01/16 2,000 2,131,520
------------
MISSOURI -- 1.3%
Lake of The Ozarks Cmnty. Bldg.
Corp. Sys. Rev., Ser. 98
5.25% 12/01/14 4,915 4,410,279
------------
NEBRASKA -- 0.4%
Omaha Pub. Pwr. Dist. Elec. Rev.,
Prerefunded Ser. 92A
6.30% 02/01/02 340 352,702
Omaha Pub. Pwr. Dist. Elec. Rev.,
Unrefunded Ser. 92B
6.15% 02/01/12 1,000 1,088,500
------------
1,441,202
------------
NEW JERSEY -- 5.4%
New Jersey Econ. Dev. Auth. Mkt.
Transition Fac. Rev., Ser. 94A
5.80% 07/01/08 495 522,289
New Jersey St. Tpke. Auth. Rev.,
Ser. 00A
5.75% 01/01/16 4,000 4,115,080
New Jersey St. Trans. Tr. Fd. Auth.
Trans. Sys. Rev., Ser. 00A
6.00% 06/15/19 10,000 10,409,100
Port Auth. New York & New Jersey
Spec. Oblig. Rev., JFK Intl. Arpt.
Term. Prj., Ser. 97-6
6.25% 12/01/09 2,680 2,956,683
------------
18,003,152
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
NEW MEXICO -- 0.5%
Los Alamos Cnty. Util. Sys. Rev.,
Ser. 94A
5.80% 07/01/06 $1,500 $ 1,578,990
-------------
NEW YORK -- 5.8%
New York City G.O., Prerefunded
Ser. 95B
6.37% 08/15/09 805 874,133
New York City G.O., Prerefunded
Ser. 95E
6.50% 08/01/02 285 295,517
New York City G.O., Ser. 95A
6.00% 08/01/05 1,000 1,055,900
New York City G.O., Ser. 96A
6.00% 08/01/05 2,000 2,111,800
New York City G.O.,
Unrefunded Ser. 95B
6.37% 08/15/09 3,035 3,247,693
New York City G.O.,
Unrefunded Ser. 95E
6.50% 08/01/02 715 739,096
New York City Ind. Dev. Agcy.
Rev., Term. One Grp. Assoc.
Prj., Ser. 94
6.00% 01/01/08 360 374,706
6.00% 01/01/19 500 501,280
New York St. Dorm. Auth. Rev.,
St. Joseph's Hosp. Prj., Ser. 97
5.25% 07/01/18 3,000 2,853,480
New York St. Hsg. Fin.
Agcy. Rev., Ser. 96A
6.37% 11/01/04 4,000 4,221,400
New York St. Loc. Govt.
Assistance Corp. Rev., Ser. 95A
5.70% 04/01/08 340 361,706
New York St. Urban Dev. Corr.
Fac. Rev., Ser. 93
5.62% 01/01/07 2,750 2,848,725
------------
19,485,436
------------
NORTH CAROLINA -- 0.8%
Eastern Mun. Pwr. Agcy. Sys.
Rev., Ser. 93C
5.25% 01/01/04 1,000 1,015,980
5.37% 01/01/05 1,250 1,277,675
North Carolina Mun. Pwr. Agcy.
Rev., Catawba Elec. Prj.,
Ser. 92A
6.00% 01/01/10 300 322,647
------------
2,616,302
------------
OHIO -- 0.4%
Cleveland-Cuyahoga Cnty.
Port Auth. Rev., Ser. 97
6.00% 03/01/07 725 717,757
Columbus Refuse Coal Fired
Plant 5-E-L G.O., Ser. 91
6.62% 09/15/01 35 35,735
Ohio Wtr. Dev. Auth. Rev.,
Clean Wtr. Prj., Ser. 92
5.65% 12/01/05 300 311,883
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
OHIO (CONTINUED)
Olentangy Loc. Sch. Dist. G.O.,
Ser. 95A
5.85% 12/01/07 $ 340 $ 362,457
------------
1,427,832
------------
OKLAHOMA -- 0.3%
Grand River Dam Auth. Rev., Ser. 93
8.00% 06/01/02 1,000 1,054,740
------------
OREGON -- 2.1%
Klamath Falls Elec. Sr. Lien Rev.,
Klamath Cogen Prj., Ref. Ser. 99
6.00% 01/01/25 7,500 6,717,750
Portland Swr. Sys. Rev., Ser. 92A
6.00% 10/01/12 300 314,148
------------
7,031,898
------------
PENNSYLVANIA -- 10.4%
Beaver Cnty. G.O., Ser. 96A
5.75% 10/01/15 1,000 1,055,880
Beaver Cnty. Ind. Dev. Auth. Poll. Ctrl.
Rev., St. Joe Minerals Corp. Prj.,
Ser. 77
6.00% 05/01/07 2,425 2,429,365
Dauphin Cnty. Gen. Auth. Rev.,
Hotel & Conf. Ctr. Hyatt
Regency Prj., Ser. 98
6.20% 01/01/19 5,000 4,658,850
6.20% 01/01/29 1,500 1,368,300
Delaware Cnty. Auth. Rev.,
Mercy Hlth. Corp. Prj., Ser. 96
5.75% 12/15/20 2,400 2,431,368
Lehigh Cnty. Gen. Purp. Auth.
Rev., Kidspeace Oblig. Prj., Ser. 98
6.00% 11/01/23 4,000 3,931,160
Pennsylvania Con. Ctr. Auth.
Rev., Ser. 94A
6.60% 09/01/09 4,250 4,586,898
Pennsylvania St. Hgr. Ed. Fac.
Auth. Hlth. Svcs. Rev.,
Univ. of Pennsylvania Hlth.
Svcs. Prj., Ser. 96A
5.87% 01/01/15 3,450 3,309,965
5.75% 01/01/17 3,535 3,321,592
Philadelphia Ind. Dev. Auth.
Arpt. Fac. Rev., Aero
Philadelphia LLC Prj., Ser. 99
5.25% 01/01/09 1,190 1,117,779
Philadelphia Ind. Dev. Auth.
Rev., PGH Dev. Corp. Prj., Ser. 93
5.25% 07/01/17 1,935 1,825,731
Philadelphia Mun. Auth. Rev.,
Ref. Ser. 93D
6.12% 07/15/08 1,000 1,059,080
Philadelphia Sch. Dist. Unltd.
Tax G.O., Ser. 99C
5.75% 03/01/29 4,000 4,025,760
------------
35,121,728
------------
PUERTO RICO -- 0.3%
Puerto Rico Elec. Pwr. Auth.
Rev., Ser. 94S
7.00% 07/01/06 1,000 1,118,740
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
TAX-FREE INCOME PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
RHODE ISLAND -- 0.9%
Rhode Island Depositors Econ.
Protection Corp. Spec. Oblig.
Rev., Prerefunded Ser. 93
5.62% 08/01/09 $ 190 $ 199,758
Rhode Island Depositors Econ.
Protection Corp. Spec. Oblig.
Rev., Unrefunded Ser. 93
5.62% 08/01/09 810 843,356
Rhode Island St. Hlth. & Ed. Bldg.
Corp. Rev., Hosp. Fin. Lifespan
Oblig. Grp. Prj., Ser. 96
5.50% 05/15/16 2,000 1,983,340
------------
3,026,454
------------
SOUTH CAROLINA -- 0.3%
Piedmont Mun. Pwr. Agcy.
Elec. Rev., Ser. 85B
6.25% 01/01/18 500 510,605
South Carolina Pub. Svcs. Auth. Rev.,
Santee Cooper Prj., Ser. 91D
6.50% 07/01/14 100 105,243
Spartanburg Wtr. Rev.,
Prerefunded Ser. 92
6.20% 06/01/09 15 15,554
Spartanburg Wtr. Rev.,
Unrefunded Ser. 92
6.20% 06/01/09 285 294,037
------------
925,439
------------
SOUTH DAKOTA -- 0.2%
South Dakota St. Lease Rev.,
Trans. Cert. Prj., Ser. 93A
6.37% 09/01/05 500 535,850
------------
TENNESSEE -- 0.6%
Maury Cnty. Ind. Dev. Poll. Ctrl. Rev.,
Saturn Corp. Prj., Ser. 94
6.50%** 09/01/24 1,800 1,851,282
------------
TEXAS -- 19.5%
Brazos River Auth. Cltrl. Poll.
Ctrl. Rev., Texas Util. Elec. Co. Prj.,
Ser. 95C
5.55% 06/01/30 5,000 4,452,300
Dallas Cnty. Util. & Cap. Apprec.
Rev., Ref. Ser. 99A
6.19%+ 02/15/21 17,225 5,104,629
6.21%+ 02/15/22 18,405 5,116,590
Dallas Ind. Dev. Corp. Rev.,
CR/PL, Inc. Prj., Ser. 87
7.50% 08/01/17 2,200 2,301,244
Dallas-Fort Worth Intl. Arpt.
Fac. Imp. Corp. Rev., Ser. 99
6.37% 05/01/35 5,000 4,834,100
Guadalupe-Blanco River Auth.
Swr. & Solid Waste Disp. Fac. Rev.,
E.I. du Pont de Nemours & Co. Prj.,
Ser. 99
5.50% 05/01/29 6,000 5,623,080
Matagorda Cnty. Nav. Dist.
No. 1 Rev., Reliant Energy Prj.,
Ser. 99B
5.95% 05/01/30 15,000 13,585,168
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
TEXAS (CONTINUED)
Sabine River Auth. Poll. Ctrl. Rev.,
Texas Util. Elec. Prj., Ser. 90B
8.25% 10/01/20 $2,500 $ 2,550,000
San Antonio Arpt. Rev., Ser. 91
7.12% 07/01/07 2,000 2,165,960
7.12% 07/01/08 2,645 2,859,483
Spring Branch Sch. Dist. G.O., Ser. 95
5.95% 02/01/12 2,245 2,314,528
Texas Wtr. Dev. Rev.,
St. Revolving Fd. Prj., Ser. 92
6.20% 07/15/05 680 711,477
Texas Wtr. Fin. Assist. G.O.,
Ref. Ser. 00
5.75% 08/01/22 3,445 3,460,089
Travis Cnty. Hlth. Fac. Dev. Corp. Rev.,
Ascension Hlth. Credit Prj., Ser. 99A
5.87% 11/15/24 10,000 10,056,000
Univ. of Texas Rev.,
Prerefunded Ser. 91A
7.00% 08/15/07 160 166,629
Univ. of Texas Rev.,
Unrefunded Ser. 91A
7.00% 08/15/07 340 353,314
------------
65,654,591
------------
UTAH -- 0.1%
Jordan Sch. Dist. G.O., Ser. 93
6.05% 06/15/03 340 352,430
Salt Lake City Hosp. Rev., Ser. 88A
8.12% 05/15/15 100 124,320
------------
476,750
------------
VERMONT -- 0.3%
Vermont St. G.O., Ser. 94A
6.00% 01/15/03 1,000 1,032,310
------------
VIRGIN ISLANDS -- 1.1%
Virgin Islands Pub. Fin. Auth.
Rev., Gross Receipts
Tax Ln. Notes, Ser. 99A
6.12% 10/01/29 3,500 3,557,330
------------
VIRGINIA -- 1.3%
Hampton G.O., Ser. 95
6.00% 01/15/08 400 428,572
Pocahontas Pkwy. Toll Rd. Rev.,
Ser. 98B
5.85%+ 08/15/23 15,300 3,002,778
Virginia Hsg. Dev. Auth. Rev.,
Multi-Family Prj., Ser. 95C
6.70% 11/01/15 1,000 1,063,370
------------
4,494,720
------------
WASHINGTON -- 6.9%
Pierce Cnty. G.O., Sch. Dist. No. 416
White River Prj., Ser. 00
6.00% 12/01/13 5,345 5,709,155
Washington St. G.O., Ser. 00B
6.00% 01/01/25 14,000 14,357,700
Washington St. Pub. Pwr. Sply.
Sys. Rev., Nuclear Prj. No. 3,
Ser. 96A
6.00% 07/01/06 3,000 3,175,470
------------
23,242,325
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
TAX-FREE INCOME PORTFOLIO (CONCLUDED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
WISCONSIN -- 0.7%
Milwaukee Met. Swr. Dist. G.O.,
Ser. 92A
6.12% 10/01/03 $ 250 $ 261,395
Wisconsin St. Trans. Rev.,
Prerefunded Ser. 92A
5.50% 07/01/02 495 502,336
Wisconsin St. Trans. Rev.,
Unrefunded Ser. 92A
5.50% 07/01/05 1,505 1,527,304
------------
2,291,035
------------
TOTAL MUNICIPAL BONDS
(Cost $317,121,944) 19,071,423
------------
CUMULATIVE PREFERRED STOCK -- 4.7%
Charter Mac Equity Issue Tr. 144A
6.62% 06/30/09 3,000 2,900,670
7.60% 11/30/10 9,000 8,972,280
MuniMae TE Bond Subs., LLC 144A
6.87% 06/30/09 4,000 3,932,640
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $15,982,359) 15,805,590
------------
SHARES
----------
Short Term Investments -- 0.6%
Smith Barney Tax-Free Money
Market Fund
(Cost $2,063,785) 2,063,785 2,063,785
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $335,168,088*) 100.2% 336,940,798
LIABILITIES IN EXCESS OF
OTHER ASSETS (0.2%) (691,056)
-------- ------------
NET ASSETS
(Applicable to 29,137,494
Institutional shares, 489,472
Service shares, 801,097
Investor A shares, 249,267
Investor B shares and 103,304
Investor C shares outstanding) 100.0% $336,249,742
===== ============
VALUE
-------------
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($332,398,523 (divide by) 30,428,063) $10.92
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $10.92
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.92 (divide by) 0.960) $11.38
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE
($2,722,565 (divide by) 249,267) $10.92
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE
($1,128,654 (divide by) 103,304) $10.93
======
----------------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 8,106,709
Gross unrealized depreciation (6,333,999)
-----------
$ 1,772,710
===========
** Rates shown are the rates as of September 30, 2000.
+ The rate shown is the effective yield on the zero coupon bonds.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS -- 97.3%
PENNSYLVANIA -- 94.3%
Allegheny Cnty. G.O., Ser. 90C
7.00% 12/01/00 $1,000 $ 1,004,000
Allegheny Cnty. Hosp. Dev. Auth.
Rev., Hlth. Ctr. Univ. of Pittsburgh
Med. Ctr. Prj. Ser. 97B
6.00% 07/01/25 7,000 7,285,460
Allegheny Cnty. Hosp. Dev.
Auth. Rev., Mercy Hosp. of
Pittsburgh Prj., Ser. 91
6.75% 04/01/01 1,000 1,031,120
Allegheny Cnty. Hosp. Dev.
Auth. Rev., Ser. 95A
6.00% 09/01/10 5,000 5,084,350
6.20% 09/01/15 1,000 1,080,940
Allegheny Cnty. Hosp. Dev.
Auth. Rev., Univ. of Pittsburgh
Med. Ctr. Prj., Ser. 95
5.35% 12/01/17 10,000 9,715,100
Allegheny Cnty. Res. Fin. Auth.
Mtg. Rev., Sgl. Fam. Mtg. Prj.,
Ser. 94Y
6.25% 05/01/17 230 238,075
Allegheny Cnty. Sanit. Auth.
Rev., Ser. 97
5.37% 12/01/24 22,500 21,687,975
Allentown Pkg. Auth. Pkg. Gtd.
Rev., Ser. 91
6.62% 11/15/01 750 768,067
Armstrong Cnty. Hosp. Auth. Hlth.
Ctr. Rev., Canterbury Pl. Prj., Ser. 91
6.50% 12/01/01 650 665,353
Armstrong Cnty. Hosp. Auth. Rev.,
St. Francis Med. Ctr. Prj., Ser. 92A
6.10% 06/01/02 1,000 1,024,260
Baldwin & Whitehall Sch. Dist. Rev.,
Ser. 92A
6.60% 08/15/02 1,000 1,037,620
Bangor Area Sch. Dist. G.O.,
Ser. 94
6.30% 03/01/04 1,655 1,679,511
Beaver Cnty. Hosp. Auth. Rev.,
Med. Ctr. Beaver Pennsylvania,
Inc. Prj., Ser. 92A
6.60% 07/01/04 2,000 2,107,480
6.25% 07/01/11 1,000 1,047,940
Beaver Cnty. Hosp. Auth. Rev.,
Ser. 96A
5.80% 10/01/06 5,830 6,170,822
Bensalem Twp. Wtr. & Swr.
Auth. Rev., Ser. 93A
6.50% 12/01/14 1,000 1,027,030
Berks Cnty. G.O., Ser. 92
6.30% 11/10/20 2,000 2,073,460
Berks Cnty. Mun. Auth.
Coll. Rev., Ser. 90
7.30% 12/01/00 1,000 1,004,470
Berks Cnty. Unltd. Tax G.O.,
Ser. 98
5.37% 11/15/28 6,685 6,354,962
Bethlehem Wtr. Auth. Rev., Ser. 92
6.25% 11/15/01 750 765,045
6.35% 11/15/01 1,000 1,021,130
Bethlehem Wtr. Auth. Rev., Ser. 92A
6.10% 11/15/02 500 516,235
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Bradford Area Sch. Dist. G.O., Ser. 95
5.80% 10/01/05 $1,465 $ 1,541,283
Bristol Twp. Swr. Auth. Rev., Ser. 84
10.00% 04/01/02 440 463,597
Bucks Cnty. Cmnty. Coll.
Bldg. Auth. Coll. Rev., Ser. 92
6.20% 06/15/02 1,000 1,027,070
Bucks Cnty. Unltd. Tax G.O., Ser. 95
5.87% 05/01/05 1,575 1,652,301
Cambria & Blair Cntys. Rev.
Bldg. Auth. Prj., Ser. 77
6.37% 02/01/07 1,380 1,455,486
Cambria Twp. Wtr. Auth. Ind. Rev.,
Ser. 93A
6.00% 12/01/02 1,000 1,001,810
Central Bucks Sch. Dist.
G.O., Ser. 91
6.75% 02/01/05 1,000 1,007,170
6.90% 02/01/08 750 755,610
Central Bucks Sch. Dist.
G.O., Ser. 94A
6.45% 11/15/04 1,000 1,067,400
Central Bucks Sch. Dist.
Unltd. Tax G.O., Ser. 94A
6.70% 11/15/09 500 538,335
Central Dauphin Sch. Dist.
G.O., Ser. 91
6.00% 06/01/01 1,500 1,515,750
Chester Cnty. Unltd. Tax G.O., Ser. 91
6.60% 08/01/01 1,000 1,017,530
7.00% 08/01/01 750 766,297
6.70% 12/15/04 385 391,907
Coatesville Sch. Dist. G.O., Ser. 91
7.12% 11/01/00 150 150,297
7.25% 11/01/00 750 751,552
6.70% 03/01/01 1,000 1,010,240
Conestoga Vy. Sch. Dist. G.O.,
Ser. 91B
7.00% 05/01/01 750 761,130
7.10% 05/01/01 750 761,550
Council Rock Sch. Dist. G.O., Ser. 91
6.60% 03/01/01 1,000 1,008,190
Council Rock Sch. Dist. Rev., Ser. 78
6.62% 09/01/01 1,325 1,350,904
Crawford Central Sch.
Dist. G.O., Ser. 95
7.00% 02/15/05 1,765 1,927,715
Crawford Central Sch. Dist.
Unltd. Tax G.O., Ser. 95
5.75% 02/15/11 1,585 1,654,946
Cumberland Cnty. Mun. Auth.
Coll. Rev., Messiah Coll. Prj.,
Ser. 95
5.12% 10/01/15 2,000 1,941,960
Dauphin Cnty. Gen. Auth.
Hosp. Rev., Hapsco Western
Pennsylvania Hosp. Prj., Ser. 92
6.25% 07/01/16 1,000 1,033,470
Dauphin Cnty. Gen. Auth. Rev.,
Harrisburg Intl. Arpt. Prj., Ser. 91
7.12% 06/01/01 750 763,057
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Dauphin Cnty. Gen. Auth. Rev.,
Hotel & Conf. Ctr. Hyatt Regency
Prj., Ser. 98
6.20% 01/01/19 $11,975 $ 11,157,946
6.20% 01/01/29 8,600 7,844,920
Dauphin Cnty. Gen. Auth. Rev.,
Sch. Dist. Pooled Fin. Prj., Ser. 86
5.50% 06/01/07 550 570,097
6.85% 06/01/09 2,300 2,379,672
Dauphin Cnty. Gen. Auth. Rev., Ser. 86
6.80%** 12/01/00 1,305 1,349,174
6.71%** 06/01/05 1,325 1,368,804
6.80%** 06/01/07 1,000 1,109,750
5.60%** 06/02/08 525 546,499
5.70%** 06/01/09 660 684,116
Dauphin Cnty. Pinnacle Gen.
Auth. Hlth. Sys. Rev., Ser. 97
5.50% 05/15/17 3,500 3,458,525
Deer Lakes Sch. Dist. Unltd. Tax G.O.,
Ser. 95
6.35% 01/15/14 1,000 1,088,130
6.45% 01/15/19 1,300 1,434,771
Delaware Cnty. Auth. Coll. Rev.,
Haverford Coll. Prj., Ser. 90
7.00% 11/15/00 600 613,662
7.25% 11/15/00 1,000 1,023,050
Delaware Cnty. Auth. Coll. Rev.,
Haverford Coll. Prj., Ser. 00
5.75% 11/15/25 6,795 6,822,180
Delaware Cnty. Auth. Hosp.
Rev., Ser. 95
5.50% 08/15/15 6,480 6,486,869
Delaware Cnty. Auth. Rev.,
Mercy Hlth. Corp. Prj., Ser. 96
5.75% 12/15/20 3,735 3,783,816
Delaware Cnty. Ind. Dev. Auth. Rev.,
Ser. 99
6.00% 06/01/29 3,400 3,469,598
Delaware Cnty. Ind. Dev. Auth. Rev.,
Wtr. Co. Fac. Philadelphia
Suburban Wtr. Prj., Ser. 92
6.50% 06/01/10 1,000 1,047,490
Delaware Cnty. Mem. Hosp.
Auth. Rev., Ser. 95
5.50% 08/15/19 3,000 2,934,360
Delaware Cnty. Rev., Prerefunded Ser. 95
5.50% 10/01/15 1,075 1,114,313
Delaware River Port Auth.
Pennsylvania & New Jersey Rev.,
Port Dist. Prj., Ser. 99B
5.70% 01/01/22 9,600 9,715,968
Delaware River Port Auth.
Pennslyvania & New Jersey Rev.,
Ser. 99
5.75% 01/01/16 8,000 8,265,520
Delaware River Port Auth.
Pennsylvania &
New Jersey Rev., Ser. 99
9.62%** 01/01/22 10,000 10,557,700
Delaware Vy. Regl. Fin. Auth.
Loc. Govt. Rev., Ser. 96A
5.90% 04/15/16 2,540 2,607,285
Delaware Vy. Regl. Fin. Auth.
Loc. Govt. Rev., Ser. 97B
5.60% 07/01/17 2,000 2,030,280
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Delaware Vy. Regl. Fin. Auth.
Loc. Govt. Rev., Ser. 98A
5.50% 08/01/28 $19,050 $18,728,626
Derry Area Sch. Dist. G.O., Ser. 92A
6.60% 09/01/10 750 776,235
Dover Area Sch. Dist. G.O., Ser. 96
5.75% 04/01/12 2,445 2,522,629
Downingtown G.O., Ser. 91
6.70% 01/15/02 750 770,527
East Whiteland-Tredyffrin Joint
Trans. Auth. Rev.,
Hwy. Imp. Prj., Ser. 94
6.30% 01/01/16 775 789,190
Ephrata Sch. Dist. G.O., Ser. 91A
6.80% 04/15/01 750 759,517
Erie Cnty. Prison Auth. Lease Rev.,
Ser. 91
6.35% 11/01/00 2,500 2,503,525
6.45% 11/01/01 1,000 1,021,780
6.25% 11/01/11 3,225 3,288,532
Erie Swr. Auth. Rev., Ser. 97
5.62% 06/01/17 2,800 2,941,512
Fairview Sch. Dist. G.O., Ser. 95
6.00% 02/15/05 1,000 1,053,910
Falls Twp. G.O., Ser. 90
6.90% 12/15/00 1,000 1,004,830
Forest Hills G.O., Ser. 92
6.45% 05/01/09 750 770,812
Fox Chapel Area Sch. Dist. G.O.,
Ser. 92A
6.30% 02/15/02 2,000 2,046,440
Governor Mifflin Sch. Dist. G.O.,
Ser. 92
6.30% 02/01/02 1,000 1,023,210
Greater Johnstown Wtr.
Auth. Rev., Ser. 92
6.10% 01/01/04 685 703,454
Greene Cnty. Gen. Fac.
Auth. Rev., Ser. 91A
7.00% 07/01/01 3,325 3,451,483
Greensburg Salem Sch.
Dist. G.O., Ser. 92
6.45% 09/15/18 1,000 1,028,980
Hampton Twp. Sch. Dist.
G.O., Ser. 91A
6.95% 02/15/01 1,000 1,009,170
Harrisburg Auth. Wtr. Rev., Ser. 91
7.00% 07/15/01 1,000 1,020,030
Harrisburg Auth. Wtr. Rev., Ser. 92
6.55% 08/15/02 1,600 1,658,768
Harrisburg Pkg. Auth. Rev., Ser. 86B
7.40% 11/15/00 500 501,660
Hatboro Sch. Dist. G.O., Ser. 91A
6.65% 04/01/07 1,000 1,010,430
6.70% 04/01/08 1,000 1,010,420
Hempfield Sch. Dist. Rev., Ser. 91
6.00% 09/15/01 650 659,529
Hempfield Twp. Mun. Auth.
Gtd. Swr. Rev., Westmoreland
Cnty. Prj., Ser. 91
6.50% 09/01/02 1,000 1,036,690
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Indiana Cnty. Ind. Dev. Auth.
Poll. Ctrl. Rev., New York
St. Elec. & Gas Corp. Prj., Ser. 95A
6.00% 06/01/06 $1,000 $ 1,064,370
Jeannette Sch. Dist. G.O., Ser. 91
6.65% 06/15/11 750 761,655
Jefferson Cnty. Mun. Auth.
Rev., Ser. 92
6.50% 06/01/06 1,515 1,573,706
Lancaster Cnty. Hosp. Auth.
Rev., Hlth. Ctr. Masonic
Homes Prj., Ser. 94
5.30% 11/15/08 500 493,815
Lancaster Swr. Auth. Sply.
Spec. Oblig. Rev., Ser. 98
5.25% 04/01/21 8,480 7,967,554
Langhorne Manor Boro Hgr.
Ed. & Hlth. Auth. Rev., Ser. 92
6.15% 11/15/02 510 527,177
6.30% 11/15/03 740 765,323
6.50% 11/15/14 1,500 1,551,195
Langhorne Manor Boro Hgr.
Ed. & Hlth. Auth. Rev., Ser. 94
6.90% 11/15/14 1,000 1,086,030
Lebanon Cnty. Hosp. Auth. Rev.,
Good Samaritan Hosp. Prj., Ser. 93
5.55% 11/15/04 355 350,875
5.65% 11/15/05 760 749,033
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Kidspeace Oblig. Prj., Ser. 98
5.70% 11/01/09 3,000 3,023,100
6.00% 11/01/18 2,000 1,997,700
6.00% 11/01/23 3,000 2,948,370
Lehigh Cnty. Gen. Purp. Auth. Rev.,
Ser. 90A
7.00% 07/01/08 1,500 1,538,955
Lehigh Cnty. Gen. Purp.
Auth. Rev., St. Lukes Hosp.
Bethlehem Prj., Ser. 93
6.00% 11/15/02 1,750 1,800,137
Ligonier Vy. Sch. Dist. Unltd.
Tax G.O., Ser. 94
5.65% 03/01/14 2,000 2,066,740
Lower Providence Twp. Swr.
Auth. Rev., Ser. 92
6.62% 05/01/02 1,000 1,031,610
Luzerne Cnty. Flood Prot.
Auth. Gtd. Rev., Ser. 96
5.60% 07/15/21 4,720 4,939,763
Lycoming Cnty. Auth. Coll.
Rev., Pennsylvania Coll.
Tech. Prj., Ser. 90
6.80% 11/01/00 1,000 1,001,770
Lycoming Cnty. Auth. Hosp. Rev.,
Divine Providence
Hosp. Prj., Ser. 95
5.37% 11/15/10 6,480 6,631,373
Lycoming Cnty. G.O., Ser. 91A
6.85% 08/15/01 1,000 1,020,900
Manheim Central Sch. Dist.
G.O., Ser. 91
6.70% 03/01/04 1,000 1,008,470
McKeesport Area Sch. Dist.
G.O., Ser. 96A
5.75% 10/01/06 1,750 1,847,790
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Media Boro Gtd. Wtr. Rev.,
Ser. 92
6.55% 01/01/17 $ 500 $ 518,390
Methacton Sch. Dist. Auth. Rev.,
Ser. 78
6.50% 10/01/06 475 518,681
Middletown Twp. Swr. Auth. Rev.,
Ser. 68
5.62% 05/01/01 10 10,017
Montgomery Cnty. Hgr. Ed. &
Hlth. Auth. Coll. Rev.,
Beaver Coll. Prj., Ser. 96
5.75% 04/01/12 1,690 1,760,879
Montgomery Cnty. Hgr. Ed. &
Hlth. Auth. Coll. Rev., Cnty.
Cmnty. Coll. Prj., Ser. 90
7.00% 11/01/00 500 500,925
Montgomery Cnty. Hgr. Ed. &
Hlth. Auth. Hosp. Rev.,
Kiddler Mld-Abington Mem.
Hosp. Prj., Ser. 91A
6.66%** 07/05/11 2,400 2,483,616
Montgomery Cnty. Hgr. Ed. &
Hlth. Auth. Rev., Holy Redeemer
Hosp. Prj., Ser. 97A
5.25% 10/01/27 9,000 8,271,540
Montgomery Cnty. Hgr. Ed. &
Hlth. Auth. Rev., Pottstown Hlth.
Care Corp. Prj., Ser. 98
5.00% 01/01/16 6,235 5,878,732
Montgomery Cnty. Hgr. Ed. & Hlth.
Auth. Rev., St. Josephs Univ. Prj.,
Ser. 92
6.50% 12/15/12 750 790,545
Montgomery Cnty. Hosp. Auth. Rev.,
Suburban Gen. Hosp. Prj., Ser. 76
7.75% 05/01/02 30 30,989
Montgomery Cnty. Ind. Dev.
Auth. Rev., Poll. Ctrl. Prj., Ser. 91B
6.70% 12/01/21 1,000 1,041,970
New Garden Twp. Swr. Auth.
Rev., Ser. 91
7.00% 03/01/15 420 424,334
Norristown G.O., Ser. 90
6.90% 11/15/00 1,000 1,002,760
7.05% 11/15/00 1,250 1,253,662
North Huntingdon Twp. G.O., Ser. 91
6.65% 04/01/04 1,635 1,651,415
Northampton Cnty. Hgr. Ed.
Auth. Rev., Lehigh Univ. Prj.,
Ser. 91
7.00% 10/15/11 4,000 4,182,160
Northampton Cnty. Hgr. Ed.
Auth. Rev., Moravian Coll. Prj.,
Ser. 94
6.10% 07/01/12 1,950 2,011,581
Northampton Cnty. Hosp. Auth.
Rev., Easton Hosp. Prj., Ser. 88
7.70% 01/01/04 825 831,435
Northeast Sch. Dist. G.O., Ser. 91
7.00% 01/15/10 890 896,372
Northeast Sch. Dist. G.O., Ser. 98
5.20% 09/01/23 2,000 1,872,860
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Northeastern Hosp. & Ed.
Auth. Rev., Luzerne Cnty.
Coll. Prj., Ser. 97
5.15% 08/15/16 $3,245 $ 3,138,921
Northeastern Hosp. & Ed.
Auth. Rev., Wilkes Univ. Prj.,
Ser. 93
5.40% 10/01/03 845 855,681
Northeastern Hosp. & Ed.
Auth. Rev., Wyoming Vy. Hlth.
Care Prj., Ser. 94A
6.50% 01/01/07 1,000 1,078,800
Northgate Sch. Auth. Bldg.
Rev., Ser. 78
6.37% 02/15/07 825 898,771
Northumberland Cnty. Auth.
Gtd. Lease Rev., Ser. 91
6.25% 10/15/01 4,000 4,075,720
6.60% 10/15/01 1,250 1,278,025
7.75% 10/15/01 2,110 2,181,487
Northumberland Cnty. Auth.
Gtd. Lease Rev., Ser. 92
6.70% 08/15/02 1,000 1,039,390
Parkland Sch. Dist. Rev., Ser. 96
5.75% 09/01/14 2,910 2,974,835
Penn Hills G.O., Ser. 93
5.87% 12/01/02 2,000 2,057,060
Pennsbury Sch. Dist. Unltd.
Tax G.O., Ser. 94
6.65% 08/15/09 685 734,642
Pennsylvania Con. Ctr. Auth.
Rev., Ser. 94A
6.60% 09/01/09 12,465 13,453,101
Pennsylvania Econ. Dev. Fin.
Auth. Sch. Rev.,
Baldwin Sch. Prj., Ser. 94A
6.35% 04/01/04 390 403,650
Pennsylvania Econ. Dev. Fin.
Auth. Solid Waste Disp. Rev.,
Ser. 99
6.00% 06/01/31 22,575 20,911,900
Pennsylvania Fin. Auth. Rev.,
Mun. Cap. Imp. Prj., Ser. 93
6.60% 11/01/09 20,805 22,166,895
Pennsylvania G.O., Ser. 94
5.50% 06/15/08 1,000 1,036,660
Pennsylvania Hgr. Ed. Assistance
Agcy. Rev., Cap. Acquisition Prj.,
Ser. 00
5.87% 12/15/25 16,400 16,719,636
Pennsylvania Hgr. Ed. Assistance
Agcy. Stud. Ln. Rev., Ser. 84A
7.43% 3/01/20 8,250 9,032,595
7.60%** 03/01/22 5,000 5,395,850
Pennsylvania Hgr. Ed. Fac.
Auth. Rev., Duquesne
Univ. Prj., Ser. 91C
6.75% 04/01/20 1,000 1,011,540
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Pennsylvania Hgr. Ed. Fac.
Auth. Rev., Philadelphia
Coll. Osteopathic Prj., Ser. 93
5.35% 12/01/10 $3,735 $ 3,813,958
Pennsylvania Hgr. Ed. Fac.
Auth. Rev., Thomas Jefferson
Univ. Prj., Ser. 90
7.30% 11/01/00 1,500 1,533,000
Pennsylvania Hgr. Ed. Fac.
Auth. Rev., Univ. of
Pennsylvania Prj., Ser. 98
5.75% 01/01/22 14,165 13,102,200
Pennsylvania Hsg. Fin. Agcy.
AMT Sgl. Fam. Mtg. Rev.,
Ser. 96A
6.05% 10/01/16 2,500 2,553,175
Pennsylvania Hsg. Fin. Agcy.
Multi-family FHA Ins. Rev.,
Ref. Ser. 92
8.10% 07/01/13 2,000 2,100,600
Pennsylvania Hsg. Fin. Agcy.
Res. Rev., Sect. 8 Prj.,
Ref. Ser. 91A
7.60% 07/01/13 1,000 1,036,040
Pennsylvania Hsg. Fin.
Agcy. Rev., Ser. 56A
6.15% 10/01/27 5,000 5,049,300
Pennsylvania Hsg. Fin. Agcy.
Rev., Ser. 92
6.40% 07/01/12 1,500 1,557,135
6.50% 07/01/23 4,850 5,029,547
Pennsylvania Hsg. Fin. Agcy.
Rev., Ser. 98
5.50%+ 04/01/30 9,000 1,423,976
Pennsylvania Hsg. Fin.
Agcy. Rev., Ser. 99
5.85% 10/01/18 1,000 1,000,660
Pennsylvania Hsg. Fin. Agcy. Rev.,
Sgl. Fam. Mtg. Prj., Ser. 91
6.95% 10/01/05 250 256,945
Pennsylvania Hsg. Fin. Agcy. Rev.,
Sgl. Fam. Mtg. Prj., Ser. 94A
6.60% 10/02/00 1,000 1,040,970
Pennsylvania Hsg. Fin.
Agcy. Rev., Sgl. Fam. Mtg.
Prj., Ser. 94B
6.87% 10/01/24 1,500 1,559,205
Pennsylvania Infra.
Investment Auth. Rev.,
Pennvest Ln. Pool, Ser. 90B
6.80% 09/01/10 3,985 4,222,307
Pennsylvania Infra. Investment
Auth. Rev., Pennvest Ln. Pool,
Ser. 94
6.00% 09/01/06 1,930 2,059,059
Pennsylvania Intergovernmental
Coop. Auth. Spec. Tax Rev.,
City of Philadelphia Fdg. Prj., Ser. 92
6.80% 06/15/02 5,505 5,711,933
Pennsylvania Intergovernmental
Coop. Auth. Spec. Tax Rev.,
City of Philadelphia Fdg. Prj., Ser. 93
5.87% 06/15/23 5,000 5,167,300
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Pennsylvania Intergovernmental
Coop. Auth. Spec. Tax Rev.,
City of Philadelphia Fdg. Prj., Ser. 94
7.00% 063/15/04 $ 500 $ 540,680
Pennsylvania Intergovernmental
Coop. Auth. Spec. Tax Rev.,
City of Philadelphia Fdg. Prj., Ser. 96
5.60% 06/15/12 1,000 1,023,380
5.50% 06/15/16 5,000 5,011,650
5.50% 06/15/20 5,500 5,427,950
Pennsylvania St. Fin. Auth.
Cmnty. Coll. Rev., Beaver
Cnty. Coll. Prj., Ser. 94A
5.87% 12/01/07 825 864,979
Pennsylvania St. Hgr. Ed.
Fac. Auth. Coll. & Univ. Rev.,
Bryn Mawr Coll. Prj., Ser. 95
6.00% 12/01/15 1,200 1,253,760
Pennsylvania St. Hgr. Ed. Fac.
Auth. Coll. & Univ. Rev.,
Lafayette Coll. Prj., Ser. 00
6.00% 05/01/30 155 158,501
Pennsylvania St. Hgr. Ed. Fac.
Auth. Coll. & Univ. Rev.,
Philadelphia Coll. of
Textiles & Science Prj., Ser. 91
7.00% 10/01/01 1,385 1,420,234
Pennsylvania St. Hgr. Ed. Fac.
Auth. Coll. & Univ. Rev., Ser. 91E
6.90% 06/15/01 1,000 1,017,240
Pennsylvania St. Hgr. Ed. Fac.
Auth. Coll. & Univ. Rev., Ser. 93I
7.50% 06/15/01 1,670 1,704,769
Pennsylvania St. Hgr. Ed. Fac.
Auth. Coll. & Univ. Rev., Ser. 97G
5.12% 06/15/24 10,355 9,572,680
Pennsylvania St. Hgr. Ed. Fac.
Auth. Coll. & Univ. Rev.,
Thomas Jefferson Univ. Prj.,
Ser. 90
7.55% 11/01/00 750 766,635
Pennsylvania St. Hgr. Ed. Fac.
Auth. Coll. & Univ. Rev.,
Trustees Univ. Prj., Ser. 98
5.50% 07/15/38 19,000 18,128,660
Pennsylvania St. Hgr. Ed. Fac.
Auth. Hlth. Svcs. Rev., Univ. of
Pennsylvania Hlth. Svcs. Prj.,
Ser. 96A
5.75% 01/01/17 17,250 16,208,618
Pennsylvania St. Hgr. Ed. Fac.
Auth. Hlth. Svcs. Rev., Univ. of
Pennsylvania Hlth. Svcs. Prj.,
Ser. 98A
5.37% 01/01/15 5,200 5,196,984
Pennsylvania St. Ind. Dev.
Auth. Rev., Econ. Dev. Prj., Ser. 94
7.00% 01/01/06 1,000 1,103,710
6.00% 01/01/12 4,000 4,176,480
Pennsylvania St. Infra.
Investment Auth. Rev., Ser. 90
6.45% 09/01/04 1,600 1,686,064
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Pennsylvania St. Pub. Sch.
Bldg. Auth. Rev., Mid Vy. Sch.
Dist. Prj., Ser. 92D
6.25% 01/01/07 $ 500 $ 524,145
Pennsylvania St. Third G.O., Ser. 91A
6.50% 11/15/01 13,250 3,370,380
6.50% 11/15/11 1,500 1,555,560
Pennsylvania St. Tpke. Comm.
Rev., Ser. 86G
7.00% 12/01/00 500 511,935
Pennsylvania St. Tpke. Comm.
Rev., Ser. 86J
7.20% 12/01/00 2,275 2,389,774
Pennsylvania St. Tpke. Comm.
Rev., Ser. 91L
6.50% 06/01/04 1,445 1,490,922
Pennsylvania St. Tpke. Comm.
Rev., Ser. 92P
5.80% 12/01/06 1,500 1,563,990
6.00% 12/01/09 500 522,730
Pennsylvania St. Tpke. Comm.
Rev., Ser. 94A
5.87% 12/01/08 500 532,515
Pennsylvania St. Univ. Rev., Ser. 91
6.75% 07/01/01 1,000 1,036,240
7.00% 07/01/01 1,950 2,024,178
Pennsylvania St. Univ. Rev., Ser. 94
5.00% 05/01/03 1,000 1,011,990
Pennsylvania Trafford Dist. G.O.,
Ser. 94
5.85% 05/01/04 1,000 1,041,400
Pennsylvania Unltd. Tax G.O.,
Ser. 94A
6.50% 11/01/05 250 259,155
Philadelphia Arpt. Rev., Ser. 97A
5.25% 06/15/15 5,770 5,676,757
Philadelphia Gas Works Rev.,
Ser. 93
5.50% 07/01/04 5,000 5,150,950
Philadelphia Gas Works Rev.,
Ser. 94
5.25% 08/01/24 2,900 2,727,218
Philadelphia Hosp. & Hgr. Ed.
Fac. Auth. Hosp. Rev.,
Children's Hosp. of
Philadelphia Prj., Ser. 93
5.00% 02/15/21 2,250 2,038,860
Philadelphia Hosp. & Hgr. Ed.
Fac. Auth. Hosp. Rev.,
Children's Seashore House Prj.,
Ser. 92A
7.00% 08/15/03 775 803,063
Philadelphia Hosp. & Hgr.
Ed. Fac. Auth. Hosp. Rev.,
Children's Seashore
House Prj., Ser. 92B
7.00% 08/15/12 1,575 1,633,259
Philadelphia Hosp. & Hgr. Ed.
Fac. Auth. Hosp. Rev.,
Frankford Hosp. Prj., Ser. 93A
6.00% 06/01/14 500 524,610
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Philadelphia Hosp. & Hgr.
Ed. Fac. Auth. Hosp. Rev.,
Frankford Hosp. Prj., Ser. 95
5.50% 01/01/07 $1,235 $ 1,282,399
5.60% 01/01/08 1,245 1,296,705
Philadelphia Hosp. & Hgr. Ed.
Fac. Auth. Hosp. Rev.,
Magee Rehab. Hosp. Prj., Ser. 91
7.00% 12/01/05 1,000 1,027,370
Philadelphia Hosp. & Hgr.
Ed. Fac. Auth. Hosp. Rev.,
Nazareth Hosp. Franciscan Prj.,
Ser. 96B
5.00% 07/01/10 4,590 4,592,570
Philadelphia Hosp. & Hgr.
Ed. Fac. Auth. Hosp. Rev.,
Presbyterian Med. Ctr. Prj., Ser. 93
5.60% 12/01/00 595 596,089
6.10% 12/01/03 1,000 1,045,350
Philadelphia Ind. Dev.
Auth. Rev., American Coll.
of Physicians Prj., Ser. 00
5.50% 06/15/20 6,370 6,249,352
5.50% 06/15/25 8,315 8,084,591
Philadelphia Ind. Dev. Auth.
Rev., Girard Estate Coal
Mining Prj., Ser. 96
5.37% 11/15/12 3,945 3,996,995
5.50% 11/15/16 1,650 1,659,240
Philadelphia Ind. Dev. Auth.
Rev., Inst. Cancer
Research Prj., Ser. 90B
7.25% 07/01/03 2,015 2,057,517
Philadelphia Ind. Dev. Auth.
Rev., Nat. Bd. of Med.
Examiners Prj., Ser. 92
6.75% 05/01/12 500 526,065
Philadelphia Ind. Dev. Auth.
Rev., PGH Dev. Corp. Prj., Ser. 93
5.50% 07/01/10 1,035 1,048,248
Philadelphia Mun. Auth. Rev.,
Justice Lease Prj., Ser. 91B
7.12% 11/15/01 1,055 1,106,189
7.10% 11/15/11 1,200 1,257,900
Philadelphia Mun. Auth. Rev.,
Ref. Ser. 93D
6.12% 07/15/08 2,650 2,806,562
Philadelphia Mun. Auth. Rev.,
Ser. 93A
5.20% 11/15/04 4,000 4,087,320
5.62% 11/15/14 2,600 2,634,918
Philadelphia Pk. Auth. Rev.,
Arpt. Pk. Prj., Ser. 97
5.75% 09/01/06 3,000 3,162,300
Philadelphia Pk. Auth. Rev.,
Arpt. Pk. Prj., Ser. 99
5.62% 09/01/18 4,430 4,458,352
Philadelphia Pk. Auth. Rev., Ser. 97
5.40% 09/01/15 5,900 5,907,965
Philadelphia Pk. Auth. Rev., Ser. 99
5.62% 09/01/13 1,390 1,436,301
5.62% 09/01/17 4,495 4,540,400
Philadelphia Regl. Port Auth.
Lease Rev., Ser. 93
6.20% 09/01/20 2,000 2,042,340
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Philadelphia Sch. Dist. G.O., Ser. 94A
5.80% 07/01/08 $1,910 $ 2,005,271
5.85% 07/01/09 1,710 1,801,810
Philadelphia Sch. Dist. G.O., Ser. 95A
6.25% 09/01/04 5,985 6,332,070
Philadelphia Sch. Dist. G.O., Ser. 95B
5.50% 09/01/10 2,500 2,635,475
5.50% 09/01/18 4,890 4,867,702
Philadelphia Sch. Dist. Untld.
Tax G.O., Ser. 91B
7.00% 07/01/01 1,720 1,769,416
Philadelphia Sch. Dist. Untld.
Tax G.O., Ser. 92A
6.40% 05/15/02 2,000 2,068,660
Philadelphia Sch. Dist. Untld.
Tax G.O., Ser. 95A
6.25% 09/01/06 2,255 2,434,588
Philadelphia Sch. Dist. Untld.
Tax G.O., Ser. 95B
5.50% 09/01/11 2,000 2,108,380
Philadelphia Sch. Dist. Unltd.
Tax G.O., Ser. 99C
5.75% 03/01/29 11,000 11,070,840
Philadelphia Unltd. Tax G.O.,
Prerefunded Ser. 94B
5.90% 11/15/09 1,620 1,726,159
Philadelphia Unltd. Tax G.O.,
Ser. 93A
5.25% 05/15/04 300 306,309
Philadelphia Unltd. Tax G.O.,
Ser. 95
6.00% 05/15/04 2,345 2,452,237
Philadelphia Unltd. Tax G.O.,
Unrefunded Ser. 94
5.90% 11/15/09 980 1,035,880
Philadelphia Wtr. & Swr. Rev., Ser. 92
7.35% 09/01/04 7,325 7,829,693
Philadelphia Wtr. & Waste
Wtr. Rev., Prerefunded Ser. 93
5.75% 06/15/13 1,595 1,671,624
Philadelphia Wtr. & Waste Wtr. Rev.,
Ser. 93
5.50% 06/15/07 6,780 7,068,286
5.00% 06/15/16 2,850 2,712,744
Philadelphia Wtr. & Waste Wtr. Rev.,
Ser. 97A
5.00% 08/01/22 15,155 13,856,217
5.12% 08/01/27 20,645 18,889,762
Philadelphia Wtr. & Waste Wtr. Rev.,
Unrefunded Ser. 93
5.75% 06/15/13 3,165 3,238,773
Pittsburgh & Allegheny Cnty. Rev.,
Ser. 91B
6.00% 07/15/01 500 506,225
Pittsburgh Pub. Pk. Auth. Rev.,
Ser 92A
5.87% 12/01/12 1,500 1,549,755
Pittsburgh Sch. Dist. G.O., Ser 97
5.50% 09/01/09 4,500 4,626,180
Pittsburgh Unltd. Tax G.O., Ser. 96A
6.00% 03/01/05 8,225 8,665,942
Pittsburgh Wtr. & Swr. Rev., Ser. 91A
6.60% 09/01/01 1,100 1,142,911
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Pittsburgh Wtr. & Swr. Rev., Ser. 98A
5.00% 09/01/21 $3,000 $ 2,722,020
Pleasant Vy. Sch. Dist. G.O., Ser. 95
5.60% 11/15/14 1,385 1,402,077
Pottstown Borough Auth. Swr. Rev.,
Ser. 96
5.50% 11/01/16 1,360 1,363,414
Punxsutawney Area Sch. Dist. G.O.,
Ser. 95
5.80% 04/15/05 1,000 1,047,720
Purchase Line Sch. Dist. G.O., Ser. 91
6.95% 01/15/01 1,000 1,007,020
Reading G.O., Ser. 92
6.50% 11/15/02 1,000 1,040,450
Ridley Park Hosp. Auth. Rev.,
Taylor Hosp. Prj., Ser. 90A
8.62% 12/01/00 3,185 3,268,511
Ringgold Sch. Dist. Rev., Ser. 95
6.20% 02/01/19 500 530,610
Riverside Beaver Cnty. Sch.
Dist. Rev., Ser. 96
5.50% 02/15/17 3,725 3,869,977
Rose Tree Media Sch.Dist.
G.O., Ser. 92A
6.55% 03/15/07 945 964,061
Sayre Hlth. Care Fac. Auth.
Rev., Guthrie Prj., Ser. 91A
7.10% 03/01/17 3,000 3,090,090
Sayre Hlth. Care Fac. Auth. Rev.,
Tioga Nursing Fac. Prj., Ser. 89A
7.25% 10/01/10 1,500 1,518,000
Sayre Hlth. Care Fac. Auth.
Rev., VHA Cap. Fin. Prj., Ser. 85
7.15% 12/01/10 1,400 1,465,982
Sayre Hlth. Care Fac. Auth.
Rev., VHA Cap. Fin. Prj., Ser. 85H
7.62% 12/01/00 750 768,563
Schuylkill Redev. Auth. Comm.
Rev., Ser. 91A
7.12% 06/01/13 2,000 2,073,160
Scranton Lackawanna Hlth.
& Welfare Auth. Rev.,
Hosp. Cmnty. Med. Ctr. Prj.,
Ref. Ser. 98A
5.25% 07/01/04 2,215 2,255,424
Solanco Sch. Dist. G.O., Ser. 94
6.30% 02/15/04 500 526,495
Somerset Cnty. Gen. Auth.
Comm. Rev., Ser. 91
6.45% 10/15/00 1,000 1,000,600
6.25% 10/15/01 1,750 1,783,128
6.70% 10/15/03 1,500 1,535,115
South Fork Mun. Auth. Hosp. Rev.,
Good Samaritan Med. Ctr. Prj.,
Ser. 96B
5.37% 07/01/16 4,000 3,926,800
Southeastern Pennsylvania
Trans. Auth. Rev., Prerefunded
Ser. 95.
5.75% 03/01/08 75 78,955
Southeastern Pennsylvania
Trans. Auth. Rev., Ref. Ser. 95
5.75% 03/01/08 1,210 1,273,803
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Southeastern Pennsylvania
Trans. Auth. Rev., Ser. 94
6.00% 06/01/01 $2,000 $ 2,020,340
6.10% 06/01/02 1,000 1,019,290
Southeastern Pennsylvania
Trans. Auth. Rev., Ser. 95
5.87% 03/01/09 1,230 1,300,934
Southeastern Pennsylvania
Trans. Auth. Rev., Ser. 97
5.75% 03/01/07 1,700 1,792,888
5.55% 03/01/13 3,500 3,577,630
5.37% 03/01/17 7,020 6,918,140
Springford Sch. Dist. G.O., Ser. 97
5.15% 02/01/18 10,010 9,567,158
State of Pennsylvania Pub.
Sch. Bldg. Auth. Coll. Rev.,
Harrisburg Area Cmnty. Coll. Prj.,
Ser. 91D
6.80% 04/01/02 1,335 1,379,402
Tarentum Gtd. Elec. Rev., Ser. 93
5.87% 09/01/18 750 776,955
Unionville Chadds Ford Sch.
Dist. G.O., Ser. 91
6.75% 06/01/06 1,000 1,013,770
Unionville Chadds Ford Sch.
Dist. G.O., Ser. 93
5.60% 06/01/03 1,000 1,024,940
Upper St. Clair Twp. Sch.
Bldg. Auth. Rev., Ser. 78
6.50% 02/15/04 265 272,280
Warren Cnty. G.O., Ser. 91
7.15% 07/01/01 1,200 1,224,144
Washington Cnty. Auth. Rev., Ser. 99
6.15% 12/01/29 8,250 8,872,710
Washington Cnty. Ind. Dev.
Auth. Poll. Ctrl. Rev.,
West Penn Pwr. Co. Prj., Ser. 95G
6.05% 04/01/14 2,500 2,606,025
West Chester Area Sch.
Dist. G.O., Ser. 91A
6.70% 01/15/01 2,000 2,012,380
West Goshen Swr. Auth. Rev., Ser. 91
7.00% 09/01/01 1,500 1,534,275
West Jefferson Hills Sch. Dist.
Unltd. Tax G.O., Ser. 91A
6.70% 08/01/01 1,250 1,273,450
West Mifflin Sanit. Swr. Mun.
Auth. Swr. Rev., Ser. 96
5.70% 08/01/15 1,445 1,520,039
West Whiteland Twp.
Unltd. Tax G.O., Ser. 92
6.75% 12/01/02 1,100 1,149,819
West York Area Sch. Dist. G.O.,
Ser. 91
6.80% 03/01/01 900 908,748
Westmoreland Cnty. G.O., Ser. 92
6.55% 08/01/01 750 763,170
Westmoreland Cnty. Ind. Dev.
Auth. Rev., Westmoreland
Hlth. Sys. Prj., Ser 93A
6.00% 07/01/11 200 208,076
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
20
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
PENNSYLVANIA TAX-FREE INCOME PORTFOLIO (CONCLUDED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
PENNSYLVANIA (CONTINUED)
Westmoreland Cnty. Mun.
Auth. Rev., Ser. 87K
2.00% 07/01/03 $1,000 $ 929,080
Westview Mun. Auth. Spec.
Oblig. Rev., Ser. 85
9.25% 11/15/05 750 881,115
Williamsport Area Sch. Dist.
Auth. Rev., Ser. 78
6.00% 03/01/07 125 130,800
Wilson Sch. Dist. G.O., Ser. 97
5.50% 05/15/14 580 605,079
5.50% 05/15/17 7,435 7,756,489
York Cnty. Hosp. Auth. Rev.,
York Hosp. Prj., Ser. 91
7.00% 01/01/01 285 292,393
7.10% 01/01/01 355 364,294
------------
895,742,429
------------
PUERTO RICO -- 2.8%
Puerto Rico Cmwlth. G.O., Ser. 00
5.75% 07/01/26 4,000 4,089,400
Puerto Rico Cmwlth. Infra.
Fin. Auth. S.O., Ser. 00A
5.37% 10/01/16 1,600 1,623,216
5.50% 10/01/17 2,000 2,044,700
5.50% 10/01/18 2,000 2,036,320
5.50% 10/01/19 2,630 2,666,820
5.50% 10/01/20 1,000 1,009,030
5.37% 10/01/24 1,000 986,070
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 91P
6.75% 07/01/03 250 259,190
Puerto Rico Elec. Pwr. Auth. Rev.,
Ser. 95X
6.00% 07/01/12 5,000 5,279,800
Puerto Rico Mun. Fin. Agy. Rev.,
Ser. 99
5.50% 08/01/18 6,500 6,584,110
-------------
26,578,656
-------------
VIRGIN ISLANDS -- 0.2%
Virgin Islands Pub. Fin. Auth.
Rev., Gross Receipts Tax Ln.
Notes, Ser. 99A
6.12% 10/01/29 1,955 1,987,023
------------
TOTAL MUNICIPAL BONDS
(Cost $909,319,325) 924,308,108
------------
CUMULATIVE PREFERRED STOCK -- 5.1%
Charter Mac Equity Issue Tr. 144A
6.62% 06/30/09 3,000 24,172,250
7.60% 11/30/10 10,000 9,969,200
MuniMae TE Bond Subs., LLC 144A
6.87% 06/30/09 4,000 3,934,000
7.75% 11/01/10 10,000 10,026,700
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $48,195,859) 48,102,150
------------
SHARES VALUE
---------- ---------
SHORT TERM INVESTMENTS -- 0.3%
Smith Barney Tax-Free Money
Market Fund
(Cost $2,986,078) 2,986,078 $ 2,986,078
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $960,501,262*) 102.7% 975,396,336
LIABILITIES IN EXCESS OF
OTHER ASSETS (2.7%) (25,330,040)
------ -----------
NET ASSETS (Applicable to 83,789,628
Institutional shares, 1,198,585
Service shares, 2,914,981
Investor A shares, 2,060,380
Investor B shares and 36,946
Investor C shares outstanding) 100.0% $950,066,296
====== ============
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL
AND INVESTOR A SHARE
($915,447,753 (divide by) 86,704,609) $10.56
======
OFFERING PRICE PER INSTITUTIONAL
SHARE $10.56
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.56 (divide by) 0.960) $11.00
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
PER SERVICE SHARE
($12,646,396 (divide by) 1,198,585) $10.55
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($21,583,952 (divide by) 2,060,380) $10.48
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($388,195 (divide by) 36,946) $10.51
======
-----------------------------
* Cost for Federal income tax purposes is $960,639,845. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $ 24,812,451
Gross unrealized depreciation (10,055,960)
------------
$ 14,756,491
============
** Rates shown are the rates as of September 30, 2000.
+ The rate shown is the effective yield on the zero coupon bonds.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
NEW JERSEY TAX-FREE INCOME PORTFOLIO
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS -- 98.9%
NEW JERSEY -- 81.9%
Atlantic City COP's, Pub. Fac.
Lease Agreement Prj., Ser. 91
7.30% 03/01/04 $1,535 $ 1,662,773
Bergen Cnty. G.O., Ser. 90
6.25% 11/15/00 645 646,432
Bergen Cnty. Util. Auth. Rev., Ser. 92A
6.00% 06/15/01 1,590 1,606,552
Brigantine G.O., Ser. 92
6.25% 08/01/03 730 759,988
Camden Cnty. Imp. Auth. Lease
Rev., Ser. 92
6.00% 12/01/02 1,000 1,040,170
Cherry Hill Twp. G.O., Ser. 92
6.00% 06/01/06 500 521,274
Delaware River Port Auth.
Pennsylvania & New Jersey
Rev., Ser. 00
8.47% 10/05/00 5,000 5,179,450
Dover Twp. G.O., Ser. 92
6.00% 10/15/03 1,000 1,044,630
6.10% 10/15/04 540 566,444
Edison Twp. G.O., Ser. 91
6.50% 06/01/04 930 989,446
Essex Cnty. Imp. Auth.
Lease Rev., Jail & Yth. Hsg.
Prj., Ser. 94
6.90% 12/01/14 500 552,715
Essex Cnty. Util. Auth. Solid
Waste Rev., Ser. 96
5.75% 04/01/05 2,000 2,094,840
Gloucester Cnty. Srs. Hsg.
Dev. Corp. Rev., Sect. 8
Colonial Pk. Prj., Ser. 94A
6.20% 09/15/11 1,250 1,288,087
Hamilton Twp. Atlantic City
Sch. Dist. G.O., Ser. 92
5.87% 12/15/07 860 897,427
Jersey City G.O., Ser. 96A
6.00% 10/01/05 1,655 1,755,773
Knowlton Twp. Bd. of Ed. G.O., Ser. 91
6.60% 08/15/11 169 192,202
Lacey Twp. Wtr. Auth. Rev., Ser. 93
6.00% 12/01/12 1,000 1,061,320
Mercer Cnty. Imp. Auth. Rev.,
Hamilton Bd. of Ed. Prj., Ser. 92
5.90% 06/01/03 500 514,000
Middlesex Cnty. Imp. Auth.
Rev., Ser. 96
5.80% 09/15/13 1,725 1,786,686
Monmouth Cnty. Imp. Auth.
Corr. Fac. Rev., Ser. 91
6.30% 08/01/01 1,000 1,035,280
Morristown Cnty. G.O., Ser. 95
6.40% 08/01/14 500 535,515
New Jersey Econ. Dev. Auth.
Lease Rev., Ser. 00
6.00% 06/01/21 4,780 4,949,594
New Jersey Econ. Dev. Auth.
Mkt. Transition Fac. Rev., Ser. 94A
5.80% 07/01/08 1,290 1,361,118
5.87% 07/01/11 4,000 4,194,840
New Jersey Econ. Dev. Auth. Rev.,
Performing Arts Ctr. Prj., Ser. 96C
5.75% 06/15/08 4,440 4,728,289
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY (CONTINUED)
New Jersey Econ. Dev. Auth.
Rev., Ser. 94
5.80% 07/01/07 $1,500 $ 1,580,565
New Jersey Econ. Dev. Auth.
Rev., Ser. 99
6.20% 12/01/24 3,000 3,079,920
New Jersey Econ. Dev. Auth.
Rev., St. Barnabas Med. Ctr. Prj.,
Ser. 97A
5.62%+ 07/01/23 4,000 1,063,680
New Jersey Econ. Dev. Auth.
Rev., W.Y. Hldg. Co. Prj., Ser. 95
5.95% 06/01/05 865 872,603
New Jersey Ed. Auth. Rev.,
Rowan Coll. Prj., Ser. 96
5.87% 07/01/16 2,185 2,249,742
New Jersey Hlth. Care Fac.
Fin. Auth. Rev., Cathedral
Hlth. Ctr. Prj., Ser. 90A
6.95% 02/15/01 640 645,869
7.25% 02/15/21 1,000 1,029,920
New Jersey Hlth. Care Fac.
Fin. Auth. Rev., Robert Wood
Johnson Univ. Prj., Ser. 96C
5.75% 07/01/07 2,595 2,733,807
New Jersey Sports & Expo.
Auth. Rev., Ser. 92
6.50% 03/01/07 600 627,340
New Jersey Sports & Expo.
Auth. Rev., Ser. 00A
5.50% 03/01/20 5,000 4,941,000
New Jersey St. G.O., Ser. 86B
6.25% 01/15/04 860 904,823
New Jersey St. G.O., Ser. 91
6.25% 08/01/02 1,160 1,207,456
New Jersey St. G.O., Ser. 00
5.75% 05/01/12 2,500 2,660,900
New Jersey St. Hsg. & Mtg.
Fin. Agcy. Rev., Ser. 92A
6.70% 05/01/05 500 522,415
6.95% 11/01/13 750 781,425
New Jersey St. Hsg. & Mtg.
Fin. Agcy. Rev., Ser. 00B
6.25% 11/01/26 2,000 2,070,280
New Jersey St. Hwy. Auth.
Rev., Garden St. Pkwy. Prj., Ser. 92
6.20% 01/01/10 750 821,115
6.25% 01/01/14 500 516,828
New Jersey St. Tpke. Auth.
Rev., Ser. 91A
6.40% 01/01/02 860 878,292
New Jersey St. Tpke. Auth.
Rev., Ser. 91C
6.25% 01/01/10 2,210 2,252,741
6.50% 01/01/16 500 552,735
New Jersey St. Tpke. Auth.
Rev., Ser. 92A
5.80% 01/01/02 1,260 1,280,161
New Jersey St. Trans. Tr. Fd.
Admin. Grant Rev., Ser. 00A
6.12% 09/15/15 2,500 2,660,000
New Jersey St. Trans. Tr. Fd.
Auth. Trans. Sys. Rev., Ser. 94A
6.25% 12/15/03 1,000 1,051,800
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
22
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
NEW JERSEY TAX-FREE INCOME PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY (CONTINUED)
New Jersey St. Trans. Tr. Fd.
Auth. Trans. Sys. Rev., Ser. 99A
5.75% 06/15/20 $2,820 $ 2,900,455
New Jersey St. Trans. Tr. Fd.
Auth. Trans. Sys. Rev., Ser. 00A
6.00% 06/15/19 2,500 2,602,275
New Jersey St. Waste Wtr.
Trtmnt. Tr. Rev., Ser. 90
6.87% 06/15/06 35 35,669
New Jersey St. Waste Wtr.
Trtmnt. Tr. Rev., Ser. 96C
6.25% 05/15/03 2,500 2,603,475
6.25% 05/15/06 5,955 6,402,399
Newark Bd. of Ed. G.O., Ser. 94
5.87% 12/15/13 1,000 1,044,430
North Bergen Twp. G.O., Ser. 92
5.90% 08/15/01 500 506,660
North Jersey Dist. Wtr.
Sply. Rev., Ser. 93
5.50% 07/01/03 860 881,887
Northwest Bergen Cnty. Rev., Ser. 92
5.90% 07/15/06 755 792,576
Northwest Bergen Cnty. Util.
Auth. Sys. Rev., Ser. 92
6.00% 07/15/07 860 905,941
Ocean Cnty. G.O., Ser. 91
6.37% 04/15/03 430 449,909
Ocean Cnty. G.O., Ser. 91A
6.25% 10/01/04 430 446,297
Ocean Cnty. Util. Auth. Rev., Ser. 95A
6.30% 01/01/12 1,005 1,077,551
Ocean Cnty. Util. Auth.
Waste Wtr. Rev., Ser. 00
5.00% 01/01/13 500 490,985
5.00% 01/01/18 1,350 1,259,644
Ocean Twp. Swr. Auth. Rev., Ser. 92
6.00% 12/01/08 1,705 1,781,793
Passaic Vy. Wtr. Sply. Comm.
Rev., Ser. 92A
5.95% 12/15/02 500 515,390
Point Pleasant G.O., Ser. 95
5.70% 12/01/03 500 518,640
Port Auth. New York &
New Jersey Rev., Ser. 92
6.10% 10/15/02 645 665,434
Port Auth. New York &
New Jersey Rev., Ser. 95
5.75% 11/01/09 3,275 3,422,179
Port Auth. New York &
New Jersey Spec. Oblig. Rev.,
JFK Intl. Arpt. Term. Prj., Ser. 97
5.75% 12/01/22 2,105 2,113,736
Port Auth. New York &
New Jersey Spec. Oblig.
Rev., JFK Intl. Arpt. Term.
Prj., Ser. 97-6
6.25% 12/01/09 7,000 7,722,680
Rutgers Univ. Rev., Ser. 92A
6.10% 05/01/03 1,000 1,036,730
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
NEW JERSEY (CONTINUED)
Warren Cnty. Poll. Ctrl. Fin.
Auth. Rev., Ser. 92B
5.70% 12/01/03 $ 500 $ 503,585
Weehawken Twp. G.O., Ser. 92
6.15% 07/01/04 350 360,910
West Deptford Twp. G.O., Ser. 00
5.37% 09/01/16 1,125 1,121,963
5.37% 09/01/17 1,310 1,297,738
West Windsor Plainsboro
Twp. Bd. of Ed. G.O., Ser. 93
5.80% 03/15/06 1,000 1,042,970
Winslow Twp. Unltd. Tax G.O., Ser. 92
6.40% 10/01/05 870 916,736
Woodbridge Twp. G.O., Ser. 92
6.05% 08/15/05 500 522,695
6.25% 08/15/08 1,000 1,049,850
-------------
124,943,444
-------------
NEW YORK -- 0.2%
New York Energy Research
& Dev. Auth. Rev.,
Niagara Mohawk Pwr. Prj., Ser. 85A
5.50%** 07/01/15 250 250,000
-------------
PENNSYLVANIA -- 0.9%
Delaware River Joint Toll Bdg.
Rev., Ser. 92
6.25% 07/01/12 1,400 1,441,902
------------
PUERTO RICO -- 15.2%
Puerto Rico Cmwlth. G.O., Ser. 00
5.75% 07/01/26 3,225 3,297,079
Puerto Rico Cmwlth. Hwy. &
Trans. Auth. Rev., Ser. 00B
6.00% 07/01/31 3,000 3,130,050
Puerto Rico Cmwlth. Hwy. &
Trans. Auth. Rev., Ser. 00C
6.00% 07/01/29 2,000 2,086,700
Puerto Rico Cmwlth. Infra.
Fin. Auth. S.O., Ser. 00A
5.37% 10/01/16 1,600 1,623,216
5.50% 10/01/17 2,000 2,044,700
5.50% 10/01/18 2,000 2,036,320
5.50% 10/01/19 2,630 2,666,820
5.50% 10/01/20 1,000 1,009,030
5.37% 10/01/24 1,000 986,070
Puerto Rico Cmwlth. Infra.
Fin. Auth. Spec. Rites PA 569, Ser. 99
5.53%** 07/01/12 2,000 2,065,660
Puerto Rico Elec. Pwr. Auth.
Rev., Ser. 94T
5.50% 07/01/20 2,250 2,228,423
------------
23,174,068
------------
VIRGIN ISLANDS -- 0.7%
Virgin Islands Wtr. & Pwr.
Auth. Elec. Sys. Rev., Ser. 98
5.30% 07/01/21 1,100 1,031,514
------------
TOTAL MUNICIPAL BONDS
(Cost $145,530,715) 150,840,928
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
NEW JERSEY TAX-FREE INCOME PORTFOLIO (CONCLUDED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
CUMULATIVE PREFERRED STOCK -- 7.2%
Charter Mac Equity Issue Tr. 144A
6.62% 06/30/09 $1,000 $ 966,890
7.60% 11/30/10 4,000 3,987,680
MuniMae TE Bond Subs., LLC 144A
6.87% 06/30/09 4,000 3,932,640
7.75% 11/01/10 2,000 2,005,340
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $10,989,412) 10,892,550
------------
Shares
----------
SHORT TERM INVESTMENTs -- 1.2%
Smith Barney Tax-Free Money Market Fund
(Cost $1,839,270) 1,839,270 1,839,270
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $158,359,397*) 107.3% 163,572,748
LIABILITIES IN EXCESS OF
OTHER ASSETS (Including $12,148,192
of investment purchases payable) (7.3%) (11,100,102)
------ ------------
NET ASSETS (Applicable to 11,535,052
Institutional shares, 1,651,030 Service
shares, 152,326 Investor A shares and
142,716 Investor B shares outstanding) 100.0% $152,472,646
====== ============
NET ASSET VALUE AND
REDEMPTION PRICE PER
INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($150,858,738 (divide by) 13,338,408) $11.31
======
VALUE
-----
OFFERING PRICE PER
INSTITUTIONAL AND
SERVICE SHARE $11.31
======
MAXIMUM OFFERING PRICE
PER INVESTOR A SHARE
($11.31 (divide by) 0.960) $11.78
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($1,613,908 (divide by) 142,716) $11.31
======
---------------------------------
* Also cost for Federal income tax purposes. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $5,538,379
Gross unrealized depreciation (325,028)
----------
$5,213,351
==========
** Rates shown are the rates as of September 30, 2000.
+ The rate shown is the effective yield on the zero coupon bonds.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
OHIO TAX-FREE INCOME PORTFOLIO
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS -- 102.4%
OHIO -- 83.5%
Akron Swr. Sys. Rev., Ser. 96
5.87% 12/01/16 $ 500 $ 516,600
Brunswick G.O., Ser. 94
6.30% 12/01/05 210 221,833
Butler Cnty. Hosp. Fac. Rev.,
Middletown Reg. Hosp. Prj., Ser. 91
6.75% 11/15/03 50 52,157
Butler Cnty. Trans. Imp.
Dist. Rev., Ser. 97A
6.00% 04/01/11 600 647,724
Cincinnati Wtrwks. Imp. Rev., Ser. 89
6.75% 12/01/01 1,000 1,024,700
Clermont Cnty. Swr. Sys. Rev., Ser. 90
7.25% 12/01/00 1,415 1,449,441
Cleveland Apt. Sys. Rev., Ser. 94B
5.70% 01/01/04 150 157,819
Cleveland COP's, Cleveland
Stadium Prj., Ser. 97
5.25% 11/15/10 2,500 2,569,125
Cleveland Ltd. Tax G.O., Ser. 94
6.25% 11/15/06 1,915 2,069,100
Cleveland Pkg. Fac. Rev., Ser. 96
6.00% 09/15/06 1,275 1,360,769
Cleveland Pub. Pwr. Sys.
Rev., First Mtg. Prj., Ser. 94A
6.30% 11/15/05 4,000 4,329,320
Cleveland Pub. Pwr. Sys.
Rev., First Mtg. Prj., Ser. 94B
6.10% 11/15/03 1,000 1,043,590
Cleveland Wtrwks. Rev.,
First Mtg. Prj., Ser. 92A
6.50% 01/01/02 500 521,860
Cleveland-Cuyahoga Cnty.
Port Auth. Rev., Ser. 97
6.00% 03/01/07 485 480,155
Columbus G.O., Mun. Arpt.
No. 30-E-U, Ser. 91
6.15% 04/15/02 1,475 1,487,906
Columbus Mun. Arpt. Auth.
Rev., Columbus Intl. Arpt. Prj., Ser. 94A
6.00% 01/01/04 150 156,757
Columbus Unltd. Tax G.O., Ser. 86
7.37% 07/01/06 1,000 1,131,530
Columbus Unltd. Tax G.O., Ser. 91-2
6.50% 09/15/01 1,105 1,126,780
Columbus Unltd. Tax G.O., Ser. 92B
6.10% 01/01/03 1,000 1,034,320
Columbus Unltd. Tax G.O., Ser. 94-2
5.60% 05/15/05 1,000 1,041,940
Columbus Wtrwks. Enlargement
No. 44 G.O., Ser. 92
6.00% 05/01/03 500 527,065
Cuyahoga Cnty. G.O., Ser. 91
6.70% 10/01/01 1,000 1,041,730
Cuyahoga Cnty. Hosp. Rev.,
Univ. Hlth. Sys. Prj., Ser. 96B
6.00% 01/15/04 3,125 3,212,500
Cuyahoga Cnty. Jail Fac. Unltd.
Tax G.O., Ser. 91
7.00% 10/01/01 1,000 1,044,610
Fairfield City Sch. Dist. G.O., Ser. 94
7.45% 12/01/14 1,000 1,187,820
Franklin Cnty. G.O., Ser. 91
6.37% 12/01/01 1,635 1,702,427
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
OHIO (CONTINUED)
Greater Cleveland Regl.
Trans. Auth. G.O., Ser. 96
6.25% 12/01/06 $2,935 $ 3,185,385
Hamilton Cnty. Elec. Sys.
Mtg. Rev., Ser. 92A
6.00% 10/15/12 500 519,145
Hamilton Cnty. Swr. Sys. Rev., Ser. 91A
6.40% 06/01/01 325 335,680
6.40% 12/01/04 675 696,465
Kings Sch. Dist. G.O., Ser. 94
7.60% 12/01/05 200 223,850
Loveland City Sch. Dist. G.O., Ser. 92
6.65% 12/01/02 145 154,060
Lucas Cnty. G.O., Ser. 96
6.00% 12/01/03 2,310 2,411,478
6.00% 12/01/05 500 532,020
Marysville Sch. Dist. G.O., Ser. 98
6.00% 12/01/24 1,910 1,985,464
Medina Cnty. Unltd. Tax G.O., Ser. 86
7.25% 12/01/03 50 53,895
Montgomery Cnty. G.O., Ser. 91A
6.75% 09/01/01 1,500 1,532,310
North Royalton City Sch.
Dist. G.O., Ser. 94
6.62% 12/01/06 100 110,520
Northwestern Sch. Dist. Rev.,
Wayne & Ashland Cntys. Prj., Ser. 94
7.20% 12/01/10 300 355,200
Ohio Hsg. Fin. Agcy. Rev.,
Wind River Prj., Ser. 94A
5.55% 11/01/18 300 294,948
Ohio St. Bldg. Auth. Adult
Corr. Fac. Rev., Ser. 94
5.90% 10/01/09 2,000 2,111,400
Ohio St. Bldg. Auth. Disalle
Govt. Ctr. Rev., Ser. 96A
6.00% 10/01/05 1,000 1,063,640
Ohio St. Bldg. Auth. St. Corr.
Fac. Rev., Ser. 91A
6.50% 10/01/02 4,000 4,156,040
Ohio St. Bldg. Auth. St. Fac. Rev.,
Admin. Bldg. Fd. Prj., Ser. 92A
6.00% 10/01/04 1,020 1,069,103
Ohio St. Bldg. Data Ctr. Rev., Ser. 93A
5.90% 10/01/07 450 482,414
Ohio St. Comm. Sch. Cap. Fac.
Rev., Ser. 94A
5.75% 06/15/14 1,000 1,044,400
Ohio St. Env. Imp. Rev.,
USX Corp. Prj., Ref. Ser. 99
5.62% 05/01/29 1,000 888,000
Ohio St. Hgr. Ed. Fac. Comm. Rev.,
Ohio Dominican Coll. Prj., Ser. 94
6.63% 12/01/04 250 260,528
Ohio St. Nat. Res. Cap. Fac. G.O.,
Ser. 94A
5.40% 10/01/05 1,000 1,030,700
Ohio St. Pub. Fac. Comm. Hgr. Ed.
Fac. Rev., Ser. 92A
5.50% 12/01/03 2,000 2,056,360
Ohio St. Tpke. Rev., Ser. 96
6.00% 02/15/05 4,000 4,212,400
Ohio St. Wtr. Dev. Auth. Poll. Ctrl. Fac.
Rev., Republic Steel Prj., Ser. 95
6.37% 06/01/07 2,880 3,036,701
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
OHIO TAX-FREE INCOME PORTFOLIO (CONCLUDED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
OHIO (CONTINUED)
Ohio St. Wtr. Dev. Auth. Rev.,
Pure Wtr. Prj., Ser. 92
5.75% 06/01/04 $1,500 $ 1,559,415
Ohio St. Wtr. Dev. Auth. Rev., Steel-Cargill
North Star Broken Hill Prj., Ser. 95
6.30% 09/01/20 500 510,045
Ohio St. Wtr. Dev. Auth. Poll. Ctrl. Fac.
Rev., Wtr. Ctrl. State Match Prj., Ser. 95
5.70% 06/01/11 1,300 1,350,921
Ohio Unltd. Tax G.O., Ser. 95
6.00% 08/01/05 225 240,874
Olentangy Sch. Dist. G.O., Ser. 95A
6.00% 12/01/08 225 241,128
Scioto Cnty. Rev., Marine Term.
Norfolk Southern Corp. Prj., Ser. 98
5.30%** 08/15/13 3,000 2,767,920
Springboro Wtr. Sys. Rev., Ser. 98
5.00% 12/01/18 2,500 2,329,500
Summit Cnty. Hosp. Rev., Cuyahoga
Falls Gen. Hosp. Prj., Ser. 94
6.65% 07/01/14 200 193,686
Toledo G.O., Ser. 96
6.00% 12/01/06 500 536,030
Univ. of Cincinnati Gen. Rec. Rev.,
Ser. 91L
6.90% 06/01/07 1,500 1,552,305
Westerville City Sch. Dist. G.O., Ser. 87
6.25% 12/01/05 1,000 1,068,310
Westlake G.O., Ser. 96
6.40% 12/01/08 1,560 1,710,774
------------
79,002,592
------------
PUERTO RICO -- 18.9%
Puerto Rico Cmwlth. Hwy. &
Trans. Auth. Rites, Ser. 98
5.33%** 07/01/18 5,000 4,476,000
Puerto Rico Cmwlth. Infra. Fin.
Auth. S.O., Ser. 00A
5.37% 10/01/16 1,600 1,623,216
5.50% 10/01/17 2,000 2,044,700
5.50% 10/01/18 2,000 2,036,320
5.50% 10/01/19 2,630 2,666,820
5.50% 10/01/20 1,000 1,009,030
5.37% 10/01/24 1,000 986,070
Puerto Rico Pub. Bldgs. Auth.
Rites PA 577, Ser. 99
5.53%** 07/01/27 4,000 3,077,360
------------
17,919,516
------------
TOTAL MUNICIPAL BONDS
(Cost $94,808,939) 96,922,108
------------
CUMULATIVE PREFERRED STOCK -- 6.3%
Charter Mac Equity Issue Tr. 144A
6.62% 06/30/09 1,000 966,890
7.60% 11/30/10 1,000 996,920
MuniMae TE Bond Subs., LLC 144A
6.87% 06/30/09 2,000 1,966,320
7.75% 11/01/10 2,000 2,005,340
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $5,996,472) 5,935,470
------------
SHARES VALUE
------ -------
SHORT TERM INVESTMENTS -- 0.5%
Smith Barney Tax-Free Money Market Fund
(Cost $469,131) 469,131 $ 469,131
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $101,274,542*) 109.2% 103,326,709
LIABILITIES IN EXCESS OF
OTHER ASSETS (Including
$10,350,471 of investment
purchases payable) (9.2%) (8,727,072)
------- -----------
NET ASSETS (Applicable to 8,729,043 Institutional
shares, 3,739 Service shares,
317,159 Investor A shares, 163,161
Investor B shares and 40,267
Investor C shares outstanding) 100.0% $94,599,637
====== ===========
NET ASSET VALUE AND
REDEMPTION PRICE
PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($92,519,827 (divide by) 9,049,941) $10.22
======
OFFERING PRICE PER
INSTITUTIONAL AND
SERVICE SHARE $10.22
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($10.22 (divide by) 0.960) $10.65
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($1,668,137 (divide by) 163,161) $10.22
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($411,673 (divide by) 40,267) $10.22
======
-----------------------------
* Also cost for Federal income tax purposes. The gross unrealized appreciation
(depreciation) on a tax basis is as follows:
Gross unrealized appreciation $2,898,024
Gross unrealized depreciation (845,857)
----------
$2,052,167
==========
**Rates shown are the rates as of September 30, 2000.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
DELAWARE TAX-FREE INCOME PORTFOLIO
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS -- 90.5%
DELAWARE -- 65.6%
Delaware Econ. Dev. Auth. Rev., Del
Tech. Pk. Univ. Del. Prj., Ser. 00
6.00% 02/01/21 $1,000 $ 1,034,820
Delaware River & Bay Auth.
Rev., Ser. 96
6.00% 01/01/05 1,460 1,532,664
6.00% 01/01/06 1,160 1,227,036
Delaware St. Econ. Dev. Auth.
Poll. Ctrl. Rev., Delmarva
Pwr. Prj., Ser. 91B
7.15% 07/01/18 500 518,475
Delaware St. Econ. Dev. Auth.
Rev., First Mtg. Gilpin ACA
CBI Prj., Ser. 98
5.62% 07/01/19 2,000 1,913,900
5.62% 07/01/25 1,500 1,405,815
Delaware St. Econ. Dev. Auth.
Rev., Ser. 00
5.65% 07/01/28 4,000 4,044,400
Delaware St. Econ. Dev. Auth.
Rev., United Wtr. Delaware,
Inc. Prj., Ser. 95
6.20% 06/01/25 2,000 2,071,360
Delaware St. Econ. Dev. Auth.
Rev., Wtr. Dev. Prj., Ser. 92B
6.45% 12/01/07 1,165 1,271,364
Delaware St. G.O., Ser. 91A
6.30% 08/15/05 1,730 1,791,225
Delaware St. G.O., Ser. 92A
6.25% 03/01/07 1,400 1,459,500
Delaware St. Hlth. Fac. Auth. Rev.,
Christiana Care Hlth. Svcs. Prj.,
Ser. 98
5.00% 10/01/15 5,000 4,692,050
Delaware St. Hlth. Fac. Auth.
Rev., Med. Ctr. of
Delaware Prj., Ser. 92
6.25% 10/01/04 2,185 2,319,181
6.25% 10/01/05 2,175 2,334,427
Delaware St. Hsg. Auth. Rev.,
Multi-Family Mtg. Prj., Ser. 91
7.15% 07/01/14 3,000 3,096,540
Delaware St. Hsg. Auth. Rev.,
Multi-Family Mtg. Prj., Ser. 92C
7.37% 01/01/15 2,000 2,099,740
Delaware St. Hsg. Auth. Rev.,
Sr. Single Fam. Mtg. Prj., Ser. 00
5.90% 07/01/20 2,930 2,926,308
Delaware St. Realty Transfer
Tax Rev., Land & Wtr.
Consv. Tr. Fd. Prj., Ser. 93
5.50% 04/01/02 1,500 1,522,695
5.75% 04/01/03 1,500 1,543,365
Delaware St. Solid Waste Auth.
Solid Waste Sys. Rev., Ser. 92
5.80% 07/01/01 1,500 1,514,430
6.00% 07/01/02 2,000 2,042,820
Delaware Trans. Auth. Trans.
Sys. Rev., Ser. 90
7.10% 07/01/01 2,335 2,379,949
Delaware Trans. Auth. Trans.
Sys. Rev., Ser. 91
6.35% 07/01/05 500 516,975
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
DELAWARE (CONTINUED)
Delaware Trans. Auth. Trans.
Sys. Rev., Ser. 92
5.40% 07/01/03 $1,000 $ 1,023,410
5.62% 07/01/05 2,400 2,485,152
Delaware Trans. Auth. Trans.
Sys. Rev., Ser. 93
5.10% 07/01/04 1,500 1,529,025
5.50% 07/01/08 1,000 1,030,150
Delaware Trans. Auth. Trans.
Sys. Rev., Ser. 94
6.10% 07/01/07 1,000 1,060,350
Dover Elec. Rev., Ser. 90
7.00% 07/01/01 500 509,520
Dover Elec. Rev., Ser. 93
6.00% 07/01/07 500 521,445
New Castle Cnty. G.O., Ser. 91
6.20% 10/15/00 500 500,275
6.25% 10/15/01 1,000 1,018,830
6.30% 10/15/02 1,000 1,035,330
6.50% 10/15/04 1,000 1,038,700
6.50% 10/15/05 1,000 1,038,490
Sussex Cnty. G.O., Ser. 93
5.60% 10/15/08 3,000 3,097,860
5.70% 10/15/12 2,000 2,058,540
Univ. of Delaware Hsg. &
Dining Sys. Rev., Ser. 89
7.00% 11/01/00 2,000 2,003,720
Wilmington G.O., Ser. 92A
6.00% 07/01/03 500 508,375
6.20% 07/01/07 1,000 1,016,470
Wilmington G.O., Ser. 92B
6.25% 04/01/12 3,050 3,185,939
Wilmington Pk. Auth. Gtd. Pk.
Rev., Ser. 92A
5.60% 09/15/02 500 509,765
5.80% 09/15/04 1,000 1,039,620
6.00% 09/15/06 500 520,700
------------
71,990,705
------------
PUERTO RICO -- 20.8%
Puerto Rico Cmwlth. Hwy. &
Trans. Auth. Hwy. Rev., Ser. 93W
5.50% 07/01/15 1,000 1,051,630
Puerto Rico Cmwlth. Infra.
Fin. Auth. S.O., Ser. 00A
5.37% 10/01/16 1,600 1,623,216
5.50% 10/01/17 2,000 2,044,700
5.50% 10/01/18 2,000 2,036,320
5.50% 10/01/19 2,630 2,666,820
5.50% 10/01/20 1,000 1,009,030
5.37% 10/01/24 1,000 986,070
Puerto Rico Pub. Bldg. Auth.
Gtd. Govt. Fac. Rev., Ser. 95A
6.25% 07/01/10 1,000 1,124,110
Puerto Rico Pub. Fin. Corp.
Rites, Ser. 99
8.35%** 06/01/14 4,025 4,563,183
Puerto Rico Pub. Fin. Corp.
Cmwlth. Approp. Rev., Ser. 98A
5.37% 06/01/14 50 52,291
Puerto Rico Rev. Rites, Ser. 98
7.61%** 06/01/12 5,000 5,666,850
------------
22,824,220
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
BLACKROCK FUNDS
SCHEDULE OF INVESTMENTS
DELAWARE TAX-FREE INCOME PORTFOLIO (CONCLUDED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
VIRGIN ISLANDS -- 4.1%
Virgin Islands Pub. Fin. Auth.
Rev., Ser. 98
5.50% 10/01/18 $4,500 $ 4,454,370
------------
TOTAL MUNICIPAL BONDS
(Cost $98,146,921) 99,269,295
------------
CUMULATIVE PREFERRED STOCK -- 5.4%
Charter Mac Equity Issue Tr. 144A
6.62% 06/30/09 1,000 967,250
7.60% 11/30/10 1,000 997,250
MuniMae TE Bond Subs., LLC 144A
6.87% 06/30/09 2,000 1,967,000
7.75% 11/01/10 2,000 2,005,920
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $5,937,420) 5,937,420
------------
SHARES
--------
SHORT TERM INVESTMENTS -- 4.1%
Smith Barney Tax-Free Money Market Fund
(Cost $4,467,644) 4,467,644 4,467,644
------------
TOTAL INVESTMENTS IN
SECURITIES -- 100.0%
(Cost $108,551,985*) $109,674,359
============
--------------------
* Cost for Federal income tax purposes is $108,614,702. The gross
unrealized appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $1,634,432
Gross unrealized depreciation (574,775)
-----------
$ 1,059,657
===========
** Rates shown are the rates as of September 30, 2000.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
28
<PAGE>
BLACKROCK FUNDS
STATEMENT OF ASSETS AND LIABILITIES
DELAWARE TAX-FREE INCOME PORTFOLIO
September 30, 2000
ASSETS
Investments at value (Cost $108,551,985) .................. $109,674,359
Interest receivable ....................................... 1,854,266
Investments sold receivable ............................... 5,935,043
Prepaid expenses .......................................... 2,066
------------
TOTAL ASSETS ....................................... 117,465,734
------------
LIABILITIES
Investments purchased payable ............................. 16,293,068
Distributions payable ..................................... 378,657
Advisory fees payable ..................................... 20,303
Administrative fees payable ............................... 19,072
Transfer agent fees payable ............................... 1,002
Other accrued expenses payable ............................ 7,762
............................................................. ------------
TOTAL LIABILITIES .................................. 16,719,864
------------
NET ASSETS (Applicable to 9,800,475 Institutional shares,
10 Service shares, 386,473 Investor A shares,
182,725 Investor B shares and 38,338 Investor
C shares outstanding) ....................................... $100,745,870
============
NET ASSET VALUE AND REDEMPTION PRICE PER INSTITUTIONAL,
SERVICE AND INVESTOR A SHARE ($98,606,140
(divide by) 10,186,958) .................................... $ 9.68
======
OFFERING PRICE PER INSTITUTIONAL AND SERVICE SHARE ............ $ 9.68
======
MAXIMUM OFFERING PRICE PER INVESTOR A SHARE
($9.68 (divide by) 0.960) .................................. $10.08
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 4.5%)
PER INVESTOR B SHARE ($1,768,577 (divide by) 182,725) ...... $ 9.68
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
(subject to a maximum contingent
deferred sales charge of 1.0%)
PER INVESTOR C SHARE ($371,153 (divide by) 38,338) ......... $ 9.68
======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
29
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
KENTUCKY TAX-FREE INCOME PORTFOLIO
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS -- 97.3%
KENTUCKY -- 79.9%
Ashland Env. Imp. Rev., Allied
Chemical Corp. Prj., Ser. 78
5.80% 03/01/03 $ 220 $ 223,238
Ashland Poll. Ctl. Rev.,
Ashland, Inc. Prj., Ser. 99
5.70% 11/01/09 7,500 7,442,025
Boone Cnty. Sch. Dist. Fin.
Corp. Sch. Bldg. Rev., Ser. 91C
6.40% 09/01/01 440 447,731
6.50% 09/01/01 490 513,167
6.60% 09/01/01 550 576,488
Bowling Green Sch. Dist. Fin.
Corp. Rev., Ser. 00
5.75% 01/01/18 1,050 1,077,688
5.75% 01/01/20 1,135 1,150,674
Christian Cnty. Hosp. Rev.,
Jennie Stuart Med. Ctr. Prj.,
Ser. 96A
6.00% 07/01/17 1,000 969,120
Christian Cnty. Hosp. Rev.,
Jennie Stuart Med. Ctr. Prj.,
Ser. 97A
5.25% 07/01/03 1,000 992,630
Danville Multi-City Lease Rev.,
Owensboro Riverpark Prj.,
Ser. 93B
5.45% 01/02/01 1,800 1,844,352
5.55% 01/02/01 1,000 1,019,500
Fort Thomas Independent Sch.
Dist. Fin. Corp. Sch. Bldg. Rev.,
Ser. 00
5.25% 04/01/20 2,155 2,063,736
Frankfort Elec. & Wtr. Plant
Bd. Rev., Ser. 99
5.60% 12/01/19 1,045 1,052,681
Grayson Cnty. Sch. Dist. Fin. Corp.
Sch. Bldg. Rev., Ser. 95B
5.95% 01/01/08 1,290 1,371,928
Hardin Cnty. Sch. Dist. Fin. Corp.
Sch. Bldg. Rev., Ser. 00
5.50% 02/01/16 1,675 1,686,089
Harlan Cnty. Sch. Dist. Fin. Corp.
Sch. Bldg. Rev., Ser. 90
7.25% 12/01/02 160 165,454
Henderson Elec. Light & Pwr.
Rev., Ser. 73
5.70% 03/01/03 1,390 1,391,640
Hopkins Cnty. G.O., Detention
Fac. Prj., Ser. 00
5.75% 02/01/20 1,800 1,830,672
Jefferson Cnty. Corp. Rev.,
Cap. Imp. Prj., Ser. 93A
5.75% 08/15/04 1,275 1,326,740
5.90% 08/15/05 1,000 1,046,930
6.10% 08/15/07 2,500 2,622,075
Jefferson Cnty. Multi-Family Hsg.
Rev., Taylorsville Rd. Prj.,
Ser. 93A
5.75% 06/01/23 3,860 3,918,132
Jefferson Cnty. Multi-Family
Hsg. Rev., Whipps Mill Prj.,
Ser. 93A
5.87%** 06/01/04 2,250 2,264,603
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
KENTUCKY (CONTINUED)
Jefferson Cnty. Sch. Dist. Fin.
Corp. Sch. Bldg. Rev.,
Prerefunded Ser. 92B
6.00% 01/01/03 $ 905 $ 944,639
6.20% 01/01/06 915 958,106
6.20% 01/01/07 1,245 1,303,652
Jefferson Cnty. Sch. Dist. Fin.
Corp. Sch. Bldg. Rev.,
Unrefunded Ser. 92B
6.00% 01/01/03 1,100 1,135,431
6.20% 01/01/06 1,085 1,132,946
Kenton Cnty. Arpt. Bd. Arpt. Rev.,
Delta Airlines Prj., Ser. 92A
7.50% 02/01/20 1,400 1,454,992
Kenton Cnty. Arpt. Rev.,
Cincinnati Northern Kentucky
Prj., Ser. 97A
5.75% 03/01/05 1,490 1,550,360
5.85% 03/01/06 1,655 1,737,634
5.95% 03/01/07 1,730 1,828,783
6.30% 03/01/15 1,000 1,058,050
Kenton Cnty. Sch. Dist. Fin.
Corp. Sch. Bldg. Rev., Ser. 97
5.37% 03/01/17 2,800 2,774,268
Kenton Cnty. Wtr. Dist.
Wtrwks. Rev., Ser. 92
6.37% 02/01/17 1,000 1,043,580
Kentucky Dev. Fin. Auth.
Hosp. Rev., St. Lukes Hosp.
Prj., Ser. 89A
7.25% 10/01/00 120 120,000
Kentucky Hgr. Ed. Stud. Ln.
Ins. Rev., Ser. 85A
9.25% 06/01/01 1,785 1,813,542
Kentucky Hgr. Ed. Stud. Ln.
Ins. Rev., Ser. 95B
6.60% 06/01/02 3,435 3,504,147
Kentucky Hsg. Corp. Hsg. Rev.,
Ser. 90A
7.40% 01/01/10 735 749,384
Kentucky Hsg. Corp. Hsg.
Rev., Ser. 96D
5.80% 07/01/13 3,350 3,439,948
Kentucky Hsg. Corp. Hsg.
Rev., Ser. 96E
6.30% 01/01/28 2,000 2,034,020
Kentucky St. Property &
Bldg. Comm. Rev., Prj. 53,
Prerefunded Ser. 91
5.75% 10/01/11 4,090 4,219,699
Kentucky St. Property & Bldg. Comm.
Rev., Prj. 51, Ref. Ser. 91
6.50% 08/01/01 740 766,980
Kentucky St. Property & Bldg. Comm.
Rev., Prj. 54, Ref. Ser. 92
5.90% 09/01/07 2,750 2,862,338
Kentucky St. Property & Bldg.
Comm. Rev., Prj. 55,
Ref. Ser. 93
4.60% 09/01/03 3,000 3,008,790
4.90% 09/01/06 2,000 2,022,500
Kentucky St. Property & Bldg.
Comm. Rev., Prj. 65, Ser. 00
5.95% 02/01/17 2,325 2,415,791
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
KENTUCKY TAX-FREE INCOME PORTFOLIO (CONTINUED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
KENTUCKY (CONTINUED)
Kentucky St. Property &
Bldg. Comm. Rev., Prj. 53,
Unrefunded Ser. 91
5.75% 10/01/11 $ 410 $ 422,398
Kentucky St. Tpke. Auth. Econ.
Dev. Rev., Revitalization
Prj., Ref. Ser. 92
5.50% 01/01/01 2,040 2,044,998
Kentucky St. Tpke. Auth. Econ.
Dev. Rev., Revitalization
Prj., Ref. Ser. 95
6.50% 07/01/08 3,000 3,336,510
Kentucky St. Tpke. Auth.
Res. Rec. Rev., Ser. 79
7.10% 07/01/02 335 340,089
Lexington Ctr. Corp. Mtg. Rev.,
Ser. 93A
5.20% 10/01/04 1,790 1,826,140
Lexington-Fayette Urban Cnty.
Govt. G.O., Ser. 00A
5.75% 02/01/20 1,500 1,524,840
Lexington-Fayette Urban Cnty.
Govt. Pub. Fac. Corp. Mtg.
Rev., Ref. Ser. 93
4.50% 02/01/06 2,100 2,086,140
Lexington-Fayette Urban Cnty.
Govt. Rev., Univ. of Kentucky
Alumni Assoc., Inc. Prj., Ser. 94
6.50% 11/01/06 660 717,565
Louisville & Jefferson Cnty.
Met. Swr. Dist. Swr. & Drain
Sys. Rev., Ser. 97A
5.75% 05/15/33 3,750 3,780,375
Louisville & Jefferson Cnty.
Met. Swr. Dist. Rev., Ser. 93
5.30% 05/15/10 2,000 2,035,880
6.25% 05/15/26 1,015 1,062,593
Louisville & Jefferson Cnty.
Regl. Arpt. Auth. Arpt. Sys.
Rev., Ser. 97A
5.75% 07/01/01 1,000 1,009,270
5.75% 07/01/03 1,070 1,100,720
Louisville & Jefferson Cnty.
Regl. Arpt. Auth. Spec. Fac.
Rev., Ser. 99
5.50% 03/01/19 4,285 3,840,088
Louisville Pk. Auth. Rev.,
River City First Mtg. Prj., Ser. 91
6.50% 06/01/01 265 276,278
McCracken Cnty. Hosp. Rev.,
Mercy Hlth. Sys. Prj., Ser. 94A
6.10% 11/01/04 400 419,020
Muhlenberg Cnty. Ind. Dev. Rev.,
Harsco Corp. Prj., Ser. 87
7.00% 03/01/01 1,000 1,018,330
Owensboro Elec. Light &
Pwr. Rev., Ser. 93B
5.05% 01/01/07 2,500 2,533,125
PAR
MATURITY (000) VALUE
-------- ------ -------
MUNICIPAL BONDS (CONTINUED)
KENTUCKY (CONTINUED)
Univ. of Kentucky Rev., Cons.
Edl. Bldg. Prj., Ser. 92N
6.00% 05/01/08 $1,680 $ 1,752,794
6.00% 05/01/10 1,000 1,040,910
Univ. of Kentucky Rev., Cons.
Edl. Bldg. Prj., Ser. 94
4.60% 05/01/07 2,540 2,525,700
Univ. of Kentucky Rev.,
Ref. Ser. 93A
5.30% 08/01/03 1,765 1,802,418
5.40% 08/01/04 750 772,365
Univ. of Louisville Rev., Cons.
Edl. Bldg. Prj., Ser. 92H
5.87% 05/01/11 1,150 1,188,410
Univ. of Louisville Rev., Cons.
Edl. Bldg. Prj., Ser. 93J
5.00% 05/01/06 2,370 2,399,838
Western Kentucky Univ. Rev.,
Hsg. & Dining Sys. Prj., Ser. 90L
7.10% 12/01/00 350 351,197
Winchester Util. Rev., Ser. 93
5.45% 07/01/10 1,500 1,539,855
------------
123,624,719
------------
PUERTO RICO -- 15.7%
Puerto Rico Cmwlth. G.O., Ser. 00
5.75% 07/01/26 6,240 6,379,464
Puerto Rico Cmwlth. Hwy. &
Trans. Auth. Rev., Ser. 00C
6.00% 07/01/29 5,000 5,216,750
Puerto Rico Cmwlth. Infra.
Fin. Auth. S.O., Ser. 00A
5.37% 10/01/16 1,600 1,623,216
5.50% 10/01/17 2,000 2,044,700
5.50% 10/01/18 2,000 2,036,320
5.50% 10/01/19 2,630 2,666,820
5.50% 10/01/20 1,000 1,009,030
5.37% 10/01/24 1,000 986,070
Puerto Rico Cmwlth. Infra. Fin. Auth.
Spec. Rites PA 569, Ser. 99
5.53%** 07/01/01 1,335 1,378,828
Puerto Rico Elec. Pwr. Auth.
Rev., Ser. 92R
5.90% 07/01/01 1,000 1,011,630
------------
24,352,828
------------
VIRGIN ISLANDS -- 1.7%
Virgin Islands Pub. Fin. Auth.
Rev., Gross Receipts Tax
Ln. Notes, Ser. 99A
6.12% 10/01/29 1,000 1,016,380
Virgin Islands Wtr. & Pwr. Auth.
Elec. Sys. Rev., Ref. Ser. 98
5.30% 07/01/18 1,685 1,585,450
------------
2,601,830
------------
TOTAL MUNICIPAL BONDS
(Cost $146,243,296) 150,579,377
------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
31
<PAGE>
BLACKROCK FUNDS
STATEMENT OF NET ASSETS
KENTUCKY TAX-FREE INCOME PORTFOLIO (CONCLUDED)
PAR
AS OF SEPTEMBER 30, 2000 MATURITY (000) VALUE
-------- ------ -------
CUMULATIVE PREFERRED STOCK -- 7.0%
Charter Mac Equity Issue Tr. 144A
6.62% 06/30/09 $1,000 $ 966,890
7.60% 11/30/10 4,000 3,987,680
MuniMae TE Bond Subs., LLC 144A
6.87% 06/30/09 4,000 3,932,640
7.75% 11/01/10 2,000 2,005,340
------------
TOTAL CUMULATIVE PREFERRED STOCK
(Cost $10,956,666) 10,892,550
------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $157,199,962*) 104.3% 161,471,927
LIABILITIES IN EXCESS OF
OTHER ASSETS (4.3%) (6,704,317)
------ ------------
NET ASSETS (Applicable to 15,693,681
Institutional shares, 9,171 Service shares,
383,953 Investor A shares, 29,064
Investor B shares and 7,170
Investor C shares outstanding) 100.0% $154,767,610
===== ============
NET ASSET VALUE AND REDEMPTION
PRICE PER INSTITUTIONAL, SERVICE
AND INVESTOR A SHARE
($154,419,610 (divide by) 16,086,805) $ 9.60
======
OFFERING PRICE PER INSTITUTIONAL
AND SERVICE SHARE $ 9.60
======
MAXIMUM OFFERING PRICE PER
INVESTOR A SHARE
($9.60 (divide by) 0.960) $10.00
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 4.5%)
PER INVESTOR B SHARE
($278,998 (divide by) 29,064) $ 9.60
======
NET ASSET VALUE, OFFERING
AND REDEMPTION PRICE
(SUBJECT TO A MAXIMUM CONTINGENT
DEFERRED SALES CHARGE OF 1.0%)
PER INVESTOR C SHARE
($69,002 (divide by) 7,170) $ 9.62
======
---------------------------
* Cost for Federal income tax purposes is $157,227,679. The gross unrealized
appreciation (depreciation) on a tax basis is as follows:
Gross unrealized appreciation $4,913,227
Gross unrealized depreciation (668,979)
----------
$4,244,248
==========
**Rates shown are the rates as of September 30, 2000.
-----------------------------------------------
INVESTMENT ABBREVIATIONS
AMT Alternative Minimum Tax
COP Certificates of Participation
G.O. General Obligations
S.O. Special Obligations
------------------------------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
BLACKROCK FUNDS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Pennsylvania New Jersey Ohio Delaware Kentucky
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Income Income Income Income Income
For the Year Ended September 30, 2000 Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------- ------------ ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment income:
Interest ......................... $19,668,338 $56,026,202 $8,901,980 $5,695,064 $5,785,147 $9,420,631
----------- ----------- ---------- ---------- ---------- ----------
Expenses:
Investment advisory fee .......... 1,661,405 4,830,777 762,168 473,908 567,929 898,887
Administration fee ............... 764,246 2,129,000 350,597 217,998 237,498 375,898
Custodian fee .................... 57,091 128,468 27,935 23,297 20,321 30,113
Transfer agent fee ............... 112,392 334,204 48,194 34,544 37,678 52,348
Shareholders servicing fees ...... 35,758 156,193 39,534 12,268 17,317 8,910
Shareholders processing fees 24,657 101,773 36,581 7,442 10,406 5,362
Distribution fees 34,446 173,690 11,505 13,828 22,457 5,302
Legal and audit .................. 10,896 38,149 1,031 2,911 13,560 10,706
Printing ......................... 51,566 142,673 16,878 13,609 34,358 34,060
Registration fees and
expenses ....................... 39,290 17,489 13,424 16,567 9,334 10,845
Trustees' fees and
officers' salary ............... 5,399 18,095 2,807 1,651 1,870 2,910
Other ............................ 38,912 70,151 35,967 25,152 18,875 24,534
----------- ----------- ---------- ---------- ---------- ----------
2,836,058 8,140,662 1,346,621 843,175 991,603 1,459,875
Less fees waived ................. (739,736) (1,861,814) (342,327) (237,566) (213,741) (293,774)
----------- ----------- ---------- ---------- ---------- ----------
Total operating
expenses .................. 2,096,322 6,278,848 1,004,294 605,609 777,862 1,166,101
----------- ----------- ---------- ---------- ---------- ----------
Net investment income ............... 17,572,016 49,747,354 7,897,686 5,089,455 5,007,285 8,254,530
----------- ----------- ---------- ---------- ---------- ----------
Realized and unrealized gain (loss)
on investments:
Net realized gain (loss) from:
Investment transactions ........ (4,822,016) (9,923,706) (2,942,718) (138,016) (19,425) (2,445,929)
Futures contracts .............. 243,479 199,671 (603,752) (315,592) (118,070) (813,847)
----------- ----------- ---------- ---------- ---------- ----------
(4,578,537) (9,724,035) (3,546,470) (453,608) (137,495) (3,259,776)
----------- ----------- ---------- ---------- ---------- ----------
Changes in unrealized
appreciation from:
Investments .................... 2,835,739 9,523,182 3,052,153 326,595 384,896 2,191,539
Futures contracts .............. -- 117,895 11,826 64,867 51,310 88,187
----------- ----------- ---------- ---------- ---------- ----------
2,835,739 9,641,077 3,063,979 391,462 436,206 2,279,726
----------- ----------- ---------- ---------- ---------- ----------
Net gain (loss) on
investments ...................... (1,742,798) (82,958) (482,491) (62,146) 298,711 (980,050)
----------- ----------- ---------- ---------- ---------- ----------
Net increase in net assets
resulting from operations ........ $15,829,218 $49,664,396 $7,415,195 $5,027,309 $5,305,996 $7,274,480
=========== =========== ========== ========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
33
<PAGE>
BLACKROCK FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Tax-Free Pennsylvania Tax-Free
Income Portfolio Income Portfolio
------------------------------ ----------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
9/30/00 9/30/99 9/30/00 9/30/99
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................ $ 17,572,016 $ 14,717,469 $ 49,747,354 $ 51,961,222
Net realized loss on investments and
futures contracts .......................... (4,578,537) (2,220,503) (9,724,035) (4,048,885)
Net unrealized gain (loss) on investments
and futures contracts ...................... 2,835,739 (18,419,727) 9,641,077 (57,466,238)
------------ ------------ -------------- --------------
Net increase (decrease) in net assets
resulting from operations .................. 15,829,218 (5,922,761) 49,664,396 (9,553,901)
------------ ------------ -------------- --------------
Distributions to shareholders from:
Net investment income:
Institutional Class .......................... (16,006,437) (13,919,295) (44,835,928) (49,406,294)
Service Class ................................ (254,377) (269,328) (629,193) (828,260)
Investor A Class ............................. (301,962) (301,111) (1,425,827) (1,635,310)
Investor B Class ............................. (112,616) (102,808) (860,523) (904,150)
Investor C Class ............................. (61,512) (84,518) (26,559) (28,216)
------------ ------------ -------------- --------------
Total distributions from net investment income (16,736,904) (14,677,060) (47,778,030) (52,802,230)
------------ ------------ -------------- --------------
Net realized gains:
Institutional Class .......................... -- (1,513,860) -- (2,813,786)
Service Class ................................ -- (29,710) -- (53,925)
Investor A Class ............................. -- (41,111) -- (94,884)
Investor B Class ............................. -- (12,418) -- (51,775)
Investor C Class ............................. -- (8,813) -- (1,119)
------------ ------------ -------------- --------------
Total distributions from net realized gains .. -- (1,605,912) -- (3,015,489)
------------ ------------ -------------- --------------
Total distributions to shareholders .......... (16,736,904) (16,282,972) (47,778,030) (55,817,719)
------------ ------------ -------------- --------------
Capital share transactions ....................... 16,191,391 42,322,574 (121,476,163) 7,792,148
------------ ------------ -------------- --------------
Total increase (decrease) in net assets ...... 15,283,705 20,116,841 (119,589,797) (57,579,472)
------------ ------------ -------------- --------------
Net assets:
Beginning of period .......................... 320,966,037 300,849,196 1,069,656,093 1,127,235,565
------------ ------------ -------------- --------------
End of period ................................ $336,249,742 $320,966,037 $ 950,066,296 $1,069,656,093
============ ============ ============== ==============
New Jersey Tax-Free Ohio Tax-Free
Income Portfolio Income Portfolio
------------------------------ -----------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
9/30/00 9/30/99 9/30/00 9/30/99
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ........................$ 7,897,686 $ 7,943,049 $ 5,089,455 $ 4,900,911
Net realized loss on investments and
futures contracts .......................... (3,546,470) (317,771) (453,608) (527,737)
Net unrealized gain (loss) on investments
and futures contracts ...................... 3,063,979 (10,000,766) 391,462 (5,776,893)
----------- ------------- ----------- ------------
Net increase (decrease) in net assets
resulting from operations .................. 7,415,195 (2,375,488) 5,027,309 (1,403,719)
----------- ------------- ----------- ------------
Distributions to shareholders from:
Net investment income:
Institutional Class .......................... (6,335,152) (6,647,926) (4,569,297) (4,683,783)
Service Class ................................ (995,598) (1,353,188) (6,424) (18,094)
Investor A Class ............................. (63,822) (82,916) (138,678) (128,385)
Investor B Class ............................. (56,635) (43,732) (57,511) (48,033)
Investor C Class ............................. (293) (543) (13,264) (13,163)
----------- ------------- ----------- ------------
Total distributions from net investment income (7,451,500) (8,128,305) (4,785,174) (4,891,458)
----------- ------------- ----------- ------------
Net realized gains:
Institutional Class .......................... -- (765,260) -- (405,483)
Service Class ................................ -- (183,068) -- (2,601)
Investor A Class ............................. -- (7,806) -- (11,809)
Investor B Class ............................. -- (5,556) -- (4,713)
Investor C Class ............................. -- -- -- (2,127)
----------- ------------- ----------- ------------
Total distributions from net realized gains .. -- (961,690) -- (426,733)
----------- ------------- ----------- ------------
Total distributions to shareholders .......... (7,451,500) (9,089,995) (4,785,174) (5,318,191)
----------- ------------- ----------- ------------
Capital share transactions ....................... (8,949,719) (10,069,641) (3,005,594) (2,110,008)
----------- ------------- ----------- ------------
Total increase (decrease) in net assets ...... (8,986,024) (21,535,124) (2,763,459) (8,831,918)
----------- ------------- ----------- ------------
Net assets:
Beginning of period ..........................161,458,670 182,993,794 97,363,096 106,195,014
----------- ------------- ----------- ------------
End of period ...............................$152,472,646 $ 161,458,670 $94,599,637 $ 97,363,096
============ ============= =========== ============
Delaware Tax-Free Kentucky Tax-Free
Income Portfolio Income Portfolio
----------------------------- ----------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
9/30/00 9/30/99 9/30/00 9/30/99
--------------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ....................... $ 5,007,285 $ 5,088,375 $ 8,254,530 $ 8,427,282
Net realized loss on investments and
futures contracts ......................... (137,495) (761,412) (3,259,776) (668,435)
Net unrealized gain (loss) on investments
and futures contracts ..................... 436,206 (5,636,561) 2,279,726 (9,949,729)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations ................. 5,305,996 (1,309,598) 7,274,480 (2,190,882)
------------ ------------ ------------ ------------
Distributions to shareholders from:
Net investment income:
Institutional Class ......................... (4,574,935) (5,129,768) (7,791,490) (8,452,511)
Service Class ............................... (4) (4) (1,181) (223)
Investor A Class ............................ (169,360) (168,639) (125,885) (64,408)
Investor B Class ............................ (84,287) (95,255) (7,237) (6,134)
Investor C Class ............................ (21,575) (33,664) (17,981) (5,713)
------------ ------------ ------------ ------------
Total distributions from net investment income (4,850,161) (5,427,330) (7,943,774) (8,528,989)
------------ ------------ ------------ ------------
Net realized gains:
Institutional Class ......................... -- (1,497,785) -- (1,852,753)
Service Class ............................... -- (1) -- (1)
Investor A Class ............................ -- (40,396) -- (9,588)
Investor B Class ............................ -- (26,907) -- (1)
Investor C Class ............................ -- (12,008) -- (1)
------------ ------------ ------------ ------------
Total distributions from net realized gains -- (1,577,097) -- (1,862,344)
------------ ------------ ------------ ------------
Total distributions to shareholders ......... (4,850,161) (7,004,427) 7,943,774 (10,391,333)
------------ ------------ ------------ ------------
Capital share transactions ...................... (12,898,673) 1,976,902 (14,992,305) (14,456,505)
------------ ------------ ------------ ------------
Total increase (decrease) in net assets ..... (12,442,838) (6,337,123) (15,661,599) (27,038,720)
------------ ------------ ------------ ------------
Net assets:
Beginning of period ......................... 113,188,708 119,525,831 170,429,209 197,467,929
------------ ------------ ------------ ------------
End of period ............................... $100,745,870 $113,188,708 $154,767,610 $170,429,209
============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
34-35
<PAGE>
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Net Net gain Net
asset (loss) on Distributions Distributions asset
value Net investments from net from net value
beginning investment (both realized investment realized end of
of period income and unrealized) income gains period
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Institutional Class
-------------------------
Tax-Free Income Portfolio
-------------------------
9/30/00 $10.96 $0.57 $(0.07) $(0.54) $ -- $10.92
9/30/99 11.73 0.52 (0.71) (0.52) (0.06) 10.96
9/30/98 11.34 0.54 0.44 (0.54) (0.05) 11.73
9/30/97 10.84 0.56 0.51 (0.57) -- 11.34
9/30/96 10.61 0.49 0.28 (0.54) -- 10.84
Service Class
9/30/00 $10.96 $0.54 $(0.07) $(0.51) $ -- $10.92
9/30/99 11.73 0.49 (0.71) (0.49) (0.06) 10.96
9/30/98 11.34 0.38 0.56 (0.50) (0.05) 11.73
9/30/97 10.84 0.53 0.50 (0.53) -- 11.34
9/30/96 10.61 0.51 0.23 (0.51) -- 10.84
Investor A Class
9/30/00 $10.96 $0.51 $(0.06) $(0.49) $ -- $10.92
9/30/99 11.73 0.47 (0.71) (0.47) (0.06) 10.96
9/30/98 11.34 0.47 0.45 (0.48) (0.05) 11.73
9/30/97 10.84 0.50 0.51 (0.51) -- 11.34
9/30/96 10.61 0.45 0.21 (0.43) -- 10.84
Investor B Class
9/30/00 $10.96 $0.44 $(0.07) $(0.41) $ -- $10.92
9/30/99 11.73 0.38 (0.71) (0.38) (0.06) 10.96
9/30/98 11.34 0.40 0.44 (0.40) (0.05) 11.73
9/30/97 10.84 0.44 0.49 (0.43) -- 11.34
7/18/96 1 through 9/30/96 10.74 0.08 0.10 (0.08) -- 10.84
Investor C Class
9/30/00 $10.96 $0.46 $(0.08) $(0.41) $ -- $10.93
9/30/99 11.73 0.38 (0.71) (0.38) (0.06) 10.96
9/30/98 11.34 0.36 0.48 (0.40) (0.05) 11.73
2/28/97 1 through 9/30/97 11.04 0.28 0.27 (0.25) -- 11.34
--------------------------------------
Pennsylvania Tax-Free Income Portfolio
--------------------------------------
Institutional Class
9/30/00 $10.52 $0.54 $ 0.02 $(0.52) $ -- $10.56
9/30/99 11.15 0.51 (0.59) (0.52) (0.03) 10.52
9/30/98 10.77 0.52 0.38 (0.52) -- 11.15
9/30/97 10.44 0.53 0.33 (0.53) -- 10.77
9/30/96 10.33 0.52 0.12 (0.53) -- 10.44
Service Class
9/30/00 $10.52 $0.51 $ 0.01 $(0.49) $ -- $10.55
9/30/99 11.15 0.47 (0.59) (0.48) (0.03) 10.52
9/30/98 10.77 0.47 0.39 (0.48) -- 11.15
9/30/97 10.44 0.50 0.33 (0.50) -- 10.77
9/30/96 10.33 0.50 0.11 (0.50) -- 10.44
Investor A Class
9/30/00 $10.52 $0.49 $ 0.02 $(0.47) $ -- $10.56
9/30/99 11.15 0.46 (0.59) (0.47) (0.03) 10.52
9/30/98 10.77 0.45 0.40 (0.47) -- 11.15
9/30/97 10.44 0.48 0.33 (0.48) -- 10.77
9/30/96 10.33 0.48 0.11 (0.48) -- 10.44
Investor B Class
9/30/00 $10.44 $0.42 $ 0.02 $(0.40) $ -- $10.48
9/30/99 11.15 0.38 (0.62) (0.44) (0.03) 10.44
9/30/98 10.77 0.39 0.41 (0.42) -- 11.15
9/30/97 10.44 0.40 0.33 (0.40) -- 10.77
9/30/96 10.33 0.40 0.11 (0.40) -- 10.44
Investor C Class
9/30/00 $10.48 $0.42 $ 0.01 $(0.40) $ -- $10.51
9/30/99 11.15 0.39 (0.59) (0.44) (0.03) 10.48
8/14/98 1 through 9/30/98 11.00 0.42 0.15 (0.42) -- 11.15
Ratio of Ratio of net
Net expenses Ratio of net investment income
assets average net Ratio of investment to average
end of assets expenses income net assets Portfolio
Total period (excluding to average to average (excluding turnover
return (000) waivers) net assets net assets waivers) rate
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------
Tax-Free Income Portfolio
-------------------------
Institutional Class
9/30/00
9/30/99 4.80% $ 318,300 0.60% 0.82% 5.32% 5.10% 43%
9/30/98 (1.68) 302,319 0.60 0.82 4.57 4.35 104
9/30/97 8.85 285,921 0.60 0.88 4.61 4.33 100
9/30/96 10.09 9,419 0.55 0.90 5.07 4.72 262
Service Class 7.45 8,350 0.55 0.89 5.10 4.78 268
9/30/00
9/30/99 4.49% $ 5,347 0.90% 1.12% 5.02% 4.80% 43%
9/30/98 (1.97) 5,754 0.90 1.12 4.27 4.05 104
9/30/97 8.52 5,430 0.88 1.16 4.34 4.06 100
9/30/96 9.77 58,779 0.85 1.20 4.76 4.41 262
Investor A Class 7.14 36,161 0.85 1.18 4.88 4.56 268
9/30/00
9/30/99 4.31%3 $ 8,751 1.07% 1.29% 4.85% 4.63% 43%
9/30/98 (2.14)3 6,591 1.07 1.29 4.10 3.88 104
9/30/97 8.34 3 6,440 1.05 1.33 4.17 3.89 100
9/30/96 9.58 3 5,530 1.02 1.37 4.60 4.25 262
Investor B Class 6.94 3 4,873 1.04 1.37 4.67 4.35 268
9/30/00
9/30/99 3.54%4 $ 2,723 1.82% 2.04% 4.09% 3.87% 43%
9/30/98 (2.87)4 3,434 1.82 2.04 3.35 3.13 104
9/30/97 7.53 4 2,034 1.79 2.07 3.39 3.11 100
7/18/96 1 through 9/30/96 8.77 4 926 1.75 2.10 3.65 3.30 262
Investor C Class 1.72 4 10 1.65 2 1.98 2 3.84 2 3.51 2 268
9/30/00
9/30/99 3.63%4 $ 1,129 1.82% 2.04% 4.13% 3.91% 43%
9/30/98 (2.87)4 2,868 1.82 2.04 3.35 3.13 104
2/28/97 1 through 9/30/97 7.53 4 1,024 1.70 1.98 3.19 2.91 100
5.02 4 -- 1.70 2 2.05 2 3.95 2 3.60 2 262
--------------------------------------
Pennsylvania Tax-Free Income Portfolio
--------------------------------------
Institutional Class
9/30/00 5.50% $ 884,678 0.60% 0.79% 5.19% 5.00% 31%
9/30/99 (0.82) 994,381 0.60 0.79 4.67 4.48 28
9/30/98 8.51 1,054,070 0.58 0.82 4.66 4.42 43
9/30/97 8.43 5,108 0.55 0.86 4.97 4.66 97
9/30/96 6.29 3,609 0.55 0.85 5.01 4.72 119
Service Class
9/30/00 5.09% $ 12,646 0.90% 1.09% 4.90% 4.71% 31%
9/30/99 (1.11) 14,132 0.90 1.09 4.37 4.18 28
9/30/98 8.19 20,669 0.86 1.10 4.39 4.15 43
9/30/97 8.10 50,395 0.85 1.16 4.67 4.36 97
9/30/96 5.97 34,297 0.85 1.15 4.74 4.44 119
Investor A Class
9/30/00 5.03%3 $ 30,770 1.07% 1.26% 4.74% 4.55% 31%
9/30/99 (1.25)3 36,634 1.04 1.23 4.23 4.04 28
9/30/98 8.04 3 34,712 1.01 1.25 4.25 4.01 43
9/30/97 7.95 3 32,900 0.97 1.30 4.54 4.23 97
9/30/96 5.81 3 38,031 1.00 1.30 4.58 4.29 119
Investor B Class
9/30/00 4.33%4 $ 21,584 1.82% 2.01% 4.01% 3.82% 31%
9/30/99 (2.21)4 23,602 1.82 2.00 3.45 3.26 28
9/30/98 7.56 4 17,601 1.78 2.02 3.46 3.22 43
9/30/97 7.12 4 12,388 1.76 2.07 3.73 3.42 97
9/30/96 5.04 4 7,974 1.74 2.03 3.81 3.51 119
Investor C Class
9/30/00 4.32%4 $ 388 1.82% 2.01% 4.01% 3.82% 31%
9/30/99 (1.93)4 907 1.82 1.97 3.45 3.26 28
8/14/98 1 through 9/30/98 7.56 4 184 1.58 2 1.82 2 2.98 2 2.74 2 43
</TABLE>
36-37
<PAGE>
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Net Net gain Net
asset (loss) on Distributions Distributions asset
value Net investments from net from net value
beginning investment (both realized investment realized end of
of period income and unrealized) income gains period
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------
New Jersey Tax-Free Income Portfolio
------------------------------------
Institutional Class
9/30/00 $11.30 $0.58 $(0.02) $(0.55) $ -- $11.31
9/30/99 12.07 0.54 (0.70) (0.55) (0.06) 11.30
5/4/98 1 through 9/30/98 11.71 0.23 0.36 (0.23) -- 12.07
Service Class
9/30/00 $11.30 $0.56 $(0.03) $(0.52) $ -- $11.31
9/30/99 12.07 0.51 (0.70) (0.52) (0.06) 11.30
9/30/98 11.65 0.52 0.42 (0.52) -- 12.07
9/30/97 11.27 0.52 0.37 (0.51) -- 11.65
2/1/96 through 9/30/96 11.61 0.73 (0.32) (0.75) -- 11.27
3/1/95 1 through 1/31/96 10.94 0.46 0.65 (0.44) -- 11.61
Investor A Class
9/30/00 $11.30 $0.53 $(0.02) $(0.50) $ -- $11.31
9/30/99 12.07 0.48 (0.69) (0.50) (0.06) 11.30
9/30/98 11.65 0.50 0.42 (0.50) -- 12.07
9/30/97 11.27 0.51 0.37 (0.50) -- 11.65
2/1/96 through 9/30/96 11.61 0.34 (0.34) (0.34) -- 11.27
1/26/96 1 through 1/31/96 11.54 -- 0.07 -- -- 11.61
Investor B Class
9/30/00 $11.30 $0.45 $(0.02) $(0.42) $ -- $11.31
9/30/99 12.07 0.40 (0.70) (0.41) (0.06) 11.30
9/30/98 11.65 0.41 0.42 (0.41) -- 12.07
9/30/97 11.27 0.41 0.38 (0.41) -- 11.65
7/2/96 1 through 9/30/96 11.15 0.09 0.12 (0.09) -- 11.27
Investor C Class
10/1/99 through 3/3/00 $11.30 $0.18 $(0.26) $(0.18) $ -- $11.04
12/9/98 1 through 9/30/99 11.98 0.32 (0.67) (0.33) -- 11.30
------------------------------
Ohio Tax-Free Income Portfolio
------------------------------
Institutional Class
9/30/00 $10.19 $0.54 $ -- $(0.51) $ -- $10.22
9/30/99 10.88 0.47 (0.65) (0.47) (0.04) 10.19
9/30/98 10.50 0.48 0.37 (0.47) -- 10.88
9/30/97 10.15 0.51 0.34 (0.50) -- 10.50
9/30/96 10.05 0.50 0.10 (0.50) -- 10.15
Service Class
9/30/00 $10.19 $0.51 $ -- $(0.48) $ -- $10.22
9/30/99 10.88 0.47 (0.65) (0.47) (0.04) 10.19
9/30/98 10.50 0.48 0.37 (0.47) -- 10.88
9/30/97 10.15 0.47 0.35 (0.47) -- 10.50
9/30/96 10.05 0.48 0.10 (0.48) -- 10.15
Investor A Class
9/30/00 $10.19 $0.49 $ -- $(0.46) $ -- $10.22
9/30/99 10.88 0.45 (0.65) (0.45) (0.04) 10.19
9/30/98 10.50 0.45 0.38 (0.45) -- 10.88
9/30/97 10.15 0.45 0.35 (0.45) -- 10.50
9/30/96 10.05 0.46 0.10 (0.46) -- 10.15
Investor B Class
9/30/00 $10.19 $0.42 $ -- $(0.39) $ -- $10.22
9/30/99 10.88 0.37 (0.65) (0.37) (0.04) 10.19
9/30/98 10.50 0.37 0.38 (0.37) -- 10.88
9/30/97 10.15 0.37 0.35 (0.37) -- 10.50
9/30/96 10.05 0.38 0.10 (0.38) -- 10.15
Investor C Class
9/30/00 $10.19 $0.42 $ -- $(0.39) $ -- $10.22
9/30/99 10.88 0.37 (0.65) (0.37) (0.04) 10.19
8/26/98 1 through 9/30/98 10.74 0.03 0.14 (0.03) -- 10.88
Ratio of net
Net Ratio of expenses investment income
assets Ratio of to average Ratio of net to average
end of expenses to net assets nvestment income net assets Portfolio
Total period average net (excluding to average net (excluding turnover
return (000) assets waivers) assets waivers) rate
-------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------
New Jersey Tax-Free Income Portfolio
------------------------------------
Institutional Class
9/30/00 5.15% $ 130,463 0.60% 0.82% 5.24% 5.02% 77%
9/30/99 (1.35) 134,046 0.60 0.81 4.59 4.37 43
5/4/98 1 through 9/30/98 8.38 145,708 0.60 2 0.90 2 4.67 2 4.37 2 24
Service Class
9/30/00 4.84% $ 18,673 0.90% 1.12% 4.92% 4.70% 77%
9/30/99 (1.65) 24,626 0.90 1.11 4.28 4.07 43
9/30/98 8.28 34,803 0.88 1.18 4.37 4.07 24
9/30/97 8.11 84,596 0.85 1.17 4.59 4.27 77
2/1/96 through 9/30/96 0.15 88,077 0.85 2 1.17 2 4.44 2 4.13 2 109
3/1/95 1 through 1/31/96 10.35 97,976 0.88 2 0.90 2 4.43 2 4.41 2 26
Investor A Class
9/30/00 4.67%3 $ 1,723 1.07% 1.29% 4.81% 4.59% 77%
9/30/99 (1.82)3 1,328 1.07 1.28 4.11 3.90 43
9/30/98 8.10 3 1,432 1.06 1.36 4.26 3.96 24
9/30/97 7.94 3 1,548 1.02 1.34 4.41 4.09 77
2/1/96 through 9/30/96 (0.01)3 894 1.01 2 1.33 2 4.29 2 3.98 2 109
1/26/96 1 through 1/31/96 0.63 3 14 1.02 2 1.36 2 2.79 2 2.45 2 26
Investor B Class
9/30/00 3.89%4 $ 1,614 1.82% 2.04% 4.02% 3.80% 77%
9/30/99 (2.55)4 1,440 1.82 2.03 3.36 3.15 43
9/30/98 7.30 4 1,051 1.80 2.10 3.43 3.13 24
9/30/97 7.14 4 767 1.74 2.06 3.60 3.28 77
7/2/96 1 through 9/30/96 2.04 4 30 1.74 2 2.06 2 3.48 2 3.16 2 109
Investor C Class
10/1/99 through 3/3/00 (0.73)%4 $ --5 1.82%2 2.04%2 3.90%2 3.68%2 77%
12/9/98 1 through 9/30/99 (3.02)4 19 1.82 2 2.03 2 3.36 2 3.15 2 43
------------------------------
Ohio Tax-Free Income Portfolio
------------------------------
Institutional Class
9/30/00 5.52% $ 89,239 0.60% 0.85% 5.41% 5.16% 23%
9/30/99 (1.38) 92,455 0.60 0.81 4.75 4.54 23
9/30/98 8.56 101,066 0.60 0.93 4.64 4.31 77
9/30/97 8.53 928 0.55 1.06 4.80 4.29 87
9/30/96 6.12 409 0.51 1.10 4.96 4.37 136
Service Class
9/30/00 5.20% $ 38 0.90% 1.15% 5.09% 4.84% 23%
9/30/99 (1.68) 254 0.90 1.11 4.45 4.24 23
9/30/98 8.23 712 0.88 1.21 4.37 4.04 77
9/30/97 8.21 7,421 0.85 1.36 4.51 4.00 87
9/30/96 5.80 6,377 0.79 1.38 4.69 4.10 136
Investor A Class
9/30/00 5.03%3 $ 3,243 1.07% 1.32% 4.94% 4.69% 23%
9/30/99 (1.85)3 3,036 1.07 1.28 4.28 4.07 23
9/30/98 8.05 3 2,774 1.06 1.39 4.22 3.89 77
9/30/97 8.03 3 2,614 1.02 1.53 4.35 3.84 87
9/30/96 5.66 3 2,833 0.91 1.50 4.57 3.98 136
Investor B Class
9/30/00 4.25%4 $ 1,668 1.82% 2.07% 4.19% 3.94% 23%
9/30/99 (2.58)4 1,426 1.82 2.03 3.53 3.32 23
9/30/98 7.25 4 1,116 1.79 2.12 3.41 3.08 77
9/30/97 7.23 4 622 1.75 2.26 3.52 3.01 87
9/30/96 4.87 4 161 1.66 2.26 3.80 3.21 136
Investor C Class
9/30/00 4.25%4 $ 412 1.82% 2.07% 4.19% 3.94% 23%
9/30/99 (2.58)4 192 1.82 2.03 3.53 3.32 23
8/26/98 1 through 9/30/98 1.60 4 527 1.71 2 2.04 2 2.82 2 2.49 2 77
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
38-39
<PAGE>
BLACKROCK FUNDS
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Net Net gain Net
asset (loss) on Distributions Distributions asset
value Net investments from net from net value
beginning investment (both realized investment realized end of
of period income and unrealized) income gains period
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
----------------------------------
Delaware Tax-Free Income Portfolio
----------------------------------
Institutional Class
9/30/00 $ 9.62 $0.47 $ 0.04 $(0.45) $ -- $ 9.68
9/30/99 10.33 0.44 (0.54) (0.47) (0.14) 9.62
5/11/98 1 through 9/30/98 10.00 0.17 0.34 (0.18) -- 10.33
Service Class
9/30/00 $ 9.62 $0.44 $ 0.04 $(0.42) $ -- $ 9.68
9/30/99 10.33 0.44 (0.57) (0.44) (0.14) 9.62
5/11/98 1 through 9/30/98 10.00 0.16 0.34 (0.17) -- 10.33
Investor A Class
9/30/00 $ 9.62 $0.43 $ 0.04 $(0.41) $ -- $ 9.68
9/30/99 10.33 0.39 (0.54) (0.42) (0.14) 9.62
5/11/98 1 through 9/30/98 10.00 0.15 0.34 (0.16) -- 10.33
Investor B Class
9/30/00 $ 9.62 $0.35 $ 0.05 $(0.34) $ -- $ 9.68
9/30/99 10.33 0.32 (0.54) (0.35) (0.14) 9.62
5/11/98 1 through 9/30/98 10.00 0.12 0.34 (0.13) -- 10.33
Investor C Class
9/30/00 $ 9.62 $0.35 $ 0.05 $(0.34) $ -- $ 9.68
9/30/99 10.33 0.32 (0.54) (0.35) (0.14) 9.62
5/11/98 1 through 9/30/98 10.00 0.12 0.34 (0.13) -- 10.33
----------------------------------
Kentucky Tax-Free Income Portfolio
----------------------------------
Institutional Class
9/30/00 $ 9.63 $0.48 $(0.05) $(0.46) $ -- $ 9.60
9/30/99 10.31 0.45 (0.57) (0.46) (0.10) 9.63
5/11/98 1 through 9/30/98 10.00 0.18 0.31 (0.18) -- 10.31
Service Class
9/30/00 $ 9.63 $0.44 $(0.04) $(0.43) $ -- $ 9.60
9/30/99 10.31 0.44 (0.59) (0.43) (0.10) 9.63
5/11/98 1 through 9/30/98 10.00 0.19 0.29 (0.17) -- 10.31
Investor A Class
9/30/00 $ 9.63 $0.44 $(0.05) $(0.42) $ -- $ 9.60
9/30/99 10.31 0.40 (0.57) (0.41) (0.10) 9.63
5/11/98 1 through 9/30/98 10.00 0.16 0.31 (0.16) -- 10.31
Investor B Class
9/30/00 $ 9.63 $0.37 $(0.05) $(0.35) $ -- $ 9.60
9/30/99 10.31 0.34 (0.58) (0.34) (0.10) 9.63
5/11/98 1 through 9/30/98 10.00 0.15 0.29 (0.13) -- 10.31
Investor C Class
9/30/00 $ 9.63 $0.41 $(0.07) $(0.35) $ -- $ 9.62
9/30/99 10.31 0.33 (0.57) (0.34) (0.10) 9.63
5/11/98 1 through 9/30/98 10.00 0.15 0.29 (0.13) -- 10.31
Ratio of net
Net Ratio of expenses investment income
assets Ratio of to average Ratio of net to average
end of expenses to net assets investment income net assets Portfolio
Total period average net (excluding to average net (excluding turnover
return (000) assets waivers) assets waivers) rate
-----------------------------------------------------------------------------------------------------------------------------------
----------------------------------
Delaware Tax-Free Income Portfolio
----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Institutional Class
9/30/00 5.50% $ 94,865 0.70% 0.91% 4.90% 4.69% 27%
9/30/99 (1.10) 104,683 0.70 0.86 4.38 4.22 31
5/11/98 1 through 9/30/98 5.16 114,524 0.70 2 0.88 2 4.18 2 4.00 2 54
Service Class
9/30/00 5.19% $ -- 1.00% 1.21% 4.60% 4.39% 27%
9/30/99 (1.40) -- 1.00 1.16 4.08 3.92 31
5/11/98 1 through 9/30/98 5.04 -- 0.67 2 0.85 2 5.00 2 4.82 2 54
Investor A Class
9/30/00 5.01%3 $ 3,741 1.17% 1.38% 4.45% 4.24% 27%
9/30/99 (1.57)3 4,468 1.17 1.33 3.91 3.75 31
5/11/98 1 through 9/30/98 4.97 3 2,546 1.15 2 1.33 2 3.68 2 3.50 2 54
Investor B Class
9/30/00 4.23%4 $ 1,769 1.92% 2.13% 3.67% 3.46% 27%
9/30/99 (2.31)4 3,149 1.92 2.08 3.16 3.00 31
5/11/98 1 through 9/30/98 4.67 4 1,740 1.83 2 2.01 2 2.89 2 2.71 2 54
Investor C Class
9/30/00 4.23%4 $ 371 1.92% 2.13% 3.67% 3.46% 27%
9/30/99 (2.31)4 889 1.92 2.08 3.16 3.00 31
5/11/98 1 through 9/30/98 4.67 4 716 1.89 2 2.07 2 2.81 2 2.63 2 54
-------------------------------------
Kentucky Tax-Free Income Portfolio
-------------------------------------
Institutional Class
9/30/00 4.66% $ 150,646 0.70% 0.88% 5.06% 4.88% 55%
9/30/99 (1.23) 167,799 0.70 0.88 4.56 4.38 25
5/11/98 1 through 9/30/98 4.95 196,493 0.70 2 0.95 2 4.54 2 4.29 2 7
Service Class
9/30/00 4.35% $ 88 1.00% 1.18% 4.76% 4.58% 55%
9/30/99 (1.52) -- 1.00 1.18 4.26 4.08 25
5/11/98 1 through 9/30/98 4.82 -- 0.67 2 0.92 2 5.00 2 4.75 2 7
Investor A Class
9/30/00 4.17%3 $ 3,686 1.17% 1.35% 4.63% 4.45% 55%
9/30/99 (1.69)3 1,856 1.17 1.35 4.09 3.91 25
5/11/98 1 through 9/30/98 4.76 3 975 1.17 2 1.42 2 4.07 2 3.82 2 7
Investor B Class
9/30/00 3.40%4 $ 279 1.92% 2.10% 3.86% 3.68% 55%
9/30/99 (2.43)4 203 1.92 2.10 3.34 3.16 25
5/11/98 1 through 9/30/98 4.45 4 -- 0.67 2 0.92 2 0.64 2 0.39 2 7
Investor C Class
9/30/00 3.61%4 $ 69 1.92% 2.10% 3.78% 3.60% 55%
9/30/99 (2.43)4 571 1.92 2.10 3.34 3.16 25
5/11/98 1 through 9/30/98 4.45 4 -- 0.67 2 0.92 2 5.00 2 4.75 2 7
<FN>
1 Commencement of operations of share class.
2 Annualized.
3 Sales load not reflected in total return.
4 Contingent deferred sales load not reflected in total return.
5 There were no Investor C shares outstanding as of September 30, 2000.
</FN>
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
40-41
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS
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 39 publicly-offered portfolios, six of which are included in these
financial statements (the "Portfolios"). Each Portfolio is authorized to issue
an unlimited number of shares with a par value of $0.001. Each portfolio of the
Fund may offer as many as seven classes of shares. Shares of all classes of a
Portfolio represent equal pro rata interests in such Portfolio, except that each
class bears different expenses which reflect the difference in the range of
services provided to them. The following table provides a list of the Portfolios
included in this report along with a summary of their respective class-specific
fee arrangements as provided under the Fund's Amended and Restated Distribution
and Service Plan (the "Plan"). Fees are expressed as a percentage of average
daily net asset values of the respective classes.
<TABLE>
<CAPTION>
Portfolio Share Classes
------------------------------------------------------------------------------------------------------------------------------------
Institutional Service Investor A Investor B Investor C
------------------------------------------------------------------------------------------------------------------------------------
Contractual Actual Contractual Actual Contractual Actual Contractual Actual Contractual Actual
Fees Fees(4) Fees(1) Fees(4) Fees(2) Fees(4) Fees(3) Fees(4) Fees(3) Fees(4)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
------------------------------------------------------------------------------------------------------------------------------------
Pennsylvania Tax-Free
Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
------------------------------------------------------------------------------------------------------------------------------------
New Jersey Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
------------------------------------------------------------------------------------------------------------------------------------
Ohio Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
------------------------------------------------------------------------------------------------------------------------------------
Delaware Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
------------------------------------------------------------------------------------------------------------------------------------
Kentucky Tax-Free Income None None 0.30% 0.30% 0.50% 0.40% 1.15% 1.15% 1.15% 1.15%
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) -- the maximum annual contractual fees are comprised of a .15% service fee
and .15% shareholder processing fee.
(2) -- the maximum annual contractual fees are comprised of a .10%
distribution fee, .25% service fee and .15% shareholder processing fee.
(3) -- the maximum annual contractual fees are comprised of a .75%
distribution fee, .25% service fee and .15% shareholder processing fee.
(4) -- the actual fees are as of September 30, 2000.
</FN>
</TABLE>
In addition, Institutional and Service shares bear a Transfer Agent fee at
an annual rate not to exceed .03% and Investor A, Investor B and Investor C
shares bear a Transfer Agent fee at an annual rate not to exceed .10% of the
average daily net assets of such respective classes.
(A) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States of America requires the use of management estimates. Actual
results could differ from these estimates.
Security Valuation -- Portfolio securities for which market quotations are
readily available are valued at market value, which is currently determined
using the last reported sales price. If no sales are reported, as in the case of
some securities traded over-the-counter, portfolio securities are valued at the
mean between the last reported bid and asked prices or on the basis of
quotations provided by a pricing service or dealer which uses information with
respect to transactions on bonds, quotations from bond dealers, market
transactions in comparable securities and various relationships between
securities in determining value. Short-term obligations with maturities of 60
days or less are valued at amortized cost which approximates market value.
Discounts and premiums on debt securities are amortized for book and tax
purposes using the effective yield-to-maturity method over the term of the
instrument. Securities for which market quotations are not readily available are
valued at fair value as determined in accordance with procedures adopted by the
Fund's Board of Trustees. As of September 30, 2000, there were no securities
valued in accordance with such procedures.
Dividends to Shareholders -- Dividends from net investment income are
declared by each Portfolio each day on "settled" shares (i.e. shares for which
the particular Portfolio has received payment in federal funds) and are paid
monthly. Over the course of a year, substantially all of each Portfolio's net
investment income will be declared as dividends. The amount of the daily
dividend for each Portfolio will be based on periodic projections of its net
investment income. Net realized capital gains, if any, are distributed at least
annually. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes due to differences between
generally accepted accounting principles and tax accounting principles related
to the character of income and expense recognition.
42
<PAGE>
BLACKROCK FUNDS
Federal Taxes -- No provision is made for federal taxes as it is the Fund's
intention to have each Portfolio continue to qualify for and elect the tax
treatment applicable to 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.
Security Transactions and Investment Income -- Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
federal income tax purposes. Interest income is recorded on the accrual basis.
Expenses not directly attributable to a specific Portfolio or class are
allocated among all of the Portfolios or classes of the Fund based on their
relative net assets.
Futures Transactions -- The Portfolios may invest in financial futures
contracts solely for the purpose of hedging its existing portfolio securities,
or securities that the Fund intends to purchase, against fluctuations in fair
value caused by changes in prevailing market interest rates. Certain Portfolios
may enter into futures contracts subject to certain limitations. Upon entering
into a futures contract, the Portfolio is required to deposit cash or pledge
municipal securities of an initial margin. Subsequent payments, which are
dependent on the daily fluctuations in the value of the underlying security or
securities, are made or received by the Portfolio each day (daily variation
margin) and are recorded as unrealized gains or losses until the contracts are
closed. When the contracts are closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transaction and the Portfolio's basis in the contracts. Risks of entering into
futures contracts include the possibility that there will not be a perfect price
correlation between the futures contracts and the underlying securities. Second,
it is possible that a lack of liquidity for futures contracts could exist in the
secondary market, resulting in an inability to close a futures position prior to
its maturity date. Third, the purchase of a futures contract involves the risk
that a Portfolio could lose more than the original margin deposit required to
initiate a futures transaction. There were no futures contracts held by the
Portfolios at September 30, 2000.
Option Selling/Purchasing -- The Portfolios may invest in financial options
contracts solely for the purpose of hedging its existing portfolio securities,
or securities that the Fund intends to purchase, against fluctuations in fair
value caused by changes in prevailing market interest rates. When the Fund sells
or purchases an option, an amount equal to the premium received or paid by the
Fund is recorded as a liability or an asset and is subsequently adjusted to the
current market value of the option written or purchased. Premiums received or
paid from writing or purchasing options which expire unexercised are treated by
the Fund on the expiration date as realized gains or losses. The difference
between the premium and the amount paid or received on effecting a closing
purchase or sale transaction, including brokerage commissions, is also treated
as a realized gain or loss. If an option is exercised, the premium paid or
received is added to the cost of the purchase or proceeds from the sale in
determining whether the Fund has realized a gain or a loss on investment
transactions. The Fund as writer of an option, may have no control over whether
the underlying securities may be sold (call) or purchased (put) and as a result
bears the market risk of an unfavorable change in the price of the security
underlying the written option. There were no options held by the Portfolios at
September 30, 2000.
(B) Transactions with Affiliates and Related Parties
Pursuant to an Investment Advisory Agreement, BlackRock Advisors, Inc.
("BlackRock"), a wholly-owned subsidiary of BlackRock, Inc., serves as
investment adviser to the Portfolios. BlackRock Financial Management, Inc.
("BFM"), a wholly-owned subsidiary of BlackRock, serves as sub-adviser for all
of the Portfolios. BlackRock, Inc. is an indirect majority-owned subsidiary of
The PNC Financial Services Group, Inc.
For its advisory services, BlackRock is entitled to receive fees, computed
daily and paid monthly, at the following annual rates, based on each Portfolio's
average daily net assets:
<TABLE>
<CAPTION>
Tax-Free Income, Pennsylvania Delaware Tax-Free
Tax-Free Income, New Jersey Tax-Free Income and Income and Kentucky
Ohio Tax-Free Income Portfolios Tax-Free Income Portfolios
----------------------------------------------- --------------------------
Investment Investment
Average Daily Net Assets Advisory Fee Advisory Fee
-------------------------- ----------------------------------------------- --------------------------
<S> <C> <C>
first $1 billion .500% .550%
$1 billion-- $2 billion .450 .500
$2 billion-- $3 billion .425 .475
greater than $3 billion .400 .450
</TABLE>
43
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For the period ended September 30, 2000, advisory fees and waivers for each
Portfolio were as follows:
<TABLE>
<CAPTION>
Gross Net Advisory
Advisory Fee Waiver Fee
------------ ---------- ------------
<S> <C> <C> <C>
Tax-Free Income Portfolio ............................. $1,661,405 $ 739,736 $ 921,669
Pennsylvania Tax-Free Income Portfolio ................ 4,830,777 1,861,814 2,968,963
New Jersey Tax-Free Income Portfolio .................. 762,168 342,327 419,841
Ohio Tax-Free Income Portfolio ........................ 473,908 237,566 236,342
Delaware Tax-Free Income Portfolio .................... 567,929 213,741 354,188
Kentucky Tax-Free Income Portfolio .................... 898,887 293,774 605,113
</TABLE>
BlackRock pays BFM fees for its sub-advisory services.
PFPC Inc. ("PFPC"), an indirect wholly-owned subsidiary of The PNC
Financial Services Group, Inc., and BlackRock 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 each 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, each of the classes are charged an
administration fee based on the following percentage of average daily net assets
of each respective class: .145% of the first $500 million, .135% of the next
$500 million and .125% of assets in excess of $1 billion.
For the year ended September 30, 2000, administration fees and waivers for
each Portfolio were as follows:
<TABLE>
<CAPTION>
Gross Net
Administration Fee Waiver Administration Fee
------------------ ------ ------------------
<S> <C> <C> <C>
Tax-Free Income Portfolio ............................. $ 764,246 $ -- $ 764,246
Pennsylvania Tax-Free Income Portfolio ................ 2,129,000 -- 2,129,000
New Jersey Tax-Free Income Portfolio .................. 350,597 -- 350,597
Ohio Tax-Free Income Portfolio ........................ 217,998 -- 217,998
Delaware Tax-Free Income Portfolio .................... 237,498 -- 237,498
Kentucky Tax-Free Income Portfolio .................... 375,898 -- 375,898
</TABLE>
Prior to February 1, 1999, BlackRock may have, at its discretion, waived
all or any portion of its advisory fees for any Portfolio. In addition, PFPC and
BlackRock may have, at their discretion, voluntarily waived all or any portion
of their administration fees for any Portfolio.
In the interest of limiting the expenses of the Portfolios, BlackRock and
the Fund have entered into an expense limitation agreement effective February 1,
1999. The agreement sets a limit on certain of the operating expenses of each
Portfolio for the next year and requires BlackRock to waive or reimburse fees or
expenses if these operating expenses exceed that limit. These expense limits
apply to expenses charged on Portfolio assets as a whole, but not expenses
separately charged to the different share classes of a Portfolio.
If in the following two years the operating expenses of a Portfolio that
previously received a waiver or reimbursement from BlackRock are less than the
expense limit for that Portfolio, the Portfolio is required to repay BlackRock
up to the amount of fees waived or expenses reimbursed under the agreement if:
(1) the Portfolio has more than $50 million in assets, (2) BlackRock continues
to be the Portfolio's investment adviser and (3) the Board of Trustees of the
Fund has approved the payments to BlackRock on a quarterly basis.
The expense limits as a percentage of average daily net assets and amounts
subject to possible reimbursement under the expense limitation agreement were as
follows:
Tax-Free Income Portfolio ................... .485% $1,166,199
Pennsylvania Tax-Free Income Portfolio ...... .470% 2,959,560
New Jersey Tax-Free Income Portfolio ........ .475% 541,441
Ohio Tax-Free Income Portfolio .............. .515% 389,770
Delaware Tax-Free Income Portfolio .......... .585% 343,791
Kentucky Tax-Free Income Portfolio .......... .585% 541,822
44
<PAGE>
BLACKROCK FUNDS
PFPC Trust Co. serves as custodian for each of the Fund's Portfolios. PFPC
serves as transfer and dividend disbursing agent.
Under the Fund's Amended and Restated Distribution and Service Plan (the
"Plan"), Investor Shares of the Portfolios bear the expense of payments
("distribution fees") made to BlackRock Distributors, Inc., as the Fund's
distributor (the "Distributor"), or affiliates of PNC Bank, for distribution and
sales support services. Under the Plan, the Fund has entered into arrangements
with various Service Organizations (including PNC Bank and its affiliates) that
provide support services to their customers who are the beneficial owners of
shares in each Investor Class and the Service Class. Refer to the fee table in
the "Notes to Financial Statements" for fee information.
(C) PURCHASES AND SALES OF SECURITIES
For the year ended September 30, 2000, purchases and sales of securities,
other than short-term and government securities, were as follows:
Purchases Sales
-------------- ------------
Tax-Free Income Portfolio ............... $154,921,398 $139,695,339
Pennsylvania Tax-Free Income Portfolio .. 300,636,734 359,389,243
New Jersey Tax-Free Income Portfolio .... 116,504,617 115,202,329
Ohio Tax-Free Income Portfolio .......... 22,504,169 22,051,915
Delaware Tax-Free Income Portfolio ...... 27,673,580 32,452,263
Kentucky Tax-Free Income Portfolio ...... 87,529,964 88,255,098
(D) CAPITAL SHARES
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
Tax-Free Income Portfolio
--------------------------------------------------------------------------
For the Year Ended For the Year Ended
9/30/00 9/30/99
----------------------------------- --------------------------------
Shares Value Shares Value
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ..................... 16,382,884 $ 174,988,526 6,853,081 $ 78,835,003
Service Class ........................... 243,246 2,609,861 592,049 6,816,763
Investor A Class ........................ 557,276 6,053,258 297,198 3,434,092
Investor B Class ........................ 75,176 802,821 181,706 2,101,564
Investor C Class ........................ 401,559 4,282,285 220,502 2,549,447
Shares issued in reinvestment of dividends:
Institutional Class ..................... 9,470 102,027 122,167 1,410,417
Service Class ........................... 15,052 161,861 14,682 168,519
Investor A Class ........................ 17,919 192,667 17,690 203,137
Investor B Class ........................ 7,800 83,827 6,589 75,421
Investor C Class ........................ 2,112 22,661 1,241 14,108
Shares redeemed:
Institutional Class ..................... (14,833,327) (158,348,118) (3,771,833) (42,951,830)
Service Class ........................... (293,627) (3,151,722) (544,873) (6,243,891)
Investor A Class ........................ (375,379) (4,029,215) (262,638) (3,002,374)
Investor B Class ........................ (146,991) (1,573,149) (48,379) (551,451)
Investor C Class ........................ (561,996) (6,006,199) (47,428) (536,351)
----------- ------------- --------- -------------
Net increase ................................. 1,501,174 $ 16,191,391 3,631,754 $ 42,322,574
========== ============= ========= ============
</TABLE>
45
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Pennsylvania Tax-Free Income Portfolio
--------------------------------------------------------------------------
For the Year Ended For the Year Ended
9/30/00 9/30/99
--------------------------------- ----------------------------------
Shares Value Shares Value
--------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ........................ 17,781,137 $ 183,459,598 11,936,803 $ 130,738,719
Service Class .............................. 611,678 6,313,771 1,946,331 21,480,866
Investor A Class ........................... 936,942 9,760,461 1,933,552 21,220,399
Investor B Class ........................... 382,148 3,944,096 893,028 9,815,318
Investor C Class ........................... 27,045 280,146 79,677 875,012
Shares issued in reinvestment of dividends:
Institutional Class ........................ 1,455 15,188 235,781 2,600,638
Service Class .............................. 46,549 483,007 62,177 682,388
Investor A Class ........................... 86,720 900,481 95,111 1,041,492
Investor B Class ........................... 56,475 582,711 52,982 579,108
Investor C Class ........................... 255 2,636 -- --
Shares redeemed:
Institutional Class ........................ (28,512,500) (295,027,933) (12,182,730) (132,469,686)
Service Class .............................. (803,793) (8,318,096) (2,518,041) (27,664,097)
Investor A Class ........................... (1,591,008) (16,505,190) (1,659,281) (18,131,789)
Investor B Class ........................... (638,284) (6,571,929) (264,644) (2,874,022)
Investor C Class ........................... (76,950) (795,110) (9,603) (102,198)
----------- ------------- ----------- -------------
Net increase (decrease) ......................... (11,692,131) $(121,476,163) 601,143 $ 7,792,148
=========== ============= =========== ==============
New Jersey Tax-Free Income Portfolio
--------------------------------------------------------------------------
For the Year Ended For the Year Ended
9/30/00 9/30/99
--------------------------------- ----------------------------------
Shares Value Shares Value
--------------- --------------- ------------- ----------------
Shares sold:
Institutional Class ........................ 2,161,396 $ 24,167,120 1,703,003 $ 20,079,320
Service Class .............................. 163,760 1,812,913 950,377 11,254,931
Investor A Class ........................... 152,398 1,703,487 157,686 1,867,021
Investor B Class ........................... 73,514 818,239 66,909 786,813
Investor C Class ........................... -- -- 1,670 20,007
Shares issued in reinvestment of dividends:
Institutional Class ........................ 1 17 53,037 631,145
Service Class .............................. 65,121 726,867 103,507 1,224,840
Investor A Class ........................... 3,066 34,295 3,615 42,510
Investor B Class ........................... 4,427 49,413 3,374 39,760
Investor C Class ........................... -- -- -- --
Shares redeemed:
Institutional Class ........................ (2,489,011) (27,748,125) (1,962,315) (23,087,074)
Service Class .............................. (757,219) (8,447,620) (1,757,218) (20,710,957)
Investor A Class ........................... (120,587) (1,349,319) (162,460) (1,871,831)
Investor B Class ........................... (62,691) (698,569) (29,876) (346,126)
Investor C Class ........................... (1,670) (18,437) -- --
---------- ----------- --------- ------------
Net decrease .................................... (807,495) $ (8,949,719) (868,691) $(10,069,641)
========== ============ ========= ============
</TABLE>
46
<PAGE>
BLACKROCK FUNDS
<TABLE>
<CAPTION>
Ohio Tax-Free Income Portfolio
--------------------------------------------------------------------------
For the Year Ended For the Year Ended
9/30/00 9/30/99
--------------------------------- ----------------------------------
Shares Value Shares Value
--------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ........................ 2,121,532 $ 21,223,749 800,308 $ 8,533,006
Service Class .............................. 138 1,363 650 7,042
Investor A Class ........................... 98,865 990,051 113,310 1,204,578
Investor B Class ........................... 45,849 458,855 40,768 440,491
Investor C Class ........................... 20,191 200,098 18,577 201,834
Shares issued in reinvestment of dividends:
Institutional Class ........................ 424 4,263 36,794 395,170
Service Class .............................. -- -- 81 867
Investor A Class ........................... 9,108 91,646 8,778 93,451
Investor B Class ........................... 3,573 35,953 3,410 36,270
Investor C Class ........................... 1,229 12,374 605 6,427
Shares redeemed:
Institutional Class ........................ (2,468,608) (24,657,325) (1,052,010) (11,152,663)
Service Class .............................. (21,304) (214,390) (41,330) (444,458)
Investor A Class ........................... (88,804) (889,393) (79,124) (838,187)
Investor B Class ........................... (26,240) (262,838) (6,775) (70,482)
Investor C Class ........................... -- -- (48,754) (523,354)
--------- ---------- --------- -------------
Net decrease .................................... (304,047) $(3,005,594) (204,712) $ (2,110,008)
========= =========== ========= ============
Delaware Tax-Free Income Portfolio
--------------------------------------------------------------------------
For the Year Ended For the Year Ended
9/30/00 9/30/99
--------------------------------- ----------------------------------
Shares Value Shares Value
--------------- --------------- ------------- ----------------
Shares sold:
Institutional Class ........................ 1,150,577 $ 10,937,172 1,576,276 $ 15,667,167
Service Class .............................. -- -- -- --
Investor A Class ........................... 109,855 1,051,583 336,725 3,400,904
Investor B Class ........................... 7,031 67,064 155,502 1,583,445
Investor C Class ........................... 24,444 229,867 46,775 478,010
Shares issued in reinvestment of dividends:
Institutional Class ........................ 439 4,169 144,431 1,460,200
Service Class .............................. -- 4 -- 5
Investor A Class ........................... 5,513 52,592 7,070 71,006
Investor B Class ........................... 4,179 39,816 5,851 58,794
Investor C Class ........................... 779 7,411 464 4,610
Shares redeemed:
Institutional Class ........................ (2,228,264) (21,219,497) (1,925,198) (19,240,639)
Service Class .............................. -- -- -- --
Investor A Class ........................... (193,118) (1,845,917) (125,943) (1,245,406)
Investor B Class ........................... (155,711) (1,475,572) (2,496) (25,055)
Investor C Class ........................... (79,234) (747,365) (24,169) (236,139)
---------- ------------ --------- ------------
Net increase (decrease) ......................... (1,353,510) $(12,898,673) 195,288 $ 1,976,902
========== ============ ========= ============
</TABLE>
47
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Kentucky Tax-Free Income Portfolio
--------------------------------------------------------------------------
For the Year Ended For the Year Ended
9/30/00 9/30/99
--------------------------------- ----------------------------------
Shares Value Shares Value
--------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C>
Shares sold:
Institutional Class ........................ 2,549,210 $ 24,224,373 2,121,093 $ 21,304,021
Service Class .............................. 9,161 86,928 11,768 119,792
Investor A Class ........................... 428,017 4,061,406 217,238 2,164,448
Investor B Class ........................... 11,559 110,105 32,197 325,615
Investor C Class ........................... 11,001 104,428 67,325 663,776
Shares issued in reinvestment of dividends:
Institutional Class ........................ 7,628 72,683 176,567 1,786,848
Service Class .............................. -- 4 -- 5
Investor A Class ........................... 7,250 68,954 1,509 14,899
Investor B Class ........................... 338 3,221 324 3,229
Investor C Class ........................... 1,934 18,345 379 3,691
Shares redeemed:
Institutional Class ........................ (4,295,021) (40,756,459) (3,926,262) (39,348,302)
Service Class .............................. -- -- (11,768) (119,086)
Investor A Class ........................... (244,162) (2,326,283) (120,476) (1,181,728)
Investor B Class ........................... (3,914) (37,199) (11,450) (112,367)
Investor C Class ........................... (65,036) (622,811) (8,443) (81,346)
--------- ------------ ---------- ----------
Net decrease .................................... (1,582,035) $(14,992,305) (1,449,999) $ (14,456,505)
========== ============ ========== =============
</TABLE>
(E) AT SEPTEMBER 30, 2000, NET ASSETS CONSISTED OF:
<TABLE>
<CAPTION>
Pennsylvania New Jersey Ohio Delaware Kentucky
Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free Tax-Free
Income Income Income Income Income Income
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------ -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Capital paid-in ............ $340,603,459 $948,499,510 $150,900,287 $93,272,414 $100,860,554 $154,314,012
Undistributed net
investment income ........ 912,958 973,016 357,186 306,760 -- 194,437
Distributions in excess
of net investment
income ................... -- -- -- -- (293,741) --
Accumulated net
realized loss
on investment
transactions
and futures
contracts ................ (7,039,385) (14,301,304) (3,998,178) (1,031,704) (943,317) (4,012,804)
Net unrealized
appreciation
on investment
transactions ............. 1,772,710 14,895,074 5,213,351 2,052,167 1,122,374 4,271,965
------------ ------------ ------------ ----------- ----------- ------------
$336,249,742 $950,066,296 $152,472,646 $94,599,637 $100,745,870 $154,767,610
============ ============ ============ =========== ============ ============
</TABLE>
48
<PAGE>
BLACKROCK FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(F) CAPITAL LOSS CARRYOVER
At September 30, 2000, capital loss carryovers were available to offset
possible future realized capital gains as follows:
<TABLE>
<CAPTION>
Capital Loss Year of
Carryforward Expiration
------------------ ------------
<S> <C> <C>
Tax-Free Income Portfolio ................. $4,276,793 2008
Pennsylvania Tax-Free Income Portfolio .... 5,817,038 2008
New Jersey Tax-Free Income Portfolio ...... 733,444 2008
Ohio Tax-Free Income Portfolio ............ 1,025,395 2008
Delaware Tax-Free Income Portfolio ........ 880,600 2008
Kentucky Tax-Free Income Portfolio ........ 1,316,142 2008
</TABLE>
At September 30, 2000, deferred post-October losses for the Tax-Free Income
Portfolio were $2,762,592, for the Pennsylvania Tax-Free Income Portfolio were
$8,345,683, for the New Jersey Tax-Free Income Portfolio were $3,186,925, for
the Ohio Tax-Free Income Portfolio were $6,309 and for the Kentucky Tax-Free
Income Portfolio were $2,668,945.
49
<PAGE>
BLACKROCK FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF BLACKROCK FUNDS:
In our opinion, the accompanying statements of net assets of the Tax-Free
Income, Pennsylvania Tax-Free Income, New Jersey Tax-Free Income, Ohio Tax-Free
Income and Kentucky Tax-Free Income Portfolios and the statement of assets and
liabilities, including the schedule of investments, of the Delaware Tax-Free
Income Portfolio (constituting the tax-free bond portfolios of BLACKROCK FUNDS,
hereafter referred to as the "Fund") and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Tax-Free Income, Pennsylvania
Tax-Free Income, New Jersey Tax-Free Income, Ohio Tax-Free Income, Delaware
Tax-Free Income and Kentucky Tax-Free Income Portfolios of the Fund at September
30, 2000, the results of each of their operations for the year then ended, the
changes in each of their net assets for each of the two years in the period then
ended and the financial highlights for each of the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 2000 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
November 17, 2000
50
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
BLACKROCK FUNDS
Investment Adviser
BlackRock Advisors,Inc.
New York, New York 10154
Sub-Adviser
BlackRock Financial Management,Inc.
New York, New York 10154
Custodian
PFPC Trust Co.
Philadelphia,Pennsylvania 19103
Co-Administrator and Transfer Agent
PFPCInc.
Wilmington,Delaware 19809
Distributor
BlackRock Distributors, Inc.
King of Prussia, Pennsylvania 19406
Co-Administrator
BlackRock Advisors, Inc.
New York, New York 10154
Counsel
Simpson, Thacher & Bartlett
New York, New York 10017
(A partnership which includes professional corporations)
Independent Accountants
PricewaterhouseCoopers LLP
Philadelphia,Pennsylvania 19103
To reduce expenses, the Fund will mail only one copy of annual and semi-annual
reports and most prospectuses to your household, even if more than one person in
the household has a Fund account. Please call (800) 441-7762 if you would like
to receive additional reports or prospectuses.
<PAGE>
BLACKROCK FUNDS
FUND SPECTRUM
BLACKROCK FUNDS IS A LEADING MUTUAL FUND COMPANY CURRENTLY MANAGING IN EXCESS OF
$25 BILLION IN 39 PORTFOLIOS DESIGNED TO FIT A BROAD RANGE OF INVESTMENT GOALS.
EACH PORTFOLIO IS MANAGED BY RECOGNIZED EXPERTS IN EQUITY, FIXED INCOME,
INTERNATIONAL, AND TAX-FREE INVESTING WHO ADHERE TO A PURE INVESTMENT
STYLE[REGISTRATION MARK].
STOCK PORTFOLIOS
----------------
Large Cap Value Equity European Equity
Large Cap Growth Equity International Equity
Mid-Cap Value Equity International Small Cap Equity
Mid-Cap Growth Equity Asia Pacific Equity
Small Cap Value Equity International Emerging Markets
Small Cap Growth Equity Select Equity
Micro-Cap Equity Index Equity
Global Science & Technology
STOCK & BOND PORTFOLIOS
-----------------------
Balanced
BOND PORTFOLIOS
---------------
Low Duration Bond
Intermediate Government Bond GNMA
Intermediate Bond Managed Income
Core Bond International Bond
Government Income High Yield Bond
TAX-FREE BOND PORTFOLIOS
------------------------
Tax-Free Income Ohio Tax-Free Income
Pennsylvania Tax-Free Income Delaware Tax-Free Income
New Jersey Tax-Free Income Kentucky Tax-Free Income
MONEY MARKET PORTFOLIOS
-----------------------
Money Market North Carolina Municipal Money
U.S. Treasury Money Market Ohio Municipal Money Market
Municipal Money Market Pennsylvania Municipal Money Market
New Jersey Municipal Money Market Virginia Municipal Money Market
SHAREHOLDER PRIVILEGES
24 HOUR ACCOUNT INFORMATION
Call us at 1-800-441-7762, 24 hours a day, 7 days a week to get information
about your account balances, recent transactions and share prices. Note:
Institutional and Service Share Class investors should call 1-800-441-7764. You
can also reach us on the Internet through the World Wide Web by accessing
http://www.blackrock.com.
EXCHANGE PRIVILEGES
Should your investment goals change, shareholders in our Investor Class shares
may exchange all or part of their investments into the same share class of any
other portfolio of BlackRock Funds. (1)
AUTOMATIC INVESTMENT PLANS
Investor Class shareholders who want to invest regularly can arrange to have $50
or more automatically deducted from their checking or savings account and
invested in any of the BlackRock portfolios.
SYSTEMATIC WITHDRAWAL PLANS
Investor Class shareholders can establish a systematic withdrawal plan and
receive periodic payments of $100 or more from their BlackRock portfolios, as
long as their account is at least $1,000.
RETIREMENT PLANS
Shareholders may make investments in conjunction with individual IRA accounts or
rollover IRAs.
GENERAL INFORMATION ABOUT THE BLACKROCK FUNDS
If you would like additional reports or have questions regarding any of the 39
BlackRock Funds, please call 1-800-FUTURE4 (1-800-388-8734)
(1) BLACKROCK FUNDS RESERVES THE RIGHT TO MODIFY OR TERMINATE THE EXCHANGE
PRIVILEGES AT ANY TIME.
<PAGE>
[BLACKROCK LOGO]
BLACKROCK FUNDS
P.O. Box 8907
Wilmington, DE 19899
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by PNC Bank, National Association or any other bank and shares are not federally
insured by, guaranteed by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, The Federal Reserve
Board, or any other governmental agency. Investments in shares of the fund
involve investment risks, including the possible loss of the principal amount
invested.
AR 9/30/00 TFP
