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As filed with the Securities and Exchange Commission on May 19, 2000
Registration No.333-94605
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U.S. Securities and Exchange Commission
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[_]Pre-Effective Amendment No. ___ [X]Post-Effective Amendment No. 2
(Check appropriate box or boxes)
Exact Name of Registrant as Specified in Charter:
BLACKROCK FUNDS(SM)
Area Code and Telephone Number:
(800) 441-7762
Address of Principal Executive Offices:
Bellevue Park Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
Name and Address of Agent for Service:
BRIAN P. KINDELAN, ESQ.
BlackRock Advisors, Inc.
1600 Market Street, 28/th/ Floor
Philadelphia, PA 19103
Copies to:
MICHAEL P. MALLOY, ESQ. CYNTHIA G. COBDEN, ESQ.
Drinker Biddle & Reath LLP Simpson Thacher & Bartlett
One Logan Square 425 Lexington Avenue
18/th/ and Cherry Streets New York, NY 10017-3954
Philadelphia, PA 19103-6996
It is proposed that this filing will become effective immediately upon
filing pursuant to Rule 485(b) under the Securities Act of 1933.
<PAGE>
EXPLANATORY NOTE
The combined prospectus/proxy statement and statement of additional
information included in Registrant's filing pursuant to Rule 497(b) on March 6,
2000 are incorporated herein by reference.
<PAGE>
FORM N-14
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Part C - Other Information
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Item 15. Indemnification.
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Indemnification of Registrant's principal underwriter against certain
losses is provided for in Section 7 of the Distribution Agreement incorporated
by reference herein as Exhibit 5(a). Indemnification of Registrant's Custodian,
Transfer Agent and Administrators is provided for, respectively, in Section 22
of the Custodian Agreement incorporated by reference herein as Exhibit 7(a),
Section 17 of the Transfer Agency Agreement incorporated by reference herein as
Exhibit 8(c) and Section 11 of the Administration Agreement which is Exhibit
8(a) hereof. Registrant intends to obtain from a major insurance carrier a
trustees and officers liability policy covering certain types of errors and
omissions. In addition, Section 9.3 of the Registrant's Declaration of Trust
incorporated by reference herein as Exhibit 1(a) provides as follows:
Indemnification of Trustees, Officers, Representatives and Employees.
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The Trust shall indemnify each of its Trustees against all liabilities and
expenses (including amounts paid in satisfaction of judgments, in
compromise, as fines and penalties, and as counsel fees) reasonably
incurred by him in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which he
may be involved or with which he may be threatened, while as a Trustee or
thereafter, by reason of his being or having been such a Trustee except
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with respect to any matter as to which he shall have been adjudicated to
have acted in bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties, provided that as to any matter disposed of by a
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compromise payment by such person, pursuant to a consent decree or
otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to the
effect that if either the matter of willful misfeasance, gross negligence
or reckless disregard of duty, or the matter of bad faith had been
adjudicated, it would in the opinion of such counsel have been adjudicated
in favor of such person. The rights accruing to any person under these
provisions shall not exclude any other right to which he may be lawfully
entitled, provided that no person may satisfy any right of indemnity or
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reimbursement hereunder except out of the property of the Trust. The
Trustees may make advance payments in connection with the indemnification
under this Section 9.3, provided that the indemnified person shall have
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given a written undertaking to reimburse the Trust in the event it is
subsequently determined that he is not entitled to such indemnification.
The Trustee shall indemnify officers, representatives and employees of
the Trust to the same extent that Trustees are entitled to indemnification
pursuant to this Section 9.3.
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Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling person of Registrant in the successful
defense of any action suit or proceeding) is asserted by such trustee, officer
or controlling person in connection with the securities being registered,
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Section 9.6 of the Registrant's Declaration of Trust, filed herein as
Exhibit 1(a), also provides for the indemnification of shareholders of the
Registrant. Section 9.6 states as follows:
Indemnification of Shareholders. In case any Shareholder or former
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Shareholder shall be held to be personally liable solely by reason of his
being or having been a Shareholder and not because of his acts or omissions
or for some other reason, the Shareholder or former Shareholder (or his
heirs, executors, administrators or other legal representatives or, in the
case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets belonging to the classes of
Shares with the same alphabetical designation as that of the Shares owned
by such shareholder to be held harmless from and indemnified against all
loss and expense arising from such liability. The Trust shall, upon
request by the Shareholder, assume the defense of any claim made against
any Shareholder for any act or obligations of the Trust and satisfy any
judgment thereon from such assets.
Item 16. Exhibits.
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(1) Articles of Incorporation
(a) Declaration of Trust of the Registrant dated December 22,
1988 is incorporated herein by reference to Exhibit (1)(a)
of Post-Effective Amendment No. 33 to Registrant's
Registration Statement on Form N-1A (File Nos. 33-26305/811-
05742) filed on January 27, 1998 ("PEA No. 33").
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(b) Amendment No. 1 to Declaration of Trust dated May 4, 1989 is
incorporated herein by reference to Exhibit (1)(b) of PEA
No. 33.
(c) Amendment No. 2 to the Declaration of Trust dated December
23, 1993 is incorporated herein by reference to Exhibit
(1)(c) of PEA No. 33.
(d) Amendment No. 3 to the Declaration of Trust dated January 5,
1996 is incorporated herein by reference to Exhibit (1)(d)
of Post-Effective Amendment No. 23 to Registrant's
Registration Statement on Form N-1A (File Nos. 33-26305/811-
05742 filed on October 18, 1996.
(e) Amendment No. 4 to the Declaration of Trust dated December
23, 1997 is incorporated herein by reference to Exhibit
(1)(e) of PEA No. 33.
(2) By-laws
(a) Amended and Restated Code of Regulations is incorporated
herein by reference to Exhibit 2(a) of Post-Effective
Amendment No. 42 to Registrant's Registration Statement on
Form N-1A (File Nos. 33-26305/ 811-05742) filed on June 11,
1999 ("PEA No. 42").
(3) Voting Trust Agreement(s)
None.
(4) Plan of Reorganization previously filed as Appendix A to the Combined
Prospectus/Proxy Statement.
(5) Instruments Defining Rights of Security Holders.
(a) Sections V, VIII and IX of Registrant's Declaration of Trust
dated December 22, 1988 are incorporated herein by reference to
Exhibit (1)(a) of PEA No. 33; Article II of Registrant's Code of
Regulations is incorporated herein by reference to Exhibit (2) of
PEA No. 33.
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(6) Investment Advisory Contracts.
(a) Investment Advisory Agreement between Registrant and PNC Asset
Management Group, Inc. relating to all Portfolios except the
Multi-Sector Mortgage Securities Portfolio III and Index Equity
Portfolio is incorporated herein by reference to Exhibit (5)(a) of
Post-Effective Amendment No. 21 to Registrant's Registration
Statement on Form N-1A (File Nos. 33-26305/811-05742) filed on May
30, 1996 ("PEA No. 21").
(b) Investment Advisory Agreement between Registrant and BlackRock
Financial Management, Inc. with respect to the Multi-Sector
Mortgage Securities Portfolio III is incorporated herein by
reference to Exhibit (5)(b) of PEA No. 21.
(c) Addendum No. 1 to Investment Advisory Agreement between Registrant
and PNC Asset Management Group, Inc. with respect to the Mid-Cap
Value Equity and Mid-Cap Growth Equity Portfolios is incorporated
herein by reference to Exhibit (5)(c) of Post-Effective Amendment
No. 27 to Registrant's Registration Statement on Form N-1A (File
Nos. 33-26305/811-05742) filed on January 28, 1997 ("PEA No. 27").
(d) Form of Addendum No. 1 to Investment Advisory Agreement between
Registrant and BlackRock Financial Management, Inc. with respect
to BlackRock Strategic Portfolio I and BlackRock Strategic
Portfolio II is incorporated herein by reference to Exhibit (5)(d)
of Post-Effective Amendment No. 26 to Registrant's Registration
Statement on Form N-1A (File Nos. 33-26305/811-05742) filed on
December 18, 1996.
(e) Form of Addendum No. 2 to Investment Advisory Agreement between
Registrant and PNC Asset Management Group, Inc. with respect to
the International Small Cap Equity Portfolio is incorporated
herein by reference to Exhibit (5)(e) of Post-Effective Amendment
No. 30 to Registrant's Registration Statement on Form N-1A (File
Nos. 33-26305/811-05742) filed on August 19, 1997 ("PEA No. 30").
(f) Sub-Advisory Agreement between PNC Asset Management Group, Inc.
and BlackRock Financial Management, Inc. with respect to the
Managed Income, Tax-Free Income, Intermediate Government Bond,
Ohio Tax-Free Income, Pennsylvania Tax-Free Income, Low Duration
Bond, Intermediate Bond, Government Income, New Jersey Tax-Free
Income and Core Bond Portfolios is incorporated herein by
reference to Exhibit (5)(c) of PEA No. 21.
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(g) Sub-Advisory Agreement between PNC Asset Management Group, Inc.
and Provident Capital Management, Inc. with respect to the Large
Cap Value Equity, Small Cap Value Equity and Select Equity
Portfolios is incorporated herein by reference to Exhibit (5)(c)
of PEA No. 21.
(h) Sub-Advisory Agreement between PNC Asset Management Group, Inc.
and PNC Equity Advisors Company with respect to the Large Cap
Growth Equity and Small Cap Growth Equity Portfolios is
incorporated herein by reference to Exhibit (5)(c) of PEA No. 21.
(i) Sub-Advisory Agreement between PNC Asset Management Group, Inc.
and PNC Institutional Management Corporation with respect to the
Money Market, U.S. Treasury Money Market, Municipal Money Market,
Pennsylvania Municipal Money Market, Ohio Municipal Money Market,
North Carolina Municipal Money Market, Virginia Municipal Money
Market and New Jersey Municipal Money Market Portfolios is
incorporated herein by reference to Exhibit (5)(c) of PEA No. 21.
(j) Sub-Advisory Agreement between PNC Asset Management Group, Inc.
and CastleInternational Asset Management Limited with respect to
the International Equity and International Emerging Markets
Portfolios is incorporated herein by reference to Exhibit (5)(c)
of PEA No. 21.
(k) Sub-Advisory Agreement among PNC Asset Management Group, Inc.,
Provident Capital Management, Inc. and BlackRock Financial
Management, Inc. with respect to the Balanced Portfolio is
incorporated herein by reference to exhibit (5)(c) of PEA No. 21.
(l) Sub-Advisory Agreement between PNC Asset Management Group, Inc.
and Provident Capital Management, Inc. with respect to the Mid
Cap Value Equity Portfolio is incorporated herein by reference to
Exhibit (5)(k) of PEA No. 27.
(m) Sub-Advisory Agreement between PNC Asset Management Group, Inc.
and PNC Equity Advisors Company with respect to the Mid Cap
Growth Equity Portfolio is incorporated herein by reference to
Exhibit (5)(l) of PEA No. 27.
(n) Sub-Advisory Agreement between PNC Asset Management Group, Inc.
and BlackRock Financial Management, Inc. with
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respect to the International Bond Portfolio is incorporated
herein by reference to Exhibit (5)(m) of PEA No. 27.
(o) Form of Sub-Advisory Agreement between PNC Asset Management
Group, Inc. and CastleInternational Asset Management Limited with
respect to the International Small Cap Equity Portfolio is
incorporated herein by reference to Exhibit (5)(o) of PEA No. 30.
(p) Form of Addendum No. 3 to Investment Advisory Agreement between
Registrant and PNC Asset Management Group, Inc. with respect to
the Micro-Cap Equity Portfolio, GNMA Portfolio, Delaware Tax-Free
Income Portfolio and Kentucky Tax-Free Income Portfolio is
incorporated herein by reference to Exhibit (5)(p) of PEA No. 33.
(q) Form of Sub-Advisory Agreement between PNC Asset Management
Group, Inc. and PNC Equity Advisors Company with respect to the
Micro-Cap Equity Portfolio is incorporated herein by reference
to Exhibit (5)(q) of Post-Effective Amendment No. 33 to
Registrant's Registration Statement on Form N-1A (File Nos.
33-26305/811-05742) filed January 27, 1998 ("PEA No. 33").
(r) Form of Sub-Advisory Agreement between BlackRock, Inc. and
BlackRock Financial Management, Inc. with respect to the GNMA,
Delaware Tax-Free Income and Kentucky Tax-Free Income Portfolios
is incorporated herein by reference to Exhibit (5)(r) of Post-
Effective Amendment No. 34 to Registrant's Registration Statement
on Form N-1A (File Nos. 33-26305/811-05742) filed on February 13,
1998 ("PEA No. 34").
(s) Form of Addendum No. 4 to Investment Advisory Agreement between
Registrant and BlackRock Advisors, Inc. with respect to the High
Yield Bond Portfolio is incorporated herein by reference to
Exhibit (5)(s) of Post-Effective Amendment No. 37 to Registrant's
Registration Statement on Form N-1A (File Nos. 33-26305/811-
05742) filed on August 7, 1998 ("PEA No. 37").
(t) Form of Sub-Advisory Agreement between BlackRock Advisors, Inc.
and BlackRock Financial Management, Inc. with respect to the High
Yield Bond Portfolio is incorporated herein by reference to
Exhibit (5)(t) of PEA No. 37.
(u) Form of Addendum No. 2 to Investment Advisory Agreement between
Registrant and BlackRock Financial Management, Inc. with respect
to the Multi-Sector Mortgage Securities Portfolio IV is
incorporated herein by reference to Exhibit (4)(u) of PEA No. 42.
(v) Form of Addendum No. 5 to Investment Advisory Agreement between
Registrant and BlackRock Advisors, Inc. with respect to the
Global Science and Technology Portfolio is incorporated herein by
reference to Exhibit 4(v) of the Post-Effective Amendment No. 54
to Registrant's Registration Statement on Form N-1A (File Nos.
33-26305/811-05742) filed on May 10, 2000 ("PEA No. 54").
(w) Form of Sub-Advisory Agreement between BlackRock Advisors, Inc.
and BlackRock Financial Management, Inc. with respect to the
Global Science and Technology Portfolio is incorporated herein by
reference to Exhibit 4(w) of PEA No. 54.
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(7) Underwriting Contracts.
(a) Distribution Agreement between Registrant and BlackRock
Distributors Inc. dated as of June 25, 1999 is incorporated
herein by reference to Exhibit 5(a) of Post-Effective Amendment
No. 45 to Registrant's Registration Statement on Form N-1A filed
on August 24, 1999.
(b) Form of Appendix A to Distribution Agreement between
Registrant and BlackRock Distributors, Inc. is incorporated
herein by reference to Exhibit 5(b) of PEA No. 54.
(8) Bonus or Profit Sharing Contracts.
None.
(9) Custodian Agreements.
(a) Custodian Agreement dated October 4, 1989 between Registrant
and PNC Bank, National Association is incorporated herein by
reference to Exhibit (8)(a) of PEA No. 33.
(b) Amendment No. 1 to Custodian Agreement between Registrant and PNC
Bank, National Association is incorporated herein by reference to
Exhibit (8)(b) of PEA No. 33.
(c) Amendment No. 2 dated March 1, 1993 to Custodian Agreement
between Registrant and PNC Bank National Association with respect
to the Short-Term Bond, Intermediate-Term Bond, Core Equity,
Small Cap Growth Equity and North Carolina Municipal Money Market
Portfolios is incorporated herein by reference to Exhibit (8)(c)
of PEA No. 33.
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(d) Form of Appendix B to Custodian Agreement between Registrant and
PFPC Trust Company is incorporated herein by reference to Exhibit
(7)(d) of PEA No. 54.
(e) Sub-Custodian Agreement dated April 27, 1992 among the
Registrant, PNC Bank, National Association and The Chase
Manhattan Bank is incorporated herein by reference to Exhibit
(8)(e) of PEA No. 34.
(f) Global Custody Agreement between Barclays Bank PLC and PNC Bank,
National Association dated October 28, 1992 is incorporated
herein by reference to Exhibit (8)(f) of PEA No. 33.
(g) Custodian Agreement between State Street Bank and Trust Company
and PNC Bank, National Association dated June 13, 1993 is
incorporated herein by reference to Exhibit (8)(g) of PEA No. 34.
(h) Amendment No. 1 to Custodian Agreement between State Street Bank
and Trust Company and PNC Bank, National Association dated
November 21, 1989 is incorporated herein by reference to Exhibit
(8)(h) of PEA No. 34.
(i) Subcustodial Services Agreement dated January 10, 1996 between
PNC Bank, National Association and Citibank, N.A. is incorporated
herein by reference to Exhibit (8)(j) of PEA No. 27.
(10) Rule 12b-1 and Rule 18f-3 Plans.
(a) Amended and Restated Distribution and Service Plan for Service,
Series A Investor, Series B Investor, Series C Investor,
Institutional BlackRock and HL Shares is incorporated herein by
reference to Exhibit 15 of PEA No. 21.
(b) Form of Appendix A to Amended and Restated Distribution and
Service Plan is incorporated herein by reference to Exhibit 13(b)
to PEA No. 54.
(c) Amended and Restated Plan Pursuant to Rule 18f-3 for Operation of
a Multi-Class Distribution System is incorporated herein by
reference to Exhibit 15(a) of PEA No. 45.
(11) Legal Opinion.
Opinion and consent of Ropes & Gray (previously filed).
(12) Opinion as to Tax Consequences.
Opinion and Consent of Drinker Biddle & Reath LLP as to Tax
Consequences Filed herewith.
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(13) Other Material Contracts.
(a) Form of Administration Agreement among Registrant, BlackRock
Advisors, Inc. and PFPC Inc. is incorporated herein by reference
to Exhibit 8(a) to PEA No. 42.
(b) Forms of Appendix A and Appendix B to Administration Agreement
among Registrant, BlackRock Advisors, Inc. and PFPC Inc. are
incorporated herein by reference to Exhibit 8(b) to PEA No.
54.
(c) Transfer Agency Agreement dated October 4, 1989 between
Registrant and PFPC, Inc. is incorporated herein by reference to
Exhibit (9)(e) of PEA No. 33.
(d) Amendment No. 1 to Transfer Agency Agreement dated October 4,
1989 between Registrant and PFPC, Inc. relating to the Tax-Free
Income Portfolio is incorporated herein by reference to Exhibit
(9)(f) of PEA No. 33.
(e) Amendment No. 2 to Transfer Agency Agreement dated October 4,
1989 between Registrant and PFPC, Inc. relating to the
Pennsylvania Municipal Money Market, Ohio Municipal Money Market,
Intermediate Government, Ohio Tax-Free Income, Pennsylvania Tax-
Free Income, Large Cap Value Equity, Index Equity and Small Cap
Value Equity Portfolios is incorporated herein by reference to
Exhibit (9)(g) of PEA No. 33.
(f) Amendment No. 3 to Transfer Agency Agreement dated October 4,
1989 between Registrant and PFPC, Inc. relating to the Short Term
Bond, Intermediate Term Bond, Core Equity, Small Cap Growth
Equity and North Carolina Municipal Money Market Portfolios is
incorporated herein by reference to Exhibit (9)(h) of PEA No. 33.
(g) Amendment No. 4 to Transfer Agency Agreement dated October 4,
1989 between Registrant and PFPC, Inc. relating to Series B
Investor Shares of the Money Market, Managed Income, Tax-Free
Income, Intermediate Government, Ohio Tax-Free Income,
Pennsylvania Tax-Free Income, Large Cap Value Equity, Large Cap
Growth Equity, Index Equity, Small Cap Value Equity, Intermediate
Term Bond, Small Cap Growth Equity, Core Equity, International
Fixed Income, Government Income, International Emerging Markets,
International Equity and Balanced Portfolios is incorporated
herein by reference to Exhibit (9)(i) of PEA No. 33.
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(h) Form of Appendix C to Transfer Agency Agreement between
Registrant and PFPC, Inc. is incorporated herein by reference to
Exhibit 8(h) of PEA No. 54.
(i) License Agreement dated as of December 1, 1995 between the
Registrant and Compass Capital Group, Inc. is incorporated herein
by reference to Exhibit (9)(q) of PEA No. 27.
(j) Share Acquisition Agreement dated April 29, 1998 by and among
Registrant and PNC Bank National Association and PNC Bank
Delaware, respectively; each as a trustee for certain of the
common trust funds listed therein is incorporated herein by
reference to Exhibit (9)(l) of Post-Effective Amendment No. 36 to
Registrant's Registration Statement on Form N-1A (File Nos. 33-
26305/811-05742) filed on April 29, 1998.
(k) Form of Expense Limitation Agreement dated as of January 28, 1999
between Registrant and BlackRock Advisors, Inc. is incorporated
herein by reference to Exhibit (8)(k) of Post-Effective Amendment
No. 41 to Registrant's Registration Statement on Form N-1A (File
Nos. 33-26305/811-05742) filed on January 28, 1999.
(14) Other Opinions.
Consent of PricewaterhouseCoopers LLP (previously filed).
(15) Financial Statements Omitted Pursuant to Item 14(a)(1).
None.
(16) Powers of Attorney.
None.
(17) Additional Exhibits.
(a) Form of Proxy Card (previously filed).
(b) Prospectus for Investor Shares of the Bond Portfolios of
BlackRock Funds(SM) dated January 28, 2000 (previously
filed).
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(c) Statement of Additional Information of BlackRock Funds(SM) dated
January 28, 2000 (previously filed).
(d) Annual Report to Shareholders for Investor Shares of the Bond
Portfolios of BlackRock Funds(SM) dated September 30, 1999
(previously filed).
(e) Annual Report to Shareholders of ISIS dated December 31, 1999
(previously filed).
Item 17. Undertakings.
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(1) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is
part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, as amended (the "1933 Act"), the reoffering
prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other
items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1), above, will be filed as part of an amendment to
the registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933 Act,
each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide
offering of them.
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SIGNATURES
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As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant certifies that it meets all of the requirements for
effectiveness of this registration statement under Rule 485(b) under the
Securities Act and that this registration statement has been signed on behalf of
the registrant, in the City of New York and the State of New York, on the 19th
day of May, 2000.
BLACKROCK FUNDS
Registrant
By: /s/ Raymond J. Clark
--------------------
Raymond J. Clark
President and Treasurer
(Principal Executive Officer)
As required by the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Raymond J. Clark Trustee, President and May 19, 2000
- ------------------------------
Raymond J. Clark Treasurer
/s/ David R. Wilmerding, Jr. Chairman of the Board May 19, 2000
- ------------------------------
David R. Wilmerding, Jr.
/s/ Anthony M. Santomero Vice-Chairman of the Board May 19, 2000
- ------------------------------
Anthony M. Santomero
/s/ William C. Albertini Trustee May 19, 2000
- ------------------------------
William C. Albertini
/s/ Robert M. Hernandez Trustee May 19, 2000
- ------------------------------
Robert M. Hernandez
</TABLE>
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<TABLE>
<CAPTION>
Exhibits
Item Description
- ---- -----------
<S> <C>
(12) Opinion and Consent of Drinker Biddle & Reath LLP as to Tax Consequences.
</TABLE>
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Exhibit 99.12
May 17, 2000
Independence Square Income Securities, Inc.
One Aldwyn Center
Villanova, PA 19085
BlackRock Funds(SM)
Bellevue Park Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
Re: Agreement and Plan of Reorganization by and between
Independence Square Income Securities, Inc. and BlackRock
---------------------------------------------------------
Funds(SM)
---------
Dear Ladies and Gentlemen:
You have asked for our opinion as to certain Federal income tax
consequences of the transactions contemplated in the above-referenced Agreement
and Plan of Reorganization (the "Reorganization Agreement").
Background
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Independence Square Income Securities, Inc. (the "Transferor Fund") is
a closed-end management investment company registered with the Securities and
Exchange Commission (the "SEC") under the Investment Company Act of 1940, as
amended (the "Act"). BlackRock Funds(SM) ("BlackRock") is an open-end
management investment company registered with the SEC under the Act. BlackRock
has several portfolios, one of which is the High Yield Bond Portfolio (the
"Surviving Fund").
On this date, it is contemplated that the Transferor Fund will
transfer all of its assets and liabilities to the Surviving Fund in exchange for
Series B Investor Shares of the Surviving Fund. The Transferor Fund will then
distribute the Series B Investor Shares to the shareholders of the Transferor
Fund in exchange for all outstanding shares of the Transferor Fund, and the
existence of the Transferor Fund will be terminated. All of the above steps
constitute the "Transactions."
For purposes of this opinion, we have relied on certain written
representations of Officers of the Transferor Fund and BlackRock, copies of
which are attached hereto, and have assumed such representations to be true. We
have also assumed that the Reorganization Agreement in the form included as
Appendix A to the
<PAGE>
Combined Prospectus/Proxy Statement (the "Proxy Statement"), which is part of
the Registration Statement (the "Registration Statement") as filed with the SEC
on Form N-14, has been duly authorized by the parties and approved by the
shareholders of the Transferor Fund, and the appropriate documents have been
filed with the appropriate government agencies.
Conclusions
- -----------
Based upon the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury Department regulations in effect as of the date hereof,
current published administrative positions of the Internal Revenue Service
contained in revenue rulings and procedures, and judicial decisions, and upon
the assumptions and representations referred to herein and the documents
provided to us by you (including the Proxy Statement and the Reorganization
Agreement), it is our opinion for Federal income tax purposes that:
(i) the acquisition of the assets and assumption of the liabilities
of the Transferor Fund by the Surviving Fund in return for Series B Investor
Shares of the Surviving Fund followed by the distribution of such shares to the
shareholders of the Transferor Fund, as provided in the Reorganization
Agreement, will constitute a "reorganization" within the meaning of section
368(a)(1)(C) or 368(a)(1)(D) of the Code, and each such Fund will be "a party to
the reorganization" within the meaning of section 368(b) of the Code;
(ii) in accordance with sections 361(a), 361(c)(1) and 357(a) of the
Code, no gain or loss will be recognized by the Transferor Fund as a result of
the Transactions;
(iii) in accordance with section 1032(a) of the Code, no gain or loss
will be recognized by the Surviving Fund as a result of the Transactions;
(iv) in accordance with section 354(a)(1) of the Code, no gain or
loss will be recognized by the shareholders of the Transferor Fund upon the
receipt of the Series B Investor Shares of the Surviving Fund in exchange for
their shares of the Transferor Fund;
(v) in accordance with section 358(a)(1) of the Code, the tax basis
of the Series B Investor Shares of the Surviving Fund received by the
shareholders of the Transferor Fund will be the same as the tax basis of the
shares of the Transferor Fund exchanged therefor in the Transactions;
(vi) in accordance with section 362(b) of the Code, the tax basis of
the assets received by the Surviving Fund in the Transactions will be the same
as the tax basis of such assets in the hands of the Transferor Fund immediately
before the Transactions;
-2-
<PAGE>
(vii) in accordance with section 1223(1) of the Code, the holding
period of the Series B Investor Shares of the Surviving Fund received by the
shareholders of the Transferor Fund will include the holding period of the
shares of the Transferor Fund exchanged therefor, provided that at the time of
the exchange the shares of the Transferor Fund were held as capital assets;
(viii) in accordance with section 1223(2) of the Code, the holding
period of the Surviving Fund with respect to the assets acquired in the
Transactions will include the period during which such assets were held by the
Transferor Fund; and
(ix) in accordance with section 381(a) of the Code, the Surviving
Fund will succeed to the tax attributes of the Transferor Fund described in
section 381(c) of the Code.
This opinion represents our best legal judgment, but it has no binding
effect or official status of any kind, and no assurance can be given that
contrary positions may not be taken by the Internal Revenue Service or a court
concerning the issues. We express no opinion relating to any Federal income tax
matter except on the basis of the facts described above. Additionally, we
express no opinion on the tax consequences under foreign, state or local laws.
In issuing our opinion, we have relied solely upon existing provisions of the
Code, existing and proposed regulations thereunder, and current administrative
positions and judicial decisions. Such laws, regulations, administrative
positions and judicial decisions are subject to change at any time. Any such
change could affect the validity of the opinion set forth above. Also, future
changes in Federal income tax laws and the interpretation thereof can have
retroactive effect.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
DRINKER BIDDLE & REATH LLP
WMG:SDDH
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<PAGE>
INDEPENDENCE SQUARE INCOME SECURITIES, INC.
One Aldwyn Center
Villanova, Pennsylvania 19085
May 17, 2000
Drinker Biddle & Reath LLP
One Logan Square
18/th/ & Cherry Streets
Philadelphia, PA 19103-6996
Re: Agreement and Plan of Reorganization by and between
Independence Square Income Securities, Inc. And BlackRock
---------------------------------------------------------
Funds(SM)
---------
Dear Ladies and Gentlemen:
BlackRock Funds(SM) ("BlackRock") and we have requested your opinion
as to certain Federal income tax matters in connection with the proposed
reorganization (the "Reorganization") of Independence Square Income Securities,
Inc. (the "Transferor Fund") into the High Yield Bond Portfolio of BlackRock
(the "Surviving Fund") pursuant to the above-referenced Agreement and Plan of
Reorganization (the "Reorganization Agreement") by and between the Transferor
Fund and BlackRock, and joined for limited purposes by BlackRock Institutional
Management Corporation. On this date, it is contemplated that the Transferor
Fund will transfer all of its assets and liabilities to the Surviving Fund in
exchange for Series B Investor Shares of the Surviving Fund. The Transferor
Fund will then distribute the Series B Investor Shares of the Surviving Fund to
the shareholders of the Transferor Fund in exchange for all outstanding shares
of the Transferor Fund, and the existence of the Transferor Fund will be
terminated. All of the above steps constitute the "Transactions." To enable
you to render such opinion, we are furnishing the following representations:
1. The Transferor Fund qualified as a "regulated investment company"
under Part I of Subchapter M of Subtitle A, Chapter 1, of the Internal Revenue
Code of 1986, as amended, for its most recently ended taxable year and will so
qualify for its current taxable year.
2. The Transferor Fund will transfer to the Surviving Fund assets
consisting of at least 90% of the fair market value of the Transferor Fund's net
assets and at least 70% of the fair market value of its gross assets immediately
prior to the Transactions. For purposes of this assumption, all of the
following shall be considered as assets of the Transferor Fund held immediately
prior to the Transactions: (a) amounts used by the Transferor Fund to pay its
<PAGE>
expenses in connection with the Transactions and (b) all amounts used to make
redemptions of or distributions on such Transferor Fund's shares (except for
distributions of net investment company taxable income and net capital gains,
other than net capital gains resulting from sales of assets for the purpose of
satisfying investment objectives of the Surviving Fund, if any, that differ from
the existing investment objectives of the Transferor Fund).
3. The Transferor Fund will distribute the Series B Investor Shares
of the Surviving Fund received in the Transactions to the Transferor Fund's
shareholders in complete liquidation of the Transferor Fund and, having made
such distributions, will take all necessary steps to terminate its existence.
4. Prior to this date, the Transferor Fund has continued its
historic business within the meaning of Treasury Regulations section 1.368-1(d)
and has not disposed of more than fifty percent (50%) of the fair market value
of its assets for the purpose of satisfying investment objectives of the
Surviving Fund, if any, that differ from the existing investment objectives of
the Transferor Fund.
5. The adjusted income tax basis and the fair market value of the
assets to be transferred by the Transferor Fund to the Surviving Fund each
equals or exceeds the sum of the liabilities to be assumed by such Surviving
Fund or to which such transferred assets are subject.
6. There is no plan or intention by the shareholders of the
Transferor Fund who own five percent (5%) or more of the Transferor Fund's stock
and, to the best of the knowledge of the management of the Transferor Fund, no
plan or intention on the part of the remaining shareholders of the Transferor
Fund, to redeem or exchange a number of Series B Investor Shares of the
Surviving Fund's stock to be received in the Transactions that would reduce the
Transferor Fund shareholders' ownership of Surviving Fund stock to a number of
shares having a value, as of the time of the Transactions, of less than fifty
percent (50%) of the value of all of the formerly outstanding stock of the
Transferor Fund immediately prior to the Transactions. For purposes of this
assumption, (a) shares of the Transferor Fund surrendered by dissenters will be
treated as outstanding Transferor Fund stock immediately prior to the
Transactions, and (b) shares of the Transferor Fund and the Surviving Fund held
by Transferor Fund shareholders and otherwise redeemed (except for redemptions
occurring in the ordinary course of the Surviving Fund's business as an open-end
investment company) in anticipation of the Transactions, or subsequent to the
Transactions pursuant to a plan or intention that existed at the time of the
Transactions, also will be taken into account.
7. The Transferor Fund is not under the jurisdiction of a court in a
case under Title 11 of the United States Code or a receivership, foreclosure or
similar proceeding in any Federal or State court.
8. The liabilities of the Transferor Fund that will be assumed by
the Surviving Fund and the liabilities, if any, to which the transferred assets
are subject were
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<PAGE>
incurred by the Transferor Fund in the ordinary course of its business.
9. The sum of the cash paid to dissenting shareholders of the
Transferor Fund pursuant to the dissenting stockholder provisions of the
Maryland General Corporation Law and the liabilities of the Transferor Fund
assumed by the Surviving Fund in the Transactions will not exceed 20% of the
fair market value of the assets of the Transferor Fund transferred to the
Surviving Fund in the Transactions.
10. The Transactions have been proposed for the purposes set forth in
the Combined Proxy Statement/Prospectus, which is part of the Registration
Statement filed with the Securities and Exchange Commission.
We understand that you will, and expressly authorize you to, rely upon
each of the foregoing representations in rendering your opinion of even date
herewith. We undertake to advise you promptly if we become aware of any facts
or circumstances that would cause any representation that we have given to be
incorrect.
Very truly yours,
INDEPENDENCE SQUARE INCOME
SECURITIES, INC.
By: /s/ Edward J. Roach
-----------------------------
Edward J. Roach
Vice President and Treasurer
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<PAGE>
BLACKROCK FUNDS(SM)
Bellevue Park Corporate Center
400 Bellevue Parkway
Wilmington, Delaware 19809
May 17, 2000
Drinker Biddle & Reath LLP
One Logan Square
18/th/ & Cherry Streets
Philadelphia, PA 19103-6996
Re: Agreement and Plan of Reorganization by and between
Independence Square Income Securities, Inc. and BlackRock
---------------------------------------------------------
Funds(SM)
---------
Dear Ladies and Gentlemen:
Independence Square Income Securities, Inc. (the "Transferor Fund")
and we have requested your opinion as to certain Federal income tax matters in
connection with the proposed reorganization (the "Reorganization") of the
Transferor Fund into the High Yield Bond Portfolio (the "Surviving Fund") of
BlackRock Funds(SM) ("BlackRock") pursuant to the above-referenced Agreement and
Plan of Reorganization (the "Reorganization Agreement") by and between the
Transferor Fund and BlackRock, and joined for limited purposes by BlackRock
Institutional Management Corporation. At the Effective Time of the
Reorganization (as defined in the Reorganization Agreement), it is contemplated
that the Transferor Fund will transfer all of its assets and liabilities to the
Surviving Fund in exchange for Series B Investor Shares of the Surviving Fund.
The Transferor Fund will then distribute the Series B Investor Shares of the
Surviving Fund to the shareholders of the Transferor Fund in exchange for all
outstanding shares of the Transferor Fund, and the existence of the Transferor
Fund will be terminated. All of the above steps constitute the "Transactions."
To enable you to render such opinion, we are furnishing the following
representations:
1. The Surviving Fund qualified as a "regulated investment company"
under Part I of Subchapter M of Subtitle A, Chapter 1, of the Internal Revenue
Code of 1986, as amended, for its most recently ended taxable year and will so
qualify for its current taxable year.
2. Following the Transactions, the Surviving Fund will continue the
historic business of the Transferor Fund or will use a significant portion of
the Transferor Fund's historic business assets in a business. In particular, the
Surviving Fund will retain at least fifty percent (50%) of
<PAGE>
the assets of the Transferor Fund immediately after the Transactions, and will
retain at least thirty-three and one-third percent (33-1/3%) of the assets of
the Transferor Fund for at least twelve months after the Transactions.
3. The Surviving Fund has no plan or intention to reacquire any of
its Series B Investor Shares issued in the Transactions, except in the ordinary
course of business.
4. The Surviving Fund has no plan or intention to sell or otherwise
to dispose of any of the assets of the Transferor Fund acquired in the
Transactions, except for dispositions made in the ordinary course of business.
5. There is no intercorporate indebtedness between the Surviving
Fund and the Transferor Fund that was issued, acquired or will be settled at a
discount.
6. The Surviving Fund does not own, and has not owned during the
past five years, directly or indirectly, any stock of the Transferor Fund,
except for shares of the Transferor Fund purchased by the Surviving Fund
pursuant to the dissenting stockholders provisions of the Maryland General
Corporation Law, which such shares will amount to no more than 1% of the
outstanding shares of the Transferor Fund.
7. The Transactions will be accomplished for the purposes set forth
in the Combined Proxy Statement/Prospectus, which is part of the Registration
Statement filed with the Securities and Exchange Commission.
We understand that you will, and expressly authorize you to, rely upon
each of the foregoing representations in rendering your opinion of even date
herewith. We undertake to advise you promptly if we become aware of any facts
or circumstances that would cause any representation that we have given to be
incorrect.
Very truly yours,
BLACKROCK FUNDS(SM)
By: /s/ Raymond J. Clark
---------------------------
Title: President
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